Sitting of 13 July 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  HUYTON-WITH-ROBY URBAN DISTRICT COUNCIL BILL [Lords]
  As amended, considered; to be read the Third time.
ORAL ANSWERS TO QUESTIONS
  WIRELESS AND TELEVISION

    Television Reception, North Lincolnshire
    Sir C. Osborneasked the Postmaster-General what action he proposes to take on the request from the Cleethorpes Borough Council, a copy of which has been sent to him by the hon. Member for Louth, for improved reception from B.B.C.1; in view of the fact that the people of North Lincolnshire are concerned at the delays in improving this service, if he will take action; and if he will make a statement.
    The Assistant Postmaster-General (Mr. Joseph Slater): As I told the hon. Gentleman on 15th June, the construction timetable for the B.B.C.'s stations is the Corporation's responsibility. I understand that the B.B.C. has told the Cleethorpes Borough Council that it now hopes to bring this station into operation in September.
    Sir C. Osborne: The equipment has been on the site since April; it has been lying there and nothing has been done about it. My constituents feel that they are being defrauded by the B.B.C. They could not get a good picture of Wimbledon, and now they cannot get a good picture of the football games. Will not the Minister do something with the B.B.C. on their behalf?
    Mr. Slater: I appreciate the hon. Member's feelings on behalf of his constituents in this matter, but my information is that it was originally intended that the B.B.C. and the I.T.A. services from the joint Belmont station should open at about the same time but that there has been delay in the manufacture and testing of the B.B.C.1 aerial. Until this can be put right, I cannot say anything further.

    National Sporting Events (Closed-circuit and Pay Television)
    Mr. Rowlandasked the Postmaster-General what steps he proposes to take to ensure that national sporting events do not become confined to closed circuit and pay television.
    The Postmaster-General (Mr. Edward Short): I am considering the issues of policy raised by the exclusive televised showing of certain sporting events in cinemas and on pay television.
    Mr. Rowland: In thanking my right hon. Friend for that Answer, may I ask whether he does not agree that there is a potential threat to the virtually free mass viewing of public sporting events and that urgent discussion with the B.B.C. and the I.T.A. would be in order from him?
    Mr. Short: I agree with my hon. Friend. The problem is that the Conservative Government agreed to allow both big-screen television and pay television to have a trial, and I think that their decision was right. There is, however, a considerable problem thrown up that the greater part of the viewing public are deprived of seeing these events. That is the problem which we are now considering.
    Mr. Frederic Harris: In congratulating the right hon. Gentleman on his appointment, may I also ask whether he is aware that from the public's point of view—one gets a lot of letters from one's constituents about this—this is a most unfortunate trend which is taking place? Will the Minister do his utmost to ensure that the sporting public get the opportunity, through the B.B.C., etc., to get a full view of the sporting activities available to them?
    Mr. Short

    Pirate Radio Stations
    Mr. Rowlandasked the Postmaster-General how many pirate radio stations are broadcasting to Great Britain from within and without British territorial waters; and what action the British Government proposes to take to uphold national and international law in this matter.
    Mr. Edward Short: Ten stations in all. A Bill to enable the Government to deal with them will be introduced before the Summer Recess.
    Mr. Rowland: In thanking my right hon. Friend and his predecessor for the recent announcements on legislation, may I ask whether he can indicate when this legislation will be implemented, as distinct from being introduced?
    Mr. Short: That, of course, depends on the House, which, like the mills of God, grinds slowly. But I imagine that it will have the Royal Assent very early in the new year.
    Mr. Bryan: Will the right hon. Gentleman agree that the international law referred to in this Question has been strengthened by international agreement? Of the various countries which signed the agreement with Great Britain, may I ask him how many have succeeded in taking the action which they promised to take and why we have not been able to do so?
    Mr. Short: I think that one country has ratified, and three other countries already have legislation to deal with the problem. We intend to introduce this Bill, which will get the Royal Assent shortly, and the pirates will be put out of business.
    Mr. Lipton: Side by side with this impending legislation, what arrangements are being made to satisfy what is obviously a 24-hour demand for this kind of music?
    Mr. Short: That is another question, but my predecessor indicated that we were looking urgently at the possibility of a national music programme, and we are actively pursuing that.
    Mr. Bryanasked the Postmaster-General what preliminary discussions he has had regarding future pogrammes to replace those of the pirate radio stations; and whether he will make a statement.
    Mr. Edward Short: I would refer the hon. Member to my predecessor's reply to the debate on the Adjournment on 22nd June.
    Mr. Bryan: Can the right hon. Gentleman say how long discussions about, shall we say, a permanent music programme have been going on? In view of the great importance of this subject, I feel that they should have been going on for a long time now.
    Mr. Short: I cannot tell the hon. Gentleman how long they have been going on because I do not know, but they are going on very actively at the moment. I have been engaged on them this morning. I hope that we can bring these discussions to a conclusion in the not too far distant future.
    Mr. O'Malley: Will my right hon. Friend give a categorical assurance that it is no part of the policy of this Government to allow commercial sound radio? Secondly, will he ensure that any new programme will provide substantial employment for live musicians?
    Mr. Short: With regard to the second part of my hon. Friend's supplementary question, again I am quite sure that his union will ensure that that is the case. With regard to the first part of his question, we must await the White Paper which is coming out.

    Licence Fee
    Mr. Dempseyasked the Postmaster General with a view to preventing any further increase in the cost of television licences, what other steps he proposes to take to meet increasing costs; and if he will make a statement.
    Mr. Boyd-Carpenterasked the Postmaster General when he contemplates increasing the British Broadcasting Corporation licence fee.
    Mr. Stratton Millsasked the Postmaster General if he will make a statement on the proposals put forward by the British Broadcasting Corporation to maintain stability of the licence fee for two years or possibly longer, referred to by his predecessor in the debate on 3rd March.
    Mr. Edward Short: As my predecessor explained on 3rd March, the Government are currently studying the B.B.C.'s

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    proposals for maintaining stability of the licence fee for about two years. The Government are also considering what steps should be taken to reduce licence evasion. Progress is being made but I am not yet able to make a statement.
    Mr. Boyd-Carpenter: Is it not perfectly clear from a study of the B.B.C.'s accounts that, whatever is done about licence evasion, either the licence fee will have to be increased or advertising revenue obtained? Is it not necessary, if the B.13.C. is to progress, that the right hon. Gentleman should come to an early decision on this?
    Mr. Short: I quite agree with the right hon. Gentleman. This is the central problem in broadcasting in this country, and it arises from the dichotomy in our television arrangements which the Conservative Government established. Half the system, when it improves its service, makes a greater profit; the other half gets into deficit.
    Mr. Dempsey: Would the Postmaster-General bear in mind that any increase in television licence fees bears most heavily on those with fixed incomes, especially pensioners? Would he consider easing the financial strain affecting his Department by reducing some of the extortianate fees paid to mediocre performers on television?
    Mr. Short: That is another question. The House must face the fact that, if it wants half the service run on a public service basis, it has to be prepared to pay for it.
    Mr. Stratton Mills: As these proposals were referred to as long ago as 3rd March, would it not be possible to reveal to the House what exactly they are? What did the right hon. Gentleman's predecessor mean when he referred recently to the assumptions on which these proposals were made?
    Mr. Short: Clearly,if the B.B.C. makes such a proposal, it is based on a number of assumptions, and it is my job to examine these assumptions. It is no good looking at the conclusions unless the assumptions are sound.
    Mr. Bryan: Is the right hon. Gentleman aware that the cost of the Selective Employment Tax on the B.B.C. is the
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    equivalent of engaging a thousand extra employees? Can he say how the B.B.C. can face a new factor like that without altering its previous promises with regard to the two years?
    Mr. Short: The B.B.C. has assured me that it can still maintain the two-year stability and absorb the Selective Employment Tax.
    Sir G. Nabarroasked the Postmaster-General, in view of the loss of £10 million this year by the British Broadcasting Corporation in evasion of television and radio licences, what further consideration he is now giving to attachment of the licence to sale of television and radio sets as quasi-emolument to Purchase Tax on such sale, collection authority to be Customs and Excise; and whether he will make a statement.
    Mr. Edward Short: No, Sir. I have considered various proposals for incorporating the licence fee in the purchase price of sets, but have found them all to he impracticable.
    Sir G. Nabarro: I recognise the difficulties of any transposition of this kind, but would the right hon. Gentleman say what effective methods he has in mind to quell the rising tide of evasion? Is he aware that about 16 per cent. of all radio and television licence fees are now being evaded and that the figure gets bigger every year and that detection vans are no good? What does he propose to do?
    Mr. Short: I answeredaQuestion about this last week. We are actively engaged in discussion with the retail trade which we hope to associate with anti-evasion measures. I hope that it will be possible to bring a Bill to the House after the Summer Recess. We are also doubling the number of detector vans.

    B.B.C. Television Programmes (Reception)
    Sir G. Willsasked the Postmaster-General if he will arrange for a refund of part of the television licence fee paid by viewers in areas which have serious interference with the reception of the British Broadcasting Corporation's programmes; and if he will make renewed efforts to find a remedy for this and so ensure that all viewers get equal value for their licence fee.
    Mr. Joseph Slater: I take it that the hon. Gentleman has in mind interference occurring at times in the summer and caused by foreign stations. This is due to a natural phenomenon to which there is no complete answer. However, the relay stations being built by the Corporation should reduce its effect. It would be impracticable to vary licence fees according to reception conditions which may vary not only from place to place but also from time to time.
    Sir G. Wills: Is the hon. Gentleman aware that many people who get very bad reception feel that it is inequitable that they should be called upon to pay the full licence fee when in many cases they cannot properly receive the programme that they require? Would he hasten the time when the B.B.C. is able to put up the number of stations necessary to make reception absolutely right?
    Mr. Slater: Many hon. Members will have experienced the same interference from foreign stations as the hon. Gentleman and some of his constituents. But there is no absolute view on this. It is much easier, and therefore much cheaper, to provide first-class reception in some places than in others. Viewers in the former are, in effect, subsidising viewers in the latter.

    B.B.C. Television Films (Scripts)
    Mr. Martenasked the Postmaster-General if he will direct the British Broadcasting Corporation under the provisions of the Licence and Agreement to refrain from transmitting films made by them, the scripts of which they are unwilling to make available to those persons wishing to see them.
    Mr. Edward Short: No, Sir. The broadcasting authorities are responsible for the content of the programmes they broadcast.
    Mr. Marten: Is the right hon. Gentleman aware that for some months I have been trying to get the B.B.C. to place in the Library of the House a copy of the script of the film called "The War Game" which is of interest to many hon. Members on both sides of the House? Would he kindly use his good offices to ensure that the B.B.C. places a copy of the script in the Library?
    Mr. Short: I have inquired into this matter. The B.B.C. tells me that the script alone is meaningless. Normally it would make scripts available to hon. Members, but it tells me that in this case the script alone is not really worth having. There are, of course, a number of difficulties—legal difficulties among others—about issuing scripts to anybody who asks for them. But in fairness to the B.B.C. I should say that it has made the film available. It is now on show in London, and anybody can see it.
    Mr. Dickens: Would my right hon. Friend reconsider an early decision to show this film nationally on television at a peak viewing hour?
    Mr. Short: That is not a matter for me. The B.B.C. is master in its own house. Although it made the film, it decided not to show it. But, as I say, it is on show in the cinema now, and anybody can see it.
    Mr. Hogg: May I refer to the issues raised by the Question? Does not the Postmaster-General appreciate that there may be people who are wronged by the terms of a script issued by the broadcasting authorities, either the one or the other? Therefore, is it not right that they should have a legal right to look at the script if it refers to them in possibly defamatory terms?
    Mr. Short: That raises a different aspect of the matter which should be put to, perhaps, the Attorney-General, but not to me. All that I am saying is that the B.B.C. has difficulties in this matter, but it has informed me—and I have made careful inquiries about this; I anticipated that this was the point of the Question —that it feels that the script alone is not worth issuing.
    Mr. Hogg: Is not the right hon. Gentleman evading his Departmental responsibility? Surely it is his business to acquire legal advice through his legal advisers. It is not the business of hon. Members to put down Questions to Ministers without executive responsibility for the Department which is responsible for issuing directions.
    Mr. Short: The hon. and learned Gentleman is quite wrong. I have no complaint, but if any member of the

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    public feels that he has a complaint about the contents of this script it is open to him to take what legal action he can.

    Independent Television (Colour Transmissions)
    Mr. Ian Gihnourasked the Postmaster-General when the Government propose to authorise independent television to begin transmissions in colour.
    Mr. Edward Short: I would refer the hon. Gentleman to the speech I made on Thursday in the debate on Motion for the Adjournment.
    Mr. Gilmour: In view of the very small audience for B.B.C.2, the frequently bad reception and the possible other demands made upon it, is it not quite plain that it is utterly wrong that the right hon. Gentleman should go on preventing commercial television from transmitting in colour?
    Mr. Short: There is another Question on the Order Paper about this; but it is not just a question of transmitting on 405. The fact which we have to face is that for very many years to come most viewers would receive the colour transmission in black and white, which does not give a good picture. We cannot justify spoiling the picture for the vast majority of viewers so that a small minority of people who can afford the very expensive set can have colour television, especially when colour television will be available on B.B.C.2 next year.
    Mr. Bryan: Does the right hon. Gentleman recall that in his Adjournment speech the other night he said that reception of colour television on 405 was not satisfactory? May I ask whether he has seen a recent demonstration of colour television on 405?
    Mr. Short: There is another Question on this matter. What I am saying is that this is not the essential point. The essential point is that for very many years to come most people would receive colour transmission in black and white. The black and white picture from a colour transmission on 405 is not satisfactory. We cannot justify penalising the vast majority of viewers so that a wealthy minority can see colour television on two channels instead of one.

    B.B.C. 2
    Mr. Ian Gilmourasked the Postmaster-General when he expects the reception of B.B.C. 2 to be extended to cover the area now receiving B.B.C. 1.
    Mr. Edward Short: Stations already authorised should have made B.B.C. 2 available to about 75 per cent. of the total population of the country by 1969. The extension of population coverage thereafter will depend on the rate at which more stations are added to the U.H.F. network.
    Mr. Gilmour: Does not this merely confirm that B.B.C. 2 is an inadequate vehicle for colour television and the need for another channel on which colour television can be transmitted?
    Mr. Short: No, I do not think so. I think that the receiving of colour television will be limited for many years to come by the cost of the set. The cheaper set is about £250, I understand.
    Mr. Bryan: The right hon. Gentleman may be satisfied with the geographical growth of the coverage of B.B.C. 2, but is he satisfied with the growth in the size of the audience'? Does not the disappointing growth in the size of the audience mean that it is a hard programme to receive'? Secondly, is it not quite the wrong channel for the University of the Air to occupy at peak periods, thus making the programme even less attractive to the public?
    Mr. Short: This Question has nothing to do with the University of the Air; we shall come to that later. My point was about the receipt of colour television on B.B.C. 2. This has nothing to do with educational broadcasting.

    Pirate Radio Ship Radio Scotland"
    Mr. Hugh Jenkinsasked the Postmaster-General if he is aware that the pirate radio ship "Radio Scotland" is operating off Troon, near Prestwick Airport, well within territorial waters; and if he will take action in this case.
    Mr. Edward Short: As the House knows, legislation to deal comprehensively with the pirate broadcasting stations around our shores will be introduced before the Summer Recess. I am

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    sure that this will provide the most effective means of dealing with the problem although I do not rule out the possibility of action in the meantime against the stations within territorial limits.
    Mr. Jenkins: Does my right hon. Friend recall that the International Telecommunication Convention of 1959 prohibited transmissions from on board ship? Although the Conservative Administration did nothing about this for so many years, will my right hon. Friend consider that in taking the action which he intends to take?
    Mr. Short: I am pursuing this matter very actively. There is a legal complication concerning the Territorial Waters Order in Council made in 1964. However, I am becoming more hopeful that we can take some action ahead of the Royal Assent to the Bill.
    Sir Knox Cunningham: Will the right hon. Gentleman bear in mind the service rendered by these stations to people who like to hear this sort of music? What will he do about replacing this service?
    Mr. Short: These stations present a very squalid picture of which no hon. Member is proud. They are in breach of the law, and it is no use talking about lawlessness in our cities if we are prepared to allow this to take place on the high seas.
    Sir Knox Cunningham: Owing to the unsatisfactory nature of that reply, I give notice that I will seek leave to raise the matter on the Adjournment.
    Later —
    Mr. Jenkins: On a point of order. Is the hon. Member for Antrim, South (Sir Knox Cunningham) entitled to raise on the Adjournment a matter arising from a Question put down by an hon. Member on this side of the House?
    Mr. Speaker: The simple answer is, "yes

    Broadcasting White Paper
    Mr. Stratton Millsasked the Postmaster-General when he will publish the Broadcasting White Paper; and if he will make a statement.
    Mr. Edward Short: The White Paper will deal with a number of complicated
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    issues and will be published as soon as possible.
    Mr. Stratton Mills: Has not the delay over this White Paper been absolutely fantastic? May we have an assurance from the right hon. Gentleman that there will be a statement on it before the Summer Recess and that a statement will be made in the House at the same time as the White Paper is presented?
    Mr. Short: All I am prepared to say is that there will be a statement as soon as we can possibly make it. But the hon. Gentleman must realise that the Government were left with a whole pile of very complicated issues by the Conservative Government, a whole backlog of issues. Central to all of them was the question of financing television. The hon. Gentleman must be patient and not complain if we take a little time over it.
    Mr. O'Malley: Bearing in mind the desirability of having a soundly based musical profession, will my right hon. Friend reject any proposals for commercial radio and regard with great caution the suggestion by the B.B.C. that it could provide adequate programmes of local sound radio for as little as £50,000 a year?
    Mr. Short: If we decide to have a national music programme, that is one of the issues which we will have to discuss with the hon. Gentleman's own union.
    Mr. Bryan: Returning to the White Paper; despite all these excuses, is the right hon. Gentleman aware that his predecessor expected to get this White Paper out last January? That being so, will the hon. Gentleman tell us exactly what obstacle is stopping it from coming out?
    Mr. Short: There is no specific obstacle. It is simply that there is a great backlog of major problems dealing with television and broadcasting bequeathed to us by the Conservative Government. Central to all these, as I said earlier, is the dichotomy in British broadcasting and British television and this presents an almost intractable problem of financing. I often think that it would be better to put the two systems into the melting pot and go back to square one and get something new.

    Local Broadcasting
    Mr. Bryanasked the Postmaster-General what request he has received from the Council of the Local Radio Association for an interview regarding local sound broadcasting; and what reply he gave.
    Mr. Edward Short: On 4th July the Chairman of the Association sent me a copy of its memorandum on local broadcasting and offered to meet me. I thanked him for the memorandum, which I shall study with interest; and noted his offer.
    Mr. Bryan: Do I understand from what the right hon. Gentleman has said that he is to meet this Association, or not? I assume that he will have discussed this matter with the B.B.C., as representing those who advocate local sound radio as a public service. It is important that he should also discuss it with those representing those who advocate local sound broadcasting by independent means.
    Mr. Short: The hon. Gentleman can make any assumptions he likes. I have looked at this memorandum and I shall study it with great care. If I feel that there is anything to be gained, I shall meet the Association. But let it be quite clear that this Association is just an association of companies formed to promote local broadcasting on a commercial basis.
    Mr. Alfred Morris: Can my right hon. Friend say whether any further consideration has been given to the proposals by Manchester Corporation for a local broadcasting station in the city?
    Mr. Short: I am very grateful to Manchester for putting forward this proposal and it is just the sort of imaginative scheme which we would certainly look at in our consideration of this matter.

  POST OFFICE

    Sub-Post Office Staff (Security)
    Sir C. Osborneasked the Postmaster-General, what reply he has sent to the communication from the National Federation of Sub-Postmasters, whose membership is around 23,000, which has demanded greater protection against
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    raiders, and flogging as a punishment for crimes of violence; and if he will make a statement.
    Mr. Joseph Slater: Representatives of the Federation have been invited to meet my right hon. Friend's security advisers to discuss what more can be done to protect sub-post office staff. The Federation made no reference to flogging.
    Sir C. Osborne: Does not the Minister feel for the sub-postmasters and sub-postmistresses, especially in the rural areas, who have been brutally beaten up? Since these thugs continue with their work, ought not some punishment to be administered to them to stop them?
    Mr. Slater: In regard to the latter part of that supplementary question, punishment for these crimes is a matter not for the Post Office but for my right hon. Friend the Secretary of State for the Home Department. In regard to the sub-postmasters and what we are able to do, I can tell the hon. Member that in view of the telegram that was sent, a meeting is taking place today between the Secretary of the Sub-Postmasters' Association and the Director of Postal Services on this matter.
    Mr. Whitaker: While sympathising with the Federation as regards the second part of the question, may I ask my hon. Friend to send to the Federation, and to the hon. Member for Louth (Sir C. Osborne), a copy of the Report of the Advisory Committee on the Treatment of Offenders, which unanimously rejected flogging both as being counter-effective and on merit?

    Letters from Rhodesia
    Mr. Wallasked the Postmaster-General why letters from Rhodesia are being opened by the Post Office authorities.
    Mr. Edward Short: Letters from any country abroad, including Rhodesia, are liable to be opened by my Department at the request of Customs for the purposes of Customs and Exchange Control. Any letter which is opened in this way is resealed with an official label bearing a printed explanation.
    Mr. Wall: Is the Postmaster-General aware of the widespread belief in this country and in Rhodesia that letters are

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    being opened, presumably for the purpose of gaining information about conditions in Rhodesia? Can he categorically deny that that is so?
    Mr. Short: I can categorically deny that there is any censorship of letters coming into this country, except for the purposes that I have mentioned. I think that the difficulty arose in the early days of U.D.I. because the Rhodesian authorities opened a number of letters coming to this country, and they were stamped with a censor's stamp. That may have given rise to the misunderstanding.
    Mr. Crawshaw: Would my right hon. Friend consider not only opening letters but confiscating letters which are filling hon. Members' postbags with a lot of racial propaganda?

    Postal Delivery Services, London
    Mr. Boyd-Carpenterasked the Postmaster-General why the postal deliveries service in London has deteriorated.
    Mr. Edward Short: There has been no general deterioration recently in the postal delivery services in London. If the right hon. Gentleman will give me details of any particular cases which have come to his notice I will gladly look into them.
    Mr. Boyd-Carpenter: Is not the right hon. Gentleman aware, even after his brief period in the Department, that deliveries in London sometimes take two days in respect of letters emanating within the area, and a great number of letters are delivered at addresses to which they are clearly not addressed? Is he not going to attempt to halt the deterioration which took place under his predecessor?
    Mr. Short: I do not accept the last part of the right hon. Gentleman's supplementary question. As he knows, an announcement was made in August of last year that changes were to be made to provide for better labour utilisation. I have looked carefully through the records of the Post Office, and we have had no complaints from the right hon. Gentleman for six months now.
    Mr. Frederic Harris: Is the Postmaster-General aware that a parcel posted in London to the House of Commons always takes two days? Is that not quite appall-
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    ing, and will he kindly ask the local postmaster here, who will confirm that fact?
    Mr. Short: If the hon. Gentleman will give me specific cases, I will look at them immediately, but I cannot answer a general question of that kind.
    Mr. John Smithasked the Postmaster-General how many letters posted in London on Saturday, 9th July, to addresses in London were still undelivered at noon on Monday 11th July.
    Mr. Joseph Slater: About 700 at full letter rate. Apart from some incorrectly and badly addressed items these were nearly all due to shortage of delivery staff, particularly at one office, owing to sickness, holidays and vacancies.
    Mr. Smith: Is the hon. Gentleman aware of the waste and damage to the economy caused by these late deliveries to offices and that this log-jam is mainly caused by the number of letters of complaint about the Post Office which my constituents write to me, my answers to them, my letters to him about it, his answers to me, and my letters sending those to them? All this could be avoided by punctual delivery.
    Mr. Slater: I sincerely hope that the replies to his inquiries which the hon. Gentleman has received from me have been satisfactory. Our staffing position is better than it was a year ago, but we are still unable to get the staff we require.
    Mr. Lubbock: Is the hon. Gentleman aware that only recently I sent the Postmaster-General a complaint from a constituent of mine saying that not one but some half dozen letters were delivered six to seven days late to my constituent's premises and that thereby he lost a number of valuable orders? As this is only one of numerous complaints which I have received in the last year, confirming what the hon. Member for the Cities of London and Westminster (Mr. John Smith) has said, will not the hon. Gentleman undertake an investigation into the whole of the postal delivery service within the Greater London area?
    Mr. Slater: This is something which we are constantly doing with the postal services. We have endeavoured to assist, but we have been faced with staff difficulties, particularly in London. We are

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    doing everything we possibly can to bring more people into the service so as to provide the deliveries which hon. Members want.

    Sub-Post Offices (Selective Employment Tax)
    Mr. Kenneth Lewisasked the Postmaster-General what extra payment he proposes to make to sub-post offices to compensate them for having to pay the Selective Employment Tax.
    Mr. Joseph Slater: This is a matter that my right hon. Friend has under consideration and on which he will consult the National Federation of Sub-Postmasters as soon as possible.
    Mr. Lewis: Will the hon. Gentleman bear in mind that it would not be an advantage for many of these sub-post offices to get rid of qualified staff and that it would not be in the interests of the Post Office itself? Secondly, as they earn little enough for having these sub-post offices, will they not find it very difficult to carry this tax?
    Mr. Slater: Assistants are employed by the sub-postmasters and not the Post Office, so the Post Office has no control over them.

    Japanese Space Programme
    Sir J. Edenasked the Postmaster-General what study he has made of the Japanese space programme; and what are his conclusions with reference to the British space programme.
    Mr. Edward Short: I assume that the Question refers to the communications aspects of space. We have many contacts with Japan, both through our common membership of INTELSAT and directly. As far as we are aware, they are not building their own communications satellite but, like British industry, are seeking to secure sub-contracts in orders placed by INTELSAT. In earth stations, we believe that Britain is in a very competitive position.
    Sir J. Eden: Will the right hon. Gentleman find time to make a further study of the Japanese space programme, when he might conclude that a great deal has been achieved in the Japanese national effort for a very small expendi-
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    ture, which perhaps has something to do with the establishment of the Japanese National Space Activities Council, a body which we might well copy over here?
    Mr. Short: I agree that the Japanese have done very well. My right hon. Friend my predecessor went to Japan, of course, and I have had the advantage of seeing his notes of his visit. But I repeat that, so far as we are aware, the only satellites being made in Japan are scientific and not communications satellites.

    Postmaster-General (Correspondence)
    Mr. Robert Cookeasked the Postmaster-General whether he will continue to send personalised letters of apology for lapses in Post Office services to those who send him complaints.
    Mr. Edward Short: I am continuing to deal with correspondence on the lines adopted by my predecessor.
    Mr. Cooke: What is the right hon. Gentleman going to do with all those sugary circulars with "Wedgwood Benn" printed on them?

    Postal and Telegraphic Services, Malvern
    Sir G. Nabarroasked the Postmaster-General for what reasons he proposes to place postal and telegraphic services at Malvern, Worcestershire, under the management control of Worcester; and whether he will make a statement.
    Mr. Joseph Slater: As I have explained to the hon. Member, we propose to make this change because the managerial work now done at Malvern can be done more efficiently and at less cost at Worcester, without any adverse effect on our public services.
    Sir G. Nabarro: Would the Minister tell the House how much money he proposes to save? Would he give an assurance, in view of the unhappy experiences in Greater London, with a progressive deterioration in postal services, that this greater centralisation in Worcester will not have the same unhappy consequences to the embarrassment of my constituents in Malvern?
    Mr. Slater: While I cannot accept the first part of the hon. Member's supplementary question, I can tell him that the saving in cost will amount to nearly £8,000 a year. Private addressees will not be affected and it will have no adverse effect on the public service as a whole. It is purely a matter of internal organisation.

  TELEPHONE SERVICE

    Coin Boxes (Long-Distance Calls)
    Mr. Henry Clarkasked the Postmaster-General if he will arrange that pay-on-answer telephone coin boxes are made to take coins of higher denomination to facilitate the making of long-distance calls.
    Mr. Edward Short: Such a change must now await the modifications needed for a decimal system of currency which, as the hon. Gentleman knows, the Government plans to introduce in 1971.
    Mr. Clark: Will the Postmaster-General give an assurance that when they are adapted to a decimal system of currency, the pay-on-answer coin boxes will be fully redesigned to take account of many defects, not the least being that they are simple to burgle?
    Mr. Short: I have a great deal of sympathy with the hon. Gentleman on this point, but it would involve a great deal of expense to do the thing twice. The Government have taken this firm decision now, and we must wait until 1971 to see what the new coins are.

    S.T.D. System (Northern Ireland)
    Mr. Pounderasked the Postmaster-General which telephone exchanges in Northern Ireland are scheduled for conversion to the subscriber trunk dialling system in 1966, 1967, and 1968, respectively.
    Mr. Edward Short: With permission, I will circulate a list of the exchanges concerned in the OFFICIAL REPORT. But it does show that in 1966 20 exchanges will be converted; in 1967, 30, and in 1968, 22.
    Mr. Pounder: While thanking the Postmaster-General for that Answer, may I ask him to say whether there has been
    1448
    an improvement or short-fall in the rate of conversion to S.T.D. in Ulster compared with the forecasts originally made?
    Mr. Short: There has been a slight rephasing, as the hon. Gentleman will see from the many Questions that he and his hon. Friends have had down on this. But, overall, there is a slight improvement.
    The following is the information:
    Telephone exchanges in Northern Ireland at which it is planned to introduce the STD facilities:

    In 1966

    Comber

    Portaferry

    Ahoghill

    Portavogie

    Anghaffaten

    Enniskillen

    Garvagh

    Brookhall

    Greyabbey

    Campsie

    Lisburn

    Clandy

    Donaghadee

    Cross

    Newtownards

    Eglinton

    Ballywalter

    Draperstown

    Kircubbin

    Maghera

    In 1967

    Helen's Bay

    Rathfriland

    Whitehead

    Richhill

    Whiteabbey

    Tandragree

    Omagh

    Dromore (Down)

    Aughnacloy

    Hillsborough

    Beragh

    Maze

    Castleclerg

    Ballycastle

    Fintons

    Cookstown

    Newtownstewart

    Coalisland

    Sion Mills

    Dundonald

    Kilnea

    Cloughmills

    Crumlin

    Glenanne

    Templepatrick

    Ballyward

    Portrush

    Whitehouse

    Loughgall

    Banbridge

    In 1968

    Newcastle

    Mountfield

    Strabane

    Castlerock

    Newtownhamilton

    Coagh

    Castlewellan

    Pomeroy

    Kilkeel

    Moneymore

    Rostrevor

    Aghadowey

    Rasharkin

    Tuomebridge

    Warrenpoint

    Dungiven

    Clogher

    Dromone (Tyrone)

    Drumquin

    Stoneyford

    Gortin

    Ballygawley

    Mr. Pounderasked the Postmaster-General what is the proportion of telephone subscribers in Northern Ireland who were on the subscriber trunk dialling system in 1965; and what additional proportion he estimates will come on to this system in 1966, 1967, and 1968, respectively.
    Mr. Edward Short: 64 per cent. of the telephone subscribers in Northern Ireland had the S.T.D. facility in 1965.
    I estimate that the additional proportion to have S.T.D. during the next three years will be:

    1966

    7 per cent.

    1967

    10 per cent.

    1968

    4 per cent.

    Medway Telephone Exchange
    Mr. Murrayasked the Postmaster-General how many applications for telephones are outstanding in the Medway telephone exchange area.
    Mr. Joseph Slater: 1,818 at 31st May, 1966, not counting orders under inquiry or being met. Nearly 3,000 new connections were provided in the previous 12 months.
    Mr. Murray: I thank my hon. Friend for those figures. Could he say whether any further provision is being made for equipment in this area?
    Mr. Slater: Relief schemes are in hand for all the exchanges and, for the benefit of my hon. Friend, I will send him particulars.

    Kiosk (New Design)
    Mr. Randallasked the Postmaster-General if he will provide a different type of telephone kiosk for new modern development areas.
    Mr. Edward Short: Yes, Sir. A new kiosk, designed by Mr. Bruce Martin, is being developed. It has been planned to blend with old and new architecture in both rural and urban areas. It is hoped that these new kiosks will be available in the spring of 1968.
    Mr. Randall: May I thank my right hon. Friend for that reply? Can he tell us anything more about the new design than he has already indicated to the House? Do I understand that it will become available in 1968?
    Mr. Short: Yes, Sir. It will become available in 1968, and, as new kiosks are required, they will be brought into use. They will replace the old, present-day kiosks which I think came into operation in 1935, although they have a 50-year life. But the new kiosk will appear. It is an excellent design. Its sides consist of three large windows reaching from the floor to the roof, which we believe will cut down vandalism.

    Public Telephones (Emergency Calls)
    Mr. Randallasked the Postmaster-General what progress has been made with the experiment to provide special public telephones for emergency calls.
    Mr. Edward Short: Three of these telephones have been on trial for two months: two in Scotland and one near the junction of the Catterick-by-Pass and the Al main road. It is too early as yet to say how far they meet a need.
    Mr. Randall: Can my right hon. Friend give any indication whether it is intended to extend this number? I note that there are two in Scotland and one in England. Why?
    Mr. Short: This is a trial. If it is felt that special public telephones fill a need, we shall certainly extend them. They are an interesting experiment and are first-rate instruments. I hope that they will prove a success and can be introduced widely throughout the country.

    London—Australia Calls
    Mr. Costainasked the Postmaster-General what is the average time taken to get a call between the London toll exchange and Australia.
    Mr. Joseph Slater: Straightforward calls to the large towns in Australia can be dialled direct by the London International Exchange operator and are usually connected in less than 15 minutes from the time of the request. Extra delay can occur for various reasons such as congestion within the Australian network or difficulty in locating the called person, but these are outside our direct control.
    Mr. Costain: Is the hon. Gentleman aware that this is an excellent service which I use very much and which merits greater publicity? Can he explain how in my personal experience I have never failed to get through to Australia in three minutes while it takes 15 minutes to get through to Sevenoaks, and that the quickest way to get through to my daughter in Sevenoaks is to ring my son in Australia to ring her?
    Mr. Slater: I think that it would be most advisable for the hon. Gentleman to get through to Australia and back to Sevenoaks.

    Telephone Service (Private Enterprise Participation)
    Mr. John Pageasked the Postmaster-General whether, in view of the continuously deteriorating quality of the telephone system, he will call a meeting of telecommunications manufacturers and contractors to discuss the feasibility of private enterprise participation in providing some or all of those telephone services which are now the monopoly of the Post Office.
    Mr. Edward Short: No, Sir, The improvement of the telephone system depends primarily on the speedy provision of extra exchange and line plant and this is already the subject of close collaboration between the Post Office and the private enterprise manufacturers and contractors concerned.
    Mr. Page: Does the right lion. Gentleman's Answer mean that he is refusing even to consider the handing over of the present G.P.O. monopoly powers to private enterprise even though they might be able to give a better service? Does he realise that his previous Answers to Questions, where he showed prejudice against Independent Television, will be remembered in this context?
    Mr. Short: I hope that I do not show prejudice against anybody. The hon. Member's assumption is absolutely correct. I am not proposing to hand over any part of the telephone service to private enterprise. The basic problem in the Post Office is that in the 1950's—and I do not blame anybody for it—the forecasting of telecommunications needs was completely inadequate. That is the cause of all our difficulties, which will in,;rease for the next few years.

    London Telephone Directory (Borough of Brent)
    Sir E. Bullusasked the Postmaster-General if he will give directions that the entire telephone numbers of the official local authorities of the London Borough of Brent be included in the London telephone directory.
    Mr. Edward Short: It is necessary to minimise the repetition of entries in the London telephone directory to keep the book to a manageable size. I sympathise
    1452
    with the hon. Gentleman but I cannot agree to his suggestion at present, but studies are proceeding into how the pattern of directories for London could be improved and the needs of the new London Boroughs are being given particular consideration.
    Sir E. Bullus: Does not the Postmaster-General consider it absurd that, when Parliament creates the London Borough of Brent, the local departments of that authority are scattered over three telephone areas, causing great inconvenience to my constituents? Would he give a more satisfactory Answer and try to speed up the provision of a single entry for these numbers?
    Mr. Short: I agree that the hon. Gentleman has a point, which arises from the redrawing of the London borough boundaries. We are consulting the Pest Office Users Council and the local authorities and I hope that this position will eventually right itself.

  PARLIAMENTARY PAPERS
  Mr. John Leeasked the Lord President of the Council if he will arrange for the format of all Parliamentary papers to be reviewed by an organisation and methods team, with a view to their being simplified and provided with an adequate index.
  The Lord President of the Council and Leader of the House of Commons (Mr. Herbert Bowden): The Select Committee on House of Commons (Services), in its Second Report which was published last Thursday, has made some recommendations to simplify and clarify the Order Paper. There is insufficient time to provide an index for the Order Paper each day, and even a weekly index would be costly in time and staff.
  Mr. Lee: I thank my right hon. Friend for some part of that Answer, but will he consider the matter with considerable urgency? Surely it is possible for the Order Paper to be rendered in a simpler form—like the agenda for the meeting of a local authority or a board of directors?
  Mr. Bowden: If my hon. Friend will read the Report of the Select Committee which was published on Thursday of last week he will see that we are moving

  1453
  considerably in this direction. On the question of an index, this needs a great deal of time, and is very costly.

  PALACE OF WESTMINSTER (COPYING MACHINES)
  Mr. Higginsasked the Lord President of the Council if he will estimate the cost of providing a service to collect from, copy and return to hon. Members documents which they duplicate on the copying machines in the Palace of Westminster.
  Mr. Bowden: It is difficult to make an assessment before the details of the service have been worked out but the cost is unlikely to be less than £5,000 or £6,000 a year.
  Mr. Higgins: Does the right hon. Gentleman agree that the cost of employing staff to do this—their salaries and wages— would be less than that of Members' secretaries?
  Mr. Bowden: The real problem is that although the number of staff—probably four or five—is not great, they would spend a great deal of time chasing round the building looking for Members and delivering material after it had been copied. It would be much better to provide additional copying machines which the Members themselves could use.
  Mr. Higginsasked the Lord President of the Council if, following the recent sample survey, he will estimate the total time taken by hon. Members and by hon. Members' secretaries, respectively, using the copying machines in the Palace of Westminster on an average day; and if he will estimate what this represents as a proportion of a Member's salary and a secretary's time, respectively.
  Mr. Bowden: The recent sample survey only related to the number of Members and their secretaries who used the copying machines on one day and did not purport to give the total time taken in their use. The second part of the Question does not, therefore, arise.
  Mr. Higgins: Does not the right hon. Gentleman agree that the total amount of time is none the less quite sufficient to encourage at least the initiation of a
  1454
  pilot scheme? Even though, as the right hon. Gentleman has suggested, it may take some time to find Members, surely the saving in cost would be considerable?
  Mr. Bowden: I do not think that we would be serving Members better by having an additional four or five officials chasing around the House. I think that we would be serving them better by providing additional machines.
  Mr. Lubbock: Is not the right hon Gentleman aware that many of us find it quite infuriating that these copying machines are not available for our use during Recesses and at other times when the House is not sitting? Will he alter the regulations in this respect, or refer the matter to the appropriate Committee?
  Mr. Bowden: Yes, I am prepared to see that the House of Commons (Services) Committee should look at the latter point.

  STANDING ORDER No. 9
  Mr. Fisherasked the Lord President of the Council whether he will invite the Committee on Procedure to reconsider the relaxation of Standing Order No. 9 in order to make its application more flexible.
  Mr. Bowden: Following exchanges in the House after the business statement on 30th June, I drew the attention of the Select Committee on Procedure to the need to give urgent consideration to the provisions of Standing Order No. 9.
  Mr. Fisher: I am most grateful to the right hon. Gentleman for that reply. When considering this matter in Committee, will consideration be given to the fact that although the Standing Order has always been quite properly and correctly interpreted by you, Mr. Speaker, nevertheless there has been a sense of frustration on the part of hon. Members that the wishes of the House to debate matters of topical importance have been prevented? Will the right hon. Gentleman further consider the fact that, in so doing, the esteem in which the House is held by the public may decrease because the public do not understand our procedure, and the reasons for it?
  Mr. Bowden: Yes. I have said previously that there is something to look at here, in that we now seem to have got into the position where Standing Order No. 9—because of precedents—is never allowed to operate. The Select Committee must look at this very carefully, however, because, on the other side of the coin, we do not want to have Standing Order No. 9 operating every day.
  Mr. Rankin: Is it not important to know when we may expect any results from my right hon. Friend's recommendation?
  Mr. Bowden: If my hon. Friend would read the Reports, he would see that they are coming out very frequently from the Committee.

  HOUSE OF COMMONS (MEMBERS' WIVES)
  Mr. Hamlingasked the Lord President of the Council what plans he has to provide accommodation for the wives of Members visiting the House of Commons.
  Sir G. Wills: I have been asked to reply.
  Husbands and wives of Members may use the Harcourt Room unaccompanied by a Member. A proposal for further accommodation is now before the Accommodation and Housekeeping Sub-Committee of the Select Committee on House of Commons (Services).

  MEMBERS AND LOBBY CORRESPONDENTS
  Mr. Hamlingasked the Lord President of the Council whether he is aware of the dissatisfaction of hon. Members with the lack of facilities for Members to meet Lobby correspondents; and if he will seek to improve the present facilities.
  Mr. Bowden: I will ask the appropriate Sub-Committee to look into this matter.
  Mr. Hamling: Is my right hon. Friend aware that in the old days there was a common place of meeting for members of the Lobby and Members of Parlia-
  1456
  ment? Is he aware that the reestablishment of such a meeting place, perhaps enabling us to avoid "Bert's Bar", would be very welcome on all sides?
  Mr. Bowden: I am not unsympathetic to my hon. Friend's proposal. It is true that in the days before the bombing in the last war, there was a bar known as "Annie's Bar" which was freely available to members of the Lobby and to Members of the House.
  Mr. Lipton: Is my right hon. Friend aware that there is occasionally more dissatisfaction about the lack of facilities for avoiding Lobby correspondents?

  MEMBERS (ACCOMMODATION)
  Mr. McNamaraasked the Lord President of the Council what progress is being made towards supplying each private Member who requests one with a desk in the precincts.
  Sir G. Wills: I have been asked to reply.
  There are at present 134 allocated writing places for private Members in rooms, including desk rooms, in the precincts. Eighteen private Members are on the waiting list for desks in the precincts only and 13 private Members who already have desks outside but would like to move into the precincts.
  Mr. McNamara: I thank the hon. Gentleman for that reply, but does he not think that it is a deplorable situation? Will he ask his Committee to give the Government a shove in order to try to obtain better accommodation for Members?
  Sir G. Wills: We are always trying to get more accommodation, and there will be more accommodation when Star Chamber Court is occupied. Single and double rooms in these precincts will be available for Members.
  Mr. McNamaraasked the Lord President of the Council how many new Members have been provided with desk accommodation in the precincts; what proportion this is of the number of new Members returned at the last two general elections; and when the rest will be accommodated in the precincts.
  Sir G. Wills: I have been asked to reply. Thirty-eight of the 143 Members who have been elected since October, 1964, have desks in the precincts. This is 26.5 per cent. of the total.
  It is not yet possible to say when all the Members elected since October, 1964, will be able to have desk accommodation in the precincts.
  Mr. McNamara: I thank the hon. Gentleman for that reply. Does he realise the great distress which this will cause new Members who are concerned about the lack of facilities? Can he give any indication when the facilities in Star Chamber Court will be available and what proportion of new Members will have desks allocated to them?
  Sir G. Wills: It is not possible to give any indication of the proportion of new Members who will get these facilities in Star Chamber Court, but the Committee will do everything it can to ensure that as much accommodation as possible is made available to Members. We cannot get a quart out of a pint pot.

  HOUSE OF COMMONS LIBRARY (STAFF)
  Mr, William Hamiltonasked the Lord President of the Council what additional staff has been recruited for the House of Commons Library in the last six months; and what are the plans for future recruitment.
  Mr. Sydney Silverman: I have been asked to reply.
  One senior Library Clerk has been recruited, and one Office Clerk. A further nine, almost all junior grades, have been authorised, and steps are now being taken to recruit them.
  It is hoped that seven of these will have been recruited by the time the House reassembles in October and the remaining two by the end of the year.
  Five of these staff will form the new Scientific Section of the Research Division and the remainder have been authorised to meet the increased pressure on the existing Library services.
  Mr. Hamilton: Is my hon. Friend aware that that reply is the most satisfactory Answer I have heard from him
  1458
  for some time? Is he satisfied that the Librarian is satisfied that, when he gets this additional staff, it will meet all the requirements of hon. Members in the foreseeable future?
  Mr. Silverman: I am glad to have rendered satisfaction this time to my hon. Friend. He will probably know that the Library Committee is at present engaged in a review of all the Library services, with a view to dealing with short-term improvements in the first place and longer-term improvements later on. The Committee has already requested help and would be grateful if hon. Members with any ideas on the subject would let us know what they are.

  ROYAL SHAKESPEARE COMPANY
  Sir Knox Cunninghamasked the Attorney-General if he will take proceedings through the High Court to test the right of the Royal Shakespeare Company, under Article II(D) of its Royal Charter, to produce non-Shakespeare plays in London.
  The Attorney-General (Sir Elwyn Jones): No, Sir.
  Sir Knox Cunningham: But is the right hon. and learned Gentleman aware that this sub-clause is stated by the Secretary of State for Education and Science to he the one which allows the Royal Shakespeare Company to produce non-Shakespeare plays in London? Is he also aware that there is very eminent legal advice which I have been given which says that it does nothing of the sort? In the circumstances, would it not be better if it were decided by the courts, which are the only authority that can say whether the Governors are acting legally or illegally?
  The Attorney-General: In my view, no infringement of the Charter has taken place. Accordingly, there are no grounds for instituting High Court proceedings.
  Sir J. Hobson: If I sent the right hon. and learned Gentleman the views of distinguished counsel who have considered this and do not agree with the view which he is supporting, even though there may he other ways of helping the Royal

  1459
  Shakespeare Theatre, would he consider them?
  The Attorney-General: Naturally, I am always willing to listen to the views of learned counsel.

  LEGAL AID (PETITIONERS AGAINST PRIVATE BILLS)
  Mr. John Smithasked the Attorney-General whether the Government will take steps by legislation or otherwise to grant legal aid to petitioners against Private Bills.
  The Attorney-General: It is doubtful whether legal aid on the lines now available for civil litigation would be of assistance to petitioners against Private Bills. I should, however, be glad to consider any evidence the hon. Member may have to the contrary.
  Mr. Smith: Is not the Attorney-General aware that, nowadays, Private Bills such as the annual Transport Bill or the present London Transport Bill can have very serious consequences for individuals because of the demolition of their homes and that few individuals nowadays can possibly afford to petition?
  The Attorney-General: I am not aware of any evidence that hardship has been caused in the past, but, as I have said, if the hon. Member can draw a case to my notice, the matter will be considered.

  NEW INN AND CLIFFORDS INN (FUNDS)
  Mr. Whitakerasked the Attorney-General whether he has now decided to apply for an alteration in the temporary scheme set up in March, 1906, for the investment of the proceeds of sale of New Inn and Cliffords Inn; and what will be the value of these funds, at the previous rate of alteration in value, in 60 years' time.
  The Attorney-General: After consulting the Law Society and the Council of Legal Education, I applied to the court for an order for reinvestment of these funds in one of the common investment funds administered by the Public Trustee under the Administration of Justice Act, 1965, and an order authoris-
  1460
  ing such reinvestment was made on 5th July, 1966. I hope that this reinvestment will arrest and indeed reverse the process of capital depreciation, and that in 60 years time the capital value of the funds will have appreciated.
  Mr. Whitaker: As the answer to my second question is "Nil", would my right hon. and learned Friend agree that it is time, in the public interest, to reexamine the whole question of legal education, in view of the publication this week of a survey which shows that a majority of both branches of the legal profession are profoundly dissatisfied with their education?
  The Attorney-General: While not accepting the first part of my hon. Friend's supplementary question, I would say on the second part that the problem of legal education is now under the most active consideration by both branches of the legal profession.

LAW TERMS
Sir D. Renton47. Sir D. Renton asked the Attorney-General what will be the dates of the law terms from 1st October, 1966, to 31st July, 1967.
The Attorney-General: Under the Rules of the Supreme Court the Michaelmas Term will run from 1st October to 21st December, 1966, the Hilary Term from 11th January to 22nd March, 1967, the Easter Term from 4th April to 12th May, 1967, and the Trinity Term from 23rd May to 31st July, 1967. My noble Friend the Lord Chancellor is at present considering whether any of these dates should be altered.
Sir D. Renton: Will the right hon. and learned Gentleman now give an undertaking that there will not be changes caused by the fixing by the President of the Board of Trade last year of a new date for what is called the Spring Holiday, which is normally taken on Whit Monday, but will next year be on 29th May? If there is uncertainty about that, it will cause great confusion.
The Attorney-General: This is a matter which the Lord Chancellor is considering. A change in regard to the arrangements for the Whitsun Vacation may well meet public convenience, but, as I say, it is under consideration.

MANCHESTER STIPENDIARY MAGISTRATE (SALARY)
Mr. Alfred Morris48. Mr. Alfred Morris asked the Attorney-General what consultations have taken place between the Lord Chancellor's department and Manchester Corporation in relation to the salary increase for the city's stipendiary magistrate; what consultations were promised; and if he will make a statement.
The Attorney-General: Consultations between the Lord Chancellor's Department id Manchester Corporation took place in accordance with the normal practice in dealing with increases in the salaries of provincial stipendiary magistrates. During the course of these consultations the Corporation was given every opportunity to express its views. No consultations were promised beyond those which in fact took place.
Mr. Morris: I thank my right hon. and learned Friend for that reply, but is he aware that there has been some expression of disappointment that correspondence was substituted for direct consultation? is he aware that I am pleased that he has clarified the matter? What consultation was there with other major provincial centres?
The Attorney-General: I think that the consultations which took place in regard to Manchester also took place with other cities which were affected by the changes.
Mr. Carlisle: Would the right hon. and learned Gentleman agree that the increase proposed for the Manchester stipendiary magistrate is identical with the increases granted by the House for the 35 Metropolitan magistrates? Would he not agree that the work of the former is equally arduous and responsible?
The Attorney-General: With respect, I do not think that those questions arise from the main Question.

SOCIAL SERVICES (OLD PEOPLE)
Mr. Geoffrey Lloyd49. Mr. Geoffrey Lloyd asked the Minister without Portfolio whether, in planning the social services, he will consider the need for a register of old people
1462
on the lines of that now being prepared by the Birmingham City Council, particulars of which have been sent to him.
The Minister without Portfolio (Mr. Douglas Houghton): Yes, Sir. We are considering this and other ways of keeping in touch with the needs of old people.

CHATHAM DOCKYARD (FIRE)
Mr. Burden Mr. Burden (by Private Notice) asked the Secretary of State for Defence whether he will make a statement regarding the fire at Chatham Dockyard on 12th July.
The Minister of Defence for the Royal Navy (Mr. J. P. W. Mallalieu): As hon. Members will have seen in the Press, a major fire broke out in Chatham Dock-yard yesterday morning. A covered slipway containing stores was completely destroyed.
I am glad to say that there were no deaths or serious injuries, but 41 people received minor injuries in trying to put out the fire.
This slipway was of considerable historic interest. A machine shop and 16 private cars were damaged. A Board of Inquiry is being convened.
Mr. Burden: Is this not the slipway from which H.M.S. "Victory" was launched? Is it not regrettable that this historic link with the past has been broken? Is the Minister aware that the greatest benefit which can accrue to Chatham would be if this slipway were in some way modified or rebuilt to ensure that nuclear submarines are built there in future?
Mr. Mallalieu: The slipway from which the H.M.S. "Victory" was launched was close by, but I do not think that this is the one. This is a very useful site and we shall make the best possible use of it.
Mrs. Anne Kerr: Would my hon. Friend convey both to the dockyard fire brigade and to the Kent County Council Fire Brigade our very great appreciation, particularly of hon. Members who are concerned in this constituency, of the very urgent action which they took? Could he give an assurance that the

1463
people who have lost motor cars—I believe that there are 16 of them—will be fully compensated?
Mr. Mallalieu: I shall be glad to convey the congratulations of the whole House on the great speed with which the fire brigade arrived, which was within two and a half minutes, and the help which the Kent County Fire Brigade gave.
The question of compensation will have to await the findings of the court of inquiry.
Mr. Powell: Will the Minister now review all buildings of this kind in dockyards and other places under his control which ate used for stores to ensure that as far as possible this kind of risk is avoided?
Mr. Mallalieu: 1 think that that is a very good idea. This building happened to be an ancient monument and it was protected in that way.

FARM AND GARDEN CHEMICALS
3.35 p.m.
Mrs. Joyce Butler: I beg to move,
That leave be given to bring in a Bill to make provision for the labelling of farm and garden chemicals, and matters related thereto.
While it is true to say that Government restrictions on certain insecticides, together with the more careful handling of them by the users, has reduced the dangers considerably in recent years, there is still widespread concern about these insecticides which have affected the whole of our environment and have even polluted the sea and affected marine species. D.D.T. and B.H.C. are still suspect and widely used, so much so that the Council for Nature recently drew up a seven-point programme for dealing with the problem. One of these points was that the containers of these chemicals should be more clearly labelled, and that is the purpose of the Bill.
The Royal Society for the Protection of Birds, which is engaged in regional studies of the effects of pesticides on birds, has also maintained that clearer labelling would be of great help to the users and it has received many letters from people asking for information about the ingredients of particular products and about the dangers in their use.
The Bill has somewhat lightheartedly been described as the "Birds and the Bees Bill", but it may well be that, as in other respects, the birds and the bees, and the effect which insecticides have had on their fertility and their health and their lives, may serve as an early warning system for human beings about possible dangers from insecticides.
Despite the fact that one county council officer has maintained that there is no danger, the County Councils Association, the Association of Municipal Corporations and the Urban District Councils Association have combined to initiate a general study which is to start next month and to take up to two years and possibly longer examining a great variety of food for possible chemical contamination. They include not only insecticides but all forms of agricultural pesticides and chemicals. They include fruit, vegetables, butter, fish, baby foods, meat, eggs and milk in their

1465
examination. It may be that the fears which many people have are unjustified. Nevertheless, the fact that this study is being undertaken indicates the concern of the people who are best qualified to appreciate the danger.
The National Union of Agricultural Workers has recently given evidence to the Advisory Committee on Pesticides and Toxic Chemicals about its concern about the inadequate labelling of containers, their unsafe storage and the dangers from spray drift to people working on the land.
And then there is always the possibility of an accident. The Ministry of Agriculture, to whom I am grateful for its advice and help in the Bill, has stated that there have been no deaths as a result of the use of pesticides over the last 14 years and I accept that.
The Association of British Manufacturers of Agricultural Chemicals has also stated that there is no danger of accidental deaths. Nevertheless, the Principal Scientific Officer at the Chemical Defence Research Establishment at Porton, Wiltshire, has maintained that the organo-phosphorus compounds which are the basis of these modern insecticides are among the most lethal synthetic poisons, and he maintains that, however carefully they are handled, there will will always be danger, and he is certain that there will be occasional accidental deaths from their use.
Part of the danger of accidents was illustrated by the case of the poisoned flock of hens who were fed over a period with corn which was sold as being suitable for feeding, but which was, in fact, seed corn which had been dressed with a lethal quantity of aldrin and mercury. The effect on the flock was that they first lost their fertility and then flopped about as though the hand of death was on them, and finally they died.
What would have been the effects on human beings if that corn had been fed
1466
to birds which were to be sold for human consumption? Can we even be sure that not one egg from that flock found its way on to the market and was eaten by someone who might have had a particular susceptibility to this kind of poison?
There is so much unanimity among all the interests concernecl— and in this I include the Henry Doubleday Research Foundation, which was one of the pioneers in the idea of the Bill—about the need for labelling to state quite clearly the chemical constituents of the particular products, and also to indicate the degree of toxicity, that I ask the House to give me leave to bring in the Bill.
I have brought in this Measure three times before, and I hope that the obstruction which prevented it going through to a Second Reading on two occasions will not be repeated on this occasion. The hazard of a General Election coming along while the Bill was between its First and Second readings at the third attempt is not likely to be a danger at this point of time, but I am hopeful that the Bill will this time get on to the Statute Book and he of great assistance to the thousands of farmers and millions of gardeners who like to feel that they are treating dangerous chemicals with the necessary amount of care and caution and who deserve the labelling which will enable them to do so.
Question put and agreed to.
Bill ordered to be brought in by Mrs. Joyce Butler, Miss Quennell, Mr. Lubbock, Mr. loan L. Evans, Mr. Hazen, Mr. Malcolm MacMillan, and Mr. Iremonger.

FARM AND GARDEN CHEMICALS
Bill to make provision for the labelling of farm and garden chemicals, and matters related thereto, presented accordingly and read the First time; to be read a Second time upon Friday, 29th July, and to be printed. [Bill 76.]

ORDERS OF THE DAY
Mr. Speaker: I think that it will be for the convenience of the House if with Amendment No. 60 we discuss new Clause No. 5, "Corporation tax-loss relief", and Amendment No. 57, in page 79, line 40, at end to insert:
10.—(1) At the end of the first paragraph of paragraph 20(1) of Schedule 15 to the Finance Act 1965 there shall be added:
Provided that the said section 20 of the Finance Act 1954 shall apply in relation to claims by a company for losses sustained in 1965–66 if the company is assessable for that year in respect of trading profits under the provisions of section 128 or section 129 of the Income Tax Act 1952.
(2) In paragraph 20(1) of the said Schedule 15 after the words "so sustained, shall not" there shall be inserted the words "except as provided in sub-paragraph (1A) below", and at the end there shall be inserted:—
"(1A) For the purposes of section 341 of the Income Tax Act 1952 the amount of the loss which has been sustained in a trade in 1965–66 by a company which is within the charge to corporation tax in respect of the trade for the whole or part of that year shall he computed as if the allowances in respect of capital expenditure which fall to be given for a period under this Part of this Act were a trading expense incurred in the period".
Mr. MacDermot: Amendment No. 60 implements an undertaking given in Committee when we were discussing an Amendment moved by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). Amendment No. 57, in his name and the names of some of his hon. Friends, is similar to that which we had in Committee. Amendment No. 60 is also designed to meet the point involved in new Clause No. 5, put down by the hon. Member for Shipley (Mr. Hirst) and his hon. Friends.
The points arise out of the transitional provisions on the changeover to Corporation Tax which, as they stand, do not allow a company to take capital allowances into account in determining the amount of loss in its trade in 1965–66 for the purpose of relief from Income Tax on its other income for that year.
The Amendment removes that prohibition.
Amendment agreed to.
Mr. Patrick Jenkin: I beg to move Amendment No. 61, in page 82, line 29, at the end to insert:
17.—(1) Paragraph 5(b) of Schedule 18 to the Finance Act 1965 (associate of participator to include trustees of settlements of which the participator or a relative is the settlor) shall not apply to the trustees of any settlement which is

(a) a trust relating exclusively to a fund or scheme approved under section 379 or section 388 of the Income Tax Act 1952 (superannuation funds and retirement schemes) or to a scheme the whole of which is an "excepted provident fund or staff assurance scheme or other similar scheme" as defined in section 390 of that Act, or

(b) a trust exclusively for the benefit of the employees, or the employees and directors, of the company or their dependants (and not wholly or mainly for the benefit of directors or their relatives).

Mr. Speaker: I think that it will be convenient if with Amendment No. 61 the House discusses Amendment No. 118, in page 83, line 3, at end to insert:
Provided that the words "and could not as a result of the operation of the trust become" shall not apply to any trust created before 3rd May 1966.
Mr. Patrick Jenkin: I shall try to deal with the point briefly, in view of the late ness of the hour, but in doing so I hope that nobody will think that it is unimportant. Amendment No. 61, like the Amendment moved by my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) a short time ago, deals with close companies. It is concerned with the extended definition given to the concept of participator and of the associate of a participator.
I remind the House that all these provisions relating to close companies are anti-avoidance provisions. Therefore, we agree that it is right that they should be strictly—not to say stringently—drawn, in order to make sure that the Revenue is protected. But, at the same time, one must hold the balance and make sure that they are not so tightly drawn and restrictive as to interfere with perfectly legitimate arrangements and impose quite unreasonable penalties.
The concept of participator and associates in the extended definitions is designed, broadly, to bring under one roof, so to speak, those who might be regarded

1645
as within the family, that is, the relations and anyone who might reasonably be regarded as being within the influence of the main shareholder, the participator, so that it could be said that the shares would be held, and the policy exercised, in accordance with his wishes. But one must not strike so wide as to bring within the net shareholders who could not by any stretch of the imagination be held to he within the influence of the main shareholder, the participator.
The Government have gone some way to meet the arguments we put last year on paragraph 5 of Schedule 18 to the 1965 Act, but, unfortunately, they have not gone far enough. Paragraph 5 of Schedule 18 has three sub-paragraphs, (a) dealing with relatives—we have no point on that—(b) dealing with the trustees of a settlement where the participator or any relation of his, living or dead, was a settlor, and (c) dealing with trusts where the participator was a beneficiary.
The Government have dealt with subparagraph (c) and have taken out two obvious cases, the pension scheme and a trust for the benefit of employees, but for some obscure reason they have failed to make the same exceptions in relation to paragraph (b). It is to this that Amendment No. 61 is directed. It takes exactly the same exceptions, namely the pension fund and the employees' trust, out of the definitions, in order that such a trust holding shares in the company will not be lumped together with the participator so that they are all regarded as one.
If this is not done there will be ludicrous results. Consider the example of a pension fund set up many years ago by the founder of a business who was the present participator's grandfather. Under the definition, that grandfather was the settlor, but because he was the ancestor of the present shareholder and was at the same time the settlor of the trust, any shares in the company held by that pension fund have to be grouped together with those of someone who may be one of the proprietors of the business. If the result is to make the company a close company, all the penalties follow automatically.
If it is right to exclude such a trust or pension fund, which has to be set up and approved under the Income Tax Act,
1646
1952, under subparagraph (c), where the participator is a beneficiary, why is it not equally right if his grandfather happened to be the settlor? The distinction is completely illogical. There is no possibility of any greater influence being exercised in that case, and one might well argue that, because he is not a beneficiary, the influence might be less. The connection is very remote indeed.
Similarly with employees' trusts. Between the Committee stage and this Report stage, I was given a letter which dealt with the question of a co-partner-ship trust set up for the benefit of employees. I shall read an extract because it illustrates the point admirably:
"The company has been a co-partnership since 1951 when, after an experimental period of three years with a small scheme, the then director-shareholders set up trusts for the benefit of the employees and parted with control. Four directors survive and each still owns some shares (whose value is stripped to par for the benefit of the co-partnership's shares). The hardship alleged arises from close company status. The company becomes ' close because the co-partnership trusts' holdings are aggregated with those of their settlors (F.A. 1965 Schedule 18, Paragraph 5(b))."
This is utterly ludicrous and strikes at the heart of an arrangement which I am sure both sides of the House would wish to encourage and see more widely spread. For this reason, we feel that there is a strong case in favour of the Amendment.
The purpose of the other Amendment is to void a minor retrospective effect which has come to light in practice. One might have a trust in existence for many years which contained a provision which could in certain circumstances, for instance on the termination of the trust, result in the participator owning more than the limit of 5 per cent. contained in the Schedule. The question of the participator perhaps becoming the owner of more than 5 per cent. of the shares in a trust has never been a relevant factor before. It became so only under last year's Act. It cannot be changed because such a trust might well be irrevocable, and so the company is caught simply because there is this residuary power.
It might well be right—I do not know; I will not argue the case now—that the words in brackets in the Schedule should be included in the case of new trusts, but it would impose an unreasonable

1647
burden and operate in a sense retrospectively to include it in the case of pre-Budget trusts. The Amendment is designed to take those trusts out of this provision.
I believe that there is a strong case for both Amendments. I hope very much that the Government will be able to meet us on the one that I have moved.
Mr. MacDermot: I can say at once that we have an open mind on the points raised in the Amendments. We could not accept the Amendments as they stand for there are objectionable features about them.
The point raised in the main Amendment was put to us recently, and we invited the body which did so to put before us examples of actual cases where, in a way that was thought to be objectionable, a company was turned into a close company by reason of these provisions when it otherwise would not be. So far one case has been put before us for consideration, and it is being considered. But it seems doubtful whether, even with an Amendment on these lines, there would be any difference; in other words, the company would still be a close company. We are perfectly willing to look into it, and, if there is a real mischief here to be avoided, see what is the appropriate way of dealing with it.
The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) asked why in paragraph 17 of Schedule 4 of the Finance Bill we deal with only one of the two situations involving trusts in this field and not with the one where the trustees of the settlement were to be treated as the associates of the settlors. The answer is that the point that we were asked to consider last year and to which this Amendment was directed was a point solely in connection with the other case and not with this case. No arguments were addressed to this case last year and no instances were put before us. But I extend to the hon. Gentleman and other hon. Members our invitation: if any hon. Members know of cases of this kind which they think would support the argument, we will gladly consider them.
As I have said, there would be objectionable features in the Amendment as it stands in any event. Trusts with flexible terms are notorious as a means
1648
for retaining de facto control and one would need fairly stringent rules to prevent abuse if an Amendment of this kind were adopted. I would like to consider what the hon. Member has said about Amendment No. 118 and his suggestion of its having retrospective effect. That is a new suggestion that I should like to consider, although, again, there would be objections to accept the Amendment in its present form. I hope that the hon. Member will, in view of what I have said, be content to leave this matter over for a year.
12.45 a.m.
Mr. Patrick Jenkin: If I may have leave of the House, I very much welcome the conciliatory approach on this by the Financial Secretary. I hope that he will look at the matter and, if necessary, introduce relief to operate retrospectively. But I must correct him on one point. I recollect my hon. Friend the Member for Belfast, North (Mr. Stratton Mills) making quite a short speech directed solely to the question of Schedule 18 (5,b) of the 1965 Finance Act. Certain Amendments were not selected during the proceedings on that Act, but, having heard the hon. and learned Gentleman, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. MacDermot: I beg to move Amendment No. 127, in page 83, line 3, at end to insert:
(2) In applying sub-paragraph (I)(b) above any charitable trusts which may arise on the failure or determination of other trusts shall be disregarded.
Mr. Speaker: It would be convenient to discuss at the same time Amendment No. 62 standing in the name of the right hon. Member for Enfield, West (Mr. lain Macleod) and the names of his hon. Friends: In page 83, line 17, at end insert—
(3) A trust shall be deemed to be exclusively for the benefit of the employees or the employees and directors of a company, within the meaning of this paragraph, notwithstanding that there may be a gift over to charity or that in certain circumstances the income or assets of the trust may be applied in or towards charitable purposes.
Mr. MacDermot: Amendment No. 127 assures that the benefit of the relaxation which the Bill provides in the application to employees' trusts of close company

1649
rules about associates shall not be lost merely because such a trust includes a gift made over to charity. It meets a specific point raised by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) when we were discussing a rather wider provision proposed in Committee by the hon. Member for Tiverton (Mr. Maxwell-Hyslop).
We do not go all the way to meet what the hon. Member for Tiverton asked for. I do not think that any cases have been put to us which would justify us going a.; far as that. But there is clearly force in the point which the hon. Member for Wanstead and Woodford asked us to meet and that is what we seek to do in this Amendment.
Mr. Maxwell-Hyslop: I am grateful to the hon. and learned Gentleman for going as far as he has, but I remain somewhat unclear about what the effects of the Amendment, taken without Amendment No. 62, would be. Where a trust is for the benefit of employees but the trustees have the right to make philanthropic payments to people not confined to the employees of the company without winding-up the original trust—without its being determined—is it covered or not? It is by no means clear whether the original trust exclusive to the benefit of employees has to be wound up or ended before the Amendment can come into effect.
Mr. MacDermot: Perhaps I may intervene to clarify this point. What the hon. Gentleman the Member for Tiverton (Mr. Maxwell-Hyslop) had been ask-for was an extension to the case where the charitable trust was for the benefit of the employees or a trust which was established for charitable purposes—in other words, general charitable purposes—from the start. It was this that we thought would be objectionable.
The specific point raised concerned a trust which was for the benefit of employees but with a residual power in the event of the trust being exhausted, with power to make a gift over to charity. It is to meet that situation that the Amendment is framed.
Mr. Maxwell-Hyslop: In other words, unfortunately, it does not go nearly as far as I should have liked. Unlike the
1650
Financial Secretary, not being a lawyer I am not sure what is meant by
"for the benefit of an employee".
If a payment is made, for instance, directly for the benefit of an employee's son or daughter who may need assistance from the Fund, can that be construed as being for the benefit of the employee? That is not immediately clear to me. Even taking a generation the other way, if it is for the benefit of someone who is no longer an employee or who is the widowed mother of an employee, would that be covered?
This is going half-way from being exclusively for the benefit of an employee towards general philanthropic and charitable purposes. The type of trust which I have in mind was fairly widely drawn so that, in cases of hardship where financial philanthropy could provide relief, the trust deed did not prevent the trustees being able to afford it. That is why I asked the Financial Secretary for a rather wider drafting, when he came to look at it, than he has applied in the Amendment.
Amendment agreed to.
Mr. Michael Alison: I beg to move Amendment No. 64, in page 83, line 31, at end insert:
Mr. Deputy Speaker (Mr. Sydney Irving): Perhaps it will be to the convenience of the House if, with this Amendment, we discuss Amendment No. 104, in Clause 28, page 30, line 20, at end insert:
(6) In arriving at the amounts of profits tax and income tax to be taken into account under subsection 3(b) and (c) of section 85 of the Finance Act 1965, where the profits tax charged in respect of any income has been reduced because of a credit for foreign tax granted under section 348 of the Income Tax Act 1952 or under a double taxation agreement having effect by virtue of section 347 of the Income Tax Act 1952, the credit shall deemed to have been first applied in reducing the amount of income tax chargeable in respect of the income and accordingly the profits tax shall be deemed to have been paid to such extent.
Mr. Diamond: This Amendment is again self-evident. It adds a new Part II to Schedule 7 to include certain detailed technical provisions about the one year surplus relief. It reproduces the words of subsection (4) of Clause 28—the one-year surplus of life assurance companies —and makes provision for computing the calculation of the one-year surplus relief in any case where double taxation relief is concerned. Although the hour is late,

1667
I could go into the matter at greater length if hon. Members desired, but I believe the Amendment is self-evident.
Mr. Patrick Jeukin: In one sentence, the Chief Secretary has not fully explained to the House that this was a point which was pressed on him by my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd). He undertook to look at the argument, and he found that it was a good one. He has therefore brought the Amendment forward. For that. I suppose, we must be grateful.
Amendment agreed to.
Schedule 10.—(CAPITAL GAINS.)
Sir Hugh Lucas-Tooth: I beg to move Amendment No. 71, in page 104, line 45 to leave out from "occasion" to "if" in line 47 and insert:
"of the termination of the trusts of the settlement as respects any part of the settled property by the exercise of a power for that purpose contained in the settlement or of a statutory power of advancement or by the surrender of a life interest in such a part for the purpose of advancement".
During the Committee stage of the Finance Bill last year I raised the question of how what is now Section 25(4) of the Finance Act applied to advances out of trust funds. The typical sort of case I had in mind was of a man who died leaving his property to his widow during her life and after her death to their children either equally or as she might appoint. Very often cases arise where the widow wishes to make over part of the trust fund to one of the children by way of advancement, and it seemed to me that any such advancement would attract Capital Gains Tax upon the whole fund as a result of the Bill as it then stood.
I put the point to the then Minister without Portfolio, and he replied:
"The hon. Baronet is wrong about that. No such liability would arise. I am advised that, if in the case supposed the trustees make an advance of a capital sum, that does not give rise to any charge for a Capital Gains Tax."—[OFFICIAL REPORT 26th May, 1965; Vol. 713 c. 702.]
On Report, my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) and I again raised the point, and we were told by the Financial Secretary:
1668
"…an advance of the kind…. described would not be a determination of an interest so as to be an occasion of charge—."—[OFFICIAL REPORT, 7th July 1965; Vol. 715 c. 1723.]
I was still dissatisfied with those answers, and I wrote to the Chief Secretary, pointing out that there were several ways of making an advance and asking him to give me an assurance that the answer we had received in the House was correct. I received the following letter from the Chief Secretary:
"We have been considering carefully the points which you make in your letter and I am now advised that an advance out of settled property in any of the three ways you mention would result in the termination of a life interest in part of a settled property. The assurances which Ministers gave during the discussion of the Finance Bill in the House of Commons nevertheless still hold good. As a matter of practice it will not be the intention of the Revenue that modest advances out of trust funds, which are made for the usual purposes such as defraying the cost of educating the beneficiary, should bring about a charge under Section 25(4) of the Act."
That answer seemed to me to be both extraordinary and of considerable public interest, and I wrote to The Times which, with some wit, put the heading," Tax On Trust ".
As a result of that decision, I have no doubt that the Inland Revenue receives a deluge of inquiries on this matter and that that led to the Chancellor's statement in his Budget speech this year and to the first paragraph of Schedule 10 of the Bill. But this is still defective, and does not carry out the intention fully. The paragraph refers to advances made in exercise of a power.
Such words would be sufficient to cover the case where there is an express power in the trust, enabling an advance to be made, and also the case where an advance is made under the statutory power for that purpose which eixsts. But there are many cases where advances cannot satisfactorily be made under a power. It may be, and often is, that there is no express power in the trust and the statutory power enables only half the expected share to be advanced. There are many cases in which an advance is made by the surrender of the life interest—the mothers' life interest in the example I gave—in part of the trust fund in order to enable the child to receive the whole immediately.

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The purpose of the Amendment is to rectify that defect. Unfortunately, it was not selected when the matter came before us in Committee, but I hope that we shall now be told that the Government accept it.
1.45 a.m.
Mr. MacDermot: The House is indebted to the hon. Gentleman for bringing this matter forward and for the clear way in which he has explained it. On one reading of the wording as it stands, there is a possible ambiguity. The Amendment spells out in great detail what v, as our intention, and I am happy to adv se the House to accept it.
Amendment agreed to.
Mr. MacDerrnot: I beg to move Amendment No. 73, in page 106, line 50, at the end to insert:
Mr. John Hall: In expressing our appreciation for this Amendment, which fulfils a promise made in the Committee, as the Financial Secretary said, I wish to clarify a sentence in the OFFICIAL REPORT Of Our proceedings in Committee. Without clarification, it may not be understood. My words were these:
"Mr. Irving, you will forgive me this sign of weakness…" —[OFFICIAL REPORT, 22nd June, 1966; Vol. 730, c 855]
In the absence of an illustrated HANSARD, it is not clear that I had my handkerchief before my eyes, which were streaming with tears of happiness because this was the fourth concession which we had
1670
wrung from the Government that day. We are delighted that it is now enshrined in this Amendment.
Amendment agreed to.
Mr. MacDermot: I beg to move, Amendment No. 74, in page 107, line 18, to leave out" in "and to insert:
"at any time not later than the end of".
At the risk of provoking another flood of tears from the hon. Member for Wycombe (Mr. John Hall), I recommend acceptance of this and the immediately following group of five Amendments., which are designed to meet a number of points put to us by the Opposition and others.
Amendment agreed to.
Further Amendments made:
In line 20, after "or", insert "of".
In line 23, after "Kingdom", insert "or elsewhere".
In line 27, leave out "in" and insert:
"at any time not later than the end of".
In line 36, leave out "after" and insert:
"(whether that day fell before"
In line 37, after "effect", insert "or later)".—[Mr. MacDermot.]
Mr. Nigel Birch: I beg to move Amendment No. 84, in page 109, line 50, at the end to insert:

ORDERS OF THE DAY

  FINANCE BILL
  As amended, further considered.
  3.43 p.m.
  Mr. Speaker: Before I call the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) to move Amendment No. 102, it might be helpful to the House if I announce that I have slightly revised my selection of Amendments for today, having heard representations from the Opposition.
  Amendment No. 24 is now selected and Amendment No. 63 is now not selected. Otherwise, the selection stands exactly as yesterday.
  Clause 28.—(DIVIDENDS PAID OUT OF PRE-1966–67 PROFITS.)
  Mr. Patrick Jerkin: I beg to move Amendment No. 102, in page 29, line 21, at the end to insert:
  Provided that this subsection shall not apply to dividends received in the year 1965–66 from a subsidiary company which had suffered a loss in the year 1965–66 as computed for the purposes of corporation tax to the extent that such dividends are not in excess of the amount of such loss, and further provided that the amount of one year surplus accruing to the first-mentioned company by reason of such dividend shall be reduced by any three-year surplus attributable to the subsidiary company.
  With this Amendment, and the Clause which it seeks to amend, we come to what I am sure all hon. Members regard as one of the most complex pieces of tax legislation that the House has ever had to consider. This part of the Bill deals with the one-year and three-year surplus transitional provisions, covering the taxation of pre-Corporation Tax profits, and the Clause makes amendments to the Sections and Schedules of last year's Finance Act.
  In Committee, I was critical, I believe rightly so, of the Government's incompetence in having forced the legislation through last year at such a pace that the Parliamentary draftsmen unwittingly perpetrated what was a monumental miscalculation. We have since been told that this resulted in £100 million of relief which was not intended to be given. I will not reiterate those criticisms, except to say that the Government should be under
  1468
  no illusion at all as to the irritation and annoyance that this has created among those groups of companies which are affected. I will only refer the Chief Secretary to the remarks made by the Chairman of the Rio Tinto Company, if the right hon. Gentleman needs any evidence.
  In particular, I refute the statement made in Committee by the hon. Member for Orpington (Mr. Lubbock), who referred to "synthetic indignation" expressed by hon. Members of the Conservative Party. That was absolute nonsense. The hon. Gentleman's statement was not justified in any way. The indignation expressed by those taxpayers who have been affected by this change in the law amounts to nothing less than a sense of outrage, since the relief to which they thought they were entitled has been greatly curtailed.
  I begin with the assertion that the curtailing, in a sense retrospectively—although I appreciate the point made in the Clause—of this relief imposes on the Government a duty to make absolutely certain that the withdrawal of the relief goes no further than is necessary. This and a number of other Amendments attempt to deal with the problem where we feel that it is going further than is necessary and I trust that the Government will listen sympathetically to the case that I intend to make.
  In his Budget Statement, in May, the Chancellor referred to the withdrawal of this relief given by the Finance Act, 1965, and he mentioned that the profits of subsidiaries and dividends were to be disallowed from qualifying for relief if they would have borne Corporation Tax. A number of people thereupon assumed that it was only in respect of such profits of those subsidiaries on which dividends had been paid that the relief would be withdrawn. In Committee we moved a number of Amendments aimed at that, but having heard what the Chief Secretary said on that occasion, and having since received a helpful letter from him, it is now apparent that the Chancellor's remarks were, to say the least, somewhat misleading. The withdrawal of the relief is apparently intended to go a great deal further than we thought and the question of chargeability to Corporation Tax of the subsidiary's profits is really no test at all.

  1469
  I will deal, first, with the one-year surplus. The purpose of Section 85 is apparently confined to cases where the profits earned in 1965–66 were charged to Income Tax and Profits Tax. It is argued, therefore, that it is only in those circumstances—where there was an actual charge to Income Tax on profits for that year—that it is intended that the relief should operate and that it has nothing whatever to do with the fact that they have been charged to Corporation Tax.
  The Chief Secretary said in his letter— and with this I am bound to agree—that it would not be right to give to groups of companies any greater relief under Section 85 than is available to a company trading on its own as a single company. I fully concede that this is a principle which it appears right to observe, but I add a gloss, which is that it should be "so far as comparable". The burden of the Amendment, and a number of others which will follow it, is that groups of companies, particularly when dealing with the distribution policy of subsidiaries in groups of companies are not comparable with companies trading on their own; and that, in certain circumstances, events may have happened which would make it a matter of justice that the withdrawal of the relief affected by the Clause should be modified to take into account the fact that groups of companies have different circumstances applying to them.
  The Amendment deals with the case where a subsidiary has made a loss in 1965–66 and has paid a dividend out of of its pre-1965–66 profits. I concede straight away that this, by itself—were it a single company trading on its own —would not qualify it for the one-year surplus, but it does not follow that this is necessarily right in the treatment of a group. A single company in these circumstances would almost certainly, if it remained in being, qualify for the threeyear surplus, which is calculated in an entirely different way, as the Chief Secretary appreciates. I need not go into the details of this, except to say that, basically, it is where the dividends of 1966–69 exceed the distributable profits for the years 1967–68.
  This is not necessarily so with a member of a group. There, the distribution policy will be governed by the parent's policy. The parent will deter-
  1470
  mine what distribution to expect from its subsidiaries on the basis of the requirements of the group as a whole, but the fact is that the dividends in the past from a subsidiary may have been so great that there is now no possibility of that subsidiary qualifying for the three-year surplus; that is to say, it may have no past profits out of which to pay future dividends in excess of its own future profits. Therefore, in such a case only the one-year surplus is available. It was available to the parent under the 1965 Act, and it has now been withdrawn.
  The Amendment deals with the case where the subsidiary has suffered a loss in 1965–66, and its intention is to give the relief up to the amount, but not exceeding the amount, of that loss. The Amendment provides, as I am sure the Chief Secretary has appreciated, the safeguard for the Revenue—so as to make the Amendment, I hope, more acceptable to the Revenue. If by any chance I am wrong, and the subsidiary will still in some way qualify for the three-year surplus, although I have indicated circumstances where it could not, there is the further proviso in the last three lines that if the subsidiary later became entitled to the three-year surplus it would operate to reduce the one-year surplus receivable by the holding company.
  The point of this Amendment and of one or two other Amendments, is that groups of companies are different in kind from and not comparable in all respects with the single company, and it would be wrong in those circumstances to ignore all inter-company dividends, which the Clause does. I think that this is a case where relief ought to be available, and the Amendment provides a suitable safeguard.
  I hope that in those circumstances the Chief Secretary will regard it as acceptable.
  The Chief Secretary to the Treasury (Mr. John Diamond): I should like, first, to say, if I may without embarrassing the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), that I entirely agree with most of what he said to begin with. I entirely agree that this is a very complicated section of the Income Tax law. I entirely agree that there is a responsibility on the Government, having taken the steps—the proper

  1471
  steps, as I hope the House will feel—that they did, not to go beyond what is absolutely necessary to ensure that the Revenue is reasonably protected.
  I accept that basic philosophy, but I have difficulty in accepting the Amendment because, as the hon. Gentleman has made clear, his basis for moving it rests really on the one proposition that a group of companies is so different from a single company carrying on that totality of trade and making the same total profit, or whatever may be the case, that one should be able to avoid one of the major exclusions, or perhaps the major exclusion, from the one-year surplus relief; that it is so different that one should be able to avoid that exclusion.
  The exclusion to which I refer is that to which the hon. Member himself referred, namely, going back earlier than 1965–66 to ascertain the profits, and to use the tax that was paid in those years as an offset to obtain the one-year surplus. If I may say so, the hon. Member has absolutely correctly described the three-year surplus, and if I might add just one sentence to it, the three-year surplus is the normal relief.
  The one-year surplus is an abnormal relief. There were very unusual circumstances applying to that particular year. It is, therefore, totally irrelevant to the one-year surplus that the particular company, be it the parent or the subsidiary, has made profits in previous years out of which it has paid Profits Tax and Income Tax.
  As we are on the common ground that, if this were one company and not a group, the hon. Gentleman would not be attempting to persuade me that one should accept this Amendment—because in that case one would be going completely beyond the purpose of the scheme of the one-year surplus relief—he then has to persuade me that a group of companies is of such a different nature in its combined functioning and profit as to make it entitled to different treatment. All I can say is that I am sorry, but I am not so persuaded.
  I have accepted the hon. Gentleman's first premise that one must not go further than is absolutely necessary to protect the Revenue, as one is changing the rules during the course of the game, if that is
  1472
  the way to put it. That is why we have introduced the exclusion of dividends paid prior to Budget day. I reject completely that one is doing anything retrospective because, as I have previously explained, any dividend declared prior to Budget day and prior to the notification of the change in the rules would be protected.
  I accept the basic philosophy that one must not go beyond what is needed, but I cannot accept that the group of companies is so different from the single company as to warrant treating this major exclusion in a different way. For that reason, I am sorry—and I am trying to keep it as broad as possible, and not to go into technicalities unnecessarily—that I cannot recommend the Amendment to the House.
  Mr. Patrick Jenkin Mr. Patrick Jenkin rose—
  Mr. Speaker: Order. We are not in Committee. Did the hon. Gentleman want to put a queston?
  Mr. Jenkin: I wanted to put a question to the Chief Secretary before he sat down, Mr. Speaker, and I hope that I may be permitted to do so.
  The right hon. Gentleman has not dealt with my point that, in such a case as this, the subsidiary could well have put itself beyond the power to claim the three-year surplus—whereas the single company could still be able to do so—because the subsidiary may have distributed all available pre-Corporation Tax profits and, therefore, have no pre-tax profits from which to pay.
  Mr. Diamond: I did not reply to that point specifically, Mr. Speaker, but I did so generally when I said, bearing in mind what the hon. Gentleman had said, that the group was not so different from the individual company and that I found it difficult to believe that there could be a case where a subsidiary had acted in this way and where it would not have profits in the ordinary way in 1966–67 out of which to declare dividends in the ordinary way. I found it difficult to believe that the subsidiary company had acted in this rather extraordinary way.
  In those circumstances, I think that I was taking the generality of cases into account when I said that the group of

  1473
  companies was not so different from the single company as to warrant the very special and exceptional treatment the hon. Gentleman proposed.
  Amendment negatived.
  Mr. Patrick Jenkin: I beg to move Amendment No. 121, in page 29, line 41, to leave out "publicly announced" and to insert:
  "duly recorded in the minutes of the proceedings of the board of directors".
  I dealt with this very short point very briefly in Committee on the Question, "That the Clause stand part of the Bill". It will be within the recollection of the House that when the Chancellor of the Exchequer announced the withdrawal of this relief from groups of companies, he stated, in col. 1450 of the OFFICIAL REPORT, that any dividend paid before 3rd May would not be effective.
  Clause 28(3) provides that certain dividends may actually be paid after 3rd May, but are, nevertheless, to be treated as though they were paid before that date. These are the cases where it may be said that the company has committed itself to pay the dividend. For instance, we have the case in subsection (3,a) where dividend has been declared before 3rd May and only remains to be paid, or if the directors have recommended or decided hat the dividend should be paid irrevocably, that is, under paragraphs (b) and (c). The Clause goes on to say that the recommendation or decision should be publicly announced.
  In Committee, I made the point, which was taken swiftly by the Treasury Bench, that the question of a public announcement is totally inappropriate in the case of a dividend paid by a subsidiary to its parent company. The Chief Secretary undertook to look at the matter again. It was with some disappointment that we found he had not put an Amendment on the Notice Paper. Therefore, we had another shot at the matter by putting down this Amendment.
  4.0 p.m.
  I have had a letter from the Chief Secretary in which, to some extent, he dissents from the view that the company should have committed itself and says that it is a question of a public announcement having been made and there having been dealings on the basis of a public
  1474
  announcement. I suppose it is possible to conceive of a case where the size of a dividend paid from a subsidiary company would affect dealings in the hands of the parent company, or, alternatively, where the public are interested in the shares of a subsidiary company, but that kind of case would be very limited indeed.
  There may well be many cases where it would be acutely embarrassing for a number of reasons if a dividend to which the directors had committed themselves, but made nothing in the nature of a public announcement, were to be struck at because it happened to have been paid after 3rd May. The point at which the Amendment is directed is that in the case of subsidiary companies of that sort there is no public announcement. The decision is recorded in the minutes of the proceedings of the board of directors. The Amendment is so drawn that it needs to have been recorded in those minutes before 3rd May.
  I entirely recognise that there may be unscrupulous people who have been so astute as to appreciate fully the force of this and to get out the minute book on 4th May and pretend that it was done on 2nd May. That danger would be a small price to pay for the substantial justice of dealing with the case where the decision was made, the directors had committed themselves, the matter was recorded in the minutes and the whole thing was free and above board. If a decision had been taken and not recorded—I am speaking as a former company secretary—this penalty would be a warning to a dilatory secretary to get out his minutes quickly. But if there were no public announcement what else could be done? I very much hope that the Government will be able to look on this proposal favourably.
  Mr. Diamond: I have been many times asked not to pay over-much regard to the problems of tax avoidance. I am happy to say that questions of tax avoidance were completely absent from my mind on this occasion. I draw attention to it only because it is natural to think that tax avoidance is involved, but that is not the criterion. When one talks about a commitment—which is the essence of what the hon. Member has put to one is talking about the commitment made by directors of such a kind that,

  1475
  having been notified of the new circumstances they are unable to alter their minds and decide on a different dividend.
  So far as concerns a public company—a parent company—which has made a statement on the strength of which dealings may have taken place and the price has been affected—the hon. Member would readily agree that this might have a bearing on the price and on dealings—the directors of the company, having heard my right hon. Friend's Budget speech, may nevertheless be unable to do anything other than they are committed to do—to continue with the declaration they have publicly announced or the recommendation of it to their shareholders. For that reason one does not want to treat a company the board of which has committed itself in this way any differently from a company which has, in fact, paid the dividend prior to the relevant date.
  Mr. Patrick Jenkin: I am sure that the right hon. Gentleman recognises that there may be such a commitment, for instance, to a minority shareholder who may be resident overseas. The parent company may have shares in the subsidiary and it would be just as embarrassing to have to change the dividend although there has not been anything like a public announcement of the dividend.
  Mr. Diamond: We are getting closer together and admitting that the main justification for the exclusion is the public commitment which does not allow the board of directors to change course even after having heard my right hon. Friend's Budget statement.
  What the hon. Member is now saying is that there may be a case of a subsidiary company which has made some kind of commitment to a minority shareholder. This is a very unusual state of affairs. There is nothing which prevents the subsidiary company changing its dividend if it wants to do so before it has taken the irrevocable step of passing the resolution and having it recorded in the minutes
  I cannot think that there is any such case which would warrant this kind of provision, although, if there were such a case the proposal of the hon. Member would go a good deal further than that, and would relate it in the same way almost as one does to the public com-
  1476
  pany. I think that he would agree that broadly there is a substantial difference between the publicity arising prior to a declaration of a dividend by a public company and the publicity arising prior to a declaration by a subsidiary company, subsidiary to the parent company. It is because there is that very substantial difference that one cannot treat the two in the same way, as this Amendment proposes.
  I recognise that there may be something in what the hon. Gentleman said, but even if that were the case the Amendment would go too far in the present state of affairs. I hope that I have clarified the position in connection with the commitment and have made it clear to the hon. Member that we are talking about a commitment with the parent company.
  Amendment negatived.
  Mr. Patrick Jenkin: I beg to move Amendment No. 96, in page 29, line 45, at the end to insert:
  (4) The foregoing provisions of this section shall not apply to dividends paid by a company which is a member of a group of companies to another member of the group where the first-mentioned company is a company which has ceased to carry on business before the year 1966–67 or of which the business is at the beginning of that year, being carried on by a liquidator in the winding up of the company.
  This is another case of the one-year surplus where there can be genuine hardship. This is the case of the dormant subsidiary, the subsidiary which has ceased to trade and which may have very substantial funds in the form of taxed profits which have suffered only Income Tax and Profits Tax and the company has no chance whatever of earning for itself any three years' surplus simply because it has ceased to trade and will have no distributable profits in the three relevant years. Nevertheless, it is in existence and has a fund of profits which have borne Income Tax and, because of the disallowance in Clause 28, its dividends will be left out of account, in computing the one-year surplus of the parent.
  If it had its own shareholders there would be no liability but because the money will reach the ultimate owners of the company via the parent which is still trading there will be no relief. I am sure that this must be wrong. I press this

  1477
  point on the Chief Secretary. The case of the dormant subsidiary is one which ought to be dealt with as an exception to the rule. As the Chief Secretary explained so lucidly in Committee, the object of Section 85 was to prevent profits becoming subject to three taxes. These profits will have become subject to Income Tax and Profits Tax in the hands of the subsidiary beforehand, and they will then become subject to Schedule F tax when they are eventually passed on to the shareholders.
  There is no possibility of taking advantage of what the Chief Secretary called earlier this afternoon the normal relief, the three-year surplus relief. This is a clear case where some measure of relief must be given in order to allow account to be taken of the one-year relief. Yet under the exclusion and the withdrawal of the whole relief, the companies themselves will get no relief at all. I urge this point on the Chief Secretary as one of considerable substance, and on which the Government should make a concession.
  Mr. Diamond: I am anxious to be as sympathetic as possible to the hon. Gentleman who puts forward his proposals in such moderate language, but I cannot see any case in this Amendment.
  This is a case where the subsidiary, which one has to look at by itself, is not in a position to claim relief because it is not suffering. That is a very good reason for not claiming relief, because one is not entitled to ask for relief if one is not suffering in any sense. That is to say, the company is not paying the third tax. It is not declaring the dividend which will render it liable to Schedule F tax. It is the burden of the three taxes which is the suffering which one tries to relieve by the one-year relief. I therefore find it difficult to see how, in these circumstances, one could meet the hon. Gentleman's case. The probability is that the profits which will have been made will have been made in the previous years and, therefore, they will not be eligible to count for the purpose of the one-year relief.
  The hon. Gentleman asked me to look at the point and, listening between the lines—if one can do such a thing—I gather:A that he was really asking me not necessarily to accept this Amendment, which I cannot recommend the
  1478
  House to accept, but whether I would consider it further to see whether there is anything which the Government ought to take into account at a future time. I cannot give any commitment of any kind. In fact, I am completely unpersuaded that there is any need for one.
  However, the least courtesy that I can offer the hon. Gentleman is to say that I will gladly look into the matter and if, in a year's time, I have been persuaded that there is something which has been overlooked, and that there are cases where real hardship has arisen out of the circumstances which are now well known and agreed between the two sides. I will recommend that something should be done about it. But I cannot see that likelihood, and, in those circumstances, I can only ask the House not to accept the Amendment.
  Mr. Patrick Jenkin: All I can say is that the Chief Secretary has been a little more forthcoming and, in those circumstances, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Diamond: I beg to move Amendment No. 20, in page 30, line 1, to leave out subsection (4).
  This Amendment is purely paving for Part II to Schedule 7, and I feel sure that it would be more convenient to discuss it when we arrive at that point. Indeed, the same remarks apply to Amendments Nos. 21 and 22.
  Mr. Speaker: Is there any objection from the Opposition to that suggestion?
  Mr. Patrick Jenkin: No, Mr. Speaker.
  Amendment agreed to.
  Further Amendments made: In page 30, line 8, at beginning insert "Part I of".
  In line 19, after first "and", insert:
  "the provisions of the said section 85 relating to the one year surplus shall have effect subject to the provisions of Part II of Schedule 7 to this Act.
  (6)."—[Mr. Diamond.]
  4.15 p.m.
  Mr. Patrick Jenkin: I beg to move Amendment No. 103, in page 30, line 20, at the end to insert:
  (6) Where a member of a group of companies has paid a dividend to another member of the group and that dividend has been excluded,

  1479
  by reason of subsection (1) of this section from the dividends taken into account under subsection (3)(a) of section 85 of the Finance Act 1965, then both companies may jointly elect that such part of the dividend as may be stated in the election shall be regarded for all the purposes of the Income Tax and Corporation Tax Acts as having been paid on the first day of the year 1966–67.
  On we plough through this rather dreary wasteland, but I should like to urge on the Chief Secretary that these are all matters which have been put to this side of the House by companies concerned which, as I said at the outset, feel aggrieved at the withdrawal of the relief.
  This Amendment approaches the problem from a rather different angle, and it is one to which I feel the Government ought, in duty bound, to give considerable attention. The position is this. A good many groups of companies acted on the assumption that the relief which was carefully spelled out in Section 85 of the 1965 Act meant what it said.
  As I have explained in Committee, some of these people may well have looked at the reports of the debates and may have found that the Government themselves introduced an Amendment on Report dealing with groups of companies, and they may well have drawn the conclusion that the relief, substantial though it was, may have been intended. They acted on it quite properly with a view to putting themselves into the position to qualify for the relief which was spelled out.
  In those circumstances—and this has happened, I am informed, in a number of cases—the subsidiaries paid substantial dividends to their parents in 1965–66 in order to take the maximum advantage of the relief. They now find that Clause 28 not only denies them the relief which they expected but, having acted in good faith on the basis of the legislation which was passed last year, they are not now in a position to qualify for the alternative relief, the three-year surplus relief, which would have been available if they had done nothing.
  If they had left the situation as it was and did not pass these dividends on to the parents, they would have had a substantial fund out of which they would have ben able to qualify for the three-year surplus if what I may call their post-
  1480
  Corporation Tax dividends and profits brought them within the terms of that relief. In other words, they have been heavily penalised for having acted in good faith by reference to the express provisions of the Finance Act, 1965. I cannot believe that in those circumstances it is equitable to leave them in this position.
  The Government have made a mistake. They are putting this mistake right, and the effect has been not only to deprive these companies of the relief to which they thought they were entitled, but also to give them no chance whatever of restoring the position to what it would have been if the mistake had not been made. I go so far as to say that for any Government to act in that way is totally unconscionable.
  The Amendment is designed to give the companies the right to elect to treat any dividends paid in 1965–66 as having been paid in 1966–67 and so to bring them into the position where they could qualify, if the other circumstances fit, for a three-year surplus claim—that is to say, to give them a chance to put themselves back into the position which they would have been in if Clause 28 had been part of Section 85 of the Act of last year.
  This is the minimum equity which the Government can offer to these groups of companies. It would enable them to repair the damage and, perhaps most important of all, it would restore some of the faith which this monumental error has cost the Inland Revenue. It would restore faith in the probity and uprightness of the financial dealings of the Government and of the Inland Revenue. I urge the Chief Secretary to accept the Amendment and give the minimum relief necessary to restore good faith.
  Mr. Diamond: The hon. Gentleman referred to a subsidiary company having made the maximum payment of dividend, and I only add: as it was fully and quite properly entitled to do. But one should not be unaware of the thoughts that were possibly in the minds of the board of directors. They might even have included thoughts that this was an opportunity of making what is called in the City a "killing", that one should take advantage of it, exercise one's rights to the full, and therefore declare what the hon. Gentleman described as the maximum dividend.

  1481
  Nobody suggests that companies were not absolutely and properly entitled to do this. But they were aware of what they were doing, and hardly anybody was surprised that the Government acted as they did when my right hon. Friend made his Budget statement. But I repeat that I accept what the hon. Gentleman said earlier, that the Government are not entitled in these circumstances to go further than they must. They are being asked to go much too far by the hon. Gentleman in the Amendment.
  First, I imagine that in the vast majority of cases the subsidiary company would be able to claim its own one-year surplus relief by paying its dividend in 1967 in the ordinary way. I recognise that here might be a situation under which the subsidiary company had drained itself of its reserves in a previous year, but continued to make profits and would, presumably, make profits in 1966–67 and declare a dividend. It would get its own one year surplus, and therefore there must at most be a tiny, tiny number of cases where that particular door is closed to it.
  The Amendment goes miles too far and would open the door to a whole host of difficulties in the case of a chain of companies. I would bore the House if I started describing how this would happen, but perhaps the House will accept it from me. By a chain of companies I mean more than simply a parent and subsidiary company; I mean parent, subsidiary, sub-subsidiary, and so on. They could jointly act as a result of the Amendment so as to get benefits which the hon. Gentleman did not intend that they should get.
  The hon. Gentleman has also drawn his Amendment in such a way that the dividend deemed to be paid on the date in question should rank for the purposes of calculating a three-year surplus, which is a totally different conception. I repeat that in almost every case a company will be able to get its own one year surplus and there will be no need to have recourse to an extraordinarily artificial way of dealing with the situation. Although I have accepted that one should not go further than one need, the Amendment, which is extraordinarily artificial in its conception, is not the kind that one could accept.
  Mr. John Peyton: I did not intend to take part in the discussion on this very difficult problem until I heard the remarks of the right hon. Gentleman, who has been very properly sympathetic. He has admitted that a miscalculation has been made, but there are one or two things which very much interested me in what he said. He said, first, that a company was quite properly entitled to make the payment. That point is therefore unchallenged and nobody is arguing about it. He went on to say what was in the. mind of the Board—the intention to make. a "killing". This sort of talk makes every hair stand up on the back of my head.
  The business of always trying to make companies out to be crooks who are dodging things, trying to fiddle and cook the books, and trying to extract every unreasonable and uncovenanted benefit from a situation, is intolerable. I say to the Government Front Bench now, without qualification, that in so far as there are amongst industrialists and commercial people in this country those inclined to fiddle, it is the mentality of the Government Front Bench that has been the most potent factor in creating those people. It is this addiction—
  Mr. Robert Sheldon rose—
  Mr. Peyton: No. I am busy at the moment. I shall have time to spare for the hon. Gentleman, but at present I am concentrating on his Front Bench.
  There are few things that I abhor more than the horrid tendency of the Government always to be looking out for the crook and the fiddler, always to be certain that the most important thing in life is to catch them. So busy are they doing this—one can almost say that when they left the Government in 1951 they left their horrid habits behind them to a certain extent—
  Mr. Speaker: Order. The hon. Gentleman will not be out of order if he comes to the Amendment. He must refer to the Amendment.
  Mr. Peyton: I bow, with great respect, to any Ruling you make, Mr. Speaker, but the remarks I am making were directly prompted by those which the Chief Secretary made just now. I shall continue to adhere strictly to what he

  1483
  said. He went on to say that it was no surprise to those concerned and that the Government were not entitled to go further than they must to remedy the situation. The Government are responsible, as the Chief Secretary has said, for this muddle. What I deplore is that, having made an error the Government, with all the assets and advantages, with all the panoply of power behind them, are unable to face the House and say that they made a mistake and that they find the idea of demanding full restitution from those who were not responsible for the mistake intolerable.
  Instead, the Government, alone are entitled, apparently, to wipe the slate clean, go back over what happened and evade the consequences of their own errors. If the hon. Gentleman wishes to intervene, I shall be glad to give way.
  Mr. Sheldon: The only point that I wanted to make is that the hon. Gentleman is getting worked up about a word that is in fairly common use. I have always interpreted the word "killing" in the City as a coup of one kind or another. This is surely one such.
  Mr. Peyton: The hon. Gentleman is very much, although to a rather lesser degree than the Chief Secretary, one of those whom I had in mind. No doubt, if we ever have to suffer in the future the misfortune of another Socialist Government, the hon. Gentleman's mental approach to these things will qualify him very well for a place on the Front Bench.
  Mr. Speaker: Order. We are not discussing the constitution of the next Socialist Government. The hon. Gentleman must come to the Amendment.
  Mr. Peyton: I realise that I must, so far as possible, not only keep within order but avoid obscenities, so I shall revert to what the right hon. Gentleman said, as I understood him. I ask him to avoid, somehow or other, the innuendoes which he inserts, with no justification, suggesting that, because a tax, complicated as it is, allows a company to order its affairs in a certain way in its own interest, a company which acts in that way ought not to do so. The Government's reaction is a rather pious and disapproving frown—"This company has made a killing and now we must exact retribution". I deplore that attitude.
  4.30 p.m.
  Mr. Frederic Harris: I have listened to the interchanges which have taken place so far on these provisions, and I hesitate to come between the two experts in the matter, the Chief Secretary and my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), who knows the details so well. But my hon. Friend the Member for Yeovil (Mr. Peyton) has expressed in no uncertain terms what I myself feel. It is extraordinarily unfair that, after the Government have made a mistake in their last Finance Act, not only are they anxious to put the matter right, which is understandable, but they appear to want to go further and make those who have acted properly in good faith pay an even bigger penalty for having done so. This seems quite wrong.
  Mr. Diamond: I interrupt only because the hon. Gentleman was good enough, though unnecessarily modest, to say that he had been listening and, perhaps, he might not have fully understood. Had the proposition which he has just put been right, we should not be resisting the Amendment. There is no question of requiring anyone to pay an additional penalty or anything like that. There is no question of retrospection. Every dividend which was declared prior to my right hon. Friend's Budget Statement is protected.
  Mr. Harris: The right hon. Gentleman may be correct in that, but the interpretation I have been given does not put us back to where we were before. As I see it, therefore, the Government are going further than one would expect them to go.
  I am quite sure that the Chief Secretary, looking back to his accountancy days, would have expected boards of directors to be guided by professional advice given to them at the time in accordance with the current tax law. I regard it as the responsibility of boards of directors to save tax wherever it is proper and correct so to do. There is nothing wonderful in paying tax unnecessarily. Shareholders rightly expect their directors to act to save tax when it is proper and right so to do. This is where I cross swords with the right hon.

  1485
  Gentleman. He did not give me the impression that this was his view when he replied a few minutes ago.
  As it understand him, the right hon. Gentleman looks upon it almost as a crime to avoid tax. In my view, on the other hand, the avoidance of tax in accordance with the law as it stands is correct, and a board of directors should undertake it. Furthermore, they should call in such professional advice as is available to them to give advice on whether the shareholders' money can be saved.
  The Government made an unfortunate mistake, from their point of view. They are now trying to put it right, but they seem to be going too far. I join forces strongly with my hon. Friend the Member for Yeovil on this. He took exactly. the point which I take, but, unfortunately, the Chief Secretary seems to take a very different view. I can only say that I am surprised because I cannot believe that he would have taken this view i a his professional days when advising clients as to the best course to adopt when presented by a situation similar to that with which many of us in business have been faced during the past 12 months. I am quite sure that he would have advised his clients to do the very thing that many businessmen have found it necessary to do in, quite rightly, avoiding tax.
  This is the difficulty I find, and I strongly support the views expressed by my hon. Friend the Member for Yeovil.
  Mr. Eric Lubbock: I, too, have listened throughout the debate, and I had not intended to intervene until the points raised in several of the speeches brought to my mind another important point which should be raised in this connection.
  As the Chief Secretary and others have said, boards of directors were quite within their rights in taking advantage

  Division No. 110.]

  AYES

  [4.38 p.m.

  Alison, Michael (Barkston Ash)

  Bennett, Dr. Reginald (Cos. & Fhm)

  Bruce-Cardyne, J.

  Astor, John

  Biffen, John

  Bryan, Paul

  Atkins, Humphrey (M't'n & M'a'n)

  Birch, Rt. Hn. Nigel

  Bullus, Sir Eric

  Awdry, Daniel

  Blaker, Peter

  Burden, F. A.

  Baker, W. H. K.

  Braine, Bernard

  Carlisle, Mark

  Balniel, Lord

  Brewis, John

  Cary, Sir Robert

  Beamish, Col. Sir Tutton

  Brinton, Sir Tatton

  Channon, H. P. G.

  Bell, Ronald

  Bromley-Davenport,L t. Col.Sir W alter

  Chichester-Clark, R.

  Bennett, Sir Frederic (Torquay)

  Brown, Sir Edward (Bath)

  Clark, Henry

  of the provisions of Section 85 of last year's Finance Act, and there was nothing improper in what they did. But the Government realised that there would, as a consequence, be a large leakage of revenue. I think that the right hon. Gentleman gave us a figure earlier running into many millions of pounds. It was obvious that the Government could not allow the situation to stand. Therefore, as he said, many people in the City and in industry realised that the Government would have to take the action which they are now taking in Clause 28.
  This brings me to the point I wish to stress. I hope that the Chief Secretary will transmit it to the Chancellor of the Exchequer because it is of important general application in our future procedure on Finance Bills. In cases of this kind, we ought not to stick to our time-honoured rule that nothing can be announced except in a Budget speech. The matter before us now gives a perfect example of steps which the Government intend to take and which they could announce at any time during the year once they become aware of a large leakage of revenue arising from an unforeseen consequence of previous legislation.
  I hope that the right hon. Gentleman will give this point his favourable consideration. No doubt, even in the Bill before us there are provisions which will give rise to unforeseen consequences, and no doubt, also, having regard to its complexities, no one will be greatly surprised if the Finance Act, 1965 gives rise to further unforeseen actions which will be expensive for the Revenue.
  The Government should not be bound by the unduly rigid rule in our financial affairs that no changes of this kind are to be announced except on Budget day.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 124, Noes 182.

  Clegg, Walter

  Holland, Philip

  Peel, John

  Cooke, Robert

  Hordern, Peter

  Peyton, John

  Cooper-Key, Sir Neill

  Hutchison, Michael Clark

  Pike, Miss Mervyn

  Corfield, F. V.

  Irvine, Bryant Godman (Rye)

  Pink, R. Bonner

  Costain, A. P.

  Jenkin, Patrick (Woodford)

  Prior, J. M. L.

  Cunningham, Sir Knox

  King, Evelyn (Dorset, S.)

  Pym, Francis

  Currie, G. B. H.

  Kitson, Timothy

  Renton, Rt. Hn. Sir David

  Dalkeith, Earl of

  Langford-Holt, Sir John

  Ridsadale, Julian

  Dance, James

  Lewis, Kenneth (Rutland)

  Rossi, Hugh (Hornsey)

  Dean, Paul (Somerset, N.)

  Lloyd, Ian (P'tsm'th, Langstone)

  Russell, Sir Ronald

  Dodds-Parker, Douglas

  Longden, Gilbert

  Sharpies, Richard

  Elliot, Capt. Walter (Carshalton)

  Loveys, W. H.

  Shaw, Michael (Sc'h'gh & Whitby)

  Errington, Sir Eric

  McAdden, Sir Stephen

  Smith, John

  Fletcher-Cooke, Charles

  MacArthur, Ian

  Stodart, Anthony

  Fortescue, Tim

  Maclean, Sir Fitzroy

  Summers, Sir Spencer

  Galbraith, Hn. T. G.

  Macleod, Rt. Hn. lain

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

  Gilmour, Ian (Norfolk, C.)

  Maddan, Martin

  Temple, John M.

  Glyn, Sir Richard

  Marten, Neil

  Thatcher, Mrs. Margaret

  Goodhew, Victor

  Mathew, Robert

  Turton, Rt. Hn. R. H.

  Grant-Ferris, R.

  Mawby, Ray

  van Straubenzee, W. R.

  Grieve, Percy

  Maxwell.Hyslop, R. J.

  Walker, Peter (Worcester)

  Hall, John (Wycombe)

  Mills, Stratton (Belfast, N.)

  Walker-Smith, Rt. Hn. Sir Derek

  Hall-Davis, A. G. F.

  Monro, Hector

  W alters, Dennis

  Harris, Frederic (Croydon, N.W.)

  Morgan, W. G. (Denbigh)

  Ward, Dame Irene

  Harrison, Brian (Maldon)

  Morrison, Charles (Devizes)

  Webster, David

  Harrison, Col. Sir Harwood (Eye)

  Munro-Lucas-Tooth, Sir Hugh

  Whitelaw, William

  Harvie Anderson, Miss

  Murton, Oscar

  Wills, Sir Gerald (Bridgwater)

  Hawkins, Paul

  Nabarro, Sir Gerald

  Wilson, Geoffrey (Truro)

  Hay, John

  Nicholls, Sir Harmar

  Wylie, N. R.

  Heseltine, Michael

  Noble, Rt. Hn. Michael

  Higgins, Terence L.

  Nott, John

  TELLERS FOR THE AYES:

  Hiley, Joseph

  Orr, Capt. L. P. S.

  Mr. R. W. Elliott and

  Hill, J. E. B.

  Osborn, John (Hallam)

  Mr. David Mitchell.

  Hirst, Geoffrey

  Pearson, Sir Frank (Clitheroe)

  NOES

  Abse, Leo

  Dunwoody, Mrs. Gwyneth (Exeter)

  Lawson, George

  Allaun, Frank (Salford, E.)

  Dunwoody, Dr. John (F'th & C'h'e)

  Leadbitter, Ted

  Alldritt, Walter

  Eadie, Alex

  Ledger, Ron

  Archer, Peter

  Edwards, Robert (Bilston)

  Lestor, Miss Joan

  Armstrong, Ernest

  Ellis, John

  Lewis, Arthur (W. Ham, N.)

  Atkins, Ronald (Preston, N.)

  English, Michael

  Lewis, Ron (Carlisle)

  Atkinson, Norman (Tottenham)

  Evans, Albert (Islington, S.W.)

  Lipton, Marcus

  Bacon, Rt. Hn. Alice

  Fernyhough, E.

  Lomas, Kenneth

  Baxter, William

  Finch, Harold

  Lubbock, Eric

  Beaney, Alan

  Fitch, Alan (Wigan)

  Lyons, Edward (Bradford, E.)

  Bessell, Peter

  Fletcher, Raymond (Ilkeston)

  McBride, Neil

  Bidwell, Sydney

  Fletcher, Ted (Darlington)

  MacDermot, Niall

  Binns, John

  Floud, Bernard

  McGuire, Michael

  Bishop, E. S.

  Foley, Maurice

  McKay, Mrs. Margaret

  Blackburn, F.

  Foot, Michael (Ebbw Vale)

  Mackenzie, Gregor (Rutherglen)

  Booth, Albert

  Ford, Ben

  Mackintosh, John P.

  Boston, Terence

  Fowler, Gerry

  McMillan, Tom (Glasgow, C.)

  Bowden, Rt. Hn. Herbert

  Fraser, John (Norwood)

  McNamara, J. Kevin

  Boyden, James

  Fraser, Rt. Hn. Tom (Hamilton)

  MacPherson, Malcolm

  Braddock, Mrs. E. M.

  Galpern, Sir Myer

  Mahon, Peter (Preston, S.)

  Brooks, Edwin

  Garrow, Alex

  Mahon, Simon (Bootle)

  Brown, Hugh D. (G'gow, Proven)

  Greenwood, Rt. Hn. Anthony

  Mallalieu, E. L. (Brigg)

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Gregory, Arnold

  Manuel, Archie

  Brown, R. W. (Shoreditch & F'bury)

  Griffiths, David (Rother Valley)

  Mapp, Charles

  Buchanan, Richard (G'gow, Sp'burn)

  Griffiths, Will (Exchange)

  Mason, Roy

  Butler, Herbert (Hackney, C.)

  Hamilton, James (Bothwell)

  Mellish, Robert

  Butler, Mrs. Joyce (Wood Green)

  Hamilton, William (Fife, W.)

  Miller, Dr. M. S.

  Cant, R. D.

  Hamling, William

  Mitchell, R. C. (S'th'pton, Test)

  Carmichael, Nell

  Hannan, William

  Molloy, William

  Chapman, Donald

  Hart, Mrs. Judith

  Morgan, Elystan (Cardiganshire)

  Coe, Denis

  Hattersley, Roy

  Morris, Alfred (Wythenshawe)

  Conlan, Bernard

  Heifer, Eric S.

  Murray, Albert

  Corbet, Mrs. Freda

  Hooley, Frank

  Newens, Stan

  Crawshaw, Richard

  Howie, W.

  Noel-Baker, Francis (Swindon)

  Cullen, Mrs. Alice

  Hughes, Emrys (Ayrshire, S.)

  Noel-Baker,RtHn.Philip(Derby,S.)

  Davies, Dr. Ernest (Stretford)

  Hughes, Roy (Newport)

  Norwood, Christopher

  Davies, C. Elfed (Rhondda, E.)

  Hunter, Adam

  Ogden, Eric

  Davies, Harold (Leek)

  Hynd, John

  O'Malley, Brian

  Davies, Robert (Cambridge)

  Jackson, Colin (B'h'se & Spenb'gh)

  Oram, Albert E.

  Delargy, Hugh

  Jackson, Peter M. (High Peak)

  Orme, Stanley

  Dempsey, James

  Jeger, George (Goole)

  Oswald, Thomas

  Dewar, Donald

  Johnston, Russell (Inverness)

  Owen, Will (Morpeth)

  Diamond, Rt. Hn. John

  Jones, Dan (Burnley)

  Page, Derek (King's Lynn)

  Dickens, James

  Judd, Frank

  Pearson, Arthur (Pontypridd)

  Doig, Peter

  Kenyon, Clifford

  Pentland, Norman

  Driberg, Tom

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

  Perry, George H. (Nottingham, S.)

  Dunn, James A.

  Kerr, Russell (Feltham)

  Price, Christopher (Perry Barr)

  Probert, Arthur

  Skeffington, Arthur

  Wainwright, Richard (Come Valley)

  Pursey, Cltdr. Harry

  Slater, Joseph

  Walden, Brian (All Saints)

  Redhead, Edward

  Small, William

  Watkins, David (Consett)

  Rhodes, Geoffrey

  Snow, Julian

  Wellbeloved. James

  Roberts, Albert (Normanton)

  Spriggs, Leslie

  Williams, Clifford (Abertillery)

  Roberts, Gwilym (Bedfordshire, S.)

  Steel, David (Roxburgh)

  Williams, W. T. (Warrington)

  Robertson, John (Paisley)

  Steele, Thomas (Dunbartonshire, W.)

  Willis, George (Edinburgh, E.)

  Robinson, W. 0. J. (Walth'stow, E.)

  Summerskill, Hn. Dr. Shirley

  Winnick, David

  Rodgers, William (Stockton)

  Symonds, J. B.

  Winterbottom, IL E.

  Rose, Paul

  Thomas, George (Cardiff, W.)

  Woof, Robert

  Ross, Rt. Hn. William

  Thomas, torwerth (Rhondda, W.)

  Yates, Victor

  Rowlands, E. (Cardiff, N.)

  Thornton, Ernest

  Sheldon, Hobert

  Tourney, Frank

  TELLERS FOR THE NOES:

  Shore, Peter (Stepney)

  Urwin, T. W.

  Mr. Gourlay and Mr. loan Elans

  Silverman Sydney (Nelson)

  Varley, Eric G.

  Clause 32.—(TRANSITORY PROVISIONS FOR DOUBLE TAXATION AGREEMENTS FIA VING RETROSPECTIVE EFFECT.)
  Mr. Patrick Jenkin: I beg to move Amendment No. 24, in page 38, line 18, at the end to insert:
  "unless the payment is made in respect of securities issued before 3rd May 1966".
  The Amendment deals with an entirely different point. We have now come to Clause 32. I am delighted to observe that we shall now have a different replier from the Government Front Bench. Although the point is different, I am afraid that it is no less complex than the one that we have been dealing with.
  The position concerns companies which have in the past raised loans overseas. The matter at which the Amendment is aimed in particular concerns companies which Dave raised loans from the public in Switzerland. There have always been two requirements which companies trying to raise their finance in this way have sought to meet. The first was a requirement imposed by the Swiss lenders that the interest should be paid gross without tax being deducted. The second requirement, which the borrowers have tried to make sure they achieve, is that the interest when paid should be a deduction in computing their profits, formerly for Profits Tax and Income Tax and now for Corporation Tax.
  To achieve these aims, the simple transaction where a United Kingdom company raises a loan in Switzerland and pays the interest to the Swiss lenders is no good. It will not achieve its objectives because the interest has to be paid under deduction of tax, and even if the interest were paid gross to satisfy the Swiss lenders, the amount would not count as a deduction for Income Tax purposes.
  Therefore, the firms that were in this position devised a fairly complex scheme.
  1490
  I should say at the outset that it was devised with the full knowledge, assistance and blessing of the Inland Revenue, and I shall return to that point because it is very important. I take a Swiss loan as an example. This may well apply in other countries. Let us say that money was lent to a United Kingdom company. It was then lent back to a subsidiary specially formed for the purpose, resident in Switzerland, which again might relend the money to the United Kingdom company. The result, working backwards, which is what one has to do with the payment of the interest, was that the interest was paid gross by the United Kingdom company to its Swiss subsidiary, no deduction for Profits Tax being claimed, and then the interest was paid gross, as it was entitled to be under Swiss law, back to the United Kingdom company, and in the hands of that company it constituted an overseas source of income taxable under Case V. This interest was paid gross to the original lenders.
  Under Section 132(1,c) of the Income Tax Act, 1952, they were entitled to deduct that gross interest from the taxable income arising under Case V. In that way the object of the exercise was achieved. The Swiss lenders got their interest gross without any United Kingdom tax deducted from it, and the company was in a position to claim a deduction in respect of the gross amount. I emphasise that this scheme was devised with the blessing and assistance of the Revenue.
  There was another variant which some companies introduced, perhaps for convenience or to make transactions appear rather more convincing, whereby the third loan, instead of being made back to the original borrower—the parent company—was made to another United Kingdom subsidiary company, so that it would

  1491
  go from the Swiss subsidiary to the United Kingdom subsidiary.
  Then came the Finance Act, 1965. Schedule 11, paragraph 1(1)(d)(iv) said that interest paid overseas to a nonresident subsidiary, or to a company where both payer and payee were subsidiaries of a third company, was to amount to a distribution and not a charge. It had all the characteristics of distribution—in particular, that Schedule F tax had to be deducted and accounted for to the Revenue.
  I understand that some negotiations took place and it was agreed with the Revenue that this did not apply in the case particularly of Switzerland, for that position was overridden by Article VII of the then Anglo-Swiss Convention relating to double taxation. The result was that the transaction continued in being as it had originally been intended to do, in effect, by the 1965 Act.
  Subsection (2) of this Clause recognises the position to be what it was. Subsection (2) deals with Schedule 11, paragraph 1(1)(ci)(iv) and says that Schedule 11
  "… shall apply to any such payment if, under an existing double taxation agreement, the recipient is entitled to relief …"
  But subsection (3) takes us back to square 1, because it says:
  "Subsection (2) above shall not apply to any payment to a company more than fifty per cent. of the voting power in which is controlled, directly or indirectly, by a person or persons resident in the United Kingdom."
  That takes us back to the position where companies had thought they were and from which they thought they had extricated themselves by their arguments last year with the Revenue.
  The Amendment is intended to restore the position in the case of arrangements of this nature made before Budget day and to leave the position as it was and as it had been agreed to be under last year's Finance Act. I believe that this is entirely justified. The Government are encouraging firms which want to invest overseas and, indeed, are compelling them to raise their money abroad. It is now almost impossible to obtain the sanction of the Bank of England for the transmission abroad of funds from this country to invest overseas.
  The needs and requirements of foreign lenders must still be met and firms which
  1492
  want to borrow money in these circumstances will find that they will have to pay the interest gross. These arrangements, which were entered into in the past entirely for this purpose and have been given the Revenue's blessing, should be allowed to stand. It might be thought that as a result of the change in the law companies might unscramble their present arrangements and make new arrangements which would avoid the difficulty. But in many cases the securities on which the loan is secured were issued to members of the Swiss public and not to a single lender. Indeed, perhaps the lenders total hundreds or indeed thousands of people. An unscrambling operation is impracticable.
  The result is that subsection (3) of this Clause would put these companies into a substantially worse position than they were and had been agreed to be by the Revenue under the law passed last year. Justice and good economic sense require the Amendment, which would have the effect of leaving the arrangements entered into before the Budget day unaffected by subsection (3), and I hope the Government will accept it.
  The Financial Secretary to the Treasury (Mr. Niall MacDertnot): I am afraid that the Amendment is misconceived and that I cannot accept the background history or introduction which the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) gave if it was intended to suggest that this was the origin of the Clause. I agree that the matter is complicated. The background to the Clause is that Schedule 11 of the Finance Act, 1965, prescribes that various categories of interest and certain royalties paid by a close company to participators are to be treated as distributions. The result is that the paying company can make no deduction for these payments in computing its profits for Corporation Tax.
  The taxation position of the recipient of the interest or royalties is quite unaffected by this provision. Any relief which is due from our tax under an existing double taxation agreement to a resident overseas continues to be due, regardless of the treatment of the paying company. That is the starting point.
  In negotiating our new double taxation agreements, we are prepared to concede

  1493
  that, unless the recipient is a company under United Kingdom control, the provisions of Schedule 11 should be overridden so as to allow the paying company a deduction in computing its taxable profits in respect of two cases—first, interest paid by a U.K. subsidiary to an overseas parent company or overseas close subsidiary company and, secondly, royalties paid by a close company to participators. We have written a provision to that effect into our recent protocols with the United States aid with Switzerland.
  As a transitional measure while we are negotiating these agreements, the Clause unilaterally writes this concession into existing double taxation agreements which we have not yet had time to renegotiate. It does this for a long transitional period of two years, to allow deductions for Corporation Tax purposes for the payment of interest and royalties of these kinds. It also limits the class of payments to those which are received by non-resident persons who are entitled under an existing double taxation agreement to exemptions from U.K. tax on them.
  Subsection (3) limits the class of payments still further by excluding payments to a company under United Kingdom control in which more than 50 per cent. of the voting power is controlled by United Kingdom residents. The Amendment would remove that limitation in respect of payments on securities issued after Budget day. It is unlikely that many such securities were issued before Budget day and the effect of the Amendment would, for practical purposes, be to remove that limitation in subsection (3) for practically all interest payments.
  We see no reason why it should be removed. This proposal might be appropriate if the Clause withdrew relief to which companies had formerly been entitled but that is not the position. The Clause gives relief which, prior to Budget day, companies were not entitled to expect and the exclusion by this subsection of payments made to a company under United Kingdom control corresponds to provisions which have been incorporated in revised double taxation agreements, including agreements with the United States and Switzerland.
  5.0 p.m.
  The main reason for this exclusion is that since the payments in question effectively belong to United Kingdom residents, other countries cannot reasonably expect us to override the provisions of our domestic law in relation to them. Indeed, if we were to accept the Amendment, we would get the rather absurd result that, for example, a company making payments to a United States company under United Kingdom control in respect of securities issued before Budget day would get relief under the Amendment for the two-year transition period and when the transition period ended it would then lose the relief, because it would not be provided for in the Double Taxation Agreement which we have concluded with the Americans. For these reasons, I must ask the House to reject the Amendment.
  Amendment negatived.
  Clause 33. — (TRANSITORY PROVISIONS FOR DOUBLE TAXATION AGREEMENTS HAVING RETROSPECTIVE EFFECT.)
  Mrs. Margaret Thatcher: beg to move Amendment No. 25, in page 38, line 43, to leave out:
  "concerning interest or royalties"and insert"in respect of interest or royalties which have already been allowed against income tax and profits tax".
  The Amendment concerns a discussion which we had in Committee on what was then Clause 31 and is now Clause 33. The Financial Secretary will remember that we had a good deal of difficulty in construing the purpose of that Clause from what it said. The hon. and learned Gentleman gave quite an explanation, which consisted of saying, first, that it was an enabling Clause and implying, secondly, that it could not be very damaging because any agreement brought before the House under the Clause would have first to have been agreed with another country as well as our own and that that would limit its operation.
  We should always look carefully at a Clause which confers enabling powers on any Government. We want to see precisely what we are enabling that Government to do. The Amendment is one means of narrowing down those powers to achieve exactly what the Financial Secretary said it was meant to achieve, and no more.

  1495
  There is no reference in the Clause to the Swiss Double Taxation Agreement. One would say, therefore, that the Clause could go a good deal wider than the new protocol which has recently been signed. The only limitations in the Clause are three. First, any agreement which is brought before the House of Commons must be made before 1st January, 1968; secondly, the agreement can only withdraw relief from Corporation Tax; and, thirdly, it must be one which concerns interest or royalties.
  That leads us to ask a number of questions of the Financial Secretary about the powers under the Clause and under the Amendment. First, will he tell the House whether he has it in mind to bring any other double taxation agreements before the House before 1st January, 1968, withdrawing relief retrospectively? As the hon. and learned Gentleman has not referred to the Swiss Agreement only, it is possible that he may have it is mind to vary other agreements before 1st January, 1968.
  Secondly, will the Financial Secretary give an assurance that he will not use his enabling powers under the Clause to require a taxpayer to repay tax for which relief had previously been granted? If the Clause refers only to the Swiss Agreement, it will not he a question of repaying tax, because the first payment of Corporation Tax will not be due until 1st January, 1967. There is, therefore, no question of clawing back tax which has already been paid.
  My third question is whether the hon. and learned Gentleman can give us an assurance that these powers will be invoked only where there has clearly been a mistake and relief was never intended in the first place. I refer to a mistake not in the amount of relief but as to the terms upon which it was granted.
  The Amendment is a little more specific than the Clause. It attempts to replace the phrase
  "concerning interest or royalties"
  with one which narrows that phrase and states:
  "in respect of interest or royalties which have already been allowed against income tax and profits tax".
  That is merely one attempt to try to narrow the Clause to do what the Financial Secretary said he wanted it to do.
  1496
  I shall be grateful if the hon. and learned Gentleman will answer one or two of my questions so that before we part finally with the Clause and the Amendment, we may have certain undertakings from him.
  Mr. MacDermot: In moving the Amendment, the hon. Lady the Member for Finchley (Mrs. Thatcher) is exercising a proper traditional function of the House of Commons in scrutinising closely any demand for enabling powers. I share the hon. Lady's concern about it.
  As I explained when we discussed this matter in Committee, all that we are seeking to do here is to take powers for the House, to enable the House to consider the provisions which, if approved, would have the effect of withdrawing certain reliefs retrospectively and to enable them to be considered when we look at the protocol to the Swiss Agreement. That is the sole purpose for which the Clause was drawn.
  The purpose of the Amendment, as the hon. Lady has made clear, is to narrow the terms in which the Clause is drawn and to limit it more closely to that specific Agreement or agreements strictly parallel with it.
  In principle, I see no objection to limiting the Clause in the sort of way that the hon. Lady suggests, but the Amendment would not succeed in achieving the right result. First, although this is not the main difficulty, there is the fact that, quite understandably, the Amendment is drawn in such terms that it is limited to cases where the retrospective withdrawal of the provision in the Swiss Agreement entitling a payer of interest or royalties to a deduction for Corporation Tax purposes was made necessary because payment of interest or royalties made prior to 6th April would otherwise have got effective relief both against Income Tax for the year of assessment in which the payment was made and also against Corporation Tax charged on the profits arising during that year.
  One rather exceptional case is covered by the protocol where the provision will also apply to payments made after 6th April. I did not go into this in detail in Committee, but when we look at the protocol it will be seen. The matter is a little involved and perhaps hon. Members

  1497
  will not wish me to take up the time 01 the House in explaining it.
  The effect of the Amendment would be that we would not be able to consider those provisions in the protocol which we have provisionally agreed with the Swiss. Secondly and more seriously, however, in its reference to Profits Tax the wording of the Amendment would frustrate the whole exercise. Profits charged to Corporation Tax are not also charged to Profits Tax, and, therefore, there would be no question of the interest or royalties which are to be denied Corporation Tax relief having, in the words of the Amendment, been allowed against Profits Tax.
  There is also a drafting error in referring to interest or royalties which have already been allowed against Income Tax. That would be more apt a reference if interest were allowed as a deduction from income for Income Tax purposes.
  Those are somewhat technical arguments, but they are valid ones for rejecting the Amendment.
  Mrs. Thatcher: When I put the Amendment down on the Notice Paper, I hoped that the Financial Secretary would see what I was trying to get at, and put the Amendment in order if he is prepared to accept it in spirit. I am a little concerned about the breadth of the powers.
  Mr. MacDermot: I am coming to the breadth of the powers. I do not think that the anxieties which the hon. Lady has expressed are ones which need concern her or the House.
  The Clause is already fairly narrowly drawn. In the first place it only applies in respect of interest and royalties. It is only in respect of them that it can authorise the retrospective withdrawal of relief, and then only if the withdrawal is in consequence of arrangements made pursuant to an Address presented to Her Majesty by the House before 1st January, 1968. That means that we are not taking some permanent power for the future.
  The hon. Lady referred to my explanation in Committee that the consent of the other country must first be obtained. It would only be in unusual circumstances that another country would agree to consent to the retrospective withdrawal of a relief in this way. I explained in
  1498
  Committee briefly how those circumstances have arisen in one case. I do not think that it is something that is likely to arise often.
  I was asked whether we have any other agreement or protocol in mind. The answer to that is no. We do not anticipate that we shall need the power in respect of any agreement other than the Swiss one. Equally, the question of clawing back any tax which has already been paid does not arise, and I do not envisage this being used except in comparable circumstances, if they arise, to the ones which gave rise to the Swiss agreement, where there clearly was a mistake which both countries recognised must be rectified.
  Mrs. Thatcher: In view of the Financial Secretary's reply, I beg leave of the House to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Clause 35.—(ABOLIT1ON OF INVESTMENT ALLOWANCES AND AMENDMENTS AS TO INITIAL ALLOWANCES.)
  Mr. Diamond: I beg to move Amendment No. 28, in page 39, line 42, leave out from "where" to end of line 2 on page 40 and insert:
  "that asset is brought into use not later than 16th January 1968".
  Mr. Deputy Speaker (Sir Eric Fletcher): I think that it will be for the convenience of the House to discuss with it Amendment No. 27, in line 42, leave out from "1966" to end of line 2, in page 40, and Amendment No. 29, in line 43, after "made", insert:
  "not later than 16th January 1967".
  5.15 p.m.
  Mr. Diamond: It will be within the recollection of the House that there was a long and helpful discussion in Committee relating to a situation where capital expenditure incurred after 17th January, 1966, but under a contract entered into before that date, would still rank for investment allowance, provided that the asset concerned was brought into use and paid for within nine months of that date.
  There were many views expressed about the nine months, and they were unanimous in saying that the period was inadequate. There were a number of examples given

  1499
  of ships, industrial buildings, farm buildings, buses, lorries, and so on. I was much impressed with the weight of the arguments particularly coming from my hon. Friends the Member for Heywood and Royton (Mr. Barnett) and the Member for Ashton-under-Lyne (Mr. Sheldon).
  As usual, the Government are always anxious to take full account of the views expressed in the Committee and to come forward at the appropriate stage with what is a suitable Amendment, in the Government's view—[Laughter.] I am totally unaware of the cause for merriment. I made an obvious statement about the flexibility of the Government and, in particular, the Treasury Bench.
  It will he recalled that I was not anxious at the time to indicate which of the many Amendments moved was the most suitable one, because the Government wanted as far as possible to take them all into consideration and come forward with an Amendment which would satisfy the whole House.
  Dealing with it in its two parts, and, first, the period within which the asset ought to be brought into use, there were many speeches advocating periods of up to two years. I do not recollect a single case of a suggestion of more than two years, although there were other suggestions of periods less than that. It seems to me that we ought to try and meet the fullest wishes of the Committee, so the Government are proposing in the first place that the period shall be a full two years. That should be adequate to meet the needs of every hon. Member who spoke on that occasion.
  There was also the point about the date of payment, and many difficulties were brought to our attention about it. One hon. Member referred to the discounting of bills, where the payer's bills had been discounted by the seller and therefore it was no longer possible for the payer to expedite payment, because he had a promissory note or whatever it might be, had to meet the bills on the due day and therefore could not expedite the bills as could have been done by a person paying by cheque.
  There was a related argument about retentions, where a contractor would naturally expect to have five or 10 per cent. of the final payment withheld until
  1500
  after a period of testing had been carried out on whatever it was he was supplying to the satisfaction of the purchaser. It was certainly not the intention of the Government that that normal safeguard should be prejudiced in any way.
  There was also the point about accounting machines, which do not readily identify the date of purchase.
  For all of those reasons, it seemed that the question of a date for payment was one of some difficulty, and certainly a period of nine months was not suitable. But, on further consideration, we came to the conclusion that there was no particular safeguard in the provision with regard to payment. The essential safeguard is the period within which the asset is brought into use.
  I think that it would be accepted all round that once an asset is brought into use, the provider expects to be paid for it within a reasonable time afterwards, if it has not been partly paid for before that date. Therefore, the relevant provision is the date when the asset has been brought into use.
  As a result, we are proposing this Amendment, which is a costly one. hope that the House will not be unduly critical of a Treasury Minister who comes forward with an Amendment which will cost about £10 million within the next three years. It is the responsibility of a Treasury Minister to put himself at the mercy of the House and accept whatever criticisms for extravagance may be forthcoming. In the present case, I hope that it will be agreed that this is a useful Amendment.
  Mr. Terence L. Higgins: We on this side of the House welcome the Amendment. We are very glad that it appears that reason has prevailed and that the Government have seen fit to make some concessions. I do not know that I would agree with the Chief Secretary in feeling that the representations of the hon. Members for Ashton-under-Lyne (Mr. Sheldon) and Heywood and Royton (Mr. Barnett) were largely responsible for the Government's change of heart. The Amendment which they have now tabled linked with the Government's Amendment is asking for something less than they are now prepared to give. Therefore, it may well be that it was the very

  1501
  cogent representations made from this side which rightly persuaded the Government to change their mind regarding the restrictions which have been imposed.
  We stressed in Committee that it was essential that confidence in the investment allowance system should not be shaken. Yet, even if the Government Amendment is accepted, we shall still find ourselves in a position in which an additional restriction has been placed on the grants after the investment decisions have been taken. There is still to be a restriction with regard to the date by which the assets have to be "brought into use". The terms originally offered have been altered ex post by the Government. This is clearly not desirable.
  The Chief Secretary said that this is a costly Amendment; about £10 million would he involved. I should have thought that this was something which the Government should incur in order to increase investment, particularly at a time when investment is being deterred by the general squeeze on liquidity which is likely to be greatly accentuated by the Selective Employment Tax in the autumn. I should like to ask how much more it was likely to have cost if the restriction had hen removed altogether, because we have not been given any reason why this additional restriction has to be imposed.
  I should like the Chief Secretary to clarify one point of definition. Suppose that the House accepts the Amendment. The crucial phrase in the Clause would then be "brought into use". I wonder whether the right hon. Gentleman could clarify precisely what this means. For example, if the chassis of a vehicle has been constructed but the vehicle has not been fitted with, say, seating but has been tested, and "brought into use" on the road. Would it be considered to be "brought into use "? Suppose that a bus has been delivered and has been completed in every respect but is being held as a reserve stock until the existing buses become uneconomic to repair. Would it be considered to be "brought into use" within the terms of the Amendment?
  What would be the position with regard to equipment installed in a building which had been "brought into use"
  1502
  initially and produced samples but which had, perhaps, teething troubles and was not in full production by the date specified in the Amendment. Would it be regarded as having been "brought into use"? If so, would the investment allowances be granted to the people who had carried out the construction of the building and machinery? It would be helpful if the Chief Secretary could clarify what this phrase in the Amendment means, because a number of industrial firms are worried even now about the restriction which the amended Clause would impose on their entitlement to investment allowances.
  We on this side still feel that there is a strong case for accepting Amendment No. 27 which would eliminate these additional restrictions altogether. Even if the Government Amendment is accepted the time limit between the date when the contract was entered into and when the asset has to be "brought into use" will still be only two years. There may well be cases in which the asset is not brought into use "in full production within this period. The building which will be occupied by the asset may not have been completed within the two years. It may be that the effect of the credit squeeze has had an impact on the building and delayed it. It may be that this has deferred certain parts coming forward and being used in the completion of the project. It may be that the impact of the squeeze on liquidity brought about by the Selective Employment Tax will slow down the operations and make it more difficult for the project to be completed within two years.
  I presume that all the projects which would be covered by this Clause have been approved and are known to the appropriate Government Departments. I wonder whether the Chief Secretary could give some idea of the total value of the projects. He has given an estimate of the cost of the Amendment. Therefore, presumably he has figures for the total number of projects. What is roughly the value of those projects, and what does he think the value is likely to be of those which may go beyond the two-year period? Unless some of them are likely to go beyond the two years, there is no point in the Government's Amendment. There would be every case for accepting; Amendment No. 27.

  1503
  I should be grateful if the Chief Secretary would clear up the technical points which I have raised, because I know that he agrees that it is desirable that industry as a whole should be clear about the circumstances surrounding these investment allowances. Perhaps he would also give a clear indication as to why the Government do not feel able to accept the Amendment which would limit these additional restrictions completely.
  Sir Robert Cary: May I thank the Chief Secretary for and congratulate him on his act of repentance in moving this Amendment. In Committee I made the plea that two years was fairer than nine months. I named quite a large number of vehicles which I had ordered only a few months ago which I hope will be delivered and in service within two years. By that much the point is covered.
  But I would ask the right hon. Gentleman to bear this in mind. We are heavily committed and visibly engaged in the export trade. I do not begrudge the chassis of a public service vehicle due to go to the Manchester Corporation or to the concern in which I am interested, Lancashire United Transport being diverted to the export trade. That would be a national benefit, although in operating my fleet it would retard progress. For that reason, I agree with the sentiment expressed by the Financial Times yesterday, namely, that 1969 would be better than 1968. The Financial Times was pleading for three years. I am pleading for two years.
  What the Chief Secretary has done matches the words he used in Committee, namely,
  "What we would be considering sympathetically are arrangements related to the transitional period and we would not be considering a complete root and branch operation."—[OFFICIAL REPORT, 22nd June, 1966; Vol. 730, c. 650.]
  We shall deal with that later.
  I ask the Chief Secretary to bear this in mind, too. My hon. Friend the Member for Worthing (Mr. Higgins) referred to the phrase" brought into use ". A chassis may be delivered, but it may take three, four, five or six months of bodybuilding operations to complete it before it can be brought into operation. There may be an overflow of eight, nine or ten vehicles because of the delayed work
  1504
  of the body-builders in bringing them into operation. I do not want to retreat from what I said about two years, but it would be wise if there were a little more flexibility. Operation root and branch will be dealt with by a later Amendment.
  I conclude by again thanking the right hon. Gentleman for the Amendment, which is the reverse of an operational extraction. We are suddenly taking £10 million out of the Treasury instead of having the Treasury take £10 million out of us, and that is always a very satisfactory state of affairs for Private Members on the back benches.
  5.30 p.m.
  Mr. Sheldon: 1, too, am impressed by my right hon. Friend's generosity, which went further than I had intended. Perhaps I was trying a little too hard to protect the revenue in a manner which my right hon. Friend found unnecessary. I am delighted to see this extension, which covers so many of the points which I made in Committee.
  I am particularly pleased that we are now taking account of the delay between the ordering of and the paying for plant or machinery, or whatever the investment may be. This is important largely because of the recent upsurge of investment, which has considerably extended delivery dates and has led to some firms over-stretching themselves and using somewhat unorthodox methods to make payment for some of the investment programmes which they have had in mind.
  We now know that there are many occasions when plant and equipment and instrumentation are put in progressively, one after the other, in very great detail and such planning can be largely upset by any interruption in the scheme by which allowances are paid. We are getting much more sophisticated in our ideas about investment and as we become more sophisticated, so interruptions or changes in investment allowances have more effect, although the country ultimately benefits from such greater sophistication.
  I believe, as the Royal Commission on the Taxation of Profits and Income said very strongly, that it is important always to honour to the maximum investment allowances, grants and incentives of whatever kind. What we need most is some assurance that, so far as it lies within the province of the Government, investment decisions will be honoured and

  1505
  that the investment decision will not be distorted by the introduction of factors which may be outside the province of those making the decisions. They must have a reasonable assurance that future legislation will not detract from the correctness of the decision as and when it is made.
  This is becoming even more important now that more sophisticated methods of determining the value of an investment are being used. It is useless thinking of a discounted cash flow if there is to be a change in the investment incentive which will nullify the effect of such massive sophistication. There have been many critics of these types of refinement who have felt that investment decisions are so broadly based that such refinements are of limited value. But it is useless to expect people to bring in any refinements if there is then a massive change in the allowances or the incentives.
  The most important aspect of this is that it is the largest of the investment decisions, those which use the most sophisticated methods, which have the longest period of gestation. So by one blow we affect the largest investment decisions as well as those who use the most sophisticated methods. It is important that we do not upset this kind of investment more than is necessary and I therefore very much welcome the Amendment.
  Mr. Richard Wainwright: We on this bench naturally welcome the Amendment which deals with an issue which we raised on Second Reading and, more important, which brings to an end at last the period of very great anxiety among those businesses, large and small, with contracts now outstanding and placed before 16th January in the expectation of civilised treatment of investment allowances.
  While welcoming the Amendment, I must note that throughout several discussions of this time limit no defence or excuse was ever offered for the date of 16th October which appeared in the Bill and which naturally gave rise to great anxiety in the business community. Perhaps it is not too much to hope that when limits of this kind have to be introduced in future legislation, unnecessary alarm will not be caused by apparently
  1506
  random choice of dates. Quite naturally, I very much support the Amendment.
  Mr. Diamond: I rise to speak again by leave of the House. I fully realise that we are on Report and I am in a rather difficult position, having moved the Amendment, that if I do not seek the leave of the House to speak again, I shall not be able to reply to the questions which have been properly put to me. I hope quite shortly to give whatever information I can, although I do not have a great deal.
  I cannot make any estimate of the further cost which might arise if there were no limit on the period. The words "brought into use" are simple English and have no special legal definition which would detract from their ordinary English meaning. The inspectors of taxes will not take too narrow a view of the meaning and if as in the example put to me, a factory or machine is being run in. that will certainly be regarded as being brought into use. I cannot think that there will be any difficulty, as we have gone to the length of two years so as to cover any possible case.
  Mr. Peter Walker: This is rather important in connection with buses. I do not necessarily expect the right hon. Gentleman to know the answer now, but I would be most grateful if the Treasury could make clear to the bus operators what their position will he when taking delivery of a bus which has to he fitted with certain needed refinements. Presumably, on a legal definition, if a bus went on a trial run before the fittings were added, it could be argued that it was brought into use.
  Mr. Diamond: I take the point. That is why I have said that the inspectors of taxes will not take too narrow a view of the meaning of the words. I would not have thought that there would be any difficulty, in what I shall have to call the bona fide cases, about satisfying the reasonable requirements of the Revenue, which are the reasonable requirements of the House.
  There was a comment about diversion for export which struck a sympathetic chord. I have not had an opportunity to consider this, but I am sure that it would be right for me to say that if, notwithstanding the two-year extension,

  1507
  there were to be a case in which it became apparent that there was competition to satisfy an export order and to satisfy an English domestic operator—and one knows that lorries, for example, are regular exports—it would obviously be in the interests of the nation that the export order should have first claim on the manufacturer of the chassis, for example, and it would be the duty of the Treasury and the Government to take note of that in any necessary adjustments. I do not want to go further than that except to say that we regard exports as priority No. 1.
  There is one further point. I was asked why there should be any limitation at all. The reason is the same as that for which we introduced the nine-months' limitation. First, it was thought to be a reasonable half-way house between the proper requirements of those who acquire assets and the proper protection of the Revenue against those who had anticipated the situation and entered into long-term contracts.
  We feel that a two-year period goes quite far enough. Those who have thought fit to protect themselves by entering into long-term contracts for a long period of years cannot object to having a two-year run and that being the end of it. I am grateful to you, Mr. Deputy Speaker, and I hope that the House will accept the Amendment.
  Amendment agreed to.
  Mr. Peter Walker: I beg to move Amendment No. 31, in page 39, line 42, after the words last inserted, to insert:
  (ii) in so far as that expenditure is on public service vehicles as defined by section 117 of the Road Traffic Act 1960.
  Mr. Deputy Speaker (Sir Eric Fletcher): With this Amendment we can also discuss Amendment No. 30, in page 40, line 2, at end insert:
  "or where that asset is a public service vehicle as defined by section 117 of the Road Traffic Act 1960"
  and if this is desired it will be convenient for the vote to take place on Amendment No. 31, I understand.
  Mr. Peter Walker: This seeks to continue investment allowances in respect of those vehicles defined as public service vehicles under Section 117 of the Road
  1508
  Traffic Act, 1960. This is a continuation of the argument propounded in Committee. There we argued that there was a need to continue investment allowances for buses and public service vehicles, seeing that they were not to receive the new cash grants which the Government are bringing into being.
  On an examination of the debate in Committee it will be seen that the Chief Secretary—I think he would agree with this—did not answer the points made on this subject. This appears to have been due to a genuine misunderstanding on his part. We therefore welcome this opportunity of his being able to propound the arguments for not providing any form of investment grant or cash grant in respect of buses and public service vehicles.
  It seems an extraordinary thing for a Government who have stressed the need for better public transport suddenly to introduce taxation policies which add to the tax burden on bus companies. The Amendment seeks to ensure that bus companies continue to enjoy investment grants. When I say that no argument was propounded by the Chief Secretary, I should make it clear that in a previous debate on 22nd June, on another Amendment, he propounded a rather remarkable argument, which is the only one I can find on record which enables the Treasury to put forward the view that it is a reasonable thing to take away all forms of investment allowances in respect of buses. In that debate, the Chief Secretary was talking about investment allowances and was dealing with the argument of my hon. Friend the Member for Manchester, Withington (Sir R. Cary), and he said:
  "I would not wish to encourage him to believe that the Government are likely to look very sympathetically on cases where investment is already so overstretched it is impossible to supply the investors' demand for two or three years."—[OFFICIAL REPORT. 22nd June, 1966; Vol. 730, c. 616]
  5.45 p.m.
  This is a very interesting new concept why investment allowances should be offered. If we examine current Government proposals as they concern the new cash grants we find many items in respect of which there are long order books and other items where, presumably, the Government hope that the grants will

  1509
  result in a considerable demand. Is this concept of the Chief Secretary's to be applied in the future? If the Government decide that machine tools are in great demand at a certain time will they take away the investment allowances?
  If that is the case, it is a very dangerous and frightening new concept of the Government's attitude to the question of investment allowances. If this is not the basic argument, however, I must ask the right hon. Gentleman to give the House the arguments that the Government can provide for seeing that the bus industry is penalised in this way.
  On a previous Amendment, the Chief Secretary boasted of his generosity. In my view the Treasury is never generous. It is our money and not the Treasury's. Thus, we are very surprised that the Government now intend to take away investment grants on buses. This will cost the public bus companies £2.8 million a year. This is apparently the Chancellor's policy for the bus companies. This is the same Chancellor who, when he increased petrol tax, decided that the level of fares was such an important problem that special legislation should be introduced whereby the bus companies could obtain a rebate in respect of the increase in fuel tax, worth approximately £5 million a year.
  This is the same Chancellor who, last year, decided that it was essential—in terms partly of the Government's prices and incomes policy and partly their policy on public transport—to introduce the novel and unusual factor of the rebate scheme in respect of fuel tax. Yet a year later the same Chancellor, in the same Government, by doing away with the investment allowances, imposes additional taxation amounting to £2.8 million a year, and, by way of the Selective Employment Tax, takes from the bus industry an interest-free loan of £15 million.
  Those two factors combined mean that there will be no advantage from the rebate on the fuel tax for about seven years. We see that the net result of the rebate and the removal of investment allowances is a total concession of £2.2 million a year. In their Selective Employment Tax the Government are taking an interest-free loan of £15 million, and I just cannot understand why, of all organisations, the buses should have this form of investment incentive removed,
  1510
  with the very dramatic result that in respect of a bus costing £6,000 there is an increase of £720. A bus company operating 300 vehicles, with the normal sort of replacement programme, will have to bear a burden of £45,000 a year. This question appears to have been treated by the Government with the most remarkable complacency. In Committee, I gave some attention to the remarks which had been made by the Ministry of Transport. Once again, one must express surprise that on a major transport matter such as this there is no representative from the Ministry of Transport present. However, this is the normal practice and we are now used to it.
  I quoted this in Committee. As, obviously, the Chief Secretary will have read through carefully the reports of the Committee debates, he will no doubt wish to comment on these words of the spokesman of the Ministry of Transport. He said that he:
  "had considered the representations made by the industry to see what could be done to help but he appreciated that this had not yet resulted in effective action. He appreciated that the effect of the withdrawal"—
  of the investment allowances—
  "might be increased fares, reduction of services or standards."
  The Ministry of Transport have appreciated that the withdrawal of the investment allowances will mean increased fares, reduction of services or standards. Will the Government tell the House whether they are happy to produce taxation proposals which will increase fares and reduce services or standards?
  The same spokesman of the Ministry of Transport said that:
  "It was necessary that the industry and the Ministry jointly should face these problems and whilst he was not yet in a position to comment on the recommendations of the Prices and Incomes Board, he had noted the recommendations that the industry should take the lead in obtaining extention of one-man operation."—[OFFICIAL REPORT, 22nd June, 1966; Vol. 730, c. 640.]
  Taking the lead in going over to one-man operation means more new buses. There has to be a different type of bus. Therefore, if the Government wish to go over to one-man operation of buses, their task, if anything, is to increase the investment allowances to those public companies which are willing to do so.
  Yet if the Amendment is not accepted, rather than increasing the investment allowances to encourage the conversion to one man operation, the Government will discourage it by taking away what allowance exists. I believe that public transport has been very badly treated and affected. It has had to meet considerable wage increases, it pays an enormous fuel duty, it has considerable licence fees to meet and it now has the burden of the Selective Employment Tax. It is remarkable that, added to all this, the Government should ruthlessly decide to do away with the investment incentives which have existed. I therefore hope that, in the interests of the many people who travel by bus, the Amendment will be accepted by the House.
  Sir R Cary: I would reinforce what has been said so vigorously and eloquently by my hon. Friend the Member for Worcester (Mr. Peter Walker). He has raised many questions in my mind. I could speak a long time on the relationship which I have known for many years between the industry and the Treasury. It is only in recent years that I have begun to see any relaxation or any gesture to the industry at all. A recent example of this, almost the first that I can recall, is the putting into effect of the right hon. Gentleman's intimation in Committee, giving the industry a benefit of £10 million.
  However, that is in the short run, and we are now considering the long run, the root and branch operation. What my hon. Friend has said is all too true. I am fearful of the range of additional expenses which may fall upon the operation of our fleets, whether municipal or private. In the pipeline at the moment is a claim, under consideration by the National Council, for 6 per cent. The Government are making their own pleading about what any such advance could be, but in any case, if the Government's norm of 3,½, per cent. were agreed, plus the withdrawal of investment allowances and with no concession on the extremely heavy fuel duties carried by the industry, in spite of the modest concession by the right hon. Gentleman of £10 million for vehicles in the short run spread over—
  Mr. Walker: My hon. Friend will realise, of course, that this does not apply solely to vehicles but to everything in the economy. Not only this industry will get the benefit.
  Sir R. Cary: Yes, only a limited part of that £10 million applies to this industry. Only a proportion will apply, which makes it rather worse for the industry.
  These are two shattering things at constituency level which upset me more than anything else. One is, outstandingly, any substantial increase in rates. The second is the destruction of fare schedules which necessitates the rebuilding of the fare structure to give an enhancement of revenue of about 15 per cent. to 16 per cent. to operate a company.
  Private companies have to operate profitably or go out of business. The municipalities operate too, but always have the acrobat's net of the ratepayers' cheque book below them to make up the deficiency if necessary. This is often done by the municipalities, but private companies, whether a holding company and an operating company like the B.E.T. or the Lancashire United Transport Company, in my constituency, which is a wholly joint stock company, have to make both ends meet. If it had two bad years and used up its reserves, in the end it will go out of business.
  Following my hon. Friend's pleas, I would put this proposition to the right hon. Gentleman. The Government are extremely keen to get an economy by co-operation. Because of the slow improvement of the industry, they want a change-over as quickly as possible to one-man operation. Even if the right hon. Gentleman will not consider accepting the Amendment root and branch, if a company decides, in conjunction with the manufacturers, to expedite the replacement of its fleet, with as much one-man operation as possible, under the referee-ship of the Traffic Commissioners, will he allow investment allowances to be given to those vehicles which have to carry into effect the Government's policy of converting fleets as much as possible to one-man operation?
  I know that this will make a separation in taxation between some vehicles on the road and others which will be brought

  1513
  on to help to meet the Government's point about the use of manpower in industry.
  In addition, I repeat a plea which I have made over and over again—a plea which the industry has made repeatedly: will the Government ease the fuel tax position of the industry? The industry is still paying 2s. 9d. a gallon on its fuel. If the Chancellor will consider the age-old problem which has worried the House for a long time he will realise that he can confer no greater benefit on the industry than that of reducing the level of fuel taxation. The Government have demanded that the industry should not destroy the existing fares structure, but I make a prophesy that in less than two years the present fares structure all over the country will have to be destroyed and rebuilt— and that can be done only at the expense of the fare-paying public. How shall we get moderation in wage and salary demands if we allow a substantial increase in the cost of living— and bus fares are a basic part of the cost of living—by destroying the present level of fares over the whole industry? In great cities such as Manchester and Liverpool there will be an additional 15 to 16 per cent. added to the fares paid by the general public.
  6.0 p.m.
  Mr. Geoffrey Hirst: I rise briefly but very sincerely to support the Amendment and the very strong and lucid speech of my hon. Friend the Member for Worcester (Mr. Peter Walker). We discussed this very important matter in Committee in various ways, and I hope that the Chief Secretary is now ready to offer a solution to what is a glaring inconsistency in Government policy which must be corrected.
  It is shattering that, on a subject which is so important, and which must inevitably lead to an increase in cost to the travelling public, apart from the thin red line on the Treasury Front Bench and the attentive and long suffering P.P.S. sitting behind the Chief Secretary, we have had an average of fewer than two hon. Members on the Government Benches throughout the discussions, and in part of the time there has not been one hon. Member on those benches.
  It is devastating that so little interest has been shown in a proposal which will add £750,000 to the costs of the operating
  1514
  bus companies. Hon. Members opposite ought to be up in arms about it. If I had been on that side of the House and the Conservative Party had been in power, hon. Members know what hell the Treasury Bench would have been getting from me had they introduced a proposal such as this. Nothing inhibited me when I was on the benches opposite and nothing inhibits me now. Hon. Members opposite should have been out in full cry on this occasion. The Government last year said that they would give a rebate in respect of the petrol duty to ensure that the fare structures were maintained as far as possible, but now they have added this charge to wipe out a great slice of that essential advantage which was needed to maintain the structure.
  Another important aspect concerns the manpower situation. We hope to see manpower in this country fully stretched. I could make some comments about vacancies at present but this would not be an appropriate time to do so. We all know that there is a shortage of manpower and we want to see more economic and a more modern use of the manpower available. If that is related to the Amendment it will he seen clearly that we are seeking to encourage bus companies to go over to the new one-man buses. Yet the Government produce a fuel investment policy which has been condemned throughout industry. How can they defend this inconsistency?
  What particularly concerns me is that this matter was discussed clearly in Committee and yet the right hon. Gentleman did not jump to his feet immediately after my hon. Friend had moved the Amendment in order to save the precious time of the House by saying," This fault will be rectified ". He has not done so and his silence gives me no encouragement that the inconsistency of the Government's policy has been admitted, despite the inevitable increase which it must cause in fares being paid by the public.
  Mr. David Mitchell: I rise only briefly to add to the pleas which have been made particularly in two respects, one of which has scarcely been touched on in the debate. The first is the effect which this proposal will have on the costs of bus operators and on a fares structure, and the way in which it will

  1515
  affect old-age pensioners. I make the point particularly strongly that it is the old people who have no cars and who have had no share in the prosperity of the past 13 years. This section of the community uses bus transport most and will be most affected by this proposal.
  Secondly, I make a plea about the effect of the proposal on rural transport. In the Basingstoke and Andover rural areas, we have serious problems arising from the difficulties which local bus operators have in maintaining an economic service without driving up fares to a point at which they will cause great difficulties, or without—this is more serious—being forced to withdraw their services from the outlying villages and hamlets. This aspect causes me grave concern and it should concern a Government which at the Election said that it would help all sections of the community Their proposals are making the problems of rural transport substantially worse. Looking at the Government benches, I regret that only five hon. Members of the Labour Party appear to consider this matter sufficiently important to attend the House.
  Mr. Hirst: That is a 100 per cent. increase on two-and-a-half minutes ago.
  Mr. Mitchell: There is no Transport Minister on the Front Bench. I very much hope that the Minister will give a sympathetic hearing to this proposal. One of the major social problems of the country districts is that we are having a drift out of the smaller hamlets, because farmers cannot get farm workers who will live in those areas because they are isolated and cut off from public transport. I hope that the Minister will be more receptive to this proposal.
  Mr. Paul Dean: I should like to support the plea which has been made from this side of the House and particularly the remarks of my hon. Friend the Member for Basingstoke (Mr. David Mitchell) about the difficulties of rural bus operators. I am sure that even the Chief Secretary admits that they are having an exceedingly difficult time under present arrangements. They are finding it very difficult to maintain a satisfactory service, and in many cases already the service is inadequate. Their costs and their fares have been
  1516
  mounting rapidly. The Chief Secretary also knows that we are dealing with a comparatively small section of the community who are not well off. Tycoons do not travel by public transport[Interruption.]—not usually. The majority of people who use public transport, particularly in the country districts, are those with comparatively modest means, certainly those who cannot afford motor cars. They are already finding bus fares a considerable burden, and now the Chancellor is making things even harder for them. Hon. Gentlemen opposite are always talking about social justice. Here is a policy which is completely contrary to their avowed aims.
  Many rural bus operators are having to run additional services because of railway closures, services which would not have been contemplated had those closures not taken place. These are additional burdens being placed on bus operators and I hope that the Chief Secretary will recognise the strength of the pleas which my hon. Friends and I are making.
  Sir Douglas Glover: Unless the Chief Secretary accepts the Amendment, he will be demonstrating that the Government have completely lost control of their transport policy. I trust that the right hon. Gentleman has noted that only one back bencher is seated behind him voluntarily and is not a pressed man. That is an indictment of the party opposite, which was returned to power to protect the interests of the underprivileged and the transport problems particularly of those who cannot afford motor cars. I am surprised that more hon. Gentlemen opposite have not been prepared to come here to listen to our discussions, even if they are not prepared to take part in them. It is a pity that there are not a few honourable and independent hon. Gentlemen opposite of the calibre of my hon. Friend the Member for Shipley (Mr. Hirst).
  It is obvious, from the policies the Government have pursued, that they are like a wounded rhinocerous which has been shot in one eye and is running around in ever increasing circles damaging the remainder of the herd and not achieving anything else. This has happened to the Government's transport policy.

  1517
  Before referring to last year's Finance Act, I must mention that we seem to have had a permanent Finance Bill since the Government came to power. No sooner have we dealt with one Measure than another is before us. In this continuous process, might it not be a good idea for the Government to introduce a running Finance Bill, which they could amend from time to time, thus saving us the trouble of having to go through the various stages of each Measure? I am certain that before this Measure has received its Third Reading the Chancellor will produce further measures of financial repression and restriction.
  Sir Harmar Nicholls rose—
  Sir D. Glover: I will not give way.
  Hon. Members: Give way.
  Sir D. Glover: I trust that my hon. Friends and I will not argue over this. My hon. Friend the Member for Peterborough (Sir Harmar Nicholls) always makes brilliant speeches. I am sure he will do the same today.
  6.15 p.m.
  In 1965 the Government had a transport policy. But that was in the dim and distant past when there were heads of agreement and statements of intent. At that time they were trying to keep down the cost of transport, so much so that when they introduced what they called their mini-Budget, in which fuel tax was increased by 6d., the Chancellor excused the transport undertakings from paying it. Now—having saved the road transport operators about £5 million on that occasion—in this Measure the road transport undertakers will have to pay another £2,¾ million, in addition to which they are faced with the Payroll Tax, which will cost them £10 million to E12 million, so that their total oncost of the Government's so-called co-ordinated transport policy is colossal and means that the Government are deliberately putting up the costs of the road transport undertakings at a time when hon. and right hon. Gentlemen opposite keep telling us that they want to keep the cost of living stable.
  The Chief Secretary should remember that these additional costs are paid not by the community at large but by those in the lower income groups. I should,
  1518
  at this point, correct my hon. Friend the Member for Worcester (Mr. Peter Walker), who said that it was not the Treasury which found the money but us. I am grateful that he thinks that Members of Parliament are so wealthy that we raise all this money for the nation. Of course, the money is not raised just by us but by the public in general. These increased charges will be paid by, if anyone, the under privileged people in our community. I am glad to see the right hon. Lady the Minister of Pensions and National Insurance in her place because she takes a great interest in these matters. Hon. Gentlemen opposite stated that they would help the underprivileged members of society, but here they are increasing the costs of the road transport industry, costs which will be paid by those in the lower income groups.
  My hon. Friend the Member for Basingstoke (Mr. David Mitchell) spoke about the rural districts, and while I do not want to make a special case of my constituency, I must tell the Chief Secretary that the Minister of Transport is at present considering whether or not to accept the closure of the line from Ormskirk to Preston. If that line is closed, additional rural road transport will have to be provided. What encouragement have the Government given, by their recent actions, for rural road transport undertakings to produce such additional facilities? The rural areas are finding it increasingly difficult to keep their road services going.
  A great drive is on for the introduction of one-man operated buses, but this involves capital expenditure. Bearing that in mind, what have this modernising Government done? They have taken away the capital allowances which would encourage operators to introduce buses controlled by one man.
  As I said, the Government are acting like a wounded rhinocerous, running around in ever increasing circles, damaging the population and showing more and more that they are losing control of events and are acting out of panic rather than out of real thought and resource. I hope that, for once, the Chief Secretary will realise the sense of what my hon. Friends and I are saying and will accept the Amendment.
  Mr. Robert Cooke: I am privileged to speak following my hon.

  1519
  Friend the Member for Ormskirk (Sir D. Glover), although he did not go nearly far enough in drawing the attention of the House to the way in which the Government have utterly neglected the sphere which we are trying to help by the Amendment.
  It is also worth noting that, despite the hurrying and scurrying of the Government Whips throughout the building, they have managed to produce only a smattering of hon. Gentlemen on the benches opposite who, I am sure, have no idea of what we are discussing. For their benefit, we are at page 1674 of the Notice Paper—Amendments Nos. 30 and 31. I suppose that we have the one consolation that they are unlikely to muster 100 Members for the Closure in the near future.
  I want to take up one or two of the points made by my hon. Friends and also to make some new ones. First, there is the question of one-man bus operation—. the modern approach. This will not be helped by the Government's attitude. In fact, as a result of Government action it will go forward much more slowly. The result will be the perpetuation of out-of-date public service vehicles; out-of-date buses blocking up our roads long into the future, because those buses cannot be replaced by new vehicles as the operators will not get the necessary help.
  That will make for considerably worsened traffic conditions. Heaven knows, we have had evidence that with buses or taxi cabs off the road traffic moves with complete freedom in London. Perhaps if we had better buses in the provinces—and we need them in Bristol—we might have a quicker flow of traffic. Here we have an example of Britain's modernisation being impeded by the Government's own policies.
  Before I had the privilege to speak in this debate I listened to the end of the previous one, when I heard the Minister say that exports were the Government's No. 1 priority. How do we have a healthy export market in these new buses if we do not have a healthy home market? We shall not find them being ordered in great quantities unless we have them being used here, and they will not be available here unless they get the proper tax treatment—
  Mr. A. Woodburn: I am very much interested in the arguments advanced by the hon. Member for Bristol, West (Mr. Robert Cooke) and his hon. Friends. During this debate we have heard a great deal about the numbers of people and the kinds of people who should not pay the tax. Will the hon. Gentleman now suggest who should pay it, if these people should not?
  Mr. Speaker: The hon. Member would be out of order if he responded to the challenge.
  Mr. Cooke: I am most grateful, Mr. Speaker, for your guidance, and help in not getting this debate off the lines. I have no intention of following the right hon. Gentleman the Member for Clackmannan and East Stirlingshire (Mr. Woodburn) into his irrelevant field. We are now discussing the difficulties which bus operators, in particular, are facing, and which are not being helped by what the Government are doing. It is a pretty desperate state of affairs when all one can get from the other side is the right hon. Gentleman coming in and, as you said, Mr. Speaker, interrupting, with something quite irrelevant and out of order.
  One of my hon. Friends spoke of municipal bus undertakings. The Government are no doubt in favour of anything not privately owned, but many undertakings are a partnership between the municipal and the commercial elements— and we have just that state of things in Bristol. My hon. Friend the Member for Manchester, Withington (Sir R. Cary) said that underneath there was always the ratepayer's cheque book as a sort of safety net into which the undertaking could fall if it got into deficit. That is a pretty poor attitude to adopt, and a pretty poor solution— that because the Government are not doing their duty, the ratepayers will pay lest the undertaking should go out of business.
  From what I have heard in this debate this afternoon I am thoroughly convinced that the Government should make this concession. I hope that they will accept the Amendment.
  Mr. James Dance: I want to underline what was said by my hon. Friend the Member for Somerset, North (Mr. Dean) about rural buses. In

  1521
  Worcestershire we have been, and are, threatened with railway closures, and some of these have been carried out. When this scheme first came out under Dr. Beeching, most of us approved, provided we got adequate alternative forms of transport. I gave my support to closures of uneconomic lines and insisted that we must have this alternative form of transport.
  The ordinary bus is not good enough today. We need a form of goods van such as they have on the Continent, where a woman can pack her pram or her trunk. I have even travelled in France with a thing on top of the vehicle carrying a lot of chickens, ducks and geese—[An HON. MEMBER: "Pigs?"]—yes, let us take a few pigs along, too. We need proper goods vans on our buses.
  When I got in touch some time ago with my right hon. Friend the Member for Wallasey (Mr. Marples) on this subject he produced a photograph of one of these things being tried out. They were not cheap. They were tied to the back of an ordinary single-deck bus and contained quite a lot of things that people in the country areas want to have carried —prams, mail carts, trunks, parcels, and so on, which cannot be taken in the normal bus.
  The Government are completely falling down in this respect in not allowing these allowances. This development would cost money, but if the Government intend to pursue their policy, with which I do not disagree, of closure of certain uneconomic railway lines, they must provide this alternative transport. As people in the country areas know, though I do not suppose that everyone in the towns appreciates it, what is needed in the rural areas is not just a bus, but an extra bit of accommodation at the back or on the top of the bus for the carriage of goods.
  I therefore plead with the Government to consider this subject again to see whether they cannot grant this allowance for something that is so completely essential for the efficient running of the bus services that I hope we shall have in the future and, in particular, for the welfare of the countryside.
  Sir Eric Errington: I should like to add my support to those of my hon. Friends who have spoken
  1522
  of the difficulties and problems facing bus companies. We are fortunate enough in my constituency to have an extremely efficient and well-run organisation, yet I get a very large number of requests for further bus routes and for more convenient arrangements. The question is often posed whether, instead of having the double-decker bus, which is too expensive, we could have the single-decker which takes a less number of people. The bus companies' problems are mounting up. The transport of children to school also needs the most careful consideration.
  Investment allowance policy is only one of a number of things that the bus operators have to face, and the only way they can face up to it without cutting off the services—which in the country parts is a very unsatisfactory way of dealing with the matter—is by increasing the fares. Let us have no doubt at all that one of the results of the Government's attitude will be an increase in fares. It will also mean a worse service, as buses, like other motor vehicles, require constant renewal because of the desirability of having up-to-date arrangements. All these things are hitting at a service that is absolutely essential in the countryside.
  I have had letters from old people who are desirous of having increased bus services. In certain places there is only one bus service during the daytime. They desire at least two so that they can make journeys at reasonably convenient times. When I put this to the bus company the reply was, "We do our very best, but this is not a viable route. In consequence, money has to be made from other services to meet the situation." I ask the Chief Secretary to look at this matter in a broader way than that merely of a question of abolition of investment allowances. That is only one thing, but the accumulation of things which make it difficult for bus operators to provide a service is very serious indeed. There is little doubt that this will have the result of increased fares being charged or no service being provided.
  6.30 p.m.
  Mr. Diamond: The hon. Member—
  Sir Gerald Nabarro: On a point of order, Mr. Speaker. Several of my hon. Friends and

  1523
  I have been sitting here for a very long time trying to catch your eye. May we have the assurance of Mr. Speaker that the fact that the Chief Secretary has risen in his place will not curtail in any way our honest endeavours from the Opposition benches?
  Mr. Speaker: I can put the hon. Member out of his misery. I called the right hon. Member on the Front Bench on the Government side, but that does not necessarily mean the end of the debate.
  Sir G. Nabarro: I am most grateful to you Sir.
  Mr. Diamond: The hon. Member for Aldershot (Sir E. Errington) asked me not to regard this matter too narrowly but to deal with it more widely than the Amendment before us does and to deal with investment allowances. Indeed the whole of the debate, with the possible exception of the speech by the hon. Member for Worcester (Mr. Peter Walker) has dealt with matters which are broadly related to the difficulties of bus services in the country and other services. Hon. Members who have suggested that an hon. Member coming into the House and listening for an hour would not follow what the debate was about have been on sound ground, because the number of times in which the matter contained in the Amendment has been mentioned has been minimal.
  Mr. Peyton Mr. Peyton rose—
  Mr. Diamond: No, I shall not give way. I hope that the House will allow me to deal with the speech of the hon. Member for Worcester and the Amendment before us. What is being asked is that an exception shall be made from a general policy decision, an exception shall be made in regard to buses from the general policy decision which is to exchange for investment allowances investment grants in appropriate cases with the special application of those grants as a backing to economic policy. The case which is to be made therefore on the Finance Bill is that buses are in such a special category as to be necessarily separated from every other kind of asset in the country so as to continue alone to get investment allowances which are attributable to no other asset in future.
  1524
  I am bound to say that I have not heard arguments making that case. I have heard arguments making the case for the difficulties of the public service vehicles. I have heard arguments making the case that they should have special treatment and acknowledging that they have had special treatment. Indeed, the basis of the claim for inconsistent treatment is that they have had special treatment from the Chancellor in relation to the rebate of fuel tax.
  Mr. Peter Walker: If the right hon. Gentleman will now say that he is willing to exchange investment grants for the new cash grants for buses, I shall withdraw the Amendment.
  Mr. Diamond: I thought the hon. Member was going to say that. This underlines how inappropriate the Amendment is to this particular debate because the hon. Member knows, and knows full well—no doubt he has made this argument elsewhere himself—that this is not the Bill which deals with investment grants. He knows that there is no Clause in this Bill dealing with investment grants. There is no power here to deal with investment grants. He is asking me to agree to do what this Bill does not do. There is another Bill in which there will be full opportunity for hon. Members to take—
  Sir G. Nabarro Sir G. Nabarro indicated dissent.
  Mr. Diamond: It is no use the hon. Member shaking his head. He is wrong again. There has been a debate on the White Paper in which the whole policy of investment grants has been discussed. There is a Bill which has been debated on Second Reading and in Committee upstairs dealing with the full details of investment grants. We are now dealing with the Finance Bill under which as a corollary, but only as a corollary—not as a matter of policy, only as a corollary to the other Bill which deals with investment grants—this Bill deals with the withdrawal of investment allowances.
  Mr. Peter Walker: This is an extraordinary argument. It is known that it is Government policy not to give the new grants for buses. Therefore, we should discuss on this Clause of the Finance Bill the leaving of buses without any allowance of any description. It is perfectly

  1525
  reasonable that we should continue the discussion.
  Mr. Diamond: We are not discussing buses with no allowances at all.
  Mr. Peter Walker: What have they got?
  Mr. Diamond: I repeat that this is not a debate on general transport policy or even on a limitation of general transport policy as far as it affects buses concerned in the Amendment, public service vehicles. There are many ways in which services mentioned in this Amendment are helped, very many ways. If there is not a sufficient number of ways there are other methods of putting forward requests and appropriate ways in which they can be met. This is not the occasion for doing anything other than establishing that the withdrawal of investment allowances which is accepted—
  Sir G. Nabarro: Not on buses.
  Mr. Diamond: —by the whole of the House, and the House is now sitting. The withdrawal of investment allowances has been accepted by the whole of the House.
  Sir G. Nabarro Sir G. Nabarro indicated assent.
  Mr. Diamond: It has been accepted on several occasions. The approval of the White Paper was one. The Second Reading of the Bill dealing with investment grants was another. Everyone who voted for acceptance of investment grants knew that he was voting for withdrawal of investment allowances.
  Mr. Raymond Gower: Will the right hon. Gentleman answer—
  Mr. Diamond: Yes, I will answer.
  Mr. Speaker: Order. I hope the right hon. Gentleman will not go too wide in the answer.
  Mr. Diamond: I hope that I shall go considerably narrower than the points which were put to me. I shall certainly endeavour to follow your Ruling, Mr. Speaker, and deal with them very narrowly indeed. The whole of my argument is to claim that all the arguments put to me are far too wide and I am grateful for your comment and help. What we are concerned with here is the very narrow
  1526
  point as to whether vehicles of this kind are so to be distinguished from every other asset and every single other asset in the country, that they alone should continue to get investment allowance.
  Mr. Gower Mr. Gower rose—
  Mr. Diamond: I have said six times that I am not giving way to the hon. Member. Cannot he hear? I have given way I dare say 50 times—[An HON. MEMBER:" It is a prolonged debate."] The debate has been very much prolonged already. I have noticed hon. Members on the Front Bench opposite collecting speakers to keep it going.
  Mr. Peter Walker: Mr. Speaker, I ask the Chief Secretary to withdraw that remark which is completely untrue.
  Mr. Diamond: If it is not hon. Members on the Front Bench opposite who have been getting speakers in, it is others who have been collecting speakers to continue the debate.
  Hon. Members: Withdraw.
  Mr. Walker: On a point of Order, Mr. Speaker. I must ask the Chief Secretary to substantiate that remark or to withdraw it.
  Mr. David Webster: Withdraw.
  Sir G. Nabarro: On a point of order. Is it in order for the First Secretary to indulge in crass mendacity in the House?
  Mr. Speaker: I hope the hon. Gentleman will withdraw the word "mendacity".
  Sir G. Nabarro: I withdraw "mendacity" and substitute "inaccuracy", Mr. Speaker.
  Mr. Speaker: It is in order for any hon. Member to indulge in inaccuracy. It is a common complaint.
  Mr. Diamond: I may have been inaccurate in my hearing, Mr. Speaker. However, I do not want to pursue the matter. I thought I heard the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport) invited to come in and make a speech. If that is not the case, if he was not invited—
  Mr. Speaker: Order. I hope that we can get back to the Amendment.
  Lieut.-Colonel Sir Walter Bromley-Davenport: Mr. Speaker, did my own ears deceive me? I wonder whether the right hon. Gentleman who has just referred to me would mind repeating the glowing remarks that he has just made about me.
  Mr. Speaker: I think the House had better take my advice and get back to the Amendment.
  Mr. Diamond: I accept your advice very readily, Mr. Speaker, and I repeat shortly, therefore, that the only case which could be made out for the exceptional treatment of public service vehicles as being the only asset in the country to be excluded from the withdrawal of investment allowances has not been made out, and therefore I regret that I cannot recommend the House to accept the Amendment.
  Mr. Peyton: We have listened to a number of unsatisfactory answers during the course of these debates, and the right hon. Gentleman the Chief Secretary must now be awarded the palm or some more suitable prize. The answer which he has just given is surely the most unsatisfactory, unsympathetic and unfeeling that we have yet had from the Government, and that is saying a lot. The right hon. Gentleman's commencing remarks were quite astonishing. He appeared to be suggesting that investment allowances had no bearing on the general problems of running rural transport.
  Mr. Diamond: I did not say that.
  Mr. Peyton: The right hon. Gentleman was so generous in giving way and I trust that he will not indulge tonight in the habit of sedentary interruptions. Perhaps he will have other opportunities to explain exactly what he did mean. I am certain that I carry my hon. Friends with me when I say that the right hon. Gentle. man gave us the clear impression that he was conducting a very specious argument by suggesting that the removal of investment allowances had little or no bearing on the difficulties of running rural transport. This seems to me astonishing.
  The right hon. Gentleman then capped that amazing piece of speciousness with another suggestion, that all those who had voted for investment grants were auto-
  1528
  matically against investment allowances. A little bit of something is better than nothing at all, but any suggestion that those of us who are speaking on behalf of the Amendment are against investment allowances for buses or anything else is quite wrong and without foundation, and the right hon. Gentleman knows it very well.
  I cannot help but believe that the Government are now giving one more indication of their real hostility or callousness where the affairs of the countryside are concerned. When one recollects the crocodile tears which were once shed by some enthusiastic but irresponsible advocates of helping the countryside when the Socialist Party was on this side of the House, one feels some disappointment that those sentiments are not reflected in Government policy now.
  6.45 p.m.
  It is very sad indeed that we do not have any representative from the Ministry of Transport here. The Treasury Ministers already have quite a load on their shoulders. They cannot be expected to be masters of every aspect of Government policy, even though they think they are. We think it would be unfair to expect it of them. But it is not unfair for the House of Commons to expect the presence of representatives from a Department whose affairs are under discussion on a Bill of this kind. They certainly should be here. I recollect only too well that the Minister of Power was not here during a power debate. But the right hon. Lady the Minister of Pensions and National Insurance does come. Why cannot her example be followed by the Minister of Transport? I observe, Mr. Speaker, that you may be getting restive but I am sure you understand the peat amount of provocation that we have had.
  I want to remind the Government not only of the Jack Report but of the series of local inquiries which followed that Report. May I remind the Chief Secretary, or may I tell him because I do not suppose he has heard of it before, of the Report on Rural Bus Services which indicates how marginal was the possibility of rural bus services even surviving, and referred in particular to the help that might be given by a remission of the fuel tax. I shall not read much of it, but I

  1529
  should like to quote from paragraph 84 as follows:
  "The bus operators' representatives in the area emphasised the heavy cost of maintaining rural services. Additional facilities could only be provided if financially supported, whether locally or nationally."
  It goes on to consider the advisibility or otherwise of a remission of fuel tax. I am not going to consider that now. I am only raising it because the evidence of the Committee and its inquiries were to one effect, a-at even the most marginal help would be valuable.
  What would have been the reaction of this Committee had it been told that the Government contemplated, in Measures such as this, removing investment allowances from the bus companies? I believe those responsible for these inquiries would have thought that the Government or the Treasury which is responsible for such a proposal as this, had gone clean out of their minds. But they were not such pessimists as to anticipate the arrival of right hen. and hon. Gentlemen on the Front Bench opposite.
  I do not wish to delay the House from the joys which I expect will come pouring forth from my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport). But I want to register my utter disgust at the Government's careless dismissal of the genuine anxieties felt by bus operators and their customers throughout the countryside, and if the Government do not do better than this I shall be driven to the conclusion that Hungarians do not travel in buses.
  Mr. Webster: I thought the Chief Secretary was, to say the least, a little irritable and I thought that made up for his lack of argument in replying to this excellent debate.
  The point that has been quite clear is the deep strength of feeling among hon. Members on this side of the House who represent every shade and sector of the community. I thought it ill became the right hon. Gentleman to say that people had been inciting my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport) to declare his views which he holds very strongly, when we have drawn attention to the fact that not only has there been no Transport Minister on the Government Front Bench through-
  1530
  out the whole of this debate which has last for two hours, but also that there have been very few Government supporters present during almost the last two hours and the Whips had to be sent out to fetch them in.
  Every time they came in we cheered them and approved the fact that at last, willy-nilly and reluctantly, they were showing some interest in this matter, which arouses very deep feelings in the House. [Laughter.] The hon. Member for Bilston (Mr. Robert Edwards) is pleased to laugh at this, but he is one of those who supported the Travel Concessions Act, brought in by his former Chief Whip. Concessionary fares will be eroded by the withdrawal of investment allowances.
  The former Secretary of State for Scotland, the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) came in, pushed in by his own Whips, then interrupted, with his hands in his pockets and talked about a tax. We are talking about an allowance, not a tax, and that is something which I hope he will accept.
  I reiterate to the Chief Secretary that our purpose is absolute opposition in principle to withdrawal of investment allowances. But if he, as a senior Minister of the Government, will give the assurance that he will give the investment incentive to the bus companies, we shall withdraw the Amendment. We have an absolutely rooted objection to the exclusion of bus companies from both investment allowances and investment incentives. Why are they singled out?
  I see that hon. Members opposite are going back now to their cups of cocoa and various things like that, which probably are very tasty. But these are important matters. Why is the industry singled out? I notice that the Chief Secretary was looking unhappy when he came in at the beginning. He had to make an Amendment, which he did with very good grace, to give away Government money, as he said. That is a complete misconception. It is returning to the industry its own money. This is a matter of principle which I hope that the Chief Secretary and his friends will immediately take into account.
  Mr. Sheldon: Quibble.
  Mr. Webster: It is a matter of principle that the hon. Gentleman would do well to learn.
  Mr. Sheldon: I always consider this to be a quibble—the double return of money is the same thing as giving money. These quibbles and semantics impress few people outside the House.
  Mr. Webster: I remind the hon. Gentleman that the duty of the House is to withhold the taxpayer's money until we are sure that a grievance is redressed and that the country is properly administered. It is the taxpayer's money, and it is the taxpayer that hon. Members on both sides of the House—and I hope that he will remember this—are here to serve and protect.
  We have seen the industry suffer first the 6d. on the gallon fuel duty. Later, it was given a concession, and was grateful, but now it has suffered the loss of investment allowance. Today it has been given a concession, and is grateful, but it is bemused; it is being treated like Pavlov's dog, and at the end of the day the concession is very much less than the original impost. That is what is going wrong with this unfortunate industry.
  We have heard statistics from my hon. Friends the Members for Worcester (Mr. Peter Walker) and Manchester, Withington (Sir R. Cary) showing that the bus companies will have to earn 40 per cent. more when investment allowances are withdrawn in order to keep the profit level the same as it is today. With that profit level, they have to plough back money to buy more vehicles, because all the time they are being exhorted by the Minister of exportation and transportation to invest in new equipment and new buses.
  What help are they being given in this respect? As we know, the Minister of Transport is not interested in looking after these people. Today she is talking to the N.U.R. She talks about social needs and removing congestion from the streets of the Metropolis and our major cities. Yesterday we had the report of the G.L.C., showing that if something is not done immediately there will be crippling congestion.
  What is being done today to assist public transport, to assist in moving the
  1532
  traffic in and out of our cities so that people are encouraged to leave their cars in their garages and go by bus? This is something that the House and the Minister of Transport approves of. But what pressure is the right hon. Lady making on this, and what interest is she taking in it, to ensure that something—not simply lip service—is done to assist in reducing the congestion in our great cities?
  There is the problem of regional development. The whole of the development areas lack capital investment, and they are the areas that are, broadly, dependent on the bus services.
  Mr. Gower: Hear, hear.
  Mr. Webster: I heard a Welsh voice behind me, and I was glad to hear the voice of Wales on this matter. What is being done to help regional development? My hon. Friends have talked today on behalf of the West Country, and will later talk, I hope, on Scotland and Wales. Those are the regions that have been particularly promised regional development, and there is now a Secretary of State for Wales and so on. In all the regional developments, rural transport is a key point that has been totally neglected.
  Withdrawal of investment allowances, without the balancing investment incentive about which the Chief Secretary has spoken, proves that the whole of the Ministry of Transport's policy is simply lip-service and exhortation. There is nowhere a case for taking away the investment allowance from the public transport and the bus industry, unless one gives them an investment incentive as well.
  I hope that my right hon. and hon. Friends will explore this matter thoroughly in the important debate that still lies ahead of us, and when they have done so I would advise them to divide on behalf of the Amendment so ably moved by my hon. Friend the Member for Worcester.
  Sir G. Nabarro: The reason why rural transport has entered largely into our lengthy debate this afternoon, almost entirely from my hon. Friends and myself, is that nearly all the rural constituencies of England are represented on this side of the House, and the Ministers on

  1533
  the Treasury Bench sit almost entirely for industrial and urban seats. They have no appreciation of the influences on the rural constituencies of removal of investment allowances on buses.
  The right hon. Gentleman the First Secretary sits for Gloucester. Hm! Not a blade of green grass in Gloucester. The hon. and learned Gentleman the Financial Secretary sits for a Derby seat. Not a blade of green grass in Derby. My hon. Friend who opened the debate, the hon. Member for Worcester (Mr. Peter Walker) sits for a county constituency.
  Mr. Brian Walden: Gloucester and Derby pay more in taxes.
  Sir G. Nabarro: The hon. Gentleman displays his ignorance of English constituencies. My hon. Friend sits for a constituency comprising 68,000 acres, of which the city of Worcester is the major part and there are vast adjoining rural areas. The Parliamentary Private Secretary should remain quiescent.
  Mr. Walden Mr. Walden rose—
  Mr. Speaker: Order. If the hon. Gentleman who has the Floor does not give way, the hon. Gentleman must keep his seat.
  Sir G. Nabarro: I am always generous in these matters, Mr. Speaker. I should be delighted to allow the hon. Gentleman to make his maiden speech as a Parliamentary Private Secretary.
  Mr. Walden: I rose simply to inform the hon. Member, as he well knows, that it is a convention that keeps Parliamentary Private Secretaries silent. I have just as much right to speak on this Amendment as the hon. Member has, since he made a comment on what I said. I did not say that Worcester was not a county seat. I said that it is possible that the constituencies of Gloucester and Derby pay far more taxes than the City of Worcester.
  Sir G. Nabarro: I should immediately incur your displeasure, Mr. Speaker, if I followed that entirely irrelevant intervention.
  I complete the trinity of speakers from the County of Worcestershire this afternoon. My hon. Friend the Member for
  1534
  Worcester opened the debate and my hon. Friend the Member for Bromsgrove (Mr. Dance) spoke a little later.
  An Hon. Member: Not many blades of grass there.
  Sir G. Nabarro: The hon. Gentleman intervenes—
  Mr. Speaker: Order. There are 630 constituencies. I hope that the hon. Gentleman will not mention them all.
  7.0 p.m.
  Sir G. Nabarro: I have no wish to respond in detail on that point, Mr. Speaker. I am talking of one two hundred and tenth part of the 630, namely, the three contiguous Worcestershire county constituencies, Worcester, Bromsgrove and Worcestershire, South, my own constituency. They are contiguous and they have certain features in common. They cover widespread rural areas and they all return Tory Members. They are largely denuded of rural transport. That is why our three voices have been heard in unison in this important connection.
  I turn now to the fiscal technicalities of the Amendment. The Chief Secretary said that he was dealing with a narrow point. So he was, a narrow but critically important point. There are three forms of capital allowance to which the House has become accustomed in the 21 years since capital allowances were first introduced by the late Sir John Anderson at the end of the last war. The three forms of capital allowances are the initial allowance, the investment allowance and the cash grant.
  The initial allowance has disappeared almost entirely from the industrial fiscal scene. The investment allowance is in process of disappearing, and in its place we have the cash grant, but with certain important exclusions. Public transport vehicles and goods vehicles are specifically excluded, and the only method which my hon. Friends and I have for securing the retention of a form of capital allowance on the narrow but critically important sector of public service vehicles is by moving this Amendment for the retention of investment allowances for public service vehicles. This is entirely relevant and we are entirely justified in calling in aid three important supporting arguments.

  1535
  First—we have heard from practically every speaker on this side—that the rural areas are being progressively denuded of transport services. We have practically none left in Worcestershire. There are vast areas of the countryside now where the railway lines have been closed and the stations have disappeared. There is even a threat now to shut the station at Pershore, a famous Worcestershire town the centre of an important horticultural area. There are hardly any bus services left at all, and we fear that added costs resulting from the withdrawal of the investment allowance will sound the death knell of the residual rural bus services.
  If anyone challenges me on what the increased costs will be, I respond at once. Does the House understand what an investment allowance, as introduced by former Tory Governments, did? It paid 130 per cent. of the historical capital cost of an asset over the working life of the asset. It gave a premium of 30 per cent. less Income Tax at the standard rate, on the value of the asset purchased. If that investment allowance is removed, it follows that on all capital assets purchased by bus companies there will be a commensurate increase in the cost of operation spread over the life of the working asset, the omnibus. This is critically important in the context of rural bus services. That is the first point.
  The second point I cannot do better than emphasise once more on behalf of my hon. Friends the Members for Worcester and for Bromsgrove and myself, in Worcestershire, South—these three widespread, contiguous, and largely rural constituencies.
  Mr. Michael Foot: Not again.
  Sir G. Nabarro: The hon. Gentleman sits for Ebbw Vale. Not a blade of green grass there either. No rural bus services in Ebbw Vale. The hon. Gentleman ought to sympathise with me in the plea I am making, for his industrial workers come to my constituency to enjoy good clean fresh air and the Worcestershire countryside.
  Mr. Foot: I was not complaining of the anthem. I was inviting the hon. Gentleman not to repeat the chorus every time.
  Sir G. Nabarro: It is not a question of a chorus. It is a question of alliteration and of emphasis, both very apposite to these arguments.
  I return to the trinity of Worcestershire Members, and I am coming to the second point. The fuel duty was mentioned. The Midland Red Omnibus Company, which covers these three Worcestershire constituencies, has estimated that the fuel duty alone cost it £900,000 in operating rural services in the West Midlands. My hon. Friend the Member for Yeovil (Mr. Peyton) mentioned the Jack Report. He spoke first of the Jack Report on Rural Bus Services in 1959. Bringing the matter up to date, the investigation in 1965, six years later, in four sample areas, again brought out this figure of £900,000 for Midland Red fuel costs. That is the second factor.
  The third factor has been mentioned, namely, the export market for buses. I hope that the Chief Secretary will not laugh at this point. It was his Administration which appointed Sir Donald Stokes to promote additional overseas sales, and Sir Donald Stokes, deputy chairman and managing director of Leyland, is the most successful bus salesman, overseas. Leyland earns huge sums in foreign exchange, but if the rate of output of buses for the home market is slowed down, it vitiates and undermines export promotion capability. [Laughter.] Those are the three factors. They should not be treated with levity by my hon. Friend the Member for Knutsford (Sir W. Bromley-Davenport).
  Sir W. Bromley-Davenport: I am sorry that my hon. Friend misunderstood. I was not treating what he said with levity. What I like about all his speeches is that they are so tremendously fluent and full of so many facts that the dumb Lobby fodder opposite dare not interrupt.
  Sir G. Nabarro: As always, I am grateful to my hon. Friend for his stimulating intervention.
  The Chief Secretary inquired whether my right hon. and hon. Friends and I wished to put buses into a special category for capital allowance purposes. My answer is an unequivocal," Yes ". He put buses into a special category in a negative sense by withdrawing the investment allowance and refusing in

  1537
  substitution the cash grant. He unilaterally discriminated against omnibuses.
  Mr. Sheldon: Will the hon. Gentleman allow me?
  Sir G. Nabarro: No, I will not. I told the hon. Member yesterday that he is a pest.
  The right hon. Gentleman discriminated unilaterally against buses by withdrawing the capital allowance upon them and refusing to substitute a cash grant. I seek in my speech, delivered with the utmost seriousness, to restore capital allowances to omnibuses, thereby helping rural services and helping our export trade, and that is the purpose of the Amendment. I hope that all my right hon. and hon. Friends, together with the Liberal Party, will join in the Lobby and vote unanimously and enthusiastically against the retrogressive step taken by the Treasury this day.
  Mr. Sheldon: The hon. Member tor Worcestershire, South (Sir G. Nabarro) did not show what I thought he always considered to be his usual courtesy in giving way. Otherwise I should not have risen now to make the only point that I wished to make when he referred to capital allowances and the need for their continuation in the form of investment allowances for buses.
  The Industrial Development Bill sought to replace investment allowances by investment grants. In passing the Second Reading of the Industrial Development Bill, the House accepted, as the Chief Secretary tried to make plain, that the two systems could not go side by side, that one cannot have investment grants side by side with investment allowances. Not only is the hon. Member for Worcestershire, South trying to get them going side by side but he is even trying to get them for one special category only, public service vehicles. This makes nonsense of the whole system of the Industrial Development Bill, which has been accepted by the House.
  Mr. Gower: Although the Chief Secretary is not primarily responsible for transport and is a Treasury Minister, it was hardly creditable that he should have spoken in reply to the Amendment with an apparent disregard of the plight of the bus services. The position here is in a special category because it is so des-
  1538
  perate. It is desperate in the South-West, in Worcestershire and certainly in the Principality of Wales. It is desperate in the case of rural services. The position is only slightly better in some of the municipal services where the loss-making capacity is much the same as in the rural areas but the position is disguised by rating precepts.
  The Chief Secretary must appreciate that we are pressing this point because it is the final straw, the culmination of many things which have made the difficulties of the industry so much greater. I am astonished that he should apparently have been so relatively unconcerned about the survival of bus services in some of the least accessible parts of the country.
  Mr. Lubbock: I was tempted to intervene by what was said by the hon. Member for Worcestershire, South (Sir G. Nabarro) and the hon. Member for Ashton-under-Lyne (Mr. Sheldon). The hon. Member for Worcestershire, South asked whether the Liberals would support the Amendment. We expressed our views forcibly on the subject during the Committee stage of the Finance Bill, and I thought that I could save time if I did not reiterate the views that I expressed then.
  The hon. Member for Ashton-under-Lyne has missed the whole point of the argument, which is that the Chief Secretary has refused to include buses in the proprosals for the investment grants. That is why some of us on this side are seeking to apply the investment allowance system to them.
  We believe that a result of the proposals which the Chief Secretary has brought before us very great harm will be caused to the rural bus industry and also to buses in constituencies such as mine in the outer parts of the big conurbations, where, I am sorry to say, we are not very well served in all respects by the London Transport Board.
  So in talking about the Amendment we should not limit our remarks purely to the people who live in rural areas. I believe that the bus companies about which the hon. Member for Manchester, Withington (Sir R. Cary) spoke serve a very large area in the City of Manchester as well as outside it. So we are talking about services which affect perhaps the majority of the inhabitants in the United

  1539
  Kingdom and not just one small section of the population. I wish the Chief Secretary would think again even at this late hour.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 138, Noes 204.

  Gourlay, Harry

  McGuire, Michael

  Roberts, Gwilym (Bedfordshire, S.)

  Greenwood, Rt. Hn. Anthony

  McKay, Mrs. Margaret

  Robertson, John (Paisley)

  Gregory, Arnold

  Mackenzie, Gregor (Rutherglen)

  Robinson, W. 0. J. (Walth'stow, E.)

  Grey, Charles (Durham)

  Mackie, John

  Rodgers, William (Stockton)

  Griffiths, David (Rother Valley)

  Mackintosh, John P.

  Roebuck, Roy

  Griffiths, R t. Hn. James (Llanelly)

  McMillan, Tom (Glasgow, C.)

  Rose, Paul

  Hamilton, James (Bothwell)

  McNamara, J. Kevin

  Ross, Rt. Hn. William

  Hamilton, william (Fife, W.)

  MacPherson, Malcolm

  Rowlands, E. (Cardiff, N.)

  Hamling, William

  Mahon, Peter (Preston, S.)

  Ryan, John

  Hannan, William

  Mahon, Simon (Bootle)

  Sheldon, Robert

  Hattersley, Roy

  Mallalieu, E. L. (Brigg)

  Shinwell, Rt. Hn. E.

  Hazell, Bert

  Manuel, Archie

  Shore, Peter (Stepney)

  Heffer, Erie S.

  Mapp, Charles

  Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

  Herbison, Rt. Hn. Margaret

  Mason, Roy

  Silverman, Sydney (Nelson)

  Hobden, Dennis (Brighton, K'town)

  Miller, Dr. M. S.

  Skeffington, Arthur

  Hooley, Frank

  Mitchell, R. C. (S'th'pton, Test)

  Slater, Joseph

  Houghton, Rt. Hn. Douglas

  Morgan, Elystan (Cardiganshire)

  Small, William

  Hoy, James

  Morris, Alfred (Wythenshawe)

  Spriggs, Leslie

  Hughes, Emrys (Ayrshire, S.)

  Morris, Charles R. (Openshaw)

  Steele, Thomas (Dunbartonshire, W.)

  Hughes, Roy (Newport)

  Murray, Albert

  Summerskill, Hn. Dr. Shirley

  Hunter, Adam

  Newens, Stan

  Symonds, J. B.

  Hynd, John

  Noel-Baker, Francis (Swindon)

  Thomas, George (Cardiff, W.)

  Jackson, Colin (B'h'se & Spenb'gh)

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

  Thomas, lorwerth (Rhondda, W.)

  Jackson, Peter M. (High Peak)

  Norwood, Christopher

  Thornton, Ernest

  Jeger, George (Goole)

  Ogden, Eric

  Tomney, Frank

  Jenkins, Hugh (Putney)

  O'Malley, Brian

  Urwin, T. W.

  Jenkins, Rt. Hn. Roy (Stechford)

  Oram, Albert E.

  Varley, Eric G.

  Jones, Dan (Burnley)

  Orme, Stanley

  Wainwright, Edwin (Dearne Valley)

  Jones, J. Idwal (Wrexham)

  Oswald, Thomas

  Walden, Brian (All Saints)

  Judd, Frank

  Owen, Will (Morpeth)

  Walker, Peter (Worcester)

  Kelley, Richard

  Page, Derek (King's Lynn)

  Wallace, George

  Kenyon, Clifford

  Pannell, Rt. Hn. Charles

  Watkins, David (Consett)

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

  Parkyn, Brian (Bedford)

  Wellbeloved, James

  Kerr, Russell (Feltham)

  Pearson, Arthur (Pontypridd)

  Whitlock, William

  Lawson, George

  Pentland, Norman

  Williams, Clifford (Abertillery)

  Leadbitter, Ted

  Perry, George H. (Nottingham, S.)

  Williams, W. T. (Warrington)

  Ledger, Ron

  Price, Christopher (Perry Bar)

  Willis, George (Edinburgh, E.)

  Lestor, Miss Joan

  Price, Thomas (Westhoughton)

  Wilson, William (Coventry, S.)

  Lever, Harold (Cheetham)

  Probert, Arthur

  Winnick David

  Lewis, Ron (Carlisle)

  Pursey, Cmdr. Harry

  Winterbottom, R. E.

  Lomas, Kenneth

  Randall, Harry

  Woodburn, Rt. Hn. A.

  Luard, Evan

  Rankin, John

  Woof, Robert

  Lyons, Edward (Bradford, E.)

  Redhead, Edward

  Yates, Victor

  McBride, Neil

  Rhodes, Geoffrey

  McCann, John

  Richard, Ivor

  TELLERS FOR THE NOES:

  MacDermot, Niall

  Roberts, Albert (Normanton)

  Mr. Joseph Harper and

  Mr. Walter Harrison.

  Mr. Diamond: I beg to move Amendment No. 105, in page 40, line 9, after "expenditure", to insert
  "or be made by virtue of section 332(3) of the said Act of 1952 in respect of a proportionate part of any contribution towards that expenditure".
  This Amendment deals with a possible defect in the application of Clause 35 to capital allowances which a trader may claim in respect of contributions he makes towards another trader's capital expenditure. The present position is that expenditure in respect of which a relevant grant is paid does not rank for an initial or investment allowance but, as the Clause is drafted, there is nothing to stop one trader getting a grant in respect of expenditure and another contributing to its cost and claiming an initial allowance in respect of his contribution. The reason is that, under Section 332(3) of the Income Tax Act, 1952, a trader who, for the purpose of his trade contributes a
  1542
  capital sum towards another trader's capital expenditure, can claim allowance as if his contribution had been expenditure on the provision of a similar asset.
  Of course it follows that the recipient of the contribution is to that extent debarred from claiming allowance himself on his expenditure. But the Board of Trade does not propose to take any account of contributions made by one trader towards another's capital expenditure. The contributor's expenditure under this Clause, therefore, is not expenditure that is taken into account for the purposes of a relevant grant. The duplication must be cured and the Amendment does so by providing that no initial or investment allowance shall be made under Section 332(3) for a proportionate part of any contribution towards the expenditure for which a relevant grant is paid.
  Amendment agreed to.
  Clause 36.—(TERMINATION OF FREE DEPRECIATION IN DEVELOPMENT DISTRICTS.)
  Mr. Higgins: I beg to move Amendment No. 32, in page 41, line 1, to leave out Clause 36.
  This is a dramatically worded Amendment, inasmuch as it asks the House to delete the Clause completely. I believe that it is unusual for an Amendment in this form normally to be selected at Report stage, so I am hopeful that the fact that it has been selected may help us persuade the Government that they should accept it.
  The main point to be made is that it is not intended to be a destructive Amendment but a constructive one. We believe that the system of free depreciation introduced by the Conservative Government has been extremely successful in encouraging investment in development districts. Indeed, the Minister of State, Board of Trade, replying to the debate on the Clause in Committee, said that the system had been extremely helpful in furthering regional policy.
  We on this side—and, I am sure, the House as a whole—are clear that, if we are to solve our economic problems, maintaining a high level of employment and stabilising the cost of living, it is vital in the long run to encourage investment in development districts because only if we do can we hope to keep the economy in balance and avoid deflating it, which would create more unemployment in areas of intrinsically high unemployment or else, as we tried to mop up such unemployment, would create an inflationary situation in the South and the Midlands. It will, therefore, be generally agreed that it is essential to have the right kind of regional policy which will encourage investment in development districts and areas.
  7.30 p.m.
  We pointed out in Committee that the system of free depreciation which enable people in development districts to write off immediately the assets against tax, as against the situation elsewhere where they can only write off the asset over the life of the asset has been instrumental in encouraging firms to go to the development districts. We on this side feel that this is a preferable system to the system of cash grants which the Government now propose to introduce.
  In the debate in Committee, however, we pointed out that the Government's proposals for the Selective Employment Tax have had, or are likely to have, a serious effect upon the distribution of industry between the regions, for the reason that the Selective Employment Tax will have the most favourable effect on the area of the West Midlands, which is the area which tends to overheat whenever the economy begins to gain momentum.
  Conversely, I quoted at column 708 on 22nd June the National Institute of Economic and Social Research Report, which pointed out that the effect of the tax, on the other hand, on areas such as Scotland would be far less favourable than on the West Midlands, and similarly for the north of England. Therefore, the Government are introducing in the Selective Employment Tax what is essentially a counter-regional policy. For that reason, we suggested in Committee that there would be a strong case for continuing to maintain the system of free depreciation incentives to offset the Selective Employment Tax.
  That, in essence, is why we have tabled the Amendment. It means that if the Government wish to continue the system of free grants, they will continue but, on the other hand, the system of free depreciation will continue alongside it and will do something to offset the adverse effects which the Selective Employment Tax is likely to have on the regions which naturally suffer from a high level of unemployment.
  When I made this point in Committee, the Minister of State, Board of Trade, agreed that it was an interesting proposition and that he would certainly pass it on to his right hon. Friend the Chancellor of the Exchequer. I am hopeful that the House will consider the point and agree that it is essential that we should do everything possible to encourage a regional balance and that, for that reason, we should be prepared to continue this existing incentive in addition to the incentives which the Government now propose in their Bill, which will give cash grants.
  It is also important to stress that since the Committee stage there have been further developments which make this all the more necessary. We now have a rather clearer idea of the view of the

  1545
  Chancellor of the Exchequer on the state of the economy over the next six months or year. This will have important effects on investment intentions, particularly in development districts, which would be affected by the deletion of the Clause.
  It now seems clear that in spite of the fact that the Chancellor was reluctant to give a clear view of the economy in the "regulator" debate, the right hon. Gentleman envisages a situation in which he will introduce measures in the autumn —namely, the Selective Employment Tax —which will take out of the economy £1,100 million. This inevitably will have a serious deflationary effect upon the economy, unless some of it were offset by some other method of increasing credit and easing things up. From the answer given yesterday by the Chancellor, however, it is clear that he has no intention of easing up credit restrictions, so that the interest-free loan which industry will be making to the Government in the period between September and next February will be covered by bank loans. In these circumstances, it is clear that the liquidity of firms will be severely squeezed. This inevitably will have an impact on their investment decisions.
  As the Chief Secretary has agreed on a number of points, people making investment decisions are open to be influenced by short-term measures, and this is likely to affect the decisions which they make. If, however, we wish to continue to encourage investment, and particularly in the development districts, I suggest that in the present economic climate, and in view of the prospects now facing the country, we need to take additional measures to offset those which the Chancellor has introduced and, apparently, proposes to introduce during the next year or so.
  Unless we do this, there is a grave danger that the country will get the worst of both worlds in the way of stop-go policies. Hon. Members opposite have constantly stigmatised previous efforts by Conservative Governments as stop-go policies, but, at least, in those circumstances, when we felt it necessary to adopt policies to reduce the increases in costs and in prices which were making our exports less competitive and foreign imports more competitive, they had a
  1546
  generalised effect on consumption, on investment and on Government spending, throughout the whole pattern of activity.
  The situation which the Government are now pursuing is in danger of having the bad effect which the previous policies had upon investment decisions, for the reasons which I have mentioned. At the same time, it is having very little effect upon consumption, prices or wage increases. This is the worst of all possible worlds. We cannot allow ourselves to be in a position where investment is deterred. Particularly, we cannot put ourselves in a position where investment in the development district is deterred. For this reason, we on this side feel that the Amendment is one which the House should accept.
  When we discussed this matter in Committee, we referred to the Press release which had been issued by the Board of Trade on 21st June and which was concerned with investment intentions. This confirmed the view which I have just expressed that industry's intentions with regard to investment are apparently declining. I asked the Minister of State, who replied to the debate, whether he could provide us with figures broken down by regions. He agreed that this was certainly an important point. He had not then had an opportunity of studying other than the Press release made by the Board of Trade, but he said that he would endeavour to ascertain whether such figures for investment intentions by regions were available.
  Those figures are clearly relevant to the Amendment and I hope that the Minister of State has been able to provide them for the Chief Secretary. It is only in the light of those figures that the House can fully appreciate the situation concerning development districts. I certainly hope that the figures will be produced. If they are not available, I hope that the Chief Secretary will ensure that the study which is to be taken into 1966 and 1966 intentions on investment will cover this regional problem, because we are very short of statistics in this sector and it is extremely difficult for us to appraise the effect which the various incentive schemes are having if we do not also have corresponding statistical inquiries of the kind which I have just mentioned.
  The essential thing here is that investment intentions are likely to be deterred by the Government's present measures and forecasts. Therefore, we need to take measures which will offset that. It may be that the Government feel quite unable to meet the cost of this. If, however, one looked at in terms of the total impact of all the taxation problems of the regions, in terms of the development areas and districts as against other areas, we would find that the development districts are not gaining significantly if one takes into account all the tax changes as a whole. We on this side very much hope that something of this kind can be done to help industry to invest in those areas.
  There was some debate in Committee on whether one system of giving incentives was better than the other, whether the system of cash grants was more likely to encourage industry to go to the development districts and invest there. In proposing this Amendment, I want to raise this query with the Chief Secretary. If we have two alternative systems about which the Minister of State said in his reply that it is open to doubt, when one looks at the arithmetic, which is the greater incentive, is there not a case for giving business firms the option as to which system they will adopt? It would seem that if we do that we shall have some real basis for deciding which system is likely to encourage firms to go to development districts and, more particularly, over a period of years which appears to have produced investment which is remunerative and helping the national economy.
  I add that point in parentheses, because the main point is that we need to do everything possible to encourage investment in the development districts. It is not sufficient merely to take the measures which are now proposed because of other actions which the Government are taking in the taxation field.
  I hope that the House will see fit to approve the Amendment on the lines which I have suggested.
  Mr. John Biffen: I am not an enthusiast for interventionist measures, even when they are sanctified by the description of a balanced regional economic policy. I rise only to ask the Chief Secre-
  1548
  tary if he can give me some information in dealing with an Amendment which seeks to abolish Clause 36, concerning the termination of free depreciation in development districts.
  Does the Treasury have any evidence of the effect which free depreciation has had in the past in attracting to development districts investment which would not have taken place there in any case?
  One appreciates that this kind of concession of free depreciation is quite expensive, and perhaps the Chief Secretary will be able to give us some figures on that point. But the matter of real interest for all who seek to make up their minds on the cost of our regional policy is the knowledge of how much additional investment has come to those districts on account of this concession, and how many jobs did that represent.
  Mr. Diamond: We are at one in our desire to help the development districts, now to be called development areas.
  Mr. Higgins: They are the same.
  Mr. Diamond: They are not the same, and that is a defect in the Amendment. The hon. Member for Worthing (Mr. Higgins) wants to leave in development districts, and development districts will cease to exist when the new Bill calls them development areas, which are of a larger area. But it does not matter. The point that I want to make is that we are at one in our desire to help.
  The only question is, which is the best way of helping as between alternatives? I gather that the alternatives which the hon. Gentleman suggests are two. The first is that we should give a choice of free depreciation as opposed to investment grants in the development areas, and the other is that we should have free depreciation instead of investment grants in the development areas. I was not sure whether at one time he was suggesting that we should have free depreciation as well as investment grants in development areas.
  Mr. Higgins: If the right hon. Gentleman reads through the debates on the Committee stage, he will see that we were suggesting "in addition to", in order to offset the counter-regional policy of the Selective Employment Tax.
  7.45 p.m.
  Mr. Diamond: I am glad to have that clear, because I thought that was what the hon. Gentleman was saying at one point.
  He has asked me to indicate the effect of free depreciation in encouraging firms to move into development districts. It is not possible to pinpoint the particular incentives which have had an effect on a particular firm. One can only say that the total effect of our policy and that of previous Governments has been to encourage firms, and the latest figures would indicate that. Recent indications are quite encouraging, particularly in one area. One has to have regard to the totality of all the things which help to make sure that there are not areas where economic resources, human and otherwise, remain unused. That is the purpose that both sides of the House seek to serve.
  We have had many debates on White Papers, on Second Readings and on the Bill which specifically deals with the problems as to which is the better method of encouraging investment in and encouraging firms to come to these areas. I have no doubt that free depreciation is an attractive freedom, and I willingly confess that I have made speeches from where the hon. Gentleman is now sitting in favour of the concept, always being told in reply that it cannot be done and that it is much too expensive for the Treasury.
  Although I am at one with all those who feel that free depreciation is a great encouragement, nevertheless a greater encouragement is a cash grant, not necessarily in terms of the final arithmetic, though I do not dispute what the hon. Gentleman has said about the final arithmetic; an incentive is not a matter of accountancy alone, although that enters into it. It is the feeling which the potential investor gets and what excites his investing appetite. That may be more than the arithmetic at the end of the discounted cash flow exercise.
  My own feeling about a cash grant is that, admittedly, the sooner one is in a position to get the cash grant more nearly in cash than in credit, the more will the incentive be effective.
  Mr. Biffen: That is all very metaphysical. Surely what the right hon. Gentleman is saying is that he does not know
  1550
  how much additional investment and how many jobs have gone to these districts on account of free depreciation, although I am sure that he is able to tell the House how much it has cost the Treasury.
  Mr. Diamond: No, I have not got the figures. I can perhaps get them for the hon. Gentleman. I have no figures in front of me of the cost of free depreciation as far as it has gone. What I am saying is that I agree entirely with the hon. Gentleman that it is metaphysical. The arguments which have gone on have gone on as to which is the better kind of incentive, and, as I say, incentive is more than a matter of arithmetic.
  The view which has been taken by the Government is that the incentive which we are proposing, expounded in the White Paper on Investment Incentives (Cmd. 2874), is the most helpful one that we can provide. It is more helpful than the one which is being forgone, and we believe that the allowance of 40 per cent. in the newly expanded development areas will be a great inducement, together with all the other items that I do not list now which form the Government's development area policy.
  The only question which remains is whether there should be a choice and/or, failing that—and I am glad the hon. Gentleman does not pursue the point—whether, in addition to a 40 per cent. cash grant policy, we could afford a free depreciation policy as well. The answer to that is, certainly not. The whole thing has been geared, and the Budget has been balanced, on the basis of the present proposed method of a cash grant, and one does not want to interrupt that.
  All the arguments put to us are that we must encourage investors to feel that they are safe in the knowledge that the present encouragement will continue until the investment is not only decided upon but has been made and the relief granted. We could not possibly consider the concession of free depreciation as well as. the very great encouragement which we are giving in the development areas.
  I do not hide my feeling that perhaps. this is a matter which is more easily discussed fully on the appropriate Bill. But it certainly has its relevance to the removal of free depreciation. Its removal is a corollary to the White Paper and the Bill which was fully discussed and

  1551
  to which the House agreed. I hope that the House recognises why I am dealing with this matter, although sympathetically, somewhat shortly. I do not want to go over the arguments which we have had many times. We have an established policy which has been fully explained on several occasions and which does not permit of free depreciation in the development districts continuing side by side with cash grants—a most expensive suggestion. I cannot recommend the Amendment to the House.
  Mr. John Boyd-Carpenter: As I was in the Chief Secretary's position when my right hon. Friend the Member for Barnet (Mr. Maudling) introduced the system of free depreciation, I should like to register my protest at what seems to me to be the wanton destruction of a most effective instrument in helping the development disticts. The right hon. Gentleman said very fairly that the question of the correct incentives to stimulate industrialists was not a matter of accountancy or precise calculation but, to some extent, metaphysical. I agree with him. But all the evidence is that this has been a most powerful instrument.
  The Chief Secretary and the Government underrate the strong effect of tax concessions of this sort in inducing the business community to make particular arrangements. The stimulus of a tax concession of this kind has always been underrated by right hon. Gentlemen—at any rate when they are in office. The Chief Secretary very fairly wondered whether this proposal was put forward by my hon. Friend the Member for Worthing (Mr. Higgins) as an alternative to the system of cash grants or in addition to it. As my hon. Friend rightly said, it is put forward in addition to the system of cash grants.
  The Chief Secretary sought to reject this proposal on the traditional and obvious grounds of expense. His rejection would have carried a good deal more weight if he had been in a position, as he was not, to say what was the cost of the system of free depreciation—in other words, what cost on top of the system of cash grants would be involved in running both these systems together. It is treating the House a little casually for him merely to say that the whole Budget
  1552
  is geared on this basis unless he is able to give the magnitude of the additional cost.
  The system of free depreciation has proved a most powerful stimulus and has worked well. This kind of tax concession has been tried not only in this country but somewhat differently in other countries. I do not know whether the Chief Secretary has seen the wonderful work which successive Italian Governments have done through the Caissa di Mezzogiorno in regenerating the south of Italy and dealing with the appalling poverty which used to exist in that part of the world. I have studied it on the spot. It has arrangements, not precisely in this form—this is a unique form—but having broadly this kind of effect which, according to Italian industrialists with whom I have discussed the matter, have been one of the major factors in getting them to invest in the south of Italy and to regenerate almost miraculously what used to be one of the most poverty-stricken areas of Europe.
  The question which arises on this Amendment is this: are we so sure that we shall never need this instrument to help our development districts that we can safely allow it to be abolished? I thought that my hon. Friend the Member for Worthing made a very powerful point when he drew attention to the fact that a situation seems to be developing which is likely to raise the same difficulties which the development districts have known in the past.
  At Question Time yesterday, the Chancellor of the Exchequer, by what he said and, more significantly, by what he did not say, gave to many of us a very grave impression of his views of the nation's economy and of the restrictive steps he was likely to take in the near future. It is common gossip that Bank Rate is to be raised. Whether tomorrow or the following week is a matter of argument, but it is coming soon. The right hon. Gentleman certainly gave the impression that other severe measures will be necessitated by, among other things, the appalling trade figures which the right hon. Gentleman knew yesterday and which we learned about today.
  In those circumstances, if the right hon. Gentleman, rightly or wrongly, is to apply further restrictive measures in

  1553
  the near future, since on every past occasion when they have been applied they have bitten particularly sharply on the development districts, it is a very considerable thing to ask the House to abandon what has been proved to be one of the best instruments—perhaps the best —for helping the development districts.
  My right hon. Friend the Member for Barnet was rightly applauded by both sides of the House on a new and imaginative concept in using taxation and fiscal measures to help the development districts when this instrument was produced. There was much reaction in old-fashioned circles against it. It proved a triumphant success in the circumstances in which it was introduced. The question for the House is whether, in view of what the Chancellor of the Exchequer suggested and against the background of these impending measures, this is the moment to abandon an instrument which has proved to be effective in maintaining investment and, therefore, employment, in the most vulnerable districts. We should be acting dangerously rashly so to abandon it.
  Mr. Higgins: If I may have the leave of the House to speak again, I must stress that the Chief Secretary has failed completely to answer our points. They were naturally an extension of the debate in Committee. It was abundantly clear from that debate that the Minister of

  Division No. 112.]

  AYES

  [8.0 p.m.

  Abse, Leo

  Carter-Jones, Lewis

  Fletcher, Ted (Darlington)

  Allaun, Frank (Salford, E.)

  Coe, Denis

  Floud, Bernard

  Alldritt, Walter

  Corbet, Mrs. Freda

  Foley, Maurice

  Archer, Peter

  Craddock, George (Bradford, S.)

  Foot, Michael (Ebbw Vale)

  Armstrong, Ernest

  Crawshaw, Richard

  Ford, Ben

  Atkins, Ronald (Preston, N.)

  Cronin, John

  Fowler, Gerry

  Bacon, Rt. Hn. Alice

  Cullen, Mrs. Alice

  Fraser, Rt. Hn. Tom (Hamilton)

  Baxter, William

  Davidson, Arthur (Accrington)

  Galpern, Sir Myer

  Beaney, Alan

  Davies, Dr. Ernest (Stretford)

  Garrow, Alex

  Bennett, James (G'gow, Bridgeton)

  Davies, G. Elfed (Rhondda, E.)

  Ginsburg, David

  Bessell, Peter

  Davies, Harold (Leek)

  Gourlay, Harry

  Bidwell, Sydney

  Delargy, Hugh

  Greenwood, Rt. Hn. Anthony

  Bishop, E. S.

  Dempsey, James

  Gregory, Arnold

  Blackburn, F.

  Dewar, Donald

  Grey, Charles (Durham)

  Booth, Albert

  Diamond, Rt. Hn. John

  Griffiths, David (Bother Valley)

  Boston, Terence

  Dickens, James

  Griffiths, Rt. Hn. James (Llanelly)

  Bowden, Rt. Hn. Herbert

  Doig, Peter

  Hamilton, James (Bothwell)

  Braddock, Mrs. E. M.

  Donnelly, Desmond

  Hamilton, William (Fife, W.)

  Bradley, Tom

  Dunn, James A.

  Hamling, William

  Brooks, Edwin

  Dunwoody, Mrs. Gwyneth (Exeter)

  Hannan, William

  Broughton, Dr. A. D. D.

  Dunwoody, Dr. John (F'th & C'b'e)

  Harper, Joseph

  Brown, Hugh D. (G'gow, Proven)

  Eadie, Alex

  Harrison, Walter (Wakefield)

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Edwards, Robert (Bilston)

  Hazen, Bert

  Brown, R. W. (Shoreditch & F'bury)

  English, Michael

  Helfer, Eric S.

  Buchan, Norman

  Ensor, David

  Herbison, Rt. Hn. Margaret

  Buchanan, Richard (G'gow, Sp'burn)

  Evans, Albert (Islington, S.W.)

  Hobden, Dennis (Brighton, K'town)

  Butler, Herbert (Hackney, C.)

  Evans, loan L. (Birm'h'in, Yardley)

  Hooley, Frank

  Butler, Mrs Joyce (Wood Green)

  Fernyhough, E.

  Houghton, Rt. Hn. Douglas

  Cant, R. B.

  Finch, Harold

  Hoy, James

  Carmichael, Neil

  Fitch, Alan (Wigan)

  Hughes, Emrys (Ayrshire, S.)

  State, Board of Trade would represent to the Chancellor of the Exchequer whether this proposal could be included to offset the counter-regional effect of the Selective Employment Tax in addition to the cash grant system. It is clear that the cost would be comparable with the premiums introduced in the Selective Employment Tax.
  But the more important point which we must consider is what is likely to happen to the revenue in the longer run. If we can balance up the regions in the way in which I had suggested, the level of income will go up faster than otherwise and the revenue obtained from that income will be greater because of our progressive system of taxation, and the whole economy will be stronger and better.
  Standing in for the Minister of State, Board of Trade, the Chief Secretary might have done the House the courtesy of reading the earlier debates and being quite clear what it was that we were getting at with this Amendment. On those grounds, I hope that my right hon. and hon. Friends will support the Amendment in the Lobby.
  Question put, That the words proposed to be left out, to the word "any in line 20, stand part of the Bill:—
  The House divided: Ayes 208, Noes 131.

  Hughes, Roy (Newport)

  Manuel, Archie

  Ryan, John

  Hunter, Adam

  Mapp, Charles

  Sheldon, Robert

  Hynd, John

  Mason, Roy

  Shore, Peter (Stepney)

  Jackson, Colin (B'h'se & Spenb'gh)

  Miller, Dr. M. S.

  Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

  Jackson, Peter M. (High Peak)

  Mitchell, R. C. (S'th'pton, Test)

  Silkin, John (Deptford)

  Jeger, George (Goole)

  Morgan, Elystan (Cardiganshire)

  Silverman, Sydney (Nelson)

  Jenkins, Hugh (Putney)

  Morris, Alfred (Wythenshawe)

  Skeffington, Arthur

  Jenkins, Rt. Hn. Roy (Stechford)

  Murray, Albert

  Slater, Joseph

  Johnston, Russell (Inverness)

  Newens, Stan

  Small, William

  Jones, Dan (Burnley)

  Noel-Baker, Francis (Swindon)

  Spriggs, Leslie

  Jones, J. Idwal (Wrexham)

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

  Steel, David (Roxburgh)

  Judd, Frank

  Norwood, Christopher

  Steele, Thomas (Dunbartonshire, W.)

  Kelley, Richard

  Ogden, Eric

  Summerskill, Hn. Dr. Shirley

  Kenyon, Clifford

  O'Malley, Brian

  Symonds, J. B.

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

  Oram, Albert E.

  Thomas, George (Cardiff, W.)

  Kerr, Russell (Feltham)

  Orme, Stanley

  Thomas, lorwerth (Rhondda, W.)

  Lawson, George

  Oswald, Thomas

  Thornton, Ernest

  Leadbitter, Ted

  Owen, Will (Morpeth)

  Thorpe, Jeremy

  Ledger, Ron

  Page, Derek (King's Lynn)

  Tomney, Frank

  Lestor, Miss Joan

  Pannell, Rt. Hn. Charles

  Urwin, T. W.

  Lever, Harold (Cheetham)

  Parkyn, Brian (Bedford)

  Varley, Eric G.

  Lewis, Ron (Carlisle)

  Pearson, Arthur (Pontypridd)

  Wainwright, Edwin (Dearne Valley)

  Lomas, Kenneth

  Pentland, Norman

  Wainwright, Richard (Colne Valley)

  Luard, Evan

  Perry, George H. (Nottingham, S.)

  Walden, Brian (All Saints)

  Lubbock, Eric

  Price, Christopher (Perry Barr)

  Walker, Harold (Doncaster)

  Lyons, Edward (Bradford, E.)

  Price, Thomas (Westhoughton)

  Wallace, George

  McBride, Neil

  Probert, Arthur

  Watkins, David (Consett)

  McCann, John

  Pursey, Cmdr. Harry

  Wellbeloved, James

  MacDermot, Niall

  Randall, Harry

  Williams, Clifford (Abertillery)

  McGuire, Michael

  Rankin, John

  Willis, George (Edinburgh, E.)

  McKay, Mrs. Margaret

  Redhead, Edward

  Wilson, William (Coventry, S.)

  Mackenzie, Gregor (Rutherglen)

  Rhodes, Geoffrey

  Winnick, David

  Mackie, John

  Roberts, Albert (Nortnanton)

  Winstanley, Dr. M. P.

  Mackintosh, John P.

  Roberts, Gwilym (Bedfordshire, S.)

  Winterbottom, R. E.

  McMillan, Tom (Glasgow, C.)

  Robertson, John (Paisley)

  Woodburn, Rt. Hn. A.

  McNamara, J. Kevin

  Robinson, W. O. J. (Walth'stow, E.)

  Woof, Robert

  MacPherson, Malcolm

  Rodgers, William (Stockton)

  Yates, Victor

  Mahon, Peter (Preston, S.)

  Roebuck, Roy

  TELLERS FOR THE AYES:

  Mahon, Simon (Bootle)

  Rose, Paul

  Mr. William Whitlock and

  Mallalieu, E. L. (Brigg)

  Ross, Rt. Hn. William

  Mr. Charles R. Morris.

  Rowlands, E. (Cardiff, N.)

  NOES

  Alison, Michael (Barkston Ash)

  Fortescue, Tim

  Mathew, Robert

  Allason, James (Hemel Hempstead)

  Galbraith, Hn. T. G.

  Mawby, Ray

  Astor, John

  Gilmour, Ian (Norfolk, C.)

  Maxwell-Hyslop, R. J.

  Atkins, Humphrey (M't'n & M'd'n)

  Glover, Sir Douglas

  Mills, Stratton (Belfast, N.)

  Awdry, Daniel

  Glyn, Sir Richard

  Mitchell, David (Basingstoke)

  Baker, W. H. K.

  Goodhart, Philip

  Monro, Hector

  Batsford, Brian

  Grant-Ferris, R.

  Morgan, W. G. (Denbigh)

  Beamish, Col. Sir Tufton

  Gurden, Harold

  Morrison, Charles (Devizes)

  Bell, Ronald

  Hall, John (Wycombe)

  Munro-Lucas-Tooth, Sir Hugh

  Bennett, Dr. Reginald (Gos. & Fhm)

  Hall-Davis, A. G. F.

  Murton, Oscar

  Biffen, John

  Harris, Frederic (Croydon, N.W.)

  Nabarro, Sir Gerald

  Birch, Rt. Hn. Nigel

  Harrison, Brian (Maldon)

  Nicholls, Sir Harmar

  Boyd-Carpenter, Rt. Hn. John

  Harrison, Col. Sir Harwood (Eye)

  Noble, Rt. Hn. Michael

  Braine, Bernard

  Harvie Anderson, Miss

  Orr, Capt. L. P. S.

  Brewis, John

  Hawkins, Paul

  Osborn, John (Hallam)

  Brinton, Sir Tatton

  Hay, John

  Page, Graham (Crosby)

  Brown, Sir Edward (Bath)

  Heald, Rt. Hn. Sir Lionel

  Pearson, Sir Frank (Clitheroe)

  Bruce-Gardyne, J.

  Heseltine, Michael

  Peel, John

  Bryan, Paul

  Higgins, Terence L.

  Peyton, John

  Bullus, Sir Eric

  Hill, J. E. B.

  Pike, Miss Mervyn

  Burden, F. A.

  Hirst, Geoffrey

  Pink, R. Bonner

  Campbell, Gordon

  Holland, Philip

  Pounder, Rafton

  Carlisle, Mark

  Hordern, Peter

  Powell, Rt. Hn. J. Enoch

  Cary, Sir Robert

  Hunt, John

  Pyrn, Francis

  Chichester-Clark, R.

  Hutchison, Michael Clark

  Quennell, Miss J. M.

  Clegg, Walter

  Irvine, Bryant Cadman (Rye)

  Renton, Rt. Hn. Sir David

  Cooke, Robert

  Jenkin, Patrick (Woodford)

  Ridsdale, Julian

  Corfield, F. V.

  Joseph, Rt. Hn. Sir Keith

  Rossi, Hugh (Hornsey)

  Costain, A. P.

  King, Evelyn (Dorset, S.)

  Russell, Sir Ronald

  Crawley, Aidan

  Kitson, Timothy

  Sharpies, Richard

  Cunningham, Sir Knox

  Knight, Mrs. Jill

  Shaw, Michael (Sc'b'gh & Whitby)

  Currie, G. B. H.

  Lewis, Kenneth (Rutland)

  Smith, John

  Dance, James

  Longden, Gilbert

  Summers, Sir Spencer

  Dean, Paul (Somerset, N.)

  Loveys, W. H.

  Talbot, John E.

  Deedes, Rt. Hn. W. F. (Ashford)

  McAdden, Sir Stephen

  Taylor, Sir Charles (Eastbourne)

  Dodds-Parker, Douglas

  MacArthur, Ian

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

  Elliot, Capt. Walter (Carshalton)

  Maclean, Sir Fitzroy

  Taylor, Frank (Moss Side)

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

  Macleod, Rt. Hn. lain

  Teeling, Sir William

  Errington, Sir Eric

  McMaster, Stanley

  Temple, John M.

  Eyre, Reginald

  Madden, Martin

  Thatcher, Mrs. Margaret

  Turton, Rt. Hn. R. H.

  Weatherill, Bernard

  Wylie, N. II.

  van Straubenzee, W. R.

  Webster, David

  Walker, Peter (Worcester)

  Whitelaw, William

  TELLERS FOR THE NOES:

  Walters, Dennis

  Wilson, Geoffrey (Truro)

  Mr. Anthony Grant and

  Ward, Dame Irene

  Wood, Rt. Hn. Richard

  Mr. Peter Blaker.

  Amendments made: In page 41, line 20, after" of ", insert:
  "or of any contribution towards".
  In line 22, leave out "thereof" and insert "of that expenditure".—[Mr. MacDermot.]
  Clause 39.—(CANCELLATION OF TAX ADVANTAGES FROM CERTAIN TRANSACTIONS IN SECURITIES.)
  Mr. Harold Lever: I beg to move Amendment No. 108, in page 46, line 6, at the end to insert:
  (8) Section 28 of the Finance Act 1960 shall be amended by the addition after proviso (ii) to subsection (10) thereof, of the following further proviso:—
  "(iiA) in the event that the Commissioners do not notify him that they are so satisfied as aforesaid, he shall have right of appeal to the Special Commissioners in like manner in all respects (with such modifications as may be required) as provided under subsections (6), (7), (8) and (9) of this section".
  I should find it most agreeable if the House accepted this Amendment with the same celerity as it accepted the last two. I hope that I shall be forgiven by the House in raising this very complex point if I make a few introductory remarks of explanation. The Amendment intends to add a proviso of benefit to the taxpayer, not in respect of any Clause in this Bill but in respect of Section 28 of the 1960 Act, which deals with tax avoidance and confers upon the Revenue the right to nullify for tax purposes transactions entered into that result in a tax advantage to the citizen.
  I ought to start by assuring the House that when a citizen obtains a tax advantage he is not necessarily engaged upon any kind of nefarious or complex duel with the Inland Revenue; he might be conducting his affairs in a quite normal way and still obtain a tax advantage. For example, a man who sells a ground rent obtains a tax advantage, in the sense that he gets the capital, which is tax free, instead of receiving the future income, which is taxable. It is the most innocent thing in the world for people to get tax advantages. A man who gives up smoking obtains a tax advantage.
  1558
  I hope that when the House examines the proviso it will not start on the assumption that only a certain group of people who are not worthy of the House's sympathy are affected by Section 28 of the 1960 Act. That Act gives the widest power to the Inland Revenue to decide that certain transactions come within the Section, in which case the direst and most penal consequences may follow. When I use the words "penal consequences" I merely echo words used by a learned law lord in a recent decision, where he described the consequences of the decision that he was reluctantly compelled to come to in a case where Section 28 was applied to a taxpayer.
  I can assure the House that there are many innocent and wholly acceptable transactions which could come within that Section. This was recognised by the House when those provisions were enacted, and a number of safeguards were put in to assist the taxpayer. One provided that if he was about to enter upon any kind of transaction which could conceivably come within the Section he could go to the General Commissioners of Inland Revenue and submit a statement of the transaction or transactions that he intended to enter into, whereupon the Commissioners would be obliged to tell him within a specified period— after obtaining all the necessary information—whether or not, in their opinion, the transaction came within the provisions of that penal Section.
  This was a well-intentioned protection and was received with approval by the House. The trouble is that it is largely nullified in practice, because the very nature of the transactions concerned lead to the Commissioners of Inland Revenue, when cases are submited to them, on most occasions to come to a decision unfavourable to the taxpayer unless the transaction is as innocent as taking over Aunt Millicent's poodle stud. Unless it is as simple as that the Revenue is apt to say "No". The Statute provides that a taxpayer who wishes to be sure that he is not within the penal provisions can apply to the Revenue for a certificate that the transaction was in order, and it was expected by the House that the Revenue,

  1559
  in many cases, would say "Yes" and in some cases "No".
  8.15 p.m.
  The defect arises from the fact that no provision is made for those cases where the taxpayer finds that the Revenue has said "No" and he is of the opinion that the Revenue is wrong. There should be some provision for this, and my Amendment would provide it. If a taxpayer submits to the Commissioners details of a transaction into which he proposes to enter and they say "No, this is within the Section", and refuse him a clearance, the least right he should have if Parliament's intention is not to be largely frustrated is to appeal to an impartial tribunal of a judicial character to decide whether or not the Commissioners were right in saying that he was entitled to a clearance for his transaction.
  The first point is that when a person applies to the Commissioners to have a transaction certified as being outside Section 28 he is not applying to an impartial body. I hope that no words of mine will be held in the least to reflect upon the entirely honourable way in which the Commissioners discharge their functions. On the other hand, they are the trained watchdogs of the Revenue and their natural reflex is to presuppose that almost anything that a taxpayer is getting up to which may conceivably advantage his tax position is something which ought not to be assisted.
  Therefore, owing to the present defective words of the Section, the unfortunate taxpayer who applies for the protection that Parliament intended, can apply only to the very people who are, by habit and training, occupationally suspicious of every transaction put to them. It is quite right that they should be, but the least protection that the taxpayer should have if the Section is to have any meaning is a right of appeal to the Special Commissioners of Inland Revenue or to the Board of Referees from a decision of the General Commissioners of Inland Revenue.
  The right which I propose to give the taxpayer by the Amendment is exactly the same as that which he receives in connection with another part of the Section. I am not asking for any intoxicating or revolutionary relief for the taxpayer; I am
  1560
  merely asking for the same sort of relief as is already given him in another part of the Section, whereby he is enabled to appeal to the Special Commissioners or to the Board of Referees.
  The Special Commissioners are of a judicial character. Although they are employed by the Revenue their habit, training and duties are such that they approach every case in a judicial manner and they do not have the reflexes to which I have referred. Unless we amend the law in the sense that I recommend we are sending the taxpayer who applies for relief before a biassed body, who, if they say "No", leave him without any remedy. With a little thought we can easily test how the protection we intended to give under the Section is valueless, or largely valueless, when we realise that most of these cases are of necessity complicated and perhaps permit of some dubiety.
  Obviously, when the Special Commissioners consider a case in which there is any kind of doubt, why should they clear it when they have the simple remedy of saying "No", in the blissful confidence that the taxpayer has no means of challenging their refusal. When in doubt, they must say, "No". They are hardly to be blamed: they cannot be expected to say, "Yes, this is certified for ever as a clear transaction", when they are in some doubt in the matter.
  That means that in any case where there is the smallest doubt they understandably turn it down. My hon. Friend shook his head or made some inclinations of his head which I wrongly inferred to be indicating dissent, but I have spoken to many of the leading institutions in the City whose duty it is, often on behalf of clients, to conduct these transactions and they tell me that it is their experience that transactions are often turned down when counsel has advised that, in his opinion, there is little doubt that the Section ought not to apply.
  However, if the clearance were not obtained, the citizen would be in great danger if he went ahead. I hope that I may be forgiven for going into some detail, because hon. Members may not be familiar with some of the technicalities on this point. It will be understood that when Parliament enacted this safeguarding proviso, it intended that account should be taken of the very precarious and dangerous situation in which a citizen would find

  1561
  himself if he were about to embark on transactions which may bring Section 28 into operation against him. Once the die is cast and the transaction undertaken, there is no going back and the citizen's tax position can be fraught with immense peril and serious and penal consequences
  I am explaining this at some length because I hope that I may be fortunate to catch your eye, Mr. Deputy Speaker, on other Amendments, when it will not be necessary to rehearse the same arguments. The recent case of Parker gave rise to a strange situation. Although we are always hearing complaints by the Revenue about adroit taxpayers who turn income into capital and escape tax, in this case the. Revenue succeeded by the use of Section 28, in turning capital into income and making it liable to Income Tax and Surtax. That shows the dangerous consequences which face a taxpayer who goes ahead with his transaction notwithstanding that he has not had a certificate of clearance.
  I am not asking for an alteration by this Amendment of the full rigour of a very rigorous and even dangerous Section —Section 28. What I am asking is that the taxpayer should have a simple ordinary right dictated by common justice. Before he commits himself to the penal liabilities of a transaction in which Section 28 may be invoked against him, he should have the right to go before some form of judicial tribunal—the simplest form, the Special Commissioners of Inland Revenue or the General Commissioners. That right is denied him at the moment.
  Another consequence follows. I would invite hon. Members who are restless of night to pass the weary hours of sleeplessness by attempting to read Section 28 in its entirety. Anyone who gave it even a casual glance would soon see the very difficult, intricate and almost incomprehensible nature of its provisions for the average man. The result is that when the Commissioners turn down his application, nothing in the world will make him go ahead with an ordinary, prudent transaction if he is told that this famous Section is likely to be applied to him without his having the opportunity of seeing what a judicial mind says about the transaction which he proposes to undertake.
  Another point to be considered, of course, is the numbers turned down. I invite my hon. and learned Friend—as this is of some consequence—to tell us how many applications have been made under this Section and how many turned down. I know of one which was accepted —the Trafalgar House case, I think, which was reported in the newspapers. But that was accepted only because, a few weeks later, the Chancellor intended to enact another Clause in the 1966 Finance Bill which would nullify the transaction.
  It would be interesting to know from the Financial Secretary what sort of percentages of refusals occurred to these applications. Nobody makes such applications frivolously. If one is engaged on a blatant form of tax avoidance, one does not go to the immense expense of hiring accountants and lawyers to prepare one's statement of case to put before the Commissioners, because one knows in advance that it will be turned down. I should be interested to hear the percentages of cases which are turned down without appeal.
  Most of the cases put up to the Revenue must be, almost ex hypothesi, innocent cases. I am also aware, and have been informed to this effect by leading City institutions and merchant bankers, that transactions which to them and their legal advisers seem completely innocent and without the Section, as long as they cannot give the assurance that the transaction is in order because the Commissioners, being in some doubt for some reason have said, "No", the unfortunate taxpayer is unable to engage in this transaction. This means that, for no good reason, he is intimidated from conducting his affairs prudently and reasonably.
  The fatal effect of the Section is that a man is done out of his rights without any judicial mind being applied to the case. Most taxpayers cannot afford to go ahead just the same and say, "When the Revenue assaults ' us for this we will go to the courts and have it decided." Such a man probably does not go through with the transaction, which means that a judicial mind has never been brought to bear on the question of whether the transaction is permissible.
  The effect of this subsection, as we thought it was in 1960, was to say," We are enacting a very penal, general and, from the average taxpayer's point of view, very dangerous and costly Section. The least that the citizen is entitled to expect from the House when it enacts such a section is that they will provide him with the mechanism for knowing his rights." This is done in a general way in many other countries.
  It would be no loss if we accepted the Amendment. It provides only some elementary justice for a taxpayer, in entitling him to know his rights. It would be far from setting a bad example in other areas of tax law. It might turn the Revenue's mind to the desirable idea that many taxpayers in other sections should have the mechanism for having their rights decided.
  In these circumstances, I submit that the case is made out for this modest Amendment to what is admittedly a very unusual innovation by way of tax legislation. I am concerned with the duty of the House. It is the duty of the House to hold the balance between the taxpayer and the Revenue in a fair way. In my submission the balance is at present in favour of the Revenue and against the taxpayer because of the formidable consequences of the taxpayer putting a foot wrong, because of the complexity of the law, because of the difficulty of his knowing his rights, because of the expense of litigation if he has to undertake it and if he cannot get the clearance—and also because of the great consequences to his personal fortune if the transaction comes unstuck and it is held, however reluctantly, by the courts that the Section applied.
  This has been held to be the case by the House of Lords. The case which seems to me most persuasive from the point of view of the use of the Section was one in which the taxpayer won by the unanimous decision of three Lord Justices of Appeal. It was held that the Section did not apply to the transaction by three eminent Lord Justices of Appeal, but that decision was revoked in the House of Lords by a vote of three to two. I want the House to bear this in mind as an indication of the difficulty which the taxpayer has in knowing his rights. Can we be doing any harm by
  1564
  this modest assistance to the taxpayer in going about his affairs?
  8.30 p.m.
  Mr. MacDermot: My hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) has developed his argument in favour of the Amendment very clearly and very fully. He is asking for a right of appeal against a refusal by the Commissioners to give a clearance under Section 28 for a proposed transaction.
  I begin by reminding the House that this Section has a limited effect. We are not concerned with whether the taxpayer has a general right to ask in advance what the attitude of the Revenue would be to a certain kind of transaction. That does not exist. But Section 28 gives the Revenue the power to counteract a tax advantage which has been obtained in specified circumstances—I admit that it is an involved Section—in consequence of a transaction or transactions in securities.
  When that power was given to the Revenue it was thought right, and obviously was right, to give to the taxpayer this right to go to the Commissioners and to inquire in anticipation of a transaction which he was contemplating what the attitude of the Commissioners would be to it. Would they seek to take action under Section 28 or would they not? They have to commit themselves in advance. There was a rather similar clearance procedure in the general Profits Tax anti-avoidance provision in the 1951 Act, and I remind the House that that, too, was unappealable.
  What the Amendment seeks to do is to introduce an entirely new concept into our tax administration in this country, aid that is to require the whole appellate machinery from the special tribunals to the courts to pronounce on the tax consequences of transactions that have not been carried out, in other words of a hypothetical situation. We know that in general our courts lean against being asked to decide such questions.
  What my hon. Friend asks would have practical implications which I am not sure would be welcomed. One of the great advantages of the present system is that the taxpayer can know, and know quickly, what the attitude of the Revenue would be to a transaction which he is contemplating. He has to have a reply within

  1565
  30 days from the Revenue or within 30 days of providing any further information which they may call upon him to supply before they can answer his question. When the provision was introduced, as a result of an Amendment proposed by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), in 1960, he said,
  "I feel that it is, therefore, all the more important that that clearance should be a procedure which would be liable to work reasonably quickly and efficiently".-[OFFICTAL REPORT, 25th May, 1960; Vol. 624, c. 615.]
  Mr. Harold Lever: Could it not work speedily and efficiently if it went to the Special Commissioners or the General Commissioners?
  Mr. MacDermot: I was doubtful whether I should give way to my hon. Friend and I see that I was wrong in doing so.
  Let me point out the result of what he proposes. First of all, against a refusal of a clearance there would be a right of appeal to the Special Commissioners. Supposing he wins before the Special Commissioners, the Revenue would have the right of appeal—indeed, either side would have the right of appeal—to the special appellate tribunal under this Section. Then, from there, there would be a right of appeal to the courts. It could be carried right up to the courts. One can argue both ways about this and say that it would be a very strong deterrent for anyone to seek to exercise the right of appeal in what was a hypothetical transaction in that he might find that he was taken up with expensive litigation in the courts.
  Mr. William Baxter: If the right of appeal were granted it could be granted up to the Special Commissioners and no further.
  Mr. MacDermot: That is not what the Amendment proposes. It proposes to apply the appeal procedure which exists in the case where the transaction has been carried out. All that we can do here is to consider the Amendment and I am pointing out what its implications would be.
  However, to take my hon. Friend's point, if it is right to allow the point to be adjudicated upon, with all the implications that that would have—for establishing precedent and helping to build
  1566
  up case law on the subject—I do not see how one could limit that right of appeal.
  My hon. Friend the Member for Cheetham suggested that under the present system Parliament's intention was being frustrated and that the Revenue applied this procedure in such a way that it would grant a certificate only if a transaction was as innocent as the disposal of Aunt Millicent's poodle stud. That is not the case. The Revenue's approach is that it will not refuse a clearance unless, having considered the transaction fully and all the circumstances of it, it would itself take action under the Section if the transaction were completed. That is the test which the Revenue applies and I assure my hon. Friend that there is no element of bluff in this. In other words, if, in spite of the decision of the Commissioners, a taxpayer went ahead, he would be confronted with action being taken under Section 28.
  About 200 applicants a year have been dealt with since this provision came into effect and, of those, clearance has been refused to about one-fifth. My hon. Friend is, therefore, right in thinking that the majority of applications obtain clearance. It is a large majority, with four-fifths of applications obtaining clearance.
  In view of these figures, and hearing in mind the big departure that this would make in our tax administration, I hope, in view of what I have said, that my hon. Friend will not feel it necessary to press the Amendment.
  Mr. Harold Lever: I do not wish it to be thought that I do not regard Section 28 as requiring Amendment along the lines I have indicated. However, there is some force in some parts of the argument adduced by my hon. and learned Friend and, on that basis, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Harold Lever: I beg to move, Amendment No. 109, in page 46, line 6, at the end to insert:
  (8) Section 28 of the Finance Act 1960 shall be amended by the addition, after proviso (ii) to subsection (1) thereof, of the following further proviso:—
  "(iiA) the tax advantage relates to tax which would have been chargeable in respect of any period ending before 5th April 1960".

  1567
  This Amendment also relates to Section 28 of the Finance Act, 1960. Perhaps I should have mentioned earlier that this is not in the least a party matter since it was a Conservative Government who enacted the 1960 Act. Nobody could doubt the enthusiasm for implementing that Measure, particularly Section 28 of it, and I am, therefore, happy to note that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has attached his name in support of the Amendment. I merely wish to make it clear that I am not seeking to make a party point out of this.
  As I said when discussing the previous Amendment, under Section 28 people who gain a tax advantage are, in certain circumstances, brought within the ambit of that Section. Whatever else the House intended, it is clear from the wording of the Section that Parliament did not intend that it should apply retrospectively in any sense to anybody.
  A proviso to that effect was inserted in the Section. I am not saying that the Section is retrospective; merely that it is exceedingly ambiguous. And if my hon. and learned Friend the Financial Secretary says that it is not retrospective and does not need amendment, I trust that he will give an explicit assurance that it is not the intention of the Revenue to treat as a tax advantage—to bring a man within that Section—where the tax advantage relates to tax which would have been chargeable before that Section was enacted.
  If he intends to give an explicit assurance I will be very happy, because it makes such a refreshing contrast, sometimes, from being quoted as a precedent how other Sections of other Acts have been passed in an oppressive form, so that we can be assured that the same mistakes will be made in all future legislation. If I can have that assurance from my hon. and learned Friend, I will be happy to withdraw the Amendment.
  Mr. MacDermot: I suspected that my hon. Friend's Amendment was in the nature of a probing Amendment, and I think that I can give him the assurance for which he is asking. It is our view that the object which the Amendment appears to be intended to achieve is already achieved, and that the Amendment is therefore unnecessary.
  1568
  As it stands, Section 28 provides that it is not to apply if the relevant transaction, or transactions, in securities was carried out before 5th April, 1960, provided that any change in the nature of a person's activities, being a change necessary in order that the tax advantage should be obtainable, was effected before that date. But also, and this is the specific assurance that my hon. Friend seeks, it does not apply to years before 1960–61—the year in which it became law —and it does not apply to enable the Revenue to take counteraction against avoidance in 1959–60 or any earlier year. I do not think that I can put it clearer than that.
  Mr. Harold Lever: Before my hon. and learned Friend sits down, perhaps he will answer explicitly two questions. First, do I take it that what he says means unambiguously that a man who gets a tax advantage relating to tax that would have been chargeable in any period before April, 1960, cannot thereby be brought within the Section on that count? If so, why not remove the ambiguity? Everyone reads the Section; not everyone listens to my hon. and learned Friend's wise and conciliatory words on the point.
  Mr. MacDermot: By leave of the House, I can only repeat that I do not think that my hon. Friend's Amendment is necessary; that there is nothing retrospective in the Section, and that the Revenue is not able, under the Section, to take counter-action against a tax advantage at a date earlier than that mentioned in the Amendment, namely, 5th April, 1960.
  Mr. Patrick Jerkin: I should like to take issue with the Financial Secretary on his statement that there is nothing retrospective in the Section. It may well be, as he has explained, that it is not open to the Revenue, under the Section as it stands, to make an assessment for any period before 5th April, 1960, but that is a very different thing from saying that there is nothing retrospective in the Section.
  The Parker case, to which the hon. Member for Manchester, Cheetham (Mr. Harold Lever) has referred, was an example that many people thought really amounted to a restrospection—
  Mr. MacDermot Mr. MacDermot indicated dissent.
  Mr. Jenkin: The hon. and learned Gentleman shakes his head, but perhaps he will listen for a moment. What is suggested is that possibly the House of Lords erred. That error cannot be put right judicially, but it can be put right through the Legislature.
  The order of events in the Parker case is worth recalling, because it is the retrospective aspect of the Section that has caused such a great deal of disturbance. The debentures were issued in 1953. Five years later, a so-called expert advised those concerned that they would be able to pay the Estate Duty that might become due if they were to redeem those debentures. In April, 1960, the then Chancellor of the Exchequer introduced the Budget and announced this new measure. On 14th July there was a notice to redeem the debentures. On 29th July, the new measure became law, and then, as the only stage after the measure became law, the debentures were actually redeemed, and the cash became payable.
  It has been suggested, indeed the House of Lords held, that the last stage was the point at which the tax advantage accrued, but when one has regard to what was said in this House and in Committee while a Bill was going forward on the subject of retrospection, it must be clearly established that the House did not recognise the effect which the legislation would have.
  8.45 p.m.
  I will make one or two quotations from the Committee stage and the Report stage of the Bill on this particular point. An Amendment was introduced by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in Committee to deal with the question of retrospection. In his reply the Attorney-General. then Sir Reginald ManninghamBuller, asked my hon. Friend to withdraw the Amendment and indicated that the Amendment in fact would not be wholly effective. The Attorney-General said:
  "The intention of this proviso is to ensure that Clause 26 should be in no way retrospective. There, we are on completely common ground."— [OFFICIAL REPORT, 25th May, 1960; Vol. 624, c. 504.]
  At a later stage, on Report, the Attorney-General himself introduced a
  1570
  further Amendment to deal with the subject of retrospection and he said:
  "I hope that this Amendment, which deprives the operation of this Clause of any retrospective effect will be satisfactory to my hon. Friend and to the House."—[OFFICIAT. REPORT, 6th July, 1960; Vol. 626, c. 603.]
  "Any retrospective effect", yet we had the Parker case where it appeared that the issue of the debentures and the decision to use them for Estate Duty avoidance all happened years before the Act became law. It may be said, surely if the transaction was within the Section it was right that it should be caught, but one has to look to see what the Attorney-General said when he dealt with the question of issue of bonus securities and their subsequent redemption.
  On 25th May he said:
  "One of the devices aimed at here is, for instance, the creation of bonus shares"—
  I emphasise the word "creation"—
  "followed by a corresponding reduction of capital."—[OFFICIAL REPORT. 25th May. 1960; Vol 624, c. 511.]
  He went on to make clear that it is not the creation itself which gives rise to tax advantage—of course not, it is the redemption—but the Clause struck at the creation. I cannot believe that the House would have accepted the Attorney-General's assurances which he gave in Committee if it had realised that a creation of bonus debentures seven years before would be the start of a series of transactions which would give rise to liability under the Section.
  Mr. Harold Lever: Perhaps the hon. Gentleman will allow me to ask him this. The House can hardly have supposed that that very Attorney-General would give the casting vote in the House of Lords which reversed the unanimous decision of the Court of Appeal.
  Mr. Patrick Jenkin: This is a matter to which I have no doubt attention has been drawn in other places, and it would be wrong for me to comment on that. The fact is that the most explicit assurances were given in Committee and to the House that this Section was intended to have no retrospective effect whatever and the leading case, the Commissioners v. Parker, decided in the House of Lords in January this year, is one which clearly by any stretch of language would be regarded by the House at that time as

  1571
  having retrospective effect. Only the final stage of the transaction was completed after the Bill became an Act.
  Perhaps this aspect of retrospection is not covered by the Amendment in the name of the hon. Member for Manchester, Cheetham (Mr. Harold Lever) and myself. I take what the Financial Secretary said on this but I think it would be right, if he should catch your eye, Mr. Deputy Speaker, that he should give an indication of what the Treasury thinking on that aspect of the matter is having regard to the very clear and explicit assurances given to the House in 1960.
  Mr. Harold Lever: In view of the explicit assurances which I take it my hon. and learned Friend has given, I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.
  Mr. Harold Lever: I beg to move, Amendment No. 111, in page 46, line 6, at the end to insert:
  (8) Section 28 of the Finance Act 1960 shall be amended by the addition of the following subsection:—
  "12A. This section shall not apply where it is proved that the result of the transactions relied upon could reasonably have been obtained by transactions to which this section does not apply".
  The Section to which the Amendment refers is Section 28 which we have been discussing on the two previous Amendments. The intent of the Amendment is to direct Section 28 exclusively to those transactions which were regarded by the House when passing the Section as a mischief to be eliminated by action on the part of the Revenue.
  If a man can undertake transaction A or B to the same effect and have the same tax advantage, and if transaction A would not bring him within the Section but, because he happens to do it by transaction B he comes within the Section, under the law as it stands he is caught by this penal Section. This must in all logic be clearly wrong.
  What the Revenue is saying is, "You could have got the same tax advantage by taking any other similar commercial step that would not have brought you within the Section. Too bad, you have come within the Section." It should be remembered that we are not playing a game of croquet here where, if people go the wrong side of the hoops, they
  1572
  are penalised. We are dealing with very serious and substantial rights of the taxpayer which are liable to be infringed by the most penal Section of tax which has ever been enacted by Parliament. This House should be very jealous to see that only the kind of transactions and tax advantages which the House is anxious to stop should be stopped.
  If a man gets a tax advantage that was open to him in a hundred innocent ways which would not be within the Section, it is ludicrous that the Section should be applied to him because he happens to have made some legal error or has been wrongly advised by his accountants in an area of law where the most skilful advisers are baffled by ambiguity. In those circumstances, the least the taxpayer ought to be able to say is," It is quite by chance that I am within this Section. What I was doing was so fundamentally innocent of the intentions which Parliament was anxious in 1960 to end, that I could well produce the same kind of tax result to myself by a transaction which nobody could complain about." But the Revenue says," We have got him. We want our pound of flesh."
  Let me give an example. Leaving aside the retrospective character of what was done, because it would not be proper for me to emphasise it again, take the case of somebody who put herself in possession of a debenture before the 1960 Section came into being to confer these inestimable blessings upon the Inland Revenue and presumably upon the taxpayers as a whole. This lady had a debenture which was in existence before the Act was passed. She could have sold it to an institution or to a third party and got her money for it. She could not conceivably have come within the Section. By no kind of argument could she have come within the Section. That is not only my opinion. That was the express opinion of Lord Justice Salmon, the only judge who made an express comment upon it so far as I know, though other judges said that this was a general mischief.
  I am sorry that my argument troubles my hon. and learned Friend the Financial Secretary to a point of tedium, but I cannot help it. I feel it my duty to advance the argument. In the Parker case the Lord Justice said that this lady

  1573
  could quite properly, normally and without any risk, have escaped the penal consequences of this penal Section had she sold the debenture to a third party. The third party could have had it redeemed by the company and there would have been no question of liability under the Section. Because she happened, in innocence, and precisely because she was innocent and thought herself to be outside the scope of the Section, to act in a direct and naive manner, she was caught by the Section and the Inland Revenue, and was penalised to the extent of losing probably the whole of the value of the capital asset that she had in being before the 1960 Act was enacted.
  Unless the Section is amended in this way, the Revenue will collect tax that is not avoided by the transactions at which we were aiming but the liability is brought into being simply because of an error of judgment on the part of the legal advisers. The only people who could get any benefit by these transactions are people who have made a mistake of judgment based upon legal advice. In order to come outside the Section they would still have to prove that a perfectly normal commercial transaction would have produced the same tax advantage. I am really saying that the tax advantage must be basically innocent if it could have been obtained without performing any of the transactions hit at by Section 28. In the circumstances, I hope that I may have an encouraging answer from my hon. and learned Friend.
  Mr. MacDermot: It is a long time—almost 12 months—since I have found myself in greater disagreement with my hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) than I do over the Amendment. Section 28 is an anti-avoidance provision. There is the clearance procedure which we were discussing a short time ago for the innocent kind of person on whose behalf my hon. Friend was speaking. The Section has a limited scope. It is not a general anti-avoidance provision; it operates only in certain specified circumstances, and in consequence of a transaction or transactions in securities. If, as a result of that provision, the Revenue is able effectively to take action against an avoidance measure., it seems to me to be a curious argument to say, "Well, of course, if the person who is indulging in the tax
  1574
  avoidance had been able successfully to achieve—
  Mr. Harold Lever: Will my hon. and learned Friend allow me?
  Mr. MacDermot: I will not. I shall complete my argument before giving way to my hon. Friend, but I shall give way in a moment.
  The effect of what my hon. Friend proposes is that the avoider against whom the Section is aimed, would be able to say of the avoidance results—" result" is the word that my hon. Friend uses in the Amendment—of the transaction, "I agree that you have caught me on this transaction, but if I had only thought of it in time or if my advisers had been sufficiently astute, they might have thought up some quite different, or slightly different, transaction which would have escaped the net of Section 28, and I should have been able to achieve my avoidance purpose in that way".
  If, in those circumstances, the Revenue were to be told by the Amendment that it is not entitled to put into operation the power given to it by Parliament under Section 28, it would have to operate it with one hand tied behind its back. I shall now give way to my hon. Friend.
  Mr. Harold Lever: I am grateful to my hon. and learned Friend, who is always exceedingly indulgent to me. He keeps using the phrases, "tax avoidance" and "aimed at the tax avoider". He is utterly mistaken. The Section is not aimed at tax avoidance or the tax avoider. One does not have to be a tax avoider to come within the provisions of the Section. It is merely a question of tax advantage, which is a totally different matter. My hon. and learned Friend should look at the definition of tax advantage.
  Mr. MacDermot: As my hon. Friend knows, many transactions of this kind are perfectly innocent and the person concerned can approach the Revenue and obtain a clearance beforehand. As I said a short time ago, four-fifths of such transactions obtain the clearance. But this was a power given to the Revenue effectively to prevent transactions being entered into the object of which was avoidance. It is an anti-avoidance provision and it was passed as such by Parliament.
  Mr. Patrick Jenkin: That is a very unsatisfactory answer. I do not believe that the Financial Secretary and his advisers have taken account of the difference between the intention of Parliament when it passed the Section and the explanations given to it when it was asked to do so and the interpretation which has been placed on the Section by the courts.
  9.0 p.m.
  It is apparent that Section 28 opened a Pandora's box of measures to strike at all sorts of transactions, transactions which might be colourable or wholly innocent. To illustrate this, I will read to the House two quotations. The first is from the Attorney-General, on 25th May, 1960:
  "It is wrong to say—some people have said it because they have misunderstood the Clause, which is not easy to understand that it is a wide general power exercisable at the discretion of the Revenue directed against tax avoidance. It does no such thing. Subsections (1) and (2) clearly limit the scope of the Clause to doing what the Chancellor said on 7th April….."—[OFFICIAL REPORT, 25th May, 1960; Vol. 624, c. 5101
  There is a case now before the courts, which recently came before the Court of Appeal but which, I understand, is under appeal at the moment, so I shall not refer to it. I shall read only one passage from the judgment of one of the learned lords justices who heard the case

  Division No. 113.]

  AYES

  [9.2 p.m.

  Alison, Michael (Barkston Ash)

  Dance, James

  Johnston, Russell (Inverness)

  Allason, James (Hemel Hempstead)

  Dean, Paul (Somerset, N.)

  Joseph, Rt. Hn. Sir Keith

  Astor, John

  Deedes, Rt. Hn. W. F. (Ashford)

  King, Evelyn (Dorset, S.)

  Atkins, Humphrey (M'en & M'd'n)

  Dodds-Parker, Douglas

  Kitson, Timothy

  Awdry, Daniel

  Elliot, Capt. Walter (Carshalton)

  Knight, Mrs. Jill

  Baker, W. H. K.

  Errington, Sir Eric

  Longden, Gilbert

  Batsford, Brian

  Fortescue, Tim

  Loveys, W. H.

  Beamish, Col. Sir Tufton

  Gilmour, Ian (Norfolk, C.)

  Lubbock, Eric

  Bell, Ronald

  Glover, Sir Douglas

  McAdden, Sir Stephen

  Bennett, Dr. Reginald (Gm. & Fhm)

  Glyn, Sir Richard

  MacArthur, Ian

  Bessell, Peter

  Goodhart, Philip

  Macleod, Rt. Hn. Iain

  Bilfen, John

  Grant, Anthony

  Maddan, Martin

  Birch, Rt. Hn. Nigel

  Grant-Ferris. R.

  Marten, Neil

  Blaker, Peter

  Gurden, Harold

  Mathew, Robert

  Boyd-Carpenter, Rt. Hn. John

  Hall, John (Wycombe)

  Mawby, Ray

  Braine, Bernard

  Hall-Davis, A. G. F.

  Maxwell-Hyslop, It J.

  Brinton, Sir Tatton

  Harris, Frederic (Croydon, N.W.)

  Mills, Stratton (Belfast, N.)

  Brown, Sir Edward (Bath)

  Harrison, Brian (Maldon)

  Mitchell, David (Basingstoke)

  Bruce-Gardyne, J.

  Harrison, Col. Sir Harwood (Eye)

  Monro, Hector

  Bullus, Sir Eric

  Harvie Anderson, Miss

  Morgan, W. G. (Denbigh)

  Burden, F. A.

  Hawkins, Paul

  Morrison, Charles (Devizes)

  Campbell, Gordon

  Heald, Rt. Hn. Sir Lionel

  Munro-Lucas-Tooth, Sir Hugh

  Carlisle, Mark

  Heseltine, Michael

  Murton, Oscar

  Cary, Sir Robert

  Higgins, Terence L.

  Nabarro, Sir Gerald

  Chichester-Clark, R.

  Hiley, Joseph

  Neave, Airey

  Clark, Henry

  Hill, J. E. B.

  Nicholls, Sir Harmar

  Clegg, Walter

  Hirst, Geoffrey

  Noble, Rt. Hn. Michael

  Cooke, Robert

  Holland, Philip

  Nott, John

  Corfield, F. V.

  Hordern, Peter

  Orr, Capt. L. P. S.

  Costaln, A. P.

  Hunt, John

  Osborn, John (Hallam)

  Crawley, Aldan

  Hutchison, Michael Clark

  Page, Graham (Crosby)

  Cunningham, Sir Knox

  Jenkin, Patrick (Woodford)

  Pearson, Sir Frank (Clitheroe)

  Currie, G. B. H.

  Peel, John

  in the Court of Appeal. Lord Justice Danckwerts said:
  "Its objects are clear"—
  referring to the section—
  "to enable the Commissioners of Inland Revenue to outmanoeuvre the ingenuity of wealthy taxpayers in arranging their business affairs so as to avoid or minimise tax. How delightful it must be to a taxing officer to have the power to counteract ' a tax advantage ' "—
  the words "a tax advantage" are in inverted commas—
  "which a person is in a position to obtain or has obtained by assessments or other adjustments. The section is indeed the tax collector's dream. Gone is the old principle that the citizen is entitled to arrange his affairs so as to minimise his liability to tax".
  What would have happened if the Attorney-General had stood at that Box and used those words in describing the Section? What sort of response would it have had from Parliament then? I regard this as a matter of considerable constitutional importance, and I consider that, for those reasons, it is right that the House should register its protest and divide in favour of the hon. Gentleman's Amendment.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 132, Noes 193.

  Peyton, John

  Smith, John

  Ward, Dame Irene

  Pike, Miss Mervyn

  Summers, Sir Spencer

  Weatherill, Bernard

  Pink, R. Bonner

  Talbot, John Er

  Webster, Davi

  Pounder, Ration

  Taylor, Sir Charles (Eastbourne)

  Whitelaw, William

  Powell, Rt. Hn. J. Enoch

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

  Wilson, Geoffrey (Truro)

  Pym, Francis

  Taylor, Frank (Moss Side)

  Winstanley, Dr. M. P.

  Quennell, Miss J. M.

  Teeling, Sir William

  Wood, Rt. Hn. Richard

  Renton, Rt. Hn. Sir David

  Temple, John M.

  Wylie, N. R.

  Ridsdale, Julian

  Thatcher, Mrs. Margaret

  Rossi, Hugh (Hornsey)

  TurtOn, Rt. Hn. R. H.

  TELLERS FOR THE AYES:

  Russell, Sir Ronald

  van Straubenzee, W. R.

  Mr. R. W. Elliott and

  Sharpies, Richard

  Wainwright, Richard (Coine Valley)

  Mr. Reginald Eyre.

  Shaw, Michael (Sc'b'gh & Whitby)

  Walker, Peter (Worcester)

  NOES

  Abse, Leo

  Gregory, Arnold

  Norwood, Christopher

  Alldritt, Walter

  Grey, Charles (Durham)

  Ogden, Eric

  Archer, Peter

  Griffiths, David (Rother Valley)

  O'Malley, Brian

  Armstrong, Ernest

  Griffiths, Rt. Hn. James (Llanelly)

  Orem, Albert, E.

  Atkins, Ronald (Preston, N.)

  Hamilton, James (Bothwell)

  Orme, Stanley

  Bacon, Rt. Hn. Alice

  Hamilton, William (Fife, W.)

  Oswald, Thomas

  Beaney, Alan

  Hamling, William

  Owen, Will (Morpeth)

  Bennett, James (G'gow, Bridgeton)

  Hannan, William

  Page, Derek (King's Lynn)

  Bidwell, Sydney

  Harper, Joseph

  Parkyn, Brian (Bedford)

  Bishop, E. S.

  Harrison, Walter (Wakefield)

  Pearson, Arthur (Pontypridd)

  Blackburn, F.

  Hazett, Bert

  Pentland, Norman

  Booth, Albert

  Heifer, Eric S.

  Perry, George H. (Nottingham, S.)

  Boston, Terence

  Herbison, Rt. Hn. Margaret

  Price, Christopher (Perry Barr)

  Bowden, Rt Hn. Herbert

  Hobden, Dennis (Brighton, K'town)

  Price, Thomas (Westhoughton)

  Braddock, Mrs. E. M.

  Hooley, Frank

  Probert, Arthur

  Bradley, Tom

  Houghton, Rt. Hn. Douglas

  Pursey, Cmdr. Harry

  Brooks, Edwin

  Hoy, James

  Randall, Harry

  Broughton, Dr. A. D. D.

  Hughes, Emrys (Ayrshire, S.)

  Rankin, John

  Brown, Hugh D. (G'gow, Proven)

  Hughes, Roy (Newport)

  Redhead, Edward

  Brown, Bob (N c' tie-upon. Tyne, W.)

  Hunter, Adam

  Rhodes, Geoffrey

  Buchan, Norman

  Hynd, John

  Richard, Ivor

  Buchanan, Ftichard (G'gow, Sp'burn)

  Jackson, Cohn (B'h'ss & Spenb'gh)

  Roberts, Albert (Normanton)

  Butler, Herbert (Hackney, C.)

  Jackson, Peter M. (High Peak)

  Roberts, Gwilym (Bedfordshire, S.)

  Butler, Mrs. Joyce (Wood Green)

  Urger, George (Goole)

  Robertson, John (Paisley)

  Cant, R. B.

  Jenkins, Hugh (Putney)

  Robinson, W. 0. J. (Walth'stow, E.)

  Carmichael, Neil

  Jenkins, Rt. Hn. Roy (Stechford)

  Rodgers, William (Stockton)

  Carter-Jones, Lewis

  Jones, Dan (Burnley)

  Roebuck, Roy

  Coe, Denis

  Jones, J. Idwal (Wrexham)

  Rose, Paul

  Corbet, Mrs. Freda

  Judd, Frank

  Rosa, Rt. Hn. William

  Craddock, George (Bradford, S.)

  Kelley, Richard

  Rowlands, E. (Cardiff, N.)

  Crawshaw, Richard

  Kenyon, Clifford

  Ryan, John

  Cullen, Mrs. Alice

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

  Sheldon, Robert

  Davidson, Arthur (Accrington)

  Kerr, Russell (Feitham)

  Shore, Peter (Stepney)

  Davies, Dr. Ernest (Stretford)

  Lawson, George

  Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

  Davies, C. Elfed (Rhondda, E.)

  Leadbitter, Ted

  Silkin, John (Deptford)

  Davies, Harold (Leek)

  Ledger, Ron

  Skemngton, Arthur

  Delargy, Hugh

  Lester, Miss Joan

  Slater, Joseph

  Dempsey, James

  Lewis, Ron (Carlisle)

  Small, William

  Dewar, Donald

  Lomas, Kenneth

  Spriggs, Leslie

  Diamond, Rt. Hn. John

  Luard, Evan

  Steele, Thomas (Dunbartonshire, W.)

  Dickens, James

  Lyons, Edward (Bradford, E.)

  Summerskiii, Hn. Dr. Shirley

  Doig, Peter

  McBride, Nell

  Symonds, J. B.

  Donnelly, Desmond

  McCann, John

  Thomas, George (Cardiff, W.)

  Dunn, James A.

  MacDermot, Niall

  Thomas, lonverth (Rhondda, W.)

  Dunwoody, Mrs. Cwyneth (Exeter)

  McGuire, Michael

  Tourney, Frank

  Dunwoody, Dr. John (F'th & C'b'e)

  McKay, Mrs. Margaret

  Urwln, T. W.

  Eadie, Alex

  Mackenzie, Gregor (Ruthergien)

  Varley, Eric G.

  Edwards, Robert (Bilston)

  Mackintosh, John P.

  Wainwright, Edwin (Deanne Valley)

  English, Michae

  McMillan, Tom (Glasgow, C.)

  Walden, Brian (All Saints)

  Ensor, David

  McNamara, J. Kevin

  Walker, Harold (Doncaster)

  Evans, Albert (Islington, S. W.)

  MacPherson, Malcolm

  Wallace, George

  Evans, loan L. (Birm'h'm, Yardley)

  Mahon, Peter (Preston, S.)

  Watkins, David (Consett)

  Fernyhough, E.

  Mahon, Simon (Bootle)

  Wellbeloved, James

  Finch, Harold

  Mallalieu, E. L. (Brigg)

  Wkliams, Clifford (Abertillery)

  Fletcher, Ted (Darlington)

  Manuel, Archie

  Willis, George (Edinburgh, E.)

  Floud, Bernard

  Mapp, Charles

  Wilson, William (Coventry, S.)

  Foley, Maurice

  Mason, Roy

  Winniek, David

  Foot, Michael (Ebbw Vale)

  Miller, Dr. M. S.

  WinterbOttoM, R. E.

  Ford, Ben

  Mitchell, R. C. (S'th'ptort, Test)

  Woodburn, Rt. Hn. A.

  Fowler, Gerry

  Morgan, Elystan (Cardiganshire)

  Woof, Robert

  Fraser, Rt. Tom (Hamilton)

  Morris, Alfred (Wythenshawe)

  Yates, Victor

  Galpern, Sir Myer

  Morris, Charles R. (Openshaw)

  Carrow, Alex.

  Murray, Albert

  TELLERS FOR THE NOES:

  Ginsburg, David

  Newens, Stan

  Mr. William Whitlock and

  Gourley, Harry

  Noel-Baker, Francis (Swindon)

  Mr. R. W. Brown.

  Greenwood, Rt. Hn. Anthony

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

  Clause 40.(ESTATE DUTY: INTERESTS LIMITED TO CEASE ON DEATH.)
  Mr. MacDermot: I beg to move Amendment No. 112, in page 46, line 42, to leave out from "and" to end of line 5 on page 47 and to insert
  "for the purposes of this subsection the following interests shall be deemed to include an interest limited to cease on a death—

  (i) an interest enjoyed under two or more titles one of which confers an interest limited to cease on a death,

  (ii) an interest so related to a death that it cannot terminate before the death, and

  (iii) an interest so related to a death that, except in contingencies not related to the death, it cannot terminate before the death".

  This is a purely drafting Amendment to meet the point raised by the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) in Committee. It makes no alteration in the sense of the subsection but improves its layout and to some extent its clarity. As I explained at the time, this is a highly technical subsection which must of necessity be cast in very technical language.
  Mrs. Thatcher: I recognise that this is purely a drafting Amendment but the hon. and learned Gentleman will recollect that a number of points were raised on this Clause in Committee and that the learned Solicitor-General agreed to look into them. Since that time I have sent the Financial Secretary details of a case which I think is caught by this Clause but which is not on all fours with either the Ralli or the Holmden cases, which proves that the Clause goes wider than either of them. I hope that the Financial Secretary will consider that case and the point I have put previously about protection for bona fide purchasers of interests affected by the Clause and let me know his conclusion in due course.
  Mr. MacDermot Mr. MacDermot indicated assent.
  Amendment agreed to.
  Clause 44.—(SELECTIVE EMPLOYMENT TAX.)
  Mr. Hirst: I beg to move Amendment No. 45, in page 52, line 27, at end to insert:
  Provided that in respect to any person who is blind the tax shall be one shilling.
  I am sure that the House will be grateful to the Chair for selecting this Amend-
  1580
  ment, which I am happy to see is highly supported, although in Committee we discussed—at some length, according to the Chancellor of the Exchequer—a number of Amendments which included this point on the famous night of 29th June and the morning of 30th June by the calendar, even if, in this House, it remained the same day.
  It was a vital debate on very important matters but some of us feel that this aspect did not get proper consideration, despite the alleged length of the debate, because a large number of Amendments were taken together. It would not be proper to comment on that circumstance, but it did not allow concentration of purpose and consideration to be given to this group of people in some of the speeches, not least in that of the Financial Secretary, who felt that he could not answer all the points raised. Whatever criticism I may sometimes have of him, I acknowledge the fact that it is an almost impossible task after an eight-hour debate, which itself was a difficulty, to answer all the points made in all the speeches. Therefore, I am not particularly critical that he did not give full attention to the matter on that occasion, although I sincerely hope that the intervening period has given opportunity to the Government to think much more cogently and clearly about how strongly the House as a whole feels about it.
  9.15 p.m.
  On that occasion the hon. Lady the Member for Wood Green (Mrs. Joyce Butler) made, as the Committee recognised at the time, a very effective speech about disabled people of this character. I mention that only because that debate was somewhat uncharacteristic of some of our discussions on the Finance Bill, because it was, strangely enough, contrary to what has happened at other times, well attended upon the Government benches, and the speeches went on for about seven or eight hours of that debate—until, unfortunately, the Government saw fit to seek the Chair's permission for a Closuretit-for-tat across the Chamber. There was all the way through very strong feeling that particularly in the way that they were proposing to operate the Selective Employment Tax the Government were doing very considerable injustice to large sections of people in special positions, in

  1581
  which those like the blind were very considerably involved.
  I was not only available and present throughout every minute of the discussion but I have looked it up again in HANSARD, and I am satisfied that those who spoke in the debate—happily, I was one—jointly and from both sides of the Committee indicated only too well, and proved by their arguments, that the tax would discriminate against a most worthy and wonderfully courageous section of our people. I feel that in an instance of this character no Government should have needed even one debate to point that out.
  So we have come back again to this subject. In your temporary absence, Mr. Speaker, I paid a very high tribute to the kindness of the Chair in selecting this important matter for discussion tonight. The interval should have given the Government extra time and opportunity, and I hope that it has been usefully used, to realise that there is a feeling in the country of grave unfairness in this matter and actually one of considerable discrimination.
  Far from arguing all the things that we heard on that occasion, the Government, as most hon. Members would have been only too willing to do, should have been leaning backwards to make it easier for these unfortunate people. I mentioned on that occasion, without quoting names, a case in my constituency. That is not unique we all have such cases. I have one at the moment which is causing me the greatest possible difficulty. It concerns a blind person, and I am in great difficulty in placing that person. I find that the Ministry of Labour is very helpful, but, most of all, I have particularly found in my constituency—I am sure that this goes for other places—that, by and large, a number of employers, if not a vast number, are extraordinarily co-operative in endeavouring to give employment to disabled people. When I say "co-operative" I mean way and beyond the statutory limit that applies to firms employing more than 20 people and a 3 per cent. disablement quota. Some firms employ double that proportion. None the less, there is a limit to this when it will involve, as it will, such employers in additional and heavy taxation. It was intended to be so by the Government. It is
  1582
  heavy in many types of industry in which, very often, these people can get employment. Certainly it applies to one or two cases in my constituency.
  There will be some danger, inevitably, that there is a limited extent to which this can be carried for someone who, through misfortune, cannot in many instances do the same work as a fully competent person with all his faculties.
  The occasion was late, and the Financial Secretary may have been tired. Because of the circumstances of the debate, he certainly had too much to answer. However, I can only think that his attitude can be likened to that of a deep-frozen cold slab, and I hope that tonight he will not approach it in that way. Generally speaking, his arguments were hardly characteristic of a Government which I like to feel have a real appreciation and consideration for social problems of this kind.
  In addition, his case was not factually correct. Among other things, he said:
  "Most of these speeches expressed very pessimistic prognostications of the effect of the tax upon the employment of the disabled. Speaking for myself, I feel that many of those fears will prove to have been unfounded."
  That is a matter of opinion, and I accept it as a sincere opinion on his part. However, I have been making a number of inquiries since then, and I do not find that that is the reaction. I do not wish to involve members of the Civil Service, but I have been in contact with three people in the Ministry of Labour seeking their private opinions of what the difficulties are likely to be.
  The hon. and learned Gentleman was comforted by the thought that we were dealing statistically with a small number of people, and at that time we were dealing with far more people than I am at the moment. He said:
  "In effect, we are dealing with about 200,000 people, all of them still able to enjoy the protection of the quota of designated employment schemes, under the Disabled Persons (Employment) Act."—[OFFICIAL REPORT, 29th June, 1966; Vol. 730. c. 1953.
  That is the Act to which I have referred which provides that employers with 20 or more workpeople have to employ 3 per cent. of disabled persons. But that does not by any means get down to the problem. It is only a start towards solving

  1583
  the problem of the employment of disabled people.
  The Financial Secretary cannot hide behind cold statistics in judging a new tax of this kind which was described in speech after speech from both sides as acting in an unfair and discriminatory manner on people of this character.
  Another argument advanced by the hon. and learned Gentleman was that this is not a case of taxing the disabled but, rather, taxing employers. That, too, was refuted in every speech. I suppose that it was one of his thoughts when he first came to the House that day, and it was obviously still in his mind eight hours later, but he would not have expressed the thought if he had paid attention to the speeches during the debate. Among others, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) touched on it at the beginning of the debate. He said:
  "The great danger which I see is this. There is now a tax on the employment of these people."—[OFFICIAL REI'ORT, 29th June, 1966; Vol. 730, c. 1835.]
  That is the view which was upheld in speech after speech. That is what the effect of it will be. In his deep-frozen cold slab way of approaching the matter, which was the Financial Secretary's mood on that occasion, it can be argued in that way. It is the way in which the Government first attempted to sell this punitive tax to the nation, but people have now been alerted to what it means. Certainly those who work in the social field have been. No one any longer has the Government's wool pulled over his eyes in the matter. The tax will discriminate against the employment of disabled people such as the blind. That is absolutely cardinal, and it emerged from every one of the speeches made on that occasion.
  We are in the difficulty that we are always in owing to the Budget Resolution, namely, that we cannot make ourselves 100 per cent. clear in an Amendment. Therefore, this Amendment proposes to reduce the charge on blind people to a relatively nominal amount. What we really mean is that they should be excluded from this tax. But such a proposal would not be in order and therefore we have attempted to indicate our views in the only way open to us, and that is to
  1584
  propose that the tax should be reduced to 1s.
  Throughout the debates on Clause 42 as it was—it is now Clause 44—the Financial Secretary and Government spokesmen in general stressed time after time the difficulty—which the House appreciated—of knowing where to draw the line. In an earlier debate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) indicated that this is not as difficult administratively as the Government made out for convenience or argument in not meeting reasonable cases. But in this Amendment —and I am very happy that it has been called—the line is very clear indeed.
  In past years when I was sitting on the benches opposite I had difficulty in advocating various social requirements of this kind. I was told," We could do this for the blind because they are registered ". It is difficult to say where the deaf begin and end, although in the past the hon. Lady the Member for Wood Green has made a good case for them. But they do not come within this Amendment. We are specifically testing the Government's sincerity and humanitarian attitude towards a section of people in respect of whom that argument is not valid in any way. I trust that we shall have none of those arguments which shame any Government before the nation, because what the nation expects is not arguments which evade the issue but arguments which face up to and meet the social need.
  Captain Walter Elliot: I support the Amendment. It has been said from the Government benches that this tax has been proposed for a variety of reasons—for instance, to raise revenue and redeploy labour. Latterly the emphasis has been on its deflationary impact at the end of this year. One of the main objects which was put forward was the redeployment of labour from the service industries to manufacturing industries.
  I would not say that the job of a blind man working in manufacturing industry was imperilled by this tax, be, cause presumably he would be subsidised. But the jobs of blind people in the service industries will be imperilled. I think particularly of a case which I know in my constituency. The owners of a small

  1585
  tobacconist's shop to which I used to go when I smoked trained a blind man to serve behind the counter. It took some time to do it, but they achieved it. I have a strong feeling that if these employers have to pay this tax in respect of that man they will get rid of him. If the Government persist with this tax on the blind, they should tell the House what would be the cost of the concession. if the object of the tax is to raise revenue, we ought to be able to judge whether that is a fair point to make.
  9.30 p.m.
  Secondly, we have frequently been told by this and earlier Governments that if we make a concession in one case, everybody will ask for it. We ought to stamp on that argument when the blind are concerned, for they have always been regarded as suffering from a special disability. It is my recollection that blindness is regarded as a 100 per cent. disability for disability allowances and both sides of the House agree that that is fair, just and humane. The argument "all or none", which in any case is a sterile argument, is not applicable to the blind.
  Above all, it is the object of all of us to keep these people with this great affliction in a job if it is possible, but I doubt whether that will happen if the tax remains.
  Dame Irene Ward: I merely want to add my support to the Amendment which was moved with great sympathy and clarity by my hon. Friend the Member for Shipley (Mr. Hirst), who completely demolished any arguments which might be put against it by the Financial Secretary.
  We have always been told that it is difficult to discriminate and to define a group for whom a concession is asked. That argument has been demolished, for the fact that the blind are in a special category has been recognised in Government policy. The blind have been recognised as being apart from other sections of the disabled community. I do not expect the Financial Secretary to use that argument. Indeed, the case is so strong that I think that the hon. and learned Gentleman will shortly rise and say that without argument he will accept the Amendment. He cannot argue against the Amendment that a concesson given
  1586
  to one section of the community has to be paid for by other people, for such a policy has been embodied in our legislation for many years.
  The House seems to have become slightly confused about the reason for the tax. As I understand it, the idea was that those employed in the service industries, as distinct from those in manufacturing, had not made their full contribution to taxation. As we have always recognised the blind as being in a special category, no Government could impose a burden on them. The blind working in the service industries cannot be expected to make an additional contribution to the country's taxation, and we all think that the blind have a sufficient burden to bear with their affliction.
  If the Government want to move people from service industries to manufacturing industries—which I understand is one of the basic arguments—the Financial Secretary must realise that the jobs for which the blind can be trained are very limited, and that to apply the general concept of transferring people from the service industries to the manufacturing industries is a ridiculous one when applied to the blind. That fact must stand out a mile.
  All the arguments against the Amendment have been demolished. I do not want to help the Government to overcome any of the bad reputation that they have built up for themselves and I must emphasise that there is nothing of any social consequence in the Bill. Even in the 13 years of Tory rule it was always accepted that some progress would be made in some aspect of the social services.
  I know that it is exciting to create records and to establish precedents, but it would be most unusual if, in this great Finance Bill, in order to create a precedent the Government were to impose a tax on those employers who make a contribution to social welfare by employing the blind. I cannot think that even the Treasury Front Bench would want to create such a precedent.
  I am sure that most Government supporters, as well as my hon. Friends and I, would welcome the Government's acceptance of the Amendment. I therefore look forward with the greatest pleasure to hearing that the Financial Secretary accepts it.
  Dr. Reginald Bennett: I want to add my support to the arguments put forward by my hon. Friends. I feel sure that when they first heard of the incidence of this tax hon. Members on both sides of the House were thunderstruck at the thought of its being levied on people so completely and utterly handicapped as the blind. I thought that it was a scandalous thing, and I remain scandalised. I can hardly believe that even now the Government intend to levy this tax on blind people. Make no mistake about it: it will be levied upon them, because they will become unemployable.
  It is important that we should think of the blind people particularly, because they are in a special category, which can easily be explained by the fact that man depends more completely on the power of vision than upon any of his other senses, and people deprived of this sense are far more savagely handicapped than those who are deprived of any other sense. That is why the blind have a paramount claim upon our sympathy, and why we should act in accordance with that sympathy. The fact that an employer employs a blind man in a production industry means that he has gone out of his way to provide a public service by employing a disabled man. He will not be penalised. But the man who has gone out of his way voluntarily to provide this public service by employing a blind man in a service industry will now be penalised for doing so. This is absolutely fantastic.
  If this should be permitted to go through the House, the country will be ferociously angry. I support the Amendment and say with the greatest emphasis that it is worthy of being passed. I trust that the Government will accept it.
  Mr. Tim Fortescue: I should like to draw the attention of the House to Cmnd. 2639, published on 5th April last year—the White Paper which established the National Board for Prices and Incomes. In that White Paper, it is made mandatory on the Board to have regard to social justice in considering any matters brought before it. Part I of the White Paper, I understand, is to be enshrined in statute law and discussed in this place tomorrow. If this is passed into
  1588
  law, it will be not only mandatory but statutorily mandatory for the Board to have regard to social justice.
  Every hon. Member has the most vital and involved regard for social justice in all his dealings with his constituents. I am sure that we shall hear tomorrow that there are many interpretations of social justice and that what one thinks is social justice another may think is injustice. But I am certain that not one hon. Member will think that to tax the blind or make it more difficult for them to be employed is in accordance with the principles of social justice.
  No person could be so uncompassionate as to think that it is socially just to tax the employers of the blind. I would urge the hon. and learned Gentleman to take this matter, the policy of his own Government, into consideration when considering the Amendment.
  Mr. MacDermot: On a matter which arouses such feelings as anything touching the blind, I do not expect to have much success in persuading hon. Members who are already convinced of the justice of the Amendment that it should not be accepted. Nevertheless, I must state my reasons.
  Let us look at the scope of the problem. There are about 11,500 blind employed people in this country. Of that number, about 7,000 are employed in ordinary factories or offices and about 3,500 in special workshops for the blind. About half of these workshops are charities and consequently the employers of the blind who work there would qualify for the refund. Of course, the employers of the blind employed in the manufacturing sector will qualify not only for the refund but for the premium, and there will in that case be an actual incentive to employ people in that area. The employers of people in the neutral sector other than the charities will also get the refund.
  We are not dealing with very large numbers—[HON. MEMBERS:" All the easier to accept it."] Hon. Members anticipate. This is, of course, an argument which cuts both ways. I am not arguing this on the basis of cost: the sums involved are not great for the Treasury or for the employers. I have been asked not to argue this on administrative grounds

  1589
  and I do not say that it would be impossible to devise an administrative procedure. As has been pointed out, there is a register of the blind. I do not say that it could be done in time for the proposed date of commencement of the Bill, but I do not argue the matter on that basis. I simply point out the problems that hon. Members may attach such weight to them as they wish. It would require quite elaborate administrative machinery to achieve it, but I have been asked not to argue on these grounds and I will not go into that.
  9.45 p.m.
  Let us look at the case on its merits. The ho t Lady the Member for Tyne-mouth (Dame Irene Ward) asked me to accept the Amendment without argument. Frankly I feel that that is what I have been asked to do because the argument w'lich has been put to the House in suprort of the Amendment is an assumption which has not been fully argued and in my belief cannot effectively be argued. The assumption quite simply is that which was put by the hon. Member for Shipley (Mr. Hirst) when he moved the Amendment—that this tax would discriminate against the blind. In fact, this, tax will not discriminate against the blind. This tax is imposed on employers in certain sectors in respect of all employees—the blind and the others. The Amendment asks us to discriminate in favour of the blind.
  That is quite different from saying that the tax discriminates against the blind. In order to make out the case that the tax should discriminate in favour of the blind, it surely must be shown that the tax as proposed will operate in a way which will be harmful to the blind, and this is the assumption which has not been proved. Let me spell it out to the House: the assumption implies that employers who are finding difficulty in paying this tax and who it is assumed will therefore seek to reduce the number of their employees because of the burden of the tax personally I have a serious doubt as to the extent to which the tax will operate in that way—will choose to discriminate against the blind by dismissing their blind employees.
  That involves another assumption which hon. Members have not spelled out in their minds, and it is that for
  1590
  some reason blind persons are economically less useful to their employers than are other employees. If hon. Members will follow this logically, that is the assumption to which they are driven—and it is an erroneous assumption. We have had references to the views of Ministry of Labour experts who are responsible for placing blind persons in employment. I assure hon. Members that the considered view of my right hon. Friend's Department is that quite the opposite is the case and that employers are more than justified on purely economic grounds in employing blind persons.
  The Ministry of Labour go to immense pains to ensure with the blind that round pegs go into round holes and square pegs into square holes. In other words, far greater care is taken with the machinery of the D.R.O.'s department—immense care—than in the usual cases to ensure that blind persons are found employment which truly matches their capacities and their talents, in spite of their loss of sight. This is done with great success.
  The productivity of blind persons is frequently higher than that of persons who suffer no physical handicap and who are doing like work. It is the experience of that department that when employers need for various reasons to discharge labour, it is not the blind whom they discharge first. Quite the contrary. I am putting it on economic grounds. I may also remind hon. Members of a point which has been made—the great sympathy which a vast number of employers have for the blind and the great consideration which they show to the blind. When that is added to the very real economic arguments which I have put forward, I can only say that I do not believe that the assumption on which this argument has been based is well founded.
  Mr. Hirst: The hon. and learned Gentleman has stressed the question of dismissal. I had very much in mind the argument deployed by the hon. Lady the Member for Wood Green (Mrs. Joyce Butler), who referred to people losing their jobs for a number of reasons. I have been informed that some businesses cannot continue because of this tax. Is it not a great disincentive for the reemployment of these people and will not the tax result in employers not wishing to add to their liabilities in such cases,

  1591
  remembering that it is in cases of this sort that hon. Members are often asked to help?
  Mr. MacDermot: I do not believe that that argument is any better founded than the other one. Exactly the same considerations apply for the reemployment of blind persons as for their dismissal. In other words, if it is an advantage for an employer to retain a blind person, it is equally advantageous to him to employ him.
  Dr. Bennett: Is the hon. and learned Gentleman not aware that the argument which he has so skilfully deployed only ends in establishing one conclusion—that in his mind blind people are not disabled?
  Mr. MacDermot: Certainly not. I had completed my remarks and I gave way merely because I thought I could assist the House further.
  Miss Mervyn Pike: We have listened to one of the lamest arguments we have heard so far from the Financial Secretary. He put it forward with grace and courtesy, but without conviction. He started his logic from the wrong end, although that is a characteristic of the present Government.
  I remind the hon. and learned Gentleman that in discussing the Ministry of Social Security Bill, which is going through the House. the Government's argument for giving a special allowance to the blind and for not extending it to other disabled categories has been that the blind are in a very special category and have always received special attention. The assumption that they are at a disadvantage has been enshrined in legislation. We do not have the responsibility of proving that that assumption is right

  Division No. 114.]

  AYES

  [4.55 p.m.

  Alison, Michael (Barkston Ash)

  Blaker, Peter

  Clark, Henry

  Allason, James (Hemel Hempstead)

  Boyd-Carpenter, Rt. Hn. John

  Clegg, W alter

  Astor, John

  Braine, Bernard

  Cooke, Robert

  Atkins, Humphrey (M't'n & M'd'n)

  Brinton, S.r Tatton

  Corfield, F. V.

  Awdry, Daniel

  Brown, Sir Edward (Bath)

  Costain, A. P.

  Baker, W. H. K.

  Bruce-Cardyne, J.

  Crawley, Aldan

  Batsford, Brian

  Bryan, Paul

  Cunningham, Sir Knox

  Beamish, Col. Sir Tufton

  Bullus, sir Eric

  Currie, C. B. H.

  Bell, Ronald

  Burden, F. A.

  Dance, James

  Bennett, Dr. Reginald (Cos. & Fhm)

  Campbell, Gordon

  Dean, Paul (Somerset, N.)

  Bessell, Peter

  Carlisle, Mark

  Deedes, Rt. Hn. W. F. (Ashford)

  Biffen, John

  Cary, Sir Robert

  Dodds-Parker, Douglas

  Birch, Rt. Hn. Nigel

  Chichester, Clark, R.

  Elliot, Capt. Walter (Carshalton)

  and certainly the hon. and learned Gentleman did not prove that it is wrong.
  It is within our knowledge that these people are at a great disadvantage when presenting themselves for employment and we know the difficulties of training and so on that inevitably accompany this type of disablement. When an employer is making a decision about taking on a disabled person, particularly a blind person, these difficulties must weigh heavily in the balance.
  I submit that we have always accepted that the blind have this disadvantage. This has been accepted in legislation in recent years and we are merely asking that this disadvantage shall be offset in some small measure by a reduction in this tax.
  The Financial Secretary said that about 7,000 blind people are in open employment. Neither he nor my hon. Friends have the exact figures, but it is fair to assume that a high proportion of them are employed in the service industries, since it is in these industries that they can give of their best and obtain the training which is most suitable for their disablement. These people will be most heavily hit by this taxation. While we have been told that the purpose of the tax is to have more flexibility, there is none for these people.
  We have heard arguments of great sincerity and force in favour of the Amendment. I do not wish to delay the House, so I will not repeat them. However, I advise my hon. Friends to press this Amendment to a division, because the Financial Secretary has in no way disproved the case that has been accepted for many years.
  Question put, That those words be there inserted in the Bill:—
  The House divided Ayes 135, Noes 198.

  Errington, Sir Eric

  Loveys, W. H.

  Quennell, Miss J. M.

  Eyre, Regitiald

  Lubbock, Eric

  Renton, Rt. Hn. Sir David

  Fortescue, Tim

  McAdden, Sir Stephen

  Ridsdale, Julian

  Gilmour, Ian (Norfolk, C.)

  MacArthur, Ian

  Rossi, Hugh (Hornsey)

  Glover, Sir Douglas

  Macleod, Fit. Hn. Iain

  Russell, Sir Ronald

  Glyn, Sir Richard

  Madden, Martin

  Sharpies, Richard

  Goodhart, Philip

  Marten, Neil

  Shaw, Michael (Sc'b'gh & Whitby)

  Gurden, Harold

  Mathew, Robert

  Smith, John

  Hall, John (Wycombe)

  Mawby, Ray

  Steel, David (Roxburgh)

  Hall-Davis, A. C. F.

  Maxwell-Hyslop, R. J.

  Summers, Sir Spencer

  Harris, Frederic (Croydon, N.W.)

  Mills, Stratton (Belfast, N.)

  Talbot, John E.

  Harrison, Brian (Maldon)

  Mitchell, David (Basingstoke)

  Taylor, Sir Charles (Eastbourne)

  Harrison, Col. Sir Harwood (Eye)

  Monro, Hector

  Taylor,Edward M.(C'gow,Catheart)

  Harvie Anderson, Miss

  Morgan, W. G. (Denbigh)

  Taylor, Frank (Moss Side)

  Hawkins, Paul

  Morrison, Charles (Devizes)

  Teeling, Sir William

  Hay, John

  Munro-Lucas-Tooth, Sir Hugh

  Temple, John M.

  Heald, Rt. Hn. Sir Lionel

  Murton, Oscar

  Thatcher, Mrs. Margaret

  Heseltine, Michael

  Nabarro, Sir Gerald

  Thorpe, Jeremy

  Higgins, Terence L.

  Neave, Airey

  Turton, Rt. Hn. R. H.

  Hiley, Joseph

  Nicholls, Sir Harmer

  van Straubenzee, W. R.

  Hill, J. E. B.

  Noble, Rt. Hn. Michael

  Wainwright, Richard (Colne Valley)

  Hirst, Geoffrey

  Nott, John

  Walker, Peter (Worcester)

  Holland, Philip

  Orr. Capt. L. P. S.

  Ward, Dame Irene

  Hordern, Peter

  Osborn, John (Hallam)

  Weatherill, Bernard

  Hunt, John

  Page, Graham (Crosby)

  Webster, David

  Hutchison, Michael Clark

  Pearson, Sir Frank (Clitheroe)

  Whitelaw, William

  Jenkin, Patrick (Woodford)

  Peel, John

  Wilson, Geoffrey (Truro)

  Johnston, Russell (Inverness)

  Peyton, John

  Winstanley, Dr. M. P.

  Joseph, Rt. Hn. Sir Keith

  Pike, Miss Mervyn

  Wood, Rt. Hn. Richard

  King, Evelyn (Dorset, S.)

  Pink, R. Bonner

  Wylie, N. R.

  Kitson, Timothy

  Pounder, Rafton

  TELLERS FOR THE AYES:

  Knight, Mrs. Jill

  Powell, Rt. Hn. J. Enoch

  Mr. R. W. Elliott and

  Longden, Gilbert

  Pym, Francis

  Mr. Anthony Grant,

  NOES

  Abse, Leo

  Dunwoody, Dr. John (F'th & C'b'e)

  Jenkins, Rt. Hn. Roy (Stechford)

  Alldritt, Walter

  Eadie, Alex

  Jones, Dan (Burnley)

  Archer, Peter

  Edwards, Robert (Biloton)

  Jones, J. Idwal (Wrexham)

  Armstrong, Ernest

  English, Michael

  Judd, Frank

  Atkins, Ronald (Preston, N.)

  Ensor, David

  Kelley, Richard

  Bacon, Rt. Hn. Alice

  Evans, Albert (Islington, S.W.)

  Kenyon, Clifford

  Baxter, William

  Fernyhough, E.

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

  Beaney, Alan

  Finch, Harold

  Kerr, Russell (Feltham)

  Bennett, James (G'gow, Bridgeton)

  Fletcher, Ted (Darlington)

  Lawson, George

  Bidwell, Sydney

  Floud, Bernard

  Leadbitter, Ted

  Blackburn, F.

  Foley, Maurice

  Ledger, Ron

  Booth, Albert

  Foot, Michael (Ebbw Vale)

  Lestor, Miss Joan

  Boston, Terence

  Ford, Ben

  Lever, Harold (Cheetham)

  Bowden, Rt. Hn. Herbert

  Fowler, Gerry

  Lewis, Ron (Carlisle)

  Bradclock, Mrs. E. M.

  Fraser, Rt. Hn. Tom (Hamilton)

  Lomas, Kenneth

  Bradley, Torn

  Galpern, Sir Myer

  Luard, Evan

  Brooks, Edwin

  Garrow, Alex

  Lyons, Edward (Bradford, E.)

  Broughton, Dr. A. D. D.

  Ginsburg, David

  McBride, Neil

  Brown, Hugh D. (G'gow, PrOvan)

  Gourley, Harry

  McCann, John

  Brown, Bob (N 'c'tle-upon-Tyne, W)

  Greenwood, Rt. Hn. Anthony

  MacDermot, Niall

  Brown, R. W. (Shoreditch & F'bury)

  Gregory, Arnold

  McGuire, Michael

  Buchan, Norman

  Grey, Charles (Durham)

  McKay, Mrs. Margaret

  Buchanan, Richard (G'gow, Sp'burn)

  Griffiths, David (Rother Valley)

  Mackenzie, Gregor (Rutherglen)

  Butler, Herbert (Hackney, C.)

  Griffiths, Rt. Hn. James (Llanelly)

  Mackintosh, Jchn P.

  Butler, Mrs. Joyce (Wood Green)

  Griffiths, Will (Exchange)

  McMillan, Tom (Glasgow, C.)

  Cant, R. B.

  Hamilton, James (Bothwell)

  McNamara, J. Kevin

  Carmichael, Neil

  Hamilton, William (Fife, W.)

  MacPherson, Malcolm

  Carter-Jones, Lewis

  Hamling, William

  Mahon, Peter (Preston, S.)

  Coe, Denis

  Hannan, William

  Mahon, Simon (Bootie)

  Corbet, Mrs. Freda

  Harper, Joseph

  Matlalieu, E. L. (Brigg)

  Craddock, George (Bradford, S.)

  Harrison, Walter (Wakefield)

  Manuel, Archie

  Crawshaw, Richard

  Hattersley, Roy

  Mapp, Charles

  Cullen, Mrs. Alice

  Hazell, Bert

  Mason, Roy

  Davidson, Arthur (Accrington)

  Hefter, Eric S.

  Miller, Dr. M. S.

  Davies, Dr. Ernest (Stretford)

  Herbison, Rt. Hn. Margaret

  Mitchell, R. C. (S'th'pton, Test)

  Davies, G. Elfed (Rhondda, E.)

  Hobden, Dennis (Brighton, K'town)

  Morgan, Elystan (Cardiganshire)

  Davies, Harold (Leek)

  Hooley, Frank

  Morris, Alfred (Wythenshawe)

  Delargy, Hugh

  Houghton, Rt. Hn. Douglas

  Morris, Charles R. (Openshaw)

  Dempsey, James

  Hoy, James

  Murray, Albert

  Dewar, Donald

  Hughes, Emrys (Ayrshire, S.)

  Newens, Stan

  Diamond, Pt. Hn. John

  Hughes, Roy (Newport)

  Noel-Baker, Francis (Swindon)

  Dickens, James

  Hunter, Adam

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

  Doig, Peter

  Hynd, John

  Norwood, Christopher

  Donnelly, Desmond

  Jackson, Colin (B'h'se & Spenb'gh)

  Ogden, Eric

  Dunn, James A.

  Jackson, Peter M. (High Peak)

  O'Malley, Brian

  Dunwoody, Mrs. Gwyneth (Exeter)

  Jeger, George (Goole)

  Oram, Albert E.

  Jenkins, Hugh (Putney)

  Orme, Stanley

  Oswald, Thomas

  Rodgers, William (Stockton)

  Varley, Eric G.

  Owen, Will (Morpeth)

  Roebuck, Roy

  Wainwright, Edwin (Dearne Valley)

  Page, Derek (King's Lynn)

  Rose, Paul

  Walden, Brian (All Saints)

  Parkpo, Brian (Bedford)

  Ross, Rt. Hn. William

  Walker, Harold (Doncaster)

  Pearson, Arthur (Pontypridd)

  Rowlands, E. (Cardiff, N.)

  Wallace, George

  Pentland, Norman

  Ryan, John

  Watkins, David (Consett)

  Perry, George H. (Nottingham, S.)

  Sheldon, Robert

  Wellbeloved, James

  Price, Christopher (Perry Barr)

  Shore, Peter (Stepney)

  Whitlock, William

  Price, Thomas (Westhoughton)

  Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

  Williams, Clifford (Abertillery)

  Probert, Arthur

  Silkin, John (Deptford)

  Willis, George (Edinburgh, E.)

  Pursey, Cmdr. Harry

  Skeffington, Arthur

  Wilson, William (Coventry, S.)

  Randall, Harry

  Slater, Joseph

  W innick, David

  Rankin, John

  Small, William

  Winterbottom, R. E.

  Redhead, Edward

  Spriggs, Leslie

  Woodburn, Rt. Hn. A.

  Reynolds, G. W.

  Steele, Thomas (Dunbartonshire, W.)

  Woof, Robert

  Rhodes, Geoffrey

  Summerskill, Hn. Dr. Shirley

  Yates, Victor

  Richard, Ivor

  Symonds, J. B.

  Roberts, Albert (Normanton)

  Thomas, George (Cardiff, W.)

  TELLERS FOR THE NOES:

  Roberts, Gwilym (Bedfordshire, S.)

  Thomas, lorwerth (Rhondda, W.)

  Mr. Edward Bishop and

  Robertson, John (Paisley)

  Tomney, Frank

  Mr. Loan Evans.

  Robinson, W. 0. J. (Walth'stow, E.)

  Urwin, T. W.

  Mrs. Thatcher: I beg to move Amendment No. 46, in page 52, line 27, at the end to insert:
  Provided that the said amount shall be one penny in respect of those persons who are not liable to pay, or who under section 102 of the National Insurance Act 1965 elect not to pay, the employee's insurance contribution ".
  Mr. Speaker: With this Amendment I have suggested that we take Amendment No. 49, in page 54, line 7, at end insert:
  "employee's insurance contribution ' means a contribution other than a graduated contribution payable by an employee under the National Insurance Act 1965 or any amendment thereto passed after the passing of this Act'.
  Mrs. Thatcher: The purpose of this Amendment is to exclude considerable groups of people from the incidence of Selective Employment Tax. There are two main groups which the Amendment would exclude, those of retirement age and many of the married women who work part-time. It would also exclude other married women. I submit that if the Amendment were accepted it would deal with a very large part of the problem of Selective Employment Tax as it affects retired people and part-time workers.
  A great deal of the argument of the Financial Secretary and of hon. Members opposite about this tax has proceeded on the assumption that because we follow th,:, National Insurance stamp system, the groups of people whom we on this side of the House desire to exclude from the tax cannot be excluded. Therefore, in this Amendment I have deliberately attempted to use the National Insurance system in order to exclude those very people. My contention is that if the Government had chosen not to follow
  1596
  the employers' contributions but to levy tax only in those cases where the employers' and employees' contributions were payable, the tax would have been infinitely less damaging in its effect.
  I deal first with the case of retired people. Anyone who employs a retired person for more than eight hours a week is liable to pay the employer's part of the National Insurance contribution. So he is already liable to pay 13s. 4d. a week for a man. Because he is liable as an employer, as the Bill stands without the Amendment, he will have to pay in respect of that retired person another 25s. a week. That makes the cost of employing a retired man 38s. 4d. a week before one penny has been paid to the retired person, and he has to pay that even though the retired person works for only a few hours more than eight hours a week. Our contention, therefore, is that the effect of this tax will be to make an employer stand off a number of part-time retired people. Economically those people cannot go elsewhere to work, so it can only redound to their own disadvantage if this tax continues in its present form.
  Several things could happen. Either the employer could stand off the person, or he could submit that the man is self-employed. I suppose that if a man goes out to do a bit of gardening for two or three people one can say that he is holding out his services for hire and that he is self-employed. Thirdly, he could be stood off for one or two weeks, and then be employed for a week, and one could cut the incidence of the tax in that way. Fourthly, there could be a large-scale evasion of this tax through people not declaring that they are

  1597
  employing retired people for a few hours or for one or two days a week.
  We feel that if the Financial Secretary were to accept the Amendment the way would be eased for retired people to continue in work. We do not feel that they should attract the Selective Employment Tax. I have already said that for a man an employer would have to pay 38s. 4d. a week in National Insurance contributions and Selective Employment Tax, and for a woman the corresponding amount would be 23s. 10d. a week. This is a great deal of money for part-time work, performed by retired people. That is one group of people whom the acceptance of this Amendment would exclude from the operation of the tax.
  The second group of people concerned in the Amendment are married women. As the Financial Secretary will know, having undoubtedly been told by the relevant Department, married women can opt whether or not to pay National Insurance contributions. The employer will have to pay those contributions in any event, but the maried woman herself can decide whether or not she wants to pay her part of the contribution. I do not, in common with many other married women. It does not pay many married women to pay National Insurance contributions. Not a lot of them know this. if a lot more knew it, far fewer would pay.
  But a married woman gains by paying National Insurance contributions only if she is considerably older than her husband or is separated from him and does not know his insurance record. That means that comparatively few married women themselves pay National Insurance contributions. This is not surprising, because they get very little return in benefit if they pay contributions on their own account. A married woman will not get the full retirement pension if her husband is living; she will get only the difference between what he would have got for them and the single rate. It is a comparatively bad bargain for the ordinary married woman.
  I see that the Financial Secretary is getting a good deal of tutoring from the Parliamentary Secretary to the Ministry of Pensions. He need not bother. I shall tell him all he needs to know about it. I reckon that I know a good deal more about the insurance of married
  1598
  women than the Parliamentary Secretary. If the Financial Secretary accepted the Amendment, that would have the effect of excluding from the incidence of the tax married women who opt not to pay contributions, that is, to exclude the large majority.
  One of the problems concerned with the tax has been that of married women who do part-time work. The Government have freely admitted that this is one of the strongest cases for asking for some relief from the tax. An example makes this clear. A retailer perhaps cannot get a person to work full time for him. Therefore, instead of having someone to work, say, 36 hours a week, he has to employ three women to work 12 hours a week each. That means that he must pay three times the amount of tax that he would have to pay if he could get one person to do the same amount of work. This is patently unfair on the retailer.
  If the Government were to accept the Amendment a large part of their problem would be dealt with. I know that the Financial Secretary will say in reply that this would discriminate unfairly against those warried women who opted to pay the full contribution, or who had to do so. If the employer does not have to pay in respect of the vast majority of married women, he is very much better able to pay for the minority who choose to make their National. Insurance contribution. I admit that there are anomalies, but the main part of the problem would be dealt with.
  There is a third group of people who do not have to pay the employee's part of the National Insurance contribution. It is a small group, consisting of people undergoing full-time education or unpaid apprentices. I refer only briefly to this group because it does not comprise a very significant number, but a number of university students who do vocation work. Theoretically, they are undergoing full-time education.
  They might go into a factory to do a certain amount of scientific work, and it is very good for them to do it. Perhaps they do not earn a great deal, although they may be paid a certain amount. It would be very helpful if they were excluded from the incidence of the tax, because it would cost the employer quite a large amount to pay

  1599
  for them. Perhaps there is some question that they would not be liable as it is, but perhaps the Financial Secretary can clear that up.
  What I am mainly concerned with in the Amendment is to exclude retired people and the vast majority of married women from the incidence of the tax. I hope that the Financial Secretary will accept the Amendment in spirit, because it would solve very many of his problems, and problems which the House as a whole desires to see solved.
  10.15 p.m.
  Mr. Boyd-Carpenter: My hon. Friend the Member for Finchley (Mrs. Thatcher) has made an unaswerable case and, but for the unhappy performance of the Government on the previous Amendment, I should have assumed that the Financial Secretary would rise at once to accept this Amendment. But it seems clear that the Government are adopting a wholly unreasonable attitude irrespective of the case put. If, at the last election, it had been said by any of my hon. Friends that a Labour Government when returned to power would tax the employment of blind people and use some of the money to subsidise the manufacture of bingo machinery, no one would have believed them. But this is precisely what the Financial Secretary's attitude on the last Amendment amounts to.
  I am delighted that my right hon. and hon. Friends put down this Amendment. In Committee, I had an Amendment down, which was discussed with some others, to exclude the employment of retired people from the incidence of the tax. In reply, the Financial Secretary said that there were administrative difficulties about it because retired people, though the great majority, were not the only people in respect of whom an employer-only contribution was made. The hon. and learned Gentleman rested a good deal of his argument against my Amendment on that point of administration.
  This Amendment is not subject to that argument. The Financial Secretary will not argue that there would be any difficulty of administration in accepting it. The tax is to be collected on the National Insurance stamp, by increasing the value of the stamp to the very large figures which my hon. Friend mentioned. All
  1600
  that would be needed, as I understand it —I hope that the Financial Secretary, with the briefing he is having from beside him, will correct me if I am wrong—is an arrangement whereby those who already pay on a stamp different from the vast majority, that is, those who pay a contribution based on employer-only plus a few pence for industrial injuries, should continue to pay on a different stamp, that is, the present stamp plus Is. That is all that would be needed administratively to implement this proposal framed as it now is. Does the Financial Secretary accept that proposition? Like my hon. Friend, I have had a little experience of these matters, and I shall take it that it is right.
  We come, then, to discuss the Amendment on its merits. A week or two ago, I asked the Chancellor of the Exchequer how much it would cost to exempt the employment of retired people from the incidence of this tax, and he said that the amount would be £10 million. That is a substantial sum, and one must add for the purposes of the Amendment something, though a good deal less, in respect of married women opting out and the smaller groups to which my hon. Friend referred. But I do not believe that the Financial Secretary will quarrel with me if I say that the total cost, on the basis of the Chancellor's own figures, would be well below £14 million or £15 million.
  Will the Financial Secretary rest his argument on that? Will he say that the state of our economy today is so serious that it could not stand the loss of £14 million or £15 million? If he does, the argument will have to be treated with respect, but, in that event, I shall beg him to raise the £14 million or £15 million in other ways, for example, by reducing the premium of 7s. 6d. paid in respect of employment in manufacturing industries, simply redistributing the cost within the structure of the tax. I am sure that the House will agree that that would be a better and more socially more just way of doing things.
  Taking first the most important aspect, surely all parties and all Ministers of Pensions or Ministers of Labour have been desperately anxious to encourage the employment of older people. That is, first of all, in their own interests people rust out so much more often than

  1601
  they wear out because enforced idleness is the worst of all killers of older people. Secondly, it is from the economic point of view, because we have a great shortage of labour, and if older people who are fit can be encouraged to work or continue to work we are adding to the labour pool. On both grounds, therefore, we want to encourage the employment of older people.
  The Financial Secretary will say that this tax will not operate to the contrary. I put two points to him. First, the tax is intended to discourage employment in the service industries. That is part of the point of it. It is intended to discourage such employment in order to move labour into manufacturing industries. l will not waste time in arguing whether generally that is true, but it is patently not true in respect of the great majority of the older people whom we are discussing. It is unrealistic to believe that someone who has not worked in a factory up to the age of 65 will be able to adapt himself to factory life after that. Therefore, this will discourage employment in the service industries without affecting redeployment. In so far as it operates at all, it will drive these people from employment into unemployment. What good will that do?
  Secondly, we are dealing here with people in many cases on modest wages. The older person doing a job of more than eight hours but a great deal less than the 40-hour week today is generally paid a modest wage. The more modest the wage, the bigger the proportionate incidence of the tax. In other words, the more likely is it to operate on the mind of the employer to make him say," If I have to pay this wage for this kind of work plus this tax, it is not worth my while. I shall get rid of this man."I warn the Financial Secretary that a great deal of the employment of older people. perhaps particularly in the country and perhaps in offices, will be put in jeopardy. If the tax is imposed on top of the rather marginal considerations that cause them to be employed at all, sometimes, to the credit of employers, the semi-charitable motives that cause them to go on employing someone of some age, a great many people who could have been carrying on in work will cease to be in work. That will be the direct and inevitable consequence of this Measure and of the Govern-
  1602
  ment's action in respect of it. Again, what good will that do anybody?
  The other main field, as my hon. Friend said, is that of married women The typical married woman is the part-time employee. Again, it has been the policy of all Governments to increase the amount of labour available through part-time married women, many times with skills acquired before marriage, such as teachers, going back into work. If they go into productive industry, the Financial Secretary will say that that is all right and they will get a premium. If they go into Government employment, such as teaching, there is no harm done, but if they want to go into service industries—and to many people service industries, and retail distribution is typical, represent the natural and inevitable field —a very heavy impost relative to their earnings is imposed, and one gets the same effect on their respective employers as one does in respect of the older people.
  Therefore, one comes to the fundamentals of this tax by applying it to retirement pensioners and part-time married women. The Government will get a negligible reinforcement of the manufacturing or industrial labour force. They will pay for that by driving a number of people out of work who otherwise would be in work. In return they will get between £10 million and £15 million, but I warn the Government that that figure is gross. In so far as people are driven out of employment and their taxable earnings eliminated, there will be a compensating revenue loss to set against this quite moderate gross figure.
  We are at the crunch of the case. If the Government persist in applying this tax in this way they will convince many moderate minded people outside that they do not know what they are doing—that, having decided at the last moment on this tax, they are determined to bulldoze it through regardless of consequences. What effect do they think it will have on the desperately critical opinion, anxious about the state of our economy, if people outside see the economy being directed by a Government who apply a tax of this sort without apparently understanding its direct consequences? Obstinacy by the Government on this Amendment may go in its

  1603
  repercussions a good deal wider than the social damage that it will do.
  Mr. Peyton: I am glad to have the opportunity to follow my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who has made a remarkable speech. I am sure that most of us on this side of the House feel that he has spoken for us fully and with great clarity and has enabled us to cut short our own remarks. Nevertheless there are one or two comments I want to make.
  The situation has changed since we discussed this tax in Committee. The Chancellor has told us his intentions. The banks will not be allowed to help. He intends the tax deliberately as a deflationary measure, and as the first victims he is singling out those covered by this Amendment, the part-time workers—retired people and married women.
  I appreciate that the Financial Secretary has a difficult job defending the tax. In discussion in the last Amendment, he made a case in suggesting that blind people were amongst the limited number for whom it was possible to make special arrangements. But those covered by this Amendment are among those for whom no special arrangements are possible. My right hon. Friend is right in suggesting that their interests are to be sacrificed and their jobs jettisoned. To do this to them is to achieve nothing. No gain at all will accrue to the Government or to the economy. It will be impossible for the Government to explain to people why they have placed upon employers such a very heavy deterrent before these people's services can be taken up.
  There are many occasions during the proceedings on a Finance Bill when it is perhaps possible to take time to tell a Government of their many sins and offences and to stir up strong feelings.
  I do not believe that the Amendment is one of those occasions. It is a very serious one, and it will place on the shoulders of the Financial Secretary, for whom I have great sympathy, a very unhappy task. I hope that he will be able to tell his right hon. Friend that the arguments which have been presented tonight, particularly those advanced by my right hon. Friend the Member for
  1604
  Kingston-upon-Thames, are arguments which he cannot answer, does not wish to answer, and that the purpose for which he has sat on the Treasury Bench tonight—to defend the integrity of this tax at all cost—is one which he would rather not discharge.
  10.30 p.m.
  Mr. Dean: I wish, first of all, to make a plea to the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance, whom we are delighted to see listening to the debate. I hope that, in the next few minutes, he will quietly and secretly take out the Treasury brief from the Financial Secretary's file and substitute for it a brief from the Ministry of Pensions and National Insurance. Then, at last, we shall see a glimmer of light and get some change.
  I want now to put forward one or two arguments based on the points which the Financial Secretary himself made when we last debated this matter on 29th June. The hon. and learned Gentleman's first argument was that it is not possible administratively to grant exemption. His actual words were:
  "It is not possible administratively to grant exemptions which are dependent upon the occupation of the employer or the employee." —[OFFICIAL REPORT, 29th June, 1966; Vol. 730, c. 1948.]
  He went on to explain that that was because of the National Insurance system.
  I suggest that that argument is bogus. We already have a refund for special households and for charities yet in both cases there is no separate National Insurance category. For that reason, the hon. and learned Gentleman's argument does not stand up. It applies in exactly the same way to the refunds which are available for local authorities, for agriculture and other bodies. None of them can be identified with separate National Insurance categories; yet in each of these cases the Government have found a way in which they can be treated differently from the way proposed for part-time workers, married women and the like. In my view, the argument on which the Financial Secretary based that part of his case in the last debate does not stand up.
  The second argument which he used is that there has not been time to work out the administrative arrangements. If it can be done for special households and for charities, why can it not be done for

  1605
  retirement pensioners, married women and part-time workers? If the Government have not had time to do their homework, it is monstrously unfair that these sections of the community should be the people who should suffer, owing to the Government bringing forward this proposal at the last minute without taking time to think it out properly.
  We all know that, once a proposal finds its way on to the Statute Book, it is exceedingly difficult to change. It is all very well the Financial Secretary saying that the Government will keep these matters carefully under review and that they are sympathetic. But once provisions are put in a Statute it is far more difficult to change them than if the changes are embodied in the legislation while it is going through the House.
  I wish to make a special plea to the Financial Secretary about part-time workers. Whatever he may have felt and argued about other categories, he appeared more hopeful about them. In the debate of 29th June, he said:
  "I can see that there is a difference, and very special force, in the argument on part-time workers".-[OFFICIAL REPORT, 29th June, 1966; Vol. 730, c. 1957.]
  What progress has he made since the Committee stage in finding a way by which part-time workers can have a refund?
  If the Government refuse to budge on this and do not act on the powerful arguments put forward, not only by hon. Members on both sides of the House, but by many people outside who know about these matters, they will reap a bitter and well deserved harvest.
  Mr. MacDermot: I suspected that these Amendments were, in their form, prompted by what I said in Committee, and that has been confirmed by what the hon. Lady the Member for Finchley (Mrs. Thatcher) and the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said. The hon. Lady ended by asking me to accept the Amendments in spirit. I am not sure what the invitation was or what the limitation is. I cannot advise the House to accept the Amendments, but I have a great deal of sympathy with much of what has been said. I do not propose to repeat the arguments which I put forward in a somewhat lengthy speech in Committee. I shall confine myself to the new points raised by this Amendment.
  1606
  The Amendment covers a particular and peculiar group of people—on the one hand, retirement pensioners who are employed, and, on the other married women and widows who have not elected to pay the flat rate National Insurance contribution. This obviously is not a collection of people whom anyone would have chosen to single out were it not for the fact that they are people whose employers use a particular and special stamp.
  When we were dealing in Committee with the question of the retirement pensioners who are employed, the right hon. Member for Kingston-upon-Thames said that here was a class of people whom we could deal with differently, in spite of the general administrative difficulties, because they had a special stamp. I pointed out that, unfortunately, the stamp was not confined to those people because it was also used for married women and widows who elected to pay the flat rate National Insurance contribution. Consequently, we have these Amendments which say, in effect, "If that is the case, let us include them in the exemption".
  Most of the arguments have been based on the particular case of part-time workers in these categories. It is not limited to them; it covers all the workers in these categories, full-time as well as part-time. But the particular arguments are addressed to the supposed effect of this tax upon the employment of part-time workers in these categories. Shortly we shall come to an Amendment dealing specifically with part-time workers, but I am not seeking to take any false point on that.
  I appreciate that it is argued that there are more part-time workers in this field, and that bearing in mind the difficulties which the Government say they would have in excluding part-time workers in general, here is a way in which they could exclude some by dealing with this category. But if the Amendments were accepted they would produce a considerable distortion and many anomalies, as the hon. Lady recognised, because they would exempt from the tax not only the employed retirement pensioners and married widows in part-time employment but those in full-time employment, and it would be quite arbitrary and illogical to make the employers' liability for the tax depend on whether or not a woman had
  **
  1607
  elected to pay the National Insurance contribution.
  Mrs. Thatcher: Very few do.
  Mr. MacDermot: The hon. Lady says that very few do, but I did not hear her when she was a Minister in the Ministry—nor did I hear the right hon. Member for Kingston-upon-Thames when he was a Minister—urging women not to pay their full contribution.
  Mrs. Thatcher: We did not attempt to impose a Selective Employment Tax. The point therefore was not as important as it is now.
  Mr. MacDermot: It is far more important for the woman than it is for the employer who is affected by the S.E.T. I did not hear her put forward that argument when she was employed in the Ministry, and I suppose that the policy of the Ministry under her Administration, as under this Government, is to urge women in this position to secure their full National Insurance rights.
  Mrs. Thatcher: No.
  Mr. Boyd-Carpenter: I was responsible for this Department for some years, and that is not the case.
  Mr. MacDermot: I will accept the right hon. Gentleman's denial. He has far more experience than I do in this field. I was expressing what I thought to be the position. I will revert to my original statement, which is that I do not recall any propaganda being directed to women urging them not to do it. I suggest that an arrangement which would result in the preferential employment—which is what it would be—of married women and widows who had elected not to contribute, as compared with other women, and which would result in a highly prejudicial and undesirable pressure being put on married women and widows to sacrifice their National Insurance interests and elect not to contribute is not something which we should ask the House to accept.
  I was asked by the hon. Member for Finchley what the position was in relation to students undergoing full-time education, and also unpaid apprentices. The position is as she surmised—that students receiving full-time education are not
  1608
  obliged to pay contributions except for any period in which they may be in employment, say, during vacations. No tax would be payable in respect of such students.
  Mrs. Thatcher: Obviously, while a student is at university no tax is payable either by the employer or the student. The question is, what is the situation where a chemistry student goes to work in a consultant's laboratory during the vacation?
  Mr. MacDermot: If he is in paid employment, then of course the tax will be payable. The same applies to the apprentice. If he is unpaid, no tax is payable, but if he is paid he is in Class 1 from the National Insurance point of view and the tax would be payable.
  For these reasons, I must advise the House to reject the Amendments.
  Mr. F. A. Burden: The hon. and learned Gentleman must have been swayed by our powerful arguments, but he is in a difficulty because the Chancellor has undoubtedly told him not to give way under any circumstances. He has implied that he will not give way on a later Amendment dealing with part-time workers but I hope that, because of our arguments, even at this late stage, he will find the Chancellor somewhere and get him to give the hon. and learned Gentleman an opportunity of meeting our case.
  The way in which the tax will treat elderly people and part-time workers, including women, will not assist in achieving the object of the Selective Employment Tax to release people from the service industries to go into manufacturing. It will often secure the opposite result. Many distributive firms employ two or sometimes three people for a week because they perform a useful service. If those firms have to pay three amounts of Selective Employment Tax for that work, they will get rid of those part-timers and employ one person full-time. This is the opposite result from that which the tax is designed to have.
  This will hit most harshly the elderly and those incapable of working long hours. It will keep out of work altogether aged people who work only a few hours a week. My right hon. Friend

  1609
  made an important point when he said that the cost of the Amendment would be about £14 million. Part-time workers made unemployable by the tax will often he thrown on National Assistance, that cost will go up, and the total cost would be much less than £14 million.
  There is a good deal of hardship in my constituency among retired service pensioners in part-time work. In many households there are elderly people who are incapable of looking after themselves and yaw are helped by someone coming in for a few hours each week. Many of these elderly people are themselves in straitened circumstances. They will have to pay Selective Employment Tax on

  Division No. 115]

  AYES

  [10.51 p.m.

  Alison, Michael (Barkston Ash)

  Gurden, Harold

  Orr, Capt. L. P. S.

  Allason, James (Hemel Hempstead)

  Hall, John (Wycombe)

  Osborn, John (Hallam)

  Astor, Johri

  Hall-Davis, A. C. F.

  Page, Graham (Crosby)

  Atkins, Humphrey (M't'n & M'd'n)

  Harrison, Brian (Maldon)

  Pearson, Sir Frank (Clitheroe)

  Awdry, Daliel

  Harrison, Col. Sir Harwood (Eye)

  Peel, John

  Baker, W. H. K.

  Harvie Anderson, Miss

  Peyton, John

  Batsford, Brian

  Hawkins, Paul

  Pike, Miss Mervyn

  Bell, Ronald

  Heald, Rt. Hn. Sir Lionel

  Pink, R. Bonner

  Bennett, Sir Frederic (Torquay)

  Heseltine, Michael

  Pounder, Rafton

  Bennett, Dr. Reginald (Cos. & Fhm)

  Higgins, Terence L.

  Powell Rt. Hn. J. Enoch

  Bessell, Peter

  Hiley, Joseph

  Quennell, Miss J. M.

  Bitten, John

  Hill, J. E. B.

  Renton, Rt. Hn. Sir David

  Birch, Rt. Hn. Nigel

  Hirst, Geoffrey

  Ridsdale, Julian

  Blaker, Peter

  Hordern, Peter

  Rossi, Hugh (Hornsey)

  Boyd-Carpenter, Rt. Hn. John

  Hunt, John

  Sharpies, Richard

  Braine, Bernard

  Hutchison, Michael Clark

  Shaw, Michael (Sc'b'gh & Whitby)

  Brinton, Sir Tatton

  Jenkin, Patrick (Woodford)

  Smith, John

  Brown, Sir Edward (Bath)

  Johnston, Russell (Inverness)

  Steel, David (Roxburgh)

  Bruce-Gardyne, J.

  Joseph, Rt. Hn. Sir Keith

  Summers, Sir Spencer

  Bullus, Sir Eric

  King, Evelyn (Dorset, S.)

  Talbot, John E.

  Burden, F. A.

  Kitson, Timothy

  Taylor, Edward M.(C'gow,Catheart)

  Carlisle, Mark

  Knight, Mrs. Jill

  Taylor, Frank (Moss Side)

  Chichester-Clark, R.

  Longden, Gilbert

  Teeling, Sir William

  Clark, Henry

  Leveys, W. H.

  Thatcher, Mrs. Margaret

  Clegg, Walter

  Lubbock, Eric

  Thorpe, Jeremy

  Cooke, Robert

  MacArthur, Ian

  Turton, Rt. Hn. R. H.

  Costain, A. P.

  Macleod, Rt. Hn. Iain

  van Straubenzee, W. R.

  Crawley, Aidan

  Maddan, Martin

  Wainwright, Richard (Colne Valley)

  Cunningham, Sir Knox

  Marten, Neil

  Walker, Peter (Worcester)

  Currie, G. B. H.

  Mawby, Ray

  Walters, Dennis

  Dalkeith, Earl of

  Maxwell-Hyslop, R. J.

  Ward, Dame Irene

  Dean, Paul (Somerset, N.)

  Mitchell, David (Basingstoke)

  Weatherill, Bernard

  Deedes, Rt. Hn. W. F. (Ashford)

  Munro, Hector

  Webster, David

  Dodds-Parker, Douglas

  Morgan, W. G. (Denbigh)

  Whitelaw, William

  Elliott, R.W.(N icille-upon-Tyne,N.)

  Morrison, Charles (Devizes)

  Winstanley, Dr. M. P.

  Errington, Sir Eric

  Munro-Lucas-Tooth, Sir Hugh

  Wood, Rt. Hn. Richard

  Fortescue, Tim

  Murton, Oscar

  Woodnutt, Mark

  Gilmour, Ian (Norfolk, C.)

  Nabarro, Sir Gerald

  Wylie, N. R.

  Glover, Sir Douglas

  Heave, Airey

  Glyn, Sir Richard

  Nicholls, Sir Harmar

  TELLERS FOR THE AYES:

  Goodhart, Philip

  Noble, Rt. Hn. Michael

  Mr. Francis Pym and

  Grant, Anthony

  Nott, John

  Mr. Reginald Eyre.

  Grant-Ferris, R.

  NOES

  Abse, Leo

  Booth, Albert

  Buchan, Norman

  All dritt, Walter

  Boston, Terence

  Buchanan, Richard (G'gow, Spiburn)

  Archer, Peter

  Bowden, Rt. Hn. Herbert

  Butler, Mrs. Joyce (Wood Green)

  Armstrong, Ernest

  Braddock, Mrs. E. M.

  Callaghan, Rt. Hn. James

  Atkins, Ronald (Preston, N.)

  Bradley, Tom

  Cant, R. B.

  Beaney, Alan

  Brooks, Edwin

  Carmichael, Neil

  Bennett, James (G'gow, Bridgeton)

  Broughton, Dr. A. D. D.

  Carter-Jones, Lewis

  Bidwell, Sydney

  Brown, Hugh D. (G'gow, Provan)

  Coe, Denis

  Bishop, E. S.

  Brown,Bob(Nicitle-upon-Tyne,W.)

  Conlan, Bernard

  Blackburn, F.

  Brown, R. W. (Shoreditch & F'bury)

  Corbel, Mrs. Freda

  the part-time help which assists to make their lives bearable.
  I believe that the Chancellor has made up his mind about this Amendment, but in view of the next Amendment on part-time workers, I ask the Financial Secretary to take the opportunity to consult his right hon. Friend, wherever he is, to see whether he will relax this rule, which will cause much hardship and will in no way assist to meet the aim with which, we are told, the Tax has been introduced.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 123, Noes 185.

  Craddock, George (Bradford, S.)

  Hughes, Roy (Newport)

  Parkyn, Brian (Bedford)

  Crawshaw, Richard

  Hunter, Adam

  Pearson, Arthur (Pontypridd)

  Cullen, Mrs. Alice

  Hynd, John

  Pentland, Norman

  Dalyell, Tam

  Jackson, Colin (B'h'se & Spenb'gh)

  Perry, George H. (Nottingham, S.)

  Davidson, Arthur (Accrington)

  Jackson, Peter M. (High Peak)

  Price, Christopher (Perry Barr)

  Davies, Dr. Ernest (Stretford)

  Jeger, George (Goole)

  Probert, Arthur

  Davies, G. Elfed (Rhondda, E.)

  Jenkins, Hugh (Putney)

  Randall, Harry

  Davies, Harold (Leek)

  Jenkins, Rt. Hn. Roy (Stechford)

  Redhead, Edward

  Delargy, Hugh

  Jones, J. Idwal (Wrexham)

  Reynolds, G. W.

  Dempsey, James

  Judd, Frank

  Rhodes, Geoffrey

  Dewar, Donald

  Kelley, Richard

  Richard, Ivor

  Diamond, Rt. Hn. John

  Kenyon, Clifford

  Roberts, Albert (Normanton)

  Dickens, James

  Kerr, Russell (Feltham)

  Roberts, Gwilym (Bedfordshire, S.)

  Doig, Peter

  Lawson, George

  Robertson, John (Paisley)

  Donnelly, Desmond

  Leadhitter, Ted

  Robinson, W. 0. J. (Walth'stow, E.)

  Dunwoody, Mrs. Gwyneth (Exeter)

  Ledger, Ron

  Rodgers, William (Stockton)

  Eadie, Alex

  Lestor, Miss Joan

  Roebuck, Roy

  Edwards, Robert (Bilston)

  Lever, Harold (Cheetham)

  Rose, Paul

  English, Michael

  Lewis, Ron (Carlisle)

  Ross, Rt. Hn. William

  Ensor, David

  Lomas, Kenneth

  Rowlands, E. (Cardiff, N.)

  Evans, Albert (Islington, S.W.)

  Luard, Evan

  Ryan, John

  Fletcher, Raymond (Ilkeston)

  Lyons, Edward (Bradford, E.)

  Sheldon, Robert

  Fletcher, Ted (Darlington)

  McBride, Neil

  Shore, Peter (Stepney)

  Floud, Bernard

  McCann, John

  Short,RtHn.Edward(N'c'tle-u-Tyne)

  Foley, Maurice

  MacDermot, Niall

  Silkin, John (Deptford)

  Foot, Michael (Ebbw Vale)

  McGuire, Michael

  Slater, Joseph

  Ford, Ben

  McKay, Mrs. Margaret

  Small, William

  Fowler, Gerry

  Mackenzie, Gregor (Rutherglen)

  Spriggs, Leslie

  Fraser, Rt. Hn. Tom (Hamilton)

  Mackintosh, John P.

  Steele, Thomas (Dunbartonshire, W.)

  Garrow, Alex

  McMillan, Tom (Glasgow, C.)

  Summerskill, Hn. Dr. Shirley

  Ginsburg, David

  McNamara, J. Kevin

  Thomas, George (Cardiff, W.)

  Courlay, Harry

  MacPherson, Malcolm

  Thomas, lorwerth (Rhondda, W.)

  Greenwood, Rt. Hn. Anthony

  Mahon, Peter (Preston, S.)

  Urwin, T. W.

  Gregory, Arnold

  Mahon, Simon (Bootle)

  Varley, Eric G.

  Grey, Charles (Durham)

  Manuel, Archie

  Wainwright, Edwin (Dearne Valley)

  Griffiths, David (Rother Valley)

  Mapp, Charles

  Walden, Brian (All Saints)

  Griffiths, Rt. Hn. James (Llanelly)

  Mason, Roy

  Walker, Harold (Doncaster)

  Griffiths, Will (Exchange)

  Miller, Dr. M. S.

  Wallace, George

  Hamilton, James (Bothwell)

  Mitchell, R. C. (S'th'pton, Test)

  Watkins, David (Consett)

  Hamilton, William (Fife, W.)

  Morgan, Elystan (Cardiganshire)

  Wellbeloved, James

  Hamling, William

  Morris, Alfred (Wythenshawe)

  Whitlock, William

  Hannan, William

  Murray, Albert

  Williams, Clifford (Ahertillery)

  Harper, Joseph

  Newens, Stan

  Wills, Sir Gerald (Bridgwater)

  Hattersley, Roy

  Noel-Baker, Francis (Swindon)

  Wilson, William (Coventry, S.)

  Hazell Bert

  Noel-Baker, Rt.Hn.Phillp(Derhy,S.)

  Winnick, David

  Helfer, Eric S.

  Norwood, Christopher

  Winterbottom, R. E.

  Herbison, Rt. Hn. Margaret

  Ogden, Eric

  Woodburn, Rt. Hn. A.

  Hobden, Dennis (Brighton, K'town)

  O'Malley, Brian

  Woof, Robert

  Hooley, Frank

  Oram, Albert E.

  Yates, Victor

  Houghton, Rt. Hn. Douglas

  Orme, Stanley

  Howie, W.

  Oswald, Thomas

  TELLERS FOR THE NOES:

  Hoy, James

  Owen, Will (Morpeth)

  Mr. loan Evans and

  Hughes, Emrys (Ayrshire, S.)

  Page, Derek (King's Lynn)

  Mr. Charles R. Morris.

  11.0 p.m.
  Sir Keith Joseph: I beg to move Amendment No. 47:
  In page 52, line 27, at the end, to insert:
  Provided always that in the cases of persons who worked less than twenty-one hours during that week the following amounts shall be paid:—

  (a) if that person is a man over the age of eighteen twelve shillings and sixpence.

  (b) if that person is a woman over the age of eighteen six shillings and threepence.

  (c) if that person is a boy under the age of eighteen six shillings and threepence.

  (d) if that person is a girl under the age of eighteen four shillings.

  As this Amendment seeks to halve the burden of the tax on part-timers, and as part-timers number between 1¾ million and 2 million persons, it is a very important Amendment both in quantity
  1612
  and, as I shall show, in quality. The range of part-timers covers the whole spectrum of those who are most affected by this Bill—the disabled, the elderly, the married women returning to work, as well as the people who, for one reason or another, cannot take permanent employment.
  The Government should be aware without my prolonging the argument that it is deeply in the interests of the country —which, according to the National Plan, is short of labour—to encourage the activity in the labour force of as many part-timers as possible. These comprise one of our reserves of labour, and the Government should be doing all they can to encourage them to return to work rather than discouraging them.

  1613
  Already, the employment of the part-timers is discouraged by the full National Insurance stamp. Now, this Bill puts another burden on their employment and, as my hon. Friend the Member for Gillingham (Mr. Burden) said in the debate on the previous Amendment, these part-timers are not industrially mobile. Most of them cannot switch from the service trades to manufacture. They can only take a job that offers work in the hours they can manage to be away from home. Most of the work they are offered is essentially in the service industries and trades.
  I believe that the Government are trying to maintain that large numbers of part-timers are employed in manufacture, but if the Government will look at their own figures in the May Ministry of Labour Gazette they will find evidence, which I will not now spell out, that, at most, a quarter of part-timers are engaged in manufacturing industry, and three-quarters of them—and probably 95 per cent. of the women part-timers, who are, above all, not mobile as between service and manufacture—are engaged in the service trades.
  It is not only in the national interest that these people should be encouraged to work, but very much in the personal interest of the disabled, the elderly, the married women, and others who, because of personal circumstances, cannot take full-time employment—and their employment in jobs which are almost to a dangerous extent dependent on part-time workers. We all have pleas from many industries and service trades that depend to a very large extent on part-time workers—shops of all sorts, stores of all sorts, the invisible export industry of hotels, the leisure industries, and the like, are all heavily dependent on part-time workers. There are the services: cleaning—we are all familiar with the Mrs. Mopp case—laundries, dry cleaning—and a whole host of necessary though not glamorous industries are heavily dependent on part-time workers, and will bear a worrying burden of their wage costs because of this Bill.
  Most of these activities are short of labour, and these trades will therefore find it very difficult to reduce the numbers they employ. But it is inevitable that, if they can cut labour, it will be the vulnerable part-time labour—the elderly,
  1614
  the disabled, the married woman—whom they will be most inclined to dismiss if they can manage to reduce their labour force. I repeat—these are the people who, above all, are not mobile, and will not move to manufacturing.
  Let not the Government say that all they are charging is another 12s. 6d. a week on the adult woman. Her part-time earnings are much smaller than those of the full-time adult woman worker, and 12s. 6d. represents a very high proportionate increase on the wage costs of that industry. The increased wages cost will have to be passed on to the consumer or reflected in reduced employment of the most vulnerable employees, the elderly, the disabled and married women.
  Many of these arguments have emerged in part on other Amendments. I draw them together in this whole Clause to deal with part-timers. We should like if possible to abolish altogether the tax as it affects part-timers. The Government should be encouraging, not discouraging, these people to work. We all recognise that the Chancellor wants to protect the bulk of his payments, so we put this reasonable Amendment down to save half the burden. We have defined the part-time worker in the same way as in the Redundancy Payments Act as one who works for less than 21 hours a week. I am sure that the Amendment will have the sympathy of many hon. and right hon. Members opposite. We appeal to the Government, even at this late hour to be reasonable and constructive. In no other way than by accepting this Amendment can they put right so many of the damaging results which this Bill has introduced.
  Mr. Burden: My right hon. Friend referred to right hon. Members opposite, but has he noticed that there is not one right hon. Member opposite listening to this debate?
  Sir K. Joseph: It is sadly true, as my hon. Friend has observed, that the Front Bench opposite when this important Amendment is being discussed is very empty. I am glad to see the Financial Secretary is studying his paper seriously while I speak. I ask him to recognise that by one blow he can help so many groups and provide for the disabled, the elderly and part-time women workers

  1615
  who, because of obligations at home, cannot go into full-time work.
  Mr. Hirst: I rise almost rapidly to support my hon. and right hon. Friends in this Amendment—[HoN. MEMBERS: "Friends?"]. Hon. Members opposite need not worry, for these are still my hon. and right hon. Friends. If hon. Members opposite imagine that they are to gain anything by my personal disaffection shown by the fact that I have moved a few feet from my normal seat they will be quickly disillusioned. That is enough to say about that, and I return to the Amendment before the House. It is one which I think you, Mr. Deputy-Speaker, will remember was argued very strongly in Committee, on both sides of the Committee. There was no question of one-way traffic such as there may have been in some of our discussions. Indeed, some of the strongest arguments came from hon. Members opposite. I recollect what was said by the hon. Lady the Member for Wood Green (Mrs. Joyce Butler).
  I was impressed by the instance which she quoted on that occasion. The difference between that and our Amendment is very noticeable. She mentioned the case of a shop which employed three part-time workers and suggested that there was a great strain on their employment as the cost would be 300 per cent. above what it would be if the shop could employ one full-time worker. By the proposition of my right hon. Friend the cost in a similar instance would be 18s. 9d., 50 per cent. more. This was argued very strongly by hon. Members in the cooperative movement. The Government were given a strong warning.
  No doubt, Mr. Deputy Speaker, since there were so many Amendments from which to make a selection the strength of feeling on both sides of the House, since one assumes that the interests of the House are safeguarded by the Chair, must rightly have caused this Amendment to be selected for further discussion on Report.
  I trust that the time taken between then and now has improved the Government's reflection on this particular matter. It was a great sadness to find that that was not the case on an Amendment which we have just disposed of, and I sincerely
  1616
  hope that this time we shall have almost the one and only concession of any worthwhileness, apart from one technical Clause on backgammon, that we have had all through the progress of this Bill. There may have been one on betting, but this is something which concerns us all in our constituencies, and I find it is very keenly felt in my own.
  The suggestion that a large proportion of these people are employed in the manufacturing industries has been completely demolished by my right hon. Friend, and I can endorse every bit of what he said from my own personal knowledge. As we have had to point out, so grotesque is the tax system of S.E.T., so ridiculous in its incidence, so contrary to the Government's aim, that in fact many sections of employment in this country which are adding tremendously to the effort to meet our need for exports are not included either in the rebate or in the premium. So they are not concerned in this field at all, yet they employ part-time workers and, if the hon. Gentleman does not know that, I will ask him to come to Shipley this weekend with me. I cannot invite him to my association meeting, but I will rub his nose in these cases where many part-time workers are employed in vital industries which are not to get these alleged benefits.
  I hope that this Amendment, which has ben pushed and pressed and argued so much on both sides of the House, will get the recognition it deserves, because the Government owes it to their own supporters. The Government are lucky not to have more rebellions on their side in view of the way they have handled this business. I could give hon. Members opposite some lessons from past Finance Bills on how to tease up the Government on matters of this sort. In all seriousness, I must invite the Financial Secretary to realise that this is really important to many people in all our constituencies. It is not fair, or a genuine argument, to say that these people are very substantially employed in industries which will get some money back or benefit from this tax. It just is not true, and it cannot be defended upon that basis.
  Many of the competitive industries in my constituency cannot continue to employ a string of part-time people with this tax attached to them. Many are married

  1617
  women, prepared to go out for a limited period of hours to do a job for which they have had past training, but they are not going to get that work in highly competitive industries, especially some I have in mind which are already suffering from the difficulties arising from the Tariff situation on the Continent, and this certainly applies to the clothing business.
  This is not something which can be dismissed lightly, and I warn the hon. Gentle man that he must not come to the Dispatch Box and imagine that he can get away with the type of argument he put forward on the Committee stage. If he does it will be rightly thrown out by this House and by the country.
  Mr. David Steel: This Amendment, which would have the effect of reducing by 50 per cent. the tax payable on part-time workers, is very similar to one tabled on the Committee stage by the Liberal Party and supported by the Opposition. I take the opportunity of speaking to this Amendment tabled by the Opposition because I have received further examples since the Committee stage of the effect the proposed tax will have on part-time workers.
  11.15 p.m.
  There are two specific examples which I should like to draw to the attention of the Financial Secretary. The first is the case of the small hotels in the smaller communities. In both my examples I am concerned with the smaller communities and not with the large cities. There are in many parts of the country small hotels which are run, perhaps, by a married couple whose sole employment force consists of a number of part-time people. The wage level is not high, but the incidence of this tax will be severe on these people in small hotels, many of whom are already in difficulties. The investment allowances do not apply to them and they will be severely hit by this tax.
  Mr. Archie Manuel: Will the hon. Gentleman not agree that these types of hotels to which he refers employ casual labour which is thrown bare-facedly on to the labour market during the winter?
  Mr. Steel: I do not accept that suggestion. That may be so in some parts of the country; the hon. Member may
  1618
  have a point, but I am talking about the small hotels which exist not to exploit the tourist trade but which render a service to the community in many parts of the country.
  I should like to come to my second example. A concrete example was given to me in my constituency this week. There are in some of the smaller communities shops which are dependent upon part-time labour not only for serving in the shops but for jobs like van deliveries and newspaper deliveries. It may be argued by the Government that in the city this kind of employment is precisely what they wish to discourage and that, therefore, it is no bad thing if some of these jobs cease to exist. But I submit that in the rural communities the effect of this tax has a different complexion because there the service is a genuine one. Very often it is a service given by a small shopkeeper—not a profitable service, but nevertheless a service which is rendered to the community, and the charges that the shopkeeper can make to his customers do not cover the wages paid to these part-time workers.
  I have been told of some specific instances where the effect of the tax is the last straw in the difficulty of maintaining these services, and that they will cease. This cannot have been the intention of the Government, and these implications cannot have been considered when the tax was proposed. I hope, therefore, that we shall have a concession and that employers of part-time workers will be allowed to pay only 50 per cent. of the tax.
  Mr. MacDermot: The right hon. Member for Leeds, North-East (Sir K. Joseph) said that he and his hon. Friends would like to see the tax abolished for part-timers, and that is something which we discussed at some length in Commit.. tee. I pointed out then that, apart from the reasons why on merit and on principle we do not think that it is necessary to do such a thing, administratively it would not be possible for us to do it.
  I must say straight away that exactly the same administrative difficulties would apply to trying to impose a 50 per cent. tax on part-timers as would apply to imposing no tax at all. I would refer anyone who is interested in the details to the

  1619
  explanation which I gave in Committee. The difficulties would be exactly the same.
  The only way in which we could deal with this problem would be by exemption in a form which I do not think any hon. Member would like to see, which would be by raising the present eight-hour limit below which employers do not have to pay any National Insurance contributions to a 21-hour limit. That would be the only way in which it could be done. [An HON. MEMBER:" Why not? "]
  I am asked, why not? There are very good reasons. Not only would it mean a very substantial loss of contribution income to the National Insurance Fund, but, more important, it would take a very large number of people— some 800,000-out of full National Insurance cover.
  They would lose, for example, their rights to industrial injury benefit and unemployment benefit. I do not think that anyone would feel that we should seek to relieve the employers of the burden of the tax at that cost to the employees.
  Sir D. Glover: The right hon. Gentleman is saying that the Government, having produced a tax which is complete nonsense, cannot amend it because that would make it even more complete nonsense.
  Mr. MacDermot: The Government are saying what they have said all along, having produced a very good new tax, which broadens the tax base in a way that has been badly needed for very many years. The choice was between doing that in a form which, admittedly, is capable of refinement in future years while introducing it now, and having to wait before introducing such a tax, while imposing a heavy tax burden in one of the old ways in which tax increases have been made in the past. The choice had to be made, and the general feeling in the country and among the vast majority of hon. Members, including many hon. Members opposite, was that this was the right thing to do.
  If it was right, then it was right at the price of having to put up for a time with lack of refinement in the tax. My right hon. Friend has made this clear right from the start, and he has said that he will watch most carefully how the tax operates and introduce, as he is able, such changes as he can.
  1620
  What is the risk about which hon. Members opposite are so concerned? It is feared that the tax will lead to the dismissal of many part-time workers. The right hon. Member for Leeds, North-East (Sir K. Joseph), in moving the Amendment, put his argument very skilfully on this point, because he conceded that the places where part-timers are employed are places where employers are heavily dependent on part-time employees.
  Let us face it. Unless they were heavily dependent on getting the services of part-timers, they probably would not already be employing part-timers. There are already disincentives in the employers' National Insurance contribution. If an employer were able to employ one full-time worker instead of three part-timers he would be doing so now. It does not need the Selective Employment Tax to point out to him that there are advantages in having one full-timer in the place of three part-timers.
  Therefore, as I indicated on an earlier Amendment, this is not the way in which the tax will have its economic effect. Its economic effect will be long-term. I do not think that anyone believes—certainly no hon. Member on this side of the House believes—that the effect will be immediate. Hundreds of thousands of part-time workers will not be suddenly thrown out of work in the service industries and re-employed in manufacturing.
  I believe that by putting additional pressure on employers in the service industries the tax will lead to their being more careful in their recruitment. It is on recruitment that there will be the economic effect. In addition, not only will there be the encouragement of the premium, but the pressure of demand for labour will lead to an increase in part-time employment in the manufacturing sector. That is the economic effect which we hope to achieve.
  I again remind the House that the very large majority of part-time workers are married women and other women in respect of whom the rate of tax paid is much lower than it is for adult males. This also is a reason why we think that the fears which have been expressed about the effect of the tax upon part-timers are grossly exaggerated.
  Sir D. Glover: I have rarely heard a more unsatisfactory reply. Let me deal first with the hotel trade. I do not accept all the arguments put from this side of the House. I do not think that a great many hotels will close down as a result of this tax, but, nevertheless, I am quite certain that there will be a serious damaging effect on our hotels. The House w ill remember that the Chancellor exhorted us to take our holidays in Britain rather than spend foreign currency. The effect of the tax will be this. Someone arriving at a hotel in Scotland and asking for tea to be brought at 7.30 a.m. will be told by the proprietor, "I am very sorry, but because of the burden of this tax"—[HoN. MEMBERS: "0h."] Certainly. He will say," We are not able to serve tea in the morning now ". People arriving at a small hotel at 8 in the evening will be told than: dinner goes off at half-past 7 and they can have a cold meal.
  Next year, instead of going to Scotland, people will go abroad where they can have all the facilities for a good holiday, and that will be quite contrary to what the Chancellor has exhorted us all to do.
  I come now to a totally different aspect of the matter which I have not heard mentioned yet from either side. Of course, hon. Members opposite have been so moribund since this debate started that it has been a completely one-sided discussion. Hon. Members opposite have either been muzzled or they are so cretinously stupid that they cannot realise the dangers of the Bill and have not sought to intervene.
  What worries me is that the Chancellor of the Exchequer is only too likely to come to the Box in 1967 or 1968—
  Mr. Boyd-Carpenter: If they are still there.
  Sir D. Glover: Yes, and if they are, I shall pray for the future of the nation. But, if he is still there, he is only too likely to say that his Selective Employment Tax has been a brilliant success"I can report to the House that 50,000 additional people have been engaged in manufacturing and 50,000 fewer are employed in services, which proves my whole thesis in 1966". What will have happened in fact? It is time the House
  1622
  of Commons realised what modern industry and commerce is about.
  In nearly every major city today, there are large firms which have organised a large body of workers, almost entirely part-time workers, in taking on the job of cleaning our factories. Before the Ford, B.M.C. or Pressed Steel factory opens, a squad of women, nearly all married part-timers who probably do 20 hours a week, will descend on it and clean up the floor, windows, toilets and so on. They are employed by a contractor, and under the Bill the contracting firm is a service industry. For every part-time woman that the contractor employs he has to pay the Treasury 12s. 6d. for the privilege of employing her.
  11.30 p.m.
  What will happen as a result of the Act? The contracting firm will probably go out of existence. Then Ford, B.M.C. and all the other major industrial organisations will go back to the system that existed 20 years ago. The employees of Midland Cleaners Ltd. or Birmingham Cleaners Ltd. will get the sack. Then they will be taken on by B.M.C., Ford or Vauxhall or another of the great industrial empires to do exactly the same job as they have been doing for the last 10 years.
  If they continue with their present employer, he has to pay 12s. 6d. to the State for the privilege of employing each one. If he gives them the sack and they are then engaged by M.B.C. or Pressed Steel, the State in its wisdom does not exact 12s. 6d. from B.M.C. or Pressed Steel for the privilege of employing each of them but pays them 16s. 3d. each for doing so. Yet those cleaners will use the same brooms and mops and clean the same floors, windows and toilets, doing exactly the same job as they have been doing for 10 years.
  In twelve months' time the Chancellor will say "Here is the triumph of my proposals. There are now 50,000 more people in manufacturing industry and 50,000 fewer in the service industries." The hon. Member for Manchester, Cheetham (Mr. Harold Lever) knows that that is true and beyond argument. It is so obvious to anybody who knows how the commercial and industrial life of the country works that I am appalled

  1623
  that this point has not been made from either side until now.
  This is the result of the Chancellor's proposals. It will cost 3s. 9d. in direct cost for every part-time worker. Yet these people will still go on doing exactly the same job as they have been doing for the last 10 years. As I said, if they remained with their present employer he would have to pay the State 12s. 6d. for each one, but if they do the same job with the same broom and the same mop, doing the same toilet and the same floor, for another employer the State will pay the employer 16s. 3d. for each one.
  Mr. Burden: I hate to correct my hon. Friend, hut the new employers will still pay 12s. 6d. in respect of each employee and then get 16s. 3d. back.
  Sir D. Glover: Yes, they will, of course, pay the 12s. 6d. It is part of the forced loan. But they will get 16s. 3d. back again. So the difference for the same girl doing the same job—
  Sir G. Nabarro: With the same broom.
  Sir D. Glover: —with the same broom—
  Sir G. Nabarro: With the same mop.
  Sir D. Glover: —with the same mop—
  Sir G. Nabarro: Doing the same toilet and the same floor.

  Division No. 116]

  AYES

  [11.36 p.m.

  Alison, Michael (Barkston Ash)

  Fortescue, Tim

  Marten, Neil

  Allason, James (Hemel Hempstead)

  Gilmour, lan (Norfolk, C.)

  Mawby, Ray

  Astor, John

  Glover, Sir Douglas

  Maxwell-Hyslop, R. J.

  Atkins, Humphrey (M't'n & M'd'n)

  Glyn, Sir Richard

  Mitchell, David (Basingstoke)

  Awdry, Daniel

  Goodhart, Philip

  Monro, Hector

  Baker, W. H. K.

  Grant-Ferris, R.

  Morrison, Charles (Devizes)

  Balniel, Lord

  Gurden, Harold

  Munro-Lucas-Tooth, Sir Hugh

  Batsford, Brian

  Hall, John (Wycombe)

  Murton, Oscar

  Bell, Ronald

  Hall-Davis, A. C. F.

  Nabarro, Sir Gerald

  Bessell, Peter

  Harrison, Brian (Maldon)

  Nicholls, Sir Harmar

  Biffen, John

  Harrison, Col. Sir Harwood (Eye)

  Noh:e, Rt. Hn. Michael

  Birch, Rt. Hn. Nigel

  Harvie Anderson, Miss

  Nett, John

  Boyd-Carpenter, Rt. Hn. John

  Hawkins, Paul

  Orr, Capt. L. P. S.

  Brinton, Sir Tatton

  Heald, Rt. Hn. Sir Lionel

  Osborn, John (Hallam)

  Brown, Sir Edward (Bath)

  Heseltine, Michael

  Page, Graham (Crosby)

  Bruce-Gardyne, J.

  Higgins, Terence L.

  Pearson, Sir Frank (Clitheroe)

  Bullus, Sir Eric

  Hill, J. E. B.

  Peel, John

  Burden, F. A.

  Hirst, Geoffrey

  Pike, Miss Mervyn

  Carlisle, Mark

  Hunt, John

  Pink, R. Bonner

  Chichester-Clark, R.

  Hutchison, Michael Clark

  Pounder, Rafton

  Clark, Henry

  Jenkin, Patrick (Woodford)

  Powell, Rt. Hn. J. Enoch

  Clegg, Walter

  Johnston, Russell (Inverness)

  Pym, Francis

  Cooke, Robert

  Joseph, Rt. Hn. Sir Keith

  Renton, Rt. Hn. Sir David

  Crawley, Aldan

  King, Evelyn (Dorset, S.)

  Ridsdale, Julian

  Currie, G. B. H.

  Kitson, Timothy

  Rossi, Hugh (Hornsey)

  Dalkeith, Earl of

  Knight, Mrs. Jill

  Shaw, Michael (Sc'b'gh & Whitby)

  Dean, Paul (Somerset, N.)

  Longden, Gilbert

  Smith, John

  Deedes, Rt. Hn. W. F. (Ashford)

  Loveys, W. H.

  Steel, David (Roxburgh)

  Dodds-Parker, Douglas

  Lubbock. Eric

  Summers, Sir Spencer

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

  MacArthur, Ian

  Talbot, John E.

  Errington, Sir Eric

  Macleod, Rt. Hn. Iain

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

  Eyre, Reginald

  Maddan, Martin

  Taylor, Frank (Moss Side)

  Sir D. Glover: Is my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) supporting me or opposing me? I should like to know.
  Sir G. Nabarro: I am cheering you on, dear boy.
  Sir D. Glover: Purely on a point of administrative nonsense, for the same employee, doing the same job—
  Mr. Manuel: The hon. Gentleman is saying the same thing again.
  Sir D. Glover: The hon. Member for Central Ayshire (Mr. Manuel) has been saying the same thing, and equally boringly, for the last 20 years. I understand from one of the great national newspapers that they have decided that he is an old bore.
  This is a serious point, because the Chancellor is claiming that the tax will be a great change in moving employees from services to manufacturing, out a great deal of it will be facade. The only reality is that this will cost the Treasury 16s. 3d. for a person who may change his employment but will go on doing the same job. If that is how the Government view things, the sooner we get a new Government the better.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 112, Noes 169.

  Teeling, Sir William

  Walker, Peter (Worcester)

  Winstanley, Dr. M. P.

  Thatcher, Mrs. Margaret

  Walters, Dennis

  Wood, Rt. Hn. Richard

  Thorpe, Jeremy

  Ward, Dame Irene

  Woodnutt, Mark

  Turton, Rt. Hn. R. H.

  Weatherill, Bernard

  Wylie, N. R.

  van Straubenzee, W. R.

  Webster, David

  TELLERS FOR THE AYES

  Wainwright, Richard (Coins Valley)

  Whitelaw, William

  Mr. Peter Blaker and

  Mr. Anthony Grant.

  NOES

  Anse, Leo

  Greenwood, Rt. Hn. Anthony

  Morris, Alfred (Wythenshawe)

  Allaun, Frank (Salford, E.)

  Gregory, Arnold

  Murray, Albert

  Alldritt, Walter

  Grey, Charles (Durham)

  Newens, Stan

  Archer, Peter

  Griffiths, David (Rother Valley)

  Noel-Baker, Francis (Swindon)

  Armstrong, Ernest

  Griffiths, Will (Exchange)

  Norwood, Christopher

  Beaney, Alan

  Hamilton, James (Bothwell)

  Ogden, Eric

  Bennett, James (G'gow, Bridgeton)

  Hamilton, William (Fife, W.)

  O'Malley, Brian

  Bidwell, Sydney

  Hamling, William

  Dram, Albert E.

  Bishop, E. S.

  Hannan, William

  Orme, Stanley

  Booth, Albert

  Harper, Joseph

  Oswald, Thomas

  Boston, Terence

  Hattersley, Roy

  Parkyn, Brian (Bedford)

  Bowden, RI. Hn. Herbert

  Hazell, Bert

  Pentland, Norman

  Braddock, Mrs. E. M.

  Heffer, Eric S.

  Perry, George H. (Nottingham, S.)

  Bradley, Tom

  Herbison, Rt. Hn. Margaret

  Price, Christopher (Perry Barr)

  Brooks, Edwin

  Hobden, Dennis (Brighton, K'tOwn)

  Probert, Arthur

  Brown, Hugh D. (G'gow, Proven)

  Hooley, Frank

  Redhead, Edward

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Howie, W.

  Reynolds, G. W.

  Brown, R. W. (Shoreditch & F'bury)

  Hoy, James

  Rhodes, Geoffrey

  Buchan, Norman

  Hughes, Emrys (Ayrshire, S.)

  Richard, Ivor

  Buchanan, Richard (G'gow, Sp'burn)

  Hughes, Roy (Newport)

  Roberts, Albert (Normanton)

  Butler, Mrs. Joyce (Wood Green)

  Hunter, Adam

  Roberts, Gwilym (Bedfordshire, S.)

  Callaghan, Rt. Hn. James

  Hynd, John

  Robertson, John (Paisley)

  Cant, R. B.

  Jackson, Colin (B'h'se & Spenb'gh)

  Robinson, W. 0. J. (Walth'stow, E.)

  Carmichael, Neil

  Jackson, Peter M. (High Peak)

  Rodgers, William (Stockton)

  Carter-Jones, Lewis

  Jeger, George (Goole)

  Roebuck, Roy

  Coe, Denis

  Jenkins, Hugh (Putney)

  Rose, Paul

  Conlan, Bernard

  Jenkins, Rt. Hn. Roy (Stechford)

  Ross, Rt. Hn. William

  Crawshaw, Richard

  Jones, J. idwal (Wrexham)

  Rowlands, E. (Cardiff, N.)

  Cullen, Mrs. Alice

  Judd, Frank

  Ryan, John

  Dalyell, Tarn

  Kelley, Richard

  Sheldon, Robert

  Davidson, Arthur (Accrington)

  Kenyon, Clifford

  Shore, Peter (Stepney)

  Davies, Dr. Ernest (Stretford)

  Kerr, Russell (Feltham)

  Short,Rt.Hn.Edward(N'c'lleu-Tyne)

  Davies, Harold (Leek)

  Lawson, George

  Silkin, John (Deptford)

  Delargy, Hugh

  Leadbitter, Ted

  Slater, Joseph

  Dempsey, James

  Ledger, Ron

  Small, William

  Dewar, Donald

  Lessor, Miss Joan

  Spriggs, Leslie

  Diamond, Rt. Hn. John

  Lever, Harold (Cheetham)

  Steele, Thomas (Dunbartonshire, W.)

  Dickens, James

  Lewis, Ron (Carlisle)

  Summerskill, Hn. Dr. Shirley

  Doig, Peter

  Lomas, Kenneth

  Thomas, George (Cardiff, W.)

  Donnelly, Desmond

  Luard, Evan

  Urwin, T. W.

  Dunwoody, Mrs. Gwyneth (Exeter)

  Lyons, Edward (Bradford, E.)

  Varley, Eric G.

  Eadie, Alex

  McBride, Neil

  Wainwright, Edwin (Dearne Valley)

  Edwards, Robert (Bilston)

  McCann, John

  Walden, Brian (All Saints)

  English, Michael

  MacDermot, Niall

  Walker, Harold (Doncaster)

  Ensor, David

  McGuire, Michael

  Wallace, George

  Evans, Albert (Islington, S.W.)

  McKay, Mrs. Margaret

  Watkins, David (Consett)

  Evans, loan L. (Birrn'h'm, Yardley)

  Mackenzie, Gregor (Rutherglen)

  Wellbeloved, James

  Fletcher, Raymond (Ilkeston)

  Mackintosh, John P.

  Willis, George (Edinburgh, E.)

  Fletcher, Ted (Darlington)

  McMillan, Tom (Glasgow, C.)

  Minn, William (Coventry, S.)

  Floud, Bernard

  McNamara, J. Kevin

  Winnick, David

  Foley, Maurice

  Mahon, Peter (Preston, S.)

  Winterbottom, R. E.

  Foot, Michael (Ebbw Vale)

  Mahon, Simon (Bootle)

  Woodburn, Rt. Hn. A.

  Ford, Ben

  Manuel, Archie

  Woof, Robert

  Fowler, Gerry

  Mapp, Charles

  Fraser, Rt. Hn. Tom (Hamilton)

  Mason, Roy

  TELLERS FOR THE NOES:

  Darrow, Alex

  Miller, Dr. M. S.

  Mr William Whitlock and

  Ginsburg, David

  Mitchell, R. C. (S'th'pton, Test)

  Mr. Char'es R. Morris.

  Gourley, Harry

  Morgan, Elystan (Cardiganshire)

  Schedule 3.—(SUPPLEMENTARY PROVISIONS AS TO DUTIES RELATING TO BETTING AND GAMING.)
  Amendment made: In page 65, line 5, leave out" on ".—[Mr. MacDermot.]
  Schedule 5.—(AMENDMENTS OF CORPORATION TAX ACTS.)
  11.45 p.m.
  Mr. Diamond: I beg to move, Amendment No. 113, in page 79, line 6, to leave out from "effect" to the end of line 20.
  The Deputy Chairman: We can discuss at the same time Amendment No. 54, page 79, line 9, leave out from "and" to end of paragraph and insert:
  "the words ' or from general annuity business at the end of that subsection shall be omitted";
  Amendment No. 55, page 79, line 26, leave out "franked investment income" and insert:
  "distributions of companies resident in the United Kingdom".

  1627
  and Amendment No. 56, page 79, line 40, at end insert:
  (5) In section 69(5) of the Finance Act 1965 the word" them "in line 10 shall be omitted and the words" franked investment income "inserted.
  Mr. Diamond: This Amendment and the associated Amendments relate to relieving measures affecting life insurance companies. Of all the complexities one comes across in taxation, insurance companies are without question the most complex. I would therefore deal with the major principle and then, if the House wishes, make a quarter-of-an-hour speech explaining the technicalities.
  The normal arrangement with regard to dividends paid by a subsidiary company to the parent company is that the subsidiary company pays its Corporation Tax, and there is no further tax paid on the income transferred to the parent company so long as it remains within the parent company and is not further distributed by that parent company to its shareholders. What is proposed with regard to life annuity business of insurance companies is that the same principle should apply. It does not apply at the moment. I hope that the House will agree that it should apply.
  Mrs. Thatcher: I am glad that the Government have brought forward this series of Amendments. They have been urged on them for some time. They were on the Notice Paper in Committee in the names of my right hon. Friends and myself, and they have been on the Notice Paper for the Report stage. They substantially meet the point that there should not be a double charge to Corporation Tax on companies doing general annuity business.
  Amendment agreed to.
  Further Amendments made: In page 79, line 27, after" income"insert" and group income".
  In page 79, line 38, leave out subparagraph (4) and insert:
  (4) Any franked investment income which is taken into account under the said section 69(3)(b) to enable annuities referable to general annuity business to be treated as charges on income shall be left out of account under section 48 of the Finance Act 1965, except that for the purposes of this sub-paragraph there shall be deducted from the amount of the franked investment income of the company arising in any accounting period and taken into account under the said section 69(3)(b)—

  (a) the amount of any profit arising in that accounting period to the assurance company from general annuity business and computed under the said section 24 of the Finance Act 1956, and

  (b) the amount of any group income arising in that accounting period to the company and referable in accordance with the said section 24 to its general annuity business.

  (5) Subject to sub-paragraph (6) below

  (a) the exclusion by section 47(1) of the Finance Act 1965 from the charge to corporation tax of franked investment income shall not prevent such income being taken into account as part of the profits in computing under section 24 of the Finance Act 1956 the profits arising to an assurance company from pension annuity business.

  (b) notwithstanding anything in section 48 of the Finance Act 1965 a company resident in the United Kingdom and carrying on life assurance business shall be entitled to repayment of income tax in respect of franked investment income of the company's annuity fund in so far as it is referable in accordance with the said section 24 to pension annuity business and

  (c) any franked investment income on which income tax is so repayable shall be left out of account under the said section 48.

  (6) If for any accounting period there is, apart from this sub-paragraph, a profit arising to an assurance company from pension annuity business and computed under the said section 24, and the company so elects as respects all or any part of its franked investment income arising in that period, being an amount of franked investment income not exceeding the amount of the said profit, sub-paragraph (5) above shall not apply to the franked investment income to which the election relates.
  If an accounting period falls partly in one income tax year of assessment, and partly in another such year, the power of making elections under this sub-paragraph may be exercised separately for the respective parts of the accounting period as if they were separate accounting periods, and an election under this sub-paragraph shall be made by notice in writing given to the inspector not later than two years after the end of the accounting period, or part of an accounting period, to which the election relates, or within such longer period as the Board may by notice in writing allow.
  (7) In computing under the said section 24 of the Finance Act 1956 the profits arising to an assurance company from pension annuity busine—

  (a) group income shall not be taken into account as part of those profits,

  (b) section 53(5) of the Finance Act 1965 shall not prevent annuities paid by the company being deductible.

  (8) In section 69 of the Finance Act 1965, in subsection (5) the words from "and the exclusion" to the end, and in subsection (7) the words from "but notwithstanding" to the end (which are superseded by this paragraph) shall cease to have effect.—[Mr. Diamond.]
  Mr. Harold Lever: I beg to move Amendment No. 117, in page 81, line 16, at the end to insert:
  (6) Paragraph 9(1)(a) of the 11th Schedule to the Finance Act 1965 shall not apply to any interest payable by a close company which carries on a bone fide banking business to which section 200 of the Income Tax Act 1952 applies in respect of a deposit accepted by that company in the ordinary course of such business.
  The non-party nature of this Amendment is indicated by the fact that it is supported by the hon. Member for Wan-stead and Woodford (Mr. Patrick Jenkin).
  The gist of the Amendment is that interest paid in the ordinary course of a banking business to a depositor shall not be subject to the penalties that interest payments attract when the loan is from a member of the banker's family. I do not want to go into a long exposition about the pangs of last year's Finance Bill, but under the present law, when a close company is a banking company and one of the depositors who is a member of the banking family—for example, the wife of a controlling shareholder, or something of that sort—banks with the banking company, any interest paid on those bank deposits, unlike other bank deposits, will be treated as a distribution for tax purposes and consequently will not he allowable as a trading expense like other deposits.
  There is no obvious reason for this, and my Amendment, like most of the Amendments that I have sought to move, will not cost the Chancellor a penny. When representations on this matter came from the City the answer was that there was no reason why banks should be treated differently from dressmaking businesses. I suggest that one reason is that banks do not make dresses, and that the dressmaker's object is to make dresses—although the lower part of his activities are currently carried out on a minute scale—whereas the banker's business is to attract deposits, and it does not make sense that when a man is carrying on a banking business we should so construct our tax system that a member of his family cannot bank in the family firm.
  When a member of a banker's family banks in his bank and receives interest he does not enjoy some special exemp-
  1630
  tion from tax on that interest; he pays Income Tax and Surtax at the not inconsiderable rates we have arranged, without any further intervention. We are forced to ponder why it should be thought necessary to place such a penalty upon the family.
  I know that my right hon. Friends on the Front Bench are anxious to heal the rift that exists between them and the City, owing to the unfortunate misunderstandings that occur from time to time. Here is a cost-free way of doing it. When Dr. Johnson—like the members of the Treasury Bench—insisted on saying "No" against the opinion of everybody else, Boswell said to him, admiringly. "That, Sir, must have shown great fortitude of mind". "No, Sir", said Dr. Johnson, "Stark insensibility." I can only say that this is such a useful and commonsense Amendment that even I, affectionately disposed as I am to the Treasury Bench, would regard it as open to criticism if it does not accept it.
  Mr. Diamond: My hon. Friend has moved his Amendment with persuasiveness and moderation, but with slight inaccuracy. He says that he cannot understand why the Treasury takes the view it has taken, and which every Government has taken for a long time in relation not only to this tax but to its predecessor, or its similar predecessor, Profits Tax, namely, that interest paid in those circumstances shall not be treated in the same way as interest paid to a stranger, but as part of a distribution to the owner of the business.
  The answer is that it is costly to treat it in the way in which my hon. Friend has in mind. His proposal is that the recipient should pay the normal Income Tax and Surtax which is attributable to him on receipt of income— [Interruption.] Certainly, but what he proposes is that the interest should be deducted for Corporation Tax purposes. That would not be the case if it were a dividend paid to a shareholder—[Interruption.] I hope that two or three sentences will be allowed without an echo. There are echoes in the walls of this House, one realises that.
  I am not arguing whether it is the same or is not the same. If it were different and my hon. Friend secured that it were

  1631
  different, he must recognise that the reward would be a cost to the Treasury in the sense that the Revenue would be losing 40 per cent. on the loan interest—
  Mr. Harold Lever: I ought to make it clear that when I said that it would not cost a penny, I did not mean that that would be the case if anyone were foolish enough to deposit in the family bank. I suggest that this leads people not to bank in the family bank, so the Revenue get no tax but merely causes inconvenience to members of the banker's family.
  Mr. Diamond: We are getting nearer and nearer to the simple point of difference between my hon. Friend and myself, which is a point of fact and not one of law—whether, in the present circumstances, members of the family do bank in the family bank and so provide part of the capital. The answer is that they provide a small part of the capital, so small a part that the bank is well able, out of its profits, to provide an adequate margin to pay the Corporation Tax. But there ought to be included in the profits made the interest paid to a depositor who is, for these purposes, treated as a contributor.
  In these circumstances, I am sure that my hon. Friend will realise that I am unable to go all the way with him and accept the Amendment.
  Amendment negatived.
  Sir Lionel Heald: I beg to move Amendment No. 58. in page 82, line 5, at the end to insert:
  15.—Paragraph 9(1Xc) of Schedule 11 to the Finance Act 1965 shall not apply to so much of any royalty or other consideration paid or given by the company to a participator for the use of a patent within the meaning of the Patent Act 1949 (or any corresponding right under the law of a country to which that Act does not extend) as represents a reasonable commercial consideration, provided—

  (a) the amount of that royalty or other consideration is calculated by reference to the extent to which the invention the subject of the patent is made, used, exercised or vended, during the period in respect of which that royalty or other consideration is paid or given, or

  (b) the participator is the inventor or a joint inventor of the invention the subject of the patent, or is the personal representative of such inventor or joint inventor

  1632
  It will be remembered that this subject was discussed both last year and this year in an attempt to persuade the Government to remedy what appeared to be a serious hardship. When the profits of a close company are computed for Corporation Tax purposes, no deduction can be made in respect of any patent royalties paid to any participator in such a company or to any associate participant.
  That is a situation which applied last year to copyright as well as to patent royalties, and it was recognised by the Government last year that relief should be given in respect of copyright. It seemed last year that the authors had managed to secure some attention to their requirements and that the inventors had not been so fortunate. We discussed the reasons why that might have happened. This year there is no excuse for that and we raised the matter in Committee.
  This is not simply a question of repeating the same Amendment which was objected to and refused in Committee. We have carefully considered the arguments put forward against the Amendment in Committee by the Chief Secretary and, although we did not agree with his answers, we have taken every step we can to meet all the points which he raised. We believe that we have produced a form of words which will meet the point on which the right hon. Gentleman relied by way of objection and will deal with the most important aspect of the matter.
  12 p.m.
  I can summarise it briefly. It was pointed out that there was a danger in the broad wording which we originally proposed that arrangements might be made under which a close company and the participator entered into an agreement whereby use was made of an invention simply for the purpose of covering a financial arrangement which was advantageous. It was suggested that he might even buy up some old patent which was advantageous. It was suggested that he might even buy up some old patent and use it as a structure on which to build a financial advantage. We thought that that was rather an unreal supposition, but we have inserted words—I need not read all of them—which would exclude these artificial

  1633
  arrangements and by which the amount of the
  "royalty or other consideration is calculated by reference to the extent to which the invention the subject of the patent is made, used, exercised or vended"
  —that is to say, the royalty would be dependent on the actual use; it would be a percentage of the receipts or something related to quantities of use which can be examined carefullly and checked.
  The other alternative we have suggested is
  "the participator is the inventor or a joint inventor of the invention the subject of the patent, or is the personal representative of such inventor or joint inventor".
  That seems to dispose of the contention that it would be far too indefinite, and those with great experience who have considered the matter are satisfied that if it is dealt with in this way there should be no difficulty in arriving at a reasonable commercial arrangement, the idea being that anything beyond a reasonable commercial reward should not qualify for relief.
  It is interesting that this failure to exempt patent royalties does not apply to the recent Double Taxation Relief Agreement with the United States. Despite the great difficulties said to be involved in the valuation of these royalties in the Double Taxation Agreement negotiated with the United States in March, this very point, dealt with in the Amendment, was accepted between the two Governments. The other day an American lawyer with great experience in this matter was over here and I asked him, "How did it come about that this relief which we cannot get our Government to give appears in the Double Taxation Agreement?". He replied, "In the United States we will not stand for this odd kind of Treasury argument by which you seem to be bound down in England."
  One of the ingenious arguments of the Chief Secretary on the last occasion was that copyright was different because it dealt only with books and everybody knew what a royalty on a book was. I was surprised to hear that and, because I thought that copyright went a good deal beyond books, I checked up. I have found that copyright extends far beyond books. It covers rude limericks, Bradshaw's Railway Guide and many other things, including industrial drawings—
  1634
  and it would be wrong to say that for each one there is a recognised market value.
  While there may have been some justification for the Chief Secretary saying that the wording of the original Amendment was too wide—because it would have allowed the possibility of ingenious arrangements which were not genuine patent royalty agreements—we have now drafted a clearly stated, moderate and reasonable Amendment and I trust, therefore, that we will receive a more helpful reply from the right hon. Gentleman than on the previous occasion.
  Although this appears a complicated and technical matter, it is a subject of real importance, since we wish to encourage inventions, particularly by small companies. History shows that many of today's successful industries originated by someone starting in a very small way. If, in the early stages of such a development, we place a burden on the inventor, we may strangle the future development of an excellent idea.
  I need not remind the Chief Secretary that when we discussed this matter last he indicated that the Government were anxious to be of help and that they would consider any suggestion which my hon. Friends and I might make. I trust that he has considered this one and will respond in a more helpful way than he did last time.
  Mr. Diamond: There is a great deal of common ground between the right hon. and learned Member for Chertsey (Sir L. Heald) and myself on this whole question. My information is that by far the majority of inventions these days come from the research departments of large organisations. Nevertheless, I entirely share with him the view that there are individual inventions which might be deterred by tax arrangements which, shall we say, are not the most helpful that could be designed to that end. One would therefore wish to remove any deterrent of that sort.
  I recognise that the right hon. and learned Gentleman has gone a long way towards removing the difficulties which previously existed and that all that is left is the one major difficulty, which he recognises and with which I will deal without needing to refer to any others:

  1635
  the difficulty of arriving at what is a fair market price, or however else it is described.
  In this connection, the right hon. and learned Gentleman drew attention to the recent Double Taxation Agreement, in which the principle of arriving at a reasonable figure between parties at arms length has been incorporated. Any double taxation agreement is necessarily a matter of give and take.
  Lieut.-Colonel Sir Walter Bromley-Davenport: Mainly take.
  Mr. Diamond: Each side accepts provisions which it regards as disadvantageous because of the benefits it obtains under other provisions. I do not think that I can say more on that score.
  The right hon. and learned Gentleman said that I had indicated that I would look into the matter, and I have done so. He was very helpful in indicating sources, amongst others, to which inquiries might be directed. Those inquiries have taken place, but I must say that on the essential problem of finding out what would be a reasonable figure one is confirmed in the position one previously took up. I said—and it is not very reliable evidence for a Minister to go on—that my own experience confirmed the difficulty of arriving in a simple way at a figure which would be acceptable all round as the appropriate market price—a reasonable figure, which is a necessary precondition of adopting the right hon. and learned Gentleman's proposal. The information we have, and the further inquiries we have made, all confirm the difficulty of arriving, even in the terms of the much narrower Amendment that the right hon. and learned Gentleman has now moved, at a reasonable figure.
  It is quite open to experts and knowledgeable people to have totally different, or considerably different, views of what a fair figure is. The Revenue have no doubt that this proposal would lead to extreme difficulty in settling matters. There would be a good deal of litigation. I am therefore afraid that I cannot say that I am persuaded that this proposal is something we can accept.
  I recognise that this still leaves a problem. I do not think that the comparison with books is a difficult one at all. I
  1636
  recognise that the right hon. and learned Gentleman is quite right in saying that copyright applies to more things than books alone, but books are its major content; and just because it is perhaps difficult, as he rightly says, to deal with other matters, such as designs, it does not mean that one should deny the ease of dealing with things like books. So one has accepted books, and I am sure he would not seek to persuade the House to the contrary. The right hon. and learned Gentleman seeks to persuade us that inventions are of a similar commonplace character. But they are not. They are by the nature of things, unique, and therefore it is difficult to find a market price.
  I can only say that I am sorry that I cannot recommend the House to accept the Amendment but we shall certainly continue our review of the matter in the course of the coming year. We shall look at any difficulties to inventors that may arise. We do not think that there are likely to be many, but we shall look at them if they arise in the working of the Act as it now exists, and we shall certainly see whether there is any method by which we can meet without going too far, part, at all events, of what he would like us to meet I am afraid I cannot go further.
  I do not want the words I use to be taken as any kind of commitment, except a commitment undertaken in good faith to look at the matter in the course of the next year in order to see whether there are any difficulties to inventors which justify going much further than one has done, and to see whether, in view of those difficulties, there is good reason to go further.
  Sir L. Heald: Before the right hon. Gentleman sits down, he has spoken again of the difficulty of administration which he considers justifies penalising British inventors in this way. Is it not rather extraordinary that those difficulties can be overcome or disregarded, under double taxation, in the case of American inventors? Does not that suggest that there is something wrong somewhere?
  12.15 a.m.
  Mr. Diamond: No, there are many differences between the tax practices of the two countries. It is very enlightening to go, as I did a short time ago, to listen

  1637
  to an American tax expert giving a lecture over here and explaining that we live in the land of freedom while they are burdened by a tyrannous Treasury which treats them infinitely worse than we are treated in this country. It is quite refreshing to attend such a lecture. It is reasonably right to say that there are differences between the two countries.
  I do not want to put it too high, there is obviously a point in what the right hon. and learned Member has said. Double taxation is there for everyone to see, but we are not persuaded that there is any penalty of the kind to which he referred. If there were, one would be moved to deal with it even at some difficulty. We shall consider during the coming year any case which comes before us where there is anything approaching a penalty on an inventor. In those circumstances, I hope that the House will agree to let the matter rest for a year.
  Mr. Harold Lever: I hesitate to intervene, however briefly, but since my right hon. Fr] end is to consider the matter, I offer him some stimulus in doing so.
  I understand that he has rejected the claim of the right hon. and learned Member for Chertsey (Sir L. Heald) exclusively on the line that it would be difficult to value the royalty for the purpose that the Amendment would require. If my right hon. Friend takes that view, it is difficult to see how he can hope to administer any Estate Duty upon such royalties which are inherited. I wonder if he would consult the Estate Duty Department and find how it manages to solve this difficult problem when it is at the receiving end of the Revenue.
  If this is denied, not on the ground of fact but on the impossibility of evaluation, it is an impossibility which does not appear to exist when it comes to a question of Estate Duty or if the question of Capital Gains Tax arises. The argument does not stand up. If that is the only objection to this proposal, and my right hon. Friend said that it is, the case of the right hon. and learned Member is conclusively proved.
  Mr. Higgins: I support my right hon. and learned Friend the Member for Chertsey (Sir L. Heald), who moved this Amendment in an admirable way. Like
  1638
  the hon. Member for Manchester, Cheetham (Mr. Harold Lever), I cannot accept the argument put forward by the Chief Secretary I take issue on one point he raised. He said that most inventions nowadays come from the research laboratories of large organisations. If he will consult the only really authoritative work on the sources of invention, by Professor Jewkes, Sawyer and Stillman, he will find that they discovered that most of the significant inventions in the post-war era have probably come from the small man. They stress at great length the difficulty he has in forming his own company and making it a close company and exploiting the invention. This is why the Amendment is so important in the present context for our country. On both sides, we must do all we can to encourage the utilisation of inventions and encourage the formulation of inventions themselves.
  In Committee the Chief Secretary relied on a quite different argument from the one he has put forward this evening. He employed the loophole argument and suggested that if the Amendment were accepted there would be an enormous loophole which would enable people in close companies to use royalties or patents as a means of getting round taxes which otherwise they would have to pay. The right hon. Gentleman has not relied on that argument this evening, but if it were based on the Amendment we have before us it would not work anyway. He would have to argue that the close company would say to someone it wanted as a director or shareholder," We want to employ you without paying more tax than we otherwise would. Invent something which is marketable and profitable patent and licence it. We will manufacture and sell it, make a profit, and then be able to pay you a tax-free royalty."
  The Amendment, as we have phrased it, eliminates any question of tax avoidance of that sort. As my right hon. and learned Friend pointed out, we have two clear qualifications. The royalty would be paid only if it is a reasonable sum related to the fact that the patent is actually used, whereas on the previous formulation it might have been a patent which was not used and was a nominal way of getting round taxation. Secondly, we have said that he must be an actual inventor or associated with an invention.

  1639
  Given those two points, it seems to us clear that we have provided adequate safeguards, and the only argument that the Chief Secretary can put up is this question of valuation. As the hon. Gentleman who has just sat down has pointed out, valuations of this kind are carried out for other purposes and carried out for the purposes of copyright and so on, which have already been conceded by the Government.
  In conclusion, we really must take issue with the Chief Secretary when he argued during the Committee stage when asked by my hon. Friend the Member for Barry (Mr. Gower) to consider whether there was any real difference between a novel, for example, "The Moon and Sixpence", and someone who had invented a safety razor blade, that these were not comparable. This is the real crux of the matter.
  The Chief Secretary said:
  "Yes, I aver that there is a total difference between the two kinds of cases. The book is something which is produced, and it matters

  Division No. 117.]

  AYES

  [12.22 a.m.

  Alison, Michael (Barkston Ash)

  Harrison, Brian (Maldon)

  Page, Graham (Crosby)

  Allason, James (Hemel Hempstead)

  Harrison, Col. Sir Harwood (Eye)

  Pearson, Sir Frank (Clitheroe)

  Astor, John

  Hawkins, Paul

  Peel, John

  Atkins, Humphrey (M't'n & M'd'n)

  Heald, Rt. Hn. Sir Lionel

  Pike, Miss Mervyn

  Awdry, Daniel

  Heseltine, Michael

  Pink, R. Bonner

  Baker, W. H. K.

  Higgins, Terence L.

  Pounder, Rafton

  Balniel, Lord

  Hill, J. E. B.

  Powell, Rt. Hn. J. Enoch

  Batsford, Brian

  Hirst, Geoffrey Hunt, John

  Pym, Francis

  Bell, Ronald

  Hutchison, Michael Clark

  Renton, Rt. Hn. Sir David

  Bitten, John

  Jenkin, Patrick (Woodford)

  Ridsdale, Juliar,

  Birch, Rt. Hn. Nigel

  Johnston, Russell (Inverness)

  Rossi, Hugh (Hornsey)

  Blaker, Peter

  Joseph, Rt. Hon. Sir Keith

  Shaw, Michael (Sc'b'gh & Whitby)

  Boyd-Carpenter, Rt. Hn. John

  King, Evelyn (Dorset, S.)

  Smith, John

  Brinton, Sir Tatton

  Kitson, Timothy

  Steel, David (Roxburgh)

  Bromley-Davenport,Lt.Col.Sir Walter

  Knight, Mrs. Jill

  Summers, Sir Spencer

  Brown, Sir Edward (Bath)

  Longden, Gilbert

  Talbot, John E.

  Bruce-Gardyne, J.

  Loveye, W. H.

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

  Chichester-Clark, R.

  Lubbock, Eric

  Taylor, Frank (Moss Side)

  Clark, Henry

  MacArthur, Ian

  Teeling, Sir William

  Clegg, Walter

  Macleod, Rt. Hn. lain

  Thatcher, Mrs. Margaret

  Cooke, Robert

  Madden, Martin

  Turton, Rt. Hn. R. H.

  Crawley, Aidan

  Marten, Neil

  van Straubenzee, W. R.

  Dalkeith, Earl of

  Mawby, Ray

  Walker, Peter (Worcester)

  Dean, Paul (Somerset, N.)

  Maxwell-Hyslop, R. J.

  Walters, Dennis

  Deedes, Rt. Hn. W. F. (Ashford)

  Mitchell, David (Basingstoke)

  Ward, Dame Irene

  Dodds-Parker, Douglas

  Monro, Hector

  Weatherill, Bernard

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

  Morrison, Charles (Devizes)

  Webster, David

  Fortescue, Tim

  Munro-Lucas-Tooth, Sir Hugh

  Whitelaw, William

  Gilmour, Ian (Norfolk, C.)

  Murton, Oscar

  Winstanley, Dr. M. P.

  Glover, Sir Douglas

  Nabarro, Sir Gerald

  Woodnutt, Mark

  Glyn, Sir Richard

  Nicholls, Sir Harmar

  Wylie, N. R.

  Goodhart, Philip

  Noble, Rt. Hn. Michael

  Grant-Ferris, R.

  Nott, John

  TELLERS FOR THE AYES:

  Gurden, Harold

  Orr, Capt. L. P. S.

  Mr. Anthony Grant and

  Hall, John (Wycombe)

  Osborn, John (Hallam)

  Mr. Reginald Eyre.

  Hall-Davis, A. G. F.

  NOES

  Ahse, Leo

  Archer, Peter

  Bidwell, Sydney

  Allaun, Frank (Salford, E.)

  Armstrong, Ernest

  Bishop, E. S.

  Alldritt, Walter

  Bennett, James (G'gow, Bridgeton)

  Blackburn, F.

  little what the title is or what the length of it is. There is a regular market price for books. As one would expect, for inventions which are so varied and unique—otherwise they are not inventions—the patent royalties and the terms for them are of immense variety."—[OFFICIAL REPORT, 21st June 1966; Vol. 730, c. 394.]
  Of course, there is just as much variety in books as there is in inventions, and the crucial thing is not what the price is but how much of it is sold. This point is entirely covered by our Amendment, and I would submit to the House, as indeed the hon. Gentleman opposite did, that the two cases are very closely related indeed and that if the Government are prepared to give way on the one then they should give way on the other.
  We appreciate that the Chief Secretary is coming round to our viewpoint, but we cannot accept the arguments he put forward on Committee stage, nor can we accept those he has put forward tonight. I would therefore advise my hon. Friends to divide the House on this Amendment.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 103, Noes 156.

  Booth, Albert

  Hattersley, Roy

  Norwood, Christopher

  Boston, Terence

  Hazell, Bert

  Ogden, Eric

  Braddock, Mrs. E. M.

  Hefter, Eric 8.

  O'Malley, Brian

  Bradley, Tom

  Herbison, Rt. Hn. Margaret

  Oram, Albert E.

  Brooks, Edwin

  Hobden, Dens (Brighton, K'town)

  Orme, Stanley

  Brown, Hugh D. (G'gow, Provan)

  Hooley, Frank

  Oswald, Thomas

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Howie, W.

  Parkyn, Brian (Bedford)

  Brown, R. W. (Shoreditch & F'bury)

  Hoy, James

  Pentland, Norman

  Buchan, Norman

  Hughes, Emrys (Ayrshire, S.)

  Perry, George H. (Nottingham, 8.)

  Buchanan, Richard (G'gow, Sp'burn)

  Hughes, Roy (Newport)

  Price, Christopher (Perry Barr)

  Butler, Mrs. Joyce (Wood Green)

  Hunter, Adam

  Probert, Arthur

  Caltaghan, Rt. Hn. James

  Hynd, John

  Redhead, Edward

  Cant, FL B.

  Jackson, Colin (B'h'se & Spenb'gh)

  Reynolds, C. W.

  Carter-Jones, Lewis

  Jackson, Peter M. (High Peak)

  Rhodes, Geoffrey

  Coe, Denis

  Jeger, George (Goole)

  Richard, fear

  Crawshaw, Richard

  Jenkins, Hugh (Putney)

  Roberts, Gwilym (Bedfordshire, S.)

  Cullen, Mrs. Alice

  Jenkins, Rt. Hn. Roy (Stechford)

  Robertson, John (Paisley)

  Dalyell, Tam

  Jones, J. Idwal (Wrexham)

  Robinson, W. O. J. (Walth'stow, E.)

  Davidson, Arthur (Accrington)

  Judd, Frank

  Rodgers, William (Stockton)

  Davies, Dr. Ernest (Stretford)

  Kelley, Richard

  Roebuck, Roy

  Davies, Harold (Leek)

  Kenyon, Clifford

  Rose, Paul B.

  Dewar, Donald

  Kerr, Rusell (Feltham)

  Ross, Rt. Hn. William

  Diamond, Rt. Hn. John

  Lawson, George

  Rowlands, E. (Cardiff, N.)

  Dickens, James

  Leadbitter, Ted

  Ryan, John

  Doig, Peter

  Ledger, Ron

  Sheldon, Robert

  Donnelly, Desmond

  Lester, Miss Joan

  Shore, Peter (Stepney)

  Dunwoody, Mrs. Cwyneth (Exeter)

  Lewis, Ron (Carlisle)

  Silkin, John (Deptford)

  Eadie, Alex

  Lomas, Kenneth

  Slater, Joseph

  Edwards, Robert (Bilston)

  Luard, Evan

  Small, William

  English, Michael

  Lyons, Edward (Bradford, E.)

  Steele, Thomas (Dunbartonshire,W.)

  Ensor, David

  McCann, John

  Summerskill, Hn. Dr. Shirley

  Evans, loan L. (Birm'h'm, Yardley)

  MacDermot, Niall

  Thomas, George (Cardiff, W.)

  Fletcher, Raymond (Ilkeston)

  McGuire, Michael

  Urwin, T. W.

  Floud, Bernard

  McKay, Mrs. Margaret

  Varley, Eric G.

  Foley, Maurice

  Mackenzie, Gregor (Rutherglen)

  Wainwright, Edwin (Dearne Valley)

  Foot, Michael (Ebbw Vale)

  Mackintosh, John P.

  Walden, Brian (All Saints)

  Ford, Ben

  McMillan, Tom (Glasgow, C.)

  Walker, Harold (Doncaster)

  Fowler, Gerry

  McNamara, J. Kevin

  Wallace, George

  Fraser, Rt. Hn. Tom (Hamilton)

  Mahon, Peter (Preston, S.)

  Watkins, David (Consett)

  Garrow, Alex

  Mahon, Simon (Bootle)

  Wellheloved, James

  Courlay, Harry

  Manuel, Archie

  Willis, George (Edinburgh, F.)

  Greenwood, Rt. Hn. Anthony

  Mapp, Charles

  Wilson, William (Coventry, S.)

  Gregory, Arnold

  Mason, Roy

  Winnick, David

  Grey, Charles (Durham)

  Miller, Dr. M. S.

  Winterbottom, R. E.

  Griffiths, David (Rother Valley)

  Mitchell, R. C. (S'th'pton, Test)

  Woodburn, Rt. Hn. A.

  Griffiths, Will (Exchange)

  Morgan, Elystan (Cardiganshire)

  Woof, Robert

  Hamilton, James (Bothwell)

  Morris, Alfred (Wythenshawe)

  TELLERS FOR THE NOES:

  Hamilton, William (Fife, W.)

  Murray, Albert

  Mr. William Whitlock and

  Hamling, William

  Newens, Stan

  Mr. Neil McBride.

  Hannan, William

  Noel-Baker, Francis (Swindon)

  Harper, Joseph

  12.30 a.m.
  Mr. MacDermot: I beg to move Amendment No. 59, in page 82, line 9 to leave out" but "and to insert:
  "which is constituted under any Act, Royal Charter or Letters Patent or is".
  The Amendment is designed to implement an assurance which I gave in Committee to meet a point raised in an Amendment -moved by the hon. Member for Finchley (Mrs. Thatcher). I hope that she will agree that it meets the point.
  Amendment agreed to.
  Mr. MacDermot: I beg to move Amendment No. 60, in page 82, line 13 at the end to insert:

  Transitory provisions as to right to set capital allowances against general income
  16.—(1) Section 20 of the Finance Act 1954 (under which. as amended by section 18 of the Finance Act 1962, capital allowances for a year of assessment may be included in a
  1642
  claim for a loss sustained in the year of assessment which is the basis year) shall, notwithstanding the words "but not after the year 1964–65" in paragraph 20(1) of Schedule 15 to the Finance Act 1965. apply in relation to claims by a company for losses sustained in the year 1965–66, and sub-paragraph (2) of the said paragraph 20 (under which relief for a loss in the year 1965–66 may, so far as it cannot be given against income tax, be given against corporation tax) shall apply accordingly.
  (2) For the purpose of the said section 20 as applied by sub-paragraph (1) above the company shall be treated, in the case where the year 1965–66 is not the basis year for the year itself, on the footing that

  (a) section 46(2) of the Finance Act 1965 (which excludes companies from the charge to income tax after the year 1965–66) did not apply in relation to the trade in question, and

  (b) the period on the profits or gains of which income tax for the year 1966–67 would fall to be finally computed were the twelve months starting at the time at which the company came within the charge to corporation tax in respect of the trade.

  and relief under the said section 20 may be given accordingly by reference to what, on that footing, would have been the company's capital allowances for the year 1966–67 for income tax purposes.
  (3) Relief in respect of the same matter shall not be given both in a manner authorised under this paragraph and in some other manner.

  Close companies: assessment to Income Tax in respect of certain loans
  19. Section 75 of the Finance Act 1965 shall not apply to any loan or advance made by a close company to any person accountable by law for the payment of any estate duty due by reason of the death of a deceased participator in the said company in respect of any shares or other interest in the said company beneficially held or enjoyed by such participator at, or at any time within five years immediately prior to, his death:
  Provided that this subsection shall not apply unless the inspector is satisfied—

  (a) that the said loan or advance is made bona fide and for a full consideration for the purpose of paying such estate duty as aforesaid, and is duly applied in or towards the payment of such estate duty as aforesaid; and

  (b) that the said loan or advance is reasonably necessary in order to ensure the payment of such estate duty as aforesaid without imposing hardship on any individual beneficially entitled to any interest in the said company or in the estate of the said deceased participator;

  and it is hereby declared that hardship within the meaning of this subsection shall be deemed to include the loss of control of the said

  1651
  company enjoyed whether by the said individual alone or with other participators by reason of the disposal of any shares or other interest in the said company in favour of any person or persons other than the said individual or such other participators.
  The Chief Secretary, with those eagle eyes of his, will no doubt have picked out the fact that this Amendment appeared in almost the same words 12 months and one day ago, at that time in the name of my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd), to whom we owe the inspiration for the Amendment.
  With that equally sharp memory of his, I have no doubt that the Chief Secretary will recall that, at the time, in replying to the Amendment moved on 12th July, 1965, he made some positively encouraging noises. In place of the customary growl and the occasional bark which we have learned to expect from him, we had a purr; indeed, it went further, because the Chief Secretary recognised explicitly the genuine hardship involved in the case which we are trying to amend. He indicated that the Government proposed to try and provide by their own means some workable scheme to deal with the case in point.
  We have seen no Amendment brought forward by the Government to try and redress the injustice which we feel exists under the Finance Act, 1965. For that reason, we now move the Amendment and hope that we shall get an equally sympathetic response from the Government.
  Hon. Members will no doubt remember that Section 75 of the Finance Act, 1965, makes close companies liable to Income Tax in respect of certain advances and loans. When a close company makes a loan or advance to a participator or associate, under Section 75 the company is treated as if it had paid a dividend which, after deduction of Income Tax, leaves the same amount as the loan in question. In other words, under Section 75, the loan which a close company might make has to be grossed up and an equivalent and proper proportion of it handed over to the Exchequer in taxation.
  The effect of the provision is to treat a loan or advance by a close company to an associate or participator as a distribution and not as a cost item which is available to set against Corporation Tax.
  The object of Section 75 of the earlier Act was anti-avoidance. It sought to stop a device by which a close company might avoid payment of tax by lending money to participators or associates on an indefinite basis or, perhaps, waiving repayment. It was designed to nip that way of distributing funds in the bud.
  We do not want to argue the merits or demerits of that anti-avoidance Section, but we want to argue a special case in which a close company should be allowed to make a loan or advance to participators without incurring the necessity of paying the appropriate amount of tax to the Exchequer. This special case arises when the loan or advance is made in connection with death duties. I am sure that we shall be able to engage the attention of the House on what is essentially a human interest point which deals not with the cold jargon of tax measures but with a human need arising in the case of an unexpected death.
  Without this concession in the Amendment, it is possible that the close company, on becoming liable, through one of its participators dying, to pay death duties, would have to wind up and sell its assets to get the necessary money for death duties, or it might be necessary for one of the partners in the close company to take into partnership, or to lose control to, other people with whom he had no wish to enter into partnership.
  I should like to illustrate the point with facts and figures given to me by an accountant friend of mine concerning a death which occurred in 1965. The man who died was director and participator of a close company. He left to his two sons, who had come into the company and were working in it, shares in the close company worth £50,000 as valued for estate duty. He had outside the close company a free estate worth £10,000, making a total estate valued for estate duty purposes at £60,000, on which the duty payable was between £20,000 and £30,000. It was possible for the executors of the deceased to raise out of the free estate of £10,000 about £6,000 for the settlement of death duties. Part of the free estate consisted of a private house which the widow was left. That could not be sold over her head. There was, therefore, left a balance of £14,000 payable in death duties which

  1653
  could be raised only by realising shares in the close company or by borrowing from the close company.
  Of the ways in which the extra money might be raised, it happened that the option of raising the money by selling shares in the close company or realising the whole of the close company assets to meet this extra sum due to the Inland Revenue caused real hardship. Apart from anything else, the fact that one has to sell shares in the close company to pay the residue of death duties involves one in extra Capital Gains Tax. It might involve the surviving partner or partners in a close company in losing control of the company by virtue of the fact that the executors of the deceased have to sell shares to some other interested party—for example, the Estate Duties Investment Trust.
  1.0 a.m.
  If, instead of having to sell assets of the close company it was possible for them to borrow out of the company, the loan be ng repayable over a period of time, simply for the purpose of topping up the residue of revenue out of the loan, everybody would be happy except the Government, under the provisions of Section 75 of the 1959 Finance Act, because under those provisions—which were anti-avoidance—not only would the executors have to raise the balance of, say, £14,000 extra death duty but would have to find another £10,000 in the form of a grossed-up loan, making about £25,000.
  This would be a substantial extra sum, and it means that in order to pay death duties, if one is a participator in a close company, one has to pay the Revenue the net sum due on the estate and a net sum representing the grossed-up equivalent which Section 75 makes necessary, and the same sum would be paid to the same body.
  This is totally unfair in the case of an occurrence like death, which is unavoidable and which often involves enough hardship already. We propose that in the case of a deceased participator in a close company the necessity to gross-up the loan from the close company should be dispensed with, in order to enable the death duty to be paid without hardship. I think that the Chief Secretary will agree that there are strong grounds in equity
  1654
  for preventing the hardship which may be involved where death occurs in this way. The right hon. Gentleman recognised this hardship last year, when he spoke on 12th July.
  I would also point out that there are strong economic grounds why it is wrong for the Chancellor to insist on the grossing-up of loans in this way for the payment of death duty where a close company makes a loan to a participator, because it may force a perfectly profitable, live and satisfactory close company to go out of business. A small building business which was up against it already might be forced out of business in this way, and we do want that to happen. It could be argued that if the close company is able to make a loan without penalty to the executors of a deceased participator in the estate this has the effect of calling upon the reserves of the close company, possibly lodged at the bank in the shape of deposits, which will narrow the credit base of the economy and deflate it effectively by enabling the people to borrow out of close companies, whereas if it were necessary to sell the assets in the close company it could lead to some capital being released.
  There is no. loss to the Revenue in this case. The Chancellor will not lose a penny. It simply prevents the paying of double tax to the same person. Admittedly one part can be paid back under Section 75, but there is a long time lag. The small close company which has to find practically double the amount of the loan in order to meet the tax requirement must find accommodation at the bank. In present circumstances of stringency this is very difficult.
  On grounds of economy and equity the Chief Secretary should go the whole way—as he promised he would last year —and give us this humane concession on behalf of people who contribute to the economy of the country and ought not to be penalised.
  Mr. Michael Shaw: I support the Amendment, which arises out of last year's legislation, but more generally because the incidence of Estate Duty is falling more and more heavily upon industry and its share, holders. There are many and varied instances of potential hardship. The Chief Secretary probably spent many happy

  1655
  and sometimes anxious hours advising his clients in former days how the incidence of Estate Duty could be minimised. But one piece of advice which our clients cannot follow is the advice to live for another five years.
  There are many cases of calls for adjustments in businesses by way of Estate Duties. I am concerned not with the saving of the estate of the dead person, but with the living and with the business itself. The future of a company might be jeopardised, not through mismanagement but through the sudden demand for Estate Duty, because of the death of one of the main shareholders. This applies particularly to close companies and private family businesses, which have enough to put up with.
  One often comes across examples of two kinds of case. One is that of a man with most of his wealth vested in the shares of a limited company which he built up. When he dies, there are few resources left apart from the shares. Either the shares have to be sold and the business jeopardised, or else the money has to be borrowed. With the present restrictions, probably the only place the money could be found would be in the business itself.
  The object of the Amendment is not to relieve the beneficiaries from the liability to Estate Duty but to give them the chance to continue the business and the time to sort out the problem of paying the duty. In the old days, the money could be found from the business and arrangements made for the family to pay it back, and the company could continue for the benefit of the shareholders, the workpeople and the tradition it had built up.
  I was interested to note last year that the right hon. Gentleman sympathised with the objectives of the Amendment. Like all these Amendments, it might need adjustments, but the intention is clear. I hope that he will accept it in that spirit, perhaps with alterations and the insertion of a period of years during which the advance should be repaid. I I am sure that we would agree to this. The main point of the Amendment is to see that a period of time is given to the beneficiaries by the advancement of money by the company—a period in
  1656
  which they can make adequate arrangements to settle the debt and to allow the business to continue.
  Mr. A. G. F. Hall-Davis: I wish to speak for two or three minutes only to bring out one aspect of the problem. My hon. Friend the Member for Barkston Ash (Mr. Alison) has referred to the debates last year. It is not unfair to say that since those debates the Government have given the impression that they would not be sorry to see the steady elimination of small businesses such as those which the Amendment seeks to help continue as independent entities. If they do not wish to see them eliminated or their numbers drastically reduced, the Amendment gives them an opportunity to demonstrate their understanding of the difficulties which their recent legislation has placed in the way of the continued existence of these small independent companies.
  For this type of business—the small close company—Estate Duty cannot be considered, and increasingly as the years go by will not be considered, in isolation without reference also to the impact of Capital Gains Tax, which will fall to be levied at the time of the death of the participator. The Amendment refers only to Estate Duty, but as the years go by it is likely that at the same time as Estate Duty has to be paid, a Capital Gains Tax will be levied as a result of the increase in the participator's investments from the basic date of 5th April, 1965.
  I do not think that the effect of this on small private businesses has yet been fully appreciated. The Chief Secretary offers us many figures and I am sure that he will follow my example rapidly if it is accurate. Take a man whose business on 5th April, 1965 was worth £5,000. Some years go by, he dies and his share of the business is then worth £20,000. I calculate that the combined effect of Capital Gains Tax and Estate Duty would require a levy of £4,700 or about 23½ per cent. on the total estate. This is almost exactly the same percentage as the simple Estate Duty on an estate of £40,000. If there is an estate worth £40,000 which has not appreciated, it will pay just the same rate as the estate of a man who built up a business over the years to a value of £20,000, because

  1657
  percentagewise the effect of Capital Gains Tax and Estate Duty is as heavy proportionately for him as for someone with twice his estate.
  We shall increasingly have to bear this in mind, if there are no amendments to financial legislation, and I suggest to the Chief Secretary that if on top of Estate Duty and Capital Gains Tax money has to be withdrawn from this type of business to pay Income Tax at the same time, there will be real difficulties, because these small businesses will find it very difficult to raise outside liquid resources to meet these dues. To impose on top the obligations of the 1965 Finance Act as it stands will make the continued existence of these businesses very unlikely.
  1.15 a.m.
  Mr. Diamond: The three hon. Gentlemen opposite who have spoken in support of the Amendment have made the difficulty that arises clear, and the hon. Member for Barkston Ash (Mr. Alison) said that while it was not usual for me to speak sympathetically, I had spoken with some sympathy on this topic a year ago.
  First, one must consider the extent of the hardship which one is endeavouring to alleviate. Hon. Gentleman opposite have clarified the issue and the hon. Member for Barkston Ash referred to it as the need, with regard to an estate, to see that a person whose main wealth is his business, which is money tied up in shares and who has precious little else, has provision made so that money can be readily realised to meet the duties that arise, and the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) mentioned the increasing duties which would fall to be paid in the course of time.
  The hon. Member for Barkston Ash was really pointing out that we are considering a difficulty which has very little to do with the Amendment but which is a common difficulty; that of paying Estate Duty when one has not made provision for it. He cited the case of an estate which was wholly unbalanced, so to speak, with, say, £50,000 in shares and £10,000 outside the shares, with a £4,000 to £6,000 house in which the widow lived and which, therefore, was not free, and £3,000 or £4,000 available
  1658
  to deal with the whole problem of Estate Duty, so that the other money was tied and was not easily realised capital.
  I am grateful to the hon. Member for Barkston Ash for dealing with that problem because advice must be given many times for people to make preparation for circumstances of that sort. The solution, however, does not concern the method of drawing out a loan— and I will come to that shortly—without attracting liability to Corporation Tax, but of making provision so that there will be assets readily realisable for the payment of Estate Duty.
  As I promised last year, I have kept this matter under review. No serious cases of hardship with which the Amendment is designed to deal have come forward. Certainly cases arise where there is a liability to pay Estate Duty on an estate and the money is not readily available. I am sure I shall get no sympathy for saying this, but in those cases the people concerned discuss the matter with the Estate Duty Office, which is comprised of sympathetic people; human beings who are anxious to help and who want to enable these estates to meet their Estate Duty liability without undue difficulty. After all, it is their job to collect the revenue, but not to cause undue hardship.
  I did undertake to look at this matter, and I have done so. My information corresponds exactly with the example the hon. Member for Barkston Ash gave; that the hardship is not related to the Amendment but is a hardship which arises through there being an unbalanced estate, so to speak. The hon. Gentleman's proposal is unsatisfactory because it would enable a loan to be made which could, in due course, be written off without any charge to Corporation Tax arising, as a result of which the accumulated profits on that business could be siphoned off to the owners of the business without any charge to, and therefore avoiding, Surtax and Income Tax because it has not be treated as a distributions which, in the course of time, it turns out to have been. I am therefore afraid that it is wholly unacceptable in its present form.
  I cannot help the House, as I would like to, by saying that there is another form which is wholly satisfactory. There

  1659
  is not. One has not been able to find one. We shall continue to keep the matter under review to see if a particular hardship arises of which we are not aware at the moment, which we can meet in a similar way and where we can provide a form of words that is reasonable, which does not go too wide, and which makes it possible to administer the law without too much difficulty. One has not found that solution, but the matter will be kept under review. Because the Amendment goes so wide—and I am sure that that was not the intention of the hon. Gentleman—because it does not meet the problem that has been expounded, and because the problem should be met entirely differently, I am afraid that I cannot recommend this Amendment to the House.
  Mr. Patrick Jenkin: I am sure that the Chief Secretary will recognise that we on this side regard that as a very disappointing reply. My hon. Friends dwelt at some length on the case that could arise where a sudden and unexpected liability to pay Estate Duty—and I emphasise the word "unexpected"; these things cannot be planned, and people die accidentally can impose hardship where, perhaps, the sole asset of the estate is an interest in a close company. Having had some experience of the administration of the Estate Duty provisions by the Estate Duty Office, I think I can say that nobody ever heard of a case where the Estate Duty Office—particularly under Sections 46 and 55 of the 1940 Act, which imposed these very stringent Estate Duty provisions—drove a company into liquidation.
  When the Chief Secretary said that the Estate Duty Office would deal with cases sympathetically, he was right—the Estate Duty Office does—but he must appreciate that under the close company provisions of last year's Finance Act an entirely new element has been introduced. My hon. Friends have described very clearly

  Division No. 118]

  AYES

  [1.24 a.m.

  Alison, Michael (Barkston Ash)

  Biffen, John

  Chichester-Clark, R.

  Allason, James (Hemel Hempstead)

  Birch, Rt. Hn. Nigel

  Clark, Henry

  Astor, John

  Blaker, Peter

  Clegg, Walter

  Atkins, Humphrey (M't'n & m.d.n)

  Boyd-Carpenter, Rt. Hn. John

  Cooke, Robert

  Awdry, Daniel

  Brinton, Sir Tatton

  Crawley, Aidan

  Baker, W. H. K.

  Bromley-D ayenport, Lt.Col.Sir Walter

  Dalkeith, Earl of

  Balniel, Lord

  Brown, Sir Edward (Bath)

  Dean, Paul (Somerset, N.)

  Batsford, Brian

  Bruce-Gardyne, J.

  Deedes, Rt. Hn. W. F. (Ashford)

  how the hardship can arise—a hardship which the right hon. Gentleman recognised when he replied last year to the debate opened by my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd).
  The Chief Secretary now comes along, first of all, with his anodyne solution that everyone should be able to prepare for these things; that an estate should be well planned, that funds should be available, that this is the right way to deal with the matter, and that the Amendment is not necessary. Quite apart from the fact that that may be totally impracticable—and, as I have said, death can happen unexpectedly and people can be caught without any preparation—that solution does not help.
  The right hon. Gentleman then says that the Amendment will not help because it offends against the whole principle of Corporation Tax and would give rise to substantial tax avoidance. The fact of the matter is that the company may be the only source from which funds are available for the payment of Estate Duty, and in such circumstances it is very harsh that the executors should have to incur—if they are to get the funds from the company—a substantial additional penalty when they take the funds in the form of a loan to pay taxation arising under a different head and payable to a different branch of the Inland Revenue.
  This is something that the Government should look at again, and it is not good enough for the Chief Secretary just to say that no proper solution exists. I am sure that if the Government wanted to find a solution that would help these companies they could do so, and I can only advise my right hon. and hon. Friends to divide on this Amendment.
  Question put, That those words be there inserted in the Bill:
  The House divided: Ayes 93, Noes 155.

  Dodds-Parker, Douglas

  Longden, Gilbert

  Powell, Rt. Hn. J. Enoch

  Fortescue, Tim

  Loveys, W. H.

  Pym, Francis

  Gilmour, Ian (Norfolk, C.)

  MacArthur, Ian

  Renton, Rt. Hn. Sir David

  Glover, Sir Douglas

  Macleod, Rt. Hn. Iain

  Rossi, Hugh (Hornsey)

  Glyn, Sir Richard

  Maddan, Martin

  Shaw, Michael (Sc'b'gh & Whitby)

  Goodhart, Philip

  Marten, Neil

  Smith, John

  Grant, Anthony

  Maxwell-Hyslop, R. J.

  Summers, Sir Spencer

  Grant-Ferris, R.

  Mitchell, David (Basingstoke)

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

  Gurden, Harold

  Monro, Hector

  Taylor, Frank (Moss Side)

  Hall, John (Wycombe)

  Morrison, Charles (Devizes)

  Teeling, Sir William

  Hall-Davis. A. G. F.

  Munro-Lucas-Tooth, Sir Hugh

  Thatcher, Mrs. Margaret

  Harrison, Brian (Maldon)

  Murton, Oscar

  Turton, Rt. Hn. R. H.

  Harrison, Col. Sir Harwood (Eye)

  Nabarro, Sir Gerald

  van Straubenzee, W. R.

  Hawkins, Paul

  Nicholls, Sir Harmar

  Walker, Peter (Worcester)

  Heseltine, Michael

  Noble, Rt. Hn.

  Walters, Dennis

  Higgins, Terence L.

  Michael Nott, John

  Ward, Dame Irene

  Hill, J. E. B.

  Orr, Capt. L. P. S.

  Weatherill, Bernard

  Hunt, John

  Osborn, John (Hallam)

  Webster, David

  Hutchison, Michael Clark

  Page, Graham (Crosby)

  Whitelaw, William

  Jenkin, Patrick (Woodford)

  Pearson, Sir Frank (Clitheroe)

  Woodnutt, Mark

  Joseph, Rt. Hn. Sir Keith

  Peel, John

  Wylie, N. R.

  King, Evelyn (Dorset, S.)

  Pike, Miss Mervyn

  TELLERS FOR THE AYES:

  Kitson, Timothy

  Pink, R. Bonner

  Mr. R. W. Elliott and

  Knight, Mrs. Jill

  Pounder, Rafton

  Mr. Reginald Eyre.

  NOES

  Abse, Leo

  Griffiths, Will (Exchange)

  Murray, Albert

  Allaun, Frank (Salford, E.)

  Hamilton, James (Bothwell)

  Newens, Stan

  Alldritt, Walter

  Hamilton, William (Fife, W.)

  Noel-Baker, Francis (Swindon)

  Archer, Peter

  Hamling, William

  Norwood, Christopher

  Armstrong, Ernest

  Hannan, William

  Ogden, Eric

  Bennett, James (G'gow, Bridgeton)

  Hattersley, Roy

  O'Malley, Brian

  Bidwell, Sydney

  Hazel!, Bert

  Orem, Albert E.

  Bishop, E. S.

  Heifer, Eric S.

  Orme, Stanley

  Blackburn, F.

  Herbison, Rt. Hn. Margaret

  Oswald, Thomas

  Booth, Albert

  Hobden, Dennis (Brighton, K'town)

  Parkyn, Brian (Bedford)

  Boston, Terence

  Hooley, Frank

  Pentland, Norman

  Braddock, Mrs. E. M.

  Howie, W.

  Perry, George H. (Nottingham, S.)

  Bradley, Tom

  Hoy, James

  Price, Christopher (Perry Barr)

  Brooks, Edwin

  Hughes, Emrys (Ayrshire, S.)

  Probert, Arthur

  Brown, Hugh D. (G'gow, Proven)

  Hughes, Roy (Newport)

  Redhead, Edward

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Hunter, Adam

  Reynolds, G. W.

  Brown, R. W. (Shoreditch & F'burY)

  Hynd, John

  Rhodes, Geoffrey

  Buchan, Norman

  Jackson, Colin (B'h'se & Spenb'gh)

  Richard, Ivor

  Buchanan, Richard (G'gow, Sp'burn)

  Jackson, Peter M. (High Peak)

  Roberts, Gwilym (Bedfordshire, S.)

  Butler, Mrs. Joyce (Wood Green)

  Jeger, George (Goole)

  Robertson, John (Paisley)

  Cant, R. B.

  Jenkins, Hugh (Putney)

  Robinson W. 0. J. (Walth'stow E.)

  Carmichael, Neil

  Johnston, Russell (Inverness)

  Rodgers, William (Stockton)

  Carter-Jones, Lewis

  Jones, J. Idwai (Wrexham)

  Roebuck, Roy

  Coe, Denis

  Judd, Frank

  Rose, Paul

  Crawshaw, Richard

  Kelley, Richard

  Ross, Rt. Hn. William

  Cullen, Mrs. Alice

  Kenyon, Clifford

  Rowlands, E. (Cardiff, N.)

  Dalyell, Tam

  Kerr, Russell (Feltham)

  Ryan, John

  Davidson, Arthur (Accrington)

  Lawson, George

  Sheldon, Robert

  Davies, Dr. Ernest (Stretford)

  Leadbitter, Ted

  Shore, Peter (Stepney)

  Davies, Harold (Leek)

  Ledger, Ron

  Silkin, John (Deptford)

  Dewar, Donald

  Lestor, Miss Joan

  Slater, Joseph

  Diamond, Rt. Hn. John

  Lever, Harold (Cheetham)

  Small, William

  Dickens, James

  Lewis, Ron (Carlisle)

  Steele, Thomas(Dunbartonshire, W.)

  Doig, Peter

  Lomas, Kenneth

  Summerskill, Hn. Dr. Shirley

  Dunwoody, Mrs. Gwyneth (Exeter)

  Lubbock, Eric

  Thomas, George (Cardiff, W.)

  Eadie, Alex

  Lyons, Edward (Bradford, E.)

  Urwin, T. W.

  Edwards, Robert (Bilston)

  McBride, Neil

  Variey, Eric G.

  English, Michael

  McCann, John

  Walden, Brian (All Saints)

  Ensor, David

  MacDermot, Niall

  Walker, Harold (Doncaster)

  Fletcher, Raymond (Ilkeston)

  McGuire, Michael

  Wallace, George

  Floud, Bernard

  McKay, Mrs. Margaret

  Watkins, David (Consett)

  Foley, Maurice

  Mackenzie, Gregor (Rutherglen)

  Wellbeloved, James

  Foot, Michael (Ebbw Vale)

  Mackintosh, John P.

  Whitlock, William

  Ford, Ben

  McMillan, Tom (Glasgow, C.)

  Willis, George (Edinburgh, E.)

  Fowler, Gerry

  McNamara, J. Kevin

  Wilson, William (Coventry, S.)

  Fraser, Rt. Hn. Tom (Hamilton)

  Mahon, Peter (Preston, S.)

  Winnick, David

  Garrow, Alex

  Mahon, Simon (Bootle)

  Winstanley, Dr. M. P.

  Gourlay, Harry

  Manuel, Archie

  Winterbottom, R. E.

  Greenwood, Rt. Hn. Anthony

  Mapp, Charles

  Woodburn, Rt. Hn. A.

  Gregory, Arnold

  Miller, Dr. M. S.

  Woof, Robert

  Grey, Charles (Durham)

  Mitchell, R. C. (S'th'pton, Test)

  TELLERS FOR THE NOES:

  Griffiths, David (Rother Valley)

  Morgan, Elysian (Cardiganshire)

  Mr. Joseph Harper and

  Morris, Alfred (Wythenshawe)

  Mr. loan L. Evans

  Schedule 7.—(THREE YEAR SURPLUS OF MEMBERS OF GROUPS OF COMPANIES.)
  Amendments made: No. 65, in page 98, line 41, leave out from "period" to "after" in line 42.
  No. 66, in line 45, leave out "so taken into account" and insert "to be taken into account as franked investment income or group income under paragraph (b)(i) of the said section 85(6)".
  No. 67, in page 99, line 2, leave out from" period "to end of line 3.
  No. 68, in line 8, at end insert" and shall be so ascertained whether or not the member is entitled to relief by reference to a three year surplus,".
  No. 69, in line 13, at end insert:
  "and
  (c) where the member itself is the beneficial owner of part of the ordinary share capital of a company which is another member of the group, or which is the member's subsidiary company, account shall be taken under paragraphs (a) and (b) above of the amendment of the said subsection (6)(b) made by sub-paragraph (1) of this paragraph, attributing under paragraph (a) above to the whole of any financial year any amount included by virtue of that amendment in that member's franked investment income or group income as the appropriate part of that other company's distributable profits of that financial year, or of any part of that financial year".—[Mr. Diamond.]
  Mr. Patrick Jenkin: I beg to move Amendment No. 101, in page 100, line 28, at the end to insert:
  (6) Sub-paragraphs (1) to (5) above shall not operate so as to reduce the dividends received from that member taken into account under subsection (6)(d) of section 85 of the Finance Act 1965 to an amount which is less than any excess of the total income of that member for the three years to 5th April 1966 on which income tax was borne, calculated as for the said subsection (6)(d) after giving effect to sub-paragraph (2) of this paragraph, over the three year surplus of that member calculated in accordance with the said section 85 before applying such reduction thereto as is provided in paragraph 1 of this Schedule.
  I would defy any Member on either side of the House to explain to the Chief Secretary the effect of the Amendments we have just accepted, but if I were to say that they referred to the three-year surplus of income—the notional surplus which is a three-year surplus which we discussed on the Finance Act last year—that, of course, would explain everything.
  1664
  This Amendment deals with exactly the same point, namely the three-year surplus. The three-year surplus is calculated as the excess of the dividends paid in the three years 1966–69 over the distributable profits in those years. But it has a ceiling. There is a ceiling imposed that the surplus must not be more than the grossed up equivalent of the tax actually paid during the three years before that, 1963–66.
  That was the provision in Section 85 of the Finance Act, 1965. Paragraph 5 of Schedule 7 of this Bill introduces a new restriction and provides that in the last of these three years, 1965–66, the annual dividends which may be counted towards the limitation are the standard dividends, and that is a reference back to Section 83 of last year's Act which dealt with forestalling. That has the effect, therefore, of reducing the ceiling on the three-year surplus and therefore in effect making it less valuable. The effect of this is that it prevents, in the case of a group of companies, the parent company from getting the full benefit of the three-year surplus. This is a point I referred to in an argument I addressed to the Chief Secretary in an earlier debate this afternoon, because the assets of the subsidiary may have been entirely cleaned out by the payment of dividends last year and this may deprive the subsidiary of any chance of it getting the three-year surplus.
  The purpose of the Amendment, which I will not attempt to explain in detail, is to right this injustice and to give the company the three-year surplus at any rate up to the level of its taxed income. The effect of the Amendment is once again to lift that ceiling in part.
  We feel that this Amendment should be accepted as a measure of justice to relieve the rather harsh position which has been created by para. 5 of the Schedule. Since the whole of this position stems from the miscalculation for which the Government were responsible in last year's Finance Bill, it seems incumbent on them to do something to put the position right. This is a very small Amendment and it seems to me that it could perfectly well be accepted. I hope we can receive an encouraging reply.
  Mr. Diamond: As the hon. Gentleman says, this is a fairly short point and

  1665
  perhaps I can deal with it shortly in reply. The Amendment, in effect, provides that if a subsidiary company has plenty of tax borne in the years 1963–66 more than it can use to cover the excess of its dividend of the last three years, the 1966–69 period, over the current income— it should be allowed by the 1965–66 dividend to pass up to the parent company the increased tax so that the parent can use it for itself.
  The short answer, I am afraid, is that it was never the intention that the whole of the 1963–66 Income Tax borne by a group should be available in one way or another to the group to frank dividends of the Corporation Tax era. The intention was that the parent company should get relief measured by the normal dividends received by it from its subsidiary in those three years 1963–66, and that the subsidiary itself should get relief by reference to its income in those three years less the normal dividends. That is why paragraph 5(1) removes any forestalling element in the 1965–66 dividend from the reckoning of the parent's relief and leaves it to count for the subsidiary.
  Therefore, sympathetic though I am to the point which the hon. Gentleman has made, I am afraid that this is not an Amendment which I can recommend to the House.
  Amendment negatived.
  Mr. Diamond: I beg to move Amendment No. 70, in page 100, line 28, at the end to insert:

  PART II
    THE ONE YEAR SURPLUS
      Companies carrying on life assurance business
      1. The one year surplus of a company carrying on life assurance business shall be computed without regard to any such part of dividends or other income from investments held in connection with its life assurance business as belongs or is allocated to, or is reserved for, or expended on behalf of, policy holders, and without regard to the tax on such part of such income.

      Elections as respects double taxation relief
      2.—(1) If a company so elects, its one year surplus shall be computed in accordance with sub-paragraphs (2) and (3) below.
      (2) In arriving at the amount of profits tax and income tax to be taken into account under paragraphs (b) and (c) of subsection (3) of the said section 85, it shall be assumed that paragraph 2(2) of Schedule 16 to the Income Tax Act 1952 provides for credit for foreign tax to
      1666
      be first applied in reducing the amount of income tax chargeable in respect of the income and, so far as it cannot be so applied, in reducing the profits tax chargeable in respect of the income (instead of applying the credit first against profits tax and then against income tax).
      (3) In arriving at the fraction defined at the end of the said subsection (3) (income tax for 1965–66 divided by that plus corporation tax for the financial year 1965), and in applying subsection (8) of the said section 85 (under which any one year surplus is to be deregarded if that income tax is not greater than that corporation tax)—
      (a) so far as any tax at subsection (3)(a) of the said section 85 consists of tax at a net United Kingdom rate (that is to say a rate less than the standard rate of 8s. 3d. for the year 1965–66) that tax shall be increased by applying the ratio A/B where
      "A" is the said standard rate of 8s. 3d. and "B" is the said net United Kingdom rate, and
      (b) any credit for foreign tax which is allowable against United Kingdom income tax or corporation tax shall be disregarded.
      (4) In this paragraph "credit for foreign tax" means credit allowable by virtue of arrangements made under section 347 of the Income Tax Act 1952, or by way of relief under section 348 of that Act.

  Expenses of valuation, &c., incurred by personal representatives
  5. In computing under Schedule 6 to the Finance Act 1965 the gain accruing on a disposal of assets deemed to be made by an individual on his death, the sums allowable as a deduction under paragraph 4 of that Schedule shall include any costs incurred by the personal representatives or other persons on whom the assets devolve which would have been incidental costs of making the disposal within sub-paragraph (2) of that paragraph if they had been incurred by the deceased.
  The Amendment fulfils an assurance given in Committee to meet a point raised by the Opposition. It ensures that the incidental costs incurred by the personal representatives, including costs of valuation or apportionment, required in order to calculate capital gain will be allowable as a deduction.

  Gilt Edge Switching
  11. In section 27 of the Finance Act 1965 there shall be added the following subsection after subsection (4):—
  "A gain on the disposal of United Kingdom Government Securities shall not be a chargeable gain to the extent that the proceeds of sale are reinvested in United Kingdom Government Securities".
  The effect of the Amendment would be that switching in the gilt-edged market was free of Capital Gains Tax. In other words, if somebody sold a block of gilt-edged securities and bought an exactly equivalent block, no question of Capital Gains Tax would arise.
  This is, as it were, a fall-back position from an Amendment I moved in Committee to exempt gilt-edged securities altogether from the effect of the Capital Gains Tax. Both would be palliative only, of course, but this Amendment would be of some importance, particularly in view of the present state of the market.
  As I pointed out then, the gilt-edged market is damaged not only by the Capital Gains Tax and the Corporation Tax in that companies are forced to try to finance themselves by debentures; it is damaged because income from gilt-edged securities is not franked income, and it is damaged by the general inflation. As I said, the market is sinking and it has sunk a good deal since I used those words.
  The market has been further damaged by the Steel Bill. The effect of that is to monetise the steel industry and create the best part of another £600 million of gilt-edged securities which nobody is very keen to buy. One can buy gilt-edged securities at discounts up to 6 per cent. by buying steel shares, which is damaging business in the market.
  It is also damaged by the refusal to allow the banks to give extra credit to finance the effect of S.E.T. It means that more debentures will be issued, that people will be forced on to the grey market for credit at very high rates of interest and that the building societies will have to put up their rates, thus pulling down the gilt-edged market again.
  I have several times predicted a state of affairs where the Government will lose control of their own credit and bond market. That is very serious. One cannot run a sophisticated economy without a proper bond market. It is desperately serious for people. How many constituents have we all got who have put their whole life savings in War Loan, now at 49 and sinking? So it is a fairly important business.
  If the Chief Secretary will study the last Quarterly Review of the Bank of England he will get some very important points from it. In the text it said that the real object of debt management was to make Government securities as attractive as possible to holders both here and abroad. It went on to say that one of the attractions of gilt-edged securities was that one could deal in such very large amounts at any time, buying or selling, or used to be able to do so.
  It went on to give certain figures which are relevant to the Amendment. The first figure is that in the year ended 31st March last the net sales of Government securities with a life of 15 years or over was only
  1672
  £40 million, whereas in the year ended 31st March, 1963, the net sales were £487 million. If one can sell Government securities one does not have to raise so much in taxes. If one cannot sell them one has to raise the money in taxes.
  I commend to the attention of the Treasury Bench the difference between the £40 million—they are selling nothing now —and the £487 million, the result of the courage shown by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). If the Government had shown a tenth of his courage they would have been out of their troubles now instead of dashing down a steep slope into the sea. The great attraction is marketability. One cannot get a real marketability for the gilt-edged market unless one gets some dealings, and the people who deal mostly in the gilt-edged market are life assurance companies. In the year ended 31st March last the turnover of gilt-edged dealings by life companies in securities of a life of five years and over went down by 48.3 per cent., and now I imagine dealings are more or less non-existent. So the marketability is going down.
  What would the Amendment cost? It would cost a great deal less than nothing. It would help the market, and the Government would draw tax from the commissions paid on these deals. It costs nothing. It helps the market. It is desperately important to do something about the market which is now getting completely out of hand.
  I hope that the Chief Secretary will not give the same answer as was given last time on the Committee stage when I moved an Amendment to exempt the gilt-edged market altogether from Capital Gains Tax. Then it was said, "You cannot do it because you would have to do it for everyone else".
  But what happened last year? Special provision was given to the gilt-edged market—in a dotty form, admittedly, but that is the hallmark of the Hungarian Mafia which devised it. It gave special privileges to the gilt-edged market which were not given to anyone else. I hope that the right hon. Gentleman will not use that argument. I am hoping for a rational reply. If only the right hon. Gentleman would read his Inland Revenue brief he would find it better than his last speech.
  Mr. Diamond: I cannot help the right hon. Gentleman. I recognise a good deal of what he said about the seriousness of the position and I do not propose to enter into a long debate about the health of the gilt-edged market. What is at issue is whether this Amendment would have a considerable effect on the gilt-edged market; whether it is necessary because of the history of the market since the 1965 Finance Act and the right hon. Gentleman's similarly dolorous speech last year; and whether the health of the market has been in any way prejudiced, so far as one can see, by the legislation that the Government are introducing and by their unwillingness to do more than recognise what we called a debt of honour but which our predecessors were not prepared to recognise as such.
  The question is whether this Amendment in tax terms would be fair to other taxpayers and likely to achieve any marked effect on the market. One has only to go back to the Chancellor's speech yesterday on the question of dealing sympathetically with the market in tax terms. He made it clear that he is going to considerable lengths, in cooperation with and with the assistance of the Stock Exchange, to maintain a system which is very difficult for the Inland Revenue to work but which allows dealings in the market which would not otherwise take place.
  Indeed, so difficult is it that the hon. Member for St. Ives (Mr. Nott) suggested that we should not attempt to carry it on but should withdraw the facility which caused all the trouble. However, my right hon. Friend made it clear that he wanted the facility continued notwithstanding the problem of bond washing and so on because he acknowledged that we needed to give every encouragement to this market. That is the position of the Government.
  The Government do not feel that this Amendment would have any material effect on the market but it would have a prejudicial effect on other taxpayers. It would breach a serious principle in picking out a particular kind of capital gain and saying that it shall not be taxed—shall [IX be taxed in the case of a limited company virtually at all and in the case of a private holder not taxed for a very long period.
  1674
  The right hon. Gentleman says, "Let there be no tax payable so long as there is switching; let the tax be paid when there are sales either of the whole amount or part of an amount, when there is a realisation". But he will acknowledge that a limited company could go on switching for ever.
  Mr. Birch: Why not?
  Mr. Diamond: The purpose of the Capital Gains Tax is not to provide machinery whereby no Capital Gains Tax can be paid. The purpose of the Capita] Gains Tax machinery is to see to it that all holders of securities where capital gains are realised pay their fair share of Capital Gains Tax, and it is a modest tax at a moderate rate. This would breach that principle.
  It is a short time since all the arguments were adumbrated about why it is a principle which we cannot accept. It has gone back over many years, and I am sorry that I cannot possibly recommend the House to accept the proposal, albeit that it is in a less objectionable form than previously.
  2.0 a.m.
  Sir G. Nabarro: Before the right hon. Gentleman sits down, may I put a question to him? He accused my right hon. Friend the Member for Flint, West (Mr. Birch) of being dolorous last year, and he suggested that he has been equally dolorous this year. The right hon. Gentleman admitted in the opening stages of his speech that the position in the gilt-edged market is extremely serious, and it is about to be made very much more serious by the loosing on the market of something approaching £600 million in all of scrip in respect of the proposed nationalisation of the steel industry, which my right hon. Friend referred to as "monetising" the steel industry.
  If the right hon. Gentleman agrees that the position of the gilt-edged market has deteriorated progressively since the speech which my right hon. Friend made last year and is now in a serious position—and that is self-evident and manifest, anyway—and having regard to the grave current economic circumstances, then if my right hon. Friend's suggested solution is the wrong one, surely the Treasury must be able to offer an alternative which is the correct solution. I suggest to my right hon. and hon. Friends

  1675
  that we cannot sit on the sidelines in this vitally important matter of the gilt-edged market and allow it to slide until my right hon. Friend is compelled to make another dolorous speech in 1967.
  I repeat that this is a critically important matter, and I press on the Treasury Bench that if the suggestion offered in the Amendment is the wrong one—perhaps it is a palliative or an ameliorating measure—why will the right hon. Gentleman not give us his version of what is the right one? We are all agog with interest, waiting for a constructive suggestion from him suggesting that he should arrest the drift in the gilt-edged market. I need hardly repeat that there are hundreds and thousands of small investors in our constituencies who are holding War Loan at something below 49, and it is still sliding down. Therefore—[Interruption.]—the hon. Gentleman should not be flippant about this.
  Mr. John Hynd: I am not being.
  Sir G. Nabarro: I suggest that he is—
  Mr. Hynd Mr. Hynd rose—
  Sir G. Nabarro: Very well. I will give way.
  Mr. Hynd: The hon. Gentleman is talking about people who are holding gilt-edged securities which are falling in value, but we are talking about capital gains. If they fall in value, will they be taxed?
  Sir G. Nabarro: The hon. Gentleman evidently did not listen to my right hon. Friend's speech; otherwise, he has not the mental capacity to understand simple English.

  Division No. 119

  AYES

  [2.5 a.m.

  Alison, Michael (Barkston Ash)

  Cooke, Robert

  Harrison, Col. Sir Harwood (Eye)

  Allason, James (Hemel Hempstead)

  Dalkeith, Earl of

  Hawkins, Paul

  Astor John

  Dean, Paul (Somerset, N.)

  Heseltine, Michael

  Atkins, Humphrey (M't'n & M'd'n)

  Deedes, Rt. Hn. W. F. (Ashford)

  Higgins, Terence L.

  Awdry, Daniel

  Dodds-Parker, Douglas

  Hill, J. E. B.

  Baker, W. H. K.

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

  Hunt, John

  Balniel, Lord

  Eyre, Reginald

  Hutchison, Michael Clark

  Batsford, Brian

  Fortescue, Tim

  Jenkin, Patrick (Woodford)

  Biffen, John

  Gilmour, lan (Norfolk, C.)

  Johnston, Russell (Inverness)

  Birch, Rt. Hn. Nigel

  Glover, Sir Douglas

  Joseph, Rt. Hn. Sir Keith

  Boyd-Carpenter, Rt. Hn. John

  Glyn, Sir Richard

  King, Evelyn (Dorset, S.)

  Brinton, Sir Tatton

  Goodhart, Philip

  Kitson, Timothy

  Bromley-Davenport, Lt.Col.Sir Walter

  Grant, Anthony

  Knight, Mrs. Jill

  Brown, Sir Edward (Bath)

  Grant-Ferris, R.

  Longden, Gilbert

  Bruce-Gardyne,J.

  Gurden, Harold

  Loveys, W. H.

  Chichester-Clark, R.

  Hall, John (Wycombe)

  Lubbock, Eric

  Clark, Henry

  Hall-Davis, A. G. F.

  MacArthur, Ian

  Clegg, Walter

  Harrison, Brian (Maldon)

  Macleod, Rt. Hn. Iain

  Mr. Ivor Richard: Get on with it.
  Sir G. Nabarro: I will get on with it. If I am pressed, I will get on with it for another half hour. I am perfectly capable of talking about a matter as important as this for a very long time.
  I rose to press the Chief Secretary with a simple question. If he considers that my right hon. Friend's Amendment is irrelevant to the issue of the slide in the gilt-edged market, will he please give us the remedy that he considers is relevant? The slide has been going on continuously now for 12 months, and we have not yet reached the bottom. It is in the interests of hon. Members on both sides to press the matter with a view to an improvement in gilt-edged securities.
  Mr. Birch: May I say, with leave, that the Chief Secretary introduced some slightly irrelevant points. This has nothing to do with bond washing. So far as being let off from Capital Gains Tax is concerned, this is a switch. It is not basically a realisation. Simply to say that the Government's measures have not damaged the gilt-edged market is dotty. The Chief Secretary should ask the Bank of England, the Government broker—or anybody. They will tell him that the application of Capital Gains Tax to the gilt-edged market and the effects of the Corporation Tax have been devastating. These are largely the reasons why there has been this big slide in the gilt-edged market. Therefore, I ask my right hon. and hon. Friends to press this Amendment to a Division.
  Question put, That those words be there inserted in the Bill:—
  The House divided: Ayes 92, Noes 148.

  Maddan, Martin

  Pearson, Sir Frank (Clitheroe)

  Turton, Rt. Hn. FL H.

  Marten, Neil

  Peel, John

  Walker, Peter (Worcester)

  Maxwell, Hyslop, R. J.

  Pike, Miss Mervyn

  Walters, Dennis

  Mitchell, David (Basingstoke)

  Pink, R. Bonner

  Ward, Dame Irene

  Monro, Hector

  Pounder, Rafton

  Weatherill, Bernard

  Morrison, Charles (Devizes)

  Powell, Rt. Hn. J. Enoch

  Webster, David

  Munro-Lucas-Tooth, Sir Hugh

  Rossi, Hugh (Horrney)

  Whitelaw, William

  Murton, Oscar

  Shaw, Michael (Sc'b'gh & Whitby)

  Winstanley, Dr. M. P.

  Nabarro, Sir Gerald

  Smith, John

  Woodnutt, Mark

  Noble, Rt. Hn. Michael

  Summers, Sir Spencer

  Wylie, N. R.

  Nott, John

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

  Orr, Capt. L. P. S.

  Taylor, Frank (Moss Side)

  TELLERS FOR THE AYES:

  Osborn, John (Hallam)

  Tooling, Sir William

  Mr. Francis Pym and

  Page, Graham (Crosby)

  Thatcher, Mrs. Margaret

  Mr. Peter Blaker.

  NOES

  Abse, Leo

  Griffiths, Will (Exchange)

  Newens, Stan

  Allaun, Frank (Salford, E.)

  Hamilton, James (Bothwell)

  Noel-Baker, Francis (Swindon)

  Alldritt; Walter

  Hamilton, William (Fife, W.)

  Norwood, Christopher

  Archer, Pater

  Hamling, William

  Ogden, Eric

  Armstrong, Ernest

  Hannan, William

  O'Malley, Brian

  Bennett, James (G'gow, Bridgeton)

  Hattersley, Roy

  Oram, Albert E.

  Bidwell, Sydney

  Hazell, Bert

  Orme, Stanley

  Bishop, E. S.

  Helfer, Eric S.

  Oswald, Thomas

  Blackburn, F.

  Herbison, Rt. Hn. Margaret

  Parkyn, Brian (Bedford)

  Booth, Albert

  Hobden, Dennis (Brighton, K'town)

  Pentland, Norman

  Boston, Terence

  Hooley, Frank

  Perry, George H. (Nottingham, S.)

  Braddock, Mrs. E. M.

  Howie, W.

  Price, Christopher (Perry Barr)

  Bradley, Tom

  Hoy, James

  Probert, Arthur

  Brooks, Edwin

  Hughes, Emrys (Ayrshire, S.)

  Redhead, Edward

  Brown, Hugh D. (G'gow, Provan)

  Hughes, Roy (Newport)

  Reynolds, G. W.

  Brown,Bob(N'c'tle-upon-Tyne,W.)

  Hunter, Adam

  Rhodes, Geoffrey

  Brown, Ft W. (Shoreditch & F'bury)

  Hynd, John

  Richard, Ivor

  Buchan, Norman

  Jackson, Colin (B'h'se & Spenb'gh)

  Roberts, Gwilym (Bedfordshire, S.)

  Buchanan, Richard (G'gow, Sp'burn)

  Jackson, Peter M. (High Peak)

  Robertson, John (Paisley)

  Butler, Mrs. Joyce (Wood Green)

  Jenkins, Hugh (Putney)

  Robinson, W. 0. J. (Walth'stow, E.)

  Cant, R. B.

  Jones, J. Idwal (Wrexham)

  Roebuck, Roy

  Carmichael, Neil

  Judd, Frank

  Rose, Paul

  Carter-Jones, Lewis

  Kelley, Richard

  Ross, Rt. Hn. William

  Coe, Denis

  Kenyon, Clifford

  Rowlands, E. (Cardiff, N.)

  Crawshaw, Richard

  Kerr, Russell (Feltham)

  Ryan, John

  Cullen, Mrs. Alice

  Lawson, George

  Sheldon, Robert

  Dalyell, Tam

  Leadhitter, Ted

  Shore, Peter (Stepney)

  Davidson Arthur (Accrington)

  Ledger, Ron

  Silkin, John (Deptford)

  Davies, Dr. Ernest (Stretford)

  Lestor, Miss Joan

  Slater, Joseph

  Dewar, Donald

  Lever, Harold (Cheetham)

  Small, William

  Diamond, Rt. Hn. John

  Lewis, Ron (Carlisle)

  Steele, Thomas (Dunbartonshire, W.)

  Dickens, James

  Lomas, Kenneth

  Summerskill, Hn. Dr. Shirley

  Doig, Peter

  Lyons, Edward (Bradford, E.)

  Urwin, T. W.

  Dunwoody, Mrs. Gwyneth (Exeter)

  McBride, Neil

  Varley, Eric G.

  Eadie, Alex

  McCann, John

  Walden, Brian (All Saints)

  Edwards, Robert (Bilston)

  MacDermot, Niall

  Walker, Harold (Doncaster)

  English, Michael

  McGuire, Michael

  Wallace, George

  Ensor, David

  McKay, Mrs. Margaret

  Watkins, David (Cornett)

  Fletcher, Raymond (Ilkeston)

  Mackenzie, Gregor (Rutherglen)

  Wellbeloved, James

  Flom', Bernard

  Mackintosh, John P.

  Whitlock, William

  Foley, Maurice

  McMillan, Tom (Glasgow, C.)

  Willis, George (Edinburgh, E.)

  Foot, Michael (Ebbw Vale)

  McNamara, J. Kevin

  Wilson, William (Coventry, S.)

  Ford, Ben

  Mahon, Peter (Preston, S.)

  Winnick, David

  Fowler, Gerry

  Mahon, Simon (Bootle)

  Winterbottom, R. E.

  Fraser, Rt. Hn. Tom (Hamilton)

  Manuel, Archie

  Woodburn, Rt. Hn. A.

  Garrow, Alex

  Mapp, Charles

  Woof, Robert

  Gourlay, Harry

  Miller, Dr. M. S.

  Greenwood, Rt. Hn. Anthony

  Mitchell, R. C. (S'th'pton, Test)

  TELLERS FOR THE NOES:

  Gregory, Arnold

  Morgan, Elystan (Cardiganshire)

  Mr. Joseph Harper and

  Grey, Charles (Durham)

  Morris, Alfred (Wythenshawe)

  Mr. loan L. Evans.

  Griffiths, David (Rother Valley)

  Murray, Albert

  Mr. Speaker: I think that the next six Amendments can be dealt with in one block.
  Mr. MacDermot: Yes, Mr. Speaker. Amendments Nos. 85–90 all meet the same points in relation to short-term gains tax as the House accepted a few moments ago in relation to long-term gains tax.
  Amendments made: No. 85 in page 110, line 47, leave out "in" and insert:
  "at any time not later than the end of".
  No. 86, in page 111, line 1, after "or", insert "of".
  No. 87, in line 4, after "Kingdom", in. Bert "or elsewhere".
  No. 88, in line 8, leave out "in" and insert:
  "at any time not later than the end of".
  No. 89, in line 17, leave out "after" and insert:
  "(whether that day fell before".
  No. 90, in line 17, after "effect", insert "or later)".
  —[Mr. MacDermot.]
  Schedule 13.—(REPEALS.)
  Mr. MacDermot: 1 beg to move Amendment No. 116, in page 117, line 10, column 3, to leave out "section 69(7)(b)" and to insert:
  "In section 69, in subsection (5) the words from ' and the exclusion ' to the end of the subsection and in subsection (7) the words from 'but notwithstanding' to the end of the subsection".
  This Amendment is consequential on others discussed earlier in the day.
  Amendment agreed to.
  Bill to be read the Third time this day and to be printed. [Bill 78].

  TELEVISION (SPORT)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. loan L. Evans.]
  2.17 a.m.
  Mr. Philip Goodhart: I think that I will carry the whole of a rapidly retreating House with me when I say that, at this time of the year, the Finance Bill seems to dominate our proceedings. In the same way, sport dominates television. I must admit that I do not object to this. I am an addict of sport on television. I can look at Wimbledon and the test match for hours on end. During this period, my productivity falls to a dangerously low level.
  I am not alone in this: many people share my addiction. On Saturday, July 2nd, when both Wimbledon finals and the vital third day of the third test match were on television not to mention Henley—it is estimated that a third of the population over the age of five were looking at one programme "Grandstand", on B.B.C. In other words, the number of people watching the closing minutes of the record-breaking last wicket stand for England between Basil D'Oliveira and the brighest product of
  1680
  Beckenham cricket for many years, Derek Underwood, equalled the entire number who had gone to watch first-class cricket on the spot for the preceding 10 years.
  Now there will be another tremendous dollop of sport on television, with the World Cup. Regularly about one-third of the total British population over the age of five watch the cup final, and it has been estimated that the total viewing public for the final of the World Cup will reach 400 million, although I feel that that estimate may be too high. But even if one takes a lower figure than 400 million, the fact remains that on this one evening the number of people look-in throughout the world will be 10 times as great as the total attendance at all the Football League matches last season in England, Scotland, Wales and Northern Ireland.
  I do not think there can be any argument at all about the popularity of sport on television, but the position, to put it mildly, is not very satisfactory. On the one hand, a substantial number of people resent the amount of time that is devoted to sport, particularly at certain times of the year, just as many misguided people resented the amount of time devoted to politics and politicians during the General Election. They would rather have seen their favourite programmes go on. At the same time, probably a smaller, but still substantial, number of people clearly would like even more sport on television and would like to be able to watch every ball of every test match played in this country.
  Nor is the position satisfactory from the point of view of sport. We have been told that 400 million people may watch the final of the World Cup, but the Government had to hand out, for improvements of football stadia where the preliminary rounds of the World Cup are being played, no less than £400,000 in the way of grants. It seems odd that a sport which has this vast appeal has to call on the Government for hand-outs which could be put to substantially better use, perhaps to pay for the relief of blind workers from the Selective Employment Tax, an Amendment to the Finance Bill which was turned down a few hours ago. Surely it is odd that a sport with such a wide appeal should need a Government hand-out.

  1681
  Each year 4 to 5 million people watch the finals of the amateur athletics championships, and yet each year the Amateur Athletics Association has to go cap in hand to the Government and to private sources to try to raise enough money to send representative teams abroad. Perhaps 6 million or more people will be looking at any one moment at a test match, and yet the county cricket championship, which is the focal point of the first-class game in this country, has been tottering on the edge of bankruptcy for many years. The imposition of S.E.T. on county cricket may drive a number of county cricket clubs into bankruptcy.
  There must be a better way of getting some financial sense into our sporting organisation. I believe that the answer lies with pay television, which has been launched on a strictly experimental basis in Britain and which televised the recent Cooper-Clay world heavyweight championship. There is evidence, in this country, the United States and Canada, to show that if pay television is to work on a really national basis, sport must provide the staple part of the programmes. Certainty the money-making programmes have basically been sporting ones.
  I am not saying that all sport on television should be swept on to a pay-asyou-look basis, because there are a number of sporting fixtures which must be made available to the B.B.C. and the I.T.A., and this might be extended in future. However, there is a case for transferring a major part of the sport which now appears on ordinary television to a pay television organisation.
  Nor do I want to see the substantial sums of money that would clearly be raised in this way going to the promoters of pay television alone. About three years ago I suggested that the major sporting organisations in Britain, such as the Football Association, the M.C.C., the Rugby Football Union and the Jockey Club, should get together and organise their own pay television network. This may never be practicable, but I am sure that, with sensible organisation, it would be possible for the sporting organisations to work out the organisation of a pay television system which meant that the major part of the money raised from sporting events went to the sporting associations
  1682
  concerned. The best way to do that could be settled by sensible negotiation.
  I am satisfied that a large number of leading people in the sporting organisations appreciate the importance of pay television and that the Joint Under-Secretary at the Department of Education and Science, who is responsible for sport, appreciates the importance of pay television as a potential Pandora's box for sport. I am not sure that the Post Office Ministers have grasped its importance and I fear the attitude of the B.B.C., which seems to regard pay television as a potential enemy that must be crushed at birth. I know that the strongest pressure has been put on at least one promoter not to have any dealings with pay television, even in its present minute form. I am particularly afraid that the B.B.C. will try to inflame any prejudices it may find in our new Postmaster-General, and that a snap decision may be taken in the not-too-far-distant future which could damage the prospects for pay television.
  In this very restricted debate, at this very late hour, I do not expect the Assistant Postmaster-General to give a detailed survey of the future of pay television and the role of sport in it, but I would ask for an assurance that before a final decision is taken on the future of pay television our representative sporting bodies will be fully consulted, because I believe that pay television offers them the financial strength which at the moment they so sadly lack.
  2.32 a.m.
  The Assistant Postmaster-General (Mr. Joseph Slater): I am grateful to the hon. Member for Beckenham (Mr. Goodhart) for raising the subject of sport and television for discussion tonight. Before coming to the particular points he made, I should like to make one or two observations of a more general kind. The first is to recall that there is written into the Instruments governing the conduct by the B.B.C. and the I.T.A. of their services this broad specification. They are to be provided as a public service for disseminating information, education and entertainment. And they are to maintain, among other things, a proper balance and a wide range in their subject matter. These broad injunctions are for the two broadcasting authorities to turn into the practical realities of programme planning and provision, week in and week out.

  1683
  But there would, I am sure, be general agreement that, if these broad injunctions are to be met satisfactorily, then sport should occupy an important place in the programmes of the television services.
  May I turn now to the particular arguments put forward by the hon. Member. Essentially, what he had to say is this. There are very large audiences for the sporting events shown on television. These audiences, he has already indicated, often amount to several million: indeed, there have been occasions when, at a crucial stage in a test match, or a popular champion is carrying our fortunes in a final at Wimbledon, or during the Cup Final, a sizeable fraction of the total population will be watching the event on television. Yet at the same time, much sport is in a bad way financially.
  Some of the smaller football clubs are scarcely able to survive from one season to another. We have even been reminded that attendances at cricket matches are not nearly as high as they might be. Though Wimbledon is crowded to capacity for the more important games, the smaller tournaments do not attract big enough audiences. The hon. Member goes on to say that if a charge could be levied, as it were, on each set when it is tuned in to such events as these, and if the proceeds could be made available to the particular sports, then the state of their finances would be transformed. From being generally impoverished, they would become very well off.
  It is sometimes argued that broadcast television is, in part at least, the cause of the decline in the financial fortunes of sport. The viewer sitting in his armchair at home would, before he had broadcast television at his disposal, have been a spectator who paid to get into the ground. Sometimes the argument is taken further in this form. So far as competition by broadcast television is the cause of the financial problems facing sport, if some way can be found whereby sport can compete more effectively, it should be given every chance; and pay-television is just such a way.
  We have been reminded more than once that it was in its second White Paper on Broadcasting (Cmnd. 1893), published in December, 1962, that the
  1684
  Government of the day announced its decision to permit an experiment in pay-television. This the hon. Member sees as providing a way for sport to tap the pockets of the huge television audience. But, as I understand the hon. Member, he also sees it as necessary to the success of the experiment that the co-operation of all the main sporting organisations will be forthcoming. He points out that the cost of the provision and maintenance of the special equipment attached to the set of each subscriber has to be recovered. Then there is the cost of collecting the payments from subscribers. So subscribers have to be willing to pay enough each week to enable these costs to be covered.
  Well, it is questionable whether they will want to do so unless they can be reasonably sure that the programmes for which they will have to pay are better than those they can get on broadcast television for the price of an annual licence fee of £5: that is for a fraction more than 3d. a day. At the same time, the pay-television operators cannot be expected to provide expensive programmes unless they have enough subscribers to their service. This is only common sense. This is the dilemma which, in the hon. Member's view, faces the pay-television operators. And the way out of it, he has suggested, would be for the leading sporting organisations to switch the most attractive sporting events from the broadcast television services—that is, from the B.B.C. and independent television—to pay-television.
  There are a number of points in the case made by the hon. Member for Beckenham about which I would have reservations. Thus, the proposition that attendances at sporting events have declined, though true of some sports, is not true of all. I am told that public interest in some sports has grown considerably in recent years. Show jumping, swimming and ice-skating are examples. It may be thought that it is the presentation of these sports on television that has led to their new-found popularity. But do not know that one could insist that this is the sole reason, any more than one could insist that broadcast television of sporting events accounts, by itself, for the decline in the number of spectators for some sports. I suspect that a whole tangle of reasons underlies such a change

  1685
  as this in social habits; and that these reasons have their source in all those things which, over the years, have served to widen tastes and interests and have led people to look further afield for their amusement and entertainments than they did in the past. Television is certainly one of those things. The car is another. In general, we may say that there are more ways of spending our leisure time —and money—than there used to be.
  Perhaps I may quote the Wolfenden Committee Report. The Committee, whose concern was with sport in general and chiefly with sport that is not organised primarily for profit, had no hesitation in recording the view that television is, overall, of financial help to sport in this country.
  The hon. Member for Beckenham based h is case on pay television. Here again, I think it would be unwise to venture too absolute a view about the role that it might play. He will, I am sure, recall the serious doubts that the Pilkington Committee felt about pay television, doubts which led the Committee to recommend against the idea. Incidentally, the Committee's view was that, in general, sport would suffer from the introduction of pay-television. However that may be, the Government of the day decided that there should be an experiment. The experiment is now taking place. Perhaps because of the doubts expressed by the Pilkington Committee, the terms of the decision were cautiously drawn. They are there for all to read in the second White Paper on Broadcasting; and they say, among other things that it is necessary not only to ascertain whether there is likely to be a significant demand for a service, but also to try to measure the effect on B.B.C. and I.T.A. services, the
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  effect on sport and entertainment, and the demand on resources generally.
  As my right hon. Friend said in the debate on broadcasting in May last year, the licences granted to the experimenting companies by the Conservative Government are binding on the present Government; and though all but one of the companies had withdrawn, one company is providing an experimental service. The implications of a major transfer of sporting events from the B.B.C. and independent television to pay television, would, I think be very serious indeed. Certainly I am convinced that no responsible Government could fail to concern itself with them.
  It is against this background that we should, I suggest, set the hon. Member's proposition that the right place for sport is on pay television and that sports programmes should be switched from broadcast television to pay-television. There is the experiment; there are the broad considerations on which it was decided that it should take place. How it will work out, and what interpretation we can put on the results, remain to be seen. Certainly, it is far too soon to start offering judgments now. We shall have to see what in practice are the implications of this service, also authorised in the second White Paper.
  I hope the hon. Member will feel able to agree that, besides the considerations that have led him to raise the question of sport and television tonight, there are other important and far-reaching considerations. All will have to be most carefully weighed, when the time comes for the final decision on these issues.
  Question put and agreed to.
  Adjourned accordingly at nineteen minutes to Three o'clock a.m.

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

LORD MONSLOW
Walter Monslow, Esquire, having been created Baron Monslow, of Barrow-in-Furness in the County Palatine of Lancaster, for life—Was, in his robes, introduced between the Lord Champion and the Lord Royle.

LORD COOPER OF STOCKTON HEATH
John Cooper, Esquire, having been created Baron Cooper of Stockton Heath, of Stockton Heath, in the County Palatine of Chester, for life—Was, in his robes, introduced between the Lord Citrine and the Lord Williamson.
Several Lords—Took the Oath.

SCHOOL-LEAVING AGE IN SCOTLAND
2.25 p.m.
LORD TWEEDSMUIR: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether it is still their intention to raise the school-leaving age, in Scotland, to 16 in 1970.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): Yes, my Lords.
LORD TWEEDSMUIR: My Lords, I am much obliged to the noble Lord for his short and optimistic Answer. Is his Answer in no way impaired by the slump in school building and the slump in graduate school teachers?
LORD HUGHES: No, my Lords. We do not admit that the statement in that question is in accordance with the fact.
VISCOUNT STONEHAVEN: My Lords, would the noble Lord agree that from the academic timetable the time until 1970 represents about 2,000 hours? Is that not a rather short time in which to get everything done?
LORD HUGHES: My Lords, the only thing I would query about that is the arithmetic and I do not know whether it is right or wrong.
VISCOUNT STONEHAVEN: My Lords, I cannot guarantee it.

SELECTIVE EMPLOYMENT TAX AND SCOTTISH SERVICE INDUSTRIES
2.27 p.m.
LORD TWEEDSMUIR: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in respect of the importance of the service industries to the Highlands and North-East of Scotland, they are yet ready to announce what measures they propose to take, to offset the damaging effects of the selective employment tax on these regions.]
LORD HUGHES: My Lords, the Government do not accept that the selective employment tax will have damaging effects in the Highlands and the North-East of Scotland. Therefore the question of special offsetting measures does not arise.
LORD TWEEDSMUIR: My Lords, I am obliged to the noble Lord for his second terse and extremely optimistic Answer, and I should like to ask him this further question. What is the sense of giving the Highlands and Islands Development Board about£500,000, at most, in this present financial year, in order to boost development, and removing£2 million from that area through the medium of this vicious tax?
LORD HUGHES: My Lords, there is no question of giving the Highlands and

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Islands Development Board £500,000 "at most". My right honourable friend the Secretary of State has repeatedly stated that the Highlands and Islands Development Board will be given adequate funds to undertake the tasks which they seek to do.
THE EARL OF SELKIRK: My Lords, can the noble Lord say what will be the effect of the selective employment tax on the Highlands, if it is not damaging?
LORD HUGHES: My Lords, the Government's policies in the Highlands and Islands must be taken together, and I am quite satisfied that some of the forecasts made in relation to the effect of the selective employment tax will be as far from the mark as the predictions about the possible success which will attend the work of the Highlands and Islands Development Board.
THE DUKE OF ATHOLL: My Lords, how does the noble Lord reconcile that reply with the fact that the proportion of the tax that is to be returned in premiums and refunds in the Highlands and Islands is something like 18 per cent., whereas the figure for the whole of England, which is hideously overpopulated, anyway, for the most part, is 68 per cent.? Perhaps the noble Lord can tell us how he marries those two figures together and still maintains that this tax will not damage the Highlands and Islands and other remote areas.
LORD HUGHES: Quite simply, my Lords. The Government do not operate the policies in the Highlands and Islands in watertight compartments, but work them to produce a satisfactory result in the whole.
LORD HARLECH: My Lords, is the noble Lord therefore saying that the Government will offset the effect of the selective employment tax, so far as the Highlands are concerned?
LORD HUGHES: My Lords, I have stated that there is no need to bring about special offsetting measures, because of the policies which the Government are operating for the Highlands and Islands as a whole.

THE WAVERLEY (EDINBURGH)—ST. PANCRAS LINE
2.30 p.m.
BARONESS ELLIOT OF HARWOOD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether a decision has been taken to close the "Waverley line" (between Waverley Station and St. Pancras via Galashiels, Hawick and Carlisle) to passenger services.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, no such decision has been taken. My right honourable friend the Minister of Transport has informed the Railways Board that they may publish their proposal to withdraw passenger services from the line between Edinburgh and Carlisle, but this in no way pre-judges her eventual decision. The proposal will now be fully investigated. My right honourable friend will receive the report of the Transport Users' Consultative Committee on hardship and the advice of the Economic Planning Council on the planning implications.
BARONESS ELLIOT OF HARWOOD: My Lords, I beg to thank the noble Lord for his Answer, but as a supplementary I should like to ask him whether, in view of the announcement of Her Majesty's Government that there are to be big developments in the Borders, including the building of a thousand houses in Galashiels and a big overspill building arrangement between Glasgow and Hawick, this is not a most unfortunate moment to have published this announcement about closure. Further, if it is published, as I understand it may be on July 26, it will coincide with the holiday period, when most of the people engaged in collecting the evidence for the purposes of the Committee will be on holiday, because the holiday month is August. There are eight county boroughs and three counties involved. Would the Minister not think that this is a most unfortunate moment to allow this to be published?
THE DUKE OF BUCCLEUCH AND QUEENSBERRY: My Lords—
LORD CHAMPION: My Lords, I think I had better answer one question at a time, especially as the noble Lady's supplementary question was rather a long one. Her Majesty's Government have considered this. There will be seven weeks between publication and the holding of the T.U.C.C. public hearing, and I should have thought that even in Scotland they do not get seven weeks' holiday and therefore would be in a position to make such objections as they would wish.
THE DUKE OF BUCCLEUCH AND QUEENSBERRY: My Lords, may we take it that the noble Lord's first reply was one of considerable encouragement? And would he agree that, if the decision is adverse, it will result in a most unfortunate situation in the Border Counties, for whose development and well-being I, among many others, have a special concern? Will he do his best to give an undertaking that there will be a full opportunity for discussion at not too early a date during the holiday season?
LORD CHAMPION: My Lords, I can only repeat what I said. After the date of publication there will be these seven weeks. But I can assure the noble Duke that all the people who will be responsible for any development proposals for this area will be fully consulted before the Minister finally takes her decision. I cannot give any undertaking that there will any discussion in the House about it, but certainly discussion will take place through the channels which are provided by Act of Parliament for the purpose.

THE AIRBUS PROJECT
2.33 p.m.
LORD MERRIVALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what is the present situation regarding the Airbus; whether they have received official notification that the French have been compelled to consider, as an alternative to the Rolls-Royce engine, an American engine for it; if so,
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whether any reasons have been given, and whether they are on grounds of cost and delivery; whether there has been any change in the original plans; and what action Her Majesty's Government propose to take, in order that this project may remain a purely European venture.]
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, an outline specification for a short haul, high capacity aircraft, apart from the choice of engine, has been agreed in discussion with the French and German Governments. Further talks are planned during the next few weeks. The choice of engine cannot be made, of course, without assessment of the implications, including cost and delivery, of all suitable candidates, and this is in hand. Naturally, we hope that a European airbus will be fitted with a European engine, but no decision has yet been taken.
LORD MERRIVALE: My Lords, I am grateful to the noble Lord for that Answer. May I ask him whether he can tell the House when a decision will be reached on whether the airbus is to be a two-engined or a four-engined aircraft? In that context, would the noble Lord not agree that the Rolls-Royce RB. 178 would be an ideal engine for the airbus. if it is to be a two-engined aircraft, and that a smaller version has been designed should the airbus be a four-engined aircraft?
LORD SHACKLETON: My Lords, as usual, the noble Lord is very well informed on this matter. I am afraid I cannot tell him when the matter will be settled. It is one of considerable detailed discussion, but I share his hopes with regard to both the RB. 178 and the RB. 205. I am afraid that at the moment these are matters that are still being talked about.
LORD SHACKLETON: Certainly I would agree with the noble Lord.

MENTAL HEALTH: CARE OF THE YOUNG
2.36 p.m.
LORD GRENFELL LORD GRENFELL rose to draw attention to the working of the Mental Health Act 1959, with special reference to the care and education of children and adolescents; and to move for Papers. The noble Lord said: My Lords, in 1962 we had a debate on the workings of the Mental Health Act 1959, and during that debate I spoke on the progress made by local authorities in implementing the permissive powers given them under the Act regarding the care and education of mentally subnormal children. In that speech I was greatly assisted by a survey made by the National Society for Mentally Handicapped Children, and they have again given me reports which have been most helpful.
Prior to putting before your Lordships the evidence I have received, I should like to say a few words about the requirements of a family of a child of tender years. When a mentally handicapped child is born, the family are in desperate need of help. It is one of those things which are always very sad when they happen to someone else, but never seem to happen to on self. I have the greatest sympathy with general practitioners and consultants who have to diagnose and then tell the family the news that they have a subnormal child. Diagnosis is not always easy, and frequently parents have been put off by vague terms, and passed from doctor to doctor, until, in the end, they lose all faith in the medical profession, which is disastrous.
I am convinced that the best way to deal with this situation is for Her Majesty's Government to set up diagnostic centres, fully equipped to deal with the many disabilities in small children, to which the medical practitioner can refer any child which appears to be backward in any way. There are many tests which can be done, and in some cases a disability diagnosed early can be corrected. I am sure that these centres would be welcomed by the medical profession, and they would, I know, be of infinite assistance to the families who are now left in doubt about the future of their children. Attached to these centres should be counselling services, staffed by social workers and
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almoners who could explain to the family their rights under the law, and also advise them on the special care needed for their child. In nearly every case parents will face the future if they know what that future is: it is the fear of the unknown which causes such unhappiness and bewilderment. The National Society for Mentally Handicapped Children has set up a counselling service, and hopes to extend it. This service has been so successful that there can be no doubt that the State should follow up this pioneering effort for the good of all.
My Lords, I cannot pass on without mentioning the urgent requirement of all backward children to be tested for deafness as a matter of routine. This could take place in these centres. To-day there are children being diagnosed as mentally subnormal when in fact they are merely deaf. This can be disastrous to the family and to the future of the child. I asked an Unstarred Question in your Lordships' House regarding the education of children who suffer from the dual handicap of mental subnormality and deafness. I received a sympathetic Answer, and I hope that Her Majesty's Government will again study that speech and consider whether anything can be done for these children who are so very difficult to place in deaf schools, and who, in spite of their deaf aids, are in most cases completely lost in special training schools.
The South-West Metropolitan Regional Board, under, if I may say so, the very able chairmanship of the noble Viscount, Lord Addison, has asked hospital management committees to do a survey of children who would benefit by deaf training, and we are doing this. The real point is that training must, in my opinion, be continuous, and not just for one or two sessions a week. It would appear from this that accommodation should be residential, as the catchment area will be wide. Whether the teaching should be in hospitals or in the deaf schools already situated in the country is a matter for consideration by the Government.
May I now turn to the care of the child prior to school age? The local authorities have been empowered by the Act to set up special care units for the care of severely subnormal children on a day basis in order to give the mother some respite for shopping and recreation. These

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special care units are sadly lacking, and it appears to me that it should be possible for hospitals to co-operate with local authorities in setting up these units within the hospital grounds. Although in many cases land is at a premium, it is often possible to find a small piece of land within hospital grounds which could be used for this purpose, and hence achieve a necessary service, and at the same time save money. The staffing and costs should be a matter of arrangement between the hospital and local authority. Day hospitals are common knowledge for the mentally ill, and in my opinion this excellent provision should be extended to the severely subnormal child whose family would benefit so greatly by this assistance.
There are so many points which I wish to make in this debate that I have decided not to quote all the evidence I have received on the care and training of the mentally subnormal by the local authorities; otherwise, my speech would be far too long. But I propose to quote a few examples to show that, although the progress made in many parts of the country has been spectacular, there are some areas where there is still a grave lack of services. It is hard to understand why some local authorities are excellent, while others seem to have very little sense of responsibility in providing the minimum facilities for the care and training of these children. I fully realise the difficulties in rural areas, where long distances make the collection of children to one centre difficult; but it is not only in these areas that facilities are lacking, and in many rural areas difficulties have been wonderfully overcome.
May I now quote a few reports which will illustrate the points I have made? I shall then draw a conclusion which I trust will be carefully considered by Her Majesty's Government. In giving these reports I must state that they were drawn up earlier this year, and there may have been changes, but I believe them to be reasonably correct. With regard to the best establishments, one could go into any Lancashire or Cheshire training centre or hostel and find that everything is just what one would desire. Similarly, Manchester and Salford are both farseeing in their outlook and practical in their address to this work. With regard
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to authorities which have limited budgets and yet are making outstanding efforts, one could cite Flintshire, in North Wales. which for some years now has had both junior and senior training centres operating, and also hostels. All these are in fine buildings, well suited to their purpose, some newly built and some adapted and with a drive second to none anywhere in the country.
Monmouthshire is an outstanding example of the best kind of local-authority provision for the young mentally handicapped child. In this county at all baby clinics instructions are given that any baby who is slow in developing—that is, in walking, feeding, et cetera—should be referred to the mentally handicapped diagnostic clinic for examination. That is one point which I brought out earlier in my speech, which I hope will be noted, as it is most desirable that these things should be extended. In addition, health visitors, who visit all babies periodically for some years after birth, are instructed to report any child with a suspicious mental handicap to these clinics. The backward babies' clinics are well known in Monmouth-shire and hospital child specialists refer any suspect cases direct to the clinics for diagnosis. If a child is found to be mentally retarded he can be admitted from the age of two years to training centres and subsequently given six graded classes of instruction as in a normal school. When the child reaches the age of five years an official diagnosis of mental subnormality is made and reported to the education committee, and the child is then normally excluded from entering school.
Radnorshire is an authority that has not provided any facilities whatsoever for mentally subnormal children. It is intended that children from this county should attend a training centre at present being built in Brecon. However, no hostel accommodation is planned for this centre, which would make it virtually impossible for some of the children in Radnorshire to attend the centre at Brecon. In Huntingdon and Peterborough there are two junior training centres—one at Peterborough and one at Huntingdon—the latter being purpose-built, with a hostel and one bed to provide for short-term care. There are no adult centres, sheltered workshops,

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special care units, crèches or hostels for adults.
The authority provides a club for the mentally handicapped in the Broadway Club, Peterborough, which is also used for the elderly. It appears to be the policy of this authority, or at least of the health committee, never to pay for short-term care. Since the hospital waiting list is so long, this means that in fact short-term care is never available and families with helpless or extremely difficult children never have relief of any kind. Until the new hospital is opened, a child can be on the waiting list for ten years without even the relief of short-term care.
The St. Ives Society of the National Society for Mentally Handicapped Children were originally running the training centre now replaced by the new Huntingdon centre. This St. Ives Society now have a new building of their own where they run a club for adults and a crèche. It will be seen from the above that the local societies are still carrying out a great deal of the work which we would expect the authorities to undertake. In Barnsley County Borough there is an old wooden building with a corrugated roof which at present accommodates forty juniors and twenty-three adults. There is no leisure space and the building is quite inapproriate for the for the purpose. It appears that there is little hope of this building being replaced by 1971, but the council have obtained authority and a site for an adult training centre for eighty adults by that date.
I think that I have said enough to show you the great differences in the care given to the mentally subnormal, and I now draw my conclusions before moving to other subjects. I am convinced that the time has come when Her Majesty's Government must make a survey of the care and education of the mentally subnormal, and lay down minimum standards which must be complied with. It is the statutory duty of all parents to send their children to school, but if there is no adequate school for them to go to, how on earth can parents comply with this requirement? We have abandoned the word "ineducable" and substituted the words "unable to benefit from a normal education". It is up to Her Majesty's Government to
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ensure that an education is given to these children which will benefit them in their future life, and relieve their families of a bitter and frustrating experience which is unfortunately the lot of so many.
My Lords, may I, for a few minutes, turn to the teachers of the mentally subnormal? We cannot expect to recruit really good teachers unless we pay them a reasonable salary. We cannot accept in this day and age that this is a vocation and hence teachers should accept a greatly reduced remuneration. In some ways the teaching requires more skill than that required in normal schools. The teacher must be a saint and a psychiatrist with a large degree of firmness. He or she has to deal with a class of varying intelligence, some of whom will be non-communicating, and many of whom will be highly disturbed in one way or another. The teacher must be able to switch from one subject to another at short notice as the pupils, with their limited intelligence, can benefit from only a short period on any subject and may need a complete change to something like a percussion band.
I can assure your Lordships that the whole future of these children's lives depends on their early training, and it is not easy to find the right people and this is the reason why: the scales of remuneration do not compare favourably with those of normal schools. In making these comparisons I have taken assistant supervisors in both hospital and local authority schools, and assistant teachers in normal schools under the Burnham Scale, as these posts seem to correspond with each other in seniority. The pay in the case of assistant teachers in hospital schools is £575 to £765 over eight years, while in local authority schools it is £545 to £765 over the same period. In both cases it is £70 a year less if unqualified. There is one difference in that local authority schools get twelve weeks' holiday but hospital schools get only three weeks, as laid down by the Ministry of Health, and anything further is at the discretion of the hospital management committee, the average being two weeks, making five weeks in all.
Let us now compare this with Burnham Scale assistant teachers. They get with three years' training £750 to £1,400 over 14 years, and if unqualified£520 to £730 over 7 years. In addition to this, if they

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are working in a special school, such as an educationally subnormal or a hospital school, they get another £120 a year, and if they do a year's course in teaching the blind or deaf another £50 a year, bringing the possible scale up to £920 to£1,570 for the trained teacher. If we sum this up, we find that a qualified assistant supervisor gets a maximum of £765 and cannot advance any further, and if in a hospital school gets only five weeks' holiday. A Burnham Scale teacher can reach £1,570 over 14 years with twelve weeks' holiday. My Lords, is it any wonder that it is hard to find the best teachers for the mentally subnormal?
I find that the London Borough of Greenwich was advertising in the Federation of Association of Mental Health Workers' leaflet for an assistant supervisor starting at £735 and rising to £960. This shows that they consider that the normal rate as laid down is not adequate to fill the post. It is vital that teachers should not only be paid adequately but also be trained in the special skills required to get the best out of the children. Great strides have been made by the Council for Teachers of the Mentally Handicapped set up by the Ministry of Health, on which I am privileged to serve, in setting up courses in universities and technical colleges on the pattern pioneered by the National Association for Mental Health, who continue to do wonderful work in this field. In this context I should like to record, with the deepest regret, the death of Lady Adrian, the late Chairman of the Council, who did so much for the mentally handicapped. It is essential that the salaries of teachers should be carefully considered in relation to the importance of their work in bringing the children up to a standard which will make them useful members of the community rather than a permanent liability to the State.
May I turn now to hospitals, and on this subject, as Chairman of the Fountain and Carshalton Group of Hospitals, my experience is limited to hospitals for mentally subnormal children, with the exception of Queen Mary's Hospital for Children, Carshalton, which is the only comprehensive hospital with patients both long stay and acute on the pædiatric side, and long stay on the subnormal side. This
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is a wonderful concept, furthering the efforts of us all to integrate the mentally handicapped into the life of the community, and I hope that in years to come this idea will spread and hence the segregation of the mentally subnormal will be ended and all nurses will automatically be trained in both forms of nursing as a matter of course.
Here, my Lords, may I pay my very sincere tribute to all nursing staff, and especially those who nurse so devotedly the very severely subnormal? In so many cases there can be no word of thanks to these nurses as the patients are non-communicating. The work is hard, and as I visit the wards I come away with a great sense of admiration and gratitude for the wonderful service these men and women are giving. I believe that all of us would like to honour the nursing profession in whatever branch of nursing they are, and I feel that it would not only be right but also a great morale raiser if a few more nurses, both male and female, with long devoted service were put forward for decorations in the Honours Lists. I know full well how this would be appreciated, not only by the recipient but by the whole hospital in which the recipient was working. In the Birthday Honours there were decorations for four matrons and two ward sisters, and I was delighted to see it, but I think that a certain number of nominations could be allocated to the Regional Hospital Boards for really deserving cases among the more junior ranks who have given a life time of service to the care of the sick.
My Lords, I turn now for a moment to the administration of hospitals. We have been told that it is proposed to spend£1,000 million on the Health Service over the next ten years, and this certainly appears to be a large sum, but if it is broken down it will be found to be totally inadequate if our hospitals are to be brought up to the standard required to give a good service to the community. Without being in any way extravagant, I could spend£250,000 tomorrow on Queen Mary's, Carshalton, alone, and I know there are many more hospitals in the same circumstances.
It is essential that money should be found for the hospitals, and I am convinced that the time has come when we should consider a National Lottery the

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proceeds of which go exclusively to hospitals. There will inevitably be some that would object to this as an extension of gambling, but I am certain that the vast majority of people would rather have a little "flutter" on behalf of a good cause than let the money go to outside sources. Gambling has come to stay in this country so let us channel the proceeds into the cause of humanity as is done in other countries.
My Lords, before I close may I put one more suggestion to Her Majesty's Government? I can say from personal experience that there can be little doubt that a child brought up in the home with all the love and care of the family does much better than one in hospital or institution; and in saying this I am not in any way insinuating that the child in hospital or institution does not get loving care, because I know it does. But the family background will in nearly every case be the best solution. The published average weekly cost of severely subnormal children in hospital throughout this country is£10 5s. 4d. per head. It will be obvious that the cost to the parents of a subnormal child cared for in the home is greater than that of a normal child, quite apart from the mental stress. There is more laundry, and a modicum of help is desirable if the mother is to have any personal liberty at all, and in many cases special feeding is required.
We all wish to keep the mentally subnormal out of hospital if we can, not only for their own sakes, but also in order to keep the beds for those who are so severely affected that they need hospital care. I believe that Her Majesty's Government should consider a scheme to pay a small sum in the form of maintenance to the families of mentally subnormal children, until they reach school age, who are willing to look after them in the home. Perhaps the right amount would be the equivalent of that paid to foster mothers, which I believe to be something between£4 and£5 per week. I am convinced that this scheme would in the end save money and shorten the waiting lists for admission to hospitals, which are still, I fear, long.
My Lords, finally, may I appeal to all noble Lords to assist so far as possible
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the work being done in their own areas for the mentally handicapped. I pray that I may be spared for many years to fight the cause of families who are so sadly afflicted, and of children who through no fault of their own are unable to rise to the heights of other members of the community. Over the last twenty years great strides have been made, but we have not yet reached our goal and ensured that no family of a mentally handicapped child can feel that they have been forgotten by their fellow men. My Lords, I beg to move for Papers.
3.4 p.m.
LORD AMULREE: My Lords, I am pleased that the noble Lord, Lord Grenfell, has put down this Motion on the Order Paper to-day. I do not propose to follow him entirely in regard to the training and teaching of the mentally handicapped child. I should like to begin by going one step further, and to come to the training of the young mentally ill person for some kind of trade or industry, because I think that at the present time, with modern industrial development, there is far more possibility than hitherto of bringing the psychologically handicapped person into the normal run of the world. This would not only be of benefit to the patient or the person himself, but also to the benefit of the community and of industry.
There are one or two particular types of mental disease which are peculiarly suitable for training at the present time. With the growing mechanisation and simplification of some parts of industry, there are now coming into being a large number of what one might call purely stereotyped jobs which the mentally normal worker may find rather difficult to do, because of the strain of doing this stereotyped work, but which some of those suffering from forms of mental disease, in particular those suffering from various forms of schizophrenia, as it is called, can do extremely well. That, I think, is partly because there has been a great deal of improvement in the treatment of these patients in hospital, so that many of their more trying signs and symptoms can be coped with. Indeed, it looks as though there is a great deal of evidence coming along now that much of these trying signs and symptoms have been due to the fact that the patient was taken away and locked up.

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So one would like to see more of what I think has already started, certainly in one or two hospitals in this country and in some foreign countries, particularly I think in Denmark. I have in mind schemes under which workshops are attached to mental hospitals, where there can be trained staff, rather on the lines suggested by the noble Lord, Lord Grenfell, to supervise the training of the mentally sick people, and where there would be no earnings rule imposed upon them, so that, provided the work which was turned out was reasonably good and up to standard, they would get the rate for the job in the ordinary way. Supposing one were to get that occurring, there is no reason why the patients should not have their money to spend. In this way they could be encouraged, particularly the younger ones, to spend money on clothes, cameras, bicycles, and so on; and this would tend to bring them more and more into a normal kind of world, rather than leave them in the difficult world in which, up to the present time, they have been kept.
If we are going to do this kind of work on any scale, there will have to be a greater amount of liaison, co-operation and integration between the work of the local authorities, should the patient be discharged from one of these hospitals. There would be no reason at all, if the patient was a satisfactory worker, why he should not have a start. But there must be a great deal of linking between the local authority and the Regional Hospital Board or the management committee—the hospital authority in general. One has found in the past that there has been some difficulty in regard to handing over records and notes from one side to the other. I think that is one thing that we have to break down in order to obtain a perfect sense of co-operation and freedom between the two.
LORD TAYLOR: My Lords, before the noble Lord leaves that subject, is he aware of what has been done at Richard Thomas and Baldwin's factory at Scunthorpe, where mentally handicapped people are operating blast furnaces successfully? It is a most magnificent piece of work.
LORD AMULREE: That is exactly the kind of thing one wants to see going on
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more and more throughout the country. I am grateful to the noble Lord for drawing attention to that particular example, for I am sure that if such work can be carried out in one place it can be repeated in a great many more. The fact that that example has been mentioned by the noble Lord, Lord Taylor, should encourage more people to go in for the same kind of thing.
I should like to take advantage of the general terms of Lord Grenfell's Motion and say a few words about elderly people and their problems because, from the Ministry point of view, they are similar to the younger people to whom the noble Lord's Motion specifically refers. I do not think I shall stray too far from the terms of the Motion, and I trust that your Lordships will give me your indulgence to say a few words on this subject.
The passing of the Mental Health Act 1959 made an enormous change in the position of all the age groups coming under its ambit, because the doors of the mental hospitals were at last opened. These hospitals were no longer places to which one sent people, particularly the elderly suffering from degrees of senility or senile dementia, so that they could be locked up and put away. In those days, if one found a thing that one did not like, one shut it up and put it away and then forgot all about it. The same thing happened with mentally defective children and mentally decayed old folk.
These big hospitals, however, are extremely unsuitable for patients of all kinds, whether young, middle-aged or old. Generally, they are not in the centres of population, but are kept some distance away; and although the patients, whether children or the old, receive a certain amount of care and attention, they are more or less cut off from their families, and from their friends and visitors. In this sphere it is extremely important, both for the young and for the old, that contacts with home life should be kept up. They provide one of the few links which the old have with the world, and if the link is broken it leads, in many cases, to a rapid rate of deterioration which probably need not have occurred. The same consideration applies to young people. Therefore, I consider that patients, old or young, should not go into mental hospitals unless they have some kind of disease for which treatment is possible.

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In the case of the elderly, they should not go to mental hospitals unless they suffer from some depressive condition for which mental treatment is possible and desirable, or from some kind of persecution feeling, which again is not uncommon, and for which some kind of treatment is possible. In short, I believe that nobody should go into a mental hospital at present unless he has a disease which requires proper, skilled treatment.
If this does occur, there needs to be a very close working ararngement and co-operation between the physician in charge of the geriatric department—and this would apply to pædiatric wards and to normal adult wards—and the physician in charge of the psychiatric department. One wants to bring these two branches of the profession as closely together as possible, rather than keep them apart as separate entities. Indeed, some authorities in the geriatric field think there is value in creating special psycho-geriatric departments for patients. I am not at all sure that that is necessary. It may be necessary in some cases, but it seems to me that it is a way of coining a new word, making something new out of something which is not necessarily so—a not uncommon trait, I am afraid, in my profession. I think the noble Lord, Lord Taylor, will agree that we rather like to make up new words from time to time.
Those are some of the points I should like to bring out. They have a bearing on mentally sick patients, whether they be young or old. There is one point I would mention in relation to treatment. If one is going to have wards in general hospitals where mentally deranged or mentally disturbed patients are going to be taken into care, then it is of great advantage if some of the nursing staff have received special training in the care of people suffering from mental diseases. They will not be so surprised and perplexed by the curious things which mentally deranged patients can do. I should like to see people being moved from the mental hospitals, and the mental hospitals gradually being run down and made part of the general hospitals, providing that there is a sufficent number of nursing staff trained in this work to look after them.
The local authorities have a very big part to play in the care of mentally sick
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people, both young and old. The old get transferred or placed in a variety of accommodation, some of which in some authorities can be extremely good and in other authorities, as in the case of children's accommodation, it can be extremely bad. When one visits institutions of this type one sees that they were built in the old days of the Poor Law, probably at the end of the 19th century. The authorities have done a great deal to improve them and make them more comfortable, but all their efforts cannot make them up to date. Therefore, one would like to see some change in this direction as soon as possible. One point which has always struck me when dealing with elderly, senile types is that it is extremely important that local authorities should arrange for them to be given some simple physiotherapy and simple occupational therapy. There was one place in which I was involved where we managed to provide physiotherapy, but it was merely because somebody came along and did it on a voluntary basis in their spare time. The effect was quite startling. One would like to see forms of treatment for these patients, just as for mentally handicapped children.
There is, after all, a great deal in common between the care of mentally handicapped children and the care of mentally handicapped elderly. The only difference is that the elderly have not so long to live, whereas the children have a long time to live and therefore need more special care taken of them. The greatest improvement can be achieved by a far closer co-operation than there has been in the past between physicians in charge of psychiatric departments and physicians in charge of general departments, and with the officers of the local authorities whose job it is to care for these people when they go back to the community. Therefore, I would support the noble Lord in what he has said, although I approach the matter from a rather different point of view.
3.20 p.m.
LORD NEWTON: My Lords, the noble Lord, Lord Amulree, and I are old comrades in debates of this kind. I would join with him in thanking my noble friend Lord Grenfell for moving

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his Motion and giving us the opportunity to have this debate this afternoon. I should also like to express my admiration for the tremendous wealth of detail in my noble friend's speech. He has made a very large number of suggestions, some large and some small, but all of which, I think, are seriously deserving of consideration. I certainly cannot comment on all of them, but I shall, of course, try in my speech to make some observations about some of them.
It is exactly four years and one week since your Lordships' House last debated the working of the Mental Health Act, then at the initiative of the late Lord Feversham. Some of us who took part on that occasion have been speaking, or will be speaking, this afternoon, but I fancy that all of us will be conscious that we miss Lord Feversham's exceptional knowledge and humane approach to these matters. Although the 1959 Mental Health Act clarified and slightly extended the powers of the local authorities, it is principally concerned with the procedures for detention and compulsory admission to hospitals. During this last week-end I re-read the 1962 debate, and I found that, on the whole, with the exception of the noble Baroness, Lady Wootton of Abinger, and myself, those who spoke concentrated on standards of provision, care, education and training of the mentally disordered. Admittedly, at that time the Act had been in operation for only a very short time, just a matter of months, but, on the whole, all those who commented on it seemed to think that in practice it was a good Act. That was certainly my view then, as it still is to-day, and I do not have any suggestions to make for amending the Act. But I shall be interested to hear whether any other noble Lords and Ladies who speak this afternoon have any.
In the course of the 1962 debate some fears were expressed about the increase since the inception of the Act in the number of readmissions to psychiatric hospitals. But I think this increase was largely due to new ideas about medical treatment and there was no reason to suspect something sinister such as encouragement by the Act of superficial assessment of patients or of inadequate treatment. Since then, of course, the
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number of re-admissions to hospital has gone on growing every year. There were something like 80,000, I think, in 1964as against about 56,000 in 1960. That is a pretty sharp rate of increase, but I do not myself think that it is sufficient to give cause for alarm. It may be that the noble Lord, Lord Champion, will wish to say something about this in his speech. If he does not, we probably can take it that he agrees with me that there is no cause for alarm.
I am sorry that we are not going to be treated to the benefit of the wisdom of the noble Baroness, Lady Wootton of Abinger, this afternoon. I mentioned this to her before this debate, because in the 1962 debate she made some very penetrating observations about the tendency—which I think she considered to be a regrettable tendency—on the part of both public opinion and the law to widen the concept of mental disorder. Particularly she suggested that, although very few psychopaths compulsorily detained under Part IV of the Act had been kept in hospital for more than a very short time, nevertheless it might be safer and wiser if all diagnosed psychopaths were dealt with under Part V of the Act instead of Part IV, and so came before the courts of law.
I did not give the noble Lord, Lord Champion, any notice that I was going to talk about this subject, and I do not expect him to be able to give me an answer this afternoon. But I think it would be very interesting if we were able to know how many diagnosed psycopaths, compulsorily admitted to hospital under Part IV, have, since the inception of the Act, been detained for more than six months, and how many for less than six months. The point of that is that one does not want eccentric people to be compulsorily admitted to hospital just because they are eccentric and nothing else, any more than one wants the plain "bad hats" to escape the due processes of law by being compulsorily admitted to hospital as psychopaths under Part IV of the Act.
May I come on now to the question of hospital provision for the mentally disordered? In May of this year the Minister of Health presented to Parliament Command Paper 3000, which is a Blue Book containing a revision of The Hospital Plan for England and Wales

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which was first published in January, 1962, and which I had the pleasure of introducing to your Lordships in a debate in this House on February 14, 1962. We were originally promised this revision before the end of last year, and we have waited for it a long time. There is a lot that I could say about it, and may do one day, but this afternoon, obviously, I must confine myself to the bearing which it has upon mental health.
There are two points about it which I welcome without reservation. The first is that it is still the intention to base the Hospital Service of the future on a network of district general hospitals which will include units for active psychiatric and geriatric treatment. This seems to me a good thing, not only because it will help to end the invidious distinction between mental and physical illness, and encourage the recognition that both types of illness are equally susceptible to appropriate treatment, but also because eventually it will—if I may put it like this—speed up the running down of the largest old-fashioned mental hospitals, about which the noble Lord, Lord Amulree, just spoke and whose views on this matter I very much share.
Secondly, I am very glad (I have discovered this from reading this Blue Book) that the Minister considers that there is no reason, at any rate at the moment, to doubt that the need for mental illness beds will fall to 1.8 per thousand of population by about 1975. This forecast, which was based on a statistical exercise, was embodied in the 1962 Hospital Plan and it came in for quite a lot of criticism. Some people said that it was just a bit of financial cheeseparing by a mean Government. Others said that, even if it were an accurate forecast, it ought not to have been announced because it was likely to be bad for the morale of those who worked in mental hospitals. For my part, I am glad that the forecast still stands, because it is yet another guarantee of the eventual redundancy and disuse of our old and very large mental hospitals
It is very easy to wax eloquently indignant—and many professional writers on the subject do—about these old institutions: the sweetly cloying smell, the starkness, the overcrowding, the atmosphere redolent of outmoded ideas and so on. Fortunately, these institutions
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which we call mental hospitals are devotedly served by high-minded, though often frustrated, people—and nobody can be happy about them. But they do present a formidably expensive problem, and it is no good pretending otherwise. That is one reason why I am saddened by the revised Hospital Plan.
May I consider some of the things in it? It says:
"The expectations of the original Plan could not possibly have been fulfilled."
My Lords, I do not accept that. What I am prepared to accept is that the expectations of the original Plan cannot now possibly be fulfilled, which is a very different matter. The Blue Book also says:
"A somewhat greater provision of resources over the coming years has been assumed in revising the programme than in the original Hospital Plan"—
and my noble friend Lord Grenfell, I think it was, referred to that. My Lords, that is so, but I do not for a moment think that this greater provision of resources is sufficient to make up for the decline in the purchasing power of the pound that has taken place in the last four years or for the decline in the purchasing power of the pound which is likely to take place in the years to come.
The Blue Book says that it may be misleading to set starting dates for building projects, and it does not set them. I personally would much rather set starting dates and miss them than not set them at all, for this reason, if for no other: that the publication of starting dates is an extremely good stick with which to beat the Treasury when the time comes for those starting dates to be implemented; and, again, published starting dates are a splendid spur to the planning staff—the architects, and so on—of the Regional Hospital Boards to get on with their work. Again—and this is the last quotation I want to make—the Blue Book says:
"It would hardly be appropriate to publish in this paper, and thus give an illusory permanence to, the detailed programmes as they now stand".
What do those words mean? What they mean to me is that the Hospital Plan of 1962 has in 1966 been turned into a non-plan, into a pious hope by the political Party which has always believed in the importance of detailed planning. I

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do not blame the Minister of Health for this. The trouble is that the economic condition of the country is such that he is not allowed to enter into firm commitments at all.
LORD TAYLOR: My Lords, the noble Lord, Lord Newton, has based his case on an attack on the large mental hospitals. I think that is very unfair and very wrong, because in fact a great number of these large mental hospitals are extremely good institutions, first-class institutions; and I would say, as a generalisation, that any mental hospital in this country, any psychiatric hospital, with less than 1,000 beds will be found quite first-class, without rival throughout the world. It is the 2,000-bedders which are so awful, and they are the ones we aught to be tackling.
LORD NEWTON: My Lords, it was the very large ones about which I was talking. I think there are too many of them. I do know quite a lot about them, and I ask the noble Lord to accept that I entirely agree that a lot of them are very well run; but I do not take back the general criticisms which I made earlier about those larger hospitals.
May I now leave the hospital side of the picture and come on to the community care of the mentally disordered? This is a phrase which a year ago the noble Lord, Lord Amulree, told us he did not like. It certainly is not an elegant phrase, I agree, but it is difficult to think of anything better with which to describe all the health and welfare services, both statutory and voluntary, which are available outside the hospitals. That was why that phrase was used in the title of the Blue Book published in 1963 which contained the long-term plans of the local health and welfare authorities. I noticed with some interest that in the title of the revised version of this Blue Book (Command Paper 3022), which was presented to Parliament only last month by the present Minister of Health, the same phrase is used. As I was one of the authors of the introductory chapters of the 1963 Blue Book, I have studied the revised version of June, 1966, with considerable interest and with some despondency.
The original purpose of the 1963 Blue Book was twofold: first, to enable com-
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parisons to be made between the long-term plans of the individual authorities; and, secondly, to enable the Minister to comment upon the standards of provision envisaged not only by individual authorities but also by all the authorities as a whole. Now when one looks at the revised version (I hope the right reverend Prelates will not mind my talking about the "revised version" of this Blue Book) it is apparent that, although staff numbers have been improving in the last few years, in almost every case, and notably in the case of health visitors, mental health social workers and teachers in training centres, the targets have not been hit. This is a serious matter, but I do not propose to abuse the Government about it this afternoon, because I know well enough—too well, in fact—the problems of manpower in all spheres of the National Health Service.
On the other hand, I well recall the abuse that descended upon my head in the series of debates which we used to have in your Lordships' House about different manpower aspects of the National Health Service. The noble Baroness, Lady Summerskill, the noble Earl, Lord Longford, and the noble Lords, Lord Stonham and Lord Taylor, used to take it in turns to berate me about this particular shortage or that particular shortage. Sometimes they would all set about it together; and sometimes, for good measure, the noble Lord, Lord Amulree, would join in, too. I confess to your Lordships that I was sorely tempted to re-read those debates and to select some appropriate passages and epithets to hurl back this afternoon at the noble Lord, Lord Champion.
LORD CHAMPION: I never said anything.
LORD NEWTON: No—and the trouble is that the noble Lord, Lord Champion, is just about the last person in the world at whom I should wish to hurl anything, let alone the past words of his noble friends. However, my Lords, if later speakers in this debate choose to take the Government to task about staffing shortages, that will be quite all right with me.
But even more serious than the staffing situation in the local authority field is the clear warning—and the language of the warning in the Blue Book is very strong indeed for a Government publication—

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that some local health and welfare authorities are not setting their sights anything like high enough, in the numbers, both of staff and of buildings, which they are planning to provide for the care of the mentally disordered. This point was extremely well emphasised, I thought, by my noble friend Lord Grenfell. He gave some interesting instances of this, and I could give more, but I think that both of us have by now said enough between us to bring this matter home. In a moment I want to come back again to this point, but before I do so there are just two other matters on which I should like to touch briefly.
The first is that I should like to pursue the suggestion of my noble friend, Lord Grenfell, about the need of counselling services for the parents of young, severely subnormal children. I do not see why these services should not be provided in ordinary children's welfare clinics or, if the clinics are not big enough, even in training centres. I recall seeing a session going on in a clinic in which there were a number of mothers of severely subnormal children and their children, and while the children were playing together the mothers, if they wished, were able to have private discussions with the medical officer in charge, who was fully qualified to give advice. The mothers also had the opportunity to give each other counsel, to talk about their own experiences, their own successes and failures. The doctor told me afterwards that these sessions were becoming a great success. I cannot see why the same sort of sessions should not take place all over the country. I hope that possibly there may have been some developments along those lines in recent years.
The other matter I should like to touch on is the vexed question of whether the time has come when severely subnormal children (that is to say, those trained in training centres) ought now to be trained in some sort of E.S.N. school, run by the local education authority rather than by the local health authority. I used to think, and say, that it did not very much matter where the training took place or who provided it, so long as the training was good and so long as the teachers were good. But one cannot ignore the fact that there is a growing body of informed opinion that the time has now come to make the change. I do not know whether
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the noble Lord, Lord Champion, would wish to say anything about the Government's thinking on this subject. I have not warned him that I was going to raise this point. My mind is still open on the question. The only thing that really matters, I think, is that what is best for the children should be done, and not what is best for the feelings and susceptibilities of their parents.
Finally, my Lords, I should like to offer two suggestions, which I hope are practical and comparatively easy suggestions, for helping to eliminate quality variation in the standards of local health and welfare authority provision for the mentally disordered. According to the Blue Book (Command 3022) the Minister is proposing that his officials should have discussions with the laggard authorities. That is probably as good a way as any of trying to deal with quantitative efficiencies—that is to say, of trying to improve those situations in which an authority is obviously not planning to have in the future enough staff or buildings. But what about the qualitative variations in the standards of provision as between authority and authority which, as we all know, exist?
My two suggestions are first that there should be set up a small mental health inspectorate on the lines of the inspectorate of schools. It could be quite small and therefore it would not have to be expensive. I think that that would contribute a great deal: that such men and women could do a great deal to iron out disparities in standards of provision. The second suggestion is that there should be another Parliamentary Secretary in the Ministry who is a Member of this House, who would concentrate on travelling round the country visiting hospitals and local authority establishments, and who would have the freedom to do so. In my opinion it is absolutely essential that when you have an enormous, centrally-run organisation like the Ministry of Health, which spends a tremendous amount of the taxpayers' money, the Ministers responsible should be able to get out and about and see what is going on on the ground. I am sure that the present Minister, Mr. Robinson, and his Parliamentary Secretary travel as much as they can; but it is only in the nature of things that two Ministers, both of whom are Members of the other place,

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cannot possibly do as much travelling and visiting as could three Ministers, one of whom is a Member of this House and who, therefore, enjoys much more freedom from the daily turmoil of Parliamentary activity.
When I was one of the Parliamentary Secretaries I did a great deal of visiting. It does not take long to learn to judge differences in quality of provision. If necessary one can have a quiet word in the ear of the chairman of the responsible committee, or even, perhaps, in the ear of the chairman of the council. That is something far easier for a Minister than for a civil servant, because the officials concerned normally deal with the medical officer of health. There are at the present time seven Ministers at the Foreign Office, five in the Home Office, the Board of Trade and the Department of Education and Science, and four in the Ministry of Housing. In the Ministry of Health there are just two. I think that something could and should be done about that.
I do not expect that the noble Lord, Lord Champion, will wish to say anything about either of these two suggestions, but I commend them to Her Majesty's Government as serious and practical suggestions which, if implemented, might make for a considerable improvement in the working of the Mental Health Act, which is something that all of us, wherever we sit in this House, want to see.
3.47 p.m.
BARONESS HYLTON-FOSTER: My Lords, as is customary on these occasions, I ask for your indulgence. Over the years I have been fortunate enough to have considerable experience in listening, but to-day I have got my "L" plates up, and I am conscious of it. I am very grateful to the noble Lord, Lord Grenfell, for allowing me to bring to your Lordships' attention this afternoon the place of voluntary work in the mental health service, With the introduction of the National Health Service Act in 1946 it was thought by some that it covered everything and that there would be no place for the voluntary worker. But it soon became plain that this was not so because, as your Lordships may remember, the hospitals started forming their leagues
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of friends to provide for the patients amenities which were not covered by the National Health Service. We then had, thirteen years later, and have now, a Mental Health Act. I have read the Act carefully and I cannot find in it any real mention of the place of the voluntary worker yet to-day I think it is recognised that, without the help of these voluntary services, much of the mental health service could not continue. I must now declare my interest, again as is customary: I have all my life been connected with voluntary work of one kind or another and, of course, in particular with that of the British Red Cross Society.
My Lords, mental health concerns us all. We all have it; it is either good or bad and, with the stresses and strains and speed of modern life, the bad seems to have increased. Therefore I think it very important that it should be talked about openly as is any other form of illness; and this is what the noble Lord, Lord Newton, has just been saying. What is the best way of setting about securing mental health? Surely, by educating people about it and helping them to be less frightened about it. That is where voluntary societies come in; and, with your Lordships' permission, I should like to give just a few examples of what they are doing.
All over the country voluntary societies are working with, and under, the local medical officer of health's department in various ways, such as in mental health education campaigns; visiting families who have had a pateint discharged from hospital to see how they are getting on and what supplementary services are needed; setting up clubs for the mentally sick to help them to return to normal life later; running weekly créches for mentally subnormal children. This relieves parents and gives them an opportunity to do their shopping or to do other jobs, while at the créche, through skilled play therapy, the children are taught so far as possible to deal with matters of their own toilet and feeding, and things like that.
Escorts are provided for adults, and also mentally retarded children to child guidance clinics. Beauty therapy inside the mental hospitals is provided in order to restore the self-confidence of women patients, and the London Association of

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the National Association of Special Education has asked for help in activities for mentally handicapped children. My Lords, may I just add about this that the aim and object of these activities is to try to give children something to do, so that they may feel they are contributing and are not all their lives on the receiving end. These are just a few examples of what the voluntary societies can do and are doing.
Much more help could be given if there were more volunteers, and surely with the coming of the shorter working week and increased leisure this is the moment for Her Majesty's Government to give a lead and encourage people to come forward to offer their services. But. my Lords, alas, far from giving a lead we get the selective employment tax. I welcome the fact that this tax is to be refunded; nevertheless, it still has to be collected and the money loaned free of interest to Her Majesty's Government. Voluntary societies are saving the taxpayer a great deal of money by providing many free services, and it is really most disappointing that this was forgotten and that their work was not recognised from the start by making it plain that this tax did not apply to them. That is why I felt it necessary to try to draw the attention of your Lordships to-day to the place of voluntary work in modern society.
3.53 p.m.
LORD BRAIN: My Lords, it is my privilege to be the first to congratulate the noble Baroness, Lady Hylton-Foster, on her maiden speech—a speech of such warm humanity—to which we have just listened. I am sure we all look forward to hearing her on many future occasions. I should like also to thank the noble Lord, Lord Grenfell, for having brought forward this Motion. I am particularly interested, as I was a member of the Royal Commission which laid the foundation for the Mental Health Act. The noble Lord, Lord Grenfell, has given us a very comprehensive review of the whole subject, and I propose to deal only with some particular instances.
A great deal has been said already by noble Lords about the need for more activity on the part of local authorities in the foundation of community hostels to enable the mentally subnormal to go out into the community. Noble Lords may have seen only last Sunday the figures
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published in a letter in the Observer by the statistical information officer of the National Society for the Mentally Handicapped, in which he quoted the Minister of Health as saying that in eight years' time there would be 2,000 places in community hostels. Today there are 700 places. The letter went on to point out that there are now 30,000 children in hospital with a waiting list of 4,000, and clearly, a proportion of those will be suitable for training in such community hostels. One might point out also that we have an expanding population, so that inevitably these figures will increase.
One must draw the conclusion that not only are the present facilities inadequate but the plans for the necessary expansion of future facilities appear to be also inadequate. What this means in terms of human happiness will be clear to those who have had the privilege of seeing what can happen to these subnormal people when they go out and are trained, and find a job which they can do and realise that there is a place for them in the community. I think those who have seen such people before and after this will have been astonished that such a change has been possible.
I should like to say a little about the need for better education for those already in hospitals. This point has been touched on by noble Lords, particularly by the noble Lord, Lord Amulree. There are units in existence, about which I shall say something in a moment, for short-term training, but there is a comparative neglect of long-term education of patients in mental hospitals. As has already been said, there are a number of patients with schizophrenia who are capable of benefiting from education. There are brain-damaged, epileptic children who also could profit from some education and training. I believe it is the local education authority which has the power and the duty to provide this education for those needing a long-term stay in a mental hospital; and here again I believe that there is great need for developing this service. It is an expensive service—special training is needed for the teachers—but it contributes substantially to human happiness.
The short-term units are developing, but perhaps not quite quickly enough.

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They were the subject of a recommendation to hospital authorities by the Ministry of Health in a Memorandum in 1964. They are designed to provide for a wide variety of children. Some are mildly mentally subnormal. Others have normal intelligence but experience emotional difficulties. Some are mentally ill but are still able to receive educational training.
My Lords, such units, I believe, need to be especially built. It is not enough to try to make do by adapting some existing buildings. Such converted buildings severely limit the possibility of what can be achieved. The practical problems of the management of these difficult children call for specially designed buildings. Moreover, the work is extremely exacting, especially for the teachers and the nursing staff concerned, and they cannot be expected to undertake this work and remain at it if they have to struggle with bad physical conditions as well as with the natural problems involved in the work.
Then there is the rather small but very difficult problem of the intractable delinquent adolescent—a small minority but a considerable problem; and again there is no adequate provision for these. If two or three happen to get into an approved school it can call for a disproportionate amount of work from the staff and provide a very disruptive influence. The natural tendency is to call upon a psychiatrist. Unless there is evidence of mental illness or some disorder like epilepsy or some physical disease of the nervous system, there is little that a psychiatrist can do. There are a number of psychiatrists who feel that once a diagnosis has been made and serious illness excluded, these people constitute a social rather than a medical problem. I am not going now into the question of by what means they should be sent to an institution, but there is, certainly among psychiatrists, a feeling, first, that there is not enough provision for this difficult problem, and, secondly, that residential accommodation is required, and that there is a case for putting it under the Home Office rather than under the Ministry of Health.
Lastly, I must say a little about nursing. I should like to echo what the noble Lord, Lord Grenfell, said about
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the magnificent work done by those who nurse the mentally subnormal. I have known many of these devoted people. But one has to remember that it is increasingly hard nowadays to get staff for such hospitals and such patients. It is an odd and unexpected side effect of exiling policy that if you provide hostels and get back into the community the high-grade subnormals, who otherwise create a worse problem in your hospitals, so that hospitals are left with a larger proportion of the heavier cases, the lower-grade subnormals, there is less variety in the nursing and a heavier task for the nurses and doctors. This, however, clearly has to be faced.
I will not say much about conditions in the older mental hospitals, because the point has already been made. I would, however, emphasise the fact that we have to take into account the conditions in which the nurses work. The better the conditions, the more likely we are to get and retain nurses. At present we depend in these hospitals to a large extent upon nurses from overseas. We value their help very much, but we should clearly like to see far more of our own nurses going into this particular form of work. I should like to urge the need for better residential accommodation for nurses, particularly married nurses. They have to work, as the noble Lord, Lord Amulree, has said, in difficult conditions, sometimes away from major centres; and, therefore, all possible facilities, residential and otherwise, which can be provided should be provided and need to be provided if we are to maintain and retain the services of these nurses who have done such good work in the past and are doing it still.
4.3 p.m.
THE LORD BISHOP OF COVENTRY: My Lords, I am glad that two Lords Spiritual are taking part in this debate, because the Church has always been deeply concerned about the maladjusted minority of our community, and must always continue to be thus concerned. We live at a time when it appears to be rather an amusing hobby to make it appear that the nation is going downhill rapidly and that our problems and failures are far more numerous than our successes and achievements. I believe this to be not only untrue but psychologically dangerous. Nowhere is this less true than

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in the field of the care for mental sub-normality, where there has been a quite remarkable advance in effective treatment of this problem during the past ten years.
Of course, we know that mental sub-normality is a major problem. Indeed, it has been estimated that one in every 100 persons in this country is mentally subnormal. But things have changed for the better in almost every single aspect of this problem. Advances have been made in research, in the training of qualified teachers, in the training of mentally subnormal children to take their full part in public life, and, not least, indeed almost most important, in the attitude of the public and of parents towards this tragic mental condition. In the four years from 1959 to 1963 the number of subnormal children and adults receiving training increased by just over 45 per cent.; and that number has gone up steadily since then. Current expenditure by local authorities on their mental health services rose during those years from less than£4 million to over£9,750,000, an increase of over 100 per cent.
Of course, we know that this increase is not universal, and the noble Lord, Lord Grenfell, has quite rightly called our attention to the wide disparity in the handling of this problem by different authorities. I am one of those who would strongly underline his plea that the Government should make a survey as soon as possible to ensure that every local authority is helped to be raised to at least a minimum standard below which they ought to be ashamed to go: because, alas! as has been pointed out by the noble Lord, there are authorities that are not doing nearly enough in this respect. Nevertheless, the fact remains that there has been, on the whole, a major advance during the past decade.
First, as I said earlier, there has been a remarkable advance in research. When the Mental Health Research Fund was founded, a little over a decade ago, the total money spent on mental health research was probably not more than£50,000 per year: the current psychiatric budget of the Medical Research Council is over£500,000. But, even so, it is necessary to get things into proportion. One Polaris submarine would finance all the research that has ever been done in this country or is likely to be done over
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the next decade. Nevertheless, despite the comparatively small amount of money raised for mental research, compared, shall I say, with the equally vitally important area of cancer research (none of us would want to see that lessened but all of us would want to see the other raised), there have been some remarkable successes, and diagnosis at birth of children suffering from certain serious diseases has led to complete cure. Even in the tragic field of Mongol children, through right diagnosis, the story has been one of partial success. It should not be forgotten that these advances alone would justify the amount of money spent in this all-important field of research into mental subnormality, and it should challenge the country to set aside a still higher proportion of its budget for this vitally important work.
Secondly, there has been considerable advance in the training of staff. The National Association for Mental Health has made an immense contribution to the pioneering training of teachers of the mentally subnormal. It is estimated that there are about seventeen courses for psychiatric social workers. There are possibilities of new types of courses in colleges of advanced technology; and I am led to understand that some of the new universities are interested in planning courses for psychiatric social workers. All of this, of course, is only the beginning of the beginning, but there are large numbers of people employed in teaching the mentally handicapped who have not had the opportunity to take a formal training. No praise can be too high for these people. I am very glad that the noble Baroness, Lady Hylton-Foster, who made her admirable maiden speech to-day, drew our attention to the important work that continues to be done by voluntary workers in this as in so many other fields.
Thirdly, there has been a marked advance in the adaptation of these mentally sub-normal children to the public life of the country. Ten years ago a high proportion of these mentally subnormal children were allowed to languish for long periods of time, and sometimes for life, in a hospital. To-day this situation is changing, and quite a high percentage, as we have heard from a recent speaker, are now being trained to take their part in industry. And even though in some

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cases little can be done to raise them above a low standard of educational ability, a great deal can be done in what is known as "socialization"—helping them to learn the rules of society so that when they emerge from their home or their training institution or hospital they are not considered odd, nor are they allowed to regard themselves as odd, for they have learned the rules and are able to comport themselves in such a way that they are no longer gazed at or treated as strange objects of wonder.
This advance in adaptation to public life must, of course, be accompanied by an equal adaptation by the public and by the parents of these mentally subnormal children. In this field a great deal of education still remains to be done, and if this debate has no other effect—and it will have many—one hopes that it will have an effect in this respect. For the public must be helped to adjust themselves to these children, or to adults with children's minds, so that the public no longer regard them as patients, treating them as diseased people, but learn the difficult art of coming alongside them, helping them to feel wanted, and to feel that they have a part to play in the public life of the nation. And of course this is particularly true of parents. We have all known parents who have been so shocked, bewildered, and even infuriated, by the arrival of a subnormal child that they have in some cases, disowned it, with tragic results (I heard only last week of a child who had died of a broken heart because its mother had disowned it at birth), or known parents who, quite a long time afterwards, are ashamed of their child. This attitude is, of course, tragic and disastrous.
At the other end of the scale there are parents who are sentimental and possessive, cosseting their mentally subnormal child and refusing to allow it to be trained and adapted to normal life. In my own city of Coventry, as in many, if not most, other areas of local authority, a child can be taken over for training almost at birth. Schools have been set up to deal with infants, juniors and seniors, so that they can pass in training from one school to another. Hospitals are also available for those who are unable at that moment to go to schools of training. It is an interesting fact that
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to-day in hospital only about 10 per cent of patients are certified: all the rest are voluntary patients. Here again, throughout the country one sees a quite remarkable success story (and I should not like it to be felt that there has not been success), for a high percentage, after five or six years of hard work by the staff, are helped to adjust themselves to life.
I want to say a further word about the part the ordinary citizen can play in helping the subnormal child to be readjusted to normal life. In an age of increasing specialisation, it is sometimes thought that only the expert (with a capital "E") can help to bring a solution to a problem, but in this particular sphere a good neighbour has an important part to play. It is possible that, in the automated world towards which we are moving, people may well have more time to learn the difficult art of being good neighbours. Of course, I hasten to add that the good neighbour and the mere enthusiast will never take the place of the skilled, trained, social worker. Nevertheless, it remains a fact that the neighbour who cares, and who has a little time to spare for a subnormal child, who interests that child in some hobby and takes time to ensure that the hobby is learnt through patient and unhurried example, repeating a few things again and again, until "the penny drops" is worth his or her weight in gold.
This good neighbourliness, which was a marked feature of the village—or, indeed, let us face it, of the old slum world which, thank God! is now disappearing—needs to be developed in the new tower blocks of flats and in the new affluent suburban life which is the background of so many people's lives to-day. At the moment, this good neighbourliness is normally to be found only among the more unusually responsible, religious or talented groups. Yet it needs to be inculcated from the earliest days among normal schoolchildren, so that they emerge from school with a sense of responsibility, shorn of all sentimentality, for those less well adjusted than themselves. This development of the good neighbour will not diminish the professional social worker's load; nor will it make the slightest difference to the present tragic shortage of trained

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teachers. But it can, as has been pointed out, make possible
"the step within community care, from care in the community, to care by the community."
I would say a further word about the parents' part in the rehabilitation of mentally maladjusted children. It happens all too often, as I have already pointed out, that the mother and the mentally subnormal child are for the time being, at any rate after birth, incompatible, each upsetting the other, so that a vicious circle is set up. At that point it is advisable that parents should allow their children to be brought to a hospital, allowing the child time to settle down to the new life without too much parental visiting. Often this has a quite dramatic effect, with immediate improvement in things like toilet habits, excessive food fadism and restlessness. But once the child has settled down in hospital it is important that parents should begin once again to visit their child, otherwise the gap between child and parent will have become so wide that it will be very difficult to bridge.
To this end bodies like the Nuffield Provincial Hospitals Trust has built a parents' hostel attached to at least one hospital, consisting of flatlets in which the children can live with their parents for a few days, or even a week or two, during which time they are slowly introduced to, and absorbed into, hospital life. The mother can have periods of well-earned rest, mingled with visits to the hospital with increasing frequency. Thereafter, the hospital becomes a sort of family centre, where not only mothers are welcomed, but brothers and sisters, and even fathers. Furthermore, in this curative process brought about by the right relationship between the handicapped child and its family there is a place for the less mentally handicapped patient to look after the more severely subnormal patient. In the process of so doing the less severely handicapped patients are themselves greatly helped to be adjusted to life. They become "big sisters" or "big brothers", and in many cases the mental health of the "big sisters" has improved even more than that of the children whom they are looking after.
In all these ways the handicapped child to-day is being no longer regarded as incurable, a person to be ashamed of,
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a dead loss to the community. On the contrary, the mentally handicapped child is being regarded increasingly as a potential citizen of value to the community who, by the right treatment of trained workers, untrained good neighbours and family, can begin to play his part as a responsible citizen in the world tomorrow.
I would add one last word, my Lords. This work should be undertaken, not merely to make the mentally maladjusted and handicapped child into a responsible citizen, so that he can pull his weight in the nation's life, important though that is, but also because a child is a person, of immortal value and significance, no longer to be tucked away out of sight (and, therefore, too often out of mind), but loved and cared for, developed and trained, just because that child, like every other child, is of value to God and of immortal value in itself.
4.18 p.m.
LORD SEGAL: My Lords, I hope that the right reverend Prelate will forgive me if I do not follow him in the excellent speech that he has just made. I should like to add my word of thanks to the noble Lord, Lord Grenfell, for having given us the opportunity of debating this most important subject. We know his own close interest in the welfare of the mentally handicapped and of the many years of devoted service he has given to this work, not only as treasurer of the National Society for Mentally Handicapped Children, but also for the Carshalton Group of Hospitals, which in itself is a highly specialised group, in many ways an example to the rest of the country. I should like to relate my remarks more particularly to the role of the voluntary bodies in the working of the Mental Health Act. Perhaps at this stage I may add my words of congratulation to the noble Baroness, Lady Hylton-Foster, on her excellent maiden speech, and particularly to congratulate her on having chosen this subject for her speech. She, too, referred particularly to the role of the voluntary bodies, and I think it is of help to survey their particular work more from the national angle.
As we all know, the whole approach to the problem of mental illness has changed radically during the last twenty years. The conception of the mentally sick

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person as someone quite apart, to be segregated from the rest of the community and condemned to virtual isolation behind locked doors, has now been entirely discarded, and the straitjacket and padded cell have almost taken their place with the thumbscrew and the rack as mediæval instruments of torture. Instead, mentally sick persons are now regarded as intimate members of our community, who need to be helped and healed and enabled to return to their homes at the earliest possible opportunity. They have assumed at last their rightful place in our sympathy and understanding. We have accepted their claim to be given sheltered work, to keep them fully occupied, both mentally and physically, and to be regarded as useful, self-respecting citizens.
Enormous advances have been made recently in the treatment of mental illness, especially by means of the new, valuable drugs, which can soothe their fears and allay their anxiety. Terms of opprobrium and contempt, such as "idiocy" and "lunacy" have now largely been eliminated and have given way to a new terminology which reflects no sense of shame on patients who are mentally ill. They are no longer incarcerated in asylums as outcasts from the community, but attend hospitals as out-patients, secure in the anchorage of their own families and their own homes. The asylums have now become almost completely out of date, as grim relics of the Victorian era. They stand condemned by the progress of medicine and the growth of human understanding. Perhaps even more striking is the community of interest which these patients find in helping one another. They are tending to be drawn away from introspection and self-pity towards a degree of extroversion and a realisation that they have become members of a wider community. All these new advances in the treatment of mental illness had to be given concrete form, and the Mental Health Act, 1959 repealed all our previous legal enactments and swept away most of our earlier misconceptions of these vast and urgent problems.
But if enormous advances have been registered in our treatment of the mentally sick, there is one aspect of mental illness which has lagged woefully behind.
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I refer to the treatment of our mentally handicapped children. To some extent this is inevitable. Where manifestations of mental handicap are apparent from birth or develop in early childhood, they cannot be expected to respond readily to treatment. That is where the factor of their prevention is so vastly important; and this leads us inevitably into the field of research. Grateful as we are for Government assistance in this direction, the hard fact remains that only 8 per cent. of the Medical Research Council's annual budget is directed towards research into mental disorders. There is no aspect of mental illness more agonising to a parent than the thought that so little is known about its causation and prevention, and I feel an enormous field is still open to us to make further advances in this direction.
On the other hand, one of the most heartening facts about our approach to this problem is the rapid growth of the many voluntary organisations now working in this field, and the great assistance that they are rendering to the Government, to the local authorities, and to the community at large. It is greatly to the credit of successive Governments that they have never ceased to pay their tributes on many occasions to the magnificent work done by these voluntary bodies. The latest tribute is to be found in the recent White Paper on The Development of Community Care (Command 3022), presented by the Minister of Health only last month, and one passage especially deserves quotation:
"Reference is made in the following paragraphs to the wide and varied contribution made by voluntary bodies of all kinds. These play an invaluable part, not only as pioneers of untried measures but as providers of essential services. The training of the mentally subnormal, the accommodation of the elderly, and the mentally or physically handicapped, the running of social clubs and centres for all these groups, and friendly visiting in the home, these are outstanding examples of the help that voluntary bodies can give and local authorities must, and do gladly, take account of that help in making their own plans."
Of many voluntary organisations, I should like to make special reference to the work of two with which I am particularly acquainted. Foremost is the National Association for Mental Health, a pioneer body which has grown out of the early organisations, founded when this type of voluntary work was in its infancy. Its

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activities now range over the whole vast field of mental health. It recruits among its members doctors, research students, social scientists, mental health social workers and teachers of the mentally handicapped. As has already been said, it organises training courses to qualify teachers for the special work of teaching the mentally subnormal. It administers residential homes for elderly persons who need mental care. It issues an excellent periodical Mental Health; and it organises a special advisory service which is staffed by trained social workers who advise all who are faced with the problems of mental illness. It is linked with 54 local associations, carrying on its work in all parts of the country, and maintains the closest contact with mental health organisations all over the world. Naturally enough, it is handicapped severely by lack of funds and of suitable premises to carry out its beneficent work.
Secondly, there is the National Society for Mentally Handicapped Children, with which I happen to be closely connected. This is a vast organisation whose membership consists almost entirely of the parents of mentally handicapped children. It is a model organisation of its kind and serves as a guiding example to the movements for the welfare of mentally handicapped children in other countries. I have been amazed at the sacrifice and the devotion which these dedicated parents bring to bear in trying to help the problems of other parents similarly affected. From very small beginnings this national society has, in the short space of barely ten years, grown into a huge organisation comprising over 360 branches and with a membership of well over 30,000. It has launched out into pioneer ventures of industrial training centres, holiday homes, training schools for teachers, advisory bureaux and many other activities. These are fields also dealt with by Government agencies, by local authorities, by the National Association for Mental Health and other bodies.
But there is an especial merit that this similar work should be carried out on the initiative of the parents of mentally handicapped children themselves. Through their own deep personal involvement, they bring to bear a special sympathy and understanding which is a vital element in the progress of this work. It is work which cannot be done in the same way by
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other agencies. For example, those parents whose children are away in hospital are constantly urging that more humane influences should be brought to bear, that children should be treated as individuals, helped to evolve their own personalities, encouraged to wear their own distinctive clothes and to take a pride in their personal appearance; helped to utilise their leisure time in a creative way, given a chance to broaden their education, and to develop their latent artistic and individual skills. These parents are anxious to de-institutionalise these hospitals and to humanise them in every conceivable direction.
There is just one question I should like to put to my noble friend the Minister who is to reply, and upon his sympathetic understanding of this question a very great deal depends. Why is it that the saddest parents I meet are nearly always those whose mentally handicapped children are in hospital? If only those 30,000 children to whom reference has already been made, or even if only some of them who are really not hospital cases at all, could be taken out of hospital and placed in a few more specially-run homes and hostels, given better individual care and education and a deeper understanding! As has already been said, no praise can be too high for the present hospital staffs who struggle bravely, often under the most appallingly antiquated conditions. But everything is loaded against them—the buildings, the huge obsolete wards, the shortages of staff, the enormous amount of work and the poorness of the pay. We are all fully mindful of the difficulties. I merely wish to point out the long, long road we still have to travel and the vast amount of work that still remains to be done.
And may I also say this? These parents face their problems with a cheerfulness and heroism that is an example to the rest of the community. They spare no sacrifice of time and money and energy to help one another. They emphasise the spiritual values in their own lives and in the lives of these children who so desperately need their help. We plead very much to-day, and very rightly so, for our old-age pensioners. But think of those elderly parents of pensionable age who have mentally handicapped children on their hands and who have worked so hard throughout their lives and sacrificed

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so much to help these children entrusted to their care. We, as a community, should pay our tribute to these parents who have done so much to help one another, and to ease the burden on our own consciences. Speaking for myself, I can only say that I have felt personally drawn rather less to the professional and scientific bodies than towards these parents' organisations, because I feel that they supply a real need in our community that no other organisation, governmental, local authority or professional, can ever hope to supply. They are especially deserving of our gratitude and our generosity.
Naturally enough, with all their rapid growth, despite their steadily increasing income, the demands being made upon them are now becoming greater than ever. I have been appalled to realise the devotion of their workers in cramped overcrowded premises almost bursting at the seams. There is a crying need to-day for some public-minded benefactor to endow in our midst a Mental Health Centre where these organisations can expand to meet the heavy demands now being made on their services from all sides. I know of no more urgent need in our community to-day, nor one more richly deserving of Government aid or public benefaction.
Think of the plight to-day of young parents who suddenly find their child is growing up under the severe handicap of mental retardation. To whom are they to turn? First to their own doctor. He may or may not be able to render help or advice. Quite often, with a shrug of the shoulders he says that nothing can be done. But these parents will go to almost frantic lengths to help their children. They turn to the local authorities, to the local branch secretary of the National Society for Mentally Handicapped Children. They come into contact with other parents who, in their turn, help and advise them in every possible way.
But I should like to see established in London a Mental Health Centre to which these parents could turn, to be helped at once with the fullest information and the best available advice. This centre would house our parents' organisations and other mental health bodies in a way that would allow them full scope for expan-
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sion and enable them to carry out every branch of their rapidly increasing activities. Not only in the field of treatment and research, but in the field of education much more can be done. New trends in education, new methods of instruction, the use of electronic aids, such as that of the recently introduced "talking typewriter", all these should be exploited and developed as fully and speedily as possible.
The urge from the parents pleading on behalf of their own children is powerful and insistent. They constitute something far better and finer than a mere pressure group. They are themselves deeply involved. By their own sacrifices and devotion they are an example to the whole of our community. They are determined to press on with their efforts until the last mentally handicapped child in our country has been given the opportunity of attaining its own birthright of human dignity, self-respect and creative achievement. To-day tuberculosis has become an almost forgotten disease. May I urge upon the Government to strengthen the work of these voluntary organisations and many others of a similar character, to assist them in every possible way, so that by their own unique contribution to these problems they can help to eradicate the scourge of some types of mental illness present in our midst.
4.38 p.m.
BARONESS ELLIOT OF HARWOOD: My Lords, I think we are all greatly indebted to the noble Lord, Lord Grenfell, for raising this matter in your Lordships' House to-day, and for giving so many people the opportunity of saying something about a subject which I think does not divide this House at all but is one in which we are all deeply interested. I would also add my word of congratulations to the noble Baroness, Lady Hylton-Foster, on her altogether admirable and charming contribution to this debate, and to the noble Lord who has just sat down, whose speech was most moving and whose appeal for help for those working in the voluntary organisations is one that I echo fully. I think we are deeply indebted to those people who for many years now have struggled to build up these really splendid groups of voluntary organisations working in this field.
I also speak, if I may (I have done so in your Lordships' House many times),

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as a member of a local authority charged with the duty—and a very responsible and difficult one it is—of administering the Mental Health Act 1959. The problem is a very large one. I do not think that anybody has quoted the figures this afternoon, but some of your Lordships' may know them—they are of a very formidable size. In 1964 there were approximately 587,297people who were mentally ill. Of those, 180,056 were in hospitals and 399,241 were in the community. These are very large and very disturbing figures, and they give some idea of the challenge given by the Mental Health Act—and a very great Act it is—to those who are struggling on local authority committees to try to administer it.
We are speaking particularly this afternoon of children and young people. Here also the figures are most distressing, though not of quite the size that I quoted just now. During 1964, 6,400 adolescents were admitted to hospitals for the mentally ill. There were only 157 beds, in only 7 special units, for the psychologically ill adolescents, and probably each adolescent would require something like six months' treatment in hospital. There were also only 370 beds for mentally ill children. This represents about 3 beds per million for the adolescent population, and only 8 beds per million for the child population.
In this circular which I have here, issued in 1964, the Ministry of Health urged that there should be at least 20 to 25 beds per million for the short-term treatment of children, and 25 beds per region for long-stay cases. This is approximately, in all, 1,500 beds, compared with the existing 370. Twenty to 25 beds per million for adolescents represents approximately 1,000 beds, as compared with the existing 157. However, the increase since 1964 has been of only 36 beds. In my opinion, this is a great challenge to the Minister of Health and to the Health Department. Of course, they are enormously hampered by a shortage of staff and training facilities and, as I think Lord Grenfell mentioned, by the low salaries paid to teachers who are instructing the mentally ill and those who are nursing the mentally sick. Therefore, whatever our political opinion, whatever our views, this is something which is a real challenge to the whole community; and we must work in every
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possible way we can, whether it is in local government or in the voluntary organisations, to see if we cannot really make a real step forward to meet these problems and these shortages of staff and accommodation.
The question of hostels has been raised. So far as I know, there are no hostels for mentally disturbed adolescents to live in while going to work outside. Of course, such hostels would need trained staff. But if we could get such hostels going, through either local authorities or voluntary organisations, I am sure that we should be doing something to help the young, who in my opinion should not be in hospital if they can be employed, even in a humble capacity, in the community. One noble Lord (I think it was the noble Lord, Lord Brain) has referred to the letter which Mr. Tudor Davies published in the Observer. I, too, was enormously impressed by the figures he gave. They stress strongly this problem which I have mentioned at the beginning of my speech.
The noble Lord, Lord Segal, raised a point about which I have always felt tremendously strongly; namely, the inadequate amount of money that we have for research into mental illness. Thirty-five per cent. of mental illness is either schizophrenic or manic-depressive. As has been said, new methods have been discovered in recent years for treating this kind of illness. And again far too little money is available for this purpose. The noble Lord, Lord Segal, gave the figure. But 8 per cent. of the Medical Research Council's budget is far less than has been spent in the past, certainly on the magnificent work that has been done on tuberculosis research, and also that which is being done to-day. I entirely agree with Lord Segal that we do not want to see any reduction in that work, or on the work that is done on cancer research. But if we calculate that one out of every nine girls aged six to-day will enter a mental hospital at some time in her life, and that one out of every fourteen boys aged six years to-day will probably do the same, it shows the absolutely desperate situation which lies behind this question of mental illness and research into it.
As Lord Segal has said, I am sure the research has helped the medical profession to cure tuberculosis and to create

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the position where sanatoria are now closed or used for other purposes. I should like to see as much power, as much money and as much desire put behind research into mental illness as was put behind tuberculosis research and is behind cancer research to-day. It is essential that we get public support for this, that we increase the great funds that are being raised for research into mental health, because I am sure that herein lies the best way to arrest the increase in the incidence of mental illness to-day.
I should like to pay my tribute, as did Lord Segal and others, to the National Association for Mental Health. They have done a perfectly marvellous job, both with the public and with the patient. More people to-day look on this illness like any other illness, and in the recent campaign which culminated in the Mental Health Week I think we had something of quite outstanding importance. It was supported by 32 voluntary organisations. It was a costly business for them, since they had no help from the Ministry except moral support. I should like to urge upon the Minister that he might realise that a campaign of this kind, doing something which is vital to him as well as to the voluntary societies, is something to which he might well give some financial support on future occasions. It must have benefited him and the local authorities and the medical profession as much as it did those who inaugurated it in order to explain to the public about mental health and what the National Association for Mental Health and its 32 supporting organisations means at this time. The B.B.C. and I.T.V. took part.
I should like to make one comment about the B.B.C. film which appeared on "Panorama". Looking at it and studying it, I found it to be unnecessarily depressing. In one of its shots of a mental hospital it showed a long, gloomy corridor, overcrowded wards and an atmosphere of Edwardian or even mid-Victorian institutional treatment. I am sure many of your Lordships know, as I do, mental hospitals of to-day which are not in the least like that. Even though some of their exteriors are of the Edwardian or Victorian age, inside they have been reconstructed; they are cheerful, they are
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gay, they have modem colouring and modern furniture. I was in one, The Dingleton Hospital, in my own county of Roxburghshire, only on Monday. I have also been many times to the Crichton Royal, in Dumfries.
There is nothing depressing about these places. There is nothing which gives you the feeling of people not being cared for. There are no locked doors. There are wonderfully beautiful gardens. People walk in and out. People who are not patients are welcome to come and visit in a hospital of that kind, just as people are welcomed and cared for if they are patients. I do not think that the "Panorama" programme which the B.B.C. put over in regard to a mental hospital (I have forgotten which hospital it was; it may not have been named, but, in any case, it was an old-fashioned hospital) was anything but a great mistake. It gave people the wrong impression. We want to give to people the impression that mental hospitals are up to date and modern, and are as anxious to be welcoming in their appearance as any other kind of hospital. The noble Lord, Lord Segal, made the same point, and it is absolutely true.
I should like to speak for a few moments about a voluntary organisation with which I am closely associated, the National Society for Autistic Children. This is a small organisation only five years old. It was formed as a result of the many developments which have taken place in the treatment of mental health and which are so very encouraging. Due to research, experiment and experience, it has been possible to break down the various types of mental illness which at one time were described generally as subnormality or as "ineducable". Research and work carried out both inside and outside hospitals have led to this break-down, so that there are now many new definitions available and this is most encouraging. It means that one can look at all these different types of mental illness and know that they can be cured.
The small society with which I am associated has been formed because so many doctors and people working with this type of child have discovered ways of teaching them and bringing them into a normal life. This Society has been

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in existence for only five years, and it is estimated that there are about 5,000 autistic children. This is a withdrawn, mental condition. In the past when children could not speak and when they showed signs of great mental disorder they were often designated as uneducable. This is now proved to be quite untrue because, with skilled teachers and with parental care and love, these children can be and are educated. Only the other day I had the privilege of opening a small new school in the Borough of Ealing devoted to the teaching and training of autistic children. I was enormously impressed with what is being done. Although it is a tiny unit it is a pioneering unit which will show to anybody who cares to see it what can be done for this type of child.
One very important matter in connection with the Mental Health Act 1959 is the great importance of the diagnosis of children who suffer from mental disorder. I am speaking of Scotland because in my local authority in Scotland I was chairman of the education committee and I have had something, although not as much as many noble Lords, to do with this question of educating or not educating mentally disturbed children. In Scotland the assessment of children is done by an educational psychologist in cooperation with the medical officer of health and also the director of education. I understand that in England the question of educational diagnosis by an educational psychologist is not compulsory. The diagnosis is done in the main by a medical officer, who may of course be a highly skilled mental specialist; on the other hand, he may not. There is a case for seeing whether it would not be better for the assessment of children of this kind to be done through an educational psychologist in the first instance with the assistance of a medical officer, rather than to leave it entirely to a medical officer. I am not suggesting for one moment that he may not be highly competent to do this, but he may not be since the educational standard and I.Q. of children is something which educational psychologists are trained to assess, and medical doctors are not necessarily trained in this way.
In Scotland the duty of the education authority is to provide special classes for any child who is educable, and the duty
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of the health authority to provide help to the severely handicapped who are perhaps non-educable. I think the same applies here in England. There is nothing like enough accommodation for either of these categories. A definition which defines specifically many categories of handicap should, I hope, in the long run, do away with a general label like "subnormality" which is sometimes put upon children and which depresses everybody, particularly the parents. The autistic child has in the past been labelled in that way, but through long study and by adopting different methods of teaching he can be brought a long way along the road to normal development. The classification of "uneducable" is hard to overcome, and the National Society for Autistic Children have spent many years doing some hard fighting, on the part of their professional workers and parents, to win the right of an educational trial for these children. I would suggest to the Minister that in this year of 1966 no mental condition should be called incurable. Therefore, it is vital to get the educational department to assess the child.
Just as there is a shortage of nurses and teachers, there is a shortage of educational psychologists, but I hope we shall encourage people to train for this vital profession. I do not know whether our system in Scotland works better through the education committee than it does in England through medical officers of health only, but I feel very strongly that the value of educational assessment as well as of medical assessment is of the greatest importance. On page 2 of the Mental Health Act, in Section 4, one finds the definition and classification of mental disorder. Then on page 103 of the Act there is, in the Second Schedule, a definition dealing with medical examination and classification of children who are unsuitable for education. The Second Schedule stresses very strongly the question of using the education authority. There seems to be a slight anomaly on this matter, and I wonder whether the Minister will look at this to see whether or not in England the importance of the education authority should not be stressed still further so as to give the education authority, rather than the medical officer of health, responsibility for the educational future of the child.

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Then there is the emphasis on community care in the 1959 Act which makes it more important to try to assimilate the child in its own environment and the home environment into the community. The most helpful way of dealing with the children in this way is by the care of the home and family and by special classes which in the circumstances are essential. This is where I entirely agree with noble Lords who have stressed the great disadvantage which can arise from children being sent into hospital and left there for too long. I believe—and I have seen some of this myself—that a disturbed child needs more, not less, love and care and companionship than a normal child. Indeed, the probability is that there will be other normal children in the family who are able to help in the rehabilitation process. This, possibly more than any other factor in the child's life, as the noble Lord, Lord Grenfell, has stressed—and he is perfectly right—is so important.
This remarkable Act of 1959 was the biggest challenge to local authorities in many years. It put responsibility in the community, as the right reverend Prelate the Bishop of Coventry said, and I am sure that is right. It is a very great responsibility. I think it is essential that we should have more professional help, and this must be a priority in the health services.
But I sometimes wonder whether we make full use of the professional help that is available. The modern mental hospital is open to all who are interested. In my county I have tried to link the child who comes into care under the Children's Service, with action from one of the psychiatrists or psychologists available through the local mental hospital—the Dingleton Hospital. In the Borders area the skilled professional doctors and social workers of Dingleton are willing to help with advice on community care, or to visit these cases in their own homes. This is something which I hope will develop all over the country; otherwise, the home care of mental patients will not be as good as it could be. Inevitably the families need help with the problems which they have to face. It is not only the patient who wants help; it is also the
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family. So the co-operation between the health and welfare services and the hospital in any given area could be of very great value.
If I may sum up, we need more trained professional help, more teachers of mentally-handicapped children and more special schools and classes; not to keep them segregated but to enable them to grow up, to join in with the normal schools when they have reached that stage and it is possible. We need more money for research. I should like to support the suggestion of the noble Lord, Lord Segal, that we might try to have some centre in London where research and co-operation between all the agencies could come together. We need, above all, the determination of all of us to break down the barriers that the words "mental illness" still erect between the patient and the community. We must carry into this battle for the children the faith and knowledge that every child can be helped, if not to perfect normal life at least to a place in the community. I hope this debate will have helped in that cause.
5.3 p.m.
THE LORD BISHOP OF WAKEFIELD: My Lords, it is with very considerable diffidence that I rise to speak on this very vital matter which has been raised by the noble Lord, Lord Grenfell, especially at this stage of the debate when practically all the great and important points have been so ably made. I can claim no special knowledge of the subject; nor have I had any special experience of the ways in which the problem of subnormality is being directly met. It is for me but one aspect, albeit a particularly poignant and challenging one, of the general concern which anyone in my position must have for the well-being in the fullest possible sense—spiritual, mental, moral and physical—of all children.
Behind anything that a Bishop says on this subject, or on such an issue as this, is the knowledge that he is representing the compassion which innumerable parish priests bring, and have brought, to individual cases in their parishes with which they inevitably come in contact. Also, as I see it at any rate, in a sense he represents the devotion and skill of all the hundreds of workers in this field

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whom he must regard as his lay colleagues in the pastoral care of handicapped children and handicapped people of all ages, be they professional and fully trained, or amateur, voluntary, partially-trained or not trained at all.
I shall never forget the impression made on me by a great statement which confronted visitors to the Church Pavilion at the Brussels International Exhibition in 1958, the year before the Act about which we are talking came into force. In four languages, it read:
"Every human being, educated or ignorant, rich or poor, of every nation and of every race is a creature of God and King of Creation. Every human being has an immortal soul, and is called to enjoy an eternal happiness. This is the true foundation of the dignity of man and the sole basis of an unalterable happiness."
It is in that kind of faith that one approaches this subject of the care and education of the subnormal person, however defective, however limited, he or she may be, and one knows just how far those terms can be stretched.
It is as Chairman of the Church of England Children's Council, a department of our Board of Education, that I am particularly concerned—and I am so very glad to be following the speech of the noble Baroness, Lady Elliot of Harwood, who speaks with so much authority on this whole subject of education—though I also have some concern as Warden of a Guild which has to do with the Church's ministry of healing. From the point of view of the Children's Council, the care and education of severely subnormal children is necessarily seen as one very special aspect of the education of all children for life in its fullest and deepest sense. It is this that we ask for children, however limited they may be. Our responsibility is only for children up to the age of 14, and therefore adolescents do not come within our responsibility to a great extent. I was so relieved to hear that at last, in the speech of the noble Baroness, something said about adolescents and their need.
Four years ago we appointed a research officer, the Reverend Anthony Denny. He had already been interested in handicapped children and adolescents, and this interest led him to do some research, which was most valuable from our point of view, into what is being done for the ESN and SSN children, and into
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experiments which are going on within both the Hospital Service and the Education Service. The report, which he edited two years ago, with the titled Number Unknown—and how often that fact of the unknown number has been referred to in your Lordships' House this afternoon—has aroused fairly wide interest, and his most recent book Children in Need is a very helpful and competent statement of the whole problem. What little understanding I have of the issue is very largely due to what he has taught me.
How recent it is that opinion has changed on this whole subject, from the attitude which thought that the severely subnormal child should just be put away in an asylum, to the attitude that such children can be helped to live some measure of normal life and even take some part in the life of the community! I suppose the ideal which the 1959 Act put before the country, that there should be a reorientation of the mental health services towards community care and away from hospital care, except where the special facilities of the hospital are needed, has done as much as anything else to bring about this change. But it has come to be recognised in only comparatively few circles in the country.
A look at what has happened since 1959, therefore, must call for a look at what local authorities are doing (as the noble Lord, Lord Grenfell, has so carefully pointed out) as they set themselves to translate this ideal into practice. I am afraid that I have not looked at what authorities other than those in my own West Riding have been doing—because, of course, as your Lordships will understand, a Yorkshireman does not normally think it necessary to look at what other counties are doing. He is quite happy to think that things are going on as well as they should in Yorkshire.
Be that as it may, my own authority was, in fact, spending£99,500 on this service in the financial year 1957–58; in 1965–66 it spent£516,000; and it has budgeted this year for£579,000. That is a very considerable advance; and, when you look into what this expenditure represents, you realise that it is a very considerable advance in many directions since the Act was passed. For instance. there are many more training centres now than there were—not enough,

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but more; and in these centres the whole conception of training is being widened so as to get away from the idea of just teaching patients suffering from the various kinds of subnormality to occupy their time in some sort of way—often, as we all know, with a deadening, repetitive sort of occupation—and in the direction of helping them make the most of whatever capacity can be discovered in them, so that they may live, and live with other people, instead of just existing.
Special care units have been mentioned. They are being experimented with, I am glad to see, for those who are too handicapped to fit into the routine of the junior and adult sections of the training centres, and these are proving an immense boon, especially to parents. I am also thankful to see that one sheltered workshop is to be built, which will provide places for 36 subnormal older people. There is only the one, but it means that perhaps there will be more to come. I only wish there were more special hostels for the younger people when they first go to work in the ordinary, workaday world. How important it is that they should be very carefully looked after in those early stages! It is clear that more is being done to secure that the staff in the various establishments are being more adequately trained. At present, about one-third of the staff hold the teaching diploma—one-third only. From what I can discover, a good deal of thought is being given to what should be the real content of the course leading to a diploma—and here, it seems to me, is where the great problem lies: in the recruitment and training of teaching staff.
When we consider the amount of research which has been undertaken at Brooklands (which the noble Lord, Lord Grenfell, will know so intimately), where Dr. Tizard and his staff have been applying normal methods of residential care and using up-to-date educational methods which would be used for normal children of a comparable mental age; when we realise the response of the children to this educationally; and, of course, when we take into account the trends in the thinking of many psychologists and educationists to-day, not only in this country but in many other countries, it seems to me that, whatever the physical
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conditions that may be provided, we must make absolutely sure that when we speak of "care" we do mean education.
Whether it is hospital care or community care, the aim must be to help the child to develop as a person to the fullest extent of which it is capable. Social training, speech training, occupational training—all contribute towards helping the child to live. Naturally, religious education is my special concern, but religious education is not adding a subject which has to be taught as an addition to a general curriculum: it is aiming to develop a person spiritually, mentally, physically and morally so as to live up to whatever capacity he or she has. This is in order that a person may respond—and this is how every person concerned with one of these children is trying to help—not only to what might be called the natural environment, but to the whole of life, the very substance of which, from the Christian point of view, is personal, because its origin and source is God.
Now the evidence to-day increasingly points to the conclusion that, although a child may be classified as incapable of reaching even the educationally subnormal standard, that no longer means that he is ineducable (this has been said several times this afternoon, and I want to underline it), given the best educational methods available. It is here, my Lords, that we come to the debate, which is quite clearly warming up at the present time, as to whether all such children should be transferred to the Department of Education and Science and taken out of the hands of the Ministry of Health. No doubt there would be advantages in this course. The teaching staffs in hospitals and training centres would not be cut off, as they are at the present time, from their colleagues and fellow educationists; their salaries would certainly be higher if they came under the Burnham scale (and they certainly ought to be higher: that has been said only too plainly this afternoon); training centres and similar establishments would be inspected, like any other school, to their great benefit; and the training of teachers for this highly specialised and exacting work would be upgraded, as it certainly should be.
But there would also be disadvantages, for there must always be a great deal of

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the kind of care which is fundamentally skilled nursing care. This care has been accepted as a major responsibility within the health services, and it might so easily become the Cinderella of the education services if the transfer were made. The Motion before the House does not explicitly call for this transfer, and I am fairly sure that this is not the moment to ask for it. Nevertheless, a review of the situation as it is now, seven years after the passing of the Act, makes me certain that, whatever happens, there needs to be a real understanding, not only within the services themselves but also by the public, that the problem of the care of these children is fundamentally an educational problem. For this reason, there ought to be as effective a co-operation as possible between the two services, and arrangements should be made to ensure that community care, as well as hospital care, is more and more understood in these terms. The most crucial point at which this has to be tackled is, of course, the training and the recruitment of staff. While all that the National Association for Mental Health has done, in developing the diploma, particularly needs to be appreciated, it is still not enough. What is called for is teacher-training of a specialised kind. And I cannot believe that this cannot be worked out.
While I cannot claim that this is yet the general opinion of the Church—for Church people, like most other members of the community, still have a long way to go in catching up with the real insights of those most personally involved in this subject—I can, I think, say that it is the view of those who have thought their way through the practical application of the Christian faith in relation to the severely subnormal child. I hope this debate to-day will help in the whole process of the reorientation of the ideas of the general public about this subject, as my brother, the Bishop of Coventry, has so splendidly stressed.
There is one last point. Again it has been made, and better made, by the noble Lord, Lord Segal. "Prevention is better than cure" is a truism which applies very much in this case. So often, so much more could be done if care and education could begin at the earliest stage of a child's life. If there were more understanding by the public of just how much can be achieved by way of education, not
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just by way of custodial care, how many more parents would have the courage to seek help when their child was in its infancy instead of waiting until the problem defeats them!
5.21 p.m.
LORD AUCKLAND: My Lords, just over seven years ago the Second Reading debate of the Mental Health Act, as it now is, took place in this House. I have been reading some of the proceedings and I find that I and a number of noble Lords who have taken part in this debate took part in that, too. I should like to add my thanks to my noble friend Lord Grenfell for having enabled us to discuss this very vital question to-day. I have the honour of serving on the house committee of one of the mental hospitals within the Carshalton Group, of whose hospital management committee my noble friend is chairman. I know from first hand that wonderful work he and his associates have done, particularly for that group of hospitals.
There are, it seems to me, two separate problems here: one is of the children up to the age of, say, 11; the other is that of those who have gone beyond that age and become adolescents. Only yesterday my wife and I attended one of the many jubilee half-century celebrations of the Royal College of Nursing which are taking place. This one was held at Horton Hospital in Epsom, one of the largest mental hospitals in that area. We spent several hours attending a forum, having a long tour of the hospital and ending up with a cheese-and-wine party which enabled us to have a most interesting discussion and also refreshment after a long tour.
I listened with great interest to the speech of my noble friend Lady Elliot of Harwood and, in particular, to her reference to the recent "Panorama" programme on mental health. I saw that programme and I saw, too, a programme on the other channel later in the week which I believe was called "A World of their Own", and which showed mental hospitals in both Canada and this country. I was very impressed by the contrast between these programmes. As my noble friend said, the "Panorama" programme tended to stress the depressing aspect of these hospitals. No doubt some hospitals of a depressing aspect

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still remain in this country; but from the limited experience I have had of visiting such places I believe that they are now in the minority and are becoming more so. The general attitude of the Independent Television Authority programme and the hospitals they chose to feature made a very much contrasting picture. It showed the great reforms which have taken place, particularly in making these places much more cheerful and colourful.
At Horton Hospital, which has a population of all ages (a great many geriatric patients and a number of adolescent and slightly older patients) one of the most vital features was the accent on bright colour: colourful carpets and curtains and well laid-out gardens. I believe this has a very important psychological effect on a large number of its patients. While I should be the last to decry the use of drugs, which obviously are of great help, particularly in the case of severely disturbed patients, I think this accent on brightness is of great importance.
I would add my congratulations to those already given to the noble Baroness, Lady Hylton-Foster, on her very brief, very lucid and very sincere maiden speech. Living in Surrey, as I do, I know of the very valuable and practical work which she has done in the hospital world, not only for the Red Cross but in other fields; and I know it is the wish of all of us to hear her more often; and particularly on these vital social problems which this House can discuss so valuably.
One of the most important results of the 1959 Act was the removal of the stigma attached to the lunatic asylums, as they were called in days of yore, and the ending of the locked doors and padded cells. As has already been said during this debate, it was not so many years ago that children who were mentally disturbed were neglected, kept away from other children, kept away from the world in general. It is very different to-day. I know of at least two or three schools in my own area where many of the pupils go to these mentally-handicapped children to read and play with them; and this is much appreciated.
I should like to ask the noble Lord, Lord Champion, one question; and I
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apologise for not giving him notice of it. I wonder whether he could tell the House what progress is being made in encouraging local authorities to appeal to schools in their areas in their turn to appeal to their children to help out by reading and playing with some of the children in these hospitals, particularly on an informal basis. I know a great deal of this goes on already; but I think the more this happens, the more work is taken off the hands of the already overburdened teachers of these children, who do such splendid work.
Some of your Lordships may have visited the Qantas Gallery in Piccadilly recently and seen the exhibition of paintings by mentally handicapped children. I have seldom been more moved by anything than I was by some of this work. Admittedly, much of it was hand-picked, but some of the children concerned were, I am told, very mentally disturbed. Yet much of the painting—I say this quite seriously—would have been well placed in some of our National Gallery exhibitions. Some of it was quite brilliant. One of the fascinating aspects of mental health is the way in which these patients have a tremendous aptitude for painting.
Again reverting to Horton Hospital, I saw there only yesterday the work of some patients of all ages who had been trained by a Czech-born charge nurse who had taught himself to paint. He served in the Czechoslovakian Air Force and settled in this country, and now devotes much of his free time to teaching many of the patients in this large hospital to paint. I am told that therapeutically the results have been absolutely staggering. Certainly results, particularly in respect of some of the more severely schizophrenic patients, have been very good indeed.
My Lords, one cannot speak too highly of the staffs of these hospitals, particularly those who look after very violently disturbed children. I have seen some of them and I know many of your Lordships have done likewise. My information is that if you try to transfer one of these nurses to another ward after they have looked after very mentally disturbed children, a great deal of trouble is caused, because the nurses become very devoted to their charges even though these children have literally to be nursed day and night.

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This has been a very valuable debate. Since 1959 we have seen a great deal of progress. Going into these hospitals one finds that locked doors are very much an exception to the rule. There is more association between the sexes and this works very well. I am told that it causes very little trouble. There has been a great deal of progress in the case of children. For example, if hydrocephalus is diagnosed at a very early age now, although not curable, it is possible for it to be treated pretty effectively. Alas! those of a more advanced age cannot be so treated. One can only hope that medical research in the years to come will make that possible too. As has been said, much more money is needed for this purpose. During the course of the forum at Horton which I attended yesterday the point was made that£900 million was spent each year on gambling. A lot of that money, I know, goes back to the Exchequer, but it is a sobering thought when one compares that amount with the money available for mental health research.
In conclusion, my Lords, I should like to ask the Government seriously to bear in mind that the progress which has been made since the 1959 Act, and before that, is due very largely to the devoted work put in by those in voluntary service, and of nurses and staffs of these hospitals. It is to be hoped that the Government will find a way of allocating more money to mental health research as soon as possible.
5.36 p.m.
LORD ST. JUST: My Lords, to be bottom of the list is probably a very good training in self-discipline. As the debate, which was particularly interesting this afternoon, went on one found that point after point one wished to raise was already being raised. I therefore ask your Lordships to forgive me if I cover points which have been raised already in the debate, except in respect of mental health research, about which I feel one must pummel away rather like a machine-gun, whichever Government may be in power.
The debate has drawn attention partly to the workings of the Mental Health Act. I believe that to be one of the greatest pieces of legislation ever to pass through Parliament. As we have heard to-day, it produced a completely new
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feeling in mental hospitals. The wards were unlocked. It produced generally a new outlook on the future of mental health and also—this is rather extraordinary—almost at the same time a great change came about in treatments. For instance, the old insulin treatment has departed completely and, according to what one hears from psychiatrists to-day, the analytical couch and the analyst are also on the way out.
To come for a moment to the question of children and adolescents, I think it is one of the big problems that if a breakdown occurs at an early age it is bound to be serious. If it is treated in the right way, which probably needs a great deal of patience and understanding, when a person is young, there is a very good chance that the child will be cured for life, but, alas!, if this does not happen, the child will probably become neurotic or need continually to go back to hospital for further treatment.
I do not myself know of child-caring hospitals in the National Health Service. I do, however, know of two places outside the National Health Service; I know them very well. One is a very remarkable place run by a man named Mr. Lywood. It is called Fincheden Manor in Kent. Some of your Lordships may have read a book called Mr. Lywood's Answer. He was a public schoolmaster, in fact a housemaster, and he was offered the headmastership of Repton. This was before the war. He turned down the offer on the assumption that the public school system of this country could not be judged on its successes, but on its failures.
He started the school, if one can call it a school, for maladjusted boys. It was so successful throughout the war that after the war he was approached by the London County Council and asked whether he would take the really bad maladjusted children from London. This he has been doing for some twelve years. They all seem to get on extremely well. I went down to see Mr. Lywood, and when travelling back in a car with a leading psychiatrist I asked his opinion of the Lywood theory. He said: "It is traditional. Quite how it works I do not know, but it is rather like your House—it works". I think that this covered the situation very well. Mr. Lywood is a man who has a strong appeal and has

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produced a system which with children of this type works very well.
To enlarge a little on the whole subject of mental health—my next point is one about which we have heard a little this afternoon—one of the great problems in our mental hospitals is the shortage of staff. I think this probably comes about through a certain amount of prejudice, and also because of the extra training that is necessary before a person is qualified as a fully trained psychiatric nurse. How this is to be overcome is a great problem. One of the ways which seem to be helping is the use of voluntary workers. An interesting experiment has been taking place at the Fulbourn Hospital near Cambridge. There they have had a considerable number of volunteers working within the hospital at certain times.
The interesting thing is that a person from an outside environment produces a totally different feeling in mental patients. They produce new ideas; they can talk about different things. Often when I have run into one of these volunteers who has worked in a hospital he has said: "This is quite extraordinary. Surely such-and-such a person cannot be ill. He appears to be absolutely normal. "This relates to the quite natural reaction of a patient to a person he does not know. The indent makes a supreme effort, and can probably hide his difficulties and problems while conversing with this person. But then, after the person has gone, he will revert to his problems once more. But this is a progressive system, and it helps enormously in the general welfare and rehabilitation of the patients.
There is one point I should like to ask about, and it is whether or not in these hospitals it would be possible for the voluntary workers to be paid out of public funds. As I think the noble Lord, Lord Champion, knows, I am really asking this because it is of some importance and the hospitals have found that they cannot leave it to the staff to get this organised. There are a lot of difficulties which come up in connection with the work of these volunteers, and it is necessary for a fully trained person to deal with them.
I wish to turn for a moment to the problem of occupational training and facilities for it. As I think we all know, this has now become one of the big
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factors to help patients recover. The actual occupational training is long and arduous, and there is no doubt that those people who provide it do great work. But often the accommodation they have to work in is appallingly bad. The other day I was going round a psychiatric clinic attached to one of the big teaching hospitals in London. One can tell this story, because both the patients concerned are now practically cured. There was a girl sitting there doing some knitting, and just behind a barricade was a gentleman hitting a piece of iron with a large hammer. Every time he hit this, naturally the girl jumped about a foot in the air. I said to one of the occupational therapists, "Surely something could be done about this." She said, "It is a problem, because we are so short of room. But the girl has been told that she has to face noise, and we cannot stop the gentleman who is hitting the iron because he has got to get rid of his repressions on the iron. "These are the kind of problems that have to be dealt with.
I now want to turn to the amount of money that is available for mental health research. This has already been mentioned by the right reverend Prelate, and we have had some figures given by the noble Baroness, Lady Elliot of Harwood, of the numbers of mental cases in this country. I think this has a great bearing on the situation. At present, so far as the Mental Health Organisation know, there are some 587,000 mentally disordered people in the country. The figures broken down, are: mentally ill in hospitals, about 130,000; mentally subnormal,57,000: in the community, mentally ill, 310,000; mentally subnormal, 89,000. This, of course, is a gigantic figure. But I feel that if the Government could be persuaded to provide some additional funds (I know it is not easy, because every day we sit in this House and hear demands made on the Government for more money for this and for that) this would greatly assist the whole of psychiatry, which I believe is on the verge of a breakthrough.
I do not know whether your Lordships know this, but for a long time there has been a feeling that the whole glandular system of the body has been very much tied in with any form of mental illness, even schizophrenia. An interesting thing

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was done not long ago at the Menninger Clinic in America. A mental health worker there, a chemist, got a line on the question of blood. They found out that a great many people who suffer from schizophrenia had a certain type of blood complaint. Some of this blood was injected into normally healthy people, who then suffered an attack of schizophrenia for a few hours. This shows that we are getting closer and closer to many of the answers to this enormous problem. As I have said, I feel that if the Government followed up my suggestion to allocate additional funds, I believe that in the long run it would pay them, because it would start to empty a lot of the beds in the National Health hospitals; and, after all, the percentage of beds taken up by mental patients is enormous at the present time.
I apologise to your Lordships if I have taken slightly longer than I meant to, but this is a subject that I have studied carefully over a good many years. It is a vast problem, but light on mental illness is filtering through, and the more the community can do to lessen the suffering of people who are mentally ill, the more will the hell on earth which patients suffer be lessened.
5.49 p.m.
LORD MACPHERSON OF DRUMOCHTER: My Lords, I apologise for joining your Lordships halfway through this debate, which concerns a subject that interests me deeply. The reason why I was late this afternoon was because I was taking my son to St. Andrew's, at Northampton. Unfortunately, he suffered a serious cycle accident which has resulted in his being unconscious for twelve months. From my own painful experience, I should like to draw your Lordships' attention to one serious shortage in our medical facilities. We have establishments which deal with young persons' physical disabilities, and we have hospitals—some exceptionally good—which deal with mental problems. But we appear to have almost no facilities for children and young persons who require physical and mental treatment simultaneously for their disabilities, which are due mainly to road accidents. I understand that there is a steady increase in the numbers of this type of patient. May I, as a concerned
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parent, urge Her Majesty's Government to look into this particular shortage of our facilities for children and young persons, and may I hope that in the not too distant future the necessary facilities will be available to patients requiring this dual treatment.
5.51 p.m.
LORD CHORLEY: My Lords, the last speaker has drawn attention to the wide scope of the problem we are discussing this afternoon, and I am sure that he has the sympathy of every Member of your Lordships' House. I should like to follow what he has said by drawing attention to another aspect of this matter, one that I think has not been touched upon this afternoon. Something has been said—and it was said particularly well, if I may say so, by the right reverend Prelate the Bishop of Wakefield—about the tremendous progress that has been made in connection with mental problems over the last few years. It is really this aspect which has brought me to my feet, because a number of my friends who are interested in these matters, and who are also musicians, have been much concerned over these last years with the problem of music as a method of therapy for mentally ill patients. So far as I can judge, there has been a quite remarkable breakthrough, or something in the nature of a breakthrough, which I think needs to be known much more widely and to be appreciated much more than it is.
Many years ago, a very close friend of mine, who had a distinguished career in music, gave it all up in order to run a home for mentally sick children on the basis of seeing what could be done to help them by musical means. So far as I can judge from meeting people who have had children in this place, the experiment has been a great success. This was a pioneer effort, at any rate in this country, but of quite recent years it has been recognised that it is a valuable method of therapy in connection with this mental problem. At more than one of the great mental establishments—certainly the one at Epsom, about which everybody knows—music is now part of the regular mental therapy; musical therapy is now recognised as a type of help which has considerable value. It has been found that many of these people, however abnormal they may be in ordinary mental

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ways, are exceptionally musically sensitive, and can provide executive musicianship of a very high order which may well enable them to take part in the general musical life of the country. I do not want to say any more about that subject, except that I hope the Ministry of Health will be able to pay attention to it.
I am really echoing something the right reverend Prelate said on the question of the pay of those who are taking part in the trying, difficult, and important work of educating and helping these mental cases. The right reverend Prelate pointed out that if they came under the education scheme they would get Burnham scales, which are better than those which now exist for them. As I understand it, some of the highly qualified musicians who are helping in this work are classed as occupational therapists, and most of the work is done on a part-time basis. I should be ashamed to tell your Lordships what miserable fees are paid to them. I hope that the noble Lord who is to reply, and the Minister of Health, will look into this matter, because to hear about it made me feel quite ashamed. It is only right that the workman should have the proper pay for his job, and I am sure that if those who are concerned with the arrangements in the National Health Service will look into this point they will feel that the present basis is not a fair or equitable way of handling this aspect of this important matter.
5.56 p.m.
LORD CHAMPION: My Lords, the debate to-day was opened by the noble Lord, Lord Grenfell, with a speech charged with compassion for those with mental illness, and with understanding for their parents. It is good that someone such as he ensures, by periodic prodding of Governments, no matter what their complexion, that we are always moving forward. Because of his exceptional knowledge, he prods us to move forward in the right direction. The whole House has rightly thanked him for putting this Motion down for consideration to-day.
The debate has been given distinction by the maiden speech of the noble Baroness, Lady Hylton-Foster. Until she came here, I knew of her only as the wife, and then the widow, of a dis-
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tinguished Parliamentarian whom I tremendously admired. To-day she has proved herself a Parliamentarian in her own right, in a speech full of knowledge of the problems we have been discussing. When I say that the House will be happy to hear her again, I can assure her that this is no empty formula—we really do mean it.
The speech that I have to make tonight is designed as something of a report to Parliament of the progress in this whole field, and will, I fear, be fairly lengthy. So if noble Lords decide to go out saying, "I will read it to-morrow" I shall not regard it as a discourtesy, so long as I am left with a quorum for this House, which happens to be three. The noble Lord, Lord Newton, in a speech full of knowledge, was kind enough not to use past speeches of my noble friends to berate me. I am grateful to him for that as I am for his continuing interest in this whole problem, to the solution of which he has made a useful contribution. I can assure the noble Lord that I will read his speech carefully to-morrow, as will the Department, and if I find that I have not replied in my speech to some of his points I will ensure that he has a reply by letter. This also applies to the other speeches made here to-day.
I listened with a lump in my throat to the touching speech of the noble Lord, Lord Macpherson of Drumochter. It was brief, but his personal experience moved us all, and I can assure him that his short speech will receive a special study, arising, as it does, from his personal experience. That applies also to one other noble Lord in the House to-day.
Perhaps it would be helpful to the House if I now gave a short outline of the main services provided for mentally ill or subnormal children and adolescents and their parents. I shall refer to some of them in detail later. Medical treatment and hospital and specialist services for people of any age who are suffering from any form of mental disorder are provided by general practitioners and hospitals as part of the National Health Service. Local health authorities also have a statutory duty to provide a wide range of services; since the earlier special legislation was repealed by the Mental Health Act 1959,

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these also have been provided entirely under the National Health Service Act. Health services for the mentally ill and subnormal are thus now fully integrated as part of the comprehensive National Health Service.
The services for which local health authorities are responsible include attention to the mental as well as the physical health of mothers and young children; early screening for handicapping conditions, such as phenylketonuria; advice to parents on the special problems of bringing up a subnormal child; training for children whose mental disability is so severe that they are unsuitable for education at school; training and occupation in adolescence and adult life for those who are not capable of open or sheltered employment; residential accommodation if they are unable to live with their own families, and skilled advice on the special social problems which are associated with these forms of illness and handicap. Many of these services are still at an early stage of development, and though much progress has been made in recent years, we are far from having a fully developed comprehensive mental health service in all areas. Local education authorities are responsible for the education of all children other than those whose mental disability makes them unsuitable for education at school. This includes responsibility for providing special education, where necessary, for children who are maladjusted or educationally subnormal.
Before describing these services in more detail, I should like to deal with some of the points raised by the noble Lord, Lord Grenfell and I am extremely grateful to him for having advised me of some of the points he was going to make in this debate. He mentioned the need for diagnostic and counselling centres to which general practitioners could refer children showing symptoms of backwardness, and in particular the need to identify as early as possible deafness in children where this may be responsible for the symptoms. This is, I know, a subject which the noble Lord has very much at heart, and he is right about it.
It is right that we should ensure too, that in the early examination of children we look for other things as well. I think of my own experience of a niece of mine who was very backward in school. We could not understand why. Eventually
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it was found that her eyesight was so bad that she could not see the blackboard. When this was remedied she went on to pass the usual examinations, went to a university and ended up with a Bachelor of Arts degree. Had her defective eyesight not been discovered she probably would have been regarded for years and years as a mentally retarded child, to some extent, so that I most heartily support the noble Lord on this point about identifying defects, both physical and mental, as early as possible in life, so that some remedial treatment may be given.
The necessity for this has been stressed repeatedly by circulars issued by the Ministry of Health in recent years. In particular, a circular issued last December referred to the value of out-patient clinics held in general hospitals by specialists in subnormality, the importance of investigating sensory defects and other neurological abnormalities, and of assessing the emotional and social problems which are frequently associated with subnormality.
From the time when subnormality is first diagnosed in a child, and continuing through the often lengthy process of assessment of its nature and degree, the child's parents ought to have an adequate service of advice—what is now becoming known as "a counselling service". I was grateful to the noble Lord, Lord Newton, for having especially stressed the need for this. The statutory and administrative framework within which this service should be provided is already in existence. The health and welfare departments of local authorties, and, where appropriate, their education departments, and the hospitals and general practitioners can and should contribute. But I would be the first to admit that this service is not yet fully developed in most parts of the country, and that we still have a long way to go before the parents of every subnormal child receive all the help and support which they should have. This also was stressed in the memorandum issued last December, and I hope that we shall see a great improvement in the aspect of our services for all types of handicapped children and their families. This is an aspect of the service in which the national and local societies for mentally handicapped children naturally take a

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great interest and in which they can play a most valuable part, both by forming a group through whom the views of parents can be made known to the responsible public authorities and through the support which parents gain from contact with each other. This, too, has been rightly stressed to-day.
To return to the early diagnosis of deafness, this matter is, as I have indicated, one in which the Ministries of Health and Education are deeply interested; and, of course, they issued a Memorandum on it which I am sure will be known to the noble Lord, Lord Grenfell. This recommended that every infant should have a hearing test at between nine and twelve months, though it was recognised that it would not be practicable to do this immediately for all children. It added that all infants with a family history of deafness, those with congenital abnormalities or other handicaps, and all retarded children should be considered to be at special risk because of the danger that impaired hearing might otherwise remain unsuspected and untreated for several years, or even lead to a mistaken diagnosis of mental subnormality.
We do not know how many children are screened early for deafness but the number is probably very large. Practically all local health authorities screen all children on their "at risk" register and, in addition, as many other children as they can. If a child fails the screening test, it is followed up and, if necessary, referred through the general practitioner to the appropriate hospital specialist to find the cause of the failure. The Ministry of Health are encouraging authorities to maintain "at risk" registers and to provide facilities for appropriate screening tests, including tests for phenylketonuria and congenital dislocation of the hip, and vision and hearing tests. More and more local health authority medical officers are taking an interest in development diagnosis which should help to pinpoint the children who are not developing normally at an early age.
The noble Lord referred also to the need for special care units, possibly under joint hospital and local authority administration. Special care units run by local authorities can make a considerable
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contribution to the care of children with severe physical and mental handicap, and many local authorities have established such units. But it is important that the resources of the health services as a whole should be properly deployed in caring for these children, many of whom may benefit from the specialist services which are provided by the hospitals. The provision of day hospitals for multiply-handicapped children or adults who need specialist treatment or constant nursing care but who can be managed in their homes at night, was commended to hospital authorities in the circular issued last December to which I have already referred; we hope they will eventually become a feature of the services for the subnormal in all areas.
The noble Lord, Lord Grenfell, also referred to the use of hospital grounds for facilities of this type. The difficulty here is that many hospitals for the subnormal which may have land available are far removed from centres of population and would not therefore he well suited to this purpose. But where a site is conveniently placed and not needed for other purposes, the Minister of Health is always willing to consider proposals, for its use, either for a day hospital or for a unit run by the local health authority.
The noble Lord and the right reverend Prelate the Bishop of Coventry referred to variation in the quality of the arrangements made by local authorities for the training of severely subnormal children and suggested that the Government should consider laying down minimum provisions. I would say that the variation to which I have just referred applies over the whole field. The variation as between one local authority service and another, I think, is something that we have to try to get over as early as possible and to ensure that the worst is brought up to the level of the best. This is really what it amounts to. Where the provision of the service is below an adequate level, it must be the job 'of the Minister of Health to continue to prod, to stimulate and to ensure that we work up to an acceptable standard of service to be provided everywhere.
I must admit I am always a bit worried about this fact. We give to local authorities jobs; inevitably if we

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are going to have local authorities they must have responsibilities within their own areas. And yet one finds in so many of these services for which they are responsible this wide variety, which really is a disgrace to this civilisation of ours. I hope that my words will come to the notice of some of the backward authorities, whom of course I will not here name to-day.
Reverting to the training point I was speaking about, I can assure the noble Lord, Lord Grenfell, that even though no formal guidance has been issued—and indeed it might be inappropriate or even harmful to attempt to prescribe standards in a service which is developing so fast, with new methods and techniques professional officers of the Ministry visit local authority training centres and hospital schools to give guidance on these subjects. They also encourage the local health authority and hospital officers to use the resources which can be made available by local education departments.
The noble Lord, Lord Grenfell, also suggested that in order to keep young children out of hospital, consideration should be given to making payments to parents who are willing to keep their children at home. I can assure the noble Lord that we fully appreciate the problems faced by parents who have at home a child who is severely mentally handicapped, and indeed parents who have at home a child suffering from a severe physical handicap—mental or physical or both. A great burden is placed on the parents. Some Members of this House may have seen the film called Stress which was made recently by the Mental Health Film Council in collaboration with many voluntary societies concerned with the mentally or physically handicapped and which shows in a vivid and very illuminating way the strains which this imposes on the parents and on the whole family, in many cases fundamentally affecting their whole social life when they devote themselves to the care of a severely handicapped child. I can assure the House that this is not the film to which the noble Baroness, Lady Elliot of Harwood, referred, and if we ever get a chance in this House to see this film I am sure we all ought to see it. The love and individual care which is given by the parents of an afflicted child is of the
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greatest possible value in ensuring that such a child is able to develop to the maximum of his potential, whatever that potential may be—provided of course that use is also made of any available services for expert treatment or training.
As the noble Lord appreciates, there are no powers under the National Health Service Acts for the payment of financial subsidies. The National Health Service provides services of many kinds, through local authorities, hospitals and family doctors, but not financial subsidies. Cash benefits are paid to adults through the National Insurance and Assistance schemes, and in most cases the severely mentally handicapped become eligible for National Assistance from the age of 16 onwards—that is, he or she can apply in their own right or application can be made on their behalf. But cash payments are not made to parents in respect of their children unless the parent is receiving benefit, and benefits are not payable if the father is at work. Family allowances are payable in respect of subnormal children, of course, in the same way as for other children, but not at a special rate, and the noble Lord is clearly envisaging that the parents of subnormal children should receive financial assistance greater than that which parents normally receive through the Family Allowance Scheme.
Local health authorities are able to provide various forms of assistance to the parents of severely handicapped children at home. When such a child is very young, his care is not very different from that of any very young child, but his development will be slower and may be very much slower; indeed, in some cases he may need for many years or even permanently the sort of physical attention which is normally only needed by very young children. Local health authorities can offer relief to parents by the provision of home helps, laundry services and special aids where the child has a physical handicap, for example, if the child is also spastic. Local health authorities and local voluntary societies can also help such parents greatly by arrangements for sitters-in to take the burden off the family from time to time. There is great scope for the development of voluntary service, on an organised basis.
I particularly welcome the speech of the noble Baroness, Lady Hylton-Foster, which had particular application to this

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aspect of it, as did the speech of my noble friend Lord Segal. But whether it would be right to make cash payments to parents in the circumstances outlined by the noble Lord, Lord Grenfell, is a much more difficult question. It raises fundamental issues of the responsibility of parents for the costs of bringing up their own children. In some ways, the upbringing of severely handicapped children involves the parents in special costs. There are other expenses which the parents of normal children face but which will not occur with these children. And who can say what are the normal expenses of bringing up a child? All children have their own individual needs and interests, and the expenses which go with them fall to the parents to meet, except in so far as they are relieved by the provision of public services. In our view, it is to the development of these services that we should look for helping the parents of these children, rather than contemplating financial assistance. I hope the noble Lord will not find that disappointing. Clearly, he has given a great deal of thought to it; and so, of course, has the Minister of Health, and this is the conclusion to which he has come. I am sorry I have to give the noble Lord what would appear to him, I am sure, to be a disappointing reply.
I will now comment in more detail on some of the services for subnormal children and adolescents. First, services for children. These have been growing in quantity and changing in character in recent years. Attitudes to the needs of mentally handicapped children and how to meet them have altered radically. They should and will undoubtedly continue to do so. First there are the children who are classified as educationally subnormal, whose education is the responsibility of the local education authorities. The great majority of them are quite properly placed in ordinary schools, with special attention, or in special classes. Only the more seriously handicapped are admitted to special schools for the educationally subnormal. The number in special schools rose from just over 36,000 in January, 1962, to 42,500 in January, 1965, in England and Wales.
The training of children who are too severely handicapped to be suitable for education at school is the responsibility
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of the local health authorities or of the hospitals, according to the nature and character of their handicap. There are, of course, fewer children with this severe degree of handicap than the children I have already mentioned who are educationally subnormal. The greater the divergence from the normal standard of intelligence—either above average or, in the case of the children we are discussing, below the average—the smaller the numbers become. There are at present about 29,000 mentally handicapped children under the age of 16 who are receiving care from local health authorities of in hospital in England and Wales. Those include children of all ages from birth to age 16, whereas the figures I have quoted for educationally subnormal children refer only to those of school age who are regarded as in need of education in a special school. I should emphasise that the care of the severely handicapped children is the responsibility of local health authorities from the time when the subnormality is first apparent, which in some cases is from birth. This must be borne in mind when comparing the total number of children receiving care with those attending training centres.
The great majority of these children are living at home and are under the care of the local health authorities who are responsible for all the services they need, including training. These authorities are, of course, responsible for services for all young children from birth, and it is often through their normal child welfare services that the special needs of subnormal children first come to their attention. Here I should like to emphasise what may seem like a very obvious point, which is that subnormal children are children. They need the same sort of stimulus and sensory training as children obtain from play, exploration and affectionate care, and they and their parents also need special help because of their subnormality. Subnormal children develop more slowly than normal children, but, as with all children, it is important for their emotional, physical and social development that they should have close and satisfactory human relationships, including contacts with other children. This was the point to which the noble Lord, Lord Auckland, referred, and I think the suggestion he has made on this particular

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point deserves careful study by the Minister, and it will be brought to his attention. The right reverend Prelate, the Bishop of Coventry, was, I think, right also to emphasise this aspect of the child's growing up.
One aspect of the care of the mentally handicapped in which ideas are developing in the light of pioneer work in particular localities is the need for services for children of pre-school age. In some places nurseries are being run for handicapped children in this age group, and in other areas authorities accept some young, subnormal children into some of their day nurseries and nursery schools, together with normal children. Where this can be done, I think it ought to be done. Early and expert assessment is, of course, fundamental to the provision of proper services for these children. Assessment may involve the bringing together of many forms of expertise, particularly where physical as well as mental handicap is present or suspected. In some cases temporary admission to a hospital may be needed for a full assessment to be carried out, but in other cases this can be done while the child lives at home.
As I have already said, the importance of adequate facilities for assessment and co-operation between local authorities and hospitals for this purpose was one of the main points stressed in the Memorandum issued last year. But some of these children have disabilities of a nature or degree which require specialist treatment or constant nursing care in hospital. There are at present nearly 10,000 children in subnormality hospitals. Their teaching and training is normally carried out in units within the hospital which are called "schools" and which are generally supervised by staff holding the diploma of the Training Council for Teachers of the Mentally Handicapped.
The Memorandum from the Ministry of Health of which I spoke earlier stressed the need for suitable training for all the children, and reminded hospital authorities that the more intelligent children may require special educational provision from the local education authorities, with whom the hospital should be in close contact. The Memorandum also reminded the hospitals that children aged 5 or over with an I.Q. of more than 50 or 55 should be reviewed with a view to having them recognised
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by the local education authorities as suitable for education at the schools provided by them.
The noble Lord, Lord Grenfell, and the noble Lord, Lord Chorley, and others, referred to the salaries of those who are engaged in this particular work. The point is one of some substance, it is true. The fact of the present position is that the salaries of staff in local authority training centres are a matter for the National Joint Council for Local Authority Administrative, Professional and Technical Staff, and are not the responsibility of the Government. However, I understand—and I hope this brings a little hope to the noble Lord—that the salaries and grading structure for these staffs are at present under review by the Council.
This brings me to the training of children of school age who are regarded as too severely handicapped for education in schools for the educationally subnormal but who do not need to be in hospital. The number of children in the local health authorities' training centres in England and Wales rose from just over 8,500 in 1956 to over 18,500 in 1965. By 1976, local health authorities plan to have places for just under 28,000 children. This we must recognise as a very considerable advance.
The provision of more and better training centres for children has been the first priority in the local health authorities' mental health building programmes during the 1950s and early 1960s, though in the last few years the provision of training centres for adults has taken an increasing part of the increasing amount of capital investment available. Capital expenditure on training centres for children has risen from under£300,000 in 1956–57 to over £1,200,000 in 1965–66—a fourfold increase. This money has been spent not only in providing places for more than double the number of children but also in replacing old and unsatisfactory premises by new purpose-built premises. I would agree with those who have said that we have to get away from buildings which were, in so many cases, built in the last century and to use specially designed buildings with all the facilities, so as to bring the necessary cheerfulness—and this is important.
A welcome trend in recent years has been the provision of separate training

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centres for children and adults to replace joint accommodation. There is a long way yet to go before we shall be satisfied with the provision in every local authority area, but the progress made over the last eight or nine years is really very remarkable. I should add that the total planned capital expenditure on junior training centres for the ten years 1966–76 is over £9,500,000. I have mentioned the fact that this progress has been going on over the last eight or nine years, so that the present Government cannot claim the sole credit for it. The noble Lord, Lord Newton, had some part to play in this advance, and as this is not in any sense a Party debate I am glad to be able to pay tribute to those who preceded the present Minister and Parliamentary Secretary.
The training centres for children aim to encourage the emotional, intellectual, physical and social development of the children. Although their real ages range from 5 to 16, their mental level is comparable with that of normal children of 2 to 6 or 7 years of age, and their training must take this fully into account. In recent years the approach to this work has been from a viewpoint which can be described as educational in the broadest sense rather than occupational. What everybody must try to do, as the right reverend Prelate the Bishop of Wakefield said, is to enable them to develop as a person, to develop to the full the capacities which they have, and somehow to try to fit them into society as a person and not as a patient or as someone to be considered apart from the rest.
The educational methods used in nursery and primary schools are being adapted to the needs of the severely subnormal. Links between schools for the educationally subnormal and the junior training centres have also become very much stronger over the past few years. In some areas local authorities are experimenting with very close physical association between the training centre and an E.S.N. school on the same site, and in at least one case the training centre and the school are under the control of one headmaster. These experiments are being watched with great interest by the health and education Departments and by all concerned with the training of the severely subnormal.
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Perhaps I might say here how much I welcome the suggestion which was made by Lord Grenfell about decorations for nurses and those who are engaged in this work. It is not for me to criticise all the decorations which have been given over the years, but some have been awarded to people who give to the community not one-tenth or one-hundredth of the service which nurses and others in our hospitals give to the community as a whole.
SEVERAL NOBLE LORDS: Hear, hear!
LORD CHAMPION: Perhaps I have gone a little outside my brief, but I think that in this matter it is permissible. What I can say is that I sincerely hope that the Prime Minister, who, I gather, is looking into this whole business of the Honours List, will give special attention to the point Lord Grenfell has made.
This brings me now to the health and education services for subnormal adolescents. Here the basic problem is to help the individual over a very difficult period of transition, where he has to cope not only with the strains of growing up but also, very often, with a change of environment. The noble Lord, Lord Amulree, made some reference to this. We encourage local health authorities to make careful arrangements for the move from a junior training centre into an adult training centre. We also encourage them to continue with the provision of education where this is appropriate for those who have moved into adult training centres.
In the last few years there has been an improvement in provision for the training of subnormal adults no less marked than in that for the training of children. The handicapped adults for whom these training centres are provided are those who are temporarily or permanently incapable of remunerative employment either in open or in sheltered employment. Most of them will as children have attended one of the local health authorities' training centres for children, but others will have attended ordinary or special schools but have not developed to the stage where they are capable of supporting themselves in remunerative employment. The object of training centres for adults, as for children, is to provide forms of training and occupation which will facilitate

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the best possible setting and stimulus for the mentally handicapped to develop to their full potential.
In recent years a much more positive approach has been adopted, with increasing knowledge of the extent to which even the severely subnormal can progress towards useful and meaningful work in adult life, if they are given the right form of training from an early age. I am sure that the noble Lord, Lord Amulree, will be delighted to hear that. Some of the trainees, after a period of training, may be able to move on from an adult training centre to sheltered or open employment, and here they are helped by the Youth Employment Service and the disablement resettlement officers of the Ministry of Labour. Perhaps I should mention here that help could also be derived from the development of youth work for adolescents, whether they are in or out of hospital, along the lines of normal youth activities but adapted to their special needs. This is a field in which voluntary effort would usefully contribute.
The noble Lord, Lord Amulree, also mentioned rehabilitation through industrial therapy of the young mentally ill. This form of rehabilitation may, of course, take various forms, but most psychiatric hospitals have an industrial therapy unit where patients, including those suffering from schizophrenia, are encouraged to undertake, and persist in, some form of occupation which is meaningful and useful, and is directed towards increasing their capacity for independent living. Those patients who are well enough can go out to work daily while continuing to receive treatment in hospital; others may be advised to attend one of the Ministry of Labour's industrial rehabilitation units before seeking ordinary employment.
In addition to providing social support for the mentally handicapped, and arrangements for training and employment, it is also the responsibility of the local health authorities to ensure that they have a suitable home in which to live. In the great majority of cases their own family home is the best place, but circumstances sometimes arise in which a handicapped child needs to be provided with a substitute home. In other cases where a child remains at home and continues to live at home in early adult life,
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the time usually comes when parents and relatives are no longer able to provide a home.
In some cases local health authorities provide residential accommodation in hostels of their own, but, particularly for adults, it may be possible to find suitable lodgings and in some cases groups of the less severely handicapped live together in a house provided by the local health authority without resident staff, looking after themselves with the advice and support of visiting social workers. It is only since 1959 that local health authorities have been asked to provide residential accommodation, and at the end of 1964 it was being provided for only 860 subnormal children and 1,800 subnormal adults.
The local authorities' 10-year plans covering the years 1966–76 expect expenditure of over £4,000,000 on hostels for subnormal children, providing over 2,500 places, and over £14,500,000 on hostels for subnormal adults, providing over 8,500 places by 1976. The need for accommodation for adults is likely to be far greater than for children, and even the six fold increase envisaged in the present 10-year plan is almost certainly far below what will eventually be needed. The Ministry of Health will be discussing this with those local authorities who are not at present planning to provide hostels for adults, to see how their plans may be improved.
The noble Lord, Lord Amulree, made some points about old people's homes and geriatric provisions in various areas. I will not, because of the length of my speech, attempt to give him the information which happens to be at my disposal at the moment. But I will certainly communicate with him and tell him the reply which I have.
The noble Lord, Lord Grenfell, suggested a National Lottery. As one who likes an occasional flutter I should not be against this on any ground that it would upset my Nonconformist conscience or anything of that sort. But I am bound to tell him that a National Lottery for hospitals, which might be attractive as a way to raise money, would not increase the resources available to the country as a whole, or assist the Government to make a rational and equitable distribution of the resources

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available for public expenditure. The noble Lord, who listened to yesterday's debate on building programmes, must realise that what really matters in these days is the allocation of resources, and not so much the provision of the money, so far as matters of this kind are concerned. This the Government must always keep in mind.
I am sure we would all agree with the points made about research. The noble Baroness, Lady Elliot of Harwood, and the noble Lords, Lord Auckland, Lord St. Just and Lord Segal, all stressed the need for this. There has been a considerable increase in the money and resources devoted to this, but I think we would all agree that there is not enough yet. I will ensure that these points are brought to the notice of my right honourable friend, who, I am sure, is sympathetic.
We shall have to look very carefully at what the noble Baroness, Lady Elliot of Harwood, said about autistic children. If I told her all that is in my brief I should be adding another quarter of an hour to my speech, and I am afraid that some noble Lords are beginning to look anxiously at the clock, thinking of the football matches which will start at half-past seven. So I will not worry the House with this.
I will conclude by saying that I have attempted to give the House a survey of the main features of the present services for mentally ill or subnormal children and adolescents. I have said little about the services for adults, but I hope that I have said enough to make it clear that, while we are encouraged by the progress which has been made in recent years, we are in no way complacent and recognise that we must continue to strive to improve all aspects of the services both in quantity and in quality. I can assure your Lordships that we regard this as one of the highest priorities among the many calls for development within the National Health Service.
6.48 p.m.
LORD GRENFELL: My Lords, I am deeply grateful to noble Lords, noble Ladies and right reverend Prelates for speaking in this debate, and also to those who have given a sympathetic ear to our deliberations. I should particularly like to say how grateful I am to the noble Baroness, Lady Hylton-Foster, for choosing this subject for her maiden speech—and a very able one it was. We thank her greatly. I would say to the noble Lord, Lord Macpherson of Drumochter, how much I feel for him in his dilemma, and perhaps we could have a talk together about it at some time. I should also like to thank the noble Lord, Lord Champion, for his deeply sympathetic speech.
I feel that we have moved a step further and that this debate has been a useful one. I am encouraged in that way. I hope that the noble Lord. Lord Champion, will put forward our case urgently to the Minister, with all that we have said to-day. Especially, although I realise that it is not a matter solely for this Government, perhaps he would apply a little pressure in the right place about teachers' salaries, because I feel that this matter is very urgent indeed. What we have put forward today will not cost millions, but it will bring untold relief to many families whom I know from personal experience to be hard-pressed. I am grateful to all your Lordships and I feel that this has been a useful debate. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

SCOTTISH UNION AND NATIONAL INSURANCE COMPANY BILL [H.L.]
Returned from the Commons, agreed to.
House adjourned at ten minutes before seven o'clock.