§ 3.16 p.m.
§ The Earl of GOWRIE rose to call attention to the problems of selfemployed persons and the professions in this country; and to move for Papers. The noble Earl said: My Lords, since most of us in this House, as well as in the world outside, are engaged in employment, it is inevitable that in rising to move this Motion I should declare an interest. It was a year ago almost to the day when my professional salary, which I had come to take for granted, was brutally and, in my view, prematurely cut off. I joined first the "un" and then the self-employed.
§ A year ago one of my duties was to defend value added tax. I have now the obligation to assess myself and to pay it. I still defend VAT, but with rather less of the old vim. I work as an independent consultant to a very small commercial firm. I am fortunate both in the work and in what I earn, and I have nothing to grumble about. But having all my life been protected by institutions, whether academic or Parliamentary or governmental, I have now come to some knowledge of the anxieties which may be felt by those who do not have powerful corporations or powerful trade unions to look after them. I have come sharply to learn how these anxieties are acute in a time of steep decline in the value of money. We think often of the inflationary spiral as whirling upwards, but for most of us it means going downhill all the way.
§ My motion is to call attention to the problems of self-employed and professional people in this country. Their problem is that they are becoming poorer. Those who at present earn between £5,000 and £6,000 a year will need to be earning—if the current level of inflation and the current rates of taxation hold— about £17,000 to £18,000 a year by the time the next General Election must constitutionally be held. Getting poorer is a problem that self-employed and professional people might put up with for a time. Most professional people have enough independence of mind to recognise the severe economic difficulties facing the country, and enough loyalty and affection for the country to see their 1257 standard of living reduced if that would help in a difficult situation. Most self-employed people know at first hand what it is like to put by, to go without, to take the long rather than the short view. Virtually all people in a country with our kind of liberal and democratic political framework accept and even welcome the very considerable redistribution of wealth that has taken place since the last war. So getting poorer is not the whole story.
§ The special anxiety felt by self-employed and professional people at present is that they are unprotected and unrepresented at a time when their savings, and their qualifications and their industry are rendered progressively worthless by the decline in the value of money. "What is the use?" is a cry increasingly heard. What is the use of working hard when you are young to qualify for professions that do not just pay badly—they may have other compensations—but which pay less and less each year? What is the use of building up your own business—with all the weekend and evening work that that might entail—if any profits which you may be intelligent enough to make are then grabbed by Governments with both hands? There is the hand that takes by taxation and the hand that takes by inflation. We can live with one or the other, but the combination of the two is intolerable.
§ In this debate I am reluctant to use the term "middle class". This is not just on account of my tender sensibilities —the slight squeamishness that comes over middle-class people when class is mentioned. I am reluctant because the term contains a hint of aggression towards other groups in the country. The anxieties caused by inflation are felt right across our nation. In any case, not all middle-class people are professional or self-employed. However, I believe that a majority of people in Britain share what is sometimes called middle-class values. These are legion, and I shall mention only the crucial ones.
§ There is the right and duty to work. Unemployment is no part of the middleclass ethic, although unemployment through no fault of your own is, I acknowledge, a less common experience to professional people than to labourers or industrial workers. There is the respect for money. Money is the proof that you work. It is also the instrument whereby 1258 you exercise choice and the creation of security for yourself and your family. A modest sufficiency means that you can live freely and tolerantly with your neighbours as well as paying your way through taxation in the wider community you share.
§ In my view, one of the most dangerous of present-day myths is the myth that money is in some way immoral. Incidentally, it is a myth given birth by affluence. We are already beginning to hear much less about it. A modest surplus as against a modest sufficiency means the chance to build up something, to exercise creativity, to hand on some life enterprise when you die. In sociological jargon, it means social or upward mobility—the avoidance of a static society. Also it means savings and the desire and opportunity to invest.
§ I believe that most British people aim for a modest sufficiency and hope for a modest surplus. Certainly the professions and the self-employed do so. It sounds almost too commonplace to be worth saying, but what is not commonplace is that these values are under attack, shared though they are by butchers, bakers, farmers, solicitors, garage proprietors, surgeons, Parliamentary draftsmen, carpenters, most university lecturers and all art dealers: the 100 activities situated socially, as Frederick Forsyth has wittily put it, between the Trades Union Congress and the Confederation of British Industry. They are under attack, not by Communists or militants, although both of these groups have an interest in the outcome of the battle. They are under attack by the failure of Governments to control inflation. The House will notice that I spoke of "Governments" in the plural. In the second half of my speech I shall try to show that the effects of the present Government's policies, if they pursue them unchecked, will put an end to self-employment on any significant scale for a generation and that the professions, in the same case, will cease to attract firstclass people and so will decline.
§ Because I feel that these policies are almost literally lethal, I must try to clarify dangers in the Conservative position as well. In recent decades there has been a tendency for my political Party to become associated in the public mind with a "big business" ethic of hard selling, high consumption and easy credit. This is not altogether fair, but there is little doubt that such values also militate 1259 against the middle-class instinct for preferring conservation to consumption. They are not just material values; they spring from decent Keynesian motives as well as greedy ones, but they have gone too far. In practical terms, the big business ethic weighs heavily on the self-employed; the supermarket heavily on the corner grocer. Enemies are often more alike than friends, and big business shares with Socialism a hankering for uniformity and monopoly. My right honourable and noble friends and I will have to earn our passage back to our natural constituency of those who play small but collectively vital roles in our mixed economy.
§ There are, too, the little local difficulties of resale price maintenance and value added tax to contend with, justified in many respects though they were. They did not bring us many friends. Our aim in Office—to stimulate growth in our economy, to take the brakes off—was a proper aim shared by small as well as by large businesses up and down the country. It was certainly shared by the trades unions and they are urging it again on the present Chancellor. However, it was inflationary unless accompanied by wage controls, and wage controls proved less acceptable than either inflation or growth.
§ Acknowledging, then, the failure of the Conservative counter-inflation plan, we come to the plan of the present Labour Government. This is not a case of honest failure but of limbo—of hardly even trying. The Social Contract is relevant to our Motion this afternoon, because it has tried to create a new spirit in industrial relations, and hence a moderating of wage inflation, by offering union leaders fiscal and legislative measures directed against the very groups in society which we are discussing. In other words, it offers as a sacrifice to those least hit by inflation and most responsible for it those most hit by inflation and least responsible for it. Mr. Roy Jenkins has said that inflation is the greatest threat to our society since Hitler. He must be casting the Prime Minister in the role of Mr. Chamberlain. On the scrap of paper which is the Social Contract we find a list of sheerly punitive measures, directed not at property speculators or local government corruption or at whatever might reasonably inflame people's feelings during a difficult period —not even at the great and maligned 1260 multi-national companies—but at small businesses and the whole professional and service sector of our economy. This shabby arrangement has not whittled a single point off wage inflation, but it has been used, rather, to sanction larger and larger claims. That is why there is so much feeling, so much anger, in the professions and among the self-employed.
§ Let me itemise the policies which, in the name of a fairer society and in the hope of lower wage settlements, the Government have directed against professional and self-employed people. First comes the frontal attack, so to speak— the immediately-felt measures. Your Lordships will be asked next week to give a Second Reading to the Finance Bill. It is limping on to the Statute Book, not without an "own goal" or two, amid scenes of positively Mancusian uproar in another place, and just before the next Budget comes out on to the field. This Bill proposes rates of taxation not as substitutions for but as additions to capital gains, and to the highest rates of tax on investment incomes in the world. This is still thought of as unearned income, at a time when everyone—even the Secretary of State for Industry—states that lack of investment is one of our greatest problems.
§ The capital transfer tax looks forward to the wealth tax. When we were in Government, I wrote a memorandum to the effect that control of wages by law must be balanced by capital taxation, perhaps on the German model. I have no doctrinaire objection to any form of taxation, provided that it is intended principally to raise revenue and provided it always allows for the formation and accumulation of surplus which is vital to the social attitudes which I mentioned earlier. Small family businesses will be specially hard hit by the capital transfer tax. When a family business is transferred from father to son, there will be a tax bill heavy enough, in many cases, to necessitate the sale of the business to meet it.
§ My Lords, it is estimated that about 6 million people, or a quarter of the entire work force, work for small firms, and the bulk of those 6 million work for the 2 million registered as self-employed. Later in the debate, my noble friend Lord Ferrers will have something 1261 to say about the effect of capital transfer taxation on agriculture. For the moment, let me say that as well as being directly involved in terms of the asset value of partnerships, practices and the like, professions such as solicitors, accountants and bankers may be required to violate professional confidence under the powers to extract information in the Finance Bill. It is my opinion that my noble and right honourable friend maintained too high levels of taxation. Added to a rate of inflation which is taking off from 20 per cent., the present Government levels are, by comparison, tragically grotesque. In the days of "Swinging London", someone commented wittily that the English were Romans in the process of becoming Italians. At a certain level of taxation consent simply breaks down. We shall shortly evade taxes on a national scale as if we were Italians. I love Italy for her people and for the joys of flesh and spirit there, but not for her fiscal habits.
§ I turn now to the question of rates. In addition to inflation and new methods of taxation, small businesses are being savaged by rising rates. A protest meeting of members of the CBI in the Liverpool area concluded, according to yesterday's Times, that the average of rate increases in 1974–75 was 65 per cent., rising to 90 per cent. at the top end of the scale. Add this to the existing squeeze on profits and liquidity, my Lords! We are waiting for Layfield rather as if for Godot and must remember that the first lines of that great play were, "Nothing to be done." While we are waiting, the distant rumble of militancy can be heard in these least militant sections of our society. My Lords, if something is not done soon I believe, with The Times, that small businessmen will quite likely be found among those who are manning the nonpayment barricades.
§ I have said that the rates burden falls principally on those with small businesses. Business at least has a chance, though an ever-diminishing one, of making profits, but many self-employed people are not "in trade", as the old expression goes, but live on fixed, or almost fixed, incomes. Nothing has given greater offence than the Government's Social Security Amendment Act. Under this Act a self-employed person with 1262 annual earnings of £3,600 will from next month have to find a lump sum payment of £160 on top of his Schedule D tax, and there is no tax relief on this contribution, unlike the self-employed employers who set their contribution against a corporation tax which is now standing at 52 per cent. The standard rate tax payer with £3,500 a year will have to earn £250 more if he is merely to maintain a cash value of his income. This is on top of the rates increases, increases in existing taxation levels, the new proposals under the Finance Bill and all the rest. By contrast, an employed married man with two children earning the same amount will pay just £90 a year less and receive more benefits. We must not forget that the self-employed do not receive earnings-related benefits; they do not even qualify for unemployment benefit.
§ Miss Katherine Whitehorn—hardly a crusted Tory journalist—has written recently in the Observer that the increase in the self-employed stamp hits hard on individual craftsmen, authors and sculptors, all of whom point out that they do not get any pension contribution from an employer and no reciprocal free medical services when they go abroad.
§ In the present crisis and throughout this year and the next many salaried people are going to lose their jobs. They are going to find themselves made redundant—the most terrible phrase in all the vocabulary of the work place. Many will become self-employed and cease to be eligible for benefits, however long they have been making contributions to the national kitty. To add insult to injury, Members of Parliament are taking themselves out of the self-employed sphere as the new contributions start to bite. This has raised furious resentment and added to the feeling shared by more and more people that organised pressure groups are of more relevance to them and are a more effective way of dealing with their problems than Parliament.
Your Lordships will remember that we in this House of Parliament defeated the Government on this issue. I am delighted to see that the noble Baroness, Lady Burton of Coventry, will be taking part in this debate. She has said that the Government was, and I quote her,
attacking a section of the community which was not able to fight back ".
§ She helped to defeat the Government at that time. I would say to her that I am afraid that this section of the community is starting to think of ways in which to fight back, and I doubt whether such ways will content themselves with purely Parliamentary methods.
§ My Lords, I said earlier that these measures—and had I time there are others that I could pursue—constitute a frontal attack on the self-employed and the professions. They are the immediately felt measures—the heavily increased local business rates, higher income tax and corporation tax, the proposed capital transfer and wealth taxes and the singling out of the self-employed to shoulder most of the burdens of the national insurance contributions. Coupled with the refusal to take measures to bring inflation under control, they compound the felony. I want to close by pointing to an altogether more subtle form of attack, a movement from the rear, so to speak. It is subtler because it is fundamentally an attack on the values I mentioned at the beginning of my speech and because it is less easy for another Government to remedy—less easy but I hasten to add, my Lords, not impossible. All of us are aware that there are at present bitter conflicts in the professional worlds of medicine and education. These require debates to themselves and both are outside my Shadow responsibilities. Behind the Health Service, however, and the anxieties raised by the Government's determination to force comprehensive education, are not simply differences in attitude or emphasis as to the best means of treating or curing illness or educating young people. We are learning in every sphere of national life that the State is being made agent and patient, judge and jury, and the only context in which our individual life decisions, however complex or delicate, must by force be taken.
This is not the socialism of Mr. Gaitskell or of Mr. Jenkins or even of Mr. Prentice. It is not even the socialism of Mr. Dubchek and his courageous and tragic stand in Czechoslovakia. It is the socialism of Herr Ulbrecht and Dr. Nagy; of Eastern Europe and of the Party machine. I cannot put it better than in the words of my noble and learned friend Lord Hailsham of Saint Marylebone:
Anyone who wants to spend his money on educating his own children or having his own doctor or even paying for a little privacy or saving up for old age, anyone who does not spend the whole of his surplus cash on consumer durables, is penalised, derided and indeed condemned.
§ My Lords, in case you think that I am being politically contentious, this last point is directed towards bigness in business as well as in Government. Both worlds are hostile to the qualities of thrift, self-reliance and far-sightedness which we loosely term middle class but which are, as I hope this debate will show, held by all groups in our society. Big business, however, is very sensitive to individually minute but quantitatively devastating changes in public attitudes. I do not believe that Governments are as sensitive. The first sure protection for ordinary people are their own professional organisations. Where these do not exist they are being created. The closed shop legislation, which we shall be discussing in Committee next week, threatens such organisations. The second sure protection is, or should be, Parliament. Professional and self-employed people are starting to doubt the effectiveness of Parliamentary lobbying—and who can blame them when they watch the Executive in Parliament swopping their own legal sanctions and protections, and their own ability to accumulate and dispose of a modest surplus wealth in their own way, for a wholly illusory wage restraint and for a level of lost working days which compounds rather than restrains our inflation.
§ The self-employed are still anxious to make their presence felt in orderly and Parliamentary ways. They would like a Minister, as in Belgium, to watch over them in Government. They are still, in the main, refusing to withhold their taxes. The Government, and the shadow government, must listen and must do so before the militancy of other pressure groups in our society catches on. My Lords, it is not too late. The government in opposition are listening, and that is why I beg to move for Papers.
§ 3.41 p.m.
§ Lord WADE
My Lords, we are greatly indebted to the noble Earl, Lord Gowrie, for giving us the opportunity ofs 1265 discussing this subject of the self-employed and the professions. It is certainly a very topical subject today. So far as my own position is concerned, I retired two years ago. Before then I was, so far as politics permitted, engaged in the legal profession, though I should add not as an advocate—in that I am a mere amateur—but in a more modest aspect of the legal profession. Having retired, I do not think I have any interest to declare. In any case, I am not proposing to talk about the legal profession; I hope others may refer to their particular problems.
Speaking as a Liberal, I would not normally expect to find myself in agreement with everything that the noble Earl, Lord Gowrie, has to say, but I am bound to comment that on this subject and on this occasion there is a great deal of common ground, and I think there is much common ground in this House. This was noticeable in the debate on the Social Security Amendment Bill, particularly at the Committee stage when nearly every speaker from all sides of the Chamber supported the Amendment which was carried against the Government. In some respects, that debate provided a curtainraiser for the debate today when we are able to look into the subject a little more deeply.
In pleading the cause of the self-employed we must endeavour to get the subject into perspective. First, not all professional people and not all self-employed people have suffered excessive hardships. During the period of the property boom, a number in the professions and in other occupations indirectly did rather well through the work that came to them. It is true that in the last twelve months they have suffered a very steep decline in income, but I think I should direct my remarks primarily towards those in the lower income bracket, including of course many in the professions. Secondly—and I think the noble Earl would probably agree with me, in view of his opening remarks—we cannot limit the debate solely to what has happened in the last twelve months. One has only to look at the High Streets and the shopping centres of most of our towns and cities to see the gradual disappearance of the independent retailer over the last 15 to 20 years. So it is not a new problem so far as they are concerned, 1266 and even the exasperations over VAT are in some respects comparable with what was said about purchase tax. At any rate, retailers can now say, as they said then, that they are unpaid tax collectors. So complaints have been made against successive Governments, and I think the frustrations today are the result of an accumulation of experiences over a number of years.
Of course we are not talking only about the independent shopkeeper. There are the small firms of artisans and craftsmen who have a very valuable contribution to make to society; and I referred to them during the debate on the Social Security Amendment Bill. There are writers, artists, musicians and many others affected by that Bill, and perhaps part of the trouble is that in our modern society the division in politics reflects primarily the conflict between capital in the form of big business and organised labour, and the people about whom we are talking today have tended to become forgotten. They are the people whose interests are overlooked, or at least not high on the list of priorities when Government policy is being formulated. Sometimes I think it is due to oversight; to a lack of concern.
To be more specific, I do not myself think that the 8 per cent. levy was a deliberate attempt to "do down" the self-employed. I think it was due to a lack of awareness of how these people felt and of their difficulties. Furthermore, there is no fundamental difference in principle between the Conservative's proposed levy of 5 per cent. on the self-employed and the 8 per cent. introduced by the present Government. It is a matter of degree. But it has been felt by many to be the last straw and I think it is also resented, because it seemed to be assumed that this and other impositions would be accepted patiently and without protest, like so many other impositions in the past.
So far as the levy is concerned, I think some may ask whether the criticisms are really justified. I think the view that there is an injustice received powerful support from the remarks made by the noble Lord, Lord Houghton of Sowerby, on 5th December last, during the debate on the Social Security Amendment Bill. He pointed out that the social security 1267 scheme was originally based on the principle of insurance, but that is no longer so. I should like to quote briefly from what he said, because I always listen to him with great respect.
He pointed out that it really is no longer insurance, and he said:But it is no longer an insurance scheme and it has not been so for a very long time.Later he said:It has nothing to do with insurance any more. It is a form of social tax, and in looking at taxation one should look at the equity of the matter, because the benefits that the self-employed contributor gets are no better, and in some respects are not so good, as the benefits of the employed contributor. Yet he can be asked to pay more for those benefits than is paid correspondingly by an employed contributor on the same income.He added:This is the injustice of what is proposed, and I think it should be rectified before lone." —[Official Report; 5/12/74; c. 373.]In fairness to the noble Lord, Lord Houghton, he did not think that the Amendment should be supported on that occasion, but I think he agreed with the principle we were discussing.
I know there are many who do not follow all the intricacies of this subject, but they have a vague sense of injustice, which is supported by the remarks of the noble Lord, Lord Houghton. I know it has been contended in some quarters that the self-employed are making an unnecessary fuss, and there has been a great deal of argument as to how many will come into the band to which the 8 per cent. levy applies. There has been a good deal of argument about the figures provided by the Government Actuary. But what the Actuary has to say depends on the questions put to him, and there are many relevant points that are not within the purview of the subject on which the Government Actuary was asked to comment. I should like to give a few practical examples.
First, your Lordships will be aware of the great concern felt last year in industry over the inflated value of stock, and the effect that this had in creating paper profits—unreal profits in some respects, but taxable profits. Yet so far as the self-employed with small businesses are concerned, these are profits liable to the 8 per cent. levy. In the autumn Budget last year, the right honourable gentleman the Chancellor of the 1268 Exchequer announced a concession for large companies, but he made it clear it would not apply to individuals, partnerships or other incorporated bodies: in other words, the small firms. It was explained that there were administrative difficulties. So often a much needed reform is not carried out because of administrative difficulties, but the fact remains that there is no relief for the small firms.
May I take one other aspect of this subject of taxable profits—again, something that cannot be taken into account by the Government Actuary? There are many proprietors of small businesses who put all their savings into the business and, at the end of a lifetime, have made not much more for income than the income they might have received from investing their capital in some other way. Of course, they have had the advantage of independence. But the interest on their capital is part of the profits on which the levy of 8 per cent. is imposed. But if they gave up business and became a wageearner or a salary earner they could invest their capital, I hope in some safe investment, receive the income and it would have no effect on the amount of contribution for social security. Obvously, there are anomalies.
My Lords, to turn briefly to the controversial subject of capital transfer tax, to which the noble Earl, Lord Gowrie, referred, I am in favour of the redistribution of capital. I am in favour of a man, when he gets on in years, handing over the business to his son, if his son is capable of carrying it on. But this legislation is typical legislation, and its consequences have not been fully considered. Even with the latest concessions announced by the Government, there will be an inducement to the head of the family to go on and on, however old he may be. It will be a deterrent to transfer. One could continue with illustrations.
I should like to say this in conclusion, and in some respects it is in tune with what the noble Earl said. The problems facing the self-employed are varied, and there is no simple remedy. Unfortunately, there is a growing conviction that the only answer is to be found in powerful pressure groups. I am not commenting today on the value of trade associations and 1269 other bodies, but I will regret the day— if it comes—when the extent to which any move towards social justice is achieved is dependent on the size and aggressiveness of the relevant pressure group, or when militant protest is accepted as more effective than reasoned argument. Yet we are moving in that direction. It would be out of character for most self-employed and most professional people, but it will come to pass if the belief grows that militant protest is the only way to ensure that grievances, justified or otherwise, receive attention. In that kind of climate, the small firm and the independent professional man will, in my view, always come off worst.
§ 3.55 p.m.
§ Lord HUGHES
My Lords, like the noble Lord, Lord Wade, it is my first duty and my pleasure to express thanks to the noble Earl, Lord Gowrie, for having introduced this Motion this afternoon, to enable your Lordships to discuss a subject so wide in range that, even if our Standing Orders were much more strict than they are, it would be almost impossible for any speaker to find himself ranging outside the terms of the Motion. Although the noble Earl was good enough, lateish yesterday morning, to give my office an indication of some of the subjects that he hoped to touch on—in the evident expectation on my part and perhaps the hope on his, that this would elicit favourable replies from the Minister concerned—the possibilities were such that my noble friend Lord Jacques and I decided in advance that I would deal with certain subjects in my first speech for the Government, and that he when he replied would take such of the remainder as were touched on in the course of the debate. So if in fact I do not, as I will not, touch on some of the points raised by both noble Lords who have spoken, it is not because they are to be ignored. It falls within the division-of-labour principle which we on the Front Bench have accepted.
My Lords, may I say that while at least one noble Lord has had some doubts about the Introduction procedure—we had another two Introductions today— one of the advantages of the many recent Introductions of new Peers is that in due course we have the benefit of an equal number of maiden speeches. Today we are to have four. In this International 1270 Women's Year, it is perhaps appropriate that equality has been achieved at least in the maiden speeches, because we shall have had two from the one sex and two from the other. Therefore, since I have to speak in advance of hearing them, may I say I am looking forward to hearing all four, and, having regard to the backgrounds of those making the maiden speeches this afternoon, it will be unnecessary for those who follow and who express congratulations to the maiden speakers to have recourse to other than sincerity when they do so.
My Lords, in so wide-ranging a debate, it is not surprising that the first thing the noble Lord, Lord Wade, said was that he found himself, exceptionally, in the position of being on common ground with the noble Earl, Lord Gowrie. May I say right away that I too find myself on common ground with the noble Earl, because except on the very highly political notes which he, I am certain, was not so much directing at me but possibly to applause from the Benches behind him, I found a lot to agree with. If I were to sum up the basis on which I agreed with him, I would say that he and I seem to be in the same position, in that we do not accept that "big" is necessarily "beautiful". The noble Earl went on from criticising the policies of the Conservative Party in the past, and the extent to which in the months or years or decades which lie ahead of them they will be in Opposition, to a recasting of their policies. Well, it is not for me to intervene in these family quarrels. I am quite certain, like the noble Lord, Lord Wade, that we shall look with interest to see what emerges from all this, but will not seek to intervene.
If I might turn to some of the points which the noble Earl made, on the subject of general taxation, despite what he said, there is in fact no evidence to suggest that the self-employed are in any way singled out for harsh treatment by this Government any more than by their predecessors. They are subject to the same rates of tax and receive the same allowances as any other taxpayer. Indeed, since the self-employed in effect pay tax on their profits the year after they are earned, they are in some ways more favourably treated than employees, who pay tax on their earnings in the current year. The benefit of being able to defer payment of tax in this way 1271 is, of course, greater in times of inflation because of the old maxim that you are getting good pounds and paying out bad ones.
§ Lord HUGHES
My Lords, provided the noble Earl does not intervene too often. A speech is spoiled if it is subjected to constant interruption.
The Earl of GOWRIE
My Lords, I quite agree, and I recognise that the noble Lord was kind enough not to interrupt me. The simple point is that he misrepresented me. My point about the taxation policies of the present Government is that compounded with the rates of inflation they are so devastating in their effect.
§ Lord HUGHES
My Lords, that shows the disadvantage of interruption. Perhaps the noble Earl will allow me to continue. After all, he has interrupted almost on the first sentence. Inflation, of course, affects companies in other ways which are less desirable to them. This was recognised by the Chancellor in his last Budget, when he undertook to allow companies to reduce closing values of their stocks for tax purposes.
For practical reasons the Government were unable to extend this provision to small traders and unincorporated businesses last year, but the Chancellor has stated his intention that there will be further relief next year and—and I do not think the noble Lord, Lord Wade, mentioned this second point when he was referring to this subject—that the self-employed will in fact be given relief to cover both years. So except for the case about which he spoke, of the person who has left self-employment and taken a job, they will not in fact be losing in the long run; except that it works the other way round: they will have paid out good pounds and will be getting relief in bad ones.
On the subject of the capital transfer tax, I do not wish to say a great deal at this stage, although I would suspect that it will crop up more than once in the course of the debate. This was one of the subjects with which we thought it would perhaps be more appropriate that my noble friend should deal, so that he could take account of all the views which might 1272 be expressed on the subject. All I wish to do at this stage is to state the general position, and that is that the capital transfer tax will be more effective than the avoidable estate duty which it replaces. Its impact on the self-employed and the professions is less than has been alleged in some quarters.
The rates of tax are rather lower than the rates of estate duty, and for the first time gifts and bequests to spouses are completely exempt. In addition, provision is now made for the charge to tax at much lower rates in respect of lifetime gifts made more than three years before death. These arrangements apply equally to the self-employed and to others, but there are special provisions deemed to facilitate the transfer of businesses and firms. Taken as a whole, the measures are seen by the Government as fair, indeed much fairer than was estate duty, and as applying reasonably to the taxable capacity represented in transfers of capital.
The noble Earl, Lord Gowrie, gave his own interpretation of the Social Contract. This is the sort of thing I meant when I was referring to the more political parts of his speech, because it certainly did not commend itself to me as an interpretation, reasonable or otherwise, of the Social Contract. May I spell out what, in the Government's view, the Social Contract means. First, it is an agreed basis on which this Government and the trade unions defined their common purposes. It is not concerned solely or even primarily, with wages, but covers the whole range of national policies. The Government's side of the Social Contract encompasses a number of measures in the social field. Pensions have been increased, tax changes have been introduced to help the less well-off, food subsidies have kept down the price of essential items—if there is criticism of that, it is quite obvious that to whatever extent prices have risen in essential items, they have risen less because of food subsidies than they otherwise would have done.
In housing, the Government have frozen rents, encouraged local authorities to expand their housing programmes and taken direct action to keep down mortgage rates. All these contribute to the social wage which, as the Chancellor of the Exchequer pointed out on 8th February, has risen by between 10 and 12 per cent. in real terms during the past year. Not 1273 least, the Government have repealed the Industrial Relations Act and abolished statutory pay controls, restoring the framework of voluntary collective bargaining.
On the union side, the Social Contract involves adherence to the TUC's guidelines on wage settlements. Those guidelines were published by the TUC General Council in June 1964 and were overwhelmingly endorsed by the Trades Union Congress in September. The main points are: first, the basic aim is the maintenance of existing living standards, either through compensation for the rise in the cost of living since the last settlement, or through arrangements to compensate for future cost of living increases after they have occurred; secondly, there should be a 12-months' interval between major increases; thirdly, priority should be given to negotiating agreements with beneficial effects on unit costs and efficiency and to reforming pay structures; fourthly, priority should also be given to attaining a minimum basic rate of £30 for a full week; and, fifthly, full use should be made of the independent Advisory Conciliation and Arbitration Service to help towards a quick solution of disputes.
The Trades Union Congress has asked any union in difficulties in conforming to the spirit of the recommendations to seek the advice of the General Council. Inevitably, wage settlements which do not conform to the Social Contract guidelines receive more publicity than the many which do conform to them. In fact, since the end of statutory wage controls the substantial majority of the workers about whose wage settlements the Department is reasonably fully informed have settled within the guidelines, and these attract either little or no publicity whatsoever.
§ Lord NEWALL
My Lords, will the noble Lord give way? With the greatest respect, this debate is about the self-employed and the professions, and I would submit to him that his argument about the Social Contract has nothing whatsoever to do with these people, even though he is reading a very good brief.
§ Lord HUGHES
My Lords, I am grateful for the fact that the noble Lord recognises the goodness of the material I am using. I did not introduce the Social Contract into the debate; it was introduced by the mover of the Motion. And 1274 in so far as it is considered that what is being done under the Social Contract for the great mass of working people is being done at the expense of the self-employed, I am reciting what is in it.
I was proposing to say, and I will say it now, that there is nothing which I have said so far which is in any way directed against the interests of the self-employed. It is not part of the policy of Government that when help is given to one section of the community—and particularly when it is a majority of the community —it must necessarily be at the expense of others, except in the general field of taxation. So I consider that it is wholly appropriate, in view of the fact that the Social Contract is at the root of so much of Government policy. If I had not used this I am certain I would have been told, "Has the Minister refused to say anything about the Social Contract because of Mr. Prentice and Mr. Foot?"
If I may return to the good material, which has been recognised, the highly publicised large pay increases which break the guidelines, or stretch them to the limit (and this is a point for which credit has not been given) would almost certainly have been very much larger had it not been for the existence of the guidelines. After all, we know that some of the National Union of Mineworkers' Executive were originally pressing for a £30 increase across the board, so the success of the Social Contract in restraining wage inflation has been far from illusory. I would remind your Lordships, particularly the second intervener, that in so far as the noble Earl referred to the greatest danger to the self-employed being inflation, the Government, through the Social Contract, have in no way diminished the inflationary effects which must be of direct advantage to the self-employed as well as to other sections of the community.
The third point raised, on which I wish to touch briefly, was that of rates. Rates increases of course is not something for which the self-employed are singled out. They affect all classes of ratepayers. Undoubtedly the present rating system needs reform. That is why the Layfield Committee of Inquiry into local government finance has been set up by the Secretary of State for the Environment. That Committee will no doubt wish to consider most carefullly the relative contributions 1275 to local taxation made by small businessmen generally compared with other ratepayers. The professions and traders of all kinds should make their views on rating reform made known to the Committee, either individually or through the appropriate professional and trade associations.
Many Governments have tried to reform the rating system, and generally I think the difficulty has been, in the words which the late Sir Winston Churchill was reputed to have used to a distinguished civil servant, that for every solution the civil servant could find a problem. In the reform of rating, undoubtedly, this is what emerges, in that every solution which has been proposed in the past has been found by those concerned to present more difficulties than exist in the rating system. But obviously as the years go by the defects of the rating system grow greater and greater, and it may be that some of the solutions, which in the past have been found unsatisfactory, may be viewed in a different light today. Therefore, like everybody else—because the one thing which is certain is that almost all in this House are ratepayers— we look forward in the hope that the Layfield Committee will produce a solution. Just as it was necessary within the scope of the rating system to devise the method of giving relief to domestic ratepayers, it may be, as I have indicated, that the problems of the small trader or the professional man is something that the Layfield Committee will be considering. Certainly it will be obliged to do so if people direct their attention particularly to these aspects, and certainly I would encourage the people concerned to put such points before the Committee.
The matter of national insurance was touched upon by the noble Lord, Lord Wade. There may well be a number of points raised in reference to the 8 per cent., and when he replies my noble friend Lord Jacques will be putting the contributions of the self-employed and the employed in a proper perspective. The matter of the earnings-related benefits was fully debated on the Social Security Amendment Bill before Christmas. Last week in another place my right honourable friend the Secretary of State for Social Services made it clear 1276 that the Government were in favour of earnings-related benefits in return for earnings-related contributions for the self-employed as well as for other earners, but under successive Governments practical difficulties have so far ruled out this possibility. However, she announced that she was commencing a detailed re-examination of the problems and that she would present her conclusions along with any proposals for further legislation on this subject. In the light of that assurance, I do not think I wish to make further comment at this stage, since of course I cannot anticipate the outcome of that re-examination.
My Lords, I set myself a second objective in replying, which was to try to confine my remarks within 20 minutes, and I would have accomplished that but for the second intervention. May I therefore close, in the hope that I can beat the clock, by saying that I was intrigued by the use of the words by the noble Earl, Lord Gowrie, of a new definition of "Shadow Ministers" as being the "Government in Opposition". If that implies that "Shadows" can have responsibility for running the country (and I am on dangerous ground in talking about another place) certainly it was not very noticeable the other day in another place.
§ 4.16 p.m.
My Lords, this is the first time that I have spoken in your Lordships' House and therefore I would request your indulgence. When making my maiden speech in the other House, I was interrupted. When I brought in my first Bill three Conservatives and three Labour Members sat in the corridor so that I should not get a quorum. When I brought in my second Bill, I got it through the Committee stage but it was then beaten by 40 Amendments being put down at Report stage and it was talked out. I am sure that I shall receive much better treatment in your Lordships' House, particularly in view of the very kind words already spoken by the noble Lord, Lord Hughes. I chose to take part in this debate, because I thought that the subject affected all sections of the population and those who vote for no particular Party in the House. Therefore, I thought I would not be controversial, though I must say that the noble Lord, Lord Hughes, has tempted me a little. However, I will not be drawn today.
1277 I want to deal with the question of small businesses. Recently—only 150 days ago—an organisation called the Federation of Small Businesses was formed. I understand that already it has 25,000 members who are paying as much as 25p a week to join this organisation. They represent about 98 different retail trades. In addition there is the considerable number who are members of the Chambers of Commerce who, I understand, are sending a deputation to the Minister in March. In Belgium, there is an institute of the self-employed which has 2 million members, and I gather that the British Federation hopes to be in contact with them. One thing which Belgium has, which is an advantage, is a Minister to whom they can refer. This shows that Britain is not the only country in which the self-employed have felt it necessary to form together to protect their interests.
Napoleon called us a nation of shopkeepers, which I know he meant in a derogatory way. But we should be very proud of our shopkeepers for the way they have served us over hundreds of years, particularly for the way in which they acted during the last war and also for the way in which they help the general public. I want to refer to shopkeepers in particular, because they are some of the people who will be in considerable danger in the coming months. Recently, there has been a draft Instrument of the EEC concerning measures for the attainment of freedom to establish and provide services in respect of activities for the self-employed persons, which reads as follows:The Directive would make it easier for UK nationals and companies to set up in business or to provide services in the EEC countries where access to the activities concerned is at present restricted.Therefore, the countries of the EEC are lowering their barriers to the self-employed, while we in this country appear to be putting up more barriers in regard to their activities.
I should like to mention the farmers—300,000 of them—who will be hard hit, particularly the small hill farmers, and the fishermen. The fishermen with 14 ft. boats will be particularly hit because they do not receive any fuel subsidy. There are also the small grocers, who are open six days a week, or seven when the regulations permit them to open on Sunday. There are the garage proprietors and there 1278 are the pharmacists. Regrettably, a great many of the latter have closed already, causing considerable inconvenience to people in towns. Then there are the Post Offices. Recently, there has been a drive to shut some of the State Post Offices, and sub-postmasters are being found to take over the smaller offices. But these are beginning to close, too, because they cannot make sufficient money to keep open.
I suggest that nobody wants the retail trade to become entirely the preserve of the multiples and the supermarkets. The small shopkeeper knows his customers, he is a friend to all of them and when they are in temporary financial difficulties may offer them help by letting them have some goods on "tick". The small shopkeeper is a general friend to the neighbourhood. He is also very useful to the housewife who goes out to work, as she is not able to shop in normal hours and most of these shops keep open until eight o'clock. The small shopkeeper is at a very great disadvantage if he lives over his shop, because he does not get the domestic rate for his accommodation. That is another great difficulty for him.
My Lords, the self-employed are now paying a larger contribution, but they are not receiving any more benefits. I should have thought that one action that could have been taken is to make married women now pay the full contribution. After all, they have husbands who help to support them and I should have thought that this was a far better way of getting some of the £21 million which it is said it is necessary for the self-employed to pay. Those people get no unemployment benefit, no industrial injuries benefit and they have no earnings-related supplement for their extra contribution. A self-employed man will, if he is earning £50 a week, be paying double; and, if he is earning £60 a week, 140 per cent. more. The Bolton Committee suggested that there were about 1,250,000 self-employed people who were employing 6 million others; that is, 25 per cent. of the total population. This appears to be a very unfortunate moment to consider penalising these people, because they may have to dismiss employees and that will cause more unemployment.
My Lords, I have talked about physical needs and I should now like to mention spiritual needs. The clergy will be very 1279 badly hit, particularly the curates. If a curate gets, say, £1,090 a year he is considered to be self-employed. I only hope that that will be remembered in the Whitsun offerings, which will help them to pay the extra taxes. We shall also be penalising the artists, musicians and writers who do so much to refresh our spirits. It is unfortunate that firms of all kinds, artists and professional people are finding it more and more difficult to carry on. Many of them, particularly those in industry, will not have the same incentive, because it will be difficult to hand much on to their families in future. Gandhi said that civilisation is to be judged by the treatment that is shown to minorities. Perhaps it is still possible for us to act in a civilised manner.
§ 4.25 p.m.
§ The Lord Bishop of ROCHESTER
My Lords, I count it both a privilege and a pleasure to follow the maiden speech in your Lordships' House of the noble Baroness, Lady Vickers. I know that I speak for every Member of this House with that sincerity which the noble Lord, Lord Hughes, said we might take for granted, when I thank her for her first speech here and congratulate her on a notable and informed contribution to our debate. Quite a number of your Lordships will have heard the noble Baroness speak many times in another place. Most of us have had to wait till she arrived in your Lordships' House. We are very glad that we did not have to wait very long and hope that she will be a regular contributor to our debates. I think I can assure her that she will have an easier time here than at the other end of the corridor!
My Lords, we are all accustomed to new phrases coming into common use almost overnight and to old words being given fresh connotations. I doubt whether until recently many people in the professions consciously thought of themselves as self-employed. If they thought about it at all, they were more likely to have regarded themselves as having been trained—often over a very long period—for work of one kind or another done not only for their own self-fulfilment but also in the service of the community. Although they would undoubtedly have regarded themselves as employed in such service, they also 1280 enjoyed—if that is the right word—the freedom to do their work in their own way and without a fear of its being brought to an end by somebody else's decision. Now such people have to accept that because they have no contract of service—indeed, very often they have no one who can be thought of as their employer—they must be regarded as self-employed. Into this category by long tradition, as the noble Baroness, Lady Vickers, has just reminded us, come parochial clergymen and all other ministers of religion, whatever their denomination, except those who are employed under a contract of service as teachers or as chaplains to the Forces, hospitals or prisons.
My Lords, in the Church of England, what is sometimes called the "parson's freehold" gives him a personal independence, notwithstanding any oaths of loyalty or obedience he may take and notwithstanding his call to minister to a particular congregation. The fact that he may be part of an episcopal, presbyterian or connexional system of church government does not alter the fact that he has no contract of service, cannot be summarily dismissed and is bound to perform the duties of his office whether or not he is being paid for doing so. So it is that, up to now, the majority of clergy and ministers have been self-employed for National Insurance purposes. Although the status and the method of payment of the clergy have undergone far-reaching changes in recent times, they are for the most part not in the position of employees with a contract of service to an employer who could be expected to pay the employer's share of the National Insurance contribution. Moreover, so fundamental a change in their position would for some clergy raise far-reaching questions.
It might be that some younger men would not object to becoming an employee of a parish or a congregation, of a diocese or even of the Church Commissioners. But there are, I believe, many older men in all denominations, and many of the laity to whom they minister, to whom such a change would seem a threat to their freedom as ministers of the Gospel. I hope I have said enough to show that both the previous Government's social security proposals in 1972 and the present Government's proposals for better 1281 pensions raise for the churches more than financial problems.
All the religious denominations in the British Isles meet regularly in the Churches' Main Committee and this body has made its main concerns known to the Minister concerned. I know that I speak for the Church of Scotland, the Roman Catholic Church and the Free Churches, as well as for the Church of England, when I say how grateful we are to the Government for allowing clergy and ministers to remain self-employed for the next tax year, 1975–76, thus giving a moratorium during which the denominations can consider this new situation and decide what advice they want to give together to the Minister about the permanent status of the clergy after the end of this interim period.
My Lords, you will see that the Churches are faced with a very real dilemma. In addition to the quasiconstitutional questions that I have hinted at, it is a fact that it would cost them over £2 million more each year to make the transfer from self-employed to employed status for all ministers, and that at a time when the lay members of every congregation arc trying to help their clergy keep pace with inflation. It may well be right that such a change should be made—with all the adjustments of stipends and pensions that that would involve—and I have no doubt that there are some who feel that in the long run it would be in the interests of the clergy, their wives and their widows for them to be provided with a wide range of benefits, including pensions fully proofed against inflation. But I am equally sure that the higher cost of Class I contributions and the far-reaching consequences of the change in status involved may lead many in the Free Churches in this country, as well as in the Church of England, to desire to maintain the self-employed status. This view would undoubtedly be strengthened if the Government decided to provide some additional benefits in return for Class 4 contributions, especially if these could be earnings-related.
The Synods and Assemblies of all the denominations will do their best to consider these matters carefully during the coming months so that, as already promised, the Government can, if at all possible, be given agreed advice as to 1282 whether clergy and ministers should in future be regarded as employed or should continue, as at present, self-employed.
§ 4.33 p.m.
§ Lord COLWYN
My Lords, I wish at the outset to thank my noble friend Lord Gowrie for initiating this debate and giving me the oportunity of addressing your Lordships for the first time. In doing so, I ask for your Lordships' traditional indulgence for the few remarks I wish to make. At the same time I must declare a personal interest, in that I am self-employed as a dental surgeon working partially within the National Health Service. The self-employed and the professions play a vital role in our national life. To an extent quite out of proportion to their numbers, we rely on them for the creation of new wealth for the running of our Welfare State and, perhaps most important of all, for their independence of thought, which is so important in a free society. With few natural resources to exploit, this country relies on the talent of its people, and it is the skilled professional man who provides the tools and techniques which make labour and capital productive.
The record of small business in industrial innovation often puts the larger companies to shame. We discourage ingenuity and inventiveness at our peril. Until quite recently, the professions offered their members a satisfying and rewarding life, and it must be admitted that there are still real advantages in being self-employed—in being one's own boss, working when and where one wants and being in control of one's own destiny and less a mere victim of fate. It would take much more than an increase in National Insurance contributions to make people forgo these advantages, although I must say that the new contribution rates seem to be somewhat unfair, since the self-employed person will be paying a substantially higher contribution out of net income or salary than an employee.
I support the view put forward by a number of professional bodies recently that part of the self-employed contribution should now be given tax relief as a business expense. In my view, however, the change in social security payments and the proposed capital transfer tax—where the Government have recently made some major concessions to small 1283 businesses—are of relatively minor importance compared with the effects of inflation on the self-employed and the professions. The principal characteristics of this group are probably thrift and a willingness to wait until tomorrow for their reward, either in building up a business or embarking on a long and low paid period of training. It is very difficult to see how these attitudes can survive a 20 per cent. or 30 per cent. rate of inflation.
Inflation is undermining our society in many ways and it may ultimately destroy it. One of its most undesirable consequences is that it becomes more and more difficult to earn a living through hard work and service to the community. The rewards which eventually come to someone who decides to acquire some professional skill are being eroded year by year, and even overtaken by the pay of powerful unskilled groups. The only skill which is increasingly well rewarded today is the skill in the manipulation of money. As William Rees-Mogg said, with stable money one has to be creative but with inflation one need only be clever or lucky. The position of employed professional people is as bad or worse than that of the self-employed. By far the largest employer of professionally qualified manpower in this country are the Government.
Recent Governments have been reluctant to give their professionally qualified employees fair pay increases for fear of setting a bad example to the private sector. Consequently their position has fallen steadily further behind. In recent years this has happened repeatedly in teaching, the Civil Service and in the National Health Service. The people involved have a strong tradition of loyalty. They are extremely reluctant to apply sanctions of any kind, but it is hardly surprising that they are now growing more militant when they face an employer who appears to be much more receptive to arguments about emoluments for washing time than about overtime pay for hospital consultants.
To be fair, the same is happening in industry. The noble Lord, Lord Kearton, has called managers a hunted class and has said that the advantages of being a manager in Britain today, financially and in terms of status, are minimal. The 1284 Economist tells me that chief accountants in industry are taking home 20 per cent. less in real terms than the people in the same jobs six years ago. As I have said, some of your Lordships may know that I am a practising dental surgeon but I doubt that any of your Lordships are aware of the fact that my remuneration for a simple filling carried out in the National Health Service is exactly the same today as it was in 1948–27 years ago; a fact which truly speaks for itself.
If these trends continue, we shall find ourselves increasingly starved of professional talent. We desperately need the professions, and the functioning of modern society depends on their special skills. There may be a case for a more even distribution of wealth, but we must think very carefully before redistributing income very much farther away from the professional people on whom we depend in so many ways.
§ 4.40 p.m.
§ Viscount ECCLES
My Lords, your Lordships will not only wish to congratulate my noble friend Lord Colwyn on a remarkably lucid and well-informed speech, but I think your Lordships will agree that his first speech in your Lordships' House has lived up to the best of our tradition, which is to talk about what you know about, and to bring out your own experience in a way that the other place finds very much more difficult to do. We have had a remarkable speech from a man who has himself experienced the subject of this debate. May I also congratulate my noble friend Lady Vickers. It is a great pleasure, after some years of separation, that we should both be in the same Chamber again.
When the Social Security Amendment Bill—which has often been mentioned— was passing through your Lordships' House I was in America, and so I missed the opportunity to intervene on behalf of artists and craftsmen. I am therefore very grateful to my noble friend Lord Gowrie for providing me with a second opportunity this afternoon. I know from speaking to artists and craftsmen that there is a genuine feeling of bitterness that this additional NHS contribution is really a graduated tax levied only on the self-employed. Of course it is not a tax , it is an insurance contribution—but it looks like a tax. Your Lordships are familiar with all the arguments on this point and 1285 therefore, although I feel very deeply about this matter, I do not propose to rehearse these arguments this afternoon. Instead I want to speak about the circumstances of craftsmen which are, I am quite sure, typical of many self-employed per-persons in other occupations.
These craftsmen feel that Ministers simply cannot know what is happening to them and to their standard of life. It is true that successive Governments have given the Arts increasing help from public funds, and Mr. Heath's Administration initiated similar assistance to the crafts. The present Government have just announced substantially more help to the Arts Council, and we expect that they will do no worse by the Crafts Advisory Committee. We are very glad of that: it is very good news, but there is still some doubt as to whether the additional grant will really make up for the rate of inflation, because the figures that were submitted to the Government were calculated many months ago, and since then inflation has got worse. So far as the self-employed artists and craftsmen are concerned, these enlightened policies must now, in a large measure, be stultified because fresh financial burdens are being placed by the Government on the very people whose need for larger grants is accepted, not to make them rich, but simply in order that they may keep their heads above water. This is an extraordinary contradiction: paying out with the one hand, and, more often than not, taking back even more money with the other hand. This situation requires to be examined in the light of the actual circumstances of the people concerned.
Again I shall take craftsmen as my example. I do not suppose that anyone seriously believes that their financial circumstances have improved in the past year in comparison with those of the general run of employed persons. As a matter of fact, we all know that the exact reverse is true, because, for a wide variety of reasons, inflation hits the self-employed harder than it hits the employed, and the self-employed do not have the same means of defending their standard of life. The Social Contract, which was dealt with at rather extraordinary length by the noble Lord, Lord Hughes, may help the employed, because within those guidelines they are able to 1286 press for increases in incomes to keep pace with the rate of inflation, but the self-employed are quite powerless to obtain similar increases in their incomes. The craftsman cannot escape his rising costs. Everything he uses has shot up in price. Prices for most of his raw materials have risen three or four times, and some have been almost impossible to obtain at any price: I instance certain kinds of clay and uncommon species of mature timber. Some others are obtainable only in qualities that are much less easily workable—silver, oddly enough, is an example of those.
The expenses of the craftsman's workshop have risen and will rise further as the cost of gas and electricity—which he uses for power—increases, and as higher local rates come into force. Now business rents are derestricted—and I agree with that—and so some craftsmen will be asked to pay much more for their premises. They may not always know how to persuade the courts to order that their rents should not rise. Indeed, some craftsmen hardly have the time to go to court; and if they did so they would hardly know how to conduct such hearings on their own behalf.
Your Lordships also know that self-employed craftsmen have always found VAT a form of torture. Now they are fearful—and I understand with good reason—that Mr. Healey will introduce a two-tier VAT system and apply the higher rate to their hand-made products. If the Chancellor does that, he will deliver a final blow, one that will kill off craftsmen in many parts of the country. That will happen because these self-employed men cannot get round the repeated rises in their costs, nor increase the selling price of their work. Craft products are not like bread; they are not necessities of life. Their sale depends on a very sensitive demand. The work of contemporary jewellers and silversmiths, along with pottery, woodcarving, engraved glass, hand-woven textiles and custom-built furniture are among the things that make life civilised and gracious; but they are not essentials, and when inflation is rampant and many of the craftsmen's customers begin to feel the pinch, artists and craftsmen are the first to suffer.
1287 I can tell your Lordships that there is already a severe falling off in commission work, and the same is true of the Fine Arts. For example, in the theatre more and more plays have to be written for small casts and have to be produced with the minimum of scenery and costumes because there is no money for full length productions. On those grounds alone—that is to say, the exceptional vulnerability of the self-employed to both inflation and recession—ought we to tolerate what appears to be, or certainly appears to them to be, a campaign to add to their burdens? Just let us remember that these people have very little security, no paid holidays, no full pay for short-time working, no unemployment benefit, no graduated pension or graduated health benefits.
It is hardly surprising that craftsmen, like many other self-employed persons, see themselves singled out for bad treatment. Why is it? Why should the self-employed be treated as a nuisance by the officials who have to deal with them, by the Socialist Government and, still more, by that Government's bosses in the trades union movement? I think those are interesting questions and perhaps your Lordships will allow me a moment to give my answers.
First, the self-employed are a nuisance to the Inland Revenue. The noble Lord, Lord Wade, made that clear in his speech. Of course it is true that it is very much easier to extract the tax due under the law from an employed man than from a self-employed man. The man running his own business, without an accountant at his elbow, is always filling up the forms wrong and sending them in late; he is a nuisance. Admittedly, when they have a chance to be paid in cash, some self-employed people take that chance and do not declare their earnings. But so will employed persons who do jobs after hours or at weekends. There is not a whit of difference in ethical standards between the employed and the self-employed. We can be quite sure that when a new tax—in this case, a contribution—is imposed which is generally thought to be unfair, evasion of the law will increase.
Secondly, how can one expect people who do not take kindly to direction from outside or to working in large organisa- 1288 tions controlled from somewhere in Whitehall, to be the favourite sons of Socialism? More important still, the self-employed are a great nuisance to organized labour. Can your Lordships imagine a self-employed man supporting the policy of the closed shop? It is a contradiction in terms. Here is a man who wants to be his own master, to hold his own opinions and to work for as long and as hard, for as much or as little money, as he himself decides. That is the point. That kind of independence is very irritating to the mandarins of organized labour. Then I ask myself whether perhaps the Socialists and the trade union leaders have a point. Perhaps the self-employed are a menace to the sort of society at which we should all be aiming.
This, I think, is the question that really lies at the back of this debate. Therefore, one must ask: What kind of society would this be with the self-employed deliberately squeezed out? Let us take as an example Soviet Russia and Solzhenitzyn. Solzhenitzyn, the author, was self-employed. If that brave man had not been self-employed and had not won world-wide reputation for his genius, how could he have stood out against the tyranny of communist rule? I think your Lordships may ask: What has this example to do with us in Britain? I reply that all self-employed and self-opinionated persons are, like Solzhenitzyn, non-conformists. They refuse to conform to the pattern set by the Establishment, whatever may be the political colour of that Establishment. Their hope is to make their lives and work all of a piece. It is a very civilised hope indeed.
Why should we believe that these non-conformists are desirable in any society at which we aim? It is because their self-employment is an expression of man's eternal quest for freedom, for the best kind of freedom—freedom to choose your own way to serve other people. Of course, in Western society millions of people in employment still enjoy this kind of freedom; but only because it is protected and made real by the possibility of going it alone. Take away that possibility and see how much freedom is left. We are considering, therefore, a great social and human issue. If a man feels that his creative gifts cannot be fully exercised under a contract of service to 1289 an employer or within the rules of a trade union, his one and only escape route is blocked if he cannot make a decent living on his own.
I know of a self-employed bookbinder who uses his exceptional gifts not only to repair and bind books for customers, but to do some remarkable original research. He considers it essential that he should be the master of his own timetable. If he became an employee, he might earn more; he would certainly earn it with less effort and in less time; but he could not use his gifts when he felt moved either to work on a customer's order or to do his own creative research. Financially, that man is just able to stick it out.
But, my Lords, I know another book-binder who, because he could not earn enough at his craft to keep his family, has abandoned his skilled trade and gone to tie strings round bundles of newspapers in the purlieus of Fleet Street. We employed this man; this man worked in our bindery upstairs; and before he left a few weeks ago he gave to your Lordships' Library a most beautiful example of a book bound by himself. I hope that perhaps some of your Lordships might ask to see that book; and, when you take it in your hands, will you remember that he is now tying string round bundles of newspapers in Fleet Street?
What is happening to craftsmen is happening to artists. Many musicians prefer to work freelance. So do actors and actresses. They could throw in their hand and go to work for a wage or salary and would earn a good deal more than they do now. But, deep down inside themselves, they know they would lose something beyond price to them. Just what this independence means to an artist was well put recently by Paul Scofield, the actor. Scofield said:We in this country seem to have thriven in free-lanceship. This has contributed to making our talent independent and flexible. We actors have no security, no pensions no State protection. But our material insecurity has given us a kind of strength, an enormous resilience.This personal strength and resilience is something no free society can do without. I think it is often said that, because we then possessed it in such full measure, we became great in the 19th century.
1290 But look at the odds against starting on your own today! Science and technology, wedded to the objective of economic growth for its own sake, make the production process ever more complicated, constantly reducing the importance of the individual in relation to the machine, constantly compelling the self-employed to give up the struggle and go and work for a wage or a salary. We ought to observe that this economic process is contrary to human nature because it insists on ever larger organisations: huge Government Departments, huge local authorities, enormous industrial complexes, whether nationalised or not— whereas by nature men and women are easier to work with, easier to understand, and easier to care for in small groups rather than in large.
That Socialist dream, so attractively put to us this day last week by the noble Lord, Lord Soper, that the entire community should become the sole owner of all the assets of production and exchange, and cheerfully and efficiently administer these assets as one great band of brothers—my Lords, that dream would break more hearts and cause greater loss of freedom than any of us can possibly imagine. The interesting thing is that the young are beginning to see it. They are questioning the system that generates such vast organisations and multiplies the handicaps which the self-employed have to bear. And not only the young: as we have heard, the doctors also; and perhaps we shall hear something about the newspaper editors. They have realised the danger. I think that these small disparate trickles of protest might shortly well become a sweeping flood.
I want, in conclusion, to ask whether this two-pronged attack upon the self-employed is something we ought to resist or something we ought to give in to. It is of course quite new in our history. We have never before had technology for blind purposes of so-called efficient production with its insistence on large aggregations of capital mowing down the independent man and, at the very same time, those with poliitcal ambitions outside this House seeing that if they can get as many people as possible into larger and larger organisations of workers they will have power bases for their own ambition. This is something we have not seen before— this combination of technology and an 1291 attempt to overthrow society as we know it. I cannot help asking for how much longer it will be sensible to advise young people to become independent artists, craftsmen, shopkeepers and masters of small businesses, managers of farms, independent practitioners of one or another of the professions. Perhaps we ought to tell them that all such careers belong to an age that is dying. Perhaps we ought now to advise them to learn the tricks of getting on in a corporate State which is so obviously desired by Mr. Benn and his followers.
My Lords, it is a difficult problem. We must make up our minds how much we value the opportunity to choose for oneself whether to be employed or self-employed. We must come down on the side of freedom of opportunity, and must work out and canvass a whole range of policies to rescue the self-employed from the evident danger that blind technology aided and abetted by some in Government and some in the trade unions, will squeeze them out of existence. That means discriminating in favour of the self-employed. There is nothing new in this. The French discriminate in favour of artists. In the Republic of Ireland there is discrimination in favour of writers. It is merely that we are so behind times in this country that we think we ought to discriminate against these people, and have not yet realised what it will mean to the quality of our life and the freedom of our choice.
My Lords, if this debate does something to set us thinking about giving positive help to the self-employed—not just not discriminating against them but giving positive help to them—then my noble friend Lord Gowrie should be well satisfied in having brought forward his Motion.
§ 5.4 p.m.
Baroness WARD of NORTH TYNESIDE
My Lords, may I first ask for the indulgence of the House for my maiden speech here today. When I awakened this morning I suddenly thought that it is about 40 years since I made my maiden speech in another place, and I realised at once how "rusty" I had become. I would rather not have made my speech here today because I should have liked some time to absorb the ways 1292 of the Upper House. I had thought I would start by putting down a couple of Questions, which seemed to me a much easier way of getting into the life of this House. I put down my two Questions for next Monday, but rather late last night a delightful official came along and said to me: "It is not in order to ask Questions until you have made your maiden speech." So I am forced to make my maiden speech today, and then on Monday I shall be able to go backwards, so to speak, and ask my Questions. But there it is. I find that in the Upper House politics are as unpredictable as life itself.
Certainly my speech today is going to be relatively short, as noble Lords will realise I have had little time to think out a speech which will be useful in this very important debate. But I am extremely lucky to have been able to make my maiden speech on this Motion proposed by my noble friend Lord Gowrie. We have heard some most helpful speeches. What I am really waiting for is to find out, both from my own side of the House and from the opposition, how all these problems are going to be met. On the whole, having had a fairly long experience in the other place, I realise it is much easier to talk than to act. So I am looking forward to hearing the result of this very important debate.
However, may I for one moment refer to something that always used to give me great pleasure in the Lower House. It is that some of my friends—not all of them, but some—used to speak about "Irene's small fixed incomes". So I was delighted when the noble Earl referred to that section of the community who are badly hurt by both inflation and some of the policies of Her Majesty's Government. I am particularly pleased that this debate also covers the professions, and I much enjoyed the speech made by the noble Lord, Lord Colwyn. For a long time I have been a vice-president of the Royal College of Nursing; and I am very proud of it. For a very long time—I do not know for how many years—I have represented Parliament in the Chartered Society of Physiotherapists; and, stemming from them, we have tried to give help to the ancillary workers in medicine.
I should not like the House to feel that I am necessarily against industrial workers, because I have many marvellous industrial workers living in my part 1293 of the country. In the Lower House we talked a great deal about the needs and desires of the industrial workers, but we left the professions rather out of account. Therefore I should like to congratulate the noble Earl, Lord Gowrie, for having included the professions in this debate today. When one is an individual, as a great many of us like to think that we are, it is always very nice to know that one is trying to fight for the needs of a good section of the community; but one realises how little one can achieve over the years. In the Motion which has been set down for debate this afternoon there is ample room for looking at and acting upon the disabilities—I call them real disabilities—of the self-employed and of the professions.
In conclusion, therefore, in this speech which I have been forced to make, may I say that I hope that when the noble Earl, Lord Gowrie, and, indeed, the Government, come to wind up—sometimes there is co-operation; it is one of the good things about our Parliamentary democracy that occasionally one can achieve co-operation—they will deal with this point. I was most interested in what the noble Viscount, Lord Eccles, had to say. At last the whole of the country is waking up to the desire for the Arts—for music, for ballet, for all the things which give pleasure. Although sometimes we get support from the Government, I think that in their various recent decisions they have done very badly for the self-employed and for the professions who, after all, have just as much right to consideration from the Government side as from the Conservative side—consideration which we have to give, very rightly, to the industrial worker.
I hope that the result of this very good debate which has been initiated by the noble Earl, Lord Gowrie, will be that together we are able to eliminate some of the things which have been decided by the Government, because that will be to the advantage of our country and to Parliamentary democracy as a whole.
§ 5.14 p.m.
Lord BRUCE of DONINGTON
My Lords, having recently had the honour of coming to your Lordships' House, I find it most agreeable to add 1294 my felicitations to those which have already been expressed by the right reverend Prelate the Bishop of Rochester when he spoke of the maiden speech which has been made by the noble Baroness, Lady Vickers. Also, it is agreeable to endorse very sincerely the remarks of the noble Viscount, Lord Eccles, in regard to the maiden speech of the noble Lord, Lord Colwyn. It is more particularly agreeable to me on this occasion to be able to congratulate the noble Baroness, Lady Ward of North Tyneside, on the maiden speech which she has just made. For some time I was a Member of the other House, but unfortunately I missed making the acquaintance of the noble Baroness. For some obscure reason, the noble Baroness left the other place in 1945, and I came in. In 1950, owing to the harsh arbitrament of arithmetic, I left and the noble Baroness arrived! I am very pleased indeed at last to have made her political acquaintance.
I think your Lordships will agree with me that the reputation of the noble Baroness has preceded her to this place. We shall expect from her a degree of independence and forceful argument, of which her maiden speech has, I think, given us some slight forecast. I am sure that your Lordships will agree that we shall be very pleased indeed to hear from the noble Baroness on many occasions in the future.
I must declare a personal interest in this debate. I am a self-employed person, having been engaged on my own account as a professional accountant since 1938, apart from a period of six years in the Armed Forces and a period of five years in another place. Therefore, I think that I know something, at any rate, of the problems which are facing the self-employed at this time. It is not only the self-employed who face problems in any extreme sense of the term. Of the 1,910,000 people who rank technically as self-employed, there are quite a number who are members of large partnerships— large partnerships of accountants, large partnerships of solicitors, large partnerships of architects, and, indeed, surveyors. To some extent, this isolates them from the anxieties which are felt, as time goes on, among the self-employed, wherever they may be.
1295 These anxieties are very real. The self-employed have no regular sick leave that they can take as of right. It would not be becoming if I were to suggest that employees of industrial firms, whether they be directors or whether they be operatives, of necessity are trying to avoid going to work when they obtain the necessary medical certificate. Undoubtedly, some of them do go to their doctor for this purpose; but if a person who is employed as a director, or as an employee, or as an operative, or as a clerk, feels ill, perhaps there is sometimes the temptation, if he can obtain a certificate, to absent himself from work, no matter how exalted his position may be. That is not the case with the self-employed person who is working on his or her own. For that person, illness is a direct menace to his security. He will not stop working, or she will not stop working, unless he or she can possibly help it. On the whole, therefore, they present far less of a drain on the national economy, on account of absenteeism through sickness, than the rest of the population who are more happily placed within the big organisations to which they belong.
Similar considerations apply to holidays. It is now becoming quite commonplace for operatives working in industry, for clerks, for directors, and for others, to take four to five weeks' holiday with pay every year. There are very few self-employed persons who can afford this luxury. In fact, I shall make a personal confession, whenever I can get a fortnight in one year I consider myself to be remarkably lucky. These, surely, mean that the self-employed, of necessity, make less call upon the social services which are provided in this country. It is for this reason that I must record my disagreement with the provisions with regard to the category for contribution of the Social Security Amendment Bill that went through this House. I say it with the utmost regret, but at the same time I must point out that precisely the same principles were incorporated in Section 5 of the Social Security Act 1973 passed by the preceding Conservative Government. So my criticism is of both Governments. But the House will forgive me if, as an accountant, I give your Lordships some details of the result.
1296 If a self-employed person earns £2,704 per annum—I am putting it at that figure because it represents £52 a week which is easily comparable with the remaining figures—he will pay £3.08 in terms of the case for contributions assessed under Schedule D, and will pay his basic contribution of £2.41, giving a total of £5.49. In the case of an employed person earning £52 a week—which, of course, corresponds with the same figure—the employee will contribute £2.87 and the employer will contribute £4.4, making a gross total of £7.31. On the face of it, it would appear that more contributions are payable in respect of the employee in industry than the self-employed, but this is not so. The self-employed person is not permitted to deduct his contribution for taxation purposes, whereas the company is permitted to deduct its proportion of the contribution for corporation tax purposes. With corporation tax running at 42 per cent., in the case of the smaller companies it means that they get a tax relief on this contribution of £1.86, so that the total net contribution is £2.58, giving a net contribution in cash in respect of the employee of £5.45 as against £5.49 paid by the person who is self-employed. If the company is liable for corporation tax at 52 per cent., which applies to the bulk of the large companies, the effective contribution, in terms of net cash payable in respect of an employee, is £5.01.
In view of the fact that the self-employed person is not entitled to many of the benefits that accrue to the employed, this is not just. If it is not just, it should be attended to. I was very grateful for the words which fell from my noble friend's lips when he spoke of the possibility of some of these matters receiving consideration at a later stage. I would suggest that, before the Budget, some words are whispered to his right honourable friend the Chancellor of the Exchequer, so that some relief, preferably by omission of the entire contribution for Schedule D tax purposes, is given in order to redress the position.
I have spoken in this respect of both the Conservative Government under Mr. Heath and the present Administration in another place which I have the honour to support. But I am not really speaking about them at all, because, of course, it is not they, as the political leaders, for 1297 the time being, of the Executive, who are doing this; it is their civil servants. Indeed, part of the anxiety of the self-employed is to know how to deal with bigness. Bigness is now enshrined in the Civil Service hierarchy of this country, particularly of the permanent Civil Service associated with the Treasury.
I cannot imagine the noble Lord, Lord Barber, when he was Chancellor of the Exchequer in another place, thinking up this delightful device at present incorporated in Section 5 of the Social Security Act 1973, nor can I imagine any of my right honourable friends in another place perpetuating it in the Social Security Amendment Bill. It is one of these typical Civil Service devices which they impress! upon their Department, something devised with the whole idea of raising revenue. Avid readers of the Crossman Diaries will probably, by this time, have arrived at some assessment as to how powerful the organised Civil Ser-vice, particularly in the Treasury, can be. The self-employed would like any Government to establish more effective control over the central Civil Service, and indeed over the local government Civil Service. The enemy of the self-employed is bigness.
I was tempted to reply to the noble Viscount, Lord Eccles—in connection with some of the more provocative remarks which he addressed towards my Party—but I noticed that he was a little coy when it came to the question of rents. I have been examining statements which have been made over the last few weeks about the various ills from which the country has been suffering. Rates have been mentioned; trade union pressures have been mentioned; but something that has not been mentioned is rents. One of the greatest economic threats to the self-employed in this country comes from the greatly increased rents which have been imposed during the last five years. Small firms up and down the country have been driven out of business. This has not. been the result of the activities of a Labour Administration; it has been a direct result of the activities of the Party opposite.
I was a little surprised when the noble Earl. Lord Cowrie, raised the question of inflation. Only the utmost devotion to 1298 the public interest could have induced him to enlarge upon an argument so embarrassing to himself and to his Party; because if any Party was responsible for inflation in this country, it was surely the Heath Administration which, in the years 1971/73, pumped nearly £5,000 million into the property market and the construction industry. Indeed, it is common knowledge, and members of the Administration in another place are falling over their heels and apologising for the excesses which took place in their day. It does not lie in the mouth of any member of the Party opposite to reproach this Govvernment with the incidence of inflation. They were responsible for the crisis and we are the people who have to get the country out of it.
I return once again to the self-employed and the disabilities under which they labour. One noble Lord opposite ventured to raise the question of value added tax. This must be a subject of considerable embarrassment to them. Every day we hear dismal stories of the long time it takes to complete VAT forms and to submit them, and all the rest of it. But who was it who introduced the Finance Act 1972, which set out the whole paraphernalia of the value added tax? It was a Conservative Government. This is something which bears very heavily indeed upon the self-employed person in this country. They have to spend hours and hours completing the forms. I do not intend to read to your Lordships the contents of these documents because it would take far too long and I do not wish to try your Lordships' patience much longer. But there is this mass of documents relating to the levying of value added tax in this country, and it takes a highly skilled professional man, let alone a self-employed person, fully to understand them. It is quite true that they are accompanied from time to time by chatty items, such as "VAT news No. 1", "VAT news No. 2", and so on, together with other amendments, but they are a great imposition upon the person who is trying to run his or her own business. It is an even greater imposition on those sections of the self-employed which have been referred to in this House this afternoon—those people who are engaged in the more creative activities of life. I am speaking of the musicians, the artists, the writers, the sculptors, whose minds 1299 are not attuned to the assimilation of documents of this kind or the completion of the forms.
As if that were not enough, we should warn the self-employed person now that further disabilities await him, because under the Draft Directive recently published in Brussels there is going to be— that is, unless something is done before 1st January 1976 by Her Majesty's Government—a requirement of a monthly instead of a quarterly return and a supplementary annual statement from all traders; a reduction of the exemption limit on small traders from £5,000 to £1,600; a substantial broadening of the range of goods and services on which registered traders would not be permitted to deduct input tax; an end to zero rating for exports of certain services, notably in the finance and insurance field, and an end to the special tax treatment involving taxation on the worker's margin instead of the full retail price, for works of art and antiques, and also for the taxation of certain imported services.
So if the lot of the self-employed person now is bad—which I believe it is—unless something is done it will be far worse after 1st January 1976. I know that this is not the place to enlarge upon the arguments as to whether or not this country should stay in the Common Market. There will probably be other occasions when it will be possible to go into greater detail, but one thing is quite clear; that is, that this country's entry in to the Common Market has made it much more difficult for the self-employed in this country than it has for any other section of the community. Big companies can always afford their own accountants to carry out these tasks and deal with the forms and the spate of regulations. The normal employee or operative in a firm is not responsible for them at all, but the self-employed person is, and it is a considerable imposition upon him. Perhaps those who now affect to be so concerned about the fate of the self-employed might, if they are ever again in Office, exert themselves in taking practical steps to implement that concern —and speaking purely personally in the terms which my Party has laid down, may I say how much I personally would welcome the support of your Lordships on the other side of this House in taking 1300 this country out of the Common Market, if for that reason alone.
That brings me back to my original point of bigness. The real enemy of the self-employed is bigness: bigness on the part of the large combines, the large companies which are organised through the CBI and who can easily put the self-employed out of business whenever they wish. It is not the bigness of the trade unions that threatens them, except perhaps that in the exercise of a dispute they may inconvenience his travel. It is the menace of big business and big finance that is the chief threat to the self-employed. It is not only a threat to the self-employed; I think we are now beginning to find out that ultimately bigness is probably the enemy of us all. It is time we all began to conduct our activities wherein we can engage ourselves in meaningful contact day by day with our fellows, performing services for them and making goods for them in a manner that is not impersonal and enshrined in the big machine. As Matthew Arnold once said, we arebetween two worlds, one dead,The other powerless to be born ".I hope that the next years will find a way out of that dilemma for us.
§ Lord ROBBINS
My Lords, before the noble Lord sits down, may I ask him a serious question? In the course of his observations, he made a very grave attack on a dedicated and hard working body of men who are unable to reply in this place or in public against accusations which are made against them. He also diagnosed one of the worst evils from which the self-employed and others in this country are suffering; namely, the present state of inflation. My question to him is this: would he say that civil servants rather than Ministers were responsible for this evil?
Lord BRUCE of DONINGTON
My Lords, I am most grateful for the opportunity to correct any such impression. I endeavoured to explain that in my view the power of the Civil Service was too all-pervasive to be at all healthy for the democratic administration of the country in enforcing the will of the people. However, apart possibly from any advice that they may have given—and they are entitled to do that—I most certainly 1301 acquit them as individuals from in any way causing the inflation from which the country suffered at the end of 1973 and the beginning of 1974.
§ 5.39 p.m.
§ Lord HARMAR-NICHOLLS
My Lords, with certain parts of his robust speech very well in mind, I think one should say that the noble Lord, Lord Bruce of Donington, would be a worthy colleague to follow if one were not inhibited by making a maiden speech. My speech today is being made almost 25 years to the day after the occasion when I made my maiden speech in the other place in this very Chamber—because in those days The Speaker's Chair was the other way round; and, indeed, I was almost on the same spot on the other side of the Chamber as now. I imagine that your Lordships are relieved that I am the last of the four maiden speakers today. Your Lordships' indulgence has been well and truly tried, but as one always knows, your Lordships have a courtesy and a sympathy which make it so much easier for those of us who go through the ordeal of making a maiden speech. It is always an ordeal, however often one has gone through a similar task.
My Lords, my reason for speaking today cannot be as good a reason as that of the noble Baroness, Lady Ward of North Tyneside. The noble Baroness made it quite clear that her object in speaking today was to legitimise her question next Monday—and she is not the first young lady who has rushed through a ceremony in order to legitimise a genuine mistake! It is one with which we would all have a great deal of genuine sympathy. Indeed, it is very difficult to speak on a topic in a non-controversial way when it is really a deeply controversial one, as well as being significant and important in its possible development. But as in all legislation, there is always an aspect which is non-controversial. In this instance, I believe that the non-controversial part will be more important in the long term than the swapping of actuarial figures and making suggestions that one side has done more than the other, which normally under the Party Parliamentary system is a very proper exercise in which to indulge.
1302 My Lords, I do not think that it will be a waste of time to reiterate the points already made which fall outside the strictly controversial sphere of our discussion. In debate as in business, it is sometimes a very useful exercise indeed to restate the obvious. Underlining the obvious often allows people to "see the wood for the trees". There is one thing that I believe is blindingly obvious; it has been referred to today, but in a way which was rather like a passing mention. It is blindingly obvious that inflation under the Conservative Government and their Social Services Act, and inflation under the present Government and their amendment of the Social Services Act, plus the capital transfer tax, plus the increased rates, has aroused resentment among the self-employed which is truly deep and real. There is nothing phoney about these feelings. It is not a partisan gesture but a reaction—what one might call a "gut" reaction. There is a feeling that there is something profound behind what is happening and unless thought is given to it it will grow to a disaster.
There is nothing new about the beginnings of it. It is perfectly true that for a long time shopkeepers, solicitors, farmers, accountants, small industrialists and partnerships have thought that their contribution to our national endeavour has been unrecognised and has gone unrecorded, when compared with the attention given to the bigger businesses, or the larger and more organised units of employees. For a long time there has been a feeling among these people that their contribution, which has been truly significant, has not been recognised at a time when people seem mainly to react to the way their claims are put forward on the media and in newspapers. The self-employed truly believe that the quality of their citizenship has been higher than many other groups who have been recognised. They feel their contribution to the wealth and stature of the nation has been equally significant to that of some of the more favoured groups in this country.
Until recently, they have felt disturbed that for years they have been placed "below the salt", when they were listed by such authorities as the right honourable gentleman the Chancellor of the 1303 Exchequer or the Secretary of State. This feeling that they are not getting the recognition to which they are entitled as part of the nation has been very disturbing to them. What I am now saying is that for years these people have been upset as a consequence of their worth not being fully recognised. But now, quite suddenly—and it is quite suddenly; it is as recent as recent months—they have become resentful, and verging upon the militant. They have this feeling now, I believe, because whereas in the past they felt the disinterest in them was not wilful neglect, they now feel that they have been deliberately discriminated against by all Parties. This is what has made the difference. This would bring me into the realms of controversy, but in return for your Lordships' kindness I must observe the Rules, so I cannot try to argue whether their feelings with regard to being discriminated against are justified or unjustified.
My present purpose is to underline what has been said already; that this feeling is deep and real, and it will grow. Those of us who have been in active Party politics have clear evidence that this feeling is real. Those of us who have been in politics and have presumed to speak at meetings over the years have seen how recently the attendance at political meetings has dwindled to a point where no-one turns up. The political meeting is now a thing of the past. In recent elections we have found that we no longer have meetings where the case is argued and the evidence submitted, where there is a feeling that one can persuade people to one's point of view. The political meeting has been replaced by going round the streets with a loudspeaker, shouting some sort of slogan, with no coherence and no real message behind it.
My Lords, with regard to the reaction of the self-employed to what they feel is discrimination against them, over recent weeks we have seen a revival of interest reflected in their attendance at meetings in their thousands. The self-employed now turn up at meetings as far apart as Wade-bridge in Cornwall to Kendal in Cumberland. They have even left their television sets, to move away from what is the now accepted way of spending evenings, to go to meetings to argue their case. These 1304 people feel deeply that there is something they ought to be dealing with. It is useless to try to counter this spontaneous reaction from a group whose social and business interests are normally poles apart. It is wrong to look at this and try to answer it by quoting one actuary against another, or by one Party saying to the other, "We did better than you did". These things are not important any more. There is now a spontaneous feeling, and this feeling is something that not only Governments, but Parliaments must face up to. Something recognisable, something tangible must be done to nip in the bud what could be a dangerous development.
My Lords, as an example, with regard to the amendment of the Social Services Act, I believe that nothing else will do but the setting up of an independent inquiry with wide terms of reference, and with a remit to produce an objective, impartial report. Only such an inquiry can make clear once and for all whether or not this discrimination to which I have referred, exists. I believe that the setting up of such an inquiry is necessary in order to justify or amend the actions of Parliaments in turning out legislation affecting people in a way that they think is likely to end their existence as self-employed business men or professional men. And, similarly, as regards the fears which flow from the gift tax and the rate increases and all the matters referred to in this debate, I believe that at the end of the day we need nothing less than a Minister in Government clearly designated as the Minister for collating the self-employed's needs, as we had a Minister for small Businesses and as we have had Ministers responsible for certain aspects. The first junior post I was honoured to be invited to take on was Minister of Food, when Food and Agriculture and Fisheries were joined together. When we had our inter-Departmental discussions, the Minister responsible for Food and the Minister responsible for Agriculture and Fisheries were there to present the special point of view of that section of the Department. I believe something of that kind has to be done. It could well be that, when the Prime Minister is thinking of reframing his Government at some time, this is a point he might take into account. I believe that nothing less than this will 1305 quell the growing fears and the consequent militancy which will grow from it.
At the end of the day, there are 2 million self-employed people with responsibility for looking after another 4 million employees. Their contribution to the nation's wealth-producing capacity is needed; the professions, the invisible earnings, the sub-contractors to some of the bigger firms, and even the service industries—where the self-employed help to give a service to the firms which are the big exporting manufacturers of this country—are all part of the success which comes from that. I believe that the self-employed section has this great part to play, and it is vital that it should be recognised. They are not part of the Social Contract. They are never invited to have the sandwiches and beer at 10 Downing Street when these discussions are going on. They never really feel that their point of view is represented in a coherent way in Cabinet or Cabinet Committees.
We are living through difficult and troublesome times. It is a new world. Those of us who played our part in politics over the last quarter century or more can forget many things we thought we learned. It is a new world, a new approach. Men walk on the moon today. I believe it is in the light of the new world, the new militancies and the new outlook that we have to look at some of these matters which at first glance look quite insignificant, but behind them is a power and significance we shall ignore at our peril. We have to make more difficult the development of any more divisive groups. I believe if we allow the self-employed to develop into a militant divisive group by neglecting them, it may become a problem that will undermine the Parliamentary system itself. These may sound extravagant words, but I do not believe they are. So I believe the noble Earl, Lord Gowrie, did a great service in arranging for this topic to be discussed in the kind of detail which can come out only in a formal debate such as this.
§ 5.54 p.m.
The Earl of LYTTON
My Lords, it falls to me to congratulate the noble Lord, Lord Harmar-Nicholls, on his maiden speech, a speech of tremendous vigour and wit, and I thought of particu- 1306 lar value. I look at him with especial interest, as he is at the top of the profession on the bottom rung of which my elder son has just set his foot. I shall watch him with great interest in this House from that point of view. I have reflected on his career as a Sapper, but what attracts me most is the diesel car which I think he has on one occasion driven to Vienna. I have taken up the pushbike again, and I am looking forward to a donkey engine diesel to push me up the hills. I am sure all of us are going to be interested in this before long. I used to ride 5,000 miles a year, but 3 miles is my limit now. I look to the noble Lord for advice on this, and look forward to hearing him again on other matters. On one point where I so much agreed with him, he recommended a council to consider the justice of the impact of national insurance on the self-employed.
I want to associate that thought with the noble Lord, Lord Bruce of Donington, with a large part of whose speech I agreed more than with anything else said so far. I agreed in particular with his remarks about the Treasury. For 35 years at least I have had a solid conviction that the Treasury is too big for any Chancellor to manage in the short duration of his life there. I am absolutely certain of it. If I am not right there, I am not right in anything on this earth. The Treasury is focussed on gathering revenue. Justice is irrelevant to it. I wish the noble Lord had not given way to the magisterial authority of the noble Lord, Lord Robbins, who says everything I normally agree with, and, of course, was right to defend the Treasury. It is the organisation which is wrong; the focus is wrong. I should like to see a Council of Justice, composed of five noble Baronesses of this House whom I have heard expressing the most fair and just views I have ever heard anywhere on this earth, sitting in judgment on social justice administered by fiscal means from the Treasury. That is what is wrong. You do not get justice from Shylock, and you never will.
My Lords, I have been so stimulated by those two speakers that it is impossible to deliver my own. I was going to express regret at something the noble Lord, Lord Hughes, said, but he is not here; I will do so if he comes back, so that he can tick me off, if he likes. I had 1307 come to this House in order to bring to your Lordships the voices of the dying English village, and by a village I mean a proper village, such as Porlock on Exmoor, and a village which is part of a town, and I have made a survey of both of these. I hold that a healthy town is a collection of villages, or ought to be, and one of the troubles with many towns is that they are not. In so far as they are, I have studied them. They must have their little shops. They must have their farms not far away.
I have communicated with a number of people, and they have this in common, that they are all known to me, they are all honest folk, nearly all of them work, man and wife; all of them work at least 60 hours a week, in summer more than 84 hours a week. They are content, most of them, to try to do a little better than the minimum agricultural wage, which is £40 per week. None of them at the present time is as well off as my farm workers, with a minimum of £40 a rent-free, rates-free, water-free, cottage. All of them would be better off if they want to be employed. But they do not; they are content and they would like to go on. But their rate of reward at the present time, so far as I am able to find out from the Chambers of Trade, is 28.5p an hour—and I pay a man over 75p an hour when he conies to work for me. Twenty-eight pence is the rate which the self-employed man gets. That is also the reward that his wife gets, and they work 60 hours a week; that is £34 a week each, or therabouts, and of course that is well below the agricultural minimum wage which is somewhere near the bottom of the league in this country. They are not generally unhappy; I do not know that they pride themselves particularly on being good citizens, although they jolly well are! As your Lordships can imagine they are loyal and they are all small-scale, many handling £25,000 worth of turnover a year, for this miserable reward, at enormous risk, and all the stocks they get are wasting away at the rate of 20 per cent. a year.
Let me inflict a few examples. Consider the position of a widow farmer with 300 acres of difficult hill farming land, five miles from the village. Let me explain its value: about £300 an acre— 1308 Heaven knows why! Therefore she is in control of £90,000 worth of land—with crops, stock, tractors, machinery and all, that represents well over £100,000. But do she and her two sons get the equivalent of one labourer's reward each from this difficult land? Most certainly not. What is her trouble? She writes to me:I was so astounded by the new death duties "—a lawyer in Minehead informed her of what she still calls "death duties"—that I have lost all interest as to what they will do next".She goes on to say:The same must be true of the little businesses ".That is the long-term executioner's axe which is preparing to fall on all these people.
I turn to the problems of the village greengrocer cum fishmonger. He pays one man £40 a week to grow fresh vegetables. He can no longer cover the cost. Farmers get help—horticulturists do not. He writes:Before VAT my wife and I, as we never have time for a holiday, always had a few hours out on a Saturday evening, but I am afraid that even this has now gone, because my wife has to work these long hours on VAT.While I am talking of holidays, it should be realised that most of these people never have one. The lady on the farm to which I referred has had one holiday in 45 years. On the death of her husband, the family clubbed together and sent her to New Zealand to stay with kinsfolk who had emigrated in the 'nineties, when things were worse than they are today.
I must mention that nearly everybody refers to this national insurance tax. They all regard it as unjust and I call it the "wicked tax". I do not want to hit at one Party rather than the other, but perhaps at both; the Conservatives for conceiving it, Labour for carrying it out. I am not giving only my own views; anyone can examine my file to see that scores of people call it the "wicked tax". But it is not the only tax. There is one trouble, which, to my surprise, is even worse. It is cited again and again in all the letters I receive. It is stressed by a social worker—a lady of some substance —who attends international conferences in Lagos and Rio (I never quite know 1309 where she is) and she goes under the unlikely name of Ida Down. She says:VAT has placed an almost intolerable burden on the self-employed. As a result their nerves as well as their health, are in danger of breaking down. Added to this anxiety is the constant apprehension of visits from officials demanding to inspect books and stock".These officials arrive without warrant, without appointment and without any indication that they are going to stay the whole day and occupy the entire attention of the only proprietor. The snoopers have arrived. They do not come to help; they come to snoop.
I do not quite know how VAT started. I have heard today that it is attributed to the Conservatives, but is it not something which is imposed upon us by our membership of the EEC? I do not know whether it is. But everyone mentions this as something which will smother the small self-employed person. It will smother him on top of everything else. The Chamber of Trade estimate that it is costing £500 a year for a small business to keep the books. A friend of mine, a man retired from Coutts Bank, whose profession involved figures, said he had applauded the arrival of VAT in replacing the other two taxes. After helping one shopkeeper he declared himself dismayed:But the egg has hatched into a monster".He is doing the figures for a small man with one regular employee and three half-time women. As first explained by the noble Lord, Lord Bruce of Donington, he is inflicted with these awful matters: "The Employer's guide to national insurance contributions" (43 pages of Civil Service jargon); "VAT News No. 5" (23 pages); "Value Added Tax: special schemes for retailers" (Her Majesty's Customs and Excise Notice 727, 30 pages); "Value Added Tax scope and coverage—Revised February 1975—(Her Majesty's Customs and Excise Notice 701, 94 pages).
Look at these documents and for heaven's sake! if you are going to do anything about these people, stop them being stifled. Look at this awful trash with which the little man and his wife are trying to cope at night. It is awful! They will go, my Lords; they will not be dishonest, but they will be succeeded by a new order of people—twisters, advised by crooked lawyers and helped by shady accountants. There are the new people 1310 who can live with this kind of thing and we shall get the kind of dishonesty which the noble Lord, Lord Robbins, prophesied in connection with inflation. Inflation is doing it one way, bureaucracy is doing it in another.
It is absolutely certain that these honest folk will go. They will become anything you like—doorkeepers; yet they will still be honest, but a new range of people will follow. It is something which I think is unforeseen. I am not trying to blame anybody. I believe that many events are subject to "Ferrers law", the law propounded by the noble Earl, Lord Ferrers, a little while ago in a debate in your Lordships' House—"the effect of things being the opposite to what you intend". I am sure that that is what frequently happens.
I had intended to go further, but perhaps I have said enough. One of the maiden speakers, and also a maiden speaker of the other day, have covered half I wanted to say, and 15 minutes is enough.
§ 6.10 p.m.
My Lords, I am sure that the House will be grateful to the noble Lord for having introduced the Motion this afternoon, not only because of its importance but also because it has been a vehicle by which four very distinguished people have made their maiden speeches. Three of them one might describe graciously and, I hope, embracingly as veterans of the game, and we were very glad indeed to hear them. The fourth has not only distinguished himself as a dentist but what he did not tell your Lordships is that in his spare time he is self-employed as the owner of a band in which he plays the trumpet and, indeed, the hose pipe with as much aplomb as he displayed in his maiden speech. I was glad to hear it.
My Lords, I suppose that it is inevitable that throughout the years society will never get into equilibrium. There will always be sectors—differing sectors— which from time to time are unfairly and unduly subjected to pressures, and it is right that we should be made to recognise which sectors are under pressure at any particular time. In this respect my noble friend Lord Gowrie was right in putting down his Motion today.
My Lords, I sometimes despair about civilisation because we educate ourselves 1311 better, we provide better facilities for housing, for schooling and for hospitals, we provide better conditions for work and for leisure time and more facilities for the enlightenment and edification of the mind. Civilisation ought to enable us to be better, more understanding and more sympathetic to the other person, but the strange thing is that the more civilised we become the more we jostle ourselves into big groups, big enterprises, big companies, big factories and big unions. What for? Presumably, in order to survive, but to survive what? Again, presumably, those who are stupid enough not yet to be so organised. This should be the complete opposite of civilisation and I was glad to hear the noble Earl, Lord Lytton, refer to Ferrers' law because this is an example of it. The reverse effect to what one would have thought would happen is being produced. The result is that we are growing into a grossly selfish society, content to witness and—what is worse—to design that those who are not joined into a powerful, egocentric and impersonal group should be squeezed out and trodden on.
My Lords, who are these people who are so dealt with by society? They are those who want to be independent, who want to be individuals, who do not want to be part of a mass, who are content to be identified and who are prepared to be identifiable, who are happy to—and who wish to—work without restrictions and who are prepared to stand and indeed to fall on the results of their own endeavours. In this stratum of society lie the creative and independent forces of our people, which we should nurture, for they are those who are individualistic, usually unorganised, frequently unorganisable, diverse in thought, self-reliant in attitude and vital to the country. In this rugger scrum of power which we watch in our daily lives, it is the weak, the unorganised and the non-militant who get hurt. Curiously enough, they are often hurt by the actions or the results of the actions of the big organisations—whether unions or Governments of any political Party— which were originally set up to protect people from the very hurts which they are now, sometimes wittingly and sometimes unwittingly, themselves inflicting on others.
1312 My Lords, I would ask your Lordships to consider one particular section of the community which is under pressure at the moment. It would be invidious to claim that these people are under more pressure than any one else, but it is very considerable pressure. They are frequently self-employed. Their work is vital to the nation. They are individualists. They are entrepreneurs. They work—and are happy to work any and all hours, and in all conditions. What they produce is required. Yet they are in utter despair, both financially and for the future. I refer to farmers, of whom I happen to be one and of whom the noble Earl, Lord Lytton, spoke earlier.
My Lords, 97 per cent. of the work force of the country is engaged in occupations other than farming and, on the principle that other people's jobs are always much nicer than one's own, I suppose that it is not surprising if 97 per cent. of the population think that farmers are doing very nicely thank you. I venture to suggest that that is a wholly erroneous impression.
Inflation has been recognised by all Parties as the greatest enemy we face. It causes industrial hurt and business chaos; it causes human misery and mental anguish; we have all suffered and are all suffering from it. But I suggest that the agricultural industry has suffered more than most. This, among other things, is having a devastating effect on output, on returns, on morale and on investment. In the two years of 1973 and 1974 together, agriculture which is largely made up of self-employed people, has seen the cost of its inputs rise by £1,400 million —a rise of no less than 50 per cent. When others faced with inflation can argue for and receive wage increases of 35 per cent., it is not surprising that farmers ask where they stand in all this. When other businesses are faced with unprecedented cost rises, they can apply to the Price Commission for an increase in prices. Not so the farmers. They have to reply on a combination of market forces and Government support. They have little control over the price of inputs and little control over the price of their products. I am not complaining of the system. I am merely drawing attention to it to show how inevitable it is that the farmers must look to the Government for protection.
1313 My Lords, what have we seen happening to the farmers? The net income for 1974–75 is forecast by no less a body than the Ministery of Agriculture to decline by 12 per cent. In money terms, that means a decline of 25 per cent. and in personal spendable income it means a decline of 17 per cent. Contrast that with the national average earnings which have increased by 25 per cent. Furthermore, that may be the effect on cash, but only last week the true extent of the crisis in the industry of which these people form the major part was revealed when the December 1974 agricultural returns for England and Wales were published by the Ministry. Compared with a year earlier, they showed that the beef breeding herd was down by 1 per cent., the dairy herd by nearly 5 per cent., the pig breeding herd by 7 per cent. in three months and 17 per cent. in the year, that the number of gilts dropped by 12 per cent. in the last quarter and by 37 per cent. in the year and that the number of ewe-lambs kept for breeding is down by 14 per cent. The egg-producers are losing money hand over fist and are coming to London tomorrow to draw attention to their plight. Those figures refer to last year, but now steer and heifer slaughterings are up 50 per cent. on last year, cow and bull slaughterings are up 35 per cent. and calf slaughterings up 300 per cent., and the production of pork is down 12 per cent. and that of bacon is down by 17 per cent.
My Lords, these cold, clinical statistical facts show two things: first, in personal terms, they mean that farmers have often lost money and some have faced and are facing ruin—and I do not use that expression lightly. They certainly cannot find the money, and even if they can find the money they cannot find the will to invest. Secondly, they mean in national terms that the food which, as a country, we need and which they could produce has to be bought from abroad and this is a drain on the balance of payments of £4,000 million.
My Lords, last year the oil-producing countries put up their prices so vastly that we had an oil deficit of £4,000 million a year. Everyone has gone mad about it. The price of petrol has rocketed. Prime Ministers and Governments say that this has rocked the economy and caused inflation and everyone yearns for the day when 1314 North Sea oil will save this massive bill. But when we have a £4,000 million deficit for food, what action do the Government take to stimulate home production? Not only are they willing to see output drop and individuals hurt in the way I have indicated, but they frustrate agriculture and those who work in it still further by threatening to rate agricultural land, to abolish the tied cottage system, which is essential to any livestock enterprise, and by ensuring that any farms are totally busted up by the new capital transfer tax, and then for good measure they say that farmers will have to subscribe to a wealth tax. Of course, in the end you can break a man's spirit.
Last week I had the pleasure of taking the chair at a meeting in Peterborough where the effects of the capital transfer tax were explained to some 350 farmers. It was not a political meeting, but a meeting to inform organised by the Ministry of Agriculture in conjunction with various other bodies. The level of despair at that meeting was amazing, even to me, as farmers realised that, whether big or small, landlord, tenant or owneroccupier, their enterprises were to be literally carved up when they passed them on to another person. As one farmer put it, "What on earth is the point of trying to produce more and invest more money? We might just as well go home, produce less, borrow less and save taking the risk". It was Mr. Crossman who admitted in his diaries that his own farm of Prescote had taught him much about the facts of business life, and he said:I am sure Prescote has taught me a lot more about economic growth, about capital investment, about business, about tax law than I knew before. All these things have I learnt by having responsibility for these 500 acres.I hope that the Chancellor of the Exchequer will heed those wise words and will value the expression of opinion which emanates from a similar training ground.
My Lords, if this total fragmentation of farms is to be the result of a life's work—the arduous conditions giving a return on capital which in other industries would be totally unacceptable—is it to be wondered that people are saying, "It just isn't worth it"? Indeed, is it fair that even a small farmer with, perhaps, 200 acres valued at £500 an acre, having 100 cows can now find himself ripe for a huge slice of capital transfer 1315 tax, despite any considerations there may be for full-time farmers? But he has probably inherited that farm some 25 years ago when the value of the land was not £500 but less than £100 per acre. It is neither sharp practice, nor shabby dealings which have made him such a suitable candidate for taxation, but, rather, inflation, and it is inflation which has required him during his business life to borrow in order to keep his business viable, and which will enable the Government to carve his farm up on his retirement, and even more so on his death. He will be obliged to sell part of his farm to pay the capital transfer tax. But it is not clear who is to buy these odd uneconomic and ubiquitous parcels of land which are to appear all over the country without any buildings on them. The only person who will be interested is the next door farmer, but he will not buy them only to find that such a purchase will eject him into a higher tax bracket and a heavier taxation liability when the time comes for him to stand down in favour of a younger man.
I find it hard to understand how any Government can be proud of a policy which is deliberately designed to fragment farms of all sizes so as to ensure, whether by design or ignorance, that those engaged in them will be returned in a couple of generations to a peasant agriculture. Whether or not that is what the Government want, I can tell the noble Lord who will reply to the debate that that is what they will get, and that is why the farmers are in despair. But why is this done? I cannot help but disagree with the noble Lord, Lord Hughes, who said earlier that the Social Contract does not have any adverse effect on other members of society. It is done because the prerequisite of the Social Contract—which we now see being broken day after day—is that there should first be the redistribution of wealth. Indeed, because farmers, like owners of small businesses, appear on paper to have wealth, the Government are prepared to sacrifice them, their families, their businesses and others in order to hope to obtain moderation in wage demands.
The Government are right to try to get moderation in wage demands, but they are wrong if they are to sacrifice another section of the community in order 1316 to achieve it. Only a solution to inflation which is aimed at the protection of all society can be justified. But the Government have decided in this case to make a bargain with only one sector of it. This may in itself be unfair or unwise, but what is manifestly unjust is that the success of that bargain depends on action having first been taken against other members of society.
Over the years, civilisation has tried to teach us that it is unethical for those with power to use their power for their personal advantage at the expense of others. We consider that we are civilised, yet we still have the situation of those with power using their power for their personal advantage at the expense of others; but this time it is backed up by Government. The Social Contract obliges those with power at the expense of those without. As a country we depend on harmony of effort, and most of our businesses, large or small, have depended at some time in their life, and usually at the beginning, on the initiative, drive and enterprise of the individual. Frequently, those men were self-employed.
My Lords, I have sought to restrict my remarks to those who are largely self-employed and who work in agriculture, but the same principle applies to all sections of the self-employed. The nation needs their individuality of thought, their individuality of work, their individuality of approach and their determination not to be dragooned into a mould. The Government should seek to preserve that independence of outlook and realise that at the moment it is seriously at risk.
§ 6.27 p.m.
§ Baroness BURTON of COVENTRY
My Lords, I regret that I am not speaking immediately following the noble Baroness, Lady Ward of North Tyneside, who made her maiden speech today, because in the 'fifties, when we were both in another place together under the speakership of Colonel Clifton Brown, it was frequently given to us to speak following the other. Whether he regarded us as two statutory women, I do not know. The noble Baroness, Lady Vickers, is well known, particularly to those of us who have been in another place, for her work in the international sphere; the noble Lord, Lord Harmar-Nicholls, for, I think, holding the championship in recounts 1317 from time to time; and we greatly enjoyed the speech of the noble Lord, Lord Colwyn. I do not know whether he realises that in his absence from the Chamber the noble Earl, Lord Ferrers, told us of facilities he has other than practising dentistry. All of your Lordships will agree that we look forward with pleasure to hearing more from our four maiden speakers, and those who served in another place particularly look forward to hearing again from our three Parliamentary colleagues whom we regard as good friends from the past. It is good to have them with us.
I will not pursue the remarks of the noble Earl, Lord Ferrers, who knows much more about agriculture than I do. However, I think he will find that what I am going to say fits in with a good deal of what he said. I hope very much that it will not be seen as being controversial, because I should like the whole House to agree with what I am trying to say. Particularly, of course, I should like my Front Bench to agree because it is there for the moment that power lies and I hope the noble Lord, Lord Jacques, has taken note of that.
I want to take a different line. I want to talk about one particular problem confronted or feared by self-employed and professional people in this country—the problem of their future, of retirement. To do so I shall have to set out the position today for those who are already in retirement, and broaden the context to include those living on small fixed incomes, which will delight the heart of the noble Baroness, Lady Ward of North Tyneside. I must say that when I saw this Motion on the Order Paper I thought, if the House will forgive the colloquialism: "Irene Ward and her small fixed incomes". I am sure that the noble Baroness will be returning to this matter in the future.
My Lords, we all know that many of the self-employed people nearing retirement will find themselves in this category. For some years—not so long as the noble Baroness—I have been trying to do something about this problem. I have been trying even to have it admitted as a problem, to have it admitted that it exists. Over the past two years, as a result of letters in The Times, I have received a good deal of correspondence, including corres- 1318 pondence from people who would not be classified as readers of The Times. The letters have come mainly from self-employed and professional people, retired or about to retire. Other letters have been from writers who describe themselves as working-class or as members of my political Party. All wrote excellent letters; none was asking for favours; all had saved for their old age. In common with most of us—probably all of us—here today, I am not interested in "class" of any kind, whether you define class by birth or wealth, position or influence, or type of employment. Instead, I want to talk about a section of the community which embraces a problem of the people mentioned in the Motion which we are debating.
In the past, no Party and no Government have been interested in this section. Certainly, pensions have been increased. There is a real and admitted concern on this front, but the section I am talking about has had no powerful friends. I want this Government to admit the problem and to do something about it. My Lords, what is going to be done to help the elderly people living on small fixed incomes, those over pensionable age? In all the words written about inflation, in all the propaganda put out by the political Parties, nothing is put forward for this section of the community. A small fixed income does not stretch at all, even to the most moderate inflation. I believe that the contributory old age pension—the retirement pension—should be taken out of taxation altogether. The number of rich elderly people who would benefit from such a concession should be contrasted with the numbers of the non-rich. Everyone is prepared to contribute his share in these difficult times, but I suggest that the definition of "unearned income" should now be reconsidered. It seems to me that money saved by people through their working years, taxed when received, and then put by in a building society or insurance company to live on in old age just cannot be classified as "unearned income".
Would it be possible to differentiate this type of saving from, say, saving made possible by inherited wealth? Could not income from what I will call "working" savings be classified as earned income after pensionable age? That at least would be fairer to the people concerned, 1319 who are not the rich. This Government have departed from the status quo in an effort to safeguard savings of pensioners and the elderly. But both the index-linked bond and the savings scheme to be brought in this year do nothing—I repeat, nothing—to help the considerable number of people existing on small fixed incomes who need the annual interest to live on; and secondly, those who may feel that five years is too far ahead for them to benefit. Both groups need help now.
Is it quite impossible for something to be done before it is too late, or are we all prepared merely to sit here and say that this is a section of the community which does not matter? Shares on the Stock Exchange fell recently to an all-time low, although a small recovery is now taking place. I know nothing about the Stock Exchange, but I gather that people are not sure whether or not the recovery will continue. Yet there seems to be a refusal on the part of many people in this country, who ought to know a good deal better, to realise that this fall has meant that millions of small retired people are losing all their savings and are seeing their small life assurance policies produce less and less. Why is this? I ask a rhetorical question of my Front Bench, and I hope that my noble friends will be able to give an answer. Why are small retired people outside the pale? Why is their problem not admitted?
All the letters sent to me, without exception, have stressed a willingness to make sacrifices—as all of us must do. I think that "must" is probably not the correct word. If wages or salaries are in advance of prices and inflation, then there is no sacrifice for the people concerned and, even more important, no realisation of what inflation means. If you are "sitting pretty" above it, you have no idea what it is like below it. But the people who have written to me, again without exception—usually there are exceptions, but not in this case— feel that they have been discriminated against. I agree with them. Their savings have almost gone. They deplore the injustice of the taxation imposed on elderly people who worked and saved with some pride towards financial independence in their old age. Those were not bitter letters, but running through 1320 them all was a sense of complete disillusionment and a feeling of hopelessness. Running through them all—I think I felt this more than anything—was a sadness that "thrift" is now a dirty word. These letters did not come from any group; they came from individuals, and that was the feeling of those individuals.
My Lords, one comment—I think that the noble Earl, Lord Ferrers, implied a similar point—was that it seemed ironic, almost cruel, to compare the increase in average wages over the past year with what had happened to the incomes of those retired people depending on pensions or investment income. I think that somehow we seem to have lost our way in this country at the moment. I just do not believe that those demanding, nay, insisting, on increased earnings of what? —25, 30, or 35 per cent., have given real thought to what such increases must mean to people about to retire or to those in retirement.
I leave out the effect on the country because I do not want to get side-tracked on to that at the moment. But the prices leap in coal, gas and electricity—to take only three—is something which people on small fixed incomes cannot pay. They have nothing extra coming in. I am sure that I am talking to the converted here, but power lies here and along the corridor. We talk about small wage increases, but these people have nothing. Are we going to wash our hands of them and say that it is just too bad? They have nothing at all extra coming in. Their savings are being taken from them, and I ask: could we not understand and help? My concern is for the millions about to retire or already in retirement. All these people have saved for their old age. My Lords, is this a crime? Is it right that such savings should be penalised?
The words "unearned income" are taken in some quarters as referring to millionaires. The only "unearned income" coming to those with small fixed incomes is from investments made with savings from what they earned over many years. As a result of present taxation— and I think unfair taxation—the return is a fraction of the general rate of inflation and savings are draining away. So I believe that the retirement pension should be taken out of taxation altogether, and taken out now. After all, people have 1321 paid for their pensions over many working years. I believe that the very real hardship suffered by the elderly under the present investment surcharge should be alleviated. I suggest that the definition of "unearned income" should be reexamined for those over retirement age. And I think we would all be convinced that there should be equality of sacrifice in these difficult times—as nearly as one can get equality. No section of the community has a right to insist on maintaining its own standard of living while denying it to everyone else. That could not be denied wherever one went in this country.
I know that my noble friend is not the Chancellor. If he were he would not reply in any detail to what I have put forward just before a Budget. All I would ask the Minister who is to reply is that he passes on for consideration all that I have said. I would hope that he could do this with his blessing; and an admission that the problem I have been talking about does exist. I am not overlooking the commitment of the Government in the new Pensions Bill; but that is for 1977 or 1978 at the earliest. It does not affect what I am talking about now. Even the Treasury—I would say to the noble Earl, Lord Lytton—powerful though it may be, must do what it is ordered by the Chancellor of the Exchequer. This is a matter of political will. Ways can be found if the will is there. The Party to which I belong believes in helping weak and oppressed minorities. I hope the Government will decide to help this one.
§ 6.42 p.m.
§ Lord AUCKLAND
My Lords, this has: been an historic debate in more ways than one. We have had no fewer than four excellent maiden speeches and, if I may, I refer particularly to my noble friend Lord Harmar-Nicholls because I think I know him better than the other maiden speakers. They all contributed excellent speeches and I refer to my noble friend Lord Harmar-Nicholls only because I recall once going to speak for him in the course of his almost "Ride of Death" campaigns in his constituency of Peterborough. On that occasion, albeit with a wafer-thin majority, he retained the seat. But I know I echo the sentiments already expressed that a "return 1322 match" of speeches from all my noble friends will be very much welcomed.
The noble Baroness, Lady Burton of Coventry, referred to the fact that the noble Lord, Lord Jacques, would never be Chancellor of the Exchequer.
§ Lord AUCKLAND
My Lords, in any case I believe it would be constitutionally very difficult for him to hold that office; but even if it were possible, I am sure that he would be an extremely kind one from the benevolent expression he always wears on his face. My noble friend Lord Gowrie, in initiating this debate, has performed not only a valuable service but a service which is very much to the moment, so to speak. I speak as one who has been self-employed and in employment. I spent some 12 years as a self-employed person in the field of management consultancy. I am still a director of the company, but I have now returned to the field of insurance though not in an executive position. I think that what one must remember about the self-employed is that so many professions and industries are concerned with this state of affairs. As a management consultant I recall the tremendous amount which is contributed to the export trade. This has not been mentioned so far during the debate.
In the small company of which I am a director two of my colleagues have been to Australia, New Zealand, Scandinavia and Africa to give the expertise of British consultancy to these countries and thereby earn valuable money for our exports. This can be multiplied a good many times in the large number of consultants there are in this country, small, medium-sized and large, and, indeed, in the field of insurance. I think we as a nation still contribute more than any other country in the field of insurance coverage both in Lloyds, with which I am particularly concerned, and in the smaller insurance companies.
My noble friend Lady Ward of North Tyneside mentioned one particular grade of self-employed person for whom I have a particular affection; that is, the physiotherapists. In my small way I have in this House campaigned over a number of 1323 years for better remuneration and conditions for these people. They work very long hours and have an extremely arduous job both mentally and physically. I am thinking particularly of the female physiotherapists, but both male and female physiotherapists, and the workers in the Health Service as a whole, quite a number of whom are self-employed or are in that category, work very hard for relatively low wages. It could be argued that a number of people who are self-employed could get themselves out of that category. I have heard that argument put forward. It is not one which I think can be readily accepted.
I do not think this debate is intended as an entire cri de coeur merely for the self-employed; but there is no doubt whatever that it is time that the plight and conditions of the self-employed were brought to the fore. There have been some very valuable speeches from those who in some cases have had many years experience in this field.
My Lords, we all know the reasons for the present financial conditions under which this country and many others are reeling at the present time. There will be an opportunity to discuss this question in far more detail when the Finance Bill finally reaches us, one hopes, some time next week. But the self-employed and those in other categories are finding things very difficult at the present time. The self-employed are in a particularly difficult position nowadays for reasons which have already been advanced. Mention has been made of the small shopkeeper. We all know of the growth of the supermarket and in these days few would dispute that the supermarket has a vital role to play. But so has the small shopkeeper, particularly in the villages, who sells everything from a pocket comb to, in some cases, lawnmowers—and in the United States he sells an even wider range of goods than that. These are people who in many cases have carried on a business from generation to generation and have been the epitome of courtesy, kindness and good service. One point to bear in mind is that the self-employed person, whether a shopkeeper, a management consultant or an insurance broker, must give personal service to survive. Some large monopolies may be able to fob off the public from time to 1324 time, but not the small self-employed person. Therefore, in this competitive age nowadays it is important to bear in mind the value which self-employed persons and self-employed businesses give, not only in this country but in the vital field of the export drive—figures will show this to be true—and that is why this Motion is so valuable today.
§ 6.53 p.m.
My Lords, at this late hour I will try to condense the little I have to say into several short paragraphs, and I hope that that is what your Lordships would like. I would start by saying how timely and apt it is that we should be discussing this subject here this evening. When my noble friend Lord Gowrie was speaking, I was interested to see on the Back Benches opposite the number of faces wearing uncomfortable expressions. Noble Lords on the Front Bench could not see them, but I can assure them that that was so. I thought that the noble Lord, Lord Hughes, in his speech tended to miss the spirit of the Motion, even if there was a good deal of fair debating stuff in what he said to us. He is generally so good, but I thought that today he was below his best —I must not say "below par"! He said little about the problems, hopes and fears of the small independent man, whether in business or doing professional work. But two of his noble colleagues later in the debate—the noble Lord, Lord Bruce of Donington, and the noble Baroness, Lady Burton of Coventry—made amends. The oddest part of the noble Lord's speech was the welcome he invited us all to give to the capital transfer tax, whether we were in a more or less fortunate position in this country.
I want to speak in these few sentences more of the national importance and the national service which these people give, rather than just of the interests of the people themselves. It stems from something we must bear in mind which was said by the noble Lord, Lord Bruce. That is the extraordinary feature today where-by we assume that if something is bigger it is therefore better. It is a strange and vulgar feature of life today and it pervades the whole of society from Government downwards. All Governments have tended to be dazzled by big names in business and to have looked past the quality, the treasure and the gold that 1325 can be found among the smaller men. All too often those on whom they have bestowed their favours—and I am not thinking of just the present Government; it has happened with other Governments before—have turned out to be lame ducks, and sometimes very big lame ducks. Yet they, whatever the state of their health, always seem more likely to get favours from any Government. Maybe it is because they can achieve certain results quickly—important results, for example, in the export field which are very difficult for smaller businesses to achieve. But we must not forget that today's big names were the small names of yesterday. The noble Lord, Lord Melchett, will bear that out. Behind the noble Lord earlier today sat the noble Lord, Lord Sainsbury, and I think he too would bear that out. It is something we are apt to forget: today's big names were the small names of yesterday; and some of today's small names (of course, many will fall by the wayside) will be the big names of tomorrow and will be the firms which will be in a position to do this country great service.
I wonder how many flourishing businesses today, smaller as well as larger, started after the war with no more capital than the gratuities of one or two men coining out of the army. Long may that spirit remain in this country! It has served us well in the past and we need it badly today. The more successful will probably have had good fortune with something which we can call innovation, as well as having to put in tremendous hard work. The inventors' problems— and I do not think they have yet been mentioned here this evening—have never been treated seriously, so far as I know, by any Government. I am sorry that the noble Lord, Lord Lloyd of Kilgerran, is not here at the moment because he and I have both been associated with the Institute of Patentees and Inventors. Millions of pounds are lobbed out to those who have the ears of Governments and their advisers; and there should be encouragement of innovation, which is so important and is worth, surely, more than the few hundreds of pounds a year of public money which the Institute of Patentees and Inventors may enjoy in the course of a year. This, I submit, is a field which is absolutely vital to us in the future, because innovation has served 1326 us so well in the past and it will serve us well in the future only if not only this Government but others which follow give it all the encouragement they can.
§ 6.58 p.m.
§ Lord JACQUES
My Lords, first may I congratulate the noble Earl, Lord Gowrie, on moving this Motion. We have had a useful and interesting debate. I hope that I shall add to its usefulness and interest I must also congratulate the four noble Lords who have made maiden speeches. They spoke with knowledge; they were non-controversial and spoke briefly. Their speeches were entirely in accordance, with the traditions of the House and we hope that in the years to come we shall hear them on many occasions. It is interesting that the number of self-employed in the decade 1961–1971 increased considerably, while the number of employed decreased. In that decade the number of self-employed, including employers, increased by 10 per cent. The number of employees fell by 1½ per cent. I think there were two reasons for the increase in the number of self-employed. By far the biggest reason was that one had the development of the labour-only contractors—those who we on this side of the House regard as the "bogus" self-employed, the people who saw an opportunity to evade tax, insurance, training and safety responsibilities. It was part of our Manifesto that we should deal with that part of the problem. There will be legislation to follow which will, in fact, deal with that problem.
However, I should like to think that there is another reason why we have had an increase in the number of self-employed. I believe that there are legitimate advantages in being self-employed because, no matter which Party is in power, they are trying to be rather kindly disposed towards the small man. I hope to show that on balance we on this side of the House are just a little more kindly disposed towards the small man than the Party on the other side of the House.
In passing, I will give an example. Until 1966, the benefit which was given to new entrants in the development areas was by way of tax allowances. These tax allowances favoured the big company. It could immediately set the tax allowances which it obtained in a development area against profits it made elsewhere, even 1327 though it had made a loss, as it normally would have done, in the first few years in that development area. However, it penalised the small man; if he was going to benefit only from tax allowances, he would have to wait until his business was profitable before he obtained any advantage at all. In 1966 we changed that and substituted cash allowances. One of the reasons why we substituted cash allowances is that we want to give benefit directly and immediately to the small man who, in the initial stages, may be making a loss. However, when the Party opposite came into power in 1970 they completely reversed our decision. From 1970 to 1972 we went back to the old method of income tax allowances which favoured the big company and were very much to the disadvantage of the self-employed. There are other examples which I hope I shall be able to give in the course of my speech to show that, on balance, we are probably a little more kindly disposed towards the small man than the Party opposite.
The point that was raised most frequently in the debate was that relating to National Insurance contributions. Here there is misunderstanding and, in fact, error. For example, my noble friend Lord Bruce of Donington quoted the Class 4 contribution of a self-employed person earning £2,704 per annum as £3.08 per week. This is not the true figure. I have spoken to my noble friend and he admits that he has made a mistake in his calculation. He says that his misunderstanding is due to the wording of the circular.
Lord BRUCE of DONINGTON
My Lords, if my noble friend will permit me to intervene, I have not had the advantage of reading the Bill. I have relied entirely upon the form which is No. NP 18. It says in paragraph 2:The Class 4 contribution rate for 1975–76 is 8 per cent. of profits or gains between £1,600 and £3,600.It does not say:… on the band between £1,600 and £3,600 ".I naturally assumed that it was on the actual total income between those figures. Subject to that, on the figures which I gave the figure should be £4.11 per week—which is still, in my view, unjust.
§ Lord JACQUES
My Lords, may I give an example. In the case of a self-employed person receiving £50 a week, under the Bill which was recently before this House he will pay £3.95 per week. The combined contributions of the employer and the employee receiving the same amount, £50 a week, is £6.25 per week. The fact is that if the self-employed are going to pay for the benefits which they receive, they should pay 90 per cent. of the contribution made by the employed person and the employer who employs them. However, in point of fact, even under the proposals in the Bill which has been before the House the self-employed will not be paying 90 per cent.; they will be paying only 65 per cent. of the contribution of the employer and the employee. One would assume and, indeed, it could be argued, that that is the answer to the query which was raised in the debate—that in the case of the employer, his contributions on behalf of the employee are allowed for tax. But the self-employed get no such tax allowance. The reason which may be given is that the self-employed pays only 65 per cent., whereas he ought to pay 90 per cent. of the employer's and employee's contribution.
My Lords, will the noble Lord agree that last summer a self-employed person was paying £1.99 per week and that during the coming summer he is likely to be paying £5 a week?
§ Lord JACQUES
My Lords, I should think that that is extremely likely to be right, because at a time when the self-employed should have been paying 90 per cent. of the contribution of the employer and the employee, he was paying only 40 per cent. The self-employed were being subsidised by the employed people on a colossal scale. They should have been paying 90 per cent. They were paying 40 per cent. Even under the Bill which has been before the House, they would be paying only 65 per cent. These figures are absolutely irrefutable. Nevertheless, my right honourable friend has said that she will re-examine the whole question of the contributions and benefits of the self-employed and will make her findings known at a very early date. It was mentioned that at this very crucial moment Members of Parliament 1329 are becoming employed rather than self-employed. That arises out of the legislation of the last Government. It arises out of the Social Security Act 1973, not the Social Security Act 1974. Do not blame this Government for your sins as well as our own!
My noble friend Lady Burton put forward a very strong case, but I could not agree with her that pensions should be taken out of tax. This would be quite wrong. For example, it would mean that, as an old-age pensioner of seventy years of age, I would receive the old age pension free of tax. That would be absolutely wrong.
§ Several Noble Lords: Why?
§ Lord JACQUES
My Lords, what would apply to me would apply to thousands more. Noble Lords ask why. I will tell them why. The reason is that this country cannot afford that kind of thing. We have to look after the less well-off and, so far as possible, we must do so without spreading the net too wide. May I say that the noble Baroness made a very good case for continued consideration of the less well-off, no matter what their source of income may be. May I assure the noble Baroness that I shall see that the comments which she has made will be passed to the right quarter.
May I come to value added tax. In the case of VAT, both the last Government and the present Government have shown great consideration for the small man. For example, the last Government introduced special schemes for retailers in order to simplify and minimise their paper work, and 300,000 small men opted for those schemes. As a result of experience, the present Government have found that these simplified schemes can be further simplified, and in consultation with the trade these further simplified schemes will be introduced as from the 1st April. We have gone a step further. We have initiated a new scheme, even simpler, for the small trader with an annual trade of only £25,000 a year or less. This will operate from 1st April. The small man in retailing, for VAT purposes, will have the choice of nine ways of calculating tax.
§ Several Noble Lords: Very simple!
§ Lord JACQUES
I want now to come to the capital transfer tax, and here I want to take up the challenge which has 1330 been thrown out by the Opposition. I would remind your Lordships that this is not a tax to raise further revenue. In point of fact, the Inland Revenue has estimated that the new tax in the year 1975–76 will raise only £335 million, whereas the old estate duty would have raised £360 million, so this is not increased taxation, and certainly not increased taxation on the self-employed. This is merely an effort to get rid of an ineffective, unfair and avoidable tax —that is what the present estate duty is. It is an avoidable tax and a tax which is completely unfair. We want to put in its place a more effective tax which will be fair to all citizens, not just some of the citizens. I am surprised that there should be so much humbug about this. This is not new. Look at the Continent. What we are doing has already been done in France, in Germany, in Sweden, in Denmark and in the English-speaking community. It has already been done in New Zealand, in Australia and in the United States of America. These countries all have gift taxes. They do not depend on an estate duty which can so easily be avoided.
Let us be quite clear what we are doing. We are not trying to soak anybody; we are trying to put the tax on a fair and effective basis. For example, the 45 per cent. abatement for agricultural land will be discontinued, for two reasons: first, because it is unfair to those taxpayers who happen to hold other assets as part of their wealth and who would have to pay in full without any abatement and, secondly, because it distorts. Because of the 45 per cent. abatement on agricultural land, there has been, over a period, an influence on the price of agricultural land. It has been a good investment because of the concession. This kind of fiscal privilege always leads to distortion and is one of the principal reasons for the high price of agricultural land.
While we are trying to make capital transfer tax fair, we are also going out of our way to try to help the small man. For example, in the case of the working farmer, for the first 1,000 acres or £250,000—whichever gives the greater relief—he will be assessed not on the capital value of the land but on 20 times the annual rent. This, taken into account with the new lower rates of tax compared with the estate duty, will give the small 1331 working farmer with up to 1,000 acres less tax than he had to pay under estate duty.
May I interrupt the noble Lord? Does he realise that that was a concession when the price of land was £800 an acre—as it was about 12 months ago—and is no concession now that the value of land has gone down?
§ Lord JACQUES
My Lords, first of all, in the Committee in the other place which considered the Finance Bill, the Treasury Ministers said they would be prepared to show in detail—and they did so—that the concessions which are given under this Finance Act result in a lower tax for the working farmer than under estate duty. Furthermore, when exactly the same issue as has been raised by the noble Earl, Lord Ferrers, was then raised, the Chancellor said:We realise that if there is a change in the price of land we have to look at the multiplier. I will give an assurance that the multiplier will be looked at.He gave a clear, categorical assurance that the multiplier would be looked at at frequent intervals, and amended if need be. He said that it was the firm intention of the Government that this concession would be given to small farmers, and if adjustments were necessary to give the concession they would be made. Furthermore, when the agricultural interests made their representations and suggested that there should be encouragement to transfer land before death, the Government made their concession of drastic reductions on lifetime transfers—and, remember, a lifetime transfer is not seven years before death as under present estate duty but only three years before death, and at a level of a quarter of a million. The rate for transfers during life is reduced by one-third, and at lower levels the reduction is far greater than that, because we are looking after the small man, the self-employed in agriculture.
On the Price Code I think that only one point was raised. The noble Baroness, Lady Vickers, raised the question of the sub-postmaster. Originally, under the Price Code as introduced by the former Government, this was controlled as a fee, but in a recent review of the Code this has been exempted together with the remuneration of dentists, optical and medical appliance con- 1332 tractors who work for the National Health Service, and is subject merely to the normal control of the negotiation procedure. In that case, may I say to the noble Baroness, Lady Vickers, that her noble friend brought the postmaster under the Price Code, but we have taken him out of it.
I come now to inflation, and I want to try to put this in proper perspective. The noble Earl, Lord Gowrie, made a great deal of inflation. I do not think there is any doubt that the present bout of inflation was initiated by the financial policies of the last Government. My noble friend Lord Bruce of Donington put forward the amount of money that was pumped into the economy, £5,000 million, by the last Government. There is no doubt about that. Time after time —year after year during their term of Office—they were told by the noble Lord, Lord Robbins, that they were doing it. But, as we found out last year, it was not the real cause of the inflation. The real cause was the increase in the price of raw materials and food which we import.
The increase in May 1974 as compared with May 1973 was 90 per cent. That was the major cause. So that in the earlier part of last year—or, indeed, for a good deal of last year—the inflation was imported; it was not wage inflation, it was imported inflation. But in due course that inflation in the price of imported raw materials and foodstuffs went through the economy and it eventually became part of the price which the housewife had to pay. When it became part of the price which the housewife paid, it was inevitable that those who depended upon wages—and, sometimes, very low wages—wanted an increase. So gradually we reached the point where we had wage inflation: but it was not wage inflation that initiated the inflation; it was the financial policy of the last Government. But it was boosted by the inflated price of imported raw materials and food and the wage inflation followed from that.
Wage inflation is not a matter for one class rather than another. It is no use blaming the employees for wage inflation, especially when one sees—according to the Guardian of 13th February— that the Hospital Specialists' and Consultants' Association is seeking an in- 1333 crease of 119 per cent. These are some of the self-employed—
§ Lord JACQUES
My Lords, I should think that it is a gross figure, and the figure which goes to the wage earner is also a gross figure. He has to meet all the deductions which are made by his employer and he is left with only his take-home pay.
The Earl of LYTTON
My Lords, may I interrupt the noble Lord in the interests of fairness and ask him whether, long before the raising of oil prices and other imported raw materials, Mr. Wilson did not say: "One man's wage rise is another man's price rise"? And did not Mr. Heath say almost exactly the same; both of them before this crisis, to which now everything is—I think wrongly— attributed?
§ Lord JACQUES
My Lords, we must put things in perspective. My right honourable friend the Prime Minister made that statement long before the last Government took Office—long before 1970. He made the statement during a period of wage inflation. I was not speaking about 1966 and 1967, but about what happened in the period from 1970 to 1974, when the circumstances were somewhat different. With regard to the statement that the inflation was initiated by the last Government, that is a question of fact: one has only to look up the record and see for oneself.
The Earl of LYTTON
My Lords, may I interrupt the noble Lord again? Surely inflation has been going on since the thirteenth century.
§ Lord JACQUES
My Lords, in my statement I said that the present bout of inflation was initiated by the policies of the last Government. We have certainly had inflation during the whole of the post-war period, but it has been excessive during the last few years. I feel that I have said enough to show that this Government, certainly as much as any previous Government, have in mind the self-employed and the small man, and even 1334 when they are trying to make our taxes fair and just they go out of their way to safeguard the small man, as they certainly have done in the case of the small farmer.
§ 7.25 p.m.
The Earl of GOWRIE
My Lords, it is not my intention at this time to make a full winding-up speech, although I must say that the speeches from the Government side, from the noble Lord, Lord Hughes, and the noble Lord, Lord Jacques, sorely tempt me. We on this side of the House decided not to put a "tailender" on this debate, because we calculated—I think more or less accurately —that the sternest opposition we should receive would probably be from the noble Lord, Lord Hughes, and the noble Lord, Lord Jacques, and not from anyone else. This is what has transpired. I have an answer to the noble Lord, Lord Bruce of Donington, and I shall come later to what he had to say, although unfortunately I did not hear all of it.
I must take up the noble Lord, Lord Jacques, on one or two points. I know that he is not the Chancellor of the Exchequer —if he were, I think he would be running for cover at this moment. I also know from our experience of his vigorous and brave windings-up—usually with fairly rotten cases—that he will do what he said and will bring this debate to the attention of the Chancellor of the Exchequer. Of course we make Party points here and it is right that we should do so, but we are dealing with a serious problem affecting many people in the country with many differing Party allegiances.
I must take issue with the noble Lord's point on the question of the last Administration creating inflation. If the noble Lord will be kind enough to read my speech tomorrow morning, I think he will find that I said some fairly severe things about the last Administration, although not along the same lines as his own remarks. It is of course true that the last Government reflated the economy, partly but not exclusively as a result of their agreement with the trade unions, and the trade unions are asking the Chancellor of the Exchequer to do exactly the same thing now. This was not inflationary so long as wage controls could be kept. It would not be inflationary if the present Government were able to check the rise in wages.
1335 I think the noble Lord misunderstood my remarks on the issue of the kinds of taxation which the Government are proposing. I was not criticising the mechanisms of a capital transfer tax as against estate duty; I was saying that when one applies these new taxes as well as increases in the old taxes and as well as increases in the rates, and as well as increases in National Insurance contributions—if one compounds all these factors with a going rate of inflation somewhere in excess of 25 per cent. the self-employed and the professions will be the worst hit.
The Earl of GOWRIE
My Lords, I said it was additional when considered with other kinds of taxation which I itemised, including the wealth tax. I believe the self-employed will be highly gratified to read the speech made by the noble Lord, Lord Jacques, and to learn how well they have done under the present Government. If his figures were so irrefutable—and I must say I did not follow them, but I shall try to make sense of them tomorrow—I wonder how it comes about that his right honourable friend the Secretary of State is in the process of exercising that very reasonable feminine prerogative of changing her mind.
I want now simply to refer to the speeches made by the maiden speakers. One looks upon one's own Motion rather nervously, like an adolescent child, wondering how it will develop. I must say one thing in favour of it; it is a very long time since anything I have done has attracted four maidens simultaneously. I am extremely gratified by this. I particularly enjoyed the speech of my noble friend Lady Vickers; I thought her point about the role of credit-giving among small neighbourhood shops was a highly relevant point. The noble Baroness said, by way of answer to some of the points made by the noble Lord, Lord Bruce of Donington, that the EEC was opening its barriers to self-employed people, while we in this country were engaged in closing them. I accept a lot of the noble Lord's case. I do not think that the current state of play in the Common Market is particularly favourable to the self-employed, but the contributions to self-employed organisations from Gov- 1336 ernments in the Common Market, as well as the fact that Belgium has a Minister for the Self-Employed, means that their hearts are in the right place and they are working on the problem.
The noble Lord, Lord Colwyn, made a remarkable maiden speech, one of the most remarkable I have heard in this House—short, accurate and well-informed. I apologise to the noble Lord for the fact that I did not know that he was a dental surgeon and a band leader. If ever any of your Lordships decide to have dental treatment or to give a dance, then obviously the noble Lord should be consulted.
As the noble Lord, Lord Bruce of Donington, said, the reputation of the noble Baroness, Lady Ward of North Tyneside, has preceded her. She said she was involved in this debate only in order to "have a go" at the Government later in Question Time. They are warned; she will prove to be our very own noble Lord, Lord Brockway! I felt a jolt of envy when the noble Baroness referred to "Irene and her small fixed incomes". The plural seemed to be an enviable situation, but I quickly realised she was referring to the interests of those whom she has represented in this matter. Seriously, however, I must say that the noble Baroness comes to the subject with a lot of experience. She has been at it longer than I have, and in greater depth.
I must now make reference to the maiden speech of the noble Lord, Lord Harmar-Nicholls. Looking at the list of speakers, I see my noble friend seems to have enviably talked Garter King of Arms out of the statutory hyphen, which the noble Lord, Lord George-Brown, was obliged to adopt. I must congratulate my noble friend in that matter, as well as for his maiden speech. My noble friend talked about the revival of interest in this subject, reflected by the attendance at meetings of thousands of self-employed and professional people. He said they were not part of the Social Contract, and shared my own concern that they might start using extra-Parliamentary methods to press their case.
My Lords, in conclusion, I think the proof of this particular debate will be in the eating of the pudding when the Government, as I have no doubt they will, change their mind and serve up a 1337 rather different dish over the next few years in relation to this acute and important social problem. I therefore beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.