Commons Sitting of 9 May 1988

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  ENERGY

    Energy Production
    Mr. Forth: To ask the Secretary of State for Energy what proportion of the nation's energy production is provided by the private sector; and what was the proportion in 1979.
    Mr. Hunter: To ask the Secretary of State for Energy what proportion of the nation's energy production is provided by the private sector; and what was the proportion in 1979.
    The Secretary of State for Energy (Mr. Cecil Parkinson): Provisional figures indicate that the private sector currently accounts for 70 per cent. of indigenous production of primary fuels, compared with 55 per cent. in 1979.
    In terms of final energy consumption met by the private sector, that represents an increase from 41 per cent. in 1979 to 73 per cent. now. After the privatisation of the electricity supply industry that figure should rise to 87 per cent.
    Mr. Forth: I thank my right hon. Friend for that most encouraging reply. Will he confirm his belief that this
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    process has been good for both the consumer and the country as a whole, and will he say whether he has any immediate or long-term plans to extend that proportion of private provision even further?
    Mr. Parkinson: The Government have made their position clear. They believe that energy provision, as well as most other industrial and commercial activities, are best carried on by the private sector, and we shall be pursuing that policy with the other industries for which, at present, we have no immediate plans for privatisation.
    Mr. Hunter: Although I quite unreservedly welcome and applaud the private sector's increased role in energy production, will my right hon. Friend take this opportunity to comment on the successful implementation of the Government's wish to see increased competition in energy production?
    Mr. Parkinson: As my hon. Friend knows, a prime purpose of our electricity privatisation proposals is to create competition in generation. We believe that, in the long term, that offers the best prospects for keeping down prices to the consumer.

    Neighbourhood Energy Action
    Mr. Knapman: To ask the Secretary of State for Energy what level of grant he has approved for neighbourhood energy action and energy action Scotland in 1988–89.
    The Minister of State, Department of Energy (Mr. Peter Morrison): My Department's grant to neighbourhood energy action will be £392,000 and to energy action Scotland £68,000.
    Mr. Knapman: I thank my hon. Friend for that reply. Will he confirm that those figures represent an increase, and will he tell us what part the private sector plays in those projects?
    Mr. Morrison: I confirm that those figures are an increase. Last year we paid £341,000 to neighbourhood energy action and £57,000 to energy action Scotland, so

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    there are increases of about 15 and 19 per cent. respectively. The private sector plays a part, but I have made it clear that I hope that next year the two bodies will be able to encourage the private sector to play a substantially increased part.
    Mr. Matthew Taylor: The Minister may be aware that, under the new employment training programme, there is worry that funding will not be sufficient for energy projects and that approved training organisations will not be keen to keep them going? Will he liaise with officials at the Department of Employment about that, and has he any helpful advice to offer for those projects?
    Mr. Morrison: I appreciate, as does the hon. Gentleman, that negotiations must take place as a result of the change, but I am assured that the Manpower Services Commission is keen to ensure that those projects are able to continue.

    Electricity Supplies
    Mr. Tam Dalyell: To ask the Secretary of State for Energy, pursuant to his reply of 28 March, Official Report, columns 719–20, what consideration he has given to the implications for the promptness with which electricity supplies can be called up in an emergency by the grid controllers, of possible differences in interpretation of the contractual obligations to be placed on private generating companies; what assessment he has made of the effects on the cost of operating the grid of changing to a contractual relationship between the grid controllers and private suppliers; and if he will make a statement.
    Mr. Parkinson: All generators will have a commercial and contractual interest in ensuring that the power supply system does not fail in an emergency. Operating procedures in emergencies will be set out clearly in their contracts, and the ability of the grid controllers to manage emergencies should be unaffected. We believe that any costs will be outweighed by the benefits of competition and diversity.
    Mr. Dalyell: Why do the Government think that they know better than Lord Marshall?
    Mr. Parkinson: The Government think that they know better than Lord Marshall because, although he is a learned and powerful figure in the industry, he is only one voice. There are many other people in the industry who know just as much about transmission as he does and who do not agree with him. The president of the Institution of Electrical Engineers does not agree with him. Our professional advisers advised us that what we wished to do was technically possible. Lord Marshall accepts that it is technically possible. He believes that costs will be involved. We believe that those costs are sustainable and will be more than outweighed by the savings from diversity.
    Mr. Rost: What assessment has my right hon. Friend made of the benefits that will result when area boards are able to use the grid to shop around for competitive contracts from new private producers?
    Mr. Parkinson: We think that that is precisely the sort of competition and diversity of supply of electricity that will give rise to competition in prices and will benefit the customer. That will compensate for some of the possible additional costs of ensuring that the system remains safe.
    Mr. Prescott: The technical argument over whether the Secretary of State or Lord Marshall is right will continue, but can the right hon. Gentleman assure us that it is still his belief that prices will be cheaper under the privatisation system and grid separation? He may have seen a recent report by National Utility Services Ltd.—it was produced two days ago—that electricity prices under privatisation will be far more expensive than hitherto and are likely to be the most expensive in Europe.
    Mr. Parkinson: The company to which the hon. Gentleman referred is not entirely unbiased in this instance. It makes its living by giving advice on how to reduce power bills. It therefore has a vested interest in pretending that the bills are extremely high. It has an entirely unrepresentative sample of customers and we prefer to believe the CBI and the Electricity Council, which have agreed figures. I congratulate the hon. Gentleman on discovering—wrongly in this instance—an enthusiasm for the private sector.

    Flue Gas Desulphurisation
    Mr. Heathcoat-Amory: To ask the Secretary of State for Energy how many flue gas desulphurisation units are being fitted to coal-fired power stations.
    The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer): The CEGB has announced plans to retrofit FGD equipment to the six generating units at Drax power station and four generating units at Fiddler's Ferry. In addition, FGD equipment will be fitted to the generating units of all new coal-fired power stations.
    Mr. Heathcoat-Amory: This equipment is essential to prevent acid rain, but is my hon. Friend aware that each unit consumes 300,000 tonnes of limestone a year? This has to be quarried at places such as the Mendip Hills in my constituency. Will my hon. Friend take this environmental damage into account in deciding which type of power station to order in future?
    Mr. Spicer: I can give my hon. Friend a number of assurances. First, there is no question of the Mendip Hills being used for the extraction of limestone for this purpose. Nor is there any question of national parks being used. I understand that less than 0·3 per cent. of the limestone that is nationally produced is used for each power station.
    Sir Trevor Skeet: Will my hon. Friend give me advice on the cost of removal of sulphur dioxide and NOx from a 2,000 MW power station? Obviously this will increase the cost considerably.
    Mr. Spicer: The best available figure for a 2,000 MW power station is £200 million.

    Electricity Industry
    Mr Thurnham: To ask the Secretary of State for Energy what recent representations he has received about statutory obligations and supply regulations in the electricity supply industry following privatisation; and if he will make a statement.
    Mr. Parkinson: I have received many representations on electricity privatisation, including comments on the proposed revisions to the electricity supply regulations.
    Mr. Thurnham: In looking ahead to 1992, can my right hon. Friend say whether reciprocal registration agreements will be used with our European partners, most of whom, I understand, require registration now?
    Mr. Parkinson: This is strictly a matter for my right hon. Friend the Secretary of State for Trade and Industry, who is dealing with this aspect of 1992. We have a meeting arranged with the Electrical Contractors Association, and I shall he interested to hear the views of its members.
    Mr. Cryer: Does the Secretary of State agree that privatisation and competition involve cost-cutting exercises to increase profits? That is the main motivation of running private concerns rather than services. What guarantee does he have that directors in the privatised sector will not be as incompetent and criminally irresponsible as the directors of Townsend Thoresen?
    Mr. Parkinson: The hon. Gentleman is making the mistake of assuming that profits can come only from what he describes as cost cutting, which implies sacking employees and behaving anti-socially. Operating efficiently can provide a useful source of profits and a useful source of help for the customer, who enjoys a keener price.
    Mr. Andy Stewart: When the supply regulations are introduced after privatisation, will British Coal be allowed to compete fairly and equally with foreign imports, which can be dumped here in the short term to decimate the British industry before prices are increased?
    Mr. Parkinson: My hon. Friend knows that there is a huge market for coal that will exist way into the foreseeable future. Most of our electricity will come from coal. The Government have invested more than £9 billion in the past nine years to ensure that we have a modern, efficient British coal industry. Therefore, there is a market and the industry has been given the investment. If that is used properly, the British coal industry has nothing to fear.
    Mr. Prescott: Will the Secretary of State confirm that his consultative document, in which he promised new rights for consumers, includes provision in the regulations for the duty to supply—which may be prosecuted for at the moment—to be prosecuted only through civil actions agreed by the director general of electricity supply? Will he also confirm that the duty to supply will now be reduced to supply on reasonable terms? Finally, will he confirm that the right to disconnect—which is qualified at the moment—will be unqualified? That is clearly a reduction of consumers' rights and in conflict with the Secretary of State's promise in his White Paper.
    Mr. Parkinson: I do not know where the hon. Gentleman got those findings. No decisions have been taken on those matters. We are in the middle of a process of consultation about the possible supply regulations and no decisions of any kind have been taken. They will be taken after consultation.

    Electricity Costs
    Mr. Hannam: To ask the Secretary of State for Energy what plans he has in drawing up the regulatory framework for the electricity industry to include energy efficiency as an option for ensuring that electricity is supplied to the consumer at the lowest possible cost.
    Mr. Michael Spicer: The details of the regulatory framework, including their effect on energy efficiency are being considered with the Department's advisers. The regulatory system will encourage the industry to meet its customers' requirements at least cost.
    Mr. Hannam: While welcoming my hon. Friend's reply confirming that energy efficiency is one of the options under consideration, may I ask whether he accepts that if we are trying to achieve the right balance between low-cost electricity for the consumer and profitability for the utilities, the means of ensuring energy efficiency must be included in the powers given to the regulator and they must be strong enough to ensure efficiency at the generating and distribution ends?
    Mr. Spicer: I listened carefully to what my hon. Friend said and we shall bear his remarks closely in mind. Our regulatory framework will be designed to promote energy efficiency through competition, especially among generating companies.
    Mr. Darling: Is the Minister still convinced that the insistence on providing a substantial proportion of electricity generation through the nuclear industry is the best means of providing low-cost electricity, especially in view of the difficulties and unknown costs of decommissioning and in light of this morning's report in The Guardian which suggests that nuclear power stations are running at below their generating capacity because of loading and unloading difficulties?
    Mr. Spicer: The Government's position on that is quite clear. We believe that there should be a minimum of nuclear energy in this country, for efficiency reasons. Also, there is no way in which we can tell at the moment what the price of fossil fuels will be in 20 years' time. Therefore, there is a very good reason for nuclear energy on economic grounds. Leaving that aside, we believe that there should be a thriving nuclear industry, to ensure that we have a wide variety of energy sources.
    Mr. Jack: What steps is my hon. Friend taking to ensure that all branches of the Government respond enthusiastically to offers of private sector money to invest in energy-saving measures?
    Mr. Spicer: The first step that I can take is to ensure that my hon. Friend's remarks are widely read.
    Mr. John Garrett: Will the Minister agree that for years the Government have claimed that their objective is to make Britain the most energy-efficient nation and that the Prime Minister set us a target of a saving of £7 billion on fuel bills? How will that be achieved unless the regulatory body has very strong powers and a duty to promote energy conservation? Is it not a fact that the present Secretary of State for Energy has much less interest in and commitment to energy efficiency than his predecessor had?
    Mr. Spicer: I listend carefully to my hon. Friend the Member for Exeter (Mr. Hannam) and to what the hon. Member for Norwich, South (Mr. Garrett) has just said about the need for efficiency as one of the criteria within the regulatory regime. I must repeat that a prime way of achieving efficiency, at least thermal efficiency, is through competition among generators, and we shall ensure that the regulatory regime includes that.

    Fast Breeder Reactor, Dounreay
    Mr. Haynes: To ask the Secretary of State for Energy if he will make a statement on the future funding of the fast breeder reactor project at Dounreay, Scotland.
    Mr. Parkinson: My Department reviews its expenditure on research and development each year, including that on the fast reactor. All options are considered, but no decisions have yet been taken.
    Mr. Haynes: I know what the Secretary of State is up to. I can read it like a book, and I can read him like a book, too. There is a cut back on the financing of future projects. The same is true of research and development.
    Mr. Parkinson indicated dissent.
    Mr. Haynes: The Secretary of State should not look surprised. We know what is going on. The Government are cutting back on expenditure with a view to privatisation, so that they can have a cheap rake-off in other public industries. Here we go again, this time with electricity.
    Mr. Speaker: Briefly, please.
    Mr. Haynes: I shall be brief, Mr. Speaker. I ask the Secretary of State to come off it and to be honest at the Dispatch Box with the people of this nation.
    Mr. Parkinson: I thank the hon. Gentleman for his brevity and for the quietness with which he asked his question. This matter is in no way connected with the privatisation of electricity. The only connection is that the CEGB has been funding 30 per cent. of the cost of the fast reactor. The fact that it has taken a decision about its expenditure in no way affects the overall decision on the fast reactor. It is a complex issue and one to which we are giving serious consideration. It also has international aspects. Above all, it has enormous implications for the people of Caithness and Sutherland. We recognise our obligations to them, and when I am ready I shall come to the House with a statement about our policy. We are not ready to do so yet, and we are not prepared to be bounced by inaccurate newspaper articles.
    Mr. Haynes: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise the matter on the Adjournment.
    Mr. Maclennan: I thank the Secretary of State for his robust recognition of his obligations.
    Mr. Speaker: Order. I am not able to hear the hon. Member. I shall have to call him on another question, because this matter is to be raised on the Adjournment.

    Magnox Reactors
    Mr. Frank Cook: To ask the Secretary of State for Energy what recent information he has received from the Nuclear Installations Inspectorate about the future decommissioning of Magnox nuclear reactors.
    Mr. Michael Spicer: The future of the Magnox nuclear power stations in the United Kingdom is a matter for the operators concerned, subject to their meeting the requirements of the Nuclear Installations Inspectorate.
    Mr. Cook: I should like to be able to thank the Minister for that reply, but there is not a great deal for which I can thank him. It was a fairly empty statement. Can the Minister tell the House whether he is prepared to require the NII to consider the option, on decommissioning Magnox stations, of strengthening their primary and secondary cladding to improve the integrity of their structure, and perhaps use the redundant, cavernous capacity of disused turbine halls for storing—under managed, monitorable and redeemable circumstances—the nuclear waste that is causing so much trouble? It would not have to be transported all over the country to new sites because we would have on site the expertise to do the job that needs to be done.
    Mr. Spicer: The hon. Gentleman is extremely knowledgeable in these matters and has demonstrated his knowledge on this occasion. The Government do not tell the NII what it should do about its inspections, because the NII sets its own standards. We have full confidence in it and have made sure that it is fully staffed. The NII is the Government's expert body for ensuring standards, and we give it every support in maintaining those standards.
    Mr. Campbell-Savours: Has the Minister received representations from the private sector on electricity generation under the fast breeder reactor programme? Will he place on record the statement that the FBR programme has been, and continues to be, a useful programme?
    Mr. Spicer: I believe that that relates to the previous question and not to this one, which is about Magnox stations. They have nothing to do with fast breeder reactors.
    Mr. Campbell-Savours: No, I am sorry, Mr. Speaker.
    Mr. Speaker: Order.
    Mr. Campbell-Savours: It was absolutely in order.
    Mr. Speaker: I call Mr. Alexander Eadie.

    South of Scotland Electricity Board
    Mr. Eadie: To ask the Secretary of State for Energy if he has been informed by British Coal of progress made in its meetings with the South of Scotland Electricity Board regarding future coal burn at power stations.
    Mr. Parkinson: These negotiations are a commercial matter for the two industries concerned, but I have asked to be kept informed.
    Mr. Eadie: Does the Secretary of State not agree that, in the midst of the negotiations with British Coal, the South of Scotland Electricity Board is being provocative and threatening? We have learnt that between 20,000 and 30,000 tonnes of foreign coal are now at Rotterdam awaiting delivery to the SSEB in small cargoes, and that 3,000 tonnes have already arrived at the Kincardine power station in Scotland. Did the Secretary of State not endorse the three-month agreement to halt foreign coal imports, to give time for British Coal and the SSEB to reach an agreement on coal burning in this country?
    Mr. Parkinson: As the hon. Gentleman knows, I have made my position very clear. I cannot force either party to reach an agreement, although I should like them to do so,

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    and I have been doing all that I can to encourage them. The negotiations are in hand, and I hope that they will be successful.
    Mr. Maclennan: Is the Secretary of State aware that the SSEB is among the generating boards that are impressed not only by coal burn rates but by the burn-up rate of the fast breeder reactor—which is why it has put its weight behind the project for the future?
    Mr. Parkinson: Yes. I want to make it clear that we wish to retain the fast breeder reactor technology for this country. The question is how we do that in the most economic way possible. As I said in answer to an earlier question, we are looking at all the aspects of the problem very carefully. I look forward to discussions with the hon. Gentleman when he comes to see me tomorrow.

    Flue Gas Desulphurisation
    Mr. Pike: To ask the Secretary of State for Energy whether he has recently discussed with the Central Electricity Generating Board its proposals for flue gas desulphurisation to reduce acid rain.
    Mr. Michael Spicer: We are fully aware that the CEGB plans to fit FGD equipment at a cost of £600 million to 6GW of existing plant as well as on all new coal-fired stations.
    Mr. Pike: In view of the growing concern about acid rain, both in this country and elsewhere in Europe, is the Minister satisfied that the CEGB is proceeding with the work as speedily as possible? Does the Minister not believe that it may be necessary to take action on some of the other power stations?
    Mr. Spicer: The United Kingdom now has a 10-year sulphur dioxide emission control programme costing about £1 billion. We accept that that speed is appropriate for controlling emissions. It is not often realised that Britain has reduced its emissions by 40 per cent. since 1970, and by 25 per cent. by 1980. We have done a tremendous amount already to reduce emissions, and we intend to continue the programme.
    Mr. Butler: My constituents will be very grateful for the £200 million investment in Fiddler's Ferry, but when my hon. Friend next meets the CEGB will he suggest that some disruption may be caused to the local community in Cuerdley and ask the CEGB to minimise that disruption?
    Mr. Spicer: I am sure that the CEGB will read carefully in Hansard what my hon. Friend has said. The matter is clearly causing some local concern, and I am sure that the CEGB will be aware of that.
    Mr. Patchett: With gas desulphurisation in mind, has the Minister discussed the future of the fluidised bed experiment at Grimethorpe, in my constituency? Will he make a statement?
    Mr. Spicer: I am afraid that I cannot make a statement now, but the Grimethorpe plant is being considered very carefully.

    Coal Industry
    Mr. Greg Knight: To ask the Secretary of State for Energy, how much has been invested in the coal industry since April 1979.
    Mr. Parkinson: Since 1979 the Government have provided British Coal with £9 billion of grants—together with substantial loan finance—of which £6 billion has been spent on capital investment.
    Mr. Knight: Is not a healthy economy one of the prerequisites of any Government policy of substantial and continuing investment? Should not those who work in the coal mining industry be grateful to the Government, not only for supporting worthwhile investment, but for helping to create an excellent economic outlook for Britain? Does my right hon. Friend agree that the biggest threat to the industry and to jobs within it comes from those who instigate unnecessary strike action, such as Mr. Arthur Scargill, and those who support such action, such as the Leader of the Opposition? [Laughter.]
    Mr. Parkinson: We shall all be voting for the hon. Member for Kingston upon Hull, East (Mr. Prescott).
    It is important that modern working practices go with capital investment and that strikes and waste are eliminated. Provided that we have modern working practices to go with modern machinery, I see a very bright future for British Coal, but every strike and work to rule lessens the prospects for the industry.
    Mr. Douglas: Will the Secretary of State concede that a substantial proportion of the investment in Scotland has been in the Longannett complex, and that that investment has been endangered by the cavalier attitude of the South of Scotland Electricity Board in importing foreign coal at dumped prices? I recognise that the Secretary of State has shown an interest in this matter, but what steps is he taking to protect the nation's investment in the Scottish coalfields—an investment that can get a return only if the coal is burnt in SSEB stations?
    Mr. Parkinson: There are two things in our proposals which I believe will improve the prospects for the Scottish coal industry. First, we are strengthening the inter-connector to England and Wales, which means that there is a big potential market for the electricity produced from Scottish coal. Secondly—and I am pleased to say that Scottish miners have shown great good sense about this—we are encouraging the adoption of modern working practices.
    Although the investment has been made, Scottish coal is still relatively expensive. Therefore, we have to find ways of reducing the costs and opening up for Scotland the prospects of a good market. We are also encouraging the two parties to get together. I believe that the Government are doing what they can to ensure a good future for Scottish coal.
    Mr. Gow: Despite my right hon. Friend's legitimate pride in the amount invested in the British coal industry during the past nine years, will he confirm that the whole of that investment could have been made by the private sector? What greater justification is there for retaining the ownership of British Coal in the public sector compared with the Government's conviction that the oil industry should be in the private sector?
    Mr. Parkinson: We have no plans at present, but it is our ambition that all the energy industries should be returned to the private sector. However, there is a limit to what we can do at any given time. I believe that privatising the electricity supply industry is a big enough job for us at present. I assure my hon. Friend that we have ambitions for the rest of the industries for which we are responsible.

    Magnox Reactors
    Mr. John Garrett: To ask the Secretary of State for Energy what representations he has received about the share of the costs of maintaining and decommissioning Magnox reactors to be borne by the privatised electricity supply industry.
    Mr. Michael Spicer: After privatisation, nuclear power station operators will continue to be required to make appropriate financial provision for decommissioning and other long-term liabilities.
    Mr. Garrett: Given the recent report on the very high cost of maintaining safety at Bradwell for the next four years, the likely costs of maintaining safety and maintenance at the other 10 Magnox stations and decommissioning costs of £250 million to £300 million each, who will be expected to pay for the deteriorating safety standards and decommissioning? As those stations are likely to have to be encased in concrete for 100 years, should not the Department make a statement on this issue as soon as possible?
    Mr. Spicer: First, I deny that there is any question of deteriorating safety standards. The British nuclear industry has had a tremendous track record for safety, and we mean to keep it that way.
    Secondly, all forms of energy safety have costs in terms of protection of the environment. Noisy and obtrusive windmills, potential radiological hazards from nuclear power, sulphur emissions from coal, which we have been discussing, or, indeed, disruption to bird life from estuarial barrages involve costs in protecting the environment. In that sense, there is nothing special about the nuclear industry. I repeat that, with privatisation, proper provision will be made for those costs in the accounts.
    Mr. Matthew Taylor: The Minister will be aware that the advisory committee on the safety of nuclear installations has recommended that there should be a 50 per cent. increase in the number of Nuclear Installations Inspectorate personnel working on decommissioning. Will he tell the House how many are currently working on decommissioning and whether he will accept the advice to increase the numbers?
    Mr. Spicer: I cannot give the precise number of those within the Nuclear Installations Inspectorate who are working on decommissioning, but I shall write to the hon. Gentleman if that figure is available. However, we are up to the complement of 120 inspectors, the target that we had set for 1 April, and I assure the hon. Gentleman that the Government will ensure that there is an adequate number of inspectors for the future requirements of the NII.

    Electricity Prices
    Ms. Quin: To ask the Secretary of State for Energy what further representations he has received about the rise in electricity prices.
    Mr. Parkinson: I have received a number of representations about electricity price rises.
    Ms. Quin: What is the Minister's reaction to the report that was published last week by National Utility Services, which shows that the United Kingdom is well on the way to becoming one of the countries with the most expensive electricity because of the targets that have been imposed on the industry by the Government? What initiatives does he intend to take to help those at the lower end of the income scale who are faced with electricity price rises?
    Mr. Parkinson: As I told the hon. Member for Kingston upon Hull, East (Mr. Prescott), that company draws its statistics from a very narrow range of its own customers. It does not pretend to cover the whole industry. The CBI and the Electricity Council produce the most authoritative figures. They show that Britain is firmly in the middle of the list, for both industrial and domestic prices. The price increase this year is the first since 1985. Under the Labour Government prices increased ahead of the rate of inflation by more than 30 per cent. Under this Government they are 12 per cent. less than the rate of inflation, even after taking the present price increase into account.
    Mr. Watts: Does my right hon. Friend agree that the best prospects for low-price electricity will come from his proposal to introduce competition into the generation of electricity and also from giving to the generating companies the right to buy their fuel, including coal, at competitive market prices?
    Mr. Parkinson: Yes. Generation costs cover 80 per cent. of the cost of electricity. Competition in that area of the industry offers the best prospect of keen prices for the customer.
    Ms. Gordon: Is the Minister aware that because of the increasing cost of electricity a growing number of poorer people are late in making their payments? In London they are receiving very aggressive and unpleasant letters from the electricity authorities, threatening them with court orders allowing the authorities to break into people's homes and install electricity meters if those poorer people are not prepared to sign a statement to the effect that they are willing voluntarily to have meters. A number of these letters have been received by people who are in hospital—often elderly people—and they have caused great distress. Will the Minister do something about it?
    Mr. Parkinson: The hon. Lady knows that under the code of conduct the electricity authorities do not disconnect elderly people during the winter months. I should like her to tell her constituents that the electricity authorities are ready to listen to representations on behalf of consumers who have a real problem and who need help in the staging of the payment of their bills. I hope that the hon. Lady will agree that people should pay their electricity bills, just as they pay other bills. If they do not do so, the price of electricity for everyone will have to be increased.

    Electricity Generation
    Miss Widdecombe: To ask the Secretary of State for Energy when he last met with the electricity area board chairmen; and whether new electricity generation developments were discussed.
    Mr. Parkinson: I have meetings from time to time with the area board chairmen, at which we discuss a number of issues of common interest.
    Miss Widdecombe: In the course of those discussions, how supportive is my right hon. Friend of the idea of emphasis being placed on the future of renewable sources of energy?
    Mr. Parkinson: We have a substantial programme of support for investigations into various sources of renewable energy. We are supporting about 218 individual programmes into sources of renewable energy, but most of the area board chairmen and other members of the industry recognise that the main source of electricity will be coal, atomic, gas and oil and that, although renewables will be a valuable peripheral supply, the prospect at present is that they will be a peripheral supply only.
    Mr. Campbell-Savours: Has fast breeder reactor electricity generation been discussed? Will the Secretary of State place on record the fact that the fast breeder reactor programme has been, and continues to be, a useful and effective programme?
    Mr. Parkinson: There is no question but that the fast breeder reactor offers a useful future source of energy. One of the problems is that, commercially, we are not likely to develop the technology for another 30 years. The debate is not whether we abandon the technology, but how we preserve it until we need it. I am pleased to confirm that we regard the fast breeder reactor as a potential source of electricity.

    Electricity Industry (Regulatory Authority)
    Mr. Moss: To ask the Secretary of State for Energy what progress he has made in considering the setting up of the regulatory authority for the electricity supply industry; and if he will make a statement.
    Mr. Parkinson: All aspects of the regulatory regime are being actively considered with our advisers. We have also had helpful discussions with the electricity supply industry and other interested bodies. I am pleased to say that we are making good progress.
    Mr. Moss: I thank my right hon. Friend for his reply. Will he endorse the conclusions of a recent study of energy utilities in the United States, which showed that the companies with the best credit rating and whose bonds were most popular on the market incorporated energy-efficiency responsibilities into their regulatory framework?
    Mr. Parkinson: As my hon. Friend said, we intend that the regulators should be responsible for the promotion of the advantages of energy efficiency. We are not prepared to go as far as some critics would wish. We do not seek to impose on people the obligation to save electricity in their homes and to impose on companies an obligation to make energy-saving arrangements. We are in the business, as will be the regulator, of encouraging the efficient use of energy.

  THE ARTS

    National History Museum
    Miss Lestor: To ask the Minister for the Arts what have been the administrative costs of admission charges at the Natural History museum in 1987–88.
    Mr. Boyes: To ask the Minister for the Arts what was the level of admission to the Natural History museum in 1987–88.
    The Minister for the Arts (Mr. Richard Luce): The administration and monitoring of admission charges at the Natural History museum are matters for the museum's trustees. On 9 April the trustees announced that the number of visitors to the public galleries, including the geological and zoological museums, during 1987–88 was 1,633,000, and that the net receipts from admission charges were £1,352,000.
    Miss Lestor: Does the Minister put in the debit or credit column the amount being charged to the 50 Third world countries which use the Natural History museum for research into a variety of matters, such as mosquitoes, blood worms and various parasitic diseases? As the Overseas Development Administration uses that museum for research, will he say what discussions he has had with his hon. Friend the Minister for Overseas Development about the effect that that will have on the ODA's budget?
    Mr. Luce: There are a number of sectors in which it is sensible for the Natural History museum to collaborate on research projects with people in other countries. It is for the trustees to decide what priority should be given to projects, but it is only reasonable that the essential costs of that service should be covered.
    Mr. Boyes: Do not the figures that the Minister has given hide the fact that attendances at the Natural History museum are at least 40 per cent. down? Does that not mean that many people who get much pleasure and education from visiting the museum are, because of charges, being denied access to it? As the figures show that the numbers of visitors are dropping, will that not inevitably lead to redundancies and low morale among the staff? Should not the Minister withdraw these charges immediately?
    Mr. Luce: The trustees must decide whether to accept voluntary donations or make admission charges. It is absolutely right that they should decide whether to introduce charges. The Natural History museum introduced charges just over a year ago. It has increased its overall resources by £1,300,000 and announced that it will improve its facilities as a result. The public, therefore, will get a better service. We find that although in the initial stages of the introduction of admission charges there is a drop in attendances, it does pick up. Attendances at the National Maritime museum increased by 16 per cent. last year compared with the previous year. That museum has introduced admission charges. It is only right that we should leave such decisions to the museums. And they should use that money to increase overall services and facilities for the public.
    Mr. Jessel: Have the Government upheld their grant to the Natural History museum, regardless of any charges?
    Mr. Luce: I can confirm that without any shadow of doubt. The amount given to the Natural History museum has gone up in real terms by 37 per cent. during the past nine years. Moreover, it has had its funding earmarked for the next three years so that it knows what money it will have. In no way has punitive action been taken on account of the introduction of charges.
    Mr. Harris: Can my right hon. Friend explain why museums and galleries are sacrosanct? Why should trustees not be able to raise extra revenue to supplement Government grants if that is what they want, just as their counterparts do in practically every other country?
    Mr. Luce: My hon. Friend is right. As he says, it is for the trustees to decide. Western and Communist countries have museum charges in addition to basic Government funding. The choice should be open to museums and galleries. If they make charges, however, what matters is that they show the public how facilities will be improved to their benefit.
    Mr. Fisher: Does the right hon. Gentleman not understand that the figures that he gave the House should be compared with the 3·3 million admissions the year before? Is he aware that his figures show a drop of 40 per cent. on the previous year? The trustees have not been anxious to introduce charges, but they have been forced to do so because the Government are under-funding and neglecting their service. That neglect is documented in the National Audit Office report, which shows under-funding in conservation, research, display, cataloguing, building maintenance and the rest. Is it not time that the Minister faced the time bomb ticking away under our national museums, recognised his responsibilities, and funded museums and galleries properly?
    Mr. Luce: The hon. Gentleman is talking nonsense. He is fishing around for a crisis when there is none. He says that funding has been diminished, but since 1979 it has increased by 26·5 per cent. in real terms. That is not a crisis. Funding has increased. Moreover, in the next three years we shall increase funding for museums and galleries by just under 16 per cent., and this year we shall increase by 20 per cent. the money available for building and maintenance. The Government are earmarking £11 million for increased storage. We can be proud of our record.

    Museums and Galleries
    Mr. Key: To ask the Minister for the Arts how much income is generated by public museums and galleries through providing shops and refreshment facilities on their premises.
    Mr. Luce: In the present financial year the national museums and galleries that I sponsor expect their income from non-grant sources, including catering and trading, to exceed £20 million. I have taken a number of measures to encourage and facilitate their efforts to increase such income.
    I have given the Museums and Galleries Commission a special allocation for the next three years to help non-national museums and galleries improve their performance in this area.
    Mr. Key: Can my right hon. Friend assure those galleries and museums that respond to public demand for these services and generate extra income from them that they will not have their grant cut pro rata?
    Mr. Luce: I can confirm without any doubt that there will be no reduction whatever; nor will there be any adjustment to grants for any of the national museums and galleries on account of extra income from the private sector.
    Mr. Menzies Campbell: Does the right hon. Gentleman agree that any contribution made by shops and cafes is no substitute for proper public funding of museums and galleries? Does he also agree that this generation has an obligation to pass on the nation's heritage in at least as good a condition as we inherited it? Is he satisfied that sufficient money is being provided for storage, maintenance and restoration of the many objects in musums that are in sad need of proper care?
    Mr. Luce: My sole interest is to see an overall increase in the resources of museums and galleries. It would be absolute folly to say that if private sector income increases we should reduce the private sector income accordingly. That would not be an incentive to increase the overall resources. That is my objective, and that is what we are doing, to such an extent that today the national museums and galleries raise at least £20 million from private sector resources.

    USSR
    Mr. Knapman: To ask the Minister for the Arts what steps he is taking to encourage cultural exchanges with the Union of Soviet Socialist Republics.
    Mr. Luce: The majority of cultural exchanges with the USSR take place within the framework of the Anglo-Soviet cultural agreement. The memorandum of understanding signed by my right hon. Friend the Prime Minister at the time of her visit to Moscow last year has helped to provide a further impetus for such activity. I shall be making an official visit to the Soviet Union next month and shall do what I can to encourage further exchanges.
    Mr. Knapman: Does my right hon. Friend agree that such exchanges and visits help the cause of world peace and detente? Can he give any details of likely exchanges over the next few months?
    Mr. Luce: There is no doubt that arts and culture help to break down national barriers, because in so many areas culture does not know or understand those barriers—it goes beyond that. Therefore, exchanges between the Soviet Union and this country in the performing arts and heritage should be warmly welcomed. The National Theatre is about to tour the Soviet Union, and arrangements are being made for the exchange of exhibitions between museums in this country and the Soviet Union.

  CIVIL SERVICE

    Recruitment
    Mr. Mans: To ask the Minister for the Civil Service what new initiatives have been introduced to encourage recruitment to the Civil Service.
    The Minister of State, Privy Council Office (Mr. Richard Luce): Examples of a number of initiatives aimed at attracting as wide a field of qualified candidates as possible are given in the Civil Service Commissioners' annual report for 1987, which was placed in the Library of the House on 20 April.
    Mr. Mans: I thank my right hon. Friend for that answer. What efforts are being made to recruit people into the Civil Service at a later stage who have already benefited from careers outside the Civil Service? Will he say what experience they can offer if they are recruited into the Civil Service at that age?
    Mr. Luce: I am grateful to my right hon. Friend for raising that question. It is important to encourage into the Civil Service people who have experience in other areas. A recent direct entry competition for grade seven in the service has led to the recruitment of a number of people in their late 30s and early 40s. Many of those people have had experience in local government or education, and at least 50 per cent. of them have had experience in commerce and industry. That is something that I welcome.
    Dr. Marek: What will be the effect on recruitment to the Civil Service of the recently announced 40 per cent. drop in attendance figures for the Natural History museum?
    Mr. Luce: That is a good try. I am now wearing a different hat and it is that of the Civil Service. Recruitment and retention in the Civil Service are broadly satisfactory, but there are areas in which it is difficult to recruit people with specific skills and in specialist areas and, of course, we have a regional problem. It is true that in the south-east, in particular, we have acute recruiting difficulties. As the hon. Gentleman knows, my right hon. Friend the Chancellor of the Exchequer is seeking to contain that by the introduction of more flexible pay and allowances for the London area.

    Management Improvement
    Mr. Thurnham: To ask the Minister for the Civil Service what proposals for reorganisation in his Department he is making following the recommendations of the Efficiency Unit report, "Improving Management in Government: The Next Steps."
    Mr. Luce: Like other Ministers, I am reviewing the functions of my Department to see what areas might be appropriate for agency status. I have already identified the Civil Service college and the occupational Health Service as promising candidates for closer examination.
    Mr. Thurnham: I welcome that positive lead. May I ask my right hon. Friend to stir his ministerial colleagues to share his sense of urgency in making those much needed reforms?
    Mr. Luce: In fairness to some of my colleagues, as my hon. Friend will know, we have already identified 12
    18
    possible candidates for the creation of agencies in other Government Departments. Some of my right hon. Friends are looking urgently at the practical implications of that, and I hope to have something further to say before the summer is over.
    Mr. Winnick: Have any steps been taken to reorganise the post of chief press officer to the Prime Minister and to change the manner in which he goes out of his way to give warnings to the press and the media generally on what they should or should not publish and broadcast? Is the right hon. Gentleman aware that Mr. Ingham is increasingly seen as the Deputy Prime Minister?
    Mr. Luce: That is principally a matter for my right hon. Friend the Prime Minister, but there is no shadow of doubt about the outstanding calibre of Mr. Ingham and the job that he does.
    Mr. Beaumont-Dark: Does my right hon. Friend agree that one of the problems of improving management in government is that for some vital skills industry can pay far higher salaries than the Government—for example, computer and tax experts? Are the Government urgently considering the fact that, to be efficient, they must be able to compete with private enterprise, or they will not get the best people whom they so urgently need?
    Mr. Luce: My hon. Friend puts a finger on a problem that we face. As he rightly says, there is a disparity in certain specialist skills between what the Government can pay and what can be achieved in the private sector. It is partly for that reason that we are losing a number of people. My right hon. Friend the Chancellor of the Exchequer has judged it right to introduce more flexible allowances and pay to deal with that problem. Pay additions are now available for certain jobs, and that is one way in which we can help to contain the problem.

    Agencies
    Mr. Allen: To ask the Minister for the Civil Service what representations he has received from Civil Service or civil servant unions about the proposals for the privatisation and creation of new agencies to assume the work of some sections of Government Departments.
    Mr. Luce: I have received two representations about the creation of agencies.
    Mr. Allen: Is the Minister aware that he needs to state clearly from the Dispatch Box the exact position that the Government are adopting on agencies in relation to trade unions? On 18 February the Minister's Office issued a central guidance note to managers in Departments. The note said:
    "the new arrangements for agencies will not undermine national bargaining on terms and conditions of service including pay"
    and
    "the unions will be fully consulted on the handling of the proposals."
    That contradicts many of the Minister's statements in the House. Which view is correct—the Minister's, or the one issued by his Department?
    Mr. Luce: There is a clear commitment that, when final decisions are to be taken on the implementation of certain agency proposals, there will be proper consultation with the unions. Until we have identified which agencies are to

    19
    have that kind of agreement, we cannot say. The unions will be fully consulted at that stage. As for national bargaining, negotiations on most conditions of service for departmental agencies are conducted centrally, and that will continue.
    Ms. Mowlam: What percentage of first division civil servants are women? How has that percentage changed since 1984, when the programme for action was introduced—
    Mr. Speaker: Order. It would be more appropriate to raise that point on the next question.

    First Division Staff
    Mr. Barry Field: To ask the Minister for the Civil Service how many first division grade civil servants have had industrial or commercial experience.
    Mr. Luce: This information is not held centrally. The Government place great value in attracting to the Civil Service at all levels those with industrial or commercial experience.
    Mr. Field: Does my right hon. Friend agree that such commercial and industrial experience is invaluable to the Civil Service? Will he do his utmost to ensure that the Civil Service recruits people with the skills that may not be available to it? May we look forward to the day when a member of the first division is seconded for a short period to industry?
    Mr. Luce: I agree with my hon. Friend on the importance of doing that. As I said in answer to an earlier question, following the recent direct entry competition for people who are older than the normal recruitment age, at least 50 per cent. of those recruited came from industry and commerce. The Government want to encourage that.
    We have a policy on arranging secondments. The number of Civil Service secondments from and to the private sector has doubled in the past nine years. The number increased substantially last year on the previous year. We have a number of other arrangements—for example, the Whitehall and industry scheme, under which civil servants go for short periods to industry—to enable greater contact between the private sector and the Civil Service.
    Ms. Mowlam: Let me try again. What percentage of those first division grade civil servants are women, and how has that percentage changed since 1984 when the programme for action to increase the percentage of women at the high levels in the Civil Service was introduced?
    Mr. Luce: There has been an increase, and the report shows that, in the proportion of women in grades up to senior positions, although for the very senior positions—grade 3 and above—the proportion of women is still very low. My concern is to ensure that there is equality of opportunity and that any obstacles to that are ironed out. I am pleased that in the recent promotions to very senior positions, 11 per cent. were women. The hon. Lady may think that that is a low figure, but it is much higher than the proportion in the senior grades.
    Mrs. Virginia Bottomley: I welcome the improvement in the representation of women, but has my right hon. Friend any further plans for improving matters?
    Mr. Luce: Yes. There is a recommended programme of action and the Government will do their best to implement it. It is noticeable that there is now more scope for part-time jobs in the Civil Service, and a large proportion of women are taking up those opportunities. There is also scope for job sharing in the service, and a large number of women are taking up that opportunity, too. I shall ensure with my colleagues in other Departments that the programme of action is implemented as well as possible.

    Prime Minister's Office
    Mr. Dalyell: To ask the Minister for the Civil Service what action he is taking on issues not covered by his reply to the Adjournment debate on Friday 22 April on the conduct of the Prime Minister's Private Office.
    Mr. Luce: None, Sir.
    Mr. Dalyell: Does the Minister recollect that in the Adjournment debate that he courteously answered I referred in detail to the statement by Sir Frank Cooper, former permanent secretary at the Ministry of Defence, that Mr. Bernard Ingham ought not to be a civil servant, given the role that he performs? May we refer back to the question posed by my hon. Friend the Member for Walsall, North (Mr. Winnick) and ask seriously whether those who talk in the terms in which Mr. Ingham did over the weekend about the hysteria of the press ought to be paid from party rather than taxpayers funds?
    Mr. Luce: I noted in that Adjournment debate, and again today, that the hon. Gentleman seeks to dredge up old issues that have already been dealt with and adequately answered. He does that because he knows that my right hon. Friend the Prime Minister has been an outstanding success and is a Prime Minister of great integrity. It is because of that that the hon. Gentleman seeks to undermine the whole position.

P and O Dispute
3.32 pm
Mr. Michael Meacher: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the latest developments in the seamen's dispute."
It is a specific matter in that P and O's insistence that its package of 400 job cuts, increased working hours, less leave and a cut in pay should be implemented almost immediately has provoked a 14-week strike. It is equally specific and relevant that the National Union of Seamen has repeatedly made clear its willingness to accept the P and O proposals if they are phased in over three years—which is what the company itself originally asked—well in advance of the Channel tunnel. It is also a specific and relevant matter in that the NUS has been willing to accept binding arbitration and has been asking for it for 13 weeks, but P and O has turned it down.
It is an important matter because the safety of the public is at stake. Under P and O's proposals, if the Herald of Free Enterprise were sailing tonight from Zeebrugge, it would have 15 fewer crew than on the night of 6 March last year when it went down. Department of Transport officials have been checking the structural seaworthiness of the ferries, but the dangers involved in having untrained crews, reduced crewing levels and 18-hour shifts are outside their brief. It is critical for the public, as well as for the seamen, that the safety risks in the proposals, as revealed in the "Brass Tacks" television programme, are fully known and publicly scrutinised.
The matter is urgent because the possibilities of resolving the dispute by negotiation are coming to a head. Whether or not the current Sealink plan proves acceptable, there is now a real risk that the primary dispute with P and O at Dover may harden to the point where compromise becomes difficult, if not impossible.
The NUS has shown itself willing to compromise. The dispute could be resolved by further negotiations between the two sides. I submit that it is vital that all public pressure he brought to bear now to ensure that any intransigence on the part of P and O is not allowed to stand in the way of the wider public interest.
For all those reasons, Mr. Speaker, I earnestly seek your support for a full and early debate on this matter of crucial public concern.
Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the latest developments in the seamen's dispute."
I have listened with care to what the hon. Member has said. As he knows, my sole duty in considering an application under Standing Order No. 20 is to decide whether it should be given priority over the orders set down for today or tomorrow and also to consider the critieria laid down in the Standing Orders. I regret that under those criteria I cannot submit the hon. Member's application to the House.
Several Hon. Members rose—
Mr. Speaker: No, there is another application under Standing Order No. 20 from Mr. Dave Nellist.

GEC Plessey Telecommunications Limited
3.35 pm
Mr. Dave Nellist: I beg to ask leave to move the Adjournment of the House under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the announcement at 11 am on Friday 6 May of 1,800 redundancies by GEC and Plessey through the new telecommunications company GPT."
Of those 1,800 redundancies, 40 per cent. are due to take place in Coventry, 40 per cent. in Kirkcaldy and the rest in the constituencies of my hon. Friends the Members for Bishop Auckland (Mr. Foster) and for Liverpool, Broadgreen (Mr. Fields). The Spon street plant in Coventry is destined for virtual closure. This will affect not only hundreds of my constituents, but also those of my hon. Friend the Member for Coventry, North-East (Mr. Hughes).
My constituents are bitter and upset. Many have given their lives to GEC. The GEC-Plessey merger of October last year, with the rationalisation and streamlining taking place now, is simply about profit—about increasing dividends to shareholders, while 800 of my constituents and those of my hon. Friend the Member for Coventry North-East have to pay the price of being thrown on to the scrap heap. Hundreds more people in our city could be affected.
GEC is not a poor company. It is not for financial reasons that all these redundancies and closures have been announced. The company has hundreds of millions of pounds in liquid assets at the bank. In a letter to me the company speaks of senior management spending many months since the plans were first announced in order to endorse
"plans consistent with the objectives and needs of the merged Company."
It says that there will be retraining and hope for redundant people finding other employment.
If there is really a cash flow problem, perhaps the Butcher of Bowden—Lord Weinstock—could sell a couple of racehorses. He spends half a million pounds a time buying them. There will not just be 800 redundancies. There will be several hundred more in ancillary sub-contractors, service companies, shops, and so on. Above and beyond that, in the city of Coventry, where already only 14 or 15 per cent. of school leavers get real jobs when they leave school, a further thousand school leavers will have no jobs to go to.
GPT is the biggest telecommunications firm in Britain and the tenth biggest in the world. If the limit of its social responsibility rests on profit margins, it is about time the House redebated the privatisation of British Telecom and the monopoly position of GPT within that supposedly expanding industry, and brought back into extended public ownership these crucial firms in the economy and put them into the hands of the workers instead of profit managers like Weinstock. If workers ran those companies, the horizon of their responsibilities would not be the bottom line of shareholders" dividends, but would be the families of those who have given their lives to GEC and Plessey for the past 34 years in Coventry, Warwickshire, Liverpool, Kirkcaldy, Beeston and Bishop Auckland.
I urge you to grant this debate, Mr. Speaker.
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the announcement by GEC Plessey of 1,800 redundancies in the telecommunications firm GPT."
I have listened with care to what the hon. Gentleman has said, but I must repeat what I said to the hon. Member for Oldham, West (Mr. Meacher). I regret that the matter that he has raised does not meet the criteria laid down under Standing Order No. 20. I hope that he will find other opportunities to bring the matter before the House.

Points of Order
3.39 pm
Mr. Tony Banks: On a point of order, Mr. Speaker. Will you clear up some confusion that arose during business questions last Thursday? At columns 1021 and 1024 points of order were raised by the hon. Members for Hertford and Stortford (Mr. Wells) and for North Down (Mr. Kilfedder), and you allowed them to be heard. At the end of business questions, and after an application under Standing Order No. 20, at column 1031 I suggested that you had adopted a practice different from the one previously followed in your rulings on when points of order can be made during Question Time. I was supported in that by my hon. Friend the Member for Stockton, North (Mr. Cook).
In reply, Mr. Speaker, you said:
"I dealt with those points of order because they appeared to require my immediate intervention. If the hon. Gentleman had risen at that time, he would certainly have been heard in the same way. There is no change at all. In our debates, the points of order raised are dealt with immediately."—[Official Report, 5 May 1988; Vol. 132, C. 1031–32.]
I accept that that is true for debates, but that was not the case at Question Time, and had not been the case until that point.
I refer you, Mr. Speaker—I have supplied your office with the references in the Official Report—to an incident that took place in the House on 19 November 1986. At column 548, the Secretary of State for the Environment implied that I had stolen some articles of silver that had belonged to the Greater London council. I shall not go into the issue again, but I say simply that I had taken them into protective custody. When I tried to rise on a point of order, you said:
"Order. We shall deal with this later."
My hon. Friend the Member for Copeland (Dr. Cunningham) also tried to raise a point of order, and at column 549 you said:
"Order. No, I cannot take points of order in the middle of questions. I shall take them at the end of Question Time."—[Official Report, 19 November 1986; Vol. 105, c. 549].
It is clear that what happened last Thursday was a variation on a rule that we have come to accept. Indeed, it has been accepted by the House because it makes for good order. It is pointless people making points of order during Question Time when they should make them at the end of Question Time.
Will you consider, Mr. Speaker, making a statement on the matter so that we are all absolutely clear? If you reaffirm the rule that points of order arising from statements made or incidents during Question Time should not be made until after Question Time, will you consider doing what you did for me on the previous occasion, which was to get the Official Report to insert the point of order that was made after Question Time at the point where it was originally raised? The matter is slightly confusing, but if you made a ruling, it would assist us all.
Mr. Speaker: I thank the hon. Gentleman for his courtesy in giving me some knowledge of what he was going to say—
Mr. Jeremy Corbyn: He is a gentleman.
Mr. Speaker: He is, indeed.

25
I adhere to what I said last Thursday. I shall hear points of order during questions only if they concern matters that require my immediate intervention, such as the use of a grossly disorderly expression. I do not propose—I think that the hon. Gentleman will understand this—to reopen today what occurred on 19 November 1986. I have looked again at the interventions and points of order during business questions last Thursday, and I agree that they should have been taken, not when they were, but immediately before the business of the day.

Points of Order

  P and O Dispute
  3.43 pm
  Mr. Jeremy Corbyn: On a point of order, Mr. Speaker. This morning my hon. Friend the Member for Newham, North-West (Mr. Banks) and I visited the picket line at the P and O dispute at Dover. Although I do not wish to challenge your response to the application made my my hon. Friend the Member for Oldham, West (Mr. Meacher) under Standing Order No. 20, may I say that several people involved in the dispute drew to our attention serious unsafe working practices on the P and O vessels that are attempting to sail and the mad and desperate search by P and O to find people to scab in the dispute?
  Many of the people on the picket line asked us how safety could be debated in the House and by what means Parliament can express its view on the dispute. They looked to us, as we look to you, Mr. Speaker, to find some means by which the serious matters of safety at sea, the appalling treatment of those who are in dispute with P and O and the mad drive for profits by that company can be brought to public attention through the House.
  Mr. Speaker: This is a serious matter. There are plenty of opportunities to raise the matter; for instance, on Opposition days, in Adjournment debates and at Question Time.

Social Security Reform
3.45 pm
Mr. David Winnick: As you will appreciate, Mr. Speaker, one of our responsibilities is to try to ventilate the concern of our constituents. You are no doubt aware as, first and foremost, a right hon. Member of this House, that many elderly people simply do not know whether the housing benefit increases are to be paid and, if so, from what date, and when they will be compensated. There is total chaos and confusion on the ground, which is causing tremendous hardship, worry and anxiety.
I know that you are not responsible for a statement being made. No statement has been made by the Secretary of State for Social Services since he first made his statement on the Government's climbdown. You may well say that tomorrow is the day for social services questions. I have looked at the Order Paper and believe that I am right in saying that only two questions on this matter are likely to be reached.
It is wrong that we should be denied the opportunity to express on the Floor of the House of Commons the worries of so many people in this country. Literally hundreds of thousands of those people could well be faced with substantial increases. They do not know whether they will have to pay, whether they have the means to do so and when they will receive compensation.
The other point—
Mr. Speaker: Order. We had a debate on this about 10 days ago and, as the hon. Gentleman correctly said, there are social services questions tomorrow. I have not yet looked carefully at them, but, if the hon. Gentleman says that there are only two on this matter that are likely to be reached, no doubt he is right. I am sure that, as this is a major matter, those on the Front Bench responsible for the organisation of business will have heard what the hon. Gentleman has said, but it is not a matter of order for me.

Abortion (Amendment) Bill
3.46 pm
Mr. Bob Cryer: On a point of order, Mr. Speaker. Following the conclusion of the debate on the Abortion (Amendment) Bill on 6 May, you may have seen a number of press reports and television interviews in which it was suggested that there had been a parliamentary mugging, foul play and, according to one broadcast, cheating.
I should be grateful if you would confirm that on 6 May the Standing Orders were fully and properly followed in Parliament, that the rules of debate were properly followed, that the treatment of the hon. Member for Liverpool, Mossley Hill (Mr. Alton) appeared to many of us very generous, in that closures were granted within an almost unprecedentedly short time and that, in all, there was a perfectly fair and proper debate on a number of amendments throughout the morning. There was no parliamentary mugging, no foul play and certainly no cheating on that day.
Mr. Speaker: I cannot be held responsible for the extravagant adjectives that have been used elsewhere, but I confirm what the hon. Gentleman has said. To my knowledge, the debate proceeded in good order and under our usual procedures.

Standing Order No. 20 Debates
3.47 pm
Mr. Eric S. Heffer: On a point of order, Mr. Speaker. The other day my right hon. Friend the Member for Chesterfield (Mr. Benn) asked for a debate, under Standing Order No. 20, on the seaman's dispute, and he was turned down. Today, my hon. Friend the Member for Oldham, West (Mr. Meacher) asked for a debate under Standing Order No. 20, and he was also turned down.
For many years I have noticed that Back Benchers have sometimes been granted debates under Standing Order No. 20—or, as it used to be Standing Orders Nos. 9 and 10—and that Front-Bench spokesmen, who have then made an application, have usually been turned down.
This is a matter of great importance. Over the years we have had many debates on issues affecting seamen and on trade union strikes. How on earth can any hon. Member obtain a debate under Standing Order No. 20? In my 24 years here I have known Speakers of all sorts—and sizes—grant Standing Order No. 20 applications from Back Benchers on precisely such issues as this. I should like to know how a Back Bencher or an occupant of the Opposition Front Bench can obtain a Standing Order No. 20 debate on a matter of this importance. Are we reaching a stage when it will not be possible to discuss such issues unless they fall in Government time or Front-Bench time generally? Such a situation would represent a serious departure from the rights of Members of this place as we now understand them.
Dame Elaine Kellett-Bowman rose—
Mr. Anthony Beaumont-Dark rose—
Mr. Speaker: Order. Do the hon. Members for Lancaster (Dame E. Kellett-Bowman) and for Birmingham, Selly Oak (Mr. Beaumont-Dark) wish to raise points of order on the same issue? If so, I shall respond to them in one reply.
Dame Elaine Kellett-Bowman: Further to the previous two points of order, Mr. Speaker. Admittedly you are not responsible for this, but as extra time was given in 1967 to what I shall call the Steel Abortion Bill, can you not understand—
Mr. Speaker: Order. That is a different matter.
Mr. Beaumont-Dark rose—
Mr. Speaker: Does the hon. Gentleman wish to raise a point of order on the NUS dispute?
Mr. Beaumont-Dark: My point of order relates to the rights that attach to debates in this place and points of order that are being raised in the Chamber. Many of us have not heard such disingenuous nonsense. There are calls for a debate on the dispute affecting the National Union of Seamen. We heard these calls last week and we have heard them again today. The Opposition, quite rightly in a democracy, are able to initiate half-day debates, a one-hour debate or a three-hour debate. Why should the time of the House be taken up when it has other important debates before it, when it is clear that if the Opposition feel so strongly about the mad idiots in the

29
NUS who want to destroy seamen's jobs, they could have a debate on them? Why should we be kept here listening to this disingenuous rubbish?
Mr. Speaker: I can answer both the hon. Member for Liverpool, Walton (Mr. Heifer) and the hon. Member for Selly Oak by saying that it is an extremely onerous responsibility of Mr. Speaker to decide whether to grant an emergency debate that will take precedence over the orders that are set down for this day or the next day. The Chair must take into account all the criteria that are set out clearly in Standing Order No. 20, to which I draw the attention of hon. Members. One of the criteria, as the hon. Member for Walton well knows, is the other opportunities to raise issues before the House, and these have been mentioned by the hon. Member for Selly Oak.

Orders of the Day

  Finance (No. 2) Bill
  (Clauses Nos. 22, 23, 26 to 28, 31, 42, 49, 91, 98, 127 and 128 and Schedule No. 7). [Progress 3rd May.]
  Considered in Committee.
  [Mr. Harold Walker in the Chair.]
  Ordered,
  That the order in which proceedings in Committee of the whole House on the Finance (No. 2) Bill are to be taken shall be Clause 22, Clause 23, Clause 27, Clause 28, Clause 49, clause 31, Clause 98, Clause 26, Clause 127, Clause 91, Schedule 7, Clause 128, Clause 42.—[Mr. Norman Lamont.]
  3.53 pm
  The Chairman of Ways and Means (Mr. Harold Walker): The Committee will note that amendments to clause 42 appear on the first page of the Amendment Paper. However, the Committee resolved last Tuesday to consider clause 42 at the end of its proceedings. The first clause to be taken today is clause 49.

  Finance (No. 2) Bill
    Clause 49

      PRIVATE RENTED HOUSING
      Mr. A. J. Beith: I beg to move amendment No. 1, in page 49, line 15, after 'tenancies', insert
      'let at or below a reasonable rent as determined by a rent assessment committee under the Housing Act 1988'.
      When the Chancellor of the Exchequer announced in his Budget statement that he would expand the business expansion scheme to cover properties to let in the private rented sector, there were immediate cries of "Rachmanism". It was claimed that such an expansion would bring back the worst of the Rachman era. Those cries are understandable for anyone who remembers the evils of that period, which became, in the words of the right hon. Member for Old Bexley and Sidcup (Mr. Heath), the unacceptable face of capitalism.
      The Committee must ask whether there are ways of attracting private capital into housing that will not bring back Rachmanism. My right hon. and hon. Friends do not think it right to dismiss out of hand the use of the business expansion scheme as a possible approach. In view of the housing crisis, those who appear to take that approach and who represent other Opposition parties do a disservice to the people.
      I believe that by the means that they have chosen the Government will open the door to the worst sort of private landlord. Instead, they should use a carefully tailored device to attract private capital back into rented housing, but ensure that that is done in a way that will provide adequate security and rent protection to tenants. Given the scale of the housing crisis, it would be irresponsible to say that there is no place for private capital and that we should not be attempting to attract it back into housing.
      It is clear that the public authorities alone have not been able to solve some of our most serious housing problems. Even if they were not subjected to the unnecessary restrictions to which the Government have subjected them, they would still not be able to solve those problems.

      31
      Much more could be achieved if the Government were not preventing housing authorities from spending the capital receipts that they have obtained from selling houses on more investment in housing. The Government are clearly placing many unnecessary and inappropriate restrictions on the ability of local authorities to play their part in tackling housing problems. The Government are also tightening the reins on the voluntary housing sector in many ways.
      With the present serious crisis we cannot exclude the role of private capital in housing. If we were to do so, we would perpetuate the monopolistic aspects of rented housing that are among the worst features of the problem. I have experienced that problem in all its different forms during my years as a Member of Parliament. I have experienced the dangerous consequences of a private monopoly on rented housing where people are afraid to reveal their political allegiances for fear that they will not get a cottage from the big landowner. I have seen exactly the same thing in its municipalised form where people fear that if they have said anything rude to any member of the family of the housing officer, they will not be considered for a council house.
      The same kind of feudal deference arises in the municipal rented sector as has arisen over the years in the private rented sector. Any kind of monopoly of rented housing tends to be extremely dangerous for rights of choice or a sense of independence.
      Many groups of people who want or need rented housing are not getting it. One obvious group includes people who have to move in search of work. The previous lack of privately rented accommodation in many areas is a serious impediment to those looking for work elsewhere who find that the public housing sector cannot help them.
      Many people looking for jobs in different parts of the country have found that they cannot obtain housing when they apply for those jobs. The national mobility scheme does not provide those people with sufficient access to council housing in the area to which they want to move. I am thinking particularly of people who move from areas like mine in the north-east to the south-east of England. They cannot afford to enter the private housing market in the south-east because prices are so high. They cannot get council houses in the south-east where there are relatively few council houses as the rate of council house sales has been so high. There are very few privately rented houses available and that is a strong argument for ensuring that more are provided.
      The Committee should consider whether we can tailor the business expansion scheme incentive to ensure that it provides adequate protection for tenants. The fear is that the people most likely to use the scheme will be those who regard it as a get-rich-quick opportunity, and will take advantage of the changes in tenants' protection to exploit tenants in near monopolistic situations.
      The Government appear to have removed many of the aspects of tenants' security and protection on rents on the argument that that was the only way to get private capital back into housing. Is the business expansion scheme really necessary on top of what the Government have done already? They have greatly weakened the tenant's position
      32
      by arguing that if they did not do so there would not be many houses to rent and therefore tenants in general would suffer.
      Mr. D. N. Campbell-Savours: I want to ask the hon. Gentleman a question in the most comradely terms about a statement that was made in the middle of the previous election campaign which suggested that a policy should be pursued whereby people who let a room in their home would not pay tax on the income that they derived. Will the hon. Gentleman develop that concept so that we may hear the argument explained more fully?
      Mr. Beith: That suggestion was an extremely good idea. It was an attempt to unlock the large amount of accommodation that could be available in the short term to deal with the housing problem for single people. Several disincentives have been suggested as reasons preventing people from offering such accommodation. It was suggested that people might be unable to remove an unsatisfactory tenant or regain the use of a room when the family required it. It was also suggested that there was not a great financial incentive to provide that accommodation.
      That incentive could have been increased by the scheme that we put forward. It combined a degree of financial incentive with a system of administration designed to relieve the landlord—who might in many cases be a widow living alone in a house of three or four bedrooms—of the problems and complications of tenancy protection. It was a sensible scheme, but I cannot address it in connection with the amendment, which does not bear directly upon that scheme.
      Nevertheless, that scheme was another attempt to acknowledge the fact that we have housing and property that could be put to better use and that private capital is available which could be used to expand the provision of rented housing.
      4 pm
      I am worried, as are others who are critical of the Chancellor's proposals, about what will be the position of tenants if the business expansion scheme is used without giving them any protection. The purpose of the amendment is to ensure at least that rents are set at reasonable levels. It is no longer possible to tie the business expansion scheme proposals to fair rents, because the Government have abolished that provision. Fair rents are on their way out. There will remain only rent assessment committees, which are normally used not for the assured tenancies with which we are dealing but for shorthold tenancies. Indeed, access to rent assessment committees in respect of assured tenancies is very limited and is available primarily to the landlord. That is a fairly weak limitation.
      If a business expansion scheme tenancy conferred upon the tenant the right of access to a rent assessment committee, that would provide some means of ensuring that the tenant was not exploited. That would be particularly when the landlord—perhaps a company—had a monopoly or near-monopoly of rented property in the area. It would at least limit the ability of the business expansion scheme to create exploitable tenancies and the ability of landlords to push up rents in an area.
      A company that wanted to make a lot of money fast out of the business expansion scheme could move into an area where there was a shortage of rented accommodation and buy a number of properties. It could then push up the rents in that area. It would have the benefit of the business

      33
      expansion scheme in financing that operation in the first place and could then, by use of its monopoly, push up rents to an exploitative level.
      Mr. Anthony Nelson: I wonder whether the example that the hon. Gentleman has given is correct. If a company tried to do what he said by acquiring existing properties which were tenanted, the people occupying those properties could continue as fair tenants and there would be no advantage to the company. If the company were to purchase instead vacant or newly developed properties, in either case there would be a net introduction of new accommodation for rent that would not otherwise he available. How could a net new supply force up rental levels?
      Mr. Beith: It could do so if the net new supply fell far below the level of demand. Provided that supply was less than demand, the company could force up prices. Indeed, no market price can be calculated if there is no rented property available. I could take the hon. Gentleman to various parts of London and elsewhere in the country where virtually no rented property is available. If he were able to obtain in such an area two or three properties—which had, perhaps, been in single occupation—and turn them into tenanted properties, he would have a virtual monopoly of rented housing and could set what rents he chose.
      The situation is further distorted by the complications of housing benefit. There is not a free market in rented housing. I have submitted another amendment which, although it cannot be debated now, the Minister might like to keep at the back of his mind. It is designed to probe why it was necessary to apply the higher rate of tax relief to the business expansion scheme. A landlord who takes advantage of the scheme without the protection that I am suggesting will be investing in property with a potential for capital appreciation that is greater than almost anything else into which he could put his money. Why should he need such a large incentive? With existing schemes, no more that 50 per cent. of net assets may be represented by property. It is already recognised within the business expansion scheme that it is not the purpose of the scheme to finance property ownership and that there is not the degree of risk in property ownership to justify the conferring of substantial incentives.
      The Government are offering large incentives to draw people into projects in which they can make a great deal of money without being offered a big incentive, and in which they will find it easier to participate if tenants are not given a measure of protection. The Minister may feel that my amendment to make use of rent assessment committees is not the best way of maximising tenants protection. However, unless he is able to offer some guarantee that tenants will not be exploited under the scheme, he will do the cause of expanding privately rented housing no good.
      If the business expansion scheme is used in that way it will get a very bad name after the first two or three landlords are found engaging in the kind of activity I have described. Considerable harm will be done, when we should be looking in every possible direction for means of tackling an appalling housing problem. It is a problem which creates social injustice, reduces people's economic opportunities, and prices people out of a free society—if they cannot obtain access to housing in areas where there is work available to them.
      34
      If the Minister wishes to win our support for the business expansion scheme in the private rental market, he must do something to afford protection to tenants. Otherwise, the scheme will be too easy to abuse. Unless the Minister can offer such protection, either by accepting my amendment or by an alternative, he cannot expect our support for the clause.
      The Financial Secretary to the Treasury (Mr. Norman Lamont): I hope that the hon. Member for Berwick-upon-Tweed (Mr. Beith) will forgive me if I reply briefly to his remarks, because some of the wider issues on which he touched might be more conveniently discussed in the clause stand part debate. The hon. Gentleman may agree that he went wider than the narrow terms of his amendment. None the less, I am grateful to him for the moderate way in which he proposed his amendment and did not express total hostility to the idea of the business expansion scheme being used to provide more privately rented property. Indeed, he went further and indicated that he felt there was a shortage of such accommodation, which was a great impediment to mobility in locking people into areas of high unemployment. That is one of the major reasons why we want to see a revival in the privately rented sector.
      The hon. Gentleman was essentially trying to strike a different balance between the landlord and tenant than that being struck by the Housing Bill and by the concept of the new assured tenancies. I do not want to open up the whole Housing Bill debate this afternoon, but the tax relief in question is built upon the assumption that the Bill will be enacted. The proposals that we have put before the House try to strike a balance between the landlord and tenant that we believe is reasonable. The hon. Gentleman knows as well as I do that there have been many attempts by previous Conservative and even by Labour Governments—for example, by the late Richard Crossman—to alter that balance within an adminisrative framework and to try to achieve a greater, albeit regulated, supply of private rented accommodation. Those previous attempts all came to grief because they did not move far enough towards allowing genuine market rents to be charged in the private sector.
      Mr. David Winnick: Is it not at the core of this debate that a previous Conservative Government set out to deregulate the housing market under the Rent Act 1957? All new rented dwellings were deregulated with the promise, at the time when that Bill was going through the House of Commons, that that would lead to a substantial increase in rented accommodation. However, the opposite occurred. The Minister mentioned the late Richard Crossman. but he was responsible, as Minister for Housing, for repealing the 1957 Act, which was so discredited that the then Conservative Opposition did not even vote against his doing so.
      Mr. Lamont: I do not think that in the first part of his observation the hon. Gentleman was really disagreeing with what I was saying. I was saying that Conservative Governments in the 1950s did not go far enough and that what they did did not have the intended effect.
      Although it is largely my fault that we are doing so, I do not think that it serves our purpose this afternoon to go too far back into the policies of Henry Brooke, or indeed the late Richard Crossman. I merely say to the hon.

      35
      Gentleman that I do not think that past Governments, Labour or Conservative, went far enough in giving freedom to landlords to charge a market rent.
      The new assured tenancy scheme will allow a tenant and landlord to agree any rent that they choose. We believe that that is right, because the best way to arrive at a reasonable rent is to allow it to be determined by competition and market forces. In the past we have seen, all too clearly, attempts to restrict rents causing properties to leave the private sector or not to appear in it, so that people who wanted to rent and were willing to pay a market rent found that no property was available. Indeed, there has been almost no worthwhile investment in private rented property for 50 years, and the sector is declining considerably.
      The clause extends the business expansion scheme to investment in companies that let residential property on the new assured tenancy basis. We consider this necessary in the early years of deregulation, to speed up the process of bringing more rented property on to the market. It would be counter-productive and foolish to restrict the rents that could be charged by the BES company. The likely outcome would not be that the benefits of the tax relief would be passed on to the tenant in the form of lower rent. It would simply discourage the supply, and discourage landlords from making more rented property available. Again, we would find willing landlords and willing tenants being frustrated by Government restrictions.
      It is doubtful whether the amendment would have any effect. Under the Housing Bill, a rent assessment committee determines the rent when the landlord proposes an increase under a periodic tenancy and the tenant chooses to refer it to the committee. The committee, however, has no role in connection with the initial rent that is charged, and no role in fixing the rent when the mechanism for increasing it is built into the tenancy agreement.
      Furthermore, the Housing Bill does not use the term "reasonable rent", which the hon. Member for Berwick-upon-Tweed has incorporated in the amendment. What the Housing Bill does is to provide for the committee to determine a rent at which the property might reasonably be expected to be let on the open market by a willing landlord: in other words, the market rent. We believe, however, that imposing a rent assessment committee's view of what would be a market rent on all tenancies from the outset, as the hon. Gentleman suggests, so that a higher rent could not be charged even if the landlord and tenant were in agreement, would not be right. It would create uncertainty, and would discourage landlords from providing property for letting.
      I am afraid that, despite the moderate way in which the hon. Gentleman proposed his amendment, I do not think that I can accept it. I hope to deal on clause stand part with some of the wider issues that he raised.
      Mr. Gordon Brown: The tragedy is that, good as the intentions of the hon. Member for Berwick-upon-Tweed (Mr. Beith) are in relation to fair rents, no tenant would save money, no rent would be reduced and no family would be better off as a result of the amendment. The reason is that he has totally misunderstood what rent assessment committees are there
      36
      to do, under the Housing Bill. They will not set the initial rents. They will determine rents only on appeal, and, as the Minister has conceded, they will have no remit in regard to fair rents.
      One strong objection to the business expansion scheme is that we are not in a position to force fair rents, but we have a number of other objections. We believe that the major problem of the scheme is that money that ought to be used to provide better housing under housing associations and local authorities will be frittered away in tax reliefs. For those reasons—which we want to debate this afternoon—I hope that the hon. Gentleman will withdraw his amendment, which will have no force whatever, and allow us to get on with the major debate on the business expansion scheme.
      4.15 pm
      Mr. Ian Gow: I understand that the hon. Member for Berwick-upon-Tweed (Mr. Beith) is making his parliamentary debut in his new role as shadow Chancellor and in addressing the Committee on the Finance Bill. [Interruption.] If I am wrong about the hon. Gentleman's experience, I shall gladly give way and apologise to him.
      Mr. Beith: The hon. Gentleman may have failed to notice that I have been addressing the House on this subject for about a year.
      Mr. Gow: I think that I may be right. I said that this was the hon. Gentleman's debut as shadow Chancellor in addressing a Committee of the Whole House on the Finance Bill. If he has done it before, I can only say that this afternoon was not a triumph. We understand the the hon. Gentleman is not only the shadow Chancellor for the newly formed party, but a possible candidate for the leadership. You may care to reflect, Mr. Walker, on the hon. Gentleman's good fortune in not being surrounded by all his colleagues. Only one has been here to learn the truth, which is that the hon. Gentleman has misunderstood the Finance Bill and does not understand the Housing Bill, of whose Standing Committee his hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) was a rather undistinguished member. It would have been greatly to the advantage of the shadow Chancellor if he had studied both Bills more carefully. I hope that he will not detain the Committee any longer, and will withdraw the amendment.
      Mr. Beith: I thought that the hon. Member for Eastbourne (Mr. Gow) was going to make a speech discussing the issues raised in the amendment. I used to think that he was interested in housing issues; he was, after all, Minister for Housing at one time. He clearly prefers, however, to engage in discussion of wider political matters at a pretty superficial level.
      I also thought, when the hon. Member for Dunfermline, East (Mr. Brown) spoke, that I had intruded on a private quarrel which could be conducted only on the basis of being either in favour of private landlords or wholeheartedly opposed to them. Indeed, the hon. Member for Walsall, North (Mr. Winnick) intervened when they were mentioned, and said that they should go. It is a widespread view in the Labour party that there is no role for the private rented sector.
      My purpose in tabling the amendment—and I am strengthened in my view that we should press it—is to

      37
      suggest that there is a role for private rented housing, and that the Government should be looking for ways to encourage a responsible private rented sector without doing so in ways that afford no protection to tenants. I can hardly be criticised for the unsatisfactory features of the Government's housing legislation—including the rent assessment committees—given the effort put by my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) into criticising those proposals when they were put forward. The amendment offers the Government an opportunity to find a way of moderating their own proposals.
      Let us suppose for a moment that the Government are right in their assumption that the change in the balance between landlord and tenant will attract more people into private sector housing. That must have been their intention. The argument that they used throughout all the debates on the housing legislation was that the balance was wrong, and that shifting it would bring more capital into private housing.
      If there were anything in that argument, the business expansion scheme would be of only limited relevance to the expansion of the private rented sector. As it accords considerably greater benefits to landlords who will already have been released from their former obligations, which the Government believe kept some of them out of the housing market altogether, why should not a greater obligation towards tenants be imposed on that group of landlords—particularly as it may prevent the scheme from being abused, and becoming a means of returning to the days of Rachmanism?
      We have put forward a reasonable proposal, and have offered the Government an opportunity to suggest alternatives. But they seem determined to drive ahead with an unrestrained incentive to landlords, with no tenant protection at all. The Labour party seems determined not even to consider ways in which the private sector could play a larger role in tackling the enormous housing problems. In those circumstances, I feel that we are entitled to differ, and to say that there is a role for a responsible private sector. 1 therefore intend to press my amendment.
      Question put, That the amendment be made:—
      The Committee divided: Ayes 145, Noes 221.

      Division No. 290]

      [4.20 pm

      AYES

      Allen, Graham

      Campbell, Menzies (Fife NE)

      Anderson, Donald

      Campbell-Savours, D. N.

      Archer, Rt Hon Peter

      Clark, Dr David (S Shields)

      Banks, Tony (Newham NW)

      Clay, Bob

      Barnes, Harry (Derbyshire NE)

      Clwyd, Mrs Ann

      Battle, John

      Cohen, Harry

      Beith, A. J.

      Cook, Frank (Stockton N)

      Benn, Rt Hon Tony

      Cook, Robin (Livingston)

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

      Corbett, Robin

      Bidwell, Sydney

      Corbyn, Jeremy

      Blair, Tony

      Cox, Tom

      Blunkett, David

      Cryer, Bob

      Boateng, Paul

      Cunliffe, Lawrence

      Boyes, Roland

      Cunningham, Dr John

      Bradley, Keith

      Dalyell, Tarn

      Bray, Dr Jeremy

      Darling, Alistair

      Brown, Gordon (D'mline E)

      Davies, Rt Hon Denzil (Llanelli)

      Brown, Nicholas (Newcastle E)

      Davies, Ron (Caerphilly)

      Bruce, Malcolm (Gordon)

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

      Buchan, Norman

      Dixon, Don

      Buckley, George J.

      Dobson, Frank

      Caborn, Richard

      Doran, Frank

      Callaghan, Jim

      Douglas, Dick

      38

      Dunnachie, Jimmy

      Michie, Bill (Sheffield Heeley)

      Dunwoody, Hon Mrs Gwyneth

      Millan, Rt Hon Bruce

      Eadie, Alexander

      Mitchell, Austin (G't Grimsby)

      Eastham, Ken

      Moonie, Dr Lewis

      Evans, John (St Helens N)

      Morgan, Rhodri

      Ewing, Harry (Falkirk E)

      Morris, Rt Hon A. (W'shawe)

      Fatchett, Derek

      Mowlam, Marjorie

      Faulds, Andrew

      Mullin, Chris

      Fearn, Ronald

      Murphy, Paul

      Field, Frank (Birkenhead)

      Nellist, Dave

      Fisher, Mark

      Orme, Rt Hon Stanley

      Foot, Rt Hon Michael

      Owen, Rt Hon Dr David

      Foster, Derek

      Patchett, Terry

      Fyfe, Maria

      Pendry, Tom

      Galloway, George

      Pike, Peter L.

      Garrett, John (Norwich South)

      Prescott, John

      Golding, Mrs Llin

      Quin, Ms Joyce

      Gordon, Mildred

      Randall, Stuart

      Gould, Bryan

      Redmond, Martin

      Griffiths, Nigel (Edinburgh S)

      Rees, Rt Hon Merlyn

      Griffiths, Win (Bridgend)

      Richardson, Jo

      Grocott, Bruce

      Roberts, Allan (Bootle)

      Harman, Ms Harriet

      Rogers, Allan

      Hattersley, Rt Hon Roy

      Rooker, Jeff

      Haynes, Frank

      Rowlands, Ted

      Heffer, Eric S.

      Ruddock, Joan

      Hogg, N. (C'nauld & Kilsyth)

      Sedgemore, Brian

      Hoyle, Doug

      Shore, Rt Hon Peter

      Hughes, Robert (Aberdeen N)

      Skinner, Dennis

      Hughes, Roy (Newport E)

      Smith, Andrew (Oxford E)

      Hughes, Sean (Knowsley S)

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

      Hughes, Simon (Southwark)

      Smith, Rt Hon J. (Monk'ds E)

      Illsley, Eric

      Snape, Peter

      John, Brynmor

      Soley, Clive

      Kinnock, Rt Hon Neil

      Spearing, Nigel

      Leighton, Ron

      Steel, Rt Hon David

      Lestor, Joan (Eccles)

      Stott, Roger

      Litherland, Robert

      Straw, Jack

      Livingstone, Ken

      Taylor, Mrs Ann (Dewsbury)

      Lloyd, Tony (Stretford)

      Taylor, Matthew (Truro)

      McAllion, John

      Turner, Dennis

      McFall, John

      Wall, Pat

      McKay, Allen (Barnsley West)

      Walley, Joan

      McKelvey, William

      Wareing, Robert N.

      McLeish, Henry

      Welsh, Andrew (Angus E)

      Madden, Max

      Williams, Alan W. (Carm'then)

      Mahon, Mrs Alice

      Winnick, David

      Marek, Dr John

      Marshall, Jim (Leicester S)

      Tellers for the Ayes:

      Martin, Michael J. (Springburn)

      Mr. James Wallace and

      Meacher, Michael

      Mrs. Ray Michie.

      Michael, Alun

      NOES

      Alexander, Richard

      Bright, Graham

      Alison, Rt Hon Michael

      Brittan, Rt Hon Leon

      Allason, Rupert

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

      Amos, Alan

      Browne, John (Winchester)

      Arbuthnot, James

      Bruce, Ian (Dorset South)

      Arnold, Jacques (Gravesham)

      Buck, Sir Antony

      Atkinson, David

      Burt, Alistair

      Baldry, Tony

      Butcher, John

      Beaumont-Dark, Anthony

      Butler, Chris

      Bendall, Vivian

      Butterfill, John

      Bennett, Nicholas (Pembroke)

      Carlisle, John, (Luton N)

      Benyon, W.

      Carlisle, Kenneth (Lincoln)

      Biffen, Rt Hon John

      Carrington, Matthew

      Biggs-Davison, Sir John

      Cash, William

      Blackburn, Dr John G.

      Channon, Rt Hon Paul

      Blaker, Rt Hon Sir Peter

      Chapman, Sydney

      Bonsor, Sir Nicholas

      Chope, Christopher

      Boscawen, Hon Robert

      Clark, Sir W. (Croydon S)

      Boswell, Tim

      Clarke, Rt Hon K. (Rushcliffe)

      Bottomley, Peter

      Conway, Derek

      Bottomley, Mrs Virginia

      Coombs, Anthony (Wyre F'rest)

      Bowden, A (Brighton K'pto'n)

      Coombs, Simon (Swindon)

      Bowden, Gerald (Dulwich)

      Cope, John

      Boyson, Rt Hon Dr Sir Rhodes

      Couchman, James

      Braine, Rt Hon Sir Bernard

      Cran, James

      Brazier, Julian

      Currie, Mrs Edwina

      39

      Curry, David

      Lloyd, Sir Ian (Havant)

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

      Lloyd, Peter (Fareham)

      Davis, David (Boothferry)

      Lord, Michael

      Day, Stephen

      Luce, Rt Hon Richard

      Devlin, Tim

      McCrindle, Robert

      Dickens, Geoffrey

      Macfarlane, Sir Neil

      Dicks, Terry

      Maclean, David

      Dorrell, Stephen

      McNair-Wilson, M. (Newbury)

      Douglas-Hamilton, Lord James

      Malins, Humfrey

      Durant, Tony

      Mans, Keith

      Evans, David (Welwyn Hatf'd)

      Maples, John

      Fallon, Michael

      Marshall, John (Hendon S)

      Favell, Tony

      Marshall, Michael (Arundel)

      Fenner, Dame Peggy

      Martin, David (Portsmouth S)

      Field, Barry (Isle of Wight)

      Mates, Michael

      Forman, Nigel

      Maude, Hon Francis

      Forsyth, Michael (Stirling)

      Maxwell-Hyslop, Robin

      Forth, Eric

      Mellor, David

      Fox, Sir Marcus

      Miller, Hal

      Franks, Cecil

      Mills, Iain

      French, Douglas

      Mitchell, Andrew (Gedling)

      Fry, Peter

      Mitchell, David (Hants NW)

      Gardiner, George

      Moate, Roger

      Garel-Jones, Tristan

      Montgomery, Sir Fergus

      Gill, Christopher

      Morrison, Hon Sir Charles

      Goodlad, Alastair

      Moss, Malcolm

      Gorst, John

      Moynihan, Hon Colin

      Gow, Ian

      Mudd, David

      Gower, Sir Raymond

      Nelson, Anthony

      Grant, Sir Anthony (CambsSW)

      Neubert, Michael

      Gregory, Conal

      Newton, Rt Hon Tony

      Griffiths, Peter (Portsmouth N)

      Nicholls, Patrick

      Grist, Ian

      Page, Richard

      Ground, Patrick

      Paice, James

      Grylls, Michael

      Patten, John (Oxford W)

      Gummer, Rt Hon John Selwyn

      Price, Sir David

      Hanley, Jeremy

      Rathbone, Tim

      Hannam, John

      Rhodes James, Robert

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

      Riddick, Graham

      Hargreaves, Ken (Hyndburn)

      Rossi, Sir Hugh

      Harris, David

      Rost, Peter

      Haselhurst, Alan

      Rowe, Andrew

      Hawkins, Christopher

      Sackville, Hon Tom

      Hayes, Jerry

      Sayeed, Jonathan

      Hayhoe, Rt Hon Sir Barney

      Scott, Nicholas

      Hayward, Robert

      Shaw, David (Dover)

      Heathcoat-Amory, David

      Shaw, Sir Giles (Pudsey)

      Hicks, Robert (Cornwall SE)

      Shaw, Sir Michael (Scarb')

      Higgins, Rt Hon Terence L.

      Shepherd, Richard (Aldridge)

      Hind, Kenneth

      Shersby, Michael

      Hogg, Hon Douglas (Gr'th'm)

      Sims, Roger

      Hordern, Sir Peter

      Smith, Tim (Beaconsfield)

      Howard, Michael

      Speller, Tony

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

      Steen, Anthony

      Howarth, G. (Cannock & B'wd)

      Stern, Michael

      Hughes, Robert G. (Harrow W)

      Stevens, Lewis

      Hurd, Rt Hon Douglas

      Stewart, Andy (Sherwood)

      Irvine, Michael

      Stradling Thomas, Sir John

      Irving, Charles

      Sumberg, David

      Jack, Michael

      Summerson, Hugo

      Jackson, Robert

      Tapsell, Sir Peter

      Janman, Tim

      Taylor, Ian (Esher)

      Jessel, Toby

      Taylor, John M (Solihull)

      Johnson Smith, Sir Geoffrey

      Taylor, Teddy (S'end E)

      Jopling, Rt Hon Michael

      Temple-Morris, Peter

      Kellett-Bowman, Dame Elaine

      Thompson, D. (Calder Valley)

      Key, Robert

      Thorne, Neil

      King, Roger (B'ham N'thfield)

      Thurnham, Peter

      Knapman, Roger

      Tracey, Richard

      Knight, Greg (Derby North)

      Tredinnick, David

      Knight, Dame Jill (Edgbaston)

      Trippier, David

      Knox, David

      Twinn, Dr Ian

      Lamont, Rt Hon Norman

      Waddington, Rt Hon David

      Lang, Ian

      Wakeham, Rt Hon John

      Latham, Michael

      Waldegrave, Hon William

      Lawrence, Ivan

      Walker, Bill (T'side North)

      Lee, John (Pendle)

      Waller, Gary

      Lester, Jim (Broxtowe)

      Walters, Dennis

      Lightbown, David

      Ward, John

      Lilley, Peter

      Warren, Kenneth

      40

      Watts, John

      Young, Sir George (Acton)

      Whitney, Ray

      Younger, Rt Hon George

      Widdecombe, Ann

      Wiggin, Jerry

      Tellers for the Noes:

      Wilshire, David

      Mr. Mark Lennox-Boyd and

      Winterton, Nicholas

      Mr. Richard Ryder.

      Wolfson, Mark

      Question according negatived.
      Question proposed, That the clause stand part of the Bill.
      Mr. Norman Lamont: This clause, together with schedule 4, extends the business expansion scheme to investment in companies which let residential property on the new assured tenancy terms. It complements the current Housing Bills, which introduce this kind of tenancy. The aim is to encourage the provision of private rented accommodation. The shortage of such accommodation in many areas in our cities has been one of the main causes of homelessness, and it has also been an obstacle to labour mobility.
      In the longer term, the freedom for landlords to charge market rents under the new-style assured tenancies will stimulate more investment in private rented housing, but we see a strong case for speeding up this progress by providing a special incentive in the early years of deregulation. Therefore, we propose to extend the business expansion scheme to investment in companies letting properties on the new assured tenancy terms, which give tenants security of tenure. This relief will be available for only five years. The Bill provides for BES relief to be available for shares issued after Royal Assent and before the end of 1993.
      Mr. Gordon Brown: Will the Minister assure the Committee that companies formed under the business expansion scheme to provide private rented accommodation will have to subscribe to a social landlords' charter that has been proposed by the Minister for Housing and Planning?
      Mr. Lamont: No. The terms of the assured tenancies under which investment can take place under the legislation are precisely the same as those in the Housing Bill. Any proposal that is made by my hon. Friend the Minister for Housing and Planning would be incorporated and would have to be observed by any company which was benefiting from the business expansion scheme. I shall return to that question in order to confirm or amend my answer.
      Relief will apply to shares that are issued after Royal Assent to the Finance Bill and before the end of 1993. The new assured tenancy basis will not be available immediately. We expect it to come into force early next year. In the interim, a company will be able to use the business expansion scheme to raise money to buy or build properties, but it will be unable to let them. Nevertheless, we felt that it was right to make BES relief available during the interim period, because the purchase of properties and any necessary preparations to make them ready for letting could take some time. We want companies using the BES to be able to let properties on assured tenancies as soon as possible.
      As the aim of the BES relief is to encourage the continuing provision of rented property, the relief will be available only for assured tenancies that give the tenant long-term security. There will be a limit on the value of each let property. This will prevent tax relief from being

      41
      used to provide expensive properties for renting. The limit will he £125,000 in Greater London, and £85,000 elsewhere. If the value of the property exceeds this limit, the letting will not qualify. The Bill contains a power to amend these limits by statutory instrument.
      Mr. Gordon Brown: What are the mandatory reasons that will allow houses to be repossessed? Does the Minister agree that it may be in the financial interests of a company to attempt to repossess its houses after five years?
      Mr. Lamont: The hon. Gentleman is arguing against the whole basis of the Housing Bill. He is saying—and I expect that it will be the major point in the debate—that it provides an incentive to evict people. The hon. Gentleman knows as well as I do that my hon. Friend the Minister for Housing and Planning has produced a battery of new safeguards for tenants that will strengthen the criminal law and give the tenant the right to compensation if he is unfairly evicted. There is a risk of eviction from rented property, but that is more likely to arise from controls that make it impossible for landlords to receive a decent return on their property. The Housing Bill provides tenants with security of tenure, backed by changes to the legal protection that is available to them. Moreover, in certain circumstances, there will be access to the rent assessment committees. The legislation strikes a balance between the needs of the landlord and the tenant.
      Mr. Brown: Does the Minister agree that intention to redevelop is one of the means by which tenancies can be repossessed on a mandatory basis, and that it may be in the financial interest of a company to repossess the tenancies after five years?
      Mr. Lamont: Yes. Under the business expansion scheme the property has to be let on a long-term basis. The hon. Gentleman believes that there will be an incentive for a landlord to get vacant possession or to develop a property with vacant possession, but a company will be unable to qualify for BES relief unless it is letting the property as rented property. The BES relief will bring into existence companies which will let property on a continuing basis and also on an assured tenancy basis.
      Mr. Campbell-Savours: Is the Minister able to foresee circumstances in which a person who is a tenant and an investor under a business expansion scheme will be able to rent from his own investment? Is it not possible that he might receive tax relief on an investement from which he had already received a benefit?
      Mr. Lamont: That is not possible. If the hon. Gentleman can demonstrate any way in which that is possible we shall take action to stop it, because that is not the purpose of the business expansion scheme.
      The Opposition refer to harassment and to incentives to evict, but that is not the purpose of the legislation. We are prepared to look at any reasonable provisions that the Opposition may wish to put to us to safeguard the rights of tenants that do not cut across the Housing Bill, which we believe strikes the right balance between the rights of tenants and the need to give landlords a proper incentive to invest in rented property.
      Mr. John Battle: When we discussed the Housing Bill the Minister accepted that practices of landlords or property developers such as Nicholas Hoogstratel were not covered by the law and that changes
      42
      in the Bill would make it easier for him to carry on such practices. Although the Minister expressed grave reservations about that landlord's practices, when that landlord came before the courts his case was dismissed. What is there to prevent that person and his companies benefiting from the business expansion scheme and continuing to keep properties in bad condition and charge prices that tenants cannot afford to pay?
      Mr. Lamont: I wish to make no comments about one individual. Bad landlords are a product of previous Rent Acts. This legislation, the housing legislation and the BES are intended to provide a continuing supply of property on an assured tenancy basis. That is not compatible with the examples that Opposition Members are giving.
      I was explaining about limits on the values of properties prescribed under the legislation, but if the value of a property exceeds the limit it will not necessarily cause BES relief to be lost, because a company will be allowed to carry on some non-qualifying activities. If those non-qualifying activities are substantial, BES relief will not be available. What that means in practice will depend on the facts of each case, but the Inland Revenue's existing practice is that if non-qualifying activities amount to less than 20 per cent. of total activities they are not regarded as substantial.
      That rule will ensure that the company specialises in the provision of qualifying tenancies, which will give some desirable flexibility. For example, a company may from time to time have money on deposit while it is preparing to buy or improve properties. It would clearly be wrong to withdraw BES relief because it received a relatively small amount of interest on its deposit. Indeed, these provisions reflect the general provisions of the BES for all types of companies. The Bill excludes sub-standard properties by reference to standards laid down in the Housing Act 1985 and the Housing (Scotland) Act 1987.
      There is a further feature of BES relief that I should mention. Clause 50 imposes a limit on the total amount of investment in a company in any year that can qualify for BES relief. Ordinarily the limit will be £500,000, but for companies letting residential property on assured tenancies it will be £5 million. It is not our intention that the BES should be used to finance large property companies, which should have less difficulty obtaining equity finance from the markets. Thus, a limit is necessary. We want to enable a company to benefit from economies of scale in offering shares to the public and in managing a large number of properties. We felt that the £5 million limit, which we have extended to ship chartering, was about right.
      The privately rented sector has been in continuous decline since rent control was introduced in 1915 in response to wartime shortages. It has continued ever since and has been reinforced by other Governments. In 1915, 90 per cent. of the population lived in privately rented homes, but today barely 8 per cent. do so.
      The lack of a ready supply of rented housing has become a major obstacle to labour mobility. Many people have been losers, including many unemployed people. Many people have been unable to take jobs because of the lack of a privately rented sector in areas where work is available. The country has lost from the economic activity that has been forgone. A battery of legislation, statutory rent controls and other rent restrictions are largely to blame for that profoundly unsatisfactory position.
      Mr. Campbell-Savours: I press the Minister about this simple question and I want a simple answer. Can a person rent a flat from a company in which he is a BES investor? The answer is either yes or no.
      Mr. Lamont: I answered that question earlier and said that I believed that the answer was no. I shall return to this issue later.
      Mr. David Shaw: Is not the question asked by the hon. Member for Workington (Mr. Campbell-Savours) answered by schedule 4 to the Bill, on page 123, which says:
      "In subsection (2) of section 291 (individuals qualifying for relief), after paragraph (a), there shall be inserted—
      '(aa) a tenant of a dwelling-house of which the company is the landlord;'."
      Consequently, a tenant is unlikely to obtain relief under that subsection.
      4.45 pm
      Mr. Lamont: The answer to the question is no, but I shall return to it if the hon. Member for Workington (Mr. Campbell-Savours) wishes to pursue it.
      The Government have decided to take action to reverse that profoundly unsatisfactory position by introducing a new assured tenancy scheme. Under its proposals, existing tenants will have the same protection as at present, but we are relaxing controls for future tenancies. Landlords and tenants will have a choice of two types of tenancies. Assured tenancies will provide long-term statutory security, and assured shorthold tenancies will give the tenant at least six months' security. In both cases, market rents will be payable. These proposals will provide the incentive for landlords to invest and, at the same time, give protection to the tenant.
      For the new assured tenancy scheme, but not for assured shorthold tenancies, we are introducing tax relief under the BES scheme for a limited five-year period. We have a considerable task in pressing ahead with deregulation in the privately rented sector, and we believe that the extension of BES relief will give a significant boost to plans for deregulation. Decades of legislation have left this sector demoralised and in decline. It is important to reverse that decline, to give the unemployed a greater chance to find work and to give the population a greater choice in their housing.
      Mr. Gordon Brown: The one thing that we can say about the Minister and his speech about tax concessions for the BES is that, despite all the criticisms that have been made of BES and of this new proposal in particular, his enthusiasm for the scheme remains undiminished.
      Since the scheme was set up in 1983—it was originally intended to provide tax concessions for high-risk investment in high-technology industry to create jobs—Ministers have had to come to the House at least twice to say that, because of the increasing dependence on property and fixed assets, they intend to change the terms of the scheme. First, they had to admit that there were abuses in the scheme as it applied to expensive wines and antiques. They said that they intended to rule out those abuses. They then said that, because land and buildings form such a large part of the capital issued under the scheme, they would limit the amount that could be used to 50 per cent. Today, they appear to have turned full circle. Instead of saying that they will limit the dependence of BES
      44
      companies on property they are saying that privately rented sector companies can be 100 per cent. dependent on property assets.
      There is a further irony in what is happening. For months we have been saying that public funds that should have gone to the National Health Service, local authorities and social services departments for the benefit of the many have been going in tax concessions to private hospitals, nursing clinics, private health clinics, private schools and private accommodation for bed and breakfast for the benefit of the few. We said that those abuses should be limited. Yet the Government have opened up a new area of opportunity, with tax reliefs for a new area of the private sector, which is as yet unexploited under the BES. That is why we now have this proposal to extend BES relief to the private rented sector.
      All Opposition Members recognise the housing problem—250,000 more people are on waiting lists than in 1979, there has been a 30 per cent. increase in the number of homeless people, there are twice as many people in bed-and-breakfast accommodation and 500,000 houses have been lost from the rented sector, even after taking account of council house sales.
      As has been said, more houses have been lost from the rented sector under this Government than at any other time since the infamous Rent Act of 1957. In response, we believe that the Government's proper action should have been to give funds to housing associations and local authorities to enable them to build houses, and to encourage housing co-operatives. We believe that, for the same money, local authorities and housing associations could achieve far more than is possible under this new business expansion scheme.
      Mr. Winnick: Does my hon. Friend agree that, as the rents are to be market rents, it will often be the case, especially in London and the south-east, that rents will be higher than the cost of a mortgage, so the very people about whom we are worried, who cannot afford a mortgage, are hardly likely to benefit from the Housing Bill. Is that not a measure of the hypocrisy of the Government's legislation?
      Mr. Brown: If my hon. Friend will stay with me, I shall return to that point, which goes to the heart of our objections to the scheme.
      We know what the scheme will do for the private investors whom the Minister is anxious to encourage. We know that someone who invests £40,000 in a BES company can save £16,000-worth of tax. We know that, on the occasion of houses being rented, complete decontrol is proposed under the Housing Bill and that companies can charge whatever rent they want. We know, too, that, after five years, shares in BES companies can be sold without there being any liability to capital gains. We know what gains there are—they come three times over—for those who invest in such schemes. What we do not know and what we have not heard, however, are the gains to tenants.
      There is no guarantee—the Minister confirmed it—of fair rents, of long-term security in accommodation or of good quality landlords. It is small wonder, therefore, that this proposal did not surface in the Conservative party manifesto. As far as we can understand, it has never been advocated by any local authority and it has never been put out to anyone for consultation, and when it was

      45
      announced immediately after the Budget the reaction of housing authorities and housing associations was anything but supportive.
      Mr. Quentin Davies: The hon. Gentleman asks what is the benefit to the tenant. Is not the provision of new, additional rented accommodation of inestimable benefit to potential tenants?
      Mr. Brown: The hon. Gentleman should read the details of the scheme. There is no guarantee of new accommodation. There is no guarantee that houses will be newly built rather than merely bought for renting under the scheme. As for rents, the hon. Gentleman will see clearly that the people who will benefit are not the migrant workers from the north looking for jobs in the south, which was the original intention of the scheme, but people looking for second flats, such as executives wanting accommodation in London or other major cities.
      Mr. Gow: The hon. Gentleman unintentionally misled the House. He said that there was no reference in our manifesto to the proposal before the Committee. I shall read what we said:
      "We must attract new private investment into rented housing—both from large institutions…as well as from small private landlords…to encourage more investment by institutions, we will extend the system of assured tenancies. When introducing the motion, my right hon. Friend followed precisely the promises made on page 13 of our manifesto.
      Mr. Brown: I hope that the hon. Gentleman does not wish to mislead the House. He failed to mention that at the heart of the scheme is the provision of a tax concession to people who, primarily, will be top rate taxpayers. There was nothing in the Conservative party manifesto which said that public money—taxpayers' money—would go to BES companies or any other companies to stimulate the private rented sector. That is the basis of the objection to the scheme—public money is being used to finance accommodation in respect of which there is no guarantee of fair rent, secure accommodation or good quality landlords. That money could be far better spent by local authorities or housing associations to build more houses or to repair houses for which fairer rents are charged.
      I shall consider the drawbacks of the scheme. The Minister said that it is based on the principle of assured tenancies, and that people who rent under the scheme will have what he would regard as security of tenure under assured tenancies. We know that assured tenancies will provide less protection than secure tenancies under the Rent Acts, that there are seven mandatory reasons for tenancies to be repossessed and several other discretionary powers, that among them is the failure of the owners to pay the mortgages and that another is rent arrears after three months.
      We know that another justification for repossession, at least in England, is the offer of alternative accommodation, which is vaguely defined as "suitable". We know that one of the principal loopholes that is likely to be used is the landlord declaring his intention to redevelop, whereupon he automatically has the right to repossession without, as we understand it, even having planning permission to carry out the redevelopment. We know, therefore, that there will be considerable abuse of the scheme.
      The Financial Secretary has conceded that there is a financial benefit to companies which sell up after five
      46
      years, and therefore secure vacant possession to enable them to sell up. We know that assured tenancies are more likely to be five-year tenancies at best. The people who gain them are likely to find themselves in other accommodation at the end of that period.
      It is small wonder that those who advise investors in this matter have already said—an estate agent has said it:
      "the grounds for possession are much more extensive than under the Rents Acts and include some previously available only under part II of the Landlord and Tenant Act 1954 for business purposes".
      The latest publication from the BES advisory group called "Best BES" concludes with a paragraph entitled, "Likely Exit Routes" thus:
      "more likely perhaps properties will be sold either untenanted or with tenants".
      The idea that people will be advised that they are in the business of providing long-term accommodation lasting beyond five years, and the guarantee that these will be assured tenancies which cannot be broken will, under the new Housing Bill, I believe, prove groundless.
      What are the guarantees about the quality of landlords? Housing associations are debarred from involvement in the scheme. Assurances involving the registration of landlords under assured tenancies, are, as in the previous legislation, being abandoned. There is no provision such as that involving the Housing Corporation whereby landlords are registered and approved. The proposal for social landlords will not come within the remit of BES landlords—the Financial Secretary confirmed that. What guarantees do we have, therefore, that landlords who have no experience, no track record and no approvals or supervision will have any commitment to proper standards of property and the proper treatment of tenants?
      Is it not as my hon. Friend the Member for Leeds, West (Mr. Battle) suggested—that the landlords that local authorities and housing associations are trying to outlaw because of their atrocious record will be brought back to life? Indeed, under this scheme, they will be guaranteed state support in the form of tax concessions. Far from eliminating exploitative landlords, there is nothing here which will guarantee, under a social landlords charter or anything else, that the landlords who are being outlawed will not reappear. That is why one firm of accountants recently said:
      "Rachman one suspects would not have been slow to take advantage of the scheme had it been around in the Sixties."
      Under these proposals, Rachman is subsidised by the state with an open-ended commitment which the Government think might cost £40 million in its first year.
      5 pm
      That is not the only problem. There is another problem that the Minister did not properly address. We are being told by Ministers that the aim of the scheme is to help the mobility of people round the country. We are told that it is to help workers in the north find accommodation once they find employment in the south. However, the information available to us suggests that the rent for a house costing up to £125,000, which is the limit of the scheme in London, could be as high as £240 a week and the rent on a £85,000 house, which is the limit in the cities and turns of the rest of Britain, could be as high as £154 a week on a market basis. When rent is as high as that and the housing benefit maximum will be only £114 in Westminster, £70 or £75 in other parts of London such as Kensington and Chelsea, £88 in Camden, £39 in the west

      47
      midlands and £34 in Humberside, there is little chance, even with housing benefit support, of the migrant worker being able to afford the rents that will be charged under the business expansion scheme.
      In other words, the rents that will charged will rule out the very people the Government say they are trying to help. It is the higher paid business men, with the rent probably paid by the company, who will benefit from such tenancies. It is not the first home for migrant workers that it likely to result from the scheme but a second home for temporarily resident business men. That is not the group in the country with the highest claim upon the charity of taxpayers.
      Instead of suggesting that ordinary average wage workers are likely to benefit under the scheme, surely it would be better if the Government took up the suggestions made by the Employment Institute in its pamphlet published a few days ago. It said that if the Government are to continue to reject the proper answer to these problems, which is an active regional policy, the best solution for people moving south is publicly provided accommodation at rents that people can afford.
      On top of the insecure tenures that are likely to result, the high rents that are likely to debar all but the best-off workers and the failure to provide guarantees against bad quality landlords, we come to the problem at the heart of the scheme. The same amount of money as the Government will give in tax subsidies to the rich could have been used to build local authority housing, sponsor housing associations or develop housing co-operatives.
      We asked the housing associations what they believed could be done with the sum of money that the Government have set aside for the first year cost of their tax concessions. They told us that for that amount of money they would be able to build more than 2,000 new houses—2,000 extra houses, not houses taken from the accommodation sector now—and charge sensible rents for them.
      We asked the Association of Metropolitan Authorities what it could do with the same amount of money—£40 million. It said that that would be sufficient capital to enable it to borrow sufficient money to build 10,000 local authority houses a year. Therefore, in return for a provision that will probably bring about 1,000 rented properties in its first year, we could have provided the capital to help to build up to 10,000 local authority houses. That is the scale of the missed opportunity caused by the Government's obsession with providing tax reliefs under the business expansion scheme.
      As a result of the Government's policies, the number of public sector starts is at its lowest since 1945—and at a time when the need is becoming greatest. At the same time, the annual figures for house building in the public sector have fallen from 81,000 in 1979 to what is estimated to be only 29,000 this year. The Minister should respond to us by saying that, after looking at the finances of the business expansion scheme and recognising that the £40 million could be far better spent in the provision of local authority or housing association finance, the value for money achieved by this proposal is far less than would be achieved in the public sector.
      It is a tragedy that the Government seem to feel that there is a psychological need to circulate cash around
      48
      property developers and speculators before it can do any public good. The truth is that ideology in the Conservative party is now so rampant that it would prefer to subsidise the private sector to do the job inefficiently than support the public sector to do the job efficiently.
      We are aware of a number of deficiencies in the business expansion scheme and my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) will deal with them when he winds up. Money that should have been raised for businesses in the north has been diverted to the south, money that should have gone to small businesses has gone to large businesses, money that should have gone to the manufacturing sector has gone to the service sector and money that should have gone to projects that would have created far more jobs has been frittered away on projects that the Minister has latterly had to ban.
      The truth of the business expansion scheme for private rented housing accommodation is that it has been founded on dogma about the benefit of the private sector. It has been fired by selective generosity towards top rate taxpayers who stand to benefit far more than any tenant can benefit from the scheme. It has been justified on the myth about the average migrant worker being able to do well out of the scheme when the Government know that that cannot be the case. It is riddled with abuses and anomalies that will force the Minister back to the House to change the legislation in a short time.
      In this debate the scheme has been exposed for what it is. It is a mechanism for taking the housing problems of the many and transforming them into the tax havens for the few. The scheme will do little for those who most need housing help. The money that is being spent on it should have been given to local authorities and housing associations to allow them to build the houses that we need. It is for those reasons that we will vote against the scheme.
      Mr. John Watts: There would be little disagreement in the Chamber about the fact that there is a need for greater provision of rented housing in this country. Home ownership has increased at a rapid rate. That is commendable and desirable if it is a matter of free choice. However, if home ownership is merely a matter of Hobson's choice for those who would prefer to rent but who are denied the opportunity because there is no supply of rented housing, it is not a matter for congratulation. Therefore, one reason for wishing to see a greater supply of rented housing is to give individuals the same choice of renting accommodation as they have of owning their home.
      Mr. Battle: Is the hon. Gentleman still in favour of the policy of increasing the number of owner-occupied homes in Britain? At present, that stands at 62 per cent., and I understood it was the Government's policy to increase it to 75 per cent. Has it not occurred to the Conservative party that perhaps the reason for the shortage of private rented accommodation is that owner-occupation has increased? Is the hon. Gentleman now saying that his party feels that we have gone too far in the direction of owner-occupation and that we should pull back from that policy?
      Mr. Watts: Not at all. I am happy that we should continue to encourage and assist those who wish to become home owners. However, there should also be the option of renting. I believe that we have reached the point where, because of the fast dwindling private rented sector,

      49
      many people do not have that choice. That is what the proposals in the Housing Bill, supported by this clause in the Finance (No. 2) Bill, are designed to redress. Therefore, the first justification for what we are putting forward is the freedom of individual choice. The choice of renting is as valid as the choice of owning.
      Mr. Winnick: How can the hon. Gentleman talk about choice? I do not know about his mailbag or surgeries, but people write to me daily asking for rehousing and they come to my surgery with housing problems. They do not know about choice. They cannot afford a mortgage. In the main, they are family people who, on their restricted incomes, cannot obtain a building society mortgage. How will they he in a position to pay market rents when in many cases the rent will cost more than a mortgage and when housing benefit is being drastically reduced?
      Mr. Watts: I cannot understand how a market rent on a property could possibly be greater than the cost of funding a mortgage to purchase the same property. If it were, no would-be tenant would take that option. There will not be any choice for people who wish to rent if the hon. Member for Walsall, North (Mr. Winnick) and his hon. Friends continue to seek to frustrate any measure designed to increase the supply of rented accommodation. If the Labour party does that, it will not in any way give greater choice either to my constituents or to those of the hon. Member.
      Mr. Ian Taylor: Few lenders are prepared to advance a 100 per cent. mortgage. The difficulty for people trying to get a mortgage is in finding the differential capital amount. The attraction of rented accommodation—at least while people are establishing themselves in new working environments—is that people do not have to find the capital deposit that is required.
      Mr. Watts: My hon. Friend makes a valid point. In addition, people do not necessarily wish to put down permanent roots—as is often implied by home ownership—early in their careers, when they may make many job moves.
      After choice, the second justification for seeking to increase the supply of rented accommodation is that it will improve labour mobility. Labour Members pooh-pooh this, but every Friday 30 or 40 pages of vacant jobs are advertised in my local newspaper. There are unemployed people in Walsall, North who would love to come to Slough for a job, but they are prevented from doing so because they cannot obtain accommodation there.
      We have heard from Labour Members, predictably, the bleat for more council housing. The Labour party has only one solution to any housing problem—build council houses. That will not improve labour mobility. One need only look at the poor supply of council housing in the pool for the national mobility scheme to see how true that is. Obviously, the claims of existing constituents of local authorities are given priority over those of potential constituents. The demand of an existing tenant to transfer to better accommodation will always be accorded priority over the claim of someone who wishes to move into the area to take up employment. No conceivable level of capital expenditure on public housing will ensure that there is such an oversupply that the needs of those wishing to move into an area to take employment can be met by expansion of public sector housing.
      50
      There is no advantage for labour mobility in providing greater funds for the public sector. By contrast, the private rented sector is available equally to local people who are seeking rented accommodation and to those who want to move into the area for employment. There is no bar to the latter being granted a tenancy. They compete in the same market with others seeking rented accommodation.
      The importance of expanding the private rented sector is recognised in the Housing Bill, which is the main vehicle for encouraging a resurgence of supply of private rented housing. Clause 49 of the Finance (No. 2) Bill, extending the business expansion scheme to assured tenancies, is intended to provide an initial boost to the intentions behind the Housing Bill. It is common sense and essential that the BES should apply to the same categories of assured tenancy as are defined in the Housing Bill. Any move to impose on housing investment further qualifications and requirements that would qualify under the BES—such a suggestion was made in amendment No. 1, which we have rejected—would blunt the impact of the useful boost that we are able to provide through this fiscal measure. Any such additional qualifications would he bound to defeat the pump-priming purpose of clause 49.
      5.15 pm
      The Opposition have professed concern for the future security of assured tenants. Their form of protection would prevent potential tenants from ever having the opportunity to obtain a tenancy. It would so constrain the conditions under which anyone could offer accommodation for rent in the private sector that no one would offer it. The purpose of providing housing for rent, and providing for greater choice and the needs of labour mobility, would be defeated by the Opposition's professed concern to provide protection.
      The hon. Member for Dunfermline, East (Mr. Brown) criticised the tax relief that will be given under the scheme as squandering money that should be given to the National Health Service, local authorities, and so on. We have heard that bleat throughout our consideration of the Budget and the Bill. The hon. Gentleman missed the point that incentives to encourage investment maximise the benefit to potential tenants who are looking for property to rent and minimise the cost.
      With tax relief at a maximum of 40 per cent., it must follow that two and a half times as much housing is provided for every £1 in lost tax revenue as would be provided if the same amount of cash were expended through local authorities. For every £1 lost in tax revenue through this relief, it would be necessary to spend £2·50 if the same amount of accommodation were provided through the public sector, and that is even making the generous concession that the public sector could provide housing as efficiently and as cheaply as the private enterprise system.
      The Government's proposal maximises the benefit for people who need houses to rent—people for whom the Conservative party cares and whom the Opposition would sacrifice to their hatred of the private enterprise system in general and of landlords in particular. I give the clause my full support. I hope that it will be carried with a substantial majority to show how serious we are about expanding the provision of private rented accommodation.
      Mr. Alistair Darling: The Government's support of the clause is indicative of their

      51
      attitude to a major problem. The primary purpose of the clause is to provide a tax shelter for a few, using the housing shortage as an excuse. It has potentially unpleasant side effects. There is no doubt that there is a major housing shortage. The high demand is ruthlessly exploited by many private sector landlords. There is a particular shortage of rented accommodation at prices that people can afford. The people who find it most difficult to move about and to secure any accommodation at all are those on low incomes, who cannot afford the price of housing.
      The hon. Member for Slough (Mr. Watts) asked why the private sector has been in decline. The answer is simple: successive Governments have subsidised home ownership. It is obvious that anyone who has the means will attempt to buy his or her own home because it is very much to his or her advantage to do so. That is why the private rented sector has declined throughout this century.
      It is interesting to note that in home ownership the subsidy goes to the purchaser of the home, whereas under this scheme, rather than the public subsidy being given to the tenant, it goes to the landlord. On Second Reading I said that if the Government were serious about promoting tenants' choice it would be far better to subsidise tenants so that they could shop around and use their increased purchasing power to choose suitable accommodation. Instead of that, the cuts in housing benefit have greatly reduced the purchasing power of prospective tenants, especially at the bottom end of the market.
      What is the answer to the housing shortage? The Government are providing an opportunity for a few people to obtain further tax relief. The clause provides a tax break for the better off. Rachman rides again, and this time the taxpayer is providing the horse.
      Mr. Ian Taylor: The hon. Gentleman has got it the wrong way round. The Government are trying, through the medium of tax incentives, to provide much more rented accommodation for people who need it.
      Mr. Darling: I shall develop that argument shortly. I do not think—and I do not think that the Government believe—that this scheme will bring on to the market the thousands of extra houses that are needed. In any event, any houses for rent will be at the top end of the market, particularly in the south-east of England, where high profits can be made. Other parts of the country where there is a demand for accommodation and a need to encourage increased mobility will not be so attractive to people who wish to invest under the business expansion scheme.
      One of my objections to the clause is that it specifically excludes organisations such as housing associations which have done much to provide low-cost housing. Clause 49(2) (b) specifically states that the qualifying activities are
      "activities which … are, during the relevant period, conducted on a commercial basis and with a view to the realisation of profits."
      Clearly it is those who would profit from providing accommodation who will be subsidised.
      I have three basic objections to the clause. First, it provides a tax shelter, giving a 40 per cent. discount to higher rate taxpayers. We must remember that only a few people in this country have between £500 and £40,000 to invest. They are not the ordinary, run-of-the-mill people.
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      Very few people have that sort of money to play around with. The Government are aiming the provision at those who have a great incentive to reduce their tax liability and who have vast sums of money available to tie up for five years.
      Mr. David Shaw: Is the hon. Gentleman aware that about 70 per cent. of all those who have invested under the business expansion scheme are taxpayers at below the highest rate and that many standard rate taxpayers have invested in the scheme over the years?
      Mr. Darling: Most of the money has gone to those paying higher rate tax. I repeat that the scheme is aimed at those with substantial sums of money available to invest which they are willing to tie up for five years.
      The second objection is that after five years investors can sell up and get a profit, free of capital gains tax.
      The third objection is that in some cases those providing accommodation at the bottom end of the market will receive a subsidy from the public purse because their tenants will have their rents financed through the Department of Health and Social Security. A few will provide accommodation at that level, but for the most part investors will be looking for market rents to improve the return on their investment, and that means high rents. Those with low incomes will not be properly catered for.
      The scheme provides a tax break for the rich instead of looking after the least advantaged. It exploits those who have no choice. Furthermore, it is open to abuse, as my hon. Friend the Member for Dunfermline, East (Mr. Brown) said. If the capital gains tax advantages are to be realised, it is necessary to ensure that there are no tenants in the building at the end of the period. Clearly, the value of a property increases if it is not burdened by tenancies. This will give landlords the incentive to get rid of tenants by using the powers to be made available to them under the Housing Bill. By arguing that there is alternative suitable accommodation and that he wants the house for redevelopment, the landlord will be able to get the tenants out and realise his profits.
      Who is to police the scheme? The Inland Revenue has enough trouble as it is in tracking down people who push tax advantages to their very limits. To give powers to local councils would be anathema to the Government, who have a pathological dislike of local authorities. With the money that is to be made available, local authorities could provide properly supervised accommodation for those who need it. If we are prepared to make funds available by way of tax forgone under the business expansion scheme, it would be far better to give that money to public bodies to provide accommodation, without the need to make a profit, thereby making a saving to the public purse.
      We should invest in the public sector. I cannot see what is intrinsically good about the private sector providing accommodation, or what is intrinsically bad about local authorities and public bodies providing it. We should be willing to look after local authorities and housing associations, many of which have a very good track record of providing accommodation where it is needed.
      The Government have completely abandoned any regional policy. We know that most of the money under the business expansion scheme has been invested in the south-east and that less than 4 per cent. has been invested in Scotland. If we are serious about encouraging businesses to set up outside the south-east of England, we

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      should provide accommodation and give industry other incentives to move out of the overheated south-east. One of the laudable aims of the Scottish Special Housing Association, for example, was that it sought to provide accommodation where the labour was needed. Such a policy would get round the argument of the hon. Member for Slough.
      In short, the clause is a tax break for those who have always been looked after by the Government—the few people to whom the Government have always attached a high priority and shown great favour. Those who have are to benefit at the expense of those who have not. The provision is, first and foremost, a tax shelter. Everything about the scheme points in that direction.
      The serious problem of homelessness is not being addressed either in this Bill or in the Housing Bill. The business expansion scheme will not solve the problem. It will not bring on to the market the rented accommodation that is so desparately needed. According to the Government, there was a need to cut back on housing benefit because it was an open-ended commitment. This proposal is an open-ended commitment if ever there was one. We do not know how much it will cost the Exchequer in tax forgone, yet the Government are prepared to allow this blank cheque to be written to look after the few. The provision is a tax break first and foremost, and it will take a great deal to convince us that it is anything else.
      Mr. Gow: The Committee may want to take note of the fact that, having lost his amendment, the shadow Chancellor of the Social and Liberal Democrats has left us and made way for others on the Liberal Benches.
      The debate is about whether the clause should stand part of the Bill, but quite rightly, my right hon. Friend the Financial Secretary and the hon. Member for Dunfermline, East (Mr. Brown) spent much of their time dealing with the housing aspects of the Bill. I, too, intend to talk mainly about the housing aspects, although at the very end I shall have to say something about the fiscal desirability of the proposal.
      When the Chancellor made his Budget statement, he said:
      "For years, the shortage of private rented accommodation has been an obstacle to labour mobility. The Government's proposals to deregulate new rents are already going through the House. Deregulation will, over time, substantially increase the supply of housing for rent. But this will not happen overnight, and there is a case for a special incentive to speed up the process in the early years."—[Official Report, 15 March 1988; Vol. 129, c. 1002.]
      I entirely agree with what the Chancellor said on 15 March.
      There is no doubt that there is available and empty today a large amount of property which is underused or unused. Part of the purpose of the Finance Bill is to bring that unused or underused accommodation into use. The fact that it is empty at a time of considerable homelessness is a massive indictment of the present state of the law. It is to the redressing of that evil that the Housing Bill is in part directed. That Bill is designed not just to bring into use existing unused or underused accommodation, but to achieve something that has virtually not happened at all in the past half century—to attract new investment into the building or conversion of housing for rent in the private sector.
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      5.30 pm
      Everyone should welcome the provision of new investment for the building of houses or flats to let in the private sector The Labour party should welcome it, especially for its employment consequences. Labour Members are rightly deeply concerned about employment. They used to tell me constantly that we needed to spend more money on housing. Part of the reason for that was the fact that construction of houses and flats is highly labour intensive. [Interruption.] The hon. Member for Workington (Mr. Campbell-Savours), clad in the Liberal colours, seeks to intervene from a sedentary position. He would be wiser to make his own speech in due course if he manages to catch your eye, Sir Paul.
      I do not wish to be led astray by the hon. Gentleman who, like me, has this afternoon escaped from the Public Accounts Committee. Even he should welcome the prospect of still further employment in the construction industry as a result of this measure. It is not enough just to encourage those who have empty accommodation to let their property. It is high time for some new investment in the private rented sector.
      Mr. Battle: Will the hon. Gentleman explain why he has not supported an increase in housing investment programme allocations so that cities such as Leeds can put money into private rented accommodation through improvement grants in housing action areas? Local authorities have a strategy which seeks to deal with housing in both the private and the public sectors, but the cuts in HIP allocations have meant that money could not go into improving private rented accommodation.
      Mr. Gow: As the hon. Gentleman well knows, in this financial year there has been an increase in the Treasury allocation to the public sector of housing, so his intervention is somewhat self-defeating. [Interruption.] I was comparing this year with last. The hon. Gentleman wants more money and my right hon. Friend the Chancellor has provided it this year.
      A dramatic increase in private ownership of houses must by definition mean a diminution in the rented sector, but one of the consequences of the drying up of the private rented sector has been that many people who would be only too happy to rent accommodation are today unable to do so. The hon. Members for Edinburgh, Central (Mr. Darling) and for Dunfermline, East asked how we could prove that migrant workers would go into the houses and flats that will be built as a result of clause 49 of the Finance Bill. Of course we cannot prove that, but whoever goes into them, someone somewhere in the country will move up. The hon. Member for Edinburgh, Central should not laugh. It is self-evident that an increase in private rented accommodation will make itself felt throughout those parts of the kingdom in which there is currently an unmet demand for such accommodation.
      The provisions of the Finance Bill on their own will make it more attractive for private money to go into the building of houses and flats for rent, but because for the past 50 years there has been virtually no private sector investment in that area, I believe that my right hon. Friend the Chancellor is right to give it an extra boost for the first five years. Clause 49 will accelerate the revival of the private rented sector by accelerating the long overdue return of private investment in that sector.

      55
      The Labour party is thus in a dilemma. Even the hon. Member for Walsall, North (Mr. Winnick), except in his most eccentric mood, must agree that it is no bad thing to have more accommodation available in the United Kingdom. The hon. Gentleman, however, finds it difficult to reconcile that with support for clause 49.
      For us, there is no such dilemma. We support the renewal of the private rented sector and believe that clause 49 will accelerate that renewal. We congratulate both my right hon. Friend the Chancellor and my hon. Friend the Minister for Housing and Planning, who was here a moment ago, on the combination of the Housing Bill, which has completed its Committee stage, and the Finance (No. 2) Bill which has just started its Committee stage. We believe that the two together will achieve that purpose which has eluded Governments for the past 50 years, and the sooner the clause reaches the statute book, the better it will be for housing.
      Mr. Win Griffiths: It gives me some pleasure to follow the hon. Member for Eastbourne (Mr. Gow) as he has clearly shown the link between the extension of the business expansion scheme in the Budget and the Housing Bill. The Government argue that those two measures will bring an extension of the private rented sector because they believe that the problems of rent control for landlords have resulted in the decline of the private rented sector, but all the evidence collected by reasonable people who might be considered experts on this tells us virtually the opposite.
      The vacant property survey carried out by the Department of the Environment showed that rent control was not the reason for empty property. The survey showed that 60 per cent. was vacant due to the poor condition of the property and only 2 per cent. because of the landlord's dissatisfaction with Rent Act controls. The Institute of Housing—scarcely a bastion of Socialist thought—took a similar view. One of its reports states:
      "In the Institute's view statutory controls on both security and rent have contributed to the decline but the evidence is inconclusive to say the least."
      The Select Committee on the Environment, in its 1981–82 report, states that the real problem for the private rented sector has been the massive advantage to owner-occupiers through mortgage interest tax relief.
      Mr. Winnick: I was a member of that Select Committee. My hon. Friend may be interested to know that when we took evidence from the Small Landlords Association, it dismissed assured and shorthold tenancies as being of no use, and evidence has shown that they were not taken up. Moreover, the association said that small landlords—the same probably applies to large property companies—would be willing to rent only if there was no protection of rents and no security of tenure. If those circumstances could not be achieved, there would be no incentive for the private sector to intervene in housing.
      Mr. Griffiths: I thank my hon. Friend for pointing that out and for reinforcing the view of the Select Committee.
      A survey carried out in London in 1983–84 found that fewer than two thirds of households were protected by the Rent Acts, and that during the period covered by the survey fewer than one third of new lettings were covered by rent controls. When one adds to that the ease of evasion
      56
      of existing rent controls, one would have imagined that there would be an increase in lettings, but that has not been the case. The number of lettings has decreased.
      In 1983–84, rents that were not protected in any way were an average of £345 a month. Protected tenants were paying £158 a month and registered tenants were paying £128 a month. Translated into current prices, that would mean £450, £190 and £154 a month, respectively. Rent controls have had little influence on the reduction of activity by private landlords. Indeed, the abolition of some controls after 1957 did not result in an increase in the private rented sector.
      We can all agree with the view of the Select Committee on the Environment about what is needed to encourage private investment in housing for rent. Its report said that a healthy independent rented sector would require that landlords could obtain a return on investment similar to that obtainable elsewhere and that tenants could, without hardship, pay rents for suitable secure accommodation. There's the rub. Although it is possible for landlords to obtain a return on investment—I dare say that many right hon. and hon. Members pay hefty monthly rents for property in London with which their landlords are well satisfied—the problem lies in tenants being able to pay those rents without hardship. In a city such as London, many people could not dream of paying rents in excess of £400 a month.
      The Halifax building society said that the market rent for a terraced property worth £45,000 in the south-east—it must be a little way out of London—would be £86 a week, whereas the mortgage repayment would be £76 a week. There would be no advantage in renting such a house.
      Mr. Sydney Chapman: Apart from the valid point made by my hon. Friend the Member for Esher (Mr. Taylor) about the need to put down a deposit on such houses, which must be a material factor, does the hon. Gentleman agree that mortgage interest rates can increase as well as decrease? Although the position is favourable at present, anyone going into the serious business of home ownership, which we wish to encourage and expand, should take those unpredictable factors into account.
      5.45 pm
      Mr. Griffiths: We can all agree about changes in the mortgage rate and that, until recently, mortgage interest rates have been at record levels under this Government, but we should not deal with that now. We must discuss what is happening. At almost every stage during the past 20 years it has been more expensive to rent decent accommodation that it has been to buy that accommodation, notwithstanding the problems of finding a deposit.
      By introducing property companies into the business expansion scheme, the Government are not making a significant contribution to tackling the problems. Will there be a large take-up of the extended business expansion scheme? The Chief Secretary to the Treasury said that the demand for the business expansion scheme remains uncertain. Although the Treasury has estimated that it will cost £40 million in the first year, no one knows for sure. In April, there were reports that Barratts would become involved in the scheme in a big way, although according to the magazine Housing in May—only a few weeks later—Barratts was already considering drawing in its horns and

      57
      not becoming so involved. When one considers the advantages of tax relief and owner-occupation against the fact that those who rent accommodation obtain no relief, it is difficult to understand how the scheme can be successful.
      With the Government's policy of reducing higher rates of tax, although the 40 per cent. relief may prove to be attractive for many people, other schemes will be equally attractive and perhaps less burdensome than this scheme—unless the so-called assured tenancies prove to be less effective and less well-meant than the Government claim.
      Under the Housing Bill, tenants will not be as well protected as they were in the past. Landlords could run a coach and horses through some tenancy agreements and get their tenants out without too much trouble. The Government more or less admitted as much by the exclusions that are provided under the assured tenancy scheme—for example, for redevelopment.
      The outcome of the business expansion scheme is uncertain, yet the Treasury is committed to pouring millions of pounds into it. The money may not be spent at the end of the year. If in the first year the £40 million is not taken up, it will be interesting to know whether the shortfall will be used to provide money for home improvements or for building new properties in the public sector. We would welcome a commitment from the Minister on that.
      We must also consider how the business expansion scheme has dispersed its money throughout the United Kingdom. Anyone from outside the south-east of England must wonder whether the scheme will do his region any good. In the south-east, the business expansion scheme took up 43 per cent. of the money expended in the last year for which information is available. In the same year, only 2·7 per cent. of the money available was spent in Wales. The amount spent in Scotland was less than 4 per cent. Less than 5 per cent. of the money went to the north-west, the north-east and the west midlands.
      It appears, therefore, that this will be an opportunity primarily for unregistered and unlicensed landlords, who may not be controlled in any way, to run riot in the south-east because the money is unlikely to be spent elsewhere. The opportunities to boast that Rachman rides again, subsidised by the taxpayer, will be legion.
      We call upon the Government to reconsider the clause and to expunge it from the Bill. We must ask whether it is a suitable vehicle for encouraging long-term growth in the private rented sector, or whether it will simply provide for a tax-subsidised property development scheme with a brief rental interlude. Obviously, the Government hope that, having extended the lollipop to potential investors in the property market, the aftertaste will be so sweet that they will keep their money there. They are building that hope on an illusion. All the evidence suggests that investors will make some money out of the scheme while it lasts, but, when it finishes in 1993, there will be a flight of investment away from this area, the money to provide decent housing at a decent cost will be lost, and we shall be no further forward in dealing with the problems of providing housing than we are today.
      Mr. Chapman: I am grateful to have the opportunity to contribute briefly to this part of the debate. The Minister reminded the House that in the last 70 years the number of private rented houses has declined from 90 per cent. of the total to just under 8 per cent. today.
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      There are many reasons for that. First, although it may appear to be a strange reason, there are more houses, or dwelling units. Secondly, there has been a great growth in private home ownership, which Conservative Members welcome. Thirdly, there has been a growth in the past 70 years in the public rented sector; and, more recently with the housing association contribution, which is an invaluable part of our housing stock today.
      I have no doubt that there is another reason—that until recently our rent legislation has been framed on the assumption that every landlord is a villain and every tenant a saint. We now have a more equable and fair regime of rent legislation. We must have this better balance on the one hand, while assuring security of tenure to the reasonable tenant on the other. The reasonable tenant represents the vast majority of tenants in this country.
      There have been one or two inconsistencies in contributions from Labour Members. The hon. Members for Edinburgh, Central (Mr. Darling) and for Bridgend (Mr. Griffiths) have fairly pointed out that the business expansion scheme is taken up mainly in the south-east. Clause 49 may or may not assist the provision of housing principally in the south-east, where, in certain areas, there is a particularly severe housing shortage. If the Bill is effective, it will help meet the housing needs of people in our capital city and in the south-east generally.
      Mr. Andrew Smith: Given the tight constraints on planning permission in my constituency and in many parts of the south-east, will the hon. Gentleman tell us how that additional housing subsidy can have any effect other than to fuel price inflation and carry owner-occupation further beyond the pockets of many people? It is already way beyond the reach of many people in the south-east. I presume that the hon. Gentleman is a market economist. Will he explain how, with extra money available and no more housing being built, this can be other than property speculation subsidised by the state?
      Mr. Chapman: I say, with relief, that I am not a market economist. I do not quite know what that means. However, I take the hon. Gentleman's point. There is pressure for development in the south-east, and there is a shortage of land for development in the south-east, compared with many other parts of the country. Nevertheless, there are plenty of opportunities and there is much spare land in the south-east. I can take the hon. Gentleman to parts of this great capital city and show him sites that are crying out for development.
      Be that as it may, not all the housing needs in the south-east can be provided on existing under-used or derelict urban sites. I do not wish to stray too far from the clause, but I invite the hon. Gentleman to attend the Chamber this time next week, as I have been fortunate enough to draw first place in the ballot and intend to bring up the subject of planning controls and the problems facing us, particularly in a sustained expanding economy.
      Mr. Darling: I do not want to accept the hon. Gentleman's invitation to attend a debate next week, but he appears to be developing a theme that was developed to some extent by his hon. Friend the Member for Eastbourne (Mr. Gow). He appears to be saying that if a business expansion scheme creates tenancies in London it will create surplus accommodation in other parts of the country. Is not most BES property likely to be at the top end of the market, because market rents will be charged?

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      Even if someone came to London to take up a place, that would not help someone in Newcastle who wanted to come to London to seek work but did not have very much money.
      6 pm
      Mr. Chapman: The hon. Gentleman makes a series of important points, but the issue cannot be divided into black and white. There is a capital limit in paragraph 13 of schedule 4. I do not think that there will be provision only at the top end of the market. House prices and land prices are extremely high in the metropolis, and these prices will be reflected when comparison is made with other areas. I do not accept that the business expansion scheme will play into the hands of those who can afford to provide the most expensive private rented accommodation.
      It is said that my right hon. Friend the Chancellor of the Exchequer is wrong to provide a tax incentive which is open-ended. How dreadful. It is then said that we shall be lucky if 1,000 houses are built under the scheme. There is a difference between offering a tax incentive and finding public funds to pay for subsidies in another area of housing. I am not saying that we should have one to the exclusion of the other. I am advocating a fair balance. We need to encourage private rented sector investment much more than we have done in recent years.
      If I recollect correctly the words of the hon. Member for Dunfermline, East (Mr. Brown), he said something about ideology running rampant on the Conservative Benches. Having listened to some of the contributions of Opposition Members, it is clear that the well-worn political prejudices are alive and thriving on the Socialist Benches. I am confident that with such antiquated thinking the great Socialist ship will go down at the next general election, as it has in the past three.
      I welcome the provisions in the clause and the schedule. Private rented dwellings can and should have an important role in housing provision. An increasing number of young people are unable to start the process of home ownership, for reasons which have been mentioned already, especially by my hon. Friend the Member for Esher (Mr. Taylor). These young people need temporarily and initially to find rented accommodation so that they can save for a deposit and then step on to the ladder of home ownership.
      Secondly, there is increasing mobility in our nation. People are seeking jobs in different parts of the country. The hon. Member for Islington, South and Finsbury (Mr. Smith) will be aware that, in some areas of the south-east and some parts of London, employers are crying out for people to work for them and are offering attractive income levels. If the business expansion scheme is a success and creates market rents, those who take employment in the south-east and in parts of London, and who have come from other areas, will be able easily out of their incomes to afford market rents. We must keep an open mind if we care about encouraging the maximum number of people to be in employment.
      My third example—the list is not exhaustive—is that there are people who, for various reasons, choose not to own their own home. Instead, they choose to rent. Some of these people would not qualify by any calculation for public sector housing, and provision should be made for
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      them. We must encourage more private capital into rented housing because of the demands that I have mentioned, and others.
      I accept that the business expansion scheme is not the only approach, but I am sure that it will make a valuable contribution. Clause 49 will help to add accommodation to the existing meagre stock. I have gone carefully through the detail of these provisions, as have hon. Members on both sides of the House. I recognise that there are exclusions that apply to tenure and type and value of property. After a careful study of the clause and the schedule, I see nothing to prejudice a tenant or prospective tenant.
      For example, the Bill excludes property where the landlord or the owner demands a premium. As well as having the market rent established—that has to be done by agreement—the landlord will be prevented from saying, "I can charge only this amount of rent, but if you pay a higher premium than the other person who wants the place, you can have it." I accept that there is a shortage of housing in my area, and I see advantages in the scheme.
      I have one detailed query to put to the Minister; and it is appropriate to do so now, as we are in Committee. It concerns the provisions in paragraph 13(1) of schedule 4, which relate to clause 49. I cannot understand why the market value limit is £125,000 in Greater London and £85,000 elsewhere. I agree that there should be value limitation, but I should like to know why my hon. Friend the Minister hit upon these figures. My constituency is an area where the metropolis meets the countryside. In one road in the constituency one comes across the boundary with Hertfordshire. One of the houses in that road adjoins a house that is deemed to be in Hertfordshire. Why should a value limit of £85,000 attach to the house in Hertfordshire, while the house next to it, which is in my constituency, is the subject of a £125,000 limit?
      More important, does the limit refer to a dwelling house that may subsequently be divided into units of accommodation, or does it refer to the unit of accommodation that might be derived out of a greater whole? That is worth looking into. Much depends on the value of properties in any one area when compared with values elsewhere. Prices are extremely high in constituencies such as mine and in many other parts of London and the south-east. This could be a material factor. I shall be glad if my hon. Friend will respond to those points. However, I fully support the intention and spirit behind the clause and commend it to the House.
      Mr. Campbell-Savours: When the business expansion scheme was originally introduced, I did not show outright hostility, because I believed that it could be made to work. That is still my belief. In a way it has helped in part to create jobs in the regions and in other parts of the United Kingdom. However, what has always worried me is abuse.
      It might be worth reflecting for a moment on the origins of the scheme and the conditions in which the Government produced it. It came at a time when industry was not investing in the way that it should. The Government then produced a number of schemes, some of which were quite successful, to produce jobs. Those schemes were on a small scale and they were operated in every part of the United Kingdom. One of the problems at that time—to some extent it persists—was that high interest rates meant that there was a reluctance to invest. Some people said that it was easier to sit on a pot of gold in the bank and live on

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      the interest than to invest. Against that background, schemes such as BES were introduced to offset the damaging effect of high interest rates on the small investor, especially in areas of unemployment where, invariably, small investors were not too inclined to congregate. Such areas do not normally have living within them people of great economic means. Workington is such an area.
      When we originally discussed these matters three or four years ago, I made a somewhat ambiguous speech in that I partially welcomed the scheme but drew attention to a number of areas where I believed that abuse would take place. If I may say so, with modesty, I have been proved to be correct because there have been abuses. I can only repeat what I said then. I believe that the Government have produced a perfectly good scheme, but it was not targeted to avoid the inevitable abuses that have taken place.
      I am concerned about one area of abuse. Although the Minister has replied to two of my interventions to reassure me, I want to present him with a scenario in which abuse will occur. I hope that I will not have to return to this point in two or three years' time in the way that I have had to refer to abuses about the scheme in general today.
      I refer to comments made by Mr. Stephen Howe of BES Investment Research. I am not sure whether my hon. Friend the Member for Dunfermline, East (Mr. Brown) referred to those comments earlier. However, we seem to have missed the point that a new ceiling has been introduced for the business expansion scheme. Many people have set up companies which have benefited from the scheme. They now believe that there will be a policy shift in the organisations in terms of where they place BES money. They believe that the ceiling will prevent them from adopting—or direct them away from adopting—the schemes that I would have wanted or perhaps would not have wanted if they involved abuse, and force them into investment in housing.
      To what extent has the Minister been able to assess in advance the impact and scale of that movement away from the previous investment areas towards housing? The statements from Mr. Stephen Rowe are quite strong. He is quoted in the Financial Times of 16 March 1988 as saying:
      "It would take a lot of money into the residential property market which would otherwise have gone into genuine businesses."
      Mr. Rowe might be correct. I hope that those areas where the scheme has been successful will not suffer as a result of the switch in investment.
      I also received a letter from a gentleman in Kent, an area in which I have taken a great interest over recent months. The gentleman, whom I am unable to name today, drew my attention on 2 February to an area of BES investment which he believed was an abuse. I do not know whether it is an abuse, but it certainly shows some remarkably high returns. He said:
      "The scheme was prompty abused by the City so much so that some measures were introduced to prevent this, but it would seem without much success. One measure was to limit investment in property to 50 per cent. of the funds raised which has turned out to be something of a joke."
      He refers to BES managers looking for a minimum return of at least 30 per cent. per annum, something that was quite easy to achieve with retirement homes where a profit of £100 a week per patient is considered modest. He writes:
      "I know of one home here in the south-east"—
      that is in Kent—
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      "which was purchased for £200,000 under the BES and has now 50 occupants each paying an average of £1,034 a month plus extras."
      That is £600,000 a year to run a home that was purchased for £200,000 under the business expansion scheme.
      If the firm concerned is offering a high quality of care in Kent, I am sure that we would all welcome it. However, I wonder whether the Minister believes that that is the kind of investment that he would have wanted to attract when the scheme was established. Surely the benefits paid by the Department of Health and Social Security, which in many areas are the minimum fees that these homes ask, are enough to insulate people against the heavy expenditure involved in setting up and running those homes.
      6.15 pm
      I want to refer to my previous interventions and the Minister's responses. The Minister told me that someone could not be a tenant—not officially—of a house or flat in which he had invested under the business expansion scheme. Is it not possible for one, two, three or four people to join together and invest in a house? They might split up that house, perhaps in London, into a number of flats so that each flat, dependent on how the scheme was put together, would fall under the £125,000 threshold for London. If I have been slightly misled in that, I am sure that the Minister can imagine another scenario in which four people might join together to invest in that way.
      Mandatory grounds for repossession after four years of assured tenancy require that where the landlord acquired the property before the tenancy began and now wishes to occupy it as his only or principal home, notice must normally be served that this ground will be used before the tenancy begins. My hon. Friend the Member for Leeds, West (Mr. Battle) tells me that those are self-standing grounds for repossession.
      Is it not possible that someone seeking to secure a £40,000 discount, which is effectively what the tax deduction would mean, on a £100,000 investment, might make that investment and put in place someone who could not be deemed an associate under the Income and Corporation Taxes Act 1988, specifically section 291, subsections (2), (3), (4), and (6)?
      Is it not possible that those people might not necessarily be associates? Might somebody be installed in that residence at a rental agreed between the two parties—remembering what the Minister said—which might effectively be £1 a year? Is it possible that the tenant might be fictitious or even a friend? Someone may become a resident and be given notice at the beginning of the term of four years that he would hand over tenancy after four years while the investor simply lived in the property.
      The hon. Member for Dover (Mr. Shaw) intervened earlier when I put my case—no doubt because he is wise about these matters. He said that my point was dealt with in section 291 of Income and Corporation Taxes Act 1988. Perhaps he would intervene now and tell me where the Finance Bill precludes the scenario to which I have referred. Could a person put a friend in a flat in London, save £40,000 or £50,000—through a concession on the higher rate—with an agreement signed at the beginning of a four-year term to state that at the end of that time the friend would release occupation and the investor would move into the flat having procured it with a 40 per cent. discount? Is that not possible?
      If it is possible, it will be an abuse. If the Minister wants to check the records, he need simply look back at the

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      abuses that I predicted some years ago about a scheme that I supported. I am not rejecting the scheme out of hand. However, I believe that it will lead to abuses.
      I want the Minister to assure us that the abuses will be dealt with. The Inland Revenue cannot police these matters. We cannot have teams of funny little men from the Inland Revenue running around blocks of flats in London to see who is living with whom, who happens to be in residence or whether there is any connection between a person in residence and someone investing in a business expansion scheme who has gained 40 per cent. relief. I do not believe that the system works like that. Understanding the way in which the Prime Minister's mind works about civil servants, I believe that that is the very last thing on earth that she wants to happen. Will the Minister give me an absolute assurance that that will never happen? If he cannot do so, he has a duty to the Committee to withdraw the whole proposition or to amend it in such a way that the Committee will be reassured.
      Mr. Quentin Davies: This Government have been faithful to two important principles in their fiscal policy so far. The first is the desirability of simplifying the tax system. The second is the desirability of getting away from the fatal temptation—I almost called it addiction—to which so many of the Government's predecessors were subject.
      That temptation consisted in using each Budget to introduce new tax incentives or penalties with a view to persuading various agents, in one sector or another of the economy, to change their behaviour patterns and to take decisions they would otherwise not have taken—or not to take decisions they otherwise would have taken. Over the years, that tendency has produced, in effect, an increasing attempt administratively to second-guess the market. The distortions that that produced were cumulative and did enormous damage to our economy. I am glad that we have moved away from that tendency to the extent that we have over the past seven or eight years.
      The Government have acted pragmatically and not dogmatically. They have been prepared to retain fiscal incentives where there seemed to be a special case for them and introduce fiscal incentives where there seemed to be a very special case for doing that. There are two questions for the Committee to examine. First, is there really a special case? Secondly, if there is, is the particular means of intervention foreseen in clause 49 the appropriate one?
      Mr. Gow: Before my hon. Friend addresses himself to those questions, will he explain to the Committee why not a single member of the Liberal party is in his place?
      Mr. Davies: Since entering the House I have attempted to interest myself in a number of matters. I find some of them simple to grasp and others more complicated. Some of them I find completely inscrutable. The behaviour of the Liberal party falls into the latter category, and I can offer no help or light in regard to the interesting mystery to which my hon. Friend the Member for Eastbourne (Mr. Gow) has drawn attention.
      It seems to me more appropriate, where a special case of the kind I have outlined has been identified, to intervene by means of a tax break rather than by means of a subsidy—simply signing a cheque with taxpayers' money, which is the preferred course in such circumstances of the Labour
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      party. My reason for making that distinction is twofold. First, a tax break tends to reinforce the logic of the market rather than go against it, so it takes investors a little further in the direction in which they might otherwise have been inclined to go more cautiously—rather than turn people back from the course which the market appears to have dictated.
      Secondly, as has already been pointed out, if one produces a tax break, one generates a great deal of additional money that is leveraged into the same purpose. I refer to the arithmetic that we have used today, and to the fact that for every £1 that it costs the taxpayer by way of tax breaks, we shall generate £2·50 of new money for investment in private rented accommodation by means of clause 49.
      Another question to which I address myself is whether the argument has been made that the priority of rented private accommodation represents a special case. I believe that it does and I shall mention three reasons that seem to me to be cumulatively convincing. First, there is the present state of the private rented sector in this country, but I shall not elaborate on what was said by my right hon. Friend the Minister when he spoke of the important social and economic need to revive the private rented sector.
      Secondly, the tax incentive will fit neatly, productively and fruitfully with the Housing Bill that is before the House, with its new concept of assured tenancies, which will involve the tenant paying a market rent. If one has market rents, one finds again that one can with reasonable confidence predict the future real value of rents and therefore of properties, which is the function of rents, over a number of years. It is arguable that, under a restricted rent system, one can more easily predict nominal values. What is important for investment decisions are real prices and values.
      If we are to offer the private investor a stake in projects to provide private rented accommodation, and if we are to syndicate investments of that kind, as is foreseen in the Bill, one must produce a reasonable projection of cash flow. That can only be based on some reasonably reliable estimate of what the real value of the rents to be derived in future years is likely to be.
      The third reason why I believe there is a special case, and why clause 49 embraces a good and appropriate concept, is that, whether one likes it or not, the memories of the past 30 or 40 years have had a traumatic effect on private investors. The history of rent controls and of excessive security of tenure way beyond the long-term interests of the tenants themselves has left investors with many unhappy memories.
      Mr. Battle: Like me, the hon. Member for Stamford and Spalding (Mr. Davies) served in Committee on the Housing Bill. He will surely agree that schedule 2 to that Bill took away tenants' rights under which there was a measure of discretion. There could be a row with the landlord about whether tenants should be evicted, but the Bill is weighted in favour of the landlord, who can say that his tenants will be mandatorily evicted. Tenants have lost their rights and could now, for very small reasons, be evicted. Does the hon. Gentleman think that that is a good thing? Also, what guarantees can he give, from his financial analysis, that moneys from rents will be reinvested in improving properties, to ensure a decent private rented housing stock in Britain?
      Mr. Davies: To answer the hon. Gentleman's second question first, the question whether the return from an investment is reinvested in the same sector will depend on the continued attractiveness of that type of investment. The Housing Bill, together with the provisions before the Committee in clause 49, will go a long way, inasmuch as governmental and legal action can, to ensure that investment in the private housing sector remains attractive.
      As to security of tenure, one must strike a balance between the apparent and immediate interests of tenants in providing maximum security of tenure and the fact that, if there is absolute security of tenure, no landlord will rent his property. I believe that the Housing Bill strikes a good balance, but that matter is slightly outside the scope of the Committee.
      My final point is that, after the traumatic effect of the controls on investors of the past 30 or 40 years, if we are to attract investors—and particularly private investors—back into private rented accommodation, given that there is tremendous hesitation in doing that, we must do something to counterbalance the ill effect on investor confidence of the policies which have been pursued up to now.
      Governmental action up to now has been very damaging. I feel that it behoves us to take the need of the economy seriously, and do something to sugar the pill additionally before we invite a whole new range of private investors to swallow it. The Bill does that very neatly. It is well conceived and presented, and clause 49 merits the support of the House.
      6.30 pm
      Mr. Battle: Although the hon. Member for Eastbourne (Mr. Gow) made great play of the fact that this proposal was in the Conservative manifesto, those of us who served on the Standing Committee considering the Housing Bill were slightly surprised that it was not mentioned once during that Committee stage. The Minister said that the provision builds on the assumption that the Housing Bill will become law. In practice, it will go much further than that Bill towards undermining the rights of tenants.
      Conservative Members have expressed the view that rights have swung too far in the direction of the tenant and that power has shifted away from the landlord. However, the myth should be scotched immediately that any tenant has—in the words of the hon. Member for Stamford and Spalding (Mr. Davies)—had "absolute rights". That has never been the case. Under the Housing Bill, tenants' rights to appeal are being eroded and leverage is being provided for the landlord. Clause 49 of the Finance Bill will underpin and assist the landlords by giving them a tax break—as the hon. Member for Stamford and Spalding put it—from the Treasury.
      During consideration of the Housing Bill, the Minister for Housing and Planning made great play of introducing a new concept, that of the social landlord. I suspect that he introduced that concept because he felt that the reputation of landlords—particularly private landlords—needed tempering, because there were examples of bad landlordism throughout the length and breadth of Britain. The Minister introduced the notion of a social landlord charter—stretching the language, as it were, between the public and private sectors.
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      Will those who take up the business expansion scheme have to register with the Housing Corporation? Will they have to register with anyone? Will they be required to have any record in property management, tenant management and rent management? Will the rent be controlled? We know that controls on rent will be taken away by the Housing Bill, but we were also assured that any increase imposed by a private landlord would be matched for those who could not afford to pay by an increase in housing benefit—a public subsidy. That point should not be neglected by those who refer simply to the capital subsidy, taking no account of revenue subsidies.
      What guarantees can be given that people will have decent and appropriate housing to rent in the private sector? What will the clause do to improve the standard and quality of housing? It is sometimes suggested that the Rent Acts alone got rid of the private landlord. The hon. Member for Elmet (Mr. Batiste) nods in assent. It seems to me that the private landlord was disappearing in the city that he and I represent long before the Rent Acts were introduced.
      In Leeds, at the turn of the century, 72,000 private rented houses called back-to-backs were built in the inner-city areas alongside the rivers and the courtyards of the pubs and inns. That was so that they could plug into the drainage systems and inside lavatories did not have to be provided. Although indoor lavatories had been invented by the Romans, the builders decided, for some unknown reason, to cut the costs of providing decent sanitation. As a result, the drainage system was overloaded. Lo and behold, at the turn of the century the streets where those houses were built were rife with tuberculosis. It was not the Labour councils that introduced the Public Health Acts and public housing to replace the private sector because it had done such a bad job in providing decent conditions.
      Mr. John Butterfill: Does the hon. Gentleman not accept that we have moved on rather since those days? We have Town and Country Planning Acts, building regulations and Public Health Acts, with all of which any new builder must comply whether he is building for rent or for sale. The problems that the hon. Gentleman recites from the past are hardly likely to recur today.
      Mr. Battle: I am delighted with that intervention. I invite the hon. Gentleman to visit my constituency, for some of the conditions that existed under private landlords then exist today. I could show him flats full of people who live in basements—[Interruption.] Conservative Members may find it amusing, but when environmental health inspectors have to take to court the cases of elderly people who live in basements without a window to provide them with light because the landlord is breaking the law, I take the view that such conditions must be tackled.
      When a local authority includes in its plans a housing action area to put money direct into the private rented sector and to improve and tackle those conditions, when an £88 million plan is put before the Government and their response is that the city can spend only £22 million so that there can be no grant for the private rented sector, we do not get very far in tackling he problems of at least 50,000 houses in the private sector in Leeds which are sub-standard and in need of major repair and modernisation.

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      I hope that the fabric of houses is part of the equation. This is not simply an issue of supply. Quality is also important. Homes must be supplied that people find decent, at a rent that they can afford. The clause is merely a pocket-liner. It has nothing to do with the supply of decent and appropriate housing, and it will not improve the housing stock. Everyone, from the Duke of Edinburgh downwards, has highlighted the crisis in Britain's housing stock. Nor will it give tenants security. Conservative Members may hide behind the word "assured", but they need only read the report of the Committee stage of the Housing Bill to see how past assurances have now been weakened.
      I urge hon. Members to think again and to reject the clause. It will do nothing to improve housing conditions in this country.
      Mr. Spencer Batiste: It is fortunate that I should rise immediately after the hon. Member for Leeds, West (Mr. Battle), because I should like to present a rather different perspective on current events in the city of Leeds, which contains both our constituencies.
      Before I do that, it may be worth recalling that the business expansion scheme as a whole came out of particular needs in 1979. Those of us who at that time were specially concerned with small business and the development of investment in it—in the many sectors of the economy where venture capital was woefully lacking—saw the scheme as a prime lever to get money into those sectors. It has been spectacularly successful. The Peat Marwick McLintock report showed that 50 per cent. of the investment raised under the scheme would not have been raised without it.
      Perhaps the most valuable part of the scheme is that it signposts areas of investment in which further investment is needed. It signposts them in such a way that further investment follows rapidly from the wider market place, because it is seen, when the business expansion scheme leads, that there is an opportunity for the venture capital market to benefit from it.
      It follows from that that the needs for the scheme will vary. The position is now quite different from that of 1979: there is a substantial and much better developed venture capital market. It is surely wrong to adopt a static approach to the business expansion scheme, because if there are sectors of the economy in which there is patently adequate investment in more conventional forms, there is no need to provide tax relief in channelling further money into it.
      It is right that from Budget to Budget the Government repeatedly look at the business expansion scheme and try to change its focus to meet changing needs. That seems entirely sensible and logical. From the speeches that we have heard, it seems that no hon. Member has denied that further substantial, varied and flexible investment that can come only from the private sector is needed in rented accommodation. I have no difficulty in warmly endorsing the clause as a method of encouraging a new investment focus by the private sector in rented accommodation alongside the reforms in the Housing Bill.
      I must say to many of my hon. Friends who have spoken that for me, and no doubt for the hon. Member for Leeds, West (Mr. Battle), this is not a matter of helping migratory workers going to live in the south-east. If that
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      were the sole justification for the scheme, it would be relatively slender. In Leeds and my constituency, we do not want our workers migrating to the south-east. I came here today from the opening of a £20 million factory in my constituency. It represents the state of the art, as do so many other places in my constituency and in Leeds. When I visit the chamber of commerce and the chamber of trade, they say that we need more skilled people, and we do not want them to be drawn off to go to the south-east.
      However, we have a corollary of the problem of the south-east. Because of the success of certain areas, many of the people born and bred in those areas find it difficult to find homes there. Particularly in a constituency such as mine, which consists of countryside abutting on to a city, people who are born and bred in the towns and villages, because of the rapid rise in house prices—exactly the same phenomenon as the south-east—find it difficult to live and work in their home areas where they first chose, and where they have spent so much of their lives. Equally, people who have retired and who are looking for sheltered rented accommodation find it very difficult to find homes near their families who live in the villages and towns around the cities.
      It seems to me that success of the business expansion scheme will be measured not just in terms of whether it encourages further investment into the south-east in rented accommodation, but whether it provides a solution in other regions of the country, in areas where there is a desperate need for further rented accommodation. We are hoping that it will produce more units of accommodation out of the existing housing stock.
      In many of our constituencies, there are large houses that are not really economic as single family homes. There are many derelict farm buildings which could be converted into smaller homes for renting. That is precisely the operation in which the private sector, and in particular the small business man, seeing an opportunity, needs some fiscal encouragement. With land prices rising as rapidly as they are in the area that I represent—in the triangle between Leeds, York and Harrogate—it is extremely difficult for someone to buy land and buildings for rented accommodation unless there is some form of financial incentive. I believe that the success of the scheme will be judged in those situations.
      A number of hon. Members have mentioned that much of the business expansion scheme seems to be centred around the south-east. About a year ago, along with some of my hon. Friends who are particularly interested in small businesses, and with some BES fund managers, I investigated why so much investment was channelled into the south-east. The answer was really quite simple. The scheme is relatively expensive to set up and relatively complex to administer. There needs to be a measure of sophistication in terms of the advice and the support services for setting up and running such schemes.
      Until now, all too often those centres of sophistication and the people who are able to handle that complexity tend to set themselves up in the London area. They have many opportunities to invest the money available to them, and naturally, they choose to invest it in places that are most convenient for them to run, to look at, to visit and to monitor.
      Mr. Michael Grylls: Does my hon. Friend agree that the limit of £500,000 which the Budget has put on individual investment under the BES, is

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      likely to draw the scheme out of the City of London, because it is unlikely to prove all that attractive to the big institutions that were investing very large sums in individual companies? I believe that one of the objectives of my right hon. Friend the Chancellor was to make the funds more locally generated.
      I agree with my hon. Friend, and I hope that there will be more investment outside the south-east. Does he agree that the scheme could he attached to some of the enterprise agencies that could get together groups of business men who could provide funds locally? That would be much more attractive and would target the scheme to small businesses that need investment, and not to larger ones who can get it through venture funds.
      6.45 pm
      Mr. Batiste: My hon. Friend, who is chairman of the Small Business Bureau, makes the point that he made so eloquently in his submission to my right hon. Friend the Chancellor prior to the Budget for precisely that kind of amendment to the Bill. I agree with him completely that the lowering of the ceiling to £500,000 may well have that effect.
      Equally, one has to bear in mind that the scheme is still complex to administer and that the start-up and monitoring costs can be relatively high. The growing sophistication of the professional advice services in the provinces may provide the best answer, alongside the development of the business expansion scheme. In the various islands of investment around the country where there are very high instances of BES investment, it is usually because some big player locally has taken a scheme by the scruff of the neck and decided to make it work in that area.
      The scheme has unlimited potential for further investment in the regions, and in that context it is particularly sad that, with the sole exception of the hon. Member for Workington (Mr. Campbell-Savours), Opposition Members have been so critical of the scheme. I have no hesitation in welcoming it. I believe that it will produce many more units of accommodation out of the existing housing stock, it will improve much sub-standard accommodation, and return it to the rented market, it will assist the mobility of labour, and I hope that it will also increase the accommodation available in the cities and villages of the north and the midlands.
      My only regret about the debate is that, with the sole exception of the hon. Member for Workington, there has been such a negative attitude to this important scheme from Opposition Members, and most importantly from the Opposition Front Bench, but that is hardly surprising, as the views of today's Labour party are increasingly irrelevant to today's needs.
      Mr. Winnick: The hon. Member for Elmet (Mr. Batiste) says that our arguments arc irrelevant to housing in Britain. I must say that his speech was totally irrelevant to the housing needs of so many people throughout the country.
      We have heard two main themes from Conservative Members. First, they argued the case for private investment in housing, and one would expect that from Conservative Members. Their second theme is that the housing shortage in the rented sector is all the fault of wicked Socialist controls, and that, if there had not been rent controls since 1915, there would be a flourishing
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      rented sector in the private market, no one would need rented accommodation and all would be absolutely well. If anyone believes such nonsense and such an absolute fallacy, they would believe anything.
      During one of my interventions in his speech the hon. Member for Slough (Mr. Watts) disputed that market rents would be as much as, if not higher than, a mortgage. Last November, the Evening Standard carried some advertisements for rented accommodation that clearly would be outside the Rent Act 1977. Houses were advertised for rents ranging from £130 to £240 a week. Some flats—not many, but one or two one-bedroom and two-bedroom flats—were costing up to £70 a week.
      Bearing in mind the escalating property prices in London and the south-east, surely it is obvious that market rents under the Housing Bill would not he much less, if anything, than the rents which were quoted in the Evening Standard last November. That demonstrates the Opposition's basic point that people who are in desperate need of rented accommodation will be unable to afford market rents of the kind that will be allowed by the Housing Bill.
      We do not object for reasons of dogma or prejudice. We object because the genuine housing needs of our constituents who write to us or who come to see us will not be satisfied if the only rented accommodation that is available is to be let at market rents. That is why we oppose the Housing Bill and this clause.
      I intervened during the speech of the hon. Member for Berwick-upon-Tweed (Mr. Beith) because I consider that the private rented sector has a limited role to play. I do not believe that housing should lead to private profit. It is perfectly acceptable that an owner-occupier should be able to let a room in his house. In many cases that is highly desirable, but housing should be in owner-occupation or provided by local authorities and housing associations. It should not be the subject of private profit.
      Mr. Butterfill: Would the hon. Gentleman oppose the provision of private sector rented housing by building societies, insurance companies and pension funds? That is what happens in other countries, which provide better housing conditions than we do.
      Mr. Winnick: I would oppose it to the extent that market rents would be payable by the prospective tenants, for all the reasons that I have given.
      The business expansion scheme is a form of tax shelter that can easily be abused. My hon. Friend the Member for Workington (Mr. Campbell-Savours) referred to one form of potential abuse. I shall be interested in the Minister's reply. In his usual simplistic way, the hon. Member for Eastbourne (Mr. Gow), who is not in the Chamber, said that the provision of new rented buildings would provide work and that it would help to reduce unemployment. But assured tenancies and shorthold tenancies will not necessarily be provided only in new buildings. Those two forms of tenancies under the Housing Bill will apply to all new lets. The hon. Member for Eastbourne cannot have read the Housing Bill if he believes that such tenancies will apply only to new buildings.
      When the Housing Bill becomes the law of the land and landlords let on shorthold tenancies, the minimum length of letting will be reduced to six months. I am aware that the business expansion scheme does not apply to that

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      form of letting, but I do not accept that the Bill will lead to the provision of a large amount of new rented accommodation.
      Sheer dogma and political prejudice lie behind the Government's policy not to allow local authorities to build and not to allow genuine housing associations to provide much-needed rented accommodation. The hon. Member for Bournemouth, West (Mr. Butterfill) implied that local authorities are not perfect. I accept that there have been many shortcomings over local authority accommodation, but local authorities have done a great deal to replace the slums and hovels that were such a curse. They have provided accommodation at a reasonable rent and enabled ordinary people, often for the first time, to live in decent, adequate accommodation. I pay tribute to the local authorities. That is why the Opposition are not on the defensive.
      Local authorities are said to be too bureaucratic and centralised. My local authority was one of the first to decentralise its housing services by providing 28 neighbourhood services and neighbourhood offices throughout the borough. That example has been copied by many other local authorities. The way to satisfy the acute housing needs of those who cannot afford market rents or mortgages is to provide them with local authority housing or housing association accommodation. They have as much right to be adequately housed as any Member of Parliament.
      The Minister said that the Housing Bill goes further than the Rent Act 1957. That is interesting. When the Secretary of State for the Environment spoke on Second Reading of the Housing Bill, I compared that Bill with the Rent Act 1957, but he said that the Housing Bill does not go as far as the 1957 Act. Who is right?
      I do not deny that we face all kinds of disadvantages when we grow old. However, one advantage of getting on in years is that one remembers, certainly if one has been in politics for many years, what happened in the past. I am one of the very few Members of Parliament who served on a local authority when the Rent Act 1957 was being implemented. That local authority in north-west London, despite all its difficulties at that time, had to spend a large amount of money on rehousing people who were lawfully evicted as a result of the Rent Act 1957.
      Conservative Members say that all the trouble stems from the tight rent control restrictions that were introduced by a wicked Socialist Government, but I ask them to consider what happened when the Rent Act 1957 was enacted. We were told that if the rented housing market were deregulated, plenty of accommodation would be provided, but by the time that the Conservative Government left office there had been, to some extent as a result of the 1957 Act, not an increase but a substantial reduction in rented accommodation. The Housing Bill will have much the same result. Tax shelters, tax relief and subsidies to those who provide private rented accommodation at market rents are completely without justification. For that reason, we shall vote against the clause.
      Mr. David Shaw: It is appropriate that before I comment on the clause I should declare an interest. I have been involved in the setting up of a number of business expansion scheme companies. I have also been involved in
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      the setting up of two business expansion scheme funds. I am pleased to say that those companies and funds have resulted in the creation of about 1,000 jobs.
      It is relevant to consider the success of the business expansion scheme. Since 1983 it has provided £150 million a year and created about 20,000 jobs. It has also helped small businesses. Often, the money that was raised was below £100,000. Up to half the small businesses that have been given help are not in the south-east. That is quite an achievement. To help small businesses in areas other than the south-east has been a problem, but a number of the clauses will help them to expand. An investment limit of £500,000 in any one company is being imposed under the expansion scheme. That is helpful. Furthermore, the ability of a fund to invest its money after the end of a tax year will help a number of regional funds.
      I commend the BES to the House. The Government will find that the tax revenues of the more successful companies that have been set up under the scheme will exceed the relief given to private individuals to invest in those companies. One of the companies with which I have been involved has already paid the Government, in PAYE, national insurance, corporation tax and VAT, more than the relief originally given to the investors. The BES is not intended only for those at the top of the income range, because 70 per cent. of those who receive it are below the highest rates of taxation.
      7 pm
      It is good to extend the BES to investment in housing. Over the past 20 years there has been little money for private housing. I used to live in my right hon. Friend's constituency of Kingston upon Thames. He used to have advice centres and, as one of the members of the housing committee, I used to assist from time to time. Many of the complaints and problems with which I have to deal relate to housing and the shortage of rented housing. Most hon. Members will confirm that they have similar problems in their constituencies.
      Job mobility and the opportunity for people to move around the country to find jobs elsewhere will be helped by this measure. Much reference has been made to the fact that the money given will go to executive second homes. Nothing could be further from the truth. There is a limit of £125,000 in London and £85,000 for the rest of the country, and those amounts will not be used to purchase executive second homes.
      The overall limit of £5 million for companies is about right. It will attract much investment, and it has been suggested that about £500 million might be invested in a short time under the BES if the clause is passed. I hope that it will be passed, because that money will provide a lot of rented accommodation.
      I was upset when the hon. Member for Dunfermline, East (Mr. Brown) quoted from the BES publication, because he did not quote the last paragraph, which said that people will not be required to leave their homes at the end of the five-year period and that it should be possible to sell the houses to pension funds or investment trusts. I was upset by the suggestion that housing associations will be excluded from involvement in the scheme. There is no reason why they should be. They may be excluded from receiving money under the scheme, but they are not excluded fron managing the housing. I expect that many companies set up under the scheme will delegate management to housing associations.

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      The opportunities offered by the extension of the BES will be tremendous. It is with regret—I am advised that the Front Benches wish to make their winding-up speeches—that I cannot speak further about the benefits that the clause will bring.
      Mr. Beith: I shall be brief mainly because I shall not have to respond to the second jibe this afternoon from the hon. Member for Eastbourne (Mr. Gow). He is not present and is unlikely to be for some time.
      In the preceding debate I gave the reasons why I believe that it is wrong to proceed with the BES for private sector rented housing unless it is accompanied by significant safeguards for tenant protection on levels of rent and security of tenure.
      Mr. Quentin Davies rose—
      Mr. Beith: I promised to be brief, so I shall not give way.
      The Minister said that he was willing to consider elements of protection, but no Conservative Member has shown any willingness to accept such a measure. Nor have I been convinced yet that the incentive offered calls for a 40 per cent. level of tax relief. The Minister may yet convince us about that, but I find it hard to believe that he will do so, given the nature of the asset that is involved in rented housing—property. The security and prospect of capital appreciation of property is such that it is unnecessary to have 40 per cent. tax relief. Surely standard rate relief would be adequate for the purpose.
      The Minister has left us with ample reason for voting against the scheme in the form that he has presented it.
      Mr. Rhodri Morgan: I should like to raise a couple of matters that have not been raised so far about the way in which the Government believe that clause 49 fits in with the Housing Bill and why it does not achieve the objective, shared by all hon. Members, of improved choice in housing.
      Clause 49 is an attempt, late in the day, to cover the inadequacies of the Housing Bill, which was presented as the great deregulating measure which would lead to investment flowing back into the privately rented sector. It was said that it would do so by creating two new forms of tenancy—the assured tenancy and the assured shorthold tenancy.
      During consideration of the Housing Bill, the point was made that the assured shorthold tenancy conferred so many additional advantages on the landlord, compared with the assured tenancy, that it would undermine the effective use of the assured tenancy. That point was never denied by Ministers, and I think that it sunk in that there were severe dangers that the assured shorthold tenancy, which gives an approximate six-month tenure, would continuously undermine the likelihood of tenants and landlords agreeing on longer tenancies of 12 months or two years.
      Clause 49 emanates from the Government conceding the argument of Labour Members that the assured shorthold tenancy will undermine the assured tenancy if nothing is done about it. As a result, by clause 49 the Government have made the assured tenancy a little more attractive to the landlord by conferring on it but not on the assured shorthold tenancy the benefits of tax incentives at the top rate and the capital gains tax exemption if one sells at the end of four years.
      74
      The measure has nothing to do with an attempt to improve labour mobility. If anything, it will have the reverse effect. If the Government intended to improve labour mobility one would have expected them to confer tax advantages on the shorthold assured tenancy, which is far more likely to be used by people moving into a town for the first time. It was expected that people could have an assured tenancy for anything up to 10 or 15 years. This measure cuts out the assured shorthold tenancy. It is merely an attempt to cover over the difficulties that the Government got themselves into with the assured tenancy. A tenancy that confers almost no rights on a tenant is bound to be more attractive to the landlord than one that confers some rights.
      The logical dilemma facing the Government is that they do not know what to do to create a level playing field for landlord and tenant. They have undermined the concept of the assured tenancy and are attempting to cover it up with a most unsatisfactory tax break, which itself shows every sign of following the path of failure that the BES has followed since 1979.
      Certain specific sectors, which are not highly risky, will tend to attract all the BES investment. That has been the case with old people's homes, and I fear that the BES will not help to cover the equity gap in highly risky investments and new technology but will grow and be invested in safe investments such as property. As investment previously went to old people's homes, it will go in future to the private sector. This measure has no contribution to make to solving our labour mobility problems.
      Mr. Nigel Griffiths: I am sad, but not surprised, that the Government are introducing this clause to increase the potential for exploitation of tenants and to champion the rights of private landlords.
      The clause reinforces the Housing Bill, which has deprived tenants of many rights and in particular robbed spouses of rights of succession. We all accept that there are conscientious private landlords. Indeed, when I meet them in my constituency they complain of being driven out by the irresponsible, crooked landlords, who, they tell me, receive support and succour from the policies and philosophies of the Government.
      I shall not vote for the clause because elements of the private sector have an appalling record. Yesterday, Mary Marshall, the director of Age Concern, said:
      "Some private sector homes are making huge killings"
      exploiting the elderly. Like me, she believes that
      "the law is not strong enough to deal with the cowboys."
      We know that the Government have done nothing to strengthen the law to protect private tenants. An excellent article in the Sunday Post yesterday revealed that the private sector has not been contracting as all Conservative Members have claimed. Provision for people in private nursing homes in Scotland has doubled in two years to 6,132, and with it has come rampant exploitation. One company operating in Scotland is making £6·5 million a year, mainly from the Department of Health and Social Security, and plans to increase its income to £9 million over the next year.
      The £85,000 tax limit on properties will have an horrendous effect on the Edinburgh property market. In Marchmont in my constituency there are already far too many flats in multiple occupation—properties where the landlord's interest in the behaviour of tenants is limited to their payment of rent. I fear that the clause will cause an

      75
      explosion of such tenanted flats, to the detriment of neighbours and local residents. It is not that the clause will increase the number of houses or flats. Owner-occupied flats will be taken out of the home-owner market and replaced by tenanted flats, and flat prices will soar as a result.
      We are entitled to ask whether the money could be better spent. There are 12,000 families on the council house waiting list in Edinburgh alone, 2,000 of them in my constituency. The Government's investment for one dwelling in Edinburgh under BES is estimated by the Treasury at £34,000. The same sum would enable the local council to finance a loan to build 10 houses to rent.
      The clause shows that, when the Government have to choose between giving the private sector £34,000 to provide one house and giving the public sector the same money to provide 10 houses, their heads are ruled by dogma and not by the practical necessities which the whole country would support.
      Mr. Chris Smith: The Opposition have made clear for some considerable time their doubts about the operation of the business expansion scheme. We believe that it is an inadequate and inappropriate mechanism for raising equity finance for high-risk small ventures. It is, however, a highly appropriate mechanism for avoiding tax; and even when the tax rate being avoided is 40 per cent. rather than 60 per cent., though less attractive, it is still attractive.
      The Government are introducing changes, which we shall no doubt spend some time discussing in Committee, to ensure that there is a limit of £500,000 on the investment. It is only a marginal improvement. It is worth noting that that limit does not apply to the rented housing provisions which form the burden of clause 49.
      The Government have relied heavily when praising BES—the hon. Member for Elmet (Mr. Batiste) did it again today—on the Peat Marwick report. The Financial Secretary has mentioned it several times in our debates thus far, but he ignores and fails to tell us that that report dealt only with the first year of BES. It did not go into any detail for subsequent years.
      During the later years, however, there have been changes in the nature of investment under BES. For example, there has been a significant increase in the average size of investment. There has been an increase in the proportion invested in non-manufacturing enterprises. There has been a growth of prospectus issues as opposed to individual issues. Above all, there has been an increase in the cost per job of BES. It is worth remembering that, even in 1983–84—the first year of operation—the cost per job of BES was higher than the cost of creating or saving jobs in other small business promotion ventures.
      Mr. David Shaw: Would the hon. Gentleman care to comment on something that I said—that one of the companies in which I am involved will pay more in tax to the Government after five years than the Government gave in tax relief to investors?
      7.15 pm
      Mr. Smith: Of course I heard what the hon. Gentleman said. I was listening with great care, as he is closely involved with seven BES companies and funds. His
      76
      comments ignore the fact that that is not the universal experience. Moreover, the Peat Marwick report reveals that BES has been more successful at saving than creating jobs. It is worth examining carefully what money the Exchequer has paid out, and what it has got in as a result.
      The business expansion scheme has many flaws, but clause 49 represents a wrong use of an already inefficient scheme. It is being applied inappropriately and unacceptably when it comes to the provision of housing. It is worth noting that Housing said of the BES:
      "Cut-price property deals giving short-term pets for those who can't afford to buy their own homes and tax breaks for the rich—that's the reality of the Government's latest scheme to boost private rented housing."
      That is indeed the reality. We should consider what will be provided by the scheme that is proposed in clause 49.
      Rents will be high. They will be at market levels. The Housing Bill, which sets up the system of assured tenancies, establishes a two-stage process for the establishment of rents. The first is what is called an agreement between landlord and tenant. It is effectively the amount at which the property is advertised by the landlord. The second stage is the rent assessment committee, which acts as a final court of appeal. It has a statutory duty to take account of market forces. There is no question of fair rents. There is no mention of a rent officer or of a comparison with housing association or local authority rents. Market forces, and market forces alone, will determine rents.
      Mr. Butterfill: Can the hon. Gentleman conceive of any way in which it would be possible to encourage the private sector to invest in the provision of housing for rent if it had to provide the subsidy? Does he agree that if subsidies are to be provided, they must come from the public?
      Mr. Smith: The hon. Gentleman ignores the basic point at the heart of the debate. A subsidy is being provided by the taxpayer through tax relief available under BES. We do not believe that that is a particularly sensible or sensitive way in which to target public subsidy.
      If the hon. Gentleman wants to find out about market rent levels, he should come and see what happens in my constituency. Only this morning, at my advice surgery, I saw a family with no recourse to local authority accommodation who are desperately looking for somewhere to rent. They have no capital and cannot afford to buy. The cheapest property for rent in the private market that they can find in the borough of Islington costs £200 a week.
      If the Government say, "Ah, but housing benefit will take care of their problems if their income is low," they have clearly forgotten that the higher rent limit on housing benefit for the borough of Islington is £61 a week. Clearly, that puts such accommodation out of the reach of anyone in any of the categories mentioned by Conservative Members as those likely to be helped by the scheme. It puts accommodation to be provided at market levels under this scheme completely beyond the reach of ordinary people. The rents will be high and, as a result, ordinary people will not be helped by the provision of accommodation under the scheme.
      Not only will rents be high, but there will be little security of tenure. "Assured tenancies" is an Orwellian phrase to describe tenancies that will be anything but assured. There are 12 different grounds for possession in schedule 2 to the Housing Bill. For example, ground 7

      77
      enables possession to be regained by a landlord simply because work is to be carried out on the accommodation. That will be the easiest, simplest, and, I predict, the commonest ground on which possession will be sought. Also, the prospect of sale to another landlord offers little ground for security under the provisions of that schedule to the Housing Bill.
      If a BES company is looking for a mechanism to maximise its profit, maximise the capital gain available to shareholders, which will be tax-free at the end of a five-year period, and a way to get rid of the tenants involved, all it needs to do, at the same time as it sets up the BES-funded company, is to set up a non-BES-funded company with the same directors. It can sell the property from the first to the second at the end of five years and put the capital gain that will be made to the benefit of the first.
      It will be easy for landlords to get rid of awkward tenants. They have requirements and needs and, on the whole, they tend to be treated badly by private landlords. The Financial Secretary was asked by my hon. Friend the Member for Dunfermline, East (Mr. Brown) whether he would agree that redevelopment is one of the grounds on which repossession can take place and that it would be to the financial benefit of the company to sell after five years. His answer, which I heard clearly, was yes. If he now wishes to say that he has had second thoughts, I should be delighted to give way to him. If not, that is clearly the position—that it is to the financial benefit of the company to sell after five years.
      Not only will rents be high and tenancies anything but secure: it will be a relatively unregulated sector. Who will police the operation of the assured tenancies offered under the scheme? Who will police the companies involved? It will not be the Department of the Environment or the local authority. The only body that will be able to do that is the Inland Revenue, and that is hardly geared up to examining whether a social form of landlordism or a bad form of landlordism is being offered.
      The tenancies will be at high rents and there will be little or no security for tenants. The letting will effectively be unregulated. It will be bad, high-cost housing and the scheme will do nothing for tenants. It will do everything for those who want to avoid paying tax. It will do nothing to solve our housing crisis, but it will do everything to create splendid new tax shelter opportunities. I strongly urge my right hon. and hon. Friends to vote against clause 49.
      Mr. Norman Lamont: The hon. Members for Workington (Mr. Campbell-Savours) and for Islington, South and Finsbury (Mr. Smith) referred to the wider changes that had been made in the business expansion scheme. The hon. Member for Workington said that he had been fairly favourably disposed towards the scheme originally. Indeed, I remember that. If he will forgive my saying so, it was slightly curious to observe his anxiety about the new ceiling that we have imposed because he is worried that it might affect genuine growing businesses, whereas the thrust of much of what was said by other Opposition Members was that the Government had not done enough to curb abuses under the scheme. I am grateful to the hon. Member for Workington for saying that he approaches the matter with an open mind.
      The hon. Members for Islington, South and Finsbury and for Dunferline, East (Mr. Brown) did not acknowledge what has happened under the other changes
      78
      in targeting the BES much more on the smaller company. One reason why we have been able to do that, as my hon. Friend the Member for Dover (Mr. Shaw) said—I know that he is strongly in favour of the change that has been made—is that after several years' experience of the scheme we now have a venture capital industry that is more able to finance start-ups and new businesses. We do not need a tax relief that goes on for ever for that sort of business. After a few years' experience we decided that it was better to return to the original purpose, which was to concentrate on the smaller business and start-ups.
      The hon. Member for Islington, South and Finsbury criticised the BES because, he said, it has started up too many businesses in the south and not enough in the north. He might have acknowledged the fact that the change that we are to make is likely to have a much more favourable effect on areas such as the north where there are fewer entrepreneurs and start-ups.
      As my hon. Friend the Member for Elmet (Mr. Batiste) said, it has been widely commented that the changes are likely to bring about a much more even spread of BES activity throughout the country. I am sorry that Opposition Members do not feel more able to welcome the changes in the scheme, which have been widely welcomed outside and which are overwhelmingly sensible.
      The hon. Member for Workington raised a specific point about avoidance under the BES as applied to the new lettings. He described a situation in which somebody might let a property to an associated person. My hon. Friend the Member for Dover drew his attention to schedule 4(4). That was a reasonable point to make, but I believe that the hon. Gentleman's imagination has been at work. He will be aware that the provisions for the BES as applied to rented property are also governed by other general BES provisions.
      Section 289(11) of the Income and Corporation Taxes Act 1988 has a general anti-avoidance provision as applied to the BES. It says:
      "An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose, or one of the main purposes of which, is the avoidance of tax."
      That provision covers the point made by the hon. Gentleman.
      Mr. Campbell-Savours: I would be happy to be reassured, but the Minister must be able to assure the Committee that the Inland Revenue will be able to establish the position. The staff are not in place to check on the personal lives and habits of people and the relationships that might exist between people who might be able to make an arrangement which would be an abuse and which the Inland Revenue could not identify. The Minister has not given me that assurance. He simply says that the matter is covered by the Income and Corporation Taxes Act 1988. I cannot find that provision.
      Mr. Lamont: The hon. Gentleman is changing his question. His first question was: is this covered by the Act? The unequivocal answer is yes. His second question was: is it impossible? We do not want an army of snoopers. The Revenue's provisions and resources in this respect are similar to those that it has for checking on many other types of abuse. Given the relatively small number of business expansion schemes, I do not believe that it will he impossible for us to identify those sorts of cases.

      79
      7.30 pm
      My hon. Friend the Member for Chipping Barnet (Mr. Chapman) asked about the limit of £125,000 in Greater London and £85,000 elsewhere and about properties that were subsequently divided. We determined the figures after consultation with the Department of the Environment. We could have fine-tuned them more for different areas, but that would have made the legislation much more complex. Where property is divided, the value of each separate dwelling as let on an assured tenancy is relevant, not the value of the whole property.
      Some Labour Members seemed to doubt that we were talking about the provision of new lets. They may not all be new build, but they will be new lets. That is provided for in paragraph 15 of schedule 4.
      The Opposition have very much misrepresented the position on security of tenure. Assured tenancies will provide considerable security of tenure. A landlord will be able to repossess a property only by court order, on one or more specified grounds. The general approach is similar to that in the Rent Act 1957, although the grounds for possession differ in some respects. The vital difference is that tenants will pay market rents. Housing benefit will be available to qualifying tenants.
      Mr. Battle: Will the Minister concede that whereas the grounds for a change in security of tenure under schedule 2 of the Housing Bill were discretionary before, they are now mandatory? This means that a tenant will have no right to appeal, but will have to go if the landlord applies for a court order.
      Mr. Lamont: The grounds have changed in a number of respects. There are fewer grounds than under the original Act.
      The Opposition have spent a large part of the debate talking about harassment and Rachmanism. I do not know how resonant the name of Rachman is today, but obviously the Opposition's points are serious. I suggest, however, that they are confusing the incentive to get vacant possession, which exists under present legislation, with deregulation and tax relief, which, if anything, will work in the opposite direction and lessen that incentive. There is no point in getting tenants out if they must be replaced with others, which is what a landlord would have to do under the business expansion scheme, because he must be in the continuing business of letting property.
      It is less likely that people will have that incentive if there are market rents, because the values of properties tenanted and of properties untenanted will be much closer. The Opposition, in their desire to misrepresent our proposals, again have totally ignored the steps taken by my hon. Friend the Minister for Housing and Planning to strengthen the criminal law and the civil rights of tenants.
      Mr. Chris Smith: Will the Minister confirm two crucial points? Will he confirm that it is easier for a landlord to gain possession under the terms of schedule 2 to the Housing Bill than it is at the moment under the Rent Acts? Will he confirm that there is every incentive for a BES-established company, after the five years of BES funding are up, to gain vacant possession and sell the property?
      Mr. Lamont: The hon. Gentleman is—[HON. MEMBERS: "Answer the question."] I am answering. The hon. Gentleman assumes that at the end of the four-year period the landlord can regain possession of the property. Under the Housing Bill, when the tenancy ends, a statutory periodic tenancy arises automatically, so the tenant's security is protected and the landlord cannot count on getting possession. The hon. Gentleman misrepresents the position.
      The hon. Member for Islington, South and Finsbury talked about security of tenure. It is clear that, despite all the assurances that have been given, the Opposition simply want to surround rented property with a plethora of controls that will make it extremely unlikely that anyone will ever rent any property. There must be some grounds on which people can regain possession.
      Mr. Winnick: A few moments ago the right hon. Gentleman said that there was no incentive for an unscrupulous, Rachman-type landlord to get the existing tenant out. There will be every incentive if the Housing Bill becomes law. I accept that the tenant continues to have protection, but once he leaves voluntarily, or is forced out, that place can and will be re-let, at market rents. There is every incentive for the unscrupulous landlord to act as he would under the Rent Act 1957, and the Minister for Housing and Planning knows that very well.
      Mr. Lamont: The hon. Gentleman ignores what I have said about what happens at the end of a fixed-term tenancy. A periodic tenancy then arises automatically. A tenant also has the right to go to a rent assessment committee.
      The hon. Member for Dunfermline, East talked about the money that could have been spent on other types of property instead of on this tax relief. As my hon. Friends the Members for Slough (Mr. Watts) and for Stamford and Spalding (Mr. Davies) said, we are getting, not just the 40p in the pound tax relief, but the additional non-taxed relief money, which is going into the provision of rented accommodation. Through tax relief we are harnessing additional resources from the private sector and putting them into the provision of rented property.
      The hon. Member for Dunfermline, East said that tax relief would not help the tenant. As my hon. Friend the Member for Stamford and Spalding said, it will help the tenant if it increases supply. The hon. Member for Dunfermline, East said that it would not help to alleviate the problem of moving from the north to the south. As my hon. Friend the Member for Eastbourne (Mr. Gow) said, it will if it increases supply. Of course tax relief will not do so on its own. We need deregulation as well. The Labour party always threatens to reimpose controls, but all the evidence is that rent decontrol by itself cannot always increase supply. The threat of legislation from the Labour party is one factor that has forced us to put forward the proposition that there should be tax relief.
      The hon. Member for Walsall, North (Mr. Winnick) does not believe that anyone should be allowed to make a profit out of private housing. No doubt he was opposed to anyone making a profit out of the supply of owner-occupied housing a few years ago. No doubt he would extend his argument to many necessities—clothing, food and so on—but most of us think that the basic things in life can be provided better, more efficiently and at a higher quality by the private sector.

      81
      My hon. Friend the Member for Slough said that the Labour party has only one answer—to build more council houses. We believe that if decent rented private accommodation were available on a larger scale it would appeal to the British people. The Labour party will find itself overtaken by events and opinion, just as it was on the sale of council housing and on privatisation. Labour Members will live to regret the day that they voted against the clause.
      Question put, That the clause stand part of the Bill:
      The Committee divided: Ayes 255, Noes 194.

      Division No. 291]

      [7.40 pm

      AYES

      Adley, Robert

      Curry, David

      Aitken, Jonathan

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

      Alexander, Richard

      Davis, David (Boothferry)

      Alison, Rt Hon Michael

      Day, Stephen

      Allason, Rupert

      Devlin, Tim

      Amess, David

      Dickens, Geoffrey

      Amos, Alan

      Dicks, Terry

      Arbuthnot, James

      Douglas-Hamilton, Lord James

      Arnold, Jacques (Gravesham)

      Dover, Den

      Arnold, Tom (Hazel Grove)

      Dunn, Bob

      Aspinwall, Jack

      Durant, Tony

      Atkinson, David

      Emery, Sir Peter

      Baker, Nicholas (Dorset N)

      Evans, David (Welwyn Hatf'd)

      Baldry, Tony

      Fallon, Michael

      Banks, Robert (Harrogate)

      Favell, Tony

      Batiste, Spencer

      Fenner, Dame Peggy

      Beaumont-Dark, Anthony

      Field, Barry (Isle of Wight)

      Bellingham, Henry

      Forman, Nigel

      Bendall, Vivian

      Forsyth, Michael (Stirling)

      Bennett, Nicholas (Pembroke)

      Forth, Eric

      Bevan, David Gilroy

      Fox, Sir Marcus

      Biffen, Rt Hon John

      Franks, Cecil

      Biggs-Davison, Sir John

      Freeman, Roger

      Blackburn, Dr John G.

      French, Douglas

      Blaker, Rt Hon Sir Peter

      Fry, Peter

      Bonsor, Sir Nicholas

      Gardiner, George

      Boscawen, Hon Robert

      Garel-Jones, Tristan

      Boswell, Tim

      Gill, Christopher

      Bottomley, Peter

      Goodhart, Sir Philip

      Bottomley, Mrs Virginia

      Goodlad, Alastair

      Bowden, A (Brighton K'pto'n)

      Gorman, Mrs Teresa

      Bowden, Gerald (Dulwich)

      Gorst, John

      Bowis, John

      Gow, Ian

      Boyson, Rt Hon Dr Sir Rhodes

      Gower, Sir Raymond

      Braine, Rt Hon Sir Bernard

      Grant, Sir Anthony (CambsSW)

      Brazier, Julian

      Gregory, Conal

      Bright, Graham

      Griffiths, Sir Eldon (Bury St E')

      Brooke, Rt Hon Peter

      Griffiths, Peter (Portsmouth N)

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

      Grist, Ian

      Browne, John (Winchester)

      Ground, Patrick

      Bruce, Ian (Dorset South)

      Grylls, Michael

      Buchanan-Smith, Rt Hon Alick

      Hamilton, Hon Archie (Epsom)

      Buck, Sir Antony

      Hampson, Dr Keith

      Burt, Alistair

      Hanley, Jeremy

      Butcher, John

      Hannam, John

      Butler, Chris

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

      Butterfill, John

      Hargreaves, Ken (Hyndburn)

      Carlisle, John, (Luton N)

      Harris, David

      Carrington, Matthew

      Haselhurst, Alan

      Carttiss, Michael

      Hawkins, Christopher

      Cash, William

      Hayes, Jerry

      Channon, Rt Hon Paul

      Hayhoe, Rt Hon Sir Barney

      Chapman, Sydney

      Hayward, Robert

      Chope, Christopher

      Heathcoat-Amory, David

      Churchill, Mr

      Hicks, Robert (Cornwall SE)

      Clark, Sir W. (Croydon S)

      Higgins, Rt Hon Terence L.

      Clarke, Rt Hon K. (Rushcliffe)

      Hind, Kenneth

      Conway, Derek

      Hogg, Hon Douglas (Gr'th'm)

      Coombs, Anthony (Wyre F'rest)

      Hordern, Sir Peter

      Coombs, Simon (Swindon)

      Howard, Michael

      Couchman, James

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

      Cran, James

      Howarth, G. (Cannock & B'wd)

      Currie, Mrs Edwina

      Howell, Rt Hon David (G'dford)

      82

      Hughes, Robert G. (Harrow W)

      Neale, Gerrard

      Hunt, David (Wirral W)

      Needham, Richard

      Hunter, Andrew

      Nelson, Anthony

      Hurd, Rt Hon Douglas

      Neubert, Michael

      Irvine, Michael

      Newton, Rt Hon Tony

      Irving, Charles

      Nicholls, Patrick

      Jack, Michael

      Nicholson, Emma (Devon West)

      Jackson, Robert

      Paice, James

      Janman, Tim

      Patten, John (Oxford W)

      Jessel, Toby

      Rathbone, Tim

      Johnson Smith, Sir Geoffrey

      Rhodes James, Robert

      Jones, Gwilym (Cardiff N)

      Riddick, Graham

      Kellett-Bowman, Dame Elaine

      Ryder, Richard

      Key, Robert

      Sayeed, Jonathan

      King, Roger (B'ham N'thfield)

      Shaw, David (Dover)

      Kirkhope, Timothy

      Shaw, Sir Giles (Pudsey)

      Knapman, Roger

      Shepherd, Colin (Hereford)

      Knight, Greg (Derby North)

      Shepherd, Richard (Aldridge)

      Knight, Dame Jill (Edgbaston)

      Shersby, Michael

      Knox, David

      Sims, Roger

      Lamont, Rt Hon Norman

      Speller, Tony

      Lang, Ian

      Stanbrook, Ivor

      Latham, Michael

      Steen, Anthony

      Lawrence, Ivan

      Stern, Michael

      Lawson, Rt Hon Nigel

      Stevens, Lewis

      Lee, John (Pendle)

      Stewart, Andy (Sherwood)

      Lennox-Boyd, Hon Mark

      Stradling Thomas, Sir John

      Lester, Jim (Broxtowe)

      Summerson, Hugo

      Lightbown, David

      Taylor, Ian (Esher)

      Lilley, Peter

      Taylor, John M (Solihull)

      Lloyd, Sir Ian (Havant)

      Taylor, Teddy (S'end E)

      Lloyd, Peter (Fareham)

      Temple-Morris, Peter

      Lord, Michael

      Thompson, Patrick (Norwich N)

      Luce, Rt Hon Richard

      Thurnham, Peter

      Lyell, Sir Nicholas

      Tracey, Richard

      McCrindle, Robert

      Tredinnick, David

      Macfarlane, Sir Neil

      Trippier, David

      MacKay, Andrew (E Berkshire)

      Twinn, Dr Ian

      Maclean, David

      Waddington, Rt Hon David

      McLoughlin, Patrick

      Wakeham, Rt Hon John

      McNair-Wilson, M. (Newbury)

      Waldegrave, Hon William

      McNair-Wilson, P. (New Forest)

      Walden, George

      Major, Rt Hon John

      Walker, Bill (T'side North)

      Malins, Humfrey

      Waller, Gary

      Mans, Keith

      Walters, Dennis

      Maples, John

      Ward, John

      Marland, Paul

      Wardle, Charles (Bexhill)

      Marshall, John (Hendon S)

      Warren, Kenneth

      Marshall, Michael (Arundel)

      Watts, John

      Martin, David (Portsmouth S)

      Wells, Bowen

      Mates, Michael

      Whitney, Ray

      Maude, Hon Francis

      Widdecombe, Ann

      Maxwell-Hyslop, Robin

      Wiggin, Jerry

      Mayhew, Rt Hon Sir Patrick

      Wilshire, David

      Mellor, David

      Winterton, Mrs Ann

      Miller, Hal

      Winterton, Nicholas

      Mills, Iain

      Wolfson, Mark

      Miscampbell, Norman

      Wood, Timothy

      Mitchell, Andrew (Gedling)

      Woodcock, Mike

      Mitchell, David (Hants NW)

      Yeo, Tim

      Moate, Roger

      Young, Sir George (Acton)

      Montgomery, Sir Fergus

      Younger, Rt Hon George

      Morrison, Hon Sir Charles

      Morrison, Hon P (Chester)

      Tellers for the Ayes:

      Moss, Malcolm

      Mr. Stephen Dorrell and

      Moynihan, Hon Colin

      Mr. Kenneth Carlisle.

      Mudd, David

      NOES

      Abbott, Ms Diane

      Beith, A. J.

      Adams, Allen (Paisley N)

      Bell, Stuart

      Allen, Graham

      Benn, Rt Hon Tony

      Anderson, Donald

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

      Archer, Rt Hon Peter

      Bermingham, Gerald

      Ashton, Joe

      Bidwell, Sydney

      Banks, Tony (Newham NW)

      Blair, Tony

      Barnes, Harry (Derbyshire NE)

      Blunkett, David

      Barron, Kevin

      Boateng, Paul

      Battle, John

      Boyes, Roland

      Beckett, Margaret

      Bradley, Keith

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      Brown, Gordon (D'mline E)

      Leighton, Ron

      Brown, Nicholas (Newcastle E)

      Lestor, Joan (Eccles)

      Bruce, Malcolm (Gordon)

      Lewis, Terry

      Buchan, Norman

      Litherland, Robert

      Buckley, George J.

      Livingstone, Ken

      Caborn, Richard

      Lloyd, Tony (Stretford)

      Callaghan, Jim

      Lofthouse, Geoffrey

      Campbell, Menzies (Fife NE)

      Loyden, Eddie

      Campbell, Ron (Blyth Valley)

      McAllion, John

      Campbell-Savours, D. N.

      McAvoy, Thomas

      Canavan, Dennis

      Macdonald, Calum A.

      Clark, Dr David (S Shields)

      McFall, John

      Clarke, Tom (Monklands W)

      McKay, Allen (Barnsley West)

      Clay, Bob

      McKelvey, William

      Clwyd, Mrs Ann

      McLeish, Henry

      Cohen, Harry

      McNamara, Kevin

      Cook, Frank (Stockton N)

      McTaggart, Bob

      Cook, Robin (Livingston)

      McWilliam, John

      Corbett, Robin

      Madden, Max

      Corbyn, Jeremy

      Mahon, Mrs Alice

      Cousins, Jim

      Marek, Dr John

      Cryer, Bob

      Marshall, David (Shettleston)

      Cummings, John

      Martin, Michael J. (Springburn)

      Cunliffe, Lawrence

      Martlew, Eric

      Dalyell, Tam

      Maxton, John

      Darling, Alistair

      Meacher, Michael

      Davies, Rt Hon Denzil (Llanelli)

      Meale, Alan

      Davies, Ron (Caerphilly)

      Michie, Bill (Sheffield Heeley)

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

      Michie, Mrs Ray (Arg'l & Bute)

      Dewar, Donald

      Millan, Rt Hon Bruce

      Dixon, Don

      Mitchell, Austin (G't Grimsby)

      Dobson, Frank

      Moonie, Dr Lewis

      Doran, Frank

      Morgan, Rhodri

      Douglas, Dick

      Morley, Elliott

      Dunnachie, Jimmy

      Morris, Rt Hon A. (W'shawe)

      Eadie, Alexander

      Morris, Rt Hon J. (Aberavon)

      Eastham, Ken

      Mowlam, Marjorie

      Evans, John (St Helens N)

      Mullin, Chris

      Ewing, Harry (Falkirk E)

      Murphy, Paul

      Fatchett, Derek

      Nellist, Dave

      Fearn, Ronald

      Oakes, Rt Hon Gordon

      Field, Frank (Birkenhead)

      O'Brien, William

      Fisher, Mark

      Orme, Rt Hon Stanley

      Foot, Rt Hon Michael

      Patchett, Terry

      Foster, Derek

      Pendry, Tom

      Foulkes, George

      Pike, Peter L.

      Fyfe, Maria

      Powell, Ray (Ogmore)

      Galbraith, Sam

      Primarolo, Dawn

      Galloway, George

      Quin, Ms Joyce

      Garrett, John (Norwich South)

      Radice, Giles

      Garrett, Ted (Wallsend)

      Randall, Stuart

      George, Bruce

      Redmond, Martin

      Gilbert, Rt Hon Dr John

      Rees, Rt Hon Merlyn

      Gordon, Mildred

      Reid, Dr John

      Gould, Bryan

      Richardson, Jo

      Griffiths, Nigel (Edinburgh S)

      Roberts, Allan (Bootle)

      Griffiths, Win (Bridgend)

      Robertson, George

      Grocott, Bruce

      Rogers, Allan

      Harman, Ms Harriet

      Rooker, Jeff

      Hattersley, Rt Hon Roy

      Ross, Ernie (Dundee W)

      Haynes, Frank

      Rowlands, Ted

      Heffer, Eric S.

      Ruddock, Joan

      Hinchliffe, David

      Salmond, Alex

      Hogg, N. (C'nauld & Kilsyth)

      Sedgemore, Brian

      Holland, Stuart

      Sheerman, Barry

      Home Robertson, John

      Sheldon, Rt Hon Robert

      Howarth, George (Knowsley N)

      Shore, Rt Hon Peter

      Hoyle, Doug

      Short, Clare

      Hughes, John (Coventry NE)

      Skinner, Dennis

      Hughes, Robert (Aberdeen N)

      Smith, Andrew (Oxford E)

      Hughes, Roy (Newport E)

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

      Hughes, Sean (Knowsley S)

      Smith, Rt Hon J. (Monk'ds E)

      Illsley, Eric

      Snape, Peter

      Ingram, Adam

      Soley, Clive

      John, Brynmor

      Spearing, Nigel

      Johnston, Sir Russell

      Stott, Roger

      Jones, Barry (Alyn & Deeside)

      Strang, Gavin

      Jones, Martyn (Clwyd S W)

      Straw, Jack

      Kennedy, Charles

      Taylor, Mrs Ann (Dewsbury)

      Kinnock, Rt Hon Neil

      Taylor, Matthew (Truro)

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      Turner, Dennis

      Williams, Rt Hon Alan

      Wall, Pat

      Williams, Alan W. (Carm'then)

      Walley, Joan

      Winnick, David

      Wardell, Gareth (Gower)

      Wise, Mrs Audrey

      Wareing, Robert N.

      Welsh, Andrew (Angus E)

      Tellers for the Noes:

      Welsh, Michael (Doncaster N)

      Mrs. Llin Golding and

      Wigley, Dafydd

      Mr. Alun Michael.

      Question accordingly agreed to.
      Clause 49 ordered to stand part of the Bill.

    Clause 31

      ABOLITION OF AGGREGATION OF INCOME
      Mr. Norman Lamont: I beg to move, That the clause stand part of the Bill.
      It may be for the convenience of the House if I deal with clause 98 at the same time.
      It must be rare for so short a clause as clause 31 to introduce such a fundamental change in the structure of our tax system. The clause repeals the rule deeming a married woman's income to belong to her husband for tax purposes, which has determined the tax treatment for married couples since 1805. The rule has become increasingly anachronistic as the role of married women in society has changed, and it is widely resented by wives who find that it denies them independence and privacy in their financial affairs. Making the husband responsible for tax on the couple's combined income forces the wife to disclose her income to him, including details of any investment that she may have and the amount of her savings income, however small. That situation is simply no longer acceptable.
      The correspondence received by the Inland Revenue shows that the present system is unacceptable. One lady recently wrote to an inspector of taxes saying:
      "I trust there will be no objection to your writing to me personally as I am now old enough to reply to my own letters."
      We have moved a long way from the days when the Inland Revenue never wrote to married women, and things have changed since the day when a tax officer concluded a letter to a husband announcing a meeting about the wife's tax affairs:
      "Please bring this letter and your wife with you."
      Another lady gave her opinion of the present state of affairs when she received a statement from the Inland Revenue by writing back:
      "I feel that all your letter would have needed was a penny black to add that final touch of Victoriana, don't you agree?"
      Speaking from memory, I believe that another lady wrote as follows:
      "My husband played no part in creating my savings though he is only too willing to spend them."
      There has been a strong feeling for a long time—reflected in the position taken by the various parties—that the present rule was unsatisfactory.
      The rule also imposes a tax penalty on marriage which can result in a married couple paying more tax than two single people in otherwise similar circumstances, just because they are married, and it can discourage a married woman from working if her husband is liable to higher rate tax. At present, a couple share a single basic rate band against their combined incomes and the wife does not have a full personal allowance of her own. Also, the wife's

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      earned income allowance cannot be set against any savings income that she may have, so this is taxed at her husband's rate from the first £1.
      The clause sweeps away this unfair and antiquated system and in so doing it recognises married women as taxpayers in their own right for the first time. From April 1990, a husband will no longer be responsible for his wife's tax affairs. They will each be taxed independently and take individual responsibility for returning their own income, when called upon to do so, and for paying their own tax. As a result, married women will be able to have complete privacy in their tax affairs. Tax offices will communicate with them directly about tax matters and all repayments of tax overpaid on their income will be made to them. The present separate assessment provisions will therefore be redundant.
      As individual taxpayers, the taxable incomes of husband and wife will be worked out separately. They will each have their own personal allowance, and any other reliefs for which they qualify in their own right, and their own basic rate band. The tax penalty on marriage and the disincentive to work will thus be removed and there will be no need for the present wife's earnings election arrangements. As a result, 1·6 million wives will have less tax to pay on their income than under the present system. Three quarters of them have incomes of less than £5,000 a year, and 700,000 of them are elderly.
      The elderly obtain a particular benefit from independent taxation because of the change in the taxation of national insurance pensions which elderly married women receive on the basis of their husband's contributions. These pensions are currently taxed at the husband's rate. Under independent taxation such a pension will be treated as the wife's income, and her personal allowanceage—related if she is 65 or over—will be available to set against it. That is a very significant change for thousands of elderly couples.
      Elderly married men also benefit because a pension of this kind, and any other income that their wives may have, will no longer be treated as the husband's income for the purpose of the income limit on age allowance. As a result, 130,000 more elderly married men will qualify for age allowance. More than 90 per cent. of elderly couples who pay tax at present will be better off, and 160,000 will be taken out of tax altogether.
      We believe that it is right that husband and wife should enjoy the benefits of independence and privacy which independent taxation will bring, and that the discrimination against marriage inherent in the present system should be abolished. But it would be wrong and unrealistic for the tax system to take no account of marriage. That is why we have provided in clause 32 for a married couple's allowance and retained the rule that transfers of assets between husband and wife are not chargeable either to capital gains tax or to inheritance tax. Our approach throughout has been to treat husband and wife as individuals rather than as a single unit in determining the liabilities on their separate incomes, while continuning to recognise the special nature of their relationship in a legal and social context.
      Independent taxation will be introduced in April 1990—the earliest practical date. Hon. Members may recall that other proposals that have come before the House, such as those for transferable allowances, could not be implemented until 1993, so it is a significant advance to be able to implement this reform from April 1990. In the
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      meantime, the Inland Revenue will be preparing for the change by setting up new tax records for married women, making changes to computer systems and training staff in the new procedures. It is all to easy to underestimate what is involved in all that. Taxpayers will need to take no immediate action and most will have to do nothing extra. During 1989, the Revenue will take the initiative in contacting taxpayers when information is needed to help set up the new system and launch it smoothly. Since the change will not take effect until 1990, taxpayers and their advisers will have time to familiarise themselves with the new legislation before it is implemented.
      The revenue cost of independent taxation is estimated at £500 million in 1990–91 and £1 billion the following year. The full-year Inland Revenue staff requirement to operate the new system once it is up and running will be of the order of 2,000 to 2,500. Those are substantial costs, but I make no apology for them because we believe that the policy is right in principle arid demands the commitment that we have demonstrated that we are prepared to make. The bulk of the revenue cost arises from treating married women fairly for the first time as independent taxpayers and would arise under any form of independent taxation.
      Clause 98 extends the principle of independent taxation to capital gains tax. April 1990 is the earliest possible date for introduction. Because of the aggregation of capital gains and income, it is impossible to bring forward the capital gains tax side by itself, and there might be some criticism from hon. Members if we did. But it is clearly right that, having had independent taxation on income, we should also have an independent allowance on capital gains, and if one accepts the principle of independent taxation for men and women, that principle should apply equally to capital gains tax.
      These are far-reaching proposals, and I commend them to the Committee.
      8 pm
      Mr. Nicholas Brown: I hope that it will be helpful if I say at the outset that the Opposition will not divide the Committee on clause 31, but we shall divide on clause 98.
      We do not wish to divide on clause 31 because it sets out the principle, not the detail and, as is fairly well-known, the Labour party is strongly committed to moving towards truly independent taxation. We favour creating a taxation system that treats married women as equals, not as dependants of their husbands. Married women are entitled, if they want it, to privacy in their financial affairs, and the resources that are available for redistribution through the taxation system should be distributed so that the poorest feel the benefit the most and first.
      How typical of this Government and this Budget that even on an issue where there is no difference in principle between the two sides of the House, they have managed to ensure that the wealthy will benefit disproportionately from the changes. The Minister said that the proposals will help pensioners. So they will, but they will especially help pensioner couples with an income between them of £21,000.
      One quarter of my electorate are over pensionable age, which is not untypical of many metropolitan constituencies. No doubt those who have incomes of £10,600 each will be grateful to the Government, but I did not meet many people with that sort of income during last week's

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      local government election campaign. The 90 per cent. of pensioners will gain little out of the proposal—the poorest 90 per cent.—said what they thought of the Government. Pensioners who I met asked about housing benefit, not about income tax. Even those who stood to gain from income tax cuts were well aware that they could lose 85 per cent. of that in housing benefit reductions.
      Disappointingly for the Government, no pensioner said to me on last week's election trail, "Mr. Brown, we have always been Labour but now that we have retired we thought that we would each take our £40,000 business expansion scheme tax relief through the Government's disaggregation proposals, so we feel obliged to vote Conservative." That was not being said on the doorsteps of Tyneside last week. Perhaps popular capitalism has not yet reached the streets of Walker, but it is much more likely that many people elsewhere, as well as in the north-east, do not have the money to take full advantage of the new opportunities. In Walker, that probably applies to Conservative voters, too—all 114 of them.
      It is an interesting reflection on the way that the Budget has been received in different parts of the country that in 1974 the Conservative party controlled Newcastle city council. Yet today, out of 78 councillors, the Conservatives have only six and do not have complete control of a single ward. The defeated former councillor who led the Conservative group before the election summed it up thus: "We've been massacred. They voted against the Government." I do not know whether the Minister agrees with that analysis. I see him smiling, but I promise not to take his smile as an endorsement of that view.
      The story is similar throughout the north-east. Those who have not benefited from the Budget are making their protests known. The reasons are straightforward. The main beneficiaries of the changes are the wealthy. About £77 million will go to 120,000 couples where the husband earns more than £30,000 per annum. What sort of targeting is that? How can it be fair to start tax reforms with concessions to the rich, leaving the poor?
      The proposals are especially advantageous to couples who derive income from investments, because there is scope for transfer of assets, making maximum use of the separate allowance which is worth about £75 a week to non-pensioner couples who are in a position to take advantage of it.
      The other principal objection to the Government's proposals is that the changes do not represent truly independent taxation. It does not matter how the Government try to dress up the issue for presentational purposes; the wife's position is still bound up with that of her husband. It is not just a question of nuance. As the Minister made clear, the intention of the proposals is that the married couple's allowance should go automatically to the husband. The wife will have no automatic right to any excess allowance. It will be for the husband to allocate. The transfer applies only if the husband gives written notice to say so. The Opposition will try to amend the Bill to remove that indefensible anomaly.
      Interestingly, when the European Communities Select Committee in the other place considered its response to the memorandum from the Commission to the Council of Ministers on income taxation and the treatment of men
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      and women, it concluded that the aim of equal treatment was best served by a system of fully independent taxation. It is not clear whether that is the Government's view, and today's proposals are the first step in that direction, or whether the Government will content themselves with the concessions that have been made to the better-off. The latter seems to be more in line with present Government policy.
      Clause 98 provides for separate taxation for husband and wife for capital gains purposes. The important, if obvious, point to make is that one must pay capital gains tax before one can benefit from the changes, and fewer than one in 100 taxpayers pays capital gains tax. I do not wish to trespass on tomorrow's debate, but in the context of disaggregation, it is clear that substantial sums will be gained by married couples who, from 1990, can each use their capital gains tax allowances of £5,000. The Government are not arranging the allowances so that the change is neutral in terms of the public purse. Although the beneficiaries are reasonably wealthy, even from a Conservative point of view, there should be—there would have been in the days of the old Conservative party—a case for neutrality.
      As my hon. Friend the Member for Dunfermline, East (Mr. Brown) said in the debate on clause 49, such decisions represent public expenditure that should more properly be focused on the Health Service, public sector housing, the social security system and the issues that matter to the many rather than to the already advantaged few. The Government have followed a twisted and rather shabby road to arrive at their present proposals. Impelled by social changes, outside even this Government's control, the Chancellor produced his famous Green Paper in 1986, cautiously advocating a partially transferable allowance. I have always suspected that the real thinking behind it was that the Government believed that it might reduce unemployment.
      As it transpired, the Government made light of their Green Paper proposals in the 1987 general election campaign. They did not make light of the Labour party's proposals. They attacked the Labour party ruthlessly for supporting the principle for which the Minister is now trying to take credit. After the election, the Green Paper was put to one side and we were presented with something different—today's proposals.
      The failure to provide a structure that is genuinely independent and the shameless further advantages given to the wealthy few make the proposals unacceptable to the Opposition and to many people, especially women, outside the House.
      For those reasons, I urge the Committee to vote not against the principle in clause 31 but against the giveaway in clause 98.
      Miss Ann Widdecombe: It is often said that jewels come in small packages. In this short clause, we have a long-awaited jewel. Despite the comments of the hon. Member for Newcastle upon Tyne, East (Mr. Brown) about women outside the House and how they would view the proposals, women have been waiting for this for a long time and I have heard nothing but praise from outside the House and within it.
      This is not just an important financial measure for some couples; it is an important social measure. It is the correction of a social injustice that has been ignored by

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      Governments of all parties for far too long. I congratulate the Government on their courage in, despite the cost, finally putting right the injustice.
      Clause 31 gives dignity and independence to a wife. There is no reason why a wife's income should be regarded as her husband's property when it is many years since we have regarded the wife herself as the husband's property. Furthermore, it recognises the role of the married woman as a person in her own right and it is long overdue. However, it is also just for the married man. Why should he be responsible for his wife's taxation and, particularly, for paying tax on his wife's income when that may exceed his own in these happily liberated days?
      Mr. Nicholas Brown: I wholly agree with the tenor of the hon. Lady's speech, but why should the husband then be responsible for the allocation of the allowance?
      Miss Widdecombe: I do not intend to address clause 32, because I am dealing strictly with clause 31. I have considerable sympathy with what the hon. Gentleman has said and have expressed that sympathy outside the Chamber. However, I am prepared to accept, pending a further consideration of the matter, that, if making that difference will delay the process by several years, I should prefer that we went ahead. However, I join the hon. Gentleman in hoping that this will be just the first step and not the final step and I hope that I have put his mind at rest. I shall keep to clause 31 because we can thrash out clause 32 in Committee. Clause 31 is social justice for both the man and the wife.
      The hon. Gentleman made considerable play of the fact that the reforms benefit principally the better off. That may he so, but I need a great deal of convincing that the better-off woman is less entitled to her dignity and independence than the less well-off woman. Although the hon. Gentleman castigated the Government he did not come up with a system that would have allowed independent taxation for everybody and did not benefit the better off.
      Mr. Nicholas Brown: I hope that I made it clear that it would have been possible for the Government to adopt a position of fiscal neutrality in dealing with unearned income. I hope that I gave the House the impression that I would have endorsed that approach.
      Miss Widdecombe: Unearned income, whether it belongs to the wife or the husband, is still an independent source of income and should be treated in exactly the same way as we are now treating earned income. The hon. Gentleman mentioned targeting, whereby one can introduce independent taxation in such a way that one does not create some benefits for the better-off, while creating substantial benefits for the less well-off. I shall address that point later because it is crucial.
      8.15 pm
      Ms. Marjorie Mowlam: Will the hon. Lady give way?
      Miss Widdecombe: If the hon. Lady wishes to intervene on that point later, I shall be willing to give way to her then.
      The elderly will benefit substantially from the measures. It is all very well to say that only the well-off elderly will benefit from the measures, but we are encouraging the elderly to be independent. We want to see our pensioners
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      enjoy a reasonable standard of living. Surely it is not sensible to penalise them merely because they happen to be somewhat better off than other pensioners. If we introduce the measure and make incomes independent, it will benefit people across a wide range of incomes, but the largest benefit will be a social one.
      I wish to deal with a benefit that has perhaps not been discussed so much. Let us take the case of a part-time working wife with a high-earning husband. There may be some difference between myself and Opposition Members about what constitutes high earning, but let us assume that the husband will pay a higher rate of tax if he adds on his wife's part-time earnings than he might if he had only his own earnings to take into account.
      Under the present system of aggregation, even if the wife is earning only a modest part-time income, when it is aggregated with the husband's salary and taxed from £1 at the higher rate, the value to that couple of the wife's part-time income is severely reduced. In many cases, a husband and wife will conclude that it is simply not worth the wife's time to make the considerable effort to arrange to have the children looked after and to go out to work because the family will enjoy only a tiny proportion of what she receives.
      That acts as a social disincentive to the working wife to have some financial independence. She may not wish to go out to work full time, despite the social pressures to do so. She may not wish to stay at home and bring up the family full time. She may want some independence and some income to call her own, yet there is a positive disincentive under the aggregation system. The new measure will benefit a certain type of wife who can work only part time and earn a modest wage and may not be well qualified. Once again, the clause remedies a considerable social injustice.
      It is wrong that, as a society committed to the family, we should have tolerated for so long a situation that acts as a disincentive to marriage. However, one can well understand how two people, wishing to start a family, to take on responsibility for the expenses of that family, to provide that family with a home and to give their children the advantages that they want to give them, will say that, for financial reasons, it might be better not to marry. That decision is not taken just by very high earners. It is taken by those earning fairly modestly who reckon that, with an aggregation of incomes, perhaps in a couple of years' time, when their lot has improved, they will suddenly find themselves in the next tax bracket. The new proposal, together with the change in mortgage relief for unmarried couples, has acted as an incentive for marriage and is socially desirable.
      The capital gains tax provisions are logical steps to take, but I understand why Opposition Members do not like them. If we are accepting independent taxation and if we are treating a wife's income as completely separate from the income of her husband, with the husband's income being completely separate from his wife's, we must be logical and look beyond the narrow range of earned income. If we do not, we shall create an anomaly whereby a woman is a person in her own right while she is earning but if she has any other income that becomes the property of her husband.
      Any system of taxation that separates one set of income from another and allows only partial independence is perpetuating the injustices that women have suffered for

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      the past 180 years and which they would have continued to suffer but for the courage of my right hon. Friends the Chancellor and the Financial Secretary to the Treasury.
      On social grounds, never mind the cost to the Treasury, we have before us a long overdue measure. If it offers a financial benefit for the better-off, it benefits also the less well-off. It provides social justice straight across the scale. We have no ethos that states that individuals are less entitled to social justice as a reflection of their circumstances.
      Ms. Mowlam: The hon. Lady has talked about those who are financially better-off benefiting as opposed to the less well-off. As my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) said, we must consider tax changes in relation to national insurance contributions and benefit changes. If these factors are taken together, especially the benefit changes that are squeezing people with lower incomes, it is clear that many people are not benefiting. Many are faced with double jeopardy. That is why I disagreed with the hon. Lady's earlier comments.
      The hon. Lady has spoken about the needs of women in part-time employment. Will she support my campaign to ask the Chancellor of the Exchequer to consider tax relief for workplace nurseries? If the Government are serious about getting women back to work, it is clear that that would be a positive step forwards.
      Miss Widdecombe: The changes in benefit that the Government have introduced in a series of measures are geared to achieve the sort of targeting that the hon. Member for Newcastle upon Tyne, East said was desirable. That is gearing specifically to help those who are the least well off and who are least able to provide for themselves. The benefit changes, taken with the raising of benefit thresholds and the lowering of income tax rates, will certainly help those who are paying only the basic rate of tax. They will help also the many who have been taken out of the tax system. All these measures will benefit the less well off. I think that the Government have it right. I believe that their scale of social justice is right. It applies regardless of income.
      Ms. Mowlam rose—
      Miss Widdicombe: I shall respond to the second question raised by the hon. Member for Redcar (Ms. Mowlam) before she asks a third. I would not wish to do her the injustice of forgetting her second question. I regret that I cannot support the hon. Lady's campaign for tax relief on workplace nurseries. At first sight it might appear to be an entirely reasonable request. If an employer is providing a workplace nursery, he is providing a benefit. To grant tax relief on top of that is to introduce a double benefit.
      I do not wish to reduce child care by calling it a perk, but it is a benefit provided by an employer. Unlike a company car or a uniform, for example, it is a benefit that is solely for the employee's comfort while at work. Unless an employer cannot recruit without providing that benefit, he is not gaining a benefit. The benefit lies with the employee. I cannot see the justice, social or otherwise, of allowing women who have access to workplace nurseries to have the benefit of tax relief while their companions,
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      their sisters—other women—do not have access to that benefit and have to make their own arrangements through playgroups or whatever.
      Although I honour the principle behind the hon. Lady's campaign, I find it inconsistent with justice for all women. It would benefit some disproportionately while being completely out of kilter with the tax system, which provides that tax is paid on a benefit and relief is not gained on it. I cannot support the hon. Lady's argument. Am I right in understanding that she has a third question?
      Ms. Mowlam: I did not have a third question. I merely wish to give an example to contradict the first of the hon. Lady's arguments. There are specific examples in my constituency of pensioners who in 1990 will have their income tax reduced and who will lose housing benefit as a result. In the end, they will be worse off. There are concrete examples that contradict the claim that the system will work to the benefit of pensioners and people on benefit. The same will hold for many single parents with children. I can give examples of that at a later stage to prove that the hon. Lady's claims do not match reality.
      Secondly, I do not believe that the hon. Lady's argument holds on tax relief in terms of workplace nurseries. Tax relief could be extended to other nursery facilities. My campaign is merely a foot in the door. The reality is that many women who want to work take on low-paid work, including part-time jobs. It is not equal pay for equal value. My proposal would be one way of easing the conditions that now prevail.
      Miss Widdecombe: I am grateful to the hon. Lady for her third and fourth questions. I have no doubt that there will be a fifth and a sixth.
      The hon. Lady is right when she says that women take on jobs that are low paid and then have difficulty in making the necessary nursery provision. But there are women in low-paid jobs who do not have any sort of nursery provision made available to them. The logic of the hon. Lady's position will soon be that everyone who works must have some provision made for the care of his or her children. I do not want to denigrate those who work and have a child. It is a major part of women's liberation this century that we have come to realise that that is a reasonable thing to do.
      However, it is a decision of individual responsibility. The individual must decide. "Am I going to have a family? If I am, am I going to work? If I work, what will be the consequences? If I do not, what will the consequences be?" It is a matter of personal responsibility, and the state cannot pick up the tab for every individual's decision. If we are to encourage independence, independent decision-making and independent financial provision for women, they must have independent responsibility. They should not have a basic issue such as child care dealt with for them.
      The hon. Member for Redcar claims that some pensioners will be worse off in 1990. I, too, have received representations on that subject. Pensioners who will be most worse off are those who already have capital assets to the fairly substantial tune of £8,000, or assets in a property in which neither they nor a dependant relative live. In those circumstances it cannot be said that we are hitting the least well-off pensioners. However, we are very much off the point. I do not know what this has to do with clause 31, which is directed to independent taxation for women.

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      Clause 31 is not merely a financial measure. It is one of the greatest pieces of social justice that we have seen in legislation for the past two decades.
      Mr. Beith: The inclusion in the Finance Bill of the proposal for independent taxation for women is to be welcomed and is long overdue. I have criticised the Chancellor of the Exchequer for not taking the opportunities open to him in many areas because of considerable buoyant reveues, but he has taken the opportunity open to him in this area. However, I will argue that he might have acted slightly differently. It is right to place on record that he has done what women for many years believed should have been done.
      It is perhaps right to call the proposals for women's taxation "social justice". However, if Conservative Members, like the hon. Member for Maidstone (Miss Widdecombe), claim the term "social justice", they should apply it rather more fully in the rest of the Budget than they have done so far. In almost all other respects, the Budget denies the most basic principles of social justice.
      8.30 pm
      The present system of the taxation of married couples cannot be defended. Its most obvious fault, which clause 31 will correct, is that it treats a married woman's income as if it were her husband's. It treats her discriminately, as if she were an unequal partner in the marriage. That would be ended by clause 31, and so it should be.
      However, other problems arise from the present pratice involving women's taxation. The present married man's allowance is not only by its very title illustrative of a now challenged concept of equal partnership in marriage; it also represents a situation in which allowances go, in very large measure, to those who perhaps need them less than others. Primarily they go to two earner couples who represent less than one quarter of the population, but who receive 43 per cent. of the benefit of the allowances.
      The Government's chosen solution has been to preserve the married man's allowance, but to change its name to a married couple's allowance. They have revealed that by the obvious fact that the allowance will still reside with the man until he takes the step voluntarily to transfer it to the woman. The Government have chosen to preserve the married man's allowance under a different name. That has the effect not merely of reducing the independence that should be given to the woman, thereby negating one of the main effects of the clause, but of preserving a form of benefit that is not particularly well targeted.
      It is very difficult to argue that there should be a specific allowance for being a married couple. I believe that marriage is an excellent institution. I am strongly in favour of it and I have benefited greatly by being a party to it. However, I do not need specific tax allowances to induce me to join it. Conversely, I do not believe that the tax system should be rigged against marriage as it has been in a number of ways, not least in relation to mortgage tax relief, as the hon. Member for Maidstone explained.
      There is little argument in logic or principle for a married man's or a married couple's allowance as such. The alternative solution for independent taxation would have been the ultimate abolition of the married man's allowance—or married couple's allowance, as it is to be known—with transitional protection and having two single non-transferable allowances. That would release resources that could be targeted on those most in need
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      through cash benefit, particularly child benefit for those couples with children whose needs are greater. The Government should have taken that step.
      If the Government are suggesting that using transitional provisions to protect the existing beneficiaries and allowing the effects of inflation over the years to complete the change is somehow an inappropriate way of proceeding, I remind them that that is what they are doing with the breadwinner wives. One of the anomalies of the present system is that where the wife earns but the husband does not, the couple receive 2·6 personal allowances—the married man's allowance plus the wife's allowance. However, that is not true the other way round. If the husband earns, but the wife does not, they receive only 1·6 personal allowances. That is illogical and not consistent with independent and equal treatment of married men and women. Clearly, breadwinner wives will lose through the 1990 changes.
      Many wives are breadwinners because their husbands are unable to work, unemployed or disabled and there is obviously a case for transitional protection. The Government have granted that by effectively freezing the 2·6 personal allowances in cash terms until what is now the equivalent of that allowance becomes equal to the value of the married couple's allowance. The Government have built in a transitional protection of the kind that I have argued that they could introduce if they chose to abolish the married man's allowance. In other words, they have set a precedent for the procedure which I believe would be a better way to proceed towards independent taxation.
      If independent taxation means anything, it must mean independent taxation of investment income as well as what is called earned income. That is one of the reasons why the change is expensive. It means that wealthy couples with considerable assets will be able to rearrange their affairs so as to derive a very considerable benefit. That leads me to ask why the Government have not taken some steps to create a forestalling provision to discourage or prevent people from simply rearranging assets to maximise benefits and transferring benefits between partners to benefit from the position.
      The Government's answer is that it would he very complicated to make that provision. That is presumably why the official Opposition have not tabled an amendment to deal with the problem in that way. If it is not dealt with through the measures to prevent the transfer of investments from one partner to another, it appears that Labour Members are arguing about investment income—and certainly in relation to capital gains tax—and that they will have to vote against the whole proposal because of the benefit that it will confer on people who possess considerable assets. That is illogical. It is difficult to accept that, because some people will benefit a great deal, it is wrong to have independent taxation for investment income or capital gains tax.
      Mr. Nicholas Brown: I hope that the hon. Gentleman is not implying that that is the official Opposition's view. It is not.
      Mr. Beith: I distinguished between investment income and capital gains tax because what I have described appeared not to be the position in relation to investment income but appeared to be the case for capital gains tax

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      and therefore the reason why the official Opposition intend to vote against clause 98 involving the application of the same principle to capital gains tax.
      Mr. Brown: I am grateful to the hon. Gentleman for giving way because I do not want there to be any misunderstanding about the official Opposition's attitude. If we are to support the principle of disaggregation, it must apply to earned and unearned income. The point that I made in an intervention earlier is that, were that to apply to unearned income, it should be applied in a fiscally neutral way. If it is done in any other way, it is, in effect, an item of public expenditure. We contend that where money can be put back into tax concessions, it should go to the poorest rather than to those who are significantly wealthier than average citizens.
      Mr. Beith: That might be fiscally neutral but it is not neutral for the individuals concerned. It will mean treating parties to a marriage differently because they are married. It is a complete departure from the principle of independent taxation.
      I understand why the Labour party wants to make that qualification and I understand the anxiety with which Labour Members viewed the investment income aspect. However, I am not willing to be dragged along that road. I do not accept that the proposals should not be accepted because they cannot be done in a fiscally neutral way. None of this can be achieved on a fiscally neutral basis. We have all accepted that the mere introduction of independent taxation in any form, for earned as well as unearned income, is not fiscally neutral. It costs money. The Chancellor happens to be able to afford to do some of these things in this Budget.
      Obviously, Labour Members and Social and Liberal Democrats must judge this measure against others—for example, the way in which the Budget has piled benefits on the wealthy and penalties on those who are considerably disadvantaged. That makes this part of the Bill look particularly heavy and adds to the tilting of the Budget. The fact remains—[Interruption.] The hon. Member for Rhondda (Mr. Rogers) appears to want to make an intervention. I would have given way to him, because he appeared to be saying, sotto voce—although the hon. Gentleman's version of sotto voce would fill the Albert hall—that I was trying to have it both ways, to have the penny and the bun. He was suggesting that I was trying to take a neutral stance. Far from it. That is what the Labour party is trying to do. It is trying to say that it is in favour of independent taxation, but, because it will benefit some people in large measure, it will not apply the principle logically and fully.
      Mr. Dafydd Wigley: As to the hon. Gentleman's point about whether or not fiscal neutrality could be achieved, in the context of capital gains and the split that we now have proposed of £5,000 each for men and women, surely if that were reduced to £3,000 for each individual, in terms of the likely uptake it would have gone some way to meeting the hon. Gentleman's point. It would also have encouraged men to transfer resources to their wives if they were geared up to using in full their £6,000 relief.
      Mr. Beith: That could possibly be considered. I am not sure whether the hon. Gentleman is arguing for a general reduction in the disallowed portion, or again, for a particular discrimination against married people. I do not understand how one can argue that allowances should be less for people simply because they are married.
      I do not believe that marriage needs a large tax cushion; but I am against people being discriminated against because they are married and against people being invited to enter into a relationship other than marriage because that it is fiscally advantageous for them to do so. That is contrary to all the principles of independent taxation and public policy—which ought to be supportive of marriage. The Labour party is mistaken if it feels that it has to vote against such principles.
      If the introduction of any element of independent taxation was difficult because the revenue to the Government was so small, that might be a different matter, but that is not the situation. The Government could have introduced fully fledged independent taxation by the route that I suggested—targeting more help on people receiving child benefit. I hope and believe that I have the support of Labour Members at least in respect of that issue.
      The Government could have done many other things to make the Budget fairer, while still keeping within the revenue and resources available to them. The Opposition should not oppose the logical extension of independent taxation into the area of capital taxation. I shall argue later that there are other ways in which the capital taxation system could do more to distribute capital and achieve greater social justice. However, we should not attempt to do that by denying the principle of independent taxation.
      Mr. Andrew Mitchell: I am grateful for this opportunity to take part in the debate on clause 31, although I feel that I am in a sense guilty of tokenism before I even start, surrounded as I am—the only male Member on the Government Back Benches—by Tory ladies. Nevertheless, I shall press on.
      The Government's decision to end the system of taxation which has blatantly discriminated against married women must be widely welcomed by almost everyone. Indeed, as a relatively new Member of the House, I am astonished that this testimonial to the values and customs of a by gone age has lasted so long. Perhaps within the House it has increasingly been seen as an intolerable measure, because a larger number of the younger male Members are married to professional women who pursue careers which in the past have more usually been associated with men. Whatever the reason, the Government are to be congratulated, not only on making the necessary reform, but on creating the economic strength and success required to allow such costly reforms to be implemented. It is a reform that will cost about £1 billion.
      In preparing for the Committee stage of the Bill I found myself flicking through the Income Tax Act 1918, where-in I noticed that "an incapacitated person" means
      "any infant, married woman, lunatic, idiot or insane person."
      It is time our tax laws recognised that things have moved on and that the present archaic system has become a fiscal embarrassment.
      8.45 pm
      Some hon. Members have tonight criticised this reform on the grounds that it grants an extra tax advantage to be

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      enjoyed by all who are married, regardless of their income. I shall deal with that, but even if it were true—which it is not—I would still support the reform. It is right that society should recognise and support the institution of marriage through its financial and fiscal regulations. For far too long the dice have been loaded against those wishing to get married, and in favour of those wanting to cohabit. How often have we heard people getting married declare that they will be much worse off materially as a result, or making it clear that they "cannot afford" to get married? The Budget makes major progress in eradicating this injustice and supporting the structure of marriage itself.
      Ms. Mowlam: I am listening carefully to the hon. Gentleman's arguments on marriage and the Bill. Can he explain why, in the Committee on the poll tax Bill, he supported joint and several liability for cohabitees?
      Mr. Mitchell: The two are not anomalous, but it would probably he better, Mr. Walker, if I did not try your patience by going down that route and talking about the community charge.
      Dame Elaine Kellett-Bowman: Many of my constituents find it obnoxious that two unmarried people living together can enjoy double mortgage relief, but that a married couple cannot. Does my hon. Friend agree that that is wholly wrong?
      Mr. Mitchell: My hon. Friend has made an excellent point in her usual graceful and cogent manner.
      Under the new arrangements stemming from this clause, it is not only well-off married couples who will benefit. The Treasury calculates that 75 per cent. of the 1990–91 cost will go to basic rate taxpayers or indeed to those who pay no tax at all. That is an important statistic. In particular, the position of thousands of elderly people will significantly improve. Under the new arrangements, that portion of the state pension which a man receives because he is married will be treated as if it was his wife's income. This will have a wholly welcome effect on the level of tax paid by old folk. According to the Inland Revenue, 900,000 women aged over 65 will benefit, and more than 1·5 million married women of all ages will pay less tax.
      It is particularly interesting to note that of those 1·5 million women who will pay less tax, more than 1·2 million earn less than £5,000 per year.
      Under the proposals, many elderly married women will, for the first time, have an age-related personal allowance, and 160,000 elderly couples will be taken out of tax entirely. In addition, as I understand the effect of that change, since a wife's income will no longer be added to her husband's for the purpose of applying the income limit for age allowance, approximately 130,000 elderly men on modest incomes will qualify for age allowance under the new system. I shall be grateful for my right hon. Friend's assurance on that point.
      I am genuinely astonished that so little public attention has focused on the dramatic effect that this three-line clause will have on so many elderly and less well-off people. Quite apart from its effect on married women, 500,000 husbands will also pay less tax. It is clearly absolutely right also that those who are married and have savings should benefit from the provisions of the clause because of the independent taxation of investment income. If any Opposition Members believe that that will benefit
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      only the rich, they are mistaken. The provision will be of great benefit to elderly people in particular, many of whom will now gain from the change. The system has hitherto penalised very low savings levels.
      Because of the effects of Conservative policies of spreading ownership widely throughout society, and in particular of the right-to-buy provisions, we are becoming what one distinguished economic commentator writing in The Independent described as "a nation of inheritors." That is one principal reason, in my view, why it is no longer acceptable to separate taxation of earnings while treating all other income as though it belonged to a husband. Changes in the pattern of ownership and savings over the past few years have made that very clear.
      As a result of this clause a number of new things will happen after 1990–91. Husbands and wives will be taxed independently on all their income. Married women will become taxpayers in their own right, giving them the privacy to which they are entitled and which is long overdue. A significant benefit will accrue to elderly married couples in larger personal and married allowances for package payers aged between 65 and 79 or those aged 80 and over. For the first time, elderly married women will qualify for age allowance in their own right.
      Finally, the Government have given some modest but important support to the institution of marriage itself. This, too, will be widely welcomed, not only in this Committee, but in the country.
      Mr. Wigley: First, let me welcome the change that the Government have made in the marriage allowance. I have written about it to successive Chancellors, Chief Secretaries and other Treasury officials, because I have had the invidious task of doing my wife's accounts for several years. It is bad enough doing the accounts of a professional musician a year or two behind schedule and in Welsh, but doing it in a way that balances her interests and mine in a fair manner is particularly difficult. I am therefore glad to support the change—for all the wrong reasons.
      Mr. Morgan: Do not harp on about it.
      Mr. Wigley: I assure the hon. Gentleman that I shall not.
      I welcome the principle, and many of the details that accompany it. I realise that it is a far-reaching package. I cannot see, however, why the married man's allowance could not have been split 50:50, making it neutral initially, with any opting to be done from that base. The Minister shakes his head, but that would have been a practical starting point, which would have taken away some of the misgivings of those who in other respects welcome the change wholeheartedly, both here and outside the House. Nevertheless, perhaps it can be considered in the future. I also hope that the gamut of allowances will work in a neutral manner—socially neutral as well as neutral in their treatment of husbands and wives—to give us the most acceptable package.
      I intervened a moment ago to make a point about capital gains. My point was that the Government are accepting a drop from £6,000 to £5,000, albeit £5,000 for each couple. I should have thought that, unless the drop is to £3,000 or £3,500, an immediate adjustment—as was hinted by the hon. Member for Berwick-upon-Tweed (Mr. Beith)—must be undertaken in people's finances to minimise that. Such an adjustment would be expensive for

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      the Treasury, and the money given away—as Labour Front-Bench spokesman have suggested—could be used for other purposes.
      The Government have been open to criticism on other parts of the Budget, and I felt that this move was unnecessary. I welcome the principle, but a limited number of people will benefit from the shared capital gains. Many pensioners have saved capital sums because they have no pension from employment, and for them this is a significant but limited benefit. I do not see why there could not have been a bigger giveaway.
      I am not clear on one point, perhaps because I have not read enough of the detail of the Bill. We are told that the husband and wife will be assessed independently and be responsible for their own income tax. Am I to take it that there is to be a complete ending of joint and several liability for the payments? I am thinking particularly of circumstances in which one partner, or both, are self-employed, so that no pay-as-you-earn system is in operation. If one partner is not paying, the other may be taken to court. I should be more than happy to give way if the Minister wishes to intervene on that important point, but perhaps he would prefer to comment later. We must be clear on that matter if we are to have a workable package that is genuinely non-sexist.
      We also need provision to ensure that there is no likelihood of a man or woman being charged when he or she may not know the partner's financial position and be landed with the bill. This could be a minefield, and I should be grateful for some clarification.
      Miss Emma Nicholson: I welcome clause 31, and I particularly welcome the gradual acceptance of its importance by the Opposition. I noticed, and remarked on it at the time of the Budget, that neither Opposition spokesman—there could conceivably have been an invisible third party as well—even bothered to comment on this extraordinarily large change. That was very upsetting, and I am delighted that Opposition hon. Ladies must have done considerable work between then and now to ensure that today's warm welcome was spontaneous, even if rather late in the day.
      Mr. Chris Smith: Clearly, the hon. Lady either was not present in the House or has not read Hansard's account of the Budget debate on the Thursday evening. Speaking from the Opposition Front Bench, I gave a warm welcome to the principle of independent taxation, and spent a considerable time dealing in detail with the Government's proposals.
      Miss Nicholson: I take the hon. Gentleman's point. I was referring to the first speakers from the Opposition Front Bench, who in their immediate response to the Budget did not even bother to pick up that point. I picked it up, and I am glad that the hon. Gentleman responded. However, I found it very distressing.
      This is a remarkable and unique change. It will never happen again. It is extraordinary to think that married women in the United Kingdom have never really been treated fairly since the days of Julius Caesar. I say that not entirely jokingly. When Caesar wrote about what a grey and rainy island this was, he added that the British were an extraordinary race, because they treated their women in
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      law on the same level as men. Alack, alas! Roman law then took over, and women have not seen the light of day until the present Conservative Government.
      Mr. Wigley rose—
      Miss Nicholson: It is different in Wales.
      Mr. Wigley: The basis of that British law was the Welsh law which was coded by Hywel Dda. That gave equal status, and assets were distributed even-handedly. Some of us in Wales are looking to the day when we can reintroduce that system.
      Miss Nicholson: In that case, let me say how sorry I am that civis Romana sum!
      Hon. Members will recall the pre-eminence of city widows even in mediaeval days. They were the only women in the United Kingdom who were allowed to inherit and to deal. If unmarried, a woman was the belonging of her father; she did not exist in law. When she married, she was the belonging of her husband and certainly did not exist in economic law. If she did not marry and her father died, again she apparently did not exist in law. That explains why, in Chaucer's "Canterbury Tales" the Wife of Bath was such a popular lady; she had cash to play with. That is why, in Pepys's diaries, the city widows figure so largely in his dreams.
      I do not raise those points entirely jokingly. Hon. Members who are gentlemen will not realise the degradation of begging for money. It is a beastly thing to have to do. So many married women over so many generations have been reduced to having to ask their husbands for small sums of money for housekeeping. That is a most degrading and beastly thing for married women to have to do. Real freedom is economic freedom. Freedom is just a word unless one has the money to buy.
      9 pm
      Ms. Mowlam: As usual, I agree with some of the hon. Lady's points. However, her statements are based on the premise that equality has been reached under the present Government, and that the historical examples which she gave have now changed. She knows as well as I do that women do not have equality at work, in education, in the professions or in the Civil Service—as we heard this afternoon—or on the streets at night. We do not have equality, and we should get away from the sham and the facade that the hon. Lady is putting forward, as it clearly is not true.
      Miss Nicholson: I am grateful to the hon. Lady for her intervention. I am very aware of that problem and I shall move on to it in a moment.
      Mr. Allan Rogers: I wonder whether the hon. Lady's feelings about women extend to the unemployed in the same way.
      Miss Nicholson: May I remind the hon. Gentleman that a lot of women are unemployed? However, I do not think that clause 31 deals with unemployment. Although it is tempting to go down that path, I shall not allow myself to be tempted by the hon. Gentleman at the moment.
      May I remind hon. Gentlemen that, as hon. Ladies already know, the problems of identity for women are not yet over. It is not always easy for a woman to be recognised on the same level as a man in any walk of life. Indeed, last week I received a letter from the Prime Minister's Office

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      addressed to "Emma Nicholson Esq MP". The week before, when I was at Lancaster house, I asked an attendant where I could wait out of the rain while my husband parked the car. He replied, "I should wait for your husband over there if I were you, sir." I did not realise that entering the House of Commons gave one size 14 feet and made one grow a moustache. But I say most seriously that it is very difficult for women to be treated in a professional and proper manner, even in this hallowed place.
      I welcome most strongly the Minister's tremendous step forward for womankind in giving married women a genuine identity in fiscal matters. The women of the Conservative party have long been seeking that identity. As far back as 1979, a report from the Conservative women's national committee urged the incoming Government—we knew that we would win—to establish independent taxation for married women. It said that all the difficulties that I have mentioned and that have been stated by other right hon. and hon. Members were true, and urged the Government to do something about it.
      It was to the credit of the Conservative Government that despite all the talk from previous Labour Governments, and despite the tremendous Socialist ideal to favour married women as equals—I do not think that it is very good of them to favour married women as equals; the Labour party should treat married women as equals perhaps in organisations such as the Trades Union Congress which has very few women on its platform—the Conservative Government have taken up the challenge, and I cannot say how glad I am that they have done so.
      When I was Conservative party vice-chairman with special responsibility for women, I launched a survey in response to the Chancellor of the Exchequer's proposals in the previous Budget for the transferable personal allowance. My postbag was massive. Hundreds of letters poured in from women of all parties, saying how enormously unhappy they were with the present system and how much they wanted it changed. I sent out the survey to 50,000 women. It was published in The Sunday Times which considered the transformation of taxation for married women to be important. It was also published by an entirely different style of publication—Cosmopolitan, which appeals to much younger, single working women—and in a number of other papers, particular Conservative Newsline.
      There was a massive response—98 per cent. of all women questioned said that the tax system had to be changed, and 78 per cent. favoured personal transferable allowances which did not see the light of day because it was not possible to get a consensus among women in the United Kingdom. I was very sorry about that because I recognised the comments that my right hon. and hon. Friends made earlier on the importance of not discriminating against marriage. I believe that the state should be non-judgmental when it looks at the lives of its citizens, and that it should not be the Ayatollah Khomeini telling us that we should be swathed in black or living in any particular way. If the state is to be non-discriminatory, it should not discriminate against marriage. It is enormously unfair that in recent years the state has discriminated against married people.
      I favoured the personal transferable allowance, which would have helped the non-working married woman. Far be it from me to try to guide women back to the sink. Let us have freedom of choice to go out to work or to stay at
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      home, but real freedom is economic freedom. It is very difficult for the married, non-working woman to he truly free. The personal transferable allowance would have been of immense help. However, there is now the important principle, which I hope will soon be enshrined in law, that for tax purposes women are to be treated independently. It is a remarkable move forward. Nevertheless, I ask my right hon. Friend the Minister to consider most carefully the married person's allowance. I cannot accept that in perpetuity the married person's allowance should go as of right immediately to the man.
      The Chairman: Order. That matter is dealt with elsewhere in the Bill. I do not think that we ought to trespass on the responsibilities of another Committee.
      Miss Nicholson: I apologise, but this matter has been debated—
      The Chairman: Order. We are debating clauses 31 and 98. Personal allowances are covered by clause 32. That is not a matter for a Committee of the whole House.
      Miss Nicholson: The matter was discussed extensively by other hon. Members and that is why I have referred to it, but in view of your ruling, Mr. Walker, I shall not trespass on clause 32. However, I believe that it would be right and proper for my right hon. Friend the Minister to consider that point and, if I am allowed to trespass for a moment longer, to accept it in principle, even if it is too expensive now to put it right. The principle ought to be accepted that the married person's allowance should go to the highest earner.
      Once again, I thank the Government, Treasury Ministers and my right hon. Friend the Chancellor of the Exchequer for responding to the needs of women by at last giving them equal treatment.
      Ms. Joyce Quin: All hon. Members agree that there should be independent taxation. I support also the right of privacy in tax matters for women. However, the Opposition have two major criticisms of the Government's proposals. First, the proposals are half-baked. They do not provide true, independent taxation; they provide a mixture of independent and joint taxation. Secondly, these measures, like so many other Government measures, will help wealthy couples but they will provide limited help to families at the bottom end. of the income scale.
      The half-baked nature of the measures is referred to in the report on the Budget that was published by the Treasury and Civil Service Select Committee. One of the Committee's advisers described the reform as more cautious than had been expected and said:
      "It effectively retains the married allowance, thus favouring households of two married people over those of two single people. It provides for the married couple's allowance to be transferred from husband to wife, but favours the husband by awarding it to him in the first instance."
      The hon. Member for Maidstone (Miss Widdecombe) said that she hoped that the measure would be a step on the road towards full independent taxation, but in evidence to the Treasury and Civil Service Select Committee, the Chancellor of the Exchequer, answering a question that I put to him about whether 1990 was a staging post, said:
      "No, I see 1990 as a satisfactory solution to the problem."
      That seems to show that the partial nature of the reform is likely to be with us for some time.

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      Apparently, a full move to independent taxation was ruled out because it was considered too complicated and would have involved a large increase in staff dealing with taxation matters. Further, it was considered to be too expensive, although no details were given to the Treasury and Civil Service Select Committee about how much would be involved. Suspicion remained that the Government had gone only halfway because it would have cost too much to have a truly equitable system. Even if it was too expensive, I do not understand why the Government could not have given a long-term commitment to completely independent taxation. Perhaps the Minister will make such a commitment tonight.
      There is still a great deal of confusion about whether married people will be treated as individuals or as a household with their incomes being added together. Mortgage tax relief has been mentioned, but there are many other examples that show that confusion exists. Perhaps an independent commission is needed to sort out the position and to ensure that in future a completely coherent, logical approach is applied to the taxation of married couples and to the law relating to matrimonial property.
      In the short term, it does not appear that such a position will be reached. Regrettably, we now have a halfway house, which is not something that we favour in the long term.
      Miss Widdecombe: Despite the hon. Lady's comments about a halfway house on the equality of the taxation system between single and married households, does she agree that at a stroke the changes have provided a satisfactory solution to the problem of subordination of women within marriage? By taking on board earned as well as unearned income they ensured that financially there is no room for the subjugation of women within marriage.
      Ms. Quin: I agree that they were an important step but I do not think that they are a solution to the problem. I hope that the hon. Lady will try to persuade the Chancellor of the Exchequer to regard 1990 not as a solution but as a staging post.
      My second criticism is that the measures that the Government have taken on the taxation of married couples, allied to the other Budget measures, simply disproportionately help already wealthy couples, whereas those on low incomes will see little advantage.
      Whatever attitude is taken to the indexation of capital and investment income, it will benefit wealthier couples more than those at the bottom of the income scale. There is a great deal of worry that a Government who said that they wanted to tackle some of the tax breaks in the system will be encouraging wealthy couples to minimise tax liability by transferring assets between themselves. I do not know whether the Government are considering extra anti-avoidance measures to ensure that that does not happen, but if they are not they should be.
      I would have been happier about the steps that the Government are taking in the direction of independent taxation if they had been part of the Budget that sought to redress the growing gap between rich and poor—for example, if those measures had been allied to measures such as an increase in child benefit, which, given the revenues at the Government's disposal, could easily have
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      been done. Child benefit could have been doubled for the cost of the special allowance for married couples. Unfortunately, the reforms take place against a background of reduced housing benefit and the social security changes which have created great hardship. Moreover, maternity benefits were reduced last year. That affects families on low incomes in particular.
      A truly independent taxation regime can bring great benefits, but unless it is accompanied by measures that help couples and families on low incomes, the benefits of independent taxation will not be widely felt and its effects will be selective. We need additional measures to bring much-needed financial relief to families and couples who are the worst off in the land.
      9.15 pm
      Ms. Mowlam: I hope that it will be in order for me to pick up two points that were made earlier and which are important to this debate.
      The hon. Members for Maidstone (Miss Widdecombe), and for Torridge and Devon, West (Miss Nicholson) talked about independence for women. We were told that independence is related to economic freedom and that it is important for pensioners to be independent. I do not see how they can argue that line when television licences and electricity prices are going up. We cannot speak of independence for women or pensioners because their economic freedom is not taken into account. We are told that about 900,000 pensioners will benefit from the proposed changes, but there are 11 million pensioners. That means that 10 million will not benefit. Without some form of economic freedom, the only freedom that those people have is the freedom to sit in front of an electric fire with one bar on and to decide whether they can afford to watch telly tonight. That is not the independence to which hon. Members are referring.
      Conservative Members have accused us of not being logical. It is therefore incumbent on the Government, if they maintain that this is a reform and that it does not discriminate against the institution of marriage—that is fine, if it is non-discriminatory—to be logical about poll tax. If joint and several liability affects marriage and cohabitees, I should like it transferred to this Bill.
      The Minister referred often to "hon. Gentlemen", which seemed to be a psychological slip. He said that he is sweeping away anachronisms that date from 1805. I consider that to be an overstatement, to put it delicately. On Second Reading, I described the reform as a fraud and a sham, and I do not retract that statement in so far as it relates to the majority of women. This is a breakthrough—I accept what has been said, primarily by hon. Ladies, about that—but to go into hyperbole is to go too far.
      Miss Emma Nicholson: Does the hon. Lady agree that, with the coming computerisation of the income tax system, if we had not made the programming change now there would have been a major problem? This is therefore an honest breakthrough to identify women as tax units. If we do not do that, women will for ever be invisible to the system.
      Ms. Mowlam: It is not a question of satisfaction for computers and the tax system. Nor was that the commitment that the Chancellor led us to believe underlay his views when he introduced the change. If it was a case of making things easy for computers, those papers which

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      described the Chancellor as a feminist ought to withdraw and describe him instead as a technocrat, for his interest is in computers rather than women.
      My point is that this reform—which is a step forward—benefits some women but not the majority. In fact, the majority of women will see no change. They will notice no difference when the change is introduced in 1990. Let us look at the argument that has been advanced by Conservative Members as to why the change will be an advantage. They said it is an advantage for married women because it means they can make their own tax returns and get their own tax rebates on earned and unearned income. Therefore, it gives some legal independence and financial privacy.
      At first glance, I accept that as a plus for many women. When we debated that on Second Reading, the hon. Member for Torridge and Devon, West also accepted that that was a plus. However, we have to look at how the married couple's allowance will work. The husband will be able to transfer any part of the unused portion of the married couple's allowance to his wife. To do so will involve paperwork and exchange of information and take away the supposed privacy and independence that will have been given to women by the introduction of the reform. As my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) said, it can only be transferred to a woman in writing. Is that an indication of equality? Is that an indication of the sort of change in the position of women that we hoped for? It means that it is not an automatic right for women. That has to be borne in mind.
      Miss Nicholson: Will the hon. Lady admit that it is a significant step to give both the woman and man in marriage an individual personal allowance? I thank the hon. Lady for referring to my constituency correctly. It is often turned back to front. The clotted cream on the top of the cake is the oddity, the married person's allowance, which many of us would like to see handled in the same equal manner as the joint single person's allowances will now be handled. It is the establishment of the single person's allowance for the married woman that is the technical, practical and freedom breakthrough.
      Ms. Mowlam: To continue the hon. Lady's analogy, the clotted cream has seeped so far down that the married couple's allowance has made the whole thing a stodge—and so unrealistic that the position of women is not necessarily improved.
      I accept the hon. Lady's first statement, that it is a step in the right direction. However, because of the way in which the married couple's allowance will work, it takes that independence from women. For any unused portion to be transferred from the man to the woman, the woman will have to talk about her income. Therefore, all this talk about financial independence and privacy at last is not the case. It is not an automatic right and we must acknowledge that.
      Miss Nicholson: Does the hon. Lady agree that the privacy element is brought in by the independent taxation, particularly of savings and investments? Does she also agree that the cry that it is only the rich who will benefit totally disregards the many thousands of women who have small savings, which at the moment are taxed at their husband's income level? The aggregation of the married
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      people's income is the real abomination and setting those two things apart gives real privacy to many thousands of women.
      Ms. Mowlam: I accept part of what the hon. Lady has said. However, as I said before, it is not an automatic right. The husband can go ahead, plan his investments and take part in the BES shares that we heard about earlier. The wife cannot do that without some reference to the couple together. I am not willing to go as far as the hon. Lady in saying that it is a monumental change. I accept that it is a positive step in the right direction, but we should not kid ourselves that the hyperbole that we heard from the Minister is the reality.
      Miss Widdecombe: Can we please define the concept of automatic right?
      Ms. Mowlam: Yes.
      Miss Widdecombe: I thank the hon. Lady for her agreement. We all have rights. Women have a right to work. Some women may find that, because of their personal circumstances, they cannot exercise that right. We all have a right to vote. Some women may decide that they will not use that right or find, through slip-ups, that it has been taken from them. We all have a right to marry. Some women will not choose to exercise that option. We have a right to independent taxation. If we decide to exercise the transfer option and, in doing so, lose a little privacy, that does not affect the basic right to independent taxation if we choose to exercise it. Will the hon. Lady concede that this is a major piece of social legislation giving us basic rights?
      Ms. Mowlam: I wish that the hon. Lady would notice the distinction which I make. I acknowledge that this is a positive step forward. I have not denied that, either on Second Reading or in Committee. I am fighting this corner because I do not want the fantasy which we have heard from the Financial Secretary portrayed as reality. The hon. Lady says that distinguishing between independent taxation and the married couple's allowance does not change the reality, but it does change it because the allowance is given to the man.
      If the allowance were given to either partner, as the Equal Opportunities Commission asked, the EOC and I—and I am sure the Members for Torridge and Devon, West and for Maidstone—would be happier, but it was not. It is not an automatic right. It does not give equality. That cannot be ignored. I should like to continue this discussion, but I am afraid that you, Mr. Walker, will not allow it.
      The Chairman: Order. I think that we have heard far too much. I remind the Committee that we are dealing with clauses 31 and 98. Clause 98 deals entirely with capital gains tax. Clause 31 states:
      "Section 279 of the Taxes Act 1988 (which treats the income of a woman living with her husband as his income for income tax purposes) shall not have effect for the year 1990–91 or any subsequent year of assessment."
      I find it difficult to understand what that has to do with allowances. I draw the Committee's attention to the fact that these allowances are covered elsewhere in the Bill. They will be dealt with by another Committee, and this Committee should not trespass upon those considerations.
      Ms. Mowlam: Thank you for that guidance, Mr. Walker. I was merely responding to points raised by Conservative Members.
      I should like to take the exact point that you made, Mr. Walker, and refer to the nature of the married couple's allowance. As the hon. Member for Maidstone will have to acknowledge, this is another point that does not result in equality between men and women. The wife starts paying taxes above earnings of £2,600 while the man starts at earnings above £4,900. Because of the allowance, the amount that the man gets in his pay packet will vary between £7 a week and £41 a week, depending on his wage. Again, there is a clear differential which benefits the man. That is the effect of the clause. One cannot begin to argue that it treats men and women equally.
      I acknowledge that the clause benefits retired people, many of whom are women. As the hon. Member for Gedling (Mr. Mitchell) said, we are talking about 900,000 people. There are 11 million retired people. A small minority, knocking on 1 million, will benefit, but 10 million pensioners will not necessarily gain from this legislation, as my hon. Friend the Member for Newcastle upon Tyne, East pointed out.
      I am pleased that certain people with investments will benefit, and I do not want to penalise them. We should be clear that those who will benefit are not pensioners as a whole, but a small group. Many of those pensioners will be further penalised by the social security legislation. Unless we look at that jigsaw as a whole, we cannot see the total impact of the Bill.
      I shall draw my remarks to a close. As I said on Second Reading, this clause is a fraud and a sham. I acknowledge that it is a step forward.
      Miss Emma Nicholson: Does the hon. Lady agree that the principle of independent taxation is being established for the very first time in this Finance Bill?
      9.30 pm
      Ms. Mowlam: I shall be pleased when the principle manifests itself in reality. The hon. Member for Maidstone talked a great deal about principle—about independence and choice—but unless that principle is backed by economic independence and economic freedom it is meaningless. Let us agree the principle—it is easy and cheap to agree principles—but let us also ensure that the reality, the practice and the process accord with it. Under the Bill, that will not necessarily happen. If we are honest with each other, we must acknowledge that the provisions abolish the married man's allowance only to introduce it under another name.
      The hon. Member for Torridge and Devon, West asked me how the povisions will benefit some people more than others. Many Conservative Members have doubted that assertion. Let me give two examples to support my case. A couple with investments of £10,000 will save an additional £41 a week when the provision is introduced in 1990. A single mother, with two children under the age of 11, will lose £11·69 per week overall under the Bill. Her £1·23 tax cut will not make up for the loss of child benefit and housing benefit, despite increases in family credit. Overall, she will be worse off as a direct result of the changes. We must take both those examples into account if we are to understand the exact meaning of the Bill. I acknowledge
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      that the clause is a step in the right direction, but do not let us listen any more to Conservative Members' hyperbole.
      Mr. Morgan: We are discussing the abolition of disaggregation in clause 31 and the parallel provision for equality of treatment of men and women for capital gains purposes in clause 98. So far, two aspects of the matter have not been covered. First, we have not dealt with targeting. Secondly, we have not yet said that when Chancellors introduce provisions intended to benefit a major social group—in this case women—they should ask the members of that group what they regard as their priority.
      Last month the Government introduced social security and housing benefit changes, which caused them great difficulties. Those changes were based on the principle, enunciated several thousand times by Conservative Members, that they gave help where it was most needed. It was argued that if public expenditure was to be reorganised we should target assistance to those who needed it most, in circumstances where they needed it most. There is complete dissonance between that principle, enunciated in our debates on the social security and housing benefit changes, and the provision that we are debating.
      The Chancellor is attempting to make his mark. He wants to appear in the history books and make his mark in the footnotes. Perhaps it will be among the Chancellors whose political ambitions were terminated by the Brian Walden interview with the Prime Minister at the weekend. If he can do nothing else and rise no further in the political hierarchy, he wants it said of him that he introduced independent and equal taxation for women which had not been in operation since the time of Julius Caesar.
      How can the provision, which is completely untargeted, be squared with the housing benefit and social security changes that were introduced last month? We all know from our constituency surgeries and mailbags that independent and equal taxation is not one of women's main priorities. It may be one of the Chancellor's main priorities in his attempts to gain a place in the history books, but it is not what women want. Had women been asked, "What are your main priorities?", I am sure that they would have presented independent and equal taxation as a long-term aim—there is no question but that it is needed—but they would have argued that far more important things needed to be done if there was public money to be spent.
      Miss Emma Nicholson: The hon. Gentleman, because he is not a woman, perhaps fails to realise how deeply this issue has troubled married and unmarried women for so long, as the postbags of the Treasury and of people such as myself have shown.
      The Sunday Times reporter was appalled at what came out of the questionnaire that was printed. This has been one of the foremost priorities for women, because it is of crucial importance.
      Mr. Morgan: I am sure that the hon. Lady is correct in saying that women cannot abide injustice as between themselves and men. We all appreciate that very strongly. In considering what women would most want from this year's Budget, however, my surgery experience and my mailbag suggest that there is more concern about what has happened to widows' pensions, for example. A 42-year-old

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      widow bringing up a daughter has written to me to say that she will lose £56·80 per week when her daughter leaves full-time education this summer. This widow is in part-time work, but she simply does not know what she will do. The need to increase child benefit has already been stressed, as has the impact of poll tax on women through joint and several liability.
      Miss Nicholson: Without wishing to be discourteous, I suggest that the hon. Gentleman's constituents who are women do not ask him to do anything about women and tax because the Labour Government failed so significantly to do anything whatever about the problem.
      Mr. Morgan: In my closing remarks—I trust that the hon. Lady will be able to restrain herself and not intervene again—I wish to refer to the unequal treatment of people who have saved to provide for old age, compared with those who have small occupational pensions. The situation has been made far worse by the changes in housing benefit. It is women, particularly, who miss out on company pensions or small occupational pensions from the Post Office, British Rail or whatever, if they have a career break to bring up children and thus tend to depend on savings rather than on a pension. They are far worse off as a result of the Government's changes in housing benefit.
      Had women been asked in what ways they would like additional public expenditure to be made available to them, equality would have been put down as a long-term goal, but my correspondence and surgery experience suggest that they would have given far higher priority to other areas such as child benefit in terms of what should be achieved by this year's Budget. The Chancellor has made no attempt to consult women about what they actually want.
      Mr. Chris Smith: The Opposition have no quarrel with the principle of clause 31 and independent taxation for a man and his wife. We warmly welcome the principle of disaggregation. That is why I shall advise my right hon. and hon. Friends to accept clause 31. We have doubts about clause 98. They have been aired in the debate and I shall return to them later.
      As we stated in the election campaign, we believe that it is offensive that a wife should be regarded for taxation purposes effectively as a chattel of her husband and we warmly welcome the removal of that principle from our income tax system.
      The present system is not just offensive—it is a muddle and a mess, as the Institute for Fiscal Studies clearly identified when it said that the system was
      "a mess. It provides an incentive to some to marry and a deterrent to others. For some purposes it presumes that the wife is wholly dependent on her husband, while for other purposes it rests on a presumption that husband and wife form an economic unit."
      With a system that deals in such different ways with the same couple in the same marriage it is clearly a benefit to try to sort out the anomalies.
      The report from the Institute for Fiscal Studies also reveals some of the problems that the Government are setting for themselves and for married couples with their intended replacement of the present system. That is where our principal concern lies.
      My hon. Friend the Members for Gateshead, East (Ms. Quin) and for Redcar (Ms. Mowlam) said that we do not believe that the system after 1990 will give true independence to married women. It will not do that,
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      especially because of the institution of the married couple's allowance—the married man's allowance by another name—which will go in the first instance to the man; only on his decision and in limited circumstances will it be transferable to the woman. That is not true independence. It is certainly not true independence and economic freedom for women. That is our principal objection to the structure with which the Government wish to replace the present system.
      We wish that the Government had listened to the hon. Member for Torridge and Devon, West (Miss Nicholson) who, on 31 March, joined the Equal Opportunities Commission in seeking to allow husbands and wives to choose who should have the allowance. We agree entirely with that principle and we hope to pursue it in greater detail in Committee. We believe that the administrative difficulties that the Government say would attend such a principle can be overcome and are worth overcoming.
      The Opposition's second anxiety is that the Government's proposals will not replace a judgmental system with a non-judgmental system. The hon. Member for Torridge and Devon, West said that the Government are removing discrimination against marriage. To some extent they are, but they are replacing it with a system that will discriminate in favour of marriage. That is not non-judgmental. It may be something which the Government wish to enshrine as part of public policy. The Chancellor likes the idea of marriage—he has had two of them. We should be clear that the Government intend to create a system that will discriminate in favour of marriage.
      Our third principal objection to the proposals is that they will benefit primarily the better-off. The inclusion of unearned income within the allowance system and the principle of disaggregation will benefit people with large unearned incomes. Of course many pensioners will benefit, but, as some of my hon. Friends said, many more pensioners will not benefit at all. A group that will benefit is married couples who currently make the wife's earnings election. The disaggregation principle will be achieved without the loss of the married man's allowance, which is lost at present. People who elect for the wife's earnings system are overwhelmingly those in the high joint earnings bracket.
      Another group that will benefit especially is married couples where the wife has earned or unearned income in excess of the personal allowance and where aggregation of that income with the husband's income would push the couple into a higher rate band. Disaggregation would push them back into the lower rate band and they would benefit considerably from the Government's proposals.
      The principal beneficiaries of the Government's new scheme will be people on more than average incomes. A small group of women may lose under the Government's proposals and will require transitional protection. That group comprises wives who are the main breadwinners in the household. The example frequently quoted in this respect is that of an unemployed steelworker whose wife is a teacher. Those women may well lose as a result of the Government's proposals, unless transitional protection is afforded.
      9.45 pm
      One other anomaly will result. It has been little noticed, but it is worth referring to briefly. The Government's new system will almost certainly encourage the removal of a considerable amount of savings funds from building

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      society accounts. We should perhaps ask the Government whether the building society movement has been consulted about their proposals. When the husband is a basic rate taxpayer, there is at present no disadvantage in his non-working wife placing her savings in a building society account. However, when she can use her own tax allowance, it would be a waste to leave funds in an account from which tax is deducted at source.
      It would be prudent, therefore, in such circumstances, for the wife to remove her funds from the building society account and to opt for either National Savings or perhaps an offshore account paying gross interest. In those circumstances, building society accounts are likely to suffer and I hope that the Government have had discussions with the building society movement about the effect of the proposed changes.
      There are a number of problems with the Government's proposed scheme. We have no quarrel with their desire to scrap the present system. They could have gone much further. They could have done something sensible about child benefit and put it up to a decent level, as we have been arguing for many years. They could have tackled the absurd measure that treats the provision of workplace nursery places as a taxable benefit, as we have been arguing for over many years. Both those measures would have greatly benefited the position of women within the tax and benefit system.
      The Government have not taken that route. They have taken the route of disaggregation, but they have enshrined in it the continuing sexist principle that the married couple's allowance goes, in the first instance, to the man. Although we thoroughly endorse the principle, we note that the gains will be made primarily by people who are better off, especially under the provisions of clause 98.
      The hon. Member for Berwick-upon Tweed (Mr. Beith) said that the Labour party claims to be in favour of independent taxation, but that it is not in favour of independent taxation of capital gains. If the Government removed the £5,000 exemption allowance from capital gains tax, we would be entirely and immediately in favour of independent taxation of capital gains. However, because that £5,000 exemption allowance will remain for both the husband and the wife and because the inclusion of that additional allowance is not the best use of taxpayers' money, we shall vote against clause 98.
      We endorse the principle, but the Government's practice does not match up to their declared intentions. We urge the Government to go much further along the road to true independence.
      Mr. Norman Lamont: I am grateful to the hon. Member for Islington, South and Finsbury (Mr. Smith) for saying that the Labour party welcomes the principle of disaggregation. This has been an interesting debate, and even the hon. Member for Redcar (Ms. Mowlam) managed to describe the Government's proposals as a step forward. The fact that she said that was in itself a step forward. If the hon Lady will up her rhetoric in favour of the proposals, I shall downplay my rhetoric in favour of them. Perhaps we shall then find common ground.
      Ms. Mowlam: If the Minister reads the report of the Second Reading debate he will find that I made exactly the same statement on that occasion. I shall adjust my rhetoric
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      when he ups the degree of honesty that is to be found in the Budget proposals on what is actually happening to women.
      Mr. Lamont: That was not, as I recall, how the hon. Lady seemed to present her opinion at the time of the Budget statement debates. However, I welcome her position in any event.
      The hon. Member for Islington, South and Finsbury asked about the building societies and described the effect of receiving interest that is paid net of tax. We shall have time to discuss the issue fully with the building societies in the run up to 1990. We do not expect the flows that will occur as a result of these measures to be in any way large when compared with the flows that we see taking place all the time.
      The hon. Member for Caernarfon (Mr. Wigley) asked about joint and several liability in terms of taxation. He referred especially to a husband and wife working together in partnership. Where a husband and wife are in partnership, there will be a joint and several liability, but that is no different from the position of any two people who are in partnership. The arrangement will be no different from any other couple working together in that way.
      Mr. Wigley: I was talking about a husband and wife, one or other or both of whom may be self-employed—not necessarily in a partnership together—with incomes that lead to the payment of income tax. I wanted to know whether in those circumstances there would be joint and several liability.
      Mr. Lamont: If separately employed in different businesses, there is no joint and several liability. If a husband and wife are in a partnership, which I thought I heard the hon. Gentleman say, there will be a joint and several liability.
      Joint and several liability applies to the community charge because the safety net covering liability to pay the charge for poorer households is linked to the support that is provided by the social security system. That system must necessarily take into account a household's combined resources.
      Some hon. Members have suggested that the proposals do not affect a significant number. In fact, they do. Over 2 million will benefit, of whom 1·6 million will be married women. About 500,000 will be husbands.
      The hon. Member for Newcastle upon Tyne, East (Mr. Brown), from the Opposition Front Bench, said that the Labour party favoured independent taxation. I think that he sought to give the impression that the aspiration and the aim were very much the same as the Government's. There is one crucial difference, however, and that emerged during the general election when the Labour party tried to keep a little quiet about its intention to abolish the married man's allowance. We are now talking about the married couple's allowance.
      If the Labour party is in favour of getting rid of the married couple's allowance—a move that we are emphatically against—the cost will be about £7·16 per week to the basic rate taxpayer. It is the married couple's allowance that will keep 1 million people out of tax. About 12 million couples would lose if the proposals that appeared to be being advanced by the Labour party during the election were to be implemented.
      Mr. Nicholas Brown: I thought that I was measured and careful in what I said. It is rather naughty of the Minister to attribute remarks to me that I did not make.
      Mr. Lamont: The hon. Gentleman is quite right. He is always measured. I would never try to represent him otherwise. However, I received the impression that there is a desire to phase out the married couple's allowance, and I merely made clear the consequences.
      The hon. Member for Berwick-upon-Tweed (Mr. Beith) was not ambiguous about that in any way. He made an interesting speech and advocated that the married couple's allowance should be frozen in cash terms. He said that the same principle applying to the breadwinner wives should be applied to the married couple's allowance. With respect, I do not believe that the breadwinner wives' position is analogous. It is anomalous that two and a half times the single person's allowance should apply to breadwinner wives.
      We believe that although, as the hon. Member for Berwick-upon-Tweed said, there may be some special circumstances, there are many one-earner couples and we cannot make a case for such a couple receiving two and a half times a single person's allowance. We believe that the married couple's allowance, which has been a feature of the tax system in one form or another, should be preserved. Even if it was preserved in cash terms, what the hon. Member for Berwick-upon-Tweed advocated would involve a gradual reduction in real terms.
      Opposition Members tried to portray the measures as designed to benefit the wealthy. They seem to think that there is some way in which independent taxation can be introduced which will be of no benefit to the wealthy. An inevitable consequence of introducing independent taxation in any form is that it will involve some substantial gains for people with large incomes. However, Opposition Members should not misrepresent the fact that our changes will bring very substantial benefits to many people, and three quarters of the costs of independent taxation will go to basic rate taxpayers and non-taxpayers after the change. Some 1·2 million wives with an income under £5,000 a year will gain. Half the cost of independent taxation will go to the elderly, and 80 per cent, of elderly taxpayers will gain. All that amply shows that the reform is extremely beneficial to very many people.
      The hon. Member for Newcastle upon Tyne, East referred to introducing independent taxation in a fiscally neutral way. That makes no sense. There is no way in which we can introduce independent taxation on income on a fiscally neutral basis. If there is, the hon. Gentleman did not do much to enlighten the House about what he had in mind. He told us what he was going to do about capital gains tax, and I hope to show that it is complete and utter nonsense to have independent taxation for income and somehow to resile from that position for capital gains.
      Mr. Nicholas Brown: The Minister is being uncharacteristically unfair and he misrepresents what we said. All that we advocated was progressive taxation on unearned income. We advocated nothing more than that. In other words, there should be redistribution from the wealthy to the less wealthy.
      Mr. Lamont: I certainly did not want to misrepresent the hon. Gentleman. I am grateful to him for making his position clear. I assume that he means that the burden of the increasing progressive taxation will be spread over all
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      taxpayers, whether or not they are beneficiaries of independent taxation. I do not think that that is necessarily a very logical position to adopt.
      Several of my hon. Friends, notably my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson), referred to the married couple's allowance going to the man in the first place. the hon. Members for Gateshead, East (Ms. Quin) and for Redcar rehearsed those arguments. They know, of course, that the allowance can be transferred to the wife. They have also heard me say that the effect of our proposals will achieve the right results in 99 per cent. of cases. Only in a quarter of 1 per cent. of cases will we not achieve the right result.
      I make the point that with that one quarter of 1 per cent. one is talking about the better-off, and Opposition Members are advocating that I should give just a little bit more to the better-off. We have decided that that solution is not worth pursuing. Our solution will allow us to implement the proposals in 1990 and to advance the timetable, which would otherwise not have been feasible. I am not saying that a Government will not look at that matter again one day, but I emphasise that an enormous amount of work has been involved in getting the revenue and computer programmes ready to implement the measure by 1990. It is a tight timetable as it is.
      10 pm
      The hon. Member for Gateshead spoke of the possible risks of forestalling and of couples transferring assets between them. Perhaps that will happen to some extent, but it will be a consequence of independent taxation. I do not for one minute believe that we could introduce the concept of taxing transfers between husband and wife. If Opposition Members reflect on that point, they will come to the conclusion that it would be far too draconian to prevent husbands and wives from switching assets between them.
      One point that has not been mentioned in this debate, and which Opposition Members appear to have left totally out of account, is how we are to combine capital gains tax and income tax. The Opposition have not said that they are against taxing capital gains at income tax rates, so I presume that they are in favour. If they are, surely it follows logically that if capital is to be treated as income, capital gains also should be subject to a separate exemption for husband and wife. That seems to me to follow logically.
      It is said that capital gains tax should be revenue-neutral. But what precisely does that mean? It can only mean one of two things: either that the annual exemption on capital gains would be reduced for everyone, penalising capital gains tax payers who are not married—which would be a nonsense—or introducing a lower exemption for husbands and wives than for single people. The hon. Member for Berwick-upon-Tweed found that out when he was exploring the subject with the hon. Member for Caernarfon. Either way, that proposal makes not one jot of sense. I urge the Committee to support the clause.
      Question put and agreed to.
      Clause 31 ordered to stand part of the Bill.

    Clause 98

      MARRIED COUPLES
      Question put, That the clause stand part of the Bill:
      The Committee divided: Ayes 248, Noes 182.

      Division No. 292]

      [10.02 pm

      AYES

      Adley, Robert

      Evans, David (Welwyn Hatf'd)

      Aitken, Jonathan

      Fallon, Michael

      Alexander, Richard

      Favell, Tony

      Alison, Rt Hon Michael

      Fearn, Ronald

      Allason, Rupert

      Fenner, Dame Peggy

      Amess, David

      Field, Barry (Isle of Wight)

      Amos, Alan

      Forman, Nigel

      Arbuthnot, James

      Forsyth, Michael (Stirling)

      Arnold, Jacques (Gravesham)

      Forth, Eric

      Arnold, Tom (Hazel Grove)

      Fox, Sir Marcus

      Aspinwall, Jack

      Franks, Cecil

      Atkinson, David

      Freeman, Roger

      Baker, Nicholas (Dorset N)

      French, Douglas

      Baldry, Tony

      Fry, Peter

      Banks, Robert (Harrogate)

      Gardiner, George

      Batiste, Spencer

      Garel-Jones, Tristan

      Beaumont-Dark, Anthony

      Gill, Christopher

      Beith, A. J.

      Goodhart, Sir Philip

      Bellingham, Henry

      Goodlad, Alastair

      Bendall, Vivian

      Goodson-Wickes, Dr Charles

      Bennett, Nicholas (Pembroke)

      Gorman, Mrs Teresa

      Bevan, David Gilroy

      Gow, Ian

      Biffen, Rt Hon John

      Gower, Sir Raymond

      Biggs-Davison, Sir John

      Grant, Sir Anthony (CambsSW)

      Blackburn, Dr John G.

      Gregory, Conal

      Body, Sir Richard

      Griffiths, Sir Eldon (Bury St E')

      Bonsor, Sir Nicholas

      Griffiths, Peter (Portsmouth N)

      Boscawen, Hon Robert

      Grist, Ian

      Boswell, Tim

      Ground, Patrick

      Bottomley, Peter

      Grylls, Michael

      Bottomley, Mrs Virginia

      Hamilton, Hon Archie (Epsom)

      Bowden, Gerald (Dulwich)

      Hampson, Dr Keith

      Bowis, John

      Hanley, Jeremy

      Boyson, Rt Hon Dr Sir Rhodes

      Hannam, John

      Brazier, Julian

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

      Bright, Graham

      Hargreaves, Ken (Hyndburn)

      Brittan, Rt Hon Leon

      Harris, David

      Brooke, Rt Hon Peter

      Haselhurst, Alan

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

      Hawkins, Christopher

      Browne, John (Winchester)

      Hayes, Jerry

      Bruce, Ian (Dorset South)

      Hayhoe, Rt Hon Sir Barney

      Buchanan-Smith, Rt Hon Alick

      Hayward, Robert

      Buck, Sir Antony

      Heathcoat-Amory, David

      Burt, Alistair

      Hicks, Robert (Cornwall SE)

      Butler, Chris

      Higgins, Rt Hon Terence L.

      Butterfill, John

      Hind, Kenneth

      Campbell, Menzies (Fife NE)

      Hordern, Sir Peter

      Carlile, Alex (Mont'g)

      Howard, Michael

      Carlisle, John, (Luton N)

      Howarth, G. (Cannock & B'wd)

      Carlisle, Kenneth (Lincoln)

      Howell, Rt Hon David (G'dford)

      Carrington, Matthew

      Hughes, Robert G. (Harrow W)

      Carttiss, Michael

      Hunt, David (Wirral W)

      Cash, William

      Hunter, Andrew

      Channon, Rt Hon Paul

      Irvine, Michael

      Chapman, Sydney

      Irving, Charles

      Chope, Christopher

      Jack, Michael

      Churchill, Mr

      Janman, Tim

      Clark, Sir W. (Croydon S)

      Jessel, Toby

      Clarke, Rt Hon K. (Rushcliffe)

      Johnson Smith, Sir Geoffrey

      Coombs, Simon (Swindon)

      Jones, Gwilym (Cardiff N)

      Couchman, James

      Kellett-Bowman, Dame Elaine

      Cran, James

      Kennedy, Charles

      Currie, Mrs Edwina

      King, Roger (B'ham N'thfield)

      Curry, David

      Kirkhope, Timothy

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

      Knapman, Roger

      Davis, David (Boothferry)

      Knight, Greg (Derby North)

      Day, Stephen

      Knight, Dame Jill (Edgbaston)

      Devlin, Tim

      Knowles, Michael

      Dickens, Geoffrey

      Knox, David

      Dicks, Terry

      Lamont, Rt Hon Norman

      Dorrell, Stephen

      Lang, Ian

      Douglas-Hamilton, Lord James

      Latham, Michael

      Dover, Den

      Lawrence, Ivan

      Dunn, Bob

      Lawson, Rt Hon Nigel

      Durant, Tony

      Lee, John (Pendle)

      Emery, Sir Peter

      Lester, Jim (Broxtowe)

      116

      Lilley, Peter

      Shaw, David (Dover)

      Livsey, Richard

      Shaw, Sir Giles (Pudsey)

      Lloyd, Sir Ian (Havant)

      Shephard, Mrs G. (Norfolk SW)

      Lloyd, Peter (Fareham)

      Shepherd, Colin (Hereford)

      Lord, Michael

      Sims, Roger

      Lyell, Sir Nicholas

      Speller, Tony

      McCrindle, Robert

      Stanbrook, Ivor

      Macfarlane, Sir Neil

      Steen, Anthony

      MacKay, Andrew (E Berkshire)

      Stern, Michael

      Maclean, David

      Stevens, Lewis

      McLoughlin, Patrick

      Stewart, Andy (Sherwood)

      McNair-Wilson, M. (Newbury)

      Stradling Thomas, Sir John

      McNair-Wilson, P. (New Forest)

      Summerson, Hugo

      Madel, David

      Taylor, Ian (Esher)

      Major, Rt Hon John

      Taylor, John M (Solihull)

      Malins, Humfrey

      Taylor, Matthew (Truro)

      Mans, Keith

      Taylor, Teddy (S'end E)

      Marland, Paul

      Temple-Morris, Peter

      Marshall, John (Hendon S)

      Thompson, Patrick (Norwich N)

      Martin, David (Portsmouth S)

      Thurnham, Peter

      Mates, Michael

      Tracey, Richard

      Maude, Hon Francis

      Tredinnick, David

      Maxwell-Hyslop, Robin

      Trippier, David

      Mayhew, Rt Hon Sir Patrick

      Twinn, Dr Ian

      Mellor, David

      Waddington, Rt Hon David

      Michie, Mrs Ray (Arg'l & Bute)

      Walden, George

      Miller, Hal

      Walker, Bill (T'side North)

      Mills, Iain

      Wallace, James

      Miscampbell, Norman

      Waller, Gary

      Mitchell, Andrew (Gedling)

      Ward, John

      Mitchell, David (Hants NW)

      Wardle, Charles (Bexhill)

      Moate, Roger

      Warren, Kenneth

      Montgomery, Sir Fergus

      Watts, John

      Morrison, Hon Sir Charles

      Wells, Bowen

      Morrison, Hon P (Chester)

      Whitney, Ray

      Moss, Malcolm

      Widdecombe, Ann

      Moynihan, Hon Colin

      Wiggin, Jerry

      Mudd, David

      Wilshire, David

      Neale, Gerrard

      Winterton, Mrs Ann

      Needham, Richard

      Winterton, Nicholas

      Neubert, Michael

      Wolfson, Mark

      Newton, Rt Hon Tony

      Wood, Timothy

      Nicholls, Patrick

      Woodcock, Mike

      Nicholson, Emma (Devon West)

      Yeo, Tim

      Paice, James

      Young, Sir George (Acton)

      Porter, David (Waveney)

      Younger, Rt Hon George

      Rathbone, Tim

      Riddick, Graham

      Tellers for the Ayes:

      Roe, Mrs Marion

      Mr. Mark Lennox-Boyd and

      Ryder, Richard

      Mr. David Lightbown.

      NOES

      Abbott, Ms Diane

      Campbell-Savours, D. N.

      Adams, Allen (Paisley N)

      Canavan, Dennis

      Allen, Graham

      Clark, Dr David (S Shields)

      Archer, Rt Hon Peter

      Clarke, Tom (Monklands W)

      Ashton, Joe

      Clay, Bob

      Banks, Tony (Newham NW)

      Clwyd, Mrs Ann

      Barnes, Harry (Derbyshire NE)

      Cohen, Harry

      Barron, Kevin

      Cook, Frank (Stockton N)

      Battle, John

      Cook, Robin (Livingston)

      Beckett, Margaret

      Corbett, Robin

      Bell, Stuart

      Cousins, Jim

      Benn, Rt Hon Tony

      Cryer, Bob

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

      Cummings, John

      Bermingham, Gerald

      Cunliffe, Lawrence

      Bidwell, Sydney

      Dalyell, Tam

      Blair, Tony

      Darling, Alistair

      Blunkett, David

      Davies, Rt Hon Denzil (Llanelli)

      Boateng, Paul

      Davies, Ron (Caerphilly)

      Boyes, Roland

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

      Bradley, Keith

      Dewar, Donald

      Bray, Dr Jeremy

      Dixon, Don

      Brown, Gordon (D'mline E)

      Dobson, Frank

      Brown, Nicholas (Newcastle E)

      Doran, Frank

      Buchan, Norman

      Douglas, Dick

      Buckley, George J.

      Dunnachie, Jimmy

      Caborn, Richard

      Eadie, Alexander

      Callaghan, Jim

      Ewing, Harry (Falkirk E)

      Campbell, Ron (Blyth Valley)

      Fatchett, Derek

      117

      Field, Frank (Birkenhead)

      Millan, Rt Hon Bruce

      Flynn, Paul

      Mitchell, Austin (G't Grimsby)

      Foot, Rt Hon Michael

      Moonie, Dr Lewis

      Foster, Derek

      Morgan, Rhodri

      Foulkes, George

      Morley, Elliott

      Fyfe, Maria

      Morris, Rt Hon J. (Aberavon)

      Galbraith, Sam

      Mowlam, Marjorie

      Galloway, George

      Mullin, Chris

      Garrett, John (Norwich South)

      Murphy, Paul

      Garrett, Ted (Wallsend)

      Nellist, Dave

      George, Bruce

      Oakes, Rt Hon Gordon

      Gilbert, Rt Hon Dr John

      O'Brien, William

      Golding, Mrs Llin

      Orme, Rt Hon Stanley

      Gordon, Mildred

      Patchett, Terry

      Griffiths, Nigel (Edinburgh S)

      Pendry, Tom

      Griffiths, Win (Bridgend)

      Pike, Peter L.

      Grocott, Bruce

      Powell, Ray (Ogmore)

      Harman, Ms Harriet

      Primarolo, Dawn

      Hattersley, Rt Hon Roy

      Quin, Ms Joyce

      Heffer, Eric S.

      Radice, Giles

      Hinchliffe, David

      Randall, Stuart

      Hogg, N. (C'nauld & Kilsyth)

      Redmond, Martin

      Holland, Stuart

      Rees, Rt Hon Merlyn

      Home Robertson, John

      Reid, Dr John

      Howarth, George (Knowsley N)

      Richardson, Jo

      Howell, Rt Hon D. (S'heath)

      Roberts, Allan (Bootle)

      Hoyle, Doug

      Robertson, George

      Hughes, John (Coventry NE)

      Rogers, Allan

      Hughes, Robert (Aberdeen N)

      Rooker, Jeff

      Hughes, Roy (Newport E)

      Ross, Ernie (Dundee W)

      Hughes, Sean (Knowsley S)

      Rowlands, Ted

      Illsley, Eric

      Ruddock, Joan

      Ingram, Adam

      Salmond, Alex

      John, Brynmor

      Sedgemore, Brian

      Jones, Barry (Alyn & Deeside)

      Sheerman, Barry

      Jones, Martyn (Clwyd S W)

      Sheldon, Rt Hon Robert

      Kinnock, Rt Hon Neil

      Shore, Rt Hon Peter

      Leighton, Ron

      Short, Clare

      Lestor, Joan (Eccles)

      Skinner, Dennis

      Lewis, Terry

      Smith, Andrew (Oxford E)

      Litherland, Robert

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

      Lloyd, Tony (Stretford)

      Smith, Rt Hon J. (Monk'ds E)

      Lofthouse, Geoffrey

      Snape, Peter

      Loyden, Eddie

      Soley, Clive

      McAllion, John

      Spearing, Nigel

      McAvoy, Thomas

      Stott, Roger

      Macdonald, Calum A.

      Strang, Gavin

      McFall, John

      Straw, Jack

      McKay, Allen (Barnsley West)

      Taylor, Mrs Ann (Dewsbury)

      McKelvey, William

      Turner, Dennis

      McLeish, Henry

      Wall, Pat

      McNamara, Kevin

      Walley, Joan

      McTaggart, Bob

      Wardell, Gareth (Gower)

      McWilliam, John

      Wareing, Robert N.

      Madden, Max

      Welsh, Andrew (Angus E)

      Mahon, Mrs Alice

      Welsh, Michael (Doncaster N)

      Marek, Dr John

      Wigley, Dafydd

      Marshall, David (Shettleston)

      Williams, Rt Hon Alan

      Martin, Michael J. (Springburn)

      Williams, Alan W. (Carm'then)

      Martlew, Eric

      Winnick, David

      Maxton, John

      Wise, Mrs Audrey

      Meacher, Michael

      Meale, Alan

      Tellers for the Noes:

      Michael, Alun

      Mr. Frank Haynes and

      Michie, Bill (Sheffield Heeley)

      Mr. Ken Easth

      Question accordingly agreed to.
      Clause 98 ordered to stand part of the Bill.

    Clause 26

      CORPORATION TAX: SMALL COMPANIES
      Question proposed, That the clause stand part of the Bill.
      10.15 pm
      The Economic Secretary to the Treasury (Mr. Peter Lilley):Since 1979 we have introduced a large number of
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      measures to help small businesses. The Finance Bill introduces further measures. In particular, clause 26 reduces the rate of corporation tax on the profits of small companies from 27 to 25 per cent. Since we have been in office, the small companies rate of corporation tax has been cut by 17 percentage points from 42 to 25 per cent.
      This is the sixth successive year in which we have been able to keep the rate of tax to the small company in line with the basic rate of income tax. It is now the marginal tax rate for the vast majority of unincorporated businesses. Out of a total of 418 companies paying corporation tax in 1985–86, the last year for which we have comprehensive figures, no fewer than 392,000 companies paid tax at the small companies rate. A further 19,000 were in the transitional band, still paying below the full corporation tax rate. Only about 7,000 companies in the United Kingdom paid the full standard rate of corporation tax.
      The total number of companies in the low tax band has been increasing rapidly. Between 1982 and 1985–86 an additional 160,000 companies paid the small companies rate. The number of companies rising into the transitional and full tax zones has more than doubled, so more companies are paying more tax, but at lower rates. Above all, this reflects the return to profitability of British industry as well as an increase in the number of small businesses that have been started or expanded.
      As a result of the progressive reduction in the small companies tax rate and related changes, the regime for small businesses in this country is now one of the most favourable in the industrialised world. We have a lower rate of corporation tax than most countries, we have a more favourable rate for small companies than most countries, and we have a wider band to which that rate applies than almost any other country. In short, Britain is now as attractive a country in which to establish and expand a small company as any of our major competitors and there is every incentive for our small companies to grow larger. The clause reinforces that position, and I am pleased to put it before the Committee.
      Mr. Chris Smith: It might help if I said at the outset that we do not intend to divide on clause 26. We welcome its provisions, but there are a number of questions about it that ought to be answered.
      First and foremost, the clause enshrines the principle of progressivity. The Labour party has advocated and will continue to advocate a much more progressive income tax system. The same principle ought, in fairness and logic, to be applied to corporation tax. That principle is enshrined in the proposal that there should be a 25 per cent. rate for companies whose profits do not exceed £100,000 and also in the consequential adjustment to the marginal relief fraction.
      We also welcome the clause because we support and wish to encourage the growth and development of small businesses. The Chief Secretary told us in the Budget debate that the Government are doing far more for small businesses than have any previous Government. He told us that the number of small businesses is increasing at about 500 a week. That figure is more or less accurate. The number is 494 a week—a figure that is based on VAT-registered companies and VAT returns. It is worth pointing out that the equivalent increase for the the period 1974–79 was 417 a week. The Government have made a marginal improvement in the rate at which small

      119
      businesses have been established, but the record of previous Labour Governments stands reasonable comparison.
      The Government have taken a number of measures that doubtless they will claim encouraged the formation of small businesses, including provisions for a delay in the payment of tax by giving an average of several months' credit to small businesses. Those small businesses would probably nominate liability on the preceding year basis, which allows the offsetting of costs and expenses against tax. The Government would probably also claim to have helped small businesses through the self-employment schemes and national insurance changes. It is small wonder, therefore, that small businesses may have improved their position marginally over the lifetime of the Government.
      The greatest factor affecting small businesses is the level of interest rates. In that regard, the Government do not have such a good record. To the detriment of small businesses and, indeed, business as a whole, we still have one of the highest real rates of interest of the entire developed world. That is not something of which the Government should be proud, even if it is a matter by which the Prime Minister seems to place so much store when considering the exchange rate level and the Government's inflation policy.
      A further caveat should be entered. If we are placing so much importance on the development of small businesses, we should pay attention—the Government never seem to pay attention to this—to the increasing domination of our economy by large business and large-scale enterprise. The figures are startling. If we look at the number of firms in the United Kingdom representing the upper half of retail sales, we find that in 1950 there were 4,750. By 1961, the figure had fallen to 1,700. By 1971, it had fallen further to 930. According to 1985 figures, the figure now is 94. The concentration and centralisation of economic power which that represents is something about which the Government should be more concerned. It is fine to talk about promotion being available for small businesses but at the same time a blind eye is being turned to the agglomeration of an enormous amount of economic power into the hands of a small number of companies.
      The further change in the corporation tax rate for small businesses may encourage payments to be made to shareholder-directors in the form of dividends rather than a salary. If a privately owned small company makes a profit and distributes it as dividend to basic rate tax paying shareholders, it pays corporation tax at 25 per cent., against which the shareholder's personal income tax can be set.
      That results in a tax burden of 25 per cent. to the company and zero per cent. to the shareholders, giving a net tax rate of 25 per cent. If, however, the same profit is paid as salary to the directors, who, in small companies, are also likely to be the shareholders, the company has to pay 10·45 per cent. in national insurance and the employees have to pay 9 per cent. national insurance on top of their basic rate tax. The net tax burden in such circumstances is therefore 41 per cent. I think that we are entitled to ask whether it is right that we have a system which, because of how national insurance operates, encourages that device.
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      Broadly speaking, we favour the clause. We shall not divide the Committee but simply want the Government to be a little more honest and realistic about small businesses and the desire—theirs and ours—to encourage the enterprise that they represent. Moreover, the Government should cover the efforts of small businesses and the Opposition's attitude with less of a gloss than they sometimes apply.
      Mr. Graham Bright: I, too, sincerely welcome clause 26. Any reduction in the tax payable by small companies is desirable, to say the least, but I am worried lest we leave it there.
      Small companies usually try to expand. They often borrow heavily and are not flush with cash. It is irksome to make a profit and then have to pay out quite a lot of it in taxation. A company may be keen to expand or re-equip, especially in view of present challenges, such as preparing for 1992. It is important that our small firms are as well equipped and prepared for 1992 as are those in Germany or France. Moreover, they must face competition from engineering companies in South Korea and Taiwan.
      When companies want to retain cash for further development or research and development—I am not talking about those which milk profits to pay directors or use schemes such as the hon. Member for Islington, South and Finsbury (Mr. Smith) described—we should make it as easy as possible for them to put their profits back to work. That is always more difficult for small companies. They cannot be as fast on their feet as a large company with a chain of accountants looking for every possible way in which to delay or avoid paying taxes.
      We are talking here of corporation tax for small companies being in line with income tax. That is great, and I hope that we will keep it that way. It prevents any temptation to switch funds or to take them out of the company. There is a problem with the existing structure. I have argued for a graduated corporation tax. At the moment there is a marginal rate between £100,000 and £500,000. The effective rate for companies of this size is 37·5 per cent., which is 2·5 per cent. over the higher rate. I always think that that is a bit of a discouragement. It causes a company to think seriously about putting the brakes on at £100,000 and perhaps using all sorts of devious ways to stop paying that tax. I want to see a system that alleviates that.
      10.30 pm
      I do not want a system under which companies waste money. That always worries me. Sometimes an accountant says to a company, "You are going to make a profit, so it might be a good idea if you got rid of some money. Perhaps you ought to buy yourself a new Merc, refurbish the office or buy some equipment." Such spending does not occur because a company wants it to, but because it is a way of getting rid of some of the money. I do not like that, and I hope that we will look at that point. Let us make sure that we do not put things in the path of small businesses so that as they grow they design their business round the tax system. That is wrong. The tax sytem should be there to take money when people are making profits, but we should make it simpler. When we talk about a progressive tax, I hope that that is what we mean and that we will not have the clawback position that we have now.

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      We have put corporation tax in line with personal income tax, so what about providing an allowance for tiny companies? For personal income tax there is an allowance of £2,605. For a large company that does not mean anything. However, for small companies, we should have a band of profits that are tax-free at the lower end. It could be linked to the personal allowance, but it could be higher, at perhaps £5,000 or £10,000. I am suggesting that because we should try to encourage companies to put cash back into the business. We should encourage small businesses to do that regularly.
      As I said earlier, we are looking towards 1992 and we want to make sure that companies are equipped to face the position then. The most important thing they can do to equip themselves is to ensure that they have the most modern tools and machinery and that they invest money in research and development. Often a company starts well and gets its own share of the market, but if it does not plough money back into research and development, it loses that share of the market.
      I welcome the clause and I congratulate my hon. Friend the Minister on what he has introduced. However, I hope that he will look at the points that I have raised because they bother me as a small business man, and I know that they bother most of the small business men to whom I have spoken.
      Mr. Beith: The hon. Member for Luton, South (Mr. Bright) made some interesting suggestions. This is not the moment to go into the list of things that small businesses would like to see modified to make their lot easier. However, I should like to place on record the fact that we welcome the reduction in small business corporation tax.
      We suggested to the Chancellor that he might use the corporation tax device that was so successfully used by the right hon. and learned Member for Surrey, East (Sir G. Howe) when he was Chancellor, which was to carry out a phased reduction in corporation tax for large as well as small companies. That produced an incentive to
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      investment, which might have been a productive step to take in current circumstances. There are quite strong arguments for doing so. The present Chancellor has not done that, but he has at least given the corporation tax reductions for small businesses in this clause and we welcome them.
      Mr. Lilley: I do not intend to detain the Committee, but I should like to respond to a point raised by my hon. Friend the Member for Luton, South (Mr. Bright) to whom I pay tribute as a doughty defender of small businesses. He raised the question whether there should be a tax-free band for small businesses. There is a problem in that that would create a more favourable position for incorporated business than for unincorporated businesses. Also, it would presumably have to be available for all companies large and small, or we would have the problem of clawing it back, which would create a somewhat higher rate while it was being clawed back. My hon. Friend said that that happens under the present system, when we move from the rate for small companies to the standard rate. The clawback rate in that intermediate zone is significantly below the low rate that we used to have for small companies. Therefore, the position is not too serious and companies generally feel better off than they did.
      I am grateful to the hon. Member for Islington, South and Finsbury (Mr. Smith) for the fact that he does not propose to divide the Committee. I welcome the Committee's support for the cause of small businesses. I confess that I am slightly puzzled that the Labour party thinks that business men should pay a lower rate of tax than the ordinary man in the street, but that is for it to explain to the electorate.
      Question put and agreed to.
      Clause 26 ordered to stand part of the Bill.
      To report progress and ask leave to sit again.—[Mr. Peter Lloyd.]
      Committee report progress; to sit again tomorrow.

  PETITION

    Rating Reform
    10.37 pm
    Mrs. Maria Fyfe: I have the honour to present a petition on behalf of several constituents of Glasgow, Maryhill, including the Ruchill unemployed workers centre, Milton community council, Maryhill "B" tenants association, Cadder residents association, Woodside tenants association, Botany action group, Maryhill elderly forum, Lambhill community council and Lambhill senior citizens.
    The petition is addressed
    To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
    It states
    that the Abolition of Domestic Rates Etc. (Scotland) Act provides for the introduction in Scotland of the system of Community Charge or Poll Tax which will impose upon the people of Scotland a system of local taxation which will take no account of the ability of the citizens to afford such taxation and will cause hardship to many who are already poor. The Community Charge or Poll Tax will cause the redistribution of resources away from the poor areas into areas which are already prosperous. It will be expensive to operate and its collection will entail invasions of privacy and allocation to each adult Scot of an algorithm or personal computer identification number.
    Wherefore your petitioners humbly pray that your Honourable House repeal the Abolition of Domestic Rates Etc. (Scotland) Act and your petitioners, as in duty bound, will ever pray etc.
    I presented a similar petition some months ago. The people of Maryhill are no more in favour of the poll tax than they were then. Last Friday night the people living in Braid square in Woodside informed me that a poll tax canvasser was going about knocking on their doors at half-past 10 at night delivering the poll tax forms. She had a can of beer in her hand. I do not think that any hon. Member would attempt to justify such conduct, nor do I think that this behaviour was ever expected when the authorities embarked upon the distribution of the poll tax forms. I warn the House that this is the kind of thing that is likely to happen when poll tax canvassers are paid 40p per successful form completed and are largely recruited through their local jobcentre, which tells them that they must take on this occupation—
    Mr. Deputy Speaker (Sir Paul Dean): Order. I am sorry to interrupt the hon. Lady, but she is now arguing the case, which she must not do when presenting a petition.
    Mrs. Fyfe: In that case I shall conclude, Mr. Deputy Speaker, by presenting the petition, in the hope that the House will pay heed to my constituents' wishes.
    To lie upon the Table.

  Government Departments (Relocation)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Lloyd.]
  10.39 pm
  Mr. James Cran: I am pleased to have the opportunity of a short debate on the relocation of Government Departments and the dispersal of civil servants, not simply because I think that it is an important policy objective but because the Government share that view.
  In 1979 the Government made a commitment to relocate civil servants and Government Departments. They said that they would relocate 5,900 posts. I cannot criticise the Government in that regard because to date they are on course to meet that target. As I understand it, 5,500 posts have already been dispersed and the remainder of the process is in train.
  In addition, 6,000 posts have been dispersed on Departments' own initiative. It would be interesting to know how they exercise their initiative in this regard. That means that over the past nine years about 11,500—shortly to be 11,900—posts have been dispersed, out of a Civil Service consisting of more than 500,000 individuals. My question is whether the progress to date is satisfactory. I say that because, even though the target will have been achieved, it was an exceedingly modest one in the first place. Given that it was a modest target, perhaps it could have been achieved more quickly.
  It is said—especially by civil servants—that four fifths of the Civil Service is located outside Greater London. I have checked the facts, and that is absolutely true. However, as with all statistics, one needs to look behind the figures to find out exactly what they mean. While those statistics are factually correct, an analysis of the number of staff by economic planning region gives a wholly different picture. I considered non-industrial Civil Service staff in England, although I readily agree that I could have chosen the whole of the United Kingdom.
  I found that the south-east has the considerable total of 46·6 per cent. Dear old Yorkshire and Humberside—the House will understand why I call it that—has 7·2 per cent.; the west midlands has 7·1 per cent.; the north 7·4 per cent.; the east midlands 4·8 per cent., the north-west 12 south-west 11·3 per cent., while East Anglia comes up tail-end Charlie with about 3·2 per cent.
  Mr. Timothy Devlin: I am sorry to interrupt my hon. Friend in mid-flow. Is he not appalled that out of about 600,000 civil servants in the United Kingdom, only 33,600 are in the northern region? Does that not show a signal failure on the Government's part to sell the northern region, with all its strengths, to civil servants, who should be moving north and making a valuable contribution to the local economy?
  Mr. Cran: My hon. Friend makes his own point in his usual eloquent fashion, although he perhaps uses rather more extravagant language than I would use. I heard what he said, and there is no doubt that others did.
  Let us move on to consider industrial civil servants, again in England. I shall not go through the figures, but essentially they are no different from those for non-industrial civil servants. When one puts the two

  125
  together, one finds that the south-east of England is way ahead in its ability to attract and keep civil servants at the total of 46 per cent.
  I have not mentioned Scotland, Wales and Northern Ireland because in a sense those three countries prove the point. They have their own Departments of State, and Scotland has almost 10 per cent. of the total number of civil servants in the United Kingdom. What is good for Scotland, Wales and Northern Ireland might be good for some of the other regions apart from the south-east. The gist of my remarks, therefore, is that the south-east is doing well and the other regions are doing extremely badly.
  I am not one of that band of people who believe that we should disperse civil servants for the sake of doing so. If it is not cost-effective and does not increase or maintain efficiency, we should not do it, but there is no iron rule to suggest that if greater numbers of civil servants were distributed throughout the other regions either of those criteria could not be met. Indeed, cost-effectiveness can be measured. Inner London weighting cost the taxpayer the fairly substantial—some would say staggering—total of £675·5 million in the five years from 1983–84 to 1987–88. If I am correct in assuming that in the Government's view more civil servants could be dispersed, a considerable proportion of that sum could have been saved.
  In saying that, I pay tribute to the fact that this Government of all Governments have been extremely careful in their management of public expenditure. I believe that the same could be equally true in this area. In addition to inner London weighting, there are intermediate and outer London zone costs, London pay additions, inner London secretarial allowances and London allowances for lawyers, accountants and those whom we have all learnt to love—tax inspectors. In other words, a myriad costs of this kind have grown up in an extremely tight labour market. That is another reason why relocation policy should perhaps be more aggressively considered.
  There are other reasons. For some reason that is not entirely clear to me, it seems that in London civil servants work 41 hours per week whereas outside London they work 42 hours. Clearly, if more of them were outside London they would produce an extra hour's work each, which would again save taxpayers' money.
  Resignation rates are an important consideration for any employer, and in this context the Government are the employer. For reasons that we all understand, resignation rates are far higher in the south-east than in any other region. That, again, entails additional and, in my view, needless costs to the taxpayer.
  In addition to the manpower costs, there are office costs. It costs not far short of £300 million per annum in rent, rates and maintenance for all our buildings in Greater London. The Treasury guide to office rental values which has been laid in the Library shows that considerable savings could be made if offices were opened in other regions. To give the House the flavour of the situation, new office accommodation per square foot costs between £25 and £57 in City—my right hon. Friend the Minister will no doubt say that we do not have many offices there, and I take the point—£18·50 to £40 in the west end, in the London suburbs £7·50 to £17, in dear old Yorkshire and Humberside £4·75 to £7 and in the west midlands £3 to
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  £8·50. It does not take a chartered accountant to work out the savings that could be made if we had a more aggressive policy.
  That is the cost-effectiveness argument. What about the efficiency argument? Nothing in the Treasury guidelines suggests any major efficiency obstacles; quite the contrary. The hoary old arguments that we have all heard about bad communications between London and offices relocated to Hull, Humberside or Stockton are nonsense. The Government's communications network covers the entire nation and can be adapted in almost any way to meet new technology. The developments in information technology, including visual and document transmission, render the arguments about bad communications completely out of date.
  If I had longer, I could outline many other reasons why I believe that we should be more aggressive, but I shall canter quickly over three of them. The first is the contribution to regional economies. That significant reason has been accepted by the Government in the Treasury guidelines. An example is the move of the Manpower Services Commission to Sheffield. There is no evidence to show that that move was not extremely good, and there is plenty of evidence to show how it has affected the local economy.
  Secondly, the regions have a stake in the government of the United Kingdom. We must dispel the notion that London-based means London-biased, although we understand why it has occurred. The civil servants who are out in the regions tend not to be the policy-makers. Far from it. They tend to be mainly functional. The further away civil servants are from the south-east, not only are there fewer of them but they are less senior. As one who has spoken to and worked with more regional directors of more Departments than anyone, I can honestly say that most of them believe that being sent to a region is like being sent to Siberia. They always keep their houses in the south of England because they know that they will move back. The simple reason is that most of the Civil Service is here.
  The third point is the benefit to civil servants. This is an extremely difficult problem for the Government, but they are no different from other employers who must communicate with their work force. I hope that the Government will communicate aggressively with civil servants to show the advantage of relocation. My right hon. Friend the Minister is my Member of Parliament. When I was elected to the House, I had to buy a flat in Westminster, which cost twice as much as a four-bedroomed house in Yorkshire and Humberside. What a compelling reason for a civil servant to want to be relocated. But the facts must be presented to him.
  To give my right hon. Friend the opportunity to reply, I end by saying that I have some anxiety about our relocation policy and the modest achievements that we have had to date. I do not say that we made a promise and did not keep it, because we indubitably did. But the targets were too modest, and there was a propensity to relocate out of Greater London simply to overspill into the south-east and the regions adjacent to it. I am worried that no more central targets will be set. From the experience of all the jobs that I did before 1 came to the House, I know that unless targets are set from on high, it is easy to find reasons not to do what is required. I am worried about that, and, therefore, the passive nature of the policy requires further consideration.

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  I am assuaged in going a little further only by the fact that there will be annual surveys of progress by Government Departments—perhaps my right hon. Friend will tell us when those are due—and that annual efficiency gains will be sought from Government Departments. Perhaps that will act as a spur to relocation.
  We need greater progress. If the subject were debated on another occasion, hon. Members would agree that we should not return in another nine or 10 years to find that all we had done was to relocate 5,900 civil servants, plus the other 6,000. The other regions of the United Kingdom simply will not understand such lack of progress.
  10.55 pm
  The Paymaster General (Mr. Peter Brooke): I congratulate my hon. Friend the Member for Beverley (Mr. Cran) on his success in the ballot and on his choice of subject for our short debate.
  If I had not known before of my hon. Friend's considerable interest in matters of Civil Service location generally and, of course, of his constituency and regional interest in these issues, the large number of pointed parliamentary questions that he has asked me and others over recent months would have left me in no doubt of it.
  My hon. Friend's choice of subject gives me a timely opportunity to elaborate a little on the Government's policy on the location of Government work, to provide some further background on the new phase of that policy that I announced to the House in March, and to assure my hon. Friend of the Government's continuing commitment to relocation, wherever that is efficient and cost-effective.
  As my hon. Friend has rightly said, in 1979, we announced a programme for dispersing 5,900 Civil Service jobs out of London. As he acknowledges, that programme has been a success and is all but complete. Some 5,560 jobs have already been relocated as a consequence. The locations to which they have gone are widespread and include Sheffield, Glasgow, East Kilbride, Southend, Salisbury and Norwich. Planning is in hand for the small balance of 340 jobs remaining for dispersal under the 1979 programme.
  Over and above that centrally run dispersal programme, individual Departments have, at their own initiative, relocated a considerable number of jobs, or created new ones, out of London and the south-east. In all, those amount to well over 6,000. They include, for example, a new office with 150 posts created by Her Majesty's Land Registry in Hull, and increases in the number of Department of Health and Social Security jobs in North Fylde, Lytham St. Annes and Preston of almost 1,200. My hon. Friend and the House will also be aware of the recent decision to relocate the Patent Office to Newport, which should create at least 500 new jobs locally.
  In all, therefore, since 1979, some 12,000 Civil Service jobs have been located or created outside London and the south-east, about half through the centrally managed dispersal programme and half at the intitiative of individual Departments.
  That has contributed significantly to a substantial spread of Civil Service work and job opportunities throughout Britain, particularly when it is remembered that during this period the Civil Service has fallen significantly in size. The present picture is that about four
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  fifths of all civil servants already work outside greater London and more than three fifths work outside London and the south-east. My hon. Friend will be more aware than most that the Yorkshire and Humberside region was a major beneficiary of the Government's dispersal programme. The move of 1,760 Manpower Services Commission jobs from London to Sheffield accounts for almost one third of the total number of posts so far dispersed under this programme.
  The figures that I have just quoted are good, but before I come to our plans for the future I should like to say a word about the interesting figures that my hon. Friend gave for civil servants in the English regions. I am not sure that I could endorse the details he gave, but the overall picture he paints is, within its limits, a fair one. The south-east has a larger proportion of civil servants—industrial and non-industrial—than any other English region, or than Scotland, Wales or Northern Ireland. It also has a significantly larger population than any other region, and if one looks at the number of civil servants per thousand of population the picture is rather different. The northern region, to which my hon. Friend the Member for Stockton, South (Mr. Devlin) referred, has almost as many—and the south-west region has more—civil servants per head of population as London and the south-east, despite the fact that the south-east region includes the national capital and seat of Government.
  If my hon. Friend the Member for Beverley was seeking to create the impression that no other English region has the same or a higher proportion of civil servants as Scotland, Wales or Northern Ireland, I hope that he will allow me to correct him. At 1 April last year, the north-west region of England had 10 per cent. and the south-west region over 9 per cent. of the total non-industrial Civil Service—that is, civil servants in the United Kingdom as a whole—compared to just under 10 per cent. in Scotland, about 5 per cent. in Wales and just over 0·5per cent. in Northern Ireland.
  I assure my hon. Friend that the Government do not intend to rest on the progress already made. When, on 31 March, I informed the House in a written answer of the successful completion or near completion of the 1979 dispersal programme, I announced also a new phase in Government policy on the location of their work. I explained that, though no further central targets for relocation would be set, Departments would be reviewing the location of their work with a view, in suitable cases, to finding locations offering advantages in terms of recruitment and retention of staff, value for money and other considerations relevant to service delivery and management.
  After careful thought, we decided that it would not now be sensible to have a new version of the dispersal programme of 1979, which was centrally managed and had overall statistical targets, but that we would instead exploit the tide of individual departmental initiative for relocation that has been running strongly in the past few years and has, as I said, led to the actual or planned relocation of as many jobs as the formal dispersal programme itself.
  There are a number of reasons for this. First, it is consistent with the general trend in Civil Service management, which is to avoid central direction where possible and place the power to make decisions and the responsibility for making them with individual Departments acting within a clear framework of policy and with clearly defined incentives to take sensible

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  decisions. It seems to us that decisions taken in this way are likely to be better decisions than those taken in conformity with some massive central blueprint or master plan which would, very likely, be the product of a vast interdepartmental committee—probably meeting, incidentally, in the SW1 postal district.
  Secondly, it is consistent with the general change that has been taking place in the economy and in decision-making processes. Property is cheaper and staff are easier to find, outside the south-east. Sensible businesses are increasingly exploiting these advantages, and we want to build on the wish of individual Government Departments to do the same.
  My hon. Friend has some doubts that Departments will respond without central direction. But they have already shown that they are keen to do so. It is of the essence that I cannot forecast now exactly how many jobs will be relocated as a consequence of this new phase of our policy, but I am sure that all Departments will look seriously and sensibly at the options, and that if the trend of the past few years is any guide, a substantial number of jobs will be relocated, to the benefit of the efficiency of the Departments concerned, of their costs and the value for money that they give, and of the economic conditions in the receiving localities. I know that my ministerial colleagues are committed to this programme.
  My hon. Friend refers to the guidelines for Departments on the location of work. These guidelines emphasise the importance of thorough reviews based on the principles that I have mentioned. They also require Departments to give adequate weight to Government policy for the regeneration of regions and inner cities and provide in a good deal of detail examples of the kind of cost and labour supply advantages that relocation can bring. I might add that they also offer the prospect, in suitable cases, of some short-term help from the Treasury with the transitional costs of relocation. Those costs can be significant, and we are anxious that they should not be a disincentive to achieving the longer-term benefits.
  The new guidance takes account of the regional policy dimension in terms agreed with the regional and territorial Departments. It requires that
  "For all major possible relocations, i.e. those involving more than 100 people, the department should consider any site or sites suggested by the territorial or regional policy departments within assisted or urban programme areas and include at least the most favourable of these in their list of costed options, even if this does not provide the greatest overall saving the move must, however, generate a positive Net Present Value".
  The new guidelines have been firmly linked to running costs and to the public expenditure survey; first, because we considered that the policy might work better if the Treasury agreed to consider requests for help with transitional costs by additions to running costs limits; secondly because some expenditure benefits might be expected to be achieved if relocation were chosen; and, thirdly, because the Treasury would need to "keep the score" of the overall plans and achievements of Departments as the new policy progressed. In addition, Treasury expenditure divisions will ensure, within the context of the annual expenditure survey arrangements, that Departments produce worthwhile and relevant proposals on relocation in accordance with the guidelines.
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  It is clear that there are benefits in the longer term from sensible decisions on location and relocation. We have not done, retrospectively, a full cost-benefit analysis of the dispersal programme undertaken in 1979, but there is evidence that sensible decisions can lead to considerable savings. For example, a recent report submitted to my right hon. and learned Friend the Secretary of State for Scotland evaluates very positively the results of dispersing part of the Overseas Development Administration from central London to East Kilbride in 1981. I understand that my right hon. and learned Friend intends to publish the report in the near future. I am sure that my hon. Friend will read it with interest and encouragement, and I have already made arrangements to circulate it to Government Departments generally as an example of the benefits that can be achieved.
  As I am sure that the House will recognise, relocation is not the answer to every Civil Service problem; nor should it be seen as an automatic device for spreading employment opportunities. Some Civil Service work will have to remain in London arid the south-east. People who live in these areas need local services just as much as people living elsewhere—jobcentre clients, for example. Although modern communications, technology and good transport links now mean that much work can be done elsewhere, some Civil Service work will always have to be done in close proximity to Parliament, Ministers and the City.
  My hon. Friend mentioned the attitude of the Civil Service unions. It is of course important, in introducing policies of this kind, to consider the position of the staff who will be subject to the new arrangements. We have given an assurance to the Civil Service unions that, when jobs are relocated, every effort will be made to avoid the compulsory transfer of people in mobile grades and to find alternative jobs within reasonable travel distance for non-mobile grades. We have also confirmed, in the guidelines, the existing requirement on Departments to consult their own trade union sides when planning relocations; and, while there are issues which I have no doubt that the unions will wish to discuss further with the Treasury, I see no ground for pessimism.
  In sum, I am sure that this new phase of location policy will yield considerable benefits—to Departments, to the public that they serve, to the Exchequer and to the localities which receive new Civil Service jobs. I will at the earliest suitable opportunity—probably some time next year—give the House some account of the progress made and planned. I am sure that my hon. Friend, with his enthusiasm for the subject, will not be alone among hon. Members in following this progress with keen interest. He has done a service to that cause and process by his detailed and eloquent treatment of the matter tonight.
  To conclude on a personal note, as the local Member of Parliament for SW1 and adjacent places, I should say that 3 per cent. of the working population of the entire country comes to work in my constituency daily, leaving the rest of the House to look after the remaining 97 per cent. I am not jealous and I should be happy to see many of those people going to work elsewhere to the good of the rest of the economy.
  Question put and agreed to.
  Adjourned accordingly at nine minutes past Eleven o'clock.