Sitting of 25 May 1966

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  BRITISH RAILWAYS BILL
    BRITISH TRANSPORT DOCKS BILL
    As amended considered; to be read the Third time.
    LIVERPOOL CORPORATION BILL (By Order)
    Consideration, as amended, deferred till Wednesday, 15th June.
ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    European Economic Community
    Mr. Peter Millsasked the Minister of Agriculture, Fisheries and Food what arrangements he has made for consultations with the Ministers of Agriculture of the Common Market countries.
    The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): No special arrangements have been made.
    Mr. Mills: Is not this rather extraordinary, in view of the various methods which the Government are now seeking of going into Europe? Surely consultation should be started right now to facilitate our entry.
    Mr. Peart: I see no reason for this. I meet many Ministers from different countries, including the Common Market countries, from time to time, and I often have informal chats with them. No special arrangements have been made.
    Mr. Godber: Could not the Minister go a little further? Will he say whether
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    the attitude of the British Government is the same as it was before the election, namely, that he would expect others to adopt the British deficiency payment system if we join the Common Market rather than our adopting the Common Market system?
    Mr. Peart: I am sure that the right hon. Gentleman will know quite clearly what the attitude of the British Government is. It has been repeated so often by my right hon. Friend the Prime Minister. Above all, we have always said that we must bear in mind essential and vital British interests, including agriculture.

    Pig Industry
    Mr. Peter Millsasked the Minister of Agriculture, Fisheries and Food if he is aware of the fall in pig gilts from 119,000 to 71,000 and a 10 per cent. drop in all breeding stock; and if he will take steps to restore confidence in the pig industry.
    The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): As fewer marketings are forecast, the third successive 9d. increase since February was restored to the guaranteed price last week. This, together with the addition of 400,00 pigs to the "middle band" at the recent Price Review and the fact that more pigs will be required as the Plan progresses, should give this confidence.
    Mr. Mills: Surely the Joint Parliamentary Secretary must agree that this is a very serious drop in the number of pig gilts and that it will lead to a serious shortage of store pigs later on? Will he do something to restore confidence so that this muck or money cycle can be stopped.
    Mr. Mackie: The figures the hon. Gentleman gives in the question are earlier figures than those which we have. Gilts are rising slightly, although the total numbers are still down a little, which shows some growth of confidence. The hon. Gentleman must admit that the figure I mentioned of 2s. 3d. per eight-score pig, which is 18s. a pig, will help considerably.
    Mr. Buchanan-Smith: In view of the fall in the size of the breeding herd, which is a direct result of the stringent policy of the Government, can the Joint Parliamentary Secretary say whether home producers will be able to meet their share of the bacon sharing agreement?
    Mr. Mackie: Yes; I think that up to now they have met it. I see no reason why they should not continue to do so, providing that they produce the quality pigs for the job.

    Salmon (Disease)
    Mr. Onslowasked the Minister of Agriculture, Fisheries and Food what assistance his Department has offered to the Department of Agriculture and Fisheries of the Republic of Ireland in identifying the organism causing salmon disease in certain Irish rivers; and if he will make a statement.
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food what action he is taking to prevent the disease at present affecting salmon in Irish waters from spreading to United Kingdom rivers.
    Mr. Kimballasked the Minister of Agriculture, Fisheries and Food if he will make a statement about the fish disease now affecting Irish rivers; and what action he will take to safeguard all freshwater fish in the United Kingdom.
    The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): My Department and the Scottish Fisheries Department, with the help of the Public Health Laboratory Service and the Torry Laboratory of the Ministry of Technology, are carrying out experiments to isolate and identify the bacteria responsible for the disease.
    With regard to action to prevent the disease spreading to this country, I would refer the hon. Member to the reply given by my right hon. Friend on 4th May to the hon. Member for Gainsborough (Mr. Kimball) and the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport).
    Mr. Onslow: I thank the Joint Parliamentary Secretary for that reply. Does he agree that it is in the public interest
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    that the facts of this situation should be known as fully as possible? Will he undertake to publish as soon as he can a statement, for the information of fishermen and in the interests of the tourist trade between this country and Southern Ireland?
    Mr. Hoy: Yes, indeed. We realise how serious the position is, as do the Government of Southern Ireland. As soon as we have anything definite to say, I assure the hon. Gentleman that we shall make it known.
    Mr. Farr: In connection with the risk of infection spreading to this country, has the hon. Gentleman circularised angling and fishing clubs, which organise expeditions to the Republic at this time of the year, bearing in mind that infected tackle could well cause the disease to spread to this country?
    Mr. Hoy: We have made public the dangers which are involved in this. I am certain that no angler who goes to Southern Ireland will be unaware of the danger, nor of his responsibility for ensuring that it does not spread.
    Dame Joan Vickersasked the Minister of Agriculture, Fisheries and Food whether he will seek consultations with the Government of the Irish Republic with a view to ensuring that waders, gum boots, and fishing tackle used for the fishing of salmon in the Republic of Ireland are thoroughly cleaned in order to prevent the spreading of disease to Great Britain.
    Mr. Hoy: This is something which depends on the voluntary co-operation of anglers. I do not think it would be appropriate to raise it with the Irish authorities.
    Dame Joan Vickers: Is the hon. Gentleman aware that his reply is very disappointing? The disease can only be carried by equipment of the kind mentioned in my Question. If it is not disinfected and the disease is brought into this country, it will ruin our salmon industry. Will the hon. Gentleman look at this again?
    Mr. Hoy: We have not yet discovered what the disease is. When we find out, we shall be able to take action. I am certain that we have drawn the attention

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    of all anglers fishing in these rivers—as have the Irish Government—to the need to take precautions. Knowing anglers as I do, they will respond in order to see that it does not spread further into this country if it can possibly be prevented.
    Mr. G. Campbell: While trying to find out the cause of the disease, will the hon. Gentleman nevertheless take all the elementary precautions he can to prevent the disease spreading?
    Mr. Hoy: We have already done so. My right hon. Friend made this clear, in reply to an earlier Question, in a statement on the matter. I thought that the hon. Gentleman would have been aware of that.

    Beef Cow Subsidy
    Mr. Kitsonasked the Minister of Agriculture, Fisheries and Food what percentage of the national beef herd of suckler cows will receive the £6 10s. grant in full; and if he will make a statement.
    Mr. Ridleyasked the Minister of Agriculture, Fisheries and Food if he will now give all the conditions attached to the payment of the £6 10s. beef cow subsidy.
    Mr. John Mackie: About half the national beef herd gets hill cow subsidy and therefore will not get the new beef cow subsidy. All other herds will be eligible, and after stocking and milk tests have been applied, we estimate that about three-quarters of the cows will qualify for payment. Detailed arrangements for the new subsidy will be announced as soon as possible.
    Mr. Kitson: Does that mean that three-quarters of them will get the full payment? Is it not about time that we saw this scheme so that the agricultural industry knew where it stood in the matter?
    Mr. Mackie: It does mean that three-quarters of them will get the full payment. I think that the industry is perfectly aware that discussions are going on with all concerned. We will announce the details in due course.
    Mr. Ridley: Does not the hon. Gentleman realise that this scheme was announced in the Price Review as applying to all cows but that now these limits have
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    reduced it to three-quarters of the cows only? Will he expedite the publication of the scheme so that farmers may know where they stand?
    Mr. Mackie: Yes, Sir.
    Mr. Godber: Could the Parliamentary Secretary tell us a little more about this matter, particularly in the case of, say, a farm which has not only beef cattle but a flock of sheep as well? How are the arrangements in regard to the allocation of grazing as between the two to be fair to all the farmers concerned?
    Mr. Mackie: These are the sort of arrangements which we are discussing with the industry.
    Mr. Monro: Would the hon. Gentleman say whether cows of the dairy breeds now suckling beef calves will rate for the subsidy?
    Mr. Mackie: Subsidy will be given up to a certain stocking limit and up to a certain level of milk sales per cow.

    Selective Employment Tax
    Mr. Kitsonasked the Minister of Agriculture, Fisheries and Food what machinery he intends to introduce into his department to determine a fair method of recoupment of the selective payroll tax by agriculture, horticulture and forestry to ensure that the burden of this taxation to those industries is repaid in full; and if he will make a statement.
    Mr. Wolrige-Gordonasked the Minister of Agriculture, Fisheries and Food what will be the total cost of the Selective Employment Tax to agriculture; what remuneration the farmers will receive; and when they will receive it.
    Mr. Brewisasked the Minister of Agriculture, Fisheries and Food what will be the extra price per lamb necessary to recoup the Selective Employment Tax for a hill farmer employing a shepherd for 40 score of ewes.
    Mr. Danceasked the Minister of Agriculture, Fisheries and Food why farmers will have to wait until the 1967 Price Review before the effect of the Selective Employment Tax, payable in September, 1966, is offset.
    Mr. Peart: I would refer the hon. Members to my reply to my hon. Friend

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    the Member for Norfolk, North (Mr. Hazell) on 13th May stating that the Government had decided to repay the tax direct to individual farmers and growers, and that the industry would be consulted about the detailed arrangements for repayment. The cost of the tax to agriculture was given in my reply to the hon. Member for Oswestry (Mr. Biffen) on 9th May. Forestry is a matter for my right hon. Friend the Minister of Land and Natural Resources.
    Mr. Kitson: Is it not time that the position of forestry was cleared up? Is it not intolerable that it should be left in the present situation? Would the Minister say what the cost of this tax will be to the agricultural and horticultural industries in terms of interest rates?
    Mr. Peart: I have already said that I am not the Minister responsible for forestry, but if the hon. Gentleman will be a little patient, who knows, probably in an hour from now he may hear something. [HON. MEMBERS: "Ah."] I am not thinking about the Derby winner. The question of interest charges is a matter which will be taken into account in the Annual Price Review, but the hon. Gentleman should not be too worried about it.
    Mr. Wolrige-Gordon: Is the Minister aware that at present the agricultural industry is in the position of presenting the Government with an interest-free loan for a certain number of months at any rate, this being money which they will almost certainly have to get from the banks and on which they will have to pay considerably high rates of interest? Is not this extremely unfair?
    Mr. Peart: I have said that any costs incurred will be taken into account in the Annual Price Review. I am now working out the detailed arrangements for making repayments. I hope this will be done quickly. I think that this move has been welcomed by the industry.
    Mr. Bessell: Would the right hon. Gentleman say whether the terms which he has announced for agriculture apply equally to horticulture and whether horticultural and agricultural employers will benefit by the scheme which he has announced?
    Mr. Peart: Yes, Sir.
    Mr. Blaker: On a point of order. Is it not a fact that the right hon. Gentleman is answering my Question with a number of others? Is it not in accordance with your usual practice, Mr. Speaker, to——
    Mr. Speaker: Order. I was not aware that a Question in the name of the hon. Member was being answered by the Minister at the moment. To which Question is the hon. Member referring?
    Mr. Blaker: My Question, No. 13.
    Mr. Speaker: That is not on the list I have of the Questions which the Minister is taking together.
    Mr. Pearl: I said No. 32, not No. 13, Mr. Speaker.
    Mr. Noble: How does the Minister think that he will repay to the industry, through the Price Review, the interest rates which only some part of the industry will be paying? Is he not falling into the same mistake as was made in the White Paper originally?
    Mr. Pearl: Certainly not, and this has been accepted by the industry.
    Sir G. Nabarro: Don't you believe it.
    Mr. Peart: I believe that it has.
    Mr. Godberasked the Minister of Agriculture, Fisheries and Food what is his estimate of the cost to the agricultural industry of the Selective Employment Tax on the industries which provide agricultural requirements and services and on those which handle farm output; and whether all increased costs of this nature will rank for reimbursement at the Price Review.
    Mr. Pearl: No reliable estimate is possible but changes in farmers' costs will be taken into account at the Annual Review in the usual way.
    Mr. Godber: Does not the right hon. Gentleman accept that there must be substantial increases in farming costs as a result of the new tax and that in some quarters the increases have been put at as high as 10 per cent.? For that reason, should not agriculture be put in the first category of this tax so as to give it fair treatment?
    Mr. Pearl: The right hon. Gentleman keeps referring to putting it into the

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    first category. I have already dealt with that. The industry gets fair treatment under the present Government. We cannot give any precise estimate of the increase in costs. I have said—and this will be accepted by all sensible people in the industry—that we will take this into account in the Annual Review.
    Mr. Brewis: Can the right hon. Gentleman say whether the costs will be fully recouped in the Price Review, or covered partly by increased efficiency in the industry?
    Mr. Peart: I cannot announce decisions of an Annual Review which has not yet taken place.
    Mr. James Davidson: Would not the right hon. Gentleman agree that the massive support for agriculture of which he speaks is in fact massive support not for agriculture but for a cheap food policy?
    Mr. Peart: Certainly our support under existing legislation has provided for the consumer food cheaper than that of many other industrial countries and it has also given long-term security. I hope that the hon. Gentleman will bear that in mind when he considers not only Liberal but Opposition policy.
    Mr. Blakerasked the Minister of Agriculture, Fisheries and Food what steps he proposes to take to assist the horticulture industry, in view of the extra costs which will be imposed on it by the Selective Employment Tax.
    Mr. John Wellsasked the Minister of Agriculture, Fisheries and Food when he will give details of the development of horticultural policy foreshadowed in paragraph 17 of the White Paper on the Selective Employment Tax.
    Mr. Gowerasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the increased costs which will fall on the horticultural industry as a result of the Selective Employment Tax; and what steps he 14 ill take to mitigate the effects.
    Mr. Peart: I would refer the hon. Members to the Answers which I gave to the hon. Member for Holland with Boston (Mr. Body) on 11th May and to my hon. Friend the Member for Norfolk, North (Mr. Hazell) on 13th May.
    Mr. Blaker: While I welcome the Government's change of heart over the tax or, the horticultural industry—which is welcome so far as it goes—is the Minister aware that a great deal of needless anxiety was caused to the gowers by the Government's original announcement? Will he try to see that he and his colleagues think out their policies a bit better in future before announcements, rather than afterwards?
    Mr. Peart: That has nothing to do with the Question. I acted quickly and an announcement was made. We are anxious that our Horticultural Improvement Scheme should benefit the industry.
    Mr. Ridley: The Minister says that agriculture can recoup this tax, or the loans under it, through the Price Review. How does he propose that horticulture is to recoup the loan it is making to the Government?
    Mr. Peart: It is quite true that horticulture is not covered by the Annual Price Review, but I am consulting with the industry, and I want quick repayment.
    Mr. Astorasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the increased costs which will fall on the agricultural industry as a result of the Selective Employment Tax between its introduction and the time of the next Price Review; and what steps he proposes to take to mitigate the effects.
    Mr. Peart: The answer to the first part of the Question is that the tax payments will amount to between £11 million and £12 million. As to the second part, the tax will be refunded direct to farmers and growers.
    Mr. Astor: Does not the right hon. Gentleman agree that the farmer will be giving an interest-free loan to the Government and that the imposition of this additional tax contravenes the conditions upon which the Price Review was agreed? Will he give an assurance that the Price Review will be fully honoured and the farmers recouped?
    Mr. Peart: I have said previously that this will be taken into account.
    Mr. Godber: The Minister must be aware that the wording of the Question

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    talks of the increased costs which will fall upon the agricultural industry. Does he really tell us that there are no secondary effects which will arise from ancillary industries, whose costs will be increased and who will put up their charges as a result? Has he taken this into account?
    Mr. Peart: I did not say that, but anything which will affect the viability and profitability of the agricultural industry would be taken into account.
    Mr. Deanasked the Minister of Agriculture, Fisheries and Food what representations he has received from farmers and others about the effect on agriculture, horticulture, forestry and fishing of the Selective Employment Tax.
    Mr. Peart: On agriculture and horticulture I would refer the hon. Member to my reply to the hon. Member for Norfolk, North (Mr. Hazell) on 13th May. Forestry is a matter for my right hon. Friend the Minister of Land and Natural Resources. I have received no representations about the effect on fishing.
    Mr. Dean: While I recognise that these representations have resulted in a welcome change in policy, may I ask the Minister now to give a clear assurance that these wealth-producing industries can count on the Minister's support in their attempt to be classified with manufacturing industries, from the point of view of the Selective Employment Tax?
    Mr. Peart: As I have said, there is no question of running down the industry or of regarding it as something inferior. It is in a special category. As I asked earlier: do people who want to classify the industry as a manufacturing industry also want it to be rated in the same way as the manufacturing industries?
    Mr. More: Was it not said yesterday by the Prime Minister, in answer to a Written Question that forestry was to become the responsibility of the Ministry of Agriculture?
    Mr. Pearl: We must wait for the legislation to be completed.
    Mr. Godber: Is the Minister aware that he has twice put a ridiculous question this afternoon about comparability with manufacturing? If agriculture were rated, is he not aware that this would rank fully
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    for Price Review purposes and that the only relevance of it to this matter is that agriculture should have the same standing in receiving the premium return as manufacturers?
    Mr. Peart: The right hon. Gentleman knows full well that agriculture has a special role in the National Economic Plan regarding production and manpower. It would be absurd to give it a premium. In addition to this, agriculture has special and massive support, which I defend.
    Mr. Emrys Hughes: Would the Minister define "land owning" as a manufacturing industry?
    Mr. Peart: I do not think that I could.

    Interim Price Review
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food if he will hold an autumnal Price Review.
    Mr. Biffenasked the Minister of Agriculture, Fisheries and Food if he will hold an interim Price Review this autumn.
    Mr. Peart: No, Sir.
    Mr. Farr: While hon. Members, particularly those on this side of the House, welcome the changes in the Chancellor of the Exchequer's original proposals relating to the Selective Employment Tax, may I ask whether the Minister would not regard it as disgraceful that agriculture should, in the first place, be regarded as a service and, in the second place, even now, not be regarded as a manufacturing industry?
    Mr. Peart: That is another question. The hon. Gentleman should bear in mind that the industry is being helped considerably in a different way. If we were to consider it a manufacturing industry, would it be the policy of hon. Gentlemen opposite to treat it and rate it as such an industry?
    Mr. Biffen: While appreciating that the circumstances have altered since Question No. 21 was originally tabled, may I ask whether the right hon. Gentleman would agree that bank overdrafts for agriculture, according to the latest available figures, stand at well over £500 million? Will not the result of even the revised imposition of this tax mean that farming will have to carry a further £11 million for six months? Would the right hon.

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    Gentleman assure us that, even if this is not included in an interim Price Review, it will be borne in mind next April?
    Mr. Peart: Does not what the hon. Gentleman states show that the banks have confidence in the industry?

    Brambell Committee's Report
    Mr. Iremongerasked the Minister of Agriculture, Fisheries and Food if he will make a further statement on battery farming and the possibility of cruelty to animals involved; and what action he will take following the report of the Brambell Committee.
    Mr. Peart: I would refer the hon. Member to the reply I gave on 11th May.
    Mr. Iremonger: Is the right hon. Gentleman aware that people are getting very anxious about this delay and are feeling that the Minister does not have his heart in this? Could he not take advantage of Parliamentary time to take action with a little more expedition?
    Mr. Peart: It is not a question of whether or not one has one's heart in this matter. One must scientifically assess both the best possible approach and what effects it could have on the industry? I feel, therefore, that this is a matter which should not be rushed but that there should be a careful study. This is exactly what I am doing.
    Mr. Godber: Does the Minister recall that the leader of the House gave an indication that we would have a debate on this subject? Will the right hon. Gentleman help to secure that debate at the earliest possible moment in view of the real concern that exists about this matter?
    Mr. Peart: I would welcome a general debate on the Brambell Report. It would be interesting to know the views of all hon. Members on this subject. Those opinions may cut across party views.

    Brucellosis
    Sir A. V. Harveyasked the Minister of Agriculture, Fisheries and Food (1) what steps are being taken to make brucellosis notifiable;
    (2) what estimate he has made of the cost of eradicating brucellosis from cattle.
    Mr. Buchanan-Smithasked the Minister of Agriculture, Fisheries and
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    Food if he will introduce a pilot scheme for brucellosis eradication.
    Mr. Peart: It would not be useful or practicable to make brucellosis notifiable. The cost of eradicating this disease from cattle would depend on the method of approach, including the form and phasing of any scheme of eradication. I regret that I am not at present in a position to make a statement about a pilot scheme of eradication.
    Sir A. V. Harvey: Is the right hon. Gentleman aware that his inaction in this matter is causing distress to thousands of people in this country; that quite recently one doctor in Macclesfield was treating 28 patients suffering from Malta fever? Why is the right hon. Gentleman so dilatory in this matter? Why does he not get on with the job, see that something is done and help to allay the anxieties of thousands of people who are greatly distressed about it?
    Mr. Peart: I am aware that this is a serious problem, but it did not arise just because a Labour Government came to power.
    Mr. Buchanan-Smith: Is the Minister aware that a pilot scheme of eradication has already been carried out in Cheshire by Messrs. Bibby and Sons and that the preliminary results indicate that the costs of eradication are far less than those suggested by his Department so far?
    Mr. Peart: I cannot accept that. I am not yet in a position to announce anything relating to such a scheme.
    Mr. Kitson: As the Minister supported an eradication scheme two years ago, why will he not start one now? Is it not disgraceful that Northern Ireland should have nearly completed its eradication scheme while we have not yet even started one? Why should we be virtually the only country in Western Europe not to make this a notifiable disease?
    Mr. Peart: It is, as I have said, a pity that previous Administrations did not take this matter seriously. [Interruption.] I personally believe in some form of eradication, and I am still carefully looking into the matter.
    Sir A. V. Harvey: In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I will raise the

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    matter on the Adjournment at the earliest possible opportunity.

    Salmon Fishing (Greenland Waters)
    Mr. Onslowasked the Minister of Agriculture, Fisheries and Food what recent discussions have been held with the Danish Government concerning salmon fishing in Greenland waters; and if he will make a statement.
    Mr. Hoy: Discussions were held last February with Danish scientists, and a further international meeting is taking place this week, at which British and Danish scientists will be present. The objective is to work out arrangements for continuing research in Greenland waters.
    Mr. Onslow: Can the Minister tell the House what the Greenland catch was last year and how many of those fish in the catch were tagged as coming from British rivers? Will he assure the House that he takes this problem seriously?
    Mr. Hoy: This is a serious problem and that is why we are taking immediate action on it. The catch in 1965 was substantially less than that of 1964, for which we are grateful.
    Mr. Hector Hughes: Will the Minister say specifically what steps he is taking to protect the traditional rights of the Aberdeen fishing fleet?
    Mr. Hoy: Salmon proceed into many rivers and we have to try to protect them all. When we are carrying out that protection, we will not omit Aberdeen.

    Horticultural Improvement Scheme
    Mr. Ian Gilmourasked the Minister of Agriculture, Fisheries and Food if he will announce details of the extension of the Horticultural Improvement Scheme.
    Mr. Hoy: My right hon. Friends hope to lay a draft Scheme before Parliament very soon after the Whitsun Recess.
    Mr. Gilmour: Is the hon. Gentleman aware that the delay and uncertainty over this Scheme has already caused havoc in parts of the horticultural industry, including loss of crops? Will he see that his right hon. Friend in future refrains from making general propaganda
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    statements, until he has some idea of what he is going to carry out?
    Mr. Hoy: There is no havoc, but there is certainly some concern until the scheme is made. We have been discussing this with the Farmers' Union, and I am certain that the hon. Gentleman would not want us to carry out a scheme without going through that procedure.

    Live Animals (Export for Slaughter)
    Mr. Bessellasked the Minister of Agriculture, Fisheries and Food whether he will now introduce further legislation to protect live animals exported for the purposes of slaughter.
    Mr. John Mackie: No, Sir. I believe that the existing arrangements provide reasonable safeguards.
    Mr. Bessell: May I ask the hon. Gentleman if he is aware that there have been a number of reports recently of unnecessary cruelty? Will he undertake to look at this matter again?
    Mr. Mackie: Various cases of cruelty have been reported to us but upon investigation we have discovered that many of the allegations were unfounded.
    Mr. Peter Mills: Will the Minister bear in mind how important it is to safeguard these animals? Will he also bear in mind that the export of old cows, old ewes and old sows has been of tremendous importance to agriculture?
    Mr. Mackie: We do bear that very much in mind.

    Statutory Smallholdings (Committee's Report)
    Mr. Charles Morrisonasked the Minister of Agriculture, Fisheries and Food whether he intends to implement the recommendations of the first report of the Departmental Committee of Inquiry into Statutory Smallholdings.
    Mr. Peart: I would refer the hon. Member to the reply I gave to the hon. Member for Dorset, West (Mr. Wingfield Digby) on 18th May.
    Mr. Morrison: Can the right hon. Gentleman say whether he has issued any interim instructions to county councils

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    in the light of the recommendations of the Report?
    Mr. Peart: I have not. I would rather wait for the views of the various responsible organisations which are affected.

    Egg Marketing Board (Centralised Payments)
    Mr. Ian Gilmourasked the Minister of Agriculture, Fisheries and Food if he is satisfied with the rate of the introduction of centralised payments by the Egg Marketing Board; and if he will make a statement.
    Mr. Hoy: This is a matter for the Board. Ministers cannot intervene in the Board's administrative arrangements save in the special circumstances provided for in the Agricultural Marketing Act, 1958. A complaint about the operation of the centralised payments system generally has been referred by Ministers to the Committee of Investigation under Section 19 of the Act.
    Mr. Gilmour: Is not the hon. Gentleman aware that until they go over to centralised payments, producers are making an interest-free loan of 10s. a case to the Board and that at the present rate of striking this will mean some producers will be making a loan of something like £6,000, which they cannot afford? What is the Minister going to Flo about this?
    Mr. Hoy: The hon. Gentleman knows perfectly well that no Government has a right to interfere with the working of the Board except under these special circumstances. The Board has announced that the differential payment of 4d. a dozen will be accumulated and paid to each producer when he is transferred to the central payments system.

    Cereal Producers (Levies)
    Mr. Joplingasked the Minister of Agriculture, Fisheries and Food what discussions he has had with the Cereals Marketing Authority with a view to instituting a two-tier system of levies on producers; and if he will make a statement.
    Mr. Hoy: The Authority has recommended a two-tier levy on barley for 1966-67. My right hon. Friends will
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    shortly lay an Order giving effect to this recommendation.
    Mr. Jopling: May I thank the hon. Gentleman for that reply and ask if he can give us some idea about what the differential will be between those growers who sell all their crop and those who consume all their crop at home?
    Mr. Hoy: The hon. Gentleman had better wait until the Order is made. These are the two distinct cases which the two-tier levy proposes to take into consideration.

    Wheat and Barley
    Mr. Joplingasked the Minister of Agriculture, Fisheries and Food how many contracts the Cereals Marketing Authority made for the 1965 crop for wheat and barley; how many tons were involved; and what proportion he estimates this is of the total crop.
    Mr. Hoy: The latest estimates of contracts expected to qualify for payment are: Wheat, 27,900 contracts; 1,647,000 tons; 41 per cent. of estimated total sales. Barley, 35,640 contracts; 1,839,000 tons; 37 per cent. of estimated total sales.
    Mr. Jopling: Would the hon. Gentleman agree that to take 41 per cent. of the wheat crop and 37 per cent. of the barley crop in the first year of a contract sales system for cereals is a magnificent testimony to the agricultural industry in taking up a new system from scratch? Does he not think that the waiting period for the contracts might be shortened in future?
    Mr. Hoy: I agree with what the hon. Gentleman has said, in contrast, perhaps, to something that was said in Committee. I am delighted with the results. I will pay a little attention to his second point. I have not yet considered it, but will do so.

    Chicks (Veterinary Certification)
    Mr. Waltersasked the Minister of Agriculture, Fisheries and Food whether he is satisfied with the effects of charges imposed in January for the veterinary certification of chicks for export; and if he will make a statement.
    Mr. John Mackie: The new arrangements referred to have brought the practice for members of the Poultry Health

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    Scheme into line with the rest of the livestock industry. We have received representations on this matter from the Poultry Stock Association and have undertaken to take into account the points they have made.
    Mr. Walters: Bearing in mind the amount of money spent by the industry on research to develop this form of export and the small profit margin owing to the high level of competition, and the fact that these exports have a value of nearly £750 million and good prospects of increasing further, should not the hon. Gentleman remove this disincentive immediately? The Minister is on the one hand exhorting the industry to export and on the other hand making it virtually impossible to do so.
    Mr. Mackie: No, Sir; we are giving an export incentive anyway, as the hon. Gentleman knows. After all, this is a small matter which is being brought into line with all the rest. It is in line with Government policy that a service like this has to be paid for.

    Farmers, Abbotsley (Grants)
    Sir D. Rentonasked the Minister of Agriculture, Fisheries and Food why farmers in the Abbotsley area are being refused improvement and production grants; and how long it is proposed to continue to refuse to pay such grants to them.
    Mr. John Mackie: The land at Abbotsley may be required for a reservoir. We have therefore deferred consideration of grants for long-term fixed capital investment there until a decision is taken.
    Sir D. Renton: Is the hon. Gentleman aware that the Great Ouse Water Board has made it clear that a reservoir is not likely to be needed in the Abbotsley area for 10 years? Does he propose to impede farming progress for the whole of that time?
    Mr. Mackie: No, Sir. If the right hon. and learned Gentleman's first statement is correct, the answer to his second point is "No".

    Seamen's Strike (Food Prices)
    Mr. Thorpeasked the Minister of Agriculture, Fisheries and Food whether he is aware of the increased prices now
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    being asked of wholesale fruiterers and greengrocers by certain merchants in Covent Garden as a result of the present seamen's, strike; and what action he proposes to take to maintain a steady supply of produce at reasonable prices.
    Mr. Pearl: Prices for some fruits and vegetables in Covent Garden, as in other wholesale markets, rose on the first day of the strike for a number of reasons, including a certain amount of panic buying. Prices are now generally steadier—indeed some are lower than before the strike—and trade representatives have assured me that they will do all they can to maintain them at a reasonable level.
    Mr. Thorpe: Is the right hon. Gentleman aware that the representations which he made to merchants in Covent Garden have been well received by consumers generally? Will he give an undertaking that he will continue to keep the matter under review, and that if profiteering once again appears to be the order of the day, he will bring all possible pressure to bear?
    Mr. Peart: Certainly, Sir. I am sure that having the voluntary co-operation of the trade provides an essential leadership. So far this has worked. We must watch it daily.
    Mr. Skinwell: In view of the serious allegations made in the House the other day about stockpiling by wholesalers at the docks, can my right hon. Friend make any statement, and does he contemplate any action?
    Mr. Peart: I took action immediately. One of my officers made an investigation there, and found that there was no evidence of stockpiling. On the Canary Wharf there were no tomatoes or apples. They had been removed. There was no stockpiling of onions, and it was the same with potatoes. I replied to that effect to the hon. Member who made the allegation. I appeal to hon. Members to be responsible about these matters.
    Mr. Godber: We on the Conservative side would like to endorse what the right hon. Gentleman has said about the need for responsibility and the fact that responsibility has been shown. We were very glad to hear what the Minister had to say on the last point.
    Mr. William Hamiltonasked the Minister of Agriculture, Fisheries and

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    Food if, in view of the increases in food prices immediately consequent on the seamen's strike, he will take steps, by legislation or otherwise, to introduce a measure of price control.
    Mr. Murrayasked the Minister of Agriculture, Fisheries and Food if he is aware that the wholesale price of New Zealand lamb was increased by up to 3d. per pound on 17th May and that other foodstuffs have also increased in price; and if he will introduce leglisation to control food prices.
    Mr. Peart: I would refer my hon. Friends to the Prime Minister's statement on Monday. Voluntary co-operation has so far worked well and we wish to rely on that as far as possible.
    Mr. Hamilton: Has my right hon. Friend any evidence that prices are increasing? If he has not, will he consult a representative housewife, who will give him the information? Is it not a fact that meat prices have been going up steadily, particularly since the seamen's strike, and can he say whether there is any justification for that or not?
    Mr. Peart: It is not quite so. As I indicated earlier, prices of some commodities have fallen. There are fluctuations for other reasons. There is no sign that pepole are using the strike as a means of exploiting the public. If this occurred, we should have to consider what action to take. However, I believe that by means of voluntary co-operation we have achieved tremendous good and stability.
    Mr. Murray: My right hon. Friend appears to be wrong in fact in saying that there is no exploitation over the strike. I have had representations from butchers in my constituency who state that wholesalers issued price lists on Saturday, 14th May, and then cancelled them by telephone on 17th May, increasing prices by 3d. per lb. at least.
    Mr. Peart: If my hon. Friend has any particular complaint, I wish that he would let me know. I would welcome it and investigate it as I did the accusation of stockpiling. New Zealand lamb was mentioned in Question No. 43. It was he same price on 17th May as on 16th May and 1d. a pound more than on the
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    preceding Thursday, 12th May. It was 1½d. less than the average of May, 1965.
    Earl of Dalkeith: If the right hon. Gentleman has to use his powers of price freezing, will he distinguish between those prices which have gone up as the result of the seamen's strike and those going up in any case as a result of the Government's incompetent handling of the economy, which is causing the inflationary spiral?
    Mr. Peart: That supplementary question is not worthy of the hon. Gentleman. Much of it is purely hypothetical.
    Mr. William Hamiltonasked the Minister of Agriculture, Fisheries and Food if he will institute an inquiry into the reasons for increased food prices since 16th May.
    Mr. Peart: After the first day of the strike food prices have been very stable. Indeed, some are lower now than before the strike began.
    I have already had discussions with the leaders of various sectors of the food industry, who have readily associated themselves with the Government's intention not to allow this situation to be exploited for excessive personal profit. No purpose would be served by a further inquiry.
    Mr. Hamilton: What additional administrative machinery has my right hon. Friend established since the onset of the strike? Does he intend to keep it for the duration of the strike? What investigation did he make into the charges made by my hon. Friend the Member for Poplar (Mr. Mikardo) on a certain situation in the docks last week?
    Mr. Peart: I have already replied to the accusation made by my hon. Friend the Member for Poplar (Mr. Mikardo) and have refuted it. I made a careful inquiry and there was no evidence of the stockpiling alleged. We, have not introduced as yet anything to deal with statutory control because, in the present circumstances, it is better to try and achieve success by voluntary co-operation.
    Sir C. Osborne: May we take it that the Minister's Answers repudiate the accusations, made from the Liberal benches and across the Floor of the House, that there has been profiteering?

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    May we take it that there is no statistical evidence for the allegation?
    Mr. Peart: I have not heard any accusation of wholesale profiteering.

    Farm Rents
    Mr. Emrys Hughesasked the Minister of Agriculture, Fisheries and Food what he estimates to have been the increase in farmers' rents in England and Wales during the last year.
    Mr. John Mackie: From October, 1964 to October, 1965, an average of 7¼ per cent. or about 5s. an acre.
    Mr. Hughes: Is my hon. Friend aware that the word "rent" has just become to many farmers the most objectionable four-letter word in the language? Does not he think it time that the Prices and Incomes Board thoroughly investigated the whole question of exploitation of farmers by landlords?
    Mr. Mackie: As a farmer of long standing, I would not agree that the word "rent" has just become so objectionable. I have previously replied "No" to my hon. Friend's suggestion of a reference to the Prices and Incomes Board.

    Meat Exports
    Mr. Buchanan-Smithasked the Minister of Agriculture, Fisheries and Food what was the value of meat exports in the first quarter of 1966 compared with the same period in 1965.
    Mr. Peart: Exports of carcase meat of cattle, sheep and pigs, and offal, were valued at £3,337,000 in the first quarter of 1966 compared with £855,000 in the corresponding period of 1965.
    Exports of live animals—other than for breeding—and including our very substantial trade with the Irish Republic, were valued at £5,674,000 in the first quarter of 1966 compared with £5,289,000 in the corresponding period of 1965.
    Mr. Buchanan-Smith: Is the right hon. Gentleman aware that, as a result on the ban on exports of meat, many individuals and firms who have built up this valuable trade are likely to suffer loss through having to break contracts with customers overseas? Is he in a position to say whether he is prepared to compensate those people where they suffer loss?
    Mr. Peart: I cannot do that. I took this step because I believed that it was right to protect our own beef supplies for the home consumer.
    Mr. Noble: Will the right hon. Gentleman look at this carefully because, over the past year, there has been a considerable development of exporting high-quality Scottish produce, in particular, to the Continent? This is of great benefit and may be of greater benefit to the country in future. Will he keep his mind open if the position appears reasonable?
    Mr. Peart: I hope that, after the strike is over, exports will build up again, but I had to take the action I did in order to protect the domestic consumer at this time.

    Hypomagnesia Anaemia
    Mr. Bakerasked the Minister of Agriculture, Fisheries and Food what progress he has to report in the research into hypomagnesia anaemia, its cause and cure, particularly in relation to beef breeds of cattle.
    Mr. John Mackie: The basic cause is an insufficiency of available magnesium. Research is still going on. Risks vary from farm to farm but enough is known to allow the application of preventive and curative methods.
    Mr. Baker: Can the hon. Gentleman state the number of deaths among beef cattle in any one year—last year, for instance? May we have an assurance that research will be pressed on with the highest priority?
    Mr. Mackie: I cannot give the hon. Gentleman these figures offhand. I will try to secure them and send them to him. My farm in Scotland has suffered from this disease, so the hon. Gentleman can take it that I will see that research is carried on.

    Agriculture (Manpower)
    Mr. Godberasked the Minister of Agriculture, Fisheries and Food how far it remains the policy of the Government that agriculture should release 140,000 men during the period covered by the National Plan.
    Mr. Peart: It remains the Government's policy to continue releasing manpower by increasing productivity in agriculture. I see no reason to change the forecast, which is that agricultural manpower will fall about as fast as during the last five years, but I am keeping it under review.
    Mr. Godber: This figure represents over one-third of the existing number of workers in the industry. It will be an intolerable burden. Is it not worse when it is used as an argument as to why agriculture should not take its rightful place with manufacturing industry under the Selective Employment Tax?
    Mr. Peart: But the industry has its rightful place in the national economy. The rate is not unusual, incidentally. The highest release of manpower was in 1956. I will watch the situation carefully, however.
    Sir Harmar Nicholls: On two occasions, the right hon. Gentleman has said that he cannot put agriculture on the same footing as manufacturing because, to give agriculture recoupment from the tax, would encourage it to carry more labour. Is he suggesting that it would carry more labour inefficiently? Is he not suggesting, in effect, that, if he gives the money back to manufacturing industry, it will carry labour more inefficiently?
    Mr. Peart: I am not saying that at all. I am sure that the hon. Gentleman did not intend to, but he should not distort what I have said. I pointed out that agriculture is already given large support and that for this reason it was wrong to argue that it was comparable to manufacturing.
    Mr. Gibson-Watt: The right hon. Gentleman is responsible for agriculture in Wales. How many men in the agricultural industry in Wales will the policy of the Government make redundant, according to the National Plan?
    Mr. Peart: If the hon. Gentleman will put down Questions relating particularly to Wales or to counties, I will do my best to answer them. I have no specific figures with me.

  MEMBERS AND MINISTERS (PRIVILEGE AND COMMUNICATION)
  Mr. John Leeasked the Lord President of the Council if he will introduce legislation to amend the law regarding Privilege and communication between Members of Parliament and Ministers as pronounced by the House in the case of the right hon. Member for Lambeth, Vauxhall.
  The Lord President of the Council and Leader of the House of Commons (Mr. Herbert W. Bowden): The need for legislation can be examined if, in due course, the House decides to set up a Select Committee to inquire into its Privileges generally.
  Mr. Lee: May I have an assurance that this will not be a long time forthcoming? It is a matter of very considerable importance that hon. Members should be able to communicate with Ministers about industries under their control without being harassed by the fear of libel actions.
  Mr. Bowden: There is a long history in this matter, particularly a case eight years ago. I intend to set up a special Select Committee to look into the whole question of Parliamentary Privilege as soon as possible.

  DIVORCE LAW
  Dr. Grayasked the Attorney-General whether, in view of the unsatisfactory state of the divorce laws, he will now seek to give their reform higher priority.
  The Attorney-General (Sir Elwyn Jones): Divorce law is currently being examined by the Law Commission and by the Bishop of Exeter's Committee, whose Report is expected before the summer Recess. I think it is better to await the outcome of these studies before taking further steps in this field.
  Dr. Gray: Will my right hon. and learned Friend ask the Lord Chancellor to do all he can to expedite the Report of the Archbishop's Committee?
  The Attorney-General: I do not think that there is any need for pressure. It

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  is hoped that it will be published at the end of July.
  Sir J. Hobson: Do the Government intend to adhere to the usual practice that alteration in the substantive law of divorce is left to private Members, or do they intend to embark on legislation in this field?
  The Attorney-General: That matter will fall for consideration when the problem arises.

  LAW OF DEFAMATION
  Mr. Arthur Davidsonasked the Attorney-General whether he will seek to amend the law of defamation in such a way as to enable all cases to be decided by a judge alone.
  The Attorney-General: No. I do not think it would be satisfactory to interfere with the well-established principle that a person is entitled to trial by jury where his reputation is in jeopardy.
  Mr. Davidson: Does my right hon. and learned Friend agree with the statement of Lord Justice Diplock in a recent case, that the law of defamation is bogged down in a mass of technicalities, and would he agree that, short of getting rid of the technicalities, it is unfair for a jury to have to decide such technicalities?
  The Attorney-General: I observed the remarks which fell from Lord Justice Diplock on that occasion. I have little doubt that this is a matter to which the Law Commission should perhaps give early attention. But under the present arrangements I think that where matters of reputation or questions of fraud are involved most judges take the view that the function of the jury is very important.
  Mr. Hooson: Would the right hon. and learned Gentleman agree that from the litigants' point of view it is far better to get rid of the technicalities than to get rid of the jury?
  The Attorney-General: Somebody has described a technicality as a point of principle that he had forgotten about.
  Mr. Carlisle: Would the Attorney-General agree that, in view of the recent increase in the jurisdiction of the county court—now to £500—one might consider
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  looking at the question of starting such actions in the county court?
  The Attorney-General: I am not sure that that would be very appropriate. This is a difficult field of the law, and the matters involved of a great seriousness to the parties. I am not sure that I find that a very attractive proposition.

  SCOTLAND

    Police Officers (Radios)
    Mr. Dempseyasked the Secretary of State for Scotland if he will approve for grant purposes the equipping of every police officer on duty with a personal radio which is effective in combating outbreaks of crime and violence.
    The Minister of State, Scottish Office (Mr. George Willis): My right hon. Friend has already approved schemes for eight police authorities and has given approval in principle for two others. These all provide limited numbers of sets. He will give sympathetic consideration to other similar applications, but it is doubtful whether the issue of personal radios to every man on duty would be justifiable.
    Mr. Dempsey: Is my hon. Friend aware that demonstrations of this device have proved a very great success? Will he appreciate that it is much more than a Napoleon Solo gimmick? Will he consider granting police authorities these aids to enable police officers to combat rowdyism against which the devices have proved so successful?
    Mr. Willis: I agree that this is rather more than a gimmick, but there are technical and operational problems which need to be solved and much more experience needs to be gained before we can determine exactly how far it can be used.
    Mr. Noble: Can the Minister consider as an experiment in some part of the country where crime is particularly prevalent equipping all police officers with this equipment? That would yield better results than giving a few sets all round the country.
    Mr. Willis: That is certainly worth considering. At present, there is one authority operating the personal wireless scheme, Glasgow, where the crime rate is

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    fairly high. We shall have to wait and see what the results of the operation of the scheme are.

    East Scotland Conservancy
    Mr. James Davidsonasked the Secretary of State for Scotland of the 24,000 acres of reserve for planting, held by the East Scotland Conservancy, how much is arable and grazing land, how much is unplantable, and how much is in the county of Aberdeen.
    Mr. Willis: All the 24,000 acres are plantable. None is arable and about 3,400 acres are let temporarily as seasonal grazings. About 2,500 acres are in the county of Aberdeen.
    Mr. Davidson: Is the hon. Gentleman a ware that certain Commission forests in the area are now not training any more young foresters and are refusing to establish unestablished foresters who have been working in the forests for anything up to 15 years, and that in the same area various private owners are planting arable land with trees? Does he not agree that that appears to be a sad state of affairs?
    Mr. Willis: We will certainly consider what the hon. Gentleman has said, but it does nor, seem to be related to his Question.

    Trainee Fishermen (Residential School)
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland if he will give details of Government proposals for providing a residential school for trainee fishermen during their pre-sea training.
    The Joint Under-Secretary of State for Scotland (Mr. Bruce Milian): The provision of further education for trainee fishermen is in the first instance a matter for the education authorities concerned. My right hon. Friend has received no proposals for a residential school but he proposes to discuss the educational needs of trainee fishermen with the interested authorities.
    Mr. Wolrige-Gordon: When the hon. Gentleman has these discussions, would it not be a good idea to consider a proposal of this kind quite seriously, because one of the great needs of the fishing industry is to attract more men into it?
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    There is otherwise a danger that manpower will decrease.
    Mr. Millan: We shall certainly keep that in mind.

    Tay Road Bridge-North-East Scotland (Road Link)
    Mr. James Davidsonasked the Secretary of State for Scotland what plans he has made to link the north end of the Tay Road Bridge with Aberdeen and the north by means of a motorway or four-lane trunk road.
    Mr. Willis: I would refer the hon. Member to the answer which my right hon. Friend gave to the right hon. Member for Orkney and Shetland (Mr. Grimond) on 9th March.
    Mr. Davidson: Does not the hon. Gentleman agree that if plans for this type of road are not made now, we shall not get such a road until 1980, and that if the liner train terminus is to be at Aberdeen, the North-East will suffer from a lack of proper communication?
    Mr. Willis: I do not agree with the first part of the hon. Gentleman's question. As my right hon. Friend said on 9th March, in the development of these roads we have to give priority to modernising to dual carriageway standards the roads in Scotland which carry the heaviest volume of traffic.
    Sir J. Gilmour: Does not the hon. Gentleman agree that it is much more necessary to pay attention to the roads between the Forth Bridge and the Tay Bridge now, because those are the roads carrying much the biggest volume of traffic?
    Mr. Willis: That, too, is a different question.

    Rivers (Fishing Rights)
    Mr. Alasdair Mackenzieasked the Secretary of State for Scotland whether he is aware that the North of Scotland Hydro-Electric Board are arranging to sell fishing rights on Scottish rivers affected by their operations; and, in view of the benefits to local angling clubs and the tourist industry, if he will give a general direction, in the public interest, to the Board to retain those fishing rights for the benefit of the community.
    Mr. Willis: In the first instance my right hon. Friend has asked the Board to defer disposing of these fishing rights until he has completed his consideration of the Report of the Hunter Committee on Salmon and Trout Fishing in Scotland and he has every hope that it will agree to do so.
    Mr. Mackenzie: I thank the hon. Gentleman for that reply. Will he bear in mind the great importance of this matter, especially to the Highlands, and remember that when the Highlands and Islands Development Board was set up one of its specific purposes was to encourage tourism?
    Mr. Willis: It is because we realise the importance of this that my right hon. Friend has written to the Hydro-Electric Board.
    Mr. Bruce-Gardyne: Can the hon. Gentleman give any indication when his right hon. Friend expects to have completed his consideration of the Hunter Report?
    Mr. Willis: Once again, that is a rather different question.

    Store Cattle (Imports)
    Sir J. Gilmourasked the Secretary of State for Scotland how many store cattle have been imported from Eire to Scotland in each month of this year; and what is his estimate of the number to be imported each month during the rest of this year.
    Mr. Willis: As the Answer contains a number of figures about shipments of store cattle in the first four months of this year, I shall, with permission, circulate that part of my reply in the OFFICIAL REPORT.
    It is not possible to make a worthwhile forecast of numbers of store cattle likely to be imported in the remaining months of this year.
    Sir J. Gilmour: Is it not a fact that under the recent agreement with Ireland a requisite number of store cattle are to be imported into this country? If we do not know what progress we are making, how shall we implement the agreement?
    Mr. Willis: We have to wait to see how the agreement is operating before we start to form conclusions from it.
    Following is the information:
    The numbers of store cattle imported from the Republic of Ireland in the first four months of this year were:—

    Direct from Republic of Ireland Ports

    Through Northern Ireland Ports

    January

    …

    7,656

    2,435

    February

    …

    6,842

    1,632

    March

    …

    7,791

    1,324

    April

    …

    2,695

    1,260

    The numbers of cattle shown as coming via Northern Ireland refer to consignments of cattle in transit through Northern Ireland on their way to Scottish ports.

    Highlands and Islands (Industry)
    Mr. G. Campbellasked the Secretary of State for Scotland to what extent it is Her Majesty's Government's policy to reduce the numbers employed in non-manufacturing industry in the Highlands and Islands.
    Mr. Willis: This is certainly no part of the Government's policy for the Highlands and Islands. On the contrary it is their aim to increase production and employment generally in the area, and particularly by the development of manufacturing and other productive industries.
    Mr. Campbell: In that case, will the Minister of State and his right hon. Friend point out to the Chancellor of the Exchequer that there is no point in applying the Selective Employment Tax to the Highlands? Will the hon. Gentleman urge his right hon. Friend the Chancellor to exempt that area?
    Mr. Willis: We have to bear in mind what the tax is for, and the fact that if we are to encourage and promote the development of manufacturing industry with the arrangements at present operated by the Government, Scotland, and the Highlands, stand to gain.
    Mr. Noble: But has not the Minister of State read any of the comments from the Highlands Development Board? In view of these, can he not talk to his right hon. Friend, who is sitting quite close to him, and have this matter carefully considered? There is nobody in the Highlands who believes that what

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    the hon. Gentleman has said is even faintly true.
    Mr. Willis: I am not sure to what comments the right hon. Gentleman refers when he speaks of comments frorn the Highlands Board. I, too, have seen the comments of the Board—the comments of the Board and not those of one of its members. The Board is seeking to see my right hon. Friend on this matter in order to talk it over.

    Rates
    Mr. G. Campbellasked the Secretary of State for Scotland what is the percentage increase in the total amount of rates which he estimates will be paid by ratepayers in Scotland in 1966 compared with 1965.
    Mr. Willis: My right hon. Friend still does not have enough information on which to make a firm estimate.
    Mr. Campbell: Nevertheless, in the light of the information which is appearing and as the Secretary of State held out hope as long ago as December, 1964, that increases in rates would be reduced, is the Minister of State aware of the disquiet among ratepayers in Scotland at the present increasing burden?
    Mr. Willis: Yes, but the increasing burden of rates, of course, is not something which has just occurred under the Labour Government. It has been going on for a very long time. This is the first Government to try to do something about it. I should point out that there are certain complications in making any estimates as this is the year of revaluation.
    Mr. Edward M. Taylor: As it was estimated last year that the increase in rates would be only 4 per cent., is the reason why no estimate has been given this year that that estimate proved to be disastrously wrong, having been less than half the actual increase?
    Mr. Willis: An estimate was given last year. It was grossly misinterpreted by hon. Members opposite. There are other factors and I have mentioned one of them, which make it that much more difficult this year.
    Mr. John Hall: Is it not a fact that the result of the Government's efforts
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    to do something about rates is to raise rates to the highest burden we have ever had to bear in this country?
    Mr. Willis: That does not alter the fact that this Government at least are, trying to do something about it.

UGANDA (BRITISH SUBJECTS)
Mr. Maudling Mr. Maudling (by Private Notice) asked the Secretary of State for Common. wealth Relations what steps have been taken to safeguard the lives and property of British subjects in Uganda, and if he will make a statement.
The Secretary of State for Common wealth Relations (Mr. Arthur Bottomley): The House will know of the tragic incident on Monday in which two young British surveyors lost their lives and will wish to join me in expressing the deepest sympathy to their relatives. This incident took place in an isolated area of Buganda, and as far as I can ascertain on the basis of reports so far received, there is no reason to think that it indicates a general threat to the British Community.
The British High Commissioner in Kampala is in touch with the Uganda Government authorities, both about this incident and about the safety of British citizens generally. The High Commissioner has been contacting members of the British community in the disturbed area and advising them to avoid unnecessary travel. There appears to be no immediate danger in areas outside Buganda.
Mr. Maudling: I thank the Secretary of State for that information and associate the Opposition with the expression of sympathy to the relatives of the young men who were killed. Will the right hon. Gentleman keep a very careful eye on the situation to see whether there is anything at any time that Her Majesty's Government can possibly do to help in this tragic development?
Mr. Bottomley: Yes, Sir.
Mr. Thorpe: I associate those of us on this bench with the sympathy expressed by the right hon. Gentleman. Are communications still existing directly between the High Commissioner in

475
Kampala and Her Majesty's Government in London?
Mr. Bottomley: Yes, Sir. We are in direct contact still.
Sir G. de Freitas: Can my right hon. Friend say, roughly, how many British subjects there are in Uganda?
Mr. Bottomley: Yes, Sir. Speaking from memory, there are about 7,000.

BUSINESS OF THE HOUSE
Ordered,
That the Proceedings on the Motion relating to Alexandra Palace may be entered upon and proceeded with at this day's Sitting at any hour for a period of One hour after they have been entered upon, though opposed. —[Mr. Gourlay.]

ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  4.33 p.m.
  The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Bill be now read a Second time.
  We have now reached the stage when we start to implement my right hon. Friend's Budget proposals, proposals which the House unanimously regards as relevant to the needs of our country, novel in their conception, and challenging to certain habits of thought. I hope that I may be allowed to depart on this occasion from the normal tradition in introducing a Finance Bill, which has been to go through the Clauses one after another, explaining the effect and purpose of each.
  So many of the Clauses have already been described in speeches made from this Box earlier and, as the Press has correctly said, there are no surprises in the Bill, nothing that one was not expecting, and very little that is not administrative or has not been already explained. I am sure, therefore, that it will be for the convenience of the House if I deal with those matters which are of new principle, which alter existing taxes or which bring in new taxes.
  There are several Clauses which help international trade and exports. Clause 1, for example, makes it easier for exported goods to qualify for relief from duty on their import content. Other Clauses give effect to undertakings which we have given to our partners in E.F.T.A. and concern, among other things, vodka and heavy oils, both of which, I am told, are lubricants, though one has to be careful which one uses for which purpose.
  There are many provisions defining with greater precision the position of the taxpayer, but I do not think that they involve any new principles. There are, of course the usual number of provisions relating to avoidance, and I think that I should say a word or two on the general topic of avoidance, particularly having regard to what the hon. Lady the Member for Finchley (Mrs. Thatcher) said during the Budget debate on 5th May. I am

  477
  glad to see the hon. Lady in her place. During her speech, she is reported to have said:
  "… it is now time to point out that some of the anti-avoidance devices are really anti-confiscatory devices".
  I do not know whether HANSARD correctly reported the hon. Lady's words because, obviously, she was referring to avoidance devices, not to anti-avoidance devices.
  Mrs. Margaret Thatcher Mrs. Margaret Thatcher (Finchley) Indicated assent.
  Mr. Diamond: I am not quite sure which way she actually put it, but I am sure that, if she had thought about it beforehand, she would have said it as I have just amended it.
  The hon. Lady went on:
  "The complex of taxes, with Income Tax, Surtax, Capital Gains Tax and an 80 per cent. rate of Estate Duty, is so great on some of the top incomes that people try to take defensive action."—[OFFICIAL REPORT, 5th May, 1966; Vol. 728, c. 1891-2.]
  At that point, one of my hon. Friends said "Shame", and we on this side, at all events, share that view.
  We do not take the view that high marginal levels of taxation on incomes of £200 a week and more, imposed by Parliament after full debate, can justify one section of the population in using the resources available to them to avoid and escape their fair share of the burden which Parliament clearly intended to impose upon them. We would not describe that kind of taxation decided upon by this House after full debate as confiscatory. We would regard a remark in that regard coming from the Opposition Front Bench as wholly irresponsible. [An HON. MEMBER: "What?"] Wholly irresponsible. I am astonished that no right hon. Gentleman who shared the responsibility of government for 13½ years has risen to say anything about it.
  What we try to do in this House is to ensure that the will of the House is carried out. If there are any complaints about the kind of taxation imposed, this is the place to debate them. Once a decision is taken, patriotic citizens should pay their taxes and——
  Mr. Nigel Birch: Does the right hon. Gentleman?
  Mr. Diamond: Yes—and, moreover, a comment like that must sound odd indeed
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  in the ears of millions of taxpayers who pay their taxes willingly and of those millions who are subject to the most rigorous of all Schedules, Schedule E, who have their taxes deducted under P.A.Y.E., who have no opportunity to reduce their burden, to take advice to see whether it is open to them, or even the means to do so. In those circumstances——
  Mr. John Farr Mr. John Farr (Harborough) rose——
  Mr. Diamond: I will give way in a moment.
  I want to add a further point about the effect of a high level of tax on high incomes. For those who have high incomes and have to pay taxes it may be that the payment of taxes results in their having to forgo some additional luxury. But, for the ordinary man or woman, payment of taxes may mean that one of their children has to go without a pair of shoes. [HON. MEMBERS: "Oh."] That is the difference. I could have hoped that Parliament would speak with one voice on the responsibility for paying taxes.
  Mr. Farr: Would not the right hon. Gentleman agree, however, that it is the confiscatory level of taxation on, for instance, the £200 a week man which is the very reason that we in this country are suffering from the brain drain?
  Mr. Diamond: I would not accept any such comment at all. I repeat the simple fact which hon. Members opposite seem to be unable to be aware of, that at all levels of income one can eat only three meals a day.
  In the Bill there are three Clauses relating to the new duties. Those are the Clauses which, I imagine, will attract the greatest amount of interest. There are Clauses dealing with the new betting duty, the references to the new investment incentives, and, of course, the Selective Employment Tax. The duties relating to betting and gambling were fully described in principle by my right hon. Friend in his Budget statement. It is clear that he is in the exceptional position of having won universal approval, at all events, for this tax.
  I need only draw the attention of the House to two aspects of the control of the new betting duty. First, it will be seen

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  that racecourse authorities may be required to assist the Customs and Excise in administering the duty, and, in particular, to deny access to their courses or tracks to bookmakers who have not complied with the fiscal law applicable to them.
  The Customs and Excise for a number of years have had co-operation from the proprietors of dog racing tracks in the administration of existing duties imposed on bookmakers operating on their tracks, duties now to be replaced by the general betting duty. I should like to pay tribute to the proprietors for that help. I am confident that there will be similar co-operation forthcoming from the horse racecourse authorities. Secondly, while we do not wish to sound in any way minatory I mention the provision in Schedule 2(20) for the withdrawal of a betting office licence in the event of a second conviction for an offence.
  While bookmakers have assured my right hon. Friend of co-operation in making the new duty work, it would be unrealistic to assume that there will not be some cases of attempted evasion. This stringent penalty is necessary both to protect the reputable bookmakers from unfair competition based on tax evasion and to make it clear and plain to others that such evasion will not be worth while.
  As to gaming, there is one relaxation in the scale of duty from the plan already announced. Where bingo and other dutiable games are played on the same premises, it will not be necessary to take out two licences. The higher rates of licence duty will cover the playing of all games, including bingo. There will be other details which perhaps we can usefully discuss in Committee.
  Clause 33 of the Bill provides for the abolition of investment allowances and the amendments——
  Mr. J. Bruce-Gardyne: Before the right hon. Gentleman leaves the subject of the betting tax, would he not agree that the Chancellor said that the money from the tax was to be used to finance the Government's option mortgage scheme? Why is the tax not financing the mortgage scheme?
  Mr. Diamond: The hon. Member is not accurate in what he says about my
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  right hon. Friend's statement. [HON. MEMBERS: "Oh."] My right hon. Friend compared the amount coming from this source and the amount which would be available for another purpose. Every right hon. Gentleman knows that under no circumstances does one hypothecate a particular tax to a particular item of expenditure. It all goes into the same pool. [HON. MEMBERS: "Answer."] My right hon. Friend did not say that and I have answered the hon. Member.
  Dame Irene Ward: Read it out.
  Mr. Diamond: The provisions of Clause 33 are to be read in conjunction with the measures giving the new investment grants described in the Industrial Development Bill, which received its Second Reading last week.
  Before I turn to the third of the new taxes, the Selective Employment Tax, perhaps I may say a word about the interrelation of the two taxes. It is sometimes argued that the way to discourage recruitment of labour into the service industries is by providing additional incentives to investment in labour-saving plant and equipment and that we have failed to do this. Conversely, so the argument runs, it cannot be right to encourage the recruitment of labour to manufacturing industries and, at the same time, to provide incentives for the kind of investment which reduces labour requirements.
  Both these views are mistaken so far as concerns service industries the imposition of a tax of these quite measurable proportions, and, in particular, the impact of a new and unexpected tax, would be sufficient of itself to encourage the acquisition of labour-saving equipment without a special inducement to investment. In manufacturing industry the need is both for additional labour and plant. It is by increasing the scale of industrial production that we shall get both a greater volume of production and greater efficiency.
  I now turn to the Selective Employment Tax, which is the main talking point of the Finance Bill. I wish to deal with some of the principles of the tax and then with the administration, about which there have been one or two grumbles. First, as to the tax itself, may I remind the House, because I think that

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  this has been overlooked in pursuing the argument about service versus manufacturing, that the main reason for introducing the tax was to provide revenue. Every political and economic commentator in the period leading up to the Budget was agreed that there was a need for £200 million to £300 million of extra revenue to provide the necessary element of deflation. I doubt whether there was ever such unanimity in the Press except when the Press told us that Labour would lose the Hull by-election. On this occasion, however, they were clearly right and all have accepted my right hon. Friend's Budget judgment.
  One way of raising the equivalent revenue would be to increase the rates of Purchase Tax in the way described when my right hon. Friend gave cogent reasons for not adopting those traditional methods. In particular, he had in mind the need to maintain a high rate of investment and full employment. It is clear that increases in Purchase Tax fall with severity on a limited sector of our manufacturing industries and have damaging effects, such as those on motor car production, for example. My right hon. Friend, therefore, turned to a new indirect tax which provides the necessary revenue—in particular, at the time of year when it is expected to be needed—which avoids depressing employment and investment, which avoids the pitfalls of the stop-go policy of the party opposite and which is widespread in its impact.
  Anyone, therefore, who seeks to criticise this tax must first say in the most precise terms exactly what alternative method he would have proposed for raising the necessary revenue and raising it at the right time and in the right way and avoiding stop-go. Any criticism which does not base itself on a positive alternative proposal is completely without validity. The Selective Employment Tax can be used——
  Mr. T. L. Iremonger Mr. T. L. Iremonger (Ilford, North) rose——
  Mr. Diamond: I have given way four times already.
  Mr. Iremonger: I am obliged to the right hon. Gentleman for giving way. An alternative should have come from savings, which would have been available
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  if there had been more incentives in the economy. The right hon. Gentleman says that the object of this tax is to raise revenue, but is this really so? Is he not also saying that the object is to deflate the economy, to mop up surplus purchasing power, which is not at all the same thing? The Government could have perfectly well done without the revenue, for they are not spending all that much more and are boasting about their surplus.
  Mr. Diamond: I am sure that the hon. Gentleman does not want to make a speech now. Perhaps he will have an opportunity later, when I shall listen with interest. There is very little difference between raising revenue and saying that deflating is the purpose of the Budget. That is the purpose of every Budget nowadays. There is more than a revenue-raising purpose behind the tax. It is a contemporary tax which takes account of contemporary conditions, particularly full employment.
  Much of the criticism which I have read has provided the major justification for this aspect of the tax, for it has demonstrated the extent to which employers of all kinds have been stimulated into looking at their employment practices and considering how they should use their labour force more efficiently. It has been most gratifying to note that only a minority of employers appear to be taking the view that they should automatically pass on the whole of the increased cost and that, therefore, there is no need for them to consider the efficient deployment of their labour. Here again, we see further proof of the wisdom of adopting this kind of indirect tax, because if we had instead increased Purchase Tax the general reaction would immediately have been to put up the price of goods by the corresponding amount.
  Purchase Tax, because of its nature, has come to be regarded as something which is automatically added on at the end of the bill and paid for by the consumer. It is much more encouraging to greater efficiency to have a tax which, by its very selectivity, makes employers question themselves about their use of the scarcest of our resources—manpower.
  Mr. Anthony Royle Mr. Anthony Royle (Richmond, Surrey) rose——
  Mr. Diamond: By providing——
  Hon. Members: Give way.
  Mr. Diamond: No. I have given way five times now.
  Hon. Members: Three.
  Mr. Diamond: Moreover, by providing premiums the tax encourages recruitment into manufacturing, and to a certain extent could also encourage the flow of labour from services into manufacturing. That would be all to the good. For too long our fiscal policies have encouraged the flow of labour into services, with the result, as was pointed out by my right hon. Friend the Chancellor of the Exchequer in his Budget speech, that 90 per cent. of the increase of our labour force in the past five years has gone into services and only 10 per cent. into manufacturing.
  I say "for too long" because if we as a nation wish to increase our productivity we can most readily do so in the field of manufacturing. The available statistics indicate very clearly——
  Mr. Richard Sharples: On a point of order, Mr. Speaker. Is it in order even for a Minister to read his speech word for word from a prepared text?
  Mr. Speaker: The hon. Gentleman knows that Ministers, like back-benchers, are allowed to make use of copious notes.
  Mr. Diamond: I was saying that it is in manufacturing that the increase in productivity is conditioned and limited by the increase in the numbers of employees attracted to it. All the statistics clearly show that this country, in particular, has been limited in its increase in productivity because it has denied manufacturing the necessary increase in the volume of labour. All the international statistics, comparing countries at a similar stage of development, have shown that we are virtually at the bottom of the list as regards the proportionate increase in our labour force in manufacturing.
  This has been going on for a long time, and it is high time that we took note of it and tried now to encourage the employment of labour in, and particularly the recruitment of labour into, manufacturing. The tax is fully justified as a revenue raiser, as a wise beginning in broadening the tax base, as a step towards redressing the balance of taxation
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  between services and manufacturing, and as an encouragement to greater efficiency and productivity in manufacturing. In this way we shall grow more competitive in the manufacture of goods for both the home and overseas markets.
  A number of hon. Members, on both sides of the House, have questions about the administration of the tax which they would like answered. I thought it right first to describe at some length the various weighty arguments in support of the tax because, although it is easy to criticise detailed points in the proposed administration in isolation, no such criticism has any real validity unless those who criticise offer, at the same time, an alternative tax which would do all the things to which I have referred. We shall be only too happy to listen to suggestions for improving the tax.
  Clearly, there could be arguments about its ultimate effects, about the various rates at which it is to be imposed, or on detailed points of administration. We have deliberately delayed finalising all these detailed points until we had an opportunity, which, in fiscal matters——
  Mr. A. Royle Mr. A. Royle rose——
  Mr. Diamond: —can only arise after the proposals have been published to this House, of discussing with the various interests concerned the best method of achieving our objectives and also of listening to representations by those who are likely to be affected. The administration which we propose must be based on simplicity and the minimum use of additional labour.
  This tax is infinitely variable in both rates and area of impact. It can be as sophisticated or complicated as Parliament may desire, but with complexity inevitably goes the engagement of large numbers of civil servants with the necessary skills. We do not think that it would be consonant with the spirit of the tax, or would pay sufficient regard to the shortage of labour, to introduce too many complications. We are, therefore, keeping it simple and, as far as possible, making it capable of being used with existing machinery. For this reason we are compelled to make the tax universal in its application and are adopting other methods, which will be described in more detail when the Ministry of Labour Bill

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  becomes before the House, of dealing with payment of refunds or premiums.
  To get a totally new tax launched and accepted it should be capable of being easily grasped and understood. Its out1ine should remain clearly visible, rather than being hidden behind a host of subtle refinements. The logic of all this is that for the time being, at all events until everyone is used to the working of the new tax, we should use the administrative machinery which is available to us and avoid, as far as possible, unnecessary refinements and complexities.
  In the light of these principles, we have considered the group of employees comprising the elderly, the part-time and the disabled. The argument which has been put forward is that the Selective Employment Tax will bear disproportionately heavily on these categories, with the result that there will be not merely a transfer of labour, but, in certain cases, a loss of employment. For both economic and social reasons, these questions deserve the most careful and sympathetic consideration. very much doubt, however, whether the tax will have the effect on which the whole of this argument is based.
  So long as the policy of full employment is maintained—and this the Government are determined to do—it does not seem that there can be an overall falling-off in the need for workers in these groups. Moreover, we must remember that the tax falls on the employers and not on the employees.
  In the case of part-time workers, any scheme for exemption or refund would, by the very nature of the part-time employment, be complicated and open to serious risk of evasion and abuse. Disabled employees—and no category merits more careful consideration—will continue to be covered by the special quota system under which employers with 20 or more workpeople are legally bound by the Disabled Persons Employment Act, 1944, to employ a minimum number of disabled persons—that is to say, 3 per cent. of their labour force. More importantly, it must be remembered that generally they do as good a job as the next man. To suggest otherwise would be to do them a great disservice.
  As to the more seriously disabled who may require sheltered employment, the Government, of course, provide this
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  through bodies such as Remploy. For all these reasons, therefore, my right hon. Friend does not feel that it is necessary to take any special steps at the present time—[HORN. MEMBERS: "Shame."]—concerning these three most important categories.
  Mr. Nicholas Ridley Mr. Nicholas Ridley (Cirencester and Tewkesbury) rose——
  Mr. A. Royle Mr. A. Royle rose——
  Mr. Diamond: I hope that those two hon. Members, who have been bobbing up and down the whole time and to whom I have given way on many occasions, will have regard to the fact that I have already given way five times—[HON. MEMBERS: "Three."]—that they have been bobbing up and down a dozen times during one paragraph dealing with the same item, and that had they had any responsible interest in wanting to hear about this topic they would have sat down and waited until I got to the end. If they will be good enough to contain themselves until I have got to the end of the paragraph, about which the House is anxious to hear, if the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is not, I will be glad to give way to his hon. Friend.
  Mr. Farr: On a point of order. Is it not the case, Mr. Speaker, that the Minister is making a parody of Parliamentary dialogue by reading so exactly from what is obviously a written statement? I suggest that he not reading from copious notes, but is reading word for word, line by line, a prepared speech which has been put into his hands, properly prepared by Dr. Kaldor.
  Mr. Speaker: Order. The hon. Member has been in Parliament long enough to know that what he has raised is not a point of order.
  Mr Archie Manuel: A schoolboy trick.
  Mr. Diamond: It will, perhaps, interest the House to know that I have a number of announcements to make concerning a number of categories in which hon. and right hon. Members, on both sides, have expressed a great deal of interest. In accordance with the normal practice of the House, I propose to read precisely what I have carefully prepared to say about it.

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  I repeat that for the various reasons which I have given my right hon. Friend does not feel that it is necessary to take any special steps at the present time. In any event, many people will be in employment where the tax is reimbursed or where a premium is paid already. We will, of course, keep their circumstances under review. Given, however, the need to get a simple scheme into operation this year, my right hon. Friend does not feel that there is any need for special arrangements at the present time. I repeat that we shall watch the position closely in case it is found right and possible to give them special treatment under a more refined scheme later.
  Mr. A. Royle: I am grateful to the right hon. Gentleman for giving way. Does his decision also exclude the Star and Garter Home, where over 200 disabled men, who were disabled in two world wars, are involved and the tax will cost the hospital over £10,000 a year?
  Mr. Diamond: I wish that the hon. Member had waited. I have told him several times that I have a number of announcements to make. He has asked me about a charity. I shall talk about charities presently.
  Mr. Paul Dean: May I ask the right hon. Gentleman a question concerning the disabled?
  Mr. Diamond: I am sure you will forgive me, Mr. Speaker, for saying that we are on Second Reading of the Finance Bill. We shall have a long Committee stage of the Bill and of an associated Bill. I shall be at the service of the House and of the Committee to answer as many questions in as much detail relevant to the various Clauses as hon. Members may require, as has happened in the past. I am sure that this will satisfy the hon. Member.
  A related question is the effect of the tax upon disabled employers. The Government recognise that these represent a class which merits particular, sympathetic consideration. It is not possible to exempt them from the Selective Employment Tax itself, but the Government hope to bring forward proposals to deal with the real hardship which might otherwise result.
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  We have considered the effect of the Selective Employment Tax in relation to various bodies which receive grants from the Exchequer. There are a large number of these bodies and the amount of assistance which they receive varies greatly from case to case. The Government have decided that the effect of the Selective Employment Tax on these bodies should be regarded in just the same way as any other cost increase and, indeed, in exactly the same way as one would regard an increase of indirect taxation.
  That means that as a general rule the effect of the tax will be taken into account with all other costs when the level of the grant is next reassessed in the normal course of events. I recognise, however, that there may be exceptional cases where a grant-aided body finds itself itself in financial difficulties before the end of the current period. In these and future cases the Government will consider requests for assistance on their merits. We will, of course, expect the grant-aided bodies concerned to have first made any possible economies in manpower.
  I next come to charities. The Government recognise that charities are in a somewhat special, indeed unique, position. My right hon. Friend will be meeting the National Council for Social Services and the Churches Main Committee after Whitsun. He is looking forward to a useful discussion with them. There are, of course, a great number of charities. A fair proportion will not be directly affected by the tax, but there are many who will be faced with serious problems. It is the Government's intention to consider in principle how and in what way they might be recompensed.
  Finally, the House will wish to know the Government's decision on two particular industries affected by the Selective Employment Tax. First, extractive industries. The position here is that nine-tenths of all employment in mining and quarrying is under the National Coal Board, which is to get the refund along with the nationalised industries generally. We think that it would be right for the remaining one-tenth in the other extractive industries to be treated in the same way. These include stone and slate, chalk, clay, sand and gravel extractions.

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  This will also help the construction industry.
  In the case of forestry, after discussion with some of the interests concerned we have considered the most appropriate machinery for giving effect to the policy of the White Paper relating to forestry. In the light of the decision to make individual repayments to agriculture and horticulture it has been decided to make similar arrangements for private forestry. Power will, therefore, be taken in the Ministry of Labour Bill for repayment of the tax to be made to private woodland owners through local offices of the Ministry of Agriculture, and the Department of Agriculture for Scotland. Details will be announced in due course.
  Sir Harmar Nicholls: The right hon. Gentleman is puzzling me. At one point he explained, very properly, that before the Budget he could not have more than preliminary discussions to see how the ideas would work, and that the post-Budget period could he used for further discussions. Now he seems to be giving categorical decisions which one would have expected to have been made in Committee on the Bill when, one would have thought, proper consideration could have taken place. Are his decisions on these matters now ruling out any further Amendments we might move in Committee?
  Mr. Diamond: I am quite at a loss to know what the hon. Gentleman is complaining about. I am not quite sure whether he is saying "Thank you" or not. He said that I had got him confused. He has certainly got me confused. If he is asking me whether it would be out of order for him to put down Amendments, I can only say, Mr. Speaker, that I wish I could say "Yes", but I am afraid not, and I shall look forward to any Amendments he cares to put down——
  Sir Harmar Nicholls: And look at them sympathetically?
  Mr. Diamond: —and look at them with the same sympathy as I always do.
  Last year my right hon. Friend introduced an important new tax directed towards establishing a greater sense of social justice, to increasing efficiency in production, to lightening the burden on those companies which look more to
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  future growth than immediate high returns. This year we are continuing the process of modernising our tax system. We are creating a new source of revenue, spreading the burden more widely and more evenly, and keeping in the forefront of our minds at all times the need to maintain full employment and a high level of investment.
  No one can doubt that the Labour Government, in their fiscal policy, are ever conscious of their social responsibilities, and both imaginative and resourceful in their determination to strengthen our economy.
  4.10 p.m.
  Mrs. Margaret Thatcher: The Chief Secretary at least chose an unusual method of introducing the Finance Bill, and I must say that seldom have I heard a speech to lead me with more pleasure into the "No" Lobby at the end of the debate.
  The Chief Secretary described the new tax as "modernising" the tax system. Some modernising! If he had read his own professional journal last week he would have discovered that this tax was first introduced in 1777, when it was a tax upon servants, and that, ironically enough, in 1873 it was abolished with respect to hotel employees—only to be reimposed less than 100 years later. He made a number of announcements and he made noises of sympathy which extended only to the sermon part of his speech and not to the announcement of practical points of policy. It was extremely disappointing. He quoted conclusions from a number of international statistics, with most of which I could not agree in any way. I have always been taught to be very careful about comparing international statistics, and I gratuitously pass on the advice to the Chief Secretary.
  I now come to the main part of his thesis, which was the Selective Employment Tax. This is, of course, entirely the core of the Budget. The Chancellor has chosen to make it the core of the Budget, and I believe that it has left him with very little manœuvring space to deal, as he should, with cases on their merits when they are presented to him from all parts of the House, as I am sure they will be. This is his choice. It is our job to criticise the measures which he puts forward in his Bill and not to

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  attempt to impose another Finance Bill; that is not our task. We dislike this Bill. The Chancellor has never show himself inhibited from introducing a Budget at any time of the year other than that traditional for a Budget, and indeed it may be that we shall have another Budget before the end of this year.
  We dislike intensely the method he has chosen for implementing his proposals and also we dislike not being in a position even now of knowing the full implications of the tax. Indeed, almost every word the Chief Secretary said made it clear that he is not ready to bring in this tax. It should be delayed till next year—at least till his proposals have been sorted out. We are in a difficult position in putting forward Amendments to this Bill without knowing what the next Bill will contain, and we are in a difficulty because of the terms of the Money Resolution to the Bill.
  Now, as to the tax itself. Seldom has a tax caused such an upheaval and such widespread dismay. From all sides there have been criticisms of it; indeed, from all sides criticisms have been sent to the Chancellor, and it is those criticisms which have led the Chief Secretary to make some of the noises of sympathy he has made today. There are certain criticisms which go to the root of the tax and certain criticisms which lead to mitigating its effect in relation to certain groups of people. I shall try to deal, first, with those which go to the root of the tax.
  The White Paper says that one of the objects of the tax was to redress
  "the balance between services and manufacturing, because services have been lightly taxed as compared with manufactured products."
  In fact, however, services have often borne the brunt of indirect taxes on commodities; they have borne the brunt of petrol tax, and they have borne the brunt of Purchase Tax. Indeed, in the days when we used to have Budgets which reduced Purchase Tax—those days, of course, are long since gone—those Budgets caused shopkeepers a good deal of trouble because they lost a lot of money through Purchase Tax having financed the holding of goods which were liable to that tax. But there are certain other services which have borne a lesser
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  proportion of taxes. These are the services which the Chancellor is proposing to tax now. They are not luxury services. They are the essential and vital services. They are food, housing, clothing, insurance—and, therefore, saving—financing, and all the specialist services, including research.
  This is a widespread tax. It is widespread tax upon essential and vital services. If its object is to take money out of the consumer's pocket—that is to reduce demand—it will only work through rising prices I thought I heard the Chief Secretary say that he thought that most industries would absorb the tax. If they do, the absorption will come from money which would otherwise have gone in savings and into modernising. It would seem, therefore, to be a backward step and not a forward step. The psychology of the Budget has not been lost upon the country. I think it will work only by price rises, but if prices do rise the Chancellor has arranged his Budget in such a way that he can blame someone else for the rises. This, of course, is a frequent occurrence with the present Government, for they are always ready to pass on the blame to somebody else while ready to take credit for the things which go right.
  The second objection, which goes to the root of the tax, is that it will hit export earners very badly indeed. I mentioned in my earlier speech on the Budget the special case of export houses and other export services. These services already suffer compared with manufacturing industry, because at least exports which attract tax get the drawback of tax. At least if one exports manufactured goods one gets an export rebate. Export services get no such rebate and are, therefore, in a bad position compared with manufacturing, and in this case if there is a balance to redress it will go to services. It will hit the hotel and catering trades very badly, and I understand that tourism is our fourth biggest dollar earner.
  It will also hit insurance and finance. The whole trend of financing exports recently has been to have a series of measures which will make it easier and easier to get finance and enable manufacturers to sell to people who cannot pay immediately. Yet these very finance houses will be the ones to be penalised in the Budget. They are the ones who

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  are enabling some of the manufacturers to do the exporting. That is a very serious objection to the tax.
  I noted that the Chief Secretary said, or I thought that he did, that the tax was infinitely variable in its impact and in its area. In that case, he can do a lot of the things which later in his speech he refused to do, and we shall make certain that we table Amendments which I hope we shall be successful in moving in order to put some of the things right.
  The next objection which goes to the root of the tax is the completely artificial classification between manufacturing and services. In so far as one manages to export products—and this is a vital part of the whole Budget strategy—it is a matter of teamwork between all sides of industry. It is no use being able to produce the goods if one cannot distrib ute, finance and sell them.
  Numerous Questions have been put to various Departments of Government to try to elucidate in more detail the exact classification. So far, they have been unsuccessful. Only last Monday there was an Answer from the Minister of Labour about the precise classification of head offices which said that the hon. Member must await the publication of the Bill. That means that we cannot discuss in detail the precise effect of the tax upon even manufacturing industry, not knowing the exact definition of "manufacturing industry." We should have had the other Bill long before we had to discuss the Second Reading of this Bill. But the essential point is that the whole of exporting is really part of one process, and it is quite artificial to try to divide it between the manufacturing and service industries.
  There is one further objectionable aspect of the tax, and I refer to the financing of it. In the Budget debate, the Chancellor said:
  "It is true that manufacturers… will have to wait for the premiums for which they are eligible. I have not over-looked this, and, against the background of the general credit restraint which it is necessary to maintain, I shall be considering what steps may be needed to enable the banks to respond to temporary needs for credit in such cases."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 728, c. 1457.]
  Three weeks have passed. I hope that the Chancellor has considered and will tell the House when he winds up what his decision is and how far he is going
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  to allow the banks to relax their credit restrictions and lend money to enable manufacturers and others to meet their very considerable obligations under the tax.
  We believe that it is quite wrong to force everyone to borrow at 7 or 7½ per cent. in order to give an interest-free loan to the Government. We shall table Amendments designed so that the impact of the tax does not come until the end of the financial year when the mechanism for repayment of premiums should be ready. I say "should" because for most taxes it would be an insult to call them half-baked. With this tax in its present state, it would be a compliment.
  The Chief Secretary, like all hon. Members, is worried about the administration of the tax. He will agree that I have some idea of the National Insurance administration, and I do not accept for a moment that it is necessary to collect the tax in respect of every single person. National Insurance is an excellent system of administration. There are already some 35 different insurance stamps and some 60 different rates of National Insurance contributions. That is a considerable number of permutations and combinations, and if given a reasonable amount of time to administer the tax properly—and no tax should be introduced before it is capable of being administered properly—it will not be necessary to take in the tax in respect of every single employed person. The Ministry could deal with it in a much better way by taking in the tax only from those whom it is desired to make liable to it.
  Apart from those objections which go right to the root of the tax, there are a number which could be used to mitigate the effect of it. During the course of the Bill and of the Ministry of Labour Bill later, we shall table many Amendments to mitigate the effect of the tax on people who are deserving cases.
  I anticipate that we shall get back to the days of Government majorities of the kind that we had under the previous Governments, when back bench Members spoke to Amendments on merit and even voted on merit. I anticipate that we shall be joined on this side on the occasion of this Finance Bill, unlike the last one, by many hon. Members opposite,

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  because a lot of these Amendments are not party political matters at all. I imagine that the Chancellor's own back benchers will be just as annoyed with him as we shall be if he does not give in.
  The Chief Secretary referred to some of the cases. I was very disappointed in what he had to say about charities. By a decision taken in principle many years ago, charities have always been exempt from direct taxes and direct rates have been mitigated. There is no new decision to take here. It is one which is as old as the hills. Charities are exempt from the effect of direct taxation, and that is a principle from which the Chancellor should start now. He should build the tax around that, so far as it relates to charities.
  Most hon. Members have had a large number of letters from charities in their constituencies and all over the country about the effect of the tax upon them. I want to refer to one in particular which came from the charity called "Help the Aged". It put the point most cogently:
  "The point we feel the Chancellor may not have appreciated is that he is not taxing those who are running charities such as 'Help the Aged', but is taking money from those in need."
  That is the essential point. In so far as he is taxing charities, he is not taxing something rather cold and abstract. He is taking money directly from those whom the charity is designed to help.
  The point was cogently put again in a letter published in The Times on 20th May, 1966:
  "We have just had a house-to-house collection for the Red Cross which has realised £3 10s. Od. It is gratifying to know that this sum will pay the employment tax for an ambulance driver and one assistant for one week and leave 20 shillings to run the ambulance and equip it with essential medical supplies."
  These cases speak for themselves. It is not a question of whether charities can be exempted from the tax; they must be exempted from the tax. We hope that the Chancellor will change his mind and announce that they will be exempt when he replies to the debate.
  Employees of all religious bodies should also be exempt from the tax. I have had representations from all kinds of religious bodies—from the Church of England, the Free Church and the synagogues
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  —and I should have thought that that again would have gone without argument.
  I come to another aspect about which we feel strongly. We feel that employees of educational establishments should be exempted from the tax. There are half a million children educated in independent schools. I understand that the tax would cost some £6·9 million. If they were all to close down there would be educational chaos. We think that the fiscal instrument should not be used to give vent to any political feelings that hon. Members opposite may have about independent schools. I come to a different category of employees—employees of nursing and convalescent homes, private hospitals and old people's homes. Not all are registered charities. Most of them, in fact, save a far greater liability from falling on the State. It would be far better for the State to do a little to help them, or at least to refrain from penalising them, than to take over all the buildings and obligations. These organisations should be free from the tax.
  The Chief Secretary referred to the employees of disabled persons who require whole or part-time help. He suggested that he would have some proposals to make, but he did not say what those proposals were. This is another example of the way in which the tax has not been thought out. The Chancellor has several hours between now and winding up the debate to find out what these proposals are. I hope that he will tell us exactly what he proposes to do to help those disabled who have to employ people to look after them.
  Another group of employees of organisations which we shall endeavour to help are those who work for organisations for the promotion or study of science, literature and the arts. It took us on this side of the House many years to exempt the theatre from Entertainments Duty. This Budget is a reverse step; it is, in effect, putting an entertainments tax on the theatre once again.
  For all those categories which I have mentioned we shall table Amendments, and I hope that we shall be successful in moving them. It would be even more helpful to the passage of the Finance Bill if the Chancellor were to give in to some of them at the outset. They all

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  speak for themselves, and I hope that he will consider them very carefully.
  Another aspect of the same group of Amendments concerns other employees who certainly should be excluded. The Chief Secretary referred to these—the part-time workers. It is inequitable that part time for this purpose should be defined as eight hours a week merely because the tax comes under the National Insurance Act. Why should it not be 20 to 21 hours a week as under the Redundancy Payments Act? I am delighted to note that I appear to have some support in this matter from hon. Members opposite. If that were done it would make a very considerable difference to the incidence of the tax, and it would help those in the retail trade who have to rely on this part-time labour to a considerable extent. It would also help a number of the old folk, many of whom do not work for more than about 20 hours a week but for whom it is most important that they should be able to continue work and that work should be available for them.
  The Chief Secretary referred to disabled employees. I hope that they will be excluded from the incidence of the tax, because it would be a great incentive to employers to employ more than the minimum quota if disabled workers were excluded from the operation of the tax. I hope that the Chancellor will consider the problems of the handicapped and disabled people and will agree that these people, too, should be exempt.
  We shall also table Amendments designed to raise the absurdities of a tax which treats farming, horticulture, forestry, tourism, catering, hotels and the construction industry differently from some of the manufacturing industries. This matter will arise to some extent on this Bill and to some exent on a later Bill, but we should have discussions on this Bill about the classifications.
  The Chief Secretary referred to certain aspects of the Selective Employment Tax. First, he mentioned the appeal procedure. II is obvious that if we are to impose a tax which falls on employed but not on self-employed, there will be a number of questions for determination as to classification. Under the National Insurance Act at present—and I assume that this will apply in this case—such questions are for the determination of the Minister.
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  It is rather strange that the Minister of National Insurance should have jurisdiction to determine what are essentially taxation matters. We shall have to look very carefully at whether a proper appeal procedure is provided for this tax. Under certain circumstances the Minister can refer the matter to the courts, but we are here dealing with a tax, and it is wrong to have the National Insurance appeals machinery applying to this tax.
  Very few people have referred to a fact which struck me the moment the Chancellor announced the tax—that it is a staggeringly high impost, for 25s., or 25 bob-a-nob, as one of the newspapers put it, is very high indeed. When I think how carefully we used to consider the question of raising National Insurance contributions and how we were always wary of raising them as by as much as 3s. a week for the employer, I realise just how high this tax is; and the higher it is the more important it will be to get the appeal procedure right.
  Any new tax should be thoroughly considered before being presented to the House—not afterwards but before. The requisite decisions have not been taken, and the House will have to do the work of the Executive throughout the Finance Bill by making essential decisions on policy.
  Mr. William Hamilton: The hon. Lady has suggested certain exemptions from the tax. Some of us might agree about some of them. Has she, or has her right hon. Friend, made any attempt to estimate what the loss to the Revenue would be from those exemptions? Has she any suggestion as to an alternative source of that revenue?
  Mrs. Thatcher: It is difficult to assess the loss to the Revenue when it is so difficult to assess the yield of the tax. The Chancellor pointed out that with a new tax it is very difficult to assess the yield. When he cannot even decide what is a manufacturing establishment and what is not, it is even more difficult.
  I come to what the Chancellor called his general Budget judgment in relation to this tax. There have been a number of views about the general Budget judgment in relation to this tax. I recognise at the outset that it is a very difficult year in which to make a general

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  Bugetary judgment. There is the unknown effect of the imports surcharge being taken off at the end of November. We do not know whether quotas or licensing will be imposed a couple of days before the imports surcharge is due to come off. We cannot get an undertaking from the President of the Board of Trade on this point. We do not know the effect of the present strike on exports and imports. We do not know how far the terms of trade will continue to turn against us or how far copper prices will rise, although we know that they almost certainly will rise. We do not know the cost of sanctions against Rhodesia. All this makes it a very difficult year. I accept that at the outset. But even accepting that, in relation to the tax itself the judgment is by no means clear cut.
  The Economist, too, shares this view. The Chancellor put his estimate of the deflationary effect of this tax at £315 million. But the Economist points out that he will have to return a part of that in the quarter beginning in the next fiscal year. Other commentators have put the deflationary effect of this tax this year at only £135 million, which is the amount of net non-returnable receipts this year. Others have said that the effect of the tax is deflationary by some £240 million a year because that is what it would do in a full year. This is a very wide discrepancy, and if it is as wide as this I doubt very much whether I am under any obligation to propose alternative sources of taxation.
  Moreover, even since the Chancellor framed his Budget there have been a number of other Measures agreed to which will require many Supplementary Estimates to be placed before the House. Indeed, the Chancellor must have begun to feel that the economy is in very much better shape now to give his approval to the Measure which was brought before the House yesterday and which required another £65 million of expenditure. The Chancellor shakes his head. Perhaps the economy is not in very much better shape after all. Undoubtedly he will tell us tonight.
  It may be that there is an alternative explanation—what we know as the "lump it" explanation, which was referred to at the Dispatch Box by the
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  former Chancellor of the Duchy of Lancaster on one occasion, when he said that the Government would do what they liked about the social services and if the international financiers did not like it they could lump it. Perhaps the right hon. Gentleman will give us the true explanation.
  I now turn to certain other specific taxes mentioned in the Budget. The Chief Secretary has given us a number of details about these taxes. The Second Reading of the Finance Bill is not the place to discuss them in detail, but there are a few comments that I should like to make. Everything that we said last year about the complexities of the Capital Gains Tax has been abundantly borne out in fact and can be substantiated by those whose duty it is to try to operate this tax, whether inside or outside the Inland Revenue. I do not know who is complaining most.
  Even the Chief Secretary will have noted that there was a meeting of accountants last week at which their grumbles were very vociferous and entirely warranted. This tax will probably go down in history as the tax which had the highest cost of collection in proportion to its yield. In some cases the requisite calculations are impossible to make even when presented to the Treasury. My hon. Friend the Member for Belfast, North (Mr. Stratton Mills), on 8th March, 1966, asked the Chancellor of the Exchequer:
  "what was the original cost to the Treasury of the £316 million of dollar securities recently sold?"
  That would be a standard calculation if we were having to do it for Capital Gains Tax purposes, and one would have expected the Treasury to be able to provide an answer. Not a bit of it; the reply was:
  "Their current value is, as I stated, £316 million."
  That was very helpful. That was what the Question was about. The answer went on:
  "Changes in the composition of the portfolio over time make it impossible to calculate the original cost of these securities."—[OFFICIAL REPORT, 8th March, 1966; Vol. 725, c. 460.]
  It is extraordinary how the Treasury and the Inland Revenue expect taxpayers to do what they themselves cannot do.

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  The Bill provides some specific reliefs from Capital Gains Tax, and we shall table Amendments to these. There is one point to which I want to refer now. In the Bill the Chancellor has allowed to life assurance funds the same Capital Gains Tax level as we wrested from him in the middle of one night in respect of investment trust funds last year. But this rate is too high for life assurance funds. These funds are mostly held by people who would not be liable to the maximum Capital Gains Tax rate and who, if they were individuals, would be able to choose the alternative basis of assessment.
  It is quite unfair that these individuals should be penalised because they hold their savings in life assurance funds rather than individually. This is specially important now that the majority of savings are done through life assurance companies. There are also special reasons why life assurance companies warrant more relief than they will at present obtain in respect of dividends paid oat of pre-1966-67 profits. They are reasons which do not apply to ordinary companies but do apply to life assurance companies, and we shall have something to say about this matter when the time comes.
  I now come to a further small but important necessary relief from some specific taxation proposals. I refer to the adverse effect of bunching dividends on age relief, where a person over 65 years of age receives age relief if his investment income does not exceed £900 during the fiscal year. It may be that the bunching of dividends takes his or her income well above that amount, and I would have thought that this was a case where specific reliefs should be provided to take this into account, so that these people are not penalised.
  In my last speech on the Budget I devoted a section to what might be entitled "Women and Children Last". I shall confine my remarks now to the elect of the Budget on married women, and the way in which I think the taxation erect may be alleviated. The difficulty is that what the Government preach and what they practise are two entirely different things. There is nothing unusual about that with this Government, but there must come a time when the process
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  comes to an end. The National Plan, on page 38, in paragraphs 11 and 12, says:
  "Further consideration will then be given to ways of making it easier for those married women who wish to do so to take paid employment."
  The National Plan is attempting to make it easier. Part of the debate on the Gracious Speech was devoted to Ministry of Labour matters and this theme came up again. But as soon as we had an assurance on the matter along came the Chancellor with his fiscal measures, which make it infinitely more difficult. It would be so much easier if the two Departments worked together and pulled in the same direction instead of opposite ones.
  There are three fiscal ways in which the Chancellor could encourage married women to return to work. Here I should declare an interest. I am at work—at least I hope that the Chancellor considers that replying to his Budget is being at work. First, tax relief could be given for domestic help, without which a married woman cannot contemplate going back to work. There is a legal decision which prevents any expenditure on domestic help from ranking for relief from tax. It is about time we reversed that decision and made special statutory provision.
  A second way would be to provide that the first £1,000 of a wife's earnings—because many of the women whom we want back are highly trained, and it has cost the State a lot of money to train them, and they can command high salaries—should not count for Surtax purposes.
  A third possibility would be a considerable extension of the point of earned income relief. Whichever way the Chancellor wishes to do this, the essential point is as The Times put it the other day in a short piece of doggerel, that
  "Working wives ought to be
  Left with a lot more £ s. d."
  I hope that that message is not lost on the Chancellor.
  The idea has been floated about that the taxes in the Budget could one day be used to raise revenue in place of Income Tax. It is important to get one fact clear. This tax is not in substitution for any other tax; it is in addition to taxes which are already severe. This is a bad tax, and for that reason we shall vote against it tonight.
  4.47 p.m.
  Mr. Roy Hughes: I welcome my first opportunity to address the House, and, in passing, I express my thanks to the people of Newport who sent me here. From time to time there is controversy on the question whether my constituency lies in England or Wales. In view of the fact that maiden speeches tend to be non-controversial it may be appropriate if I describe Newport as being situated in the ancient Kingdom of Gwent. What is beyond dispute is the fact that Newport possesses the premier Rugby team in Wales, despite any reservations my right hon. Friend the Chancellor may have on the subject.
  On a personal note, I recall a train journey that I made a few weeks ago. I entered a compartment which was occupied by an hon. Lady who sits on the benches opposite. After we had exchanged the usual pleasantries, she said, "Are you a lecturer?" I said, "Oh, no, I am one of those dreadful trade unionists." Needless to say, after that we had a most interesting conversation.
  The right hon. and learned Gentleman who preceded me as Member for Newport, Sir Frank Soskice, played a most distinguished part in the affairs of the House. I am very privileged indeed to succeed him. He was popular in the constituency and most kind to me personally. I know that hon. Members on both sides will join me in congratulating him upon his recent honour and will welcome him back to Westminster in another place.
  Hon. Members: Hear, hear.
  Mr. Hughes: Fundamentally, Newport is known for its dock facilities. It grew up as a port when millions of tons of coal were being exported to many parts of the world. Nowadays, the industrial pattern and organisation of the area has considerably changed and my constituency tends to be increasingly reliant on the steel industry. It imports vast quantities of iron ore: although this is a valuable traffic, it would seem to be tempting fate to rely so exclusively on this one form of trade. We need a wide diversity of traffic so as to ensure the future prosperity of the area.
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  At the moment, we are anxiously awaiting the decision of the Minister of Transport on the future organisation and development of dock facilities in the Bristol Channel. In view of the tragic past industrial history of South Wales, any decision by the Minister to by-pass the area will bring back many old fears and anxieties.
  The Government propose in the next few years to carry out a major reorganisation of the steel industry. I welcome this. On the border of my constituency lies the great steel plant of Llanwern. I believe that there is a need for a further major extension of the plant to spread its overheads and make it a more viable economic unit. When considering their reorganisation plan, I am sure that the Government will bear this suggestion in mind.
  This is the Second Reading of the Finance Bill. One of its fascinating features is not what it contains, but rather what it does not contain. Before the Budget, the pundits were confidently predicting stiff taxation in the traditional pattern, but they were proved wrong. It is not proposed to increase Purchase Tax, car licences, beer or tobacco duties. Instead, one of its principal provisions is the Selective Employment Tax, which I welcome, though bearing in mind that it contains a number of anomalies which need to be ironed out. It is, however, a new way of raising taxes and a means of tilting the balance of the economy towards greater productivity. After all, the primary issue is how can we earn our living as a nation. In this sense, the new tax is a step in the right direction.
  I also welcome the recent proposals of the Prime Minister for increasing productivity. To me, the real problem all along has not been that wages are too high, but that productivity is too low. There has been a tendency for many firms to rely on out-dated methods, failing to modernise simply because labour has been too cheap. Sir Maurice Laing, the President of the Confederation of British Industry, subscribes to the view that our basic economic difficulties stem from a lack of efficient use of manpower.
  Speaking in London on 18th May this year at the annual meeting of the newly formed association of employers' and

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  manufacturers' organisations, he is quoted as saying:
  "Until we permanently solve the problem of using our manpower with the maximum practical degree of efficiency we shall stagger from balance of payments crisis to crisis."
  Compared with our principal trading rivals—Western Germany, France and Japan, wages in this country have not risen more. If, however, output per man hour had risen as much in this country as it has in Western Germany and Japan, our exports would be much more competitive in the world's markets. Is it a coincidence that in these countries, where hourly rates have risen most, output per man hour has also risen most?
  I have always had the highest regard for the British worker, from the point of view both of skill and of effort put into a job. As I see it, the increased productivity which the nation so badly needs can come only from increased capital investment in industry. In other words, it will come by putting more horsepower at the elbow of the worker so that more can be produced with less effort.
  In one of his more philosophical moods, the Minister of Labour has described the period in which we live as the "age of grab". He is also reliably reported as having come to the conclusion that the principal difficulty in industry is that of overtime working. Many of us have realised for some time that some employers rely on overtime as a form of temporary wage increase. When the order books are full, plenty of overtime is available, but when there is a slackening off in orders, overtime is cut to a bare minimum and, correspondingly, wage costs are, too.
  I do not wish to place all the blame in this respect on the employers, however. Many work people are heavily in debt with mortgage repayments and payments on cars, televisions, washing machines and refrigerators. Far be it from me to deny ordinary people these useful amenities and labour-saving devices, but in many cases these articles are not being paid for through higher wages and increased productivity, but through systematic overtime working.
  During the last 25 years, hours of work have hardly been reduced because industry has been organised in such a way that ordinary families cannot obtain a
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  decent standard of living on a 40-hour week. There is a fundamental need for change and a reawakening in industry. It is the manufacturing sector of our economy on which we must concentrate and which we must make more efficient.
  The principal provisions in the Bill and recent utterances of Government spokesmen gives me cause for hope that, at last, more emphasis is being placed upon increased productivity, to be obtained through a more efficient organisation of industry, and less on the more negative aspects of wage restraint. I trust that this trend will continue.
  5.0 p.m.
  Mrs. Jill Knight: Throughout the length and breadth of this land there exist some strange, and even primitive, customs by which newcomers are initiated into a new life. For instance, I believe that those adopting the cooper's trade are incarcerated in a barrel and rolled around a yard. I know of a school where the custom is to rub a certain white berry which, fortuitously or not, appears on the bushes at the start of the new school year, into the hair of the poor unfortunates commencing as new pupils.
  However, such is the gentleness of the House to its fledglings that I take courage from the certainty that I am in no danger today from barrels or berries. The only ordeal is inflicted from within by one's own nervous reflexes.
  I understand that it is customary on these occasions for new Members to speak of their constituencies and their predecessors. I do this with justifiable pleasure and pride. Dame Edith Pitt was a very great lady. When I came here I very quickly discovered the depth of affection and respect that existed for her in all quarters of the House. The whole object of her life was service; and serve she did—her constituents, her country, and her party, with utter devotion and loyalty. Hon. Members will perhaps recognise that in choosing another woman the Edgbaston constituency was quite deliberately paying an important tribute to Dame Edith, for this is the first time a woman of the same party has ever succeeded a woman to a Parliamentary seat.
  What a seat it is. Edgbaston goes back in history to Anglo-Saxon times, although

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  I have no intention of tracing it all the way there this afternoon. Just over 100 years ago a great deal of it was laid out on pleasant, spacious lines, and I recommend those who believe that Birmingham is nothing but factory chimneys to visit my green and pleasant constituency. Here they will find the judges' lodgings, some very beautiful botanical gardens, a silver sweep of reservoir, a famous hospital, an important university, many excellent schools, a high-powered chamber of commerce, and a world-famous cricket ground. I am very proud to represent the Edgbaston constituency.
  Now to the Bill. I wish, first, to speak on Clause 42. I listened with very great anxiousness to what the Chief Secretary said about the Selective Employment Tax and I was, like my hon. Friend the Member for Finchley (Mrs. Thatcher), very bitterly disappointed that he was not more forthcoming with regard to charities. Perhaps I am over-optimistic, but I seemed to detect that there was a slight glimmer of hope and that at least the doors were not quite closed. If this is so, may I warmly recommend the right hon. Gentleman to yield to whatever impulses he may have to be more generous towards charities, because there certainly is every reason to be so.
  The Chancellor of the Exchequer has already told the House that the cost to the larger charitable institutions will be of the order of £2 million. For thousands of smaller charities, there is as yet no estimate, but we know, for instance, that Oxfam will be poorer by £10,800. The Royal School for Deaf Children—I have one in my constituency—must find £2,800. The Church of England Children's Society will lose £23,000. The National Society for the Prevention of Cruelty to Children will have to find no less than £30,000.
  There is an almost endless catalogue, and I have no doubt that some charities will be forced out of existence, unless something is done to alleviate the impact of this tax, because, although the British public is as generous as any public anywhere, I point out that it gives deliberately to certain causes. People will not give to the State, which they suspect is already taking more than a fair share from them in rates and taxes. I am sorry if this distresses the right hon.
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  Gentleman, but I must tell him that, while the man in the street will buy a flag for charity, he will not buy one for the Chancellor of the Exchequer.
  State and local authority welfare services will certainly become less efficient. Speaking as one who has been engaged for some years in the practical application of these services, I can tell the House that these, by themselves, are not capable of meeting all needs. Without the aid of voluntary helpers administered by such bodies as my own Birmingham Council of Social Services, they cannot manage. There are the W.V.S. ladies, for instance, who carry out the meals on wheels service. There are the case workers and voluntary helpers who work in hospitals or with problem families. The Birmingham Council of Social Services says that it simply cannot afford to absorb the extra charge, which, I understand, will be in the region of about £1,000 a year.
  Children committees are often very glad indeed to place some of the children they have in care to a voluntary children's home. For one thing, these homes are very much cheaper than those run by local authorities. For another thing, particularly difficult cases, not perhaps acceptable to local authority homes, can often be accommodated in voluntary homes. This is because devoted workers put in hours of service for reward which is not only monetary.
  Ministries, too, ask the Y.M.C.A. to run hostels. How can such work be extended if this organisation, which I remind the House is one of the oldest of the recognised voluntary organisations, has to sustain an employment tax at about £124,000 a year? It seems to be neither wise nor just that voluntary bodies, already stretched to the limit of their resources, and using the maximum voluntary help for the minimum of paid staff, should be penalised.
  The Government must surely by now also be aware of the blow that the Selective Employment Tax is to music and the arts. For a country which is aiming at raising its standards of taste, I find it astonishing that the Government should smile upon juke box manufacturers and tax the philharmonic orchestras, should fine the museums and art galleries and yet give a subsidy for the manufacture of plastic gnomes.

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  Perhaps the most incredible thing about all this is the army of extra civil servants needed to perform the complicated fiscal minuet of taking more than is needed and giving back more than is taken. The cost of this danse macabre will mop up a goodly portion of the money bled from charitable institutions.
  The gyrations of this strange dance are certainly very extensive. The Arts Council gets a grant from the Government amounting to £1,250,000; but the theatres, the orchestras and the ballet will have to pay almost the same sum back to the Exchequer. Local authorities give rate rebates to charities, but the Selective Employment Tax takes it away again.
  I am also deeply concerned about part-time workers. I am not really happy about what the Chief Secretary said, in his optimistic tone, about these women. Some are women, fitting in a job they can manage while their children are at school. Some are old-age pensioners. Some are disabled. It simply is not good enough to say that it does not matter, that these people will not be sacked, because it is the employer who pays the tax. With the employer paying just the same tax for them as for full-time workers, there is no doubt but that they will tend to become redundant. It is no use telling them that they must get a full-time job in a manufacturing industry. I hey will not, because they cannot.
  Another question disturbs me very much. Some enlightened health authorities set up sheltered workshops for handicapped people. Strictly speaking, I understand that this is not a "service" as listed in the explanatory leaflet about fie Selective Employment Tax. These people are frequently mentally handicapped people and they do contract work for local factories. They also do a great deal on the service side. For instance, some of them do laundry work. Are these workshops to be penalised? Undoubtedly, the tax will add enormously to their running costs. Whether a local authority will bear it and then have the money paid back again in another of these costly monetary manoeuvres so beloved of the Chancellor, I do not know.
  I understand that already warning signs are appearing to the effect that even
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  tax officials are of the opinion that the complexities of measures passed by the Chancellor are becoming too much to comprehend. It would seem that those drafting fiscal legislation either cannot or will not speak plain English. For example, I draw attention to Clause 38(3), which literally defies elucidation. It states:
  "For the purposes of this section an interest including an interest limited to cease on death shall be treated as two separate interests one of which is the interest limited to cease on death, and an interest shall he regarded as one including an interest limited to cease on death if it is an interest under more than one title and one title is to an interest limited to cease on death, or if it is an interest which cannot terminate before the death, or which in certain contingencies not related to the death cannot terminate before the death."
  I tried out that subsection on three lawyers. Two of them said frankly that they could not make head or tail of it. The third said that he might be able to do something with it if I left it with him over the weekend. Is it not possible for Bills to be couched in phrases which are comprehensible to the hon. Members who pass them?
  Since coming here I have reached the conclusion that, if brevity is the soul of wit, there are too few witty souls in this place. Wit may desert one, the opportunity for brevity never. I now take it.
  5.12 p.m.
  Mr. William Hamling: I am fortunate to have the opportunity to follow two very fine maiden speeches. The first was made by my hon. Friend the Member for Newport (Mr. Roy Hughes), who comes here with a typical South Wales accent and reminds one of so many of our old friends. He speaks with the authentic tones of the old South Wales trade unionist.
  It is particularly pleasant to be reminded of his predecessor, Sir Frank Soskice, whom so many of us have known for so very many years and have admired, respected and loved. Perhaps the Newport Rugby team is not the best there is—there are one or two others, like Waterloo and Liverpool—but we welcome my hon. Friend to the House and congratulate him on having made his maiden speech.

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  It also falls to me to compliment the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) on her very charming maiden speech. The hon. Lady is a pleasant addition to the benches opposite. One could wish for a few more like her and perhaps a few less of the others. She made what I would call a typically West Woolwich noncontroversial speech, because she clouted my right hon. Friend the Chancellor with everything she had but did it so nicely that he could not possibly be offended. The hon. Lady's speech warned him and other members of the Treasury Bench that in future there will be on the Opposition benches a very good ally for the hon. Lady the Member for Finchley (Mrs. Thatcher), who is a formidable debater indeed. I often wonder what would happen if Cassius Clay had to fight someone like the hon. Member for Finchley. He would certainly lose.
  It is also pleasant to be reminded of Dame Edith Pitt, the predecessor of the hon. Member for Birmingham, Edgbaston, whom we all admired and respected. I had a special affection for Dame Edith, because she showed great kindness and restraint in dealing with me when she was Chairman of a certain Committee upstairs. Perhaps that takes a bit of doing now and again.
  I turn to the attitude of the Opposition to the Finance Bill in general and the Selective Employment Tax in particular. I am reminded that we received a good deal of advice from financiers, bankers and economists in various quarters urging us to introduce a deflationary Budget. It is remarkable that, having produced a Budget—certainly a type of tax—which is intended to be deflationary, we should then have complaints from the very people who previously advocated the introduction of a deflationary Budget.
  While they are being indignant about the Selective Employment Tax, we might remind them that a most distinguished right hon. and learned Gentleman opposite introduced a similar tax in 1960, the Payroll Tax. That was very similar in purpose because it was designed to reduce consumption—to place a regulator on consumption—and to take out of the economy about £200 million of purchasing power; which, I suppose, compares very much with the figure that the Selective
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  Employment Tax is intended to take out of the economy. So before hon. Gentlemen opposite start getting too indignant over this, they might look back to some of the proposals of this sort which they have advocated and supported.
  Mr. Ridley Mr. Ridley rose——
  Mr. Hamling: No, I will not give way. I do not have much time. I promised not to speak long and I am sure that the hon. Gentleman will have an opportunity to speak later.
  The Opposition now repudiate any obligation on their part to suggest how, alternatively, this revenue should be raised. The only comment I will make on that—apart from the obvious one of reminding hon. Gentlemen opposite of what they said when they were in Government—is that if my right hon. Friend had presented a Finance Bill in which he set out to increase Corporation Tax, the tax on petrol, Vehicle Excise Duty or Income Tax, the indignant speeches of hon. Gentlemen opposite would have outdone anything that the hon. Member for Finch-ley said this afternoon.
  While considering the Tory attitude towards finance in general, one should not forget that hon. Gentlemen opposite have consistently stated for the last two years that we are in a state of over-employment. And, having said that, they are indeed under a moral obligation to tell the House and the country how they would proceed to increase unemployment and what economic and financial measures they would introduce to produce an increase in unemployment. I hope for once that they will accept that challenge.
  Having come to the aid of my right hon. Friend the Chancellor, I will now say something of a more critical nature to him. [Interruption.] We are entitled, unlike hon. Gentlemen opposite, to do that. Hon. Gentlemen opposite had 13 years of bankruptcy, so they can rest silent for once. I question whether it is necessary at this stage to remove so much purchasing power from the community, and I ask whether it is necessary to produce this degree of deflation at this time. We are budgeting this year for a very high surplus—for a great amount of deflation in the economy—and it is questionable whether we are going a little too far. The index of

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  production has stuck obstinately at about 131 to 133. [HON. MEMBERS: "Hear, hear."] It is no good hon. Members opposite saying, "Hear, hear". After all, they want unemployment. They want to reduce output. What is needed, surely, is to encourage output, if not demand, and one may ask whether this tax is designed to do that.
  Another purpose of the tax is supposed to be to subsidise exports without breaking G.A.T.T. rules. One point here is that non-exporting industries will benefit from the tax. One might ask whether continued membership of the G.A.T.T. is worth all this sacrifice. The E.E.C. countries manage to use G.A.T.T. rules and at the same time have Customs unions. In these circumstances, we seem to be suffering certain disadvantages compared with them.
  Another purpose of the tax is supposed to be to increase the efficient use of labour by all employers during the period September, 1966, to March, 1967. Is it true that labour hoarding is to be found anly in the small inefficient firms and in the service industries? Is it not true that there are some manufacturing firms hoarding labour which will benefit from the tax—[An HON. MEMBER: "Hear, hear."]—especially in Birmingham? I am glad to hear that somebody opposite agrees. Is it true that labour hoarding exists only in distribution? There are many larger firms which will continue to hoard labour in anticipation of the end of the credit squeeze, and there is much labour hoarding in manufacturing.
  There may well be a shake-up of labour, but the labour shaken out may well be inefficient and will need a great deal of retraining in order to be absorbed in manufacturing industries, and much of it—I think of part-time workers and women workers—may not be readily adaptable to manufacturing trades.
  On the question of shifting the emphasis on growth from service industries to manufacturing, it is reasonable to argue that the standard industrial classification is not entirely satisfactory in this respect. Past editions of the Ministry of Labour Gazette have shown that about 22 per cent. of the labour force in secondary industry is clerical or administrative. Some of this, surely, is not of very great advantage to the export trade or to
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  manufacturing. Should not bounties be based, perhaps, on occupational rather than industrial classifications so that, for example, chemists, technicians and people of that kind could count towards the bonus and clerks, typists, administrators and, perhaps, managing directors would not?
  There is also the doubt as to whether in integrated concerns there may be a tendency for ambiguously classified staff to be transferred from the non-industrial parts of the undertaking to the industrial subsidiaries or operating companies. These are points which should be watched.
  In presenting the Finance Bill, my right hon. Friend anticipated some of the criticisms which certain of us might make, particularly about charitable societies and organisations and the mentally and physically handicapped. But I make one point on this aspect of the matter. Not all mentally or physically handicapped workers are easily identifiable. I want my right hon. Friend to look into this very closely. I hope that he will look also at the position of some elderly workers and part-time workers, especially widows.
  On the retail trade side, I make a plea for discrimination in favour of the Cooperative movement. Some of my hon. Friends have argued with me on this and said, "Surely, you will not argue that co-ops ought to be treated differently from private retail firms". The short answer is that I am, and I shall explain why. A co-operative society is not like an ordinary private retail firm which exists for profit. The purpose of a cooperative society, although it has to make a surplus in order to continue, is service. My society, the Royal Arsenal Co-operative Society, provides services to its members as consumers which no private firm in Woolwich or the South of London provides. We provide services that no private firm could or would give, and we shall be in great difficulties under this tax. It will cost us about £300,000 a year. We offer very special services which we shall have to discontinue, and our members will be losing certain services to which they, as members, feel they are entitled.
  Normal economic considerations do not apply in this sort of case. I hope very much that my right hon. Friend will have

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  something to say when he winds up which will be of benefit to a co-operative society. [Laughter.] Before hon. and right hon. Members opposite laugh too much, it should be remembered that, over the years when they were in Government, they themselves accepted discrimination at law in favour of co-operative societies. They should keep that in mind before they start giggling, or they should go outside and do their homework. The other plea I make is for investment grants for co-operative societies and for retail firms in order to make them more efficient.
  In general, I am in favour of this kind of selective tax, this approach to taxation. It is necessary to look at new sources of revenue. It is necessary to cast the fiscal net much more widely. How dreary it would be to have another of the sort of Budgets we were having, for example, in 1961. There is need for a new look to be given to our taxes, and in that respect I congratulate my right hon. Friend.
  5.27 p.m.
  Mr. Tim Fortescue: I thank you, Mr. Deputy Speaker, for allowing me to catch your eye in this important debate. I do not know whether I am relieved or alarmed to find that I have hit the period between the Front Bench speeches and the time at which hon. Members return from Epsom. It must, I suppose, be a long time since there were more hon. Members on this side of the House than on the other side on Derby day.
  I stand here in the room of Richard Bingham, who represented Garston in the House from 1957 until this year. Dick Bingham is a courteous and charming man who made many friends in the House. He is much beloved by the constituents of Garston, where he is their pride and joy, being a "local boy". About a year ago, he felt that he had to choose between his legal career and his Parliamentary career, and he decided that he would choose the law. Who am I to say that he was wrong? His recent appointment as Judge of Appeal in the Isle of Man is undoubtedly the first step towards greater eminence which, I am sure, will come. He will be much missed in the House.
  I suppose that for every Member his constituency is remarkable, just as for
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  every parent his child is remarkable; but for Garston the word "remarkable" is too mild. Garston must be very nearly unique. It covers about 13 square miles of the city of Liverpool, and one cannot get much nearer to being unique than that. It has its own dock system quite distinct from the ordinary Mersey dock system, and I am glad to say that this dock system is on the point of being removed from the control of a nationalised board where it has been most efficiently administered, and being handed over to the less public Mersey Docks and Harbour Board. This must be an unusual way for any enterprise to move in these days.
  Garston has five golf courses within the bounds of the city of Liverpool. It has belts of rolling parkland. It has an industrial estate, it has Speke Airport, and it has Woolton Village, a famous name in the Conservative pantheon. Above all, it has 67,000 of the kindest, warmest-hearted and most hospitable people I have ever met. I should know, because I am the first southerner ever to be elected for this constituency. They have taken me to their hearts, and I only hope that I shall not let them down.
  There is another feature of representing a Liverpool constituency which may not be entirely appreciated by all hon. Members, and that is that once a year about this time half one's constituents come to London on the same day to see one or other of their football teams playing in the Cup Final at Wembley. This was the other day, and they came as usual. I would also point out that if one hears a violent argument going on in Liverpool, even during a General Election campaign, between a group of men, and the name "Wilson" is being bandied about, they are talking about the Everton full back and not the Prime Minister. Liverpool priorities are sometimes slightly humbling.
  New Members of Parliament have three advantages to which I wish briefly to refer. First, there is the extraordinary kindness and courtesy which is shown to them by all hon. Members on both sides of the House. This has been referred to by many maiden speakers, and I add my tribute to all hon. Members for this feature. Every one has been enormously kind to me. I should like especially to

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  mention the hon. Members representing Liverpool constituencies on the other side of the House—I am afraid that I cannot at the moment see any of them here—who went out of their way to show me the ropes. I am most grateful to them.
  The second courtesy is the indulgence shown to the maiden speaker, which is being shown to me now. A third, which comes from circumstance rather than tradition, is that, by definition, new Members of Parliament are able to look at things through the eyes of the general public rather more easily than other hon. Members can because we are closer to being members of the general public than the others are.
  It must be admitted that this time the new Members of Parliament have been thrown into the deep end of Parliamentary matters rather fiercely. We had a Budget debate about 24 hours after we came here. Since then we have had a Motion of censure, several pieces of major legislation and a message proclaiming a state of emergency. There have been many things in the space of four or five weeks which in other circumstances we might not have met for a long time. These things have made a considerable impression on us, perhaps more impression on new hon. Members on this side than on the other side for obvious numerical reasons.
  We have seen many things happening. During the Budget debate we saw the Chancellor refusing to give the House the date on which the Ministry of Labour Bill would be published, and we kept our counsel. During the debate on the Motion of censure on a Minister, we saw an hon. Member, for whom I have the greatest regard, brought into the House in an attempt to turn the whole thing into a boisterous farce. In the debate on the Land Commission Bill we saw a Minister refusing to give the House what the estimated levy of the Bill would be, and we kept our counsel again.
  Perhaps I might say—I know that I am a little out of order—that from the height of my extreme ignorance it would seem to me to be more profitable for any reform of the procedure in this House to turn its attention towards limitations of the power of the Executive in the shape of the Government Front
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  Bench than to trying to take away any of the pieces of harmless ceremonial which remind us of the strenuous efforts of this House during its history to reduce the power of the Executive in the person of the Sovereign. The action of the Minister during the Land Commission debate in refusing to give the estimated yield of taxation was surely a twentieth century version of the reasons why in the seventeenth century Charles I was executed. I am not one who normally advocates capital punishment, but in this case the precedents seem to be remarkably strong.
  I turn to the subject of this debate—the Finance Bill in particular, and the Selective Employment Tax. I have one simple question to which I should like the Chancellor to reply. To me and to many others it is still not clear, in spite of the cogent speech of the Chief Secretary this afternoon, exactly what the Chancellor's objectives are in imposing that tax, and, in patricular, how he reconciles it with other objectives of the national economy which he and his colleagues constantly put at the top of the list of our national priorities.
  It is easy to ridicule the tax, and so many have done it far better than I can that it would be almost sadistic to continue. Who would have thought that we should ever see the Governor of the Bank of England and other eminent bankers put in the same category for taxation purposes as a lady employed by a striptease joint, simply because neither is productive? It seems to me that this is not a logical or sensible categorisation. In the Budget debate the First Secretary said that it was a question of rough justice. On this side of the House the roughness is painfully obvious but the justice is scarcely visible.
  Before I came to this House I had the honour and privilege of being a manager in a large industrial concern. I am told that there are very few managers in this House. I do not know why that should be. It has been suggested that, whereas there are plenty of company directors and trade union officials, there are very few managers, because managers cannot be spared. It would not do for me to follow that line of thought very far, because, after all, I have been spared. However, I believe that we

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  should have more managers in the House, and I will explain why.
  Part of the job of a manager—perhaps the most important part—and the thing which distinguishes a good manager from a bad manager, or a manager from a non-manager, is the ability to foresee the result of one's actions before deciding what to do, and before putting a decision into practice, to be able, roughly anyway, to foresee what will happen when one does so. That is what management is all about. I believe that the Selective Employment Tax has been imposed without anybody foreseeing what effect it will have on the nation.
  In order to illustrate this, I will take one or two of the sections of the economy and explain my meaning. The first one, of which I know something, is the milk industry. The price of milk is controlled throughout every stage of its long journey from the farm to the doorstep. The price which a farmer gets for his milk from the Milk Marketing Boards is set by the Minister of Agriculture at the Annual Price Review. It is then allotted by the Boards according to the estimated gallonage to be used for liquid milk and manufacturing milk. Then the agreed costs of the producers and distributors of milk are set by abstruse calculations based on costings from dairy companies all over the country, and decided by the Ministry, on a cost plus basis.
  These calculations are made to three decimal points of 1d. per gallon. Everything is calculated, everything is fixed and everything is arranged. This is a controlled industry. It is the last controlled industry. It is the last relic of wartime food controls. Whether it should continue to be so is an argument that I should like to deploy on another occasion; but it is.
  Into this controlled situation the Chancellor suddenly introduces a new tax. He intends, we presume, to tax milk distribution with the Selective Employment Tax. I should like to know what he is trying to do to the price of milk on the doorstep. Is he intending to increase it; or is he intending to say to the housewife "You cannot have the milk on your doorstep every morning, where you want it, because it will cost the milkman too much to put it there"? Would it not
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  have been more honest and more ethical to have said to the electorate before the General Election campaign that if Labour got back to power milk would either be more expensive or would not be on the doorstep in the morning?
  My second point concerns the building industry, which has been mentioned by many other hon. Members. The architectural profession will be greatly hit by this tax. There is a grave shortage of labour in that profession. We have not enough architects. Private firms of architects serve local authorities and the central Government all over the country. Is it the Chancellor's intention to make the architects more expensive or to make the service given by them less efficient? We ought to know. We ought to know what he is trying to do—if he has, indeed, decided what he is trying to do.
  Many hon. Members have spoken about the effect on charities. I am sure that there is not a single hon. Member in this House who has not had representations from his constituents about the effect of the tax on charities. I have here a formidable letter from one of my constituents, an archbishop—and that is a frightening sort of letter to have. The Archbishop of Liverpool and the Bishop of Liverpool live in my constituency. I am somewhat worried about what I shall have to reply. The Archbishop writes:
  "It seems to me that in this matter a basic principle is at stake, and I hope that you will use all your influence in persuading the Chancellor of the Exchequer that registered charities should be exempt from this additional and crushing burden."
  My influence on the Chancellor is minimal, but somehow I have to reply to the Archbishop. So I urge the Chancellor, in order that I may send a reasonable reply, to interpret generously what the Chief Secretary said when he told the House that the Chancellor "will consider in principle how and in what form charities might be recompensed". I hope that the Chancellor's decision will give me every assistance in replying to the Archbishop.
  Inventors of new taxes are not noted in history books very kindly. Morton, of "Morton's Fork", is not remembered kindly, and Callaghan of "Callaghan's Cudgel" will not be remembered kindly, either. But there is one way in which he can make his memory sweeter and that is

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  to tell us what his objective is. People do not resent so very much being taxed so long as they understand the purpose. In this case, they do not understand. They feel that the tax is being put up as a cockshy to be knocked down by the strongest lobby. That is Government by pressure group, and it is inevitable when the necessary homework has not been done.
  During the next few weeks we shall spend many long and weary nights of tedium in considering this tax until the very words "Selective Employment Tax" will stink in our collective nostrils. I hope that the Chancellor will enable the process to be more pleasant by explaining to us today what he expects the outcome of the tax to be.
  I thank you, Mr. Speaker, and the House, for your indulgence.
  5.52 p.m.
  Mr. Harold Lever: It is always a pleasure to congratulate a maiden speaker, and the pleasure in this case is all the more because the hon. Member for Liverpool, Garston (Mr. Fortescue) comes from my part of the world. He delivered his speech with considerable charm and, if we cannot say that it entirely escaped the winds of controversy, we can at least say that it was delivered in such a non-controversial manner as fully to justify the House in extending its indulgence. We look forward to hearing him again. We lament the passing of his predecessor to the Isle of Man, where he will spend the rest of his days in an area where fiscal modernity is unknown so that his successor, the hon. Member for Garston, will have to put up with the disagreeable consequences and no doubt will be in constant communication with him.
  Any hon. Members who have a stink in their nostrils from the tedious debates likely to come should be sure of what the stink is. It does not necessarily derive from what my right hon. Friend the Chancellor of the Exchequer has done. If I plunge at once into the aspect of the Bill that has excited most immediate attention—the Selective Employment Tax—I say at the outset that I support this great innovation. At the risk of being tedious and repetitive, I still think that the heart of the matter is that if one concedes
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  that there has to be a budget for so large a surplus as the Chancellor has demanded in the present situation, one must suggest, at any rate in general terms, where the money is to come from if some such innovation as this is not being undertaken, as it is, with a great deal of courage, by my right hon. Friend.
  I know that the favourite word of the Opposition in describing the tax is "half-baked". But even the best bread is half-baked at some stage. It is no reflection upon the Chancellor that the House will take some part in the final stages of the baking of this loaf. There are half-baked Bills and half-baked bread and half-baked arguments, but whereas bread may proceed to delicious completion some half-baked arguments remain permanently half-baked.
  I want to deal with some arguments advanced by the hon. Lady the Member for Finchley (Mrs. Thatcher). I note that she is in search of enlightened company in the Conservative lobby during the Committee stage. I can understand that need. I am not sure that we will fulfil it. But if we do, it will be more likely because of her charm than because of her logic. For example, she put the argument by anomaly. That is a favourite argument, because it can be directed against every tax ever instituted. One picks upon a particular application of a tax which is the least in accordance with its general principle and points out the anomaly of inflicting it upon the person in question. No one, however, objects to the fact that the charities have to pay tax on petrol for the cars they use for merciful purposes. They are charges nevertheless. It is idle and unfair to charge my right hon. Friend in a tear-jerking way of taking money from charities because, under the S.E.T., charities will pay for their employees.
  It is equally inaccurate to say that charities have always been exempted from taxation. That is not so. I will give one example, but, in fact, there are very many. The only taxation from which charities are exempted is Income Tax, and it might be a good idea for the Chancellor to look at that matter. I must emphasise that I am not unsympathetic to general charitable endeavours. I know what great value they are to the State. During the Budget debate the right hon. and learned Member for Chertsey (Sir L. Heald)

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  thought I was being unsympathetic to pleas for charity, but that is not so.
  But I must point out that my right hon. Friend is not operating a city state in which the effect on each individual and operation can be judged. We have to deal in general with these matters. We can discuss the position of charities in Committee, but it is inaccurate and unfair to say that the new tax proposes to take money from them and to make inroads into reliefs that they have enjoyed hitherto. The hon. Lady complained that the tax will bear on essentials and not just on luxuries. It is all the more honest because of that. If the Chancellor wishes to take money out of circulation and reduce buying power, it is ridiculous for him to tax caviare or luxuries of that kind because, if he did, he would be taxing the rich, which would cause a decline in investment, and would be neglecting to bring about a decline in general overall consumption. One must be honest and candid about these things.
  If the total buying power of the country is largely in the hands of the mass of population, as it is said to be, and if it is decided for economic reasons to reduce that buying power, then the reduction must fall on day-to-day needs as well as on what we call luxuries, like tobacco and cigarettes. It is not new that we tax day-to-day necessities. What is new is that the Chancellor has the courage to widen the tax base and make it fairer, more beneficial and less damaging to the economy.
  I am unimpressed by the arguments about artificial borderlines and points of that kind. Artificial borderlines exist in every tax in every industrial country. I could spend the next hour giving examples of existing taxes where artificial borderlines exist, but I shall not do so. I leave that to the hon. Member for Worcestershire, South (Sir G. Nabarro), who spent hours under the Conservatives drawing attention to artificial borderlines existing under Conservative Governments in relation to Purchase Tax.
  I want to say something on other aspects of the tax. We are really too near an election for me to resent the fact that most hon. Members opposite who have spoken have found it necessary to amortise their election oratory and
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  allow the House to enjoy benefits which were restricted to rather narrower audiences at the recent election.
  I want to make a few comments on some of the arguments which have been advanced. It has been widely said that manufacturers are as great hoarders of labour as the service industries. I do not know what experience other hon. Members have of this, but I have not found a great deal of hoarding going on. It is an expensive proclivity to have a whimsical retention of labour at considerable cost just for one's own amusement. I know that academic economists rarely set foot in the sordid precincts of factories and consequently cannot immediately understand the function of everybody employed in factories. That does not astonish me.
  However, it does not follow that we should try to cut by half the number of people employed there. There is an ebb and flow in production and the organisation and administration of production sometimes require people to be fully employed and at other times not so obviously employed. Surely the people actually paying the wage bill are better judges than some of the lighthearted commentators as to whether hoarding is taking place. Economy is not necessarily achieved by maintaining an inadequate staff organisation. I have yet to meet hoarding.
  Over-manning is a different matter, and discussion of that would take me into a wide and interesting area. But the Chancellor of the Exchequer cannot himself in the Finance Bill cure the tendencies and arrangements of over-manning. If one thing is certain, it is that the present Government have done and are doing more and intend to do more about over-manning more effectively than any of their predecessors.
  I want now to refer to the alleged favourable treatment of the manufacturers. The bonus given to manufacturers is not very striking and it is certainly ludicrous to suppose that anybody will employ extra men because he will get a few extra shillings net a week from the Chancellor of the Exchequer for doing so. I do not make the case that the tax will shift people from the service industries to manufacturing industries. I pin my case wholly to the fact

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  that the Chancellor needs to raise revenue and needs to widen the tax base.
  It is very much to our economic advantage that he should not operate, as has been done in the past, on a narrow area of industry, but should spread his benign or retarding influence, according to circumstances, over a wider area of our industry. The bonus for manufacturing industry when one takes into account the advance payment which has to be made amounts to little more than shielding manufacturers from the impact of the new tax, little more than exemption of manufacturing industry from any retarding effects of the new tax. This hullabaloo and this attempt to mislead the public and arouse agitation and excitement about the tax is beyond me.
  The Conservative Government themselves tentatively proposed a payroll tax and it was widely rumoured in the Lobbies that it would have been brought in but for the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who threatened resignation. That was the rumour among the knowledgeable in the Lobbies of that time. I know that the right hon. Gentleman would neither confirm nor deny the accuracy of that, but that shows that the tax is not something thought up by a malicious Socialist Chancellor of the Exchequer anxious to make milk dearer on the doorstep, or to forbid its arrival there altogether. The tax is just desirable in the special circumstances of our case.
  The Chancellor has said, and it is said, that increased costs must be absorbed or there will be price rises. The answer is that, if the tax is absorbed by increased productivity, there will be no price rise, of course, and the tax will not have done any harm, but, on the contrary, will have done good. On the other hand, if, most unfortunately, there are price rises, it does not follow that, for example, charities will have less money. It may well mean that those who are charitably minded will decide that they have to deny themselves some other expenditure so as to maintain their charity at full strength. [Laughter.] But this is a choice which the Chancellor is leaving to the citizen.
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  It is not for the Chancellor to decide how a man should spend his money. It is for the man to decide. Broadly, the Chancellor decides the overall consumption which, in our given economic circumstances, is desirable and how much money may be demanded in society, but it is for every individual to decide how to spend it. It is one of the unfortunate necessities when the Chancellor is forcing us to cut our coats according to our cloth that we cannot have everything we want. It will, therefore, be for the individual citizen to decide what he wants most.
  This tax will be very much overdue in order to broaden the tax base and it must be welcomed. It is quite false to charge the Chancellor, when innovating in this way, that he can justify it only if he brings in a tax which is so faultless in its prose, agreeable in its incidence and compelling in its logic and justice that the whole House rises in one chorus of praise in unanimous and excited approval of the Chancellor of the Exchequer.
  I know that, theoretically, that is the scene which we all hope will arrive one day. I agree with the hon. Member for Garston that inventors of new taxes rarely go down to posterity in the most amiable sense, but I must say that this tax is necessary, useful, and inevitable, and I entirely support its general principle.
  However, I want to conclude my comments on the tax by saying that nobody should take it to be an annual tax of so much a year. It is wrong for a charity or anybody else affected by the tax to say, "This will cost me £40,000 a year", or, "This will cost me £10,000 a year". It will cost them £40,000 or £10,000 this year. No doubt next year, when our circumstances are different and when administrative possibilities have increased, it will be possible to make more adjustments than will be made in Committee this year.
  In Committee, I shall want strongly to press the Chancellor on only the following concessions. First, he ought to look at some of the charities, at any rate, although personally I favour the idea that he should undertake a general overhaul of the definition of "charity" for tax exemption purposes. I have pointed out before that it seems a little illogical for the State to make financial concessions to both the

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  Lord's Day Observance Society and the "Society for the Propagation of Enjoyable Sundays", to help to finance the League Against Cruel Sports and with equal zest and at equal cost to finance the "Society for the Propagation of Open-Air Exercise on Horseback". So I could go on—Muslims, Jews, Sikhs, Seventh-Day Adventists, all impartially receive the bounty of the Chancellor of the Exchequer.
  I do not say that these are not all worthy and deserving cases, but I suggest that the logic of all this should be considered.
  The Chancellor of the Exchequer (Mr. James Callaghan): I shall not judge between that lot.
  Mr. Lever: The hon. Member for Manchester, Ardwick (Mr. L. M. Lever) is thought to have a unique experience of the places of worship of different denominations in his constituency and he might be pressed into doing this service if desired.
  I yield to no one in the House in my belief that the voluntary work undertaken in this country for charitable purposes is a great saving to the Government and of great advantage to the country, not only for the spirit which it engenders, but the substance of the work done, and I do not make this case out of any lack of sympathy for their work.
  I hope, too, that the Chancellor will not listen merely to the negative advice from the bowels of the Treasury on other matters such as disabled persons, old persons and part-time workers. It would be a disaster if a tax especially concerned with the labour situation could at any time be charged with reducing the amount of labour available in both the manufacturing and service industries by causing any depletion in the supply of part-time workers, disabled people, old people and the like, apart from the moral case which should be borne in mind in the instances which I have mentioned.
  I want to pass from there to one or two other matters that have occupied the mind of the House on the Finance Bill. It has been mentioned that the question of tax avoidance arises on every Finance Bill. I heartily agree with the Chief Secretary, though I do not perhaps interpret
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  his words in quite the sense that he intended. Surely no one in the House is in favour of illogical tax avoidance. We ought to get this question about a person's obligations clear. These obligations are established, and can only be established, by strict wording of law. No citizen is obliged so to organise himself to his disadvantage so as to come within the taxation spectrum when he might reasonably be outside of it.
  It is high time that the whole question was candidly thrashed out, because there is great confusion of thought in two respects and it is shown in an aspect of this Finance Bill. It is this. The Chancellor should not be concerned with the motives which induce a taxpayer to alter his situation so as to obtain a benefit, in a taxation sense. What he should be concerned with is the effect of these alterations upon the position of the citizen. If he thinks that the effect is bad, he should change the law so that this effect will not be brought about.
  The other matter that ought to be looked at, and it follows closely upon what I have said, relates to a person finding himself accidentally in a situation which anomalously redounds to his advantage under the taxing Statute. Nobody can blame him then, but if he deliberately puts himself in such a position then that is thought to be infamous, vile, and generally to be deplored. I confess that this seems anomalous as an argument. I cannot, for the life of me, see why when my neighbour accidentally happens to be in an anomalously advantageous taxation position which makes him better off than myself, I should not put myself in the same position.
  A good deal of humbug is always talked in the House on this occasion, and by no means exclusively from this side of the House. If I had to adjudge I would have to say that much more humbug was talked on the other side of the House. Hon. Members on the other side are so anxious to whitewash themselves that I often hear a good deal of cant on this subject. I get the impression that the House of Commons, at any rate on taxation affairs, is unrepresentative of the great mass of the population. In the House we have groups of persons, almost without exception, unanimously eager to

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  pay the maximum amount of tax payable to the Revenue in all possible circumstances.
  This does not entirely tally with what is to be seen outside the House. My own position is very clear upon this—one should not be dependent upon accident in assessing one's taxation position, and I will give a little illustration from the Bill. I see that the Chancellor has acted against what he calls a transparent tax avoidance, namely, the "Siamese twins". I must congratulate the Treasury. It has managed to give each of these devices names that no one else has ever heard of before, but which are extremely interesting and make ready identification tabs. In the case of the twins, what is happening is that people deliberately put themselves into a situation which already exists by accident in innumerable private and public companies. It is very questionable whether, even in the case of the "Siamese twins", these people are causing any greater loss to the Revenue than is already taking place by the very nature and design of the tax, without any deliberate attempt on their part.
  The Chancellor will have to look at this. I cannot resist saying, since the hon. Lady the Member for Finchley (Mrs. Thatcher) was good enough to refer to a suggestion I made, that this was one of the things which I had in mind before the Finance Bill of 1965, in relation to the dangers of dividend tax. It could produce the anomalous situation that the capital structure of a company would decide the total amount of tax paid upon the profit. This is a matter in which I am in a minority of one, because the Conservative Party are pledged to continue the Corporation Tax unamended, according to a declaration—[Interruption.] Unamended in this respect. I have not heard any declaration. It would be interesting to have one and I would like to hear from the Conservative Party about its proposals for amending die Corporation Tax. One thing is certain—at no stage during the last Finance Bill did they put down any Amendment, or use any argument which would eliminate this anomaly.
  Mr. Patrick Jenkin: Surely the hon. Gentleman has forgotten the Amendment, debated at
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  considerable length and put down by my right hon. Friend the present Leader of the Opposition and other hon. and right hon. Friends, providing that the rate of tax on distributions should be at a substantially lower level than the rate of tax on retained profits? That was the structure of the Corporation Tax which we urged upon the Chancellor, as I am sure he will recognise. It is a structure which we would like to see.
  Mr. Lever: The hon. Member is merely confirming what I have said, namely, that the Conservative Party did not propose the reconstruction of the Corporation Tax in such a manner as would eliminate the anomaly that the amount of tax to be paid by two companies, in otherwise identical circumstances, would vary because of the company's capital structure. That can only be achieved not by pious and electorally advantageous resolutions to reduce the magnitude of the dividend tax, but by a total reconstruction of the tax so as to eliminate the dividend, and that was never proposed, and has not been proposed, by the Conservative Party. It is, therefore, unlikely to be adopted. I am not vain enough to suppose that my minority opinion should prevail against so much collective wisdom.
  The other matter which was dealt with in the Finance Bill was the question of share options. The Chancellor has an overwhelming case here for abolishing the share option schemes. I shall go into this in greater detail in Committee stage. but if one is to produce an incentive effect upon one's higher paid staff by a shareholding interest in a company it should be done in a direct fashion and not in a devious way, as it is done in the share option schemes. I am not making any reflection upon those who misguidedly took part in the Garda scheme. I refuse to believe, although I do not know any of the gentlemen concerned, that they were dishonest, or were dishonestly inclined in any way whatever. They failed to realise the full implications of what they were doing, and that is much to be deplored. This sort of option scheme produces the kind of devious thinking which results in the Garda scheme, and that kind of thing.
  The Chancellor has an impeccable, logical and moral case for abolishing

  531
  share options, and I will certainly support him, in Committee, as well as on the main Bill. In abolishing share options it means that many companies will be deprived of a means of giving additional incentives to their senior employees and it follows that the Chancellor should look with benign sympathy upon alternative and justifiable schemes for encouraging share ownership by employees at all levels in business. This is a very desirable thing. It is bad, and we in this party particularly believe it to be bad, that ownership of property should be concentrated into a few hands. It follows that we must believe in the wider spreading of the ownership of property, including wider ownership of shares.
  Sir Tatton Brinton: Would the hon. Gentleman not agree that share option schemes are a dodge and arise because of the difficulty of rewarding the abler managers of this country? In the face of such excessively high direct taxation these people are prevented from ever building up any substantial nest-egg without dodges of this sort.
  Mr. Lever: During the Committee stage I may have the opportunity, if I am fortunate enough to be called, to suggest some alternative schemes which, without being dodges, or devious, will produce the desired results. I will ask the Chancellor to say that he will not regard them as being undesirable, as I believe that the wider ownership of property adds to the dignity of individuals while achieving greater social justice. This applies especially to shares in businesses and undertakings in which people have worked for many years. It is very attractive and reassuring to know that on retirement one owns a fifty-millionth part of British Railways, but it does not buy a cottage at the seaside, or add to the pleasures and securities required by older people. As we are all in favour of people saving it is not a bad thing that we should encourage the wider ownership of shares among those who work in industry.
  The final point I want to raise deals with the export of capital. I heartily endorse everything that the Chancellor has said on this matter. I speak as one who greatly favours investment overseas when our circumstances make it to our overall advantage to do so. The country
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  has been labouring under a complete delusion in believing that, whereas we cannot afford investment in the dollar area, we can afford investment in the sterling area. This is a kind of sentimental self-deception which has to be ended. We must face the fact that investment in the sterling area produces almost precisely the same strain on our resources as investment in the dollar area. There is hardly any justification at all for it and the Chancellor has done well to bring this matter up and to see if we can produce some curbs upon it.
  My right hon. Friend has also done it in a manner which shows that he has control, in spite of what has often been alleged against him, and has a very reasonable, trusting and open mind. He rightly showed great trust in the big companies which he hopes will co-operate in this respect. He may find that it will not be through lack of co-operation or of sincerity on the part of those companies that he will have to take further measures to deal with these matters, but generally there will be great co-operation.
  Sir Cyril Osborne: Does the hon. Member think that this restriction should apply to the export of plant and machinery to subsidiary companies abroad which would have the same effect as restricting capital? So far as I know, the Chancellor did not say a word on that aspect of the problem.
  Mr. Lever: It is not possible to deal with this in detail now and I do not want to go into great detail. The main thing is that the Chancellor has shown great courage in tackling something in an area where there has been serious lack of logical thought which has had very serious effects on our economy. No one has dared to touch this very vital aspect of foreign exchange problems, the export of capital to the sterling area on a vast scale.
  It is striking that misguided liberalism causes people to emigrate from this country and to convert their capital into dollars. I should like the Chancellor to tell us why it is necessary at this stage of our difficulties to allow emigrants to take their fortunes out of the country immediately in one lump sum, converting them into dollars through blocked sterling. They do not do it through the ordinary

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  channels, but by blocked sterling. Probably we would find that in the end the biggest buyers of blocked sterling are the Bank of England. The Chancellor should follow the logic of what he said, and of which I utterly approve, in getting the balance of payments right.
  I congratulate the Chancellor. He has shown great courage and intelligence in addressing himself to our central problems. If he goes on in this way, with the backing which he will get from this side of the House and from the country—because what is said by hon. Members cpposite by no means reflects accepted opinion on the Labour Party in the country—he will at long last put the country on the right economic road.
  6.14 p.m.
  Mr. Nigel Birch: The hon. Member for Manchester, Cheetham (Mr. Harold Lever) did something which I do not think I have ever heard a Socialist do before. He rejoiced that indirect taxation was being very heavily increased, and that it was being imposed on necessities. That, of course, was not quite the line which his party has taken in the past, but he showed courage in putting forward that view, and good luck to him.
  The hon. Member also said that this Government were the first to do anything about over-manning. I am delighted to hear it, but I should like to be told what it is they are doing, as I have not heard of it before.
  On the question of Corporation Tax, the position taken by the Conservative Party has always been that we were free to do anything we liked with it, including abolishing it if we wanted to. We are not committed to it at all.
  Mr. Harold Lever: May I remind the right hon. Gentleman that the present Leader of the Conservative Party made it quite plain that neither the Capital Gains Tax nor the Corporation Tax were to be abolished, but were to be made a permanent part of our system? Of course, hon. Members opposite are free to do what they like, but they should give a fuller indication of their policies than they gave in our debates last year.
  Mr. Birch: That, I think, will be given soon and that is a subject to which I shall refer.
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  I shall not go into the question of how many Budgets the Chancellor has had. He will probably have to have another this year. The two Budgets I want to talk about were both at orthodox times of the year. There was great similarity between the two. Both imposed new taxes. We can say with certainty that the taxes in last year's Budget failed in their ostensible object. They caused vast administrative confusion, were ill-prepared,, and are having damaging side-effects which were not foreseen. This Budget, I believe, will fail in its ostensible object. It is certainly already causing extraordinary confusion, it was obviously quite unprepared, and it will also have damaging unforeseen side-effects.
  I want to illustrate those points, but, first, I say this, and make no apology for saying it. The reason why there has been this great similarity between the two Budgets is that the taxes in both were conceived by the same man, who of course, was not the Chancellor of the Exchequer. Mr. Kaldor—I can mention his name, because he has been at great pains not to hide his light under a bushel—has long been an open advocate of devaluation and he has quite a record of advising other countries.
  I remember that when I was in Ceylon, in 1958, all the Ministers, the civil servants and the business community, both foreign and local, said that the advice taken and the taxes put on had produced administrative chaos. Kaldor's advice was given in India and the Finance Minister had to resign. In Mexico, there was prolonged and violent opposition, in Turkey the Government had to resign, in Ghana there was a general strike, and in British Guiana there was a revolution. That is not a bad record. He is not a man who has been taken very seriously by other economists. Hon. Members ought to read what that very distinguished economist Sir Hubert Henderson wrote about Mr. Kaldor's book, "Full Employment in a Free Society."
  Take last year's Budget—what was the ostensible object of bringing in Corporation Tax and Capital Gains Tax? We were told that this would do two things. The taxes would help with the wages policy and there would be simplification of taxation. Wages have gone up more quickly than ever before and quicker than one would expect in the

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  state of pressure on the economy. I cannot think that any trade unionist gave a moment's thought to either of these taxes before putting in his wages claim.
  As to simplification, the tradition of the administration in our country, particularly Treasury administration, is very distinguished. Infinite care has been taken in the past before a new tax was imposed to think out every detail. The only complicated change with which I had to do when I was at the Treasury was the Overseas Trading Corporation Tax. Eleven months' work was done by the Treasury, the Inland Revenue, the Colonial Office and the Board of Trade on the proposal and when it was brought about no major amendments were necessary.
  I know that the Chancellor abolished it for foreign exchange reasons. I do not argue whether that was right or wrong. The point I make is that the administration was so done that it did not have to be amended to make it work. Contrast this with the Corporation Tax and the Capital Gains Tax. There were 400 Amendments to the Finance Bill last year. I think that the Chancellor has cheated a little this year because he has conflated the Amendments to an unprecedented degree. If we look at the Bill we find that 40 pages of Clauses and Schedules are taken up with Amendments to the Corporation Tax and the Capital Gains Tax—and this is before the taxes have really started working.
  What about the Inland Revenue? The only thing which has cheered me since this Government came in has been that the Inland Revenue has declared the Capital Gains Tax "black". The Chancellor of the Exchequer will appreciate the point here, as a former official of the union. If the union has declared the Capital Gains Tax "black," anybody who returns a capital gain is blacklegging—an odious charge.
  I would bet a very large sum of money that if the Chancellor himself were given an examination paper on the Capital Gains Tax, he would get very low marks indeed, despite the fact that he brought it in himself and is a bloodsucker by trade, and even if he had by him the
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  7,000 clause crib that the Inland Revenue now has. If I am right on that, as I am certain that I am—I certainly could not pass an examination on it myself—how does he expect people to cope with this sort of thing? How can he expect people in the Inland Revenue, who are not at all well paid, to cope with this situation?
  The tax will bring in very little revenue and it will lose far more, because the whole machine is clogging up and slowing down. What about the unforeseen side effects? One, which probably was foreseen, is damaging to the free enterprise system, and it may have been foreseen and wished for. The effect which probably was not foreseen is the effect on interest rates that this has had. Hon. Members may have noticed that last month's cost-of-living index went up by 1·4 per cent. and that the Ministry of Labour attributed this rise largely to increases in rates and water rates. Interest payments have a considerable bearing on the expenditure of local authorities and water undertakings. This is a considerable factor. The last local authority issue was floated at an effective rate of 7 per cent. This is 16⅔ per cent. more than the last issue during the golden years of Tory rule.
  The rate is still rising and is forcing the Chancellor to pay more. The grossed-up rate of interest on the last issue of National Savings Certificates was equivalent, for somebody paying Income Tax at the full rate, to 7¾ per cent. Even the best companies are having to pay very high rates on debentures. How, in those circumstances, can one suppose that building societies can charge less than 7⅛ per cent.? How, in fact, can they charge only that? What could be dottier than referring the question of building societies' reserves to the Prices and Incomes Board? Ministers are increasingly trying to shelter behind the tattered fig leaf provided by the wretched Jones.
  The ostensible object of the Selective Employment Tax was to switch labour from service industries to manufacturing industry. I do not believe that will come off. I do not think that service industries on the whole are really wasters of labour. They certainly do not have over-manning. The banks and insurance companies are as highly mechanised as they can be, and they are all in their

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  second generation of computers, and they are still short of labour.
  Practically every country hotel which I know is desperately short of labour. The sort of hotels that this tax will succeed in closing down are the tourist industry hotels of Northern Scotland, North Wales, where I come from, and the West of England. There is no manufacturing industry there to which labour can move. The Chancellor will get nothing out of that at all. I do not really believe that any of these service industries is grossly over-manned. That does not, of course, apply to many other industries.
  Hon. Members may have seen a report in last Wednesday's Daily Telegraph of a rather interesting case at the Mansion House Court. It appeared from the facts that the newspaper industry was employing men on a short night shift at £12 6s. 10d. a shift, but one could only obtain that job if one had a chit from the union. Very naturally, there was a thriving black market in forged chits at the local "pub". This is over-manning. That is where things are going wrong, and not elsewhere.
  I should like now to mention one of the things which is going more wrong than anywhere else as a result of S.E.T. I have received a lot of letters, some of which I have sent to the Chancellor, from people in my constituency, very old people who are trying desperately hard to make do but who cannot manage on their own without a certain amount of home help. Several of them have written to me saying that this tax is the end. Very often they employ two home helps for short periods of perhaps eight hours, and they will be liable to two lots of tax if they do this. They simply cannot manage it. If they break down in health, they will have to go to an institution of some sort, which will cost the State money, and there may not be accommodation for them. This is far more labour-consuming. I do not believe that this tax will fulfil its ostensible objects.
  It is most fantastic that the Chancellor was unable to answer any of the main questions on administration. Hon. Members may have noticed that he said in his Budget speech that agriculture would be compensated as far as practicable during the Price Review. Everybody gasped, because they knew that it could not happen. They knew that he
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  would have to run, and run he did. He could not say what would happen about disabled people, and he cannot answer today about part-time workers and pensioners in full- and part-time employment. All these basic questions cannot be answered; and the thousands of things which will be thrown up, and which nobody has thought of, beggar description.
  It has not been the tradition in this country to introduce vast new measures of taxation without most careful thought, the longest possible consideration, consultation with other Ministries which are affected, and so on. I believe that the very evil side-effect here will be the degradation of the Treasury's reputation. We have been the most law-abiding people in the world and the most docile taxpayers, and we have been that because the Treasury has been efficient and has tried to be fair and to think things out before they were introduced. This has not happened this time. The Treasury might have stood up to one of them, but two years running is too much. I believe that a great weight of guilt hangs upon that Department and that we shall all suffer for it in the future.
  6.28 p.m.
  Mr. Joel Barnett: The right hon. Member for Flint, West (Mr. Birch) was in his usual witty form, but, as we have learned to expect from right hon. and hon. Gentleman opposite, his speech was solely destructive. There was not one constructive element in it.
  Much of the debate has dealt with the Selective Employment Tax. There has been much criticism of it, and I myself have some criticism. For example, I hope that, despite what my right hon. Friend the Chief Secretary said in opening today, Amendments will be accepted in due course in respect of people over 65, part-timers and the disabled. I hope, too, that we might be able to do something for charities. I am also none too happy about the idea of refunds to manufacturing industry in the way suggested in the Bill. I would far rather that this was done by investment grants paid in greater amounts and more quickly. But I find the general idea of the Selective Employment Tax entirely acceptable, and the idea of broadening the tax base in this way has my complete support.

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  That is not to say that I like the tax. I do not like tax. For anybody to say that he likes a particular tax would be a rather dishonest statement. It may well be that a few people like tax, but I am not one of them. Those who seek exemption for particular industrial categories should recognise how easy it is to make a very strong case for almost all industrial categories. If their arguments were to be accepted, we would have an entirely non-selective tax.
  If hon. Members want a non-selective tax, let us hear them say so. Do they want a blanket form of tax? If so, let us hear it from them. If they want that kind of tax, there would be no anomalies and no discrimination, but there would be no imagination either and we would be back to the old answers that have failed in the past. Therefore, I do not quarrel with the general idea of the Selective Employment Tax. I welcome the opportunity that it will provide in due course to change the whole tax system. What I disagree with about the Budget and the Finance Bill generally, however, is the defensive approach underlying the whole thinking behind the Bill.
  The Budget statement of my right hon. Friend the Chancellor of the Exchequer referred to his triple objective. He told us that the mandate which we had was to achieve all three items in the triple objective at the same time, and a strong £ came first. The maintenance of the £ is the centre of the Chancellor's thinking. Indeed, it has been the centre of his thinking for so long that it is tending to obscure his vision. I believe that we are in grave danger of making the £ into a little tin god and bowing down and worshipping it.
  Growth should be the centre of our thinking. Economic growth is what we need, and growth should be at the top of our list of objectives. We cannot have a strong £ without economic growth, unless people are prepared to restrain themselves or allow the Government to restrain them to a greater degree than is really possible in a free society. Thus, the inevitable end of putting growth second to the £—and this is the underlying reasoning of the Finance Bill—will not be to save the £.
  To talk of an incomes policy as being the only way to save the £ is dangerously to overestimate the value of such a policy.
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  In the process of doing so, we could ensure its failure because, by the nature of things, a prices and incomes policy can have only limited success.
  I do not mean that in any way as criticism of my right hon. Friend the First Secretary of State—indeed, the achievement of the prices and incomes policy, particularly concerning prices, has been immense; but the mistake is in believing that in our type of society we can achieve more than a slight slowing down in prices and incomes. On the other hand, by putting growth at the head of our objectives before the £, as it were, we are more likely to save the £ than by having it the other way around.
  That is not to say that I do not appreciate the difficulties of my right hon. Friend the Chancellor in his problems with the nation's creditors. We have to carry them with us in the steps that we shall be taking now and during the next few years. I believe that we can carry them with us if we take certain steps and if we show them the steps which we propose to take.
  First, while pursuing economic growth we should be taking positive action to reduce Government expenditure. I refer, in particular, to Government expenditure abroad and to defence expenditure in the area east of Suez. I have said this many times before and I propose to keep on saying it. I do not believe that we can expect our creditors to pay for us to maintain the myth of a world military rôle.
  Secondly, we should restrain demand, not by the dead hand of tax, but rather by a new and major offensive in National Savings. There is a great deal that can be done here. We must take a new and major offensive in this direction so that we can have restraint of demand without having constantly to increase taxation.
  Thirdly, we must put some certainty into our balance of payments position. In the short period, until we can reduce Government expenditure abroad, there is really no alternative to getting some certainty into our balance of payments by having a system of quotas. It is not enough simply to list the difficulties of such a policy. The solutions which we have tried in the past have failed, and it is not enough merely to live in hopes.
  Mr. Bruce-Gardyne: Does the hon. Member really believe that after operating the import surcharge for more than 18 months, against all the rules of a whole series of international treaties, if we were to replace it by import quotas, other countries would not retaliate against our exports?
  Mr. Barnett: Many difficulties are inherent in a policy of import quotas, but we should be concerned not with making debating points, but about the state of our economy, with getting certainty into our balance of payments, in the short term. I am not proposing that a policy of quotas should be persisted in for very long—I suggest that we should have a selective form of import quotas until such time as we can deal with the longer-term problem. In the short term, however, with the surcharge coming off in November, resulting in a flood of increased imports, it seems to me that there is no alternative to this sort of policy.
  Fourthly, I would continue the attempt to keep the growth of prices and incomes below the growth of productivity, whilst recognising the very limited success for which one can hope, bearing in mind, as we should bear in mind, the basic unfairness of our existing wage structure. We are starting with a wage structure which is anything but fair. Therefore, to hope and suggest that we can have a prices and incomes policy which could be wholly successful is totally to overstate the case for such a policy.
  Taking that view, it will be clear that while I welcome the Selective Employment Tax and the fresh thinking evidenced by it, I am disappointed that the opportunity has not been taken with the introduction of this tax to give back some of it by way of increased personal incentives as well as greater incentives to industry, although in the latter case I do not wish to belittle the measures which have already been taken and are proposed to be taken.
  The plough back in Corporation Tax and the incentive to plough back for greater growth, cash investment grants, of which I very much approve, assistance to development areas, the Industrial Reorganisation Corporation, aids to exports, which we have never had before, and the whole fresh approach by the
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  Department of Economic Affairs—all these measures we have had and are very good, but we must face the fact that, despite all these measures, industrial production is stagnant.
  The reason is known. It is the insistence on putting the £ before growth. I fear that this policy will fail on both counts, because that seems to me to be the thinking behind the Bill; and because that seems to me to be the thinking behind it I am rather disappointed with it.
  6.38 p.m.
  Mr. John Boyd-Carpenter: As the Bill deals with taxation and as the age of the taxpayer is sometimes relevant to his liability, I hope that you will not rule me out of order, Mr. Speaker, if I wish you many happy returns of the day—[HON. MEMBERS: "Hear, hear."]—and if in doing so I use the word "returns" in the non-taxation sense.
  As the Chief Secretary to the Treasury has told us, the Bill is necessary to give legal effect to the Budget; and as it is a bad Budget it is a bad Bill. It imposes additional taxation upon what is already the heaviest-taxed nation in the world. It offers not a spark of the incentive to which the hon. Member for Manchester, Cheetham (Mr. Harold Lever) referred, and not a spark of the encouragement to enterprise to which the hon. Member for Heywood and Royton (Mr. Barnett) referred. It offers not the slightest encouragement to anybody to end the stagnation which affects British industry today. It simply goes on with the dreary process of adding a further solid load of taxation to the burdens which the Chancellor, in his previous Budgets, has imposed upon the country.
  The stagnation in our economy comes at a time when taxation is at its highest, when the rewards which can be offered, the incentives to young executives which were referred to, are so low, and when, inevitably, so many people at the heads of great enterprises have to concern themselves with the taxation effects of the actions they take rather than with enterprise and profits.
  That is why for my part I feel under no obligation to respond to the Chief Secretary's challenge and say, when I

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  come to criticise the Selective Employment Tax, what alternative I would propose. I will say bluntly that taxation is too high already, and that for my part I propose not only that the Selective Employment Tax be not applied, but that there is no need for any alternative whatever. I would quote the Chancellor of the Exchequer on that proposition, from his own Budget speech:
  "The message is clear: 'More savings, less tax'."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1440.]
  There is nothing here in this Finance Bill to encourage those savings which, on the Chancellor's own showing, would reduce the necessity for tax.
  I want to address myself to the Selective Employment Tax. The Chancellor, who has been very patient in listening to this debate, cannot feel exactly encouraged by the response to it. Even his hon. Friends who began by saying how much they welcomed it ended by damning it pretty fully in practice, and my hon. Friends have shown that it is really riddled with anomalies. The hon. Member for Cheetham thought the argument by anomalies, as he called it, unfair, and he quoted by way of example, in the context of charities, the fact that charities are not exempted from the petrol tax. What the hon. Member did not seem to appreciate was that this is a tax which prides itself on its selectivity, whereas petrol tax is universal, or almost universal, in its application, and the criticism which we make of the Chancellor is that these are not accidental anomalies inherent in a universal tax, but these are deliberately imposed by the right hon. Gentleman, through that selective aspect of this tax which he claims to be its particular merit. Therefore I say to the hon. Member for Cheetham, as I say to the Chansellor, that the criticisms which have been made this afternoon most effectively—and others no doubt will be made—of the anomalies and unfairnesses of this tax are not ones which he can rebut by this kind of argument, which is relevant to a universal tax but is completely irrelevant to a tax which the Chancellor has chosen as selective. As far as petrol tax is concerned, though charities have to pay it, they do not, at least, have the irritation of knowing that somebody else is subsidised to the extent of 7s. 6d. a gallon.
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  The tax itself, I think, owes its origin to two unhappy mental approaches, the old-fashioned Labour Party idea that there is some moral superiority about working in a factory as opposed to working anywhere else, and the concept of the planners and those who advise the Chancellor that human beings are "bodies"—in the old Army phrase—to be moved about in accordance with the precise direction in which the planners think they can be most usefully employed.
  It is on these two curious intellectual strains that there has grown this curious concept that workers are in three classes: the first-class workers who are quite admirable and to be encouraged and are encouraged by 7s. 6d. a week extra to their employers, who work in factories; second-class workers whose employers have to make the Chancellor interest-free loans but who ultimately do not pay more than that—these now, thanks to the right hon. Gentleman's surrender, include agriculture as well as transport; and the third-class, really bad workers, who work in such disreputable occupations as insurance, banking, building, and export agencies. This is the result of this curious thinking which has produced this quite extraordinary tax.
  I take it first, straightforwardly, on the economic judgment behind it. It is simply not a fact that the capacity of this country to earn its living in the world is concentrated on its manufactures. There are an infinite variety of services, banking, insurance and so on, which earn a great deal of foreign exchange with the further advantage of attracting the minimum of imports. Therefore, I do suggest to the House that even on the straightest economic test the Chancellor has really done a most curious thing when he has provided that the man who prints the most trivial publication, a brochure which advertises a bunny club, or the man who manufactures bingo equipment—and the Prime Minister is always talking about the bingo society—are admirable people engaged in manufacturing who must be subsidised, whereas those who work in an export agency or in banking or in insurance are people who should be discouraged and fiscal means should be taken to diminish the strength of their employment. I shall come to the social point of view in a moment, but even from the economic point of view, surely,

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  with very great respect to the Chancellor, this is nonsense, and it is extremely dangerous nonsense.
  We know of another aspect of this from the recent statement by the Chairman of the Prudential, Sir John Mellor, whom many of us knew as a very distinguished Member of this House. He quoted the words of the Chancellor that I quoted a moment ago,
  "The message is clear: More savings, less tax"
  and he went on to say with very great effect:
  "Life assurance and pensions provision are the pre-eminent sources of private saving in the lower income groups, for whom industrial life assurance is virtually the only form of saving. Whatever merits may be claimed for the Selective Employment Tax, its effect on life assurance savings is in conflict with the Chancellor's stated aims."
  Sir John pointed out that the effect on the great organisation over which he presides would be a gross tax burden of £1,400,000.
  Why impose it on the building industry? The House knows well that last year we had a record increase in the cost of house building—10 per cent. When I asked the Minister of Housing and Local Government at Question Time yesterday what would be the effect of this tax on the price of houses he said that it itself would produce a further increase of 2 per cent. Well, 2 per cent. may not seem much to hon. Members, but the ordinary price of a house in London is about £4,000, and, though I dare say that the right hon. Gentleman under-stated the case, taking his words at their face value it means an increase of £80 in the price of a house. What economic or social purpose is served by deliberately imposing the full burden of a selective tax on the construction industry, and in particular on that section of it which is concerned with building houses for our people? I asked the question yesterday, and I repeat it, is it the policy of the Government to increase or decrease the price of houses? Because this tax, on the statement of Ministers themselves, is a tax which must have the effect of making an appreciable increase in the cost of a house.
  There is the tourist industry, our best dollar earner, one of the most important sources of overseas earnings. The Chief Secretary, at that Box today, said that we want employers to think hard about
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  whether or not they are retaining too much labour. In the hotel industry they are not worried about having too much labour. They are worried about how to get the labour necessary to keep up in the hotels the standards which are required if we are to attract tourists here. Here again is one of the best methods of earning foreign exchange, and yet by this tax it is discriminated against by the right hon. Gentleman. From the economic point of view, with respect to the Chancellor, this is foolish discrimination, and is surely nonsense.
  I turn to the social side. I think it is the very greatest mistake to put the collecting of the tax on the Ministry of Pensions. The hon. Member for Cheetham referred, perfectly fairly, to the fact that my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) some years ago went so far as to include in a Finance Bill a much more modest proposal which would have had the same effect in respect of a much smaller and non-discriminatory tax. But the House will recall that my right hon. and learned Friend made it clear that it was only intended to put it in as a safeguard during one year and that a better method of providing a regulator would be found. In the event, it was never applied. Whether my right hon. and learned Friend was right or wrong is not material to whether the imposition of this large tax—25s. as against 4s.—through a social service Department may not do very serious harm. I suggest that it will.
  The Ministry of Pensions and National Insurance is a Department with a very high standard of administration and a considerable social conscience. It is a social service Department. To put upon it this duty must be to alter the administration of our social services in considerable degree, because it will be turned into a tax-gatherer.
  Is the amount to be collected on the same stamp as the National Insurance contribution? I think that it will have to be, because there is no room on the card for another. That will mean that the stamp itself will cost over £2 a week. It is the fact that the difficulties of enforcement will be greater. It means that the difficulty of enforcement for a contribution where everyone knows that what is being provided is for someone's benefit is very much less in human terms than

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  the enforcement of a tax. If there is evasion of a joint stamp, then the pension rights of the individual worker will be affected.
  Has the Chancellor considered the enormous stimulus that it will give to people becoming self-employed? The labour-only type of contract which exists in the building industry will be enormously stimulated by it.
  Mr. Harold Lever: I am sure that the right hon. Gentleman would not want to give credence to the story and would want to make it clear to the country that if workers co-operate in this they will suffer by not being eligible to get redundancy pay or unemployment pay.
  Mr. Boyd-Carpenter: The hon. Gentleman may say that, but, if he knows the building industry, he will also know that it has already developed to a considerable degree. If he wants confirmation, his right hon. Friend the Minister of Labour admitted that only a few days ago. The factors that the hon. Member has in mind do not seem, even now, to prevent it developing.
  I am saying that the temptation to arrange for a man who works for one to become an independent contractor must be increased if that is going to save one a 25s. a week tax. It is a pity, because it will deprive the worker concerned of the protection of the Industrial Injuries Act and the advantages of unemployment benefit. Socially, it will be a bad thing, but surely it must be the inevitable effect of linking the tax to the National Insurance contribution in respect of employed people. That, again, is one of the quite unthought-out social effects of the tax.
  There is one advantage that the Chancellor could take of using the National Insurance system. It is that it is not anything like as inflexible as he appears to think. He could easily exempt those drawing pensions but still working, because they contribute on an employer contribution only, with a different stamp and I think a different coloured card. The Chancellor could also exempt Northern Ireland, because it has its own National Insurance system. Why does he not do both those things? Is it really helping the deployment of labour to impose a 25s. a week tax on someone who
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  employs an old man for a limited number of hours at a moderate wage—so moderate in most cases that 25s. a week will loom very large in proportion?
  The tax will make the employment of old people more difficult, though to make it easier is the very objective for which social service Ministers of both parties have fought hard in years past. I beg the Chancellor to take advantage of at least one of the flexibilities of this instrument and exempt employed pensioners altogether. I suggest that he should consider doing the same for Northern Ireland, where unemployment is three times the United Kingdom level, where there is no shortage of labour and where, as they have their own machinery of National Insurance, they could do it.
  I beg him to think hard about the disabled person. It is all very well for the Chief Secretary to say that a disabled person makes the same contribution as anyone else. Disabled people work very hard and well. I have seen many of them at work. But it depends on the degree of disability, and they are registered by the Ministry of Labour as disabled people because it is felt that they need special and sheltered employment and special protection. Does the Chancellor think that by imposing the tax, which will discourage the use of disabled people, he is really doing any good? Does he think that he can take a disabled man who acts as a lift operator in an office and send him into a factory? He will much more likely cause automatic lifts to be introduced and that disabled person to be deprived of his job.
  I come, then, to the shocking inclusion of charities. The right hon. Gentleman the Chief Secretary said something about considering how and in what way they could be compensated. I hope that the Chancellor will tell us what that means. Does it mean that the Government are determined that these charities shall be in no worse position after the tax is imposed than now? If that is so, it is a repentance which would be very welcome. Alternatively, does it mean, to adopt the rather sinister phrase that was used, that the whole matter is still the subject of useful discussion which is to take place after Whitsun? We must press for an assurance about that.
  I agree with my right hon. Friend the Member for Flint, West (Mr. Birch) that

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  it is shocking that a tax should be brought in which will fall in this way on the multiplicity of charities that we have. To give the Chancellor an example from my own constituency, we have in Kingston the only voluntary hospital to be started and maintained since the National Health Service came into being. The Kingston Victoria Hospital has been maintained, despite the difficulties of the day, as a result of devoted service by consultants and physicians and a tremendous fund raising effort in the locality. The tax will cost that hospital an additional £1,000 a year which, for a hospital on this small scale, will be a crippling and perhaps fatal burden.
  If one considers the great charities, Dr. Barnardo's Homes have said that it will cost them over £100,000. The National Lifeboat Institution says that it will mean the cost of a new lifeboat every year. There are half a dozen major charities, as well as the small ones, which will be very adversely affected.
  It is no good hon. Members opposite saying that they can raise more money. Do they not realise that it will make it even more difficult to raise the present sums of money when the public know that a proportion of what they contribute at some sacrifice to themselves is to be taken into the Exchequer by way of the tax? It is my view that, far from raising more, the charities will be in a position probably to raise less.
  What good is done by stopping the service to children, sick, old, disabled and ex-Service people which these bodies perform by deliberately imposing a selective tax upon them? It means diminishing the amount of service that they can do. They can look after fewer children, house fewer old people and give less help and employment. What about the Lord Roberts Workshops, which provide sheltered employment, good in financial terms and better in self-respect, for disabled ex-Service men? Does the Chancellor contemplate imposing a selective tax which will fall upon that kind of employment?
  The right hon. Gentleman will remember that Chancellors of the Exchequer are not always remembered in the future for the financially significant parts of their Budgets. Lord Butler is sometimes
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  remembered for the "pots and pans" Budget. Unless he can tell us that he will take charities completely out of this Measure, the right hon. Gentleman will certainly be remembered as the Chancellor of the Exchequer who, so far from trying to soak the rich, tried to drown the poor, and his Budget will be known as the Barnardo Budget.
  7.1 p.m.
  Mr. Robert Edwards: I have seldom listened to two speeches from the other side of the House as destructive and negative as the two speeches which we have heard during the last hour. Apart from the last five minutes of the speech of the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), which was excellent and full of idealism, his contribution was completely negative and, in my view, extremely dangerous for the British economy. To suggest to the House and the country that the economy is stagnating is a very damaging statement to make.
  I wonder who is doing the work in this country. I wonder who is responsible for producing the highest volume of exports ever in our history. Does that sound like stagnation? I wonder who is producing the chemicals which we export to the markets of the world in greater volume and of a greater value than we have ever exported before. I wonder who produces the cars which we sell in the markets of the world to a greater extent than ever before. It is nonsense to suggest that the economy of this country is stagnating. It is true that we could do much better, but it is dangerous in the extreme to say that the economy is stagnating.
  Mr. John Hall: My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that the economy was stagnant. Is the hon. Member saying that production is not stagnant? If so, would he like to quote the more recent figures?
  Mr. Edwards: The right hon. Member for Kingston-upon-Thames said that the. economy was stagnating. I should be very happy to enter into a dialogue about production, but at the moment we are not talking about production; we are talking about our economy in general.
  Mr. Boyd-Carpenter: Is the hon. Member arguing that an economy can be vigorous and expanding when production within it is stagnating, as he apparently accepts?
  Mr. Edwards: The economy of this country is not stagnating because production is not stagnating. I hope that in reply to the debate the Chancellor will be able to produce what I cannot produce at a moment's notice, because I do not speak from notes—the up-to-date figures relating to productivity.
  I admit that some of our basic industries are working at only about 60 per cent. of their capacity, and the basic purpose of this Selective Employment Tax is to deal with that special problem. As a nation we live by our exports. We have to buy from other countries half of the food which our people eat. In order to purchase this food we have to export to the markets of the world. In order to export, we have to import raw materials, and in order to do this we have to have a bias on taxation in the direction of production.
  Mr. Iremonger: We do not have to import anything in order to export our invisible exports, which are supported by the service industries.
  Mr. Edwards: By some of the service industries. But perhaps I might be allowed to make my own speech without all these interruptions. Some of the points which hon. Members are making are Committee points. [Laughter.] I do not know why you think it is so frivolous. These are Committee points, as you know and I know.
  Mr. Speaker: Order. This is the second time that the Chair has been brought into the matter. The Chair is neutral.
  Mr. Edwards: I would never dream of accusing you of being frivolous, Mr. Speaker, and I withdraw the remark. The point which I am making is that when we get into Committee we begin to deal with such finer points as hon. Members opposite are raising. The service industries were mentioned in an interruption. Only a few of the service industries make a basic contribution to our balance of payments, and I presume that those services will receive special
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  consideration during the Committee stages of the Bill.
  The right hon. Member for Flint, West (Mr. Birch) made a dreadfully destructive speech. He made an attack on a fine economist who is serving this nation and who has been subject to libel and attack from hon. Members opposite just because he was born in Hungary. This man is giving his services to this nation, and he is a brilliant economist. To suggest that he was responsible for the difficulties in India or that they were due to his advice; to suggest, as the right hon. Member for Flint, West did, that he was responsible for the collapse of the economy in Ghana; and to suggest that he was even responsible for a revolution in British Guiana is no joking matter. [[Laughter.] It is no joking matter to libel and attack a man and to blacken his character in this way. Apparently you think this is funny. You ought to be ashamed of yourselves.
  Mr. Speaker: Order. The hon. Member must not permit his indignation to take him beyond the rules of order.
  Mr. Edwards: I beg your pardon, Mr. Speaker, but I think you will admit that we have been very heavily provoked during the last hour of the debate. We all know that we are living in a world of inflation. This is characteristic of India, Ghana, British Guiana and of this country, and it is a problem which every nation, including the Communist countries, is having to face. To dare to suggest that an economist who is serving this nation well was responsible for inflationary developments in the three countries which were mentioned, and to let that be placed on the record without some kind of response, would be doing a disservice to the House and is not related to the kind of issues which we are debating.
  It is my view that the Budget is very imaginative. It moves away from the old routine of stop-go economics. If new income had to be found for the nation, I believe that most of us on this side of the House agree that the Selective Employment Tax is a very constructive way of obtaining it. There are, however, criticisms which I should like to make.
  I am sorry that I have taken so long to get to the point which I wanted to make. Our economy basically is biased

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  in favour of the producer. There is an unbalance in the economy in favour of the producer and against the consumer. We must have a proper and better balance in this respect.
  My criticism of the Selective Employment Tax is that it will unbalance our economy much too far in favour of the producer and less and less in favour of the consumer. During the last half century there has been massive pressure in this House, against all Governments, in favour of manufacturers and producers. All kinds of Bills have reached the Statute Book giving the producer overwhelming power in our economy. Tariffs have been built up to protect the manufacturer. The worker, as a producer, has organised unions and has developed campaigns which have brought about the great Factory Acts and Acts which deal with redundancy and all the other social problems that affect the workers.
  In recent years, however, we have begun to introduce Bills for consumer protection. We were achieving a realistic balance in our economy. I am afraid that the payroll tax will unbalance our economy all over again. Basically, it is a tax on the distributive trades and services, into which we were trying to inject more efficiency and a better organisation of distribution. I presume that one of the basic purposes of the tax is to draw surplus labour out of the distributive industry. But, as the right hon. Member for Kingston-upon-Thames rightly pointed out, the tax will not draw surplus labour from distribution because it is just not there; there is a shortage of labour in the distributive trades.
  I hope that I may be forgiven if I refer to the Co-operative movement. I have an interest to declare. For three generations my people have been active members of the movement. A forebear of mine started one of the first co-operative bakeries in this land. The village in which he lived had no regular wholesale fresh bread. A group of workers got together and formed the bakery so that the village would have regular daily supplies of fresh bread. My forebear was not paid for this; he did it voluntarily and never made any money out of it. All the profits went back to the consumers in the form of dividends.
  From these localised beginnings the great Co-operative movement has developed,
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  based on the principle of common ownership, with no profit-making, and with all surpluses going into modernisation and dividends to buyers who are the owners. This tax is one of the heaviest blows delivered at that movement since its inception. I hope that I have now put myself in order, Mr. Speaker. The tax will cost the Co-operative movement £10 million a year. It distributes dividends amounting to £40 million a year, which means that the tax represents a loss of one quarter of its distributed dividends to 13 million co-operators each year.
  The technique of voluntary common ownership should be part of the structure of our society. This method of self-help and mutual aid should develop in industry, the distributive trades and agriculture to an increasing extent, but it will not do this if those trades have to bear the dead weight of the payroll tax. The London Co-operative Society, in addition to all its other taxes, will have to find an extra £750,000 a year, and the Royal Arsenal Co-operative Society will have to find another £350,000 a year. These are heavy blows at organisations built on the principle of service to the community.
  Co-operative organisations deliver milk, coal and groceries to their customers. This is a costly method of distribution, but it is demanded by consumers.
  Mr. W. R. Rees-Davies: Does the hon. Member realise that Unigate will have to carry £11 million? Is he suggesting that the Cooperative movement should be specifically excluded, or that the distributive services as a whole should be excluded, and that if they are not the delivery of bread and milk to which he has referred may cease and the whole thing be put on a cash-and-carry basis in future?
  Mr. Edwards: I am not suggesting that the Co-operative movement should be completely excluded, or should receive more favourable treatment than any other section of the distributive trades at this moment. But for the future this technique of common ownership by voluntary association is worthy of favourable treatment, such as it receives in Denmark and Sweden.
  Nor do I suggest that the distributive trades should be relieved completely of

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  this tax. I suggest, however, that at this moment there is little justification for the very heavy rebates that will be paid to industry without discretion. I take the town of Burton as an example. The distributive trades there, including the Co-operative movement, will pay the payroll tax. By doing so they will help to subside the brewers who do not need the subsidy and have never asked for it. It means that voluntary organisations and charities will subsidise the patent medicine industry which produces its witches' brews which have no medical value at all.
  There should be discrimination in the question of rebates, because they will amount to £130 million a year. They should be abolished in respect of industries which are making no important economic or social contribution to the economy. The money thus saved should be used to reduce the sum of 25s. a week for each male worker and 12s. 6d. a week for each woman worker which service industries will have to pay.
  I have spoken much longer than I intended. It was my purpose to make a short speech, but I was provoked into lengthy arguments by hon. Members opposite. It will be the intention of a number of hon. Members on this side interested in the Co-operative movement to table Amendments and we hope to have a dialogue with the Government during the Committee stage. I hope, by this means and by detailed and constructive arguments, that some concessions will be made, particularly as the tax relates to part-time labour and to the employment of older people and younger people.
  7.20 p.m.
  Mr. Richard Wainwright: I sympathise with the attack of the hon. Member for Bilston (Mr. Robert Edwards) upon certain aspects of his Government's tax. I, too, like many hon. Members, have had sombre figures from co-operative societies in my constituency—significantly enough, one from one of the largest and most dominant retail societies in the kingdom and another from one of the smallest.
  When another practising accountant in the House—the hon. Member for Heywood and Royton (Mr. Barnett)—spoke,
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  I, as a practising accountant myself, was fascinated at the prospect of a defence of the Bill from a professional point of view from that side of the House. I noticed that he quickly turned instead to an interesting speech on the £ and the prices and incomes policy.
  The Bill underlines the perplexity and confirms the dismay created in the country by the Budget statement and brings certain added disappointments. Part V clamps down even further on the country the Capital Gains Tax, with none of the hoped-for provisions for a general exemption limit for small capital gains. I hope that, in the Chancellor's winding-up speech, we shall hear something of the reasons for the continual refusal to provide some general exemption limit, particularly having regard to the storm which was caused when the return forms for 1966-67 were issued to the public recently.
  Part III clamps down the Corporation Tax even further upon the country, with no recognition of the folly of importing into a 40 per cent. tax all the crudities inherent in the 15 per cent. Profits Tax so usefully forged for the present Government by those now sitting on the Opposition benches. I doubt whether any practising accountant can understand why the acceptance, such as it was, of the crudities of the comparatively low Profits Tax should excuse their appearance in what is now the chief company tax in our system.
  The Bill, in the view of my right hon. and hon. Friends, suffers basically from a lack of consultation, a lack of ventilation of its main proposals, over the years beforehand. In that fault, it contradicts entirely the spirit of the National Plan, which is that of co-operation in planning. It contradicts good practice in other countries. In the United States of America, for instance, most of their revenue proposals are ventilated well beforehand and there are even public hearings. In that way, a great many crudities and inequities are eliminated and some tax proposals never see the light of day at all.
  Perhaps the Treasury has forgotten that all previous innovations of taxation on this scale have been introduced when war was imminent or taking place or we were in the immediate aftermath of war—in conditions, therefore, when controversy

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  was stilled and those who operated the tax system, both for the taxpayer and for the Revenue, were willing to swallow their distaste and get on with the job. This is not the atmosphere at the moment and one cannot except it to be so.
  Therefore, I suggest that an entirely new approach to innovations in taxation is required and that there should be a great deal more preliminary consultation. I know that I shall be confronted with the alleged need for secrecy, but I suggest that the shadow of the bonded warehouse is no longer a legitimate excuse for regarding the Budget as a great conspiracy which has to be sprung on the nation with out public opinion being in any way prepared.
  I should like to take up the challenge thrown out from the benches opposite for alternative suggestions. I was sorry that the right hon. Member for Kingstonu'Don-Thames (Mr. Boyd-Carpenter) refused to take up this challenge. I was surprised to hear that Conservatives do not want to reduce taxation on earnings and are apparently not seeking methods reducing tax on the profits and earnings of success, enterprise and risk-taking. We on this bench want to do just that.
  We went on record before and during the election in favour of a general payroll tax, payable by all employers on a basis of a percentage of pay, variable according to region, age and sex in order to reduce the burden of taxation on earnings. I would say to hon. Gentlemen opposite who have thrown out the challenge that we were on record with this before the election. I did not hear during the election—certainly not up the Colne Valley—any proposals for a Selective Employment Tax, although that district, being conspicuously a manufacturing district and lacking in service trades, would have been an excellent platform from which to launch their tax biased in favour of manufacture.
  The opportunity for consultation and preliminary ventilation has gone by. I hope, therefore, that at least during the winding-up speech we may have some enlargement of the statement made earlier this afternoon that the framework of the tax is infinitely flexible. If the Chancellor has deliberately chosen a flexible instrument, he must have some idea of what
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  way he hopes to bend it as the years go by. I hope that he will reveal this to us.
  There are one or two other aspects of the Bill in which we are interested. I will not dwell on them at length, because we hope to table Amendments, but I wish to quote them now as evidence that there has not been any proper consultation with responsible opinion.
  We read on page 37 that, in addition to the usual Clause to which we have become accustomed, in respect of changes in the investment allowance—namely, that the allowance shall apply if a contract has already been entered into for the purchase of the asset—there is now for the first time the extraordinary addendum that the asset which has been contracted for must be borught into use not later than 16th October this year.
  I should like to ask the Chief Secretary how he supposes that, in the case of industrial buildings, where the allowance has to disappear and not be replaced by any of the new grants, a large factory contracted to be built, with the contract sealed in January, 1966, can be expected to be brought into use not later than 16th October this year. His experience of the building trade must be entirely different from mine.
  From the point of view of the Revenue it seems extraordinary that Clause 23, which is apparently aimed at catching options and bringing these things into the Revenue net, is strangely aimed only at options to acquire shares in the employing company. Therefore, not attempting to catch practices such as that of the Garda Trust, of which we have heard so much recently, it will endanger a great many useful co-ownership and co-partnership schemes.
  It is our opinion that if——
  Mr. Harold Lever: Surely, in the case of the Garda Trust we are dealing with a totally different subject. The Chancellor is dealing with share options. I do not think that there were share options in the Garda Trust. There was a share subscription, which is another question. It is questionable whether the right to subscribe shares in the trust was not already given under existing tax legislation as an emolument to the Treasury.
  Mr. Wainwright: I am grateful to the hon. Member for that point. I stand

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  by my general comment that there are share option schemes where the shares are not to be in the employing company and those, very strangely, are missed by this legislation.
  Mr. Barnett: The hon. Gentleman will agree that that already would be treated as an emolument.
  Mr. Wainwright: No. As I understand, the rules to which apparently the Revenue now takes exception are the same in, the case of a share option for shares outside the employing company as they are for a share in the employing company. I am satisfied about that.
  In conclusion, if there are to be further innovations on this scale—the Prime Minister promised us some in his speech at the Press Gallery luncheon recently—it is the hope of the Liberal Party that we shall have a more civilised procedure, more preparation, and the consulting of responsible opinion, particularly the opinion of those who will have much of the duty of operating new taxes
  7.31 p.m.
  Mr. Robert Sheldon: The hon. Member for Colne Valley (Mr. Richard Wainwright) brought up one point that I, too, am interested in, concerning the time limits for payment in the case of new investments. He will find that one or two hon. Members on this side will agree with part of what he said. Perhaps this is a point we can discuss rather more fully on Committee.
  I judge the Bill principally by its effects on economic growth. I admit that there are other ways than by bringing in Finance Bills by which one can have some greater effect on economic growth. Better methods are by using the ingenuity of manufacturers, the use of educated skills and technology, and, most particularly, using the drive and energy of some of our better industrialists. These are not matters in which the Government can concern themselves very greatly.
  I believe that what the Government can do is to concern themselves about the level of investment. There are two Clauses which have a bearing on investment—Clause 33, which replaces allowances by grants, and Clause 42, which introduces the Selective Employment Tax, which also can have some effect, if used in a
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  certain way of improving investment. These two Clauses, coupled with the investment grants introduced in the Industrial Development Bill, are valuable, but must be seen in the context of the Budget statement of my right hon. Friend the Chancellor of the Exchequer. In his Budget statement my right hon. Friend said this:
  "At present, I foresee little change in private industrial investment this year."—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1443.]
  It is this statement which I find so disturbing, because of its implications for the future and for economic growth. Many have witnessed forced development in a country such as Russia, where large sums were accumulated through massive saving, which helped to create there an industrial base. Despite the inefficiency, the result was a massive increase in investment and, consequently, production. There is a very great difference between forced investment, which can succeed in producing a certain quantity of production, and the kind of production that we would wish to acquire, the kind of production required by a sophisticated market, and, most particularly, the kind of production required by our overseas customers.
  Nevertheless, the example of Russia shows that the capacity of a country to invest is not dependent upon outside circumstances, but only upon what diversion of resources a country is prepared to accept. If heavy investment and the consequent rapid economic growth are considered important enough, we can have it, even in our present economic difficulties; but we must be prepared to forgo other things to get it. In particular, we must be prepared to forgo the expensive privilege of helping to order the affairs of countries east of Suez while neglecting our own.
  In the short term, too, it may mean the acceptance of import quotas as a means of introducing some certainty into our balance of payments position, so that industrial investment can expand. These are hard and ruthless decisions, but if we are serious in wanting high investment leading to high growth such a choice must be made.
  There are two main shortages of investment that we have to remedy. First, the level of capacity generally has been too low. There have been in the past

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  fears of stop-go: fears, too, of the dangers of over-investment with unsaleable production resulting from it. But, for the nation as a whole, even such over-investment may not be totally unprofitable, if the industry concerned is forced to a ruthless examination of its costs and if it then turns to export markets to keep its plant and machinery running. But, because capacity has been so low, manufacturers generally have had a greater choice than they ought to have between export markets, on the one hand, and the softer home market, on the other.
  It has also meant that early in an expansionist phase the limits of capacity are quickly reached, with a consequent increase in prices that manufacturers are so able to obtain, coupled with a stagnation in exports and an increase in imports.
  This is the case for the encouragement of investment leading to a general increase in capacity. My right hon. Friend the Chancellor of the Exchequer can give investment grants or allowances, but it is no use, unless an expansionist economic climate is created at the same time. Industry will not invest in plant if it sees little chance of selling the increased production. The great strength of the National Plan and the way it was introduced was not that it laid down goals capable of precise attainment but that by making clear the expansionist aims of the Government it encouraged industry to take a long look ahead. It thus encouraged the modest increase in investment which the economic situation did not justify.
  The greater investment which should have been made last year and the sub-slantial investment that ought to have been made this year will be denied to us. The machinery and the equipment which should have come into use this year will affect the level of production next year and in 1968. There are great dangers here for the future—dangers that manufacturers will be disillusioned by future forecasts by the Government and also, by its own optimism, dangers that the retrenchers of industry may come into their own and that the investment cycle may once more resume its position in the economy: a danger, too, that co-operation between the Government and industry may be soured for years to come. These may be the consequences of failing to
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  provide conditions favourable to general investment.
  The second kind of investment that I believe we ought to encourage needs to be much more selective and discriminating. I believe that the Selective Employment Tax is an attempt to introduce such discrimination. By the standards of modern industrial countries, our investment relative to our gross national product has been low, but it has not been too low to account for all our investment problems. If we accept the figures, it would appear that we have invested in too many of the wrong things. We need to be much more selective and discriminating. We need to encourage modernisation and new techniques of manufacturing.
  The thinking behind the discrimination of investment is well documented and the arguments also apply to the Selective Employment Tax. In 1951, the Tucker Committee on the Taxation of Trading Profits favoured discrimination of annual allowances. In 1955, the Royal Commission on the Taxation of Incomes and Profits favoured discrimination by subdividing investment into categories qualifying for different capital allowances. In 1963, the N.E.D.C. pamphlet "Conditions favourable to faster growth" pointed out the advantages of greater discrimination.
  One report after another has favoured such greater discrimination and the case for this is now overwhelming. However, as soon as we decide on greater discrimination, we need to break down investment into categories and to state what kinds of investment will qualify for the differing rates of grant. Discrimination walks hand in hand with categorisation and to accept one is to accept the other.
  The Tucker Committee anticipated this and also anticipated the pressure of Parliamentary lobbies which would be introduced in an attempt to change the categories. This pressure we are seeing, and we shall see, during the passage of the Selective Employment Tax and the Ministry of Labour Bill. The task of such pressure groups is obviously made easier because of the inevitable anomalies created whenever categorisation is attempted. Anomalies we shall always have, although a reduction in their number and importance should be possible.

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  Legislation involving categories inevitably provides a field day for the carpers and nigglers of our Parliamentary system, but if we wish to influence the direction of the economy—when economic growth is the first priority of our time—the Government cannot be neutral. If we wish to influence the direction of the economy, decisions favouring certain investments and not favouring others must be taken. There may from time to time be need for the use of blunter weapons than we might like to use. We need finer instruments, but the Government must not be reduced to inaction because they have no rapier to hand.
  Mr. Stratton Mills: Is the hon. Gentleman aware that he is drifting into the use of language of a totalitarian State?
  Mr. Sheldon: The function of the Government is to see that broad economic goals are achieved. I quoted at some length the opinions of a number of bodies which examined this matter on behalf of Governments. I should have thought that that was answer enough to show that some discrimination needs to be applied by any country, particularly a country in our position.
  I was saying, concerning discrimination, that frequently we will have to be satisfied with broad differentiations, such as we see between services and manufacturing in Clause 42. I admit, however, that such differentiation is a rough form of categorisation and that the growth of services is a sign of increasing wealth. But I draw a distinction between consumer services and other services, a proportion of which are of definite advantage to the nation.
  This distinction between consumer and other services cannot be too closely defined, but it is one which the House will recognise. Increases in consumer services largely come about not because the requirements increase, but as consumers' needs for manufactured goods become satisfied, so that the surplus income spills over into demand for such increased services. If we can afford it, it is splendid, although it is reasonable to expect that such services should pay their share of taxation.
  But when we are trying to encourage investment, such encouragement should
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  go to those who, in the main, are contributing to the economic good of the country. Of the other non-consumer services, some are of great benefit to the country—to manufacturing industry and exports—and here I hope that it will be possible in time to refine these categories much further to give incentives to certain non-consumer services. I appreciate that anomalies are an unavoidable adjunct to discrimination, but some assistance for modernisation could be given, and there are others to which I will return in Committee.
  The recent economic measures of the Government have followed two main lines of thought: one towards greater discrimination and the other an unwillingness to put growth at the head of our priorities. As discrimination becomes refined, so valuable economic weapons can become available for use. It is necessary, however, that such discrimination should be joined to an expanding economy which alone will provide real grounds for confidence. My fear is that discrimination, with too much deflation, may not prove the remedy for our economic ills.
  7.45 p.m.
  Mr. Geoffrey Hirst: I trust that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) will forgive me if I do not comment closely on his remarks, although I found them extremely interesting. I observe that a large number of hon. Members still hope to take part in the debate and I wish to direct my attention to several points which I had noted before the hon. Gentleman rose to speak.
  I will not say a lot about the Selective Employment Tax because a great deal has already been said. I made a public comment on the subject about half an hour after the Chancellor had completed his Budget speech. I said on that occasion that the tax was complete nonsense and that everyone would realise that it was. Virtually everyone has now realised that that is the case and the view which I expressed is getting a great many more adherents among intelligent writers on this subject. It is obvious that this view is held by a great many hon. Members, including many hon. Gentlemen opposite.
  The hon. Member for Bilston (Mr. Robert Edwards) obviously does not like

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  this form of tax. The only difference between him and some of his hon. Friends—and, of course, my hon. Friends and I—is that we propose to vote against it Strongly tonight. If the hon. Gentleman wishes to justify his claim that the tax will damage the Co-operative movement, he should vote with us, but I am sure that if we do not find him lurking there, we will find him happily wandering through the Labour lobby.
  I can afford to speak in this way because I have occasionally played truant when I have felt keenly that something was against the interests of those whom I represent, and it would be a pity if the Government could not get a shaking on this issue because, whether or not hon. Gentlemen opposite like it, they are going to get a shaking sooner or later from the country.
  In many respects this tax is really a bit of a swindle, as my hon. Friend the Member for Worcester (Mr. Peter Walker) pointed out in an earlier debate. It is a bit of a swindle because while hon. Members have been talking this afternoon about beneficiaries receiving a um alleged to be about £133 million, we know perfectly well that they will get nothing of the sort. Indeed, they will have to pay a very large sum for the extra costs of the services and materials which they use. One hon. Member after another has pointed out the many instances in which it is absolutely vital that these services are obtained in businesses. These are not services which can just be discarded. In addition, they will have to pay the smacking great rate of 40 per cent. Corporation Tax. This will, therefore, be an administrative nuisance even for those who are allegedly the beneficiaries.
  The Chief Secretary is always courteous to the House and has always been courteous to me. I therefore do not wish to be anything but courteous to him. However, while I have a great deal of respect for the ability of the right hon. Gentleman—and we have argued over the years on many subjects, sometimes on the same points—I must tell him that he should not have allowed himself to come to Parliament with the sort of brief with which he was armed today. He was obviously uncomfortable with it. Indeed, I thought that it was the only shocking
  566
  speech which I had ever heard the right hon. Gentleman make, although I realise that it was not enirely his fault. He was let down and I trust that he will not get let down again in Committee because that would make the legislative process affecting the Bill a very long one.
  Come to think of it, the Government come before us and plonk down a blank cheque for £1,100 million and ask the House to sign it without giving us the precise details of how the Chancellor's statements will be carried out in regard to those who, we are told, will get their money back or will receive a so-called bonus, in addition to everything else we have been told that they will be given. Bearing that in mind, the Chief Secretary—and I trust that he will excuse the phrase—waffled his way through all these important points, about disabled people and others, without making anything clear. My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), with his great experience of the Ministry of Pensions and National Insurance, pointed out the difficulties and I do not understand why these matters could not have been sorted out before this stage. It is not very forthcoming—it is not quite the usual standard of courtesy that I would expect—to imagine that we can sit down and take on the chin a debate of this kind when the leading spokesman for the Government cannot be clear even on the points about which he tells us the Government are thinking.
  The same goes for charities. We must have a definite answer, and I hope that the Chancellor will give one tonight. There can be no argument about it. It is a special case and is recognised to be. The Chief Secretary says that charities are a special case, yet at the beginning of the debate we have no answer on it at all. All this is exceedingly shocking.
  From the general point of view, let the Government realise that the new tax will put up the cost of living considerably. It is not just a question of passing it on here and there—which, even though they do not like to give too much lip-service to it, might be regarded as a desirable economic necessity from their point of view—but it will put up the cost of living a great deal and will lead inevitably to wage claims. Of course it

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  will. The Confederation of British Industry, with which, as the Chief Secretary knows, I have many connections, has given authority to that statement. I was on the committee which prepared the paper which was passed by the Council the other day, and I can tell the House that that is very strongly the Confederation's view.
  The Government's scheme for payment of rebates implies, as I understand it, a permanent compulsory loan by industry to the Government of a standing amount in the region of £400 million. That is the way it is going. It may be a bit more—I do not know—but that is my guess.
  Mr. Iremonger: And interest-free.
  Mr. Hirst: And interest-free. There is another snag here. As the timing for company payments for the purpose of Income Tax on dividends is being advanced by reason of the last Budget and Finance Bill, there is a double disadvantage to industry. This is bound to make it more difficult for firms to have cash available for investment. In the circumstances, investment will inevitably be reduced, even by those happy firms which have the money and do not have to go to the bank to achieve these objects.
  Do not the Government realise that a rapid advance in the growth of services and the construction industry in a modern society such as we are developing today is not a snag, is not something which should be shouted down or be regarded as stinking, as somebody said. It is the hallmark of a go-ahead advancing economy, not something which should be shot down in flames. The Government's distinction between manufacturing and services in this context is arbitrary, anomalous, and positively absurd.
  I am concerned also that we have had no answer about part-time workers. As the House knows, I represent an area which has a high concentration of the wool textile industry, in which the part-time worker is almost the life and soul of the industry's capacity to keep up its high export record. This will be further discouraged now unless something is done to deal with that aspect of the matter. Certainly, nothing under 20 hours a week,
  568
  for example, should count for tax. Something of that kind must be considered.
  The Government ought to look—it is not a bad thing occasionally—at the sins in their own life. If the need to economise is one of the ideas, it ought not to be forgotten that non-productive manpower is just as important and, indeed, is very relevant to the position of some Government Departments. It is very relevant also to the position of the nationalised industries and local authorities. Somehow, they should not go scot-free under this selective tax system.
  The tax will not produce any rapid redistribution, if anything at all, from the distributive trades into manufacturing. The two are quite different. In any case, many of the distributive trades are vastly important. In the Bradford and Shipley wool district I have one association—in fact, it is a national organisation—which is 100 per cent. exporting. There is not a member otherwise. They are merchants, dealers in raw wools and yarns, and theirs is a first-class organisation. The Chief Secretary knows it and the Board of Trade knows it only too well. Yet these merchants are 100 per cent. penalised. In schoolboy language, the thing is positively "crackers" The Government must give more thought to it.
  I am not necessarily against some form of payroll tax, if it is necessary. I was not against it when it was being discussed in my own party. But what the Government propose now is a very different story. That tax, if it had been put across the board right away, would have involved rates of something like 7s. for a man, 3s. 6d. for a woman and 2s. 4d. for a girl. I think that it was something like that—my figures are not wildly wrong—so that it would have been about one-third the present rate. If that had been done, with some compensatory factors to give encouragment, perhaps a slightly lower rate of Corporation Tax than was expected, or something like that, there would have been incentive to effort and the drive we want in our economy. There is something to be said for that. I cannot say that I should particularly like it, but, at least, I could argue a case for it. Nobody can argue a case for this tax, however, and it is obvious that right hon. and hon. Members opposite are having a

  569
  devil's time in trying to do so. Having known something of that sort of thing in my time on those benches, I sympathise with them, though I cannot think that what they are doing is at all reasonable.
  Under Clause 11 we are to have a betting tax. My hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) in a very amusing and entertaining maiden speech, drew attention to the Finance Bill itself and asked whether we could have it in better language which people could understand. I do not know whether the right hon. Gentleman had got down as far as studying Clause 11(4), which is supposed to guide people on the General Betting Duty:
  "For the purposes of the general betting duty, where a person bets on more than one contingency on the terms that, in the event of his bet being successful in respect of one contingency, his stake on the bet, or his winnings in respect of that contingency, or both, are to provide the stake in respect of another contingency, then, unless he makes his bet on both or all of those contingencies at the same time and on the terms that both his original stake and the whole of his winnings in respect of any of those contingencies are to be the stake in respect of any other contingency on which the bet is made—"
  That is very good. I have read a lot of these Bills——
  Mr. Harold Lever: It is quite simple.
  Mr. Hirst: I am not a betting man, but I should like to have some idea of what that means before the Committee stage. It all sounds rather like mumbo-jumbo to me.
  There is to be a Gaming Licence Duty, and Clause 12 lists all sorts of games. I think that the Bill will become known as the "chuck-a-luck and craps" Bill—one cannot help that sort of thing happening—hut my concern is that enormous powers are given to the Treasury to add to the list. This also needs looking into.
  There is then the question of the rates of duty on gambling halls. I do not object in the slightest to a duty, and a fairly high one, being imposed here, but I am sure that the Government have gone wrong in their allocation of the different rates. The duty on premises of under £1,000 rateable value is £500 for all games. Over £1,000 and under £3,000 rateable value it will be £5,000, in respect of premises of rateable value over £3,000, it will be £50,000.
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  My objection to this is that it is nearly always the small places which are inclined to be the least desirable. The highly organised club of the Crockford's kind is usually carried on exceedingly well. We all know that it is much more difficult on the Continent to set up a casino and get permission than it is in this country. It has been too easy here, and it is quite right that the Government should do something about it both on the control side and also to recoup some revenue. But, unless they are going to stop all gambling, they should not penalise by taxation the type of gambling establishment which, I think, might be quite an asset in our tourist trade and quite a credit and which usually has arrangements and circumstances which are highly desirable as compared with the smaller places.
  Now a word about certain things which the Finance Bill does not do. It does nothing to amend—we drew attention to this last time—the unacceptable restrictions on the remuneration of directors of close companies. The present distribution limits must be greatly increased. That is painfully obvious. I trust that, as further Amendments will no doubt come from the Government, we may be saved the need to put one down ourselves.
  Next, I must again maintain that there is no rhyme or reason for disallowing the interest at normal commercial rates paid on a loan by a director who owns some—I believe 5 per cent. or more is the figure—of the equity capital in a close company. That also requires attention. Ha s anything been done to permit United Kingdom companies within the same group to elect to group their profits and losses for Income Tax purposes? That was permitted for Profits Tax. I think that the figure was 75 per cent. ownership for Profits Tax, and I would accept that figure for Corporation Tax. Many other changes are necessary.
  I should like the Government to take courage to do something which my own party, unfortunately, did not do. It would be a matter of justice, and also the right thing to do for other reasons, to increase the absurdly low Surtax level for investment income. We have all grown up—even the Labour Party—to realise that investment income is an asset to the country. It is a source of investment in our companies. It is not something to

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  penalise. Other countries do not penalise it—the United States, for example. It is one of the forces in industry. I should like the Government to show a little political courage and do something which has been overlooked far too long. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) failed to deal with it when he adjusted the other aspect of the problem.
  With regard to Clause 36, statutory redundancy payments should be permitted as a full allowance where businesses cease. I hope to press on the Government exemption of small transactions under Capital Gains Tax. The whole machine will become clogged through the fussing around with pettifogging little items. The Government should get away from this absolutely absurd attitude towards tax evasion. It is a rather mean-minded, mealy-mouthed attitude that it does not matter if one hits 5,000 people on the head provided that one prevents someone getting away with sixpence. We shall never get our economy right if everything has to be shut down and enormous numbers of people have to be penalised because somebody somewhere might get a little advantage. It is a parish pump attitude. I could not have believed that the Chief Secretary would have worn it as well as he did this afternoon. I know that some of his right hon. Friends have very little knowledge of these matters, but I should have thought that he had more intelligence—I know he has—and would know that this is tommy rot and that the less we have of it the better.
  There is far too great a tendency in many quarters—they are diminishing rapidly—almost to welcome a 40 per cent. Corporation Tax. That is a smacking great increase, amounting to £150 million. I know that there are one or two compensating factors, but some of them are compensating not against this but against what the right hon. Gentleman withdrew in an earlier Budget. Industry does not look at all calmly on the statement that this is merely a "hand back". It is not. It is a great rate of tax. If people who draw their income from industry are to be taxed at that rate of Corporation Tax and then at the standard rate of Income Tax, shareholders, including members of unit trusts—not Surtax payers—will be paying the
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  appalling rate of 64½ per cent. in tax. To put it another way, they will be allowed only 35½ per cent. of their money.
  I have no time to go into the general economic situation. However, the Bill, like the Budget, shows that the Government's whole approach is wrong. I wish that the Finance Bill had carried out what the Chancellor said—savings instead of taxation. Now we have taxation instead of savings. That is fundamentally wrong. It will cost the country very dearly. It will certainly cost the reputation of the Government equally dearly.
  We shall challenge the Bill and also the other Bill which is coming along unless we get a great deal more forthcoming attitude towards these measures than we have had today. I trust that my party will challenge them at every stage, and, if necessary, as indeed I shall, without mercy.
  8.5 p.m.
  Mr. W. S. Hilton: The hon. Member for Finchley (Mrs. Thatcher), opening for the Opposition, said that the Selective Employment Tax was the core of the problem, and the speeches of others have shown that this is true. Indeed, most of us believe that it is the core of the problem.
  Unfortunately, the taxation implications of the Measure have been dealt with more than the Chancellor's other basic objective, which is that the Selective Employment Tax should have a beneficial long-term effect by encouraging economy in the use of labour in services. I gathered from the speeches of two hon. Members opposite that they felt this to be nonsense because there was no over-manning in industry at present and no further efficiency in manpower could be achieved in the industries mentioned in the Bill That is an amazing tribute to the efficiency of the industries and the workers concerned, perhaps the first time it has ever come from the Opposition benches.
  This tribute to the high level of efficiency was made before the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) arrived to declare that the economy was in a state of stagnation. The Opposition will have to decide

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  whether or not there are economies which can be made in industry with this tax. The construction industry was mentioned in particular. The House should do an exercise on this industry to decide whether the Chancellor is right in his assumption that some economy can be made in the use of labour. The construction industry is divided into various sectors, such as repairs and maintenance, new housing, large civil engineering projects, and industrialised building, and so the tax will not fall evenly over every employee in it.
  What is the level of production efficiency in the construction industry? Opposition speakers have lamented that builders have proclaimed that housing prices must go up. In the repair and maintenance section nearly 500,000 men are employed, and there are almost no incentive schemes to greater productivity in that section. If any Opposition speaker can tell me that this tax and premium on using labour will not bring about greater efficiency because there is no leeway to be made up, I shall be glad if he would tell me now.
  There have been experiments with repair and maintenance. In Wolverhampton, a very large building section had a time and motion study carried out which led it to send out teams of men in specially designed vehicles to do its repair and maintenance programme, and it achieved a 55 per cent. increase in productivity. Manchester, which has another very large department, used short-wave radio contact together with vans equipped with spares, and so on, and achieved an 80 per cent. productivity increase. Of course, I should explain that these are examples of municipal enterprise, and perhaps that explains why these achievements were obtained.
  So, in the repair and maintenance section of the construction industry, large productivity increases can be obtained provided that the employers will do what is required. An increase of 50 per cent. means that 40 men can do the work previously done by 60 men. If we have a 5 per cent. overall increase, this would mean in relation to the 500,000 men employed in the repair and maintenance section that 25,000 skilled men would be released to go into other areas of the industry.
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  The method of applying incentives in house building is quite easy. It has been done for many years. Yet today only 16 per cent. of the men employed on house building are working on incentive production schemes. What does this mean in terms of completion times? A study by the Building Research Station showed that an efficient employer can build a traditional semi-detached bricks and mortar house in 900 to 1,300 hours. Other contractors may take between 1,300 and 1,800 hours. There can, therefore, be a difference of 900 hours in the production of a home. Is there any other industry where a manufacturer could survive if he took twice as long as others to produce a similar commodity?
  This is a matter to which my right hon. Friend the Chancellor of the Exchequer has turned his attention in so far as the Selective Employment Tax affects the construction industry. I believe that achievements in efficiency are possible in the industry, provided that the employers are prepared to do so. I accept that the worker has a responsibility for responding to moves towards greater efficiency, but it always rests with the managements to initiate these moves—an aspect that sometimes escapes attention among right hon. and hon. Members opposite.
  I hope that greater industrialised production of houses will take place within the near future, for I believe that the primary costs of house building are not so important as erecting the house quickly and getting back rents and rates to offset the tremendous interest burden. Industrialised building is, therefore, extremely important. Now there is in the Bill an incentive for people to enter industrialised production of houses because, when they do so, they will receive the same premium as other manufacturers.
  In other words, my right hon. Friend has not applied a cat-o'-nine tails to the industry, more the principle of the stick and a carrot. Those who want the carrot can have it. If they transfer more of the manufacture of a house from the site to the factory, this could achieve a great break through in industrialised building because a premium of 7s. 6d. would be payable, and would help to reduce present costs. That is something that the building industry should take

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  into account. I hope that what I have said will convince the House that my right hon. Friend is right in his assumption that there can be greater efficiency levels in some of the industries that he has mentioned.
  I want to put in a word of caution, however, echoing the sentiment uttered by the right hon. Gentleman the Member for Kingston-upon-Thames and other hon. Members. It concerns the way in which the self-employed person is being dealt with. He is, in fact, being exempted from the Selective Employment Tax. If that loophole is not stopped up, then it is possible that the Chancellor's objectives will not be achieved in the construction industry, but that there will be more anarchy through the growth of labour-only sub-contractors and self-employed labour contractors. When I say "anarchy", I am not dramatising.
  I want to quote from an article written by a member of the Construction Industry Training Board on the effect that labour-only sub-contracting has on the work of the Board, set up under the Industrial Training Act, passed by the last Conservative Government and perhaps one of the finest things they did. When the Board came to examine the number of employers liable to pay the levy they found about 45,000 labour-only sub-contracting firms in existence. The article, written by Mr. Harry Weaver, said that the Board
  "…circularised 45,000 labour-only firms with assessment forms to enable their contribution to the Government imposed levy to be assessed. Of these, 15,000 forms have been returned by the G.P.O. dead-letter office because they could not be traced, another 16,000 employers have not replied, 7,000 claimed that they were either self-employed or in partnership as self-employed persons… All in all, out of the 45,000 firms written to, the magnificent total of 647 have, up to now, conceded their liability to contribute to the scheme."
  This is anarchy. If a loophole is provided in the Bill for self-employed people, we can be sure that the effect on the construction industry will not be an inducement to greater efficiency but to greater evasion.
  Up until a few weeks ago, I thought that this danger applied in construction, but almost nowhere else. The loophole has since grown wider because other people have seen the possibilities. In
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  distribution—and I am particularly interested in this as a Labour Cooperative Member—I know that the cooperative societies cannot resort to these practices in order to dodge this legislation, but that is not true of other sectors of retail distribution.
  I have now heard that there are private retailers who are ready to make self-employed contracts with people distributing milk, bread and coal if self-employed people are to be exempt from this tax. What we could have is anarchy developing, not only in the construction industry, but throughout all industries where self-employed people are to be exempt. Once that happens, and this tax is evaded, it will also mean, in turn, as we have seen in the construction industry, evasion of the industrial training levy and of normal taxation and other payments. In the long run, the Chancellor may find that, unless he stops the loophole, advantage will be taken by many sectors of industry to deny his objectives completely.
  I say that not on behalf of the cooperative societies alone, but on behalf of the trade union executives in the building industry who have discussed this Measure. They feel that the Chancellor is right in his assumption that greater levels of productivity can be achieved and they are behind him in that. But they believe that, if this loophole is not sealed up, his objectives will be denied.
  Mr. Diamond: My hon Friend is giving considerable publicity to this point, for the best of reasons which I well understand. But, because of this, I ask him whether he is satisfied, in the case of the roundsmen and others he has referred to, that this practice could possibly spread when the individuals concerned would forfeit, knowingly, their unemployment benefit and put themselves in very great difficulty indeed by accepting the so-called self-employment arrangements?
  Mr. Hilton: Certainly, I think that the practice could spread. Already, 250,000 men in the construction industry are' prepared to forgo these things in order to be self-employed or work for labour-only sub-contractors. This is a definite danger. The inducement is there both for the employer and for the self-employed person.

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  For example, employed by a construction firm a man may earn an average of £20 a week, and, after taxation and paying for his National Insurance stamp, may take home a net £17 or £18. The employer pays the industrial training levy in respect of that man, for insurance and other contingencies. Thus, he may pay the man £20 in gross wages and perhaps another £3 for him in other overhead payments. He is paying a total of £23 for that man whereas the man himself is getting only a net £17 or £18. The employer can, therefore, offer a man this £23 a week as a self-employed person without loss to himself. That is the inducement and, unfortunately, people are willing to forgo the protection of other legislation in order to earn it.
  I say very sincerely that I believe that the Chancellor's assumptions are right and that there are sectors of the construction and other industries where great improvements in efficiency levels can be made, but, at the same time, there is this tremendous loophole which he must close so as to achieve his long-term objectives.
  8.20 p.m.
  Mr. Gordon Campbell: The hon. Member for Bethnal Green (Mr. Hilton) has dealt with the construction industry. While I agree with him about the need to encourage industrialised building, it surely should not be necessary to do so by harshly penalising the rest of the building industry at a time when we need to use all construction methods to build the houses and schools and other buildings which are needed.
  I wish to address myself entirely to Clause 42 and the Selective Employment Tax. When he introduced the tax, the Chancellor of the Exchequer no doubt hoped that he would give the impression to the ordinary taxpayer that he was getting off lightly, but the effect of the tax on the citizen will be the equivalent of a general increase in indirict taxation, Purchase Tax, Excise Duty, the motor tax and so on. I quarrel with this tax in that it is selective, and I quarrel with the method of selection and its proposed application.
  I am not against a payroll tax as such, but it is the selectivity which makes the application of this tax so anomalous. Today the Chief Secretary made a vague
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  statement about what is to be done about charities. As he will have noticed, I am a sponsor of the Motion on the Order Paper deploring the effect of the tax as now proposed on charities. The concept that if anything is manufactured a premium will be paid but that a charity will have to pay 25s. a week for every man it employs is a concept which the House should surely not accept. My hon. Friend the Member for Finchley (Mrs. Thatcher) spoke of the position of the disabled, the elderly and part-time workers and the need for the Chancellor to look again at the way in which the tax will affect them.
  I want to speak especially about Scotland and the effect of the tax there. I recognise that in built-up industrial areas the effect may not be sharply felt. There may be enough in the way of factories and manufacturing industries for such areas to escape much of the impact of the tax.
  It is the extensive rural areas, including the Highlands, which will be hard hit, and the Highlands cover nearly half of Scotland. In the White Paper published only last January, figures were given for the structure of employment in the seven crofting countries, the Highlands, and show that in 1964 only 10 per cent. of the employment in the Highlands was provided by manufacturing industry. Precise figures for the rest of the North of Scotland were not given, but the position there is broadly similar.
  Is the Chancellor trying to reduce the jobs in the service industries in the Highlands and the North of Scotland? Only today I had a Question to the Secretary of State for Scotland asking to what extent it was Government policy to reduce the numbers employed in non-manufacturing industry in the Highlands and Islands and the answer was that it was certainly not part of Government policy in those areas. Why is the Chancellor proposing to apply this tax, when he says that it is his intention to encourage transfers from service to manufacturing industries, to an area where that is not needed?
  It may be argued that the object of the tax is simply to raise revenue, but if that is the case why it is made selective in a way which is bound to damage the Highlands and no doubt other rural areas in Scotland and Britain as a whole? For the Government cannot think that they

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  can rapidly increase the amount of manufacturing industry in the North of Scotland. Geography and the available resources dictate that a high proportion of the industries there must be industries such as tourism, agriculture and forestry.
  In reply to a Question on 19th May, the Chief Secretary gave percentages of premiums returned on the tax payments as a proportion of the tax payments, excluding the public sector. The figures were for England 68 per cent., for Scotland 60 per cent. and for the Highlands 18 per cent. It is clear that the Highlands will be paying far more tax per head of the population than will be the case anywhere else. The attraction of the premiums in manufacturing areas, urban and built-up areas, must surely have the effect of attracting people into the towns and cities, and surely that will simply accelerate depopulation which the January White Paper said that it was the intention to halt.
  The hon. Member for Ashton-under-Lyne (Mr. Sheldon) criticised some speeches from this side of the House as coming from pressure groups concerned with categories, and he spoke of carping and niggling. I do not speak as a member of any pressure group other than a Member of Parliament for the North of Scotland. I speak for the people living in a large and important area in which my constituency is situated. This is not a question of pressure groups.
  This acceleration of depopulation, this burden on the North of Scotland and the Highlands, would not be so strange if there had not recently been issued the White Paper on the Scottish Economy, which is also called the Scottish Plan and which was supposed to be linked to the National Plan published last September. Two of its objects stated repeatedly were to stem depopulation and to create as many new jobs in the service industries as possible. It was said that in the six years 1964 to 1970 it was proposed that 130,000 new jobs should be created in Scotland. This in itself was a very disappointing target, because in the previous four years of Conservative Government 157,000 new jobs had been created.
  Even this modest target may now be at risk because of the Government's attitude to the service industries, since these new
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  jobs were given in the White Paper in their categories. Only 50,000 of them are to be in manufacturing industry—the other 80,000 are to be in the service industries. Has the attitude of the Government changed since last January, and is it their intention that there should be 80,000 new jobs in the service industries in Scotland as opposed to 50,000 in the manufacturing industries?
  Paragraph 143 of the White Paper said:
  "The Government is conscious of the rôle which the Service industries have to play in the expansion of the Scottish economy."
  They do not appear to be conscious now. In January the service industries were made ineligible for investment grants, and now we have this new tax penalising them. Why have the Government got this fetish about the manufacturing industries? These industries benefit at the expense of the service industries under both of these fiscal measures. The Chancellor should call in a psychiatrist to attend to the originator of these schemes. It will probably be found that there is some simple reason for the complex about manufacturing industries and the phobia against the service industries.
  The Chief Secretary must have read in the papers today that the General Assembly of the Church of Scotland passed a resolution yesterday deploring the effect of this tax upon their organisation and said that it would cost about £100,000 a year. There is the anomalous situation of the merchanting firm which achieves a high percentage of exports but which has to pay the tax at the full rate.
  Mention has been made on both sides of the House of the temptations there will be to change status from self-employed to employed or, probably more often, from employed to self-employed in order to get into a different category for the purposes of this tax. There will be many borderline cases. An extra man in this or that job may make the difference in the classification of a firm. It becomes almost metaphysical when we come to consider, for example, whether a fish fillet is manufactured. Which category will it be in? It could also be regarded as an extractive industry.
  There are two industries which are going to suffer as a result of the tax. One is tourism, which has received two major

  581
  blows from the Government this year. It has an acute shortage of labour and in Scotland this is because it is expanding. It is providing employment and has been expanding rapidly for the past six or eight years, particularly as a result of such developments as winter sports. The other industry to suffer is the construction industry, to which the hon. Gentleman the Member for Bethnal Green referred. Here the Scottish White Paper stressed the shortage of labour, particularly skilled labour, and prophesied an increase. That seems contradictory to what the Government, on the Treasury side, are intending. At present the housing programme in Scotland is all at sea. In Scotland there were 2,000 fewer houses built in 1965 than in 1964. The Minister of Housing, who is only responsible for England and Wales, did not say this when we had a housing debate a few days ago. In Scotland there is an acute housing shortage. This is going to make it more difficult for the construction industry and it is going to make houses more expensive.
  Can the Chief Secretary say what is to be the position of the direct labour forces of local authorities as compared with the rest of the construction industry? In paragraph 22 of the White Paper dealing with the new tax it is stated that the local authorities will be reimbursed for the extra amount they have to pay. Are they to be reimbursed for what is spent on their direct labour force? If so, this is going to make the position even more difficult, competitively, for the rest of the construction industry. It has been shown recently in this House that the rest of the industry has a much better productivity record than direct labour forces.
  Does the Chancellor know that the effects of this new tax in Scotland will be the opposite of everything which his party has said about jobs and development in Scotland and the Highlands before and during the General Election? Has he simply forgotten Scotland, or is he determined to reverse the regional development measures of the last ten years? Does his spcial adviser on taxation use one of those maps of the British Esles which ends at the top at Berwick? Because of these likely effects in Scotland the Chancellor was asked to receive a deputation of Scottish Conservative M.P.s, including my right hon. Friend the Member
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  for Kinross and West Perthshire (Sir Alec Douglas-Home) and my right hon. Friend the Member for Argyll (Mr. Michael Noble). The Chancellor apparently refused to see us and said that instead we should go to see the Secretary of State for Scotland.
  The last-named Minister cannot be responsible for this new tax. In any case he is reported in the newspapers in Scotland as having said in a speech that the new tax will benefit Scotland. After the facts which I have stated, any Minister who can say that is not in a position to receive this deputation. I was very sorry about this because I was part of a deputation which the Chancellor most courteously received at the end of last year. I was therefore sorry that the Chancellor, who usually receives deputations and gives them time when he is very busy, should have treated us in this way on this occasion.
  The effect of this tax on Scotland will be extremely serious, particularly in the North and other extensively rural areas. When he opened the debate, the Chief Secretary said that the selectivity of the tax was one of its chief points, or words to that effect. He said that it could be varied in different directions at different times. I ask him, in considering its selectivity, to make sure that it does not run completely in contradiction to the regional policies to which his Government have at least paid lip-service.
  8.37 p.m.
  Mr. Frank Judd: In this debate there has been much concern about the position of charities under the Selective Employment Tax. Those of us on both sides of the House who have been concerned will have welcomed indications from the Government Front Bench that this problem will be looked at sympathetically together with responsible representative bodies. Some of us who are concerned will be quite confident that when the problem is looked at it will not regarded in the light of a reluctant concession, but will be seen rather in terms of a positive aspect of social policy.
  The reason for making this point is that the Government have constantly stressed the importance of partnership between the Government and people in the execution of the Government's social priorities. It is quite certain that in the

  583
  wide variety of non-governmental organisations in Britain we have an excellent growth point in social responsibility as a basis for partnership with the Government. It would be sad if measures were taken at this stage which were to stunt positive involvement of ordinary people just at a point when that was so vital for overall policies.
  It might be suggested that this tax will not hit voluntary activities and that if the tax were implemented on charities it would be to break down bureaucracies which are tending to appear in charitable activity as distinct from the charitable action of the ordinary supporting membership. It might be true that some important organisations have a more adequate staff these days than they had in the past, but any careful analysis of the situation will clearly reveal that the majority of charitable organisations are working with minimum administrative resources and smallest possible staffs necessary to underpin the voluntary activity of the ordinary members.
  We might find that some of the most valuable work done by voluntary organisations is done in the smallest with the smallest staffs which will have most difficulty in paying the tax. It would be impossible to contemplate the operation of the tax on charities without accepting that this would inevitably lead to a cutback in the activities of charities and in the charitable work undertaken for those in need.
  We ought also to recognise another problem. Because of the shortage of resources in many of these organisations, the full-time professional staff are often doing exemplary work with high productivity at rates of remuneration far below those which they could command elsewhere. There is a real danger that if this tax were applied we might over-exploit their sense of commitment and vocation.
  We already have the precedent. The Government have established that they recognise the value of charitable organisations in social policy. It has been said that already, under tax concessions, these organisations receive back £55 million a year from the Government. Many have received official and specific encouragement from Government Departments.
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  I should like to give just three brief examples to illustrate the point. The Government are now stressing in their social policy the importance in social work of looking at the family as a unit. One of the most important organisations pioneering this sort of approach has been the family service unit. In Glasgow, a new family service unit has recently come into being, and it is more or less exclusively financed by the Glasgow Corporation. Yet if this tax were applied to charitable organisations the F.S.U. would be faced with a bill of about £5,000.
  Then there are the organisations which receive constant praise from both the Government and the Opposition, which are sending young qualified people to work as volunteers in the developing countries, as part of the Government's overseas development programme. These organisations would have to find £6,000 to £7,000 between them if the tax were applied.
  We also hear from the Government, and very rightly, the importance of youth work. At a time of considerable juvenile delinquency and an alarming rise in crime rates, perhaps the youth service work is one of the most important investments that we could see in the sort of social standards that we want to develop in the community as a whole. Yet these very services, some of them very small enterprises, would be gravely hit at local level by trying to find the extra funds to meet the bill. One could go on with a list of countless smaller organisations.
  Charities must be given a clear-cut lead and decision from the Government, a clear-cut ruling on this issue. The precedent is there. The Charities Act, 1960, underlines this, the rating relief enjoyed from local authorities underlines this, the exemptions provided under the Finance Act, 1965, underline this and the deeds of covenant which have been operating for many years also underline it.
  Of course, the Government can understandably be concerned about some bodies which might slip through the net, bodies which by no stretch of the imagination could be regarded as charities in the commonly accepted sense—for example, some independent schools. But this is a nettle which must be grasped by the Government, by introducing urgent

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  alternative social legislation. It may even be necessary for the Government to look at the definition of charity, which was not considered in the Charities Act, 1960.
  It is quite certain—and I know that this is a view which is held strongly on this side of the House at this juncture, especially in view of the announcements which we have heard from the Front Bench this afternoon—that there is a great opportunity for the Government to demonstrate that they are anxious to encourage those organisations which have a vital role to play by bringing ordinary people into active participation in social policies and meaningful participation in society as a whole.
  8.44 p.m.
  Mr. Stratton Mills: I do not wish to follow the theme of the hon. Member for Portsmouth, West (Mr. Judd) as time is short and I wish to be brief, but there are three basic points which I wish to make this evening. The debate has been dominated essentially by the Selective Employment Tax and it is becoming increasingly clear that nothing like enough thought has been given to this measure before it was introduced by the Government.
  I represent a constituency in Northern Ireland. In such an area, which has high unemployment, there is concern that the Government should have taken this action, which is working entirely against their other activities to help promote employment in that kind of area. There is great resentment at the introduction of this tax and the general feeling is that the needs of the under-developed areas have been overlooked by the Treasury.
  I do not wish to over-dramatise the situation, but undoubtedly this new tax must have the effect of cutting back on jobs in certain industries and of working against Government policy of promoting industrial development. I ask the Treasury before the Committee stage to look seriously at the effect upon areas of high unemployment and to consider whether Northern Ireland and the development areas cannot be excluded from this iniquitous tax.
  The initial reaction of many people in looking at this tax is to say that a Selective Employment Tax could serve a
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  useful purpose provided that the right exemptions are granted—and, of course, the Government have given their own list of exemptions. One's own reaction is to say that the list is not complete. As I have argued, one could well exempt areas of high unemployment, as well as the building and construction industry, if, as the party opposite always tell us, housing is a social service. We could exempt the over-65s. We should exempt the staff who are required to look after the elderly and the disabled in their homes. We could exempt part-time workers, charities and hotels. But when we come to the end of this list, on top of the list already given by the Government, one is forced to the conclusion that precious little is left to bear the weight of this tax.
  My point is that it is really impossible to patch up this tax and that it is basically an unworkable and unsatisfactory measure. That is the only conclusion to which one can be forced upon examination of its effects right across the board.
  Next I would like to say something about savings. One of the great fallacies of both parties in the post-war years has been the idea that purchasing power can be taken out of the economy by increasing direct or indirect taxation. This has been proved to be a fallacy because people apply their own corrective devices. Merely because the Government say that more money must be taken out of the economy, people are not prepared to accept a lower standard of living than that to which they have been accustomed. The only way of tackling this difficulty is to persuade people that if they save money it will be ultimately to their benefit, rather than wasting time on exhortation on the need to save.
  I was disappointed with the Chancellor's Budget speech because it contained all the old pious platitudes about the need for savings, tributes to various people in the National Savings movement and a couple of minor amendments of the law. That was not the kind of approach that was needed. The only thing that the Bill contains about savings is to bash severely on the head an excellent scheme prepared by the friendly societies which was having a substantial effect in encouraging people to save. While I condemn the Garda type of scheme of share options, the Bill also has the effect of

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  discouraging the other method of encouraging people in industry to take share options in their firms. This is a very undesirable measure in the Finance Bill.
  The point has been clearly made before that incentives to savings are in a complete mess. There is a limit to the number of Savings Certificates which a person may hold, but they give complete exemption from tax even to those who pay tax at the highest rate. The Post Office Savings Bank at 2½ per cent. yields £15 tax-free; the building societies, for standard rate taxpayers, have tax exemption; life insurance and pension schemes have complete tax concessions. I think that the more one looks at it the more one can become convinced that it is a complete mess which has grown up piecemeal over a period, and it does need to be looked at again. Mr. Ian Fairburn of M. & G. Securities recently made a statement on this point. I think he put the point very well when he called for an inquiry to look into:
  "The whole structure of personal savings, and the reliefs given or necessary to encourage them".
  He also made the point forcefully that it is the act of saving which is important, not the media, and that people who are prepared to save through private schemes are every bit as worthy from the country's point of view as people who are prepared to save through the National Savings movement.
  I should like to have seen a savers' Budget, with less exhortation and more positive incentives, and I do ask the Treasury over the next year to look at this whole field again—to look at tax incentives to savings: to look at the small marginal amounts of capital gains, perhaps up to £100, to see if they might be exempt; to look at the treatment of investment income; to look at the development of National Savings; to look at the desirability of a State unit trust, perhaps mixed in with Savings Certificates; to look at contractual savings, because with 5s. per head per week for 23 million people the yield would be something like £250 million a year. So there are really great opportunities if the Government are prepared to look imaginatively at the whole field of savings. I ask them to pay particular attention to this, and to convince people that it pays to save.
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  The right hon. Gentleman will have seen the article by Harold Wincott in the Financial Times of 12th April, in which he referred to the fact that in the United Kingdom something like 8 per cent. of all disposable incomes are saved, but in Germany, with very much greater financial incentives, 12 per cent. per annum is saved. Harold Wincott went on to argue that if the United Kingdom saved 12 per cent. of disposable incomes this would put an extra £1,000 million into savings per annum. I think that this is a very great goal for a Government prepared imaginatively to look at this whole field of savings afresh.
  Now I turn to my final point. It is a matter which, I hope, it will not be thought presumptuous for me to deal with, but I think it is an important point, and it concerns the whole relationship between the City and Westminster, which over the last two years has, frankly, gone very sour indeed. It is not in the national interest that this relationship should be so very bad. The reasons for it are well known. They go back some time. They go back, probably, to the time of the Prime Minister's analysis, at the time of the Bank Rate Tribunal, of the workings of the City, and that got him off to a very bad start. They went wrong during the election when, for party political reasons, the City was attacked by the Prime Minister and described as "parasitical". I think it went very sour indeed because of the whole attitude of the Treasury Bench to the City's comments on Corporation Tax and Capital Gains Tax, those comments were very ill received last year and were dismissed as pure special pleading. Of course, on the other side—I accept this entirely—the City is too much of a compact body, and nothing like enough is known about it by hon. Members on the other side of the House. I think that matters like the Garda Trust are to be condemned. It is, however, worth noting that the self-policing mechanism of the City has been quite effective in such matters.
  The point that I wish to make is that, in the national interest, the City of London has a vital contribution to make to the growth of the economy. It is the most effective and efficient capital market in the world. The savings collected by

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  the City over an average year are £1,000 million in life and pension funds, £500 million in the building society movement, and £100 million in unit trusts. Those savings are channelled by the savers to the capital spenders, so that the City is a very important asset to the nation. I ask that the Government should, for their part, recognise the importance of the City and not regard criticism of their tax policies as coming from purely selfish vested interests.
  The Chancellor of the Exchequer and the Prime Minister himself would be well advised to make a positive effort during the next year to repair relations which have so badly deteriorated over the last two years. If they make that effort, I am sure that it will be greatly to their advantage and to the advantage of the nation.
  There is a great opportunity for the development of savings and in using the mechanism of the City of London to help in that. The rewards which would reach the Government who did that could be very great.
  8.56 p.m.
  Mr. William Hamilton: I want to get away from the City and go north of the Border for a few minutes to reply to the speech made by the hon. Member for Moray and Nairn (Mr. G. Campbell), who has no doubt gone out to get some sustenance, and I do not complain about that. I will deal later with one or two of the points which he raised.
  At the outset, I want to say that right hon. and hon. Gentlemen opposite have very much overstated their case, particularly on the Selective Employment Tax. In so far as they have made a case at all, it has been an extremely negative one. They have never attempted to pose any alternatives, and the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) went out of his way to say hat he had no intention of doing so. That is a very undesirable state of affairs in the House.
  Mr. Iremonger Mr. Iremonger rose——
  Mr. Hamilton: The hon. Member has just walked in, and, in view of the time available, I had better get on with my speech.
  Mr. Iremonger: On a point of order, Mr. Deputy Speaker. I have been in my place without a break for the whole of the debate.
  Mr. Hamilton: I think that that is not true.
  Mr. Iremonger: Further to that point of order, Mr. Deputy Speaker. I really must object. If the hon. Gentleman does not want to give way, that is up to him, but he cannot say that he is not giving way because I have not been here.
  Mr. Deputy Speaker (Sir Eric Fletcher): Order. The hon. Member for Fife, West (Mr. William Hamilton) must please himself whether or not he gives way.
  Mr. Hamilton: Yes, of course, Mr. Deputy Speaker, and I am doing just that. If the hon. Member for Ilford, North (Mr. Iremonger) has been here all the time, I apologise to him. He will understand that, in view of the time available, I would prefer to get on with my speech.
  I want to refer to the speech of the hon. Member for Moray and Nairn, who addressed the House about the effect of the Selective Employment Tax on the Highlands. If he had been here, I would have asked him what his party's alternative was to the solution of the problem in the Highlands when it was in power. Far from discriminating in favour of the Highlands and Scotland, its policies discriminated against them, and that is why the party opposite fared disastrously north of the Border, particularly in the Highlands, in two successive General Elections.
  The Selective Employment Tax is designed specifically to encourage manufacturing industries and in that regard Scotland will benefit. I will come back to the specific problem of the Highlands when, I hope, the hon. Member who made the attack and the former Secretary of State for Scotland are in their places.
  The basic problem facing the Government in this situation was how to achieve some measure of deflation without the stop-go policies which we had from the Conservative Party in successive crises during the course of their 13 years in office. The Government could quite easily have taken the orthodox, easy and rather lazy way out of this dilemma—

  591
  an increase in Purchase Tax, in Income Tax, in taxes on tobacco, beer and other commodities. Had they done so we should have had the predictable howls from the Opposition benches and from interested parties outside.
  If the Opposition reject that kind of alternative, we have a right to know what other alternatives they would have taken and what other new source of taxation revenue they would have put forward. Or would they have let things rip? If the Opposition have any ideas at all about new sources of taxation, there is an obligation on them to tell us exactly what they are. We all know that the rather daunting prospect of at least five years in opposition presents them with an almost irresistible temptation to be wildly and negatively irresponsible in their criticisms of the Government.
  There is nothing so unpatriotic as the Tory Party out of power. They are carrying over into this Parliament the tactics that served them so ill in the last and which brought them at the election the results which they suffered—tactics based on malice, on misrepresentation and on exaggeration, seeking to cash in on the grievances of various sections of the community, sections whose grievances had been studiously ignored, neglected or even exacerbated by those tiresome 13 years of Tory "fiddling".
  I remember the speech made by the Leader of the Opposition on the Welfare State just before the election, in which he talked about the poverty of large families, the poverty of the non-pensioned old, the hardship for ratepayers, and so on. We have now the same malodorous manoeuvres. The Selective Employment Tax appears to them to offer a heaven-sent target on which to vent their spleen, and we have had a bit of it this afternoon. No doubt we shall get it, too, when we reach Committee stage. Extravagant forecasts have been made as to the effects of the tax on various industries, on various regions and on different groups of people. In the event, I suppose, some of the forecasts may turn out to be accurate. I do not know. We shall have to wait and see.
  But, meanwhile, a new tax is being launched. The base of the tax structure is being enlarged. Whenever one introduces
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  a new tax or increases any tax at all, it hurts somebody somewhere. All taxes do that. Whenever a new tax is imposed, those on whom it falls for the first time squeal loud and long. Of course they do, until they get used to it. But it does not follow that the new tax is necessarily wrong. The British people have an almost pathological dislike of innovation, of change, of modernisation, whether it be in their Parliamentary procedure or in their tax structure.
  We have opponents of modernisation in some respects even on our own Front Bench. Some of the worst reactionaries are there at the moment. But hon. Members on this side of the House unanimously acclaim the principle of the new tax. It is easy to administer. [Laughter.] Yes. That is one reason why it has been brought in now, and the machinery suggested is suggested precisely because of the need to get action this year. It is extremely flexible. It can be used as an instrument in the furthering of the Govvernment's plans for regional development, and I hope that it will.
  The tax can be used to differentiate between various industries and types of employment. The contributions and the premiums, and their incidence, can vary according to the will of the Government. The more flexible tool the Government have at their disposal the more smoothly can the whole economy advance along the road that we want it to take.
  Tributes to the ingenuity and the morality of the tax have been paid by all kinds of people. Margot Naylor writing in the Observer on 8th May——
  Mr. Iain Macleod: The only one.
  Mr. Hamilton: No—wait a minute. There is plenty of time.
  Mr. Iremonger: The hon. Member said that he could not give way to me because he had no time. Now he says that there is plenty of time because this is exempted business.
  Mr. Hamilton: This is selective intervention. I have no time for the hon. Member.
  Margot Naylor said:
  "With his highly ingenious solution of the Selective Employment Tax Mr. Callaghan has made history and I congratulate him."

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  She went on, referring to the right hon. Member for Enfield, West (Mr. Macleod),
  "With this thought in mind, I am disappointed with the Conservative Party's negative reaction. Mr. Macleod says the amount raised by the Chancellor is the equivalent of 1s. 6d. on income tax. Would he have preferred this way of raising revenue?"
  Would he? We should like to know. The editorial of the Observer on the same day made the same point about the tax, but I shall not quote from it now.
  Rather interestingly, the Archbishop of Canterbury commended the morality of the tax in the Observer on 15th May. So it is clear that there are some very notable people and notable journals on our side in this matter. I am proud to call them in aid. The tax as it now stands may well be criticised for having rough and blurred edges, and for containing within itself some anomalies——
  Mr. Iain Macleod: Purely as a matter of accuracy, for the record, when the hon. Member referred to the Archbishop of Canterbury does he not mean the former Archbishop of Canterbury, who is known to have very peculiar views on this sort of subject?
  Mr. Hamilton: Many people have a lot of peculiar views on a lot of things. [HON. MEMBERS: "Answer."] I take the point. I have the quotation. If it is worth anything to the right hon. Gentleman I will concede the point to him. At any rate, the Archbishop is as respectable as is the right hon. Gentleman, and is as worthy an authority on these matters.
  As I have said, the tax has some rough edges. As one of my hon. Friends said, it is rough justice. But a lot of these rough edges can be smoothed off in Committee and in the course of the history of the tax. It is here for a very long time, I hope.
  Some claims for exemption have more force than others. We have heard a lot about charities. The case for a blanket exemption for all charities may seem to be very strong on the face of it, but, as the Sunday Times said on 15th May, there are charities which strain one's benevolence. There are many charities which would need very careful examination before we exempted them from this tax. A total exemption of all charities would almost certainly lead to widespread abuse.
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  I turn now to another complaint made by the hon. Gentleman the Member for Moray and Nairn. It was about hotels. There may be a case for special treatment of the Highlands, but there is no case for special treatment of hotels in, for instance, London—[HON. MEMBERS: "Why?"] I will tell the House why. I will quote one example from The Guardian of 6th May. The article is headed, "The Savoy, with salt", and reads:
  "Mr. Hugh Wontner, the Chairman of the Savoy Hotel Limited, made a plaintive little protest yesterday morning about the payroll tax and produced some figures showing how tourist receipts have risen while hotel and catering staff have been pared down over the last few years. Filled with sympathy, 'Miscellany' arranged a small … luncheon at the Savoy Grill Room to show Mr. Wontner we were all on his side. A modest, three-course lunch, with cheese, coffee and wine. At one time or another, nine separate waiters. either picked up or put down something on our table during the hour-and-three-quarters it all took. One of the younger ones spent his plentiful spare moments scribbling on a pad—his memoirs, perhaps?
  Apart from eating, the only thing we did ourselves was pour out the salt. (Salt-mills and attendant grinders have no doubt all been ground away by ruthless rationalisation.) We also came into direct contact with one doorman, one youth who revolved the revolving doors, two cloakroom attendants, one lift man, one welcoming head-waiter and a farewelling one. Net total: 16. The Savoy won't say how many it employs or if its staff has dwindled of late. But one sympathises: indeed, indeed."
  Indeed, indeed. The sooner these people are sorted out, the better. If this tax can do anything towards that end, it has the full support of every hon. Member on this side——
  Mr. Peter Bessell: Will the hon. Gentleman——
  Mr. Hamilton: No, I am thinking of the time. I have taken longer than wanted to take.
  I wanted to put this question of hotels in the context of the Highlands. The hon. Member for Moray and Nairn forgot the tax which his Government were seeking to impose on the hotels in 1963, in the Countryside and Tourist Amenities (Scotland) Bill. On that occasion, the idea was to impose a bed tax on every bed in every hotel, apart from the smallest ones, in the whole of Scotland——
  Mr. William Baxter: Only in Scotland.
  Mr. Hamilton: Only in Scotland: I am coming to that point.
  The right hon. Gentleman who was then Secretary of State for Scotland talked about tourism being a prosperous industry with a good growth record and said:
  "In these circumstances it is difficult to see why the industry cannot help to promote further expansion without help from the taxpayer."
  He went on:
  "…Additional charges are never popular initially."—[OFFICIAL REPORT, Scottish Grand Committee; 3rd December, 1963, c. 9.]
  This is a very good reason why the present tax should be introduced. It is perhaps not popular initially, but people will get used to it——
  Mr. G. Campbell Mr. G. Campbell rose——
  Mr. Hamilton: No.
  The proposition was that there should be a charge of 50s. per bed per year and the estimated total income would be £225,000 annually. This was differentiation, discrimination, against Scottish hotels, because no such charge was proposed for English hotels and this was the argument which was used against the tax by hon. Members on that side, including the hon. Member for Bute and North Ayrshire (Sir F. Maclean)——
  Mr. G. Campbell Mr. G. Campbell rose——
  Hon. Members: Give way.
  Mr. Hamilton: The hon. Member for Edinburgh, South (Mr. Clark Hutchison) used these words in that context:
  "I do not believe that we should put overmuch faith in the tourist industry…We should not be hypnotised by the possibilities that it is sometimes suggested are in the tourist industry. While visitors are welcome…we should not grovel to get them. Our people in Scotland are not servants or lackeys."—[OFFICIAL REPORT, Scottish Grand Committee; 3rd December, 1963, c. 31-2.]
  This was the attitude of hon. Members opposite against a tax on the tourist industry.
  Mr. G. Campbell: Surely the hon. Gentleman remembers that the money collected from this levy was all to be used within Scotland for the tourist industry. It was simply a subscription. This has been done on a smaller scale within Scotland, such as along Speyside and Strathspey, with great success.
  Mr. Hamilton: It was such an enormous success and such a wonderful idea that the last we heard of the Bill was on Second Reading. They never went any further with it.
  I regard this year's Budget and Finance Bill as excellent, relevant to our economic problems, forward looking, and challenging to all of us. The editorial in the Observer of 8th May sums up the feelings of this side of the House and, I believe of the country:
  "Despite the passionate, and frequently exaggerated, criticisms of the new payroll tax. Mr. Callaghan and his advisers have produced a Budget which is well designed to improve the strength of Britain's domestic economy. The effects of the Selective Employment Tax will be to deflate the economy quite sharply; by reducing spending (particularly by the well-to-do) while at the same time doing the minimum possible harm for the prospects for long-term economic growth. It was a remarkable achievement to produce measures which are at the same time, deflationary, socialist and oriented towards maintaining growth."
  This sums up the attitude of my hon. Friends. When the Bill has been through the fire of the Committee stage, I am certain that it will be a very powerful weapon in the cause which we all have at heart.
  9.18 p.m.
  Mr. W. R. Rees-Davies: I am delighted to have the opportunity, briefly though it may be, to follow the hon. Member for Fife, West (Mr. William Hamilton). It is of no real account that the hon. Gentleman should call us malicious, accuse us of being full of misrepresentation, call us unpatriotic, and accuse us of being a bunch of Tory "fiddlers", because we are accustomed to hearing that kind of language from him. It is the typical puerile piffle to which we are accustomed from him, and he treated us to it tonight. However, he tried to misrepresent the tourist industry, a subject on which I have at least some knowledge, and in this matter I propose to try to put him firmly and squarely in his place.
  Tonight, I want to confine my remarks to one aspect of the Finance Bill, namely, those parts affecting the tourist industry in all its aspects. As I want to be brief, I say here and now that I do not propose to give way. The tourist industry is just as much industrial as agriculture and manufacturing are industrial. Anyone who has the slightest understanding

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  of the tourist industry will soon become aware of that, if he is not already aware of it. The tourist industry is now our fourth largest industry, with 2¾ million visitors last year, producing over £300 million for the country. It is also our biggest dollar earner.
  The labour shortage is more acute in this industry—certainly in the hotel section of it—than in any other industry. The position is that in the hotel section alone there are about 272,000 employees with a present short fall of about 46,000. That is the picture and those who talk about the number of waiters who serve one at the Savoy Hotel should remember that the whole purpose of the luxury side of the industry is to give first-class service and attract a large amount of dollars thereby. To do that, one must offer the sort of service that cannot be had elsewhere and for which people are willing t o pay.
  It so happens that the Savoy Hotel provides probably some of the finest service to be found in any hotel anywhere in the world. That is what Americans come here for and what they are willing to pay for. If one wants to ruin this country by driving away overseas trade, the hon. Member for Fife, West is about the first person who could lead us straight into bankruptcy.
  I will give the House briefly a few important figures. It is, of course, a farce to try to divide manufacturing industry on the one side and what is one of the fastest growth services industries on the other. The fastest growth industry in this country today is the tourist industry. The present Government have done more deliberately to damage this industry since they came to power than any Government in any country in any similar period.
  They have done the following things. First, they have provided no investment grants, and that must be remedied. Secondly, they took away the investment allowances. Thirdly, they applied building control under the Building Control Bill with a system of licensing by which one could not build the hotels which are badly needed for the tourist industry. Fourthly, they provided no type of capital allowance for industrial buildings. Fifthly, they have found no method of alternative system by which one can get
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  a loan at a reasonable rate of interest to erect a building because their policies resulted in such high interest rates.
  Sixthly, they have found no method by which one can carry out necessary structural improvements in the tourist industry and be able to modernise and improve the industry as is possible in other countries. This has become impossible because the Government have refused to treat earnings and revenue as being for purposes which are deductable for tax. Seventhly, they have even managed to keep luncheon vouchers at the same price fixed 15 years ago, 3s. only being allowed as a deduction.
  Having failed to do all these things—which has prevented the tourist industry from developing in the way it should—the Government have finally introduced the Selective Employment Tax and it is apparent to all my hon. Friends, and a great many hon. Gentlemen opposite, that if one had to have such a tax at all—assuming that it is necessary to take £150 million to £200 million by way of further taxation—then clearly it should have been a poll tax straight across the board, which would have been 4s., 5s. or, at the most, 7s. for a man and 3s. 6d. for a woman. Had that been done we would not have had all the trouble that we have had over the Selective Employment Tax and all the trouble that will arise in Committee.
  I have instanced a number of things which should or should not have been done and which my hon. Friends and I will develop at greater length in Committee. I warn the Government that there are many hon. Members in all the three parties who will seek to show that if the Government intend to go on with a tax of this nature, very great concessions will have to be made in other spheres to compensate for it.
  I will give a few more figures to show the direct impact that this tax will have because the public generally and hon. Members would like to have them. These figures have not been disclosed. They come from two or three large public companies, the names of which are well known but which I will not disclose, although they will be available to the Chancellor or his advisers if they require them.
  Apart from the labour shortage, there will be a 3½ per cent. increase in bar

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  prices. This means at least 1d. extra on every drink, and if one takes into account services, renewals and other matters, it will probably mean an increase of 2d. a drink at bar prices.
  The most serious effect is in banqueting. Most hon. Members must attend banquets, whether in their constituencies or elsewhere, and the figures I have been given show that on a 30s. dinner, the cost of wages is about 9s. and the effect of the tax will be a rise of about 6 per cent., or 1s. 8d. If one allows for wages and takes into account laundry repairs and renewals, the effect will be an increase of 2s. 7½d., or nearly a 10 per cent. surcharge on a 30s. meal.
  On wines, the estimate is that there will be a surcharge of about 10 per cent. For hotels, it will be about 3½ per cent., but allowing for extra costs which will fall on laundry and other requisite services, a surcharge of about 5 per cent. will be carried on every hotel bill in this country. For restaurants it will be more, the estimate varying between 6½ and 7 per cent.
  I have here some other figures, of which I shall give only one example. This is a non-seasonal hotel with a male staff of 142 and a female staff of 180. In 1965 the annual turnover was £584,000. The cost of staff was £160,000, that is, 27·4 per cent. of turnover. The estimated cost of the Selective Employment Tax for the year 1967 is £16,143, that is, 2·76 per cent. of turnover, or 10 per cent. of the wage cost. I have here figures relating to cafés and each of the various types of restaurant and hotel as well.
  I cannot think that the country yet begins to appreciate what a serious divergence is being drawn between the whole of the tourist industry, the most rapid growth industry in the country today, and manufacturing industry, with agriculture, forestry and horticulture treated, so to speak, as being in baulk in between.
  I shall not say more tonight, but I hope that I have said enough to show the House that it is simply no good trying to regard this matter as though it involved only a number of people with luxurious lives. I am not speaking at the moment only for Margate or Ramsgate. I am speaking of matters which profoundly affect the whole country. In the enormously competitive conditions of
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  tourism today, it must never be forgotten that it is a battle to bring and keep the tourists here. Our visitors from tourism are rising by a quarter of a million every year, and in income the aim is to reach £500 million by 1970. The past year was a record year with over £300 million.
  I hope that the Government Front Bench will show enough experience and knowledge to look properly at the facts and to listen to the various associations and interests in the industry. They must bring forward effective proposals to combat something which is distorting and will distort the whole of this sector of the country's economy and be highly damaging if prompt remedial action to bring about the necessary reforms is not taken.
  9.27 p.m.
  Mr. Hugh Jenkins: Hon. Members opposite seem to be divided between those who think that the Selective Employment Tax should not be selective and those who think that it should be much more selective than the Government propose. I have one or two suggestions to make following the latter line, but, before I come to those, I have a general proposal to make regarding this tax.
  I suggest that the tax should be levied not according to weekly wages but according to hourly earnings. Adoption of this method would be most advantageous. Being based on a 40-hour week, it would provide a rate of 7½d. per hour for men and 3¾d. per hour for women, and in that way it would immediately solve the whole problem of the part-time worker. The employer would pay pro rata according to the number of hours worked.
  It would have the additional advantage that there would be incentive to economy in labour because the more hours were worked by way of overtime the more would have to be paid in Selective Employment Tax.
  I hope that the Government will con-side this proposition seriously. It has another incidental administrative advantage. The present proposal is that the tax shall be collected by a stamp. I regard this as an entirely wrong and mistaken idea. The purpose of collection by stamp through the Ministry of Pensions and National Insurance is that the individual may have a record of his

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  own contributions. This is quite unnecessary in the case of this tax, and the mere fact of collection by the Ministry of Pensions and National Insurance is no ground for adopting the stamp method of collection.
  If we adopt the method which I suggest, the employer can write a cheque at the end of the week for the number of hours employed in the enterprise. The consequence would be that the whole thing would be very much simpler and the administration would be much easier. Also, we should have what my hon. Friend the Member for Fife, West (Mr. William Hamilton) asked for—a much more selective tax. It would be more appropriate to proceed with this point in Committee, but I hope that, in replying, my right hon. Friend will make some sympathetic noises in this direction.
  The question whether the cheque should be made out to the Ministry of National Insurance or direct to the Treasury is immaterial. If the Treasury does not want to receive the money in small sums but would prefer to receive it en bloc from the Ministry of National Insurance, there is no reason why that should not happen. However, that is not an important point. The method also avoids the possibility, which might occur with some methods of collection, of avoidance. The method—[Interruption.]
  Mr. Speaker: Order. There is a background of conversation which is not fair to the speaker.
  Mr. Jenkins: I do not think that there should be or can be any occupational exceptions or exemptions from the tax. What there can and should be is exclusion of categories of persons—old-age pensioners and disabled persons. They could easily be excluded. For the rest, the question of occupational adjustments must be dealt with on the basis of payment followed by refund.
  The standard industrial classification is riot a good instrument for this, not being designed for the purpose. It was drawn up for a quite different function and is altogether too crude. However, if the Chancellor is committed to this blunt instrument, he can lessen its absurdities by being flexible and wise in his refund policy. There is no virtue in being rough and ready and doing needless damage.
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  That will not impress anyone and will only bring what is fundamentally a good new tax into disrepute. A new tax should be applied with discretion from the beginning if it is to gain general support. There is no point in being rough and ready for the sake of being tough. That will merely get the new tax off to a bad start. It is not possible to compensate for weakness abroad by being tough at home unless that toughness is directed towards correcting injustice. To be rough in creating anomalies is not to impress anyone.
  Before I turn to the industry which I know best—the entertainment arts—I want to point out that one side-effect of the tax will be to strengthen the drive towards bogus self-employment, which is already causing alarm in the construction industry and elsewhere. In the construction and building industry so-called employment agencies, which are licensed, are being created solely for the purpose of giveing a legal fiction of self-employment, and they are thriving. I have been lucky in the Ballot and hope to introduce a Private Member's Bill to regulate employment agencies. The proposal has been supported on both sides of the House. It was supported in 1951 by the Labour Government, who issued proposals for implementation, and it was supported by the Conservatives in 1957——
  Mr. Speaker: Order. The hon. Gentleman must not pursue this in detail. He must come to the Finance Bill.
  Mr. Jenkins: Then, Mr. Speaker, I will merely say that the proposals for this have been produced on both sides of the House. If the Measure can be supported on both sides, it will help to plug up one of the gaps in the Finance Bill to which I have referred.
  The Government have abandoned the idea of reimbursing the farmers through the Annual Price Review. This has not prevented the Government from proposing to do something even less advantageous for the arts and entertainment. The reimbursement of farmers might have been clumsy but it could have been done through the Annual Price Review, for all farmers are concerned in that Review. But reimbursement cannot effectively be done in the arts because all arts are not subsidised by the Arts Council. Only a minority of the theatres will be

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  reimbursed. That is likely to be too little and too late.
  No business enterprise works on such a narrow profit margin as the small professional provincial theatre manager. Large monopolies will survive. What Mr. Lew Grade loses on the Moss Empires roundabouts he can make up on the A.T.V. swings, but the publicly supported theatre will be hard put to it to survive the period between payment of the tax and reimbursement by the Arts Council, while the commercially managed theatre in some cases will not survive at all.
  I want to make a new point about the publicly supported theatres. Over the years, the Arts Council has always advised local authorities not to run their own civic theatre companies but to create trusts so as to avoid the position of local authorities being subsidised by a Government agency, so few actors are employed directly by local authorities. An exception to this rule is the Manchester Library Theatre, which needs no Arts Council subsidy but makes a profit for the rates. Its actors will be in the refunded category, whereas large companies with big overheads surviving with a subsidy will not be reimbursed.
  Budgeting in a theatre is very tight and companies make their plans on the basis of the support they are to receive, having, in most cases, no contingency funds. The consequence of a non-reimbursement must be an immediate reduction in standards, for what bank manager will lend money to a local repertory manager? If he did, he would be fired because he would have no security and no chance of securing repayment.
  One could give several examples of the cost to the Arts Council supporting repertory companies of the new tax. Figures vary between a minimum of about £2,000 a year to a maximum of about £5,000 a year if we are talking solely about small repertory companies. We understand from my right hon. Friend the Chief Secretary to the Treasury that we may expect to see such reimbursement but before the Bill is passed I hope that that expectation will be couched in more positive and direct form.
  But the Arts Council does not support the commercial theatre. The principle is that it does not subsidise a profit-distributing organisation and that principle is
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  sound. Indeed, it is one that the Chancellor would do well to operate in industry generally. If he did, he would avoid a great deal of public money being distributed in dividends and giving rise to lucrative capital appreciation. But that principle, although sound, means that the commercial theatre in the provinces will take a beating, unless my right hon. Friend does what he could easily do—put the theatre as a whole into the position of the Manchester Library Theatre, which is in the refunded category.
  Those are some of the problems which the entertainment world—[Laughter.] Hon. Members opposite need not worry; these letters are merely ballast to my hands—will encounter if, during the course of its passage through the House, the Bill is not modified in the way I have suggested.
  I have received many letters from theatrical managers all over the country and you, Mr. Speaker, and hon. Members on both sides of the House, will be relieved to know that I shall not read them. I merely hold them in my hand as evidence. They are documents which, if the House had time to hear them, hon. Members would find interesting and absorbing, and I hope that later in the passage of the Bill an opportunity will arise for me to advise hon. Members of them.
  9.40 p.m.
  Mr. John M. Temple: I will not comment on the arguments of the hon. Member for Putney (Mr. Hugh Jenkins), as I heard most of them in the main debate on the Budget. This Budget will be judged mainly by its effect on keeping prices stable and I am very dubious about whether that will be its effect. The effect of the Selective Employment Tax is much more likely to be inflationary than deflationary. I would have thought that one of the strategies behind the Budget should have been to get productivity going again, a matter frequently mentioned by hon. Members opposite.
  I shall endeavour, in the short time available to me, to make my points with as much rapidity as possible. I shall refer, first, to some of the matters in the Finance Bill, then to one or two things which certainly should be, and to one matter of financial strategy. A tremendous opportunity has been lost by the Chancellor of

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  the Exchequer to invigorate the whole economy by this Finance Bill. There are practically no concessions to increase productivity, but only more taxation, and I would describe it as a thoroughly Socialist Budget.
  In the debate there has been very little mention of the rate of Corporation Tax. I am sorry that the Chief Secretary is not here, because he has some very dubious and devious arguments to support his view that the equivalency of Corporation Tax to present rates of Income Tax and Profits Tax added together would be 42½ per cent. We did not hear anything about 42½ per cent equivalency during the Finance Bill debates last year. The figure mentioned was 35 per cent.
  One of the arguments the Chief Secretary uses in his support of a rate of 40 per cent. is the fact that some concessions were made during the last Finance Bill. One so-called concession was of considerable magnitude and was made as a result of pressure by myself, and I am sure that the Financial Secretary will remember it. It involved a special concession about the remission of dividends and interest on investments of insurance companies which were placed abroad in order that they could carry on their business of insurance abroad.
  If that concession had not been made, British insurance companies would have withdrawn from those overseas markets and there would have been no chance whatever of the Chancellor getting any taxation whatever from that source. It cannot be called a concession when it saves an industry from death overseas and when the Chancellor has a vested interest in the profits of every insurance company to the extent of nearly 60 per cent.
  I want now briefly to refer to the Selective Employment Tax which has been mentioned once or twice. During the course of waiting a number of hours to be called in this debate, I happened to go to the Tea Room where, fortunately, the ham sandwiches had run out. The lady behind the counter, with her own hands, gave me a freshly cut ham sandwich. That was the product of a service industry. If I had had a ham sandwich out of a cellophane bag, or a biscuit out of a cellophane bag, that would have been a product of a manufacturing industry. How stupid can one
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  get? If one gets a delicious ham sandwich produced while one is waiting, something one is looking forward to, then the employee is in an industry subject to this new tax.
  I can give another example. I am rather fond of Cheshire farmhouse cheese. I can say that the Cheshire farmhouse cheese-makers are in a very much worse position than the producers of all kinds of factory cheese. Being factory-produced it means that the workers in that factory are to get 7s. 6d. a head extra for producing this cheese which is not nearly as acceptable to me or most Members of the House, yet the Cheshire farmhouse cheese-making industry is only regarded as an industry which will be in the neutral zone.
  I would like to answer an hon. Member who said something about the noble Lord, Lord Fisher, one-time Primate of All England. I have had rather more up-to-date advice from the Church, because my good friend the Dean of Chester wrote on 23rd May to the Chancellor of the Exchequer. He wisely sent a copy of the letter to me. He said that the effect of the new Selective Employment Tax on his employees at Chester Cathedral would cost the cathedral £1,600 per annum. The cathedral is kept open from 7 a.m. until dusk so that regular services can be held and to provide a major tourist attraction for the City of Chester, indeed to the whole country.
  I hope that the Chancellor will have in mind the importance to our economy of such organisations, and of such places as Chester Cathedral being kept open, because I am told by the Dean that the tax cannot be passed on, by any method, to those people visiting the cathedral.
  The other evening I had the great good fortune to be invited to the Catering Creative Circle's dinner. [An HON. MEMBER: "How many waiters?"] I must say that there were not two waiters for everyone eating on that particular occasion, but the dinner was very good indeed. The Circle had sent invitations to the Labour Party, the Liberal Party, and to myself as a member of the Conservative Party. The main matter under discussion was the Selective Employment Tax. Hardly surprisingly, only myself and the representative of the Liberal Party turned up. There was no Labour

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  Party representative there. [HON. MEMBERS: "Shame."] The point made at the Catering Creative Circle dinner was the effect of the Selective Employment Tax on industrial catering. It may seem surprising that the industrial catering companies do 25 per cent. of this country's industrial catering and that British industry subsidies industrial catering to the extent of £100 million a year.
  This is no small matter. If an industrial catering company is catering for, say, the Ford Motor Company or the B.M.C., as it does, and for central and local government, as it does, or for the Royal Exchange Assurance, as it does, it will be catering for three different types of establishment, one is in the bonus zone, one is in the neutral zone and the other in the service zone. That is the Royal Exchange Assurance. What will be the position of the employees of industrial catering services who are providing the same services in these various organisations falling into different zones for the Selective Employment Tax?
  I had occasion to have conversation a few days ago with persons connected with the industrial cleaning industry, an industry which has not so far been mentioned. [Laughter.] Hon. Members may laugh, but £300 million worth of industrial cleaning is done every year. These industrial cleaning companies work in factories, offices, schools, hospitals—a fairly wide range of institutions. Ninety per cent. of the costs of industrial cleaning are labour costs and 60 per cent. of the workers are part-time workers. The "Mrs Mopps" work a morning or an evening shift. They are part-time workers.
  A great many workers in the industry are disabled. Organisations and firms that I know have very close relationships with industrial cleaning companies so that they can take on men and women for part-time work who are not capable of doing anything other than light jobs. The incidence of this tax on the part-time workers in the industrial cleaning sphere will be about 10 per cent. of the wage bill. If the Chancellor insists on putting this tax through in this form, the effect on the industrial cleaning industry will be extremely anti-social, because it will mean that these organisations will
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  employ full-time men who will work throughout the night with mechanised equipment. As they are doing a job by night they will not be seeing their families. If women do it by night they will certainly not see their families. The Chancellor will force the industrial cleaning industry—far from its wishes because I know it wants to be as social as possible in its employment—into an anti-social attitude.
  Sir Harmar Nicholls: To pinpoint that instance, which is very fair, may I inform my hon. Friend that under the tax an excellent firm of which I know will have to pay £53,000 extra, yet the biggest profit it has made since it came into existence was £23,000 a year.
  Mr. Temple: My hon. Friend has emphasised the point I was making and given me a slight breather before turning to a subject which is very much in our minds on Derby Day. No one has mentioned it and I sat on this bench for two hours before I got the name of the winner conveyed to me. I did not actually back the horse.
  The Chief Secretary to the Treasury suggested that all had been agreed behind the scenes about this tax. That, on his part, was wishful thinking.
  There were three ways in which the betting levy could have been imposed on the horse- and dog-racing industry. It could have been imposed on premises, on telephones as a licence fee. It could have been put on winnings, but it has been proposed on stakes. I suggest that the Chancellor has picked the worst of three methods. I shall do all I can in Committee to make him change his mind.
  There are two omissions from the Bill in regard to proposals for betting legislation. Has the Chancellor forgotten about hedging bets and the blower?
  Mr. Callaghan Mr. Callaghan indicated dissent.
  Mr. Temple: The Chancellor indicates that he has not forgotten. I shall have to draw his attention to this. Has he forgotten void bets and that in the case of a cancellation one can get the money back?
  On the question of the taxation of gaming clubs, I am amazed at the Chancellor. Has he consulted

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  his right hon. Friend the Minister of Housing and Local Government about this? That Minister is constantly telling the House and the country that he has no faith whatsoever in the rating system and in the accuracy of rateable values. Yet the Chancellor is basing his entire system of taxation on gaming clubs on the basis of rateable values. Can he clear this up? Is he fully behind what his right hon. Friend says about rateable values?
  I turn to a couple of glaring omissions from the Bill. I thought that all of us were in favour of home-ownership and wanted to do something for building societies. The Chancellor of the Exchequer has missed a golden opportunity to do something in the way of relief from tax for building societies so that they would not have to raise their rates to 7⅛ per cent. The onus lies entirely on the Chancellor for having saddled them with 7⅛ per cent. because he has clone nothing whatever to help building societies. The Selective Employment Tax amounts to nearly £¾ million a year and the composite rate of Income Tax paid by societies will be very much greater this year than last year.
  I make only one point about investment abroad. An hon. Member opposite said that he was very much in favour of cutting down overseas investment. I was in Australia about a month ago. Only today I was giving lunch to the Agent-General for New South Wales. When in Australia, and when giving him a lunch today, I found everyone concurred that it was disastrous to the future of British exports to Australia that we were cutting down on investments in Australia. One cannot cut off the supply of money and expect the orders for replacements to flow. The United States, Japan and other countries are jumping quickly into the market, which we have, unfortunately, left wide open for them.
  To me it is no strange coincidence that stagnant production goes hand in hand with increasing taxation. The Financial Secretary knows the points which I put to him about the impact of increased taxation on rising prices. The two are correlated. I do not believe that the country will ever leap ahead again so long as it is saddled with this enormous impost of Socialist taxation.
  9.56 p.m.
  Mr. Martin Maddan: We have spent just over six hours so far in this debate, and the greater part of it has been about the Selective Employment Tax. We have had criticisms from both sides of the House, some in politer terms, and some in less polite terms. The debate has shown in a most startling way what an extraordinarily ill-prepared tax this was for the Chancellor of the Exchequer to bring before the House. It is even more surprising, because after the Chancellor's Budget speech, in the tea room next door, within half an hour, I heard voiced at least the embryo of just about every criticism that we have heard during the debate. In other words, these points occurred to hon. Members on both sides of the House very shortly after the Chancellor had brought his Budget proposals to the House.
  This emphasises and underlines what extraordinarily poor preparation there must have been in the Chancellor's Department before he brought this proposal to us. As an aside, I add that I was surprised that political and financial journalists swallowed this hook so happily in the first days after the Budget, because it certainly was not swallowed by hon. Members, certainly on this side of the House. This, perhaps, shows that hon. Members in touch with their constituents are more aware of the realities of economic and social life than some of the writers upon whom we rely for views and comments to be spread.
  I want next to underline two of the points which have been raised in objection to the Selective Employment Tax. The hotel industry is our largest dollar earner. It is a dollar earner with an extremely small import content and, therefore, its net earnings are even higher than the normal figures initially suggest. To hit this industry in this way highlights once again what little thought can have been given, not only from the fiscal but also from the economic point of view, when the tax was proposed and brought forward.
  The hon. Member for Bilston (Mr. Robert Edwards) said that the tax was weighting the economy in favour of manufacturers and against consumers. I want to develop that point by going a little further and saying that in so doing it particularly weights the scales against

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  those who are retired, who are living on fixed incomes and are out of the productive age. They can only be consumers, because they not only cannot go with their union and obtain higher wages but they largely spend their money on service items. Perhaps they have people coming in to help them with their housekeeping. They do not buy new refrigerators, new carpets, new furniture, and the like. Therefore, this tax will bear particularly heavily on the cost of living of elderly and retired people. I am grateful to the hon. Member for Bilston for having begun to make that point and I hope that he will agree with me when I carry it that stage further to the conclusion which I have just reached.
  The Bill does not contain the provisions for repayment of the premium, although we have before us the provision for the payment of the tax in the first instance. When this tax is paid it will go into the hands of the Government and there may be arguments for many months about whether employers get it back. Is the Chancellor aware that he has introduced the first tax in history, as far as I know, in which the Administration have a vested interest in confusion, muddle and delay? The money will be taken, no interest will be paid upon it and the longer the question of either straight rebates or rebates with premiums can be delayed by administrative muddle, confusion, bureaucracy, "red tape," spinning out, "passing the buck" and all the rest of it, the better will it suit the right hon. Gentleman.
  The Chancellor has thus introduced not only a new tax. He has introduced a new fiscal weapon by turning what used to be considered to be a vice into what he may start to consider to be a virtue. That is a yet further reason why I and my right hon. and hon. Friends will certainly vote against the Bill and this tax and certainly, in Committee, seek to change it in many important ways.
  10.2 p.m.
  Mr. T. L. Iremonger: Hon. Members opposite will have observed that the night is young and that the Bill is exempted business and even after the trains have stopped the taxis will be available for a short time and
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  after that the trains will start again. [Hon. Members: "Hear, hear."]
  Mr. Speaker: Order. The hon. Member must come to the Bill.
  Mr. Iremonger: I am coming to it, Mr. Speaker——
  Sir Douglas Glover: Is my hon. Friend aware that the taxes will be there all the time waiting for him to pay?
  Mr. Iremonger: That is a helpful intervention by my hon. Friend. It was Lord Byron who said:
  "I like a parliamentary debate,
  Particularly when it's not too late."
  And so I shall hasten to the Bill. This must have been a very painful debate——
  Mr. Manuel: It is painful to us.
  Mr. Iremonger: The pain has not started yet. It has been a painful debate for the Chief Secretary, who sat here so assiduously, and also, I am sure, for the Chancellor of the Exchequer in so far as what has been said has been passed on to him. What the Chancellor must have observed throughout this debate is that in speech after speech from the benches behind him the Bill and, in particular, the Selective Employment Tax have been subjected to ruthless and merciless criticism.
  We hear a lot nowadays from hon. Members opposite about the reform of Parliamentary procedure. That is relevant to the objections which have been made to the Bill, because I would say to hon. Members opposite that it is not the procedure of this House that needs to be reformed but the attitude of hon. Members to their duty. The most potent weapon in the hands of hon. Members is not any device of procedure: it is their right to vote on matters such as have been raised from both sides of the House during this debate. I hope that the Chancellor will take stock of these criticisms which have been made with great tact and great skill and great persuasiveness, and I hope the Chancellor will have taken note of the very serious temper of the criticisms, from that side of the House as well as from this.
  I hope that hon. Members on the other side of the House, when it comes to putting down Amendments to this Bill,

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  will not hesitate to support them in the Lobby. [HON. MEMBERS: "0h."] We are talking about Parliamentary reform and the reform of Members of Parliament. [Laughter.] Well, there will not be much left of this Finance Bill if hon. Members live up to what they have been saying in this debate. I hope it will have been a sobering experience for the Chancellor and that when he comes to have the discussions which we understand he is going to have with those concerned with the taxation of charities he will realise that not only on this side of the House are there very serious misgivings about the proposals in their present form in this Bill.
  I should like to refer to one thing said by the hon. Member for Fife, West (Mr. William Hamilton), who taxed hon. Members on this side of the House, my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) particularly, with not having put forward alternative taxes. As has been rightly said from this side of the House, it is not the business of the Opposition to do that: but the real point and the real answer is that if the level of savings in the economy at the moment were at the height at which it was under the administration of the Conservative Party there would have been no need to take this degree of purchasing power out of the economy.
  I should like to take the parts of this Bill—and there are seven of them—and the Schedules—there are 12 of them—in order, with the exception that I should like to single out for earlier treatment Part VI, the Selective Employment Tax, before I go on to discuss the general principles raised by all the other Parts and all the other Schedules.
  I should like to make two preliminary observations about the victims of the Selective Employment Tax. These are very important matters, which affect constituents of mine in particular, and the first is embodied in a letter which I have had from a constituent, a letter which, will reflect the anxieties of the constituents of hon. Members on both sides of the House and could well be treated with a degree of seriousness. This is a letter from a constituent, who says:
  "I am a retired professional man, aged 90. I was in a hard professional practice in East London until my retirement. I am now a widower, and owing to my age I have to employ a housekeeper to attend to my needs.
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  In October, 1964, I was paying National Insurance on her account of 8s. 9d. a week. In April, 1965, this went up to 11s. 8d. and is now 11s. 10d. a week."
  I would say in passing that there can be only a minority of inhabitants of this country who have reached the age of 90 and are able to be so acutely aware of what their outgoings are. He goes on to say:
  "When the payroll tax becomes law I shall have to pay another 12s. 6d. a week, bringing the total to 24s. 4d. a week, more than two and a half times what I paid when Labour took office, and a rather high price to pay for the so-called benefits of a Socialist administration. I do not suppose you can do anything to help me"—
  I think that he rather underestimates the assistance which we expect from the other side of the House. He goes on:
  "…but I thought you should know how a very ordinary person is affected."
  There are many others in similar circumstances.
  That is the kind of appeal which the Chancellor ought to take very seriously, and I would like to submit to him a case of rather wider implication also directly concerning my constituency, in which is situated the largest of the village homes of Dr. Barnardo's Homes. The Secretary of Dr. Barnardo's Homes tells me that the Selective Employment Tax will cost the Homes £110,000 a year in respect of a total staff of 2,900 employees. That is equivalent to a tax of 3 per cent. on a gross income of £3½ million. Dr. Barnardo's Homes estimate that, in addition, they will pay an equivalent of a 3 per cent. tax on their income because of the effect of costs, which are particularly heavy for them since they use so many services such as the laundry and so on which have to come from outside.
  The tax is a levy upon a charitable organisation, the whole income of which has to come from gifts which are made voluntarily by members of the public who have already paid tax on the income out of which they make those gifts.
  The Chancellor might consider whether he agrees with the Nathan Committee which said that in welfare work the charities and the local authorities were a partnership. As he considers it suitable to make a rebate to local authorities in respect of their employees, he ought to consider whether he should not make a similar rebate to the organisations which

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  the Nathan Committee quite rightly classified as being in partnership with the local authorities. When the time comes, on the Bill or on a subsequent Bill, I hope that we shall be able to have an exemption made for Dr. Barnardo's Homes and other similar organisations. I hope also that we shall see special provision made for organisations which are not strictly charities but which could not on any construction be classified as profit-making organisations. I refer to such bodies as the Commonwealth societies, Voluntary Service Overseas and other organisations which have been referred to by hon. Members on both sides.
  Reference has already been made to the tourist trade. Much of what has been said might be taken for granted, but I would add that if the idea is that the service industries are employing too many people, the Chancellor should have regard to the fact that the numbers employed in hotels and catering in 1963, according to the Ministry of Labour Gazette, were 536,000. This year, they are 519,000. That represents a drop of nearly 6 per cent. per annum, and it is difficult to see why those services should invite this kind of taxation, which can hardly be expected to slow down a process which is already very embarrassing for an industry that is a great earner of foreign exchange.
  Just how great may not be appreciated by the House. It is the top dollar earner, with £320 million in foreign exchange and no import costs at all in the balance of payments context, as compared with £416 million for chemicals and £653 million for transport engineering, both of which have very heavy import costs to counterbalance them. The export and import agencies, of which there are over 1,000, are very short of labour already, and it is impossible to see how this tax can do anything but decrease the efficiency of our export services and put up the prices of our exports.
  The victims are the charities, education, the arts and those parts of our industry which are most valuable as export earners. The beneficiaries are very largely the bureaucracies—11,000 extra civil servants to be employed during the year—the brewers and the manufacturers
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  of candy floss, to whom the Prime Minister referred in such scathing terms in his General Election campaign.
  Nor can there by any possible justification for the tax if its object is to be deflationary. The Chief Secretary said that its object was to raise revenue, but I questioned that in an intervention. I do not see how the revenue can be required, since the Government boast of having a surplus. The Government want to take purchasing power out of the economy. If the Chancellor is to succeed in this aim, then he will deliberately put up the cost of living, and in so far as he fails, his tax will fail in its purpose of being deflationery.
  Nor is it necessarily desirable that labour should be deployed into manufacturing industry, because it has been pointed out that in so far as the tax makes labour less short in manufacturing industry, it removes the incentive from manufacturing industry to re-equip with automotive equipment and so to raise productivity. The Chancellor may have seen a letter to The Times of 10th May from the managing director of an engineering company in East London in which he said that the foreman of his welding shop was delighted because he had long been struggling valiantly to keep delivery promises, despite a desperate shortage of skilled labour, and he was now to understand that he was to have the help of three hairdressers, two photographers and one male ballet dancer. How the Chancellor imagines that sacking one ladies' hairdresser will increase the productivity of pig-iron puddling in the North of England passes understanding.
  I do not think that the alleged economic philosophy of the tax has anything to do with its imposition. I think that it was a hastily conceived tax, put on at the last moment because the Chancellor was made acutely aware of the fact that the Inland Revenue absolutely refused to take on the administration of any further impost of tax through conventional means. The Chancellor was at his wits end, and he went to his advisers and asked, "What on earth can we do?". To his rescue came the ubiquitous Dr. Kaldor.
  I should like to say something about Dr. Kaldor, because there is something offensive in references in the House to civil servants by name.
  Sir Beresford Craddock: He is not a civil servant.
  Mr. Iremonger: I understand from what has been said from the opposite benches that he is a civil servant. At any rate, he is a gentleman who cannot answer for himself in the House. It is a highly objectionable situation in which to put anyone, and I think that the Government are open to very serious criticism for having done so. It is well known that the Government take advice from this man. He is a man of impeccable personal reputation, and of great intellectual and academic achievement, and in my opinion the fact that he came here from Hungary reflects credit both on his judgment and our merit as a country to which people come. I am in no way criticising him. I am criticising the Government. That the Government should base their policies upon the eccentric advice of an economist with a particular and individual series of theories, instead——
  Mr. Michael Foot: Disgraceful stuff.
  Mr. Iremonger: —instead of bringing him into the House—[Interruption.] The Chancellor should not accuse me——
  Mr. Callaghan: I am not speaking to the hon. Member; I am addressing my hon. Friend.
  Mr. Iremonger: The Chancellor says that what I am saying is too cheap for him to bother about. What I am saying about Dr. Kaldor is very serious. When the Government wanted the advice and services of the right hon. Member for Nuneaton (Mr. Cousins) he came into the House as a Member of the Government and, although he does not do it very often, he can appear at the Dispatch Box and answer for his policies, and be questioned by hon. Members.
  The Chancellor is the puppet of Dr. Kaldor. He ought to bring his adviser into the House and let him answer for his own policies at the Dispatch Box, and be questioned by hon. Members, instead of having his policies brought forward in this hole-and-corner way in a written speech which the Chief Secretary has to read out entirely based upon these theories.
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  This is a typical example of the arrogant and contemptuous way in which the Government treat the House. What the Government want is silent support from a large majority, and they are contemptuous of the representations made by hon. Members on this side of the House.
  The most objectionable feature of the Selective Employment Tax is that it embodies the Socialist philosophy of hon. Members opposite. It is designed to penalise above all those enterprises which are the result of individual initiative and personal endeavour. What hon. Members opposite want is State control of all the agencies of social improvement. I very much doubt whether the Chancellor will give a sympathetic ear to the representations made to him in respect of charities. What he wants to do is to monopolise the charitable activities of a public service in the hands of the State. He does not want to preserve this traditional element in English life.
  That is the basic philosophical origin of the Selective Employment Tax, and it is for that reason that it is so highly objectionable and that we on this side of the House will see to it that it is relentlessly opposed. We hope that the support given vocally from the benches. opposite during the debate will be manifested physically in the Division Lobbies in Committee.
  10.25 p.m.
  Mr. J. Bruce-Gardyne: I do not intend to delay the House for very long. If I had been fortunate enough to catch the eye of the Chair earlier I might have had more to say about the impact of the Selective Employment Tax on the Scottish economy. Fortunately, my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) has covered the ground very much more effectively than I could hope to do.
  The Budget conforms to a pattern with which we are becoming drearily familiar. It involves more taxation; it involves more civil servants, and it involves more congestion—[Interruption.]
  Mr. Speaker: Order. The hon. Gentleman who has the floor at the moment has sat right through the debate. I hope that the House will give him a courteous hearing.
  Mr. Bruce-Gardyne: Thank you, Mr. Speaker.
  I was saying that the Budget conforms to a wearily familiar pattern. It involves more taxation, more civil servants, more congestion in the Inland Revenue, which is approaching a stage when it will come to a halt altogether; it involves an ill-prepared and inequitable new taxation proposal, and it is totally irrelevant to the fundamental problems facing our economy, where it does not positively accentuate them.
  Clause 8 deals with the withdrawal of the export rebate on exports to E.F.T.A. countries. I raised this point on frequent occasions last autumn with the President of the Board of Trade, when this concession was being negotiated by him. My complaint is that this involves a permanent concession in exchange for a temporary forgiveness on the part of our E.F.T.A. partners for the import surcharge. I cannot help wondering whether it can end there. Either the export rebate is a rebate of internal taxation, in which case it is surely in conformity with the Treaty of Stockholm. If, as the Government seems to have admitted, it is not in conformity with the Treaty of Stockholm, it must presumably be classified as an export subsidy. If so, surely it is not merely against the Treaty of Stockholm, but also against the G.A.T.T. I wonder how long it will be before the export rebate will have to be withdrawn altogether in order to satisfy similar demands from the members of the G.A.T.T.
  As I said, my hon. Friend the Member for Moray and Nairn dealt thoroughly with the inequitable effects of the Selective Employment Tax on the economy of Scotland. I have for long been in favour of a regionally differentiated payroll tax, because I believe that it could do two things at the same time. It could encourage the movement of industry to areas where there is room for industry to expand, and it could discourage the over-manning of industry in areas of high employment, in the South and the Midlands. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) said that we must not talk about wastage of labour, but I am not sure whether I would agree with him. At any rate, let us talk about over-manning.
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  I believe that a regionally differentiated payroll tax could have both these effects. I should not have thought it possible to devise a payroll tax which would have precisely the opposite effect, which would hit hardest the areas of underemployment and areas of emigration, where there is room for industry to expand, and that at the same time would encourage over-manning and wastage of labour in areas of high employment. Yet this, I believe, is precisely what the Chancellor, in his ingenuity, has managed to achieve.
  I do not suggest that the 7s. 6d. rebate will have an enormous effect in encouraging over-manning, but we cannot consider this in isolation. We must also take account of the Redundancy Payments Act. We have got ourselves into a position where an employer with surplus labour will receive 7s. 6d. a week for every man he retains and have to pay up to £600 for every man he declares redundant. I cannot believe that this sort of stick and carrot treatment can possibly do other than encourage wastage of labour and over-manning in the areas of high employment.
  The Chancellor often tells us how successful the Government have been in their policies for reducing the incidence of unemployment in Scotland. I see the right hon. Gentleman nodding, presumably in agreement, now. It is true that we have managed to keep the level of unemployment in Scotland down below 3 per cent., and we are delighted with that, but the credit for that goes entirely to my right hon. Friend the Member for Barnet (Mr. Maudling) and the Leader of the Opposition for the measures which were introduced when we were in office, in particular the system of free depreciation which we introduced. Even so, the level of unemployment in Scotland is still more than double the national average, and this after a year in which, for the first time in more than a decade, the population of Scotland actually declined.
  The Chancellor has made great play of the fact that the level of unemployment in Scotland has declined more steeply than it has in England. It is rather like a doctor with two patients, one with a temperature of 102 and the

  621
  other with a temperature of 98·8, who manages to bring the temperature of the first to 101 and of the other to 98·4 and who then says, "This is a typical example of the effects of differential medicine."
  I am worried about the Finance Bill because I do not believe that it will solve the underlying problems of the British economy. This worries me most because it is still true that when England sneezes Scotland catches cold. That is why it is particularly important for Scotland that we aim to avoid a serious recess on. I appreciate that in framing his Budget this year the Chancellor had a difficult path to tread. He wanted to avoid provoking a recession in 1967 and creating a balance of payments crisis in 1966. I suggest that he has laid the basis for achieving both.
  The Budget's economic forecast struck me as being almost offensively inadequate. The Chancellor told us that he had counted on pre-Budget stocking up in anticipation of a much more immediately deflationary Budget to reduce demand this summer. Many hon. Members, certainly my hon. Friends, know by now that the right hon. Gentleman is a remarkably bad psychologist, and once again I believe that his psychology has gone wrong. I call in evidence the latest figures of demand in the motor car industry. These figures hardly suggest that the Chancellor's forecast of a drop in demand after the Budget is being fulfilled.
  Nevertheless, in his Budget the Chancellor introduced a number of measures to tackle directly the underlying balance of payments problem, and I will refer briefly to two of them. First, the question of the Rhine Army offset. I wholeheartedly welcome his statement that he hopes to arrange a new agreement with the Federal German Government, and I hope that when replying to the debate the right hon. Gentleman will say something about the outcome of his discussions with the German Chancellor yesterday.
  I find it rather nonsense that we should continue to tolerate a position in which, when the West German reserves are more than double ours. reserves which do not, unlike ours, make a substantial
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  contribution to the financing of international trade and we should continue to be paying between £30 million and £40 million per year, which represents in affect a net loss to the international liquidity circuit. I wish the right hon. Gentleman good fortune in correcting this situation, but, on the basis of past experience, I am not sanguine about his chances. In any case, I hope that he will keep the negotiations well clear of the hands of the Foreign Office.
  I also hope that the right hon. Gentleman will clear up a point which arises from a Written Answer which the Financial Secretary gave me on 27th April last, when I was told that of the
  "…£45 million set aside…for the financing of additional British exports…"
  that was in the Anglo-German Agreement of 29th June, 1965,
  "…transactions have now been approved in principle which will in due course result in the whole of the deposit account referred to in Article 5 of the Protocol of 20th July, 1965, being used up".—[OFFICIAL REPORT, 27th April, 1966; Vol. 727, c. 37.]
  What does "in due course" mean? Can the right hon. Gentleman assure the House that any transactions accruing from this £45 million account will not be used to count against the £54 million which the Federal German Government have undertaken to pay over across the exchanges during the current financial year?
  I hope that the Chancellor will clear up another point in his Budget speech when he appeared to imply that he was hoping to get agreement on the offset of these exchange costs during the course of the current financial year and apply it in the current financial year. I take it that all he is, in fact, expecting is to have the complete offset over the financial year 1967-68.
  I appreciate that the sums involved here are not enormous, certainly not in terms of the sums which the Government propose to spend on the F111, but every little counts in these matters. We must look carefully at what has come over the balance of payments account on current account over the past ten years. Comparing the figures on current account for

  623
  the period 1951-55 with those for the period 1961-65, one finds that there has been a substantial improvement in the overall visible trade position, and there has been a very substantial improvement in the overall position of invisibles on current account, which, of course, the Selective Employment Tax will do its best to reverse. Nevertheless, we ended the first five-year period with a global surplus and we ended the second with a global deficit.
  The reason was that Government spending had increased from about £530 million over the first five-year period to nearly £2,000 million in the second. These are formidable figures. We cannot allow this situation to continue. I know that hon. Members opposite believe that the answer lies in cutting our defence commitments overseas. The Secretary of State for Defence has not found this so easy, and, in any case, it is not the only answer. If we could recover the proportion of international trade and exports in manufactured goods which we used to have, we could bear this burden. Besides that, about 40 per cent. of Governmental overseas spending accrues from civilian transactions, and I imagine that a large part consists of aid. We must do more to increase the proportion of our aid which is tied to the purchase of British goods.
  The aspect of the Budget which depresses me most is that in his Budget speech the Chancellor almost began to admit defeat on the balance of payments side. The achievement of equilibrium seems to be becoming the crock of gold at the end of the right hon. Gentleman's rainbow. Originally, his target date for equilibrium was the second half of 1966. Then it was the end of 1966. Now, we are told—he said it again yesterday—that it is the trend which matters. He says that we have ample credit facilities for meeting the temporary fluctuations which may occur in the balance of payments account. Of course we have, if we are permitted to use them. But this is for the judgment of the international central bankers, and I question whether they will be quite so sanguine about trends as the Chancellor appears to be.
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  The right hon. Gentleman is taking a great gamble in this Budget, and he is counting—perhaps safely counting once more—on the willingness of the United States to bail him out because the United States has its own fears about the consequences of a devaluation of the pound. But I believe that this willingness to depend in the last analysis on an acceptance of further credits from the United States conflicts with what should be the essential first objective of the British Government—to take this country within the European Economic Community. I do not believe for a moment that President de Gaulle will accept this country into the Community so long as it is, in effect, attached—almost by a begging bowl—to Washington.
  It is because I believe that the Budget does nothing to deal with the underlying economic problems facing the country and, in effect, represents recognition by the Government that they can continue to rely on charity from overseas that I shall be delighted to join my hon. Friends in voting against the Bill tonight.
  10.41 p.m.
  Mr. F. A. Burden: I find it difficult to imagine how the Chancellor, who has been a member of the Inland Revenue, can introduce such a Measure as the Selective Employment Tax. It seems almost impossible to conceive of a tax more difficult to administer or collect. One can only suppose that in some way he has lost all the knowledge that he must have learned when he was in the Department. Undoubtedly the most scathing remark made against the tax was that of the right hon. Member for Leeds (Mr. C. Pannell), who stated that, although he was a Minister until early April, he had no idea that the tax was being considered and felt that it had not been given proper consideration.
  I think that if the Chancellor were honest he would admit to a great deal of concern behind the benign smile that he has spread over the proceedings on this Bill and the Budget debate. He must have been gravely concerned at the criticisms that have come from his back benchers. It may well be that they have been largely muted criticisms because of

  625
  party loyalty, but he must admit that there has also been very strong criticisms. If there had been full voice of the criticisms held by his hon. Friends, I think that he and his party would have been in a very difficult position. I believe that if they followed out their inclinations and cast aside party loyalty for what they believe to be in the best interests of the country, a number of hon. Gentlemen opposite, besides co-operative society Members, would be in the Lobby with us tonight.
  The Chancellor has made some conciliatory noises towards charities, but I hope that he will take some positive action on their behalf during the Committee stage. The taxes on charities cannot be upheld on any social or moral grounds, and they must be repudiated on those grounds. Any tax that must be repudiated on social and moral grounds must be a bad one, whatever Government might try to introduce it.
  I am on the board of management of two charities which operately solely on behalf of elderly people, bringing them free homes and a great deal of help in their declining years, including medical attention. I am also a member of the Council of the R.S.P.C.A. The tax will cost it £40,000 a year. It means that it will now have to cut back very considerably the services that it gives to local authorities, particularly in regard to the care, housing and destruction of stray dogs. Will the Chancellor provide the money for local authorities to carry out these services which will undoubtedly have to be cut back by the R.S.P.C.A.? If charities, such as Dr. Barnardo Homes, are unable to carry out their considerable duties towards children, will the Government make good the money taken by the tax? Does the Chancellor not realise that many people who now give to charities will say, "Why should I give so freely when the Government will take a good deal of it?" Does not he realise the psychological effect of the tax? I hope that the right hon. Gentleman will discontinue the conciliatory noises and take positive action to rectify the situation. I ask him—and I shall be writing to him about it—to allow me to bring to see him representatives of some of the charities in which I am interested.
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  The Chancellor—and here I speak from experience—did not do his homework before introducing the tax. Most of us engaged in the distributive industries know that we are on a shoe-string with our employees. We cannot get rid of any employees. Indeed, many of us are not fully efficient because we cannot get enough employees, either full time or part-time. I hope that he will look again at the tax on part-time and elderly employees, who are invaluable and essential to many concerns in distribution.
  There is much Government talk about distributive industries absorbing the extra cost. I remind the right hon. Gentleman that the wholesale textile associations work mainly on a 3 per cent. net profit. That is their average net profit. If he really believes that it is possible for them to go on absorbing more taxation, then he is living in cloud-cuckoo-land. It just is not possible. It will have to be passed on to the consumer.
  The same is true of stores and retail shops. They are all starved of staff. The staff excesses are not in the distributive industries but are more likely to be found in many of the manufacturing industries, which are now to draw an extra bonus for harbouring labour. Does not the right hon. Gentleman realise that if the cost of living goes up the workers in manufacturing industry will not be content to allow the employers to draw 7s. 6d. bonus per worker? The first thing they will do is to say to their employers, "You are drawing 7s. 6d. a week for each of us; we want it, and a bit more". That will be the reaction. The tax will promote more wage demands.
  I put some Questions to the Chancellor about the operation of the tax and got woolly answers. Indeed, they were no answers at all. I was fobbed off and told the matter would be given consideration. An example of the difficulty of administering the tax is in the position of the manufacturing wholesalers. I hope that the right hon. Gentleman will listen, for these are points to which I hope he will give serious attention. They are not meant to be unhelpful and he must apply himself to them. What is

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  the position of the manufacturing wholesaler who has his own distributing organisation? If he were purely and simply a manufacturer, he would receive the rebate with a bonus of 7s. 6d. a week, but as a manufacturing wholesaler will he receive the rebate on the manufacturing side of his business and only for those people employed on that side? If so, how is it to be assessed and who is to assess which is which, and what is to stop him from putting, say, his packers from the wholesale side into the manufacturing side? What of the manufacturing wholesaler who, in addition to wholesaling his own merchandise, buys from other manufacturers and wholesales their products? Those are only two of the questions. I refrain from giving the many more I could give, because of the lateness of the hour.
  I ask for the Chancellor's very serious attention for a few minutes while I deal with a very serious export matter. The right hon. Gentleman constantly tells us that we must have more exports. In a Question, I pointed out to the Chancellor that in this country are many firms entirely financed by their overseas principals and whose one object is to act as buying offices in this country in order to send British merchandise to their principals or customers overseas. They perform another very important function. They have a staff in this country whose sole job is constantly to seek out new sources of manufacture of goods which might be useful to their overseas principals. When the buyers come here, they are taken to the manufacturers to give them guidance, if needed, on styling and generally to promote the sale of their goods abroad.
  These firms will have to pay the Selective Employment Tax for doing this essential job. Their only function is to promote British exports and ensure that their overseas customers and principals buy as much as possible from this country. Many of these firms are very bitter about this imposition and I fear that they will switch their business and their buying offices to Europe and that we shall suffer as a result.
  There would be no difficulty about excluding them, for it would be the easiest
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  thing in the world to find out who they were and to ensure that they were not subjected to the tax. I hope that the Chancellor will consider that. I am glad that he is not smiling and I am sure that he will consider it, for I know that he is very concerned about our balance of payments and exports. Anything that he or anyone else does which minimises or stops exports is against the best interests of the country.
  During the election, the Labour Party treated us to the remarks of Lord Sainsbury, a good Socialist and a Socialist Peer. What has he said about this tax? I do not know why the right hon. Gentleman did not consult him before introducing this tax, because a greater expert on the distribution of merchandise, the distributive industry, and on the likely effect on costs of an action such as this tax it would be very difficult to find. As an acknowledged expert he was paraded by the Labour Party as such, yet he was ignored. He has said recently that this is a bad tax and that the distributive industries will suffer and that they cannot be further denuded of staff. I wonder if the right hon. Gentleman might not now take note of what he said and at this late stage realise what a bad tax this is. Lord Sainsbury and everyone else knows this, and it is extraordinary that the Minister did not know this when he said that the cost of the tax would add less than 1 per cent. on the cost of living.
  This is the acknowledged expert whom he could have consulted but this was wishful thinking, this was cloud-cuckoo-land. I am afraid that the Minister in due course will be called to account for his prophecy and will be shown to be very wrong indeed. It is extraordinary, if one looks at the record, that in his 1951 Budget speech Hugh Gaitskell said:
  "…we have to recognise that there must be some reduction in our standard of living."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 828-9.]
  There had been massive increases in taxation during that time and, after six years of Labour Government, the Chancellor had to stand up at that Dispatch Box and admit that the country had reached a position in which there must be some reduction in our standard of living. This Government have raised

  629
  £1,000 million in extra taxation since they have been in power. On 11th March, 1964, the right hon. Gentleman admitted to me across the Floor of the House that when one raised taxation one automatically increased prices. He said that everyone knew that. If that is true, the right hon. Gentleman knows full well that his actions must increase prices, and he knows this will hit the aged, the people living on small fixed incomes, the old-age pensioners. The situation has now been reached after two years of Socialism, without being acknowledged by the Governmental—although Hugh Gaitskell admitted it openly in 1951—that we must again expect some reduction in the standard of living, which means a reduction in the standard of living of old-age pensioners and a cut back in the services they receive from charities. If this is the legacy of Socialism so far, heaven knows what the future holds.
  10.58 p.m.
  Mr. Iain Macleod: I would like to thank the House for exercising a great deal of patience while this debate ran into exempted time. I recall with some embarrassment now, that a few days ago I wrote in not wholly charitable terms about some of the maiden speeches which have been made. I must now eat those words, because three admirable maiden speeches have been made in the course of the debate.
  The hon. Member for Newport (Mr. Roy Hughes) and the hon. Member for Liverpool, Garston (Mr. Fortescue) both made first-class speeches, and I assure them that I am not saying that out of conventional politeness but by way of tribute to them. I hope they will not mind my saying—they can put it down to prejudice, if they like—that I thought the speech of my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) was, by any standards in any Parliament, an outstanding maiden performance.
  A Second Reading stage of the Finance Bill is not the most exciting of stages. The debates on the Budget are behind us and the debates in Committee and on the remaining stages are still to come. The Chief Secretary opened
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  this debate with a speech which, frankly, we on this side of the House found deplorable. I do not just mean that it was a bad speech. We all make bad speeches. What worried us as to the future of our discussions on this Bill was that it was completely insensitive to the problems which this original tax—we must give it that much credit—will cause to so many people.
  I listened to the hon. Member for Manchester, Cheetham (Mr. Harold Lever) praising this Budget, and I turned up what he said on the Second Reading of the Finance Bill a year ago. He said:
  "I have not been able to agree with complaints that the Bill is badly drawn. It is a little masterpiece of its kind…those who are at all expert in understanding the drafting and style of Finance Bills must find that this is an outstanding one."—[OFFICIAL REPORT, 10th May, 1965; Vol. 712, c. 86.]
  As we all know, in the end it turned out to be the worst drafted, most incomprehensible of any Finance Bills, or indeed any other Bills, and no one proved that more eloquently than did the hon. Member for Cheetham—with his voice if not his vote as we went through those days. Perhaps we could ask that the Treasury would this year listen at the beginning instead of at the end of our discussions. We then might avoid having, as we have this year, between 40 and 50 pages of the Finance Bill—and this is only the first instalment—devoted to putting right some of the errors of the Bill which went through the House a year ago.
  I mention, in passing, because I do not want to dwell on it but wish to come fairly swiftly to the S.E.T., the question of the betting and gaming tax. I think the Financial Secretary, who discussed my views on this in the last debate on the Budget, was a little supercilious in dismissing them. The point is that there are three possible methods, as he will agree. There is the method of turnover, the method he has selected as far as betting is concerned, the method of a tax on winnings—or more accurately on returns, as it can include stakes—and the method of taxing the physical assets. I think that everyone who is well-informed on this matter believes that the Government have picked the worst of the three methods. This is something

  631
  which we shall have to demonstrate to them in the course of the Finance Bill. He quoted Mark Twain to me in response to my views. I do not ask for my views to be considered because I have given some minor study to this matter, but I ask them to be considered for Whistler's reasons, when he said:
  "I don't ask this price for two days' work, but for a lifetime's experience."
  Perhaps I can assure the Financial Secretary of this. There are many things of which he knows much more than I do. I cannot think of them at the moment, but I am sure that there are. Perhaps he will take it from me in advance of the Committee stage that the taxation of gaming is not one of those, and this we shall demonstrate to him.
  I mention, in passing, because it is of such importance, the question of Corporation Tax at 40 per cent. That is quite a major decision. The position, I understand, is that the old combined rate was 561 per cent. and the new rate is 641 per cent. This is a swingeing increase, one which we are not satisfied with for the reasons given, and one which we shall move in due course to lower in Committee. Very briefly, and perhaps the Chancellor might wish to make some reference to this, on the question of his general estimate to which my hon. Friend the Member for South Angus (Mr. BruceGardyne) referred, I found the Chancellor strangely optimistic in his Budget speech on the facts as they are available to the House at present. If, for example, one takes the trade figures—clearly for some months they will be affected by the strike, but when unaffected by the strike—we find that for the first four months of this year they showed an average deficit of £23 million, as against an average of £16 million for 1965. Those figures are seasonally adjusted, and clearly the trend is a bad one.
  Secondly, on the question of the balance of payments—£23 million as against £16 million—the total deficit for the first four months of 1966 was £92 million, and it was £65 million in 1965. I think the Chancellor will find that that is correct.
  Mr. Callaghan: Take the average over the 12 months and not five.
  Mr. Macleod: I was comparing the first four months of this year with the first four months of last year. The right hon. Gentleman will find that my figures are correct—an average of £16 million as against an average of £23 million.
  I now turn to the general trend in the balance of payments. Before the General Election, in our debate on 1st March, I warned the right hon. Gentleman—he will find it in HANSARD and will remember it—that he was being much too optimistic in his assessment of the speed at which we should recover from our balance of payments difficulties. It is now admitted that he was too optimistic, but he is still being bullish about 1967. I have the same doubts, and I have the same reasons.
  It is not easy to see, although I welcomed it at the time, what confidence lies behind the right hon. Gentleman's assertion that we can repay on time, and perhaps even before time, the first of the loan repayments which are required from us. The possible explanation—he might like to comment on this—is that the import surcharge might be replaced by quota restrictions. Can he give a firm indication tonight that that is not so?
  All of this leads us to further anxiety about the timing of the Chancellor's proposal, because nothing effective will happen until the third quarter of this year, which is seasonally always the most difficult quarter, and then, with the winter beginning to loom up, he will take very nearly £100 million a month in a forced, interest-free loan from the employers. He justified this on what seemed to me to be a very strange argument about the course of demand anticipating the Budget. This can only be a trifling factor in the ordinary course of demand. It is far too slender a base on which to hang as much as the Chancellor has chosen to do.
  The Selective Employment Tax has, of course, dominated the debate, and probably about 90 per cent. of the time of the speeches has been devoted to it. I find it difficult to discuss this tax rationally. I find anger boiling up in me when I consider it. I feel exactly as Sir Geoffrey Crowther did in a letter to The Times, which all hon. Members will know. In it he said that he had intended to ask for space
  "to protest once again about the way in which the Government seems determined to

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  ruin British hotels, a struggling export industry."
  Then he says that
  "on reflection, I think there is something even more basically wrong with the Selective Employment Tax than its capricious economic mpact."
  And he says that the tax
  "is an outrage against morality."
  The evidence is now overwhelming that this tax was thought of at the last moment. The clearest possible evidence is a statement made by the Chancellor towards the end of the General Election campaign. Speaking at Cardiff on 25th March, the right hon. Gentleman said:
  "We will sit the burdens on the shoulders of those able to carry them, on the strongest, not on the weakest."
  This tax will fall on the old, on women, on the disabled, on charities, on the development areas. I do not believe hat the Chancellor could possibly have made a. remark like that if the Selective Employment Tax had been in his mind, because otherwise that statement at that time would be completely immoral. I do not for a moment believe that on 25th March the Chancellor had even thought of this.
  If I may produce another piece of evidence, I do not mind who gets the credit for the move from agriculture and, now, forestry away from their original position. What is apparent is that to everyone, at least on this side, the absurdity of the original proposal was manifest at once. My hon. Friend the Member for Hove (Mr. Maddan) said this. My hon. Friend the Member for Macclesfield (Sir A. V. Harvey), who rose to speak at 6.28 p.m. on the day of the Budget, said this:
  "My purpose in rising to speak is to refer to agriculture. I could not believe my ears when I heard the Chancellor say that the new tax upon employees in agriculture would be taken into account at the next Price Review. I cannot understand what he must be thinking about ".—[OFFICIAL REPORT, 3rd May, 1966; Vol. 727, c. 1500.]
  My right hon. Friend the Member for Grantham (Mr. Godber) issued a statement the same evening. There was a Motion on the Order Paper at once, the same night. I referred to this next day in my speech and on television and on sound radio. The absurdity is the manifest one of assuming that a national review
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  could conceivably take account of the individual interests of individual, farmers.
  For my part, I am in the same position regarding agriculture as A. P. Herbert, who once put a paragraph in his election address headed "Agriculture" and beneath it, "I know nothing about agriculture." I know only a little more than that, but I know that every person who heard the Chancellor's speech knew within minutes that this was an absurd idea.
  What, then, are we to think of the Minister of Agriculture who, I presume, was consulted on this matter, in view of the wording of the White Paper, who in any event must have heard this in the Cabinet, at the latest, the day before the Chancellor made his speech and either sat dumb or did not realise the implications of this tax for his industry? It is clear that we are heading for what my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) called administrative bedlam.
  Let me give two short quotations from The Guardian leader on Monday of this week:
  "The Ministers of Labour and National Insurance, who will have to administer the tax, seem to have been given only the sketchiest information in advance of the Budget. They were not asked to give their views on the possible consequences of the tax or to advise on the ways in which it ought to be operated.…
  What happened before the Budget was not planning, purposive or otherwise. Crude guesswork is a closer description."
  That, therefore, is the position.
  I do not want to spend too much time on the anomalies, obvious though, of course, they all are. There are the sort of anomalies that under the Government's proposals as they have been presented, we will pay a premium to cigarette manufacturers and we will tax cancer research. We will tax the churches and we will pay a premium to the manufacturers of ice cream, bingo tables and the rest. All these can conceivably be described, if one likes, as debating anomalies, but it goes much deeper than this. There is the whole question, to which my hon, Friend the Member for Gillingham (Mr. Burden) has just referred, of export merchants and all those who are concerned in their insuring, forwarding or merchanting the country's products.

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  There are, too, the question of contractors and all the problems of tourism and hotels. The hon. Member for Fife, West (Mr. William Hamilton) is utterly wrong when he attacks the luxury hotels of London. I have not the reference here, but I remember a letter from my hon. Friend the Member for Eastbourne (Sir C. Taylor) in The Times referring to Grosvenor House, and the figures, as I recall them, were that 73 per cent. of the lettings were foreign lettings and 56 per cent.—no less—were for bookings from North America. The advantage of that to the economy of this country is enormous. It is not just the expenditure in the hotel. It is all the other expenditure—in places of entertainment, in the shops, in everything related to tourism. But the point is that it is the hotel booking which is the anchor for all the tourist expenditure which comes to this country, and it is particularly stupid to tax in a way in which other countries do not and to penalise the hotel and tourist industry of this country.
  Mr. William Hamilton: They do.
  Mr. Macleod: No. I have a list which I was going to use in Committee, and if we compare the treatment of hotels in this country with that of hotels in other countries we shall find that their treatment in this country is worse than their treatment in almost any other country.
  Finally on these main subjects, on the question of the distributive trades, what we feel was splendidly put in a leader in the Co-operative News on 21st May. This is how it opens:
  "Nothing that has happened since Mr. Callaghan introduced his so-called Selective Employment Tax proposals has modified our view that it is a thoroughly bad and dishonest measure. It taxes the people's food, it will provide free gifts without any selection to all types of manufacturing industry, and it will not result in a single distributive employee being transferred to manufacturing."
  Perhaps I should make quite clear on this—because I think it is an important point—that we will move at the appropriate stage an Amendment to this. We do not believe in what has been called the Welfare State for industry, and we shall oppose the payment of premiums to manufacturing industry and move that they be struck out of the Bill altogether.
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  The next point I should like to make is in relation to the Ministry of Labour classification. I have, I suppose, some indirect responsibility for this, because I think the last time it was revised was in 1958 when I was at the Ministry of Labour, but, as the hon. Member for Putney (Mr. Hugh Jenkins) and other hon. Members have said, the classification, of course, is entirely for the purposes of statistics, and it is intellectually illiterate to use this form of classification as a method of demarcation between different forms of manufacturing in this country. It was said by the Financial Secretary to the Treasury, quite rightly, that the definition, broadly speaking, of an establishment—on which so much is going to turn: no less than 32s. 6d. for every man in the labour force, the difference between the maximum 25s. and 7s. 6d., an enormous sum—was that the whole of an establishment was normally the whole of the premises. That is perfectly true, but I wonder if the House would just listen while I read the next paragraph, which says:
  "The reference to 'the whole of the premises at a particular address' in paragraph 4 above is subject to the following qualifications. Where, at a single address, there are two or more departments engaged in different activities in respect of which separate records are available, each department is treated as a separate establishment and classified accordingly. It may be, however, that separate records are available for some types of information and not for others and for the purposes of some kinds of statistics all the departments at the address, even if engaged in different activities, have necessarily to be classified as one unit. Indeed for some statistics—for example bank advances—it may not be possible to obtain statistics by establishments but only by enterprises."
  Well, we know just where we are, do we not, as a result of this? I wonder if the Government have really thought for a moment of the administrative chaos which will be created. The Ministry of Labour machine is utterly unfitted to deal with these disputes.
  Then there is the point raised by my hon. Friend the Member for Finchley (Mrs. Thatcher) about the legal responsibility and the right of appeal. We all know why the Ministry of Labour has come into the matter, and the Ministry of Pensions has to come into it. As I said in a speech last weekend, the reason is that the Inland Revenue is so clogged

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  up with work that the Chancellor of the Exchequer has to sub-contract this year's Finance Bill to other Ministers in the Government.
  Some of the consequences are only just becoming apparent. I only mention this one on the legal point which was taken up because the effect of paragraph 1 of the 10th Schedule is to assimilate the collection of the tax with the provisions for collecting insurance contributions. It follows that any question relating to payments by an employer of S.E.T. or of any employer's liability to pay the tax will be decided not by the court, not by the Commissioners of Income Tax, not by any tribunal or judicial body, but by either the Minister of National Insurance or one of her local officials. With great respect to her and her Ministry, that is something that they are not suited for or capable of doing.
  So what happens? There is no appeal, except on an individual point of law to a single judge, and there is no appeal from that judge's answer. In that very unsatisfactory way, the rights of the ordinary citizen are gradually being taken away.
  I turn now to my last two and most serious, criticisms. First of all, the Bill is wholly against the flow of policy of many Ministries and Departments in the Government. It is against many of the things that the First Secretary of State is trying to do in the development areas, and it is against things that the Secretary of State for Scotland is trying to do. It is overwhelmingly against the very jobs which lie at the heart of the work of the Ministry of Labour, and I am coming to that special point in a moment.
  That is why it is intolerable that we should have two Bills pushed before us this summer, and why I ask the Chancellor to conduct both those Bills himself. After all, this tax is the central and only real feature of his Budget, and he must explain and defend the answers that he wishes to give to the country, not only on the Finance Bill but on the Ministry of Labour Bill as well.
  When I had an exchange with the First Secretary of State in the Budget debate and quoted something that he had said about the tax introduced by my right hon. and learned Friend the Member for Wirrall (Mr. Selwyn Lloyd) in
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  1961, the right hon. Gentleman, who thinks very fast on his feet, said, "Ah, but that was quite different; the unemployment level was quite different." In fact, the unemployment level for May, 1961, was 1·3 per cent., which I guess is what it will be in May, 1966. That point sounded all right at the time, but it disappears now.
  As someone who has been Minister of Labour, I think that it is very wrong that the Minister of Labour should be asked to conduct this Bill. What is more important is that almost everything that the Minister of Labour tries to do is attacked by the Bill. Ministers of Labour of all parties have tried to bring the disabled more and more into the ordinary stream of employment. They have tried to find occupations for married women and for part-time workers, to the great benefit of our economy. Every single one of those things is attacked directly by the Chancellor of the Exchequer in these proposals.
  What he does not seem to realise is that, almost throughout, there is a double loss.
  Take the question of the catering, tourist and hotel trade in this country. There is the obvious loss that if we make hotels in this country more expensive, we encourage people to holiday abroad and therefore put a strain upon our balance of payments. But, equally, if we make this country more expensive relatively than, say, Italy, or any of the other choices of people coming from North America, then they do not come here and we do not get the compensation which we have had in the past.
  This double loss runs right through the Bill, because if it happens that a woman who has been able to do part-time work is no longer employed because the 12s. 6d. makes the difference between it being worth while and not being worth while, again there is a double loss. There is a loss to the economy and there is also a social loss, because, clearly, this woman will not go into manufacturing industry. She will go back to her own home and there will be a loss both to her and to the economy.
  Many letters have been quoted, and I want to quote only one. It is one which I think the House would like to hear, and perhaps they will bear with me while I

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  read it. It is not from my constituency. I do not know the area. It reads:
  "I am very glad that you are opposing the pay-roll tax. I am a widower who, of necessity, has to employ a housekeeper to care for my daughter aged 2½. While I do not expect that the Chancellor intended to include persons in my circumstances, we have not been specifically excluded. As I receive an Income Tax allowance for my housekeeper, she is surely in a different category from private domestic service. But I feel that we are likely to be included with valets, gardeners, housemaids. etc., unless someone speaks up for us. At the moment my income as a clerical officer in the Civil Service is less than my expenses. So 12s. 6d. a week will be a real hardship to me. I have had a very worrying time lately and it is grossly unfair that I should have had this added anxiety. Life is quite difficult enough for widowers who are struggling to bring up a family."
  I have been in a somewhat similar position myself, except that I was much luckier than this man. His wife died and he was left with a daughter aged 21. The point is that successive Chancellors of all Governments have gone out of their way to make the circumstances a little more tolerable for a man in this situation. I know that the Chancellor will look sympathetically at this point. I am quite prepared to leave the matter there.
  The point is that there is an income tax allowance of £75 for people in this category. Unless exemption can be made for such cases, the result of the Selective Employment Tax is that about half the value of that allowance is taken away. I think that the House as a whole—I do not mean just one side of the House—would say to the Chancellor, having heard that letter, that this is something up with which we will not put, and we ask the Chancellor to find a way, perhaps along the lines which I suggested or perhaps in some other way, to get round these difficulties.
  The last question with which I want to deal is that of charities. What the Chief Secretary said worried me very much indeed. He said that the Chancellor intended to have discussions, and obviously that is right, although I feel that it would have been much easier if, from the beginning, as is traditional and has been for centuries in this country, charities had been exempted straight away from this tax. What I am unhappy about is the suggestion which seemed to
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  be in the Chief Secretary's speech that there would be some sort of discrimination between charities, and that we should have a selected list of charities—those which the Minister may approve and those which he may not approve. [HON. MEMBERS: "Hear, hear."] I am horrified that hon. Members on the other side of the House should approve that. Of course we all have our favourite charities. I have. Every hon. Member has. We all contribute, and I dare say most of us work for one, two or more charities. But it would not be tolerable to have a Minister of the Crown deciding about the charities of this country. One remembers the Nye Bevan phrase about priorities being the language of Socialism. I hope that no one will dare to use that phrase again unless the charity problem is cleared up swiftly and straight away.
  This is one of the reasons why I believe it to be vital that the Chancellor of the Exchequer should himself conduct the Ministry of Labour Bill. I will take a full part, of course, in discussions on the Bill, not because I am looking for work but because, as this is the central feature of the Budget, that clearly is the appropriate thing to do. The Chief Secretary said in answer to an intervention that he would look at all Amendments with the sympathy with which he always does. That is just our anxiety. I hope very much that, if we are to be told that our economy depends on hurting some of the people to whom the attention of the House has been drawn tonight, at least the Chancellor will shoulder the responsibility of decision for himself.
  It is comparatively rare—or was until recently—to divide the House on the Second Reading of the Finance Bill, yet I am in no doubt that that is the right course for us to take. It is not important, in the last resort, whether the Bill has been born of ignorance or of malice. What matters is that if unamended it will have disastrous effects for the whole quality of life in this country and for all our constituents. [HON. MEMBERS: "Nonsense."] We have already had a number of votes in this Parliament, and no doubt there will be many more. I am certain that there will never be one more fully justified than the one we shall cast tonight.
  11.32 p.m.
  The Chancellor of the Exchequer (Mr. James Callaghan): Before I proceed to deal with the right hon. Gentleman's speech—[HON. MEMBERS: "Oh."]—surely that is the object of a reply—I should like to echo what he said about the maiden speech of my hon. Friend the Member for Newport (Mr. Roy Hughes). I agreed with my hon. Friend about many things; but I thought that his superlatives about his local rugby side might be challenged on another day in another place. I also agreed with what the right hon. Member for Enfield, West (Mr. Iain Macleod) said about the very pleasant speeches of the hon. Member for Liverpool, Garston (Mr. Fortescue) and the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight). Women are rare enough in this Chamber, and we are delighted to see so powerful an addition to their ranks.
  The right hon. Gentleman got into a little trouble in talking about maiden speeches, and I should like to share some of his trouble with him. Speaking as someone who, like many other hon. Members, has been here for over 20 years, it seems to me that some new traditions are growing up. Indeed, there are three traditions of maiden speeches which hon. Members seem either to ignore or to observe. Two traditions which they observe are new, and one which they do not observe is old. The two traditions which seem now to be growing up are that one must always eulogise one's predecessor no matter how badly one thinks of him, and that one must say what a splendid place one's constituency is.
  As one ordinary hon. Member of the House, I would say that these were not traditions when I came into the House. I see no reason why we should build up traditions of this kind, which are quite needless. I am expressing my own opinion and not that of the Government. The tradition which is not being observed is that hon. Members should make a noncontroversial maiden speech. I do not think that that matters so much, except that most of us did not make controversial maiden speeches in our day—at least, I do not think I did—and it taxes to a certain degree those who have been here longer when controversial speeches are made. On the whole, this is a
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  pleasant innovation: I would much prefer to hear an hon. Member speaking his mind from the word "go" rather than making a non-controversial speech. I hope that the House will forgive my reflecting on the old traditions and the new ones which seem to be growing up.
  The debate today has been dominated by the Selective Employment Tax, and I am not surprised that it was. But before we consider that, there are one or two other matters to which I should refer because they have been brought up by hon. Members.
  There is, first, the voluntary programme which I announced in my Budget speech for restraining investment in the developed countries of the sterling area. This is not a welcome development of policy; but it is a necessary one. I wrote immediately after the Budget to the chairmen of more than 200 major companies which in the past have been concerned with direct investment in the countries to which I referred, and I invited their co-operation in carrying out the voluntary programme. So far I have received about 100 replies, and almost all of them promise the fullest co-operation in support of the programme. I thank those who have promised their support, and I assure them that I have read each letter.
  I wish in some ways that every hon. Member could see the kind of response I have been getting from the chairmen of companies to a policy which cannot be welcome to them but of which, nevertheless, they say, "We think it is necessary and, however unpalatable it may be, we will do our best to carry it out." It has been most encouraging to me, in my capacity as Chancellor of the Exchequer, to see the wealth of good will—whatever disposition there may be to disagree with the policy—that exists in trying to carry it out; and I am confident, in the light of the replies I have had, that we shall get a great deal of support from them.
  I expect that I shall be able to give reports from time to time to the House about the way in which the programme is going, and I shall certainly hope to do so. I appreciate the anxiety of companies investing overseas that the programme should be a temporary one. That would certainly be my intention, too, because I simply do not see that there is much profit in supporting a foreign policy and defence commitments all over the world

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  at the expense of earning our living in the world.
  As was pointed out by the hon. Member for South Angus (Mr. Bruce-Gardyne), Government overseas spending on defence and in support of our overseas policy has risen exceptionally during the last 10 years, and especially during the last six years. We use foreign exchange to support our overseas policy; and Government overseas spending must be brought into better relationship with our resources.
  I am glad to have at least some support from hon. Gentlemen opposite on this. But, like so many other things, it is all very well to say "Yes, we agree in general": one must agree in particular as well. How can we escape from commitments in Aden and how can we cut down overseas expenditure unless we in fact take these very painful decisions? It is for this reason, that I ask for the support of the House. These are practical alterations that must be made in our defence policy. They must be pushed through in the face of very great difficulties, overseas and at home on occasions; but we must go ahead with them.
  I was asked about my conversations, and those of the Government, with Chancellor Erhard. I do not think that it would be proper for me to go beyond what is in the communiqué. I can say, however, that we have agreed that the Minister of Finance, Dr. Dahlgrun, and I should meet. I have sent him an invitation to come to London immediately after Whitsun, as I am anxious to get on with this, and we shall be able to transfer the discussions elsewhere to set up a mixed commission to consider every aspect of the matter.
  I am looking for some means of supplementing the Offset Agreement. That Agreement, which was negotiated some years ago—and I make no party complaint about that—has been a source of irritation as much to the Germans as to ourselves. Their manufacturers complain that they are being required to buy—or that their customers are buying—British exports which they would not otherwise buy. We on our part are unable to say whether the exports which we are getting are in part in satisfaction of the Offset Agreement or are exports
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  which we would have made in any case. This is not a satisfactory way of carrying out these obligations and we are, therefore, trying to find other means of doing so.
  Chancellor Erhard has agreed that both parties should report back to their Governments by 15th September, and I hope to press ahead with these negotiations during the next few months.
  Mr. Bruce-Gardyne Mr. Bruce-Gardyne rose——
  Mr. Callaghan: I ought to push on as I have a great deal to say. I have dealt with the hon. Gentleman's observations rather fully.
  Mr. Bruce-Gardyne: I am most grateful to the right hon. Gentleman for giving way. Could he clear up one point? Is he expecting or hoping to get the full offset over the current financial year, or was he referring in his earlier statement to 1967-68? It is an important question.
  Mr. Callaghan: I prefer not to answer that question at this moment. It has not escaped my notice.
  In addition to the defence costs which we bear, there are the requests for foreign aid which continue to grow at a rapid rate. They are genuine and necessary requests. We should endeavour to meet them as far as we can; and yet, in our straitened balance of payments circumstances, it is extremely difficult for us to meet requests for aid which, I believe, the whole House would want us to meet in other circumstances. Our capacity to help must be strictly limited until we get our balance of payments right.
  We are constantly trying to secure an improving trade balance against a background of full employment. Full employment is the most difficult economic policy to follow, yet we are following it and we intend to continue to follow it, adjusting our measures in order to maintain it. The strains which it imposes are obvious, first, in relation to imports, because, when demand is high, imports are sucked in. Second, full employment imposes a strain on exports because products which might otherwise go abroad are kept in the home market. There is also the consequence that demands for increased wage are readily conceded in conditions of full employment. Indeed, employers may themselves

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  offer higher pay in order to attract and keep their labour force.
  Against that background we are struggling to solve the problems concerned with our trade balance, and the present situation in the docks—[Laughter.] I know the right hon. Member for Wolverhampton, South-West (Mr. Powell) takes this seriously. At least, I hoped that he took it seriously, but his inane laughter makes me begin to wonder. He has pointed out the dilemma here, and he, at least, is one of those who are honest about a solution. He believes that there should be substantial deflation and large-scale unemployment. [An HON. MEMBER: "He is not the only one."] I shall return to the question whether there are others. But that is, at least, a solution. The right hon. Gentleman is right: if we had large-scale unemployment in this country, we would at least release resources—whether they would go into exports or not is another question—and we should cut down the volume of imports. At least, I respect the right hon. Gentleman's intellectual integrity, if not his compassion.
  But we have to try to work a policy with which, I believe, a great many hon. Members opposite are in agreement as well as all my right hon. and hon. Friends. We have to try to work a policy under which we do not throw men and women out of work, but endeavour at the same time to earn our living in the world and so keep our balance of payments right. It is against this background that the present dispute, from which our attention has been diverted today, must be seen. It is clearly setting back the time when we shall be able to balance our payments.
  This is recognised on all sides. The dispute highlights the dilemma which we face. I can only say to the House, to those engaged in the dispute now, to those engaged in launching further wage claims and to those who may concede wage claims, that large wage increases in 1966 mean nothing but inflation. Unless this is understood, and not only understood but acted on, by all concerned, then other remedies—not other remedies; it will be another disease—will creep up on us in a way that not even the best intentions of the most able Government will be able to avert.
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  I want to put it quite clearly that full employment in this country means voluntary self-restraint in wage increases. There is no escape from that conclusion. If we do not have voluntary restraint in wage increases, in the end full employment will be the sufferer and men and women will be out of work. We cannot have full employment and a free-for-all in wages. If we have a free-for-all in wages we drive up industrial costs, we suck in imports, we divert exports and we get further into debt with other countries.
  We are still doing this despite the great improvement in 1965. Wages have risen much faster than production. Industry's costs are going up at the present time and its competitiveness is being reduced. Exports naturally suffer when competitiveness is reduced. It would be folly for the Government to bring pressure to bear on employers to concede large wage increases in 1966. It would spell nothing but inflation, and we should be breaking faith with the ordinary people of this country who know we are here because we do not wish to jeopardise full employment, because we wish to control inflation and because we want to see ordinary people in secure jobs living out their lives. It is for this reason—it is not merely an abstract "policy on prices and incomes"—that the Government have put their weight behind it. How shall we organise the structure of society today? This is the problem; and that is why the Government have to say that we cannot concede, nor can we encourage, large wage increases in present circumstances.
  There is another way, and the right hon. Member for Wolverhampton, South-West has told us what it is. This way is constantly being pressed upon me. There is hardly a day passes when I do not get advice from some quarter or another that I should so manipulate the economy as to create widespread disinflation and, therefore, unemployment. It is sometimes open; it is more usually whispered. I reject that advice. The Government have made their choice, and it is to stand firm on a policy of full employment and moderate wage increases and higher productivity. It is the basis for a healthy development of this country's economy.
  I do not ask, and the Government do not seek, restraint only on the part of

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  those who earn their incomes from wages. During 1965, because to some extent of the Government's policies, companies' profits turned down, and in the second half of the year they were about the same as a year earlier. There is also evidence that profit margins have been affected adversely by the rapid rise in wages. On the other hand, dividends have not fallen back. They have gone up, and gone up substantially. They have shown some very sharp increases. This is because of a rephasing of payments reflecting the change to Corporation Tax and designed to escape its consequences. Many people have endeavoured so to escape Corporation Tax. Hence, in the Finance Bill I have taken power to ensure that about £60 million which would otherwise have escaped the Revenue and which should properly have come into the Exchequer should now do so. So this is not a one-sided policy in any way.
  We introduced the Corporation Tax and the Capital Gains Tax because it was long recognised that the absence of Capital Gains Tax made possible a great deal of tax avoidance based on the conversion of taxable income into capital gains. Of course, it is in the interests of some hon. Members opposite to pretend that the Capital Gains Tax cannot be worked. They do not like it. But they do not care about the tax gatherer who is merely a convenient vehicle for their complaints.
  We say that if there is to be this kind of restraint on the part of incomes in order to maintain full employment, and if hon. Members opposite really want a policy like this to succeed, they should not be attacking the Capital Gains Tax in its present form.
  I take another illustration of this, the question of tax avoidance. It was raised today and I want to state the way in which we look at the problem of avoidance—and if it causes trouble among hon. Members opposite, so be it. What has happened in the past is that a particular form of avoidance has been detected and legislation introduced to stop it. Then the original legislation has had to be followed by a number of amending provisions year by year designed to close loopholes which the practitioners in these activities have discovered. A good deal of time, energy and money has been spent
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  on discovering loopholes in legislation about whose intention Parliament was quite clear. Until each successive loophole can be closed, large sums of money may be and sometimes are lost to the Exchequer.
  I do not think this is the way for Parliament to proceed. Nor is it fair to the many millions of taxpayers who cannot or will not avoid their liabilities in this way. I therefore wish to state that when Parliament has expressed a clear intention of putting an end to a particular form of avoidance, but that intention is put in danger of being frustrated because loopholes are discovered in the original legislation and exploited, I shall feel justified in proposing further legislation to the House which will be retrospective to the date from which the original legislation became operative. [Interruption.] We shall no doubt have an opportunity of debating this.
  Before we do debate it, I hope that hon. Members opposite will look up the policy of their own Government which, alas, they never carried out. The then Financial Secretary to the Treasury, Mr. Henry Brooke, said in December 1955 in relation to dividend stripping:
  "…if clever people should discover ways and means of getting round this legislation, which is squarely directed against dividend stripping, the Government will not hesitate to stop any such loophole by further legislation and to make such legislation retrospective."—[OFFICIAL REPORT, 13th December, 1955; Vol. 547, c. 1022.]
  We shall see the difference in the philosophies of the two sides of the House in that I shall certainly carry out the promise which the then Chancellor of the Exchequer did not despite the expressed intention. [Interruption.] The party opposite really must beware of the way it is going in many ways, because it will soon become known as the friend of the wealthy and of the tax dodgers.
  One of the major proposals by the hon. Lady the Member for Finchley (Mrs. Thatcher) today was that the first £1,000 of a wife's earnings should be free of Surtax. I must say that I thought it was rather an odd set of priorities to put forward at this time. It would, of course, go to married couples with a joint income of more than £5,000 a year. I quite accept that there could be a condition in which this country might eventually

  649
  arrive when it would be worth while for something of this sort to be done, but to select as one of the major priorities extending joint earned income relief and tax relief for domestic work seems to be very odd.
  The hon. Lady has indicated the reliefs which she herself would propose if she had the opportunity. The right hon. Member for Enfield, West indicated that he thought that at least some rates of tax were too high. I suppose that one could hold both views at the same time. I made a rough calculation of the hon. Lady's suggestions and I would put a figure of £75 million as the cost of the concessions she asked for. How we are at one and the same time to give concessions of that kind—it depends on how high she wants to put the earned income relief, and we would obviously have to discuss that, but I put a modest figure on it—and still reduce the rates of Corporation Tax and other taxes are matters about which no doubt we shall be enlightened during the course of the next few weeks.
  I listened to the right hon. Gentleman's speech. It was erudite; it was witty; it was thorough; it was well prepared; it had all the qualities of logic arid sentiment which go to hold the House of Commons. It was completely sterile and negative. He had not a single positive proposition to make. it was the epitome of the position of the Conservative Party at present—it can do nothing but attack what is put forward without being able to put anything positive in its place. I promise right hon. Gentlemen opposite—and I had 13 years of this—they will remain the Opposition until they put forward something positive.
  Of course, it was right and proper that the right hon. Gentleman should find the weaknesses of the tax and the difficulties in putting it forward. I am reminded of what Winston Churchill said—"Do not argue the difficulties; they will argue themselves". They have been well argued this afternoon. Many of them have been extremely well argued. A great many Committee points have been made. But nobody has said that, faced with the situation in which we are today, he would come forward with an alternative proposal for a different kind of tax. But nobody!
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  But this follows from the right hon. Gentleman's analysis. He said that I was being too optimistic—he thought that my estimates were on the optimistic side. I hope that he was wrong. I can say in passing that it certainly is not our intention to replace the temporary import charge. I mention that because I think that it is important that I should say so, having been asked the question.
  But it is necessary for the Opposition to indicate whether they believe that it was worth while, despite all the difficulties, which obviously anybody could foresee, to do this. What is their answer? Is it worth while trying to do this or not? [Interruption.] Out of the babble of voices, I did not get a clear reply.
  Mr. Ray Mawby: The last thing I wanted to do was to interrupt the right hon. Gentleman, but as he has asked the question so many times I think that I ought to answer. None of us on this side of the House and few hon. Members opposite, after the Chancellor's statement before the election, expected that he would ask for an increase in taxation of £300 million a year. That is the simple answer.
  Mr. Callaghan: That, I agree, is an alternative proposition, but it does not answer the major question which I am putting.
  Do the Opposition believe that it is worth while breaking fresh ground in order to broaden the tax base in this way? We have had no clear answer to that question. There will be other opportunities when they can make up their minds as to whether they want it unselective, more selective, or whether they want it at all, and I have no doubt that in due course we shall get the same sort of reply as we got on the Corporation Tax. The position is that here is a new instrument that does not fall severely upon the whole community. [HON. MEMBERS: "0h."] It is spread very thinly over a very wide range of services and industries.
  Let me give an example of what I mean. [Interruption.] I will show the hon. Gentleman whether I know what I am talking about by quoting figures. If one considers the burden of taxation at present on alcoholic drink, the tax as a percentage of consumption, excluding the

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  cost of distribution, is 62½ per cent. On tobacco, it is 76½ per cent.; on oil, which enters heavily into industrial costs, it is 58 per cent.; on matches and lighters, which are a separate Customs heading, it is 52 per cent. The Purchase Tax overall on average is l4½ per cent. This is as a percentage of consumption excluding distribution costs.
  If one now takes the general spread of this tax, and that is what I have been doing with these other taxes, 62½ per cent., 76½ per cent., 58 per cent., 52 per cent., and 14½ per cent., it comes out at around 3 per cent. on average. That will be the general level of the tax on services in this country. It is not additional. It is a separate range of taxation.
  Mr. Victor Goodhew (St. Albans)Mr. Victor Goodhew (St. Albans) rose——
  Mr. Callaghan: I know that the hon. Gentleman is a distinguished restaurateur, and he will be able to argue his case later, but not just now. I have no doubt that it was better to use a system of this sort rather than intensifying taxation in the particular areas that I mentioned with the consequences that would have flowed to industry in a very direct way.
  The second advantage of the Selective Employment Tax is the ease of collection. [HON. MEMBERS: "0h."] I thought that hon. Gentlemen were concerned about administration. Have they reached the giggling stage when they are ready to laugh, at anything? All afternoon I have been told that we must find simple administrative means of levying this tax. I warrant that even the collective wisdom of the other side could not find a simpler administrative means of doing it than this—collecting it through the insurance stamp.
  The third advantage of the Selective Employment Tax is that it is capable of very great variation and flexibility. It can be varied for regional purposes by means of inclusions and exclusions as the House believes right from year to year.
  It would be interesting to have a clear statement from the Opposition of what their objections are to this in principle. Do they have any? I believe that they do not, and if they do, then I will put my view against theirs—that the country
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  is not thinking or saying what they are saying in this House. This is a matter of opinion, and everyone is entitled to his own.
  This is a progressive tax. It is pretty clear that the more affluent members of society, in terms of family incomes, spend more on services. It is the case, and we have been able to show that it is the case, that the higher the income level the more is spent on services. Therefore, this is a truly progressive tax and it certainly satisfies those of us on this side of the House.
  There have been a number of proposals for exemption, but before I come to them, perhaps I should say a word about the question of appeals. The hon. Member for Finchley put the point and it was followed up by the right hon. Member for Enfield, West. I think he was a little off the mark in his belief that there are thousands of appeals a year to the Minister in cases where a man says that he is self-employed and so on. In fact there are about 200 cases a year, I am told, which go to the Minister. The right hon. Gentleman was also not right when he said that of course there would be no appeal to a judge. I understand that one or two appeals are made to the High Court: this is allowed for by the legislation.
  Mr. Quintin Hogg (St. Marylebone): He said that.
  Mr. Callaghan: I am reading what it says here; that there are one or two appeals. [Laughter.] Hon. Members do not imagine that I know, do they? It says:
  "one or two appeals are made to the High Court each year."
  I promise the right hon. Gentleman that I do not read everything in my speech, but I had better read this:
  "The legal distinction between employment and self-employment is generally dependent on whether there exists a contract of service, and a contract of service generally exists where the employer has the right to control the manner in which the employee works."
  I understand that it is in one or two of these cases where appeals are made. If someone puts the stamp on and if it is shown that the stamp is payable, they pay the tax. It is for that reason that exemption from the tax cannot be given at that stage.
  Mr. lain Macleod: I do not think the Chancellor has taken the whole of the point. Clearly figures in advance are useless as a guide because this situation has not arisen, and will not arise until 5th September this year. The point is that judgments in the past of what are matters of National Insurance are perfectly proper to be decided by the Minister of Pensions and National Insurance and by her chain of local officers. It is not proper—this is the submission we make to the Chancellor and ask him to look at—that taxation matters themselves should be decided in that way. Therefore, a special right of appeal should be provided.
  Mr. Callaghan: I really do not follow that argument. Appeals at the moment are made from the inspector of taxes to the general commissioners, a local body of worthy gentlemen selected for their eminence, and they decide the appeal. Local officers are at least a rough equivalent for this purpose. [HON. MEMBERS: "Oh!"]; Of course they are a rough equivalent. [HON. MEMBERS: "No."] I am taking the view that they are. We shall argue it later, but that is my view. Then, if there is an appeal from the general commisioners, it goes to the courts.
  Likewise, I understand, an appeal here can go to the courts; but what are we discussing? We are not discussing, as the general commissioners are, whether a Schedule D assessment should be in the sum of £5,000 or £15,000. We are discussing a very simple, narrow issue, which is what they will be concerned with, whether someone is liable to pay the National Insurance stamp or not. That is the question. This is an entirely different set of circumstances from those in which we bring in the panopoly of the commissioners.
  I come to the exemptions. I repeat what my right hon. Friend said about a number of proposals which have been put forward for exemptions. Of course, it is the simplest thing in the world to propose exemption from this tax. I quite understand that everybody has a good case for not paying it and no one wants to pay it. That is universally the view about all taxes at all times.
  This tax will raise £315 million this year arid £240 million in a full year.
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  Therefore, in considering any exemptions, I start from the budgetary point that revenue is needed for a number of purposes, which I shall specify at any time I am asked to do so. This is the beginning of the discussion whether there can be exemptions. I want to make the point clear. In the administrative machine as designed, everyone must pay the tax. That is the way in which it will be done for administrative simplicity. It is a matter for the House to decide in due course who shall be repaid or receive a premium.
  The right hon. Gentleman has expressed himself quite properly about this. He wanted to see the repayments side as well as the taxing side. In some ways, in the Government's mind these two things go together, but the taxing side is separate. I am raising £240 million net in a full year. The Opposition is entitled to vote against that if it wishes, but this is the taxing aspect of the Measure, which stands on its own. I am anxious to meet the right hon. Gentleman on this matter, as he knows from what my right hon. Friend the Leader of the House has said.
  Therefore, we have placed the Clause on the Selective Employment Tax at a strategic position in the Finance Bill, so that we shall reach it quite late on, and by that time I understand that the repayments Bill, the Ministry of Labour Bill, will have been published. It will certainly be published by the first day of the Committee stage of the Finance Bill. The House will be in possession of the facts before we reach the relevant Clause in the Finance Bill. There will be opportunity for discussion on Second Reading of the Ministry of Labour Bill, and it will be for my right hon. Friend the Leader of the House to say when we start the Committee stage.
  I now turn to particular cases, first, that of charities. Everyone has a feeling about charitable organisations, and this is not limited to one side of the House. I fully accept what the right hon. Gentleman said. One of the difficulties in introducing a tax of this sort is identifying the people concerned. As far as I can make out—we did this calculation a long time ago—there are over 100,000 charities, something like one for every 500 citizens. Many of them are very small, and not a very large number—a few thousand—are of a significant size where this tax might hit them. It is very difficult to track them

  655
  down and identify them. Indeed, I understand that in Scotland there is no process of registration of charities, and the law has never been codified.
  Charities range over a very wide field, varying from the kind of cases which the right hon. Gentleman and others have quoted. All sorts of charities are clearly registered as such and, therefore, must be regarded as such. I do not regard it as my responsibility, nor do I want to undertake the task, to judge between the relative social merits of any of these charities. Therefore, it is a case of all in or all out, as far as I can see, with all the implications that flow from that.
  Charities as a whole at present receive very substantial State aid. The Inland Revenue has given me a figure of £55 million of tax a year of which they are relieved. A great deal of this takes the form of seven-year covenants, by which people get Income Tax relief, and the House has agreed that they should get this Income Tax relief. [Interruption.] The Opposition are getting more atavistic with every week they pass in opposition. Very many hon. Members opposite took the view when they were in Government that it clearly is a relief to the charity from the general body of taxpayers that payments should be made in this way. Nobody—at any rate at a normal time of day—would try to argue against that proposition.
  I hope to meet the leading charities in the next week or so. I have asked them to come to see me because I am anxious to find a solution to this problem. We must try to find a way in which they can be recompensed. This is my view. [Interruption.] If hon. Members opposite had been here this afternoon they would have heard my right hon. Friend the Chief Secretary say that, and I repeat it. It is our intention to try to find away of recompensing them.
  Sir Arthur Vere Harvey: Did the Chancellor take into account when considering covenants that a charity like the Royal National Lifeboat Institution, in building without Government aid its vessels for saving life, must budget five or six years ahead to replace craft, that there is nothing to spare over and above the covenants that
  656
  it receives and that without these funds it would need a subvention from the Government?
  Mr. Callaghan: I appreciate that such a body budgets several years in advance. I am anxious not to prejudice any discussions that I shall have with such bodies. I have said that we shall certainly try to find ways and means of recompensing them for the payments they are making. Having said this, I think the House will accept that that is the intention which I shall try to carry out.
  Mr. Temple Mr. Temple rose——
  Mr. Callaghan: I am sorry, I must carry on.
  Mr. Speaker: Order. If the right hon. Gentleman does not give way, the hon. Member must resume his seat.
  Mr. Callaghan: There will be time to discuss this later. I know that the hon. Member is one of the team of thirteen appointed to follow us in the Finance Bill. My right hon. and hon. Friends and I are flattered. But the hon. Member will have many more opportunities.
  As regards hotels and tourism, a great deal of the criticism is misplaced. We clearly cannot put hotels or the tourist industry into a special category because of their export merits. The right hon. Gentleman and others who follow these matters will clearly understand that if we were to do so, we should immediately fall foul of the G.A.T.T. It simply is not possible to say that because an industry takes a large part in exporting, it can for that reason be put into a new category. That is the answer to other hon. Members, too.
  I must also point out, if the case is based on tourism and on the revenue that is got from the foreign tourists, that only about 10 per cent. of the hotel industry's trade is derived from tourism. Even if we were prepared to defy the G.A.T.T. and to say openly and flagrantly, as some hon. Members, apparently, would do, that we will exempt exporters, we would still be giving the premium to an industry 90 per cent. of whose turnover has no relation whatever to exports.
  As regards some of the retailing institutions, and especially the co-operatives, I accept what my hon. Friend the Member

  657
  for Bilston (Mr. Robert Edwards) said about the co-operative societies. They render a great service to ordinary working people. They have taken on a burden that some other institutions have not, namely, they have kept the burden of milk and bread retailing and delivery in a way that some other institutions have not. I have understanding for that position. The basis of this tax, however, is that retail services should be taxed, and it is impossible for me, therefore, to exclude the co-operative societies, whatever may be their other merits, from the tax. I thought it rather odd, in view of the attacks made on me about the cooperatives, to read the stirring letters in the Daily Telegraph saying that this was clearly a piece of class legislation against the public schools which I was introducing.
  As to pensioners and part-timers, all these matters can be reviewed, not this year, but as the tax proceeds. I cannot recommend any concessions on these matters this year. From the debate today, I am not sure yet how strong the economic case is. One cannot say, in one and the same breath, although some hon. Members contrive to do so, that it is impossible for the distributive industry to give up any labour, so great is the shortage, and that employers will discharge all their part-timers and pensioners unless this tax is removed. The two things do not run together. One of them is not true.
  In my view, there has been a great deal of exaggeration by hon. Members opposite of the consequences on employment of this tax. I have never claimed it will have a large effect; I simply do not believe it will have a large effect. Because 90 per cent. of part-timers are women we deliberately fixed the rate of tax at one-half that of men, unlike the National Insurance stamp, where the rates are much closer.
  As regards arts and theatres, in the case of those who are receiving grants from the Arts Council, then the Selective Employment Tax will be one of the matters which can be taken into account in considering the amount of the grant, and consideration will be given to that. But I cannot exempt any of these institutions from the tax. It must be paid. As regards other reliefs, for budgetary reasons I cannot see a way of recommending
  658
  any major concessions apart from those I have announced so far.
  Mr. Burden Mr. Burden rose——
  Mr. Callaghan: No. I have answered the hon. Member's point in relation to exporters and I would be glad if he would relieve me of the obligation to go further now.
  As regards the regions—and I conclude on this—I need only echo what has been said before, that the Selective Employment Tax must be seen against the whole range of Government measures designed to aid the regions of this country and to build up their economic strength. It is an armoury we can be proud of, and I believe myself that the country has accepted the Budget, and will accept the Finance Bill and its consequences, because they believe it is a new means of striking out in a different direction in an attempt to escape from the stagnation of the past.
  Mr. Edward Heath: The Chancellor has been dealing with specific exemptions, which are matters of policy, and we appreciate this, though we may disagree with him on the points he has made, but in view of the importance of this matter, which I am sure he appreciates as much as anybody, will he now give the House the assurance for which I asked, that he will handle the second Bill himself rather than leave it to the Minister of Labour, who is responsible for machinery and is not responsible for matters of policy with which the Chancellor has been dealing?
  Mr. Callaghan: The repayments and the premiums are the responsibility of the Minister of Labour. [HON. MEMBERS: "No. Rubbish."] The Bill is his Bill. [HON. MEMBERS: "No."} I was asked a question. I hope I shall be allowed to answer it even if hon. Members opposite do not like the answer. The Minister of Labour's Permanent Secretary is the accounting officer for his Bill. I cannot take responsibility for another Minister's accounting officer, as the right hon. Gentleman will know.
  But I certainly say this to the right hon. Gentleman, that either I or one of my hon. and right hon. Friends, one of the Treasury Ministers, will be on the Treasury Bench when the Minister of Labour

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  is introducing his Bill, and at all convenient stages during Committee. I certainly give that assurance to him, and if that helps him I promise him we shall be here as much as possible, but I cannot—constitutionally I cannot, as the right hon. Gentleman knows—take responsibility for the Bill. The Minister of Labour must do that.
  Mr. Heath: I am grateful for the assurance the right hon. Gentleman has given so far as it goes, but he will appreciate that the Committee will be in a difficulty on this point because the Minister of Labour is responsible administratively, of course, for handling the whole of this, but on the other hand the question of exemptions with which the Chancellor has been specifically dealing are policy matters for which the
  Chancellor is already taking full responsibility. Therefore, I do hope it will not be forgotten that the Committee will be bound to regard the Chancellor as settling these points of policy on exemptions. They are matters of policy for him. They are not administrative matters. They are policy matters.
  Mr. Callaghan: The right hon. Gentleman seems to forget that we have such a thing as Cabinet Government and Cabinet responsibility and that when one Minister speaks he speaks for the Government. He speaks for all of us, and when the Minister of Labour speaks he speaks for all of us.
  Question put, That the Bill be now read a Second time:—
  The House divided: Ayes 317, Noes 240.

  Division No. 16.]

  AYES

  [12.24 a.m.

  Abse, Leo

  Craddock, George (Bradford, S.)

  Galpern, Sir Myer

  Albu, Austen

  Crawshaw, Richard

  Gardner, A. J.

  Allaun, Frank (Salford, E.)

  Cronin, John

  Garrett, W. E.

  Alien, Scholefield

  Crosland, Rt. Hn. Anthony

  Garrow, Alex

  Anderson, Donald

  Crossman, Rt. Hn. Richard

  Ginsburg, David

  Archer, Peter

  Cullen, Mrs. Alice

  Gordon Walker, Rt. Hn. P. C.

  Armstrong, Ernest

  Davidson, Arthur (Accrington)

  Gourlay, Harry

  Ashley, Jack

  Davies, Dr. Ernest (Stretford)

  Gray, Dr. Hugh

  Atkins, Ronald (Preston, N.)

  Davies, G. Elfed (Rhondda, E.)

  Gregory, Arnold

  Atkinson, Norman (Tottenham)

  Davies, Ednyfed Hudson (Conway)

  Grey, Charles

  Bacon, Rt. Hn. Alice

  Davies, Harold (Leek)

  Griffiths, Rt. Hn. James (Llanelly)

  Bagier, Gordon A. T.

  Davies, Ifor (Gower)

  Gunter, Rt. Hn. R. J.

  Barnes, Michael

  Davies, Robert (Cambridge)

  Hale, Leslie (Oldham, W.)

  Barnett, Joel

  de Freitas, Sir Geoffrey

  Hamilton, James (Bothwell)

  Baxter, William

  Delargy, Hugh

  Hamilton, William (Fife, W.)

  Bellenger, Rt. Hn. F. J.

  Dell, Edmund

  Hamling, William

  Bence, Cyril

  Dempsey, James

  Hannan, William

  Benn, Rt. Hn. Anthony Wedgwood

  Dewar, Donald

  Harper, Joseph

  Bennett, James (G'gow, Bridgeton)

  Diamond, Rt. Hn. John

  Harrison, Walter (Wakefield)

  Bidwell, Sydney

  Dickens, James

  Haseldine, Norman

  Binns, John

  Dorg, Peter

  Hattersley, Roy

  Bishop, E. S.

  Donnelly, Desmond

  Hazell, Bert

  Blackburn, F.

  Driherg, Tom

  Healey, Rt. Hn. Denis

  Blenkinsop, Arthur

  Dunn, James A.

  Helfer, Eric S.

  Boardman, H.

  Dunnett, Jack

  Henig, Stanley

  Booth, Albert

  Dunwoody, Mrs. Gwyneth (Exeter)

  Herbison, Rt. Hn. Margaret

  Boston, Terence

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

  Hilton, W. S.

  Bottomley, Rt. Hn. Arthur

  Eadie, Alex

  Hooley, Frank

  Bowden, Rt. Hn. Herbert

  Edelman, Maurice

  Homer, John

  Boyden, James

  Edwards, Robert (Bilston)

  Houghton, Rt. Hn. Douglas

  Braddock, Mrs. E. M.

  Edwards, William (Merioneth)

  Howarth, Harry (Wellingborough)

  Bradley, Tom

  Ellis, John

  Howarth, Robert (Bolton, E.)

  Brooks, Edwin

  English, Michael

  Howell, Denis (Small Heath)

  Broughton, Dr. A. D. D.

  Ennals, David

  Howie, W.

  Brown, Rt. Hn. George (Belper)

  Ensor, David

  Hoy, James

  Brown, Hugh D. (G'gow, Provan

  Evans, Albert (Islington, S.W.)

  Hughes, Emrys (Ayrshire, S.)

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

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

  Hughes, Hector (Aberdeen, N.)

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

  Faulds, Andrew

  Hughes, Roy (Newport)

  Buchan, Norman

  Fernyhough, E.

  Hunter, Adam

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

  Fitch, Alan (Wigan)

  Hynd, John

  Butler, Herbert (Hackney, C.)

  Fitt, Gerald (Belfast, W.)

  Irvine, A. J. (Edge Hill)

  Butler, Mrs. Joyce (Wood Green)

  Fletcher, Raymond (Ilkeston)

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

  Callaghan, Rt. Hn. James

  Fletcher, Ted (Darlington)

  Janner, Sir Barnett

  Carmichael, Nell

  Floud, Bernard

  Jeger, George (Goole)

  Chapman, Donald

  Foley, Maurice

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

  Coe, Denis

  Foot, Michael (Ebbw Vale)

  Jenkins, Hugh (Putney)

  Coleman, Donald

  Ford, Ben

  Jenkins, Rt. Hn. Roy (Stechford)

  Concannon, J. D.

  Forrester, John

  Johnson, Carol (Lewisham, S.)

  Conran, Bernard

  Fowler, Gerry

  Jones, Dan (Burnley)

  Corbet, Mrs. Freda

  Fraser, John (Norwood)

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

  Collisins, Rt. Hn. Frank

  Fraser, Rt. Hn. Tom (Hamilton)

  Jones, J. Idwal (Wrexham)

  Judd, Frank

  Morris, Alfred (Wythenshawe)

  Sheldon, Robert

  Kelley, Richard

  Morris, John (Aberavon)

  Shinwell, Rt. Hn. E.

  Kenyon Clifford

  Moyle, Roland

  Shore, Peter (Stepney)

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

  Mulley, Rt. Hon. Frederick

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

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

  Murray, Albert

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

  Kerr, Russell (Feltham)

  Neal, Harold

  Silkin, S. C. (Dulwich)

  Ledger, Ron

  Newens, Stan

  Silverman, Julius (Aston)

  Lee, Rt. Hn. Frederick (Newton)

  Noel-Baker, Francis (Swindon)

  Slater, Joseph

  Lee, Miss Jennie (Cannock)

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

  Small, William

  Lee, Joan (Reading)

  Norwood, Christopher

  Snow, Julian

  Lestor, Miss Joan

  Oakes, Gordon

  Steele, Thomas (Dunbartonshire, W.)

  Lever, Harold (Cheetham)

  Ogden, Eric

  Stewart, Rt. Hn. Michael

  Lever, L. M. (Ardwick)

  O'Malley, Brian

  Stonehouse, John

  Lewis, Arthur (W. Ham, N.)

  Oram, Albert E.

  Strauss, Rt. Hn. G. R.

  Lewis, Ron (Carlisle)

  Orbach, Maurice

  Summerskill, Hn. Dr. Shirley

  Lipton, Marcus

  Oswald, Thomas

  Swain, Thomas

  Lomas, Kenneth

  Owen, Dr. David (Plymouth, S'tn)

  Swingler, Stephen

  Loughlin, Charles

  Owen, Will (Morpeth)

  Symonds, J. B.

  Luard, Evan

  Page, Derek (King's Lynn)

  Taverne, Dick

  Lyon, Alexander W. (York)

  Palmer, Arthur

  Thomas, George (Cardiff, W.)

  Lyons, Edward (Bradford, E.)

  Pannell, Rt. Hn. Charles

  Thomas, lorwerth (Rhondda, W.)

  McBride, Neil

  Park, Trevor

  Thomson, Rt. Hn. George

  McCann, John

  Parker, John (Dagenham)

  Thornton, Ernest

  MacColl, James

  Parkyn, Brian (Bedford)

  Thin, James

  MacDermot, Niall

  Pavitt, Laurence

  Tomney, Frank

  Macdonald, A. H.

  Pearson, Arthur (Pontypridd)

  Tuck, Raphael

  McGuire, Michael

  Urwin, T. W.

  McKay, Mrs. Margaret

  Pearl, Rt. Hn. Fred

  Varley, Eric G.

  Mackenzie, Gregor (Rutherglen)

  Pentland, Norman

  Wainwright, Edwin (Dearne Valley)

  Mackie, John

  Perry, Ernest G. (Battersea, S.)

  Walden, Brian (All Saints)

  Mackintosh, John P.

  Perry, George H. (Nottingham, S.)

  Walker, Harold (Doncaster)

  Maclennan, Robert

  Prentice, Rt. Hn. R. E.

  Wallace, George

  MacMillan, Malcolm (Western Isles)

  Price, Christopher (Perry Barr)

  Watkins, David (Consett)

  McMillan, Tom (Glasgow, C.)

  Price, J. T. (Westhoughton)

  Weitzman, David

  McNamara, J. Kevin

  Price, William (Rugby)

  Wellbeloved, James

  MacPherson, Malcolm

  Probert, Arthur

  Whitaker, Ben

  Mahon, Peter (Preston, S.)

  Pursey, Cmdr. Harry

  Whitlock, William

  Mahon, Simon (Bootle)

  Randall, Harry

  Wigg, Rt. Hn. George

  Mallalieu, E. L. (Brigg)

  Rankin, John

  Willey, Rt. Hn. Frederick

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

  Redhead, Edward

  Williams, Alan (Swansea, W.)

  Manuel, Archie

  Rees, Merlyn

  Williams, Alan Lee (Hornchurch)

  Mapp, Charles

  Reynolds, G. W.

  Williams, Mrs. Shirley (Hitchln)

  Marquand, David

  Rhodes, Geoffrey

  Willis, George (Edinburgh, E.)

  Marsh, Rt. Hn. Richard

  Richard, Ivor

  Wilson, Rt. Hn. Harold (Huyton)

  Mason, Roy

  Roberts, Goronwy (Caernarvon)

  Wilson, William (Coventry, S.)

  Maxwell, Robert

  Roberts, Gwilym (Bedfordshire, S.)

  Winnick, David

  Mayhew, Christopher

  Robertson, John (Paisley)

  Winterbottom, R. E.

  Mellish. Robert

  Robinson,Rt.Hn.Kenneth(St.Picias)

  Woodburn, Rt. Hn. A.

  Mendelson, J, J.

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

  Woof, Robert

  Mikarda, Ian

  Rodgers, William (Stockton)

  Wyatt, Woodrow

  Milian, Bruce

  Roebuck, Roy

  Yates, Victor

  Miller, Dr. M. S.

  Rogers, George

  Zilliacus, K.

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

  Rose, Paul

  Molloy, William

  Ross, Rt, Hn, William

  TELLERS FOR THE AYES:

  Moonman, Eric

  Rowlands, E. (Cardiff, N.)

  Mr. John Silkin and Mr. Lawson

  Morgan, Elysian (Cardiganshire)

  Ryan, John

  Shaw, Arnold (Ilford, S.)

  NOES

  Alison, Michael (Barkston Ash)

  Bromley-Davenport,Lt.Col.SirWalter

  Cunningham, Sir Knox

  Allason, James (Hemel Hempstead)

  Brown, Sir Edward (Bath)

  Currie, G. B. H.

  Astor, John

  Bruce-Gardyne, J.

  Dalkeith, Earl of

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

  Bryan, Paul

  Dance, James

  Awdry, Daniel

  Buchanan-Smith,Alick(Angus,N&M)

  Davidson,Janies(Aberdeenshire,W.)

  Baker, W. H. K.

  Buck, Antony (Colchester)

  d'Avigtior-Goldsmid, Sir Henry

  Balniel, Lord

  Bullus, Sir Eric

  Dean, Paul (Somerset, N.)

  Barber, Rt. Ho, Anthony

  Burden, F. A.

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

  Batsford, Brian

  Campbell, Gordon

  Dighy, Simon Wingfield

  Beamish, Col., Sir Tufton

  Carlisle, Mark

  Dodds-Parker, Douglas

  Bell, Ronald

  Carr, Rt. Hn. Robert

  Doughty, Charles

  Bennett, Dr. Reginald (Gos & Fhm)

  Channon, H. P. G.

  Douglas-Home, Rt. Hn. Sir Alec

  Berry, Hn. Anthony

  Chichester-Clark, R.

  Drayson, G. B.

  Bessell, Peter

  Clark, Henry

  du Cann, Rt. Hn. Edward

  Biffen, John

  Clegg, Walter

  Eden, Sir John

  Biggs-Davison, John

  Cooke, Robert

  Elliot, Capt. Walter (Carshalton)

  Birch, Rt. Hn. Nigel

  Cooper-Key, Sir Neill

  Errington, Sir Eric

  Blaker, Peter

  Cordle, John

  Eyre, Reginald

  Body, Richard

  Corfield, F. V.

  Farr, John

  Bossom, Sir Clive

  Costain, A. P.

  Fletcher-Cooke, Charles

  Boyd-Carpenter, Rt. Hn. John

  Craddock, Sir Beresford (Spelthorne)

  Forrest, George

  Boyle, Rt. Hn. Sir Edward

  Crawley, Aidan

  Fortescue, Tim

  Braine, Bernard

  Crosthwaite-Eyre, Col, Sir Oliver

  Foster, Sir John

  Brewis, John

  Crouch, David

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

  Brinton, Sir Tatton

  Crowder, F. P.

  Galbraith, Hn. T. G.

  662

  663

  Gibson-Watt, David

  Lambton, Viscount

  Prior, J. M. L.

  Gilmour, Ian (Norfolk, C.)

  Lancaster, Col. C. G.

  Quennell, Miss J. M.

  Gilmour, Sir John (Fife, E.)

  Langford-Holt, Sir John

  Ramsden, Rt. Hn. James

  Glover, Sir Douglas

  Legge-Bourke, Sir Harry

  Rawlinson, Rt. Hn. Sir Peter

  Glyn, Sir Richard

  Lewis, Kenneth (Rutland)

  Rees-Davies, W. R.

  Godber, Rt. Hn. J. B.

  Lloyd,RtHn.Geoffrey(Sut'nC'dfield)

  Renton, Rt. Hn. Sir David

  Goodhart, Philip

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

  Ridley, Hn. Nicholas

  Goodhew, Victor

  Lloyd, Rt. Hn. Selwyn (Wirral)

  Ridsdale, Julian

  Gower, Raymond

  Longden, Gilbert

  Rippon, Rt. Hn. Geoffrey

  Grant, Anthony

  Loveys, W. H.

  Rodgers, Sir John (Sevenoaks)

  Grant-Ferris, R.

  Lubbock, Eric

  Roots, William

  Grieve, Percy

  McAdden, Sir Stephen

  Rossi, Hugh (Hornsey)

  Gurden, Harold

  MacArthur, Ian

  Royle, Anthony

  Hall, John (Wycombe)

  Mackenzie,Alesdair(Ross&Crom'ty)

  Russell, Sir Ronald

  Hall-Davis, A. G. F.

  Maclean, Sir Fitzroy

  St. John-Stevas, Norman

  Hamilton, Marquess of (Fermanagh)

  Macleod, Rt. Hn. Iain

  Scott, Nicholas

  Hamilton, Michael (Salisbury)

  McMaster, Stanley

  Sharpies, Richard

  Harris, Frederic (Croydon, N.W.)

  Madden, Martin

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

  Harris, Reader (Heston)

  Maginnis, John E.

  Sinclair, Sir George

  Harrison, Brian (Maldon)

  Marples, Rt. Hn. Ernest

  Smith, John

  Harrison, Col. Sir Harwood (Eye)

  Mathew, Robert

  Stainton, Keith

  Harvey, Sir Arthur Vere

  Maude, Angus

  Steel, David (Roxburgh)

  Harvie Anderson, Miss

  Maudling, Rt. Hn. Reginald

  Summers, Sir Spencer

  Hastings, Stephen

  Mawby, Ray

  Talbot, John E.

  Hawkins, Paul

  Maxwell-Hyslop, R. J.

  Tapsell, Peter

  Heald, Rt. Hn. Sir Lionel

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

  Taylor, Sir Charles (Eastbourne)

  Heath, Rt. Hn. Edward

  Mills, Peter (Torrington)

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

  Heseltine, Michael

  Mills, Stratton (Belfast, N.)

  Taylor, Frank (Moss Side)

  Higgins, Terence L.

  Miscampbell, Norman

  Teeling, Sir William

  Hiley, Joseph

  Mitchell, David (Basingstoke)

  Temple, John M.

  Hill, J. E. B.

  Monro, Hector

  Thatcher, Mrs. Margaret

  Hobson, Rt. Hn. Sir John

  More, Jasper

  Thorpe, Jeremy

  Hogg, Rt. Hn. Quintin

  Morgan, W. G. (Denbigh)

  van Straubenzee, W. R.

  Holland, Philip

  Morrison, Charles (Devizes)

  Vaughan-Morgan, Rt. Hn. Sir John

  Hooson, Emlyn

  Mott-Radclyffe, Sir Charles

  Vickers, Dame Joan

  Horderm, Peter

  Munro-Lucas-Tooth, Sir Hugh

  Wainwright, Richard (Coins Valley)

  Homby, Richard

  Murton, Oscar

  Walker, Peter (Worcester)

  Howell, David (Guildford)

  Nabarro, Sir Gerald

  Walker-Smith, Rt. Hn. Sir Derek

  Hunt, John

  Nicholls, Sir Harmar

  Walters, Dennis

  Hutchison, Michael Clark

  Noble, Rt. Hn. Michael

  Ward, Dame Irene

  Iremonger, T. L.

  Nott, John

  Weatherill, Bernard

  Irvine, Bryant Codman (Rye)

  Onslow, Cranley

  Webster, David

  Jenkin, Patrick (Woodford)

  Orr, Capt. L. P. S.

  Wells, John (Maidstone)

  Jennings, J. C. (Burton)

  Orr-Ewing, Sir Ian

  Whitelaw, William

  Johnson Smith, G. (E. Grinstead)

  Osborn, John (Hallam)

  Wills, Sir Gerald (Bridgwater)

  Johnston, Russell (Inverness)

  Osborne, Sir Cyril (Louth)

  Wilson, Geoffrey (Truro)

  Jones, Arthur (Northants, s.)

  Page, Graham (Crosby)

  Winstanley, Dr. M. P.

  Jopling, Michael

  Page, John (Harrow, W.)

  Wolrige-Gordon, Patrick

  Joseph, Rt. Hn. Sir Keith

  Pearson, Sir Frank (Clitheroe)

  Wood, Rt. Hn. Richard

  Kaberry, Sir Donald

  Peel, John

  Woodnutt, Mark

  Kerby, Capt. Henry

  Percival, Ian

  Worsley, Marcus

  Kershaw, Anthony

  Peyton, John

  Wylie, N. R.

  King, Evelyn (Dorset, S.)

  Pike, Miss Mervyn

  Younger, Hn. George

  Kirk, Peter

  Pink, R. Bonner

  Kitson, Timothy

  Pounder, Rafton

  TELLERS FOR THE NOES:

  Knight, Mrs. Jill

  Powell, Rt. Hn. J. Enoch

  Mr. Pym and Mr. R. W. Elliott.

  Bill accordingly read a Second time and committed to a Committee of the whole House.
  Committee this day.

  ALEXANDRA PALACE
  12.36 a.m.
  Mrs. Joyce Butler: I beg to move,
  That this House regrets the transfer by the Minister of Housing and Local Government of control of the Alexandra Park and Palace from the Trust which has successfully administered it for 66 years to the Greater London Council when agreement had been reached among the local authorities concerned, including the Greater London Council, for a continuation of the Trust on a new basis of representation.
  I am very grateful for the opportunity of raising the subject of Alexandra Park and Palace. I understand that the circumstances in which I do so are quite unprecedented. It is a matter of particular interest to me, because the whole of the park and palace, with the exception of a very small part, is within my constituency. When people in Wood Green talk about "going to the palace", they mean Alexandra Palace and never think of the expression as having any other meaning.
  The background of the Motion has legal implications upon which I do not propose to touch. At the moment, the matter is before the courts, to decide whether or not the Minister was right in using Section 84 of the London Government Act instead of Section 81, and whether he had the power to take the action which he has taken under Section 84 in regard to Alexandra Park and Alexandra Palace. But it is important from other points of view.
  The history of the palace is that, about six years ago, the local authorities in the area subscribed to purchase the land and the buildings to prevent the land being built upon and to preserve it as an open space. A trust was formed and the local authorities which had subscribed appointed representatives to the trust. These local authorities were the Boroughs of Hornsey, Tottenham and Wood Green, which now comprise the new London Borough of Haringey, the Borough of Islington, which is part of the new London Borough of Islington, the Urban District Council of Friern Barnet, which is part of the new London Borough of Barnet, and the Middlesex County Council, which has, of course, been succeeded by the Greater London Council. Over this period, the trustees have administered
  666
  the park and palace in the interests of the general public, in an efficient way, and, perhaps even more important, on a self-sufficient basis.
  The participating local authorities have made a very small contribution towards the upkeep of the grounds and altogether from the authorities concerned, this did not amount to more than about £6,000 during the year. The trustees, with their administration of the building, have in the last year made a profit of £30,000, which they would have ploughed back into redevelopment. This has been their policy throughout their history; to make the building self-supporting, to make a profit and to put that profit back into redevelopment. They have done this successfully. The building was severely damaged during the last war but the great hall has been completely renovated and is now in considerable demand for exhibitions. It ranks with Earl's Court and Olympia for a great many exhibitions and shows and is constantly in use for this purpose.
  There is in the palace the finest banqueting suite in North London, with its own catering department. A number of members of the Government have sampled the catering when they have been guests at the Palace and will, I am sure, agree that it is first-class. It has a skating rink which is a great attraction for young people in the district and it has provided facilities for the Hornsey College of Art. There are many recreational facilities in the grounds and it is, of course, used as a park by people in the neighbourhood.
  All that was needed when the London Government Act came into operation was for new trustees to be appointed by the successor authorities. My hon. Friend the Joint Parliamentary Secretary will know that I have had considerable correspondence with him about this matter, as have many other people. We were anxious that a decision should be made so that the trustees could look and plan ahead, review the whole situation, and know exactly where they stood.
  My right hon. Friend the Minister of Housing and Local Government asked the local authorities concerned and the successor authorities for their views and then he asked them to get together and reach agreement about the new form of the trust, and this they did. There

  667
  was a certain amount of discussion, and, finally, agreement was reached on the basis that the Greater London Council should appoint 11 trustees and the successor boroughs should appoint 10, which gave the Greater London Council effective control of the trust.
  Agreement having been reached, and the Minister having been notified, everybody concerned was completely staggered when my right hon. Friend made a public announcement that he had decided to hand the park and palace over to the Greater London Council. It was a great blow to all concerned and I think I am right in saying that we still do not know the reason why this was done.
  Some of the reasons given by the Minister do not appear on examination to be valid. He said that he wanted the park and the palace to be enjoyed by large numbers of people in the whole of the London area, and it is recognised that for a great many people this will be an attraction. But there is no reason why a continuation of the trust on a new basis could not have done this in the same way as the Greater London Council could. The Minister said that it needed vast sums of money spent on it. But these vast sums can now come from only one source. They could come, as the trustees have raised them, from making the enterprise self-supporting, or they could come from the rates.
  Presumably, the object of handing the park and palace over to the Greater London Council is that the Greater London Council will be able to raise the rates in order to produce the money. But this could have been done equally well if the trustees had remained in control. This was why the agreement reached about the new trustees gave the Greater London Council a majority share of trustees, it being recognised that there would be additional finance and additional power needed. The Greater London Council was, therefore, given majority control.
  It is difficult, therefore, to understand why this action was taken. I have not yet heard any satisfactory explanation. The fact remains that it has gravely disturbed the good relations which had been reached between the local authorities concerned, and this is a matter of some importance. Hon. Members may be wondering why there is this controversy
  668
  as to whether there should be a continuation of the trust, with the Greater London Council having a majority, or whether Alexandra Park and Alexandra Palace should go over to the Greater London Council completely.
  Agreement having been reached, it should have been honoured by the Minister. Not to have done so makes the Greater London Council appear somewhat in the guise of "big brother", which is quite unwarranted because the Greater London Council has always maintained that the trust should be continued, and wished to do so, and it also makes the Minister appear somewhat dictatorial.
  The second matter which, to my mind, is very important is the question of the money which is to be found for the rehabilitation of the palace. No decision has yet been taken as to what the future of Alexandra Palace is to be. The trustees had intended, when reconstituted, to carry out a review of the position of the park and palace in relation to the needs of London as a whole and, in particular, in relation to the Lea Valley scheme, which is very close and, obviously, must have some bearing on what one does with the palace in the future.
  It is necessary to decide how much should be spent on a building of this kind. Should it be completely pulled down and rebuilt? That would be an enormous expense, but it is one possibility. Should it be used extensively for education purposes or for youth purposes? Whatever the decision, a great deal of time and thought has to be given to it, and who better to do this than trustees reconstituted on the basis suggested by the agreement?
  If large sums of money are to be spent, and if these are to come from the rates, this, also, is a most important question. We are all very concerned today about the burden of rates on the community. The fact that, hitherto, the trust has stood on its own feet, independent of the rates to a very large extent, is a most important consideration. If, as we are now told, the money is to come flowing in from the pockets of the ratepayers, we should be told why it has been arranged in this way. What is the purpose to be, what is to happen to the palace, and how much is likely to be involved?

  669
  The third point I stress is that in Alexandra Park and Alexandra Palace, as administered by the trust, we had something quite unique. We had a unique combination of municipal and business enterprise, with appointees of a local authority working quite independently of the authority on a business basis and making a success of it. When we are considering, as we are today, all kinds of recreational schemes, we ought not to have to choose between recreational schemes provided by private enterprise on a profit-making basis and those provided by local authorities on a non-profit making basis. We ought to be able to have experiments with other ways of doing things. I submit that the park and palace trustees were such an alternative, and, if only for this reason, they should have been kept in being. They provided a very interesting pattern which, with modifications to suit local circumstances, might well have been copied in other places for similar purposes.
  I therefore very much regret, as my Motion indicates, that the Minister has seen fit, for reasons which are not clear to me or to many other people, to end the life of the trust in this abrupt way with no prior warning to the local authorities concerned and to hand the property over to the Greater London Council to administer. I trust that the House will support my Motion.
  12.52 a.m.
  Mr. Hugh Rossi: I find myself in a very strange situation in that, a new Member on this side of the House, I am about to support a Minister on the other side of the House from an attack from his rear.
  I have listened with great attention to all that the hon. Lady the Member for Wood Green (Mrs. Joyce Butler) has said, and I must take issue with her on a number of points. I have the deepest interest in Alexandra Palace and the trust because my constituency neighbours on the area of the park, which is also the playground for my constituency. Indeed, it was at the instigation of a former member of the then Urban District Council of Hornsey that the trust came into being. In 1900, a very public-spirited gentleman named Henry Burt discovered that the area of the palace was about to be acquired by developers.
  670
  He stepped in very energetically and prevented that from happening, getting the whole of his council behind him and persuading the neighbouring councils to take part in a joint effort to preserve the palace and its grounds as an area of recreation for the citizens of the district. So the trust was formed.
  I cannot agree that the trust has been an unqualified success since its inception. In fact, it consistently lost money and was a "white elephant" up to about 1961. Then, with a new policy on the part of the trustees, who began to let out the palace for exhibition purposes, it began to show a modest profit in relation to the terms of the capital investment that one must regard the land and buildings as representing. Last year, £55,000 had to be spent on ordinary maintenance, running repairs, renewing lighting and electric wiring, and tarmacing roadways and terraces. Still there is a bill of some £40,000 to be met in the very near future to preserve the external walls of this ancient building, which is in great danger of decay.
  The question has been raised of the possible future of the palace. One suggestion is that it should be pulled down and replaced by something else. That is a widely held view among people who know the building well and know what is represented in the future cost of maintenance of a very large, uneconomic and decaying building. One has heard sums of about £400,000 to £500,000 quoted for the purpose of doing something really worth while with this wonderful site in North London. We then, of course, turn to the question of payment.
  The ratepayers of the area would not welcome having to foot any part of the enormous bill with which they are bound to be faced if the immediate local authorities are to take on the responsibility of managing and developing this site as it should be developed. There is great merit to be seen in the transfer of the palace to the G.L.C., because thereby the burden on the ratepayers would be much more widely spread.
  In any event, by its situation and its character, the palace, with its park, is obviously something that does not belong to the immediate local authorities. It belongs to Greater London as a whole. It is to the north of the river what

  671
  the Crystal Palace is to the south of the river, and we have seen what the old L.C.C. and now the G.L.C. have been able to do through their resources and "know-how" with the Crystal Palace.
  This is what we in North London would wish to see being done with Alexandra Palace. Frankly, as good and devoted as the trustees of the past may have been—and all credit to them for their work and the way they have managed this place despite the tremendous difficulties and the odds against them—their resources are nowhere near those needed to develop this place as it should be developed.
  One has every confidence in the G.L.C., through its Parks Committee. One sees also the way it looks after nearby Ken Wood as a cultural and recreational centre. One has confidence that the G.L.C. will be able to deal with Alexandra Palace in a way that it should be dealt with to the betterment and for the benefit of the people of North London.
  I take issue with the hon. Lady on the suggestion that one is regarding and trying to create the G.L.C. as a "big brother" merely by promoting its cause as far as Alexandra Palace is concerned. I was amongst those who resented and opposed the attempt by some sections of the G.L.C. to take back certain powers over the children's service a little while ago—powers given by the London Government Act to the boroughs. I would deplore it if the G.L.C., in due course, did not give its housing estates to the boroughs, as it is obliged to do under the Act. I would deplore it if the organisation of education in the Inner London area did not in due course go to the boroughs. But even though I think in that way on those matters, I still see considerable merit in the park and Alexandra Palace going to the Greater London Council and being dealt with in a way similar to that for Ken Wood and Crystal Palace.
  Much criticism has been made of the way in which the Minister has dealt with this matter. I know that he does not need me to defend his action. It would be wrong of me to comment on the way in which he has operated Section 84 and he knows that in the past I have regretted some of the ways in which
  672
  he has operated or failed to operate Section 84 in connection with a differential rate. I have put questions on the subject and, to say the least—and I put it no higher than this—the Minister's attitude to this Section has been a little curious. But in this case whether he has gone about it in the right way is not my concern, for the result is right and it is to be welcomed.
  1.2 a.m.
  Mr. Norman Atkinson: The hon. Member for Homsey (Mr. Rossi) has somewhat missed the point. It is not a question whether the local authorities or the G.L.C. will participate in or put money into this venture. It is a matter of trying to preserve local representation on the expected set-up for Alexandra Palace in future. The argument is whether Haringey should have much more responsibility and representation on the new authority for the future administration of Alexandra Park. The issue is whether there can be adequate representation of local authorities surrounding the palace.
  I support the compliment of my hon. Friend the Member for Wood Green (Mrs. Joyce Butler) on the work done, especially since 1961, by the trustees and the old management. Tribute must be paid to the people who put in a tremendous amount of voluntary work into making this a self-supporting venture, which is greatly appreciated by my constituents who often use the facilities provided in the park.
  The most outstanding feature of the palace and the park is the park facilities offered to my constituents. There are magnificent panoramic views if one is able to get to the top of the park and no doubt people enjoy a little racing in the sunshine from time to time, but the important thing is that there is this oasis in North London and it has been appreciated in that way, in later times especially for the amenities in the palace itself, the hall, and so on. It has often been regarded as a co-operative venture, even though it has continued to be organised by a group of trustees.
  I ask the Minister to recognise the relationship between the planning of the Lea Valley and any possible duplication in ideas which may be considered for the future of Alexandra Palace. I support

  673
  what my hon. Friend said about duality, an important consideration when thinking about the whole parkland and the pleasure amenities for North London, something which we have to consider as a whole. Most of my constituents would like to feel that there is a great future for the development of the palace and its surrounding parkland. I hope that we can look forward, not to great expansion in terms of what is already there, but on the basis of the open space offering more opportunities to the people in the area.
  I welcome the fact that local authorities in the area will be able to give their resources, such as their park departments, to the venture, adding to the delightful work already being done there. We recognise that this is a milestone in the history of the palace. It is not something which will change the direction of the amenities, but something equally revolutionary. We can look forward to an adventurous, exciting, future, and one that is going to give tremendous benefit to the people of North London.
  1.6 a.m.
  Mr. Patrick Jenkin: I rise to say a few words on the Motion moved by the hon. Lady the Member for Wood Green (Mrs. Joyce Butler) and in support of the remarks of my hon. Friend the Member for Hornsey (Mr. Rossi), in whose constituency I live. It is on that ground that I feel justified in saying a word or two. I might also plead in aid the fact that on a clear day one can stand on the terrace of Alexandra Palace and look across the whole of my constituency, from north to south.
  It is quite right that the palace should be recognised for what it is—an asset serving the whole of the north and west of Greater London—and right that it should be placed under the control of the Greater London Council. Only a few weeks ago I stood in this House and made some critical remarks about the policy of the G.L.C. on a number of matters. This is essentially a selective intervention, and one must make qualitative judgments as to what an authority like the Greater London Council should look after and what it ought not. I talked about some of the things which it ought not to do, but on this occasion I believe that this is one of those functions
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  which the Greater London Council should take over.
  I agree that the trustees have struggled long and manfully against considerable odds. No one who has spent, as I have, a good many hours wandering round the building of the palace, could regard the existing building on the top of the hill as of any great value. I agree with the hon. Member for Tottenham (Mr. Atkinson) that it is the grounds and the view which ought to be dealt with, because that is the asset of the area. As one goes further round the building one realises what a real monstrosity it is. By contemporary standards it is hideously ugly.
  Whenever I have attended functions at the palace—and I agree that the catering is very good—I have the impression that it is like a dowager duchess, rather down-at-heel, struggling to keep up appearances, as her house falls down around her head for want of maintenance. It is a little oasis in what is otherwise a poor and rather dingy affair.
  This is a building which must be replaced with something more attuned to the requirements of the last third of the 20th century and the beginning of the 21st century. With my hon. Friend the Member for Hornsey I believe that it is right that the Greater London Council should do this. I would have rather greater faith in a body such as Haringey Council having a greater say in this if that council, and I am a ratepayer in the authority's area, had shown itself more ready to recognise the rights of minorities.
  I was horrified to read the other day—this is relevant to this debate—that the Labour majority on Haringey Council had put its nominees in every one of the places it nominates for the old people's welfare council of the borough. An authority which behaves like that is not fit to be trusted with an asset like Alexandra Park and Alexandra Palace which is to serve people of all parties, creeds, colours and beliefs in this part of London. I hope that the Minister will not yield to the blandishments of his hon. Friend, but will stick to the Order and that the park and the palace will come into the control of the Greater London Council.
  1.11 a.m.
  The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish): In debating this Order tonight four hon. Members have spoken, three in favour of the Order from either side of the House and only one against, my hon. Friend the Member for Wood Green (Mrs. Joyce Butler).
  In reply to her statements I ought to begin by giving the House a description of Alexandra Park and Alexandra Palace and some account of its history. It covers about 200 acres and it is now in the London Borough of Haringey. Most of it is in the constituency of my hon. Friend the Member for Wood Green. The building itself is enormous and covers 7½ acres. The eastern part is occupied by the B.B.C. The western part has a roller skating rink and a banqueting suite let out for functions. In the middle is the great hall used for the summer show of the National Rose Society and other exhibitions. There is a racecourse in the park which is let to Pratts on a lease expiring this year.
  Between 1875 and 1900 the park had a chequered history. It was derelict and up for sale as building land when a group of local authorities in the area decided to buy it and run it for public use through a body of trustees appointed by them. They obtained Private Act powers in 1900 and this Act was later added to by others. The original idea was that the local authorities which had found money for the purchase were entitled to appoint one trustee for every £7,000 they had contributed, but two authorities which did not qualify by this test were allowed to appoint one trustee each. The latest position was that the 21 trustees were appointed by Middlesex County Council, the Borough Councils of Hornsey, Wood Green, Islington, and Tottenham, and Friern Barnet Urban District Council.
  Following London government reorganisation under the Act of 1963, Middlesex County Council was wound up and nearly all the county came into Greater London. Hornsey, Wood Green and Tottenham went into Haringey, the old Borough of Islington into the new London Borough of Islington, and Friern Barnet into the London Borough of Barnet. Clearly, something had to be done about the administration in view of
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  these changes. The trustees could not carry on in a vacuum, their appointing councils having disappeared. Moreover, there was no doubt that the whole undertaking was in a desperately rundown condition. For years its maintenance and development had been crippled by lack of resources. The income of the trustees was only enough to meet current expenses, leaving practically nothing over for essential improvements.
  I am the first to join with those who have paid tribute to the work the trustees have done. They were a fine body of public-spirited men and women who did an excellent job. Nevertheless, the income from tenants and from functions was inadequate and the councils concerned had to come to the rescue from time to time. Most of this help came from Middlesex County Council, but it was not sufficient to do more than to meet current liabilities. The hon. Member for Hornsey (Mr. Rossi) referred to the deficit up to 1961. I want to put it on record, as it was not by my hon. Friend the Member for Wood Green, that the deficits had to be met by someone, and that was the Middlesex County Council. The council could, however, do no more than meet current liabilities,
  Describing how the place was slowly dying, the planning correspondent of The Guardian recently wrote that the park was shabby, with yards of rusty fencing that children had climbed over or cut through, and that in the spinneys there were lumps of concrete, and lengths of old piping. The entrance to the children's playground was a quagmire, and the banks of the lake were rotting away. The trustees themselves estimated at the beginning of this year that £440,000 was required to be spent on capital works.
  I shall not weary the House with the full account of the consultations which my right hon. Friend the Minister of Housing and Local Government has had with local authorities. They started in January, 1965, and after a whole year they were still unresolved. My right hon. Friend made clear from the beginning what the alternatives were. The first was to abolish the trustees and vest the park in a single authority, either the Greater London Council or the Haringey Borough Council. The second was to do no more than to amend the trust, by

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  altering the names of the authorities appointing the trustees and adjusting the number of trustees appointed by each of them.
  In June, 1965, the Minister impressed on the authorities the need for the future organisation to have adequate resources and sufficient experience to carry on the undertaking efficiently, and to provide imaginatively for future needs. He mentioned that the G.L.C. was prepared to take over responsibility, and that he would be content with this arrangement. If the authorities still preferred a scheme of joint administration, they were asked to tell tie Department as soon as possible what sort of contribution they would make towards the operation of the park.
  By January this year, all the authorities concerned had expressed themselves content with an amended Trust, but there was not full agreement about its constitution, and the only specific figure put forward as a financial contribution was Barnet's suggestion of a maximum of £100 per annum. As I said earlier, the trustees said that £440,000 was needed, arid we were offered £100 per annum by Barnet.
  In February, my right hon. Friend decided that matters must be brought to a head, and announced his decision to vest the undertaking in the Greater London Council. There are several reasons for this decision. First, the London Government Act, 1963, gave the Greater London Council responsibility for major entertainment, parks and open spaces, and it gave the borough councils responsibility for providing local parks and open spaces. It is clear to anyone who knows this area that Alexandra Palace should be an asset for the whole of Greater London.
  There should be nothing parochial about this part of London. It is for all London, and the very best that can be provided must be provided for all London, not just for a few people. This new arrangement will allow capital resources to be provided on the right scale, for the Greater London Council has great financial strength and will spread the cost over the whole of Greater London. If the trust went on, only the G.L.C. would be able to spread its contribution
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  in this way, and the rest of the load would have to be borne by the local ratepayers. I repeat, so that there shall be no misunderstanding, that the rest of the load would have to be borne by the local ratepayers, and I repeat the figure of £440,000 mentioned by the trustees as a minimum. I wish to make that clear, so that if the local Press print anything of this speech they will print that part.
  The third point about the Minister's decision was that it makes for simple and effective administration and, at the same time, allows local interests to be represented. The Greater London Council has already stated that it will co-opt representatives from Haringey, Barnet and Islington—in which you may be interested, Mr. Deputy Speaker. It will co-opt those representatives on to a special committee, a separate committee of the Greater London Council which will be run for this park. I gather that it may even call it the Alexandra Park and Palace Committee. The representatives of the local authorities concerned will be on the committee.
  Under the existing Private Acts the powers of the trustees are limited. Under the London Government Act, 1963, the Minister could not overcome the restrictions while leaving the trust in being, and the trustees would need to secure additional powers by Private Acts. The Greater London Council, on the other hand, has general management powers which it can apply to the park. I will not refer to anything that has been happening recently in the courts except to say that I understand that the Greater London Council and the trustees have reached agreement about the running of the park until the action is heard. We shall hear more of this, no doubt, in due course.
  The House is concerned only with the merits of the Order, and on this there can hardly be any doubts. So far as I know, there has been no public criticism of my right hon Friend's decision, except from interested parties. I hope sincerely that it will be borne in mind that what we are talking about is not the interests of the few, but the interests of the majority and the interests of those who have to run this great asset for the benefit of the majority.

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  If I understood his speech aright, my hon. Friend the Member for Tottenham (Mr. Atkinson) supports what we are doing. He asked, properly, what is to be the future. There can be no future without finance. Let us get that clear from the beginning. How the park and palace will be run, how the money will be spent, on what purpose and in what way, are, I think, matters for the new committee which will be established under the auspices of the Greater London Council, upon which the local authorities will be fully and adequately represented. I am confident that that committee will take into account what sort of asset this is, because I have spoken to the people in the Greater London Council who are concerned in this matter.
  I am confident that as the years go by we shall see that the decision was a very wise one, and I ask the House to show its approval of what we are doing by rejecting my hon. Friend's Motion.
  Question put and negatived.

  RAILWAYS, RENFREWSHIRE (CLOSURES)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. R. W. Brown.]
  1.23 a.m.
  Mr. Norman Buchan: I wish to raise the question of certain rail closures which are pending in Renfrewshire, and especially the stations of Lochwinnoch, Kilbarchan and Milliken Park. I thank my hon. Friend the Joint Parliamentary Secretary for his unfailing courtesy to me on this question in the past and for being present at this late hour.
  A large number of stations in Renfrewshire were scheduled for closure in the past, and they were not closed. We are very pleased about this, but certain exceptions were made and some closures have taken place and others are pending. They are taking place against a triple background.
  First, there is the question of development in Renfrewshire. Hearings are taking place this week to discuss the future development of Renfrewshire, involving new towns and new industries. These future projects have to be kept in mind
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  when considering the situation. All this involves the question of an integrated transport system. Therefore, this is the wrong time to be closing any stations in this area in Renfrewshire.
  Secondly, the situation has to be considered against the background of the whole complex and difficult problem of Glasgow and the industrial conurbation of the Clyde Valley. Renfrewshire is involved in a Glasgow transportation study which is now in progress. For this reason, too, therefore, this is the wrong time to proceed with these closures.
  Thirdly, the situation has to be examined against the background of the policy statement of my right hon. Friend the Minister of Transport. We were told that there would be no closures unless new enterprising and imaginative ways of keeping the line open had been tried and failed. I do not know what has been tried in terms of these stations. There has been nothing new or imaginative so far. We were told also that closures would not be allowed which would interfere with planning or would cause social or economic damage. One recognises the social, economic and planning problems which closures cause. They would not agree to the closure of lines just because they did not meet certain profit margins.
  This, of course, has been the basis of the main arguments put forward by British Railways for the closures. We are, therefore, dealing with a situation in which, in the words of the Minister of Transport in the House on 18th May,
  "we are dealing with a railway system which has certain irremovable social obligations to the community…—[OFFICIAL REPORT, 18th May, 1966; Vol. 728, c. 1355.]
  It is those social obligations with which I am concerned.
  In the first case—for I am dividing it into two—I take the loop line through the villages of Kilbarchan and Lochwinnoch and through the Ayrshire village of Kilbirnie. While that is not in my constituency I should say that I have consulted very closely my hon. Friend the Member for Central Ayrshire (Mr. Manuel) on the problem of Kilbirnie, and it is closely tied up with any comments I may wish to make about Lochwinnoch and Kilbarchan. In this case the main argument which has been adduced has been the cost of maintaining

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  the loop line. A figure of £115,000 has been quoted to me earlier by British Railways as the cost, but I have heard a possible figure of £70,000 mentioned. Indeed, the cost appears to be rising as pressure against the closure is maintained, but it would now appear that these figures are in any case irrelevant because we have heard that the line is to be retained for freight traffic.
  Is this the case? Because if the line is to be retained for freight traffic the main argument for closure based on cost goes, because the main argument was the cost not of the station but of maintaining the line. I want an answer particularly to that question. These stations have not so far closed. If they are to remain for freight traffic I can see no reason for their not being operated for passenger traffic, too, because we should not then be involved in major cost, and, indeed, we would be saved the £3,000 estimated cost of reopening the substitute station at Lochside. Therefore, both there and at Kilbarchan there is opportunity of fulfilling the obligations advocated by the Minister of Transport.
  Certainly, the proposed alternative of a bus to Lochwinnoch and only two commuter trains in the morning and evening do not meet the needs of this community. There has been a grave suspicion on the part of many people in the past—I am not blaming the present Government for this—that the services have been allowed to deteriorate so as to pave the way for closure. I believe that the right and positive policy would be to reopen increased passenger traffic and freight traffic from both Lochwinnoch and Killarchan.
  At any rate, the alternatives proposed are inadequate. From conversations I have had there is no doubt about that. The proposed future development of Lochwinnoch should be brought into consideration, the possibility of a new town being built there and in Killarchan. The question of the nature of the village and its unsuitability, as anyone who knows the village will agree, for increased bus traffic through that narrow and very beautiful street.
  In this connection, the proposed alternative here of a bus on to Johnstone is just not "on". The idea that people will take a through bus all the way to
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  Paisley and Glasgow and not take a train is just not "on". By the closing already of Milliken Park station we have pushed many people to walk down to Kilbarchan station as an alternative, and we are proposing to close Kilbarchan. So the two examples I am using appear to be very closely linked, and what we are now proposing is to close, also, the alternative which people have been using.
  I should like to quote a letter from a lady representing an organisation there. She writes:
  "In conclusion, I would add that during December of last year I approached British Railways in Glasgow with a view to our 'Rural' having their annual outing by train, and asking suggestions of different places they could offer to take us, but was regretfully told this could not be done.
  About four or five weeks ago I received through the post a circular from British Railways suggesting it was better and more economical if we were arranging an outing to go by rail."
  That is typical of the reaction of the villagers there.
  It is worth pointing out that the Kilbarchan receipts have risen between February, 1964, and March of this year by 40 per cent., from 872 to 1,352 per month. There was a rapid jump in the last month from 1,107 to 1,352, which shows the effect of the existing closure of Milliken Park.
  I do not think that the line should close, but, if it does, the alternatives are quite inadequate and unimaginative. In closing Milliken Park, it is clear that British Railways have made a mistake. In the letters that I have received from British Railways and even from the Ministry of Transport, there are indications that there is a suspicion in their minds that such a mistake has occurred. The line is in use. It is a fairly busy line, and it runs right alongside a new housing scheme at Little Corseford. It would be an ideal situation for a new station if none existed.
  The receipts are quite extraordinary. I have not seen such a dramatic increase anywhere. There were 179 tickets issued at Milliken Park in February, 1964, and there were 1,232 issued in March, 1966. That represents an eightfold increase, and there has been a threefold increase in the number of season tickets issued. The reason for that is the housing scheme that has gone on alongside it, but that

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  is only about two-thirds occupied. Out of 650 houses, only 400 are at present occupied. A third of the scheme still has to go up, which will mean a further addition to the already dramatic increase in the number of passengers carried. On top of that, within 10 or 15 minutes' walking distance from Milliken Park there is to be a new housing scheme at Spateston. That will comprise 1,000 houses, and three-quarters of the occupants of them will be Glasgow commuters.
  Receipts are eight times up, with a quarter of the Spateston and Little Corseford schemes completed, making an annual passenger number of 15,000. That number has risen from 2,000 in a year, and it is reasonable to expect that it will grow to about 50,000 by 1969-70. From my discussions with British Railways, I should have thought that that was a satisfactory number, even on the basis of their economic costings.
  There is no case for this closure to take place, and I do not want British Railways to have to suffer the costs that would be occasioned by closing and then reopening it when they eventually see their error. The line is already breaking even. I have been told by British Railways:
  "Our staff and terminal costs alone at Milliken Park are of the order of £2,000 per annum before even thinking about a contribution to track and signalling expenses or train running costs."
  In any case, they have to go up; so the costs are £2,000. But, in telling me that receipts have gone up by about 345 per cent over. 1963, British Railways say that they are of the order of £2,000 in 1965, so that by last year the station was breaking even. There is no immediate argument for the closure at all.
  I reminded the Minister that in a letter to me the Ministry wrote,
  "If as a result of the Greater Glasgow Transportation Study it would eventually turn out that a station here had a real part to play in the transport system of the area, she"
  —that is, the Minister of Transport—
  "would not expect the Board to resist the restoration of services."
  This is quite pointless. The station has been closed for a month and it would be a simple business to reopen it. Reopening
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  should occur now before further closure and before traffic damage is done. The alternative of travel to Johnstone in the same town by bus and then transfer to a train is not "on" in the area. People will not do this, no matter how neat it looks on a map. The combined fare will be 4s. 7d. a person, by bus and train, to Glasgow and back.
  I have complimented the Minister on her dealings with me, but I must emphasise that British Railways will not meet us. We have asked on many occasions for a meeting on this closure—the town council, local tenants' associations and myself have asked. I hope that the Ministry will bring to bear such pressure, as they can to ensure that we get such a meeting to thrash out the whole question.
  I expect a better answer tonight from the Ministry than I have had so far because on the second matter I feel that we have an unanswerable case and on the first matter there is a case for thinking and for an imaginative approach. I want an assurance, therefore, that there will be further approaches regarding an improvement in the loop line or proper alternatives before the closure of the loop line. I expect a statement from British Railways about the immediate reopening of Milliken Park in line with the Minister's view about social policy—and not only social policy but the existing economic viability.
  I have also been told by the experts of the roads division that the increased road traffic as a result of these closures would add only about the equivalent of two years' natural growth, but two years' natural growth means that in two years' time we shall have had four years' natural growth, and no one can predict the road traffic situation which we are likely to see in the period to 1970, which we are now pulling down to 1968. Certainly, none of us can predict this in terms of Renfrewshire, which is subject to development of all kinds. I therefore hope for a sympathetic reply from the Ministry.
  1.38 a.m.
  Miss Harvie Anderson: I am glad of this opportunity to support the hon. Member for Renfrew, West (Mr. Buchan) in his plea, particularly in relation to Milliken Park station.

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  I emphasise that while this station is in his constituency, this development group is of an entirely new scheme concentrated on an old village in my constituency. These people are entirely dependent on the local transport, because this is a completely new community. How lucky, one thought, that the community would have an existing station on its very doorstep—Milliken Park. When the train service is stopped it means that they go literally in the opposite direction to get back to where they were. This accounts for the very high fare which the hon. Member mentioned.
  Like the hon. Member, I have had much correspondence with the Ministry on this subject. I have had many letters from my constituents. It is a fallacy to say that the bus service fills the gap n any way. Not only does it go in 'he opposite direction in taking the majority of people to their work in Glasgow, thereby adding to the cost, but it does not run in definite conjunction with certain trains, and this is particularly true for those who are not members of the commuter population but are perhaps going to do their shopping.
  In view of the development of Renfrewshire, which we all know will take place, we have to recognise that the existing community of 400 houses will grow to a community of 600 houses with, along the road, a further development even larger in size. When we add these two together, when we accept the figures which my hon. Friend has quoted, I hope that the Parliamentary Secretary will understand that it is the future position which we are concerned about and that he will feel able to reopen this station, which already exists and has the services which the public have shown that they wish to use.
  1.40 a.m.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. John Morris): I am glad that my hon. Friend the Member for Renfrew, West (Mr. Buchan) has raised this subject, because it gives me, once again, the opportunity to illustrate to the House how the procedure for considering closure proposals operates. I should congratulate my hon. Friend on the tenacity with which he has fought these matters. Since I came to my present office in January, we have had a number of meetings and a large
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  amount of correspondence. There has also been correspondence with the hon. Lady. My hon. Friend has certainly fought like a tiger on this issue.
  In some respects, I shall tonight be re-emphasising what my hon. Friend has learned from me or direct from the Board in correspondence, but this is inevitable in presenting the arguments on both sides fully. It may give several hon. Members who are interested a greater insight into individual circumstances. I do not intend to take up time in dealing with the future policy setting of closures as a whole. My hon. Friend has indicated my right hon. Friend's views. This matter is central to the Government's whole railway policy and it will be made clear in the Minister's forthcoming White Paper.
  I believe that the general outline of our procedure for dealing with closures and the role of T.U.C.C.s in advising on hardship and the important part now played by the Economic Planning Councils will be largely familiar to the House. Instead, I should like to concentrate on the specific issues raised in the debate.
  The first point is that these proposals were not considered in isolation. I have said on other occasions that we try always to consider closure proposals in relation to the general railway and transport pattern of the area and the history of the closures with which my hon. Friend is concerned bears this out. Milliken Park, Lochwinnoch and Kilbarchan were all considered in the context of a wide range of services using St. Enoch terminus, Glasgow. As hon. Members may recall, it was as part of his decision on these proposals as a whole that my right hon. Friend the Member for Hamilton (Mr. Tom Fraser) refused permission in present circumstances for the closure of the East Kilbride, Kilmacolm and Canal lines.
  I should like to deal only with Milliken Park, because it was this station about which my hon. Friend was most concerned. It is a station on the main Glasgow—Ayr line, on which the services are being retained. When he came to look at this station last year, my right hon. Friend the Member for Hamilton had before him the advice of the T.U.C.C., who had reported that no hardship would be caused to the small number of users of the station. He also had the benefit

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  of the views of the Scottish Economic Planning Council and the Scottish Development Department.
  Even so, he and my predecessor in this role, my hon. Friend the Member for Newcastle-under-Lyme (Mr. Swingler) went carefully into the position and all the alternative facilities which would be available to these users and they concluded that, because of the frequent bus services through to Glasgow, and also the possibility for transfer to rail at Johnstone, facilities were adequate, even if they might cost a little more to the user.
  My right hon. Friend therefore gave consent to the closure in December last year, without requiring any extra bus services as a condition. This is the statutory position. Consent has been given to closure under the Transport Act of 1962. The hon. Lady the Member for Renfrew, East (Miss Harvie Anderson) is familiar with that Act, because she voted for it. From then on, the date of closure and any question of reopening became essential matters of judgment for the Railways Board in the light of their commercial judgment. I stress that as we are now looking at this matter in the post-closure period, these are essentially matters for the Railways Board.
  My hon. Friend has rightly drawn attention to the implications of the large-scale development now under way at Milliken Park. We are grateful to him for doing this and it is right that we should be constantly reviewing our decisions in this way in the constantly changing world of transport.
  Because of the scale of this development and the importance which my right hon. Friend attaches to it, I asked the Board to take a special look at the prospects for Milliken Park Station to see whether, after allowing for every possible economy, it considered that it might be viable to retain. The Board gave the matter a very thorough re-examination but, as my hon. Friend knows, it could not, in the end, justify retention.
  This is, of course, a matter coming directly within the Board's responsibility. It is a matter for its judgment and decision. There are no reasons, either of hardship or of regional economic planning, which would give the Minister the
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  right to seek to override its judgment. But because of my hon. Friend's concern, I have studied the Board's explanation carefully indeed and I am bound to say that I think it was right. I have also consulted the Under-Secretary of State for Scotland, my hon. Friend the Member for Greenock (Dr. Dickson Mabon) and he would not dissent, either. I will go into some of the reasons.
  My hon. Friend the Member for Renfrew, West said that Milliken Park is near viability and that, as the development proceeded, it would have become profitable. I agree that this is an important issue. Use of Milliken Park certainly rose in the last year before closure and some of this rise can be attributed to commuters from the new development. But the crucial question is by how much more could it have been expected to increase.
  The Board has concluded that in its judgment it would not have increased by enough to basically alter the financial future. It has calculated that the two-thirds or so of the houses on the Little Coresford Estate so far occupied have produced about 25 more regular users, and these were the houses nearer the station. The Board estimates that another 15 might have come from the remaining houses. But it does not expect, and I agree with the Board in this, that the Spateston development would have greatly added to the number.
  I am sure that nearly all the travellers towards Glasgow from that area not using their own transport would have chosen to go to Glasgow by bus, either right through or changing to rail at Johnstone. They would have preferred this to a walk of up to 20 minutes to the station. In saying this, I realise that there may sometimes be difficulty in boarding the through buses on the A 737, but it seems likely that, as the estate is developed, the bus operators would find it worthwhile to seek a licence to operate from it direct.
  My hon. Friend suggested that by closing Milliken Park the Board will lose nearly all its revenue because people will not be willing to transfer from bus to rail at Johnstone. This, too, is clearly a crucial factor. It is central to the Board's commercial decision. If travellers do use this route, the Board can keep most of its revenue but save all its costs. Last year

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  receipts at Milliken Park barely equalled the direct station costs, with no contribution to track costs or signalling.
  No one can yet be certain what Milliken Park travellers will do, but the Board believes that bus to Johnstone and then rail will prove very attractive. It will save up to 17 minutes on a 47-minute journey, assuming that the bus will leave on time, and in some cases it will be as quick as the train journey from Milliken Park, and take travellers to a more convenient point in Glasgow. I have asked the Board to find out what route the Milliken Park travellers finally adopt and I will keep my hon. Friend and the hon. Lady fully informed. Because of the tenacity and vigour of my hon. Friend in dealing with this matter, I have familiarised myself with the details of this issue and have asked for this special study to be made.
  On the question of congestion on the A737, I do not wish to imply that there is no congestion on this road. We have obtained a special report from the chief road engineer in Scotland, and he has confirmed that, by comparison with other roads, this road is not overloaded, and that any increase in traffic resulting from the transfer of rail passengers would not really be significant.
  So much for the present. The Board has looked very carefully at my hon. Friend's points but, as a matter of comrnercial judgment, has decided to close Milliken Park and to concentrate its efforts on providing a good reliable service from the railhead at Johnstone. This is the Board's responsibility, and we could not challenge its decision.
  But what of the future? What safeguards are there against this station ever being needed again at any time in the future? I would not like my hon. Friend or the hon. Lady to think that, now that the closure has been effected, my right hon. Friend will take no more interest in transport services in the area. On the contrary, she has deliberately had the attention of those responsible for the Greater Glasgow Transportation Survey drawn to this particular closure. Until the results of this important survey are available, we simply cannot foresee the transport needs of the area with complete certainty.
  I said in my letter to my hon. Friend of 27th April, and I repeat the assurance
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  now, that, should these studies reveal a future need for the station, it would be possible to reopen it. I have no doubt that the Board would be willing to reinstate it in those circumstances, as it is reinstating Lochside. As a final safeguard, I should add that the Board could not dispose of the site of the station without the Minister's specific consent. These are specific steps which we have taken in this matter.
  I have concentrated on Milliken Park because I know that this is what most concerns my hon. Friend the Member for Renfrew, West, but I want also to deal with the situation at Lochwinnoch and Kilbarchan. The circumstances at these two stations are quite different from Milliken Park. They are not on the main line but on a loop line ten miles long but parallel with and very close to the main line. This loop is one of the curiosities of railway history, a gigantic and costly monument to an age which did not believe in planning. The Board intend to close the loop completely. By so doing, it will save itself, and the taxpayer, no less than £115,000 per year, over half of which is directly attributable to the passenger service.
  Consent was given to the closure of Lochwinnoch and Kilbarchan—and of Kilbirnie, the third station on the loop—by my right hon. Friend the Member for Hamilton at the same time as for Milliken Park. In this case also, of course, he had the advice of the economic planning council and of the T.U.C.C. The committee had advised that considerable hardship would result from these station closures because of the extra journey time for the 100 or more commuters using each of them who would have to transfer to bus and who would be subject to traffic delays.
  It was with this advice particularly in mind that my right hon. Friend required, as a condition of closure, the provision of——
  The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at seven minutes to Two o'clock.

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Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Norwich
Several Lords—Took the Oath.
Lord Francis-Williams—Affirmed.

THIRLMERE AMENITIES
2.36 p.m.
LORD WAKEFIELD OF KENDAL: 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 what progress has been made in agreeing proposals in the vicinity of Thirlmere for (1) Lay-bys for Lake Viewpoints; (2) Lakeside Footpaths; (3) Lakeside access areas; (4) Fellside Access; and (5) Camping Sites for tents and caravans.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, the provision of further access to the Thirlmere lakeside and its immediate surroundings depends on the installation of treatment plant for the water, which is at present put into supply with only partial treatment. I understand that Manchester Corporation intend to provide full treatment as they have already done for their Longdendale reservoirs, and as they plan to do for Haweswater. This is a large-scale project costing £2 million to £3 million, and the Corporation cannot yet say when it will begun. Meanwhile, there have been discussions between officials of the Cumberland County Council and the Corporation of Manchester and agreement appears to have been reached on access to the fell-side and on extension of the picnic site at Station Coppice, but both these matters will have to be considered by the appropriate committees of the authorities.
LORD WAKEFIELD OF KENDAL: My Lords, while thanking the noble Lord for that reply may I ask whether he is aware that greater access can be given to the neighbourhood of Thirlmere than is now the case, and before the building of this purification plant, without any danger to health? Is he further aware that while it is satisfactory to learn that some progress has been made, nevertheless, provided that there is no danger to health, that progress could be increased?
LORD KENNET: My Lords, the question of access to Thirlmere is one which is very near to the hearts of the Lake District Planning Board, but in the long run it has to depend on the assessment of the health question, on which the views of Manchester Corporation have very much to be taken into account.
VISCOUNT BRENTFORD: My Lords, will the noble Lord bear in mind that there is really little point in improving the amenities at these places, so as to encourage tourists to visit them, unless at the same time roads leading to them from the neighbouring conurbations are improved so as to carry the traffic?
LORD KENNET: My Lords, that is another question, but I surely will bear it in mind.

UNDERWATER DIVING
2.38 p.m.
LORD WAKEFIELD OF KENDAL: 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 it is intended to issue certificates or licences of competency for underwater diving as for aviation, vehicle driving and marine operations, in view of the rapid development of underwater diving.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE ROYAL NAVY (LORD WINTERBOTTOM): No, my Lords. There is already a marked degree of control exercised by the British Sub-Aqua Club which controls a large majority of sporting divers in this country. The Club has produced a manual on safe diving which is recognised by the Royal

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Navy and acknowledged throughout the world.
In addition, members of the Club are required to undergo a full training course and examination before being certificated into varying degrees of competency. Additionally, the National Underwater Instructors' Association exists to improve safety and to standardise techniques in diving. Courses for diving instructors have been arranged by the Association in co-operation with the Royal Navy. As the noble Lord might expect, the Royal Navy has an excellent liaison with all diving clubs and plays as active a part as possible. Physiological facilities are provided by the Royal Navy Physiological Laboratory at Alverstoke, and material advice is given by H.M.S. "Vernon".
LORD WAKEFIELD OF KENDAL: My Lords, I thank the noble Lord for that very full reply. In view of the work that is being done by the British co-operation Club in training underwater divers, and because of the danger of underwater diving without adequate training and preparation, would the Government consider giving greater support to the Club to enable it to undertake this work to a greater degree and to a better standard than it is now doing?
LORD WINTERBOTTOM: My Lords, I will arrange to discuss this point with my colleagues.
LORD CONESFORD: My Lords, what diving is not under water?
LORD BOWLES: High diving.

ARMED FORCES PERSONNEL AND MARRIAGE
2.42 p.m.
VISCOUNT MONTGOMERY OF ALAMEIN: 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 study has ever been made of the possibility of having the Armed Forces composed solely of unmarried personnel, or of married officers and men whose wives and families would be officially unrecognised; whether they do not consider that such a policy would do away with married quarters, schools, transport of families and many other commitments; and whether, as a compensation, Service personnel would not be given very high rates of pay; and further, what would be the savings in terms of both money and civilian staff to Her Majesty's Government of such a policy, and what effect it would be likely to have on recruiting.]
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, a detailed study has not been made in the terms of the noble Viscount's Question, although some consideration has of course been given to the problem. Seventy-nine per cent. of officers, and over 52 per cent. of soldiers, sailors and airmen are married. The present pay of the Armed Forces is approximately £333 million per annum. In addition, there are certain other allowances, the largest of which is marriage allowance, on which the annual expenditure is £96 million. After including the cost of other items—married quarters, schools, transport and so on—the total net bill for marriage is in the region of £150 million per annum, some 7 per cent. of the Defence budget, although only a more detailed study could substantiate this figure. Even if the whole of this £150 million were distributed pro rata as an addition to pay, it would not, in my judgment, provide a sufficient sum either to enable those who do wish to be married to make adequate provision or to induce them to forgo entering that happy state.
I will not comment on the social aspects of such a policy; but I have no

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doubt whatever that its implementation would have an effect on recruiting which would be disastrous, and its effect on the retention of officers and men in the Services would be catastrophic.
VISCOUNT MONTGOMERY OF ALAMEIN: My Lords, I am grateful to the Minister for the obvious care that has been taken in finding out this information. Clearly, it needs further study.

NATIONALISED TRANSPORT'S MANUFACTURING POWERS
2.44 p.m.
LORD WILLIS: 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 it is still their intention to introduce legislation to extend the manufacturing powers of the nationalised transport undertakings.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): Yes, my Lords: in due course.
LORD WILLIS: My Lords, I thank my noble friend for that full and complete reply. In view of the statement that he has just made, may I further ask him what were the conditions which were applied when the agreement was made that the Aldenham works of the London Transport Board should be handed over, in part, to a private contractor? Does not this agreement rather go against what my noble friend has just said, since it would effectively prevent the use of these works by London Transport for the manufacture of their own bus bodies?
LORD CHAMPION: My Lords, the partial closure of the depot is a matter for the London Transport Board, but my right honourable friend has examined most carefully with the Chairman of the Board the future of the Aldenham workshop. Reductions in the size of the London Transport Board's vehicle fleet over the years, coupled with the reorganisation of the maintenance work undertaken by that workshop, has enabled the
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Board to vacate about one-third of the workshop area, and they are proposing to lease this part, rather than allow it to lie idle. My right honourable friend has concluded that the Board are justified in this decision.
LORD DRUMALBYN: My Lords, in considering this matter will the Government have regard to the continuing and overriding need to maintain and increase exports?
LORD CHAMPION: My Lords, the Government always have that in mind in regard to the position of the country.
LORD LINGDREN: My Lords, will the Government at the same time bear in mind that there is an essential need for a check on the monopoly production of the essential parts for a transport undertaking?
LORD CHAMPION: This also, my Lords, the Government will keep in mind.
LORD WILLIS: May I further ask my noble friend whether, when it was decided that one-third of the space at Alden-ham could be handed over, appropriate consultation was made with the appropriate trade unions, as well as with the Board?
LORD CHAMPION: My Lords, I could not answer that question at the moment, but of course the unions have been in touch with my right honourable friend on the whole question of using capacity in the various workshops for the purposes which clearly my noble friend has in mind.

UGANDA: SAFETY OF BRITISH SUBJECTS
LORD CARRINGTON: My Lords, I beg leave to ask a Question of which I have given Private Notice; namely, to ask Her Majesty's Government whether they will make a Statement about the safety of British subjects and property in Uganda.
LORD CHAMPION: My Lords, my noble friend the Leader of the House will be answering this Question by a Statement at about 3.30 p.m.

THE PRESS AND THE LAW
2.48 p.m.
LORD TANGLEY LORD TANGLEY rose to draw attention to the effect on the Press of the law concerning libel, contempt of court, and official secrets; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper, and I am most grateful to your Lordships for allowing me this opportunity to bring to the notice of the House the matters which are mention in it. I believe that they are worthy of discussion, and my belief is confirmed by the number of noble Lords who have expressed a desire to take part in this debate, notwithstanding a certain counter attraction which is now taking place—at Chelsea.
The form of my Motion, I am afraid, inevitably has a somewhat dry legal flavour. Contempt of court and official secrets and libel have become very complicated and technical legal subjects, particularly, perhaps, the law of libel and the practice in actions for defamation. But is it not the case that all legal conceptions and procedures are the outward and visible signs of deep-lying human and constitutional relationships? They are instances—are they not?—of the ways in which the law seeks to regulate and harmonise or balance interests, all of which are valuable and important and in need of preservation, but which may from time to time conflict with one another. If one looks at the subject in that way I believe that my theme becomes far less dry and technical, and gains in human interest.
When I raise the matter of contempt of court, what I am really doing is to invite your Lordships to consider the true basis of the relationship between the Press and the administration of justice. When I consider the Official Secrets Act and its administration I am in reality considering the relationship between the Press and one aspect, at least, of the executive government of the State. And when we are looking at the law of libel we are considering, on the one hand, the need in a free society for the fullest information to be disseminated by the Press and, on the other, the need of individual citizens to be protected from unjustified aspersions on their character and reputation.
I am sure that all your Lordships will agree that there must be a law to regulate
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these relationships and balances, and that from time to time the law should be looked at in order to see whether, under the conditions of the day, the balance is being held at the right point. But if the Press is to carry out its proper functions, and if at the same time the necessary protection of the courts of justice, the State, and the individual citizens is to be preserved, then I suggest to your Lordships that more than law is needed. There must be mutual confidence and understanding between the various interests. Is it open to doubt that in recent years there has been a breakdown in some important respects in that confidence and understanding?
Perhaps the breakdown became most obvious at the time of the Vassall inquiry. Your Lordships will recall, as I do, the disgust felt at the behaviour of some sections of the Press in that matter—a disgust which I think must be shared by almost everybody. Your Lordships will also recall the dismay with which the Press learned that journalists might be punished for contempt of court if they disobeyed an order to reveal the sources of their information. It was at this point that an organisation known as "Justice" became interested in the matter. As many of your Lordships know, Justice is an inter-Party society of lawyers devoted to the maintenance and the extension of the rule of law. Many leading lawyers work for the society; in particular, the noble and learned Lord on the Woolsack has rendered the most distinguished service, and we have had great help from him and from many other lawyers. Most of the past and future Law Officers take part in the work of this society. The current Law Officers, of course, are precluded by their offices from doing so.
It seemed to us that this growing rift, as we saw it, between the Press and the law ought to be a matter of concern both to the newspaper world and to lawyers. So, as a first step, we arranged a public meeting, to which a distinguished audience came, to discuss the question of contempt of court as it affected the imprisoned journalists. There were three speakers at that meeting: the present Solicitor General, an experienced journalist and myself. To our surprise and pleasure, we found that although each of us approached the matter from

1373
a separate point of view, we were much closer together than we had imagined possible. Indeed, the journalist suggested that it might be valuable if the Press and the lawyers got together to study a whole range of problems.
After a long series of confidential discussions, of which the noble and learned Lord on the Woolsack may remember something, if echoes of a previous existence still vibrate in the memory, a joint working party was set up, consisting of members appointed by the British Committee of the International Press Institute and members appointed by Justice. The chairman was the noble Lord, Lord Shawcross, who, may I say, was most anxious to take part in this debate to-day, and would have done so but for the fact that he has been unable to get home from a business journey abroad.
After many months of meetings, during which we had the help of many editors, journalists, newspaper proprietors and lawyers, including some who have had experience in representing plaintiffs, as well as defendants, in libel actions, we came to a series of unanimous conclusions. These conclusions are embodied in a report which has been published and will, I think, be familiar to many of your Lordships. I was a member of the working party, and it is this report which is the basis of my Motion to-day. I think I may fairly claim at least that the suggestions I have to put forward have a respectable and responsible ancestry, though I cannot imagine that they will meet with the unanimous approval of all your Lordships indeed, not all members of Justice are agreed upon these matters. May I say this? I should be rather sorry if there were unanimity on these matters. They seem to me to be so important that every shade and every variety of opinion ought to be brought to bear upon them.
Before I go any further, may I ask this question: What can we legitimately expect from the Press in a free society? I would say primarily that we can expect fair and accurate presentation of the news of the day, accompanied by honest editorial comment on it. I would say, too, that, by and large, we get it. When I get irritated, and sometimes disgusted, by what I read in the newspapers, I find it a useful corrective to remember that there
1374
is available every morning, and often in the evening also, to every would-be reader a pretty clear summary of what he needs to know about the affairs of the day. Moreover, the presentation of the news often has a succinctness and concision which I am sure would relieve the mind and delight the heart of the noble Lord, Lord Egremont.
When one considers the state of affairs in a newspaper office while the paper is being set up and got off to the presses, the mass of messages coming in by every known means of communication, all being sifted, edited, sub-edited and squeezed into the limited space available, the result seems to an outsider like myself to be a near-miracle. Although we criticise the Press, as, frankly, I often do, let us also occasionally—and perhaps this is a suitable opportunity for the purpose—recall this basic service that is done for us which we usually take for granted.
Then I believe, too, that on the whole we get in the Press fair comment and honest editorial opinion. Of course, much of it is written from some particular point of view, and that surely is harmless, so long as we know it is written from a particular point of view. Indeed, many readers buy their paper not so much to get new light on current affairs as to be confirmed in their existing views and opinions. I wonder how many broken blood vessels there might be at British breakfast tables if the Daily Express were suddenly found to be advocating the immediate signature of the Treaty of Rome, or if the New Statesman suddenly burst out into pæans of praise for the capitalist system. In addition, of course—one has to accept this—we get a great deal we could very well dispense with: gossip columns, sensational headlines, some sentence taken out of its context and consequent distortion of meaning. These things I detest, but many people seem to enjoy them, or at least to find them inoffensive. But I am certain that each of us would be able, without much difficulty, to add his or her own pet aversion.
Then, too, there is a great deal of unease, and legitimate, justified unease, I think, about the methods used by some sections of the Press in getting their news. Many may complain of intrusion upon privacy. At this moment of time one

1375
cannot ignore the alleged behaviour of a newspaper in the Moors murder trial. If it turns out to be as reported, my reaction, and I am sure that of all your Lordships, must be one of revolt and disgust. But I believe that this matter is before the Press Council, and I am trying—I admit, standing before your Lordships to-day, with some difficulty—to suspend judgment until we have heard what the Press Council have to say. It comes to this—does it not?—that the Press display some solid virtues and some rather sordid vices. Personally, I believe that the virtues far outweigh the vices. The object of the law should be the
"encouragement of virtue and the punishment of wickedness and vice",
as we say Sunday by Sunday.
I lay this Motion before your Lordships to-day because in some respects it appears that the law fails in this dual object. Indeed, in some respects it seems to handicap virtue without restraining vice. It is against that background that I wish to turn to the particular branches of the law that are mentioned in my Motion. May I first of all speak for a few moments about contempt of court? Contempt of court has been defined in the standard text book on this matter in these terms:
"To speak generally, contempt of court may be said to be constituted by any conduct that tends to bring the authority and administration of the law into disrespect or disregard, or to interfere with, or prejudice, parties litigant or their witnesses during the litigation."
In practice, contempt of court arises in three particular sets of circumstances. The first is reference to proceedings known to be pending or imminent; the second is comment on trial proceedings and sentences pending a possible appeal; and the third is criticism of the conduct of judges. May I say this at once: that the lawyers on our working party felt that the Press were far too timorous in this matter, and were really much more afraid of the situation than they need have been.
First of all, may I take reference to proceedings known to be pending or imminent? This is a matter of common sense, and I think few editors of experience have much difficulty in feeling, at any given moment of time, what they should or what they should not say.
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There is one exception, perhaps, to that. It is this: that is it quite a common practice for a man to issue a writ against a newspaper, not really for the purpose of getting damages or protecting his reputation, but really to shut the paper's mouth. If a writ is issued it does not have to be served for a year, and then, if you are an ingenious plaintiff you can keep the litigation going for quite a long time after that. In the meantime the paper dare not say anything about the matter, nor can any other newspaper. That is really an abuse of the law which is designed to shut the mouth of the Press. It is quite a serious matter. Unfortunately, we did not find any remedy for it, except perhaps to suggest that the courts might be much more active in exercising their powers to dismiss actions for want of prosecution.
On the matter of comment on trial proceedings there is really little difficulty, although it is much more uncertain and much more a matter of opinion. I do not think that any newspaper which commented, for example, on the sentences passed by Mr. Justice Edmund Davies in the train robbery trial before the appeals were heard got into any trouble about it. So far as criticism of the conduct of judges is concerned, it is perfectly open to any newspaper, or to any individual, to make a criticism in proper, reasonable terms of the conduct of a judge—a judge holds a public office; he exercises in public and he is subject to public criticism—provided, of course, that justice is not impugned, that the motives of the judge are not impugned and that the course of justice is not brought into question.
Here I think the Press are a bit too timorous, because, so far as I know, there have been only two incidents in the 20th century when any newspaper has been brought before the court on such a charge. In each case there was a scurrilous attack on the personal character and conduct of the judge, and in each case the editor got off extremely lightly. So there is no serious danger there. But, none the less, having regard to the conditions under which a newspaper is prepared, it is difficult to decide on the spot; and the editor must remember that although the law of contempt of court is

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designed to protect the whole administration of justice, it is open at present to any individual to start proceedings. I suggest that it would be right and proper that proceedings for contempt of court should not be started except by the Attorney General, or with the fiat of the Attorney General. It is part of his business, one would think, to protect the course of justice. This is not an original suggestion on my part. It was made as long ago as 1953 by Lord Goddard, who was then Chief Justice, in the Lilliput case; and I suggest that the time is now ripe for dealing with it.
Now may I say a few words about official secrets? The Official Secrets Act was designed, of course among other things but mainly for the purpose of security, to make the receiving of information in peace time possibly a criminal offence: in other words to make spying in peace time a criminal offence. So far as it concerns security there is little criticism, but a great deal of praise on the part of the Press for the way in which the system operates. There are occasional slips-up, as there are in the best system; hut, on the whole, it works well. Here I should like to pay my tribute to my old war-time friend and colleague, Admiral Thomson, who had so much to do with the building up of this admirable system.
But the Act is used now for things well outside security. There is a tendency, the Press firmly believe—and we had a good deal of evidence of it in our working party—for the Official Secrets Act to be used for the purpose of muzzling criticism or restraining the passage of information, outside the strict realm of security. This has a good deal to do with the privilege of State documents in court, on which I know that noble Lords will take differing views. But this is a dangerous thing which should be looked at administratively. There is no question of changing the law on this matter, but it ought to be looked at administratively, I suggest, because the surest way of shutting up the Press is to give them a little confidential official information. It is not an offence to publish what you receive; it is an offence to receive it, and of course publication is pretty good evidence of receipt.
Now I come to the law of libel, which is the last head that I want to speak
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about. We feel that there are a number of things which ought to be considered here, but I will deal shortly with only three of them this afternoon. The first is the question of damages. There is no doubt at all that in some recent cases quite outrageous damages have been awarded by juries in libel actions against newspapers. It may be that it is one way in which the public feels it can get its own back on the newspapers for some of the things to which I have referred and to which we all object. But there is no doubt that this is a serious matter, and we considered very carefully whether we ought not to suggest that damages should be a matter for a judge—indeed, that all libel matters should be a matter for a judge, rather than for a judge and jury. We did not take that view because the ordinary Englishman, I believe, still thinks, and rightly, that if it is a matter of life or honour he would prefer to entrust his life or honour to twelve of his fellow countrymen rather than to any one person, however learned and however impartial. But we did feel that there was a case for enabling the Court of Appeal to review, if necessary, damages given by a jury, as they do in the case of damages awarded by a judge.
The second point I wish to mention to your Lordships, which will certainly he controversial, is whether a new form of qualified privilege should not be given to the Press in libel cases. We suggest that it is well worthy of consideration that it should be a defence to a newspaper, even if it cannot plead literal accuracy, to say that it believed the information to be true when it was published; that it had checked and found its sources reliable, and, thirdly, that, if the paper went wrong, a proper and adequate expressed apology had been made at the appropriate moment. Most of us felt, that if those three things were established, one could suggest that it was a case for qualified privilege.
Your Lordships may ask why that should be necessary. It is necessary principally for this reason. I would again invite your Lordships to think of the conditions in a newspaper office. An editor who is going to press has to ask himself, in matters of libel, not only, "Do I believe this to be true; is it true; is my source reliable?", but, "Can I prove all that in three years' time, in court,

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in a highly technical proceeding?" And, of course, the law of libel has become highly technical, and in that respect has received a great deal of criticism, with which I respectfully agree, from the Bench.
It is an optimist who would say he can win a libel action in three years' time, even if what he has said is true. He would have to hope that his witnesses will still be alive; he would have to hope, even more optimistically, that they will still tell in three years' time the same story as they are telling now—and after 50 years in the law I would not bet on that in any case. He would also have to get through the technicalities of pleading. It is those three things the editor has to keep his eye on at the time, not merely, "Is this true; is my source reliable?" I have been assured by the most responsible editors in this country that, because of that situation which I am describing to your Lordships, there are a number of stories and an amount of information, perfectly true, which ought to have been disseminated but which it was too risky to disseminate. That is the justification in general terms for the suggestion of this new kind of qualified privilege.
The last of the three things I want to mention about libel may amuse your Lordships. There is a statutory provision which says, in effect (I am not speaking in technical language), that if you tell a story about a man, if the general story is correct you are not going to be tripped up simply because you have made one inaccurate statement. For example, if you say that a man is a liar, a murderer, a thief, a forger, and has a hairy wart on his nose, if the whole passage is pleaded as a libel you can say that the wart on his nose was not really relevant and that you had given a fair account of the man's character. But if the plaintiff chooses to pick out the remark about the hairy wart on his nose and not to refer to the rest of the passage, the newspaper cannot put in evidence that this was part of the rest of the passage, I suggest that this situation was not intended when this Statute was passed, and that is another matter which I suggest might be looked at.
My Lords, there are many other matters which could be discussed. I have
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tried to pick out some of the most important. I have tried to put them against the background, historical and actual, as I see it; and I think I have said enough to justify my temerity in bringing this matter before your Lordships' House. I want to restore the balance to its right point, if only we can find it. I beg to move for Papers.
3.15 p.m.
THE EARL OF DUNDEE: My Lords, your Lordships know that I am one of the most unlearned Members of your Lordships' House, and I certainly cannot try to compete with the wealth of legal talent which has been, and will be, displayed this afternoon. But all through my political life in both Houses of Parliament I have always found that I am the sort of person who is given someone else's job to do on Derby Day. I rise only for a few minutes to say, on behalf of my noble friends who are here, and perhaps on behalf of one or two of them who are not here, that we welcome very much the Motion which the noble Lord, Lord Tangley, has put down. We have listened to him with the respect and attention which is deserved by one of his knowledge and eminence in these matters. I think in many respects we would agree with a great deal of the proposals which he has put before your Lordships in his very interesting and well-informed speech.
The Motion deals with three matters: contempt of court, libel, and official secrets. I think perhaps official secrets, on which the noble Lord said least of all, is in some ways the most difficult. I think that it is true, as the noble Lord said, that at present the Official Secrets Act, which was originally passed purely for reasons of national security, is sometimes—perhaps rather frequently—used by Government Departments in order to prevent things from being known which not only are harmless but which might be useful if they were known. I think perhaps the motive of using this method of preventing criticism is too easily seized upon. But I feel bound to add that the remedy which was suggested by the noble Lord in the report of the working party to which he referred, that it should be a valid defence in any prosecution to show that the national interest or legitimate private interests confided to the State were not likely to be harmed and that the information was passed and

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received in good faith and in the public interest, might be a rather difficult one to apply.
I think it would be a little unfair on the judges to ask them to decide whether any official document belonging to any Government Department should or should not be regarded as one whose disclosure would be against the public interest. It seems to me that, however much abuse the practice may give rise to, the Minister is really the most appropriate person, although he may not always do it rightly, to decide whether or not any document ought to be secret in the public interest.
The noble Lord dealt at greater length with the subject of contempt of court. I am sure he would agree it is a matter of satisfaction, as is shown in the report of his working party which was appointed partly to deal with the situation which arose out of the Vassall case, that representatives both of the Press and of Justice in that working party were all agreed that the liberty of the Press depends, in the last resort, upon the independence of the law courts; and that the independence of the law courts cannot function properly if in the last resort they are not permitted to demand that a witness shall give evidence on a point which is essential to the decision of the case.
I think everybody recognises that judges sympathise to the full with the difficulties of professional people—priests who have heard statements in confession which they are bound by their profession not to reveal; doctors who have professional secrets which they are not allowed to reveal; and journalists whose professional honour does not permit them to reveal the source of their information—and I think it will be admitted by all professions that the judges always stretch to the limits their desire to respect the scruples of professional witnesses of this kind. They do not positively require, on pain of prosecution for contempt of court, that a witness shall state a fact, unless they feel it is absolutely essential in the interests of justice that he should do.
With much of what the noble Lord said on this subject of contempt of court I think I would agree, such as that proceedings for contempt of court should be undertaken only with the leave or on the instructions of the Attorney General. As the noble Lord said, that
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has the respectable authority of Lord Goddard behind it. It is also, of course, and always has been, the law of Scotland that prosecutions of this kind can be undertaken only by, or at the instance of, the Lord Advocate. I think it is also reasonable that the Press should be allowed to appeal for witnesses in an important criminal case, without incurring the danger of being in contempt of court. I believe they are in fact allowed to do so, but they are often under some doubt about it, and what the noble Lord proposed in the recommendation of his working party was that their rights should be made clear.
Finally on libel, I think the noble Lord made out his case that Section 5 of the Defamation Act should be amended, so that one small allegation, like having a wart on your nose, could not be taken out of its context and made the subject of a criminal prosecution for libel. I think it is surely reasonable that the whole of the context should be used in evidence, if necessary, in order to prove that the matter complained of was not a major allegation; that it was only a small and perhaps irrelevant part of the whole passage complained of.
With regard to damages, I also agree with what the noble Lord said about the court having power to amend unreasonable damages which have been given by a jury. I would just make this qualification, that I think many of our judges are often inclined to be conservative in their ideas about money. They are still inclined to think that money has the same value today as it had in the days of their youth, and that a fine imposed or damages awarded now, in 1966, will bring the same benefit to the person who is given the damages, and inflict the same penalty on the person who has to pay them—let us say, £1,000—as it would have done in about 1930 or 1935. But the truth may be that, if you allow for the change in the value of money, the satisfaction by the plaintiff who has been awarded damages may not be quite so large as the judge thinks, nor the pain suffered by the offender quite so heavy.
There is one interesting recommendation at the end of the report of the noble Lord's working party in the passage on libel, which I am not sure whether he mentioned—I do not believe he did—in

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that the Press should be allowed to publish fair and accurate reports of judicial and Parliamentary proceedings abroad, even although they might contain some untrue statement which might be held to damage the character of some person in this country. One can think of all kinds of ways in which that might be abused. For example, you might persuade some friend of yours in the French or Irish or German Parliament to make a speech which was highly derogatory of someone you did not like here. But, on the whole, I think that this is not likely to happen, and that that is probably a recommendation to which we should give our favourable consideration.
But I am afraid I do not feel quite the same sentiments of approval of what the noble Lord said about qualified privilege, in cases in which false statements are published in good faith and where a reasonable apology has been made. I think it might be very dangerous if that were to be a good defence. I can think, and I am sure your Lordships can think, of so many possible cases in which a newspaper might publish the most highly damaging statements, with the plausible explanation that it thought they were true; that it thought there was reasonable authority. One often does say that, and think that, about gossip which is nothing more than gossip. If they thought it was reasonable in the public interest that this gossip should be published, and afterwards they made an apology which exempted them from prosecution, I think that that might open the way to a great deal of abuse and might involve a dangerous possibility of undermining the rights of individuals to redress.
In conclusion, I cannot forbear from quoting one short sentence which I quoted last time I spoke to your Lordships on the Press. That was six years ago now, so I think there is a fairly good chance that your Lordships will have forgotten it and it will not matter if I repeat it again. A great deal had been said about the scurrility and unscrupulousness of our modern Press, and I suggested that it might not be quite so bad as it was 100 or 130 years ago. I quoted a passage from The Times of June 26, 1830, which read:
"The long and severe illness of His Majesty King George IV was closed this morning at
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ten minutes past three o'clock by death. We shall reserve our further reflections and our remarks on the character of His Majesty till Monday. Flattery cannot reach him now, and truth may be of advantage to his sucessors".
On the Monday, an obituary of seven or eight pages appeared, one sentence of which read:
"The late King, before his 20th year, was supposed to have been initiated in all the vices by which an advanced and affluent and corrupt society is infested. He led a course of life the character of which rose little higher than that of animal indulgence. Not one but a series of licentious favourites are understood to have presided over the Royal Household of King George IV".
It occurred to me that very few obituary notices in The Times have so successfully avoided flattery as this one. If it happened now, I do not know what notice, if any, would be taken of it by the Press Council.
But, my Lords, we are all inclined, I think, to look on the Press as a rather terrifying ogre—because it is now a very large and powerful organisation indeed. We are inclined to look on it as a kind of monster which refrains from reporting anything interesting or intelligent which we say but which, the moment we make a slip, gives it a headline; a monster which consistently ignores our many and consistent virtues but seizes on any odd delinquency to which to give prominence. We are always a little inclined, perhaps, to think mostly of the rights of the individual who may be defamed, or whose interests may be adversely affected by the Press. But the Press, my Lords, has its difficulties, too. It is one of the great pillars of our liberty in a free society. It has to give fair comment, to report news as well as it can, and to voice criticism which otherwise might not find expression. It has to do these things if freedom is to survive; and it is very difficult indeed for newspapers to do them successfully and to make their way successfully through the rather difficult forest of potential law-breaking, in which they may sometimes inadvertently get caught. I think we ought to sympathise with their difficulties, as well as our own. I am sure that the Government and the Law Officers will consider and study what Lord Tangley has said this afternoon with the earnest desire to do justice, both to the individual and to our Press.

UGANDA: SAFETY OF BRITISH SUBJECTS
3.34 p.m.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, the House will know of the tragic incident on Monday in which two young British surveyors lost their lives. This incident took place in an isolated area of Buganda, and, as far as I can ascertain on the basis of reports so far received, there is no reason to think that it indicates a general threat to the British community.
The British High Commissioner in Kampala is in touch with the Uganda Government authorities, both about this incident and about the safety of British citizens generally. The High Commissioner has been making contact with members of the British community in the disturbed area and advising them to avoid unnecessary travel. There appears to be no immediate danger in areas outside Buganda.
The whole House, I am sure, will wish to join me in expressing the deepest sympathy to the relatives of these two young men.
LORD CARRINGTON: My Lords, may I first of all associate myself and those who sit on these Benches with the last words of the noble Earl the Leader of the House?
My Lords, I am grateful to the noble Earl for what he has said. I suppose it is difficult for any of us to know exactly what is happening in Uganda at the present time, but, having regard to the particular circumstances of that country, it is possible that there will be even greater unrest in the future than there is at the present time—and there are a great many British subjects there. Parliament will be rising for a fortnight's Recess to-morrow evening. I hope, therefore, that the noble Earl and the Government will be satisfied that there are adequate arrangements for the safety of British subjects in Uganda should the situation take a turn for the worse.
LORD WADE: My Lords, may I join in expressing deep sympathy for the relatives of these two young men? Is it possible for the noble Earl to give us any information about the Kabaka?
THE EARL OF LONGFORD: My Lords, I am grateful to both the noble Lords. I am afraid that, in spite of up-to-the-minute inquiries, I have no information about the Kabaka. Obviously I share the anxieties expressed or implied by the noble Lord, Lord Wade, but I have nothing to say on that subject, although, as I have said, I made inquiries only a few minutes ago. I can assure the noble Lord, Lord Carrington, that the Government will do all in their power to look after the British subjects. He knows the country well and realises the difficulties involved; but I do not want to say anything to suggest that the difficulties already in our minds are greater than might appear.
LORD MONTAGU OF BEAULIEU: My Lords, may I ask the noble Earl to bear in mind that there may be several Buganda in this country, particularly the three children of the Kabaka, who include the son and heir, who may in future wish to apply for political asylum owing to the danger to them of going back to Uganda?
THE EARL OF LONGFORD: My Lords, the noble Lord, if I may say so, has done well to point out a very touching aspect of this problem, of which we shall certainly not lose sight.

THE PRESS AND THE LAW
3.38 p.m.
Debate resumed.
LORD THOMSON OF FLEET: My Lords, the subject of this Motion to-day is so comprehensive, including as it does three almost different subjects, that I feel I have not the time to touch in any depth on all of them. Consequently, my remarks are going to be confined almost entirely to the matter of libel. I must, of course, declare an interest. I speak as a newspaper proprietor. To some, that may seem to make my comments too partial. I hope at least they will be seen to be informed by more than narrow sectional interests, though on the technicalities of the law itself I will, in this Assembly, pretend no more than a knowledge of where the shoe pinches.
The trouble, my Lords, as I see it, is that the law of libel too often hinders newspapers in doing their public duty, which is to make facts of public importance public knowledge. There is always

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a narrow balance to maintain between public duty and private right. It is fair and proper that honest individuals should have their reputations and their private lives protected from undue exposure. I am not interested in loosening the law of libel to the point of licence. I have always insisted on decent standards and fair play in my own newspapers, and I would not be speaking here to-day if I thought that anything was proposed here to-day which might enable unscrupulous people to make money out of pure sensationalism.
But, my Lords, this is not the real issue, not the real danger, to-day. It is not that we know too much about private people, but frequently we know too little about public affairs. That balance between the individual's right to privacy and the public's right to know has been tilted too far to privacy. The caprices of the law as it is administered to-day mean that too often it is not the honest man but the scoundrel who is protected—the crooked salesman, the Rachman, the fraudulent speculator, the tax evader. Newspapers have, in my view, a positive public duty to uncover facts in such instances and to make them public knowledge. The law does not recognise that duty.
Of course, a good newspaper will continue to try to do that duty, despite the difficulties and perils; and we should not exaggerate the hindrances that exist. They did not prevent the Sunday Times, for instance, exposing the antique dealers' ring or, more recently, the affair of the cooker that did not cook. However, I believe there are reforms that we could safely make that would assist the newspapers to do their public duty while preserving the private individual's right to his reputation.
I will confine myself to two small reforms which could help. First, the method of trial. Again in this connection I am repeating something I have said before, but I hope with a little more emphasis. Libel actions should be tried by a judge alone. Jurors may be excellent for criminal trials where they have to give simple "guilty" or "not guilty" verdicts. The law of libel is, however, different. It has become so technical that it is asking too much of juries to cope with its complexities. We have recently had the celebrated case of the "Three
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Little Pigs" in which the jury's verdict resulted in a judgment they had not intended. I do not want to comment on the rights or wrongs of that case; but there is no doubt that it dramatically demonstrated that even the most consciencious jury cannot grasp the technicalities of a libel case even after a fifteen-day trial and a summing-up, which ran to 26,000 words, of a judge who is an expert in the libel field. In the words of one of the jurors: "I did not know whether I was on my head or my heels." In the words of another: "I think the legal mumbo-jumbo beat us".
The result, my Lords, is that libel actions are a lottery and are apt to be decided other than on their true merits. A judge is much better qualified to deal with the technicalities, and a judge, I submit, is certainly in a much better position to fix a proper figure for damages. Juries are given no guidance at all on this in terms of actual figures. As your Lordships will know, previous awards in comparable cases cannot be mentioned to them during the course of the trial. It is not surprising, though very inhibiting for public-spirited newspapers, that in a number of cases juries have gone wildly wrong on damages. A number of them, of course, have had their awards set aside by the Court of Appeal. But this is not the answer. Since we are making judges (in the Court of Appeal) the ultimate arbiter of the rightness or wrongness of a verdict, why do we not do this in the first place? What objection can there be to that? The consistency and fairness which should result would help newspapers without threatening anyone's rights.
The other day a libel case was brought to my notice in which damages were awarded and the foreman of the jury was asked how he had arrived at the figure for damages. He said: "I had each member of the jury write a figure on a piece of paper; I added them up and divided by twelve—and that was the figure." That is not a very scientific way of meting out justice.
My second point is one on the question of privilege. The Press should, in my opinion, be given clear protection for fair and accurate reports of all foreign Parliamentary and judicial proceedings. The noble Earl pointed out the dangers that that might involve; but I submit that if anyone really wanted to do something

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against an enemy in this country he need only sit in the House of Commons or in your Lordships' House or in a court of law and make those remarks. He would then be quite privileged. Why would he have to go to a German court or a French court? If proceedings in a foreign Parliament or foreign court are to be properly reported, surely it should be a matter of privilege for British newspapers to quote them on the same basis as they can quote proceedings in this House.
We should also consider extending that protection in a qualified way to other matters of legitimate public interest. In this country, of course, newspapers are protected from libel when they give fair and accurate reports of our courts and Parliament. With a world that is getting smaller every day I find it incredible that the same protection does not extend to reports of foreign proceedings. It is true, and I concede it, that since the case against The Times in 1960 these reports can be privileged in certain circumstances. But that is not enough. The privilege should be automatic. Surely it is wrong that a newspaper might have to fight an expensive action right up to this House to establish that it could safely publish fair and accurate reports of, for example, the United States Senate. Those are two reforms that I feel sure we could safely make.
My Lords, there are other areas that we should explore. There is a case for qualified privilege for other reports of legitimate public interest. For instance, it was something of a shock for me to be told the other day that newspapers in this country might have had to pay out some thousands of pounds, or perhaps hundreds of thousands of pounds, in damages for their reports of the assassination of President Kennedy if it had ultimately turned out that Lee Oswald had survived and was innocent. Your Lordships will remember that at the time that was a question which arose; though later, I think, it was resolved to everyone's satisfaction. We published the reports that came across to us at that time, but if Lee Oswald had survived, and had been proved innocent, he could have sued all the newspapers in this country who published those reports and could have been awarded substantial damages. Surely that is not a situation which should be perpetuated. I believe—and I am sure your
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Lordships will agree—that the newspapers were justified in carrying that news as they did. They did not suppress the news; but they were taking a deliberate and unnecessary risk.
Whether we should go on from this, and say that newspapers should have qualified privilege for other reports published in good faith and without malice on matters of true public interest is a more controversial point. It would have to be made conditional upon publishing a reply in equal prominence; and such a change in the law would need the most careful drafting to see that we did not tilt the balance too much against the individual. At the moment, on the broad issues, I am convinced that the balance is too much against the members of the public who have a right to know.
3.47 p.m.
LORD FRANCIS-WILLIAMS: My Lords, I should like to begin by thanking the noble Lord, Lord Tangley, very much for introducing this subject to the House. I think that both the Press and the public already owe him and other eminent lawyers a great debt for the work they have done on Justice and for what they did on the working party on these matters. That debt will be increased by his raising this subject before the House. Like the noble Lord, Lord Thomson of Fleet, I must declare an interest, although perhaps one not so financially large and profitable as his. I have been for some forty years a working newspaper man, and I am glad to say—and I hope your Lordships will share my pleasure in this—that so far, during those forty years, I have managed to escape being "had up" for libel, or being charged with contempt of court or with a breach of the Official Secrets Act. But whether this is luck or prudence I should not like to say, because I know many very eminent and admirable newspapermen who have not had my good fortune.
Indeed I would say, dealing first of all with libel, that in many matters where it is essential in the public interest and in the safeguarding of the ordinary people that there should be examination and investigation, this is frequently prevented by the fear which hangs over all newspaper offices that they might and themselves faced with a libel action and, nowadays, with quite exorbitant

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damages. I frankly admit that, to some extent, the immense damages that have been found in some recent libel cases are the direct fault of the Press itself. There was a period, I believe now passing, when the reputation of the Press for harrying the innocent grew to such an extent that it was perhaps natural that when juries found a newspaper before them for libel they should feel that they had a duty to their fellow citizens to cut it down to size and to inflict the most swingeing damages possible upon it. But I believe that the Press has reformed its ways considerably, and that under the stimulation of the Press Council it is doing so even more; and it is in that light, and in the light of the newspapers' traditional duty to seek to safeguard the public, that this matter of libel needs to be looked upon.
At one period I was myself a financial editor. It was the period of the Hatry crash and a whole similar series of financial crashes which inflicted great damage and pain and sorrow upon many innocent people. I as a financial editor at that time, and many others I know who were financial editors, were aware of much that was going on and were deeply anxious to disclose what we could in order that a due and proper warning should be given, particularly to prevent small investors from being rooked to the extent that they were. Again and again during those days, after the most careful examination and inquiry I would try to write something, only to be told by the newspaper's lawyer, quite rightly and properly, "Although I believe, from the investigations you have made and the evidence you have put before me, that this is a true case, I have to advise that it may be extremely difficult to prove it in court, and that if you failed against financial promoters of this kind and wealth the damages would be crippling." Again and again we had to drop stories, which resulted from the most careful investigations, often supported by the advice and information of some of the most reputable people in the City, who were worried about what was happening, because of both the effect on small investors and the effect upon the repute and reputation of the City if things did go wrong.
THE EARL OF SWINTON: My Lords, I wonder whether I might put one point to the noble Lord? I fully appreciate his difficulty. I was always very anxious to get this into the law, and indeed I acted accordingly, without its being in the law, when I was President of the Board of Trade. It is always possible in a case of this kind to go to the Board of Trade and to say, "Put in an inspector." If there is the least evidence the Board of Trade has full power to do that, and it has proved extraordinarily effective.
LORD FRANCIS-WILLIAMS: My Lords, it may be effective when it happens—
THE EARL OF SWINTON: No, that is not what I mean. I mean if you suspect anything. I will not interrupt too much, but I did it in cases exactly the same as those to which the noble Lord has referred, where the suspicion had not been proved, and the situation was effectively stopped.
LORD FRANCIS-WILLIAMS: I can only say that on several occasions we did, as I believe other people did, speak to the Board of Trade, and they felt that at that time they lacked sufficient grounds to go forward. Moreover, even if there had been a Board of Trade inquiry, many months would probably have passed before it was concluded, during which time we felt—I think rightly as events proved—the harvest was being reaped almost every day, and it was desirable to publish something which would flash an adequate warning light in order to stop the flow of investment into what we believed were fundamentally crooked concerns.
It is, of course, the case, as the noble Lord, Lord Thomson of Fleet, has said, that newspapers do on occasions carry out investigations. The investigation by his own paper the Sunday Times into the "antique ring" is an example. There was another investigation by the People newspaper—not everybody's "cup of tea" in journalism, but nevertheless a paper which on occasions shows great force, courage and pertinacity. It conducted an investigation into allegations which had come to its notice of widespread difficulties and criminal activities in association football. The position

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then was that, although the police were fully aware of these allegations, and were very strongly of the belief that the suspicions were justified, they lacked, and could not at that stage get, the evidence to take any proceedings. It is very probable that they never would have, if the People newspaper had not acted.
The People newspaper employed a team of special reporters and investigators on the matter for over six months and spent very large sums of money; ultimately getting confessions, for which in one case I have to admit they paid, from some of those involved. Even at that stage they were warned, and I am sure they were properly warned, by their legal advisers that to publish might bring on their heads a libel action, with the possibility of heavy damages. As it happened the then editor of the People, the late Stuart Campbell, was not only a man of courage but had the full confidence of his publishers, and he was able to persuade them to allow him to go ahead despite the possible consequences. Following the disclosures in the People, the police were enabled to act against those who had committed these crimes and, as a result, several of them were sent to prison.
It was only because the People is part of an immensely wealthy organisation, and because the editor had, by his past actions, gained the confidence of his board of directors, and because he was himself prepared to take a very substantial risk, that this material was published about what was indeed a public scandal and, in view of the immense public interest in football, a matter of considerable public importance. Only because of that were the disclosures made, and action in a court of law became possible.
Not all newspapers in the country are large and powerful, or can afford to be courageous in the face of possible heavy damages. When we look at the Press we have to think not only of the great national newspapers, but also of local newspapers which serve their communities and endeavour to see that local government is operated efficiently and well. They endeavour to secure that the small-time, small-town crooks, whose activities may never reach the columns of the national newspapers, are not
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enabled to "get away with murder", so to speak, against citizens living in the areas where the papers are published. Those papers, because of their comparative lack of financial reserves, are often immensely vulnerable, to threats or fear of libel, even though they may have made the most careful examination and investigation, and want to publish after they have convinced themselves, and believe that they can convince any fair minded man, that there is a case.
We also have to take into account the immense number of trade journals which are concerned with the activities and development of trades and industries of all kinds and are concerned to try to ensure that those trades and industries are run by honest and reputable people, and that if they fall among rogues, the roguery shall be disclosed. Again, it is often the case that editors of such journals carry on in fear of a libel action which perhaps a national newspaper could ride. I therefore strongly support the proposal made by the noble Lord, Lord Tangley, and made in the report of the working party of which he was so distinguished a member, that consideration should be given to a statutory defence of qualified privilege for a newspaper where publication of matters of public interest in good faith, without malice, and upon evidence that might reasonably be believed to be true, can be shown, and where, if there was any error a reasonable letter of explanation or apology has been published on request.
I will try to meet the argument put forward that this means that any newspaper could simply say: "We believed this to be a matter of public interest and that it ought to be published, and, therefore, we published it." But such a clause would specifically lay down that a newspaper would be required to prove that publication was in good faith, without malice and upon evidence that might reasonably be believed to be true. The newspaper would have to convince the court that the evidence upon which it published was of that character: that it was not an idle or irresponsible decision taken by a newspaper.
VISCOUNT DILHORNE: My Lords, may I ask one question about that, because it may be of some relevance in

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relation to the Vassall case? Does that mean, if that defence were pursued, that newspaper reporters would disclose their sources?
LORD FRANCIS-WILLIAMS: I think they might well be called upon to do so. There was a great deal of feeling by newspapers, much of which I shared, perhaps emotionally, at the time of the Vassall case about reporters being required to disclose their sources of information, but I would certainly say that in the event of a libel action in which a newspaper entered such a defence it would be right and proper that it should be called upon, in pursuit of that defence, to disclose information of that character. I do not think you could put forward such a defence without readiness to produce everything upon which you had acted in publishing the story, and that obviously would include the reliability, in your view, of the sources from which you had received the information.
I believe that in this matter we are concerned, as we must be, with a balance of the public interest. Nobody want to give the Press the right to harry the innocent, or even to harry those about whom they have suspicions, without basis. Nobody of any repute in journalism wants newspapers to be in any way above the law; and, thank heaven‡ even if they did, Parliament and public opinion in this country would say that they were not. All that is asked is that the law should be looked at and amended in this particular, in order that newspapers should be the better able to carry out what has been their traditional function, and is still one of their most important functions—namely, to attempt to disclose information and material that the public ought to have as a safeguard, and to do so in good faith, without malice, after the most searching investigation it has been possible for them to make, knowing that they will have to show that that investigation has been as thorough and complete as they could make it, and that on the evidence they disclosed they had a reasonable case for publication.
Let we now pass on briefly to the question of contempt of court. I agree that in many cases newspaper editors walk about in perhaps too great fear of a contempt of court. I hope that your Lordships' debate will help to clarify
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the position about contempt of court, because undoubtedly it is the case that many newspaper editors have come to believe over the years that if they say anything in what they believe to be legitimate criticism of a judgment or of a judge, this may bring upon their heads a contempt of court and there is no appeal against a contempt of court.
VISCOUNT DILHORNE: My Lord, the noble Lord is wrong about that. There is an appeal.
LORD FRANCIS-WILLIAMS: I am sorry. I was saying that many editors have quite wrongly got this feeling about contempt of court, and one of the things this debate could do in that area would be to clarify the position. I believe, as the noble Lord, Lord Tangley, said, that many newspaper editors, quite unjustifiably, walk about in fear of a contempt of court action. They often fail to do what they ought to do and what their public duty requires them to do, because of what is a quite mythical idea that a contempt of court action could be brought, and because of a fear of what it could do to them.
I now turn to the Official Secrets Act. For most of the last war I had the experience of being Controller of Press Censorship, in which it was my function to be a sort of poacher turned gamekeeper, and to ensure, so far as possible, that nothing that was a breach of security would be published by the newspapers. It was, as your Lordships will know, a voluntary censorship: in other words, the Press was given guidance as to what might be dangerous to the national security. To refuse to follow the recommendations of the censorship was not in itself an offence, although if material published had been passed through censorship, and approved by censorship, it was a defence in any future action, if any such action should be brought.
During the period in which I was Controller of Press Censorship, we operated—and still operate in a somewhat different way—a joint committee of the Security and Defence Services and of the Press to set out the general principles upon which censorship advice should operate.
I want to say here, and to say it as emphatically as I can, that I know of no single incident during all that period when any newspaper sought to publish

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anything which it could be shown might have created security difficulties. And I am sure that that is exactly the position to-day. No newspaper would want to publish anything that would affect the security of this State.
I well remember Sir Winston Churchill, at a meeting of editors, saying to them that he was proud to meet them because he knew them as men of great fidelity to the State. And they are men of good fidelity to the State. When the Official Secrets Act and its operation are criticised, this is not for any reason of trying to get freedom to publish defence matters which might be dangerous. What is criticised, as the noble Lord, Lord Tangley, has said, is what appears to be a growing extension of the use of the Official Secrets Act to prevent publication in all sorts of areas where security and defence matters do not really arise. There was a case, some years ago, in which a reporter was fined for publishing some wills before they had been officially published by Somerset House.
There have been many cases of fears or threats of action. Indeed, it too often seems in these days that frequently a kind of an unholy alliance is reached between official secrets and public relations, designed not to defend the security of the State, but to prevent legitimate criticism of what is believed to be inefficiency in Government Departments or in local authorities. It is part of the historical movement of the times that all Governments, whether the present Government or any other, tend to take more and more centralised authority into their hands. Similarly, at every level of bureaucracy there tends to be an increase of the attempt to get control and build a fence around activities so that they shall not be subjected to too strong a light of public criticism.
LORD TAYLOR: My Lords, may I ask my noble friend one small question? He mentioned local authorities. Does the Official Secrets Act in fact cover the work or doings of local authorities?
LORD FRANCIS-WILLIAMS: No, but the general atmosphere, what I may call the general approval of secrecy of administration, has undoubtedly had a substantial affect on the operations and attitudes of local authorities.
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I agree that in the case of the Official Secrets Act it is difficult to suggest any change in the law. What does seem desirable is that there should go out from the Government, and, I suggest, go out from this House of Lords, as an advice to all who occupy positions of authority, whether in Central Government or the Civil Service or local authority, that it is essential, and is becoming steadily more essential, to take a look at how far these possibilities of preventing publication are being misused. And it should be laid down that they shall be used only in issues which are of genuine public security and importance, and shall never be used to create the justified suspicion that they are being utilised simply to prevent the proper examination of public affairs by politicians, public officials or anybody else. All that is desirable is that the Press should be given, not a free ticket to explore and publish whatever pleases it, however sensational, but that the barriers which have grown up in the way of its ability to perform its proper public duties should be removed.
4.16 p.m.
VISCOUNT DILHORNE: My Lords, I feel that I ought almost to apologise for intervening in this debate, because I have spoken so frequently in recent days. But I rise to-day to intervene because certainly on two of the matters that have been raised I feel I can be of some assistance to the House. Certainly the noble Lord, Lord Tangley, has no reason to apologise or offer an excuse for raising this subject this afternoon. I think it is one which this House can most usefully debate and discuss. But I must say that I do not find myself in agreement with him in his major proposition, that the law is now tilted unfavourably, and unduly unfavourably, against the Press. That some changes should be made I think is certainly desirable, and I should like to refer to them in a moment or two.
I should like to approach the various points referred to in the same order as the noble Lord, Lord Tangley, dealt with them. First of all, with regard to contempt of court, I think it is true that the ignorance on the part of the Press, of editors and journalists, as to what constitutes contempt of court is quite remarkable. With all their resources I cannot see why they do not take enough trouble to inform themselves more about

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it. From what has been said in the last speech and the speech before, one might think that there were constant applications to the courts for committal for contempt, and also constant prosecutions for offences under the Official Secrets Act. I have had some experience of having to move motions for contempt, and I should like to say something about that aspect.
It was, I think, just before I became Attorney General that my noble and learned friend Lord Goddard recommended what is now the recommendation in this report, that proceedings for contempt by newspapers should be instituted only by the Attorney General. That proposal was considered at that time, and I think I am right in saying that the then Attorney General of that time did not agree with it. Nor did I; nor do I. I will explain why. I certainly agree that it is part of the Attorney General's duties, when matters are brought to his attention which appear to constitute a serious contempt of court, to bring the matter before the court; and that duty Attorney Generals have, I think, consistently followed. On occasions I had to follow it myself. What happened was that other people would bring to one's notice cases where they thought that there was a publication which constituted a contempt, and they would invite action by the Attorney General.
It is one thing to say that the Attorney General should be ready to undertake that duty if he thinks that the case warrants it; it is quite another thing to say that he, and he alone, can undertake it. I do not think I moved motions for committal for contempt very frequently. I had to do it now and then, but in answer to some applications, I had to say:" I do not agree. I do not think this constitutes a contempt, or it does not constitute a contempt of such gravity as to warrant a Motion to the court. But you must remember that, if you disagree with me, you can move the court yourself." Of course, there is a great advantage for the layman to get the Attorney General to do it, because it saves his pocket. It is also, I think, a great advantage that the layman, if he disagrees with the opinion expressed, should be free to move the court himself.
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Some time ago we had the Attorney General's fiat for appeals to this House from the Court of Criminal Appeal, and he alone could decide that. That lasted for some time but it has gone, and I am glad that it has gone. I think it would be a retrograde step to make it essential that the Attorney General should consent to a motion's being made to commit for contempt. In my opinion the present system is much better, because if the Attorney General says he is not prepared to move, then at least the layman has a warning. Of course, the court may take a different view; but if the Attorney General does not think much of it, then if the layman goes on it will be at his peril.
In this country, unlike Scotland, anyone as a general rule can institute a prosecution, and I should be sorry to see that right go. There are exceptions, and each time an exception to that rule is made it must be established that there is a good case for exception. And here I think that if this recommended reform were made we should be taking away one of the rights of the individual which he ought to be allowed to possess for his own protection. I take, for instance, the case where perhaps the Crown in involved in a piece of litigation and a layman feels that the publication in some paper may prejudice the trial. He might be not altogether content with the decision of the Attorney General. He might be critical if the Attorney General's decision was final. If it is left to him and if he takes an opposing decision, a layman can take steps, if he wants to. That seems to be a satisfactory procedure and I should be against any change in that respect.
How many applications are there against the Press for motions of contempt? How many have there been in recent years? Very few indeed. At the time when I was Attorney General there was, unfortunately, a slight increase in the number. There were some rather unfortunate cases where there was a contempt, and I believe that if editors and journalists had taken more trouble to acquaint themeslves with the law those offences would not have been committed.
Now may I turn to the Official Secrets Act? From what the noble Lord, Lord Francis-Williams, said, and indeed from

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what the noble Lord, Lord Tangley, said, one might think that the Official Secrets Acts were in daily use. The noble Lord, Lord Tangley, said the Act was used for muzzling criticism, and I was sorry to hear my noble friend Lord Dundee say that the Act was too often seized upon. What exactly is meant by those statements? Is it meant that there are too many prosecutions? I do not think that can be justified. Prosecutions can be instituted only with the leave of the Law Officers, and there are very few prosecutions for offences under the Official Secrets Act. But it may be that those words "Official Secrets Act" are used in terrorem and that they frighten at lot of innocent people—because, of course, they must be innocent with regard to the Official Secrets Act—innocent journalists and editors, once some official says, "Oh, the Official Secrets Act applies".
So again I think those who want to publish ought to make a more careful study of the Acts. They are wide in scope but they are not as wide as all that, and the prosecutions are very few indeed. However, I come out strongly against the recommendation in this report that in the case of a prosecution under the Official Secrets Act it shall be a valid defence to show that the national interest or legitimate private interests were not likely to be harmed. I should like your Lordships to consider for a moment what in fact that means and what it involves. How is that to be done? Is evidence to be called by the defence to say that the national interest is not likely to be harmed? In my belief, the question whether something is, or is not, in the national interest is really not a triable issue in the criminal courts. Suppose some evidence were called in support of this defence, the prosecution would then have to call evidence, and so the trial would be converted into a political debate and the question whether the accused had done the acts alleged would fade into the background.
May I remind your Lordships that some years ago there was a prosecution which I conducted against some individuals for seeking to invade an airfield on which there were some aircraft thought to be carrying nuclear bombs. These people were charged with conspiracy under Section 1 of the Official Secrets
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Act, and it was admitted that their object was to ground all aircraft, to immobilise the airfield and to regain the base for civilian purposes. There the charge was that they had conspired, among other things, for a purpose prejudicial to the safety and interest of the State. The accused sought to put forward the defence that the acts which they hoped to accomplish would benefit the State and not prejudice the national interest. The Judge at the trial did not allow that to be put forward, and the matter went to the Court of Criminal Appeal and up to the House of Lords. The Judge's ruling was upheld in each of these appellate tribunals. So what is suggested here is that the decision of this House, sitting judicially, should be reversed, and if there is another case of that kind then evidence will be allowable to prove what is, or is not, in the national interest. Then we shall be converting a criminal trial into a political debate.
The recommendation in this work of Justice, to which the noble Lord, Lord Tangley, referred, is that this defence should be available in all prosecutions under the Official Secrets Act. I cannot think that that is right, and it seems to me that if it were allowed in any case it would put the State in a very awkward dilemma. Supposing some evidence was given to show that it was the view of some that something which they contemplated doing was in the national interest, although possibly the majority of people took a different view then the Crown would have to call evidence in contradiction and the Crown might well be in a serious dilemma. If it called evidence in contradiction it might have to make disclosures which might not be in the national interest.
If this issue had been allowed to be raised in the trial in which I was engaged, the Crown would have been in real difficulty, because one would not have wanted to disclose precisely the role which that airfield played in the defence of this country. On the other hand, if that evidence was not given, then the Crown's case would be seriously prejudiced. I do not think that that recommendation is at all well founded, and I consider it is necessary for some further study to be made by those who feel they are threatened by the provisions of the Official Secrets Act. If need be they should not

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hesitate to incur the expense of getting a little legal advice, as a result of which I think that on many occasions they will be able to say to those who threaten them that they should go to a place of an inferior character.
May I now turn to the law of libel? I listened with the greatest interest to the speech of the noble Lord, Lord Thomson of Fleet. He was suggesting, I think his words were, just two small reforms, one of which was the abolition of a jury to determine whether or not the verdict should be for the plaintiff or the defendant. That, the noble Lord thought, was a small reform. We in this country have had juries dealing with these actions for many hundreds of years, and I would say to him that it certainly is not an apt description to say that that would be a small reform. It would be a major reform, with major consequences, and in my belief no case for it is made out at all. I do not think any case for it is made out by repeating gossip from some member of a jury or by citing a case where it is alleged, not that the jury did not understand what was happening, but that in fact, inadvertently, they had returned a different verdict from that which they intended. That was the small pigs case. I myself believe that it is right for the protection of the individual that he should have the right to have this kind of case tried before a jury. I do not believe that in the vast majority of cases the technicalities are such that the case is beyond the jurors' comprehension.
I come to damages. It is easy to talk about excessive damages. I entirely agree that in some cases the damages are obviously excessive. It is sometimes worth considering what it is that has led twelve reasonable men and women to award a sum in damages so far in excess of the damage done to the individual's reputation. There is no doubt that at times juries do get carried away. It may be because they think that insufficient care has been taken before putting forward a very serious suggestion against a man's character. However that may be, I certainly should not think that in future, following the decision of this House in the case which your Lordships know well, in another connection, Rookes v. Barnard, the risk of excessive damages is
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anything like so great as it was. But I would not myself be averse to giving the Court of Appeal power to interfere in the award of damages where they thought the damages were clearly excessive. I think that would be a desirable reform. On the other hand, it would in my view be absolutely wrong to take away from the jury an issue which is just the kind of issue that a jury should determine, the issue of malice where there is a defence of fair comment or qualified privilege. I do not think it would be right to cast that burden on the judge.
So far as the reporting of foreign Parliamentary proceedings or judicial proceedings is concerned, there is, I agree, a case for alteration of the law in favour of the Press. But I do not think that this argument for a new qualified privilege for the Press, which is put forward by Justice, and which was adumbrated by the noble Lord, Lord Francis-Williams, and put forward by the noble Lord, Lord Thomson of Fleet, will really do. The noble Lord, Lord Thomson of Fleet, said how hard it would have been if Mr. Lee Oswald had been found innocent and the Press of this country had had to pay heavy damages. There is the other side of that coin. I would invite the noble Lord to consider, supposing he was accused of some conduct in this country which was widely reported in this country, and which reflected upon his character and he was innocent of it, and supposing his innocence was proved, how hard it would be on him if a Canadian chain of newspapers made a full report of that conduct, and he, with his reputation in Canada, which deservedly stands so high, had no right of redress because the Canadian newspapers could say, "After all, we were only reporting what had been reported in England".
I do not think there is any case for this new qualified privilege for the Press. I do not think it is necessary. And though, of course, the case can be put at its strongest in support of reputable, respectable papers, the Sunday Times and others, one must realise that this kind of defence would be available to any publication, not only to the Sunday Times but also to Private Eye, and I have no doubt they would be able to call a number of witnesses to argue till the cows came

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home that in all the circumstances they had made reasonable inquiries before publishing a most defamatory libel. Therefore, as I say, I do not think that this new qualified privilege is necessary.
I have made my remarks as short as I can. I am very glad that the noble Lord. Lord Tangley, has raised this issue. I believe that there are changes which can be made with advantage. In particular, I think that Section 5 of the recent Act is not being achieved, and that obviously ought to be amended. But I hope that this House, after discussing this matter, will not be in favour either of this new suggested defence of qualified privilege, or of taking away the issue of malice from the jury; nor, indeed, of fettering the Official Secrets Act in the way proposed, or of placing on the Attorney General the sole responsibility for instituting proceedings for contempt.
There is one last thing I would say. When you have to study the Official Secrets Acts it is very hard to do so. The law is embodied in a number of Acts. There is a great case for clarification of those Acts, and I do commend that particular field to the noble and learned Lord on the Woolsack as a very suitable field for revision and, possibly, reform.
4.38 p.m.
BARONESS GAITSKELL: My Lords, I feel very grateful to the noble Lord, Lord Tangley, for initiating this important debate and for the interesting and informative speech that he has made, though I am nervous of discussing any aspect of the law in the presence of so many noble and learned lawyers. However, my very superficial knowledge of the law does not inhibit me from discussing any aspect of the Press. I find myself, very humbly, almost entirely in agreement with the noble and learned Viscount, Lord Dilhorne. At first glance the idea of enlarging the freedoms of the Press fills anyone in public life with despondency, if not with alarm. It seems to me that in this country the Press is very free indeed and is not much inhibited or constricted by any of our laws, when reporting on matters of public interest or in commenting on them. For three months of the year, when I sit on the Human Rights Committee of the United Nations, I continuously extol the freedom of our Press and hold it up as an example to the Soviet bloc and the Afro-Asians.
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Of course, all the laws relating to the Press are not perfect, being, after all, man-made. There is scope for many reforms, as has been said in the speeches already made, though not, I believe, for major ones, as the noble and learned Viscount, Lord Dilhorne, has said. The law of libel is often held up as an example, as has already been mentioned. When it comes to the damages granted when a man's honour and reputation is involved, juries can be fanciful, and ridiculous assessments can be made. The Press complains that the level of libel damages inflicted by juries has become an inhibition to fact-finding newspapers. I am perhaps a little sceptical of this charge. Fact-finding for the Press is quite a bulldozing operation. After all, a newspaper need have no fear of being libelled if it sticks to the facts and the truth. The remedy for unrealistic or excessive damages lies not with making exemptions for the Press, but in improving the law and giving the Court of Appeal the power to vary damages awarded by a jury. The Report called The Law and the Press, of a Committee whose chairman was Lord Shawcross, puts forward this suggestion. The Defamation Act 1952, which released the Press from having to prove the truth of each indictment separately—even the negligible ones—also removed another injustice.
A Member of Parliament, Mr. Harold Lever, proposes to bring in another Bill which will incorporate far-reaching reforms, allowing temperate comment on verdict and sentence which might amount to reasonable criticism of our judges. Lord Shawcross argues for what he calls a qualified privilege for the Press—the right to publish statements in the public interest which, because of our rules of evidence, are difficult to prove, only admissions of the inaccuracy and publication of an apology being required. This really fills me with alarm as well as despondency. Few of us in this House have not been the victims of misquotations, sometimes silly, sometimes serious. Few of us have not searched for that tardy line of apology in small print at the bottom of the page. It is rare (though it does sometimes happen) that an apology is headline or front-page news.
I think it would be true to say that the Press lives by the motto, "Everything that interests the public is in the

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public interest". Many of us would challenge this lowest common denominator for the publication of news. I do not think things have changed much since 1949, when a Royal Commission on the Press reported its findings, among them one that the Press showed a readiness to make statements on inadequate evidence, and that many newspapers fell short of truth and fair-mindedness—I do not say all; I say some. I myself would go further and maintain that in reporting the news and commenting on it there is still too much suppression, distortion, invention, triviality and sensationalism—all part of the stock in trade of some newspapers.
In 1960 the Queen magazine published a brilliant article by Penelope Gilliat which exposed the methods used by certain gossip columnists. The Denning Report, in 1963, after the Profumo affair, drew attention to the same kind of traffic in rumour and scandal. I quote from its conclusions:
"Scandalous information about well-known people has become a marketable commodity. True or false, actual or invented, it can be sold."
I myself have often thought that the bank statements of some gossip columnists might make lively reading. But Lord Denning, who I am glad to see here to-day, goes on to say:
"The law of libel and the rules of contempt of court exercise an effective restraint."
So I should be in favour of reforming the law of libel only if we introduced a law of privacy. They have one in the United States: why cannot we have one here? Otherwise, the private person, already often harassed by the Press, would be at its mercy. I would ask the Press whether they recognise an area of privacy for the individual, because this is a right which I believe should be most valued by civilised society—and we need a brake to stop the invasion of privacy, because to-day people in public life are vulnerable as never before.
THE EARL OF ARRAN: My Lords, may I interrupt the noble Baroness for one second to ask whether she does not think that there has been a great improvement in the last few years in this matter of intrusion into privacy? I would also say that there is no such thing left in the British Press as a vicious gossip column.
BARONESS GAITSKELL: Well, my Lords, I think there may have been some, though not such a great deal of improvement; but I still think there is an intrusion into private life, even to-day. I believe that the gossip columnists have never raised their heads as high since the articles by Penelope Gilliat—
THE EARL OF ARRAN: And since we had a debate in your Lordships' House on this subject at the same time. I should like to think that we also had some effect.
BARONESS GAITSKELL: My Lords, I apologise, in that I was not in your Lordships' House at the time and I was not aware of this. Newspapers are still free to rake up a man's past and ruin him. The law and Parliamentary privilege both act against this privacy. After all, the committal procedure of English law, as distinct from Scottish law, provides a feast for reporters, while it does not help unprejudiced trials.
In a free society we know that journalists have to be public watchdogs. That does not give them a licence in this country to be sleuths or King's Proctors. Mr. Baldwin made a memorable remark during a by-election, after he had been grossly libelled. He said:
"What the proprietors of these papers are aiming at is power."
Then he went on to say that
"power without responsibility is the prerogative of the harlot throughout the ages."
When speaking about the Press, I wish, so to speak, to make an honest woman of her, because I regard the relationship between the public and the Press in a democracy as a marriage—an indissoluble marriage; and I maintain that the prerogative of a wife throughout the ages is power coupled with responsibility. So, finally, I should like to stress that, so far as humanly possible, only provable facts should be published as being the only way of ensuring and maintaining the delicate balance between a free Press and the rights of private citizens.
4.48 p.m.
LORD REAY: My Lords, I am afraid I must start by apologising for the unlikelihood of my being able to be here for the end of this debate. I deeply dislike committing such a discourtesy to this House, but I shall certainly take great care to read the written record of

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everything that has been said in my absence.
On the subject of the laws of libel, I do not think there is as much wrong with them as do many distinguished Members of your Lordships' House. I am certain that the Press should have the maximum immunity to report and to comment critically on matters of public interest; but I think also that journalists do have a power to damage, the strength of which they sometimes do not seem to realise themselves. I think it is undeniable that damages have been excessive, and there is a long history of this. The outstanding example is the £100.000 award in the case of Lewis v. Daily Telegraph, when that newspaper had published a statement that the Fraud Squad were investigating the company's affairs. I am glad to say that, since that occasion, there seems to have been a different trend in damages awarded.
I feel that the way to deal with this matter is in the directions which judges give to juries, which should include an instruction that the award is to be calculated according to the principle of compensation but on no account according to any principle of punishment against the newspaper concerned. It is interesting to note that last year there was the case of Broadway Approvals v. Odhams Press, and when the matter came to appeal one judgment recognised this principle. Lord Justice Davies said that the damages which were then awarded, some £15,000, were out of all proportion to any damage the plaintiff could possibly have suffered. The learned judge specifically reproved the judge in the first court for not giving instruction to the jury that they should not consider awarding damages for their punitive nature but simply according to a just view of what the compensation should be. It may be that this signalised—and in some quarters of the legal profession it has been taken to have signalised—a new departure in this respect. If this is so, some of the very justified objections may now have begun to be met.
On the proposal for qualified privilege, although in principle it is attractive, one must admit that it has grave defects. It would enable untrue statements to be made by someone which could cause great damage indeed and could be said to
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ruin a person's reputation. It is said that, to provide against cases like this, newspapers should be required to print apologies. I have never in my life seen a published apology in a newspaper that looked a sufficient recompense for the damage that might have been done by a libel. I do not blame the newspapers for this. I think that this is probably a very difficult thing to do, and even if an apology were given some sort of prominence in the newspaper, I very much doubt if its effect would be to restore the reputation of the individual to what it was before the original libel was committed.
It is arguable against this that newspapers may take less trouble to check their facts. The principal objection is that probably a range of authorities, possibly from malicious informers up to something as respectable as The Times, could be produced as plausible authorities for the libel which was said to have been committed. One imagines that it is possible for a libel to be passed from one newspaper to another; that is to say, for one newspaper to take it off another. If the first newspaper is highly respectable and has a good reputation for reliability, this could amount to sufficient justification for other newspapers having printed the libel themselves. I believe that there should be an alteration in the "Limitations Act".
At present one can institute proceedings for libel any time within six years of the offence complained of. I feel that this is far too long a period. Justice suggested a period of six months, which is possibly too short, and I feel that it should be something of the order of a year or so, provided that there was an escape clause for special circumstances where it had not been brought to a person's attention, or he was abroad or ill. This might go some way to meet the objection which was mentioned by Lord Tangley.
I agree wholeheartedly with the noble Lord, Lord Thomson of Fleet, that there is no justification whatever, in this age of expanding international interests, why the same privilege should not extend to "fair and accurate" reporting of proceedings in foreign tribunals, even if they are defamatory, as is now extended to domestic tribunals and also proceedings in Commonwealth tribunals. In current law the test as to whether or not it is

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libel to print proceedings in a foreign court is this—and I quote the judgment in The Times case in 1960:
"One has to look for a legitimate and proper interest as contrasted with an interest which is due to idle curiosity or the desire for gossip."
Clearly, this is a very difficult distinction to draw, and in cases such as the Bobby Baker case in the United States newspapers face a very difficult problem indeed. Some newspapers find it difficult to decide what they are permitted to print, and what they are not.
I consider that in all cases it should be a sufficient defence against libel to prove that there has been a conviction for the offence, for the mention of which the newspaper is being sued. In other words, after the appeal has been heard offences for which a person has been convicted should then become facts which for the purposes of libel are true; that is to say, that it should be possible—which it is not at the moment—to refer to the train robbers without thereby making yourself liable to a charge of libel. At the moment this is not covered. You are not able to say that A is a murderer, or that he stole something, on the basis of his having been convicted of it. I do not think it is even clear whether one is covered if one says that X was convicted of that crime. In principle, there must be an end to litigation, and it is quite wrong that anyone should be able to use a private person to have his case retried, for the purposes of proving whether or not a conviction was correct.
There are only two things I should like to say on the matter of contempt of court. In the first place, I would refer to what recently happened in the Moors case, where the chief prosecution witness was discovered not simply to be in receipt of financial reward from a newspaper for a story that he was providing but with a definite and admitted financial interest in a conviction rather than an acquittal. It seems to me to be in every way thoroughly undesirable that such a thing should have been permitted, and I regret that it has been decided to take no action in this matter. This being so, it seems to me that, unless the Press Council is able to control this sort of thing, there will have to be legislation on this subject.
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The final matter to which I will refer is the question of commenting on judgments, convictions and sentences before cases go to the Court of Appeal. This seems to me to be the time when newspapers are likely to want to publish their commentary. At present the rule is that comments may not embarrass a judge in the sense of influencing him so that "his impartiality might be consciously or even unconsciously affected." This seems to me to be an astonishing requirement. I wonder how on earth one could test the likelihood of whether something will affect a judge's impartiality unconsciously? In a case in 1960 concerning an article written in the Daily Sketch, Mr. Justice Hilbery said that he could not imagine a judge reading, let alone being influenced by, the Daily Sketch. The implication is that there are other newspapers which would have to take greater care in this sort of case because they are newspapers which might influence a judge and are obviously more vulnerable. I think that the Appeal Court should be treated as if it were of impregnable impartiality, and I do not imagine that that Court would quarrel with such an assumption.
5.0 p.m.
LORD GOODMAN: My Lords, may I apologise for intervening in this debate without having had the opportunity of hearing the speech by my noble friend Lord Tangley? Unhappily, I was occupied on public duties. I am therefore under that disadvantage, but I have taken the opportunity of receiving a rapid report of what he had to say. I gather that the general tenor of his remarks is what I anticipated, and why I have intervened, to commend to your Lordships in substance what has come to be called, perhaps not with entire accuracy, "the Justice report" in relation to reforms in the law of libel so far as it affects newspapers. I should perhaps declare a rather slender interest. I am a trustee of a Sunday newspaper, but I have no editorial commitments in the matter. More important, I have for a long period of my professional career been engaged in matters connected with libel. I have advised, I imagine, many hundreds of people on the subject, often very wrongly; but it has been a matter of special interest and concern to me, and I can speak with an accumulated

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weight of professional knowledge. However sordid, is another matter.
I would say this. This report comes bearing the commendation, which it necessarily brings with it, of having as its sponsors and authors the noble Lord, Lord Shawcross, and the noble Lord, Lord Tangley, among others. It would show great temerity to question the views expressed by either of those gentlemen on a subject of this kind. I am going to venture to display a little of that temerity, however, because I think that their immense professional standing (Lord Tangley is a most distinguished member of my own profession) will bring a weight and respect to this report which makes it doubly necessary that it should be studied with particular care.
The first point I should like to make about this report is that it is necessary to examine the circumstances in which it was made. I do not mean that there is anything suspect or sinister about the circumstances—it is an immensely respectable report, having the most factual origins—but it contains no published evidence of any kind. There is not a syllable of evidence from anyone in the report—although evidence was, in fact, received by the committee—to support any of the recommendations made by the committee. There may have been a good reason for it—I do not know. But I should have thought it would have been very much better to receive the evidence and publish it, and to ascribe to particular individuals a viewpoint on the matter, so that the reader could assess how many people were in support of one view and how many against it. But that does not appear in the report.
More important, it is disclosed—and I think proudly disclosed—that the committee took evidence only from members of the Press. I would urge your Lordships to consider this. This is a report which is recommending the enlargement of the rights of newspapers; it is recommending that newspapers should have higher privileges. That result can be achieved only by taking away someone else's rights; it can be achieved only by diminishing the rights of the public. I venture to suggest very strongly to your Lordships that a committee which did not hear the voice of the public, which deliberately excluded the voice of the public, could arrive at nothing but a
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one-sided conclusion, however distinguished the members of the committee, and however profound their knowledge of the law. If ever there is a subject where it is necessary to receive the views of people who have been concerned in this situation I think the law of libel is that subject. And that is particularly so in relation to newspapers.
One of the deficiencies of this report, and it is a very marked deficiency, is that it fails anywhere to indicate the present constitution and control of our Press. I am not concerned to attack the Press. That would be far removed from any desire I have. But I think it is very important, where one uses camouflage words like "the Press", that a report which is supposed to have considered the rights and privileges of the Press should indicate the nature of the Press with which it is dealing. In fact, of course, we are dealing with newspapers owned by a very few private individuals, who wholly control them and exercise absolute powers in respect of them. I do not think our Press is worse than anyone else's Press, but it is a highly fallible human institution, and we must therefore, before increasing the rights that we bestow upon it, take into regard the nature of that fallibility.
The liberty and the safety of the realm are preserved by securing suitable safe-guards against highly fallible human institutions, and I think that the law of libel at the moment constitutes one such safeguard. It would be very dangerous indeed to tamper with that right without an authoritative Royal Commission having heard all the views of the people who are concerned in this matter, which could affect every private citizen in the land. I would venture to say this. I do not for one moment dissent from the views expressed about contempt of court and about official secrets. But when it comes to the law of libel, I do very profoundly dissent from many of the conclusions.
I do not intend to weary your Lordships with a long speech, but I should like to instance a few cases. I should like to touch, first, on the one that was mentioned by the last noble Lord who spoke. He was referring to a suggestion that there is some injustice to a newspaper, in not providing a privilege for the publication of a report of a foreign court. In my opinion the law as it stands

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at the moment, and as it was enunciated by a learned judge in a most recent case, is absolutely exemplary on this matter, because what the law says is this. If the report of the foreign court is a matter of general public interest in this country, then it receives a qualified privilege. But if it is a matter of no public interest in this country why in Heaven's name (if I may put it in that way) should it be necessary to bestow any privilege upon it?
Let me instance a case from my own experience. A man goes to a foreign jurisdiction. He becomes involved with some notorious or immoral woman. She sues him for an assault. She sues him because she is using the publicity that is attendant on proceedings in foreign parts as a blackmailing weapon to exact money from him. Why, in any circumstances whatsover, should a report of those proceedings receive a privileged position in regard to action in this country? Why, in fact, should a blackmailing weapon be sharpened on behalf of this lady by the law of this country? It is totally unnecessary, and in my opinion this would be a reactionary reform and one that is not in the public interest.
I come to the major recommendation, which is a startling one. I refer to the suggestion that there should be a qualified privilege where a statement is published allegedly as a matter of public interest (whatever that may mean), and where it emerges that although the statement is untrue it is based upon what is regarded as reliable information; it comes from a reputable source. If one analyses this, what it involves is that we should penalise a newspaper when it published a wild rumour but protect a newspaper when it published a plausible rumour. This cannot be right. Just imagine the situation of an unfortunate person who is defamed by a newspaper and who has to go through a lengthy, complicated and expensive libel suit to establish, not whether the statement was justified, not whether he deserves the reputation he holds at the moment, but whether, in fact, the newspaper received its information from a reputable source. I have rarely heard a proposition that commends itself to me less. I would urge upon your Lordships not to send any message from this House which gives
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the slightest support to an amendment of this kind.
The public interest is heavily involved. It is not necessary to abuse the newspapers. I do not believe they are seeking opportunities to defame people. But the important weapon in the possession of a private person, which enables him to deter newspapers from publishing matters, is one of the things which holds the balance between the public and the newspapers. I believe that in this instance the newspapers require to be protected from their friends. I know that The Times, the Observer and other newspapers did not commend this particular reform to the committee when the report was published. I know that it is not strongly supported by the legal profession. I should be surprised if many of the practitioners of the law of libel, very few of whom had any part in the preparation of this report, would find themselves on the side of a reform of this kind.
That brings us to the question of damages. There is throughout this document an unspoken abhorrence of juries. With this view I have no sympathy at all. I think that a jury does protect the private person from great and oppressive power. It will be a sad day indeed—and I have suffered at the hands of juries; and clients of mine have suffered at the hands of juries—when we abolish the jury and say that, because a jury is prepared to award swingeing damages against a newspaper, there should be discriminatory legislation in favour of one class of the community so that a jury does not adjudicate on those affairs.
I would invite your Lordships to consider this. The quantum of damages in libel matters has been large for very many years. In 1907, I think, Lever Brothers and associated companies recovered damages to an amount of £151,000 from one newspaper, still in existence, for what was undoubtedly a very serious defamation. Nobody asserted or suggested that on account of that verdict damages should be reduced in libel actions. The verdict was accepted and approbated as a rightful verdict for a serious injury. In the 1930s, Princess Yusupoff recovered some £30,000 from a film company, because there was an

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imputation against her virtue. Nobody suggested that the law in relation to damages should be changed. What has happened since then is a considerable amelioration of the situation in favour of newspapers. The cases cited in this weird and wonderful report, if I may call it that, are nearly all cases which have had an end result in favour of the Press.
The Rookes v.Barnard case has established what I think is the unsatisfactory decision that penal damages can now no longer, as a matter of course, be obtained in libel. I think this is quite wrong, but it is a decision in favour of the Press. The Lewis case decided that the House of Lords could intervene and declare as ridiculous the damages that were awarded by a jury in circumstances which, under analysis—and I do not know Mr. Lewis, and had no concern in his case—were by no means ridiculous. If he succeeded in making out to a jury that he and his company—a public company of substance, as it was—had been accused of dishonesty in a fashion which reduced the value of the assets of the company, why was it wrong, why was it inappropriate, that the jury should award damages which they thought would rectify that situation?
It is, of course, right that a sensible balance can be maintained. It is right that the Press should not be terrified by the prospect of publishing anything; but the Press are great and rich and powerful institutions. I do not think the Press is deterred in any way from publishing something because of the fear of an ordinary libel verdict. It is very significant that, in relation to the newly-claimed defence of privilege for statements which are not true but are based on well-authenticated report, the report does not instance a single statement, if I may say so, of what the newspapers wanted to publish but were prevented from publishing. I have not heard a single word, a single paragraph, instanced to support the introduction of this particular reform. If such a reform were to be brought in, it would be absolutely imperative that a whole list of matters which in the public interest should be mentioned by newspapers should be brought to the notice of the committee which was engaged in preparing the report, that one should be satisfied that
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there was a serious inhibiting factor in this matter, and that one should be satisfied that the newspapers could not do their duty.
After all, there is nothing to prevent a newspaper from publishing anything provided that it can justify it. The newspapers have an enormous area of privilege in the law of libel, and I will instance a few examples. Take the case of fair comment. Very properly, our law provides that any amount of criticism, however foolish, however misguided, however ignorant, however absurd, can be published without any risk of a libel proceeding. If the comment is fair and if it is a matter of public interest, it does not matter how perverse the comment is, a newspaper may publish it. Yet we find this is not enough. In this strange report, there is a plea for an addition. There is a plea that a newspaper should be entitled to publish a comment which it knows initially to have been malicious, or which was initially malicious, and which, on account of the malice, it can republish without any danger to itself. On what conceivable ground can an extension of a privilege to a newspaper be permitted in such a case?
I think that the law on fair comment, if anything, goes too far. It has been held by the House of Lords to mean not fair but honest comment. It means that you are subjected to anybody's comment on a subject on which you are an expert and he is a complete tyro, and you have no redress of any kind. I think that, on balance, it is probably right. I think it will be a very sad day if we seek to restrain the right of critical expression. But it is an enormous and valued privilege, and the newspapers are very fortunate to have it. Many countries do not have it; and the newspapers should not ask for too much when they already have such a substantial share of the cake.
Another great privilege of the newspapers, nowhere mentioned in this report, is our law in relation to injunction. You cannot get an injunction to restrain the publication of any material if the defendant is prepared to say that he justifies it. If your Lordships think for a moment you will realise what an extremely civilised nation this is. It means that if a newspaper thinks it is in the public interest to publish something, or

1419
if a publisher thinks it is in the public interest to publish something, and is prepared to stand by it and justify it, you cannot suppress that publication. This is a most valuable privilege enjoyed by the newspapers.
They have many other privileges. They have special defences of every kind; and they have other privileges which are not found in the law. Nowhere in this document is there to be found a syllable about the difficulty of a plaintiff who wants to institute proceedings. Think of the position of a man of slender means who finds that he has been maligned by a newspaper, resents it bitterly and wants to vindicate himself. What is his situation? He cannot get legal aid because libel is not one of the grounds on which a legal aid certificate can be issued. He must risk his entire fortune. He must take his courage in his hands and decide whether he prefers to preserve his fortune or his reputation. That is the risk he has to take—and he is fighting the enormously long purse of the Press. I do not think the Press is wise to ask for these additional advantages.
I think we enjoy a good relationship with the Press, and that we shall continue to do so, but I believe we enjoy it because the Press realises there are restraints available to people who are tried too far. I do not suggest for a moment that the publication of this report coincides with any particular misbehaviour on the part of the Press. There is a rather comic feature of the report, if I may say so, which is that at various stages we are told the Press is much better, that it has improved, that its image has improved. We are not told what were the cracks or the chips which previously disfigured its image. I do not know how, in fact, it is possible to arrive at a conclusion on this matter without knowing something about its previous enormities, its previous iniquities. What was it that gave it the bad reputation from which it has now redeemed itself? How has it redeemed itself? It appears to have redeemed itself on its own ipse dixit. No one else says that it has redeemed itself except the Press. I do not know, and I am not accusing it of anything, but it appears to have accused itself of very serious crimes and
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then to have declared that it has reformed, and, as a reformed character, is entitled to special consideration.
Let me now come, if I may say so, to the last of the suggestions which in some ways is the most opprobrious. That is the suggestion that, if a man is sued for libel, there can be introduced into the defence by way of mitigation any evidence relating to his previous behaviour, provided that it has some sort of relevance in point of time or association with the libel. Consider the implications of this. I am, let us say, a malevolently designed editor of a small newspaper—I would not suggest it would be done by a large newspaper—and I know that a particular person has committed particular offences; that he has in the past been, say, a homosexual and has associated with other homosexuals. I know this and I wish to injure him. I therefore publish a statement that he has done it again. I publish an allegation of a homosexual association with another person. My position is absolutely secure, because I know that, although it is untrue of this particular instance, I can bring up against him the earlier instances of which I have known. Nothing is more contrary to the tradition of British justice than that a man may not bury his past. Nothing is more contrary to that tradition than that a man may not redeem himself by subsequent good behaviour. Yet here in this report we find an invitation to revoke both of those principles. It is, if I may say so, totally unacceptable.
The newspapers have another privilege in the realm of criminal libel. No proceedings can be instituted against them without, I understand, the consent of a judge in chambers—I think it is a judge in chambers who must give consent before proceedings can be instituted. This, I think, is right. I think the law of criminal libel can be gravely abused. I should like to say this because it is the first opportunity I have had, and may be the only opportunity I shall have, of mentioning a matter which has been of great concern to me but not in relation to newspapers.
I recently observed that the law of criminal libel—a most terrifying, blunt instrument that has always been regarded

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as inappropriate for any delicate use—was employed by the police who instituted criminal proceedings against a man who was accused of a particular crime, because he had alleged that the police officers concerned had stolen his possessions. If there is one change that is required, it is to prevent a repetition of this sort of situation. I am not suggesting that the circumstances were not right; I am not suggesting that the man ought not to have been convicted. But think of the situation of a man charged with one crime who wants to make allegations against police officers whom he alleges have assaulted him or stolen from him. What an extraordinary thing it is that the law of criminal libel should be used for this purpose‡ I think myself that the conviction was entirely inappropriate. The law of criminal libel requires as one of its planks that there should be the possibility of public disorder. In relation to a police officer, I should have thought by definition there was no possibility of public disorder. A police officer is a man trained to maintain order. I should like the noble and learned Lord the Lord Chancellor to be kind enough to look into this case because it is a conviction which must give the greatest anxiety and concern to a great number of people. It is a sphere in the law of libel where I think changes are required.
May I conclude by saying this? I have a great respect for the noble Lord, Lord Tangley. I have expressed my view of him as a most distinguished member of our profession, and that he is. I will add only this. I think a man of his public distinction, and a man of Lord Shawcross's public distinction, are entitled to an occassional abberation.
LORD TANGLEY: My Lords, may I ask my noble friend Lord Goodman to refer me to the passages on "fair comment" in the report to which he objected, because I could not find them, or any other of his views on "fair comment", in the form in which he made them?
LORD GOODMAN: My Lords, I did not refer to "fair comment" in connection with the report. I was alluding to the general law as being extremely wide and protective of newspapers in relation to fair comment. I did not find in the
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report anything touching on fair comment at all. I should have thought it appropriate for a report which is to recommend various very drastic, draconic changes in the law of libel in favour of one particular section of the community to have instanced the privileges that section already possess.
5.20 p.m.
LORD CONESFORD: My Lords, the noble Lord, Lord Tangley, has introduced a Motion of the greatest interest in a characteristic and admirably moderate speech. It has given rise, I think, to a very good debate and, I am bound to say, to the very brilliant speech to which we have just listened. I have not had the good fortune of hearing Lord Goodman's previous interventions in our debates, but I shall certainly look forward to them in future. My greatest regret about his speech was that the noble Lord, Lord Thomson of Fleet, was not here to enjoy it, if that is the correct expression.
The most astonishing statement made in the course of this debate was by the noble Lord, Lord Thomson of Fleet, who suggested, as a quite minor but necessary amendment of the law, that we should abolish trial by jury in libel cases. Let me say at once in the interest of Lord Tangley that this, of course, is not recommended in the report. But I think it is rather interesting that somebody with knowledge, at any rate of the Press, should be quite so ignorant of the history of this country and the importance of trial by jury.
To show that I am not exaggerating this matter, may I read one sentence from a celebrated judgment of Lord Justice Scrutton in the case Broome v. Agar:
"Since Fox's Act of 1792 it has been a commonplace of civil procedure that libel or no libel, since Fox's Act is, of all questions peculiarly one for a jury …'"
I need not go on. But, really, to cast aside something so embedded in our law since Fox's libel Act of the 18th century as though it were a matter of trivial importance will not, I think, endear the modern Press even to the Liberal Party. I did not mean that; I should have said that it will not endear them at all to the Liberal Party. I was making a comment on the speech of the noble Lord, Lord Thomson of Fleet, and was not suggesting that the Liberal Party did not value Charles James Fox.

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One of the things that pleases me in this debate is that, on the whole, there has been no unnecessary deference to the Press. Let me make my own position clear. I have many very good friends in the Press. I agree with my noble friend Lord Tangley that the Press has many good points and many bad points; and do not let us pretend that the Press is the unique guardian of all that is good and must never be criticised for anything. I was refreshing my memory this morning of a passage about the Newspaper Man by George Bernard Shaw which has always given me pleasure. It will be found in a stage direction in Act IV of The Doctor's Dilemma. Let me read it to the House:
"Walpole returns with the Newspaper Man, a cheerful, affable young man who is disabled for ordinary business pursuits by a congenital erroneousness which renders him incapable of describing accurately anything he sees, or understanding or reporting accurately anything he hears. As the only employment in which these defects do not matter is journalism (for a newspaper, not having to act on its descriptions and reports. but only to sell them to idly curious people, has nothing but honour to lose by inaccuracy and unveracity), he has perforce become a journalist, and has to keep up an air of high spirits through a daily struggle with his own illiteracy and the precariousness of his employment …".
There are many journalists who do not answer to that description; but there are also many journalists who do. So for Heaven's sake let us be free of this nonsense that the Press is an institution to which we owe quite unreasonable respect and allegiance.
LORD LEATHERLAND: My Lords, as one who has earned his living as a journalist for well over 40 years, I think I might apply those very words of Shaw's to lawyers.
LORD CONESFORD: Not only "might"; the noble Lord certainly will; frequently. I have no complaint whatsoever of his doing so. I do not think that lawyers are immune from criticism. Nor do I think they are always demanding extra privileges for themselves. But I am saying that I think the Press has some good points and some bad points. The main object of my intervention is to say that, while there may be defects in the law, there are many more defects in the Press—and I think that needs saying.
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My Lords, to turn to the report of the committee of Justice (and may I say that I am a member and a supporter of that institution), I read this report last year with the greatest interest. I agreed with some passages and disagreed with others. Perhaps I ought to give an example both of my agreement and of my disagreement. First of all, I think the noble Lord, Lord Goodman, was perhaps a little unfair to the suggestion in the report that the Court of Appeal should be able to deal with cases where the jury, in the opinion of the Court, had gone wrong on damages. I think that that is a passage in the report for which there is a good deal to be said, because under the law as it now stands the Court of Appeal already does so in cases where the damages have been grossly excessive; but it can do so only by ordering a new trial. I think the object of the report was that the power to deal with damages which the Court of Appeal now has by ordering a new trial ought to be exercisable without the necessity of a new trial. For that reform there is rather more to be said than one would have gathered from the speech of the noble Lord, Lord Goodman.
Might I turn to the other suggestion which was not mentioned by the noble Lord, Lord Tangley, but which was a prominent recommendation in the report; that the question of malice should be for the judge and not for the jury. I cannot think of any question of fact arising in a libel case which is more obviously for the jury than the question of malice. If we believe in trial by jury at all in libel cases—and we have had it since Fox's libel Act in the 18th century—it seems to me that we must leave the question of malice to the jury. With the claim for a new qualified privilege I do not propose to deal at any length, first because it has been admirably dealt with by my noble and learned friend Lord Dilhorne and by the noble Lord, Lord Goodman, and secondly because it is, I understand, going to be dealt with by one of the noble and learned Law Lords who are to follow me. I would say only this about the proposed new privilege. I am not at all convinced of its desirability, still less of its necessity.
It is suggested that a newspaper has a duty to publish various matters which at present it is inhibited from publishing

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for fear of the law of libel. My Lords, I should be more convinced of the genuineness of this complaint if some newspapers were not so very selective in their consideration of what it is their duty to publish. One might have thought, for instance, that newspapers which are so free with their criticism of industrialists who hoard labour would publish their own agreements with the trade unions; agreements maintaining scandalous restrictive practices, which have been brought to light both by a Royal Commission, some three years ago, and by a more recent Report of the Prices and Incomes Board. Those noble Lords who want further particulars might refer to the admirable speech in this House on the 11th of the present month by the noble and learned Lord, Lord Shawcross.
When newspapers ask for new privileges under the law of libel, in order that they may publish information which they say the public ought to have, they might, I think, show their sincerity by letting the public have full particulars of the numbers of men they maintain, either in idleness or ludicrously under-employed, in order to avoid labour difficulties. A subsidiary purpose may be to make the production of newspapers so expensive that they need not fear that any new rival will arise. My Lords, that is a suggestion to the newspapers. The particular evil to which I call attention is, of course, about to be increased in its scandalousness by the lunatic suggestion that they should be given a bonus for the unnecessary labour that they hoard. That is a suggestion of such outstanding lunacy that it will no doubt be the subject of further and different debates.
The other matter to which I wish to allude, and on which I am critical of this report, was mentioned in a speech—with much of which I agreed—by the noble Baroness, Lady Gaitskell. It is the question of the invasion of privacy. My Lords, there is a paragraph in the report which deals with this, paragraph 107. I will not trouble to read it to the House, but I think that it is much too optimistic. It suggests that this is a difficult matter on which to legislate; which it is. But it also suggests that this is eminently a matter for the strengthened Press Council, and that the growing influence of that Council will be sufficient to deal with this evil.
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My Lords, I do not share that optimism. I do not think there is any evidence that the Press Council, in spite of its excellent intentions, either can or will cause the newspapers to abandon all these invasions of privacy. I was one of those who spoke and voted in the debate on the Second Reading of the Bill of my noble friend Lord Mancroft on March 13, 1961. The Second Reading was carried by a majority of 74 to 21—a majority of more than 3 to 1. The noble Earl, Lord Arran, interrupted the noble Baroness, Lady Gaitskell, this afternoon to ask whether this was not a matter in which this House had set such an outstanding example that the evil had largely vanished? I am glad that the noble Baroness, making a very temperate reply, reserved her right to look into that. I would only say that the noble Earl, Lord Arran, on that occasion in 1961 voted with the minority, and I am very glad if he now thinks that that debate with that result did so much good.
LORD BOOTHBY: My Lords, may I interrupt the noble Lord for one second? He has not yet told us what Lord Arran's Bill was about.
LORD CONESFORD: My Lords, it was not Lord Arran's Bill, it was Lord Mancroft's Bill. The noble Lord, Lord Boothby, will find the debate in Hansard of March 13, 1961.
LORD BOOTHBY: I will look it up.
LORD CONESFORD: It was a Bill to confer a right to privacy on the individual so that, if there were an outrageous invasion of privacy, it would give a right of civil action. Some very interesting speeches were made in that debate, and I think it was agreed by the majority that there were many difficult questions which had to be looked into. But the House, by a strong majority, supported the Second Reading of the Bill.
Now, my Lords, if it is said that there is now no invasion of privacy by the Press, I wonder whether such a suggestion could be seriously made by those who read our Press day by day. Let me give two examples. The first example is a matter about which our Press has offended far less than the American Press, but still, I think, has offended. Why on earth should the widow of

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President Kennedy have no right to a private life? Why on earth should the Press speculate on what future arrangements she may or may not be considering, and whether she is considering being married, to whom and things of that sort? It seems to me an intolerable affront that this lady is considered by the Press—here our Press is much less bad than the American Press—to have no right to a private life.
I give another example. What about members of our Royal Family? Is it really thought by Members of this House that the Royal children should have no right at all to a private life into which the Press does not pry? I cannot believe that that represents the view of most noble Lords. But, nevertheless, the Press goes on treating any member of the Royal Family as a person with no right to a private life at all. I could give many other examples, but I will not do so. My view is perfectly simple. I know that there are difficulties about devising a satisfactory law to protect privacy. But, my Lords, I say this. If such legislation is practicable, it should be introduced. If it is not practicable, then the Press should improve its conduct without legislation. Any easing of the law of libel as it affects the Press should follow, and not precede, a marked improvement in its conduct.
5.38 p.m.
LORD DENNING: My Lords, we are here concerned with a question of balance. Freedom of the Press is essential to our liberties, but it must be combined with responsibility, because the Press owes a duty to every individual not unjustly to accuse him, and the whole of our law of libel, and indeed of contempt of court, is aimed at preserving the right balance. The task eventually is left to a jury, and, as my noble friend Lord Conesford has said, it was established many years ago that the question of libel or no libel was for a jury. Indeed, judges at one time went wrong. Lord Mansfield himself said that "libel or no libel" was for the judge, and in effect directed a jury to find the printers and publishers of a newspaper guilty. They found them not guilty. And Charles James Fox, in Fox's Libel Act of 1762, affirmed that the law always had been: "libel or no
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libel" was for the jury. And if I may say so to the members of the Press, the freedom of the Press in England was established by the jury.
But juries do occasionally go wrong. There is no doubt whatever that in quite a number of cases lately juries have awarded damages which are far too high. Let me say at once that in the Court of Appeal we regard ourselves as having power to set aside an award by a jury if it is out of proportion to the circumstances of the case. We have the self-same power in regard to the award of a judge, and we have recently declared that we have the self-same power in regard to the award of a jury: and, indeed, we can, if need be, send it back to be assessed by a judge. I feel that we need no further powers in that regard.
Then this report suggests that newspapers should be given a wide and extended qualified privilege in regard to matters which are of public interest. This matter was considered in an Act in 1952, and they have been given all the privileges that they could reasonably desire. For instance, in regard to the publication of the Racing Calendar of the Jockey Club, they can insert the decision of the Stewards without fear. Indeed, quite recently we had a case in our court where they were allowed to publish the request by the police for information as to an offender. Matters of public interest of that kind have been laid down by Parliament as being matters on which newspapers can comment quite fairly as long as they do it without malice.
This brings me to the question of malice. This report suggests that the question of malice should be withdrawn from the jury and reserved for the judge. Comment has been made on the recent case which came into our Court, and perhaps I may remind your Lordships of the details. It was a case where some auctioneers put up three little pigs for sale in a market, and then some man—a fraudulent man—gave the name "Boston of Rugeley" and the little pigs were knocked down to him. He went off with them without paying and was never seen again. He had stolen them. Those auctioneers wrote round to other auctioneers to warn them. They informed the police, and the police put out a television broadcast in order to try to find the thief, in which they said that a man

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wearing a brown smock, giving his name as Boston of Rugeley, had made off with the three little pigs. This was clearly a privileged occasion for the police.
The matter was tried before a jury, because a true Mr. Boston of Rugeley said that he had been defamed. It was difficult to see that he was, because everybody knew who he was and knew that he would not have taken them; and the auctioneers actually told the police: "Of course, it was not Mr. Boston of Rugeley". The jury, quite properly, after five hours' consideration, found the auctioneers not guilty of malice, and the judge quite rightly awarded the verdict for the defence. The jury afterwards, for some unknown reason, wanted to say that they had made a mistake. I do not want to comment too much on the jury, but they made not the slightest mistake. They had found a full and proper verdict, and it would be quite impossible for any court to let them say the contrary. That really upholds trial by jury; it upholds the right of a jury to say whether it is malice or no malice. It does not in any way shake my confidence in the jury system.
Then I would mention the matter of commenting upon judgments which have been given in a court. Our courts of law are, and should be, as much open to comment and criticism as anyone. We are not afraid of it. Indeed, as my noble friend Lord Reay said, if a judge in a trial court gives a decision or a verdict, we do not mind the newspapers commenting on it. It would not influence us in the Court of Appeal. I do not think we should take too much notice of what the newspapers said.
There is one final matter, the right of privacy. Certainly, scandal of people in public positions is a marketable commodity. I myself have seen how much has been paid for it from time to time by newspapers, who are only too glad to use it whenever they have the opportunity. If it is true, and it is published, no person at the moment can complain in law. And not only that, but some people do not wish to bring libel actions, or actions against the newspapers, in regard to it because of their positions. We ought to have in our law a right of action for infringement of privacy. There was wide support for it in this House in Lord Mancroft's Bill a few years ago. In the
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United States there has already been developed at common law a right of action for infringement of privacy. We can only do it at the moment under cover of an action for libel, as in Mr. Tolley's case a little while ago. I hope it is still open to the judges, if the occasion should arise, to develop it, and if we have the opportunity I think we have a good chance; but in case we do not have a chance I should welcome a Bill in this House to give a right of action for infringement of privacy.
But all this, as I have said, is a question of balance. Some of the matters which are recommended in this report of Justice have a little foundation, but the major ones, I feel, ought not to commend themselves to your Lordships' House. Over the years we have tried to get the balance, and on the whole we have succeeded. Do not interfere too much.
5.48 p.m.
LORD MORRIS OF BORTH-Y-GEST: My Lords, I should like to join with other noble Lords who have expressed gratitude to the noble Lord, Lord Tangley, for introducing to your Lordships to-day a discussion on a subject which is, I think, of wide general importance. I approach the question as one who feels admiration for most of the activities of the Press and admiration for the greater part of the work that they do. We depend so greatly upon the Press. It is quite impossible for any one of us to take an intelligent interest as a citizen in the affairs of the community unless we have the quite remarkable services that are provided for us by the Press. I never cease to wonder that in the morning at the breakfast table there is a newspaper which brings one up to date with an account of the events, not only here but throughout the world, and often most helpful and useful comments which set one on a line of thought. All that has been produced with a race against time. The clock does not stop, and trains do not wait for the finishing touches. So I approach this question with a sense of gratitude for most of the activities of the Press.
But I feel that it is right and proper that we should pause to consider whether the law is being in any way unfair to the Press who are performing for the most part this valuable public service. I respectfully agree with the approach of

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the noble Baroness, Lady Gaitskell. I do not think we can too often remember that truth in a civil action is an absolute defence—justification. There is not always the necessity to publish something that is published, but if it is published, in a civil action truth is a complete justification. What a great defence that is‡ What a great privilege that is‡ If I may respectfully say so, surely the approach of the noble Lady was a wise one: that if we keep to the truth and adhere to the truth in what is published, then difficulties do not arise.
But I think we must recognise that a libel action is an action in which somebody claims damages for loss of his reputation. We must know that there are cases where a plaintiff is quite un-meritorious; there are cases where a plaintiff becomes a gold-digger. If there are any defects in the law in cases to which such a description can apply, then surely we ought to seek to put them right. If somebody picks out a few words from a publication, and if read in their full context there would be rather a different meaning, if there are any difficulties to-day in the law—and I am not sure that there are—in enabling a court or a jury to have the words in their full and rightful context, then surely we ought to be able to put that right.
As somebody who sues for damages for libel is saying, "My reputation is being harmed", it is possible for the defence to say, "The plaintiff has no reputation to lose". But there are difficulties in that branch of the law, for in general it is said that any evidence of bad reputation or bad character of a plaintiff can only be given in very general terms. And there is much to be said for that. Would it be right if a defendant could say, "I said this about him and that is false, but if only I had said that which I did not, that would have been true"? We could not allow anything to creep in on those lines. But there might be cases in which some details of character or reputation would be helpful. The noble Lord, Lord Goodman, has pointed to certain difficulties in the recommendations that the Committee of Justice has made on this matter, but I feel that there may be some room for further inquiry there, as to whether something could be
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done to meet the sort of difficulty to which I have referred.
I would agree entirely with those noble Lords who have regretted the suggestion that the part to be played by juries in legal actions should be altered. It is said in the report that sometimes juries may be misled because the judge gives a ruling to say that words are capable of bearing the meaning, leaving it to the jury to say whether they do or not. If there are any possibilities of a jury's being misled there—and I rather doubt it—it could easily be met in some way. But I should be sorry indeed if we did not leave the jury as the tribunal, where a plaintiff claims a jury and is entitled to a jury, to decide on such issues as malice, whether words are defamatory or not, and on the issue of damages.
At this stage of the debate your Lordships will be anxious to hear what the noble and learned Lord on the Woolsack has to say, and I will refer to only one other topic which has been discussed in the debate: that is, the suggestion of a new defence for newspapers, the statutory defence of qualified privilege in respect of the publication of matters of public interest where the publication is made in good faith and without malice and is based on evidence which might reasonably be believed to be true. I am bound to say that I feel there are great disadvantages in that suggested change. "Matters of public interest"—well, there may not be any difficulty there, because, surely, in general, newspapers publish only matters that are of public interest. "Good faith and without malice"—it is reasonable for a newspaper to have to show that they acted in good faith and without malice.
But when one comes to the next words, I think there are great difficulties: "based upon evidence which might reasonably be believed to be true". Could a newspaper, or a reporter, say "Well, I was told this by a friend whom I will not name, but he is one in whom I have absolute faith"? Surely that would not do. Could he say: "Well, I was told by a friend, whom I will not name and whom I trusted, and then I heard it from a second person, and then from a third person, and so I thought it must be true"? Will it be reasonable to allow that? I submit that it would

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be quite contrary to all that we believe in. We should be introducing the voice of rumour, and the sinister, hushed whisperings of rumour find many amplifiers.
How else would the newpaper deal with the matter? Would they disclose the source of their information? I had always thought that the newspapers would go to the stake rather than do that. When the noble and learned Viscount, Lord Dilhorne, raised this matter in the course of the debate, he received an answer that there would have to be disclosure of the source. Where should we be getting to? The witness on behalf of the newspaper says, "I was told this by so-and-so". Would "so-and-so" then be protected? Could the plaintiff then go and sue "so-and-so" for either libel or slander? That would not seem to be very fair, unless you are to give a qualified privilege to that person. Where are we to stop?
We respect our newspapers because we trust them, and because what we expect to find in them is statements of fact or news. News must imply that what we are being told is the truth. How would this compare with a case where the police receive some information that something is awry? What do the police do? They make careful inquiries, they take statements, they verify the statements and then, if eventually they think there is something amiss that they can prove—but only then—they present a charge. But it is only a charge, and it is a charge which the person concerned can have the opportunity of answering, and he may answer it. It is known to have been only a charge; and, indeed, if the charge was not properly put forward there might, on the dismissal of the charge, be an award of costs.
How different it is in the case of a statement in the newspaper. It is put as a statement; it is not put as a charge. It is put as the decision, the verdict, the conclusion, and accepted as such. How often, perhaps in country districts, has one heard it said, "Well, it must be true; it is in the newspaper"? That is a measure of the respect and faith and dependence that we have regarding our newspapers, but it suggests that it would be very dangerous if we were to give any encouragement by way of an additional
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defence if there were for some reason a departure from the truth. We have today the defence of fair comment, provided it is fair comment on facts truly stated. Is there to be a new defence of fair comment—fair comment upon facts which one might reasonably have been able to believe to be true? Where should we be getting to?
It is said, "Oh, but there can be a correction and an apology". In the busy race of life corrections and apologies are always a lap behind, and they never catch up. There are many people, even after a correction or apology, who still believe that the smoke of imputation was the product of some hidden fire of truth. I cannot believe that it is in the interests either of the Press or of the community that this new privilege or immunity should be given.
6.5 p.m.
LORD SOMERS: My Lords, I will not keep your Lordships for more than a few moments, but I should like to say a few words on one aspect of the Press which has not been touched upon, and that is the excessive damage which can be done to practising artists. I speak of one art in particular, of course—music. A great deal of damage can be done by irresponsible criticism in the Press. I say "irresponsible criticism" because by no means is all criticism irresponsible, but a good deal of it is and a professional musician can suffer a great deal of damage from a single bad Press notice. The trouble is, of course, that to the general public most of them are merely names and one can imagine what would happen at, say, a local festival where the organisers were thinking of engaging some professional artist. Perhaps they are discussing whether they will have a particular artist and one of them will say, "Well, I saw a shocking notice of him in the paper a few days ago", and that of course will mean that he loses the engagement. If we multiply that by hundreds it can be seen that it could cause serious damage to a man's career, particularly as regards recordings.
Although some critics are very responsible, some of them seem to be unnaturally biased to-day. I really sometimes wonder at the extraordinarily acid outlook which seems to emerge from music critics in some sections of the Press. I remember a distinguished

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musician with whom I once had the privilege of studying, saying he considered the music critics were chiefly made up of disappointed musicians. Whether that is so or not, I cannot say.
This is not, technically speaking, libellous but it can do just as much damage and it can do damage to those who neither deserve it nor have any defence against it. But now comes the question: how are we to guard against it? The merit or demerit of a single performance is very largely a matter of opinion. The only possible defence that springs to my mind is a jury composed entirely of professional musicians. What a thought, my Lords‡ I confess that I have no solution to this problem—I leave that to those who are more learned in the law than I am—but I do feel it is a problem against which the professional musician should have some sort of defence.
LORD BOOTHBY: My Lords, may I say a word in reply to the noble Lord, Lord Somers. The answer to his problem is perfectly simple: the critics are acid for one simple reason, because they cannot make music themselves and that is what they all long to do. The only other thing I wish to say is that there is no legislative remedy.
LORD STRANGE: My Lords, the noble Lord, Lord Tangley, has kindly allowed me to intervene. I merely wish to say, for the Record, that in the future—I hope in the very far future—the question of retouching photographs and of cutting tapes may cause serious legal complications.
6.8 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, we have had an extremely interesting debate and I am sure that all of us, and the Government, are most grateful to the noble Lord, Lord Tangley, for having given us the opportunity for it. I fear that all I can really say on behalf of the Government is that I am afraid there can be no question of legislative time being found in this Session for a reform of this branch of the law. The Government have not yet made up their minds what, if any, reforms in this branch of the law there should be, and the debate which has taken place to-
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day has been of great advantage to them because in coming to a conclusion they will naturally take into account and consider most carefully everything that has been said in the course of it.
That is really all I can say on behalf of the Government but I suppose I should add a few words of my own. As the noble Lord, Lord Tangley, said, I have been a member of Justice and a great admirer of their reports. I thought, if I may respectfully say so, that the noble Lord, Lord Goodman, was a little rough on this report, for two reasons. First, because the majority of the recommendations are of a technical character, to put right aspects which the lawyers know are wrong, and are really matters more for lawyers than for laymen. Secondly, whereas every other Justice report is, I think, a report by a committee of Justice, this is a report by a committee on which, apart from the distinguished chairman, there were three members of Justice and three newspapermen. In those circumstances you do not, I think, expect to have the same report as you would have if it had been a report by six members of Justice.
If I may briefly refer to the recommendations which have been referred to, in the order in which they appear, the first seven deal with contempt of court. The first is a recommendation that:
"Proceedings in relation to publications in newspapers and journals should be brought only on the instructions or with leave of the Attorney General."
The case for that was as ably put by the noble Lord, Lord Tangley, as the case against it was put by the noble and learned Viscount, Lord Dilhorne. It is a case in which I think there is a great deal to be said both ways, and I should prefer to express no conclusive opinion.
The second recommendation was this:
"The question of whether it is contempt for a newspaper to publish a further libel after a writ has been issued or to comment on a libellous publication in another newspaper should be clarified in any future legislation."
That is only asking for the law to be clarified, and I think there is something to be said for the view that it is not really clear at the moment. The third recommendation—I do not think we have had much discussion about this—is:
"In the light of the proposed prohibition of the publication of contemporaneous reports

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of committal proceedings, the rights of newspapers to publish responsible appeals for witnesses to come forward should be clearly established."
I had not thought there was any doubt that a newspaper could publish an appeal for witnesses to come forward. I am not quite clear what is contemplated when they do come forward, but if this means that they are to be directed to the prosecution's solicitors or to the solicitors for the defence, I can see no objection to it. If it means that the Press are to be free to advertise for witnesses so that the Press can then interview them and, if they wish, obtain their life story, this, I think, would be unfortunate.
I forbear to say anything in detail about what happened in the Moors case or in a subsequent case at the Central Criminal Court, because I know that my right honourable friend the Prime Minister and my right honourable friend the Attorney General have discussed the matter with the noble and learned Lord, Lord Devlin, who has told them that he recognises what happened in the Moors case to be a matter of great gravity which calls for urgent consideration, and that the Press Council will consider it from that point of view. But, speaking generally, I would say that if in any case a witness is paid money by a newspaper, or a newspaper agrees to pay money in certain circumstances, in which the probability is that the money will not be payable unless there is a conviction, this I should have thought obviously must be wrong.
But it has a second face to it, which has received much less comment, and that is that if a witness for the prosecution in a case of serious crime is interviewed repeatedly by "ghost" writers and other representatives of a paper with a view to articles all about the crime in question, one effect of that is bound to be that when that witness is called into the witness box he is not really giving his own recollection of the events which happened, but is tending to repeat a story which he has gone over again and again and which may—it may not, but it may—have been added to by questions or suggestions made by the "ghost" writer. Any evidence which is, as it were, learned by heart cannot, I suggest, be fully relied upon.
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I remember a case of a schoolmaster who was alleged to have been guilty of indecent conduct with a small boy in the classroom. When the boy gave his evidence—and lawyers all know how dangerous children's evidence can be; how convincing it may seem when in fact it is quite untrue, though often of course it is quite true, and the difficulty is to distinguish between the two—he said, "I had an occasion to go to the desk for a pencil", and then he described in some detail exactly what happened. Counsel who was leading me for the defence said, "You gave your evidence very well, William. Would you mind repeating it?" The boy said, "I had an occasion to go to the desk for a pencil", and then quite a long story came out which was a verbatim repetition of what he had said previously. Inquiries were made, and it appeared that the police officer in charge of the case had taken the depositions round to him and said, "You have got to learn this by heart and I will come round on Saturday to make sure you know it properly", and then when he was satisfied he tore up the depositions. The judge naturally told the jury they had to acquit because you cannot rely on something learned parrotwise.
The next recommendation is:
"Newspapers should regard themselves as free to comment responsibly on sentences between a trial and the hearing of an appeal and should do so in appropriate cases".
The next is:
"Newspapers should accept their responsibility as guardians of the proceedings in the courts and if criticism of judges needs to be made they should be prepared to risk the consequences of making it."
Numerous noble Lords—the noble Lord, Lord Tangley, the noble Lord, Lord Francis-Williams, and the noble and learned Viscount, Lord Dilhorne—have commented on the apparent impossibility of persuading newspapers that they are free to comment on the proceedings of courts of justice. The law is not in any doubt. It is a free country. Anybody is entitled to express his honest opinion about a sentence and about the way in which the judge has conducted a case, though it is desirable that it should not overstep the bounds of courtesy and should not be a virulent personal attack on a judge. But, subject to that, the

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administration of justice is not, as Lord Atkin once said, a cloistered virtue, and anybody is entitled to express his honest opinion about it. I have tried for about thirty years to persuade newspapers that this is the law. They will not believe it. They say, "No, I cannot say that because that is contempt of court". Member after Member of your Lordships' House has said the same this afternoon.
Newspapers have plenty of good legal advice, lawyers on their own staff, but they cannot be persuaded about this. One result, unfortunately, is that the administration of justice in this country is insufficiently criticised. It is very good for everybody to be criticised. Of course, a man who sentences somebody and finds his sentence is criticised may be annoyed, but that is a very good thing.
I entirely agree with the recommendations which Justice makes in these paragraphs, as with its concluding one on contempt of court, which I think has not been read. It is this:
"In the public interest newspapers should devote more continual and serious attention to matters concerning the administration of justice and should employ more experienced reporters and editorial stall for this purpose."
So much for the contempt of court. As far as the Official Secrets Acts are concerned, here again the proposal made by Justice was supported, I think, by the noble Lord, Lord Tangley, and the noble Lord, Lord Francis-Williams; but I thought, if I may say so, that the case made against it by the noble and learned Viscount, Lord Dilhorne, was right for the reasons which he gave.
Coming to the recommendations in relation to libel, if I may take first the proposal that the question of malice should be for the judge and not for the jury, I entirely disagree with that, for the reasons given by the noble and learned Lord, Lord Denning. I do not think there was much disagreement with the recommendation that the rules should be
"so that if a defendant can show that a plaintiff has taken no steps to prosecute an action for at least six months he shall be entitled to have the action dismissed unless the plaintiff can show good cause for his delay".
Then there is this proposal that
"Section 5 should be amended to provide that where an action is brought in respect
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of a defamatory publication, the defendant shall be entitled to rely on the defence of justification in respect of the whole publication so that if the truth of every allegation of fact is not proved the defence shall not fail if the words not proved to be true do not materially affect the plaintiff's reputation taking the publication as a whole."
I should have thought we could all probably agree upon that.
So, too, I think with the final recommendation that:
"Fair and accurate contemporaneous reporting of foreign judicial and parliamentary proceedings published in a newspaper should be the subject of qualified privilege."
I know that the noble Lord, Lord Goodman, did not agree with that, but I think the law as it now stands is that which was laid down by the noble and learned Lord, Lord Pearson (as he now is), in the case of Webb v. The Times Publishing Company. The note on that case says he held that qualified privilege attached to the report in that case
"for its subject matter was closely connected with the administration of justice in England, and was, therefore, of legitimate and proper interest to the English newspaper-reading public. The foundation of all privilege was the public interest, in the sense of a legitimate and proper interest as opposed to an interest due to idle curiosity or a desire for gossip. Where such an interest could be shown there was such privilege for a newspaper report of foreign judicial proceedings."
I should respectfully have thought that that was right.
Finally, I come to what are perhaps the three main contentious matters: first, whether trial by jury should be abolished; secondly, whether, if not, the Court of Appeal should be able to fix the damages; and, thirdly, whether there should be this general new plea of qualified privilege. Obviously, there must be specialists; but I have always thought, with many others, that the most fascinating side of life at the Bar is its variety. One can be engaged at one time in the question of whether a ship has been scuttled; then in a divorce case; then at the Central Criminal Court, and then perhaps on a Parliamentary Bill before a Joint Select Committee of the two Houses upstairs. One therefore views with apprehension any suggestion that one is a specialist. I remember the late Mr. Justice Fraser, who was a most able all-round lawyer, but who wrote a good book on the law of libel. The result was that, while he was in every libel case, nobody sent him anything else.

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I was at one time in so many libel cases, some a good many years ago, in the days when Mr. Birkett (as he then was), was usually on one side, and Sir Patrick Hastings on the other, and I was usually sitting behind one or the other, and in later years on my own, that I was in some danger of being regarded as a libel specialist. As always happens at the Bar you tend, when you are young, to act for individuals, whereas when you are older, and your practice is larger, and perhaps your fees also are larger, you tend to act for limited companies. So perhaps in earlier life I acted more against newspapers, and in my old age more for them. I had at one time a general retainer from a national newspaper, and appeared for many other newspapers, too. So I think I can say I have seen the problem from all sides.
I would not, of course, put my experience against that of the noble Lord, Lord Goodman, who has enormous experience, not only in fighting libel actions, but also in settling them. If he will forgive me for saying so, I always thought that he was the most astute settler in London. It is a great art. I have known what it is to advise newspapers, in all kinds of actions faced with a man who has not suffered any real damage at all but who brings a sort of "gold-digging" action—and this was particularly so before the Act of 1952, although one does not often see this now.
One knows what it is to say to a man, "I don't think this amount of money is anything like what a jury will award. But you have to remember that you are up against a newspaper. They have all the money in the world. They can hang the whole thing up for a year quite legitimately, by which time all the damage will have been done. If you lose you will have to pay the costs on both sides, and this may absolutely ruin you." Having looked at it from both points of view, if I am asked the question: does our present law, on the whole, operate unfairly to one lot or the other, and, if so, to which, I would reply that I think that, on balance, the law is just about right. I should find it difficult to say whether I thought it unfair to plaintiffs or unfair to newspapers.
When it is said that trial by jury should be abolished to please the Press, I do not agree, because looking back,
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although of course one is disappointed at losing a case, I can hardly remember a single civil case in which I thought that the jury were wrong. In criminal cases juries do acquit large numbers of guilty people, but in civil cases they get a sort of wisdom which is greater collectively than the wisdom of any one of them. As I say, looking back I think that, as a whole, juries are almost always right.
Then it is said that the Court of Appeal must assess damages for the jury, or that something must be done about the damages because they are far too high. I accept what the noble Earl, Lord Dundee, said. I think he was against that proposal, partly because he thought that judges award too low damages. I think this is so; I think this is so all round. All our damages awarded by judges are substantially on the low side. If you take one of these pathetic paraplegic cases the sort of amount which is awarded here by a judge is about £18,000. Most Continental countries (I will not take America because their living standards are so different) would award in the same sort of case about £40,000. I think that the comment made by the noble Earl, Lord Dundee, that judges do not sufficiently appreciate the fall in the value of money may be right.
But why do juries award large sums against newspapers? There is a document going around Fleet Street which purports to give the appalling history of all the awful cases in which ridiculously large amounts have been awarded by juries against newspapers. It goes back about 35 years. It covers all my time at the Bar, and of course many of the cases I have been in, on one side or the other. But the extraordinary thing is that over a period like that the cases which the newspapers can rustle up, or in which even they suggest that the damages are excessive, are relatively few. In some of them there were obvious reasons. One such case was referred to to-day, that of Yusupoff v. Metro Goldwyn Mayer. Both the jury and all the judges agreed that that film was highly defamatory of Princess Yusupoff. The film was seen by some friends of hers who asked her to go and see it. She did so, and was so horrified that she went to her solicitors, who then wrote and said "While the matter is sub judice—we do not know

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how quickly we can get the action on—will you stop showing this film?"
The complaint in that case is that the jury awarded £25,000. But the reason may be that when the film company was asked, "Will you agree not to go on showing the film until the hearing", they said "What a ridiculous suggestion‡ Do you realise that if we did that we should lose £25,000 profit?" It may be that, if the defence write a silly letter like that, the jury may think, "They are making £25,000 out of it already by showing the film", and award damages accordingly. Then, of course, there was the fuss made about the Lewis case, in which the amounts of damages were obviously too large. The Court of Appeal and the House of Lords said that the amount was too large, and the newspaper did not have to pay. So I do not see really that they have a great deal to complain about.
Some amounts have done a lot of good. It is, I am sure, the fact that what happens at law has its public effect, and that is true of an award of damages. When legal aid started, the medical profession were most upset because there were a great many actions for negligence against doctors and hospitals. They have all died out now. You now hardly ever hear of one. But at the time people who previously could not afford to bring such actions were in a position to do so. A large proportion of them were cases of terrible burns, from hot-water bottles given to them when they were unconscious. You never hear of this sort of thing to-day. The reason is that as soon as these cases were brought all nursing staff were told, "For goodness' sake take care of the temperature of a hot-water bottle if you give it to an unconscious person". So in that way what happened has done good.
So, too, most of the high awards were in respect of articles of the gossip type which you never see now. My noble friend Lady Gaitskell referred to the article which killed them—I think that it was both the article and also the cases in which there were damages. In many of the gossip cases one could not sue, as one never can, if the report is true. The noble Lady may remember one well-known column which specialised in the sexual lives of the aristocracy,
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and if a marriage was breaking up or somebody was committing adultery it was always put in the gossip column. I think one case concerned Sir John Somebody and his wife. He apparently had left her, and the column rather suggested that he had gone off with somebody else, but did not say so. Then it said, "Their two sons, Tom and Henry, are at such-and-such a school." When the sons read it in the newspapers at school it was the first time they had any idea that their parents were not living happily together. Is one surprised if juries, when they get the chance, award large damages against newspapers who behave in this way?
It is only if they are hit in the pocket that they will be stopped. If I have to pay damages for libel to somebody it will have to come out of my taxed income; but to the newspapers it is a business expense which is allowed for tax. Whether that means the taxpayer pays for about half of it, I do not know, but it is allowed for tax. I personally would agree with all noble Lords who have disagreed with the proposal that there should be a new special defence of qualified privilege for newspapers, and who have disagreed with the suggestion either that juries should be abolished or that the Court of Appeal should be allowed to fix damages.
I think that covers the substance of the various proposals put forward in the debate. I myself entirely agree with a law of privacy. I have always thought that there should be one, and I agree both with my noble friend Lady Gaitskell and with the noble Lord, Lord Denning, about that, subject only to this. When one comes to sit down to try to compose it and to put into words what exactly are the circumstances which constitute a breach of privacy, one realises it is rather easier said that done. Subject to that, I am in favour of it in principle.
As I have said, all noble Lords, and the Government in particular, are most grateful to the noble Lord, Lord Tangley, for raising this matter. Libel is, after all, something of great importance to people as a whole, and most of the law of libel is not law applicable only to the Press. Our law may seem complicated as a whole, but its main outlines are fairly clear. If you say what is true, you cannot be touched. Lay people have sometimes

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heard the expression, "The greater the truth, the greater the libel". Your Lordships will therefore forgive me if I say that that applies only to criminal libel, which is very rare; but in the ordinary case, if you say what is true nobody can touch you.
There is a point not referred to in the Justice report which I should have thought worth considering, and it is this—and it would be in favour of newspapers. There is something to be said for the view that, if the issue is whether it is true or untrue, it should be for the plaintiff to prove that it is untrue. Curiously enough, our law assumes that what has been said is untrue. If the defendant then wants to prove that it is true, the onus is on him to do it. This is a little odd because in most cases it is for the man who brings the action to prove his case. What is a man doing when he is seeking to prove a libel? He is saying, "This defamatory thing is being said about me, and it is quite untrue". I do not see why he should not prove that it is untrue, rather than that the onus should be on the newspaper or whoever is concerned. It would not make much difference, and in most cases would not do injustice to the plaintiff.
The law of fair comment does not apply only to newspapers, but to all of us. It is the right of all of us to say what we honestly think on a matter of public inerest. This may seem hard on musicians. It may at first sight seem odd that a man like the dramatic critic of The Times, who obviously has studied the Greek theatre, the classical French theatre, as well as our own classical theatre, should have exactly the same right to express an opinion about a play as a man on top of a bus who has never seen a play before. The answer is that this is the right of all of us whether we are highly skilled and knowledgeable, a newspaper, or anybody else. Even if you have never seen a play before, you are entitled to say, "I went to see such-and-such a play. I thought it was awful tripe, and I advise everybody not to see it." If that is what you honestly think, then that is what you are entitled to say. I do not see why newspapers should have any special privileges which other people do not have, except in one or two respects in regard to which they have already got them. The Government
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will carefully consider everything that has been said on these many points on all sides of the House. We are all most grateful to Lord Tangley for initiating this discussion.
6.38 p.m.
LORD TANGLEY: My Lords, I most sincerely thank every noble Lord who has taken part in this debate. I feel that it has been very worth while. Indeed, for a Cross-Bencher to have provided a platform on which the noble Baroness, Lady Gaitskell, and the noble and learned Viscount, Lord Dilhorne, can stand arm in arm and disagree with him, is something to be remembered for a long time.
I would say a word about the Justice report, to which others have referred much more extensively than I did. There is perhaps some misunderstanding as to the status of that report. It is not a report by Justice. The working party was set up by the Press, on the one side, and by Justice, on the other, and the report was a report to the two constituent bodies. Neither of them has expressed any opinion upon that report, and it was decided just to publish it and get public reaction to it. That is why any member of the working party, such as myself, feels free to support or not to support some of the particular recommendations which were made, or even to ignore some of them. They were not made as recommendations of the working party to the world, but only for consideration by the two parties concerned.
It is worth while remembering that matter because it takes a good deal of the sting out of the friendly and hostile speech I received from my noble friend Lord Goodman. It obviously shows that there was no question of publishing evidence at this particular stage of the proceedings. With reference to Lord Goodman's speech, might I invite noble Lords to read the report, rather than the somewhat picturesque embroidery with which the noble Lord surrounded some of the recommendations?
I do not think I will take up any more of your Lordships' time at this stage. Bearing in mind that I did not recommend the whole report to the House, I find myself in agreement with a great deal that has been said. I expressly said that both the report and

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my own personal view is that we should not depart from trial by jury. I think I said that the traditional view of the Englishman is that when life or reputation is at stake, he would prefer to have it judged by twelve ordinary people rather than by any one man, however impartial or learned he may be. I think that that is the attitude which both the Press and the law must respect. I certainly do.
With regard to official secrets, I think that in putting the matter before the House in my opening remarks I expressly said that I was not suggesting any alteration in the law, but only in the administration. I do not think that the recommendation which Justice made is a practical one in that respect, and I did not refer to it. But I think the noble and learned Viscount, Lord Dilhorne, was a little simple-minded, if I may say so, about the working of the Official Secrets Act. Of course there are very rarely any prosecutions.
The matter was properly put in its perspective by the noble Lord, Lord Francis-Williams, who pointed out the close connection between the public relations service of the Government Departments and the Official Secrets Act. There is a skilful way of feeding information in such a way that it cannot he used, and it is the extension of that for purposes beyond security—it is covered by the system which has been built up over so many years on the security side—which is rather dangerous, in our view and in the view of the Press. I suggested, therefore, that it was a matter for administrative action and caution on the part of the Government, and not for legislative action. I think I should make that clear. I must not weary your Lordships with any further observations at this stage of the proceedings. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

POST OFFICE (SUBWAY) BILL
Brought from the Commons; read 1a, and to be printed.

THE HOUSING PROGRAMME
6.42 p.m.
THE EARL OF KINNOULL THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they are aware of the growing concern felt at the sharp fall in the number of new houses being built under the present Housing Programme, whether they will now announce what measures will be taken to counteract the present trend, and whether they will consider exempting residential development land from the proposed Land Commission Levy to encourage house building. The noble Earl said: My Lords, a year ago I put down a Question on the state of the mortgage market and the effect it was having on the housing programme. At that time I received from the noble Lord, Lord Mitchison, who was answering on behalf of the Government, a most skilful answer which in parts was extremely scornful. He adamantly refused to accept that the then mortgage deficiency would affect the housing market, and, furthermore, went on to say that the case had been grossly exaggerated and many of the facts were distorted.
At that time, in my innocence, I naturally accepted the noble Lord's assessment of the position, for he obviously was in the best position to judge. But it is interesting to see now, on the figures recently published, that the noble Lord's assessment of the position was in fact woefully wrong. Even the right honourable gentleman the Minister of Housing and Local Government admitted last Thursday in another place that one of the factors in the disappointing completion figures for 1965 was, as he termed it, the "mortgage famine". I hope that this evening the reply of the noble Lord, Lord Kennet, will stand the test of time better than that of the noble Lord, Lord Mitchison.
The housing programme as I understand it—and perhaps the noble Lord will correct me if I am wrong—has to be judged, both in the public and in the private sectors, first, on the number of buildings started; secondly, on the number of buildings under erection or construction; and, lastly, on the number of completions. At any time one can compare these three sets of figures with corresponding figures for previous years

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and judge the pulse and the pace of the housing programme.
The present situation, as disclosed by the Minister last Thursday, is that the number of houses started in the first quarter of this year fell by over 13,000 as compared with the corresponding period of last year; the number under construction is also down; and the number of completions, in both the public and the private sectors, has dropped, I believe, by around 10 per cent. This fall-off shows more in the private sector than in the public sector, but in fact both are affected. These are the facts of the case. We now see that there is a serious decline in the housebuilding programme, and unless some steps are taken immediately, and unless the Government can create a more buoyant market, the completions for the whole year will fall far short of the 1965 figure of 382,000.
The primary reason for this decline, particularly in the private sector, is, without doubt, the terrible uncertainty that exists both in the minds of the developers and in the minds of the house purchasers. During the last month I have discussed with a number of small private developers the reasons for their anxiety. It is, after all, the small builders who constitute over 60 per cent. of the construction industry. The main anxiety that exists in their minds—and this was repeated to me on every occasion—is the unknown damage and effect the transitional period of the Land Commission levy will have on their business. No builder to-day can afford to purchase and hold residential development land unless he is confident that he can pass the ultimate levy, when it is charged, on to the house purchaser.
The threat of the levy tax, which has hung over the building programme for nine months, has without doubt caused a serious freeze-up of the immediate future plans of developers. The land banks of developers have been run down to the minimum, and until an announcement is made as to when the levy tax will become operative no future decisions can really be made with any confidence. On top of this the builders have been faced in the last year with a 10 per cent. increase in building costs, as well as the selective employment tax which will come into force in September and which,
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I understand, will put a further 2 per cent. on building costs.
Yet a further problem facing the builders is the shortage and high cost of bridging finance. If a builder surmounts all these problems, he finds when he comes to sell his house that at the present time the market is in one of the lowest troughs it has been in for many years, and the reason for this is, of course, that the house purchasers themselves face equal problems. Their problems are that mortgages are scarce and mortgage interest rates are, I believe, at the highest they have ever been in the history of this country. Possibly one of the most serious problems that house purchasers face to-day is when they seek bridging loans from banks when changing their houses.
I do not think it will break any confidence if I repeat a recent conversation I had with one of the branch managers of one of the Big Five banks. He told me that at the present time the banks can offer little service to their clients on bridging loans, as they are severely limited. Bridging loans will only be offered, first, when contracts have been exchanged on the house being sold, and, secondly, when the banks are satisfied that the purchaser's solicitors can give some undertaking that the purchaser of the house is in a position to complete the purchase. The effect of this is to weaken further the house market and to cause considerable worry to those exchanging houses. I should like to ask the Government to look into the present situation and to examine the possibility of local councils offering to help with bridging loans, when banks at present have no power to do so owing to the credit restrictions.
There are two further points which I should like to raise this evening. The first is the question of the availability of building land, and, in particular, the future of the Green Belt policy. The Minister mentioned this in last Thursday's debate in another place, and referred to the Green Belt policy, if taken on its own, as a "negative preservationists' policy". He seemed to imply that the pressures and demands for building land had become so great that this policy would have to be abandoned. To many people, this came, perhaps, as no surprise in view of some of the Minister's recent decisions, particularly the Hartley development in Kent.

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But I should like to ask the noble Lord whether he could say something of the future of the Green Belt policy as the Government see it.
The second point I should like to ask the noble Lord to comment on is the present interminable and wasteful delays that are caused by planning appeals and the decisions that come from those appeals. At the present time, it is not uncommon for decisions to take up to over half a year, and this, of course, snarls up the planning procedure, causes untold costs and delays the building.
In conclusion, I would say that it is clear to most people that the fall-off in the building programme is due to the uncertainties that exist in the market—uncertainty on the part of the developers as to the effects of rising costs and the new taxes, particularly the levy of the Land Commission, and uncertainty on the part of the house purchaser as to the cost of mortgages and bridging loans. It is, I believe, the duty of Government to create a buoyant and confident property market, and, unless steps are taken to correct the present uncertainties, the housebuilding programme is surely doomed to further disappointments for many years to come.
6.52 p.m.
LORD HAWKE: My Lords, I am glad my noble friend has not fallen into the trap into which so many politicians fall, which is to assume that the Government build houses. It is, of course, builders who build houses, but Governments can stop them from building them. I am afraid that this gigantic erection of bureaucracy which is gradually being put up by the present Government is definitely not going to help the production of more houses by builders. I am not going to deal so much with the question of the number of houses, although we are naturally all deeply interested, because housing is a great social question; and, if just at the moment the numbers are rather smaller than we should have expected, no doubt they may catch up one day. But there is one thing that cannot catch up, and that is the question of price. Many of us are deeply concerned over the very high cost of housing, and there seems very little likelihood that that situation is likely to change.
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I have not studied, recently at any rate, the development in the cost of council houses, or even of the houses erected by private developers, in fairly large blocks—what might be called the bulk contracts, where mechanisation, standardisation, and so on, can have full play. But I am fairly closely concerned in a pretty big housing programme to rehouse the clergy of the Church of England, either by replacement or modernisation, and I can say that here there has been a rise of 20 to 25 per cent. in prices over the last four years, and of about 50 per cent. over the last ten years. I am now talking of small houses which are designed by architects and built of materials which are designed to last a century or so, so they are not strictly comparable to the council house programme, or even to a great deal of the housing that is going up under private development at the moment. But they do much more nearly reflect the current cost of materials and wages, because there is not the same opportunity for mechanisation, and so on.
It seems to me that the enormous cost of these houses to-day—and it is enormous as compared with pre-war—reflects the very high wages for craftsmen in the industry and rather doubtful productivity. We all know that the builders are paying far more than the official rates to maintain or attract craftsmen into their service. Clearly, this state of affairs is affecting all of us, because it is having such a marked effect in putting up the cost of repairs. That is one of the facets of our economy which our Government and their professors seem to overlook; that is, that a more prosperous society owns far more assets, and the maintenance of those assets takes a far larger proportion of the working population that is the case with a much poorer society.
Moreover, the service of the existing assets, so far from being helped in any way by the Government, is going to be penalised by the imposition of a selective employment tax. So the house-owner who wants his repairs done, the motor-car owner who wants his repairs done, the owner of the fridge that goes wrong will all have to pay for those articles to be serviced or repaired by somebody on whose wages a special tax has been laid, whereas the product as it comes from the factory will presumably be subsidised by the reverse procedure.

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What can one do now about this grave shortage of tradesmen? With your Lordships' permission, I should like to quote a few lines from The Times of to-day. It is headed, "From Our Labour Staff" at Torquay on May 24, where the National Union of General and Municipal Workers is having some sort of a jamboree. The report says:
"To claim that training was synonymous with apprenticeship, Mr. Jack Cooper, General Secretary, said, was nonsense in this changing world. All young people with the aptitude for industrial skill should have every opportunity to acquire it".
Then, further on, the mover of a motion on that particular subject said:
"… that many semi-skilled members had already acquired advanced skills which craft unions and employers would not let them exercise. The craft unions, instead of merely paying lip service to the Act, should permit adult apprenticeships. Workers who had been compelled to take any jobs they could get in the past should now have a chance to train for better class work".
I could not agree with that more, and I am sure that all your Lordships will agree, too.
But what are the arrangements? We hear a great deal about adult employment schemes, redeployment and all that sort of thing. Are they really working? I cannot expect the unfortunate Minister who is to answer this debate to answer me that question, because I have not given him notice of it, and I do not think it is a question for his Department. But I would ask that somebody in the Government should look into these points, because it is very important indeed that this industry should be manned up. There are not enough people in it. We want to make certain that there are no restrictive practices—for instance, that nobody shall lay a brick unless he has been watching a bricklayer for five years, and so on and so forth. When I consider that, in a few months during the last war, the United States turned out some pretty adequate seamen in gigantic quantities from people who had never seen the sea, I always think that we could turn out plumbers and bricklayers rather faster than the existing apprenticeship system seems to do.
I do not know precisely how to achieve this. It would be ridiculous to ask for a Royal Commission on the subjects; but
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it seems to me that there ought to be some sort of departmental inquiry, in which one of the more practical economists might sit with one or two trade union leaders, to see whether there is some method by which we can get more people into this trade. It is not only a matter of the housing programme which every Government put forward to try to beat the target of the other side; it concerns also the maintenance of existing houses. If we are to have a much larger stock of houses in this country to cater for what will inevitably be a larger population, we shall need more people to maintain them; and at present we are not going the right way to get them. In fact, on the present basis it looks to me as if these costs of building and maintaining housing will continue to go up and up, because of the shortage of skilled labour.
7.1 p.m.
LORD KENNET: My Lords, I thank both noble Lords who have spoken for the constructive points they have raised. May I say to the noble Lord, Lord Hawke, that he is preaching to the converted about the mobility of labour within different trades in one industry. It is one of the principal objectives of the Government to increase this intra-industry mobility as much as to increase the inter-industry mobility. I agree with all he said. Are we not appealing with every breath to the trade unions to burn the rule books in this respect at least? The noble Lord will excuse me, as he has already done in advance, from answering in detail, not only because he gave me no warning but also because this matter affects all industries—building no more nor less than others.
I turn now to a point made by the noble Earl, Lord Kinnoull, in asking his Question—the question of planning appeal delays. I think that nothing he feels about this could be stronger than our feeling about it in the Ministry. It is an appalling situation which has been getting worse, and unless steps are taken it will continue to get worse. Steps are therefore going to be taken. Unfortunately, they may not be possible without legislation. What we are seeing now is the fruit of the existing system which simply is not geared to the volume of planning decisions which have to be taken

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in the late 1960s. I can assure him that the matter is under examination, and under swift and intense examination, in the Department, and there will be results.
With regard to Green Belts, the noble Earl would be wrong to take my right honourable friend's remarks in another place last Thursday as any sort of abandonment of the concept of the Green Belt as a protection of green country around the cities for amenity purposes. There is no question of abandonment. It is in fact the intention of my right honourable friend to extend the areas of Green Belt. But we do not want to be entirely rigid about not permitting one house ever to be built in a demarcated Green Belt. It seems to me that the people of the city ought to be able to get quickly into the country and that there should be country close to cities. But that does not mean that there must be absolute green country at exactly the same distance from the city centre all around the circumference; it might be found nearer in one place than another. A lot of planning thought is towards the idea of green fingers coming in towards the city centres and permitting city fingers to radiate out. As long as there is a solid area of green country which is available to everybody, that serves the purpose of a Green Belt. However, it is not the intention to chip away and erode the Green Belt and so get a massive spreading from the conurbations in all directions as there used to be some twenty or thirty years ago.
THE EARL OF K1NNOULL: My Lords, before the noble Lord leaves the question of the Green Belt I wonder whether he could perhaps clarify a riddle. I think many people feel that in the existing Green Belt much of the land is known as "proposed Green Belt". This applied for about four years and the Ministry's confirmation of Green Belt has been awaited. Could the noble Lord comment on that?
LORD KENNET: I could not without notice comment on it in respect to any particular Green Belt, but in all these questions of designation under planning legislation there is always a proposal, often an inquiry, and then a confirmation or not; and in this matter, I must regretfully admit, as in others, there are long delays.
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The question of bridging finance is a difficult one. I think I should only like to say to the noble Lord that he will know that the banks are restricted in this respect and are asked to keep their lending to 5 per cent. more than they were lending in March last year. They have had guidance in general terms, but in each particular case it is left to the discretion of the bank manager, having taken everything into account, whether or not he should accord bridge finance. It is an interesting suggestion that local authorities should be empowered to assist with bridging finance as they are now with mortgage in general. I think that if this were to become the Conservative Party policy it would be more readily considered by the Government.
I am glad in this mini-debate that we are holding aloof from the wearisome task of slicing the housing figures, casting aspersions on the Government's performance, and casting aspersions on the morals and intentions of the Opposition. I believe that one can easily get too close to these figures. It seems to me that the most important one—the noble Lord will excuse me for quoting a figure, as he himself did so—is that in the last full year, 1965, 382,000 houses were completed; and this is the highest figure in the history of the country. That is the "macro-picture." Let us not be bogged down in the "micro-picture." It is true that early this year there was a dip in completions and it is also true that the results have now turned up again. They have not yet turned up far enough to make the part of this year that has already elapsed as good as the same period of last year. The cause for this has, we believe, partly been the weather. It is true that there was not as much frost this February as last, but there was more rain. But we must not get bogged down on this question of "bad weather." There is no definition of it. That is a matter that is being looked into by my Department and by the Ministry of Public Building and Works to see if it is possible to get a definition of bad weather so that we can start relating this to the housing figures.
LORD BURTON: My Lords, could the noble Lord tell me whether those figures were for England and Wales

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alone or included Scotland and Northern Ireland?
LORD KENNET: The figure of 382,000 is the United Kingdom figure. Completion times are increasing in the private sector from ten to twelve months, and we agree with the assessment made in many quarters that there is a "lack of confidence" especially among the smaller builders. It is very hard indeed to find precisely what this lack of confidence is and from what it comes.
The noble Earl said that 60 per cent. of houses are built by small builders. That implies a generous definition of a small builder. Sixty per cent. of houses are built by builders who build less than 50 houses a year. A builder who can build as many as 50 houses a year is not very small. I am thinking more of the 30 per cent. of houses built by builders who build less than 10 houses a year. These are the people we are talking about. There is a difficulty here because they are hard to reach. How do you find them? It is easy to set up working parties between Government and the industry and to get representatives of the big firms on to them. They are easy to find; and the Government do so. It is harder to tap the opinion and inform ourselves of the problems of the small builders. We are, however, tackling at the moment the problem of getting in touch with them and hearing precisely what it is that restrains them.
I think it was the noble Lord, Lord Hawke—he will correct me if I am wrong—who spoke of the "scarce" performance in the mortgage sector this year. As a matter of fact, savings, advances and commitments by building societies in the first quarter of this year were all running at record levels, and, moreover, they made advances on more new houses than in the same quarter last year. This hardly seems to me "scarce". I think one should avoid confusing the fact that the mortgage rate is now high—this has been referred to the Prices and Incomes Board—with the actual level at which mortgages are coming forward, which is also high.
LORD HAWKE: My Lords, one must not forget, and I think the Government should not forget, that as prices go on inflating, you need a larger and larger volume of mortgages to service the same amount of stuff.
LORD KENNET: My Lords, a larger volume of mortgages by value, but not by the number of mortgages issued. That depends on the number of houses, irrespective of the prices of the houses.
The completions in the public sector in the first four months of this year were the same as those for last year and there is no dip there. The completion time of houses was the same as in last year—no dip there. The completion time of flats was just perceptibly longer, but not, I think, in any meaningful way. It was just a faint oscillation, which may easily iron out the other way before we know where we are.
Turning to the prospects for the future for a moment, I would say that the pattern varies in different parts of the county. Local authorities in the West Midlands are letting new housing contracts at record rates, while the demand among authorities in the Southern counties and the South-Eastern counties remains very high indeed. Tender approvals, which is another way of measuring it (the noble Lord mentioned the multiplicity of ways of measuring which is such a confusion in this field), by Scotland, the London Boroughs, the G.L.C. and East Anglia, are below expectations, but the so-called "priority" authorities, the list of 130 with which the noble Lord will be familiar, mainly the conurbations in the North, now have their settled three-year programmes, and a great deal is expected of this innovation. It is too soon to predict the out-turn of these programmes but public authorities should start about 195,000 houses this year compared with 181,500 last year and complete 180,000 compared with 168,500 last year. As the House knows, the Government are committed to a steadily rising programme of building by public authorities. The results for this year should be better than those for last year, and next year they should be higher still. By 1970 public authorities are to be building about a quarter of a million houses a year.
If I may mention the selective employment tax for a moment, I would point out that it has been stated in another place that the effect of this will be to increase the price of small houses by about 2 per cent., which is not a very terrible matter. Against this we have to set three factors. First of all, the

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removal this autumn of the, formerly 15 per cent. now 10 per cent., import charge, which will again reduce the price of timber to house builders, and secondly, the rebate to be paid with the other hand on manufactured building materials, especially on industrialised building components. This is an extremely important matter when we bear in mind the increasing sector of all building which is to be done by industrialised methods. This is a net receipt from the centre. It is a receipt which will very largely offset, if not overtake, the effects of S.E.T. Thirdly, we have to consider the effects of the investment grant scheme for industrial investment, once again a large matter indeed for the building industry when you bear in mind that the total amount of investment in machinery under the National Plan is to double between 1964 and 1970.
Turning to the question of the betterment levy, I would say that we believe that the idea that residential development land should be exempt from the levy, as the noble Lord put it in his Question, must probably be based on a misconception about how it is going to work and who is going to pay it. The basis of the levy is that the person who realises the development value pays the levy, whoever it is. The Bill provides that the levy shall be charged on sales, in which case it is payable by the vendor, but the developer, if he pays any at all, pays only to the extent that he has not paid for the development value in the price he paid for the land. That is to say, the development value is going to be taxed in this levy, and it is adjusted according to the circumstances of the sale, whether it is paid by the vendor or the purchaser, who is probably the developer.
THE EARL OF KINNOULL: My Lords, may I interrupt the noble Lord? It is the transitional period about which developers are particularly worried, because here they will have paid for the development value but in fact the land will be treated at existing use value, so they will be taxed on it. This is the point of my Question.
LORD KENNET: I hope I am not becoming confused, but does it not de-
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pend on whether or not there is planning permission on the land? Because there is an exemption under Clause 62 which exempts from the levy residential development of land which was owned and had planning permission at the date of the publication of the White Paper. This we believe will cover the point the noble Earl was raising.
To be brief, so far as we can see, there is no reason why the proposed betterment levy should increase the price of land, and therefore the price of housing, at all. The purpose of the levy is that the increased value of the land arising out of the development possibilities should be taxed to the extent which is proposed in the White Paper. The fact that the levy is payable, the fact that the community is taking some of that value, should not, we believe, lead the overall price of land to increase at all. There is also the provision in the Bill itself, as the noble Lord will know, which says that any contracts of sale which stipulate that the amount of the levy, or any part of it, shall be passed on, shall automatically be of no effect.
THE EARL OF KINNOULL: I wonder whether I may interrupt the noble Lord on this important point. I appreciate that the matter depends as from the White Paper, but that was last September and, of course, builders work a long time ahead. They want to known now. Their real anxiety is whether, supposing they do not start the development by the time of the first appointed day, they will be taxed on it.
LORD KENNET: My Lords, the situation here is of intense complication, and there are large interests at stake, and I should be very sorry to mislead the House. I would therefore ask the noble Lord, if he thinks fit, to put down a detailed Question on this point. If he would do that, I could prepare a detailed Answer, which might be rather lengthy, in order to take account of all the considerations.
In conclusion, my Lords, let me say that it seems to us that, though the present phase of the house-building programme shows some disappointing features, the use of phrases like "sharp fall" in the noble Lord's original Question does show a selective approach to the whole picture. Housing achievements are not measured month by month in breathless pounces,

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although there are many political and journalistic pressures which tempt us to do precisely that. We believe that they should be measured year by year, or three-year period by three-year period.
We now have the three-year rolling programmes for 130 top-priority local authorities, to which we attach the very greatest importance. Although these authorities have the greatest need, it does not necessarily follow that they are in places where it is easiest to get the building done. An obsessive interest in monthly fluctuations might tempt us to say, "All right, we will build wherever it is easiest, just to get the figures up quickly." We believe that it would not be right to do that. We think, on the contrary, that it is best to stick firmly to our policy of channelling effort to places where the need is greatest, and that in the long run this policy will bear results of which this Government need not be ashamed.

HOUSE OF LORDS OFFICES
First report from the Committee made, and to be printed.
CENSORSHIP OF THE THEATRE
Message from the Commons, that they concur in the Resolution communicated to them on Tuesday the 17th instant, That it is desirable that a Joint Committee of both Houses be appointed to review the law and practice relating to the censorship of stage plays.

POST OFFICE (SUBWAY) BILL
Brought from the Commons; read 1a, to be printed, and referred to the Examiners.
Viscount De L'Isle—Took the Oath.
House adjourned at twenty minutes past seven o'clock.