HC Deb 20 July 1987 vol 120 cc42-113

'In Schedule 12 to the Finance Act 1986 the prescribed maximum by which the value of the assets of an approved retirement benefit scheme may exceed the liabilities of the scheme for the purposes of paragraph 6 of the Schedule shall not be less than 10 per cent.'. — [Sir Brandon Rhys Williams.]

Brought up, and read the First time.

Sir Brandon Rhys Williams

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

I believe that this is a matter that can be dealt with quite briefly because this clause provides an opportunity for my right hon. Friend to explain his position rather than that I should be obliged to expound my argument at any great length. Therefore, I hope that my right hon. Friend is ready with his case.

If I may explain briefly, this new clause arises from a perfectly proper decision taken by the Chancellor some 18 months ago that the tax haven status of occupational pension funds should not be exploited by corporate treasurers putting money into the fund far in excess of any reasonable expectation of liabilities of the fund over time, in order to take advantage of the tax haven status. That status gave complete exemption from tax on putting the money in and, as things used to be, complete exemption from tax on taking that money out. It was a glorious opportunity for large and small corporations, which temporarily had a surplus of funds, to put the funds to employment in a way that exploited the tax advantages which were intended for the pension fund beneficiaries, but which actually flowed back to the firm and were an abuse of the intentions of the Inland Revenue.

My right hon. Friend the Chancellor decided, perfectly properly, that money recouped from trusts that went back to the employer should pay a substantial rate of tax, recognising the fact that when the money was first taken out of the general funds of the company and put into the pension trust it was a tax-exempt transfer. To make certain that these things went right, my right hon. Friend suggested that funds that had got themselves overfunded should bring their funds down to 105 per cent. of their liabilities forthwith and incur the tax on making the adjustment.

Of course, there was a great deal of agitation in the pensions movement about those proposals. Compromises were suggested, some of which were right. It was suggested that, before the pension fund repaid the money to the employer, much should be done to improve the way in which the pension fund operated for its real purposes—namely, to provide benefits for the employees. I believe that much more could still be done. That is obvious from what I said on new clause 1. There has been and still is genuine concern that the 105 per cent. of the liabilities of the fund, as calculated at any one time, may not allow enough margin as things develop over time — inevitably unpredictably — for a prudent firm to say that it is operating its pension fund sensibly. If the trustees repay the fund to the employer and incur a lot of tax in so doing, it may well be found that 5 per cent. is not a sufficiently large margin to cater for all the changes and chances of this fleeting world.

When we heard the reasons why 5 per cent. had been chosen and why the Government intended to stick to 5 per cent., it appeared to me that the benefit of the doubt should be given to the Government Department concerned. However, as I know that there has been a continuing anxiety that, in some cases, 105 per cent. does not allow enough latitude even for prudent firms to manage their affairs in accordance with their predictable liabilities, I hope there might be some room for movement. I have suggested the figure of 10 per cent. simply because it is a round figure and because this subject should be kept alive and we should not leave the Finance Bill without giving my right hon. Friend the opportunity to tell us about the discussions that have taken place and to explain his future intentions.

Mr. Norman Lamont

I hope that I may be able to allay some of the fears of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). Although we are not immutable on this matter, I believe that my hon. Friend's fears are a little exaggerated.

5 pm

My hon. Friend the Member for Kensington said, quite rightly, that we had two aims when we brought forward our proposals last year— first, to discourage employers from parking spare profits in their pension schemes in order to delay or escape a tax charge, and, secondly, to reduce the uncertainty about when and in what circumstances an over-funded pension scheme can pay part of a surplus to an employer. Action was necessary not only to require heavily over-funded schemes to reduce surpluses, but also to clarify the rules regarding the possible scope for payments by schemes to employers, subject always to the overriding need fully to protect the prudential interests of scheme members.

The case for action was generally accepted, but, as my hon. Friend said, considerable concern was originally expressed that our proposals did not contain adequate safeguards. In particular, it was at first claimed that the proposed safety margin of 5 per cent. beyond which a surplus need not be reduced was too low.

As we made clear last year, the safety margin has to be considered in the context of other changes. I think it is fair to say that the criticisms that were made under-estimated the strength of funding methods and the security of the actuarial assumptions which will apply for these purposes. On the advice of the Government Actuary, these were deliberately chosen as being at the top end of the range. A 5 per cent. surplus on this basis is a much larger surplus than the funding methods and actuarial assumptions adopted by most pension schemes in this country.

During the passage of last year's Finance Act through Parliament, we issued draft guidance notes on how the new rules would operate. These set out in some detail the proposed funding method and actuarial assumptions and they immediately reassured many of those who had previously expressed concern about these proposals. I must say that I am slightly surprised at what my hon. Friend the Member for Kensington has said about the reaction because it does not entirely tally with the reaction as it has been relayed to me.

Subsequently, the detailed provisions setting out the new rules were implemented when, under the powers conferred on it by schedule 12 of last year's Act, the Inland Revenue laid the Pension Scheme Surpluses (Valuation) Regulations. These provided, among other things, for the strong actuarial basis which would operate for these purposes, and for the margin of 5 per cent.

The question of pension scheme surpluses generally and the related issue of the investment policy of schemes have attracted a certain amount of attention. My hon. Friend the Member for Kensington, and some Opposition Members, argue that, as a matter of principle, first priority should be given to members. That is a separate matter, which goes rather wider than this new clause, and rather wider than my hon. Friend went.

We must remember that occupational pension schemes are arrangements made voluntarily by employers to provide retirement benefits for their employees. The requirements of the Inland Revenue, in considering whether schemes should be tax approved, take no view on such matters as the level of benefits. Provided that the maximum limits are not exceeded, the Revenue leaves schemes free to fix benefits at whatever levels are considered appropriate.

Another argument is that pension scheme surpluses belong to members. I am aware of this line of argument, but in law, of course, members of occupational schemes have only a contingent right to benefits when they reach the relevant retirement date. They have no direct legal interest in any of the assets in the fund, whether or not they have paid contributions. As the House will know, many schemes are funded entirely by the employers' contributions.

Then, of course, there is the question which exercised people very much last year of employers raiding the pension schemes—a danger which, I think, has perhaps been exaggerated. Occupational schemes are, as the House knows, established under irrevocable trusts, and the interests of members are protected by general trust law. Moreover, the 5 per cent. additional margin and the 40 per cent. free-standing tax charge on refunds will act as a powerful safeguard against employers seeking to withdraw scheme funds without proper regard to the interests of their members.

Mr. Blair

One of the matters that concerned people was whether the 5 per cent. excess of the assets over the liabilities took sufficient account of the difficulty of assessing precisely what the value of the assets and liabilities may be, given the number of variables involved. Has the Minister been satisfied from the representations received subsequent to the Finance Act last year that the 5 per cent. margin covers any margin of difficulty in assessing the true value of assets or liabilities?

Mr. Lamont

I am satisfied. I was about to say to my hon. Friend the Member for Kensington that his fears are exaggerated. They do not correspond with what I hear.

The precise point put by the hon. Member for Sedgefield (Mr. Blair) is, of course, a technical matter. It would be a lengthy matter for me to seek to say how the Government Actuary chose to define 5 per cent., which was on a different basis from that presumed by the pensions industry when it initially reacted to the 5 per cent. figure. I could go into the matter, but it was debated at considerable length in Committee last year.

The criticisms that were initially levelled at the 5 per cent. figure now seem to have abated and the anxiety expressed about it receded when the full details of the new rules were made clear. However, if at some point in the future it became necessary to revise the 5 per cent. figure, we would amend the regulations, which I assure my hon. Friend is the more technically appropriate way to set about the matter. But we have not reached that point and, for the reasons that I have hinted at, I do not think that we are about to in the foreseeable future.

Sir Brandon Rhys Williams

With the leave of the House, I should like to comment briefly on what my right hon. Friend the Financial Secretary has said.

This short debate has been useful, in that it has brought a statement from the Front Bench on this subject, which I know is regarded as controversial, certainly by some schemes, if not by all. I recognise that if the assets are valued on the same basis as the liabilities, the margin of 5 per cent. is very likely to prove acceptable in many cases, but it is possible to feel some anxiety that circumstances might change. I think that the House will have been interested to hear my right hon. Friend say that the figure of the excess of 5 per cent. might also be modified with the passage of time and in the light of experience. That was a helpful clarification of a concession that we did not appreciate that we had had before.

The situation that it is not impossible to imagine is one in which wages rise faster than productivity. In final salary schemes, that would place higher obligations on the pension trusts than they might have anticipated, although it would also produce higher contributions than they might have anticipated. If wages rise faster than productivity, it seems inevitable that the real profits of the investments will fall and the assets of the pension trusts may not respond as the trustees hoped. There may be smaller dividends because the money is flowing out to the wage earners which they hoped would flow out to the investors, or there may be less capital growth because of various factors, when people do not put the same stock exchange valuation on assets because the dividends are proving to be somewhat disappointing. If that was so, a 5 per cent. margin might prove to have been inadequate and a refund to the sponsoring employer might prove to have been a most mistaken decision on the part of the trustees.

My right hon. Friend the Minister explained that in those trusts the beneficiaries do not have a direct claim on the fund, as I understand it. I regard that as in urgent need of change. That is why I place emphasis on the identification of the employees' assets and on the clarification of the duties of pension fund trustees, even where the pension fund has not been set up formally under a trust. The administrators or managers of these schemes, and the insurance companies that operate them, should recognise that they have the status of trustees, and that the money has been put in their hands for the beneficiaries and not to be refunded from time to time to the employers.

The circumstances in which the trustees are entitled to refund the money to the employer seem very unusual, and there should be far more pressure on the funds that have large sums at their disposal—possibly well in excess of their apparent liabilities—to find ways to distribute that money to the beneficiaries. If all occupational pension schemes accepted it as a liability to uprate fully with the RPI as public sector schemes do, in many cases they would prove not to be so fully funded as they think. There are plenty of other ways in which they could treat their beneficiaries more generously if they have funds to dispose of in trust for the beneficiaries that are not specifically allocated to meet their clear obligations. Nevertheless, as my right hon. Friend is aware that 5 per cent. may prove, with the passage of time, not to be a sufficiently generous figure, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Order for Third Reading read.

5.12 pm
Mr. Norman Lamont

I beg to move, That the Bill be now read the Third time.

When a Bill is committed to a Standing Committee, it is customary to thank hon. Members at the end of the proceedings. However, as the Bill was discussed in Committee on the Floor of the House, it was not possible stop to pay tribute to hon. Members at the end of the Committee stage. Had it been possible, I should have liked to pay tribute to two hon. Members. First, of course, I thank my hon. Friend the Member for Kensington (Sir B. Rhys Williams) who has advanced his views on pensions with remarkable resourcefulness and lucidity. We have all become well educated on pensions as a result. I only hope that my hon. Friend is not too despairing and truly believes in the Jericho principle that he enunciated on Second Reading.

The second hon. Member to whom, in the best nonpartisan way, a tribute should be paid is the hon. Member for Sedgefield (Mr. Blair) who has handled over 100 clauses absolutely on his own. All hon. Members who have listened to the debates will agree that he has done remarkably well. Now that the Opposition reshuffle has taken place, I am extremely sad that we are not able to welcome the shadow finance team here, because I wanted to point out that it has increased its numbers. For the first time, a shadow team outnumbers the real team; there are six shadow Ministers, compared with five real ones. There are only two explanations for that. One is that my right hon. Friend the Chancellor of the Exchequer is the Gary Lineker of politics: he has to be marked by three men at once. The alternative version, which the Opposition may prefer, is that the hon. Member for Sedgefield has done such sterling work in Committee that they cannot find two people up to doing the work that he has done so well. The hon. Gentleman may choose the interpretation that he prefers.

I must say something about the pension provisions because they are the largest group of clauses in the Bill. They contain important and far-reaching changes. Much has been done to widen the choice of pensions. Many employers have established occupational schemes for their staff with the help, as my hon. Friend the Member for Kensington has emphasised, of generous tax reliefs. At present, more than 10 million people are members of such schemes, but there was clearly considerable scope for more to be done. Some 10 million employees are still not in occupational schemes and make no private provision for retirement. A central feature of our strategy is to bring private pensions within the reach of those employees, for two reasons: first, to provide them with a pension of their own, and, secondly, to increase their independence.

The new personal pensions will be available to all employees who are not in an occupational scheme, to the minority of employees who choose to opt out of their occupational scheme and to the self-employed. These schemes will be available from next January. The legislation is based on the present, broadly similar, retirement annuities provisions but, in addition to being brought up to date, the new measures incorporate a number of new features that have been widely welcomed. The Social Security Act 1986 enables employees to contract out of the additional component of the state scheme through a personal pension. The Finance Bill provides the necessary tax procedures to achieve that. Everyone will agree that these are important proposals, and my hon. Friend the Member for Kensington, who has been frank in some of his criticisms of the pensions regime, was kind enough to describe them as "inspired and imaginative." I hope that he will not mind my reminding him that those were his words.

In addition, the Bill enables a much wider range of pension providers to establish personal pension schemes. As well as insurance companies and friendly societies, the field will be open to banks, building societies and unit trusts. The Bill also contains provision to allow members of occupational schemes to make additional voluntary contributions to a pension plan that is completely separate from their employer's scheme, up to the tax approval limits on contributions and benefits. That, too, has been widely welcomed as something that will increase the choice of providing for retirement.

A number of hon. Members expressed concern about two aspects of the AVC proposals. First, they argued that benefits should not, as we propose, lose the right to be commuted. I am afraid that the Government do not accept that, because the tax reliefs for AVCs are intended to assist provision for additional pension benefits. Secondly, it was argued that the present benefit limits should not apply to free-standing AVCs which, it was suggested, were analogous to personal pensions. Again, I had to disagree with some of my hon. Friends and made clear my view that AVCs—whether in-house or free-standing—are not only personal pensions under another name. They provide benefits that supplement those available to someone in an occupational scheme. Therefore, I cannot accept that the benefit limits should not apply; nor do I believe that the necessary monitoring arrangements that the Revenue will be working out in consultation with the industry will make free-standing AVCs unworkable.

A further purpose of our reforms is to remove as far as possible the pensions obstacles to job mobility. My hon. Friend has emphasised time and again the problem of the early leaver. There is no quick and easy solution to that, but the new pensions opportunities which have been brought forward and which I have described will greatly reduce some of the worst aspects of this problem. I hope that my hon. Friend will at least agree with that. The improvements that we propose can be justified only if the tax reliefs for pensions are not abused. We have felt it necessary to impose some limited restrictions to guard against misuse of the tax reliefs, particularly by a small number of very high earners. The tax rules for pensions were never intended merely as a tax shelter for investment generally, with scope for postponement and, when it comes to lump sums, complete elimination of a tax liability. These restrictions will have no impact on the vast majority of pension scheme members. For ordinary working people, the opportunity for abuse has never been available.

During the debates in Committee, a number of hon. Members suggested that some aspects of the proposals — in particular, the rules on accelerated accrual of pensions—would restrict job mobility. My hon. Friend the Member for Slough (Mr. Watts) was extremely concerned about that. I am still not persuaded that any change in our proposals is justified, but I can assure my hon. Friend and the House that we shall keep the position under review, and if the rules appear to have a wider and more adverse impact on job mobility than I expect, we shall urgently consider the case for modifying them. I hope that my hon. Friend the Member for Slough will note that.

I could not leave the subject of pensions without again referring to what my hon. Friend the Member for Kensington has said about final salary schemes, although in the debate on new clause 1 we covered that ground fairly well. My hon. Friend is right that the question of early leavers still poses problems that we need to address in certain ways.

Mr. John Redwood (Wokingham)

Does my right hon. Friend agree that if in some future legislation we manage to move nearer to money purchase in the way described by my hon. Friend the Member for Kensington (Sir B. Rhys Williams) we would solve the problem of early leavers and the whole point of those amendments was to improve job mobility?

Mr. Lamont

My hon. Friend the Member for Wokingham (Mr. Redwood) is absolutely right. I hope that in the proposals we have brought forward in this Finance Bill we have taken a modest step in that direction. As my hon. Friend said, those arguments will disappear the more we go down that road. It is to some extent a question of people's choices under the new types of pensions that are now available.

The hon. Member for Sedgefield asked whether the personal pension legislation in clause 21(2), which concerns the waiver of premium options, represents a change from the present law. The answer is no. Such an option allows premiums payable under a contract to be waived if a person cannot afford to pay them because of illness. That is possible for retirement annuities now, but does not have to be expressly legislated for. Personal pensions legislation, however, is structured in a different way.

My hon. Friend the Member for Ryedale (Mr. Greenway) asked, in regard to clause 22, whether the new earlier retirement age of 50 may be applied between now and 4 January to existing retirement annuities. I am afraid that the answer is no. The present retirement annuity rules are not being changed, but there will be no objection to the amendment of existing retirement annuity contracts after 4 January so that they will be capable of approval under the new personal pension legislation.

My hon. Friend the Member for Ryedale was also concerned about the administrative arrangements for dealing with excessive personal pension contributions. Those and other aspects of the administration of personal pension schemes will he discussed fully with the pensions industry. It is hoped that a discussion document will be circulated to interested parties by the end of the month.

In addition to the debates about pensions, we had two important debates on retrospection. The first was in the context of United Kingdom members of foreign partnerships in clause 62, and the second was in the context of roll-over relief for gains on oil licences in clause 80. I understand completely why the House and the Committee were concerned and anxious to examine those matters closely. Hon. Members will recall that in both those clauses the Government recommended retrospective legislation to restore the general understanding of the law following unexpected decisions in the courts. The general understanding of the law prior to those decisions in the first case was that United Kingdom resident partners of foreign partnerships are liable to United Kingdom tax like all other United Kingdom residents, and in the second case that roll-over relief is not available for gains on oil licences.

Right hon. and hon. Members will recall that I said that such retrospection has caused the Government very deep concern, and we had not come to the decision easily. We had to give greater weight to the interests of the majority of taxpayers than to a limited class of taxpayer. In both cases we were introducing legislation which, while restoring the general understanding of the law, was also preventing third parties from suddenly deriving a windfall benefit from the decisions of the courts for six years back.

The provisions in clause 70 on Lloyd's reinsurance to close are an important part of the Bill. The original proposals caused hon. Members considerable worry and perhaps I should remind the House why legislation was necessary.

As matters stand, the Revenue does not have an effective locus for examining claims for tax deductions in respect of reinsurance to close premiums and, where necessary, making adjustments for tax purposes If nothing were done, Lloyd's underwriters would be in the unique position of being able to determine the amount of a tax deduction without effective review by an inspector of taxes.

There must be an effective system for ensuring that reinsurance to close premiums can be properly scrutinised for tax purposes. That is both right in principle and necessary to ensure fairness to other taxpayers whose claims for tax deductions have to satisfy examination by the Revenue.

However, the system must also be fair to Lloyd's and take account of its special features. We recognised that fact from the outset and when my right hon. Friend the Chancellor of the Exchequer announced the proposals in his Budget speech he said that there would be immediate consultations with Lloyd's on the details of the legislation. Those discussions have been extensive and thorough and we have carefully considered Lloyd's representations.

Quite properly, Lloyd's has recognised throughout the discussions that there needs to be a proper system for ensuring that tax deductions for reinsurance to close are not excessive, but it was worried about the original wording, which treated reinsurance to close as a provision. In particular, it objected to the principle of equating reinsurance to close premiums paid by one syndicate of Lloyd's underwriters to another with the provisions for outstanding liabilities made by insurance companies. Lloyd's feared that if those criteria were applied to it there would be excessive disallowances of claims for tax deduction, which might consequently damage Lloyd's commercial position.

The revised clause in the Bill, with the amendments made in Committee, meet Lloyd's anxieties about the original proposals. The chairman of Lloyd's has told his members that the Lloyd's council considers that the legislation should prove to be "workable and acceptable".

Instead of equating reinsurance to close with insurance company provisions, the Bill now provides a free-standing test for the tax deductibility of reinsurance to close. The test is that the figure must be a fair and reasonable value of the liabilities, designed to produce neither a profit nor a loss for the underwriters who assume the outstanding liabilities. So reinsurance to close will be tax deductible in full if — but only if — the figure can be justified by adequate evidence.

I think that it is fair to say that clause 70 is a satisfactory outcome of the consultation with Lloyd's. It meets the twin objectives of giving the Revenue an effective locus, which it must have, and being fair to Lloyd's members. In future, the amount of reinsurance to close can be properly scrutinised by the tax inspector to ensure that tax deductions are not excessive. At the same time, the proposal takes full account of the unique characteristics of Lloyd's and reinsurance to close, which I accept cannot be equated with provisions made by insurance companies.

I referred earlier to the oil industry provisions in clause 80. Clause 101 contains a series of amendments to the oil taxation provisions in the Finance Act 1987, mainly affecting the petroleum revenue tax "nomination scheme", which we introduced in section 61 and schedule 10 of that Act. Many of the amendments are directed at detailed difficulties that emerged during the continuing discussion with the industry of the provisions in the 1987 Act and are designed to make life simpler for the taxpayers who are affected.

Rather than leave the amendments over until the spring Bill, we felt that oil companies, which will soon be making their first returns under the nomination scheme, would find it helpful if we proposed the necessary legislation now. In addition to these detailed changes, clause 101 and schedule 8 introduce a measure to counter certain practices that could be used to circumvent the nomination scheme. Unlike the nomination scheme itself, this will not take effect at once. It will be on the statute book only to be triggered by Treasury order should evidence of abuse arise.

One cannot avoid mentioning the changes in inheritance tax legislation. We have liberalised inheritance tax in that we have allowed transfers to interest-in-possession trusts to count as potentially exempt transfers, provided that they meet the normal qualifying conditions of potentially exempt transfers. This measure will help businesses that are often held in interest-in-possession trusts. It will also help our heritage when many of our great houses and works of art are held in interest-in-possession trusts. I again make it clear that, although we have given this exemption for transfers into interest-in-possession trusts, we intend to draw the line there and do not intend to extend this to other forms of trust such as discretionary trusts.

We had some discussions about acceptance of property in lieu of tax and the Bill now contains some important alterations about the way in which interest is calculated. The donor of the property or the painting can now calculate the interest either to the point at which the item is offered instead of tax or to the point at which it is accepted — depending on which is more advantageous from the point of view of the taxpayer. We hope that this will encourage more of our heritage to remain in Britain. Hon. Members may recall that under these arrangements we were enabled to acquire Constable's "Stratford Mill". We hope that the new optional arrangements will provide further encouragement for the continued use of the facility.

I should also mention the provisions on stamp duty. Clauses 99 and 100 are stamp duty clauses and correct anomalies which would otherwise inhibit the smooth working of the securities market. Clause 99 makes minor amendments to section 50 of the Finance Act 1987. Section 50 extended the stamp duty exemptions for gilt-edged securities to options to acquire such stock, such as "call options". Clause 99 extends the scope of section 50 exemption options to "put options" as well.

Clause 100 deals with two problems that have been encountered following the introduction of the reserve tax when shares have been sold to the public on the occasion of a listing. The clause removes charges to the reserve tax that occur when an issuing house stands as principal between the company and the vendor shareholders on the one hand and the public on the other. It also removes the double charge to stamp duty and the reserve tax that can arise in certain circumstances when a member of the public receives initially a renounceable document of title. The clause will enable the new issues market to operate more smoothly to the benefit of companies bringing their shares to the market and also to new investors.

Mr. Tim Smith

Has my right hon. Friend noticed that, since the rate of stamp duty was substantially cut, the yield from stamp duty from stock exchange transactions has risen? Does he think that there is any connection between those two things and, if so, what lessons should we draw?

Mr. Lamont

My hon. Friend makes an extremely interesting point. [Interruption.] That sedentary interrup-tion is wrong. I know the answer all too well. If the House wishes we can debate for a considerable time the increased revenue that results from many areas when we cut taxes. That is a lesson that the Opposition have yet to learn and it is why so much of their argument that one can only afford more public services by increasing taxes is wrong. We can sometimes get better public services by cutting taxes.

Lastly, I should like to speak about what is perhaps the most important part of the Bill, the part which is undoubtedly a considerable innovation — profit-related pay. I am sorry that the Opposition persist in the view that the purpose of profit-related pay is to produce a low-wage economy. That is quite wrong. The purpose of profit-related pay is to produce pay that is affordable. Such pay has been wanted and pursued by Chancellors of the Exchequer in both Conservative and Labour Governments. It is very different from saying that we want a low-wage economy.

If we can have pay that is affordable, in the long run we shall have high wages and a prosperous economy. The new relief for profit-related pay is only one of several measures produced by the Government to encourage flexibility and to help create jobs by improving the supply performance of the economy. Profit-related pay means flexible pay. That means flexible upwards as well as downwards, in line with the commercial success of a business. Anyone who thinks that this necessarily means lower pay takes a much more pessimistic view of our business prospects than I or the markets do. We all want to see business success and higher remuneration and the Government are pursuing policies to those ends.

One could make the point that industrial production is at its highest ever level. Since 1979 we have seen dramatic growth in productivity and in profits. The idea of linking employees' pay to the commercial success of their business does not inevitably imply lower remuneration; quite the contrary. I make no apology for a measure that will encourage flexible pay. That is the direction in which we need to move, because although Britain's economy is making progress that would have seemed unbelievable 10 years ago, it is still hampered by rigidities and inefficiencies in its markets. That applies most of all to the labour market and to its pay system.

We have seen record falls in unemployment but we need more jobs and PRP can help here. Of course it is not a panacea, but I firmly believe that, if there were more profit-related pay schemes covering a significant part of the earnings of a large number of employees, that in itself would be a major step down the road on which we have set out towards higher output, productivity and employment. The hon. Member for Sedgefield said that he and his party opposed the general principle of profit-related pay. Presumably that means that they believe in pay that is not related to profits. I wonder where they think that the money to pay employees comes from.

Mr. Blair

I do not think that I ever said that I am against the principle of profit-related pay. I said that people were perfectly free to enter into profit-related pay bargains if they wanted to. What I am against is this provision which builds in an incentive for a specific type of incentive-based pay. That is altogether a different proposition.

Mr. Lamont

I am grateful to the hon. Gentleman for making that clear. Certainly some of his hon. Friends have shown opposition to the concept. They do not like the idea of pay being related to what is affordable by a company. I am glad that the hon. Gentleman departs from them on that.

The clauses that provide tax relief are designed to encourage the spread of PRP schemes. The same principle underlay the income tax relief for share schemes which were introduced in 1978 which we have turned into a great success. In the year to June 1987, a further 210 all-employee share schemes were approved under the legislation, as improved since 1978, bringing the total to over 1,300. If Opposition Members had at that time shown the same miserliness with tax relief as they now show to the clauses that encourage the spread of PRP schemes, I wonder whether we would ever have had the success that we have seen with share schemes. Profit-related pay complements the various existing share schemes, and those who support income tax relief for one should support it for the other.

The details of the proposed tax relief have been criticised for their complexity, and I would be the first to agree that the clauses have a complex appearance in parts, but that does not mean that a PRP scheme registered in accordance with this legislation would have to be complex. It could be simple and easy for employees to understand. We have gone to great lengths to allow employers to be able to choose from a great range of options what form their simple schemes should take. It is this freedom and flexibility that gives the Bill the appearance of complexity.

The Inland Revenue will be issuing guidance notes in September to assist employers. It is an encouraging sign of the widespread interest that our proposals have attracted that already over 21,000 employers have asked in advance for copies of that guidance, and in that number are 120 of the top 250 companies. I hope that they will turn their interest into action without delay. They will need to be thinking now about how to construct a scheme if they are to he registered to operate tax relief on it in time for the next profit year. Some will prefer to negotiate introduction next year and begin the tax relief in the year afterwards. Our costings anticipate a gradual take-up but I shall clarify that. A high take-up in 1988–89 would not produce the full annual cost in that year. Our estimate of a £50 million cost in 1988–89 could thus be consistent with over 1 million employees being covered by registered schemes in that year, which would produce higher costs in later years. I am sure that take-up will grow over time.

As tax relief could be very valuable — up to the equivalent of 4p off the basic rate to a man on average earnings—it will have a significant cost. I am not sure that it will ever cost £1 billion a year, which was the figure produced at one stage in the debate on the assumption that practically everyone who could be eligible will be covered by a registered scheme. A figure of several hundreds of millions a year is not unlikely, however, if the initiative has wide appeal. If it were to cover every potentially eligible employee, however, no one would be happier than the Government. That would indicate a radical change for the better and would ease our labour markets, which is something which we need very much to do. This would be a worthwhile return to the taxpayer.

The hon. Member for Sedgefield has said repeatedly that he could find better things to do with such large amounts of money. I think that we know what Opposition Members mean when they talk about better things that they would do with the money. There is probably no need to enlarge on that. They are extremely good at finding ways of spending large sums, sums larger by far than what is at stake with the proposed tax relief, and they would be able quickly to spend them. The difference is that the proposed tax relief will be a constructive contribution to making the economy work better. It will be a way of getting us away from the rigidities that have bedevilled our performance in the past. That is why it is essential that the House should support it as a way of helping businesses to do better. It will help employees to earn higher living standards and help our economy to grow and prosper in response to the challenges of competitive world markets.

In successive Budgets, the Government have held steady to the objectives of cutting taxes and simplifying the tax system to reduce distortion and lighten the administrative burden. Tax reform and reduction is a vital part of our overall strategy. We want to see a society in which enterprise is rewarded and where individuals are allowed to keep more of their money to spend or save as they wish. We want to provide greater incentives for individuals and their families. The pre-election legislation implemented vital measures to enable us to pursue these objectives. Overall, taxes were reduced by over £2.6 billion, the basic rate was cut by two percentage points to 27 per cent., inheritance tax was reformed and there was a package of measures to reduce the burden of VAT on small businesses.

The record is clear. Personal tax rates have been reduced and we have introduced reforms in business taxation that are being copied in other parts of the world. We have a system of business taxation that rightly rewards enterprise by allowing companies to retain more of the profits that they have made to spend as they wish, rather than the old self-defeating system that gave tax subsidies to encourage investment but taxed away the incentive to invest properly.

The Bill continues the process of reform and imaginative proposals, especially those relating to pensions and profit-related pay, which I predict will bring about significant change.

I commend the Bill to the House.

5.46 pm
Mr. Tony Blair (Sedgefield)

First, I thank the Financial Secretary to the Treasury for his kind remarks, his courtesy, his good will throughout the course of our consideration of the Bill. and for what was the most detailed explanation that I have ever heard on the Third Reading of a Finance Bill. I welcome the two Ministers who have participated in the proceedings of the Finance Bill for the first time, the Economic Secretary—it is a pleasure to welcome him to our deliberations—and the Chief Secretary, who spoke on Second Reading. Since Second Reading, the Chief Secretary has stayed in the background — no doubt he has been preoccupied in trying to square the Government's pre-election promises with the realities of public expenditure.

I wish to join in the praise of the hon. Member for Kensington (Sir B. Rhys Williams), whose knowledge of pensions brought expertise to our debates. To make an understatement, that expertise is not always present. The hon. Gentleman must have thought that Heaven had arrived on earth when, after years of containment no doubt by the Government Whips, he was given licence to advance a pretty well unlimited expansion of his arguments this afternoon. We are grateful to the hon. Gentleman for his contributions to our debates. If I may say so, it is greatly to his credit that he made a detailed speech in moving new clause 1 and was never once in danger of straying outwith the bounds of order. When he dies, I think that "transferability" will be found written on his heart.

I shall confine myself carefully to the contents of the Bill. It is the rump of a previous measure but it contains two especially important measures, those on profit-related pay and pensions. Though not necessarily headline-catching, these are measures that could be extremely far-reaching in their effect. On pensions, many of the measures flowed from the Social Security Act 1986, but this Bill included provisions on lump sum payments and the right to make additional voluntary contributions.

I wish to expresss one note of hesitation about the pensions legislation. The benefits of personal pension schemes are now considerable, especially in terms of accelerated rights of accrual. I hope that occupational pension schemes are able to keep up with personal schemes and that they will not become second-class schemes for those who cannot put together a decent personal pension scheme. The benefits of both need to be understood clearly and explained.

The Opposition found themselves unconvinced about profit-related pay and the claims that it would lead to lower unemployment and have beneficial effects on the relationship between workers and management of a sort that other incentive-based schemes have lacked. I do not say that profit-related pay is bad, and that is not the issue that we have to consider. We have to decide whether it was right to introduce this form of fiscal incentive to encourage PRP. The dilemma is that if the eventual costs of PRP are small because it has been little used, it will have failed because PRP, if it is to have any impact on the broader economy, must be widely used.

If profit-related pay succeeds in catching on and becomes expensive, the extravagant claims made for it will be subject to even greater scrutiny. If its costs run to hundreds of millions of pounds, as is possible — the Financial Secretary did not hotly dispute this—and its benefits prove to be vague or even illusory, we shall have made a very expensive mistake. Opposition Members felt that we could not support it for that reason.

Mr. Tony Marlow (Northampton, North)

The hon. Gentleman seems to be worried about the scheme suggested in the Bill being a success. If it is a success because companies make a lot of profits and therefore people pay less tax, because they are in the scheme for profit-related pay, is it not the case that as the company itself makes more profit it will be paying more tax so the cost of the scheme would be counterbalanced by the additional income from the company?

Mr. Blair

Obviously, that is the hope expressed by the proponents of this scheme. However, the argument that profit-related pay will help to reduce unemployment rests on a case posited at a time of recession. It is argued that in a recession there will be less incentive to sack workers but the profits will be reduced. I am not saying that profit-related pay is about cutting wages but rather that the case for profit-related pay, as against other incentive schemes, has not been made out.

The scheme may succeed in the sense that many people use it, but it will succeed in justifying the claims made for it only if it has a favourable impact on the broader economy.

We have also discussed various minor matters, such as the corporation tax changes which allow for automatic penalties. Those introduced some of the matters recommended by the Keith committee. I repeat the warning that, without a power of mitigation, the penalties could work great injustice, and in value added tax terms they have certainly done so.

The Government have changed their mind on at least three matters. They changed their mind on the treatment of the reinsurance to close premium in relation to Lloyd's in clause 70 and on the life assurance companies, where the treatment of capital gains on policies is to remain the same pending a review of the whole question of the tax treatment of life assurance companies. The Government changed their mind, too, on clause 80 and the taxation of oil companies in relation to roll-over relief in the farming out of licences. On that, the Minister agreed to consider some form of relief at the exploration phase when no profit is made.

Clauses 62 and 80 introduce retrospective legislation. The first concerns partnerships resident abroad and the second deals with roll-over relief for oil licences. We were right to draw attention to those two clauses on the basis of retrospection alone and to restate, as a matter of general principle, the fact that we dislike and distrust retrospective legislation, except in very special circumstances. There was a measure of common agreement that retrospection should be permitted only when it restored a general understanding of the law and when the tax loss resulting from the anomaly is very substantial.

During our debates, I was never convinced of the wisdom of the way in which the Government have proceeded in these clauses. When a tax case is taken to the commissioners or to appeal, the taxpayer wins and the Revenue introduces legislation to close the loophole, the legislation usually provides—and does so in the clauses — for the original taxpayer to be put into a unique category and thus secure the benefits resulting from his appeal. That is a very strange state of affairs, especially when many other cases may have been hanging fire pending the outcome of the original case.

The Finance Bill contains 104 clauses and nine schedules. Given that I have served on three Finance Bill Committees and that I am now moving on to other things, perhaps I may be permitted a moment of reflection. There are two enduring characteristics of Finance Bills. First, much of what they contain is highly technical, although non-controversial. When complexity is combined with lack of controversy in specialised matters such as taxation, there is a strong case for consideration by a Committee specifically formed to examine such matters. A Front Bencher, or indeed a Back Bencher — particularly in Opposition—will find that most of his time is devoted to understanding the legislation, let alone interpreting it or amending it sensibly.

Secondly, many of the clauses affect taxation of certain sectors or interests in a limited but profound way. The Government found with the clauses dealing with Lloyd's and life assurance companies that they benefited from a period of consultation. That period was forced upon them by the general election. However, in many cases the advantage of surprise on Budget day is negligible compared with the highly significant disadvantage of introducing measures without adequate consultation with those most closely affected.

At its best, this Bill is a typical Conservative measure. The Government are caring to a fault in considering the tax efficiency of foreign-controlled companies. They are painstaking in their study of detail when debating the future of inheritance tax, interests in possession or the plight of the wealthy. They welcome with open arms the slightest representation from Lloyd's. However, when it comes to hearing the voice of the under-privileged, the pleas for help of the unemployed or the cry for action on behalf of the 10 million or so people who are living below the poverty line, the Government fall strangely deaf. Their attitude becomes dismissive and their purse stays tight shut.

It is for that reason above all others—not because of the minutiae of the Finance Bill but because it affects the nature of our society — that we shall oppose the Bill tonight.

5.58 pm
Mr. Andrew Mitchell (Gedling)

I rise to address the House for the first time in a spirit of great humility—deeply honoured to represent my constituency in this place.

I am particularly pleased to have caught your eye relatively early in the Session, Madam Deputy Speaker, so that I may pay tribute to my predecessor, Sir Philip Holland. Philip's love and knowledge of this place and his service to his constituency was well known and well respected—as much in Gedling as in this House.

I mean no disrespect to Acton when I say that Philip graduated from that seat, from 1959 to 1964, to Carlton, which he went on to represent for 21 years—latterly as the constituency of Gedling, following the Boundary Commission's most recent review.

Any hon. Member who chairs the Committee of Selection and yet remains so well liked and respected by hon. Members on both sides of the House must be endowed with the greatest of skills. Only time will tell whether any of my hon. Friends will take up Sir Philip's mantle as a great hunter of quangos. I have been left in no doubt over the past few weeks that Philip's many friends on both sides of the House will join me in wishing him and Lady Jo Holland a long and happy retirement.

The House may be aware that I am not the first member of my family to have taken his seat in this House; indeed, I am at least the fourth to have done so. Nevertheless, over the past three weeks I have come to the confident conclusion that not since Lloyd George have so many people known my father.

I beg to suggest that the constituency of Gedling is insufficiently well known outside Nottinghamshire. The rural deanery of Gedling, which gave its name to the refashioned seat of Carlton in 1983, is far more compact than its predecessor, having lost all the land south of the River Trent. My constituency stands at the crossroads of England, with a foot in the north, a foot in the south, but its heart in the Midlands.

Many hon. Members wax lyrical about the rural or urban nature of their constituencies and their agricultural or commercial interests. The great delight and at traction of the Gedling constituency lies in the exciting cross-section of the great variety of our national life that it provides. From the rural beauty and farming lands at the northern end to the more industrial areas of Netherfield and Colwick, my constituency includes the prime residential areas of Carlton, Woodthorpe and Arnold, perched either side of a hilly ridge. It also contains the attractive villages of Gedling, Burton Joyce and Stoke Bardolph, which include two of the most beautiful churches in the country which date from Saxon times. The Gedling colliery is achieving record productivity. It has been recruiting new members to the industry over the past six months and is an important feature of my constituency.

The quality of life enjoyed by my constituents is, by and large, excellent. We are particularly well served by the fine health facilities in Nottinghamshire which have seen a 30 per cent. decrease in waiting lists over the past four years. My constituents profit from living under the benign sway of the Gedling borough council, which is continuously singled out for praise by the Audit Commission for its standards of efficiency and service provision. Indeed, the council had its own version of the right to buy before the Government introduced their Housing Bill in 1980. We receive national and international delegations to inspect our housing schemes for the elderly and the frail elderly.

Of great significance is the fact that Gedling lies alongside the city of Nottingham. We know only too well that what happens in Nottingham today affects us in Gedling tomorrow. Gedling's wealth and success are inextricably linked to the future of Nottingham city. As I try to follow that rocky pathway which is the lot of a Government Back Bencher, travelling as it does between toadyism and revolt, I shall be hoping, Madam Deputy Speaker, to catch your eye in the future when the Government's bold plans to tackle the problems of our inner city come under discussion. We have much to be proud of in Gedling, and I am pleased to have been able to tell the House briefly some of those things.

Many of my constituents have followed the passage of this Bill with keen interest. The measures which passed into law before the election were widely welcomed. The help for business in dealing with VAT and in reducing small companies' corporation tax was warmly supported, as was the further help for the blind and the elderly. Above all, we have had the welcome reduction in income tax. Today we are asked to give a Third Reading to this Bill. the greater part of which reintroduces proposals for tax relief for profit-related pay, as well as extending the accessibility and flexibility of personal pension schemes. I warmly welcome both measures. As my right hon. Friend the Chief Secretary said on Second Reading: The working of the labour market remains one of the greatest weaknesses in this country." —[Official Report, 8 July 1987; Vol. 119, c. 356.] There is common cause on both sides of the House that the level of unemployment remains appallingly high.

I hope that I am being equally uncontroversial when I say that it is the supply side of our economy that must particularly command our attention and the Bill, with these two principal measures, makes a direct contribution on that front. In spite of significant progress on the supply side, there remain real restrictions on job mobility, occasioned by the lack of private rented accommodation and immobility within the council housing system.

The problems within education and training are well rehearsed, but the results are that we do not always turn out children equipped to compete in today's industries or win tomorrow's jobs. There are still problems within the labour market which hinder productivity along with our industrial performance. Above all, there is the absurdity of a system whose rigidities can attribute greater value to being unemployed than to working.

Tax relief for profit-related pay will ecourage the widespread adoption of such schemes and will help to dispel any vestige of that bizarre myth which was prevalent during the days of our economic decline in some parts of the private sector —that pay is somehow not in reality always directly linked to profitability.

These measures will help further to eradicate the them-and-us sentiments which for so long have dogged British industry. They will extend and enhance a community of interest between employee, employer and shareholder and secure a more motivated and committed work force. Above all, who can doubt that such measures, when implemented, will act to cut unemployment by ensuring less risk for an employer contemplating taking on labour as well as acting as an alternative to redundancy when times are bad?

I believe that the clauses which relate to private pensions will secure an equally warm welcome. They improve the lot of the early leaver, and perhaps I should declare an interest at this point. It is a sad fact that many who have changed careers during their working life are particularly disadvantaged in respect of their pension entitlements. The relevant clauses in the Bill will not only increase the freedom to choose in pension planning but free another rigidity in the labour market over the long term.

The Bill's provisions join the many other economic measures taken by the Government to improve choice and freedom for millions of our fellow citizens. Such measures also extend personal responsibility greatly within society. It is the extent to which these opportunities and responsibilities have been grasped throughout society which is truly remarkable. Many of these measures have been practical methods to improve the commercial operation of our economy, but they are part of a shift in opinions and ideas, and expression of a new consensus which has sprung up. They mark a sea change in public opinion. It may be that the Falklands factor disguised the extent of support for this new reality, but the 1987 third election victory is a message which cannot be ignored on the Opposition Benches. Indeed, the right hon. Member for Plymouth, Devonport (Dr. Owen) acknowledges these truths in his books and in his more recent speech in the debate on the Loyal Address. I dare to suggest that even the hon. Member for Dagenham (Mr. Gould) has shown an awareness of these new realities and aspirations over the past few weeks.

It was a Conservative Prime Minister returning to office in 1951 who reflected in the House that the nation required time to allow certain Socialist legislation to reach its full fruition. Although the positions are not comparable, I hope that the Opposition will accept how great has been the revolution in the spread of choice and ownership within society as well as in personal responsibilities keenly grasped. It is time for the Opposition to embrace these verities.

6.6 pm

Mr. Andrew Smith (Oxford, East)

I, too, am rising for the first time to speak in the House and I should like first to congratulate the hon. Member for Gedling (Mr. Mitchell) on his speech, which I found eloquent and confident and which taught me a great deal about his constituency. It is a double pleasure to congratulate him because, last week, I had the misfortune to lose my identity pass and the hon. Member was, first, observant enough to find it and, secondly, kind enough to return it to me personally.

It is an honour to have been elected to represent the people of Oxford, East. I sincerely thank them for the privilege that they have afforded me. That Labour gained the seat with an increase in our vote of more than 20 per cent. on 1983 is a real tribute to the Labour party members and supporters in our constituency and beyond who worked hard and long to secure victory. It is a tribute, too, to the standing which Labour has built up in our community over the years. The result was proof that Labour can win new seats in southern England. I am sure that it will be followed by other similar southern successes in the next election.

It is not as though my predecessor, Steve Norris, and the local Conservative association were any pushover. Indeed. I should like to express the thanks of the constituency, as I did on election night, for his service, especially his assiduous work on behalf of individual constituents. I thank him also for his stance on issues such as freedom of information and sanctions against apartheid. As many hon. Members will know, Steve Norris is a man of very considerable ability and persuasiveness. I do not want to damage his chances by saying this, but if the Conservative party has any sense, it will forgive his achievement in securing last year the title of The Guardian Back Bencher of the year and get him back in the House by finding bluer waters for him to swim in next time.

For those who do not know our constituency, Oxford, East is not the Oxford of "dreaming spires" or colleges but the Oxford of the people who built them, who work in them and who are rightly proud of the city's heritage, for it is their heritage—a heritage which also takes in the Oxford of motor manufacture, very fine hospitals and a polytechnic which is second to none. It is a compact and yet varied constituency in which the pride, the sense of community and the very diversity of the parts bring something greater to the whole.

I especially place on record my gratitude to the people of Blackbird Leys estate, where I live, for their invaluable advice and support over the years I have had the privilege of representing them on the city council.

I also record my personal appreciation of the contribution of the ethnic minorities to the community life of our constituency and pledge to continue here the work to eliminate the evils of racism whereby ethnic minorities are seen as a problem rather than as an opportunity for a genuine multi-cultural society based on equality, mutual respect, and full and fair opportunities for all.

Ours is a constituency which has escaped the very worst ravages of monetarism and recession. By present national standards, the Oxford area is a prosperous one; yet we have in our midst pockets of bad unemployment, serious poverty, one of the worst housing crises in Britain and shortages of funds for health and education that are drastically undermining services held in the highest regard by all in the area. Across our constituency, people of all backgrounds and political persuasion have come to demand and expect quality in public service provision that can only be secured by harnessing to the dedication of the work force adequate resources efficiently managed and applied in an economic and political environment that backs up their collective efforts and provides a democratic framework within which the individual and the family— not just a few of them, but every individual and family —can make the most of their lives. The Government's programme, the Finance Bill and the Budget that preceded it contain nothing to enable our people to do that. It is such a waste of the potential of my constituency, as it is of Britain as a whole.

I should like to make two comments and one suggestion about the fiscal incentives for profit-related pay in the Bill. My comments are, first, that if those provisions have any merit, which I think is doubtful, in any case there is nothing whatever in them for Austin Rover workers, local authority workers, hospital workers and the many others in Oxford, East working in the public sector, as clause 6 of the Bill specifically excludes them from the scheme and further relegates them to the status of second-class citizens. If there is benefit to be had, they lose out twice. They lose out by not being eligible and, to add insult to injury, they will be paying through their taxes for any benefits that others may enjoy.

My second comment is that, if we are to provide fiscal incentives for pay to be linked to profits, any sense of natural justice would require that this be conditional upon rights to information and, indeed, bargaining on the part of employees as to how those profits are determined. The absence of any such rights destroys any benign purpose that this part of the Bill may have had.

My suggestion is that if the Government are not merely engaged in a wage-cutting exercise, as the Financial Secretary said, if they are genuinely convinced of the merits of taxpayers subsidising linked pay and profits, they could best demonstrate their conviction by going the whole hog—by applying the thing the other way round and providing the same incentives for linking distributed profits to wage levels. We could have wage-related profits. That way, shareholders would benefit only where managements succeeded in getting wages up—a true harmony of interest, to my mind. However, I fear that that is not altogether what the Government have in mind.

Hon. Members on both sides in Committee referred to Austin Rover workers and others under the control of the Crown being excluded from the profit-related pay provisions of the Bill. Even more disturbing was the response on behalf of the Government to the effect that this way was all okay because public sector activities would be covered when they were transferred to the private sector. This can only add to the anxieties that afflict the future of our car industry.

The Oxford area has seen 11,500 jobs in the car industry destroyed in the past 10 years. We have seen car workers wages' tumbling down the pay ladder not because of any lack of effort on the part of the work force; workers are working harder than ever before. It is not because of any resistance to new technology; some of the most advanced robotics in Britain are at Cowley. It is because the Government have signally failed to provide the market conditions for the success of the domestic car industry. Worse than that, they have heaped on top of the high exchange and high interest regimes that all but crippled the industry all the uncertainties about the future ownership of Austin Rover. Last year's Ford sell-off talks and the forced disclosure of commercial secrets to Ford dealt a body blow to the company at the very time when all the efforts of the work force and the completion of the new model range were starting to turn the company around.

I would hope to stay within the conventions on controversy in maiden speeches and have the support of Conservative Members when I say that the future of the car industry depends, first, on keeping Austin Rover in the ownership of the British people; secondly, on assuring investment for the models for the future; and, thirdly, on creating the market conditions in which the products the workers are so keen to produce can be sold. Long-term planning is needed to ensure the success of this key industry, not just for the sake of those directly employed and those in components manufacture who, together with dependants, total around 1 million people, but for the sake of the future of other key industries — steel, robotics, plastics, electronics and glass industries, all of which have a future linked closely to the success of our car industry.

There would be no clearer sign that Britain is the first undeveloping country than to further dismember and dispose of the only bits of the car industry in British hands. It would be a catastrophe not just for my constituency but for the country as a whole—a catastrophe of such an order that I sincerely hope that even the present Government will shrink from the prospect and instead now provide the support for the industry that its efforts and contribution to the economy so richly deserve. That way, our key manufacturing industries might generate profits for investment and profits from which workers can take a share. It is fair shares and fair opportunities for all that the Oxford, East voters and Labour Members are looking for. It is a tragedy and a great pity that those fair shares and those fair opportunities are not reflected in the Bill any more than they are in the Government's programme.

6.18 pm
Mr. Tony Marlow (Northampton, North)

It is a great pleasure and a privilege to follow two such charming and eloquent maiden speeches. I am pleased to be able to do so. I say to my hon. Friend the Member for Gedling (Mr. Mitchell) that I hesitate to make remarks about chips off old blocks, but such was his eloquence and the content of his speech, of which we hope to hear many more in the future, that it may well be said before too long that father is a chip off the new block. I was pleased to hear the remarks he made about his predecessor, Sir Philip Holland, who was well respected and loved by those of us here. He had the wonderful knack of making sure that one got on the Committees that one wanted to get on and that one did not get on to those that one did not want to get on.

I liked the caution about treading the narrow path between toadyism and revolt. I understand that Private Eve has a competition for what I think could be described in the Chamber as the excrement of the year. It may well be that at some stage Private Eye will set up a competition for the revolting toady of the year. I am quite confident that it will not be me or my hon. Friend.

The hon. Member for Oxford, East (Mr. Smith) also showed great promise for the future and we all enjoyed his speech. He made some kind remarks about his predecessor, Steve Norris. It is one of the sad and savage paradoxes, one of the harsh ironies of politics, that "the good die young", as it were. I am sure that we all agree that Steve Norris was one of the outstanding Members in the previous Conservative intake. He had great ability, personality and charm and, as the hon. Gentleman has said, great concern for the unfortunate. The hon. Gentleman suggested that if we were wise we should hope to see him back here again. We are indeed wise and we hope to see him back before long. The hon. Member for Oxford, East also referred to the importance of the motor industry and spoke with concern and affection about his constituency. Conservative Members, too, are deeply concerned about the fortunes of the motor industry and we are pleased that reports from Austin Rover are positive. We wish the hon. Gentleman and his constituents well.

This Finance Bill has been described as a hangover from the last Parliament—the controversial bits that we could not get through before the general election—but what was controversial then is perhaps less so now. Many of the controversialists before the election now sing a very different tune. The hon. Member for Oldham, West (Mr. Meacher) is convinced now that Conservative Finance Bills in the past few years have led to growth in the economy. The right hon. Member for Plymouth, Devonport (Dr. Owen), who is much respected among my colleagues, also believes that the economy is in good fettle. The perhaps less respected right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was filled with foreboding about the state of the economy, but having seen that his dire predictions are not to come to pass, he has removed himself from Treasury affairs and returned to where he was some four years ago.

Tunes have changed and from the Opposition's treatment of the Finance Bill in the past few days it seems that it is no longer a controversial hangover from the last Parliament. The hon. Member for Sedgefield (Mr. Blair) seemed almost to welcome many of the provisions. He was not sure whether this was the best way to do things, although he suggested no alternative, but he seemed to imply that many of the measures might have his support, if not today at least when they prove successful, as they surely will.

That has been the Government's history in the past eight years. They and their policies have been criticised, castigated and damned by the Opposition, but eventually their measures have been seen, if not in Socialist eyes as the right measures, as effective and popular measures respected by the British people. Socialist candidates are learning what to say when they knock on the door of a person who has bought his council house, his car and shares in British Gas. There was a time when it was felt that we were all Socialists. I believe that now we are all becoming Conservatives.

Mr. Nicholas Soames (Crawley)

We all are Conservatives.

Mr. Marlow

My hon. Friend is certainly a robust follower of that persuasion.

This Finance Bill is one of a long line of Conservative Finance Bills which have regenerated and transformed the British economy. One loses count, but this must be about the seventh year of uninterrupted growth, with an average of 3 per cent., which is the fastest of any economy in western Europe. We used to be the sick man of Europe, but now we are the fit man of Europe. As a result of the Government's economic policy, manufacturing productivity has increased by a massive 43 per cent. since 1980 —again, a greater increase than in any other advanced industrial country. That magnificent achievement is in part due to Bills such as this, but the majority of the credit must go to the British people, who have grasped with both hands the opportunity presented to them.

The Opposition always seem to give statistics about manufacturing industry, choosing one little slice of the economy and comparing it with, from their point of view, favourable figures from some past time in history. Manufacturing industry, the extractive industries and the construction industries are all creating wealth—doing things, building things and making things— and when they are all added together one sees that there has been a massive increase in output since 1979. For some reason —I think that I know why—the Opposition choose only manufacturing industry.

I see the hon. Member for Stockton, North (Mr. Cook) on the Opposition Front Bench looking at me intently. Let us take British Airways as an example. There are people who drive aeroplanes, people who build hangars and transit facilities, people who operate those facilities, people who sell holidays and people who maintain the aircraft. There are also people who manufacture aircraft, but an airline needs all those things and all generate wealth and provide a service that people want.

Of course manufacturing industry is important, but one must consider the whole cake and not just a slice of it. Moreover, if the Opposition are still worried about manufacturing industry, the news is good. Productivity has increased by 43 per cent. and output is set to increase by 4 per cent. this year, as is manufacturing investment.

Conservative Members welcome the specific measures in the Finance Bill. I am pleased to see further action on profit-related pay. I have always been very keen on the idea of co-operatives. I cannot see why it is regarded as a Labour party idea, because the Labour party that we know—and perhaps love—has always believed in central control, believing that the party knows best and wanting to tell people what to do. In a co-operative, control is not from the top down but from the bottom up. It is about cooperation and working together for a common cause.

Profit-related pay is halfway between a normal firm and a co-operative. As with a co-operative, the better the firm does, the better those who work in it will do, but a co-operative goes a stage further and those who work in it have an equity stake as well. As my hon. Friend the Minister and others have said, this is part of our policy of building up incentives and commitment at the workplace. The better the firm does, the better the workers will do. The greater the co-operation between workers and management, the greater the benefit. To my mind, that is a very Conservative philosophy.

I am not the only person to take that view. There has been massive interest in the scheme proposed by the Government. I understand that some 20,000 employers have requested further details because they are thinking of introducing it in their workplace. Nearly half the 250 largest companies in this country are interested to see whether they can make profit-related pay work in their enterprises. Opposition Members have said that it may well work. I am sure that it will work. I am sure that we will all be pleased by the result. It is a great step forward and it is an imaginative scheme.

One of the main issues in the Finance Bill is the broadening of pensions—the freedom and the flexibility of pension schemes that are going to be available to people. In future, people will be able to make their own pension arrangements. I, like many other people, worked for a company with a company pension scheme. I dare say that, when I retire at the age of 65, I shall get an extra two shillings and sixpence per week for five years' work. Had that pension scheme been transferable or had I been able to have my own private pension scheme and transfer that into my later pension schemes as I changed jobs later on, as people do, of course it would be worth a great deal more money to me. This is a long overdue improvement that should be welcomed.

My right hon. Friend said that it should encourage job mobility. My right hon. Friend, as we know, was a man of Industry and Energy. Now he has gone to the Treasury. Job mobility affects Ministers, and it is a good thing that it does affect Ministers. They get experience on one part and move on to another job. Perhaps my right hon. Friend will move on to become Secretary of State for Scotland or Wales after the next stage. We shall have to wait and see. For many people, moving from one job to another— career development—is valuable. I was in the services for 11 years. We used to get postings for two years, two and a half years or three years. We would do one job in one part of the services and then go on to another one. It was that build-up of experience of different jobs that helped to build up a total career and an understanding of the total operation. The change in pension schemes will be valuable in assisting job mobility. As my hon. Friend the Member for Beaconsfield (Mr. Smith) said, there is nothing worse tahn someone seeing out his time to retirement because otherwise he will lose his pension rights. That is again a much overdue change.

I said to my right hon. Friend in regard to a previous amendment that there is one area within the pensionable population that we should do something about. That is, those who have already retired—there is nothing that they can do about it any more — and have limited occupational pensions. They are not on supplementary benefit, they cannot get any other provisions that the state provides, and they have got only a limited occupational pension and limited savings. For those who are on the basic pension and supplementary benefit, and receive rate rebates, various other allowances are made. Those who have large company pension schemes are better off than they have ever been before. Those who have built up big savings, as people have been able to do over the past eight years of the Government, are better off than they have ever been before. I put it to my right hon. Friend that we should introduce measures to help that group of people whom we have all found during the election campaign.

My right hon. Friend said—I think accurately at the time—that the way to deal with that is to deal with the age allowance. I make another plea to my right hon. Friend that, when we are considering the Budget, with the great success of the economy, with increased tax revenues, with the increased buoyancy of the economy, one of the things that we should be able to do above all during the next Budget is to help that group of people who have saved, been prudent, looked forward to tomorrow and to their old age and yet, at this stage, are not enjoying the benefits of the increased prosperity of the country. Let us see if we can do something really dramatic for them with the age allowance when it comes up in the next Budget.

There is one other point that I put to my right hon. Friend before I finish. One of the first political experiences I was ever exposed to — it was very formative — was going to a public meeting somewhere in Oxfordshire. It was a Conservative meeting and it was being addressed by my right hon. Friend the Chancellor of the Exchequer in a previous incarnation. I think that he was a prospective candidate at that stage; it was quite some time ago. It was the then policy of the Conservative party to go for something called the inheritance tax. We had something called capital transfer tax, we had something called death duties, and we have now got something called inheritance tax.

This inheritance tax is a whole lot different from that suggested by my right hon. Friend in those days—that which was Conservative party policy in those days. In those days, we would tax the amount that each recipient got rather than the amount that the donor passed on. There is a great deal of benefit in that. It encourages the spread of wealth. Also, there are those who are concerned about spoilt young men getting too much money too early in their lives. If on the one hand there is one spoilt young man with 10 rich uncles and they all leave their money to him, and on the other there is one parent, no uncles and 10 sons, it makes sense to introduce a real inheritance tax if it can be arranged. I understand that it would be difficult. I ask my right hon. Friend to think about it when he is thinking about inheritance tax. Let us see whether we can put the tax effectively on the recipient. It was party policy once rather in the way that we have got it now.

It is with great pleasure that I have studied the Bill, and it is with great pleasure that I have listened to two excellent maiden speeches. I hope that the Bill will be passed by the House this evening.

6.35 pm
Mr. Malcolm Bruce (Gordon)

I shall make a brief contribution to what I hope will be a relatively crisp debate, although I am not convinced that it will be. The Bill has been before the House, counting Second Reading, on five full days and has been described as the tidying-up operation of what was not in the mark 1 Finance Bill. The debate has provided a good opportunity for, so far, two maiden speeches. Maybe there will be a few more. I join in the tributes that were paid to the hon. Members for Gedling (Mr. Mitchell) and for Oxford, East (Mr. Smith) on their maiden speeches, one made after the other. Their speeches had a difference of character which, I think the House will agree, shows that we have two hon. Members who will make distinctive contributions. The hon. Member for Gedling claimed to be the fourth generation and, therefore, a member of a well-established dynasty. No doubt the hon. Member for Oxford, East hopes to be the first of a dynasty to represent his area.

My colleagues supported Second Reading and will support the Bill again tonight because of the main issues of which we have long been advocates. I say to the hon. Member for Northampton, North (Mr. Marlow), after his usually robust knock-about that we have heard, that it is true that many economic indicators are moving upwards. But I do not think that the House should forget that we are climbing out of a pit that was substantially dug by the first two years of Conservative party monetarist policy. The House should welcome the fact that we are climbing out of the pit, but some of us are a little less than effusive about giving all credit to the Government who helped to put us into the mess in the first place.

The Government make unqualified claims about inflation. It is worth looking at countries such as West Germany, which has a negative rate of inflation. The difference between its rate of inflation and ours is about 7 per cent. After all, it is our major competitor within the Economic Community. The Government should not argue that there is any cause for complacency about achievements in regard to inflation, particularly since many pressures are working through the economy at the moment and are pushing it in the opposite direction.

Two main measures in the Bill relate to personal pension schemes and profit-related pay, most of which are necessary and which I support. I shall make a comment on pensions, take up something that the hon. Member for Sedgefield (Mr. Blair) said and, maybe, develop it slightly further. The flexibility and portability that are developed in the Bill are welcome and essential to the way in which the economy will develop in future. It is right to be careful not to undermine the occupational pensions of those who are dependent on them. At the very least, we must ensure that everybody in society has an equal chance of making proper provision for their retirement.

It is time that the Government addressed what we should do about people who are in no occupational pension scheme, have worked all their lives, yet have made no provision for their retirement. In some cases, they should not be criticised, as they sometimes are by Conservative Members, when they reach the end of their working lives and find themselves dependent on the old-age pension and nothing else and, very often, are forced to apply for social security benefits. Many of those people have been misled by Governments of both complexions into believing that pensions would be kept at an adequate level on which to live. On several occasions, Governments have promised earnings-related provisions, but they have never been delivered.

The debate should go on from the Bill to consider how we can ensure that everyone makes proper provision for his retirement and recognises that, although the state will, rightly, provide the base, the old-age pension, most people will find life much more comfortable when they retire if they have an adequate means of topping-up the state pension. They should enjoy their retirement instead of moving from a reasonably comfortable working life to abject poverty in retirement. Far too many people face the latter, and we should tackle the problem head-on.

I prefer the expression "profit sharing" to "profit-related pay" because it creates the climate within a company which the idea properly underpins. Profit sharing implies that the work force is being treated as part of the whole enterprise and that the provision is not simply a mechanism for topping up pay. Profit sharing detracts from the suggestion that has been made by some Labour Members that profit-related pay is a means of imposing backdoor pay cuts. Although there may be pay cuts, which the Minister does not deny, it is wholly malicious of Labour Members to suggest that that is the prime motivation for profit-related pay. Some Labour Members are clearly totally opposed to the concept in principle. The Liberal party has long favoured the idea of profit sharing and profit-related pay and managed to persuade one Labour Government to introduce such measures. Therefore, I support their extension and would have gone further than the Government have done and given generous tax relief to ensure that the provision would be of greater benefit to companies and individuals to build up the significant profit-sharing proportion of pay.

I was interested to hear the Minister's suggestion that the take-up may be substantially more than the £50 million forecast. I turn that round in the negative sense: if it is not more than that, the Bill will have been a failure. If the measures are at all beneficial, one would hope to see a take-up of hundreds of millions of pounds, and I hope that it will be developed even further in future Bills.

However, as someone who represents a party which is enthusiastic about the principle of profit-related pay, may I sound a note of caution? The enterprise which is creating profit must operate properly and fairly in a genuine free-enterprise economy and in a proper competitive market. During the past two to three years, the Government's enthusiasm for privatisation has got them into a bind. They have created some monolithic monopolies, and the Minister will not have to think hard to realise that, in some circumstances, the management and work force of a private monopoly such as British Telecom or British Gas may be more than happy to get together with a generous tax-funded profit-sharing deal, knowing that they have a monopoly with which they can rip off the consumer to fund that deal. I hope that the Minister is mindful of the need to ensure that the wider issues are taken on board and that we must have a proper, clearly directed competition policy. The enthusiasm of the hon. Member for Northampton, North for British Airways should be tempered by the fact that it appears to be following the same road — or it will if the takeover of British Caledonian goes through. I hope that it will not.

Despite the qualifications that I have mentioned and my anxiety that the proposals should be developed more fully and thoughtfully, I believe that the two main measures in the Bill are a valuable, important and essential step forward. I regret the fact that the Labour party will force a Division on the Bill. Labour Members are out of touch with reality, and it is difficult to justify their opposition when one examines the details of the Bill. I and my colleagues will vote in favour of the Bill.

6.45 pm
Mr. Keith Mans (Wyre)

I rise to make my first speech in the House with a mixture of pride and hesitancy— pride because of the honour that has been bestowed on me by my constituents to represent them here, and hesitancy because of the many excellent speeches that have gone before, especially the two maiden speeches this afternoon from the hon. Member for Oxford, East (Mr. Smith) and my hon. Friend the Member for Gedling (Mr. Mitchell). Indeed, I was beginning to get a little worried. If I had listened to many more excellent speeches like those, I would have become so nervous that I would have been unable to rise.

If one believes the media, I am a rare breed of person —a Conservative Member of Parliament from the north of England. But we are not nearly as rare as some Opposition Members would have us believe. In Lancashire, where my constituency is situated, there are no fewer than 13 Conservatives out of the total of 16 Members of Parliament.

Wyre is one of those constituencies which the Boundary Commission decided, in its wisdom or otherwise, to rename and, in the process, to consign to obscurity. During the general election campaign, one person came up to me and said, "Mr. Mans, will you please put us back on the map," clearly showing that the Boundary Commission had removed us from it. That statement was a little uncharitable because my predecessor, Sir Walter Clegg, certainly put his constituency on the map and kept it there for the 21 years during which he represented the people of the area. Indeed, I find it much easier to tell people that I am Sir Walter Clegg's successor instead of the Member for Wyre.

Sir Walter was a great Member of Parliament, much loved by his constituents, and a great parliamentarian much respected on both sides of the House, as I have already begun to appreciate in the short time that I have been here. He was a born-and-bred Lancastrian who lived in the area that he represented for most of his life. He understood his constituents and they respected his judgment and wisdom, as I have done since I have got to know him. He has a shrewd legal mind, which made him a keen scrutineer of legislation and a person who could intervene effectively when it mattered. Probably much more surprising, he was a much-liked party Whip in the Conservative Administration of the early 1970s.

Many hon. Members will know that Sir Walter has not been well of late. However, I am delighted to say that he is now out of hospital and making a good recovery. He wishes all his former colleagues well.

To most people, my constituency, with its major town of Fleetwood, means fishing. But the cod war round Iceland dealt the townsfolk a cruel blow and, sadly, the industry is only a fraction of its former self. But a small revival is taking place, led not by the established fishing companies of old, but by enterprising young skippers who are buying shares in boats, going out to fish and returning to sell their catch through the excellent shore facilities that still exist at Fleetwood. With a little loosening of the red tape — especially the Brussels variety — in terms of licences and quotas, while at the same time maintaining equal treatment in terms of policing for all boats of member states, there is a fair chance that this small revival will turn into something bigger. I am certain that this is something that all hon. Members would welcome.

The decline in the fishing industry has meant that ICI, with its large chemical works alongside the River Wyre, is now the main employer in the area. In my constituency we must fight for investment against the many other areas that have assisted area status. It is a hard battle, which we do not always win. To those two industries should be added an expanding retail and tourist sector, a dairy farming sector and a high retirement population. My constituency is one of many contrasts and huge variety. Certainly there is enough in it to keep me occupied—I hope—for many years.

Wyre has one more characteristic which, I am sure you will be pleased to hear, Madam Deputy Speaker, brings me a little closer to the subject that we are debating today. Wyre is already a property-owning democracy. In fact, it has one of the highest levels of owner-occupation in the country. That figure is over 80 per cent., in a county that itself has a high level. In the past, Lancashire led the textile revolution. Today, Lancashire leads the revolution towards a property-owning democracy. The housing in my constituency is not the type that one finds in the leafy groves of Sussex or in the better suburbs of London. It is made up largely of small semis and of even smaller terraced housing. However, the people who live in and own those houses are proud of doing so and want nothing to do with a life that is dependent on institutionalised housing. That is probably the main reason why I am standing here this afternoon.

I am certain that it will not surprise at least some hon. Members to know that the borough council in Wyre is highly efficent. well run, and has a massive Conservative majority. Indeed, I could say that the benefits which it is hoped that the community charge will bestow elsewhere in the country have already been achieved in Wyre because of the high level of owner-occupation. I should add that I am not for one minute suggesting that, because we already have such a high level of accountability in Wyre, we should be exempted from the community charge.

Alongside property ownership goes the capital-owning democracy. More specifically, profit-related pay, share ownership and share ownership by employees represent an integral part of that. However, like property ownership in my constituency, profit-related pay is not new. Indeed, it is the main reason why I am speaking in today's debate. For the past 10 years I have been a member—perhaps I should say a partner—in the largest worker co-operative in the country, the John Lewis Partnership. That company has had a system of profit-related pay and of share ownership since before the second world war. I can say that profit-related pay and share ownership are successful. They work and are to be commended to other companies. I am not suggesting that all companies should have the same system. Indeed, there should be a variety of schemes, and I sincerely hope that any future Government measures are not too rigid so that decisions on the schemes can be taken by the participating firms. However, I believe that the concept itself is correct.

Unlike the hon. Member for Sedgefield (Mr. Blair), I believe that such schemes are an excellent use of Government money, because they encourage the private sector to take part in such schemes which, for many reasons, are good for everyone. Such schemes foster better communication between all levels of management and employed people in a company. They result in a greater commitment towards the objective that the company has set itself. They mean greater productivity, as I can vouch for in the firm in which I work. To date, I have not seen any evidence that profit-related pay means lower wages. Indeed, I suggest that Opposition Members should study carefully the wage levels of the companies that already have such schemes and compare them with those that have not. I am certain that if they do so, they will discover that the firms in the former category have higher rather than lower wage levels, without the addition of profit-related pay put in as a bargain counter.

Finally, and something that should appeal to all hon. Members, profit-related pay and share ownership mean greater job security. I have seen it myself and I am certain that it will be truer in the future if more companies adopt such schemes. I have the sneaking suspicion that if they were given half a chance, many hon. Members of the Opposition parties would support, not oppose, this proposal. From my own experience in industry, I know that the concept of profit-related pay and share ownership works and that it will work even better in the future, provided that the proposals in the Bill become law. Therefore, I thoroughly recommend them to every hon. Member.

6.55 pm
Mr. James Arbuthnot (Wanstead and Woodford)

It is with some nervousness that I say that I am grateful, Madam Deputy Speaker, for the fact that I have caught your eye. My constituency has not had many Members of Parliament. In fact, since 1924—nearly 30 years before I was born—it has had only two. Hon. Members will understand my difficulty in finishing this maiden speech within the bounds of propriety, or even by the end of the week, when I say that those two were Patrick Jenkin and Sir Winston Churchill. Whoever coined the phrase, "Follow that if you can", had it easy compared with me.

As one would expect, my constituents are exceptionally proud of their former Members of Parliament. However, I should like to speak first about my constituency, which is a residential suburb in the north-east of London, on the borders of Essex and London. My constituents were so proud of their former member, Sir Winston Churchill, that they put up a statue to him on Epping forest land, at Woodford Green. That is one of the more attractive parts of my constituency. One of the less attractive parts, which hon. Members may know rather better than the statue, is the M11, which starts in my constituency. Many hon. Members will probably have spent many an angry minute waiting in a traffic jam, trying to get on to the thing. I am delighted to say that that traffic jam will one day be a thing of the past, when the new link road is built.

A debate on the Third Reading of the Finance Bill is not the time to go in for a travelogue of Wanstead and Woodford. However, it is the time to mention my immediate predecessor, Patrick Jenkin, because among the many offices that he held were those of Financial Secretary to the Treasury and Chief Secretary to the Treasury. They may not be the offices for which he is most remembered, but that is only because he had so many others. For a man who served on the Conservative Front Bench for 20 years —that is nearly the entire time that he was in the House — and who was Secretary of State for three major Departments, that is quite an achievement. Indeed, when he was Secretary of State for each of those three Departments, his achievements were considerable. I know that he is remembered with great affection and respect by hon. Members of all parties. From canvassing during the general election, I can say that that is completely true in his constituency also. He will be an extremely hard constituency Member to follow. I can best describe him by saying that he was a thoroughly worthy successor in every way to Sir Winston Churchill and I cannot think of higher praise than that for anyone.

Sir Winston was elected for what was to become my constituency on 29 October 1924. On 5 November 1924 he was invited to become Chancellor of the Exchequer. I have been waiting by the telephone, but it seems that promotion does not follow so quickly nowadays. It is interesting that, in his first Budget, two of the major proposals were a complete overhaul of the pension system and a reduction in the basic rate of income tax to what would now be 20p in the pound.

I do not wish to speak too much about the pension provisions in the Bill, save to say that I was a little sad that the hon. Member for Sedgefield (Mr. Blair), who made a most attractive speech—I wondered whether he was on the right side of the House—was a little grudging in his enthusiasm for the pensions provisions and for the profit-related pay provisions in the Bill. They will improve the employment prospects and the enterprise culture which the Government have already begun.

I wish to concentrate rather more on a narrow provision in the Bill — clause 96 and schedule 7. For those who are unaware of what they contain, I shall describe them in a moment, but first I must say that, as a barrister specialising in Chancery work and, inside Chancery work, mostly in tax, I am speaking about these provisions with considerable diffidence. I have taken an interest in Finance Bills for several years and I have never failed to be impressed by the depth of knowledge of hon. Members on all sides. Therefore, I am extremely nervous about preaching to an audience who may know rather more about my subject than I do. Having said that, clause 96 and schedule 7 relate to inheritance tax and capital transfer tax.

In the Finance Act 1986 capital transfer tax was abolished and inheritance tax introduced in its place. The effect was to make lifetime gifts between individuals potentially free of tax. I hailed that as an excellent move. The effect of the provisions in this Bill is to extend that relief to gifts into and out of trusts in which an individual has an interest in possession. This, too, is a truly excellent move. But I wish to take this matter a step further because what has happened in this move is symptomatic of what often happens in Finance Bills.

The Government rightly believe that they should reduce the burden of taxation on individuals and companies, and I congratulate my right hon. Friend the Chancellor of the Exchequer on doing that. However, all too often Governments do not go far enough. They are cautious and the following year they must return to finish the job. This has two effects. The first is that it complicates the tax system. We have one of the most complicated tax systems that I have ever discovered. The law, particularly tax law, is the possession of the common man and it should be understandable by him, but it is not. It is incomprehensible. When a Government take two bites at the cherry, they make the law more complicated. I have a vision of a tax system which is simply worded and administered and which everyone can understand. I hope that that vision will materialise before too long.

The second effect of two bites at a cherry is that the law is changed too often. It is not the Government's job to change the law too frequently because the effect of that on individuals and companies is to cause them the immense extra cost of paying people like me to find out what the new law is because the law is never the same. Perhaps I should declare an interest, although I am speaking against this, but I do not believe that one should pay people like me too much to find out what any law is.

My right hon. Friend the Chancellor of the Exchequer has a praiseworthy habit of abolishing a tax every year. I had hoped that because there were two Finance Bills this year he would manage to abolish two, but I suppose one should not he greedy. I am sure that my right hon. Friend will have a chance and the inclination to reform our ramshackle tax system, particularly three areas of it. First, the taxation of women, which is an insulting and archaic antique; secondly, capital gains tax legislation, which is absurdly complicated; and, thirdly, the way in which the tax system relates to the benefit system, or rather, the way in which it does not. When my right hon. Friend has a chance to look at those areas, I have one plea, which is to go the whole hog the first time.

7.4 pm

Mr. Tim Smith

It is a great pleasure for me to compliment my two hon. Friends the Members for Wyre (Mr. Mans) and for Wanstead and Woodford (Mr. Arbuthnot) who have made outstanding maiden speeches this evening.

My hon. Friend the Member for Wyre succeeded Sir Walter Clegg who, as he said, is remembered with much affection in this House. I am sure that we are all glad to know that he is making a recovery after his recent illness. My hon. Friend spoke with great authority about profit-related pay. As he told the House, he was until recently a partner in the John Lewis Partnership, which operates such a scheme, so he can speak with authority and from experience. He did not tell the House that the John Lewis scheme has recently been affected adversely by the change in the national insurance arrangements. Clearly he has a tremendous amount of tact, so should go far.

My hon. Friend the Member for Wanstead and Woodford spoke without notes, which I cannot do after 10 years in the House and I admire him for that, if for nothing else. It must also be clear to you, Madam Deputy Speaker, that he is a great expert on taxation and company law as he is a barrister in Chancery. He was rather modest when talking about clause 96 and schedule 7 because every year he writes an authoritative guide on the Finance Act. Therefore, he is a great expert on taxation. I sympathise greatly with his challenge to the Government that we should have a simpler tax system. We would all like to see that, but we all know that it will grow more complicated. There will be plenty of work in future for tax lawyers, so he need not worry too much. We shall look forward to his future contributions to our debates on Finance Bills.

This summer's Finance Bill contains two major proposals on personal pensions and profit-related pay, which we have already chewed over in some detail. The advent of personal pensions at the beginning of next year will present a difficult choice for many individuals and I hope that a proper and full explanation will be given to them of the pros and cons of the options before them. In future, they may join their company's occupational pension scheme, if it is open to them, or set up for themselves alone a personal pension scheme.

I notice that a debate on the virtues of the two approaches is already under way. An article in this morning's Financial Times reports the comments of a partner in Bacon and Woodrow, a firm of consulting actuaries, who pointed out that the ideal arrangement under the present structure of occupational pension schemes will be for a young person to take out a personal pension in the early years of a career and later to join an occupational pension scheme, if that is possible. If that sort of advice is given to individuals, clearly occupational pension schemes will have to change their arrangements so that they are more attractive to young members. At present there is undoubtedly an imbalance in occupational pension schemes and younger members subsidise older members.

We have also debated profit-related pay at some length and we have considered the cost. If the cost was as high as £1,000 million, as the hon. Member for Sedgetield (Mr. Blair) suggested, 2.5 million employees would benefit to the tune of £400 every year, which is roughly the maximum benefit possible.

Mr. Blair

indicated dissent.

Mr. Smith

The hon. Gentleman shakes his head, but I calculate that 27 per cent. of £1,500 is about £400. I am talking about the average standard rate taxpayer. It seems that the maximum benefit available to the basic rate taxpayer will be £405 a year. Therefore, if the scheme costs £1,000 million a year, 2.5 million people will be able to benefit to the maximum. Of course, very few will benefit to the maximum every year so many more will participate and gain benefit from the scheme. If the scheme takes off on that scale I believe that it will be a runaway success. I agree with my right hon. Friend the Financial Secretary that, in those circumstances, we should view the cost as a major contribution to wealth creation rather than wealth consumption. Such wealth consumption would occur if we followed the advice of the hon. Member for Sedgefield and, rather than give this tax allowance, added that amount to public spending.

The hon. Member for Sedgefield referred to his experience, gained as a result of three Finance Bills. I agree with him that many of the provisions are technical and that, therefore, there is a case for a special committee to deal with those provisions. That argument has been advanced for many years by those who take an interest in such matters. It has always been argued that a distincition can be drawn between the political element of a Finance Bill—cutting the standard rate of tax and other elements that are highly controversial between the political parties, but which represent a small proportion of the clauses—and the many technical provisions.

It has been argued that it is unsatisfactory to introduce the Finance Bill so late in the parliamentary Session. Normally, the Bill is introduced in late March or early April and there is little time in which to debate the provisions. I believe that a distinction should be drawn between the two elements contained in a Finance Bill. I believe that a technical Finance Bill should be introduced at the beginning of a parliamentary Session in November so that more time can be addressed to it. Perhaps the Special Select Committee system should be used and outside parties invited to give evidence. Alternatively, a longer period of time should elapse between the publication of the Bill and the Second Reading and Committee stage of the Bill. In that way outside observers would have the maximum time in which to comment on the clauses. Indeed, the hon. Member for Sedgefield has already argued that we should maximise the opportunities for consultation on technical matters. I believe that the consultation record of successive Governments has improved greatly over the years. Now it is the practice of Governments to publish, on occasion, draft clauses.

There is no excuse for bringing in technical measures at short notice after the Budget. It is right that draft clauses should be published wherever possible. In that way we can listen to the views of people outside — we need not necessarily take their advice—and I hope that the net result will improve the quality of the legislative process. There is scope for improvement.

We are often under a time pressure in Committee when considering Finance Bills. There have certainly been problems with this Bill even though some of the provisions were published in the previous Bill. This Bill has been pushed through fairly quickly and it is difficult for people outside to keep up to date. I hope that my hon. Friend the Paymaster General will discuss with his colleagues in the Treasury the way in which parliamentary consideration could be improved by allowing us more time.

7.13 pm
Mr. Alex Salmond (Banff and Buchan)

I should like to associate myself with the remarks of the hon. Member for Beaconsfield (Mr. Smith) on the fine maiden speeches that we have heard this evening. I want to make a brief contribution and comment on this, my first Finance Bill. I believe that it has been an asset to have had detailed consideration—in Committee and on Second Reading—of certain aspects of this Bill.

I welcome the Government concession in clause 80 regarding oil industry taxation. That concession is a tribute to the effect that Back Benchers' detailed examination, from both sides of the House, can have on the Government's consideration of certain legislation.

My main contribution refers to profit-related pay, which is a concept that my party and Plaid Cymru—our parliamentary allies — favour. We believe that profit-related pay is a good idea on the basis of many of the arguments that have been advanced in its favour throughout the debate. However, on Second Reading and on considering the detail of the measure, certain aspects of the Government's proposal caused me great concern.

In common with the hon. Member for Oxford, East (Mr. Smith), who made an excellent maiden speech, I am concerned about the public sector. Is it right and proper that the public sector should be excluded from the benefits that are being offered to the private sector? I suppose that a reason for that exclusion could be practicality. It could be argued that it is not possible to associate the public sector with this legislation in the same way in which a public limited company or companies within the private sector can be related. I believe that the acid test of whether practicality is a reason for excluding the public sector comes with the consideration of public limited companies with majority public sector ownership. If it was purely a question of practicality, surely a public limited company, such as the Rover group, in dominant public ownership, could still he included under this legislation. It is a clear entity generating profits and it could be brought within the scope of profit-related pay.

The Government, however, have made it clear that any public sector company will be excluded from the profit-related pay legislation. That leads me to suspect that the public sector is being excluded not on the ground of practicality, but because of naked prejudice against the public sector. It is unacceptable that those who work in education, the Health Service and the social services are viewed by the Government as somehow contributing less to the economy than those who work in the private sector.

I am also concerned that the tax benefits from profit-related pay will not be restricted to the basic rate of income tax. The essence of the argument in favour of profit-related pay is that it associates individuals with the profitability of the company. On those grounds I believe that the individuals most in need of that association are those on average or somewhat below average earnings. However, as a result of the Government's proposal, most of the benefits will go to people on the highest rates of income tax. If a person pays 60 per cent. income tax, the potential maximum benefit is £900 a year. If a person is on the basic rate of income tax the maximum benefit is £405 a year. If the Government are seriously interested in transforming the supply side of the economy the reverse should apply: the biggest benefits should go to those on average or somewhat below average earnings.

If one considers the details of this legislation, it is clear that, cloaked in the rhetoric of the supply side measures, it is yet another shabby attempt by the Government to give handouts to their friends and supporters.

I am aware that many Conservative Members are puzzled by their party's poor performance in Scotland. That failure was largely due to that party's lack of appreciation of the national question. However, there is also the matter of morality. I do not believe that Scotland likes the morals of this Government. On the matter of profit-related pay we once again see prejudice against the public sector and favouritism towards those on highest earnings.

For those and other reasons my party will vote against the Finance Bill tonight.

7.18 pm
Mr. David Shaw (Dover)

I welcome the Finance Bill and in particular the two main proposals, the introduction of profit-related pay and the proposal to widen pension ownership. I believe that those proposals will lead to people taking more control of their lives. With regard to profit-related pay, people will take responsibility for the success of their own companies. They will also take responsibility for and an interest in the success of the economy in relation to the benefits that they will receive from their pensions. The consequence of those proposals will mean that working people will be less alienated from the goals and objectives of management. All will be involved in the success of their companies and the wider success of the economy.

It is likely that more innovation and positiveness on the part of employees on the shop floor will result from the measures. That can be contrasted with the negativeness and destructiveness that characterised so much of industrial relations during the late 1970s. Much of it came from the friends of the Opposition, but it is interesting to see how many of the more moderate leaders of the trade unions are now becoming interested in profitability and the success of the companies in which their members are employed. I hope that my experience in giving profit- related pay benefits to management and senior employees will he followed for a wider audience, by bringing in all the employees. Whenever I have been involved in the bringing in of profit-related pay schemes, I have seen management take a new interest and experience a new incentive to perform better. Under past schemes involving all employees, many more employees were interested in the success of their companies.

Opposition Members have suggested that such schemes could be a recipe for low pay. Nothing could be further from the truth because, in my experience of industry and business, the companies in which there is low pay are those that lack success. Where companies are successful and it is understood by the employees that profit needs to be earned, there is high pay because such companies can afford to make contributions to profit-related pay schemes and give high pay.

We have seen the benefits of employee involvement in share option schemes, which has been one of the Government's successes. I am pleased to say that in my constituency there is a share option scheme in one of the more significant industrial companies in the area. It goes right down the scale, involving those on the shop floor as well as the secretaries and typists in the pool. It also involves management. I am pleased to say that it does not matter whether one talks to someone at the top or bottom of the pecking order; everybody is intensely interested in the share price in the company from week to week and day to day. The people who work in the company are intensely interested in its success. I long for that to continue because it is by involving more people in the success of their companies that we shall engender the necessary changes.

I hope that my hon. Friend the Paymaster General will consider the letter in the Financial Times today, which expresses the concern of a company called Reward Consultants about the way in which profit-related pay schemes may impact on small businesses. As with all good innovations, there are technical requirements. Perhaps the Inland Revenue is sometimes over-zealous in the way in which it brings in technical requirements, when it wants to make sure that there is no tax evasion. I hope that the Minister will consider the fact that profit-related pay should be a simple concept, easily understood by the man on the floor, the accountant in the company who has to compute it, and the managing director who devises the scheme. We do not want lots of bureaucracy. I hope that the special needs of small businesses and small companies will he borne in mind when the scheme is changed. Inevitably, minor changes will he required over the years to make sure that the scheme is effective and efficient.

It has been suggested that one of the disadvantages of profit-related pay is that tax revenue is lost by that means. That is utter bunkum and rubbish. More tax revenue must result from the scheme because, in the main, profit-related pay will come out of a pool of between 5 and 20 per cent. of the increase in profits over the previous year of the companies. If that is so, at least 80 per cent. more profitability will not form part of profit-related pay. As corporation tax still exists, even in many small companies, at rates of at least 30 per cent., there will be more revenue for the Exchequer as a result of the increase in profits. Therefore, it is extremely unlikely that profit-related pay will result in a loss of revenue. As profits become larger, it should result in more money going to the Exchequer.

Benefits will result from the widening of the ownership of occupational pensions suggested in the Bill. Over 10 million people are now involved because of the widening of ownership of occupational schemes. As many of my hon. Friends and no doubt many Opposition Members are aware, that is well above the number of people in trade unions. Many trade unionists are members of occupational pension schemes. That involvement of the electorate in occupational pension schemes and the fact that each year more trade unionists are involved accounts for rising Conservative popularity not only in the most recent general election but in previous general elections. It is through the ownership of pensions that people begin to understand what share ownership is all about. It is through widening share ownership, whether directly or indirectly, that we involve more people in the benefits of the nation.

Benefits also arise from more choice in pensions, as proposed in the Bill. One can now be a member of more than one pension scheme, and one can opt out of occupational pension schemes if one wishes. That means that there will be more competition among managers; of pension schemes to keep people in those schemes wherever possible. More competition is good because it will result in greater emphasis on investment performance, which is important to the economy as a whole. We do not want scandals continuing, such as the Labour councils investing pension fund money in News on Sunday. At the moment, those scandals are swept under the carpet because pension fund performance is not observed as widely as it should be. That will happen and such scandals will be prevented under the new proposals because pension fund performance will become more important.

Mr. Robert N. Wareing (Liverpool, West Derby)

What about insider dealing?

Mr. Shaw

Insider dealing has been exposed as never before by this Government. This Government has made it illegal, which the previous Labour Government railed to do.

Fairness to those who change jobs was mentioned by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has fought for it for a long time. Many Conservative Members, particularly younger Members, have perceived that the job market has never been so good as it has been in the past eight years compared with periods under previous Governments. One has taken the opportunity to change jobs. I declare an interest, as did other hon. Members. It is galling to all of us who have changed our job that we cannot take advantage of the pension fund money that accumulated in our previous pensions. It is wonderful that the Government are slowly grasping the nettle and making an improvement.

I should like to express a mild note of concern on clause 80. We are all concerned that retrospective action should not take place often, if at all. It is a matter of considerable concern that it has been necessary to include this retrospective action in the Bill. It may be a mild case of the Inland Revenue being too worried about tax avoidance or tax evasion. The clause affects oil licences, which cost money. Expenditure is incurred. When companies try to minimise the risk involved in that expenditure, it is unfair that they are heavily taxed. I hope that that anomaly will be removed. I am pleased to note that Ministers have said that they will look at that when they draft the next Finance Bill.

The Bill will bring immense benefits to our economic performance over the years ahead. I am particularly pleased with the improvements that the Bill brings to the overall financial situation of companies and private individuals, who will benefit more from their own contributions. I support the Third Reading of the Bill.

7.29 pm
Mr. Nicholas Soames (Crawley)

The House has heard four excellent maiden speeches tonight. However, it will be surprised that those hon. Members who made them have not been able to be detained by the debate. Nevertheless, it would be improper for me not to say a few words about their speeches.

We heard from my hon. Friend the Member for Wyre (Mr. Mans), who took over from Sir Walter Clegg, who was an hon. Member much loved on both sides of the House. He was a distinguished and honourable Member of the House who will be remembered especially for his humour, courage and charm. All hon. Members will be glad to hear that he is making a full recovery from his illness. My hon. Friend the Member for Wyre made an excellent speech and showed a considerable feel for his constituency and a real knowledge of the matters about which he spoke—not least as he is a partner in the John Lewis Partnership, and was thus able to bring a good deal of knowledge to the debate.

I pay tribute also to the maiden speech made by my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot), who represents a constituency that my grandfather represented in the House for more than 40 years. My hon. Friend succeeds Patrick Jenkin, a Member of Parliament who was greatly admired for his integrity, warmth, exceptional capacity for hard work and intellect. He was Financial Secretary and Chief Secretary to the Treasury, as my hon. Friend mentioned in a witty, knowledgeable and excellent speech. I am sure that the House will look forward to hearing from him again.

Earlier in the evening, my hon. friend the Member for Gedling (Mr. Mitchell) made an excellent and attractive speech. The hon. Member for Oxford, East, (Mr. Smith), to whom I am sure the House will have warmed, paid an elegant, charming tribute to Steve Norris, who was greatly admired on both sides of the House, and who will be much missed.

I take this opportunity to welcome the hon. Member for Sedgefield (Mr. Blair) to these debates. He will bring an economic literacy, ability and good humour that has been sadly lacking from the Opposition Front Bench, and will be welcomed warmly by all those who haunt these rather dry debates.

This is also an opportunity to say farewell to absent friends. It seems almost strange not to have the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) with us. He must have forecast gloom and disaster at least 30 or 40 times in the last Parliament—on every occasion on which he spoke in major economic debates, the economy was permanently headed for utter disaster. He proved disastrously wrong and I am sure that we sympathise with him. He has had to pay the price for his tragic performance in the past election. We welcome the new Treasury team to the Opposition Front Bench; I am sure that its members will prove to be formidable opponents.

Mr. Ian Gow (Eastbourne)

Does my hon. Friend recall that during the general election campaign of 1983 the right hon. Member for Sparkbrook predicted that within one year of the general election inflation would reach 10 per cent? Would my hon. Friend care to comment on the value of that forecast?

Mr. Soames

My hon. Friend, as usual, raises the key point. The trouble with the right hon. Member for Sparkbrook——

Mr. Blair

On a point of order, Madam Deputy Speaker. We are perfectly willing to be subjected to a filibuster when it consists of flattery, but when Conservative Members filibuster and insult us at the same time we are entitled to protest.

Mr. Soames

I think that that is going a bit far. My hon. Friend the Member for Eastbourne (Mr. Gow) was oozing the milk of human kindness. It is difficult to imagine how it would be possible to be nicer. Suffice it to say that it is probably better for us all to leave summarising the career of the right hon. Member for Sparkbrook, as the hon. Member for Sedgefield says, to another occasion. I shall try to stick to this important debate.

I congratulate my right hon. Friend the Chancellor, the Chief Secretary to the Treasury and their colleagues on their excellent and warmly welcomed Budget. At the same time, my right hon. and hon. Friends will be sustained by the fact that it was so splendidly endorsed by so handsome a victory at the last election. The Government have set the framework—[Interruption.] Does the hon. Member for Liverpool, West Derby (Mr. Wareing) wish to intervene?

Mr. Peter Snape (West Bromwich, East)

My hon. Friend is not allowed to speak; he is a Whip.

Mr. Soames

I am glad that they found someone to go to the Opposition Whips Office. I thought that they had all disappeared.

Mr. Snape

They would not have me.

Mr. Soames

I am not surprised.

The Government have set the framework during the past few years for the economy to prosper. It has proved to be a startling success, and even the Government's harshest critics have now had to accept the sound policy that my right hon. Friend the Chancellor and his colleagues are pursuing. The Finance Bill is a welcome extension of that overall strategy.

I want to make a point about my own constituency in relation to the legislation. Right hon. and hon. Members of the Opposition—and, indeed, my hon. Friend the Member for Eastbourne—will well remember the point that the right hon. Member for Sparkbrook used to make about the crisis in manufacturing industry in this country. In my constituency, which is fortunate to have full employment and a booming, successful labour economy, the local paper only the other day ran a headline saying that "Mrs. Thatcher's Britain" was "on the move". On the move it is. Manufacturing industry and service industry are booming. All the statistics and all the feelings that one gets listening to people talk show that industry and the economy are going through a great awakening. My right hon. Friend and his colleagues have achieved a tremendous renaissance in this country and we warmly welcome that. Manufacturing industry is doing every bit as well as the service industry, which gives the lie to what Opposition Members say.

I warmly welcome the profit-related pay provisions. I believe that that is one of the key points — the centrepieces — of the Budget. Profit-related pay gives employees a far more direct personal interest in the profitability of the firms in which they work. My hon. Friend the Member for Wyre, a partner in an organisation that already practises these excellent ideas, spoke about that this evening.

Profit-related pay allows a greater pay flexibility in the face of changing market conditions. For example, a company might be able to survive a downturn in trade without recourse to redundancies if its pay bill is flexible downwards as well as upwards. One would have thought that that would have been warmly welcomed by the Opposition, in view of the so-called interest that they take in unemployment matters, as demonstrated by how many of them are here in the Chamber. The economy also gains from profit-related pay because a broad spread of PRP schemes means better productivity, increased output and more employment. Again, I should have hoped that that would have been welcomed by the Opposition. Interest in profit-related pay has been substantial. My right hon. Friend the Financial Secretary to the Treasury made the point that, since the Chancellor announced tax relief on PRP in his Budget, more than 20,000 employers have contacted the Inland Revenue to establish their interest.

The measures on pensions provisions will widen individual choice in pension planning by providing tax relief for people who make their own pension arrangements. The measures will also, more importantly, contribute to job mobility—one of the sad problems that has affected all our efforts to reduce unemployment. Anything that can increase job mobility will be warmly welcomed by those out of work. It is a tribute to the Government's strategy that all sound, responsible and decent financial indicators and opinion in this country point to a remarkably successful economy.

The CBI monthly trends inquiry of 22 June showed orders at their highest level for 10 years, with exports booming. Many firms are planning increased production for the next four months to cope with a rise in orders. The average growth rate forecast by 12 recent surveys was 3 per cent. in 1987. Manufacturing industry's recovery has been underpinned by a strong and continuing growth in productivity. Since late 1980, the productivity in manufacturing industry has risen by 43 per cent. That is the best performance of any industrialised country. [Interruption.] Labour Members may chunter away, but these are facts and they cannot argue with them. Our economy is booming and that is bad luck for the Labour party. The Government's record was given a remarkable endorsement by the electorate, although the hon. Member for West Bromwich, East (Mr. Snape) managed, yet again, to sneak in under the wire.

Mr. Gow

Before my hon. Friend leaves this part of his speech, would he care to comment on the remarkable tribute to the management of the economy by our right hon. Friend the Chancellor of the Exchequer that was paid in the debate on the Loyal Address by the hon. Member for Dagenham (Mr. Gould), who unfortunately is not in his place?

Mr. Soames

My hon. Friend is right to draw attention to another of the gilded and literate team that is now adorning the Opposition Front Bench. The hon. Member for Dagenham (Mr. Gould) is another Labour Member who can read.

Mr. Blair

On a point of order, Madam Deputy Speaker.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)

Is the hon. Gentleman going to deny it?

Mr. Blair

About the only correct thing that the hon. Member for Crawley (Mr. Soames) said was that Labour Members can read. Indeed, they can read better than Conservative Members. May I seek your guidance, Madam Deputy Speaker? On Third Reading, should we not be debating the contents of the Bill and not having a general debate on the economy?

Mr. Deputy Speaker (Miss Betty Boothroyd)

The hon. Member for Crawley (Mr. Soames) has been a Member for some time and should speak to the subject.

Mr. Soames

I am very sorry that I was dragged off the narrow road that I was treading. I shall not pursue the point raised by my hon. Friend the Member for Eastbourne, although it was a relevant issue.

The hon. Member for Dagenham was endorsing Government policies which were headlined in the Financial Times today as "the unbeatable combination" of lower taxes, lower borrowing and higher public spending. The Government's policies were endorsed by the electorate and were made possible by the sort of measures that appear in the Finance Bill. I welcome them very much.

I shall conclude before you, Madam Speaker, dive too deeply into "Erskine May". Sustained economic growth has set unemployment on a firm downward trend. The House will rejoice at that. Seasonally adjusted adult unemployment has fallen over 12 successive months by almost 290,000. Between May and June, unemployment fell by 24,000 to 2,925,000 — 10.6 per cent. of the working population. The figure is still far too high, but the House will wish to pay tribute to Government policies that are denting the unemployment figures and putting so many people back to work in important areas of the economy.

The Government's programme is enshrined and fashioned in the Bill. Lower taxes, lower borrowing and higher public spending form a programme which was ringingly endorsed at the general election. We rejoice to see the Chancellor of the Exchequer putting forward that programme again and I have no doubt that the House will endorse it.

7.44 pm
Mr. Julian Brazier (Canterbury)

I shall speak only about the part of the Bill dealing with portable pensions. It will not produce headlines in the media, because it suffers from two defects — it is not particularly controversial and it is quite difficult to understand. Faced with such complicated provisions, the House could easily lose sight of the fact that the provision on portable pensions is a very important measure and may be the most underrated measure to come before us this year.

My constituency has the second highest proportion of pensioners in the country. Many of them are occupational pensioners and I receive many letters — often heart-rending letters — about their pension problems. Some complain that their occupational pensions have been destroyed by the rampant inflation caused by the profligacy of previous Governments and others have more technical problems, especially in connection with losses of pension rights incurred when people move from job to job. The Bill is designed to counter that problem.

Of course, some of my constituents have no occupational pension; 49 per cent. of pensioners still have no such pension. I am glad that the Bill will enormously improve the ability of those working for companies that do not operate occupational pension schemes to get such pensions.

Sad to say, we cannot solve most of the problems of the people who write to me. The trouble is that they are worried about the difficulties that arose in the past. However, the Bill will go some way to preventing another such crop of miserable problems from arising in the next generation. The Bill should ensure that the proportion of people with occupational pensions continues to rise and that those who change jobs have a better opportunity to maintain their pension rights.

As I listened to the erudite debate between my hon. Friend the Member for Kensington (Sir B. Rhys Williams) and my right hon. Friend the Financial Secretary to the Treasury. I remembered that when I was a mathematician at Oxford nearly all my clever colleagues— I was not one of them—went on to become actuaries, working in an extremely complex and difficult area. I am not a bit surprised that most members of the public and, perhaps, a number of hon. Members will have had some difficulty following the intricacies of the debate.

At the heart of the problems caused by people who move from job to job is a simple but intractable bias in the system. I am glad that the Bill will go some way to counter it. If we regard the 40 years of a man's working life as annual packets of pension contributions, we see that when a man changes jobs the packets get bundled together into various small pension trusts, each with its own management system, and so on.

The only employer with whom the man who changes jobs has any leverage is the one to whom he can say, "Will you offer me a decent pension package?" That is the only employer with whom that man has any negotiating power. The imbalance is brought into the system by the fact that his most valuable pension payments— those with many years to accrue—are made at the beginning of his 40 years of service. His employer of those days is lost in the mists of time and the employee has no leverage with him.

I was entranced by the debate between my hon. Friend the Member for Kensington and the Financial Secretary. I side with my right hon. Friend, because I believe that the proposals suggested by my hon. Friend the Member for Kensington would be too expensive.

Mr. Blair

On a point of order, Mr. Deputy Speaker. The hon. Member for Canterbury (Mr. Brazier) is making an erudite speech, but new clause 1, which he is talking about, was withdrawn and, therefore, forms no part of the Bill. Is it in order for him to be discussing that new clause?

Mr. Deputy Speaker (Sir Paul Dean)

It is traditional for the debate on the Third Reading of a Finance Bill to range fairly wide. However, perhaps the hon. Member for Canterbury (Mr. Brazier) is going a little wider than wide. I am sure that he will note that fact.

Mr. Brazier

I take the point made by the hon. Member for Sedgefield (Mr. Blair). The Bill goes a long way towards meeting the demands made by my hon. Friend the Member for Kensington.

The measure on portable pensions has an indirect effect that goes well beyond its direct effect. I shall illustrate that point. As I understand it, the measure offers the right to anybody who wishes to do so to ask to have a personal pension scheme set up. He can do that either through independent contributions or can decide to opt out of his company's pension scheme. As a result, a small number of people—and I suspect that in the beginning the number will be small—will choose at the outset to go for a pension package of this sort, one that they can manage themselves all the way through their working lives, because of the problems that they see encountered by people who move jobs.

That is the direct benefit, but there will be a much greater indirect benefit because the fact that people can do this and that employers will know that people joining them will be able to follow this course of action will encourage employers to reform their pension funds and sort out the problem of the prejudice against the early leaver. People will then be induced to stay and to keep all the contributions in the pension fund and will see an employer as an attractive one to work for.

I hope that when we debate our own pay later this week hon. Members will remember that we enjoy very privileged pension provisions. An hon. Member who sits in the House for 15 or 20 years will get, pro rata, the same pensions benefits when he retires at the age of 60 irrespective of whether he is elected to Parliament at the beginning of his working life, in the middle of it or during the last 20 years of his working life. That is not the case at present with any private sector pension fund.

I make no apology for concentrating exclusively on the pension aspect of this Bill. The measure will extend to people in the private sector some of the benefits that hon. Members enjoy. It will well be that before too long some Opposition Members will find a more attractive career. They may then appreciate the position of people in their forties and fifties who presently feel trapped in their jobs and want to move to more attractive ones. I support the Bill.

7.52 pm
Mr. John Browne (Winchester)

I support the Bill. Like other hon. Members, I declare an interest in certain sections of the Bill such as pension provisions and profit-related pay. I join other hon. Members in congratulating the four maiden speakers, three of whom are my hon. Friends the Members for Gedling (Mr. Mitchell), for Wyre (Mr. Mans) and for Wanstead and Woodford (Mr. Arbuthnot). My hon. Friend the Member for Wanstead and Woodford spoke without notes. That would be an achievement for any hon. Member, but for a Member making his maiden speech it is worthy of note. The hon. Member for Oxford, East (Mr. Smith) was extremely fair in his maiden speech. I was impressed by his speech and hope that in future we shall hear more from him and from my hon. Friends.

This part of the Finance Bill, covering the areas not agreed to before the general election, is the legislative backing for part of the Budget. In itself, the Budget is a testimony to the successes of an eight-year crusade of national revival. The revival of our economy was not the only thing that happened during that crusade, but it is the critical factor. The success of the economy depends on freedom and enterprise. Profit-related pay and personal pension schemes arc part of the whole philosophy of freedom. We hope that this injection or restoration of freedom will result in a great increase in enterprise. In the eight years of this crusade a foundation has been laid. Doing that was often tough and unglamourous, but now we are entering an era during which the superstructure can be erected. There are exciting times to come, and the whole of Britain can share in them.

Government philosophy is to base economic policy on sound finance, reducing inflation and increasing growth. Those things have eluded almost every Government not only in Britain but in the West. The problem is how to break the link between inflation and growth. In the old days, when we wanted growth we ended up with high inflation. If we wanted to reduce inflation, we ended up reducing growth. The Government have succeeded in breaking that link.

Mr. Blair

Regretfully, Mr. Deputy Speaker, I have to raise another point of order. The hon. Gentleman is debating the general economy, and, no matter what latitude is allowed during our debate on Third Reading of the Finance Bill, that is surely out of order.

Mr. Browne


Mr. Deputy Speaker

Order. The hon. Member for Sedgefield (Mr. Blair) raised a point of order a few moments ago. I explained to him and to the House that, by convention, on Third Reading of the Finance Bill it is in order to range rather more widely than on Third Reading of any other Bill, particularly in the special circumstances in which this Bill is being discussed. I know that the hon. Member for Winchester (Mr. Browne) is still on his preamble, and I am sure that he will shortly relate his remarks fairly directly to the clauses in the Finance Bill.

Mr. Browne

I listened to a number of speeches in Committee by the hon. Member for Sedgefield (Mr. Blair). They were extremely good and delivered in an erudite manner. I might say that they were charming and elusive. I must remind the hon. Gentleman that at times he strayed into the realms of the general economy during debates on specific clauses in the Bill. I take your point, Mr. Deputy Speaker, and I shall get into the main part of my brief speech.

As the Bill well documents, the Government have transferred power from the producer to the consumer. I shall give one example. In personal pension schemes the measures taken by the Government are oriented towards the consumer, the beneficiary of the pension. The measures will make the competition much tougher for the pension institutions. This will result in much more competition in the market place for pension schemes and that will benefit the consumer. As a result of this general philosophy, Britain is much more competitive now than it was eight years ago.

We have restored democracy to the trade unions and that has made Britain work as a team. This team spirit will be reflected in the profit-related pay measures designed specifically to keep the team together. They will motivate the whole team, not just the directors or the shareholders. People working on the shop floor can be directly involved in the profits of their company. The Government have always tried to push, quite rightly, for incentives so that enterprise will take place and Britain will be a success. What more incentive could someone on the shop floor wish to have? What could be more directly related to their contribution than profit-related pay? A bonus has an element of subjective merit that is recognised by the management rather than by the customer, but PRP reflects recognition by the customer. The subjective judgment of management does not apply to PRP. We have already seen the British economic disease become the British economic miracle, and I urge Opposition Members to bear that in mind when they criticise various elements of the Bill.

The hon. Member for Sedgefield has said that PRP will cost too much. Four or five days ago he claimed that it would cost between £50 million and £1,000 million. If it were to cost £1,000 million, that would be a mark of its success. If the work force were able to claim to the tune of £1,000 million, think of the increased profits that would have to be won by the companies employing those enjoying tax deductions. A large tax reduction will be a good thing for the economy, because we know that lower taxation rates lead to an increase in aggregate tax revenues. That means that more revenue is available to the Government to spend on education, defence and social welfare, for example. The result is the same if a company can give its employees more take-home pay as a result of measures such as PRP.

By introducing PRP the Government have struck a good balance because the range of companies that will come within the scheme is well chosen. The Government have shown a great understanding of management and of motivation of those on the shop floor. The scheme reflects the urge to be identified with something that is small and the concept that small is beautiful. The Government are demonstrating that profit centres are to be encouraged, and their flexibility is to be applauded.

The personal pension scheme provisions will improve and encourage motivation, enterprise, mobility and freedom of choice. There will be more incentive and consequently better results and a fairer and better system. In other words, there will be a cheaper system for the consumer and, therefore, a greater incentive for the consumer or employee. That will lead to greater success for Britain.

I ask the Opposition to accept that some of the Government's policies are seen to be working. Satisfied customers throughout the world are creating jobs in our economy. Real jobs are being created at a fast rate. There have been 12 months of successive falls in unemployment and about 1.25 million jobs have been created in the past 18 months, not as a result of a Government spending gimmick. Real jobs have been created by the consumer, not false jobs by the Government, and this has been achieved on an international basis.

It has been said that PRP will be too costly, but we have seen Government revenues rise despite cuts in tax rates. Government revenues are rising along with private incomes. Therefore, the Government can give more effective care to the inner cities, for example.

I strongly support the Government in introducing the Bill, which is the second part of the legislative backing to be given to the Budget. I applaud particularly the PRP measures and the provisions that have been made for personal pension schemes. I applaud also the Government's constructive attitude in their negotiations with Lloyd's, which have been based on the provisions in clause 70. It appeared that the negotiations would be sticky, but I believe that people on both sides of the fence have been pleased with the Government's attitude. I commend the Government and I welcome and support the Bill.

8.5 pm

Mr. David Heathcoat-Amory (Wells)

The two major proposals in this No. 2 Finance Bill relate to personal pensions and profit-related pay, and the success of PRP will be judged later in the light of experience. It is a worthwhile attempt to improve the supply side of the economy, especially wage flexibility. It may not prove to be the great breakthrough that we want, and we shall have to wait to see what the take-up is and its effect on wage bargaining. Only time will tell us whether employees are prepared to recognise PRP as part of their remuneration package and not merely as a bonus.

Profit-related pay is worth a try because previous Governments of all parties have been inclined to concentrate too much on controlling aggregate demand within the economy whereas the central weakness of the British economy has been translating demand into efficient and effective supply. There has not been lack of demand. In other words, the issue has been the ability of industry and commerce to meet demand without that demand leading to higher prices or increased imports. This central fact seems now to be dimly recognised on the Opposition Benches. Recent speeches by Opposition Members suggest that they feel that there is too much demand in the economy rather than too little. We hear that private credit is too buoyant, that consumption is too high and that too many people are enjoying themselves. Instead of advice that we should be reflating we have a warning that we are about to have a balance of payments crisis. That warning figured prominently in the speeches of Opposition Members before the general election. It is of great credit to the strength of the economy that no such crisis has occurred.

Mr. Blair

On a point of order, Mr. Deputy Speaker. I well understand your ruling that on the Third Reading of a Finance Bill we have greater latitude than on Third Readings of other measures, but I respectfully submit that hon. Members cannot enter into a general debate on the economy, including economic growth and the balance of payments. I draw your attention, Mr. Deputy Speaker, to page 840 of "Erskine May", part of which states: While the normal rules relating to the scope of debate on third reading apply to the Finance Bill as much as to other bills, in practice some degree of latitude is frequently permitted. I submit that that means that we can refer occasionally to the economic effect of certain clauses in a broader way than would be possible when participating in other Third Reading debates, but we cannot translate a Third Reading debate into a Second Reading debate. When discussing a Finance Bill two years ago, some of my hon. Friends were very much slapped down by the Chair when they sought to broaden the scope of the debate, and I am concerned at the breadth of the debate.

Mr. Deputy Speaker

The hon. Member for Sedgefield (Mr. Blair) has partly answered his own point of order by quoting from "Erskine May" and making the distinction, as "Erskine May" does, between Finance Bills on Third Reading and other Bills. As he has said, it is permissible to range more widely on Third Reading of a Finance Bill. The Chair must take into account also the special circumstances of this Finance Bill, which has not been discussed at great length. It has not been subject to the probing that normally takes place in Standing Committee. All these matters must be considered. In addition, I must take into account that the hon. Member for Wells (Mr. Heathcoat-Amory) has been speaking for only a minute or two. I am sure that he is still in his preamble and that within a few moments he will address his remarks specifically to various clauses in the Bill.

Mr. Heathcoat-Amory

Thank you, Mr. Deputy Speaker. In fact, I was addressing very directly the likely consequences of an important provision of the Bill, because it is a crucial element in the strength of the economy and the absence of a balance of payments crisis that we now have the supply side improvements that profit-related pay will do everything to encourage. That is why I drew attention to the fact that the balance of payments crisis about which we heard so much from the Opposition before the election —a crisis so confidently predicted, so earnestly hoped for and so fervently prayed for — has not occurred. It has been postponed, and I believe that it can he postponed indefinitely if improvements in efficiency and productivity can be maintained. It is in achieving those aims that profit-related pay has a part to play.

Nothing that I have heard from the Opposition has suggested that they have a better approach. I listened in vain to the hon. Member for Sedgefield (Mr. Blair) in case he had some better key to improvements in the supply side to put forward as an alternative. I listened in vain to the municipal Socialists who talk about Socialism in one borough. The only practical consequences of their policies for business are higher rates and politically inspired constraints written into commercial contracts.

I listened in vain, too, to speeches from SDP and Liberal Members. I read their manifesto with interest, but all that they had to offer was a proposal of so-called industrial investment boards to be scattered around the countryside. No doubt those will now be abandoned as part of democratic fusion. However, alliance Members fail utterly to address the central weakness of the British economy, which has never been a lack of demand but a lack of effective supply.

That is why I congratulate my right hon. Friend the Chancellor and his team for an imaginative proposal that directly and effectively addresses our past weakness. Profit-related pay represents a bold and worthwhile attempt to tackle the continuing problem of inflexibility in the labour market. However, there is still a word of warning to be sounded. Nominal wages are still rising at twice the rate of inflation and I believe that inflationary dangers could lie ahead. That is why profit-related pay deserves a welcome and a chance. If we can achieve greater awareness in the minds of employees about the links between investment, profitability and jobs, and bring to the labour market the greater flexibility to which I alluded, we shall have found the best way of keeping inflation down while promoting industrial efficiency and effectiveness.

One of the tax regimes in the Bill has not been discussed at length, either on Second Reading or in Committee. It relates to the close companies referred to in clause 61, which was not discussed or voted upon, and I do not intend to criticise the clause. Perhaps I should explain for the benefit of the House and the less technically inclined that a close company is one that is controlled or owned by fewer than a certain number of individuals or trusts.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

On a point of order, Mr. Deputy Speaker. Is it in order for an hon. Member to go on at length on Third Reading about a clause which was neither discussed nor voted upon in the previous stages of the Bill's proceedings? Some of us are getting the impression that Conservative Members are going through the Bill in a somewhat tedious and prolonged way to try to delay the important Scottish business which is to follow. The hon. Member for Wells (Mr. Heathcoat-Amory) has hitherto not shown any great interest in the proceedings on the Bill. He seems now to have been dragged in by the Whips and by other Conservative Members as a device. I wonder whether you, Sir, could rule on whether it is in order for him to go on at such length about a clause which has not been discussed or voted upon.

Mr. Deputy Speaker

Order. Some of the earlier remarks of the hon. Member for Wells (Mr. Heathcoat-Amory) caused me a little concern. However, he is now referring specifically to a clause in the Bill—clause 61—and he is perfectly in order to do so.

Mr. Fleatheoat-Amory

I am sorry that my speech is being prolonged by interventions of Opposition Members. It is important that those outside the House should know that each clause gets a passing mention, either in Committee or in the House. That is why I am addressing myself to the important close company provisions.

I was explaining what a close company was. The legislation originated in the 1920s, when there was a considerable incentive for funds to be retained within close companies rather than distributed to shareholders. At that time, there was a great difference in the rate of taxation applying to registered companies, as they were known then, and individuals. Registered companies bore tax simply at the basic income tax rate, which was then mercifully low, whereas individuals could pay surtax at a very much higher rate. In addition, capital was either lightly taxed or not taxed at all. Therefore, there was every incentive to try to convert income to capital by retaining earnings within close companies. Quite naturally, the Revenue sought powers of direction so that earnings and profits in the companies could, in some circumstances, be taxed as though they had been distributed to shareholders.

I question whether those arrangements are appropriate today, for two reasons. First, before the war, a high proportion of British industry was owned and controlled by close companies, which were frequently owned by families or small groups of individuals. Therefore, the potential loss of revenue to the Exchequer was considerable. In the main, ownership has passed from close companies to public limited companies with hundreds or thousands of shareholders and the problem simply does not arise.

Secondly, the great difference in taxation as between companies and individuals is more or less ceasing to apply. The rates are now narrower. My right hon. Friend the Chancellor brought the rate of corporation tax down to 35 per cent. and the top rate of income tax down to 60 per cent. I hope and believe that in the next few years the differential will narrow still further. Also, capital is now taxed at a higher rate particularly if assets are held through companies.

Over the years, there has been provision to bring some relief to close companies if they are engaged in trading, but the definition of trading is restrictive and somewhat arbitrary. I argue that the close company legislation is becoming obsolete. I urge that it should be replaced by a more general anti-avoidance provision to catch the artificial use of close companies set up for avoidance purposes alone.

I shall not discuss clause 61 any further. I simply wish to ask my right hon. Friends two related questions. Will they establish, first, how many close company apportionments have been made over the last year or two and, secondly, how much revenue has been raised as a consequence? If the answer to both questions is "small", I again suggest that, when the future course of close company legislation is considered, it might be thought desirable to sweep away much of the legislation governing close companies which remains on the statute books and to replace it with a much simpler anti-avoidance provision.

I should like to touch on the more general matter of tax reform. I hope that my right hon. Friends will persist: in their valiant efforts to simplify the British tax system. We have already achieved great success with corporation tax, bringing the rate down and reducing——

Mr. Blair

On a point of order, Mr. Deputy Speaker. It is becoming increasingly clear that we are seeing an undignified and unworthy exercise of the filibuster to prevent the Scottish debate from taking place early. In my respectful submission, Sir, it cannot be right that we are entitled to debate tax reform on Third Reading of the Finance Bill. I draw your attention to Hansard of 10 July 1985 when, on Third Reading of the Finance Bill, Mr. Deputy Speaker specifically ruled out of order a more general discussion on taxation. He said: On Third Reading debate is restricted to what is in the Bill. Discussions at previous stages are not relevant. The discussions to which the hon. Gentleman refers are not relevant. Debate must be about the content of the Bill." —[Official Report, 10 July 1985; Vol. 82, c. 1231.] We are extremely concerned that the proceedings of the House are being abused to prevent my Scottish colleagues from debating important matters which the Government are afraid to debate in prime time and thus want to keep back.

Mr. Deputy Speaker

I think that the whole House knows that the Chair is in no way involved with tactics which perhaps are being used at the moment and which are used from time to time on both sides of the House. The Chair is concerned only with whether the debate taking place is in order. I am satisfied that this debate is in order. The hon. Member for Wells (Mr. Heathcoat-Amory) is now referring to points which I believe he will direct to a series of clauses in the Bill under the heading "Taxes Management Provisions".

Mr. Foulkes

On a point of order, Mr. Deputy Speaker. I am astonished at your ruling on what you think the hon. Member for Wells (Mr. Heathcoat-Amory) is about to say. I have never heard that happen in the House before. I should have thought what was happening was clear. We have had a posse of parliamentary private secretaries put up deliberately to filibuster. I should have thought that the Chair should take account of that. The hon. Member for Wells, who is speaking—when he is not interrupted—started this part of his speech by saying that he would now talk about the general matter of tax reform. I am sure that you heard him say that, Sir. It would be useful if you would rule whether the general matter of tax reform, as opposed to the specific reference in the Bill, is appropriate for Third Reading. It seems to some of us, especially those from beyond Hadrian's wall, that this is a deliberate abuse of the House. I hope that you will protect hon. Members whatever part of the country from which they come.

Mr. Deputy Speaker

I have already made it clear—I can add nothing further — that the hon. Member for Wells is perfectly in order in his remarks. It often happens that certain hon. Members wish to proceed to the next business. That has nothing to do with the Chair. The Chair's concern is to ensure that the debate is in order. I am satisfied that this debate is in order. I am beginning to deprecate a certain intention on the part of some hon. Members who appear to be leaning on the Chair. That is not tolerable, and I am not prepared to put up with it.

Mr. Foulkes

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. The hon. Member has made his point of order.

Mr. Foulkes

I have another point of order, Sir.

Mr. Deputy Speaker

Order. The hon. Member has made his point of order, and I have answered it to the best of my ability. I hope that he will not prolong proceedings by persisting.

Mr. Robert Sheldon (Ashton-under-Lyne)

On a point of order, Mr. Deputy Speaker. It has been held clearly in the past that the debate on Third Reading deals with what is in the Bill and its consequences and not with the alternatives to it, which one is perfectly able to debate either in Committee or on Second Reading. It has normally been held that the point of a Third Reading is to show the consequences of what is in the Bill and to consider whether it should be passed.

Mr. Deputy Speaker

The right hon. Member is a very experienced Member who has dealt with many Finance Bills. He will know that I have already ruled that some latitude is allowed on Third Reading of the Finance Bill as distinct from other Bills. That latitude is being exercised. In my judgment, it is within the normal rules that we apply in the House.

Mr. Heathcoat-Amory

This speech is becoming rather longer than I had expected, through no fault of my own. You are entirely right, Mr. Deputy Speaker. What is a Finance Bill if it is not a Bill to provide tax reform and to make changes to tax management? I was touching on that feature of the Bill. I was expressing my approval of the fact that the philosophy running through the Bill is fully in line with my right hon. Friends' earlier tax reform measures to make taxes simple, general in application, low and enforced. I have left "enforced" until last. It was mentioned in Committee—in fact, by the hon. Member for Sedgefield—that we had to be vigilant in not giving the Inland Revenue executive powers beyond what were absolutely necessary. One of the functions of the House is to put checks on the Executive if there were ever a danger of that. One reason why the Revenue's tax-gathering has created resentment is that the Revenue has been used to levy confiscatory taxes. If we can achieve comprehensible, comprehensive and low taxes, that danger ceases to be so great. Lower taxes are not only good in themselves but lead to greater compliance.

I hope that my right hon. Friends will carry forward the watchwords of tax reduction and reform which we have seen at work in this Finance Bill and which I am confident will be a feature of future Finance Bills.

Mr. Donald Dewar (Glasgow, Garscadden)

On a point of order, Mr. Deputy Speaker. I am sorry to rise during this debate, but I do so for certain reasons. On contemplation I was a little alarmed by the suggestion that my right hon. and hon. Friends were trying in some way to lean on the Chair. I hope that you will take our assurance that that was not the intention. But we are alarmed to some extent, and rightly so. by the way in which the House has been manipulated. I understand that that is not a matter for you and that you have to consider only what is in order, but my right hon. and hon. Friends' points were serious points about the latitude allowed on Third Reading and they are of some interest to the House.

As I understand it, you were making the point that there was a distintion between Third Reading of a Finance Bill and Third Reading of any other Bill. But the hon. Member for Wells (Mr. Heathcoat-Amory) made it unashamedly clear in one passage that he was going to discuss general tax reform. If that is in order, it is difficult to see the distinction between Second Reading and Third Reading of a Finance Bill. Whatever latitude has been allowed in the past, and judging by the quotation of a previous Deputy Speaker's ruling two years ago on a Finance Bill, it seems to me that a sharp distinction has been made between the Second and Third Reading of the Finance Bill. I wonder whether you can help me by defining the difference so that in future we shall know exactly where we stand.

Mr. Deputy Speaker

I am grateful for the first comments of the hon. Gentleman, which I gladly accept. I have said on a number of occasions already that debates on the Third Readings of Bills that are not Finance Bills must be strictly related to the contents of the Bills. It is also clear that the hon. Member for Sedgefield (Mr. Blair) helped me by readng from "Erskine May" the passage to the effect that Finance Bills are treated in a somewhat different manner in that a wider debate is allowed, but there must be a direct relationship to the clauses in the Bill. There have been one or two occasions when hon. Members have assisted me in keeping other hon. Members in order, but nothing that has happened so far is out of order. It is nothing to do with the Chair whether we should go on to the other business that is on the Order Paper. All the Chair has to do is to give to any hon. Member who rises the opportunity to speak on the matter that is before us. which is the Third Reading of the Finance Bill. As long as an hon. Member is in order, the Chair does and should call him. That is the position.

I am sure that any hon. Member who rises from now on will sense the feeling of the House, will recognise that the House does have other business to come to in due course, and, therefore, I am sure that hon. Members will be particularly careful to relate their remarks to the Bill before us.

8.31 pm
Mr. Tim Boswell (Daventry)

I am pleased to join in the debate on the Third Reading of what remains a very substantial Finance Bill. I would like, first, to mention the excellent contributions in the maiden speeches of my hon. Friends the Members for Wyre (M r. Mans), Wanstead and Woodford (Mr. Arbuthnot) and Gedling (Mr. Mitchell) and the hon. Member for Oxford, East (Mr. Smith) who are swelling the ranks of those new Members who, like myself, have now made their maiden speeches.

In the spirit of what you have just said, Mr. Deputy Speaker. I have only one remark to make by way of preamble, and that is that I have the great privilege of having a very old friend who is now almost 100 years old who has a remarkable brain and interest in financial matters, whose simple test——

Mr. Foulkes

He cannot be a Tory.

Mr. Boswell

He is indeed a Conservative. His simple view of financial matters is to ask whether things are getting better or worse and whether Budgets and Finance Bills will make things better or worse. Neither he nor I have any doubt about the legislation now before us.

I did not participate in Committee on the pensions legislation. I am sure that it is broadly within the right lines and that it is doing, as Government Members hope to do, two things at the same time. The first is that at the top level it is pruning one or two fiscal anomalies that Labour Members, when they had the chance to prune, took no action on. The first of those is the top limit on lump sums. which I do not recall having been in the legislation in the past. The second is the new arrangement on the reinsurance to close for Lloyd's where, after what was an unduly harsh first proposal, a sensible and workable compromise has been achieved.

I now turn to the remarkable contribution made by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who has very much borne the heat and burden of the day on the issue and in particular has set out to establish one substantial point — that pensions are an important and central property right. That should be recognised as far as possible both in legislation and in practice. The closer we can approximate our legislation to that ideal, the better.

Although things are much improved in the Bill, there arc matters to be attended to. I notice, for example, that my right hon. Friend the Financial Secretary referred to additional voluntary contributions. I must declare my own interest. Not only do I benefit from the pension scheme here, but some of us carry over financial retirement annuities from previous self-employment. We are in a better position than a person with his own pension scheme that is supplemented by additional voluntary contributions. The Government might pay attention to that point in the future.

Profit-related pay is the most important part of the Bill. It is an important social development. Benefits should not simply be internal; they should benefit the whole economy by stressing productivity and giving greater flexibility in the labour market. Those are the strengths in it. If it transpires that this experimental scheme is not taken up, as perhaps some people expect, although I do not, it is appropriate to treat it as an experiment and to look for something else. It is entirely wrong not to try the experiment to see how it works in practice.

As I want to speak only for a few minutes, I would like to pose the question that has gone through my mind in the time that I have spent looking at those issues in the past and during the passage of the Bill and draw an analogy with the work of my right hon. Friend the Chancellor in another area of taxation because there is an underlying dilemma. In this case the Government have made the right choice, but it is right to recognise the dilemma. The dilemma is whether one goes for a regime of lower tax rates generally or for differential reliefs for particular purposes. When one looks at the success of the Government's proposals on corporation tax where differential reliefs have been unpicked and a lower rate introduced, it must give one pause to look at any proposals, such as the ones in the Bill, for additional differential reliefs, particularly when they are not available to employees in the public sector because, by definition, they are not in profit-making activities.

The Government have been right to bring forward those proposals because they have value for the whole economy as well as for those within the profit-related schemes. It is a seed-corn exercise. It follows on from the earlier seed-corn exercises, such as the share savings scheme, which has been a remarkable success with over 1,300 entrants to date.

If hon. Members on either side of the House are concerned about an excess pattern of reliefs, the way to defuse those excess reliefs is to get general tax rates down. The lower the tax rate, the less the differential between being in a tax-sheltered environment and paying the full rate. The time to get tax rates down is not tonight, but it is and will he again in the next Budget. Meanwhile, I am delighted to join Conservative Members in commending this imaginative and substantial Finance Bill to the House.

8.38 pm
Mr. Conal Gregory (York)

I welcome the opportunity this evening to discuss two or three pertinent points on Third Reading of the Finance Bill. It has been delayed somewhat because of the general election, and I am pleased therefore that the aspects of pensions and particularly profit-related pay should be considered in some depth. I am saddened that the Opposition, not for the first time, have chosen not to participate adequately in the debate. Nevertheless, Opposition Members will have the opportunity later to read in Hansard the golden words from Conservative Members.

The Green Paper forecast in the Bill confirmed that 20 per cent., or £3,000, of the pay packet could be related to the profit-related bonus to qualify. There are several advantages in that. First, it makes wages more flexible and, therefore, employment more stable. After all, in any recession it will provide a cushion for cost cutting rather than by redundancies. If the system is introduced for smaller companies in my constituency, especially on the trading estates, it will hind individuals together and they will feel an integrated part of their firm and the profit created. Secondly, the emphasis on giving employees a stake in their companies must lead to better industrial relations, encouraging employees to work harder and boost productivity. I will come to the related problem of overtime shortly. Thirdly, unemployment will be reduced. For that, above all other reasons, profit-related pay will be of merit.

My right hon. Friend the Chancellor has doubled the tax relief since the Green Paper of July last year so that the limit of 20 per cent., or £3,000, whichever is the lower, will apply. That means that a married person on average earnings would qualify for tax relief to the extent of up to £6 per week or 4p off the basic rate of tax. That is no mean achievement.

This is no idle, theoretical concept. A number of companies have already successfully introduced profit-related pay and it is appropriate on Third Reading of the Finance Bill to pay tribute to the clearing banks which have introduced such schemes and to companies such as Boots, British Airways, Marks and Spencer, Sainsburys British Oxygen and Burtons, to name a few.

In relation to the moral and economic problem of overtime, companies which have profit-related pay will be able to overcome some of the difficulties. For instance, July is not the high season for the Post Office as it is for the farmer with his crops. Yet a great deal of overtime is being worked in the Post Office. If nationalised industries could introduce profit-related pay, those postmen and the engineers in major companies, such as British Rail, could share in the fruits of their extra work rather than working for time and a half or double time. The chairman of British Rail, which is a major employer in my constituency, is currently looking at ways to deal with subsidiary companies, such as Travellers Fare. A profit-related pay scheme would bring bonuses not just for management but for the employees, because they would benefit from the profits of the company rather than simply working for hourly or weekly pay.

A further growth sector of the economy is tourism, which is achieving 50,000 to 55,000 new jobs per annum. In this sector, too, there are major advantages in profit-related pay, not merely for major companies, such as Trusthouse Forte, Embassy and Grand Metropolitan, but for smaller enterprises such as the independent hoteliers in the Consort Hotel consortium. To achieve these benefits in smaller schemes, the Government might consider the possibility of a managing agency to deal with smaller companies.

I well understand that there are objections to profit-related pay and these need to be addressed before we agree to this imaginative and far-reaching Bill. The first objection is that there would be greater uncertainty of pay levels, but wages are already uncertain due to overtime, short-time working and piecework, so no further instability would be created and there would be greater employee involvement.

Secondly, some economists might suggest that pay is more closely related to profits and employees might therefore want more involvement in corporate decisions. I do not see that as a disadvantage. Like many of the companies which have already introduced profit-related pay, I regard that as a bonus. I am sure that any imaginative management would agree.

A third possible objection is that employees already on the payroll may seek to defeat the logic of the scheme by preventing further recruitment because it might result in a diminution of profit per head. That is a theoretical concept, but I do not believe that employees actually participating and keen to improve profitability would behave in that way.

Mr. Foulkes

Will the hon. Gentleman give way?

Mr. Gregory

I shall be happy to hear some words of wisdom from the Opposition.

Mr. Foulkes

During the hon. Gentleman's discourse on profit-related pay, my hon. Friends and I were contemplating how it might apply to Members of Parliament. What formula does the hon. Gentleman suggest? I should be happy for it to be based on one's electoral majority, but I doubt whether the hon. Gentleman would find that desirable. If the hon. Gentleman has any other suggestion, we should be interested to hear it. I am sure that you, Mr. Deputy Speaker, would not rule it out of order, in view of the generosity with which you have allowed the debate to proceed.

Mr. Gregory

I shall not be taken in by the hon. Gentleman's mischievous suggestion. I am sure that he, like me, wishes to return to the mainstream of Third Reading rather than unnecessarily delaying proceedings, which Conservative Members certainly do not wish to do.

Before that rather unhelpful intervention, I was referring to the third theoretical objection to profit-related pay. It has been suggested that existing employees may not wish new staff to come on to the books and thus to share in the profits. I believe that that is a false analogy and that if employees have the best interests of the company at heart as they will share in its profits up to the maximum that I have cited, they will be looking out for suitable employees and schemes to boost their enterprise.

In the 1930s and 1940s, as some of us know from our history books and others from experience, firms had suggestions boxes. We have moved a long way from there and profit-related pay provides tangible benefits for every stratum of a company. I therefore see great advantages in the scheme set out in the Green Paper and in the Bill and I commend it fully.

8.48 pm
Mr. Quentin Davies (Stamford and Spalding)

I begin by paying tribute to the masterly way in which my right hon. Friend the Minister has taken us through this excellent Finance Bill and to the parliamentary marathon that we had the privilege to witness from my hon. Friend the Member for Kensington (Sir B. Rhys Williams)—a marathon not without results—to which I shall return in due course.

As a new boy, I find it slightly strange that on Third Reading of a Finance Bill it is possible to conduct a debate without referring at all to what is surely the most important consequence of any Finance Bill—the fiscal stance enshrined in the Bill and enforced by it. It must be in the mind of every hon. Member that the current fiscal stance in this country has been extraordinarily felicitous. That lies behind a remarkable fact which I believe is unprecedented in our history or in that of any other country with which I am familiar. We have had unprecedentedly high rates——

Mr. Norman Hogg (Cumbernauld and Kilsyth)

On a point of order, Mr. Deputy Speaker. It is quite obvious that the hon. Member for Stamford and Spalding (Mr. Davies) has nothing to say. It is also quite obvious that Conservative Members have been dragged in to make speeches to delay the debate. From a previous role that I have played in the House, I know that you are an extremely helpful Deputy Speaker who understands the procedure. In what way would it be in order for me to move the closure?

Mr. Deputy Speaker

Order. The hon. Member for Stamford and Spalding (Mr. Davies) is on his preamble at the moment. If he continues a wide preamble for more than a few more sentences—I was already sitting on the edge of the Chair — I shall pull him up. As the hon. Member for Cumbernauld and Kilsyth (Mr. Hogg) knows well, every hon. Member is entitled to a few sentences of preamble before he comes to the detail of his speech. The hon. Member for Stamford and Spalding is about to do that.

Mr. Hogg

Further to that point of order, Mr. Deputy Speaker. It seemed to me to be more of an amble than a preamble. The hon. Gentleman was ambling all over the place and not directing himself in any way to the Bill. In what way and in what manner that would be consistent with the Standing Orders can I move the closure of the debate; in other words, That the Question be now put?

Mr. Deputy Speaker

I am not prepared to accept that motion.

Mr. Hogg

With respect, Deputy Speaker, I was not seeking to move the closure of the debate but asking in what way it would be in order for me to do that as a member of Her Majesty's Opposition as opposed to a member of Her Majesty's Government.

Mr. Deputy Speaker

The hon. Member is an experienced parliamentarian. He knows that the Chair will never give a ruling on a hypothetical question. If, in the fulness of time, he were to move the closure, the occupant of the Chair would have to make a decision. If I have misunderstood him, I am sorry. I am perfectly prepared to accept that he did not move the closure and therefore that I did not refuse it. He will understand the signifance of that.

Mr. Dennis Canavan (Falkirk, West)

Further to that point of order, Mr. Deputy Speaker. Will you accept a definite question from me rather than a hypothetical question from my hon. Friend? I should like to move the closure so that we may get on to more important business — the way in which this rotten Government are clobbering Scottish local authorities. All that the House is hearing are filibustering contributions from the Government who arc the Opposition in Scotland. I therefore move the closure of the debate.

Mr. Deputy Speaker

I regret to inform the hon. Gentleman that I am not prepared to accept that motion.

Sir Brandon Rhys Williams

Further to that point of order, Mr. Deputy Speaker. Would it not be right to say that in any Bill that is introduced on a Ways and Means resolution the Second Reading is an open-ended debate and there is no prospect of a closure? Am I right in saying that the same applies to the Third Reading and that a closure motion is not in order on a Finance Bill?

Mr. John Maxton (Glasgow, Cathcart)

Further to that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Is it the same point?

Mr. Maxton

Yes, Mr. Deputy Speaker. I inform the hon. Gentleman —I hope that you, Mr. Deputy Speaker, will do exactly the same—that it is not the case on the Second Reading of a Finance Bill when the closure is moved by the Government.

Mr. Deputy Speaker

Order. The Chair has the onerous duty of deciding whether to accept a closure motion. Then, of course, it is for the House to decide whether it wishes to end a debate. The hon. Member for Falkirk, West (Mr. Canavan) moved the closure, and I have told him and the House that I am not prepared to accept it.

Mr. Davies

I shall complete my preamble in the course of one sentence. As I was saying, the fiscal stance in this country has permitted us to enjoy an unprecedentedly fast rate of growth and, at the same time, to maintain a remarkable degree of equilibrium in the balance of payments, between different sectors of the economy and, above all, between growth in consumption and in investment. That is a consequence of our fiscal stance.

It is no accident that a great deal of attention has been paid to two aspects of the Bill simply because they are the two aspects that are, first of all, conceptually and philosophically new and, secondly, because they are likely to have a significant effect on microeconomic behaviour. They are profit-related pay and pension provision. I am one of the many casualties of the present pension system, but since I do not expect to be able to profit from any improvement, I am not sure that, strictly speaking, I have any interest to declare this evening. However, by general consent, it is pernicious to discriminate against early leavers. It is not merely morally pernicious but exceedingly economically unsound, for the simple reason that one is discriminating against and penalising those who are mobile and those who take risks and subsidising those who play safe and stay put. That is completely contrary to the general philosophical thrust of the Government's economic policies that I am proud to support. Therefore, I was grateful for the assurance that my hon. Friend the Member for Kensington extracted from my right hon. Friend to the effect that the walls of Jericho might conceivably be inclined to move a little further.

Mr. Norman Hogg

On a point of order, Mr. Deputy Speaker. What have the walls of Jericho got to do with the Finance Bill? The House is being abused. We have heard one cliche after another. The hon. Member is pouring forth empty rhetoric, Deputy Speaker, and you are allowing it to happen. The time has come for this—[Interruption.]

Mr. Deputy Speaker

Order. I know that hon. Members, particularly from Scottish constituencies, wish to get on to the important matters that are on the Order Paper for later this evening. I distinctly heard the hon. Member who has the Floor say that he was addressing his remarks to profit-related pay and pension schemes. [Interruption.] Order. The hon. Gentleman is doing just that. I suggest that points of order are only prolonging the proceedings. I guarantee hon. Members who are keen on later business that I shall ensure that the remarks that are made by any hon. Member are directed to the business before us. I repeat the appeal that I have already made to those hon. Members who rise to remember that other business will come on later and that many hon. Members are anxious to speak on it.

Mr. Canavan

Further to that point of order, Mr. Deputy Speaker. Just a few minutes ago, I heard the hon.

Member for Tayside, North (Mr. Walker) whisper to his colleagues, "Keep it going, lads, keep it going." This is a deliberate filibuster to try to minimise the time for democratic debate of Scottish business. What are you going to do about it, Mr. Deputy Speaker? If you are not going to do anything about it, I will move a motion of no confidence in you as Deputy Speaker.

Mr. Deputy Speaker

Order. It is just as well that the Chair does not always hear everything that is said below the Gangway. All that I say to the House once more is that the sole job of the Chair is to ensure that speeches are in order. The speeches are in order, and if we had fewer points of order we might dispose of this business more quickly and get on to the Scottish business.

Mr. Davies

I do not know whether the walls of Jericho would have withstood the clamour from Opposition Members, but I am more than ready to do so to make what I believe to be a serious point about profit-related pay.

I was amazed to hear the remarks of the hon. Member for Sedgefield (Mr. Blair) on profit-related pay. If I understood him correctly— I apologise in advance if I did not—he said that he was not against profit-related pay, but he was against using fiscal incentives to induce it. That was close to a declaration of intellectual funk, because the issue is not whether we have profit-related pay with fiscal incentives or whether we have it without. The issue is whether we have profit-related pay with fiscal incentives or whether we do not have it at all.

The reason for that is simple: we are asking workers to accept a cost in the form of a risk attaching to a portion of their present earnings, and there is no reason why we should expect anyone to accept such a cost unless we offer a corresponding reward at the same time. In the long term, that reward will be effectively an equity stake in the profits of the company for which they work, and that will bring with it all the economic, psychological and social benefits to which much attention has been paid in the debate. But for the immediate term, there is no way that the workers or staff in firms will accept that a portion of their present earnings should be subject to uncertainty to which they are not now subject unless there is a countervailing inducement for them to accept it. The only other way in which profit-related pay could be introduced would be to expect the employer, while guaranteeing existing wages or salaries, to go beyond that and guarantee an element of profit, too. It is neither realistic nor desirable to expect employers to do that. If they did, they would significantly increase the cost of labour and thus reduce employment.

This issue must be faced fairly and squarely. It is regrettable that it has not been so faced by the Opposition. It is with great pleasure and enthusiasm that I support this provision in an excellent Finance Bill.

9.3 pm

Sir Brandon Rhys Williams

I hasten to reassure you, Mr. Deputy Speaker, and the House, that I have only very brief remarks to make which arise directly out of the Bill as we have it before us on Third Reading.

In the 1986 Budget there was what I thought an objectionable proposal in regard to interest in possession trusts; and I sought to argue with my right hon. and hon. Friends at the time that it should be changed. I did not succeed, but I would like to say how very gratified I am that the present Bill has been amended in precisely the way I had hoped.

When this year's Budget was announced, I did not agree with the proposed tax treatment of life assurance funds and, having had the good fortune to be selected to serve on the Standing Committee, I tabled an amendment to the Bill which would have had the effect of reversing what the Chancellor intended in his Budget speech. I am pleased to see that that provision has now been dropped in the Bill which is before the House—or at any rate significantly revised.

We were concerned about the reinsurance to close proposal affecting Lloyd's. There, too, I tabled an amendment in Committee just before the election, and it was already apparent that my right hon. and hon. Friends were ready to move on that subject. They are to be warmly congratulated on the way in which they have attended to the experts, and have now made significant changes. I believe that what is now in the Bill, so far as Lloyd's is concerned, is satisfactory all round. However, in accepting the amendments in Committee, my right hon. Friend the Financial Secretary agreed that further changes might be seen to be necessary and said that he would pay attention to the matter as time went by. That was extremely satisfactory and I should like to express my thanks for all those improvements.

On the question of personal pension schemes, which constitutes chapter II of the Bill, the Government are making a highly imaginative and important new move that should be welcomed in all parts of the House. I am sure that it is very welcome in the country. It is very much in line with my own recommendation over a long campaign. I wish the new movement towards personal pension schemes every possible success. However, I am sorry to say that in schedule 3 there are provisions which I do not think will help the Bill at all. I am sorry that the House did not agree that it would have been better if schedule 3 had been dropped.

In opening the debate on Third Reading, my right hon. Friend said that tax reform and the reduction of tax is a vital part of our overall strategy. I warmly endorse that and should like to add one more thing: we should make extreme simplification of the tax system for its own sake a particular party commitment. We should aim to make progress with that during the present Parliament. I certainly hope that we shall.

In the area of occupational pension schemes, there is a great deal of room for an extreme simplification of the rules. The occupational pension movement in the private sector is vitally important. It stimulates saving for retirement, which is probably the most important spring for a private capitalist system. Saving for retirement is the most natural thing for everybody. It should be encouraged by the Government so far as ever possible.

We also have a motive to see that occupational pension schemes provide a sufficient pension, so that people in retirement do not have to rely on the taxpayer through supplementary benefit. We are not yet doing enough in that direction. The result is that millions of pensioners have to rely on supplementary benefit, which is a sad state of affairs. Not enough is yet being done in this Bill to put that right.

We should run our occupational pension schemes so that they assist members of our property-owning democracy to make the best of their careers. They should not find themselves anchored in funds from which they cannot move without making serious losses. They should be able to make their own choices of career in their own best interests—and that would be the best interests of the economy as well. Sadly, the provision in the Bill as it now stands will reduce the mobility of labour in precisely the area where it matters most, which is for senior executives in the closing years of their careers. Those people will now add it up and discover that it is far better to remain in the schemes that they are in, than to try to jump into new schemes and to negotiate themselves a satisfactory retirement benefit. That is a most unfortunate aspect of the Bill and it is something that the House must undertake to come back to very soon.

The provisions for the AVCs are highly complex. Many experts think that they are unworkable and I am bound to say that I think so too. The movement towards the AVCs, which we all applaud, is unfortunately being stymied by the very provisions that the Government have included in the Bill. I do not like to be critical, because I know that my right hon. Friend has his heart in the right place. That is why I am optimistic when making these remarks, because I am sure that he will listen to what I say — and also to what the professional people in the pension movement are saying extremely clearly.

I also do not like the provisions in regard to accelerated accrual. The Inland Revenue has got that wrong. It will hold employees in schemes instead of encouraging mobility; it is an unnecessary restriction on freedom, and a sign that the Inland Revenue has not done enough thinking about the tax-free lump sum.

On tax-free lump sums, the £150,000 limit is inexplicable. It cannot be justified. It is a form of discrimination against the better-off which is not based on any kind of logic. I hope that it will be removed very soon because it is the wrong approach to take.

Having voiced those critical thoughts, I do not want to say more except that, in general, this is an excellent Bill. Its major features are vitally important and progressive. The points that I have criticised can be put right and must be put right very soon.

9.9 pm

Mr. John Greenway (Ryedale)

I am grateful for the opportunity to speak once again on the Finance Bill. Some of us have spent long hours on these Benches dealing with these matters and it is slightly offensive for Opposition Members to talk about us being brought in to filibuster into the night when we had every intention of speaking in this debate this evening.

We have discussed many provisions in detail, and before I refer to the points that I wish to raise, I wish to join in the commendations made earlier of my hon. Friend the Member for Kensington (Sir B. Rhys Williams), my right hon. Friend the Financial Secretary and the hon. Member for Sedgefield (Mr. Blair). Sadly, for the first time during these proceedings, the hon. Gentleman has gone to take some refreshment. We have had interesting and detailed discussions during which there has not always been unanimity.

I wish to address primarily the pension provisions, particularly those affecting personal pensions and AVCs. Choice is certainly a central plank of Government strategy and the Bill introduces the third main area of choice available to individuals. We have had home ownership and share ownership and now the Government seek to widen the choice in pensions. As someone who for the past 15 years has been involved in marketing pensions, I must say not only that I have an interest to declare, but that that is to be welcomed.

The question of tax relief on pension arrangements has figured greatly in our debates. One of the areas where I am most at loggerheads with my hon. Friend the Member for Kensington is in relation to the purpose of that relief. I hope that I am not doing him an injustice when I say that I do not agree that tax relief should be considered as a form of loan from taxpayers which is subsequently repaid when the pension benefits are eventually taxed. There is every justification for continuing with sensible tax advantages in pension provision.

From the employer's point of view, in this day and age we should regard the provision of pensions as every hit as important as the payment of salaries. No one would suggest that the payment of salaries should not be a tax-deductible item on company and business balance sheets. Equally, from the individual's point of view, it is sensible for us to encourage people to make provision for the future. My hon. Friend the Member for Kensington referred to the possible problem of the burden of retired people on future generations of taxpayers. The thrust of the Bill to a large extent prevents that. People are given every encouragement to provide for their retirement, so that, next century, millions of pensioners will not depend on the state.

We welcome and support the retention of tax advantages and the Government have a right to ensure that there is no major abuse of those tax facilities. They have introduced changes in the lump sum arrangements. We have had considerable and enjoyable discussions about why the figure should be £150,000, and by any measure that figure is substantial and generous. The Financial Secretary has assured us that that figure will not be eroded, and we take that assurance on board. Let us retain our tax advantages for pensions and ensure that we do not see abuses to the extent that it would put them in jeopardy.

Questions have also been raised about AVCs, accelerated accrual and certain aspects of the financial arrangements for retirement annuities, now changing into personal pensions. My right hon. Friend assured us that the door was not closed and that further representations on the practicality of putting these matters into practice can be made. I welcome that.

An interesting feature of this debate is that much of the comment has come from the Conservative Benches and some people——

Dr. Lewis Moonie (Kirkcaldy)

Especially in the past few hours.

Mr. Greenway

It has been apparent throughout the entire debate. Labour Members remind me of a football team that is three goals down, but keeps kicking the ball to their own goalkeeper.

When we debate pensions and future pension provision, people may ask about the significance of those measures in relation to people who are out of work or who are already retired. The Social Security Act 1986 and the personal pension proposals will bring flexibility to people who may be in work for periods of time or where one member of a family is a wage earner. Such flexibility is welcome.

Comment was made on the fact that clause 29 does not allow the aggregation of relevant earnings between husbands and wives. Surely that is right. We must encourage wives to make their own pension arrangements. People who are already retired must wonder about the effect of this debate on pensions. I was grateful for the earlier ruling of Mr. Deputy Speaker, who said that we may refer to the first Finance Bill, which was passed before some of us were fortunate enough to be Members of this House. I greatly welcome the imaginative approach that was contained in the first Finance Bill in relation to increased age allowance, especially for those over 80.

Mr. Blair

On a point of order. Mr. Speaker. The hon. Member for Ryedale (Mr. Greenway) has just said that he thought that Mr. Deputy Speaker ruled that the earlier Finance Bill, which this House passed before the election, could be referred to and its provisions discussed in relation to this Bill. I cannot believe that to be the case. I never heard Mr. Deputy Speaker say that and it seems wholly out of order.

Mr. Speaker

I was not in the Chair at the time, but the hon. Member for Ryedale (Mr. Greenway) must stick to this Finance Bill.

Mr. Greenway

I do not want to go against your ruling, Mr. Speaker, but in future Finance Bills I should like movement towards an increased age allowance.

One measure that was introduced in this Bill, but not in the same form in the previous Bill, is the capital gains tax treatment of life assurance companies. I share the welcome that my hon. Friend the Member for Kensington gave to the Government's change of mind in this matter. It may interest some of the Scottish Labour Members—I sympathise with them for having to wait to discuss their own business a little later—that that change of heart has been greatly welcomed by the Scottish life assurance industry, which has much to gain from the benefits of the measures in the Bill in relation to personal pensions.

The tax changes introduced during the past eight years have been radical and far-reaching, so much so that one is reluctant to over-egg the pudding by commenting on the measures contained in the Finance Bill. Nevertheless, it is absolutely clear that this Bill introduces fundamental changes in relation to the provision of pension benefits for future generations. I greatly support the Bill.

9.19 pm
Mr. William Cash (Stafford)

The provisions in this Bill are, without doubt, some of the most important provisions that are likely to come before this Parliament. The notion of profit-related pay, which comprises clauses 1 to 17 of the Bill, is of exceptional importance for the following reasons. For many years it has been commonly accepted that the question of pay should be linked directly to the trade union negotiating machinery. Now at last, in the new environment created by the Government, pay will he related to the individual effort of the people in industry or services. That mirrors the mid-19th century, in the days when there was no income tax to speak of, and all that was gained by people in their respective industries and services was pay, wages and the profits of those who ran the businesses. The intrusion—welcome in many respects— of the volumes of public expenditure that have been generated since the mid-19th century, particularly in the welfare state, has cast a great burden upon the state.

A consequence has been an increase of taxation. The consequence of clauses 1 to 17——

Mr. Foulkes

On a point of order, Mr. Speaker. Before you came in, some challenges were made about the irrelevance of speeches and the fact that they were out of order. The hon. Member for Stafford (Mr. Cash) is taking us back to the 19th century. That was well before the Bill was introduced, and it is out of order. Perhaps you did not hear everything that the hon. Gentleman said, Mr. Speaker, but I can assure you that everything that I heard in the past 30 seconds was out of order, and I hope that you will bring the hon. Gentleman to order.

Mr. Speaker

My record shows that the hon. Member for Stafford (Mr. Cash) has been speaking for about one and half minutes, but I imagine that if he referred to the previous century, it must have been a preamble and that he was drawing lessons from past experiences.

Mr. Cash

Thank you very much, Mr. Speaker.

The Bill proposes that the maximum amount of profit-related pay eligible for tax relief will be £3,000 or 20 per cent. of the total PAYE, whichever is the lower. I challenge the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) to dispute whether that is germane to the debate that is now in progress.

Mr. Foulkes

It is germane, but it is boring.

Mr. Cash

It is on the spot and it is in the Bill.

The limits that have been determined for the purposes of the Bill are rather on the low side. In a future Finance Bill, I should prefer it if we increased those limits because ever greater incentives will be required to develop enterprise and efficiency and to develop the economy to the level to which we aspire. Let me risk raising a matter that goes outside this country. We have much to learn from the incentive-based economy in Japan because the relationship between profit-related pay and incentives lies at the heart of enterprise in the modern world.

The proposals in the Bill are the very antithesis of the drab Socialism represented on Opposition Benches. The notions of profit-related pay and incentives, the drive for enterprise and the determination to improve the quality of our services and industries are represented by clauses 1 to 17.

The more we can increase the relationship between profit-related pay and industry and services, the more we shall be able to reduce the perks and other informal accruals of income that are not directly related to the performance of the person who is working on the shop floor or in the boardroom. Therefore, the provisions to ensure that there is a direct relationship between the work that is done by those on the shop floor or in management and the amount of money that they take away with them is greatly to be applauded. That is also related to the reductions in taxation.

The combination of the various factors ensures that there is a direct contact between work, pay and income. People have a direct incentive to enterprise, which is what we require as we move towards the end of the century. To some extent, I accept the strictures of the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) on my reference to the 19th century; but we must learn from the experience of other countries. We must learn how to recreate enterprise in this country. These provisions are adequate and proper testament to the endeavours of this Government over the next five to ten years. There is no doubt that they are necessary and helpful and will play a large part in ensuring that the country stays on the rails and becomes more prosperous during the next 15 years.

9.25 pm
Mr. John Redwood (Wokingham)

I shall endeavour to speak without hesitation, repetition or deviation because I know that Opposition Members are worried about our motives for coming here tonight. I can assure them that I was not lassoed by a Whip or waylaid by a Minister. I came tonight because I sat through the Committee stage of the Bill and I want to make some points about what emerged. Opposition Members would be well advised to take a greater interest in how the Government put their hands in the nation's pockets; they might then find the electors more sympathetic to their cause.

On personal pensions, a number of good new clauses were moved and then withdrawn, particularly by my hon. Friend the Member for Kensington (Sir B. Rhys Williams). A serious point that the Government must recognise arises out of that debate. Money purchase schemes do not easily go together with final salary schemes. They offer many advantages that final salary schemes cannot offer the taxpayer, the fund manager or — most important of all—the beneficiary. For example, in a final salary scheme one cannot be sure how much tax relief will have to be given, and one has to be careful about the amount of tax relief and how the limits to be placed on it are defined. With final salary schemes, if the rate of inflation rose too high, the beneficiaries would be largely unprotected, in the way in which they were throughout the terrible inflation of the 1970s, when the widows and members of schemes in receipt of pensions were often wiped out by high rates of inflation and inadequate rates of increase or compensation from the scheme managers.

Similarly, those who seek to change jobs—we need job mobility in this country— often find it difficult to obtain a good deal from the pension fund that they are leaving or from the fund to which they are going. The Government have enacted many measures to improve these matters by inflation-linking the pensions up to a limit and improving the right of transferees. There is no doubt that the best guarantee of all for anyone is to have his own assets visible, under his own control and professionally managed—and that is exactly what personal pensions offer everyone. That is exactly what the money purchase type of scheme offers pensioners, within and without the large schemes run by employers. We are offering opportunities—[Interruption.] Opposition Members may knock or deride them, but the people are in favour of them; they want choice and better pensions, and these proposals go some small way to achieving that aim.

There are disappointments in some of the other provisions of the Bill. Why, for example, for capital gains tax, are we still left with this ridiculously complicated scheme of indexation? Why have the Government not taken the opportunity to remove the indexation provisions and increase the amount that is tax-free for those making gains? Alternatively, the Government could have scrapped the capital gains tax machinery and replaced it with a speculators' tax—at income tax rates—on those making short-term gains. The Government have missed an opportunity, but I hope that they will seize it on another occasion.

I am disappointed that nothing has been done to tackle the problem faced by those on lowest incomes, particularly as they move from unemployment into employment, which is happening frequently and quickly now. They face benefit withdrawals and a higher proportionate rate of tax than is paid by those on the highest incomes. That anomaly should be redressed rapidly.

I welcome the profit-related pay proposals and hope that they will catch on and become a large expense. It is not before time that such measures have come before the House. We need more flexibility in pay. Profits are booming, industry's order books are full and industry and commerce are flourishing across most of the country, so many people will benefit from the Government's proposal. It will be an addition to their income and will introduce the flexibility that we need to take on prosperity and to generate new jobs. It is not a scheme for cutting wages; it is a scheme for improving our economic prospects. If large sums are given in tax relief, much of that money will buy new jobs and new activities, and the flexibility will strengthen the prosperity of the whole nation. That prosperity will spread—yes, even to Scotland, though Labour Members always seem to deny that Scotland could ever prosper. Prosper it will, and the Government's proposals will help.

This is a radical Government and there are modest and good radical measures in the Bill. I hope that this will not be the end of it. Cutting taxes is a good thing. Reduced tax rates bring in more tax revenue and can further speed the process by which the wheels of industry turn more rapidly and people get back into jobs, which is what we all sincerely wish to see.

9.32 pm
The Paymaster General (Mr. Peter Brooke)

We have had a good-humoured debate, with a powerful strand of continuity. My first pleasure in responding is to congratulate four admirable maiden speakers.

My hon. Friend the Member for Gedling (Mr. Mitchell) traded not at all upon his father who is also an hon. Member. At the risk of going back into the 19th century, some of us recalled that Mr. Gladstone described Austen Chamberlain's maiden speech as a speech to warm a father's heart.

My hon. Friend told us that his constituency was named after a rural deanery. The only rural dean whom I know to appear as a symbol in British literature appears in the poem by my namesake Rupert Brooke about the vicarage at Grantchester. The fact that a constituency is named after a rural deanery adds greatly to the knowledge of the House. My hon. Friend was both lyrical and practical and I know that the House will look forward to hearing from him again.

The hon. Member for Oxford, East (Mr. Smith) declared that he had recently lost his identity. His speech clearly demonstrated that he had refound it. The hon. Gentleman made a most workmanlike speech and it was impressive that, when speaking of the motor industry, hospitals in his constituency and the Oxford polytechnic, he demonstrated great familiarity with how those institutions work.

My hon. Friend the Member for Wyre (Mr. Mans) earned the affection of the House by the manner in which he spoke of his predecessor, Sir Walter Clegg. I had to do business with Sir Walter on further education and on VAT on take-away foods. It is clear that my hon. Friend the Member for Wyre will represent his constituency with the same closeness and effectiveness as was shown by Sir Walter, of whom we were all so fond. In a moment I shall come to what my hon. Friend said about profit-related pay.

My hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) set the House an outstanding example because of the manner in which he spoke without notes. I dare say that this is the first time that the House has heard a maiden speech by an hon. Member whose father was present and another maiden speech on which my hon. Friend the Member for Wanstead and Woodford was congratulated by the grandson of one of his predecessors. It was a well-informed speech and we were grateful for my hon. Friend's discretion in leaving until next year those matters that require our further attention, and giving us a year in which to consider the points.

In a similar way my hon. Friend the Member for Beaconsfield (Mr. Smith) referred to draft clauses. My hon. Friend the Member for Wells (Mr. Heathcoat-Amory) raised a query on clause 61.

Mr. Blair

I join the Minister in his praise of the four maiden speakers. Their speeches were all of excellent quality and brought great lustre to the debate.

Mr. Brooke

I am grateful to the hon. Gentleman for those remarks.

My hon. Friend the Member for Wokingham (Mr. Redwood) gave a trailer and pointers for subsequent legislation.

There were continuing references to a power of mitigation in the speech by the hon. Member for Sedgefield (Mr. Blair), and I reassert that this matter will be reviewed in advance of next year's Finance Bill. Those who can sing "Abide with Me" in French will know that this is our dernier rendez-vous with the hon. Member for Sedgefield because he is moving to other pastures. I join my right hon. Friend the Financial Secretary to the Treasury in praising the hon. Gentleman for the way that he managed the Committee stage.

It is now 99 years since the first occasion on which someone played through a test match and carried his bat. He made only 26 runs in 47. The hon Member for Sedgefield made 104—if we do not count the schedules, which in any case are extras. The support that the hon. Member for Sedgefield received was thin.

Opposition Members voted against the Second Reading and were then conspicuously absent from the Chamber, though in the course of the last hour they have shown a late interest. In Committee, twice the number of Back Benchers spoke on the Conservative side as spoke on the Opposition side. Only four of the seven Opposition Back-Bench speakers were from the Labour party and three of those came in on the final day of the Committee stage. The opposition was constructively provided by my hon. Friends the Members for Beaconsfield, for Croydon, South (Sir. W. Clark) and for Kensington (Sir B. Rhys Williams).

I am told that the hon. Member for Sedgefield is to shadow my constituents in the City. It is a compliment to my constituents that he has been selected for that role. He raised a specific point on retrospection, about which he was quite right. My hon. Friend the Member for Dover (Mr. Shaw) also addressed clause 80. The hon. Member for Sedgefield was quite right in his reading of the Finance Bill provisions. Both clauses 62 and 80 effectively ensure that the benefit of a favourable decision for the taxpayer from the commissioners or the courts is not removed by the substantive provisions of the relevant clause. This aspect of those clauses follows well-established precedents. Successive Labour and Conservative Administrations have clearly thought it right as a matter of constitutional principle not to deprive a successful litigant of the fruits of his legal victory.

A substantial part of the debate was devoted to profit-related pay. The hon. Member for Sedgefield said that the employment effects apply only in a recession. I repeat that it is knowledge that one can cope with the recession that causes management to operate more effectively and competently during an upturn.

The hon. Member for Oxford, East raised the absence of rights of access to knowledge. The intention of the legislation is that solutions must be found within the business. There is intended to be no detailed blueprint. Instead, there will be the maximum freedom to tailor schemes to individual circumstances. It will be a truly voluntary arrangement, and we do not want "conscripted" volunteers.

A host of my hon. Friends supported that part of the Bill. My hon. Friend the Member for Northampton, North (Mr. Marlow) made a characteristically robust speech. My hon. Friend the Member for Crawley (Mr. Soames) addressed himself to the issue, as did my hon. Friend the Member for Daventry (Mr. Boswell), who spoke about differential reliefs. That issue demonstrates the importance that the Government attach to the Bill. My hon. Friend the Member for Dover asked for simple concepts and said that technical requirements should be uncomplicated. It is a paradox that we must have complicated legislation to produce a simple result.

My hon. Friend the Member for Stamford and Spalding (Mr. Davies) produced a powerful argument for tax relief. My hon. Friends the Members for Stafford (Mr. Cash), for Wells, for Winchester (Mr. Browne), for Wokingham and for Wyre participated in the debate. My hon. Friend the Member for Wyre was especially eloquent in speaking from his experience with the John Lewis trust on both participation and employment effects. I must correct my hon. Friend the Member for York (Mr. Gregory): the Bill adds 50 per cent. to relief and does not double it. I was grateful to him, however, for his analysis of the objections and his overcoming of them.

The hon. Member for Gordon (Mr. Bruce) asked about the forecast cost, a subject that was taken up in Committee. There is a chronological factor because so much of the relief is granted after the year in question. The material that accompanies the Bill refers to £50 million, but on a running relief basis it is a higher figure. The scheme is called profit-related pay because that is what it is. I understand the preference of the alliance to have flexibility of language, but we have described it as profit-related pay because, as I have said, that is what it is. It would be churlish not to welcome the support of the alliance on this occasion, and I was particularly gratified to hear that it would be supporting the Government on Third Reading, as it did on Second Reading. When I was the Government's pairing Whip it was never always certain that that would happen.

The hon. Member for Banff and Buchan (Mr. Salmond) made a good speech in which he charged the Government with having certain motives in introducing various measures in the Bill, and he challenged what he described as our rhetoric. The motivation behind the Bill is exactly what we have always stated it to be. We wish to confer greater flexibility within the labour market and to make further improvements to the supply side of the economy.

I owe the hon. Member for Sedgefield one point on clause 13, on which we spent much time in Committee. The Institute of Chartered Accountants of Scotland was much milder in its language in drawing our attention to the issue of information powers than the hon. Gentleman or the hon. Member for Great Grimsby (Mr. Mitchell). The hon. Member for Great Grimsby implicitly described what I was doing, and certainly what the Revenue was doing, as "extending the circles of tyranny". I have returned to the Finance Act 1978, to which my hon. Friend the Member for Croydon, South referred in Committee, when he quoted an eloquent speech that I made during what was then the Bill's passage through Committee. I am sorry that he did not raise it when dealing with clause 71 because I would have replied to that debate.

In 1978, the Conservative Opposition's grouping in Committee included my right hon. Friend the Chancellor of the Exchequer, my right hon. and learned Friend the Secretary of State for Scotland, my right hon. Friend the Secretary of State for the Environment, my right hon. Friend the Minister of Agriculture, Fisheries and Food, my right hon. Friend the Lord Privy Seal, my hon. Friend the Minister for Health, my hon. Friend the Minister for Employment, my hon. Friend the Minister of State, Home Department, my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who was a Defence Minister, and the Minister of State for the Armed Forces. The then Conservative Opposition mounted those 10 right hon. and hon. Members while the hon. Member for Sedgefield was left to mount the opposition to this Bill himself.

The House will recall the observation of President Kennedy when Nobel prize winners dined at the White House. He said that it was the most distinguished array of human talent since President Jefferson had dined there alone. I pay that final compliment to the hon. Member for Sedgefield. Despite the array of talent that scrutinised the 1978 Finance Act, the legislation proposed then was exactly the same as that which we are introducing now. The Conservative Opposition mounted no objection to it in 1978. As the hon. Member for Great Grimsby tried to curdle the blood of the House by speculating on what we might have said had we been in opposition, I stress that we allowed exactly similar measures to find their way on to the statute book in 1978. We raised no objection on that occasion.

My hon. Friend the Member for Kensington is a one-man think tank outside the House and a one-man Panzer division inside it. He has been conferring new logic on the term "think tank". We had prolonged debates on the subjects that my hon. Friend raised and we shall continue our dialogue with him. Clearly one of his purposes was to identify allies in the House. He could have identified my hon. Friends the Members for Canterbury (Mr. Brazier), for Stamford and Spalding and for Wokingham as allies, although my hon. Friend the Member for Ryedale (Mr. Greenway) was against him.

In much the same way as my hon. Friend the Member for Kensington, I was brought up at the knee of a Welsh mother. I make an allusion which some of those who came into the Chamber late will not have heard. I was brought up on a rhyme which went: Joshua the son of Nun And Caleb the son of Jephunneh Were the only two who ever Got through to the land of milk and honey. Only two members of the shadow Cabinet served in Cabinet when the last Labour Government were in power. It is a compliment to my right hon. Friend the Chancellor that both of them in turn have been placed opposite him. I suspect that my right hon. Friend made many runs off the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). I await with interest to sec the performance of the right hon. and learned Member for Monklands, East (Mr. Smith). As my right hon. Friend the Financial Secretary said, we are now confronted by a shadow team of six instead of five — a fact that the Opposition disguised by separating the shadow Chief Secretary from the rest of the list, thus divorcing public expenditure formally from tax as they divorced it informally in the election campaign.

I shall pass from my references to what the French call the cabinet fantôme. Last week the Leader of the Opposition asked for an economic debate this week. The opportunity for that has not been taken during this debate, although the strength of the economy has been recognised by a number of my hon. Friends. Even the hon. Member for Oxford, East introduced the subject of the car industry, and I pay tribute to the strength that the car industry is demonstrating.

Mr. Foulkes

On a point of order, Mr. Deputy Speaker. Surely the Minister has finished his speech, yet he is still going on. Is that in order?

Mr. Speaker

Order. It is a very elegant speech, and I do not think that he has yet finished it.

Mr. Brooke

It is an index of and a testimony to the muscle of what there was in the Budget that this Finance Bill should have occupied us for as long as it did, enabling the hon Member for Sedgefield to produce the score that he has. As he differs from me in not having Scottish blood, he generously gave up the opportunity of making a final speech so that we could get on with the final business.

Twelve-and-a-half hon. Members—the hon. Member for The Wrekin (Mr. Grocott) has come back to the House —have made maiden speeches, and three of those were Scottish maiden speeches. There cannot have been a Finance Bill to which more Government supporters have paid a tribute on Third Reading than this one, and I commend it to the House.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 267, Noes 205.

Division No. 19] [9.50 pm
Aitken, Jonathan Arbuthnot, James
Alexander, Richard Arnold, Jacques (Gravesham)
Alison, Rt Hon Michael Arnold, Tom (Hazel Grove)
Allason, Rupert Ashby, David
Amess, David Ashdown, Paddy
Amos, Alan Aspinwall, Jack
Atkins, Robert Forth, Eric
Atkinson, David Fowler, Rt Hon Norman
Baker, Nicholas (Dorset N) Fox, Sir Marcus
Baldry, Tony Freeman, Roger
Batiste, Spencer French, Douglas
Beaumont-Dark, Anthony Gale, Roger
Beith, A. J. Gardiner, George
Bendall, Vivian Garel-Jones, Tristan
Bennett, Nicholas (Pembroke) Gill, Christopher
Benyon, W. Glyn, Dr Alan
Bevan, David Gilroy Goodhart, Sir Philip
Biffen, Rt Hon John Goodlad, Alastair
Biggs-Davison, Sir John Goodson-Wickes, Dr Charles
Blackburn, Dr John G. Gorman, Mrs Teresa
Body, Sir Richard Gorst, John
Bonsor, Sir Nicholas Gow, Ian
Boscawen, Hon Robert Gower, Sir Raymond
Boswell, Tim Grant, Sir Anthony (CambsSW)
Bowden, Gerald (Dulwich) Greenway, John (Rydale)
Bowis, John Gregory, Conal
Boyson, Rt Hon Dr Sir Rhodes Griffiths, Peter (Portsmouth N)
Braine, Rt Hon Sir Bernard Ground, Patrick
Brandon-Bravo, Martin Grylls, Michael
Brazier, Julian Hampson, Dr Keith
Bright, Graham Hannam, John
Brooke, Hon Peter Hargreaves, A. (B'ham H'Il Gr')
Brown, Michael (Brigg & Cl't's) Hargreaves, Ken (Hyndburn)
Browne, John (Winchester) Harris, David
Bruce, Ian (Dorset South) Haselhurst, Alan
Bruce, Malcolm (Gordon) Hawkins, Christopher
Buchanan-Smith, Rt Hon Alick Hayhoe, Rt Hon Sir Barney
Budgen, Nicholas Hayward, Robert
Burns, Simon Heathcoat-Amory, David
Burt, Alistair Heddle, John
Butcher, John Hicks, Mrs Maureen (Wolv' NE)
Butler, Chris Hicks, Robert (Cornwall SE)
Butterfill, John Higgins, Rt Hon Terence L.
Carlisle, Kenneth (Lincoln) Hill, James
Carrington, Matthew Hind, Kenneth
Carttiss, Michael Holt, Richard
Cash, William Hordern, Sir Peter
Chapman, Sydney Howard, Michael
Chope, Christopher Howarth, G. (Cannock & B'wd)
Churchill, Mr Howell, Rt Hon David (G'dford)
Clark, Dr Michael (Rochford) Hughes, Robert G. (Harrow W)
Clark, Sir W. (Croydon S) Hunt, David (Wirral W)
Clarke, Rt Hon K. (Rushcliffe) Hunt, John (Ravensbourne)
Conway, Derek Hunter, Andrew
Coombs, Anthony (Wyre F'rest) Irvine, Michael
Coombs, Simon (Swindon) Irving, Charles
Cope, John Jack, Michael
Cormack, Patrick Jackson, Robert
Couchman, James Janman, Timothy
Cran, James Jessel, Toby
Critchley, Julian Johnson Smith, Sir Geoffrey
Currie, Mrs Edwina Johnston, Sir Russell
Curry, David Jones, Gwilym (Cardiff N)
Davies, Q. (Stamf'd & Spald'g) Jones, Robert B (Herts W)
Davis, David (Boothferry) Kellett-Bowman, Mrs Elaine
Day, Stephen Kennedy, Charles
Devlin, Tim Key, Robert
Dickens, Geoffrey Kirkwood, Archy
Dicks, Terry Knight, Greg (Derby North)
Dorrell, Stephen Lamont, Rt Hon Norman
Douglas-Hamilton, Lord James Lang, Ian
Dover, Den Lawrence, Ivan
Dunn, Bob Lawson, Rt Hon Nigel
Durant, Tony Lennox-Boyd, Hon Mark
Eggar, Tim Lester, Jim (Broxtowe)
Emery, Sir Peter Lightbown, David
Evans, David (Welwyn Hatf'd) Lilley, Peter
Evennett, David Lloyd, Peter (Fareham)
Fallon, Michael Lord, Michael
Farr, Sir John McCrindle, Robert
Favell, Tony Maclean, David
Fearn, Ronald Mans, Keith
Fenner, Dame Peggy Marshall, Michael (Arundel)
Field, Barry (Isle of Wight) Martin, David (Portsmouth S)
Forman, Nigel Michie, Mrs Ray (Arg'l & Bute)
Forsyth, Michael (Stirling) Miscampbell, Norman
Mitchell, Andrew (Gedling) Speller, Tony
Monro, Sir Hector Squire, Robin
Montgomery, Sir Fergus Stanbrook, Ivor
Morrison, Hon C. (Devizes) Stern, Michael
Neale, Gerrard Stevens, Lewis
Neubert, Michael Stewart, Allan (Eastwood)
Nicholls, Patrick Stewart, Andrew (Sherwood)
Nicholson, David (Taunton) Stewart, Ian (Hertfordshire N)
Nicholson, Miss E. (Devon W) Stradling Thomas, Sir John
Onslow, Cranley Sumberg, David
Page, Richard Summerson, Hugo
Paice, James Tapsell, Sir Peter
Parkinson, Rt Hon Cecil Taylor, Ian (Esher)
Patnick, Irvine Taylor, John M (Solihull)
Pawsey, James Taylor, Matthew (Truro)
Peacock, Mrs Elizabeth Temple-Morris, Peter
Porter, Barry (Wirral S) Thompson, D. (Calder Valley)
Porter, David (Waveney) Thompson, Patrick (Norwich N)
Portillo, Michael Thurnham, Peter
Powell, William (Corby) Townend, John (Bridlington)
Price, Sir David Tracey, Richard
Raison, Rt Hon Timothy Trippier, David
Redwood, John Vaughan, Sir Gerard
Rhodes James, Robert Viggers, Peter
Rhys Williams, Sir Brandon Waddington, Rt Hon David
Riddick, Graham Wakeham, Rt Hon John
Ridley, Rt Hon Nicholas Walden, George
Ridsdale, Sir Julian Walker, Bill (T'side North)
Rifkind, Rt Hon Malcolm Waller, Gary
Roberts, Wyn (Conwy) Ward, John
Roe, Mrs Marion Wardle, C. (Bexhill)
Rossi, Sir Hugh Warren, Kenneth
Rost, Peter Watts, John
Rowe, Andrew Wells, Bowen
Sackville, Hon Tom Wheeler, John
Sainsbury, Hon Tim Whitney, Ray
Scott, Nicholas Widdecombe, Miss Ann
Shaw, David (Dover) Wiggin, Jerry
Shaw, Sir Giles (Pudsey) Wilkinson, John
Shaw, Sir Michael (Scarb') Wilshire, David
Shelton, William (Streatham) Winterton, Nicholas
Shephard, Mrs G. (Norfolk SW) Wood, Timothy
Shepherd, Colin (Hereford) Woodcock, Mike
Shersby, Michael Yeo, Tim
Sims, Roger Young, Sir George (Acton)
Skeet, Sir Trevor
Smith, Sir Dudley (Warwick) Tellers for the Ayes:
Smith, Tim (Beaconsfield) Mr. Richard Ryder and
Soames, Hon Nicholas Mr. Alan Howarth.
Speed, Keith
Abbott, Ms Diane Canavan, Dennis
Adams, Allen (Paisley N) Clark, Dr David (S Shields)
Allen, Graham Clay, Bob
Archer, Rt Hon Peter Clelland, David
Armstrong, Ms Hilary Clwyd, Mrs Ann
Ashton, Joe Cook, Frank (Stockton N)
Banks, Tony (Newham NW) Cook, Robin (Livingston)
Barnes, Harry (Derbyshire NE) Corbett, Robin
Barron, Kevin Cousins, Jim
Battle, John Crowther, Stan
Beckett, Margaret Cummings, J.
Benn, Rt Hon Tony Cunliffe, Lawrence
Bennett, A. F. (D'nt'n & R'dish) Cunningham, Dr John
Bermingham, Gerald Dalyell, Tarn
Bidwell, Sydney Darling, Alastair
Blair, Tony Davies, Rt Hon Denzil (Llanelli)
Blunkett, David Davies, Ron (Caerphilly)
Boateng, Paul Davis, Terry (B'ham Hodge H'I)
Boyes, Roland Dewar, Donald
Bradley, Keith Dixon, Don
Bray, Dr Jeremy Dobson, Frank
Brown, Gordon (D'mline E) Doran, Frank
Brown, Nicholas (Newcastle E) Douglas, Dick
Buckley, George Duffy, A. E. P.
Caborn, Richard Dunnachie, James
Callaghan, Jim Dunwoody, Hon Mrs Gwyneth
Campbell, Ron (Blyth Valley) Eadie, Alexander
Campbell-Savours, D. N. Evans, John (St Helens N)
Ewing, Harry (Falkirk E) Maxton, John
Ewing, Mrs Margaret (Moray) Meacher, Michael
Fatchett, Derek Meale, Alan
Faulds, Andrew Michael, Alun
Field, Frank (Birkenhead) Michie, Bill (Sheffield Heeley)
Fisher, Mark Millan, Rt Hon Bruce
Flannery, Martin Moonie, Dr Lewis
Flynn, Paul Morgan, Rhodri
Foot, Rt Hon Michael Morley, Elliott
Foster, Derek Morris, Rt Hon A (W'shawe)
Foulkes, George Morris, Rt Hon J (Aberavon)
Fraser, John Mowlam, Mrs Marjorie
Fyfe, Mrs Maria Mullin, Chris
Galbraith, Samuel Murphy, Paul
Galloway, George Nellist, Dave
Garrett, John (Norwich South) Oakes, Rt Hon Gordon
Garrett, Ted (Wallsend) O'Brien, William
George, Bruce O'Neill, Martin
Gilbert, Rt Hon Dr John Orme, Rt Hon Stanley
Godman, Dr Norman A. Parry, Robert
Golding, Mrs Llin Patchett, Terry
Gordon, Ms Mildred Pendry, Tom
Gould, Bryan Pike, Peter
Graham, Thomas Powell, Ray (Ogmore)
Grant, Bernie (Tottenham) Prescott, John
Griffiths, Nigel (Edinburgh S) Primarolo, Ms Dawn
Griffiths, Win (Bridgend) Quin, Ms Joyce
Grocott, Bruce Redmond, Martin
Hardy, Peter Rees, Rt Hon Merlyn
Harman, Ms Harriet Reid, John
Hattersley, Rt Hon Roy Richardson, Ms Jo
Heffer, Eric S. Roberts, Allan (Bootle)
Henderson, Douglas Robertson, George
Hinchliffe, David Robinson, Geoffrey
Hogg, N. (C'nauld & Kilsyth) Rogers, Allan
Holland, Stuart Rooker, Jeff
Home Robertson, John Ross, Ernie (Dundee W)
Hood, James Ruddock, Ms Joan
Howarth, George (Knowsley N) Salmond, Alex
Howell, Rt Hon D. (S'heath) Sedgemore, Brian
Hoyle, Doug Sheerman, Barry
Hughes, John (Coventry NE) Sheldon, Rt Hon Robert
Hughes, Robert (Aberdeen N) Shore, Rt Hon Peter
Hughes, Sean (Knowsley S) Short, Clare
Illsley, Eric Skinner, Dennis
Ingram, Adam Smith, Andrew (Oxford E)
John, Brynmor Smith, C. (Isl'ton & F'bury)
Jones, Barry (Alyn & Deeside) Snape, Peter
Jones, Martyn (Clwyd S W) Soley, Clive
Kaufman, Rt Hon Gerald Spearing, Nigel
Lambie, David Steinberg, Gerald
Leighton, Ron Stott, Roger
Lestor, Miss Joan (Eccles) Strang, Gavin
Lewis, Terry Straw, Jack
Litherland, Robert Taylor, Mrs Ann (Dewsbury)
Livingstone, Ken Thompson, Jack (Wansbeck)
Lloyd, Tony (Stretford) Turner, Dennis
Lofthouse, Geoffrey Vaz, Keith
Loyden, Eddie Wall, Pat
McAllion, John Walley, Ms Joan
McAvoy, Tom Warden, Gareth (Gower)
McCartney, Ian Wareing, Robert N.
Macdonald, Calum Welsh, Michael (Doncaster N)
McFall, John Wigley, Dafydd
McKelvey, William Williams, Alan W. (Carm'then)
McLeish, Henry Wilson, Brian
McNamara, Kevin Winnick, David
McTaggart, Bob Wise, Mrs Audrey
McWilliam, John Worthington, Anthony
Madden, Max Wray, James
Mahon, Mrs Alice Young, David (Bolton SE)
Marek, Dr John
Marshall, David (Shettleston) Tellers for the Noes:
Marshall, Jim (Leicester S) Mr. Frank Haynes and
Martin, Michael (Springburn) Mr. Allen McKay.
Martlew, Eric

Question accordingly agreed to.

Bill read the Third time, and passed.