Sitting of 5 July 1965

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  PUBLIC BUILDING AND WORKS

    Plasterboard
    Mr. Peter Millsasked the Minister of Public Building and Works why there is an acute shortage of plasterboard in the West Country; and what he proposes to do about it, in view of the fact that in the Torrington area the delay is at least 12 months.
    Mr. Murrayasked the Minister of Public Building and Works whether he will make a statement on the progress made in remedying the shortage of plasterboard.
    The Parliamentary Secretary to the Ministry of Public Building and Works (Mr. James Boyden): There is a national shortage of plasterboard, and the situation in the West Country is no exception. The manufacturers are providing additional capacity, and the difficulties should ease progressively.
    Mr. Mills: Would not the hon. Gentleman agree that these annual chronic shortages in the building industry must be overcome? We are rather tired of the pathetic excuses which the manufacturers keep making. Will the hon. Gentleman take action now and not just look into the matter?
    Mr. Boyden: The answer to the first part of the question is "Yes, Sir". The manufacturers are making strenuous efforts, and I hope before very long to be able to give more satisfactory answers to these points.
    Mr. Snow: How can my hon. Friend reconcile the apparently reasonably good
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    development of the housing programme with these recurrent shortages of component parts? I have already written to his right hon. Friend the Minister about another component part of building. Is it possible to reconcile the housing programme with these recurrent shortages, which indicate bad management programming?
    Mr. Boyden: The building materials manufacturers are increasing their output all the time. Fortunately, the builders and contractors are also increasing their output. Better organisation and better estimation is one of the answers.

    Ministry of Pensions Office, Glasgow
    Mr. Edward M. Taylorasked the Minister of Public Building and Works how long his Department has been considering the question of finding alternative accommodation for the Ministry of Pensions office at present situated in Langside Church Hall, Glasgow; and what progress has been made.
    The Minister of Public Building and Works (Mr. Charles Pannell): Since 1957. Part of this local office will be accommodated with others in a new Crown building at Pollokshaws Road on which construction is about to start. The balance is required to be rehoused in the Cathcart area and sites there are being considered.
    Mr. Taylor: I am glad to see that some progress is being made, but does the Minister appreciate that this office covers a population of 200,000, which is still growing, and that no fewer than 77 people are employed in it? Does not he think it highly unsatisfactory that it should be located in a converted church hall? Would the right hon. Gentleman take every possible step to speed things up and, if possible, to visit the office next time he is in the area?
    Mr. Pannell: Yes, Sir.

    Industrial Monuments
    Mr. Newensasked the Minister of Public Building and Works what steps are being taken by his Department to protect buildings and the remains of buildings important during the Industrial Revolution.
    Mr. Boyden: My right hon. Friend has already scheduled a number of monuments of this kind as ancient monuments, and has also given grants in aid of preservation in suitable cases. We are at present engaged in formulating a definite policy which will be designed to deal with the special problems and difficulties of "industrial monuments".
    Mr. Newens: Is my hon. Friend satisfied that only a small proportion of the total moneys at present devoted to the preservation of historic buildings is devoted to buildings of the sort to which my Question refers. Does he realise that as a result of this many sites and buildings important in the Industrial Revolution will disappear without hope of trace or restoration although they are unique monuments in the process of industrialisation not only in this country but throughout the world?
    Mr. Boyden: We are very conscious of the need to improve the method of dealing with this problem. But I would point out this particular difficulty. Industrial monuments invariably are associated with manufacturing industry, or something of that sort, and progressive industry wants to get rid of old machines and things of that description in order to modernise. This is, therefore, a special difficulty which wants looking at rather carefully.
    Mr. Hamling: Does not my hon. Friend agree that the export drive would be expedited if some of these ruins were knocked about a bit?
    Mr. Boyden: I do not think that that is particularly helpful. I have been criticised in the House for sponsoring the case of industrial monuments. One of the difficulties is that we need a good deal of support from industry itself as to the particular historical importance of things with which they are concerned, and I hope that we shall be able to get this.

    Windmills
    Mr. Newensasked the Minister of Public Building and Works if he will undertake a review of the efforts and expenditure by his Department on the preservation of ancient windmills, especially postmills, in this country, with the aim of seeking to preserve more of them.
    Mr. Boyden: The preservation of windmills must be tackled within the broader context of "industrial monuments" generally and not in isolation. We already have two windmills, one of which—Saxtead Green Mill—is a postmill, in our guardianship. We have made grants towards the repair and maintenance of five other windmills.
    Mr. Newens: Is my hon. Friend aware that many mills which in theory are the subject of preservation orders are being allowed to fall into decay for want of funds, with the result that many of these charming and historic monuments will disappear before anything can be done to save them unless urgent action is taken very early on? I could give many examples of this at another time.
    Mr. Boyden: This is a constant problem with ancient monuments, and industrial monuments, too, for that matter. All cases which come to the attention of my Ministry are considered very carefully. If my hon. Friend knows of any special case in which decay is rapid and should be stopped, I hope that he will let me know of it.
    Mr. Lipton: Is it not up to the local authorities concerned to take the initiative in this matter? If my hon. Friend wants a good example of what an alert local authority can do, will he look at one of the last windmills left in London, on the top of Brixton Hill, which Lambeth Council has succeeded in preserving, and around which it has put a nice little garden?
    Mr. Boyden: I always thought that Lambeth was a good local authority and I am glad to hear of this example.
    Mr. Shinwell: Does my hon. Friend find it easy to reconcile this request with the modernisation of this country?
    Mr. Boyden: As I said earlier, that is a particular difficulty with industrial monuments.

    Hampton Court Palace (Son et Lumiére)
    Mr. Hamlingasked the Minister of Public Building and Works what representations have been made to him about the decision not to hold a son et lumiére performance at Hampton Court Palace this year; and what replies he has sent.
    Mr. C. Pannell: I have received representations, but I have made a general rule that because of the disturbance to residents permission should not be given for son et lumiére at Hampton Court Palace or at similar historic places in two consecutive years.
    Mr. Hamling: Will my right hon. Friend tell the House whether the grace-and-favour residents objected and, if so, is it not remarkable that people who live there free should object to other people who pay having their entertainment?
    Mr. Pannell: My hon. Friend is usually fair, but I think that this supplementary question is unfair, in so far as many old people in the grace-and-favour residences have spent out their lives in the service of the State and, as a matter of fact, it is probable in many of these cases that it is we who owe them something.
    Mr. William Hamilton: Will my right hon. Friend say how many complaints he has had about the holding of son et lumiére at Hampton Court? Will he indicate whether the people who have served the nation well and who occupy these houses include retired coal miners and steel workers, for example—or who are they?
    Mr. Pannell: They do not include retired coal miners and steel workers, but people who serve the State are not limited to this sort of people.
    Mr. Hamilton: In view of the very unsatisfactory answer, I beg to give notice that I shall raise the matter on the Adjournment.

    Building Operations (Winter Months)
    Mr. William Hamiltonasked the Minister of Public Building and Works what progress is being made in developing building methods to facilitate continuous building in the winter months.
    Mr. Boyden: The building industry continues to improve its methods of working through the winter. My right hon. Friend and his officials are very active in encouraging builders to take effective measures against bad weather.
    Mr. Hamilton: Can my hon. Friend say whether progress in this field has been sufficient to make a measurable im-
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    pact on the house-building programme in the forthcoming winter? If so, can my hon. Friend give an assurance that the raw materials which will be used increasingly by these methods will be available?
    Mr. Boyden: It is making an impact, but, of course, far too many firms do not do enough about it and what they do, they do too late. I shall be glad if my hon. Friend's Question draws attention to the need to start planning for the winter now. Many of the things which are required, such as equipment and lighting, are relatively simple and relatively cheap and make a big improvement in production.
    Mr. Boyd-Carpenter: Has the right hon. Gentleman's Department obtained information from Canada where great progress has been made in this development against the background of a much worse winter climate than we have?
    Mr. Boyden: Yes, Sir. We have collected information from all countries which have been progressive in winter building and we have found it very useful.
    Mr. Urwin: Will my hon. Friend continue to bear in mind the urgent necessity of modernising the building industry, particularly bearing in mind that thousands of building trade operatives have their standard of living reduced in winter because of their inability to work due to lack of modernisation in the industry?
    Mr. Boyden: Yes, Sir. This is one of the keys to increasing productivity in the building industry.
    Mr. Hector Hughesasked the Minister of Public Building and Works what technical and other means he proposes to adopt to prevent a slackening of his house-building plans during inclement winter weather.
    Mr. Boyden: The Ministry published a guide "Winter Building" in 1963. Contractors to the Ministry are required to maintain continuity of working during bad weather.
    Mr. Hughes: Is my hon. Friend aware of the miraculous progress made in Canada and other countries in the transport and use of building materials in bad weather? As his answer did not specify,

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    as is requested in my Question, what steps he is taking, will he specify what steps he is taking to prevent slackening in house-building during a bad winter in the north-east of Scotland, particularly in Aberdeen, where the house-building achievement during the summer has been so great?
    Mr. Boyden: Perhaps the pamphlet "Winter Building" has not reached my hon. and learned Friend. If he would read it he would see that a considerable number of methods are being used. Briefly, my Ministry is giving lectures and making films and it has a Winter Building Adviser. More important than anything else, it is encouraging the use of industrialised systems, which to a large extent get over the main difficulties of traditional building in that they can be used out of the weather.
    Mr. Speaker: Mr. Heffer.
    Mr. Hector Hughes: On a point of order. In view of the thoroughly unsatisfactory nature—
    Mr. Speaker: Order. Before the hon. and learned Member started to give that notice I had called the hon. Member for Liverpool, Walton (Mr. Heffer).
    Mr. Heffer: Particularly in view of his last remarks, will my hon. Friend indicate what efforts are being made to encourage the Jackblock system of industrialised building, which allows for the production of the building throughout the winter months?
    Mr. Boyden: There are 400 systems, and I do not know whether that system is on the short list or on the long list. I should need notice of that question.
    Mr. Hughes: May I now say that, in view of the thoroughly unsatisfactory answer to my question and that of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), I give notice that, with your permission, Mr. Speaker, I shall raise this matter on the Adjournment.

    Ash and Shale
    Mr. Harold Walkerasked the Minister of Public Building and Works what research is being carried out to encourage the further use of power station ash and National Coal Board shale in building.
    Mr. Boyden: The Central Electricity Generating Board, the National Coal Board and the Building Research Station are between them doing a considerable amount of research on power station ash, and the National Coal Board is actively engaged in developing the further use of colliery shale.
    Mr. Walker: Is my hon. Friend aware that heavy power station ash and clinker are very important to the reinforced concrete manufacturers and that the change-over from heavy fuels to pulverised fuels is diminishing the supply and leading to a stock-piling racket on the part of merchants who deal in ash and clinker in terms of supply to the reinforced concrete manufacturers? Will he look into the matter?
    Mr. Boyden: I do not know about a racket, but if my hon. Friend will write to me I shall be glad to investigate the matter. Substantial and increasing quantities of ash are being used as a result of this research.

    Cement
    Mrs. Renée Shortasked the Minister of Public Building and Works what further plans he has to remedy the periodic shortages of cement in view of the inadequate rise in cement production during the last 10 years.
    Mr. C. Pannell: I refer the hon. Lady to my speech on 1st July in the Supply Day debate, which I hope she has read. I read her speech with interest and sympathy.
    Mrs. Short: May I assure my right hon. Friend that I have not only read it but I heard it? Is my right hon. Friend aware that up to 1963 the output of the cement monopoly had increased by only 1½ per cent. per annum and that the building programme in the Midlands and many other parts of the country has been affected by this? Is he also aware that the stocks of cement clinker, which is necessary for the production of cement, have been used up and that the production of this is growing only at a very small rate? Will he see that the cement manufacturers use granulated blast furnace slag in order to produce the quantity of cement necessary to deal with our house-building and other building programmes?
    Mr. Pannell: The demand has risen rapidly since March as many jobs, particularly in civil engineering, are ahead of schedule. This has caused a gap between supply and demand, even though deliveries are also up.
    I remind my hon. Friend that the production of ground cement rose from 11,960,000 tons in 1954 to 16,698,000 tons, in 1964, an increase of about 40 per cent. If I attempted to reply now to the other technical matters to which she referred I should get out of my depth technically, but I am prepared to receive Questions on the subject.
    Mr. Monro: Does the Minister realise that because of the very serious shortage of cement in Scotland the road programme and house building are being seriously held up, and will he tell us what he proposes to do in the immediate future?
    Mr. Pannell: The question is, "Will I tell the hon. Member what I propose to do?" This is not a nationalised industry. This is a private industry. I can only tell the hon. Member that I have been in constant touch—almost daily touch—with the cement industry, which is doing its best in the matter, and all instances brought to our notice by Members of Parliament are forwarded on to the industry. I would merely refer the hon. Member to the latter part of my Answer, which indicated a tremendous increase in production over a period due to the continual rise in the building and construction industries' programme.
    Mr. Hefferasked the Minister of Public Building and Works what steps are being taken to improve the supply of cement in the Merseyside area.
    Mr. Mappasked the Minister of Public Building and Works if he is aware that a major housing project in Oldham is unable to be assured of necessary cement supplies after mid-July; what action he will take; and if he will make a statement.
    Mr. Cordleasked the Minister of Public Building and Works what action he will take to remedy the present shortage of cement in Hampshire.
    Mr. William Hamiltonasked the Minister of Public Building and Works if he is aware of the continuing shortage
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    in the supply of cement, and that this is having a detrimental effect in the building of schools, houses, etc., as well as involving local authorities in financial losses arising from delays in the completion of contracts; and what steps are being taken to solve the problem.
    Mr. Ioan L. Evansasked the Minister of Public Building and Works whether he is aware of the shortage of cement in Birmingham; and what measures he is taking to maintain supplies.
    Mr. Boyden: There is at present a marginal shortage of cement which is affecting many parts of the country. My right hon. Friend and I have met the cement makers and they have assured us that, until the record increase in capacity which they have in hand is ready, they will continue to import in order to reduce the gap.
    Mr. Mapp: Will my hon. Friend bear in mind that in my own town the supply of cement for a major industrial scheme has been cut from 25 tons down to 15 tons? Is he not aware that in the interim, temporary difficult period he must offer some guidance in such cases as to the priorities in the dispersal of the stocks?
    Mr. Boyden: Yes. I sympathise with my hon. Friend. My right hon. Friend has written to him about the Shotover estate, to which, presumably he refers. It appears that sufficient supplies are available for working at a reduced rate. The cement manufacturing people have agreed with my right hon. Friend that they will give priority to the housing programme and will also intervene if there is any shortage which is causing serious under-employment.
    Mr. David Steel: Can the hon. Gentleman say how he will encourage manufacturers to give priority to housing if the Government are not prepared to take steps to reduce their own building commitments at the present time?
    Mr. Boyden: I do not know whether the hon. Gentleman wants a system of rationing and quotas and that sort of thing, but that is what his remarks appear to indicate.
    Mr. Hamilton: Can my hon. Friend say on what grounds he replied to the

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    letter which I sent to him from Fife County Council complaining about the shortage of cement—the reply in which he said that the facts put forward by the county council were exaggerated and inaccurate? Can he give an assurance that while the shortage persists manufacturers will not be allowed to exploit the shortage by putting up prices?
    Mr. Boyden: I think, perhaps, my right hon. Friend used rather different words—that it was not as bad as feared. As for overcharging, I would be most grateful to my hon. Friend and to any other hon. Member if they would let us know of cases like this, which, of course, are quite scandalous in the existing circumstances.
    Sir J. Langford-Holt: Could the hon. Gentleman say, apart from the 10 per cent. import charge, whether there is any restriction at all on imports at present?
    Mr. Boyden: No, Sir.
    Mr. Ioan L. Evans: Would my hon. Friend, realising the mix-up in the industry, make some concrete proposals to assist local authorities such as the City of Birmingham? The authorities there have a great housing drive which is being held up because of the failure of the industry to meet the demand.
    Mr. Boyden: We have given special consideration to Birmingham. If there are special steps which can be taken by us we see that they are passed on, but we think that at present manufacturers are doing their best.
    Mr. Heffer: asked the Minister of Public Building and Works what steps are being taken to improve the supply of cement; and to what extent cement is being imported from Poland.
    Mr. Boyden: The manufacturers are increasing their capacity considerably, and they are also importing cement. Imports from Poland in the first five months of the year amounted to nearly 11,000 tons.
    Mr. Heffer: I wonder whether my hon. Friend would indicate whether these imports from Poland are growing? Secondly, is he aware that on Merseyside there have been a number of building operatives who have become redundant as the result of the cement shortage? Would he also
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    take into consideration that our process of industrialisation in the building industry will be seriously curtailed, particularly where cement is the primary product used in industrialisation, unless something is done seriously to increase cement?
    Mr. Boyden: Imports from Poland are difficult to compare as a percentage as a big increase this year because there were no imports in the previous year. As to unemployment, I would have thought that anyone engaged in the building industry would have been able to get another job quickly, and I would hope that this would be so. As for holding up industrialisation, there is this risk, but so far we have not seen very much sign of it.
    Mr. Boyd-Carpenter: In view of the fact that the hon. Gentleman now speaks encouragingly of imports of cement, is it not utterly illogical to maintain on cement the surcharge whose proclaimed object is to keep it out?
    Mr. Boyden: Well, the whole position is quite absurd, of course—that this country is importing cement, as it has been importing cement for a long time, to deal with the industry's difficulties which started under the previous Government, and if the right hon. Gentleman really expects us to do miracles in this time—
    Mr. Kershaw: Not really.
    Mr. Boyden: —we do not believe that the attitude of hon. and right hon. Members opposite have to the coal industry, for example, is wholly consistent with this.

    Royal Ordnance Factory, Woolwich
    Mr. Hamlingasked the Minister of Public Building and Works what proposals have been made to his Department for the preservation of buildings of historical interest in the Royal Ordnance Factory, Woolwich.
    Mr. C. Pannell: I intend to look at the hon. Gentleman's suggestion.
    Mr. Hamling: Is my right hon. Friend aware that in the past Woolwich Borough Council has had its housing programmes severely interfered with by undue consideration for buildings of so-called historic interest, and in this case will he

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    look at this most carefully to ensure that our future development programmes are not inhibited in the same way?
    Mrs. Renée Short: Like Cromwell, knock the ruins about a bit?
    Mr. Pannell: Well, as I said earlier, I am prepared to look at all these things. There has sometimes to be a balanced view as between one thing and another. The hon. Member, representing his constituency, presumably has responsibility for its past as well as its future, and he can, perhaps, come along and tell me all about it.
    Mr. Ramsden: Will the Minister undertake to look in particular at the factory at Woolwich which, I believe, was built by Vanbrugh and must be a unique example of its sort, and also some of the clocks and bell towers which may be demolished but which could be re-erected, preferably on other estates connected with defence?—
    Mr. Pannell: Does the right hon. Gentleman want to come as well. I think that, with the exception of my hon. Friend, I live closer to Woolwich Arsenal than any other Member of the House, and I would certainly be prepared to take all these matters into consideration. I am giving a fresh view to the subject.

    Industrialised Building
    Mr. Urwinasked the Minister of Public Building and Works what representations he has received from the building trade unions regarding the possible impact on traditional building methods arising from the increasing use of industrialised building systems; and what replies he has sent.
    Mr. C. Pannell: None, Sir. I call the hon. Gentleman's attention to my speech to the National Federation of Building Trades Operatives on 16th June.
    Mr. Urwin: While thanking my right hon. Friend for his reply, may I ask whether he will continue to bear in mind that while the building trades unions appreciate the absolute necessity for the supplementation of the building programme provided by traditional means, through the medium of industrialised building, there is, nevertheless, growing concern about the future of the tra-
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    ditional section of the industry? Does he not think that the time is now opportune to give an assurance to that section of the industry that there will be a continuing demand and an increasing demand for traditional building and that there will be a flow of materials for it?
    Mr. Pannell: On the first part of that question, my hon. Friend will appreciate that my roots are among the craftsmen of the engineering industry. I believe that the craftsman is the backbone of any trade or calling. I am very sensitive to all this sort of thing, and I would wish to keep in touch with the building trade unions as much as possible. The future of their craft and their calling are matters which have been built up over the years, and I am very sensitive to them.
    Sir Knox Cunningham: Will the Minister not allow restrictive practices to hold up programmes in the building industry?
    Mr. Pannell: The hon. and learned Gentleman has not even a nodding acquaintance with this sort of thing. There is always plenty of talk about restrictive practices in the building trade, but there is never any mention of the restrictive practices in the professions, such as a lawyer having to go into court with a No. Two and how much he gets for the job. All the professions have their restrictive practices. One finds them in medicine, and that sort of thing. I think that we had better address ourselves to subjects of which we have some knowledge.
    Mr. Speaker: Mr. Urwin.
    Sir Knox Cunningham: Will the Minister not turn his face against any restrictive practice?
    Mr. Speaker: Order. Having come to the conclusion that we had had enough of that topic, I called the hon. Member for Houghton-le-Spring (Mr. Urwin) to ask the next Question.
    Mrs. Renée Shortasked the Minister of Public Building and Works if he will make a statement on the part played by his Department in the setting up of publicly-owned factories for the production of industrialised building components in developing districts.
    Mr. C. Pannell: The principal obstacle to greater use of industrialised building is the need to organise the demand, not to supplement the supply. Capacity is ample.
    Mr. Kershaw: Is the right hon. Gentleman aware that there is little point in supplementing the resources available until existing factories, such as the Reema factory at Tetbury, can get the materials which they need for their production?
    Mr. Pannell: For once the hon. Gentleman and I are on the same beam.
    Mrs. Short: Would not my right hon. Friend agree that there is every indication of the need for the Government to be able to control the supply and flow of industrialised house-building for houses and flats? Will he, therefore, consider the setting up of factories for industrialised house-building in those areas mentioned by my right hon. Friend the Minister of Power the other day, for example, where uneconomic pits are likely to close? Will he set up factories for the production of the units on lines approved by the National Building Agency?
    Mr. Pannell: We have these things very much in mind. Fully exploited, the industrialised building industry could produce 50,000 dwellings a year. If we are asked why we do not do that, the answer is that we could not spare the labour on the building sites where it would be in competition, in the erection of these houses, with traditional forms of house building. Until that is fully exploited I do not think that I can go any further.

    Building Materials
    Mr. Urwinasked the Minister of Public Building and Works what discussions he has had with representatives of building trade unions on the subject of supply of building materials; and if he will make a statement.
    Mr. C. Pannell: The supply of building materials is discussed regularly at the quarterly meetings of my National Consultative Committee at which the trade unions are represented, and I have also had correspondence with them about particular shortages. As far as I am aware, in no case have shortages of materials led to unemployment.
    Mr. Urwin: Would not my right hon. Friend agree that had the building material supply section of the industry been properly planned under previous Governments, productivity in the industry would have increased by more than the 7½ per cent. record which it achieved last year? Will he ensure that the situation is remedied as quickly as possible?
    Mr. Pannell: I am far more prone to turn my mind to the brighter future than to the sordid past.
    Mr. Eldon Griffithsasked the Minister of Public Building and Works what steps he is taking to ease the shortage of cement, plasterboard and bricks in Suffolk.
    Mr. Boyden: I have no reason to believe that the situation in Suffolk is appreciably different from that for the rest of England.
    Mr. Griffiths: Is the Minister aware that in saying that the position is no different from anywhere else he is not saying very much? Is he aware that the situation is not good in Suffolk and that there is a growing shortage of these building materials and labour? Would he take steps to see that builders, in good weather, can get on with the job?
    Mr. Boyden: Yes, Sir, and perhaps the hon. Gentleman can help me in this by letting me know of any situation with which I can deal.

    Official Cars
    Mr. Kenneth Lewisasked the Minister of Public Building and Works whether he will arrange that all official Government cars be fitted with safety belts.
    Mr. C. Pannell: Yes, Sir.
    Mr. Lewis: Is the Minister aware that I have seen Government cars which appeared not to have safety straps? The Minister of Transport has said that there should be such straps on all cars. Will the right hon. Gentleman check on this? We on this side of the House recognise that under the present Administration the whole country needs safety straps, but in particular we think that Government cars should have them.
    Mr. Pannell: Those without safety straps were bought by the previous Administration.
    Sir G. Nicholson: Can the right hon. Gentleman assure the House that he uses safety straps? I hate to think what would happen if he came to a sticky end, though of course we would bear it with our customary courage and resignation.
    Mr. Maxwell-Hyslopasked the Minister of Public Building and Works what is the practice concerning the use by Ministers of official cars to take them home from the Palace of Westminster at the conclusion of the day's business in Parliament.
    Mr. C. Pannell: I would refer the hon. Member to the reply which I gave to the hon. Member for Fife, West (Mr. William Hamilton) on 24th June.
    Mr. Maxwell-Hyslop: Is there any reason why drivers should be kept waiting all night to take Ministers home? At the end of the day, when Ministers are going home rather than going to their offices, is there any reason why they should not get home in the same way as other Members do?
    Mr. Pannell: The hon. Gentleman ought to have addressed that Question to the previous Administration. He must not think that this Administration, in matters which refer to the responsibility of Ministers, is of a lower breed than its predecessors. Is the hon. Gentleman aware that a great deal of harm is done by asking that sort of question? In so far as we are all Members—
    Mr. Maxwell-Hyslop: On a point of order. Mr. Speaker, I was under the impression that I had asked the Minister a Question, to which he was replying. If he now asks me a question, will I have the opportunity of replying to it?
    Mr. Speaker: No. I excuse the hon. Member from making any answer, but we are in the middle of one at the moment.
    Mr. Pannell: As you say, Mr. Speaker, I am in the middle of an answer. The arrangement in every Administration is that the Prime Minister is responsible for things of this sort, and the Minister of Public Building and Works has to approve the regulations. I can only say that the regulations under which we operate now are substantially those which characterised the Administration of
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    our predecessors during the past 13 years. It would be a bad thing if controversy in this place was conducted in the small change of innuendo.
    Mr. Maxwell-Hyslop: Is the Minister aware that my Question was transferred to him by the Prime Minister, presumably because the Prime Minister wanted the right hon. Gentleman to answer it? As the right hon. Gentleman has made a practice of saying at Question Time that he is taking a new look at things and doing things the new way, will he answer the Question on its merits rather than try to hide behind previous practice?
    Mr. Pannell: A new look is always taken under a new Administration, and this new look was taken last October, when I studied the regulations that went before. I have looked at all the provisions that went before and I know what was done—and the hon. Member had better not pursue this line. I would only say that Ministers who come to their Departments have to do so early in the morning, and go through to the end of the day. The Parliamentary situation has been a double burden on Ministers, and this would be so under any Administration. I have looked at all the Parliamentary Questions that have been asked over the last 13 years and I can say that when my hon. Friends were in opposition they did not resort to that sort of thing in regard to the difficulties that arose from 1951 onwards, when hon. Members opposite formed the Government. The hon. Member had better leave it alone.
    Mr. Shinwell: Does not my right hon. Friend agree that it would add to the dignity of the House if some right hon. Member on the Opposition Front Bench refuted the hon. Member's innuendo?
    Mr. Boyd-Carpenter: Is the Minister aware that many of us see no objection to cars taking Ministers home? The real criticism is when they bring them back.
    Mr. Pannell: The real objection of the right hon. Gentleman and his hon. Friends is that we are using the cars at all.

    Westminster Hall
    Mr. Robert Cookeasked the Minister of Public Building and Works what steps he proposes to take to ensure

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    the stability of the exposed wall of Westminster Hall, from which the buttresses have been removed, following the demolitions in Star Court.
    Mr. C. Pannell: I am assured that the wall is stable.
    Mr. Cooke: Will the right hon. Gentleman take it from someone who has some knowledge of this that there might be difficulties, especially as on some days workmen seem to be messing about with chisels on the site?
    Mr. Pannell: I presume that the craftsmen working on the job know what they are doing. The wall did not depend in any way on the arcade which has been removed preparatory to the construction of the new building in Star Chamber Court.
    Mr. English: Is my right hon. Friend aware that many hon. Members would not object if he managed to make a considerable portion of it fall down provided that he rebuilt it to modern standards?
    Mr. Thorpe: Can the Minister give the House an assurance that there will be no interruption with the flow of light into Westminster Hall by reason of this building being built on the side of it?
    Mr. Pannell: We paid particular attention to that. I do not know where the model is at the moment, but if the hon. Gentleman wants to see it I shall make it available to the Liberal Party.
    Mr. Thorpe: Can we keep it?
    Mr. Ramsdenasked the Minister of Public Building and Works if he proposes to take the opportunity afforded by the works in Star Court to remove the buttresses on the exposed east wall of Westminster Hall and subject this wall to careful archaeological examination and restoration.
    Mr. C. Pannell: No. I am not proposing to remove the buttresses, but an archaeological examination of the wall is being carried out.
    Mr. Ramsden: Will the right hon. Gentleman bear in mind the fact that there will be wide public interest in anything that may be discovered about the nature and date of the original fabric? Will he consider the possibility even-
    1108
    tually of treating some of the original stonework in a similar way to that in which the Tudor brickwork of the Old Treasury has been treated, so that it could remain visible for people to see in the future?
    Mr. Pannell: I sometimes think that the most distinguished servants in my Department are the Inspectors of Ancient Monuments. They have a particular nose for this sort of thing. The wall will be largely hidden by the new building shortly to be erected in the court, but if the original masonry is revealed by the archaeological examination we will restore the visible part of it.

    Building Standards
    Sir B. Jannerasked the Minister of Public Building and Works what representations he has received from the Incorporated Association of Architects and Surveyors about their proposed new control body to beat jerrybuilders; and what reply he sent.
    Mr. C. Pannell: I am studying the Association's ideas for a new control body along with other comments on my proposals for new legislation for the regulation of building in England and Wales.
    Sir B. Janner: I thank my right hon. Friend for that reply. Will he bear in mind that there is a need at the moment for some of this jerrybuilding to be carefully watched and prevented? Will he take what steps he can to get qualified surveyors to see to it that inspections are properly carried out?
    Mr. Pannell: Yes. Sir.
    Sir B. Janner: I thank my right hon. Friend.

    Overseas Work (Departmental Co-ordination)
    Mr. Goodhartasked the Minister of Public Building and Works what proposals he has for improving the machinery for co-ordination between the department of Defence and representatives of his Department working overseas.
    Mr. C. Pannell: None, Sir. My Ministry co-operates closely with the Ministry of Defence and no new machinery is required.
    Mr. Goodhart: Is the right hon. Gentleman aware that the prolonged nature of the defence review is causing some difficulty in making sensible planning arrangements for essential work overseas? Is he sure that these problems are being adequately represented to his colleagues in the Ministry of Defence?
    Mr. Pannell: I am not too sure that the earlier part of that supplementary question is for me to answer. There is a good deal of information on this. Apart from formal arrangements, there is close day-to-day contact at all levels between the staff of the Ministry and Service officers on matters of common concern.

    Palace of Westminster Staff (Health and Welfare)
    Mrs. McKayasked the Minister of Public Building and Works how many persons are now employed by him within the precincts of the Palace of Westminster; and how many persons are employed in the care of their health and welfare.
    Mr. C. Pannell: On 30th June, 1965, my Department employed 295 people within the precincts of the Palace of Westminster. It is not necessary for any officer at the Palace of Westminster to be specifically responsible for the health and welfare of these officers; all matters of this nature are dealt with by the welfare section at Lambeth Bridge House.
    Mrs. McKay: I thank my right hon. Friend for that answer. In his present review of the Palace of Westminster, will he please incorporate room for adequate medical facilities for the staff and for all who work in the precincts of the Palace, including Members of Parliament?
    Mr. Pannell: It was following the Select Committee of which I was a Member that the present facilities were produced by Oliver Cromwell's Statue. If they are not adequate at present it is for the House to say so, through the Serjeant at Arms, and then, when we get that sort of request, we will try to meet the need. It is not specifically a matter for me.
    Mr. Pavitt: Will my right hon. Friend look at this question again? Does he recall that in 1961 the then Prime Minis-
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    ter, Mr. Macmillan, undertook to have an investigation into this matter, but that it never took place? Will he look at the whole question of an occupational health service in this very large factory?
    Mr. Pannell: In view of what my hon. Friend has said, I shall certainly start some sort of consultation with the authorities of the House.

    House of Commons Accommodation
    Mr. Robert Cookeasked the Minister of Public Building and Works whether he will explore the possibilities of raising the ceiling of the Library corridor in the House of Commons and introducing a new floor bisecting the resulting space, to provide a small number of rooms for the use of honourable Members, and at the same time explore the possibility of building two additional floors on the roof of the Members' Tea Room, to provide for a number of small rooms for the use of honourable Members, all within easy reach of the Chamber of the House; and if he will make a statement.
    Mr. C. Pannell: Yes, Sir.
    Mr. Cooke: I am grateful to the Minister for his reply. I hope he will bear in mind the fact that there is a misprint in the Question, and that it should have referred to "a large number of small rooms" and not "a small number of rooms". In view of the great interest that has been shown in this subject, perhaps I may give notice that I should like to raise the matter on the Adjournment at the earliest possible moment.
    Mr. Pannell: I thought that I had given a satisfactory answer. I suggest to the hon. Member that he does not—
    Sir J. Langford-Holt: On a point of order. Notice having been given by my hon. Friend of his intention to raise the matter on the Adjournment, is it not quite out of order for the Minister to speak further on the subject?
    Mr. Speaker: The hon. Member started by asking a supplementary question and then gave notice in the middle of it. I thought that the Minister might be allowed half an answer to balance the matter.
    Mr. Pannell: I was dealing with the point that the hon. Member put to me a week or so ago in another place. [HON. MEMBERS: "Another place?"] I would be out of order if I referred to evidence given before the Select Committee. Since then, knowing the hon. Member's interest in the subject, I have made some preliminary inquiries. In view of that I would be grateful if the hon. Member would await some action on our part, which would have to be taken in the Summer Recess, before precipitately running in with an Adjournment debate.
    Mr. Cooke: On a point of order. I did not seek to criticise the right hon. Gentleman. I sought to give notice to you, Mr. Speaker, in a way which would enable us to pursue the matter without implying any criticism.
    Mr. Speaker: The hon. Member is more regular now. I accept his notice to seek to raise the matter on the Adjournment.

    Official Functions (Temporary Seating Accommodation)
    Mr. J. E. B. Hillasked the Minister of Public Building and Works what system of prefabrication he has evolved for raised temporary seating accommodation for official functions.
    Mr. C. Pannell: Prefabrication is used to the fullest possible extent, but no one system is used.
    Mr. Hill: Does not the present system of scaffolding, which has to be cut to length, seem somewhat wasteful of labour, time and raw materials? Could not the Ministry devise some equipment which could be more rapidly erected and dismantled, especially where the dimensions of the erections are the same annually, as in the case of the stands on Horse Guards Parade?
    Mr. Pannell: I do not know what case the hon. Member has specifically in mind, but in the case of the recent 700th anniversary ceremony in Westminster Hall it was impracticable to adopt full prefabrication because the stands had to be made to precise dimensions to suit the Hall. However, the tubular scaffolding and fittings, as well as the chipboard sheets used for the flooring, were all of standard sizes and were taken away for
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    re-use by the contractor. We are continually seeking improved methods of erecting temporary seating.
    Mr. Allason: Has the right hon. Gentleman studied the Dexion system, which looks like gigantic meccano and is already used widely in Government Departments for racking and would be extremely effective for this purpose?
    Mr. Pannell: I have not studied it, but I have no doubt that it has not escaped the notice of my Ministry.
    Mr. J. E. B. Hillasked the Minister of Public Building and Works if he will give the number of seats provided, their total cost and the average cost per seat for the temporary stands erected for the Trooping the Colour and the septencentenary celebrations in Westminster Hall, respectively.
    Mr. C. Pannell: For the Trooping the Colour ceremony, 6,640 seats at a total cost of £8,240 and an average cost of about 25s. per seat. For the 700th Anniversary celebrations in Westminster Hall, 1,800 seats at a total cost of £4,200 and an average cost of about 46s. per seat.
    Mr. Hill: In the case of Trooping the Colour, would the Minister confirm that the cost is covered by the charges? In view of the comparatively high average cost, would he not follow the suggestion of my hon. Friend the Member for Hemel Hempstead (Mr. Allason) and investigate whether there are any means of having equipment which would do the job more easily and quickly? We know that it will be required at any rate once a year on Horse Guards Parade and, we hope, on many occasions.
    Mr. Pannell: We look into all these sort of things. It is true that Horse Guards Parade is used about once a year for Trooping the Colour. The use of Westminster Hall is a rarity, but the cost of all the arrangements for Westminster Hall will be met by the Treasury from their Miscellaneous Expenses Vote, which will be presented to the House as a Supplementary Estimate on this account later this month. The hon. Member refers to the Westminster Hall celebrations. He will find that the cost works out over the 700 years at less than 1d. a seat per year for the ceremony.
    Mr. David Steel: Can the Minister say whether the average cost per seat for Trooping the Colour includes the cost of the involuntary dyed red human seats?

    Polaris Base, Faslane
    Mr. Emrys Hughesasked the Minister of Public Building and Works what is his latest estimate of the cost of the work he is undertaking at the Polaris base at Faslane; and to what extent the original estimate is likely to be increased, following the rise in the price of cement and other building materials.
    Mr. Boyden: £21 million, including the cost of associated work at Coulport, Helensburgh and elsewhere. We do not expect this estimate to be increased.
    Mr. Hughes: Is the Minister aware that the original estimate by the previous Administration was £25 million, which has now gone up, according to the last estimate which I had, to £45 million? Is he aware that we believe that this will be the most expensive white elephant which has ever been erected in Scotland?
    Mr. Boyden: The total cost of the Polaris base has been given as £45 million, but the part to which I was referring was the work specified in my hon. Friend's Question.
    Sir C. Osborne: As the Question mentions the rise in the price of cement, could the hon. Gentleman say what is the average price of cement at home and abroad and whether the home price has risen faster than that abroad?
    Mr. Boyden: The price of cement has not risen.
    Mr. Emrys Hughesasked the Minister of Public Building and Works how many construction and building workers were employed at the Polaris base at Faslane during the month of July; and if he will classify the number of building workers now employed there.
    Mr. Boyden: The latest figure available is for 30th June; 988, of whom 913 are in building trades.
    Mr. Hughes: How does the Minister reconcile these figures with his previous statement that priority would be given to housing? Is he aware that the build-
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    ings on this Polaris base are taking away the building labour and materials which are necessary for houses, hospitals and schools, and that we do not regard this as one of the great priorities?
    Mr. Boyden: As I have told my hon. Friend, the policy on this matter is not a matter for my Ministry. The jobs are specified and my Ministry gets on with them, and does so very well. Housing is included in some of these projects.

    Chapter House
    Mr. Dodds-Parkerasked the Minister of Public Building and Works whether he will, after due restoration of the stonework, take steps to hand back to the Dean and Chapter of Westminster Abbey the Chapter House, to mark the 900th anniversary of the foundation.
    Mr. Boyden: No, Sir.
    Mr. Dodds-Parker: As this building is not used by the Ministry of Works but is kept open as a museum, will the hon. Gentleman have another look at this? It will provide the Minister with his sole chance of being canonised.
    Mr. Boyden: Perhaps the hon. Member has in mind the celebrations to mark the 900th anniversary of the Abbey's foundation next year. My Department is making the Chapter House available for the whole year to the Abbey authorities. They have not made any request of my Department for this.
    Mr. Dodds-Parker: Has the Minister any objection to the Abbey authorities having this building back? It was taken over on the dissolution of the monasteries and is not being properly used for the purpose for which they would use it.
    Mr. Boyden: This building has a very long tradition of association with Parliament. The first Parliament met there. It was then used as a public record office and in later years it has been visited by a great many people. There have certainly been no demands of any sort that it should change its caretakership, as it were, from my Department.
    Mr. Dodds-Parker: It, has an even longer history—
    Mr. Speaker: Order.

    SOCIAL SERVICES (PROBLEM OF LONELINESS)
    Mrs. McKayasked the Chancellor of the Duchy of Lancaster what plans he has, arising from his review of the social services, to take steps to encourage voluntary organisations concerned with the amelioration of the social problem of loneliness.
    The Chancellor of the Duchy of Lancaster (Mr. Douglas Houghton): I am at present in close touch with voluntary bodies dealing with special problems of this kind. I am anxious to establish the fullest co-operation between voluntary action and State provision and have convened several conferences with this end in view. The particular social problem of loneliness comes, with many others, within this review.
    Mrs. McKay: I thank my right hon. Friend for that reply. Will he undertake to study the very excellent report of he Women's Group on Public Welfare on this tragic problem with a view to implementing its recommendations?
    Mr. Houghton: I will certainly do that.
    Mr. Braine: The right hon. Gentleman, of course, will be aware that this touches on a very great human problem. Has he considered inviting not only voluntary organisations but the old people's welfare committees, who deal with this at the grass roots, to submit ideas on the subject?
    Mr. Houghton: I am in close touch with the National Assistance Board, who in many cases first come into touch with problems of loneliness among old people, and they in turn are in touch with old people's welfare committees. This is a big problem. I am entering a vast field of noble and humanitarian work. I require some time to acquaint myself with it so as to see the possibilities of voluntary action in many fields connected with social problems.
    Mr. Frank Allaun: Would the Minister consider giving wider publicity to the pioneering work which is done in at least one city—Salford—where the whole community from youth onwards is involved in caring for the elderly and overcoming the loneliness which affects them?
    Mr. Houghton: I am aware of the great work which has been done in Salford, and I am happy to think that they are able to tell the world a great deal of what they are doing.
    Dame Irene Ward: I appreciate the efforts which have been made by the right hon. Gentleman to collect information. Could he kindly circulate in the OFFICIAL REPORT the names of those bodies with whom he has been in touch in order that they may be encouraged to put forward all the ideas which they have collected through experience of this problem?
    Mr. Houghton: It would be premature to do that—
    Dame Irene Ward: Why?
    Mr. Houghton: —because I am in the middle of the job and I have a number of other organisations which I wish to consult. In due time, I shall be very happy to make a report to the House on what I have been doing.

  PENSIONS AND NATIONAL INSURANCE

    Graduated Pension Scheme
    Mr. Bostonasked the Minister of Pensions and National Insurance what has been the annual difference between contributions paid in and benefits paid out of the graduated pensions scheme, introduced by the last Administration, in each year since its inauguration; and for what purposes the difference is used.
    The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mr. Norman Pentland): In the years 1961–62, 1962–63 and 1963–64, income from graduated National Insurance contributions exceeded the amounts paid out in graduated additions to pension by about £148 million, £182 million and £229 million, respectively. It is provisionally estimated that for 1964–65 the corresponding figure was £277 million. The contributions went into the National Insurance Fund out of which all the benefits of the scheme, including flat-rate pensions, are paid; the balance in the Fund went down over the period.
    Mr. Boston: Does my hon. Friend agree that these figures reveal that this

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    graduated scheme introduced by the last Administration amounts to a grotesque deception of the people? Would he try to see that these figures are given the fullest possible publicity? Does it not also suggest that the time has come for us to press on with our own Government scheme? Can he say how his own efforts are getting on?
    Mr. Pentland: As my hon. Friend will be aware, we have always been critical of the present scheme and replacement of the present graduated pension arrangements is among the principal matters to which the Government's current review of social security schemes is being directed. We intend, as soon as we can, to replace these graduated pension arrangements with a new wage-related scheme of our own.
    Mrs. Thatcher: If the hon. Gentleman is so critical of the graduated scheme, why is he taking £277 million out of it this year? Why did he not replace it by 2s. 8d. on the flat-rate stamp when he had the opportunity to do so?
    Mr. Pentland: I remind the hon. Lady that in the recent National Insurance Act which we implemented this year we abolished the increase in graduated contributions which, under her Government's legislation, was due to come into operation this year without any corresponding increase whatever in graduated pensions. In this way we have prevented a worsening in the terms provided by the graduated pension scheme which would otherwise have occurred.

BRITISH SUBJECTS OVERSEAS (REPATRIATION)
The following Question stood upon the Order Paper:
Mr. DEEDES: To ask the Secretary of State for Foreign Affairs what progress he has made in seeking means of dealing with British tourists overseas who get into temporary financial difficulty; and if he will make a statement.
The Minister of State for Foreign Affairs (Mr. George Thomson): With your permission, Mr. Speaker, and that of the House, I will now answer Question No. 56.
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The House will remember that in answer to a Question by my hon. Friend the Member for Dover (Mr. Ennals) on 14th December last I said that the Government would introduce a consular fee of £3 for the repatriation of a United Kingdom resident in financial difficulty abroad.
This fee came into force on 1st July. It is intended to ensure that persons whose difficulties are only temporary shall contribute towards the cost of repatriation facilities, and to limit the number of cases of repatriation. Unless repatriation is strictly limited to those cases in which it is unavoidable, the growth of foreign tourism will lead to a serious waste of public funds and to a diversion of administrative resources which will reduce our ability to deal with cases where the need is real and urgent.
The House and the public will understand that repatriation can be granted only as a last resort. Applicants will have to satisfy the Consul that they have no means of getting money themselves from any source. While inquiries are being made into his financial circumstances the applicant must expect to fend for himself. The undertaking to repay the debt which is always required of the repatriate will be enforced, if necessary, by legal proceedings.
Mr. Carol Johnson: Can my hon. Friend say what is the increase in the number of repatriations in recent years and, in particular, in which country the need arises? Secondly, having regard to these new rules, will he arrange for a simple leaflet explaining the effect of his statement to be made available to travellers leaving the country?
Mr. Thomson: Yes, Sir. The need for this arises from the substantial increase in foreign travel, particularly to Western Europe, over the last few years. The number of travellers has more than doubled in the last four years and the number of repatriation cases has gone up by more than 50 per cent. We are arranging to revise the existing "Hints to Travellers Abroad", in what, I hope, will be rather less official language, to include information not only on this point, but on other matters of which travellers should take account.
The Government very much hope that travellers will protect themselves against

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the risks of foreign travel by arranging the necessary insurance.
Mr. Maudling: The hon. Gentleman has talked about a serious waste of public funds. Can he say how much is involved? Is not this enormous increase in foreign travel a very good thing?
Mr. Thomson: Yes, Sir. The ability of a much wider range of people to enjoy the benefit of foreign travel is welcomed by everybody. The number of repatriation cases last year was 60,000 and in 20,000 of these cases it was impossible to obtain a refund of the sums of money involved.
Mr. Eldon Griffiths: In addition to the sensible and reasonable measures that the Minister has announced, will he bear in mind that British nationals abroad have on occasion to be taken into embassies and put up or accommodated for some time? This can often happen in areas where crises occur. Can the hon. Gentleman give the House some information about the kind of charges that his Department makes to those people who are put up at British embassies when in difficulty?
Mr. Thomson: I could not, without notice, give precise information in reply to the last point raised by the right hon. Gentleman. One of the motives behind this announcement of the new charges is not simply to save public funds, but to make sure that the administrative resources of our overseas posts are enabled to deal with those cases of genuine need and urgency instead of being turned into part-time tourist agencies.
Lady Tweedsmuir: The Minister has mentioned that in 20,000 cases it was not possible to obtain repayment. Will he say whether any undertaking is required to be given, or what are the legal obligations of people who take advantage of these facilities? What was the cost to the taxpayer in the 20,000 cases in which a refund was unobtainable?
Mr. Thomson: I have to apologise to the right hon. Member for Barnet (Mr. Maudling) for an inaccuracy in my answer to him. I should have said that the cost to public funds last year was £60,000 and that £20,000 of this was unrecoverable. I apologise.

GIBRALTAR (DISTURBANCES)
Sir F. Bennett (by Private Notice)Sir F. Bennett (by Private Notice) asked the Secretary of State for the Colonies if he will make a statement on the disturbances at Gibraltar last Friday night.
The Secretary of State for the Colonies (Mr. Anthony Greenwood): A demonstration took place in Gibraltar last Friday when a crowd of about 700 people, many of them youths, gathered at the frontier at about 4.0 p.m. The crowd gathered to support a number of French subjects who were delayed at the frontier as a result of the restrictions imposed by the Spanish authorities. When the frontier gates closed at 11.30 p.m. the crowd moved to the Governor's residence where the Governor met some of the demonstrators and at their request made an appearance on the balcony.
Some of the demonstrators later went to the residences of the Chief Minister and the Flag Officer, Gilbraltar, before dispersing at about 2.0 a.m. No one was hurt during this demonstration and no damage was done except to a few panes of glass.
The Governor informs me this morning that there have been no further incidents.
Sir F. Bennett: Will the Secretary of State accept from an eye witness—I think, the only one from this House—of what occurred that, if anything, the statement which he has made does not fairly describe the extent to which feelings expressed themselves on that occasion and that the Gibraltar authorities themselves gave me an estimate of nearer 2,000 people? I assure the right hon. Gentleman that they were not only youths. It was a substantial body of people, comprising every age.
Moreover, does the right hon. Gentleman realise—I am sorry to ask him this, but the matter is regarded seriously there—that this is not just an isolated incident which can be dismissed as being a gathering of youths, but represents a real feeling of growing frustration which could turn to bitterness?
Does the Secretary of State realise that additional problems have been caused by the fact that following the restrictions on

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the French, very high-level representations were conducted through the French authorities with the result that thereafter all the French were allowed through freely yesterday, with only a minute or two for each car, whereas the British and Gibraltarians were kept waiting an hour at a time, as has happened in the past?
This discrimination between what the French authorities have done for their subjects and what we in Gibraltar have done has not made a good impression. Is the right hon. Gentleman aware that all the banners at the meeting carried the slogan, "Less talk, Mr. Wilson. More action"? Can the right hon. Gentleman do something to endorse the view of the Gibraltarians?
Mr. Greenwood: The difference between the French situation and our own is that this is a purely seasonal increase in the number of French people involved, whereas ours continues throughout the year. As to numbers involved in the disturbance, I was not trying to mislead the House. This is the information with which the Governor has supplied us. I did not say that the crowd consisted only of youths, but said that many of them were youths.
I think that all of us share the view expressed by the hon. Member about the strength of feeling. In spite of the character of his more recent remarks, I should like to thank him for the help which he gave on Friday night. The strength of the feeling is, however, something which we all share, and the fact that this feeling exists shows that the Spanish authorities are not being successful in intimidating the people of Gibraltar.
Mr. Sandys: Realising the difficulty of this problem, we on this side have not pressed the Government. Does not the Secretary of State recognise, however, that continued total inaction by the Government is now becoming quite intolerable? Will he either announce some kind of retaliatory action to bring pressure upon the Spanish Government, or, alternatively, make a statement to the House explaining the various measures which he has considered and why he has rejected them?
Mr. Greenwood: The wider question of our relations with Spain is a matter
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for my right hon. Friend the Foreign Secretary and I suggest that a Question be put to him. The policy of Her Majesty's Government was stated very plainly in the House on 18th June by my hon. Friend the Minister of State, Foreign Office. The broad view of Her Majesty's Government is that a policy of obstruction and harassing of the kind the Spanish are carrying on is not the way we should adopt to deal with this situation. [Interruption.] We are taking the proper diplomatic action.
As we have explained on a number of occasions, and as the right hon. Gentleman knows perfectly well, the steps which we are taking inside Gibraltar are to build up her economy and to make Gibraltar as far as possible free from dependence on Spain.
Mr. Murray: Would my right hon. Friend consult with his colleagues and ensure that, in a tricky situation like this, admirals do not appear dressed in polo clothes going through the frontier in front of people who are facing these difficulties?
Mr. Thorpe: Would the right hon. Gentleman not agree that these matters are symptomatic of the anger and frustration which is felt by the people of Gibraltar? Would he answer three questions? First, is there continued discrimination against British passports issued by the Government of Gibraltar as opposed to those issued by Her Majesty's Government? Secondly, are Spanish workers still allowed in with work permits and are they having no difficulty in obtaining such permits? Thirdly, are these workers compelled to export all of the sterling they earn into Spain without spending it in the Colony?
Would the right hon. Gentleman not agree that if we were to take counter-economic measures they would hit Spain harder than Gibraltar? Will he see to it that the Spaniards are left in no doubt that our patience is beginning to become exhausted?
Mr. Greenwood: It is true that the money earned must be exported to Spain. The difficulty is that if one considers retaliatory measures one has difficulty in finding measures which would not harm the people of Gibraltar as much as, if

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not more than, the people of Spain. We believe that at this stage retaliatory measures are undesirable.
Mr. J. Amery: Would the right hon. Gentleman bear in mind the fact that the Spanish Government published figures yesterday which showed that Britain is her second best client in the world? While we all want to see the best possible trading relations going on, should we not keep in mind the importance of using every opportunity where trading matters are concerned to safeguard the interests of our fellow subjects in Gibraltar?
Mr. Greenwood: Yes, Sir. We are doing that. The right hon. Gentleman, on 15th April, very rightly said that this was a matter which called for patience and firmness. We are showing both.

CHANCELLOR OF THE EXCHEQUER (VISITS TO CANADA AND U.S.A.)
The Chancellor of the Exchequer (Mr. James Callaghan): With your permission, Mr. Speaker, I should like to make a statement about my visits to Canada and the United States.
Both these visits had as their aims the exchange of views and information with my opposite numbers in the two countries, and in particular to see what common ground exists, or can be developed, for achieving progress on the vital question of international liquidity.
In Ottawa, I had very useful talks with Mr. Walter Gordon, Canadian Minister of Finance, and some of his colleagues.
In Washington, I met the recently appointed Secretary to the United States Treasury, Mr. Henry H. Fowler, and several other United States Ministers. In addition I had conversations with the President and Vice-President. With permission, I will circulate in the OFFICIAL REPORT the text of the communiqué issued in Washington on 30th June.
On the particular issue of international liquidity, Her Majesty's Government regard as urgent the problem of devising appropriate arrangements which might be used for the creation of additional liquidity. In this connection, I would remind the House that there is an expectation that the growth of world trade
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will slow down over the next year. We must try to ensure that our problems are not made more difficult by deficiencies in international monetary arrangements. Some progress has, of course, already been made. As the House knows, if the recommendations recently made by the International Monetary Fund are fully implemented the total of Fund quotas will be increased from about 16 billion dollars to 21 billion dollars.
I am under no illusions about the serious difficulties in the way of making further progress, which can only come by agreement. At present, the nations hold many differing views. There are those who believe that the present scale of international liquidity is in itself sufficient, but that the system is being misused by countries in balance of payments deficit; while there are others who believe that there is currently a shortage of liquidity and that immediate action should be taken to create more.
Following from this, nations are not yet in agreement about the priority of the tasks which need to be undertaken. One view, for example, is that the first requirement is to put in hand a fundamental reconstruction of the international monetary system, in the belief that once this has taken place the supply of liquidity will be brought under more conscious control than hitherto. Another view is that comparatively small adjustments in the functioning of the system would be sufficient.
My talks with the United States authorities show that they are actively considering these problems and are proceeding—as we are—with a sense of urgency. I see the rôle of Her Majesty's Government as one requiring continued persistence and flexibility. I should myself prefer to reach a solution which is built upon, or is closely linked with, the International Monetary Fund, since this institution has great capacity for expansion and development, and has served the world well during the last 20 years.
I therefore propose to continue my discussions with the French Finance Minister and with the Secretary of the U.S. Treasury. I also hope to have talks with other Finance Ministers, in an endeavour to secure a solution which will contribute to the growth of world trade and thus assist both the industrialised

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countries, and also the developing nations.
The talks in Washington shewed that both Governments are agreed that the pound and dollar will continue to play an essential rôle as reserve currencies; that there is an identity of interests between them; and that both Governments must, and will, maintain and intensify the measures of financial co-operation which already exist.
Mr. Heath: While welcoming the Chancellor back to take part later in the Report stage of the Finance Bill, may I ask whether he will answer three questions? First, can he give to the House any one practical, concrete result which has been achieved by his visit to Ottawa or Washington, since all that emerges from his rather lengthy statement is the fact that he proposes to continue to have talks? In particular, what is meant by the phrase "intensify the measures of financial co-operation"? Is this just part of the talks or is some practical action meant?
Secondly, on the question of liquefying the portfolio, which is mentioned in the communiqué, the phrase used is:
"… would continue to co-operate by managing the portfolio in such a way as to minimise the impact of the operations on the United States balance of payments …"
This implies that there has already been some transfer of the proceeds of liquefying the portfolio into the reserves themselves, but I know that the Chancellor recently stated that this was not the case. Will he now clarify the situation?
Thirdly, on the question of international liquidity, his statement describes the various positions which are held in the world on this point, but it does not give Her Majesty's Government's position. Would the right hon. Gentleman kindly tell the House what exactly is the view of Her Majesty's Government about international liquidity and what action they consider should be taken?
With great respect, now that the right hon. Gentleman describes the rôle of Her Majesty's Government as "one requiring continued persistence and flexibility," is he aware that continued persistence and flexibility is not a policy? Will he now say exactly what is the policy of Her Majesty's Government?
Mr. Callaghan: On the last point made by the right hon. Gentleman, I went on from what he quoted to the next paragraph, which he did not read out. These problems must be based—at least, it would be best to base them—on the International Monetary Fund and we are making it our aim to try to get international liquidity increased in that way. At the same time, where extreme views are held on either side, in view of our desire to see a mechanism for creating international liquidity in existence, it is not for us to take up an extreme view one way or the other if we are to try to synthesise different points of view.
Although I could make a tremendous demarche, if the main objective is to secure a mechanism which will enable additional liquidity to be created I am certain that the best rôle which Her Majesty's Government could play is persistently and patiently to try to reconcile different points of view which may not be so far apart as they seem at first blush.
The right hon. Gentleman also asked what concrete results came from the meeting. I went there to meet my opposite number, and to exchange views for the first time with him. We did not set out to solve all the world's problems. We did achieve a certain identity of interest, and found that the approach we were making to problems in which the United States and Britain are very largely concerned is a joint one. But I cannot pretend that in the course of 48 hours we achieved concrete results. What we found was an identity of view.
The expression "intensifying financial co-operation" refers to the particular measures that exist between the United States and Britain at present in this field, and they will continue. As to liquefying the portfolio, I can tell the right hon. Gentleman that no transfer has taken place so far into the reserves; when it does take place I shall say so.
Mr. Grimond: As the policy of the Government as expressed by the Chancellor is to reach a solution built on or linked with the International Monetary Fund, can the right hon. Gentleman give the House a little more information? Does it mean that he views the International Monetary Fund as eventually taking the

1127
place of what one might call the International Central Bank, or has he in mind to initiate or administer one of the numerous schemes linked with famous economists put forward during the last few years?
Mr. Callaghan: All I have in mind is that the General Agreement to Borrow was designed—and it comes up for renewal this year—among the main industrial nations in close connection with the International Monetary Fund. As is, I think, well known, there are some nations which feel that any proposal for creating international liquidity should not be based on the Fund. It could possibly be that a solution was found by linking arrangements outside the Fund with the Fund, perhaps somewhat on the lines of the General Agreement to Borrow. It is in that connection that the phrase was used.
Sir C. Osborne: The Chancellor said that it was agreed that world trade would slow down next year. This is very important to this country, which has to live, as to 30 per cent., on its exports. Can the right hon. Gentleman say by about how much it is thought that world trade will slow down next year? Will his plans forestall any possibility of a repetition of 1931, which started in the same way as this movement seems to be starting?
Mr. Callaghan: I do not think that I said that there was agreement on this, but that there was an expectation that world trade would slow down. I must particularise, and say that that is my expectation, based on the advice I get; but not all nations would share that view. That is one of the difficulties in trying to get them to move at present. Some say that it is merely a question of maldistribution of liquidity, and do not think that a slow-down in world trade will arise as a result of the present arrangements.
I do not think that there is any prospect of 1931 being repeated. The underlying strength of the United States economy is profound; and the United States authorities recognise their responsibility in this field. No speeches that have been made there—although certain phrases have been picked up—would, I think, lead anyone to believe that a responsible body of opinion in the United States, which has
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such a great weight in the development of world trade, thinks that there is any danger of the sort of situation that arose over 30 years ago occurring again.
But I take the view that there is the danger of slow-down. I cannot quantify. It is making our export problem more difficult, and I have based my forecast that we will get into balance in the second half of 1966 on a large increase in exports, so that we have a large interest in this country in maintaining a high level of world trade.
Mr. Emrys Hughes: In his discussions with his opposite number, did my right hon. Friend explain that we were trying to solve some of our financial problems by reviewing our defence expenditure? And did he dare suggest to his American opposite number that the dollar might be safer if Americans themselves spent a little less on defence?
Mr. Callaghan: I did not like to suggest what their policy should be, but I did inform their financial authorities that we were hoping, from now on as far as possible and certainly by 1970, to keep within an overall limit of £2,000 million on defence at 1964–65 prices. I made it quite clear, and I repeat it now in this House, that without the great burden of overseas defence and overseas aid across the exchanges, this country would have a balance of payments surplus at the present time.
I may say also to my hon. Friend that we had some very interesting discussions on the operation and nature of the Corporation Tax; and that they found some of our recent discussions a little surprising.
Mr. Maudling: Are the Government still pursuing, amongst other possibilities, the possibility of a mutual currency account within the Fund?
Mr. Callaghan: That proposal, which is linked with the name of the right hon. Gentleman, and which I always thought was rather unfairly attacked when it was put forward, is certainly one that I would be very glad to adhere to if there seemed any likelihood of general agreement on it; but, alas—and the right hon. Gentleman found this, too—it is not so easy to get unanimous agreement on matters of this sort.
Several Hon. Members rose—
Mr. Speaker: Order. We must pass on.
Following is the text of the communiqué:
Statement on discussions held 29th June by Chancellor of the Exchequer James Callaghan of Great Britain and Secretary of the Treasury Henry H. Fowler at the United States Treasury.
British Chancellor of the Exchequer James Callaghan and Secretary of the Treasury Henry H. Fowler agreed in their talks at the United States Treasury that in present circumstances the primary contribution of both the United Kingdom and the United States to international financial stability and the improvement in the international monetary system is to achieve and sustain a broad equilibrium in their international balance of payments.
Secretary Fowler noted that the voluntary effort by American bankers and businessmen to reduce their net dollar outlays abroad undertaken earlier this year at the President's request is having an encouraging effect. Provisional indications are that this and the wide range of other efforts being made to end the United States payments deficit resulted in surpluses during March, April and probably in May, however the United States plans no relaxation of its efforts. The country is now entering the period of the year when tourist expenditures increase dollar payments to foreigners markedly. Imports are rising with continued internal expansion and there are increased dollar outlays in South Vietnam and in the Dominican Republic. The accumulation of dollars in reserve holdings abroad in past years is the cause of large continued gold outflows, such as those of the current year.
The Chancellor of the Exchequer and Secretary Fowler agreed that the prospects for an early and sustained equilibrium in the United States balance of payments resulting from the efforts of the last four years were good, and that there should be no relaxation in the execution of President Johnson's programme of 10th February, 1965.
The Chancellor said that a substantial improvement had taken place in the British balance of payments during the first quarter of 1965. He expected a big reduction in the deficit on current and long-term capital account for 1965 as a whole. The measures which the British Government had taken in the fields of fiscal policy, credit control, the stimulation of industrial efficiency, incomes policy and economic planning were beginning to work through the economy—and he reiterated his aim of balancing Britain's overseas payments in the second half of 1966.
In discussing the interaction of the balance of payments programmes of the two countries, the Chancellor drew attention to the effect on the British position of the measures which the United States had undertaken to correct its balance of payments. In this connection, Secretary Fowler emphasised that the guidelines for the voluntary restraint programme take account of the United Kingdom payments
1130
problem. The United States pointed out that the British Government's programme described by Mr. Callaghan to the British Parliament on 12th April, for continuing to raise gradually the proportion of the British Government's holding of non-sterling securities in a liquid form, and their use to reinforce the reserves, would involve an adverse impact on the United States balance of payments. Secretary Fowler recognised the need for this British programme and the Chancellor reiterated earlier assurances that the British authorities would continue to co-operate by managing the portfolio in such a way as to minimise the impact of the operations on the United States balance of payments and avoid any significant impact on the United States security markets. He added that these operations had now been carried to a point where the portfolio could be used to reinforce the United Kingdom reserves at short notice.
With respect to the problem of international liquidity, it was felt that a number of countries will require time to consider their attitudes in the light of changing developments in international payments, and with the benefit of technical studies now being completed in the Group of Ten. In this connection, the Chancellor referred to discussions which he had held with M. Giscard d'Estaing, the French Minister of Finance, and Secretary Fowler indicated that he hoped to have talks with the finance ministers of other major countries in the latter part of the year on the subject of international liquidity.
These talks would explore the various possibilities with a view toward any reinforcement that would help to assure a payments system fully responsive to the continued growth of international trade.
The British and American Ministers were agreed that any such reinforcement must await the development, out of the present divergent opinions, of an international consensus on this subject, but that constant and persistent efforts should be pressed at the ministerial level, both during and after the meetings of the World Bank and International Monetary Fund. In this connection the Chancellor stressed the importance of the needs of the developing countries.
The Ministers agreed that the two reserve currencies would continue to play an essential part in the financing of international trade and as a medium in which to hold reserves. They recognised that the interests of the two currencies were closely bound up with one another. This identity of interests had already been recognised in the measures of financial co-operation taken by the two countries which should be maintained and intensified.
In addition to the Chancellor and the Secretary, participants in the Treasury discussion included:

Sir Patrick Dean, British Ambassador to the United States,

Sir William Armstrong, Joint Permanent Secretary of the British Treasury,

Sir Denis Rickett, Second Secretary of the British Treasury.

Mr. Robert Neild, Economic Adviser to the British Treasury,

1131

Mr. M. H. Parsons, Executive Director, Bank of England, and

Mr. John Stevens, Economic Minister in the British Embassy, Washington.

Mr. Joseph W. Barr, Under-Secretary of the United States Treasury,

Mr. Frederick L. Deming, Under-Secretary of the Treasury for Monetary Affairs,

Mr. Merlyn N. Trued, Assistant Secretary of the Treasury for International Affairs, and

Mr. Stanley S. Surrey, Assistant Secretary of the Treasury for Tax Policy.

VIETNAM
Mr. Warbey: On a point of order, Mr. Speaker. Are we to have a statement from the Minister of State or the Foreign Secretary on our relations with the Nazi Government in Saigon?
Mr. Speaker: I have had no application to make a statement—without adopting any description or epithet.
Mr. Warbey: Then, if there is to be no statement, Mr. Speaker, I wish to seek your permission to move the Adjournment of the House under Standing Order No. 9, for the purpose of discussing a definite matter of urgent public importance, namely,
"the failure of Her Majesty's Government to withdraw recognition and support from the Government of the Republic—
Sir R. Cary: On a point of order, Mr. Speaker. I have a case of a breach of privilege to put to you—
Mr. Speaker: That follows after an application of this kind, in our order of batting. Mr. Warbey.
Mr. Warbey: As what I was saying was interrupted, perhaps I can begin again.
I wish to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a definite matter of urgent public importance, namely,
"the failure of Her Majesty's Government to withdraw recognition and support from the Government of the Republic of Vietnam immediately following the publication of an admission by the Prime Minister, Air Marshal Nguyen Cao Ky, that his Government and his Government's policy are modelled on those of Adolf Hitler."
I have to show that the matter is definite and urgent—and not funny, as the Leader of the Opposition seems to
1132
think. The definiteness of the matter is established, first, by the fact that there has been a failure on the part of Her Majesty's Government to withdraw recognition. Over a week ago they stated that they were recognising the new Government in Saigon, headed by Air Marshal Cao Ky, and that they recognised the Air Marshal as the Leader of the Government of the democratic Republic—not of the democratic Republic, but of the Republic of Vietnam; and, moreover, recognised that Government as the Government of the whole of Vietnam, and not merely of the Southern half. Her Majesty's Government have had an opportunity since yesterday's publication to withdraw recognition, and they have not taken it.
Publication appears in yesterday's Sunday Mirror, with the headline:
"Our Ally: A Premier whose Hero is Hitler."
There is a report of an interview in Saigon with Air Marshal Ky, in the course of which he describes the methods and policies which his Government pursue, and will pursue, in Vietnam—methods which involve the use of deliberate and calculated violence and cruelty in accordance with Nazi methods. He is quoted as saying:
"People ask me who my heroes are. I have only one—Hitler."
He also says:
"We need four or five Hitlers in Vietnam."
That appeared—[Laughter.] Apparently the Opposition Front Bench still think that this is funny—
Mr. Speaker: The hon. Member must not abuse the application by making observations about other Members. Let him get on with the basis of it.
Mr. Warbey: With great respect, I should have thought that one of your duties as Speaker was to ensure—[Hon. MEMBERS: "Order."]—one of your duties as Speaker was to ensure that a request of the type which I am making, namely, for the Adjournment of the House under Standing Order No. 9, should be listened to in silence and without interruption. [Interruption.]
Mr. Speaker: Order. Do not let us distress the hon. Member. Let us hear him in silence.
Mr. Warbey: I am grateful to you, Mr. Speaker. I was going on to say that this publication appeared yesterday and this, therefore, is the first opportunity which I have to raise the matter in the House. I must, of course, raise it at the first opportunity.
The next question is: is it also urgent? I should have thought that it was a matter of supreme urgency that for the sake of the name of Britain, the British people, the British Government and the standing of Britain in the world, as a supporter of the principles of freedom and democracy, we should not hesitate for one hour in withdrawing recognition and support from a régime in Vietnam which is now publicly admitted in the eyes of the whole world to be a Facist, Nazi régime pursuing well-known Nazi methods of the use of violence and cruetly as a deliberate instrument of policy. I should have thought that the Government would have welcomed a debate today so that they could make the necessary announcement in order to put Britain's good name back where it ought to be in the world.
Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House pursuant to Standing Order No. 9 for the purpose of discussing a definite matter of urgent public importance, namely,
"the failure of Her Majesty's Government to withdraw recognition and support from the Government of the Republic of Vietnam immediately following the publication of an admission by the Prime Minister, Air Marshal Nguyen Cao Ky, that his Government and his Government's policy are modelled on those of Adolf Hitler."
I cannot accede to the hon. Member's request to leave this to the House.
Mr. Paget: On a point of order, for guidance. I had always been under the impression that the rule on Standing Order No. 9 submissions was that one must state one's facts succinctly, without argument and without comment. Has that practice been altered, as this seems to be the second time on which we have had a rather long tendentious speech?
Mr. Speaker: I have heard them in that form from both sides of the House in my time. What we should aim at, of course, is just making the application succinctly and effectively, bearing in mind that it would be quite out of order to
1134
make on the application the kind of speech that one could make were the application to be granted. I hope that everybody will remember that.
Mr. Warbey: Further to that point of order, Mr. Speaker. May I say, first, that I am grateful for your Ruling on the matter of the succinctness of an application? I think that if reference is made to HANSARD tomorrow it will be found that I confined myself to a statement of fact and not to argument.
Secondly, may I say that I make a final plea—
Sir W. Bromley-Davenport: Is this a point of order?
Mr. Warbey: I am on a point of order—
Mr. Speaker: Supposing there be a point of order it should be heard in silence so that I can hear it. Will the hon. Member for Ashfield (Mr. Warbey) be good enough to say what it is?
Mr. Warbey: The point of order is that I make a final plea to your—[HON. MEMBERS: "No."] I make a final plea to you in my submission on the matter of urgency—[Interruption.]
Mr. Speaker: Order. I am sorry I did not deal with the hon. Member's application on the matter of urgency, but I have ruled on it and no point of order arises.

COMPLAINT OF PRIVILEGE
Sir R. Cary: I wish to raise, Mr. Speaker, what I consider to be a prime facie case of breach of privilege.
My complaint is centred on words and sentiments uttered by the Chancellor of the Exchequer in a speech this last weekend at Swansea. I have in my hand a copy of today's Daily Telegraph, 5th July, which actually prints the words about which I complain. May I read them to the House?
In referring to some hon. Members of the House, the Chancellor said:
"he did not think of them as the honourable Member for X, or Y or Z.
'I look at them and say "Investment trusts"'."
Hon. Members: Hear, hear.
Mr. Speaker: Order. It is of great importance that when an hon. Member exercises his right to address a complaint of privilege to the Chair he should be heard in silence.
Sir R. Cary: The quotation says:
"'I look at them and say "Investment trusts", "Capital speculators" or "That is the fellow who is the Stock Exchange man who makes profit on Gilt Edge".
I have almost forgotten their constituencies, but I shall never forget their interests'."
I submit that those words are a gross contempt of the House of Commons and a breach of privilege.
Mr. Speaker: I will consider the hon. Member's complaint in the light of the authorities and rule upon it tomorrow.

ORDERS OF THE DAY

  RENT BILL
  Order for Third Reading read.—[Queen's consent, on behalf of the Crown, signified]
  4.8 p.m.
  The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I beg to move, That the Bill be now read the Third time.
  As this is the final occasion upon which the House will look at the Bill as a whole, I take the opportunity of saying that the House has, I think, worked very hard on it. It has had a very careful consideration in Committee. Amendments have been suggested, considered and made from both sides of the House. It has had a long Report stage and, on the whole, an amicable one. I think that it has come out—I have no hesitation at all in saying this—a better Bill than when it appeared before the House for its Second Reading.
  That, I think, is the object of having parliamentary review of a Bill of this sort. In its nature, such a Bill is bound to be difficult and complicated and to put a great deal of strain not only on right hon. and hon. Members who have to formulate their criticisms in the form of Amendments, but also on the draftsmen, the officials and the legal advisers who have to guide our proceedings to see that we do what we intend to do.
  The Bill deals with four groups of people. First, there are the old controlled tenants who have survived the decontrol after the Rent Act, 1957. They remain as they were before, subject to the same rent levels. The provisions for decontrolling them—lifting them into the next level of control—have been tightened a good deal in Committee and on Report. The old Clause 15—which was discussed at some length—is now to be found in the new Clause 11 and it puts an absolute duty on the Minister, when bringing property out of the old control, to limit the amount of increase that that involves.
  The second group are what are called "regulated tenancies". These are a mixture of those tenancies which were decontrolled either as a result of the lowering of rateable values under the 1957 Act or by

  1137
  creeping decontrol. These now have once again the full security of the Old Rent Acts and that is extended to include new rented houses which were never within the old control system. This new security of tenure is combined with a system of rent regulation. The inclusion of this group in the Bill is governed now by Clause 12 and again there has been a tightening of the obligation upon the Minister to satisfy himself that the conditions of scarcity are being removed before removing them from regulation.
  The third group are to be found in Part III of the Bill, dealing with safeguards for occupiers who would otherwise receive no protection.
  Finally, there is the furnished accommodation. The old Clause 33 is now Clause 37 and there still remains a different legal system for regulating the rent of furnished accommodation as opposed to unfurnished accommodation. But the Bill includes the Minister's power to work towards fusing to some extent the personnel working the two different systems, so that there is a chance that, by degrees, it will be possible to move towards something like a common system for the two types of accommodation.
  I wish to draw the attention of the House to the security of tenure provisions for furnished accommodation. These are extended from three months to six months, but that is not a once-for-all provision. The tribunal can extend up to six months once and then can go on extending the period indefinitely if circumstances make that necessary.
  Now, something about what has come to be called "basic protection", which is a very important part of the Bill and which is not limited at all by rateable values not forfeited if property is taken out of control. There are two main features. First, there is the definition Clause—now Clause No. 29—which has been widened so that more people are now covered by basic protection than were covered when the Bill first appeared. This takes two forms.
  First, tenants who are not otherwise covered by the existing law, and service occupiers, are protected from eviction without a court order. Secondly, there is the new criminal offence of harassment which covers anyone who is living in a house under some kind of legal arrangement. The Bill provides that any attempt
  1138
  to interfere with the enjoyment of their rights by people in that position will be stopped with the full force of the law. That, of course springs particularly from the Milner Holland Report and, indeed, from the practical experience of any hon. Member who has had constituency problems with this type of property.
  Now I turn to rent regulation. The old Clause 22, which led to a great deal of discussion, is now Clause 26 and concerns the determining of the nature of a fair rent. The Bill also provides the machinery for fixing a fair rent. Part II of the Bill will be brought into operation by the Minister when he is able to do so. We are already getting on with the preliminary work and hope to be able to begin to take action under Part II as soon as the Royal Assent is received.
  The first emphasis of rent regulation under the Bill is on agreement between the landlord and tenant. If the landlord and the tenant agree a rent, that agreed rent remains the recoverable rent unless a lower rent is registered. So there is incentive for people to come to an agreement rather than simply remain at arm's length. If they fail to come to an agreement, they can go to the rent officer, whose good offices will be available to try to bring them together to produce what he accepts as a fair rent. The final determination of what should be a fair rent is by the rent assessment committee.
  The accent throughout is on the idea of getting people to have enough confidence in themselves and their bargaining position and in the machinery of rent fixing so that they will not hesitate to come to an agreement when able to do so. The fair rent provisions were discussed a good deal on Second Reading and in Committee and I think that they stood up very well to criticism. Basically, the Clause remains the same as it was when it first appeared.
  A feature of the discussion has been what is really the final abandonment of the idea of using gross value as a means of fixing a fair rent. I think that most people—including me—as we have gone through the arguments have gradually had to accept that gross value would not stand up as a basis for fixing rents. The lesson of our debates is that there is really no middle way between a new and rigid form of rent control, which will be completely

  1139
  inflexible and will not adapt itself quickly enough to changing circumstances, and a broadly defined concept which will be appraised by fair-minded and intelligent men. That leads me to say something about the work of the rent assessment machinery.
  One of the factors which has emerged concerns the status of the presidents of the panels out of which the rent assessment committees are to be appointed. We are very anxious that there should be no suggestion that the Government are giving any kind of directives to rent assessment committees. These committees will be independent bodies and if they are to have the full confidence of both landlord and tenant they must be seen to be acting as independent bodies.
  The presidents of the panels, more than the Minister, will be responsible for the proper functioning of the rent assessment committees. My right hon. Friend can and intends to group rent assessment areas together into panel areas. He has it in mind to have something like 16 panel areas, with their presidents, and those presidents will be the key people in their areas, because on them and the watch they keep on the standard of rents being produced by the rent assessment committees a great deal of the confidence will depend.
  There has been a good deal of criticism of the Bill because it is said it does nothing about securing repairs. May I remind the House what the machinery is? In the formula in Clause 26—Determination of fair rent—it is specified that the state of repair is one of the circumstances to be taken into account. The fair rent will be fixed on the state of repair found at the time when the rent officer looks at the property. Under paragraph 3 of the Third Schedule, one of the grounds for varying a registered rent, which normally lasts for three years, is that there has been a change in the condition of the house, and the condition of the house would include the state of repair.
  I doubt whether that will get houses into repair, because I do not think purely financial sanctions such as the reduction of rent by themselves get accommodation into repair. The risk is that both sides, landlord and tenant, prefer to carry on at a low rent rather than face up to
  1140
  the cost of bringing the house into a state of modernisation or into repair. Any positive steps to get a house into repair must inevitably come under improvement of housing legislation rather than through the medium of the Rent Acts.
  There have been two main criticisms made of the working of the Bill. One is that it is said we are covering too wide an area and that, within that area, we are covering too many expensive houses and that we ought to have narrowed our sights to cheaper properties, concentrating on the Metropolis or the built-up areas.
  The answer to that is that, until we know more about the situation in different parts of the country, we cannot be sure of the areas in which there is scarcity and of the areas where something like a free market works or over what band of property the free market does work. We do not want to follow the 1957 Act in going too far to the other extreme and burning our boats in advance, so that we never catch up with the damage that is caused. We want to be able to move quickly. If we find in a particular area that there is a change in the position caused by a sudden exploitation or high rents are discovered, we want to be able immediately to deal with the matter. It is far better to start with a broad survey of the position, and my right hon. Friend has power to narrow the band if he thinks it can be done and that there is no need to continue to keep the protection for a particular band of rateable value.
  The other point on which there has been a good deal of discussion is the hardship caused by landlords having to go to court to get possession of their properties. I must say that I have been surprised at the extent of the criticism from hon. Gentlemen opposite and the importance they have attached to this particular point. It surprised me, because at one time we were exhorted not to use tribunals, and that we ought to accept the ordinary courts as the body to settle disputes between landlord and tenant. That is precisely what we are doing here, yet it is said that the courts will be slow and gullible.
  Mr. J. E. B. Hill: We certainly complain as far as the tied cottage is concerned. What worries us

  1141
  is not the reference to the courts, but the uncertainty of the timing. If a more speedy procedure in advance could be provided, this would get over the difficulties.
  Mr. MacColl: Obviously, we must have courts which act swiftly and which are accessible to the ordinary people. We are taking steps to watch that position carefully. We have not much evidence yet of delay, but where there is evidence of delay my right hon. and noble Friend the Lord Chancellor is taking steps to see that the position is dealt with. In any cases that have come to me, I have passed them on to my noble Friend and asked him to look at them.
  What the Bill is against is eviction without due process of law. We believe that if anyone is to have his home taken away from him, it must be done by the due process of law, by going to the courts to do it. In no other way can one hope to get rid of the mistrust between landlord and tenant. Some people think that every landlord is a Rachman, while others think that every tenant is an alcoholic who smashes up the property in which he lives. It is that kind of approach to the problem which we have to tackle by getting the confidence of both sides.
  I was very grateful to the hon. Gentleman the Member for Orpington (Mr. Lubbock), because he told us in moving terms how he trudged the streets with his bride, having been evicted without notice not for raping the landlady's daughter but for damaging a table with a soda syphon.
  One of my hon. Friends came to see me recently with an example of the winter let which has caused so much alarm. He had been in a winter let and now, in the summer, was told that there was no accommodation for him, with no advance warning or time to make alternative arrangements, because the landlady wanted to let the room at a full rent.
  That is the kind of difficulty which has to be sorted out. An hon. Member opposite sent a case to me of an owner-occupier, which shows the other side of the story. This was a case when an employer of labour complained that a key man in his factory, upon whom the employment of all the people in the
  1142
  factory depended, was to be evicted by an owner-occupier who wanted possession of the property for his own use. The hon. Gentleman to whom I have referred sent the case to us to see what we could do about it.
  I am not saying that there is any one answer to those cases. I am not even saying that the hon. Member for Orpington, who is nearly always right, is infallible. The proper way is through courts of law and not by self-help. That is the basis upon which the Bill has to work.
  I remember the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) was quoting from The Times the headline, "Faith is not enough". The right hon. Gentleman said that if one knows a thing to be true, it requires no faith to believe it. The right hon. Gentleman was guilty of a theological deviation.
  Mr. John Boyd-Carpenter: The hon. Gentleman has made that grave charge. However, it lies not against me, but against the late Mr. George Bernard Shaw, whose remark it was.
  Mr. MacColl: The right hon. Member would do better if he relied on Bernard Shaw for his Socialism rather than his theology. The point about that is that intellectual assent may be possible by reason, but faith is required to get a move on. "Faith which does not lead to action is lifeless."
  That is our job now that we have this machinery. We have to get the people involved in the operation working together to achieve our common goal. We are very much dependent on the action which the courts will take to give swift and dispassionate justice to deal with the disturbances caused by cases coming to them suddenly and perhaps in large numbers. We are enormously dependent on the clerks of local authorities, who are to appoint the rent officers to look for first-class men qualified for the job and not to appoint merely someone who is found to be embarrassing in the town hall office. We are very much dependent on the rent officers and the rent assessment committees to build up public confidence in their wisdom, confidence which

  1143
  will come only after a period of trial and seeing how they do the work.
  However, if the Bill succeeds in getting the machinery to work, we will change the whole climate of the relationship between landlord and tenant, because for the first time we will have a found a middle way between stagnation and decay in rented housing, on the one hand, and ruthless exploitation of scarcity on the other. If we can use the Bill as a basis upon which confidence is based, so that landlords and tenants together are prepared to go to the rent officers and to the rent assessment committees confident about accepting their views and taking advantage of their advice, we shall have a constructive approach to the problem of rent fixing for the first time in the history of rent regulation.
  The revolutionary nature of the Bill springs from the fact that we are not to have a rigid system anchored to an historical event, like rateable value, but a machinery sufficienly flexible to provide what will be widely accepted as a fair rent and which will attract people to accept the relationship of landlord and tenant with full confidence.
  4.32 p.m.
  Mr. John Boyd-Carpenter: As the Parliamentary Secretary said, the Third Reading of the Bill is perhaps the occasion for what the Leader of the House frankly described last Thursday as "the usual courtesies." Certainly, it was appropriate that the Parliamentary Secretary should have been given the task of moving the Third Reading. I am sure that the Minister himself will agree that during our discussions the Parliamentary Secretary has carried perhaps the heaviest share of the burden and that it is quite right, to use an analogy which the Minister may like less, that he should be in at the death.
  We have also had the attendance from time to time—although, unhappily, not this afternoon—of the right hon. and learned Gentleman the Attorney-General, who has been unfailingly courteous and charming and quite often right in law. We have also had the attendance—and I am glad that the Parliamentary Secretary mentioned it—of the Ministry officials who have had to tackle a very severe and onerous task in a limited
  1144
  period of time and who have tackled it with the intellectual distinction and capacity for work which one associates with major Departments in Whitehall.
  If one is to judge from the speech of the hon. Member for Poplar (Mr. Mikardo) at Bow on Thursday night, the Minister himself has apparently had a less easy time with his hon. Friends. It is not for me to pry into the discussions of the party opposite, but I must say that I am rather surprised that the hon. Member for Poplar is not here to repeat to the Minister's face the very vigorous things which he said about him behind his back; but that is not my business.
  The Minister of Housing and Local Government (Mr. Richard Crossman): Hear, hear.
  Mr. Boyd-Carpenter: I take it by that that the Minister means that it is his business. I wish him luck.
  As the Parliamentary Secretary very fairly said, the Bill itself comes to us at any rate better for the parliamentary process. When it fell to me to speak first from this side of the House on Second Reading, which, by a curious coincidence, was exactly three months ago to the day, I said of the Bill:
  "It contains a mixture of what is not unreasonable, what is wholly unnecessary, and what is rank bad". [OFFICIAL REPORT, 5th April, 1965; Vol. 710, C. 68.]
  Although it has been improved in considerable measure in the course of our discussions and minor ambiguities and medium-sized injustices have been removed, I still think that those words constitute a fair description of it as it concludes this phase of its discussion in this House.
  I come to the main criticisms of the Bill as it now stands and as they appear to me. As I omitted to do so when opening, once again, as I have many times before, I should declare a possible personal interest as a director of a company with property interests.
  First, it seems to us that the Bill is too far-reaching. The Parliamentary Secretary briefly referred to this issue. This difference between us is not merely a difference of degree. It derives from a fairly clear clash of principle on this issue between the parties. Our view is that the return to an all but universal system of rent control is, in the true sense

  1145
  of the term, a reactionary step. We believe that where there is shortage and where shortage can be shown to exist, there is a case for a system of security of tenure and, therefore, necessarily, of course, of rent control.
  But we take the view that that scarcity must be shown to exist to justify interference with the normal working of the market. After all, in time of peace other necessities of life, food, clothing, and so on, have their price and volume of supply settled entirely by the market. Equally, in time of war or national emergency, the Government of the day rightly impose control and restriction because of scarcity and to ensure that hardship is not caused in conditions of scarcity. In this case, the Parliamentary Secretary has admitted that control is being established or re-established over areas of the country where he does not know that there is scarcity.
  The geographical spread of the system is too wide. We certainly accept, in the light of the Milner Holland Report, that there is a case for control and regulation in London up to certain levels of value of accommodation.
  Mr. Stanley Orme: That is a change.
  Mr. Boyd-Carpenter: The hon. Gentleman says that it is a change, but we referred to the fact that we would accept Milner Holland on that in our election manifesto, so the hon. Gentleman cannot make that point.
  There may be a case in some of the major conurbations, but we say that it is not only unnecessary but positively harmful to extend control- universally over the whole country, including areas where there is no shortage.
  In Committee, we had a discussion in which figures were given, with which I will not weary the House again, about large numbers of areas, many of them rural, where plainly there was no such scarcity. The great objection to the extention of control all over the country in these circumstances is not only that it is unnecessary and not only that the right hon. Gentleman is taking upon himself an excessive administrative burden; it is also that control where it is not needed can be positively harmful, because it discourages the provision of accommo-
  1146
  dation to let. It provides a most powerful incentive to any owner whose house comes into his possession not to relet, but to sell it. Therefore, it can be the effect, and experience has shown that it is the effect, that where unnecessary control is imposed shortages are created by measures whose only justification is the existence of them.
  It is a major criticism of the Bill that there is nothing in it to check the falling off in the provision of privately-owned accommodation to let. On the contrary, there is every encouragement to the owner of that accommodation to sell. That is made the more serious when one remembers the very clear warning about this which was given by the Milner Holland Committee when it pointed out, at page 225 of its most interesting Report:
  "The Governments which have been most successful in surmounting these stresses and maintaining order and justice within this sector of the housing market have been those which have accepted and incorporated private rented property among the instruments to be used in meeting the housing need, hence assisting those who build, own or live in it, and regulating the price, management and distribution of this housing with the aid of effective local administrative and judicial instruments."
  There is nothing in the Bill to help to encourage the production of that accommodation and there is much to discourage it. It is clear, and the Minister has been perfectly frank about this, that he regards the provision of rented accommodation as being increasingly the function of the local authority only.
  We also think that the values selected, even in the areas where there is a case for control, are far too high. The levels are £400 a year rateable value in London and £200 a year in the country. The Parliamentary Secretary told us in Committee that in England and Wales that left only 160,000 houses above the controlled level, and that included many houses not let. The number of houses which are let and which will be above control, will, therefore, be a great deal less than that.
  If one considers London the facts are quite astonishing. A rateable value of £400 a year in London can relate to a rent of about £800 or £900 a year. We have it, again on the authority of the Milner Holland Report, that there is in London no shortage of accommodation at levels of rent above £400 or £500 a

  1147
  year. It is clear that, if one accepts the Milner Holland review, this carries rent control in London much too far up the scale. It covers luxury flats in the West End of London, and accommodation provided for a class of people who are not in the slightest need of the assistance of State machinery. It is wholly unnecessary.
  But in Scotland the case is even more ludicrous. The Under-Secretary of State for Scotland, who was extremely helpful throughout the Committee and Report stages, told us that in Scotland there were only 500 houses above the control level, although he could not tell us how many of those houses were let. I do not blame him, because I do not think that the figures exist, but this is virtually complete control in Scotland, including, I will not press the castles, large houses which can have no conceivable need of protection.
  This is carrying it too far. The Minister may remember that when the Bill was introduced, The Times said that it was defeatist to accept that in this prosperous society of ours many people would never be able to pay the market price for their homes. I think that is true and I think it is even more startling and ludicrous to suggest that in our society there are only 160,000 houses in England and Wales, and 500 houses in Scotland, occupied by people who can afford to pay the present market price.
  Security of tenure also seems to have been carried much too far. The case for it is strongest where one has a commercial letting intended to be for a substantial period. We had a considerable discussion in Committee, which resulted in some modification at the Report stage, of the cases of letting for a definite period. But I must return to this because, though I acknowledge that the Minister has tried to meet us in some measure, I do not think that he has completely succeeded in dealing with a situation which he has created.
  The situation is that of those who go abroad for a fixed period of time, either in the service of the Crown, the developing countries or of British industry and of business, and who, while they are away, wish to let their houses. Most of these appointments are for a fixed term. Therefore these people let their houses for a
  1148
  fixed period and the tenant comes in knowing that it is for a particular period and knowing that he would not be let in at all if he had not promised to get out on the fixed date when the owner intends to return.
  This is a case where, what the Minister at an early stage called "the delicate balance between the interests of landlord and tenant" does seem, on merits, to come down very strongly on the side of the landlord. The tenant is in the house only because he promised to get out on a particular date when the landlord returned. The landlord is at the greatest disadvantage, because he has been out of the country and returns with the need to occupy his house immediately. As the Bill now stands, if the tenant holds out, he has to take him to the county court. If he has to take him anywhere I have no great quarrel with the county court, though I am sorry that in this case the Bill has abolished the much speedier High Court procedure.
  Picture the position of the man who returns from service abroad. He has to find a solicitor and get the case to the county court. In the country, in particular, that may take a considerable time. Even when the case is before the court and the judge has made an order for possession the court still has its inherent jurisdiction, which the Bill does nothing to affect, to give four or six weeks further possession to the man who is wrongly holding on, contrary to his own undertaking. I do not think that the anxiety, which, as the Minister knows at least as well as I do, has been expressed by people all over the world, has been allayed.
  I think that the effect of the Bill will be to cause many of those houses to be left empty when people go abroad. As a result, accommodation will be lost, and no one knows better than the Minister how serious that will be. The property itself would deteriorate through being left empty. The man who goes abroad and thinks that when he returns he may be presented not with his house, but a law suit, will hesitate to let.
  The provisions in respect of the extension under the Bill of the sections about furnished letting are of very doubtful merit, particularly in the case of the owner-occupier. I must acknowledge,

  1149
  however, the handsome last-minute repentance by the Parliamentary Secretary, at the end of the Report stage, on the case of the seaside landladies. There are a number of smaller anomalies which still remain in the Bill. One is the position in respect of ministers of religion. Here I pick up the Parliamentary Secretary, because it looks as if the Minister has taken his theology from the late Mr. George Bernard Shaw.
  The position, as the Bill stands, is this. In the case of an Anglican parson the ecclesiastical authorities can obtain possession of his vicarage when he leaves his cure of souls simply on the order of the bishop. But in the case of the other faiths, the Roman Catholic priest in his presbytery, the Nonconformist minister in his manse, it is necessary for the Church authorities to go to the county court and to take the time which I have already described, while attempting to take possession. Meanwhile, the spiritual needs of that particular congregation are almost certain to be jeopardised.
  Be that as it may, what logical, proper distinction is there in this respect between the Anglican parson and the other ministers and clerks in holy orders? It is worth remembering that this distinction is deliberately preserved by the Bill, because what used to be Clause 29—I have not checked its present numerology—by continuing the Pluralities Act, 1838, specifically preserves this preferred position in respect of property belonging to the Anglican Establishment.
  Mr. MacColl: Only Anglican incumbents are covered by the Pluralities Act. Assistant curates are treated in exactly the same way as other denominations.
  Mr. Boyd-Carpenter: I have said nothing inconsistent with that. I referred to the parsonage which is occupied by the incumbent, not by the assistant curate. This is a small matter, but it is an indefensible discrimination. [Laughter.] It is no good the Minister laughing. Other people who are interested in these matters will take his laughter rather sadly.
  The other extraordinary discrimination is that in respect of agricultural tied cottages. I think that it was a mistake to bring tied cottages within the Bill; it will cause a good deal of unnecessary difficulty. It is, however, quite indefensible to treat the farm cottage differently from
  1150
  every other tied cottage. As I understand the Bill, in respect of the railway cottage or the manager's or steward's flat, though there is the difficulty and necessity for the owner to go to the court, the court, apart from the ordinary discretionary powers, has to make an order for possession. However, in the case of the farmworker, the court is given the specific power to extend his period of possession, apparently indefinitely.
  Mr. Orme: Hear, hear.
  Mr. Boyd-Carpenter: The hon. Member says "Hear, hear". I know that this is a matter on which opinions differ, but would he apply his mind to the discrimination between the two? If this is right for the farmworker, why is it wrong for the railway signalman? Is it suggested that the operation of agriculture is so much easier that the farmer has less need to obtain possession of the premises than have other employers in industry or the railways?
  Mr. Orme: I do not think the right hon. Gentleman appreciates that we on this side of the House have wanted to put right the abuses which have taken place over the years in relation to farm labourers' accommodation, and we have put them right in the Bill. We see this as a matter of priority.
  Mr. Boyd-Carpenter: I understand the hon. Gentleman's point of view. What I find more difficult to understand is the Minister's attitude. At least the Minister, I hope, does not take the view that agricultural employers are such had employers in this respect that they have to be discriminated against compared with the treatment of all other employers. That seems to me the implication of the hon. Gentleman's suggestion.
  Mr. Crossman: I am confused about this. I thought that on Report we had reached an amicable agreement about farmworkers. We had no vote on Report.
  Mr. Boyd-Carpenter: If the Minister is worried about not having a vote, may I say that his appetite may be satisfied in that respect as the months pass. What I am asking—and I hope the right hon. Gentleman will deal with this seriously when he replies to the debate

  1151
  —is what is the reason for this discrimination? Why treat the agricultural worker differently from other occupiers of tied cottages? Is it because of the foolish pledge which the First Secretary of State gave at Swaffham, which the Minister himself said it would be impractical to carry out?
  The main problem of the Bill—and the Parliamentary Secretary rightly gave some attention to it—is how rents are to be fixed. If we have security of tenure, we must have some system of fixing rents; the two inevitably go together. In theory, it is much better to fix the rent of the property at what is thought to be a fair figure than to tie it to an outdated level. There is almost everything to be said for dealing with the log jam which has arisen on old controlled rents. By a curious coincidence, a constituent of mine, an old lady in her 84th year, came to see me on Saturday. She is the owner of three controlled properties. The total rent from the three properties, which is a main part of her modest income, is £162 a year. It is clear that it is right to tackle this admittedly difficult problem.
  However, we have the gravest doubts about the method which the Bill proposes for determining a fair rent. The Bill proposes to exclude the element of scarcity. This is what has been called, I think, an economist's concept, but a lawyer's nightmare. It will be extraordinarily difficult to apply, because the demand for a house depends on the rent at which it is available. Yet it is this question of scarcity which must be eliminated before the rent can be determined. This has a reminiscent connection with the old saw about which came first, the chicken or the egg. It is an extremely difficult problem, however admirable it may be as a concept. It has great attraction as a concept, but is it effectively capable of application, and does the Bill permit of its effective application?
  In determining a fair rent, is it the Minister's concept that the same rent will be determined for similar houses whether they are in Mayfair or, to quote an example, in Poplar? How is the question of the fair rent to be applied, having eliminated scarcity? It is a criticism of the Bill that those who have to determine a fair rent are given no firm criteria on
  1152
  which to make their determination. Nothing is laid down to enable any measure of uniformity to be maintained between decisions. It is an exercise of judgment by a large number of people on the broadest and most imprecise basis.
  I do not wish to say anything offensive or wounding, but this is a decision which must be made in the first place by people who, we have been told, will not have professional training or professional knowledge in the very difficult subject of valuation. They will be amateurs in the true sense. Although I am sure that the town clerks with whom the selection lies will do their best to select fair-minded and independent people, I am afraid that they will have the greatest difficulty in finding people who are sufficiently knowledgeable. It certainly appears that there will be a very wide disparity in the rents fixed, not only in different parts of the country, but possibly in different parts of the same town.
  I know that the Minister and the Parliamentary Secretary rely on the rent assessment committees to put all this right. If every one of the potentially very large number of cases is to go on appeal to the committees, the machinery will be hopelessly clogged, and the same difficulty of finding skilled and trained personnel will occur at the appellate stage. Even if the committees do their best, there is no machinery, I understand, for securing that the decision of one committee on appeal bears any relation to the decision of other committees throughout the country on similar appeals in respect of similar houses. There is, I understand, no appeal beyond the committee except on questions of law which, I should have thought, would be very unlikely to arise and would not, if the bodies concerned behave reasonably, involve consideration of the level of rents fixed.
  We have a serious warning about the difficulties of all this from the difficulties which have arisen concerning rate assessments. The Minister himself last week, in what The Times called an astonishing admission, said something on Report about the state in which rating assessments had got. If rating valuations, done by skilled public servants, professionally trained, whole-time, with a central direction and control and with a full system of appeals right up, if necessary, to another place, can produce the difficulties

  1153
  which many of us have been talking about and which the Minister himself has now admitted, surely the problem of amateurs, with no central organisation and no central appeal on the merits, must be extremely disturbing.
  It is no use saying that one is choosing the fine concept of a fair rent if one is not providing the machinery for ensuring that these decisions are fair—fair to both parties and fair in relation to other decisions—and workable. There is nothing in the Bill, despite what we did in Committee and on Report, to remedy this. We still are faced with the fact that these decisions will be made by untrained men with no firm guidance given by the Bill and appeal only to probably overworked, localised rent assessment committees.
  The Joint Parliamentary Secretary, in the Third Reading atmosphere of this afternoon, took a rather valedictory line. This is not goodbye to the Bill. It is au revoir. The Government told us on Report that they propose to seek to persuade another place to put in a number of Amendments and that they were considering asking another place to put down even more. Those will come back to us.
  Mr. Crossman: Hear, hear.
  Mr. Boyd-Carpenter: It is fortunate for the right hon. Gentleman that the efforts of his hon. Friends to remove the legislative powers of another place have not so far been successful. I agree with the Minister that this is a Bill which is suitable for the attention of the revising Chamber, because for all our efforts, apart from major matters of policy, there are still ambiguities and ill-drafted and difficult points. The position is still left open, for example, about the agricultural tied cottage and the succession of the family, including members of the family who may have been there for a very short period. All these are points which, I hope, may be looked at in another place.
  As the Bill leaves us, it leaves us, on the Minister's own showing, still requiring further Amendment. It leaves us with grave difficulties unsolved. The tragedy of it all is that the major part of this difficulty results from the Minister's overambitious concept. Had he concentrated on the lower-rated accommodation in the great cities, he could have devised a system in which the ingenious and hope-
  1154
  ful concept of the fair rent could have been tried out with practical chances of success. It was his decision to apply the system universally and high up the scale which has magnified the problems and which, undoubtedly, has caused informed opinion outside this House to have the strongest doubts whether this vast structure will operate.
  It recalls to me the incident of the Kaiser's battleship. The House may recall that the late Emperor William of Germany—who had characteristics in common with the right hon. Gentleman; he was volatile and had great ideas—sought to design, out of the kindness of his heart, a battleship for his then Italian allies. He sent the plans to the Admiralty in Rome. The reply came in due course after the normal channels had considered it saying that they were grateful to His Imperial Majesty and that, indeed, the battleship which His Imperial Majesty had deigned to design was superior in armament, armour and fuel endurance to any other battleship in the world. It had, however, one trifling defect: it would not float. That, I think, is the comment on the Bill.
  5.5 p.m.
  Mr. Arthur Blenkinsop: I congratulate my right hon. Friend the Minister and my hon. Friend the Joint Parliamentary Secretary upon their success in getting this important Measure to this stage. I congratulate them, above all, on providing, at long last, a system of security for many thousands of people that they have lacked so seriously over many years and giving them, what is more, a chance of protection against the kind of exploitation from which they have had to suffer and from which they have suffered because of the inaction of right hon. and hon. Members opposite, at least since the 1957 Act was passed.
  Many hon. Members on this side pleaded for changes in that Measure right from the start of its operation, but not a single effort was made by the party opposite to change it. The Government of that day were impervious to any kind of argument and they allowed a situation to develop in London that was finally dramatised by the Milner Holland Report. Hon. Members opposite now seek some kind of credit for this situation, which is intolerable to those of us

  1155
  who have spent many years trying to battle with their predecessors in getting the grievances of our constituents put right.
  Now, I suppose, we should be glad to see some conversion from the speech of the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). We still do not know whether he will divide the House against Third Reading. We had a rather equivocal speech from him on Second Reading. We had some fascinating tight-rope walking throughout the proceedings in Committee and on Report, and, no doubt, we will have some rather fanciful displays at this final stage on Third Reading.
  Mr. Frank Allaun: Is not there confirmation of what my hon. Friend has just said in the fact that on Second Reading there was no vote against the Government and, from what we have heard this afternoon, there is to be no vote against Third Reading? Is not this tantamount to an admission that the Rent Act was a criminal mistake on the part of the former Government?
  Mr. Blenkinsop: So I would say. At least, hon. Members opposite have come to realise that they can no longer hold to the kind of action that they took, not just once, but over a period of years.
  Their whole policy has had to be thrown overboard. The way to ease their passage is to try to pretend that today's Bill should have been limited to London to start with. Hon. Members opposite have tried to insist that as the Milner Holland Report dealt only with London, the Bill should have been restricted to London, and occasionally they have thrown in the suggestion that there are, perhaps, one or two other major cities to which it might also apply. As the Bill comes into operation, it will be seen that every town of consequence has cases which have to be dealt with under it.
  Mr. Evelyn King: Does the hon. Member realise that if what he says is true it still represents only half the country, because one-half of the country does not live in towns?
  Mr. Blenkinsop: If the hon. Member had been wise, he would have stood by his old views when he supported action
  1156
  from this side of the House in dealing with matters of this sort under previous Administrations. However that may be, he is likely to find that even in constituencies such as he represents, and in rural areas as well, there are cases that otherwise would be neglected and not covered had this legislation not been introduced. Therefore, this is important, vital legislation.
  The right hon. Member for Kingston-upon-Thames and his supporters have, apparently, accepted the need for the Bill to a limited extent. They have tried to play for time by pretending that it should not have been as comprehensive in application, although, no doubt, in time we may even get their support for this. We may find in years to come that they claim complete credit for this Measure—
  Mr. Tam Dalyell: As with the National Health Service.
  Mr. Blenkinsop: —as with other Measures to which my right hon. and hon. Friends could readily refer.
  So important is this Bill to give protection to so many of our constituents that I should like my right hon. Friend the Minister, when he replies, to say something about the steps which he intends to take to ensure that the general public know about its provisions. I know that my right hon. Friend is one of the first to acknowledge how incomprehensible very many parts of the Bill are even after, as I grant, some improvement of drafting which has taken place. I do not think that there has been a rent Bill or a landlord and tenant Bill which has ever been at all intelligible to the average layman. Do not let us pretend that this is something peculiar and new to this Measure. It is probably more difficult still, but it is only a matter of degree.
  I do not think that many of my constituents have been able to make much sense of any of the landlord and tenant legislation over the years, and I do not blame them. There has always been an urgent need for a simple explanation of these Measures, and I ask my right hon. Friend to ensure not only that the local authorities, who will, of course, have a great responsibility in passing on information, will have explanatory material provided for them, but, also, that the wider advantage provided by the Press, radio

  1157
  and television will be taken to explain the facts of the Bill and how it applies to the hundreds of thousands of people who will unquestionably be affected, and who will have the first chance, really, of getting some protection against the type of oppression which they have suffered in the past. So my first question is about the steps which—as I am sure he will be intending—my right hon. Friend will take to see that the whole country knows the detailed provisions of the Bill.
  The second point is this. The right hon. Gentleman the Member for Kingston-upon-Thames pointed out that there had been a most dramatic fall in the number of private tenancies—the tenancies of private landlords—over recent years. Indeed, the various social studies which have been carried out in different parts of the country have shown how true this is. There has been a very great increase in the number of owner-occupiers, on the one hand, and there has also been, of course, through slum clearance and other processes, a very dramatic fall in the amount of property now let in this way.
  Personally, I do not regret this. I think that the rational end to which we should look is the position where the great bulk, if not the whole of, the lower-rented properties within the reach of the great bulk of our population should be provided, in so far as it is rented, by public authorities of one sort or another. I think that we have to accept that as a natural development. The private landlord is ceasing to be able to make a contribution in this field. No doubt there will be private landlords still, in the more expensive ranges of property. That may well be so, but for the most urgent need I do not believe that the private landlord has in the future a very long and important rôle to play.
  However, I would be very anxious to see that the public provision should be made as varied as possible. That is to say, I want to see not only the local authority making provision, but I should like to see more advantage taken of experience from abroad, on the Continent, in Scandinavia and elsewhere, where the co-operative societies, the trade unions, and other bodies play a very much larger part than they do in this country in providing for the needs of their members.
  1158
  I would hope that we shall be able to encourage that type of public provision just as much as we want to encourage the provision by local authorities.
  I am glad that special provision still remains in the Bill for some special consideration of the position of housing associations; bodies of this kind which can, I think, make a very real and valuable contribution, non-profit-making housing associations, of which there are many, and of which I hope there will be many more, some of them experimental.
  Meantime, there is no doubt that there will be for some years to come private landlords still providing accommodation for tenants and there is equally no doubt at all that many of these landlords are what I would call unwilling landlords, small landlords, small owners of property, who have felt obliged to acquire property in order to get somewhere to live themselves. Certainly, in the north-east of England, on Tyneside and elsewhere, we have an enormous amount still of what we call upstairs and downstairs flats. It is now the common situation that those houses are owned to a very large extent by one or the other of the two occupiers, the two part tenants. Therefore, we do unquestionably have today many more small owners with very limited means indeed who have, as I say, acquired property unwillingly as the only obvious way of having somewhere to live themselves and who have taken into the house another sitting tenant.
  The problem there is that very often the fairly "fly" previous owner has got out of this business in reasonably good time and has sold the property for perhaps far too high a price and at a price which no reputable building society would support, and, therefore, the new owner is probably in debt to a small moneylender, and is having to pay far too high charges to meet what was initially far too high a capital charge.
  These are the people who, quite frankly, ought not to be now letting this property at all, and the most helpful thing would be if, in the course of time, some of this property were to be taken over by the local authorities, on reasonable terms. It would be of assistance to many of these small owners, if that were to happen, even if they suffered some loss

  1159
  on the capital involved, rather than meeting very heavy maintenance charges. These are the cases of the small landlords, each with one house which he partially occupies himself.
  There is no doubt that under the terms of the Bill, and quite properly, a landlord of this character is reasonably treated. His claim is heard, as well as that of the tenant, and our experience today is that there are cases of hardship which emerge here, as they do, of course, among the tenants. I am happy that during the course of our consideration of the Bill—indeed, under the first proposals for the Bill—it was recognised that what we wanted to establish was a flexible system under which fair rents could be assessed. I was interested to find the right hon. Gentleman opposite now apparently giving some sort of half-tribute to the proposal for fair rents. Anyhow, under the Bill there is a flexible system adopted, which will enable the problems of this type of landlord fairly to be met without hardship to the tenant as well. That is why I feel that this is a particularly satisfactory solution to this problem which we have all had to face.
  I would return to reminding the House that for all the talk about the relative technicalities of this Measure, it is one which, unquestionably, will give new and absolutely vital protection to thousands of people up and down the country, something which they have sought for years from the Conservative Administration, who constantly refused to grant it and I am delighted that now my right hon. Friend has had the chance of introducing and carrying through this Bill.
  5.20 p.m.
  Mr. David Mitchell: I welcome the Bill, for a number of reasons. I welcome particularly the Clause which prevents the harassment of tenants. Having gained some knowledge and experience in Camden Town and Kentish Town of the scale which this harassment can reach, I am delighted to see this Clause in the Bill. I welcome, too, the increased security of tenure for tenants, and the prospect of statutory tenancies becoming regulated tenancies.
  I am attracted to the idea of fixing fair rents, but here one comes to the nub of the problem. What is a fair rent? In
  1160
  my view, a fair rent is the figure arrived at by a qualified valuer having regard to all the circumstances of the property. The Minister says that a fair rent is a figure arrived at by an unqualified valuer having regard to all the circumstances of the property, except one, and I think that we ought to consider that exception, the thing which is to be disregarded.
  If I might paraphrase Clause 26(2), it says that when fixing the rent it shall be assumed that the number of people wanting to live in that area is not greater than the supply of houses. This is inviting the rent officer to be an ostrich, to put his head in the sand and pretend that a shortage which is there is not there. The result—and no doubt this is the Minister's intention—will be artificially low rents in certain areas. If one had artificially low rents throughout the country, one could see a good deal of logic in that arrangement, and the difficulties to which I propose to draw attention would not arise; but if there are artificially low rents in certain areas, those areas begin to suffer certain effects, and I want to draw the attention of the House to the grave misgivings that I have in this connection.
  In London, in particular, one can see the sort of situation which I have in mind. The centre of the capital provides a tremendous attraction to people to come and live here. The demand is overwhelmingly greater than supply. As one gets to the suburbs of London, the pressure eases off, but the Minister is asking rent officers to fix the basis of rent in the inner suburbs of London on the same basis as that of the outer suburbs, where there is not the serious shortage that there is in central London.
  That procedure will lead to a distortion in the pattern of housing, and I believe that the result will be extremely serious. I believe that fewer people will be housed than could be. I think that a greater number of people will live in the wrong sized house for their circumstances, and that younger families will be compelled to commute from further and further afield. Moreover, in spite of the provisions in the Bill, I think that we are likely to see a black market of a sort developing as the years go by.
  I have three important points which I wish to put to the House. First, I believe

  1161
  that fewer people will be housed than could and should be. Additional housing comes from new building, and from the conversion of existing properties. From my reading of the Bill—and I shall be glad to be corrected if I am wrong—it appears that a person building a new house will get as much rent for it if he builds it in an area of low demand as if he builds it in one of high demand.
  I say that because in fixing the rent the element of high demand has specifically to be excluded. It seems to me, therefore, that builders will be attracted to the areas of lower cost and lower demand, because those will be more profitable to them since their rents will be just as high. I believe, too, that there will be fewer conversions of existing properties, because in the central areas of high demand people will not be able to get the sort of rent which is a sufficient incentive to make them divide their houses and let off parts of them as separate flats.
  I think that we shall see an increasing number of people living in houses of the wrong size. The natural pattern of housing is that when people marry they move into a flat consisting of a couple of rooms. They then have children and move into a family-sized house which they occupy while their children are growing up. When their children grow up and leave home, they move into the country, perhaps into a bungalow or something of that sort.
  As I see it, in future there will be no incentive to older people to move out of their houses. The result will be that an elderly man perhaps approaching retirement—such as right hon. Gentlemen who occupy the Front Bench opposite on normal occasions; I exempt the Minister of Housing and Local Government from that—will continue to occupy a house big enough for a family. In future, the children, after they have married, instead of staying on in the house, while their parents move to a smaller place, will themselves move into a small flat, after their children are born they will not be able to get back into the family house, simply because there will be no incentive for the older people to move. Young couples will have to continue to live in two rooms.
  1162
  I have seen families with three or four children living in two rooms in which they have to eat, cook, sleep, wash and bring up their children. It is not surprising that such conditions lead to juvenile delinquency. The alternative for these young couples is to move out of their flats and start commuting from ever increasing distances. When that happens, children are brought up with few opportunities of seeing their father. He comes home after dark for six months of the year, and he leaves in the morning just as the children are having breakfast.
  One of my hon. Friends says that Members of Parliament are faced with this problem. I do not know the juvenile delinquency rate among Members' children, but to me it is a serious problem that I do not have much time for looking after my children and exercising parental discipline to the extent that I should like to exercise it. However, that is by the way.
  This is a serious problem. People are travelling to London daily from further and further away. They travel herded together like cattle in a truck. Indeed, if cattle were treated like that, I am sure that the R.S.P.C.A. would institute a prosecution. I ask the Minister to recognise that this is a serious social problem, and one which will be considerably increased in future by elderly people occupying property which ought to be occupied by the younger generation who have children and who ought to be able to live near their work. If we provide artificially cheap accommodation for those who do not need it, the elderly and the retired, it will be denied to those who do need it, and that seems to me to be a grave social injustice which will grow under the provisions of the Bill.
  Mr. Julius Silverman: Is the hon. Gentleman suggesting that as a matter of policy old people ought to be driven out of their homes by imposing excessive rents? If that is the policy he is advocating, where does he suggest the old people should go?
  Mr. Mitchell: I have tried to draw attention to the damage which I think will be caused by having artificially low rents in certain areas where there is intense demand. It is in these areas that Clause 26(2) will have the most effect,

  1163
  and it is in these areas that we will prevent the operation of normal economic pressures which makes the family shuffle round into the size of housing unit that it needs. I agree that one does not want to exert pressure to make older people move to a bungalow in the country.
  But for every case in which we say, "How unkind it is that this older person should have to move out into the country to live in order to allow a young man with his family to move in", we equally have to recognise the hardship caused to a young man with his family who will have to commute from Tunbridge Wells, Basingstoke, or even further out, and spend one-and-a-half hours each way travelling daily to and from his work, although he is the one who needs to live near his work. This situation will become increasingly difficult under the operation of the Bill. That is what causes me great concern.
  I have said that there will be a black market. In London, it will take the form of removal money and not key money as I knew it when I married. I was asked £500 for two rooms when I married in 1954. As I say, it will not be key money, but removal money. The young man who is living in the country and is having to commute into town will go in desperation to an older person and say, "Please will you go? If you will leave your house I will pay you £X". This is something which the Minister cannot prevent happening by any amount of regulation, because of the sheer necessity for some people to live near their work and the social damage that will follow if they are unable to do so.
  No doubt the Bill will be popular. I recognise that there is no popularity and no votes in the attitute that I am adopting, but I believe that in the long run the Bill will do serious social damage to younger people who have to commute from further and further out.
  5.30 p.m.
  Mr. S. C. Silkin: As the Bill reaches its concluding stages in this House, anyone who has been listening to the debate might suppose that, broadly, it is a bipartisan or even perhaps a tripartisan Bill. Even the hon. Member for Basingstoke (Mr. Mitchell), who ended by condemning its results, began
  1164
  by welcoming it. Listening to the debates throughout the various stages of the Bill, one would suppose that although there might be doubts about the way in which the broad principles should be worked out, the broad principles themselves were agreed between the parties. Apparently we all agree that it is right that a measure of control should be brought back again, certainly in areas of housing scarcity, and that in those areas there should be a system under which fair rents are regulated by some form of tribunal.
  It is right that the House and the public should remember that the Bill has been brought in in the teeth of intense opposition by the Conservatives both in the 1956 debate and since, and that my hon. Friends fought the 1956 Bill line by line, as they have since fought, night after night, to reverse its provisions. Neither the House nor the public should go away with the impression that we are all together in this, and that this Bill is not the result of intense pressure by hon. Members on this side of the House, not only against the evils of Rachmanism, which were created by the 1957 Act, but also against the misery and anxiety suffered by thousands of ordinary people who have been faced with the threat of losing their homes and with the reality of paying exorbitant rents in areas of housing scarcity.
  Mr. Mitchell: Is the hon. and learned Member really suggesting that Rachmanism was the result of the 1947 Act? Is he ignoring the fact that Rachman made his money before that Act came into operation by buying up houses controlled by the old control Acts and squeezing the tenants out?
  Mr. Silkin: I suggest that many of the practices which are known as Rachmanism followed directly from the decontrol provisions of the 1957 Act, which created a high market in decontrol.
  That is the background against which the Bill is being passed into law—a background of intense and persistent action by the party opposite in favour of the free market system which the party opposite, even now that it has apparently abandoned its opposition to control in respect of areas of housing scarcity, is nonetheless persisting in to a degree and in a way

  1165
  which, if accepted, would have weakened the effect of the Bill.
  I want to illustrate what I have said by referring to one or two Clauses, and particularly to Clauses 11 and 26. I was astonished to hear the criticisms of Clause 26 which were put forward by the hon. Member for Basingstoke. They seemed to amount to the argument that in areas of intense demand the Bill would create artificially cheap accommodation and that under-occupation would result. I thought that it was at least agreed by the right hon. Member who spoke first for the Opposition, and by other hon. and right hon. Gentlemen opposite, that it is in those very areas of intense demand and scarcity of houses that the need for rent regulation is greatest.
  I heard the right hon. Gentleman suggest that the Bill extends over too wide an area and that there were areas where there is no intense demand and where the provisions of the Bill might not be so necessary. Nevertheless, I thought that it was at least agreed that where there was scarcity the provisions of the Bill, and especially of Clause 26, were necessary.
  Surely that must be so. Surely there could hardly be a fairer test than the test of wiping out altogether the influence of scarcity—the excess of demand over supply—in order to decide what a fair rent is. I can understand that it might be said that the method of doing this is not the best one—although in my opinion it is. But surely it is agreed that the principle must be right.
  The only real alternative suggested throughout our debates was that which was suggested by the Opposition on Report. The putting forward of that alternative shows what a tremendous gulf remains between the parties. It makes it clear that, notwithstanding their formal abandonment of the principle of a free market, the Opposition are trying to the last to hang on to it. The hope of amendment—
  Mr. Deputy-Speaker (Dr. Horace King): Order. The hon. and learned Member cannot now discuss what is not in the Bill.
  Mr. Silkin: I am much obliged, Mr. Deputy-Speaker. What I want to do is to try to compare what we have in the Bill with possible alternatives.
  Mr. Deputy-Speaker: That is the difficulty. The time for doing that was in Committee or on Report. It cannot be done in the Third Reading debate.
  Mr. Silkin: I must not trespass upon your Ruling in this matter, Mr. Deputy-Speaker. I hope that it is in order to say that we have the possibility of deciding what is a fair rent on the basis either of equating supply and demand or of what may be agreed between the landlord and the tenant. These are the only two alternatives.
  If we consider the situation in areas of housing scarcity and say that the right approach is to take what is agreed between the landlord and the tenant as being a fair rent, the inevitable result is that in a situation where 50 or 100 people desire to take up residence in one vacant property the landlord will be able to get whatever rent he cares to ask for and, in effect, hold up the house for letting to the highest bidder. That is the difference between the view of the Opposition and that of the Government on this principle. They want to go back to the principle of the highest bidder. The same result comes when one considers the Clause which enables the Minister to convert controlled tenancies into regulated tenancies. The relief of hardship is provided for by staged increases of a reasonable sum over and above the controlled rent. While some of my hon. Friends may criticise that, undoubtedly, if we are to accept that there must be fair rents throughout the country, some sort of staging must be introduced.
  When, in a previous debate, I asked the hon. Member for Crosby (Mr. Graham Page) for his reaction to the proposal of the Opposition that this staging should be removed and we should jump directly from a controlled rent of, say, £2 a week to a regulated rent of £4, the hon. Member said that that was fair and just to the landlord and that that was what he would recommend. This is the way in which the gulf between the thinking of the Opposition and that of the Government on the Bill is demonstrated. I think that it is right that the House and the public should know that, in these respects, the Opposition are clinging to the idea of the free market, even if they have abandoned it in principle.

  1167
  One of the reasons why it has been necessary to provide the system which has been the subject of criticism in detail is, as my right hon. Friend has explained very clearly, the defects of the rating system. I hope that my right hon. Friend will not be satisfied that those defects should continue—though, of course, he is not responsible for them. Simply because we are dealing with a Bill which determines rents, let us not sit back and say that this defect having been discovered we can now forget about it. I hope that my right hon. Friend is thinking very deeply about it and will on some future occasion introduce improvements which will prevent those defects from being present in future.
  Clause 13, the House will remember, provides for the transmission of a statutory tenancy, not, as now, to a first successor, but to a second successor. To that extent, it is certainly an improvement. It was a matter of pleasure to me, at the end of the debate on that Clause, to find that my hon. Friend the Parliamentary Secretary took the view that my suggestion that it should continue indefinitely had much to commend it, and that the hon. Member for Crosby, while opposing the Clause as a whole, at least did me the honour of saying that my proposal was a logical one if the Clause were to be introduced at all.
  Fortified by that support from both sides of the House, I hope that my right hon. Friend will look at this again and will realise—as I know he does—that we are dealing here with what people regard as the family home—
  Mr. Deputy-Speaker: Order. It seems to me that the hon. Member is now discreetly proposing an Amendment. He cannot do that at this stage.
  Mr. Silkin: I hope that I am not doing that. I am asking my right hon. Friend to look at the matter, to think about it again, and to see whether, between the time of the passing of the Bill through this House and its emergence in another place, it may be improved. It is capable of improvement in order to enable people to think of a house as their home, just as much as the owner-occupier does, and to have the security of tenure from one
  1168
  generation to another which is at present denied them.
  I welcome the Bill heartily. It removes the fear and anxiety of thousands of people—including many of my constituents—who are anxiously waiting for it to become law. I am sure that many of them go to hon. Members and to their advisory services with their problems, their fears of eviction, their wondering whether to accept a new tenancy at a rent which they know to be excessive. Again and again, we have to say to them, "We cannot offer you any hope until a Bill of this kind becomes law. As things are at present, inevitably you will have to go if you are unable to pay the rent which is demanded." But for the provisions of the Protection from Eviction Act, which passed into law some of the preliminary provisions, again and again that would have happened.
  Now, for the first time, a Bill which really provides a sensible framework for rent regulation—not just a standstill framework on rents—is to become law. It is one which will relieve those many anxieties and enable people to breath once again and not to have the threat of eviction constantly hanging over their heads. I congratulate the Government on having been able to achieve it and on being able—as I hope they will—to do it in so short a time after having come into power. I am certain that nothing which they will do in future will earn greater gratitude than the passing into law of this Bill.
  5.48 p.m.
  Mr. Eric Lubbock: I have great sympathy with much of what the hon. and learned Member for Dulwich (Mr. S. C. Silkin) said. In particular, I agree with him that many of our constituents in London constituencies are anxiously awaiting the passage of the Bill into law. We have found that the Protection from Eviction Act has been effective, and we are thankful for that. We are looking forward to the time when this protection for our constituents is put into a more permanent form. I think that all Parties have accepted the Bill in principle, although we may have disagreed on some details on Committee and on Report.
  It is interesting that the Official Opposition did not dare to oppose the Second

  1169
  Reading. If the First Parliamentary Secretary had been here, I would have told him that they will not oppose the Third Reading, either, because they realise the immense electoral damage they would do themselves if they did. Their attitude to this Bill has been, to say the least, ambivalent. The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), although professing to welcome the Bill this afternoon in principle, said at the end of his speech that it would not float. This attitude is not very consistent. He must either say that he does not accept it because it would not work—that is what I thought he meant by saying that it would not "float"—or that he accepts it in its totality while, of course, reserving the right to criticise some of its details.
  To say that it will not work and, at the same time, not to vote against either Second or Third Reading seems rather peculiar. It can only have the explanation I have ascribed to it.
  The Tories have not dared—
  Mr. Julius Silverman: Is not the explanation that they hope that it will not float but dare not try to sink it?
  Mr. Lubbock: That may well be true—I would not disagree with the hon. Gentleman.
  The Tories have not dared to criticise the conclusions of the Milner Holland Report that both security of tenure and rent regulation are essential for the protection of tenants. They have all along tried to improve the Bill as far as possible in regard to the landlords while seeking to water down the provisions for the protection of tenants. Two examples of this have been their attempts to lower the rateable value limit to which regulation applies, and to secure that the Bill should initially operate only in Greater London, and such other areas as the Minister might designate by Order. One could quote many other examples from the Committee stage.
  What was their object in that approach? Ostensibly, it has been to enable private enterprise to make a larger contribution to the provision of new homes to let. They do not seem to have learned the lesson of the last few years, which is that with no controls at all on the rents charged for new property it is
  1170
  quite impossible for private landlords to help with dwellings that can be afforded by people with average or below-average incomes, among whom the shortage of accommodation is most severe.
  In her evidence to the Milner Holland Committee, Ruth Glass said that it was difficult to make an assessment of the contribution by private landlords of new houses to let in Greater London because, in the 1951 census, we did not have the tenure analysis we had in 1961. But she said that in that period the stock of private housing as a whole in the county—I am sorry, it is the county that is referred to, not Greater London—increased by only 4 per cent. From that she deduced that of that increase no more than 2 per cent. or 3 per cent. was in the sphere of private rented housing.
  I hesitate to quarrel with such an authority, but I wonder whether any increase in rented accommodation occurred at all, because we know that at that time whenever houses came out of control they were sold off to owner occupation. I seem to remember seeing figures that showed that there was a decline in private rented property over that period, although there had been an increase in the number of properties for owner occupation in the County of London between 1951 and 1961. I take my information from paragraph 82 of Ruth Glass's evidence to the Milner Holland Committee.
  I should have thought it obvious, on the arithmetic alone, that private landlords had no rôle to play in the provision of low-cost rented accommodation—
  Mr. Frank Allaun: I agree with almost everything that the hon. Gentleman has said so far and would only say that there are figures in the Milner Holland Report showing that the number of rented properties shrank by 11¼ million.
  Mr. Lubbock: I was sure that I had seen those figures, and I was trying to locate them so that I could quote from them—
  Mr. Crossman: That information was in the White Paper which was about Great Britain, whereas Milner Holland referred to London.
  Mr. Lubbock: I should have thought it obvious, on the arithmetic alone, that

  1171
  private landlords could not possibly provide accommodation at the lower end of the scale—
  Mr. Boyd-Carpenter: Before the representative of the Liberal Party wholly throws free enterprise overboard, I invite him to look at page 34 of the Report, where it is made clear that the problem of rents for privately provided accommodation being above what the average and lower-income groups can afford arises from the level of taxation which it is in the hands of the Government to improve.
  Mr. Lubbock: I would be ruled out of order were I to reply to that intervention, although I am in favour of helping the private owners. It is very difficult for them to compete with local authorities in the provision of housing at rents which people of average and below average income can afford. Local authorities can borrow over a 60-year period at more reasonably favourable rates of interest—although we complain about the Public Works Loan Board's rate having gone up as a result of the general tightness of money—than can the private developer. I am sure the right hon. Member for Kingston-upon-Thames will agree there. Private developers certainly would not be able to borrow over a period of 60 years, so the annual repayment represents a much larger element of rent. Again, local authorities do not have to make a profit. In those circumstances, it is quite impossible for private owners, when they have none of these advantages, to build houses to let at rents similar to those charged by local authorities.
  What I have said applies almost as much to the comparison between private landlords and housing associations. It is not possible to regulate the supply of rented property by means of this kind of legislation, and even if this Bill had been more favourable to the private landlord its effect would have been only marginal. Instead of paying lip-service to the rôle of private enterprise in the provision of rented houses generally, the Government should frankly acknowledge that below a certain level of income the burden will fall entirely on the local authorities; that there will be a level about the middle where local authorities and housing associations will overlap, and that at the very top end we can leave the housing provi-
  1172
  sion entirely to private enterprise. The right hon. Member for Kingston-upon-Thames will doubtless be reassured to learn that I do not propose to exclude private enterprise entirely from the provision of housing, but I think that its rôle must be somewhat more restricted than we have imagined in the last few years.
  The Government must also take steps to prevent the remaining 2¼ million controlled properties from passing out of the rental pool as and when the landlords obtain possession. Without such a provision an impossible burden will be placed on local authorities, because, over a period of years, they will have to provide 2¼ million new houses into which to move the tenants who would otherwise have been accommodated in the privately-rented homes. I therefore hope that the Minister will take all possible steps to encourage local authorities to buy a controlled property with the tenant still in it, so that when the tenant dies or leaves an extra house will be added to the pool.
  I know that the right hon. Gentleman is sympathetic to this idea, because I have had correspondence—
  Mr. Evelyn King: When the hon. Member says that local authorities should buy controlled houses, has he taken into account the fact that the average rent of a controlled house is £38 a year? Is he suggesting that the local authority, having bought the house, should continue to charge that rent, or should put up the rent to what it normally charges?
  Mr. Lubbock: That is a matter for discussion. My concern is to prevent the accommodation going outside the rental pool altogether as and when landlords gain vacant possession. In present circumstances, such a landlord would almost certainly sell the house to owner occupation. If he did that in the past, when he could let the property at any price the market could command, he will certainly do it in the future when the property comes under regulation.
  It is all the more important therefore, that wherever possible local authorities should obtain possession of these properties while the controlled tenants are still in them. This should be done without compulsion. I am sure that if local authorities offered to do this, many landlords of controlled properties would

  1173
  sell because under the existing rent control provisions they cannot make a profit. Although they can ultimately look forward to coming out of control and into regulation, many of them would sooner realise the value of their property now by selling to local authorities.
  My hon. Friends and I on this bench have supported the Bill as an honest attempt to deal with the immediate difficulties highlighted by the Milner Holland Report, notwithstanding my disappointment—which I know the Minister shares—that it was impossible at this stage to sweep away the whole rickety structure of rent legislation and start again with a sound, 1965 construction. By going about it the way we have there are certain disadvantages, of which I will give four. First, as the Minister admitted in Committee, the Bill is extremely difficult to understand, even for an expert. I reiterate my hope that as soon as possible the right hon. Gentleman will produce an easily-understood pamphlet explaining the provisions of the Measure to landlords and tenants.
  Secondly, we still have different machinery for dealing with furnished and unfurnished property. Any consolidation Measure which is ultimately produced will have to try to integrate these two procedures so that there is no disparity between the rents of similar properties, whether furnished or unfurnished. The Minister has said that landlords are already putting a few sticks of furniture into their unfurnished properties so that they can escape the more stringent provisions which apply to unfurnished accommodation. This is a great danger. It was pointed out in Committee that it could be avoided only by bringing the two types of property into a similar rent-fixing and security of tenure machinery.
  Thirdly, I have been rather critical of the fair rent criteria and I still believe that they could have been improved on the lines I suggested in Committee. However, they are by no means unworkable and I consider that some of the more extravagant criticisms which have been made of them are not fair.
  My fourth and final example of where the Bill has not completely satisfied me is that we have made no provision for the large and growing section of the population who live in caravans. They
  1174
  have not been granted the new and important protections given by the Bill. I have pointed out how this is beginning to operate to the detriment of those who live in caravans and I trust that this matter will be borne in mind by the Minister.
  I was glad that the right hon. and learned Gentleman the Attorney-General had such a helpful approach to our suggestions about prescribed notices and explanations of the Bill. We are grateful to the Government for having found it possible to accept the reasonable suggestions which we made in Committee for improving the Bill, such as dwellings held for occupation by Ministers of religion. Although the right hon. Member for Kingston-upon-Thames was rather severe on the Minister in this respect, and I agree that it is illogical to treat parsonage houses on a different footing from manses, I reiterate that the Free Churches are satisfied with the Amendment tabled by the Minister. We are grateful for the efforts of the Under-Secretary of State for Scotland in clarifying Clause 31; and for the concession, if it can be called such, relating to agricultural cottages which are let to persons who are not employed in agriculture. That concession will be of immense value to those living in rural constituencies.
  We believe that the Bill has been considerably improved by our efforts in Committee and that the Minister has done his best to meet the legitimate criticisms which have been made. It would have been quite impossible for him to have satisfied both his hon. Friend the Member for Salford, East (Mr. Frank Allaun) and the right hon. Member for Kingston-upon-Thames. That may be the finest testimony we have of the Minister's wisdom—the fact that he has pleased neither. The right hon. Member for Kingston-upon-Thames said that the Bill was too far-reaching and I think that he referred to a return to an almost universal system of rent control, where scarcity has not been demonstrated, and said that the Bill was reactionary. The hon. Member for Salford, East, on the other hand, would like control to take the form of the old rent legislation, with some modification.
  We on this bench believe that the Minister has struck a fair balance between

  1175
  these totally conflicting interests and although we hope that the right hon. Gentleman will press on urgently with the task of producing a consolidation Bill which will both simplify and bring up to date our rent legislation, in the meantime we support the Measure and are convinced that it will work.
  6.6 p.m.
  Mr. Patrick McNair-Wilson: It is common ground that some form of security of tenure in a certain section of the housing market, together with a structure of fair rents in that section, has been long overdue. As an hon. Member for a London constituency, I eagerly awaited the introduction by the Labour Government of a Rent Bill which would serve to do just that. I must admit that I am disappointed by the final result.
  The Bill disappoints me for two reasons; first, because it goes far beyond the needs of the situation and, secondly, because the whole tenor of the arguments adduced by Government spokesmen have been couched in such a way as to make it quite clear that the Government do not any longer interest themselves in the usefulness of the private landlord.
  If we are to solve the situation which many of us realise exists, we must have the good will of the landlord in the private sector, not only in our great cities but throughout the country. We must encourage the landlord in the private sector to be even more efficient than the Milner Holland Report proved he already is. If one studies that Report one realises that it is impossible to solve the housing situation, particularly in our big cities, notably in London, without the active support of the private landlord.
  Perhaps the Government—and it certainly would appear so from what hon. Gentlemen opposite havesaid—are anxious to see the private landlord disappear altogether. If so, I trust that a Bill will be introduced in the near future to ensure that the local authorities which replace him run their properties more efficiently. But that is another story.
  We are in the presence of a Bill which gives security of tenure and contains a structure for a fair rent over the greater part of the rented market. Indeed, these
  1176
  two aspects—security and a fair rent—will range in London over houses with rents up to £800 or £900 a year in the unfurnished sector and up to perhaps £1,200 a year in the furnished sector. We are, therefore, covering virtually the whole market.
  Apart from the fact that it is totally unnecessary to introduce legislation to deal with the very high end of the rented market, the Bill will defeat the aims and objects which the Government seek to achieve, since this elaborately conceived machinery will be clogged by unnecessary applications through the rent assessment committees and the courts to the detriment of those in real need.
  A structure has now been created which will be blocked by the very people who are not in need of its services. We shall find ourselves with a serious log jam both at the rent assessment committee level and throughout the courts. This will hold up the flow of cases which are really urgent at the lower end of the private rented market.
  One asks oneself exactly how the initial stages of sorting out these problems is to be tackled. One's attention is immediately drawn to the man who will, perhaps, be more important than anybody in the whole scheme of affairs—the rent officer. Upon his shoulders rests virtually the total responsibility for making the Bill work.
  That man, however, is not to be an experienced professional. He is to be a man who is a professionally nice chap who will go round attempting to do acts of conciliation between landlord and tenant, but a man who will lack the one essential ingredient to make his position effective: knowledge in the assessment of housing property. Indeed, his yardsticks for arriving at a fair rent are so vague and so lacking in definition that if one looks at Clause 26, which deals with the yardsticks, such as they exist, which have to be taken into consideration, the only firm landmark which one finds is that of locality.
  That inexperienced individual—I say this with due respect to whoever he or she may be—arriving in the borough where I live and trying to assess what is a fair rent in the street in which I live, will find on one side of the street controlled properties, properties some of

  1177
  which do not even have electricity and houses badly in need of renovation. On the other side of the street he will find houses recently built which have been selling for up to £14,000. What, I ask the Minister, is the definition of locality which the rent officer is then to take into consideration? Upon which side of the street does he base his fair rent?
  It is obvious that as a result of a situation like that, which is not uncommon in London, one will find different rents with widely ranging disparities between them being fixed in the same small areas of London purely because the rent officer, with the best will in the world, does not have the professional knowledge to be able to arrive at what would be a fair rent, because he will be taking only the one main yardstick of locality into consideration.
  That is bound to mean that landlords in those areas, as elsewhere, will not submit themselves to the test of an inexperienced amateur. They will get out of the rented property market as quickly as they can. Far from having the effect of improving the situation, that will make it worse. Far from helping to solve the housing situation in the great cities, it will aggravate it.
  My final words are these. The Government have already shown themselves fully capable of turning problems into crises. We have seen this in the economic situation which faces us. In housing, we must not allow it to happen. We must not allow over-ambitious and ill-considered measures such as this Rent Bill to ruin the housing situation in our great cities and to make it even worse.
  6.14 p.m.
  Mr. B. T. Parkin: It is with some hesitation that I take part in this debate, because I am not sure that at this stage there is much constructive that can be added to the excellent work that has been done already. It is, however, right that a few words should come from this side of the House in unqualified praise and acceptance of the policy of my right hon. Friend the Minister and its embodiment in the Bill and of the fact that from the beginning my right hon. Friend has invited consultations, advice and improvements on difficult points.
  Instead of lighting the bonfires of rejoicing that a person like myself might
  1178
  be tempted to do on Third Reading of the Bill, one accepts the situation with a sense of humility and an immense sense of responsibility, because we are now dealing with a subject which has not been in the forefront of active, constructive thinking by any political party until within the last few years. We are all exploring new ground. There is no point at this time in recriminating or going back over past history, but let us at least admit that there were no positive ideas on either side of the House for dealing with the enormous sector of decaying old property still in private hands.
  It darkens counsel for the hon. Member for Lewisham, West (Mr. McNair-Wilson) to suggest that there is, in some way, a deliberate act of policy on the part of the Government in neglecting some recommendation or other. The hon. Member's words were that they have made it clear that they do not interest themselves in the good will of the private landlord and that they speak of the great help that the private landlord might have given.
  That needs a good deal of amplification. We need to find out who the private landlord is and whether there are any survivors of those who, in years gone by, built and continued to own—[Interruption.] I thank my hon. Friend for that note. It is not often that one gets a note saying that one can continue speaking for a minute or two longer. [Laughter.] I very much doubt whether there are still in existence any large areas of property which are still owned by the people who built them and intended to continue to own them and let them for rent.
  If we have to look at the problem of the help given by the private landlord, we have to consider how he acquired the properties. These great estates have been the subject of bidding between property companies, borrowing to add to their ownership. At best they have been management companies, at worst they have been speculative companies. Ten years ago, I excited some ill will by describing an auction sale of property of the Church Commissioners in Paddington as a thieves' kitchen of financial speculators gambling with the homes of the people of Paddington. That was the understatement of the year in view of

  1179
  what has since happened to those estates passing out of the hands of the Church Commissioners and into the hands, the whole lot of them, of Lintang, Jasper, Rachman and his associates, many of whom are getting away with it even today.
  Tomorrow, there is to be another auction in the Porchester Hall, Paddington, of the properties of a company which has now decided to dissolve itself. It attributes its decision to the influence of the Corporation Tax. Thus, if nobody else has been told what the new Finance Bill is about, the landlords know. They object to being fairly taxed. They are getting out of the business on the ground that they cannot face the proposition that corporations owning property should be taxed, like anyone else, on their earnings. In the past, of course, they have made their earnings by speculation.
  One could amplify at great length the story of the big speculative companies, but let us never forget that a tremendous burden in connection with this problem is laid upon the shoulders of all of us by the proliferation of the unwilling legatee, the owner-occupiers' heirs who do not know what to do with the property when they get it and who think that it should be bled to death. It is this bleeding to death of the old properties which is the real problem. It is not true that there are people ready with orchards in the London area which are waiting to be developed. It is not true that there are financiers with spare money wanting to buy land which is available and wanting to build on it flats to rent at prices which ordinary people can afford.
  What is true is that we have the duty of making the maximum use of property at present in private hands for so long as it lasts. This has become a social duty because of the incapacity of the small owners to deal with it and, generally, the unwillingness of the large owners to stay in the business and, above all, to undertake vast schemes of renewal. In this situation, bearing in mind that no less than 18 months ago I was advised by highly-placed lawyers in my party that my little kite-flying Bill to prevent eviction from rented dwellings would not be capable of translation into law—it was a good thing for a slogan but could not be
  1180
  made to work—in view of the fact that within a few months of this Government's existence this Bill has not only been conceived and argued but new principles accepted and interpreted in terms of a reasonable gamble that it will work, it is a new idea altogether. It was sloganised at the General Election and people talked about fair rents; now we have to make it work.
  It is slightly unfair of the Opposition constantly to suggest that there is any reasonable comparison between the duty of a rent officer and that of rating valuation officer. Rating valuations take place under high pressure at irregular intervals and have to be done, of course, according to certain sound principles, but no one has yet gone chasing after a rating officer saying, "You have not assessed my house as highly as you should; come and look at it, it is far better than the one next door." Such a person simply says, "Thank goodness for that, it is the same as next door." It will not be the job of the rent officer to revalue the whole property of a borough at the same time, but to assess each individual property. It is all right for debating purposes, but hon. Members should stop suggesting that the Minister has introduced a device which is less competent or less likely to succeed than that employed by the rating valuation authorities.
  We have been told that the landlords will get out. I think that was the kind of threat in the speech of the hon. Member for Lewisham, West, who has spoken with such great energy on this Bill in the course of its progress through the House. I commend his energy and enthusiasm and fighting spirit because, of course, the Tory Party as a whole has not much to fight back about on this subject. But if he was prophesying that the landlord will get out by way of suggesting that this will land both sides of the House in some kind of new crisis, I do not think he was right. I firmly believe that there will be a combination of disciplines and incentives. The disciplines will be in the sense of sanitary regulations, local authority bye-laws, rules for houses in multiple occupation and so forth which must be enforced.
  The incentives will be of encouragement to improve dwellings so that in

  1181
  crowded areas the rent officer will say to an owner, "This rent is about what this lot is worth, but if you propose to do this, this, or this I can give you a certificate of fair rent in advance of your doing it. Go away and think it over." This is what the Bill provides. It provides for the owner of the controlled property to take a chance that a rent officer would offer to increase the rent as it is, which is extremely unlikely, although one could find examples where that could occur. One could find examples where the only remaining controlled tenant had collected all the amenities because all the flats had been made self-contained. There would be cases where the old controlled rent was out of tune, but not many.
  If, as in most cases, they refer to a single floor, here is the opportunity to put it to the landlord that there is nothing to prevent him going to the council to see what grants and loans he can get and seeing whether that is worth while or offering the property for sale, which is what the hon. Member suggested he would do. That is something which would terrify no one. What the Opposition have been arguing is that there is a field for private enterprise building housing to let. That has not been denied, and we have indicated many fields in which it could operate, but no one has seriously suggested that it could play a rôle in the blighted areas so that they may be repopulated by people who could service the great cities with which we are chiefly concerned.
  This Bill is a courageous, new, imaginative device which will indicate that there is a way out. I am sure that if it is properly explained to the tenants and to the public in general it will catch their imagination. It has not had much chance yet. It has not had the right kind of publicity. It is the job of us all to try to make it work. I hope that the Opposition will at least insist on it being given a fair chance and that they will show, as we all need to show, maximum vigilance at the lowest level locally to see that we get the greatest benefits which will stem from the initiative and courage of the Ministers who between them have conceived and carried through this Bill in this House.
  6.28 p.m.
  Mrs. Margaret Thatcher: I shall try to be brief, because a number
  1182
  of my hon. Friends wish to speak in this debate. I echo the sentiment of the hon. Member for Paddington, North (Mr. Parkin) that it is the job of all of us to try to make the Bill work. I accept absolutely the objective that a fair rent ought to be the rent chargeable. I think that the Minister will agree that some of our efforts have been directed not towards confounding that objective, but making sure that it will work properly.
  When we reach this stage on a Bill of this kind we area little apt to think that all the problems have been solved and that there will not be any difficulties in future. Nothing could be further from the truth. Even if a fair rent is decided there will, of course, be many social problems still arising and many retired people who cannot afford that rent. These problems will have to be dealt with outside this Bill. It is our task to try to see that a fair rent is the rent that shall be charged.
  Throughout the debate we have had various comments made about landlords and tenants. I make it clear at the outset that all the good is not on one side and all the bad on the other. There are good landlords. There must be good landlords, because the right hon. Gentleman is himself a landlord. There are good tenants and bad tenants. When we debate landlord and tenant relationships we tend to think of all landlords as big ones and many of them as bad, but that is not so.
  I know many who are very anxious indeed to try to help retired people living in rented property.
  I know one landlord who is herself retired, aged 70. Her only income—from two rent-controlled properties—is very small indeed and she is responsible for all the repairs. She wrote to me asking about the Bill and I was bound to tell her that I thought that it would be some time before rents would increase in the London area under the provisions of the Bill.
  I suspect that what will happen is that a good deal of political play will be made of the fact that the Bill will bring a large number of rents down, and I believe that it will. But there is also provision in the Bill to enable a large number of rents to be put up, because many rents at present being charged are below the designation of "fair rent". I think that we shall see some rents go down before the Minister

  1183
  gives any permission for rents to go up and it would not surprise me if there were a General Election between the coming down and the going up processes.
  I hope, however, that we shall not see a repetition of what happened with the National Health Service prescription charges. The last Labour Government got the machinery ready and passed an Act enabling prescription charges to come into operation. After the 1951 election, the Labour Party disowned that Measure completely. Let us be quite certain what this Bill does. As well as enabling rents to come down, it enables them to go up, because its objective is that fair rents shall be chargeable—and if there is an election in between, which we win, let us see that right hon. and hon. Members opposite do not disown this Bill as they disowned the Act to impose prescription charges.
  I was bound to tell my constituent that I thought that it would be two or three years before she could charge a fair rent for her property.
  Mr. Crossman: And before the election?
  Mrs. Thatcher: I admit that the lady said, "I know that you are all working very hard to defeat this terrible Labour Government", but she also wrote:
  "I wish to thank you for your kind letter and am shocked to hear that I will not be able to raise my two rents for 2 to 3 years. This controlling of rents is the cause of much had feeling between landlord and tenants. Tenants take advantage knowing the landlord is not able even to go to a tribunal for fair play, there is no justice."
  Perhaps I have laid emphasis a little too much on this, but the point is that equity is not divisible between landlord and tenant but is something which should apply to all.
  Mr. Parkin: Surely, in view of the hon. Lady's Ministerial experience, it was also her duty to convey to this old lady that she did not accept it as socially desirable that an old lady of 70 should have to depend for her income on the rents of old properties that she could not maintain or repair.
  Mrs. Thatcher: This lady has looked after her property most conscientiously.
  1184
  Everything that can be done under existing social security has already been done.
  Another point about which I am rather worried arises from an interview case which I had last Friday. I wish that it had arisen on the Friday before, when something could have been done about it. Throughout our period of office, deserted wives had security of tenure. The Minister, therefore, cannot complain that we were lacking in that respect. Through no fault of the present Government, deserted wives at the moment have not got security of tenure. I have looked very carefully at the transitional provisions in Clause 19, but I fear that they will not be covered and that we may have missed an opportunity under the Bill to see that their rights are restored.
  I hope that the right hon. Gentleman will undertake to join this to the other matters which he will refer to their Lordships in another place. In the meantime, these women have no protection whatever and may well be thrown out unless they are protected under Clause 19. I am worried about what may happen between now and the passage of a new Bill.
  The right hon. Gentleman must have weighed up very carefully the advantages and disadvantages of a Bill of this kind. I know full well the problems of deciding what is a fair rent. Indeed, I was reminded of the comment in "Tom Brown's Schooldays":
  "He never wants anything but what's right and fair; only when you come to settle what's right and fair it's everything that he wants and nothing that you want. And that's his idea of a compromise."
  There will, therefore, be considerable difficulty over what is a fair rent. As my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said, it will be difficult to get the Bill launched. The fact that we want the Bill should not blind us to these difficulties. I am sure that there will be one considerable disadvantage to the Bill. It will undoubtedly lead to a greater shortage of accommodation.
  I know many old people who would let part of their houses, but are now afraid to do so because, although they would get more income if they did, the price might be domestic friction—and there is nothing worse than domestic friction. Although I have no personal interest in

  1185
  the Bill, I fear that the right hon. Gentleman has made it easier for me to have a flat in central London as well as a house in the country. Indeed I shall perhaps follow the right hon. Gentleman in that.
  I see that the right hon. Gentleman looks rather puzzled. If the Bill works, rents in central London will come down and that means I shall be able to afford to have a house or flat there and relieve myself of the fatiguing job of driving home very late at night. Of course, I shall thereby relieve the transport problem, but I shall be taking up two accommodation units instead of one.
  Mr. Crossman: Earlier, I listened with great interest to the hon. Member for Basingstoke (Mr. Mitchell) when he urged me to try to arrange for hardworking people like himself and the hon. Lady to have accommodation in central London.
  Mrs. Thatcher: The right hon. Gentleman is not listening to my hon. Friend the Member for Basingstoke (Mr. Mitchell). He is listening to me.
  I have made my criticism of the Bill, but, nevertheless, I hope that the major objective of achieving fair rents will be well and speedily achieved.
  6.38 p.m.
  Mr. Derek Page: I congratulate my right hon. Friend on a courageous and necessary Measure, but I want to take up the qualms which some of us feel about the Bill in dealing with the agricultural tied cottage. We do not have disagreements on this side of the House, as has been made clear. We have mutual elucidations. It will be very difficult to decide who is right in this process unless we have adequate data.
  Those who are connected with agricultural constituencies, particularly hon. Members on this side, have felt all along that the provisions dealing with the agricultural tied cottage were at fault in containing a call for consideration by the court of agricultural efficiency in giving security of tenure. We thought that there was everything necessary to ensure justice in asking whether alternative accommodation was available and what was the balance of hardship. I realise that this is an immensely difficult problem—far more so than appears on the surface.
  1186
  I know that my right hon. Friend believes he has struck an equitable balance in the Bill. However, he realises that some of us have our doubts, and he has assured us that he will look at the subject again after a reasonable period to see whether he is right or whether we are right.
  A little while ago I asked, in a Question, what were the figures of evictions under the Protection from Eviction Act, which is very similar in wording as regards the tied cottage to this Bill. It turned out that figures were not available. It is well-nigh impossible to continue considering this subject if the data are not made available.
  While again congratulating my right hon. Friend on the part of the Bill dealing with the security of tied cottage tenants—because this is a very considerable improvement, and I make no bones about it—he will receive my extreme gratitude if he undertakes to make available over the coming months figures of evictions of tenants of agricultural tied cottages and so enable the process of mutual elucidation to continue on a rational basis.
  6.42 p.m.
  Mr. Peter Mills: I welcome a very large part of the Bill, and I am able to say this as a "new boy" in the House, because I have not taken part in any previous debates on this subject. Naturally, as the Member for a rural, constituency it is the agricultural part of the Bill in which I am particularly interested. That is not to say I am not interested in the problems of our towns and cities, because I am. But I think it is important that a Member should contribute to a subject about which he knows at least a little.
  Clause 31 of the Bill makes special provisions for agricultural employees. Unless the Bill is handled with great care, wisdom and tact, that it could have quite a serious effect on the farming community, not only farmers but agricultural workers, who, together, make up the farming community. It is important to know if it will help and further the cause of the agricultural worker.
  Will it help in the industry at all? Will it create better relationships between the worker and the farmer? Will it help the industry to be more profitable both for the worker and the farmer? Unless there

  1187
  is tact and understanding on both sides in the working of the Bill, I believe that it could run into serious difficulties and problems in the countryside.
  I hope that from his farming experience the Minister realises the difficulties of the farming community. We are dealing with animals that require attention day by day, and most farmworkers and farmers realise that to live in a farmhouse or a farm cottage has its very great responsibilities. One cannot just jump in and out of one's cottage or stay in it without causing great difficulties. It is right that the farmworker should be protected, and, certainly, I would always champion his cause. But it is also right that the farmer should be protected against difficult and unco-operative men. In practice, these arrangements work very well, and it is not true to say that there are great problems. It is not true to say that there are a lot of wicked farmers turning out farmworkers, because I believe that that is greatly exaggerated.
  Mr. Derek Page: Would the hon. Gentleman not agree that the eviction of even one farmworker is a crime against humanity?
  Mr. Mills: Yes, I would. However, this problem can easily be exaggerated, because a very happy relationship exists between most farmers and their workers.
  Looking at the Bill, I feel that time is not on our side. Time is vital in the countryside. If a farmer wishes to make a change or the farmworker himself wants to change jobs, delay for both parties in any dispute will cause difficulty. It has to be faced that no workman worth his salt wants to wait until a cottage becomes vacant. His first question to his future employer is, "Is the cottage vacant, boss?". Certainly, his wife wants to know if it is vacant, so that she can have a good look round. It is vital that the courts should decide quickly and fairly, for the benefit of all concerned.
  It is certainly true that a small farmer with one or two cottages cannot move his men round to do the work of the cowman or stockman who is leaving. For the bigger man, it is probably easier. He can delegate another man to take on the work whilst waiting for a cottage to become vacant.
  1188
  I am still not happy about Clause 31(2,b), the last few words of which are:
  "… any member of his family residing with him at his death."
  This is a potential danger, because while one must have every sympathy and consideration for those who have lost the breadwinner, it is something that is open to abuse when one considers that it is quite impossible for a relative suddenly to move in two or three weeks before the death and be able to continue the tenancy.
  Then there is the problem of the service cottage. A man and wife and their son may be living in it. If the father dies, his wife may not want to leave, but the son may want to marry and stay on. This can be a very serious problem, and I should like the Minister to reassure me on the points I have raised on this part of the Clause.
  There is the question of empty cottages and their being let to people who are not concerned with agriculture. These cottages are seen in every village, and it is a great pity. I welcome the decision of the Minister to allow such cottages to revert to the farmer after a certain time, if so desired and with the court's permission. I welcome it because nothing is more lowering to the general morale in a village than to see cottages left empty. It is bad for the farmer and his pocket, it is bad for the village and its prosperity, and it is bad for the homeless in the district.
  However, there is one point I would like to make. What is the position of the cottage which has been modernised or repaired under the Livestock Rearing Act or with the aid of any other improvement grants? Every year, I have to sign a certificate that one such cottage will remain in agricultural use. How will the Rent Bill affect these premises? Will there be any change?
  Like the curate's egg, the Bill is very good in parts, but it is bad in others. Delay on vital decisions, particularly where they involve the countryside and the farming community, will cause grave problems. I hope that decisions by the courts will be made quickly, for the benefit of all concerned. If they are not, an unhappy relationship may arise which has not existed before between farmworkers and their employers.
  6.50 p.m.
  Mr. Graham Page: If I repeat the expression of appreciation voiced by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) of the Government's spokesmen throughout our debates on the Bill, I intend something more than the usual courtesies. The right hon. Gentleman the Minister, the right hon. and learned Gentleman the Attorney-General, the hon. Gentleman the Under-Secretary of State for Scotland and the Joint Parliamentary Secretary have listened to us from this side of the House with the greatest patience, and we are grateful to them for that. They listened to us urging Amendments involving greater changes, obviously, than in policy they dared to make, and yet they listened at least with outward and I think with sincere patience.
  We are grateful for the substantial Amendments which have been accepted throughout the stages of the Bill, but because the Government have obstinately held to many misguided policies in the production of the Bill it is a curate's egg, as my hon. Friend the Member for Torrington (Mr. Peter Mills) said. The parts in which it is good can be operated to the benefit of all, but the parts in which it is bad are very bad. I am speaking not only of the drafting, as mentioned by the hon. Member for South Shields (Mr. Blenkinsop) and the hon. Member for Orpington (Mr. Lubbock). There is some amazing drafting in the Bill, for example, in Clause 1(2) and in Clause 3(3), which no layman could possibly understand—and no lawyer could understand some parts.
  We have done our best to improve the Bill not only in drafting, but in substance for the benefit of all who may be concerned with it and I hope that the Minister will not continue, as his hon. and learned Friend the Member for Dulwich (Mr. S. C. Silkin) did, to draw "phoney" distinctions between the Government and the Opposition. Of course there are distinctions, but they are not that the Government have the tenants solely at heart while the Opposition think only of the pockets of the landlords. Although I have to declare an interest as the director of a property company which, incidentally, does not hold residential property, and the director of a building
  1190
  society—I am glad to see that the Attorney-General is now present and I repeat the thanks to him which I expressed at the beginning of my speech—the real differences between the Government and the Opposition are that the Government believe not only that they are able to prevent further building of homes to let by private landlords, but that it is right that they should do so.
  The hon. Member for South Shields expressed that view and went so far as to say that the occupier-landlord ought to be deprived of his house, that we should take it over from him and that the occupier-landlord was not fit to be in that position.
  Mr. Blenkinsop: I did not say anything of the sort. I suggested that he would be put out of a lot of his worries if the local authority took over.
  Mr. Graham Page: I accept the hon. Gentleman's modification of what I thought he said, but I take it that it is the policy of the Government to prevent further building of homes to let by private landlords and, not only that, but to drive the remaining 3¾ million private landlords out of business. I am glad to hear that that is not quite the policy of the Liberal Party, which does not entirely exclude private enterprise from the ownership of houses to let, but wishes local authorities to take over all controlled property. If that is the Liberal policy, let the Liberal Party put it forward. The Bill will undoubtedly go a long way to achieving the job of putting the private landlord out of business.
  Mr. S. C. Silkin: Is the hon. Gentleman suggesting that the private landlord is likely to be driven out of business as a result of receiving a fair rent?
  Mr. Graham Page: No. I will explain to the hon. and learned Gentleman later why I say that as drawn the Bill will not encourage, but rather discourage, the private landlord to remain in business. On this side of the House we believe that it is disastrous if those who desire or need to rent their homes are to have no choice other than a council house, or the comparatively small number of housing association dwellings.
  When I say that the owner of a house to let should receive a fair rent, I am not thinking merely of the immediate rent payable by the tenant. Like my hon.

  1191
  Friend the Member for Lewisham, West (Mr. McNair-Wilson), I am thinking in the longer term. If the Bill so discourages landlords that no more come forward to provide homes to let and the 3¾ million remaining landlords give up as soon as they get the chance, it will take local authorities 22 years to replace those homes at the rate at which the Minister intends that local authorities should build.
  If the Minister has his way, I am sure that for a very long time there will be shortages of houses to let, that local authority waiting lists will lengthen, that there will be a slowing down in slum clearance and that there will be a deterioration in maintenance. To curry short-term favour, the Government will bring hardship to tenants in the long run.
  The basic principles of the Bill are not in dispute, and I ask the hon. and learned Member for Dulwich (Mr. S. C. Silkin) to believe that. The principles of the Bill can be made to work justly and fairly between landlord and tenant. For example, the basic protection is sound, provided that there is a quick reaction from the courts not only to a breach by landlords, but to abuses by occupiers—although I fear that there will still be some cases of possible hardship for the individuals whom I term the occupier-landlords and for employers, as we have endeavoured to point out.
  Regulation by a judicial or semi-judicial decision is a very good way of arriving at a fair rent. It is not an entirely new way, as the hon. Member for Paddington, North (Mr. Parkin) suggested. We have had regulation of rent for business premises since 1927 and of furnished dwellings since 1946. This is certainly appropriate where security of tenure is necessary because of shortage or because of hardship in removal.
  But the manner of applying rent regulation adopted by the Bill is based on prejudice rather than reason. There is the doubtful formula for a fair rent which may have the effect, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) and my hon. Friend the Member for Lewisham, West, pointed out, of there being a wrong use of property in the centre of town.
  As my right hon. Friend said, the Minister's scheme reaches too high and,
  1192
  at the same time, not low enough in the rents it embraces. No one can possibly pretend at the present day that controlled rents are fair. Yet for an indefinite time such properties are to be kept out of the determination of a fair rent. No one can possibly pretend that the rents of dwellings in the higher rateable values which are brought into the scheme are unfair because the rent is dictated by shortage, yet those dwellings are to be brought in to clutter up the machinery for determining a fair rent, the log jam, as my hon. Friend the Member for Lewisham, West, expressed it.
  It is all very well for the Parliamentary Secretary to say that we want a broad survey to see the extent of the problem, but in this machinery there is not the capacity for that broad survey. We ought to concentrate on those spheres where it is so necessary to determine the fair rent. If the right hon. Gentleman wants to see justice done, he should tell the tenants of Mayfair and the higher reaches of Hampstead that they can fend for themselves for the present and make room for the tenants of controlled premises where it is generally acknowledged that there is a deep social problem, as instanced by my hon. Friend the Member for Finchley (Mrs. Thatcher).
  I would remind the Minister of his words about rateable value and the unfairness of rateable value in very many cases. I add to that the fact that controlled rents are based on gross rateable values. In the face of that how can he justify the delay in bringing controlled property into this scheme, and yet persist in bringing in the stately flats of Knightsbridge—Camden Hill instead of Camden Town? This is a gross defect in the Bill.
  Mr. Parkin: The hon. Gentleman is trying to have it both ways. Either these higher rents are fair or they are unfair. Either a shortage is applying or it is not applying. If, as he maintains, there is no problem, then they will be in and out of the rent office and in and out of the rent assessment committee in a very short time.
  Mr. Graham Page: As to the higher rents, if the hon. Gentleman believes the Milner Holland Report, it is quite unnecessary to bring into this scheme rents

  1193
  up to £800 or £900 a year as will be by the rateable value of £400. I am talking about the limits of rateable values set by the Bill not necessarily by the high rents. I do not believe that at rateable values between £300 and £400 in London there is any shortage of accommodation, or that the rents are governed by a shortage, or that we need to bring them into this machinery for discovering a fair rent.
  I have been speaking about the machinery coming into operation, but I want to draw the attention of the House to the position before that machinery is set up. Before that almost every tenanted dwelling becomes controlled—not regulated—but put into the category of control. There are no fair rents for that period until a rent assessment committee is set up. The rents and tenure will be frozen. This is what I think is the farce of the position. The Minister has said he is to hurry along with the setting up of rent assessment committees in London and the big cities, but when will he get round to the other towns and villages, where rents and tenure do not need to be frozen because there is no shortage? These places will have to wait.
  Mr. Julius Silverman: If there is no shortage, why worry about the assessment which the rent officers will make?
  Mr. Graham Page: Because control lands on those at once and they remain controlled up to the limit of £200 rateable value until rent assessment committees are set up in the area.
  I say that there is no need to impose control in those areas because there is no shortage. No district should have been brought into control under the Bill until machinery for determining a fair rent had been installed. But the right hon. Gentleman has insisted on applying the Bill from Land's End to John o'Groat's without distinction of where shortages may occur. I suppose that he has gone beyond John o' Groat's, to the constituency of the right hon. Gentleman the Leader of the Liberal Party (Mr. J. Grimond). I wonder who will volunteer for the job of rent officer in Orkney and Shetland? There will not be enough volunteers among valuers for appointment as rent officers to cover the whole country.
  The point, if I can perhaps impress it upon the mumbling Leader of the
  1194
  Liberal Party, is that it is quite unnecessary to cover the whole country with a system of control. The result will be a shortage of personnel as rent officers, and for the manning of the rent assessment committees. What shortage of accommodation can there be in mid-Wales at a rateable value of £200? We talked a lot about castles in Scotland—I should think that the Bill will bite on a few castles in Wales.
  We say that the regulation of tenancies at fair rents can be operated perfectly well and beneficially to the parties concerned if it is applied in the right way. The Joint Parliamentary Secretary said earlier, "If the Bill succeeds it will change the whole climate of relationship between landlord and tenant". He hoped that the Bill would form a basis on which confidence could be built between the parties. We join with him in that hope and for that reason we shall not divide against the Third Reading of the Bill. The Government have made their own task far more difficult by the way they are trying to supply the bad part of this curate's egg. The regulation of tenancies at a fair rent can be operated to do justice between the parties, where there is a shortage, and within the range of that shortage, provided that the system is operated by experts and not by amateurs. The Bill can be used in that way and we urge the Government so to use it.
  7.5 p.m.
  Mr. Crossman: I think I must follow precedent and start by talking about the behaviour of everybody during the last three months of this Bill. I will join the Opposition in congratulating the Parliamentary Secretary. I am well aware that a back bencher with 19 years' experience of only criticising his own side, or the other side in Government, when suddenly propelled into Ministerial responsibility needs a good Parliamentary Secretary who knows the subject through and through. I agree with the Opposition that I have one and that he did a tremendous job. I should also like to congratulate the Opposition on carrying through with aplomb and skill an extremely delicate operation—that of allowing the Bill to become law, as it will, although they actually disapprove of it a great deal more than they care to admit.

  1195
  This, I think, is the profound truth about it. There were one or two back benchers, not on the Committee perhaps, who genuinely disagreed with those who led the Opposition to this Bill, but on the Opposition Front Bench, with whom I had the most dealings, it was plain that the more they studied this Bill the greater a threat they found it to interests with which they feel themselves to be deeply associated. They felt this and said so quite openly. They said it was a basic threat to private landlordism; that it was the end of them and would destroy things. They felt it passionately, and I cannot remember a single division, in the Committee stage or the Report stage, in which they did not move something in favour of a landlord, because they felt this Bill was balanced much too far against the landlord.
  We finally reached the stage where the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) in his speech today said that this was a battleship which would not float but the Opposition would not oppose its being introduced into the High Fleet. I think that one of the disadvantages of the kind of delicate opposition they have carried out has been that the major importance of the Bill has been underestimated. This is why I agree with my hon. Friend the Member for South Shields (Mr. Blenkinsop), that it will be extremely important to explain this Bill to ordinary people when it becomes an Act of Parliament. I agree with him about the incomprehensibility of the Bill, and I have been with it for three months now. As a simple layman I have already given instructions, and the work is in progress, for translating the Bill, Clause by Clause, into layman's English. They say the job is now being undertaken by men of the highest competence at "laymanry". I am told that this Bill is an absolutely brilliant piece of draftmanship—the right hon. Gentleman the Member for Kingston-upon-Thames is quite wrong about this. Those who have really a taste for this caviar assure me it is the highest grade of legal caviar and that there has never been a Clause like Clause One in the history of legal clauses, for those who can appreciate the finer points of legal draftsmanship.
  Mr. Boyd-Carpenter: And no Clause as expensive.
  Mr. Crossman: All of this is going to be translated and when we have translated it we shall then distribute it in leaflet and in brochure form and publicise it on radio and television if we can have the time. We shall put it on film and we shall have our four travelling cinemas going round in order to put it across. It is enormously important that the rights of landlord and tenants under the Bill are explained to them in the simplest possible way.
  I thank the hon. Member for Orpington (Mr. Lubbock) for his contribution. At critical moments he was extremely helpful on the Bill. Apart from one very important issue on which he disagreed, he genuinely agrees that this is an important Bill. Funnily enough, I agree with the hon. Member for Crosby (Mr. Graham Page). I see no reason to think that as a result of the Bill the decline in the pool of rented houses which has been going on at such a rate since the Rent Act, 1957, will be halted by the Bill. I put it moderately in the way that I always do "that the decline will be halted". We should recognise—and I said this during last Thursday's debate—that it will fall on local authorities, assisted, to some extent, by housing associations, to build up the pool of rented houses. We see the rôle of the private landlord being played only at the luxury flat level—or, shall we say, from the middle level upwards of rented houses.
  I turn to the major objections to the Bill which were recorded by the Opposition. They were, I thought, very fairly summarised by the right hon. Member for Kingston-upon-Thames. I deal first with the criticism that even in its final form the Bill is too far-reaching. The more I reflect on this argument the more fascinating I find it, because it is deeply and passionately felt. It is said, "You have set the rateable value too high, with the result that people who are perfectly happy can go to the tribunal". It does not seem to me a tremendous disaster, even if we have done it, to enable a number of people who say that they are happy to stay at home instead of going to the tribunal. But I have a suspicion that it is not quite like that. Even in the higher levels tenants may be exploited by landlords. There is, therefore, no

  1197
  harm in discovering at what level real hardship begins.
  All we have done in the Bill is to raise the level a little high. We have given ourselves power to reduce it area by area. The moment we find there is no need for regulation we can do this; but we have to have a law to cover the whole nation. The Opposition might just as well say "Let us have an Act of Parliament against poaching. But let us have a five-year social survey and then locate the areas where poaching is taking place". When the Tories care about something they advocate national legislation. It is only when they do not like something that they want to deal with the matter locally.
  We thought that we should not do one thing which the right hon. Member for Kingston-upon-Thames wanted us to do He said that the Bill should operate only where shortage was shown to exist. How does one show that shortage and scarcity exists? I will give the House a very simple example: we show it by setting up a tribunal and allowing people to complain. Then we shall discover the shortage. At no point did the Opposition say by what test could one say whether shortage existed. They said that if the gross figures of accommodation in certain areas exceeded the number of family units no shortage existed. They might have learned from the Milner Holland Report the fallacy of this argument. There are shortages of certain classes of accommodation, particularly of low rented houses, and those shortages can exist even when there is a surplus in terms of housing as against family units.
  My answer to the Opposition is this. I believe that it is right to make this a national matter to give ourselves power to lower the rateable values if we find it necessary. There is, however, something else which the Opposition have not mentioned. They have not mentioned that there are controlled tenants all over the country. If we have a Bill which covers nothing but London and Birmingham, what are we to do for all the controlled tenants outside? I know what the Opposition want to do: they want to decontrol them in one lump. We do not want to do that. That is why we have arranged to deal with the matter in stages. There is a world of difference between the two sides of the House on this.
  1198
  I will not waste time on the small subject about which the right hon. Member for Kingston-upon-Thames is tickled—the problem of the manse and the Catholic Church—except to say that the slight advantage of the Church of England which has existed for several hundred years still exists in the Bill. I wish that it did not, but I find it difficult to avoid it.
  I am disappointed about what has happened concerning agriculture, because I thought that we had come to an amicable arrangement. In the mood of the Report stage, we moved so fast that we did not have the Division which the right hon. Member for Kingston-upon-Thames wanted. It is of the greatest importance that we should have inserted in another place a Clause which enables a farmer to let a tied cottage to somebody other than an agricultural worker and to get it back. This is of the greatest importance in the country because there are literally thousands of cottages kept vacant because the farmer cannot be sure that if he fills it with somebody who needs it for the time being he can get it back. Provided that we tighten up the Clause, it will be important for the farming industry. Nobody on this side of the House, and no representative of the National Union of Agricultural Workers, wants to see thousands of cottages vacant, provided we can ensure that they are properly used.
  Secondly, I was asked why we needed Clause 26 and whether it was not better to let the agricultural worker have the same degree of security as any other licensee.
  Mr. Boyd-Carpenter: This is Clause 31.
  Mr. Crossman: The number of the Clause has been changed. It is now Clause 31.
  I have been asked why we need Clause 31. I will give the House the answer frankly. There has been a long-standing feud in the countryside which we wanted to end in the Bill by providing a genuinely fair deal in the Clause. No one has shown that the Clause is in any way unfair. An Amendment was moved on Report, but it was withdrawn when I pointed out that it was unnecessary and that the Clause as it stood did all that was required. I am delighted about the Clause.

  1199
  I would say to my hon. Friend the Member for King's Lynn (Mr. Derek Page), who asked me for an assurance, that I am convinced that under the Clause the eviction of agricultural workers without the provision of alternative accommodation will cease. To be honest, it has almost ceased already. If we were to ask the National Union of Agricultural Workers how many cases of eviction there had been in the last 12 months, it would be able to collect under 20. This is therefore a declining practice. But if the Clause does not have the desired effect, and if there is an outcrop of evictions, we shall, as I have said to the agricultural workers, reconsider the position and consider what measures we should take. I am, however, perfectly convinced that the Clause provides a fair deal. It is just to the farmer and to the agricultural worker and will finally eliminate what was already a dying form of victimisation.
  Mr. Boyd-Carpenter: In view of what the right hon. Gentleman said about the procedure on Report and his statement that an Amendment was withdrawn, may I point out that the main Amendment which would have dealt with the matter, which would have sought to leave out words of the then Clause 27, which is now Clause 31, was not selected.
  Mr. Crossman: I was not making a serious point on that issue.
  I turn to rent fixing, which is the heart of the Bill. May I say a few words on rent fixing? This method of fixing rent has not had such a bad Press among serious-minded people as the Opposition like to pretend. I noticed in The Times of 2nd July a letter from Lord Lloyd of Hampstead, who is a considerable expert. He is an academic lawyer, a professor of law. Referring to the editor of The Times, although it could have referred to the leaders of the Opposition, he wrote:
  "There is something dogged about your continued appeal for a 'formula' when every responsible expert accepts that no formula exists. … Unless one is to accept the proposition that rent control is an impossibility without a formula, I believe the Minister has done the best that human fallibility allows and I see no reason to share your gloomy forebodings about the outcome of his proposals."
  I must record the fact that no one has put forward any concrete proposal on
  1200
  this subject, apart from inserting the words "rateable value" and apart from some suggestion about the word "amenity", which would hardly have transformed the Clause to something totally different. Those were the only two proposals of any sort on this subject put forward in Committee. No one from outside the House put forward formulae which would have enabled us to provide a definition in the sense which has been demanded, and I do not believe that it could be done.
  The hon. Member for Crosby, who was curiously immoderate in his thought, though not in his tone, said that my proposal was based on prejudice rather than on reason. May I mention to him the case of John Kay Limited v Kay about the Leasehold Property (Temporary Provisions) Act, 1951, which was a forerunner of Part II of the Landlord and Tenant Act. As all lawyers know, this contained a provision which enabled occupiers to apply to the county court for the grant of a new tenancy, the tenancy to be
  "at such rent and on such terms and conditions as the court in all the circumstances thinks reasonable."
  This case of Kay v. Kay was appealed from the county court, and a fairly distinguished group of judges heard it on appeal, including the Master of the Rolls and Lord Jenkins. In the county court, the fair or reasonable rent was fixed as between two parties. In his judgment on the county court decision, the Master of the Rolls said:
  "The evidence before the court … seems to me sufficient to justify the view that the figure of £750"—
  that was the rent demanded—
  "is one that is derived not merely from the increase in general costs or the decrease in the value of money … but is a figure further inflated by the particular and, one hopes, temporary circumstances of shortage of this sort of property; in other words, though £750 per annum is the market rent, the market figure is one inflated by the particular circumstance of shortage."
  He added:
  "The judge has, and I think rightly, said that in so far as the figure has been inflated by that circumstance, it becomes an unreasonable figure; or, at least, that it is unreasonable to impose on the tenant the obligation of having to pay that inflated sum."
  The county court judge said that the tenant should pay £550.

  1201
  There the Court of Appeal was precisely carrying out the fixing of a fair rent, less than the market rent, according to the principles of the Bill. I should read into the record a comment made by Lord Jenkins, who said:
  "If the only power the court had was to ascertain and fix the open market rent as the reasonable rent to be paid under a new tenancy, plainly this legislation … would be in a great measure defeated, because the whole difficulty which has to be met is that, in conditions of scarcity, the open market value may be forced up to a point which does exceed all reason; and it is essential in order to make legislation of this kind effective that the tribunal which is to fix the rent should be able to discount contemporary open market values to the extent necessary in its opinion to arrive at a fair result."
  I am told by the Opposition that the proposal in the Bill is based on prejudice rather than on reason. What an insulting reference to the Master of the Rolls and Lord Jenkins! I am sure that it is an embarrassment to the hon. Member for Crosby, now that he knows who are the people who thought this out, to remember that he described them in the way which he usually reserves for poor laymen on the Government benches.
  Mr. Graham Page: The right hon. Gentleman said that no formula was ever put forward as an alternative to the Bill. He did not mention my Amendment. That Amendment would have taken into account scarcity value only in about one-seventh of the value for the whole of the property.
  Mr. Crossman: That is not in the Bill, and I am not allowed to discuss it. In any case, we discussed it on Report.
  I turn to other criticisms which have been made. If the proposal in the Bill is fair and reasonable—and they are beginning to say that it is—the Opposition nevertheless claim that there is only one kind of person who can fix a fair rent. Not a judge—certainly not he, they say, is inexpert. They say that the only class of person to do this is a trained valuer.
  I will say something bluntly to them. If we had been as innocent as that, if we had arranged for rent tribunals manned solely by professionally-trained valuers, we could have said goodbye to even an appearance of justice being done to the tenant. I said this on Report and I repeat it: of course we need the advice of the
  1202
  valuer, but the suggestion that only the valuer, he and he alone, is able to decide on rents is erroneous. It would also be disastrous to anybody who wanted to try to take rents out of politics and to get a sense of fair play between landlord and tenant. That is why we chose rent officers who were not professional valuers and rent committees on which the valuer would certainly play his rôle, but it would not be a dominant rôle. In fact he will play his rôle alongside the lawyer and alongside the layman.
  Mr. Graham Page: Do we understand from what the Minister said that he expects the fair rent to be less than the figure which a valuer would give as a fair rent?
  Mr. Crossman: This is what I said on Report and what I repeat: if we had taken the advice of the Opposition and had manned our tribunals exclusively with valuers, or if we had arranged that all the rent officers were valuers, if all those who were seeking conciliation from the point of view of the tenant were professional valuers, then anybody who knows anything about tenants also knows that the tenant would never have accepted that as fair. It may be that the tenant has a one-sided view. The valuer must have his rôle but not a dominant rôle if it is to appear to be a fair court.
  I want to sum up in a few sentences what the Bill does. It will have a very big effect. It will provide full security straight away, when it receives the Royal Assent, for 900,000 people in houses decontrolled by the 1957 Act. Those people will have their rents frozen immediately so that rises in rents are impossible. That must have an important effect, and it means that in this respect the Rent Act will have been repealed.
  We shall proceed as fast as we can, I hope over the whole country, to establish tribunals to determine a fair rent. This is an enormous job. Simultaneously and in addition to that rent regulation, we are providing basic security for the first time for millions of people who have not had it in the past. We shall provide basic security against evictions not only for those who had security in the short-term Protection from Eviction Act but for all people living as licensees, all those who up to now could be thrown out without due process of law; they will have that

  1203
  security. In addition, we have spread it even wider. We shall make it a crime even in respect of a lodger; anybody who is the rightful occupier of a house in the broadest sense will from now on be protected against people who bully, people who persecute, people who try to force him to pay a higher rent or to get him out of the place. That will become a crime. Those people are to be protected throughout the country.
  I will just put this thought to the House. Sometimes the so-called truisms of British life are gross lies, and it may be that one of the greatest pieces of self deception has been the phrase that an Englishman's home is his castle. As applied to a very small minority it may have been true, and it may be that we all had rights as citizens under habeas corpus and due process of law, but when, under that law, into millions of people's castles the landlord could enter, and get rid of them out of their homes, with due process of law, I would have thought this was in itself a major change.
  I have every belief that when this Bill becomes an Act of Parliament it will be seen for what it is, giving a fundamental right—and I agree with the hon. Lady the Member for Finchley (Mrs. Thatcher), the tone of whose speech I very much appreciated—which is scores of years overdue to people who ought to have it, and at the same time creating in that difficult area of the privately rented house conditions in which the cold war between the landlord and the tenant may end in a fair deal for both.

  New Clause.—(TRANSITIONAL ASSISTANCE TO WATER COMPANIES IN RESPECT OF TAXATION OF DIVIDENDS.)

  (1) Where a water company is liable to account for and pay income tax in respect of dividends paid by it in the year 1966–67 or either of the two following years of assessment, the Minister of Housing and Local Government may, subject to such conditions as he sees fit to impose, make to the Board such payments towards satisfaction of that liability as are authorised by this section, and his expenses of so doing shall be defrayed out of moneys provided by Parliament.

  (2) In computing the payments authorised by this section to be made for the benefit of a water company in respect of dividends paid in any year of assessment, there shall be deducted from the amount of the dividends paid in the year—

  (a) the amount of any franked investment income received by the company in the year; and

  (b) forty per cent. of the related profits on which the company is charged to corporation tax.

  (3) For purposes of subsection (2) (b) above the related profits on which the company is charged to corporation tax are, in relation to dividends paid for any period, the amount of the profits on which the company is so charged in respect of that period (ascertained, if need be, by division and apportionment or aggregation of amounts for accounting periods wholly or partly comprised in that period), but

  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  FINANCE [MONEY] (No. 3)
  Resolution reported,
  That, for the purposes of any Act of the present Session relating to Finance, it is expedient to authorise the making out of moneys provided by Parliament of payments towards satisfaction of any liability of water companies to account for and pay income tax in respect of dividends paid by them in the year 1966–67 or either of the two following years of assessment.
  Resolution agreed to.

  FINANCE (No. 2) BILL
  As amended, considered.
  7.32 p.m.
  The Financial Secretary to the Treasury (Mr. Niall MacDermot): I beg to move,
  That Amendments to Clause 1, Schedules 1 to 4, Clauses 2 to 5, Schedule 5, Clauses 6 to 41, Schedules 6 to 9, Clauses 42 to 83, Schedules 10 to 20, Clauses 84 to 90, Schedule 21, be considered in that order, and that new Schedules be brought up after Amendments to the Clauses and Schedules.
  I need only say that this Motion follows in general the order in which we discussed the Bill in Committee. I think that it will be for the convenience of the House to follow that order again, particularly as we have reprinted the Bill in that order.
  Question put and agreed to.

  where dividends are paid for the same period in more than one year of assessment, the said amount shall be apportioned rateably between the parts paid in each of those years.

  (4) The payment that may be made under this section in respect of a company's dividends shall be an amount not exceeding for the year 1966–67 three-quarters, for the year 1967–68 one-half and for the year 1968–69 one-quarter of the amount (if any) by which income tax at the standard rate on the amount ascertained in accordance with subsections (2) and (3) above exceeds the yield to the company in that year of a water rate of twopence in the pound.

  (5) No payment shall be made for the benefit of a company under this section except on a claim made to the Minister of Housing and Local Government in such manner, and supported by such evidence, as he may direct; and it shall be lawful for the Board and their officers to disclose to the Minister such particulars as he may reasonably require for determining whether any, and if so what, payment is authorised by this section in the case of any company.

  (6) In relation to water companies whose area of supply lies wholly or mainly in Wales references to the Secretary of State shall be substituted in this section for the references to the Minister of Housing and Local Government.

  (7) In this section "water company" means any company (being a body corporate) which is a statutory water undertaker for purposes of the Water Act 1945.

  (8) Notwithstanding anything in the Government of Ireland Act 1920 the Parliament of Northern Ireland shall have power to make laws for purposes similar to the purposes of this section.—[Mr. MacColl.]

  Brought up, and read the First time.
  The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I beg to move, That the Clause be read a Second time.
  Mr. Speaker: I would suggest that the discussion on the new Clause be extended to the Amendments to it in the name of the hon. Member for Gloucestershire, South (Mr. Corfield), in line 11, leave out from "year" to the end of line 21; in line 26, leave out "subsections (2) and (3)" and insert "subsection (2)"; in line 27, after "a" insert "domestic"; in line 27, leave out "twopence in the pound" and insert:
  "of such amount as the Minister of Housing and Local Government may prescribe in any particular case",
  and also new Clause No. 42—Water Companies—if that be thought convenient.
  Mr. Edward Heath: May I ask for your guidance, Mr. Speaker? Naturally, we are hopeful, and, indeed, expectant, that the Government will accept the Amendments, but if that should not be so, may we reserve the right to have Divisions on some of them?
  Mr. Speaker: Yes.
  Mr. MacColl: It has fallen to me to move this Clause, dealing with the transitional assistance to water companies. As the House no doubt knows, this matter arose out of a discussion which took
  1206
  place in Committee about the special position in which water companies would find themselves as the result of practice which they had very properly adopted in past years to minimise the amount of money they had to raise. Broadly, as I understand it, what happened was that they paid dividends by deducting tax net. They did not then have to account for the tax deducted to the Revenue because they had set-offs in other ways from capital allowances. The result was that this was all for the benefit of the consumer, because the consumer did not have to pay out of water rates the cost of this extra money which otherwise would have had to be raised. In doing that they were in a peculiar position rather different from that of the local authorities. This has come up now—
  Mr. John M. Temple: I apologise for interrupting so early in the hon. Gentleman's speech, and I am grateful to him for giving way, but I think that he said that water companies were in a peculiar position. I think that the hon. Gentleman would have to admit that they were in no different position from any other company setting off its taxation in a similar manner.
  Mr. MacColl: No, but they were in a different position from local authorities who were providing the same kind of services. I do not know that the analogy with other companies is a very happy one because the whole case, really, is for treating them in a special way.

  1207
  The proposals which my right hon. Friend suggests in this new Clause seem to us to be a very reasonable compromise to meet some of the main difficulties which have arisen. What is now proposed is that my right hon. Friend the Minister for Housing and Local Government should be able to make some payments to the Inland Revenue as compensation for the extra cost of the money which has to be raised and that will fall on his Vote and not on that of the Revenue.
  To decide what amounts he has to pay there will, in respect of each water company, be an assessment made of the dividends which have been paid and from that assessment will be deducted two deductions. The first is that the amount of any franked investment income they receive—something for which they do not have to account. That seems reasonable, that that should be deducted.
  The other deduction which is proposed requires a little more explanation and it is the 40 per cent. of the related profits on which the company is charged. That arose because under the present system the water companies are liable to pay Income Tax and Profits Tax, so if there were no deductions of this amount they would, in fact, be better off than other taxpayers. Therefore, it would not be right to leave an unqualified relief. The deduction which is mentioned here of 40 per cent. of taxable profits is designed to put them in the same position as other taxpayers, and it is based on the calculation of Corporation Tax at the highest rate it is likely to be. The point at which the company will break even under the new system is when it distributes approximately 40 per cent. of its net taxable profits. That is why it is accordingly deducted.
  The next point, in subsection (4) of the new Clause, is that there will be a tapering of the payment—in the first year three-quarters, in the second one-half, and in the next one-quarter. That means that there will be a gradual assimilation of the position to that of other taxpayers, and it is only fair to say that that will be a burden on the people paying water rates. It is proposed to make a deduction from the payment in relief of the product of a 2d. rate. That is to cut out those cases in which the burden falling on the consumer is not going to be an unduly
  1208
  heavy one. The 2d. rate is a limited amount, and is thought to be an amount which reasonably can be carried.
  Those are the main points of the new Clause. I think that there is an appreciation of the special difficulties of the water companies, and indeed of the water consumers. That is why my right hon. Friend the Chancellor has introduced this new Clause, and, from the point of view of the Ministry of Housing and Local Government, I appreciate what he has done in this matter.
  Mr. Temple: Can the hon. Gentleman explain subsection (3), which is very complex and difficult, and which he slipped over without any explanation whatsoever?
  Mr. MacColl: Subsection (3) provides the method of assessment of the profits. It is the working subsection which describes in detail how it is done.
  Mr. F. V. Corfield: I welcome the hon. Gentleman the Joint Parliamentary Secretary to the Ministry of Housing and Local Government in the well founded knowledge that, unlike his colleagues in the Treasury, he will be briefed by someone who knows something about water companies. It was evident during the Committee stage that his colleagues were not.
  The hon. Gentleman said that the new Clause followed the debate in Committee of Clause 62 of the Bill. The Amendments which my hon. Friend the Member for Newcastle-upon-Tyne North (Mr. R. W. Elliott) moved in Committee were designed to deal with, and directed at, the problem of the burden of Corporation Tax rather than the problem of Income Tax. I said during the Committee stage that I had been invited to become President of the Water Companies Association, and, lest there by any of the sort of nonsense that we had at Swansea over the weekend, I want to make it clear that that is not a financial interest in any way at all, nor am I provided with any services, so my position differs from that of some of the people who talk about vested interests.
  I believe that this is a matter connected with a public service on which the Government are making a grave mistake. The Amendments moved in Committee were directed to the burden of

  1209
  Corporation Tax which hit the statutory water companies in a peculiarly harsh manner because of their peculiar status. That status arises from the fact that they are under statutory control as to the amount which they may pay out in dividends. If they have to raise new capital, they have to put their issues out to tender or auction. They are also under statutory control as to the total amount of their reserves, the amount that can be transferred to reserve in any one year and the sum that can be carried forward in any one year.
  If there is any income in excess of what is required to meet those commitments—dividends, interest on debenture, and allowable reserves—they are statutorily compelled to devote that surplus to the reduction of water charges and not to any increase in dividends.
  During the Committee stage of the Bill I quoted a calculation which showed that under the new tax system introduced by the Bill it will be necessary to raise £284 in water charges for every £100 due on dividends. In other words, from a gross profit of £284 one deducts 40 per cent., which is £113 12s. in respect of Corporation Tax, leaving a sum of £170 8s. Income Tax on that at 8s. 3d. is £70 8s., leaving £100 available for dividends.
  7.45 p.m.
  As I tried to point out in Committee, it is clear that the main burden is caused by Corporation Tax rather than by Income Tax. This is a particularly vicious tax for a company devoted to a public service because it is a spiralling tax. To meet Corporation Tax, water charges have to be raised. As soon as they are raised the income is increased. As soon as the income is increased Corporation Tax is increased and the whole operation starts again in a vicious circle.
  Naturally, any concession by way of tax of any sort, whether Income Tax or Corporation Tax, may help to ease the difficult position in which companies will find themselves, particularly during the transition period, but it is the incidence of Corporation Tax which causes the problem. It is for this reason that I have tabled new Clause No. 42. It is designed to put these companies in the same position as the Government have put local authorities or water boards constituted
  1210
  by a number of local authorities, which is the other form of water undertaking in this country.
  As regards Income Tax, the companies have always recognised the logicality, however inconvenient to themselves, of the new provisions of Clause 43, and during the Committee stage I pointed out to the Chief Secretary that the last of the series of Amendments which we moved specifically provided that the statutory water undertakings should not be exempted from the liability to tax under that Clause. Despite that, the Chief Secretary devoted his whole argument to the Income Tax problem, which was not the subject of the Amendment, and I must therefore try again to explain the problem that arises with regard to Corporation Tax.
  It is necessary to raise £284 for every £100 paid by way of dividend. To put this in a slightly different way, if we ignore the Income Tax altogether and account solely for the Corporation Tax, it is necessary to raise £166 13s. 8d. for every £100 of dividend. Thus, it is necessary to raise an extra £66 13s. 8d. as a result of the measures in the Bill with regard to Corporation Tax. This is being done at a time when the First Secretary of State is preaching from the house tops a lot of stuff about the stabilisation of prices. The only effect of these measures is a direct tax on the consumer of water because there is no other way in which the statutory water company can raise the money.
  I think that it should be known that by these measures the Government are deliberately increasing water charges in the areas served by the water companies. It is noticeable that this increase is taking place only in those areas. In other words, the Government are putting water companies in a substantially less favourable position than local authorities and joint boards. Some water companies which have recently been expanding their undertakings by large capital investments may not for a period, but only for a period, be liable for the full 40 per cent. Corporation Tax, but whether or not they are depends solely on local needs, on the one hand, and the rate at which locally available sources of water can be exploited. This position is fortuitous; it does not reflect the efficiency of the

  1211
  company, but it will make all the difference as to the incidence of Corporation Tax.
  It is quite clear—and I say this with respect to the Chief Secretary—that the Government did not understand the purport of the debate in Committee. As a result, the Water Companies Association asked the Chancellor to accept a deputation so that the problem could be discussed with representatives of the industry. All that we have had is the usual little acknowledgment card, and here we are, on Report, with no attempt at an explanation; merely an opportunity of discovering once again that the Government are not prepared to consult those who will be most concerned. It is not surprising that the Government now have the reputation of being against all forms of private enterprise. It is precisely this sort of thing which makes so utterly hollow the First Secretary's charge about the conspiracy of the Press and industry.
  I am at a loss to know how I can explain the position in respect of Corporation Tax any more clearly, but I repeat that its only effect is to put a burden upon the consumer in direct proportion to the amount of the tax. I urge the Government, even at this late hour, to admit that this is something which is quite unjustifiable in respect of organisations which are responsible for a public supply, and are under a large measure of public control. I hope that when the time comes the House will accept new Clause No. 42, although we shall not be voting on it for some time.
  I now turn to the Government's new Clause and my Amendments to it. I willingly admit that in assessing the relief provided for it is quite fair to deduct investment income, as provided for by subsection (2,a), but if there is to be a further deduction in respect of a 40 per cent. Corporation Tax the effect of the Clause will be to give the greatest relief to those who are least affected by the new provision and the smallest relief to those who are most affected by it. Those companies which, because of their investment allowances, will pay no Corporation Tax in the next few years will have the greatest relief, because no deduction will be made under subsection (2,b).
  1212
  The purpose of my first Amendment is to delete paragraph (b) and the whole of subsection (3), which contain the provisions for deduction in relation to liability for Corporation Tax. Whatever the Parliamentary Secretary may have said about the present position in relation to Profits Tax, if Corporation Tax is a bind on those companies, despite the peculiar inappropriateness of this sort of tax, relief should be granted in relation to the amount of Corporation Tax likely to be paid, rather than the reverse.
  The second Amendment is consequential upon the first, and the third seeks to clarify the situation. It is not always understood that when we talk about water rate we are talking solely about the means of raising money from the domestic consumer. The commercial and industrial consumer is charged from a meter by a system of water charges which is different. The fourth Amendment, like the third, refers to subsection (4). As I understand the position—and I think that I have understood it, in the sense that my understanding corresponds to that of the Parliamentary Secretary's—that subsection provides that after assessing the deduction authorised to be made by the new Clause, in accordance with subsections (2) and (3) there is, in effect, a further deduction, equivalent to the product of a 2d. in the £ water rate. This means that the further relief depends upon a large number of factors, which inevitably vary from one undertaking to another, and, again, have no conceivable bearing upon efficiency or inefficiency, or anything of that sort.
  For example, the effect of this provision upon actual relief will depend on whether, for reasons dictated by nature or the distribution of population in the area of supply, a company operates in an area of high cost or of low cost—an area where the cost of conserving and distributing water is high, for geographical or population reasons, or particularly low. If it is low, and the water rate is low, a 2d. rate may represent a substantial percentage increase on the existing rate.
  A number of companies have water rates which are round about the 8d. mark, and a 2d rate therefore represents a 25 per cent. increase. On the other hand, some companies have a 1s. 4d. water rate, in which case the percentage increase is reduced to 12½. I have no doubt that

  1213
  some local authority undertakings have a still higher rate.
  The effect of this deduction will also depend upon rateable values in the area. If they are high a 2d. rate will yield a large sum and if they are low it will yield a proportionately smaller sum. This, again, is a matter that is wholly outside the control of a water company, and which has nothing to do with its operational efficiency.
  Mr. J. T. Price: The hon. Member is pursuing a logical argument, which I am trying to follow. He has been well briefed on it. Since the hon. Member is referring to valuations and their relationship to the rates levied, it is an important factor to remember that water undertakings benefited greatly by the new Act which came into operation in 1963. To my knowledge many of them had an increase of about 300 per cent., on a valuation basis of the property in their areas, but they have not reduced the water rate proportionately to make up for the gap created.
  Mr. Corfield: The hon. Member is right. But these provisions apply to all water undertakings and not merely to water companies. That is not the argument that I was trying to make. My argument is that if a water company has a relatively high rate, being in a highly industrialised area or an area with high rateable values, a 2d. water rate will represent a very different factor, for the purpose of this calculation, than if, through the accident of life, it were in an area with a predominantly low rate. That is the crux of the matter.
  If there is a high proportion of industrial and commercial consumers, as opposed to domestic consumers, that will also make a difference. The water rate provides the means for charging domestic consumers. If a high percentage or proportion of a company's water goes to industrial consumers the water rate will be relatively less important than it is to a company which predominantly serves domestic consumers, and where the water rate will be the main source of income.
  Mr. Norman Cole: My hon. Friend may not realise that dividends are controlled, and that any benefit from the Act must have gone back to the consumers.
  Mr. Corfield: That is so. Water companies are obliged to devote any benefit that accrues to them from the amenities that I have itemised to a reduction in the water rate.
  Again, the effect of this 2d. factor will depend upon the financial structure of a company. A company that has raised its capital predominantly by the issue of shares will be in a different position from one that has raised its capital by means of debentures and fixed interest loans. A company with bulk supply agreements with neighbouring undertakings will probably have raised its capital in the form of issues of shares, and will therefore have increased sums payable in dividends, although mainly for the purpose of providing its neighbours.
  The House will be aware that in many cases where available sources of supply are on the boundaries between water undertakings it is not unusual for the water undertaking in which the source falls to exploit that source to a much greater extent than is necessary for its own requirements, because it is cheaper, overall, to make a big reservoir than two small ones, and to enable neighbouring undertakings to benefit in return for contributions. This means that the capital cost must increase the issues of the company which makes the capital investment. This, again, could have a substantial effect on the whole sum calculated under the Clause. As a result, the whole sum payable in dividends can become inflated, well above the needs of a company for the supply of its own area.
  Another defect of the Clause, although one which it is possible to put right by administrative arrangements is that, in order to declare the water rate, it will be necessary to know beforehand what the relief forthcoming will be. This is a particularly unhappy form for a Clause of this sort, where certainty in advance of requirements is of prime importance. I presume that there will be either some sort of estimate from the hon. Gentleman's right hon. Friend of the amount of relief forthcoming or there will be a series of post hoc adjustments which are never very satisfactory and always difficult to explain to an undertaker who supplies the public.

  1215
  For all these reasons, I submit that this 2d. rate is wholly inappropriate. If it is to operate fairly and there is to be a minimum amount, which the Government think reasonable, by which the rate should go up, a minimum which the public ought to accept as a result of their taxation arrangements, it is absolutely essential that the burden imposed should have regard to the individual companies concerned. In other words, it is quite apparent that the relief must, to some extent, be tailored to the conditions under all the heads which I have mentioned which operate in each particular case.
  8.0 p.m.
  This is why I have put down the last Amendment, which substitutes for 2d. in the £
  "such amount as the Minister of Housing and Local Government may prescribe in any particular case."
  That would leave him open to provide a general formula which could, however, be adjusted on representations from the individual companies that it was wholly unsuitable to their particular structure.
  There is very little to be said for a Clause in this form, which gives the whole as a discretionary power to a Minister, unless the Minister is to be given a discretion which is of some value in the circumstances of the case. I hope that this Amendment will be accepted.
  The more one looks at this Clause—as at Clause 62—with the arguments of the Chief Secretary in Committee, the clearer it becomes that the Government do not understand the problem, although I know that the Joint Parliamentary Secretary, who, unfortunately, is not to reply to us, would at least be properly briefed. In view of the refusal of the Treasury to accept the proposition of a deputation and a discussion with the people in the industry, one has to wonder whether the Government even want to understand or care whether they do or not.
  I hope that even at this late stage of the proceedings—although it may be a forlorn hope—the Government have listened to the arguments and that they understand that the problem is Corporation Tax more than Income Tax and that they will accept the Amendments, which
  1216
  will make the Clause much more satisfactory to do what it purports to do and, above all, accept new Clause 42, which goes to the root of the problem which the Government have failed to advert to at all.
  Mr. R. W. Elliott: When those of us on this side of the House put down our Amendments to Clause 62, we did so because we wished to emphasise that—as had been impressed upon us in various parts of the country by those concerned—statutory water boards were, through the Clause, placed in a comparatively unhappy position with regard to their consumers to those water undertakers who are local authority water undertakers.
  We attempted, by way of our Amendments, to obtain the same exemption from Corporation Tax for the statutory water companies which was to be afforded to local authority undertakings. At the time, the Chief Secretary promised to examine our speeches, though he made it quite clear that he would not commit himself in any way. We are very grateful to him for that promise.
  We waited with some interest to see the result of that study and what the further thinking which we asked the right hon. Gentleman to undertake on this matter would yield. I must confess that, having looked at the new Clause, I feel that he has had a very unsatisfactory new thought. As my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) has well and truly pointed out, we tried to emphasise in Committee that we were concerned with Corporation Tax rather than Income Tax. This new Clause can give little comfort to such companies as my own in Newcastle-upon-Tyne and, I am sure, to companies in other parts of the country. I was distressed—as, I am sure, were many of my hon. Friends—to hear that the Government, the Chief Secretary and others concerned, had not seen the deputation which offered to see them on this subject. I should like to stress to the Chief Secretary the very real concern which people associated—
  Mr. David Webster: Is this complete lack of interest not shown by the fact that there is only one back bencher on the other side?
  Mr. Elliott: As my hon. Friend pointed out, we began to suspect a complete lack of regard for the statutory water company and an emphasis in favour of the local authority undertaker in this matter.
  I would impress on the Chief Secretary and the Government the fact that they should take heed of those concerned with the provision of water for one-fifth of this country's population under the working of the statutory boards. They are extremely concerned. I do not propose to follow my hon. Friend's excellent speech by covering again the case which I attempted to outline in Committee of the unfortunate effect of Corporation Tax on these companies.
  The proposed deduction under subsection (2,b) will apply, it seems, only to those companies liable to Corporation Tax in the first three-year period. It is these companies which will be hardest hit. As my hon. Friend has emphasised, it is the customers of these companies—because of increased charges being the only source of increased revenue—who will suffer. It is companies affected by the combination of handing over that tax deducted from dividends and the paying of Corporation Tax who should obtain the suggested transitional relief, yet it seems that they are to be less favourably situated.
  With regard to subsection (4), we can only presume that where the increased burden of taxation involves an increase of a 2d. rate or less, the consumer should bear this increase and that no transitional relief is necessary. Again, my hon. Friend has pointed out how much water charges vary throughout the country from one statutory water undertaker to another. Twopence may well represent as much as a 25 per cent. increase in some parts of the country and less than half that in others. This, we can only suggest, is an arbitrary standard and will lead to most unfair discrimination between consumers. In the main, this new Clause gives no relief with respect to proposed Corporation Tax for statutory water companies.
  Our appeal, made at the Committee stage, seems to have fallen on deaf ears. I must express my deep disappointment.
  Mr. Frederic Harris: I also will not take up much time, because my hon. Friend the
  1218
  Member for Gloucestershire, South (Mr. Corfield) put the case so extraordinarily well and with such facts to support his argument that one would have thought that automatically the Government would accept the situation and realise, as my hon. Friend has said, that they were making a grave mistake. Many of us are used to the grave mistakes that the Government have made during the last eight or nine months. This, therefore, is just one more.
  For my part, anything that smells of increased rates, whether the general rate or water rate, concerns me and should concern every hon. Member. I am amazed at the lack of interest which is displayed in this debate by the Government and their supporters. Although they are, presumably, all here somewhere under a three-line Whip, there is nobody whatever on the Government back benches. The Ministers who are present do not even have a P.P.S. to support them, unless one happens to be coming back suddenly as I am speaking. [An HON. MEMBER: "Where are the Liberals?"] They, too, have disappeared.
  Those of us who are concerned about increased rates realise that what the Government are doing in the Bill with the Corporation Tax must mean, certainly after a period of three years, that water rates will rise substantially. Lip-service is constantly paid by the Government to rate reform on the basis that they will try to ease the ratepayer's burden. What they are doing in the Finance Bill, however, is going completely in the opposite direction.
  Suggestions have been made that water rates might rise by 25 per cent. There certainly can be no doubt that in my town of Croydon, where the water rate is approximately 10 per cent. of an already high general rate, in the years ahead a substantial increase in the water rate will be added to the burden to be borne by the ratepayers because of the Government's action in this Finance Bill alone.
  My hon. Friend the Member for Gloucestershire, South has said that the water companies are public undertakings giving a public service. I cannot see the sense of the Government in wanting to raise further taxation by this form and then suggesting that possibly they will give it back by some method of rate reform later. What foolishness. Why not accept new Clause 42? What would

  1219
  be the complication in doing so? The Joint Parliamentary Secretary to the Ministry of Housing and Local Government, the one man who, with his Minister, should be directly interested in such a matter, gave no explanation to indicate that the Government would exempt water companies from this taxation. Why not? Why cannot somebody drum some common sense into the Government? Why cannot somebody make them realise that people are sick and tired of ever-increasing rates?
  Sir Stephen McAdden: Has my hon. Friend noticed that the Joint Under-Secretary of State for the Home Department, whose interest in water is well known, has at last arrived to attend the debate? Does my hon. Friend think it possible that the complete absence of anyone on the Government side, except for three Ministers, one Whip and one back bencher, as well as the whole of the Liberal Party, may be due to the fact that they are drinking as much water as they can before the price goes up?
  Mr. Harris: I thank my hon. Friend for that interesting intervention.
  The ratepayers are sick and tired of the ever-increasing burden of rates. The Bill is another direct attack upon the ratepayer. The rate issue is a real hot potato, but nobody on the Government side seems to realise how serious it is.
  Surely, even at this late stage, the Government can change their minds. When the Chief Secretary replies to the debate, cannot he take a different view and accept new Clause 42? That would be common sense. Why put up the backs of everybody by charging more because of the Corporation Tax and possibly, in due course, having to suggest that some of it will be handed back to the ratepayer through general rate reform?
  This is a serious matter. We on this side are treating it seriously. Nobody on the Government side cares a twopenny whatever it is.
  The Chief Secretary to the Treasury (Mr. John Diamond): Perhaps the hon. Member is referring to a 2d. increase in the water rate.
  Mr. Harris: Possibly so. Even if it were limited to that, I should be surprised.
  1220
  I doubt whether the right hon. Gentleman can say that in Croydon the water rate will not be increased by more than 2d.
  8.15 p.m.
  Mr. Corfield: The figure of 12½ per cent. is applicable only to this transitional Clause. Once it runs out the estimates are much more in the neighbourhood of 16 or 20 per cent.
  Mr. Julian Ridsdale: The increase in my part of the world would be nearly 100 per cent.
  Mr. Harris: We can see how serious it is. People have tried to keep quiet about this, particularly the Government and their supporters. They do not want ratepayers to know what they are in for. The sooner the public realise what the Government are doing to them, as they are in this case, and turf them out, the better.
  Mr. Temple: I am glad to support my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), who has taken such a great interest in the welfare of water consumers, particularly in areas served by the statutory water undertakers. It is certainly not my wish to reiterate any of the excellent arguments which have already been put forward. I wish, therefore, to put three entirely new points to the Committee and to re-emphasise one point which I regard as being of particular importance.
  The first fresh point which I draw particularly to the attention of the Joint Parliamentary Secretary to the Ministry of Housing and Local Government is to ask him what precedent there is for a new Clause of this nature. I asked this relevant question on Clause 87, when it was commented upon by his hon. Friend the Joint Parliamentary Secretary, who told me that he was not able to quote a precedent for the Clause and that he would be writing to me subsequently to explain something about it. I am still waiting to hear. That appears to be the way in which the Government are carrying on. There has been no explanation to me of the precedents for Clause 87, which, strangely enough, precedent or no precedent, has been followed in the new Clause.
  The precedent to which I refer gives the Minister of Housing and Local Government power to grant remissions of taxation. In Clause 87, he has that power

  1221
  with regard to housing societies. In the new Clause he has it with regard to statutory water undertakings. In both these Clauses, significantly there is no appeal procedure. In the new Clause, however, we have a different position. Whereas, in Clause 87, the Minister of Housing and Local Government is able to give whatever tax remission he thinks fit, in the new Clause he is encumbered all round by all kinds of formulae. If the Joint Parliamentary Secretary understands those formulae, I do not. They are extremely complicated and their effects will be widely different in the areas of different statutory water undertakers.
  This is another example of sheer ad hoc-ism by the Government. To paraphrase what the Chief Secretary said in Committee, they did not anticipate the position which faced them concerning statutory water undertakers. They should have anticipated it because it stuck out like a sore thumb. It was obvious to dozens of my hon. Friends on this side immediately the Bill was brought in that the position of statutory water undertakers would be prejudiced by an approach of this nature. Now, we are met with another example of sheer ad hoc-ism which does not meet the case.
  My second point concerns new Clause 42. My hon. Friend's proposal is, I suggest, entirely the right approach to this matter and I hope that the Government will accept his new Clause. However, I have a suspicious mind. I listen to the radio, even over the weekend. I heard last weekend what the Minister of Land and Natural Resources was reported to have said in regard to the grouping of water undertakings. Is the right hon. Gentleman foreshadowing the nationalisation of water companies? Having a suspicious mind, I suggest that he may be, for I believe that the Government, through their taxation policies, will be putting the water companies in an unplayable position. They would like to see them in such a position because they could then say, "The statutory water undertakings are failing the consumer". That will be the terminology which hon. Gentlemen opposite will use—although the undertakings will be failing the consumer because they will have been put in a position where they cannot keep their charges down to reasonable proportions.
  1222
  There is a significant point about new Clause 42 in connection with Capital Gains Tax which has not been mentioned today but which I mentioned in Committee. Capital Gains Tax will be a comparatively serious and extraordinarily difficult matter for all water companies and I cannot think that the Government want to exempt local authority water undertakings from the Tax. It is extraordinarily difficult to value a water undertaking. It is a costly operation, and, unless new Clause 42 is accepted, every time a small parcel of land is taken from a statutory water undertaker we will have to go through the whole rigmarole of valuing it, above and below the ground, to ascertain the value of the land being taken away.
  In these circumstances, new Clause 42 would represent a magnificent holding operation. If accepted, the consumers of water in these areas would be in no worse a position than they are today and it would give the Government, or any Government, time in which to look at the position and have the proper consultations which are necessary in a matter of this kind.
  My third point concerns the three year transitional period. I suggest that this period is an insult. Statutory water undertakers have planned all kinds of new equipment and impounding reservoirs on the basis of being able to make full use of the depreciation allowances. I am not an accountant, but I understand that depreciation allowances are allowed over a period of 10 years. Therefore, any statutory water undertaking would naturally say during consultations in the board room, "We are looking at this proposition on a 10-year basis". Such undertakings reckon to write off certain capital charges in 10 years, yet here we are giving a derisory transition period of only three years.
  I anticipate that the Government expect to be out of office long before the end of that three-year period. They are now trying to cushion the effect for 18 months or so so that the consumers do not realise that the blame for any increase in charges should be laid at the door of the Labour Party. If we do not alter this when we return to power the main effect of the increased charges will be felt by the consumers under a Conservative Government.

  1223
  What the Government propose is monstrous and, as my hon. Friend the Member for Harwich (Mr. Ridsdale) said, the consumers of water under the Government's proposals will pay increased charges of I believe up to 40 per cent., although my hon. Friend suggested up to 100 per cent. at the end of the three year period. It is monstrous for this Committee even to be considering that charges could go up at that rate in such a short period. I wonder what the Chief Secretary would say if he knew that water charges were going up by between 40 per cent. and 100 per cent. in the next three years. I am sure that he would immediately refer the matter to the Prices and Incomes Board.
  Mr. Ridsdale: I should perhaps make it clear to my hon. Friend that the charges might go up by that much in five years and not three years. I hope to have an opportunity of speaking, when I will say why.
  Mr. Temple: Even over a three-year period the increase is tremendous. Based on simple arithmetic it is 20 per cent. a year, giving 100 per cent. in five years. That would be the result in my hon. Friend's constituency, although I hope that he will have an opportunity of explaining the matter in full shortly.
  The extraordinarily illogical point is whether, in sub-paragraph (4), the determining factor in regard to the relief will be a 2d. rate. That seems extraordinary by any standard, particularly when one considers that water rates vary throughout the country. I believe that they vary from between 7d. and 2s. 6d. in the £. In the area where there is a charge of only 7d., the rich area, the consumers will tend to benefit greatly, whereas in an area with an already heavy charge the consumers will be charged even more. This is an unfair provision and I suggest that the approach of my hon. Friend in new Clause 42 is more realistic, for it would give the Minister of Housing and Local Government power to fix the rate by 2d. or 3d. or the appropriate proportion of the present rate.
  I would have gone along with a proposal which suggested "the appropriate proportion of the present rate", for that would have been more logical. I am indeed surprised at the Government's approach to this matter. They should at
  1224
  least have had consultations because I am sure that, having had them, they would have come forward with something better than their proposed new Clause.
  Mr. Ridsdale: I am pleased to support the remarks of my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), particularly in regard to new Clause 42 and the exclusion from this type of taxation for the statutory water undertakers. I am indeed surprised that the Government have not been willing to receive a deputation to discuss the problem of increased water rates because a serious situation is bound to be created in many parts of the country, particularly in north-east Essex.
  I have also been surprised at the uncompromising attitude of the Government, particularly after the strong pleas which were made by my hon. Friends and myself in Committee. Having re-read the words I uttered on that occasion and having had consultations with the statutory water undertakers in my constituency, I realise that I was far too moderate in putting my case at that stage, especially when I said that I thought that the Chief Secretary was a sympathetic and understanding man. This new Clause shows that to be far from the truth. I assure him that this kind of transitional assistance to the water companies will come nowhere near to meeting the problem in north-east Essex.
  8.30 p.m.
  The failure to do anything substantial shows a complete ignorance of the kind of burden that the right hon. Gentleman is placing on people in north-east Essex that are served by the statutory water companies. For the Chancellor's information, I must explain that this area has been expanding very rapidly. The company has had to supply a population of 90,000, plus the temporary population received in the holiday resorts, and the existing trades for a capital expenditure of £1 million. In order fully to provide for the new development envisaged at 1971, a sum of £2⅓ million of capital expenditure is required to meet the needs of about a further 30,000 residents, and ancillary expansion.
  That means that the water company by 1971 has to face an increase in capital expenditure of over twice the present

  1225
  amount. It is estimated that the annual costs entailed will increase from £215,430 to £320,600. Running costs are up 20 per cent. This includes negotiated wage increases and extra national Insurance contributions. Another 29 per cent. of the increase will be in capital charges; 8 per cent. goes for depreciation of company assets, and 43 per cent. of the increase, or £42,000, will result from the fiscal changes in the Budget.
  That the water company should have to face the burden of extra running costs is bad enough, and increased capital charges will mean very heavy burden in an area that has a very high proportion of retired people, but to face an increased burden of 43 per cent. because of this Budget is something for which I know the inhabitants of north-east Essex will find it very hard to forgive the Chancellor.
  Like my hon. Friend the Member for the City of Chester (Mr. Temple) I ask the Chief Secretary: what is the motive behind trying to force this kind of charge on a statutory company? I hope that the right hon. Gentleman will bear in mind that these statutory charges are in addition to the increased charges that people in my constituency will have to face. It it estimated that these increased charges will add 50 per cent. to the domestic water rate in 1966 and 1967, and by 1970 and 1971 the estimate is that the increase will be 100 per cent. This is a conservative estimate. Such increases in charges, to which the Government by their fiscal action have become a party, make nonsense of their election promises of helping the retired. This proposal will mean an increase in the price of water supplies for trade purposes of 60 per cent. over five years—something hardly likely to help those engaged in the export trade.
  To me, this is typical of the ineptitude of the Government. It is no good their preaching about keeping wages steady and increasing productivity when immediately afterwards the Chancellor carries out this stupid and incomprehensible action, so deliberately putting up costs, not only for retired people but for the trading community as well. The Chancellor now offers relief, but it is a purely transitional relief, reducing quite rapidly to nil by the end of the third year. It will not help very much bringing in this
  1226
  increase by gradual steps—in the end the increase will have to be paid.
  I hope that the right hon. Gentleman will listen to my plea, and the pleas of my hon. Friends, which is simply to put statutory water companies in an exactly similar position for taxation purposes as local authority and statutory water board undertakings. Whether or not the Chancellor denies it, he is now altering the basis of taxation and placing an extra burden on those least able to afford it. The result will be that old-age pensioners will have to pay more for their water. I therefore hope the Chancellor will adopt the simpler means offered in new Clause 42.
  Mr. Cole: It is most difficult to try to arrive at the mind of the Government on this and other matters which have been before the House in recent months. Obviously they appreciate that there is a problem here, so they come forward with a half-baked Clause to put off the evil day, or to offer some concession, possibly in the hope that we would keep quiet on Report.
  The best expression with which to try to summarise the attitude of the Government in this and so many other things is uninspired hesitancy. They think that there may be something here and that if they go too far someone may make something out of it. We are dealing with the all-important matter of water, a commodity which no householder and no industrial undertaking can do without. The commodity is ringed around with statutes, rules and regulations, and those concerned have a limited dividend basis. Just in case something might slip through all the rules and regulations, the Government put on 40 per cent. Corporation Tax.
  My hon. Friend the Member for Gloucestershire, South (Mr. Corfield), in an excellent speech, the points of which I shall not attempt to underline, referred to the fact that this cost will be passed on to the consumer in due course. If this were an ordinary product these sort of charges when put on to the commodity might be passed on to the community, but then one could choose whether or not to use that commodity. If the practice became too extensive it would have the attention of the First Secretary of State and Secretary of State

  1227
  for Economic Affairs and of the Prices and Incomes Board, but this commodity is as essential to life as the air. Statutory undertakings alone are to pay tax on any profits which they make in the course of their undertaking.
  Can the Government by any stretch of imagination reconcile this with the threat we heard recently from the First Secretary about taking the Electricity Authority before the Board? How can these two opposite things be thought of by the same Government? This proposal will lead to an increase in the cost of something which everyone has to use, yet suggested increases for electricity which not everyone has to use, it was suggested, should go before the Prices and Incomes Board. What sort of Government can think two ways at once in this manner? If we were dealing with a special type of company which had a monopoly to which no one else had access, we could begin to understand what was in the mind of the Government, but here we are dealing with something which is essential. Like gas, before it was nationalised, it is ringed around with all kinds of laws and regulations. The dividend used to be 5 per cent. before the war and now it can go up to 7 per cent., but there is still limitation.
  In the face of all this, the Government are frightened to take a risk. This is something which we can level at the Government in many respects. They are frightened that someone might make a pound. As a result millions have to suffer to make sure that no one gets anything out of the transaction. This is a very dismal, sordid arrangement. I hope that we of the Opposition will go into the Division Lobby against it. It would be far too much of an adventure on the part of the Government to accept new Clause 42, but I hope that they will think again on this matter for they should be under no delusion about the strength of feeling on this side of the House.
  Mr. Diamond: I think that it would be convenient if I intervened now because, with great respect to hon. Members who have spoken so far, so many of their criticisms, which have been violent and aggressive, are based on a misunderstanding. There is not much point con-
  1228
  tinuing to listen to criticisms which do not apply to the new Clause, which has been introduced because, although I did not commit the Government to do anything of this kind, I was anxious to meet the request by a number of hon. Members opposite that the impact of the new tax should be alleviated as far as possible.
  I have been asked time and again by many people to put the stautory water undertakers in the same position as local authorities. That is what the Bill does. Whereas statutory undertakers have had a tax advantage hitherto, they are now being put in identically the same position as the local authorities inasmuch as they will now have to account to the Inland Revenue for tax deducted just as much as the local authorities always have done and will continue to have to do.
  Local authorities, when they have deducted tax on the interest or whatever it may be, have had to account to the Inland Revenue, and they still do. Statutory water undertakers have been, many of them, paying dividends, deducting tax from the dividends and not accounting to the Inland Revenue. The whole of this debate is based on the change whereby, under the new circumstances of the Corporation Tax, they will for the first time have to account to the Inland Revenue for tax which is being deducted. I say therefore, first, in reply to requests made to me on this point, that whereas statutory water undertakers have had a tax advantage hitherto, they are now having that advantage removed and are being put on all fours with the local authorities.
  Secondly, the other kind of advantage which they have had hitherto is now being removed also. This second advantage is that their consumers have, in effect, been receiving a subsidy at the cost of the general body of taxpayers. As I explained on the last occasion and will repeat briefly, as a result of not having to account for the tax previously, they were able to do what the Public Accounts Committee of the House of Commons roundly criticised—declare dividends, allegedly net, allegedly after deduction of tax, and issue accordingly tax deduction certificates or warrants to dividend recipients who, in turn, in appropriate circumstances, could claim back from the Inland Revenue tax which had never been

  1229
  accounted for to the Inland Revenue. That is what the Public Accounts Committee so roundly criticised and that is what is being stopped by the Bill.
  There are those who have argued that, if Corporation Tax had not been introduced, this procedure, perfectly legal but roundly condemned, would have continued. That assumption does not necessarily arise. It does not follow at all that under this Government that procedure which the previous Government accepted would have been allowed to continue. Nor does it follow that this Government would not have introduced alterations to the tax system under which a dividend payer would have had to account to the Inland Revenue and that, when a secretary signed a dividend warrant saying "I undertake to account to the Inspector of Taxes for the tax deducted, he might not have been called upon to do so.
  First then, the Income Tax advantage of the water undertakers over and above the local authorities is being removed and they are being put on a par with the local authorities. Secondly, their advantage which amounted to a subsidy at the expense of the general body of taxpayers is being removed.
  8.45 p.m.
  Mr. Corfield: The right hon. Gentleman keeps referring to this tax problem, and he really must remember that in the original set of Amendments we specifically moved an Amendment that:
  "Nothing in this section shall exempt a statutory water undertaker from liability to income tax under section 43 of this Act".
  There is no assumption on this side at all that had there not been a Corporation Tax the ability to deduct tax from the dividend would have been continued.
  Mr. Diamond: I am grateful to the hon. Gentleman, because he anticipated the next point I was coming to, namely, that the Amendments which had previously been put down in Committee would have been practically of no help whatsoever to the statutory water undertakers, because the incidence of Corporation Tax does not provide a burden of Corporation Tax at all.
  Mr. Corfield: Yes, it does.
  Mr. Diamond: It is no use the hon. Gentleman saying, "Yes, it does", because he does not know the figures and
  1230
  I do. The water undertakers are making such large profits that, after the deduction of investment allowances, the liability to Corporation Tax will be very small indeed. The problem does not arise there at all, and to relieve them of that is to relieve them of practically nothing.
  The real difficulty is that under the Corporation Tax system, no one can deduct tax from a dividend without accounting to the Revenue for it, and we are not budging from that system for anyone or any corporation of any kind. Therefore it follows that the statutory water undertakers will no longer be able to pay dividends without accounting for tax, and, as has been said, in order to account for the tax, in certain circumstances they will have to increase their charges. By doing so, they will be removing from their consumers the subsidy which has hitherto been paid by the general body of taxpayers throughout the country.
  Mr. Webster: The hon. Gentleman said that the profits of statutory water undertakers are immense. Would he say what is the average cover for dividends in these water undertakings?
  Mr. Diamond: I am coming to that point when I deal with the 40 per cent. As I have given way twice now to hon. Gentlemen who have, with intelligence, anticipated what I am going to say next, perhaps I may now continue so as not to delay the House to long.
  We are in the situation under which it is right that this subsidy should be recognised and removed, but it is wrong that it should be done quickly so that the impact falls too suddenly on people. What the Government are doing is introducing in this new Clause a method whereby the impact will be cushioned over three years. No one suggests it is other than transitional. There is a principle about taxation involved here that he who deducts and undertakes to account for it to the Inland Revenue should in future account for it. That is what it is all about. We are doing our best to meet the statutory water undertakers and, I repeat, putting them on the same basis as the local authorities, namely, having to account to the Inland Revenue for tax deducted.

  1231
  The hon. Member for Weston-super-Mare (Mr. Webster) asked me about the 40 per cent. and perhaps I should say a word about it because, understandably, it has been confused with the rate of Corporation Tax. It has nothing to do with that whatsoever. The reason why the 40 per cent. has been put in the Clause is that, making the worst assumption against the Government and making the best assumption in favour of the water companies as to what the rate of Corporation Tax might be in the future, those water companies which pay a dividend of as much as 40 per cent. will break even at about 40 per cent. or a little under—39 per cent. plus. I am sure the right hon. Gentleman understands the point.
  Therefore, in order to avoid the water companies being better off as a result of the Clause than they would otherwise have been, we have to put in that limitation so that the effect of Corporation Tax plus the new Clause will not make them better off. Those who would have been batter off will now be level and those who would have been worse off will, subject to the minimal variation of a 2d. water rate, recover in a decreasing fraction over three years the excess tax which they are being called upon to bear as a result of the institution of Corporation Tax.
  I hope that I have explained why it is right and proper that the new Clause should be brought forward to help the statutory water undertakers over a difficult period and why it is quite clear that there has been some considerable misunderstanding which has given rise to the criticisms which would not otherwise have been made.
  Finally, I am bound to say that I very much regret that the request for a delegation has gone without acceptance. Many delegations have been received. There was a request for a delegation to my right hon. Friend, who has been in America for the whole week, as the House knows. He got back only on Friday and received delegations even on that day. I myself have been in Germany, but I have received delegations the whole time I have been back. It has not been possible to accommodate everybody we would have liked to have met, but I doubt very much whether it would have
  1232
  made the slightest difference. However, that is not the point and we would have been only too willing to receive the delegation had time permitted.
  Mr. Anthony Barber: It is not for me to determine the debate at this juncture, but perhaps it is only courteous if I follow the Chief Secretary now. I should like to say at the outset that I am extremely disappointed that he spent so much of his time demolishing a proposition which, so far as I know, none of my hon. Friends has put forward. He spent a good deal of time talking about a water company having to account for tax deducted on the payment of dividends, and yet, when we considered this matter in Committee, quite clearly in the Amendment were the words:
  "Nothing in this section shall exempt a statutory water undertaker from liability to tax under section 43 of this Act."
  After the cogent arguments of a number of my hon. Friends, I can be brief. The debate is concerned with the taxation position of statutory water undertakings. At a time when the First Secretary of State is appealing for price stability, the country should know that, as a direct consequence of the introduction of the Corporation Tax, the Chancellor of the Exchequer is ensuring that there will be an increase in water rates for about one fifth of the population of England and Wales and, as we have heard, in some areas an increase which in due course will amount to as much as 100 per cent.
  The new Clause merely seeks to moderate the increase over a period of three years and is not intended to prevent an increase. Indeed, when we were considering the matter in Committee, the Chief Secretary went out of his way to explain why he thought that water rates "should go up". Those people who have been listening to the First Secretary's strictures on the pricing policies of private enterprise will think it very odd, to say the least, that the Labour Government should now, quite deliberately and needlessly, set out to increase the cost of the first necessity of life for millions of people. It is significant that until a short time ago no Labour back benchers were present to consider this, a matter of great importance to many millions of people. There may or may not be merit

  1233
  in the fiscal reasoning of the Chief Secretary, hit let no one be unaware of the consequences of what he is advocating.
  As this is the first debate on the Report stage of the Bill, I would like to point out the sequence of events which have led up to this debate, because I think it typical of what has been happening, and what is still happening, throughout our consideration of the Bill. The first stage was the publication of the Bill. At that point, it had never occurred to the Chancellor of the Exchequer that the Corporation Tax would mean an increase in water rates. Indeed, as the Chief Secretary put it in Committee, with his usual fairness and frankness:
  "It is a situation which I do not think was anticipated and, therefore, one finds that it takes a little time to sink in."—[OFFICIAL REPORT, 16th June, 1965; Vol. 714, c. 662.]
  Mr. Diamond: I was referring to the fact that it was not anticipated that a subsidy was being paid. There was no question of my referring to the effect of it so far as the Government were concerned. I was referring to the fact that the House would find this a novel argument and take a little time to accept it.
  Mr. Barber: I accept what the Chief Secretary says. But he did say in Committee:
  "On examination, it reveals a situation which I doubt that all of us had expected."
  and then he went on to say:
  "It has given concern to me and to the Government."
  But at that stage the Government intended to do nothing about it. The second stage was reached when the Opposition brought to light the unhappy consequences of this change in taxation advocated by the Chancellor. Thus it was that the Chief Secretary, again with his usual courtesy, promised the Committee that he would look into the matter. Even at that stage, with our Amendments having been down on the Notice Paper for some time, the Chief Secretary said that it was quite impossible to undertake that anything at all would be done about it.
  The third stage was last Wednesday, when the Chancellor put down a new Clause to give some minor transitional relief. The fourth stage was on the very
  1234
  next day, when the Chancellor found that he had made a mistake and withdrew his Clause, which he had put down previously, amending his own Bill. He put down another new Clause in its place. Meanwhile, as we have heard in the course of this debate, the statutory water undertakers were asking to see the Chancellor to explain to him, if I can put it bluntly, that the right hon. Gentleman was barking up the wrong tree. But all the Treasury Ministers were either away or busy with their last-minute Amendments, and none of them had the time to receive a deputation. I do not doubt that if the right hon. Gentleman the Chief Secretary had had the time, he would have seen these people.
  This sequence of events which I have outlined is typical of the muddled and incompetent way in which the whole of this debate has been handled. In the light of what I have just set out, it would be a miracle, if now, at the eleventh hour, the Government's latest version on the Notice Paper was the right one. Of course, it is not the fault of the Chief Secretary, or the Parliamentary Secretary. It is the fault of the Chancellor of the Exchequer, who is determined to press on regardless, without heed to the Government's Parliamentary programme and to the consequences for the taxpayer.
  I certainly hope that in the light of these facts and the argument put forward by my hon. Friends my hon. Friend in whose name the Amendment stands will seek the leave of the Chair to move it and to press it to a Division.
  Mr. Webster: I noticed that the Parliamentary Secretary to the Ministry of Housing and Local Government, who has at least been a new face on the Front Bench during this stage of the Bill, addressed most of his remarks to Income Tax, as did the Chief Secretary. We are also very much involved with the Corporation Tax aspect of this matter. Being involved with the Bristol undertaking area, and having had the advantage—and it is an advantage—of having the First Secretary of State in Bristol last weekend, when he said "We have been taken for a ride", I must say that that was certainly the feeling of the Bristol waterworks authority. I very much regret that this arbitrary action has been taken, as usual with no consultation.

  1235
  The Chief Secretary says that my hon. Friends do not know what they are talking about. The opinion which they have stated has been given to them by the British Waterworks Association which has not had the opportunity of addressing itself directly to the Chief Secretary. It would have been better if he had agreed to meet a deputation from the Association. I notice with regret that when we ask a Minister to meet a deputation there is an increasing reluctance to do so.
  9.0 p.m.
  This flat-rate 2d. interim rise strikes me as a direct parallel with what the Chancellor of the Exchequer said in the House at eleven o'clock one night about redeemable gilt-edged securities. He made the most arbitrary decision which threw up more anomalies than it prevented. It threw the whole gilt-edged market into complete confusion and chaos. This proposal, also, will throw up more anomalies than it prevents.
  As my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) ably said, the two main objections are that this proposal will apply to companies liable to Corporation Tax only in the initial period, and the maximum 2d. increase over the three-year period can vary from 11 per cent. to 100 per cent. This will mean an increase in charges, which will mean more income to the company and more Corporation Tax to be paid. This escalation will continue.
  Again, I ask whether the First Secretary was consulted about this. Has the National Board for Prices and Incomes been consulted on this subject? My hon. Friend the Member for Gloucestershire, South, who is Chairman of the British Waterworks Association, may have to advise members of the Association whether they should increase their rates. If they propose to increase them, the matter will be referred to the Board, which will say that this is a blanket increase and that it should be vetoed. This is what happened to the road hauliers. This is an unfortunate practice which is likely to recur in future. Bristol, which is a particularly excellent and responsible undertaking, is caught on a Morton's fork. This proposal will result in a direct tax on the consumer.
  1236
  During this debate, when so many of my hon. Friends have been present in the Chamber and anxious to speak, there have been practically no hon. Members opposite present. It is not surprising to me that they should take no interest in the affairs of water undertakings. They think that we should have new voting procedures to steamroller through measures like this. They take not the slightest interest in them and treat with callous disregard, as the Government have done, the interests of the consumer, particularly retirement pensioners who will suffer considerably pro rata from this proposal. Hon. Members opposite brashly put forward suggestions for reforming the procedure of the House of Commons. It would be better if they reformed themselves.
  Mr. Robert Cooke: One thing which has emerged from this long and intense discussion is that the Government do not give a damn for those people who will be caught by this iniquitous proposal. They say that some people have been subsidised in the past. We have heard that about one-fifth of the water consumers of this country have been subsidised.
  I could not possibly let this go without saying something on behalf of the citizens on Bristol. For many years they have enjoyed a splendid water undertaking, the Bristol Waterworks Company, which has handled its affairs efficiently and with humanity. In no case which I have taken up with the company on behalf of a constituent has the company not dealt with the matter immediately and in a most efficient and humane fashion.
  My hon. Friend the Member for the City of Chester (Mr. Temple) suggested that the Government's policy was to get all the water undertakings into the claws of nationalisation. That is where I see it all leading, and that is why I support my hon. Friends.
  The citizens of Bristol will be affected by this proposal. The Chief Secretary has given the game away on that. He has admitted that the citizens of Bristol will be worse off as a result of this proposal. Where are the Labour Members for Bristol? It is obvious that they will follow the Government like a lot of sheep

  1237
  into the Lobby and will do nothing whatever to protect the rights of the citizens of Bristol.
  It is not too late for the Chief Secretary to do something about this, even if he discovers in his labyrinthine mind a method which is not that which we propose. The Government can at any time recommit the Bill and thus have a chance to think again. There are procedural ways in which the Government can deal with this problem, and I hope that they will do so.
  Mr. John Harvey: I had not intended to intervene until the Chief Secretary sought to persuade the House that the analogy between public companies and local government was one which needed to be examined in greater detail. He omitted to remind us that under Clause 62 local authorities are specifically exempt from Corporation Tax. There is, therefore, a significant difference between the position of the companies and that of the local authorities which calls for a great deal of further consideration.
  The Chief Secretary and his colleagues on the Government Front Bench must bear in mind that the Bill is not capable of further improvement on being sent to the House of Lords. This Bill stops here. Whatever we leave amiss after Report stays amiss until a better Government has an opportunity to put it right.
  I urge the Chief Secretary to think again, because the difference between the company and the local authority is that
  by virtue of the tax requirements a company immediately becomes liable to find under Corporation Tax a much larger sum of money to pay the tax deducted from dividends. Hence the increase, which some of my hon. Friends think will be a considerable increase, in water rates in different parts of the country. Before we hear it suggested that these are wealthy companies which can afford the extra charge, we should emphasise that these companies act under very severe limitations in the charges which they can impose and the rates of dividend which they can declare.
  There is no scope for speculation. Additional share capital has to be raised by tender. Maximum and actual amounts which can be allocated to reserve and contingency funds are restricted, as is the amount which can be carried forward, and all the surplus has to be devoted to reducing the water rate. That should be compared with the Government's action, which makes sure that water rates will be increased.
  Question put and agreed to.
  Clause accordingly read a Second time.
  Amendment proposed to the proposed Clause: In line 11, leave out from "year" to the end of line 21.—[Mr. Corfield.]
  Question put, That the words proposed to be left out stand part of the proposed Clause:—
  The House divided: Ayes 282, Noes 278.

  Division No. 229.]

  AYES

  [9.9 p.m.

  Abse, Leo

  Buchan, Norman (Renfrewshire, W.)

  Dempsey, James

  Allaun, Frank (Salford, E.)

  Buchanan, Richard

  Diamond, Rt. Hn. John

  Alldritt, Walter

  Butler, Herbert (Hackney, C.)

  Dodds, Norman

  Atkinson, Norman

  Butler, Mrs. Joyce (Wood Green)

  Doig, Peter

  Bacon, Miss Alice

  Callaghan, Rt. Hn. James

  Driberg, Tom

  Bagier, Gordon A. T.

  Carmichael, Neil

  Duffy, Dr. A. E. P.

  Barnett, Joel

  Carter-Jones, Lewis

  Dunn, James A.

  Baxter, William

  Castle, Rt. Hn. Barbara

  Dunnett, Jack

  Bellenger, Rt. Hn. F. J.

  Chapman, Donald

  Edelman, Maurice

  Bence, Cyril

  Coleman, Donald

  Edwards, Robert (Bilston)

  Benn, Rt. Hn. Anthony Wedgwood

  Conlan, Bernard

  English, Michael

  Bennett, J. (Glasgow, Bridgeton)

  Corbet, Mrs. Freda

  Ennals, David

  Binns, John

  Cousins, Rt. Hn. Frank

  Ensor, David

  Bishop, E. S.

  Craddock, George (Bradford, S.)

  Evans, Albert (Islington, S. W.)

  Blackburn, F.

  Crawshaw, Richard

  Evans, Ioan (Birmingham, Yardley)

  Blenkinsop, Arthur

  Cronin, John

  Fernyhough, E.

  Boardman, H.

  Crossman, Rt. Hn. R. H. S.

  Finch, Harold (Bedwellty)

  Boston, T. G.

  Cullen, Mrs. Alice

  Fitch, Alan (Wigan)

  Bottomley, Rt. Hn. Arthur

  Dalyell, Tam

  Fletcher, Sir Eric (Islington, E.)

  Bowden, Rt. Hn. H. W. (Leics S. W.)

  Darling, George

  Fletcher, Ted (Darlington)

  Braddock, Mrs. E. M.

  Davies, Harold (Leek)

  Fletcher, Raymond (llkeston)

  Bradley, Tom

  Davies, Ifor (Gower)

  Floud, Bernard

  Bray, Dr. Jeremy

  de Freitas, Sir Geoffrey

  Foot, Sir Dingle (Ipswich)

  Broughton, Dr. A. D. D.

  Delargy, Hugh

  Foot, Michael (Ebbw Vale)

  Brown, Hugh D. (Glasgow, Provan)

  Dell, Edmund

  Ford, Ben

  Fraser, Rt. Hn. Tom (Hamilton)

  Loughlin, Charles

  Robertson, John (Paisley)

  Freeson, Reginald

  Mabon, Dr. J. Dickson

  Robinson, Rt. Hn. K. (St. Pancras, N.)

  Galpern, Sir Myer

  McBride, Neil

  Rodgers, William (Stockton)

  Garrett, W. E.

  MacColl, James

  Rogers, George (Kensington, N.)

  Garrow, A.

  MacDermot, Niall

  Rose, Paul B.

  George, Lady Megan Lloyd

  McGuire, Michael

  Ross, Rt. Hn. William

  Ginsburg, David

  Mclnnes, James

  Rowland, Christopher

  Gourlay, Harry

  McKay, Mrs. Margaret

  Sheldon, Robert

  Greenwood, Rt. Hn. Anthony

  Mackenzie, Gregor (Rutherglen)

  Shinwell, Rt. Hn. E.

  Gregory, Arnold

  Mackie, John (Enfield, E.)

  Shore, Peter (Stepney)

  Grey, Charles

  McLeavy, Frank

  Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

  Griffiths, David (Rother Valley)

  Mahon, Peter (Preston, S.)

  Short, Mrs. Renée (W'hampton, N. E.)

  Griffiths, Rt. Hn. James (Llanelly)

  Mahon, Simon (Bootle)

  Silkin, John (Deptford)

  Griffiths, Will (M'chester, Exchange)

  Mallalieu, J. P. W. (Huddersfield, E.)

  Silkin, S. C. (Camberwell, Dulwich)

  Gunter, Rt. Hn. R. J.

  Manuel, Archie

  Silverman, Julius (Aston)

  Hale, Leslie

  Mapp, Charles

  Silverman, Sydney (Nelson)

  Hamilton, James (Bothwell)

  Marsh, Richard

  Skeffington, Arthur

  Hamilton, William (West Fife)

  Mason, Roy

  Slater, Mrs. Harriet (Stoke, N.)

  Hamling, William (Woolwich, W.)

  Maxwell, Robert

  Slater, Joseph (Sedgefield)

  Hannan, William

  Mellish, Robert

  Small, William

  Harrison, Walter (Wakefield)

  Mendelson, J. J.

  Snow, Julian

  Hart, Mrs. Judith

  Mikardo, Ian

  Soskice, Rt. Hn. Sir Frank

  Hazell, Bert

  Millan, Bruce

  Steele, Thomas (Dunbartonshire, W.)

  Healey, Rt. Hn. Denis

  Milne, Edward (Blyth)

  Stewart, Rt. Hn. Michael

  Heffer, Eric S.

  Molloy, William

  Stonehouse, John

  Henderson, Rt. Hn. Arthur

  Monslow, Walter

  Stones, William

  Herbison, Rt. Hn. Margaret

  Morris, Alfred (Wythenshawe)

  Strauss, Rt. Hn. G. R. (Vauxhall)

  Hobden, Dennis (Brighton, K'town)

  Morris, Charles (Openshaw)

  Stross, Sir Barnett (Stoke-on-Trent, C.)

  Holman, Percy

  Morris, John (Aberavon)

  Summerskill, Hn. Dr. Shirley

  Horner, John

  Mulley, Rt. Hn. Frederick (Sheffield Pk)

  Swain, Thomas

  Houghton, Rt. Hn. Douglas

  Murray, Albert

  Swingler, Stephen

  Howarth, Harry (Wellingborough)

  Neal, Harold

  Symonds, J. B.

  Howarth, Robert L. (Bolton, E.)

  Newens, Stan

  Taverne, Dick

  Howell, Denis (Small Heath)

  Noel-Baker, Francis (Swindon)

  Taylor, Bernard (Mansfield)

  Howie, W.

  Noel-Baker, Rt. Hn. Philip (Derby, S.)

  Thomas, George (Cardiff, W.)

  Hoy, James

  Norwood, Christopher

  Thomas, lorwerth (Rhondda, W.)

  Hughes, Cledwyn (Anglesey)

  Oakes, Gordon

  Thomson, George (Dundee, E.)

  Hughes, Emrys (S. Ayrshire)

  Ogden, Eric

  Thornton, Ernest

  Hughes, Hector (Aberdeen, N.)

  O'Malley, Brian

  Tinn, James

  Hunter, Adam (Dunfermline)

  Oram, Albert E. (E. Ham, S.)

  Tomney, Frank

  Hunter, A. E. (Feltham)

  Orbach, Maurice

  Tuck, Raphael

  Irvine, A. J. (Edge Hill)

  Orme, Stanley

  Urwin, T. W.

  Irving, Sydney (Dartford)

  Oswald, Thomas

  Varley, Eric G.

  Jackson, Colin

  Owen, Will

  Walden, Brian (All Saints)

  Janner, Sir Barnett

  Page, Derek (King's Lynn)

  Walker, Harold (Doncaster)

  Jeger, George (Goole)

  Paget, R. T.

  Wallace, George

  Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

  Palmer, Arthur

  Warbey, William

  Jenkins, Hugh (Putney)

  Pannell, Rt. Hn. Charles

  Watkins, Tudor

  Jenkins, Rt. Hn. Roy (Stechford)

  Pargiter, G. A.

  Weitzman, David

  Johnson, Carol (Lewisham, S.)

  Park, Trevor (Derbyshire, S. E.)

  Wells, William (Walsall, N.)

  Johnson, James (K'ston-on-Hull, W.)

  Parker, John

  White, Mrs. Eirene

  Jones, Dan (Burnley)

  Parkin, B. T.

  Whitlock, William

  Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

  Pavitt, Laurence

  Wigg, Rt. Hn. George

  Jones, J. Idwal (Wrexham)

  Pearson, Arthur (Pontypridd)

  Wilkins, W. A.

  Jones, T. W. (Merioneth)

  Peart, Rt. Hn. Fred

  Willey, Rt. Hn. Frederick

  Kelley, Richard

  Pentland, Norman

  Williams, Alan (Swansea, W.)

  Kenyon, Clifford

  Perry, Ernest G.

  Williams, Clifford (Abertillery)

  Kerr, Mrs. Anne (R'ter & Chatham)

  Popplewell, Ernest

  Williams, Mrs. Shirley (Hitchin)

  Kerr, Dr. David (W'worth, Central)

  Prentice, R. E.

  Willis, George (Edinburgh, E.)

  Lawson, George

  Price, J. T. (Westhoughton)

  Wilson, Rt. Hn. Harold (Huyton)

  Leadbitter, Ted

  Probert Arthur

  Wilson, William (Coventry, S.)

  Ledger, Ron

  Pursey, Cmdr. Harry

  Winterbottom, R. E.

  Lee, Rt. Hn. Frederick (Newton)

  Randall, Harry

  Woodburn, Rt. Hn. A.

  Lee, Miss Jennie (Cannock)

  Rankin, John

  Woof, Robert

  Lever, Harold (Cheetham)

  Redhead, Edward

  Wyatt, Woodrow

  Lever, L. M. (Ardwick)

  Rees, Merlyn

  Yates, Victor (Ladywood)

  Lewis, Arthur (West Ham, N.)

  Reynolds, G. W.

  Zilliacus, K.

  Lewis, Ron (Carlisle)

  Rhodes, Geoffrey

  Lipton, Marcus

  Roberts, Albert (Normanton)

  TELLERS FOR THE AYES:

  Lomas, Kenneth

  Roberts, Goronwy (Caernarvon)

  Mr. John McCann and

  Mr. Joseph Harper.

  NOES

  Agnew, Commander Sir Peter

  Balniel, Lord

  Birch, Rt. Hn. Nigel

  Alison, Michael (Barkston Ash)

  Barber, Rt. Hn. Anthony

  Black, Sir Cyril

  Allan, Robert (Paddington, S.)

  Barlow, Sir John

  Blaker, Peter

  Allason, James (Hemel Hempstead)

  Batsford, Brian

  Bossom, Hn. Clive

  Amery, Rt. Hn. Julian

  Beamish, Col. Sir Tufton

  Bowen, Roderic (Cardigan)

  Anstruther-Gray, Rt. Hn. Sir W.

  Bell, Ronald

  Box, Donald

  Astor, John

  Bennett, Sir Frederic (Torquay)

  Boyd-Carpenter, Rt. Hn. J.

  Atkins, Humphrey

  Bennett, Dr. Reginald (Gos & Fhm)

  Boyle, Rt. Hn. Sir Edward

  Awdry, Daniel

  Berkeley, Humphry

  Braine, Bernard

  Baker, W. H. K.

  Berry, Hn. Anthony

  Brewis, John

  1240

  1241

  Brinton, Sir Tatton

  Hamilton, M. (Salisbury)

  Osborn, John (Hallam)

  Bromley-Davenport, Lt.-Col. Sir Walter

  Harris, Frederick (Croydon, N. W.)

  Osborne, Sir Cyril (Louth)

  Brooke, Rt Hn. Henry

  Harris, Reader (Heston)

  Page, John (Harrow, W.)

  Brown, Sir Edward (Bath)

  Harrison, Brian (Maldon)

  Page, R. Graham (Crosby)

  Bruce-Gardyne, J.

  Harvey, John (Walthamstow, E.)

  Pearson, Sir Frank (Clitheroe)

  Bryan, Paul

  Harvie Anderson, Miss

  Peel, John

  Buchanan-Smith, Alick

  Hastings, Stephen

  Percival, Ian

  Buck, Antony

  Hawkins, Paul

  Peyton, John

  Bullus, Sir Eric

  Heald, Rt. Hn. Sir Lionel

  Pickthorn, Rt. Hn. Sir Kenneth

  Burden, F. A.

  Heath, Rt. Hn. Edward

  Pike, Miss Mervyn

  Butcher, Sir Herbert

  Hendry, Forbes

  Pitt, Dame Edith

  Buxton, Ronald

  Higgins, Terence L.

  Pounder, Rafton

  Campbell, Gordon

  Hill, J. E. B. (S, Norfolk)

  Powell, Rt. Hn. J. Enoch

  Carlisle, Mark

  Hirst, Geoffrey

  Price, David (Eastleigh)

  Carr, Rt. Hn. Robert

  Hobson, Rt. Hn. Sir John

  Prior, J. M. L.

  Cary, Sir Robert

  Hooson, H. E.

  Pym, Francis

  Channon, H. P. G.

  Hopkins, Alan

  Quennell, Miss J. M.

  Chataway, Christopher

  Hornby, Richard

  Ramsden, Rt. Hn. James

  Chichester-Clark, R.

  Hornsby-Smith, Rt. Hn. Dame P.

  Rawlinson, Rt. Hn. Sir Peter

  Clark, Henry (Antrim, N.)

  Howard, Hn. G. R. (St. Ives)

  Redmayne, Rt. Hn. Sir Martin

  Clarke, William (Nottingham, S.)

  Hutchison, Michael Clark

  Rees-Davies, W. R.

  Clarke, Brig. Terence (Portsmth, W.)

  Iremonger, T. L.

  Renton, Rt. Hn. Sir David

  Cole, Norman

  Irvine, Bryant Godman (Rye)

  Ridley, Hn. Nicholas

  Cooke, Robert

  Jenkin, Patrick (Woodford)

  Ridsdale, Julian

  Cooper, A. E.

  Jennings, J. C.

  Roberts, Sir Peter (Heeley)

  Cooper-Key, Sir Neill

  Johnston, Russell (Inverness)

  Rodgers, Sir John (Sevenoaks)

  Cordle, John

  Jones, Arthur (Northants, S.)

  Roots, William

  Corfield, F. V.

  Jopling, Michael

  St. John-Stevas Norman

  Costain, A. P.

  Joseph, Rt. Hn. Sir Keith

  Sandys, Rt. Hn. D.

  Courtney, Cdr. Anthony

  Kaberry, Sir Donald

  Scott-Hopkins, James

  Craddock, Sir Beresford (Spelthorne)

  Kerby, Capt. Henry

  Sharples, Richard

  Crawley, Aidan

  Kerr, Sir Hamilton (Cambridge)

  Shepherd, William

  Crosthwaite-Eyre, Col. Sir Oliver

  Kershaw, Anthony

  Sinclair, Sir George

  Crowder, F. P.

  Kilfedder, James A.

  Smith, Dudley (Br'ntf'd & Chiswick)

  Cunningham, Sir Knox

  Kimball, Marcus

  Smyth, Rt. Hn. Brig. Sir John

  Curran, Charles

  King, Evelyn (Dorset, S.)

  Soames, Rt. Hn. Christopher

  Currie, G. B. H.

  Kirk, Peter

  Spearman, Sir Alexander

  Dalkeith, Earl of

  Kitson, Timothy

  Stainton, Keith

  Dance, James

  Lagden, Godfrey

  Stanley, Hn. Richard

  Davies, Dr. Wyndham (Perry Barr)

  Lambton, Viscount

  Steel, David (Roxburgh)

  d'Avigdor-Goldsmid, Sir Henry

  Lancaster, Col. C. G.

  Stodart, Anthony

  Dean, Paul

  Langford-Holt, Sir John

  Studholme, Sir Henry

  Digby, Simon Wingfield

  Legge-Bourke, Sir Harry

  Talbot, John E.

  Dodds-Parker, Douglas

  Lewis, Kenneth (Rutland)

  Taylor, Sir Charles (Eastbourne)

  Doughty, Charles

  Litchfield, Capt. John

  Taylor, Edward M. (G'gow, Cathcart)

  Douglas-Home, Rt. Hnu. Sir Alec

  Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)

  Taylor, Frank (Moss Side)

  Drayson, C. B.

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Teeling, Sir William

  du Cann, Rt. Hn. Edward

  Loveys, Walter H.

  Temple, John M.

  Eden, Sir John

  Lubbock, Eric

  Thatcher, Mrs. Margaret

  Elliot, Capt. Walter (Carshalton)

  Lucas, Sir Jocelyn

  Thomas, Sir Leslie (Canterbury)

  Emery, Peter

  McAdden, Sir Stephen

  Thompson, Sir Richard (Croydon, S.)

  Eyre, Reginald

  MacArthur, Ian

  Thorpe, Jeremy

  Farr, John

  Mackie, George Y. (C'ness & S'land)

  Tiley, Arthur (Bradford, W.)

  Fell, Anthony

  McLaren, Martin

  Tilney, John (Wavertree)

  Fisher, Nigel

  Maclean, Sir Fitzroy

  Turton, Rt. Hn. R. H.

  Fletcher-Cooke, Charles (Darwen)

  Macleod, Rt. Hn. Iain

  Tweedsmuir, Lady

  Fletcher-Cooke, Sir John (S'pton)

  McMaster, Stanley

  van Straubenzee, W. R.

  Foster, Sir John

  McNair-Wilson, Patrick

  Vaughan-Morgan, Rt. Hn. Sir John

  Fraser, Rt. Hn. Hugh (St'fford & Stone)

  Maginnis, John E.

  Vickers, Dame Joan

  Fraser, Ian (Plymouth, Sutton)

  Maitland, Sir John

  Walder, David (High Peak)

  Galbraith, Hn. T. G. D.

  Marten, Neil

  Walker, Peter (Worcester)

  Gammans, Lady

  Mathew, Robert

  Walker-Smith, Rt. Hn. Sir Derek

  Gardner, Edward

  Maude, Angus

  Wall, Patrick

  Gibson-Watt, David

  Maudling, Rt. Hn. Reginald

  Walters, Dennis

  Giles, Rear-Admiral Morgan

  Mawby, Ray

  Ward, Dame Irene

  Gilmour, Ian (Norfolk, Central)

  Maxwell-Hyslop, R. J.

  Weatherill, Bernard

  Gilmour, Sir John (East Fife)

  Maydon, Lt.-Cmdr. S. L. C.

  Webster, David

  Glover, Sir Douglas

  Meyer, Sir Anthony

  Wells, John (Maidstone)

  Glyn, Sir Richard

  Mills, Peter (Torrington)

  Whitelaw, William

  Godber, Rt. Hn. J. B.

  Mills, Stratton (Belfast, N.)

  Williams, Sir Rolf Dudley (Exeter)

  Goodhart, Philip

  Miscampbell, Norman

  Wills, Sir Gerald (Bridgwater)

  Goodhew, Victor

  Mitchell, David

  Wilson, Geoffrey (Truro)

  Gower, Raymond

  Monro, Hector

  Wise, A. R.

  Grant, Anthony

  More, Jasper

  Wolrige-Gordon, Patrick

  Grant-Ferris, R.

  Morrison, Charles (Devizes)

  Wood, Rt. Hn. Richard

  Gresham Cooke, R.

  Mott-Radclyffe, Sir Charles

  Woodhouse, Hn. Christopher

  Grieve, Percy

  Munro-Lucas-Tooth, Sir Hugh

  Woodnutt, Mark

  Griffiths, Eldon (Bury St. Edmunds)

  Murton, Oscar

  Wylie, N. R.

  Griffiths, Peter (Smethwick)

  Neave, Airey

  Yates, William (The Wrekin)

  Grimond, Rt. Hn. J.

  Noble, Rt. Hn. Michael

  Younger, Hn. George

  Gurden, Harold

  Nugent, Rt. Hn. Sir Richard

  Hall, John (Wycombe)

  Onslow, Cranley

  TELLERS FOR THE NOES:

  Hall-Davis, A. G. F.

  Orr, Capt. L. P. S.

  Mr. R. W. Elliott and

  Hamilton, Marquess of (Fermanagh)

  Orr-Ewing, Sir Ian

  Mr. Geoffrey Johnson Smith.

  1242

  Clause added to the Bill.

  FINANCE (No. 2) BILL

    New Clause.—(EXEMPTIONS FROM CAPITAL GAINS TAX IN CONNECTION WITH PRESERVATION OF LAND FOR PUBLIC BENEFIT.)
    5

    (1) A gain accruing on the disposal of an asset by way of gift, or accruing on a disposal on death of an asset devised or bequeathed by the deceased, shall not be a chargeable gain if under section 40 of the Finance Act 1931 (which, as amended by section 27 of the Finance Act 1936, section 31 of the Finance Act 1937, section 31 of the Finance Act 1949, section 33 of the Finance Act 1951 and section 54 of the Finance Act 1963, affords relief from estate duty in the case of land given to the National Trust or for certain other public purposes)—

    (a) the asset is exempt from estate duty which is or might have been leviable by reference to the gift, devise or bequest, or

    10

    (b) the Treasury remit estate duty so leviable or where (as in the case of a gift or in the case of an asset exempt from estate duty) remission under that section would have no effect for the purposes of estate duty, if the Treasury determine that the gift, devise or bequest qualifies for relief under that section.

    (2) A gain accruing—

    15

    (a) on a disposal of assets forming part of a property deemed under Part III of this Act to be effected by a deceased person on his death, or

    (b) on a disposal of assets forming part of settled property deemed to be effected in accordance with section 24 (3) of this Act in consequence of the termination of a life interest by death,

    20

    shall not be a chargeable gain if and to the extent that under section 31 (3) of the Finance Act 1937 (which, as amended by section 31 of the Finance Act 1949, section 33 of the Finance Act 1951 and section 54 of the Finance Act 1963, affords relief from estate duty in respect of settled property to which the National Trust or some other public body is entitled subject to one or more life interests) exemption is to be granted as to the estate duty (if any) leviable on that death in respect of those assets.

    25

    30

    (3) This section shall apply in relation to estate duty leviable under the law of Northern Ireland as it applies to estate duty leviable under the law of Great Britain with the substitution for the estate duty enactments mentioned in this section of the corresponding enactments forming part of the law of Northern Ireland and subject to any other necessary modifications.—[Mr. MacDermot.]

    Brought up, and read the First time.
    Mr. MacDermot: I beg to move, That the Clause be read a Second time.
    Mr. Deputy-Speaker: It will be in order to discuss, at the same time, the Amendment in line 25, at the end to insert a new subsection (3).
    Mr. MacDermot: This new Clause has been put down in fulfilment of an undertaking given in Committee to grant an exemption from Capital Gains Tax for the benefit of the National Trust and similar bodies. As I undertook in Committee, the exemption has been coextensive with the exemption from Estate Duty. It is modelled upon it and follows it exactly. The result is that the exemption will apply, first, to gifts or bequests to the two National Trusts of land or buildings and of chattels kept with the buildings and maintenance funds for the upkeep of the land, buildings or chattels if given by the donor of the land or buildings either at the time of the original gift or later.
    Secondly, it applies to gifts or bequests to a Government Department; a local authority or non-profit-making preservation body of either buildings of outstand-
    1244
    ing historical, architectural or æsthetic interest; chattels going with the building or maintenance funds for the upkeep of the building or chattels if given by the donor of the building either at the time of the original gift or later; and to land of outstanding scenic, historic or scientific interest and objects going with the land. Finally, to an out-and-out gift or bequest of an ancient monument to the Minister of Public Building and Works, or a local authority.
    As we are on Report, perhaps I should refer briefly to the Amendment which we are discussing with the new Clause. All I need say at this stage is that, as I indicated in Committee, we do not feel able to extend this exemption beyond the Estate Duty exemption. I fully appreciate the reasons which motivated the hon. Member in putting down the Amendment, and will listen carefully to what he has to say.
    It may seem in some ways illogical that the exemption applies to maintenance funds which are provided by the donor of land but not to maintenance funds provided by other persons. I am afraid that the short answer is that if we were to accede to this Amendment we should find

    1245
    ourselves inexorably driven to grant a similar concession for all gifts for charitable purposes. It would not be possible to make any valid distinction in principle. The result of extending the exemption in this way would be so wide that it is unacceptable.
    As it is, the National Trusts and similar bodies fare better in many ways than other charitable organisations under our Estate Duty law and they are fortunate to be able to carry over the same privileges into Capital Gains Tax. As we have the clear precedent of Estate Duty law, we thought that it was right to follow it.
    Mr. Nicholas Ridley: I wish to speak on the Amendment to the proposed Clause, which I have on the Paper; namely, in line 25, at the end to insert:
    (3)(a) Far the purpose of subsection (1) of this section, where a person gives property to the National Trust as a sources of income for the upkeep—

    (i) of any land which is at the time of the gift inalienably vested in the National Trust; or

    (ii) of any objects which are then vested in the National Trust and ordinarily kept in a building forming part of any such land, having been given to the National Trust with a view to their preservation or use in that building;

    such property shall be deemed to be an asset which is exempt from estate duty under section 40 of the Finance Act 1931 within the meaning of paragraph (a) of that subsection notwithstanding that he did not give or join in giving to the Trust its estate or interest in that land or those objects and notwithstanding that he did not give or join in giving to the Trust its estate or interest in the building in which the objects are ordinarily kept at the time of the said gift.
    (b) For the purposes of this subsection expressions to which meanings are assigned by section 33(5) of the Finance Act 1951 have the same respective meanings.
    It is rather difficult to speak to an Amendment to which the answer has, apparently, already been given. I shall attempt to deal with with the substance of my Amendment and with some of the points in the answer which the Financial Secretary has already given. I am grateful to him for moving this new Clause, and I freely admit that it fulfils the pledge which he gave in Committee, although that pledge did not go far enough. It is for that reason that I sought to move this relatively small Amendment to widen the
    1246
    scope of the relief for the National Trusts. In his reply in Committee, the Financial Secretary talked about adhering to precedent, and he reinforced that tonight by saying that he was determined not to create any wider precedent than that granted by the Estate Duty reliefs.
    He has limited the extent of the concession to Capital Gains Tax to gifts of land given or bequeathed to the Trust indefeasibly which is vested in the Trust inalienably to the public benefit; secondly, to objects ordinarily kept in the building forming part of such land; and, thirdly, maintenance funds given to the support of that land. Those gifts are exempt only if they are given by the donor of the original property or by one who has joined with the donor in giving it. I agree with the Financial Secretary that this minutely follows the Estate Duty exemptions to which he referred. In Committee, I pressed him to include shares in other property given for the support of land by other persons and, in his wisdom, he declined to accept that concept.
    The only reason he advanced and the only one he has advanced tonight is that he declined to diverge front the precedents already set in this matter. I cannot help remarking in passing that it is odd for a Government of the colour we have now to be frightened of departing from precedent in any matter. [An HON. MEMBER: "Reactionaries."] I hope that he will not think it unreasonable or ungrateful of me if I press him to include all gifts of property whether given to the Trusts by the original donor or by some other person, income arising from such property to be used for the maintenance and upkeep of land held inalienably for the public good by the National Trust. The Amendment which I move is to extend this not only to the original donor but to other donors who may later wish to help the work of the Trust by giving them a capital asset.
    The Financial Secretary will note that this does not apply to shares or blocks of stock. There is some case for his maintaining that he must raise Capital Gains Tax from them. We have at present the odd position that, if a house and its property is given to and accepted by the trust as inalienable then further land given by the original donor would be

    1247
    exempt from Capital Gains Tax. If, however, a neighbour or other person were to give adjoining property or property elsewhere, the income from which was to be used for the maintenance of that historic house or piece of countryside, that gift would be subject to Capital Gains Tax whereas that of the original donor would not. This is surely illogical.
    9.30 p.m.
    Secondly, if a person were to give a picture, a work of art or chattel to the National Trust to put in one of the houses which it already possesses, I assume that that picture would be subject to Capital Gains Tax. Suppose that there was a set of furniture and one piece was missing. If a well-wisher were to find the missing piece and give it to the Trust, would it or would it not be subject to Capital Gains Tax upon gift to the Trust? It is the Trust, which is not in a strong position, which would have to find the tax on that gift. It is illogical that this position should apply.
    Hon. Members are well aware of the immense cost of upkeep of these historic houses and of the backlog of repair and modernisation which confronts both the Trusts. It is significant that the Trusts, which have always insisted upon taking an adequate endowment before they accept a property, have had to start public appeals to support inalienable land. I am certain that it would help enormously if this further small concession were granted whereby people would not be inhibited from giving property by fear of the Capital Gains Tax.
    I acknowledge very much the great contribution which the Historic Buildings Councils have made to the work of the Trusts, but this contribution is available only to be spent upon the repair of buildings and is not available for the upkeep of land. As all concerned with agriculture know, modern farming consists almost entirely of an endless injection of fresh capital to keep up with modern farming practice.
    I know that the Amendment goes slightly beyond the exemption for death duties, but I do not believe that it would lead, as the Financial Secretary suggested, to wide pressure for the extension of the concession to other fields. I cannot see
    1248
    to which other fields the hon. and learned Gentleman was referring, nor do I believe that it is necessary for him to give way to that pressure. The National Trusts already possess in law a special position because of their special function for preserving these houses and the countryside, which no other organisation, either Government or private, could possibly do so well. I do not believe that any other organisation would be justified in pressing for the special position which I seek on behalf of the Trusts.
    "Wide pressure" is an odd phrase for the Financial Secretary to use. In scientific terms, it is nothing like the same as strong pressure. The wider the area over which the pressure is exerted, the weaker it is. That can be said to apply to the Amendment, which has not been selected, in the name of my right hon. Friend the Member for Harrogate (Mr. Ramsden) and others, although I make no comment on their desire to extend this concession; it is neither in order nor relevant to my argument. I believe that the Trusts have this special position which can be singled out and pressed upon the Government because nobody else is in the same position and no one else could do the same sort of work anything like as successfully.
    I should like to know from the Financial Secretary whether the title "National Trust" in his new Clause applies both to the National Trust for England and the National Trust for Scotland. There is a Scottish Minister on the Front Bench and I am glad to welcome him, because he is certainly concerned in this matter. I hope very much that we will have it confirmed that "Trust" applies to both the Trusts and not simply to the National Trust for England.
    The National Trusts are unique organisations. They are typically British, pragmatic and have become the envy of most other nations because of the extraordinarily successful way in which they have steered clear of the political rocks and have managed to preserve the inheritance of famous buildings. They have no Government subsidy and if they were subjected to these taxes—Estate Duty, Capital Gains Tax or any other form of taxation—they would begin to be in the same position as the private landlord.
    Sooner or later private owners of these houses will be squeezed out. I am not

    1249
    arguing on that score now, because it is not relevant to the discussion. However, if these private landlords are to be squeezed out we must allow organisations of this sort to take their place, to hold these houses and keep them up—but they must have sufficient funds to do this work in future. If it is part of the policy of the Labour Government to destroy the means whereby private individuals can do this work, they must ensure that the National Trusts, which are the only possible alternatives, have the means to do it.
    While I welcome the new Clause, I urge the Government to accept the Amendment, which would slightly widen its scope. I do not believe that it would create a precedent which would be difficult to accept. It would be of immense benefit to the unique organisations, the National Trusts.
    Mr. Blenkinsop: I thank my hon. and learned Friend the Financial Secretary for the concession which is made in the new Clause. It is always difficult for a Government to make concessions because they can be sure that applications for further concessions or for the ones which have been made to be extended are bound to follow. I have every sympathy with the Amendment standing in the name of the hon. Member for Cirencester and Tewkesbury (M r. Ridley), although I appreciate the difficulties which my hon. and learned Friend may face in its acceptance. I am sure that the National Trusts would be pleased if the Government found themselves able to make this further concession, for the reasons adduced by the hon. Member for Cirencester and Tewkesbury.
    I understand that the request came from the legal advisers to the National Trust and I agree that there would appear to be an anomaly in the present situation, as has been pointed out. This is perhaps all the more true now since the Trust is being used as the instrument for preserving the coastline, an object which we are all anxious to achieve. We are grateful that the Government have made a direct contribution and we are aware that the Chancellor has shown a great personal interest in this matter.
    I hope that, even at this stage, the Government will find it possible to go this little way further and accept the Amendment, although I appreciate that, from the National Trusts' point of view, half a loaf is better than no bread. Indeed,
    1250
    the Trusts are sincerely pleased with the concession the Government are already making.
    Mr. Robert Cooke: If some of what I have to say includes some words of criticism I should perhaps make it clear at the outset that I have absolutely no quarrel with the National Trust, an organisation without which Britain would be poorer. I always strive to do all I can to support it in its work and I had the pleasure recently, with a number of hon. Members of both sides of the House, of visiting National Trust properties. The Trust keeps closely in touch with Parliament so that we know the sort of work it is doing.
    My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) had a good point when he drew the distinction between lands given by the original owner of the house for its support—and, I imagine, also from the amenity point of view—which would be exempt, and lands given by an adjoining landowner, which would not. That would seem to be a ridiculous distinction. One could conceive a case where a house had practically no land with it at all, and an adjoining landowner wanted to make a splendid gift which would make the whole property, if not economically viable at least protected from undesirable development—because we have not yet got all the legislation that is needed there. The land might be available, but there might be difficulties; the National Trust might be caught with Capital Gains Tax.
    My hon. Friend also spoke quite validly on the subject of contents. An owner might have something of unique importance to a particular property, and if we are really anxious to do all we can to help the National Trust in its work surely this sort of concession should be made.
    The Financial Secretary, in explaining the Government's Clause, frequently spoke of "the National Trust or other similar bodies." My only quarrel with my hon. Friend the Member for Cirencester and Tewkesbury is that he is asking for a further concession for the National Trust alone, and I quarrel with the Government because they would seem to be giving a special concession just to the National Trust. I would have no quarrel if the new Clause gave the same concession to any body doing similar work.
    Mr. MacDermot: Perhaps I might be permitted to assist the hon. Gentleman on that point. I spelt this out rather precisely at the beginning of my speech, but there was a lot of noise in the Chamber at the time and some hon. Members may not have heard what I said. The concession follows precisely the Estate Duty exemption which extends, for the second class of which I spoke, beyond the National Trusts to gifts or bequests to a Government Department, to a local authority or to non-profit-making preservation bodies of buildings, chattels and land of the appropriate kind. It has to be subject to Treasury direction, but it was to those that I referred, rather loosely, as "other similar bodies."
    Mr. Robert Cooke: I am grateful to the hon. and learned Gentleman for once more saying what was drowned by the noise of the previous Division. I am grateful for that clarification, and I hope that such will be the case, as I am sure that the National Trust would not want to be in any special and somewhat invidious position. I do not think that the Trust would go as far as to say what my hon. Friend in his enthusiasm said—that nobody else could do its work. That would be to come dangerously near to a nationalised trust; the sort of idea that perhaps in the future some body, not even privately organised, should be responsible for all our historic buildings and all our places of national beauty. That is a dangerous thought. My hon. Friend also said that the National Trust was a completely English institution. In so doing he contradicted what he said earlier, because it is half Scottish.
    That leads me to my next point, which is that there are very definite individual requirements in some parts of the country, and private individuals have their part to play, because a historic building is nothing if simply preserved in its landscape as a museum. I am glad to see that my hon. Friend nods his assent. If we are to encourage private individuals to go on with the healthy struggle of keeping historic buildings as living homes, surely the private individual and the private trust should receive the same sort of concessions as the National Trust. I hope that that will be the case.
    1252
    9.45 p.m.
    Perhaps because of the difficulties of our procedure I may have said some things which seemed to my hon. Friend somewhat unkind. I ought to conclude by saying that not only have I had my mind to some extent put at rest—and I hope that I speak for hon. Friends who have put their names to an Amendment to be discussed later—but I am also glad to know that the Government view with favour other bodies working in this field in which the National Trust will not be in an extraordinary and invidious position. I am sure that it would not wish to be in such a position.
    I hope that I am right in thinking that the Government, with all their enthusiasm for preservation and enjoyment of historic buildings and countryside, are well aware that as well as the National Trust in England and Scotland others are striving in this field and that they merit just as much consideration.
    Sir Charles Mott-Radclyffe: On the basis that it is always unwise to "look a gift horse in the mouth" whether in political or other walks of life, I express gratitude to the Government for the concession they have made in this new Clause, coupled with the earlier concession in respect of works of art of certain quality being exempt from Capital Gains Tax provided that they are not sold.
    I support my hon Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in the Amendment he has placed on the Paper on behalf of the National Trust. I am sure that the Financial Secretary knows what are the problems of the National Trust. He knows that it will not accept any property as a gift in lieu of Estate Duty or for any other purpose, unless accompanied with the gift of the property there is a sufficient endowment to cover the maintenance and upkeep of the property in question.
    The problem has been that the National Trust in years past, very properly, has accepted houses with endowments which then were sufficient to cover the maintenance and upkeep but which, in the light of subsequent rises in costs, are now insufficient. The Trust, therefore, is in a

    1253
    great dilemma, because it has to maintain properties for which, in many respects, it has insufficient income with which to do so.
    What happens when a National Trust house needs urgent and perhaps very expensive repairs and there is an insufficient endowment in relation to the house to cover the cost? The National Trust asks the Historic Buildings Council to help to defray the cost. Here, I must declare a personal interest, although certainly not a financial one, I am the only Member of the House who is a member of the Historic Buildings Council. My colleague from the party opposite is Lord Faringdon. I pay my tribute on behalf of the Council to the great experience and advice from which we benefited for many years from Lord Chuter-Ede and latterly from the hon. Member for Stoke-on-Trent, Central (Sir B. Stross), whose illness we all deplore and for whose speedy recovery we express good wishes. At the moment, I am the only Member who is a member of the Council, so I declare an interest in this matter although it is not a financial one.
    I will illustrate to the Financial Secretary what happens. The National Trust approaches the Historic Buildings Council stating that a certain house needs £40,000 spent on essential repairs—perhaps the eradication of dry rot. We have to assess this request with the other demands up on our resources. The only resources we have are the funds allocated by the Government. We administer Government funds annually and make a report. The demands made by the National Trust have to be taken into consideration with all the other demands upon the Historic Buildings Council.
    Thus, at one and the same time, the National Trust's problem is partially the headache of the Historic Buildings Council and—because the Council can only dispense funds granted by the Government—partially the Government's headache. Merely on the basis of arithmetic, surely it would be cheaper for the Government to accept the Amendment rather than be faced with what might well be a demand for increased funds by the Historic Buildings Council.
    1254
    It also seems odd that the Financial Secretary should resist an Amendment that would seek to increase the funds available to the National Trust. It has been in the experience of all of us concerned—I can think of 15 or 20 instances—that houses are sometimes bequeathed to the National Trust after a substantial part of the furniture has already been sold. Thus, on the death of the owner, when the property is transferred to the National Trust in lieu of death duty, the Trust receives a house that is half empty and for which no tenant can be found.
    It is not easy to find tenants for National Trust houses. Very often, one of the reasons for this is that few prospective tenants will go into a large house and furnish it properly. Most have not the resources to do so. Now if a neighbour or any other person who is interested in architecture or furniture, wishes to help by bequeathing some property to the house, surely it is not unreasonable to suggest that the Government should accept the gift or bequest without its being subject to Capital Gains Tax.
    The more such bequests, whether in land or chattels, are subject, on transfer of ownership, to Capital Gains Tax, the greater the disincentive to make this kind of bequest and that in turn means that the burden falls more hardly on the National Trust, making its task doubly difficult. We all have a great admiration for the task which the National Trust is trying to perform, and all that the Amendments seek to do is make their task marginally a little easier.
    Mr. John Hall: It is quite clear that the House welcomes the initiative of the Financial Secretary in bringing forward the new Clause to honour the promise made in Committee. It is also clear that the sympathy of the House is with the Amendment spoken to so persuasively by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). Not only has it had verbal support from both sides, but it is clear from the interest shown in the debate and from the sympathetic expressions on the faces of those facing me that there is a great deal of support for the Amendment. One the whole, it seems a very logical thing to do.

    1255
    The arguments are basically that it is against precedent and that, to quote the Financial Secretary's own words, the Government would be driven inexorably to giving similar concessions or gifts to other charitable institutions. It is said that every concession given by the Treasury leads to other concessions, but the Treasury has shown remarkable skill in resisting pressures when need be. It is said that it would diverge from precedent, but that is not a strong argument. After all, the Government have been diverging from precedent very rapidly over the last few months, so they cannot call that in aid to resist the Amendment.
    My hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) produced very powerful arguments in support of the Amendment, particularly when drawing attention to the difficulty which arises when the original endowment proves, through the passage of time, to be quite inadequate. We know that the National Trust is faced with great problems arising out of that very fact. I am certain the Financial Secretary is sympathetic to this Amendment and that he would like to extend the Clause to include it. I think he appreciates the logic of the arguments deployed on both sides, and I beg of him not to look at the proposal purely from the rather formal Treasury approach, not be bewildered and bemused, but to look at it anew. However, I am certain he will prepared to accept it, because it is a comparatively small Amendment to make and is doing what both sides want. For that reason alone, the Financial Secretary must accept the Amendment.
    Mr. MacDermot: May I first thank the hon. Members who have spoken on both sides of the House for the favourable reception they have given to the new Clause, and for the timely remarks about my right hon. Friend's interest and support for the work of the National Trust?
    If I may begin by answering one or two specific questions, I confirm what I said during the noisy period in my original remarks, that the new Clause does apply to both the English and the Scottish National Trusts, as well as to the other bodies who may benefit from the estate duty exemption.
    1256
    The main question has been whether we can extend this relief beyond the scope of the Estate Duty exemption in the way that is suggested in the Amendments. I am afraid we cannot, in spite of the very persuasive arguments to which I have certainly listened sympathetically. I willingly confess that if I had been able to see my way to accept these Amendments, I would have been glad to do so. I tried to indicate at the outset that I was sympathetic with their object, but, as hon. Members know, it is important in framing our tax laws to give them a structure which is based on an adherence to principle. We must have logic in our tax system. That is why we have felt it imperative to adhere to the precedent of the Estate Duty exemption, because in one sense that exemption is itself, if not anomalous, exceptional. It is in recognition of what the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) described as the special position occupied by the National Trust's and the other bodies which do similar work and which benefit from this exemption.
    10.0 p.m.
    The hon. Member for Windsor (Sir C. Mott-Radclyffe) urged me as a matter of arithmetic to accept the Amendment because of what it costs the Treasury indirectly through the Ministry of Public Building and Works in grant by way of support for the costs of maintenance of the buildings of the body which he devotedly serves. The fact which he left out of his sum was what it would cost the Treasury if we accepted the Amendment and then had to extend it to other gifts to charitable organisations, as I suggest we would. It would then become a very expensive Amendment.
    I am asked why it would lead to spread. If one imagines a charitable person who is the supporter of two charities, one the National Trust and the other a quite different kind of charity, say, medical research; if he knew that if he were to make his gift to the National Trust it would be exempt from Capital Gains Tax while in the other case it would not be, not many hon. Members would hesitate to see that he would lean to give it to the National Trust. This at once would lead to all other charitable bodies saying, "This is quite unfair; you have created a built-in inducement to

    1257
    people to make their gifts to the National Trust". These are ordinary cash gifts resulting from the realisation of securities or other assets.
    Sir C. Mott-Radclyffe: I hope that the hon. and learned Gentleman is not trying to argue that the Capital Gains Tax Clauses are not already so plastered with anomalies that one more or less would be noticed.
    Mr. MacDermot: I do not accept that. I am trying to answer the main ease, which is the suggestion that it would be easy for the Treasury to accept the Amendment and then hold the position without it leading to further spread. I am trying to demonstrate what sort of arguments, which would be unanswerable, would be addressed to us if we were to accept the Amendment.
    Mr. John Hall: The hon. and learned Gentleman said that it would be costly to the Treasury if it had to give way over other charitable gifts. Presumably that was based on some estimate. Can the hon. and learned Gentleman tell the House what is the estimate of the cost to the Treasury of doing it altogether for other charitable bequests?
    Mr. MacDermot: I do not have a precise estimate, but hon. Members will see that if all gifts to charitable organisations were to be exempt from Capital Gains Tax the result would be something quite beyond what is contemplated by those who are asking for this Amendment.
    Mr. Ridley: We are not asking for shares or money to be exempted but only property. The idea of giving 2,000 acres of rural England to the Medical Research Council is one which would not appeal to anyone. It is a matter of giving land or property only and surely the hon. Gentleman would agree that the National Trusts are the only bodies which would be concerned with property as opposed to shares.
    Mr. MacDermot: Property can be realised and this would be property given for the purpose of providing funds for maintenance purposes and it would be a gift in order to put the Trust in funds. Two hon. Members, in the course of their remarks, suggested that the effect of rejecting this Amendment would be that the liability for Capital Gains Tax, in the
    1258
    case of gifts to the Trust would result in the liability falling upon the Trusts. That is not right. In the case of a gift the liability, in the first instance for Capital Gains Tax, falls upon the donor.
    Sir C. Mott-Radclyffe: I do not think I said that. I did not mean to convey that meaning. The point I made was that the liability to the Capital Gains Tax falls upon the donor of course, but the liability for the upkeep of the National Trust properties is still on the National Trust. To the extent that any property or chattels bequeathed to the National Trust subsequently attracts Capital Gains Tax, the increased burden still remains, to an increased extent upon the National Trust.
    Mr. MacDermot: The hon. Member for Windsor (Sir C. Mott-Radclyffe) argued his case perfectly logically and I was not referring to him. I am sorry but for these reasons I must advise the House to reject the Amendment.
    Question put and agreed to.
    Clause read a Second time and added to the Bill.

    New Clause.—(FUNDS IN COURT.)
    (1) For the purposes of section 21 (5) of this Act and of section 12 (5) of the Finance Act 1962 (which is the corresponding provision for income tax under Case VII of Schedule D) funds in court held by the Accountant General shall be regarded as held by him as nominee for the persons entitled to or interested in the funds, or as the case may be for their trustees.
    (2) The Public Trustee shall apportion to the shares into which a common investment fund established under section 1 of the Administration of Justice Act 1965 is divided the chargeable gains accruing in a year of assessment in respect of assets comprised in the fund, after deduction of the capital gains tax which will be charged in respect of those gains, and the amount so apportioned to any shares shall be treated for the purposes of Part III of this Act as if it were expenditure allowable under paragraph 4 of Schedule 6 to this Act in computing a gain accruing on the disposal of those shares and incurred in respect of those shares at the time when the amount was so apportioned.
    (3) Where funds in court standing to an account are invested or, after investment, are realised the method by which the Accountant General effects the investment or the realisation of investments shall not affect the question whether there is for the purposes of Part III of this Act or of Chapter of Part II of the Finance Act 1962 an acquisition, or as the

    1259
    case may be a disposal, of an asset representing funds in court standing to the account, and in particular there shall for those purposes be an acquisition or disposal of shares in a common investment fund established under section 1 of the Administration of Justice Act 1965 notwithstanding that the investment in such shares of funds in court standing to an account, or the realisation of funds which have been so invested, is effected by setting off, in the Accountant General's accounts, investment in one account against realisation of investments in another.
    (4) If any common investment fund established under section 1 of the Administration of Justice Act 1965 is for the time being designated for the purposes of this subsection by an agreement between the Commissioners of Inland Revenue and the Public Trustee—

    (a) the Public Trustee shall be entitled to exemption from income tax in respect of so much of the income derived from that fund or any investment thereof as is paid by him by way of dividend on the shares into which the fund is divided; and

    (b) dividends on those shares shall be paid without deduction of tax and shall be chargeable under Case III of Schedule D.

    (5) A claim for exemption under subsection (4)(a) above shall be made to the Commissioners of Inland Revenue and section 9 of the Income Tax Management Act 1964 (procedure on claims) shall apply to any such claim.
    (6) Where at any time, by virtue of subsection (4) of this section, the income of a person from any source becomes chargeable as therein provided, not having previously been chargeable by direct assessment on that person, so much of section 131(3) of the Income Tax Act 1952 as relates to the charge of tax where a person acquires a new source of income shall apply as if the source of that income were a new source of income acquired by that person at that time.
    (7) The Accountant General shall as respects each year of assessment furnish to the Commissioners of Inland Revenue, at such time and in such manner as they may direct, particulars of any sums paid without deduction of tax by virtue of subsection (4) of this section and of the persons to whom such sums were paid, except that particulars shall not be required of any case where the total of such sums paid to any person in that year did not exceed fifteen pounds.
    (8) An agreement designating a fund for the purposes of subsection (4) of this section may provide for incidental and consequential matters, including arrangements for giving effect to subsection (4)(a) of this section by provisional repayments of tax deducted at source, and may be determined by the Commissioners of Inland Revenue or the Public Trustee by one year's notice in writing expiring with the end of any year of assessment.
    (9) In this section "funds in court" means—

    (a) money in the Supreme Court, money in county courts and statutory deposits
    1260
    described in section 14 of the Administration of Justice Act 1965,

    (b) money in the Mayor's and City of London Court transferred to the Accountant General in pursuance of section 11 of the said Act of 1965, and

    (c) any such moneys as are mentioned in section 30 of the said Act of 1965 (which relates to Northern Ireland) and money in a county court in Northern Ireland,

    and investments representing such money; and references in this section to the Accountant General are references to the Accountant General of the Supreme Court of Judicature in England and, in relation to money within paragraph (c) above and investments representing such money, include references to the Accountant General of the Supreme Court of Judicature of Northern Ireland or any other person by whom such funds are held.—[Mr. MacDermot.]
    Brought up, and read the First time.
    Mr. MacDermot: I beg to move, That the Clause be read a Second time.
    I hope that this Clause may prove to be non-controversial. I told the right hon. Gentleman the Member for Bexley (Mr. Heath) at an early stage of our intention to put it down and I think I may say that he evinced a sympathetic interest in it. It was originally put down at the Committee stage, but owing to the request that we should reprint the Bill in two parts, in order not to disturb the numbering of the Clauses, we withdrew the new Clause at that stage and have put it down again in slightly modified form. This explains why at this late stage we have brought the matter forward.
    The need for the Clause arises out of the establishment of common investment funds under the Administration of Justice Act, 1965. It gives effect to one of the recommendations of the Committee of Funds in Court which led to the passing of that Act. As hon. Members will know, this Act deals with the administration of funds in court where successful plaintiffs, mostly widows and children, who have recovered damages in the courts, have those damages supervised by the courts. Very many of these people are people who either pay no Income Tax or very little. It would be a considerable burden to them if the proceeds of their investments were paid net of tax and they then had to claim repayment of tax on the very small and numerous amounts which, although small, are naturally of great importance to them.

    1261
    The typical case is what some hon. Members will recognise as the "county court widow". Up to now these funds have been invested in 3½ per cent. war stock, the interest on which is paid gross and, consequently, the problem has not arisen. Now that these funds are being invested in common investment funds it is important, as the Committee points out, that one, at least, of these funds should cater for the needs of this class of impecunious and successful suitors. That is what this Clause does. It authorises arrangements to be made for income from a common investment fund to be paid gross. The intention is that this power should be increased in relation to one of the common investment funds. The shares in the funds would be held by the Accountant General as nominee for the suitors. The new Clause provides for relief from double taxation in respect of capital gains.
    I imagine that the House will not wish me to elaborate at length on the somewhat complicated and technical provisions of the Clause, but if there are any specific points on which I can help I shall be glad to try to do so if I have leave to address the House again.
    Mr. Donald Box: Before the Financial Secretary sits down, would he clarify one important point concerning the effect of the Administration of Justice Act, 1965, on funds in court? As I understand, funds in court are transferred to the common investment fund to which the Financial Secretary referred which is under the jurisdiction of the Public Trustee. That is done presumably on a market value basis when the law came into effect on, I think, 23rd March this year. The problem which I cannot understand—
    Mr. Deputy-Speaker: Order. This is a long intervention. Would it not be better if the hon. Gentleman made a speech during the debate? The Minister will be able to answer the debate later.
    Mr. Box: Very well, Mr. Deputy-Speaker: I have practically finished. I just wanted to explain the position.
    The problem, as I see it, is that the Queens' Bench Master who had control of the trust funds was a very poor trustee indeed and invested, as the Financial Secretary said, the proceeds of these im-
    1262
    pecunious and successful suitors in 3½ per cent. War Loan. I have a specific example—
    Mr. Deputy-Speaker: Order. I have to protect the House. Interventions should not be speeches, specially when speeches will be in order at the appropriate moment.
    Mr. Box: I thought that you had turned my intervention into a speech, Mr. Deputy-Speaker.
    Mr. Deputy-Speaker: If the hon. Gentleman will wait a moment, he will get a chance to speak when the Clause is formally before the House. It has not yet been formally moved. The Question is, That the Clause be read a Second time.
    Mr. Box: I apologise, Mr. Deputy-Speaker. I had nearly reached the fundamental point of what I was putting to the Financial Secretary.
    I have a specific case of a constituent who was awarded £750 damages in 1955. That £750 was invested in War Loan at 82. It stood on 23rd March at 55. In other words, the injured person has suffered a 33⅓ per cent. fall in the value of his original damages. As the Financial Secretary said, this applies to many widows and infants, who are the chief people concerned. I remember looking at the Pearson Report some years ago and finding that upwards of £4 million was invested in this way. There is, therefore, quite a considerable sum in question.
    What I seek from the Financial Secretary is an absolute assurance that these unfortunate people will not find themselves liable to Capital Gains Tax if the Public Trustee is successful with his common investment fund. The hon. and learned Gentleman will agree that it would be absolutely monstrous and unfair if people who had already suffered a 33⅓ per cent. depreciation in the value of their damages were to suffer Capital Gains Tax if after the transfer of those damages from 3½ per cent. War Loan to the common investment fund they were to find that the new investments appreciated and might be liable to tax. I hope that the hon. and learned Gentleman will clarify this very important point.
    Mr. MacDermot: There is no provision in the new Clause to deal with the situation to which the hon. Member for

    1263
    Cardiff, North (Mr. Box) has referred. There is no provision for carrying forward a pre-Budget loss against a post-Budget gain in this or any other sphere. An individual in the situation which the hon. Gentleman has described would be taxed only on a gain which had been made compared with an increase over the original acquisition price. But as here there is a clear disposal of the old asset and its reinvestment, the starting point is the Budget date.
    I have not had the point drawn to my attention before, and I shall be glad to look into it and to consider it. I take the point which the hon. Gentleman makes, but the answer to his Question is that it is not covered under the provisions of the Clause.
    10.15 p.m.
    Mr. Box: May I point out that the unfairness of the situation is that the person who was awarded damages had no choice in the matter; he was forced to put them under the jurisdiction of the Supreme Court, who lost 33 per cent. by bad investment.
    Mr. William Roots: I am sure that the House and the Financial Secretary are grateful to my hon. Friend the Member for Cardiff, North (Mr. Box) for raising this very important point. We on this side of the House acknowledge that the hon. and learned Gentleman said that he would
    1264
    look at this matter. I think that the point was clearly one of considerable and avoidable hardship, and since it is avoidable I am sure that the House will agree that it should be avoided. At this stage, however, having considered the new Clause, it is not our intention to divide against it on this point. In general I can only give our view of it as better late than never in terms of a new Clause.
    Mr. John Harvey: What worries me is a point which I touched on earlier today. The Financial Secretary said that he will look at any important matter which is raised. But what can be done about it after today? Presumably if we pass the Clause as it stands the point cannot be dealt with in this year's Finance Bill and must, therefore, be left until further legislation. Can anything further be done about points which are left in an unsatisfactory state at this stage?
    Mr. MacDermot: If I may have leave to answer the specific question, the position is that once the Bill leaves the House after Report it cannot be amended, and if amendment proved desirable on a point such as this it would have to wait until next year's Finance Bill. But if a decision is clearly taken that an alteration should be made, I think that the precedents are that it would be applied administratively straight away.
    Question put and agreed to.
    Clause read a Second time and added to the Bill.

    New Clause.—(UNIT TRUSTS FOR EXEMPT UNIT HOLDERS.)
    (1) It throughout a year of assessment all the issued units in a unit trust scheme as defined in section 26(1) of the Prevention of Fraud (Investment) Act 1958, or section 22 of the Prevention of Fraud (Investments) Act (Northern Ireland) 1940 are assets such that any gain accruing if they were disposed of by the unit holder would be wholly exempt from capital gains tax or corporation tax (otherwise than by reason of residence) gains accruing to the unit trust scheme in that year of assessment shall not be chargeable gains.
    (2) If throughout a year of assessment all the issued units in a unit trust scheme as so defined constitute investments to which section 33(1) of this Act applies, each being an investment such that any gain accruing if it were disposed of by the unit holder would either be wholly exempt from capital gains tax or corporation tax, or be so exempt as to not less than eighty-five per cent., then of all the gains accruing to the unit trust scheme in that year of assessment one-tenth (that is one-tenth of what would apart from this subsection be chargeable gains) shall be chargeable gains; and section 34 of this Act, with the provisions of section 63 applying for the purposes of the said section 34, shall apply in relation to chargeable gains accruing to the unit trust scheme in that year of assessment (as reduced under this subsection) where the unit trust scheme is not within section 63(1) of this Act, as well as where it is.
    >—[Mr. MacDermot.]
    Brought up, and read the First time.
    Mr. MacDermot: I beg to move, That the Clause be read a Second time.
    This is another Clause which has been put down in fulfilment of an undertaking given in Committee and its general effect is to provide that where unit trusts cater exclusively for investors who are themselves exempt from liability for tax, then the gains of that trust shall be exempt. It also extends this provision to provide for the case of certain local authorities who have a special problem in connection with investment funds and the solution which is contained in the new Clause has been worked out after some fairly lengthy and detailed discussion with the representatives of the local authorities.
    Mr. G. A. Pargiter: Before my hon. and learned Friend sits down, will he say whether this applies equally to long and short-term gains?
    Mr. Diamond rose—
    Mr. Deputy-Speaker (Dr. Horace King): The question was asked of the Financial Secretary.
    Mr. MacDermot: The answer to my hon. Friend is that it does not apply to the short-term gains.
    Mr. Pargiter: While this new Clause goes some way to meeting the case which was put in Committee and subsequently discussed at official level it does not really go as far as one might have hoped it would. As I see it now, in regard to the Local Authorities Mutual Investment Trust, which is the body with which we were particularly concerned in Committee, the position, prior to local authorities themselves being exempt from tax, was that L.A.M.I.T. would have been in the same position, but we having accepted the Clause which exempts local authorities from tax, which presumably includes both long and short Capital Gains Tax amongst other tax exemptions, the position now will be that L.A.M.I.T. will be subject to tax in respect of short-term capital gains.
    I was rather hoping that my hon. and learned Friend would be able to tell us that this would cover short-term gains as well. It may be that in the intervening period this point may have been overlooked, but we rather thought that it was covered. It now appears that it was not. It is, perhaps, rather late in the day to get it covered, but, certainly, there is an inequity here which ought to be remedied, because we come back to the original argument, that what a local authority may do individually it remains logical for it to do collectively, and that was the general principle which previously we were discussing.
    I can only express the hope that my hon. and learned Friend will say that he will watch this with a view to receiving sympathetically representations, with a view to amendments at some future time, which would at least place the Local Authorities Mutual Investment Trust in the same position as local authorities. I can hardly hope for more than that now, but I think that I can reasonably expect my hon. and right hon. Friends to give us an assurance that they will receive sympathetically representations on this point.
    The other point I would ask my hon. and learned Friend to deal with is the question of this rather rough and ready rule of one-tenth of the amount as being

    1267
    subject to tax. This one-tenth is probably a larger amount than the non-approved part of superannuation funds and so on which would be liable to tax in the ordinary way. I understand that in discussions it has not been found possible to do what was thought originally, which was to take the average of non-approved funds for the purpose of striking the right balance. Therefore, this rather arbitrary figure of one-tenth has been included.
    I wonder whether my hon. and learned Friend would consider that when there has been some experience of the actual amounts involved it will be possible to reconsider this question of the arbitrary figure of one-tenth and fix this at what is an equitable and proper figure, being the actual amount on which tax is paid rather than the arbitrary amount of one-tenth.
    I appreciate the difficulties in settling this at this time because of the absence of factual information, though it would have been possible to have got it if the authorities had been asked for it.
    With that in mind I would thank my hon. and learned Friend for going this far, and I can only express the hope, like Oliver Twist, that we can ask for a little more in the not far distant future.
    Mr. John Harvey: The Financial Secretary did not really go to any great distance in explaining the new Clause. Indeed he did not seem entirely happy about the intervention of the hon. Member for Southall (Mr. Pargiter). The second subsection is particularly complicated, and I think that it would be helpful if the Chief Secretary, in the absence of the Financial Secretary, could explain it in greater detail than his hon. and learned Friend did.
    Mr. Diamond: I readily respond to that, and perhaps the House will permit me to say that it was a matter of courtesy which led my hon. and learned Friend to move the new Clause. I should have been in my place to do so, but was not, and I apologise for my absence.
    Perhaps I might, first, answer the two questions put to me by my hon. Friend the Member for Southall (Mr. Pargiter) with regard to short-term Capital Gains Tax, and 10 per cent. As regards the
    1268
    former, L.A.M.I.T. has been paying it since 1962, when it was introduced, and it is therefore continuing an existing practice.
    My hon. Friend is right when he says that the 10 per cent. is an arbitrary figure. It is arbitrary in the sense that it is a fixed figure. It has many advantages. People know where they are. It is a simple calculation, and it is estimated to be just about right. My hon. Friend will have noticed that the exemption is for funds approved to the extent of at least 85 per cent., and he is right in saying that many funds are approved to a greater extent, and that 90 per cent. might be the average.
    I think that 10 per cent. might turn out to be approximately right at the end of the year, but my hon. Friend need have no fears about this. There is nothing to prevent us looking at the matter again at the end of the year, and if there is a wide divergence, which I do not expect, this could be looked into then. However, in my view it will prove to be the right figure, within a very small margin indeed, and the simplicity involved will outweigh any slight variation that might otherwise have taken place.
    Mr. Raymond Gower: Will the concession of the benefits provided by the new Clause inure for any kind of unit trust or investment trust which may be set up in future by any association of local authorities? For example, if the local authorities in Cumberland or Wales decide to set up their own trust, will they enjoy the benefits of the new Clause?
    Mr. Pargiter: They have already done that.
    Mr. Diamond: Is the hon. Gentleman asking about setting up a new fund?
    Mr. Gower: Yes.
    Mr. Diamond: If it satisfies these conditions, it will gain the advantages described in the new Clause. Perhaps it might be convenient shortly to repeat the advantages. There will be a 100 per cent. exemption from Capital Gains Tax if those bodies which will be wholly exempt themselves get together and form their own unit trust, provided that it is a unit trust of a kind which is serving

    1269
    them exclusively. A unit trust which exclusively serves exempt bodies will, under these provisions, itself be exempt, and there will not, therefore, be any problem at all. This corresponds to the precedent of the Charifund, to which my hon. Friend referred earlier, and which I promised to look at to see whether we could introduce something of that kind. That deals with the first subsection.
    Subsection (2) deals not with 100 per cent. exemption, but with 90 per cent. exemption where the bodies who are investors, the unit holders, will be investing their superannuation funds, and those funds will be of a kind which are approved for Income Tax purposes as to no less than 85 per cent. If they are less than 85 per cent. approved, they should not come into this grouping at all, but if they are of at least 85 per cent. approved, and they come into this grouping for the purpose of investment as a group under unit trust methods, then 90 per cent. will be exempt for Capital Gains tax.
    The credit system to which we referred earlier, in Committee, would still apply, so that there is no question of double taxation. This is a relief of a kind which my hon. Friend and others interested in this matter were anxious to have secured, and I am glad that as a result of the many and long negotiations which have taken place this exemption has been found possible.
    Mr. Pargiter: Will my right hon. Friend say a few words on the question of the short-term aspects of the matter? He referred to the fact that in 1962 L.A.M.I.T. had been paying it and that the position had not altered. But local authorities paid it from 1962, and the position has altered for them. Logically, therefore, it should also alter for the Local Authorities' Mutual Investment Trust. Will my right hon. Friend say a word on that point? Will he agree to look at it again?
    Mr. Diamond: My hon. Friend knows that everything can be looked at again, but that we are on Report now, and we look again at things that are perhaps less of immediate advantage than was the case at an earlier stage. This has been the position: short-term capital gains are in quite a different position from long-term
    1270
    ones, and have been accepted as such for a long time. I will look at the situation again, but my looking at it again could not possibly have any effect on this Bill. My hon. Friend is not asking that. He wants me to be aware of the fact that the situation has changed because of the relief given to local authorities.
    I will bear that point in mind, but this position has held for a long time and there are good reasons why it should continue. I will, nevertheless, look at the position, as my hon. Friend has asked me to do.
    10.30 p.m.
    Mr. Peter Walker: I want to make it quite clear that we are extremely disappointed at the new Clause. I do not consider that it goes very far in meeting the indication given by the Chief Secretary in Committee. I would remind the House that when considering Clauses 32, 33 and 34 in Committee it was pointed out that the majority of superannuation funds and charities primarily invest in investment trusts, as opposed to unit trusts. The new Clause applies only to unit trusts.
    I want to make it clear that the provision in subsection (1), that
    "a unit trust scheme as defined in section 26(1) of the Prevention of Fraud (Investments) Act, 1958"
    means that the majority of investments by charities and superannuation funds currently held in investment trusts will obtain no benefit from the Clause. What is more, no benefit will be obtainable from the Clause even if an investment trust was set up solely for the purpose of local authorities or charities, or for superannuation funds.
    I consider it rather surprising that neither the Financial Secretary—who, in the circumstances, dealt with the matter quite well in proposing the Clause so quickly—nor the Chief Secretary gave any explanation why he had decided to exclude the principle of investment trusts from the provisions of the Clause. Investment trusts are much more appropriate media for investment for charities and superannuation funds than are unit trusts. I checked today on four companies' superannuation funds and found none had any investments in any form of

    1271
    unit trust, although they have considerable investments in investment trusts.
    Those trusts will be taxed by the Government at the rate of 35 per cent. In spite of all the representations made to them, the Government have decided to do nothing to assist charities, superannuation funds and local authorities in respect of their investment trust investments. The House needs to be told why the Government have decided to allow the principle of unit trusts, but completely to disallow that of investment trusts.
    There are many reasons why the investment trust is more appropriate. First, a "gearing-up" of capital is possible within an investment trust which cannot go on within a unit trust. Secondly, this Clause gives complete and utter freedom to the Board of Trade. Section 26 of the Protection of Fraud (Investments) Act more or less says that a unit trust is a unit trust which is approved by the Board of Trade.
    There are no stipulated regulations. There are certain things which one must do to become a unit trust, but if one complies with those conditions, the Board of Trade could still say "No" to a unit trust. It is completely in their hands and under their control. I do not understand why the Government have decided that, if a group of local authorities or a group of charities or a group of superannuation funds form an investment trust between them, they will be allowed no benefit at all, but will be subject to Capital Gains Tax at 35 per cent. within those trusts, but that if they form unit trusts, they will obtain exemption. We have had no explanation of this difference.
    I would ask the Chief Secretary to comment further on the provision for superannuation funds. This affects 10 million people. I do not think that his explanation of the 90 per cent. provision was good enough, as he must know that many superannuation funds obtain virtually 100 per cent. exemption and there is a large number of such funds which come into the category of less than 85 per cent. Those in the latter category—for example, a superannuation fund enjoying a 70 or 80 per cent. exemption—will obtain no benefit from this Clause. They do not come into the Clause. They do
    1272
    not get 80 or 75 per cent. exemption; they get nothing at all. We have the rather absurd position, therefore, that if a superannuation fund enjoys 84 per cent. exemption, it will obtain no advantage or benefit, but if it receives 86 per cent. exemption, it will obtain a 90 per cent. exemption and a 90 per cent. discount.
    I cannot see how any Government can defend a situation where a difference of 2 per cent. can make the difference between no exemption and 90 per cent. exemption. That is what the Clause does as at present drafted—[Interruption.] When I want advice on speaking, I will certainly go to the hon. Gentleman the Member for West Ham, North (Mr. Arthur Lewis), who is very learned in most languages.
    This Clause is designed basically to give benefit to charities and superannuation funds. It will benefit but a small fraction of the existing charitable and superannuation funds. We shall be moving Amendments at a later stage which would give the full benefit of the elimination of the Capital Gains Tax, which will continue as a result of this Clause on charities and superannuation funds.
    Mr. Diamond: With your permission and that of the House, Mr. Deputy-Speaker, I should like to deal with the second point of the hon. Member for Worcester (Mr. Peter Walker) first. Wherever one draws the line, of course, there is always a difference between being on one side of the line and being on the other. What the hon. Gentleman does not fully appreciate is that the credit scheme is in operation. The reason that it was necessary to do more than the plain credit scheme was that the funds of a number of organisations of this kind were almost wholly exempt. There would have been no real advantage to them in giving them a credit certificate, because there was very little against which to place that certificate and so recover the Capital Gains Tax which they had suffered, according to the certificate.
    Therefore, where the funds are not of that kind and to the greater extent that they are not of that kind, the more will there be other Capital Gains Tax funds against which the credit can be set. Therefore, the benefit would be obtained in that way. I do not think. Therefore,

    1273
    that there is any doubt but that this division, slightly arbitrary as it is, will meet the case by and large.
    As to investment trusts, the hon. Member is raising an entirely different point. Investment trusts are different bodies from unit trusts and carry out a different activity. They buy and sell their shares in the open market; they seek to make capital gains. They are a different kind of organisation and they would not normally serve this purpose. If local authorities desire to obtain the complete exemption which the Clause provides, they can so organise it through a unit trust and get everything they require in that way.
    Mr. Peter Walker: If that is the case, why did the right hon. Gentleman say in Committee, when dealing with this point:
    "What I am considering, and what we want to see, is whether it is possible in some respects to meet the spirit of this Amendment; whether if charities did combine together to form an investment trust, which was not itself a charity but the whole of whose members were charities, and whose membership was exclusively open to charities, we could provide special regulations …"?—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1235.]
    In Committee, therefore, the right hon. Gentleman considered that an investment

    New Clause.—(TRANSFER OF BUSINESS ON RETIREMENT.)
    (1) If an individual who has attained the age of sixty years—

    (a) disposes by way of sale or gift of the whole or part of a business which he has owned throughout the period of ten years ending with the disposal, or

    5

    (b) disposes by way of sale or gift of shares or securities of a company which has been a trading company and his family company during the period of ten years ending with the disposal, and of which he has been a full time working director throughout that period,

    then relief shall be given under this section in respect of gains accruing to him on the disposal and the amount available for that relief shall be—

    10

    (i) if he has attained the age of sixty-five years, ten thousand pounds,

    (ii) if he has not attained the age of sixty-five years, two thousand pounds for every year by which his age exceeds sixty, plus, for any odd part of a year, a corresponding part of two thousand pounds.

    15

    (2) Where subsection (1) (a) above applies the gains accruing to the individual on the disposal of chargeable business assets comprised in the disposal by way of sale or gift shall be aggregated, and only so much of that aggregate as exceeds the amount available for relief under this section shall be chargeable gains (but not so as to affect liability in respect of gains accruing on the disposal of assets other than chargeable business assets).

    20

    (3) Where subsection (1) (b) above applies—

    (a) the gains which accrue to the individual on the disposal of the shares or securities shall be aggregated, and

    25

    (b) of a proportion of that aggregate sum which is equal to the proportion which the part of the value of the company's assets (including cash) at the time of the disposal which is attributable to the value of the company's chargeable business assets bears to the whole of that value, only so much as exceeds the amounts available for relief under this section shall constitute chargeable gains (but not so as to affect liability in respect of gains representing the balance of the said aggregate sum).

    trust was the appropriate thing. Now, he is saying that unit trusts are.
    Mr. Diamond: The problem here is exactly the same as the hon. Member suffered from when speaking a moment earlier and using investment trusts at one stage as being a category which included unit trusts, as most people do. The general category is investment trusts, and that category includes unit trusts. One of the difficulties of our discussions time and time again is that the term "investment trusts" is often used to include both categories, investment trusts and unit trusts. That is why, when one is talking sometimes about unit trusts, one refers to them in the general form which includes both categories.
    Mr. Geoffrey Lloyd: We agree that investment trusts are different bodies, but I cannot let pass the right hon. Gentleman's remark that the purpose of an investment trust is to make capital gains. Its main purpose is to maximise its income in the interests of its shareholders, and that is quite different.
    Question put and agreed to.
    Clause read a Second time and added to the Bill.

    30

    (4) So far as the amount available for relief under subsection (1) above is applied in giving relief to an individual as respects a disposal within that subsection it shall not be applied in giving relief to that individual as respects any other disposal (and the relief shall be applied in the order in which any disposals take place), and—

    35

    (a) if the total amount of relief given to an individual under this section exceeds five thousand pounds section 23 (2) of this Act shall apply on the death of the individual as if the five thousand pounds there mentioned were reduced by the amount of the excess, and

    40

    (b) if the total amount of relief given to an individual under this section is ten thousand pounds, no relief shall be given under the said section 23 (2) on the death of that individual.

    (5) In arriving at the aggregate under subsection (2) or subsection (3) above—

    (a) the respective amounts of the gains shall be computed in accordance with the provisions of this Act (other than this section) fixing the amount of chargeable gains, and

    45

    (b) any allowable loss which accrues on the disposal shall be deducted,

    and the provisions of this section shall not affect the computation of the amount of any allowable loss.

    (6) In this section—

    50

    "chargeable business asset" means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of a trade, profession, vocation, office or employment carried on by the individual, or as the case may be by the individual's family company, other than an asset on the disposal of which no chargeable gain accrues or (where the disposal is of shares or securities in the family company) on the disposal of which no chargeable gain would accrue if the family company disposed of the asset at the time of the disposal of the shares or securities;

    55

    "family company" means, in relation to an individual, a company the voting rights in which are,—

    60

    (a) as to not less than twenty-five per cent., exercisable by the individual, or

    (b) as to not less than seventy-five per cent., exercisable by the individual or a member of his family, and, as to not less than ten per cent., exercisable by the individual himself, and

    65

    "family" means, in relation to an individual, the husband or wife of the individual, and a relative of the individual or the individual's husband or wife, and "relative" means brother, sister, ancestor or lineal descendant;

    70

    "full time working director" means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity;

    "trade", "profession", "vocation", "office" and "employment" have the same meanings as in the Income Tax Acts;

    "trading company" has the meaning given by paragraph 8 of Schedule 17 to this Act,

    75

    and in this section references to the disposal of the whole or part of a business include references to the disposal of the whole or part of the assets provided or held for the purposes of an office or employment by the person exercising that office or employment.—[Mr. MacDermot.]

    Brough up, and read the First time.
    Mr. MacDermot: I beg to move, That the Clause be read a Second time.
    Mr. Deputy-Speaker: With the new Clause, it is proposed that we should take the Amendment in the name of the right hon. Member for Rushcliffe (Sir M. Redmayne), in line 7, at end insert:
    "or disposes of the liquidated assets of such a company",
    and the Amendment in the name of the hon. Member for Barry (Mr. Gower), in line 13, at end insert:
    1276
    (2) If an individual who, having attained the age of fifty years, but not having attained the age of sixty years,—

    (a) satisfies the Inspector of Taxes that he is obliged through ill-health or physical disability to dispose by way of sale or gift of the whole or part of a business which he has owned throughout the period of ten years ending with the disposal, or

    (b) satisfies the Inspector of Taxes that he is obliged through ill-health or physical disability to dispose by way of sale or gift of shares or securities of a company which has been a trading company and his family

    1277
    company during the period of ten years ending with the disposal and of which he has been a full-time working director throughout that period,

    then relief shall be given under this section in respect of gains accruing to him on the disposal and the amount available for that relief shall be ten thousand pounds.
    Mr. MacDermot: Being a little more prepared, perhaps I can move the new Clause a little more fully. This is another Clause which, in Committee, we undertook to introduce. It covers a number of points which were raised in debate. It primarily owes its origin to an Opposition new Clause which was moved in Committee and upon which our new Clause is closely modelled. I paid tribute on that occasion to the draftsmanship of the Opposition Clause and I am happy to do so again. It contained a number of ideas which have been helpful in finding a solution to the problem with which it deals.
    Essentially, the new Clause is to assist the person who wants to provide on retirement for his old age and to grant a limited, qualified exemption from liability to capital gains when he transfers his business on retirement. Perhaps it would assist the House if I were to indicate the salient points of the relief which is proposed in the new Clause.
    The normal case with which it deals will, of course, be one where the individual concerned who is retiring sells his business, but we have not confined the new Clause to the case of sale but have extended it also to disposal by way of gift. This, in particular, was to meet a point raised by the hon. Member for Down, South (Captain Orr) who pointed out that it is a common practice in his part of Northern Ireland for a farmer at the time of retirement to hand over his farm to his son or whoever is taking it over; and the farmer continues to live on the farm, although he may live off the farm as well. This is, as it were, his provision for his retirement. There is no cash transaction involved, but that is the way he provides for his retirement. We thought it right to frame the new Clause in such a way that it would cover that kind of case.
    10.45 p.m.
    The sort of exemption we propose is that it should exempt gains up to £10,000. This may mean a realisation
    1278
    of business assets of considerably more than that amount. All that the exemption deals with is the capital gain and there will be an opportunity for exemption up to £10,000. When we compare that with the death exemption of £5,000, we feel that that is a generous but reasonable sum. It is less than the sum proposed in the Opposition proposal, which was £15,000, but I suggested then that that might seem rather high and out of proportion with the death exemption.
    There is a relationship between these two exemptions because the new Clause provides for the second £5,000 of the £10,000 to be set off, as it were, against the death exemption. In other words, if a person claims an exemption for more than £5,000, anything over £5,000 that he claims successfully will go in reduction of the exemption which will be available to his estate on his death.
    The full relief as we have proposed it would be available at the age of 65, but we have, again in accordance with a matter which we discussed in Committee, written in a tapering provision to enable the relief to begin at the age of 60; and then it will be graduated evenly throughout the five-year period. It will not rise in £2,000 jumps but gradually throughout the five years to the full amount of £10,000 to the age of 65.
    The assets which will be available for this relief on their disposal are what may generally be classed as "business assets". This is intended to be a provision particularly to help what were described in Committee as small businessmen—and included in that term would be a farmer, using the word "business" in the very widest sense. We propose that all truly business assets should be included as being available for the exemption. It will, therefore, include goodwill, but it will not include assets which, although held in the ownership of a business, are held purely as investments.
    Hon. Members may have noticed that there is, in the closing lines of the new Clause, a reference to persons holding an office or employment. The effect of these words is to extend the benefit of the exemption to persons such as insurance agents, who were discussed on a number of occasions in Committee, in particular in relation to their problem when they come to dispose of their insurance book. This exemption will also be available to

    1279
    insurance agents on retirement after the appropriate age.
    How is it achieved that this is confined only to retirement? Where a business is a company, the individual concerned must for the last 10 years before the disposal have been a full-time working director of the company, and must also either have himself held not less than 25 per cent. of the voting rights in the company or must have held 10 per cent. and his family must have held a total of 75 per cent. We hope that the House will find this to be a satisfactory way of confining the scope of relief to the kind of family business which, I think, we all had in mind during our discussion.
    Where the business has not been incorporated, and is owned by the man either alone or in partnership with others, the relief will still be available but, again, he must have owned the business either alone or jointly with his fellow partners for the last ten years before the time of the disposal. This 10-year period, I think, is a necessary provision in order to ensure that the scope of the exemption is of the kind we had in mind when framing the provision.
    I do not think that it would be helpful to the House if, at this stage, I were to seek to comment on the Amendments which we are to discuss with the Clause.
    Sir Martin Redmayne: I understand, Mr. Deputy-Speaker, that we are to debate broadly the Amendments to the proposed new Clause, and I hope that we may be able to divide on them if we so wish.
    The new Clause is similar to our Amendment that was debated in Committee very briefly, for the convenience of hon. Members. As it was then debated only briefly, we did not quite rub in one or two points as much as we should have wished. But the Chancellor has met a very great number of points, and I would not quarrel with those with which the Financial Secretary has dealt, although one can always say that what is done is not enough. However, I think that probably it is fair.
    Nevertheless, it seems to me that when instructions were given to the parliamentary draftsmen, the Financial Secre-
    1280
    tary missed one very important point which would have come out had he followed our earlier Amendment more closely. In the earlier part of that Amendment we referred to the individual who, in connection with his retirement, disposed before his death of all of his interest in assets used, and used only, for the purpose of the trade. Towards the end of that Amendment we provided that in the case of a company the interest in the shares of that company should be the equivalent of an interest in the assets of a partnership.
    The drafting of the new Clause has removed one of the virtues of our Amendment, in that it covered the case where a man retiring from private business might prefer, or, indeed, might find it very much to his advantage, or might have no other alternative than to wind up the business rather than sell it as a going concern. That is the point of the first of the Amendments we are debating.
    I will give one example which illustrates clearly the situation that ought to be covered, and it is one that happens often in private business. One can have a prosperous trader, a man who has been in trade for much longer than the 10 years which the Financial Secretary has specified, and, in the course of that trade, carrying a large and valuable stock and, equally, having year by year, as a matter of good business, a very solid figure of sundry debtors—both of which are realisable assets.
    But combined with this in the course of his trade, having had a long lease on the property in which he trades, he decides that the time has come for him to retire when that lease might expire very shortly. Private businesses of this sort are best sold on the record of profits and not on the asset value. A profit record has no value to a purchaser, unless there is to be continuity both of the premises in which the trade is carried on and the management.
    In a case of this sort the man has been in the trade for a long time and wants to retire. If he were a younger man, seeing that the lease is about to expire, he would tackle the problem himself. He would either renew it, as one has to nowadays, at three or four times present rent and cope with that and its effect on the business until such time as it can be absorbed, or remove the business elsewhere.

    1281
    Both courses are considerable tasks for a small business. Both are perfectly practicable to a man who considers that he has health and strength to carry on, or if he has someone to follow him in tackling these problems, but it is certain that for a business of that sort with that problem ahead and the management of the business not assured because the man intends to retire as he is not fit or able to carry on the business, it is very difficult to find a buyer.
    In such circumstances, which are real and do happen, the business is best sold for its asset value, because there is no probable continuity of the profit record. Therefore, this man seeking to retire, should liquidate his assets, sell the fag-end of the lease if he can for what it is worth, and make the best of the situation. He is not covered by the Government's new Clause, although he would be covered by our Amendment. This is a very cogent and real case and I ask the Financial Secretary to give this Amendment very special consideration.
    My special interest is farming, although I have no financial interest in this matter. In farming, liquidation of the assets of a business of this sort is more common than not. There are few buyers for a going concern of the type we are considering. If the Amendment is not accepted, the Government will have left a wide gap in what they intend to do on the lines of the Amendment we moved in Committee. It would be a great pity if that gap were left and I doubt very much if the Government intend that it should be so.
    If I may, I will now refer to the Amendment in the name of my hon. Friend the Member for Barry (Mr. Gower). If he had not put it forward, others of my hon. Friends and I would have done so. We all know that 50 to 60 is a dangerous age. I am rising 55.—[An HON. MEMBER: "Cheer up!"] A man of my age, afflicted by any sort of disability which makes him incapable of carrying on his business—I do not regard myself, fortunately, as in that class—may yet live for many years. [HON. MEMBERS: "Hear, hear."] I worked up to that, but it was unintentional. For an active man, when he is 55, to be
    1282
    incapable of carrying on the business in which he has been all his working life, is worse than a living death.
    I think it very hard that the new Clause should not consider such a man because it is certain that no one else will. That is the penalty of independence. I do not doubt that my hon. Friend the Member for Barry will put the case much better than I and in more detail, but I remind the Financial Secretary that in Committee, moving an Amendment concerning this matter, I said that I believed that 60 to 65 was too old and that a little latitude should be shown so that a man who had to give up his business because of ill-health before the age of 60 could enjoy the same provision. I hope that the Government will consider it.
    11.0 p.m.
    Mr. Gower: Like my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne), I welcome the new Clause. I feel that it will go some way to lessening the fears and anxieties of many thousands of smaller family businessmen and those who look after the destinies of many of our smaller companies.
    Nevertheless, I hope that the Financial Secretary will not think that my hon. Friend the Member for Worthing (Mr. Higgins) and I are lacking in gratitude because we now press him to incorporate our Amendment in the Clause. While, as the hon. and learned Gentleman correctly said, the Clause is designed to assist the person who wishes to provide on retirement for his old age, I submit that a person who is providing for retirement and old age, and who sells or disposes of his business at the age of 60 or 65, can claim that, to some extent, his affairs have gone according to plan. He does not fare nearly as badly as a person who is in the category described in my Amendment.
    Such a person may wish to have provided for his old age in retirement, but, unfortunately, before reaching the age prescribed in the Clause is prevented by ill-health or physical disability from carrying on his business or pursuing his directorship in which he has been working full time for 10 years. To that extent, his position is much worse than that of someone who has managed to remain well until retiring age.

    1283
    We have, therefore, designed this Amendment so that, provided such a person can satisfy the inspector of taxes that he is obliged—and the obligation has to be established—through ill-health or physical disability to dispose of his business or interest, and provided that he can also establish, as in the Clause, that he has been associated with the business for 10 years, he should be entitled to some comparable benefit.
    The hon. and learned Gentleman may object to the wording
    "… satisfies the Inspector of Taxes …"
    but repeatedly, during our debates on the Bill, some discretion has been pleaded as a virtue by the Treasury. Here, indeed, the onus is placed upon the taxpayer and surely the Treasury would not object to that. He would have to satisfy the inspector of taxes with medical evidence, and so on. I hope that the hon. and learned Gentleman will be able to say that the Government will gladly incorporate this deserving, group in the benefits of the Clause.
    Mr. J. T. Price: When we debated this matter in Committee on 31st May, I took the opportunity to make a few critical observations of a restrained character to point out the great injustice which would be caused to many insurance agents if the goodwill in their books were to be subjected to Capital Gains Tax. I am, therefore, bound to acknowledge my gratitude, limited though it may be, for the concessions which are embodied in the new Clause and which will adequately cover retiring insurance agents, whom I had chiefly in mind.
    It is already well known that there are probably no fewer than 80,000 insurance agents collecting weekly business for their respective companies and that probably 15,000 to 20,000 of them are subject to the Clause. The limit of £10,000 free of Capital Gains Tax would more than cover those whose case I was pleading a few weeks ago.
    However, there is another aspect of the matter which only my Christian sympathy for suffering humanity prevents me from expounding at this time of night at the length which I would find necessary at some other time, because I am still not sure that the Treasury Ministers and their
    1284
    advisers understand the matter properly. For instance, only the agents of certain companies enjoy an interest in the goodwill of their own books—The Co-operative Insurance Society and the Liverpool Victoria are two which come readily to mind. I am not briefed on this matter and I am speaking purely from personal knowledge. For other companies, such as the Prudential, which is probably the largest, this factor will not arise, because they do not recognise their agents' interest in their books.
    The Clause will relieve agents from liability to Capital Gains Tax if those gains are applied to providing for the agent's retirement. I understand that the amount in question may be reserved by a sort of delayed action effect under Clause 31, but no doubt that is something which will be explained.
    The point which I want to make, shortly in view of the hour, is that a company which does not recognise the agent's interest in his book will not have this capital gains equation applied to its agents. In any year in which such a company does £10 million worth of new business, not an uncommon sum, and that is retained even for some years, there will be no question of capital gains on the new business because the gains will not be designated to particular agents. However, if another company achieving the same record of business does split up the sum among its agents, there will be a liability on the assessed amount of the increase.
    This is something difficult to explain in simple terms in a short time, but the great distinction is that while the new Clause will benefit those using the capital gain to retire, it will not have the same effect on agents who, for one reason or another, leave the insurance industry at 45 or 55, or some other age short of the full retirement age.
    I think that it would be very difficult, in logic and equity, to sustain the taxation of these amounts, because a man may pay a nominal sum of say, £250 for a small book, which is producing income in commission at the approved rate for his company. He keeps the book for 10 years, by which time, when he relinquishes it or comes to sell it, it is worth £500.

    1285
    Can any Minister tell me how it will be assessed as to how much of that £500 is represented by the original investment of £200? Nearly all the clients in the original book will have gone and the new business is not a capital gain on what existed before. The difference of £250 and £500 need not be a capital gain on the original investment at all. It can be something quite different. I know that at this stage of the Bill we cannot expect any Government to go on fiddling about with it and make minor adjustments. I thought that my gratitude, which I have freely expressed, for what has been done, must be tempered by the consideration that there still remains an injustice which I regard it as my duty to raise, in restrained and proper terms, because I do no think it can be defended in this House.
    Mr. Terence L. Higgins: It is always a pleasure to follow the hon. Gentleman the Member for Westhoughton (Mr. J. T. Price). I think that we all agree that he has raised an important point on the question of insurance accounts. He may well have enunciated a general principle which can be extended to other activities besides insurance. I am sure that he will forgive me if I do not follow him in detail into that territory.
    We all welcome the Government's Clause, tabled in response to the assurance given in Committee, when the Financial Secretary said he was "attracted" to the idea which our Amendment embodied. I think it important that people who are faced with retirement should be given the kind of relief which the Government are now proposing to give.
    On the other hand, it should be stressed that while there is much in the present amendment concerning shares and directorships, and so on, the fact remains that the Clause also extends to a great many people who have their own businesses, such as small shopkeepers. Numerically, this is an important group for which we all believe something ought to be done when it comes to the question of retirement. Another reason we welcome it is because it will give help to the small businessmen who have been efficient, and built up goodwill over the years, by ensuring that they will not be taxed on the fruits of their efforts when they come to retire.
    1286
    My right hon. Friend the Member for Rushcliffe (Sir M. Redmayne) pointed out in Committee that
    "under the Bill, if any trader retires, instead of dying in harness, when he would get the advantages set out in the Bill, he is offered the roughest of treatment. He is liable to Capital Gains Tax in full without any relief on the disposal of his assets. His retirement automatically deprives him of the 45 per cent. reduction in Estate Duty, which he would have got had he died in harness."
    I think that we are all agreed that that was an extremely cogent argument and that relief should be given.
    In summing up, my right hon. Friend pointed out that
    "where the choice is between retirement alive and retirement dead, it is death which gives the best bargain."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1200.]
    We are now in a situation in which we have covered the case of the person who retires at 60 or 65; he will get relief. But the person who is forced to retire by ill health, who does not have an option to retire or to go on until he dies, is treated less favourably than either of the other two groups.
    It should be clear to all hon. Members that if we accept the new Clause, which we welcome, we should also accept the Amendment in the name of my hon. Friend the Member for Barry (Mr. Gower). I hope that the Financial Secretary will not find it necessary to oppose that Amendment. He can turn round and say that we in the Opposition are like Oliver Twist, always asking for more; we have been given one concession and we are asking for another. But it is clear that this additional concession is reasonable and equitable, and I hope that the Financial Secretary will have no hesitation in accepting it.
    11.15 p.m.
    Dame Irene Ward: My hon. Friend the Member for Worthing (Mr. Higgins) has spoken of men who run small businesses. Presumably there are also women who run small businesses. Would they not be included by the Amendment?
    Mr. Higgins: I certainly hope so.
    Mrs. Freda Corbet: It is a great pleasure for me to be able to welcome the concession made by my right hon. Friend, because I was instrumental

    1287
    in some small way in helping the hon. Member for Worthing (Mr. Higgins) to suggest that my right hon. Friend should give further consideration to the problem.
    I now add my plea to that of hon. Members opposite to the Chancellor in respect of people suffering from ill-health. The House, I think, recognises that I have some practical experience in the matter. At this very moment I am concerned with the ill-health of someone I know very well. It is not a question of a disease occurring when the person is approaching retirement age. It is a question of one of those serious diseases which completely incapacitates in the middle years of one's life. When a person's livelihood depends on the business, and it becomes necessary to sell the business at an even earlier age than is suggested in the Amendment, and provision is needed for years of ill-health, I feel that we can safely appeal to the Chancellor's sense of humanity.
    I add my voice—although perhaps if it came to a vote, not my vote—to those of hon. Members who have pleaded to the Chancellor to look very carefully at this problem. I hope that he will go even further than the Amendment suggests and will look at the possibility of including people who are suffering from incurable diseases which may yet allow them to live for quite a number of years. It is a simple plea, easily understood. It may not be so easy to administer, but I hope that it will be possible to overcome such difficulties as there are.
    Captain L. P. S. Orr: I am sure that the Financial Secretary's heart will be moved by the plea of the hon. Lady the Member for Peckham (Mrs. Corbet), and we look forward to hearing him say in a moment that he accepts the Amendment. I hope that he will do so.
    But before he does so, may I put a further argument to him? The new Clause will be welcomed. He will recall that in Committee I made a particular plea on behalf of the small owner-farmer, of whom we have a great number in Northern Ireland. Our farming there is done almost entirely by owner-farmers rather than by tenants. It will also be welcomed by the crofters in Scotland. It will go a long way towards relieving their anxiety.
    1288
    If I may make one further point, I would say that it is a very great pity that this sort of anxiety was ever raised, a great pity that these people were left in this state of uncertainty and trouble for so long. It is a pity that this matter was not properly thought out before it was brought to the House. However, let us not be grudging. Let us acknowledge the concession which has been made and say that it will be very welcome.
    At the same time, I would ask the Financial Secretary to consider the Amendment tabled in the name of my hon. Friend the Member for Barry (Mr. Gower). I ask this because the lot of these small farmers and crofters is particularly hard. It entails very long hours of work among their families, because, it is a rare thing for these men to employ labour other than that provided by members of their families, and they all work these long hours, and it is often the case that, because of ill-health they want to retire earlier than at the age of 65.
    I plead with the Minister to consider whether, if not by way of this Amendment then by way of something of his o.wn, he could meet the point which has been so ably made.—[HON. MEMBERS: "He cannot."] If he cannot, then perhaps he would devise the means by which it could be done next year if there is no possibility at all of help being given now. Could he put it right next year? I ask him to consider the matter seriously, because it is one which we regard as of very great importance.
    Sir Richard Thompson: When he spoke to this Amendment, the Financial Secretary, in most moving terms, said that it was to assist that person who wanted to provide for his retirement in old age. That seems to be a most proper aim, but from the way in which the hon. and learned Gentleman put it one would have thought that he was making a novel concession; but this is not something which everybody wants to do. People who have spent their entire working lives building up small businesses for retirement, or for those who will follow after them, are as important as those who, on the other hand, are wage or salary earners and who have a pension when they reach retirement age.

    1289
    Although this concession has received general approbation from the House, I suggest that it is not the big thing which it is written up to be. For one thing, the Financial Secretary has written in an exemption up to £10,000; but rarely today, in times of absolutely roaring inflation, does it seem to be appreciated what this kind of numerical limit can mean. It might sound a big figure today, but in a few years' time it will be very small indeed. I, personally, would wish that he had acceded to the earlier Amendment, moved during the Committee stage, where the figure was £15,000.
    When he replies, would the Financial Secretary give a bit more information about subsection (6), where it is stated that:
    "'chargeable business asset' means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of a trade, profession,…"?
    Does that mean that if a man has a small business earning reasonable profits over the years and if, in an effort to keep those profits in the business he has invested some in, for example, Government securities or National Savings Certificates or something of that kind, thereby carrying out the Chancellor's wishes as enshrined in this whole Bill, and has devoted some part of those profits to reinvestment in the business, that man is then to find that the money put by is exempted when it comes to calculating what his benefit under this Clause will be? If that is the right construction to put on subsection (6) it seems to me to be very wrong indeed, that a small man who has not freely spent or squandered some profit he has made but tried to retain it in his business should be penalised in this way.
    I take the view that we in this House do not do nearly enough for people who try to stand on their own feet and be a little bit independent in their old age. They get caught in the same net as the big speculator, of whom we are always hearing. As so often in the Bill, this is a Measure which, originally, I suppose, was aimed at the big man, but falls most hardly and unjustly on the small man.
    I cannot join in the general applause for a concession which, I think, does much less than justice to some of the staunchest and most self-reliant people
    1290
    we have, who are not relying on the State or the public services to maintain them in their old age but have tried to do something to make sure that at the end of their lives they are still a little proud and a little independent.
    I hope that when the hon. and learned Gentleman replies to the debate he will see the wisdom of widening the scale of his concession by accepting the Amendment to the new Clause.
    Mr. MacDermot: By leave of the House and by your leave, Mr. Deputy-Speaker, I should like to thank all hon. Members, up to the hon. Member for Croydon, South (Sir R. Thompson), for the warm welcome they have given to the Clause and express modified gratitude to the hon. Member for Croydon, South for his modified welcome to the Clause.
    Perhaps I may deal with some of the small points first. The hon. Member for Croydon, South referred to the question of assets in the form of investments. If they are purely investments and not connected with the trade or business, then there is no reason why they should be entitled to exemption, any more than a wage earner who saves and invests, and who, in due course, if he realises his investments, may be liable to a capital gain.
    But if the money he has saved from his business is ploughed back for the purpose of the business—it might be that at the time of retirement some of this was invested in securities because he had been accumulating a fund for some genuine purpose of acquiring new machinery say, in the business—if he could establish this to the satisfaction of the inspector, then this would be treated, properly, as a business asset. The test is whether the asset is a business one or not.
    Sir R. Thompson: Let us take, for example, the case of a greengrocery shop. A man who saved some money on that could not really invest it in such things as stocks which are perishable. If he chose to plough it back in the form of investing in National Savings Certificates, instead of investing in the business, what would be the difference?
    Mr. MacDermot: I cannot understand how that is the same as ploughing it back in the business. It is not. It is something entirely different.

    1291
    My hon. Friend the Member for Westhoughton (Mr. J. T. Price), whom I thank for his welcoming remarks, raised two specific points. First, he asked whether this would be related to the provisions in Clause 31. I cannot anticipate the Amendments which are on the Notice Paper in relation to that, but it is intended that the provisions of that Clause shall also extend to insurance agents.
    My hon. Friend also asked me why this should not apply to the man who retires at 40 or 45. I think that the answer is quite simple. It is that it is outside the scope of the purpose of the Clause, which is one designed to provide a special relief for a man who is making provision at the time of his retirement for his retirement.
    My hon. Friend asked how, on the disposal of an insurance agent's book, one would ascertain how much of the goodwill attaching to the book at the time of the disposal was related to the customers who were customers when the book was acquired. This is of the nature of goodwill. It is an asset which relates to a shifting population of customers as it were, but it is the value of the goodwill of the asset which is the subject matter of the charge.
    11.30 p.m.
    I turn now to the two Amendments. The first, which was moved by the right hon. Member for Rushcliffe (Sir M. Redmayne), deals with liquidated assets. Until the right hon. Gentleman spoke, I was not sure exactly what it was that he had in mind, and I fear that he has not achieved it by the wording of the Amendment. "Liquidated assets" is not a term of art known to the law, but it must, I think, on any construction, refer to assets which result after a liquidation has taken place, and therefore the Amendment would apply only to any gain accruing on the subsequent disposal of assets after they had been distributed at the time of the liquidation.
    Unless a considerable period of time had elapsed between the liquidation and the subsequent disposal, it is unlikely that there would be any appreciable gain attaching to the assets. Thus, as drafted, I do not think that the Amendment would have the effect that is intended, or indeed, could have any real effect which was related to the purpose of the Clause.
    1292
    I think that it is apparent from the right hon. Gentleman's remarks that what he really has in mind is extending the exemption not merely to the disposal of a business, but to the gains accruing to a shareholder on the distribution of a company's assets in liquidation. This is not a proposal that we could accept. A capital distribution takes place under the provisions of the Bill when a liquidation takes place, but that distribution is really nothing to do with the retirement provisions at which the new Clause is directed.
    I am not saying that there could not be a case—and the right hon. Gentleman illustrates a possible one—where someone might, at the time of retirement, liquidate his business, but this is not the normal case, or the normal provision at all, and in our view it would be wrong to reduce what is intended to be a general charge on capital distributions by extending this special relief to the case of the liquidation of a company.
    The right hon. Gentleman envisaged the trader who had the lease of premises where the life of the lease was shortly coming to an end. If that trader wanted to claim this exemption and provide for his retirement through it, he would take the same kind of action which the right hon. Gentleman envisaged a younger man might take to secure the value of his business for the future, and indeed perhaps to enhance its value for the purposes of disposal. I must, therefore, advise the House to reject the Amendment.
    The second Amendment, that in the name of the hon. Member for Barry (Mr. Gower) has, naturally, excited great sympathy from both sides of the House. It was movingly and eloquently supported by my hon. Friend the Member for Peckham (Mrs. Corbet). The hon. Gentleman proposes to extend the relief to a person who, between the ages of 50 and 60, disposes of his business and satisfies the inspector of taxes that he is obliged, through ill-health or physical disability, to dispose of the business in whole or in part.
    We have to be very careful, when we create an exemption of this kind, this special exemption for retirement, to be wary of proposals for its extension, or we will rapidly find ourselves in the position where we are whittling away in

    1293
    a very wide sense the basis of this tax. What would be the consequences of this proposal? Inevitably, it would, if we were to accept it, lead to similar pressures for exemptions to be given wherever a business was disposed of in an involuntary way. This is a particular type of involuntary disposal, singled out in this Amendment, namely, one that is provoked by ill-health or disability.
    There are, of course, other ways in which involuntary disposal can take place and where, again, people would feel, if this relief were granted, that it would be an injustice that they could not have it, too. There are considerable practical difficulties in enforcing provisions of this kind. Presumably, if it were accepted, it would have to be a condition of that relief that the person disposing of the business was permanently retired and was discontinuing his activities in the business. But one has to envisage a situation in which the person makes an unexpected recovery from his illness and wants to start up in business again.
    Then, presumably, the relief would have to be clawed back at a later stage and that would create obvious problems. Perhaps the greatest administrative problem of any provision relating to relief of this kind is that the ordinary inspector of taxes is not really in a position himself to judge what is a medical question. The hon. Member referred rather vaguely, as if it was an easy matter, to medical opinion. It is difficult to relate a tax exemption involving sums of about £10,000 merely to the granting of a medical certificate.
    Hon. Members know that there is a great difference between the readiness of different medical practitioners to attribute a particular cause of retirement or disability to certain medical conditions.
    Mr. F. A. Burden: Is it not a fact that when pensions for disability are granted to Service men and others this is done as a result of medical evidence? Why, in these cases, could not medical evidence of a similar character be provided?
    Mr. MacDermot: I was just coming to that. It illustrates precisely my point that the tax inspector is not a suitable person to reach a decision. That is why, for pensions purposes, we have to have an elaborate machinery with a system of
    1294
    medical examination. In those cases, one is dealing with a definite disability which, under the regulations, has to have specific characteristics. When one is dealing with something as vague as ill-health or disability, to lay down and decide—particularly in cases of various kinds of mental or psychological illness—to what extent it is proper to attribute a man's retirement from business to the strain that he has been suffering from in connection with his business, is very difficult. One can see problems that would be far greater than the problems that exist already with medical examinations for pensions.
    Mr. Higgins: Would the Financial Secretary not agree that the objection he is now raising would be overcome were he to introduce an understanding that the retirement must be permanent? We on this side would, I am sure, agree that, if that were the test, it would be better occasionally for someone who had relief, and later went back to work, to have to return it, rather than that no one should be given relief at all.
    Mr. MacDermot: I do not see the purpose of the hon. Member's intervention. I had just referred to that point myself. When this point was first raised in Committee it was specifically referred to in connection with the man who did retire due to ill-health and then recovered and wanted to return to his business.
    Quite apart from the administrative problems, serious problems of equity would arise if the Amendment were accepted. The Amendment provides that if a person retires from ill-health between the ages of 50 and 60 he shall receive the full relief, up to £10,000. Compare his position with that of someone who does not retire, but struggles on, although undergoing a period of bad health, and then retires at the age of 61. He is then entitled only to £2,000 relief. He would feel it a great injustice that the man who had given up the struggle much sooner than he had was entitled to a much greater exemption.
    I hope that I have said enough to show the House that there are serious problems involved in trying to give relief of this kind. I am willing to give an assurance that I will look further at the problem and see whether there is any way in which it can be overcome, without holding out

    1295
    any hope. It is not a matter which can be dealt with in this Finance Bill. For the reasons that I have given, I must advise the House to reject the Amendment.
    Mr. James Scott-Hopkins: I am sorry that the Financial Secretary's second speech was not so attractive to this side of the House as was his first. His rejection of the two Amendments was most disappointing—in particular, the argument he adduced for the rejection of the second Amendment concerning those who retire on the ground of ill-health. It was difficult to follow, and completely unacceptable to us.
    I want to deal briefly with the first Amendment. It seems that the Financial Secretary has completely failed to grasp the point made by my right hon. Friend. He made no distinction between the business, as such, and its assets. My right hon. Friend explained clearly that we are trying to deal with the case where there is no business worth speaking of to dispose of, because the lease is running out and because of a variety of other factors, and all that remains to dispose of are the purely physical assets. There is no business to dispose of, and there can be no relief accruing.
    As the new Clause is drafted those assets would not rank for relief, because it refers to
    "the whole or part of a business".
    I understand that this cannot refer to assets. Therefore, it seems that the Financial Secretary has completely misunderstood the point, and I hope that, on reflection, he and the Government will see the rightness of our argument and will be able to accept the Amendment.
    I cannot help echoing the words of the hon. Member for Westhoughton (Mr. J. T. Price), who seems again to have left the Chamber, that the Treasury does not seem to understand this situation.
    This question also arises on the second Amendment, moved by my hon. Friend the Member for Barry (Mr. Gower) and so movingly supported by the hon. Member for Peckham (Mrs. Corbet). It could be that a person who wishes to retire through ill-health would wish to dispose of the liquidated assets of his business.
    1296
    The acceptance of the first Amendment would help such a man in retirement.
    I cannot accept the Financial Secretary's argument for rejecting the Amendment. I do not see why a person who has ill-health and can produce medical evidence to that effect should not be allowed to have the exemption up to £10,000. The Financial Secretary said that there would be inequity between the person who retired at 61 and was allowed £2,000 and the person who retired earlier and, under the words of the Amendment, was allowed £10,000. The point is that the person who is forced to retire through ill-health is compelled to stop through no fault of his own, whereas the person who retires between the ages of 60 and 65 can make his own decision about whether to continue after 65 and thereby get the full benefit. There is no difficulty here.
    11.45 p.m.
    The Financial Secretary's main argument seems to be that administratively this is too difficult. He must have accepted the fact that hardship could be caused, and that—after the moving speech of his hon. Friend the Member for Peckham about those people with an incurable disease—there is a very strong case here. But the Financial Secretary fell back on the argument that it was administratively impossible. I cannot see why. If the person concerned can produce medical evidence that his retirement is due to no fault of his own—[Interruption.] Does the hon. Gentleman wish to intervene?
    Mr. Arthur Lewis: I wanted to say, "Like the lawyer who gets his last year tax-free". It can easily be done.
    Mr. Scott-Hopkins: That is not the same point. We are talking about someone who is gravely ill and forced to retire. In that sense, it is an involuntary decision. If he can produce medical evidence which can be accepted by the Inland Revenue, there is no reason why he should not have some form—
    Mr. Arthur Lewis: I was saying that if it can be done in the simple case of a lawyer getting his last year tax-free, it can be done in this case.
    Mr. Scott-Hopkins: It is so unusual to have the hon. Member's support that for a moment I could not believe he was giving it. I am delighted to have it.

    1297
    This can be done. The drafting of paragraph (b) of the second Amendment says only that the inspector of taxes should be satisfied. If it is so desired, there is no reason that the Government should not set up the machinery of a board which the Financial Secretary talked about, with evidence being given to the board. There is no reason—as my hon. Friend the Member for Worthing (Mr. Higgins) said in an intervention after his excellent speech in support of the Amendment—if, after a person has retired after producing medical evidence that the cause is ill-health, if the advance of medical science makes it possible for him to enter businessess again, why should he not voluntarily make payment of the sum of Capital Gains Tax which would have accrued if he had retired normally and not through illness.
    I found the Financial Secretary's reply most disappointing. I hope that the House will support these Amendments and agree that they should be added to
    the new Clause. The Clause goes a long way, I admit, to meeting the points which we raised in Committee, but in my view and that of my hon. and right hon. Friends, it does not go far enough and will not do so unless the Amendments are accepted.
    Question put and agreed to.
    Clause read a Second time.
    Mr. Deputy-Speaker: Does the right hon. Member for Rushcliffe (Sir M. Redmayne) wish to move his Amendment?
    Sir M. Redmayne: Yes, Mr. Deputy-Speaker. I beg to move as an Amendment to the proposed Clause, in line 7, at the end to insert:
    "or disposes of the liquidated assets of such a company".
    Question put, That those words be there inserted in the proposed Clause:—
    The House divided: Ayes 274, Noes 286.

    Division No. 230.]

    AYES

    [11.49 p.m.

    Agnew, Commander Sir Peter

    Cary, Sir Robert

    Fraser, Ian (Plymouth, Sutton)

    Alison, Michael (Barkston Ash)

    Channon, H. P. G.

    Galbraith, Hn. T. G. D.

    Allan, Robert (Paddington, S.)

    Chataway, Christopher

    Gammans, Lady

    Allason, James (Hemel Hempstead)

    Chichester-Clark, R.

    Gardner, Edward

    Amery, Rt. Hn. Julian

    Clark, Henry (Antrim, N.)

    Gibson-Watt, David

    Anstruther-Gray, Rt. Hn. Sir W.

    Clark, William (Nottingham, S.)

    Giles, Rear-Admiral Morgan

    Astor, John

    Clarke, Brig. Terence (Portsmth, W.)

    Gilmour, Ian (Norfolk, Central)

    Atkins, Humphrey

    Cole, Norman

    Gilmour, Sir John (East Fife)

    Awdry, Daniel

    Cooke, Robert

    Glover, Sir Douglas

    Baker, W. H. K.

    Cooper, A. E.

    Glyn, Sir Richard

    Balniel, Lord

    Cooper-Key, Sir Neill

    Godber, Rt. Hn. J. B.

    Barber, Rt. Hn. Anthony

    Cordle, John

    Goodhart, Philip

    Barlow, Sir John

    Corfield, F. V.

    Goodhew, Victor

    Batsford, Brian

    Costain, A. P.

    Gower, Raymond

    Beamish, Col. Sir Tufton

    Courtney, Cdr. Anthony

    Grant, Anthony

    Bell, Ronald

    Craddock, Sir Beresford (Spelthorne)

    Grant-Ferris, R.

    Bennett, Sir Frederic (Torquay)

    Crawley, Aidan

    Gresham Cooke, R.

    Bennett, Dr. Reginald (Gos & Fhm)

    Crosthwaite-Eyre, Col. Sir Oliver

    Grieve, Percy

    Berkeley, Humphry

    Crowder, F. P.

    Griffiths, Eldon (Bury St. Edmunds)

    Berry, Hn. Anthony

    Cunningham, Sir Knox

    Griffiths, Peter (Smethwick)

    Biggs-Davison, John

    Curran, Charles

    Gurden, Harold

    Birch, Rt. Hn. Nigel

    Currie, G. B. H.

    Hall, John (Wycombe)

    Black, Sir Cyril

    Dalkeith, Earl of

    Hall-Davis, A. G. F.

    Blaker, Peter

    Dance, James

    Hamilton, Marquess of (Fermanagh)

    Bossom, Hn. Clive

    Davies, Dr. Wyndham (Perry Barr)

    Hamilton, M. (Salisbury)

    Box, Donald

    d'Avigdor-Goldsmid, Sir Henry

    Harris, Frederic (Croydon, N. W.)

    Boyd-Carpenter, Rt. Hn. J.

    Dean, Paul

    Harris, Reader (Heston)

    Boyle, Rt. Hn. Sir Edward

    Digby, Simon Wingfield

    Harrison, Brian (Maldon)

    Braine, Bernard

    Dodds-Parker, Douglas

    Harvey, John (Walthamstow, E.)

    Brewis, John

    Doughty, Charles

    Harvie Anderson, Miss

    Brinton, Sir Tatton

    Douglas-Home, Rt. Hn. Sir Alec

    Hastings, Stephen

    Bromley-Davenport, Lt.-Col. Sir Walter

    Drayson, G. B.

    Hawkins, Paul

    Brooke, Rt. Hn. Henry

    du Cann, Rt. Hn. Edward

    Heald, Rt. Hn. Sir Lionel

    Brown, Sir Edward (Bath)

    Eden, Sir John

    Heath, Rt. Hn. Edward

    Bruce-Gardyne, J.

    Elliot, Capt. Walter (Carshalton)

    Hendry, Forbes

    Bryan, Paul

    Elliott, R. W.(N'c'tle-upon-Tyne,N.)

    Higgins, Terence L.

    Buchanan-Smith, Alick

    Emery, Peter

    Hill, J. E. B. (S. Norfolk)

    Buck, Antony

    Eyre, Reginald

    Hirst, Geoffrey

    Bullus, Sir Eric

    Farr, John

    Hobson, Rt. Hn. Sir John

    Burden, F. A.

    Fell, Anthony

    Hopkins, Alan

    Butcher, Sir Herbert

    Fisher, Nigel

    Hordern, Peter

    Buxton, Ronald

    Fletcher-Cooke, Charles (Darwen)

    Hornby, Richard

    Campbell, Gordon

    Fletcher-Cooke, Sir John (S'pton)

    Hornsby-Smith, Rt. Hn. Dame P.

    Carlisle, Mark

    Foster, Sir John

    Howard, Hn. G. R. (St. Ives)

    Carr, Rt. Hn. Robert

    Fraser, Rt. Hn. Hugh (St'fford & Stone)

    Hutchison, Michael Clark

    Iremonger, T. L.

    Miscampbell, Norman

    Spearman, Sir Alexander

    Irvine, Bryant Godman (Rye)

    Mitchell, David

    Speir, Sir Rupert

    Jenkin, Patrick (Woodford)

    Monro, Hector

    Stainton, Keith

    Jennings, J. C.

    Morrison, Charles (Devizes)

    Stanley, Hn. Richard

    Johnson Smith, G. (East Grinstead)

    Mott-Radcliffe, Sir Charles

    Stodart, Anthony

    Jones, Arthur (Northants, S.)

    Munro-Lucas-Tooth, Sir Hugh

    Studholme, Sir Henry

    Jopling, Michael

    Murton, Oscar

    Talbot, John E.

    Joseph, Rt. Hn. Sir Keith

    Neave, Airey

    Taylor, Sir Charles (Eastbourne)

    Kaberry, Sir Donald

    Noble, Rt. Hn. Michael

    Taylor, Edward M. (G'gow, Cathcart)

    Kerby, Capt. Henry

    Nugent, Rt. Hn. Sir Richard

    Taylor, Frank (Moss Side)

    Kerr, Sir Hamilton (Cambridge)

    Onslow, Cranley

    Teeling, Sir William

    Kershaw, Anthony

    Orr, Capt. L. P. S.

    Temple, John M.

    Kilfedder, James A.

    Orr-Ewing, Sir Ian

    Thatcher Mrs. Margaret

    Kimball, Marcus

    Osborn, John (Hallam)

    Thomas, Sir Leslie (Canterbury)

    King, Evelyn (Dorset, S.)

    Osborne, Sir Cyril (Louth)

    Thompson, Sir Richard (Croydon, S.)

    Kirk, Peter

    Page, John (Harrow, W.)

    Tiley, Arthur (Bradford, W.)

    Kitson, Timothy

    Page, R. Graham (Crosby)

    Tilney, John (Wavertree)

    Lagden, Godfrey

    Pearson, Sir Frank (Clitheroe)

    Turton, Rt. Hn. R. H.

    Lambton, Viscount

    Peel, John

    Tweedsmuir, Lady

    Lancaster, Col. C. G.

    Percival, Ian

    van Straubenzee, W. R.

    Langford-Holt, Sir John

    Peyton, John

    Vaughan-Morgan, Rt. Hn. Sir John

    Legge-Bourke, Sir Harry

    Pickthorn, Rt. Hn. Sir Kenneth

    Vickers, Dame Joan

    Lewis, Kenneth (Rutland)

    Pike, Miss Mervyn

    Walder, David (High Peak)

    Litchfield, Capt. John

    Pitt, Dame Edith

    Walker, Peter (Worcester)

    Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)

    Pounder, Rafton

    Walker-Smith, Rt. Hn. Sir Derek

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Powell, Rt. Hn. J. Enoch

    Wall, Patrick

    Longden, Gilbert

    Price, David (Eastleigh)

    Walters, Dennis

    Loveys, Walter H.

    Prior, J. M. L.

    Ward, Dame Irene

    Lucas, Sir Jocelyn

    Quennell, Miss J. M.

    Weatherill, Bernard

    McAdden, Sir Stephen

    Ramsden, Rt. Hn. James

    Webster, David

    MacArthur, Ian

    Rawlinson, Rt. Hn. Sir Peter

    Wells, John (Maidstone)

    McLaren, Martin

    Redmayne, Rt. Hn. Sir Martin

    Whitelaw, William

    Maclean, Sir Fitzroy

    Rees-Davies, W. R.

    Williams, Sir Rolf Dudley (Exeter)

    Macleod, Rt. Hn. Iain

    Renton, Rt. Hn. Sir David

    Wills, Sir Gerald (Bridgwater)

    McMaster, Stanley

    Ridley, Hn. Nicholas

    Wilson, Geoffrey (Truro)

    McNair-Wilson, Patrick

    Ridsdale, Julian

    Wise, A. R.

    Maginnis, John E.

    Roberts, Sir Peter (Heeley)

    Wolrige-Gordon, Patrick

    Maitland, Sir John

    Rodgers, Sir John (Sevenoaks)

    Wood, Rt. Hn. Richard

    Marten, Neil

    Roots, William

    Woodhouse, Hn. Christopher

    Mathew, Robert

    St. John-Stevas, Norman

    Woodnutt, Mark

    Maude, Angus

    Sandys, Rt. Hn. D.

    Wylie, N. R.

    Maudling, Rt. Hn. Reginald

    Scott-Hopkins, James

    Yates, William (The Wrekin)

    Mawby, Ray

    Sharples, Richard

    Younger, Hn. George

    Maxwell-Hyslop, R. J.

    Shepherd, William

    Maydon, Lt.-Cmdr. S. L. C.

    Sinclair, Sir George

    TELLERS FOR THE AYES:

    Meyer, Sir Anthony

    Smith, Dudley (Br'ntf'd & Chiswick)

    Mr. Francis Pym and

    Mills, Peter (Torrington)

    Smyth, Rt. Hn. Brig. Sir John

    Mr. Jasper More.

    Mills, Stratton (Belfast, N.)

    Soames, Rt. Hn. Christopher

    NOES

    Abse, Leo

    Carter-Jones, Lewis

    Evans, Ioan (Birmingham, Yardley)

    Allaun, Frank (Salford, E.)

    Castle, Rt. Hn. Barbara

    Fernyhough, E.

    Alldritt, Walter

    Chapman, Donald

    Finch, Harold (Bedwellty)

    Atkinson, Norman

    Coleman, Donald

    Fletcher, Sir Eric (Islington, E.)

    Bacon, Miss Alice

    Conlan, Bernard

    Fletcher, Ted (Darlington)

    Bagier, Gordon A. T.

    Corbet, Mrs. Freda

    Fletcher, Raymond (Ilkeston)

    Barnett, Joel

    Cousins, Rt. Hn. Frank

    Floud, Bernard

    Baxter, William

    Craddock, George (Bradford, S.)

    Foot, Sir Dingle (Ipswich)

    Bellenger, Rt. Hn. F. J.

    Crawshaw, Richard

    Foot, Michael (Ebbw Vale)

    Bence, Cyril

    Cronin, John

    Ford, Ben

    Benn, Rt. Hn. Anthony Wedgwood

    Crosland, Rt. Hn. Anthony

    Fraser, Rt. Hn. Tom (Hamilton)

    Bennett, J. (Glasgow, Bridgeton)

    Cullen, Mrs. Alice

    Freeson, Reginald

    Binns, John

    Dalyell, Tam

    Galpern, Sir Myer

    Bishop, E. S.

    Darling, George

    Garrett, W. E.

    Blackburn, F.

    Davies, Harold (Leek)

    Garrow, A.

    Blenkinsop, Arthur

    Davies, S. O. (Merthyr)

    George, Lady Megan Lloyd

    Boardman, H.

    de Freitas, Sir Geoffrey

    Ginsburg, David

    Boston, T. G.

    Delargy, Hugh

    Gourlay, Harry

    Bottomley, Rt. Hn. Arthur

    Dell, Edmund

    Greenwood, Rt. Hn. Anthony

    Bowden, Rt. Hn. H. W. (Leics S. W.)

    Dempsey, James

    Gregory, Arnold

    Bowen, Roderic (Cardigan)

    Diamond, Rt. Hn. John

    Grey, Charles

    Braddock, Mrs. E. M.

    Dodds, Norman

    Griffiths, David (Rother Valley)

    Bradley, Tom

    Doig, Peter

    Griffiths, Rt. Hn. James (Llanelly)

    Bray, Dr. Jeremy

    Driberg, Tom

    Griffiths, Will (M'chester, Exchange)

    Broughton, Dr. A. D. D.

    Duffy, Dr. A. E. P.

    Gunter, Rt. Hn. R. J.

    Brown, Rt. Hn. George (Belper)

    Dunn, James A.

    Hale, Leslie

    Brown, Hugh D. (Glasgow, Provan)

    Dunnett, Jack

    Hamilton, James (Bothwell)

    Buchan, Norman (Renfrewshire, W.)

    Edelman, Maurice

    Hamilton, William (West Fife)

    Buchanan, Richard

    Edwards, Robert (Bilston)

    Hamling, William (Woolwich, W.)

    Butler, Herbert (Hackney, C.)

    English, Michael

    Hannah, William

    Butler, Mrs. Joyce (Wood Green)

    Ennals, David

    Harper, Joseph

    Callaghan, Rt. Hn. James

    Ensor, David

    Harrison, Walter (Wakefield)

    Carmichael, Neil

    Evans, Albert (Islington, S. W.)

    Hart, Mrs. Judith

    1300

    1301

    Hazell, Bert

    Mahon, Simon (Bootle)

    Ross, Rt. Hn. William

    Healey, Rt. Hn. Denis

    Mallalieu, J. P. W. (Huddersfield, E.)

    Rowland, Christopher

    Heffer, Eric S.

    Manuel, Archie

    Sheldon, Robert

    Henderson, Rt. Hn. Arthur

    Mapp, Charles

    Shore, Peter (Stepney)

    Harbison, Rt. Hn, Margaret

    Marsh, Richard

    Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

    Hobden, Dennis (Brighton, K'town.)

    Mason, Roy

    Short, Mrs. Renée (W'hampton, N. E.)

    Holman, Percy

    Maxwell, Robert

    Silkin, John (Deptford)

    Horner, John

    Mayhew, Christopher

    Silkin, S. C. (Camberwell, Dulwich)

    Houghton, Rt. Hn. Douglas

    Mellish, Robert

    Silverman, Julius (Aston)

    Howarth, Harry (Wellingborough)

    Mendelson, J. J.

    Skeffington, Arthur

    Howarth, Robert L. (Bolton, E.)

    Mikardo, Ian

    Slater, Mrs. Harriet (Stoke, N.)

    Howell, Denis (Small Heath)

    Millan, Bruce

    Slater, Joseph (Sedgefield)

    Howie, W.

    Milne, Edward (Blyth)

    Small, William

    Hoy, James

    Molloy, William

    Snow, Julian

    Hughes, Cledwyn (Anglesey)

    Monslow, Walter

    Soskice, Rt. Hn. Sir Frank

    Hughes, Emrys (S. Ayrshire)

    Morris, Alfred (Wythenshawe)

    Steel, David (Roxburgh)

    Hunter, Adam (Dunfermline)

    Morris, Charles (Openshaw)

    Steele, Thomas (Dunbartonshire, W.)

    Hunter, A. E. (Feltham)

    Morris, John (Aberavon)

    Stewart, Rt. Hn. Michael

    Hynd, H. (Accrington)

    Mulley, Rt. Hn. Frederick (Sheffield Pk)

    Stonehouse, John

    Irving, Sydney (Dartford)

    Murray, Albert

    Stones, William

    Jackson, Colin

    Neal, Harold

    Strauss, Rt. Hn. G. R. (Vauxhall)

    Janner, Sir Barnett

    Newens, Stan

    Summerskill, Hn. Dr. Shirley

    Jay, Rt. Hn. Douglas

    Noel-Baker, Francis (Swindon)

    Swain, Thomas

    Jeger, George (Goole)

    Noel-Baker, Rt. Hn. Philip (Derby, S.)

    Swingler, Stephen

    Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

    Norwood, Christopher

    Symonds, J. B.

    Jenkins, Hugh (Putney)

    Oakes, Gordon

    Taverne, Dick

    Jenkins, Rt. Hn. Roy (Stechford)

    Ogden, Eric

    Taylor, Bernard (Mansfield)

    Johnson, Carol (Lewisham, S.)

    O'Malley, Brian

    Thomas, George (Cardiff, W.)

    Johnson, James (K'ston-on-Hull, W.)

    Orbach, Maurice

    Thomas, Iorwerth (Rhondda, W.)

    Johnston, Russell (Inverness)

    Orme, Stanley

    Thomson, George (Dundee, E.)

    Jones, Dan (Burnley)

    Oswald, Thomas

    Thornton, Ernest

    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

    Owen, Will

    Tinn, James

    Jones, J. Idwal (Wrexham)

    Page, Derek (King's Lynn)

    Tomney, Frank

    Jones, T. W. (Merioneth)

    Paget, R. T.

    Tuck, Raphael

    Kelley, Richard

    Palmer, Arthur

    Urwin, T. W.

    Kenyon, Clifford

    Pannell, Rt. Hn. Charles

    Varley, Eric G.

    Kerr, Mrs. Anne (R'ter & Chatham)

    Pargiter, G. A.

    Walden, Brian (All Saints)

    Kerr, Dr. David (W'worth, Central)

    Park, Trevor (Derbyshire, S. E.)

    Walker, Harold (Doncaster)

    Lawson, George

    Parker, John

    Wallace, George

    Leadbitter, Ted

    Parkin, B. T.

    Warbey, William

    Ledger, Ron

    Pavitt, Laurence

    Watkins, Tudor

    Lee, Rt. Hn. Frederick (Newton)

    Pearson, Arthur (Pontypridd)

    Weitzman, David

    Lee, Miss Jennie (Cannock)

    Peart, Rt. Hn. Fred

    Wells, William (Walsall, N.)

    Lever, Harold (Cheetham)

    Pentland, Norman

    White, Mrs. Eirene

    Lever, L. M. (Ardwick)

    Perry, Ernest G.

    Whitlock, William

    Lewis, Arthur (West Ham, N.)

    Popplewell, Ernest

    Wigg, Rt. Hn. George

    Lewis, Ron (Carlisle)

    Prentice, R. E.

    Wilkins, W. A.

    Lipton, Marcus

    Price, J. T. (Westhoughton)

    Willey, Rt. Hn. Frederick

    Lomas, Kenneth

    Probert, Arthur

    Williams, Alan (Swansea, W.)

    Loughlin, Charles

    Pursey, Cmdr. Harry

    Williams, Clifford (Abertillery)

    Lubbock, Eric

    Randall, Harry

    Williams, Mrs. Shirley (Hitchin)

    Mabon, Dr. J. Dickson

    Rankin, John

    Williams, W. T. (Warrington)

    McBride, Neil

    Redhead, Edward

    Willis, George (Edinburgh, E.)

    McCann, J.

    Rees, Merlyn

    Wilson, Rt. Hn. Harold (Huyton)

    MacColl, James

    Reynolds, G. W.

    Wilson, William (Coventry, S.)

    MacDermot, Niall

    Rhodes, Geoffrey

    Winterbottom, R. E.

    McGuire, Michael

    Roberts, Albert (Normanton)

    Woodburn, Rt. Hn. A.

    McInnes, James

    Roberts, Goronwy (Caernarvon)

    Woof, Robert

    McKay, Mrs. Margaret

    Robertson, John (Paisley)

    Wyatt, Woodrow

    Mackenzie, Gregor (Rutherglen)

    Robinson, Rt. Hn. K. (St. Pancras, N.)

    Yates, Victor (Ladywood)

    Mackie, John (Enfield, E.)

    Rodgers, William (Stockton)

    Zilliacus, K.

    McLeavy, Frank

    Rogers, George (Kensington, N.)

    Mahon, Peter (Preston, S.)

    Rose, Paul B.

    TELLERS FOR THE NOES:

    Mr. Alan Fitch and Mr. Ifor Davies.

    Amendment proposed to the proposed Clause, In line 13, at end insert:
    (2) If an individual who, having attained the age of fifty years, but not having attained the age of sixty years,—

    (a) satisfies the Inspector of Taxes that he is obliged through ill-health or physical disability to dispose by way of sale or gift of the whole or part of a business which he has owned throughout the period of ten years ending with the disposal, or

    1302

    (b) satisfies the Inspector of Taxes that he is obliged through ill-heath or physical disability to dispose by way of sale or gift of shares or securities of a company which has been a trading company and his family company during the period of ten years ending with the disposal and of which he has been a full-time working director throughout that period,

    then relief shall be given under this section in respect of gains accruing to him on the disposal and the amount available for that relief shall be ten thousand pounds.
    —[Mr. Gower.]
    Question put, That those words be there inserted in the proposed Clause:—
    The House divided: Ayes 278, Noes 282.

    Division No. 231.]

    AYES

    [12.2 a.m.

    Agnew, Commander Sir Peter

    du Cann, Rt. Hn. Edward

    Lancaster, Col. C. G.

    Alison, Michael (Barkston Ash)

    Eden, Sir John

    Langford-Holt, Sir John

    Allan, Robert (Paddington, S.)

    Elliot, Capt. Walter (Carshalton)

    Legge-Bourke, Sir Harry

    Allason, James (Hemel Hempstead)

    Elliott, R. W. (N'c'tle-upon-Tyne, N.)

    Lewis, Kenneth (Rutland)

    Amery, Rt. Hn. Julian

    Emery, Peter

    Litchfield, Capt. John

    Anstruther-Gray, Rt. Hn. Sir W.

    Eyre, Reginald

    Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield)

    Astor, John

    Farr, John

    Lloyd, Rt. Hn. Selwyn (Wirral)

    Atkins, Humphrey

    Fell, Anthony

    Longden, Gilbert

    Awdry, Daniel

    Fisher, Nigel

    Loveys, Walter H.

    Baker, W. H. K.

    Fletcher-Cooke, Charles (Darwen)

    Lubbock, Eric

    Balniel, Lord

    Fletcher-Cooke, Sir John (S'pton)

    Lucas, Sir Jocelyn

    Barber, Rt. Hn. Anthony

    Foster, Sir John

    McAdden, Sir Stephen

    Barlow, Sir John

    Fraser, Rt. Hn. Hugh (St'fford & Stone)

    MacArthur, Ian

    Batsford, Brian

    Fraser, Ian (Plymouth, Sutton)

    McLaren, Martin

    Beamish, Col. Sir Tufton

    Galbraith, Hn. T. G. D.

    Maclean, Sir Fitzroy

    Bell, Ronald

    Gammons, Lady

    Macleod, Rt. Hn. Iain

    Bennett, Sir Frederick (Torquay)

    Gardner, Edward

    McMaster, Stanley

    Bennett, Dr. Reginald (Gos & Fhm)

    Gibson-Watt, David

    McNair-Wilson, Patrick

    Berkeley, Humphry

    Giles, Rear-Admiral Morgan

    Maginnis, John E.

    Berry, Hn. Anthony

    Gilmour, Ian (Norfolk, Central)

    Maitland, Sir John

    Biggs-Davison, John

    Gilmour, Sir John (East Fife)

    Marten, Neil

    Birch, Rt. Hn. Nigel

    Glover, Sir Douglas

    Mathew, Robert

    Black, Sir Cyril

    Glyn, Sir Richard

    Maude, Angus

    Blaker, Peter

    Godber, Rt. Hn. J. B.

    Maudling, Rt. Hn. Reginald

    Bossom, Hn. Clive

    Goodhart, Philip

    Mawby, Ray

    Bowen, Roderic (Cardigan)

    Goodhew, Victor

    Maxwell-Hyslop, R. J.

    Box, Donald

    Gower, Raymond

    Maydon, Lt.-Cmdr. S. L. C.

    Boyd-Carpenter, Rt. Hn. J.

    Grant, Anthony

    Meyer, Sir Anthony

    Boyle, Rt. Hn. Sir Edward

    Grant-Ferris, R.

    Mills, Peter (Torrington)

    Braine, Bernard

    Gresham Cooke, R.

    Mills, Stratton (Belfast, N.)

    Brewis, John

    Grieve, Percy

    Miscampbell, Norman

    Brinton, Sir Tatton

    Griffiths, Eldon (Bury St. Edmunds)

    Mitchell, David

    Bromley-Davenport, Lt-Col. Sir Walter

    Griffiths, Peter (Smethwick)

    Monro, Hector

    Brooke, Rt. Hn. Henry

    Gurden, Harold

    Morrison, Charles (Devizes)

    Brown, Sir Edward (Bath)

    Hall, John (Wycombe)

    Mott-Radclyffe, Sir Charles

    Bruce-Gardyne, J.

    Hall-Davis, A. G. F.

    Munro-Lucas-Tooth, Sir Hugh

    Bryan, Paul

    Hamilton, Marquess of (Fermanagh)

    Murton, Oscar

    Buchanan-Smith, Alick

    Hamilton, M. (Salisbury)

    Neave, Airey

    Buck, Antony

    Harris, Frederic (Groydon, N. W.)

    Noble, Rt. Hn. Michael

    Bullus, Sir Eric

    Harris, Reader (Heston)

    Nugent, Rt. Hn. Sir Richard

    Burden, F. A.

    Harrison, Brian (Maldon)

    Onslow, Cranley

    Butcher, Sir Herbert

    Harvey, John (Walthamstow, E.)

    Orr, Capt. L. P. S.

    Buxton, Ronald

    Harvie Anderson, Miss

    Orr-Ewing, Sir Ian

    Campbell, Gordon

    Hastings, Stephen

    Osborn, John (Hallam)

    Carlisle, Mark

    Hawkins, Paul

    Osborne, Sir Cyril (Louth)

    Carr, Rt. Hn. Robert

    Heald Rt. Hn. Sir Lionel

    Page, John (Harrow, W.)

    Cary, Sir Robert

    Heath, Rt. Hn. Edward

    Page, R. Graham (Crosby)

    Channon, H. P. G.

    Hendry, Forbes

    Pearson, Sir Frank (Clitheroe)

    Chataway, Christopher

    Higgins, Terence L.

    Peel, John

    Chichester-Clark, R.

    Hill, J. E. B. (S. Norfolk)

    Percival, Ian

    Clark, Henry (Antrim, N.)

    Hirst, Geoffrey

    Peyton, John

    Clark, William (Nottingham, S.)

    Hobson, Rt. Hn. Sir John

    Pickthorn, Rt. Hn. Sir Kenneth

    Clarke, Brig. Terence (Portsmth, W.)

    Hopkins, Alan

    Pike, Miss Mervyn

    Cole, Norman

    Hordern, Peter

    Pitt, Dame Edith

    Cooke, Robert

    Hornby, Richard

    Pounder, Rafton

    Cooper, A. E.

    Hornsby-Smith, Rt. Hn. Dame P.

    Powell, Rt. Hn. J. Enoch

    Cooper-Key, Sir Neill

    Howard, Hn. G. R. ((St. Ives)

    Price, David (Eastleigh)

    Cordle, John

    Hutchison, Michael Clark

    Prior, J. M. L.

    Corfield, F. V.

    Iremonger, T. L.

    Quennell, Miss J. M.

    Costain, A. P.

    Irvine, Bryant Godman (Rye)

    Ramsden, Rt. Hn. James

    Courtney, Cdr. Anthony

    Jenkin, Patrick (Woodford)

    Rawlinson, Rt. Hn. Sir Peter

    Craddock, Sir Beresford (Spelthorne)

    Jennings, J. C.

    Redmayne, Rt. Hn. Sir Martin

    Crawley, Aidan

    Johnson Smith, G. (East Grinstead)

    Rees-Davies, W. R.

    Crosthwaite-Eyre, Col. Sir Oliver

    Johnston, Russell (Inverness)

    Renton, Rt. Hn. Sir David

    Crowder, F. P.

    Jones, Arthur (Northants, S.)

    Ridley, Hn. Nicholas

    Cunningham, Sir Knox

    Jopling, Michael

    Ridsdale, Julian

    Curran, Charles

    Joseph, Rt. Hn. Sir Keith

    Roberts, Sir Peter (Heeley)

    Currie, G. B. H.

    Kaberry, Sir Donald

    Rodgers, Sir John (Sevenoaks)

    Dalkeith, Earl of

    Kerby, Capt. Henry

    Roots, William

    Dance, James

    Kerr, Sir Hamilton (Cambridge)

    St. John-Stevas, Norman

    Davies, Dr. Wyndham (Perry Barr)

    Kershaw, Anthony

    Sandys, Rt. Hn. D.

    d'Avigdor-Goldsmid, Sir Henry

    Kilfedder, James A.

    Scott-Hopkins, James

    Dean, Paul

    Kimball, Marcus

    Sharples, Richard

    Digby, Simon Wingfield

    King, Evelyn (Dorset, S.)

    Shepherd, William

    Dodds-Parker, Douglas

    Kirk, Peter

    Sinclair, Sir George

    Doughty, Charles

    Kitson, Timothy

    Smith, Dudley (Br'ntf'd & Chiswick)

    Douglas-Home, Rt. Hn. Sir Alec

    Lagden, Godfrey

    Smyth, Rt. Hn. Brig. Sir John

    Drayson, G. B.

    Lambton, Viscount

    Soames, Rt. Hn. Christopher

    Spearman, Sir Alexander

    Tiley, Arthur (Bradford, W.)

    Whitelaw, William

    Speir, Sir Rupert

    Tilney, John (Wavertree)

    Williams, Sir Rolf Dudley (Exeter)

    Stainton, Keith

    Turton, Rt. Hn. R. H.

    Wills, Sir Gerald (Bridgwater)

    Stanley, Hn. Richard

    Tweedsmuir, Lady

    Wilson, Geoffrey (Truro)

    Steel, David (Roxburgh)

    van Straubenzee, W. R.

    Wise, A. R.

    Stodart, Anthony

    Vaughan-Morgan, Rt. Hn. Sir John

    Wolrige-Gordon, Patrick

    Studholme, Sir Henry

    Vickers, Dame Joan

    Wood, Rt. Hn. Richard

    Talbot, John E.

    Walder, David (High Peak)

    Woodhouse, Hn. Christopher

    Taylor, Sir Charles (Eastbourne)

    Walker, Peter (Worcester)

    Woodnutt, Mark

    Taylor, Edward M. (G'gow, Cathcart)

    Walker-Smith, Rt. Hn. Sir Derek

    Wylie, N. R.

    Taylor, Frank (Moss Side)

    Wall, Patrick

    Yates, William (The Wrekin)

    Teeling, Sir William

    Walters, Dennis

    Younger, Hn. George

    Temple, John M.

    Ward, Dame Irene

    Thatcher, Mrs. Margaret

    Weatherill, Bernard

    TELLERS FOR THE AYES:

    Thomas, Sir Leslie (Canterbury)

    Webster, David

    Mr. Francis Pym and

    Thompson, Sir Richard (Croydon, S.)

    Wells, John (Maidstone)

    Mr. Jasper More.

    NOES

    Abse, Leo

    Evans, Albert (Islington, S. W.)

    Jones, J. Idwal (Wrexham)

    Allaun, Frank (Salford, E.)

    Evans, Ioan (Birmingham, Yardley)

    Jones, T. W. (Merioneth)

    Alldritt, Walter

    Fernyhough, E.

    Kelley, Richard

    Atkinson, Norman

    Finch, Harold (Bedwellty)

    Kenyon, Clifford

    Bacon, Miss Alice

    Fletcher, Sir Eric (Islington, E.)

    Kerr, Mrs. Anne (R'ter & Chatham)

    Bagier, Gordon A. T.

    Fletcher, Ted (Darlington)

    Kerr, Dr. David (W'worth, Central)

    Barnett, Joel

    Fletcher, Raymond (Ilkeston)

    Lawson, George

    Baxter, William

    Floud, Bernard

    Leadbitter, Ted

    Bellenger, Rt. Hn. F. J.

    Foot, Sir Dingle (Ipswich)

    Ledger, Ron

    Bence, Cyril

    Foot, Michael (Ebbw Vale)

    Lee, Rt. Hn. Frederick (Newton)

    Benn, Rt. Hn. Anthony Wedgwood

    Ford, Ben

    Lee, Miss Jennie (Cannock)

    Bennett, J. (Glasgow, Bridgeton)

    Fraser, Rt. Hn. Tom (Hamilton)

    Lever, Harold (Cheetham)

    Binns, John

    Freeson, Reginald

    Lever, L. M. (Ardwick)

    Bishop, E. S.

    Galpern, Sir Myer

    Lewis, Arthur (West Ham, N.)

    Blackburn, F.

    Garrett, W. E.

    Lewis, Ron (Carlisle)

    Blenkinsop, Arthur

    Garrow, A.

    Lipton, Marcus

    Boardman, H.

    George, Lady Megan Lloyd

    Lomas, Kenneth

    Boston, T. G.

    Ginsburg, David

    Loughlin, Charles

    Bottomley, Rt. Hn. Arthur

    Gourlay, Harry

    Mabon, Dr. J. Dickson

    Bowden, Rt. Hn. H. W. (Leics S. W.)

    Greenwood, Rt. Hn. Anthony

    McBride, Neil

    Braddock, Mrs. E. M.

    Gregory, Arnold

    McCann, J.

    Bradley, Tom

    Grey, Charles

    MacColl, James

    Bray, Dr. Jeremy

    Griffiths, David (Rother Valley)

    MacDermot, Niall

    Broughton, Dr. A. D. D.

    Griffiths, Rt. Hn. James (Llanelly)

    McGuire, Michael

    Brown, Rt. Hn. George (Belper)

    Griffiths, Will (M'chester, Exchange)

    Mclnnes, James

    Brown, Hugh D. (Glasgow, Provan)

    Gunter, Rt. Hn. H. J.

    McKay, Mrs. Margaret

    Buchan, Norman (Renfrewshire, W.)

    Hale, Leslie

    Mackie, George Y. (C'ness & S'land)

    Buchanan, Richard

    Hamilton, James (Bothwell)

    Mackie, John (Enfield, E.)

    Butier, Herbert (Hackney, C.)

    Hamilton, William (West Fife)

    McLeavy, Frank

    Butler, Mrs. Joyce (Wood Green)

    Hamling, William (Woolwich, W.)

    Mahon, Peter (Preston, S.)

    Callaghan, Rt. Hn. James

    Hannan, William

    Mahon, Simon (Bootle)

    Carmichael, Neil

    Harper, Joseph

    Mallalieu, J. P. W. (Huddersfield, E.)

    Carter-Jones, Lewis

    Harrison, Walter (Wakefield)

    Manuel, Archie

    Castle, Rt. Hn. Barbara

    Hart, Mrs. Judith

    Mapp, Charles

    Chapman, Donald

    Hazell, Bert

    Marsh, Richard

    Coleman, Donald

    Healey, Rt. Hn. Denis

    Mason, Roy

    Conlan, Bernard

    Heffer, Eric S.

    Maxwell, Robert

    Corbet, Mrs. Freda

    Henderson, Rt. Hn. Arthur

    Mayhew, Christopher

    Cousins, Rt. Hn. Frank

    Herbison, Rt. Hn. Margaret

    Mellish, Robert

    Craddock, George (Bradford, S.)

    Hobden, Dennis (Brighton, K'town)

    Mendelson, J. J.

    Crawshaw, Richard

    Holman, Percy

    Mikardo, Ian

    Cronin, John

    Horner, John

    Millan, Bruce

    Crosland, Rt. Hn. Anthony

    Houghton, Rt. Hn. Douglas

    Milne, Edward (Blyth)

    Crossman, Rt. Hn. R. H. S.

    Howarth, Harry (Wellingborough)

    Molloy, William

    Cullen, Mrs. Alice

    Howarth, Robert L. (Bolton, E.)

    Monslow, Walter

    Dalyell, Tam

    Howell, Denis (Small Heath)

    Morris, Alfred (Wythenshawe)

    Darling, George

    Howie, W.

    Morris, Charles (Openshaw)

    Davies, Harold (Leek)

    Hoy, James

    Morris, John (Aberavon)

    Davies, S. O. (Merthyr)

    Hughes, Cledwyn (Anglesey)

    Mulley, Rt. Hn. Frederick (Sheffield Pk)

    de Freitas, Sir Geoffrey

    Hughes, Emrys (S. Ayrshire)

    Murray, Albert

    Delargy, Hugh

    Hunter, Adam (Dunfermline)

    Neal, Harold

    Dell, Edmund

    Hunter, A. E. (Feltham)

    Newens, Stan

    Dempsey, James

    Hynd, H. (Accrington)

    Noel-Baker, Francis (Swindon)

    Diamond, Rt. Hn. John

    Irving, Sydney (Dartford)

    Noel-Baker, Rt. Hn. Philip (Derby, S.)

    Dodds, Norman

    Jackson, Colin

    Norwood, Christopher

    Doig, Peter

    Janner, Sir Barnett

    Oakes, Gordon

    Driberg, Tom

    Jay, Rt. Hn. Douglas

    Ogden, Eric

    Duffy, Dr. A. E. P.

    Jeger, George (Goole)

    O'Malley, Brian

    Dunn, James A.

    Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)

    Orbach, Maurice

    Dunnett, Jack

    Jenkins, Hugh (Putney)

    Orme, Stanley

    Edelman, Maurice

    Jenkins, Rt. Hn. Roy (Stechford)

    Oswald, Thomas

    Edwards, Robert (Bilston)

    Johnson, Carol (Lewisham, S.)

    Owen, Will

    English, Michael

    Johnson, James (K'ston-on-Hull, W.)

    Page, Derek (King's Lynn)

    Ennals, David

    Jones, Dan (Burnley)

    Paget, R. T.

    Ensor, David

    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

    Palmer, Arthur

    1306

    1307

    Pannell, Rt. Hn. Charles

    Sheldon, Robert

    Tuck, Raphael

    Pargiter, G. A.

    Shore, Peter (Stepney)

    Urwin, T. W.

    Park, Trevor (Derbyshire, S. E.)

    Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)

    Varley, Eric G.

    Parker, John

    Short, Mrs. Renée (W'hampton, N. E.)

    Walden, Brian (All Saints)

    Parkin, B. T.

    Silkin, John (Deptford)

    Walker, Harold (Doncaster)

    Pavitt, Laurence

    Silkin, S. C. (Camberwell, Dulwich)

    Wallace, George

    Pearson, Arthur (Pontypridd)

    Silverman, Julius (Aston)

    Warbey, William

    Peart, Rt. Hn. Fred

    Skeffington, Arthur

    Watkins, Tudor

    Pentland, Norman

    Slater, Mrs. Harriet (Stoke, N.)

    Weitzman, David

    Perry, Ernest G.

    Slater, Joseph (Sedgefield)

    Wells, William (Walsall, N.)

    Popplewell, Ernest

    Small, William

    White, Mrs. Eirene

    Prentice, R. E.

    Snow, Julian

    Whitlock, William

    Price, J. T. (Westhoughton)

    Soskice, Rt. Hn. Sir Frank

    Wigg, Rt. Hn. George

    Probert, Arthur

    Steele, Thomas (Dunbartonshire, W.)

    Wilkins, W. A.

    Pursey, Cmdr. Harry

    Stewart, Rt. Hn. Michael

    Willey, Rt. Hn. Frederick

    Randall, Harry

    Stonehouse, John

    Williams, Alan (Swansea, W.)

    Rankin, John

    Stones, William

    Williams, Clifford (Abertillery)

    Redhead, Edward

    Strauss, Rt. Hn. G. R. (Vauxhall)

    Williams, Mrs. Shirley (Hitchin)

    Rees, Merlyn

    Summerskill, Hn. Dr. Shirley

    Williams, W. T. (Warrington)

    Reynolds, G. W.

    Swain, Thomas

    Willis, George (Edinburgh, E.)

    Rhodes, Geoffrey

    Swingler, Stephen

    Wilson, Rt. Hn. Harold (Huyton)

    Roberts, Albert (Normanton)

    Symonds, J. B.

    Wilson, William (Coventry, S)

    Roberts, Goronwy (Caernarvon)

    Taverne, Dick

    Woodburn, Rt. Hn. A.

    Robertson, John (Paisley)

    Taylor, Bernard (Mansfield)

    Woof, Robert

    Robinson, Rt. Hn. K. (St. Pancras, N.)

    Thomas, George (Cardiff, W.)

    Wyatt, Woodrow

    Rodgers, William (Stockton)

    Thomas, Iorwerth (Rhondda, W.)

    Yates, Victor (Ladywood)

    Rogers, George (Kensington, N.)

    Thomson, George (Dundee, E.)

    Zilliacus, K.

    Rose, Paul B.

    Thornton, Ernest

    Ross, Rt. Hn. William

    Tinn, James

    TELLERS FOR THE NOES:

    Rowland, Christopher

    Tomney, Frank

    Mr. Alan Fitch and Mr. Ifor Davies

    Clause added to the Bill.

    New Clause.—(ANNUAL ALLOWANCES FOR NEW SHIPS.)
    (1) Subject to the following subsections, annual (or writing-down) allowances under Chapter II of Part X of the Income Tax Act, 1952, in respect of capital expenditure incurred after the beginning of the year 1965–66 on the provision of a new ship shall be computed in accordance with Section 281 of that Act (normal method of computation) as if, instead of requiring such an allowance for a year of assessment to be five-fourths of the percentage therein specified of the relevant capital amount, that section required it to be so much of that amount as is specified by the person to whom the allowance is to be made in making his claim for the allowance; and accordingly (but subject as aforesaid) neither Section 282 or 285 of that Act (alternative method of computation, and adjustments for abnormal use) nor section 35 of the Finance Act 1963 (rules for determination of rates of allowances) shall apply in relation to such allowances.
    (2) Subsection (1) above shall not apply to allowances falling to be made to a person in respect of expenditure on the provision of a ship treated as incurred by him by virtue of Section 299 of the Income Tax Act 1952 (allowances to lessees), unless the contract of letting provides that he shall or may become the owner of the ship on the performance of the contract; and where the contract so provides, but without becoming the owner of the ship he ceases to be entitled (otherwise than on his death) to the benefit of the contract so far as it relates to the ship, subsection (1) above shall be deemed not to have applied to allowances falling to be made to him in respect of the ship.
    (3) Where subsection (1) above is to be deemed not to have applied to allowances for
    1308
    any period, there shall be made all such additional assessments and adjustments of assessments as may be necessary.
    (4) For the purposes of this section—

    (a) "new" means unused and not secondhand, but a ship shall not be treated as secondhand in relation to a claimant for an allowance in respect of it by reason of the property in the ship or any part thereof having previously passed to a person other than the claimant, if the ship has not been taken over from the builder by any such person; and

    (b) "relevant capital amount" means the amount specified in Section 281 (1) (a) of the Income Tax Act. 1952, as the amount by reference to which an annual allowance is to be computed.

    (5) Expenditure shall not be treated for the purposes of this section as having been incurred after the beginning of the year 1965–66 by reason only of Section 279 (2) of the Income Tax Act, 1952 (which relates to expenditure incurred by a person for the purposes of a trade before he begins to carry it on).—[Mr. Diamond.]
    Brought up, and read the First time.
    12.15 a.m.
    Mr. Diamond: I beg to move, That the Clause be read a Second time.
    This arises out of my right hon. Friend's endeavour to help the shipping industry, an endeavour frequently expressed by both him and myself, and since the Committee stage we have been searching for ways and means by which that help can be afforded through the machinery of the Bill.
    We have two methods by which that aid can be given. I will refer to one

    1309
    only very shortly, because it is not now before us and that is by an Amendment to Clause 80. I am bound to refer to that because it puts the matter into perspective. When we reach Clause 80, we shall move an Amendment which will help the shipping industry in the short term, but, having found a method satisfactory to the industry for helping it in the short term, we are now able to help it in the long term.
    The way in which we do that is by providing, as the new Clause does, for free depreciation; that is to say, the method whereby an operator buying a new ship can write off the whole cost as he desires, so that 140 per cent. of the cost of the ship can be written off in the first year it puts to sea. We are here dealing with a new ship or any major new part of a ship such as a completely new set of engines.
    That is the proposal and it may well fit the needs of the shipping industry, because although there is at present the problem that the industry has accumulated a large figure of investment and capital allowances which it has not used because of the low level of profits, in years to come those profits may increase and, having dealt with the short-term problem by the Amendment to Clause 80 and having covered two or three years ahead, we hope that shipping profits will rise considerably over the years further ahead when free depreciation will then be very relevant, indeed. Having, as my right hon. Friend did, found the key to the solution of the short-term problem, we hope that this solution, which would not be of assistance in the short run, will be of great assistance to the industry in the long run.
    Mr. Simon Wingfield Digby: I welcome the new Clause. I am glad that the Government have recognised the special position of the shipping industry in this way. In Committee, we were at pains to suggest a number of Amendments designed to that end and we put forward a new Clause, No. 33, which had almost exactly the same end as this. I also welcome the Amendment to Clause 80 which the Government are to move. However, we shall have some criticism to make of that Amendment, because we feel that it might have gone a little further in selecting more favourable years as the
    1310
    test years. I agree that the new Clause will mitigate the effects of Corporation Tax on shipping. I have always regarded it as one of the worst features of Corporation Tax that it would have a bad effect on shipping.
    The Clause will provide interim help for the industry in its immediate problems and difficulties. However, although it will help the industry in its temporary difficulties, it is not the long-term solution for the problems of the industry which still faces very fierce competition from flag discrimination and flags of convenience. I hope that the Chancellor of the Exchequer will not feel that now that he has done this in this Finance Bill this is all that is needed for the industry and that it will not be necessary to hold further conversations to see what can be done to help the industry to face its problems and continue to make a very big contribution to our balance of payments in future as it has in the past.
    In Committee, when we raised new Clause No. 33, we discussed a lot of these points. At that time the Chief Secretary was very much less benign to us than he has been tonight. He complained that under existing circumstances, no less than 55 per cent. of a new ship was allowed to be written down in the first year, whereas under the Clause, as he rightly told us, it will be 140 per cent. I am glad that we have seen some considerable conversion in his attitude, because I am sure the new approach is the right one.
    Some firms will be able to draw immediate advantage from these new conditions, and others at a later stage when the shipping industry is able to improve its profitability, as we believe it will. I would like to remind the Chief Secretary of something he said, looking rather sternly at me, during the Committee stage:
    "Although he is trying to help the industry he is not doing SO."—[OFFICIAL REPORT, 23rd June, 1965; Vol. 715, c. 1900.]
    That was when I was talking in favour of a Clause which was almost identical to this one.
    I am glad that he agrees that I was trying to help the industry and that I was trying to help it effectively, and I am delighted that the Government have come round to the same view. I hope that when shipping comes up on future

    1311
    occasions, we shall be able to look forward to their co-operation.
    This applies not only to new ships laid down after the beginning of the financial year, but to expenditure from the beginning of this financial year on ships which may be on the slipway, laid down, or may be fitting out. That portion of the expenditure which falls from the 5th April will be covered by the Clause. It will apply to capital expenditure on ships already afloat if it comes to replacing their machinery or if they have a major refit. Although I believe that to be the intention of the Government under the Clause it is not absolutely clear on a first reading and I wanted to get this on the record.
    I welcome this Clause, which will be of benefit to the shipping industry and I am glad that, with the persistence of my hon. Friends we have managed to secure this concession. We have long believed the Chancellor had sympathy with the industry and we are very glad that he has shown it. I am glad that the Government have, like previous Governments of all parties, recognised that in an island like ours, dependent on trade, the shipping industry is in a special position.
    Dame Irene Ward: I, also, want to add my thanks and to support the points put forward by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby). I noticed that he mentioned the question of capital expenditure on ships in the case of a refit, but rather tossed it off and did not really state in clear and precise terms, by making use of the phrases "ships afloat" and "ships existing before the passing of this particular Finance Bill". It is always a little difficult when these things are not written clearly into the Clause. We want to make clear what the shipping industry wants, what we want and what I understood the Chief Secretary to say. I want it to be spelled out in conclusive terms.
    We are all very pleased that we have been able to help the shipping industry, but occasionally, just occasionally—and I say this in the nicest possible way—it would be pleasant if the Government would acknowledge the help which they have had from the Opposition. When the Bill was introduced the shipping industry was not mentioned in it at all.
    1312
    It would, therefore, be pleasant if the Chief Secretary would refer to the substantial part which the Opposition have played in having the shipping industry included in the Bill. I do not mind being hit on the head for doing nothing, but when something is done I fail to see why the Government cannot say how delighted they are that the Opposition have taken so much interest in the shipping industry that they have been able to help the Government with their proposals.
    I hope that the Chief Secretary will clear up the points which have been raised. I know that sometimes he enjoys my speeches. I also hope that he will acknowledge that he listened to the words of wisdom from this side of the House in Committee.
    Mr. Stanley R. McMaster: May I add a few words in support of my hon. Friends the Members for Dorset, West (Mr. Wingfield Digby) and Tynemouth (Dame Irene Ward) in welcoming the Clause. But I would stress that although the Clause will be of some help to a certain number of shipping companies, it is not a long-term solution.
    I notice that the Minister in charge of shipping partly agrees with me. I draw his attention to the words of the Chief Secretary when we were considering new Clause No. 33. The Chief Secretary then rejected the idea that free depreciation would help. In close argument, he said that many companies did not make profits but were gathering so many certificates in capital allowances that they could paper walls with them. This is true. A number of companies have made progress in the past 10 years, but a number have not, and the new Clause will not help them.
    I hope that the Chief Secretary and his Treasury colleagues will consider carefully whether some additional assistance besides the new Clause and the Amendment to Clause 80, which provide only short-term relief, will be necessary to enable our shipping companies to face the kind of competition to which my hon. Friend the Member for Dorset, West referred.
    Mr. Edward M. Taylor: I, too, welcome the new Clause. In the words which the Chief Secretary used in Committee, it will give

    1313
    the shipping companies more paper for their walls, and they will be able to remove it a great deal faster. To that extent, it is welcome. Certainly, when better times return to the industry it will be of great value.
    I should like clarification of two small points which have arisen in the debate. First, what is a new ship? Will the Clause cover the "jumbo" job in which a tanker is brought in and fitted with a new centre section to increase the capacity? This was done very successfully by the Blythswood Shipbuilding Company, on the Clyde. There is a great deal of scope for work on similar jobs. For example, a small tanker which is not economic can be made economic by additional capacity in this way. I should like to know if this would come within the scope of the definition of "a major overhaul".
    Secondly, could I ask about the overhaul of a passenger liner which does not change the character of the ship but does change the kind of traffic it takes? Two jobs have been undertaken by John Brown's on Clydebank in which there was a major conversion to improve passenger accommodation and to cater for a trade not possible with the ship in its previous form. Would it be possible for the allowance to be claimed here? This is a major concession but, from the point of view of the shipyards which undertake this type of work, I would seek an assurance that it will apply in the cases to which I have referred.
    12.30 a.m.
    Mr. Peter Emery: Although late in the day, I, too, would like to say that this is an important matter for the shipping industry. I think that it would feel most constrained if this Clause, or something very similar, had not been tabled by the Government. I say, without any political aspect at all, that it is a sign of constructive opposition that we have this concession because, whether the Government like it or not, our new Clause 33 moved during the Committee stage was almost identical to this new Clause. I would remind the Chief Secretary of what he said during our discussion on 23rd June:
    "I therefore suggest that although the Clause has been put forward with great sincerity, it is of no help to the shipping Indus-
    1314
    try we all desire to assist."—[OFFICIAL REPORT, 23rd June, 1965; Vol. 714, c. 1901.]
    That is the way in which the Chief Secretary summed up our discussion on that new Clause which, I must emphasise, is all but identical to the one before the House tonight. It is obvious that the Chief Secretary and his right hon. Friends must have read our arguments and found that they were quite sound. Therefore, we congratulate the Government in no small measure on their wisdom in having seen the folly of their former ways and having as a result tabled this new Clause.
    I would like to ask two questions. It is important that we should realise that so far as shipping is concerned this does not go all the way toward meeting the criticisms which had been made about Corporation Tax. I ask the Chief Secretary whether he intends to carry out—and I believe that discussions have been going on—any sort of investigation to see what further ways can be devised specifically to help the shipping industry through the Treasury. I should like in to be made quite certain that the Government do not suggest that there is finality in any further consideration they may give to the industry.
    The second point is that I should like to reinforce what has been said by my hon. Friends the Members for Dorset, West (Mr. Wingfield Digby) and Tynemouth (Dame Irene Ward) about the definition of a new ship. I think this necessary in view of the wording in subsection (1) and the reference to the Income Tax Act, 1952. I suppose that any major refit taking place after 6th April this year would be liable for the free depreciation which the new Clause allows. I should think that this is a correct understanding of the Clause, but because of the wording of the Schedule there is misunderstanding. Could we have a comment on that?
    The last point I would ask is whether the right hon. Gentleman can say that he realises that, although we fully welcome this and, indeed, say that it will go much further than the Government spokesman have previously suggested, the Chamber of Shipping has said that the grant of free depreciation is of first importance in the long term, but asks about the smaller companies. The Government must realise that it is the large companies which will be most able to benefit from

    1315
    this free depreciation concession, and I would ask the right hon. Gentleman what provisions the Government have in seeing that the smaller companies will, in fact, be able to benefit. That goes back to an earlier question which I asked during our previous discussions.
    If we could have answers on these points which have been raised by my hon. Friends we would say that we think the Government have done wisely in bringing this new Clause, but we must, after all, take credit for it, as it is the Clause we moved in Committee.
    The Chancellor the Exchequer (Mr. James Callaghan): As I conducted, with the Chief Secretary, most of the negotiations with the shipping industry perhaps I should say a word about this. I am grateful for the way in which this new Clause has been received, though I did not wholly recognise the versions of history which are now going to appear in HANSARD. The answers to the particular questions which were asked are these.
    First of all, as far as the "jumbo-ised" ship is concerned, that would certainly, in my understanding of the way the Clause is drawn, rank for free depreciation. I am not quite so certain about the passenger liner. I do not think hon. Gentlemen should press me too far on that one, although it would depend not so much on the purpose for which the ship was being run as on the nature of the reconstruction which was done. But I should not care to give an authoritative answer on an individual ship. I think that that must be allowed to be worked out between the Inland Revenue and John Brown's or whichever firm is concerned.
    With regard to a ship on the slipway—to answer the hon. Lady the Member for Tynemouth (Dame Irene Ward) and the hon. Gentleman the Member for Dorset, West (Mr. Wingfield Digby)—expenditure, if incurred after 6th April, would rank, as would major refits, for free depreciation. So I hope that answers most of the detailed questions which were raised.
    As regards the problem of the shipping industry, the hon. Gentleman the Member for Reading (Mr. Peter Emery) has claimed credit for the new Clause, but in order to get the history in perhaps
    1316
    a slightly different focus I ought to say that I discussed the questions of the future of the shipping industry with the industry long before the Budget—in January—because the problem of the shipping industry is not, frankly, the problem of Corporation Tax. It is the problem of the lack of profitability of the shipping industry. It is that which is causing these problems and not that there is a Corporation Tax; but because, with the change-over in the tax system, the industry is unable to take advantage of practices—on which I shall pass no judgment, but merely state they are practices—which enable the industry to reclaim a lot of tax it had not paid and which in future it will not be able to. This is what is causing the problem in the shipping industry. If it had had a higher profit ratio it would not be faced with this problem. I pointed this out to the industry in January. I said, "Come to me with an agreed solution. Tell me what you think is the way to handle this problem in the industry." We have had discussions at various stages since.
    Free depreciation does not solve the industry's problem. Only greater profitability will solve that. Otherwise it would only have bits of paper to stick to its walls. Not till it becomes more profitable will this be of advantage to the industry.
    Meantime, there is a problem remaining. I would be the first to come to its support if the industry were to come to the point when it wants Government intervention in its affairs, but it will have to decide that, though it must be a matter of balance between the industry and the Government. This is such a great national asset that if it looked as though it were going to be a burden on our balance of payments I told the industry that if it wanted Government intervention—I did not say assistance, for one would need to know what form it would take—I should be glad to consider that in continuing discussions, and these have been going for some time. I think that basically their problem is that because of its cyclical nature the shipping industry has not been profitable. Perhaps it will become profitable, I do not know. It looks a little more like it, but it has not been profitable for many years.
    The hon. Gentleman asked why the Chief Secretary had rejected the new

    1317
    Clause in Committee but was prepared to accept it now. My right hon. Friend gave the answer to that. It must be looked at in conjunction with Clause 80, because they go together. Clause 80 provides a measure of transitional relief. That is to say, it provides for a larger set-off of tax to shipping companies for a short period of some years, and then the free depreciation will be geared and will take up the advantage.
    Dame Irene Ward: I think that "co-operation" is a happier word than "intervention". There is a great difference between intervention, which has a possible political content, and co-operation.
    On the general question of Corporation Tax, is it not a fact that Sir John Hunter, who plays a distinguished part in Government circles as well as in private industry as Chairman of Swan Hunter, has said—and we on the North-East Coast would never doubt his word—that Corporation Tax is a disadvantage to the shipbuilding and shipping industries?
    Mr. Callaghan: There is bound to be disadvantage if it destroys the prerogative which has been enjoyed so far of getting a repayment of tax which has not been paid. But that was the object of
    1318
    the change-over, and to that extent he is right.
    As regards the semantics, I shall adopt any form of words which the hon. Lady cares to suggest. Shall I say, "Co-operation to intervene at the moment when it is asked for"? If we could conclude on that basis, perhaps I might say that the shipowners welcome this idea of free depreciation which I put forward to them at an early stage. I think that it is medium-term help of a considerable nature, but the basic profitability of the industry is going to be the test in the long run. I am grateful to the House for the way in which the new Clause has been received.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.
    Further consideration of the Bill, as amended, adjourned.—[Mr. Ifor Davies.]
    Bill, as amended, to be further considered this day.

  ADJOURNMENT
  Resolved, That this House do now adjourn.—[Mr. Ifor Davies.]
  Adjourned accordingly at seventeen minutes to One o'clock.

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  MIDDLE EAST (INFORMATION SERVICES)
  MIDDLE EAST (INFORMATION SERVICES)
  MR. W. A. H. BRAMPTON
  MR. W. A. H. BRAMPTON
  MR. GERALD BROOKE
  MR. GERALD BROOKE
  ANGLO-AMERICAN PARLIAMENTARY CONFERENCE ON AFRICA
  ANGLO-AMERICAN PARLIAMENTARY CONFERENCE ON AFRICA
LAND AND NATURAL RESOURCES
  Forestry Commission (Camping Sites)
  Forestry Commission (Camping Sites)
  Land Use (Evaluation)
  Land Use (Evaluation)
  Land Prices (London Area)
  Land Prices (London Area)
  National Forest Parks
  National Forest Parks
  Forestry Commission (Land Acquisition)
  Forestry Commission (Land Acquisition)
  Dartmoor National Park
  Dartmoor National Park
NATIONAL FINANCE
  Double Taxation (New Zealand)
  Double Taxation (New Zealand)
  Overseas Investment
  Overseas Investment
  Inland Revenue Staff, Londonderry and Coleraine
  Inland Revenue Staff, Londonderry and Coleraine
  Inland Revenue Offices
  Inland Revenue Offices
  Public Service Pensions (Review)
  Public Service Pensions (Review)
TRANSPORT
  London Area
  London Area
  Driving Tests, Coventry
  Driving Tests, Coventry
  50 m.p.h. Speed Limit
  50 m.p.h. Speed Limit
RAILWAYS
  Romford-Upminster Line
  Romford-Upminster Line
ROADS
  King's Lynn By-pass
  King's Lynn By-pass
COMMONWEALTH RELATIONS
  Far East (Australia and New Zealand)
  Far East (Australia and New Zealand)
HOME DEPARTMENT
  Immigration
  Immigration
  Embassies, London (Police Officers)
  Embassies, London (Police Officers)
  LEGISLATIVE PROGRAMME
  LEGISLATIVE PROGRAMME
AGRICULTURE, FISHERIES AND FOOD
  Agriculture (Exchequer Support)
  Agriculture (Exchequer Support)
MINISTRY OF AVIATION
  British Overseas Airways Corporation (Boeing 707–820 Aircraft)
  British Overseas Airways Corporation (Boeing 707–820 Aircraft)
MINISTRY OF DEFENCE
  Royal Air Force Maintenance Unit, Heywood
  Royal Air Force Maintenance Unit, Heywood
EDUCATION AND SCIENCE
  Royal Shakespeare Company (Arts Council Assessor)
  Royal Shakespeare Company (Arts Council Assessor)
  Bircham Newton Airfield (Teacher Training College)
  Bircham Newton Airfield (Teacher Training College)
  Secondary School Pupils (Statistics of Examination Achievements)
  Secondary School Pupils (Statistics of Examination Achievements)
  Chelsea College of Science and Technology
  Chelsea College of Science and Technology
LOCAL GOVERNMENT
  Local Historical Records (Preservation)
  Local Historical Records (Preservation)
  Public Recreation and Leisure-Time Activities (Provision)
  Public Recreation and Leisure-Time Activities (Provision)
  Weymouth (Expansion)
  Weymouth (Expansion)
  Advertising Signs (Design)
  Advertising Signs (Design)
HOUSING
  Owner-Occupiers (Reduced Mortgage Rates)
  Owner-Occupiers (Reduced Mortgage Rates)
TELEPHONE SERVICE
  Kiosks (Vandalism)
  Kiosks (Vandalism)
WIRELESS AND TELEVISION
  B.B.C. 2 (Northern Ireland Coverage)
  B.B.C. 2 (Northern Ireland Coverage)
  Television Aerials (Size)
  Television Aerials (Size)
POST OFFICE
  Special Messenger Service
  Special Messenger Service
  Inland Printed Paper Rate
  Inland Printed Paper Rate
  Woodchurch (Postal Address)
  Woodchurch (Postal Address)
SCOTLAND
  Fishing Ports (Heaviest Landings)
  Fishing Ports (Heaviest Landings)
TECHNOLOGY
  B.O.A.C. (Computers)
  B.O.A.C. (Computers)
  Standards Practice (Inquiry)
  Standards Practice (Inquiry)
  High Pressures (Research)
  High Pressures (Research)
  Electronics and Telecommunications Industries
  Electronics and Telecommunications Industries
BOARD OF TRADE
  Depopulated Areas (Assistance)
  Depopulated Areas (Assistance)
  Cotton and Jute Textiles (Import Discussions)
  Cotton and Jute Textiles (Import Discussions)
  Associated Fire Alarms Ltd.
  Associated Fire Alarms Ltd.
WALES
  New Town, Mid-Wales
  New Town, Mid-Wales
  Swimming Baths
  Swimming Baths
  Sewage Disposal Arrangements, South Wales
  Sewage Disposal Arrangements, South Wales

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of St. Albans

THE CHANCELLOR OF THE EXCHEQUER'S VISIT TO U.S.A.
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 p.m. I shall be making a Statement on the Chancellor of the Exchequer's visit to the U.S.A.

MONOPOLIES AND MERGERS BILL
2.35 p.m.
Order of the Day for the Second Reading read.
THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES): My Lords, I beg to move that this Bill be now read a second time. I suppose that one of the phenomena of the latter end of the 19th century and of this century has been the efforts that have been made all over the world to cope with the possible abuses that stem from monopolistic practices. I think I am right in saying that the first effort was made by the United States in 1890, with their Sherman Act, and they followed it, in 1914, by the Clayton Act. Since then all over the world something in the way of comparable efforts have been made to cope with this problem. Here in this country we have followed our cautious and characteristic desire to evolve our legislation gradually, and we began in 1948 with the Labour Government's Monopolies and Restrictive Practices (Inquiry and Control) Act. It was followed in 1953 by an amending Act of a similar kind which enlarged the Monopolies Commission from 10 to 25 and enabled the Monopolies Commission to work in groups. Thereafter, until 1956 when the Restrictive Trade Practices Act was brought in, they worked in groups. But after the 1956 Act that was
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discontinued and the number of members of the Monopolies Commission was reduced.
This Bill is really amending the 1948 Act. The 1948 Act will remain the basis of legislative policy on monopolies. The 1948 Act provided for an impartial, thorough and administrative investigation into the facts of monopoly situations and their effects. I mentioned that in 1956 we had the Restrictive Trade Practices Act. Under Part I of that Act many restrictive arrangements were made registrable and referable to the Restrictive Practices Court. In 1964 the Resale Prices Act was enacted which, subject to provisions for exceptions, makes the particular restrictive practice of resale price maintenance generally unlawful. The provisions of the present Bill make no amendments to Part I of the Restrictive Trade Practices Act. The reason is that there was not time or opportunity this Session to do all that needs to be done. This does not mean that the Government are satisfied that the 1956 Act is completely effective as it stands. Noble Lords will know that recent decisions of the Restrictive Practices Court may have made some people aware for the first time that the law on restrictive practices is far-reaching, and capable of effective enforcement. Nevertheless, there are desirable amendments that should be made to the law to render it clearer and tighter. But the present Bill is confined to what is most urgent and most necessary. It is confined to the Monopolies Commission and their field of work, and it operates, as I have said, by amendment to the Monopolies Act, 1948.
First, the Bill reforms what may be described as the machinery for investigation. The provisions on this aspect are technical, but they are not the less important for that. Secondly, the Bill extends the list of matters which may be referred to the Monopolies Commission for investigation. For the first time, mergers are made referable to the Commission. There are special provisions for newspaper mergers. There is a provision which would improve the Board of Trade's power to ask the Monopolies Commission for "general reports". Monopoly conditions, including collective restrictive agreements, in the supply of services are for the first time brought within the law. I will deal with all these matters in more detail in a few moments.

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Thirdly, the Bill looks to the point where a Monopolies Commission investigation has been completed, and the Government have received their report on the particular monopoly, merger or restrictive agreement and its implications for the public interest. The Bill would extend and improve the Government's power to make orders, following up the Commission's findings. The most elaborate provision for thorough and impartial investigation would be useless, as I am sure noble Lords would agree, if at the end of the day there were inadequate powers to do anything about what had been found out. I might add here that need for change in all three sectors was recognised by the previous Administration. I do not think that there is any argument about the general need for moving forward on all these points. In some respects we have thought it necessary to go further than was proposed by the previous Government in their White Paper. The provisions of the Bill are tougher, and to that extent more effective. I come now to the detailed provisions of the Bill.
Clause 1 and Schedule 1 make the improvements in machinery which I have mentioned. The Monopolies Commission is to be enlarged. For the immediate future, the Bill will permit the Board of Trade to make appointments to the Monopolies Commission up to a total maximum of 25 members, which, noble Lords will remember, was the figure in the 1953 Act. But this is not to be a hard-and-fast ceiling. For the first time the Board of Trade will have power by order to raise the maximum figure set by the legislation. We think that this is an important and useful change, and will make it possible to adapt the size of the Commission, if necessary, to changing circumstances. There is also provision for the appointment of paid deputy chairmen, and for the Commission to discharge its functions in groups, again as in the 1953 Act. In this way the number of cases which can be dealt with at any one time should be considerably increased. Clause 1 also gives the Board of Trade an improved power to frame references to the Monopolies Commission in terms which will require the Commission to concentrate on the more significant aspects of the monopoly situation. Finally, Clause 1 includes pro-
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visions which should make it easier for the Monopolies Commission to obtain the evidence they need from industry, and which could be useful if there was any question of lack of co-operation or unnecessary delay.
Clause 2 is the clause which would provide for the Monopolies Commission to investigate price rings and other restrictive arrangements in the supply of services. This clause, I must concede, does not make easy reading. This is partly because, as I have explained, the Bill operates by amendment of the 1948 Act. Much of the background to the proposals for bringing services into the law must be looked for there. Broadly speaking, what the clause does is to take the definition in the 1948 Act of monopoly "conditions" and to apply it to the supply of all types of services. The 1948 Act already provides for inquiry into a very limited class of services (commission processing). That provision is now extended to apply to other types of service. The Government will be empowered to make references to the Commission in all cases where it appears that monopoly conditions prevail, either in the sense that there is a single monopoly firm—I might say here that this situation is likely to be rare in relation to the supply of services—or where there are restrictive arrangements in operation over a sufficiently large percentage of the trade.
This provision applies equally to all types of service. Professional as well as commercial services are included. But there are two general exceptions to which I should draw attention. First, services rendered "under a contract of service" are out of the picture. This means, broadly speaking, that the Monopolies Commission could not be required to investigate restrictions arising in connection with employment. Secondly, there is a relevant provision in the 1948 Act which has the effect that the Government cannot refer monopoly "conditions" to the Commission if the situation in question is expressly authorised by Statute. It is time that the law was brought to bear on restrictive practices in the supply of services, and the Government would hope to make early use of the powers in the Bill; I would invite those who have evidence of monopolistic or restrictive practices in this field to

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bring it forward. All suggestions as to matters which might appropriately be investigated by the Monopolies Commission will be carefully considered.
I come now to an even more important matter on which the Bill breaks new ground—the provision on mergers. Mergers may have far-reaching and important effect on the industries in which they take place, and even on the national economy. These effects may in some cases be beneficial. Mergers may mean better allocation of resources and greater efficiency. Such mergers are to be welcomed. But sometimes a merger may have adverse effects, possibly arising from a reduction in competition, possibly from other factors. The Government take the view, and this view was also expressed by the previous Administration in their White Paper, that in this respect mergers and monopolies present rather similar problems. Monopolies are not necessarily against the public interest, but they may be so in particular circumstances. A procedure of investigation was therefore established, so that the Government and the public could be advised whether in a particular case the existence or operations of a monopoly were contrary to the public interest. In the same way, the Government ought to be able to inform themselves of the implications of mergers, and be able to act effectively where necessary to safeguard the public interest.
The Bill makes provision for investigating mergers. There are two tests in the Bill which will distinguish mergers which come within the field of public scrutiny. The first test would bring in mergers which created or strengthened "monopoly". The second test would bring mergers in, whether or not they made any contribution to monopoly, where a firm taken over exceeded a specified value. But I should emphasise that these are simply qualifying tests. It will be for the Government to decide whether a particular merger should be referred. It will be for the Government to ensure that reference is made only in cases where they believe that there is a risk of detriment to the public interest arising from the merger. It will be for the Government to ensure that their powers are not used in such a way as to impede mergers
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which are demonstrably beneficial. I would stress that many mergers may pass the qualifying test for reference which will never in the event be referred to the Commission at all. The provisions and powers in the Bill are for a small minority of cases where there is a prima facie reason to suspect the outcome of the merger. If there is to be a control of mergers at all, it is our duty to see that it, is effective. The Government believe that if control is to be effective it may be necessary to hold up a merger while it is under investigation or, at least, to prevent the integration of the firms in question in such a way that they cannot subsequently, if necessary, be divorced. The Bill makes the required provision.
Clause 8 of the Bill makes special provision for newspaper mergers. This provision really stands alone. Unlike the other provisions I have described, this clause is not intended to serve economic ends. It is designed to implement the recommendations of the Royal Commission on the Press, which concluded some years ago that action should be taken to regulate the increased concentration of newspaper ownership. There is a lot to be said on both sides on this question. It may be argued that newspaper mergers have not yet produced any disastrous consequences, or that the cure is worse than the disease. I expect that we shall discuss this more fully on Committee stage. After careful consideration, however, the Government have accepted in principle the Royal Commission's conclusion. It has not been possible to follow the Royal Commission in all their detailed proposals for imposing this regulation. In our view, the issues which are likely to arise on a newspaper merger are simply not justiciable. So we could not commit them to a court of law, as the Royal Commission proposed. In providing for newspaper mergers to go to the Monopolies Commission we have taken what we thought to be the only practicable course. Here, again, there is a test to be applied to particular mergers to see whether or not they come within the newspaper provisions of the Bill. But in this case it is not merely a qualifying test. Where the test is satisfied, it will be unlawful to complete the merger without the consent of the Board of Trade. In normal cases there must first be an investigation by the Monopolies Commission. But the

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Board of Trade will be able to dispense with this where only urgent action can save the destiny of a newspaper.
I have now dealt with the new matters which the Bill brings for the first time within the scope of reference of the Monopolies Commission. I must deal finally with the powers to make orders which are to be available to the Government when the Monopolies Commission have reported. The powers conferred by the Bill are set out in Clause 3.
The Bill carries forward and clarifies the powers in the existing legislation, and adds new powers to the list. In ascending order of importance, these new powers are as follows: first, power to require the publication of price-lists; secondly, power to prohibit departure from published price-lists; thirdly, power to control prices; fourthly, power to prohibit further acquisitions or mergers; fifthly, power to provide for the break-up of monopolies or mergers. These are the powers which experience has shown to be necessary, if the Government are to be able efficiently to follow up a Monopolies Commission report. They will not be lightly used. Indeed, in all but the most exceptional case, the reserve power to make an Order should in itself be an effective sanction to secure voluntary action, where this is appropriate, on the part of the firms concerned. But there must be full order-making powers in reserve.
Most far-reaching of all are the powers which the Bill confers to break up firms. The Government agree with the view expressed in the last Administration's White Paper that such powers must be available. But to use them would be a most serious step, to be taken only in the last resort, where it was clear that only this radical solution would safeguard the public interest. The Government have added provisions to the Bill to ensure that the procedure for making orders gives the fullest opportunity for all interested parties to make representations, and for those representations to be considered by the Board of Trade.
There is one rather special case for which some of the powers listed in Clause 3 are made available. This is the case dealt with in Clause 4, where a Monopolies Commission report reveals that a
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monopoly or restrictive arrangement is in conflict with the United Kingdom's international obligations. We are thinking in terms of EFTA and the Stockholm Convention. The Government think it right that they should take this opportunity to show, it contains some provisions of fulfil their obligations.
This is a short Bill, but, as I have tried to show, it contains some provisions of very great importance. We shall have further opportunity to examine its detailed provisions. I should like to conclude by making one general point. The Monopolies Commission are there to be used, and if this Bill is enacted we shall be able to use them more freely and more effectively. More references to the Commission will be made. My right honourable friend the President of the Board of Trade has explained in another place the general principles which the Board of Trade would expect to follow in making references to the Commission. I would urge industry, when investigations are initiated, not to regard the Board of Trade and the Monopolies Commission as simply necessary evils. It has been emphasised on many occasions that an investigation is a neutral and impartial procedure. The intention is simply to elicit the facts, and, if necessary, but only if necessary, to take steps to safeguard the public interest. Experience of monopoly investigations has shown that the Monopolies Commission have not normally found much amiss; the record is not discreditable at all. We do not yet know enough about the new services to say whether experience in that connection will be similar. But in all these cases it must not be assumed that an investigation which does not end in dramatic recommendations has been a waste of time and money, either for the public interest or for the industry in question.
The existence of the Monopolies Commission is in itself a powerful incentive to industry to give adequate weight to the public interest in day-to-day commercial decisions. It is a discipline. It is a sign of the Government's commitment to a competitive and forceful economy. Those firms and sectors of industry which are pulling their weight have nothing whatever to fear from this kind of legislation. If it can improve the utilisation of our industrial and economic resources, it is of value to all, not least to everybody

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associated with the professions, industry and commerce. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Rhodes.)
2.59 p.m.
LORD DRUMALBYN: My Lords, I am sure that we are all extremely grateful to the noble Lord, Lord Rhodes, for his full explanation of the purposes of this Bill. Legislation on monopolies has not been a matter on which there has been a great deal of controversy on principle, although on questions of application and method there has been some difference of opinion. On the main objectives of the Bill, there is no cause to quarrel. Indeed, there is a close similarity between the provisions of the Bill and those contained in the last Government's White Paper (Cmnd. 2299) Monopolies, Mergers and Restrictive Practices, published in March, 1964.
There has been a broadly common approach since the Coalition Government. The noble Lord mentioned that the first legislation was in 1948, but it was in 1944 that the Coalition Government worked out together their policy, published in the White Paper, Employment Policy. In paragraph 54 of that Paper they said this:
"The Government will seek powers to inform themselves of the extent and effect of restrictive agreements and of the activities of combines and to take action to block practices which may bring advantages to sectional producing interests but work to the detriment of the country as a whole."
That, I think, has been the policy of all Parties ever since. I may say, in passing, that it was not until four years later that legislation to give effect to these intentions reached the Statute Book. I say that not to cast any reflection on the will of the Government of the day to deal with the problem as quickly as possible (I realise that they had many other matters in hand), but to stress the inherent difficulties of the problems involved if one is to treat the matter fairly.
This time, the preparatory work, other than the actual drafting of the Bill, had already been done before the present Government came into office. It is hardly surprising that the purposes of the Bill, as set out in the Explanatory Memorandum—and very clearly, if I may say so—follow closely what was fore
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shadowed in the last Government's White Paper, with the exception of the special provision for newspaper mergers, referred to in paragraph (e), and the possible exception in paragraph (d),
"to extend the power to require general reports from the Monopolies Commission."
Even there, noble Lords will recollect—and especially my noble friend Lord Conesford—that it was on one such general report of the Commission, that on collective discrimination, that the Restrictive Trade Practices Act, 1956, was based. So that this proposal in the Bill is not entirely new. I gather that it contains some extension.
The noble Lord, Lord Rhodes, referred to the powers in the Bill, and for my part I accept the necessity for the extension of the powers to require the Commission to look into practices designed to block healthy change, not only in the production or supply of goods, but in the supply of services or the export of goods. I should like to ask the noble Lord who is to reply one question on that point. The White Paper indicated that the then Government intended to bring information agreements within the scope of the 1956 Act, so that particular agreements could be called up by order for registration. This intention is not implemented in the Bill, for the reasons which the noble Lord explained, but I would ask whether Clause 5 can be used to include information agreements, whether in general or as regards prices or in relation to any other exchange of information.
The last Government declared themselves in the White Paper to be satisfied that the present powers to implement recommendations made by the Commission were not adequate. Generally speaking, they said that firms had shown themselves willing to comply with recommendations of the Monopolies Commission at the request of the Board of Trade, or to give undertakings to comply with them, and that they had, in fact, carried out those undertakings. The White Paper did not specify the powers that would be required, but I have no reason to suppose that the powers which the last Government would have sought would have been substantially different from those in the Bill. What matters is not so much the powers themselves—for it is generally recognised that there must be some

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powers in reserve—as the way in which they are exercised. I gather from the noble Lord, Lord Rhodes (and I should like to have confirmation of this) that it is the intention of the Government to proceed by way of voluntary agreement, as before, wherever possible.
At least, we can all welcome the need to obtain the sanction of both Houses to the exercise of the powers, to which I do not think the noble Lord referred, except in the one case to which I shall refer later. The House will naturally have reservations about Clause 3(4)(c), which empowers the Board to regulate prices; but your Lordships will, I am sure, welcome the limitation on the exercise of the power, introduced in another place, to cases where the Commission's report indicates that price levels have been, or are, operating, or are likely to operate, against the public interest. On that I would only comment that perhaps the paragraph appears to need a little redrafting.
I turn now to the question of services. The Bill departs in four main aspects from the White Paper. At present, as the noble Lord said, the only service covered is the application of a process to goods. While the White Paper proposed to limit the services which were to be brought under scrutiny and control for the first time to commercial services (in particular, services relating to goods), Clause 2 covers all services. The last Government considered that it would be better not to try to advance on too broad a front; and, in any case, there were no apparent instances of abuse in professional services not related to the supply of goods, including buildings, which appeared to need immediate attention. I think the House is entitled to know why the Government decided to cover the entire field of services. I would ask the noble Lord who is to reply what specific services the Government have in mind to inquire into, apart from commercial services.
I turn now to the question of mergers. In regard to mergers, in the White Paper the last Government said that they
"recognise and welcome the contribution which mergers can make to the well-being of the community".
But they expressed the belief that there should be power to investigate mergers,
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since in a small minority of them the practices might have harmful results. They therefore intended to seek powers to inquire into any proposed or recently completed merger which would bring a firm within the somewhat artificial definition of a monopoly, or would increase the proportion of the market held by a firm already in the definition. They then added these words:
"The Government do not intend to seek power to hold up a proposed merger while it is being investigated. This could well frustrate desirable mergers."
That is contained in paragraph 25 of the White Paper. But in Clause 6(10) of the Bill the present Government are seeking powers, without the need for Parliamentary approval, to prevent a merger from taking place while the inquiry is in progress, by exercising their powers as if the Commission had already reported and the Board of Trade were considering making an Order to prevent acquisition or undo its effects: in other words, to hold up the merger, whether it is desirable or not.
But how long will it be held up? The Commission, under the Bill, are to report within a period not exceeding six months, which could be extended by a further three months. Then the Board have to consider their findings. I would ask your Lordships to consider whether any merger could take place on exactly the same terms as originally proposed after all that time. Conditions are bound to change in the meantime. Even if the Board of Trade were to lay an obligation on the company to be acquired not to entertain any other offer in the meantime, they cannot impose a complete "freeze" on the whole situation. I must therefore ask the Government: Do they deny that such action may well frustrate desirable mergers?
The noble Lord may say that investigation into proposed mergers can also frustrate them. But if the acquiring company believes that it is both in its own and in the public interest to go through with the merger, and accepts the risk, which it may consider remote or infinitesimal, it will go through with it. But a merger stopped by an order of the Board of Trade which I repeat, is not to be subject, under the Bill, to Parliamentary approval, is almost certainly a merger frustrated. Is that what

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the Government want, even if the merger is found, or would be found when the inquiry were completed, to have been desirable? Of course, if the time of the inquiry were curtailed very substantially the objections to this standstill power would be considerably reduced. But this could be done, I submit, only if some members of the Commission were to be willing to serve full-time, or if there were a panel of experts on mergers, prepared to give their whole time for brief periods, who could be added to the Commission—say professional men and men who had perhaps just retired from industry.
The noble Lord referred to the power of the Board of Trade to add members to the Commission, and I would ask the Government whether it is their intention to contemplate this kind of addition in order to hasten and accelerate the inquiries into mergers. But even so, I am afraid that this power will greatly hamper the growth of the confidence of industry in the Board of Trade that has been taking place in recent years through co-operation in exports and in other ways. It will reduce the willingness of industry to consult the Board of Trade in advance, and yet Clause 8(2) implies that the Board of Trade would like industry to consult it at the stage when a merger is contemplated, no doubt on a strictly confidential basis. But if the Board of Trade has power to stop a company from going ahead with a merger before any inquiry has taken place, industry will be much more wary of consulting it. The company will want to try to tie things up in such a way that a standstill order will not in itself prevent the merger before it tells the Board of Trade anything about it. It will hold up the merger, but it will not prevent it. This is surely what those who are contemplating mergers will want to do before they consult the Board of Trade. This, I think, is unfortunate. The effect of that will be that the kind of mergers that will be frustrated are those which tare opposed by the company to be acquired, and yet it is by no means always only the ones which are opposed that are likely to harm the public interest. Those which are agreed may also do so as much, or, in certain circumstances, more.
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Your Lordships will want to look very carefully at the characteristics of mergers—the qualifications, I think the noble Lord called them—which bring them within the purview of the Bill. A merger or proposed merger, as he said, may be referred to the Commission, not only if the resulting combine will control at least one-third of the supply of goods of any description in the United Kingdom or any part of it—that is, not only if it results in a so-called monopoly—but also if the book value (and I think it was established in another place that the book value was meant, though the Bill says just the value) taken over exceeds £5 million. No satisfactory explanation has yet been given of this figure. There are serious disadvantages in this proposal. In the first place, £5 million may represent a comparatively small proportion of the productive capacity in a particular industry, and in any case only a part of that may be related to goods which the acquiring firm also supplies. In the second place, the book value of the assets is not a sound guide to the importance of a firm in a particular sphere. Its assets may be under-used, and it may be a good thing for the economy that the firm is taken over.
In the third place, the acquiring firm may have no common production interests at all with the firm acquired, and may wish to acquire it simply for the purposes of diversification. The only plausible justification for a value of assets test so far put forward is that it might enable the Board of Trade to intervene to stop a foreign firm from taking over a British company with sizeable assets. Desirable as that might be in some circumstances, it is hard to see on what basis a Commission concerned with monopolies could judge whether or not to recommend that such a merger should be prevented. If it should be, surely some other appropriate means should be found to prevent it.
I turn now to the question of divesting. The whole business of unscrambling the omelette where a merger has taken place and has been adversely reported on by the Commission, is one of the most complicated parts of legislation, and entails, as I think the noble Lord expressed it, the most far-reaching power of all. With that view I would not disagree. Some

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noble Lords may have read the article in The Times of March 21, I think it was, about the unscrambling of the Hanover Trust. The complications are legion, and even include what I believe is known as sub-delegated legislation. I leave that point to others, or to a later stage of the debate, when I think it could be more fully examined.
I turn to newspapers. The third main difference is that special provision is made for newspaper mergers, as distinct from other mergers; and I noticed that the noble Lord said that this power was not intended for economic purposes. In short, the Bill provides that where any newspaper merger would result in a total circulation of 500,000 copies or more, the written consent of the Board of Trade must be obtained, and cannot be obtained until the Commission has inquired and reported, unless, in effect, the newspaper is in such financial difficulties that it must either close down entirely or merge as a matter of urgency.
Most of your Lordships, I think, will have some sympathy with the general purpose of this special provision, designed, no doubt, to prevent two things in particular: first, the sudden acquisition of a large and influential paper, whether daily or Sunday, and the possible, though not necessarily inevitable, consequence of either a change in its editorial policy or the suppression of the paper altogether; and, secondly, the gradual mopping-up and control of papers with bad circulations. What I think the Government have to justify is the arbitrary figure of 500,000 circulation and, secondly, the extraordinary provisions as to the meaning of "associated persons" in Clause 9. Under Clause 9 two brothers, or an uncle or a nephew, must be treated as associated, even if the association has in fact come to an end in circumstances of notorious acrimony—even if they had been running a paper together with a circulation of close on 500,000, and one or the other of them had broken the association and gone off to buy up or found another paper in an entirely different part of the country. Surely this is very much a case where the word "shall", in Clause 9(1), which deals with "associated persons", should be altered to "may". Whether they are associated or not is surely a question of fact, and to assume that they
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are associated when they are not must surely be a violation of the truth.
The fourth and last main deviation from the White Paper is the failure to implement the proposal to appoint a Registrar of combines, or whatever they are to be called. Personally I should prefer to call them combines, rather than monopolies; and "combines", incidentally, was the word used in the passage that I quoted from the 1944 White Paper. After all, "monopoly" means, as the Oxford English Dictionary says,
"the exclusive control by a trade of the whole of the trade."
In the past year or two the Board of Trade have become aware that industry—and one must face this—has not the same confidence in the Monopolies Commission as it has in the courts. As the White Paper expressed it,
"The Commission's inquiries have been of great value, but experience has shown that certain aspects of the law are open to criticism—

" 1. The impression that the same body is asked to carry out the function of both judge and prosecutor.

"2. The length of time which goes to the production of a report.

"3. The lack of powers in the hands of the Government effectively to implement the Commission's recommendations."

The Bill rectifies the third criticism. The second criticism is difficult to rectify without a full-time Commission, and we know the objections to that. As the noble Lord said, the increase in the size of the Commission will enable it to undertake more work simultaneously, but will not necessarily reduce the time taken over any one reference. What should reduce it more than the increase in the size of the Commission is an increase in the size of the staff, together with greater continuity of service in it. The first criticism, that is to say, the impression that the same body is asked to carry out the function of both judge and prosecutor, is the most fundamental. Industry is under no misapprehension as to the task of the Commission, which, as the White Paper says, and, as the noble Lord said, is to elicit the facts and examine them impartially.
Most certainly the integrity and impartiality of the Commission have never been questioned, and nothing I say is intended as any reflection on them whatsoever. What causes concern is the way

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in which the staff present what they believe to be the facts to the Commission and the opportunities for the company concerned to make corrections and to defend its conduct in so far as it is said to conflict with the public interest. I have found from my inquiries in industry a feeling that the company is put into the dock but that it does not have the same opportunity to prove its innocence as a person accused in court. Really it is not any good trying to gloss over this and saying this is an investigating body, because the fact is that where this is in question a firm is expected to prove its innocence of doing things, or creating or preserving conditions, which operate, or may be expected to operate, against the public interest.
With the best will in the world and the utmost desire in the world to be impartial, the staff of the Commission are bound to act in a manner more akin to a detective than to a research historian seeking for truth, and to treat any firms whom the Board of Trade think it worth while to refer to the Commission as suspects.
A Registrar would have had three main functions. First of all, to decide what so-called monopolies the Commission should inquire into—that is to say, to refer his suspicions to the Commission; secondly, to investigate, and, thirdly, to present the case against the company or companies in much the same way as the Registrar of Restrictive Practices does for the Court. It would then have been for the Commission's own staff to draw up the report. This would have enabled the so-called monopoly to know what case it had to answer, and I must say I regret very much that the Government have not accepted this recommendation. As it is, I feel it is not too late to amend the Bill, at least, so as to secure improvements in the procedure of the Commission.
I am inclined to think that Section 8 of the 1948 Act, which permits the Commission to determine its own procedure, ought to be amended so that its rules of procedure should be laid before both Houses and subject to the Negative Resolution procedure. In particular, I believe that any company whose affairs are inquired into should have the right to see the factual part of the report in its entirety before it is presented to the Board of Trade, so that it may comment on what are thought
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to be the facts and the Commission may adjust both the factual part of the report and its recommendations.
LORD SHEPHERD: When the noble Lord says "factual part", does he mean the evidence that has been given to the Commission?
LORD DRUMALBYN: In a sense everything which goes before the Commission is evidence. I am using the words that have been used by the Report of the Committee on Administrative Tribunals and inquiries. The noble Lord has referred to paragraph 343 and to Recommendations 80 and 82 of that Report, and he will find there what I have now said, that the factual part of the report should be shown to the parties. That is completely in line with the recommendations of the Committee, which have been largely implemented. I see no reason why it should not be implemented also in monopoly investigations where, I may say, there is generally very much more at stake. I will add this, too, that considering the extent of the powers that the Bill seeks to confer on the Board of Trade, it is hardly too much to ask that every possible step should be taken and no step should be omitted to get the facts right, for it is on the basis of the facts that decisions to exercise far-reaching powers have to be taken, at least so it is devoutly to be hoped.
In conclusion, may I stress again that ever since 1944 there has been a large measure of agreement between the parties that, on the one hand, a person or company is not to be taken as necessarily operating against the public interest because it is big or because it controls a considerable proportion of the supply of any class of goods, or because it acquires another company; and, on the other hand, we should be vigilant to see that economic power is not abused and that we should be willing and ready to concede powers to the Government to prevent that, subject to proper safeguards. I will end on this note—and I recognise it is a note on which there is a division of opinion. Ever since the 1948 Act was introduced, conditions of employment and remuneration have been outside the Act. Now, of course, the Commission on Prices and Incomes will have power to look into a good many of the circumstances which may lead to increases

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in prices and incomes. But at the root of our troubles at the present moment lies a certain number of practices which seem to be outside the scope of the Commission on Prices and Incomes and yet are not within the scope of the monopolies legislation. Is it not time that somebody had the power to look into all practices—and I quote again from the 1944 White Paper—so that appropriate action is taken
"to check practices which may bring advantages to sectional producing interests"?
And that, of course, means not only the management side but practices which may work to the detriment of the country as a whole.
3.29 p.m.
LORD BYERS: My Lords, on behalf of the Liberal Party I should like to follow the noble Lord, Lord Drumalbyn, and welcome the objectives of this Bill. We agree with the noble Lord, Lord Rhodes, in that we do not regard all monopolies and mergers as bad in themselves; but in our view it is right that they should be scrutinised to see that the power which they possess is not used against the public interest. There are, quite clearly, amalgamations and mergers which should be encouraged (and when I say that I am not referring to any suggested new political alliances: I am speaking entirely in the industrial field), because they will make for greater efficiency. Indeed, in the view of many of us in different parts of the House this may well be the way in which United Kingdom and European industry will have to develop, in order to compete with the might of the United States of America. I take it that there is nothing in this Bill that will prevent useful efficient mergers of that sort. But what we want to see exposed is the monopoly or the amalgamation that is exploiting the public, and for this reason we welcome the stronger powers that are taken in this measure.
In the past, the work of the Monopolies Commission—and I do not say this against its members—has been, in the view of the public, and in the view of many of us, painfully slow. On numerous occasions over the past years we from these Benches have called for an enlargement of the Commission and for the appointment of more sub-committees to
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deal more expeditiously with a larger number of subjects. I am glad to see that this Bill provides for such a development, and I hope that the Government will use the powers they are taking. We have also commented adversely on a number of occasions on the unwillingness, or the inability, of past Governments to ensure that decisions of the Monopolies Commission were adequately enforced. At the time of the General Election, I believe, about 18 of the 23 reports made by the Commission up to that time had found that monopolies existed which were indulging in practices contrary to the public interest, but only in two cases had orders against them been made. I wonder whether the noble Lord, Lord Shepherd, when he comes to reply, will tell us what the score is to-day. Is it any better or is it worse?
LORD DRUMALBYN: My Lords, may I ask the noble Lord whether he does not think it a very good thing that in only two cases out of 20 it was necessary to apply reserve powers, and that the rest should be implemented voluntarily?
LORD BYERS: That is not the impression I have. The impression I have is that there is a good deal of reluctance on the part of industry to get on with the job of complying with the recommendations and the orders of the Court. Certainly if that is not what has been happening, let the Government make it clear. The new powers the Government are taking are to be welcomed, and I hope that they will be used to improve the competitive power of British industry—because that is their object—and to remove the restrictive practices which always flourish in monopoly conditions.
There are only three points that I want to make on this occasion. I follow the noble Lord, Lord Drumalbyn, in saying that I think the Government may have been ill-advised not to accept the proposal made in Command Paper 2299 that a Registrar of Monopolies should be appointed. I should have thought the work of the Commission would be further speeded up if there were somebody who was going to prepare cases impartially for reference to the Commission itself. I should have thought that a good deal could be done to reconsider this proposal. I believe I am right in saying

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that in another place the Minister of State at the Board of Trade expressed his personal view that such an appointment should be made, and I think that he gave the impression that if the Government had had time they, too, would have come down on the side of having a Registrar. I should have thought we have an opportunity in this House to make the necessary Amendment and that the Government should consider the administrative way in which they can give effect to this suggestion.
Secondly, I wonder whether the Government have given sufficient attention to the mechanics of scrutinising mergers before they take place. Very often, secrecy is of paramount importance, if speculation in shares and substantial movements in share prices are to be avoided. How is it proposed to deal with these problems? Are dealings in shares to be suspended by Government order?—because, if so, the period in which this can be done without causing chaos is very limited indeed. Under the Bill, the Commission can take up to six months in order to find out whether a merger is going to be in the public interest, and this is a point which will have to be looked at by the Government, because it will not be possible to have a long period to examine the merger without causing chaos on the Stock Exchange.
Moreover, I would ask whether the test of the public interest is going to be the sole criterion so far as mergers are concerned. Ought we not to give some attention to the position of employees and staff? Because quite often, and quite rightly, a merger results in reduction of staff—that is one of the objects of it. I think it only right that proper arrangements should be made for those who are redundant, for retraining and so on. Therefore, to that extent, I am not satisfied that the public interest in the sole criterion in a matter of this sort.
Thirdly, I hope there will be no attempt (although I got a hint of it, I think, from the noble Lord, Lord Drumalbyn), as there was in another place, to try to bring the trade union movement within the scope of this Bill. I believe this to be quite wrong in principle, and I think it will completely distort the work of the Commission and slow it up. If trade union restrictive prac-
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tices are to be abolished they should either be dealt with by a separate tribunal or left to the normal processes of productivity bargaining, preferably at plant level. These are matters on which I understand the Royal Commission will be expressing a view, and I hope we shall not distort the objects of this Bill, dealing with industrial monopoly situations, by introducing this particular idea. At the time the Resale Prices Bill was before the House we made it clear that it should have been preceded by a Bill to deal with monopolies and mergers, and for that reason I am glad the situation has now been brought about where we have the Resale Prices Act on the Statute Book and we shall have a stronger Bill to deal with monopolies and mergers in the future.
3.36 p.m.
LORD BROWN: My Lords, like previous speakers in this debate I find myself in agreement with the provisions of this Bill because it gives the Government additional necessary powers. I would stress the statement that I find myself in agreement, because I want to be quite critical about some broad issues, and I might inadvertently give the opposite impression. It is a strange fact that on one of the major and rather rare points of agreement between the Labour and the Conservative Parties, both are, as Parties—and I stress the term as Parties—in my humble opinion somewhat confused in their thinking. The point of agreement is a shared dislike of what both refer to as monopolies. Conservatives, I think, have disliked the so-called monopoly because of their admiration for free competition, and Socialists seem to have disliked it because of the feeling that it results in power over the consumer resting in the hands of the few private interests.
I must explain why I think this confusion exists and its nature. First, the term "monopoly" means exclusive power. I think the noble Lord, Lord Byers, has just made this point. But in this sense it would be very hard to find a monopoly in this country, except those covered by patents, and they are not in question. I doubt in fact, whether any exist at all. Your Lordships may think that this is a mere semantic argument, but I believe that the public of this country accept the word in its literal sense and

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are led to believe that real monopolies, big bad wolves, really exist. So the semantic issue is really an extremely important issue in a political sense. It is from this ill-founded conviction on the part of voters that much of the political support for action against the so-called monopolies arises. Thus are we confused by a word.
When political Parties talk about monopoly, it is quite clear that what they really mean is oligopoly. It is a difficult word, but it is in the tradition of the previous word. Lord Drumalbyn mentioned combines, but that is a much less exact word. Oligopoly is the correct word in the circumstances; it means power in the hands of a few companies. It is clear from the Bill that the reference is in fact to oligopoly. Companies are to come under scrutiny if they control more than a third of the market. We may conclude that both Parties fear the growth of oligopoly. This is one of the confusions.
I must break away from my theme at this time to comment on mergers of companies. There are bad mergers when a company buys others which make products widely different from its own products, for sale in quite different markets. Large companies built in this way and constituted by a veritable rag-bag full of small subsidiaries tend to hinder our economy. There are other types of merger where a company seeks to increase its product development, its volume of production and its sales activities, by taking over some of its smaller competitors. So long as these are integrated into a well devised overall organisation, rather than being left as a series of autonomous and possibly badly managed subsidiaries, then, in my opinion, such mergers are generally helpful to our economy. I shall, for clarity, refer to this type of merger as an "integrative merger"—one must invent some more language in this field.
Political insight is confused for another reason. The original anxieties about oligopolies arose at a time when the degree of internationalisation of trade was extremely limited. To-day when the size of the world has shrunk considerably, the existence of many more overseas competitors ready to step into the British market when they see that opportunities exist because of the small number of competitors means that they are not
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nearly as dangerous as they might have been fifty or sixty years ago.
Thus, for example, Unilever faces the competition of American Proctor and Gamble, I.C.I. faces American Monsanto and Dupont; Lucas faces Delco-Remy, and so on. With the current virility of international trade, we have little to fear from the integrative concentration of the supply of specific types of goods into the hands of a smaller number of firms, so long as we keep an eye on the extent to which they resort to inter-company price fixing. We positively need competitive oligopoly. Some may suggest that the oligopoly brings a tendency in industries that remain organised in small units to ill-advised price raising; but I do not think this would be borne out by an investigation. I believe the opposite might well prove to be the case.
The third confusion I want to refer to is concerned with competition itself. It is regarded in an almost absolute sense as a good thing, lauded by politicians and businessmen alike, although the latter spend much of their days trying to get rid of it. On the other hand, price-fixing arrangements are the subject of general odium. Yet it can be logically argued that price-fixing arrangements inhibit the growth of oligopoly by keeping a large number of inefficient small companies in existence—and this clearly happens quite frequently—whilst, on the other hand, continued competition leads inevitably to oligopoly.
What has not seemed to come to the surface is the idea that in some conditions consumer pressure can push producers into a situation where either they resort to price-fixing or the least unsuccessful purchase their less successful competitors and form these oligopolies. Such action may be to the eventual good of the consumer as well as the country, and therefore will certainly open up greater possibilities of exports. But the danger is that the powers in this Bill might be used willy-nilly to inhibit such moves. I am not suggesting they are always good—they can be bad. But they must be judged on their merits. I fear, however, that conventional attitudes may condemn them without looking impartially at the situation.
The current operations of I.C.I. and Courtaulds in the textile industry may

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lead eventually to a situation of oligopoly; indeed, I hope they do. Can anybody doubt that this is greatly in the national interest? Our machine tool industry has put up a pretty wretched performance since the end of the war, although I am glad to see that discussions are going on which are hopeful. It embraces more than 200 firms employing less than thirty people. This is indeed a bad situation, where few of them employ sufficient technicians, do enough product development or have sufficient volume of production to compete with overseas companies.
As an example, two years ago we had in the computer field Leo, Ferranti, Elliott's, I.C.T. and English Electric. Today, these five have become three. It is possible that to save our industry there will have to be one British firm only. Will such a move, if it comes about, attract the conventional anxiety and criticism of the general public and of Parliament? If it does, it will demonstrate just how unrealistic to-day our thinking is, for such a consortium might be essential to keep the British computer industry in existence at all. I hope I have said sufficient to demonstrate that we seem to lack some conceptual clarity on these issues, and I think it is most important that we in the country get them clear as a whole.
Oligopoly, competition, price-fixing, cartelisation, mergers, take-over bids, and the like are references to relationships between trading companies. Such relationships are not essentially bad or good. They are relationships which can work for the good or to the detriment of all concerned, according to their nature and the manner in which they are manipulated. It is right that the Government should have power to examine these relationships. But I think that if society had been clearer about these issues, this Bill might well have contained measures not only for curbing price-fixing and the aggregation of industry but also for encouraging or even arranging such relationships in appropriate circumstances. The Government ought to have powers now to stimulate integrative mergers in the interests of our export industries. There is nothing new in such an idea except its statement in explicit form.
I would remind those who are anxious about the idea I have expressed that the
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Government have already condoned, if not encouraged, almost complete price-fixing in the steel industry; they have pressured the aircraft industry into the formation of fewer and bigger companies, and for the last forty or fifty years they have shielded the automobile industry with high productive tariffs against foreign competition. I think these moves have all been good, with the possible exception of the one in the steel industry.
We are a nation of 50 million people, and we have to compete for our food and our raw materials with Japan, with 100 million people, the European Common Market, with 200 million, the U.S.A., with 250 million, and, last, with Russia, with 300 million or 350 million. If a U.S.A. firm control 10 per cent. of the United States market they have as much volume of production as a British firm which controls 50 per cent. of the British market. That is probably a gross understatement, owing to the relatively larger consumption of most goods in the United States. To-day, in international competition, it is the firm with the large volume of production that has the potentiality of winning the competitive fight. Therefore, we need more large integrated companies rather than fewer.
Many of our companies will not be able to compete internationally unless they control perhaps as much as 50 or 60 per cent. of the home market, and as long as they are efficiently run and are earning overseas currency at an appropriate rate they must be positively encouraged to absorb those of their competitors who are inefficiently using up scarce national resources. I think it is time we stopped those few industrialists who are still talking about themselves as public benefactors in giving employment. They are not and they do not. They use resources which we all know are the source of our national wealth. This Bill is almost silent on the essential criteria for assessing companies. I suggest that these criteria should be the working conditions provided for employees; effectiveness of product development; productive efficiency; service to the consumer; and, above all, the ability to earn foreign currency through exports. We really want an Industrial Efficiency Commission, not a Monopolies Commission.
Using the criteria I have mentioned, if we compare the performance of large

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firms organised in "oligopolies" and small firms fighting it out in classically competitive style, the laurels will, in general, go to the "oligopolies" and not to the small competitors. The latter suffer very often from too much fear of their own early demise, too much difficulty in attracting capital and technological talent, too little prosperity to enable them either to plan their own future or to plan how to export. Necessity can be the mother of invention, but it can often be sterile. The present somewhat unhappy theme of agreement between the two major political Parties is based on too much absolutism on these issues.
I want to come now to one other very important aspect of this matter of the size of the individual company. Suppose, for a moment, that we have a choice, either one company employing 50,000 people, or 50 companies each employing 1,000 people. I want to make a particular point, but before proceeding further I want to make it clear that my comment contains the assumption that what is paid to managers is, in general, an index of their capacity for managerial work. I know that this is obviously not true in every individual case, but I think that it will hold for a large sample. I must exclude those who earn money by percentage on profits. This might run up to £250,000, as we know, and I could not possibly include them in this statement.
Taking this assumption as the basis of what I have to say, in the firm employing 50,000 people one will probably find a chief executive being paid £25,000 a year or thereabouts, with eight subordinates at about £12,000; with 50 people on the next layer at about £8,000, and about 300 at the next layer earning in the £5,000-a-year range. This makes a total of nearly 400 people earning £5,000 or over, who are presumably men of that calibre. If, on the other hand, we take the 50 companies each employing 1,000 people, we will find in each of them one person at the £5,000 mark, and nobody else above that: in other words, 50 people of that calibre against 400 in the large firm. Of those 400 in the large firm there are a substantial proportion who are more capable people than any whom one will find in any of the smaller firms. This is one of the beneficial aspects of integrative concen-
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tration of industry which is often overlooked. This is a sweeping statement in setting up my simple model. It can be criticised in detail, but the broad sense of it is true.
If industry continues to consist mainly of small companies, then it fails to attract in sufficient quantities the potential Beechings, Robens' and Chambers' of our society. Small firms in industry cannot attract sufficient potentially able people, and, instead, at an early stage of their livelihood they become university dons, journalists, lawyers, judges, merchant bankers, research scientists, civil servants. I imply no disrespect for those professions. On the contrary, I suggest that they already contain too much of our top talent. If we create a small number of larger and efficient companies, they will provide the opportunity for a considerable proportion of this country's best brains to get into the front line in the economic battle for greater exports. This is the crucial battle which faces us at this moment.
Before I conclude, may I add one small comment to what was said by the noble Lord, Lord Drumalbyn? I left out of my speech any reference to my personal anxiety about the progress of American business in taking over increasingly key industries in this country. I think there is an ever-present danger of what, rather emotionally, I might call a sort of economic colonialism developing. I know that the French are very keen about this. I took the bottom limit of £5 million assets to be a reference to the need to deal with this sort of thing. I am sure that there ought to be in this Bill means for this Commission to deal with these incipient dangers when foreign firms seek to get into key positions in our industry.
I started by indicating that I welcome this Bill and, for clarity, I say so again, but I urge on the Government the need, first, for a rethinking and reorientation of our attitudes towards monopoly, "oligopoly" and competition within the context of the need for more exports; second, for the encouragement rather than the discouragement of integrative mergers; and, third, for a change in the title of the Bill. May I suggest, as has been suggested in another place, the title "Trades Commission Bill"? Unless it

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is changed, I fear that the confused image which is alive in society about the nature of industry will remain confused.

CHANCELLOR OF THE EXCHEQUER'S VISITS TO NORTH AMERICA
3.56 p.m.
LORD SHEPHERD: My Lords, I think that it may be convenient if I were now to repeat a Statement which has just been made by my right honourable friend the Chancellor of the Exchequer in another place. I will use his own words:
"With your permission, Mr. Speaker, I should like to make a Statement about my visits to Canada and the United States. Both these visits had as their aims the exchange of views and information with my opposite numbers in the two countries, and in particular to see what common ground exists, or can be developed, for achieving progress on the vital question of international liquidity.
"In Ottawa, I had very useful talks with Mr. Walter Gordon, Canadian Minister of Finance, and some of his colleagues.
"In Washington, I met the recently appointed Secretary to the U.S. Treasury, Mr. Henry H. Fowler, and several other U.S. Ministers. In addition, I had conversations with the President and Vice-President. With permission, I will circulate in the OFFICIAL REPORT the text of the Communiqué issued in Washington on 30th June.
"On the particular issue of international liquidity, Her Majesty's Government regard as urgent the problem of devising appropriate arrangements which might be used for the creation of additional liquidity. In this connection, I would remind the House that there is an expectation that the growth of world trade will slow down over the next year. We must try to ensure that our problems are not made more difficult by deficiencies in international monetary arrangements. Some progress has, of course, already been made. As the House knows, if the recommendations recently made by the International Monetary Fund are fully implemented
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the total of Fund quotas will be increased from about 16 billion dollars to 21 billion dollars.
"I am under no illusions about the serious difficulties in the way of making further progress, which can only come by agreement. At present the nations hold many differing views. There are those who believe that the present scale of international liquidity is in itself sufficient, but that the system is being misused by countries in balance-of-payments deficit; while there are others who believe that there is currently a shortage of liquidity and that immediate action should be taken to create more.
"Following from this, nations are not yet in agreement about the priority of the tasks which need to be undertaken. One view, for example, is that the first requirement is to put in hand a fundamental reconstruction of the international monetary system, in the belief that once this has taken place the supply of liquidity will be brought under more conscious control than hitherto. Another view is that comparatively small adjustments in the functioning of the system would be sufficient.
"My talks with the United States authorities show that they are actively considering these problems and are proceeding—as we are—with a sense of urgency. I see the role of Her Majesty's Government as one requiring continued persistence and flexibility. I should myself prefer to reach a solution which is built upon, or is closely linked with, the International Monetary Fund, since this institution has great capacity for expansion and development, and has served the world well during the last twenty years.
"I therefore propose to continue my discussions with the French Finance Minister and with the Secretary of the U.S. Treasury. I also hope to have talks with other Finance Ministers, in an endeavour to secure a solution which will contribute to the growth of world trade and thus assist both the industrialised countries, and also the developing nations.
"The talks in Washington showed that both Governments are agreed that the pound and the dollar will continue to play an essential role as reserve

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currencies; that there is an identity of interests between them; and that both Governments must, and will, maintain and intensify the measures of financial co-operation which already exist."
That is the end of the Statement.
Following is the communiqué referred to :

CHANCELLOR OE THE EXCHEQUER'S TALKS WITH SECRETARY OF U.S. TREASURY
Statement on discussions held June 29 by Chancellor of the Exchequer James Callaghan of Great Britain and Secretary of the Treasury Henry H. Fowler at the United States Treasury:
British Chancellor of the Exchequer James Callaghan and Secretary of the Treasury Henry H. Fowler agreed in their talks at the United States Treasury that in present circumstances the primary contribution of both the United Kingdom and the United States to international financial stability and the improvement in the international monetary system is to achieve and sustain a broad equilibrium in their international balance of payments.
Secretary Fowler noted that the voluntary effort by American bankers and businessmen to reduce their net dollar outlays abroad undertaken earlier this year at the President's request is having an encouraging effect. Provisional indications are that this and the wide range of other efforts being made to end the United States payments deficit resulted in surpluses during March, April and probably in May, however the United States plans no relaxation of its efforts. The country is now entering the period of the year when tourist expenditures increase dollar payments to foreigners markedly. Imports are rising with continued internal expansion and there are increased dollar outlays in South Vietnam and in the Dominican Republic. The accumulation of dollars in reserve holdings abroad in past years is the cause of large continued gold outflows, such as those of the current year.
The Chancellor of the Exchequer and Secretary Fowler agreed that the prospects for an early and sustained equilibrium in the United States balance of payments resulting from the efforts of the last four years were good, and that there should be no relaxation in the execution of President Johnson's programme of February 10, 1965.
The Chancellor said that a substantial improvement had taken place in the British balance of payments during the first quarter of 1965. He expected a big reduction in the deficit on current and long-term capital account for 1965 as a whole. The measures which the British Government had taken in the fields of fiscal policy, credit control, the stimulation of industrial efficiency, incomes policy and economic planning were beginning to work
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through the economy—and he reiterated his aim of balancing Britain's overseas payments in the second half of 1966.
In discussing the interaction of the balance-of-payments programmes of the two countries, the Chancellor drew attention to the effect on the British position of the measures which the United States had undertaken to correct its balance of payments. In this connection, Secretary Fowler emphasised that the guidelines for the voluntary restraint programme take into account the United Kingdom payments problem. The United States pointed out that the British Government's programme described by Mr. Callaghan to the British Parliament on April 12, for continuing to raise gradually the proportion of the British Government's holdings of non-sterling securities in a liquid form, and their use to reinforce the reserves, would involve an adverse impact on the United States balance of payments. Secretary Fowler recognised the need for this British programme and the Chancellor reiterated earlier assurances that the British authorities would continue to co-operate by managing the portfolio in such a way as to minimise the impact of the operations on the United States balance of payments and avoid any significant impact on the United State security markets. He added that these operations had now been carried to a point where the portfolio could be used to reinforce the United Kingdom reserves at short notice.
With respect to the problem of international liquidity, it was felt that a number of countries will require time to consider their attitudes in the light of changing developments in international payments, and with the benefit of technical studies now being completed in the Group of Ten. In this connection, the Chancellor referred to discussions which he had held with M. Giscard d'Estaing, the French Minister of Finance, and Secretary Fowler indicated that he hoped to have talks with the Finance Ministers of other major countries in the latter part of the year on the subject of international liquidity.
These talks would explore the various possibilities with a view towards any reinforcement that would help to assure a payments system fully responsive to the continued growth of international trade.
The British and American Ministers were agreed that any such reinforcement must await the development, out of the present divergent opinions, of an international consensus on this subject, but that constant and persistent efforts should be pressed at the ministerial level, both during and after the meetings of the World Bank and International Monetary Fund. In this connection the Chancellor stressed the importance of the needs of the developing countries.
The Ministers agreed that the two reserve currencies would continue to play an essential part in the financing of international trade and as a medium in which to hold reserves. They recognised that the interests of the two currencies were closely bound up with one another. This identity of interests had already been recognised in the measures of financial co-operation taken by the two countries which should be maintained and intensified.
In addition to the Chancellor and the Secretary, participants in the Treasury discussion included:

Sir Patrick Dean, British Ambassador to the United States,

Sir William Armstrong, Joint Permanent Secretary of the British Treasury,

Sir Denis Rickett, Second Secretary of the British Treasury,

Mr. Robert Neild, Economic Adviser to the British Treasury,

Mr. M. H. Parsons, Executive Director, Bank of England, and

Mr. John Stevens, Economic Minister in the British Embassy, Washington.

Mr. Joseph W. Barr, Under Secretary of the United States Treasury,

Mr. Frederick L. Deming, Under Secretary of the Treasury for Monetary Affairs,

Mr. Merlyn N. Trued, Assistant Secretary of the Treasury for International Affairs, and

Mr. Stanley S. Surrey, Assistant Secretary of the Treasury for Tax Policy.

4.1p.m.
LORD ERROLL OF HALE: My Lords, I should like to thank the noble Lord for his courtesy in reading out the Statement made by the Chancellor of the Exchequer in another place. It seems to me that this was one of those occasions when the talks were undoubtedly useful, but when there was not perhaps a very great deal to put in a Statement after the talks themselves. Perhaps I might be allowed to say that we are glad that the Chancellor was able to go to Washington in the midst of a very complicated Bill in another place, and to have had talks which showed the full co-operation existing between Ministers in Washington and the Chancellor of the Exchequer in this country. Could the noble Lord say what the Chancellor of the Exchequer is going to do next? Is he going to prepare for a major initiative at the Bank and Fund meetings in September?
LORD SHEPHERD: My Lords, I am glad that the noble Lord has welcomed this Statement. I think he will understand if I fail to answer the question which he has just put. I think it would be wrong for me in this House, not being a Treasury Minister, to make any comment as to what actions the Chancellor of the Exchequer intends to take, except to repeat the words in his Statement, that we shall continue with tenacity and a sense of urgency in pursing this infinitely difficult task.
LORD ERROLL OF HALE: My Lords, could the noble Lord perhaps convey to the Chancellor of the Exchequer our wish that he would take such an initiative and thereby continue the good work carried out by his predecessor in this field?
LORD SHEPHERD: My Lords, that, I should have thought, was a double-edged question. But certainly I respond to the noble Lord's first suggestion and will convey his remarks.

MONOPOLIES AND MERGERS BILL
4.5 p.m.
Debate on Second Reading resumed.
LORD FRANCIS-WILLIAMS: My Lords, in rising to support the Monopolies and Mergers Bill, I intend to restrict my attention almost entirely to one clause in it, Clause 8—that dealing with newspapers. I do so because without always, I am afraid, succeeding in my undertaking, I endeavour, so far as possible, to speak in this House only about things of which I know something. I confess at once that my knowledge on the general field of the Monopolies and Mergers Bill is small, but I think I have some knowledge on Clause 8, which deals with newspapers. It is, of course, an extremely important clause, because it marks a complete break with past practice in this country. It is, I think, the first instrument of legislation in recent history to deal specifically with newspapers.
I should like to say right away that I most strongly approve of Clause 8; but because it is, and marks, a break with the past in introducing legislation dealing specifically with newspapers, it has, quite naturally, led to a certain amount of disquiet and some anxiety on the part of many newspapers and newspaper organisations. The clause has been subject to criticism, although of a rather mild and friendly character, by the Press Council, which fears that it may mark, so to speak, the first opening in a move to bring the Press under greater control. But that I do not believe. It has also been attacked with an immense broadside by the Thomson organisation which has widely circulated a long and closely argued criticism of the Bill. I had hoped very much

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that the noble Lord, Lord Thomson of Fleet, might have been present in your Lordships' House when the Bill was having its Second Reading, in order to put before your Lordships the case set out in his organisation's memorandum; but I understand that he is away in Canada. However, I hope that perhaps he will come and speak at the Committee stage.
Let me say at once that I find the objections made by the Thomson organisation, and others, completely unacceptable. They are, I think, based on a complete misjudgment of what the freedom of the Press is really about. The freedom of the Press is the freedom to publish without censorship and without interference by Governments or other organisations, so long as you publish freely within the ordinary law. Controls of mergers, of amalgamations and of monopoly trends in the Press, of the buying and selling of newspapers by millionaires, has nothing whatever to do with the freedom of the Press, as it has been traditionally understood in this country, and as it is defended; because the freedom of the Press is not the possession of newspaper proprietors, or even of newspaper editors and journalists. It is, of course, the possession of the ordinary people of this country, and is simply exercised on their behalf by the provision of newspapers and of a Press that is not subject to censorship or control
Obviously, what has disturbed public opinion, and what was expressed in the Report of the Royal Commission on the Press, out of which this idea emerges, was such mergers, for example, as those under which Odham's Press—owners of an immense number of magazines, and also of the then Daily Herald and the People—were taken over by the Mirror—Pictorial group to form an immense empire controlling both newspapers and magazines to a possibly dangerous extent. Then there was the takeover bid in which the Thomson Group was recently concerned, when an attempt was made to buy the Glasgow Herald, thus putting both the Scotsman and the Glasgow Herald, the two quality daily newspapers in Scotland, under one control—fortunately, as I believe, resisted by local groups in Scotland. This, I think, provides exactly the sort of case in which
1102
an inquiry by a Commission of this kind is desirable, because great issues of public interest arise.
Originally, the Royal Commission on the Press restricted to daily and Sunday newspapers their proposals for what they called a "court" to examine newspaper mergers, but under this Bill the principle is extended, as I understand it, to local weekly newspapers of all kinds. That is probably right, though it raises some problems which will need consideration; and I hope that they will receive more consideration than they have yet been given before we reach further stages of this Bill. I think the extension is possibly right because we are now at a most interesting stage in newspaper development—a stage at which new methods of production, including web offset printing, photo-setting, the use of computers and so on, make it look as if it will be possible for evening and daily newspapers in the Provinces to become economically viable with a much smaller circulation than has until recently been the case. Indeed, we may see so much of a reversal of the trend that instead of, as in the past twenty or thirty years, having to record the death of newspapers, we may find ourselves in the next few years in the happier position of recording the birth of newspapers.
This is an important development, but it is probable that in the first instance it will depend, in part, upon the operations and the investment potentialities of sizeable newspaper groups which are able (as has been done by the Thomson organisation in Reading) to buy up an existing local weekly paper and, with these new printing techniques, to build an evening newspaper serving the interests of a wider area, which is very desirable indeed. It is not, I think, wholly desirable that a great town like Reading should depend for its evening newspapers, as it at present does, almost entirely upon the London evening newspapers. The local interest—municipal affairs, and all the cultural and other activities of such an area—should be reflected in its evening newspapers.
The same sort of thing has happened, under the same sort of processes, with the development of a new evening paper in Shropshire—the Shropshire Star. Then the Thomson organisation itself, I think, has plans—at any rate, it is surveying

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the ground—for the possible development of some eight evening papers in various provincial centres on the same sort of pattern—that is, for the building of a new evening paper on the foundation of an existing local weekly, with the use of these new techniques of photo-setting, web offset printing, and so on. Although we need to be very careful of too much of a monopoly developing in the hands of any one newspaper group, it is very necessary that we should not, in our anxiety to prevent that, be so concerned that we make it impossible for the development of new newspapers, serving new or old communities, to come into existence. I hope that some consideration will be given to this kind of problem.
In many ways it would obviously be most desirable if new evening papers of this kind could be financed by and could arise from strong local interests, and could have deep roots in their own local communities. I think that the best local newspapers, whether day, evening or weekly, are papers which have these local roots. However, in the nature of things it is highly probable that local groups with the necessary "know-how" and with the necessary knowledge of the new techniques will not exist; and so the only means by which new evening papers of this kind can be brought into existence will be with the aid and assistance, and possibly the investment, of existing newspaper groups. So long as there are means of ensuring that there is some independence of editorial control, some representation of local interests in the new paper, and so on, that may not be a bad thing. And it is possible, if we look at the proposals of this Bill too narrowly, that we may stand in the way of such a development, desirable in many ways as it is, and certainly desirable as it is, as I said earlier, that there should be means to prevent such great mergers in the national Press as we have seen.
My Lords, whilst welcoming Clause 8 of this Bill, as I do, I would also suggest that it needs a good deal of clarification and a certain amount of additional thought. I am very anxious that it should be effective, but effective in the right way. Therefore, not only should we know exactly what is intended, but the clause should be in such a form as to do exactly that. I must say that,
1104
on reading the Bill, I find a certain confusion as to what exactly is meant by "circulation". In the Explanatory Memorandum of the Bill, it is stated that in Clause 8 the reference to "circulation" is to
"…newspapers having an aggregate daily circulation in the United Kingdom of five hundred thousand or more copies".
But when we come to Clause 8 itself, we find it stated, in subsection (5):
"…the reference to relevant circulation is a reference, in relation to a newspaper published on any given day, to the circulation of that newspaper as published on that day …"
If one can make logical sense of a somewhat confused piece of English, it would seem to suggest that, when one talks about circulation, one is doing so as one in fact normally does when referring to circulation figures (when saying, for example, that a Sunday paper has a circulation of 2,100,000), and that that is the figure which would be regarded as "relevant". However, if it is to be daily circulation, as is suggested in the Explanatory Memorandum, then presumably one would divide that circulation of 2,100,000 by seven in order to bring it to a daily circulation. That would make the figure 300,000, which, of course, would leave the paper outside the confines of this Bill; whereas otherwise, if the relevant circulation is the actual circulation, it would come within it.
This is, I think, a point of some importance, and one which those concerned in newspapers ought to have clarified; because it may be the case—it quite likely is the case—that there will be situations in which a newspaper group controlling a morning and an evening paper in, say, Birmingham or another large town of that kind may have a combined circulation getting very near to this 500,000-a-day figure. It may be approaching, and it may be a sensible thing for it to take an interest in, a group of local weekly newspapers circulating in the area and serving the same sort of interests as does the group itself. Whether their circulation is to be divided by seven to give the figure or whether the figure to be taken is that given in the A.B.C. ratings, and so on, may be a highly relevant consideration in determining whether they can proceed with their discussions with or

1105
without reference to the Board of Trade. I feel that some clarification is needed, because I am anxious that this clause should operate, and should operate successfully, in the public interest.
I think we could also do with a little more clarification as to what exactly is meant by "a newspaper proprietor". This is particularly important, because in what is a rather exceptional provision—and one which, it seems to me, is open to a certain amount of criticism—the newspaper proprietor can, under this Bill, in certain circumstances, if he fails to do what the Commission require, be sent to prison for up to two years. It may well be that a large majority of the public would neither break their hearts nor burst into tears if Lord Rothermere, Mr. Cecil King or Mr. Max Aitken were conveyed to prison, to remain there for a certain period to be taught a lesson. But who, exactly, is a newspaper proprietor? It is clear when we are dealing with great newspapers, where there is one dominant figure, but what about a paper like the Observer, which is governed and controlled by a trust and which has a group of trustees separate from its group of directors?
Or, to take a quite different case, what about a newspaper group like the East Midland Allied Press, which owns a substantial group of provincial newspapers of one kind or another, the ordinary voting shares of which are held by 371 persons, none of whom has a controlling interest? In that case, are all 371 of them newspaper proprietors? Do they all have to go to prison if they overstep the mark? Because you cannot put a corporation, a company, into prison; and the fact that provision for not only fines but prison sentences is included in this Bill does, as the drafting of the clause shows, indicate that actual persons are thought of. I think that it will be the case increasingly in the future that persons, in that sense, are not likely to be relevant; because, despite the development of a few big newspaper figures or tycoons, what we are seeing now is the development of a managerial revolution in the newspaper industry, whereby companies owning newspapers are run by a board of officials with no dominating shareholder, no newspaper proprietor in the old sense, at all.
1106
Therefore I suggest that before we come to a later stage of this Bill this, too, needs to be looked at. If we are going to agree that in certain circumstances people ought to be sent to prison, let us at any rate try to be clear in our minds about what we mean by "proprietor" and about whom we intend to send to prison. I wanted to raise these points because I think this clause is important. It marks a new development in our law and in the acceptance of public responsibility to safeguard the public rights in the Press. Therefore it seems to me highly important that we should get it working right.
4.26 p.m.
LORD ERROLL OF HALE: My Lords, I think we have had an interesting debate this afternoon covering many different aspects of this important Bill, so admirably introduced by the noble Lord, Lord Rhodes, not only with his customary clarity but also with his customary brevity. I should like to say how much I enjoyed listening to his explaining, so far as he could in the time, the work and nature of the Bill before us this afternoon. The Bill really extends and varies to a certain extent the stream of legislation passed through Parliament since the end of the war and adopts largely the principles outlined in the White Paper of the last Government issued last year; although it departs in certain important respects from what had been the views of the former Government.
I am very glad to see that the Monopolies Commission is to be strengthened once more; although I should like to place on record that the reason why it was reduced in 1956 was that there was no longer so much work for it to do, since restrictive practices were, in the light of the 1956 Act, to become the responsibility of the Restrictive Practices Court. However, industry and commerce has become more complicated over the last nine or ten years; so the need has grown for an investigating body capable of carrying out several investigations simultaneously.
We on these Benches are glad to see that the provision for increased membership of the Commission, which we proposed, is incorporated in the Bill, but I think noble Lords should realise that

1107
merely because we have panels which can sit simultaneously it does not mean that investigation can necessarily be carried out any more quickly, despite the special powers taken to overcome wilful delay on the part of those who are being investigated. The fact remains that as these investigations nowadays are much more complicated because industrial processes and arrangements are themselves more complicated, so, if investigations are to be fair, they must be long and painstaking and we must expect the time that will elapse from the referring of the case to the publication of the report to be long, rather than short.
I am sorry that the present Government could not see their way to appointing a separate Registrar for Monopolies, because although the present Ministers of the Board of Trade may say—as I did in my day when I was there—that the Board of Trade and the Monopolies Commission are completely impartial and that there is no question of an investigated firm being in any way "in the dock", the fact remains that often the firm consider themselves to be "in the dock". It would have done a great deal to establish the Monopolies Commission in the favour of industrialists if there had been set up in this Bill a Registrar who could prepare the case and put it to the Monopolies Commission and who could thus show the organisation that was to be investigated just what sort of case it was that the organisation was expected to answer.
As regards the investigating of services, the Government have decided to go further than we recommended and to embrace the whole field of services, both commercial and professional. Naturally we shall—as I am sure will the whole country—watch with the closest interest to see what are the first references which are to be made in respect of services. I hope that the Government will bear in mind that a number of professions have their scales of charges and professional conduct laid down by statutory devices or by Royal Charters, and it would seem wrong that they should be called to account for carrying out what has been provided for by Statute.
Those parts of the Bill, principally Clause 6, which deal with mergers depart substantially from what were our proposals. I do not propose to repeat what
1108
were our proposals, as that was dealt with so admirably by my noble friend Lord Drumalbyn, who was at the Board of Trade when the White Paper was being prepared and issued. Nevertheless, I think that the effect of this Bill will be to make some firms reluctant to merge who might otherwise have been prepared to do so. Although the powers of the Board of Trade are in large part permissive and not mandatory, the very fact that the Board of Trade could hold up a merger, or break up a merger after it has gone through, will have an inhibiting influence on a number of industrialists and boards of directors who might otherwise have gone ahead.
I thought that the speech of the noble Lord, Lord Brown, was particularly interesting in that he was doubtful, from practical experience as well as from a study of this important subject, whether there is not a great deal to be said for a more rapid rate of merger and to have fewer larger and stronger companies rather than a great number of small ones. Let us remember that many great companies started from small beginnings. We should never forget the importance of the small independent business—whether the manager be worth £5,000 or a quarter of a million—in Britain to-day and in the future.
The figure of £5 million in Clause 6 refers to the assets of a firm to be taken over, and I understand that by "asset" is meant the total book assets. It would be helpful if that could be written into the Bill. Presumably, it means the combined revenue and capital assets; in other words, the figure at the bottom right-hand column of a company's balance sheet. It would be helpful to know exactly what that figure is meant to be in terms of assets. I hope that the figure of £5 million may be explored during the Committee stage, rather than that time be taken up during the Second Reading debate, and that we shall be told exactly why it was chosen. I hope that it is not a case of "Think of a number and double it", but that the Board of Trade have looked at the structure of companies throughout Britain and are able to say, "Were we to draw the line at £4 million it would be too low; if we put the figure at £6 million it would be too high." Any evidence we can be given to show why £5 million is the right figure would, I

1109
think, help noble Lords in their consideration of this Bill.
Regarding foreign takeovers, I find it difficult to see how the Monopolies Commission could be capable of impartially investigating the desirability or otherwise of a foreign company making a merger deal, or a takeover deal, with a British company. Here factors quite outside the normal purview of the Commission would almost invariably enter into the consideration, and if there had to be decision I should have thought that it would be better coming from the Government, taking into account the political factors, rather than the Monopolies Commission whose information would be of United Kingdom experience and working. Although the noble Lord, Lord Brown, said that we should be careful about foreign companies, I think the words he used were "seizing key sectors of the economy", I think we should also remember that this process of amalgamation and takeover works in more than one direction; and that we should suffer a great deal were the United States to limit and restrict the activities of British companies expanding there.
LORD BROWN: My Lords, what is hitting businessmen on an ever-increasing scale as they go abroad to do their deals is the extent to which a number of foreign Governments and Commonwealth Governments are already in possession of powers which limit the extent to which we can invest in or take control of industries overseas.
LORD ERROLL OF HALE: Yes, I think it a most undesirable trend and one which we should resist, and, with our world-wide influence, try to reverse.
To turn briefly to the question of Press mergers, I thought that the noble Lord, Lord Francis-Williams, made some very interesting points, particularly about what is a newspaper proprietor. Clause 8(6), which deals with that, contains one of those circular definitions which I always find attractive, if not comprehensible. Clause 8(6) says:
"For the purposes of this section—
(a) 'newspaper proprietor' includes, in addition to an actual proprietor of a newspaper, any person having a controlling interest in a body corporate which is a newspaper proprietor, and any body cor-
1110
porate in which a newspaper proprietor has a controlling interest".
I hope that when the noble Lord studies that subsequently he will find it becomes a little clearer. I must say that to be an associated person or relative would seem even more dangerous than being a newspaper proprietor, because from the following clause one learns that a relative shall be an associated person and, curiously enough, for the purposes of subsection (3):
"…relative ' means a brother, sister, uncle, aunt, nephew, niece, lineal ancestor or descendant (the step-child, adopted child or illegitimate child of any person being taken into account as a relative or to trace a relationship in the same way as that person's child); and references to a wife or husband shall include a former wife or husband and a reputed wife or husband."
I can only wonder what has happened to all the cousins and why they have been left out. Later on we may be given some explanation why this definition of relative has been adopted.
On the subject of Press mergers, I think the question of circulation and the figure of 500,000 after the acquired newspaper has been taken over is one which we should explore more carefully during the Committee stage discussions. Much the same comments as I made in respect of the figure of £5 million would apply to this figure. Has the Board of Trade studied the present circulation figures of newspapers? Are there a number of newspapers with circulations of about 400,000 which, if they took over one small newspaper, would be caught by this provision? Or is it perhaps the case that there are a large number of newspapers with circulations of just over the 500,000 mark which would automatically be caught by the provisions in the Bill if they attempted any further acquisitions? As this is a quite new matter, I think it would be advisable for the Government to insert somewhere in the Clause—I will help them by tabling an appropriate Amendment—the power to vary the figure either up or down in the light of experience, so that if the figure is found to be too high it could be lowered, or if the figure of half-a-million was found not to be the most suitable in practice, it could be raised.
The noble Lord, Lord Rhodes, made some play with the powers being taken particularly to deal with monoplies whose

1111
practices had been adversely commented on by the Commission. My own experience was that in the absence of powers it was always possible (although it sometimes took a little time) to secure by agreement with the firm or monopoly concerned an undertaking to comply with the wishes of the Government. On balance, I think it is probably right to have these powers in reserve, but I should not like it to be thought that because we operated without such powers, we were not able to be extremely effective in this respect. Although we shall be granting these powers to the Government, I hope that they will be reluctant to use them, and will rely on persuasion, which leaves a much better taste in the mouth than does compulsion. If we may have that assurance, I shall be much happier. Apart from that, as this Bill embodies so much of what was enshrined in our own White Paper, I feel that it would be wrong to prolong the present discussion. Subject to the reservations which my noble friend and I have made, we hope that the Bill will have a good passage.
4.40 p.m.
LORD SHEPHERD: My Lords, I am sure that the Government have a sense of satisfaction at the spirit of this debate. It has been interesting but, above all else, constructive. It has been much in line with the discussions that took place in another place, when Members put Party politics aside for a moment and sought to improve what is an important Bill. I feel that this spirit is likely to continue to prevail in your Lordships' House, particularly as we have the noble Lord, Lord Drumalbyn, an ex-Minister of State, and the noble Lord, Lord Erroll of Hale, an ex-President of the Board of Trade, obviously going to take an active part in the proceedings. This is a formidable combination. I sensed sympathy with the objects of the Bill in what the noble Lord, Lord Erroll of Hale, said when going rather joyfully round the phrases of the definition of what is a newspaper proprietor. The noble Lord well knows that in this class of legislation it is difficult to make a definition clearly understandable, yet prevent loopholes.
I think that I can be brief, because many of the points that have been raised are those for Committee and, in any
1112
case, if I attempted to answer, I doubt whether noble Lords would be satisfied but would certainly feel that they should raise their points again on Committee. Furthermore, if I attempted to answer all the points that the noble Lord, Lord Drumalbyn, made, we should be here until a late hour. I should like to repeat what my noble friend Lord Rhodes said at the beginning. This is a Bill which is part of the general evolution of legislalation in this field. There is not one of us who believes that this is the end. The Bill is an extension of the first Act of 1948, which was created to obtain for the Government, Parliament and the general public information in a field which, even to those who operate in commerce, is not very clear.
My noble friend Lord Brown alluded to what he called too much absolutism in the attitudes towards this question. On the one side, there is the view that large organisations and monopolies are a danger to the country, and, on the other, there are those who believe that competition can produce all the benefits that the country needs. We all know that competition can lead companies and industries into difficulties, and we know that monopolies, if they are not properly operated to the public good, because of their size and power can be detrimental to the nation and, in particular, to its export trade.
But, with the obtaining of more information about these operations, I believe our views are changing. I think I can say that what we want to-day is not merely competition within our own country, but also the creation of organisations which are able to face competition abroad, which are able to meet and match the large organisations in America and Europe. But we must look at this development carefully. This type of legislation is largely to obtain information, and the Government are now taking powers to act if, from the information obtained from the Monopolies Commission, they consider that a monopoly or merger is likely to be against the public interest. I do not think that industry and commerce need fear this Bill. I should have thought that in many respects they would welcome it.
The noble Lord, Lord Drumalbyn, asked me in regard to services why we have gone a degree further than the

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White Paper produced by his own Administration. We felt that the terms of the White Paper in regard to services connected with goods were too narrow. It might well be necessary to look into insurance and hire-purchase organisations and other services of which one could think. But I would make it clear that the Government share the view of the previous Administration that it is the general commercial services at which we shall take a look first, and at this time we do not contemplate looking into professional services or insurance. Nevertheless, we feel that in drafting this Bill we should draft it sufficiently widely so that, if the need arose, the Government could act.
The noble Lord also asked whether Clause 5 could be brought into effect in regard to information agreements. Clause 5 could be used in regard to information agreements and I believe that in certain circumstances Clause 1(3) could also be used. As to mergers and the standstill power, I take it from what was said in all quarters of the House that your Lordships feel that mergers should be looked into. I remember the serious disquiet in your Lordships' House, in another place and in the Press during the great battle between Courtauld's and I.C.I. One can think of other mergers that have taken place where there was not sufficient information for the public to understand whether such a merger was in the public interest or not. I think there is a general welcome to the Government's taking this power to inquire.
But there would be little purpose in taking this power if it appeared from its use that a merger would be contrary to the public interest and the Government then had no power to take action. In his admirable, short speech, the noble Lord, Lord Byers, drew attention to the difficulties that had arisen about the Monopolies Commission, when they had made reports and the previous Government had been under difficulty in dealing with them. This was because under previous legislation the Government had no power to act. They were dependent upon conciliation and negotiation. We feel that the Government, if on the information that is available to them they consider that a merger is likely to be contrary to the public interest, should
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have this power. There are two qualifications. First of all, there is the question of whether the merger in itself would create a monopoly. In such a situation, the Government could hold up the merger for a period, or could permit it to go forward under certain conditions, and the Bill gives the Board of Trade power to lay down these conditions—for example, that the assets of the company, particularly the machinery and equipment for production, shall not be scrambled in such a way that, if the Monopolies Commission found that the merger was contrary to the public interest, it could not be unscrambled without extreme difficulty.
I think I should stress, particularly in view of the speech of the noble Lord, Lord Drumalbyn, that we do not believe that there will be many mergers that will have to be sent to the Monopolies Commission. In most cases it will be quite clear from the beginning whether the merger should go forward or whether it should stop. It is only in what one might call the very small fringe area, where an element of doubt may arise, that the Minister will think it right to send the case to the Monopolies Commission for investigation. I hope that the public and your Lordships' House will not feel, as might be suggested by the speech of the noble Lord, Lord Drumalbyn, that all classes of mergers are going to be involved. As I have already said, I do not think this will be the case. I believe that only a few will need to be sent to the Monopolies Commission.
I appreciate, of course, some of the difficulties that would be involved if there were a standstill. But what is the alternative? Really, it is to do nothing. I think that, on balance, considering the few companies which are likely to be involved, this is the right course. I certainly hope that all companies which do enter into merger arrangements will consult with the Board of Trade at the earliest possible moment. They will be able to get a great deal of information. As the House knows (and I am sure the noble Lord, Lord Erroll of Hale, will confirm this), these inquiries are treated with the greatest confidence.
LORD BYERS: My Lords, may I ask the noble Lord a question? Does this

1115
mean that it would be possible to get a clearance from the Board of Trade? If one can do that, of course, it is a different matter.
LORD SHEPHERD: As I understand it, only when there is a prima facie case that a proposed merger is likely to be contrary to the public interest will it be referred to the Monopolies Commission; and if it is clear that it does not come within the provisos—obviously if it does, then it will be vulnerable—it will be up to the Minister, and I imagine that the Board of Trade, given the full information, will quickly be able to make recommendations to the company.
The noble Lord, Lord Drumalbyn, also asked for full-time members of the Monopolies Commission. As the law stands, it is already open to the Board of Trade to make full-time appointments to the Monopolies Commission. One of the greatest difficulties—and the noble Lord referred to this—is whether there should be a small Commission full-time, in which event you become rather limited as to the area of knowledge and experience available, or whether you adopt the practice, as we have it in this country, of generally having part-time personnel on these Commissions, and thereby being able to bring in a wide area of knowledge and experience. I should have thought that this was the best way to do it.
What we are going to do is to strengthen the executive side of the Monopolies Commission so that the resources—one might call it the horsepower behind the personnel—will be very much stronger. I am bound to point out (I do not put this in any Party way) that there was a time, in 1954, when the Monopolies Commission employed, I think, 104 executive officers, and during the ten years in which the noble Lord was the Minister the number fell from 104 to 34. It is our intention to increase that and to give much greater strength to the Commission to act. I feel sure the House will agree with me that this Commission should embrace as wide a knowledge and experience as possible. If we are to have that, we cannot limit the opportunity of finding full-time servants for the Commission.
LORD DRUMALBYN: I am grateful to the noble Lord. I do not think that
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he has quite dealt with the point I tried to raise. The point I tried to raise concerned having full-time members of the Commission to deal particularly with mergers, because of the urgency of the matter. I did not question that, in the general way, it is better to have a widespread knowledge and to accept the greater time that results. But where urgent examination is obviously needed, I should have thought there was a good deal to be said for having a special panel of full-time people who would be able to get on with the job quickly.
LORD SHEPHERD: That is a good point, and I take it from the noble Lord. But, as I said earlier, as the law stands it is already open to the Board of Trade to appoint full-time members of the Monopolies Commission. I will certainly put to my right honourable friend what the noble Lord has said with regard to merger inquiries, but I should have thought that it would be best to leave the construction and the law as it now stands. They have a sense of flexibility, and it is up to the Commission and the Minister to see that these inquiries on mergers are dealt with expeditiously; and I agree that the sooner they are dealt with, the better.
The noble Lords, Lord Drumalbyn, Lord Byers and Lord Erroll of Hale, mentioned the question of a Registrar of Monopolies. My right honourable friend made it quite clear in another place that the Government's mind is not closed to the appointment of a Registrar. Certainly there are advantages, in that it would take away from the political arena the question of deciding what is to be sent to the Monopolies Commission. Maybe there could be such an organisation, and a great deal of the investigation work could be done by the Registrar.
But whatever the advantages may be, the Government were seized of the need (I am sure the noble Earl, Lord Erroll of Hale, will understand this) to draft a relatively short Bill in this First Parliamentary Session of a new Government. We felt that this Monopolies Commission should be dealt with immediately. If we had extended the Bill, it would undoubtedly have been a much larger and more complex Bill than it is to-day. With all the other legislation going through on other matters, it would have been

1117
extremely difficult to pilot such a Bill through in so short a space of time.
I think it was the noble Lord, Lord Drumalbyn, who said that he was contemplating putting down an Amendment to bring in the Registrar.
LORD DRUMALBYN: With respect, I did not say that. I said that I was contemplating putting down an Amendment to deal with factual reports. I realise that to deal with the position of the Registrar would be a most complicated business.
LORD SHEPHERD: I am glad that the noble Lord has set my mind, and I am sure that of my right honourable friend, at rest, because this would involve us in a difficult task, as the noble Lord, Lord Drumalbyn, will realise, having piloted the Resale Prices Act through your Lordships' House and remembering the difficulties we had in that case.
With regard to the Commissions' procedure, and the evidence, I think this would best be left to the Committee stage. The noble Lord has indicated that he intends to move an Amendment to this effect. We will look at it, and perhaps we might have a conversation with regard to it between now and the Committee stage. I am afraid that I cannot give the noble Lord much hope, if any, in this respect, but we shall certainly listen carefully to what he has to say.
So far as the Press are concerned, I must say that I was rather surprised, in view of some of the strong statements that have appeared in the Press, that noble Lords who have some connection with the Press have not come here to give us the benefit of their views. I am sure that we should have been very pleased to hear them. The Government feel it right, in bringing in a Bill of this type dealing with monopolies and also with mergers, to deal with the problems of mergers within the Press. We feel that we have struck the right balance. It is true that we have departed from the Royal Commission, which was chaired by the noble and learned Lord, Lord Shawcross, but we feel that we shall have achieved the end for which that Commission sat.
One point, which I do not propose really to answer, is with regard to the
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definition of newspaper proprietor. This is very involved. If the noble Lord, Lord Erroll of Hale, and the noble Lord, Lord Francis-Williams, cannot be satisfield in Committee I will undertake to bring the experts together—and they will not be either me or, I am sure, my noble friend Lord Rhodes—and ask them to go through this line by line. Then I would hope that the House in Committee (if the noble Lord, Lord Erroll of Hale, is satisfied) will feel that we have got the right drafting in the Bill.
The noble Lord, Lord Francis-Williams, spoke about the criminal clause. I quite appreciate the feelings in a British Parliament towards inserting criminal sanctions in what is largely a civil commercial piece of legislation. But this type of sanction appears in American and Canadian Anti-Trust laws. I would suggest to the House that where a merger could take place which could result in the death of a paper, and that once it has died the chances of being able to resurrect it again are very small, there should be pretty severe sanctions on any newspaper proprietor taking over and doing something which is unlawful under this Bill. I think we can give this assurance. There is nothing in Clause 8 which is in any way obscure. I cannot believe that there will be any newspaper proprietor who could plead that his innocence was based on ignorance of the law. It is very simple. Therefore, I would not have thought there is any fear of any newspaper proprietor—and here I need not mention any names—accidentally finding himself in prison for two years for the infringement of this law. I would suggest that in the circumstances it is right, taking everything into account, that you should have a fairly severe penalty for this type of infringement.
I think that is all I need to say. I appreciate that there are a number of points which have been made with which I have not dealt. But they are all points which I feel will arise in Committee. The Government will naturally look forward with interest to the suggestions that noble Lords opposite may wish to make. We shall certainly look at them with the greatest possible care, but—and this is in no way a threat—as noble Lords know, the timetable is getting very short and very difficult indeed, and I would hope that we shall have

1119
some understanding in this matter, bearing in mind again that this is one Bill following on others. No doubt we shall learn from experience with this Bill so that the next Bill which this Government produces will be a little better than this one.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

JUSTICES OF THE PEACE BILL [H.L.] SOLICITORS (SCOTLAND) BILL [H.L.]
Returned from the Commons, agreed to.
SOLICITORS BILL [H.L.]
Returned from the Commons, agreed to, with Amendments: the said Amendments to be printed.
CARRIAGE OF GOODS BY ROAD BILL
Brought from the Commons; read 1a, and to be printed.
CRIMINAL PROCEDURE (SCOTLAND) BILL
Brought from the Commons; read 1a, and to be printed.
HOUSING (AMENDMENT) (SCOTLAND) BILL
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill, within the meaning of the Parliament Act, 1911; read 1a, and to be printed.
LOCAL GOVERNMENT (SCOTLAND) ACT 1947 (AMENDMENT) (NO. 2) BILL
Brought from the Commons; read 1a, and to be printed.
MERCHANT SHIPPING BILL
Brought from the Commons; read 1a, and to be printed.
CRIMINAL PROCEDURE (ATTENDANCE OF WITNESSSES) BILL
Report of Amendments received (according to Order).

PUBLIC HEALTH (NOTIFICATION OF BIRTHS) BILL
5.7 p.m.
Order of the Day for the Second Reading read.
BARONESS SUMMERSKILL: My Lords, I beg to move that this Bill be read a second time. This is a very short Bill, but nevertheless I regard it as an important measure, and hope your Lordships will agree with me that it is a Bill which should go on to the Statute Book in the shortest possible time. It is designed to ensure that the notification of a child's birth is made quickly and in the best way to the local authority responsible for the care of mothers and young children. Although the Local Government Act, 1958, provided for the delegation of most local health authority functions to the county district councils, it omitted, curiously enough, to include the notification of births. Therefore, in some county areas in England and Wales, where health and welfare functions are made the responsibility of a county district council, notifications of the birth are still being sent to the medical officer of the county. He then passes them to the district medical officer for action. But however promptly he passes on these notifications, there is inevitably some delay and over weekends, of course, there may be two or three days of lost time.
In my opinion it is of paramount importance that a mother and her newborn baby should be visited without delay, since prompt action may lead to early investigation and treatment of an ailment or defect, and certainly it will lead to the mother receiving very good advice. I think your Lordships will agree that local authority maternity and child welfare services have played a large part in the steady improvement in the health of mothers and young children, and the arrangements for notifying births enable medical officers to help to mobilise the services for the care of the mother and child. In order to avoid delay, the

1121
father of the child, or the doctor or midwife, is expected, under Section 203 of the Public Health Act, 1936, to notify a birth to the medical officer of health for the area within six hours of the birth.
Of course, notification and registration are two entirely different things, and the registration of the birth does not have to be made within six hours of the birth of the child. It is patently unsatisfactory that precious time should be lost in an unnecessary passing of papers between authorities. The delay could be eliminated entirely by a simple amendment of Section 203 of the Public Health Act, 1936; and this is precisely what Clause 1(1) of this Bill proposes to do. It provides that in the area of a county district council exercising delegated health and welfare functions the notification of births should be sent direct to the medical officer of the authority. This provision applies to England and Wales. The difficulty does not arise in Scotland.
Subsection (2) deals with an entirely different matter but one to which I am sure your Lordships in these days will attach considerable importance. Subsection (2) requires local health authorities to supply, without charge, to doctors and midwives, prepaid addressed envelopes together with copies of a form of notification. The envelope will take the place of the addressed and stamped card which is all that the 1936 Act requires. It seems to me that personal information about the birth of a child and the details of the birth should be sent under cover.
Furthermore, virtually all authorities now use birth notification forms to collect information about congenital abnormalities apparent at birth. Until fairly recently little was known about congenital abnormalities and the causation of congenital malformations, but the discovery of the effects of radiation and of drugs such as thalidomide has changed matters. The thalidomide tragedy focused attention on the lack of information concerning the incidence of the different types of congenital malformations other than that obtained through mortality statistics, which of course were always available. Had a national scheme for notification been available at the time, it is probable that the increase in limb deformities would have been noticed
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earlier and perhaps some of the tragedies could have been averted.
We did profit by this appalling catastrophe, for during 1963 a scheme was devised for notification of congenital deformities to the medical officer of health, and this came into operation in 1964. This is now voluntarily undertaken by doctors and midwives, but may I say, in parenthesis—and I am quite sure I shall have the support of the House in this—that I regret that this is a voluntary scheme. In view of the mass of inadequately tested drugs on the market which are often taken by expectant mothers, it should be compulsory for a doctor or a midwife to notify the presence of some congenital abnormality in a newly-born child. However, the fact that it is notified is a great step forward. The medical officer of health, in his turn, completes a special form provided by the General Registry Office, on which the details of all malformations, whether single or multiple, can be recorded.
Now the nature of the information about congenital abnormalities underlines the importance of sending the notification in an envelope and not on a postcard. Looking back, it is quite remarkable to think that over all these years we have provided only a postcard for the important information regarding the notification of a birth.
Any additional expenditure arising from the measures proposed in the Bill is likely to be minimal. Therefore a Money Resolution will not be required. Clause 2(2) postpones its operation until one month after its passing. This is to allow the authorities time to make their new arrangements, including the printing of new forms and the envelopes. I would commend these proposals to the House and ask that a Second Reading shall be given to this small, but very important, measure.
Moved, That the Bill be now read 2a.—(Baroness Summerskill.)
5.14 p.m.
LORD NEWTON: My Lords, I did not put my name down on the list because I was not certain whether I should get here in time for this debate; but I should like to thank the noble Baroness, Lady Summerskill, for the careful information she has given us on her small but important Bill, as she herself described it.

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The Bill makes two very sensible amendments to the existing law, and I, for one, and I imagine most of your Lordships, wish the Bill well.
5.15 p.m.
LORD TAYLOR: My Lords, I have not always entirely agreed with my noble friend on every subject in the past, but this afternoon it is a great pleasure to be able to agree wholeheartedly with her and to support this Bill entirely. Her Majesty's Government welcome it, and I am particularly glad to be supporting it because one of its supporters in another place was the noble Baroness's daughter, which just shows what a family team can do.
BARONESS SUMMERSKILL: She is well brought up.
LORD TAYLOR: I agree with the noble Lord, Lord Newton, that it is a useful and necessary little Bill. As the noble Baroness has said, there are two documents which have to be filled in after the birth of every child. The first is the notification of the birth to the local health authority, which has to be done within six hours, and the second is the registration with the Registrar, which has to be done within six weeks. Here we are concerned with the notification within six hours, which has to be done either by the father or the midwife or the doctor. It will usually be the midwife or the doctor, and this is done normally immediately after the birth.
As my noble friend has explained, up to now the notification has been to the medical officer of health of the county or county borough and not to the medical officer of health of the county district, where there were delegated powers, and clearly this could lead to delay of the kind which the noble Lady has described and which was most undesirable. All the associations of local government authorities are keen to see something done about this. The first clause of the Bill will apply to about thirty county district areas where delegation has occurred. I had wondered about the situation in the new Greater London area, but in fact that is covered by Statute, and the new boroughs in the Greater London area are health authorities in their own right, so they will receive the notifications anyway.
The second point, about the substitution of a prepaid envelope for a post
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card, is equally welcome, and for the very reason that the noble Lady has given. First of all, it gives a little privacy to the affair, and secondly, it obviously encourages the doctor or midwife to notify congenital defects and abnormalities. The importance of this, as the noble Lady has said, is very much greater than it used to be, now that new drugs are so frequently coming into use and we may get unexpected and quite terrible happenings, such as the thalidomide tragedy. I agree entirely with her that had the system of notification been in existence at that time we might well have been warned much more quickly than actually was the case.
It is for the local health authorities to devise the kind of form that is inserted into the envelope. It is not laid down by the Ministry of Health, and I imagine most local authorities will now provide a place for the notification of congenital abnormalities. With the postcard, it has sometimes happened that only the fact of birth has been recorded on it, and the congenital abnormalities have had to be notified by letter. Clearly, there may have been some defects in the procedure as a result of that, and, although it is voluntary, I think the new system will be much more efficient and a good thing.
The incidence of these congenital abnormalities is something like 1·7 per cent. It varies a little from area to area. Some of them, of course, are quite uncommon defects; some of them, on the other hand, such as club foot and cleft lip and spinabifida, are more common. There are a number of serious conditions which will not be discovered immediately at birth; for example, some forms of congenital heart disease. But the fact that the child is at once brought under the care of the local health authority infant welfare service through the health visitors will help to pick this up. We have no hesitation, therefore, in hoping that your Lordships will give this Bill a warm welcome and a speedy passage on to the Statute Book.
BARONESS SUMMERSKILL: My Lords, I should like to thank my noble friend and the noble Lords opposite for the support they have given this Bill.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

TRADE DISPUTES BILL
Read 3a (according to Order), with the Amendments, and passed, and returned to the Commons.
LOST PROPERTY (SCOTLAND) BILL
Read 3a (according to Order), and passed.

GREENLAND FISHING OF ATLANTIC SALMON
5.22 p.m.
LORD BALFOUR OF INCHRYE LORD BALFOUR OF INCHRYE rose to ask Her Majesty's Government whether they are aware that exports of Atlantic Salmon from Greenland have risen from 2 metric tons in 1957 to 1,400 metric tons in 1964 due to growth of intense netting using improved methods, and that this increase constitutes a grave danger to salmon stocks in the rivers of Europe; and whether they will initiate discussions with the Danish Government with a view to agreeing on a close season and quantity limitation in the interests of conserving the salmon species. The noble Lord said: My Lords, I beg to ask the Question standing in my name on the Order Paper. I feel there can be no question at all as to the value of the Atlantic Salmon, breeding in the rivers of the Eastern American Seaboard and the rivers of Europe, as a source of food, as an industry of very considerable importance giving much employment, as an inducement to tourism, as a source of revenue in rating by local authorities and as a source of angling sport for many thousands of every section of the community.
It was, I think, your Lordships' House that a few years ago originated Parliamentary attention and persuasion on the Government of that time to take action on drift-net fishing, which at that time was menacing the breeding of salmon in our rivers. But to-day we are facing a danger far greater than that of the drift-net, for the present danger affects not only our own rivers but the whole species of the Atlantic Salmon. The tragedy to me is that the secrets of the salmon in salt water have very largely been revealed. It used to be considered a mystery. I have but to refer to the
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1963 Interim Report of the Hunter Committee, which says on page 8:
"There are enormous gaps in the knowledge of the sea life. We do not know, for example, the routes followed on migration; the feeding grounds; whether the salmon travel in shoals or individually; the depth at which they swim; and what determines the length of the marine phase of their life."
Alas! since that time things have altered, because we now know they spawn in the rivers and go round the Greenland Coast and find feeding grounds which provide their growth.
Your Lordships may have heard, as I have, from two sources, the story of one of the American Atlantic submarines taking the Northern Passage. Through the periscope they saw on an iceberg—and your Lordships know that about one-third of an iceberg shows and two-thirds are below—what they thought were tens of thousands of nodules. Going close they found, through the periscope, that in fact these were salmon vertical, tail down, nose up, sucking plankton from the bottom of icebergs; and those salmon had passed round the Greenland coast.
With this new knowledge and with its exploitation by modern equipment and ever improving methods, the raids on salmon stocks are increasing, in terms, I regret to say, of largely immature fish, because Mr. Allan, the head of the Salmon and Freshwater Fisheries Department of the Ministry of Agriculture and Fisheries, estimates that last year over 600,000 salmon, believed to be immature fish, probably around 5 lb. each in weight, were caught in this perfectly legal but nevertheless devasting Greenland system of netting off shore, and indeed developing netting from boats. If this goes on, in about five years it may well almost extinguish the salmon as a species, and with it those industries I enunciated to your Lordships a moment ago. The depredations between Greenland and Baffin Land are now going to be carried out, indeed I believe are being carried out, by at least three different European countries which have been preparing to drift-net, and therefore we must add this new European drift-netting to the menace of offshore stake netting off Greenland. The poor salmon is having a pretty rough ride and unless we can do something to alter this situation we might say goodbye to it.
I have no wish to confuse or weary your Lordships with figures. I think the

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main figure is the one given in my Question, which gives the picture of the expansion of this Greenland fishing and the export growth of the salmon from Greenland, which of course does not make any allowance for salmon which are home-consumed in Greenland. It is nothing less than an astronomic upsurge: in terms of metric tons—in 1957, two; in 1961, 115; in 1964, 1,400. These fisheries are operated by the Greenlanders with the help of the Danes, and as there is virtually only one salmon river in Greenland it is very clear that the taking of these largely immature fish of around five pounds must be at the expense of European rivers where they spawn, and the Atlantic Eastern seaboard rivers where they spawn. I give your Lordships one more figure only. In 1964, as I say, the Greenland catch was 1,400 metric tons. In 1963 the total world catch by twelve countries, on both sides of the Atlantic, was just over 10 metric tons. Therefore, the Greenland menace is shown by now, and if action is not taken the future disaster can be foreseen. The catch in fact has increased seven hundred times in seven years. That is the case.
The next question I come to is: What can be done? I know that the Government are aware of the problem. But awareness, by itself, is not enough. The Secretary of State for Scotland, answering a Question in another place recently, said that he was
"aware of the recent development of a salmon fishery off the coast of Greenland, but the evidence so far available does not enable us to assess the possible effects on the British salmon fishing industry. Investigations have accordingly been arranged to start this autumn, in co-operation with Danish and Greenland scientists, to secure further information to enable such an assessment to be made. It is necessary to have this fuller information before we can decide what further action, if any, is appropriate."—[OFFICIAL REPORT, Commons, vol. 713, (No. 130), col. 296, Friday, June 4, 1965]
Quite frankly, I find that statement most depressing, because from the figures I have given your Lordships it is clear that here and now there is an urgent problem; and though scientific investigation is no doubt valuable and of interest, and profitable in the solution of the difficulty, the difficulty itself is obvious to every one of your Lordships here to-day. I know that the Government are sending
1128
experts of the Freshwater Fisheries Department to Greenland. But it seems to me that the danger lies in delay, and I would ask the Minister, first: how soon will the scientists give of their results; and, second, what of the further damage to stocks during the investigation?
This problem cannot be solved except internationally. Could not Her Majesty's Government propose to all the countries, now, a standstill on further netting expansion, both off-shore and drift netting, while the scientific investigation goes on? The figures seem to me to justify such action by Her Majesty's Government. Then let a special international conference consider what safe amounts can be taken yearly from the salmon stocks of all the countries, including Greenland. There might be total limits for each country. There might be limitations on the size of the mesh which is used in nets. There should be, as I believe there is here, a prohibition on the method of drift netting. I ask for action as well as investigation.
When the last Government were faced with the problem they took positive action, by Orders in Council, to stop drift netting until the Hunter Committee had reported. I have quoted to your Lordships the preliminary Report of that Committee, and it has certainly given support to the action of the last Government. But the point I want to make to the Minister is that the last Government gave a good example in stopping the rot, as it were, while the problem was being investigated. I hope that the present Government are going to be as energetic and as successful as the last Administration in that particular direction. There is no reason to suppose that the Danes, who are reasonable people, will not co-operate in limitations. We trade with the Danes a great deal. We take much agricultural produce from them. We can remind them that here we have a Ministry of Agriculture and Fisheries, and that we cannot isolate the fish danger from the other agricultural considerations which allow us to take Danish imports. To use the words of Mr. Churchill (as he then was), when he was Prime Minister and used to send out Minutes which some of us remember, I appeal for "action this day"—before lasting harm is done to a great and important industry.
5.35 p.m.
THE EARL OF DUNDEE: My Lords, I am glad that my noble friend has raised this question. Of course it is not so simple as the question of drift netting off our own shores. I hope that it may soon be possible to initiate negotiations with the Danes and the other countries concerned. As my noble friend has said, we were always taught that the question of where salmon went in the winter time, like that of where flies go, was an insoluble mystery. I wish that it had remained so. But now it has been found that the salmon go off to the waters of Greenland in shoals and formations which are quite vulnerable and easily detected. I believe that the fish which are caught are in poor condition. It is a pity that they should be killed in that condition, but they are edible enough to give the fishermen a profit.
My information is that fish caught in Greenland waters have been identified as coming from Scotland, England, Ireland, Sweden, Canada and the United States. So this really is an international question, and one that ought to be discussed in the interests of all countries which have Atlantic salmon and whose economy depends partly on the Atlantic salmon. It is not only a question of what happens in Greenland territorial waters because, as my noble friend has said, it is now believed that in the high seas large shoals of these salmon have been detected and may be caught in large numbers this year by the vessels of several countries.
I know how difficult it is to start international negotiations. Of course it may be that we need more evidence: and it is always a good thing to have more evidence. But I think that we have enough evidence to put forward the proposals for international discussion because, desirable though it is to know even more about the matter than we do, by the time we have found out, not only may stocks be depleted but fishermen from all countries may have staked out a claim and established an interest in these waters; and it is much more difficult to get a Convention stopping people when they have been doing something for four or five years, than it is when they have not yet started. I therefore hope that early action may be taken to produce discussions, not simply in our
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interests but in the general interests of all countries who have Atlantic salmon in their waters.
5.38 p.m.
LORD FORSTER OF HARRABY: My Lords, I am sure the House will be grateful to the noble Lord, Lord Balfour of Inchrye, for raising this question, which is one of extreme importance to the commercial salmon fishing industry of this country and to those who are engaged in it. He has told your Lordships of the extraordinary growth of the Greenland drift-net fishing, and it must be obvious that, if this drift-netting continues on its present scale, it will cause irreparable damage to the rivers of this country, which are largely the nurseries of the Atlantic salmon.
We in this country have long had regard to the necessity for the conservation of salmon. We have a salmon netting close season. We have a close season for rod fishing. During the netting season we provide that the nets should be taken up for 48 hours in each week so that the spawning fish may have an opportunity of getting from the sea into the rivers. Two years ago this House gave effect to an Order prohibiting drift netting within a six-mile limit of the Scottish coast. If, therefore, we are to ask for some form of Convention for the protection of the Atlantic salmon, both in our own interests and in the interests of all other countries into whose rivers the Atlantic salmon go, surely we are not asking for anything unreasonable.
If we do not get some form of Convention, and if the drift netting of Atlantic salmon off the Greenland coast extends in future in anything like the proportions in which it has extended between 1957 and the present date, it is obvious that the Atlantic salmon is going to become extinct. This will result in the extinction of the very valuable commercial salmon fishing in this country, which provides labour in parts of the country, particularly in the North-East of Scotland, where other forms of employment are not easy to secure. I therefore hope that Her Majesty's Government will find themselves able to do something to ensure that the matter of a Convention is raised with the other European countries which are affected, though none is affected so much as we are, because our rivers are the nurseries for the Atlantic salmon.
5.40 p.m.
LORD BOOTHBY: My Lords, my intervention will be very brief. For a number of years I have taken a certain amount of interest in the fishing industry, and I am more concerned than I have ever been by the ruthless over-fishing that is taking place at present, mainly in the North Sea, but at the present time elsewhere as well. We all owe my noble friend Lord Balfour of Inchrye a great debt for putting down this Question to-day. In the course of my lifetime I have seen the once great herring fishing industry of Scotland brought practically to ruin, and I know the cause. It is the relentless industrial fishing of immature fish which are then converted into meal and oil, mainly by the Danes. I am sure that that is the reason why the stocks of herring in the North Sea have fallen so catastrophically.
Lord Balfour of Inchrye made an absolutely devastating case in regard to the salmon. I am not at all sure that it stops there. I believe that over-fishing—a practice which prevailed very widely between the two wars, but which was very much checked by the Second World War, though it is now in full swing again—is one of the greatest menaces of our time. I asked the previous Government some two-and-a-half years ago what action, if any, they were taking about herring, and I was informed that a special Committee—a body called the International Council for the Exploration of the Sea—was investigating the shortage of herring. Since that time I have asked two further Questions, and have been told that no report has been received from that Council, and that no agreement seems to have been reached between any of the fishery experts. Fishery experts are almost as bad as economic experts: they seem to be totally incapable of agreeing about anything.
This is a matter—and this applies also to other matters—which we ought to raise, in the first instance, with the Danes, from whom, as my noble friend Lord Balfour of Inchrye said, we import a great deal of agricultural produce, and from whom we have every reason to demand some concession—and they are not an unreasonable people. I agree wholeheartedly with the noble Lord's final remarks when he said that the time for talk is over and the time for action has
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come. Otherwise we may soon find ourselves without any herring and without any salmon—in which case I personally should prefer to go as speedily as possible to another world.
5.45 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, I should like to support very strongly everything that has been said in this debate. Only last week we were discussing in this House the Highlands and Islands Development Bill and how best to help those areas. Salmon, of course, are one of the great assets of the Highlands and Islands, and I think that if the present Government wish to help the Highlands and Islands they could not do better than now make a start and make representations to the Danish Government on the matter of this netting off the coast of Greenland.
When the salmon leave our European shores they have enough natural enemies to contend with in the sea, and if they have now to contend with this great concentration of netting off the Greenland coast, I can foresee that in even so short a time as three or four years ahead the salmon may become so depleted that they will die out. Your Lordships know that if any species, fish or mammal, get below certain numbers they can never pull back, and will die out. Therefore, I add my full support to the noble Lord, Lord Balfour of Inchrye on his Question, and I thank the noble Lord for raising the subject to-day.
It is astonishing to think that in the last seven years the catch of these Greenland salmon has gone up by 700 times, which is a fantastic figure. The noble Lord also mentioned that over 600,000 salmon were caught last year by this method. The salmon stocks cannot stand that. Denmark and Greenland themselves hardly produce any of the salmon. So far as I am aware, there are in Denmark only three or four salmon rivers—and not very good ones at that. We have a very strong point here, because our country produces, together with Norway, Sweden and Iceland, the great majority of Atlantic salmon, so I hope that, especially in the interests of the Highlands and Islands, Her Majesty's Government will make representations to the Danish Government.
5.49 p.m.
LORD DULVERTON: My Lords, I intervene briefly to support my noble friend Lord Balfour of Inchrye. My noble friend Lord Dundee made a list of other interested countries concerned in this problem. I do not think that he mentioned Iceland. I know that Iceland is very concerned indeed about this matter, and this is a point which I feel is worth noting.
5.50 p.m.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, I am very grateful to the noble Lord, Lord Balfour of Inchrye, for raising this matter, a matter which, as this brief debate has shown, is of great interest to a number of your Lordships. The interest in, and concern about, the matter goes much beyond the confines of your Lordships' House. I should like to confirm that the figures which the noble Lord quoted are, in so far as reports which have reached the Government are concerned, factual. The phenomenal increase to which he referred is by no means an exaggeration of the case. He referred only to the known export figures for Greenland and referred only briefly to the quantity kept for consumption in Greenland itself. So that when that quantity—perhaps some hundreds of tons—is added, the figure of increase is something quite fantastic.
The information which the Government have and which, as I said, confirms the noble Lord's figures, came to us from the Danish Government and is therefore a factual statement of the position. I think it is clear that there has been this phenomenal rise in the catch in recent years, and this follows the provision of freezing plants in the bigger Greenland towns, which have enabled the catch surplus to their own domestic requirements to be preserved in suitable form for export. The catch in 1964 was, in fact, appreciably higher than the salmon catch last year, which was some 1,200 metric tons. The figures which I have quoted leave out grilse, because they are not reflected in the Greenland figures.
As the noble Lord, Lord Balfour of Inchrye, said, there is only one salmon river in West Greenland, so it looks as if the salmon caught off the coast must
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have been bred elsewhere; and we know, of course, that salmon tagged mostly as smolts in the United Kingdom and in other countries on either side of the Atlantic have been caught in this fishery. Up to May this year, 64 in all have been caught, just over half of which were tagged in the United Kingdom. Moreover, the expanded fishery represents virtually a new toll by man on the Atlantic salmon stocks. It is natural, therefore, that those concerned with our own salmon fisheries should be worried about the development of the Greenland fishery and its effect on our own salmon stocks.
My Lords, all this we accept; but these portents tell us very little about the effect which the Greenland fishery may have on other fisheries or on stocks. The information is still very scarce on several aspects and insufficient for a final and reliable judgment. There is still a great deal that is relevant to this issue that we do not know. Clearly, some British salmon spend part of their sea life, when they feed and grow, in waters off Greenland. But we do not know what proportion of them do, nor how many of those that get as far as Greenland would in the ordinary course come back.
The partial information we have is to some extent reassuring. All the salmon caught in Greenland that were tagged in Scottish waters came from half a dozen batches of smolts, totalling 38,000, tagged between 1961 and 1963, including both natural and artificially reared smolts. Up to May this year, 945 had been recaptured, but nearly all on their return to Scottish waters and only 13 off Greenland. I could quote other figures for England and Wales which show almost identical proportions, and from which similar inferences could be drawn. But I should like to emphasise that these figures are reassuring only as far as they go, and they must be used with caution, because, among other things, we do not know whether tagged salmon are as easily recognised as such in the Greenland fishery as they are here. So we cannot draw absolute conclusions from these figures. Moreover, nearly 90 per cent. of the tagged Scottish smolts came from one river.
We have had representations that our tagging programme should be extended to cover a larger section of our smolt run, and suggestions as to how this might

1135
be done. We should like to tag more smolts and to give a better coverage, and we will certainly consider the suggestion made; but, as noble Lords will know, there are difficulties. Smolts are sensitive and delicate creatures and tagging requires very skilled operators. Moreover, it can be done only during the two or three weeks when smolts go to sea; and a further difficulty is that not everyone likes his smolt run interfered with by tagging.
I think I have said enough to indicate that to get a more complete picture, from which firm conclusions could be drawn, a great deal of further investigation is required. I know that that will not be very welcome, but it is an international matter and we cannot proceed as if everything were under our own control. Your Lordships will remember the tremendous reactions, the objections, which took place when we acted on matters which were within our own control. In this we are seeking to have action taken against a much poorer country than our own, and it is even more difficult to persuade Greenland fishermen that what is being done is in their interest and not in the interest of people in other countries. I do not believe that if they took that point of view they would be correct, because at the end of the day they will suffer just as much as anyone else does, if they continue to act as they are doing at the present time. But, having said that, it is necessary to take international action.
This is not something which is within the control of this country. It is not something which is even within the control of ourselves and the Danes. If it were only reasonable people that one had to deal with all the time, action would be quick. If action is taken just between the Danes and ourselves, we have no guarantee that someone else will not just move in; and it has been suggested that others are already moving into this field. So we must have the evidence for proper international action.
So far as the Danes are concerned, we have confirmation of the fact that they are behaving reasonably and are prepared to be helpful. When, a year ago, it was becoming obvious that this Greenland fishery was developing so very rapidly, scientists of our own Department, in co
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operation with Danish scientists, planned a joint tagging programme in Greenland waters, designed to show where the salmon in those waters go to if they are not caught there. This joint operation will be carried out in the late summer and autumn, and I should like to record that for this project we are receiving every help from the Danish authorities. They are contributing very substantially to the cost of the equipment required and providing many of the facilities needed. In the same way, they have been very co-operative in supplying the information about the Greenland fishery which I have mentioned earlier.
For the same reason—the need for fuller information—at the recent meeting in Canada of the International Commission for the North West Atlantic Fisheries (in whose area the Greenland fishery occurs), the United Kingdom joined with others in urging that all the countries concerned should step up their investigations on salmon fisheries. After full discussion, the Commission drew up a schedule of the further information required to enable a proper assessment to be made of the effect of the Greenland fishery on the stocks of the Atlantic salmon, and commended it to all the countries concerned. Although, of course, it is appreciated that the Greenland salmon fishery means a great deal to the economy of that country, the Danish authorities were nevertheless asked through their representatives at the Commission to consider whether means could be found of curbing further expansion of the fishery while the further investigations are proceeding.
That course urged on the Danish authorities was very recent indeed, and there has not yet been time to find out the extent to which it will be possible for them to co-operate in this way. However, it is clear that this matter is of international concern and that if remedial measures prove to be needed they can be taken only by international action. Several noble Lords have suggested to-day that we should seek urgent agreement to international control. The Commission I have mentioned for the North West Atlantic has the duty of recommending to member Governments conservation measures that may be needed, and there is a similar Commission for the North East Atlantic. The United Kingdom is a

1137
member of both. I should like to say, with regard to the remarks made by the noble Lord, Lord Forster of Harraby, that the steps which we ourselves take in this country for conserving stocks give us good grounds on which to ask other people to do it. We are not saying to other people, "Do what we tell you"; we are saying to them, "Do what we do ourselves". It gives us at least a strong moral footing on which to go to the others in this matter.
Regulatory measures for white fish are already in force on both sides of the Atlantic, but it is the practice of both Commissions to base their recommendations on scientific evidence about the state of the stocks and their need for protection, and it will, I think, be readily appreciated that in the absence of such evidence international agreement is not easy to secure. That is why the Government feel that it is necessary to press on urgently with further investigations of the kind I have mentioned. The North-East Atlantic Commission relies for scientific advice on another body whose name I hesitate to mention—the International Council for the Exploration of the Sea—who are concerned, among other things, with the salmon stocks native to the European countries; and I can assure your Lordships that when this body meets in October the United Kingdom representatives wilt press the need for further, urgent investigation.
In the meantime, we shall keep in touch with developments. I do not think we can at present do more on the international side than we are doing, and I hope your Lordships will agree that we have taken and are taking all steps open to us to prepare for dealing with this possible threat to our salmon stocks. International action, as I have said, is necessary: international action, unfortunately, is not always as quick as is desirable; and, with the particular urgency which the noble Lord, Lord Balfour of Inchrye, indicated as being present in this case, where the almost total extinction of salmon stocks could take place within four or five years, we obviously cannot, without some immediate action being taken, go through the ordinary routine of letting this thing go on for years. For that reason, I hope that we shall have the complete cooperation of the Danish Government in
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the very necessary steps which have been urged upon them, not only by ourselves but by the others who took part in the discussions in Canada, so that we can make sure that at least things do not get any worse while the necessary information is being taken; and I would assure your Lordships that these measures will be followed up most wholeheartedly by the Government.
If further inducement were necessary, I think it is the threat or the promise (I do not know quite which it was) which the noble Lord, Lord Boothby, made. I was not quite sure whether the complete elimination of salmon as well as herring was intended to presage his departure from this world, or only an emigration to Greenland. In either event, I think both the Greenlanders and St. Peter should be protected from this contingency, because the noble Lord is very much an acquired taste.

SERVICE PENSIONS: THE CASE OF MR. PAUL MUNCEY
6.4 p.m.
LORD WILLIS LORD WILLIS rose to ask Her Majesty's Government whether they will review the decision of the Ministry of Defence and the Ministry of Pensions by which a Service or war pension was refused to Mr. Paul Muncey: and whether they will amend the general regulations governing the granting of Service and war pensions so that proper financial assistance in the form of an adequate pension may be given as of right to cases of a similar nature. The noble Lord said: My Lords, I beg to ask the Question standing in my name. The facts behind this Question are as follows. Paul Muncey volunteered for the Navy thirteen years ago, when he was 17 years of age. Three years later, aged 20, he was on service with the Navy in the Far East, and he went on a day's shore leave to Sandakan, in North Borneo. During the day he went to a football match: he had a few beers with his mates, and then they all decided to go for a swim in a nearby lagoon. I want to emphasise that it is freely admitted that he had had a few beers, but there is no evidence whatsoever, and it is not true, that he was drunk.
Paul Muncey was the first to go in. It was night, and, unfortunately, in the

1139
moonlight, the depth of water in the lagoon was deceptive. He dived in and broke his neck; and, since that day, for ten years, he has been completely helpless, paralysed and confined to bed. He now lives in a pre-fab. at Greenwich with his widowed mother. They have a total income of £10 5s. 6d. a week, made up of £4 sickness benefit, £1 4s. 6d. as a grant from the Greenwich Hospital Trust and £5 1s. from National Assistance. His mother, of course, cannot work, because she is nursing him full-time. In addition, the British Legion pay 10s. a week for a television rental for him. Out of this total income of £10 5s. 6d., nearly one-fifth—£2 a week—goes in rent. This sum also has to pay for the extra costs of linen, because he cannot move and the linen has to be changed once, and sometimes twice, a day, and laundered. He needs extra heating; a light burns all night; and the doctors have put him on a special high-protein diet, which your Lordships know is expensive, because they are afraid he may get too heavy and his mother may be unable to lift him.
Here let me digress for a moment to say one word about Mrs. Muncey, because I think that, in this cynical world, hers is a story of such unwavering devotion, unceasing tenderness and indomitable courage that it assumes the proportion of a saga. She has faithfully and patiently, and without complaint, nursed her son and attended to his every need for the last ten years. She is the epitome of Blake's lines:
"Love seeketh not itself to please
Nor for itself hath any care
But for another gives its ease,
And builds a Heaven in Hell's despair."
Because, believe me, my Lords, in that little pre-fab. there has been Hell's despair for many years. It is just as well that Paul Muncey has such a mother, for the shameful and scandalous thing which angers me about this story is that everyone else, it seems, has turned his back on them. At every turn they have been met with a grim stone wall of regulations. Successive Ministers, whom I know to be humane, warm-hearted and kind, have, nevertheless, like so many Pontius Pilates, washed their hands of him.
Richard Marsh, M.P. took up the case with the Ministry of Defence last year, and received an answer which can be summarised briefly as follows:
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"The Naval service completed by Paul Muncey is not sufficient to comply with the statutory conditions for an award of a Service pension on invaliding out."
Nor had he served long enough to be eligible for even a grant from Naval funds. The Ministry of Pensions replied that:
"the accident was solely due to Mr. Muncey's own conduct and that since Service conditions neither caused it nor contributed to it, they are unable to award a war pension".
The National Assistance Board regret that it is impossible to pay him a supplement since his basic needs are assessed under the regulations at £2 15s. per week, which is the scale rate for a person living in someone else's household.
My Lords, these are the cold, clerical answers of officialdom, mixed up with a few words of sympathy. But it is not only the case of Paul Muncey with which we must be concerned here: we are concerned also, I think, with a question of principle. We have been told by the Ministry of Pensions that "Service conditions neither caused nor contributed to" the paralysis. To me, this seems to be sheer sleight of hand. Paul Muncey was a minor, a junior, when the accident occurred. He happened to be in North Borneo, not because he decided to go there for a holiday but because the Navy took him there. He had volunteered for the Navy; the Navy decided that he should go to the Far East; and the Navy decided that he should have a day's shore leave in Borneo. In these circumstances it seems to me impossible to argue that Service conditions did not contribute at all to the accident. "Ah", they say, "he was on leave at the time; he was on a day's shore leave." Do the Navy now say that they accept no responsibility for minors on leave, even on one day's shore leave? Do they tell the parents, when their sons sign up: "We accept full responsibility for these youngsters while they are on duty. But if they go on leave and get involved in an accident they are on their own; we wash our hands of them"?
Then it is said that he was skylarking at the time; that he had had a few beers. I went into a naval recruiting office and got some pamphlets and brochures which appealed to young people to join the Navy. All of them stressed the call for adventure, the need of lively lads with active spirits. In the windows outside State House, the main recruiting centre,

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I saw written: "Skill, travel, adventure", and "A life of skill, adventure and security in the Navy." The Navy cannot have it both ways. They cannot expect to have spirited lads who turn off their high spirits when they go on leave.
Finally, I come to the argument of the Ministry of Defence, in effect, that Paul Muncey did not serve long enough to qualify for a Service pension. I accept that this may be the regulation; but, if so, it seems to me that this is a regulation that is bureaucratic, soulless and ought to be destroyed. Paul Muncey served for almost three years—in fact I think it was slightly over. Was he warned when he signed up that he must be careful not to break his neck or to contract a deadly disease until he had served a statutory period? I am not asking for charity for Paul Muncey—although even a little of that would not come amiss: it has been a stranger to his bedside for a long time. I am asking for certain basic elementary rights.
I base my case on these facts: first, he was in Borneo because he was in the Navy—nobody can dodge that—and for no other reason. Therefore Service conditions, of some sort or another, did contribute to his accident. Second, he was a minor; and the Navy must have the same responsibility towards minors that society seeks in a parent or guardian. The Navy cannot expect to get young people of high spirits and, as I have said, expect those high spirits to be confined only to the quarter deck. It might be argued that if the Services accept this argument in principle, they would have to accept an additional burden of pension in many other cases. But why not? They sign on these lads; they expect them to serve; they expect them to be high-spirited. Is it to be argued that we are going to have thousands and thousands of such cases every year? Clearly, that is absurd. Clearly this would mean an extra charge; but it is one which we ought, in all justice, to meet.
If the regulations prevent Paul Muncey from being given a pension then those regulations should be changed; they should be bent or broken, for they are unjust, inhuman and a disgrace to a civilised country. I know, as I have said, that Mr. Richard Marsh, and Miss Margaret Herbison, the Minister of Pensions, are just and compassionate
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people. I know that the Minister in this House is a just and compassionate man. I ask them to remember that in the Labour Party's Election Manifesto we said we were to build a compassionate society. I ask them to remember that compassion is an individual as well as a general thing. I beg them, in judging this and other similar cases, not to forget that. Since I started with Blake, let me finish with him:
"Can I see another's woe,
And not be in sorrow too,
Can I see another's grief,
And not seek for kind relief?"
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, I think we would all agree that this is an exceptionally tragic case and it would obviously be agreed that we should treat a case of this kind with the utmost sympathy. We would certainly pay tribute to the quite remarkable devotion that Mrs. Muncey has shown to her son. At the same time, as I listened to the noble Lord I found myself somewhat in disagreement not only with the content of what he said but with his presentation of it. I should like to set out the position of Her Majesty's Government, be it of any Party, in this type of matter. Many of your Lordships will have had experience of cases of this kind and certainly those of us who have served in another place have handled many pension cases in our time and are well aware of the rules that apply. Indeed, I would suggest that much of the noble Lord's speech was rather an attack on the provisions of society as a whole than on the treatment of Mr. Paul Muncey as an individual. But I should like to set out the circumstances.
My noble friend is quite right in his facts as to the tragic injuries which occurred to Paul Muncey. In company with three other seamen on shore leave in British North Borneo, he spent the afternoon in the Sandakan Recreation Club and from there went to a small dance hall with a bar and an adjoining pool which was privately owned by a Chinese proprietor and was open to the general public. In due course Mr. Muncey decided to have a swim; he stripped off his clothes, ran to the diving platform and dived in. Unfortunately, the swimming pool is tidal and at the

1143
time it contained only six inches of water. He landed on his head on the sand on the bottom, fractured his neck and suffered damage to the spinal cord with the result that he is now totally paralysed from the neck down. A naval doctor was on the scene within half an hour and Muncey was moved to the Sandakan Hospital and transferred to the British Military Hospital, Singapore where he remained under treatment until October, 1954. From Singapore he was flown home to the Royal Naval Hospital at Haslar. On the 29th October, 1954, he was invalided from the Royal Navy suffering from quadriplegia and transferred to the Stoke Mandeville Hospital in Buckinghamshire.
The noble Lord referred to the allegation that Paul Muncey had had too much to drink. All I would say on this point is that the question of intoxication is not relevant to this case at all. I personally would not therefore have referred to it. The basic issue is whether or not his injuries were attributable to or aggravated by service. I do not think I need spend much time on the question of Service pensions. The noble Lord, Lord Willis, has referred to the fact that Paul Muncey had only had just over two years' service; and I do not think anyone in the circumstances would question whether he should be eligible for a Service pension. It is obvious that he is entirely outside the purposes of Service pensions.
The question is whether he should be awarded a war or disability pension. This is governed by War Pensions Instruments, administered not by the Ministry of Defence, but by my right honourable friend the Minister of Pensions and National Insurance. It is an essential condition for the award of a pension for disablement that the disablement must be attributable to, or aggravated by, service. I do not need to go into great detail on this, but I am bound to say that the view I took myself when I read the case was that the accident was entirely due to Paul Muncey's own actions and that Service conditions neither caused not contributed to the accident which resulted in disablement. In this type of case there is a statutory right of appeal to an independent pensions appeal tribunal against the Minister's decision. This procedure
1144
was followed by Mr. Muncey and the Minister's decision was upheld by the tribunal. The decision of the tribunal is legally binding on my right honourable friend and the only further recourse open to Mr. Muncey would be to appeal, by leave, on a point of law to the High Court. He has not done so, no doubt for good reasons. I am not suggesting that There is any possible point of law on which he could appeal.
My Lords, the conditions surrounding the award of disablement pensions are already much more generous than in any comparable field. To extend them even further to cover a case of this kind, tragic as it is, would be quite incompatible with the principle applied hitherto by which such disablement must be due to some Service cause. It has been argued that all accidents to Servicemen should be regarded as attributable to service, irrespective of whether they occur on duty or not, the argument being, as my noble friend suggested, that the victim would not have been where he was—in this case, in Borneo—but for the service which took him there. If this argument is pressed to its logical conclusion, we should be obliged to accept liability for any condition which manifested itself in service. This would entirely cut out the principle of causality on which the War Pensions Scheme is based and would make it virtually impossible to sustain the generally accepted preferences which war pensioners now enjoy. The existence of the War Pension Scheme is because of the acceptance of the principle of Service causation.
The noble Lord, Lord Willis, made some play with the fact that Paul Muncey was a minor. I am not sure what conclusion he draws from this. Should it be that in such circumstances the movements of any young man of under 21 should be completely restricted? Is it really possible for the Government to exercise a special responsibility for a man aged 20? The Royal Navy, in common with other Services, strives to the limits of possibility to take good care of its men, and particularly young men, abroad. But this does not, cannot and, in my view, should not involve continuous supervision. Quite apart from the fact that this course would be quite impracticable, I believe that it would be completely

1145
unwelcome to the men themselves. Paul Muncey was 20 years old; he was not a child, and I cannot think that it could seriously be suggested that the naval authorities were in any sense negligent in allowing him to go ashore off duty without supervision in the circumstances existing at the time.
I fully agree—we all must—that this is a tragic case, and it may well be that the points made by the noble Lord, Lord Willis, should be directed to the provisions that society makes generally, and to whether arrangements for welfare are adequate; but in this case I must stress that the Services are not in a special position, and have certain strict rules which are made and agreed to by Parliament and which it is not open to the Minister or the Government of the day to vary.
It may well be that nothing like enough has been done for Paul Muncey, but what can be done to make up for this absolute tragedy? Here is a young man who is totally paralysed, and it is not possible to make up for that terrible accident. I should point out that, quite apart from the sickness benefit which has been paid continuously since February, 1955, Paul Muncey has also received a certain allowance from the British Legion. In addition, he was awarded a Greenwich Hospital Special Pension of £1 4s. 6d. a week. This was awarded quite exceptionally. Normally, only men with longer service than Muncey are considered for these pensions, so I do not think it would be fair to suggest that Ministers and my predecessors in the Defence Department have regarded this case in a heartless way. Mr. Muncey's mother receives a widow's pension and a National Assistance supplement—
LORD WILLIS: My Lords, may I say that I do not think it is true to say that Mrs. Muncey gets a National Assistance supplement. Their total income is something like £10 5s. 0d. a week, with all the additional things indicated by the noble Lord.
LORD SHACKLETON: My information is that she does receive a supplement. I am quite willing to look further into this matter, but it seems to me that this totals up broadly to the figure mentioned by the noble Lord. All I am suggesting is that, so far as the limits are at present set, the Munceys are receiving what the
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community is prepared to give them, and in addition there is this special pension from the Greenwich Hospital.
LORD WILLIS: My Lords, the noble Lord will excuse my interrupting again, but I want to get this absolutely clear. They have a total income of £10 5s. a week. The income from the Greenwich Hospital is taken into account by the National Assistance Board, with the result that they do not get a supplement. The National Assistance Board have considered this and, as I indicated, do not think that this is a case in which a supplement would be justified.
LORD SHACKLETON: Obviously, I cannot disagree with the noble Lord. I can only stand on the facts I have. I am perfectly willing to look into this matter further, but it does not, to my mind, alter the point I am trying to make, that there has been a very determined attempt, so far as is possible, to look at this case sympathetically.
I should add that in 1959 the then First Sea Lord offered to use his influence to have Muncey transferred to a home, such as the Star and Garter Home at Richmond, where disabled Servicemen have permanent accommodation in a happy atmosphere with the best possible treatment, but it is clearly the wish of Mrs. Muncey and Paul Muncey that he should live at home, and no one would suggest for one moment that Mrs. Muncey should not have her wish and continue to give the devoted service to her son that she is now giving.
My Lords, this is a very tragic case, and all of us would like to do something to help. It has been looked into again as the result of the noble Lord's Question. It has been most carefully and sympathetically considered at every stage, but I see no grounds on which it could be taken further. I would say this to the noble Lord: those of us who have had experience of dealing with pension cases know of many heartbreaking cases where people have been invalided from the Services with a condition not attributable to service, perhaps a rare disease like ankylosing spondylitis, and Parliament has seen fit to agree to certain regulations. Any young man who suffers an accident of this kind is bound to be a

1147
tragic case, but the remarks of the noble Lord, which were couched in pretty strong language, should, I think, be directed to the wider question of the obligations of society to those members who suffer misfortune. I do not see such a significant difference between a tragedy of this kind which happens in Borneo and a similar tragedy which happens anywhere else in the world. My Lords, in these circumstances I am sorry to say that there is nothing—much as we should like to do so—that we can do further for Paul Muncey.
VISCOUNT GOSCHEN: My Lords, may I ask one question of the noble Lord? If anything does happen to Mrs. Muncey, will this boy still be able to go to the Star and Garter Home?
LORD SHACKLETON: I do not want to rest on the fact that that is a hypothetical question. I should only hope that the offer made before would then be renewed. Certainly this is a matter which has been given very much anxious and sympathetic thought. I am sure that the Royal Navy feels a strong responsibility and would like to do the most it can within the rules as approved by Parliament.

THE EXPORT BONUS
6.30 p.m.
LORD BARNBY LORD BARNBY rose to ask Her Majesty's Government whether they can explain the delay in announcing the conditions upon which exporters can obtain, on certain merchandise regularly exported in volume, the export bonus. The noble Lord said: My Lords, the purpose of this Question is to seek an explanation, hitherto not vouchsafed to repeated delegations from the industry, of the delay in according to manufacturers of wool tops the subvention provided under Section 7(5) of the Finance Act (No. 2), 1964. First of all, I should declare an interest. I am a board member, unpaid, of a body which has for long dealt rationally with redundant equipment in the wool combing industry. This association, I should add, functions with the benevolent familiarity of the Board of Trade.
The export of wool tops by the United Kingdom is not insignificant. In 1964, it
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totalled in value £45 million—an appreciable contribution to the country's export achievement. Indeed, it is an important part of the £160 million of the total exports of the wool textile industry, which places the industry among the top eight exporting industries. I believe it is the fifth—
LORD RHODES: The sixth.
LORD BARNBY: The sixth, the noble Lord, Lord Rhodes, with his knowledge, corrects me. The Act requires a 20 per cent. content of British wool to qualify for rebate. There have been protracted negotiations by authoritative bodies—the statutory Wool Export Council and the British Wool Federation with both the Board of Trade and Customs authorities; but the frustrating debate still continues. There has been helpful consideration by senior officials, but down the line less higher ranking officials, perhaps quite properly in their attempt to defend the taxpayer, have shown costiveness and delay and have advanced many complications. It will be agreed that uncertainty is a discouragement to business and this instance is certainly no encouragement to the export of wool tops to these high values.
Business in this industry is habitually done on slender margins, often as low as 1 or 1½ per cent., with long-term credits thrown in. It is often thought that we disregard cost calculations for heavily depreciated buildings and machinery in calculating prices to overseas customers. Such narrow margins would bring blushes to those in other industries when they think of the margins which they customarily secure. It will be seen that an incentive of the order proposed in the Act of 1¼ per cent. is of great encouragement if exports are to be achieved. What applies to tops would also apply to noils and other by-products. I cannot omit mentioning that the industry here meets subsidised exports from Australia and also competition from exporters in the Argentine and Uruguay who benefit considerably from tax concessions. Indeed, it can be said that this latter assistance also applies to competitors from European countries.
I would seek to forestall technical representations of complications which may be advanced by the noble Lord who is to reply. By his long association with

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the wool industry, he is familiar with all these matters and understands the problem perfectly. But he enjoys our sympathy since, whatever may be his own inclinations, a Minister must often conform to policy reactions of his Department. All the same, this offers to him an opportunity to secure accelerated equity. From a lifelong intimacy with the industry and as past head of its senior trade organisation, for a long period, I could weary the House with technical explanations. This would involve an explanation of the diversity of content or the material price ratio of the content of exported merchandise. Wool values could well vary up to 20 per cent. within twelve months. This would make it difficult to calculate the wool content value on the day a contract was made. The date of contract and the date of delivery might vary up to twelve months, or again the date of arrival might vary as against the date of purchase or sale contract or the ownership of the wool.
I would mention that certain by-products are necessarily a blend of constituent parts from various producers, which would make it impossible to calculate any average in the blend. Merchandise manufactured from British wool automatically attracts a subvention because it meets the required 20 per cent. proviso; but how on earth can the British part and the imported part be separated in a blended product? That is beyond the wit of man. I think that your Lordships have had a sufficiency to understand how complicated this matter can be. The rules of the House prevent me from replying to anything which the noble Lord may say, but I assure him that the present delay is a serious grievance in the industry. I am sure that he is personally sympathetic, and I hope that his sympathy may bring a favourable decision, which will avoid any possible unintentional miscalculations as to the composition of the product, or technical content ratios; it would, if granted, swiftly avoid inescapable long delays for the payment of the bonus. Admitted, this may be a difficult matter in interpretation. But there has been, one understands, a suggestion that each individual trader may average his raw material cost over an extended period. That is just not a practical proposition; it is just cuckoo-land. The
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average of each individual firm, the date of purchase, the date of sale contract, the date of delivery—they would all vary tremendously within the twelve months.
There is talk about arrival on premises. Whose premises—the buyer's, the railway company's, the commission comber's? Again, there is discrimination between a topmaker with combs or one without combs. There is talk of freight included—inland or marine; in United Kingdom or foreign bottoms, or freight excluded? Then, there is cost of labour directly employed. Is that in handling or in manufacture? It may include the cost of independent contracts, as set out in the regulations. Who is to be the independent contractor; and how many are permitted?
I said that I would not weary the House with too much technical data; and your Lordships will appreciate that it is a technical matter, involving very large sums, and it is entitled to a rapid and favourable decision. I venture to suggest to the noble Lord that if he still finds great difficulty in coming into agreement with the industry as to what is and what is not practical, would it be possible to invite a small committee, nominated by the trade, to come down and discuss it with the Board of Trade and the Customs authorities? Here I would say that there exists in this industry a statutory body dealing with all export matters. The secretary of that body is extremely well versed in all matters affecting wool textile export all over the world, and he would be, I suggest, a most valuable man for the noble Lord to recommend to confer with the officers of the Board of Trade and the Customs. I therefore suggest, as a quicker course, that the Government should use powers vested in them in Clause 7(5) of the Finance Act (No. 2), 1964, and make the provision forthwith that wool combed in the United Kingdom shall be regarded as ranking forthwith for subsidy.
We in the industry rejoice that we have the noble Lord, Lord Rhodes, as the Minister, because he understands this industry. He has this opportunity to clarify the position. But, what is more important, he has it in his power to impress upon the Government and the Departments concerned that exports are being jeopardised—and, indeed, it is disquieting how the curve of exports is going down—and to correct a deep sense of grievance

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among the manufacturers and exporters about this apparently inexplicable delay. I hope, therefore, that the noble Lord will feel able now to make a statement which will correct this unhappy state of affairs.
6.45 p.m.
LORD RHODES: My Lords, I am obliged to the noble Lord for telling me in advance what he proposed to say tonight. I suppose that if his Party had been in Government I should have been making exactly the same sort of speech from those Benches. But I am not. I am undermined because I have the knowledge of the other side as well. While the noble Lord is regarded as an elder statesman of industry, and has put his points with clarity and with quite a lot of technical allusions, none the less he has put his case.
I would ask him, first, to consider what the position would have been if we had not introduced a scheme at all. This has nothing to do with my reply, but I must draw his attention to the scheme—and it is encouraging to know what an enormous value is placed on it. The export rebates scheme gives exporters relief from certain indirect taxes which enter into the costs of production and transport of exported goods. That is clear. It is not, as the wording of the noble Lord's Question might be taken to imply, any sort of bonus or subsidy. The Finance (No. 2) Act, passed last autumn, stipulates that goods must be produced or manufactured in the United Kingdom in order to qualify for the rebate, and it has been laid down in the Export Rebates Order, 1965, that goods shall be treated as produced or manufactured in the United Kingdom if, and only if, 20 per cent. or more of the costs of their production or manufacture is attributable to United Kingdom expenditure. The noble Lord must agree that 20 per cent. is a very low proportion to take as the criterion.
The House will appreciate that a minimum standard had to be laid down to ensure that the rebate should not be paid on imported goods resold for export without any process or with only very minor processes carried out in this country.
LORD BARNBY: With the indulgence of the House, may I remind the
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noble Lord that there is a 20 per cent. import duty on these manufactured goods? Therefore the 1¾ per cent. proposed in the subvention would have little effect against the 20 per cent. duty.
LORD RHODES: I am afraid that I must say to the noble Lord that that has nothing to do with it at all. Imported wool into this country carries no duty. It is one of the arrangements made with the Commonwealth countries that it comes in duty-free. You cannot have it both ways: you cannot have it processed in and then do the processing here. The re-export of goods of that kind might afford little or no benefit to the United Kingdom balance of payments; moreover, they would not, in general, have borne the full burden of the United Kingdom taxes which the rebate is designed to offset. I venture to suggest that we have not been ungenerous in placing the qualifying percentage of United Kingdom costs as low as 20 per cent.; indeed, this view has been generally shared by the industrial interests concerned.
I would emphasise, too, that there has been no delay in announcing the 20 per cent. condition. Let me correct the noble Lord on this point. The necessary Statutory Instrument and Notices giving full details were published in the middle of January, well before the first claims for rebate had to be lodged. Any doubt since then, in the case of the wool textile trade, has been mainly due to the trade's requests for reconsideration of the condition and for special treatment. I know that that is the case because I have been doing a bit of it myself. I have sent it to the Customs, it has been back to me, back to the Customs, and back again to me. I have tried my damnedest on this job to do it for the trade, and I am afraid that I cannot.
We appreciate that there are special difficulties in respect of wool tops and products associated with them. There is the question of the price of the raw wool from which the tops are made—that is in answer to the noble Lord's comments about that. Some of this raw wool is British, and in those cases, of course, the United Kingdom content of the tops is 100 per cent. and the export rebate entitlement is clear. Other tops, however, are made from imported raw wool, mainly merino and crossbred, and the

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more expensive qualities, especially if they are not dyed or bleached in the United Kingdom, may fall below the 20 per cent. level because the cost of the raw wool is high in relation to the cost of the processes performed in the United Kingdom. The noble Lord understands this implicitly.
With the cheaper qualities of tops and those most highly processed in the United Kingdom, it seems that the 20 per cent. criterion will usually be met—or it is more likely to be—but there is some uncertainty caused by fluctuations in the price of raw wool. There was a period of high prices last year reflected in recent and current exports of tops. We appreciate that, in a very competitive market like wool, uncertainty whether a particular firm's tops will qualify for the rebate at any one time may inhibit competitive tender. There is also the problem of identifying the import consignment and, therefore, the price of the wool used in making any export consignment of tops. Imported raw wool may be placed in a common stock from which it is drawn indiscriminately when required for processing. Again the noble Lord will understand this rather technical reference.
The solution to these difficulties most favoured by the industry was that a new criterion should be substituted for, or added to, the present one; that the exported tops made from imported wool should qualify for rebate if they have undergone in the United Kingdom certain processes, which would be specified, irrespective of the actual United Kingdom percentage in their costs. This, of course, the noble Lord agreed would be a solution. It would probably be a radical solution, but we are not fully satisfied that a case for it has been made out. In any event, it would require a new Statutory Instrument which could not properly have retrospective effect, so that it would not dispose of such difficulties as have already arisen since the beginning of the export rebates scheme.
As an alternative solution, the industry have put forward three proposals for averaging the prices of imported raw wool so as to give all exports of wool tops the benefit of the export rebate. When the wool trade put up suggestions
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about the averaging of its content, one has to take notice of it, because they know what they are at. They are very knowledgeable on this; but so are we. One proposal is to apply an average United Kingdom content to all export of tops, those made from United Kingdom wool as well as those made from imported wool, thus giving a higher figure for the latter. Another proposal is to apply a similar average to all the exports of an individual firm. The third is to average the prices over a five-year period.
May I assure your Lordships that these proposals have been very fully and sympathetically considered—and I mean that. But the law and our international commitments oblige us to pay rebate to particular claimants individually, and to relate it to the actual goods exported by each claimant; and therefore I am afraid that we cannot treat the whole trade as a single unit. Further, the various kinds of tops, merino and crossbred, each of which may be in the natural state, or bleached or dyed, are separate and distinguishable commodities, and we do not think that it is legally open to us to treat them for the purposes of the export rebates scheme as identical. To do so would, in any case, produce anomalous results—for instance, a firm dealing wholly in unbleached and undyed merino tops might not qualify for rebate, but another firm might qualify for rebate on exactly the same type of goods by averaging them with other types in which it was also dealing. This, it seems to us, could only lead to indefensible distortions of trade.
As regards the third proposal, averaging prices over five years is precluded because there is no suggestion that any of the tops being exported now were, in fact, made from wool imported as long as five years ago. The normal through-put period is a great deal shorter. However, as supplies of raw wool from the various overseas sources reach their peak at yearly intervals, the Customs have now been able to offer the industry a measure of averaging which will go some way to avoid the uncertainties caused by fluctuating prices. The noble Lord shakes his head. I am saying, after sympathetic consideration, what we can do and how far we can go. I have taken it up with the Customs myself, so I hope he will do a bit of nodding instead of shaking.

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The offer that we are making is this. In calculating the United Kingdom content of wool tops for the purpose of the export rebates scheme, claimants may take the price of the raw wool as (1) the average price for the preceding twelve months—and, of course, taking the high costs prevailing over the last twelve months it will work itself out; or (2) the average price for the preceding quarter; or (3) the current price. Perhaps I should make it clear that the prices to be averaged are the actual prices paid for raw wool of the type in question taken into the factory during the selected period. They can have it which way they want it. As I have said, that may be the claim period during which the goods are exported for the quarter or twelve months preceding that period, entirely at the exporter's option. They may exercise this option in the way most favourable to them, and they may exercise it afresh for each quarterly claim. It will apply retrospectively from the beginning of the scheme.
I should like to assure the noble Lord, and the trade, for which I have a great affection, that this offer, though it may not go as far as the industry would have
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liked, is made in a spirit of helpfulness and sympathy with the difficulties to which the noble Lord has drawn attention. I hope that he and the trade will agree that the arrangements that I have outlined should be given a fair run, so that their actual results can in due course be assessed in the light of the practical working of the rebate scheme as a whole. It has been a technical subject. To the noble Lord and myself this does not represent much difficulty at all, because we have been born and bred in it. But I do ask the noble Lord to take back to the trade what I have said about giving it a fair run; and I am perfectly certain that as time goes on he will find that it is not so bad as he made out.

LONDON TRANSPORT BILL
The CHAIRMAN OF COMMITTEES The CHAIRMAN OF COMMITTEES informed the House that the opposition to the Bill was withdrawn: the Orders made on 21st and 29th June last discharged, and Bill committed to the Committee on Unopposed Bills.
House adjourned at seven o'clock.