RATES RELIEF FOR SMALL COMPANIES

HC Deb 12 July 1982 vol 27 cc743-59

`Where a company may claim under section 95 of the Finance Act 1972 that the corporation tax charged on its income for the relevant period shall be calculated at the small companies rate or is a registered industrial and provident society or housing association and is eligible under section 96 of the Finance Act 1972 to pay corporation tax at the special rate the charge to tax shall be reduced by a sum of the following amount: R × (C—S)—over 100 where R is the amount of rates paid by the company to local authorities in the relevant period, C is the rate of corporation tax and S is—

1. (a)the small companies' rate of corporation tax in respect of any company whose profits do not exceed the lower relevant maximum amount; and
2. (b)is the average rate of corporation tax which would be chargeable on the income of the company taking account of marginal relief under subsection (3) of the said section 95, but excluding relief under this subsection, in respect of any company whose profits do exceed the lower relevant maximum amount but which do not exceed the upper relevant maximum amount; and
3. (c)is the special rate of corporation tax, in respect of any registered industrial and provident society and any housing association as further defined in section 96 of the Finance Act 1972.'.—[Mr. Straw.]

Brought up, and read the First time.

Mr. Straw

I beg to move, That the clause be read a Second time.

Mr. Speaker

With this we may consider new clause 32—Deductions from rates by companies.

1. `(1) Any company which has in any year a liability to pay rates to a local authority shall be entitled to deduct from the sum due an amount calculated by reference to the same percentage as the percentage settled as the rate of Corporation Tax as further defined in subsection (4) below, and that local authority shall accept that reduced sum as the full sum which the company is liable to pay.
2. (2) Any local authority which has received a payment with a deduction as prescribed in subsection (1) above shall be entitled to record an amount equal to the amount so deducted from the Inland Revenue.
3. (3) For the purposes of Corporation Tax amounts payable by companies to local authorities by way of rates shall not be allowed as deductions from total profits.
4. (4) The rate of Corporation Tax for the purposes of subsection (1) above is the small companies rate for the previous year.
5. (5) Where a company's profits are charged at the standard rate of Corporation Tax for the year in which it was liable to pay rates to a local authority as mentioned in subsection (1) above, that company shall be entitled to a rebate equal to the difference between the sum withheld under that subsection and the sum which would have been withheld if that sum had been calculated by reference to the standard rate of Corporation Tax for that year.

Mr. Straw

The last three years have seen the Government seeking at every stage to use local authorities, especially Labour-controlled authorities, as a scapegoat for the failure of their economic policies. We have heard Labour authorities criticised for the rate increases that they have been forced to impose. We have heard them blamed for the rise in the number of jobless. Most preposterous of all, they have been blamed for the increasing failure rate of the Government's economic policies.

The number of companies going into liquidation and the number of small firms going bankrupt have reached an all-time high. But the Government have not been assisted in their slanders of local government by the facts and, over the past two years, I have made it my job to ensure that some of the facts about rates and local authorities were brought to the attention of the public. I have made it my job to point out to electors that, contrary to popular myth, domestic rate bills on average in Conservative-controlled areas are considerably higher than they are in Labour-controlled areas—a fact that we are only too well aware of in the low rate bill, Labour-controlled areas of Lancashire.

Local authority leaders have been the subject of sustained and often ill-founded attacks upon their services by local branches of the CBI and chambers of commerce. I have sought to point out that the proportion which rates bear to total industrial costs is very much lower than critics in the Government and CBI would have us believe.

If we look at the facts, we find that rates as a proportion of total costs in manufacturing industry have consistently amounted to less than 1 per cent. of the total. I asked the Minister for Local Government and Environmental Services for the latest information on 23 April this year. He gave me the following information about rates as a proportion of total manufacturing industry's costs. He said that rate payments totalled £925 million in 1979 and that as a proportion of manufacturing costs, these rate payments amounted to 0.66 per cent., which is two-thirds of 1 per cent.

10.30 pm

The Minister has made many speeches about rates being a job destroyer. I was surprised that the latest figures that he could provide for the House were for 1979. I asked him why he had no later figures. He simply provided me with a bland answer that Figures on rate payments by manufacturing industry and manufacturing costs are obtained from the business statistics office annual censuses of production. Information for 1980 is expected to become available at the end of this year."—[Official Report, 29 April 1982; Vol. 22, c. 330.] Therefore, first we have the basic background fact that rates as a proportion of industrial costs are less than 1 per cent. of those total costs. Secondly there is the fact that forms the background to the new clause, which is rarely, if ever, explained or admitted by the CBI or the Government. It is chat companies can obtain tax relief on their rate payments. If they are liable to corporation tax at the rate of 52p in the pound, which large companies ate, on the marginal additional payments of rates that tax relief amounts to 52p in the pound, which contrasts starkly with the domestic ratepayers, who, although they receive some domestic rate relief, get no tax relief on their rate payments.

Mr. John Heddle (Lichfield and Tamworth)

The hon. Gentleman seems to be arguing his case two ways. First, he is saying that the rates burden on small businesses is an infinitesimal proportion of turnover, output or profit, which he has not yet defined, yet the purport of his new clause is that there should be some form of relief, with which I wholeheartedly agree. Perhaps he will advise the House precisely what the domestic ratepayer gets for his or her money as opposed to what the commercial or industrial ratepayer gets for his money.

Mr. Straw

I am not sure whether, if I went down that track, Mr. Deputy Speaker would regard my remarks as being in order. There are separate occasions on which we can debate with Conservative Members the services that commercial ratepayers obtain. I made the point to draw out the fact that most large companies obtain tax relief on their rate payments at 52p in the pound. I knew when I was writing my speech in the Library that the hon. Gentleman or one of his hon. Friends would suggest that there was a contradiction between making a statement, which is generally true—that rate payments as a proportion of total industrial costs are low—and saying that, if we apply ourselves to the facts, although rate payments as a proportion of total industrial costs are low—I am glad that the hon. Gentleman is acknowledging that—

Mr. Heddle

No, I am not.

Mr. Straw

Although they are low and the Government's facts prove that point—[Interruption.] The reason why I want relief is that we in the Opposition try to apply ourselves to the facts of the situation. For example, we have all read the report on non-domestic rates with reference to small firms, which was sponsored by Shell United Kingdom Ltd. and published by Cooper & Lybrand Associates. It draws attention to the relatively small burden of rates as a whole on industry and commerce. It states that rates are, relatively, a higher burden on small businesses. The Opposition are seeking to apply fairness to the situation. I hope that the hon. Member for Lichfield and Tamworth (Mr. Heddle), who shows support for the proposal, will vote with us in the Lobby later tonight. My point is exactly the one made in the report. The Centre for Environmental Studies, which conducted a study in 1978 on behalf of itself and the CBI, said that rates were rising very sharply, both in money terms and relative to turnover, profit, and so on, up to 1975, but that since then the growth has been slower.

The report then went on to say that The highest rate burden seems to have been borne by smaller firms and by firms in the service sector. That happens to be a fact. Moreover, as the report also draws out, it happens to be a fact that the retail trades bear a higher burden of rates, as a proportion of their total costs, than industry. Whereas industry bears, as a proportion of its total costs, a rate burden of 1 per cent., the burden on the distributive and retail trades is about 4½ per cent. As hon. Members know, many firms in the retail trades are very small.

I said a moment ago that in general large firms, liable to corporation tax, are entitled to tax relief on their rate bills of 52p in the pound. But, as the House knows, small businesses—which for these purposes are businesses with profits of up to £90,000—pay corporation tax at a lower rate of 40p in the pound, and businesses with profits between £90,000 and £225,000 pay corporation tax on a sliding scale on average between 40p in the pound and the main rate of 52p in the pound.

The small business relief to corporation taxpayers is generally beneficial, but it means that for every additional pound which is paid out in rates the marginal net cost to a small firm, if it is paying or liable to pay corporation tax at 40p, is 60p in the pound compared with 48p in the pound for a large company liable to corporation tax at 52p.

The new clause seeks to give small companies, liable to corporation tax at 40p in the pound, the same tax relief as large companies. That would seem to be fair. Whatever the overall absolute burden of rates may be, whether overall rates as a proportion of total cost are 1 per cent., 10 per cent. or 20 per cent., it must be sensible and fair to ensure that the burden which falls on small companies by way of their rate payments, other things being equal, is roughly the same as the burden which falls on large companies. That is what the amendment seeks to do. It also provides similar relief for housing associations and co-operative societies which are liable only to the lower rate of corporation tax. It provides for a sliding scale of relief for those small to medium-sized companies with profits between £90,000 and £225,000 which are liable to an average rate of corporation tax of between 40 and 52 per cent. They get a level of tax relief which is the difference between their average rate and 52p in the pound.

It was made known some time ago that the Opposition would be putting forward proposals, and the views of the CBI and the London Chamber of Commerce and Industry were sought. I did not seek them, but the Treasury, about six weeks ago, sought a copy of a notice which I issued about the proposals, so we shall look with great interest at the Treasury's response. Over the telephone, the CBI expressed some interest in the proposals and raised several points about their operation. The London Chamber of Commerce and Industry, in a letter to me in response to the proposals, says: It seems likely that your specific suggestions would be helpful in a number of cases. It went on to say, to deal with a point that Conservative Members may raise in this connection: The problem however remains that they would only benefit small firms which were actually making a profit or were likely to within a fairly short period. They would not do anything for the small private firm which is suffering the effects of the recession or a group of people in the initial stages of trying to preserve their jobs through some form of common ownership enterprise. I accept that the new clause would not benefit a company that was totally tax-exhausted, although I draw to the attention of the House the fact that my hon. Friend the Member for Workington (Mr. Campbell-Savours), in his new clause, proposes that all companies, regardless of size, should be able to pay their rates net of small companies' tax relief of 40p in the £, which would plainly benefit all companies that are trading, whether they are tax-exhausted or not.

This proposal is more modest and we do not suggest that the use of this device alone will enable companies to overcome the immense problems that they face because of the Government-induced recession in the past three years. Nor do I resile from the point made by the London Chamber of Commerce and Industry that it does not provide help for tax-exhausted companies. However, it seems to be consistent with the generality of reliefs that have been written into corporation tax law. The problem with all those reliefs is that they apply only to companies that are still making a profit or that are likely to do so in the not too distant future. They can benefit from the rollover reliefs provided within the corporation tax regime.

For companies that make a profit or that are likely to make a profit—or, if they are not, the fact that their rate burden will not tip them over the edge to bankruptcy—high interest rates have had a much more serious effect. But for those that have reasonable prospects this proposal provides small companies with substantial help with their rate bills. A company that pays rates of £5,000 gross will be entitled to relief of £600 at the 40p in the £ rate.

Despite all the rhetoric that we have heard from the Government about their desire to help both the corporate and the personal taxpayer, their actions have done exactly the reverse. While promising to reduce personal taxation, the Government have forced it up and, while promising help for business, they have not only forced up business costs with high interest rates but must bear the principal responsibility for the increase in the rates that industry must pay because of cuts in the rate support grant and the way that they have eschewed the distribution of the rate support grant from our hard-pressed inner cities. The Government bear the principal burden of responsibility for the increase in business and domestic rates. We do not suggest that this is anything other than a modest proposal, but it is the first tangible proposal that has been discussed by the House to provide sensible relief for small companies and to deal with their specific problems.

I hope that we shall hear no arguments this evening from the Government about the drafting defects of the clause. It may well have some defects, but the Government have had details of it for some months and have been aware of every line of it for some weeks. It was open to them at any stage to seek the co-operation of the Opposition to ensure that the clause was put in order, or it is open to them tonight to table manuscript amendments if they wish to ensure that the clause goes on the statute book in a non-defective way. This is a sensible proposal for relieving small companies of some part of their rate burden. We hope that the Government will accept it.

10.45 pm

Mr. Richard Page

I shall reluctantly ask my hon. Friend to reject the blandishments that he should accept the new clause. I recognise the sentiment behind the clause, despite the muddled thinking displayed by the hon. Member for Blackburn (Mr. Straw) as he tried to straddle the party political position and the realities of the business world. I am also reluctant to recommend my hon. Friend to refuse to accept the new clause, because I recognise only too well the rates burden on smaller businesses. It is a burden that no management, whatever its skill, can avoid. Management can mitigate or reduce the effect of most things, including the national utilities, but the rates burden lies like a lump of lead on the balance sheet. It means that cash flow cannot be improved. It makes no allowance for the market conditions facing small companies.

A further indignity of the rates burden is that businesses have no democratic representation in respect of what they pay. That old cry "No taxation without representation" must be raised as a constant reminder every time money is demanded of taxpayers. There is a growing pressure for rate reform. There is an increasing feeling that we have an unjust and unfair system. Some people will argue that no reform is necessary. I maintain, however, that the system is unfair and undemocratic. Those who advocate that it is too difficult to change the system remind me of the yokel, leaning over the fence, who replies to the motorist asking the way to the nearest town "I would not start from here" The time is coming when we shall have to introduce a change in the rating system.

I ask my hon. Friend to resist the new clause because I do not wish to see piecemeal change. What is needed is a planned programme that will produce a new, more effective and more representative rating system. I do not wish to see any easing of pressure for change.

The clause is ostensibly designed to help smaller businesses, but it seems more designed to help the small profit of companies. We should be introducing a differential between large and small companies. For that reason, I am unhappy about the proposals of the hon. Member for Blackburn. I applaud the sentiment behind the new clause—I genuinely mean what I say—but I must ask my hon. Friend to resist it. I hope, however, that the Government will bring forward rating reform to enable businesses to flourish in a better environment.

Mr. Campbell-Savours

My hon. Friends will be grateful for the support of the hon. Member for Lichfield and Tamworth (Mr. Heddle) for the new clause moved by my hon. Friend the Member for Blackburn (Mr. Straw). I am sure that his constituents will be eager for him to accompany the Opposition into the Lobby in support of the new clause.

Mr. Heddle

The hon. Gentleman should cast his mind back. I have sympathy for any cause that seeks to lighten the burden of the industrial and commercial ratepayer who has no vote, no voice, no say and no sanction over the manner in which an extravagant local authority spends money and receives no services for that money.

Mr. Campbell-Savours

The record will clearly show what the hon. Gentleman said. He will find that what I said is a precise interpretation of his words.

The new clause is an eminently sensible way of dealing with the problem of rates. It will introduce to the rating system what has been repeatedly referred to in the three years that I have served on Finance Bill Committees as "equity in taxation".

I beg to move new clause 32, which is my clause in the sense that I thought it out. Therefore, although it may not be in order, and the Government may not wish to accept it, I hope that they will take into account the principle that I am endeavouring to establish.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. On a point of clarification. I should point out that the hon. Gentleman cannot move his new clause at this moment. He may speak to it, because it is being taken with new clause 6.

Mr. Campbell-Savours

I presume that I may speak to my new clause, which is grouped with new clause 6.

Subsection (1) would allow companies to pay rates net of corporation tax. Subsection (2) would enable local authorities to collect from the Inland Revenue all sums that should be paid if rates were paid gross. Subsection (3) would make rate payments not allowable as deductions from profits for the purposes of corporation tax. Subsection (4) deals with the rate for corporation tax in my clause, that being the lower rate of corporation tax of 42 per cent. Subsection (5) would require adjustment to the accounts of companies paying tax at the higher rate.

The new clause sets out to establish the same principle for rate payments as already exists in the option mortgage arrangements, which, in a marginal way, have been interfered with and changed because of changes in the Budget and the Finance Bill. It would enable claims to tax relief to be made prior to the payment of rates. The precedent is clearly set in clause 25, which deals with deductions of tax from mortgage interest. Under clause 25 most borrowers will be entitled to deduct income tax at the basic rate from payments of interest on such loans. From the same date, such borrowers will cease to get relief for basic rate income tax in their PAYE codes and tax assessments. Borrowers within the new arrangements will obtain basic rate relief, even if their income is insufficiently high to attract tax. In effect, a negative income tax or subsidy is introduced. Lending institutions will be able to recover from the Inland Revenue tax deducted by borrowers.

I am trying to widen that form of provision to cover rate payments by companies to local authorities. Companies that are tax exhausted—that is, not making a corporation taxable profit—would find under my new clause that their rate payments would be reduced by half. The balance would be made up by way of an Exchequer subsidy in lieu of the tax claim that otherwise would be made by the company if it were making a profit.

Companies making profits for corporation tax purposes which were not tax exhausted would have a cash flow benefit in the sense that they would be required to pay not 100 per cent. rate bills on demand, but a lesser amount. When they submitted their accounts and were due to make their corporation tax payments to the Revenue, they would find that they lost the relief that would otherwise be made available to them.

I shall not rehearse the arguments about industrial rates, because they are well known to the House. It is clear from conversations that I have had that the principle that I am seeking to establish in the new clause carries the support of many organisations, and companies to which I have spoken have expressed some interest in the principle. Perhaps I might quote the replies that I received from a number of eminent organisations.

Sir Albert Costain (Folkestone and Hythe)

Will the hon. Gentleman explain the cash flow position of local authorities under his proposals?

Mr. Campbell-Savours

Local authorities should not be affected. They would invoice the Inland Revenue for that which they did not claim direct—the difference between the net payment and the gross demand. They would invoice the Inland Revenue and then be paid the money. The Government's position would not be re-established in terms of any loss of funds until the accounts were due from the company that was making the corporation tax payment and settlement was made.

I want to quote a letter that I received from Spicer and Pegler, chartered accountants in the City. They make regular submissions each year to members of the Finance Bill Committee on matters relating to the Budget Statement. The letter, written by a Mr. Davis, an accountant, says: I think your proposals would be extremely valuable to all trading companies. Where a company makes taxable profits it would obtain a substantial cash flow advantage. It would get tax relief at 40 per cent. immediately on making the payments of rates to the Local Authority instead of having to wait until nine months after the accounting date when the corporation tax would otherwise become payable. In the case of a company with tax losses there would be an even greater cash flow advantage because under the present system effective tax relief is not obtained until the company makes enough profits to absorb the losses carried forward. I am not sure"— I quote also critical comment; it would be pointless to say that everyone supported my new clause, and I shall quote other critical comments— how sympathetic the Inland Revenue is going to be. They have been significantly unsympathetic towards the 'tax exhausted' company who tries to pay a lower rate of interest on bank borrowings by making use of the distribution provisions of Section 233 of the Taxes Act 1970. Hon. Members will know that there was considerable discussion on that matter in Committee upstairs.

I come next to the Association of County Councils, which would be directly affected by my new clause. In its letter it says: I think the Association's view would be"— it was not in a position to give a formal view, as I was late in providing it with a copy of my new clause— that any change in the techniques of financing Local Government, for example, the one you suggest, would be better considered within the overall discussion on the Government's Green Paper on Domestic Rates. The Association has placed on record, its wish to see an examination of the whole basis of industrial rating. In the context of such consideration, my initial view suggests that the principles underlying your amendment might well be worth pursuing further. The secretary of that association felt, following consultations with his friends, that the Government should pursue the matter further.

I also received a reply from the Association of Metropolitan Authorities, which said: your new clause is drafted with a view to having a neutral effect on local finances, we are concerned that it would not be the case in practice. We would be very wary of part substituting rates with a payment from the Inland Revenue; such a payment could become liable to manipulation or even be treated as some form of grant—with the possibility of strings becoming attached". 11 pm

That is interesting because it is not an attack on the principle and the financial mechanisms with which I have tried to deal in my new clause, but it expresses suspicion of the Inland Revenue. We could deal with it by clear assurances from the Government that my new clause, or a similar arrangement, would be approved.

I received a letter from the Consultative Committee of Accountancy Bodies which provides much material during Finance Bills. As regards my proposal, it said: It is limited to companies thus affording no relief for non-incorporated businesses"— I accept that as a criticism— and many small businesses fall into this category. Hon. Members on both sides believe that it is healthier for businesses to become incorporated as limited companies in relation to accounting procedures but that they do not receive benefits that they would otherwise receive. Some people are unwilling to recognise them because they involve increased paperwork, but that is no reason for not taking them into account. The letter continues: There would be administrative difficulties for local authorities which might be overcome if the deduction were to be made on the rate demand by the local authority. This would follow the principle adopted where reliefs are available to charities and similar bodies and would avoid such problems as arithmetical errors and the amount to be deducted where mixed hereditaments are involved. It would also place the scheme on a similar basis to that operated for tax relief on life assurance premiums and that which will be used by the Building Societies under the Finance Bill proposals … While similar in concept to the life assurance and mortgage interest schemes, the proposal breaks new ground in that it extends the principle to the corporate sector whereas the existing schemes, in as much that they give relief to non-taxpayers, no doubt do so on social principles. The Confederation of British Industry, in its conclusion, states: a local authority which received money from the Treasury instead of from certain local companies might then argue that as its rates weren't overloading business they could add to the overall total; secondly, since the money would have to come from the taxpayer in the end this would in itself be an additional load at least partly placed on the business. Whatever arrangements are made to govern rate payment by companies, that complication will always arise. The CBI's marginal resistance to my scheme might be removed if suitable assurances were given by the Government.

I hope that the Minister will give a considered reply. I have not made an impassioned intervention on the issue because I thought that the Minister might wish to deal with the technical aspects. A number of organisations will hang on his every word. They will want to know how much my proposals will cost. That is a reasonable question, and I hope that the Minister will not exaggerate.

Many hon. Members receive representations from industrialists. Much political flak is involved in rates. Accusations are that Labour councils go in for high rating. My county council is accused of being high-rated, but it is one of the lowest-rated authorities in the United Kingdom. It does not suit political parties to admit that too often. Tonight we ask for sweet reason. I hope that we shall have it.

Mr. Ted Graham (Edmonton)

I rise briefly to give support to my hon. Friend the Member for Blackburn (Mr. Straw), who has made out a reasonable case. I am delighted to see present many Conservative Members who have always shown a keen interest in small businesses and professed their intentions inside and outside the House to do all that they can to assist them. They have the opportunity to do that by their voice and vote here tonight.

I listened to the hon. Member for Hertfordshire, South-West (Mr. Page). He asked for a complete package and in the meantime he was not prepared to have whatever might be on offer. What might be on offer, if the Treasury Ministers are so minded, is a marginal easement of the desperate plight of small, as opposed to all, businesses.

No hon. Member will say that any assistance to any segment of the economy would not be gratefully received. New clause 6 seeks to recognise that small businesses are a special case.

My hon. Friend the Member for Blackburn said that those who benefit at the moment by paying 40 per cent. instead of 52 per cent. in corporation tax are grateful. No one would deny that that must be an advantage. However, if at the same time the opportunity to set the rates against tax enables those paying 52 per cent. thereby to pay only 48 per cent. of their rate bill, and those who pay only 40 per cent. tax to pay 60 per cent. of the rate bill, the smaller rate payer is thereby at a disadvantage.

I declare an interest, which may be well known in the House. I am sponsored by the Co-operative movement. I am a director of the Enfield Highway Co-operative Society. I listened carefully to what my hon. Friend the Member for Blackburn said about the special position of various categories of business. It has been verified, not least by the Minister for Local Government and Environmental Services, that productive industries pay less than 1 per cent. of their costs in rates. In retailing the figure is somewhere between 4 and 5 per cent.

In the business that I have some experience in, in 1981 the total rates paid were £296,000 and in 1982 they were £333,000. The Enfield Highway Co-operative Society pays rates to the London boroughs of Enfield, Waltham Forest and Barnet and to Hertfordshire county council. That is a reasonable geographical and political spread. Although £37,000 more was paid in rates, it merely lifted the percentage from 4.2 per cent. to 4.7 per cent. of the total costs.

When one looks at the same figures and relates the increase in rates to figures for per pound of sales, one finds that the 1981 rate bill was 1.1 per cent. and in 1982 it had increased to 1.2 per cent. Even though £33,000 is hard earned money, the incidence is not great when one looks at the whole.

Although Conservative Members rightly have much to say about the effect of rates on businesses, they do not point out that in the same year, and for the same business, the increase in the on-cost for gas, electricity and telephones is just as big as that for rates. Why do not Conservative Members spend their time ensuring that businesses pay less for gas, electricity and telephones?

I am delighted to see that the hon. Member for Lichfield and Tamworth (Mr. Heddle) is still in his place. He said that businesses complained that they received no services whatever for the rates that they paid. That is absolute nonsense.

Sir William Clark

My hon. Friend did not say that.

Mr. Graham

Tomorrow's edition of Hansard will reveal whose recollection of the hon. Gentleman's speech is correct. The hon. Member for Lichfield and Tamworth does not dispute what I have said. He said that companies received no services whatever in exchange for their rates. However, most businesses—certainly those in my constituency—are very grateful for the services that they receive. They may complain about the cost, but services are provided in the form of education and so on. [Interruption.] Not only the business, but the employee, benefits from the rates. Firms in Enfield and Edmonton benefit from refuse collections, transport, roads and so on. Charges may be too high in terms of value for money, but those ratepayers certainly receive services.

It is generally recognised that the rating system needs to be changed, but the issue must be seen in context. The new clause should De given a fair wind, because it deals with the special problem of the small business. Of course, rates have an important part to play in all businesses, but many of the shops and units in the retail and distributive trades are small. Rates can, therefore, greatly affect the small business. The Government claim that they are encouraging large and small businesses to expand to serve the community. However, in rural and declining and decaying inner city areas fewer and fewer shops remain in business, not least because of the charges that they have to meet.

If the Government were minded to consider ways of encouraging small businesses to remain alive to serve their communities, they would do them a great service. The Government must recognise that the increase in rate poundages has been caused not only by higher costs but by the way in which the Government have shifted the rate support grant from one area to another. The Government have decided that the London borough of Enfield and every other metropolitan area should have less rate support grant than previously. Whether or not the Minister likes the new clause's wording or its thrust, I hope that he will say something to show that he recognises the special problems of small businesses.

I do not decry the armoury of weapons that the Government have made available to encourage small businesses. The Government did not hesitate to give rate relief to businesses, whatever their size, in enterprise zones. The Government are not averse to taking big steps when dealing with rates. The new clause asks the Government to take a small step, which will make a great deal of difference to the survival of small businesses.

11.15 pm

Mr. Wakeham

We have had a good debate on this important subject. I make no complaints about the drafting of the new clause by the hon. Member for Blackburn (Mr. Straw). It is tempting for the Government to look seriously at any new clause designed to assist small businesses. No Government have put the cause of small businesses higher on their list of priorities than we have. We have initiated a large number of measures designed to assist small businesses in the present difficult economic climate.

I understand the anxiety shown by the hon. Member for Blackburn at the level of rates. Although rates are a low percentage of turnover, they are a much higher percentage of gross or net profit margins. Businesses are worried about the level of rates. I do not question the assertion of the hon. Member for Blackburn that the rate bill of small businesses is greater in proportion to their expenses than that of large businesses. However, that cannot go without some elaboration. There is no difference per se. Whichever type of property a business occupies, the basis for charging rates is the same whether the business is big or small. As the hon. Member for Edmonton (Mr. Graham) pointed out, there are a large number of businesses in the retail sector. They occupy more high street properties than factory properties, which have a lower rate assessment. It is the type of business carried out rather than the size of the business that determines the basis on which rates are charged.

I was surprised when the hon. Member for Blackburn said—his words were, that the CBI has not pointed out—that taxation relief is not given for expenditure on rates. When calculating profits liable to tax, companies or self-employed people may deduct allowable business expenses, including rates. It inevitably follows that relief on expenses is at different rates. The main rate of corporation tax is 52 per cent. payable on profits above £225,000 after this year's Finance Bill. If the company has sufficient profits to absorb its allowable expenses it receives relief at 52 per cent. Where companies pay tax at 40 per cent. relief is at 40 per cent. There is nothing unfair about that. It is the logical result of having different rates of tax.

A self-employed person pays tax on his profits at rates varying between 30 per cent. and 60 per cent. He obtains relief accordingly. There is no case to give relief at 60 per cent. to a trader who pays tax at the rate of 30 per cent. We cannot give companies relief for tax that has already been excused.

The new clause seeks to give all companies relief at 52 per cent. for rates only. I do not think that there is a case for this in general and I think that it would be wrong to single out this item rather than wages, interest or any other type of expense. Similarly, why should there be a case for negative tax for companies paying tax at a reduced rate when the new clause provides no help for companies paying no tax at all?

It is difficult to state the precise cost of the new clause, but we estimate that it would be around £50 million.

I should point out, too, that the small profits level of corporation tax is exactly that—a small profits level, not a small business level—so even under the new clause some relief might go to larger companies that have low profits in a given year, perhaps due to high levels of capital investment.

My particular difficulty with the new clause is that I am very unhappy about giving relief at 52 per cent. when the tax liability would be 40 per cent. In effect, it would be a tax refund on tax not paid. When I was a practising accountant, this was done with dividends which were deemed to have suffered tax but had not in fact done so. As the law then stood, ingenious accountants quite legitimately managed to persuade the Inland Revenue to repay the tax that was deemed to have been suffered and considerable abuse took place.

Therefore, while I applaud the hon. Gentleman's wish to assist small businesses, I do not think that the new clause is the right way to do it.

The amendment proposed by the hon. Member for Workington (Mr. Campbell-Savours) has a number of technical deficiencies. I make no criticism on that score. Indeed, as the hon. Gentleman said that he had drafted it himself, he deserves credit for a very good effort. I am sure that he is not worried about the final wording of it, and neither am I.

The hon. Gentleman's scheme attempts to give tax relief to tax-exhausted companies across the board and would be much more expensive to operate. The cost is perhaps slightly more difficult to estimate, but it could be around £500 million, so it is a fairly substantial proposal.

The amendment also suffers from the same objection in principle. We are very unhappy about the idea of giving tax relief when no profits have been made or when expenses are higher than income. The hon. Gentleman perhaps underestimates the degree of flexibility for losses that is already provided in the tax system. If a company makes a trading loss, to which rates may be only one contributory factor, relief is available in three ways. I do not suggest that every company can take advantage of them, but there is some flexibility. First, it may set the loss against other profits in the period of the loss. Secondly, it may set the loss against the profits, broadly speaking, of the immediate tax period. Thirdly, it may carry the loss forward against future profits.

The hon. Gentleman's scheme would be administratively complicated for companies and local authorities as well as for the Revenue. Additional staff would be required to handle repayment claims from local authorities and for companies liable to tax at above the small companies rate.

Under existing arrangements, a company's profits and gains from all sources are charged to tax under a single assessment. The arrangements are administratively straightforward and work well, but the hon. Gentleman's scheme would involve quite a considerable change in that set-up.

My hon. Friend the Member for Folkestone and Hythe (Sir A Costain) was right when he said that such a change would scarcely be welcomed by local authorities. It would seriously affect their cash flow. I agree with the hon. Gentleman that in the long run it would balance itself out except in the case where a company went broke at the beginning, in which case the Exchequer would be landed with the cost of repayment. But there would be a serious cash flow problem, with up to 40 per cent. of the non-domestic rates being delayed, possibly requiring additional short-term borrowing until the repayment from the Revenue was received.

The proposal would also complicate the administrative procedures of local authorities at a time when they are being asked to cut back on their costs. While I have listened with interest to what the hon. Gentleman said, I do not believe that this is the way for additional help to be provided. I do not believe that we should depart from the computation of business profits by allowing relief at more than 100 per cent. The hon. Gentleman's proposal poses serious administrative difficulties as well as being extremely expensive. I ask the House to reject the new clause.

Mr. Straw

I should like to deal with the central objection to the new clause, which was why one cost—rates—should be singled out for special treatment in this respect and accorded more tax relief than the rate of tax for which the cost would otherwise be liable. The answer is that rates are a special case and are unlike any other cost, leaving aside the national insurance surcharge. Rates are a tax and in that sense are quite distinct from all other costs to which companies are likely to be liable. Although we may argue about the impact of rates on companies, we all accept that one of the problems with business rates is that, unlike most other costs, they are not directly—in some cases they are hardly indirectly—related to total turnover in the way wages and the other costs of running a company are, and therefore can be, if a company runs into temporary difficulties, a substantially greater burden than other costs, where there is greater flexibility.

As a species rates are different because they are a tax, whereas every other cost with which companies have to deal arises in the normal course of business. Moreover, since they are a tax and since expenditure by local government is paid for as to 60 per cent. by central Government, it seems that within the totality of public spending it is justifiable to alter the balance between taxation which is locally paid and taxation which is nationally paid. That is the purpose of the new clauses.

The Minister said that the 40 per cent. rate of tax on corporations was not a small companies rate but a small profits rate. I accept his technical distinction. In some cases it can be more than technical where a large company runs into temporary profit difficulties. In those cases, where the company does run into temporary difficulties and is producing a low rate of return, such as to bring it within the 40 per cent. category, it is acceptable to us that it should be able to enjoy this additional measure of relief on its rate payments. We do not cavil at that.

The cost of this measure is £50 million. That is a relatively modest sum, and it would, in our judgment, provide some important relief for small companies.

This proposal has met with a degree of support from a number of Government supporters. The hon. Member for Hertfordshire, South-West (Mr. Page) applauded the sentiment behind the clauses, as did the hon. Member for Lichfield and Tamworth (Mr. Heddle). The Minister of State applauded me and my right hon. and hon. Friends in wanting to assist small businesses.

We thought about this proposal at some length, and we consulted about it. We believe that it would work and that new clause 6 is not so technically defective as to be impossible to work. The cost is modest. Since many Conservative Members support it, their best course is for them to join the Opposition in the Division Lobby to ensure that it goes on to the statute book.

11.30 pm

Mr. Campbell-Savours

The Minister of State identified the figure of £500 million as an approximate—

Mr. Deputy Speaker (Mr. Paul Dean)

Order. Does the hon. Member for Workington (Mr. Campbell-Savours) have the leave of the House? I had not realised that he had spoken before in the debate.

Mr. Campbell-Savours

With the leave of the House, may I make just a couple of remarks about new clause 32?

The Minister of State identified the figure of £500 million as an approximate estimate of the cost of implementing my new clause. It might be better to raise that revenue from the corporate sector to enable this distribution of money to be made in favour of those companies which, in a period of recession, are tax-exhausted and making losses. Will the hon. Gentleman consider that and perhaps communicate his response in a way other than from the Dispatch Box if he needs time to do so?

I drew attention to a number of organisations that I had circulated about the implications of my new clause. Notwithstanding my representations and the points that I drew from my correspondence, will the hon. Gentleman consider consulting some of those bodies to see whether this matter can be pursued further, subject to modification, and whether perhaps we have the embryo of a scheme that would be beneficial to industries and businesses throughout the United Kingdom?

Question put, That the clause be read a Second time:—

The House divided: Ayes 195, Noes 273.

Division No. 264]	[10.12 pm
AYES
Abse, Leo	Dixon, Donald
Allaun, Frank	Dobson, Frank
Alton, David	Dormand, Jack
Archer, Rt Hon Peter	Dubs, Alfred
Ashley, Rt Hon Jack	Duffy, A. E. P.
Ashton, Joe	Dunnett, Jack
Atkinson, N.(H'gey,)	Dunwoody, Hon Mrs G.
Bagier, Gordon A.T.	Eadie, Alex
Barnett, Guy (Greenwich)	Eastham, Ken
Barnett, Rt Hon Joel (H'wd)	Edwards, R. (W'hampt'n S E)
Beith, A. J.	Ellis, R. (NE D'bysh're)
Benn, Rt Hon Tony	Ellis, Tom (Wrexham)
Bennett, Andrew(St'kp't N)	English, Michael
Bidwell, Sydney	Ennals, Rt Hon David
Boothroyd, Miss Betty	Evans, John (Newton)
Bray, Dr Jeremy	Ewing, Harry
Brown, Hugh D. (Provan)	Faulds, Andrew
Brown, Ron (E'burgh, Leith)	Fletcher, Ted (Darlington)
Buchan, Norman	Foot, Rt Hon Michael
Callaghan, Jim (Midd't'n & P)	Forrester, John
Campbell, Ian	Foulkes, George
Campbell-Savours, Dale	Fraser, J. (Lamb'th, N'w'd)
Canavan, Dennis	Freeson, Rt Hon Reginald
Carmichael, Neil	Garrett, John (Norwich S)
Carter-Jones, Lewis	Garrett, W. E. (Wallsend)
Cartwright, John	Ginsburg, David
Clark, Dr David (S Shields)	Golding, John
Clarke, Thomas C'b'dge,A'rie	Graham, Ted
Cocks, Rt Hon M. (B'stol S)	Hamilton, James (Bothwell)
Cohen, Stanley	Hamilton, W. W. (C'tral Fife)
Coleman, Donald	Hardy, Peter
Concannon, Rt Hon J. D.	Harrison, Rt Hon Walter
Cowans, Harry	Hart, Rt Hon Dame Judith
Cox, T. (W'dsw'th, Toot'g)	Hattersley, Rt Hon Roy
Craigen, J. M. (G'gow, M'hill)	Haynes, Frank
Crowther, Stan	Healey, Rt Hon Denis
Cryer, Bob	Heffer, Eric S.
Cunliffe, Lawrence	Hogg, N. (E Dunb't'nshire)
Cunningham, G. (Islington S)	Holland, S. (L'b'th, Vauxh'll)
Cunningham, Dr J. (W'h'n)	Home Robertson, John
Dalyell, Tam	Homewood, William
Davidson, Arthur	Hooley, Frank
Davis, Clinton (Hackney C)	Horam, John
Davis, Terry (B'ham, Stechf'd)	Howell, Rt Hon D.
Deakins, Eric	Hoyle, Douglas
Dean, Joseph (Leeds West)	Hughes, Mark (Durham)
Dewar, Donald	Hughes, Robert (Aberdeen N)

Hughes, Roy (Newport)	Roberts, Allan (Bootle)
Janner, Hon Greville	Roberts, Ernest (Hackney N)
Jay, Rt Hon Douglas	Roberts, Gwilym (Cannock)
John, Brynmor	Robertson, George
Johnson, James (Hull West)	Robinson, G. (Coventry NW)
Johnson, Walter (Derby S)	Rooker, J. W.
Jones, Rt Hon Alec (Rh'dda)	Roper, John
Jones, Barry (East Flint)	Ross, Ernest (Dundee West)
Kaufman, Rt Hon Gerald	Ross, Stephen (Isle of Wight)
Kerr, Russell	Rowlands, Ted
Kilroy-Silk, Robert	Sever, John
Lamond, James	Sheerman, Barry
Leadbitter, Ted	Sheldon, Rt Hon R.
Leighton, Ronald	Shore, Rt Hon Peter
Lestor, Miss Joan	Short, Mrs Renée
Lewis, Ron (Carlisle)	Silkin, Rt Hon J. (Deptford)
Litherland, Robert	Silkin, Rt Hon S. C. (Dulwich)
Lofthouse, Geoffrey	Silverman, Julius
Lyons, Edward (Bradf'd W)	Skinner, Dennis
Mabon, Rt Hon Dr J. Dickson	Soley, Clive
McCartney, Hugh	Spearing, Nigel
McDonald, Dr Oonagh	Spriggs, Leslie
McElhone, Frank	Stallard, A. W.
McGuire, Michael (Ince)	Steel, Rt Hon David
MacKenzie, Rt Hon Gregor	Stewart, Rt Hon D. (W Isles)
McNally, Thomas	Stoddart, David
McTaggart, Robert	Stott, Roger
McWilliam, John	Strang, Gavin
Magee, Bryan	Straw, Jack
Marks, Kenneth	Thomas, Dafydd (Merioneth)
Marshall, Dr Edmund (Goole)	Thorne, Stan (Preston South)
Marshall, Jim (Leicester S)	Tilley, John
Martin, M(G'gow S'burn)	Tinn, James
Mason, Rt Hon Roy	Torney, Tom
Maxton, John	Urwin, Rt Hon Tom
Maynard, Miss Joan	Varley, Rt Hon Eric G.
Mikardo, Ian	Wainwright, E.(Dearne V)
Millan, Rt Hon Bruce	Wainwright, R.(Colne V)
Miller, Dr M. S. (E Kilbride)	Weetch, Ken
Mitchell, Austin (Grimsby)	Welsh, Michael
Morris, Rt Hon A. (W'shawe)	White, Frank R.
Morris, Rt Hon C. (O'shaw)	White, J. (G'gow Pollok)
Morton, George	Whitehead, Phillip
Moyle, Rt Hon Roland	Whitlock, William
Newens, Stanley	Wigley, Dafydd
Oakes, Rt Hon Gordon	Willey, Rt Hon Frederick
O'Halloran, Michael	Williams, Rt Hon A.(S'sea W)
O'Neill, Martin	Wilson, Gordon (Dundee E)
Orme, Rt Hon Stanley	Wilson, Rt Hon Sir H.(H'ton)
Palmer, Arthur	Winnick, David
Park, George	Woodall, Alec
Parker, John	Woolmer, Kenneth
Parry, Robert	Wright, Sheila
Pavitt, Laurie	Young, David (Bolton E)
Penhaligon, David
Race, Reg	Tellers for the Ayes:
Radice, Giles	Mr. Allen McKay and
Rees, Rt Hon M (Leeds S)	Mr. Derek Foster.
Richardson, Jo
Roberts, Albert (Normanton)
NOES
Adley, Robert	Biffen, Rt Hon John
Aitken, Jonathan	Biggs-Davison, Sir John
Alexander, Richard	Blackburn, John
Alison, Rt Hon Michael	Blaker, Peter
Arnold, Tom	Body, Richard
Aspinwall, Jack	Bonsor, Sir Nicholas
Atkins, Rt Hon H.(S'thorne)	Boscawen, Hon Robert
Atkins, Robert(Preston N)	Bottomley, Peter (W'wich W)
Atkinson, David (B'm'th,E)	Bowden, Andrew
Baker, Nicholas (N Dorset)	Boyson, Dr Rhodes
Banks, Robert	Braine, Sir Bernard
Beaumont-Dark, Anthony	Bright, Graham
Bendall, Vivian	Brinton, Tim
Bennett, Sir Frederic (T'bay)	Brittan, Rt. Hon. Leon
Benyon, Thomas (A'don)	Brooke, Hon Peter
Benyon, W. (Buckingham)	Brotherton, Michael
Best, Keith	Browne, John (Winchester)
Bevan, David Gilroy	Bruce-Gardyne, John

Bryan, Sir Paul	Griffiths, E.(B'y St. Edm'ds)
Buchanan-Smith, Rt. Hon. A.	Griffiths, Peter Portsm'th N)
Buck, Antony	Grist, Ian
Budgen, Nick	Grylls, Michael
Bulmer, Esmond	Gummer, John Selwyn
Burden, Sir Frederick	Hamilton, Hon A.
Butcher, John	Hamilton, Michael (Salisbury)
Cadbury, Jocelyn	Hampson, Dr Keith
Carlisle, John (Luton West)	Hannam, John
Carlisle, Kenneth (Lincoln)	Haselhurst, Alan
Carlisle, Rt Hon M. (R'c'n)	Hastings, Stephen
Chalker, Mrs. Lynda	Havers, Rt Hon Sir Michael
Channon, Rt. Hon. Paul	Hawksley, Warren
Chapman, Sydney	Hayhoe, Barney
Churchill, W. S.	Heddle, John
Clark, Hon A. (Plym'th, S'n)	Heseltine, Rt Hon Michael
Clark, Sir W. (Croydon S)	Hicks, Robert
Clarke, Kenneth (Rushcliffe)	Higgins, Rt Hon Terence L.
Cockeram, Eric	Hill, James
Colvin, Michael	Hogg, Hon Douglas (Gr'th'm)
Cope, John	Holland, Philip (Carlton)
Costain, Sir Albert	Hordern, Peter
Cranborne, Viscount	Howell, Rt Hon D. (G'ldf'd)
Critchley, Julian	Howell, Ralph (N Norfolk)
Crouch, David	Hunt, David (Wirral)
Dickens, Geoffrey	Hunt, John (Ravensbourne)
Dorrell, Stephen	Irvine, Bryant Godman
Douglas-Hamilton, Lord J.	Irving, Charles (Cheltenham)
Dover, Denshore	Jenkin, Rt Hon Patrick
du Cann, Rt Hon Edward	Jessel, Toby
Dunn, Robert (Dartford)	Johnson Smith, Sir Geoffrey
Durant, Tony	Jopling, Rt Hon Michael
Eden, Rt Hon Sir John	Joseph, Rt Hon Sir Keith
Edwards, Rt Hon N. (P'broke)	Kaberry, Sir Donald
Eggar, Tim	Kershaw, Sir Anthony
Elliott, Sir William	Kimball, Sir Marcus
Eyre, Reginald	Knight, Mrs Jill
Fairbairn, Nicholas	Knox, David
Fairgrieve, Sir Russell	Lamont, Norman
Faith, Mrs Sheila	Lang, Ian
Farr, John	Latham, Michael
Fell, Sir Anthony	Lawrence, Ivan
Fenner, Mrs Peggy	Lawson, Rt Hon Nigel
Finsberg, Geoffrey	Lee, John
Fisher, Sir Nigel	Lennox-Boyd, Hon Mark
Fletcher, A. (Ed'nb'gh N)	Lester, Jim (Beeston)
Fletcher-Cooke, Sir Charles	Lewis, Kenneth (Rutland)
Fookes, Miss Janet	Lloyd, Ian (Havant & W'loo)
Forman, Nigel	Lloyd, Peter (Fareham)
Fowler, Rt Hon Norman	Loveridge, John
Fox, Marcus	Luce, Richard
Fraser, Peter (South Angus)	Lyell, Nicholas
Fry, Peter	Macfarlane, Neil
Gardner, Edward (S Fylde)	MacGregor, John
Garel-Jones, Tristan	MacKay, John (Argyll)
Glyn, Dr Alan	Macmillan, Rt Hon M.
Goodhart, Sir Philip	McNair-Wilson, M. (N'bury)
Goodhew, Sir Victor	McNair-Wilson, P. (New F'st)
Goodlad, Alastair	Major, John
Gorst, John	Marland, Paul
Gow, Ian	Marten, Rt Hon Neil
Grant, Anthony (Harrow C)	Maude, Rt Hon Sir Angus
Gray, Hamish	Mawby, Ray
Greenway, Harry	Mawhinney, Dr Brian
Maxwell-Hyslop, Robin	Shepherd, Richard
Mayhew, Patrick	Shersby, Michael
Mellor, David	Silvester, Fred
Mills, Iain (Meriden)	Sims, Roger
Mills, Sir Peter (West Devon)	Skeet, T. H. H.
Miscampbell, Norman	Smith, Dudley
Mitchell, David (Basingstoke)	Smith, Tim (Beaconsfield)
Moate, Roger	Speed, Keith
Montgomery, Fergus	Speller, Tony
Moore, John	Spence, John
Morris, M. (N'hampton S)	Spicer, Jim (West Dorset)
Morrison, Hon C. (Devizes)	Spicer, Michael (S Worcs)
Morrison, Hon P. (Chester)	Sproat, Iain
Mudd, David	Squire, Robin
Murphy, Christopher	Stainton, Keith
Myles, David	Stanbrook, Ivor
Neale, Gerrard	Stanley, John
Needham, Richard	Steen, Anthony
Nelson, Anthony	Stevens, Martin
Neubert, Michael	Stewart, A.(E Renfrewshire)
Newton, Tony	Stewart, Ian (Hitchin)
Normanton, Tom	Stokes, John
Onslow, Cranley	Stradling Thomas, J.
Oppenheim, Rt Hon Mrs S.	Tapsell, Peter
Osborn, John	Taylor, Teddy (S'end E)
Page, John (Harrow, West)	Tebbit, Rt Hon Norman
Page, Richard (SW Herts)	Temple-Morris, Peter
Parkinson, Rt Hon Cecil	Thomas, Rt Hon Peter
Parris, Matthew	Thompson, Donald
Patten, John (Oxford)	Thorne, Neil (Ilford South)
Pawsey, James	Thornton, Malcolm
Percival, Sir Ian	Townend, John (Bridlington)
Peyton, Rt Hon John	Townsend, Cyril D, (B'heath)
Pink, R. Bonner	Trippier, David
Pollock, Alexander	Trotter, Neville
Porter, Barry	van Straubenzee, Sir W.
Prentice, Rt Hon Reg	Vaughan, Dr Gerard
Price, Sir David (Eastleigh)	Viggers, Peter
Proctor, K. Harvey	Waddington, David
Raison, Rt Hon Timothy	Wakeham, John
Rathbone, Tim	Waldegrave, Hon William
Rees, Peter (Dover and Deal)	Walker, Rt Hon P.(W'cester)
Rees-Davies, W. R.	Waller, Gary
Renton, Tim	Walters, Dennis
Rhodes James, Robert	Ward, John
Rhys Williams, Sir Brandon	Warren, Kenneth
Ridley, Hon Nicholas	Watson, John
Ridsdale, Sir Julian	Wells, Bowen
Rifkind, Malcolm	Wheeler, John
Roberts, M. (Cardiff NW)	Whitney, Raymond
Roberts, Wyn (Conway)	Wickenden, Keith
Rossi, Hugh	Wilkinson, John
Rost, Peter	Winterton, Nicholas
Royle, Sir Anthony	Wolfson, Mark
Rumbold, Mrs A. C. R.	Young, Sir George (Acton)
Sainsbury, Hon Timothy	Younger, Rt Hon George
St. John-Stevas, Rt Hon N.
Scott, Nicholas	Tellers for the Noes:
Shaw, Giles (Pudsey)	Mr. Anthony Berry and
Shelton, William (Streatham)	Mr. Carol Mather.
Shepherd, Colin (Hereford)

Division No. 265]	[11.32 pm
AYES
Abse, Leo	Cowans, Harry
Allaun, Frank	Cox, T. (W'dsw'th, Toot'g)
Alton, David	Craigen, J. M. (G'gow, M'hill)
Archer, Rt Hon Peter	Crowther, Stan
Ashley, Rt Hon Jack	Cryer, Bob
Ashton, Joe	Cunningham, Dr J. (W'h'n)
Atkinson, N.(H'gey,)	Dalyell, Tam
Bagier, Gordon A.T.	Davidson, Arthur
Barnett, Guy (Greenwich)	Davis, Clinton (Hackney C)
Barnett, Rt Hon Joel (H'wd)	Davis, Terry (B'ham, Stechf'd)
Beith, A. J.	Deakins, Eric
Benn, Rt Hon Tony	Dean, Joseph (Leeds West)
Bennett, Andrew(St'kp't N)	Dewar, Donald
Bidwell, Sydney	Dixon, Donald
Booth, Rt Hon Albert	Dobson, Frank
Boothroyd, Miss Betty	Dormand, Jack
Bray, Dr Jeremy	Dubs, Alfred
Brown, Hugh D. (Provan)	Duffy, A. E. P.
Brown, Ron (E'burgh, Leith)	Dunnett, Jack
Buchan, Norman	Dunwoody, Hon Mrs G.
Callaghan, Jim (Midd't'n & P)	Eadie, Alex
Campbell, Ian	Eastham, Ken
Campbell-Savours, Dale	Edwards, R. (W'hampt'n S E)
Canavan, Dennis	Ellis, R. (NE D'bysh're)
Carmichael, Neil	Ellis, Tom (Wrexham)
Carter-Jones, Lewis	English, Michael
Clark, Dr David (S Shields)	Ennals, Rt Hon David
Clarke, Thomas C'b'dge,A'rie	Evans, John (Newton)
Cocks, Rt Hon M. (B'stol S)	Faulds, Andrew
Cohen, Stanley	Fletcher, Ted (Darlington)
Coleman, Donald	Foot, Rt Hon Michael
Concannon, Rt Hon J. D.	Forrester, John
Cook, Robin F.	Foster, Derek

Foulkes, George	O'Neill, Martin
Fraser, J. (Lamb'th, N'w'd)	Orme, Rt Hon Stanley
Freeson, Rt Hon Reginald	Palmer, Arthur
Garrett, John (Norwich S)	Park, George
Garrett, W. E. (Wallsend)	Parker, John
Golding, John	Parry, Robert
Graham, Ted	Pavitt, Laurie
Hamilton, James (Bothwell)	Penhaligon, David
Hardy, Peter	Race, Reg
Harrison, Rt Hon Walter	Radice, Giles
Hart, Rt Hon Dame Judith	Rees, Rt Hon M (Leeds S)
Hattersley, Rt Hon Roy	Richardson, Jo
Haynes, Frank	Roberts, Allan (Bootle)
Healey, Rt Hon Denis	Roberts, Ernest (Hackney N)
Heffer, Eric S.	Roberts, Gwilym (Cannock)
Hogg, N. (E Dunb't'nshire)	Robertson, George
Holland, S. (L'b'th, Vauxh'll)	Robinson, G. (Coventry NW)
Homewood, William	Rooker, J. W.
Hooley, Frank	Ross, Ernest (Dundee West)
Horam, John	Rowlands, Ted
Howell, Rt Hon D.	Sever, John
Hoyle, Douglas	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	Silkin, Rt Hon S. C. (Dulwich)
John, Brynmor	Silverman, Julius
Johnson, James (Hull West)	Skinner, Dennis
Johnson, Walter (Derby S)	Soley, Clive
Jones, Rt Hon Alec (Rh'dda)	Spearing, Nigel
Jones, Barry (East Flint)	Spriggs Leslie
Kaufman, Rt Hon Gerald	Stallard, A. W.
Kerr, Russell	Steel, Rt Hon David
Kilroy-Silk, Robert	Stoddart, David
Lamond, James	Stott, Roger
Leadbitter, Ted	Strang, Gavin
Leighton, Ronald	Straw, Jack
Lestor, Miss Joan	Thomas, Dafydd (Merioneth)
Lewis, Ron (Carlisle)	Thorne, Stan (Preston South)
Litherland, Robert	Tilley, John
Lofthouse, Geoffrey	Tinn, James
Lyons, Edward (Bradf'd W)	Torney, Tom
McCartney, Hugh	Urwin, Rt Hon Tom
McDonald, Dr Oonagh	Varley, Rt Hon Eric G.
McElhone, Frank	Wainwright, E.(Dearne V)
McGuire, Michael (Ince)	Wainwright, R.(Colne V)
McKay, Allen (Penistone)	Weetch, Ken
MacKenzie, Rt Hon Gregor	Welsh, Michael
McTaggart, Robert	White, Frank R.
McWilliam, John	White, J. (G'gow Pollok)
Marks, Kenneth	Whitehead, Phillip
Marshall, Dr Edmund (Goole)	Whitlock, William
Marshall, Jim (Leicester S)	Wigley, Dafydd
Martin, M(G'gow S'burn)	Willey, Rt Hon Frederick
Mason, Rt Hon Roy	Williams, Rt Hon A.(S'sea W)
Maxton, John	Wilson, Gordon (Dundee E)
Maynard, Miss Joan	Winnick, David
Mikardo, Ian	Woodall, Alec
Millan, Rt Hon Bruce	Woolmer, Kenneth
Miller, Dr M. S. (E Kilbride)	Wright, Sheila
Mitchell, Austin (Grimsby)	Young, David (Bolton E)
Morris, Rt Hon A. (W'shawe)
Morris, Rt Hon C. (O'shaw)	Tellers for the Ayes:
Moyle, Rt Hon Roland	Mr. Lawrence Cunliffe and
Newens, Stanley	Mr. George Morton.
Oakes, Rt Hon Gordon
NOES
Adley, Robert	Bennett, Sir Frederic (T'bay)
Aitken, Jonathan	Benyon, Thomas (A'don)
Alexander, Richard	Benyon, W. (Buckingham)
Alison, Rt Hon Michael	Best, Keith
Arnold, Tom	Bevan, David Gilroy
Aspinwall, Jack	Biffen, Rt Hon John
Atkins, Robert(Preston N)	Biggs-Davison, Sir John
Atkinson, David (B'm'th,E)	Blackburn, John
Baker, Nicholas (N Dorset)	Blaker, Peter
Banks, Robert	Body, Richard
Beaumont-Dark, Anthony	Bonsor, Sir Nicholas

Boscawen, Hon Robert	Hampson, Dr Keith
Bottomley, Peter (W''wich W)	Hannam, John
Bowden, Andrew	Haselhurst, Alan
Boyson, Dr Rhodes	Hastings, Stephen
Braine, Sir Bernard	Havers, Rt Hon Sir Michael
Bright, Graham	Hayhoe, Barney
Brinton, Tim	Heddle, John
Brittan, Rt. Hon. Leon	Heseltine, Rt Hon Michael
Brooke, Hon Peter	Hicks, Robert
Brotherton, Michael	Higgins, Rt Hon Terence L.
Browne, John (Winchester)	Hill, James
Bruce-Gardyne, John	Hogg, Hon Douglas (Gr'th'm)
Bryan, Sir Paul	Holland, Philip (Carlton)
Buchanan-Smith, Rt. Hon. A.	Hordern, Peter
Buck, Antony	Howell, Rt Hon D. (G'ldf'd)
Budgen, Nick	Howell, Ralph (N Norfolk)
Bulmer, Esmond	Hunt, David (Wirral)
Butcher, John	Hunt, John (Ravensbourne)
Cadbury, Jocelyn	Irvine, Bryant Godman
Carlisle, Kenneth (Lincoln)	Irving, Charles (Cheltenham)
Carlisle, Rt Hon M. (R'c'n)	Jenkin, Rt Hon Patrick
Chalker, Mrs. Lynda	Jessel, Toby
Channon, Rt. Hon. Paul	Johnson Smith, Sir Geoffrey
Chapman, Sydney	Jopling, Rt Hon Michael
Churchill, W. S.	Joseph, Rt Hon Sir Keith
Clark, Hon A. (Plym'th, S'n)	Kaberry, Sir Donald
Clark, Sir W. (Croydon S)	Kershaw, Sir Anthony
Clarke, Kenneth (Rushcliffe)	Kimball, Sir Marcus
Cockeram, Eric	King, Rt Hon Tom
Colvin, Michael	Knight, Mrs Jill
Cope, John	Knox, David
Costain, Sir Albert	Lamont, Norman
Cranborne, Viscount	Lang, Ian
Critchley, Julian	Latham, Michael
Crouch, David	Lawrence, Ivan
Dickens, Geoffrey	Lee, John
Dorrell, Stephen	Lennox-Boyd, Hon Mark
Douglas-Hamilton, Lord J.	Lester, Jim (Beeston)
Dover, Denshore	Lewis, Kenneth (Rutland)
du Cann, Rt Hon Edward	Lloyd, Ian (Havant & W'loo)
Dunn, Robert (Dartford)	Lloyd, Peter (Fareham)
Durant, Tony	Loveridge, John
Eden, Rt Hon Sir John	Luce, Richard
Edwards, Rt Hon N. (P'broke)	Lyell, Nicholas
Eggar, Tim	Macfarlane, Neil
Elliott, Sir William	MacGregor, John
Eyre, Reginald	MacKay, John (Argyll)
Fairbairn, Nicholas	Macmillan, Rt Hon M.
Fairgrieve, Sir Russell	McNair-Wilson, M. (N'bury)
Faith, Mrs Sheila	McNair-Wilson, P. (New F'st)
Farr, John	Major, John
Fell, Sir Anthony	Marland, Paul
Fenner, Mrs Peggy	Marten, Rt Hon Neil
Finsberg, Geoffrey	Maude, Rt Hon Sir Angus
Fisher, Sir Nigel	Mawby, Ray
Fletcher, A. (Ed'nb'gh N)	Mawhinney, Dr Brian
Fletcher-Cooke, Sir Charles	Maxwell-Hyslop, Robin
Fookes, Miss Janet	Mayhew, Patrick
Forman, Nigel	Mellor, David
Fowler, Rt Hon Norman	Miller, Hal (B'grove)
Fox, Marcus	Mills, Iain (Meriden)
Fraser, Peter (South Angus)	Mills, Sir Peter (West Devon)
Fry, Peter	Miscampbell, Norman
Gardner, Edward (S Fylde)	Mitchell, David (Basingstoke)
Garel-Jones, Tristan	Moate, Roger
Glyn, Dr Alan	Montgomery, Fergus
Goodhart, Sir Philip	Moore, John
Goodhew, Sir Victor	Morris, M. (N'hampton S)
Goodlad, Alastair	Morrison, Hon C. (Devizes)
Gorst, John	Morrison, Hon P. (Chester)
Grant, Anthony (Harrow C)	Mudd, David
Gray, Hamish	Murphy, Christopher
Greenway, Harry	Myles, David
Griffiths, E.(B'y St. Edm'ds)	Neale, Gerrard
Griffiths, Peter Portsm'th N)	Needham, Richard
Grist, Ian	Neubert, Michael
Grylls, Michael	Newton, Tony
Gummer, John Selwyn	Normanton, Tom
Hamilton, Hon A.	Onslow, Cranley
Hamilton, Michael (Salisbury)	Osborn, John

Page, John (Harrow, West)	Squire, Robin
Page, Richard (SW Herts)	Stainton, Keith
Parkinson, Rt Hon Cecil	Stanbrook, Ivor
Parris, Matthew	Stanley, John
Patten, John (Oxford)	Steen, Anthony
Pawsey, James	Stevens, Martin
Percival, Sir Ian	Stewart, A.(E Renfrewshire)
Pink, R. Bonner	Stewart, Ian (Hitchin)
Pollock, Alexander	Stokes, John
Porter, Barry	Stradling Thomas, J.
Prentice, Rt Hon Reg	Tapsell, Peter
Price, Sir David (Eastleigh)	Taylor, Teddy (S'end E)
Proctor, K. Harvey	Tebbit, Rt Hon Norman
Raison, Rt Hon Timothy	Temple-Morris, Peter
Rathbone, Tim	Thomas, Rt Hon Peter
Rees, Peter (Dover and Deal)	Thompson, Donald
Rees-Davies, W. R.	Thorne, Neil (Ilford South)
Renton, Tim	Townend, John (Bridlington)
Rhodes James, Robert	Townsend, Cyril D, (B'heath)
Rhys Williams, Sir Brandon	Trippier, David
Ridley, Hon Nicholas	Trotter, Neville
Ridsdale, Sir Julian	van Straubenzee, Sir W.
Rifkind, Malcolm	Vaughan, Dr Gerard
Roberts, M. (Cardiff NW)	Viggers, Peter
Roberts, Wyn (Conway)	Waddington, David
Rossi, Hugh	Wakeham, John
Rost, Peter	Waldegrave, Hon William
Royle, Sir Anthony	Walker, Rt Hon P.(W'cester)
Rumbold, Mrs A. C. R.	Waller, Gary
Sainsbury, Hon Timothy	Walters, Dennis
St. John-Stevas, Rt Hon N.	Ward, John
Scott, Nicholas	Warren, Kenneth
Shaw, Giles (Pudsey)	Watson, John
Shelton, William (Streatham)	Wells, Bowen
Shepherd, Colin (Hereford)	Wells, John (Maidstone)
Shepherd, Richard	Wheeler, John
Shersby, Michael	Whitney, Raymond
Silvester, Fred	Wickenden, Keith
Sims, Roger	Wilkinson, John
Skeet, T. H. H.	Winterton, Nicholas
Smith, Dudley	Wolfson, Mark
Smith, Tim (Beaconsfield)	Young, Sir George (Acton)
Speed, Keith	Younger, Rt Hon George
Speller, Tony
Spence, John	Tellers for the Noes:
Spicer, Jim (West Dorset)	Mr. Anthony Berry and
Spicer, Michael (S Worcs)	Mr. Carol Mather.
Sproat, Iain

Question accordingly negatived.