Commons Sitting of 14 July 1987

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS

    ESSEX BILL [Lords]
    Considered.
    Amendments agreed to.
    To be read the Third time.

    UNIVERSITY COLLEGE LONDON BILL [Lords]
    To be read a Second time tomorrow.
Oral Answers to Questions
  DEFENCE

    Departmental Legislation
    Mr. Thurnhamasked the Secretary of State for Defence what representations he has received about proposals in the Queen's Speech for which he has responsibility; and if he will make a statement.
    The Secretary of State for Defence (Mr. George Younger): I believe that the Government's defence policy as set out in the Gracious Speech has received wide support.
    Mr. Thurnham: Following the clear statement of support for Trident in the Queen's Speech and the placing of further contracts for the development of the Trident base, will my right hon. Friend tell us the value of those contracts and how many jobs can be expected to arise from them?
    Mr. Younger: The contract to which my hon. Friend refers is worth £120 million and will bring 600 jobs to the west of Scotland. That will take the total value of contracts awarded to date for the development of Faslane and Coulport to £255 million. At its peak, this development programme will create 2,500 construction jobs in the west of Scotland. It is worth recording that had the Queen's Speech reflected the views of the Opposition parties, none of that investment would be taking place and Scotland would have been robbed of thousands of job opportunities.
    Mr. Douglas: The Secretary of State will be aware of the launch of a type 23 frigate at Yarrows. Notwithstanding his comments on Trident, when does the right hon. Gentleman expect to place further orders for type 23 frigates and fulfil his commitment to order at least three frigates a year?
    Mr. Younger: I note the hon. Gentleman's questions. We shall give further consideration to the ordering of type
    958
    23 frigates later this year, and we have given a clear undertaking to maintain the Royal Navy at about 50 frigates, at which it has been for some time.
    Sir Antony Buck: My right hon. Friend is right to say that what was outlined in the Queen's Speech about defence caused considerable satisfaction to all Conservative Members and to many reasonable Members on the Opposition Benches, too. Does he agree that if the Opposition's defence policies were to be adopted there would be little chance of making progress with the mutual and balanced force reduction and strategic arms reduction talks and obtaining what we all want—disarmament on both sides of the iron curtain?
    Mr. Younger: I entirely agree with my hon. and learned Friend. I understand that the official Opposition would have given away all our bargaining counters before they started negotiations.
    Mr. Denzil Davies: The House will be intrigued by the Secretary of State's statement that there was wide support for the Government's defence policy. That certainly did not extend to the constituency of Ayr. However, we are pleased that after three recounts the Secretary of State was able to return to the House of Commons.
    Why is the right hon. Gentleman postponing the debate on the defence White Paper until the end of the year? Clearly there must be a major defence review, which will leave our armed forces much weaker than they were a few years ago.
    Mr. Younger: I warmly welcome the right hon. Gentleman back to his position in the House in his new role as the reluctant debutante on the Opposition Front Bench. I assure him that we shall do our best to make his stay there as pleasant as possible.
    The right hon. Gentleman knows that the Gracious Speech clearly stated the Government's commitment to a strong defence policy. That is what we propose to proceed with in future.
    The matter of a debate is for my right hon. Friend the Leader of the House.

    European Fighter Aircraft
    Mr. Jackasked the Secretary of State for Defence if he will make a statement on the progress of the European fighter aircraft project.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. Tim Sainsbury): The project definition phase for the European fighter aircraft ended last September. The four nations are currently assessing the outcome of this phase before deciding whether to proceed to full development. We expect to be in a position to take our decision in the autumn.
    Mr. Jack: I thank my hon. Friend for his reply, because Fylde houses the headquarters of the British Aerospace military aircraft division and it has no doubt about the benefits of the European fighter aircraft programme. Will my hon. Friend confirm that he is eager to see British firms participating in the European fighter aircraft programme? And, to that end, will he be holding discussions with Rolls-Royce, British Aerospace and the three NATO countries that are participating in the project?
    Mr. Sainsbury: I am sure that my hon. Friend—as was his predecessor—and his neighbour, my hon.

    959
    Friend the Member for South Ribble (Mr. Atkins), will be energetic spokesmen for their constituencies' interests. I can assure my hon. Friend that the Government are planning on the basis of the United Kingdom playing a full part in the EFA programme. Discussions with our NATO Allies and the principal contractors continue, particularly through the forum of the international programme office.
    Mr. Cryer: Will the European fighter aircraft be a better aircraft than the Jaguar or the Tornado, 49 of which have been lost since 1979 at a cost of about £430 million? Will the Minister tell us why we need these sophisticated aircraft when one can fly to Red Square in a single-engined Cessna?
    Mr. Sainsbury: The hon. Gentleman will find that the aircraft to which he refers are highly thought of, and our success in selling the Tornado overseas is testimony to the effectiveness of that aircraft.
    Mr. Stern: I congratulate my hon. Friend on his new post. Did he notice during the recent election campaign how the only substitute that the principal Opposition party could find for its defence policy was to talk down EFA at every opportunity? That was especially the Labour party's policy in constituencies such as mine where parts of the aircraft are being built. Will my hon. Friend confirm, not only that an existing engine—the RB 199—has been chosen as the pre-production engine, but that the Government have the faith in the EFA that the Opposition are determined to try to destroy at every opportunity?
    Mr. Sainsbury: I thank my hon. Friend for his kind remarks. It is regrettable that, all too often, Opposition Members seem to find satisfaction in criticising British products, in defence or other areas. The Government are determined that British firms will play a full part in the project. We believe that, both in engines and other parts, we have some excellent products to contribute to the EFA programme.
    Mr. McNamara: I welcome the Minister to the Dispatch Box and say that we think that his is a good appointment, so far as the Prime Minister's appointments go.
    The hon. Gentleman will be aware that, far from running down the EFA, the Opposition said that it was going to be a possible casualty because of the Government's foolishness in pursuing the Trident programme. How firm is the RAF's commitment to the EFA?
    Mr. Sainsbury: I thank the hon. Gentleman for his somewhat barbed compliments. He has a novel way of putting these things.
    The Government's commitment to the EFA project, which, as I said, obviously reflects the commitment of the services, is very strong indeed. It is surprising that the hon. Gentleman should think that the project might be a casualty of the Trident programme. He should recall that the Tornado programme was a larger part of the total defence procurement programme than Trident is or is likely to be.
    Mr. Wilkinson: Will my hon. Friend confirm that the European fighter aircraft is in the long-term costings? Although there has been no decision on the development
    960
    of the aircraft as yet, will he give some indication of the numbers that he would expect to come into the front line were an order to go ahead for the development phase?
    Mr. Sainsbury: I can confirm that the European fighter aircraft is in the long-term costings. Obviously, it is too early to forecast with certainty the eventual size of a United Kingdom purchase. However, the work-sharing agreement for development is based on our declared requirement for 250 aircraft.

    Strategic Defence Initiative
    Mr. Wallaceasked the Secretary of State for Defence if he is satisfied with the level of British participation in strategic defence initiative research funded by the Government of the United States of America.
    Mr. Younger: A sound start was made in 1986 in the first year of participation. A broadly-based series of awards were placed on contract to the value of $34 million. Vigorous efforts continue to be made to secure SDI research business, both by industry and by the academic community in the United Kingdom, with the active and day-to-day support of my staff in the SDI participation office.
    Mr. Wallace: The right hon. Gentleman's predecessor is on record as saying that he fully expected British participation to be on a scale commensurate with Britain's industrial base. Does the Secretary of State feel that the $34 million contract so far gained is on that scale, and, if not, how far does it fall short? Is is not becoming increasingly clear that the Americans were far more interested in getting a cloak of political respectability for their project through British participation than in the project having anything to do with the advancement of Britain's technological interests, which, as the Select Committee on Defence said, would be better achieved through non-military collaborative projects?
    Mr. Younger: I note what the hon. Gentleman said, but I do not agree with the latter part of his question. I am disappointed that during the last six months there have not been further announcements of contracts under the SDI programme. The participation office is making every effort to progress the other applications that are in the pipeline and that will be coming forward in the next few months. The reason for this lack of contracts is due largely to the drop in funding of the SDI programme in the United States. I very much hope that British participation will revive when that picks up.
    Sir John Farr: Is my right hon. Friend aware that British arms exporters who have been doing so brilliantly in recent months are becoming very disillusioned with the rewards from SDI? The net return now and in the immediate future seems to be negligible compared with that promised by my hon. Friend's predecessor two or three years ago.
    Mr. Younger: I do not agree with my hon. Friend that the returns will be negligible. We must remember that this is a very long-term programme stretching over many years. We made a good start in getting participation for British firms, but there has been an unsatisfactory response in the last six months. We very much hope that this will improve. My hon. Friend is perfectly correct about defence export sales generally. Our export sales are going extremely well.

    961
    It is worth recording that had they won the election the Opposition proposed to wind up the defence export sales organisation. That would have been very bad news.
    Mr. Heffer: Has the right hon. Gentleman taken note of the exchange in the proceedings in Washington involving Colonel Oliver North, in which he talked about some unofficial British organisation tied up with the—[interruption.]
    Mr. Speaker: Order. The hon. Gentleman should make his supplementary relevant to the question.
    Mr. Heffer: It is very relevant, Mr. Speaker, because want to know whether this has had anything to do with the discussions with the United States on this very question of SDI.
    Mr. Younger: The answer to the hon. Gentleman's question is no, I do not think that it has. I have seen the report of a press conference about this and it seems to be in the realms of pure fantasy.
    Mr. Hill: No doubt my right hon. Friend will recall that we had hoped to participate far more in the research and development programme for SDI, stretching into the mid-1990s. Will he tell his counterparts in the United States that the whole House is rather disappointed at the amount of contracts that are coming our way? Will there be any diminution in the programme if a President who is not quite so pro-SDI is elected at the next presidential election?
    Mr. Younger: I am grateful to my hon. Friend. I shall certainly draw the attention of my colleagues in the United States to the points that he has made in the House today. I do not think it likely that any United States Administration will abandon research into these important techniques, because that would leave this area entirely free to the Soviet Union, which has a large research programme in this sphere.

    Low-Flying Aircraft
    Mr. Campbell-Savoursasked the Secretary of State for Defence how many representations he has received on the question of low-flying aircraft since the beginning of June.
    The Parliamentary Under-Secretary of State for the Armed Forces (Mr. Roger Freeman): Between I June and 7 July 1987 the Ministry of Defence received 542 inquiries or complaints about military aircraft flying. This compares with 683 for the same period in 1986.
    Mr. Campbell-Savours: If the number of pilots has not increased since 1979, why has the number of low-flying sorties increased from 71,000 in 1979 to 156,000 this year? Could the answer lie in the Robson report, which suggests that morale among military pilots is collapsing and that 57 per cent. of pilots who fulfilled eight years of training have now left the service? Could it be that the Ministry is now having to train pilots far more to ensure that it has fully-trained pilots to replace those who have left? Is that why the Lake District is being plagued by low-flying exercises?
    Mr. Freeman: No, Sir. Morale in the Royal Air Force is excellent. The premature voluntary retirement rates for pilots are decreasing and are substantially lower in absolute terms than they were when the Labour Government were last in power. We need more sorties because we have introduced the Tornado aircraft into
    962
    service. Clearly, pilots need to be trained to use them. However, it would seem that the number of low-flying sorties needed has now reached a plateau.
    Mr. Jopling: I recognise that low-flying exercises are both militarily necessary and dangerous, but there have been reports that the recent tragic accident over Keswick in the constituency of the hon. Member for Workington (Mr. Campbell-Savours) was caused by a head-on collision. Will the Minister set up an inquiry to establish whether it is really necessary for aircraft to fly in opposite directions in these essential but dangerous exercises?
    Mr. Freeman: I can tell my right hon. Friend that the accident trend is definitely down, and that 1986 was the best year—[Interruption.] I am coming on to answer the question. As I said, 1986 was the best year for the lowest number of aircraft accidents. As regards the tragic accident in Cumbria, I have to await the board of inquiry report, but I shall bear in mind what my right hon. Friend has said.
    Mrs. Margaret Ewing: Will the Minister and the House join me in ensuring that our sympathy is extended to the family of Flight Lieutenant Hill from RAF Lossiemouth in my constituency, who was the most recent victim of such an accident, which involved a Jaguar jet? Will he advise me what prior warning is now being given to those in the direct flight path of aircraft on such exercises in the light of the incident over Orkney last year when air traffic control at Kirkwall was not notified of such an exercise taking place? Will the Minister assure me that he will reject the blandishments of the hon. Member for Workington (Mr. Campbell-Savours) to the effect that all such exercises should be directed over the Highlands and Islands of Scotland? The people in that area are just as vulnerable as people elsewhere.
    Mr. Freeman: I am sure that the whole House will join the hon. Lady in paying tribute to the loyalty, skill and bravery of Royal Air Force pilots. The Ministry of Defence writes to hon. Members, representatives of the National Farmers Union and the press to warn them of low-flying exercises, but we cannot do that for each individual sortie.
    Mr. Bill Walker: Does my hon. Friend agree that the reason why the Royal Air Force has to conduct such sorties is that in modern fighter pilot conditions and raiding environments with strike aircraft the only way to survive is to fly low and fast? It is essential that our pilots are capable of doing that in peacetime in case they are ever exposed to wartime conditions in which, if we were not prepared, the ghastly attrition rate would be far more than we could afford.
    Mr. Freeman: I am grateful to my hon. Friend. Low-flying training is the price of freedom, which the RAF has to pay on our behalf in order to defend our skies. Low-flying exercises are necessary to train our pilots to fly underneath enemy radar, and in wartime they would have to fly considerably lower than 250 ft.
    Mr. McNamara: I am sure that the Opposition welcome the Minister's statement that RAF pilots flying conventional aircraft are the price of freedom, as opposed to the Government's policy that the price of freedom is mass extermination. The Minister is reported to have said, while the House was in recess, that a certain attrition rate was to be expected in this type of training. What rate of

    963
    attrition in terms of men, machines and cost is the RAF prepared to accept in this context, and is the Minister satisfied with the present training procedures?
    Mr. Freeman: Yes, we are satisfied with the present safety procedures. Sadly, with military aircraft, the attrition rate will clearly be higher than with civil aircraft, but, as I have said, we have an excellent safety record. The trend is down and our record is admired by many other countries and air forces.

    Service Establishments (Dispersal)
    Mr. Heathcoat-Amoryasked the Secretary of State for Defence if he has plans to devolve more service establishments and jobs to Scotland and the north of England.
    Mr. Younger: I am anxious to improve the geographic spread of defence employment, particularly in areas of high unemployment. Such moves must, however, be justifiable in both operational and economic terms.
    Mr. Heathcoat-Amory: Does my right hon. Friend agree that moving jobs northward is helpful to the regional economy, without requiring artificial subsidies? Can he tell us what progress has been made, whether earlier plans to transfer jobs to the Glasgow area have borne fruit and to what extent the jobs have been filled by local recruitment?
    Mr. Younger: I am grateful to my hon. Friend. The Glasgow programme is a good example of the Government's dispersal policy, with 1,330 extra jobs established there, of which 1,000 have been filled by local recruitment. The overwhelming majority of the jobs were dispersed from the south of England. We recognise that those jobs should be offset against further moves from posts out of London, but the net result at the end of the programme should be a gain of 1,400 jobs for Glasgow, offset by a similar loss of posts from London.
    Mr. Cartwright: As it is Government policy to provide more rather than fewer jobs in inner London, will the Secretary of State resist the temptation to remove any defence jobs from areas such as Woolwich, which has suffered massively from the systematic transfer of defence jobs in the past few years and where unemployment is still more than 16 per cent.?
    Mr. Younger: I very much appreciate that valid constituency point. It is established policy in the Department that every effort should be made to relocate work to the regions wherever it proves economically and operationally viable, but, of course, we also take into account the interests of the other areas concerned.
    Mr. Robert Banks: Will my right hon. Friend give a categorical assurance that there are no plans to remove any service jobs from Harrogate to Glasgow or anywhere else?
    Mr. Younger: That would certainly not be in tune with the Government's policy, which is to disperse jobs to other areas from London, not from Harrogate.
    Mr. Beggs: When considering relocating jobs to the north of England and to Scotland, will the Minister bear in mind the very high rate of unemployment in Northern Ireland?
    Mr. Younger: I certainly take that very much into account. As the hon. Gentleman knows, we place a large
    964
    amount of defence contract work in Northern Ireland—not least the order placed by my Department with Harland and Wolff for a new auxiliary oiler replenishment vessel, which I very much hope will be completed to price and on time.
    Mr. Holt: Will my right hon. Friend take note of the Government's recent commitment to augmenting the Merchant Marine in the event of war? Does he agree that it should be based in the north-east of England, preferably on Teesside, and will he ensure that it is not based in London?
    Mr. Younger: I note my hon. Friend's comments. I am very conscious of the defence work carried out in my hon. Friend's area in the north-east of England. It is a highly valid part of our defence industry.
    Mr. Grocott: If the Minister is keen to secure defence jobs in areas of high unemployment, will he scrap the absurd suggestion to privatise jobs at COD Donnington, threatening the livelihood of more than 400 employees?
    Mr. Younger: It is a matter, not of threatening jobs in terms of the area, but of trying to obtain better value for money in the way in which existing establishments are run. That must be in everyone's interests, because if the job is done more effectively there will be more money available for other defence work.

    Bramley Camp, Basingstoke
    Mr. Hunterasked the Secretary of State for Defence if he will make a statement on the future of Bramley camp, near Basingstoke.
    Mr. Freeman: My Department is considering the retention of part of the land for use for Army dry training and disposal of the remaining portion. It will be discussing its proposals in due course with the local authority.
    Mr. Hunter: Does my hon. Friend appreciate that would were the Property Services Agency to maximise the realisation of this capital asset, there would be a wholesale housing development that would run counter to the interests of local farmers, flout the wishes of county and district planners and go against the wishes of many of my constituents, particularly those in the villages of Bramley and Sherfield on Loddon? Will my hon. Friend take those factors as well as the economic factors into account?
    Mr. Freeman: I am sure that my hon. Friend will appreciate the great pressure upon the Ministry of Defence to sell surplus land. However, I can give my hon. Friend the assurance that there will be no wholesale housing development on that land. At a date convenient to my hon. Friend, I hope to be able to visit Bramley camp with him.

    MINIS
    Mr. Forthasked the Secretary of State for Defence if he will make a statement on the progress of the management information system for Ministers programme in the Ministry of Defence.
    Mr. Younger: The MINIS programme has been evolving steadily over the four years since it was introduced into my Department in 1983. It provides Ministers and top management with an overview of organisation, costs and activities throughout the Ministry and the service commands. For the future, and in line with

    965
    the information requirements of the financial management initiative, we shall be further developing our management information systems to meet the information needs of top management and generally to stimulate a more systematic approach to monitoring the cost-effective use of resources at all levels.
    Mr. Forth: I thank my right hon. Friend for that most encouraging reply. What further proposals does he have for linking MINIS with further aspects of the financial management initiative to gain more benefits in efficiency and operational effectiveness?
    Mr. Younger: I very much appreciate my hon. Friend's remarks. MINIS has been only loosely linked with other financial management initiatives, staff responsibility budgets and executive responsibility budgets. Proposals are currently under consideration to encourage those management initiatives within a strategic framework spanning the Department.
    Ms. Clare Short: May I ask the Secretary of State to include in this review the wastage caused by the out-of-date and unjust rules of the Ministry of Defence that require pregnant women to resign? I understand that, in particular, nurses employed by the Ministry of Defence must resign and therefore lose their seniority when they become pregnant. Is not this regulation out of date and outrageous in this day and age? Surely this regulation should be reviewed in the case of women serving in the Secretary of State's Department.
    Mr. Younger: I appreciate the hon. Lady's question. Of course, we review any out-of-date regulations as often as we can. I might point out that ladies in such a position as outlined by the hon. Lady are perfectly free to rejoin the services if they wish.
    Mr. Conway: Has the management information system brought to my right hon. Friend's attention the fact that the Territorial Army provides more than 50 per cent. of the 1st British Corps and most of our national defence at less than 4 per cent. of the Army budget? Is that not more than enough justification for the Territorial enhancement programme to which my right hon. Friend must stick?
    Mr. Younger: I entirely agree with my hon. Friend. Last week I was extremely glad to have the opportunity to address the Council of Territorial Auxiliary and Volunteer Reserve Associations and to make some of the points raised by my hon. Friend to it. There is no doubt that the contribution, both in quantity and quality, of the Territorial Army is now an absolutely major factor in the efficiency of the British Army.

    Europe (Conventional Defence)
    Mr. Burtasked the Secretary of State for Defence what plans he has to meet the Soviet Defence Minister to discuss conventional defence in Europe.
    Mr. Younger: I have no plans to meet the Soviet Defence Minister. We are, however, taking an active and positive part in the continuing negotiations on mutual and balanced force reductions dealing with conventional forces, and in the discussions on the mandate for new negotiations on conventional stability.
    Mr. Burt: I thank my right hon. Friend for that reply. Although he has no plans to see his counterpart in the
    966
    Soviet Union, what progress has been made towards establishing at least a basis for future conventional arms reduction talks?
    Mr. Younger: The North Atlantic Council communiqué, which was issued in June 1987, repeated the priority that NATO Foreign Ministers attach to agreeing a mandate for new negotiations covering the whole of Europe, from the Atlantic to the Urals, The new negotiations will cover both conventional stability, that is to say lower force levels and further confidence, and security-building measures building upon the Stockholm document of September 1986.
    Dr. Owen: Does the Secretary of State support direct negotiations between the NATO and Warsaw Pact organisations, and if not, why not?
    Mr. Younger: All the negotiations between East and West take place in different fora according to the subject of the negotiations, as I am sure the right hon. Gentleman knows. Considerable difficulties were faced in finding the right forum for the part of the negotiations that the right hon. Gentleman has in mind, but I believe that they are now resolved and that the discussions can proceed.
    Mr. Ward: In any discussions on disarmament, will my right hon. Friend pay especial attention to chemical arid biological weapons? Their inclusion in any negotiations is of great importance to the West.
    Mr. Younger: I agree with my hon. Friend. The Government have long felt that there should be a complete worldwide ban on all chemical and biological weapons. We are making this a major feature of our suggested negotiating position for all further arms reduction talks.
    Mr. Denzil Davies: Is there a common negotiating position within NATO on conventional force reductions? In other words, is NATO in a position to start negotiating? Secondly, will any negotiations in respect of battlefield nuclear weapons be linked to the conventional talks, or dealt with separately?
    Mr. Younger: There is clear agreement among the NATO Allies on how to proceed with the talks. We are extremely disappointed, however, that the East has still not responded substantively to the Western proposal of December 1985 to build on areas of agreement between the two sides. Battlefield nuclear weapons will not be addressed in the current INF negotiations, but will be dealt with in subsequent negotiations.

    Falkland Islands
    Sir John Biggs-Davisonasked the Secretary of State for Defence if he will make a statement about the future defence of the Falkland Islands.
    The Minister of State for the Armed Forces (Mr. Ian Stewart): As announced in the Gracious Speech, the Government will stand by their pledges to the people of the Falkland Islands, while seeking more normal relations with Argentina. We shall continue to maintain a military presence at a level necessary to deter aggression arid defend the islands.
    Sir John Biggs-Davison: Will Ministers regularly inform the House of the progressive fall in the cost of this necessary and righteous commitment'? To what extent can the use of the unrivalled training facilities in the Falklands be set against the expense?
    Mr. Stewart: I can assure my hon. Friend that we shall keep the House informed in the normal way through the Defence White Paper and other means of our efforts in the Falkland Islands. I endorse what he said about the value of the Falkland Islands in providing training for all our armed forces. We fully appreciate the importance of that.
    Mr. Flannery: Would it not help the cause of peace in the Falklands if the Government took a far more vigorous initiative in organising discussions with the Government of Argentina? Does the Minister realise that the position of the Falklands empowers the military caste in Argentina to be a permanent threat to President Alfonsin and the democratic forces in Argentina? It is therefore a matter of real necessity for the preservation of democracy in Argentina for us to take the initiative in discussions about the Falklands.
    Mr. Stewart: Relations between the United Kingdom and Argentina are primarily a matter for my right hon. and learned Friend the Foreign Secretary. We want the restoration of normal relations with Argentina, and we hope that in due course they will come about.
    Mr. Roger King: Can my hon. Friend confirm that since the construction of the new Falklands airport the cost of defending the Falklands has been reduced accordingly?
    Mr. Stewart: It is true that the construction of the Mount Pleasant complex and the airport permits rapid reinforcement and has enabled some reduction in force numbers to be brought about. That has reduced, and will continue to reduce, the cost of maintaining the defence of the islands.
    Mr. Ashdown: For how long do the Government intend to persist in their policy of privatising the defence of the Falklands by using Bristow Helicopters and flying foreign-made aircraft to support our armed services? Are the armed services not to be excluded from the Government's obsession with privatisation? Does the Minister not realise the sense of outrage that is felt in constituencies such as mine that are suffering massive job losses because the Government will not provide the helicopters that our armed services need, while providing long-term work for private companies using foreign-made aircraft?
    Mr. Stewart: We have provided a large number of new helicopters. The hon. Gentleman made his constituency point. We shall continue to provide our armed forces in the Falkland Islands, and elsewhere, with the equipment that they need.

    Trident
    Mr. Brandon-Bravoasked the Secretary of State for Defence if he will make a statement on the ordering of a second Trident submarine.
    Mr. Sainsbury: We plan to place the order for the second Trident submarine shortly.
    Mr. Brandon-Bravo: Will my hon. Friend confirm that this second submarine, and subsequent submarines, will be at a lower price than the initial purchase? Can he add further to the comments of our right hon. Friend the Secretary of State for Defence, who, in answer to the first question, spoke about the creation of jobs in Scotland? Is there not also a case for illustrating the enormous impact on employment that that will have elsewhere in the United
    968
    Kingdom? Can he comment further on the cost of this programme relative to the dollar, because for many months the strong pound appears to have been making the Trident programme cheaper and cheaper?
    Mr. Sainsbury: Yes, we would expect the unit priced of follow-on submarines to be lower than that for the SSBN-05. The direct job creation effect of the second Trident order will be about 7,000 jobs, which will be concentrated mainly in the north of England, and, as my right hon. Friend said, in Scotland. Only a minority of the total cost reflects the purchase in dollars. Clearly, the stronger the pound against the dollar, the lower the cost in terms of sterling.
    Mr. Duffy: Instead of proceeding with this order, would it not be better to equip the lead ship of the type 23 frigate programme with a close-in weapon system, as was confirmed in the press last week? Is not this cheeseparing policy the result of irreconcilable objectives rather than supreme confidence in the effectiveness of the Sea Wolf anti-missile system?
    Mr. Sainsbury: The hon. Gentleman should recognise that the policies of one-sided nuclear disarmament that he and his party advocate have been decisively rejected. Therefore, there is no question of cancelling the second order for Trident.
    Mr. Franks: Is my hon. Friend aware that the parliamentary constituency of Barrow and Furness was the 326th seat to be won by the Government in the recent election? Is that not a tribute to the workers in the shipyards as well as to the Government's policy of maintaining the nuclear deterrent? If, as I understand, the negotiations for Trident 2 have been concluded, will my hon. Friend ensure that the order is placed speedily, without any further delay?
    Mr. Sainsbury: The fact that Barrow and Furness was the 326th Conservative victory was also a tribute to my hon. Friend's energetic work on behalf of his constituents. He will appreciate that such a major order takes time, but we shall certainly place the order as soon as we can.
    Mr. O'Neill: As the Minister has not returned to the question asked by my hon. Friend the Member for Sheffield, Attercliffe, (Mr. Duffy), will he concede that it is disgraceful that our most modern frigate is leaving the docks in a condition that would render it vulnerable if it had to do any service in the Gulf? Does he not agree that our men are entitled to better protection than that which
    Mr. Sainsbury: The hon. Gentleman should appreciate that the prime anti-air attack protection for the frigate is from the vertical launch Sea Wolf system, which is extremely effective. Additional protection, provided by another close-in system, which would add to the cost and the weight of the frigate, would add only little, if any, additional protection from an air attack.

    Helicopter Manoeuvres
    Mr. Wigleyasked the Secretary of State for Defence if he will restrict the extent of armed forces helicopter manoeuvres in upland sheep rearing areas; and if he will make a statement.
    Mr. Freeman: We are advised by the Ministry of Agriculture, Fisheries and Food that there is no evidence

    969
    that noise from low-flying aircraft has any harmful effect on sheep or lambs, during lambing or at other times. None the less, claims for damage or loss with appropriate supporting evidence are considered sympathetically.
    Mr. Wigley: Is the Minister aware that not only low-flying helicopters, but helicopters that land as part of their manoeuvres, have caused abortions in sheep and, therefore, unnecessary losses for farmers? Is he further aware that the RAF locally sometimes has ad hoc agreements with the farmers union to ensure the minimising of such losses? Will he encourage the development of such agreements to keep down the losses for farmers in uplands areas?
    Mr. Freeman: Yes, I agree with the hon. Gentleman, and wherever there are ad hoc agreements between the RAF and landowners and farmers I encourage them. There is an adequate compensation scheme, and if the hon. Gentleman writes to me about any particular incident I shall investigate it.
    Mr. Key: Will my hon. Friend give particular attention to the problem of heavily used training areas where helicopters are part of that training, such as the Salisbury Plain training area? May I thank him for the eternal courtesy and care with which he and his officials cope with complaints from members of the public on this issue? Will he have a word with our right hon. Friend the Secretary of State for Transport about the need to increase controls over microlight aircraft, which are rightly gaining the reputation of being the most unlikely and unhelpful form of recreation?
    Mr. Freeman: I shall certainly convey my hon. Friend's comments to the Department of Transport.

  PRIME MINISTER

    Engagements
    Mr. Fatchettasked the Prime Minister if she will list her official engagements for Tuesday 14 July.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. I was also present at Victoria station to mark the arrival of the King of Morocco. In addition to my duties in the House, I shall be having further meetings later today, including one with the Prime Minister of Sri Lanka.
    Mr. Fatchett: When the Prime Minister said on 27 January 1986. in the middle of the Westland affair, that she did not expect to be Prime Minister by 6 o'clock that evening, what did she mean?
    The Prime Minister: That allegation has been made many times. I have nothing further to add to the many statements and replies that I have already given.
    Mr. Gerald Howarthasked the Prime Minister if she will list her official engagements for Tuesday 14 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Howarth: At a time when teachers are widely welcoming the Government's bold reforms in education, and when the fastest growing teachers' union, the Professional Association of Teachers, is urging no-strike agreements on the Secretary of State, is it not utterly
    970
    disgraceful that a small minority of teachers in England and Wales, although happily not in Staffordshire, are going on strike? Will she condemn that and urge the Secretary of State to introduce his Green Paper as soon as possible?
    The Prime Minister: I agree with my hon. Friend that teachers' strikes are damaging to the education of children, and in some cases they are meant to do just that. My right hon. Friend the Secretary of State for Education arid Science will introduce the Green Paper on new permanent machinery for negotiations as soon as possible, and it is expected that that will include the possibility of no-strike agreements.
    Mr. Kinnock: When the Prime Minister visits the United States this weekend, will she buy a copy of "Spy catcher"?
    The Prime Minister: I thought that the right hon. Gentleman agreed that all members of the security services, present and former, have a duty of confidentiality to the Crown and that he would endeavour to uphold that duty.
    Mr. Kinnock: The duty of confidentiality is vital and it must be honoured, but does the Prime Minister seriously think that the best way to uphold it is to take action in appeal courts in Britain and Australia and to engage in action which, with the arrival of every transatlantic airliner, is being turned into high farce?
    The Prime Minister: How else does the right hon. Gentleman think that one can enforce a duty of confidentiality, except in a court of law?
    Mr. Michael McNair-Wilson: Has my right hon. Friend had a chance to study the judge's comments following the award of more than £1 million to Mr. Samir Aboul-Hosn, who suffered brain damage? Does she think that this country is in danger of entering into an era of defensive medicine? Does she think that this is the time for a Royal Commission on medical negligence and how it is treated?
    The Prime Minister: We have not considered a Royal Commission on medical negligence. The case to which my hon. Friend referred was one in which the courts decided precisely the appropriate damages to be paid. My hon. Friend is aware that we cannot interfere in any way with the decision of the courts, nor, in that case, would we wish to do so. I shall consider further what my hon. Friend has said.
    Mr. Loyden: In view of the Prime Minister's late conversion to a recognition of the crisis in inner cities, will she now consider recent reports which argue that something like £82 billion will be necessary to overcome the problems of the inner cities? Will she therefore revise the Government's non-serious approach on that matter and increase the amounts that will be available next year for local authorities to ensure that inner cities' problems are tackled by the duly democratically elected representatives of the people?
    The Prime Minister: As the hon. Gentleman is aware, one of the difficulties in tackling the problems of the inner cities is that some of the elected Left-wing councils are hostile to private enterprise and hostile to the very businesses that can bring in the extra jobs that the cities need so much. With regard to expenditure. this

    971
    Government have spent more than £2·2 billion since 1979 and that is a very considerable increase in real terms over the expenditure under the previous Administration.
    Mr. Page: Is my right hon. Friend aware that if the news regarding the reduction of gas prices or the reduction in unemployment below 3 million, or news of other benefits such as huge profits for British Steel, had come along a few weeks earlier, not only would we have needed an extension to the Tory side of the House, but the opinions polls would have been increasingly irrelevant? Will my right hon. Friend therefore either ban opinion polls at election time or, if not, will she ensure that the statistical base from which those polls are extrapolated is a little more than simply two people per constituency throughout the country?
    The Prime Minister: There has been a considerable increase in future confidence in the improvement of the economy as the figures have steadily mounted and people have seen that industry is in a very fit and healthy state. I do not think that anything would be gained by banning opinion polls. I am sure that they would still be taken and they would only be leaked. It is far better that they should be open.
    Mr. Steel: When the Prime Minister goes to Washington, will she note the contrast between the democratically elected Congress of the United States currently exposing the existence of a state within a state and her persistent refusal to allow any independent investigation of the quite serious charges raised in Mr. Peter Wright's book about covert operations against a former Prime Minister?
    The Prime Minister: I do not answer for the United States, but I ask the right hon. Gentleman to consider which has the more effective security service.
    Mr. Ward: Will my right hon. Friend reconsider her reply about the inner cities? Does she agree that the most important step to take for the inner cities is to introduce the community charge so that those who vote will be left with the financial responsibility for the way in which they have cast their vote?
    The Prime Minister: Yes. When the community charge is in place and all people properly contribute to the services given by the local authority and for which the local authority is responsible, we shall have much better accountability and that will lead to a much better use of money than at present.
    Mr. Ieuan Wyn Jonesasked the Prime Minister if she will list her official engagements for Tuesday 14 July.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Jones: Is the Prime Minister aware of the concern felt in Wales at the lack of resources in health and social services? Is she aware that the budget of Gwynedd health authority has been so stretched that ambulance journeys to clinics have been cut, hitting low-income families? Is she further aware that last week Gwynedd county council social services department had to cut hack on home help services, hitting the elderly, sick and disabled? Will she encourage the Secretary of State for Wales to fight in the Cabinet for more resources in those areas?
    The Prime Minister: I seem to remember that on a comparatively recent visit to Wales I went to a very new
    972
    hospital, which was one of five major hospitals in Wales. With regard to health in Wales, from 1979 to March 1988 nearly £500 million will have been invested in the capital estate of the hospital and community health services. Expenditure on the National Health Service in Wales has risen by one third, after allowing for general inflation, between 1979–80 and 1987–88. Between 1979 and 1986 the National Health Service in Wales treated 23·6 per cent. more patients than previously.
    Mr. Oppenheim: During the course of her busy day, will my right hon. Friend, when considering the Government's economic policy, give close and careful consideration to comments made by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who said that there was a race on between the economic crisis and the general election? Will she also consider the comment by the hon. Member for Dagenham (Mr. Gould) that there is no immediate prospect of an economic crisis? How does my right hon. Friend square that apparent disagreement? [Interruption.]
    Mr. Speaker: Order. That is rather wide of the Prime Minister's responsibilities.
    Mr. Winnick: Will Customs officials be authorised to take from passengers arriving from the United States copies of Mr. Wright's book? If not, what possible excuse is there for carrying on with the case in Australia? Is the Prime Minister aware that we on the Opposition Benches have no sympathy at all for Wright, a wretched man who is obviously acting out of greed and spite? Is there not now the strongest possible case for a full-scale judicial inquiry into whether MI5 officials carried out subversive and criminal activities against an elected Government in the 1970s?
    The Prime Minister: It is technically possible to introduce a ban by amending the open general import licence. My noble Friend the Secretary of State for Trade and Industry has advised his colleagues against such action, because it is likely to be ineffective. However, the question of possible legal action for an account of profits made from publication of the book in the United States is under consideration. As the hon. Gentleman knows, the purpose of the original case was to uphold the duty of confidentiality, which is necessary for the effectiveness of the service.
    With regard to the other matter, the hon. Gentleman will recall that I made an extensive statement about it on 6 May 1987.
    Mr. Harris: Has my right hon. Friend seen today's report on Trident by the Comptroller and Auditor General? The report states that the estimated cost of that project is likely to be reduced by some £1,500 million. Does that projection not show the wisdom of the Conservative party in sticking to the project? Has my right hon. Friend noticed that the SDP leadership has belatedly come round to supporting Trident?
    The Prime Minister: Yes, I saw that figure. It is good news that the price has come down. It is very effective expenditure on a deterrent for this country.

    Westland plc
    Mr. Dalyellasked the Prime Minister if she will place in the Library a transcript of the television interview on Sunday 7 June with Mr. David Frost in which she referred to the Westland crisis.
    The Prime Minister: I understand that a copy of the transcript is available in the Library.
    Mr. Dalyell: Will the Prime Minister make just one reference to the "many times" when she has said that she knew what she had done as an explanation of why she said that she might not be Prime Minister at 6 o'clock that evening?
    The Prime Minister: I have repeatedly told the hon. Gentleman that I have nothing to add. He knows full well that I am here and that I am intending to stay.
    Mr. Latham: Did not that television interview, and others over the next two or three days, help to produce an extremely satisfactory result four days later?
    The Prime Minister: Yes, Sir.
    Mr. Corbyn: Will the Prime Minister take an opportunity today—[Interruption.]
    Mr. Speaker: Order. The hon. Gentleman has clearly not read the Order Paper. Supplementaries must relate to the main question.
    Mr. Blairasked the Prime Minister if she will list her official engagements for Tuesday 14 July.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Blair: Whatever the original purpose of the Government's case against Mr. Wright, now that the book
    974
    has been published in the United States, is widely read and distributed in every major European capital bar one. and is no doubt available for scrutiny by the Kremlin, why should Britain suffer a unique ban on this book? Is it the nation's security, or the Prime Minister's stubbornness?
    The Prime Minister: As I have said many times, Mr. Wright, as a former member of the security services. owes a lifelong duty of confidentiality to the Crown. Most people accept that. Some people wish to undermine it. May I make it clear that this point is essential to the effectiveness of the security service. Some people wish to undermine the security service. On this side of the House, we wish to uphold it.
    Mr. Harry Greenwayasked the Prime Minister if she will list her official engagements for Tuesday 14 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Greenway: Further to the question asked by my hon. Friend the Member for Cannock and Burntwood (Mr. Howarth), is my right hon. Friend aware that last year 24,000 teachers left the National Union of Teachers and that thousands of other teachers refused to heed its call to strike—all in the interests of children's education? Does she know that parents as well as a large number of teachers are wholeheartedly behind a no-strike deal for teachers, and will she put on all the pressure that she can to achieve such a deal in our schools?
    The Prime Minister: Parents are grateful to those teachers—there are many of them—who refused to go on strike because they put children's education first. I believe that the majority of teachers would welcome a no-strike agreement.

Points of Order
3.30 pm
Mr. Speaker: I have a brief statement to make. Following the question put last Thursday by the hon. Member for Suffolk, South (Mr. Yeo) and answered by the Prime Minister, an exchange took place which gave rise to points of order. I made reference to the supplementary question itself, which was disorderly in substantially inviting the Prime Minister to meet the Leader of the Opposition to discuss a matter that went beyond the Government's responsibility.
I undertook to reflect on the appropriate time for taking points of order, and in particular on whether my ruling of 12 February last on this subject needed amendment. Since then I have held some discussions and intend to hold others. At present, I am not minded to make any change and will make no final decision until after my consultations have been completed. In the meantime, I shall continue to deal with points of order in accordance with my ruling of 12 February.
Mr. Tim Yeo: On a point of order, Mr. Speaker, arising directly from your statement. Will you clarify two things for me? Although I appreciate the difficulty of determining in the heat of argument what is in and out of order, is it not the case that, as happened this afternoon during Question Time, you sometimes rule a question out of order immediately it has been asked? However, on Thursday, after I had asked my supplementary question, you did not rule it out of order and, in those circumstances, my right hon. Friend had no alternative but to give a very full answer.
Secondly, would it have been in order if I had confined my supplementary question on Thursday to asking my right hon. Friend whether she would discuss with the Leader of the Opposition the possible referral to the Procedure Committee—
Mr. Speaker: Order. I am not prepared to go back over that. I must say to the hon. Gentleman, who kindly wrote to me, that I did not appreciate the thrust of his question while he was asking it. Perhaps I should have done.
Mr. Tam Dalyell: On a point of order, Mr. Speaker. When you were elected, you said that you would be the protector of Back Benchers. May I put it to you that a question of ministerial behaviour is involved when those, however exalted, who claim that they have given answers many times and are asked for references to those answers, cannot point in Hansard or anywhere else to where those answers appear? Is this not a matter of parliamentary behaviour and is it not against the traditions of the House for people to claim to have given answers when they have done nothing of the sort'?
Mr. Speaker: I am afraid that I am in the dark about that. I do not know to which answer the hon. Gentleman is referring.
Mr. Dalyell rose—
Mr. Speaker: No. I think that the hon. Gentleman should come to see me, and I will try to deal with it.
Mr. Andrew Faulds: Further to your statement, Mr. Speaker. I presume that it is in order to make a comment or to put a question to you—[HON. MEMBERS: "No."] I will take Mr. Speaker's ruling. My
976
comment is that your present practice allows Ministers to get away with no questioning of their conduct until an hour, an hour and a half or two hours later. Some of us cannot hang about that long—[Interruption.]
Mr. Speaker: Order. I call Mr. Faulds—or we may indeed have to hang around a long time.
Mr. Faulds: Some of us, Sir, take our responsibilities extremely seriously and have a whole range of other things to do. My question is simple: would you care to widen your discussions to invite me, the hon. Member for Warley, East, to give you my advice on this matter?
Mr. Speaker: I am happy to receive advice from any hon. Member, especially the hon. Member for Warley, East (Mr. Faulds). But I think that the whole House agrees that attendance in the Chamber should take precedence over all other matters.
Mr. Neil Hamilton: Further to the point of order, Mr. Speaker—
Mr. Dalyell: On a point of order, Mr. Speaker—
Mr. Speaker: I will take Mr. Neil Hamilton's point of order.
Mr. Hamilton: I wonder whether you agree that, since the question asked by my hon. Friend the Member for Suffolk, South (Mr. Yeo) was not ruled out of order before my right hon. Friend the Prime Minister rose to reply last Thursday, she was perfectly in order to reply. In view of the fact that the memory of a former Member and member of the Conservative party was so comprehensively besmirched by a member of the Opposition, it was—
Mr. Speaker: Order. I do not think that we should go back over what occurred last Thursday.
Mr. Graham Allen: On a point of order, Mr. Speaker. May I seek your guidance? Is it in order for the setting up of departmental Select Committees to be delayed because of the problems encountered by the SDP-Liberal alliance in resolving its problems outside this place—
Mr. Speaker: Order. That is not a matter for me.
Mr. Gerald Howarth: On a point of order, Mr. Speaker. It is a question not only of the time when points of order are put to you but of the nature of further abuses in the House. You will know that many of us on both sides of the House can be deeply offended by remarks made by hon. Members in the House under the cloak of parliamentary privilege. If you are prepared to rule on the timing of points of order, will you please make a ruling, for the guidance of all hon. Members, that the House enjoys freedom of expression but that, if that freedom is persistently abused by the Opposition, we shall be in grave danger of losing it? [Interruption.]
Mr. Speaker: Order. This is a House in which many uncomfortable things are said. If they are in order, that is within the conventions of the House. All the conventions of the House exist for a good reason and the conventions about maiden speeches also exist for a good reason. The chair can enforce the rules but not the conventions.
Mr. Tony Banks: On a point of order, Mr. Speaker.
Mr. Dalyell: On a point of order, Mr. Speaker.
Mr. Speaker: I will take Mr. Banks' point of order.
Mr. Banks: We all appreciate the problems of my hon. Friend the Member for Warley, East (Mr. Faulds) in his attempt to make a theatrical, or indeed political, comeback. The main problem with regard to your statement which I hope you will consider, Mr. Speaker, is that, when an issue is raised on which a point of order subsequently arises, one loses the context because of the delay. On one occasion, when I was grossly offended by a statement by the Secretary of State for the Environment, you would not allow me to raise a point of order at the time, but you subsequently allowed a point of order which was raised after Questions to appear in the Official Report at the point at which the Secretary of State had made the offensive remark. Perhaps, Sir, you might like to consider extending that practice, which might get us round our present problem.
Several Hon. Members: On a point of order, Mr. Speaker.
Mr. Speaker: Order. All this is what I think the whole House seeks to avoid. [HON. MEMBERS: "Hear, hear."' As to points of order arising out of past events I have already said that I shall consider the matter further. I do not think that there is any profit in going on with it today.
Several Hon. Members: On a point of order, Mr. Speaker.
Mr. Speaker: I will take Mr. Walker.
Mr. Bill Walker: On a point of order, Mr. Speaker. I respectfully draw your attention to question No. 10 on the Order Paper. If you read that question, you will see that it deals with the ordering of a second Trident submarine. When you read the Hansard report of the questioning, including the question put from the Opposition Front Bench, you will see that it has nothing whatever to do with Trident but that it is to do with frigates and the equipment on them. When one gets into technical areas, it is difficult for those who do not understand technicalities to remain within order.
Mr. Speaker: Order. The hon. Gentleman has put his finger on an important matter, which is that, so often, points of order are raised by those who, unfortunately, were not called at Question Time. I know that the hon. Gentleman was not called on question No. 10 today and his point of order illustrates what occurs if we take points of order arising immediately after Question Time. I made a careful analysis before I made my statement of 12 February. I found that virtually all points of order were raised by those who, unfortunately, had not been called during Question Time; they were not genuine points of order at all.
Mr. Dalyell: On a point of order, Mr. Speaker. May I first apologise to you for keeping you in the dark and, secondly, raise a matter that affects the House of Commons? The system of open questions has grown up. Frankly, with open questions, it is understandable why a Minister will not give references. I was lucky enough to have a closed question—a specific question. I asked—courteously, I thought—for references. The real answer to the question was, "Because I did not have the foggiest notion whether the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) would spill the beans on me." That is the truthful answer to the question that I
978
asked the Prime Minister. Nevertheless, with substantial questions, should not references be given to those hon. Members who ask specific questions? What on earth could have caused the Prime Minister to have said that she might not be Prime Minister by 6 o'clock? That is a matter—
Mr. Speaker: Order. I can have no responsibility for the answers that are given to questions.
Several Hon. Members: On a point of order, M r. Speaker.
Mr. Speaker: Order. I will take Mr. Holt.
Mr. Richard Holt: On a point of order, Mr. Speaker. May I remind you that, last week, in response to a point of order raised by my hon. Friend the Member for Croydon, South (Sir W. Clark), you ruled that if male Members appeared in the House without a jacket or tie you would not call them. If your rulings are to be flouted so quickly when you call hon. Members in that way, how can we have standards in the House?
Mr. Speaker: The hon. Gentleman either was not here or does not read Hansard. I certainly did not say what he has put into my mouth. I said that I never give reasons why I call or do not call hon. Members in the Chamber.
Mr. James Marshall: On a different point of order, Mr. Speaker. I ask you to investigate whether the Prime Minister intentionally or unintentionally misled the House when—
Mr. Speaker: Order. The hon. Gentleman has just been re-elected to the House, and he will know that no hon. Member intentionally misleads the House of Commons. In any case, answers to questions are not matters for me. I cannot help.
Mr. Eric Forth (Mid-Worcestershire): On a point of order, Mr. Speaker. Will you give the House some guidance on a matter that gave rise to most of this exchange but has now become important in the context of what you said? A moment ago, you referred to the conventions of the House which always have value. You know better than anyone that one of the great conventions of the House is that maiden speakers should be allowed to speak uninterrupted, but on the proviso that their speeches are uncontroversial or non-provocative or do not contain the sort of substance that would normally be subject to challenge from the other side, by way of interventions or, perhaps, points of order.
You will recall, Mr. Speaker, that during the recent controversial maiden speech in the House my hon. Friend the Member for Eastbourne (Mr. Gow) sought to intervene precisely because the material in that maiden speech was not only controversial but offensive. The Chair did not allow my hon. Friend to make his intervention on a point of order.
If you, Mr. Speaker, allow maiden speeches to continue to be made which contain offensive or derisory material, but which cannot be challenged, it puts the House and yourself in a difficult position. It puts all hon. Members— particularly Conservative Members, because the offences have come only from the Opposition—in a difficult poisition, and gives rise to many of the difficulties that have arisen.
Will you, Mr. Speaker, give careful consideration to the basis upon which maiden speeches are made in the House, to their content and to the ability of other hon. Members to seek to challenge them while the speech is being made?
Mr. Speaker: I read in Hansard what occurred on that day and what Mr. Deputy Speaker said. Nothing out of order occurred. Mr. Deputy Speaker did not prevent the hon. Member for Eastbourne (Mr. Gow) from intervening. It is true that the convention of making non-controversial maiden speeches has a good basis, but if they are controversial they stand to be challenged, and that is exactly what happened. I am certainly not prepared to ask hon. Members to submit their maiden speeches to me first.

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: With the leave of the House, I will put together the five motions relating to statutory instruments.
Ordered,
That the draft Meat and Livestock Commission Levy Scheme (Confirmation) Order 1987 be referred to a Standing Committee on Statutory Instruments, &c.
That the Merchant Shipping (Light Dues) (Amendment No. 2) Regulations 1987 (S.I., 1987, No. 746) be referred to a Standing Committee on Statutory Instruments, &c.
That the Foreign Compensation (Union of Soviet Socialist Republics) (Distribution) Order 1987 (S.I., 1987, No. 663) be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Grants by Local Housing Authorities (Appropriate Percentage and Exchequer Contributions) Order 1987 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft Bunk Beds (Entrapment Hazards) (Safety) Regulations 1987 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Ryder.]

EUROPEAN COMMUNITY DOCUMENTS
Mr. Speaker: With the leave of the House, I will put together the seven motions relating to European Community documents.
Ordered,
That European Community Documents Nos. 4083/84, 4687/84, 8599/85, 5808/86 and 6213/87 on price indicators for foodstuffs and non-food products be referred to a Standing Committee on European Community Documents.
That European Community Document No. 7194/82 on credit insurance be referred to a Standing Committee on European Community Documents.
That European Community Document No. 9592/86 on hazardous imitation products be referred to a Standing Committee on European Community Documents.
That European Community Document No. 5156/82 on legal expenses insurance be referred to a Standing Committee on European Community Documents.
That European Community Document No. 10443/86 on toy safety be referred to a 'Standing Committee on European Community Documents.
That European Community Document No. 11063/86 (Part 4) on knitting yarns be referred to a Standing Committee on European Community Documents.
That European Community Document Nos. 8006/86 and 10530/86 on health inspection of meat and poultry meat be referred to a Standing Committee on European Community Documents.—[Mr. Ryder.]

Finance Bill

  Considered in Cotninittee
  [MR. HAROLD WALKER in the Chair]
  Ordered,
  That the Bill be considered in the following order: Clauses 1 to 17, Schedule 1, Clauses 18 to 57, Schedule 2, Clause 58, Schedule 3, Clauses 59 to 63, Schedule 4, Clauses 64 to 76, Schedule 5, Clauses 77 to 95, Schedule 6, Clause 96, Schedule 7, Clauses 97 to 101, Schedule 8, Clauses 102 to 104, new Clauses, new Schedules, Schedule 9.—[Mr. Norman Lamont.]

  Considered in Cotninittee
    Clause 1

      INTERPRETATION
      3.47 pm
      Mr. Tony Blair: I beg to move amendment No. 35, in page I, line 10, leave out
      'or that part of an undertaking'.
      The first chapter of the Finance Bill deals with profit-related pay and a number of amendments on the Paper relate to the first 18 clauses. For the convenience of the Committee, I intend to adhere strictly, as no doubt, you Mr. Chairman, would want me to, to the wording of the first amendment and leave a more general debate on profit-related pay and its basic principles to a clause stand part debate.
      The amendment would omit from clause 1, line 10, the words
      "or that part of an undertaking".
      That will define an employment unit as an undertaking to which a profit-related pay scheme relates, not
      "an undertaking, or that part of an undertaking, to which a profit-related pay scheme relates".
      The amendment has been tabled to probe the Government's intentions in defining an employment unit for the purpose of deciding how profit-related pay is to be administered. I raise those particular words because they crop up in many areas of the law, and, indeed, have given rise to considerable and significant legal confusion over the years. Since we are about to administer a large tax relief on the basis of a profit-related pay scheme, it is right that we should be sure of the scope of the profit-related pay scheme so that we can adequately determine the scope of the fiscal incentive towards profit-related pay.
      Among the legislation in which the words "part of an undertaking" occur, are the Redundancy Acts and the transfer of undertakings orders which transfer the rights and obligations of employees and employers in certain employment situations where one firm takes over another. I assume—perhaps the Minister will confirm this—that the definition of part of an undertaking is supposed to be the same in the Act as it is in the industrial relations legislation more generally.
      I want to give the Minister one or two examples, so that we can see the scope of what is involved. If a firm wants to introduce a profit-related pay scheme, and has its own canteen staff. do such staff form a self-contained unit such that they are part of an undertaking? For example, would the clerical side of a firm, as opposed to the shop floor shide, form a part of an undertaking? In other words, there are certain legal cases in relation to the industrial relations laws in which part of an undertaking is sometimes defined as a self-contained part—in the sense that it could even

      981
      have its own profit and loss accounts. Presumably that would not arise in relation to the clerical side of a firm; could it be included? If so, could that apply merely to the white collar staff and not to the shop floor staff? What are the requirements that go to make up the definition of "part of an undertaking"? Has consideration been given to that? Is the Treasury satisfied that no one will be excluded from the ambit of the profit-related pay schemes by an over-tight definition of an undertaking or part of an undertaking?
      We intend to vote against the general principle of profit-related pay and a fiscal incentive, but it is important that if we are to have profit-related pay, it is accepted on a clear basis and no-one is excluded from the ambit of profit-related schemes who should properly be within it, once the initial principle is accepted. I hope that I have adequately canvassed the difficulties that we foresee. I stress that this is a probing amendment that is designed to secure an explanation from the Government.
      The Paymaster General (Mr. Peter Brooke): It may be helpful if I refer to the general subject that the hon. Member for Sedgefield (Mr. Blair) has raised. In the design of our PRP proposals, we have sought, wherever it is consistent with policy objectives, to build in as much flexibility as possible. One choice that we are allowing employers to make when preparing their PRP schemes is the nature of the employment unit. We recognise that some employers will want to have a single scheme covering the whole enterprise under which PRP is related to the profits of the whole, be it a company or group of companies, a partnership or other unincorporated business. Any employer who makes that choice may do so because he considers that his employees are likely to be better motivated if they are identified with the business as a whole. He may conclude in any event that, in his own circumstances, there would he particular disadvantages or difficulties in breaking the business down into profit centres, each with it own profit and loss account prepared in accordance with paragraphs 19 and 20 of schedule 1.
      On the other hand, some businesses already operate on a basis that provides a measure of autonomy at a level lower than the whole business. They find particular advantages in such decentralisation and we have therefore provided that the employment unit need not be the whole group, company or business but can be a sub-unit of any of those. We recognise that in some businesses employees see themselves as belonging to a particular part of a business. That may be one division or even one factory. It is right that if profit figures that meet the statutory requirements can be produced for that part of the undertaking it should he permissible for that unit to be an employment unit with its own PRP scheme. It would be wrong to require that each company in a group had to belong to a group scheme despite the fact that each company made a different product and that each employee thought of himself—and was encouraged to think of himself—as employed by his own company rather than by the group.
      The tax relief that we are providing is intended to encourage the widespread adoption of PRP schemes. In our judgment, removing the choice of size of employment unit would deter some employers from adopting PRP; but the essential condition, about which the hon. Member for
      982
      Sedgefield asked, is the requirement that a unit should have its own profit and loss account prepared in accordance with paragraphs 19 and 20 of schedule 1.
      Mr. Blair: I am grateful to the Minister for his reply. I am attempting to be helpful and to do that I need to probe a little further. Some units of an undertaking might be colloquially thought of as self-contained and would not have their own separate profit and loss account. The canteen or clerical staff in a company might not have profit and loss accounts hut could form self-contained parts. The reason for our amendment is to probe whether the Government have given sufficient thought to the definition of "part of an undertaking". These words are widely used in industrial relations legislation and have given rise to considerable confusion. The Government should be clear about their legislative intent, or they will find that companies will be unduly restricted in bringing in these schemes.
      Mr. Brooke: It may be helpful if I respond further to the hon. Gentleman's remarks. I should add to what I said earlier that the Bill has no specific relationship to other legislation. There is no natural read-across but, as I said before, the touchstone will be the employer's ability to produce a profit and loss account for an employment unit of the undertaking. The hon. Gentleman used the example of canteen staff. If the employer can produce accounts it is for him to make an application for a scheme. The hon. Gentleman will know from reading the rest of the legislation that it requires 80 per cent. employee participation, although I think the hon. Gentleman has another amendment about that.
      Mr. Blair: Again I am grateful to the Minister. Perhaps I could ask him to give this matter further consideration. I do not think that it is a matter of controversy between us. I appreciate what he says, that these are different parts of the legislation, but I can tell him, and no doubt his advice will he to the effect, that the words in this statute will be defined and construed by a court in the same way as words are interpreted in other pieces of legislation. Therefore, the industrial relations definitions in the redundancy and transfer of undertakings regulations about an undertaking and part of an undertaking will he the same.
      Situations can arise in which it is not possible to produce a separate profit and loss account but in which one could think in colloquial terms of a self-contained part of an undertaking. It may be worth paying some further attention to this to ensure that certain parts of undertakings will not be excluded from the ambit of these profit-related pay schemes. I can think of examples in my own constituency where for parts of a factory floor it would be impossible to produce a profit and loss account. However, they might well respond in different ways to a profit-related pay scheme. I ask the Minister to at least give some further attention to this. Otherwise, there will be difficulties that we both want to avoid. Subject to that, I am prepared to withdraw the amendment.
      Mr. Brooke: The issue that the hon. Gentleman raises was, of course, considered during the fairly lengthy gestation period that led up to this legislation. I repeat that a scheme employer will need to make an application to the board of Inland Revenue and that one of the conditions

      983
      that he must satisfy under this legislation in order to be registered is the production of a separate profit and loss account. That of itself will be a determining factor.
      Mr. Blair: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Question proposed, That the clause stand part of the Bill.
      Mr. Blair: As I said when I spoke to the previous amendment, the debate on clause 1 is an appropriate time to have a debate on the principle of profit-related pay and whether it is in our interests to accept as a whole the scheme that the Government intend to introduce. Profit-related pay has been much discussed among academics, and various representations were made to the Government when they first mooted this scheme. The advantages and disadvantages can be said to be in some sort of balance. We cannot be certain that the balance of advantage comes down on one side or the other.
      4 pm
      The Bill will introduce tax relief on profit-related pay for up to one fifth or £3,000 of an employee's wage—whichever is the lower—provided that that part of the wage is paid on the basis of the employer's profits. Will the Minister confirm that the effect would be to give up to £20 a week tax-free to a person who wished to take up the full benefit of the scheme? Such a person would be likely to be a senior executive or manager, although in these days he might be working on the shop floor. At first blush. that £20 a week tax cut would be given to the person taking the maximum benefit for doing no extra work whatever. It would go straight into that person's hand; he would have produced nothing more and done no extra work.
      I may be wrong, but it seems to me also that it could be possible for the £3,000 to be taken off the top rate of tax so that the person's tax relief could be greater, but at any rate a person who took the maximum could receive up to £20 a week tax-free.
      The cost of the proposal has been estimated in various ways by academic bodies as well as the Treasury. The Treasury says that the costs for the full year 1988–89 will be about £50 million, but by then the scheme will just be starting up. Sam Brittan, writing in the Financial Times about the earlier limit of £1,000, thought that the cost could be anything up to £850 million to £950 million per year if profit-related pay were taken up on a large scale. Saul Estrin, writing in The Guardian, reckoned that the cost could be anything up to £1,000 million per annum. I think that it is accepted on all sides that, if profit-related pay is taken up on the scale that the Government wish, considerable fiscal incentives will attach to it. It is clear beyond argument—the Treasury accepts this—that we are talking about a fiscal incentive that could be worth hundreds of millions of pounds.
      Therefore, before we accept the benefits of profit-related pay, we need to be sure that the scheme represents the best way of obtaining the benefits the Treasury seeks. Basically, the Government make three claims for profit-related pay. The first is that it would encourage a greater identification between workers and management; in other words, that it would eradicate what is popularly called the "them and us" attitude. The second claim is that
      984
      employees will not be made redundant in times of recession. They will simply take lower wages because of lower profits, and unemployment will thus be avoided. The third claim is that the marginal cost to the employer of hiring staff will be diminished because the profit-related pay element will mean that, as more workers are hired, the profits will simply be spread more thinly. Therefore, it will be in the interests of management to hire more staff and produce more goods. As I remarked on Second Reading, that theory is propounded by Professor Weitzman of the Massachusetts Institute of Technology.
      Let me take each of those claims in turn and add some further objections. When the Financial Secretary replied to my Second Reading speech, he said, I thought rather unkindly, that I had barely mentioned the Bill. In fact, I find that my remarks on profit-related pay run to two or three columns of Hansard. I did not get an answer to any of my points, so I must apologise if I appear to be repeating myself.
      The Government argue that there will be greater identification between workers and management. In its submission to the Government, the Institute of Personnel Management said, with some justification:
      "Profit-related pay is just one, and in our view, not particularly good, method of introducing flexibility into pay structures and it hardly seems equitable to grant it tax relief that is denied to other, perhaps better, approaches, like output-related productivity schemes or merit pay."
      That is an important point. We tend to be given the idea that profit-related pay schemes have some magic attendant upon them and that they are different from other schemes. In fact, profit-related pay is a sophisticated form of bonus payment: the more profit there is, the more pay an employee gets. In that respect the scheme is not dissimilar from a bonus productivity scheme, which gives the equivalent identification between management and work force and thus provides the essential ingredient of removing the "them and us" attitude. As the Institute of Personnel Management asked, why should profit-related pay be singled out for a tax incentive? I would be grateful if the Minister would deal with that point.
      The Institute of Personnel Management and the British Institute of Management made a further point. The main purpose of the profit-related pay scheme is said to be to reduce unemployment. It is very difficult to understand how the best way of reducing unemployment can be to give what could be up to £500 million to £1,000 million-worth of tax incentives for profit-related pay. There could be many better ways of spending that sum of taxpayers' money to secure a reduction in unemployment or an increase in employment. On 27 October last year, the Financial Times reported that there was no hard evidence to suggest that the profit-related pay scheme represented a good method of reducing unemployment. We are entitled to ask the Government whether they have hard evidence or empirical studies to suggest that profit-related pay will reduce unemployment, because that macroeconomic argument lies at the heart of their claims.
      Given that there are to be fiscal incentives, a further point arises. Treasury Ministers have been telling us for years that, if something is to be given away, someone must pay for it. The truth is that the general body of taxpayers will pay for profit-related pay. It will be particularly inequitable because, on the highest estimates that I have seen, 12 million workers—half the work force—will be covered by the profit-related pay scheme. That means that

      985
      approximately half the work force will not be covered, and the public sector accounts for most of that. The public sector, in particular will have to finance the tax relief for the private sector schemes eligible for profit-related pay.
      On the identification of managers and workers, we have also to consider the whole question of employee share ownership plans. These have been used effectively in the United States and are being pioneered in this country by Unity Trust, the trade union banking institution. It is difficult to understand why profit-related pay should be singled out. When the British Institute of Management considered the employment-creating potential of profit-related pay, it said that nearly 47 per cent. of its respondents thought that the pressures to limit recruitment and investment would not be easily resisted. In other words, almost half of those responding to the British Institute of Management survey said that, so far from increasing employment, the profit-related pay scheme would limit recruitment and investment.
      The reason is not difficult to find. This was highlighted by Professor Meade, who is an acknowledged expert on these matters and to whom I pay attention, despite the fact that he is an adviser to the SDP. There seems to be a good deal of truth in his view that a profit-related pay scheme means that those already employed by a company will have a vested interest in resisting further recruitment because it will spread the jam more thinly. If more workers are taken on, the proportion of the profit going to each worker will be diminished. Professor Meade therefore suggested a different scheme, in which a distinction was made between insiders and outsiders coming in, the latter receiving a lower return in profit-related pay.
      The marginal cost of hiring workers may be reduced for the employer, but existing employees will have an interest in resisting further recruitment so as to maximise their own slice of the profits. It may be argued that management rules and will wish to take advantage of the lower marginal cost of hiring staff, but despite some people's fantasies about the way in which firms are run, most of us appreciate that in the majority of firms there is a fairly common identity between workers and management. The "them and us" attitude can be overplayed, and the notion that workers and management will automatically take opposing views seems highly academic and unreal. In reality, management and workers—-whether unionised or not—will consider the matter together.
      It should be remembered, too, that managers are not precluded from participating in the scheme. Indeed, they will almost certainly be involved in it, so both they and the shop floor will have a community of interest in resisting further recruitment. At the very least, therefore, it is difficult to see how anyone can state with certainty that profit-related pay will reduce unemployment, because there is a clear counterweight to that proposition.
      Finally, it is argued that in a recession a profit-related pay scheme will mean that workers will take a smaller share of the profit rather than being made redundant, but I am not entirely sure that it will work like that in practice. People might well go for voluntary redundancies so as to keep the same amount of profit per worker. Moreover, from the Government point of view it is not even clear that the results that they claim will be desirable. If profits are reduced and a firm gets into difficulties, it may not necessarily be a good thing to stagnate the work force in that way. Looking at the macro-economy as a whole, the only effect of profit-related pay in a recession is to produce
      986
      wage cuts. That is not a novel proposition. It was tried in the 1930s and it failed. The recession then becomes deeper. I am therefore not persuaded that profit-related pay is the panacea that it is claimed to be.
      Before agreeing to the introduction of such a potentially large fiscal incentive as would be involved, therefore, we must be extremely sure that we are going down the right route. We are far from convinced that it will diminish unemployment or increase investment. We are also not convinced that it will deal with the underlying problems of the economy. In particular, we are totally unpersuaded that this is the best way to spend the potentially very large sums involved.
      Mr. Tim Smith: In my view, the speech of the hon. Member for Sedgefield (Mr. Blair) was thorougly dull, unimaginative, negative stuff.
      Mr. Austin Mitchell: You have not heard anything yet.
      Mr. Tim Smith: I cannot wait to hear the contribution of the hon. Member for Great Grimsby (Mr. Mitchell). We have just heard the spokesman from the Opposition Front Bench pouring cold water on what he claims others—presumably the Government—have described as a panacea. No one has described profit-related pay as a panacea, but it is one of a number of measures that could help reduce inflexibility in the labour market. Various schemes with the same objective are already in place, including employee share schemes and the Finance Act 1978 and other schemes which seek to bring together workforce and management.
      It was good to hear from the Labour party spokesman that there is not a great divide or a "them and us" situation in industry, as Labour Members generally spend most of their time playing on that. Nevertheless, in some companies there are divisions and we need to bring the two sides together. Profit-related pay, with other schemes, could go some way towards that, because employees who participate will take a new interest in the overall profitability of the company. The argument for greater identification is thus an important one and I certainly find it attractive.
      4.15 pm
      With regard to the argument that there will be fewer redundancies, I am not sure that the hon. Member for Sedgefield has any experience in industry but when wage costs become excessive there are very few solutions available. At present, employers simply cut the number of employees by 5 per cent., 10 per cent. or whatever percentage is deemed necessary to keep the company afloat. Redundancy is a very blunt, crude instrument to deal with the problem and I should not have expected the Labour party to find it attractive. If a tax-related scheme goes some way to meeting the difficulty and providing other possibilities for employers in that situation, I should have thought that it would be welcome.
      It was interesting to hear the various figures suggested for the cost of the scheme. They varied from £50 million by the Treasury to about £1,000 million by Sam Brittan, who apparently commented before the relief was made more attractive. If the take-up is anything like as big as that, the scheme will be a runaway success because it will mean that every eligible company is taking part. I do not believe that the costs will be anywhere near £1,000 million,

      987
      but I believe that the experiment is worth trying. No one claims that the scheme will be an overnight success, but many companies have already expressed interest in it. If it encourages employees to take a greater interest in the overall welfare of the company or of the part of the company in which they work, I believe that we should pursue it. I shall therefore support clause 1 and the following clauses.
      Mr. Ronnie Fearn: My question to the Minister relates to the incentive aspect of the scheme. The alliance is basically in favour of the scheme and will support it. To provide an incentive to set up the administrative and negotiating machinery needed to begin such a scheme and to promote its beneficial effects, would it not be wise to provide for a rebate of employer national insurance contributions, not just on the qualifying profit-related pay but on the basic pay? Employers will be looking for such an incentive. If the Minister can show that it exists, we shall fully support the clause.
      Mr. Austin Mitchell: I do not know a great deal about the scheme, but I have read Professor Weizman's book—I occasionally read items of SDP literature—with great interest and attended his meeting in the House of Commons. Prior to that, I had thought that profit-related pay was something to do with the Ayatollah Khomeini.
      I was not immediately attracted to the scheme by the way in which it was presented by the Government. Clearly, anyone in his right mind is sympathetic to a proposal that will produce greater involvement by workers in their firms and greater identification with the future of those firms, but we must ask whether the proposed scheme is the best way to bring about the identification that we all wish.
      The principle has widespread support. The problem is whether this proposal is the best way of serving that principle. Therefore, it is unrealistic to brush aside the objections in the way that the hon. Member for Beaconsfield (Mr. Smith) has sought to do. The question is whether, by spending a similar amount of money or even less money—the amount that we will spend has not been measured—we could get even greater benefits and produce the identification that is wanted by all sides of the House.
      The idea within the proposal springs from a half-baked analysis of the reasons for Japanese industrial success. The Japanese firms that were considered are the biggest, those that dominate a third of the economy. The smaller firms have not been considered yet it is from those that all the sacrifices are demanded when economic difficulties arise. What we are discussing is the identification between workers and management in the biggest firms that dominate a third of the Japanese economy. The argument is that, in times of economic difficulties, Japanese workers are prepared to take cuts in pay. That is true. It has been a formula for success in Japan. However, that formula for success exists because Japanese firms accept responsibility for the workers on a far wider scale than British firms.
      In Japan, indentification and commitment can be built up because firms are prepared to carry the workers through lean times. They are prepared to take risks, to diversify, to provide the work force with the real bond of identification—a successful company. The bond of identification is provided by a company that is going places and one that is attempting to provide a future for
      988
      its workers. Therefore, the whole system is much more integrated than in Britain. It is unrealistic to take one aspect—wage and salary cuts in times of economic difficulty—and ask how we can achieve that in the United Kingdom.
      The Government believe that the answer is profit-related pay. They believe that that will provide the formula for success that has been used by Japan in the past. That idea is totally unrealistic and half-baked. Either we accept the total commitment of firms to workers or we accept that the present proposal is inadequate.
      Although we support the principle of involvement, it is perfectly reasonable for us to raise doubts about the way in which the principle is propounded in this country. The true aim of this measure is to cut earnings. I believe that this is a proposal from a Government that have run out of solutions for Britain's economic difficulties. The Government's economic policies have ground to a halt and they are seeking a new beginning. They are clutching at straws. In the 1970s, when the Conservatives had run out of ideas, they clutched at the work of one American economist. Lo and behold, along came Friedman and all the disasters that followed. Now, the Government are clutching at another American economist, Weizman and suggesting that he holds the key. This proposal accords with a deep and distinctive prejudice on the Tory Benches—to cut wages and earnings.
      The Government speak with two tongues. In the run-up to the election it was useful that earnings and wages were increasing ahead of inflation. Indeed, I remember the mysterious advertisement with 23 reasons for voting Conservative—the Conservatives dredged round, but all they could get were 23 reasons, not even 24 and indeed, most of those were wrong—and one of those reasons was that earnings had increased by 26 per cent. or 24 per cent.—the figures are not important. The fact was that earnings had increased ahead of inflation. Then, of course, it was a cause for congratulation and a useful weapon to win the election. Now, it has become an anathema.
      Our costs, inflation rate and earnings are increasing faster than most of our competitors. For that reason, it makes it incomprehensible that the Government are now trying desperately to peg the exchange rate to the deutschmark. The Government are attempting to join the European monetary system without declaring for the EMS. The Government have said that the pound will be held to 2·80 or 3 DM. The Government's decision to peg the pound means that every time our inflation increases ahead of our competitors—each day it edges ahead of our competitors—the real exchange rate, given that the nominal exchange rate has been pegged in that fashion, increases. Our real exchange rate is now 10 per cent. up on what it was last October. We are gradually squeezing our competitors—
      The Chairman of Ways and Means (Mr. Harold Walker): Order. We are a long way away from profit-related pay.
      Mr. Mitchell: I am glad that you have brought me back, Mr. Walker. I was arriving at my point via West Germany—a most interesting excursion. However, my point was germane.
      In the Government's eyes the reason for the proposal is that it holds down wages. That is why the Government are so enthusiastic about it. However, I must point out

      989
      that, if the Government are, at the same time, holding down the exchange rate as wages go up, they will be putting British industry in a squeeze that will remove the last vestige of our competitiveness and strangle British industry. Therefore, there will not be any profits to be distributed as a result of the profit-related pay proposal. If competitiveness is eroded in this manner, profits will go out the window. However, at your behest, Mr. Walker, I shall return to the argument.
      This proposal is not what the Chancellor had in mind when he set out to be the great reforming Chancellor when he took over the office in 1983. Then, he wanted to be a tax reformer and wished to make the whole system neutral. This proposal does not represent neutrality. A fairly large tax concession has been produced, but the extent of that tax concession is unknown. The estimate of the cost of the scheme for 1988–89 has been put at £50 million, but the Treasury has accepted that the final cost could be substantially greater.
      As my hon. Friend the Member for Sedgefield (Mr. Blair) has already said, Sam Brittan estimated in the Financial Times that the final cost could be £800 million. The hon. Member for Beaconsfield was wrong when he suggested that Sam Brittan put the final cost at £1 billion. It was The Guardian that estimated that the final cost would be £ 1 billion, so it must be true. The Guardian's assessment is more realistic than that contained in the Financial Times. However, whether the cost is £800 million or £1,000 million it is far greater than the estimates we have had from the Government or from the Treasury.
      We are signing a blank cheque for a proposal that is not neutral in the manner in which the Chancellor set out to be neutral. There are far better ways of spending this money for the purposes of the economy—for instance, on job creation. However, for a Chancellor who wants to encourage identification between workers and firms there are far more effective ways of spending this money.
      We must also consider whether firms, given their ability under this scheme to cut wages, will keep jobs. It is interesting to consider what the Government are now putting forward as this country's future. Will we face a situation in which firms, having already shed 28 per cent. of manufacturing jobs in the period 1979–83, and gone through that bloodbath, will, in all probability, shed more jobs in the future? Is this the future that the Government arc preparing for us?
      Are the Government saying that, in the years ahead, the economy, under their management, will be so difficult that there will be a great need for firms to face the choice between shedding labour or keeping labour on lower earnings? If that is to be the future, it is rather different from the one that the Government were projecting before the general election, which took place only a few weeks ago. During the election campaign, the Conservative party offered a future of almost limitless expansion, with the British economy competing effectively with the German economy. The picture that the Government have presented is entirely unrealistic and I am sure that the Government are right when they say now that economic difficulties lie ahead. I am sure that that will be the position under their management.
      4.30 pm
      Old habits do not change overnight. If we find ourselves in economic difficulties, firms will shed everything that can be thrown overboard. That has happened in the past and
      990
      it will happen again. Everything that makes for non-price competitiveness will be thrown out, including research, design work, investment and labour. If life becomes difficult economically, the old bloodbath will be repeated, and a profit-related pay system will not obviate the need, as some perceive it, for that to happen. That will be the position if economic difficulties develop, and I am sure that they will.
      I do not wish to appear churlish in my response to profit-related pay, but it is the responsibility of the Opposition to ask the necessary questions. Our questions are a reaction to the high hopes that the Government have reflected in their propagation of the scheme. If the Government are selling the scheme as an answer to the economic difficulties that they will create in future, they have a responsibility to ensure that the prospects that they are presenting will become reality.
      The scheme has been oversold, as monetarism was oversold in the 1970s. There has been overselling by the Social Democratic party and the Liberal party, which have seen the scheme as a substitute for an economic policy. The Government have taken it on for the same reason.
      Mr. Archy Kirkwood: At the beginning of his remarks the hon. Gentleman said that there was a real interest across the Floor of the Chamber in trying to relate the interests of employees with those of their employers within their place of work. Unfortunately, the hon. Gentleman has not advanced any of the new thinking of the Labour party to explain how this will be achieved. Instead, he is attacking the Government. Does he intend to end his speech with some positive and constructive proposals?
      Mr. Mitchell rose—
      The Chairman of Ways and Means: Order. If the hon. Member for Great Grimsby (Mr. Mitchell) were to take up the invitation of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I would have to remind him that we are discussing profit-related pay within the terms of clause I.
      Mr. Mitchell: It is interesting to hear that there is new thinking going on in the Labour party as against the overacting and over-emoting that is taking place within the alliance. It is surely possible to say on the basis of rational calculation that clause I is not the best approach to implementing and encouraging the greater involvement that we all wish to see. It is true that the Government see involvement as share options that are focused on top management and on the board of directors, but we want involvement within firms, which means democracy, consultation and giving unions and workers a legitimate place in the decision making that takes place within a firm. It involves also the profit-sharing proposals that Liberals have advanced for years and which were implemented only by a Labour Government during 1977–78, when the first great advance in that direction was made. I support the concept and I am sympathetic to it. I am merely saying that that is the right road and the way forward, and not the one that the Government have overpraised and for which they have made too many claims. The Government's scheme will not live up to the prospects that have been held out for it to us. It is characteristic of a Government and an alliance who have run out of ideas.
      Mr. John Redwood: Having listened to the hon. Members for Sedgefield (Mr. Blair) and for Great

      991
      Grimsby (Mr. Mitchell), I feel that the Opposition have run out of problems to allege that the Government are running into and not that the Government have run out of solutions to problems. It is extraodinary that profit-sharing pay should be represented as a scheme to cut wages. It is a scheme to allow employees to participate in the success of their enterprise. Profits are rising substantially because demand is good and because industrialists and those in commerce are responding to that demand. There are profits, and if the scheme is introduced employees will be better off. I am staggered that Opposition Members wish to deny people the opportunity to participate in such a scheme.
      The Opposition tell us that a different lesson should be drawn from the Japanese experience than the one that the Government have presented. The Opposition always take a selective view of the Japanese experience. They focus on the few large firms at the top of the Japanese economy that account for about 20 per cent. of output and activity and not on the 80 per cent. that is represented by small and medium-sized enterprises in a highly competitive environment without the many protections that are accorded to the privileged few who work in the large companies at the top. I think that the Opposition would be well advised to study the Japanese economy rather more thoroughly before drawing hasty conclusions from the Japanese experience.
      The Opposition tell us that it would be better to offer tax relief for merit pay than to introduce profit-related pay. Merit pay is a scheme that enables individual managers to say to individuals within the work force, "You are worth this much extra and you are not." Accordingly, a manager would have tremendous power and control over individual employees or groups of employees under that scheme. Is that really what the Opposition wish to write into the statute book? Do they not accept that merit pay would be difficult for the Treasury to control? Without firm limits it would be possible to allege that all parts of an individual's remuneration were related in some way to his merit. It would be extremely difficult to tie the net tightly around such a scheme to ensure that judgment was not involved. One of the advantages of profit-related pay is that it is relatively easy for those who frame legislation to produce a scheme that does not allow people to bend the rules too often or too regularly.
      I am delighted that the Opposition now understand the value of employee share option-type schemes. They should do a little more homework, however, because the ESOP schemes in the United States of America have produced many drawbacks for the employees who have been part of them who wish to change their jobs or who find that values are problematic when they come to value their stake when there is no ready market.
      I hope that the Government will introduce more proposals in the next Budget to strengthen share ownership for all employees in all companies. I hope, however, that they will not introduce a simple clone of the ESOP scheme. Instead, we should have a good British scheme that does not have the weaknesses and injustices that ESOPs perpetrate on employees.
      Mr. Robert Maclennan: The contributions from the Opposition Benches of the
      992
      hon. Members for Sedgefield (Mr. Blair) and for Great Grimsby (Mr. Mitchell) were united only in their deep conservatism. Their diagnosis of the condition of British industry and companies produced different results. The hon. Member for Sedgefield, who spoke from the Opposition Front Bench, alleged that there was no problem to be dealt with, because British firms were united and that it was artificial to talk about bringing forward a scheme to deal with the "them and us" problem. The hon. Member for Great Grimsby claimed that the position was entirely opposite to that, and that firms were so divided and managers so remote from the interests of their employees that they could not proceed along the lines of Japanese companies. It seems that there is a need for Labour Members to get together to try to work out a common approach to these problems. They do not speak with one voice.
      Profit-related pay is not a panacea for industrial relations difficulties. I should be interested to know why the Institute of Personnel Management took the view that it did. Is it defending its members' interests? Does it think that the only way to overcome management problems is through its beneficent intervention? I find its unsubstantiated arguments rather unpersuasive. The reality is that profit-related pay is not advanced as a means of resolving industrial relations difficulties or as a means of tackling unemployment. It is not a back-door method of reducing pay. It is a system that relates rewards to the returns of a business, which seems to be a profoundly sensible approach. Indeed, if one puts that proposition conversely—that pay should be unrelated to profit—the ridiculousness of opposition to that suggestion becomes obvious.
      I should like to ask the Government a more factual question about take-up.There have been suggestions that the scheme might cost about £50 million per annum from the Treasury, which seems a modest amount. If that were to be the case, will the Government reveal some of their premises about the extent of take-up? How many firms and employees do they envisage as being affected in the first years that the scheme is in operation'? That is an important question because of the range of estimates that have been canvassed in the debate and outside the House.
      The wilder suggestions by the hon. Member for Sedgefield on Labour's Front Bench have not been supported by the Government. However, I should be happier if the figures were somewhat more substantial than those that have come from the Treasury because they are not altogether satisfactory if this is purely a token scheme.
      As I said on Second Reading, the scheme seems an attractive idea. Not only would it offer encouragement to the employees through tax relief: it would also encourage the employers to go through the complexities of establishing the schemes and participating in the negotiations that will be necessary to make those schemes a success. I am not sure that the somewhat abstract advantages that the Government have deployed in support of their view that the employers will find the scheme attractive are sufficient, in practice, to make many take the initiative in setting up profit-related pay schemes.
      If one took only the evidence of the inquiries that have been made, it would be quite encouraging. I understand that between 50,000 and 60,000 inquiries have been made of the Inland Revenue. However, those are initial probing inquiries to see what lies behind the scheme. Therefore, we

      993
      cannot assume that those inquiries will necessarily be followed up by firm commitments to introduce the schemes. Perhaps the Minister can give us a little more information about the premises upon which the Treasury has based its estimate of the expected take-up.
      Mr. John Browne: I rise briefly to urge my hon. Friend the Paymaster General not to accept the amendment. I understand the argument of the hon. Member for Sedgefield (Mr. Blair). On the question of cost, the figures that he gave were roughly between £50 million and, at the top limit, £100 million, but one must consider net cost and the real cost that will affect the Inland Revenue. One hopes that, with such a scheme, activity, enterprise and productivity will increase. Therefore, profit will increase and the corporation tax take will increase in total. In his speech—I am afraid that I had to leave at the end of it—the hon. Gentleman asked for empirical evidence. Surely the evidence of the past two years, and of the past year especially, is that, despite decreasing the income tax rate, the total income tax take has increased. I hope that that will happen with this scheme.
      On the relationship between profit-related pay and bonuses, it is important for people to see the clear identification between them. This scheme would be strictly related to profit, whereas a bonus is often related to merit and sometimes involves quite a large element of subjective judgment. However, this scheme hits a different section of the market than do bonuses and would play, therefore, an important part in motivation. It would be in the interests only of the management or of the group concerned to ensure that it is successful and that it has a motivating, as opposed to a demotivating, effect.
      Therefore, I urge my hon. Friend not to accept this amendment. I know that it is a probing amendment and I do not mean to be hostile in saying this, but I feel that my points are relevant.
      Mr. Tim Boswell: I wish to take up the remarks of Opposition Members about the benefit, or the denial to the rest of the community of the benefit, of individual profit-related pay schemes. Perhaps we shall have an opportunity later to discuss the omission of the public sector from the proposals, which we understand, and on which hon. Members have already commented. It would be dangerous and churlish—perhaps characteristically churlish of certain hon. Members—to assume that, just because the benefits of such a proposal are not available to everyone—either as a matter of choice, definition or exclusion—the scheme would not, benefit the community.
      4.45 pm
      My belief, which is based on study and work that I have completed over a number of years and on my continuing interest in the subject, is that the introduction of profit-related pay could be of positive benefit to the economy. Therefore, it is directly of benefit to those who participate in it. Equally, it is indirectly of benefit to those in the public and private sectors who are not signed up on the scheme. It is in that spirit that I add my support to the proposals and hope that they will form the basis of a new look at the way in which we give new life and further stimulation to the expansion of our economy.
      Mr. Brooke: I rise to respond to the debate which, I advise my hon. Friend the Member for Winchester (Mr.
      994
      Browne) is on clause I stand part, rather than on the amendment. It may be easiest if I respond in the order in which various points were made, which means that I begin with the hon. Member for Sedgefield (Mr. Blair).
      The hon. Member raised a specific arithmetical question at the beginning, in the context of £3,000 or £20 a week. To make certain that there is common cause between us and that we are singing from the same hymn sheet, I advise him that profit-related pay would of course apply to half that figure. The application would be on the basis of £1,500 and if a person is on the top rate of tax, we should be talking about a figure of £20 a week. Profit-related pay would not apply to all the £3,000 because the relief is available on only half that figure.
      In answer to his question about a specific individual who is on that income—such a person would need to be on a particular salary level for that to apply—the hon. Gentleman knows that the purpose of the scheme is to embrace, in principle, all the people in a particular employment unit, provided that that is above the 80 per cent. figure that is required for qualification.
      The purpose of the scheme is to stimulate commitment to the activities of the business on the part of the entire work force and to stimulate also their interest in its profitability. It would be wrong to generalise in any way about specific experience, hut, having been profit-accountable for a business for 18 years, having lived in a profit-related environment during those 18 years, and having seen the payroll for which I was responsible in that capacity rise a thousandfold in cash terms during that period, I am conscious that one can achieve a community of endeavour in a business in which there is a relationship to profitability in the pay of those involved.
      The hon. Member for Sedgefield went on to ask me about costs. As the hon. Member for Great Grimsby (Mr. Mitchell) said, the hon. Gentleman was referring specifically to the quotation that appeared in The Guardian. Cost will obviously depend on take-up. The incidence of costs in financial years will depend on the growth over time in the number of employees who are covered by registered schemes, and by the amount of profit-related pay that they receive. There will be a lead time before new schemes can be operational and it is expected that costs will grow over time. Therefore, on that count alone, the estimate given in the "Financial Statement and Budget Report" of a negligible cost in 1987–88, and a cost of £50 million in 1988–89, cannot reflect the costs in the long term. I am the first to acknowledge that.
      The incidence of costs between years will depend also on the pattern of take-up between the schemes that make profit-related payments continuously, perhaps with weekly or monthly payments, and those that pay sums less frequently. As the schemes must be registered in advance of the start of the first profit period for which tax relief profit-related pay will he paid, and as firms are likely to align profit-related pay periods with their normal accounting periods, the start date of the accounting periods among the participating firms will also affect the pattern of cost between the financial years.
      For those reasons, the cost in 1988–89 is also likely to underestimate annual costs in the long term. If 2 million employees taking 10 per cent. of their pay as profit-related pay, for example, were covered by registered schemes by the end of 1988–89, the full annual tax costs would be about £300 million, but costs in 1988–89 would be much

      995
      less, as many of the schemes would not make payments until the following year or later. Long-term costings must be highly speculative and if the tax relief cost is high, it will be because there has been a valuable major change for the better in our pay systems. A tax relief which secured that would be money well spent.
      An intention of the legislation, to which the hon. Member for Sedgefield also referred, is that of greater identification, to which I have in part alluded from my personal experience. He asked about the circumstances where there was a downturn in a business and asked about the marginal cost involved. I noted that the hon. Member for Caithness and Sutherland (Mr. Maclennan) drew attention to the difference of opinion between the hon. Members for Sedgefield and for Great Grimsby, about employee identification. I do not want, the words of the hon. Member for Great Grimsby, to oversell the issue of a downturn, but imagine a business in which labour costs account for 70 per cent. of value added. Let us say that profit-related pay is 10 per cent. of labour costs which makes it 7 per cent. of value added. I find it inconceivable that it is not helpful to that business to have that margin of 7 per cent. flexibility, that it will not give some room for manoeuvre on output prices if input prices rise, and that that manoeuvring with output prices will not help to sustain output. It goes without saying that profit-related pay could be a higher proportion of pay than that, which would give more flexibility. The benefits are not just about downturns; pay flexibility can give more confidence about expansion in an upturn because of the security which it gives in a downturn. Again, I can endorse that from personal experience.
      The hon. Member for Sedgefield quoted from the Institute of Personnel Management and the British Institute of Management, as he did on Second Reading. I congratulate him on having read the submissions in response to the consultative document. I shall not remotely accuse him of selective quotation, because I am confident that he has read all the submissions. He will know that there were a large number of submissions on a whole series of different points, some of which contradicted the ones which he quoted.
      On motivation which is already secured from bonus schemes and, indeed, from share ownership, we are already encouraging share ownership successfully, but we need complementary incentives for cash profit-related pay. Bonus schemes not involving profit do not bring the external benefits that profit-related pay can. There is a need to get employees to identify with the overall commercial success of the business, and profit is the best measure of that.
      My hon. Friend the Member for Beaconsfield (Mr. Smith) made a helpful speech on flexibility in the labour market and the whole supply side issue. The hon. Member for Sedgefield had cast doubt on this issue and argued, drawing on Sir James Meade, that there would be the danger of insiders preventing extra recruitment. He will know that schemes will be able to exclude new recruits from profit-related pay until they have served for a time if that is desired. However, I doubt whether the hon. Gentleman is arguing that a union would be prepared to organise resistance to extra recruitment. I doubt if any
      996
      union would argue that as an objective. Business expansion, which is what this legislation is about, is not a zero sum game; it benefits everybody.
      My hon. Friend the Member for Beaconsfield supported the Government on flexibility and I join him in not wishing to make exaggerated claims for what the legislation will do and in believing that it will make a difference in terms of flexibility and on the supply side. We are envisaging the same sort of steady growth that has been seen in the share schemes which go back to the Finance Act 1978—that scheme was a product of the Lib-Lab pact and I pay tribute to the Liberal party for its influence on the then Labour Government—and to the all-employee share option scheme that we introduced in 1980. There are 666 schemes signed up under the 1978 Act and 647 under the 1980 Act. That is an increase which has occurred during the past decade and I envisage that we shall see the same sort of steady growth in the schemes that we are introducing on this occasion.
      The hon. Member for Southport (Mr. Fearn) raised specific questions that arise from alliance policy. Employers should need no persuading or reminding of the importance of relating pay to profits, but some encouragement—that is what this scheme is about—is appropriate to help employees see the value of linking a part of their pay to the success of the enterprise. The hon. Gentleman asked about national insurance contributions and suggested that there should be a relief from them. However, national insurance contributions are not a tax; they determine a benefit entitlement, so they are not an appropriate instrument to encourage the spread of profit-related pay.
      The hon. Member for Great Grimsby has read Professor Weitzman; I congratulate him on that. The hon. Member for Sedgefield was somewhat disparaging about American economists on Second Reading, but I remember growing up when Professor Galbraith, who started as a Canadian and only later became an American, was frequently quoted by Opposition Members. It would be a mistake if any anti-Americanism in academic thought were to creep into our affairs. We welcome suggestions from wherever they come.
      The hon. Member for Great Grimsby took up an issue which was less present in the speech of the hon. Member for Sedgefield and argued that this was a plan to cut wages and not to help profits rise and pay with them, as we intend. Certainly I would deny the hon. Gentleman's comments that the issue has been oversold. He denounced clause I as the bedrock of the legislation, but I am not sure whether he has looked at it, because clause I simply relates to interpretation. It was a slight piece of overselling to build the whole Opposition attack on that.
      The hon. Member for Caithness and Sutherland (Mr. Maclennan) asked specifically about take-up. In 1985 the organisation Industrial Facts and Forecasts carried out a survey for the Department of Employment on the use of profit-sharing and share ownership schemes by large companies. It showed that 6 per cent. of respondents had a cash-based profits scheme. It has since estimated that 8 to 9 per cent. of employees in these companies had some profit-related element in their pay in 1985.
      I have already referred to the make-up of the cost estimates. However, of the £50 million, perhaps one half may derive from companies which already have cash payment profit-related schemes. About 1 million employees out of 15 million in the private sector are in

      997
      existing schemes which might be altered for purposes of registration as profit-related pay schemes and one third of those brought into the tax relief in 1988–89 could account for the one half of the £50 million estimate that I referred to earlier. I also alluded to how we expect the figures to expand.
      5 pm
      In these matters as in others, the Social Democratic party is a little over-optimistic. The Inland Revenue received something in excess of 20,000 inquiries rather than the 60,000. However, I am delighted to say that more than 300 of The Times 1,000 largest companies in the country have shown interest at some level or another in the scheme. That is encouraging.
      My hon. Friend the Member for Wokingham (Mr. Redwood) made several most thoughtful comments in support of the scheme. My hon. Friend the Member for Daventry (Mr. Boswell) joined my hon. Friend the Member for Winchester in support of the Government's proposals. In essence,. we are aiming for an economy with high performance, high employment and high living standards. That will be achieved through a combination of measures and it is important that we get the total environment right. The proposals in the 17 clauses in the Bill and schedule 1 are a contribution to that process.
      Mr. Maclennan: Will the Minister address directly the question about inducements for employers? He has only said that he believes employers will see the advantages of profit-related pay and that they need no inducement to enter into such schemes. Does he really believe that the only obstacle to the entry to such schemes is the employees' reluctance?
      Mr. Brooke: The hon. Gentleman's question relates to an issue that was raised by the official Opposition. As the hon. Member for Sedgefield asked earlier, if profit-related pay was so beneficial, why did we need tax relief? I know that the hon. Member for Caithness and Sutherland will agree that plenty of companies run profit-related pay schemes already. The purpose of providing tax relief to secure employee interest and demand is to encourage employees to take up such schemes. Employees may be unfamiliar with the benefits. The emphasis throughout the proposals is on encouragement rather than imposition. We do not believe in dictating incomes policies and—I direct this remark to the hon. Member for Dagenham—we do not believe in the apparatus of a command economy. however disguised.
      Mr. Blair: We have had an interesting and wide-ranging debate. The hon. Member for Beaconsfield (Mr. Smith), in his usual way made an offensive point because he was unable to make a telling point. He began by saying that the scheme would bring about greater identification between employees and employers. He never satisfactorily explained what great advantage this scheme has over others. His central argument was based on the cost of the scheme. That is the heart of the argument between us.
      We are not debating whether profit-related pay is good or bad. People can enter into profit-related pay schemes now; many companies have such schemes, and their employees are free and entitled to enter them. As I explained to alliance Members, the question that we are debating is whether this scheme is the best use of public money. Is this the best way to make use of this tax incentive?
      998
      The hon. Member for Beaconsfield unwittingly put his finger on the dilemma. If the take-up of the scheme is low and the scheme is inexpensive, it has failed because the basis of the scheme's success must be that it is taken up in sufficiently large numbers to make an impact on the macroeconomy. That is the claim that has been made for the scheme. It is claimed that it will make an impact on the nation's economy. If the take-up is low and expense is low, it has failed. We are only debating the success of the scheme if the take-up is high and therefore—-by its very nature—the expense is high. If the scheme is successful, we will be talking about hundreds of millions of pounds, not £50 million.
      Conservative Members wanted to know Labour's ideas for spending the money. We have put those ideas forward constantly. Indeed, the alliance has put forward similar schemes for spending public money to create employment. We can agree or disagree about those ideas, but they exist.
      The question is whether this fiscal incentive will have the desired effect. I repeat that I remain completely unconvinced about it. This is not a question of modern ideas versus backward ideas. We should not simply take the first idea off the peg and use it just because it has a modern sounding ring to it, like profit-related pay. We should inquire—as it is our duty to inquire in the House—when debating the Finance Bill whether public expenditure is being made wisely. We remain unconvinced by the proposals.
      The hon. Member for Wokingham (Mr. Redwood) made some telling points. However, at the beginning of his speech he made a point that I must not allow to pass without comment. He said that the Opposition had run out of problems with which to tax the Government on the economy. I appreciate that the position in Wokingham is different from that in Sedgefield, but it does not lie in the mouth of any hon. Member to say that we do not have economic problems to deal with when there are 3 million unemployed.
      Being lectured on the virtues of unity by what is left of the Liberal-SDP alliance is a bit like being lectured on the virtues of being a recluse by the under-Secretary of State for Health and Social Security, the hon. Member for Derbyshire, South (Mrs. Currie). The notion that the Liberal-SDP alliance put forward any convincing argument for profit-related pay is comic. The alliance did not even deal with the objections made by its principal economic adviser, Sir James Meade, who has criticised the Government's plans for profit-related pay on the basis that I outlined.
      The hon. Member for Caithness and Sutherland (Mr. Maclennan) asked me on what basis the Institute of Personnel Management or the British Institute of Management could come forward with objections to profit-related pay. They did that on the basis of experience, and we should listen to those organisations.
      When we discuss profit-related pay and its obvious and self-evident advantages, we are told by the Treasury Minister that he cannot understand how any trade union could possibly resist recruitment to a firm on the basis that profits were to be spread more thinly. The trade union officials will not be the focus of that resistance. As anyone knows who has seen the large amount of overtime worked even in certain factories in my constituency, there is definitely a clear perception by many workers of their vested interests on the inside as against those on the outside.

      999
      We do not claim that profit-related pay is bad. I would not make that case. I know companies in my constituency that operate profit-related pay schemes and I wish them the best of luck. The question we are debating is whether this scheme, taken on the basis of it being a success—and on that basis it must be expensive—is the best way to spend public money. Unless we are persuaded of that, we will vote against the profit-related pay scheme. I must say from Labour's Front Bench that we are unpersuaded; we will therefore vote against it.
      Question put, That the clause stand part of the Bill:—
      The Committee divided: Ayes 316, Noes 197.

      Division No. 16]

      [5.10 pm

      AYES

      Adley, Robert

      Cartwright, John

      Alexander, Richard

      Channon, Rt Hon Paul

      Allason, Rupert

      Clark, Hon Alan (Plym'th S'n)

      Alton, David

      Clark, Dr Michael (Rochford)

      Amery, Rt Hon Julian

      Clark, Sir W. (Croydon S)

      Amess, David

      Colvin, Michael

      Amos, Alan

      Conway, Derek

      Arbuthnot, James

      Coombs, Simon (Swindon)

      Arnold, Jacques (Gravesham)

      Couchman, James

      Arnold, Tom (Hazel Grove)

      Currie, Mrs Edwina

      Ashby, David

      Davies, Q. (Stamf'd & Spald'g)

      Ashdown, Paddy

      Devlin, Tim

      Aspinwall, Jack

      Dickens, Geoffrey

      Atkins, Robert

      Dicks, Terry

      Atkinson, David

      Douglas-Hamilton, Lord James

      Baker, Nicholas (Dorset N)

      Durant, Tony

      Baldry, Tony

      Emery, Sir Peter

      Banks, Robert (Harrogate)

      Evans, David (Welwyn Hatf'd)

      Barnes, Mrs Rosie (Greenwich)

      Evennett, David

      Batiste, Spencer

      Fallon, Michael

      Beaumont-Dark, Anthony

      Farr, Sir John

      Beith, A. J.

      Favell, Tony

      Bendall, Vivian

      Fearn, Ronald

      Bennett, Nicholas (Pembroke)

      Fenner, Dame Peggy

      Benyon, W.

      Finsberg, Sir Geoffrey

      Bevan, David Gilroy

      Forman, Nigel

      Biffen, Rt Hon John

      Forsyth, Michael (Stirling)

      Biggs-Davison, Sir John

      Forth, Eric

      Blackburn, Dr John G.

      Fowler, Rt Hon Norman

      Body, Sir Richard

      Franks, Cecil

      Boscawen, Hon Robert

      Freeman, Roger

      Boswell, Tim

      Fry, Peter

      Bottomley, Mrs Virginia

      Gardiner, George

      Bowden, A (Brighton K'pto'n)

      Garel-Jones, Tristan

      Bowden, Gerald (Dulwich)

      Gill, Christopher

      Bowis, John

      Glyn, Dr Alan

      Boyson, Rt Hon Dr Sir Rhodes

      Goodhart, Sir Philip

      Braine, Rt Hon Sir Bernard

      Goodson-Wickes, Dr Charles

      Brandon-Bravo, Martin

      Gow, Ian

      Brazier, Julian

      Gower, Sir Raymond

      Bright, Graham

      Grant, Sir Anthony (CambsSW)

      Brittan, Rt Hon Leon

      Greenway, Harry (Ealing N)

      Brooke, Hon Peter

      Greenway, John (Rydale)

      Brown, Michael (Brigg & Cl't's)

      Gregory, Conal

      Browne, John (Winchester)

      Griffiths, Sir Eldon (Bury St E')

      Bruce, Ian (Dorset South)

      Griffiths, Peter (Portsmouth N)

      Bruce, Malcolm (Gordon)

      Grist, Ian

      Buchanan-Smith, Rt Hon Alick

      Grylls, Michael

      Buck, Sir Antony

      Hamilton, Hon A. (Epsom)

      Budgen, Nicholas

      Hamilton, Neil (Tatton)

      Burns, Simon

      Hampson, Dr Keith

      Burt, Alistair

      Hannam, John

      Butler, Chris

      Hargreaves, A. (B'ham H'll Gr')

      Butterfill, John

      Hargreaves, Ken (Hyndburn)

      Carlile, Alex (Mont'g)

      Harris, David

      Carlisle, John, (Luton N)

      Haselhurst, Alan

      Carlisle, Kenneth (Lincoln)

      Hawkins, Christopher

      Carrington, Matthew

      Hayes, Jerry

      Carttiss, Michael

      Hayhoe, Rt Hon Sir Barney

      1000

      Hayward, Robert

      Mitchell, David (Hants NW)

      Heathcoat-Amory, David

      Montgomery, Sir Fergus

      Heddle, John

      Morris, M (N'hampton S)

      Heseltine, Rt Hon Michael

      Morrison, Hon C. (Devizes)

      Hicks, Mrs Maureen (Wolv' NE)

      Morrison, Hon P (Chester)

      Hicks, Robert (Cornwall SE)

      Moss, Malcolm

      Higgins, Rt Hon Terence L.

      Moynihan, Hon C.

      Hill, James

      Mudd, David

      Hind, Kenneth

      Neale, Gerrard

      Hogg, Hon Douglas (Gr'th'm)

      Needham, Richard

      Holt, Richard

      Neubert, Michael

      Hordern, Sir Peter

      Nicholson, David (Taunton)

      Howard, Michael

      Nicholson, Miss E. (Devon W)

      Howarth, Alan (Strat'd-on-A)

      Onslow, Cranley

      Howarth, G. (Cannock & B'wd)

      Oppenheim, Phillip

      Howell, Ralph (North Norfolk)

      Owen, Rt Hon Dr David

      Hughes, Robert G. (Harrow W)

      Page, Richard

      Hughes, Simon (Southwark)

      Paice, James

      Hunt, David (Wirral W)

      Patnick, Irvine

      Hunt, John (Ravensbourne)

      Patten, John (Oxford W)

      Hunter, Andrew

      Pawsey, James

      Hurd, Rt Hon Douglas

      Peacock, Mrs Elizabeth

      Irvine, Michael

      Porter, Barry (Wirral S)

      Irving, Charles

      Porter, David (Waveney)

      Jack, Michael

      Powell, William (Corby)

      Janman, Timothy

      Price, Sir David

      Jessel, Toby

      Raffan, Keith

      Johnson Smith, Sir Geoffrey

      Raison, Rt Hon Timothy

      Johnston, Sir Russell

      Rathbone, Tim

      Jones, Gwilym (Cardiff N)

      Redwood, John

      Jones, Ieuan (Ynys Môn)

      Renton, Tim

      Jones, Robert B (Herts W)

      Rhodes James, Robert

      Jopling, Rt Hon Michael

      Rhys Williams, Sir Brandon

      Kellett-Bowman, Mrs Elaine

      Riddick, Graham

      Key, Robert

      Ridley, Rt Hon Nicholas

      King, Roger (B'ham N'thfield)

      Ridsdale, Sir Julian

      Kirkhope, Timothy

      Rifkind, Rt Hon Malcolm

      Kirkwood, Archy

      Roberts, Wyn (Conwy)

      Knapman, Roger

      Roe, Mrs Marion

      Knight, Greg (Derby North)

      Rossi, Sir Hugh

      Knight, Dame Jill (Edgbaston)

      Rost, Peter

      Knowles, Michael

      Rowe, Andrew

      Lamont, Rt Hon Norman

      Ryder, Richard

      Lang, Ian

      Sackville, Hon Tom

      Latham, Michael

      Sainsbury, Hon Tim

      Lawrence, Ivan

      Salmond, Alex

      Lawson, Rt Hon Nigel

      Sayeed, Jonathan

      Lee, John (Pendle)

      Shaw, David (Dover)

      Leigh, Edward (Gainsbor'gh)

      Shaw, Sir Giles (Pudsey)

      Lester, Jim (Broxtowe)

      Shaw, Sir Michael (Scarb')

      Lightbown, David

      Shelton, William (Streatham)

      Lilley, Peter

      Shephard, Mrs G. (Norfolk SW)

      Lloyd, Sir Ian (Havant)

      Shepherd, Colin (Hereford)

      Lloyd, Peter (Fareham)

      Shepherd, Richard (Aldridge)

      Lord, Michael

      Shersby, Michael

      Luce, Rt Hon Richard

      Sims, Roger

      McCrindle, Robert

      Skeet, Sir Trevor

      MacKay, Andrew (E Berkshire)

      Smith, Cyril (Rochdale)

      Maclean, David

      Smith, Sir Dudley (Warwick)

      Maclennan, Robert

      Smith, Tim (Beaconsfield)

      McLoughlin, Patrick

      Soames, Hon Nicholas

      McNair-Wilson, M. (Newbury)

      Speller, Tony

      McNair-Wilson, P. (New Forest)

      Spicer, Jim (Dorset W)

      Madel, David

      Spicer, Michael (S Worcs)

      Major, Rt Hon John

      Stanbrook, Ivor

      Mans, Keith

      Stanley, Rt Hon John

      Maples, John

      Steel, Rt Hon David

      Marland, Paul

      Steen, Anthony

      Marlow, Tony

      Stern, Michael

      Marshall, John (Hendon S)

      Stevens, Lewis

      Marshall, Michael (Arundel)

      Stewart, Allan (Eastwood)

      Martin, David (Portsmouth S)

      Stewart, Andrew (Sherwood)

      Mates, Michael

      Stewart, Ian (Hertfordshire N)

      Maude, Hon Francis

      Stradling Thomas, Sir John

      Mawhinney, Dr Brian

      Sumberg, David

      Maxwell-Hyslop, Robin

      Summerson, Hugo

      Michie, Mrs Ray (Arg'l & Bute)

      Taylor, Ian (Esher)

      Miller, Hal

      Taylor, John M (Solihull)

      Mills, Iain

      Taylor, Matthew (Truro)

      Mitchell, Andrew (Gedling)

      Taylor, Teddy (S'end E)

      1001

      Tebbit, Rt Hon Norman

      Warren, Kenneth

      Temple-Morris, Peter

      Wells, Bowen

      Thompson, Patrick (Norwich N)

      Wheeler, John

      Thorne, Neil

      Whitney, Ray

      Thornton, Malcolm

      Widdecombe, Miss Ann

      Thurnham, Peter

      Wiggin, Jerry

      Townend, John (Bridlington)

      Wigley, Dafydd

      Townsend, Cyril D. (B'heath)

      Wilkinson, John

      Tracey, Richard

      Wilshire, David

      Tredinnick, David

      Winterton, Mrs Ann

      Twinn, Dr Ian

      Winterton, Nicholas

      Vaughan, Sir Gerard

      Wolfson, Mark

      Viggers, Peter

      Wood, Timothy

      Waddington, Rt Hon David

      Woodcock, Mike

      Wakeham, Rt Hon John

      Yeo, Tim

      Waldegrave, Hon William

      Young, Sir George (Acton)

      Walden, George

      Younger, Rt Hon George

      Walker, Bill (T'side North)

      Wallace, James

      Tellers for the Ayes:

      Waller, Gary

      Mr. Mark Lennox-Boyd and Mr. Stephen Dorrell.

      Walters, Dennis

      NOES

      Abbott, Ms Diane

      Eastham, Ken

      Allen, Graham

      Evans, John (St Helens N)

      Archer, Rt Hon Peter

      Fatchett, Derek

      Armstrong, Ms Hilary

      Faulds, Andrew

      Ashley, Rt Hon Jack

      Fisher, Mark

      Banks, Tony (Newham NW)

      Flannery, Martin

      Barnes, Harry (Derbyshire NE)

      Flynn, Paul

      Barron, Kevin

      Foot, Rt Hon Michael

      Battle, John

      Foster, Derek

      Beckett, Margaret

      Foulkes, George

      Bell, Stuart

      Fraser, John

      Benn, Rt Hon Tony

      Fyfe, Mrs Maria

      Bennett, A. F. (D'nt'n & R'dish)

      Galbraith, Samuel

      Bidwell, Sydney

      Galloway, George

      Blair, Tony

      Garrett, John (Norwich South)

      Blunkett, David

      Garrett, Ted (Wallsend)

      Boateng, Paul

      George, Bruce

      Boyes, Roland

      Gilbert, Rt Hon Dr John

      Bradley, Keith

      Golding, Mrs Llin

      Bray, Dr Jeremy

      Gordon, Ms Mildred

      Brown, Gordon (D'mline E)

      Gould, Bryan

      Brown, Nicholas (Newcastle E)

      Graham, Thomas

      Buchan, Norman

      Grant, Bernie (Tottenham)

      Buckley, George

      Griffiths, Nigel (Edinburgh S)

      Caborn, Richard

      Griffiths, Win (Bridgend)

      Callaghan, Jim

      Grocott, Bruce

      Campbell, Ron (Blyth Valley)

      Harman, Ms Harriet

      Campbell-Savours, D. N.

      Haynes, Frank

      Clark, Dr David (S Shields)

      Heffer, Eric S.

      Clarke, Tom (Monklands W)

      Henderson, Douglas

      Clay, Bob

      Hinchliffe, David

      Clelland, David

      Hogg, N. (C'nauld & Kilsyth)

      Clwyd, Mrs Ann

      Holland, Stuart

      Cohen, Harry

      Home Robertson, John

      Cook, Frank (Stockton N)

      Howarth, George (Knowsley N)

      Corbett, Robin

      Howell, Rt Hon D. (S'heath)

      Corbyn, Jeremy

      Hoyle, Doug

      Cousins, Jim

      Hughes, John (Coventry NE)

      Cox, Tom

      Hughes, Robert (Aberdeen N)

      Crowther, Stan

      Hughes, Roy (Newport E)

      Cryer, Bob

      Hughes, Sean (Knowsley S)

      Cummings, J.

      Illsley, Eric

      Cunliffe, Lawrence

      Ingram, Adam

      Cunningham, Dr John

      Janner, Greville

      Dalyell, Tam

      John, Brynmor

      Darling, Alastair

      Jones, Barry (Alyn & Deeside)

      Davies, Rt Hon Denzil (Llanelli)

      Jones, Martyn (Clwyd S W)

      Davies, Ron (Caerphilly)

      Kaufman, Rt Hon Gerald

      Davis, Terry (B'ham Hodge H'l)

      Kilfedder, James

      Dewar. Donald

      Lambie, David

      Dobson, Frank

      Leighton, Ron

      Doran, Frank

      Lestor, Miss Joan (Eccles)

      Douglas, Dick

      Lewis, Terry

      Duffy, A. E. P.

      Litherland, Robert

      Dunnachie, James

      Livingstone, Ken

      Dunwoody, Hon Mrs Gwyneth

      Lloyd, Tony (Stretford)

      Eadie, Alexander

      Lofthouse, Geoffrey

      1002

      Loyden, Eddie

      Rees, Rt Hon Merlyn

      McAlhon, John

      Reid, John

      McAvoy, Tom

      Richardson, Ms Jo

      Macdonald, Calum

      Roberts, Allan (Bootle)

      McFall, John

      Robertson, George

      McKay, Allen (Penistone)

      Rogers, Allan

      McKelvey, William

      Rooker, Jeff

      McLeish, Henry

      Ross, Ernie (Dundee W)

      McNamara, Kevin

      Rowlands, Ted

      McTaggart, Bob

      Ruddock, Ms Joan

      McWilham, John

      Sedgemore, Brian

      Madden, Max

      Sheerman, Barry

      Mahon, Mrs Alice

      Sheldon, Rt Hon Robert

      Mallon, Seamus

      Short, Clare

      Marek, Dr John

      Skinner, Dennis

      Marshall, David (Shettleston)

      Smith, Andrew (Oxford E)

      Marshall, Jim (Leicester S)

      Smith, C (Isl'ton & F'bury)

      Martin, Michael (Springburn)

      Snape, Peter

      Martlew, Eric

      Soley, Clive

      Meacher, Michael

      Spearing, Nigel

      Michael, Alun

      Steinberg, Gerald

      Michie, Bill (Sheffield Heeley)

      Stott, Roger

      Millan, Rt Hon Bruce

      Strang, Gavin

      Mitchell, Austin (G't Grimsby)

      Straw, Jack

      Moonie, Dr Lewis

      Taylor, Mrs Ann (Dewsbury)

      Morgan, Rhodri

      Thompson, Jack (Wansbeck)

      Morley, Elliott

      Turner, Dennis

      Morris, Rt Hon A (W'shawe)

      Vaz, Keith

      Mowlam, Mrs Marjone

      Wall, Pat

      Mulhn, Chris

      Walley, Ms Joan

      Murphy, Paul

      Wardell, Gareth (Gower)

      Nellist, Dave

      Wareing, Robert N

      Oakes, Rt Hon Gordon

      Welsh, Michael (Doncaster N)

      O'Brien, William

      Williams, Rt Hon A J

      O'Neill, Martin

      Williams, Alan W (Carm'then)

      Orme, Rt Hon Stanley

      Winnick, David

      Pendry, Tom

      Wise, Mrs Audrey

      Pike, Peter

      Worthington, Anthony

      Powell, Ray (Ogmore)

      Wray, James

      Prescott, John

      Young, David (Bolton SE)

      Primarolo, Ms Dawn

      Radice, Giles

      Tellers for the Noes

      Randall, Stuart

      Mr Allen Adams and Mr Don Dixon

      Redmond, Martin

      Question accordingly agreed to.
      Clause 1 ordered to stand part of the Bill.

  Clause 2

    TAXATION OF PROFIT RELATED PAY
    Question proposed, That the clause stand part of the Bill.
    Mr. Austin Mitchell: I repeat a question to the Minister which he did not answer in the debate on clause I stand part. I should have thought that, during the past 10 years, the profits of British companies have been related not so much to the efficiency of companies, although clearly that is a factor, as to the Government's macroeconomic running of the economy. The pattern seems to be that if the pound is overvalued, as it was grievously from 1979 to 1982, profits are squeezed, firms go bankrupt and jettison everything that can be thrown overboard and a hard time is had by all. But if the pound comes down, as it manifestly has come down since 1983—by about 20 to 25 per cent. from the rate prevailing at the end of 1982—profits reemerge, especially in firms which are exporting. I am talking primarily about manufacturing, but it also affects the service sector. Profits have boomed because firms are competitive because exports pay and because they can squeeze more profits out of exports.
    In neither case is this essentially related to the performance of the firm or the work force. Therefore,

    1003
    under this scheme, workers are being rewarded for the consequences of the Government's macroeconomic policy instead of their endeavours. The rewards are coming from increased taxation, because the burden must be spread on those in the public sector who will get no benefit from this.
    If profits increase after a devaluation, pay that is related to profits will increase after devaluation. Therefore, we shall be in a less effective position to do what is necessary after a devaluation—keep costs down. After the 1967 devaluation, the Labour Government squeezed costs to free resources for exports and to stop competitiveness being eroded. But this proposal would do exactly the opposite. We shall be pumping out more money, increasing take-home pay and accelerating the rate of inflation simply because the consequences of the Government's profit-related pay scheme will put more money in workers' pockets. How does the Minister answer those points?
    Mr. Brooke: I am delighted to welcome you to the Chair, Mr. Knox. The hon. Member for Great Grimsby (Mr. Mitchell) spent his speech on clause I stand part accusing the Government of overselling this legislation. I would be the last person to oversell this legislation or the achievement of the Government in providing the framework for the economic prosperity that we have been enjoying in recent years. But I am grateful to the hon. Gentleman for paying tribute to the Government for the success being enjoyed by the economy and by individual companies within it.
    This is a wider question than the issues covered in clause 2, so I am responding generally without notice. My recollection is that, at the microeconomic level, industrial and commercial corporations are enjoying a higher rate of return than they have enjoyed since 1964. The same is true for manufacturing companies since 1973. The quarter of a century that is embraced by the figures for industrial and commercial corporations saw several Governments of different colours, and it would be wrong to generalise about the pattern during those 25 years. All that I can say is that 1 am delighted that, within the framework which the Government have provided, the profitability and returns being secured are the highest for nearly 25 years.
    The hon. Member for Great Grimsby gave us a trailer of the issues relating to the private and public sectors which we shall debate when we come to Opposition amendments as well as an amendment from my hon. Friend the Member for Beaconsfield (Mr. Smith). It would be a mistake for me to give the hon. Gentleman a general answer. At the microeconomic level, greater profitability in corporations, accompanied by profit-related pay, will ensure a greater commitment among the entire work force to the success of the company and is likely to increase the prosperity of those who work in the company.
    Question put and agreed to.
    Clause 2 ordered to stand part of the Bill.

  Clause 3

    RELIEF FROM TAX
    Mr. Blair: I beg to move amendment No. 31, in page 2, line 39, leave out '£3,000' and insert '£1,500'.
    The amendment is drafted to probe the Government for more information on their profit-related pay schemes.
    1004
    When we debated clause 1, the Minister said that the tax relief would allow those on higher earnings to claim tax relief off the top of their incomes. I should be obliged if he would confirm that. Those on higher rates of tax would gain more from profit-related pay than those on the basic rate of tax.
    The Minister also said, rightly, that only half the amount of profit-related pay would be eligible for tax relief. If the maximum amount of profit-related pay was £3,000, the maximum level for tax relief would be £1,500. We agreed that, at the top rate, that could give about £20 a week tax-free to those on higher pay, which is a considerable sum. We quizzed the Minister on this, and he dealt in some detail with the Government's estimate of the cost of the profit-related pay scheme.
    Various figures were bandied about. I quoted figures from the Treasury, which started at £50 million, and from various columnists and academics, who took the level much higher. I should like to probe a little on this matter. The Paymaster General thought that £3 million would be about the top amount that could be claimed under the schemes. I should be obliged if he will tell us whether the Treasury has made a precise study of the costs and what empirical evidence it has adduced so that we know exactly what sums we are considering. This is important when considering the amount of tax relief.
    5.30 pm
    When the proposals were first promulgated, the maximum relief for profit-related pay was £1,000, and it has increased considerably since then. I should be obliged if the Paymaster General will tell us why the Government felt it necessary to raise the amount. The hon. Gentleman may say that the reason was the many representations by employers to the effect that they did not want to engage in those schemes unless the relief was much higher, so it was obviously parti pris. It is very much in the interests of those who engage in profit-related pay schemes to have the highest maximum tax relief available. The Treasury has to be satisfied about what maximum limit will encourage the maximum number of people to take up profit-related pay. Plainly, there must be a balance between meeting the interests of the taxpayer and encouraging the PRP schemes. I am not sure that the balance is right. There has ben a considerable uplift in the schemes' limits. At the very least, we are owed an explanation before we let this pass without comment.
    Mr. Brooke: The hon. Member for Sedgefield (Mr. Blair) has returned to an issue to which he alluded in the debate on clause 1 stand part. It may be helpful if I specifically answer his question, because he has said that amendment No. 31 is a probing amendment. On £900 per annum, which would be 60 per cent. of the £1,500 proposed, we would be talking about £17·30 a week rather than the £20 mentioned by the hon. Gentleman. Nevertheless, the figures are obviously of the same magnitude.
    The hon. Gentleman said that those on high incomes would gain more. That is, of course, a function of a progressive taxation system, but taxation rates will have their effect.
    Mr. Blair: Is it not right that if people pay the higher tax rates they will obtain these higher amounts without doing any additional work for them? Without any greater productivity or extra work, they will get more than those on the basic rate.
    Mr. Brooke: I took that point when the hon. Gentleman made it in the debate on clause I stand part. I said that we were looking at a community of interest, with everyone working within a particular company. Of course. the income is a function of contribution. As the hon. Gentleman knows, there is a cut-off at £15,000. Although it is possible for a company to have more profit-related pay than the £3,000 limit, there would be no tax relief on it.
    I should like to avoid any misunderstanding. I did not say that £300 million was our likely long-term figure. I said that it would be perfectly reasonable to have a certain cost in 1988–89, as stated in the projections, yet have the scheme running by the end of that period at a level that, in the fullness of time—obviously it is phased—would produce a full annual cost of £300 million. That simply extends our £50 million figure to a long-term basis. Any take-up beyond the immediate projections will be speculative, just as were any projections made in the context of the 1978 share scheme introduced by the Labour Administration. I have not looked at the forecasts made by that Administration when the scheme was introduced, but it would have been difficult to predict precisely the figures expected over the 10-year period.
    Mr. Alex Salmond: Does the right hon. Gentleman accept the argument that those who will benefit to the maximum extent from the £900 possible profit-related pay, because they are likely to be near the top of the companies concerned, have less need of this general scheme to provide some incentive and some community of interest? It seems a little peverse that the Minister did not restrict the taxation benefit to the standard rate of tax.
    Mr. Brooke: The hon. Member for Sedgefield asked me why we had extended the relief in our proposals in this year's Budget as against those in last year's Green Paper. We decided on the basis of our wide-ranging consultation, which embraced organisations such as the Institute of Personnel Management and the British Institute of Management, which were not wholly favourable to the scheme. I think that the hon. Member for Banff and Buchan (Mr. Salmond) makes a slightly over-cynical suggestion. The Government's judgment in terms of the proposals arising from the Green Paper and the consultation exercise was that it was a balanced package, with the intention of securing certain objectives.
    Sir Peter Emery: Obviously, there are Conservative Members who are very much in favour of this scheme. We think that it is an excellent addition to the incentives which are necessary within taxation generally. Is my right hon. Friend able to tell the House whether there has been any prognostication about the number of people who might be affected in 1988–89 or 1989–90? This is obviously important in terms of the effects.
    Mr. Brooke: I am grateful to my hon. Friend, just as I was to the hon. Member for Banff and Buchan, for kindly ascribing right honourable status.
    Sir Peter Emery: It will come in time.
    Mr. Brooke: In the debate on clause I stand part, I said that, if 2 million employees with 10 per cent. of their pay as profit-related pay were covered by registered schemes by the end of 1988–89, the full annual tax cost would be about £300 million, but the cost that would fall in 1988–89
    1006
    in terms of relief would be about £50 million, because many of the schemes would not make payments until the following year or later. I referred to 2 million employees.
    Sir Peter Emery: As I said, right honourable status will come in time. I am sorry to press the point. I heard my hon. Friend make that statement. But is that the estimate of take-up that the Treasury believes will come about, or does my hon. Friend think that it is likely to be much less? I am afraid that it may be much less. I hope that my hon. Friend will tell us what he believes the actual take-up will be.
    Mr. Brooke: We needed a figure to put into the forecast, and that was the one we took. There was a degree of underlying arithmetical logic to it, but I acknowledge that it was speculative. There are 20,000 employers who have said that when the Inland Revenue produces its guidance notes shortly, assuming this legislation is passed. they would like to receive a copy. That is an index of the fairly widespread interest among employers.
    Mr. Blair: The hon. Gentleman raised an important point. I do not wish to rehearse the arguments that were put earlier, but there is bound to be an element of speculation in deciding what the take-up is. If we are talking about 2 million people with 10 per cent. of their pay—that is, about £300 million—it is important to be sure of the basis upon which we are working and to ensure that there is evidence to support our view. As I made clear earlier, I have my doubts about how successful this will be in any event. It is absolutely clear from the figures that we have been given that we are talking about substantial sums of money.
    I asked the Minister for an explanation of why, when the Government first put forward this scheme, there was a maximum of £1,000 as the top amount that is able to come within the profit-related pay. It is now £3,000. He indicated that the reason was the representations that were made. I still say that that is a significant mark-up to have occurred as a result of such representations. In the initial term, profit-related pay schemes will be introduced and people will get an immediate tax-free benefit in their hand for not producing or doing anything more at all. That is why, when profit-related pay was introduced, some people suggested that it should ensure that people will not get any more money in their hands as a result of the introduction of the tax incentive. I still think that the figure is extremely high. However, we have made our position clear in the vote on clause I, so it is not necessary to divide the Committee on the amendment.
    Mr. Brooke: To avoid misunderstanding, I would say that the £1,000 to which the hon. Member for Sedgefield (Mr. Blair) referred, in terms of the original proposals, was the total available tax relief. I agree that there was a difference in the manner in which it was expressed. Therefore, half of the £3,000, which is inherent in the legislation now, is a 50 per cent. improvement and not a case of tripling.
    Mr. Blair: I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Clause 3 ordered to stand part of the Bill.

  Clause 4

    EXCEPTIONS FROM RELIEF
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I have a couple of brief questions on clause 4. As I understand it, the principal purpose of clause 4 is to ensure that, if an employee has more than one employment and if, in that other employment, he already enjoys the benefits of a profit-related pay scheme, he cannot, in the second employment, also have the same benefits of a profit-related pay scheme. I assume that that is to do with an anti-avoidance measure, but I would welcome the Minister's confirmation of that.
    I also assume that there are perfectly genuine cases in which people have two separate employments. I assume that, under clause 4, even though profit-related pay is not able to be enjoyed in both employments, other types of bonus scheme or productivity scheme, running in conjunction with a profit-related pay scheme will be perfectly all right. In subsection (3) of clause 4 there is a statement, the effect of which is to ensure that subsection (2) does not apply to those whose earnings are below the lower earnings limit for class 1 contributions. I assume that the purpose of that is to ensure that those on lower pay with below class I contribution levels can still enjoy profit-related pay. I should be grateful if the Minister would confirm the points that have been put to me.
    Mr. Brooke: The hon. Member for Sedgefield (Mr. Blair) has stated what he believes to be the proposals. We certainly consider that it is right to encourage the spread of profit-related pay by introducing a measure of relief, but we believe that there should be upper limits to the amount of the relief. To prevent people avoiding such limits by accident or design—I freely acknowledge that it might be either—by arranging to receive profit-related pay from more than one scheme, clause 4 provides that an employee will not be eligible for tax relief on his profit-related pay if he is already receiving such relief on profit-related pay from another scheme.
    As to bonuses or any other arrangements, I repeat what I said on the amendment that we have just discussed. We do not intend to interfere with the arrangements that employers may have. It is just that the tax relief will be limited to what is contained within the scheme. On the national insurance contribution point, I confirm that the hon. Gentleman is absolutely right.
    Question put and agreed to.
    Clause 4 ordered to stand part of the Bill.
    Clause 5 ordered to stand part of the Bill.

  Clause 6

    EXCLUDED EMPLOYMENTS
    5.45 pm
    Mr. Tim Smith: I beg to move amendment No. I, in page 3, leave out lines 41 and 42.
    The Chairman of Ways and Means: With this it will be convenient to take the following amendments: No. 32, in page 3, line 43, leave out paragraphs (c) and (d).
    No. 2, in page 4, leave out lines 1 to 3.
    Mr. Smith: Clause 6 deals with excluded employments and states that no person who has employment in an office
    1008
    under the Crown or in the service of the Crown, or is employed by an excluded employer, can participate in a profit-related pay scheme. Sub-section (2)(b) states that an excluded employer means
    "a body under the control of the Crown".
    Subsection 3(b) states that in the case of a body having a share capital—which is what I am interested in—control means that
    "he holds more than half of its issued share capital".
    It was put to me by Price Waterhouse, to whom I am an adviser, that that would cover any plc owned by the state. For example, it would include the Rover Group. I am not sure, but I think it would include Harland and Wolff and a number of other plcs owned by the state because the Crown controls more than half of their share capital. I can understand why the Government want to exclude certain employments. It seems that, in certain cases, it would be inappropriate for employments to qualify for a profit-related scheme.
    That is not the only way in which a scheme can be excluded. To qualify, a scheme must be with an employer who is in the business of making a profit in the first place. Obviously, that would exclude many employments under the Crown. I ask my hon. Friend the Minister to look at the matter. If I am right about the matter, it is quite wrong that, just because people happen to work for plcs that are owned by the Crown, they should be excluded from the scheme.
    Mr. Blair: I have some sympathy with the amendment moved by the hon. Member for Beconsfield (Mr. Smith). Similar related points were raised in the debate on the amendments that are tabled in my name and have been taken together. Of course it is the case that, on the whole the public sector will be excluded from profit-related pay. Indeed, if clause 6 is passed as it stands at present, it will be totally excluded. One of the things that Professor Weitzman put forward—I confess that I did not totally understand the basis upon which he managed to do it—was some profit-related pay scheme for the public sector as well as the private sector. I hesitate to recommend that the Government turn their minds to that matter at this stage.
    It is of course the case that the public sector will have no such profit-related pay scheme at all and will be unable to participate in it. One of the traditional reasons for that is that the public sector has much greater security of tenure than the private sector has and, therefore, profit-related pay is a more intelligent way of rewarding in the private sector rather than in the public sector, quite apart from the fact that, obviously, public sector profits have to be made. I am not entirely sure that that traditional argument would apply so much nowadays.
    As I understand it, the question raised by the hon. Member for Beaconsfield concerns bodies under Government or local authority control with a fairly autonomous existence which can make profits. I join him in his question to the Minister about the purpose of excluding a body under central or local government control which makes profits and is therefore susceptible of engaging in a profit-related pay scheme. Why, if we wish for efficiency in the public sector and believe that that is the method of obtaining it, and if there are public sector bodies that are susceptible of being in these schemes, should not we allow them to participate?
    As well as the point raised by the hon. Member for Beaconsfield, my amendment deals with, for example,

    1009
    local authorities' direct labour organisations which can tender for and perform contracts, and which, in certain circumstances, may be able to participate in these schemes. Once we have accepted, as the Committee has by its decision earlier, that profit-related pay schemes are to be encouraged, the net should be cast as widely as possible. If the Government believe that that is a good idea which will encourage productivity at the work place, the burden is upon them to show why certain categories of people should he excluded. At present, there seems to be doubt over at least those two categories.
    Mr. Boswell: I want to associate myself with the amendment of my hon. Friend the Member for Beaconsfield (Mr. Smith) and substantially with many of the remarks made by the hon. Member for Sedgefield (Mr. Blair).
    We have a real problem here which goes to the heart of any analysis or attempt to help stimulate profit-related pay. Where profit does not exist it is difficult, by definition, to contrive some profit-related pay scheme. Nevertheless, it gives me some concern that about one quarter of the labour force which remains within the public sector under its different heads is excluded from what is a substantial advance.
    Earlier, I had an opportunity to speak about the fact that I do not believe that the benefits of profit-related pay are purely internal to the schemes of the beneficiaries thereof. Nevertheless, an anomaly is created to which we should address ourselves. My purpose in rising is not in any sense to solve the problem, but to invite the Government to put down a marker to see what can be done in subsequent years to balance the position as far as it can be.
    There are some grades of Government-controlled bodies at rather different levels. One is the plc with a largely public shareholding, such as the Rover Group. The next level would be Government trading funds, going through to organisations partly or entirely identified with public sector bodies, such as local authorities or the Civil Service. I have recently had the privilege of working alongside the Civil Service and I see the importance of encouraging motivation. However, one or two Opposition Members have shown a marked lack of interest in the Government's attempts to introduce incentive schemes for efficency in the public sector. Without solving these problems, I invite the Government to address themselves to them and to see whether, in a subsequent Finance Bill, they can bring forward some measures which would shadow profit-related pay.
    As hon. Members have mentioned earlier, there is the problem of creating a personal incentive because of the difficulty of allocation and the invidiousness which that may sometimes bring. That may go to some of the anxieties that some hon. Members have mentioned about incentive schemes in the public sector. Nevertheless, it is unfortunate if about a quarter of the labour force cannot participate in these schemes. I understand the reason for that and the accountancy principles which make it impossible at this stage, but I hope that it will be possible to find a way to extend the benefits of what is a considerable social advance to other groups of employees in subsequent Finance Bills.
    Mr. Brooke: I am grateful to my hon. Friend the Member for Beaconsfield (Mr. Smith) for his amendments
    1010
    and for the manner in which he moved them. He asked me a specific question about the Rover Group and I can confirm that such a body would be excluded by the legislation as it is now composed.
    The exclusion of the bodies addressed in the amendment is not a reflection of prejudice but of a careful consideration of the economic merits and consequences of profit-related pay in this sector of the economy. As my hon. Friend said, many of the employees concerned would, in any event, be excluded from access to the tax relief by other profit-related pay provisions. Those provisions require that the undertaking is carried on with a view to profit; they also exclude tax relief in respect of losses. The hon. Member for Sedgefield (Mr. Blair) made similar points in the context of local authorities and I give the same observations in response.
    Some trading bodies covered by the amendment show an accounting profit and compete directly with the private sector, but even those are not generally wholly comparable with the private sector. Some public concerns can achieve profit targets by raising prices in situations where the absence of other suppliers means that they are comparatively less vulnerable to losing business. Even where conditions are similar, there are often cultural differences. The full benefits of profit-related pay will flow where a concern operates fully in the disciplines of the market economy, as, if I may remark in parenthesis, privatisation shows.
    We take the view that, wherever it can be done, such bodies should be freed from Government control through privatisation, after which they are fully exposed to the benefits and disciplines of the market, including the benefits of a registered profit-related pay scheme.
    The matter has been carefully considered. In general, the potential benefits of profit-related pay schemes in the concerns covered by the amendment are likely to be significantly less than in the private sector, and the concentration of an innovative tax relief, such as profit-related pay, on the private sector, where the benefits of pay flexibility are most likely to have the greatest impact, has been regarded as the first priority by the Government.
    The hon. Member for Sedgefield referred to local authorities. What I said about other aspects of this scheme to my hon. Friend the Member for Beaconsfield applies equally to local authority employees. There are areas in the local authority sector where there are similarities with the private sector. I am not suggesting that it is possible to make simple straightforward distinctions. But while there are similarities, there are important differences of culture and of competitive tendering in the local authority sector for all the work cannot yet be said to have been achieved.
    I said in the debate on clause I stand part that we shall be watching with interest the evolution of profit-related pay. We expect it to be a gradual process. I hope that it will be a success. We shall certainly look at its evolution, not simply in the private sector, in terms of what is achieved there, but in terms of its potential application elsewhere. I hope that in the spirit of that response my hon. Friend will feel able to withdraw his amendment.
    Mr. Tim Smith: I can see the difficulties that arise with trading funds and, to a lesser extent, with direct labour organisations of local authorities, although they are not necessarily insuperable. After all, they would have to meet various requirements in schedule I in order to qualify. Their accounts would have to show a true and fair view.

    1011
    There would have to be an independent accountant's report and they would have to be profit-making in the first place.
    But when it comes to plcs in the public sector, I am a little disappointed by my hon. Friend's reply. I was expecting him to say not that he disagreed with me in principle, but that the Government had looked at the matter and had not been able to find a practical way to deal with the problem. In most cases there would be no question of profit-related pay. For a plc such as the Rover Group, or a nationalised industry in receipt of a Government subsidy that is loss-making, the question does not arise. If it is a nationalised industry, or a plc, which has advanced beyond that and is being prepared for transfer to the private sector and making a profit, it stands wholly apart from Government; it is not in receipt of Government subsidy. Apart from ownership, I cannot see the distinction between that plc and one in the private sector or one that is listed on the Stock Exchange. I do not wish to press this, but will my hon. Friend re-examine the sector of plcs that are 100 per cent. owned by the Crown?
    6 pm
    Mr. Blair: I understood a part of the Minister's speech; then there was a part that lapsed into pure ideology. That brought to mind what I believe the noble Lord Ross said when welcoming the shadow Secretary of State for Scotland during the period of the 1974–79 Government. He said that he had read his first speech; he had not read it well; and it had not been worth reading anyway. That summed up the part in which the Minister was talking about trading plcs.
    I would put the case of Austin Rover differently from the hon. Member for Beaconsfield (Mr. Smith). If an organisation is not making a profit, the issue hides itself and there is no question of profit-related pay. However, if Austin Rover moves into profit, or if other organisations in the public sector are in profit, why on earth should they not participate in the schemes? It is extremely difficult to see how one can justify excluding bodies from profit-related pay merely on the basis that they operate in the public sector.
    We voted earlier against the principle of profit-related pay, but now that it has been accepted, it is our duty to make it as effective as possible. At the moment, those in the public sector who have to operate on the basis of profit along commercial lines will feel aggrieved if they are unable to obtain the tax perk that arises from profit-related pay while others in the private sector can do so.
    So I did not find the Minister's explanation wholly convincing. Will the Treasury keep the matter under review and bend some of its considerable resources to finding a way around the problem?
    Mr. Brooke: I say to my hon. Friend the Member for Beaconsfield (Mr. Smith) and to the hon. Member for Sedgefield (Mr. Blair) that it goes without saying that if companies such as those that were the concern of my hon. Friend can be privatised, that will of itself resolve the problem. I do not want to imply that that is the sole objective of privatisation, because the benefits that can be secured through privatisation are common cause on this side of the House.
    I tried to answer my hon. Friend the Member for Daventry (Mr. Boswell) by saying that the Government
    1012
    would keep the matter under review. It would be pleasing if, by the time we came to discuss this issue next, the problem had been solved by the privatisation of the companies concerned, but I said that we sought to take a balanced view, and that is what we shall continue to do when examining what both sides of the House have admitted is a difficult problem.
    Amendment, by leave, withdrawn.
    Clause 6 ordered to stand part of the Bill.
    Clauses 7, 8 and 9 ordered to stand part of the Bill.

  Clause 10

    CANCELLATION OF REGISTRATION
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I have a small point to make about clause 10 that is important for anti-avoidance purposes. It may be dealt with in schedule 1. If so, I apologise for raising it here. Clause 10(4) provides:
    "If the scheme employer, by written notice, requests the Board to cancel the registration of the scheme with effect from the beginning of a profit period specified in the notice, the Board shall comply with the request."
    It seems to me that a major part of the Government's case on profit-related pay must be that the scheme exists in bad times as well as in good. There is not much point in having a profit-related pay scheme if it exists only in the good times. It must exist in the bad times, too. That is what is supposed to give firms the benefit of not needing to make redundancies when recession hits them and profitability drops. When those bad times come, what is to prevent an employer saying that he intends to cancel the profit-related pay scheme? In other words, employers obtain the benefit when times are good and profits are rising, but, as soon as profits go down, they cancel the scheme, and thus avoid any of the microeconomic benefits that are supposed to accrue under the scheme. Is that provided for anywhere else? If not, does clause 10(4) open that scheme of avoidance to them?
    Mr. Brooke: At first blush, I do not see what the attraction of making such a change would be from the point of view of the employer. Of course, there may be circumstances that call for the cancellation of the registration that arise out of the economic performance of the company, but those are dealt with in terms of the legislation as a whole. As the Government argued that potential benefits to employers and employees flow from having profit-related pay schemes at a time of downturn, I do not understand why there would be a benefit for the employer in effecting such a change at such a time.
    Mr. Blair: I appreciate that there is perhaps a difference between us as to how great a community of interest there will be between the workers and management in these profit-related pay schemes. However, if the profits of the firm drop under a PRP scheme, so the wages of the workers drop. It may be agreed between the workers and management that, rather than let their pay drop, which is the effect at present, they will engage in voluntary redundancies and keep paying at the same level and cancel the profit-related pay scheme for that reason. When it is so easily cancelled by the employer, it might be in the interests of employers and employees to do that. That would militate against the better purposes of the scheme.

    1013
    Will the Minister give consideration to the problem of those scheme employers who decide that it is in their interests to engage in a PRP scheme for a limited period and then, if it is clear that profits will accrue only over a limited period, halt that scheme and move into a different scheme with a different company? When the scheme can he easily cancelled, there is surely a risk that it will be entered into not for the benefit of the official purpose of PRP but for purposes of avoidance.
    Mr. Brooke: I have a continuing problem with the hypothesis advanced by the hon. Member for Sedgefield (Mr. Blair). The act of cancellation, just like the act of going into loss under one of the methods detailed in the schedule, produces a discontinuity of the scheme. If one found that things were improving fairly soon thereafter, one would not be able to maintain the benefit in the way in which one would if there had been continuity through the bad periods Clearly, it is possible for a company to make an application for cancellation of registration, and subsection (4) puts the board under an obligation to respond to that request.
    It may be helpful if I say something about the consequences of cancellation of registration. It obviously depends on the rules of the profit-related pay scheme, but some companies might continue to provide profit-related pay to employees even in respect of periods after the effective date of cancellation, though entitlement to tax relief would no longer exist. Payments of profit-related pay made after the effective date of cancellation may continue to enjoy tax relief where they relate to profit periods preceding the cancellation date. In respect of any such periods, the scheme employer will remain obliged to account to the Inland Revenue for the operation of his scheme. Payments of profit-related pay made after the effective date of cancellation may not enjoy tax relief where they relate to profit periods after that date. If any tax relief had been given for such periods, the employer would be liable to repay it to the Inland Revenue under the provisions of clause 11, which we shall shortly be debating.
    Question put and agreed to.
    Clause 10 ordered to stand part of the Bill.
    Clauses 11 and 12 ordered to stand part of the Bill.

  Clause 13

    OTHER INFORMATION
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I have a short point on the detail of clause 13. It is fair to say that this clause is fairly broadly drafted. It says:
    "The Board may by written notice require any person to give them, within a period of thirty days or such longer period as may be specified in the notice, any information which is so specified and which—

    (a) that person has or can reasonably be required to obtain, and

    (b) the Board consider they need to have in order to perform their functions under this Chapter."

    The clause says that the board may require by written notice "any person" to give information. Is that provision limited to those people who are employed by the scheme employer and who are engaged in the profit-related pay scheme, or does it mean any person at all? For example,
    1014
    does it mean a customer of the employer? When we come to schedule I, we will see more clearly the computations about the profit and loss account, and we will need to ensure that we get the proper profit and loss account upon which to base profit-related pay. Before we give the Inland Revenue such broad powers, we should ask from whore it can require information. On the present drafting, the Bill appears to mean people who are not even employed by the scheme employer.
    Mr. Brooke: We have passed over a number of clauses fairly quickly, and it may be helpful if I say a brief word about the Inland Revenue's attitude to the management of the scheme as a whole. This is the background to the clause that we are discussing. As the hon. Gentleman implies, this clause empowers the board to obtain information in connection with profit-related pay schemes additional to that provided by the return and the report which are covered in clause 12.
    The Inland Revenue will not normally be involved in the day-to-day running of profit-related pay schemes. On occasions when the Inland Revenue needs to become more closely involved, adequate information powers are clearly necessary. Clause 13(1) provides a general authority to seek information.
    Specific anticipated examples of that are cited in subsection (2), and subsection (3) lays an obligation on a scheme employer to pass certain information to the hoard. The general authority permits the board to require information related to a profit-related pay scheme from any person who has that information or who can reasonably be required to obtain it, provided the requirement is in writing, allows the person at least 30 days to reply and is information which the board considers that it needs about that scheme.
    The cited examples deal with situations where such information is likely to be needed. The first case concerns information related to concellation of a scheme. Situations in which this might occur are dealt with in clause 10. The second case is about information related to employee or employer tax liability. This is to ensure access to all pay documents for profit-related pay purposes. The third case concerns information related to the administration of a scheme and this may be especially necessary where one scheme covers several employers in a group of companies. The fourth case concerns information related to changes of persons paying profit-related pay under a scheme. This may be relevant to reorganisations within groups.
    6.15 pm
    The hon. Member for Sedgefield (Mr. Blair) asked a specific question about any person giving information. A wide variety of circumstances may call into question the operation of a registered scheme and the continued entitlement to tax relief. Therefore, the powers provided are wide and permit information to be obtained from any person about a profit-related pay scheme. Such powers are especially likely to be needed in group situations. The employer who registers a scheme may be the parent company, but it will be the subsidiaries who hold details of administration and payment. I hope that it will reassure the hon. Gentleman when I tell him that this information provision is closely modelled on the equivalent authority in respect of approved share option schemes in schedule 12(14) to the Finance Act 1984. The 1984 legislation did not prove contentious in Committee and has posed no significant problems in operation.
    Mr. Blair: The Minister is right in thinking that I require reassurance. A profit-related pay scheme is different from an employee share ownership scheme because by its very nature a PRP scheme deals with the computation of profit. That exercise is different from dealing with the dividends paid under a share scheme. The powers proposed here are broad and the Revenue will be able to require any person to give it any information that it wishes. There is no requirement upon the Revenue even to act reasonably in doing so.
    Mr. Tim Smith: The person has to have the information that the Revenue is seeking or has to be able reasonably to acquire it.
    Mr. Blair: It is true that the person has to be reasonably able to obtain the information, but there is no duty upon the Revenue to act reasonably in obtaining the information that it requires. The matter of a customer has been raised. As I understand it, the Minister says that the Inland Revenue is entitled under clause 12 to require information from customers, presumably about a sale deal or a contract. That does not arise in employee share ownership schemes and they are wide powers for the Revenue.
    One of the dangers of debating the Bill in the way that we are is that things can slip through without the Committee requiring some fairly stringent limitations on the powers of the Inland Revenue. I should like to know whether solicitors or other third parties could be required by the board to give information. If they are, that constitutes a broad power for the Inland Revenue. If we are to involve people who have nothing whatever to do with the scheme, it is important that we at least get a statement of intent from the Minister that the powers will not be abused or used to require information from people who are not participating in any way in a scheme. I should be obliged to the Minister if he could give me that assurance.
    Mr. Brooke: I am not sure that I can afford the hon. Gentleman all the assurances that he wants. Effectively, he is asking whether somebody to whom the Revenue made a request for information will be able to resist that request. In this area, enforcement by means of penalties has to be sanctioned by the special commissioners of income tax, the independent appellate body. Therefore, there is an appeal against such a request if it is unreasonable. I am reluctant to accept that it would be unreasonable; that hypothesis was adumbrated by the hon. Gentleman.
    Mr. Blair: With respect, will the Minister answer my two specific questions? Do the provisions apply to customers and to other third parties such as solicitors?
    Mr. Brooke: Subject to correction, yes, but I shall certainly let the hon. Gentleman know if I have given him an incorrect answer. Earlier, I referred to the phrase "any person" and I stand by that wording.
    Mr. Austin Mitchell: This is an extremely important point. Is the Minister now saying that access to solicitors' records and a requirement on solicitors to give information about their clients are implicit in the Bill?
    Mr. Brooke: I have been seeking to say that, while the Revenue will have a relatively light control over the process, if circumstances arose in which they needed information, they could seek it. I continue to make the observation that there will be the opportunity to resist the
    1016
    provision of that information by reference to the special commissioners for income tax, should the request be regarded as unreasonable.
    Mr. Mitchell: Does the Minister realise that he is abrogating an extremely important professional principle? It is true that some of my best friends are solicitors and I would not wish to seem to be speaking in defence of their interests, but the principle of confidentiality is vital to the solicitors' profession, and, indeed, to other professions. Yet the Minister blithely tells us—with no contradictory message coming along the supply lines from the Olympian powers that usually rescue Ministers—that he is abrogating that essential professional principle. That surely cannot be correct.
    Mr. Brooke: I repeat that the information provision is closely modelled on the equivalent authority in respect of approved share option schemes in the Finance Act 1984. That was self-evidently before my time; I was not involved with the Committee on the Bill, although I dare say that the hon. Members for Great Grimsby (Mr. Mitchell) and for Sedgefield (Mr. Blair) were. I do not know what they said in similar circumstances in 1984, but I know that this was not a contentious issue in 1984. That provision has worked perfectly satisfactorily and I hope that the Committee will be confident that this provision will work similarly.
    Mr. Blair: I shall not labour the point, but I am really not persuaded by the analogy with the employee share option provision; for the simple reason that in that case the board would not be engaged in the same calculation. The whole purpose of profit-related pay schemes is to tie pay to profits; that involves a wholly different set of computations.
    I think that we very often allow the Revenue to get away with much greater powers than it needs and it is a serious matter if we are about to pass a clause which will allow the Revenue to interfere with the normal rights of confidentiality of clients and solicitors and to obtain information from people who have nothing whatever to do with the profit-related pay scheme. The Minister says that they will have a right of appeal, but they will have that right only within the terms of the statute. The board's powers are qualified only by subsections (1)(a) and (1)(b). The person can be required to give information that he
    "can reasonably be required to obtain".
    There will be a lot of information that a person can reasonably obtain, because it is to hand, but he may not want to divulge that information and perhaps should not be forced to do so.
    The second qualification is that
    "the Board consider they need to have"
    the information
    "in order to perform their functions"
    under the Bill. That is very wide indeed, and I hope that we have at the very least put down a marker to make it clear to the Inland Revenue that the provision is not intended to give it carte blanche to trawl the accounts of people who have nothing to do with the profit-related pay scheme.
    It is incumbent upon the Government and the Revenue to ensure that legislation of his nature is drawn as narrowly as possible. It should give the Revenue only the powers that it needs to perform its duties adequately. This provision is drawn much more widely than it need be.
    Mr. Brooke: As I said in my opening remarks, there is a potential marginal disadvantage in passing over a number of clauses without debate, because the framework for the Revenue's involvement has not been discussed or described.
    As I said earlier, the purpose is that there should be minimum and minimal Revenue interference and involvement in the scheme, to leave maximum flexibility and freedom to employers. As is apparent from the rest of the provisions, this is very much a employer-orientated scheme.
    The hon. Member for Sedgefield is worried lest people who could be placed in an embarrassing position with regard to confidentiality were obliged to provide information under the arrangements, although he recognises that the wording is such that the board may require a person to give it information only that
    "that person has or can reasonably be required to obtain".
    The debate has demonstrated that the Revenue would be most unlikely to ask someone for information to which a degree of controversy or drama was attached without first asking those in the employing organisation who might be expected to provide the information to do so. We are talking about an unusual case, because in a scheme intended to be run with minimum Revenue involvement and maximum flexibility and freedom for the employer, the first source of information will clearly be the employer. However, I understand why the hon. Member for Sedgefield wished to pursue the question of the wording.
    The Revenue will go to those who are most likely to have the information readily to hand. However, it needs some residual powers so that it can secure the information that the House would properly expect it to secure to ensure that the relief is provided properly. This is an unusual case, but I am grateful to the hon. Member for Sedgefield for raising it in these terms and this tone. I am sure that the Revenue will have heard what he has said.
    Mr. Kirkwood: I am sorry to prolong the debate. The Committee will be grateful to the hon. Member for Sedgefield (Mr. Blair) for raising this matter. The point had certainly not occurred to me during our cursory examination of the Bill. Will the Treasury Bench reexamine the matter and come up with a slightly more convincing series of answers on Report? As a solicitor—albeit of the Scots variety—I would like to ask the Minister what sactions he thinks the Inland Revenue will have at its disposal if a solicitor pleads professional privilege. That would put both the solicitor and the Inland Revenue in a very difficult position.
    I therefore echo the fears expressed by the hon. Member for Sedgefield and others, because I am not satisfied either. There seems little point in pressing the matter to a Division today, although if the hon. Member for Sedgefield has a mind to do so I shall certainly support him. A more positive approach might be for the Government to look at the matter in more detail and to return to it on Report.
    Mr. Austin Mitchell: I echo the remarks of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). The Minister's reply was unsatisfactory. It is in this way that liberties are thrown away—with blithe assurances that the circumstances will be highly exceptional, that the provisions will be invoked with sensitivity and that the Inland Revenue, that well-known instrument of sensitivity, care and kid-glove handling, will operate will all due
    1018
    processes in this instance. On the basis of such assurances, essential professional practices and liberties can easily be lost.
    6.30 pm
    If a Labour Government had proposed a similar provision in a Finance Bill Committee there would have been howls of outrage from the Conservative Opposition. A heart-rending, tear-jerking picture would have been painted of the demise of liberty in this country as a result of the terrible powers being invoked by Somerset house. I heard just such harangues on the Finance Bills of 1977, 1978 and 1979 until my heart bled for the poor British people subjected to such tyrannical powers. Yet a Conservative Minister now blithely invokes just such powers.
    The precedent from 1984 that the 'Minister cited is not adequate because these are more trenchant, more wide-ranging powers. The Minister may be riding them in on the back of the 1984 concession, but that concession cannot be claimed as a precedent because he is extending the circles of tyranny. Perhaps more important, the Minister's argument that the Revenue would go first to the directors of the firm and only secondarily to the legal advisers is not satisfactory either. If the Revenue does not obtain satisfaction from the directors there will be an ever-widening circle of inquiry which will lead directly to the infringement of an essential professional practice. The confidentiality of the relationship between professional adviser and client will be infringed and abrogated by the clause.
    There is not a great deal that we can do about the matter today, but I hope that we can return to it on Report as the Minister's reply was not satisfactory.
    Mr. Brooke: I am grateful to the hon. Members for Roxburgh and Berwickshire (Mr. Kirkwood) and for Great Grimsby (Mr. Mitchell) for prolonging the debate. In the context of the latter's earlier reference to overselling, I hugely enjoyed his reference to "circles of tyranny", a phrase which we shall no doubt read in other places.
    A sinister quality has been read into the clause which it does not possess, but it is absolutely right that the Committee should be vigilant in these matters. The Inland Revenue proposes to manage and oversee the scheme on behalf of taxpayers everywhere with a light touch, but feels that residual powers are necessary. The hon. Members for Great Grimsby and for Sedgefield (Mr. Blair) said that the 1984 case to which I alluded was not an adequate support for the argument that I was advancing. I can only say that the 1984 case exists and has not given rise to the dramas and ever-widening circles of tyranny to which the hon. Member for Great Grimsby has referred.
    Of course, this is an issue of public moment. The Keith committee, with which we have been concerned in other contexts, has made various proposals on professional privilege. Those proposals are still under consideration, but I accept the spirit in which the Opposition have raised this matter. I shall, of course, look at it again to see whether any greater reassurance can be given.
    Question put and agreed to.
    Clause 13 ordered to stand part of the Bill.
    Clauses 14 to 17 ordered to stand part of the Bill.

  Schedule 1

    PROFIT-RELATED PAY SCHEMES: CONDITIONS FOR REGISTRATION
    Mr. Blair: I beg to move amendment No. 33, in page 70, line 23, leave out '80 per cent.' and insert '50 per cent.'.
    This is clearly a probing amendment but it is worth discussing to ascertain the basis on which the Government have drawn up the rules on profit-related pay. At first blush, it is difficult to see why profit-related pay can operate only if 80 per cent. of the work force agrees to it. Presumably employers are able to have different pay systems for those taking part and for the remainder up to 20 per cent. Why must 80 per cent. agree?
    I could see an argument for saying that, unless everyone agreed, the scheme could not be introduced because of the administrative difficulties involved in calculating two different bases of pay, but it is plainly accepted that up to 20 per cent. of people within the same employment unit and presumably doing the same type of work under the same terms and conditions can nevertheless opt out of the scheme. So why has the figure of 80 per cent. been chosen? Why should not anyone who so wishes be allowed to participate and the others be allowed to opt out? I see no rational basis for seizing upon the figure of 80 per cent. The real distinction must be between having everyone or no one in the employment unit on profit-related pay or allowing diversity within the same unit. I should be obliged if the Minister would explain that to me.
    Mr. Tim Smith: I sympathise with the comments of the hon. Member for Sedgefield (Mr. Blair). It is not clear to me why 80 per cent. has been chosen. I am also not sure exactly what the words
    "to whom the scheme relates"
    mean. Perhaps my hon. Friend the Minister will clarify that.
    My hon. Friend the Member for Woking (Mr. Onslow) asked me to raise a number of points about schedule I which were put to him by a firm which for 15 years has operated in the specialist area of employee participation arrangements, particularly employee share schemes, and which numbers about 350 of the top 500 United Kingdom companies among its clients. One of its concerns is the 80 per cent. rule. The firm says:
    "It appears that Inland Revenue will interpret this Rule to mean not that such plans must be 'available' to at least 80 per cent. of employees but that 80 per cent. of employees must actually receive payments thereunder. Companies are very conscious that a dissident minority of 20·1 per cent. of the work force could effectively lose the tax efficacy of an otherwise splendid scheme for the majority of their colleagues."
    I rather agree with the hon. Member for Sedgefield that once one concedes the principle that 100 per cent. of employees are not needed to participate in the scheme, why not simply say that all those who wish to participate may do so regardless of the proportion?
    Mr. Brooke: The hon. Member for Sedgefield (Mr. Blair) has moved a probing amendment and my hon. friend the Member for Beaconsfield (Mr. Smith) supported him.
    The profits to which pay will be related are the profits of the whole employment unit. Therefore, as the hon. Member for Sedgefield implied, ideally all the employees of an employment unit would participate in profit-related
    1020
    pay because the profits relate to the efforts of all of the employees. However, when the Green Paper was published last year we recognised that there would be circumstances in which it would not be appropriate or possible for all the employees to be eligible. Therefore, there is a need for some flexibility for employers.
    The benefits that we believe will flow from the widespread adoption of profit-related pay will be best achieved if a substantial majority of the employees in each unit participate. That goes back to the discussions that we had on clause I stand part.
    The Government considered that 80 per cent. was a reasonable, minimum level if tax relief is to be made available. I appreciate that the hon. Member for Sedgefield was arguing that his figure of 50 per cent. was chosen simply as a probe against the Government's figure of 80 per cent., but I am puzzled that the Opposition are seeking to reduce the percentage. The lower the figure is taken the easier it is to have what I would euphemistically describe as an arrangement. The more people who are required to take part in the scheme, the less likely it is that some artificial arrangement will be reached.
    Mr. Blair: Let me explain our position straight away. I do not believe that there is any inconsistency. Indeed, it is in the best tradition of constructive opposition that, having lost the vote on clause I stand part, with the result that profit-related pay schemes will come into existence if the Bill is carried, the Opposition should try to make the scheme work as effectively as possible. It was in that spirit that I moved the amendment. I believe that it is important that we should be given a good reason why, if the scheme is to be generally available, it should not be made available on the widest possible basis.
    Mr. Brooke: The disadvantage in the proposal of the hon. Member for Sedgefield is that if the scheme were required to cover only 50 per cent. of employees to secure tax relief, the scheme would be much more selective and would not embrace the totality of the work force. I suspect that if it were the other way around, if we had come up with the figure of 50 per cent., the hon. Member for Sedgefield would have proposed 80 per cent. on the basis that the 50 per cent. could lead to artificially structured schemes.
    Essentially, I believe that the proof of the pudding is in the eating. We put the figure of 80 per cent. in the Green Paper. The hon. Member for Sedgefield will be aware that we had a wide variety of comment on all aspects of the Green Paper, but few respondents saw any difficulty with the 80 per cent. requirement.
    I agree with my hon. Friend the Member for Beaconsfield that a blocking minority of 20·1 per cent. would be a complication. However, the Government believe that that complication would apply whatever the figure as there would still be a problem regarding what would happen on either side of the line.
    The Government believe that 80 per cent. is a sensible figure to get the global advantages of the scheme within the employment unit. We did not receive significant objections to that figure during the consultation period. For that reason, we stand by that figure.
    Mr. Blair: I believe that it is unfair to say that, had the Government suggested 50 per cent., I would have moved an amendment to the effect that we should make it 80 per cent. I moved this amendment on the basis that, if it were

    1021
    thought that profit-related pay was a good idea, it would be positively beneficial for those who were not working on profit-related pay to see how well those on profit-related pay were doing. Perhaps there would be an element of contagion. I accept the Minister's arguments. It is fairly clear that the figure of 80 per cent. has been plucked out of the air. However, as that figure was not objected to extremely strongly, other than in the terms mentioned by the hon. Member for Beaconsfield (Mr. Smith), I am content to let the amendment fall.
    Mr. Brooke: I failed to answer one other question that was raised in the course of the debate regarding
    "employees to whom the scheme relates".
    That is defined in clause 1(2) which states:
    "References in this Chapter to the employees to whom a profit-related pay scheme relates are references to the employees who will receive any payments of profit-related pay under the scheme."
    Mr. Blair: I am grateful to the Minister for his reply. I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    6.45 pm
    Mr. Blair: I beg to move amendment No. 34 in, page 73, line 28, after 'must', insert
    'in the view of the Board'.
    I entirely accept that, given all the comments made about the powers of the Inland Revenue in an earlier amendment, this should demonstrate the degree of objectivity I have towards the Inland Revenue. This amendment would, if anything, give the Inland Revenue greater powers than it would otherwise possess.
    The purpose of this amendment is to ask the Minister whether he is satisfied with the Government's anti-avoidance provisions. The Institute of Personnel Management and others have recognised that one of the difficulties with the profit-related pay scheme is the potential for tax avoidance.
    I vaguely recall in my dim and distant youth—long before I got to the House of Commons—that there were debates on incomes policy and how the pay that people received could effectively be related to productivity. There were all sorts of arguments about how people could get round the rules that related to wage structures.
    With profit-related pay there is a clear potential for avoidance unless the Inland Revenue is extremely careful that the profit and loss accounts give a fair and true view. I know that there are a myriad of different arguments advanced in relation to proper auditing and accounting procedures. The hon. Member for Beaconsfield (Mr. Smith) will know more about that than I do. However, it is the case that when one is computing pay on the basis of profit and when tax relief is given, there is clear scope for avoidance.
    The purpose of this probing amendment is to ask the Minister for his assurance that the rules are drawn as tight as possible to minimise the risk of avoidance.
    Mr. Brooke: Obviously, the hon. Member for Sedgefield (Mr. Blair) has drawn attention to a central issue and I shall therefore reply at some length.
    Paragraph 19 of the schedule deals with how the measure of profit for profit-related pay purposes is to be ascertained. Essentially, a profit and loss account must be produced that follows the rules and requirements of schedule 4 to the Companies Act 1985, which governs the
    1022
    production of a profit and loss account by a company. This provision ensures a standard approach to the production of such accounts using widely accepted rules,. The Companies Act 1985 also requires a profit and loss account to show a "true and fair" view of the profit. That is broadly understood as an accounting concept and it is central to a qualified accountant's duty that he establishes that the accounts meet that requirement.
    There is no requirement in the 1985 Act that any Government body should confirm that the account produced under that legislation meets the "true and fair" criterion. To insert such a requirement in the profit-related pay legislation would have the effect of supplanting the approach adopted in these proposals for ensuring a minimum of official intervention in the day-to-day operation of registeredschemes and relying on independent accountants to verify the adequacy of profit-related pay accounts and the operation of profit-related pay schemes. It would place a major burden on the Inland Revenue and increase substantially the administrative complexity of the scheme for the employer as well as for the Revenue. In any event, the Revenue will have the power to call for a check on profit-related pay accounts under clause 13, which the hon. Member for Sedgefield will recall vividly, whenever it believes that to be necessary.
    The amendment would leave the provisions for an independent accountant's audit in place. We see the provisions as adequte. The statement that a profit is or is not "true and fair" will be made by the independent accountant, not by the employer, as such a statement cannot be made authoritatively by a person unqualified in audit matters. Who may act as independent accountant is closely constrained by clause 17. The individual must be properly qualified and must not be closely connected with the scheme. The statement of a "true and fair" view is one that we have taken pains to make independent cit. the employer concerned. The employer is responsible for all profit-related pay matters, and he must obtain and submit to the Revenue a report by an independent and properly qualified accountant.
    If the hon. Member for Sedgefield is concerned that the employer is the person who decides what is or is not "true and fair", I trust that this explanation of objective and external reference allays his fears. The Government feel that there is no point in introducing another level of checking by the Inland Revenue, which could only adopt the same principles of accountancy and audit as those that would be adopted under this proposed legislation by the independent accountant.
    Mr. Tim Smith: I wanted to hear what my hon. Friend the Paymaster General had to say about the amendment before commenting briefly upon it. I like the novel idea that is incorporated in it, that the Inland Revenue would offer its own view on whether the accounts showed a "true and fair view". Even if we were to give the Revenue that power, we would not strengthen its hand. Pretty high standards of accounting are required and the accounts will have to comply in all respects with company law.
    There will have to be an independent auditors' certificate that will state whether the auditors consider that the accounts show a "true and fair view". That happens a great deal now and I have no doubt that the Revenue takes a view on the firm of accountants concerned. Firms of accountants, like other undertakings, vary in quality and the Revenue will not rely on the accounts that are

    1023
    presented. It can always demand further information, and we know from a previous debate that it has substantial powers to do so. It will not accept unchallenged the statement that the accounts give a "true and fair view" and conclude from that that there are no further questions to be asked. It will always have the opportunity to go behind that statement, and I think that that will happen in practice. Although the amendment contains an interesting and novel idea, it probably is not necessary.
    Mr. Blair: I largely accept the statement of the Paymaster General and the comments of the hon. Member for Beaconsfield (Mr. Smith). I thought it right—this is still my view—that we should not leave our consideration of profit-related pay, and especially the schedule that deals with its implementation, without making it clear that every measure that can reasonably be taken is taken to ensure that there is not tax avoidance. It is clear that there are opportunities for tax avoidance when a scheme such as that proposed by the Government is introduced. I hope that the rules that appear in schedule 3 balance adequately the rights of individuals with the rights of the Revenue to act successfully and adequately on behalf of the taxpayer. In view of what the Minister has said, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That this schedule be the first schedule to the Bill.
    Mr. Tim Smith: The firm to which I referred in an earlier debate has three further concerns about the schedule. We have passed over paragraphs 13 and 14, which deal with the two profit-sharing formulae, and anyone who considers the text of those paragraphs will agree, I am sure, that they are extremely complex. Surely it is desirable that the formulae for determining profits should be as simple as possible. It is obviously desirable that participants should be able to understand them easily. The firm that is concerned about these matters considers paragraph 14 to be almost unintelligible. I wonder why it is necessary for the formulae to be so complex.
    Secondly, the firm says that the 80 per cent. rule that we discussed earlier effectively precludes the 750 or more companies that have already implemented equity-linked profit-sharing plans under the Finance Act 1978 from offering employees participation either in that plan or in the new profit-linked pay arrangements. I am not sure whether that is exactly what the firm means, and it may be that it is trying to say that if a compny participates already in the 1978 arrangements it cannot participate in these arrangements. I do not know whether that is true and I hope that my hon. Friend the Minister will be able to deal with the matter. The firm may have it completely wrong. It is alleging that there are two mutually contradictory profit-related plans on offer.
    Thirdly, the firm says that it must be appreciated that lower-paid employees who have previously participated in a trust-related profit-sharing plan under which no national insurance deductions were made will receive less cash under the new arrangement than under the old scheme. The firm contends that while a fellow of All Souls may be able to make the distinction between a national insurance deduction and an income tax liability—there may be a
    1024
    few others who are able to do so—the majority will not. I hope that my hon. Friend the Minister will be able to deal with these three issues.
    Mr. Blair: First, I wish, like the hon. Member for Beaconsfield (Mr. Smith), to draw attention to the complexity of the two formulae for determining the distributable pool of profits. I found them to verge on the incomprehensible.
    I think that I understand the basic principles in method A and method B. It appears that under method A the pool is equal to a fixed percentage of the profits of the employment unit in the profit period. Method B is based on the first profit period to which the scheme relates, or the distributable pool for the previous profit period. In other words, that method fixes a base year by which the distributable pool is to be computed.
    I should like to know what steps the Treasury intends to take to make the schemes more understandable to those who will be called upon to use them. If profit-related pay is to be encouraged, I hope that it will not be a privilege that is confined to those employed by large companies. It must be open to small companies as well. There are many small companies with 10 or 15 employees that will read schedule 3, and whatever greater productivity arises through profit-related pay will be negated immediately by the time that the firm has to spend discovering how to administer the scheme.
    I do not fully take on board the points made by the hon. Member for Beaconsfield about the employee share ownership plan. I cannot see any inconsistency, although there may be one, but that is obviously something to which it is right for us to address our minds.
    I should be grateful if the Minister could inform us of the steps that he will take to ensure that people can understand and administer the schemes easily. We may have the greatest theories and plans, but if they are difficult to implement in practice, they will be of little practical use.
    7 pm
    Mr. Brooke: My hon. Friend the Member for Beaconsfield (Mr. Smith) asked me several questions relating to correspondence that I too have had the pleasure of seeing, and I shall respond to his questions. The hon. Member for Sedgefield (Mr. Blair) asked me some specific questions in reinforcement of the profit sharing formulae.
    I shall respond first to the questions raised by my hon. Friend the Member for Beaconsfield about the overlap of the schemes and their potential complications. The Committee knows that tax incentives for share schemes already exist, but the new tax relief is for cash. For it to be effective in terms of pay flexibility, the relief must be targeted on employees in business units in which the great majority of employees participate in a PRP scheme. We discussed this point a moment or two ago. There is, of course, nothing to stop a separate share scheme from running at the same time and in that case the benefits would be complementary. However, it would be quite wrong to try to combine into a single scheme the different tax incentives for share schemes with those that are proposed for profit-related pay. The result would be a muddle and it is, and would be, unnecessary to try to do that.
    My hon. Friend the Member for Beaconsfield raised the subject of method A and method B, which are described

    1025
    in the correspondence as the complex profit-sharing formulae. The hon. Member for Sedgefield also alluded to that. There is a paradox in that the simpler and more flexible one seeks to make the arrangements, the relatively more complicated is the legislation. However, when employers have had some time to grow to know and to love this legislation, I am sure that they will acknowledge that under its umbrella, a fundamental flexibility and simplicity exists.
    The hon. Member for Sedgefield raised the question of the ways in which we could make the schemes simpler, although I do not know whether he acknowledges the paradox that I have just explained. However, we shall pay attention to that. I referred earlier to the guidance notes that the Inland Revenue is to send out. We shall seek to explore whether there is a way in which we can provide a child's guide element.
    My hon. Friend the Member for Beaconsfield returned to the issue of national insurance contribution and said that some employees would be worse off as a result of the changes. However, that is a separate issue. The decision to withdraw certain concessions that relate to trusts, which flow out of what has happened since the 1985 changes to the upper earnings limit, is unrelated to the propositions that we are now considering. Some of the literature and some of the representations that have been made have missed some of the fundamental points about the schemes in quoting the sums of money that would be at risk or that would he involved in terms of the changes that we are making. That is an unrelated issue. I hope that those companies that have a tradition of profit-related pay will feel able to embrace the arrangements that are contained in this legislation for the generality of their employees and assuming that they take the fullest advantage of the profit-related pay arrangements, they should be able to do very satisfactorily.
    Question put and agreed to.
    Schedule I agreed to.

  Clause 18

    REGISTRATION
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: With clause 18, we come to the issue of personal pension schemes. I am acutely aware that I have stumbled into an area in which there are many experts. I do riot count myself among them. I gather that we shall hear from the hon. Member for Kensington (Sir B. Rhys Williams) about some of the amendments that he has tabled. I simply want to ask the Minister—I thought that this might be an appropriate time to do so—to tell us something about the scheme outlined in this chapter.
    As I understand it, the Social Security Act 1986 has given birth to the present provisions. This tax regime follows on from the changes in pensions that were made in the 1986 Act, under which there was the right to opt out of occupational pension schemes and to have a personal pension instead. I need not rehearse the arguments about that or about whether greater mobility would be enjoyed by people being able to opt out and, on the other side, about whether that would mean that the younger people in the pension scheme would end up financing the older ones, and the difficulties that might arise for the pension schemes in such circumstances.
    1026
    As I understand it, at the present time, the provisions will come into force in January of next year—somebody who is self-employed can buy what are called section 226 policies. The provisions in the Finance Bill substantially re-enact some of those section 226 rules and ensure that the pension schemes for the self-employed and for employees are brought together. I should like the Minister to outline briefly the main changes that would be made by this part of the Bill. As I understand it, these provisions essentially reflect the changes that took place in social security legislation in 1986, together with certain new matters that have been introduced into the Finance Bill, including many that simply translate into law some procedures that are already practised by the Inland Revenue.
    The provisions also introduce the lump sum limit of £150,000 and certain restrictions on the amount of lump sum that can be paid on retirement. Obviously, that is extremely important to millions of people. I did not think it right to allow the first clause in this new chapter to go by without at least raising some of the more general matters.
    Sir Brandon Rhys Williams: I had intended to raise on clause 19 the points that I think I might equally appropriately raise under this clause, but since I did, in fact, table an amendment to line 29 of clause 18, which did not have the good fortune to be selected by the Chair, I hope that I shall not be speaking out of order if I deal in a general way with the expression "the Board" which appears at the beginning of this section.
    The amendment which I tabled—I do not wish to dwell on it in a way that will vex the Chair—which did not make the selection—
    The Temporary Chairman (Miss Janet Fookes): Order. The hon. Gentleman must not dwell on it at all. It was not selected.
    Sir Brandon Rhys Williams: I anticipated that rebuke, and I intend to comply totally with the Chair's ruling. I had intended to draw attention to the fact that "the Board" here is assumed to be the board of the Inland Revenue. However, there is the Occuptional Pensions Board, which also has status in connection with private personal schemes. I rather wonder whether here, in the Finance Bill, the Treasury is right to arrogate, as it is seeking to do, to the Inland Revenue what appears to be the primary status of controlling authority, when the Occupational Pensions Board exists and also, simultaneously with the consideration of the Finance Bill, the House has been presented with no fewer than 20 statutory instruments emanating from the DHSS, which also seek to regulate the way in which these schemes are run.
    I accept that the Revenue must be the authority which grants the tax haven status to personal pension schemes, but I wonder whether all that follows in this long chapter of personal pension schemes is the property of the Inland Revenue to decide. I rather wonder whether it is in the best interests of these schemes that it should be the Inland Revenue that takes the primary status. I believe that it would be highly desirable if the Revenue were to drop the practice of regulating pension schemes minutely and were to leave it either to the Occupational Pensions Board or to the DHSS using the different methods that have grown

    1027
    up under those Departments to regulate these schemes. Therefore, I rather wonder whether one is entirely happy with the entire tenor of clause 18.
    We should simplify the rules that operate in connection with personal pension schemes to the absolute bare minimum. That is not the Inland Revenue practice. Under its guidance, the rules affecting pension schemes have proliferated to a terribly burdensome extent over the past 50 years or more. I believe that extreme simplicity of legislation should be accepted by the House as a virtue in its own right of the greatest possible importance, particularly when dealing with small employers and private citizens, as we are when we are discussing personal schemes. It would be a great mistake if we started off by making the whole apparatus of control, which must be considered, so complex that almost everybody is likely to be frightened off unless they can afford professional advice.
    On questions of procedure, the appointment and conduct of trustees, for example, and routine management of the trust, it would be far better to leave it to the OPB as it is expert in this area and is bent on the promotion of these schemes, rather than the restriction of opportunities for saving which these schemes are intended to offer. But that is not the Inland Revenue's way.
    On the question of the various obligations of the parties—the employer and employee—I would would be happy for the DHSS to operate because it looks at these schemes on the basis of the maximum and minimum contributions which are appropriate. The Inland Revenue's way is to set limits on the benefits which emanate and that really is incompatible with the conception of the money purchase schemes which lies behind the Government's intention.
    When one speaks to professionals in this area—I am sorry to say this, but I have to—one finds that they regard the Inland Revenue as a menace to the occupational pensions movement. They regard it as a burden and wish that the dual control system which has grown up could be ended. The Inland Revenue is now more concerned to prevent people from exploiting the advantages of tax haven status than to promote thrift and a habit of saving for retirement.
    Where the two thirds limit is concerned, which is what the Inland Revenue seeks to apply to the annuities which emanate from these schemes, why should it be important what the pension is in relation to the final salary of the beneficiary? In the end the taxpayer recovers his share which has grown up in the fund, because the system on which all these schemes operate—the tax haven status which we are giving to these schemes—is the basis of save now, pay tax later. The beneficiary pays tax later on the annuity, so why do we seek to restrict these schemes?
    I know that there is a reason, and that is because the lump sum option appears in these new proposals just as it does in the occupational pension schemes, which no doubt we shall deal with in due course when we reach schedule 3. The right way for the Inland Revenue to tackle that problem is to introduce new thinking on the tax-free status of the lump sum. I have tried to make a contribution on this before.
    I would like my right hon. Friend the Minister to tell me whether he genuinely insists that it is the Inland Revenue that is the prime authority in view of the shadow
    1028
    that that will cast over the private pensions movement, and if this attitude of the Inland Revenue is not changed.
    7.15 pm
    The Financial Secretary to the Treasury (Mr. Norman Lamont): The hon. Member for Sedgefield (Mr. Blair) invited me to outline the proposals on personal pensions in this part of the Bill. I am aware that it is difficult for me to respond to his request without, by implication, going a little beyond clause 18, although it introduces the provisions of Part II. The hon. Gentleman is right about how the new provisions follow the section 226 regime but with improvements in that there are new higher contribution limits for older people and employers' contributions may be made to personal pensions, which was not possible with retirement annuities.
    The provisions implement the promises made by my right hon. Friend the Chancellor of the Exchequer in his Budget statement—first, that the new personal pensions would have the same tax treatment as is enjoyed by retirement annuities and, secondly, that much greater transferability of pension rights would be possible between different types of pension arrangement. Therefore, the legislation completes the major programme of pensions reform which was announced by the Secretary of State for Social Services.
    The provisions were originally included in the Finance Bill introduced earlier this year. Several technical amendments have been made, but it is essentially the same as was proposed in April. The new regime for personal pensions was outlined in a consultative document published by the Inland Revenue last November. I have referred to the changes that have been made, which include a wider range of pension providers, to include building societies, banks, and unit trusts in addition to the present life offices and friendly societies; the ability for individuals to contract out of SERPS through a personal pension scheme; the provision for employers to contribute, if they wish, to their employees' personal pension schemes; and the same basic limit of 17·5 per cent. of income for younger people and a more generous scale of higher limits for those over 50, as now on contributions. I hope that in outlining the bones of this section, clauses 18 to 57, I have responded to the hon. Gentleman's request.
    My hon. Friend the Member for Kensington (Sir B. Rhys Williams) has leapt straight into an area which is also referred to in a later amendment which he has tabled, so I have no doubt that he will pursue the theme and repeat some of the points that he made. He is concerned about the relationship between the Inland Revenue and the DHSS and the Occupational Pensions Board. We have discussed this on many occasions. He believes that there is a conflict between the objectives of the Revenue and the DHSS. Naturally, many Government Departments sometimes think that they are in conflict with the Inland Revenue or the Treasury and, indeed, sometimes they have different objectives.
    The Inland Revenue is responsible under the powers conferred on it by the Finance Act 1970 for administering the tax regime for pensions. As my hon. Friend always acknowleges in his speeches on this subject, these tax reliefs are extremely generous. Indeed, he has suggested that they should be called pension trusts and he frequently uses the phrase "tax haven" when referring to pension

    1029
    funds. For the reasons he gave, the Inland Revenue is concerned about the cost of these generous limits, so the tax rules set levels of maximum benefit.
    On the other hand, the DHSS rules are primarily concerned with the level of benefits which an occupational pension scheme must provide if it is to be contracted out of the additional component of the state scheme. That is to say that the Inland Revenue is responsible for the tax approval rules while the DHSS and the OPB have their own requirements for contracting out only which applies to employees in occupational pension schemes.
    The DHSS, as I have said, is concerned with the level of benefits that an occupational scheme must provide if it is to be contracted out of the additional components of the state scheme. The requirements of the DHSS concern minimum levels of benefit. Between the minimum benefits required by the DHSS and the maximum benefits imposed by the Inland Revenue, there is considerable scope for occupational schemes to offer whatever level of benefit seems appropriate without Government interference, although there is a danger that Revenue rules would restrict DHSS minimum benefits, for example in relation to preserved benefits to which Revenue rules do not apply.
    I know that my hon. Friend the Member for Kensington would prefer to see a maximum benefit requirement on all final salary pension schemes. However, that takes us way beyond clause 18. I am sure that my hon. Friend will rehearse his arguments and concern about some types of pension being limited by contributions and others limited by benefit, all of which he sees as examples of the lack of integration. He has heard my views on these matters before. I have tried to explain why that has happened and why I believe that to some extent it is still unavoidable. I know that I have not persuaded my hon. Friend about this, but I think that he understands the position and I know that he would like to see the whole area of pensions radically reformed. No doubt my hon. Friend will come to that point later.
    I know that I will not deflect my hon. Friend the Member for Kensington, but I am bound to say that, after so many changes in pensions in recent years, there are some who feel that a period of calm and stability is desirable. However, my hon. Friend has been a great campaigner on all those issues for many years. He has a very lucid and coherent view of what the whole pensions regime should look like. Basically, he believes that we should start off on an entirely different basis.
    1030
    I should not really respond to all the points made by my hon. Friend the Member for Kensington. We will have specific debates on the lump sum later and my hon. Friend can develop his philosophy about that and its tax exemption. I have tried to respond to my hon. Friend about the different roles of the Revenue and the DHSS. I do not believe that there is a great conflict which my hon. Friend has described. However, I know that he wants to see the whole system established on an entirely different basis.
    Sir Brandon Rhys Williams: I would like to take the opportunity to thank my right hon. Friend the Financial Secretary to the Treasury for his remarks. He has penetrated to the core of what I was saying. In this country we have a public sector pension scheme which is extremely handsome. However, the private sector is really paltry by comparison in all too many cases. Therefore, we ought to be accentuating the positive which will be encouraging people to put in better and better schemes rather than to think mainly in terms of ways in which we can restrict the savings habit from becoming too exuberant.
    I do not like to be critical of the board of the Inland Revenue, because the way in which it approaches its task is immensely dedicated, as it is a dry and often very detailed business. It takes the Revenue into areas that are sometimes barely comprehensible. There is an important job to be done in avoidance work with regard to fraud and outrageous abuse of well-intentioned concessions.
    Moreover, I do not think that the board ought to be eliminated entirely from the scene; it would he an exaggeration if I gave that impression. Indeed, in a later amendment I hope to use the board's discretionary power to promote the idea of transferability at long last at the full value of the beneficiary's asset. I do not want it thought that I do not want the Inland Revenue board to have a place in the regulatory scene.
    I took the opportunity to make my point because I feel that we need to put more emphasis on the positive aspects. The positive aspects are emphasised by the DHSS approach of placing minimum levels of contribution rather than maximum levels of benefit. I do not wish to pursue that matter or to stand in the way of the Committee and its further consideration of these clauses.
    Question put and agreed to.
    Clause 18 ordered to stand part of the Bill.
    Clause 19 ordered to stand part of the Bill.

  Clause 20

    ESTABLISHMENT OF SCHEMES
    Sir Brandon Rhys Williams: I beg to move amendment No. 41, in clause 20, page 12, line 5, at end insert
    'after consultation with the Occupational Pensions Board'.
    Amendment 41 requires the Treasury, before amending section 20, to consult the Occupational Pensions Board. I express reservations about the role of the Inland Revenue in the pensions scene and I have my reservations about the Occupational Pensions Board too. I am afraid that on a number of issues on which I hoped that it would speak out clearly and strongly, it has appeared to be rather pusillanimous and vacillating, possibly because it is not quite sure whether it is expected to respond to guidance from the Inland Revenue or from the DHSS. Nevertheless, that body has been set up and it has a status that is very important for occupational pension schemes and I think that it should be made to rise to its responsibilities and should be encouraged to do so.
    Clause 20(4) states:
    "The Treasury may by order amend this section as it has effect for the time being."
    That places in the hands of the Treasury a very substantial power particularly as clause 20(5) states:
    "An order under this section shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of the House of Commons."
    Unfortunately, hon. Members who study statutory instruments and the way in which the House deals with them know that again and again, once the statutory instrument is in print that is really the end of the matter and although hon. Members may have reservations they cannot voice them, as was the case sadly with the 20 statutory instruments tabled last week by the DHSS, and with all too many statutory instruments laid under provisions of this kind.
    I hope that, even if the House of Commons is unlikely to have any say in what the Treasury does in amending the section, proper consultations will take place with the Occupational Pensions Board. I must announce to the Committee that the example before us this week is not very optimistic. I am referring to the report from the Occupational Pensions Board in relation to statutory instrument number 1105 which is now before the House entitled
    "Occupational Pension Schemes (Disclosure of Information) (Amendment) Regulations 1987".
    I do not know how many hon. Members have gone so far as to read the comments in the report. I thought that they might have some relevance to the debate.
    Indeed, I discovered that they had relevance when I read what the Occupational Pensions Board had to say on the draft statutory instrument submitted to it for comment. The board's comments are dated 3 June 1987 and are alarmingly trenchant. The report ends as a sad story. I hope that I am not detaining the Committee too much if I read just the comments made by the board with regard to regulations 2(5) and 2(11). The report states:
    "Regulation 2(5) requires the information introduced into Schedule 2 of the principle regulations to be furnished on request to any member of a tax-approved scheme. We believe that these requirements for information about additional voluntary contributions are incapable of being met and are
    1032
    likely to prove to be completly unacceptable to the pensions industry and trustees. To determine the maximum amount of AVCs that a member may make the scheme would need to have full details of remuneration (including overtime earnings and benefits in kind) and this information would often not be available to the administrators. It could be misleading to members to quote the maximum tax-deductible AVC if payments of AVCs at this level could result in the Inland Revenue benefit levels being exceeded. There is another potential problem. The Government have announced their intention that scheme members should be free to pay AVCs to schemes other than their own occupational pension scheme. If this proposal is implemented, it would mean that scheme trustees and managers would have no control over the payment of these AVCs or of the benefits that they produce. We therefore believe the practical considerations of actually providing the information required would make this provision unworkable."
    7.30 pm
    In the same report, we read the reply, dated July 1987, on behalf of the Secretary of State:
    "As regards paragraph 7 of the Board's report, regulations prescribing the information to be provided about additional voluntary contributions will not he made until the Board of Inland Revenue have published any requirements that they may have in regard to such contributions."
    We read in the revised, summer Finance Bill, that, notwithstanding that type of extremely trenchant comment from the Occupational Pensions Board, which may presumably be regarded as the most expert in the field, the dogs may bark but the caravan moves on. So far as we can read in the Bill, the Inland Revenue has simply repeated the unacceptable recommendations which appeared before the House in the first Finance Bill this year, and which aroused a great deal of adverse comment from the professionals at that time. If, in regard to anything as important as this, the Revenue is simply not prepared to listen to the Occupational Pensions Board, and the DHSS abdicates its role and leaves the Revenue to carry on as it pleases, how much hope have we that, when the Treasury exercises the power that the Committee is about to grant it under the subsection, there will be any closer liaison in the future?
    I hope that the Committee will agree that it would be a good idea at this stage to write in the requirement for consultation with the Occupational Pensions Board when the clause is amended by statutory instrument.
    Mr. Norman Lamont: I congratulate my hon. Friend the Member for Kensington (Sir B. Rhys Williams) on his assiduity and research in digging out the report of the Occupational Pensions Board. We shall probably discuss the relationship of AVCs to scheme limits on a later amendment. It may be more appropriate then to discuss the practicalities of observing the final salary scheme limits and discussing the extent to which they are endangered by the AVC proposals, or the extent to which the proposals may be criticised on grounds of practicality.
    The purpose of the amendment is to require the Treasury to consult the Occupational Pensions Board before making an order to amend clause 20. I think that the amendment is unnecessary. Clause 20 sets out which bodies may establish personal pension schemes. The main purpose of the Treasury order would be to extend the range of personal pension providers, if and when that seems appropriate, without having to introduce primary legislation in a future Finance Bill.

    1033
    If such an order were being made, we should naturally consult the OPB, and any other interested body, if appropriate. But the OPB would not always be the appropriate body to consult. The hoard is responsible for certain aspects of occupational pension schemes, in particular contracting-out rules and the preservation of deferred benefits. It is not a general pensions watchdog and it is not necessarily equipped to act as such.
    We might, for example, be dealing simply with pensions for the self-employed, in which event it might not necessarily he appropriate for us to consult the board. In many cases, we would consult the board, but I would resist the idea of writing such consultation into the legislation.
    The regulations are primarily a DHSS matter, concerning the requirement on scheme administrators to disclose information to members about the scope to pay AVCs. They are not strictly tax matters, although, as my hon. Friend the Member for Kensington spotted immediately, they have some relevance to the relationship between AVC's and benefit limits. We shall discuss that later.
    Sir Brandon Rhys Williams: My right hon. Friend is right in saying that some of my remarks were wide of the immediate context of clause 20. I took the opportunity of pointing to a place where it seemed to me that the relationship between the OPC and the Revenue had already broken down, which could not possibly refer to the particular interests found in clause 20.
    I do not wish to press the amendment, because I hope that what I have said may have had a small effect, at all events, in advancing the cause of the OPB as a body that ought to be taken seriously and should play a serious role. This was the first opportunity that presented itself in the Bill for me to make the points that I have sought to make, and if they went somewhat wide of the clause, I apologise.
    Having made that point—I see that my right hon. Friend has taken it on board—I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I should like clarification of one small point. There may be a very straightforward answer. The purpose of clause 20, as the Financial Secretary rightly said, is to give a list of new pension providers. I understand that some of those—for example, the banks—are already engaged indirectly in the provision of pensions. How much real change does the clause make regarding the bodies able to provide pensions? Are many of these institutions, albeit indirectly, already providing pensions, or is the measure of a much wider nature?
    Mr. Norman Lamont: It is a considerable change. In future, direct providers will include not just banks—the hon. Gentleman suggested that they were already providing pensions indirectly, and I suppose that that is right—but building societies and authorised unit trusts. The clause also provides for other types of provider to be authorised subsequently by the Treasury. For example, it is possible that investment trusts may provide personal pensions in the future. At present, the business can be carried out only by life assurance companies and certain friendly societies.
    1034
    This considerable change is very much in keeping with the breaking down of divisions that we are seeing in the City and in financial markets generally. However, I do not think that its significance can be underestimated.
    Mr. Blair: I am grateful to the Financial Secretary. I was uncertain about how far some of the institutions were already engaged in providing pensions, but it is clear that there will be considerable changes.
    The Financial Secretary spoke about investment trusts. Has the Treasury certain types of institution already in mind which it might allow, using its power under subsection (4), to carry on such business, or is the power to be held in reserve?
    Mr. Norman Lamont: The power will be used largely in response to representations. I referred to investment trusts only as an example. We made several changes in the clause in response to representations, and I imagine that any further widening will be based on representations from those in the market place who wish to get into this business. It is not a question of us wishing to impose it; it is more a question of the people who wish to join the pensions industry—one can think of many institutions—coming to us. We have not yet worked out the plans.
    Question put and agreed to.
    Clause 20 ordered to stand part of the Bill.

  Clause 21

    SCOPE OF BENEFITS
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: I think that I am right in saying, but I ask my right hon. Friend to reassure me, that the provisions of clause 21 cover Government approved personal pension schemes, provided that they comply with the conditions laid down in paragraphs (a) to (e)—that is, the conditions elaborated in clauses 22, 23, 24, 25 and 26. Would I be right in thinking that if they are contracted-out schemes, they are also regulated by the 20 statutory instruments which emanated last week from the DHSS? If I am making an ignorant mistake, I hope that my right hon. Friend will forgive me, but I think I am right in saying that contracted-out schemes would fall under both sets of conditions. If that assumption is correct, may we hear to what extent these provisions have been agreed with the DHSS so as to make certain that there is no risk of incompatibility with the conditions laid out in the 20 statutory instruments?
    Mr. Norman Lamont: The answer to my hon. Friend's question is yes. They are controlled in this double way. Clause 21 is just an introductory provision. The answer to my hon. Friend's second question is also yes. These matters have been discussed and agreed with the DHSS.
    Sir Brandon Rhys Williams: Can we take it that there is no risk of any of the provisions in the clauses of this Finance Bill producing any friction or incompatibility with what has emanated from the DHSS?
    Mr. Norman Lamont: That is what I was seeking to imply to my hon. Friend. That is the objective, and we hope that it has been achieved.
    Mr. Blair: As I understand it, the Financial Secretary is saying that there would be no conflict between the

    1035
    statutory instruments and the provisions in the statute. If there was such a conflict, I presume that the provisions of the Finance Bill would prevail.
    Subsection (2) states that nothing in subsection (1) will prevent the approval of a scheme
    "which makes provision for insurance against a risk related to the non-payment of contributions."
    Does that refer to cases where, for example, due to illness someone is unable to contribute for a period? Is that insured against under the terms of the scheme? Does that represent a change from the present law?
    Mr. Norman Lamont: I am advised that the answer to the second part of the hon. Gentleman's question is yes. I am afraid that I do not know whether it is a change. Clause 21 relates to benefits from voluntary contributions only. Protected rights from minimum contributions is a separate matter for the DHSS. There is no incompatibility.
    Question put and agreed to.
    Clause 21 ordered to stand part of the Bill.

  Clause 22

    ANNUITY TO MEMBER
    Question proposed, That the clause stand part of the Bill.
    7.45 pm
    Mr. John Greenway: I declare an interest as a practising insurance broker. What advice will the Treasury give to life assurance companies with regard to clause 22(2) in respect of existing retirement annuity contracts? If in this legislation we are introducing a new minimum retiring age of 50, which I greatly welcome, what will happen to existing retirement annuity contracts? Some guidance on the question will be necessary either today or in the future.
    Mr. Norman Lamont: Subsection (2) stipulates that a member's annuity must normally commence between the ages of 50 and 75. But subsection (3) permits commencement before the age of 50 if a member retires early through ill health or incapacity, or if the board is satisfied that his occupation is one in which people customarily retire early.
    Mr. Greenway: Perhaps I have not made the point clear. As my right hon. Friend will know, under the 226 and 227 1970 regulations, the minimum pension age is 60. We are now introducing a new concept. I greatly welcome the fact that we are reducing the age to 50, but it will create a dilemma with regard to practice between now and 4 January next year. Should people be advised to wait until next January to obtain an earlier age, or will the Inland Revenue accept an earlier retirement age applied to existing retirement annuity contracts?
    Mr. Lamont: Existing retirement annuities will continue on the same basis, but I am advised that they will be able to convert to personal pension plans. That is all that I can tell my hon. Friend at this stage. But I understand his point about whether the new conditions should apply to those who invest in annuities between now and January next year and what advice they should be given. I shall try to make available more precise information to my hon. Friend.
    Mr. Greenway: I am most grateful.
    Mr. Blair: The hon. Member for Ryedale (Mr. Greenway) has made an important point. The present age limit is 60, and subsection (2) would change it to 50. Will subsection (3), which allows the annuity to commence even before age 50, translate into legislation what already exists in practice? My understanding is that it does not. As a result of subsection (3), the annuity will commence before age 50 if it is payable on the person becoming incapable through infirmity of body or mind of carrying on his work or if the board is satisfied that the occupation is one in which people customarily retire before that age. I understood that if the board could be persuaded that people normally retired young in an occupation, it would allow the annuity to be paid before age 60.
    Mr. Norman Lamont: I am sorry that I cannot answer the point put by the hon. Member for Sedgefield (Mr. Blair). I undertake to make the position clear to him.
    Sir Brandon Rhys Williams: Subsection 22(5)(a) refers to the marriage of the annuitant as being one of the reasons why an annuity may terminate after the death of a member. Clauses 24 and, I think, 25 refer to what happens to annuities after the death of a member. I do not want to rule out the possibility of my raising a point concerning clause 24 by failing to put down a marker here. This matter appears to be foreshadowed in clause 22(5)(a)
    Question put and agreed to.
    Clause 22 ordered to stand part of the Bill.

  Clause 23

    LUMP SUM TO MEMBER
    Sir Brandon Rhys Williams: I beg to move amendment No. 40, in page 13, line 15, leave out subsection (4).
    The Temporary Chairman: With this, I propose to group amendment No. 39, in page 13, line 15, leave out '£150,000', and insert '£156,000'.
    Sir Brandon Rhys Williams: I am grateful for the generosity shown by the Chair in allowing me to move so many amendments. I hope that I can deal with amendment No. 40 as quickly as possible and that I shall not weary the Committee too much. This matter concerns lump sums emanating from the new personal pension schemes. A similar matter arises in schedule 3 in respect of existing schemes which may in future give lump sums of more than
    I am not happy with this provision. Although there are not many people who are able to reach a salary of £100,000 a year, and therfore qualify for a lump sum of £150,000, I do not like introducing discrimination against any particular group in the way clause 23 undoubtedly does, for no evident moral purpose. I tabled amendment No. 39, which proposes that the sum be £156,000 rather than £150,000. I think that my right hon. Friend the Financial Secretary would be hard put to explain why £150,000 is the chosen figure and why £156,000 would not be almost equally good.
    I did not pluck the figure of £156,000 out of the air. I suggested it because it corresponds to £2,000 a week, a round figure. The Treasury has to explain why it decided that this is the point after which people become second-rate citizens. Not withstanding the conditions of their

    1037
    scheme, they will not be allowed the benefit of a tax-free lump sum such as that given to someone who has arranged his affairs in such a way that the tax-free sum is £149,000.
    I do not like discrimination against the better-off. It is not a particularly Conservative principle. I am horrified to find this arbitrary and sudden recommendation appear in a Conservative Budget. That does not mean to say that I am happy with the tax-free lump sum. I spent a great deal of time in Standing Committee on the previous Finance Bill explaining how I thought it should be phased out. I do not think that a tax-free lump sum should have a place, because it attracts all kinds of consequences. It encourages people to commute their annuity for a lump sum, which they may not spend wisely. If they do spend it, it may simply force up house prices, because people have the benefit of a tax-free bonus which they can use in conjuncion with house purchase finance schemes of various kinds. They may do other things with this enormous tax-free lump sum which are not in the public interest.
    The Inland Revenue is approaching this difficult matter in the wrong way in trying to victimise the top echelon of salary earners. I happen to be the Member of Parliament for Kensington and I dare say that there may be people in my constituency who will be affected by this clause. If so, they have not been in touch with me. In my opinion, this recommendation should not have appeared in the Budget. I should be very much happier if it did not appear in the part of the Finance Bill that refers to these new personal pension schemes. It is a pity that it is there. I hope that the Treasury agrees to think in other terms about the tax treatment of lump sums.
    Sir William Clark: I support my hon. Friend the Member for Kensington (Sir B. Rhys Williams), although I do not necessarily congratulate the powers-that-be on selecting his amendments but not mine. I do not understand why amendment No. 3 was not selected because, as far as I know, it was not out of order. As I have some short experience of Finance Bills, I should have thought that that amendment could easily have been taken with my hon. Friend's amendments. I congratulate him on getting so many amendments covered. I must talk to him later to find out how he exercises the influence to effect that.
    I agree with my hon. Friend the Member for Kensington that £150,000 is an arbitrary figure. I do not know why the Revenue has thought of £150,000. Why not make it £200,000? Since the average national wage is £10,000 a year, I should have thought that a salary last year of £100,000 was an extremely low amount to be considered in respect of lump sums. I disagree with my hon. Friend the Member for Kensington about the amount of the pension that should be commuted. Spending the lump sum does not necessarily put up house prices. Normally, when a pension is commuted, the individual's mortage liabilities are immediately paid off and the balance of the money is then put into some sort of annuity or investment, so the commuted sum carries on after the individual dies.
    I deplore the idea of reducing the commuted ceiling to £150,000. I accept the question of my hon Friend the Member for Kensington as to why the sum was not £156,000. I should have thought that, if the Government are to be logical—although they have plucked this figure out of the air with no logic—they could adopt the
    1038
    same logic as they do with personal allowances. The Rooker-Wise amendment—or, as I remind the Committee, the Rooker-Wise-Lawson amendment—gave us indexation at the beginning. My amendment, which as you realise, Miss Fookes, was not selected, called for the indexing of the £150,000 lump sum each year so that it does not decrease in value. My hon. Friend the Member for Kensington has suggested that the figure should be £156,000. I appreciate his logic in saying that it corresponds to £2,000 a week. I think that most Committee members would have worked that out. Actually, it is £3,000, not £2,000, a week.
    Sir Brandon Rhys Williams: By my reckoning, £2,000 a week comes to £104,000 a year. As the lump sum is one and a half times the final salary, that brings it to £156,000.
    Sir William Clark: That is right. I think that we have unaminity. Taking a basic sum of £2,000 a week, one and a half times that must make £3,000 a week, so the £156,000 lump sum equals £3,000 a week. I do not think that we should become involved in any more arguments about that. I assumed that my hon. Friend intended having some form of indexation in respect of the £150,000.
    Why have the Government plucked this £100,000 out of the air, giving the £150,000 commuted amount? Why is the sum not indexed, as per the Rooker-Wise-Lawson amendment? Clause 23 states that the lump sum
    "must not exceed £150,000 or such other sum"
    as the Treasury may prescribe. Will my right hon. Friend the Financial Secretary confirm that, if the £150,000 is changed, it will only be changed upwards and not downwards?
    8 pm
    Mr. John Greenway: I endorse the remarks made by my hon. Friend the Member for Croydon, South (Sir W. Clark). Will the Minister assure the Committee that the £150,000 will not be reduced by Treasury order? I disagree with my hon. Friend the Member for Kensington (Sir B. Rhys Williams) on people taking all their money in tax-free cash. That is not the purpose of the provision. We see a reduction in the amount that can be commuted. Clause 23 (3) states:
    "The lump sum must not exceed one quarter of the total value".
    That is somewhat less than the present practice under the existing retirement annuity arrangements, and it is to be regretted.
    Mr. Blair: I wish only briefly to disturb the argument that is going on between the Government Back Bench and Front Bench and to defend the Chancellor against the accusations of Socialism that have been made against him in introducing the £150,000 limitation. On Second Reading of the Finance Bill, the Financial Secretary described the lump sum as a tax-free perk. That seems to sum up the position. The generosity is in having such a high limit at all. In some ways, it is difficult to see how one justifies it.
    Hon. Members are perfectly entitled to press the Minister on how the Treasury intends to use the powers that it will be given. The Treasury is given a completely free hand to decide what it wants to do—it could raise it, reduce it, or do whatever it wants. We should at least have some outline of how it intends to exercise that power.

    1039
    I do not promise that the Opposition will support the Treasury if it decides to give that outline, but it is a little unsatisfactory to leave the matter as open and vague as it is at present.
    Mr. Norman Lamont: On Second Reading, I described our thinking on the lump sum. No doubt Hansard will clarify whether I described it as a tax-free perk, but I made it clear that the Government and I regard pension funds that qualify for extremely generous tax reliefs as being primarily for the provision of pensions. The lump sum has been debated many times before; it has its critics and supporters, particularly in the industry. I recall that, on one occasion, my right hon. Friend the Chancellor used the phrase
    "the much loved lump sum".
    My hon. Friend the Member for Kensington (Sir B. Rhys Williams) thinks that we should tackle the anomaly, problem or tax-free perk—however one wants to describe it—in a different way. His view is that it should be taxed. We have left it alone, and various assurances were given in the past by my right hon. Friend about what would or what would not constitute Green Paper territory.
    There is no doubt, as my hon. Friend the Member for Kensington said in Committee during pre-election deliberations on the Finance Bill, that people use the lump sum provision in all sorts of ways, particularly when combined with accelerated accrual provisions. Notwithstanding the changes that we are making, it is still possible to use different accelerated accrual provisions in combination with the lump sum. People are getting tax deductions for contributions to pension funds, and they get a tax-free sum at the end. We certainly felt that it was not wrong that there should be a cap on the lump sum.
    My hon. Friends have perfectly fairly asked me why £150,000, why not £150,000·02, or something like that.
    Mr. Blair: It is a round number.
    Mr. Lamont: It is a round number, says the hon. Member for Sedgefield. By any standard, it is a generous figure. My hon. Friend the Member for Croydon, South (Sir W. Clark) suggested that, perhaps, it should be indexed. Notwithstanding what happens to personal allowances, it is our general stance, in a time of low inflation and at a time when we intend that inflation should remain low, to resist general indexation provisions. It is our intention to keep on top of inflation rather than to build indexation into large parts of fiscal legislation.
    In response to the point that is worrying my hon. Friends, I repeat the assurance that I gave before the election. I said that, from time to time, we shall examine the limit and that we did not wish to see the limit eroded. I repeat that statement for the benefit of the Committee, and I hope that it will satisfy my hon. Friends, even if my hon. Friend the Member for Kensington is not entirely at one with me on the approach to the problem.
    Sir Brandon Rhys Williams: I am sure that the House is grateful to my right hon. Friend. I intervene in the debate again because he made one remark about my own position which I cannot allow to stand. He said that I am against the tax-free lump sum—just in so many words. I do not believe in retrospective legislation for pension schemes. When someone has already served 20, 30 or more years in a pension scheme in the confident expectation
    1040
    that, on retirement, he or she will be eligible for a commuted annuity to be taken in the form of a tax-free lump sum, we should not intervene. That was suggested by the Treasury some three or four years ago, when it received an extremely negative response from the public.
    I do not think that we should say that, notwithstanding the fact that they have worked all those years in that expectation, that expectation should now be taken away. That is why I made the suggestion, which I elaborated at some length in Committee during consideration of the Finance Bill before the election. It is only in so far as entitlement accrues in future years that the ability to apply the tax provisions when a pension is commuted for a lump sum should apply.
    I hope that my right hon. Friend will look again at my suggestion that the amendment is the right solution and that clause 23 is the wrong one. We should give everybody equal treatment. We should not discriminate against people on high salaries. That is an absolutely wrong principle. If the Treasury were to adopt my approach, it would be 40 years before we reached the stage at which the lump sum option became totally taxable. In my estimation, that is a long enough period for people who have relied on the tax-free lump sum to make their adjustments. That is why the Treasury is entirely wrong in proceeding in this way. I do not feel able to withdraw my amendment.
    Amendment negatived.
    Clause 23 ordered to stand part of the Bill.

  Clause 24

    ANNUITY AFTER DEATH OF MEMBER
    Sir Brandon Rhys Williams: I beg to move amendment No. 44, in page 13, line 26, at end insert
    `or, in the event that the member is not survived by a spouse, to an employee of his.'.
    The Temporary Chairman: With this it will be convenient to take the following amendments: No. 42, in page 14, line 3, leave out subsection (6).
    No. 43, in page 14, leave out line 25.
    Sir Brandon Rhys Williams: I think I am right in supposing that the significance of the surviving spouse is connected with the decision to move towards unisex treatment of pensions, so that a balance is found between the claims of a male employee, or a male member of the scheme, and the claims of a female employee. I certainly welcome that move. I should not want to do anything to upset it. In fact, I am only too anxious to do everything I can to support it.
    I am grateful to the Chair for taking, in conjunction with amendment No. 44, my amendments Nos. 42 and 43. They raise a slightly different point, but the amendments are so fully related that the Chair's discretion in grouping them is perfectly right.
    My intention in amendment No. 44 is rather narrow, but it arises from the general principle that, as I understand it, when a man reaches the normal age of retirement he will have a certain life expectation, whereas if a woman retires at the same age she is likely to have a much longer life expectation. Therefore, her claim on the fund for an annuity will extend over a longer period and have a greater value than that of a man with an identical career record or other form of entitlement under the

    1041
    scheme. Therefore, women have the advantage over men in so far as they are likely to benefit for longer from the annuity which they are entitled to claim under the scheme.
    On the other hand, men have an advantage over women in the actuarial tables in that they are more likely to leave a surviving spouse for the obvious reason that, a man's expectation of life being shorter, it makes it more likely that the woman will survive him. If we are to recognise that the benefit to the survivor is part of the entitlement which has been acquired through the earnings achievement of the member of the scheme, it is not right that the subsequent conduct of the spouse should be relevant in the calculation. Equally, where there is no spouse in the case where a man's wife has died before he does, or where the reverse might be the case, it is not right that the scheme should benefit and the household should suffer.
    The amendment seeks to deal with the case of a man whose wife has died who may take a caretaker or some other person to look after him for a salary. That is not uncommon and the rules should not exclude that person being designated by the original member of the fund as the person who is entitled to continue to draw the benefit which we have decided should be allocated to the survivor under the standard rules. That is why I have moved that we should acid the words "to an employee" of the member when deciding what to do about the residual annuity after the original member has died.
    The other amendments in the group refer to the conduct of the survivor. It is objectionable, if I have interpreted the clause correctly, that the annuity should be shut off if the surviving spouse remarries. The surviving spouse's conduct in deciding to get married again should not determine what the member's asset was worth when he ceased employment and the benefit of the pension scheme was awarded to him.
    I have often thought it a most disagreeable condition that where a wife in particular remarries after her husband's death, the scheme shuts off her benefit. It is a vindictive clause and the woman should not be expected to remain single after her husband has died in order to obtain the benefit of his assets.
    It may be that there is something else to this which I have not detected, but it appears to suggest that if the surviving annuitant does not go through a marriage ceremony to another party but continues to live in the same house with that person, the scheme has to go on paying. It is only if there is marriage that the scheme is entitled to dry up the annuity.
    If I am straying from the correct interpretation of the clause, I can only apologise, but the Bill has not been before us long enough for hon. Members interested in such points to consult experts who can explain such provisions.
    If one looks at the comparable statutory instrument No. 1100 emanating from the DHSS called "The contracting out widowers' guaranteed minimum pension regulations" we find something different. The DHSS goes further in considering the conduct of the survivor and deals with the question of where a widower has entered into a new relationship with another woman. Paragraph 33(2)(b) provides:
    "There is excluded from the periods prescribed … any period during which he is under pensionable age and a woman to whom he is not married are living together as husband and wife"
    Paragraph (c) says:
    1042
    "If after he has attained pensionable age if immediately before he attained that age he and a woman to whom he was not married were living together as husband and wife."
    That is more specific than the clause we are discussing and it is an example of where liaison between the DHSS and the Inland Revenue has not been complete.
    I am not trying to score points in respect of that, but I want to understand the nature of the provision. I hope that my right hon. Friend will tell me whether I am right in thinking that these provisions have the effect that the subsequent conduct of the surviving spouse can reflect on the value of the asset which has been earned by the member of the scheme during his lifetime.
    8.15 pm
    Mr. Blair: Unfortunately, I cannot support the hon. Member for Kensington (Sir B. Rhys Williams) in his amendment, for two reasons. First, as I understand il, amendment No. 44 would considerably change and, indeed, widen the scope of the annuities that would be permissible under clause 24. The annuity would be payable not only to a surviving spouse of a dependant, but even to an employee of his. The employee may be a person in the category to which the hon. Gentleman referred, but the term "employee" can be much wider. It may well be that if the person was self-employed and employed several people it could extend to them. That is going way beyond the purpose of the original legislation.
    Secondly, sub-paragraph (6) does not insist that the annuity cease to be payable on the marriage of the annuitant; it simply allows that the annuity cease to be payable on the marriage of the annuitant. The word is "may" not "shall", and that is probably a critical distinction. Therefore, it is entirely up to those who are phrasing the terms of the annuity to decide whether they want that annuity to cease on the marriage of the annuitant. That is perfectly rational. They may decide that if the person remarries it is not necessary for him to have the benefit of the annuity in the ordinary way.
    It may be helpful if I raise at this stage a purely drafting point. It is only if one looks at the annotations at the side of clauses 24 and 25 that one realises that they refer to annuities after the death of members. Otherwise, one has to read clause 24 in conjunction with clause 21. Clause 24 simply follows on the conditions already laid out in clause 21. That is slightly unsatisfactory; perhaps the Minister will have somebody look into that, because there have been difficulties in construing statutes where there are qualifications on the scope of a particular clause which are placed in annotations rather than the body of the clause.
    Mr. John Greenway: I cannot support the amendments of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). It is important that the House should realise that we are dealing with personal pensions acquired by the individual on a money purchase basis. From an actuarial viewpoint the real issue is the provision of a pension for a member of a scheme—the person who is buying the pension policy. The more people and conditions one puts on the payment of benefit after the member's death, the less pension benefit the individual will obtain in his retirement. The actuaries would have great difficulty in dealing with a position in which one carried on paying an employee an annuity after the death of a member.
    Mr. Norman Lamont: I want first to apologise to my hon. Friend the Member for Kensington (Sir B. Rhys

    1043
    Williams) for misrepresenting his views during discussion of the previous amendment. I know from long experience that my hon. Friend has not only an answer to most problems, but a detailed answer. In fact, I was completely aware of the solution that he had to the problem that we were discussing—the long transitional period. I apologise for describing his views in shorthand, which led him to think that I was not familiar with them.
    Clause 24 sets out the conditions applicable to annuities payable under a personal pension scheme to a surviving spouse or dependant of the member after his or her death. I should stress that those conditions reflect current law and practice as they relate to retirement annuities. There are no changes; these are the existing practices. Persuasive as I find my hon. Friend on many issues, I do not find him quite so persuasive on this one, for the reasons given by the hon. Member for Sedgefield (Mr. Blair) and by my hon. Friend the Member for Ryedale (Mr. Greenway), who rightly emphasised the difficulty for the whole personal pensions and annuity markets if one went on adding conditions.
    I shall come to amendments Nos. 42 and 43 in a moment; I had more sympathy with them initially than with amendent No. 44, which would allow an annuity to be paid to an employee of the member—even, as the hon. Member for Sedgefield emphasised, if he was not a dependant and there was no surviving spouse or dependant of the member. As my hon. Friend the Member for Kensington knows, at present, such annuities can be paid only to someone who is a dependant. Revenue practice has been, I think, to accept a reasonably broad definition of "dependant", and I can confirm that that will continue to be the case. My hon. Friend is proposing to widen this scope for annuities to be paid even to people who have only the most tenuous connection with the member.
    I return to the point about the generous tax reliefs upon which the whole subject that we are discussing is based. Given that we have such generous tax reliefs, I can see no justification fo enabling someone who was not a dependant to benefit in that way. If the position were as my hon. Friend described it for amendments Nos. 42 and 43, he would have been entirely right and I would have shared his feelings, but, as the hon. Member for Sedgefield grasped—I congratulate him on doing so—the present rules are permissive.
    At present, an annuity paid to a surviving spouse or dependant may cease if the person receiving the annuity subsequently marries or remarries; but there is no objection to such an annuity being payable for the whole life of the annuitant in the normal way. The amendment would prevent an annuity payable in these circumstances from ceasing on the subsequent marriage of the recipient. That would remove an element of choice. It is entirely right that we should have a market that allows people to choose annuities or personal pensions providing for either circumstance. I share my hon. Friend's feelings that the provision would be insensitive if it were as inflexible as he thought it was. However, it is not, and we have a market here that can meet many different circumstances.
    Sir Brandon Rhys Williams: I fear that my right hon. Friend the Minister has not quite got the point that I wish to make. I am not happy with provisions that appear to
    1044
    drive people into cohabitation rather than formal marriage. It appears to me that that is permissible as one of the options that the clause would make available. My primary concern is to protect the unisex quality of the pension asset so that, at the date of award, whether the person is male or female, his or her expectation of the benefit that he or she would draw from the scheme would be the same. Since, as I pointed out earlier, the man has to rely on the fact that the scheme provides assets in one form or another that continue after his death, in order to have the equivalent value from the scheme that a woman would get in otherwise similar circumstances at the same age—of course, she would expect to live longer—I do not want the man to lose that asset for any reason.
    The scheme should not be able to treat the man badly because he has died younger than the woman would have done in the same circumstances, and has therefore got less benefit from an asset for which he has saved. If there is no surviving spouse, I want the asset that we allocate to the survivor to be available to go to someone else, or to some other objective. It might not be a large one, and it would probably taper. If a man lived to be 99, the benefit for the survivor need not be large, but if he died a year after he qualified for his pension, the asset that the pension scheme would hold on his behalf ought to be large and should not be forfeited because he does not have a surviving wife, or because she has chosen to remarry.
    It is not right to undermine the attempt to put men and women on the same footing in pension schemes. I hope that my right hon. Friend will give further consideration to that matter. I do not seek to press him on it now, but if he studies what I have said he will realise that we are potentially reintroducing inequality of the sexes, and that does not seem right.
    Mr. Norman Lamont: My hon. Friend is making the point that, as a woman has a longer life expectancy, the annuity costs more. He wants the system to be unisex. There is nothing to prevent the annuity lasting for the widow's lifetime, but the system allows it to stop if she marries again, and there is an element of choice for the person who takes out the contract. The Government require contracted-out personal pensions to be unisex. Annuities from voluntary contributions allow a choice to the member. However, I shall look at what my hon. Friend has said to determine whether the position is unsatisfactory.
    Sir Brandon Rhys Williams: In view of my right hon. Friend's helpful assurance, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Clause 24 ordered to stand part of the Bill.
    Clause 25 ordered to stand part of the Bill.

  Clause 26

    RETURN OF CONTRIBUTIONS ON DEATH OF MEMBER
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: Will my right hon. Friend enlighten me on a point that I raised on a similar clause in the Finance Bill before the election? At that time, unless I am much mistaken, I tabled a probing amendment at the end of subsection (2) to add the words
    "whichever provides the greater amount",

    1045
    the object being to elucidate what appears to be somewhat ambiguous. Subsection (2) says:
    "the lump sum must represent no more than the return of contributions, together with reasonable interest on contributions or bonuses out of profits."
    I may not have understood that correctly, but it seems to me that an option is available there and I would not want it to be possible for the option to be exercised—if I have read it correctly—in such a way that it is a disadvantage to the beneficiary. Perhaps my right hon. Friend could explain that or, if I have misunderstood the way that the clause ought to be read, perhaps he would say so.
    8.30 pm
    Mr. Blair: Perhaps I can assist. I do not think that there is a difficulty in clause 26 of the type that the hon. Gentleman suggests. That is partly because it seems that subsection (2) will simply ensure that a lump sum does not represent any more than the return of the contributions together with reasonable interest on the contributions or bonuses out of profits. It is almost a form of anti-avoidance provision to ensure that what is returned is not more than what should have gone into the scheme under the rules. As such, the clause is necessary to ensure that the rules of the scheme are not abused.
    Mr. Norman Lamont: The hon. Member for Sedgefield (Mr. Blair) is perfectly correct and he has summed up the position. No surplus will arise in this instance and we are talking about two different forms of contract—one unit linked and the other guaranteeing the annuity.
    Question put and agreed to.
    Clause 26 ordered to stand part of the Bill.

  Clause 27

    SCHEME. ADMINISTRATOR
    Sir Brandon Rhys Williams: I beg to move, in page 15, line 6, after 'Kingdom', insert
    `or in another member state of the EEC.'.
    I was rather surprised when I saw this provision because I do not know why it is there. I thought that I would ask my right hon. Friend to expand and give him an opportunity to do so. I have a particular interest here in that when I was a member of the European Parliament in 1981, I had the honour to be made the Rapporteur for the subject of the integration of the European market for capital. In the course of my work as Rapporteur I became totally convinced of the necessity for us to proceed as far as possible to regard Europe as a single capital market.
    Of course, a pension scheme is pre-eminently a capital project, and it seems a little jarring and out of tune with the Government's stated policy of supporting the conception of the integration of the European market for capital to say that where personal pension schemes are concerned we will have this "United Kingdom only" label attached to them. There must be more to this clause than meets the eye, because it seems such a petty and unsuitable restriction to insert. I trust that my right hon. Friend will be able to explain just what benefit is likely to accrue if we retain this clause in the Bill.
    Sir William Clark: I trust that my right hon. Friend will resist this amendment. We are dealing with annuities, and pensions paid by institutions in this country enjoy certain tax advantages. That is the main thing. How can we say,
    1046
    if a pension scheme is operated in Greece or France or Portugal, that the same fiscal system will be applied to those pension funds? No doubt this amendment is well-meaning, but it is highly impracticable. In any case, we are dealing with our own fiscal system and complete harmonisation with the EC may never come. Until it does, it would be ridiculous to try to transfer some of the operations, and certainly the operation of our pension funds or annuities, to any other member state. I hope that my right hon. Friend will not waste much time on this amendment.
    Mr. Norman Lamont: I agree with my hon. Friend the Member for Croydon, South (Sir W. Clark) but in the interests of making progress I am not sure that a summary dismissal of the amendment would be the appropriate thing to do. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) is always pushing integration with Europe and he brings the same care, drive and point of detail to the pension fund debate. I am afraid that I must agree with my hon. Friend the Member for Croydon, South—
    Sir William Clark: What are you afraid of?
    Mr. Lamont:—even though I am afraid of my hon. Friend the Member for Kensington. Given the very generous tax reliefs that seem to dominate debates of this kind, it is essential that we have people within the United Kingdom jurisdiction accountable to the Inland Revenue. I should stress that it has always been a requirement of an occupational pension scheme that it has an administrator resident in the United Kingdom. We are simply proposing for personal pensions the same rules as apply to occupational schemes. They do not discriminate unfairly against the nationals of other EC states. As I say, someone within this jurisdiction must be accountable to the Revenue in order to ensure that the reliefs are not abused. A similar rule is contained in the Department of Health and Social Security regulations. My hon. Friend the Member for Kensington has been following those and will find that the rule is mirrored there.
    Sir Brandon Rhys Williams: My right hon. Friend has explained that, as I understand it, the Inland Revenue would need to have someone living within the United Kingdom in order to proceed against that person if the scheme were to be improperly conducted. Obviously, in the same way that we do not like overseas landlords misconducting themselves behind foreign frontiers, we would not want scandalous abuse of the rules of pension schemes. It would seem to be a pity if there was no opening for competition and if the people providing facilities for personal pension schemes were to be excluded from doing so unless they were substantially British companies or British institutions.
    I hope that the meaning of the clause does not preclude other institutions from other financial centres entering into competition, because that would be highly undesirable. On the other hand, if it is necessary for them to establish one of their managers here as a kind of Aunt Sally, the clause seems rather a small-minded provision and I am bound to say that I regret it. However, I do not think that it is of such serious importance that we need to divide on it. Unless my right hon. Friend has further remarks to make, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Question put and agreed to.
    Clause 27 ordered to stand part of the Bill.

  Clause 28

    TRANSFER PAYMENTS
    Sir Brandon Rhys Williams: I beg to move, in page 15, line 14, at end add—
    ` (3) Regulations made under this section shall provide that the rules of the scheme shall require the trustees in respect of any member withdrawing from pensionable service before the normal pension age under the rules of the scheme at the withdrawing member's option either—

    (a) to pay an approved scheme a transfer payment in respect of the withdrawing members' entitlement of the sum that would be required by the withdrawing members' scheme for the purpose of admitting a new member of the same age, sex and pensionable remuneration as the withdrawing member in order to credit him with the same number of years of pensionable service as the withdrawing member (but subject to modification in accordance with (4) below, or

    (b) to award preserved benefits to the withdrawing member of the same actuarial value as that sum.

    (4) In a case where an actuary certifies that on the date of the certificate the scheme under this section is not fully funded, (which is to say that the scheme does not have sufficient assets to meet its liabilities in respect of the whole or any specified part of the accrued rights to benefit of its members), the transfer payment, or as the case may be, the part of the transfer payment which corresponds with the specified part of those accrued rights, may be reduced at the discretion of the trustees by the percentage by which the scheme is so shown to be deficient.
    (5) It shall be permissible for the pension trustees of an approved pension scheme under this section to amend the rules of the scheme in regard to the calculation of transfer payments and of preserved benefits on behalf of any member ending pensionable service before the normal age of retirement under the scheme in accordance with the provisions of this section.
    (6) An approved pension scheme which by 1st January 1988 does not have rules such that the transfer payments and the preserved benefits payable under the scheme are to be calculated on terms at least as favourable to the beneficiaries as those specified in this section shall not qualify as an approved pension scheme in repect of liabilities incurred after that date except by the permission of the Occupational Pensions Board.
    (7) The pension trustees of an approved pension scheme may apply to the Occupational Pensions Board for deferment of the latest date for the amendment of the rules of their scheme if necessary to accord with this section and with the approval of the Board the scheme may retain its status as an approved pension scheme in respect of its liabilities incurred after that date to a date not later than 1st January 1989.
    (8) The Secretary of State for Health and Social Security shall lay before Parliament regulations under this section subject to affirmative resolution of the House of Commons which shall specify the grounds on which the Occupational Pensions Board may approve applications for deferment under subsection (8), above.'.
    Before I embark on this I should like to say that this provision is not a new recommendation of mine but is new in the context of the newly available personal pension schemes. I shall be tabling a new clause to the present Finance Bill which would have the effect of applying a similar method of valuation for transfer values or preserved benefits in schedule 3 or wherever it is appropriate in regard to schemes already in existence. I want to say the minimum at this point in moving this amendment because I do not want to make myself ineligible to move a similar one at a later stage in the proceedings of the Committee.
    There is merit in having the same rules across the board where valuation of transferred or preserved assets is concerned. Therefore, I do not think it is wrong that we
    1048
    should seek to apply this particular formula to the new schemes just as much as to the old. I have to move this amendment at this point if I am right in thinking that there is room for it where the private personal schemes are concerned. I realise that, for the most part, in a money purchase scheme, the proposals that I have drafted, which were intended to relate primarily to final salary schemes, would seem to have only rather tangential relevance. However, I think that it might well happen in the competition which is arising already to attract the interest of people who may decide to take out personal pension schemes, that systems will be devised which will allow a measure of latitude in assessing the transfer I Lie, or at any rate the preserved value, of the assets. of one who decides to terminate his connection with the scheme before the normal age of retirement. Therefore, I believe that I may be serving a useful purpose if I present this method of valuation so that the same regime would be applicable right across the occupational pensions and the private pension schemes.
    I emphasise that, I refer only to the new schemes set up under this chapter. In order not to say too much on this point and to come to the central feature, what I am suggesting here—I have suggested it on previous occasions in the House—is that the transfer payment should be calculated by a formula which would be precisely the same if the movement of the employee was reversed. If the employee or the person taking out the pension were moving into the scheme and buying himself in, that would be a method of valuation of what I think should be the appropriate transfer or preserved value when the member leaves the scheme.
    I have to say that the result of using that formula—which I have set out in the amendment and which I do not need to read out in detail—would be very different indeed from what is often recommended even by highly competent and actuarially trained people and in normal practice now. It is difficult to estimate what people who leave schemes early leave behind and how much they lose by changing their jobs. However, over the whole field of pension provision in approved schemes, it is a very substantial amount and, after all the years for which I have been pressing this on successive Governments, I find it rather disappointing that I still have to make this point. Everyone agrees that the early leaver gets a raw deal, whether he takes a transfer payment or leaves behind a preserved asset; yet the House does not act.
    If my right hon. Friend the Financial Secretary does not think that the formula that I have adopted here for assessing the early leaver's assets is the best possible and the fairest, I trust that he will come forward with an equally specific and better provision. If he is not able to come forward with anything better, I strongly recommend that he should accept this, because it is not only in the interests of fairness and the good reputation of the private scheme institutions which are springing up that they should be seen to be giving a fair deal to someone who severs his connections before the normal age of retirement; it is also all-important to the Government's policy of encouraging the mobility of labour, particularly among senior executives. It is when a man is a senior executive that his pension asset is likely to be worth most. Therefore the fact that he is very likely to be cheated if he changes his plans and leaves his scheme early under existing normal practice makes the mobility of labour argument so important.
    I have said enough on this. The Committee can see precisely what I am aiming at in my amendment. I trust that my right hon. Friend will welcome it and that, by suggesting this again tonight I shall have got a stride nearer to a genuine system of statutory fair treatment for the early leaver. That is why I hope that the Government will accept my proposal.
    8.45 pm
    Mr. Norman Lamont: Clause 28 sets out certain basic conditions relating to transfer values and personal pension schemes. My hon. Friend said that, in a sense, his amendment anticipates the broader assault that he intends to make on this problem in relation to occupational pension schemes. The amendment appears to relate primarily to transfer values paid by occupational pension schemes. My hon. Friend acknowledged that the benefits under a personal pension scheme will be based on money purchase and will be attributable to the individual. Therefore, I am confident that the problem outlined by my hon. Friend will not arise in the same precise way with transfers from personal pension schemes. I suggest that we might debate this more widely when we come to schedule 3. That would perhaps be more appropriate than discussing it during a debate which is narrowly focused on personal pensions.
    Sir Brandon Rhys Williams: My right hon. Friend rightly pointed to the fact that, in private pension schemes that we envisage at present, my proposals might not be especially relevant. However, I think that we have to work with the ingenuity of the market, and I imagine that schemes which will be eligible for approval—which have not yet been envisaged, at any rate by me—will come into existence. Therefore it would be a good thing from the start to have a simple uniform regime for valuation of the early leaver's asset which would become applicable from the beginning.
    We have this catastrophe that in the occupational pension schemes nothing was laid down from the beginning as to the valuation of the early leaver's assets and it has done untold harm in this country that early leavers have been cheated year in year out, since the start of the private occupational pensions movement. It does not apply in the public sector, mercifully, and a very farseeing civil servant, Mr. Herbecq, whom I had the pleasure of knowing some 15 or 20 years ago, did manful work to ensure that people moving in the public sector within a very wide range of occupations were able to protect their pension rights. But this does not apply in the private sector and there is a real problem.
    I do not think that we want to start a whole new type of scheme without provision from the beginning for the early leaver to have a fair deal. Even if my particular recommendations here are not entirely appropriate, I hope that I am asking my right hon. Friend to move in a direction in which he is willing to go and that he will provide some valid protection for the early leavers asset from the very start. In the circumstances, as I accept that, in this case, I am on a rather narrow point, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Question put and agreed to.
    Clause 28 ordered to stand part of the Bill.

  Clause 29

    EXCESS CONTRIBUTIONS
    Question proposed, That the clause stand part of the Bill.
    Mr. John Greenway: Will my right hon. Friend consider how life assurance and pension companies can meet the provisions of clause 29 for self-employed scheme members? I understand that it is intended that, where an employee is setting up a pension scheme, perhaps with the co-operation of an employer, there should be arrangements to ensure that the contributions paid are not excessive in relation to the employee's salary. However, unless I have read this wrongly, it seems to me that we are asking a pension scheme to include in its arrangements the means to ensure that contributions are not excessive. I am at a loss to understand how the Revenue expects the life assurance industry to police the provisions with regard to people who are self-employed. Perhaps this matter needs further thought.
    Mr. Blair: On a similar point, I assume that the purpose of the clause is to determine what happens to excess contributions above the permitted maximum. Under the new personal pension schemes. the employer as well as the employee will be able to contribute. A novel situation therefore arises if the aggregate amount contributed by employer and employee exceeds the maximum. As II understand it, the purpose is to repay any excess to the employee up to the extent of his contributions and for the rest to be paid to the employer. I do not see how that affects the situation in relation to the maximum amount allowable, which seems to be governed by clause 32, but I should be grateful for confirmation that clause 29 merely determines what happens to excess contributions.
    Mr. Norman Lamont: The hon. Member for Sedgefield (Mr. Blair) is right. Nevertheless, my hon. Friend the Member for Ryedale (Mr. Greenway) has hit upon a point which requires further investigation. It is the subject of consultation with the pensions industry and I will see whether anything more can he said on Report. The matter is being explored and my hon. Friend is right in saying that it is recognised as an area in which there may be problems.
    Question put and agreed to.
    Clause 29 ordered to stand part of the Bill.

  Clause 30

    RESTRICTION OF CONTRIBUTORS
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: Unfortunately, it was brought to my notice only this morning that there could be a most unfortunate interpretation of subsection (2)(b), which reads:
    "in an office or employment to which section 36 below applies."
    This is a technical area and I may be misinformed, but it appears that paragraph (b) adds a restriction in that members of an occupational pension scheme may not arrange for minimum contributions arising under the Social Security Act 1986 to be paid to a personal pension scheme. If that is correct, it will effectively prevent a

    1051
    member of an occupational pension scheme which is not contracted out from using a personal pension scheme to opt out of SERPS.
    My right hon. Friend the Minister knows that I am not particularly well disposed towards SERPS and I think that it ought to be wound up, but while it continues every employee should be entitled to opt out of it if he or she so wishes. It seems completely contrary to Government policy to prevent employees from opting out. If my interpretation of paragraph (b) is correct, will my right hon. Friend give an assurance that it will be amended so that it does not have that unfortunate implication?
    I recognise that I am trespassing on a very technical area and raising a point which I was not able to cover in an amendment because it was brought to my notice only today. Nevertheless, it is a serious point and I trust that my right hon. Friend will consider it.
    Mr. Norman Lamont: I am advised that my hon. Friend may have a point. I undertake to look at it and to report back to the House on Report.
    Question put and agreed to.
    Clause 30 ordered to stand part of the Bill.
    Clause 31 ordered to stand part of the Bill.

  Clause 32

    LIMIT ON DEDUCTIONS
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: Subsection (2) sets out a scale allowing older people to benefit from a higher percentage limit on deductions, but in subsection (3) the figure of 5 per cent. appears not to be graduated according to age. I wonder whether it would be fairer and simpler to say that whatever subsection (2) entitles the individual to receive the provisions of subsection (3) may amount to one quarter of that figure. That would bring into subsection (3) the age scale already present in subsection (2).
    Mr. Norman Lamont: My hon. Friend is bowling me out with every ball. I am informed that the 5 per cent. is not graduated but merely follows the existing rules, so there is no change. I note what my hon. Friend says, however, and will certainly look at it to see whether there is purpose behind what he says, as he has clearly raised a serious point.
    Question put and agreed to.
    Clause 32 ordered to stand part of the Bill.
    Clauses 33 and 34 ordered to stand part of the Bill.

  Clause 35

    MEANING OF "RELEVANT EARNINGS"
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: This point might have been raised on a starred amendment but it can probably be raised just as easily in this debate. The importance of clause 35 is in the definition of "relevant earnings" in terms of the amount of contributions that can be made under earlier clauses and thus the amount on which tax relief applies.
    Subsection (7) provides:
    1052
    "For the purposes of this Chapter, a married woman's relevant earnings shall not be treated as her husband's relevant earnings, notwithstanding that her income chargeable to tax is treated as his income."
    I wish to probe the Government's thinking on this. If the wife's and husband's earnings were aggregated, the amount of contribution would be much larger, so they must be disaggregated to ensure that the husband can contribute only the relevant percentage of his own earnings and cannot top up his contributions by aggregating his wife's earnings. I assume that that is the only purpose, but I should be grateful for the Minister's confirmation that clause 35 merely translates into legislative effect what is already customary practice.
    Sir Brandon Rhys Williams: I should be grateful if my right hon. Friend the Minister would reassure me about the effect of subsection (7), as it appears to reintroduce an element of inequality between the sexes. I should like to feel that we are preserving the unisex character of our legislation across the board, but I cannot see how that will apply if we insist on retaining this provision.
    If the subsection was read the other way round, it would read:
    "a married man's relevant earnings shall not be treated as his wife's relevant earnings, notwithstanding that his income chargeable to tax is treated as her income."
    Is the clause intended to be read as applying equally in both senses? I may be showing my ignorance with this remark, but I believe that the Committee should express some uneasiness about that provision and that we are entitled to ask my right hon. Friend for an explanation.
    Mr. Norman Lamont: My hon. Friend the Member for Kensington (Sir B. Rhys Williams) is certainly not showing any ignorance of the subject, but rather a remarkable knowledge of it. My hon. Friend's summary was correct, as indeed was what the hon. Member for Sedgefield (Mr. Blair) said. The clause follows the existing rules for retirement annuities under which the wife's annuity is treated as earned income. I shall read what my hon. Friend said to consider whether there is anything that I can add to it. If there is, I shall write a note to my hon. Friend.
    Question put and agreed to.
    Clause 35 ordered to stand part of the Bill.
    Clauses 36 and 37 ordered to stand part of the Bill.

  Clause 38

    EMPLOYER'S CONTRIBUTIONS
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I simply want to make sure that I have understood the effect of the clause that we are about to pass. As I understand it, it is a necessary consequence of the changes that have been made that the employers' contributions to the personal pension schemes should not constitute a taxable benefit. If that is the purpose of clause 38 it is no more than following on the changes to the rules that have been made.
    Question put and agreed to.
    Clause 38 ordered to stand part of the Bill.

  Clause 39

    EXEMPTION FOR SCHEME INVESTMENTS
    9 pm
    Sir William Clark: I beg to move amendment No. 47 in, page 21, line 27, at end add—
    `(5) In respect of income which is exempt from tax under subsection (1) above or section 314 of the Taxes Act 1970, notwithstanding the provisions in section 240(5) of the Taxes Act 1970, the board shall make regulations providing for the repayment of income tax and tax credits to come into effect on or before 4th January 1988.'.
    I believe that it is well known that I am a consultant to the Life Insurance Association.
    The investment income of pension funds and insurance companies, as far as it refers to pension funds, is tax-exempt. The present rules relating to the repayments of tax deducted at source are anomalous and tend to penalise insured pension business in comparison with the self-administered pension schemes and new pension providers approved under the Bill. My amendment is an endeavour to obviate that difference.
    The amendment intends—I trust that the wording is correct and I trust that my right hon. Friend will not resist the amendment because of faulty wording—the repayment of tax on investments and tax credits, deducted at source, to all providers of approved pension schemes in respect of investments that are only attributable to the pension business. If the amendment is effective it will enable competitive distortions, which exist against life insurance companies, to be removed by permitting all providers of pensions to receive prompt tax repayment on an equal basis.
    This is a technical amendment and it affects the cash flow position of pension funds. As this anomaly exists, I hope that my right hon. Friend will feel able to accept the amendment or, if not, to give an undertaking that, on Report, he will return to this matter in order to eliminate that anomaly. The wording of the amendment may be slightly faulty, but I hope that my right hon. Friend will accept its spirit.
    Mr. Norman Lamont: I have considerable sympathy with my hon. Friend. I would not like to accept the amendment at this stage and I am not sure that, on Report, I will be able to return to the matter. However, I am entirely sympathetic to my hon. Friend's case.
    The purpose of my hon. Friend's amendment is to provide a mechanism for insured pension funds to secure monthly repayments of income tax and tax credits. That matter is already a matter of discussion between the Revenue and the Association of British Insurers. Some detailed information has still to be made available to us.
    We must take account of the cost to the Exchequer, which could be substantial. I understand what my hon. Friend has said. He wishes these pension funds to be on the same basis as self-administered pension schemes and not to be at a competitive disadvantage. I assure my hon. Friend that I entirely understand that and I am sympathetic to that suggestion.
    I cannot give an unconditional commitment, but we are certainly well aware of my hon. Friend's argument. Indeed, we are discussing the matter with the industry.
    Sir William Clark: I am grateful to my right hon. Friend for that reply. I do not know whether it was a slip
    1054
    of the tongue, but this change would not cost the Exchequer anything, because tax will be repaid at some time. It is merely a cash flow problem because payments are made monthly rather than quarterly or annually. If vve want to extend the number of pension schemes throughout the country—that is the Government's philosophy and I go along with it—all pension funds should be treated on an equal footing. The amendment will ensure that when repayment of tax is due—this will not cost the Revenue a scrap—the pension fund will receive the money sooner than at present. It will be able to reinvest the money and compete effectively with other pension funds.
    In the light of what my right hon. Friend the Minister has said, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Clause 39 ordered to stand part of the Bill.

  Clause 40

    UNIT TRUSTS
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: As I understand it, the clause makes a technical adjustment for unit trusts to ensure that there are no untoward tax consequences for them in running personal pension schemes. I understand that the clause is in the Bill because there is anti-avoidance legislation that could lead to injustice unless the clause is enacted.
    Mr. Norman Lamont indicated assent.
    Mr. Blair: I am grateful for that confirmation.
    Question put and agreed to.
    Clause 40 ordered to stand part of the Bill.
    Clauses 41 to 43 ordered to stand part of the Bill.

  Clause 44

    TAX ON UNAUTHORISED PAYMENTS ETC.
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I wish merely to raise a query that has been put to me. I understand that the purpose of the clause is to ensure that if a pension fund makes a payment that it should not make and the payment is therefore unathorised, there will he a tax on the payment. In other words, tax relief will be lost. It would seem that this is a method of ensuring that there is compliance with the rules that involves placing a penalty on pension funds that pay out when they should not do so. I am sure that this is a negligible or rare practice, but I shall be grateful for the Minister's confirmation.
    Mr. Norman Lamont: That is correct.
    Question put and agreed to.
    Clause 44 ordered to stand part of the Bill.
    Clauses 45 to 51 ordered to stand part of the Bill.

  Clause 52

    REMUNERATION OF MINISTERS AND OTHER OFFICERS
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: Virtually all the provisions in the clause are new. They did not appear at all, or did

    1055
    not appear in this form, in the Bill that we considered in March. As the clause reflects on the remuneration of Ministers and other officers, perhaps it would be appropriate for the Committee to ask my right hon. Friend the Minister to give us a brief explanation of what it portends. These provisions are rather complex but presumably they have a meaning, and I think that the Committee should know what it is.
    Mr. Norman Lamont: As my hon. Friend the Member for Kensington (Sir B. Rhys Williams) has said, this clause has been amended because of the provisions in the Parliamentary and Other Pensions Act which was enacted just before the general election. I do not believe that there are consderable changes of substance. Members of Parliament who are holders of qualifying offices may elect not to participate in the parliamentary pension scheme in relation to their salary from that office. In such cases, the clause enables the salary from the qualifying office to be treated as relevant earnings for personal pension purposes.
    Question put and agreed to.
    Clause 52 ordered to stand part of the Bill.
    Clause 53 ordered to stand part of the Bill.

  Clause 54

    RETIREMENT ANNUITIES
    Question proposed, That the clause stand part of the Bill.
    Sir Brandon Rhys Williams: Since my right hon. Friend is being so obliging in Committee and is helping us all so much, I hope that he will not object if I ask him to explain the import of clause 54 which, as I understand it, is new in the Bill and did not appear in the previous one. I imagine that my right hon. Friend will be able to enlighten the Committee with a brief explanation of what the clause means. This, too, is a very technical clause and an explanation of it would be helpful to the occupational pensions movement.
    Mr. Norman Lamont: When personal pensions are introduced in January next year, retirement annuities will cease to be available—this was the point that my hon. Friend the Member for Ryedale (Mr. Greenway) touched on earlier—although existing arrangements will be able to continue under the present tax rules. The purpose of the clause is to make two changes in the retirement annuity regime for the period between the Budget of last March and next January.
    The first of those changes is to introduce the same higher contribution limits as will apply after next January for personal pensions, and, secondly, to impose the same cap of £150,000 on lump sums, to which my hon. Friend the Member for Kensington (Sir B. Rhys Williams) took exception earlier, with effect from 17 March of this year for new occupational pension schemes and new members of existing schemes.
    The provisions concerning the lump sum limit in subsections (3) to (7) of the clause are new, but the rest of it is not. It was not possible to include them in the preelection Bill, but I can assure my hon. Friend that it was our intention to introduce them in Committee.
    Question put and agreed to.
    Clause 54 ordered to stand part of the Bill
    Clauses 55 and 56 ordered to stand part of the Bill.

  Clause 57

    MINOR AND CONSEQUENTIAL AMENDMENTS
    Question proposed, That the clause stand part of the Bill.
    Mr. Blair: I simply want to check that schedule 2 follows the pattern of our earlier discussions and that its only consequences are to make either minor changes or those that are already consequential to the provisions that we have passed earlier.
    Schedule 2 refers to personal pension schemes. Since we have considered a large number of clauses on personal pension schemes in a fairly short time, I simply wanted to make sure that what happens in schedule 2 is nothing more than was stated as giving effect to minor and consequential amendments, and that there was nothing of substance or moment that would mean any change was occurring. I thought it right to raise this point, otherwise we would have passed the schedule without comment.
    Mr. Norman Lamont: I am happy to give the Committee the assurance that that is so.
    Sir Brandon Rhys Williams: It would not be right for the Committee to pass from this important chapter without my taking the opportunity of saying that this embodies some of the most far-reaching new provisions on pensions that we have had for many years. My right hon. Friends are doing an inspired and imaginative thing in introducing these proposals. Although I may have appeared to be critical tonight, it is only in respect of certain details, which I am sure can be improved. I think that the Committee should give the warmest possible welcome to this chapter of the Bill.
    Clause 57 ordered to stand part of the Bill.
    Schedule 2 agreed to.

  Clause 58

    OCCUPATIONAL PENSION SCHEMES
    9.15 pm
    Mr. Tony Marlow: I beg to move amendment No. 4, in page 29, line 9, at end add—
    '(2) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £5 per week, when the recipient is aged 65 or more.'.
    The Temporary Chairman (Mr. Donald Coleman): With this it will be convenient to take the following amendments: No. 5, in page 29, line 9, at end add—
    '(2A) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £10 per week, when the recipient is aged 65 or more.'.
    No. 6, in page 29, line 9, at end add—
    '(2B) Any benefit received under any scheme approved under Chapter II of Part II of the Finance Act 1970 shall be exempt from income tax on the first £20 per week, when the recipient is aged 65 or more.'.
    Mr. Marlow: General elections are useful. They give the public the opportunity to say yet again, time after time, that they prefer our lot to that lot on the other side of the Committee. But it is also three weeks of high profile

    1057
    politics when the electorate as a whole can give prospective Members of Parliament a right royal ear-bashing about the issues which they think are most important.
    Apart from the fact that I was often told, "If the other lot get in, then, your Honour, we'll have to emigrate," and, "For goodness sake, do something quickly about the rates and introduce the community charge," the issue that was brought to my attention more than any other was the position of some old-age pensioners.
    As you know, Mr. Coleman, many of those who have recently retired have supplementary pensions, earnings-related supplements and savings. People in that position are much better off as a result of eight years of Conservative Government than they were when the Labour Government were in power. Those on the basic state pension are also often entitled to supplementary benefit in many of its forms, including the various forms of housing benefit. They, too, are better off than they were in 1979 when the Government took office.
    But somewhere in the middle there is a slice of people with limited personal savings and a limited occupational pension of perhaps £5, £10 or £15 a week. They are God's Conservatives—Thatcherites. When they were younger, in employment and creating wealth, they put a bit by for their old age so that they could be better off and enjoy some privileges and advantages in their old age. They have found that they are scarcely better off than their neighbours down the road who did not save and who do not have an occupational pension, but who receive supplementary benefit. This matter was brought to my attention on copious occasions during the election campaign and more than virtually anything else. I know from having spoken to many colleagues that it was also brought to their attention and I know that Ministers are worried about these people.
    We as a nation are much better off than we were in 1979. We have a great deal to be thankful for and there is a great deal that we have worked for together that we have achieved. But this particular section of our community who no longer have the opportunity to generate more wealth for themselves—they have had their working life and put their savings on one side—are not benefiting. If the rates increase and they do not get a rate rebate, some find that they must cash their savings, which they hoped would stretch until they were in their 80s or 90s, to pay the rates. These people feel, not only that they are not better off, but that they are worse off than when they first retired and worse off than they deserve.
    I know that the Government have done a great deal for pensions and pensioners as a whole, but this particular group has slipped through the net. The amendment seeks to allow that group of people with small savings and small supplementary pensions to have tax-free a slice of their pension which they have saved for during their working life. Amendment No. 4 seeks to allow £5 a week to be tax-free, amendment No. 5 £10 a week and amendment No. 6 £20 a week. I do not know how generous my right hon. Friend is inclined to be today. I should like my right hon. Friend to go the whole hog. I know that he is sensitive to the issue, and I am sure that the Committee will be very interested to hear what he has to say.
    Mr. Blair: I want to respond briefly to the amendments. The hon. Member for Northampton, North (Mr. Marlow) is to be congratulated on drawing our attention to the plight of pensioners in the United Kingdom. The Labour
    1058
    party drew attention to that plight regularly during the election campaign, during which, I understand, people such as the hon. Member for Northampton, North described how well the pensioners were doing. However, he is right to raise the plight of pensioners and the difficulties that they face. I am not at all sure that it is appropriate to deal with the matter in the way that the hon. Gentleman suggests.
    Mrs. Elaine Kellett-Bowman: Why not?
    Mr. Blair: If the hon. Lady wants to force a Division on the issue, that would be delightful and interesting.
    I used to think that the hon. Member for Northampton, North was one of those hon. Members who thought that everything that came before us should be adequately costed and put together in financial terms. However, he has not given us any information about the costings of his proposals.
    Mr. Marlow: It is late at night and I know that the Committee has a lot of business that it wants to attend to. I am grateful to the hon. Gentleman. To go as far as the first amendment would cost the taxpayer £150 million a year. The second amendment would cost £290 million and the third amendment would cost £510 million. Those figures were kindly provided for me by my right hon. Friend the Financial Secretary to the Treasury. If we consider the first figure and compare it with taking 1p off income tax, it represents about 15 per cent. or 20 per cent. of the reduction. As we know, the Government are contemplating reducing income tax and that might be one way forward.
    Mr. Blair: I am grateful for the figures. If the amendments do not find favour with the Government tonight, at the very least perhaps the hon. Member for Northampton, North can join us in voting for a larger increase in the pension later. I do not think that this is the time to introduce what would be a fairly novel tax regime, although we have deep sympathy with the plight faced by pensioners.
    Mr. Norman Lamont: The amendments would provide for part of the occupational pension paid to a pensioner over 65 years of age, varying from £5 to £20 in the different amendments, to be exempted from tax. In other respects, the amendments are identical.
    My hon. Friend the Member for Northampton, North (Mr. Marlow) is correct to identify a particular slice of the pensioner population who often have difficulty in making ends meet, as they have put money by for their retirement, but none the less find that the small occupational pension is even smaller than they had expected. My experience mirrors that of my hon. Friend and I have come across many people who feel that they face difficult circumstances notwithstanding the fact that they have contributed to an occupational pension scheme for some years.
    Unfortunately, there are a number of objections to the amendments, which would represent a significant departure from the general principle that all income, whatever its source, should be subject to income tax. An exemption of this kind would create unfairness between occupational pensioners and pensioners with different kinds of income. There is no obvious reason why a pensioner receiving a pension under an occupational pension should receive such generous treatment while someone not fortunate enough to receive an occupational

    1059
    pension, but who has had to rely either on the national insurance retirement pension or has simply saved and has an investment income does not receive similar treatment. He may be in that category described by my hon. Friend, but instead of contributing to an occupational pension, he may have put money into a savings account or a few stocks and shares. That pensioner may find himself in the position described by my hon. Friend.
    We must recognise the circumstances of all elderly taxpayers. That, of course, is why we have provided for the age allowance, subject to an income limit giving them a higher level of personal allowance.
    My hon. Friend the Member for Northampton, North knows the cost of the amendment already, as he said, because I gave it in a written answer. I think that he would agree that I cannot easily just concede such sums in a debate late at night, persuasive though my hon. Friend is. For the reasons that I have given, much as I sympathise with my hon. Friend, I think that help ought to be targeted more broadly. I entirely agree about the category of people whom my hon. Friend is trying to help, but they are not only people in occupational schemes. They may also be people with a savings income, not from a pension scheme as such. The best way to help those people is to try, by means of the age allowance, to increase the proportion of their incomes that is exempt from tax.
    Mr. Marlow: I am grateful for the sympathetic hearing that my right hon. Friend has given the amendment, and the understanding way in which he has approached it. I appreciate that such an amendment raises all sorts of issues of great complexity, and that to do anything about that would require a more sophisticated measure than can be put forward by a modest Back-Bencher late at night. I am grateful for my right hon. Friend's acceptance, in large measure, of a problem that many hon. Members on both sides of the Committee came across during the election campaign, and I hope that before long a more generous measure than we have experienced so far, along the lines suggested by my right hon. Friend, can be introduced.
    I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    To report Progress and ask leave to sit again.—[Mr. Norman Lamont.]
    Committee report Progress; to sit again tomorrow.

Licensing (Northern Ireland)
9.27 pm
The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Richard Needham): I beg to move,
That the draft licensing (Northern Ireland) Order 1987, which was laid before this House on 2nd July, be approved.
Let me begin by welcoming the hon. Member for Kingston upon Hull, North (Mr. McNamara) to the Front Bench, and say how much we appreciate and understand the deep and abiding interest that he shows in Northern Ireland affairs. Conservative Members will be extremely interested in everything that he has to say. We know how much concern and care he feels for all the people of Northern Ireland. There are those who say that to receive a post on either Front Bench is a poisoned chalice, but I have never found that. I have always found it an honour— and, of course, a challenge. We all know the dedication and concern that the hon. Gentleman brings to his post, and we look forward to his contributions.
Both this order, which amends the liquor licensing legislation contained in the Licensing Act (Northern Ireland) 1971, and the one that follows it owe much of their parentage to the Blackburn report. Mr. Blackburn was an extremely distinguished Clerk to the Stormont Parliament and later in the Assembly, and I know that he was highly respected by hon. Members in this House. The two orders owe much to him and his committee, and should be seen as a package of measures designed to bring greater control over the regulation of clubs and to make the licensing law fairer and more easily enforceable.
That is about as far as agreement on this order is likely to go. Now I wish to discuss whether public houses in Northern Ireland should be allowed to open on Sundays, as they do in the rest of the United Kingdom. I have read with the greatest care the views put forward from all sides for many years, and I have especially taken into account the views expressed in the Assembly and by hon. Members of this House. If there has been a delay in introducing these orders during the past 18 months, I am the culprit, as I wished to consider for myself all the options and the proposals that I had inherited from my predecessor. I have considered the case for banning all drink in Northern Ireland on Sunday; a Provincewide referendum on Sunday opening; districtwide referendums on Sunday opening; bringing the law into line with that in England and Wales, which those who back integration would support; bringing the law into line with that of Scotland, which those who support devolution would support; keeping the law as it is in Northern Ireland; and doing as we propose in the order.
I share hon. Members' anxiety about the way in which primary legislation for Northern Ireland is made. All that I can say is that no one can accuse me of not having considered every permutation and laboured over every variant of this order.
My starting point for what needs to be done is the same as that of the right hon. Member for Strangford (Mr. Taylor). I am sorry that he is not here tonight because he is a considerable expert in these matters. He was the architect of the 1971 legislation. On 24 May 1983, in the Assembly, he said:
"Since our consolidating legislation in 1971 the situation in the licensing trade in Northern Ireland has got out of control … This is yet another argument in favour of devolved Government for Northern Ireland."

1061
Having wrestled with the problem for the best part of two years, I heartily agree with the right hon. Gentleman on both counts.
A review of the history of licensing in Northern Ireland must start with the major cut in 1923, which was followed by a series of amending measures in 1927, 1959, 1971 and 1978. The right hon. Member for Strangford said:
"In the early 1920s there were very stringent controls introduced in Northern Ireland, but since 1923 we have seen a gradual relaxation of these controls which were introduced to combat the excesses experienced at the turn of the century."
The questions before the House tonight are as follows. Do we continue the relaxation? Do we stay where we are? Do we return to the draconian rules of the 1920s? Some would wish all liquor sales banned in any outlet in Northern Ireland on Sundays. Of course, I respect the depth of their feelings, but I think that they are wrong. Circumstances are changing in Northern Ireland, and it is impossible to ignore the changes in social behaviour that are now taking place. Many people choose not to worship on Sundays, and no amount of persuasion would make them do so. They do not deny the right of people to observe the Sabbath strictly, but they ask why they should be denied their right to enjoy themselves as they want because of other people's moral principles.
I hope that the hon. Member for Antrim, North (Rev. I. Paisley) will not mind me praying him in aid in my view of the matter. During the Assembly debate in 1985, the hon. Gentleman said:
"Everybody knows where I stand on this particular issue. I do not run away"—
no one would ever accuse him of that; he might be accused of running into things, but not of running away—
"some people say I would like to—but I meet it head on and say that if I had it my way, I would want this Province to be obedient to God's law, but I do not have it my way. I can only speak to people and try to morally persuade them … I am not saying to the Member for West Belfast (Mr. Glendinning) that he must not drink on Sunday. I am telling him that he has to make a choice. I have made my choice."
In the 1983 debate on the same subject, the hon. Member for Antrim, North accepted that Northern Ireland is a pluralistic society and must be treated as such. I agree with him. We have a pluralistic society in Northern Ireland and we need to reflect the differing aspirations of the different strains in our society. This was well put in the Blackburn report. Paragraph 12 states:
"If on the one hand the law is more restrictive than a significant proportion of the people wish it to be, then it is likely to be widely disregarded. If on the other hand the law is more permissive than the prevailing climate of opinion wants, then the public is needlessly offended and society incurs unnecessary cost."
Paragraph 13 continued:
"We do not think, therefore, that the operation of the law can be confined to limiting or influencing the individual's use of alcohol. We think that to be successful it must also to some extent reflect the demand for alcohol within the community."
Our present problem, as the right hon. Member for Strangford said, is that the licensing law is out of control. Can we therefore do something more to enforce the existing law? The answer given by the police is no. I have some sympathy with them, because the present law is extremely difficult to interpret.
I shall give the House an example. The hon. Member for Antrim, North said during the same debate during 1983 that he was not against the provision of drink on Sunday provided it was taken with a proper meal. But what is a proper meal? I know what a proper meal means to the hon. Gentleman. It means the same as it does to me
1062
—quantity and quality, perhaps in my case accompanied by a pint of Guinness. But that is not everyone's view. There are those who believe that a lettuce leaf resting lightly on some small unbuttered square of brown bread is a proper meal. Those who would consume such a meal would no doubt feel entitled to a glass of chilled white wine with such a feast. Are they to be denied?
Is each constable in the RUC to be left to determine the definition of a proper meal upon his own preference or palate, or will the matter be left to the whim of the magistrate and the preferences of their clerks? Is police and court time to be spent fruitlessly deciding how much fruit constitutes a meal or on interrogating a customer as to what he is about to eat or what he has just eaten? It would certainly make no sense to try to bring greater equity to this by bringing clubs and pubs into line with hotels on the provision of food. Why should the middle class who can afford to buy meals on Sunday have a drink while the ordinary working man in his club or pub would be denied?
I do not believe either that we should succeed if we decided on outright prohibition. The precedents of prohibition are hardly encouraging. There is enough gangster activity in Northern Ireland without encouraging any more. Shebeens would no doubt sprout like shamrock. How would we check that each tonic, each tomato juice, each orange cordial served in each hotel and each golf club on a Sunday was free of anything more exciting than lemon peel and ice? The present rules are ridiculous, but it is exactly because we have stumbled down this alley that we now have the law as an ass, unenforced and unenforceable.
The question is, if we accept that there is nothing in principle against a person purchasing liquor on a Sunday, or visiting a leisure centre or an ice rink, when and where should he or she be allowed to buy drink? What will be the effect on society? Will it, for example, increase the consumption of alcohol? Will it lead to greater alcoholism, or to increased public nuisance? As to increased consumption, of course I have carefully considered this aspect, but under the reforms in this order and the Registration of Clubs (Northern Ireland) Order, which go together, I do not believe that that will happen. Under this order, not all pubs will open on a Sunday—the publican will have the choice. Under the registration of clubs order, clubs will lose four hours a week. Under this order, bringa-bottle clubs, where drinking goes on at 3 o'clock in the morning, every morning, will be banned. I am confident that the effect of the Sunday opening of pubs on the overall availability and consumption of alcohol is likely to be small.
I have also been influenced by the finding of the surveys carried out in Scotland on the changes in the licensing laws since 1976, which included the Sunday opening of pubs. The overall conclusions were that the changes had not directly led to an increase in drinking, any adverse health effects, more alcohol-related crime, or more drunken driving.
That is not to deny the danger that alcohol abuse poses to health or, of course, the need to control and to treat it, but I do not believe that keeping pubs in Northern Ireland shut on a Sunday will make any impact on the health problems that are brought about by excessive drinking. We are legislating in support of a social custom that is enjoyed by the majority of the population in Northern Ireland—about 80 per cent. of men and 60 per cent. of

1063
women—very few of whom commit offences as a result of their drinking habits and very few of whom have related health problems.
As to nuisance, I am not convinced that the alterations will make life for the ordinary citizen any different. I spend many Sundays in Northern Ireland, where pubs are closed, and many Sundays in England, where pubs are open. I have noticed no great difference between the Province and the rest of the United Kingdom except the greater churchgoing of the Ulster people. I certainly do not take the view—to me it is insulting—that was taken by the former Assemblyman, Jim Wells, who said to my predecessor that most people go into pubs in Northern Ireland to get drunk. I just do not believe that. There are those who have said that Northern Ireland pubs are not like those in England and Wales. That statement conjures up the image of the "spit and sawdust" pub as being the norm in Northern Ireland, and there is the implication that people are satisfied with that. I reject that also.
Obviously those who say that have not been in many Northern Ireland pubs recently, or observed the large number of pubs that have been extensively refurbished. I hope that the changes that are being brought about by the order will lead to a better quality of pubs and perhaps, as has been experienced in Scotland, encourage a move from clubs to pubs.
There is also the matter of consultation. Why did we not decide to test opinion either through a Provincewide referendum or through district council referendums? I considered the matter carefully. First, I am not convinced that, even if a majority were opposed to Sunday opening of pubs, we should necessarily not allow the minority their wishes. As the hon. Member for Antrim, North said, this is a moral issue to be decided in a puralistic society. Secondly, it would be impossible to frame a question that would cover all the issues relating to the availability of drink on a Sunday. It would require the ingenuity of the general council of the TUC to wrap all the possible variations into a single composite question. The same difficulty would apply to local referendums, with the additional problems that we all know about with cost and wet and dry areas.
Mr. William Ross: Does the hon. Gentleman realise that another way of testing opinion through the elected representatives in Northern Ireland is by introducing a Bill in the House? All the serious matters that he is treating so flippantly could be explored with the depth and seriousness that they deserve rather than be treated with the hon. Gentleman's flippancy.
Mr. Needham: I assure the hon. Gentleman that I do not take the matter flippantly. I take it with the greatest possible seriousness. He is well aware that I wrote to him in October, putting forward the proposals that the Government intended to introduce. Until his intervention, I had not heard a single bleat or murmur from him. In fact, if it is his view that the matter should be considered in greater depth, there are ways, even now, to do so. For example, the hon. Gentleman could have utilised the Northern Ireland Committee if he had so wished. He did not undertake to do that. I am delighted to hear his intervention. I look forward to his continued interventions. The House takes the matter seriously, and so do I as the responsible Minister.
1064
I now refer to the order. I apologise for the difficulty in following the amending legislation. The order, while substantially altering the 1971 legislation, leaves a large part of it unaffected, and its provisions have to be read in the context of the principal 1971 Act. In due course the licensing laws will be consolidated in a single piece of legislation. I hope that we shall be able to do that over the course of the next year.
I shall deal quickly with the main provisions of the order. The effect of article 3 is to ban bring-a-bottle clubs.
Mr. Barry Porter: I appreciate and understand the anomalies and defects in the present law in Northern Ireland, but it would be helpful for the House to know whether there has been any pressure from a majority or a minority of the people of the Province to change that particular law which may or may not suit them.
Mr. Needham: The fact that the law in Northern Ireland on Sunday opening is widely abused and is unenforceable, and, as I said, I think before my hon. Friend took his place, has made the law appear a complete ass is one of the reasons why we feel that we should take this action. We cannot, as I said earlier, return to the draconian rules of the 1920s. We have spent most of the past 60 years making sensible amendments to them. It is because of the nonsense of the present laws, which many in Northern Ireland do not accept, that we are considering doing what we are tonight to bring the law into an enforceable and acceptable state for the majority of those who want to drink on Sunday.
Mr. Seamus Mallon: Has the Minister been aware of a substantial active lobby over the years against the 1971 legislation as it applies to the licensing of clubs? That is a crucial question.
Mr. Needham: As is usually the case in Northern Ireland, as the hon. Gentleman knows only too well, there are lobbies on everything and he is right to say that there have been fierce lobbies for and against what we intend doing in this order and what we are proposing to do in the next order on clubs. This order, as the hon. Gentleman is aware, deals with licensing provisions and the next order deals with clubs and their registration.
Mr. Mallon: I probably have not made myself clear and the Minister has misunderstood me. I have lived in the north of Ireland all my life and I have never been aware of a substantial lobby against the licensing laws as they apply to clubs. What is the difference between the licensing laws as they apply to clubs and as they apply to pubs? It was the answer to that question that I was trying to elicit from the Minister.
Mr. Needham: I apologise for not understanding the hon. Gentleman's point and I accept what he says.
Let me continue with the effect of article 3 which is to ban bring-a-bottle clubs. These clubs run until 3 am or 4 am and are largely supported by young people. Because they do not sell drink or supply it, they are completely outside the terms of either the licensing or clubs law. They cause law and order problems and are open to profiteering by criminal and paramilitary bodies. I am satisfied that the only answer is to ban them.

1065
Article 4 will allow pubs to provide overnight accommodation, provided that they meet certain requirements. I am sure that that will be welcomed as another aid to tourism in the Province.
Article 5 makes changes in the application procedure for licences. The most important of these is to allow the individual publican to decide whether he wishes to open on a Sunday.
Article 6 allows a court to grant up to 13 occasional licenses on one application. At present, a separate application is needed for each. The new provision is designed to help bodies such as the Royal Ulster Agricultural Society which run a large number of exhibitions. This should reduce the work of the courts and save both the licensee's and the court's time.
Article 7 refers to extension licences which allow a licensee to sell drink at certain functions after normal hours. As under the existing law, there will be no restriction on the number of these which can be granted for any licensed premises in any one year. However, the extension licences will now stop at 1 am instead of of 1.30 am as at present and will be granted only for premises that a court regards as suitable for functions.
Article 8 provides the rules covering Sunday opening. The permitted hours will be from 12.30 pm to 2.30 pm and from 7 pm to 10 pm. On that day no off-sales will be allowed for pubs, hotels or off-licenses. Neither hotels nor pubs will be required to serve a meal as a condition of serving a drink. However, the meal and other conditions will apply to licensed restaurants.
Article 9, paragraph 1, amends the provisions of the 1971 Act relating to alternative hours for off-sales. The Government are worried about the growing problem of late night drinking in public, especially by young people. They have received many complaints on that subject and there is no doubt that some of the problem is due to the fact that young people can get their drinks from off-licences as late as 11 pm. The amendment means that off-sales shops will now be able to open only from 9.30 am to 9 pm, except in the case of off-sales that are attached to pubs.
Article 10 bans young people under the age of 18 from off-licence premises, except when they are with their parents. That, I am sure, will be welcomed by everyone. Apart from drink, off-licences in Northern Ireland can sell only cigarettes, tobacco, matches and fizzy drinks. Article 4, at their request, adds corkscrews. Generously, we have also added items such as crisps, pork scratchings and lighters, and that will also apply to public houses.
Article 9, paragraph 2, amends section 45 of the 1971 Act. The new provisions of the amendment will put pubs on a par with hotels and restaurants when applying for additional hours orders. However, pubs will still have to satisfy the conditions that apply to hotels and restaurants, and will also have a certificate from the tourist board stating that the premises are well equipped, run by competent staff and provide a high standard of catering. Here again, we are trying to improve the quality of public houses.
Article 11 substitutes a new section 67 for sections 67 and 68 of the 1971 Act and provides for new rights of entry and inspection by the police. Articles 12 and 13 contain miscellaneous amendments to the 1971 Act, and article 13, paragraph 6, brings ballrooms and horse and dog racing tracks within the range of facilities that can now apply for licences.
1066
Article 14 substantially increses the maximum penalties for a number of offences. For example, the fine for permitting minors to be on licensed premises will go up from £400 to £1,000. The penalty for selling drink to a minor on licensed premises or purchasing it for his consumption on those premises goes up from £400 to £2,000 or imprisonment for six months, or both.
That concludes my detailed description of the provisions of the order. I thank hon. Members for their attention and patience. As I have explained, the order is the first part of the package of reform which we are here to discuss; we shall debate the second part later tonight.
Public debate in Northern Ireland on this order has focused almost exclusively on the issue of Sunday opening of public houses. The key question on that issue is whether to take the route advocated by some and abandon Sunday opening altogether, or move closer to the pattern of the rest of the United Kingdom. In an increasingly pluralistic society, we could not agree to closing everything. nor could we, for the overwhelming practical reasons I have given, either stay where we are, or impose further piecemeal restrictions. I believe that what we are suggesting this evening creates a more sensible balance and introduces a law which at last is enforceable and will be enforced.
Rev. Martin Smyth rose—
Mr. Needham: I commend the order to the House.
Rev. Martin Smyth: I thank the Minister for giving way. He referred to the increased fines or penalties for selling drinks to teenagers. Can he say how many people have hitherto been brought before the courts for such offences? What difference will increasing the penalties make if the law, as it stands, has not been in operation?
Mr. Needham: The whole point of what we are trying to do this evening is to ensure that the law that we introduce is more capable of enforcement than that of the past.
As I was just about to sit down, I shall cover the hon. Gentleman's point when I reply. For the second time, I commend the order to the House.
9.53 pm
Mr. Kevin McNamara: First, I thank the Minister for the kind words that he addressed to me at the beginning of his speech. I appreciate them greatly and I look forward to my work shadowing him and his right hon. and hon. Friends. The Minister used the phrase, "the poisoned chalice of Northern Ireland". I do not regard it as such, but I wondered what sort of vessel I was being given when I went to the Library this evening having suddenly been given this work to do in the space of two hours, and was presented with all these documents. I was left with the feeling that perhaps the best thing to do would be to sit out most of this order and listen to what was said by the rival parties.
The Minister covered the whole of the ground set out in the arguments by both sides and examined very fairly the cases for and against the alterations. Within half an hour of being appointed I was lobbied by the hon. Member for Antrim, North (Rev. Ian Paisley) on this matter. I toyed with the idea of the local option and thought, "Why not?" Then my mind went back to the time when I lived

1067
in Liverpool and looked at what was happening in Wales about local options. They just did not work there and that was for the reason that the Minister has given.
If a person belonged to a golf club or to a branch of the Royal British Legion or some other institution, he could get a drink on Sunday anywhere in Wales. That did not drive to drink people who did not want to have a drink. It did not stop people going to chapel or church if they wished to do so and it does not stop people in any locality who do not wish to have a drink on Sunday from attending any of the places that sell drink on that day. If such places are not allowed to sell drink on Sundays, they will not open on Sundays.
I am concerned about minors being prohibited from certain premises and about preventing under-18-year-olds buying drink from off-licences. This may be an important reform being introduced in Northern Ireland and it will be watched carefully by people on the mainland to see the effect that it has on under-age drinking and on some of the unfortunate things that many of us see in our constituencies. We see young people, some under-age and some over-age, going into off-licences, purchasing drinks and then going away and getting drunk and disturbing innocent residents and passers-by.
One of the problems associated with this matter is the responsibility of the person controlling the premises. When the Under-Secretary of State replies to the debate, perhaps he will tell us whether the defence will be that of unknowingly selling to people under the age of 18, or will it be a question of absolute prohibition? Will the defence of not knowing be applicable in this case? I am conscious of the fact that I have not carried out as much reading as I should have liked of the Assembly report, although I did manage the Blackburn report. On balance, we think that this measure ought to be supported because it can do away with some of the problems. It can help the police in Northern Ireland and make the law more enforceable and may introduce important reforms on sales to minors. We support the measure.
9.58 pm
Rev. Ian Paisley: I regret that I was not present at the beginning of the debate. I am sorry that I did not hear what the Minister said about remarks that I made. However, I think that I received a true and accurate report from my hon. Friend the Member for Belfast, East (Mr. Robinson). Before I come to that matter, I should say that we in Northern Ireland must enter the strongest possible protest about the way in which this matter has been dealt with in the House. Scotland had a similar problem. Liverpool has been mentioned and so has Wales.
When the matter came before the House every consideration was given to there being a drastic change in the opening hours of public houses on the Christian Sabbath. Hon. Members from those parts of the United Kingdom had every opportunity to put before the House amendments giving the reasons why certain matters should be taken into account. We should keep in mind the effects of our legislation on majority and minority interests.
If I had been in this House when it debated the legislation for the rest of the United Kingdom I could have moved amendments and had them voted on. Northern Ireland hon. Members now find themselves considering a
1068
matter that runs into the very heart and gut of the Northern Ireland community, yet we are not to have the opportunity of a democratic debate. We cannot move any amendments and we shall not be given the opportunity to vote on any amendments. An unamendable Order in Council will be put through this House with the overwhelming support of a majority of hon. Members who will probably never be in Northern Ireland on a Sunday. They will probably never enter a public house in Northern Ireland on a Sunday or partake of alcohol in Northern Ireland on a Sunday.
That is what we protest against tonight because it goes against the very principle of democracy. That is what the people of Northern Ireland find obnoxious. I do not think that I need to reiterate that point, because others in this House are beginning to realise at long last that the long series of protests made by hon. Members from Northern Ireland has a great deal of credibility; our protests have their own authority.
As the House votes on these orders it should remember how it dealt with the legislation affecting other parts of the United Kingdom. It is wrong to suggest that every part of this kingdom is the same and therefore that all the laws should be the same. England has different laws from Scotland and, in some cases, Wales has different laws from England and Scotland. Whatever their attitude on this matter, the people in Northern Ireland have the right to insist that their elected representatives should enjoy the same rights as the elected representatives of other parts of the United Kingdom—to state and argue their case, to move amendments, to vote and to seek the satisfaction of their wishes in a democratic way in this democratic House.
Let me come to the point which has to do with legislating for morality. Everybody agrees that the House cannot legislate for morality. Of course we cannot make people do things that they do not want to do. But in its legislation this House puts up certain markers to morality. Take the matter of prostitution, for instance. Certain laws in this country provide markers on that and possibly deterrents to it. It is no use the Minister instantly dismissing this point and saying, "Well, as I cannot legislate for morality, I am on firm ground in introducing this order." If we said that we could not legislate on any matter that would intrude into the morality or choice of individuals, no Government would have a case for making any laws at all. But we legislate on such matters all the time.
Something else needs to be said to the Minister. I do not understand his view that in these circumstances we cannot have a choice in law to say that certain places should be closed on Sundays. That is not what successive Governments have done on this issue. The people of Northern Ireland are perfectly entitled, through their representatives, to say what they think should be done and what should not be done. The Government have already made decisions in various matters of this kind.
Some people have the strange philosophy that this is a purely Protestant issue, that those who do not want the public houses opened are all Protestants and that the Roman Catholic community is unanimous in wanting the pubs of Northern Ireland to he open on Sundays. Ulster Marketing Surveys Limited carried out some research into this matter. It showed that 39 per cent. of the total population strongly opposed Sunday opening, 19 per cent. were strongly in favour, 24 per cent. were slightly in favour, 13 per cent. were slightly opposed and 6 per cent.

1069
did not know. The breakdown of those strongly opposed showed that 45 per cent. were Protestant and 30 per cent. were Roman Catholic. It is therefore quite wrong to suggest, as I have heard from Members whom I have lobbied on the subject, that this is merely a Protestant interest and that the Protestants do not want the Roman Catholics to be allowed to drink on Sundays.
The Secretary of State smiles, but I must tell the House that anyone who wants a drink on Sunday in Northern Ireland can get one. I challenge anyone to claim that some poor thirsty souls cannot get a drink anywhere in Northern Ireland on a Sunday. The Minister and I do not often agree, but he will agree with me that those with that particular type of thirst can always find a drink on Sunday in Northern Ireland. I am sorry that their thirst is not for that water of which a man drinks and will never thirst again, but that is their misfortune. I hope that no one will be so foolish as to say that a person who wants to drink on Sunday in Northern Ireland cannot do so because that is totally untrue.
I cannot understand why Northern Ireland cannot be treated in the same way as other parts of the United Kingdom were treated when this was an issue there. It was an issue in Scotland and, indeed, in Wales.
I welcome the new Opposition spokesman on Northern Ireland—the hon. Member for Kingston upon Hull, North (Mr. McNamara)—to his post. He will probably have a rough ride from Ulster Unionists, but he has been used to that through the years and it will not make any difference to him. The hon. Gentleman mentioned Liverpool.
Sir John Biggs-DavisonI do not quite follow the argument of the hon. Gentleman. I feel that he has begun to destroy his argument. The hon. Gentleman says that someone can get a drink on a Sunday in Northern Ireland. Why is it all right to get a drink in an hotel, restaurant or even a club but wrong to get it in a pub?
Rev. Ian Paisley: That is not what I am saying. I am sorry that the hon. Member does not know a little bit more about Northern Ireland and about drinking in Northern Ireland. All those in Northern Ireland who have studied alcohol abuse, no matter what their religion—no matter if they have no religion—say that there are far too many outlets for alcohol in Northern Ireland.
If we pass this order, there will he 10,000 additional hours for alcohol consumption. I do not know of a stronger argument that could be put against this order.
It is a pity that the Government did not take the bull by the horns and dealt with drinking clubs in the way that they should have been dealt with. That is the trouble.
Sir John Biggs-Davison: They have dealt with those clubs.
Rev. Ian Paisley: The drinking clubs have got away with a coach-and-four with regard to the sale of alcohol. I can understand the views of publicans—I have been lobbied by them. They must have a certain standard of premises, their trade must be carried on to a certain standard and the public house is open to inspection by the police at all times during opening hours. However, the drinking clubs do not have those restrictions and publicans cannot understand that. I can understand the concern of publicans.
1070
The Government have not moved to shut the other outlets for alcohol and they will continue to exist. However, as a result of this order, the Government will allow an additional 10,000 hours for alcohol consumption.
The hon. Member for Epping Forest, who said that I was destroying my argument, should come with me to parts of Northern Ireland where both sides of the community do not want the public house to be opened on a Sunday. They want the peace and quiet that is hard to get and they want that peace and quiet to continue.
I have also been lobbied by people who work in public houses who say that they deserve a day of rest—I am talking about people in the trade union movement. They say that it is all right for the publican, but they want a day of rest.
Mr. Jerry Hayes: I am a little confused by the hon. Gentleman's argument. A moment ago he suggested that the Government had done nothing about illegal drinking clubs. I believe that the essence of this order is that it would ban, as much as any legislation can, the bring-a-bottle clubs and place restrictions upon them. They will give the police rights of entry and the right to search those establishments. In all honesty, I should have thought that the hon. Gentleman would welcome this legislation.
Rev. Ian Paisley: I am afraid that the hon. Gentleman must have been sleeping. I never mentioned illegal clubs. I am talking about legal clubs that should have been dealt with long ago.
I am talking not about the shebeens, but about the legal clubs that are supposed to be recreational clubs. However those clubs spend £14 million a year on liquor. Why were the drinking hours on Sundays not restricted? Why say to the publican that he can open for a few hours but say to the licensed club owner that he may open for as many hours as he likes, well into the early hours of Monday? I am not talking about illegal clubs that should have been closed a long time ago. I am talking about legal clubs, but at long last a deterrent has been introduced to restrict the number of illegal clubs. It is necessary now to produce audited accounts.
I invite the hon. Member for Harlow (Mr. Hayes) to visit Northern Ireland. I shall arrange for a Roman Catholic to meet him and take him to the Roman Catholic district to hear the views of Roman Catholics. I shall arrange for a Protestant to take him to a Protestant area. Arrangements can then be made for a Jew to take him to a Jewish area. If it is possible to find an agnostic area, arrangements will be made to take him there. After that, he will have a proper knowledge of feelings in Northern Ireland. Anyone who intervenes in these debates should try to ascertain exactly what is happening in Northern Ireland. In these days of alcohol abuse, and when the police in Northern Ireland are strained to the utmost in dealing with terrorism, does anyone say that it is sensible to add 10,000 hours to the opening times that outlets for alcohol already have? Hon. Members should search their consciences. The issue before the House should be considered seriously.
Why were restrictions introduced in other parts of the United Kingdom? Why are the restrictions that operate in Northern Ireland all to be swept away in an hour and a hall's debate? We are debating an issue that affects the

1071
young people of Northern Ireland and the future of society generally in the Province. It affects the well-being of families in Northern Ireland.
I believe that the Lord's day should be a special day. I believe that the human body was so created by God that it requires a day of rest. A Sunday that is kept in the proper manner will bring a week of contentment afterwards. Apart from that, there are arguments that can be advanced showing why we should not proceed in this manner.
There are hon. Members who do not understand the way in which opening hours are arrived at for pubs in Northern Ireland. One hon. Member was amazed when he was told that our system is entirely different from that which applies elsewhere in the United Kingdom. He thought that after the passage of this measure the licensing magistrates would have a say about every public house that is to be opened on Sundays. Hon. Members should not believe that. After this measure passes through the House all public houses that currently have a licence to open during weekdays will be able to open on Sundays.
First, we must ascertain what we are arguing about, and then we can come to our own conclusions. Every reputable authority says that longer opening hours and greater consumption will bring additional problems. I do not think that the House wants to add more problems to a system that is already teeming with problems.
The House should not pass this measure. We should have a further opportunity to consider the safeguards that were given to other parts of the United Kingdom. Why have these safeguards not been given to Northern Ireland? Why cannot people have a say about what is happening in their area in respect of public houses? Why should we be faced with this blanket measure that will lead to Sunday opening?
A publican said to me, "If the public house down the street opens, I must open if I am to keep my business." That position is not helpful in Northern Ireland. We should proceed this evening in dealing with Northern Ireland as we proceeded when dealing with other parts of the United Kingdom.
10.19 pm
Mr. Seamus Mallon: The way in which this debate is taking place puts its context into perspective. I do not have to reiterate that in the North of Ireland more than 2,500 people have died and a large number of our young people are in gaol. We have social deprivation, an economic situation and unemployment that is unequalled anywhere else in this country. Yet one of the biggest issues that is facing us is whether I shall be able to have a pint before my lunch on Sunday.
Does not that put the nature of this entire debate into context? I believe that it sharpens totally the context in which the debate is taking place and highlights the fact that with this legislation the Government are trying to do something which, quite frankly, should have been done years ago. Perhaps that view is too cynical. I hope that it is not, because I know that there are many genuine and sincere people who hold the opposing points of view on this to me, and who wish to retain Sunday closing. I accept the sincerity of their position and of their point of view.
However, this issue goes beyond the issue of the opening or closing of pubs. It even goes beyond the question of the licensing of clubs of any type. It raises two
1072
questions. It asks questions about the nature of people in Northern Ireland and about the type of people that they want to be. It also asks about the type of society that we want to create in the North of Ireland and about the type of society that we might be able to create. This debate probably tells, and will tell, more about our attitudes, in the broader sense, than many of the debates in which we shall take part. What do we want in the north of Ireland where, on an ongoing basis, we have nothing but closures? The swings on which children could play on a Sunday are closed. The swimming pools in which people could enjoy themselves are closed and the pubs in which people could relax are also closed. Is it a coincidence that those closures are accompanied by probably the greatest conglomeration of closed minds of any country in western Europe? I believe that there is a connection and that we must consider the nature of society in Northern Ireland, and its politics and structures when we engage in this debate.
We have been told, and we will be told, that it is a question of morality. We will be told, in no uncertain terms, that it is a question of one person's belief taking precedence over that of another person. I do not believe that God gives anyone the right or the duty to legislate for my conscience or for the conscience of anybody else in the north of Ireland on such a matter. One could not do so successfully in any case because the hon. Member for Antrim, North (Rev. Ian Paisley) has confirmed something that most people in the north of Ireland know, which is that, once there is this type of legislation in a modern society, one creates the opposite effect to that intended.
I ask, because this question should be asked, whether as a result of the licensing law changes in Scotland, any village or town there has gone to the dogs? Perhaps we should take Bickley, that haven of depravity, as an example of the results of the licensing laws that pertain in England. It is an insult to the people of Northern Ireland to suggest that because they have the right and the ability to go for a drink before their lunch on a Sunday, all of a sudden the North of Ireland will become a terrible place, that it will be worse than it is now and that people will indulge in depravity. The people of Northern Ireland are not like that. In my view, they will respond to this type of legislation positively and responsibly. They will be no more depraved than the people in Kirkcaldy, Bickley or any other part of western Europe.
This also poses the question: what type of ethic do we want to live by in the north of Ireland? Is it a completely authoritarian ethic where we are told we may or may not do something depending on the moral attitudes of the majority of people there or is it an ethic based on freedom of choice? Do we have the strength to accept and live respectfully with the differences, political, cultural and moral, that exists in the north of Ireland? Or are we simply so weak that we demand one set of rules and the denial of choice because at the end of the day in such matters if we have the choice to be right, we also have the right to be wrong, if that is our choice? That must be the essential view regarding morality.
Rev. William McCrea: Is not the basis of the hon. Gentleman's argument rather false and hypocritical, particularly when one considers that he wants the Unionists to join a united Ireland which legislates on divorce, abortion, the sale of contraceptives and other such matters?
Mr. Mallon: The profundity of that question eludes me—[Interruption.]—and, judging from the reactions of most other hon. Members present, it has also eluded them.
Rev. William McCrea: Is it not true that the Government of the south of Ireland do not allow people the right to divorce, if they want it, or the liberty to choose to have contraceptives? Is that the sort of society which he speaks of as a liberal society and which we should all wish to live in?
Mr. Mallon: That is not the type of society that I want in a united Ireland. It is very much the type of society that I do not want. I want people to be able to live by their own consciences, not by any piece of legislation, whether in the Republic of Ireland, the north of Ireland or here. I ask the hon. Gentleman to make a serious attempt to help to create on the island of Ireland a proper legislative basis which allows that freedom of choice.
What type of people do we want to be? What type of society do we wish to have? In the north of Ireland I often hear people saying that they admire "the British way of life". I do not hear that among those I represent because we are not enamoured of the British connection. We wish to live in the type of united Ireland that I am trying to describe to the hon. Member for mid-Ulster (Rev. William McCrea). What about this "British way of life", so admired by the hon. Gentleman and his colleagues? It would be much more beneficial if they were to adopt it, to live it and to introduce it into their legislation. That is the acid test of that phrase.
Mr. Porter: Does the hon. Gentleman accept that the British way of life accepts diversity? Does he further accept that the Scots and Welsh in their own time determine whether public houses should be open on Sundays for their own reasons, whether for tourism or economics? It appears that there is no evidence yet that the Northern Irish people want their somewhat archaic laws changed.
Mr. Mallon: The fact that there has never been a substantial lobby against the licensing laws available to clubs shows that the majority of people in the north of Ireland do not hold this moralistic view about licensing laws. They are worried about the legalities and the potential for abuse. That is why I would dispute whether a majority of people oppose this legislation.
What type of society do we want? Do we want to be totally isolationist? Do we want to be introverted, or out of step with the rest of Ireland, Britain and Europe? Are we to be the oddities of the western world where we say no to everything, and where everything is closed including our minds? Is that the type of Northern Ireland that we want? Do we want to be out of step with our Johnnies over there? Do we want to be the oddities of the western world without allowing ourselves the ability to relax and enjoy that little bit of relaxation? A little bit of human frailty might get us away from many of the problems that we face and many of the terribly absolute positions that we adopt.
I praise the Minister for bringing the legislation forward. It is a recognition of the terrible injustices that publicans have suffered in the north of Ireland down through the years. They had to compete with clubs and hotels because the publicans were being under-cut in the prices that they were charging. So many of the clubs were de-rated while the publican was, and still is, paying very heavy rates. The publican was unable to deal with his
1074
overheads in the same way as the clubs and hotels. The competition was unfair and unjust and I am glad that it has been put right.
There was also social discrimination to which the hon. Member for Kingston upon Hull, North (Mr. McNamara) referred. If people can afford it, they can go to a hotel and have a meal. If they can afford it, they can become members of a club. People can have drinks at both. If people cannot do either of those things, if they live in a village in any part of the north of Ireland or in the towns, they cannot do that. That cannot be right in any man's language. The people who are suffering and being deprived are those who simply cannot afford to have a meal in a hotel or join a club.
The legislation governing clubs and hotels is one of the factors that has forced people to drink and drive. Invariably in the north of Ireland people get in their cars and drive to hotels and clubs. Would it not be much better for the whole of society, if a person feels that he wants a drink, for him to be able to walk down the street, drop into his pub and have his pint or two—and perhaps even three—and then walk home again? That factor is worth considering.
I welcome the legislation. I hope that I may indulge in a little whimsy at the end of my speech. For many of us, the legislation marks the end of an era. It is well known that forbidden fruit always tastes sweeter. There will be many in the north of Ireland who will remember with nostalgia the knock at the back door, the dim lights, walking in and then that feeling of excitement because one was going to enjoy oneself so much more because one was not allowed to do something.
10.32 pm
Mr. Michael Colvin: I congratulate the hon. Member for Newry and Armagh (Mr. Mallon) on extending this debate to more of the social issues of the day in Northern Ireland, because a pub is a very social place. It is a meeting place where people discuss the issues of the day and where opinions are formed. It is a sensible meeting place. Even my right hon. Friend the Member for Castle Point (Sir B. Braine)—who I know has very important views on the licensed trade generally and on drink—would concede that the British pub is unique. Any legislation that will enhance its standing and improve facilities in the pub, even to the detriment of other outlets for alcohol, is to be commended. I agree with my hon. Friend the Member for Newry and Armagh that this legislation should have been brought forward many years ago.
Nevertheless, my hon. Friend the Minister is to be congratulated because the Blackburn report was produced in 1978 and it has only taken the Northern Ireland Office nine years to get around to amending the law in Northern Ireland. It is now 15 years since the Erroll report was published on reforming the licensing laws in England and Wales and we are still waiting for action. I am glad to say that, following the manifesto commitment to that end, we are likely to see a change in the law for England and Wales quite soon.
I wholeheartedly welcome the measure, because it appears to bring more into line the licensing laws relating to pubs and clubs, which over the years have manifestly become more out of line. It provides for all hotels, restaurants, clubs and pubs to share the same opening hours seven days a week. Extension hours will also be the

1075
same for all. There will be no overall increase in the number of opening hours, as there will be a reduction of 13 minutes in the normal daily opening hours for clubs. All public house extensions will be reduced by 30 minutes, and club extensions by two hours. I do not know where the hon. Member for Antrim, North (Rev. I. Paisley) finds the extra 10,000 drinking hours which he says will be available.
There are more flexible features in the licensing orders for pubs to allow for greater development of tourist and food business, and that is to be commended. The two principal points are the provision for accommodation in pubs, which will allow a new style of outlet to develop, and the provision to allow a pub the same extended hours as a hotel or restaurant if it has a full restaurant facility.
The proposals do not force Sunday opening on those who do not wish to avail themselves of it. At licensing renewal, the option of a six or seven-day licence is at the publican's discretion. Even with a seven-day licence, opening on a Sunday may not be economically viable because of location, and the publican need not open.
I should like to ask my hon. Friend a question about the permitted-hours clause in the lease that most licensees sign with their brewers. That clause, if ultimately enforced, means that the publican must open for all the hours permitted by the local licensing courts. In some parts of the United Kingdom, the permitted-hours clause is not onerously enforced, but in other parts the brewers can be pretty heavy-handed. They say to the publican, "You will open for every hour that you are permitted by law to do so. If you do not, we shall evict you and tear up your lease."
Should there be any provision in the law to protect publicans if the law is relaxed so that permitted hours cannot onerously be enforced on publicans? The question is particularly relevant to Sunday opening. If the law says, "You may open on Sunday," and the licensing courts say the same, and if the publican chooses not to do so—after all, freedom of choice is an important principle in our party—can the brewer force him to?
The most controversial issue relates to the Sunday opening of pubs. The present laws, in my view, are a bit of a nonsense, and have fallen into disrepute. They seem to work unfairly against pubs as compared with clubs, hotels and restaurants, and many pubs have closed, with loss of employment and amenity. I am told that directives have been sent out by one bank to its branches saying that publicans are a poor credit risk. Perhaps changing the law will make them a better risk and enable them to obtain the credit that they require to improve their facilities, which will assist tourism and the economy of Northern Ireland generally.
The present laws on Sunday opening are almost unenforceable, save at disproportionate cost. The principle of Sunday drinking has long been established in clubs, hotels and restaurants, and anyone in Northern Ireland who wants to get a drink on Sunday can do so. As a pub is probably the most sensible place in which to drink, why can he not get that drink in a pub? Under this legislation, Northern Ireland will come more into line with the rest of the United Kingdom. I agree with my hon. Friend the Member for Antrim, North that we do not want to be exactly the same, but this is a united kingdom, and the more our laws are in line, the better. He also
1076
referred to public opinion and produced some interesting statistics, but I believe that opinion is pretty evenly divided on this issue, as shown by the attitude surveys and the response to the Government's proposal.
Mr. Geraint Howells: Perhaps the hon. Gentleman is not aware that the licensing laws in Wales are different from those in other parts of the United Kingdom. The people of Northern Ireland should have the right to decide for themselves; it should not be done through an order tabled in the House. Perhaps the hon. Gentleman is unaware that, for the past 30 years in Wales, we have had the right to vote every seven years to say whether we are in favour of Sunday opening. I am the only Member in the House who represents a dry district council area. Whether that is a good thing or not, the people of Northern Ireland. like the people of Wales, should determine whether they want pubs to open on Sunday.
Mr. Colvin: That was an interesting intervention. In a sense, it was a speech, so the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) can now go and have a drink and leave the answer to that question to my hon. Friend the Minister. A strong measure of local control over licensing hours is wise. That is why the Government are trying to lay down the broad parameters for licensing hours but will not force anyone to open. Even in Northern Ireland, there will he some control by the licensing courts. I agree that the law is different in Wales, but the hon. Gentleman will agree that the Welsh are very different from the rest of us.
Public opinion on this matter is pretty evenly divided. In response to the published proposals, 16,500 letters were in favour and 10,500 were opposed, and a couple of church petitions also opposed it.
There has been much discussion of the health aspects of the proposals, because some have said that they will undoubtedly lead to more drinking hours. My hon. Friend the Member for Antrim, North mentioned the example of Scotland. I shall quote some of the figures from the experience in Scotland. There is no reason why a similar experience should not pertain in Northern Ireland.
The law was changed in Scotland in 1976. Between 1979 and 1982, convictions for drunkenness in Scotland fell by 28 per cent., whereas in England and Wales they fell by only 9 per cent. The figures for under-21s were even better. Although consumption of drink has increased in Scotland, the extra drinking is done in pubs rather than elsewhere. Not so many people are buying drink at off-licences and taking it home, which is a bad place to drink. The pub is a sensible place in which to drink. That is what has happened in Scotland. The health aspects have been totally beneficial in Scotland—
Sir Bernard Braine: My hon. Friend has just said that everything in the garden is rosy as regards health. Since he has the figures there, can he tell us the statistics in respect of cirrhosis of the liver? Is he aware that those people who were drinking hard before the reforms are now drinking harder? What has been the effect upon women in Scotland? Let us have the whole story.
Mr. Colvin: The debate is about Northern Ireland. I am drawing a comparison with Scotland because I think that it is relevant. My right hon. Friend has asked particularly about liver cirrhosis. Liver cirrhosis mortality trends have

1077
not changed because of the altered licensing laws in Scotland, nor has there been an increase in alcohol-related mortality. There has been a downward trend in admissions to psychiatric hospitals for alcoholism and alcohol dependence. Relative risks from drunk driving have declined in Scotland compared with England and Wales. Overall, the trends in Scotland compared with England and Wales have proved to be favourable. In 1979, there were 13,628 charges in Scotland for drunkenness. Following the experience of the change in the law, there were only 6,618 in 1984. The experience has been beneficial, and I hope that the same will happen in Northern Ireland.
We are trying to equalise the law as between the pub and the club. The Brewing Review published in 1986 shows that in 1976, the year in which the law was changed, 23 per cent. of drinking occurred in public houses and 23 per cent. in licensed clubs. By 1984, consumption in public houses had increased to 28 per cent. and consumption in licensed clubs had decreased to 18 per cent. Experience will show that, if we equalise the law as between pubs and clubs and make the market more equal, the trend will be in the right direction.
Although I have not drunk much in pubs in Northern Ireland, I have a son who served in the same regiment in which I served and who has just returned from Northern Ireland. He said that the experience of drinking in pubs there was to be commended. He found outside one pub a ditty which I have stuck up outside my pub, which reads:
"Who comes here?
A grenadier.
What do you want?
A pot of beer.
Where's yer money?
I forgot!
Get you home you drunken sot."
In other words, tick, or credit, in Northern Ireland is no easier than in this country here. I am sure that that notice outside my pub will encourage my hon. Friends who go there for a drink to ensure that they take enough money with them and not expect credit at The Cricketers Arms in Tangley.
I congratulate my hon. Friend the Minister on bringing forward this measure. I wholeheartedly commend it to the House and I hope that it will be passed.
10.47 pm
Mr. David Alton: The slip of the tongue at the end of the speech of the hon. Member for Romsey and Waterside (Mr. Colvin) was revealing when he talked about the difference between Northern Ireland and "this country here". Northern Ireland is part of this country here. It is worth reminding the House that two separate issues are before us. One is whether pubs should be open on a Sunday and the other concerns the way in which we go about making decisions for the different parts of the United Kingdom.
On the first issue, I freely admit that, like probably many hon. Members, I enjoy a drink, not least after church on a Sunday evening. If I were voting for provisions in my region, I would be one of those who argued, like the hon. Member for Newry and Armagh (Mr. Mallon) did, for the opening of public houses each day. It is a matter of choice. It is a matter of moderation. I accept that the overuse of alcohol undoubtedly leads to not only physical but
1078
emotional problems. Much violence and brutality can be associated with it. The overuse of alcohol in cities such as mine, Liverpool, can have dire consequences.
The second issue is about the differences of opinion in different parts of the United Kingdom. Clearly, there are differences of opinion in Northern Ireland. The Lord's Day Observance Society, the Presbyterian Church of Northern Ireland, people from all parts of the religious equation and the trade unions have given their opinions, suggesting that public houses should not be able to open on a Sunday.
I find it ironic that Northern Ireland hon. Members should be able to amend proposals for drinking laws in Scotland, England and in Wales, but, when we consider such matters, Northern Ireland Members cannot move amendments because of the ways in which we consider such proceedings. That is why I signal a warning to the Government that, unless we do something about the over-use of Orders in Council and the constant resort to one-and-a-half hour debates to ram through Government proposals, we shall have no choice but to—[AN HON. MEMBER: "You?"]—Yes, we and other hon. Members from other political parties. We shall have no choice but to vote against the Government when they bring forward proposals that are clearly unacceptable to many people in Northern Ireland.
Such matters would be far better considered by a Northern Ireland committee, which could be established under Standing Order No. 99. They would be far better considered by Northern Ireland hon. Members. It would be far better if we could consider Bills in the normal way, with their being open to amendment. It is for the second of those reasons—it has nothing to do with the drinking laws in Northern Ireland—that my right hon. and hon. Friends and I shall call a vote. We may find ourselves in the Division Lobby with some hon. Members from Northern Ireland. It is time that such issues were considered in the Chamber, on their merits, open to amendment and not simply put to the House for black and white yes-no decisions which force polarisation. It is quite obvious that people are constantly forced to take decisions on issues and are not given a chance to vote for the shades of grey that often exist or to vote for amendments.
For those reasons—not the ones that were advanced! earlier about Sunday opening—of diversity and choice, and bearing in mind the differences of opinion that exist in many parts of our islands and people's rights to decide for themselves in the places where they live, that we shall be with those who choose to divide the House tonight.
10.51 pm
Sir Bernard Braine: I wish to approach the matter from a somewhat different angle and perhaps to sound a somewhat different warning. From what we have heard, it is quite clear that the licensing law in Northern Ireland is in disarray. One can understand the Government wishing to put it into better order, although it is exceedingly doubtful whether making it possible to drink more rather than less will improve matters. The licensing law is broken daily in this country. There has been a failure to deal with the rising tide of under-age drinking that is taking place all over the kingdom, the full facts of which were revealed to the Government by their Office of Population Censuses and Surveys about three years ago. Its report was withheld from publication for at least a year.

1079
The facts exist, and they demonstrate not only that there is a serious rising tide of under-age drinking in our public houses but that an overwhelming proportion of boys from the age of 13 upward had their first drinks not at home, not as a result of buying liquor from supermarkets, but in public houses. The law here is not being properly enforced. In short, that is why we should be concerned not merely with legal consequences but with the social and health consequences of any change in the licensing law of any part of the United Kingdom. I fervently believe that, as long as the majority of its people wish it to remain part of the United Kingdom, that should be the case. Northern Ireland should not be treated in a different way. We are all concerned about the matter. We cannot sweep aside the strong objections that are coming from the Province.
There is another good reason why we should not sweep those objections aside. There is no justification for tampering with the licensing laws anywhere in the United Kingdom before the full implications of the rising levels of consumption are understood. In addition to under-age drinking, we have the carnage on the roads and a clear link between alcohol abuse and marital break-up, non-acccidental injury to children and crime of every kind. Before any increase in drinking hours, in pubs or in clubs, is allowed, the full social and health implications should be properly understood.
The order comes to us hot-foot on the announcement in the Queen's Speech that licensing hours in England and Wales are to be extended. All this flies in the face of expert opinion. I am speaking not of the drink and tourist trades but about the views that have been expressed by doctors and magistrates.
I received a letter from Dr. Havard, secretary of the British Medical Association, when we were discussing the Bill affecting England and Wales. He wanted me to make it clear to the House that his association was opposed to any tampering with the licensing laws until the health implications were grasped. He wrote:
"There is no conclusive evidence that a change in licensing hours would decrease the health and social costs of alcohol abuse and every reason to fear that it would exacerbate an already deteriorating situation."
The Government must take note of the request by the World Health Organisation that by the 1990s all member states should reduce the level of alcohol consumption by at least 25 per cent., so great is the cost on a global scale. What has been the British Government's response? It has been to increase licensing hours, to do nothing about the proliferation of outlets, to make no moves to deal with under-age drinking in public houses and to do nothing about the link between alcohol drunk to excess and crime.
No wonder Dr. Havard wrote in his letter to me:
"Why, when other countries are desperately tightening up on the availability of alcohol, are we taking up parliamentary time relaxing things?"
Mr. Gorbachev has had the honesty to deal publicly with this problem in the Soviet Union. He has done it in a way one would never have thought possible in that country. All civilised countries are concerned about the problem, yet here we are tampering with the licensing laws before any of the other issues to which I have referred have been considered.
On 1 July The Times published a letter from Dr. Douglas Acres, a constituent of mine who is the chairman
1080
of the council of the Magistrates' Association, in which he made it clear that any tampering with the licensing laws was a mistake. Not only are all the caring agencies opposed to any extension, but I am astonished to note that the only published statement by any British Government since the 1930s on the subject of alcohol abuse was that produced by the Department of Health and Social Security entitled "Drinking Sensibly." What does that tell us? It tells us repeatedly that, if anything, there is a case for increasing the restrictions, not lessening them. Why is the Department of Health so silent on this matter? We have had evidence from that Department—the only evidence that we have ever had from it—that grave health harm is being caused and that there are risks in tampering with the licensing laws. The Minister responsible for roads and traffic has courageously drawn attention to the carnage on the roads. So why is there no co-ordination on these matters? Why did the Government see the light in the area of drug abuse? They appointed an interdepartmental coordinating committee under the then Minister of State that has worked well. It has brought together all the facets of prevention, treatment and so on. However, they have not done that on the issue of alcohol. Why? The House will find its own answer. Just as the proposed Licensing (Amendment) Bill is a mistake, the order is a mistake until such time as the Government demonstrate that they understand the totality of the problem. They must act soon, because the harm is mounting all the time.
11.2 pm
Rev. Martin Smyth: I welcome the opportunity to follow the right hon. Member for Castle Point (Sir B. Braine), who stressed the health factors that are involved. Traditionally in Northern Ireland, licensing laws have been dealt with by the Department of Health and Social Services. Unlike England, where we deal with the problem largely through the Home Office, in Northern Ireland alcohol is reckoned to have a direct impact on the health of the community.
The health factors are important. I was fascinated by the concluding comment of the hon. Member for Newry and Armagh (Mr. Mallon), who spoke of the days when the "knock knock" would be over. I put it to him, and the House, that even with these laws, the "knock knock" and after-hours drinking will continue. I am worried that the Minister has put forward nothing to show us how the law as amended will be implemented any better than previous legislation.
When facts and figures are adduced to show that, since the change of licensing laws in Scotland, there has been a decrease in convictions for crime and traffic accidents as a result of drinking offences I wonder whether any examination has been conducted into whether constables have merely said, on many occasions, "Get a grip on yourself; away home and don't let that happen again." How many cases have not been pursued because of a tendency to have a little compassion on a person who is under the influence, if not downright inebriated?
When the hon. Member for Newry and Armagh talked of the more relaxed opportunities that now exist for walking down to the village pub, did he, or any hon. Member, really believe that people in Northern Ireland will not still drink and drive, with the consequent calamity of road accidents? If so, I refer them to yesterday evening's Belfast Telegraph, in which there is an article entitled
"Government slammed over summer drink-drive move".

1081
Perhaps it is an act of midsummer madness to introduce extended licensing hours tonight, when, yesterday evening, two groups that are particularly concerned with fighting alcohol abuse criticised the Government for introducing a summer drink-driving campaign while passing laws to make Sunday drinking easier. That can be added to the point made by the right hon. Member for Castle Point. As we have been reminded in the debate, it is a tragedy that the House can only reject or accept the order. The Government have brought this forward and I imagine that the Whips will be in position and that there will be enough payroll votes to get the measure through. That is not a proper example of democracy in action.
Mr. Will Glendinning of the Alliance party in Northern Ireland was quoted last night as saying that it has been recognised that increased availability can lead to increased consumption and increased harm. The Government act quite rightly against drinking and driving, but perhaps they should realise that there are things other than an advertising campaign and the breathalysing of people. One of those things is the use of the law as a marker to discourage certain practices.
It is possible to quote from various statistics, but if one examines the statistics presented by the Central Policy Study Group and by others, one will discover that not only is there a difference in the rate of alcoholism between the citizens of England and Wales and those of Scotland, but that there is an increased level of alcoholism in Northern Ireland. When one examines the statistics even more carefully in terms of the health problem, one sees that an increasing number of people in Scotland suffered from cirrhosis of the liver between 1950 and 1985.
I realise that we are required to finish the debate shortly and for that reason I find it difficult to deal with all the points that have been raised in the debate. We welcome to the post of shadow Secretary of State for Northern Ireland the hon. Member for Kingston upon Hull, North (Mr. McNamara). He may discover that he will have to play many tunes over the years. He mentioned the Assembly report. In reply to my hon. Friend the Member for Londonderry, East (Mr. Ross) the Minister was rather testy and told my hon. Friend that my hon. Friend had not spoken to him or been in touch with him. It is a little like a dialogue with the deaf where one has to watch the other's lips.
The representatives of Northern Ireland were lobbied and then met in the Assembly to draw up a report. It is rather interesting to note that if the Assembly suggested something that was in keeping with the plans of the Government, they accepted it and said, "Well done." If a suggestion did not fit in with their plans they ignored it.
The report by the Assembly was an in-depth one and was produced on 6 March 1985. It recommended that current Sunday opening laws should be retained and rejected the suggestion that Sunday opening should be allowed during the same hours as in England, which was what the Government wanted.
Provision was to be made for objections along the Scottish lines and for objection on the grounds of public nuisance. That was rejected. It is nice for all of us to have certain facilities in society—as long as they are not too near where we live. We are not unduly worried about a nuisance that affects other people—as long as we have a reasonably relaxed and calm time. That was one of the reasons why objection on the grounds of public nuisance
1082
was suggested, but it was rejected by the Government. The Assembly Committee recommended the provision of a country-wide referendum or deed poll such as used to happen in Scotland. That, too, was rejected. It recommended that registered clubs should be brought into line with the provisions for Sunday drinking in hotels and restaurants. That was rejected and tinkering with the powers of the police and the registration of clubs was offered instead.
It will be interesting to see how the laws are implemented. I specifically asked about under-age drinking, and I have a specific recommendation to make. We shall never deal with the problem of under-age drinking until we adopt the practice of our American cousins and ask for identification. It is utterly impossible to be clear about under-age drinking unless some means of identification is provided. The offence relates not simply to the sale but to the serving of alcohol, and it is extremely difficult to prove. Furthermore, often it is not simply a question of under-age people going in to wine houses and purchasing alcohol; others purchase it and bring it out to them. Time after time, we have had experience of local police overlooking such offences. I suspect that that happens in the rest of the kingdom, too—partly because of the pressures on the police, who claim that they must devote their attention to much more serious crime. I doubt whether the modernisation of the laws will have any great effect. The Committee also recommended the tightening up of legislation relating to clubs to reduce the inequities between clubs and pubs, and the Government seem to have been rather half-hearted about that.
The hon. Member for Antrim, North (Rev. Ian Paisley) said that he had been lobbied by publicans; I suspect that all of us have. All that I can say is that every South Belfast publican who spoke to me said, "We are not asking that our pubs should be open. We are asking that the clubs should be restricted." I find no clear evidence in the new legislation to suggest that that will happen.
I suspect that this order is a foretaste of Home Office thinking, which favours an open season for everybody and no real restrictions. The arguments advanced tonight could equably be advanced for having no licensing laws a t all. Therefore, I ask the House to think seriously about joining those of us who will be voting in the Lobby against the order. The order will affect employment, too. It will provide more casual employment but fewer full-time working opportunities and will divide more families on yet another day of the week, which is contrary to the best interests of our nation.
11.8 pm
Mr. James Kilfedder: I know that there is very little time left for this debate, and I deeply appreciate the fact that you, Madam Deputy Speaker, should have called me. I intend to restrict my remarks, although I am sorry that I have to do so because very important issues have been raised.
I wish to put it on record that I deeply resent the fact that the Government have introduced this draft order to enable public houses to open on a Sunday. Why has the order been introduced? It does not have the support of the majority of the people in Northern Ireland, and that includes Roman Catholics as well as Protestants, despite what the hon. Member for Newry and Armagh (Mr. Mallon) said. Some people have said that the reason for the order is to bring the law into line with that pertaining

1083
to the rest of the United Kingdom. It has been said, too, that it is being introduced in the interest of liberty. If we had liberty, the public houses would never close. Is that what hon. Members advocate?
The hon. Member for Romsey and Waterside (Mr. Colvin), said that his son, who serves in the Army in Northern Ireland, is glad that he will be able to go to public houses on a Sunday. Having spoken to the police, I can assure the hon. Gentleman that they have endless trouble when young soldiers from the barracks in my constituency get drunk and engage in assaults, causing tremendous bother for police and local residents. I wish to put that on record in view of what the hon. Gentleman has said.
Mr. Andrew MacKay: That is disgraceful.
Mr. Kilfedder: Yes, it is a disgrace that people in my constituency have to put up with conduct of that kind. The Government should have heeded the decision of the Assembly with regard to the extension of pub hours.
Mr. MacKay: Will the hon. Gentleman give way?
Mr. Kilfedder: No, I will not give way.
Despite what the Minister said in introducing the order, it will cause extra trouble for the police, who are already hard pressed. They have difficulties enough, but the order will increase their difficulties. It is not just the difficulties of dealing with intoxicated people. When the public houses disgorge their parties at closing time there is a considerable amount of unruly behaviour which in some cases unfortunately ends in criminal behaviour. Damage is caused to property, the peace of the area is disturbed by drunks, innocent bystanders are insulted with obscenities and so forth, and from time to time there are muggings as well.
My constituents and I have a problem, especially with young people drinking to excess in Bangor and in Holywood. On behalf of those who are already incensed at the behaviour which takes place, I say that there should be no extension of drinking hours on Sundays.
Mr. MacKay rose—
Mr. Kilfedder: I regard the introduction of the order as dictatorial because we are being treated differently from the rest of the United Kingdom. I shall not rehearse what has already been said, but I support the views of the Father of the House, my right hon. Friend the Member for Castle Point (Sir B. Braine), and of the two Liberal Members who spoke. The way in which the order has been introduced constitutes discrimination against the people of Northern Ireland. Late as it is, I urge the Government to let the people of Northern Ireland decide. Let them have a referendum. Or are the Government afraid that their proposals will be rejected?
This measure will increase the problems in Northern Ireland. People there resent the fact that the order cannot be amended. We can only vote for or against it, and I certainly intend to vote against it. Debate is limited to one and a half hours. That is no way to treat people in a democracy. I have heard talk about British standards, but that is nothing like the British standards to which I have been accustomed.
11.18 pm
Mr. Needham: With the leave of the House, I shall try to deal with all the points raised as quickly as I can in the 12 minutes before the debate closes.
I was distressed to hear some of the comments made by the hon. Member for North Down (Mr. Kilfedder). He called the police in aid of his cause, but I must tell him that we discussed everything in the order very carefully and closely with the police. It was clear that the existing law was neither enforced nor enforceable, so we clearly wished to ascertain the views of the police on the matter. They did not tell us that they had to deal with drunken young soldiers in the hon. Gentleman's constituency as a result of existing licensing laws in Northern Ireland. The hon. Member for North Down should be more careful in his words when he talks about young soldiers who go to Northern Ireland to risk their lives in the defeat of terrorism.
Mr. William Ross: Will the Minister give way?
Mr. Needham: No I am afraid that I do not have the time.
The hon. Member for Antrim, North (Rev. Ian Paisley) was the first of many hon. Members who questioned the way that this order has come before the House. I appreciate that the hon. Member for Antrim, North was unable to be present at the start of the debate. The hon. Member for Liverpool, Mossley Hill (Mr. Alton), was also absent but I tried to cover that matter then.
My right hon. Friend the Secretary of State has said that the Government are prepared to consider changes to legislative procedures and are anxious to consider them in the context of the wider arrangements for the government of Northern Ireland. My right hon. Friend has also said that we are willing to consider changes in arrangements to determine whether it is possible to agree ways to improve the difficulties that we perceive.
When I opened the debate I quoted the right hon. Member for Strangford (Mr. Taylor), who said that if anything showed the case for a devolved Administration in Northern Ireland it was orders as complicated and as difficult as these. I heartily agree with that. I only wish that the hon. Friends of the right hon. Member for Strangford were as clear in their views.
In the Assembly debate in 1985 the hon. Member for Antrim, North said that licensing must be looked at in the context of a pluralistic society. It is a moral issue. The Government and myself do not believe that an issue of this nature is best legislated for by controlling the large number of people who wish to be able to pursue on a Sunday what they consider to be their perfectly reasonable and harmless habit of the six other days. They cannot understand why they should not be allowed to pursue that habit on Sunday. The hon. Member for Antrim, North rightly said that people are able to get a drink in Northern Ireland on a Sunday. The problem is that those people obtain that drink outside the law. The exisiting law is not enforceable.
Too many people obtain drinks in clubs over which we would like to see much tighter control. The order that follows this order goes into great detail about such clubs. I am sure that the hon. Member for Antrim, North will welcome the next order and will recognise that it will go a long way to deal with the problems of the clubs.
Many hon. Members, including the hon. Members for Antrim, North and for Belfast, South (Rev. Martin

1085
Smyth) mentioned the number of outlets for drink. I am sure that hon. Members are aware that when it comes to applying for a new licence for a public house in Northern Ireland an old licence must be delivered. In 1985 the number of public houses in Northern Ireland stood at 1,832 and that is 39 less than the number of public houses in 1978. The number of off-licences has increased from 200 to 250; the number of hotels has gone down from 177 to 165. I hope that the House will be pleased to learn that the number of restaurants has risen by 82 to 208. Registered clubs, with which we are concerned, have risen from 483 to 625.
The views of the people of Northern Ireland have changed since the Blackburn report of 1978. The opinion of the people of Northern Ireland is much more evenly divided, even though there is still a small majority for closing public houses on Sundays. As I said at the outset, I do not believe that, given the present circumstances, the Government can legislate on Sunday opening when any law that they try to introduce is unenforceable. The law has been unforceable because of the problem of the availability of meals.
Mr. Alton: In the constituency of my hon. Friend the Member for Ceredigion and Pembroke, North (Mr. Howells) and elsewhere in the United Kingdom it is possible to exercise a local opt-out. Why cannot that option he made available in Northern Ireland?
Mr. Needham: The hon. Gentleman was not in his place when I dealt at considerable length in my opening remarks with local referendums. We would not be dealing with a simple "Can you?" or "Can't you?". We must deal with existing law, which allows drinking in clubs and in hotels with the availability of a meal. We would be faced with having to use the genius of the entire general council of the TUC to find a question that we could put to the people of Northern Ireland. It is not a simple issue.
The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) proudly represented to us that he is in a dry area. What happens to all those people in a dry area who wish to have a drink on Sunday? As the hon. Member for Newry and Armagh (Mr. Mallon) said, they drive to a wet area and return in the condition to which the hon. Member for Belfast, South referred. The hon. Member for Belfast, South did not deal especially well with the argument of the hon. Member for Newry and Armagh that people should be able to walk to their local instead of having to drive elsewhere, which raises the very issue that my right hon. Friend the Member for Castle Point (Sir B. Braine) brought to our attention about drunk driving.
Rev. Martin Smyth: The Minister has said that my argument was not valid. People will continue to travel to the seaside, whether it be Newcastle, Warrenpoint or Port-rush. They will travel on a Sunday and return with drink.
Mr. Needham: We are talking about what the majority do on a Sunday when they are deprived of the opportunity of walking to their local. We are not discussing whether they will go to the seaside.
I turn to the deeply held views and the powerful arguments that were expressed by my right hon. Friend the Member for Castle Point (Sir B. Braine). As the Minister with responsibilities for health in Northern Ireland, I am concerned about the health of people in the Province and with ensuring that the proposals in this measure will not
1086
make the position worse. My hon. Friend the Member for Romsey and Waterside (Mr. Colvin) produced accurate figures about the Scottish experience, and in Northern Ireland, as in Scotland, there are fewer people drinking than hitherto, and those who drink are drinking less. The problem is that those who are at the margin and are extreme drinkers drink more, and there is a greater incidence of alcohol abuse. It is a problem that lies at the margin, and the incidence of cirrhosis of the liver in Northern Ireland is much lower than in Scotland, and lower than it is in England and Wales. We want to know why that is so.
In Northern Ireland and Scotland, alcohol consumption is concentrated in fewer days. It appears that a greater proportion of Scottish men and Ulster men than men elsewhere in the United Kingdom have at least one heavy drinking day a week, which makes the alcohol abuse problem worse. I acknowledge that there is a problem of alcohol abuse, but I do not see that opening the pubs on Sunday—other experience shows that it will not lead to increased consumption—when taken alongside what we are doing in reducing the hours during which clubs can open and reducing the time that hotels can remain open, will exacerbate the problem. There will not be a nil increase in the number of opening hours, but the increase will be half that suggested by the hon. Member for Antrim, North. I do not believe that that will lead to an increase in consumption and, therefore, an increase in alcohol abuse. We have had no representations from any doctors about this.
Rev. Ian Paisley: Will the Minister give way?
Sir Bernard Braine: Will my hon. Friend give way?
Mr. Needham: I give way to my right hon. Friend the Member for Castle Point.
Sir Bernard Braine: I mentioned earlier a letter that appeared in The Times on 1 July from the chairman of the Magistrates' Association, which read:
"All the evidence in this country and overseas indicates that the degree of harm resulting from inappropriate drinking is directly proportional to the total consumption in terms of absolute alcohol."
If there is an increase in opening hours either in Northern Ireland or England, overheads will increase. As a consequence, sales of alcohol will increase. All the evidence supports my view and not the suppositions that the Minister is making.
Mr. Needham: I understand what my right hon. Friend has said, but none of his points have been made to me by those who are concerned with health in Northern Ireland.
I realise that this matter is of great significance and importance to the people of Northern Ireland, and I realise how strong feelings in the House are, but the Government take the view—
It being half-past Eleven o'clock, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14 ( Exempted Business).
The House divided: Ayes 179, Noes 22.

Division No. 17]

[11.30 pm

AYES

Aitken, Jonathan

Arnold, Jacques (Gravesham)

Alexander, Richard

Arnold, Tom (Hazel Grove)

Allason, Rupert

Ashby, David

Amess, David

Baker, Nicholas (Dorset N)

Amos, Alan

Baldry, Tony

Arbuthnot, James

Banks, Robert (Harrogate)

1087

Batiste, Spencer

Hayward, Robert

Beaumont-Dark, Anthony

Heddle, John

Bennett, Nicholas (Pembroke)

Hicks, Mrs Maureen (Wolv' NE)

Benyon, W.

Hind, Kenneth

Bevan, David Gilroy

Holt, Richard

Biggs-Davison, Sir John

Howarth, Alan (Strat'd-on-A)

Boscawen, Hon Robert

Hunt, David (Wirral W)

Boswell, Tim

Hurd, Rt Hon Douglas

Bottomley, Peter

Irvine, Michael

Bowden, A (Brighton K'pto'n)

Janman, Timothy

Bowis, John

Johnson Smith, Sir Geoffrey

Brazier, Julian

Jones, Gwilym (Cardiff N)

Bright, Graham

Jones, Robert B (Herts W)

Brown, Michael (Brigg & Cl't's)

King, Roger (B'ham N'thfield)

Brown, Nicholas (Newcastle E)

King, Rt Hon Tom (Bridgwater)

Browne, John (Winchester)

Kirkhope, Timothy

Bruce, Ian (Dorset South)

Knapman, Roger

Buck, Sir Antony

Knight, Dame Jill (Edgbaston)

Burns, Simon

Knowles, Michael

Burt, Alistair

Latham, Michael

Butler, Chris

Leigh, Edward (Gainsbor'gh)

Carlisle, John, (Luton N)

Lennox-Boyd, Hon Mark

Carlisle, Kenneth (Lincoln)

Lester, Jim (Broxtowe)

Carrington, Matthew

Lightbown, David

Carttiss, Michael

Lilley, Peter

Colvin, Michael

Lloyd, Peter (Fareham)

Conway, Derek

Lord, Michael

Coombs, Simon (Swindon)

Lyell, Sir Nicholas

Cope, John

McGrady, E. K.

Couchman, James

MacKay, Andrew (E Berkshire)

Dorrell, Stephen

McLoughlin, Patrick

Durant, Tony

Malins, Humfrey

Emery, Sir Peter

Mallon, Seamus

Evans, David (Welwyn Hatf'd)

Mans, Keith

Fallon, Michael

Marland, Paul

Flannery, Martin

Marshall, John (Hendon S)

Forman, Nigel

Marshall, Michael (Arundel)

Freeman, Roger

Martin, David (Portsmouth S)

Garel-Jones, Tristan

Maxwell-Hyslop, Robin

Gorman, Mrs Teresa

Miller, Hal

Gower, Sir Raymond

Mills, Iain

Greenway, John (Rydale)

Mitchell, Andrew (Gedling)

Gregory, Conal

Mitchell, David (Hants NW)

Griffiths, Peter (Portsmouth N)

Monro, Sir Hector

Ground, Patrick

Morris, M (N'hampton S)

Gummer, Rt Hon John Selwyn

Moss, Malcolm

Hamilton, Hon A. (Epsom)

Moynihan, Hon C.

Hamilton, Neil (Tatton)

Needham, Richard

Hargreaves, A. (B'ham H'll Gr')

Neubert, Michael

Hargreaves, Ken (Hyndburn)

Nicholson, David (Taunton)

Harris, David

Nicholson, Miss E. (Devon W)

Haselhurst, Alan

Page, Richard

Hayes, Jerry

Paice, James

Hayhoe, Rt Hon Sir Barney

Parry, Robert

1088

Patnick, Irvine

Stewart, Allan (Eastwood)

Peacock, Mrs Elizabeth

Stewart, Andrew (Sherwood)

Porter, David (Waveney)

Summerson, Hugo

Portillo, Michael

Taylor, Ian (Esher)

Powell, William (Corby)

Thompson, D. (Calder Valley)

Raffan, Keith

Thompson, Patrick (Norwich N)

Raison, Rt Hon Timothy

Thorne, Neil

Redwood, John

Thornton, Malcolm

Rhys Williams, Sir Brandon

Thurnham, Peter

Riddick, Graham

Tracey, Richard

Ridsdale, Sir Julian

Tredinnick, David

Roe, Mrs Marion

Twinn, Dr Ian

Rooker, Jeff

Viggers, Peter

Rowe, Andrew

Waddington, Rt Hon David

Ryder, Richard

Walden, George

Sackville, Hon Tom

Waller, Gary

Sainsbury, Hon Tim

Warren, Kenneth

Shaw, David (Dover)

Watts, John

Shaw, Sir Michael (Scarb')

Wells, Bowen

Shelton, William (Streatham)

Whitney, Ray

Shephard, Mrs G. (Norfolk SW)

Widdecombe, Miss Ann

Shepherd, Colin (Hereford)

Wiggin, Jerry

Short, Clare

Wilkinson, John

Skeet, Sir Trevor

Winterton, Mrs Ann

Smith, Tim (Beaconsfield)

Winterton, Nicholas

Soames, Hon Nicholas

Wood, Timothy

Speller, Tony

Young, Sir George (Acton)

Spicer, Jim (Dorset W)

Stanbrook, Ivor

Tellers for the Ayes:

Stanley, Rt Hon John

Mr. Kenneth Carlisle and Mr. David Maclean.

Stern, Michael

Stevens, Lewis

NOES

Alton, David

McCusker, Harold

Beggs, Roy

Maginnis, Ken

Beith, A. J.

Meale, Alan

Braine, Rt Hon Sir Bernard

Molyneaux, Rt Hon James

Carlile, Alex (Mont'g)

Paisley, Rev Ian

Cryer, Bob

Robinson, Peter (Belfast E)

Dixon, Don

Skinner, Dennis

Duffy, A. E. P.

Smith, Cyril (Rochdale)

Forsythe, Clifford (Antrim S)

Smyth, Rev Martin (Belfast S)

Howells, Geraint

Hughes, Simon (Southwark)

Tellers for the Noes:

Kilfedder, James

Rev. William McCrea, Mr. William Ross.

Kirkwood, Archy

Question accordingly agreed to.
Resolved,
That the draft Licensing (Northern Ireland) Order 1987, which was laid before this House on 2nd July, be approved.

Registration of Clubs (Northern Ireland)
11.41 pm
The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Richard Needham): I beg to move,
That the draft Registration of Clubs (Northern Ireland) Order 1987, which was laid before this House on 2nd July, be approved.
This is the second and, I hope, less controversial part of the package of reforms. However, it is equally important and I am glad that this measure had the support of the Assembly when it was debated there.
The order repeals the existing Northern Ireland law contained in the Registration of Clubs (Northern Ireland) Act 1967. It deals with the registration of clubs to permit them to supply alcohol to members. It contains many new provisions to consolidate some of the existing law. Like the previous licensing order, this order has its roots in the recommendations of the Blackburn report for improving the law. The Government have accepted most of those recommendations in this order.
Blackburn identified a phenomenal growth in registered clubs compared with licensed premises in the Province. That growth has continued in recent years, as has the amount of drinking that takes place in clubs. I would like to give some figures. In 1975, there were 370 registered clubs. There are now more than 600. In 1975, they spent over £9 million on purchasing drinks for their members; in 1985, that figure had risen to £34 million.
I can be more specific. I know of one club whose members on the face of things spend about £40 each a week on drinks. That is about five bottles of scotch or 45 pints of Guinness each. Strangely—or perhaps not so strangely—its membership is now down to 66. If someone happens to be the member of a certain old age pensioners social club, his limit is a mere two bottles of scotch or 17 pints of Guinness a week.
However, the more worrying still is the scope for profiteering in some clubs by criminal and paramilitary elements. In some cases this has already happened. We must have adequate measures to combat this grave situation.
Mr. William Ross: On a point of order, Madam Deputy Speaker. The Minister has said that the people were drinking scotch all the time. Why was it not Blackbush?
Mr. Needham: Madam Deputy Speaker, I did not wish to insult the name of Blackbush in the kind of clubs to which I was referring.
There are two main prongs to the Government's strategy for dealing with these problems. The first is to make it harder for clubs to become registered and to keep their registration. There are stricter criteria on which courts can determine whether or not clubs applying for registration are bona fide. District councils will now have a say in registration procedures. In addition, the advantages that registered clubs have over pubs are largely removed by bringing such things as their drinking hours, and the law on the presence of minors and on drunkenness generally, into line with requirements for pubs. Penalties for offences are also greatly increased. The second is to make the affairs of clubs more open to detailed examination, and to limit the uses to which they apply
1090
their money. To assist in that, police powers are strengthened, particularly regarding examination of clubs' accounts and records.
Those, in broad terms, are the reasons for the order. Most clubs in Northern Ireland are respectable, well-run organisations. They have nothing to fear, and will, I hope accept the additional controls brought in by the order as necessary for the protection of the community.
Let me now quickly deal with what the order does, concentrating on the main provisions, especially those that are new or depart in some way from the 1967 Act. Part I is introductory; part II deals with the registration of clubs. Article 4 describes the genera] requirements for registration, and brings in schedule 1, which sets out the provisions which must be included in club rules.
Paragraph (4) provides that the court must take account of any arrangement that restricts the club's freedom to purchase alcohol. It must also have regard to any provision in the club's rules or other arrangement under which it can spend money except for its own benefit or for charitable purposes. Through that provision, and the increased police powers of investigation, the Government aim to prevent any clubs from giving financial support to paramilitaries out of club profits.
Article 6, with schedule 2, deals with the grant of registration of new clubs and the issue of a certificate of registration. Under the 1967 Act, all registration business is administered by magistrates courts. The order introduces a two-tier registration system comparable with the licensing system. The county court will now deal with the initial grant of an application for registration, and the magistrates courts will continue to deal with renewal applications. In future, a club intending to apply for a new registration must give the court notice two years in advance, and must copy the notice to the police and the appropriate district council. That provision should allow the courts to be satisfied whether such clubs can exist without having to rely on income from the supply of drink. Applicants will be required to give more information than at present.
The court will now have no discretion to accept late applications. It must also be satisfied that planning permission to use the premises as a club is in force, and that the club has been conducted in good faith as a club for two years, and not for one year as at present.
A court will be able to turn down an application if the club is used for an unlawful purpose or by persons of bad character, or is conducted so as to cause disturbance, or if any club official is not a fit person to hold office or the club has been convicted of an offence. All these provisions are aimed at stopping the undesirable clubs from being registered.
Article 8 deals with the renewal of registrations, and the renewal procedure is set out in schedule 3. The existing clubs will have to meet just as stringent requirements to have their registration renewed. Again, considerably more information will be required. Article 8 paragraphs (5) and (6) list the various grounds on which the court must or may refuse an application. There is no provision for late renewal. The court must also satisfy itself that the club is conducted in good faith as a club and not mainly for the supply of drink, and the additional information to which I have referred should be strong evidence of whether a club comes into that category.
There are several new grounds on which renewal can be refused. They relate to the conduct of the club, the nature

1091
of its clientele, the fitness of a person to hold office in it and whether it has been convicted of an offence under the order.
Part III of the order provides for the hours during which clubs may supply drink. The flexibility given under the 1967 Act goes, and is replaced by the same fixed hours as for other licensed premises. The effect is that all clubs will lose four hours each week in their total permitted hours—half an hour each weekday and an hour on Sunday. Article 25 largely reflects existing law relating to police authorisations extending club hours on special occasions. The limit on 12 on the number of these allowable in a year is increased to 20, but the hours are reduced so that drink cannot be supplied after 1 am, compared with 3 am at present.
Part IV relates to the conduct of registered clubs. Article 28 provides that intoxicating liquor can only be supplied to or obtained or consumed by a member or his guest or an employee of the club. Article 30 is especially important. Some clubs are engaging in what are almost commercial enterprises, such as dinners, dances and discos or other entertainment which members of the public attend. I will not embarrass the clubs by reading out some of the advertisements which they have been putting in the papers. They go far beyond the spirit of the clubs law, and those abuses must be stopped.
Therefore, article 30 prohibits, with certain exceptions, the holding of functions in club premises which are not for the benefit of the club as a whole or controlled or run by it. Functions must relate clearly to the objects of the club and be run exclusively for members and their guests. However, charity functions or private functions for the benefit of members will be permitted. Further, under article 39, it will be an offence to advertise in the media any function to be held on a club's premises.
Articles 32 and 33 contain provisions with respect to young people. At present, no one under 18 can be employed in a club or be admitted to club membership, except in the case of a sporting club. Club rules must also contain a provision that drink must not be supplied to anyone under 18. The original intention was to mirror licensing law by excluding minors from bar areas of clubs, as the Blackburn committee recommended. Sporting clubs and the Sports Council for Northern Ireland told me that this ban would seriously harm the activities of sporting clubs and the involvement of youngsters in sport. The Government have recognised the difficulties which many sporting clubs would face, not least of which would be the major structural alterations needed to many of the premises, were the ban to go ahead. They have decided that young people will be allowed until 7 pm in the drinking area of a sporting club. It does not mean that they can be supplied with drink. Any registered club which supplies drink to someone under 18 or allows him to drink on its premises will be liable to a fine not exceeding £2,000, or to imprisonment. Also, club premises could be disqualified from being used by any registered club for up to five years.
Enforcement of the new law is all-important, and the police must have adequate powers. Therefore, article 37 contains significant changes to police rights of inspection and entry into registered clubs. These provisions demonstrate the Government's determination to strengthen the hand of the police in investigating club
1092
accounts. They have been designed in consultation with the police and should help them to investigate a club's affairs and, in particular, to establish where the money goes and whether it is putting it to proper use.
Article 38 strengthens the powers of the court to disqualify club premises when a club has been convicted of an offence under the order. Part V contains miscellaneous provisions. Article 41 deals with the accounts of registered clubs. Clubs will have to keep proper books of accounts and maintain a satisfactory system of control of accounts, cash holdings and receipts and remittances.
The remaining provisions deal with items such as proceedings against clubs, proof of consumption of liquor, appeals, amendments, transitional and savings provisions and repeals.
That concludes my outline of the main provisions of the order. As hon. Members will recognise. this is a substantial tightening of the law, but given the background which I have explained I hope that they will accept that it is a much-needed reform.
Mr. Robert Banks: I warmly welcome the provisions of the order, which are long overdue, and I commend my hon. Friend for bringing them forward. But the period of two years before a new club can register seems to be rather restrictive and could jeopardise the club getting off the ground. Will he justify the period of two years?
Mr. Needham: The reason for the two-year period is that the Government wish to ensure that a club which sets up in Northern Ireland does not do so for the main purpose of supplying alcohol, and that the club can exist and thrive without the supply of drink. The Government's opinion is that, if a club can set itself up with a sufficiently large membership and exist for two years without drink, drink will not be the main reason for the club's existence.
As I said earlier, we deal with particular difficulties in the enforcement of club registration law in Northern Ireland and we are determined to crack down and to eliminate the disreputable club. I am reassured by the fact that almost all the letters which we have received from the public at the consultation stage have strongly supported the Government's proposals. I know that some clubs are concerned that the new controls will work unfairly against them, but I am sure that hon. Members will recognise that it is just not possible to have one law for the good and another for the bad. I believe that the new laws are vital and that they will go a long way toward the two main objectives of curbing the growth of drinking clubs and cutting off an important source of paramilitary funds from a minority of clubs.
I remind hon. Members that this order is the other half of our overall package of reform. I hope that the House will accept that, together with the licensing order, it represents a sensible codification of the law which provides a new and improved structure covering both licensing hours and the relationship between licensed clubs and licensed premises. I commend the order to the House.
11.56 pm
Mr. Kevin McNamara: On behalf of the Opposition, I welcome the spirit of the order's contents. It is perhaps not as controversial as the licensing order, but in many ways it is much more

1093
important. It does much to deal with one of the major scourges of Northern Ireland—the financing of paramilitaries on both sides by illicit drinking, often of stolen liquor. It enables the police to control that drinking and those activities and to prevent those funds from getting into the hands of paramilitaries. Therefore, it is of the utmost importance.
However, some problems arising from the measure must be carefully considered. Many social and sporting clubs depend on profits from the sale of liquor to maintain some of their services to their members. From the way in which the order was presented to the House—perhaps this was done unwittingly by the Under-Secretary of State—one could gain the impression that what in many clubs in the United Kingdom would be regarded as legitimate sources of revenue to facilitate the purposes of, for example, a sporting club might be lost while a club awaited registration.
The powers given to the police in article 37 are very wide, both with and without warrant. Those powers, if used in an oppressive or harassing manner, could be seen to be resting unfairly on particular bodies in the community. Therefore, those powers must be applied with sensitivity and finesse, so that this order is not seen as providing an increased police power to harass people otherwise going about their lawful business. Legitimate and respectable clubs might suddenly become flashpoints if a heavyhanded policeman went in there. Neither the Secretary of State, the Government nor the Opposition would like that to happen. We want the police to have these powers, but we want them to be used sensibly and with great sensitivity.
Equally, that applies to the power which is given to local authority, which is one of the groups to which an application must be made. A local authority may object to the creation of a particular club. One club may be denied permission because there is within the locality another club which belongs to another tradition and group of people. It would be wrong if the location of one club were used to prevent the creation of a second one dealing with other people and traditions. They are some of the problems.
The other problem that worries me arises from the nature of many clubs—the legitimate ones and the respectable ones. They are run by eminently respectable and law-abiding people, but some of the provisions in the order, for proper reason, demand greater knowledge, accountability and observance of the law by ordinary citizens. In some ways, that could weigh heavily upon respectable people who conduct voluntary organisations. The Government could be seen to be over-bureaucratic in the way in which they deal with them.
Again, I trust that, in the operation of the rules, the police will look on such matters with flexibility. We are not seeking to catch the person who perhaps makes an error, does not get his papers in on time or does not always produce his account directly on the dot. The main purpose behind the proposals that we welcome is to catch the evildoer, get rid of the shebeens in east Belfast and in west Belfast, and get rid of the people who supply funds for paramilitaries. That is the main purpose of the order. If we can achieve that and, at the same time, enable ordinary people in Northern Ireland to carry out their business and social activities without fearing the contents of the order, we welcome it.
12 midnight
Rev. William McCrea: I am sorry that I did not catch the Chair's eye during the previous debate. As the Minister said, many matters in this debate relate to the previouss debate. There is one reason why my colleagues and I must divide the House. Although we accept some of the recommendations, the House must appreciate that we are witnessing a sham. We had a one and a half hour debate, but not one word against the legislation mattered one iota. The Order in Council and the manner in which debates are carried on and legislation is passed will ensure that any hon. Member who opposes Government legislation for Northern Ireland may present a rational argument that the Government may accept as rational. Yet not one comma in the legislation will be changed. It will be passed. The Government will make sure that there are enough hon. Members to pass through the Division Lobby to vote for it. What we witnessed during the previous debate proves that the House does not care what the people of Northern Ireland want or what they have to say.
It is interesting that, in this debate, the Government are quick to quote statistics and tell us about the letters that they have received supporting their attitudes. But they dismiss letters concerning Sunday opening. They are irrelevant—they do not matter—because they are against the Government and their way of thinking in regard to this legislation.
No one can say that drink-related problems in Northern Ireland are a joke. Drunkenness in any part of the kingdom cannot be treated as a joke. Under-age drinking and alcohol-related illnesses cannot be treated as a joke. There are social problems. Many parts of Northern Ireland suffer from poverty. One must accept that the cause of much poverty can be traced to alcohol. Family funds are spent on the consumption of alcohol, and children are left to go without. Such matters should not be treated in a light-hearted manner.
The voting power of the Government is being used in such a way that, whether or not the people of Northern Ireland want this change, it will be made. That is no way, in a democracy, to treat the people of the Province. They are not children. They have minds of their own and if they want to be different from the rest of the nation in matters such as these, why not permit them that difference?
I shall not detain the House for long, because nothing I say—any more than what my hon. Friends said in the previous debate—will have any effect when we vote on this issue soon, and the Minister, like most hon. Members in the House tonight, hopes that it will take only a few minutes to get yet another piece of legislation concerning Northern Ireland out of the way.
Rev. Ian Paisley: But the problems will not be out of the way.
Rev. William McCrea: My hon. Friend is right. The problems related to this legislation will not be dismissed as easily as the legislation is being passed. I warn the House that the way in which the people of Northern Ireland are being treated proves that, no matter what an Ulsterman wants, an Englishman thinks he knows better.
The Government seem to have got themselves on the hobby-horse of sabbath-bashing. Having dealt with the Sunday opening of shops, we now have Sunday drinking. Such legislation will not bring prosperity to Northern

1095
Ireland. Peace, reconciliation and stability are, we are told, the Government's aim. What they are doing tonight will help none of those objectives, and let it not be forgotten that many Opposition Members are supporting the Government tonight.
In opposing this order, my hon. Friends and I are registering our abhorrence of the way in which the Government are legislating for the Province. God speed the day when Ulstermen and Ulsterwomen can once again legislate for Northern Ireland and right the great wrong that is being done tonight.
12.9 am
Mr. William Ross: By an accident of the business of the House, the previous order took not an hour and a half but two hours and three minutes. But as has happened in the past, all the words that were spoken did not make one jot of difference to the outcome of the vote. I have no doubt that the outcome of the debate on the order that is now before us will be the same.
It was interesting that in the last debate—on the first half of the legislation before the House—something happened that has happened time and time again over the years. The Minister said, in reply to points that were put to him by hon. Members, that he did not have the answers then, but that he would reply when he came to wind up. However, if my memory serves me correctly, he did not answer those points. No doubt he will write in the fulness of time to the hon. Gentlemen in question—in two or three months—giving them the answers to the queries that they made publicly in the House. When the hon. Gentlemen receive their answers, no doubt they will be delighted to receive them. The point that troubles me, as it should trouble all hon. Members, is that that information, which should be available to all hon. Members and the public, will be available only to the hon. Members concerned. It will be entirely up to them whether to publish; whereas all hon. Members who took part in the debate would be interested to hear the Minister's reply. That is a little thing that highlights the shortcomings in the procedure that we are following this evening, and which we have followed now for 15 years too long.
This evening I have listened to the Minister and other hon. Members quoting from the work of the late Northern Ireland Assembly. That Assembly was able to debate these issues, but as it lacked the ability to put its own views on Northern Ireland legislation into action, it was left in a position in which the Government, under the procedures that are being followed this evening, could accept or reject anything that it desired.
The only way in which to overcome the difficulties that I have touched on so briefly this evening is to bring in Bills, to pass them through the House in the proper manner so as to hear what the various factions in the House have to say about them, to put down amendments for all to see and to discuss them, either in Committee of the whole House and or in Standing Committee. In that way, those who sometimes treat what hon. Members from Northern Ireland have to say about the society in which they live—and the legislation that affects it—rather lightly would have a clearer and deeper understanding of the ills that we are trying to cure, the fears that we have, and the cures that we would propose, which I believe would be far wiser than
1096
many of those that are so cheerfully passed through the House by hon. Members who are not even here for the debate.
I also noticed that the Minister took umbrage, when winding up the last debate, at what the hon. Member for North Down (Mr. Kilfedder) said about young soldiers. The Minister will know, of course, that North Down is a seaside resort that attracts large numbers of young people, who occasionally become unruly in pubs, or when coming out of them. That would apply whether they were in uniform or out of it, whether they were soldiers or members of other security forces, or whether they were just young fellows out for an evening. However, the Minister did not say who had rendered the legislation that we have just replaced unworkable. Who rendered it unworkable? Who is responsible for the build-up in the drinking clubs of Northern Ireland, to the extent that they have competed on such unfair terms with the traditional pub owners there? Why were we not given the answer to that question? It was because the Government do not want hon. Members to hear the truth, which is that it was the activities of the paramilitaries and the drinking shebeens that are run principally in Belfast and, at various times, throughout other parts of Northern Ireland, which led to the enormous increase in the consumption of alcohol right across the Province and, inevitably, to these changes in the law. If hon. Members on the Minister's own side of the House had had that put clearly before them, as they should have had, they might not have been willing to support him so blithely.
The hon. Member for Newry and Armagh (Mr. Mallon) talked about knocking on the pub door. I live close to a village but I do not go to pubs. However, that is a personal preference. I remember being told when I tasted whiskey for the first time that I would get to like it. I figured that if it was that hard to get to like I would not bother with it, and I am glad that I did not. The hon. Gentleman talked about knocking on the pub door and about the thrill that one got when one was in getting a drink. He said that stolen fruit was sweet.
When Mr. Speaker was being elected for this Parliament the hon. Member for Antrim, North (Rev. Ian Paisley) drew attention to the danger of making partial biblical quotations. I think that the hon. Member for Newry and Armagh was referring to a section from Proverbs. Perhaps he should look at the end of the passage about forbidden fruit. If he does that, perhaps he will not be so happy with the quotation that he gave. It is a passage that I recall very clearly because I read it many years ago.
I do not have the same objection to the content of this order as I had to the content of the last one. My objection is to the principle of legislating for Northern Ireland in such a way that we cannot have the in-depth, detailed examination that is needed to enable us to give an explanation to other hon. Members about the attitude that we adopt to these matters. If these things were presented as Bills, the hon. Member for Newry and Armagh and I might find a common meeting place occasionally. We might not have found that in the first order but we might have found it in this one.
Rev. William McCrea: Earlier in the debate the Minister said that the previous legislation could not he easily policed. Perhaps the hon. Member for Londonderry,

1097
East (Mr. Ross) would like to hear the Minister tell us how this legislation will be policed. It is also complex legislation.
Mr. Ross: This debate may not run the full one and a half hours and the Minister may have more than the 12 minutes that were allotted to him because of speakers over-running during the debate on the last order. No doubt if he has an hour or so he will be able to give us a detailed explanation about how the legislation will work in practice. Perhaps he will also give way when he makes one of his frequent mistakes. If that happens those few hon. Members who are here will have a clearer understanding of the complexities of the legislation that is before us.
I was speaking about my objection in principle to the whole procedure that is followed in Northern Ireland legislation. The evident annoyance of many hon. Members who support the Government, never mind the hon. Members who support the Opposition, is clear to all who take part in these debates and to those who stand at the Doors of the Lobbies. I hope that as the months and years of this Parliament roll away and as we have several of these orders being debated for an hour and a half at a time, that annoyance will increase until, to adapt another biblical quotation, even the unjust judge will bow to the reasonable request by Northern Ireland Members to produce legislation by Bill so that we can have the detailed scrutiny that all legislation passing through the House deserves.
12.18 am
Mr. Seamus Mallon: When I spoke earlier I was remiss in not extending a welcome to the hon. Member for Kingston upon Hull, North (Mr. McNamara) in his new post. We look forward to working with him and to his success.
In general, I welcome this legislation, and for one reason in addition to the reasons that I gave before. It ends the unfair competition between clubs and public houses and in addition it allows people to get to grips with the situation in which paramilitary groups are running clubs in the North of Ireland in order to further their own causes. I woonder how many young men—whether nationalist or unionist—would not be in prison, or, indeed, dead, had these places not existed. For that reason alone, this must he a good piece of legislation and in general terms, I support it. I support the provision concerning the bring-a-bottle clubs, which seem to be unique to the North of Ireland; I have never heard of them anywhere else. Those clubs were a nonsense, and I am delighted that the legislation will deal with them. Those who operate such clubs do not have staff to pay and they have no overheads or responsibilities. The arrangements made no sense from any point of view.
There are dangers inherent in the order. Like the hon. Member for Kingston upon Hull, North, I have reservations about the sweeping powers that it gives a constable. Under the order, a constable of 18 years of age can, on his own initiative, demand to see not only the structural plans of a club but its membership list and its books. There is something wrong there. That decision should be made at a more senior level—for example, by a superintendent. It is a serious decision which could have great ramifications in terms of the law and would put a tremendous onus on the club. If that decision has to be taken, it should be taken by a senior police officer so that
1098
it has the full weight of his seniority behind it. Then it could not be misinterpreted, as might be the case were the decision made by a young police constable.
I also have reservations about the role of district councils in relation to applications and the registering of clubs. We need some clarification on that. What are the checks and balances? Knowing the prejudices that exist in the North of Ireland, can the House imagine the kind of attitudes that might be displayed by, for example, Craigavon council, which has already cost its ratepayers £500,000 by refusing to act fairly towards St. Peter's club in Lurgan? Twice in the courts the council has been found guilty of that; it is a matter of court record. What checks and balances will protect clubs or personal licensees applying for a licence under the order from being subjected to such prejudice? That requires some explanation, because it is potentially a dangerous state of affairs.
I have reservations about the two-year rule as well. In some circumstances it might well prevent a bona fide club from developing its facilities properly. I am thinking especially of golf clubs and sporting clubs whose overheads on equipment are very high. The two-year rule could create problems for them.
I am puzzled, too, by the distinction between a sporting club and a social club. I simply cannot get to grips with it. Paragraph 22(c) does not make the distinction and the legislation becomes even more ambiguous when it goes on to define the position of young people. The Minister has clarified it to some extent by saying that young people under the age of 18 could be in the drinking section of the club until 8 o'clock. However, if that young person happens to be playing at Muirfield—and many of those playing at Muirfield this week are under the age of 18—does that mean that he cannot go on to the premises to eat once he has finished his round?
That is the kind of situation that could arise. Football matches in summer may not end until 10 pm. Will some members of the team be able to go into the club for a meal afterwards while others may not? As the Minister knows, golf competitions often do not end until 9 pm or 10 pm. Is it suggested that people under the age of 18 should not take part or that if one of them wins a major trophy he cannot go into the club to receive it? That kind of ambiguity requires clarification.
I repeat that I support the order on the grounds that it sets out to create equality between the public house and the club and it gives the Government power to deal with illegal drinking clubs supporting paramilitary groupings, but I have reservations about the way in which it will be operated. Some Members from the North of Ireland may be surprised to know that I agree with them that there should be a system allowing far more scrutiny and a proposal for change. I suggest that one way for them to achieve that would be to involve themselves in the search for legislative devolution—then we could blame nobody here.
12.26 am
Rev. Ian Paisley: I should welcome the statement of the hon. Member for Newry and Armagh (Mr. Mallon) if he would join other Members of the House in wanting legislation to be dealt with in this House in the proper manner, but I have heard no protest whatever from him about it. He raises a whole series of matters that he does not like but then says that he intends to vote for the order. The hon. Gentleman's speech conclusively proves

1099
what unionists have been saying for years. To hear the Liberals, who are no longer present, one would think that they first carried the banner to have legislation for Northern Ireland done in a proper way, but how many times have unionist Members stood up and insisted that Northern Ireland should be treated like any other part of the United Kingdom?
As the unionist spokesman, I welcomed the hon. Member for Kingston upon Hull, North (Mr. McNamara) to the Opposition Front Bench today. I had to get in before the SDLP, but I am glad that the hon. Member for Newry and Armagh came under conviction outside and returned to apologise. I am glad that we showed him the way, but he well knows—
Mr. Mallon: Will the hon. Gentleman give way?
Rev. Ian Paisley: There is plenty of time. There will be time in this debate for a great reply from the Minister. He will have time to answer the whole debate without having to do any writing. I shall not talk for too long as I want to give him plenty of time.
The hon. Member for Newry and Armagh knows that unionists have stood up not only in this Parliament, but in the last Parliament and in those which preceded it, and argued that this is no way to do legislation. The hon. Gentleman has made our case today in saying that the Minister should clarify so many points. But what use are the Minister's clarifications? They do not alter anything.
Mr. Mallon rose—
Rev. Ian Paisley: The hon. Gentleman should possess his soul with patience. He may not know the end of the matter. When he gets his nightcap in a certain place he should go to the Book of Proverbs and begin with chapter 1. He will come to the part about how the stolen fruits are sweet and he will learn about the matter that was in the fertile mind of the hon. Member for Londonderry, East (Mr. Ross). I am sure that that will provide the hon. Member for Newry and Armagh with a most edifying thought on which to sleep and I am sure that he will not have nightmares.
Mr. Mallon: Will the hon. Gentleman give way?
Rev. Ian Paisley: I will give way in a minute or two.
If there was a devolved Government in Northern Ireland and if the majority in that Assembly voted for legislation that the hon. Member for Newry and Armagh did not like he would boycott the Assembly. He would knock at the door of the Government and say, "Please let me in." The hon. Gentleman has advocated the joy of law breaking.
I do not understand how the Minister will police this legislation. He knows perfectly well that he cannot do so. To take the example given by the hon. Member for Newry and Armagh, a boy of 18 may win a trophy, but he will not be allowed inside the door of a club for the presentation. Who will police this legislation? It will not be policed. Everybody knows that this legislation is meaningless in its practicable application.
Mr. Mallon: I am grateful to the hon. Gentleman for giving way at last. I took the opportunity—a fairly unique one—of taking part in the deliberations of a
1100
Standing Committee that dealt with a Northern Ireland Bill. It was a valuable experience because it gave an insight into the thinking of people within this House.
I believe that there is something hypocritical about people adopting a quasi-integrationist position and demanding such legislative approach while, at the same time, portraying themselves as devolutionists. They cannot have it both ways. In effect, they are putting a foot in both camps. If they made up their minds about whether they were integrationists or devolutionists, this House might more easily come to a decision about how to deal with legislation for Northern Ireland.
Rev. Ian Paisley: The hon. Gentleman—
Mr. Deputy Speaker (Sir Paul Dean): Order. I would like to hear a little more about the registration of clubs.
Rev. Ian Paisley: The club that the hon. Member for Newry and Armagh would wish to register with is the united Ireland integration club. He does not want the people of the United Kingdom to legislate properly for the whole of the United Kingdom.
At present, there is no devolved government in Northern Ireland. We have the farce of the Intergovernmental Conference, supported by the hon. Member for Newry and Armagh. He makes his representations to Dublin Ministers and Dublin Ministers make representations of his views to the Ministers on the Front Bench. That illustrates what the hon. Gentleman thinks about devolution.
We are totally opposed to any form of devolution that is not based on proper, democratic British principles. The hon. Member for Newry and Armagh was elected to the Assembly in Northern Ireland and then took the deliberate step of becoming a senator in the Irish Republic to get himself out of that Assembly. That is what he thought about legislation for Northern Ireland.
I do not wish to run foul of you, Mr. Deputy Speaker, and I know that you want me to speak to this order. The Minister got away with saying that this order is the second half of the first order and that both halves go together. However, one point has been missed by the House. If we had been given proper legislation, it would have been impossible for the Minister to get this order before the House. With the general election, all that went before it would have fallen and we would be starting again. Ministers love Orders in Council because they can be introduced regardless of general elections. I searched the Order Paper to discover what orders were coming before us, and suddenly the orders that we have discussed this evening seemed to jump from nowhere. It was only a few hours before business questions last Thursday that we were told by the Government Whips, "Perhaps they will be brought before the House next week. That is just a word in your ear."
Perhaps there are good reasons for some "generosity" to be extended to Northern Ireland Members. Perhaps it was generous to alert us in the way that I have described. If that is the Government Whips' generosity, I do not know what their charity would be.
Mr. David Harris: That is how they treat Conservative Back Benchers.
Rev. Ian Paisley: If that is the way that the hon. Gentleman allows himself to be treated, I am prepared to enter into an intergrationist compact with him to fight

1101
such treatment to show that Ulster people will help the English in their battle against the Patronage Secretary, but I do not want to fall out with the right hon. Gentleman.
Many provisions in the measure that is before us are good and I am not condemning it out of hand, but it cannot be policed. I shall be interested to know how the Minister intends to police it and how the police have told him that they can police it. A serious measure is before the House and if it could be implemented it would be helpful, but I do not believe that that is possible. The Minister has told us that he could not provide the necessary policing to keep the pubs closed on Sundays, and it would be far easier to keep the pubs closed than to implement the intricate legislation that is now before us. The hon. Member for Newry and Armagh knows that, and some of his colleagues know it even more that he does.
Many of us are aware of the problems that come from drinking and the Minister must answer our questions fully and take up the issues raised by the hon. Member for Newry and Armagh. The Minister congratulated the hon. Gentleman on his previous speech, so let him provide all the clarification that the hon. Gentleman sought. I shall listen with great interest to what the Minister says.
The Minister knows that he cannot do more than provide the dots and the commas. Even if he makes statements tonight, they will be worthless in a court of law, and the Minister knows it. He is smiling because he has all the winners in his hand. He can laugh at us while the order is accepted by the House.
This legislation will not sleep away the problems. It is extremely difficult for the best ordered drinking club or bar to keep persons under 18 years of age outside the doors. Is the management to ask for birth certificates? Flow is it to be done? The answer is that it is almost an impossibility to keep young persons under 18 from these premises. We in Northern Ireland will reap what the House decides to do during what could be two one-and-a-half-hour debates. We shall reap the broken homes, the broken hearts, the broken families and the broken lives. The problems are already with us, but they will increase as a result of the decisions of the House.
12.39 am
Mr. Needham: As the hon. Member for Antrim, North (Rev. Ian Paisley) moved down the Bench towards me I wondered, before he resumed his place, how close to me he would finally arrive. I congratulate the hon. Member for Newry and Armagh (Mr. Mallon) on some of his remarks this evening and so I congratulate the hon. Member for Antrim, North on some of his. I agreed with some of the things that the hon. Member for Antrim, North said about the previous measure.
The hon. Members for Kingston upon Hull, North (Mr. McNamara) and for Newry and Armagh (Mr. Mallon) spoke about the two-year difficulty. I have considered the matter long and hard. It will be more difficult for clubs to show that they can survive for two years without the benefits of the profits from drink, but the basis of the legislation is the need to show that a club can exist in good faith for purposes other than the supply of liquor.
It is therefore absolutely right that there should be a gestation period in which clubs can thrive without relying on profits from selling drink to achieve reasonable
1102
membership. We make no apology for that. We have taken this course of action because we have problems with clubs and their objectives in Northern Ireland.
The hon. Member for Newry and Armagh asked about the difference between a social and a sporting club and said that he did not see the distinction laid out clearly in the order. He did not see the distinction laid out because it is not there. A club has to show that it exists in good faith for social, sporting or purposes other than for purely the supply of intoxicating liquor. Social intercourse is such a reason.
The hon. Member for Kingston upon Hull, North asked about the breadth of police powers and mentioned his concern about the possibility of a heavy-handed constable. I accept the necessity of the police administering the order properly and sensibly. In England and Wales, rights of entry without a warrant to inspect a club which has applied for registration are similar to those in Northern Ireland. The circumstances in which a constable can enter under the powers of a search warrant arc also similar except that, in England and Wales, a constable needs a search warrant to obtain evidence that grounds exist for cancellation of a club's registration. In Northern Ireland, a constable would be able to enter club premises without a warrant in those circumstances. In Scotland, I understand that there is no statutory right given to the police to enter and inspect the premises of a club which is applying for registration, although that can happen in practice.
The hon. Member for Newry and Armagh spoke of the possible age of a constable and his experience. The phrase "a contable" is defined in the Interpretation Act (Northern Ireland) 1954 and means any member of the Royal Ulster Constabulary or reserve constable. A young constable at present has powers to arrest people for far more serious crimes than are likely to arise out of his seeing whether a club is operating illegally. I agree that the order will have to be policed sensibly, and I am sure that the police are aware of that.
The hon. Member for Mid-Ulster (Rev. William McCrea) spoke of the sham way in which the order is proceding through the House. I have already stated the Government's position on that matter. I assure the hon. Gentleman that I take no great pleasure in having to bring forward Orders in Council as a result of the direct rule legislation, which does not allow for proper and full debate of these issues. I would welcome an opportunity to see the hon. Member for Mid-Ulster about that. Since last October, I have asked him to discuss this matter but, for reasons which I fully understand, he has declined my seductive invitation, which does not make amending legislation any easier. The Northern Ireland committee could be set up to discuss these matters, but it has not been operating. All I can say this evening is that I hope that we shall all find the discussions that may be about to take place will prove to be a more satisfactory way of conducting our affairs.
Rev. Ian Paisley: Surely the Minister must admit that it is for this House and the usual channels to take up these points about how we should work for Northern Ireland with the various parties. The Government should be prepared to meet us. We have heard representations from the Liberal party and from the various unionists in this House. Other hon. Members sitting behind the Minister have expressed the same view. Surely the Minister should

1103
be interested, not in talks with him, but in talks with the usual channels to find out whether the House wants to proceed in this way.
Mr. Needham: It may well be a matter for the House, and the usual channels will no doubt be fully involved. They always are in such matters. I have replied to several debates on such measures and I concede that there could be better ways to proceed, one of which might be through a devolved Administration in Northern Ireland to tackle these issues, as we said in our manifesto.
The hon. Member for Londonderry, East (Mr. Ross) pointed out that in the 12 minutes available to me in the preceding debate I was unable to answer all the points raised and that no doubt in many months time some joyful letters would arrive in the post which would not be publicised throughout the Province. That is not unique to debates of this sort. He will know as well as I do that in many debates reply speeches must be curtailed for one reason or another and that when it is impossible for Ministers to answer all the points involved, letters are sent. This Order in Council is no different in that respect.
The hon. Gentleman asked who made the legislation unworkable. It became unworkable because the Licensing Act (Northern Ireland) 1971 and the previous order were flawed as public opinion altered and the legislation was not in tune with what the public was prepared to accept. The Registration of Clubs Act (Northern Ireland) 1967 did not have the teeth to control the clubs which is why we have this order.
The hon. Members for Antrim, North and for Newry and Armagh asked about the policing of the order. Once again, in the preparation of the order we asked the police for their advice on what they felt they could enforce. We have stiffened the penalties considerably, so that if clubs do not take account of the rules in the order, they will face stiff penalties. To return to the point of the hon. Member for Newry and Armagh, if a young man wins a prize after 7 pm and goes into a club, providing he goes into a part of the club which does not have a bar he can be presented with the prize. If he goes into a part which has a bar and is presented with the prize, the club is in breach of the criminal law. I do not share the hon. Gentlemans' view that in those circumstances the police will refuse to act. It is a clear breach of the criminal law and police would have to act. We have no evidence to believe that that would not be the case.
Mr. Mallon: The Minister has quite a number of points to deal with. I am sure that he would not want to overlook the point that I raised in relation to the checks and balances concerning the role of district councils. I would not like to think that he would overlook that.
Mr. Needham: I apologise to the hon. Gentleman. The point about district councils is that they have right to object to the registration of a club as laid down in the order. However, the objection must be placed before the court. It is for the court—and in the initial stage of the registration, for the county court—to decide whether the objections have validity on the grounds laid down in the order. I suggest that it is perfectly fair and right to ask district councils their opinion of what is happening in their localities.
Of course the court will determine and it will clearly have the evidence of the club if the club claims that it is
1104
being penalised or objected to by a district council purely on the grounds that it comes from the other tradition. In those circumstances, the court will make the determination and the district council has no power other than to put before the court any objection laid down in the order. However, the court must decide. Indeed, one of the reasons for the introduction of the order is to ensure that the county court will make the initial determination.
I hope that I have been able to allay hon. Members' fears. The district council will rightly be involved. Beyond that, it will be for the court to determine.
Mr. Mallon: Surely one of the specified points is that the district council will have a role to play in deciding whether the person who submits the application is a fit person to hold a licence. It is difficult to see how such an objective decision could be made in a district council where there are so many varied interests and attitudes.
Mr. Needham: The hon. Gentleman is wrong. One of the grounds on which a court can determine not to register or renew a club's registration is that it is being run by unfit people. If a district council or a member of the public—and it was argued in the Blackburn report that members of the public did not simply roll off the street to make such objections—put forward a view that someone was unfit to run a club for some reason, or if that objection was made by a member of the police, it is up to the court to determine the matter. The determination will be made by the court, not by the district council.
I hope at this early hour of the morning that I have answered as many questions as possible without needing to have recourse to letter writing. I want to conclude by stating that I believe that the order—and I was glad that the hon. Member for Mid-Ulster at least appeared to agree with the contents of the order—is sensible. It will deal strongly with the small number of disreputable clubs which must be dealt with. The order this evening signals a very bad day for those clubs. I am sure that the people of Ulster have suffered enough from the paramilitaries of one sort or another and the whole House should welcome and support the order.
Question put:—
The House divided: Ayes 134, Noes 8.

Division No. 18]

[12.55

AYES

Alexander, Richard

Colvin, Michael

Amess, David

Conway, Derek

Arbuthnot, James

Coombs, Simon (Swindon)

Arnold, Jacques (Gravesham)

Couchman, James

Ashby, David

Dixon, Don

Baker, Nicholas (Dorset N)

Dorrell, Stephen

Baldry, Tony

Durant, Tony

Bennett, Nicholas (Pembroke)

Evans, David (Welwyn Hatf'd)

Bevan, David Gilroy

Flannery, Martin

Boscawen, Hon Robert

Foster, Derek

Boswell, Tim

Garel-Jones, Tristan

Bottomley, Peter

Gorman, Mrs Teresa

Bowis, John

Greenway, John (Rydale)

Brazier, Julian

Gregory, Conal

Brown, Michael (Brigg & Cl't's)

Griffiths, Peter (Portsmouth N)

Brown, Nicholas (Newcastle E)

Ground, Patrick

Browne, John (Winchester)

Gummer, Rt Hon John Selwyn

Bruce, Ian (Dorset South)

Hamilton, Neil (Tatton)

Buck, Sir Antony

Hargreaves, A. (B'ham H'll Gr')

Burns, Simon

Hargreaves, Ken (Hyndburn)

Butler, Chris

Harris, David

Carlisle, John, (Luton N)

Hayes, Jerry

Carlisle, Kenneth (Lincoln)

Heddle, John

Carrington, Matthew

Hicks, Mrs Maureen (Wolv' NE)

1105

Holt, Richard

Patnick, Irvine

Hunt, David (Wirral W)

Peacock, Mrs Elizabeth

Irvine, Michael

Porter, David (Waveney)

Janman, Timothy

Portillo, Michael

Jones, Gwilym (Cardiff N)

Prescott, John

Jones, Robert B (Herts W)

Rattan, Keith

King, Roger (B'ham N'thfield)

Redwood, John

King, Rt Hon Tom (Bridgwater)

Rhys Williams, Sir Brandon

Kirkhope, Timothy

Riddick, Graham

Knapman, Roger

Roe, Mrs Marion

Knowles, Michael

Rowe, Andrew

Latham, Michael

Ryder, Richard

Leigh, Edward (Gainsbor'gh)

Sackville, Hon Tom

Lennox-Boyd, Hon Mark

Shaw, David (Dover)

Lilley, Peter

Shaw, Sir Michael (Scarb')

Lloyd, Peter (Fareham)

Shephard, Mrs G. (Norfolk SW)

Lord, Michael

Shepherd, Colin (Hereford)

Loyden, Eddie

Smith, Tim (Beaconsfield)

Lyell, Sir Nicholas

Stanbrook, Ivor

McGrady, E. K.

Stanley, Rt Hon John

Maclean, David

Stern, Michael

McLoughlin, Patrick

Stevens, Lewis

McNamara, Kevin

Stewart, Allan (Eastwood)

Malins, Humfrey

Stewart, Andrew (Sherwood)

Mallon, Seamus

Stradling Thomas, Sir John

Mans, Keith

Summerson, Hugo

Marshall, John (Hendon S)

Taylor, Ian (Esher)

Martin. David (Portsmouth S)

Thompson, Patrick (Norwich N)

Maxwell-Hyslop, Robin

Thorne, Neil

Meale, Alan

Thurnham, Peter

Miller, Hal

Tredinnick, David

Mills, Iain

Twinn, Dr Ian

Mitchell, Andrew (Gedling)

Viggers, Peter

Mitchell, David (Hants NW)

Waddington, Rt Hon David

Moonie, Dr Lewis

Waller, Gary

Moss, Malcolm

Warren, Kenneth

Needham, Richard

Watts, John

Nellist, Dave

Wheeler, John

Neubert, Michael

Widdecombe, Miss Ann

Nicholson, David (Taunton)

Wiggin, Jerry

Nicholson, Miss E. (Devon W)

Winterton, Mrs Ann

Paice, James

Winterton, Nicholas

1106

Wood, Timothy

Tellers for the Ayes:

Young, Sir George (Acton)

Mr. David Lightbown and Mr. Alan Howarth.

NOES

Beggs, Roy

Robinson, Peter (Belfast E)

Forsythe, Clifford (Antrim S)

Smyth, Rev Martin (Belfast S)

Kilfedder, James

Maginnis, Ken

Tellers for the Noes:

Molyneaux, Rt Hon James

Mr. William Ross and Rev. William McCrea.

Paisley, Rev Ian

Question accordingly agreed to.
Resolved,
That the draft Registration of Clubs (Northern Ireland) Order 1987, which was laid before this House on 2nd July, be approved.

HOUSE OF COMMONS MEMBERS' FUND
Ordered,
That Sir Geoffrey Finsberg, Sir Peter Hordern, Mr. Geraint Howells, Mr. Alfred Morris, Mr. Gordon Oakes and Sir Gerard Vaughan be appointed Managing Trustees of the House of Commons Members' Fund in pursuance of section 2 of the House of Commons Members' Fund Act 1939.—[Mr. David Hunt.]

PARLIAMENTARY CONTRIBUTORY PENSION FUND
Ordered,
That Sir Geoffrey Finsberg, Mr. Ted Garrett, Sir Peter Hordern, Mr. Geraint Howells, Mr. Alfred Morris, Mr. Gordon Oakes, Sir John Stradling Thomas and Sir Gerard Vaughan be appointed Managing Trustees of the Parliamentary Contributory Pension Fund in pursuance of section 1 of the Parliamentary and Other Pensions Ad 1987.—[Mr. David Hunt.]

Urban Renewal (Birmingham)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Durant.]
1.4 am
Mr. Jeff Rooker: This Adjournment debate is about the lack of urban renewal in three small parts of the Handsworth ward in my constituency. I congratulate the hon. Member for Broxbourne (Mrs. Roe) on her appointment as Minister. I think that this is her third Adjournment debate in a few short days.
I shall deal first with the easy point—the London housing action area based on part of Aston lane. The area consists of 246 dwellings for which a scheme of enveloping is proposed in respect of only 163 dwellings. The tenure mix, about which the Minister will be interested; is owner-occupation, 52 per cent.; private landlords, 21 per cent.; local authority, 19·4 per cent.; and the housing association, 6·6 per cent.
The London housing action area is one of seven schemes currently submitted by Birmingham city council to the regional office of the Department of the Environment. The Minister will know by now, I think—if she does not, she will soon—that, under the terms of enveloping circular 26/84, the Department of the Environment is given 30 working days to approve such schemes. In reality, only schemes that will be approved are submitted. By yesterday, a decision on the London housing action area was outstanding by 77 working days, having been submitted as far back as 16 March. It was planned that work on that small area would go out to tender on 1 July. I understand that it has now been put off until about October. Notwithstanding the great concern caused to my constituents living in the area, such a delay means that contracts cannot start on time, forcing Birmingham city council to underspend on its housing investment programme, thus creating further cash flow problems. Of course, at the end of the year, the council gets the blame for the delay and the underspend. That is grossly unfair.
As the scheme is an agreed scheme—if it is not, I hope that the Minister says so—my constituents in Aston lane and Railway, London and North roads want to know why there has been a delay in the regional office of the Department of the Environment in deciding whether the enveloping scheme Should go ahead. They want to know what is holding up the London housing action area work. So far as they know, there is no technical problem. They are unhappy, annoyed and unsure because of the rumours that are associated with a delay of this kind.
That is the easy point. Unlike the London housing action area, Charles and Turville—both named, as they normally are, after a local road—are proposed housing action areas. They are larger than the London one, the Charles area consisting of 447 dwellings and the Turville area of about 250. They happen to adjoin and together there are about 700 dwellings.
At present, those proposed housing action areas are an island of unhappiness for my constituents in respect of their housing. It is an island of unhappiness in the Handsworth ward in Birmingham. My constituents feel left behind, as they see the effects of all the urban renewal in nearby roads. I shall name just two. People see work done on the other side of Putney road and on the other end
1108
of Westminster road. But, by and large, their homes are falling apart. They point out at public meetings that most people who are well housed tend to complain about the renewal parts of their area, such as about getting the grass verges cut, the trees planted and the dog mess cleaned up, but the people of Charles and Turville are mainly concerned about the roofs on their homes. They are concerned about the struggle for the work that is needed to keep the very fabric of their homes in good order—enveloping. At recent meetings, I promised them that, if I was successful in the ballot, I would raise the matter in the House of Commons.
The two housing action areas, as I hope the Minister has discovered, are special cases. I do not say that they are ordinary areas like London. Indeed, they have been treated as special cases by Birmingham city council's urban renewal team—a team of first-rate people that has led the way in urban renewal in this country. Many cities in this country have followed the experiments that have begun in Birmingham. The two areas are special cases basically because of the variation in dwelling size and the special mix of tenures. Indeed, those two reasons have caused 700 dwellings to be left behind for so long in the urban renewal programme. If it were easy to deal with long rows of terraced houses, virtually all the same size, they would have been done a long time ago, as indeed nearby roads have been done. Because of the tenure mix and the size of the dwellings, they have been left and chopped off the end of the programme year after year.
A detailed survey is required before an enveloping scheme can take place. One has been completed for Charles but not for Turville. The Charles area survey was completed in July 1986. The problem relates partly to the tenure mix. In Charles, the tenure mix is: owner-occupation 57 per cent.; private landlords 9·6 per cent.; local authority 4·3 per cent.; and housing associations 38·9 per cent. We are talking about 447 dwellings. Only 27 per cent. are classed as satisfactory. It will not be easy to conduct an enveloping scheme because of the size of the dwellings and their tenure. However, it is the considered professional judgment of the Birmingham housing urban renewal team, which invented enveloping, that enveloping provides the best option. The problem is that the Minister does not like the plan and the reginal office will not approve it. Like all good things that were invented in Birmingham, enveloping has been ruined by Whitehall. It could not resist writing a circular about enveloping. The minute the circular was written, the concept of enveloping was killed stone dead. The same thing happened with half-and-half shared housing ownership.
In the heads of households count in the Charles area, 45 per cent. are unemployed, and 45 per cent. are on supplementary benefit. The majority—68 per cent.—are euphemistically classed as ethnic minorities. Old-age pensioners comprise 18 per cent. of the count.
The neglect that has been caused in the small area of Handsworth by delaying the decision—which amounts to a flat refusal by the Minister—is causing the area to deteriorate fast. The city council housing department cannot now let its own dwellings in the area without great difficulty. Basically, only homeless families will accept dwellings in the area. For one of the major housing associations in the area, the average tenancy turnover is three months. Many large houses in the area are being

1109
converted into flats by housing associations. That got so bad that the city council has put a block on that type of policy. There is now some reconversion to family housing.
There are advantages and disadvantages in such a policy. On the one hand, the housing association brings about renewal and more homes are created—housing associations get the same subsidy for a flat as they do for a house. On the other hand, flats definitely mean a more transient population and can dislodge community spirit. That is not a criticism of housing associations. Indeed, the financial structure is such that that is bound to happen in an area in which there are many large houses and where there is a shortage of local authority capital funds. Because local authorities lack funds, the housing associations move in at their request, and larger houses are ripe for such development. The tragic result is that public investment by housing associations in their refurbishment programmes is wasted if other properties in an area—mainly the owner-occupied sector—are not to be dealt with.
I invite the Minister during the summer recess to visit St. Peter's road, Rodhut road, Crompton road and Churchill road, where she will see almost derelict homes alongside homes that have been refurbished following flat conversion programmes. She will see pepper-potting at its worst. It is crazy and it does not make any economic sense.
For some reason, the regional office of the Department of the Environment disagrees that enveloping is the required option for the area. On the evidence of my experience in the city of Birmingham, I back the view of the professional Birmingham urban renewal staff against the regional office, which seems to be running rather a vendetta against the city of Birmingham.
I corresponded briefly on this issue just prior to the election with the former Minister for Housing. The new Minister will have seen his letter to me of 14 May in which he pointed to the difficulty of too many housing association dwellings. He also said, unfairly in my view, that the blame lay partly with Birmingham city council because it had not sent any housing action area declaration documents to the Department. Of course it had not. As I said about the London situation, the only documents and applications sent in were those for which approval had been organised in negotiations with city council officials and regional civil servants. The system will not work in any other way.
If a housing action area made a submission and it was rejected, it would require to be redefined geographically, and that would put the programme back at least a couple of years. How could a little pocket of 700 dwellings—two housing action areas, an island, as it were, in the middle of Handsworth—be redefined geographically when all the areas around it had been dealt with by way of enveloping schemes? There would be no practical way of redefining it, so that is not an option for the regional office or the city council.
The detailed study of Charles was completed a year ago. My constituents in the Charles and Turville proposed housing action areas have suffered considerably because the area of Handsworth in which they live—the vast majority of them live there from choice; they like living in the inner city, where there is a vibrancy of life that is missing from the outer suburbs—is mixed by size of dwellings and ownership. It is the very tenure mix that Ministers, and I as Labour party spokesman on this
1110
subject for some years, have sought to promote. Yet that mix is being held against the sort of enveloping scheme that has been proposed.
Ministers, not Birmingham, wrote the enveloping circular. Department of the Environment officials do not make themselves available at public meetings, both before and after proposals are submitted for urban renewal. That sort of consultation is left to the city council's urban renewal teams. Those teams also take the blame, and in this situation it is unfair that they should bear that blame. That is why I decided to raise this matter on the Adjournment. I want to stop the buck-passing.
I appreciate that a difficulty exists and I do not deny that there is a special case. Certainly we do not want to create another special case, since there is only this island of two small proposed action areas in this part of Handsworth, although others may exist in other parts of Birmingham. I am speaking tonight only for my constituents. Others can speak for the rest of the city, though I appreciate that the Minister must take a more strategic view of the position.
My constituents have every right to feel frustrated, annoyed and angry. They are not receiving full information about who is making the decisions and the basis on which those decisions are made. One of those decisions represents the rejection of the proposed action areas, with Birmingham not yet having been able to submit the relevant documents. If they were submitted, it is known that they would be rejected. For that reason I hope the Minister will answer the questions I have asked tonight.
1.20 am
The Parliamentary Under-Secretary of State for the Environment (Mrs. Marion Roe): I thank the hon. Member for Birmingham, Perry Barr (Mr. Rooker) for his kind remarks on my appointment. I am grateful to him for this early opportunity to speak on a subject that I know is dear to his heart and one that is right at the top of the Government's agenda—housing in the inner cities.
The hon. Gentleman has rightly drawn the attention of the House to the housing conditions in the Charles, Turville and London areas in the north of Birmingham, and to the strong wishes of the residents in those areas that those conditions should be improved. I shall deal later with these specific areas and explain how improvements to the housing stock may be achieved. I think, however, that that needs to be viewed in the context of the many housing and inner-area initiatives which have been instigated or supported by this Government since 1979. Many of them have benefited inner-city authorities, and Birmingham is no exception.
The hon. Member has, for example, mentioned enveloping and has rightly pointed out the many benefits of that technique. For those hon. Members who may not be completely familiar with the term, enveloping is a technique pioneered in Birmingham that secures the wholesale improvement of the external fabric and frontages of private housing that is old and has fallen into disrepair. Work is carried out by the council, with the consent of the owners and at no cost to them. It involves the replacement or repair or roofs, chinmeys, guttering, windows and doors; and work to external walls and curtilages. Whole terraces or blocks of houses are dealt with at a time. Indeed, during the course of the work, the

1111
whole street takes on a quite extraordinary appearance—the houses are shrouded in scaffolding, to emerge a few weeks later in something like pristine condition.
The point that I would make about enveloping is that, whilst Birmingham undoubtedly pioneered the technique, the Government have consistently provided the council with backing and financial resources. In the early days when enveloping was in the experimental stage, Government funding was provided under the urban programme through the Birmingham inner-city partnership. In 1982, when the scheme had been evaluated and had been found to have proved itself, we acted to incorporate enveloping as an important component of mainstream policy for the improvement of private sector housing. As a result, housing authorities throughout the country that wish to adopt enveloping as a means of securing the improvement of private sector stock in housing action areas may do so, and may apply to the Department for Exchequer subsidy to cover 75 per cent. of eligible costs. One hundred and thirteen such schemes have now been approved, 38 of them in Birmingham.
More substantial in cash terms has been the urban programme itself. Birmingham has benefited to the tune of approximately £160 million under the programme since 1979. Handsworth has been a priority from the start and has received urban programme funding in the order of nearly £30 million. Apart from enveloping, Birmingham urban programme has supported many innovative and exciting housing projects and many of these have been directed towards privately owned housing in the inner areas. Recently, for example, the Department has approved a pilot project of security works to houses in the Westminster road area, some of which are in the proposed Turville housing action area; and the Broughton road local labour project in Handsworth has involved the collaboration of Government Departments with the city council and Tarmac in an extraordinary housing improvement scheme designed to provide training and employment, and housing for inner-city residents. The scheme, which involves enveloping and other internal and external improvements, will provide about 100 units of accommodation, and will create 40 local jobs and 24 additional places for local trainees. The overall cost of the scheme is approximately £1·6 million, of which the DOE will fund about £1 million covering house refurbishment costs.
Mr. Rooker: I should make it absolutely clear that Broughton road is not in Handsworth ward and is not in the Perry Barr constituency. It would be quite irrelevant for me to go back to people in Charles and Turville and tell them to look at what is happening in Broughton road in the Ladywood constituency.
Mrs. Roe: I shall come to the points raised by the hon. Gentleman. I said that I would come to them, but it is fair to put into context the Birmingham scene as a whole.
However, there is more to helping inner-city residents with repair and improvement than total resources allocated to housing. In November the Government announced that they would meet half the costs of a new £6 million scheme to help poorer home owners identify and secure repairs and improvements. Fifty new agency service schemes are to be established in partnership with Neighbourhood Revitalisation Services and Care and
1112
Repair Ltd. I expect a number of these to be in the inner cities, but this is not an initiative exclusive to them. They will provide a total service, if one is needed, including advice on what work needs to be done, what builder to use, how to finance the work and how to ensure that it is done properly. We believe that this important initiative will not only help to target better the standard local authority grants towards those who need them most, but will also succeed in attracting other sources of finance. We shall be monitoring the initiative closely to assess its success in meeting these objectives.
I shall now return to the particular points raised by the hon. Gentleman in relation to the proposed Charles and Turville housing action areas and the London housing action area in north Birmingham. I will deal with London first. Birmingham declared this a housing action area on 17 November with a view to improving the area through a variety of means in a concerted plan of action over five years. This would include enveloping, internal and environmental improvements, traffic management and clearance of substantial numbers of unfit houses. Although the area contains a high proportion of local authority and housing association dwellings—about 26 per cent.—we decided in the circumstances that the housing action area should be allowed to stand. Birmingham was notified of this and, on 16 March, the council submitted an enveloping scheme for 120 dwellings at a total cost of £906,780, or £7,557 per dwelling. We had been awaiting from Birmingham clarification of the cost of works to the curtilages to some of the houses. That information has just been received, and we shall so be in a position to issue a decision very soon.
Enveloping schemes are only considered within the 30 working days set down in the enveloping circular and when they meet all the criteria. The majority of Birmingham's proposals and the schemes currently with the Department are outside the criteria on a number of counts, and it is considered that in its enveloping applications Birmingham has not fully justified these schemes being approved at the level of subsidy applied for.
The position with Charles and Turville is slightly different in the sense that the city council has not yet declared the areas as housing action areas. Last year Birmingham informally approached the Department with a view to declaring both areas housing action areas in order to carry out enveloping. It was felt that this approach was not really appropriate and that Birmingham should consider an alternative strategy to secure the improvement of these areas. Housing action areas are intended to deal with the improvement of private sector housing and both Charles and Turville contain a high proportion of local authority and housing association property for which there are other more appropriate sources of funding such as, for example, housing association grants. In addition, the dispersed nature of the private sector properties would probably have led to ineffective enveloping proposals. Accordingly, the Department wrote to the city council suggesting that it should rethink its strategy for these areas. We have seen no further proposals from Birmingham to date, but the Department is willing to discuss a range of options with the city council if it so wishes. They might include, for example, the declaration of smaller areas as housing action areas or general improvement areas, individual improvement grants, limited block repair schemes, and the selective employment of agency services to encourage

1113
effective take-up of grant or loan facilities. I must emphasise, however, that the decision whether or not to declare a housing action area, and over what area, is for the city council to take. The Secretary of State does, of course. have the last word on declarations, even if he chooses to exercise his right to intervene very occasionally.
Mr. Rooker rose—
Mrs. Roe: I shall be happy to follow up further points in a letter, but I want to conclude my remarks and answer the questions that the hon. Gentleman has asked.
I do not underestimate the difficulties that the council faces or the size of the problems to be tackled. It is worth remembering, however, that enveloping represents a substantial public investment in private housing. Birmingham's schemes approved so far have cost over £50 million at an average cost per dwelling of over £8,000. By any acount that is a substantial commitment of public subsidy to the individual owners. That is why each scheme needs careful scrutiny. The House would not wish it to be otherwise. Schemes must be cost effective and represent good value for money. I make no apology, therefore, for this level of scrutiny, or the care with which we examine the council's future proposals. Although the residents of Charles, Turville and London have made plain their desire to have their houses and areas improved — and I understand and respect those wishes—as taxpayers, like all of us, they would I am sure be equally concerned that the Government should spend public money wisely and carefully.
Earlier, I mentioned some examples of the work that is being undertaken by the Government to improve housing in the inner areas of Birmingham and elsewhere. As to the future, we intend to strengthen local authorities' ability to direct resources at the areas of worst housing need. The Government's Green Paper on home improvement, published in May 1985, proposed that a single form of
1114
statutory designated area should replace the present housing action areas and general improvement areas. We intend to legislate, as part of the general reform of the improvement grant system, to give more freedom to local authorities to designate renewal areas. Both renovation and redevelopment will feature, depending upon a full appraisal of the different options available.
We also intend to tackle some of the shortcomings of enveloping. At present, this is carried out in housing action areas only under environmental works powers. We shall build upon the lessons learnt over the past years in using these powers, and introduce new powers of group repair which will enable local authorities everywhere to carry out the renovation of blocks of poor quality housing. Provided that schemes meet certain basic criteria as to stock condition and tenure, authorities will be free to exercise such powers without requiring the specific approval of the Secretary of State. This will greatly strengthen Birmingham's and other local authorities' ability to tackle serious disrepair in the private sector in co-operation with owners, occupiers and financial institutions.
In order to make progress, I suggest that the hon. Gentleman should encourage Birmingham city council to submit to the Department of the Environment regional office fresh proposals on the Charles and Turville areas as soon as possible so that they can be scrutinised without delay.
Mr. Rooker: Is there a minimum size of housing action area? I have seen a housing action area in the north which consisted of only about 15 houses in a terrace. Would that kind of thing be acceptable?
The motion having been made after Ten o'clock on Tuesday evening, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at twenty-six minutes to Two o'clock.