Sitting of 2 July 1968

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS
DURBAN NAVIGATION COLLERIES BILL [Lords]
Read the Third time and passed, with Amendments.
GREATER LONDON COUNCIL (MONEY) BILL
Read the Third time and passed.
SAINT JAMES AND SAINT PAUL, PLUMSTEAD BILL [Lords]
Read the Third time and passed, without Amendment.
GREATER LONDON COUNCIL (VAUXHALL CROSS IMPROVEMENT) BILL [Lords]
GREAT NORTHERN LONDON CEMETERY COMPANY BILL [Lords]
NEWCASTLE UPON TYNE CORPORATION BILL [Lords]
Read a Second time and committed.

ORAL ANSWERS TO QUESTIONS
  COMMONWEALTH AFFAIRS

    Zambia
    Mr. Sandysasked the Secretary of State for Commonwealth Affairs what information he has received from the British High Commissioner in Lusaka about the camps in Zambia which are being used as bases for the dispatch of armed terrorists into Rhodesia; and what protests have been made to the Zambian Government.
    The Secretary of State of Common-wealth Affairs (Mr. George Thomson): I have nothing to add to the reply given
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    to the hon. Member for Chigwell (Mr. Biggs-Davison) on 30th January.
    Mr. Sandys: That is a most inadequate reply. How much longer are the British Government going to tolerate the organised infiltration of murderers and saboteurs into a British territory of which they claim to be the legal Government? Why do not the Government warn the Zambian Government that unless this stops Britain will stop all further financial aid immediately?
    Mr. Thomson: The British Government have made it quite clear to the Zambian Government that they deplore all terrorism and violence from whatever quarter they come. We feel this is not the right way to a solution for Rhodesia and to avoid many grave dangers in Southern Africa as a whole. We have made absolutely clear to the Zambian Government what our position is, but if the right hon. Gentleman wants to end guerilla activity of this kind he should use his influence with Mr. Smith to get him to end the rebellion.
    Mr. Crawshaw: Is my right hon. Friend aware that the Africans never had any confidence in the ability of the Opposition to solve this problem and, because of the time we have taken, they have lost faith in our ability to solve it? Will he press on with every form of sanctions that is possible? Otherwise, he will have the blood bath which we on this side of the House have been predicting for the last two or three years.
    Mr. Thomson: Yes, Sir. We believe the use of sanctions is the right way to bring peaceful pressures to produce a solution, but we always made it clear to Mr. Smith before I.D.I. that if he took that disastrous action one of the results would be an increase in violence on the part of African Nationalists who would no longer have a constitutional method of achieving political progress.
    Mr. Wall: Will the right hon. Gentleman give an undertaking that this important matter will be discussed with President Kaunda when he visits this country?
    Mr. Thomson: These kind of talks between Heads of Government are confidential, but I have no doubt that a whole range of problems relating to Southern Africa are bound to be discussed.

    Anguilla
    Mr. Martenasked the Secretary of State for Commonwealth Affairs what arrangements have been made to represent the external affairs of the island of Anguilla at international organisations.
    The Under-Secretary of State for Commonwealth Affairs (Mr. William Whitlock): Her Majesty's Government are responsible for the external affairs of the Associated State of St. Kitts/ Nevis/Anguilla, and this responsibility includes the island of Anguilla.
    Mr. Marten: Does not the Minister agree that this island declared its independence over a year ago and has worked quite satisfactorily since then? Would the Government now recognise this fact and begin to open negotiations for constitutional talks to recognise the independence of Anguilla?
    Mr. Whitlock: Anguilla is still a part of the Associated State of St. Kitts/ Nevis/Anguilla. As the hon. Member knows, an interim settlement of the dispute with the Associated State was reached some time ago designed to bring about friendly relations so that Anguilla may play its part within that Associated State.
    Mr. Braine: In this context, will the Government have another look at the whole question of Associated States in regard to St. Kitts? Is it not embarrassing for Britain to be responsible for a situation where the judiciary of St. Kitts has condemned the regime there for its attitude over Anguilla? Are we not going to stand by the people of Anguilla?
    Mr. Whitlock: Of course we shall stand by the people of Anguilla so far as it is within our constitutional position. The general picture of the settlement of the Associated States is an entirely different matter.

    Hong Kong
    Mr. Rankinasked the Secretary of State for Commonwealth Affairs what consultations he plans to hold with the administration in Hong Kong with a view to modernising its existing political structure; and if he will make a statement.
    Mr. Whitlock: None. It has already been stated in the House on several
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    occasions that, because of Hong Kong's special position, constitutional development towards self-government is not possible. I have nothing to add to that statement.
    Mr. Rankin: Is my hon. Friend aware that that is a very disappointing statement? Does he not realise that Hong Kong's present political structure is based on a series of laws which were introduced to deal with a period of social upheaval very recently? Does he think that that is in keeping with the democratic views that we in this Parliament hold?
    Mr. Whitlock: I can only repeat that there cannot be normal constitutional progress towards self-government, but the Hong Kong Government have been exploring the possibilities of developing, in the sphere of local government, measures which will enable the people of Hong Kong to participate to a greater extent in the conduct of the affairs of the Colony. There has been no great demand for that on the part of the people of the Colony themselves, who have not responded to a recent major exercise to get them to register as voters.
    Mr. A. Royle: Is the Under-Secretary aware that his statement will be welcomed in Hong Kong? Will he bear in mind the possibility of appointing a Chinese elected representative on the urban district council as one of the nominated members of the Legislative Council?
    Mr. Whitlock: That is something we could look at.

    Nigeria (Supply of Arms)
    Mr. Wingfield Digbyasked the Secretary of State for Commonwealth Affairs what requests he has received from the Nigerian Government for facilities for the supply of arms from private manufacturers in Great Britain.
    Mr. George Thomson: None, Sir. There is nothing to stop the Nigerian Government or their agents from approaching private manufacturers in this country, but all exports of arms are, of course, subject to export licensing control.
    Mr. Digby: Will the right hon. Gentleman say quite clearly what proportion of arms is going through official channels and what proportion through private

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    channels and how this compares with the proportion before hostilities began?
    Mr. Thomson: I am not quite clear what the hon. Gentleman means by his question. We understand that about 15 per cent. of the arms requirements of the Federal Nigerian Government are coming from this country, but none is coming from official British governmental channels. Perhaps the hon. Gentleman is referring to the Crown Agents. No British aid funds are involved in these arms. In these circumstances, the Crown Agents act as agents for the Governments themselves. They are not British Crown agents; they are Crown Agents in the Commonwealth sense.
    Dr. Gray: In view of the continuance of this genocidal civil war, will my right hon. Friend stop arms from being supplied, whether from private or public sources, to the Nigerian Government forthwith?
    Mr. Thomson: A number of hon. Members have Questions down on the subject raised by my hon. Friend, and I would prefer to wait until they are reached.

    Immigrants
    Sir C. Osborneasked the Secretary of State for Commonwealth Affairs why he will not seek the co-operation of all Commonwealth Governments for the assisted return to their native lands of all immigrants in Great Britain who desire such a return; and how many he estimates would return if suitable financial arrangements were made.
    Mr. Whitlock: It is for individual Commonwealth countries to decide whether to repatriate their citizens in this country who wish to go home. I have no means of estimating how many would wish to take advantage of such an arrangement.
    Sir C. Osborne: Is not the Undersecretary aware that the vast majority of the people of this country want to see further immigration stopped and all immigrants who wish to do so encouraged to go home? Is it not the duty of a democratic Government to rule according to the wish of the people?
    Mr. Whitlock: I am aware that it is the wish of the hon. Gentleman to have
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    all immigration stopped, but I am not sure that it is the wish of the majority of people in this country.
    Mr. Heffer: Does not my hon. Friend agree that there is no evidence to suggest that the overwhelming majority of people in this country wish immigration to stop? Does he not agree with me that the important thing for us to do is to go ahead with getting racial harmony and integration in Britain, rather than having these sorts of questions, which raise a whole hornet's nest and which are totally inimical to the attainment of racial equality?
    Mr. Whitlock: I agree with my hon. Friend. We have control over the entry of Commonwealth citizens in a manner which is designed to ensure that we shall not outrun our capacity to absorb these people within our community and to ensure that, within the community, they enjoy the rights which they should have as men and women.
    Sir C. Osborneasked the Secretary of State for Commonwealth Affairs why he will not ask all Commonwealth Governments to reduce the flow of immigrants into Great Britain, in order to prevent a demand for their total exclusion until such time as the social problems created by those already here have been solved.
    Mr. Whitlock: Her Majesty's Government already have powers under the Commonwealth Immigrants Acts to control the entry of Commonwealth citizens.
    Sir C. Osborne: Since the Minister doubted the statement I made in my supplementary on the previous Question, may I ask him whether he and his Government will hold a by-election to see what the people feel about it? The Government will soon get to know the answer then.
    Mr. Whitlock: That is a ridiculous suggestion.
    Mr. Hugh Jenkins: Is my hon. Friend aware that the majority of immigrants are from Australian, Canadian and European sources? Will he inquire of the hon. Member for Louth (Sir C. Osborne) whether it is these immigrants that he is anxious to return?
    Mr. Whitlock: I am not responsible for asking questions of the hon. Gentleman.
    Sir A. V. Harvey: Is the Undersecretary aware that most reasonable people want to see a fair deal given to those immigrants who are already here and to consolidate their position, and that what the people are concerned about is the tremendous number of dependants who will come in in the years ahead? They must be limited if those already here are to get a square deal.
    Mr. Whitlock: I would not wish to control the entry of immigrants into this country in the inhuman way which the hon. Gentleman seems to envisage.

    Nigeria
    Mr. Winnickasked the Secretary of State for Commonwealth Affairs if he will make a statement on the progress of the Nigerian peace talks.
    Mr. Leadbitterasked the Secretary of State for Commonwealth Affairs what discussions he has had with the Federal authorities regarding supplies of food and medical provisions to the victims of the Nigerian civil war.
    Mr. Juddasked the Secretary of State for Commonwealth Affairs what action the Government has taken, following his reconsideration of the matter, to achieve an international embargo on the supply of arms to all combatants in the Nigerian Civil War.
    Mr. Barnesasked the Secretary of State for Commonwealth Affairs what representations he has made to the Federal Government of Nigeria regarding the safe passage of food and medical supplies direct into Biafra.
    Mr. Dempseyasked the Secretary of State for Commonwealth Affairs if he will now take steps to send urgently needed medical supplies to the people of Biafra, with a view to relieving pain; and if he will make a statement.
    Mr. Frank Allaunasked the Secretary of Stae for Commonwealth Affairs what further action he is taking, following Her Majesty's Government's reconsideration of the matter, to prevent the sale of arms to Nigeria from the nations concerned; and what further proposals he has put forward to promote a ceasefire in that country.
    Mr. Henigasked the Secretary of State for Commonwealth Affairs what further initiatives he intends to take with a view to bringing about peace in Nigeria following the Minister of State's visit to Lagos.
    Mr. Tilneyasked the Secretary of State for Commonwealth Affairs what further developments there have ben in discussions with the Government of Nigeria over ending the civil war; and what plans have been made to participate in a Commonwealth or international peace-keeping force.
    Mr. George Thomson: With permission, I will answer these Questions at the end of Questions.

    Commonwealth Prime Ministers' Meeting
    Mr. Wallasked the Secretary of State for Commonwealth Affairs if he will now make a statement about the proposed Commonwealth Prime Ministers' Conference.
    Mr. George Thomson: No, Sir. I can as yet add nothing to the Answer which my right hon. Friend the Prime Minister gave on 20th June to a Question by my hon. Friend the Member for Ealing, North (Mr. Molloy).
    Mr. Wall: When does the Secretary of State expect to be able to make an announcement on this subject? Is it the Government's desire to hold a Commonwealth Prime Ministers' Conference this year?
    Mr. Thomson: It is our desire to see a Commonwealth Prime Ministers' Conference held as soon as there can be agreement about the time and the place. I have expressed some impatience about this. With 27 Heads of Government, all with busy schedules, it is difficult to get agreement on a time when as many of them as possible will be free. The Secretary-General of the Commonwealth, who is responsible for this, is pursuing his consultations with the greatest possible vigour.
    Mr. Fisherasked the Secretary of State for Commonwealth Affairs whether he will seek to arrange that the Kenya-Asian problem, so far as it involves

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    holders of British passports, will be discussed at the next Commonwealth Prime Ministers' Conference.
    Mr. Whitlock: I refer the hon. Member to the answers given by my right hon. Friend the Prime Minister on 19th March to supplementary questions by my hon. Friend the Member for Norwood (Mr. John Fraser) and the hon. Member for Wycombe (Mr. John Hall).—[Vol. 761, c. 241–2.]
    Mr. Fisher: I do not carry in my head what those answers were. Does not the Under-Secretary agree that this is not just a domestic matter, but a Commonwealth issue affecting many countries—India, Pakistan, Kenya, Uganda, Tanzania, Zambia, as well as Britain. Therefore, the Commonwealth Conference might well be the best possible forum for resolving this considerable problem.
    Mr. Whitlock: My right hon. Friend the Prime Minister said that the agenda of the Commonwealth Prime Ministers' Conference will have to be agreed by all the Prime Ministers concerned. He went on to say that he would be surprised if the immigration problem did not come up for discussion at the Conference.

    Rhodesia
    Mr. Wallasked the Secretary of State for Commonwealth Affairs if he is aware that African guerilla fighters are planning to infiltrate into Rhodesia; and what information he has on the assistance being given to them.
    Mr. George Thomson: I am well aware of the risks of continued violence in Rhodesia so long as the present unconstitutional situation persists. As regards the information available to me, I have nothing to add to what my right hon. Friend the Prime Minister said in answer to Questions on 7th May.— [Vol. 764, c. 212–14.]
    Mr. Wall: As Her Majesty's Government claim to rule Rhodesia, is it not their duty to prevent this incursion? Will the Secretary of State say categorically that no help, either direct or indirect, is being given or will be given to these guerrillas?
    Mr. Thomson: I can say categorically that no help is being given to guerrillas. We stand opposed to violence, for the reasons I have just described to the right hon. Member for Streatham (Mr. Sandys).
    Mr. Hugh Jenkins: Is it not my right hon. Friend's desire that the illegal regime in Rhodesia should be overthrown, and does he not welcome any help he can get to this end?
    Mr. Thomson: It is our desire to see peaceful progress towards majority rule restored in Rhodesia. We attach the highest importance, not only in the interest of Rhodesia, but in the interest of so many African countries, to seeing that achieved by peaceful means and not by violent means.

    Tonga (Treaty of Friendship)
    Mr. Bryant Godman Irvineasked the Secretary of State for Commonwealth Affairs if he will make a statement about constitutional progress in Tonga.
    Mr. Whitlock: Under the new Treaty of Friendship, signed in Tonga on 30th May, and still to be ratified, Tonga has full responsibility for its own internal affairs, except for certain defence purposes. Save as provided for under the Treaty, the Constitution, and any constitutional change, is the responsibility of the Tonga Government.
    Mr. Godman Irvine: Is the Undersecretary aware that after close on 90 years of treaties of friendship between these two countries this is a very satisfactory step forward? Is the hon. Gentleman further aware that if it should happen that Tonga applies to join the Commonwealth or the South Pacific Commission there will be a warm welcome for Tonga, not only in the House, but throughout the Commonwealth?

    Ceylon (Foreign Exchange Entitlement Certificate Scheme)
    Mr. Bryant Godman Irvineasked the Secretary of State for Commonwealth Affairs what representations he has made to the Government of Ceylon with regard to the Foreign Exchange Entitlement Certificate Scheme announced under a Gazette Notification of 5th May, 1968; and if he will make a statement.
    Mr. Whitlock: We have been much concerned at the possible adverse effect on British interests of the Foreign Exchange Entitlement Certificate Scheme introduced by the Government of Ceylon in May, 1968. The Commonwealth Office and other Departments have been seeking to determine the likely effects of the scheme on British individuals and companies. Our High Commission has, for this purpose, been in touch with the Ceylon Government and with the Association of British Interests in Ceylon and the Commonwealth Office has held discussions with the Ceylon Association in London.
    In order to clarify the precise working of the new scheme and to seek suitable alleviation, we have asked for, and the Ceylon Government have agreed, to hold talks at a senior official level in Colombo. These talks began last week. I am not yet in a position to make a statement on the outcome.
    Mr. Godman Irvine: Is the hon. Gentleman aware that most of the payments made under this scheme will in fact be dividends which are nearly two years in arrears? Is he further aware that, as a result of taxation plus the cost of the new service, only 45 rupees for every 100 which ought to be paid will, in fact, be received at this end? Does he not, therefore, feel that it is most urgent that these talks should be brought to a speedy conclusion?
    Mr. Whitlock: All these difficulties for individuals and for firms are fully understood by the Commonwealth Office and by our people in Ceylon, and we are trying, as far as possible, to alleviate the consequences of the scheme to those people.

    Kenya (High Commission Staff)
    Mr. David Steelasked the Secretary of State for Commonwealth Affairs how many complaints he has received about treatment of members of the public by the staff of the United Kingdom High Commission in Nairobi since the passing of the Commonwealth Immigrants Act, 1968; and what action he has taken.
    Mr. Whitlock: We have received no specific complaints, but have seen a copy of a letter sent from Nairobi to my right hon. Friend the Home Secretary contain-
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    ing general allegations about the High Commission staff. The writer of the letter afterwards called on the Acting High Commissioner to discuss these matters.
    All complaints have been investigated and only one has been substantiated. The need for courtesy and consideration in dealing with applications is, of course, fully understood by the staff concerned, and to ease the considerable pressure under which the staff were working, the staff in the sections concerned have been strengthened.
    Mr. Steel: Is the hon. Gentleman aware that that Answer, particularly the last part, will be received with satisfaction? Is he aware that there will be great sympathy with the staff of the High Commission in Nairobi in the very difficult task it has to perform? Has any thought been given to the possible employment of Kenyan-Asians in the High Commission, who would then deal with their own people?
    Mr. Whitlock: Local people are employed in the High Commission offices in Nairobi, and I am confident that the people who are there are competent in every way to carry out the task with which they are charged. I should like to take this opportunity to express my gratitude to the staff for the way in which they have carried out their task in extremely trying conditions.

    Gibraltar
    Mr. Fisherasked the Secretary of State for Commonwealth Affairs if he will give details of the revised arrangements for the admission of citizens of Gibraltar to the United Kingdom in the context of the provisions of the Commonwealth Immigrants Act 1968.
    Mr. Whitlock: My right hon. Friend the Commonwealth Secretary said in Gibraltar on 23rd May that he was satisfied that within the present number of vouchers available for the whole Commonwealth under the Commonwealth Immigrants Act, all the Gibraltarians who wanted to come to Britain would be able to do so. This is still the position. No Gibraltar voucher applications are outstanding and we are co-operating with the Gibraltar Government to ensure

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    that all applications are processed with the minimum delay.
    Mr. Fisher: If Gibraltarians are now to be freely admitted, as seems to be the case—and I am absolutely delighted that this is so—does not this make it clear, as some of us claimed at the time, that the Kenyan-Asian Bill was a piece of colour legislation, pure and simple?
    Mr. Whitlock: Not at all. One has to apply the Bill in the circumstances in which it applied in Kenya and not as it applied in Gibraltar.
    Mr. Braine: Does the hon. Gentleman recall that, in the same speech, the Commonwealth Secretary promised that he would set up an expert body to look into labour questions, employment opportunities and so forth in Gibraltar? That was nearly six weeks ago. Has any progress been made in the setting up of that body?
    Mr. Whitlock: Progress is being made, but this is an entirely different question.
    Mr. Colin Jacksonasked the Secretary of State for Commonwealth Affairs what progress has been made concerning talks over the constitutional future of Gibraltar.
    Mr. George Thomson: We are planning for the constitutional talks to open in Gibraltar under the Chairmanship of my noble Friend the Minister of State for Commonwealth Affairs on 16th July.
    Mr. Jackson: I thank my right hon. Friend for that Answer. Can he give the House an assurance that these talks will be concerned not only with internal government within Gibraltar, but with the wider constitutional links with Britain which would, for example, include the question of Channel Island status?
    Mr. Thomson: As the hon. Gentleman knows, Her Majesty's Government's attitude towards Channel Island status has been that this would present formidable difficulties for both Britain and Gibraltar, but I have repeatedly said that these talks will enable any ideas about future links to be put forward and discussed.
    Mr. Tilney: Does not the Secretary of State agree that, as long as Gibraltarians can come into this country like Channel Islanders, that will more or less satisfy them?
    Mr. Thomson: That is the importance which should be attached to the question of the right of access for Gibraltarians about which the hon. Member for Surbiton (Mr. Fisher) made such agreeable noises a few moments ago.
    Mr. Albert Roberts: Is there any possibility of the Government's complying with the United Nations resolution, or is it just a case of accepting the rulings of the United Nations, as is the case with so many other countries, only when it suits our purpose?
    Mr. Thomson: No, Sir. I had hoped that I had made that position absolutely clear to my hon. Friend in our recent debate. The United Nations resolution was non-mandatory; it was a recommendation. We voted against it to make it absolutely clear that we thought that it was a resolution which discredited the United Nations.
    Sir D. Walker-Smith: Have the difficulties about Channel Island status, which the Government see, been formulated? Would the right hon. Gentleman present, by way of a White Paper or otherwise, the exact considerations, constitutional and otherwise, which he has in mind, so that those who may be disposed to take another view can reflect upon them and answer them if need be?
    Mr. Thomson: I should not like to formulate them at this stage on the eve of the visit of my noble Friend Lord Shepherd to Gibraltar. The first thing to do is to allow the talks to begin.

    India and Pakistan (Official Visits)
    Mr. Colin Jacksonasked the Secretary of State for Commonwealth Affairs when he intends to pay official visits to India and Pakistan.
    Mr. Thomson: At present no such visits are arranged.
    Last year my right hon. Friend the Minister of Overseas Development paid an official visit to India and my right hon. Friend the present Secretary of State for Wales made official visits to both India and Pakistan. In addition, my right hon. Friend the President of the Board of Trade and my hon. Friends the Parliamentary Secretaries of the Commonwealth Office and the Ministry of Overseas Development visited Delhi in

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    February of this year for the second U.N.C.T.A.D. I naturally hope that, if agreeable to the Governments concerned, further visits can be arranged in the months to come.
    Mr. Jackson: Would my right hon. Friend admit that, while relations between Wales and India are necessarily close, it would probably be more practicable for the Commonwealth Secretary to visit India and Pakistan at the earliest opportunity, bearing in mind the serious problems of South-East Asia, China, Vietnam and the future of Asia?
    Mr. Thomson: Yes, Sir. The Secretary of State for Wales visited India as one of my deputies. My hon. Friend will be aware that we are approaching a merger of the Commonwealth Office and the Foreign Office, and I am sure that the first Secretary of State for the joint office will not overlook what my hon. Friend has said this afternoon.

    India (Mr. W. Nash)
    Mr. David Watkinsasked the Secretary of State for Commonwealth Affairs if he will make a statement on the efforts which he is making to have expedited the proceedings against Mr. W. Nash of Burnopfield, County Durham, who has been held in custody in New Delhi for many months on charges of alleged smuggling.
    Mr. Whitlock: Our High Commissioner in New Delhi has made appropriate representations to the Indian authorities about the time Mr. Nash has already been in custody, and I hope that the proceedings against him will now be expedited.
    Mr. Watkins: I thank my right hon. Friend for the efforts which he and the High Commissioner have made on behalf of my constituent. However, is it not disgraceful that anyone should be held in custody for so long without any charges being proved against him?
    Mr. Whitlock: Mr. Nash was arrested on 15th December and could not produce bail. The Indian Customs authorities completed their inquiries on 12th March when a complaint was alleged against him in court. I understand that there are 24 witnesses in this case, of whom only eight have so far appeared in court. Progress is slow, but the conduct of the case is a matter for the Indian courts on which I cannot comment. My
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    hon. Friend will be pleased to know that Mr. Nash is in good health, is being well treated, and is regularly visited in gaol by the staff of our High Commission.
    Mr. Dodds-Parker: As the Indian authorities have a very good record for expedition in such cases, can the hon. Gentleman say why there has been this delay in this case?
    Mr. Whitlock: Presumably the delay has been because of the need of the Indian Customs authorities to complete their inquiries. They were not completed until 12th March. Since then, there have been a number of hearings of the court and a variety of witnesses have been examined.

    Falkland Islands
    Mr. Chichester-Clarkasked the Secretary of State for Commonwealth Affairs whether he will now arrange to visit the Falkland Islands.
    Mr. George Thomson: I know that a visit to the Falkland Islands would be welcome and we are examining the possibility of a visit by a Minister later in the year.
    Mr. Chichester-Clark: Has not someone, either there or here, to make it quite clear that British sovereignty over the Falkland Islands is not negotiable?
    Mr. Thomson: The position with regard to the Falkland Islands has been made absolutely clear, and it is that the interests of the inhabitants of the Falkland Islands are paramount, and it is their wishes that will be taken into account in any future decision.
    Mr. Chichester-Clarkasked the Secretary of State for Commonwealth Affairs what recent talks he has had with political leaders in the Falkland Islands.
    Mr. Braineasked the Secretary of State for Commonwealth Affairs what consultations he now proposes with the Government of the Falkland Islands on the subject of their future constitutional status.
    Mr. George Thomson: As my right hon. Friend the Foreign Secretary said on 26th March, there have been consultations with the Governor, who has been authorised to keep his Executive Council

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    informed in confidence. This will continue.
    I had talks with the Governor of the Falkland Islands in London in February, and my right hon. Friend the Minister of State had talks with a leading member of the Falkland Islands Executive Council in London in March.
    Mr. Chichester-Clark: I hope that that means that sovereignty is not negotiable. Have political leaders been told why the Government are appearing to waste time and are causing what appears to be unnecessary offence to other nations in this case, and in the cases of British Honduras and Gibraltar?
    Mr. Thomson: The other points are matters for other Questions but in the case of the Falkland Islands, as the hon. Member knows, there is first of all the United Nations resolution on the subject, with which we have been seeking to comply. It is in the general interests of the Falkland Islands, as well as of our own foreign relations, that the Falkland Islands should seek neighbourly relations with the Argentine on the neighbouring Latin-American continent. There is no question of the wishes of the Falkland Islanders with regard to the future being over-ridden.
    Mr. Braine: Is the right hon. Gentleman aware that there is no doubt about the desirability of having good relations with the Argentine, but since, contrary to the wishes both of the islanders and a large number of people in the House and this country, secret negotiations with the Argentine over sovereignty are still continuing, we want to know at what stage the Government propose to tell the people of the Falkland Islands, as opposed to the Executive Council, which is bound to secrecy on this matter, concerning their future?
    Mr. Thomson: Negotiations are going on. These kinds of negotiations are better conducted in confidence. It is the normal practice. Equally, the Governor and his Executive Council are being kept informed of the negotiations, in confidence. When these negotiations develop to a point at which there is something to report, that would be the time to bring in a much wider circle of people, but that stage has not yet been reached.
    Sir Alec Douglas-Home: The right hon. Gentleman has used two sets of words. He said, first of all, in relation to sovereignty, that the wishes of the people in the Falkland Islands will be taken into account, and the second time he said that they would not be over-ridden. Will he confirm that it is the second interpretation which is the right one?
    Mr. Thomson: It is the second one.

  COAL

    Colliery Closures, North-West
    Mr. Roseasked the Minister of Power what communications he has received from the National Coal Board in respect of colliery closures in the North-West during the latter half of 1968.
    The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Free-son): I understand from the National Coal Board that it has informed the unions that Bradford and Thorney Bank pits are to close in 1968, and that the results of Ravenshead, Parsonage, Sutton Manor and Old Meadows pits are such that their future is in jeopardy.
    Mr. Rose: Would my hon. Friend consult with the various authorities interested in the future of Bradford Colliery to see whether a change in the working arrangements can extend the life of the colliery? Would he take steps with his colleagues to see that, if the colliery is closed, priority to those made redundant is given in other forms of public enterprise?
    Mr. Freeson: My hon. Friend will appreciate that negotiations as to the possible extension of the life of pits is a matter for the N.U.M. and the N.C.B. and their local representatives. As to alternative employment, while there is consultation and contact with regional authorities, the D.E.A. and other Departments, this is primarily a responsibility of those Departments, not the Ministry of Power.
    Mr. Emery: Can the Minister give an assurance that it is not the intention of his Ministry to interfere in any way with the programme of pit closures agreed by the N.C.B.?
    Mr. Freeson: We are kept closely in touch with all matters relating to the programme of pit closures and will continue to be kept in touch.

    Bradford Colliery, Manchester
    Mr. Roseasked the Minister of Power what will be the additional transport costs of the alternative arrangements for supplying coal to Stuart Street power station, Bradford Gas Works and Richard Johnson and Nephew which at present receive direct supplies by conveyor belt following the closure of Bradford Colliery.
    Mr. Freeson: As the question of alternative supplies of coal is a matter for the N.C.B. in consultation with its customers, I have asked the Chairman of the Board to write to my hon. Friend.
    Mr. Rose: Can my hon. Friend say whether these factors were considered before the closure was announced by the N.C.B.?
    Mr. Freeson: Yes, I can confirm that these are among the many factors taken into account when a decision is taken.

    Bradford Colliery, Manchester
    Mr. Ogdenasked the Minister of Power what consultations he had with the National Coal Board in advance of the announcement of the intention to close Bradford Colliery. Manchester, in September, 1968.
    Mr. Freeson: The National Coal Board is responsible for colliery closures, and keep my right hon. Friend informed. This was done in the case of Bradford Colliery.
    Mr. Ogden: Would my hon. Friend agree that there is a vast difference between being informed of a decision and being consulted about a decision before it is taken? Surely if it is anyone's business it is the business of the Ministry of Power?
    Mr. Freeson: It has not been the practice in the past, nor is it the practice at the present time, for the Ministry of Power to involve itself in the detailed programming of colliery closures.
    Mr. Sheldon: Although it is no desire of mine or my hon. Friends to interfere with the day-to-day working of the N.C.B. may I ask whether, in a matter as serious as this, my hon. Friend has
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    assured himself that the financial implications have been covered?
    Mr. Freeson: All these implications are taken into account when the decision is made. The important thing is that, so far as possible, there should be close liaison between the N.C.B. and the various Government Departments concerned so that action can be taken where possible by other Departments to direct employment and industrial development into the areas concerned.
    Sir G. Nabarro: Can the hon. Gentleman explain to the House why it is expected to vote the money consequent upon the policy of large-scale pit closures, while the Minister refuses to give us details of the displacement of labour and all the other operational details following the closure policy?
    Mr. Freeson: If the hon. Gentleman and any other hon. Member wish to put down Questions asking for this information we will do our best to supply it. We have answered such Questions in the past.
    Mr. Shinwell: Why does the Parliamentary Secretary always assume that the provisions of the coal nationalisation Act, for which he is responsible in this House, provide arbitrary powers allowing the N.C.B. to indulge in closures without full consultation, not only with the N.U.M. but with the Government, about the social consequences? Are we to assume that this is Government policy? If so, they ought to be made responsible.
    Mr. Freeson: My right hon. Friend has misunderstood one of my previous replies. I said on two occasions that there is consultation between the N.C.B. and the Government Departments concerned. It is not just a matter for the Ministry of Power, as I pointed out.
    Mr. Ogden: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest possible opportunity.

  MINISTRY OF HEALTH

    Prescription Charges 35.
    Sir D. Rentonasked the Minister of Health whether he will include Wilson's disease among those which entitle people suffering from chronic ailments to exemption from payment of prescription charges.
    The Minister of Health (Mr. Kenneth Robinson): No, Sir. I would refer the hon. Member to my reply on 30th April to my hon. Friend the Member for Wandsworth, Central (Dr. David Kerr) and other hon. Members.—[Vol. 763, c. 973–6.]
    Sir D. Renton: Is the right hon. Gentle, man aware that this is a serious question about a tragic and chronic disease? Is he further aware that it is almost incurable? Will he bear in mind that its effect can be mitigated by regular treatment, by prescription? Would he see to it that this is an exemption?
    Mr. Robinson: I have explained that the list of exemptions was the maximum upon which agreement could be reached with the medical profession. I agree with the right hon. and learned Gentleman in what he says about the disease, but I am told that it is, happily extremely rare, with less than 100 cases in the whole of the United Kingdom. I am also told that it does not require frequent prescriptions—about one a month is normal.
    Dr. Winstanley: Would the right hon. Gentleman freely acknowledge that the Government are not exempting the chronic sick from these charges as they originally promised?
    Mr. Robinson: The Government are exempting patients in the categories specified in the Order. As to the wider categories of patients who might be called chronic sick, I would refer the hon. Gentleman to the announcement I made about future arrangements.
    Sir R. Cary: On a point of order. Might I ask the right hon. Gentleman what is Wilson's disease?
    Mr. Robinson: It is also known as hepatolenticular degeneration. [Laughter.] It is not a laughing matter. It is a very serious disease, and it is due to, or associated with, a defect of copper metabolism in the body.
    Mr. Pavittasked the Minister of Health if he will issue instructions to dispensing pharmacists that any prescription which gives the patient more than two ampoules of methedrine a day shall be referred to the doctor concerned for confirmation before being given out.
    Mr. K. Robinson: The Advisory Committee on Drug Dependence has been considering the general question of central nervous system stimulant drugs since its first meeting, and methedrine in particular since February. I understand that the Committee has concluded that further restriction upon its availability is desirable and is now urgently considering the best way to achieve this. I will examine the suggestion made by my hon. Friend in the light of the Committee's advice.
    Mr. Pavitt: Can my right hon. Friend say why it is that there has been such an increase in the production of methedrine, when only a few years ago there was only one firm making it, and there has been no increase in the disease for which this is available?
    Mr. Robinson: My hon. Friend has another Question on the Order Paper about the firms manufacturing this. These are matters which we must consider in the light of the Committee's advice.
    Mr. Maurice Macmillan: Would the right hon. Gentleman consider trying new methods of stopping an addict obtaining more than he needs from chemists, perhaps by applying more widely the methods which I understand are now being used in Birmingham?
    Mr. Robinson: The hon. Gentleman may like to know that after consultations with leaders of the medical profession, my Chief Medical Officer recently wrote to all general practitioners and to doctors doing appropriate work in hospitals, about the very great care needed in prescribing amphetamines generally.

  LOCAL GOVERNMENT

    Beaches (Oil Pollution)
    Mr. Thorpeasked the Minister of Housing and Local Government whether he is aware of the proposal of the Shell Oil Company to transfer oil from large to small tankers outside territorial waters; whether officials from his department will be present to witness the trial experiments with this technique; and what steps he is taking to ensure that this method of unloading does not increase the risk of oil pollution.
    The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington): My

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    right hon. Friend is concerned about any activity at sea which involves a risk, however remote, of beaches being polluted by oil. He has therefore kept himself informed about this proposal. Officials from the Department have not witnessed the trials, but professional officers of the Board of Trade have done so. I am advised that, provided the precautions prescribed in the company's operating procedure are strictly observed and provided the transfer takes place in suitable weather, the risk of pollution is slight. My right hon. Friend the President of the Board of Trade will keep developments under close scrutiny.
    Mr. Thorpe: I thank the hon. Gentleman for his reply. Is he aware that councils with seaside resorts in their control are very worried about this matter? Can he say whether the trials will be witnessed? In view of the helpful response of the Ministry at the time of the "Torrey Canyon" disaster, will he undertake that the trials will be witnessed and that the Ministry will keep as closely in touch as possible with this development?
    Mr. Skeffington: I am happy to give all the assurances asked for by the right hon. Gentleman. Expert Government witnesses will be at all the trials and any other manifestations. Furthermore, we propose to issue to all the authorities an up-to-date and revised technical manual in case they suffer pollution, which is quite unlikely. We are keeping abreast of modern developments. If, despite the procedures, there should be harmful consequences, grants will be sympathetically considered.

  NATIONAL FINANCE

    Civil Service (Information Officers)
    Mr. G. Campbellasked the Chancellor of the Exchequer what action he is taking to reduce the number of public relations and publicity officials in, or attached to, the home Civil Service.
    The Minister of State, Treasury (Mr. Dick Taverne): Information officers are subject to the same stringent controls as all other staff of the home Civil Service, and their numbers are kept to the minimum necessary to carry out their essential function.
    Mr. Campbell: As the increase in the number of public relations officers has coincided with an unparalleled increase in the disenchantment and disgust of the public with the Government, will the hon. and learned Gentleman make this a priority in the plan to curb the size of the Civil Service?
    Mr. Taverne: There is elaborate financial control. The cost of information staff is examined separately, and if one does want proper explanations from Departments, as the public does, it is reasonable that there should be information officers to provide them.

  OVERSEAS DEVELOPMENT

    Swaziland
    Mr. David Steelasked the Minister of Overseas Development whether the conference to discuss the future finance of Swaziland will be held prior to the granting of independence on 6th September.
    The Minister of Overseas Development (Mr. Reg Prentice): No, Sir. With the agreement of the Government of Swaziland, it is proposed to hold the conference in the autumn after independence✶ but officials of my Department are having preliminary talks in Swaziland this month.
    Mr. Steel: Is this not an unusual step to take? In view of the isolated situation of Swaziland, surely financial arrangements should be known before independence is granted.
    Mr. Prentice: This procedure has been followed in a number of recent cases. Aid this year to Swaziland will cover the immediate post-independence period, and talks on aid, which will take place in the autumn, will follow preparation of the development plan of the Swaziland Government for the period ahead.

    NATIONAL EXPORT AGENCY
    Ql. Mr. Whitakerasked the Prime Minister whether he will co-ordinate the relevant work of the Board of Trade and the Foreign Office in order to establish a National Export Agency.
    The Prime Minister (Mr. Harold Wilson): My hon. Friend will know of the Overseas Marketing Corporation the establishment of which was announced by my right hon. Friend the President of the Board of Trade on 2nd November last. If my hon. Friend has any other point in mind I would be happy to consider it.—[Vol. 753, c. 11–13.]
    Mr. Whitaker: Would not a National Export Agency based directly on intelligence from commercial attaches throughout the world be invaluable for smaller British firms which cannot have exporting knowledge of every country?
    The Prime Minister: This is why the Corporation, following the Denman Report, has been set up—to act as an overseas selling organisation for British goods with export potential whose manufacturers, for one reason or another, lack the knowledge or facilities needed. The reports from our overseas representatives are available to the organisation.
    Sir C. Osborne: Does the Prime Minister not agree that our commercial attaches in most countries are doing a fine job in helping our exporters? Would not he further agree that what is needed is not a further agency like this but a reduction in direct taxation and the abolition of S.E.T. in order to give incentives to men to export?
    The Prime Minister: The latter part of the hon. Gentleman's supplementary question raises wider considerations, and I remind him that we are discussing the Finance Bill this week. But I agree with his tribute to our representatives, both in foreign countries and in Commonwealth countries. Their work is very useful to our manufacturers. I think that the new Corporation will help many small potential exporters. I have also been very impressed, in my visits to various parts of the country recently, by what chambers of commerce and other private enterprise organisations are doing to help our smaller exporters.

    DEVALUATION
    Mr. Martenasked the Prime Minister whether, in the light of the last quarter's balance of payments, he will now report progress on devaluation in another television broadcast to the nation.
    The Prime Minister: I would refer the hon. Member to the Answers I gave to similar Questions on 5th March and 25th April, 1968.—[Vol. 760, c. 222–3; Vol. 763, c. 475–77.]
    Mr. Marten: Since then much time has passed. In the present situation, with the balance of payments as it is, overseas debt mounting up, the unemployment trend, and two Cabinet resignations since devaluation, does not the nation in its anxiety deserve a massive explanation from the right hon. Gentleman on television?
    The Prime Minister: I am not getting help from the hon. Gentleman who is so misleading in his presentation of facts and figures. I remind him that industrial production this April was five points higher than in April last year, that productivity is 5½ per cent. higher, and that our exports are up 15 per cent. by value and 7 per cent. by volume over the middle period of last year, representing an annual rate of 10 per cent. compared. with the average over the last ten years of a 3 per cent. increase.
    Mr. Hugh D. Brown: Will my right hon. Friend take serious note of the point of view of hon. Members on this side who recognise that July is a sticky month in more ways than one—including Sunday's resignation? Will he accept that there would be tremendous support for him if he gave a state of the nation broadcast, because he still has many friends— [Interruption.]
    Mr. Speaker: Order. Briefly, please.
    Mr. Brown: I repeat that the Prime Minister still has many friends inside and outside this House. The country deserves an explanation of what is going on.
    The Prime Minister: I think that at the proper time that will be appropriate.
    Mr. Maudling: In the light of the figures given by the right hon. Gentleman, can he say whether the rise in prices since devaluation is yet enough to carry out the Government's policy of restraining demand, especially imports?
    The Prime Minister: The full effects of the Budget on restraining demand have not yet been felt. The latest figures for retail sales were published this morning.

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    The House was given the figures for prices yesterday. They include the effects of the Budget, which it was known would have an effect on price levels. However, there is some evidence that food prices this year have not risen as much as many of us, including myself, would have expected at the time of devaluation.
    Mr. Murray: Is the Prime Minister aware that the Conservative Party are willing to go to any lengths to discredit the Government, even if it means doing serious and permanent damage to the economy? I am sure that the public would welcome a broadcast on television giving some of the true facts to the nation.
    The Prime Minister: It is probably more important that we should all concentrate on the measures which we have been taking, including the very important measures for strengthening Britain's industry, from which we are now getting new and spectacular evidence almost every week, not only in export orders but in other ways, showing the greater robust strength of British industries that were far too long neglected.
    Mr. Peyton: Would not such a broadcast afford a melancholy example of the unpopular explaining the unacceptable to the unbelieving?

    HOUSE OF LORDS REFORM (LEGISLATION)
    Mr. St. John-Stevasasked the Prime Minister whether he will make a further statement on Government intentions with regard to the reform of the Upper House.
    The Prime Minister: I would refer the hon. Member to the statement I made to the House on 20th June and to the Answers I gave to Questions on 25th June—[Vol. 766, c. 1314–28; Vol. 767, c. 236–8.]
    Mr. St. John-Stevas: Since the Prime Minister said then that legislation would be early, radical and comprehensive, would it be fair to interpret that as meaning that the Prime Minister does not know what to do and cannot make up his mind?
    The Prime Minister: No. The hon. Member would be quite wrong to deduce that from it. The legislation will, in fact, be comprehensive, radical and early.
    Mr. Maudling: Can the Prime Minister say whether the legislation will be available and on the Statute Book earlier than could have been done by inter-party agreement?
    The Prime Minister: The right hon. Gentleman knows that it was the effect of his own Front Bench that made inter-party agreement impossible. Very reasonable progress was being made, but the Leader of the Opposition thought that he saw a chance of taking political advantage and bungled it.
    Mr. Manuel: Is my right hon. Friend aware, and will he take note, that the Members of the other place are mutilating the Transport Bill as busily as they can? Will he see that the will of the people is carried out in order to get a public transport system for the country?
    The Prime Minister: I do not think that it would be appropriate for me to comment on what is going on in another place during the passage of the Bill. We will see it in whatever form it emerges when it comes back to this House.
    Dr. Winstanley: In considering the possibility of Members of the House of Lords being subject to some form of election, would the Prime Minister bear in mind that the method of election which is used to send Members here sends rather too many Members of certain parties and too few of others? Will he bear in mind the possibility of electoral reform in this direction and recall the attempts which a previous Labour Government made in 1930?
    The Prime Minister: I have heard a large number of suggestions about another place, but I do not think that many people have seriously suggested electing the other place. As to the representation of one of the smaller parties in another place, the Leader of the Liberal Party will know that, contrary to the precedent set by my predecssors, it has been possible in the last three-and-a-half years to recommend a number of

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    distinguished Liberals for service in another place.
    Mr. Anderson: Will my right hon. Friend give an assurance that the legislation will be sufficiently speedy to prevent there being a lame duck Session in 1970–71, when the Tory Peers will have a stranglehold over the measures which we were sent here to promote?
    The Prime Minister: I am sure that that and all other relevant considerations will be borne in mind both in the timing and in the form.

    NATIONAL HEALTH SERVICE
    Mr. Pavittasked the Prime Minister if he will co-ordinate the activities of the Lord President of the Council, the Minister of Health and the Minister for Social Security, with a view to the preparation of a declaration of policy for the National Health Service as and when economic conditions improve.
    The Prime Minister: As to co-ordination, the House already knows that my right hon. Friend the Lord President of the Council is supervising the planning and timetable for amalgamation of the Ministries of Health and Social Security. As to the policies for the development of the National Health Service, these are kept under continuous review but no early statement is in prospect.
    Mr. Pavitt: Will my right hon. Friend reaffirm that it remains not only his policy but the policy of Her Majesty's Government to restore the principle of free of payment at the time of need in the health services? Will he take steps by progressive stages to that end when the economic situation permits?
    The Prime Minister: I will confirm— or reconfirm—what I said to my hon. Friend, which was not the exact words which he has just used: that when the economic situation permits more expenditure on the National Health Service, we shall consider that proposal against other high priorities in the matter of the Health Service. No decision has been taken. It is certainly premature at this stage to feel that we are in a position to begin thinking about it.
    Mr. Maurice Macmillan: Will the Prime Minister meanwhile tell the House
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    who speaks in the Cabinet on health and social security matters? Is it the Lord President of the Council, or are Departmental Ministers called in?
    The Prime Minister: It is not usual to discuss Cabinet arrangements, but the hon. Member might like to know—I think that he does know—that at the present time, as always in the past, those Ministers are present whenever there is anything directly or even indirectly affecting their Departments, and, of course, they have full rights of speaking.
    Mr. Thorpe: Whatever the method of co-ordination, will the Prime Minister confirm that it is his Government's intention at the earliest possible moment to return to the principle of a free Health Service?
    The Prime Minister: I have already answered that in relation to the question from my hon. Friend. I have said that when more money is available—and it would be foolish at this stage to say that that is in sight at the present time— for the Health Service, we shall consider various priority claims for that expenditure. We are, of course, carrying out a record hospital building programme of nearly double the rate which we inherited. There are, however, many hon. Members who would feel that it should be stepped up further before other things were considered.

    RHODESIA
    Mr. Evelyn Kingasked the Prime Minister if he will make a statement on the latest situation in Rhodesia in the light of action taken by the British representative at the United Nations.
    The Prime Minister: I would refer the hon. Member to the Answers I gave to Questions on 27th June.—[Vol. 767, c. 807–13.]
    Mr. King: Has not the Prime Minister indicated that agreement is now unlikely? If that is so, will he estimate the continuing damage thus deliberately, through sanctions, clamped on the British economy? Will he also represent to fellow members of the United Nations that if within three or six months others do not bear their fair burden this country cannot continue along this course?
    The Prime Minister: Hon. Members opposite have recently voted against the proposition that we should bear a fair burden: they opposed the United Nations Security Council resolution. They cannot have it both ways on this question.
    In reply to the earlier part of the question, I did not say that an agreement was unlikely, nor do I consider that. I said that we must see a fairly radical change of attitude about the six principles on the part of Rhodesian leaders who would have the power to deliver an agreement— not merely to make it but, after what happened on "Tiger", to deliver afterwards.
    Mr. John Lee: Bearing in mind that sanctions have been applied for a considerable time, can my right hon. Friend give his estimate of the length of time that it will now take to bring the Rhodesians to heel in the light of the very welcome imposition of the mandatory sanctions?
    The Prime Minister: No, Sir, I do not think that it would be possible now to make an estimate about that. It is very well recognised that in Rhodesia there is growing pressure for a reasonable settlement as a result of the sanctions and the fears of the latest developments, but I would like to see that translated into a genuine acceptance of the six principles and of a constitutional settlement which gives effect to them.
    Sir G. Nabarro: Will the Prime Minister say what action he is taking in regard to Zambia, which protests most loudly about British behaviour yet continues to trade on the greatest scale of any country in Africa with her neighbour Rhodesia?
    The Prime Minister: The hon. Member must realise that there has been a very large cut in Zambian purchases from Rhodesia, even though at one time they were almost an integrated economic community in very many respects. Zambia is still importing some essential goods from Rhodesia, but many other goods have been cut out. The United Nations specially recognised the problem of landlocked countries such as Zambia and countries contiguous to Rhodesia whose economies in the past have been very closely integrated.

    TOURISM
    Mr. Milneasked the Prime Minister if, in view of the fact that an adverse figure was recorded in the balance of payments returns for June 1968, he will reconsider his decision not to set up a separate Department for Tourism.
    The Prime Minister: If my hon. Friend is concerned with the effect of tourism on the balance of payments he will be glad to know that the number of foreign visitors arriving in the United Kingdom in the first four months of 1968 was 18 per cent. higher than in the corresponding period of 1967. As to a Department of Tourism, my view is still as I expressed it in reply to a Question by my right hon. Friend the Member for Kettering (Sir G. de Freitas) on 29th February.—[Vol. 759, c. 414.]
    Mr. Milne: Is my right hon. Friend aware that it is precisely for this reason that the necessity to appoint a Ministry of Tourism arises and, to take advantage of this rapidly expanding industry, it is essential that it be placed under the control of one Minister?
    The Prime Minister: I think that the most satisfactory solution is the present position where the President of the Board of Trade and his Minister of State are directly responsible not only for tourism, but also for overseas travel both by sea and by air. I think that this is a much more helpful way of encouraging tourism. As I say, the results so far this year have been extremely encouraging.
    Mr. Tapsell: Will the Prime Minister accept, in the context of our balance of payments, that the first essential for the restoration of the national credit is that he should resign?
    The Prime Minister: No, Sir, and I pray that the right hon. Gentleman the Leader of the Opposition will not either.
    Mr. Kelley: Will my right hon. Fiend avail himself of this opportunity to inform the House that if we solve our balance of payments problem by any means we are creating a balance of payments problem for someone else and they will probably take the same opportunity to rid themselves of the encumbrance?
    The Prime Minister: I think that, in a global sense, my hon. Friend is no

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    doubt expressing a great economic truth. It is the job if this Government to look after our own interests.
    Sir J. Rodgers: If, according to his priorities, the Prime Minister thinks it desirable to have a Minister looking after sport, is it not far more desirable to have a Minister looking after tourism in view of our balance of payments situation?
    The Prime Minister: My hon. Friend in the Department of Education and Science has other responsibilities besides sport. The hon. Gentleman will recognise that the Minister of State, Board of Trade, is employed virtually full-time on the related questions of tourism, civil aviation and shipping. From my own experience—and the right hon. Gentleman who had experience of responsibility for these matters will probably confirm— I think that this is probably the best arrangement in order to maximise our tourist earnings and the number of people coming to this country.
    Several Hon. Members rose——
    Mr. Speaker: Order. Mr. George Thomson to answer several Questions together.

    NIGERIA
    The Secretary of State for Commonwealth Affairs (Mr. George Thomson): With permission, I will now answer Questions Nos. 7, 8, 12, 16, 21, 22, 24 and 25 together.
    Since I made my statement in the House on 26th June, after the return of my noble Friend Lord Shepherd from Nigeria, we have taken the following action to aid a settlement of this unhappy war.
    At our request, Mr. Arnold Smith has taken steps to convey to the Biafran authorities that in the light of my noble Friend's discussions in Lagos, the opening of direct informal discussions between the two parties in London with a view to the reconvening of the Kampala peace talks are, in our view, possible and could be productive.
    In addition to Mr. Smith's action, Lord Shepherd has spoken yesterday to Mr. Kogbara, who was associated with Sir Louis Mbanefo in his earlier talks and
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    urged upon him the need for a representative of Colonel Ojukwu to come to London as soon as possible in pursuance of the undertaking given by Sir Louis.
    I have accordingly read with regret— which I am sure hon. Members on both sides of the House will share—the reports of Colonel Ojukwu's speech on Sunday at Owerri. I hope that this speech does not mean that he has turned his back on the attempt to secure a return to the negotiating table: in that event, the responsibility he would incur would be grave indeed.
    On the question of our arms policy, I have nothing to add to what I said in the House on 26th June (OFFICIAL REPORT, cols. 444–453). But I should like to take advantage of this opportunity to tell the House of our attitude if, following upon a cease-fire in Nigeria, the two parties to the conflict were to request an external observer force and were to ask for British participation in it. In that event, Her Majesty's Government would be ready to contribute up to one battalion with appropriate support, for a period of up to six months, to a Commonwealth force on the understanding that other Commonwealth countries also agreed to take part on a suitable scale and that such conditions were agreed upon as would permit the force to carry out its duties effectively.
    Regarding relief, I promised on 26th June to make a further statement on this subject. Subject to parliamentary approval, I can now say that in addition to the £20,000 which we have already given to the Red Cross, Her Majesty's Government will now make available a further sum of up to £250,000 for humanitarian relief in the war-stricken areas of Nigeria, including the Ibo areas. Parliament will be asked in due course to approve a Supplementary Estimate. In the meantime, an advance will if necessary be sought from the Civil Contingencies Fund. The intention is that this relief aid should be used as flexibly as possible in order to make the greatest contribution to the relief of suffering, hardship and malnutrition.
    To ensure that the money is spent in the most effective way, expert advice and on the spot discussion with local authorities and relief bodies concerned will be necessary. We are, therefore, arranging,

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    given the necessary co-operation of both sides, for a high-powered relief advisory team to go out to Nigeria as a matter of urgency in order to assess the forms which our humanitarian help should take.
    I am glad to be able to announce that Lord Hunt has accepted the invitation of my right hon. Friend the Prime Minister to lead the relief team to Nigeria and to make recommendations. Sir Colin Thornley, Director-General of the Save the Children Fund, and Mr. A. B. Hodgson, Deputy Director-General of the British Red Cross Society, have agreed to accompany Lord Hunt on this mission.
    I am sure that the whole House will join with me in expressing our thanks to Lord Hunt and Sir Colin Thornley and Mr. Hodgson for agreeing to undertake this arduous but vital task.
    Mr. Winnick: Is my right hon. Friend aware that everyone in the House and in the country will be very pleased about the steps that he has just announced to try to give aid—food and medical supplies—to millions of people in need in Biafra?
    Is my right hon. Friend also aware that many people here are outraged that arms supplies continue to be sold to the Nigerian Federal Government while there are millions of people starving and near to starvation in Biafra? Will the Government look again urgently at the question of arms supplies to the Nigerian Federal forces?
    Mr. Thomson: I think that the important aspect is to bring about a cease-fire. I think that Her Majesty's Government have had some influence concerning the progress that has so far been made. Under these circumstances, I do not see any reason to change the position that was adopted by my right hon. Friend the Foreign Secretary when this matter was fully debated in the House a week or two ago.
    Mr. Barnes: Does my right hon. Friend agree that the next two weeks are absolutely critical, because if supplies of food and medicines, at present sitting in Fernando Po and Lagos, are not got in by air, thousands of children will die? Has my right hon. Friend been able to use his influence to get the Federal Government to agree to Oxfam operating from Fernando Po a Hercules aircraft, which
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    is available, and for which they are prepared to pay, which later this week could be flying in 100 tons a day?
    Mr. Thomson: I understand that discussions are proceeding between the International Red Cross, Oxfam, the Ibo authorities in the East and the Federal Government in Lagos about the urgent matter that my hon. Friend has raised. From what I have been able to see of the appalling position around the fighting line in Nigeria, I think that there is a need for an emergency airlift. However, it is equally important to realise that if the human need is to be met in these areas the necessary volume of supplies can only be brought in by overland routes. The difficulty in getting agreement to that comes not from Lagos—they have given their agreement readily to these arrangements —but from the authorities in the Ibo areas.
    Mr. Dempsey: Is my right hon. Friend aware that only within the last few days Biafra was described as a modern Belsen where 3,000 children have died from starvation and disease? While we welcome the additional £250,000 aid, will my right hon. Friend see to it that the amount is substantially stepped up to make our contribution towards alleviating any further suffering by the people of Biafra?
    Mr. ThomsonI think that £250,000 is a very substantial contribution towards dealing with this problem. It is not directly a British responsibility; it is an International problem. I hope that the example set by Her Majesty's Government will be followed by some other countries.
    Mr. Frank Allaun: Is the Government's argument against stopping arms supplies the allegation that it gives us influence? Since the slaughter and starvation are continuing, it is clearly not giving us influence. Why cannot the Minister listen to the obvious feeling throughout the House and the nation that the Government should stop, jointly and individually, this traffic in arms?
    Mr. Thomson: I think that if my hon. Friend with his usual fairness, studies what I have said he will see some evidence in the initiative that we have taken, and the results that we have obtained, of the kind of influence that we have with the Federal Government of Nigeria which

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    is, after all, a major fellow Commonwealth Government. I am sure that at the moment very little slaughter is taking place. It is starvation which is of immediate concern, and the obstacle to getting something done about it is that the proposals made by the Federal Government to pull back their troops and have a kind of corridor of mercy have so far been obstructed by the authorities in the Ibo region.
    Mr. Tilney: Having had lunch with a Member of Parliament of the Eastern Region who almost alone out of 300 people survived a massacre by the Ibos, may I ask the right hon. Gentleman whether he agrees that atrocities have been committed by both sides? Although many of us have sympathy for the Ibo people, now that it looks as though their food and lives can be safeguarded internationally is not there some way of overcoming the suicidal wishes of their leaders and appealling to the Ibo people to come to a conference?
    Mr. Thomson: I am grateful to the hon. Gentleman for what he has said. I am sure that he is right. A civil war is one of the greatest tragedies that can happen, and a civil war of this character has meant that there have been atrocities on both sides. I hope that Colonel Ojukwu will respond to the appeal made by the hon. Gentleman and send somebody to the conference table. We could get these talks started immediately. They could bring about a cease-fire, and also be of vital importance in setting international agreement about a real international effort to alleviate the suffering and hardship that is going on.
    Sir Alec Douglas-Home: The right hon. Gentleman has made some announcements this afternoon which I think the House will welcome, but they are in the rather longer term. So is the organisation of supplies over the land route. Is not the essential factor an assurance from Colonel Gowon that he will allow an airlift from Fernando Po? Cannot he ask Colonel Gowon to give an assurance that there is no possible obstacle in the way of that being done? I should have thought that that was the first thing to do.
    Mr. Thomson: About an hour before coming to the House I heard from Lagos
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    that the problem raised by the right hon. Gentleman was under active discussion in Lagos between the Federal Government and the International Red Cross about the means of delivering supplies to the rebel areas. An emergency airlift is one possibility which the Federal Government have not ruled out.
    Mr. David Steel: Has the right hon. Gentleman seen the detailed report in this morning's Scotsman in which the International Red Cross said that a cease-fire is essential in Nigeria if the Ibo people are to return to their villages and produce food themselves? Can the right hon. Gentleman say that we are contributing to a cease-fire if we and other nations of the world indiscriminately pour arms into the country?
    Mr. Thomson: I studied the report in the Scotsman this morning, and was very much impressed by the account it gave of the human suffering, as one has been by so many reports coming out of these areas. But it is untrue to say that the British Government are indiscriminately pouring in arms. The arms which we provide for the Federal Government are under careful scrutiny and control all the time. The fighting is not taking place on any scale at the moment, as a result of self-restraint exercised by the Federal Government. I am sure that the important thing for us all to concentrate on is to persuade the Ibo authorities to do two things. First, to come and talk around the conference table, and, secondly, to respond to the offer to pull back the fighting men and thus create a corridor of mercy and get supplies moving on an adequate scale to deal with the problem.
    Mr. E. L. Mallalieu: Will my right hon. Friend be more precise about the observer force which he said the Government are ready to promise? Will it be armed?
    Mr. Thomson: Some contingency planning has been going on for some time about the possibility of this kind of Commonwealth force, but I think that my hon. and learned Friend will understand that it is impossible to make very much progress until we are rather closer to knowing how many people will be willing to participate, and in what circumstances. Her Majesty's Government thought it right to take the initiative in this matter and give the kind of

    1313
    lead that we have sought to give this afternoon, and we hope that it will meet with some response.
    Mr. Hugh Fraser: While the House welcomes the right hon. Gentleman's statement, I think that many of us feel that its speed is not being met by the right hon. Gentleman's proposals. There is essentially a matter of speed in these things. Will he consider again the idea of making a Royal Air Force detachment available to the International Red Cross? It is only by air that we can get supplies m quickly enough.
    Mr. Thomson: Speed is of the essence in our proposal for a relief mission. I hope that, with the necessary co-operation in Nigeria, Lord Hunt and his colleagues will be there at the end of this week. I think that we must await the report which they will bring back, with a proper sense of urgency, to enable us to decide, among other things, what is the best transport method of meeting these needs. In the meantime, I am in no doubt that there is a need for an emergency airlift as a temporary measure, but I hope that the House will accept that if supplies are to be provided on an adequate scale they must go in by overland routes.
    Mr. Crawshaw: Is my right hon. Friend aware that if the Ibos are not cooperating this is probably because we are failing to show our moral responsibility in this crisis? How can they possibly place reliance on us when we are putting supplies into the hands of their enemies? I know the difficulties confronting the Government, but is it not possible to stop supplies even for two or three weeks while these negotiations are going on, to give the Ibos some feeling of security in this matter?
    Mr. Thomson: I think that giving the Ibos a feeling of security is a vital element in this whole situation. It is for this reason that we have given the backing we have to the idea of a Commonwealth force. I think that this kind of international force will give the Ibos a longer term sense of security. I hope that on the basis of being given that assurance they will be ready to come and negotiate flexibly around the table—I hope within the framework of a single
    1314
    Nigeria—arrangements for living at peace with their neighbours.
    Mr. Braine: May I press the right hon. Gentleman to answer the crucial question? Is he aware that the advisory team must, of necessity, take a week, 10 days, or perhaps even longer to make its recommendations? In the meantime, the voluntary agencies on the spot have reported that thousands of children are dying. Is the right hon. Gentleman aware that these agencies have stockpiled food in Fernando Po, and have an aircraft ready to fly in supplies? What obstacles are preventing this mercy mission taking place tomorrow?
    Mr. Thomson: I think that the hon. Gentleman over-simplifies the position. Talks are going on about the supplies in both Fernando Po and Lagos, and about the best means of getting these as quickly as possible to the people who need them. I have no reason to believe that there are any obstacles on the Federal side to that taking place, but if they go in by air the planes will have to land on an improvised grass strip. The proposal which Oxfam and that the International Red Cross are considering is a landing on an improvised grass strip. If that is done, it will be on much too small a scale to meet the real needs.
    Mr. Braine: With respect, I think that the right hon. Gentleman is misinformed. The plan is to drop food because of the difficulty in using air strips.
    Mr. Thomson: We are ready to look at and co-operate in any method which will get the supplies as quickly as possible to the people who need them.
    Mr. James Griffiths: Is my right hon. Friend aware that we all join in the appeal that he has made to Colonel Ojukwu to accept the offer to come to London and get a cease-fire quickly? Will he reconsider what has been said from both sides of the House, that this is very urgent, and will he take all possible steps to assist Oxfam and others who are ready to go into action at once, long before the assessors can return to this country?
    Secondly, will my right hon. Friend press for a cease-fire as soon as possible? I appreciate the efforts which have been made, but is my right hon. Friend aware that the consensus of opinion is that unless

    1315
    a cease-fire is brought about the Government ought seriously to consider withdrawing arms support from the Federal Government?
    Mr. Thomson: Naturally, I always listen with respect to what my right hon. Friend, with his great experience in the office that I hold, says about these matters. I assure him that the Government are tackling everything that they do with a sense of maximum urgency. I do not think that anybody is under any illusion about the strength of public opinion on the issues here, to which my right hon. Friend has just given such eloquent expression.

    B.O.A.C. STRIKE (NEGOTIATIONS)
    Mr. Rankin(by Private Notice) asked the Secretary of State for Employment and Productivity if she will make a statement on the terms of the agreement which has been reached between B.O.A.C. and its pilots.
    The First Secretary of State and Secretary of State for Employment and Productivity (Mrs. Barbara Castle): At a meeting of B.O.A.C. and B.A.L.P.A. representatives under my Department's chairmanship yesterday arrangements for a return to work by B.O.A.C. were discussed.
    The talks covered clarification on the scope of the forthcoming negotiations on pay structure under the independent chairmanship of Professor Wood, an undertaking by both sides that there would be no victimisation by either side, including measures to ensure that the pension and seniority rights of pilots who have been on strike are not adversely affected and arrangements for the restoration as soon as possible of the Corporation's services.
    At the conclusion of the discussions, B.A.L.P.A. called off the strike and B.O.A.C. has agreed to reinstate all pilots on the Corporation's payroll from tomorrow, when its services will restart.
    B.O.A.C. and B.A.L.P.A. have met today under Professor Wood's chairmanship to begin their negotiations on pay structure. He will in due course prepare a general report on these negotiations
    1316
    which will be available to assist the P.I.B. in the reference on pilots' pay and productivity which is at present before it.
    Mr. Rankin: I am sure that hon. Members on both sides of the House welcome the progress that has been made so far and also hope that the continued meetings and negotiations will result in a full settlement which is satisfactory both to B.O.A.C. and the pilots. I am sure that no hon. Member on either side of the House would want to do or say anything today that would hinder a speedy settlement.
    Mrs. Castle: I endorse everything that my hon. Friend has said. As I have said in my reply, negotiations have already started on the detailed pay talks under Professor Wood this morning, and we must all hope that they will reach a satisfactory conclusion. In the meantime the pilots are going back to work.
    Mr. Corfield: There are still some issues outstanding. Can the right hon. Lady give us some idea of what those issues are? A number of contrasting statements have been made from both sides. Further, can the right hon. Lady give us some indication of the nature of Professor Wood's position? Is he an arbitrator? Has any agreement been arrived at that his findings will be held to be binding on either side?
    Mrs. Castle: There are no issues outstanding which would prevent the resumption of work. Agreement has been made to resume work as from one minute after midnight tonight, the earliest practicable date by which B.O.A.C. could arrange for services to be resumed. Professor Wood's terms of reference were, first, to assist the parties in finding a basis for a resumption of work and, secondly, to help them in the forthcoming negotiations on pay structure and other outstanding matters—for example, the pilots' agreement for services.
    Mr. William Hamilton: Will my right hon. Friend give an assurance that no agreement will be approved by her unless it comes strictly within all the criteria laid down in the prices and incomes policy?
    Mrs. Castle: In my statement, I said that Professor Wood will in due course be making a general report to the P.I.B.

    1317
    on the outcome of the negotiations. It has always been understood and accepted by the pilots that at the conclusion of their talks with B.O.A.C. the outcome would be referred to the P.I.B.
    Sir A. V. Harvey: To bring about a better relationship between the management and air crew, will the right hon. Lady take into account the fact that Sir Giles Guthrie has been carrying a tremendous burden as chairman of a large executive for four and a half years? Will she consider filling the existing vacancy on the Board with a senior captain who can bring about the kind of liaison which most other airlines have?
    Mrs. Castle: I am sure that the hon. Member will realise that the composition of the Board of B.O.A.C. is not for me, but for the President of the Board of Trade.
    Mr. Orme: Is my right hon. Friend aware that the whole trade union movement will watch these negotiations with a great deal of interest, and especially their outcome? In this case, will her well-known theme of linking any pay increases with productivity be maintained?
    Mrs. Castle: Certainly—these are pay and productivity talks. I can tell my hon. Friend that they have always been accepted by the pilots in that sense. We have made it clear time and again that pay linked with productivity is within the criteria.
    Mr. James Davidson: We all hope for a happy outcome to these negotiatons, but is the right hon. Lady aware that a great deal of carrying trade has been lost by Britain due to this dispute? Will she ask her right hon. Friend the President of the Board of Trade seriously to reconsider his turning down of applications for licences by various independent companies—for example, Caledonian Airways—which would have helped to fill the gap while this dispute was going on?
    Mrs. Castle: I am sure that the House realises that matters like this are not for me but for my right hon. Friend the President of the Board of Trade, who will no doubt note what the hon. Member has said.
    Mr. Heffer: Following up the point made by my hon. Friend the Member
    1318
    for Salford, West (Mr. Orme), which is a very important one, will my right hon. Friend say—now that the question of incomes is an essential part of discussions in the House—what precisely are the terms of reference of Professor Wood? Secondly, will the question of comparability with airlines in other parts of the country be included? Thirdly, are we to understand that this is to be a genuine productivity agreement and not a "phoney" productivity agreement?
    Mrs. Castle: I thought that I had made the terms of reference of Professor Wood quite clear. They are to help the parties in the forthcoming negotiations on pay structure and on other outstanding matters, such as the pilots' agreement for service. He will preside over the talks to help the parties reach agreement. I have also made it clear that he will then make a report to the Prices and Incomes Board on the outcome of the negotiations and help it in relation to the reference on pilots' pay and productivity that is currently before the Board. I am sure that we can accept that the normal procedure in these matters is being followed.
    Mr. John Page: In view of the fact that the pilots are reported to be negotiating for an increase about 15 times above the ceiling of the prices and incomes policy, may we assume that the talks at the right hon. Lady's Department anticipated a roughly similar kind of increase in productivity?
    Mrs. Castle: I have said time and again that these are pay and productivity talks. They have always been accepted as such. There clearly must be a relationship between the two sides. I suggest that we wait and see what comes out of the talks.

    AINTREE (GRAND NATIONAL STEEPLECHASE)
    The Under-Secretary of State for Education and Science (Mr. Denis Howell): With permission, I wish to make a statement about the future of Aintree and the Grand National Steeplechase.
    This race is one of the nation's great sporting festivals and its continuance is inevitably bound up with the ownership of the Aintree course, since it is clear that the race will completely change its

    1319
    character if it is transferred elsewhere. The Government also believe it to be important for considerations of regional policy to keep as many important events as possible in the provinces.
    With these objectives in mind, the Government initiated talks with all the interested parties and as a result I can now make an interim statement following discussions with the Liverpool Corporation, the Turf Authorities, the Horse Race Betting Levy Board and Messrs. Tophams Ltd., the present owners.
    The chief consideration is that of ownership and Her Majesty's Government have informed the Liverpool Corporation that we are prepared to give loan sanction for the capital sum required for the acquisition of the land. We shall also be prepared to apply the provisions of Section 8 of the 1966 Local Government Act in order to make them a grant not exceeding 50 per cent. in respect of that portion of the site which is to be kept as public open space.
    I am glad to say that the Liverpool Corporation places great importance upon obtaining full public access for general recreational purposes at Aintree, on all days when racing is not taking place. As Merseyside has much less open space than the national average this will be a significant contribution to the social life of the neighbourhood.
    It is hoped that this offer will facilitate negotiations with Messrs. Tophams for the purchase of the land.
    If Liverpool acquires the site it is understood that it will wish to lease the racecourse to a non-profit-making trust body to be established under the chairmanship of Lord Leverhulme. This trust will seek to develop Aintree as a National Hunt Racing centre in the North, a scheme which has the support of the Horse Race Betting Levy Board. By these means the Grand National and racing at Aintree will be maintained and no charge will fall upon the Liverpool ratepayers in respect of them.
    It is believed that at a later date the Liverpool Corporation may wish to establish a sports centre on the site, a project in which the North-West Regional Sports Council is much interested, and, if so, we would expect that there would
    1320
    be the fullest co-operation in the design and provision of buildings of a multipurpose character between Liverpool, the Racing Trust and the Levy Board.
    Mr. Speaker, I hope that this announcement will enable negotiations to be brought to a successful conclusion for the purposes that I have outlined.
    Mr. Charles Morrison: Everyone interested in racing, and particularly in the future of the Grand National, will welcome the Under-Secretary's statement and it will be generally welcomed that in future Aintree is to be used for other recreational purposes. However, in spite of the hon. Gentleman's statement, the future of Aintree will still clearly depend on a successful conclusion to the negotiations between Liverpool Corporation and Messrs. Tophams, and this may take time.
    Can the Under-Secretary therefore assure the House that there will be no time limit to the offer of a grant under Section 8 of the Local Government Act, 1966? Can he say whether negotiations for the purchase of the land between Liverpool Corporation and Messrs. Tophams are now in progress?
    Mr. Howell: I am grateful for what the hon. Gentleman has said. I can assure him that the offer is obviously intended to be kept open. He will understand that negotiations could not begin until we had made these arrangements with Liverpool Corporation, and we were able to conclude them last week. Liverpool Coporation now knows what help it will get from the open space grant which I mentioned and is, therefore, now prepared to enter negotiations immediately with Messrs. Tophams.
    Mr. Alldritt: Will my hon. Friend take it from me that his statement will be received with great satisfaction on Merseyside? However, will he give an undertaking that the other authorities who are bound to be involved in the recreational side of this project will meet their part of the burden?
    Mr. Howell: The whole point of the arrangement is that although we might have a sports centre, it is not an early prospect. The main point is that this arrangement will enable the whole of the land to be used for almost all the

    1321
    time, excluding race days, for general recreational purposes by the people of Merseyside. This is a significant step forward..
    Mr. Tilney: I, too, welcome what the hon. Gentleman has said. Can he tell the House the likely cost of the land and say whether Liverpool Corporation will have any representation on the non-profit-making body, so that it can watch the day-to-day administration in the landlard's interest?
    Mr. Howell: The issue of representation on the non-profit-making trust will not cause any difficulty. The parties are anxious for Liverpool to have such representation. It would be wrong for me to say what I think the land is worth, or what it will fetch. That is a matter to be negotiated between the paries, subject to the approval of the district valuer.
    Mr. Alfred Morris: Is my hon. Friend aware that there will be widespread pleasure that this major international event is to be retained in the North-West? However, can he say more about the financial side? Is there to be any public or Ministerial appeal against any amount which may be agreed between Liverpool Corporation and Messrs. Topham? Secondly, as there is only one race meeting a year at Liverpool, is it intended that Aintree will still be used for only one meeting, or are there to be more race meetings?
    Mr. Howell: As I have already said, whatever price is agreed will have to be subject to the normal district valuer procedure, and that is, therefore, a public safeguard. My hon. Friend is correct in saying that there is only one race meeting a year at Aintree, but it is proposed by the trust and the Levy Board that in future there should be more race meetings a year; but this is a matter for negotiation between the parties and is not for me.
    Sir D. Glover: Is the hon. Gentleman aware how much I welcome his statement, as the great Aintree racecourse is in my constituency? Is he aware that, although it is in the area of the Lancashire County Council, I believe it right that negotiations should have been with the Livei-pool Corporation, because the Liverpool conurbation will inevitably get far more of the advantages out of this
    1322
    remaining open space? What the hon. Gentleman has said—
    Mr. Speaker: Order. Even when an issue affects his constituency, an hon. Member should ask brief questions.
    Sir D. Glover: When will the hon. Gentleman be able to announce, or does he have any idea, when these negotiations may be concluded? It sounds from his statement as though there are many hurdles to overcome.
    Mr. Howell: I shall certainly not risk my neck as a punter or forecaster on that sort of guess. My hope is that things can now proceed much more rapidly than over the last five or six years. I know that the hon. Gentleman has a constituency interest and I take his point about Lancashire, which has been extremely helpful in these negotiations, although part of the course happens to be in the constituency of one of my hon. Friends.
    Mr. Heffer: Is my hon. Friend aware that part of the course is in my constituency? [HON. MEMBERS: "Only the start."] Is he aware that for many years many of us have been advocating that the area should be brought within the control of the Liverpool City Council and that, therefore, his statement is most welcome to us and to the people of Liverpool, who have always wanted to keep the Grand National in our area? Can he say—[HON. MEMBERS:"Too long."]—whether the plans which he suggests Liverpool Corporation already has for a future sports stadium are well advanced, or are merely in the air without any concrete basis?
    Mr. Howell: I am glad that my hon. Friend managed to get his horse over Beechers Brook. There has been a considerable measure of agreement right across the board among the various parties in Liverpool since negotiations first began. Plans were drawn up by Lancashire County Council for the sports project, but then Lancashire ceased its interest and the discussions moved to Liverpool and the project has obviously taken on a new meaning. I am not able to say that this sports centre can be produced at an early date, but I can say that Liverpool and the North-West Regional Sports Council want to do this as soon as they can financially.
    Mr. Pardoe: As Aintree is almost the only open space between Liverpool and the Prime Minister, may I congratulate the hon. Gentleman on keeping this cordon sanitaire? I welcome the proposal to keep the race on Merseyside, but will the hon. Gentleman say whether there is still room on the Aintree site for housing as well as the sporting development?
    Mr. Howell: There were discussions with Lancashire County Council about small pockets of land which might be available for housing purposes by Liverpool. These discussions have not proceeded very far, but this would be a matter between Liverpool Corporation and my right hon. Friend the Minister of Housing and Local Government.
    Mr. Crawshaw: As the only Member of the House who lives in Aintree, may I thank my hon. Friend for his statement? Will he also agree that, under the Labour-controlled Lancashire County Council, this is what was intended, but that, when the Tories got control in Lancashire, they went back on the agreement?
    Mr. Howell: I do not think that this is a moment for me to introduce party political factors when we are in sight of reaching agreement, but I am in a position to say that there is some historical substance in what my hon. Friend has said.
    Mr. Dunn: Without associating myself with the remarks made personally by my hon. Friend, may I ask whether he will be careful about co-ordinating the planning activities of all the surrounding local authorities? In the initial discussions this was a great stumbling block to a decision. I hope that he will resist any move to put housing on this open land as a first measure of this development, because, once housing gets in, the rest will go by the board?
    Mr. Howell: That point is understood and taken, but I am happy to assure my hon. Friend that the Lancashire County Council and Liverpool Corporation are working harmoniously together in these matters.

    NEW MEMBER SWORN
    David Charles Waddington, esquire, for Nelson and Colne.

    OVERSEAS AID BILL
    Mr. Hirst: On a point of order, Mr. Speaker. I have given you some notice of the point and I am glad that the Leader of the House is here. It refers to notification of change of business.
    I seek your guidance, if possible, on how hon. Members may be notified more adequately. Last Friday, we were discussing the Overseas Aid Bill, on Second Reading, and I was in possession of the House when the debate was automatically adjourned. The Government agreed to provide extra time, but no statement was made then. The Whip said, in the ordinary way,"Monday next". That is the ancient formula for keeping a Bill on the Order Paper. No further notification was made.
    No doubt owing to unavoidable delays, I and other hon. Members did not receive our Order Papers through the post in the ordinary way and on arrival at the House yesterday I went to the notice board in the "No" Lobby to see whether the business had been changed, because I had heard it rumoured that the debate would be continued next Friday, when the remaining stages had been set down.
    I was unable to be present for the resumed debate last night and it may appear that I was guilty of some discourtesy, particularly to the Parliamentary Secretary, who replied, by not being present—but that is of little account. It is, however, important that there should be a system whereby hon. Members can certainly know what the business is to be. May I ask whether some arrangement should not be made to notify change of business before you so kindly arrange to put it in the "No" Lobby?
    Mr. Speaker: This is a matter for the Leader of the House. I understand that he is present. He will have heard what the hon. Gentleman has said and will obviously give consideration to what is a serious point, put very courteously.
    The Lord Privy Seal and Leader of the House of Commons (Mr. Fred Peart): I will certainly give consideration to the hon. Member's point.

ORDERS OF THE DAY

  FINANCE BILL
  As amended (in the Standing Committee) further considered.
  [2ND ALLOTTED DAY]
  4.15 p.m.
  Mr. Speaker: I have posted an amended selection of Amendments in view of the fact that others appeared on the Notice Paper this morning. It is posted up in the usual way. We come first to new Clause 86.
  Mr. Joel Barnett: On a point of order, Mr. Speaker. It might help if you could clear up this point. On the Recommittal stage, there was some difficulty in that Amendments provisionally selected on one day fell on the following day, so that hon. Members who came to the debate on the following day thinking that they were going to discuss Amendments which had been provisionally selected found that they were not there after all.
  I notice that all Amendments have been selected right through the Bill. May we take it that these are firm Amendments and that there will be no fresh selection or no further selection each remaining day?
  Mr. Speaker: There may be new Amendments of course, but if Amendments have ever disappeared from those which have been selected, there must have been some good reason. The list is pretty firm.
  Mr. Iain Macleod: Further to that point of order, Mr. Speaker. Surely you would not wish to rule out Amendments which, say, may have been tabled this morning and which would be perfectly proper if they were to come in their ordinary place, say, on Thursday. They would not be starred, but if a new and important point were involved I imagine that the Chair would be willing to consider and alter the list accordingly.
  Mr. Speaker: I thought that that was understood from what I had said. I was dealing with the apparently mysterious point about Amendments dropping off. If they did drop of at Recommittal
  1326
  stage it would have been for some technical reason and not because of variation.

  FINANCE BILL

    New Clause 86
    DIVIDENDS PAID OUT OF PRE-1966–67 PROFITS

    (1)This section has effect as respects the calculation of the three year surplus under section 85 of the Finance Act, 1965.

    (2)If the company's dividends paid in the years 1966–67, 1967–68 and 1968–69 are related to periods of account exceeding three years in total, the amount at which those dividends are brought into the calculation shall not exceed the amount of the company's dividends which are related to the first three years of that total period, and which were paid in the years 1966–67, 1967–68 and 1968–69, or earlier:

    Provided that if any of the dividends paid in 1966–67, 1967–68 and 1968–69 are related to any period of account ending before 6th April, 1965, this subsection shall apply with the substitution, for the first three years of that total period, of a period of three years beginning with the period of account in which that date falls.

    (3)This section shall not apply to a company if before 21st June, 1968 a resolution was passed or an order was made for the winding-up of the company, or any other act was done for a like purpose in the case of a winding-up otherwise than under the Companies Act, 1948, and, subject to that, subsection (2) above shall apply where, under subsection (7) of the said section 85, the three year surplus is to be computed by reference to the period ending with the last accounting period of a company which is wound up, as if for references to three years there were substituted references to a period equal in length to the period beginning with the financial year 1966 and ending with its last accounting period.

    (4)Any adjustment under the preceding provisions of this section in the amount at which the dividends are brought into the calculation shall be made before taking account, under subsection (6)(a) of the said section 85, of any amount treated under section 83 of the Act as a dividend paid in the year 1966–67, and before applying Part I of Schedule 7 to the Finance Act, 1966 (groups of companies) so, however, that—

    (a) this section shall not affect the proportion applicable under paragraph 1 of the said Schedule 7 in reducing a three year surplus as so adjusted,

    (b) in paragraph 2 (increase of three year surplus of principal company where three year surplus of a subsidiary is reduced) subparagraph (2) (which refers to the reductions under paragraph 1) shall have effect as if the preceding provisions of this section had not been enacted,

    (c) in applying sub-paragraph (3) of the said paragraph 2 (which attributes to the principal company its share of the excess of dividends over distributable profits of

    1327
    subsidiaries) the principal company's dividends shall be brought in at the adjusted amount, but a subsidiary's dividends shall be brought in at the unadjusted amount.

    (5)For the purposes of this section—

    (a)' dividend' does not include a capital dividend,

    (b) a dividend is related to the period ofaccount for which it is expressed to be payable and, if not expressed to be payable for any period of account, is related to the period of account in which it is paid,

    (c)where under this section it is necessary to ascertain the dividends related to a period of three years which includes part only of a period of account, the two parts of that period of account shall be treated as separate periods of account, and the amount of the dividends related to the entire period of account shall be apportioned to the respective parts on a time basis according to the respective lengths of the parts,

    and in the provisions about paragraph 2 of Schedule 7 to the Finance Act, 1966 ' the principal company' means the company whose three year surplus is being computed and ' subsidiary' means any other member of the group mentioned in that paragraph.—[Mr. Diamond.]

    Brought up, and read the First time.
    The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Clause be read a Second time.
    This Clause modifies the rules governing the three-year surplus relief proposed in Section 85 of the Finance Act, 1965. That relief is a transitional relief available for a company where the total dividend in the first three years of the Corporation Tax system exceeds the distributable profits for that period. The argument was that, if it was in excess, the excess may have come out of the profits made in the pre-Corporation Tax system and must, therefore, have borne the proper weight of Income Tax and Profits Tax.
    In arriving at the surplus, a comparison is made between the three years' dividends and the three years' profits, but it is possible for a company to pay more than three years' dividends during the three years, and, where it has paid more than three years' dividends, obviously one is obviously no longer comparing like with like. So that that shall be so, the dividends to be taken into account are now to be those which are declared in respect of profits on accounting periods totalling three years, and these accounting periods' will start with the first one to which the first dividend in the post-Corporation Tax system relates.
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    I give an example of the difficulty we have in mind and which could clearly lead to abuse. It is the obvious case of a company which pays interim and final dividends to a year. Let us assume that it pays its interim in May. In the last of the three years, the company could decide to bring its interim forward from the beginning of May to the beginning of April. It could also increase its interim dividend and even so not fall foul of the dividend restraint scheme. It might both bring it forward and increase it, so that, in effect, we should be having something like nearly four years' dividends paid out of three years' profits.
    Therefore, it is necessary to restrict, in order to compare like with like, the dividends and the profits both to three years. The Clause therefore provides a new rule: that the dividends to be taken into account shall not exceed in amount those attributable to the profits of a period of 36 months. That 36 months is to commence with the period of accounts to which the first of the dividends paid in this post-Corporation Tax period relates.
    The justification for bringing the Clause forward now is threefold: first, to save the money that would otherwise be lost to the Treasury if advantage were taken of this method of increasing unfairly the relief; secondly, because there are certain companies which could take advantage of this, but many companies which could not, and, therefore, there would undoubtedly be lack of equity in taking opportunities of doing this; and thirdly, that it is right that at this early stage those who are considering or are likely to consider in due course what dividends they ought to declare at the end of this period—that is to say, broadly in the early part of 1969—would have the advantage of knowing the views of the Chancellor on this aspect.
    Mr. Speaker, I recognise that we are on Report. I would seek to answer questions which are put to me on the details of this, if I have your permission of the House to address it again at a later stage.
    Mr. Speaker: The right hon. Gentleman will not need the leave of the House.
    Mr. Patrick Jenkin: I do not think that we need

    1329
    delay the House for long on these technical matters. The Chief Secretary has explained briefly the effect of what appears to be a long and complicated new Clause. The point I wish to make is a quite general criticism which arises directly out of this amendment of the three-year surplus relief—the pre-Corporation Tax profits relief to which the Clause is related. This is a point which has been made to me by those who deal with these matters outside. They draw an unfavourable contrast between the swiftness with which the Government seek to block even limited loopholes, which this may well do, when the loophole is in the interest of the taxpayer, and the evident reluctance with which they are prepared to consider even well-founded cases where the provision appears to operate to the detriment of the taxpayer.
    This is particularly so in relation to Section 65 of the 1965 Act, which, as the Chief Secretary will remember, was introduced during the passage of the Bill through Parliament to meet an objection which apparently the Government's advisers had not thought it necessary to meet before the Bill was published—the need to give relief in the case of pre-Corporation Tax profits. Those who discussed these matters with the right hon. Gentleman's advisers gained the general impression that they were not to worry too much about the precise details of how this relief was to work; the main thing at this stage was to get the relief on the Statute Book and the difficulties would be ironed out later.
    What we have had have been almost exclusively difficulties ironed out in the Revenue's interest, including, as the Chief Secretary will remember, the very first difficulty, if it may be described as such, which was ironed out in the Finance Act, 1966 to close what was a glaring loophole for the benefit of groups of companies.
    Those who have to administer these highly complex branches of Corporation Tax law continue to look back with anger at the gilbe of the Prime Minister when he accused Parliament of engaging in tomfoolery when we sought to debate these things through the watches of the night on the Finance Bill, 1965. Here we are in 1968, still finding flaws with this
    1330
    provision. These are being put right only so far as they favour the Revenue.
    We had on the Notice Paper in Committee, on Recommittal, and now on Report, three Clauses—I merely mentioned them, making no criticism whatever of your selection, Mr. Speaker—34, 78 and 79, all of which seek to make minor adjustments to the operation of this provision in the interests of greater fairness to the taxpayer. We have not had the opportunity to debate them, but no doubt we could have had had the Government given any indication that they were prepared to offer a little quid pro quo.
    There it is. This Clause and the following one, which I do not think need detain us for long, either, are solely in the interests of the Revenue. All that I want to urge here—I hope that the Chief Secretary will feel able to give this undertaking—is that there is still time, because this is a three-year relief, to look at this again for next year with a view to making adjustments which are called for by the justice of the case in the interests of the taxpayer.
    It may be said against us: why are not these matters being debated this time? It may be said that the Opposition did not indicate that these are matters of sufficient importance—
    Mr. Speaker: Order. The hon. Gentleman has mentioned the Clauses which have not been selected. He must leave them alone now.
    Mr. Jenkin: The only point I wish to make then is that, because of the way the Bill was drawn up, all Corporation Tax Amendments had to take the form of new Clauses. The result is that there are 116 new Clauses on the Notice Paper. In previous years the Government have given the opportunity, by the way the Bill has been drawn, for such matters as these to be discussed as Amendments to the Bill; then there may have been a greater possibility of discussing them.
    The way in which the Government have leaped to the defence of the Revenue and have apparently ignored cases which have been advanced on the basis of justice for the taxpayer leaves a nasty taste in the mouth. It is the duty of Ministers to hold the balance fairly between the taxpayer and the Revenue✶ or, as the Chief Secretary is

    1331
    so fond of saying, between different classes of taxpayer. He identifies the Revenue as a class which will be disadvantaged by any relief given to any particular body of taxpapers. I emphasise that it is the duty of Ministers to hold this balance. I hope that the Chief Secretary will be able to give an undertaking, if he catches your eye again, Mr. Speaker, that he will view with sympathy the cases for relief which have been made on this very complex and technical transitional relief to the Corporation Tax.
    Mr. Barnett: I have a great deal of sympathy with what the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) said about the Inland Revenue being prepared to act quickly to deal with a loophole or an avoidance scheme which adversely affects the Revenue, but not the other way round. I also have sympathy with the hon. Gentleman's point about our not being able to discuss close company Amendments this year, because of the way the Bill has been drafted. This is a shame, although I have read somewhere that the Government have set up a committee to examine the whole question of close companies. 1 am rather sorry that some hon. Members are not also to be invited to take part in those deliberations.
    I would like to see some of the anomalies that exist to the detriment of taxpayers put right even before next year. There is a particular point, which I should have thought that the Government might well have taken, on something which affects the way a particular part of the close company provisions works. I think, for example, of directors' remuneration. It is generally thought that four directors can have up to £13,000 of remuneration between them. This is not so. There is an example, details of which I have given to the Government, in which, even where there is as little as £13,000 remuneration between four directors, £500 of that is treated as excess.
    This is clearly the type of anomaly in respect of which I should have thought that the Government would take action to bring in an Amendment this year, instead of which there is to be yet a further year during which companies and their advisers will be compelled to set up further companies and partnerships to
    1332
    deal with something with which they should not have to deal at all, simply because the Act is working in a way in which Parliament did not intend it to work.
    For that reason, I have a good deal of sympathy with what the hon. Gentleman said. I hope that the Government will be able to inform us not only that they are to have comprehensive discussions about the anomalies which arise and which have arisen in close company legislation, but that we shall not have to wait until 1969–70. I hope that, if necessary, when serious anomalies are thrown up in the way that close company legislation is working, a small Bill will be introduced before April, 1969, just to deal with those anomalies.
    4.30 p.m.
    Mr. Diamond: I have listened carefully to what has been said. I am in a little difficulty in replying in full detail to the comments on directors' allowances in close companies, and so on, but I recognise my hon. Friend's close interest in this matter, and I can only ask him to leave them with me. I will be glad of his help, which may be forthcoming in a number of ways. I can give no undertaking whatsoever that a new Bill will be introduced during the course of the year to deal with certain matters. Nor do I accept that there are any glaring anomalies of the kind he mentioned, but perhaps this is not the appropriate time to go into that matter in detail.
    I recognise what the hon. Gentleman opposite said. I am surprised that he thought that we were due for criticism for having brought this matter forward at the earliest possible opportunity. As a result of the tentative inquiries that have been made during the last few weeks it has recently come to our attention that consideration was now being given to the possible amount of dividends to be declared next year, in 1969. Even though it meant taking advantage of bringing in a provision on Report, which I agree is not a convenient stage at which to bring in new provisions, I should have thought that it would be right at the earliest opportunity to let directors and others concerned know the way in which the Government's mind was working with regard to this relief.
    As the hon. Gentleman said, our task is to hold the scales fairly, and that is

    1333
    what this provision does. I hope that the Clause can be added to the Bill.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

    New Clause 85
    DIVIDENDS PAID OUT OF PRE-1966–67 PROFITS: GROUPS OF COMPANIES

    (1) In applying paragraph 2(3)(a) of Schedule 7 to the Finance Act 1966 (which attributes to the principal company its share of the excess of dividends over distributable profits of subsidiaries) where any subsidiary is itself a company having a notional surplus which is a three year surplus which falls to be increased under the said paragraph 2, that subsidiary's excess of dividends over distributable profits shall be the amount produced by the said paragraph 2(3)(a) in calculating that increase, so that there is attributed to the principal company the appropriate share of the excess of dividends over distributable profits not only of the subsidiary, but also of some one or more other members of the group paying dividends to the subsidiary.

    This subsection applies even if the subsidiary's three year surplus as so increased is then reduced or extinguished under paragraph 1 of the said Schedule 7.

    (2) In this section ' the principal company' means the company whose three year surplus is being computed under the said paragraph 2 and ' subsidiary ' means any other member of the group mentioned in that paragraph.—[Mr. Diamond.]

    Brought up, and read the First time.
    Mr. Diamond: I beg to move, That the Clause be read a Second time.
    I am happy to say that this is a relieving Clause. The answer to the criticism made by the hon. Member for Wansted and Woodford (Mr. Patrick Jenkin) is that the first Clause we introduced protects the tax-paying public generally, and the second Clause is a relieving Clause. We have taken the first opportunity to give relief where relief is due. There is a gap in the provisions of the existing law for enabling three years' surplus relief to be given to what I can perhaps call a multi-tier company, and the provision is intended to remedy that gap.
    In speaking of a multi-tier company, I have in mind a company with a subsidiary, which, in turn, has a subsidiary, and so on✶ what is generally referred to as a
    1334
    subsidiary company, a parent company, a grandparent company; and, indeed, it can apply to a great grandparent company and a great great grandparent company. The present situation is that there is a gap in providing relief for groups of companies. The relief is a relief that we discussed on the earlier Clause and I have no need to repeat it.
    The attempt was made to apply the relief to groups of companies. To take the simplest case, where a dividend is declared by a subsidiary company to a parent company, and the subsidiary is a wholly-owned subsidiary, so that every penny of the dividend goes to the parent company, that is not a dividend to the outside world, it is a dividend to the parent company. A parent company can generally require whatever kind of dividend it wants, having regard to the relationship between parent and subsidiary, and that is therefore not the kind of case to which the relief should apply.
    Therefore, when that dividend is paid, no relief entitlement arises. Let us assume for the sake of simplicity that the dividend is wholly paid out to the public by the parent company; then, whatever relief was due is restored. The result is the situation which would have applied had there not been a group of companies, but merely one combined company distributing some of its profits to the public.
    A subsidiary company may pay to its parent, which, in turn, may pay to the public, and the appropriate machinery works. But there is a gap in the present legislation, inasmuch as a subsidiary company may pay to the parent, and, indeed, to the grandparent and out to the public. The link between the subsidiary and the grandparent does not at present exist. It should exist, it was intended to exist, and, therefore, the Clause provides for the insertion of that link so that the full relief which it was intended to give will be given.
    The detail is not entirely free from complexity. I have given perhaps an oversimplified but reasonably accurate account of the general impact of this relieving proposal.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

    New Clause 92
    DOUBLE TAXATION RELIEF: GROUP INVESTMENT IN OVERSEAS COMPANY

    (1) This section applies to any provision in arrangements having effect by virtue of section 347 of the Income Tax Act 1952 which—

    (a) applies to any company which controls, directly or indirectly, not less than a stated fraction of the voting power of a company resident in a specified territory outside the United Kingdom, and

    (b) in allowing credit against United Kingdom tax on dividends paid to any such company by the company so resident, authorises account to be taken of tax payable by the company so resident in respect of the profits out of which the dividends were paid.

    (2) Credit shall be allowed as if the provision treated the subsidiary of a company which owns, directly or indirectly, the stated fraction of the voting power of a company resident in the specified territory as if that subsidiary also owned that fraction of the voting power of the company so resident.

    (3) Credit shall not be allowable both by virtue of this section and under Schedule 17 to the Income Tax Act 1952 in the case of the same income. For the purposes of this section a company is a subsidiary of another if the other company controls, directly or indirectly, not less than fifty per cent. of the voting power of the first company, and this section shall be construed as if it formed part of Schedule 16 to the Income Tax Act 1952.

    (4) This section has effect as respects dividends paid (in the sense of section 89(4) of the Finance Act, 1965) on or after 1st April, 1968. —[Mr. Harold Lever.]

    Brought up, and read the First time.
    The Financial Secretary to the Treasury (Mr. Harold Lever): I beg to move, That the Clause be read a Second time.
    The Clause has an interesting history in that it is an attempt, and I think a successful attempt, to meet a point raised in Committee by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). He moved an Amendment on which we had, and still have, alas, different interpretations as to its effect. The Clause is intended to meet the effect that his Amendment had in his opinion. That being the relevant factor, I hope that the hon. Gentleman will accept the Amendment. It is a highly technical one which, I hope, will meet with the approval of the House without our having to grapple with the wholly irrelevant considerations of whether his original Amendment would have had the purpose he thought, and no doubt still thinks, it had, and not the pur-
    1336
    pose we thought, and still think, it had. Since we are all agreed that the purpose he intended was a valid one, we have met it by the Clause, which I hope will commend itself to the House.
    Mr. Patrick Jenkin: The Financial Secretary has reminded the House that this Clause was the one where we had a dispute in Committee as to what the Amendment which I moved meant. I have no wish to try to justify the view which I then held, namely, that the speech which I made was directed to the Amendment that I had moved. I have been satisfied that I was right. Equally, the Financial Secretary has been satisfied that he was right. I do not think that any profit would be gained from seeking to argue the case as to which of us, in fact, was right. Certainly, Mr. Deputy Speaker, I would not seek to ask you to judge in the dispute between us.
    However, I think it right to say, as it were in justice to those on whose advice we on this side have to rely, that in Committee I suggested that, so certain was the Financial Secretary that he was right, it was conceivable that I might have been wrong. As a result, we were both somewhat unfairly pilloried in a scathing leading article in the Daily Mail, of which the only part I agree with was the title, which said:
    "The farce in Committee Room Ten must stop."
    As my right hon. Friend had been saying this for some weeks, I cheered at that point, but, when I read it, I felt that we were being unfairly attacked.
    This was exactly the sort of case which, on the Government's argument, was thought might be dealt with more effectively by experts in Committee upstairs, but we have still been unable to resolve our differences. The only point that I would make before coming to the new Clause is that it gives one serious cause to wonder whether the method by which we choose to debate these complicated financial matters in Finance Bills is that best designed to serve the ends which hon. Members on both sides have at heart.
    My hon. Friend the Member for Cities of London and Westminster (Mr. John Smith) likened our operations to those of two operators of one of those pier mechanical cranes with which one tries

    1337
    to pick out prizes from amongst a mass of sugar beans, with the Government and the commercial interests concerned operating by indirect control through the Treasury Ministers and hon. Members of Her Majesty's Opposition. This is a simile which I find attractive. It is not an altogether unfair description of the way in which we work.
    Purely as my own idea, I would throw out the suggestion that it might be more convenient for these highly technical questions of taxation to be considered by a small Select Committee of perhaps four or five hon. Members, who could hear expert evidence and then present to the House a reasoned view as to the Amendments which ought to be made.
    Mr. Robert Sheldon: Has the hon. Gentleman thought—
    Mr. Deputy Speaker (Sir Eric Fletcher): Order. On Report, I do not think that we ought to debate the suggestion that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is throwing out.
    Mr. Jenkin: Mr. Deputy Speaker, I had not intended to say any more than that.
    Turning briefly to the new Clause, we on this side of the House welcome it. It meets entirely the case that I put in Committee, namely, that the test of control in the case of a group of companies owning shares in a company operating overseas should be the same, whether the relief claimed is treated relief or unilateral relief. In other words, the share should be the same for subsidiary companies in both cases. This seems to be a small but welcome improvement, and I would express the gratitude of this side of the House to the Financial Secretary for having considered the case put before him.
    Mr. Raymond Gower: I hope that the Financial Secretary will not think it presumptuous of me, because I appreciate that every care has been taken in this drafting, but I am not happy about the wording of subsection (l)(a) when it refers to
    "not less than a stated fraction ".
    I hope that the hon. Gentleman is quite sure that that wording is exact enough. He
    1338
    will appreciate that it may be necessary in due course for the Clause to be interpreted, and it is a very loose form of words. Almost anything could be interpreted as being "a stated fraction". It might be one-hundredth. It might be 50 per cent.
    Mr. Harold Lever: A stated fraction will be that relevant in relation to the double taxation treaties to which it applies. That is an exact number and causes no discretionary power to come into operation.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

    New Clause
    INTEREST PAYABLE ABROAD

    (1) Subject to subsection (2) below, in section 52(5) of the Finance Act, 1965 (conditions in which payments of interest to non-residents are charges on income for corporation tax) paragraph (b) (under which the liability must have been incurred wholly or mainly for the purposes of activities of the trade carried on outside the United Kingdom) shall apply to interest which is payable in the currency of a territory outside the scheduled territories as if in that paragraph the words ' carried on outside the United Kingdom' were omitted.

    (2)Subsection (1) above shall not apply where—

    (a) the trade is carried on by a body of persons over whom the person entitled to the interest has control, or

    (b) the person entitled to the interest is a body of persons over whom the person carrying on the trade has control, or

    (c) the person carrying on the trade and the person entitled to the interest are both bodies of persons, and some other person has control over both of them.

    In this subsection the references to a body of persons include references to a partnership, and 'control' has the meaning assigned to it by section 87(1) of the Capital Allowances Act, 1968.

    (3) In section 138(1) of the Income Tax Act, 1952 (income tax provisions comparable to the said section 52(5)(b) for paragraph (b) (payment of interest to be secured on trading assets abroad) there shall be substituted the following paragraph—

    '(b) that either—

    (i) the liability to pay the interest was incurred wholly or mainly for the purposes of activities of the trade carried on outside the United Kingdom, or

    (ii) the interest is payable in the currency of a territory outside the scheduled territories, and '.

    (4) In this section (including the amendments made by this section) ' the scheduled territories' means the territories specified in Schedule 1 to the Exchange Control Act, 1947 as for the time being in force.
    (5) This section shall apply for income tax purposes for the year 1968–69 and subsequent years of assessment, and for corporation tax purposes to accounting periods ending on or after 6th April, 1968.—[Mr. Harold Lever.]
    Brought up, and read the First time.
    4.45 p.m.
    Mr. Harold Lever: I beg to move, That the Clause be read a Second time.
    The Clause is one of fairly wide general and commercial interest, and I had better explain something of its nature.
    It is intended to secure that a trader, whether company, individual or partnership, will henceforward be entitled to a deduction against taxable trade profits for payments of interest in non-sterling currencies on moneys borrowed abroad for the purposes of a trade at home. The Clause also brings Income Tax rules into line with those of Corporation Tax by providing that, henceforward, individual traders and trading partnerships will be entitled to a deduction in respect of interest paid abroad on moneys raised for the purposes of the trade abroad without, as hitherto, any requirement that the payment of the interest must be secured upon assets of the trade abroad.
    It is the first part which is the point of general interest. The second merely eliminates the old anomaly. The purpose of the first part of the Clause is to put English companies into broadly the same position as almost all other companies in other parts of the world, namely, that if they borrow money from abroad on long-term borrowing they would be entitled to charge the interest against their trading profits and, on the other hand, that they would be entitled to pay to non-residents the interest without deducting tax. Practically every other country among the great trading nations has this facility, and it seems anomalous that we should not have it. It would appear to be advantageous to make the facility available to British companies, since I have had a great many representations indicating that English companies would find this a valuable option. I stress the word "option", because no one is driving companies to borrow abroad.
    1340
    Hitherto, if they borrowed abroad to finance their trade at home, they would have been penalised by being unable to deduct long-term interest from their profits for the purposes of Corporation Tax. It was particularly anomalous that this should be so since, if they borrowed at short, they had no problem. If they borrowed in a risky manner and contrary to their commercial interests at short-term, they were allowed all these facilities which will now accrue to them under the Clause at long-term. It seemed anomalous to force companies to borrow at short against their wishes when they might have preferred medium or long-term, and the Clause puts the matter right by placing long-term loans on the same footing as regards the deduction of the interest from their profits for the purposes of Corporation Tax.
    There are other technical provisions with which I will not weary the House permitting the Revenue to ensure that interest payments gross are not made to United Kingdom residents but only to overseas residents. I know that the Clause will be welcome by the City. It will enable it to play an ever-increasing part in the European capital markets. There appears to be no reason why it should be restricted to playing that part on behalf only of foreign customers. It should be able to serve the needs of British industry at home in a similar way.
    Mr. Patrick Jenkin: We welcome the appearance of the new Clause, which represents a significant change in the taxation of interest paid on loans overseas. It seems to recognise the reality of a good deal of overseas investment these days which is made under direct Government pressure out of money borrowed abroad rather than by the remittance of sterling from this country.
    My only question arises from the way in which the Clause is drawn. The new concession applies only to loans raised outside the scheduled territories, which is a reference to territories outside the sterling area. As I understand it, the voluntary scheme for restricting overseas investment in the developed countries of the sterling area is as much part of the Government's policy as the statutory restrictions on overseas investment. Therefore, if, in order to further our export trade, a firm is encouraged to raise a loan locally instead of investing sterling overseas and it

    1341
    invests it in, say, warehousing, why is it that the ability to pay the interest gross and claim the full deduction does not equally apply? In other words, is there a distinction, for the purposes of the new Clause, between the scheduled territories and countries outside? There may be a perfectly good explanation, but it does not leap to the eye and it would be helpful if we could have an explanation.
    Apart from that, I warmly welcome the Clause. We appreciate the Government having decided to meet the legitimate case on behalf of many companies in the City of London and elsewhere.
    Mr. Barnett: I, too, warmly welcome the new Clause. We all know, for example, of people not being willing to invest here in the past because of having to receive the interest net rather than gross. Has my hon. Friend done any calculation as to what difference this might make to the pattern of foreign investment here—for example, what the effect might be on 3½ per cent. War Loan, which foreign investors are prepared to invest in because they get the interest gross, whereas otherwise they would not be willing to do so? Has my hon. Friend considered whether there is likely to be any major variation in the pattern of investment in this direction?
    Mr. Harold Lever: On the first point, about the sterling area, there are two reasons; one is a revenue reason and one is a practical reason. From the revenue point of view, it has to be subject to certain safeguards before we allow interest to be paid gross to a non-resident, or even to a non-resident, if it is payable within the sterling area. Nothing, of course, would stop a United Kingdom citizen from so arranging his affairs that his own money comes back, in certain complex circumstances, by a circular route. He might, as it were, end up getting interest on his own money gross. That is not possible in relation to non-sterling borrowing, because that must be in a foreign currency and the exchange control barrier would protect the circuitous route.
    Even then, I should have been prepared to consider the point were it not for the fact that it is not normal for the sterling area to provide capital for Britain. It is the other way around. The
    1342
    United Kingdom has traditionally been the supplier of capital on cheaper terms to the scheduled territories than can be raised locally.
    It is unlikely that a United Kingdom firm would borrow in Australia, for example, to finance its United Kingdom business, which is the only thing affected by the new Clause. Under the existing law, one is always allowed to charge the interest if borrowing in respect of foreign assets and a foreign business. The only case which could be raised is that of a United Kingdom company seeking to borrow in Australia to finance its United Kingdom business. We think that that is unlikely, and, because of the revenue reason—on which I do not place too much emphasis—we are disinclined to open a hypothetical possibility for which there would not appear to be any practical demand on good grounds.
    As to the comment of my hon. Friend the Member for Heywood and Royton (Mr. Barnett), I should make clear the nature of this concession. It is in respect of borrowing by United Kingdom companies in foreign, that is, non-sterling, currency outside the scheduled territory currency. Therefore, of course, the War Loan situation is not comparable. A foreigner can invest in it and receive his interest gross because he invests in it in external sterling, but of course it would not make it possible—perhaps one day we could consider this—for example, for a foreigner to invest in the Rolls Royce debenture and get the benefit of the Clause. Any benefit he would secure on receiving his interest gross as a nonresident would depend on a complex of circumstances but would not be affected by the Clause because, for example, the Rolls Royce debenture is couched in sterling.
    This is essentially a Clause which permits United Kingdom companies which wish to borrow money abroad in non-sterling to do so and removes the disadvantage which they have previously had of not being able either to charge against the Corporation Tax or to pay the interest gross to a non-resident—
    Mr. Barnett: But, for example, it might well be possible for Rolls Royce to raise its debentures in a foreign country at perhaps a lower rate of interest and pay it gross to the non-resident, in which

    1343
    case it would be allowable under the Clause.
    Mr. Lever: If that is what my hon. Friend has in mind, that is the purpose of the Clause—to give wider options to a United Kingdom company to be able to say, "If we want to, it would suit our book better to borrow in dollars in the Eurodollar market or in Deutschmarks in Germany or in Swiss francs", and it could do so, virtually, as easily as borrowing in England in sterling. This might affect the pattern of investment, since it would tend to unify the already vastly expanding European capital market.
    One of the reasons that I welcome the Clause is that it seems odd that we should isolate ourselves by irrelevant tax mechanics from the ordinary full participation of what will develop, I think, into a total European capital market, long before the actual entry of Britain into the Common Market. Our able City financiers and bankers have played a notable part in the development of that market and it seems a unifying gesture to allow them to operate in it without unnecessary restrictions.
    Mr. Barnett: Would it not be as well to extend it further by way of allowing all non-residents to receive both debenture interest and dividends as well? The principle is the same—to receive their interest gross.
    Mr. Lever: On interest, there are facilities, which are not relevant to the Clause, whereby a non-resident can, in certain circumstances, get his interest gross, but I should be happy to discuss this with my hon. Friend. Even investing in sterling, he might be able to do that in certain circumstances. Dividends are a different matter, relating to the question of international practice and to what is desirable on balance in those circumstances. We already exempt non-residents from United Kingdom Income Tax on dividends. All they pay is a withholding tax, and normally the same withholding tax which our shareholders in their companies pay when they receive dividends. That seems about right. It might seem odd that we should give our dividends free of withholding tax to, for example, American investors, when we, investing in America, can suffer a 15 per
    1344
    cent. withholding tax. The ding-dong of double taxation arrangements requires that we should get as much concession from the other side as we are prepared to give, and we should not voluntarily give away a withholding tax which our citizens are not receiving.
    Question put and agreed to.
    Clause read a Second time, and added to the Bill.

    New Clause 9
    DEVALUATION, &C, RELIEF
    Where a United Kingdom resident company borrows money in foreign currency in order to provide funds for its business and incurs a loss on exchange when the foreign currency liability is repaid, the loss shall be a deductible expense in arriving at the company's total profits for corporation tax.—[Mr. Richard Wainwright.]
    Brought up, and read the First time.
    Mr. Richard Wainwright: I beg to move, That the Clause be read a Second time.
    It is appropriate that we should be debating this Clause just after the previous one, since it also arises out of the great and rapidly growing importance of U.K. companies being able to borrow abroad where that is commercially expedient, as often now happens to be the case. I make no defence of the drafting, but the new Clause has been on the Paper during all the stages of this Bill and I hope that the Government have got the message—that here is a strange fiscal "No man's land" which should not be allowed to continue.
    We are dealing with an important area, usually of business losses, but, I agree, conceivably of business gains, which at the moment falls between the two stools of Corporation Tax and Capital Gains Tax applied to companies. This is an area in which significant losses can be made, especially since devaluation. Yet the businessman, almost invariably to his surprise, find that this is a loss which he stands no chance of setting off against either Corporation Tax or Capital Gains Tax. There is, in fact, a substantial vacuum which is bound to lead to a sense of unfairness which will discourage firms from taking advantage of opportunities of foreign borrowing.
    5.0 p.m.
    The classic case which arises is that of a trading company which, with the

    1345
    encouragement of the Government— indeed, in certain circumstances at the insistence of the Government—has borrowed in a foreign currency, as the House has in recent years also enabled some nationalised industries and local authorities to do. The foreign currency having been borrowed, under the exchange control procedure it will usually have been converted into sterling at the then official ruling rate—say, before devaluation of last November. It is because the loan must be repaid in foreign currency that since devaluation a loss is almost certain to be incurred.
    I am aware of one example of a very large loan which was turned into the Bank of England only two days before devaluation took place, so that the borrower had only two days' use of the money at the old parity and now faces the prospect in a few years' time of repaying at a very great disadvantage. I concede that in certain circumstances, if the Bank of England takes a favourable view and if the United Kingdom company expands rapidly in a foreign location, the firm will succeed in building up some reserves in the appropriate currency with which to pay off its borrowings. But that is by no means always the case—for example when the foreign borrowing is used for home trade purposes.
    Thus, we are considering losses of significance and the question is whether these losses, economically and from the point of view of accounting, should be regarded as part of the true cost of a company's operations in the hiring of money. Undoubtedly this exchange loss is part of the true cost of hiring that money. If so, I cannot see why it should not be treated as an expense for Corporation Tax purposes. I agree that, theoretically, such a loss should be spread over a number of years, possibly over the whole period of the loan, and to achieve this should not be beyond the drafting powers of the Government.
    I wish to make it abundantly clear that the Clause is not designed to carry any implication of further adjustments of the sterling parity. There is a sufficient volume of cases crying out for relief arising from the 1967 devaluation and I do not intend to imply that there will be further adjustments. The Clause is
    1346
    designed to deal with an unfortunate situation which has already arisen and which will cause traders some serious losses. Many traders have suffered losses to profits from devaluation in many other ways, but almost all of them at least have the comfort of knowing that these losses will be matched by their reduced Corporation Tax bill. I suggest that the House should take steps now to see that the kind of loss which I have been describing also receives its due measure of relief.
    Mr. John Smith: I wish to speak particularly from the point of view of investment trusts. I should, perhaps, declare an interest, although I suspect that the majority of hon. Members have interests in investment trusts, as have very many thousands of our consituents. I hope that this is a matter which can be put right, if not now then in next year's Finance Bill.
    The difficulty that arises here is yet another example of the anomalies and complexities that have flowed from the decision to tax investment trusts, as well as their shareholders, on gains and losses of this sort. Many investment trusts, with the active encouragement of the Treasury and the Bank of England, have arranged loans, for the most part dollar loans, although the Clause wisely refers to losses in all foreign currencies. They have in that way saved foreign currency for the country and have done a good service to the economy by their skill in the use of these loans.
    How are losses or gains on loans of this sort assessed for tax purposes? I would like to give an illustration, but because of our procedure, both here and in Standing Committee, it is extremely difficult and cumbersome to do so orally. I believe that where we hold our Standing Committee proceedings is nothing like as important as the way in which we hold them. This is another debate in which the circulation of papers beforehand would have been useful. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) paid me the compliment of quoting what I said about our committee procedure when I described certain aspects of it as being like the machine on the pier which one must control, through a pane of glass,

    1347
    with two knobs. We are here trying in addition to deal with an extremely technical matter without memoranda having been circulated beforehand, which makes our procedure as cumbersome as playing chess by post. Therefore, if hon. Members will forgive me, I will not give an illustration now, although I gave one in Committee.
    Suffice it to say that, because one cannot offset an increase or decrease in the sterling value of a dollar or other currency loan, investment trusts are liable to be taxed on a non-existent gain; or they may be taxed on a gain when they have made a loss. The Treasury is well aware of this state of affairs and has been sympathetic to it. Although I understand that it does not wish to consider the matter in exactly the way in which the Association of Investment Trusts would like it considered, I gather, from what was said in Committee and from remarks made subsequently, that it is willing to consider it in some way.
    I hope that the Government will have further comments to make on this issue and I particularly hope that some provision will be made for those investment trusts which, with the active encouragement of the Government, have taken out dollar loans which are repayable this year, so that this problem confronts them before the introduction of next year's Finance Bill. If action on this matter must be deferred for a year, I trust that provision will be made for those who must face this problem before the introduction of next year's legislation.
    Mr. Diamond: I will come to the comments of the hon. Member for the Cities of London and Westminster (Mr. John Smith), but first I wish to answer the question posed by the hon. Member for Colne Valley (Mr. Richard Wainwright). He asked me not to pay undue regard to the drafting of the Clause. I assure him that his meaning is clear. His proposal is that the expense which he wishes to be allowed as deductable should be deducted in arriving at a company's total profits for Corporation Tax purposes. What he is seeking, therefore, is Corporation Tax relief.
    There is already Corporation Tax relief on losses on short-term loans. We are,
    1348
    therefore, concerned only with losses on long-term loans. Long-term loans are, by their nature, capital, and it would be extraordinary if anything to do with capital were a deduction for Corporation Tax purposes.
    Were I to leave the matter there I would have answered the bare wording of the Clause, but I wish to go further, because the hon. Gentleman could, with respect, have made the case even stronger —and we have heard the discussions on these lines—had he referred also to relief for Capital Gains Tax. He is right in saying that with Capital Gains Tax there is a difficult situation which stems from the fact that a loan is not an asset and, therefore, the realisation of a loan, either at a profit or a loss, is not a sum assessable for Capital Gains Tax or relief from Capital Gains Tax. But the situation that the law already provides is broadly satisfactory, though not completely satisfactory to the hon. Gentleman. I shall deal with that point and, by going over the various steps, I hope to convince him that this is the case.
    First of all—to repeat—very broadly, short-term loans would generally be allowable in computing trading profits, and anything relating to them and their repayment at extra cost involved would be taken in the ordinary way for Corporation Tax purposes.
    In dealing with long-term, I should like, first, to deal with the situation in which a company has borrowed abroad in order to invest in productive facilities abroad. In that case, there are two reasons why one does not need to take any special steps. First, the borrowing would have been almost certainly allowed on the basis that it would be paid out of the earnings abroad, so no damage is suffered. The earnings abroad have repaid the borrowings abroad. No penalty has been suffered by the mere fact that the British currency has been devalued in the meantime. Secondly, there is an asset—or a series of assets —abroad which presumably corresponds to the borrowings abroad, and to the extent that a borrowing has to be repaid at an extra figure so do the assets when they come to be realised get repaid at an exactly proportionate figure.
    The problem arises where the money has been borrowed abroad for investment

    1349
    in the United Kingdom. There, the foreign borrowing would have to be repaid at some time or other at an additional cost that is not matched by anything. I have, as I said in Committee, given the matter most careful and sympathetic thought, and the reason why we cannot recommend the House to accept a Clause giving special relief is that we cannot distinguish those transactions— there is a whole variety of them—entered into, not necessarily business transactions, in which business people have suffered through devaluation.
    Further, one is entitled to assume that a company borrowing abroad for investment in this country must have had its attention on the risks of borrowing abroad, and one of those risks is variation in exchange rates. So one cannot regard this as a risk which was unconsidered when the transaction was entered into—
    Mr. John Hall: How would the Chief Secretary treat the case of a company which borrows large sums abroad with the intention of investing abroad but, at the insistence of the Bank of England, has to repatriate part of the proceeds back to this country—although it is still its intention to use those proceeds of the overseas loan for overseas investment—and, in the meantime, because of devaluation, incurs a loss?
    5.15 p.m.
    Mr. Diamond: I am sure, by the way in which the hon. Gentleman puts his question, that he has a specific case in mind where part of the investment was made abroad and part in this country. If it were split in that way—he says at the insistence of the Bank of England, but one would have to be careful about that, because it would be unusual for the Bank of England to insist that part of a borrowing abroad had to be used for investment in this country—
    Mr. John Hall: I apologise for not making myself clear. In the case I put, the sum was raised abroad and part of the proceeds were repatriated here at the insistence of the Bank of England, although the intention was—and still remains—to use the whole proceeds of the loan in overseas investment.
    Mr. Diamond: What the hon. Gentleman now makes clear is that, when the
    1350
    loan was raised, the borrower was aware that it would, at all events for the time being, be used for investment in the United Kingdom. I can only repeat what I said in the other case, and it is related to the other cases, that the business or the individual borrowing abroad would have these problems very much in mind.
    Therefore, for the very strong reasons I have given, I do not think that one can possibly contemplate accepting a Clause which seeks relief from Corporation Tax, nor can I recommend what I understand is the much more difficult case of rejecting a provision under which companies or individuals borrowing abroad for investment in this country— where, admittedly, they would not get any Capital Gains Tax relief—for the extra cost of repaying the borrowing in due course. Nor can I recommend that even such a large reduced relief should be available.
    I should like now to deal with the question raised by the hon. Member for the Cities of London and Westminster Here we are dealing with investment trusts. I undertook in Committee to bring forward proposals, either at this stage or in a year's time, to give relief in appropriate cases. The appropriate cases one had in mind were those where an investment trust, for example—and an investment trust would be the main example—borrowed abroad, and borrowed for the specific purpose of investing in investments abroad, and those investments were hypothecated in regard to that borrowing, and the investments were nominated in respect of exchange control.
    If nothing were done in those specific cases, the situation which would arise would be that any increase in the investments arising out of devaluation would be subject to Capital Gains Tax in the ordinary way. But the additional cost of repaying the loan would not give rise to relief for Capital Gains Tax, because a loan is not an asset and is, therefore, outside the knowledge of the Capital Gains Tax legislation.
    As the hon. Gentleman said, discussions have taken place, and proposals have been put to the Investment Trust Association which, let me say straight away, is free to comment as much as it likes but is not committed, although I think that I am right in saying that, in

    1351
    general, the proposals are not unacceptable to it. These proposals broadly meet the Association's point, so the Government will, in a year's time—it is obviously not possible to do it now— bring forward proposals after these matters have been discussed in full detail— because only preliminary discussions have taken place—with bodies which might be similarly affected.
    I have particularly in mind life assurance companies which may have done precisely the same thing—borrowed abroad for investment in nominated securities and the investment hypothecated to the borrowing. After full discussions with such associated bodies, we will bring forward legislation next year which will give the appropriate relief.
    As the hon. Gentleman has said, these are urgent matters which are happening this year, so I give the undertaking that such legislation would be retrospective. I think that it would have to be retrospective to the date of devaluation. I do not think that retrospection to 5th April is appropriate, but I will want to consider that matter more carefully. The intention is to give the relief obviously due in respect of the anomaly, which is a precise anomaly, clearly described, and would not, therefore, be mistaken for any other kind of obligation.
    In those circumstances, I hope that the House will feel that I have carried out the undertaking which I gave to bring forward legislation on this occasion or in a year's time and that I have dealt adequately with the matter.
    Mr. John Smith: Does the right hon. Gentleman propose to tackle only dollar loans, or loans in any foreign currency?
    Mr. Diamond: The hon. Member himself put it in terms of dollar loans and, of course, dollars are the main currency under which this matter has arisen. I cannot see the distinction between borrowing in one currency and borrowing in another. I would not know by what process of law and equity one could distinguish. Therefore, once one lets oneself in for this kind of thing, one has to carry the argument to its reasonable and logical conclusion.
    Mr. Barnett: I am not sure whether I have correctly understood my right hon.
    1352
    Friend. I understood him to say that a loan—a loss of a debt—could not be treated in the same way as a capital gain. What is the position if a man buys shares in a small company and he also buys a debt—a loan—in that company for less than the nominal book value, because the assets of the company make it worth very little? Suppose that later he realises it in full because the company makes profits. That is a debt on which he has made profits. Is that subject to Capital Gains Tax?
    Mr. Diamond: I do not see why I should act as honorary unpaid adviser to my hon. Friend, for whom I have the highest and the most affectionate regard. I am not absolutely clear what my hon. Friend has put to me, because he referred to buying shares and he then referred to acquiring a loan which is one of the assets of the company. Presumably, he has acquired the company's net assets and liabilities through acquiring the shares. Therefore, the matter would not arise in that sense.
    Perhaps I may help my hon. Friend as much as I can by saying that a loan is not an asset for Capital Gains Tax purposes. This was fully considered when the Capital Gains Tax was introduced. Therefore, a profit or a loss on realising a loan is not a profit or a loss which is subject to Capital Gains Tax legislation. If my hon. Friend will convert that to the particular circumstances which he has in mind, I am sure that he will come, as he always does, to the right conclusion.
    Mr. Richard Wainwright: I welcome the undertakings given by the Chief Secretary on behalf of the Government on investment trust matters which have arisen during this debate. I also welcome the fact that it has proved an opportunity for the hon. Member for Heywood and Royton (Mr. Barnett) to get some top advice.
    On the substance of the new Clause, however, I am extremely disappointed that the Chief Secretary persists in trying, as it were, to sweep under the carpet a matter affecting the growing trend of United Kingdom companies borrowing abroad, which the Government have encouraged during the last two years, in

    1353
    respect of the Air Corporations, the gas and electricity industries, the Greater London Council and other local authorities.
    When the Chief Secretary says that we are dealing with a risk of loss which a borrower could have foreseen, I cannot see how this differentiates the matter from other items which are readily admitted as expenses for Corporation Tax or as losses for Capital Gains Tax. Many of the matters which are treated as business expenses or as a capital gains loss were risks which the taxpayer no doubt foresaw, but that does not prevent them being admissible when the risk comes all too true.
    Secondly, the Chief Secretary said that there had been many sources of loss and suffering due to devaluation, implying that some of them could not be relieved because they cannot be precisely identified. That is their misfortune. In the Clause, however, we are dealing with a loss arising from devaluation, which can be precisely identified and which could, on an administrative basis, perfectly well be admitted either as a loss or as an expense.
    This shows that we must return to the attack next year, but in view of the admitted difficulties of drafting on this occasion I beg to ask leave to withdraw the Motion.
    Motion and Clause, by leave, withdrawn.

    New Clause 25
    THRIFT PLANS

    (1) Subject to the provisions of this section a payment made by an employer into a thrift plan trust fund on behalf of an employee shall not constitute taxable income of the employee entitled but shall be allowed as a deduction from the profits or gains of the employer. 'A payment' shall for this purpose include a deduction made at the request of an employee from income to which he would otherwise be entitled.

    (2) Payments under subsection (1) above shall not be eligible for tax relief to the extent to which they exceed in any year of assessment in value 5 per cent. of the taxable income of the employee in that year.

    (3) A thrift plan trust fund shall be a fund set up for the employees of one or more employers for the purpose of encouraging thrift amongst employees, under the rules of which at least 90 per cent. of the employees,
    1354
    resident in the United Kingdom of any participating firm, are eligible for membership and which shall have been approved as such by the Commissioners of Inland Revenue.

    (4) Funds held by the thrift plan trust fund shall be designated for the benefit of individual employees and may be invested in National Savings, British government securities or unit trusts and investment trusts as defined for the purpose of section 37 of the Finance Act, 1965.

    (5) The income of any securities held in the thrift plan trust fund shall be exempt from income tax under the provisions of section 381 of the Income Tax Act, 1952.

    (6) The rules of a thrift plan trust fund shall not restrict the right of members to withdraw the shares of the fund at any time, but save as provided in subsections (7) and (8) below, the trustees shall deduct income tax at the standard rate from any funds so withdrawn and the funds shall be assessed and charged on the recipient under Schedule E as income in the year in which they are received.

    (7) On the death, disability or retirement of a member of a thrift plan trust fund, withdrawals shall not be assessable to income tax under Schedule E but shall be taxable as if the whole sum received were a chargeable gain assessable under section 20 of the Finance Act 1965.

    (8) A member may at any time cease to be a member for a thrift plan trust fund and any sums thereafter withdrawn representing contributions made three years or more before the date of withdrawal shall not be assessable to income tax under Schedule E but shall be taxable as if the whole sum received were a chargeable gain assessable under section 20 of the Finance Act 1965.

    (9) An individual who ceases to be a member of a thrift plan trust fund under subsection (8) above shall not be eligible for membership of the same or any other thrift plan trust fund for a period of three years from the date on which his last withdrawal of funds was made.

    (10) The Commissioners of Inland Revenue may make regulations in connection with the operation of this section and in particular may specify the conditions which must be fulfilled if a thrift plan trust fund is to be approved under subsection (3) above.—[Mr. Grant.]

    Brought up, and read the First time.
    Mr. Anthony Grant: I beg to move, That the Clause be read a Second time.
    Mr. Deputy Speaker: With this new Clause we are taking also new Clause 10— "Own as you earn", new Clause 90 "Abatement of tax payable under Schedule E", and new Clause 91 "Encouragement of personal savings for old age".
    Mr. Grant: I hope that this will be the opportunity to call attention to the

    1355
    need to increase savings generally at this time, because the subject of savings was never properly touched upon during the whole course of our lengthy proceedings on the Bill in Committee because of the effect of the Guillotine.
    I realise that there is a sophisticated argument which, I believe, is held in elevated circles by people in the Treasury —I exclude the Financial Secretary from this charge—that increased savings have only a marginal effect on increased investment. I do not believe that this is necessarily true. Even if it were true, which it is not, there are many other compelling reasons why a dramatic change in our whole attitude to savings should take place at this time.
    Even allowing, however, for a certain amount of switching when one encourages savings, I believe that an increase would provide resources for increased investment. Certainly, increased savings relieve inflationary pressure. They certainly cool down an overheated economy far more effectively than does higher taxation, which is a direct disincentive and leads to cost increases.
    Indeed, if only we had applied our minds as keenly and vigorously and had spent as much time on devising ways of encouraging people to save and to be thrifty as we have spent on considering the subject of wages and pondering how we could send people to prison for getting increases in their remuneration, I believe that we would have seen a dramatic change in our economic circumstances as a result.
    The other reason why an increase in savings attracts me, and, I believe, my hon. Friends on this side, is because it is essentially a voluntary act. People exercise choice in increasing their savings as much as they can, whereas the higher taxation which has been the vehicle used by the Government to curb consumer spending is essentially an act of the State over which the individual has less and less control as time goes on. Increased savings and the spirit of ownership encourage independence. They enhance the status of the individual and form an essential bulwark against the ever-increasing powers of the State as it is today.
    Year after year, I recall Treasury Ministers enunciating those famous words
    1356
    "More savings, less taxation". That has always been the answer which I have received when trying year after year to do something in this direction—and, of course, that is true. We all agree about it and we are at one. The opposite is not true, however, that a reduction in taxation necessarily means more savings. Alas, a reduction in taxation all too often goes into extra consumer spending and only a limited proportion—say, 10 per cent.—seems to go into increased saving. That is the evidence as I understand it.
    It can be said that £100 increased savings by an individual is almost directly £100 less taxation. That is certainly my view and the view of the Financial Secretary, and it is now, I am happy to say, the view of the C.B.I. and of all the economic commentators whom I can discover. I hope that it commands support, as I believe that it does, among hon. Members on the Government benches.
    5.30 p.m.
    My condemnation of the Government is not of their words, but of the fact that they have not translated their words into action, nor have they attempted to do so. The proportion of our national income saved and invested is lower than that in any other developed country in Europe. It is, perhaps, not purely coincidental that our growth rate is similarly well below that of any of our competitors. It is small wonder that there is little enthusiasm for saving, because in recent years savers, so far from being encouraged, have been repeatedly clobbered by a barrage of extra taxation. They are, first, stigmatised as people who do not really work, because they are regarded as unearned income holders. Secondly, they are singled out for exceptionally heavy treatment in respect of Income Tax and Surtax. The Corporation Tax and the Capital Gains Tax have militated against increased savings.
    The Post Office and various media of national savings almost verge on the level of fraud. Take, for example, the 2½ per cent. ordinary account in the Post Office. This 2½ per cent. can be contrasted with an inflation level of about 3·4 per cent. since 1910 which has gone on through the community. So a holding in the Post Office Savings Bank has been worse than a dead loss. It has been a fraud. A

    1357
    more recent example is 1962 5 per cent. Exchequer Stock redeemable in 1967. It is called 5 per cent. Let us calculate the real rate of return. Allowing for inflation, a holder who pays tax at the standard rate gets a derisory figure in real return of about 1½5 per cent.
    These are the many reasons why there has been little or no incentive or encouragement to save in the community. Nevertheless, there is a latent desire to do so, as can be instanced by the enthusiasm there was for the growth of investment clubs and the dramatic increase in unit trusts. It is clear that our existing methods are hopelessly inadequate and that something dramatic is required. I believe that one of the methods whereby this can come about is through thrift schemes such as that which I outlined in the Clause and for which direct fiscal concessions are necessary.
    There are many ways in which this can be done. There are the ways adopted in Germany and in France. The Liberals make a suggestion in a new Clause which has been grouped with this one. That suggestion is a good idea, and I have no objection to it. My hon. Friend the Member for St. Ives (Mr. Nott) has tabled details of a plan thought out, I believe, by Mr. Lionel Barras very imaginatively. There are many ways of doing it.
    Our Clause is based upon the United States' tried and proven method of company thrift schemes. I pay tribute to the work of Mr. John Chown. He has made a great study of the United States' method of thrift schemes and has contributed so much to the drafting of the Clause. It is a scheme which the Wider Share Ownership Council, an all-party organisation of which I am a member, supports as the most suitable vehicle. The Financial Secretary was a distinguished member of that organisation until he fell among bad friends and into evil ways and joined the Government.
    The thrift plan that we have outlined envisages a scheme set up by individual companies, be they great or small, under which payments are made into a fund by the employer. Payments made by the employer into this fund are not to be regarded as the taxable income of the employee up to a limit of 5 per cent. of the employee's income for that year. Equally, the payments made by the em-
    1358
    ployer are to be allowed as a deduction from his profits or gains for tax purposes.
    To be approved under the Clause schemes have to be open to not less than 90 per cent. of employees who wish to participate. The fund is invested in National Savings, British Government securities, unit trusts, or investment trusts. Perhaps I have been a little timid and I would not object to this being widened into a much greater range of equity shareholdings. As a modest move forward, I commend it on those lines.
    The one way in which I differ in this scheme from that in operation in America is that I provide for withdrawal, not only on death or retirement. I provide for an employee to be able to withdraw from the scheme after he has been in it for three years, provided that he cannot join the scheme again for another three years. I believe that this is necessary to retain flexibility and to enable movement of labour between one company and another. I think that the United States scheme is a little rigid in that respect. Lastly, I have provided the long-stop. The hallmark of respectability for any scheme is that it must be approved by the Commissioners of Inland Revenue.
    I do not regard this scheme necessarily as holy writ; nor do I think that the drafting is absolutely perfect. A change in savings attitude in Britain is essential. A radical approach is essential. I believe that the Clause is a novel step in that direction which, if accepted by the Government would, in the words of Mr. Harold Wincott, show that they have had a
    "sudden attack of common sense".
    Mr. F. A. Burden: If a member of a thrift club operating in a group of companies leaves one company in the group and joins another company in the group, will he then be debarred from joining for another three years?
    Mr. Grant: I should have to take legal advice on that, but I think that he probably would be. We have provided the three-year period. This is a point of detail. I would not mind the period being extended or reduced, as was thought desirable. There must be flexibility in these schemes. It is essential that any scheme should be based on the company or on the individual and not on some great rambling bureaucratic central body

    1359
    such as C.B.I. has in mind. It is vital that it should be geared to the wage packet. It is vital that fiscal concessions should be given by the Government to enable it to get off to a reasonable start.
    The scheme embodied in the Clause fulfils all these criteria and has been shown to work in America. For these reasons, and because I believe that it is directly relevant to our present economic difficulties, and, above all, because it is wholly in accordance with my philosophy of a free society based upon individual ownership, I commend it to the House.
    Mr. Barnett: All of us are in favour of increasing savings and, in particular, real net savings—that is, not simply switching from one form of savings to another. That is why I supported the original idea of the right hon. Member for Enfield, West (Mr. Iain Macleod) of a save-as-you-earn scheme. I believe this is an idea well worth following up.
    However, the Clause highlights the extent of the problem. The right hon. Member and the hon. Member for Harrow, Central (Mr. Grant) have obviously devoted a great deal of thought to the problem of how this could be done. We understand from the hon. Gentleman that the scheme contained within the Clause is based on the United States scheme. I believe that the scheme as shown in the Clause is an administrative nightmare.
    We hear constant complaints in the House about the complexities of our tax system. There are many of them. The Clause shows that an enormous number of administrative problems would arise. I am not judging this merely by the drafting of the Clause. Nor do I mean that problems would arise for the Inland Revenue only. I am thinking that the 5 per cent. expressed weekly, if we are talking about the small saver, could become a problem of under-payment or over-payment of tax throughout the course of a year, which would be administratively a little difficult. However, that is only one small matter.
    Many other factors would crop up. What would happen on the transfer of job? What is much worse is the administrative burden which the thrift idea plan, as outlined in the Clause, would place on companies, particularly smaller companies, even if they grouped together. I
    1360
    think of the complexities which could arise on the transfer of employees, with withdrawals, and with apportionments under some of the subsections as between one employee and another, giving rise to problems as to sharing of interests or of a cipital gain on reinvestment. Other questions which it would be difficult to answer would be when disability arose, when retirement occurred and when a person was eligible to join a scheme. For smaller firms, at any rate, it would be an extremely difficult administrative task, to say the least.
    There would also be administrative problems for the Inland Revenue itself. These would include an individual's tax liability arising out of withdrawals and amounts put in in any given year, and total salary at the end of the year when individual weeks were not exactly similar because of bonuses and short time and so on. All sorts of complexities could arise for the Inland Revenue.
    Mr. Grant: Before the hon. Gentleman says too much about administrative difficulties, let me say that I have always believed that if the will is there, we have a Government to overcome the difficulties. I am not bothered about the Inland Revenue's difficulties. Secondly, the hon. Gentleman overlooks the fact that the scheme would be entirely voluntary. Nobody would compel a company to undertake it.
    Mr. Barnett: We have to take account of administrative problems all round and I do not think that any of us would want to introduce a scheme which caused enormous administrative difficulties to anybody, particularly the Inland Revenue, which has a burdensome enough task as it is.
    Mr. Kenneth Baker: Is not the hon. Gentleman aware that the arguments of administrative difficulty and inconvenience which he has just postulated were exactly the arguments used 30, 40, or 50 years ago, when companies were first thinking about setting up pension funds?
    Mr. Barnett: The administrative problems which I am postulating are exactly those which we have heard used about other schemes by hon. Members opposite in the last few years. That is why I am

    1361
    surprised that they are prepared to consider such an extremely complex scheme. The Inland Revenue would have the problem of deciding how much should be subject to Capital Gains Tax and how much to Income Tax and to make an apportionment in any given year. We simply cannot ignore the administrative problems.
    We have also to consider whether such a scheme would be attractive to a saver. Personally, I am in favour of making it easy for an employee to have a deduction from his wage in respect of savings, but it should be clear to him what he is to get at the end of the day. For example, an employee earning £1,000 a year, under the terms of the Clause would save 5 per cent., or an average of £50 a year. If he were to put £50 a year into a life assurance policy with a respectable company, so that the policy matured fairly early, he would have a policy of £1,000 with profits and bonuses which might bring him somewhere near £2,000 at the end of the day, and he would also have cover of £1,000 plus bonuses during the course of his life. Under the terms of this scheme, he would have the additional disadvantage of not having the cover and he would also have a smaller net return, having regard to the fact that the final sum on realisation would be subject to Capital Gains Tax. Assuming that he went to the trouble of working out the computation of what he would get, such an employee would find that the net return to him was rather better in other schemes.
    Something much better than this type of Clause is required. This scheme is too complicated and not sufficiently attractive to an employee. Such a scheme must be administered nationally rather than by small and medium-sized individual firms which would not have the skills required to deal with the management of investment such as the large insurance companies have and which have enabled them to build up the sort of bonuses which they now pay. I would rather that the administration were handled nationally, so that there was better management and a better return for those concerned. It might be easier to deal with it by way of a certificate issued weekly to the employee who had a certain amount deducted from his wage, with the certificate cashable at an
    1362
    amount which became larger the further away from the date of issue.
    5.45 p.m.
    Basically, I am sympathetic to this idea, but the scheme is administratively difficult and not sufficiently attractive. Nevertheless, it is valuable to have a debate of this description and the hon. Gentleman has done the House a service by initiating it and enabling us to expose the limitations open to us in any scheme for improving savings and getting new net savings.
    We underestimate the ingenuity of past Chancellors of the Exchequer who have gone to enormous lengths to find methods of improving savings and meeting the wishes of all kinds of savers, from those in the high tax brackets to those in the lowest who for £1 can buy a National Savings Certificate in a Post Office, where it is easily obtainable, or who can buy Premium Bonds and so on. Former Chancellors have considered and thought up many schemes. It is important to recognise how limited is the scope now left. The Clause emphasises that limitation, because the hon. Gentleman and the right hon. Gentleman have clearly thought a great deal about the idea, and yet have been able to come up only with a Clause like this which, when examined in detail, goes to show just how difficult is the problem in practice, although at first sight the idea seems attractive.
    It is not possible to say whether the scheme would be too costly to the Exchequer. Clearly, one could have a savings scheme by which it would be easy to persuade people to save, but which was so costly to the Exchequer that it would not be worth while. It is not possible to say whether the Clause would be too costly, because we do not know how much would be invested by employees, or how quickly withdrawals would be made. However, that does not matter because, even allowing for the fact that only two-fifths of the premiums for a life assurance policy are allowable for tax, whereas this scheme would allow the whole against tax, the return on such a policy would be better.
    That is clearly important in the consideration of a scheme of this description or something like it. It is not possible for a small group of people without all the facilities available to a Government to work out all the complexities which

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    might be involved. I gather from the Press and elsewhere that the C.B.I. scheme is being favourably considered by the Government, and I hope that they will give it a good deal of thought and that before next year a rather simpler scheme will be brought forward, although with the same purpose, because we can all support the purpose.
    Mr. Henry Clark: The House owes a debt of gratitude to my hon. Friend the Member for Harrow, Central (Mr. Grant) for introducing this subject, and one must compliment him on the work which he has done on his savings scheme. I wish to direct my remarks not to his excellent scheme but to my own which is outlined in new Clause No. 91, an incentive to saving which would complement any of the schemes which have been put forward. We suggest that there should be £100 of unearned income tax-free for everybody over 60. This would set a target to which savers of any income could aspire. I believe that setting a target for the future is extremely important, because financial laws and taxes have created a large number of psychological barriers to having, even for the small saver.
    The figures contained in new Clause 91 are not arbitrary but were chosen with care. We chose £100 as the income which could be earned from the kind of capital sum which any family could save with reasonable thrift, over a reasonable period. It is about equivalent to the income one would get if instead of buying a house one saved one's money. In justice, every person over 60 who has saved that money should be able to enjoy it Income Tax free.
    The age of 60 has been chosen so as not to coincide with the old-age pension age for men. Too many people, particularly many younger people, regard the age of 65 and the old-age pension as a kind of Nirvana to which they look forward, when everything will be all right and all that they will have to do is to collect their money from the Post Office. Although they know very well that the pension is not adequate today, they believe, as a result of what is said by politicians on both sides, that there will be a time in the 1970s or 1980s when it will keep us all in comfort.
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    Far too many fail to realise that no matter to what level we raise the pension, because it is universal, it will provide only the floor level of living standards. Those who want to keep up with the Joneses, or be a little better, can do so only by saving before they become too old to do so. The two figures have been chosen because, as far as I can estimate—and I got no Treasury help when I put down a Question—the cost of the new Clause would be about £20 million per annum.
    The Chancellor of the Exchequer (Mr. Roy Jenkins)The Chancellor of the Exchequer (Mr. Roy Jenkins) indicated dissent.
    Mr. Clark: I see the Chancellor shaking his head. It is certainly not an excessively expensive scheme and would start people saving. The money would go to those who deserved it, very often to those who had invested in War Loan and house property to let—two of the worst and commonest investments among the lower income groups. This target could fit in with any of the several proposed schemes.
    My hon. Friend the Member for Harrow, Central, with admirable brevity, went through the arguments for saving. I was happy too to hear a favourable comment from the hon. Member for Heywood and Royton (Mr. Barnett). To some extent I agree with him that the administrative complications are considerable, but none of us can disagree about the tremendous advantage that would accrue to the economy by an increased level of personal savings.
    We all know that Lord Keynes in 1936 voiced considerable criticism of personal savings and sinking funds. I believe that some of the Keynesian doctrine of 1936 has stuck with Labour to this day. It is interesting to see that Lord Keynes changed his tune remarkably quickly and that by 1939 he was saying that in the new circumstances:
    "… savings will again serve social purposes and private prudence will coincide with public interest."
    I do not think that there is any reason to doubt that what he said then is equally true today.
    When we know that personal savings can replace increased taxation, we must tie that to the remark attributed to the Chancellor in today's papers, that this country is reaching its limit of taxable

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    capacity. I see that he is to say this on television tonight. If we cannot raise taxes further to reduce consumption, there is only one other hope and that is savings. The Chancellor told us this in his Budget speech, and then proceeded to do virtually nothing about it. He cannot honestly claim that the increase in Premium Bonds, and one or two other adjustments in National Savings, will really change the national propensity to consume to any considerable extent.
    The tragic thing about the Budget is that it is likely, more than anything else, to reduce savings. Increased taxes will cut savings more than they will cut consumption. A high proportion of families will reduce their bank balances, draw on capital, increase their debts to the shops, to try to maintain their living standards. The proportion of income spent on consumption may be higher in 1968 than at any other time. We look to the Chancellor to give us a satisfactory answer and explain more clearly than he has done so far why he did not adopt a level of incentives for savings in the Budget.
    The other side of the House does not like capitalism in the old sense of the word, but no one can have any objection to capital if it is spread broadly to every family and homestead. Everyone knows that £500 invested in a reasonably reliable way is a better hedge against worry and bad luck than any social security scheme. In Northern Ireland, where there is widespread ownership of land, and where usually one person in every family owns land, the effect has been to help Northern Ireland very considerably during the real social difficulties of unemployment, suffered over the last 30 years.
    I take the hon. Member for Heywood and Royton to task to some extent, because it is not the function of this House to discuss theoretically what will or will not make people save. We all have our own pet schemes. Mine is that we should let people save from taxed income, and get a tax refund, rather than save from income before tax and get a tax rebate. The sum of £1 a week saved from taxed income, with a refund, would become £70 or £80 a year. This would be a real incentive and similar to the scheme whereby people make gifts to a charity on a seven-year covenant. I personally feel particularly generous when I see my
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    meagre subscriptions to a charity boosted by the tax reclaimed by that charity.
    It is pointless for us to sit here talking, it is not a matter which we or the Treasury can decide. To persuade the British public to save we have to get the product right; we have to have a flexible and broad scheme, to suit all income groups and to appeal to the huge body of non-savers whose earnings are below £1,500 a year. To get this scheme right we have to appeal to the marketing industry. We have to find out by research, what kind of savings will appeal before introducing any scheme. I hope that before the Chancellor introduces a scheme, as he inevitably must next year, if he is to keep the country steady, he will do a great deal of market research.
    I conclude with a plea for sympathetic treatment by the Chancellor of the various schemes put forward, particularly that suggested by myself and my hon. Friends. I suggest that, if we can create a property-owning democracy—a capital-owning democracy—we shall create a country and society with the morale to stand up to the problems of the modern age.
    6.0 p.m.
    Mr. Eric Lubbock: I shall not add to what the hon. Member for Harrow, Central (Mr. Grant) said about the virtues of savings, except to draw attention to a recent article in The Times by Francis Cairncross, who pointed out that one of the best reasons for encouraging savings is that it means less taxation. The article added that if we had been saving as high a proportion of post-tax income as in 1951, the Chancellor would not have needed to take £560 million out of the economy in his Budget. That is the strongest possible reason for encouraging savings in a more radical way.
    I therefore deplore the remarks made by the hon. Member for Heywood and Royton (Mr. Barnett). Every time a scheme of this nature is put up, he casts doubt upon the principle, not because he disagrees with it—at one point in his remarks he accepted the idea—but because it is administratively unworkable. He knows very well that any hon. Member trying to put forward a scheme like this can only deal with principles. He cannot do other.
    Mr. Baraett: The hon. Gentleman says that I do this every time. Can he quote the last occasion? Can he say on how many other occasions I have done this?
    Mr. Lubbock: On 14th June, 1967, the hon. Member made a sarcastic speech about a scheme put forward by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright). He condemned it in much the same words as he has just used. He said that the scheme was administratively impracticable. This afternoon, he said that the scheme in new Clause 25 would be an administrative nightmare. But the only difficulties he pointed out were in relation to the P.A.Y.E. system, saying that, if people withdrew money and put it into savings schemes of the kind proposed, the Inland Revenue would have to take this into account in code numbering.
    But the Inland Revenue has faced this problem for many years. What does he think happens in the case of a scheme of payment by results where, according to the state of the economy and the fortunes of his company, a worker's earnings may fluctuate widely? A code number may be allotted to him at the beginning of the year which, unfortunately, because of the Chancellor's other actions to reduce consumption, may not be in accordance with his actual earnings. The Chancellor may decide to increase Purchase Tax on cars so that earnings in the motor industry decline because there is no overtime and perhaps there is even short time working. The code number then has to be adjusted.
    Does the hon. Gentleman really think that a system of P.A.Y.E. which can deal with these fluctuations would be incapable of accommodating a scheme for small savings such as that proposed by new Clause 25 or by my hon. Friend last year, about which the hon. Gentleman was so scathing? It is a pity that the hon. Gentleman did not make a sensible contribution about the principle of contractual savings instead of trying to make niggling details about new Clause 25, into which the hon. Member for Harrow, Central has put a great deal of thought and work, for which the House should be indebted to him.
    There is a lot to be said for examining the experience of the United States and
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    I also draw the Chancellor's attention to the experience in West Germany over the last few years, which also has something to teach us. It was decided there some years ago that a tax concession should be given to contractual savings. Because the maximum benefit would be felt by those who paid most tax if the scheme were done by means of a tax allowance. it was decided, in order to stimulate savings by the lowest paid workers, who were not paying the standard rate of tax. to have higher interest rates for contractual savings than for the normal avenues of savings which had been open before then.
    The West German Government offered a premium of 46 per cent. on top of the normal rate of interest for savings which were kept in a special account for a period of five years or more. They refined the scheme because it was found that this inducement appealed more to the executives and the staff than to the manual workers. In 1964, they found that only 30 per cent. of new savings accounts opened under the 1959 law were those of manual workers, and as the manual workers were numerically by far the largest potential market for the scheme, this indicated that only a small proportion of them were being attracted to it—a much smaller proportion than that of the salaried employees, who formed 49 per cent. of the total.
    In 1965, therefore, the West German Government extended the principle of contracutal savings so as to permit collective arrangements negotiated between workers and managements for special accounts into which the employer could pay up to 312 DM per annum for each employee on his books. These payments were allowable deductions from the company's profits for tax purposes, but did not count as part of the income in the hands of the recipient if he left the money for the period of five years.
    New Clause 10 contains many of these principles, although, of course, there are differences in detail between its scheme and the West German scheme. Under subsection (3)(a), it would be open to an employer to open a special savings account on behalf of an employee. This would permit collective arrangements between management and unions. The amount which could be deposited in the

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    account each year would be very much larger under our scheme but, on the other hand, the beneficiary would not escape tax altogether even if he left the money in for a very long time. When he came to withdraw the money, he would pay Income Tax as if he had received it in the year of withdrawal.
    Under subsection (4), the employee would not be liable to Capital Gains Tax on the amount which could be secured by his deposit in the special account. As my hon. Friend the Member for Colne Valley pointed out last year, this would provide an incentive to the employee, either individually or collectively, to put money away during periods when he was earning a good wage or salary and only withdraw it when he faced a period of adversity such as sickness or unemployment, when the effective rate of tax would be much lower and the money withdrawn would count as part of his income during the year of withdrawal.
    It is true that new Clause 10 would not provide for higher rates of interest to be paid on money deposited under the scheme, which is a feature of the German law, but this, I think, would be an added refinement which we might consider as a further improvement of the proposal. If money is to be invested for long periods, there is every justification for offering a bonus, as we already recognise in the case of National Savings Certificates, although the bonus there is not large enough to make it worth while investing in them in present circumstances.
    Sir Miles Thomas has been trying to persuade the Chancellor that interest rates of 8 to 9 per cent. should be offered where savings are left in for at least five years. The C.B.I. has proposed a variety of methods for retaining long term savings, and much higher interest rates are only one example. Both the C.B.I. and the T.U.C. have been advocating schemes which have something in common with new Clause 10. For many years, we have called for additional savings and have paid tribute to the National Savings Movement and to the most dedicated and unselfish work done by thousands of volunteers. But we are not prepared to give them what is needed to enable them to extend national savings to the extent necessary in the present climate.
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    I have attended annual rallies of the National Savings committee in my constituency over many years. I attended one in March this year. I am always very impressed by the dedicated spirit of the volunteers who are prepared to give up so much time and effort in the cause of savings to help Britain in this most practical way. In the last few years they have been struggling against heavy odds when trying to persuade the small saver that it is worth while putting his money aside. When we look back on the history of savings ever since the last war, we see that hundreds of thousands, perhaps millions, have been defrauded by inflation and rising interest rates.
    If the Government really want to help small savers to put the economy straight, they have to give the savings movement and others concerned the proper tools to do the job. A scheme for contractual savings along the lines of our new Clause or that proposed by the hon. Member for Harrow, Central would do a great deal to restore the morale of workers in the National Savings movement and would allow them to make the significant contribution which they are ready and anxious to make.
    Mr. Sheldon: What unites the whole House is the obvious need for a reassessment of all we are doing with reference to savings. I shall not spend time discussing the details of various schemes. It is a pity that we are discussing minutiae in matters which we are not well fitted to judge and which the Treasury can examine very closely. It can then come up with a workable scheme if it agrees that the principle is right. We should be discussing the principle rather than the details.
    Not only do we need to attract new savings, but it is also extremely important to retain present savings. If we look at the figures of slowly rising savings, we see that they present a complacent picture. Even our slowly rising trend of savings can show an actual drop in real terms. This is not just because of inflation, important though that may be, but because of the growth in real incomes which has been taking place.
    If this had been reflected in increased savings it would have been no more than what we should have expected. If we take the increase in inflation at about 3 per cent. per year and the

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    increase in growth of incomes in real terms at about 2 per cent. per year, we should have about 5 per cent. increase in savings, and that, obviously, we have not had. We tend to view the picture rather too complacently.
    We need not only to think in terms of new schemes, but to find ways of making present ones more attractive. Hon. Members are queuing up with pet ideas but if we are to think in terms of a radical look at savings probably the first thing we should do should be to tackle the whole question of confidence in the value of savings which will be obtained by the person who invests his money and hopes to see an appreciable return at the end of a given period. Because of this it may be that to get any movement off the ground and to reverse the process which has been going on for so long through lack of confidence which, unfortunately, has been continuing, we shall have to think in terms of some sort of tax incentive.
    Although I am unwilling to accept ideas of tax relief in general for this kind of saving, mainly because it is undiscriminating and helps the better-off more than the less well-off, there is a strong case at this time to give a boost to confidence and to have a new look at saving so that people can see a definite return and a chance of increasing their wealth in this way to their own good and that of the country.
    6.15 p.m.
    There is one important point which we must not lose sight of. We are getting very near to a situation of not having a net interest rate for savings, but almost a reverse interest. This is important because people are becoming more sophisticated about it. They are beginning to understand it and to understand that with present levels of interest, even though they are high, by the time tax is paid there is not much difference between what is left and the level of inflation. If we take the fixed interest and deduct taxation charges, what is left is not much different from the level of inflation rising each year and so the capital of the saver does not appreciate and, in certain circumstances, may actually diminish.
    It is becoming increasingly understood by people—not only by those knowledgeable in these matters but generally—that
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    something is needed to reverse this attitude to savings. It may be that we shall have to think in terms of tax concessions to give a new impetus to the whole movement.
    Whether the schemes which have been discussed this afternoon are used is not important; what is important is that new ideas are necessary. I hope that my right hon. Friend the Chancellor will consider this.
    Mr. John Smith: I found listening to the hon. Member for Heywood and Royton (Mr. Barnett) a very lowering experience. He had a difficulty for every solution. I had no idea that he was such an abominable no-man; I can only imagine that he is limbering up for the bottom job on the Treasury Bench. His other half, his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) did a great deal better by addressing himself to questions of principle instead of giving the Government an opportunity of saying, "We have heard of a great many schemes, all different and each contradicting each other and therefore nothing can be done."
    But I am sure that both hon. Members must recognise that it has been tragic that in this Budget, of all Budgets, there was no savings incentive. Well, there was one, the rate of prize money on Premium Bonds was increasesd from4½ per cent. to 4⅞ per cent., but there was no proper incentive to saving. Instead, we were taxed again. We were treated, once again, like a train of pack mules trudging our way through the sands of time. We had extra taxation and in some cases doctrinaire taxation. I welcome particularly what my hon. Friend the Member for Harrow, Central (Mr. Grant) said about choice, that savings are worth it, even ignoring financial reasons, because they give people a choice which they do not get with taxation.
    The whole Budget as it proved was an incentive not to savings, but to extravagance.
    Mr. Speaker: Order. We are not discussing the Budget now. The hon. Member must come to the schemes on the new Clauses.
    Mr. Smith: I beg your pardon, Mr. Speaker. I was led astray because I was the only hon. Member who was not called in the debate on Second Reading—
    Mr. Speaker: Order. That is interesting, but it is no excuse.
    Mr. Smith: —and, therefore, I have a suppressed Second Reading speech inside me. If savings had been properly encouraged in the way in which all these new Clauses would ensure, the Chancellor could have avoided these heavy increases in taxation. He said that he had to impose sacrifices; that he had to take purchasing power out of the economy, but in my opinion he could have coaxed it out.
    Chancellors, by nature, cannot like savings, because they make the control of consumption a great deal harder, as we are seeing now. But savings and tax are complementary. Indeed, the Chancellor said so. He said that:
    "if every working person in this country were to save 1s. a day, this would bring in over £400 mill on in a year and would go a long way towards solving our economic difficulties —and oar taxation problems."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 270.]
    If the Government put into savings a fraction of the thought and energy that they put into taxation our burdens could be greatly lightened. Indeed, savings can do the job of taxes without increasing the cost of living, as taxes do, and as, indeed, this Finance Bill will do by 2 per cent. we are told.
    Instead of legislation on the lines of these new Clauses the Chancellor simply uttered the now customary ritual platitudes about the National Savings Movement, though I think that he went a little far in saying that
    "this year offers a special opportunity in the field of national savings"
    when the value of money is, we are told, going to fall by at least 5 per cent. I endorse what has been said by several other hon. Members about National Savings, though I do not agree that they are a fraud. That is much too strong a word to use. The National Savings Movement at the moment is simply a way of tearing up your money slowly.
    But National Savings can be reconstructed if none of the new Clauses or similar schemes find favour with the Chancellor. There is nothing wrong with fixed-interest investment. We have heard a great deal about the cult of equity shares, but there is nothing wrong with fixed-interest investment, providing that
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    the rate on such investment is high enough. As was said, there should be allowance in the rate for the effect of inflation.
    If National Savings carried a rate of 7 or 8 per cent., reflecting current interest rates, plus a net addition of perhaps 3 or 4 per cent. for inflation, they would be perfectly attractive, and reasonable to put forward to the public. But if we are not to have that type of scheme, but are to have instead the types of scheme put forward in these new Clauses, let us remember that, whichever we are to have, savings have been the chief instrument of civilisation. They have been the backing for our position in the world, as the 19th century, indeed, recognised, with, to my mind, its noble ideal of freedom from dependence; from dependence on other people, dependence on charity; and, particularly, from dependence on the State.
    It is time for a return to that great Victorian ideal built on savings. What is wanted is a savings policy. By that I mean incentive to save, ability to save, and faith in savings. That involves far more than can be put into a Finance Bill. Moreover, we want not only a savings policy, but a savings scheme. I thought that the Chancellor was a bit feeble about this. He said that no satisfactory scheme could be discovered. But an arrangement very similar to what is required already exists. The savings scheme which we need, in the absence of a revitalised National Savings Movement, should be one based on ordinary shares; and here we must keep in mind a great danger to saving and investment of all kinds.
    We have seen people lose faith in fixed interest investment and turn to equity investment. We are now seeing them lose faith in equity investments and turning to non-conventional savings media altogether. People are turning to investment in chattels, for example, which is totally unproductive for the country. Therefore, I feel that any schemes which are put forward should be well based on equity shares.
    Secondly, such a scheme should—
    Mr. Speaker: Order. The hon. Member must come to the schemes in the four new Clauses that we are discussing.
    Mr. Smith: I think that investment in ordinary shares is provided for in these new Clauses, although one of them does envisage the alternative—
    Mr. Lubbock: Perhaps I can help. If the hon. Member for the Cities of London and Westminster (Mr. John Smith) looks at subsection (3)(b) of the new Clause 10 he will see that the amounts may be in
    "money, stocks and shares or other securities."
    There is a limitation in the Clause. It does not include chattels.
    Mr. Smith: The second aspect of these new Clauses which I welcome is that they are open only to savings from earned income. Thirdly, they must be more attractive—and this is most important—to remain in than to cash your savings and come out of. Those to my mind are the criteria of a successful savings scheme.
    If the Government feel that is all too difficult, as was set forth by the hon. Member for Heywood and Royton (Mr. Barnett), I would point out that there is already in existence, approved by the Revenue and the Government, a parallel scheme of this kind, namely, the existing equity-based retirement annuities for the self-employed, with which the Revenue is familiar. They could be used as a model for a savings scheme on the lines of these new Clauses, or, if they are not acceptable to the Government, for a similar scheme.
    I am not, in fact, in favour of the State setting up a scheme of its own. It would be better if the State simply set the framework for schemes arranged by other people—be the ring master, as it were. But I would point out that, since the Chancellor spoke in the Budget debate, the advent of the Post Office giro system will make a State savings scheme a great deal easier to administer.
    The Chancellor, in his Budget speech, said that he would consider suggestions to modify the problems which owners of dollar securities have when they realise them. Will he, on that analogy, consider suggestions for a National Savings scheme? To do that would be far better than to dally as we have done, with decadent schemes such as the national lottery, which are only suitable for the sort of dead-beat and down-and-
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    out countries that make fresh issues of postage stamps every three weeks or so. If we could get away from that approach to savings, and concentrate on something with the solidity of the 19th century schemes, which were such an enormous success, we should give the Chancellor the pleasure, in subsequent Budgets, should he come to open any, of reducing taxation.
    6.30 p.m.
    Mr. Kenneth Baker: I strongly support the new Clause. This is the first occasion, during the many hours spent on the Bill, that we have had the opportunity of discussing savings as such. The debate, before you, Mr. Speaker, resumed the Chair, was rather wide ranging on the principle: to what extent should the Government encourage savings? We on this side of the House are not convinced that the Government put this at the top of their list of priorities, and the earlier speeches seemed to indicate that. It should not be necessary for us to argue—and I should be out of order if I attempted to do so— the case for greater savings in our economy, but it is a fact of economic history—
    Sir Gerald Nabarro: It would not be out of order.
    Mr. Baker: I am grateful to my hon. Friend for that ruling.
    Sir G. Nabarro: On a point of order. Mr. Speaker, in your absence we had a debate on the principles of National Savings and their application to the three alternative schemes. If it is now to be ruled out of order for any speaker to talk about the principles of savings, that will stand the whole of this debate—or at any rate its earlier stages—on its head. For the benefit of anybody who may catch your eye later will you now rule on whether we may talk about the principles of National Savings, their influence on the levels of direct and indirect taxation, with which they are indissolubly linked, and also the content of these three Clauses?
    Mr. Speaker: The hon. Member must wait until he makes his speech. I shall then rule whether he is in order. These Clauses seek to give certain tax concessions to savings. As the hon. Member said at the beginning of his point of order it is in order to talk about savings,

    1377
    their incidence, and the reason why they should benefit from the various Clauses concerning them.
    Mr. Baker: The point I was making was that economic growth depends to a large extent on the percentage of the gross national product which goes into personal savings. One of the characteristics of the 1950s was the continual rise in personal savings as a percentage of the gross national product. That rise was dramatically checked from about 1964, and there is evidence of this in the recent Report to the Bank for International Settlements. This is not a bank of gnomes but one which has been a very good friend of the Government for the last three and a half to four years.
    The Report says that for the last three and a half years
    "Total savings did not keep pace with the rise in home investments and this was reflected in the external deficit."
    I hope that that short quotation puts the whole question of savings into perspective, because we on this side of the House put it at the top of our list. One of the great disappointments of the Budget is that the Chancellor neglected and rejected this wonderful opportunity, in 1968, to do something imaginative about savings and to adopt a new approach to encourage new savings.
    The philosophy and reasoning behind the new Clauses—and particularly new Clause 25—is that they will provide an imaginative approach. Far from introducing a new approach, the Finance Bill generally introduces disincentives to saving by the investment levy, the aggregation of children's unearned income, and the tighter rules—
    Mr. Speaker: Order. The hon. Member is getting wide of what is a fairly wide debate.
    Mr. Baker: I appreciate your Ruling, Mr. Speaker. I was making the point that the Government are not very sympathetic to this issue. They have introduced disincentives. They have done nothing to hack away the disincentives which already exist. The most important of these is the distinction which still exists between earned income and unearned income and I should like to see this distinction removed and unearned income called savings income.
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    I commend new Clause 25 to the House for four specific reasons. First, it will bring in new savings, thus tapping a market which generally has not been tapped before in an effective and imaginative way. Secondly, the scheme is voluntary. Thirdly, it introduces an employer/ employee relationship such as that which exists in pension schemes operating in most companies. Fourthly, it will encourage capital formation, and this is a desirable end to all taxation. There is not enough formation of capital in this country.
    Indeed, the redistribution of income is taking far too long. I agree with that politician who said:
    "As a general rule, nobody has money who ought to have it."
    I am glad that two hon. Gentlemen opposite agree with what I think is one of the better aphorisms of Benjamin Disraeli.
    I ask my hon. Friend the Member for Harrow, Central (Mr. Grant) to change the name "thrift scheme". Thrift is an old-fashioned word. Its synonyms are meagre, unlavish, cheeseparing and self-denial, and anybody who wants to sell a new exciting scheme will not do it with the name "thrift". We want "Savings with Profits", and ideas like that.
    I believe the case has been argued most strongly that we should have a scheme of that sort. I believe that what, in effect, is the American scheme would be most useful, and I hope that the Chancellor will consider it sympathetically.
    Mr. Roy Jenkins: Without wishing to bring the debate to a close, I wonder whether I might be permitted to intervene for a short time at this stage. The hon. Member for Harrow, Central (Mr. Grant) and others have raised a most important subject, and I am, therefore, anxious to say a few words in reply.
    We have had a fairly wide-ranging discussion, not perhaps, under your guidance, Mr. Speaker, as wide-ranging as some hon. Gentlemen would have liked, but, nevertheless, wide-ranging and useful, and I think there has been a considerable degree of consensus between us about the desire to stimulate savings. I attach the greatest possible importance to savings, for any Chancellor who did not do so would be extremely foolish. I assure

    1379
    the hon. Member for Antrim, North (Mr. Henry Clark) that I regard the present circumstances as making the later Keynes a good deal more appropriate than the middle Keynes, both of which he quoted.
    The methods and techniques for achieving these objects are, I think, an extremely valuable subject for study and debate in the House. I do not think that any one can claim to have found answers of complete validity in the changing social and economic climate in which these have to be viewed. They are problems which have faced every Government in this country in the post-war era, and the Governments of every developed and developing country encounter similar difficulties in stimulating and maintaining a high level of voluntary personal saving.
    Inevitably, therefore, one has to begin any survey of the possibilities in this field by defining some of the limits of what is fair and practical, and what is relevant to the economic circumstances of today and the next few years.
    Nor do I think, even though I attach great importance to savings, that one can really take the view, as the hon. Member for the Cities of London and Westminster (Mr. John Smith) seemed almost to be suggesting towards the end of his speech, that savings can be a substitute for taxation. He spoke almost as though I could have done the whole job by savings. I do not think that that can be held, and I do not think that any of my predecessors—of either party—when confronted with the problem of managing the economy felt able to rely on savings. If they had done so there would not have been increases in taxation in 1952, 1955, and in many other years.
    But that in no way minimses the importance of the subject. What I think is clear is that what is wanted is net additional personal saving on top of the present effort. There is no national gain or real encouragement to new savings in schemes which merely induce a switch of savings out of some channel into others with all the wasteful by-products of competitive rate-bidding and excessive handling of transactions. Thus attention increasingly focuses on new ideas to satisfy what appear to be gaps in the present range of inducements to save; the pre occupation with some kind of taxation help as in the new Clauses we
    1380
    have been discussing; the searching after new forms of contractual saving which build on the self-generating impulse after an initial commitment; and also the natural concern to guard against changing money values.
    I dealt with the last of those points, changing money values—in its most extreme form a safeguard would be an index-linked Government security—in my Budget speech. I indicated that I had considered this possibility, and, indeed, that I had considered the possibility of some "save-as-you-earn" scheme related somewhat to the basis of the old postwar credit scheme, but I found the existence of post-war credits unredeemed after 25 years an inescapable obstacle in the path of proceeding in this direction.
    I do not under-estimate the strength of feeling which lies behind the idea of the index-linked Government security or the genuine concern for the personal saver's welfare which inspires it, but the obstacle, to which I referred in my Budget speech—the virtual impossibility of limiting the repercussions throughout the whole fixed interest market of introducing such a security—seems to be insurmountable. If hon. Members will study the experience of other countries in this respect, and the recent experience of one of the O.E.C.D. committees in its works on capital markets, they will see that there is a good deal of support for this view.
    Stimulating savings through special tax concessions also attracts people, although it attracts Chancellors somewhat more when out of office than in office, because real difficulties are involved. It is very difficult to find ways of doing this which would be fair and would guarantee real additional saving, and would avoid a substantial loss of revenue beyond the limited arrangements which have been part of our tax system for many years.
    I do not regard it as the last word on the matter, but the Royal Commission on Taxation had a good deal to say on this in Chapter 3 of its final Report. Aside from the major problems of principle there are serious practical obstacles in the way of operating savings schemes which depend on tax relief for the contributions.
    I suppose that no tax problem of this sort is completely insurmountable. I

    1381
    forget which Member opposite took up the point made by my hon. Friend the Member for Heywood and Royton (Mr. Barnett)—I believe that it was the hon. Member for Orpington (Mr. Lubbock)— that one should not adopt the attitude of saying that because something has not been done it can never be done. Equally, however, it would be very irresponsible for any Chancellor not to have regard to the extreme complications and burdens of work which might be placed on the Revenue.
    Mr. Henry Clark: I have followed the right hon. Gentleman's argument with some interest. I should like to know why his arguments do not apply to the £160 million a year in tax rebates on life insurance and pension funds. Is he thinking of abolishing them in his next Budget?
    Mr. Jenkins: I do not propose to do that. The fact that we have one somewhat complicated scheme to operate is not necessarily a reason for saying that the Revenue can take another in its stride.
    I would point out to the hon. Member for Orpington that it is not a sound argument to say that since the Revenue was able to deal with natural fluctuations in income and earnings from week to week or month to month by means of P.A.Y.E. it should be able to deal with the problems of saving schemes based on tax relief. I have been into this matter because the same thought occurred to me, but I can assure the hon. Member that there are considerably greater problems involved in coping with a scheme geared to tax reliefs than are involved in coping with fluctuations in earnings. I am not saying that it could not be done in any circumstances; I am saying that the fact that P.A.Y.E. can cope with wage fluctuations because the tables are so designed does not mean that it can cope with other schemes in the same way.
    There is a more limited area within this broad field which could well merit further study as other Government policies develop. In particular, I have it in mind that when the Government's proposals for earnings-related State pensions have proceeded a stage further there could well be scope for the clarification and simplification of tax rules affecting other super-
    1382
    annuation schemes. I had already asked for a review of this subject, and I am not without hope that when we clarify pension fund arrangements there could be opportunities to improve upon the present inducements for such saving.
    Consideration of saving through insurance and pension fund schemes leads on to thinking about other possibilities of harnessing new inducements to other contractual forms of saving. I agree that there is a potential source of new saving in the shorter-term scheme which offers high rewards for those who pay their contributions by deductions from pay. The National Savings Movement has operated in this field for many years with its group savings schemes. Gross national savings in its industrial groups last year were £158 million, and about 2¾ million members participated. We all want this kind of scheme to continue to thrive for the benefit of those whom it suits best.
    The C.B.I. has produced some proposals for a new contractual savings scheme and I welcome this reaffirmation that employers are prepared to support and assist in practical ways the provision of good savings facilities for employees. The Government will be discussing with the C.B.I. and T.U.C. some of the new features of contractual savings schemes which are urged upon the Government, including those provided for in the new Clauses which we are considering.
    6.45 p.m.
    Some of these schemes are bound to present their own difficulties on close examination. It will be clear from what I have already said that the idea of tax relief on contributions to a scheme presents practical difficulties, as well as being open to objections of principle. For these reasons—I do not think that this will be a surprise to hon. Members, because they have indicated quite fairly that the Opposition Clauses were a sounding board and could not be regarded as completely final schemes—I shall have to advise the House not to accept the new Clause in the name of the right hon. Member for Enfield, West (Mr. Iain Macleod), which was moved by the hon. Member for Harrow, Central, or the new Clause standing in the names of the hon. Member for Colne Valley (Mr. Richard Wainwright) and the hon. Member for St. Ives (Mr. Nott).

    1383
    The new Clause standing in the name of the hon. Member for Antrim, North is rather different—not that I shall advise the House to accept it. It is different in that it proposes an extension of age relief on unearned incomes. It is not confined to people earning modest incomes; indeed, it would give the greatest benefit to Surtax payers. I doubt whether this would have much relevance to the sort of savings that we are discussing, and it would be a very expensive inducement —costing the Revenue not £20 million but about £80 million a year. In these circumstances I have no hesitation in advising the House to reject this new Clause.
    But there is scope for a new development in contractual savings, and I am having the possibilities re-examined as a matter of urgency. What I have in mind as a starting point is a scheme specially geared to the needs of employees, with all the advantages of deductions from pay at source. I feel that generous terms, perhaps with a tax-free yield, linked to an unbreakable contract to save regularly for a minimum period, are worth examining as a means of tapping a new source of money on terms which could be justified having regard to the firm commitment and the ease of handling.
    Obviously, a great deal of detailed work must be done on this. The hon. Member for the Cities of London and Westminster (Mr. John Smith) asked me if I were open to receiving advice. I am —from him or anyone else. I look forward to the co-operation of the many representative bodies in the savings world who would wish to be associated with the Government's study. I cannot commit the Government at this stage to introduce a scheme, still less to fix a date for its starting, but since I have to ask the House to reject these Clauses I have thought it right to indicate the directions of my thinking and the specific areas of work which I have commissioned. I hope to be able to report further to the House on some of these in the new year.
    Mr. Edward Du Cann: The right hon. Gentleman has been good enough to tell the House that he is conducting a full investigation of this matter. This has been listened to with gratification by all who are interested, especially those with a personal interest
    1384
    in the National Savings Movement. Will the right hon. Gentleman undertake to incorporate in the review everything that is happening—especially in respect of employees—in United States and Germany as well as in connection with proposals in the United Kingdom?
    Mr. Jenkins: Yes. Wherever it is relevant I am most anxious to have the full benefit of the experience of these two countries, as well as many other countries.
    I am aware that I have not been able to announce any further dramatic new advance to the House. I also remind the House that many of my predecessors from the other side have studied this problem over a very long period without arriving at a dramatic new advance. I believe that it needs sympathetic and intensive study, and that I propose to give it. I hope that I have said enough to show that I attach very great importance to this subject.
    Mr. Iain Macleod: I follow the Chancellor only because it will be convenient for the House that the contributions from the Front Bench should be consecutive. This has been an excellent debate. I am sure that many of my hon. Friends wish to contribute to it, but I will quite understand if the Chancellor, who, of course, is a busy man, is not able to stay for the whole debate.
    We are grateful to my hon. Friend the Member for Harrow, Central (Mr. Grant) for initiating the debate and for the work that he has put in on new Clause 25, which is the first of the four which we are discussing. Almost everybody has a scheme for the increase of savings. There is new Clause 25, which is the child, basically, of my hon. Friend the Member for Harrow, Central; there is the Liberal scheme; there is the scheme of my hon. Friend the Member for St. Ives (Mr. Nott); there is the C.B.I. scheme; there is the scheme to which I am particularly attached, which was mentioned by the hon. Member for Heywood and Royton (Mr. Barnett), which is based on a S.A.Y.E. policy, save-as-you-earn. It seems that everybody has a scheme except the Government, although it is, I suppose, something that the Chancellor has said that he is thinking about having one.

    1385
    I remember very well an anniversary meeting of the National Savings Movement, held a year or so ago at Guildhall, which I attended with the Chancellor's predecessor, the present Home Secretary. We both made speeches. The theme of the Home Secretary's speech was the theme of more savings, less tax, which came from his Budget speech. That is an admirable principle, only slightly spoiled by the fact that we have the exact reverse under the present Administration. We have, in fact, more tax and less savings.
    The Chancellor would, I think, agree that the urgency of the present search for new methods of savings is very much pointed by the fact—and that is why we have these four Clauses for discussion now—that there can be little doubt that, partly with the increasing sophistication of people, the traditional methods of saving are less and less automatic and, perhaps, less and less productive. There can be little doubt that what has been called the "spending spree" has been largely financed by the drawing-down of savings. There is little doubt that the flight from money in one way or another is gathering pace. I find it almost impossible to reconcile what I read yesterday in the Board of Trade returns with what I know to be the facts about consumer spending at the present time. But that is a digression, and I will return to the four Clauses, particularly Clause 25.
    We have all paid tribute in our day, and quite rightly, to the excellent work of the National Savings Movement, splendidly led and splendidly staffed by volunteers at all levels. Nothing which I have to say in any way derogates from that, but I feel that some methods of national savings are becoming a little outdated. I find the advertising humdrum, in fact rather dreary, and the concept is less exciting than it used to be. As the House knows, my hobby horse, the S.A.Y.E. scheme, is based on what has been called the habit of saving.
    The Chancellor said a few moments ago, and he is quite right, that what we want, and what these Clauses are designed to achieve, is net additional new savings. I think that he is wrong, however, to link the efforts which are being made in any way with the failure, as many people would regard it, looking back, of the post-war credit scheme. I see no reason
    1386
    why he should do this and no link between the two, for the obvious reason that the post-war credit scheme was compulsory, whereas I do not suggest, and none of these forms suggests, compulsory savings. This objection of the Chancellor's, which I fully understand in relation to a compulsory form of saving, is not relevant to most speeches which have been made today.
    The really big money available, if it could be tapped through a thrift plan or in some other way, is the regular comparatively small savings from an enormous number of people, rather than the present tendency and the past tendency of Chancellors for a long time, of trying to encourage comparatively small extra amounts from few people by offering them inducements to switch. It is a thoroughly desirable part of the hunt for new savings that there should be some excitement attached to the savings, that there should be a chance of appreciation of the amounts invested, and this becomes important as the investor becomes more sophisticated.
    It seems clear from the debate that the other side of the House, particularly the Chancellor and the hon. Member for Heywood and Royton, have been obsessed with the difficulties, whereas the speakers from the Liberal benches and from these benches have been interested in the opportunities put forward by the various schemes. I do not for a moment underestimate the difficulties. I have done quite a lot of work on this, and even outside the Government machine I can see many of the difficulties. I have the feeling that the right answer is the Churchillian one, "Do not argue the difficulties. The difficulties will argue for themselves."
    If it is made clear that this is what will be done, I do not believe for a moment that the difficulties will be insuperable. My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) was quite right; it was a failure of the Budget, and it has been one of our main criticisms of the Budget, that, on balance, it was anti-saving. That is why there is a vital need for such a Clause as is before the House.
    We suggest in the four Clauses—and I am linking the Liberal Clause with them —that we should learn from the experience of other countries. The Liberal Party points to West Germany; new

    1387
    Clause 25 points to the experience of the United States. When we have learned from other countries, we should put in our own experience, which is not inconsiderable, and we should do a great deal of work on it. The Conservative Party has already produced a pamphlet of one possible method of saving, and we are in advance of the Chancellor in the work he is doing here.
    Making allowance for the difficulties, which I recognise, and for the problems which he outlined to the House, I found the right hon. Gentleman's response to these imaginative proposals unhappily negative. For the reasons I have given, I regard this as an important debate, and I hope that it does not end until hon. Members who wish to speak have contributed to it, but in due course I suggest to my hon. Friend the Member for Harrow, Central that we would be right to carry out dissatisfaction, not with the ultimate intentions of the Chancellor, but simply at the snail-like progress which he is making on this topic, in to the Division Lobby when the time comes.
    7.0 p.m.
    Mr. Geoffrey Hirst: I am sorry that the Chancellor has to leave. I appreciate that he is a busy man. However, I take the view that when the Finance Bill is discussed on the Floor of the House for only four or five days, a Chancellor of the Exchequer should not deny himself the opportunity of hearing the views of back-bench hon. Members. But I have every faith in the Financial Secretary, who is very attendant on the House.
    I join my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) in disappointment at the right hon. Gentleman's approach to the subject. It is surprising that there is not already a Government solution along these lines. Equally, I am frightened when I hear him speaking about post-war credits, and so on, although it may not mean anything except that something is wrong with his thinking. Certainly, it has no relevance.
    It is not often that I agree with the hon. Member for Orpington (Mr. Lubbock), and I am rather frightened at the suggestion that I may. However, I agree with him today when he says that we need a new, radical approach to the sub-
    1388
    ject of savings. No one can doubt that there is a big awareness in people's minds that they have to protect themselves as never before from the fall in the value of money. There is no shadow of doubt about that, whatever is done, and much has been done by the National Savings Movement. But that will not be repeated. Therefore, we must think anew. The Chancellor clearly is not thinking anew, and that is our objection. He must think anew, as must the whole Treasury.
    It is no good arguing about the difficulties. I was shocked by the speech of the hon. Member for Heywood and Royton (Mr. Barnett), who generally enters our debates with rather more imagination than he displayed today. If we make up our minds to do something, my experience in the House has been that the Treasury finds the answer. It is for the Government to satisfy themselves that a new radical approach to savings is required and that it has to be along certain lines. Once a policy decision is taken to that effect, somehow or other the officials behind the scenes will find a way. After all, they have found ways to some dreadful policies in my time, and this is a simple matter by comparison.
    We are not satisfied that the Chancellor's mind is up to date and that he is conscious of the way that people are thinking. If we are to get this completely new approach to saving, it is no use our making up our minds in a vacuum simply because the Treasury suggests it or a Royal Commission thinks that it is a good idea. We have to realise what it is that the people want. They want to be protected against the fall in the value of money, and a scheme which does not take that into consideration is a waste of time.
    It is along those lines that the C.B.I. was thinking. I was on the committee of that body which devised its scheme. I do not agree with it all, but I think that the idea behind it is right. But where are the Government in this matter? As my right hon. Friend has said, everyone has a scheme except the Government, and that is what makes us nervous. I am sure that the Financial Secretary is conscious of that feeling in the House today. He realises the vast importance of it.
    If the Government got out some sort of scheme of their own, they could protect the nation from the further inroads

    1389
    of taxation which we shall see again whether this miserable Government remain in office much longer. We have to take this very important factor into consideration. I sincerely hope that the Government will now do some rapid thinking and realise that they have to get a new level of savings from people who are making fairly good money and who want a simple scheme available. It would be possible to sell a scheme where savings were made as on earned on a contractual basis, and I will not be put off by the argument that it would make the P.A.Y.E. card difficult. If it gets as difficult as all that, we must bring out a system to replace it.
    If we are to correct the present situation in the country, and encourage people to greater effort, we must get away from the idea of damning with taxation and, instead, devise a scheme of savings which maintains the value of money. Let us have some up-to-date thinking instead of the old bureaucratic line of thought, and let us have some sense.
    Captain Walter Elliot: I find it depressing to speak in support of a victim whose head has been cut off, but, if it is depressing for me, I am certain that this lack of a dynamic approach by the Chancellor to national savings will be infinitely more depressing for the country.
    Naturally, when the Chancellor speaks about tax concessions and what he considers might be a substantial loss in revenue as a result, one must respect what he says. But, just as a small influx of money into a business at the right time leads to results out of all comparison to the size of the sum of money, small concessions in certain areas of savings would lead to results out of all proportion to the costs.
    I want to speak in support of the scheme in new Clause 91, which was touched on by my hon. Friend the Member for Antrim, North (Mr. Henry Clark). I am sure that the Treasury Bench would be the first to agree that one of our great troubles even today is a consumer boom. I imagine that, in the last six or eight months, the Treasury has probably thought about little else. However, I do not believe that the problem should be looked at in the narrow sense. We should look further than the
    1390
    pre-Budget boom, further than a boom from one quarter to another, and even further than a boom from one year to the next. The situation has to be looked at in a much wider sense.
    The Chancellor referred in his Budget speech to the fact that we consume too great a proportion of our gross national product, with the result that not enough is exported and there is insufficient capital investment. As a result, we have resorted to what seem desperate and temporary measures by successive Chancellors to curb the spending boom. Socialist Chancellors especially have relied heavily on the tax weapon. I saw today, if the Chancellor was reported correctly in the Press, that he said that we have just about reached the limit of taxation in this country. I think that he is right.
    As well as the tax weapon, we have seen various financial inducements to persuade companies to invest more and to retain their earnings. But these are palliatives only. We need a massive re-orientation in the habits of the nation towards thrift and the saving of money. This is an extremely difficult task.
    Ever since the war, Government policies have tended to weaken the habit of thrift. In earlier decades the fear of poverty in old age was a spur to thrift. With the development of social services, this has been mitigated, and probably that is all to the good. Many services are now free and that leaves resources with which people can buy consumer goods. The development of hire purchase for all ages, along with high-pressure advertising, has greatly increased the pressure on people to buy goods and something must be done to counteract it. We must buttress and foster thrift to weaken the pressures to consume.
    In spite of the change in our habits and the development of social services, I am convinced that the urge to save for retirement or old age is extremely strong. Time and again, when I have been trying to arrange for supplementary pensions for elderly people—I am sure that other hon. Members have had this experience —I have been stopped, understandably enough, by the firm and ingrained desire of people to hold on to and preserve the small amount of capital which they have

    1391
    managed to save and which gives independence and security far more than any State system.
    This desire to save for old age must be encouraged. It is highly desirable for the nation and the individual. If it can be developed, it will lessen the burden of taxation, decrease consumption of goods, make room for exports and assist investment. New Clause 91 is a beginning. It is simple, people will understand it and it will encourage the small man to save, which, I believe, is what we want.
    It was most disappointing to hear the Chancellor enumerate all the difficulties against allowing the Clause. Of course there are difficulties. The Clause may need rewording and the limit may have to be altered, but that is nothing which the Treasury cannot overcome. I am sorry that the right hon. Gentleman has turned it down and I hope that, in the time ahead, the Government will seriously consider incorporating it in the next Finance Bill.
    Sir G. Nabarro: The new Clause with which we are primarily concerned is No. 25, to which my name has been added as fourth on the list,. after those of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), my right hon. Friend the Member for Taunton (Mr. du Cann) and my hon. Friend the Member for Harrow, Central (Mr. Grant), and I have waited for 2½ hours, Mr. Deputy Speaker, to catch your eye or that of your predecessor. Of course, I had not hoped to speak after the Chancellor but before him. I have now torn up what I was going to say and will confine myself to his statement.
    I alluded in an intervention in the speech of my hon. Friend the Member for Acton (Mr. Kenneth Baker) to the indissoluble link between savings and taxation. The Chancellor referred to taxation, and savings in the context of taxation, and it was that part of his statement which caused me the greatest disappointment. I am much closer to my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) than I am to the Chancellor. This evening, we have heard a further fragment of "The emerging Tax Philosophy of Mr. Jenkins"—
    Mr. Speaker: Order.
    Sir G. Nabarro: I will finish my sentence, Mr. Speaker.
    —as an appendix to the leading feature contribution to the Financial Times under that title on 9th April last. So you can see, Mr. Speaker, that I am absolutely in order.
    I have been awaiting this savings fragment to complete "The emerging Tax Philosophy of Mr. Jenkins"—to quote again the article in the Financial Times— in the special context of savings, for the important reason that every chancellor since the late Sir Stafford Cripps has, at one time or another—generally in the country, rarely in the House—alluded to the fact that he could take less in taxation if he could secure more in personal savings. That was the policy of the late Sir Stafford Cripps when Chancellor, of the late Mr. Gaitskell when Chancellor, of Lord Butler when Chancellor, of Mr. Harold Macmillan when Chancellor, of Lord Thorneycroft when Chancellor, of Mr. Heathcoat Amory when Chancellor, of my right hon. and learned Friend the Member for The Wirral (Mr. Selwyn Lloyd) when Chancellor and of my right hon. Friend the Member for Barnet (Mr. Maudling) when Chancellor.
    It was the policy of the present Home Secretary when Chancellor—[Interruption.] Does the Financial Secretary to the Treasury wish to intervene? What he murmured—sotto voce, but my hearing is acute—was that it is the policy of the present Chancellor—
    Mr. Harold Lever Mr. Harold Lever indicated assent.
    Sir G. Nabarro: But it is not—
    Mr. Lever: Yes it is.
    7.15 p.m.
    Sir G. Nabarro: But I say that it is not. Manifestly, it is not his policy, because the present Chancellor said today that of course he could not raise the large extra sums of taxation which he deemed necessary in this Budget by savings as an alternative to taxes. No one ever suggested that he could. No hon. Member would suggest that £939 million, being the added burden of taxation in this Budget, could be raised by additional savings alone, but a substantial part of it could have been.

    1393
    What the Chancellor should have done in the Budget was reduce direct taxes as an incentive and offset the fall in revenue by an increase in personal savings with powerful incentives provided to attract those personal savings. This is not a new concept. The Chancellor did not embrace it this evening, although the Financial Secretary says that he did. I listened to his speech: he did not embrace it. When the Financial Secretary reads it tomorrow morning, he will recognise that I am right and he is wrong.
    I said it much more unequivocally in 1966, and this quotation, in the context of savings, allows of no possible misunderstanding. I said:
    "The Chancellor will spring to the defence of his Budget proposals this year, and will say that he cannot afford reduction of the standard rate of 8s. 3d. in the £ to 7s. 6d. He will say that he cannot afford a reduction in the revenue of £240 million. But the same Chancellor of the Exchequer and all his predecessors for years and years past have stumped the country saying, ' Give me National Savings and I will abate tax revenue by an equivalent sum'. Every Chancellor, the present Chancellor included, makes dynamic speeches in support of personal savings and National Savings and says, 'If I can get an increase in National Savings it is as good to me as tax revenue'."—[OFFICIAL REPORT, 20th June 1966; Vol. 730, c. 61.]
    The Chancellor this year has made no attempt to do that, although he averred half-heartedly his support for the principle this, evening. The reason that he has made no attempt to do it is, I suppose, that he knows that he could not succeed on the scale that he would have preferred to achieve had he substituted savings for taxes—I mean by that a figure of £300 million or £400 million from additional personal savings of all kinds, and the money surely is there to be saved if the incentives are provided and the attractions offered.
    I added my name to this new Clause largely because the name of my right hon. Friend the Member for Taunton was on it. No one in the field of unit trusts has a record to compare with his for tremendous success in attracting new savings. It is an alternative to National Savings. In May, 1968, alone, £28 million of new money was invested in unit trusts. In two short years, between 1966 and 1968, the aggregation of sums vested in unit trusts; has grown from £600 million to more than £1,000 million. Investment
    1394
    in unit trusts is increasing at the rate of more than £200 million of new savings every year. The National Savings Movement cannot hold a candle to it.
    I urge hon. Members to study the comparative results of national savings, and I repeat this in the context of what my right hon. Friend the Member for Enfield, West said about the unattractiveness of National Savings today. In 1964–65, the last year of Tory government, £195 million was the increase in National Savings. In the first year of Labour Government that was transposed to a deficit in national savings of £54 million✶ so that in one year the change-over from a surplus of £195 million to a deficit of £54 million represented a change-over of no less than £249 million.
    The next year, 1966, National Savings broke even and in 1967 they showed a modest surplus of £80 million. That compares with the present rate of increase in the aggression of unit trusts of more than £200 million per annum. Surely these figures demonstrate that there is something gravely wrong with the condition of National Savings today and with the incentives offered to attract new national savings.
    That is the major point I wish to make. Shortly, it is that unless we have a scheme of the kind enshrined in new Clause 25 we will not attract new savings. Only through the medium of a scheme of this sort can we match the attractiveness that the unit trusts offer—that attractiveness which proliferates in the national and Sunday newspapers, offering, for example, life assurance with a saving of a few pounds per month, all sorts of attractive benefits for children's savings and the rest, few of which are matched by the National Savings Movement.
    The Chancellor rubbed along in an unattractive, pedantic way about tax incentives for savings when he should have told the House that there are admirable precedents for giving such incentives. Lest he has forgotten them, I remind the Financial Secretary of at least three of them. For many years we had a system of allowing relief of Income Tax at the rate of 3s. 6d. in £, with a maximum of one-sixth of the annual income of any saver, through life assurance schemes✶ a tax relief for small savings linked to life assurance.

    1395
    My second example, brought in by a Tory Chancellor about 10 years ago in response to pressure from my hon. Friends and myself: the first £15 of annual interest in the National Savings Bank would go tax-free, and at a flat rate of 2½ per cent. interest, that would mean a capital vested of £600. In other words, tax on the interest derived from a capital sum of £600 is tax-free as an incentive to small savers, in the National Savings Bank.
    The third example is, of course, in the form of National Savings Certificates, which are free of tax on the interest accrued, but not only for the initial published life of the certificate. For example, we have the tenth issue, of which millions are held today, but not encashed. These aggregate more and more interest year by year, though on a reduced scale, and all tax free.
    These are just three examples of tax incentives for savings. It is, therefore, ridiculous for the Chancellor to say that he cannot evolve a comparable scheme for tax-free contractual small savings through the machinery of P.A.Y.E., all of which could be operated on tax tables and by company accountants who are thoroughly skilled in these operations.
    Does the Chancellor genuinely desire new capital formation in this country to be created by the orthodox method, the correct method, of resting on the aggregation of personal and corporate savings? That is how new capital formation should be created. I do not believe that we can ever save sufficient capital sums unless we are prepared to embark on contractual savings schemes of the kind enshrined in new Clause 25.
    Last night the House of Commons behaved splendidly. It threw out Clause 50 of the Bill. In one of the final speeches in that debate I said that gambling was running at an excessive rate in this country because taxation was excessively high. I add to what I said then, in the context of savings, that National Savings in Britain are debilitated today, because of the excessive level of direct and indirect taxation.
    I prefer savings to taxes. I prefer contractual savings of the kind suggested in new Clause 25 to sporadic savings, which are much less valuable to the Treasury. It is for all these reasons that I castigate
    1396
    the Chancellor for his speech tonight, a speech which was obscurantist in character and feeble in the note it struck when he should have been bold and decisive in appealing to the nation for far larger savings, all of which are vitally necessary to our national economy in its present predicament.
    I am delighted that my right hon. Friend the Member for Enfield, West asked me to vote with him tonight.
    Sir Douglas Glover: Bully for Gerald!
    Sir G. Nabarro: It is all very well for my hon. Friend to say bully for me, but I am only too delighted to walk into the Lobby with my right hon. Friend. Although I have often quarrelled with him on matters of fiscal minutae, I have great respect for his financial and fiscal philosophies. The House might be interested in a quotation from an article written by right hon. Friend, gathered from my encyclopaedic file of his utterances, a file which is collated by my researchers. Writing in the Sunday Telegraph on 30th July, 1967—I quote his words because they are most apposite to the debate—he said:
    "I want to see a capital-owning democracy and I want to see an economy of choice. The phrases are mine, but each has a political parent. A capital-owning democracy complements Sir Anthony Eden's aim of a property-owning democracy. If today you start with wealth it is not difficult to keep it. If you start with nothing our present levels of taxation mean that even the ablest salaried man cannot acquire a modest competence."
    I congratulate my right hon. Friend. When he is Chancellor—a time which I hope will not be long delayed—I will call on him to implement those words and put into practice the principles which he has given to the House tonight, all of which I will shortly support in the Lobby.
    7.30 p.m.
    Sir Henry d'Avigdor-Goldsmid: My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) began his memorable remarks with the information that he had already torn up his speech, so presumably his notes were thrust into his hands during that moment when he absented himself after the Chancellor of the Exchequer had spoken.
    I am glad that his research department worked with such skill and speed.

    1397
    It was, perhaps, a skill and speed like that of the great Lord Birkenhead. He went further. When the great Lord Birkenhead taxed the Chancellor of the Exchequer of the day, then Mr. Lloyd George, with some words which Lloyd George denied having spoken, Lord Birkenhead said, "I had anticipated that —a lapse of memory. I have here a copy of the appropriate newspaper". Perhaps my hon. Friend has said, "I anticipate not being called, so I have here an alternative speech". Whether it was his first, second or third speech his was a very fine performance.
    On the very important subject of savings, altogether different points are at issue. One is the requirement of the Government to borrow from their citizens. It is clear that this requirement cannot be made today without some element of fiscal privilege in those who lend to the Government. This is a fact that the Treasury must now accept and absorb. I confess that I had not intended to speak at this stage, but I do so because I was so disenchanted by the Chancellor of the Exchequer's remarks. His was the kind of speech that could have been made from the Treasury Bench at any time during the last 20 years, yet even the most ignorant student of current affairs must realise that times have changed during the last 20 years, and that the Government, as borrowers, are now meeting very severe competition.
    The great mass of people are inclined to save. What worries them very much is to think that what they save is being eroded through no fault of their own. Where we have gone wrong so often has been that in trying to attract new savings all we have done has been to invite people who have money to change from one form of security to another.
    The important thing is to attract the new saver, which is exactly the purpose of the new Clause. But I believe that there is an alternative to giving him a fiscal advantage. The new saver, and I speak only of the new saver, should be given a built-in insurance against inflation. He should not necessarily be given a righ rate of interest—probably a low rate of interest—but a guaranteed assurance that his interest moves with the changes in the cost of living.
    1398
    There is no question that that would attract new saving. It is, very clearly, not practicable to extend that assurance to the entire field of savings at present, but to get the new saver in is the most important contribution that can be made in the coming 12 months, because we see a situation today where the entire fixed-interest market of the country is crumbling.
    Why is it crumbling? It is crumbling because, as the Financial Secretary very well knows, every person who has money in fixed interest is saying to himself, "What will my position be next week? What will my position be next month?" I do not believe that all our constituents spend their time reading the Financial Times—I do not think that basically they want to bother with these things— but they like to feel that what they put into the savings bank will be there when they need it.
    At the same time, I do not see that there is any special national interest involved in making it cheap and attractive for people to invest their money in various forms of speculative enterprise— some of it more speculative and some of it less—but this is something that people go into because they regard it as a means of protecting their funds. We really must apply ourselves to the question of protecting the funds of the individual.
    We have been a great deal too light-hearted in our approach to this subject over the years—and I do not think that either side can be free of that charge— and now we see where that light-hearted-ness has got us. As the Financial Secretary very clearly recognises, there is such a very large amount of money still in Government fixed-interest stocks which, theoretically, is free to come out at any moment, that if there were any real dissaving movement, a movement from fixed-interest stocks in a big way— because what we have seen so far is relatively small and unimportant—the consequences to Government credit would be disastrous.
    The only way in which the Govern-men can remedy this state of things is to accept the principle that they need the people's savings and must offer the people some form of fiscal attraction to induce them to part with their savings. I suggest that the small new saver should be

    1399
    rewarded with a built-in guarantee against inflation.
    I believe, as my right hon. Friend the Member for Flint, West (Mr. Birch) has urged in the past, that the case of the large investor might broadly be met by exempting from Capital Gains Tax transactions in the fixed interest market. I do not pursue that point now, because it only relatively affects the position. I am glad to have the opportunity this evening to support this Clause and, particularly, with my hon. and right hon Friends to mark my dispproval of the attitude of the Treasury which, like Casabianca, remains on the burning deck of the fixed interest market whence all but it has fled.
    Mr. du Cann: I had not intended to intervene, because I knew my hon. Friend the Member for Harrow, Central (Mr. Grant) would make so admirable a speech in this sector of our ideas where he has spent so much time and constructive thought that it would not be necessary for any of us to support him at all. On the other hand, I was a little shocked by what the Chancellor of the Exchequer said, and I feel that some of his comments merit some form of reply.
    I must declare an interest, although it is an interest well known to the House, and this is about the ninth time that I have declared it. I am chairman of the unit trust group which I founded about 11 years ago.
    The Chancellor of the Exchequer said that he did not wish to put himself in a position in which he was obliged to rely 100 per cent. upon an increase in savings, but no one has ever asked him to do that, or suggested that such a course would be realistic. The fact is that by his actions, or rather by his lack of actions, he relies not at all on savings at the present time. It is with that attitude and that view that we on this side substantially quarrel.
    The right hon. Gentleman said that he wanted to find ways of producing a net addition to personal savings. With that view we would all precisely agree. On the other hand, it seems to be entirely outside the right hon. Gentleman's understanding that with taxation at its present high levels, and the complications of the present tax system, it is inevitable that there will be a substantial degree of switching; and nothing en-
    1400
    courages switching more than marginal improvements in the rates of certain of the securities issued, with the approval of the Chancellor of the Exchequer, by the National Savings Committee. In other words, I accuse the right hon. Gentleman of encouraging people of switching savings, and of creating just that volume of work which he stated it was his intention to avoid.
    Thirdly, the right hon. Gentleman said that he wished to avoid losses of taxation. Again, none of us would quarrel with that. On the other hand, again the matters of which I have spoken lead almost inevitably to this process. In his speech I had hoped and expected to listen to an intellectual argument which would refute my hon. Friend's new Clause and the speeches made in support of it. The disappointment of this debate was the commonplace nature of the Chancellor's reply. I regret having to say this. It was a betrayal of his intellectual capacity and an insult to all who have laboured constructively in this field for many years.
    The Chancellor said that he and the Treasury were undertaking a wide-ranging review. The Acton Society Trust results were published many years ago emphasising the need for interest in contractual savings, a point with which my hon. Friend the Member for Harrow, Central is particularly concerned. All the evidence of public demand is available, and has been available for many years. There is no need for a review in that regard.
    As to a review of new possibilities in future, I beg the Financial Secretary— for whose understanding of these matters I have the highest regard, as does the whole House—to bear in mind that it is not only a matter of finding new methods, but a question of looking at the situation as it already exists. It is the duty of the Treasury not only to facilitate the new suggestions made from time to time, but existing savings media and to remove disabilities from them.
    Many of us have argued in different ways and at different times that those disabilities are enormous. It will be within your recollection, Mr. Speaker, that the Chancellor said that he wished to avoid complication of any sort, but I am one who, year after year, has badgered the Treasury to do something about

    1401
    the incidence of Capital Gains Tax on exactly the sort of contractual schemes we are discussing. It is well known that many small investors, by banking orders, subscribe small amounts of money—10s., £1, or £2—for purchase of shares in unit trust savings schemes. This, over a period of years, may involve several hundred transactions. In each and every one the Capital Gains incidence has to be separately assessed. If ever there were an absurd labour on behalf of individuals and the Inland Revenue, surely this is it.
    I quote one example to show that there is a substantial need to look at the existing situation and to remove the disabilities affecting those whose purpose to encourage savings at present I hope, entirely innocent and meritorious. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), speaking with the knowledge so characteristic of him, has referred to the subject of gilt-edged. In Committee, we discussed, gilt-edged. We had no comment from the Chancellor this afternoon that income from gilt-edged is currently regarded as unfranked income, a second example of disability. There is much that various savings media could do to encourage a new popular investment in gilt-edged if this silly disability were removed.
    It would be possible easily to give a catalogue, a lengthy catalogue, of disabilities which could be removed and thus providing an impetus to the existing sources of savings. I have given two examples. I regard that as sufficient to make the point. As one who has devoted his commercial life to the encouragement of savings, I say that the Government, instead, as my hon. Friend the Member for Shipley (Mr. Hirst) clearly pointed out, of engaging in platitudinous statements from the Front Bench, should encourage those who are doing their best in this field to get on in a practical fashion.
    7.45 p.m.
    I turn to the point made by my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot). He spoke of the reasons why people save. One matter of the bitterest disencouragement to me
    in my 12 years' membership of this House has been that there has never been a clear appreciation of what the philosophy of the Government should be in the savings field. Why did the Chancellor say this afternoon that a review was under way? The answer is obvious. It was because he is under pressure from this side of the House and in the country in various ways. There is no initiative. What the Chancellor speaks of is in response to consistent pressure from my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and other hon. Friends over many years.
    I believe that the national interest requires a substantial initiative in this field in the interests of us all. It is the duty of the Government to provide that initiative. I strongly support the Clause, I argue, also, something different. It is clear to us all that for the rest of our lifetime there will unquestionably be a shortage of capital for practical purposes in this country and in those abroad. It is the duty of this House to foresee situations of this character and to endeavour to supply the need for practical help of one kind or another.
    If that is insufficient in itself as an argument, I return to the point made by my hon. and gallant Friend. The reason why I got into the unit trust movement was very simple. It was because it was in accordance with my philosophy. I have long believed that the diffusion of power is infinitely better than concentration of power in a single pair of hands, or the hands of the State. There are practical ways of encouraging savings and bringing this process about.
    Last, but by no means least, there is re-encouragement of that spirit of independence and integrity of mind which has made our country great in the past and probably can make it great again. Why the Treasury sits indifferent to these great purposes I cannot imagine. I am impatient of it and I am glad to see that my hon. and right hon. Friends are as impatient as I am.
    Question put, That the Clause be read a Second time: —
    The House divided: Ayes 135, Noes 189.

    Division No. 258.]

    AYES

    [7.48 p.m.

    Alison, Michael (Barkslon Ash)

    Bell, Ranald

    Boarctman, Tom (Leicester, S.W.)

    Baker, Kenneth (Acton)

    Bitten, John

    Boyle, Rt. Hn. Sir Edward

    Balniel, Lord

    Black, Sir Cyril

    Brewis, John

    Brinton, Sir Tatton

    Hawkins, Paul

    Pike, Miss Mervyn

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

    Heald, Rt. Hn. Sir Lionel

    Pink, R. Bonner

    Bullus, Sir Eric

    Higgins, Terence L.

    Pounder, Rafton

    Burden, F. A.

    Hirst, Geoffrey

    Powell, Rt. Hn. J. Enoch

    Campbell, B. (Oldham, W.)

    Holland, Philip

    Pym, Francis

    Campbell, Gordon (Moroy & Nairn)

    Hooson, Emlyn

    Ramsden, Rt. Hn. James

    Carlisle, Mark

    Hornby, Richard

    Rawlinson, Rt. Hn. Sir Peter

    Cary, Sir Robert

    Hunt, John

    Rhys Williams, Sir Brandon

    Chichester-Clark, R.

    Jenkin, Patrick (Woodford)

    Ridley, Hn. Nicholas

    Clark, Henry

    Kaberry, Sir Donald

    Ridsdale, Julian

    Clegg, Walter

    Kimball, Marcus

    Rodgers, Sir John (Sevenoaks)

    Cooke, Robert

    King, Evelyn (Dorset, S.)

    Rossi, Hugh (Hornsey)

    Cooper-Key, Sir Neill

    Kirk, Peter

    Royle, Anthony

    Corfield, F. V.

    Knight, Mrs. Jill

    Sharpies, Richard

    Craddock, Sir Beresford (Spelthorne)

    Langford-Holt, Sir John

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

    Crouch, David

    Longden, Gilbert

    Silvester, Frederick

    Crowder, F. P.

    Lubbock, Eric

    Sinclair, Sir George

    Dance, James

    McAdden, Sir Stephen

    Smith, Dudley (W'wick & L'mington)

    Davidson, James (Aberdeenshire,W.)

    Mackenzie, Alasdair(Ross&Crom'ty)

    Smith, John (London & W'minster)

    d'Avigdor-Goldsmid, Sir Henry

    Maclean, Sir Fitzroy

    Stainton, Keith

    Dean, Paul (Somerset, N.)

    Macleod, Rt. Hn. lain

    Steel, David (Roxburgh)

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

    McMaster, Stanley

    Summers, Sir Spencer

    Eden, Sir John

    Maddan, Martin

    Taylor, Sir Charles (Eastbourne)

    Elliot, Capt. Walter (Carshalton)

    Marten, Neil

    Temple, John M.

    Emery, Peter

    Maude, Angus

    Thatcher, Mrs. Margaret

    Eyre, Reginald

    Mawby, Ray

    Turton, Rt. Hn. R. H.

    Farr, John

    Maxwell-Hyslop, R. J.

    van Straubenzee, W. R.

    Fortescue, Tim

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

    Waddington, D.

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

    Mills, Peter (Torrington)

    Wainwright, Richard (Colne Valley)

    Glover, Sir Douglas

    More, Jasper

    Walker-Smith, Rt. Hn. Sir Derek

    Coodhart, Philip

    Morgan, Geraint (Denbigh)

    Wall, Patrick

    Goodhew, Victor

    Munro-Lucas-Tooth, Sir Hugh

    Walters, Dennis

    Cower, Raymond

    Murton, Oscar

    Ward, Dame Irene

    Grieve, Percy

    Nabarro, Sir Gerald

    Weatherill, Bernard

    Griffiths, Eldon (Bury St. Edmunds)

    Nicholls, Sir Harmar

    Whitelaw, Rt. Hn. William

    Grimond, Rt. Hn. J.

    Noble, Rt. Hn. Michael

    Williams, Donald (Dudley)

    Gurden, Harold

    Onslow, Cranley

    Wilson, Geoffrey (Truro)

    Hall, John (Wycombe)

    Osborne, Sir Cyril (Louth)

    Winstanley, Dr. M. P.

    Hall-Davis, A. G. F.

    Page, Graham (Crosby)

    Wolrige-Gordon, Patrick

    Harrison, Brian (Maldon)

    Pardoe, John

    Younger, Hn. George

    Harrison, Col. Sir Harwood (Eye)

    Pearson, Sir Frank (Clitheroe)

    Harvey, Sir Arthur Vere

    Peel, John

    TELLERS FOR THE AYES:

    Harvie Anderson, Miss

    Percival, Ian

    Mr. R. W. Elliott and

    Mr. Anthony Grant.

    NOES

    Abse, Leo

    Davies, Harold (Leek)

    Heffer, Eric S.

    Albu, Austen

    Davies, Ifor (Gower)

    Henig, Stanley

    Allaun, Frank, (Salford, E.)

    Dempsey, James

    Herbison, Rt. Hn. Margaret

    Aldritt, Walter

    Diamond, Rt. Hn. John

    Hooley, Frank

    Anderson, Donald

    Dickens, James

    Howarth, Harry (Wellingborough)

    Archer, Peter

    Doig, Peter

    Howell, Denis (Small Heath)

    Armstrong, Ernest

    Driberg, Tom

    Howie, W.

    Atkins, Ronald (Preston, N.)

    Dunn, James A.

    Hoy, James

    Atkinson, Norman (Tottenham)

    Dunwoody, Mrs. Cwyneth (Exeter)

    Huckfield, Leslie

    Bacon, Rt. Hn. Alice

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

    Hughes, Emrys (Ayrshire, S.)

    Barnett, Joel

    Edelman, Maurice

    Hughes, Roy (Newport)

    Baxter, William

    Edwards, William (Merioneth)

    Hunter, Adam

    Bidwell, Sydney

    Ellis, John

    Hynd, John

    Bishop, E. S.

    English, Michael

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

    Blackburn, F.

    Evans, Albert (Islington, S.W.)

    Jackson, Peter M. (High Peak)

    Boardman, H. (Leigh)

    Fernyhough, E.

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

    Booth, Albert

    Fletcher, Raymond (Ilkeston)

    Johnson, Carol (Lewisham, S.)

    Boston, Terence

    Fletcher, Ted (Darlington)

    Jones, Dan (Burnley)

    Braddock, Mrs. E. M.

    Foley, Maurice

    Jones, J. Idwal (Wrexham)

    Brooks, Edwin

    Foot, Michael ((Ebbw Vale)

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

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

    Forrester, John

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

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

    Fowler, Gerry

    Kerr, Russell (Feltham)

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

    Freeson, Reginald

    Lawson, George

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

    Galpern, Sir Myer

    Leadbitter, Ted

    Butler, Herbert (Hackney, C.)

    Gardner, Tony

    Ledger, Ron

    Callaghan, Rt. Hn. James

    Gray, Dr. Hugh (Yarmouth)

    Lee, Rt. Hn. Frederick (Newton)

    Cant, R. B.

    Gregory, Arnold

    Lee, John (Reading)

    Carmichael, Neil

    Grey, Charles (Durham)

    Lestor, Miss Joan

    Carter-Jones, Lewis

    Griffiths, Eddie (Brightside)

    Lever, Harold (Cheetham)

    Chapman, Donald

    Griffiths, Will (Exchange)

    Lewis, Arthur (W. Ham, N.)

    Coleman, Donald

    Hamilton, James (Bothwell)

    Lewis, Ron (Carlisle)

    Concannon, J. D.

    Hamilton, William (Fife, W.)

    Lomas, Kenneth

    Corbet, Mrs. Freda

    Hannan, William

    Loughlin, Charles

    Crawshaw, Richard

    Harper, Joseph

    Luard, Evan

    Cullen, Mrs. Alice

    Harrison, Walter (Wakefield)

    Lyon, Alexander W. (York)

    Dalyell, Tam

    Haseldine, Norman

    Lyons, Edward (Bradford, E.)

    Darling, Rt. Hn. George

    Hazell, Bert

    McCann, John

    1404

    1405

    MacColl, James

    Orme, Stanley

    Small, William

    MacDermot, Niall

    Oswald, Thomas

    Spriggs, Leslie

    McGuire, Michael

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

    Steele, Thomas (Dunbartonshire, W.)

    McKay, Mrs. Margaret

    Page, Derek (King's Lynn)

    Symonds, J. B.

    Mackintosh, John P.

    Paget, R. T.

    Taverne, Dick

    Maclennan, Robert

    Palmer, Arthur

    Thornton, Ernest

    McMillan, Tom (Glasgow, C.)

    Parkyn, Brian (Bedford)

    Tinn, James

    Mahon, Peter (Preston, S.)

    Pearson, Arthur (Pontypridd)

    Tuck, Raphael

    Mahon, Simon (Bootle)

    Peart, Rt. Hn. Fred

    Urwin, T. W.

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

    Pentland, Norman

    Varley, Eric G.

    Manuel, Archie

    Price, Thomas (Westhoughton)

    Walker, Harold (Doncaster)

    Marquand, David

    Price, William (Rugby)

    Watkins, David (Consett)

    Mason, Rt. Hn. Roy

    Rankin, John

    Watkins, Tudor (Brecon & Radnor)

    Mellish, Rt. Hn. Robert

    Reynolds, Rt. Hn. C. W.

    Weitzman, David

    Mendelson, J. J.

    Robertson, John (Paisley)

    Wellbeloved, James

    Millan, Bruce

    Robinson, Rt. Hn.Kenneth(St.P'c'as)

    White, Mrs. Eirene

    Miller, Dr. M. S.

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

    Wilkins, W. A.

    Milne, Edward (Blyth)

    Rose, Paul

    Willey, Rt. Hn. Frederick

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

    Rowlands, E. (Cardiff, N.)

    Williams, Alan (Swansea, W.)

    Molloy, William

    Ryan, John

    Williams, Alan Lee (Hornchurch)

    Morgan, Elystan (Cardiganshire)

    Sheldon, Robert

    Willis, Rt. Hn. George

    Morris, Alfred (Wythenshawe)

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

    Wilson, William (Coventry, S.)

    Morris, Charles R. (Openshaw)

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

    Winnick, David

    Murray, Albert

    Silkin, Rt. Hn. John (Deptford)

    Yates, Victor

    Neal, Harold

    Silkin, Hn. S. C. (Dulwich)

    O'Malley, Brian

    Silverman, Julius (Aston)

    TELLERS FOR THE NOES:

    Oram, Albert E.

    Slater, Joseph

    Mr. Ioan L. Evans and

    Mr. Neil McBride.

    New Clause 27
    SURCHARGES AND REBATES
    As from 19th March, 1968, section 8(2) of the Finance Act, 1964, shall have effect with the substitution for the reference to five groups of a reference to six groups and with the substitution for group (bb) of the following groups—
    (b) duties of customs or excise chargeable in respect of spirits (other than power methylated spirits);
    (bb) duties of customs or excise chargeable in respect of beer, wine and British wine.—[Mr. Patrick Jenkin.)
    Brought up, and read the First time.
    Motion made, and Question proposed, That the Clause be read a Second time.
    Mr. Gordon Campbell: I hope that the Government will accept this harmless and attractive Clause. It would separate spirits from beer, wine and British wine for purposes of the regulator. The House will know that the regulator is a device for increasing or decreasing a number of indirect taxes between Budgets. It has been used twice since it was brought into existence in 1961.
    The Government may Say that this is not very often, but during the last three years there have in any case been Budgets or mini-Budgets every three or four months. Since 1965 the regulator has been divided into five groups. By this Clause, we seek to make those six groups, with spirits as a separate group. This would introduce more
    1406
    flexibility, so that each group could be considered, when increases or decreases in taxation were contemplated, on its merits.
    8.0 p.m.
    The spirit with which I am especially concerned, as you will guess, Mr. Deputy Speaker, is Scotch whisky, on which there is at present what can only be described as punitive taxation. An important part of the distilling industry is in the North of Scotland, where it provides employment for men and industrial activity in development areas where such employment and activity are much needed. Governments have been spending considerable sums in recent years on grants and loans and on the building of advance factories to induce industries and firms to go to development areas, and in this situation it is folly to penalise an industry which is already in these areas and flourishing.
    About 85 per cent. of the products of the Scotch whisky industry are exported. The Government cannot say, as they sometimes appear to suggest, that whisky sells itself, because it is the hard Work of the industry and its successful selling abroad which have resulted in 85 per cent. of the product going to exports. There is still great scope for increasing these exports—the markets are there—but if high taxation exists in the home country, Britain, and continues to increase, that naturally leads to the taxes against whisky abroad being increased as well.

    1407
    The Government, regrettably, are raising the heavy tax on whisky in this Finance Bill by another 2s. 6d., and this will mean that the tax on a bottle of whisky will be 40s. The Chancellor is proposing that the empty bottle should cost £2 before any account is taken of its contents. I know that an Amendment which sought to prevent that increase was not selected, but my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) has ably made a strong case for that Amendment in Committee.
    In this new Clause we are now trying to help the Chancellor so as to ensure that he will not be in a position, some time in the future, in which he has to raise the spirits duty, with other items in the regulator, when he may not wish to do so. The new Clause will not cost the Government any money, and in that way it is an unusual Finance Bill Amendment. It simply places spirits in a separate group for the purposes of the regulator.
    It is significant that the tax on beer is not being raised in this Finance Bill. Thus, beer is now being treated separately from spirits in any event. Why should they not be treated separately for the purposes of the regulator? The duty on spirits could then be considered in the light of the factors at the time affecting the distilling industry and the sale of spirits, on the merits of the case.
    There are two other substantial items covered by the regulator, namely, petrol and tobacco. But both come from abroad and do not involve a home manufacturing industry needing support through a firm and healthy home market. Tobacco raises considerations of health, but the Government have made it clear on previous occasions that they have no desire on medical or other grounds to restrict the home consumption of whisky, because, of course, taken in moderation it is an excellent beverage. Imports of tobacco are a heavy burden on our balance of payments—the very opposite of whisky, which is a leading dollar earner.
    The increases in taxation since 1965 have had severe effects on the home consumption of whisky. In the 12 months after the 1965 Budget, that is, up to April, 1966, there was a slump of 9·4 per cent. in the home sales of whisky
    1408
    compared with the previous 12 months. That was the first time in the annual releases for home consumption that there had been a drop since the post-war period of shortage, and it was a very large drop. Later, on 20th July, 1966, there was a further 10 per cent. increase in the tax and during the 12 months following that, up to 20th July 1967, there was a further 5·7 per cent. drop in home consumption. That is why in the last two years a serious situation has arisen, because the gradually increasing consumption at home dropped severely as a result of these two increases in taxation.
    One result has been that there has been little extra revenue for the Chancellor, because of these drops in consumption. The Minister of State will note that I have been comparing periods of 12 months with previous periods of 12 months, because that evens out any periods of Budget forestalling. The Treasury often tries to explain what is happening by saying that action has been taken in advance of a Budget. By comparing periods of 12 months, one evens out pre-Budget periods in each of the years in question.
    Another result has been that the home market is expanding very slowly, with setbacks from time to time. The Government have been playing a kind of snakes and ladders with the industry, and the growth of consumption at home has been at the rate of a tortoise compared with the growth of exports. Other countries must be amazed by this crippling taxation on a unique industry with a popular product which is a winner in the export markets.
    On a previous occasion, the Government gave an incredibly feeble excuse for rejecting the kind of suggestion which we are making tonight. They said that if we were to move from five to six groups for the regulator, there would be a demand for further splitting, possibly going to 26 or even 106 groups, and there would be no limit to the demand for splitting into further groups, and the Government would find the situation getting out of hand. That is completely wrong. So far as I know, there has not been any such demand and there is unlikely to be.
    There is no case for tobacco and oil, which are already separately two of the

    1409
    five groups. There are no other items involving a large vital home industry, such as the spirits distilling industry. I ask the Minister of State to tear up any brief with which he may have been supplied if it simply makes the same feeble excuse.
    The test of the Government's intentions towards this great and successful industry is whether they will accept this simple Clause. It would enable them, when indirect taxation is about to be put up by use of the regulator in future, to consider whether the special position of spirits and the distilling industry in general which might obtain at the time deserved such a rise of taxation. It would enable separate consideration of the merits of the case. If the Government will give the industry encouragement of this kind, I believe that the industry can go on to make an even larger contribution to out exports and our balance of payments.
    Mr. George Younger: I want to add two points to what my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) has so correctly said about this simple new Clause, which we very much hope the Government will accept. My hon. Friend detailed most accurately the situation of the Scotch whisky industry. I hope that the Government are not deceived by the fact that there is a continuation of revenue from Scotch whisky, although only a little. There was a period, a year ago, when it looked as if it might not increase because the duty had been put up to such an extent. The Government should not imagine that the industry has not suffered through these astonishing increases in duty in recent years.
    If the Minister wants evidence of this let him observe the cut-backs in production which have had to be made. Let him observe the parts of Scotland, many of them in the Highlands, with job shortages, where there have been closures of maltings and other ancillary plant in the whisky industry. I am not suggesting that the whole industry is in a terrible state of alarm and despondency, but the point has now been reached when the expansion of the industry is being visibly checked by these continual increases in duty.
    This new Clause seeks to look ahead to what may happen if there is the pos-
    1410
    sibility of the regulator being used again. It is something at which the Government must look carefully. It is a precautionary measure, but I can see circumstances in which the alterations produced by the new Clause would be to the advantage of the Government and the Chancellor. Perhaps the Minister of State can visualise a situation in which he might be placed in the future, when for some economic reason, there is a suggestion that the regulator might be imposed. Let him imagine himself in his Department discussing which parts of the regulator would be most appropriate.
    He might find, when considering the alternatives for putting the regulator on one group or another, that he reaches the point of considering the group including Scotch whisky. There would be the awful dilemma as to whether the regulator should be put on that group, which comprises many other items. Would it not be much more advantageous to have Scotch whisky in a separate group, with its separate problems and effects on the balance of payments and employment, particularly in the Highlands, separately assessed? Last year we discussed this and the then Financial Secretary said that this would be awkward because we would have to make the choice between different products. This is what governments and ministers are for. In imposing the regulator the choice has to be made betwen existing groups. There is nothing new in the principle of establishing a sixth group, and it might be helpful to the Chancellor in a difficult situation.
    Mr. J. Bruce-Gardyne: Would my hon. Friend not agree that in any case there is no obligation upon the Government to make this invidious choice? If they want to, they can apply the regulator right across the board. This just gives greater freedom.
    Mr. Younger: This is the point that comes next. If it is awkward to make a choice between the groups, which I do not accept, this new Clause makes it no more necessary than it is now. I ask the Government to take this point seriously this time. I do not think that the argument was taken seriously on the last occasion. This Clause has the rare distinction of being one which will not cost

    1411
    a penny to put into effect. It is something which the Government should accept and they might well see the day, before long, when they will be thankful that they did so.
    8.15 p.m.
    Mr. James Dempsey: I cannot help intervening after listening to the speeches of the hon. Member for Moray and Nairn (Mr. G. Campbell) and the hon. Member for Ayr (Mr. Younger). I know that the hon. Member for Ayr speaks with considerable authority on the subject. He is a Member for whom I have the greatest respect. However, this argument develops round a simple case, that whisky be treated separately for the purpose of the operation of the regulator. Out of this has developed an argument against the Government's decision to increase the tax on whisky. What we are debating is the amount of tax. The effect of the increased duty on sales remains to be seen, and neither hon. Gentleman has been able to produce any facts or figures to show that sales have fallen as a result of the increased duty.
    Other factors are operating which have not been mentioned. Neither has given any consideration to the competition coming from the Lowlands. They have overlooked the important factor that the Americans are operating in Scotland on a large scale. In Airdrie they have a new distillery which has cost £5 million, operating in competition with distilleries in the Highlands.
    Mr. G. Campbell: I think that the hon. Member is mistaken, because whether a distillery is operated by Americans or Scots, if it is making Scotch whisky, produced in Scotland, it comes within the amounts which I have mentioned. I have given definite proof, because in both recent cases where the tax has been put up, I pointed out that in the following 12 months there had been an immediate drop in consumption.
    Mr. Dempsey: The hon. Gentleman went further than that and argued that it was causing unemployment.
    Mr. G. Campbell: No.
    Mr. Dempsey: The hon. Member said that there was unemployment in some of the distilleries.
    Mr. G. Campbell: The hon. Member is wrong again, because I did not say that unemployment was being caused. I said that these distilleries in the Highlands were providing much-needed employment, and it was an industry doing an excellent job, deserving of support.
    Mr. Dempsey: If the hon. Member looks at HANSARD he will also see that he said that people were losing their jobs. He will find that a number of these people are in Airdrie, working for the American-owned distillery. This firm could not have got going without the Scottish workers from the Highlands. The local council offered them houses to induce them to come to the development area in North Lanarkshire. That factor is often overlooked.
    Another factor is the Road Traffic Act and the introduction of the breathalyser. If the hon. Gentleman will visit any hotel or licensed restaurant on Saturday or Sunday evening, he will be surprised to learn the effects the breathalyser is having on the consumption of whisky.
    Mr. G. Campbell: I am grateful to the hon. Gentleman for giving way again. I can help him here. Curiously enough, since the breathalyser came in, home consumption of whisky has slightly increased. The reductions I spoke about were earlier on, following increases in taxation.
    Mr. Dempsey: Consumption may have increased in the Highlands, but it has not increased in the southern uplands, especially in the Lanarkshire area. I live and travel there and have very good friends among licensees of premises which sell excisable liquor. The effect of the breathalyser on their sales has been, they assure me, emphatic. This is to be welcomed.
    No one can dispute that, in the industrial areas, there has been a decided drop in the sales of whisky because of the breathalyser. That indisputable evidence can be obtained from local police authorities or local hoteliers' associations or licensed trade organisations. It is for this reason that some of us have been asked time and again to try to amend the Road Traffic Act. The hon. Gentleman, therefore, cannot dispute that it has had an adverse effect on the sale of whisky in other parts of the country, if not in the Highlands.

    1413
    The hon. Gentleman should consider yet another aspect. He said that we were giving aid to industry under the Local Employment Acts. I am all for giving aid to publicans and, indeed, we are giving it to the licensed trade. We are giving grants to hoteliers and to those building hotels in the development areas. We are also giving it to publicans building licensed premises there. As far as I am aware, the whole of Scotland is a development area, excluding Edinburgh. So Scotland as a whole, its hoteliers and publicans are doing very well from the financial assistance by the Government through the Local Employment Acts. The hon. Gentleman should give the Government some credit for that.
    I am not arguing whether it is a good or bad thing that whisky should be separated for the purpose of the regulator. I am willing to admit that, once duty is increased on a particular product, it can have the effect of reduced sales to the consumer. When the Conservatives were in power, I argued year after year against the anomalies which were so silly and unjustifiable. But duties are increased deliberately in Budgets to take heat out of the economy. All Governments do it. It is a method of reducing certain types of purchasing power in order to develop the export trade and it is not new.
    Mr. Deputy Speaker (Mr. Sydney Irving): Order. The purpose of the new Clause is to redefine classifications and the hon. Gentleman is not relating his remarks sufficiently to it.
    Mr. Dempsey: I am relating my remarks to the fact that, if whisky duty is increased, which means increasing the selling price, there is every possibility that sales will go down. I am pointing out that this happens with any commodity and I have quoted examples.
    Mr. Deputy Speaker: Order. I am not disputing the correctness of what the hon. Gentleman is saying. I am merely pointing out that it is not related to the new Clause.
    Mr. Dempsey: What is related to the new Clause; is the fact that, from a rather simple, naive-looking new Clause, there has resulted a debate on whether the increase in duty on whisky has resulted in
    1414
    a falling off of sales. That is what the argument is about. If that is out of order, we have all been out of order. I argue that there are other factors to be considered before hon. Members opposite arrive at such an arbitrary decision.
    Mr. Alick Buchanan-Smith: I have listened with interest to the hon. Member for Coat-bridge and Airdrie (Mr. Dempsey), as always. But his argument is rather devious. I find it difficult to follow its import. First, he said that the whisky industry is setting up in Coatbridge. It would, therefore, be in his interests to support the new Clause. We are not arguing the interests of the Highlands against the Lowlands. We are arguing the case for the Scotch whisky industry as a whole. I hope that, in appreciation, he will vote with us. He should do so in the interests of his constituents.
    Secondly, I found it strange to hear the hon. Gentleman's reference to what my hon. Friend the Member for Moray and Nairn (Mr. G. Campbell) had said about the relationship between the time of application of the regulator and the fall in whisky sales, because the remarks of my hon. Friend referred to the period before introduction of the breathalyser. If the hon. Gentleman will read HANSARD tomorrow, as he exhorted us to do, he will see that the breathalyser had nothing to do with my hon. Friend's argument.
    It is the case that total sales have shown a marginal increase, despite the breathalyser, but the hon. Gentleman is mistaken in thinking that all whisky is necessarily sold through hotels and public houses to people who drive cars. There are many other outlets and there has been a marginal increase. We cannot say that the breathalyser has anything to do with the argument put forward by my hon. Friend.
    Mr. William Molloy: This is an intriguing debate. The hon. Member for Moray and Nairn (Mr. G. Campbell) argued at one time that he should be supported because sales of whisky were dropping. Then, intervening in the speech of my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), he said that, despite the breathalyser, sales were going up. I would like one point elucidated. When talking about

    1415
    sales of whisky dropping, do hon. Members mean output or that sales are dropping in this country but increasing in the export market?
    Mr. Buchanan-Smith: I am grateful for that intervention, for it helps to clarify the argument. On every occasion that duty has been increased, there has been a fall-off in the rate of increase in consumption and, therefore, a fall-off in the rate of expansion of the industry, which is a major industry in Scotland. That is on home consumption. But when we raise the duty in this country, other Governments follow suit—that is an established fact—by raising their duties. This has had the effect of reducing the rate of increase of sales in other countries.
    Up to the end of last year, there had been a tremendous fall-off in the rate of increase. In March, the Financial Times reported a statement by Mr. W. G. Farquharson, Chairman of Arthur Bell and Sons, the independent company in Perth, which said:
    "The high duty at home was also reflected in the amount of duty imposed on Scotch overseas. 'Again and again we have seen increases of duty in the U.K. followed by increases in foreign markets. This inevitably affects the growth of our exports'".
    The point is that it affects the growth of an export industry with a tremendous financial potential.
    8.30 p.m.
    Mr. Deputy Speaker: I must remind the hon. Member also that the new Clause deals with redefining the classification. He has not got round to mentioning it yet. I hope that he will do so.
    Mr. Buchanan-Smith: If I may finish the point, Mr. Deputy Speaker, it is important to explain why whisky should be separated from other forms of spirit. I hope that I may clarify the point raised by the hon. Member for Ealing, North (Mr. Molloy) by completing the quotation:
    "To emphasise this point, Mr. Farquharson noted that in 1966 the rise in whisky exports was only about one-third that of previous years and that last year the increase was limited to 3·7 per cent."
    That demonstrates what happens when the regulator is applied across the board, giving the Government no freedom to act if it is felt necessary to do so in the interests of an important export industry.
    Mr. G. Campbell: My hon. Friend has confirmed what I was saying. I referred to the snakes and ladders game. There has been a gradual increase in home consumption which has had setbacks every time that extra taxation has been applied. Secondly, for reasons of brevity, I did not make the point, which I have made on previous occasions, of informing the House—and the news is usually greeted on all sides—that there are plentiful supplies of Scotch whisky maturing in Scotland, both for export and for home consumption. There is no question of any conflict between home consumption and export.
    Mr. Buchanan-Smith: I am grateful to my hon. Friend for his intervention, which helps to clarify the position beyond peradventure for hon. Members opposite. In the Amendment, we are trying to remove any hindrance from one of our best export industries.
    The separate grouping of whisky is important for the employment potential in the Scotch whisky industry. On the one hand, the Government have their commitment to raise revenue and they use the regulator in one way and another. On the other hand, we have the problems of regional development and what the Government are doing to try to increase industrial activity in certain areas. That is why I would like Scotch whisky to be separated from other exercisable spirits in the use of the regulator, so that the Government would be given freedom to act if they cared to use it. As my hon. Friend the Member for Ayr (Mr. Younger) said, the decision would still be left with the Government to decide whether to use the regulator in the way we suggest by separating Scotch whisky or applying it across all the different groups over which they have power to apply it.
    If it should be against the interest of regional development to increase the regulator and thereby increase the duty of Scotch whisky and threaten regional development and employment in certain limited areas, particularly in the Highlands, by the new Clause the Government would have freedom to exclude whisky from the regulator.
    The point is of even greater importance today than when we debated the matter a year ago. My constituency includes the

    1417
    town of Montrose, which has two distilleries, one of which has been going through a difficult period for. these reasons. Sometimes it is working and sometimes it is not. Sometimes it is taking on men and sometimes it is paying off. That is in an area in which Government policy has not so far succeeded in introducing much new industry and employment. We still depend a great deal on employment in the whisky industry. If we could introduce a greater degree of stability, it would help those in the industry.
    Another important reason is that we we are talking of an industry which is already becoming labour intensive. In the type of town of which I am speaking, we have, therefore, already seen a contraction because of greater efficiency in the industry through, for example, the use of more labour-saving methods in maltings and in other ways. We are talking of an industry in which, for economic reasons, there is in any event a contraction of employment.
    Therefore, if through the use of the regulator the Government are reducing the consumption of Scotch whisky and thereby affecting production and employment in the industry, they are making a difficult situation even worse. There may not be much at stake in terms of the numbers of jobs, but where those jobs exist their importance is that they occupy a high proportion of the male population in the villages and small towns. That is why I plead with the Minister that although we are not talking of vast numbers of jobs in terms of the motor car or other mass industries of the South, in my part of the world and that of my hon. Friend the Member for Moray and Nairn this is a desperately important matter. We must keep and even expand any jobs that we can get.
    I hope that the Minister of State will accept the Amendment. It would simply give him more flexibility and more freedom to act in the future. It could be used in the interests of regional development and of areas such as the North-East and the Highlands of Scotland.
    The Minister of State, Treasury (Mr. Dick Taverne): The hon. Member for Moray and Nairn (Mr. G. Campbell) and his hon. Friends the Members for Ayr (Mr. Younger) and North Angus and
    1418
    Mearns (Mr. Buchanan-Smith) have put the argument in favour of the new Clause very attractively. They have based it on, and they have attacked the problem of the regulator from, the special plight of the whisky industry in Scotland. It was fully debated in Committee, when the case was eloquently advanced by the hon. Member for South Angus (Mr. Bruce-Gardyne) and was answered by my hon. Friend the Financial Secretary.
    Obviously, I would be out of order to deal with the particular points which are raised in connection with that industry to the extent that they do not affect the regulator. When, however, it comes to the general prospect for the whisky industry in Scotland, not all those concerned in the industry after the Budget was announced took quite as gloomy a view as hon. Members opposite. For example, on 22nd March, in the Investors' Chronicle, a spokesman for one of the largest distilling companies said:
    "It will be another blow for the United Kingdom trade, but, as you know, most of our business is overseas and we have the benefits of devaluation on exports."
    That is a considerable factor to be borne in mind.
    The real question, however, is whether it would be feasible and reasonable to alter the use of the regulator by creating this sixth group of spirits for special treatment. The hon. Member for Moray and Nairn said that in answering the debate I was not on any account to use any of the arguments which had previously been used against similar Amendments. It is always an attractive idea that one's argument should be entirely novel, but it is not something which it is always possible to achieve when the same ground is being gone over in successive Finance Bills.
    The first question is whether one can restrict the argument logically to another class, and to one only, that of spirits. The hon. Member for Moray and Nairn said that there have been, and there will be, no other candidates for special treatment. In the first part he is incorrect, because precisely the same sort of representations have been made in favour of splitting up the hydrocarbon oil group. It was suggested that heavy oil should be separately treated. I see no reason why, if spirits are to be separately

    1419
    treated, beer should not be separately treated from wines. If one enters into this argument there is no reason why the different bands of Purchase Tax should not be separately treated. Why should not one take some of the higher bands and treat these separately from the lower bands?
    I do not feel that the optimism of the hon. Member for Moray and Nairn can be shared about whisky being the only candidate for separate group treatment. There is little doubt that one would get a proliferation of groups and the regulator would become something entirely different from what it was designed for. The regulator was never designed to usurp the functions of the Budget, which is brought before the House and considered carefully in great detail in terms of the revenue produced and possibly the danger of diminishing returns, which was the kind of argument considered in Committee, and to determine the relative levels of taxation between individual products. Yet this undoubtedly is what the regulator would become if this new Clause were carried. The regulator was designed as a somewhat blunt instrument for the purpose of the broad questions of supply and demand in the economy. It was designed to be an interim weapon only to deal with the broad questions of supply and demand on a temporary basis until they could be more adequately adjusted as between different products by means of the Budgetary instrument.
    If we did what we were invited to do here and said, "Right, it is a decision for the Minister. The Minister should be able to choose and say we will use the regulator for one product and not for others", as the hon. Member for Ayr suggested, what about the general debate? The House is jealous of its privileges and rights in dealing with taxation. One would, by a Statutory Instrument, be dealing with matters which eminently were matters for the Finance Bill as a whole.
    Mr. G. Campbell: But, first, this would not isolate whisky. It would be spirits as a whole. Secondly, my argument was that the whisky industry was the only serious candidate since it was a very important home industry with 85 per
    1420
    cent. of its production going to exports. That does not apply to other items in other groups.
    Mr. Taverne: One could probably say that whisky dominates spirits and that it has this high percentage of exports. To some extent, that means that the effect on the industry as whole is less when one uses the regulator than it would be if the entire domestic production of other particular candidates were affected by the use of the regulator. The special position of whisky would not make the effect of the use of the regulator as deleterious on whisky as it might be in other spheres.
    The real question is whether one should take particular products in a generally competing group and say that the regulator should apply to some and not to others. In the past the regulator has been made more flexible by the creation of the groups. It is now suggested that it should become a very refined instrument distinguishing between separate items within the groups. Here one has different items competing against each other—alcoholic beverages generally, beer, wines and whisky—and, further, one is attempting to do by means of the regulator what should be done by the Budget.
    Mr. G. Campbell: In the Finance Bill the Government are not putting up the duty on beer, but they are putting up the duty on whisky. Therefore, they are doing this separation in the Finance Bill.
    Mr. Taverne: I am afraid that the hon. Gentleman did not follow my argument. My argument is that this is the sort of operation that one should do in a Budget, because it can then be considered in detail. But it cannot be considered in detail when one debates a Statutory Instrument, which is what the regulator must be used for. In seeking to differentiate in the treatment of different items of indirect taxation, hon. Gentlemen opposite are to some extent inconsistent with the general tendency of Opposition thought which was to treat indirect taxes all together and very much the same. They are concerned with the same rate, but nevertheless part of the argument is that one should not, in considering indirect taxation, distinguish between individual and particular objects. For these reasons I

    1421
    ask the House not to accept this new Clause.
    8.45 p.m.
    Mr. Patrick Jenkin: The hon. and learned Gentleman's reply can only be described as disappointing and unforth-coming. I can only imagine that he has found himself somewhat unsympathetic to the arguments put forward by my hon. Friends by the fact that his drinking arm appears to be out of action, for which we express our sympathy.
    I think that the House is indebted to those of my hon. Friends who advanced arguments in favour of the Clause, and I believe that the distilling industry in Scotland, too, will feel indebted to them for the case they have put forward. At this stage I think that it is right for me to declare a personal interest, which I declared in Committee, namely, that I am an employee, but have no stake in the ownership, of a large distilling company.
    The case in favour of the Clause and for splitting the regulator can be argued under a number of separate heads, but it seems to me that two stand out. First, by lumping together all wines, beers and spirits, one is dealing with three categories of alcoholic beverage which have widely different characteristics in terms of economics. Let us examine the consumption figures. On doing so for these three categories, one comes up against some surprising results. In the five years 1963–67, home-produced spirits declined from 14·2 million proof gallons to 13·7 million proof gallons. Beer, on the other hand, increased from 28·3 million bulk barrels to 31·3 million bulk barrels. Imported wines increased still further, from 22 million bulk gallons to 28·4 million bulk gallons. By grouping them all together one is dealing with different products with different histories, and a duty change which may be appropriate for one is not appropriate to the other.
    Linked with that argument—and this applies particularly to imported wines— there is the fact that one is a product which is wholly home-produced, while the other is a product which is virtually entirely imported. The point was made clearly in a letter to the Financial Times from Mr. P. J. Woodhouse, Secretary of the Scotch Whisky Association, who said:
    1422
    "… This Association has drawn the attention of successive Chancellors … to the situation created by the imposition of a much higher duty on home-produced spirits than that applicable to imported wines. As an illustration of the position, the current duty on fortified wines imported at a strength of say 35° is equivalent to 129s. 3d. per proof gallon, whereas that applicable to home-produced spirits is 342s. 9d. per proof gallon … As the Association said to the Chancellor recently, it is difficult to understand a policy which encourages imports at the expense of home production. Consequently, one can hardly let his comment pass without suggesting that he might consider practising what he preaches."
    The argument there is that it cannot be right that the blunt instrument, and such it is—the Minister of State so described it—of the regulator should apply equally to products which are wholly imported and those which are entirely home-produced. That is one argument.
    The other—and it is one to which I referred during the Budget debate—is that, as my hon. Frien the Member for Moray and Nairn (Mr. G. Campbell) rightly said, in this Budget the Chancellor has increased the duty on wines and spirits, but has not increased it on beer. He has, therefore, put himself in the position of being unable to reverse by the regulator what he has done in the Budget unless the Clause is accepted if the situation requires the use of the regulator.
    Mr. Taverne: With respect, if the Clause were accepted and my right hon. Friend wanted to reverse the position between wines and beer it would be necessary to have a separate group for each.
    Mr. Jenkin: The real competitor of whisky is beer. There are advertisements which show a glass of beer and say
    "A double Scotch at half the price."
    The point is that he could not put it back. Still more, if the situation requires the use of the regulator in an upward direction—which heaven forfend— the Chancellor would have no alternative but to increase the duty on whisky yet again in order to get the benefit of the increased duty on beer. Does the Chancellor want to be in that position? Is that the sort of weapon he wants to have in the event of his requiring to use the regulator?
    The Minister of State argued the case for the five groups. He argued on the

    1423
    footing that the regulator should always be operated in respect of all the groups. We have five groups. How can the Treasury contend that five is the right figure, and that six, or even seven would be undesirable?
    When the Measure was first introduced, an argument was put forward that the power which Parliament would be giving to the Government to exercise by order should not extend to the full range of powers of taxation which could be exercised only by Parliament. I agree. But we have come to realise that this is
    a valuable flexible weapon in the Chancellor's armoury and all we are seeking to do is to make it marginally more flexible. The Minister of State has, on the contrary, shown himself to be remarkably inflexible, and in the circumstances it is right that the Clause should be pressed to a Division. I therefore ask my hon. and right hon. Friends to support it in the Lobby.
    Question put, That the Clause be read a Second time: —
    The House divided: Ayes 124, Noes 206.

    Division No. 259.]

    AYES

    [8.52 p.m.

    Alison, Michael (Barkston Ash)

    Hall, John (Wycombe)

    Peel,, John

    Baker, Kenneth (Acton)

    Hall-Davis, A. G. F.

    Percival, Ian

    Balniel, Lord

    Harrison, Brian (Maiden)

    Pike, Miss Mervyn

    Bell, Ronald

    Harrison, Col. Sir Harwood (Eye)

    Pink, R. Bonner

    Biffen, John

    Harvey, Sir Arthur Vere

    Pounder, Rafton

    Black, Sir Cyril

    Harvie Anderson, Miss

    Powell, Rt. Hn. J. Enoch

    Boardman, Tom (Leicester, S.W.)

    Hawkins, Paul

    Pym, Francis

    Brewis, John

    Heald, Rt. Hn. Sir Lionet

    Ramsden, Rt. Hn. James

    Brinton, Sir Tatton

    Higgins, Terence L.

    Rawlinson, Rt. Hn. Sir Peter

    Bromley-Davenport.Lt.-Col.Sirwalter

    Hirst, Geoffrey

    Rhys Williams, Sir Brandon

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

    Holland, Philip

    Ridley, Hn. Nicholas

    Bullus, Sir Eric

    Hornby, Richard

    Ridsdale, Julian

    Burden, F. A.

    Hunt, John

    Rodgers, Sir John (Sevenoaks)

    Campbell, B. (Oldham, West)

    Jenkin, Patrick (Woodford)

    Rossi, Hugh (Hornsey)

    Campbell, Gordon (Moray & Nairn)

    Kimball, Marcus

    Royle, Anthony

    Carlisle, Mark

    King, Evelyn (Dorset, S.)

    Scott-Hopkins, James

    Cary, Sir Robert

    Kirk, Peter

    Sharples, Richard

    Chichester-Clark, R.

    Knight, Mrs. Jill

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

    Clegg, Walter

    Langford-Holt, Sir John

    Silvester, Frederick

    Cooke, Robert

    Longden, Gilbert

    Sinclair, Sir George

    Cooper-Key, Sir Neill

    McAdden, Sir Stephen

    Smith, Dudley (W'wick A L'mington)

    Corfield, F. V.

    Maclean, Sir Fitzroy

    Smith, John (London & W'minster)

    Crowder, F. P.

    Macleod, Rt. Hn. Ian

    Stainton, Keith

    Dance, James

    McMaster, Stanley

    Stoddart-Scott, Col. Sir M. (Ripon)

    Dean, Paul (Somerset, N.)

    Maddan, Martin

    Summers, Sir Spencer

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

    Maginnis, John E.

    Taylor, Sir Charles (Eastbourne)

    Eden, Sir John

    Marten, Neil

    Temple, John M.

    Elliot, Capt. Walter (Carshalton)

    Maude, Angus

    Thatcher, Mrs. Margaret

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

    Mawby, Ray

    van Straubenzee, W. R.

    Emery, Peter

    Maxwell-Hyslop, R. J.

    Waddington, D.

    Errington, Sir Eric

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

    Walker-Smith, Rt. Hn. Sir Derek

    Farr, John

    Mills, Peter (Torrington)

    Wall, Patrick

    Fortescue, Tim

    More, Jasper

    Walters, Dennis

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

    Morgan, Geraint (Denbigh)

    Ward, Dame Irene

    Galbraith, Hn. T. G.

    Munro-Lucas-Tooth, Sir Hugh

    Williams, Donald (Dudley)

    Glover, Sir Douglas

    Murton, Oscar

    Wilson, Geoffrey (Truro)

    Goodhart, Philip

    Naharro, Sir Gerald

    Wolrige-Gordon, Patrick

    Goodhew, Victor

    Nicholls, Sir Harmar

    Younger, Hn. George

    Gower, Raymond

    Noble, Rt. Hn. Michael

    Grant, Anthony

    Onslow, Crarriey

    TELLERS FOR THE AYES:

    Grieve, Percy

    Osborne, Sir Cyril (Louth)

    Mr. Reginald Eyre and

    Griffiths, Eldon (Bury St. Edmunds)

    Page, Graham (Crosby)

    Mr. Bernard Weatherill.

    Gurden, Harold

    Pearson, Sir Frank (Clitheroe)

    NOES

    Abse, Leo

    Blackburn, F.

    Carmichael, Neil

    Albu, Austen

    Boardman, H. (Leigh)

    Carter-Jones, Lewis

    Allaun, Frank (Salford, E.)

    Booth, Albert

    Coe, Denis

    Alldritt, Walter

    Boston, Terence

    Coleman, Donald

    Anderson, Donald

    Braddock, Mrs. E. M.

    Concannon, J. D.

    Archer, Peter

    Bray, Dr. Jeremy

    Corbet, Mrs. Freda

    Atkins, Ronald (Preston, N.)

    Brooks, Edwin

    Crawshaw, Richard

    Atkinson, Norman (Tottenham)

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

    Cronin, John

    Bacon, Rt. Hn. Alice

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

    Cullen, Mrs. Alice

    Barnett, Joel

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

    Dalyell, Tam

    Baxter, William

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

    Davidson,James(Aberdeenshire,w.)

    Bence, Cyril

    Butler, Herbert (Hackney, C.)

    Davies, Harold (Leek)

    Bidwell, Sydney

    Callaghan, Rt. Hn. James

    Davies, Ifor (Gower)

    Bishop, E. S.

    Cant, R. B.

    Dempsey, James

    Diamond, Rt. Hn. John

    Jones, Dan (Burnley)

    Paget, R. T.

    Dickens, James

    Jones, J. Idwal (Wrexham)

    Palmer, Arthur

    Doig, Peter

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

    Pardoe, John

    Driberg, Tom

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

    Parkyn, Brian (Bedford)

    Dunn, James A.

    Kerr, Russell (Feltham)

    Pearson, Arthur (Pontypridd)

    Dunwoody, Mrs. Gwyneth (Exeter)

    Lawson, George

    Pentland, Norman

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

    Leadbitter, Ted

    Price, Christopher (Perry Barr)

    Edelman, Maurice

    Ledger, Ron

    Price, Thomas (Westhoughton)

    Edwards, Robert (Bilston)

    Lee, Rt. Hn. Frederick (Newton)

    Price, William (Rugby)

    Edwards, William (Merioneth)

    Lee, John (Reading)

    Rankin, John

    Ellis, John

    Lestor, Miss Joan

    Reynolds, Rt. Hn. G. W.

    English, Michael

    Lever, Harold (Cheetham)

    Roberts, Albert (Normanton)

    Evans, Albert (Islington, S.W.)

    Lewis, Arthur (W. Ham, N.)

    Robertson, John (Paisley)

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

    Lewis, Ron (Carlisle)

    Robinson, Rt. Hn. Kenneth (St.P'c'as)

    Faulds, Andrew

    Lomas, Kenneth

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

    Fernyhough, E.

    Loughlin, Charles

    Rose, Paul

    Fitch, Alan (Wigan)

    Luard, Evan

    Rowlands, E. (Cardiff, N.)

    Fletcher, Raymond (Ilkeston)

    Lubbock, Eric

    Ryan, John

    Fletcher, Ted (Darlington)

    Lyon, Alexander W. (York)

    Sheldon, Robert

    Foley, Maurice

    Lyons, Edward (Bradford, E.)

    Shore, Rt. Hn. Peter (Stepney)

    Foot, Michael (Ebbw Vale)

    McBride, Neil

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

    Forrester, John

    McCann, John

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

    Fowler, Gerry

    MacColl, James

    Silkin, Hn. S. C. (Dulwich)

    Freeson, Reginald

    MacDermot, Niall

    Silverman, Julius (Aston)

    Galpern, Sir Myer

    McGuire, Michael

    Slater, Joseph

    Gardner, Tony

    McKay, Mrs. Margaret

    Small, William

    Gray, Dr. Hugh (Yarmouth)

    Mackenzie, Alasdair (Ross&Crom'ty)

    Spriggs, Leslie

    Gregory, Arnold

    Mackintosh, John P.

    Steel, David (Roxburgh)

    Crey, Charles (Durham)

    Maclennan, Robert

    Steele, Thomas (Dunbartonshire, W.)

    Griffiths, Eddie (Brightside)

    McMillan, Tom (Glasgow, C.)

    Symonds, J. B.

    Griffiths, Will (Exchange)

    Mahon, Peter (Preston, S.)

    Taverne, Dick

    Grimond, fit. Hn. J.

    Mahon, Simon (Bootle)

    Thornton, Ernest

    Hamilton, James (Bothwell)

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

    Tinn, James

    Hamilton, William (Fife, W.)

    Manuel, Archie

    Tuck, Raphael

    Hamling, William

    Marquand, David

    Urwin, T. W.

    Hannan, William

    Mason, Rt. Hn. Roy

    Varley, Eric G.

    Harrison, Walter (Wakefield)

    Mellish, Rt. Hn. Robert

    Wainwright, Richard (Colne Valley)

    Haseldine, Norman

    Mendelson, J.J.

    Walker, Harold (Doncaster)

    Hazell, Bert

    Millan, Bruce

    Watkins, David (Consett)

    Heffer, Eric S.

    Miller, Dr. M. S.

    Watkins, Tudor (Brecon & Radnor)

    Henig, Stanley

    Milne, Edward (Blyth)

    Weitzman, David

    Herbison, Rt. Hn. Margaret

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

    Wellbeloved, James

    Hooley, Frank

    Molloy, William

    White, Mrs. Eirene

    Hooson, Emlyn

    Morgan, Elystan (Cardiganshire)

    Wilkins, W. A.

    Howell, Denis (Small Heath)

    Morris, Alfred (Wythenshawe)

    Willey, Rt. Hn. Frederick

    Howie, W.

    Morris, Charles R. (Openshaw)

    Williams, Alan (Swansea, W.)

    Hoy, James

    Moyle, Roland

    Williams, Alan Lee (Hornchurch)

    Huckfield, Leslie

    Murray, Albert

    Willis, Rt. Hn. George

    Hughes, Roy (Newport)

    Neal, Harold

    Wilson, William (Coventry, S.)

    Hunter, Adam

    Oakes, Gordon

    Winnick, David

    Hynd, John

    O'Malley, Brian

    Winstanloy, Dr. M. P.

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

    Oram, Albert E.

    Yates, Victor

    Jackson, Peter M.

    (High Peak)

    Orme, Stanley

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

    Oswald, Thomas

    TELLERS FOR THE NOES:

    Johnson, Carol (Lewisham, S.)

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

    Mr. Ernest Armstrong and

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

    Page, Derek (King's Lynn)

    Mr. Joseph Harper.

    New Clause 28
    AMENDMENT OF PARAGRAPH 1 OF SCHEDULE 11 TO THE FINANCE ACT 1965.
    Paragraph 1(1) of the 11th Schedule to the Finance Act 1965 shall be amended by the addition, at the end of sub-paragraph (d)(iv), of the words: —
    'Provided that for the purpose of this sub-paragraph (iv) a company resident in the United Kingdom, the whole of whose share capital is owned by another company resident in the United Kingdom, shall not be regarded as a subsidiary'.—[Mr. Patrick Jenkin.]
    Brought up, and read the First time.
    Mr. Deputy Speaker (Sir Eric Fletcher): With this new Clause, we will
    1426
    discuss new Clause 29 "Loan interest paid by close companies".
    9.0 p.m.
    Mr. Patrick Jenkin: I beg to move, That the Clause be read a Second time.
    One of the effects of the Corporation Tax system was that it created a great gulf between those payments by a company which were to be regarded as charges on a company's income and, therefore, deductible for Corporation Tax purposes, and those payments which were to be treated as distributions and to attract the distributed tax. Therefore, it was essential that, when the tax was drawn up, companies should not be able to disguise what were distributions by dressing them up as charges.

    1427
    The law on this is contained in paragraph 1(1) of the Eleventh Schedule to the Finance Act, 1965, sub-paragraph (d) of which disallows loan interest which would otherwise be a charge from being a charge and forces it to be treated as a distribution in four cases. Three of them are not relevant, but one is, and it is to that that the Clause is directed. It is the case where interest is paid by a United Kingdom subsidiary company of an overseas parent on securities which are issued by the subsidiary to the parent. Alternatively, it is disallowed where the United Kingdom subsidiary pays the interest to an overseas subsidiary, both of them being subsidiaries of the same parent company.
    The reason for the disallowance is obvious. It is a way of reducing the United Kingdom company's liability to Corporation Tax by allowing a deduction for interest when, in fact, the money is a remittance of profits to the overseas parent, and, therefore, a dividend. The paragraph does not apply the other way round, to a payment by a United Kingdom parent to an overseas subsidiary. That would have to be an interest payment. It could not be a dividend. There cannot be a dividend payment from a parent to its own subsidiary. Therefore, it would be illogical to treat it as a distribution.
    New Clause 28 covers an extension of that principle where there is a payment of loan interest by one subsidiary resident in the United Kingdom to another subsidiary resident overseas, but where both subsidiary companies are subsidiaries of a United Kingdom resident parent company. The argument in favour of it is that in that case, too, there can be no question of the loan interest being a disguised dividend payment. Such a payment could not be a dividend, and it is argued, therefore, that it ought not to be treated as a distribution.
    That is the effect of the amendment which would be embodied if the Clause were accepted, As the paragraph of the Schedule stands, such a payment of loan interest is treated as a distribution. This is highly artificial and it incurs a severe taxation penalty by being so treated. The Clause is intended to remedy this, and I hope that it will commend itself to the hon. and learned Gentleman.
    1428
    I am grateful that we have been permitted to discuss new Clause 29 with this one. Although this, too, covers loan interest, it does so in entirely different circumstances and raises an entirely different point. In this case, we are dealing with the disallowance of loan interest paid by a close company to a participating director of that company. Paragraph 9 of the Eleventh Schedule of the 1965 Act gave an extended meaning to the word "distribution" as it related to close companies. The disallowance of the interest as a charge imposes very severe fiscal penalties on close companies.
    The penalty is not only that it is not deductible for Corporation Tax but also that it comes into the shortfall assessment and possibly even the Surtax apportionment under the close company rules. The purpose of the rule is clear—to prevent profits being taken out of the close company in the form of a deductible charge— but this is a clear case—this is the burden of my argument—of the Government's obsession with tax avoidance now operating to the detriment of the much wider economic interests of the country.
    Indeed, few of their fiscal innovations have done more damage than the penal provisions applying to close companies. My party has already made it clear on numerous occasions that it will be our purpose to shift the emphasis from restrictive penal, anti-avoidance provisions to measures which will encourage investment, expansion and innovation. I hope that loan interest paid to participating directors will be early on the list.
    The Clause would allow loan interest to be deductible up to the limit which would be a reasonable consideration for the loan made to the company and we have added another limitation, that the loans themselves must not exceed the equity capital of the company, including the reserves. When this matter was debated in 1965, the argument was put to the Government—
    Mr. Michael Shaw: My hon. Friend referred inadvertently to the equity capital; I think that he meant the issued capital.
    Mr. Jenkin: I accept the correction with thanks. The issued share capital and the reserves is the limitation imposed in the new Clause.

    1429
    On 22nd June, 1965, in a debate on the whole subject of loan interest and other deductions, I said, in an intervention in a speech of the Chief Secretary:
    "What is the objection to allowing the first slice of interest, up to a reasonable commercial rate, in all these cases? "
    The Chief Secretary replied:
    "The objection is that if this is, in effect, a return on capital it should be treated as a return on capital."—[OFFICIAL REPORT, 22nd June, 1965; Vol. 714, c. 1633–4.]
    That entirely begs the question. If the investment in the company is in the form of a loan, there is no entitlement to the benefits which would accrue if it were in the form of an equity share; that is to say, there is a right to payment only of the sum loaned and a right to the repayment of a fixed interest.
    If the shareholder and the debenture holder, let us say, were the same man, it would be up to him. He could disguise the one as the other, but to the extent to which the loan interest represents the reasonable commercial rate, I see no reason why it should not be treated with all the characteristics of loan interest paid to ordinary companies. It is quite different from a return on equity capital.
    The case for changing the law can be simply slated. Close companies find great difficulty in raising new capital. Either they are forced to dilute the equity by going outside and bringing in new capital, or they wish to raise the money by loans. The obvious people who might wish to lend to a close company are those who already have a big interest in its success. Under the law as it stands this is impossibly expensive. The existing directors cannot afford to make loans to the company because of the way in which the interest is treated under our legislation.
    Consider the case of a company which is pioneering in a technologically advanced sphere with a high risk project. It might wish to raise part of the capital by loans. The outsider might not be interested in lending the company money in view of the high risk involved, so that the only source may be the existing participators. One director may be able to put up the money while the other director does not have money to put up but has the technical expertise which is vital to the firm.
    1430
    In such circumstances, it would be wrong for the ownership of the company to be weighted more in favour of the director with the money, to the detriment of the other director, who has the technological expertise. Although he might be prepared to put up some money, it is probably impossibly expensive for him to do so. This cannot be right in the interests of such a firm or for the economy.
    This state of affairs places grave obstacles in the way of a company which wishes to expand and raise new capital and there is mounting evidence that this is the result of Government policy. The Government could, by accepting new Clause 29 and making this one concession, show that they are genuinely willing to take a step which would be widely recognised as evincing their intention to make amends in the face of the damage that has already been done. It would also show that they are ready to take a more favourable view of the enterprise of smaller companies.
    I hope that the Minister of State will grasp this opportunity of doing something for small enterprises.
    Mr. Michael Shaw: I wholeheartedly support the case adduced so convincingly by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) for the new Clause. I can say from experience that there is mounting evidence that the close company legislation is proving a serious hindrance to the development of close companies. This has been accentuated by the general financial policy of the Government.
    As my hon. Friend said, close companies are restricted as to where they can go for credit. Normally, they do not go to the public. One of their natural sources is the banks. If they succeed in getting their requirements from that source, all well and good; and the interest is allowed against the profits and there is no withholding tax, either.
    Since the Labour Party came to power, however—and particularly since the middle of 1965—there has been an almost continuous credit squeeze. This has attacked growing companies, which are usually close companies. If close companies are to be dynamic and are to goad established industry, they must be effective in grabbing their fair share of the

    1431
    market and establishing new markets. For this they must have capital to expand. Traditionally, the banks have supplied that capital because they have known their customers, when a project is a good one and when it is in good hands. In those circumstances, they have been prepared to back their judgment. But nowadays they are not free to do this, so close companies very often have to look elsewhere for their money.
    9.15 p.m.
    As my hon. Friend has said, the directors, or those in control of the company —which is the same thing, as a rule—very often have to look into their own resources. That need not be themselves. It might be their wives, their parents—or, indeed, their grandparents or their children, or their brothers and sisters or partners—speaking from memory, I think that I have covered all the categories. They have a fairly wide field because, for this purpose, their associates are treated as being equivalent to the directors.
    Bank credit being cut off, their natural source is one of their near relatives, to whom they may say, "We are expanding rapidly. Because of this Government"— and there is usually an adjective that goes with that, but we will let it pass— "we cannot borrow from the bank, although that is what we should like to do. Can you lend us some money to cover the next two years, when the money will begin to flow back?"
    Normally speaking, the relatives, if they have the confidence and the money, in all probability lend the money, but this raises a very serious problem, because the fact that the money comes from these near relatives means that although the rate of interest may itself be reasonable and commercial, because of its treatment for tax purposes when it is paid by the close company it becomes a very high rate of interest, as not only is it not allowed as a charge against profits but it suffers from the withholding tax. It becomes an exorbitant rate.
    This is a handicap on close companies borrowing from the natural source of borrowing from which no other type of company suffers. It is absolutely wrong. If we got rid of the withholding tax altogether, most of our difficulties in this respect would go, as would very many
    1432
    others. But I cannot discuss that tonight. I sincerely hope that, for the good of the future of close companies, which are bound up so closely with the future of the country, the Minister of State will see fit to accept the new Clause.
    Mr. John Smith: New Clause 29 seeks to put right a piece of legislation which has been presented as a measure to prevent avoidance, but directors, or those who control small companies, often put up the money in the form of loans for reasons that have nothing to do with avoidance at all but are a form of self-denial.
    Many small companies are arranged around a person with some money, and one, two or three people with no money but with technical ability. The man with the money very sensibly wishes to give his colleagues a share of the business. In order to give them a proper share, he does not swamp them by putting up the whole of his contribution, which is money rather than technical ability, in the form of equity capital. He forgoes his equity profit in order that his colleagues may have it, and puts up his capital in the form of loan capital. I should have thought that this was a form of redistribution which the party opposite would want to support and not to hinder.
    Another point is that small and developing companies cannot always forecast accurately their need for capital. Their needs fluctuate—for example, a project may not mature. If they can get the money from the bank, well and good, although a bank, even without a credit squeeze, will not be at all anxious to lend for a period of longer than, say a year or 15 months. If they cannot get it from the bank, their only source for fluctuating capital is in the form of loans from the directors or those who control the company.
    It would be quite inappropriate, in such circumstances, to put up the money in the form of equity capital, which is permanent capital and cannot be withdrawn if the need for that money disappears. Many companies in the past, for example, the steel companies before the war, got into very great difficulties through over-capitalisation. I should have thought the party opposite, who are engaged on so many projects designed to

    1433
    improve the efficiency of business, would have approved this new Clause for that reason, also.
    On these two grounds, I hope that we can persuade the party opposite that this new Clause is not designed to create a loophole. Indeed I do not regard it even as giving a concession, but rather as removing something which is not only unfair but damaging to our economy. This is a sincere proposal, designed to help small, developing companies, which, in turn, are of very great help to our economy.
    Mr. W. R. van Straubenzee: The case for new Clause 29 has been so persuasively argued that I cannot believe that the Minister of State, when he replies—the hon. and learned Gentleman smiles. I am not sure whether he smiles in anticipation, or if it is the smile which a cat gives before it kills a mouse. That we shall soon discover. He has a very powerful case to answer.
    I add my personal experience to the experience of my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) in saying that the provisions which this Clause is designed to remove are very inhibiting to the kind of business which has been clearly outlined by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin).
    Some of us were fairly actively engaged in this matter in 1965 and can remember how absolutely obsessed, when it was under discussion, the Chief Secretary was with tax avoidance. There was some reason at that time for that, for hon. Members will recall the slightly unhappy events which took place in some exempt private companies, as they used to be, relating to loans which would be covered by this Clause. There was some justification for the attitude of the Chief Secretary in 1965. I draw attention to the limitations so carefully put into new Clause No. 29. It is a very modest provision. This is absolutely right, but it is so modest that I cannot believe that the equity of it will not strike any reasonably fair-minded person.
    In our present set-up it is in the field of these close companies that the new techniques and thrusting ideas are given birth in the form of a company. This can be seen over and over again. By virtue
    1434
    of the fact that they are expanding in that way and of the difficulty of providing the appropriate finance, they are desperately reliant on loans from those who have faith in them. Overwhelmingly, they come within the terms of people very severely penalised as the law stands. In the general interests of the nation, in the sense that we want to encourage these new smaller companies to break into the technologies, this is a provision which ought to commend itself on general grounds to the Treasury Bench.
    Sir D. Glover: I congratulate my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) on the able way in which he moved new Clause 28. I want to speak particularly to new Clause 29. I speak from my own experience of close companies. About 20 years ago I formed a very small company. It had to be small, because every other member who was to be active in the company, and who was to be a director, because of various family circumstances, did not have the capital available to put into the company at that time. Therefore, if the company was to get off the ground without being dominated either by me or by any single person, all the rest of the capital had to go in the form of loan.
    I very much doubt whether that company, which afterwards became very successful, would ever have got off the ground under the conditions which were brought in by the 1965 Act. I doubt very much whether, under the conditions brought in by the 1965 Act, I or anybody else would have been prepared to put the money upon loan and be subjected to all the disadvantages arising under the 1965 Act.
    My hon. Friend has done a worthwhile job in bringing the Clause before the House. I hope that the Minister of State will accept it. If I may offer a slight note of criticism of some of my hon. Friends, I do not think that the inhibiting factor comes with a company which has been going for five or 10 years and which has established a commercial reputation. Such a company, even if it is a close company, can borrow in the normal market—from a bank or from other organisations. Where this is inhibiting is on a new company which has only brains, imagination and courage.

    1435
    People do not want to back such a company with loans, unless they have some reason for doing so.
    In my case, the reason was that I did not want to dominate the company, because it was a family business and over the years it would have led to feelings of jealousy if I had dominated it. It was, therefore, arranged that I put in a good deal of loan money. In other businesses it may be that one man has money and the remaining directors—young men, perhaps—have the know-how. In another case it may be that the father, the mother or some other member closely linked to those concerned has some money that can be used to back an idea, because that is what it is at that stage. It is a business which has an idea, the imagination and the courage to think that something can be made to grow.
    Therefore, the money advanced to such a company is not advanced at that moment on any commercial criteria. It is advanced because those who put up the money have faith in the ability of the young men who are to run the company. On the other hand, that faith is not entirely philanthropic. It may be that this is the only liquid money they have. They cannot afford to put it into a company if, by so doing, they will reap all the disadvantages that now arise under the 1965 Act.
    If the Labour Government really believe what they keep paying lip-service to—namely, in a mixed economy, in encouraging the entrepreneur, the young man with ideas, to get going in the growth of ideas that are always working through in a modern society—I do not see how they can refuse to accept the Clause, which was moderately put forward and which is moderate in its effect, but which would remove an enormous amount of inhibition from what the nation needs more than anything else, namely, the courage of the entrepreneur to take a chance and get ahead.
    9.30 p.m.
    Mr. Taverne: May I assure the hon. Member for the Cities of London and Westminster (Mr. John Smith) that no one suspects for a moment that these new Clauses are put forward with the idea of providing loopholes? Whether they have that effect is a different pro-
    1436
    position. It often happens that a solution is found which at the time seems innocent, but which, nevertheless, can drive a coach and horses through Income Tax or other tax legislation.
    May I tell the hon. Member for Wokingham (Mr. van Straubenzee) that I smiled because he started one sentence, which he did not complete, by saying that he could not believe that I would —and I am sure that he was about to say not be moved by the arguments and be able to refuse to accept the new Clause. It would be somewhat naïve to believe that on each occasion the eloquence of arguments moves the Treasury to accept everything put forward.
    Clause 28 attempts to achieve something which one would obviously like to achieve if there were no possibility of amounts of interest being paid overseas which should not be treated as distributions. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) spoke of fellow subsidiaries. I think that he recognises that it is perfectly possible for two companies to be fellow subsidiaries, although for one still to be a substantial shareholder in the other. It is perfectly possible for Company A to own all the shares of Company B, but only a small part of the shares of Company C, the rest being owned by Company B. Both would then be subsidiaries, but it would still be possible for one subsidiary to be a substantial shareholder in the other.
    The new Clause suggests where interest payments should not be treated as distributions. Unfortunately, the suggested solution does not circumvent the difficulty. A non-resident Company A could wholly own a subsidiary resident Company B, which in turn had a wholly-owned subsidiary resident Company C. Under the terms of the new Clause, Company C would not be regarded as a subsidiary of Company A. In that case, Company C could pay interest to its overseas grandparent, to call it such, Company A, and still get a deduction of relief which could not be granted to the subsidiary, Company B. It would be necessary to prevent this result from, being achieved, because it would then be very easy for subsidiary B to route interest payment to its parent A through C, and in this case the whole

    1437
    of the design of the Corporation Tax structure would be circumvented. That solution would be open to the widest possible abuse.
    The majority of the speeches were made about new Clause 29 and it was about that that the widest concern was felt. Under Corporation Tax it is necessary to prevent the profits of a company from being reduced for tax purposes by what in substance are distributions of profits.
    This is not a new problem. It existed previously under Profits Tax, and it was one which was met by similar rules, though not quite as stringent, because under the original rules the Profits Tax provisions provided that interest paid to a director, other than a whole-time service director, by a director-controlled company was disallowed in computing the company's profits for Profits Tax. This was extended, in a way to which a number of hon. Members, and some of my colleagues in the past, have objected, by the reference to associates. The whole scheme would have been blown wide open if this reference to associates was not there, by the loan being made, not by the controlling director, but by his wife or children.
    Obviously the provision gives rise to difficulties. There are clearly cases when a payment of interest should be allowed for deduction. These are cases of a public company which pays debenture interest in computing its profits for Corporation Tax. There are other cases, where payments for interest on loan capital provided are ways in which the scheme is circumvented. There are cases here where this would blow Corporation Tax sky high.
    The difficulty, as the Chief Secretary has explained, is that it is a matter of how far one should go. If one goes to the extent of preventing tax avoidance completely, there will be some bona fide hard cases. If one goes completely the other way, one opens the door to tax avoidance. One has to arrive at a reasonable half-way house. I recognise the difficulties about this. A decision was taken earlier that we would look to see how far hard cases came to light, how far there were complaints about the operation of this provision in individual cases.
    1438
    It was decided that this would be reviewed at the end of the year. The Inland Revenue has not had many complaints of cases of individual hardship. It has not had many cases emerging in practice where the rule has been criticised as inequitable. Cases which have been brought forward will be considered, and at the end of the year the whole position of these loans will be reviewed.
    Mr. van Straubenzee: Will the hon. and learned Gentleman not recognise, in his usual very fair way, that it would be unlikely, in the situation so clearly set out from this side of the House, that one would take one's troubles to the Inland Revenue? It would be the last body to whom one would turn.
    Mr. Taverne: If the tax is working in this way and individual cases of hardship arise, representations will be made. In this case, representations have been made in general, but it has been very hard to get individual cases brought forward, showing that the tax is working inequitably. A few cases have been produced and will be reviewed. It is a matter which has to be carefully considered. The new Clause will go much too wide, because its effect will apparently be to limit the loans by reference to the authorised, and not the issued, share capital. Therefore, the limit would be very high. The rule will be examined before the end of the year, and individual cases will be considered carefully.
    Mr. Hirst: The hon. and learned Gentleman is relatively new to this, but he is a little naive if he imagines that the House will accept this sort of reply on a major matter of this character. We had a long discussion on this matter in 1965, and it is one upon which my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) is absolutely right. He speaks from great experience. Mine is more modest, but it confirms his case.
    What is the difficulty in this case? If the hon. and learned Gentleman really thinks that in this sort of situation people will write letters to the Treasury, he is being too naive for words. I do not know where to begin to educate him. He must be educated if he is to take part in finance debates, because we cannot take this. There will be a rumpus if we are to have that sort of reply.

    1439
    The hon. and learned Gentleman must know what he is talking about, not from the angle of a Treasury brief—which I would not question—but from practice. He must learn what happens and what makes business tick. After all this time— they were extremely uneducated a few years ago—the Government ought to be learning that the private or close companies are the genesis of everything, and that if we do not encourage them, we shall not get big businesses or even mergers. Not even Sir Frank Kearton can do it, which is saying something. One must operate from the beginning.
    I have seen time and again in my business life and in my constituency smaller companies of this character being allowed to grow and ultimately becoming the great companies doing our export trade. They have not done it by rules, specifications and the application of the principles of the Labour Party as instanced in these debates. They never could have done. But the Government are so prejudiced by this business of tax avoidance.
    If we can only encourage close and private companies to grow, what on earth would it matter in that context if one or two people, so to speak, got away with it? Until the Government realise this factor, they will get nowhere. The great majority of people operating our individual businesses are too busy and too keen to worry about a little tax avoidance. This is a prejudice in the minds of the Government. Of course, there will be the smart chap somewhere and, whatever we do, he will be there. But he is not to be worried about. Just because one or two people will do something which is not quite ethical does not mean that the whole lot should be clobbered.
    My hon. Friend the Member for Ormskirk (Sir D. Glover) was right in saying that in many instances one cannot get one's business to grow easily. One cannot simply go to banks or finance houses in the City because, at that early stage, one has only an idea, something
    sound but which one cannot sell the outside world yet. But many people—friends and the family—will say, "I do not really know whether this is a good idea but I think this man should be encouraged and I will help him and put forward money." Is that a crime? How are we to get our businesses growing if the Government do not understand the principle behind the whole thing? How dare the hon. and learned Gentleman present the House with such an answer? He should be ashamed of himself.
    Mr. Patrick Jenkin: I entirely share the disappointment and frustration which my hon. Friend the Member for Shipley (Mr. Hirst) has just voiced with the reply. The hon. and learned Gentleman gave virtually no sign of having paid any attention to any of the arguments advanced from this side of the House about the difficulties this situation is creating for business, about the hampering restrictions it represents on the expansion of new businesses.
    I will forbear for want of time from quoting it at length but I advise the hon. and learned Gentleman to read an article in The Director called
    "Killing Off Tomorrow's Big Businesses."
    It is by Mr. James Pilditch, of Allied Industrial Designers, Ltd., who writes that, if he gets £50,000 extra export business, his accountant works out that only a little over £1,000 of that reaches the shareholders after all the tax wanted under the new rules.
    The hon. and learned Gentleman must realise that this and other rules on close companies are a grave disincentive to enterprise and effort. By his answers tonight, he has shown a marked lack of sympathy which my right hon. and hon. Friends would be justified in expressing dissatisfaction with by voting in the Division Lobby.
    Question put, That the Clause be read a Second time: —
    The House divided: Ayes 136, Noes 199.

    Division No. 260.]

    AYES

    [9.44 p.m.

    Alison, Michael (Barkston Ash)

    Brewis, John

    Campbell, Gordon (Moray & Nairn)

    Baker, Kenneth (Acton)

    Brinton, Sir Tatton

    Carlisle, Mark

    Balniel, Lord

    Bromley-Davenport,Lt.-Col.SirWalter

    Chichester-Clark, K.

    Biffen, John

    Buchanan-smith,A1ick(Angus,N&M)

    Clegg, Walter

    Birch, Rt. Hn. Nigel

    Bullus, Sir Eric

    Cooke, Robert

    Black, Sir Cyril

    Burden, F. A.

    Cooper-Key, Sir Neill

    Boardman, Tom (Leicester, S.W.)

    Campbell, B. (Oldham, W.)

    Corfield, F. V.

    Crowder, F. P.

    Kimball, Marcus

    Rawlinson, Rt. Hn. Sir Peter

    Dance, James

    King, Evelyn (Dorset, S.)

    Rhys Williams, Sir Brandon

    Davidson, James (Aberdeenshire, W.)

    Kirk, Peter

    Ridley, Hn. Nicholas

    d'Avigdor-Goldsmid, Sir Henry

    Knight, Mrs. Jill

    Ridsdale, Julian

    Dean, Paul (Somerset, N.)

    Lambton, Viscount

    Rodgers, Sir John (Sevenoaks)

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

    Langford-Holt, Sir John

    Rossi, Hugh (Hornsey)

    Eden, Sir John

    Longden, Gilbert

    Scott-Hopkins, James

    Elliot, Capt. Walter (Carshalton)

    Lubbock, Eric

    Sharpies, Richard

    Errington, Sir Eric

    Mackenzie, Alasdalr (Ross&Crom'ty)

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

    Eyre, Reginald

    Maclean, Sir Fitzroy

    Silvester, Frederick

    Farr, John

    Macleod, Rt. Hn. lain

    Sinclair, Sir George

    Fortescue, Tim

    McMaster, Stanley

    Smith, Dudley (W'wick & L'mington)

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

    Maddan, Martin

    Smith, John (London & W'minster)

    Galbraith Hn. T. G.

    Maginnis, John E.

    Stainton, Keith

    Glover, Sir Douglas

    Marten, Neil

    Steel, David (Roxburgh)

    Goodhart, Philip

    Maude, Angus

    Stoddart-Scott, Col. Sir M. (Ripon)

    Goodhew, Victor

    Mawby, Ray

    Summers, Sir Spencer

    Cower, Raymond

    Maxwell-Hyslop, R. J.

    Taylor, Sir Charles (Eastbourne)

    Grant, Anthony

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

    Temple, John M.

    Grieve, Percy

    Mills, Peter (Torrington)

    Thatcher, Mrs. Margaret

    Griffiths, Eldon (Bury St. Edmunds)

    More, Jasper

    Turton, Rt. Hn. R. H.

    Grimond, Rt. Hn. J.

    Morgan, Geraint (Denbigh)

    van Straubenzee, W R.

    Gurden, Harold

    Munro-Lucae-Tooth, Sir Hugh

    Waddington, D.

    Hall, John (Wycombe)

    Murton, Oscar

    Wainwright, Richard (Colne Valley)

    Hall-Davis, A. G. F.

    Nabarro, Sir Gerald

    Walker-Smith, Rt. Hn. Sir Derek

    Harrison, Brian (Maldon)

    Nicholls, Sir Harmar

    Wall, Patrick

    Harrison, Col. Sir Harwood (Eye)

    Noble, Rt. Hn. Michael

    Walters, Dennis

    Harvey, Sir Arthur Vere

    Onslow, Cranley

    Ward, Dame Irene

    Harvie Anderson, Miss

    Osborne, Sir Cyril (Louth)

    Weatherill, Bernard

    Hawkins, Paul

    Page, Graham (Crosby)

    Whitelaw, Rt. Hn. William

    Heald, Rt. Hn. Sir Lionel

    Pardoe, John

    Williams, Donald (Dudley)

    Heseltine, Michael

    Pearson, Sir Frank (Clitheroe)

    Wilson, Geoffrey (Truro)

    Higgins, Terence L.

    Peel, John

    Winstanley, Dr. M. P.

    Hirst, Geoffrey

    Percival, Ian

    Wolrige-Gordon, Patrick

    Holland, Philip

    Pike, Miss Mervyn

    Younger, Hn. George

    Hooson, Ernlyn

    Pink, R. Bonner

    Hornby, Richard

    Pounder, Rafton

    TELLERS FOR THE AYES:

    Hunt, John

    Powell, Rt. Hn. J. Enoch

    Mr. Anthony Royle and

    Jenkin, Patrick (Woodford)

    Pym, Francis

    Mr. R. W. Elliott.

    Kaberry, Sir Donald

    Ramsden, Rt. Hn. James

    NOES

    Abse, Leo

    Datyell, Tarn

    Herbison, Rt. Hn. Margaret

    Albu, Austin

    Davies, Harold (Leek)

    Hooley, Frank

    Allaun, Frank (Salford, E.)

    Davies, Ifor (Cower)

    Horner, John

    Alldritt, Walter

    Dempsey, James

    Howell, Denis (Small Heath)

    Anderson, Donald

    Diamond, Rt. Hn. John

    Howie, W.

    Archer, Peter

    Dickens, James

    Hoy, James

    Armstrong, Ernest

    Doig, Peter

    Huckfield, Leslie

    Atkins, Ronald (Preston, N.)

    Driberg, Tom

    Hughes, Roy (Newport)

    Atkinson, Norman (Tottenham)

    Dunn, James A.

    Hunter, Adam

    Bacon, Rt. Hn. Alice

    Dunwoody, Mrs. Gwyneth (Exeter)

    Hynd, John

    Barnett, Joel

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

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

    Baxter, William

    Edelman, Maurice

    Jackson, Peter M. (High Peak)

    Beaney, Alan

    Edwards, William (Merioneth)

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

    Bence, Cyril

    Ellis, John

    Johnson, Carol (Lewisham, S.)

    Bidwell, Sydney

    English, Michael

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

    Bishop, E. S.

    Evans, Albert (Islington, S.W.)

    Jones, Dan (Burnley)

    Blackburn, F.

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

    Jones, J. Idwal (Wrexham)

    Boardman, H. (Leigh)

    Faulds, Andrew

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

    Booth, Albert

    Fernyhough, E.

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

    Boston, Terence

    Fletcher, Ted (Darlington)

    Kerr, Russell (Feltham)

    Braddock, Mrs. E. M.

    Foley, Maurice

    Lawson, George

    Bray, Dr. Jeremy

    Foot, Michael (Ebbw Vale)

    Leadbltter, Ted

    Brooks, Edwin

    Forrester, John

    Ledger, Ron.

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

    Fowler, Gerry

    Lee, Rt. Hn. Frederick (Newton)

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

    Freeton, Reginald

    Lee, John (Reading)

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

    Galpern, Sir Myer

    Lestor, Miss Joan

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

    Gardner, Tony

    Lever, Harold (Cheetham)

    Butler, Herbert (Hackney, C.)

    Gray, Dr. Hugh (Yarmouth)

    Lewis, Arthur (W. Ham, N.)

    Callaghan, Rt. Hn. James

    Gregory, Arnold

    Lewis, Ron (Carlisle)

    Cant, R. B.

    Grey, Charles (Durham)

    Lomas, Kenneth

    Carmichael, Neil

    Griffiths, Eddie (Brightside)

    Loughlin, Charles

    Carter-Jones, Lewis

    Griffiths, Will (Exchange)

    Luard, Evan

    Chapman, Donald

    Hamilton, James (Bothwell)

    Lyons, Edward (Bradford, E.)

    Coe, Denis

    Hamling, William

    McBride, Neil

    Coleman, Donald

    Hannan, William

    McCann, John

    Concannon, J. D.

    Harper, Joseph

    MacColl, James

    Corbet, Mrs. Freda

    Harrison, Walter (Wakefield)

    MacDermot, Niall

    Crawshaw, Richard

    Haseldine, Norman

    McGuire, Michael

    Cronin, John

    Hazell, Bert

    Mackintosh, John P.

    Grossman, Rt. Hn. Richard

    Heifer, Eric S.

    Maclennan, Robert

    Cullen, Mrs. Alice

    Henig, Stanley

    McMillan, Tom (Glasgow, C.)

    1442

    1443

    Mahon, Peter (Preston, S.)

    Paget, R. T.

    Spriggs, Leslie

    Mahon, Simon (Bootle)

    Palmer, Arthur

    Steele, Thomas (Dunbartonshire, W.)

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

    Parkyn, Brian (Bedford)

    Symonds, J. B.

    Manuel, Archie

    Pearson, Arthur (Pontypridd)

    Taverne, Dick

    Marks, Kenneth

    Peart, Rt. Hn. Fred

    Thornton, Ernest

    Marquand, David

    Pentland, Norman

    Tinn, James

    Mason, Rt. Hn. Roy

    Price, Christopher (Perry Barr)

    Tuck, Raphael

    Maxwell, Robert

    Price, Thomas (Westhoughton)

    Urwin, T. W.

    Mellish, Rt. Hn. Robert

    Price, William (Rugby)

    Walker, Harold (Doncaster)

    Mendelson, J. J.

    Rankin, John

    Watkins, David (Consett)

    Millan, Bruce

    Reynolds, Rt. Hn. G. W.

    Watkins, Tudor (Brecon & Radnor)

    Miller, Dr. M. S.

    Roberts, Albert (Normanton)

    Weitzman, David

    Milne, Edward (Blyth)

    Robertson, John (Paisley)

    Wellbeloved, James

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

    Robinson,Rt.Hn.Kenneth(St.P'c'as)

    White, Mrs. Eirene

    Molloy, William

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

    Wilkins, W. A.

    Morgan, Elystan (Cardiganshire)

    Rose, Paul

    Willey, Rt. Hn. Frederick

    Morris, Alfred (Wythenshawe)

    Rowlands, E. (Cardiff, N.)

    Williams, Alan (Swansea, W.)

    Morris, Charles R. (Openshaw)

    Ryan, John

    Williams, Alan Lee (Hornchurch)

    Moyle, Roland

    Sheldon, Robert

    Willis, Rt. Hn. George

    Murray, Albert

    Shore, Rt. Hn. Peter (Stepney)

    Wilson, William (Coventry. S.)

    Neal, Harold

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

    Winnick, David

    Oakes, Gordon

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

    Yates, Victor

    O'Malley, Brian

    Silkin, Rt. Hn. John (Deptford)

    Oram, Albert E.

    Silkin, Hn. S. C. (Dulwich)

    TELLERS FOR THE NOES:

    Orme, Stanley

    Silverman, Julius (Aston)

    Mr. Alan Fitch and

    Oswald, Thomas

    Slater, Joseph

    Mr. Eric G. Varley.

    Page, Derek (King's Lynn)

    Small, William

    New Clause 30
    GROUP RELIEF
    After sub-paragraph (c) of subsection (2) of section 20 of the Finance Act, 1967, there shall be inserted the following sub-paragraphs:
    '(d) where the surrendering company is a member of a consortium and the claimant company is a trading company which is owned by the consortium and which is not a subsidiary of any company, or
    (e) where the surrendering company is a member of a consortium and the claimant company is a trading company—

    (i) which is a 90 per cent. subsidiary of a holding company which is owned by a consortium, and

    (ii) which is not a subsidiary of a company other than the holding company, or

    (f) where the surrendering company is a member of a consortium and the claimant company is a holding company which is owned by the consortium and which is not a subsidiary of any company'.—[Mr. Patrick Jenkin.]
    Brought up, and read the First time.
    Mr. Patrick Jenkin: I beg to move, That the Clause be read a Seeond time.
    Mr. Speaker: I have suggested that with this new Clause we take new Clause 66, "Definitions for the purpose of group relief".
    Mr. Jenkin: Mr. Speaker, I begin by expressing my gratitude and that of my right hon. and hon. Friends that you have accepted the suggestion that these proposed new Clauses might conveniently be discussed together.
    1444
    We are dealing with the complicated grouping provisions which were embodied in last year's Finance Act. This is an aspect of Corporation Tax law where I think the Chief Secretary will agree we have made progress in the last three years, but little by little. In the 1965 Act there was no provision for grouping for Corporation Tax. I moved an Amendment, but it was rejected as being impossible. In 1966, I moved a similar Amendment, and on that occasion the Chief Secretary, though unable to accept it, cast a benign eye on it.
    In 1967, the Bill contained a Clause, which is now Section 20 of the 1967 Act, which went part of the way to providing a system of grouping for Corporation Tax. In Committee I moved an Amendment to say that this should apply to consortia of companies as well as to parents and subsidiaries. Again the Chief Secretary cast a benign eye on the proposal and on Report a consortia Amendment duly appeared, but it went only one way. It applied only where a trading company which was owned by five or fewer companies was the loser, and enabled it to share its losses with its parents.
    I moved an Amendment to suggest that the provision should operate both ways, that where the consortium company was making a profit, that should be allowed to be shared with any losses made by any of the parent companies.

    1445
    Replying to the debate the Chief Secretary was again benign. He said:
    "I hope that the hon. Gentleman will agree with me that we have gone a long way. I am not saving that we close our minds to going any further. At the moment, we have gone as far as we can. I wanted to listen to his arguments, and I have heard them, some matters require more careful consideration, and I do not rule out the possibility of coming some way to meet him in due course, which inevitably will be in a year's time."—[OFFICIAL REPORT, 27th June, 1967; Vol. 749, c. 352.]
    Here we are, and as a result I am not entirely without hope that the Chief Secretary's benign eye might lead him to accept the Clause.
    This is a case where the joint offspring of a consortium is profitable, but its parents are making losses. I think one can add to the argument I adduced last year, and which I shall not repeat, that if this extension of the grouping relief is not allowed, one will see a growth in the pattern which is already operating of companies engaging in partnership operations because by doing so we are able to set off their losses against their profits. But this is bound to be an artificial business arrangement, and one which I should have thought was undesirable. If, however, the Clause is accepted, the case is met, and I hope, therefore, that the Chief Secretary will be able to indicate his acceptance of it this evening.
    New Clause 66 is also concerned with this grouping provision for Corporation Tax. It aims to widen the relief slightly in three separate ways. First, as the 1957 Act is drawn a consortium qualifies for relief only if it is 100 per cent. owned by the parent companies. The Chief Secretary will remember that where one is dealing with the grouping of dividends the test is 75 per cent. New Clause 66 suggests that 75 per cent. is fair and will not lead to any undesirable tax avoidance. If some minor loophole is left, I suggest that that will be a small price to pay for the added flexibility which a 75 per cent. test will bring.
    10.0 p.m.
    The second extension would apply to group relief in the case of a consortium in which the parent company did not necessarily hold shares in the joint offspring but in which some other company in the group had made a loss which was set
    1446
    off against the profits of the joint offspring. This is a small extension, and in the case of a group of companies it seems quite reasonable, because if the pattern is intended to operate both for consortia of companies and subsidiaries and a subsidiary of a parent company makes a loss and a consortium company—of which the parent company is a member— makes a profit, it is not unreasonable that the loss and the profit should be set off against each other.
    The third change is a small one, which may at first sight appear to be dangerous but which I believe is not so. That is the case in which a consortium of parent companies owns shares in a holding company which itself owns shares in subsidiaries. If those subsidiaries are all United Kingdom companies, the case is covered by existing law, but if any companies are resident overseas the relief does not apply under the provisions of Section 20(7) of the 1967 Act which defines companies to which the Clause refers as United Kingdom-resident companies.
    In general this restriction is right, but it can operate much too restrictively in the circumstances that I have described, in which a holding company is interposed between the consortium parent companies and the subsidiaries. It is quite appropriate that the relief should operate even if some subsidiaries are resident overseas.
    These are all useful extensions of Section 20. They all reflect the basic philosophy which that Section intended to embody, namely, that we tax a group of companies broadly on the balance of its profits and losses and do not tax the profits and merely leave the group to carry its losses forward to another year. I have moved the new Clause in a spirit which I hope the Chief Secretary will find sympathetic and I hope that he, in turn, will be sympathetic to the amendments which the new Clauses embody.
    Mr. Diamond: The hon. Member was correct in saying that we have made considerable progress in this matter year by year and little by little. The form of the progress is as he has indicated. He puts forward a proposal; I think about it; I make some sympathetic noises, and I am later—on Report, or during the following year—in a position to bring forward a proposal to meet the point. This process serves two purposes. First, it meets the point made and, secondly, it

    1447
    provides a suitable platform upon which a second request can be built.
    I realise this and I am grateful for what the hon. Member said, because he painted a picture of me as I would want to be seen, namely, as being sympathetic to this general approach and as trying to move with the times—and, to the extent that consortia are adopted as a suitable method of organising business, to provide that nothing in the Income Tax Acts prevents their proper businesslike spread.
    The hon. Member has now proceeded to erect on the considerable structure of Amendments which have been made hitherto a number of proposals, which we are now discussing. I will deal with them together rather than go into detail on each one as the broad case is the same on each. None of the proposals, as far as I am aware and as far as the Inland Revenue is aware, presents actual cases of difficulty at this time. The first proposal was one which the hon. Gentleman referred to on an earlier occasion last year as one of artificial hypothesis. It is of considerable artificiality. It is the case where the parents get together and set up a consortium; the consortium makes profits out of business ideas contributed by the parents, and the parents make losses.
    This is theoretically possible, but highly unlikely. I am dwelling on the point of possibility because I and my officials have said that we are not aware of any individual cases. When discussions have taken place with, for example, the C.B.I., we have invited those discussing these matters with us to give examples and to produce real cases, but this has not been done. I am strengthened in my view that, although this is theoretically possible, there are no individual cases afoot which call for consideration.
    It would be wholly illogical for me to use that argument unless I were to say that, if there were such cases, we would want to look at them with a degree of sympathy. One cannot rely on the argument that it does not arise unless one deals with the position of what happens if it does arise. If it does arise, I would be happy to look at the Clause Amendment with sympathy, and the same remarks apply to the other Clauses which we are discussing.
    1448
    The hon. Gentleman would not suggest that the only method of avoiding difficulty is the method of the relief which he proposes. If, for example, a holding company is embarrassed by containing both resident and non-resident companies, there is nothing easier than to split it up into two holding companies so that one would be of the kind to qualify for the relief. One does not want to put this trouble on to people unnecessarily, but it is an easy way of organising the matter so that the difficulty does not arise.
    My reply to the three points contained in the second Clause and the main point made in the first Clause is, first, that we are not aware of actual cases. Secondly, these proposals added together amount to a considerable rewriting of the provisions which we have so far agreed for relief where consortia are involved. Thirdly, the arrangements that we have provided have not had a long run. We have altered them every year and the latest ones have had hardly any satisfactory time to run. Fourthly, and importantly, if during the course of the coming year we are made aware of actual cases of difficulty, I will continue to look at the matter with considerable sympathy and, if necessary, bring forward proposals to the House next year.
    The difficulty has not, in practice, arisen. I do not think that we ought to anticipate it. We ought to see how the present proposals are running. I am grateful to the hon. Gentleman for what he has said, and I hope he feels that 1 have responded in the spirit in which he put forward his request.
    Mr. Patrick Jenkin: I do not wish unduly to prolong the debate. I would only assure the Chief Secretary that I find it difficult to believe that busy businessmen and their advisers would have taken the trouble last year and this year to seek parliamentary support for Amendments which clearly they regard as important to the existing structure of the Corporation Tax if they were wholly without foundation. It may be that, for example, the C.B.I. has not produced the concrete cases to the Treasury which have moved it to seek the Parliamentary support from this side of the House which it has.
    However, I have no doubt that those responsible for these matters will read what the Chief Secretary has said and

    1449
    will see that he and his officials are appraised of any cases where the existing law is operating unduly restrictively and where my Amendments might ameliorate the position. Then next year, I hope that we shall take a further step, when one would hope that the Chancellor would produce in the Finance Bill the proposals that I have moved this year so that we could move on to further concessions, taking us well into the next Government.
    Having said that, I beg to ask leave to withdrawn the Motion.
    Motion and Clause, by leave, with drawn.

    New Clause
    TAX ON DISTRIBUTION
    In paragraph 4 of Schedule 12 to the Finance Act 1965 the words from 'Act' to the end of the paragraph shall be repealed.—[Mr. Michael Alison.]
    Brought up, and read the First time.
    Mr. Michael Alison: I beg to move, That the Clause be read a Second time.
    The Clause is designed to relieve paperwork by corporate bodies who already have a great deal to undertake. I may be mistaken in the precise terms which have been adopted, but I hope that it introduces a simple remedy, the effect of which will be to straighten out some of the deviousness of the Finance Act, 1965, and introduce a shorter distance between the two points of the aggregate liability of a corporation to pay tax and its aggregate discharge of that obligation.
    To fill in the background a little, perhaps I might remind the House of an existing complication which arises from the fact that there are two sorts of outgoings for which a corporation has to account to the Inland Revenue for Income Tax. The first is in respect of dividends or other distributions made to its shareholders in the technical sense of the word "distribution" and as we understand it in the terms of the Finance Act, 1965. The second is what are generally referred to as "other payments"—interest payments, and so on—not payable to shareholders necessarily. In respect of both sorts of outgoings, the corporation has to account to the Inland Revenue for Income Tax.
    1450
    The plot thickens slightly when one recalls that there are two categories of income that a corporation may receive which correspond to those two species of outgoings. If those two categories of income accrue to it, they will do so under deduction of Income Tax. The two categories of income are distributions or dividends received from another company resident in the United Kingdom— that is, franked investment income—and other annual payments like interest payments payable to the corporation. Both those categories of income will be received under deduction of Income Tax, and tax will be borne by the receiving company.
    10.15 p.m.
    These two outgoings and two incomes are precisely the same thing, depending on whether one is paying or receiving. I am sure that the Chief Secretary, with his desire always to reach the crucial point as quickly as possible and his experience as an accountant, will agree that the common sense procedure, when a company accounts for Income Tax when it is the maker of certain payments, dividends or interest, and when it has an entitlement to repayment, is that it should marry the obligations and entitlements and strike a net obligation. This is a straightforward short cut when conflicting claims and obligations arise.
    This is where we plunge into the murky waters of Treasury deviousness in the machinery for discharging those obligations and entitlements and striking the net figure. The 1965 Finance Act provides for precisely this sort of rational off-setting in respect of the monthly accounting period, as distinct from the year-end rounding-up of the off-setting arrangements made during the monthly accounting periods. The feature which the Act introduced into the monthly accounting periods was that all these lines could be crossed; that is to say, tax which had been borne on franked investment income and to which there was an entitlement to repayment, or tax which had been borne by other payments received by the company, could be used indiscriminately in the monthly settlements to offset obligations in respect of distributions or other payments made.
    The two categories did not have to be married into precisely the same family. They could all be jumbled together. All

    1451
    that had to be resolved at the end of the period was a residual figure of all these claims and obligations. Yet, at the end of the fiscal year, instead of just being allowed to settle with the residual net figure emerging from these conflicting transactions, the Act obliged corporations to pull up all these lines and unscramble all these settlements, and made it clear that entitlement to repayment of tax in respect of franked investment income could be used only to offset obligations to account for tax for dividends and distributions, and for nothing else, including interest payments. Correspondingly, entitlement to repayment of tax in respect of other payments received by a corporation, not being franked investment income, could be applied only to offset tax obligations in respect of these other payments, interest payments, for example, forming an outgoing.
    Thus, a corporation which has conceivably gone through the year striking at the end of each month a sensible net balance for these four possible permutations of entitlement or obligation must tear up the whole complicated system, look up all the old documents and revise its whole payments procedure throughout the 12-monthly accounting period to resolve the different categories into their original family likenesses once again.
    It seems to many corporations an irrelevant waste of manpower, paper, energy and patience to have to go to this trouble. We are, therefore, merely asking the Government to persist in the logic which has been introduced into the settlement of the monthly account, namely, that all the conflicting claims and counterclaims to and from the Revenue should be settled at the end of the fiscal year by a simple net residual figure, as it is for the monthly accounting period, without the necessity being laid on corporations to resolve these conflicting claims into their original family categories.
    I concede that the words of the Clause may not precisely achieve the objective we have in mind. I hope, however, that in what is a technical and complicated sector of company finance the Financial Secretary will see the reasonable logic of our proposal, even if he must dispute the form in which we seek to achieve it.
    Mr. Harold Lever: Nobody who took part in the debates on the 1965 Act, in which we instituted our system of Corporation Tax, will attribute to me unqualified enthusiasm for every particularity of the arrangements then made for the taxing of corporations. Even my right hon. Friend the Chief Secretary, who was present during those debates, will bear witness to the truth of that. It so happens, however, that the hon. Member for Barkston Ash (Mr. Alison) has picked on a particular system for dealing with company investment income, franked and unfranked, which I think he will, on reflection, regard as not unreasonable and not unfair.
    The system of Corporation Tax involves a great number of payments in and out of the company and the Revenue to secure the tax and obligations of the company concerned as speedily as possible and as a monthly settlement, for it follows from the Corporation Tax system —I will not go into it in unnecessarily great detail—that it often involves a company holding the Revenue's money.
    This means that if, for example, a company has a fiscal year ending in May and pays its dividend in May, so deducting tax on behalf of the Inland Revenue under Schedule F, it is then in possession of the Revenue's money. The tax deducted belongs to the Revenue, which has a pardonable anxiety to have it in its pocket at the earliest date. For this reason we established the system of monthly settlements, and that does not seem unreasonable.
    It follows, however, that if the Revenue says, "We wish to have our money from the company in these circumstances at monthly intervals and as soon as possible," the company should be entitled to set off as quickly as possible against its obligations any obligations which the Revenue may have. The hon. Member for Barkston Ash will concede that we must have monthly settlements. The difficulty is that some of the tax deductions that are made in the payments through the company, notably dividends, are usable only in certain circumstances. One such circumstance which normally applies to a company is when it receives franked investment income; it can use the tax deducted only to offset it against the dividends it pays out. There are

    1453
    other circumstances, but normally the only real use that a company can make of franked investment income is to relieve itself of its obligations in this respect and so to set one off against the other.
    In the monthly computations, the Revenue takes the most favourable view from the taxpayer's point of view. It allows a taxpayer company to set off against those franked investment dividend deductions anything of any kind for which the company would be accountable including, for example, tax that it had itself deducted from a debenture payment for which it would be accountable to the Revenue and which is not offsettable under the law against the franked investment income it has received. It is offset in the monthly settlement to the advantage of the taxpayer. It follows that at the end of the year, however tedious it is to ascertain what exactly is the tax due, we have to go through the computations and segregate the different types of income received by a company into their original form.
    To put it shortly, in the monthly settlements, to make it simpler, the Revenue concedes that any tax deduction the company has suffered can be set off against any tax liability which the company has to the Revenue. This is to the advantage of the company, because in the example I have given, in the monthly settlement, instead of the company paying over at once the tax that is deducted from a debenture coupon, which it would have to do if we enforced the law month by month, the company is able to hold the money till the year ends.
    It comes down to this. Since we want monthly settlements, the fairest thing is to take the monthly settlement in the. way that is most favourable to the taxpayer, but when we come to the final settlement, alas, the Revenue wants its correct amount of tax. This involves disentangling the payments, so that the temporary advantageous use by the company cannot be finally and ultimately acceptable. Without my going into too many minute aspects of Corporation Tax law, I hope that the hon. Gentleman will be satisfied that the not uncritical eye of a Treasury Minister having looked at it, he has come to the conclusion that this
    1454
    is to the advantage of the taxpayer, and that there is no real way, short of losing that advantage to a taxpayer and making him perform monthly calculations of accuracy, as we use for the final settlement. In principle, it is easier to do 11 simple statements which need no time at all, and one final, rather more complicated system, than to have 12 monthly settlements, each minutely correct in accordance with the somewhat complicated provisions of the 1965 Act. For those reasons, I hope that the hon. Gentleman will feel minded to withdraw his Clause.
    Mr. Alison: The Financial Secretary, with his customary acumen and charm, has put the best possible light on a poor case. I appreciate his sense of obligation and his desire to help the taxpayer. He stressed that it was in the interests of the taxpayer that these monthly payments were tilted in the taxpayers' favour, but he left out one possible permutation of the alternatives which was at once apparent to hon. and right hon. Members on this side—that the principle of being of assistance to the taxpayer in 11 months out of 12 should be extended to the twelfth month.
    This principle of helping the taxpayer in respect of his obligations and preeminently in respect of the paper work with which he is encumbered when he should be doing things more directly connected with the welfare of the company and the economy as a whole, should be the overriding concern of the Treasury.
    Although, in the light of the hon. Gentleman's attempt to put the best possible construction on these provisions, I would not advise my hon. and right hon. Friends to press this issue to a Division, we would, nevertheless, like to put it on record that we think that the principle of fairness to the taxpayer in regard to the monthly payments should be extended to the full year, and that that principle should not be entirely negatived and taken away at the end of the normal accounting period. For that reason, we record our disappointment— a disappointment that will be echoed elsewhere.
    Question put and negatived.

    New Clause 33
    CHARITABLE SETTLEMENT
    The proviso to paragraph 21(3) of the Seventh Schedule to the Finance Act 1965 shall not apply to a charitable settlement nor to any settlement which, apart from this provision, otherwise satisfies the conditions prescribed by the proviso to section 25(7) of this Act.—[Mr. John Hall.]
    Brought up and read the First time.
    10.30 p.m.
    Mr. John Hall: I beg to move, That the Clause be read a Second time.
    This Clause is designed to remove an anomaly which, obviously by an oversight, occurred in the original drafting of Schedule 7 to the 1965 Act. Quite inadvertently, gifts to charities have been penalised by the operation of this Schedule. I shall read a definition of the purposes of the Schedule which admirably sets out the provisions. The definition is contained in a letter addressed by the Financial Secretary—I am sorry that he is not present now—to my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) in an exchange of correspondence on this point.
    The Financial Secretary defined the provisions of Schedule 7 of the Finance Act, 1965, as,
    "designed to prevent the creation of artificial losses by transactions entered into between associated parties. Their effect is, broadly, that transactions between 'connected' persons are deemed to take place at market value, and that a loss arising on a disposal from one connected person to another can only be set off against a gain arising on a transaction between the same two persons. The definition of 'connected persons' in paragraph 21 of Schedule 7 covers husbands and wives and close relatives; it also provides that the trustee of a settlement is 'connected' with any individual who, in relation to the settlement, is a settlor."
    That seems to be an excellent definition with which no one on the Treasury Bench would quarrel. I am sure that it was not intended when this was provided that it should catch gifts to established charities. In the same letter the Financial Secretary obviously thought that it would not catch those charities because he went on to say:
    "These provisions have no relevance to the ordinary case of a gift to an established charity, with the setting-up of which the donor was not concerned."
    1456
    Unfortunately for the charities and the donors of assets to such charities, he was not correct. Where an individual makes a gift of shares in a publicly quoted company to a charity, to be used as to capital and income for particular purposes and the shares in question show a loss as against their value of 5th April, 1965, the loss so sustained is not available for relief unless the donor makes another gift to the same charity and for the same purposes on which a profit is shown.
    The Financial Secretary agreed that that definition as established under Schedule 7 was, in fact, correct, but he went on to say, during interchanges, that it had taken the Treasury a little time to interpret the provisions of Schedule 7. When it takes time for the Treasury itself to interpret provisions, what chance has the ordinary layman of finding his way through this extraordinary morass of fiscal legislation?
    The Financial Secretary pointed out that, in practice, this had never cropped up, but he agreed that it could do and said that he would have a look at it. It has cropped up, and I hope that the Minister will have another look at this problem.
    An actual case did take place. A man who wished to make a donation of assets to an established charity did so by making over to the charity a number of shares which at the time showed a capital loss in his hands. As he passed the shares on to the charity, the loss was not available for relief from Capital Gains Tax unless at some later stage he made another gift to the same charity for the same purpose on which there was a profit on which the earlier loss could be offset.
    Clearly, if he realised that what he might have done was to make a gift of half the value of the assets and keep the other half hoping that in due course the market value would change, he could have offset the second loss against the second profit. I am sure that it was never intended to manipulate gifts to charities in that way to offset losses.
    I am certain that it is necessary only to draw this extraordinary anomaly to the Minister's attention for him to do what the Financial Secretary has already promised to do—to have an active and

    1457
    positive look at this, to accept the Clause and remove the anomaly from the Statute Book.
    Mr. Kenneth Baker: This is a very complicated point concerning minute details of the Capital Gains Tax. The point has been made clearly by my hon. Friend the Member for Wycombe (Mr. John Hall) that, because of this anomaly in Schedule 7, a possible donor may not be able to claim relief from Capital Gains Tax on the gift of shares to a charity. There is, therefore, an inhibition on the donor. Anybody who has had anything to do with charities knows that, once a donor has been brought to the point of boiling, as it were, one does not want to lose him by his having any slight worry that he may have to balance, for purely tax reasons, that donation of shares which he wants to make to a charity with another donation later of a different set of shares, possibly to a different charity. This is the law as it stands.
    The Clause attempts to remove this obstacle to the flow of compassion. I hope that the Treasury will be receptive to it. If the Treasury is in a receptive mood, we would like it to consider exempting all gifts to charity from the Capital Gains Tax. It is an anomaly in the Capital Gains Tax as it stands that all gifts to charity are, because they are a disposal and, therefore, a liability to Capital Gains Tax arises, liable to Capital Gains Tax. Yet Capital Gains Tax need not be paid on money given to a State charity or to the National Trust.
    I hope that the Treasury will bear this in mind. The Capital Gains Tax is complicated and obscure. Some of us are trying to make it simpler. This is a small anomaly. It is a point which affects some charities very much indeed. I hope that the Treasury will look upon it sympathetically.
    Mr. Taverne: As to the purpose of the tax—the case which the hon. Member for Wycombe (Mr. John Hall) raised—I cannot improve on the letter which was written by my hon. Friend the Financial Secretary setting out for what reason the tax was introduced. An anomaly was drawn attention to in the correspondence which ensued and the Financial Secretary said that this was a matter at which he would look. It is important to point out that, although there has been one case
    1458
    in which this has arisen, it is likely to be extremely rare. Gifts of assets rather than cash are very unusual. [HON. MEMBERS: "NO."] AS to hardship, the person can sell the assets and give the cash proceeds. If it is land, it is very unlikely that there would be any loss suffered on land which the donor would then be able to offset against the gain.
    Nevertheless, there is a case for looking at this. It is, however, difficult to draw the line, because in the case of gifts to private charitable trusts where the settlor is closely connected with the purposes for which the trust is set up and where, indeed, he has control over this, one is dealing with a case where there is considerable scope for tax avoidance. The private charitable trust could not easily be distinguished from the public established charity. This is something which my hon. Friend the Financial Secretary said that he would look at, but as it was such a rare case, and as one could hardly point to hardship being suffered, because there was the alternative of selling the shares, it was not something which was given great priority and it was not something in respect of which we were in a position to table an Amendment on Report.
    The difficulty about the Clause is that it means that the deserving case under the public established charity is mixed up with the private charity, where there is more room for tax avoidance. It seems desirable to distinguish these two. To answer the point put forward by the hon. Member for Acton (Mr. Kenneth Baker), there are no general Estate Duty exemptions for gifts to charities. It is reasonable that one should keep the position on Estate Duty in line with the position on capital gains.
    On another occasion a Financial Secretary said that it was of considerable importance that one should adhere to precedent, and not do something leading to wide pressure for the extension of the concession to other areas. One has the same position at the moment for exemption of gifts for capital gains purposes, as one has for Estate Duty purposes. If someone makes a gift of shares of a public company, it is likely that he will know what the company's liability will be, and he can sell enough of the shares to provide for this or can come to some arrangement with the charity that he

    1459
    should be repaid the amounts which he has foregone, and which he would have to pay as tax.
    If they are shares in a private company, a different position obtains, but it is unlikely that charities would accept shares in such companies. If one looks at gifts of land or chattels, one finds that there is a parallel with Estate Duty. It also applies if there are gifts to the National Trust under Section 32 of the 1965 Act, and in certain circumstances in the case of securities given to the National Trust. The position under Estate Duty and capital gains has been kept the same and it seems eminently sensible that this should be maintained.
    Mr. Kenneth Baker: The comparison between Estate Duty and capital gains is faulty. The hon. and learned Gentleman has selected for his argument, cases where they tally. There is the important instance where one can dispose of £1,000 worth of chattels under the capital gains legislation and not incur tax liability. If we use this example there is no comparison between capital gains and Estate Duty. One cannot give away £1,000 worth of chattels to a host of relations or charities and escape liability to Estate Duty. This is an important point, where they do not march side by side. It is not fair for the Minister to quote an example to support his argument but omit those which do not do so.
    Mr. Taverne: In almost every case the examples given are exactly side by side. If one takes the position under Sections 31 and 32 of the Act the position is the same. If one looks at the question of gifts of land or securities, in all these cases it is the same. There is no general exemption for Estate Duty purposes. The Clause would provide a general exemption for capital gains.
    10.45 p.m.
    Mr. Patrick Jenkin: I shall make a brief intervention in the debate on this new Clause since it appeared from his speech that my hon. Friend's point arose out of correspondence I had with the Financial Secretary, which, in turn, arose out of correspondence with a constituent of mine, Mr. Mace.
    1460
    The Minister of State's reply was strange. He must have heard the reaction of my hon. Friends when he said that gifts of assets to charity were most unlikely. I can assure him that many people owning shares in a private company may feel it right to give shares to charity rather than sell unmarketable securities and give the money. It is wrong to say that it is unlikely. This might happen, and for all I know, has happened.
    The hon. and learned Gentleman's second point was equally strange. He sought to distinguish between two sorts of charity, the public charity and the private. I believe that I am indebted to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) for reminding me of the words of Gertrude Stein, "A rose is a rose is a rose", and I might say to the Minister, "A charity is a charity is a charity".
    The law knows no distinction between the so-called public charity and the so-called private charity. The fact that the Minister and his advisers see all sorts of tax avoidance acts in something which he calls a private charity should not be allowed to stand in the way of remedying an admitted anomaly.
    Perhaps the most surprising thing the Minister of State said in reply to the case made by my hon. Friend the Member for Wycombe (Mr. John Hall) was that this was a matter which had not been given great priority. I gained the impression, and perhaps I do him an injustice, that it had not been given any priority at all. May I remind the Minister of what he wrote in March:
    "In practice, this point has never cropped up but I agree it could and I am having a further look into the question."
    Was there a further look after that letter, or was there no further look until the Amendment was put down by my hon. Friend for Report? The Minister has given us a most disappointing answer and although my hon. Friend the Member for Wycombe will wish to comment on it I feel that it would be right for me to urge him to invite his hon. Friends to support him in the Division Lobby.
    Sir H. d'Avigdor-Goldsmid: I am rather sad about the Minister of State, because, although he has not been long in the Treasury, he seems to have picked

    1461
    up all the jargon. For them, almost any action is action of tax avoidance and if any of us fell down dead, we should, in the eyes of the Treasury, have been indulging in tax avoidance. We are sad to see the Minister of State with his arm in a sling, but if he were so incapacitated as no longer to be able to do his duties, he would be indulging, in the eyes of his Department, in an act of tax avoidance. It is about time that the hon. and learned Gentleman and his colleagues recognised the facts of life. There are many decent, generous people who want to give money away, who want to divest themselves of their assets for the benefit of charities.
    I should like to echo what my hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) said about the Minister's scathing attitude to private charitable trusts. What is a private charitable trust? It is a trust set up to distribute funds to recognised charities, and if it is not a charitable trust it does not enjoy any of the advantages of a charitable trust. No one knows that better than the Minister's colleagues. Probably the Minister of State knows it himself. His idea that the formation of private charitable trusts is itself an act of tax avoidance is something of which he must disabuse himself, because it does not stand up to the general conceptions of the people.
    To think that any action anyone takes which does not actually involve payment of tax is itself an act of tax avoidance only shows that, although the hon. and learned Gentleman has not been long at the Treasury—I hope that it was not as a result of a wrestle with his advisers that he sustained his injury—he must have got the language deeply embedded in him. I am glad to accept the invitation to vote for the new Clause, really to show that here is a very intelligent hon. and learned Member who yet speaks not in the language of Mr. Gladstone, but in language tucked away in the Treasury files for about 100 years or more.
    Mr. John Smith: I have no wish to grill the Minister of State when he has his arm in a sling, but he has not only distinguished between types of charity —a dangerous road on which to set out; he has also invented a new meaning for tax avoidance. Most of us under-
    1462
    stand by tax avoidance a state of affairs where, instead of the Treasury getting the tax, it remains in the hands of the person who would otherwise have paid it.
    I would like to know how it is possible to avoid tax—to make money—by giving money away. If, on £1 worth of securities, Capital Gains Tax of 1s. is payable, the normal meaning of tax avoidance is that some transaction is entered into by which that 1s. remains in the hands of the person who would otherwise have paid it in tax. But if the money is going to charity, the person pays not 1s., but £1. This surely cannot be called tax avoidance.
    We have here, as we always have, complicated and restrictive legislation defended on the ground that, if it did not exist, it would be possible for ill-intentioned people to make money. Surely we cannot extend that principle and forgo the beneficial effects of the proposal in the new Clause not in order to prevent a person retaining in his own hands the tax he might otherwise have paid, but to prevent him from giving away a much larger sum and to enable the Treasury, in effect, to collect the tax from a charity.
    Mr. John M. Temple: I was a little disappointed by the reply of the Minister because he seemed to rest his case on two premises with which I am in complete disagreement. First, there was the analogy between this situation and Estate Duty. I refute that completely. The second premise was that gifts of assets other than cash are unusual. I remind him that most of our great charitable foundations, such as the Nuffield Foundation, have been founded on just these sort of gifts—gifts of shares in companies which the entrepreneur has built up and in which he takes great pride and has great pleasure in donating to charities.
    If the hon. and learned Gentleman does not accept a new Clause of this nature, there will be a very real disincentive towards those very charitably minded people who have built up their own private empires and who desire, very rightly, at a certain juncture, that charity should benefit from some of the work they have carried out during their lifetime.

    1463
    There is, however, another point with regard to land. The Minister of State seems to dismiss the idea that land could be donated for charitable purposes. As the years roll on, the Capital Gains Tax will become much heavier with regard to land, because land values constantly appreciate. In the nature of things, land is held over a long period of years. Therefore, if towards the end of his life a donor contemplates the giving away of land, which has been the basis of the fortunes of City livery companies throughout the centuries and the basis of many charitable foundations and educational trusts, he will be involved in enormous Capital Gains Tax liability and, therefore, there will be a disincentive to his giving away land.
    I make these two points because we are looking upon the Capital Gains Tax as a tax which has operated for only a few years. I fear that in some form it will be with us for a long time, possibly in perpetuity, although, perhaps, not in exactly the form in which we have it today. Nevertheless, one would, I think, accept that it will be a continuing tax. There will, therefore, be this built-in disincentive. My experience has been that these charitable trusts have been based on donations of just the sort I have described. I am sure that the Minister of State would not want to put this disincentive against the desires of donors, but that is what he is doing.
    I ask the Government seriously to make another statement on this matter—it deserves another statement from the Treasury Bench—and to say that they accept the principle that we are proposing. Even if they cannot accept it in this year's Bill, let them accept the principle in a more definite manner than we have heard so far.
    Sir D. Glover: The Minister of State's reply was so unsatisfactory that, I think, everybody in the House would like to go into the Lobby against what he said. I would like to make three points. The first is that the hon. and learned Gentleman, if he represents his party correctly, is saying categorically that any private aid for the relief of distress is disapproved of by the party opposite and that whilst the Welfare State can look after those who fall by the wayside, for it to be done
    1464
    on a private basis is something on which the party opposite disapprove.
    Even if there is some loss of tax to the Treasury, if the money goes to a charity to do a great deal of good with which the State would otherwise have to deal, I cannot see how it can be labelled as tax avoidance, because the person giving the money to the charity gets no benefit from it. The hon. and learned Member should remove the view which he has given to the House, otherwise his party will be regarded for all time as one which disapproves of all forms of private charity.
    Secondly, whether inadvertently or not, the hon. and learned Gentleman gave me the strong impression that he thought, presumably representing his party, that there was something slightly unsavoury in what he referred to as a private charitable trust. He did not, perhaps, put it into words, but he left the strong impression on me that his party, the Government, do not approve of private charitable trusts.
    I strongly support what my hon. Friend the Member for the City of Chester (Mr. Temple) said. Some private charitable trusts have done more good to research in medicine and many other ways than almost any other charitable activity that we have seen over the last 50 years.
    If this is now to have the label of sin attached to it, it will be a tremendous disincentive to people who have been fortunate in the line of battle and accumulated wealth—and they have to be very clever to have accumulated anything in the light of the State's attack on wealth to make arrangements for the benefit of the nation.
    It may be that Lord Nuffield would not have established the Nuffield Trust if life had been kinder to him and he had had a family, but he decided to use his wealth for very beneficial purposes for the nation as a whole. Surely no one will now say that there is an element of tax avoidance in what Lord Nuffield did in establishing the Nuffield Foundation? The Foundation has probably done as much good as £10 million, or whatever the sum was, ever expended for charitable or research purposes in this country, has done.
    I hope that the right hon. and learned Gentleman will remove the impression

    1465
    which he left very strongly in my mind that the Government think there is something disreputable in a private charitable trust.
    Mr. John Hall: My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), in the course of his interjection, described the reply given by the Minister of State as disappointing. I think, if I may say so, that that was a masterpiece of understatement. If there was a league table for unsatisfactory replies to points put forward by hon. Members on this side of the House, that last reply would come very near the top.
    As far as I can understand, the real reason why the Minister was not prepared to accept this Clause—the validity of which I think he approved—was that very few people were likely to be affected by this, that injustice would be felt by only a few people and he could afford to
    ignore them. Because so few people are affected, little pressure was likely to be placed on the Treasury, so let us ignore the fact that some people will suffer an injustice.
    The hon. and learned Gentleman's argument seemed to me "we know very well that we can get away with this without great public pressure or indignation, so we are prepared to penalise charities just because only a few people suffer from injustice". I was about to use the word "disgusting" about this argument, but I will withdraw that, and say that I was amazed by the reply, which shows such a lack of understanding and sympathy that I hope my right hon. and hon. Friends will take this to a Division.
    Question put, That the Clause be read a Second time:—
    The House divided: Ayes 126, Noes 185.

    Division No. 261.]

    AYES

    [11.3 p.m.

    Alison, Michael (Barkston Ash)

    Harrison, Col. Sir Harwood (Eye)

    Pike, Miss Mervyn

    Baker, Kenneth (Acton)

    Harvey, Sir Arthur Vere

    Pink, n. Bonner

    Baker, W. H. K. (Banff)

    Harvie Anderson, Miss

    Pounder, Rafton

    Balniel, Lord

    Hawkins, Paul

    Powell, Rt. Hn. J. Enoch

    Bennett, Sir Frederic (Torquay)

    Heseltine, Michael

    Pym, Francis

    Biffen, John

    Higgins, Terence L.

    Rawlinson, Rt. Hn. Sir Peter

    Birch, Rt. Hn. Nigel

    Hirst, Geoffrey

    Rhys Williams, Sir Brandon

    Black, Sir Cyril

    Holland, Philip

    Ridley, Hn. Nicholas

    Boardman, Tom (Leicester, S.W.)

    Hooson, Emlyn

    Ridsdale, Julian

    Brewis, John

    Hornby, Richard

    Rossi, Hugh (Hornsey)

    Brinton, Sir Tatton

    Hunt, John

    Royle, Anthony

    Bromley-Davcnport,Lt..Col.SlrWalter

    Jenkin, Patrick (woodford)

    Scott-Hopkins, James

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

    Kaberry, Sir Donald

    Sharpies, Richard

    Bullus, Sir Eric

    Kimball, Marcus

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

    Campbell, B. (Oldham, w.)

    King, Evelyn (Dorset, S.)

    Silvester, Frederick

    Carlisle, Mark

    Kirk, Peter

    Sinclair, Sir George

    Chichester-Clark, R.

    Clark, Henry

    Knight, Mrs. Jill

    Smith, Duley (W'wick & L'mington)

    Clegg, Walter

    Lambton, Viscount

    Smith, John (London & W'minster)

    Cooke, Robert

    Langford-Holt, Sir John

    Stainton, Keith

    Cooper-Key, Sir Neill

    Longden, Gilbert

    Stoddart-Scott, Col. Sir M. (Ripon)

    corfield, F. V.

    Lubbock, Eric

    Summers, Sir Spencer

    Crowder, F. P.

    Maclean, Sir Fitzroy

    Taylor, Sir Charles (Eastbourne)

    Dance James

    Macleod, Rt. Hn. lain

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

    Davidson,James (Aberdeenshire, W.)

    Maddan, Martin

    Temple, John M.

    d'Avigdor-Coldsmid, Sir Henry

    Maginnls, John E.

    Thatcher, Mrs. Margaret

    Dean, Paul (Somerset, N.)

    Marten, Neil

    Turton, Rt. Hn. R. H.

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

    Maude, Angus

    van Straubenzee, W. R.

    Eden, Sir John

    Mawby, Ray

    Waddington, D.

    Elliot, Capt. Walter (Carshalton)

    Maxwell-Hyslop, R. J.

    Wainwright, Richard (Colne Valley)

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

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

    Walker-Smith, Rt. Hn. Sir Derek

    Emery, Peter

    Mills, Peter (Torrington)

    Wall, Patrick

    Eyre, Reginald

    More, Jasper

    Walters, Dennis

    Farr, John

    Morgan, Geraint (Denbigh)

    Ward, Dame Irene

    Forteseue, Tim

    Munro-Lucas-Tooth, Sir Hugh

    Whitelaw, Rt. Hn. William

    Glover, Sir Douglas

    Murton, Oscar

    Williams, Donald (Dudley)

    Goodhart, Philip

    Nabarro, Sir Gerald

    Wilson, Ceoffrey (Truro)

    Coodhew, Victor

    Nicholls, Sir Harmar

    Winstanley, Dr. M. P.

    Gower, Raymond

    Noble, Rt. Hn. Michael

    Wolrige-Gordon, Patrick

    Grieve, Percy

    Onslow, Cranley

    Younger, Hn. George

    Griffiths, Eldon (Bury St. Edmunds)

    Page, Graham (Crosby)

    Gurden, Harold

    Pardoe, John

    TELLERS FOR THE AYES:

    Hall, John (Wycombe)

    Peel, John

    Mr. Anthony Grant and

    Hall-Davis, A. G. F.

    Percival, lan

    Mr. Bernard Weatherill.

    NOES

    Abse, Leo

    Alldritt, Walter

    Armstrong, Ernest

    Albu, Austen

    Anderson, Donald

    Atkins, Ronald (Preston, N.)

    Allaun, Frank (Salford, E.)

    Archer, Peter

    Atkinson, Norman (Tottenham)

    1466

    Bacon, Rt. Hn. Alice

    Harper, Joseph

    Morris, Alfred (Wythenshawe)

    Barnett, Joel

    Harrison, Walter (Wakefield)

    Morris, Charles R. (Openshaw)

    Baxter, William

    Hasedine, Norman

    Moyle, Roland

    Beaney, Alan

    Hazell, Bert

    Murray, Albert

    Bence, Cyril

    Heffer, Eric S.

    Neal, Harold

    Bidwell, Sydney

    Henlg, Stanley

    Norwood, Christopher

    Bishop, E. S.

    Herbison, Rt. Hn. Margaret

    Oakes, Gordon

    Blackburn, F.

    Hooley, Frank

    Ogden, Eric

    Boardman, H. (Leigh)

    Horner, John

    O'Macley, Brian

    Booth, Albert

    Howell, Denis (Small Heath)

    Oram, Albert E.

    Boston, Terence

    Howie, W.

    Orme, Stanley

    Braddock, Mrs. E. M.

    Hoy, James

    Oswald, Thomas

    Bray, Dr. Jeremy

    Huckfield, Leslie

    Page, Derek (King's Lynn)

    Brooks, Edwin

    Hughes, Roy (Newport)

    Palmer, Arthur

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

    Hunter, Adam

    Parkyn, Brian (Bedford)

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

    Hynd, John

    Pearson, Arthur (Pontypridd)

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

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

    Pentland, Norman

    Buchan, Norman

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

    Price, Christopher (Perry Barr)

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

    Johnson, Carol (Lewisham, S.)

    Price, Thomas (Westhoughton)

    Callaghan, Rt. Hn. James

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

    Price, William (Rugby)

    Cant, R. B.

    Jones, J. Idwal (Wrexham)

    Reynolds, Rt. Hn. G. W.

    Carmichael, Neil

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

    Roberts, Albert (Normanton)

    Carter-Jones, Lewis

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

    Robertson, John (Paisley)

    Chapman, Donald

    Kerr, Russell (Feltham)

    Robinson,Rt.Hn.Kenneth(St.P'c'as)

    Coe, Denis

    Lawson, George

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

    Coleman, Donald

    Leadbitter, Ted

    Rose, Paul

    Crawshaw, Richard

    Ledger, Ron

    Ryan, John

    Croseman, Rt. Hn. Richard

    Lee, Rt. Hn. Frederick (Newton)

    Sheldon, Robert

    Cullen, Mrs. Alice

    Lee, John (Reading)

    Shore, Rt. Hn. Peter (Stepney)

    Dalyell, Tam

    Lestor Miss Joan

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

    Davies, Ifor (Gower)

    Lever, Harold (Cheetham)

    Short,Mrs.Renée(W'hampton,N.E.)

    Dell, Edmund

    Lewis, Arthur (W. Ham, N.)

    Silkin, Rt. Hn. John (Deptford)

    Dempsey, James

    Lewis Ron (Carlisle)

    Silkin, Hn. S. C. (Dulwich)

    Diamond, Rt Hn. John

    Lomas Kenneth

    Silverman, Julius

    Dickens, James

    Loughl'in Charles

    Slater, Joseph

    Doig, Peter

    Luard, Evan

    Small, William

    Driberg, Tom

    Lyons, Edward (Bradfort, E.)

    Snow, Julian

    Dunn, James A.

    MeBride Neil

    Spriggs, Leslie

    Edelman, Maurice

    McCann John

    Taverne, Dick

    Edwards, William (Merioneth)

    MacColl, James

    Tinn, James

    Ellis, John

    MacDernot, Niall

    Urwin, T. W.

    Evans, Albert (Islington, S.W.)

    MCGUI re, Michael

    Varley, Eric G.

    Faulds, Andrew

    MACKINTOSH, JOHN P.

    Walker, Harold (Doncaster)

    Fernyhough, E.

    Maclennan, Robert

    Watkins, David (Consett)

    Fitch, Alan (Wigarr)

    Watkins, Tudor (Brecon & Radnor)

    Fletcher, Ted (Darlington)

    McMillan, Tom (Glasgow, C.)

    Wellbeloved, James

    Foley, Maurice

    McNamara, J. Kevin

    White, Mrs. Eirene

    Foot, Michael (Ebbw Vale)

    Mahon, Peter (Preston, S.)

    Wilkins, W. A.

    Forrester, John

    Mahon, Simon (Bootle)

    willey, Rt. Hn. Frederick

    Fowler, Gerry

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

    Williams, Alan (Swansea, W.)

    Freeson, Reginald

    Manuel, Archie

    Williams, Alan Lee (Hornchurch)

    Calpern, Sir Myer

    Marks, Kenneth

    Willis, Rt. Hn. George

    Gardner, Tony

    Marquand, David

    Wilson, William (Coventry, S.)

    Gray, Dr. Hugh (Yarmouth)

    Maxwell, Robert

    Winnick, David

    Cregory, Arnold

    Mendelson, J. J.

    Yates, Victor

    Grey, Charles (Durham)

    Millan, Bruce

    Griffiths, E. (Brightside)

    Miller, Dr. M. S.

    TELLERS FOR THE NOES:

    Griffiths, Will (Exchange)

    Milne, Edward (Blyth)

    Mr. J. D. Concannon and

    Hamilton, James (Bothwell)

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

    Mr. Ioan L. Evans

    Hamling, William

    Molloy, William

    Hannan, William

    Morgan, Elystan (Cardiganshire)

    Further consideration of the Bill, as amended, adjourned.—[Mr. Diamond.]
    Bill, as amended (in the Standing Committee), to be further considered tomorrow.
    ADJOURNMENT
    Resolved, That this House do now adjourn.—[Mr. Concannon.]
    Adjourned accordingly at thirteen minutes past Eleven o'clock.

COMMONWEALTH AFFAIRS
  Rhodesia
  Rhodesia
  Hong Kong
  Hong Kong
  Commonwealth Policy (Reciprocity)
  Commonwealth Policy (Reciprocity)
MINISTRY OF POWER
  Minister's Visits (Scotland)
  Minister's Visits (Scotland)
  Fuels (Comparative Costs)
  Fuels (Comparative Costs)
LOCAL GOVERNMENT
  Derelict Areas (Clearance)
  Derelict Areas (Clearance)
  Smoke Control, North-West
  Smoke Control, North-West
  Environmental Improvement, North-West
  Environmental Improvement, North-West
  Ordnance Survey Department (Location)
  Ordnance Survey Department (Location)
  South Cornwall Water Board (Water Rate)
  South Cornwall Water Board (Water Rate)
  New Towns, North-West
  New Towns, North-West
HOUSING
  Council House Rents
  Council House Rents
  Mostar Estate, Manchester
  Mostar Estate, Manchester
  Improvement Grants
  Improvement Grants
NATIONAL FINANCE
  Incomes and Expenditure, Scotland
  Incomes and Expenditure, Scotland
  Film Projectors (Purchase Tax)
  Film Projectors (Purchase Tax)
  Government Departments (Productivity Agreements)
  Government Departments (Productivity Agreements)
  National Plan
  National Plan
  Philip Morris (Proposed Merger)
  Philip Morris (Proposed Merger)
  Selective Employment Tax
  Selective Employment Tax
  Disabled Drivers (Vehicle Excise Duty)
  Disabled Drivers (Vehicle Excise Duty)
  External Sterling Liabilities
  External Sterling Liabilities
  Sovereigns
  Sovereigns
  Mr. Jocelyn Hambro (Salary)
  Mr. Jocelyn Hambro (Salary)
  Monetary System
  Monetary System
OVERSEAS DEVELOPMENT
  Tanzania (Expatriat Pension Liabilities)
  Tanzania (Expatriat Pension Liabilities)
  Nigeria
  Nigeria
  FALKLAND ISLANDS
  FALKLAND ISLANDS
HOME DEPARTMENT
  Mr. Schoenman
  Mr. Schoenman
EMPLOYMENT AND PRODUCTIVITY
  British Steel Corporation (Union Recognition)
  British Steel Corporation (Union Recognition)
  Unemployment (New Mills, Buxton and Glossop)
  Unemployment (New Mills, Buxton and Glossop)
  Hong Kong Passport Holders (Visits to United Kingdom)
  Hong Kong Passport Holders (Visits to United Kingdom)
  CIVIL SERVANTS (OUTSIDE APPOINTMENTS)
  CIVIL SERVANTS (OUTSIDE APPOINTMENTS)
  PRIME MINISTER OF CANADA
  PRIME MINISTER OF CANADA
AGRICULTURE, FISHERIES AND FOOD
  Seal Cull, Scroby Sands
  Seal Cull, Scroby Sands
MINISTRY OF DEFENCE
  R.A.F. Aircraft Strengths
  R.A.F. Aircraft Strengths
  Porton Down Establishment (Research)
  Porton Down Establishment (Research)
  R.A.F. Manned Strength
  R.A.F. Manned Strength
ECONOMIC AFFAIRS
  Hunt Committee
  Hunt Committee
EDUCATION AND SCIENCE
  University Teachers (Salaries)
  University Teachers (Salaries)
  County and Voluntary Schools, Bootle (Attendance)
  County and Voluntary Schools, Bootle (Attendance)
  Association of University Teachers (Salary Claim)
  Association of University Teachers (Salary Claim)
  Handicapped Children (Primary Schools)
  Handicapped Children (Primary Schools)
  School Building Programme, West Suffolk
  School Building Programme, West Suffolk
MINISTRY OF HEALTH
  Doctors
  Doctors
  Prescription Charges (Disablement Income Group)
  Prescription Charges (Disablement Income Group)
  Mentally Handicapped Children (Voluntary Organisations)
  Mentally Handicapped Children (Voluntary Organisations)
  Mallory Batteries (Supply)
  Mallory Batteries (Supply)
  Soft Drug Dependence (Notification)
  Soft Drug Dependence (Notification)
  Methyl Amphetamines (Supply)
  Methyl Amphetamines (Supply)
HOSPITALS
  Mentally Handicapped Children (Carlisle and Cumberland)
  Mentally Handicapped Children (Carlisle and Cumberland)
COAL
  Bradford Colliery (Closure)
  Bradford Colliery (Closure)
TELEPHONE SERVICE
  Applications, Berkhamsted Exchange
  Applications, Berkhamsted Exchange
POST OFFICE
  Mail Delivery Delays
  Mail Delivery Delays
  Postcodes
  Postcodes
PUBLIC BUILDING AND WORKS
  Industrial Archeology (Restoration and Preservation)
  Industrial Archeology (Restoration and Preservation)
SCOTLAND
  Windblown Timber (Clearance)
  Windblown Timber (Clearance)
SOCIAL SECURITY
  Council House Rents, Brighton (Increase)
  Council House Rents, Brighton (Increase)
BOARD OF TRADE
  Philip Morris (Proposed Merger)
  Philip Morris (Proposed Merger)
  Company (Investment Grant)
  Company (Investment Grant)
  Personal Credit (Review Committee)
  Personal Credit (Review Committee)
  South Africa (Imports from United Kingdom)
  South Africa (Imports from United Kingdom)
ROADS
  D-Ring Road (Alignment)
  D-Ring Road (Alignment)
  Carriage Crossings (Construction)
  Carriage Crossings (Construction)
WALES
  Forms (Welsh Language)
  Forms (Welsh Language)

Preamble
The House met at half past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.

PETROL ENGINES FOR GARDEN TOOLS
LORD HAWKE: 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 they are aware that British manufacturers appear to have almost wholly lost their once predominant position in the supply of petrol engines for garden tools in the home market; and, if so, whether any investigations have been made and whether any remedies are in view.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, my right honourable friend the Minister of Technology is aware of the difficulties that have arisen in the supply of small petrol engines from British industry for lawnmowers and other garden tools. His Ministry are in touch with firms concerned to see whether there is any way in which help can be given.
LORD HAWKE: My Lords, I thank the noble Lord for his Answer, which confirms the rather unfortunate position of this industry and which means that we are spending many millions of pounds in foreign exchange. Is there any question of dumping involved?
LORD KENNET: Not that I am aware of, my Lords.
LORD LEATHERLAND: My Lords, I wonder whether my noble friend could make it clear chat the whole of the British agricultural machine industry is not working at a disadvantage with foreign competitors. There is one com-
154
pany which manufactures a certain type of agricultural machine—I must not mention its name—which exports 66 per cent. of its output.
LORD KENNET: My Lords, that raises wider issues relating to the entire agricultural machinery industry. The Question was addressed only to small petrol engines for garden tools, where different considerations apply.

TERRITORIAL AND ARMY VOLUNTEER RESERVE TRAINING CAMPS
2.39 p.m.
LORD INGLEWOOD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what is the present strength of the Territorial Army, what proportion of this total strength is likely to attend training in camp for a weekend or longer during the current financial year, and what proportion of the cost of such training is being borne, respectively, by the Central Government, T.A. associations and the units themselves.]
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (LORD CHALFONT): My Lords, I assume that the Question is directed at the Territorial and Army Volunteer Reserve. If so, the present overall strength of the T. & A.V.R. is 53,749, and it is expected that of this total strength between 40,000 and 48,000 men and women will attend training in camp for a weekend or longer Suring the current financial year. In the case of T. & A.V.R. Categories I, II and IV the cost of their training is borne entirely by the Central Government. No public funds will be spent on T. & A.V.R. III camps and the cost of any camps which they hold must be borne by the units themselves. Some private funds are however being raised from a number of sources including the Territorial, Auxiliary and Volunteer Reserve Associations and from the members themselves.
LORD INGLEWOOD: My Lords, will the noble Lord not agree that it is something which we can all be proud of that such a very large proportion of our

155
volunteer forces in Categories I, II, III and IV will be attending some form of training this year in the face of a good many difficulties? But can he not also tell us that the money spent by units in Category III from their regimental funds in buying from the War Office petrol, rations and other items of equipment, such as 19-Sets, in order to make it possible for them to go to camp and make their training more realistic will be repaid at the end of the training season? It will seem shameful to the majority of people in this country that young men and women who give up their time at weekends for public service are then presented with a bill.
LORD CHALFONT: My Lords, that was a very interesting speech on the subject of the Territorial Army. I agree entirely with the noble Lord that what is happening in these units reflects the spirit which has always been the spirit of the Territorial Army, or at least since the days when I was a Territorial soldier. But I am afraid that I cannot give the noble Lord the assurance for which he asks. We announced in January that Home Defence was to be placed on a care-and-maintenance basis and that therefore T. & A.V.R. III was to be disbanded. The decision was as simple as that. But we are having continuing discussions with the Council of the Territorial Army and Volunteer Reserve about ways of retaining the benefits which the Regular Army and other categories of the T. & A.V.R. get from T. & A.V.R. III.
LORD BARNBY: My Lords, the noble Lord gave figures of the present strengths. Is he in a position to give any figures of the establishments of the units incorporated in the strengths which he gave?
LORD CHALFONT: No, my Lords, I did not give any details of establishment to compare with the actual strengths. If the noble Lord would like to have that information, I can certainly get it for him.
LORD BARNBY: Thank you.
LORD ALPORT: My Lords, is it the Government's intention that the third category should be financed from private sources indefinitely? Secondly, how far are Regular units who may come into
156
contact and be asked to help units these units during their annual training encouraged to give that help?
LORD CHALFONT: My Lords, so far as the second part of the question is concerned, I have already answered that. We are engaged in discussions on that point at the moment. The first part of the question is, I think, largely irrelevant. My answer to that is that the third category of T. & A.V.R. is to be disbanded.
LORD ALPORT: My Lords, does this mean that they are going to be suppressed by the Government. If it is possible to keep them going by private finance, will they be allowed and be given any encouragement to do so?
LORD CHALFONT: My Lords, what these units will do after disbandment is an entirely different question. It seems to me that it is unfair of the noble Lord to suggest, on the one hand, that we are going to leave these units to be financed by public funds and, on the other hand, to suggest that we are in some way suppressing them. We have said that so far as the Central Government are concerned this category is to be disbanded. If they remain in existence in some way after that, it would surely not be suggested by anybody that the financing of them should be chargeable to public funds.
LORD LEATHERLAND: My Lords, in view of the fact that the economic outlook is now brightening for the country—
SEVERAL NOBLE LORDS: Oh!
LORD LEATHERLAND: I am glad that that remark has given such joy to noble Lords opposite—will it still be necessary to save the £2 or £3 million involved in the disbandment of T. & A.V.R. III? May I ask the noble Lord whether the existence of T. & A.V.R. III is not essential to ensure a flow of recruits into T. & A.V.R. I and into the Regular Army? If we abolish T. & A.V.R. III, shall we not be wrecking the recruitment prospects of the Regular Army?
LORD CHALFONT: We have already discussed at very great length the arguments for and against the disbandment of T. & A.V.R.III. My noble friend

157
will be aware of the arguments adduced for carrying out this disbandment, and I can give him no assurance that this decision will be reviewed.

TANZANIA: PENSIONS LIABILITY AND WITHDRAWAL OF AID
2.45 p.m.
LORD BROCKWAY: 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 on what grounds aid programmes in Tanzania have been cancelled.]
THE MINISTER OF STATE FOR COMMONWEALTH AFFAIRS (LORD SHEPHERD): My Lords, the Government of Tanzania have decided to make no budgetary provision after July 1 this year for most of their pension liabilities towards expatriate, mainly British, officers formerly in the service of the Tanganyika and Zanzibar Governments. The pensions in question were earned before independence and are covered by the Public Officers' Agreements between the Tanganyika and Zanzibar Governments and the British Government. The Tanzania Government have also stated that they will not repay about £6·5 million of loans amounting to £9 million provided by Her Majesty's Government towards Tanzania's liabilities for compensating British officials for loss of career and for capitalising part of their pensions.
We informed the Tanzania Government that we did not agree that Tanzania should cease to be responsible for these obligations and we made certain suggestions to help Tanzania meet the cost. I regret to say the Tanzanian Government were unable to accept our suggestions.
We have had to take immediate steps to protect the pensioners from hardship arising from these decisions and the cost to Britain will be about £800,000 for the current financial year. Payments will be made on an ex gratia, basis and, in making these arrangements, Her Majesty's Government do not regard themselves as relieving the Tanzanian Government of their liability in this matter. It was for these reasons teat we felt bound to bring our aid programme to an end.
LORD BROCKWAY: My Lords, I thank my noble friend for that very full Answer. May I ask him, first, whether it is not the case that the Tanzania Government are prepared to pay the pensions of all civil servants who were in Tanganyika after independence was declared? Secondly, is it not the case that other Colonialist Government; have accepted that principle and the responsibility of meeting the cost of pensions of civil servants before independence was declared? Thirdly, is it right fiat aid, which is for the purpose of social and economic development, should be used as an instrument of coercion for political purposes?
LORD SHEPHERD: My Lords. I could not accept the last part of my noble friend's supplementary question. The pensions which are in dispute are those of civil servants and officers who were in these countries prior to independence. There was a contract—an understanding, an agreement—and it was in the light of that agreement that the financial arrangements were made with Tanzania and Zanzibar when they obtained independence. We made an offer to help the Tanzanian Government in this matter, but unfortunately they were not able to accept it. I personally very much regret the action that we had to take, but I feel that we were right to take it.
LORD BROCKWAY: My Lords, is it not the case that the Oversea Service Pensioner's Association, representing these men, takes the view that in the case of civil servants before independence, the responsibility is with the colonial Government?
SEVERAL NOBLE LORDS: No.
LORD BROCKWAY: Is it not the case that that Association had a letter published in The Times this week? I assure my noble friend—and I have a copy of the letter with me—that the Association indicated that view.
LORD SHEPHERD: My Lords, I do not accept everything that appears in the newspapers. There was an agreement, to which referred, and that agreement was between Her Majesty's Government and the Governments of Tanganyika and Zanzibar in relation to the civil servants in question.
VISCOUNT DILHORNE: My Lords, can we be assured that Her Majesty's Government are taking every possible step to secure that the agreement freely entered into by the Tanzanian Government will be fulfilled by them?
LORD SHEPHERD: My Lords, all steps that are open to us will be taken.
LORD BROCKWAY: My Lords, in view of my noble friend's statement that he does not believe everything that appears in the newspapers, is he aware that the letter to which I referred was signed by Mr. S. A. Walden, the Secretary of the Oversea Service Pensioners' Association?
LORD SHEPHERD: I have not seen the letter. If my noble friend will show it to me later, I will gladly read it.
THE EARL OF SWINTON: My Lords, would the Minister take it from me, as one who had great responsibility for the Colonial Service, that the action which he has taken in insisting on withdrawing this aid because of a gross breach of undertakings by the Government of Tanzania will have the full support of the great majority of people in this country, including all ex-civil servants?
LORD BALFOUR OF INCHRYE: My Lords, can the noble Lord say on what scale the ex gratia payments will be made to pensioners? Will it be 50 per cent., 70 per cent. or 80 per cent., remembering that many of these men have heavy family commitments and would like to be assured that the scale of payments which the Government will be giving will be adequate to meet their needs?
LORD SHEPHERD: My Lords, I note the noble Lord's question. It is a supplementary question that I had not anticipated, and I will write to him about it.
LORD BARNBY: My Lords, would the noble Lord consider, for the assistance of the House, making available in the Library the amounts paid to Tanzania in all forms of aid in the three years prior to the breaking off of relations and the amounts, if any, paid since relations were broken off?
LORD SHEPHERD: My Lords, I will consider that point, but it might be more convenient if the noble Lord tabled a Question.

PHARMACEUTICAL SUPPLIES: PRICES AND PROFITS
2.50 p.m.
LORD BROCKWAY: 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 how far they have accepted the recommendations of the Sainsbury Report.]
LORD KENNET: My Lords, I would refer my noble friend to the Statement made by my right honourable friend the Minister of Health in the House of Commons on June 24, which I repeated in this House.
LORD BROCKWAY: My Lords, is my noble friend aware that I read that Statement and heard it? May I ask him two supplementary questions? First, as branded names are sometimes held to hide excessive prices, why is there to be delay in requiring that all new products be marked under one approved name? Secondly, in view of the finding that the cost to the National Health Service has been inflated by excessive profits, to the extent of several million pounds, is it not desirable that the National Health Service Act should be amended in order to secure a reduction in these costs?
LORD KENNET: My Lords, the proposals in the Sainsbury Report that branded names should be discontinued were not adopted by the Government for the reasons given in the Statement; namely, that in the opinion of the Minister the Committee had underestimated the adverse effect which that would have upon exports. On the question of excessive profits, it appears to the Government to be more expedient to attempt to regulate the profits of the industry—and I do not now say whether or not I accept that they have been excessive—by means of negotiated agreements on individual products.
LORD BROCKWAY: My Lords, may I ask my noble friend whether he would urge the Front Bench to enable us to have a debate on this matter, as unfortunately Lord Sainsbury is unable to be here to-day and I am sure we should all like to hear his views on this matter?
LORD SEGAL: My Lords, would not my noble friend agree that the supreme value of the Sainsbury Report lies in its skilful analysis of the facts of the industry; and would he not further agree that all its recommendations are not necessarily sacrosanct, but ought to be subjected to the fullest discussion before they are adopted as Government policy?
LORD KENNET: My Lords, the answer to both questions is, Yes. The Government agree that the Sainsbury Report most skilfully analysed the industry; and the Government have adopted many of the Committee's recommendations, and have said that they may later adopt others.
LORD NEWTON: My Lords, will the noble Lord accept that, so far as we on this side of the House are concerned, in so far as the Government have so far announced their decisions on the recommendations of the Report we consider that they have done extremely well?

BUSINESS
2.53 p.m.
LORD BESW1CK: My Lords, at the conclusion of this Business Statement my noble friend Lord Shepherd will be making a Statement on Nigeria. At a convenient moment after 3.30 my noble friend Baroness Phillips will be making a Statement on Aintree and the Grand National.
I thought it would be helpful if I said something about the further Business to-day. After consultations through the usual channels, we intend to adjourn the Committee stage of the Transport Bill at a convenient moment around 7 o'clock, when we shall take the Motions on cinematograph films and also the consideration of Commons Amendments and Commons Reasons in regard to the Countryside Bill. I hope that this will be a reasonable relief to those engaged on the Transport Bill. After that we shall resume consideration of the Transport Bill, and I expect we shall sit until around 10 p.m. Dinner will be available again this evening between 7 and 8.30 p.m.

NIGERIA: PEACE TALKS AND RELIEF AID
2.54 p.m.
THE MINISTER OF STATE FOR COMMONWEALTH AFFAIRS (LORD SHEPHERD): With permission, my Lords, I will make a Statement on Nigeria. Since my Statement in the House on June 26 after my return from Nigeria, we have taken the following action to aid a settlement of this unhappy war. At our request, Mr. Arnold Smith has taken steps to convey to the Biafran authorities that, in the light of my discussions in Lagos, the opening of direct informal discussions between the two parties in London with a view to the reconvening of the Kampala peace talks are, in our view, possible, and could be productive. In addition to Mr. Smith's action, I spoke yesterday to Mr. Kogbara, who was associated with Sir Louis Mbanafo in his earlier talks, and urged upon him the need for a representative of Colonel Ojukwu to come to London as soon as possible in pursuance of the undertaking given by Sir Louis. I have accordingly read with regret—and I am sure this is shared by all Members of this House—the reports of Colonel Ojukwu's speech yesterday. I hope that this speech does not mean that he has turned his back on the attempt to secure a return to the negotiating table. In that event, the responsibility he would incur would be grave indeed.
I should like to take advantage of this opportunity to tell the House of our attitude if, following upon a cease-fire in Nigeria, the two parties to the conflict were to request an external Observer Force and were to ask for British participation in it. In that event, Her Majesty's Government would be prepared to contribute up to one battalion with appropriate support, for a period of up to six months, to a Commonwealth Force on the understanding that other Commonwealth countries also agreed to take part on a suitable scale and that such conditions were agreed upon as would permit the Force to carry out its duties effectively.
Regarding relief, I promised on June 26 to make a further Statement on this subject. Subject to Parliamentary approval, I can now say that in addition to the £20,000 which we have already given to the Red Cross Her Majesty's Government will now make available a

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further sum of £250,000 for humanitarian relief in the war-stricken areas of Nigeria, including the Ibo areas. Parliament will be asked in due course to approve a Supplementary Estimate. In the meantime, an advance will if necessary be sought from the Civil Contingencies Fund. The intention is that this relief aid should be used as flexibly as possible in order to make the greatest contribution to the relief of suffering, hardship and malnutrition.
In order to ensure that the money is spent in the most effective ways, expert advice and on the spot discussion with local authorities and relief bodies concerned will be necessary. We are therefore arranging, given the necessary co-operation of both sides, for a high-powered relief advisory team to go to Nigeria as a matter of urgency in order to assess the forms which our humanitarian help should take. I am glad to be able to announce that the noble Lord, Lord Hunt, has accepted the invitation of my right honourable friend the Prime Minister to lead the relief team to Nigeria and to make recommendations. Sir Colin Thornley, Director-General of the Save the Children Fund, and Mr. Hodgson, Deputy Director-General of the British Red Cross Society, have agreed to accompany Lord Hunt on this mission. I am sure the whole House will join with me in expressing our thanks to the noble Lord, Lord Hunt, and his colleagues for agreeing to undertake this arduous but vital task.
THE EARL OF BESSBOROUGH: My Lords, I think we must all welcome this Statement, and the fact that the Government have now taken action, even if perhaps some action might have been taken a little earlier. But I think we should welcome what the noble Lord has done and the energies he has put into this. I hope that direct talks will now be reconvened. I should like to ask the noble Lord whether he has any further information regarding participation of other Commonwealth countries in the Observer Force. I am very glad to hear that we are going to contribute one battalion.
In regard to relief, I think we should also welcome the fact that the Government have agreed to allot the sum of £250,000 for this purpose; and we cer-
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tainly welcome the noble Lord, Lord Hunt, as head of this relief mission. On the question of relief, there is only one question that I should like to ask the noble Lord. There is no doubt that people in the Eastern Region are now starving, and I understand that OXFAM are willing to fly out relief and food. But am I right in saying that there is some difficulty in this matter? I would be grateful if the Minister could say something about this.
LORD WADE: My Lords, I should like to join in thanking the noble Lord, Lord Shepherd, for making this Statement, and I certainly hope that negotiations will be resumed. On the subject of relief, I welcome the appointment of this relief team under the leadership of the noble Lord, Lord Hunt, and the fact that the relief aid is to be as flexible as possible. But may I also stress the point of urgency? From all that one reads, there is a very desperate need. To what extent is relief getting there now—for example, through the OXFAM Fund? Many people are willing to contribute, but they wish to know whether this relief can get through, and how quickly. On the subject of the observer team, is it possible at present to indicate what other Commonwealth countries will be contributing and what are the conditions referred to in the Statement?
LORD SHEPHERD: My Lords, if I may I will deal with the Commonwealth force, the external force. As I said in my Statement last week, this is a matter which is subject to discussion; but in the end the choice of the countries who will participate must be that of the two sides in the conflict. We have not yet reached that stage in those discussions. But this would arise, I hope, when the two representatives are in London for informal talks.
In regard to aid, I would say to the noble Earl, Lord Bessborough, that Oxfam have, I think, some 400 tons of food at Fernando Póo. Distribution of this food would require an airlift, and we are in active consultation with the federal military government in Nigeria to see whether it would be possible for these urgently needed food supplies to be flown in to Biafra. I say with the greatest possible sincerity that while an airlift can deal with the immediate emergency, the

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long-term problem can be dealt with only by the creation of neutral corridors through which road vehicles can travel carrying heavy quantities of food. At the present moment we have not been able to get agreement about these corridors from one side; I hope that we shall get agreement from both sides so that supplies can be got through quickly and regularly.
LORD BROCKWAY: My Lords, is my noble friend aware that we shall all support his appeal for renewed negotiations and that we welcome the steps that have been taken for relief? But in view of the urgency of the issue at this moment, when thousands of children are dying from starvation, is it not necessary that steps should be taken to provide these supplies by air? Does my noble friend remember that on the last occasion that I raised this issue he said that the air strips would not be suitable for this purpose? Is it not We case that both the International Red Cross and Oxfam have now made arrangements to use these air strips to provide relief; and will Her Majesty's Government give the utmost support with a view to the immediate relief of the present terrible suffering in Biafra?
LORD SHEPHERD: My Lords, I sought to point out to my noble friend the difficulties of using these air strips. They are very difficult from the point of view of navigation; particularly in the type of weather existing in Nigeria. Therefore, the hope of continuing supplies through this means is very precarious. That is why I stressed the need for open corridors. I agree with my noble friend that this is a matter of urgency. We are in the closest consultation with Oxfam, with the International Red Cross, with the Federal Government, and, if I may say so, with the representatives in Biafra. It is not easy to reach a conclusion quickly; but I would assure my noble friend that there is nothing that we are now doing that in any way could be done more quickly.
LORD TREFGARNE: My Lords, can the noble Lord say whether Her Majesty's Government will not only make available R.A.F. aircraft but will consider the use of local aircraft which are, presumably, more suitable for this task?
LORD SHEPHERD: My Lords, I believe that the Andover, with its capabilities, will merely scratch the surface of this problem. We have various projects
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in mind. There is a pilot who is now on his way to Biafra to see whether the air strips are suitable for a Hercules. This is something on which only the pilot can advise us and we must await his report.
THE EARL OF SELKIRK: My Lords, I agree with the noble Lord that the remarks of Colonel Ojukwe were very unfortunate. Is it possible that that situation could have been avoided if we had kept more closely in touch with the Biafra people? Is it not now and in future possible to have someone on a slightly more official basis near to the centre of their organisation?
LORD SHEPHERD: My Lords, when this unfortunate incident started we had a Deputy High Commissioner in the Eastern Region. It was Colonel Ojukwe who made it impossible for huff to remain and to carry out his duties not only to Her Majesty's Government but also to the British citizens who are in this area. It is through no fault of ours that we are not in a position to have direct contact with events in Biafra. But we hope that we are making some contact with the Biafran authorities in London on an informal basis to see whether we cannot speed up this humanitarian action.
VISCOUNT MONCKTON OF BRENCHLEY: My Lords, is it not possible to drop some supplies from the air? I realise that this would be only scratching the surface; but is it not better to save some children's lives than none?
LORD SHEPHERD: My Loris, we must take into account the question of terrain. I have heard it suggested that supplies may be dropped by parachute. But the noble Viscount can appreciate that this would afford relief of only a very temporary nature. The suggestion has been examined; I do not think it is practicable.
BARONESS ASQUITH OF YARNBURY: My Lords, I was going to ask a question on those lines but was anticipated by the noble Lord. I was told on good authority that both thy; Red Cross and Oxfam—two very well credited international bodies—had expressed their view that medical supplies and food could be dropped on to the airstrips in Biafra. They did not bring the R.A.F. into it; although, of course, we should welcome their help. I should like to

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ask the noble Lord whether he discounts that evidence. My other question is this. Does the noble Lord really believe that we can be taken seriously as mediators when we visit the country of only one of the combatants and sell arms to only one of the combatants? Surely that is a partisan position and one which cannot be accepted as mediation. When I last asked a Question on this matter the noble Lord said—although it was not in answer to my Question—that we should lose all the influence that we now possess with the Nigerians if we suspended or stopped the supply of arms. I believe that those were the noble Lord's words; perhaps he will correct me if I am wrong. In view of that statement, I should like to ask him how many human lives he thinks that we have saved by our influence up to date, and how many human lives he thinks have been destroyed through the effect of our arms?
LORD SHEPHERD: My Lords, in reply to the first question of the noble Baroness, it would be possible, as an act of desperation, to drop food by parachute; but there is a very great long-term problem and, as I have said to my noble friend, Lord Brockway, consideration is being given by Oxfam to the use of a Hercules. A pilot is now on his way to see how feasible is this project. In reply to the second part of the question of the noble Baroness, I can say only this. I have seen Sir Louis Mbanafo, the chief negotiator at Kampala for the Biafran authorities. I explained to him fully our policy and our continuing to adhere to it. Sir Louis said that he had power to negotiate and that he was prepared to return to London for talks. I had three or four meetings with Sir Louis and his colleagues. I do not believe that our position with the legal Federal Government in Nigeria in any way inhibits our using our good offices between the two parties in Nigeria.
In regard to the third part of the noble Baroness's question, of course everyone deplores war and particularly civil war. I am bound to say that I am getting a little tired of the allegations, the reflections, that this civil war was started by one side. My Lords, it was started by both, and the responsibility is borne by both sides, not by one.
BARONESS ASQUITH OF YARNBURY: My Lords, I made no allegation about the causes of this war. I said that we were selling arms to one side only, which is to my mind an act of partisanship that must inspire suspicion and mistrust in the other. I further said that none of our official negotiators had visited Biafra, whereas they all went to Lagos.
LORD SEGAL: My Lords, in view of the extreme urgency of the situation can my noble friend say what is the earliest date at which British observers can be expected to arrive at the scene of operations?
LORD SHEPHERD: My Lords, it will depend on how quickly we can arrange a cease-fire between the two parties.
LORD SEGAL: But does my noble friend—
SEVERAL NOBLE LORDS: Order!

CITY OF LONDON (VARIOUS POWERS) (No. 2) BILL
Read 2a, and committed to the Committee on Unopposed Bills.
3.12 p.m.

TRANSPORT BILL
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
Moved, That the House do again resolve itself into Committee.—(Lord Hughes.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD AILWYN in the Chair.]
Clause 49 [Powers with respect to land]:
LORD WINDLESHAM LORD WINDLESHAM moved Amendment No. 141:
Page 72, line 1, leave out from ("use") to end and insert ("in connection with").
The noble Lord said: Clause 49(4) enables the Railways Board and the Waterways Board, with the consent of the

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Minister, to acquire land adjoining their own for development. This may sound reasonable enough if the additional land is needed for the legitimate extension or development of some part of their own business, but the power is not limited in this way. Indeed, the opposite is the case, and the Bill specifically refers to land which is required
"for use otherwise than for the purposes of their business."
So here again, following on the debate we had yesterday, is an example of a very wide power concerning the acquisition of further land which comes at a time when the Railways Board and the other authorities should be concerned more with the sale of land which is no longer required than with thinking about the acquisition of further land.
This Amendment seeks to limit the power. The wording that appears on the Order Paper was carefully chosen. I would point out that we do not seek to limit this power for the acquisition of additional land for purposes which are confined to the existing business of the authority. We do not say that it should be entirely within their existing business, because we can appreciate that there might be a connecting purpose which would thereby be excluded. On the other hand, we feel that what is in the Bill—that is, no restriction at all, and that additional land can be acquired for purposes unconnected with the business of the authority—goes too far. So we have chosen a mid-way position and said "in connection with" the business of the Railways Board or the other authorities which are mentioned.
LORD ST. HELENS: I should like to support my noble friend Lord Windlesham who has moved this Amendment. Our current theme, which I think was brought out many times by speakers from this side of the Committee during the discussions yesterday, is that we believe that the prime job of the Railways Board is to run the railways. We feel that when they have proved to us and to the country that they are doing a competent job would be time enough to talk about the Railways Board branching into other activities which have no direct contact with the railways. We realise what a very difficult job the Railways Board have, but so far they have not shown the country that they are making a com-
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petent job of running the railways. They have a very long way to go, and we believe that supporting this Amendment will indicate that they should put first things first and get on with their prime job.
LORD HUGHES: If I may, I will first refer to the remarks of the noble Lord, Lord St. Helens, that the job of the Railways Board is to run the railways, and say that we want the Board to be able to run the railways without losing money in the process. We must give them every possible assistance that we can legitimately give. If we are to deny that assistance we shall be thrown back, on to a conclusion which was arrived at by the Provost of a Scottish city, Brechin, which lost its branch railway. The then Government gave a remit to Dr. Beeching to say how you can make money by running a railway. The Scottish Provost thought the answer which Dr. Beeching brought back was that the only way to make money out of running a railway was not to have a railway. So Brechin lost its railway. We do not accept that. There have to be railways and if it is at all possible, we want the railways to get their returns out of the red into the black. This is one of the ways in which they can be helped.
The noble Lord, Lord Windlesham, stressed the fact that this Bill would enable them to acquire land for purposes other than the purpose of their business. That principle has been accepted already, in the 1962 Act. The Conservative Government did not find it wrong, because Section 11(4) of the 1962 Transport Act enables the Railways Board and the Waterways Board to acquire adjoining land, by agreement, for the purpose of developing it, with their own land, for use for purposes other than the purposes of their business. So that principle has already been accepted, and if it was not an anathema in 1962, it could hardly be so in 1968.
The difference is that the power which the Boards have under the 1962 Act means that they must develop this adjoining land with their own land. We are seeking to specify in subsection (4) certain circumstances in which land can be acquired—and I would stress that it is to be acquired by agreement—for development for use other than for the purposes of the Board's business, without its

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being a condition, as in Section 11(4) of the 1962 Act, that the acquired land must be developed with the Board's existing land. That is the difference. It can be developed separately from the land which the Board already holds. I cannot see that there is any difference in principle on that point.
A circumstance in which we see that this could be very helpful to the railways is if land adjoins other land of the Railways Board, and if the Minister is satisfied that the land so acquired will be so connected by rail, or so situated in relation to a railway line, that the rail services of the Board can be directly used by the person occupying the land. Or it could be helpful, in the case of the Waterways Board, if the land adjoins any of the commercial or cruising waterways of the Board and the Minister is satisfied that the land acquired will be so connected by the waterways or is so situated in relation to that commercial or cruising waterway, that the waterway services of the Board can be directly used by the person occupying the land.
The intention is that the subsection should give the Boards the opportunity to acquire land with a view to its development either by themselves or by others, for industrial or commercial use by others, in such a way as to generate new rail or new waterway traffic. This is a principle of which private enterprise in the United States makes good use. They have this sort of freedom and they make considerable use of it.
In another place an Amendment similar to the one we are discussing was put forward by a Liberal Member. And when his attention was drawn by my honourable friend the then Parliamentary Secretary to what is done in the United States—he gave the specific example that the Southern Pacific Railroad attracts additional traffic by providing for industrial activity by tenants and by providing a rail link—the answer given by the Liberal Member, in withdrawing his Amendment, was that he congratulated the Minister on the research that he had undertaken and he accepted that this was in fact a good use for land; and the Amendment was withdrawn. During the last few days there have been occasions when the Liberal Party and the Conservatives in this House have been in agree-
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ment; there have been occasions when the Liberals have followed the Conservative lead. I think this is a case where the Opposition Front Bench can accept the arguments which I am putting forward here, and that which in another place persuaded the Liberal Party that they could safely ally themselves with the Government on this piece of commercial enterprise for the railways.
LORD WINDLESHAM: The noble Lord has trailed his coat. I hope that no Liberal foot will tread on it. This section goes one step further—I think the noble Lord has made this quite clear—than the provisions of the 1962 Act. We do not think that this sort of extension is a desirable trend from the standpoint of public policy, and that was the reason why we put down this Amendment. The examples given in reply did not seem to me to be very powerful. It is true that the Southern Pacific Railroad in the United States generates new rail traffic in this way, but of course it does not do so with public funds. The capital for development of that sort has to be raised through the market.
We do not want, on this side of the House to have an extended debate at this stage on this particular Amendment. The underlying, rooted objection that we have applies not only to this provision but, much more so, to a whole set of additional provisions running through the Bill which will come up at various times during the next few days. I therefore do not intend to press this Amendment, and, with the leave of the Committee, beg leave to withdraw it.
Amendment, by leave, withdrawn.
Clause 49 agreed to.
Clause 50 [Miscellaneous provisions as to powers]:
3.23 p.m.
LORD WINDLESHAM LORD WINDLESHAM moved Amendment No. 142:
Page 72, line 32, leave out subsection (2).
The noble Lord said: There are three Amendments on the Order Paper to Clause 50, Nos. 142, 143 and 144, which all concern hotels. These Amendments were not discussed at all, so far as we can see, in another place, and therefore it seemed to us that it was worth looking at them rather closely in this House if

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we are to exercise our function as a revising Chamber. Although each of the three Amendments concerns hotels, they are all on different points, so I am proposing to move them separately.
Clause 50(2) gives the British Railways Board
"power to provide and manage hotels in any part of Great Britain and, with the consent of the Minister, elsewhere".
We will return to the word "elsewhere" in a few moments. In addition, the limiting provisions of the 1962 Act cease to apply to the Railways Board. It seems to us that here is a very considerable extension to the powers of hotel trading which are possessed at the present time by the British Railways Board.
Since there are three Amendments on hotels, it may be convenient to run quickly through the existing position. The situation to-day is that the railway hotels are operated by a wholly-owned subsidiary of the British Railways Board, British Transport Hotels, Limited. These hotels are mostly in city centres and mostly adjacent to railway terminals or to railway terminals which have now been closed. In addition, there are certain resort hotels, in particular the three fine Scottish golfing hotels at Gleneagles, Turnberry and, the new hotel opened only last month, at St. Andrews. The assets at the book value are approximately £10 million. Last year, 1967, despite lower receipts, the net profits were slightly up, after altering, I suppose it should be said, the charge for depreciation; there was a slight increase in the net profit of £813,000. Good though it is to see a part of British Railways' business in a profit-making position, it is none the less a fairly modest return on assets of the order of £10 million.
As I say, it seems to us that this provision in the Bill is an extension to the existing powers which the Railways Board have. We accept that some railway hotels are very fine. They have been operating for a very long time. In the last few years they have been subject to the provisions of the 1962 Act, but now the limiting provisions of the 1962 Act are to be removed from the railway hotels, although not from the other hotels which we shall consider later. I think we must ask the Government for the reasons why that is so; and secondly,
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to look rather more closely at the wording of Clause 50(2), which says:
"The Railways Board shall have power to provide and manage hotels in any part of Great Britain, and with the consent of the Minister, elsewhere".
What does this word "elsewhere" mean? On the face of it, it means that the Railways Board could open an hotel in Hong Kong if they wanted to do so. There may be some explanation which has escaped us, but I think we need to hear from the Minister who is to reply what the Government draftsmen had in mind when they put in this word. I beg to move Amendment No. 142.
LORD BEAUMONT OF WHITLEY: We also should like to support Amendment No. 142, although we are considerably more doubtful about Amendments Nos. 143 and 144. Amendment No. 142 relates to a provision which seems to spread unnecessarily the powers of the railways into a position where they are are going to be able to have hotels merely in order to make money unconnected with the railways. This is where I should like to take up a point raised by the noble Lord, Lord Hughes, on the last Amendment. The Government Front Bench seem to be very hurt because they think that we in these two Opposition Parties do not want British Railways to make money. Of course we want British Railways to make money. It may he that the only way to make money with a railway is, as has been suggested, to close down the rail. In that situation we say, "Right! We recognise flat the Government must produce a grant, clearly earmarked as a social benefit, for keeping the railways going if the country needs them". What we say is that there is no point in answering the need to make the railways pay by merely adding more and more businesses until their surpluses come to more than the railways lose. That is not making the railways pay. Anyone can take a single company and add several more companies until overall their accounts are balanced. That is the point we want to make, and that is why I wish to support Amendment No. 142.
LORD SINCLAIR OF CLEEVE: May I add a word in support of my noble friend Lord Windlesham on this Amendment. As to what he said as regards the operating results of the Hotel Company,

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I think it is fair to say that that £813,000 is really a working surplus, not a net profit; and a surplus naturally tends to go to reducing the deficit of the railway company. But the operations of this holding company are by any standard pretty considerable industrial operations. The only difference this clause makes in the existing position is to widen the scope of this company by extending its operations outside this country and beyond the needs of the users of the transport system whom these hotels were primarily designed to serve. I think it is inevitable that when a power of this kind is included in a Bill, it is an encouragement to those operating it to do their best to exercise that power. Therefore this is an encouragement to the holding company to look outside and to embark on a highly speculative and difficult business which, I should have thought, was much better left to those who have some knowledge of the territory and the commercial risks.
LORD HANKEY: Before we go further into these somewhat ideological questions I should like to express a word of doubt from these Benches. First of all, if we look at the position in broad outline it seems that we have to enable the railways to bring themselves up to date, to run efficiently, to take a forward and dynamic look at what is happening in the economy to see where the best service can be rendered. But especially we have to help them to make some money and they are not likely to do it unless they are dynamic. We either have to enable the railways to make some money, or at any rate make a smaller loss, or we have to face the fact that sooner or later we shall have to subsidise them. That is a decision which I think everybody in this House is reluctant to take.
If we look round at what is happening in our economy, we see that there are many businesses which find themselves hard pressed, and that they will be able to make the grade only if they combine with other businesses. This explains many of the takeover bids and mergers that are going on. This is the way our economy achieves greater efficiency, because businesses which combine their affairs can offset small losses in other ways and especially can do business with each other in a more efficient way.
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How does this apply to the railways? If we look at Canadian Pacific Railways (which I mention because they are not nationalised) it is interesting to see that they run hotels in half the cities of Canada. And they are tremendously efficient hotels. I have stayed in a good many of them. If British Railway hotels attain that efficiency I am sure that it will be very conducive to the efficient running of the railways. Canadian Pacific also run a large telecommunications service, air lines and develop forests and minerals. They are in business in a big way, and it really is a fact that if Canadian Pacific were confined purely to the business of running a railway they would lose money on a vast scale. I think the same thing applies here.
Personally I do not believe in nationalisation. I have absolutely no ideological stand in this matter, but I do not like nationalisation because it seems to me that the nationalised industries have a way of losing money. I believe, as the Conservatives do, that if we want a really good productive job done, it is better done by, private industry. Still, the fact remains that a great deal can be done by this holding company and by small concerns sponsored by it. If we want our railways to pay, to be modern and "with it", I do not think it would pay us to put them in the position where they cannot diversify their activities to some extent. I believe that the very diversification of their activities will tend to make them more go ahead and produce better transport services.
As I am on my feet, I should like to say that I hope we are going to reject an Amendment about camping sites. We need more hotels and certainly more camping sites. I should like to see our economy developed altogether faster and with more investment, and I should be very sorry if the result of the discussions on this Bill were to prevent investment and development taking place, even if it has to be done by our nationalised railway system.
LORD ROBERTSON OF OAKRIDGE: While I cannot follow the noble Lord, Lord Hankey, in the whole of his argument, I support him in general. I find myself considerably confused by the proposers of this Amendment, some of whom support it on the ground that the railways are inefficient and cannot make money, while others support it on the

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ground that as the Bill stands the railways will make money and damage private enterprise. I think that they should agree one way or the other. In nearly all cases these hotels were started by the old railway companies, and for what were then good reasons. Certainly the Minister should keep a watchful eye on any further investment of public money in this field, but, subject to that, I think that it is rather mean to put forward an Amendment to cramp the railways and their hotels and catering branch from further enterprise.
3.36 p.m.
LORD HUGHES: I am very tempted to leave the argument on the basis on which it has been taken by the noble Lords, Lord Hankey and Lord Robertson of Oakridge. I find myself in agreement with every word the noble Lord, Lord Hankey, uttered, except for the bit he put in parenthesis about not being in favour of nationalisation. I cannot go all the way with him on that. I also agree with what the noble Lord, Lord Robertson, has said. But the noble Lord, Lord Beaumont, seems to be under a misapprehension about what the Government want to do in this matter. We are not taking the point of view that it is impossible for the railways to make money in normal railway running and that therefore we have the choice of either letting them carry on these loss-making activities and helping them by subsidy, or permitting them to make profits on something which has nothing at all to do with the railways. What the noble Lord, Lord Hankey, said suggested to some extent that it was not unreasonable that the railways, like progressive private enterprises who find their traditional lines are not doing so well as they could, should find ways of diversification. I do not believe that this should be denied to the railways.
But that is not the primary purpose here. The main purpose is that it should be made easier for the railways, waterways and buses to turn their loss-making activities to profit-earning ones by adding other lines which induce increased traffic. It may well be that a new enterprise may not in itself make a great deal of money; but if, together with the increase in revenue that accrues to the railways it substantially improves business then it is a good thing. For these reasons, we think that this is a proper thing to do.
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As the noble Lord, Lord Robertson, said, this is not something which has suddenly been thought up in 1968 by a Socialist Government. It is a longstanding part of railway history. I was surprised to hear the noble Lord, Lord Windlesham, in moving the Amendment, giving as his first justification that it and the succeeding Amendments had not been discussed in another place. He has not done his homework very well on this. These Amendments were not only discussed in another place but were negatived on a Division. It is true that they were not discussed on Report, but they were discussed in Committee.
LORD WINDLESHAM: Could the noble Lord help us by giving the reference?
LORD HUGHES: Yes. An Amendment was tabled by the Conservatives, debated in Commons Committee and negatived on a Division: Hansard, Standing Committee F, March 21, cols. 206378. An identical Amendment which was tabled for the Commons Report stage was not debated. If it will help in relation to the succeeding Amendments, the equivalent to Amendment No. 143 was No. 1813. That also was negatived on a Division. The same column references as for Amendment No. 142, I think, are applicable, and again for an Amendment identical to No. 144 which was negatived on a Division in Commons Committee. So, in fact, the three Amendments were the subject of debate in another place.
The concept which we wish to reject is that railway hotels must be next door to railway lines. We no longer accept that; we think it is quite out-dated. For one thing, "Motorail" enables travellers who use the railways for the greater part of their journey to use hotels at places to which rail passenger services are not run. We think it is desirable to give the Board freedom to exercise their commercial judgment in deciding whether to manage hotels themselves, or to entrust the management to British Transport Hotels, or to other subsidiary companies, if they so wish. II, for example, the running of an hotel was something which was obviously in the interest of the railways, and obviously was going to be a profitable concern, then it would be run by the hotel company.

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But in pursuance of the point which the noble Lord, Lord Beaumont, was following up—helping the operation of the railways itself—if there were to be a case for running an hotel in a particular place where the direct beneficiary would perhaps be not the hotel profits themselves, but the induced extra railway traffic, it might well be the case that the right thing would be for the railways to manage that hotel themselves, as they would be getting the traffic benefit, although it might not be worthwhile, say, for the hotel company who would say: "It is not going to help our position all that much."
The noble Lord asked about the power given to run hotels elsewhere than in Great Britain, and he postulated that British Railways might open an hotel in Hong Kong, or that they might open an hotel in Tahiti, or one at Christmas Island. I have no doubt whatever that they will not do any such thing. What I do think, having regard to the fact that British Rail have interests in certain shipping services, is that it might be reasonable for them to run an hotel or manage an hotel at the terminals of the shipping services, because it would be a direct advantage to them in getting business for their shipping services and for their railway lines. If this is done elsewhere than in Britain, it will obviously be done only where it has a direct connection with the services which the railways are providing in or to this country. It does not seem to me that this is an unreasonable thing to do. We propose to remove the restrictions which the 1962 Act imposes. The Government's policy is that the nationalised Boards should have power to expand ancillary activities where they can do this to advantage and where they can do it without detriment to their primary functions. If we accepted this Amendment, we should be cutting completely across the principles that we are seeking to follow up, and I therefore cannot advise your Lordships to accept the Amendment.
THE EARL OF SELKIRK: Perhaps I might ask one question of the noble Lord. He says that these services of hotels abroad should be in direct connection with the railway services. Personally, I agree with that. But there is nothing about that in the Bill.
LORD HUGHES: One of the things that we are seeking to alter in this Bill is the not surprising fact that, as Parliament has in the past been so obsessed with putting restrictions in the way of nationalised industries, the nationalised industries have found it difficult sometimes to make money. We would suggest, for a change, that it is worth while trying to look at it the other way. Let us see how we can help the nationalised industries to make money by seeing how few restrictions we can put in their way and confine them to those that are reasonable.
BARONESS HORSBR UGH: Can the noble Lord say whether the Government have considered, in order to help the railways to make more money, setting up casinos in various parts, when they would probably get a great deal of railway traffic to those places?
LORD HUGHES: I always give the most careful consideration to anything proposed by the noble Baroness. If she puts down an Amendment to that effect on Report stage, I promise her that the Government will not reject it without giving it the consideration that it merits.
3.45 p.m.
LORD NUGENT OF GUILDFORD: This has proved to be an interesting debate to start off the afternoon, and I should like to make a comment on the way the debate has gone. The noble Lord, Lord Hughes, with his customary dialectical skill, sought to put us in the dock as if we were being mean and unkind to the railways; and indeed the noble Lord, Lord Robertson, suggests this. But let us look into the facts before we get into the emotions. The noble Lord, Lord Hankey, in what I thought was a most interesting intervention, said that the railways should be helped to make money.
BARONESS GAITSKELL: Hear, hear!
LORD NUGENT OF GUILDFORD: With that we all agree; that is what this Bill is about. If we did not help them, they would have to be subsidised. And, bless my soul ! that is what this Bill is about, too. Let us consider for a moment what the Bill does provide. Those noble Lords who were present in the Committee last night will remember that we had a debate about the capital

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provision of this Bill. Among other things, this Bill writes off over £1,300 million of the railways' capital. It is the taxpayer who has paid that; it is money that the people of this country, the whole nation, have paid—and in the post-war years, too. The Bill also provides another £700 million to finance the railways needs over the coming years. We are subsidising these; and we are subsidizing current deficits, too. We accept that. Of course, the main object of this Bill is to write down the capital to a reasonable size—the £300 million—to provide certain specific subsidies, and to relieve the railways of things which they cannot make a paying proposition, like urban and conurbation services, and so put them on a viable basis. That is the primary object of the Bill.
The noble Lord's comments, I thought, were rather directed to the idea that the railways should be allowed to develop hotels wherever they liked, because this would make money for them as well. I very much doubt whether it would; there is no particular reason to think so. Our position here is that we support the railways, the subsidiaries they have, and the railway hotels which they have which are just paying their way, and we think they should go on with them. Furthermore, we are willing to see them open new ones under the terms of the 1962 Act, which are very reasonable. Section 6 of the 1962 Act, to which the noble Lord, Lord Hughes, referred as if it was a sort of stranglehold says this:
"The Railways Board shall have power to provide hotels in places where those using the railway services provided by the Board may require them for use both by those and other persons, and shall have power to manage hotels".
Then it says it is subject to the Minister. This is perfectly reasonable, and I should have thought that is all the railways would normally want. What subsection (2) does here is to remove this and allow the railways to develop hotels anywhere. I do not think this is right. Where does the money come from to do this? It comes from the taxpayer, from the nation, and while I would agree—and I am sure everybody would agree—that we want to put taxpayers' money into British Rail to strengthen their finances and to put them on a viable basis for running railways, because this is what we want them to succeed with, it is altogether
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a different matter when we are being asked to provide extra money for them to develop hotels.
The noble Lord referred with interest to the Canadian Pacific Railway and said that the Canadian Pacific rail services would not pay their way if they did not have subsidiaries. Perhaps I should declare an interest. I am a small shareholder in the Canadian Pacific Railway. It is true that they do not make much out of their railways, but they certainly "wash their face". They certainly do make their railways pay, which is due to exceptionally good management. This is entirely up to them. They are doing it with their own funds—and, incidentally, with a little of mine because I am willing to put my money there— but this is a different proposition altogether and I do not think the noble Lord, Lord Hughes, has made out his case. It is one thing to ask a nation to provide money for strengthening the finances of the railways in operating the railways. That we are doing on a gigantic scale in this Bill, and it is a right thing to do, but it is quite another matter to ask the general public to provide money for the building of hotels.
3.52 p.m.
LORD HUGHES: May I ask the noble Lord, Lord Nugent, if he will say whether he disagrees with the noble Lord, Lord Hankey, who at least implied, if he did not exactly say, that part of the success of the Canadian national railways was due to the extent to which they had these other services? And I think he expressed the opinion that if they confined themselves to running railways they would not make money out of it. I think the noble Lord, Lord Nugent, is helping to make the case for both the noble Lord, Lord Hankey, and the Government when he points out that after doing all these other think they not only make money out of them but also have been running the railways. That is what we are trying to do; to avoid providing subsidies by getting profits on other things to offset losses on the railway. If I am wrong, is it then the noble Lord's opinion, speaking with his declared interest as a shareholder in the Canadian Pacific Railway, that he would have received a dividend from them if they had confined themselves to running railways?
LORD BALFOUR OF INCHRYE: Is it not the fact that the Canadian Pacific hotels are all adjacent to the railways? The Canadian Pacific Railway does not exercise powers to build hotels anywhere, as is now proposed in this Bill. At Lake Louise, Banff, Ottawa—all the hotels are adjacent to the railway. We have no objection to that, but the Canadian Pacific Railway authorities do not do what the Government propose for British Rail.
LORD POPPLEWELL: It seems to me that we are back to where we were last night, indicating the deep cleavage between both sides of the Committee on the question of public ownership. The noble Lord, Lord Nugent of Guildford, constantly refers to the great deficit which has been created since the Tories took control of British Rail in 1951. Therefore, at the risk of tedious repetition, we must continue to remind the Committee that this huge deficit which is constantly being referred to has been created entirely by the policy followed by successive Conservative Governments.
The railways were encouraged to develop under the British Transport Commission—I am repeating myself, but in view of the number of times this has been referred to by the Party opposite I am going to give the answer. Up to 1953, under the old 1947 Act, the railways paid all interest charges, all working costs, and showed a profit. The deficit of £1,200 million has been created entirely by the Tories. Therefore, the problem to which they are referring is one of their own creation and now, under this Bill, at long last some freedom is being given to the various publicly owned undertakings to allow them to develop as they so determine in the best interests of their business, whether it be by hotels, caravan sites, or anything else. Why should they not have the right to develop?
The noble Lord, Lord Nugent, constantly refers to the fact that they are developing with taxpayers' money. This development which is taking place is a service that is being given and is deliberately being aimed at preventing the financial drain that the Tories have imposed upon the nationalised transport industry in the past. Therefore, I suggest to noble Lords opposite that, much as they possibly detest public ownership, there is surely a sense of justice in their minds and if they accept the thesis of
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public ownership—and we often hear them say that they do; they accept the question of a mixed economy—and if they are sincere in that, then surely they will be equally desirous of ensuring that the public sector of our economy should be as efficient and as commercially solvent as the private sector. I put this to them clearly, as a reasonable question, seeing that they accept the thesis of a mixed economy. If they are sincere in what they have been saying about matters of this type in the past then surely they will not insist upon these niggling Amendments that are aimed purely and simply at getting the publicly owned sector into financial difficulties and not giving them a desire to expand, and so to assist the economy.
LORD BEAUMONT OF WHITLEY: The game of baiting the Tories for what they may or may not have done is entertaining but it does not really get us down to the heart of the question. In this House we are surely all agreed that we want the railways to be as efficient and as solvent as possible, and indeed that applies to the whole of the public sector. The question is whether these particular clauses help this aim or whether they so expand the area in which this sector works that in point of fact they achieve the opposite effect.
The noble Lord, Lord Hughes, in his eloquent way, has persuaded me that we should certainly keep in subsections (3) and (4) of this clause. I should also like to see Section 25(3) of the 1962 Act repealed, as he wishes to do. The only thing about which I am still unhappy —and I should like him to answer this point—is why it is necessary to repeal Section 6 of the 1962 Act. All the examples that he has given of why we should have these hotels in places which are not next door to where the railways actually are must surely be covered already by the 1962 Act, which does not say that these hotels shall be next door to the railways but that they shall be in places where those using the railway service provided by the Board may require them. Surely it covers people who are motoring to and from the railway, and also most of what he wants. Therefore I wonder why he wants to repeal this hardly less limiting clause which does not impinge on the argument he is making.
LORD HUGHES: Perhaps the noble Lord, Lord Nugent, will permit me to answer this first. I have asked him a question which I think he wants to answer, but I will leave him to wind up. I think the question which the noble Lord, Lord Beaumont, has put, and which I think has been put by the noble Lord, Lord Nugent, also, is a perfectly reasonable one and one which I am under an obligation to answer. If the interpretation of Acts of Parliament were left to people like the noble Lord, Lord Nugent of Guildford, and the noble Lord, Lord Beaumont, and myself, I have no doubt we should come to the conclusion that those words in the 1962 Act did not stop British Railways from doing the sort of thing the Government now want them to do. The reason why the Government are taking these words out is that we are advised that these words have a restrictive effect, and do not in fact enable the British Railways Board to put up hotels where they may be helpful for their purpose.
In fact, these words, although to a layman they look as broad as they can be, are restrictive. 'What we are seeking to do is to put in a form of words which is not restrictive and which will enable British Railways to do what the noble Lord, Lord Beaumont, and what, I must confess, I myself, would have said the words in the 1962 Act allowed them to do, but which in fact do not.
THE EARL OF SELKIRK: Can the noble Lord give any case where the railways have wanted to build a hotel and have been prevented from doing so?
LORD HUGHES: I have not yet had access to all the decisions the previous Government have taken in these matters. I do not know whether this has ever taken place or not, but even if it had not, that is no reason why we should seek to place ourselves at risk in future.
EARL FORTESCUE: It is apparent that a large number of Members of this Committee are assuming that running a hotel is a gold mine, more particularly if it is run by a railway company. May I remind the noble Lord, Lord Hughes, as a good Scot that the railway hotel at Dornoch had to be closed down because it was making such losses.
LORD HUGHES: I have never suggested, and I am quite certain that no other member of the Government has suggested, that to open an hold is a certain way to make a fortune. Some hotels make a great deal of money. Some hotels, either because of their situation or because of the way they are run, would not make money this side of Time, and they go out of business. This could happen with the railways as well as with anybody else. What we will, of course, endeavour to do, and what good manage-merit in the railways (just as good management anywhere else) will do, is to ensure that hotels are opened only where there is a reasonable prospect that direct and indirect profits will provide financial advantage. It may be they are sometimes wrong, just as a private hotel keeper is sometimes wrong. But if the noble Lord wants me to put on record that I do not believe every hotel opened is a gold mine, I am prepared to confirm that I agree with him.
LORD NUGENT OF GUILDFORD: The debate has had an interesting quota, and I now have an opportunity of answering the question which the noble Lord, Lord Hughes, put to me. After all, we are in Committee and therefore we can speak as often as we like. The noble Lord asked me whether I thought Canadian Pacific Railways would pay the dividends without the subsidiaries, and the answer is that they would do so because the railways side is normally profitable. The subsidiaries side of course helps their profitability. My noble friend Lord Balfour of Inchrye made the really relevant point. So far as I know, although I do not pretend that I have been to all of them, the C.P.R. hotels are certainly in the main all adjacent to their transport services. Of course this is the point. The noble Lord has skilfully made it seem as though we are trying to strangle British Railways, but that is not true. Section 6 of the 1962 Act allows very wide powers of development of hotels, and as the noble Lord, Lord Beaumont, rightly said, it would cover all the examples the noble Lord, Lord Hughes, gave, including the shipping services; anything in direct connection where their customers would use it. The noble Lord really has not made out a case for extending the 1962 powers and allowing them powers in this Bill.

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If I may make one point in answer to the noble Lord Lord Popplewell, who came in with his customary warmhearted support for British Railways, I would remind him, when he castigates the Tory Party for what they did and did not do with regard to railways, that they at least financed modernisation of the railways, which is more than he and his right honourable friends did. In 1956, as the noble Lord, Lord Robertson, would confirm, we provided, at the rate of about £150 million a year over the early years, coming down to about £120 million, something of the order of £1,000 million for modernisation. This could hardly be said to be an unfriendly act to the railways and, of course, we are just as much concerned as noble Lords opposite to make the railways a solvent and viable business and do all we can to help them. I really do not think subsection (2) is going to achieve this, and I must ask my noble friends to press this Amendment.
VISCOUNT STUART OF FINDHORN: May I say that I feel strongly inclined to support the Government. Gleneagles is struggling along and Dornock is closed —both railway hotels. There is a big hotel in Devonshire, Morton Hampstead, built entirely by the W. H. Smith people, which the Great Western Railway Company bought "dirt cheap"; otherwise they would not have bought it. The same comment applies to the hotel at St. Ives. The Great Western did not buy them because they were serving the railways; they were encouraging people to use the railways to play golf. I do not think it will make a ha'pennyworth of difference which way this goes, and therefore I will support the Government.
LORD NUGENT OF GUILDFORD: May I say—
SEVERAL NOBLE LORDS: Order, order!
LORD NUGENT OF GUILDFORD: We are in Committee and therefore we may speak as often as we like. May I say this to my noble friend? We are not suggesting in any way restricting the activities of the existing British Railways Hotels subsidiary to which my noble
friend referred. We accept that they are useful, and the effect of our Amendment would in no way restrict them, nor prevent that subsidiary opening further hotels directly in connection with its transport services. All we are seeking to do is to limit the development to that and refuse British Railways powers to build a hotel anywhere they like which is not connected with their services.
LORD HUGHES: I cannot let the matter rest there. I think the noble Lord, Lord Nugent, is completely ignoring the answer I gave to the noble Lord, Lord Beaumont, which was that the words in the 1962 Act, which appear to open the door wide, are in fact restrictive in their effect. We seek to remove the restrictive effect of those words. The noble Lord chooses to ignore that and to say they are not restricting the activities. He says he does not wish to restrict British Railways activities, yet he persists in continuing to support these words which are restrictive in their effect.
LORD STRATHCLYDE: May I ask the noble Lord whether he will be good enough to correct me or confirm what I am about to say? Is it not a fact that to-day British Railway hotels are encouraging opposition to the railways in that their hotels are being used to a greater extent by coach parties, that is, by people who do not use the railways at all?
LORD BEAUMONT OF WHITLEY: We entirely accept what the noble Lord. Lord Hughes, said in answer to the point about the clause in the 1962 Act being restrictive although it might not seem to us to be so. But we still think that by its repeal it is made far too permissive and covers a much wider scale than necessary. We welcome two-thirds of the proposals in this clause, and therefore I would advise my noble friends on these Benches to abstain if this Amendment is pressed.
4.10 p.m.
On Question, Whether the said Amendment (No. 142) shall be agreed to?
Their Lordships divided: Contents, 97; Not-Contents, 70.

CONTENTS

Aberdare, L.

Amory, V.

Audley, Bs.

Aberdeen and Temair, M.

Arbuthnott, V.

Balfour of Inchrye, L.

Albemarle, E.

Ashbourne, L.

Barnby, L.

Allerton, L.

Auckland, L.

Beauchamp, E.

Belstead, L.

Glentanar, L.

Oakshott, L.

Berkeley, Bs.

Greenway, L.

Powis, E.

Bessborough, E.

Grenfell, L.

Rankeillour, L.

Blackford, L.

Grimston of Westbury, L.

Rathcavan, L.

Boston, L.

Hamilton of Dalzell, L.

Rockley, L.

Buccleuch and Queensberry, D.

Horsbrugh, Bs.

St. Aldwyn, E.

Burton, L.

Howard of Glossop, L.

St. Helens, L.

Carrington, L.

Ilford, L.

St. Just, L.

Clithe oe, L.

Inglewood, L.

St. Oswald, L.

Coleraine, L.

Jellicoe, E.

Salisbury, M.

Conesford, L.

Kilmany, L.

Sandys, L.

Cork and Orrery, E.

Kilmarnock, L.

Savile, L.

Cottesloe, L.

Kinnoull, E.

Selkirk, E.

Craigavon, V.

Lothian, M.

Sempill, Ly.

Cromartie, E.

Loudoun, C.

Sinclair of Cleeve, L.

Daventry, V.

MacAndrew, L.

Strange of Knokin, Bs.

Denham, L. [Teller]

McCorquodale of Newton, L.

Strathclyde, L.

Dilhorne, V.

Margadale, L.

Swinton, E.

Drumalbyn, L.

Massereene and Ferrard, V.

Templemore, L.

Dudley, L.

Mills, V.

Teviot, L.

Effingham, E.

Milverton, L.

Thurlow, L.

Elliot of Harwood, Bs.

Molson, L.

Trefgarne, L.

Exeter, M.

Monk Bretton, L.

Tweedsmuir, L.

Falkland, V.

Monsell, V.

Vivian, L.

Ferrers, E.

Mottistone, L.

Wakefield of Kendal, L.

Ferrier, L.

Mowbray and Stourton, L. [Teller.]

Windlesham, L.

Fortescue, E.

Wolverton, L.

Gage, V.

Newton, L.

Wrottesley, L.

Glendevon, L.

Nugent of Guildford, L.

NOT-CONTENTS

Addison, V.

Heycock, L.

Royle, L.

Arwyn, L.

Hill of Wivenhoe, L.

St. Davids, V.

Beswick. L.

Hilton of Upton, L. [Teller.]

Samuel, V.

Blyton, L.

Hirshfield, L.

Segal, L.

Boothby, L.

Hughes, L.

Serota, Bs.

Bowles, L. [Teller.]

Iddesleigh, E.

Shackleton, L.

Brockway, L.

Kirkwood, L.

Shepherd, L.

Buckinghamshire, E.

Latham, L.

Silkin, L.

Burton of Coventry, Bs.

Leatherland, L.

Simon, V.

Carron, L.

Lindgren, L.

Snow, L.

Chalfont, L.

Llewelyn-Davies of Hastoe, Bs.

Soper, JL.

Clwyd, L.

McLeavy, L.

Sorensen, L.

Donaldson of Kingsbridge, L.

Maelor, L.

Stocks, Bs.

Douglas of Barloch, L.

Mitchison, L.

Stuart of Findhorn, V.

Douglass of Cleveland, L.

Moyle, L.

Summerskill, Bs.

Gaitskell, Bs.

Pargiter, L.

Swanborough, Bs.

Gardiner, L. (L. Chancellor.)

Phillips, Bs.

Taylor of Mansfield, L.

Garnsworthy, L.

Plummer, Bs.

Walston, L.

Geddes of Epsom, L.

Popplewell, L.

Wells-Pestell, L.

Granville of Eye, L.

Raglan, L.

Williamson, L.

Hall, V.

Rhodes, L.

Willis, L.

Hankey, L.

Robertson of Oakridge, L.

Winterbottom, L.

Headfort, M.

Rowley, L.

Wootton of Abinger, Bs.

Henderson, L.

On Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
LORD HUGHES: I beg to move that the House do now resume to hear the statement by my noble friend the Baroness Phillips.
House resumed.

AINTREE RACE COURSE AND THE GRAND NATIONAL
4.22 p.m.
BARONESS PHILLIPS: My Lords, with the permission of the House, I should now like to repeat a Statement about Aintree and the Grand National Steeplechase which has just been made by my right honourable friend the Parliamentary Under-Secretary of State for Education and Science in another place. It is as follows:
"This race is one of the nation's great sporting festivals and its continuance is inevitably bound up with the ownership of the Aintree course, since it is clear that the race will completely change its character if it is transferred elsewhere. The Government also believe it to be important for considerations of regional policy to keep as many important events as possible in the provinces.
"With these objectives in mind the Government initiated talks with all the interested parties, and as a result I can now make an interim statement, following discussions with the Liverpool Corporation, the Turf Authorities, the Horse Race Betting Levy Board and Messrs. Tophams, Ltd., the present owners.
"The chief consideration is that of ownership, and Her Majesty's Government have informed the Liverpool Corporation that we are prepared to give loan sanction for the capital sum required for the acquisition of the land. We shall also be prepared to apply the provisions of Section 8 of the 1966 Local Government Act in order to make them a grant, not exceeding 50 per cent., in respect of that portion of the site which is to be kept as public open space.
"I am glad to say that the Liverpool Corporation place great importance upon obtaining full public access for general recreational purposes at Aintree on all days when racing is not taking place. As Merseyside has much less open space than the national average this will be a significant contribution to the social life of the neighbourhood.
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"It is hoped that this offer will facilitate negotiations with Messrs. Tophams for the purchase of the land.
"If Liverpool acquire the site it is understood that they will wish to lease the race course to a non-profit-making trust body to be established under the chairmanship of Lord Leverhulme. This trust will seek to develop Aintree as a National Hunt Racing centre in the North, a scheme which has the support of the Horse Race Betting Levy Board. By these means the Grand National and racing at Aintree will be maintained and no charge will fall upon the Liverpool ratepayers in respect of them.
"It is believed that at a later date the Liverpool Corporation may wish to establish a Sports Centre on the site, a project in which the North-West Regional Sports Council is much interested, and if so we would expect that there would be the fullest co-operation in the design and provision of buildings of a multi-purpose character between Liverpool, the Racing Trust and the Levy Board."
My Lords, I hope that this announcement will enable negotiations to be brought to a successful conclusion for the purposes that I have outlined.
THE EARL OF KINNOULL: My Lords, I am sure the whole House, as well as many outside, will welcome almost with relief this interim statement on the future security of Aintree. I am sure, too, that we are all agreed that on the grounds of almost national prestige, on the grounds of safeguarding the Grand National, on the important grounds of regional policy, the decision permanently to safeguard the race course is a wise and prudent one. Perhaps one's only regret is that it has taken so long to achieve.
There are two brief questions that I should like to ask the noble Baroness about the Statement. May we take it that the loan sanction to be made available by the Government will amount in practice to 50 per cent. of the purchase price of the race course? Secondly, how does it follow from the Statement that no charge will fall on the Liverpool ratepayers, when the Corporation has

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to find approximately 50 per cent. of the purchase price?
LORD WADE: My Lords, I should like to join in thanking the noble Baroness for repeating this Statement, which I welcome. I must admit that I am better acquainted with regional development than I am with racing, but may I, for enlightenment, ask two questions? I understand that if Liverpool acquires the site, it wishes to lease the race course to a non-profit-making trust body. I assume that the race course is distinct from that portion of the site which is to be kept as a public open space for which a grant is to be made under the Local Government Act 1966. This open space presumably is in the middle. Will this be kept permanently free and open to the public? Secondly, does the expression "full public access for general recreational purposes" refer to the public open space or to another part of the site?
BARONESS PHILLIPS: My Lords, I should not wish to prejudice my right honourable friend in any way by giving the wrong answers. So far as the open space is concerned, I think I would be correct in saying the arrangement will be similar to that at Epsom race course, which is in fact an open space available to the general public when there is no racing in progress.
On the question of loan sanction, I can hardly give a direct answer to that to-day, because this will depend on many factors. A further point raised by the noble Earl, was whether the scheme will cost the citizens of Liverpool anything. This is, of course, a very complex matter, but under what is suggested the Grand National and racing will not involve a direct charge on the Liverpool Corporation.
LORD OAKSHOTT: My Lords, may I be allowed, as one who has seen and been thrilled by every Grand National since 1923, to add my thanks to the noble Baroness for her announcement this afternoon, and to welcome also the perpetuation of this great festival which carries great prestige all over the world, for Liverpool and for this country. May I also ask the noble Baroness whether she will recognise that the proposal for an open space in the future is one that is
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very welcome in that area, and we all wish it well. Finally, will she also recognise that a holding trust such as that which she mentioned in her Statement, presided over by someone like Lord Leverhulme, with his great reputation for public life in that part of the world, is assured of support and success.
BARONESS PHILLIPS: My Lords, I should like to thank the noble Lord for his remarks and to endorse all that he has said. This is a national festival enjoyed by all groups in the community—there is little doubt of that.
LORD ALLERTON: My Lords, may I ask the noble Baroness whether the race course and the centre have been actually put in price by Messrs. Topham, or is that subject for negotiation?
BARONESS PHILLIPS: My Lords, at present, that is subject to negotiation.

TRANSPORT BILL
4.30 p.m.
House again in Committee.
LORD WINDLESHAM LORD WINDLESHAM moved Amendment No. 143:
Page 73, line 1, leave out subsection (3).
The noble Lord said: Since we are in Committee, I will begin by taking back two statements that I made as recently as moving the last Amendment. I suggested that since Amendments 142 143 and 144 all dealt with hotels, but with different aspects of the provision of hotels, they should be moved separately. But since then we have had a long debate on Amendment 142, on the principles lying behind all three Amendments. So, with the permission of the Committee, it might be convenient if we could deal with Amendments 143 and 144 together. We do not propose to press these Amendments to a vote and will treat them as probing Amendments. Second, the noble Lord, Lord Hughes, was quite right in the reference he gave me. The question of railway hotels was discussed in the House of Commons Committee, so I must withdraw what I said earlier.
Clause 50(3), on page 73 of the Bill, seeks to give a limited power to the Waterways Board, to the National Bus Company and to the Scottish Transport Group "to provide and manage hotels"

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in places where people who use their services require them. So this is a power analogous to the power given to the railways in the 1962 Act. It was with some relief that I found, on reading this clause of the Bill, that not all the new Authorities are included. Where is the National Freight Corporation? They do not have this power. So we can at least take some consolation that there are to be no State-owned resthouses for tired truck drivers. I believe that there are two small hotels originally owned by bus companies which will pass to the Scottish Group, so some sort of provision is needed in the Bill. But we must ask whether the Waterways Board really needs a power to run hotels? As the noble Lord, Lord Sinclair of Cleeve, has said, it will of course depend on the use which is made of the powers. But if there is a power in a Bill there is an encouragement for somebody to act in a way in which he might not otherwise act.
The other point I want to put to the Government is the question what is or is not a hotel. This relates to Clause 50(4). Noble Lords who have listened to this debate may have thought that they had a fairly good idea of what a hotel is. But subsection (4) tells us it is not only what we normally understand by a hotel but is
"any other form of residential accommodation or facilities, including caravan and camping sites, for travellers or persons on holiday …"
Here again, we require information from the Minister as to the reasons for such a wide definition. I beg to move.
LORD HUGHES: I am grateful to the noble Lord, Lord Windlesham, for his opening remarks, and for confirming the correctness of the information with which I was provided. I may say that I did not do my own research on the matter.
LORD WINDLESHAM: The noble Lord is lucky.
LORD HUGHES: This is a relatively simple matter, I do not think the noble Lord is seriously asking me to attempt to introduce another Amendment on Report to bring in facilities for hotels or transport cafés for N.F.C. drivers. Looking at Amendments 143 and 144, I do not wish to suggest that we are reinterpreting "hotel". A hotel is a hotel,
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and a caravan site is a caravan site. We are seeking to make it possible for these varied activities, some types of which are more likely to occur than others in particular areas, to be undertaken by the Waterways Board, the National Bus Company and the Scottish Transport Group. The reference which the noble Lord, Lord Windlesham, made to the hotels owned by what will be the Scottish Transport Group is correct. I am not aware that there is any similar by-law for the waterways, but having regard to the recreational use which we propose should be made of the waterways, some facilities for caravans or camping sites might be particularly appropriate. Not everybody who wants to use the waterways will necessarily want to spend all his time on them. People might think it reasonable to be on the waterways part of the time, and at other times to camp or to stay in a caravan, or even in a hotel by the waterways if that was the best way to do it. We do not envisage that there will be any great or sudden expansion of these activities. It seems reasonable that all three industries, the Waterways, the Bus Company and the Scottish Transport Group, should have the power to provide facilities of these kinds.
I do not accept the argument that when one gives powers of this kind people will rush to use them. These are bodies which in some cases, to put it mildly, have had difficulties in making ends meet. I think they will look with great caution on any new enterprises and will embark on them only when they are well persuaded that they will be of financial advantage to them. I would say to my noble friends who support this proposal with enthusiasm: Do not expect everything to happen overnight, or that there will necessarily be any great mass of activities under this head. All we seek to do is to make it possible for it to be done where it is obviously the correct thing to do. Inevitably, this must be (it is appropriate for me, as a member of the Fabian Society, to say this) a policy of gradualism.
VISCOUNT STUART OF FINDHORN: Would the noble Lord consider for "hotel" inserting the word "spital"? It might make the meaning clearer.
LORD HUGHES: It would be clear to the noble Viscount and myself; I am

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not so sure that it would help the Front Bench generally.
LORD DRUMALBYN: Does the noble Lord not now think that it is a good thing that your Lordships have brought the powers conferred in subsection (2) into line with the powers conferred in subsection (3)?
LORD HUGHES: If I thought for one moment that it was a good thing, I should feel that I had wasted my time in getting some Conservatives with me, in getting some Cross-Benchers with me, and in getting the Liberals to remain in the sanctuary of their Benches. I do not think I have wasted my time. I just feel that the Front Bench opposite are not prepared to recognise the facts of life.
LORD WINDLESHAM: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.40 p.m.
LORD WINDLESHAM LORD WINDLESHAM moved Amendment No. 145:
Page 73, line 23, leave out ("provide") and insert ("arrange for the provision of")
The noble Lord said: In this Amendment we leave the subject of hotels. Clause 50(5) is concerned with the powers of the Waterways Board and has nothing to do with hotels. Subsection (5) authorises the Board to provide, with the consent of the Minister, road transport services for the carriage of goods. This is an additional power. Under the 1962 Act there is already power to provide road transport for the carriage of goods which are intended to be carried by inland waterways for part of their journey, or when there has been a temporary interruption of the inland waterways service.
It is difficult to envisage what circumstances this subsection is intended to cover. In practice I suppose it is likely to be confined to the incidental carriage of goods not concerned with the Waterways Board's main business of moving goods through the inland waterway network. If this is the case, rather than set up its own road transport undertaking, we believe that there would be advantages in entering into hire agreements with hauliers or other road transport operators to provide this service as and when it may be needed. Otherwise the chances of an under-utilized fleet of inland waterways-owned road vehicles seems a possible consequence of the clause.
LORD HUGHES: This is not a matter of ideological conflict, and I am sure the noble Lord will be satisfied with what I propose to say. An Amendment similar to this was one of a series discussed in Committee in another place, and after an explanation by my honourable friend the Minister of State, to the effect that there was no intention that the Waterways Board should go into the road haulage business, the Amendment was withdrawn. I would emphasise that there is no question of the Waterways Board desiring to embark on road haulage activities of more than a modest scale. Section 10(3)(c) of the 1962 Act has proved to be unduly restrictive in practice. For example, it has had the effect of preventing the Waterways Board from serving with its own goods vehicles some warehouses which were formerly served by the goods vehicles of the waterways division of the British Transport Commission.
The purpose of Clause 50(5) is to modify these restrictions so as to enable the Waterways Board to carry goods by road in its own vehicles, to or from its own warehouses, harbours, docks or ether waterway facilities, irrespective of whether the goods have been, or are to be, carried by the Board by inland waterways. In some cases the goods may be carried by inland waterway for part of their journey; in others they may not. The new proposed provision will make for flexibility in the Board's commercial operations. This is no more than a rationalisation of the Board's activity in this field and it will be expected to operate on sound commercial principles.
The limitation of the scope of its activities will be determined by the requirements built into Clause 50(5) to the effect that the Board must obtain the Minister's consent before providing road transport services. The Board will have to comply with current road traffic licensing procedures. It is envisaged that the Minister will give his general consent to the limited extension of the Board's facilities which I have already described, to avoid numerous specific but essentially similar requests. There may a so be isolated instances where the Board will wish to provide a particular service beyond the limits of the general consent, and the broad terms in which the subsection is drawn will allow the Minister

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to consider such cases on their merits. These broad terms will also allow the Minister to consider giving general consent to a somewhat wider exercise of these powers if future circumstances should make this desirable. In view of this, I hope that the noble Lord will find it possible to withdraw his Amendment.
LORD WINDLESHAM: There is no great difference of principle between us here. The only point I should like to press a little further is the question of utilisation. I can see that it might be convenient for the Waterways Board to have its own vehicles for its own purposes. If the 1962 legislation was too restrictive, it makes sense that it should be relaxed. Would the noble Lord look into the utilisation of these vehicles? The Minister has to give his permission, and one would hope he will satisfy himself that there is a real need. This would happen in the railways anyway, because there is a mandatory review of organisation. The McKinsey Company has been called in by the Railways Board, and this is the sort of question they will be looking into. So far as I know, there is no similar obligation on the Waterways Board to undertake any review of this kind.
LORD HUGHES: I will direct the Minister's attention to the question the noble Lord has put to me.
LORD WINDLESHAM: In view of that assurance, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 50, as amended, agreed to.
Clause 51 [Subsidiaries and joint subsidiaries]:
On Question, Whether Clause 51 shall stand part of the Bill?
4.48 p.m.
LORD DRUMALBYN: I have two questions to put on this Clause. The first relates to subsection (2) and deals with the compulsory acquisition of land. Section 15(1) of the Transport Act 1962 says:
"Subject to this section, the Minister may authorise any Board to purchase compulsorily any land in Great Britain which they require for the purpose of their business."
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This subsection in the Bill authorises wholly owned subsidiaries of the Boards and the new authorities, that is the National Bus Company, the Freight Corporation and the Scottish Transport Group, to purchase land compulsorily for the purposes of their business, subject to the Minister's consent. The Minister may authorise them to do so, too. I do not know what the intention of the subsection is, but it seems extremely undesirable.
LORD HUGHES: I was not aware that I was to be asked a question on this subsection. I am now under the disadvantage that I have not heard the first part of the noble Lord's remarks, and I have no clue to what he is talking about.
LORD DRUMALBYN: I was well aware of that, and I was about to try to hide it discreetly. However the noble Lord has exposed the facts. I was dealing with Clause 51(2), in particular with the power to acquire land compulsorily. This subsection says:
"For the purposes of paragraphs (d), (f), (g) and (h) of section 14(1) of the Act of 1962 … land required for the purposes of the business of a wholly owned subsidiary of such an authority, shall be deemed to be … land required for the purposes of … that authority."
It seems that it is undesirable to have a profusion of different bodies throughout the country with powers of acquisition. Where the Minister authorises compulsory purchase of land will that purchase be carried out by the Board or the new authorities and not through a profusion of subsidiaries? I think this will he confusing to the people and, quite frankly, apart from anything else, very unpopular. So I hope the noble Lord will be able to give an assurance on that.
The second point deals with subsection (3), and this relates to Section 27(1) of the 1962 Act. I touched on this point yesterday in the course of the debate. Section 27(1) says:
"The Minister may, after consultation with any Board, give to that Board directions of a general character as to the exercise and performance by the Board of their functions in relation to matters which appear to him to affect the national interest."
Clause 51 of the Bill says:
"This section"—
meaning Clause 51—
"applies to the following authorities, namely, the Boards and the new authorities".

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Then, subsection (3) says:
"In section 27(1) of the Act of 1962 (which empowers the Minister or, as the case may be, the Secretary of State to give directions of a general character as to the exercise and performance by arty authority to whom this section applies"—
that presumably means this clause—
"of their functions in relation to matters which appear to him to affect the national interest)…",
and then it adds further words. Looking through this Bill I have not been able to find any place where Section 27(1) is applied to the new Authorities, and I find this peculiarly confusing. I wonder whether subsection (3) is intended to apply to the new Authorities, and if so, where it is applied. It certainly is not applied in subsection (3).
LORD ST. HELENS: May I ask the Minister one short question on this? Where one of the Authorities or one of the subsidiaries wish to acquire land by compulsion, before they apply to the Minister for compulsion do they have to go through the routine of getting planning permission or not?
LORD HUGHES: I must apologise to the noble Lord, Lord Drumalbyn, for having gone out when he started to put these questions. It was a misunderstanding on my part. I thought that when I had dealt with Clause 50 I was temporarily "off the leash", but apparently I am concerned with the next ones also.
In reply to the first question—whether it will be the Board or the new Authority and not the subsidiary which the Minister will authorise to do the compulsory purchase—the answer is, "Yes". Unfortunately, it does not take me nearly so long to answer the question as it took the noble Lord to put it, and it takes my friends in the Box longer to write the answers than it takes me to read them. The second one is on the way. Clause 52(3) applies Section 27 of the 1962 Act to the new Authorities. For those of your Lordships who are not accustomed to our way of dealing with these matters, perhaps I may say that I have never felt there was any advantage to your Lordships, when dealing with a Department which is not my own, to pretend that I have everything at my fingertips, because in any event your Lordships would very speedily realise that that was not the
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case. However, I hope I have provided the noble Lord with the answers he wanted to the questions he asked. I do not have the answer to the question which the noble Lord, Lord St. Helens, asked—whether the Authorities have to have planning permission in advance of an application to the Minister—but perhaps he would permit me to pass the answer on to him in due course.
Clause 51 agreed to.
Clause 52 agreed to.
Clause 53 [Provisions with respect to Holding Company]:
On Question, Whether Clause 53 shall stand part of the Bill?
4.54 p.m.
LORD LINDGREN: I should be glad if my noble friend Lord Hughes could tell us, under Clause 53, what is likely to be the future of Thomas Cook & Son. Having looked at the Bill, it seems to me that practically the only thing that will be left with the Holding Company will be Thomas Cook & Son. Nowhere in the Bill does it appear to be obvious where it is going, or under what sort of conditions it is going to operate. It is a very large organisation, and a very large group of staff is affected. I should be most grateful if the noble Lord could tell us what is their future, if it has reference to this clause.
THE PARLIAMENTARY SECRETARY, MINISTRY OF PUBLIC BUILDING AND WORKS (LORD WINTERBOTTOM): Yes, I am able to help my noble friend on this matter. At the moment, the future of Thomas Cook & Son, together with three other elements of the Transport Holding Company, is not yet decided. It is, of course, under discussion. Thomas Cook & Son is a very important unit (the noble Lord, Lord Robertson of Oakridge, mentioned it yesterday) and it does not fit easily into any other aspect of the work of the new bodies we are setting up. For this reason, the future of Thomas Cook & Son is not yet certain, and of course the Transport Holding Company must remain in existence until such time as its future is in fact decided.
Clause 53 agreed to.
Schedule 2 agreed to.
Schedule 4 [Supplementary provisions as to certain transfers of property, rights and liabilities]:
LORD WINTERBOTTOM: This Amendment is in fact self-explanatory. Since the original draft of the Transport Bill the Ministry of Labour has been re-baptised, and now for "Minister of Labour" we must read "Secretary of State for Employment and Productivity". Then, when we come to Amendment No. 147, for "Minister" we need to insert "Secretary of State". These alterations are consequential upon changes in legislative procedures. I beg to move.
Amendment moved—
Page 208, line 26, leave out (Minister of Labour") and insert ("Secretary of State for Employment and Productivity").—(Lord Winterbottom.)
LORD WINTERBOTTOM: I beg to move Amendment No. 147.
Amendment moved—
Page 208, line 27, leave out ("Minister") and insert ("Secretary of State").—(Lord Winterbottom.)
On Question, Whether Schedule 4, as amended, shall stand part of the Bill?
LORD DRUMALBYN: May I ask a general question? I think that possibly a fairly important matter arises here. Can the noble Lord say on what principle the capital debt will be fixed? Will there be any measure of writing off? Could this be done without special Parliamentary sanction, or will the Minister's choice as to what the amount of capital debt in each case should be in fact be pretty well circumscribed by the valuations placed on the assets? I hope I have made myself clear, but I think it is an important matter of principle that when we start off these new bodies their capital debt should be a realistic reflection of their assets and liabilities.
LORD WINTERBOTTOM: I am afraid I am not able to give the noble Lord that information at this moment. With his permission, I will write fully to him on it.
Schedule 4, as amended, agreed to.
Clause 54 [Railway closures]:
5.0 p.m.
LORD HANKEY LORD HANKEY moved Amendment No. 147AA:
Page 79, line 18, at end insert ("users of the services in question and any body representing such users, as well as")
The noble Lord said: In moving this Amendment I speak in effect as a commuter. I should like to say that, because of a closure proposal, we almost lost an essential railway line in Kent and Surrey last year. We were only just able to save it. I believe it is essential that, before any proposal for railway closure is approved by the Minister, the users of the railway should be fully consulted. We had some considerable discussion about consultation with users yesterday, and I was sorry that some of the suggestions made were not approved. But in the case of an actual closure it is important that the interest of the users should be properly considered. In this connection it could be argued—and no doubt will he argued by the Government—that the reference in subsection (1) to subsection (8) and (10) of Section 56 of the 1962 Act covers consultation with the users. But as paragraphs (a) and (b) are now drafted it does not appear to the unitiated that the users are given full consideration. Therefore, I should like to suggest that we insert a specific reference to the interest of the users, even though it is not, in a strictly legal context, vitally essential.
When I say "users" I should like to say that I am thinking not only of the persons who go to London or Croydon, or any other of our great cities, in order to work and to go home at night, but also of the companies affected, the organisations, the institutions, the schools, the schoolchildren or the parents' associations. And I am thinking of the local and other authorities who are not always considered as they might be and who make extensive use of the railways. In the interests of the users of the railways, I beg to move this Amendment.
LORD WINTERBOTTOM: We believe that this Amendment is unnecessary because of the provisions that exist at present in Section 56(8) of the Transport Act 1962, which subsection (1) of the present clause does not repeal but to which it adds further conditions. Section

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56(8) provides that where any user or body representing users of a service which is proposed to be withdrawn make an objection to the Transport Users Consultative Committee the closure shall not be proceeded with until the Committee has reported to the Minister and the Minister has given his consent. In the past this procedure has ensured ample time for consideration of users' views, first by the Consultative Committees and then by the Minister. There is no need to give them further statutory protection. That is what we believe, and I hope that the noble Lord will accept my assurance that this strengthens rather than weakens the present position.
LORD ST. HELENS: May I intervene on this subject? The noble Lord will remember that some time ago, when the Conservative Party were in power, it was proposed to close certain sections of the railway. I can assure the noble Lord that the users, through their M.P.s, made a colossal "song and dance" over any section of railway that was going to be closed down; and the M.P.s (irrespective of on which s de of the House they sat) were not reticent in expressing their views very loudly in the House of Commons on behalf of their constituents.
LORD HANKEY: The trouble is that as the Act of 1962 is drafted, the consultative committees can take consideration only of hardship; unless hardship can be proved they cannot recommend that the railway line in question should not be closed. That is a very restrictive interpretation. If the noble Lord can assure me that the reference in Clause 54(1) to "social or economic considerations" does, in fact, broaden the relevant sections in the 1962 Act, I shall be happy not to press this Amendment.
LORD WINTERBOTTOM: I am able to give the noble Lord that assurance.
LORD HANKEY: I thank the noble Lord, and I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
THE EARL OF KINNOULL THE EARL OF KINNOULL moved Amendment No. 147AB:
Page 81, line 15, at end insert—
(" () Section 56(7) of the Act of 1962 be amended by the insertion in the second line of subsection (7) after the words 'passenger services' of the words 'or freight service'.")
The noble Earl said: The purpose of this Amendment—and I believe it is a substantial one—is to place upon the Railways Board the same obligations in relation to freight service closure proposals as at present apply in the case of proposals for closure of passenger services —the procedure for which come, as the noble Lord knows, under Section 56 of the 1962 Act. Section 56(7) says that any proposal for the closure of a passenger service must, in the first place, be fully advertised, with details of the proposal and details of alternative services. It sets out when and to whom objections to the proposal should be lodged and requires that copies of the notice be sent to the appropriate Area Committee. The objectors state their grievances and the losses they would suffer through the closure—but they are confined to hardship.
But when it comes to closure proposals for freight services no such procedure under the 1962 Act has to be gone through. In fact, the Railways Board at present have complete power to close freight services without any prior notification to either the users or the T.U.C.C. They also have complete power, I believe, to reduce a freight service, again without reference to the T.U.C.C. In this Bill, under Clause 55, for the first time the principle that freight services should be considered by the T.U.C.C. has been accepted by the Government. I am grateful for that; but it confines itself narrowly to the National Freight Corporation and the services that it will operate, and states that in future the quality of service provided for the National Freight Corporation may be considered by the T.U.C.C. This apparently still leaves open, so far as freight services are concerned, the question of the Railways Board's freight services. They are still free to reduce the quality of service, and, indeed, are free to remove that service altogether.
The freight services and the freight tonnage on railways since the war have, as the Committee will know, been a very disappointing feature of the railways. In fact, in other countries from 1939 until now freight traffic has increased. In Japan it has increased by 2,500 per cent.; in Switzerland, by 400 per cent.; in France, by 250 per cent., and in Britain by only 2 per cent. In the last two years freight tonnage has decreased approximately by 5 per cent. a year. One of the

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reasons for this, I suggest, has been the way that private sidings and their use has been neglected. Their numbers have declined dramatically over the past seven years—from approximately 5,900 to 3,700, a drop of some 40 per cent. In other countries, private sidings are used to full advantage. In France alone in the last five years, there has been an increase of 3,200 in the number of private sidings. Three-quarters of the railway freight traffic in France never reaches the streets; 90 per cent. of it generates from these private sidings.
Many people, I believe, are not happy about the Railways Board's wagon fleet policy; and I understand that it is intended to reduce it even further. I know many cases where the railways have had to turn away would-be users—fruit growers from Wisbech, a brick-making plant in Peterborough, sugar beet producers from King's Lynn, potato growers in Scotland, a tin mine in Devon—all of which business was turned away by the Railways Board because they did not have sufficient wagons. I believe that when the Board either reduces rail freight facilities or removes them altogether hardship is often caused to existing customers, many of whom may be small businessmen. I believe it would do no harm and only good if such cases of hardship were examined by the T.U.C.C. I am sure that what the users would like to see is not an examination in retrospect, but the consideration of a proposal to reduce a service before that actually happened.
I am sure that the Government accept the principle of my Amendment. As I have said, they have gone a few yards in the right direction by the provisions in Clause 55. I suggest, therefore, that it is not illogical that the Railways Board also should come within the examination of the T.U.C.C., as the National Freight Corporation will have to.
5.12 p.m.
LORD WAKEFIELD OF KENDAL: I wish to raise a rather different point from that raised by my noble friend Lord Kinnoull. I support the policy of British Rail of closing branch lines, as they have done and are doing. It seems to me wrong that there should be these heavy losses because of the inadequate use of assets. We all know that a great deal
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of heat is generated, and emotions raised, when a branch line is closed. Some of this emotion might be removed, and perhaps less heat generated, if what appears to me to be a defect in present legislation were removed. I refer to the procedure now in operation in connection with the closure of branch lines. It seems to me that the discussion on this Amendment provides a suitable opportunity for me to say what I wish to say.
In certain cases—not, of course, in all —I should like to see the operation over short distances of a miniature railway, instead of a full gauge line. Obviously, this could not be done by British Rail because their organisation and set-up is not suitable. Quite a number of branch lines, extending perhaps, up to 12 or 15 miles, could be operated successfully by local interests, perhaps supported by a preservation society. This would be possible because of lower capital costs of equipment and far lower operational costs. If you compare the operation of a heavy vehicle with a mini-car or a motor-cycle you get a reasonable sort of comparison. If a motor-cycle or a mini-motor car can do what has been done by a heavy vehicle, there is no point in running a heavy vehicle. At present, anyone who wishes to run a miniature railway cannot do so until the branch line has been closed. The difficulty is that when British Rail say, "We wish to close this line", there are, naturally, objections. Then there is a big inquiry procedure, and the whole affair may be drawn out, perhaps for two or three years.
I speak from personal experience in this matter. I have wanted to approach British Rail to say: "You are about to close a line. Will you allow me, in collaboration with others, to operate a miniature railway on the line, either by leasing or selling the line to us?". I understand that British Rail have no such powers until they have been through all the inquiry procedure, and then there are certain legal requirements to be complied with. This is not a case of living in "Cloud Cuckoo-land". I happen to be the director of the Ravenglass and Eskdale Miniature Railway. I and others, with a preservation society, took this railway over a few years ago when it was up for sale, and we now operate it at a profit. Last year we carried

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170,000 people; this year we shall carry 200,000. Until recently we carried quite a lot of freight from certain quarries, but these have now closed.
This miniature railway, operating on a gauge of 15-inches, carries people in comfort and at some 20 miles an hour. A trainload would consist of perhaps 200 people. It is a very satisfactory service, run for ordinary purposes up the Eskdale Valley; and, of course, many people who go to the area for fun and games thoroughly enjoy riding on the miniature railway. I am asking whether it is possible to make provision somewhere in this Bill for people who so desire to run a miniature railway on a branch line which British Rail may want to close because it is too expensive for them to run. Would it not be possible to make it easy for such individuals to approach British Rail and say: "We want to run a miniature railway on this line which you are going to close. Can we enter into negotiations?"? At present such people cannot do that because all this procedure has to be gone through but if it could be done, I think that a good many of the present difficulties, emotions and anxieties over the closing of branch lines would be removed and it would be possible for local interests to run a very satisfactory and efficient public service along such lines to the great advantage of everybody concerned. So I hope that somewhere in the Bill, if it is not covered by this Amendment, it will be possible to alter the present arrangement which makes it so difficult for local interests to run a miniature line, should they wish to do so, and keep a public service going profitably instead of at great cost to the taxpayer.
LORD SOMERS: With due respect I wish to differ slightly from my noble friend Lord Wakefield of Kendal. When a branch line is closed the permanent way already exists. If you are going to have a narrow-gauge railway you would have to lay an entirely new line, and this would raise the cost enormously. There is the other question of the transport of goods. A branch line would presumably be connected to the main line, and therefore a goods wagon could be run from the branch line on to the main line. This could not be done from a narrow-gauge line. I suggest, therefore, that the
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wisest course would be to retain the present gauge.
I would press the Government t o make it possible for independent bodies to buy these "cast-off" branches. My noble friend talked about emotions being raised, but it is more than emotion. There is very hard feeling and resentment when one's transport is cut off. In thinly built-up areas there are bound to be branch lines that do not pay very well. The great thing is for the rest of the railways to be sufficiently well-off to be able to carry these branch lines; but where they are being closed I suggest that they should be offered to anyone—not merely to the local authority—and sold at a reasonable price.
I have been in communication with a Mr. O. H. Prosser, of Bristol, who is an authority on railways, and he tells me regarding the Clevedon branch, which was closed down recently, that
"It was not possible to make progress with the Clevedon scheme because, first, the price quoted was some £37.000, an outrageous one for 3¾ miles and, secondly, the Ministry were unsympathetic as they wanted to avoid building a bridge to take the projected M.5 Motorway over the line".
If one is going to throw something away in any event, one does not ask an outrageous price if somebody wants to buy it. If I am going to throw away an old chair and someone comes along and wants to buy it, I do not say, "Yes, you can have it for £5,500." That seems to me an obstructive attitude on the part of the Government and I hope that if necessary they will allow these lines to be purchased by individual bodies.
LORD WINTERBOTTOM: If the noble Lords, Lord Wakefield of Kendal and Lord Somers, will permit me, I should prefer to answer the interesting points they have raised in conjunction with the next Amendment, which covers these points, and perhaps that will save the Committee's time. In answer to the noble Earl, we believe that the Amendment as at present drafted would place an intolerable and unjustifiable extra burden on the Board's management flexibility. Then I should like to say something, which doubtless I shall repeat this afternoon. A new period is opening in front of the British railway system. It is intended that it should become economically profitable and fully competitive,

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operating under normal commercial conditions. It will no longer be asked to provide our society as a whole with certain social services free. If the Board are asked to do certain jobs which they know are unprofitable, they will have the right to demand to be paid for those services. So we are hoping that this Bill, when it is completed and all arrangements have been worked out, will give us a fully competitive railway system, capable of working economically in competition with other forms of transport.
After listening to the noble Earl, I believe that that is what he too wishes. He is a friend to the railways and hopes to see them working successfully and profitably. Unfortunately, the carriage of freight from, say, a remote tin mine in Cornwall, as the noble Earl mentioned, or to a sugar beet factory in Peterborough, a case I know well, does not necessarily justify the continued existence of a branch line that is used only at irregular intervals or for limited parts of the year. For this reason we believe that the railways, particularly in the field of freight, must be fully competitive, fitting the rail network to the current need. Their main competitor, road haulage, is not to be subject to these new procedures suggested by the noble Earl. I think that we would all agree that the railways, struggling as they are to make themselves viable, should not carry handicaps which the road transport industry does not carry. We believe that the imposition of these duties and additional considerations before a freight service is closed down would impede the Railways Board's future competitive capability and would not serve any real social purpose.
THE EARL OF KINNOULL: I am grateful for the noble Lord's reply, although naturally I am disappointed. I do not wish to press this Amendment but I think that I should say this. I am sorry that the noble Lords, Lord Shepherd and Lord Stonham, are not here, because in 1962 they took a very different view from the one expressed by the noble Lord now. I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
5.26 p.m.
THE EARL OF KINNOULL THE EARL OF KINNOULL moved Amendment No. 147AC:
Page 81, line 15, at end insert—
(" () When the Minister has given consent to the withdrawal of any railway passenger or freight service under the provisions of Section 56 of the 1962 Act (as amended) the Board shall not, without the previous written consent of the Minister first being had and obtained

(a) dispose of any of the works or assets of the said line;

(b) take any action which might prejudice the Board or any other authorised Authority from taking over and resuming operation of the railway passenger or freight service in question.

() (a) In the event of the Minister's written consent having been given as set out in clause 51(6) of this Act, the Board shall, before giving effect to such consent be required to give first refusal of the sale of such works or assets to any person or body corporate who is willing to provide an adequate public rail service over the line of route of the service in question, the price to be charged for the sale of such assets and other terms of sale to be a matter of negotiation between such person or body corporate and the Board;
(b) in the event of such person or body corporate wishing to operate a service being dissatisfied with the terms offered by the Board for the sale of such works or assets, the Board shall be obliged to notify the Minister of such dispute and the Minister shall then refer the dispute to arbitration in the manner prescribed by the Arbitration Act 1950, and the matter shall be decided by a single arbitrator appointed by the Minister under this section, who will then proceed in the manner as laid down by that Act;
(c) the provisions of Sections 51(6) and (7) of this Act shall mutatis mutandis apply to any proposals for discontinuing navigation by the Waterways Board, whether for commercial carrying or for cruising, on any canal or waterway in accordance with the provisions of Section 123 to 128 of this Act.")
The noble Earl said: The purpose of this Amendment has largely been discussed already by the noble Lords, Lord Wakefield of Kendal and Lord Somers, to whom I am very grateful. It is to lay down more specifically the duty of the Railways Board in regard to the future disposal of track, equipment and formations following the closure of a particular line. The Committee, I am sure, will recall that in the youthful days of this Government there was a certain amount of indecision about what would happen to disused railway lines. Mr. Fraser, the first Minister, announced that no track or equipment could be taken up without his specific consent. Later Mrs. Castle, his successor, announced that the equipment and track could be sold without reference to her but the Ministry's consent would be required for any sale

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of railway lard or formation. I think that I am correct in saying that that is the present position regarding this matter. The Railways Board's policy, when they come to selling disused railway land or tracks, is to give first refusal to the local authorities through whose area the railway line goes. This procedure has prevented a number of independent groups who had planned to take a line over and run it for the benefit of the travelling public from doing so, because a vital piece of the land had already been sold to a local authority.
The noble Lord will have noted that under paragraph (a) the Amendment sets out that, where a local group or local authority wish to take over a railway service, such a group may be given by the Railways Board first option for the land. In the event of disagreement over the value of the land, the matter would be referred to arbitration. I think that this is important. I know myself of cases, one in Wales, where considerable had feeling was caused by the Board's deliberately—or apparently deliberately —offering a line at a ridculous price. It may be argued that the Amendment is not practical. It could be asked, "Who on earth would want to purchase and take over a non-viable asset from the railways?" That is best answered by quoting the case of the Southampton—Le Havre ferry service, which the Railways Board closed down in 1963 because they said they could never make this service pay. I believe that over the years prior to that their losses were over £1 million. This ferry was taken over by the Norwegian company Thorensen, which in 18 months is making a profit and the service has proved so successful that it has been expanded. I think that this example emphasises the importance of the assets of the railways being disposed of and used properly. I beg to move.
LORD ROBERTSON OF OAKRIDGE: I am sufficiently acquainted with the noble Earl, Lord Kinnoull, to know that he is a pretty good authority on railway matters, and therefore I will try to be careful in speaking to his suggested Amendment. I think that, before this Amendment is accepted, it should be shown that the Railways Board are not going to be subjected to a series of delays in disposing of assets which they
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regard as non-viable. Incidentally, I suggest that the example of the passenger packet services from Southampton to Le Havre is hardly applicable to branch lines.
In the case of these branch lines there is a serious consideration once it has been decided to discontinue the service, because attaching to them are always a great many maintenance expenses which can be very costly. For example, on many of them there are bridges; across roads which may be a hundred years old or more, which are already too narrow, and which the railway would like to get rid of as quickly as it can. There are also level crossings which have perhaps become a source of danger to the public, and something should be done about them at once. If the procedure is to be made so laborious that the British Railways Board are going to be prevented from dealing with these things, then I think that is a serious matter.
LORD WINTERBOTTOM: I shall now reply to the noble Earl's Amendment and the points made by tae two noble Lords who have spoken on the last Amendment. I can only agree with the remarks of the noble Lord, Lord Robertson of Oakridge, speaking as he does with great experience of operating railways. The whole essence of the problem is that we do not want to inflict on the Railways Board further delays beyond those which are already imposed upon them. If consent is given to the closure of a rail service and the Minister agrees that the route formation can be disposed of, the Railways Board are required to give first refusal to the appropriate local authority. It would not be appropriate, after the Minister has examined the need for a service in great detail, after receiving the advice of the Transport Users' Consultative Committee, to compel the Railways Board to offer the route to some other body who might or might not eventually be prepared to provide a rail service. Such matters must remain within the commercial management responsibility of the Board.
But I should hasten to make the following point, which is a reply to the noble Lords, Lord Wakefield and Lord Somers. The Railways Board are free, after the line has been closed, to dispose

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of the route to a miniature railway society after first offering it to the local authority; that is to say, this Bill does not preclude this course of action from taking place. But the miniature railway society has to convince the Railways Board of the economic viability of its offer, and the Railways Board must be permitted to judge the issues in terms of its own commercial interests. As the noble Lord, Lord Robertson, has pointed out, these commercial interests might lead to its being forced to rebuild certain bridges which are completely obsolete and perhaps dangerous. This is, I think, the answer to the point put by the noble Lord, Lord Somers.
If the Railways Board say, "Yes; we will sell you three miles of track at a very high figure", this really means it is a protective device for them. If somebody is willing to pay a foolish price for the piece of track, they are covered against all risks of future expenditure arising out of this sale. So it may be a blocking response, but one cannot deny the Railways Board the right to make such a blocking response. That is really the reason why we are opposed to the proposals. The Board are under ministerial control in this matter. I think it is absolutely correct that the local authority, which is also, presumably, the planning authority, should have the right to the first refusal of the facilities which will be thrown up by the closing of a length of railway; and when that is all over, if a miniature railway society or anyone else wishes to purchase that length of line, and if they can convince the Railways Board, and offer the proper price, then they can buy it and there is nothing to stop them. That is the reason why we are resisting this particular Amendment.
I might say that paragraph (c) of the Amendment moved by the noble Earl might be more properly dealt with under Part VII of the Bill rather than here, because that Part deals comprehensively with the operations of the waterways. Perhaps a discussion later on this point might be more valuable.
LORD WAKEFIELD OF KENDAL: I am fully knowledgeable of the difficulties which the noble Lord has quite correctly described, and to which the noble Lord,
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Lord Robertson, referred, about liabilities for bridges, railway crossings, fences and all such matters. But I think the noble Lord has it wrong. What I am proposing is not further delay, but to try to speed matters up. What I should like to see is that as soon as a full gauge railway ceases, a miniature railway line is put in operation. When the Railways Board are contemplating a closure, I want them to let it be known, and if any responsible body of people, with adequate finances and full knowledge of the liabilities of the particular line available to it, is willing to run a miniature railway, to make it known that they would gladly negotiate with it for sale, leasing, or whatever is most appropriate in the public interest.
Therefore, I am not suggesting delay but a speeding up of matters. I think the noble Lord must have misunderstood me. The noble Lord, Lord Robertson, has pointed out the delays that take place; and I entirely agree that the delays which take place in closing a branch line are quite intolerable. But what I want to see is a speeding up in this procedure. If only British Rail, when they are considering closing a line, could let it be known that they are willing to negotiate at once with a responsible body of people, I believe there would be a speed up in getting a miniature railway into operation on a line, and there would be no need to close it. I hope that this question will be looked at again by the Government. Perhaps I did not make myself wholly clear before, but I hope that with this further explanation I have done so now.
THE EARL OF KINNOULL: I am grateful to noble Lords who have spoken, and for the noble Lord's reply, and particularly for the kind remarks made by the noble Lord, Lord Robertson. My knowledge of the subject is not at all extensive. This was mainly a probing Amendment, but I suggest to the Government that a good reason for the Amendment is the question of amenity grounds and land use, because if you have a railway line already there, and its break up is in question, possibly houses could be put on part of it and farmers could take over other parts. There is a serious problem with disused railway stations—many of them litter

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the countryside and are proving unsightly —and it is one that the Railways Board will have to face. I do not wish to press this Amendment, and therefore beg leave to withdraw.
Amendment, by leave, withdrawn.
Clause 54 agreed to.
5.40 p.m.
THE EARL, OF KINNOULL THE EARL, OF KINNOULL moved Amendment ND. 147AD:
Insert the following new Clause—
("Where the National interest and/or important National regional or local interests require it or where the Minister is satisfied that replacement omnibus services are not adequately dealing with hardship arising out of a previous consent to discontinue all railway passenger services from any station or from any line or are contributing substantially to road congestion in a particular area or are otherwise not satisfactorily dealing with a particular problem the Minister may, provided that the line or portion of line referred to and in any consent having previously been given under sections 56(7) and 56(11) of the Act of 1962 (as amended) are still in existence

(a) revoke his consent;

(b) direct the Board to re-open any station or line or to resume rail passenger services on any line from a specified date;

(c) substantially amend any consent previously given under the hand of any Minister of Transport whether under the provisions of the Act of 1962 or any previous enactments dealing with the closure, withdrawal or discontinuance of rail passenger services and whether the previous enactment has since been repealed or not;

(d) direct the Board to provide improved services required by any Ministry of State arising out of any previous consent given by any Minister of Transport, whether under the Act of 1962 (as amended) or any previous enactment;

(e) provide that in respect of any reopening, resumption or improvement of services specified in subsections (a) to (d) above he may, if he is satisfied that the re-opening, resumption or improvement will be wholly, or for a time, unremunerative, invoke the provisions of section 36 of this Act and subject to the consent in that Section provided agree to undertake to make a grant for such period not exceeding three years as he shall think fit and to impose such conditions as he may think necessary.")

The noble Earl said: The purpose of this Amendment is to give the Minister power to reopen railway lines which, owing to a change in the economic and social conditions of any one particular area, become of more benefit to users than they were in the past. I am sorry that the noble Lord, Lord Lindgren, is
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not present because he has a special knowledge of this. In 1964, before the General Election, the Labour Party made some useful political propaganda about what they would do with all the closures and the closure proposals that were made following the Beeching Report. As I understood it, the gist was that no further closures would take place until a proper integrated survey had been made.
Within a few months of taking office the Government, I think rightly, were asked why they were not keeping faith with their undertaking and why further closures were taking place. The Minister's reply at that stage was:
"I am advised I have no power under the Transport Act 1962 to withdraw consent given or to insist on the restoration of a service already withdrawn."
Later, the Prime Minister was asked a similar question on the subject of a specific line closure and he expressed regret at the lack of powers. He said:
"When this Government took over the decision taken by the then Minister under the terms of the 1962 Act we could not halt the closure which had already been decided."
In order to assist the Government in their dilemma a Private Members' Bill was introduced in another place, and in fact in this House as well, in 1965, which would have simply given the Minister powers to reopen lines. The Bill was rejected by the Government, who then stated—and here I quote the noble Lord, Lord Lindgren, who at that time was Parliamentary Secretary to the Ministry of Transport:
"The power"—
that is, the power to reopen—
"is not there by Act of Parliament, but not everything is done by Act of Parliament. My right honourable friend is fully satisfied that, if it became necessary to reopen a line, when in fact a consent had already been given, he could negotiate with the Railways Board for it to be re-opened—always provided that the Railways Board were satisfied that they would get their return on it."—[OFFICIAL REPORT, 27/5/65, c. 995.]
So the Minister was satisfied that they could reopen a railway line, so long as the Railways Board agreed and that it was profitable.
But what about the socially necessary lines? Under this Bill we have a different concept. It is understood that the needs of transport are changing almost yearly and that there is a need to ease

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traffic congestion. In my opinion, the policy of closure has never reduced the deficit—in fact it has simply cut away the feeder lines of the main system, so reducing its viability. To give the Minister power under this Amendment to reconsider closures would simply be to acknowledge the changing needs of our transport system and to add more flexibility to the hands of the Minister. I beg to move.
LORD POPPLEWELL: I would ask my noble friend to give very serious consideration to this Amendment. Although it may not be couched in exactly the right terms, I hope he will not completely dismiss the idea from his mind but will consult with his Ministerial colleagues to see whether something can be done to meet the wishes of the noble Earl. Several branch lines have been closed down from time to time. In some cases the rails are still there, because when the branch lines were closed there was the possibility of new thinking taking place. I have in mind particularly certain East Coast resorts such as Bridlington, Hornsea and Withernsea, and the possibility of people in the West Riding being able to go and enjoy the facilities of those seaside resorts.
Some of these branch lines have been closed completely, others are under sentence of death, and only the other weekend one of the lines in the Bridlington area carried traffic amounting to the value of something like £19,000. That line is under sentence of death and has to close down before long. The York-Malton-Whitby line going through Goathland has been closed. The railway lines are still there and there has been tremendous pressure to have the line reopened, particularly from the children living in the Goathland area who have to attend school in Whitby. They are pressing for special trains, particularly in snowy and inclement weather.
This is the type of case where the Minister has from time to time indicated that there is a case for some reconsideration of the decision to close these branch lines. But in the past the Government have always said that they have no authority to overrule a previous Ministerial decision. Now we are seeing the
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tremendous growth of traffic that has taken place in many of these coastal resorts. Motor cars and coaches are finding it impossible to find parking space anywhere. One has to drive round and round searching for a place to park. The general public feel extremely dissatisfied when, in trying to take the opportunity of getting a breath of sea air into their lungs during their industrial life, they find they are prevented from going by rail because of the inadequate services.
We know that, strictly speaking, from an accountability point of view, the Railways Board can put up a case for their action. Very often the financial provisions on which the Railways Board have assessed their position has been subjected to severe criticism by certain outside authorities. I am not in a position to judge who is right and who is wrong. I know that when the Railways Board investigate these matters they do so most meticulously and carefully, but I think probably they are giving undue weight to the amount of repairs and maintenance needed to keep open some of these lines. Under this Bill, the Government could accept an obligation for certain financial responsibilities in regard to those sections of line which are required for social purposes or for purposes in connection with a development area. In such a case they agree that they will accept the implications involved and reimburse the Railways Board financially. Where the branch lines have already been closed the Minister cannot honour that obligation at all, because of the decision of his predecessor.
Another interesting point is that in addition to dealing with the question of the seaside resorts and the lovely trips by rail which run along some of the Dales, there is the position with regard to the development areas, because when it is wished to extend the scope of industrial areas certain difficulties arise so far as transport needs are concerned. In the Bridlington-Whitby area there is a certain amount of industrial development and at the present time the industrial traffic has to travel on roads which are not suited to it. If we seek to disperse our industries and not just concentrate them on given trading estates, possibly putting them out into the villages where a branch line has been running

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in the past, there is the possibility that traffic could be best moved by rail. Where a case can be made out the Minister ought to have power to look again at what has taken place in the past, in the light of new evidence that may be submitted to him.
It may be that this particular Amendment is not ideally worded in that particular direction, but I sincerely trust that my noble friend, instead of turning this down completely, will give it some consideration with a view to discussing the matter again with the Ministries concerned to find out whether it is not possible at the Report stage to make certain suggestions that might meet the needs of all concerned.
LORD WINTER BOTTOM: I think the noble Earl, Lord Kinnoull, has made a valid distinction between the answer given by my noble friend Lord Lindgren and the point that he himself has made. Lord Lindgren made the point that the Board can act if the reopening of a line seems to be profitable, and I am certain that this would he the position to-day. The noble Earl goes on to ask about the situation where there is a change of mind by the regional planning authority and a line is now considered socially necessary. There is an objection to the actual proposal to give the Minister of Transport the proposed powers and to define them in the very clear manner of the noble Earl's Amendment. The trouble is that the introduction of this clause, we believe, would create public uncertainty and might lead to pressure for an impracticable and unrewarding exhumation of hundreds of past decisions at a time when the British Railways Board and the Minister have just stabilised the network and are looking to the future. We believe this might open the door a lot of argument and would cause delay and uncertainty in the planning of the rail network. But in fact Ministers have already assured another place, and I can repeat the assurance to-day, that whenever it becomes clear that passenger services on closed lines are needed, the Minister will ensure that they are provided. This assurance was given in reply to a question by Mr. Henig on August 10. 1966, the year of the noble Earl's own Bill.
There is another factor here to be borne in mind. The Minister's policy for re-
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quiring preservation of the route for formation whenever there is a real likelihood of future need, and for specific grants, makes it even less likely that services could not in practice be restored if there were a good case for it. But this good case presumably would have to be dealt with by a regional planning authority and not by a group of individuals motivated by limited interests. Finally, on paragraph (e) of the noble Earl's Amendment —the question of passenger services which would be reopened but b known to be unremunerative—the Board would in any event be entitled to apply for a social grant under Clause 39 of the Bill. On that point the noble Earl's Amendment is trying to achieve a situation which already exists in the Bill. We are only rather afraid that to spell it out so clearly might cause unnecessary pressure on the Railways Board to reverse certain past decisions when in point of fact the present position is that there is no real risk of a route with a future potential being closed permanently.
THE EARL OF KINNOULL: I am grateful for, but again disappointed with, the noble Lord's reply. The purpose of the Amendment really was to give the Minister what I would call reserve power. It was not a question of pressure on the Railways Board or delay, but simply a reserve power if it should ever be required. There was the case the other day on the Hope Valley line from Sheffield to Chinley which had been closed previously, and now I am advised by the July, 1968, issue of Modern Railways that the decision was rescinded because it was found it would cost more to subsidise a bus service than to keep the trains going. However, the noble Lord did give an assurance, which admittedly had been given in 1966, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 55 [Amendments as to Transport Consultative Committees]:
5.55 p.m.
LORD DONALDSON OF KINGS-BRIDGE LORD DONALDSON OF KINGS-BRIDGE moved Amendment 147A:
Page 81, line 37, leave out r provided by the Waterways Board or".
The noble Lord said: If I have the permission of the Committee I should like to discuss this small group of

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Amendments together. I think their importance will become clearer if I do so. The object of this group of Amendments is a simple one and I hope not very controversial. Their intention is to bring the consumer back to a position of some influence, and the method they are trying to use is to strengthen and put a little bit of go into the Transport Users' Consultative Committees. With all the controversy which has surrounded this enormous Bill, it must not be forgotten that finally its purpose is to help the people whom the transport serves, and if it fails to do this it does nothing. We have looked at it from this point of view in the Consumer Council. That is our business, and these few modest Amendments are put forward in the belief that this will help the Bill to carry out its true function, which is to provide an efficient service for people.
At the moment there are various omissions regarding what we think the Consultative Committees should have in their scope. In the first place, this Bill cuts out completely any reference to the Waterways Board; it cuts out any reference to the National Bus Company; it cuts out any reference in Scotland of the road passenger users. The noble Earl, Lord Kinnoull, pointed out that it gave back something taken away; it allowed the Consultative Committees to be concerned with the National Freight Corporation. But, from the ordinary consumers' point of view, that is not nearly as big a concession as the exclusion of the bus companies. Secondly, the Consultative Committees have been limited since 1962, and this Bill does nothing to put their powers back, and they have been prevented from considering the only things which are really of primary interest to users of transport; that is, charges and the discontinuance or reduction of services.
I would say, at the risk of taking a minute of your Lordships' time, that it is worth looking at what happened to these Committees. They were set up under the 1947 Act to consider, and where necessary make representations in regard to, any matter, including charges, affecting services and facilities provided by the then British Transport Commission which was the subject of representations made by users or which appeared to them to be a matter to which consideration ought to
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be given or which was referred to them for consideration by the Minister or the Commission; and those services and facilities provided by the Commission, included the nationalised main-line railways, London Transport, much of the road transport, docks, inland waterways and ancillary undertakings. We have no complaint about their position under the 1947 Act. But under the 1962 Act their powers were very considerably curtailed, and they were limited to the consideration of matters affecting the services and facilities of the four newly created Transport Boards, the British Railways Board, the London Transport Board, the Docks Board and the British Waterways Board. And they were excluded from consideration of those matters affecting the services and facilities of the subsidiaries of those Boards, and the services and facilities of the newly created Transport Holding Company, under which latter were placed nearly all nationalised road transport, both passenger and freight, and ancillary undertakings. They were excluded altogether from considering charges made for any services or facilities and any question relating to the discontinuance or reduction of railway services except in respect of the hardship angle of closures.
Your Lordships will see that this left them with very much less to do than they had before. So we think the time has come to ask that something should be done to put these powers back. I do not know what picture your Lordships have in your minds of Transport Users' Consultative Committees. Before I became involved in this clause I thought of them as groups of respected local citizens who used the various forms of transport of their area for themselves, their families and friends, and their businesses, and to whom any local citizen could appeal if he felt aggrieved about overcharging or the sudden cessation of services—or indeed anything else, but those were to be the main things.
This is not in fact the position. If we consider somebody who, to take an example, lives at Steeple Clayton, in my own area, and goes into Buckingham every morning by bus to get there by 9 o'clock, if for some reason best known to the authorities this bus service is curtailed he may go to the Transport Users' Consultative Committee and say to the secretary that this has occurred. The

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secretary may say, "Well, sir, I am afraid the consideration of bus services is excluded from our particular province, and even if it had not been we could not have considered in any way the discontinuance or reduction of your services. I think probably the best thing you could do would be to write to Mr. Aubrey Jones. He has just done a very exhaustive study of transport charges and services and in a few years he will be asked to do another one; and though the local T.U.C.C.s will not be able to help you, it will be intellectually extremely satisfying—and really this is the only thing we can offer you." This is not giving the consumer any right to ask anybody about anything.
I think we must seriously ask the Government to consider whether or not the Transport Users' Consultative Committees should have restored to them the powers they possessed in 1947, and whether they should not be allowed to look at all forms of transport in their area, and whether they should not be supported in this way through the Amendments which I propose to move. The first Amendment is 147A, which deals with the question of the Waterways Board and prevents the exclusion of the Waterways Board. I beg to move.
VISCOUNT ADDISON: I should like to support the noble Lord, Lord Donaldson, in his admirable group of Amendments. It seems to me that the Transport Users' Consultative Committees have always lacked teeth and were not very useful bodies to which to appeal, since they had lost most of the powers given to them under the 1962 Act. If these powers could be restored it would certainly be a move in the right direction. It occurs to me particularly on the subject of the railways, where one's complaints have always been ruled out of court owing to the fact that they were not due to hardship, which is a very narrow term of reference. I feel that the Government, in introducing this Bill, have had much more enlightened views on the social use of services and also the connecting of bus and rail services. The Consultative Committees should be empowered to consider a much wider range of questions than has hitherto been possible under the existing powers. So I should like to support the noble Lord, Lord Donaldson, on his group of Amendments, though my speech
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is perhaps an inappropriate one, because it is related to an Amendment concerning waterways. However, he spoke on the general group, and I should like to offer him my support.
BARONESS ELLIOT OF HARWOOD: I support the Amendments of the noble Lord, Lord Donaldson. I should like to speak about the whole range of them, the point being that this is an opportunity which will not occur again to put into this very important Bill one aspect of the services; namely, that the consumer of those services should have a voice in the way in which the services are run. Lord Donaldson has said, quite rightly, that originally the Consultative Committees were meant to be stronger than they are to-day, and they have been progressively ignored, if I may say so, by those people who are running these great Corporations and these different services for the public. Since the British public is very long,suffering—it does not protest unless driven to absolute distraction—it is extremely easy to treat the public with less than the respect it should have.
When we were debating that point on another clause, I think the noble Lord, Lord Mitchison, said how difficult it was to define the consumers, since everybody was a consumer. That is perfectly true. We are all consumers of something. But as regards this particular Bill we are users of the transport system in it widest sense, and I should like to see all the organisations of transport equipped with proper consultative committees and, on those committees, people who know they have the right and the reason to bring their complaints before the Boards.
I should particularly like to support the proposal which Lord Donaldson puts forward in Amendment 147F, that consideration of the charges ma de for any service or facility, and any question relating to the discontinuance or reduction of services provided by any of the bodies named in paragraph (b), shall be included. We are all subject to alterations in cost, whether we go by railway ticket, bus ticket, or any other kind of ticket. We never really know why; and nobody explains to us, except rather vaguely, why these changes have happened. I think it is only right that when the nationalised industries decide these matters they should have the advice of people who represent the buyers of these

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tickets and the consumers of these services, who can give their views to them and not feel apologetic about doing so or feel that they have no right to do so. I hope the Government will consider this matter sympathetically. It is not a Party political matter, as is obvious from the discussion, and I hope very much that the noble Lord will see his way to accept these Amendments and put them into the Bill, because if we missed this chance I should feel very sad.
LORD BURTON: I also should like to add my voice in support of the noble Lords opposite and of the noble Baroness. I am particularly pleased that the Amendments should have come from the other side. I only hope that we shall not have an entente cordiale between the two Front Benches, because this is something which I know has always been resisted in the past by the Establishment which happened to be in power at the time. I should particularly like to support the right of the Transport Users' Consultative Committees to discuss fares, for when it comes to closing a line on the grounds that it is uneconomic it is obviously difficult to discuss the matter fairly when the Transport Users' Consultative Committees are not allowed to mention fares. Regarding the general discussion, may I add that there appears to be no provision concerning airways. If waterways are being added, would it be possible to add B.E.A.'? There seems to be no means of making complaints with regard to airways.
THE EARL OF KINNOULL: I should like to add my support to the noble Lord, Lord Donaldson, and perhaps to make my brief comments on my Amendment, which really comes to the same proposal. Perhaps my own Amendment is more ambitious, but probably it is badly drafted. The noble Lord, Lord Donaldson, has of course explained why all of us are worried about the T.U.C.C.s and their hearings, and how many of them have grown into disrepute. I am sure that anyone who has attended a T.U.C.C. hearing would agree that it is rather unsatisfactory when complainants or objectors sometimes instruct counsel to prepare their case and then are very often told that all their evidence cannot be taken into account because it is out-
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side the scope of the Committee. In addition, the Railways Board can come along with their figures and, most disconcerting of all, the Railways Board are apparently allowed to produce a set of figures to the T.U.C.C. hearing and then produce a different set of figures to the Minister later. I find this very hard to understand. The result of this is, of course, unsatisfactory, and people just do not feel that their cases are being properly heard.
A second weakness of the T.U.C.C. at the present time concerns quality of service. As the Committee will know, objections may be heard in cases of any reductions of service which are related to the quality of service. But the weakness of this procedure, as I understand it, is that a hearing will arise only after the service has been cut, when the damage has been done and when it is difficult to put that damage right. I am sure that what many people would like to see, when a reduction of service is going to take place, is the proposal and not the end result, discussed in the T.U.C.C.
The present Bill does little to restore, or to correct, if I may put it that way, the present weakness of the T.U.C.C. procedure. In fact, all it does is make the Ministry responsible for the expenses of the T.U.C.C.s and the National Freight Corporation subject to the quality of service procedure. I am aware that the proper and right powers of the T.U.C.C. is a matter of delicate balance between, on the one hand, not preventing or delaying progress of management and, on the other, making sure that the views of the users are taken into account. I believe that the users are the lifeblood of the railway, and that their views should be taken into account.
It will not surprise the noble Lord to learn, as the noble Lord, Lord Donaldson, has pointed out, that there are many people and societies outside this House who strongly support the idea that the T.U.C.C.s should receive increased powers under this Bill. I know of 200 local authorities who have passed resolutions to this effect. There is the Consumer Council, as the noble Lord has already said, and there are countless users. There are many of the noble Lord's noble friends opposite, among,

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them the noble Lord, Lord Shepherd, who I believe in 1962 supported the principle behind this; and the noble Lord, Lord Stonham, certainly did.
Then, of course, there is the most interesting view of the T.U.C.C.s themselves who say in their Report of January 31, 1967, in paragraph 15:
"The limitation of reporting only on the aspect of hardship likely to take place following a railway closure had, it was thought, considerably reduced the usefulness of the T.U.C.C.s."
They went on to say, under paragraph 19:
"In collaboration with the area T.U.C.C.s the central committee drew up a list of suggested amendments to the 1962 Act, including examples given above, and this was submitted to you in January, 1967"—
this was to the Minister. Perhaps the noble Lord could advise us what has happened to these Amendments?
LORD INGLEWOOD: I should like to add one brief word in support of the Amendment moved by the noble Lord, Lord Donaldson of Kingsbridge, and his plea to "put a little go into the T.U.C.C.s", to quote his actual words. Surely it cannot be denied that at the present time there is general dissatisfaction with the state of the T.U.C.C.s? When I say that, I do not imply that it is the fault of any one Government, because it is not; the fault is spread much wider than that. I should have thought that the present situation not only was indefensible to-day but had been indefensible for a little time. I hope that when the noble Lord, Lord Winterbottom, comes to reply he will not be speaking from the same brief as the Department supplied to the noble Lord, Lord Champion, when he replied to the Bill introduced by my noble friend Lord Kinnoull in 1966. I have Hansard with me here, and I shall check and see what he says. If in fact he just repeats to the Committee the arguments which were then put forward, with great sincerity, but which at the end were really not convincing, then we shall know what to do with the later Amendments.
6.15 p.m.
LORD DRUMALBYN: I think that the noble Lord cannot fail to be impressed by what has been said from all sides of the Committee on this matter. Perhaps I should say that the Amendment stand-
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ing in my name, Amendment No. 147J, covers the same point as the Amendment of the noble Lord, Lord Donaldson, Amendment No. 147H. Therefore, perhaps I may speak to that at the same time. But I think the general point has to he made, first of all, that we aught to be discussing the powers of the T.U.C.C.s not in the light of their present functions and the present functions of the railways, but in the new atmosphere and in the light of the new powers, and new organisations that are being set up under this Bill.
It is important to make this point at the start, because it will be of no use for the noble Lord to say, "Oh, but the previous Government did so-and-so", because the previous Government did not do these things in the light of the organisations that are being set up For example, if I may take the Scottish point first, we have a number of different bus companies and they have been gradually coming together to form the Scottish Bus Group, and now they become the Scottish Transport Group. This Group, together with MacBrayne's, is going to cover virtually the whole country. This means that there is a quite different set of circumstances from that which exist at the present time.
The circumstances after the passage of this Bill will be quite different. We shall have to get the means of getting public opinion, the opinion of the users, to bear upon this vast organisation in a different way, to match the new circumstances. I think that is what the noble Lord, Lord Donaldson, is after and it is most important that we should be doing this. The same applies to the National Bus Company in England. Then, with the change in railway policy, the particular limitations on the powers that were placed in the light of what one might c111 the Beeching era are no longer applicable now, with this new change of policy that is coming about.
So I commend this series of Amendments to the noble Lord. I think it was my noble friend Lord Kinnoull who spoke of an unholy alliance between the Front Benches. I have to be particularly careful of that in these circumstances, and I think it would be reasonable to point out, or at any rate to observe in passing, that there are special considerations and circumstances that arise when we are talking about charges. After all, we are

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placing an obligation on these bodies to make ends meet; and if there were criticisms of particular charges, suggestions that charges in a particular area for a particular service should be brought down, it would inevitably mean that it would be necessary to put up the charges somewhere else to make ends meet. So I think one would have to do something along the lines of what is done in the circumstances of the Electricity Consultative Councils. There, it is a question not so much of particular charges, but of a charge structure that could perhaps be criticised by the Area Councils. But I think that in these new circumstances it is essential that we should re-think the functions and duties of consultative committees.
On the question of my particular Amendment (which is similar to that of Lord Donaldson) for the Bus Company in England, I think it would be strange if there were to be no consultative arrangements for one important passenger transport organisation. It would be hard to justify that there should be no such facilities for road passenger transport when they are there for rail passenger transport. I do not think that one can refer back to the traffic commissioners who, after all, were set up in totally different circumstances nearly 40 years ago. I do not think you can say, "Well, we can rest on the traffic commissioners. If you have a complaint send it to the traffic commissioners." What are the traffic commissioners going to do about it anyway? Are they going to take away the licences of the Bus Company and the Scottish Transport Group? I should not have thought so. Clearly there is a very strong case for giving careful consideration to Amendments along these lines even if the noble Lord cannot accept these.
6.20 p.m.
LORD WINTERBOTTOM: We have had really a Second Reading debate on Clause 55, and I must say that the contention of the noble Lord, Lord Burton, that there was an unholy alliance between the two Front Benches—which does on occasion, but very rarely, exist—has been put at rest by the speech of his noble friend Lord Drumalbyn, who I think in the main supported the contentions of speakers from both sides of the House.
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He has, however, put his finger on a point on which I think both Front Benches agree; that is, on the financial element of Amendment No. 147F, because this differs from the other Amendments.
As I have said before and will say again, we have charged the railways to operate their services within a strict commercial framework, and their prices and wages structures are subject to investigation by the Prices and Incomes Board. It would be an impossible situation—because the prices structure of the railway system is an extremely complex one—for a group of people who in economic terms are amateurs to enter into an argument with the Railways Board about fares structures. This must be left to the far more expert Prices and Incomes Board. However, I should not have thought it beyond the bounds of possibility for the consultative T.U.C.C.s to give evidence to the Prices and Incomes Board. I cannot see in the Bill any inhibition against this taking place; and this, I think, would meet the point made by the noble Lord, Lord Drumalbyn, that a general approach on the subject might be made, rather than a narrow approach on, shall we say, the fare between London and Blackpool. But we must resist the injection of the right to be consulted on charges from among the Amendments tabled by the noble Lord, Lord Donaldson of Kingsbridge.
If we turn to the other points again we have difficulties. There is no doubt that the strength of feeling in the debate today is that these particular committees should be strengthened and better used than they are at present, and there is again the feeling, which has been expressed at earlier stages in the debate, that the consumer—the traveller—and his interests are not considered sufficiently.
Perhaps I may now turn for a moment to the question of bus services—and I do not know whether the noble Lord, Lord Inglewood, will find that what I am saying has been said before—
LORD INGLEWOOD: I am watching quite carefully.
LORD WINTERBOTTOM: —but perhaps he will tell me if what was true two years ago is still true to-day. It is the belief of the Government that the Bill, as it stands, will not and cannot bring the road passenger transport services of the

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National Bus Company and Scottish Transport Group within the scope of the consultative committees. We believe that the traffic commissioners, admittedly set up some long time ago, as a statutory body have proved very effective at considering representations from users. They have much expertise and experience in this field, while the consultative committees have none.
Perhaps the noble Lord will say that consultative committees should have the possibility of gathering some experience in this field—and I should have thought this a not unreasonable request. I do not know what mechanism we could use to enable complaints to be made both to the traffic commissioners and to the consultative committees, but perhaps this is not beyond the wit of man. If this is possible, and I will put it to my right honourable friend, I will see whether I can give a favourable answer at a later stage in the Bill. I cannot make any promises, but I will try.
Finally, there is the question of service reductions, which of course brings in the element of hardship. The consultative committees can consider the level of train service after a reduction has taken place, but to enable them to have advance information and to advise on future timetable alterations would hinder management on detailed issues and lead to delay in effecting either economies or improvements. Flexibility and vigorous management is essential, we believe, to the widest interests of the industry as a whole, and for that reason we are not willing to agree that consumers shall be consulted in advance. But when decisions have been reached the impact of those decision could well be considered.
LORD DONALDSON OF KINGS-BRIDGE: Before the noble Lord sits down, could he refer to the Waterways Board which, I think, is the subject of the first Amendment.
LORD WINTERBOTTOM: I beg the noble Lord's pardon. There is, in fact, an opportunity for issues arising on this front to be considered elsewhere. The Board's services are already covered in respect of the amenity or recreational use of both the cruising and the commercial waterways by the Inland Waterways Amenity Advisory Council, which is a new body to be set up formally under
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Clause 108 of this Bill. Of course, commercial users will also have recourse to the courts if there is any serious failure on the Board's part to fulfil their maintenance obligations in respect of commercial waterways. Perhaps we might go into the position of the consultative committees in relation to the waterways on Clause 108.
BARONESS ELLIOT OF HARWOOD: Before the noble Lord sits down, did I understand him to say that the consultative committees will be consulted only after decisions have been taken? I mean, was this on the matter of charges or on the matter of general policies? I cannot see the point of setting up consultative committees, which admittedly are an additional committee, if, in fact, they are simply to be told that the decision about X Y Z has been taken before they have a chance of looking at it. The whole object of setting up consultative committees is to seek their advice. You need not take it, if you do not want to, but it is perfectly useless to set them up if they are going to deal with a matter only after the decision has been taken. I may be wrong but I thought I heard the noble Lord say that.
LORD WINTERBOTTOM: The noble Baroness did, in fact, hear me fairly clearly. What I said was that the consultative committees can consider the reductions of services—that is to say, not cancelled services but those reduced in frequency—but only after the reduction has taken place. Now I am certain that the noble Baroness considers this a gross injustice—indeed, she has already said so. But that is how these committees work. We believe that there cannot be a long debate on the subject, not of cancelling a service but of reducing it, before the reduction has actually occurred. The Railways Board or the statutory operator must be able to reach certain decisions; and if the consumer, or the consultative committee approached by the consumer, finds that this is causing real hardship, then of course the issue could well he reconsidered. But commercially one has often got to act fast.
We are trying to get the Railways Board out of the net of all the inhibitions that were placed on them in the past when they had, in fact, a virtual monopoly in transport. They have now to be

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freed to act commercially, and one of the first freedoms in acting commercially is that they should be able to plan their frequencies of service in the form which they believe commercially suits them best. If, after the Board have reached this decision, a consultative committee persuades them that they are doing something which is damaging to the public, and commercially unwise, then they may change their mind; but they must have the freedom to act with the normal speed of reaction of a private company.
THE EARL OF KINNOULL: I do not think the noble Lord in his reply referred to my specific question about the annual report of the T.U.C.C. for 1967, in which they said that they thought the usefulness of the T.U.C.C.s had been considerably reduced in their present scope. They went on to say that they had submitted Amendments to the Government. Could the noble Lord say whether the Government understand that the T.U.C.C.s are satisfied in regard to this matter and with the present scope of the Bill?
LORD WINTERBOTTOM: I am afraid that I cannot tell the noble Earl whether or not they are satisfied. Consultations and conversations have taken place. The T.U.C.C.s themselves suggested Amendments to the Government, and their proposals were carefully considered by the Minister and by a previous Joint Parliamentary Secretary, my honourable friend Mr. John Morris, who explained to them the Minister's attitude in a meeting with the Central Transport Consultative Committee. The Government explained formally to the T.U.C.C.s why their proposals could not be accepted. I imagine that this was not altogether satisfactory to them, but we had to try to meet the points they had put to us.
BARONESS ELLIOT OF HARWOOD: I hope that the Government will look again at this matter. To set up a large number of committees, and then take all the decisions, and come back and say to the committees, "If you don't like them, you can now protest", seems to be shutting the stable door after the horse has bolted, or putting the cart before the horse, or any other of the familiar clichés we so often hear. This is a most
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fantastic proposition. I can understand that you do not want to consult the public at all. All right; do not have any committees at all. But when you set them up, for goodness sake use them! I hope that the noble Lord will say to his right honourable friend, who I am sure is a highly intelligent gentleman, "This is not the way this Bill or any other Bill will appeal to the public." It just is not "on".
LORD DRUMALBYN: I think the noble Lord's attention ought to be drawn to Section 56 of the 1962 Act, which says
"Subject to the following provisions of this section, it shall be the duty of the Central Committee and of each Area Committee to consider and, where it appears to them to be desirable, make recommendations with respect to any matter affecting the services and facilities provided by any of the Boards which has been the subject of representations…which has been referred to the committee by the Minister or by a Board, or which appears to the committee to be a matter to which consideration ought to be given…"
I thought the noble Lord was inclined to "talk down" the functions of the committees very much lower than they are even at present. What we were trying to do was to say that they should be greater than they are at present. Therefore, what the noble Lord said was, to say the least, most discouraging.
I hope that he will look again at this matter, in concert with his right honourable friend, before the next stage. There is a general feeling that there is no point in having consultation unless it has a reality, unless notice is going to be taken of the advice tendered—and it can only be advice before action is taken—or, alternatively, if representations are passed on, before action is taken or with a view to action being taken. Surely this is the purpose of a consultative committee. Admittedly there are certain circumstances where special considerations apply, but apart from that I should have thought that the various Boards and the new authorities ought to be very glad to have a body to whom they can refer, a body which will grow in experience. It is not always easy for Boards to keep in touch with public opinion, yet their success depends on their doing so. Therefore, I hope that the noble Lord will look at this matter again.
LORD WINTERBOTTOM: There is a French saying that "The tone makes the music". If I put on a disinheriting countenance, it was because I was replying to my noble friend Lord Donaldson as to why a number of his proposals were not acceptable to the Government. I tried to make some encouraging remarks. There is no doubt that the feeling of the debate is running strongly in favour of the consultative committees. I have undertaken to consult my right honourable friend to see if we can say anything more helpful.
One thing which the Bill does is to move the consultative committees out of the clutches of the organisations which they are supposed to advise and to set them up in new premises provided by the Minister and not, shall we say, by the Railways Board. We believe that this may get them into a new atmosphere, take them from under the wing of the Board, and perhaps, as a result, give them greater psychological freedom to express their feelings strongly in relation to the body which they will advise.
Turning to the point which was made by the noble Lord, Lord Drumalbyn, the Transport Act 1962 was pretty tough. If one turns to the appropriate section of the Act one sees these words:
"Nothing in the last foregoing subsection shall entitle any committee to consider the charges made for any service or facility, or to consider any question relating to the discontinuance or reduction of railway services except as provided in the following provisions of this section."
This was also a rather disinheriting section. I will do my best to see whether my right honourable friend can move in any direction to meet the wishes of this Committee. I cannot be very helpful, but in one or two minor points some improvement may be made.
LORD BEAUMONT OF WHITLEY: I hope that the noble Lord will take up with his right honourable friend this question about consultation early on in regard to changes of timetable. Timetables take a long time to work out, and I do not think it is the object of anybody that a long argument should be gone into at an early stage. All we are saying is that the present system, in which users are consulted at a stage when so many people are bound up in the decision that it is almost impossible to
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go back on it, is wrong, and that at some early stage of the cutting down, or even the change of service—such as in the forthcoming shuffle which is probably going to take place in the South-East—the public should be allowed to know, before final decisions are taken, what is going on and to make comment. We are not asking for long public inquiries. We are asking that the public should be allowed to express their views at an early stage.
LORD DONALDSON OF KINGS-BRIDGE: I am grateful to my noble friend for his very full reply. I am also grateful to noble Lords and Ladies in all parts of the House who have supported this group of Amendments. I am glad that the noble Lord on the Liberal Benches got in just in time. We are grateful to the noble Lord, Lord Beaumont, for avoiding a maiden over in that direction.
I will make one or two brief comments. I had a note, which I did not use, to refer to Hilaire Belloc and the collusion between Front Benches. This has been rather taken away from me, but there was just sufficient between the noble Lord, Lord Drumalbyn, and my noble friend over charging to make it worth referring to this point. One can carry the whole idea of charges a little too far. The idea that if you reduce a fare in Norfolk, you have to put it up in Devonshire is not true. That is not the way it works. Surely there is room for a little local dealing. There was just a sniff of Hilaire Bellocry there worth referring to. We squeezed a little blood out of the noble Lord's stone.
The suggestion that the T.U.C.C.s should be allowed to make submissions to the Prices and Incomes Board was one I had down to ask for if I could not get anything else. It was given to us in lieu of anything else. As for the traffic commissioners, they are not consumer supporters. They are in a judicial category between the provider of transport and the consumer. Although they are very fair, we want somebody who is, frankly, partisan. I do not accept that the traffic commissioners are an adequate substitute. However, the noble Lord's suggestion that complaints could, perhaps, be made to the T.U.C.C.s at the same time as to the traffic commissioners

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to educate them in the kind of trouble that is going on is very helpful. In view of the noble Lord's promise to use what influence he has with his right honourable friend, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
6.41 p.m.
On Question, Whether Clause 55 shall stand part of the Bill?
LORD INGLEWOOD: The noble Lord, Lord Winterbottom, referred to the debate on the Amendments as a Second Reading debate and that it went very wide. In consequence, I will try not to repeat all that has been said, but I have one or two brief points that I should like to make about the clause. First, although the Minister said he would try to be our advocate concerning a few minor points, his reply was disappointing, in view of the strength of feeling on all sides. If I may say so without wishing to give offence, I think that the noble Lord, Lord Champion, made more of the brief when he spoke to us on this same subject two years ago.
I hope that the Railways Board will not think that this debate is being conducted in any spirit of criticism against them. I think that the Board are doing extremely well in their efforts to maintain services in my part of the country during these days of annual purgatory. Having said that, however, I should again like to say that the Government have missed a chance in the clause of doing something really worthwhile in the Bill, and something that would cost very little money. In different parts of the Bill a great many expensive and heavy burdens are being placed upon the backs of the people. Here was a chance to do something which would be popular and cost very little, either by putting the T.U.C.C.s back on a really effective basis or, as the noble Baroness, Lady Elliot, suggested, by doing away with them altogether—because in their present weak and neglected state it is difficult to justify their existence.
Admittedly, the T.U.C.C.s did not have a very good start, and in the 1962 Act the then Government made them even less effective. After the speech which we have just heard from the Minister I wonder whether anybody will want to
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continue to serve on them. Their work seems to be unrewarding and their influence limited. I do not know whether many noble Lords present have ever had personal experience of correspondence with a T.U.C.C. Some of us, particularly those who represented constituencies in another place, will probably have had considerable experience. Generally, however, it takes weeks to get an answer, and as often as not one is sent a small explanation which has been supplied by British Railways, and only very rarely an opinion by the consultative committee itself.
I should like the Minister to tell us what is meant by "quality of service", which we now hear about. Representations were made to me a short time ago by people in the neighbourhood about the new second-class rolling stock that is being introduced on the Western route main line between Glasgow and London. For those of your Lordships who have not yet sampled those carriages, I can give the assurance that they are extremely uncomfortable. I think the real reason they have been so designed is that by adopting this pattern more passengers can be crammed on each pair of four-wheel bogies. The seats are very narrow and hard and one is crammed behind small tables.
I asked the T.U.C.C. what representations they had made. This was the reply which I received from the Secretary:
"Such matters as replacing the present pattern of second-class main-line rolling stock with open coaches…are matters of policy to be determined by the British Railways Board, and their design would take in many factors quite outside the knowledge of an area committee."
I should have thought that the members of an area committee would be more likely to travel second-class than members of the Railways Board, and were therefore much more likely to appreciate what one hoped to get in return for the ever-rising second-class fare. I hope, therefore, that the noble Lord will say something about "quality of service". This is not simply a personal view which many of us have expressed. We all know from contact with people in our areas what feeling there is on this subject.
I was interested to hear the Minister's reply. I was sorry that he qualified what

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he said to a few minor points. I am sure that most noble Lords look forward, not to a few minor points of improvement, but to something substantial. We have plenty of lime to do something substantial and worthwhile. We have the Report stage ahead of us. It is much the best, in these circumstances, that the Government should take the initiative. If, however, they do not, I am sure that there are many noble Lords who are not prepared to leave things as they are.
LORD DRUMALBYN: I would like to say a word or two, not to add to the eloquence of my noble friend, but to deal with two or three particular points. First, will the noble Lord confirm that among the services to be dealt with by the consultative committees are the shipping services? There are, for example, Associated Humber Lines and the Atlantic Steam Navigation Company, in England and the Caledonian Steam Packet and MacBrayne's in Scotland. MacBrayne's also have a freight service, and a passenger service which often carries freight as well in the remote areas.
The noble Lord has referred to subsections (3) and (4) concerning the power which is given to the Minister to
"provide, or make arrangements…for providing, that committee with such officers and servants, and such office accommodation, as appear to the Minister, after consultation with the committee, to be requisite for the proper discharge of the committee's functions and shall defray any expenditure incurred by the committee with the Minister's approval in the discharge of those functions".
For my part, I should very much welcome this, in the sense that it has never seemed to me to be a good thing that consultative committees should be dominated by the bodies to whom they are supposed to tender advice. I recognise, of course, that there are advantages in such an arrangement, and that from some points of view it can be a matter of considerable convenience. The fact remains, however, that the habit of putting a member of the Board on to a consultative committee and having, inevitably, a secretary who is an official of the Board, lends to curtail the independence of the consultative committee. I think that the new arrangement is a definite improvement.
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The snag, however, is that it is not mandatory. The next subsection goes on to say that:
"The Minister may…instead of himself providing the officers and servants or office accommodation aforesaid, arrange wilt any of the Boards other than the Waterways Board or with the Freight Corporation for those officers and servants or that accommodation to be provided by that Board or Corporation in return for such payments by the Minister to the Board or Corporation as may be agreed between them."
Therefore, the only outcome of this may be to shift the cost of the advice and the committee from the Board to the Minister. That could easily be the only outcome.
Apart from that, it could be all "eyewash". I hope that it is not so and that we shall have an even firmer declaration from the noble Lord than he has given already that it is genuinely the intention of the Government to detach these bodies from the Boards which they are to advise, so that their independence may be assured.
LORD WINTER BOTTOM: Perhaps my noble friend Lord Champion was more sympathetic because he himself was a railwayman, and perhaps his heart is rather closer to the Railways Board than mine is. I do not say that I hoped to satisfy the noble Lord in my speech, but I hope that at least I made myself plain, which is the best one can hope to do on art occasion like this. I should like to give my noble friend one reassurance on the point of quality of service. Any matter relating to the services and facilities of the Boards, except charges and proposed reductions of service, can be referred to the Consultative Committees. They are fully entitled to consider representations and to make representations to the Board or the Minister on changes in, for example, a type of carriage used by the Board if the travelling public find unsatisfactory. So if the noble Lord wants to protest he knows where to do so, and I hope it is not too late in the day for something to be done as a result.
May I turn to the two points made by the noble Lord, Lord Drumalbyn? I can assure him that the shipping services, which will come under the National Freight Corporation and the British Railways Board, will in fact be covered by the Consultative Committees. It is part of their remit.
LORD DRUMALBYN: May I ask the noble Lord whether that applies to the shipping services in Scotland? Do they come under the Area Committee there?
LORD WINTERBOTTOM: If I may, I should like to give the noble Lord that reassurance in writing, or at a later stage in the Bill, because I cannot answer his question now. I should think it is highly probable, but I should like to give an answer which I know is correct.
Turning now to subsections (3) and (4), subsection (3) reads:
"In the case of each of the Consultative Committees…the Minister shall provide, or make arrangements…for providing"
the services for them. Subsection (4) reads:
"The Minister may, in the case of any such committee,…"
do a deal with any of the Boards or with the Freight Corporation. I think the most important thing is that the man who pays the piper calls the tune. It is very much better that the Minister pays than that the Board does. This arrangement is purely an administrative one. It is just possible that it would be more practical, and indeed more convenient to the Consultative Committees, to continue to hold the meetings in the places where they have been held until now—that is to say, in part of the office accommodation provided by the Boards—or in accommodation which might be provided in the future by the Freight Corporation.
But I would have said that this is a step which would be taken only with the agreement of the Consultative Committee concerned. I cannot see, under this Bill, that if a Consultative Committee said, "Look here, we do not want to meet here; we want to meet somewhere else. We want to get away from the direct pressures and supervision of the Board. We want to meet on outside premises", the Minister could in fact refuse. I would feel that the position of the Consultative Committee was very strong. Subsection (3) is the intention; subsection (4) is only the administrative detail, which I suspect would operate only if the Consultative Committee agreed.
LORD HUGHES: I wonder whether I might save my noble friend a little work by assuring the noble Lord, Lord Drum-
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albyn, that the answer in relation to the Scottish Transport group is also, Yes.
Clause 55 agreed to.
Clause 56 [Assistance by Minister or local authority towards capital expenditure on public transport facilities]:
On Question, Whether Clause 56 shall stand part of the Bill?
6.55 p.m.
LORD DRUMALBYN: May I ask one question on this clause? It relates to subsection (3), which says:
"No grant under subsection (1)…and no payment under subsection (2)…shall be made for the purposes of the provision, improvement or development of an airfield, a harbour, or"—
and this is the point—
"(except when used or to be used for the purposes of a ferry service) a dock, pier or jetty".
I am not quite certain that that is not a little too restrictive. There are many docks, piers and jetties which are used for many other purposes than the main purpose of transport. I wondered what the intention was here. There is a question of recreational facilities and there is a question of fisheries. I wondered whether that was not expressed in rather too restrictive a manner.
LORD WINTERBOTTOM: Grants by the Minister of Transport and the Secretary of State for docks and harbours are provided for in other legislation, but a terminal for a local passenger ferry service would be eligible under this clause. A ferry service is defined in Clause 149 as:
"a transport service by water (including such a service by means of a hover vehicle) which carries passengers and operates regularly between two or more points both or all of which are in Great Britain".
As originally drafted, this subsection would have made grants under this clause mutually exclusive with grants under highways legislation. There may, however, be some types of project which, though intended to help public transport, could be grant-aided from the roads Vote. An example would be a road reserved for buses built as a special road under Highway Act powers but which might more appropriately be financed from moneys voted under this clause. It will make for easy administration if in

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such special cases there is no awkwardness through a lack of overlap in the powers available, so that the individual project can be built and aided under whatever arrangements are most appropriate to the circumstances. Parts of the original draft of this subsection were therefore deleted in another place by a Government Amendment.
Clause 56 agreed to.
Clause 57 agreed to.
Clause 58 [Assistance by local authorities in Scotland for railway passenger services]:
On Question, Whether Clause 58 shall stand part of the Bill?
LORD DRUMALBYN: May I ask the noble Lord, Lord Hughes, a question on this clause? The noble Lord will remember that I raised this point on Second Reading of the Bill, when he told me that this was a power which already exists for local authorities in England and Wales—that is, the power to afford financial assistance towards the provision of railway passenger services. Is the noble Lord able to tell me whether that power has been used in England and Wales; and, secondly, whether it has been asked for in Scotland?
LORD HUGHES: I cannot answer the first part of the question, as to whether it has been used in England or Wales. What I can say is that the application of this power to Scotland has been welcomed by the Scottish local authority associations. The noble Lord asked whether it had been asked for before. I do not think it would be correct to say that the Scottish local authorities asked for it, but having become aware of the Government's intention to do this, they welcomed the opportunity to have this power.
LORD DRUMALBYN: May I also ask where the cost of this will fall? This will presumably fall on the rates. Is there any limitation so far as rate poundage is concerned on the amount that can be spent in this way by local authorities? Secondly, is any of the cost eligible for grant assistance in any form, including resources grant?
LORD HUGHES: In the first instance, the powers, as in England and Wales, are permissive, and any expenditure which the authorities propose to undertake would require the consent of the Secretary of State. The power is not intended as a substitute for the power of the Minister of Transport to assist the British Railways Board's unremunerative services under Clause 39, about which I think the noble Lord had some apprehensions, but it would in fact be complementary to such a power. There may be cases where the Minister is not satisfied that there are sufficient social or economic reasons for an Exchequer grant towards the unremunerative service under Clause 39, but in which the local authorities concerned would be perfectly willing to meet the deficit from the rates for the general benefit of the local community; and we think it would be wrong to deny that opportunity to the local authorities in Scotland when it is already available in England and Wales.
These local authority contributions to railway services will not be eligible for a specific Exchequer grant in the same way as contributions to rural bus and ferry services under Clause 34. The circumstances are entirely different, partly because of the provision for Exchequer grants to railway services under Clause 39, and partly because of the special case accepted by the Standing Committee in another place for rural bus and ferry grants. Any contributions made to railway services by local authorities on both sides of the Border will, however, rank for rate support grant in the normal way.
LORD ILFORD: Am I right in thinking that contributions made in these circumstances would be relevant to expenditure for the purpose of assessing the rate support grant?
LORD HUGHES: That was what I said in my last few words. I will repeat them: "Any contributions made to railway services by local authorities on both sides of the Border will, however, rank for rate support grant in the normal way".
Clause 58 agreed to.
Clause 59 agreed to.
House resumed.

CINEMATOGRAPH FILM (DISTRIBUTION OF LEVY) (AMENDMENT No. 3) REGULATIONS 1968
7.3 p.m.
THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN): My Lords, I beg to move that the Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations 1968 be approved. With the permission of the House, I propose also to speak to the Cinematograph Films (Collection of Levy) Regulations 1968. Drafts of both these Regulations were laid before the House on June 12. I should perhaps remind noble Lords that the levy is imposed and distributed for the benefit of makers of British films under regulations made by the Board of Trade under the Cinematograph Films Acts 1957 and 1966. Her Majesty's Customs and Excise collect the levy, the proceeds of which are distributed by the British Film Fund Agency, a statutory body established under the 1957 Act.
The Cinematograph Films (Collection of Levy) Regulations 1968 consolidate and amend the existing Regulations which were made in 1960 and have already been amended five times. The opportunity has been taken to consolidate the regulations into a single instrument, and this, I am sure, will be helpful to everyone concerned with them. The new Regulations alter the existing Regulations in four respects only. Except for these four changes, they are simply a consolidation of the Regulations now in operation.
The most important of the changes is in the standard rate of levy, which has been since 1960 one-ninth of the excess of each admission charge over 11d. Regulation 3(1) prescribes that from July 14 the rate will be one-ninth of the amount by which each payment for admission exceeds 1s. 6d. In other words, the non-liable portion of each admission charge is increased by 7d. It is estimated that this increase will result in a reduction in yield in a complete levy year of between £600,000 and £700.000. We estimate that, even with this reduction, the levy yield in a full levy year will still not be far short of £4 million. Moreover, since film-hire charges or rentals are paid on box office takings net of
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levy, the exhibitors will not retain the whole of this amount. The change means, of course, that their takings net of levy will be higher, but so, and as a consequence, will be the amounts paid in rentals. The extent to which British films will earn increased rentals will depend on the extent to which makers of British films produce box office successes.
Another relevant consideration is that, as noble Lords will know, eligible British films receive levy in proportion to their rental earnings in Great Britain. The distribution rate which is given by the British Film Fund Agency in its annual reports, tells us to what extent levy receipts have augmented rental earnings. From 1960 to 1964 the Agency paid levy at rates varying between 40 and 46 per cent. of rentals. Since then the rate has steadily increased to 49 per cent. in 1965, to 53 per cent. in 1966 and to 56 per cent. in 1967. We estimate that at the new rate of collection it is probable that the percentage will still be around 50 per cent.
In determining the yield of the levy the Board of Trade are statutorily required to pay regard
"to the prevailing economic circumstances of both exhibitors and makers of British films as well as the prevailing level of production of such films."
At present, film production is continuing at a high level. The studios are busy. In June, 24 feature films were being made in British studios or on location. The situation in the exhibition sector is less happy. Cinemas continue to close at the rate of 100 or more a year. The decline has continued for a considerable number of years. Since 1960, when the present rate of levy was set, the number of cinemas has fallen from over 3,000 to under 1,800, and admissions from 501 million to 265 million. Although box office takings have progressively declined except for a temporary recovery in 1964 and 1965, the amount paid in levy has gone up. The Cinematograph Exhibitors' Association asked that the non-liable portion of each admission charge should be raised from 11d. to 1s. 10d. The Cinematograph Films Council considered this proposal and recommended an increase to 1s. 6d.
There are various causes of the decline in cinema admissions and takings, and of course nobody suggests that the

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burden of the levy on exhibitors is the main reason. None the less, the levy reduces the income of the exhibitors so that they have fewer resources available for modernisation and other purposes. We believe that the right course, and the course that in the long run will be in the best interest of the producers, as well as of the exhibitors, is to reduce the burden of the levy on exhibitors generally, and accordingly we have decided to adopt the figure recommended by the Council. I hope that the reduced rate of levy will not only save some cinemas from closing but also permit more expenditure on renovation and modernisation which will make cinemas more attractive to the public and more competitive with other kinds of entertainment.
LORD WILLIS: My Lords, the noble Lord mentioned that 24 films were being made in British studios. Can he say how many of them are being financed by British money and how many of them by the owners of the two big circuits in this country who stand to gain most from this remission of levy?
LORD BROWN: My Lords, I am sorry but I should require notice to reply to that question. I can tell the noble Lord that an average of approximately 75 per cent. of the finance going into some 70 major British films each year is American. In the case of the less expensive films, the proportion of British finance is high—about 50 per cent. I cannot give the precise information for which the noble Lord has asked, but I will try to get it before the debate is over.
My Lords, the next amendment, new Regulation 3(2)(b)(ii), will afford relief to exhibitors whose takings vary widely according to the season of the year. Levy, although paid monthly, is assessed weekly. This is necessary because film rentals are calculated after deducting levy paid from box office takings, and rentals are normally calculated weekly. No levy is payable in any week when the takings do not exceed £400. Weekly assessment of levy liability thus means that exhibitors with widely varying takings —for example, those owning cinemas at seaside resorts—may pay substantial sums in levy during the summer months, even though their average weekly takings
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throughout the year are below the exemption limit of £400.
The effect of the new Regulation will be that levy will be payable only if both takings in the relevant week and average takings from the beginning of the levy year to the end of that week exceed £400. This arrangement is easy to understand and simple to operate. In calculating the average, any weeks in which films are not shown will be disregarded. It would obviously be wrong for an exhibitor who closed his cinema when the summer season had ended to benefit to the same extent as an exhibitor who kept his cinema open. Since the new relief is related to average takings from the beginning of each levy year, it will come into operation on October 6.
The third change is a very small one, but one which will be helpful to exhibitors. Regulation 4 allows them ten days, instead of five days as at present, in which to pay the levy. Lastly, the provision under which an exhibitor's levy liability is limited to the level of levy plus entertainments duty operative in 1960 (when entertainments duty was abolished) is to be revoked. It has, I understand, never been used and is obsolete.
The new Collection of Levy Regulations are to come into operation on July 14 except for the relief for exhibitors with widely varying takings which will come into operation on October 6, which is the beginning of the next levy year.
The Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations 1968 make a number of amendments to the existing Regulations. Paragraph (1) raises the rate at which levy is distributed to makers of eligible British newsreels from twice to two and a half times the standard rate. The makers of these films are facing serious problems—in particular, increased costs and the need to produce a greater proportion of their films in colour. Their films play an important part in presenting British news and achievements to audiences overseas as well as to those in this country. The amendment places newsreels on a par with other short films as regards the rate at which the levy is distributed.
Paragraphs (2) and (5) go together. Under the existing regulations the makers

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of British low-cost films—that is, films with labour costs not exceeding £20,000—receive levy at two and a half times the standard rate until rentals reach the labour cost of the film or £15,000, whichever is the lower. Above these limits levy is paid at the standard rate. Production costs have risen since 1959 when the present limits were set, and paragraph (2) raises the £15,000 limit to £18,750 and paragraph (5) raises the £20,000 limit to £25,000. The increases proposed are not commensurate with the cost increases. The reason for this is that we think it important to retain a powerful stimulus to efficiency and economy. If they are to qualify for levy earnings at this higher rate, producers of low-cost films have to keep a sharp eye on costs.
Paragraph (3) replaces the existing Regulation 6(3)(b). The object of the latter was that makers of non standard eligible films—for example, makers of British 70 mm. films—should be entitled to receive levy for the same length of time as the makers of 35 mm. eligible films registered as British quota films. Regulation 6(3)(a) lays down in effect that the levy life of an eligible British quota film should be the same as its quota life under the Films Act 1960. The opportunity has been taken to redraft Regulation 6(3)(b) to bring it into line with Regulation 6(3)(a). I fear that that is rather a complicated paragraph, and perhaps I can boil it down by saying that the object of that part of the Regulation is simply to bring into effect what was intended when the last Regulations were introduced, though unhappily it was not achieved. There is really no change in intention; only a change in effect.
Paragraph (4) adds a new class of films to those which are ineligible for levy payments. Section 20(3) of the Films Act 1960 states in effect that British films containing more than 10 per cent. of photographs derived from another film will not be registered as quota films except on the recommendation of the Cinematograph Films Council. Paragraph (4) applies this restriction to eligibility for levy payments. Under the existing Regulations a short film shown on television outside the United Kingdom within twelve months of its registration is ineligible for levy. This restriction does not apply to long
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films and it will be of some small assistance to the short film makers if it is removed. Paragraph (6) amends the definition of "television film" so that the showing of short films on television overseas within twelve months of registration will no longer disqualify them from entitlement to levy payments.
The amendments to the Distribution of Levy Regulations are to come into operation on October 6, except that the redrafted Regulation 6(3)(b) will become operative on July 14.
My Lords, the Cinematograph Films Council have been consulted. They have recommended all the changes in both the Collection of Levy Regulations and the Distribution of Levy Regulations. I believe that the proposed Regulations are in the best interests of the industry as a whole and commend them to the House.
Moved, That the Draft Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations 1968, laid before the House on June 12, be approved.—(Lord Brown.)
7.16 p.m.
LORD DRUMALBYN: My Lords, I should like to thank the noble Lord for his careful explanation of the purposes of these two Orders. I have no criticism to make of their effect and I recognise at once that it is very difficult to match the interests of the exhibitors on the one hand and the producers on the other. One has to bear in mind that the levy was raised for the purpose of stimulating production of films in this country. I thought the noble Lord, Lord Willis, intervened to point out that the majority of the finance for films made in this country—certainly main feature films—comes now from overseas, which is quite true. That is of benefit to this country inasmuch as those films are made for an international market and are, after all, British exports when they are made. So one has to bear in mind—
LORD WILLIS: My Lords, with respect I should like to point out that I think the noble Lord is under a misapprehension there. If a film is made here with American money the profits of that film are paid in America to the American company and do not benefit this country by one dollar, except for the employment given.
LORD DRUMALBYN: Yes, my Lords, except for the employment given. That is the point. It is giving employment here. Also, as most of these films have a British basis they are making known abroad the British way of life at the same time. So I think there are decided advantages, and we certainly do not want to discourage the production of films in this way.
At the same time, it is quite true to say that the exhibitors have been having a pretty hard time one way and another. As the noble Lord has said their box office takings are down and the levy payments that they have had to make have been going up. In addition to that they have had this extra tax, the selective employment tax, and other burdens to compete with. The noble Lord mentioned the amount of closures that are running at a pretty steep pace. It is only fair that the interests of the exhibitors should be recognised in this way, especially as I think it is reasonable to regard the basic level from which levy is collected—that is, the 11d. at the present time—as a moving base rather than a fixed one. I think we have kept this fixed for rather too long, because the average cost of a seat over the period has pretty nearly doubled. That being so one would have expected the lower level to have been raised more or less proportionately.
I think the Government have reached a very fair compromise in this. The fact that the levy should continue to run at about £4 million is satisfactory. The whole purpose of the levy was to raise something, and originally it was set at between £2 million and £5 million, or between £3 million and £5 million. At any rate, it was of that order. It could have been, of course, that if we had let things run as they are the levy would have gone on beyond £5 million, and it could be argued that the real value of that has changed. But, all the same, I think one has to keep this balance between exhibitors and producers, and I agree with the noble Lord in commending these Orders to the House.
LORD PEDDIE: My Lords, my comment is in the form of an inquiry. At present the exhibitor is called on to pay a levy in any week in which his takings exceed £400. We have been informed
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that there will be no change in that provision, with the exception that it will be averaged over the year. I wonder whether my noble friend has any information about what is likely to be the difference in the amount of levy collected by adopting the averaging principle?
7.21 p.m.
LORD BROWN: My Lords, perhaps I might answer that question before we proceed further. It is very difficult, as the noble Lord will understand, to make an accurate assessment of figures of this sort about the main result of the action taken to alleviate the position of these cinemas which have variable takings, but the best figure we can quote is about £30,000 per annum.
LORD LLOYD OF HAMPSTEAD: My Lords, I should like to thank the noble Lord for his clear exposition of these Orders. I do not quarrel with the proposition that some exhibitors in this country, especially among the smaller ones, may be in need of some relief in relation to the imposition of the levy. Nor am I going to say anything about the question whether the producer side of the industry has been adequately consulted or its interests adequately taken into account, because there are those present in your Lordships' House who are far better informed on these matters than I am.
The point I wish to refer to briefly is whether it is appropriate for the Film Fund to suffer a substantial reduction of the order of 15 per cent. without provision at the same time being made for the establishment of a National Film School, either wholly or partly out of that Fund. May I remind your Lordships of a few salient facts? As long ago as June, 1967, a Committee, of which I had the honour to be Chairman, reported to the Government their unanimous conclusion that there was a need to establish a National Film School immediately. This is not the moment to enlarge upon the merits and importance of this project from the point of view of both the film industry and the cultural and economic interests of the country generally. It is hoped that time will be found for discussion of these matters when the Motion which is now down for debate is eventually reached.
All I wish to say now is that this was the unanimous finding of a Committee of

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17, including leading film industrialists such as Mr. John Davis and Mr. Robert Clark, the Secretary General of the Association of Cinematograph and Television Technicians, Mr. George Elvin; Mr. John Terry, the managing director of the National Film Finance Corporation, and producers and directors of the calibre of Mr. Carol Reisz and Mr. Carl Foreman. In its Report the Committee stated its view that the annual income of the school should be supported from the British Film Fund, and detailed reasons were given for this. True it is that some members of the Committee thought that only part of the income, rather than the whole, should come out of the Fund, but a substantial majority were in favour of either the whole or not less than 75 per cent. coming out of the Fund. It was also pointed out, on the basis of the Fund then being some £5 million, that even when the school was fully extended under optimum conditions the estimated annual amount would be in the region of £150,000 which represented only about 3 per cent. of the Fund.
It should also be noted that in the Report of the Cinematograph Films Council, submitted as recently as March, 1958, concerning the review of films legislation, the Council, while expressing the view that in their opinion it would be wrong for the annual cost of the school to be met entirely out of the British Film Fund, recommended that the running costs of a National Film School should be met partly from the levy. Be that as it may, here is a clear acknowledgement by an authoritative body that a substantial contribution to the running of a National Film School should come from the Fund.
In the meantime, what has been the position of the Government? Without any unequivocal public pronouncement having been made, though a number of approving noises, if I may so describe them, have been made in another place and elsewhere, indications have been given that the stumbling block is finance. Those concerned with the initiation of this project are, of course, no less mindful of the present financial climate than is the rest of the country. On the reasonable footing, therefore, that the important thing is to get the project started even
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if this means sacrificing the optimum features proposed in the Report, there has been and it is no secret, a good deal of discussion about how the project might be launched on a more modest financial basis than that set out in the original Report. To this end practical proposals have already been advanced which would certainly reduce the annual cost of the project to less than half of the figure put forward, quite rightly I think, on the assumptions contained in the original Report.
I am not going to weary the House with details of this matter at this stage. I mention these points merely to provide a background for my present complaint, which is that the Government have now seen fit to make a proposal for the reduction of the Fund by something between £600,000 and £700,000 per annum, a sum approaching 15 per cent. of the total amount of the levy, without, apparently, taking a passing glance at the needs for a National Film School and the modest claim of such project on the Fund, or at any rate, indicating how the Government proposed to deal with the situation. What is particularly distressing to those who have concerned themselves with this problem is that a fraction of this very large sum by which the Fund is now to be reduced would suffice to get a film school launched and run for several years.
I quite understand, my Lords, that some exhibitors have been in difficulty, having regard to the general decline in attendances at cinemas, and it is right and proper that their views should be considered. At the same time, it is fair to point out that the present proposals are being made irrespective of the profitability of particular cinemas and, as has been pointed out in another place, it is possible—and indeed likely—that some of the most profitable cinemas will gain the most. Indeed, it is worth pointing out that the opinion of the Cinematograph Film Council on which this Order is based was in itself by no means unanimous, because if one looks at paragraph 12 of the 13th Annual Report of that Council, of March 31, 1968, these words are to be found:
"In view of these considerations"—
that is the decline in attendances—
"some members thought"—

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I repeat, some members thought—
"that the burden of levy on exhibitors should be reduced."
The Report goes on:
"Against these arguments, the view was expressed that any reduction in the amount of the levy would be inadvisable. The general opinion was that a reduction was desirable."
We are not told in the Report how many formed that view or how general was "general" for that purpose, but clearly there were dissentients.
Also, I would suggest that a picture has been painted of the industry as containing two distinct elements, one of which, the producers, are all doing rather nicely thank you, while the exhibitors are universally suffering. I suggest that this is a rather tendentious view to anyone who knows anything about the real situation of the industry in this country at the present time. Moreover, it tends to encourage that separatist disposition of the exhibitors who are apt to deploy the case that their interests are really quite distinct from those of film production. The fact is that exhibitors depend on the production of good quality films in order to have an appropriate product to display in their cinemas; and without these there would be no business for them to conduct. Their interest is very much the same as that of all other spheres of the industry, which have a common interest in improving the supply and quality of suitable films for exhibition.
It is idle, therefore, to suggest that the exhibitors have little or nothing to gain from a National Film School whose purpose is to improve the quality of the supply of films produced in this country. On the contrary, they have a profound interest in such a development. I venture to suggest that they would have as much to gain as any other branch of the industry by a deflection of the modest proportion necessary for this purpose, from the massive annual sum of nearly £700,000, in order to help to achieve the institution and establishment of a National Film School in this country.
I therefore deeply deplore the fact that the Government, in making their present proposals, have done nothing to recognise the legitimate claim of the National Film School upon a portion of the British Film Fund or to place on record not just their cordial support of such a scheme which, like a vote of thanks to the staff at the annual general meeting
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of a company, is of little practical worth in itself, but to indicate either that they recognise that, despite the proposed diminution in the overall total of the Fund, that Fund is still quite substantial enough to bear this further modest obligation or, alternatively, that they Ere prepared to finance this project from some other source.
At a time when we are all busy reading and studying the far-reaching proposals of the Fulton Report it may not be irrelevant to mention the immense disadvantage that flows from any proposal which does not fall neatly and squarely within the province of one single Department of Government. One of our difficulties in getting this, as I think, very valuable project on its feet is that it calls for the co-operation not only of the Department of Education and Science, which is its natural parent, but also of the Board of Trade and of the Treasury. I will say nothing now of the stony-hearted third member of this trinity, but I hr ye remarked on previous occasions that one of the unfortunate consequences which have flowed from the fact that the film industry is the concern of the Board of Trade is that that Department is rather apt to look upon the film industry as if it were nothing more than a commercial concern, whose products might just as well be loads of pig-iron as feature films embodied in strips of celluloid.
My Lords, of course, the film industry is a great industry and there are great commercial interests involved. But it is also something more than this. The project of a National Film School is, I think, an imaginative one, which will do much to bridge the unfortunate gap between these two conceptions, as it has succeeded in doing in most other important film-producing countries. My plea to-day therefore is simply that the Government, in the midst of their many other preoccupations, should not lose sight of this very urgent project which could do so much to help resolve some of the most intractable problems of the film industry as a whole, among which I certainly include exhibitors, and at the same time make a serious and inspiring contribution to the cultural life of this country.
7.35 p.m.
LORD GOODMAN: My Lords, I have an interest to declare. I am the chairman of a film production company. I

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debated with myself whether I ought to speak in this debate, and arrived at the conclusion that provided I discharged the onus of extreme moderation, and also made sure that I stated only the facts as I understand them, it would be wrong for one with specialised knowledge to be debarred from speaking just because he had an interest. Therefore, I hope that the House will forgive me for speaking.
I should like emphatically to support what the noble Lord, Lord Lloyd of Hampstead, has said. The moderation with which he said it is commendable, and even surprising, because he discharged the task of chairing. An extraordinary Committee of varying talents, representing every form of interest in the industry, and bringing it unexpectedly—for nobody believed that this conclusion would come about—to a unanimous conclusion. And the noble Lord is to be congratulated on that achievement. It must be especially galling to him to discover, after the unanimous conclusion had been reached, and as all of us in the industry believe, that a Film School is and has for a long time been a necessity to the industry, the recommendation should be put on one side, pigeon-holed and totally disregarded by the Board of Trade.
I should be interested to know to what extent the Board of Trade has consulted with the Department of Education and Science, which set up the Lloyd Committee, because it looks as if one Department was pulling one way and another Department pulling the other way. All I can say to the noble Lord is that it seems to be the case for saying: if you undertake onerous duties, make sure you are paid for them. If you undertake these on a voluntary basis, the only effect will be that in the end your efforts will turn out to be completely futile, as many people have already said in this Chamber.
That aside, I think that it is unfortunate that a Committee of this distinction, having arrived at a conclusion of this importance, should then have it completely overlooked, without a side glance at it. It looks as if the only possible source of providing this School is being eroded and encroached upon without any consideration, of, and certainly no refer-
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ence to, the need for maintaining the Fund in relation to the provision of a Film School. I should have thought that a Film School was a much higher priority than the need for the Fund in relation to the exhibitors' cry to reduce the levy.
I should like to make a few observations on a slightly wider front. This is a difficult question, and this is a Government to which one is very hesitant to make critical remarks about the film industry, because, but for the activity of the Prime Minister in his previous role as President of the Board of Trade, I do not believe that we should have a British film industry to-day. The British film industry is largely dependent on two devices, the National Film Finance Corporation and the Eady Levy, both of which, I believe, are attributable to the Prime Minister when he was President of the Board of Trade. Even so, where criticism is necessary one has to make it. I do not share the view the Minister has put forward, that this proposed change is in the best interests of the industry; nor do I think that he has told us the situation. I am not suggesting that this is from any motive, because he could not have treated the matter with greater frankness; but, perhaps because of pressure of his duties, he cannot be expected to be aware of it.
There are in this country something like 1,900 cinemas. Of those, over 1,000 do not pay levy at all because they do not have the requirement of taking £400 a week. It is left to fewer than 900 to pay levy. The major number with which we are concerned, and those most vulnerable to the possibility of closing, will not be in the least affected or aided by a reduction of the levy. On the contrary, a reduction will be a positive disadvantage to them, because these are the cinemas which rely on the provision of good films to stay open. What we are doing is to make the Fund available for a supply of good films the less by that extent. We are doing a positive disservice to the 1,000-odd cinemas not paying the levy in ensuring that the supply of films that will keep them alive will the sooner dry up.
The second consideration is that of the 900-odd cinemas that remain, something between 600 and 700 belong to two, or at the most three, circuits. I am delighted that these circuits exist, as they are most

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worthy organisations and render great service to the industry. To-day they are extremely prosperous, for a number of reasons. They have engaged in other activities and have T.V. licences. They are enjoying an era of considerable prosperity. One of these circuits was the subject of an immensely active take-over battle recently. Clearly, the takeover presented a considerable amount of allure to people, and no one was deterred from wishing to take over this vast circuit by the prospect of paying too much levy. If I may say so, not the slightest whisper exists in relation to these organisations that they will shut their cinemas, or ought to shut their cinemas, because of the present levy position.
You will not be assisting the exhibition side of the industry in the least in relation to these cinemas by taking £700,000 from the levy Fund and giving it back in the form of a donation to the industries concerned. I think this is an unthought-out proposal, simply because, unhappily, in the forms of government that exist, many proposals are not thought out: people do not have the time or the opportunity to think them out, or they do not have the knowledge to think them out. But certain it is that I do not believe that this proposal is in the least degree for the benefit of the film industry. The production side of the industry at the moment is precariously prosperous, and this is so, as was rightly said by the Opposition spokesman, because of films that are being made in foreign sources.
I do not think the noble Lord, Lord Willis, when he intervened, was in the least at variance with the noble Lord who spoke from the Opposition Benches. I think they both intended to say that this was a good thing; and I think, from the point of view of the British film industry, it is a very good thing. It keeps our studios occupied, it keeps our scriptwriters occupied, and it keeps our actors engaged. It contributes, as I say, to the precarious prosperity that exists.
What brings people here? I think that there are two major factors, and possibly there may be three. Strangely enough—and this, I think, will be a great comfort to many of us—I think they find the trade union conditions that prevail here in relation to the industry less onerous and less difficult than those
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in many other parts of the world, and I think this should be said. I think that, more importantly, from a financial point of view, what brings them here is first, the attraction of the Eady levy, and secondly, that they can derive certain fiscal and taxation advantages. But, above all, it is the attraction of procuring easy money on films which they are able to make on British qucta films.
I think it is extremely imprudent, when the prosperity of the production side of the industry is so very much reliant on the provision of this levy, that it should be arbitrarily altered in this fashion, without sufficient thought and consideration being given to the possible implications. I believe the implications can be very serious for an industry which has suffered considerable vicissitudes over the years. It can change almost in a moment. The film industry has suffered enormous hardships and privations. There was a time (perhaps no one knows better than the noble Lord, Lord Willis, who has been intimately acquainted with the industry for years) when many people working in that industry had the greatest insecurity of employment, and did not know from week to week whether they would be employed and how long employment would last. We have at long last tried to better that situation and to correct it, but, as I say, it is precarious; and we have tried to correct this largely because of this ingenious device which was introduced by a Labour Government some years back. I urge the Government, even at this late hour, to consider whether there should not be fun her reflection on this, not from the point of view of advantaging the producers, not from the point of view of ensuring that some benefit comes to one side or the other, but from the point of view of ensuring that the industry as a whole does not suffer.
I venture to make these concluding remarks. I think it would be quite invidious to say that the production side of an industry is more important than its exhibition side. But the production side of an industry sounds further than its exhibition side. The films made in this country are shown not only in the 1,800 cinemas in this country, but in perhaps 180,000 cinemas thoughout the world. These films produce an image and a picture of the whole country; they are a

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part of the nation's culture. It is, I venture to think, of high importance, if not of the highest importance, that that culture should be maintained at a high, good and worth-while level. This appears to be a modest change, introduced in most disarming terms with, if I may say so, a brief and perfunctory explanation from the Government, and it would look as though something was being done of no real consequence. I think that something is being done that may be of very real consequence that ought to be avoided, and I would urge the Government, even at this very late hour, to reconsider.
7.44 p.m.
LORD STRABOLGI: My Lords, I should like to agree with the noble Lord, Lord Goodman, in saying that something of great consequence is being done by the Government, but to disagree with him in saying that I support these regulations. Like the noble Lord, I have an interest to declare as I have interests in the film industry on the exhibiting side, but I speak entirely for myself. When this levy was first devised by the Prime Minister, as the noble Lord, Lord Goodman, said —a fact which is often forgotten, and I think the film industry owes a tremendous debt to the Prime Minister for this—it was definitely laid down that the levy should not impose an undue burden on the exhibitors. The rate of levy has remained unchanged since 1960. During this period cinema attendances have halved and the number of cinema licences has been reduced by one-third. On the other hand, since 1960 the levy percentage of box office receipts has risen from 6 per cent. to about 8 per cent.
It is no good driving cinemas out of business by maintaining the levy at an unrealistic rate. If cinemas are forced to close down there will be no levy at all. Therefore, I would submit that it is in the best interests of the film industry that the levy should be paid in this kind of way. I think the Government had a very difficult decision to take vis-à-vis the exhibiting side and the producing side, and I think this was probably the only way which they could decide and I support these regulations for that reason.
I should like to add a few words to the urgent plea of my noble friend Lord Lloyd of Hampstead for the National Film
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School. I agree with him that the time really has come when we must decide about this film school—this great project which was so well advocated in the Report of the Committee sitting under my noble friend's chairmanship. Indeed, if I may be personal, thirty years ago, in 1938, my late father asked the Government when a National Film School was going to be established, and I am still asking that question. I must disagree with my noble friend, however, in that I do not think this film school should be financed entirely by the levy. I accept the argument put by the noble Lord, Lord Goodman, that this is a large sum which may in the end be denied to the National Film School; but I do not think that this sum should be used for the National Film School. I consider that the school should be financed partly by the Department of Education and Science, and the remainder as to one part by the exhibitors, another part by the television industry, both I.T.V. and B.B.C., and the third part by the advertising industry.
I realise that this is perhaps not so convenient or so easy to operate as the whole finance coming from Eady levy, but I think it is much fairer. After all, as films and television come closer together, and advertising standards continue to improve, all media are going to benefit by this National Film School. But the main thing is to get it going, and I must urge the Government to make a decision on this quickly, and to tell us what they have in mind so that the matter does not drag on another thirty years and some other noble Lord in the future will be asking the same question that I am asking now.
7.48 p.m.
LORD WILLIS: My Lords, I just want to thank the noble Lord, Lord Goodman, for making it quite clear that the purpose of my intervention earlier was not to indicate that I object to American investment in British films here. On the contrary, as he has stated, it gives a great many people a great deal of work, and in that sense perhaps I should declare a small interest, inasmuch as I have been working for an American company for the last three months. On the other hand, I very much deplore the fact that while the British film production fund

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was set up to encourage British production (and I think the original intention was indigenous British production), the fact is that some of the big companies that could, and should, be doing more in this direction have not been doing so much. In fact, the company with which the noble Lord, Lord Goodman, is associated I think has been dragging its heels in this direction in the last three or four years, and I was pleased to read recently that they have decided to get going and make some British pictures.
I should like to say, also, that I think there is a case for some relief to exhibitors, and in that sense I would partly agree with my noble friend Lord Strabolgi. But I think the noble Lord, Lord Goodman, made a powerful case when he pointed out (and this has been overlooked) that 1,000 cinemas which do not come up to a certain level of takings do not pay any levy at all. So that the hardest pushed are not helped at all by this relief. I think some attention may, and should, have been given to adjusting the levy in some way to help the middle grade of cinemas, but the fact cannot be overlooked—and I think it is fair to them to say that they never asked for this—that the majority of this relief will in fact go to the owners of the two big circuits. It is not going to provide the great relief that we have been told about, to hard pressed independent exhibitors. In that sense, therefore, while accepting that some adjustment ought to have been made, I accept what the noble Lord, Lord Goodman, said that this is hasty, ill-thought out, ill-contrived, precisely because insufficient thought has been given to it and because there has been insufficient consultation with people in the industry.
I should also like to support the plea made by the noble Lord, Lord Lloyd, for the National Film School. It is a scandal that not by one whisper have the Government indicated their attitude to this matter. How can they possibly ask busy men to sit round and discuss what they are assured is an urgent and important problem, and then to prepare a report, when absolutely nothing is said or done by the Government? Why was there not, either in another place or here, a word of apology from the Government about the adjustment of the levy and the fact that no attention has yet been given to the
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film school, in spite of the recommendations made by the Committee under the noble Lord, Lord Lloyd?
I agree with my noble friend Lord Strabolgi that it would be unfair to ask the cinema to bear the whole burden of the National Film School. It would help the talents of many young people, and also help two or three industries, and I think my noble friend's suggestions of how it could be financed are important. But some small proportion might have been taken from the levy, and I would ask the Government to give a firm assurance that before any further adjustment is made in the levy they will make a statement about their policy so far as the Film School is concerned.
Finally, I was much amused by the tribute paid by the noble Lore, Lord Drumalbyn, to British pictures and the fact that we export the British way of life. I was speaking to-day to an American producer who told me that two of our pictures which show the British way of life in all its glory—"Poor Cow" and "Up the Junction"—have just "died the death" in America.
LORD MITCHISON: My Lords, I am in a condition of disinterested ignorance about the film industry. That is no doubt appropriate in a Legislature. It is only in the Fulton Report that some doubt has been thrown upon its appropriateness in the Ministries. But I listened to what was said about a National Film School with attention and agreement. This was apparently a departmental Committee which was set up at the instance of Miss Jennie Lee. I do not know the precise form of it. The Government have a terrible habit of setting up Committees and then accepting their recommendations only if they happen to suit the Government. Not only this Government but every Government acts in this way, and it is really all wrong. If you are going to have a Committee set up and reaching conclusions, especially on a matter of this real importance, then you can either agree and accept them, as the Government have done with suspicious promptitude over the Fulton Report—and only a "working lunch" is needed; I could tell about that —or else say that the matter can be accepted in part, refused in part or refused entirely. I do not think that a complete refusal is the right

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course with a Committee that has been set up in this way. Constant delay amounts to a consistent refusal.
I have had a Question on the Order Paper since May 8 asking about the Departmental Committees set up by the Government, and that Question still remains unanswered. I have taken steps to put down five more Questions in order to try to discover what has happened. It must be perfectly clear that if a Departmental Committee is set up and its conclusions are not in accord with the views of the appropriate Ministry, then it is forgotten. The Government must have lost count of the Departmental Committees they have set up, and no doubt they have forgotten about this one. But as one of my noble friends indicated, the position is ten times worse when two Departments are concerned, as in this case.
I still remember with great admiration the speech made at Scarborough by the Prime Minister. One of the things he was urging was a closer link between technical advances, scientific views and industry, and I should have thought that in an industry such as the film industry it was right that everything possible should be done to promote a higher standard in film making. I say this with great respect to noble Lords concerned in the industry. I am merely a filmgoer and all the best films I see are by no means British; they usually come from some other country. In my opinion we need a film school. The fact that we need one is recognised in the Report, and I am ashamed of the Government if they are unable to say that in principle they agree and that they will look into the matter. I hope that somehow or other they will get a National Film School on its legs.
I listened to what was said and I agree with it completely. I am convinced by it, and I hope the Government have not forgotten their own Departmental Committee to such an extent as to have failed to instruct or to remind my noble friend Lord Brown of the position when he moved this Order, because clearly it has a very close connection indeed with the Committee. If he is not able to tell us what the Government policy is on the matter of a National Film School, perhaps he would consider
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not pressing the Order for the moment but come back with it a little later, with a statement as to what the Government are going to do.
I take no part in disputes between the producers, on the one hand, and the exhibitors, on the other, but I should have thought they were equally interested in producing and showing good films. I should have thought that it was to the advantage of this country, particularly at a time when there is a little more question about our standing in the world than there has ever been before—and I am talking not only about this Government but also about previous Governments—that in a matter of this kind we, who have not been slow in the Arts but who have often not been sufficiently recognised in the Arts, should take care to see that our film industry is improved by every reasonable means, among which I would certainly include a National Film School.
LORD LEATHERLAND: My Lords, I was rather disturbed to hear my noble friend Lord Mitchison say that he was ashamed of the Government because they had not taken any action to set up a Film School.
LORD MITCHISON: I did not say that, my Lords; I said I was ashamed because they had failed to consider it.
LORD LEATHERLAND: Very well, to consider the suggestion. What is the position of the world we face to-day? We face a situation of economic difficulty in this country. We are trying to grapple with that, on the one hand, by increasing productivity and, on the other hand, by trying to regulate wages, profit and dividents, and surely that takes precedence over such matters as setting up a film school.
We are living in a world in which we are confronted with calamities, in Vietnam, in Biafra and in other places, and again in my view the relief of suffering in such places must take precedence over the setting up of a film school. We have heard from some noble Lords who have expert knowledge of the film industry. I would like to look at this from the point of view of an ordinary person who sits in the five-and-ninepennies. My general view is that salaries in the film industry over the years have been far too

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high. Far too much money has been wasted in paying fancy salaries to starlets and "sex kittens", or whatever you care to call them, and the industry itself should have regulated its procedures much more sensibly and satisfactorily and provided the money with which to undertake this film education out of its own resources.
The British film industry is always telling us that it is a competent industry, and surely it should have been capable, like the other industries that are setting up training schemes of one kind an-another, of taking this matter in hand itself and financing it out of its own resources, even if it needed to accumulate those resources by paying less fancy salaries to the people engaged in the industry. Day by day in the newspapers we see that many of those people have either spent all the huge salaries they have earned and gore bankrupt, or gone bankrupt because they have failed to pay income tax and surtax on their huge earnings, or spend half the year abroad in foreign climes to dodge British taxation to a large extent altogether. I do not think the film industry deserves to be featherbedded, although I do believe it has great potentialities, if competently managed, not only for providing decent entertainment for our people here but also helping in a very big way in the export market.
8.2 p.m.
Loan BROWN: My Lords, I am grateful to the noble Lord, Lord Drumalbyn and the noble Lord, Lord Strabolgi for welcoming this Bill. It is one of the commentaries one can make on the liberal attitude of this House that most of the criticism seems to have come from my noble friends. The noble Lord, Lord Willis, asked for certain figures with regard to current films in progress. I am sorry I cannot give them but I will see that he is provided with them in writing.
May I come straight away to the question of the Film School. The House has taken the opportunity to debate something that does I think lie a little outside the terms of the Regulations in front of us, but that is their choice. I do not want to say anything in commenting on what they have said or to give any indication at ail of the attitude of Her Majesty's Government to the
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formation of this Film School. I do not want to give any indication that the outlook is sombre or rosy, because it is not my duty to-night to give that information. This is a matter for consideration and will have to be a matter of future legislation. The point was raised entirely on the question of finance. I think it would be a great pity if a move in this way with regard to the regulation of the levy as between exhibitors and producers had to wait on every occasion for future thoughts about such matters as film schools.
I think it is not right to say that these Regulations are hasty and ill-contrived, as the noble Lord, Lord Willis, said, merely because they do not take account of something which is still sub judice. Equally, I do not agree with the noble Lord, Lord Goodman, who I must admit is a wonderful protagonist for the film industry, and for whose interest in the arts I have every admiration. I do not agree when he says the Board of Trade has totally disregarded the Film School, because it is not the object of these Regulations to consider the matter of the Film School—though the question of the levy will have a future bearing. It is not my object this evening to argue for or against the way in which a Film School should in future be started It is another matter and I must ask the noble Lord, Lord Willis, to excuse me altogether from giving the undertaking for which he asked, namely that there should be no further alteration in the levy until the matter of the Film School has been decided. I know I must sound very difficult but it is necessary to keep separate the matter of these Regulations which have to be looked at from time to time and other matters which, although they have a bearing in connection with the levy, are separate and distinct things.
Perhaps I should remind your Lordships that the percentage of box office paid in levy under the original Act and ensuing amending Orders has run from 1960 to 1967 at 5·9 per cent. 6·5, 6·7, 6·9, 7·3, 7·5, 7·6, 7·6. I think that any group of exhibitors placed in a situation where there is a rising percentage of their box office takings paid to the producers is entitled to have the situation looked at. In matters of this sort the Board of Trade is rather in the position of Solomon. It is not a matter that is

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conducive to hard logic, it is a matter of fine judgment. But I would claim that whereas the Board is in a totally unbiased position on this matter, with great respect to many who have argued for a different course they are, with their deep and commendable interest in the film schools and the quality of the films produced, in a somewhat biased position; they want a film school, they want to back producers, they want better films.
Some people are not as sympathetic to the distributors; some are. There is always argument and we are put in the position of having to exercise Solomon's judgment. I think we have come to the best balanced position we could have and we have the backing of the Cinematographic Films Council in doing so. We set them up to advise us and we have taken their advice. They are the correct body to give advice and I think it would be folly for us to turn this advice down. On these grounds I commend these Regulations.

CINEMATOGRAPH FILMS (COLLECTION OF LEVY) REGULATIONS 1968
LORD BROWN: I beg to move that these Regulations be approved.
Moved, That the Draft Cinematograph Films (Collection of Levy) Regulations 1968, laid before the House on June 12, be approved.—(Lord Brown.)

COUNTRYSIDE BILL
8.8 p.m.
LORD KENNET: My Lords, I beg to move that the Commons Amendment to one of the Lords Amendments, the Commons Amendment in lieu of another of the Lords' Amendments and the Commons Reasons for disagreeing to certain other of the Lords' Amendments be now considered.
COMMONS REASONS FOR DISAGREEING TO CERTAIN OF THE LORDS AMENDMENTS, COMMONS AMENDMENT IN LIEU OF ONE OF THE LORDS AMENDMENTS AND COMMONS AMENDMENT TO ANOTHER OF TILE LORDS AMENDMENTS.
[References are to Bill (99) as first printed for the Lords. Commons Reasons and Amendments are printed in italics.]

COUNTRYSIDE BILL

  LORDS AMENDMENT
  [No. 1].
  Clause 1, page 1, line 8, after ("Country-side") insert ("and National Parks").
  The Commons disagreed to this Amendment for the following Reason:
  Because the shorter title is neater and comprehensive.
  LORD KENNET: My Lords, I beg to move that the House doth not insist on Amendment No. 1 to which the Commons have disagreed. This was the Amendment carried into the Bill in your Lordships' House which would restyle the Countryside Commission, as it appeared in the Bill, the Countryside and National Parks Commission. I do not think it is necessary at this stage to enter into the argument, which we discussed certainly twice, and I believe three times, and I would simply draw your Lordships' attention to the Reason given by the Commons, which is that it is shorter and simpler to have the inclusive and simpler title rather than the longer one. I beg to move.
  Moved, That the House doth not insist on the Amendment (No. 1) to which the Commons have disagreed.—(Lord Kennet.)
  THE EARL OF SWINTON: My Lords, I must, having originally proposed this change, take a moment or two of your Lordships' time to put it on record that I think that in disagreeing with our Amendment the Government have taken

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  a mean and, indeed, a spiteful action. After all, what did they do? The first thing the Government did was to sack Lord Strang and his colleagues, who had done excellent work on the National Parks. Now they refuse a suggestion that the good work which the National Parks did should be remembered in the title of the new authority. That was the proposal which was made and which found almost universal favour here before. I must say that I think that is a mean and potty decision, and I would say to Lord Strang and his colleagues that I am sure the country will not forget the good work which he and the National Parks Commission did, and also that they will note, mark and remember the mean action which the Government have taken.
  Lotto BROOKE OF CUMNOR: My Lords, I should like in a word or two to endorse everything my noble friend Lord Swinton has said, and most particularly the tribute which he paid to the noble Lord, Lord Strang, and his colleagues. The significant history of this matter is that the Government were defeated in Standing Committee in another place on this issue. They were then defeated again on the Report stage in your Lordships' House. They support themselves with the argument that the existing National Parks Commission prefers the shorter name. In fact, the National Parks Commission, in their Report for 1966, said:
  "It is important therefore that the name 'National Parks Commission' should not be withdrawn from public notice or that any question should be given that the cause of the National Parks will be allowed to go by default. The National Parks Commission have therefore strongly advised that the name to be given to the new Commission shall be the 'Countryside and National Parks Commission'."
  We know that since then the Government have managed to bring the National Parks Commission to heel, and the National Parks Commission now say that they would prefer the shorter name. But the Government have not been able to bring to heel the Council of the Society for the Preservation of Rural England; nor, so far as I am aware, all the amenity societies which re concerned with these matters, all of which would strongly prefer the name "National Parks" to be retained for this new body.
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  My noble friend Lord Molson, who took a prominent part in our debates on this matter, explained to me a moment or two ago that he had not been able to stay for this discussion because of the unexpected length of time the last business took, but he would wish me to speak for him. Indeed, he asked me to do so, and he said to me in the Lobby outside, a moment or two ago, that he thought this was a flagrant example of the Government's narrow-minded obstinacy.
  LORD MITCHISON: My Lards, if the Government never did anything worse than this—
  A NOBLE LORD: If!
  LORD MITCHISON:—the Opposition would have nothing to complain about. All the Government have done is to call the Bill by what they say is a neater and more comprehensive Title: and I think that is quite right. The Long Title describes it as:
  "An Act to enlarge the functions of the Commission established under the National Parks and Access to the Countryside Act 1949…"
  THE EARL OF SWINTON: What has that to do with it?
  LORD MITCHISON: What is the complaint? The complaint is that they are giving the Bill a shorter Title. I should have thought this involved no insult whatever, but is a tribute, in which we should all concur, to the Commission established under the 1949 Act. As I have just said, the opening words in Clause 1 are:
  "The functions of the National Park; Commission shall be enlarged in accordance with this Act and in future their name shall be the ' Countryside Commission'."
  Here we have what the Opposition choose to call an exhibition of spite and obstinacy because the Government prefer a rather shorter Title and do that by explaining that they are enlarging the functions of that Commission. With great respect, if no one can think of a better case against the Government than that then they are on very strong ground indeed.
  THE EARL OF SWINTON: That is not saying very much.
  LORD KENNET: My Lords, I must emphatically reject the words that were used: that this was a mean, spiteful and

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  petty action on the part of the Government—words endorsed, to my surprise and regret, by the noble Lord, Lord Brooke, in his observations on this matter. The noble Earl, Lord Swinton, regretted that the Government should refuse that the good works done by the National Parks Commission should be remembered in the title of the new body. There is no need to remember them, either here, there, or elsewhere, because the Commission are continuing and they will continue. The new Countryside Commission will continue to be responsible for the National Parks, as the former National Parks Commission were.
  I differ from everything that has been said by Lord Swinton and Lord Brooke, with the one exception of their tributes to the work of Lord Strang, in which on behalf of the Government I most heartily join. Good work was done by that Commission. It is now time to enlarge their functions, and it would be totally unrealistic and (I say this after consideration) sentimental to insist on the retention of a lot of extra words giving rise to a whole mouthful of initials, the C.N.P.C., for the new body set up by this Bill who are to look after —and no-one has really doubted it, including the noble Lords who have just spoken—the entire countryside, including the National Parks.
  The noble Lord, Lord Brooke, said the National Parks Commission had strongly advised against the change of title. I communicated to the House in Committee, on Report and, I think, probably also on Third Reading, the present attitude of that Commission, and I now have the opportunity to communicate the fact that the Chairman has again written to the Minister of State in the Ministry of Housing, expressing the Commission's view on the Lords Amendment which has now been rejected by the Commons. He wrote:
  "It is the Commission's considered view that the short title, ' Countryside Commission' is preferable to ' Countryside and National Parks Commission'".
  My Lords, I never heard such strong words about such a small point. We all agree that good work has been done and continues to be done.

  LORDS AMENDMENT
  [No. 2]
  Clause 2, page 3, line 27, leave out ("with the approval of the Minister")
  The Commons disagreed to this Amendment for the following Reason:
  Because the Minister must retain his responsibility for ensuring that the terms of any proposed loan of officers, servants or consultants are not to the disadvantage of the public purse.
  LORD KENNET: I beg to move that this House doth not insist upon its Amendment No. 2, to which the Commons have disagreed. This is the one which said that the Countryside Commission might lend their officers to local planning authorities without the need for the Minister's approval of the terms on which they do so. The point about this Amendment is that if these words were deleted it could give rise to a false impression that the Commission would be able to lend their officers without the Minister's approval. In fact, they would not. The staff of the Commission come, for establishment and all administrative purposes, under the control of the Minister of Housing. Whether or not these words are present in the Bill, the Minister will have to approve the terms on which the Commission can lend officers to anyone else. This being so, it was the view of the Government, endorsed by the House of Commons, that it is better to say so in the Bill and so avoid any possible doubt.
  Moved, That the House doth not insist on its Amendment (No. 2) to which the Commons have disagreed.—(Lord Kennet.)
  8.20 p.m.
  LORD BROOKE OF CUMNOR: My Lords, the issue is whether or not, under the powers given to them under the Bill, if the Countryside Commission wish to lend a member of their staff for a fortnight to a local planning authority they must get the Minister's approval for the financial terms. It is of course an absurdity that that should be necessary. It is necessary because—and I am sorry to say this—my old Department has not moved with the times and still insists on keeping over the work of the National Parks Commission, a vice-like financial control which it proposes to extend to the new Countryside Commission.

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  I think one of the factors which swayed your Lordships' House in carrying this Amendment was the powerful speech made by the noble Lord, Lord Strang, against the restrictive effects of this close financial control by the Minister over the work of the Commission. I accept of course that this Amendment is symbolic. It makes little difference in practical effect whether the Amendment is in the Bill or not. The fact that the Government are insisting, and are coming out into the open to insist, on this continuation of a detailed financial control which is not conducive to wise spending of Exchequer money affords me the opportunity of expressing once again my most urgent hope that this Department will one day soon wake up to modern ideas about financial control, and will at last realise that it is not reasonable to call upon people, and to appoint people, to do a thoroughly responsible job throughout England and Wales yet treat them in matters of finance as children.
  LORD KENNET: My Lords, the Department is really fully alive to modern ideas and has no intention of treating the Countryside Commission or its staff like children. The point is, whether or not these words are in the Bill, the people concerned remain on the Vote of the Ministry, and of course all arrangements for their future, or their services, on loan or in any other way, must remain under the control of the Minister who is responsible to Parliament for them. Since there is no real issue of whether these words are or are not there, I should like to repeat my former point, that it will be for the general understanding of how things work if they remain in the Bill; but there is no intention whatever on the part of my right honourable friend to administer this in any narrow or pettifogging way.

  LORDS AMENDMENT AND COMMONS AMENDMENT IN LIEU
  [Nos. 3 and 4]
  Clause 25, page 26, line 29, after ("contributions") insert ("of such amount in each case as they shall, having regard to all the circumstances, consider reasonable ")
  The Commons disagreed to this Amendment, but proposed the following Amendment in lieu thereof:—
  Page 26, line 28, leave out subsections (3) and (4) and insert—
  ("() The highway authority shall contribute not less than a quarter of any expenses shown to their satisfaction to have been reasonably incurred in compliance with subsection (1) above, and shall have power to make further contributiotis of such amount in each case as they shall, having regard to all the circumstances, consider reasonable.")
  LORD KENNET: My Lords, I beg to move that the House doth not insist upon their Amendment No. 3, to which the Commons have disagreed. With the leave of the House I should also like to speak to No. 4, which is a drafting Amendment to make the Government intention clear. It is intended that highway authorities shall be under an obligation to contribute 25 per cent. of the expenses reasonably incurred in carrying out maintenance (I think all noble Lords here present will remember from our earlier discussions what I ant talking about) and that they should have discretion to make such further contributions as, in regard to the circumstances of each case, they consider reasonable.
  Moved, That the House doth not insist on its Amendment (No. 3) to which the Commons have disagreed.—(Lord Kennet.)
  LORD KENNET: My Lords, I beg to move.
  Moved, That the House doth agree with the Commons in their Amendment (No. 4) in lieu of the Lords Amendment (No. 3) to which the Commons have disagreed.—(Lord Kennet.)

  LORDS AMENDMENT AND COMMONS AMENDMENT THERETO
  [Nos. 5 and 6]
  After Clause 26, insert the following new clause
  Riding of pedal bicycles on bridleways
  ".—(1) Any member of the public shall have, as a right of way, the right to ride a bicycle, not being a motor vehicle, on any bridleway, but in exercising that right cyclists shall give way to pedestrians and persons on horseback.
  (2) Subsection (1) above has effect subject to any orders made by a local authority, and to any byelaws.
  (3) The rights conferred by this section shall not affect the obligations of the highway authority, or of any other person, as respects the maintenance of the bridleway, and this

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  section shall not create any obligation to do anything to facilitate the use of the bridle-way by cyclists.
  (4) Subsection (1) above shall not affect any definition of "bridleway" in this or any other Act.
  (5) In this and the next following section "motor vehicle" has the same meaning as in the Road Traffic Act 1960.
  (6) It is hereby declared that sections 9, 10, 11 and 13 of the said Act of 1960 (offences connected with riding of bicycles) apply to bridleways as being highways which are "roads" within the meaning of that Act.
  (7) Section 12(1) of the said Act (prohibition of cycle racing on highways) shall have effect as if the expression public highway "included a bridleway, but without the exception for a race or trial authorised by regulations under that section."
  The Commons agreed to this Amendment, hut proposed the following Amendment thereto:—
  In subsection (5), line 1, leave out ("and the next following")
  LORD KENNET: My Lords, I beg to move that the House doth agree with the Commons in their Amendment No. 6 to the Lords Amendment No. 5. This is the question of the wheeling of pedal bicycles on footpaths. The way it comes back to us from the Commons, after a great deal of to-ing and fro-ing, is based upon the recognition of the fact that if you go on footpaths there is nothing to prevent you from wheeling a bicycle or pushing a pram, or taking anything along with you that you may normally take anywhere. In the words of the House of Commons, there is not a reason for any special detailed provisions on this matter which has exercised both Houses for so long.
  Moved, That this House doth agree with the Commons in their Amendment (No. 6) to the Lords Amendment (No. 5). —(Lord Kennet.)
  LORD BROOKE OF CUMNOR: My Lords, I do not blame the noble Lord at all for having found it so confusing to move the right Motion and I trust, in the light of what he has said, that we can also allow the short debate to roll forward on to Amendment No. 7, for which Amendment No. 6 is a paving Amendment.
  The substance here, of course, is in Amendment No. 7. There appears to be a difference of opinion as to whether cyclists have a legal right to wheel their
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  cycles on a footpath, and I was endeavouring to remove that legal doubt when I suggested to your Lordships that we should insert this new clause. This all goes back, like so much else in this whole field, to the Hobhouse Report of 1947 on Footpaths and Access to the Countryside. What that Report said was that there is no legal right for cyclists, either mounted or dismounted, to use footpaths. That Committee went on to recommend that wheeling a bicycle, dismounted, on a footpath shall not be illegal in the absence of a by-law to the contrary.
  What your Lordships were seeking to do was to implement in legislation that recommendation of the Hobhouse Committee made 21 years ago. However, the Government will have nothing of it, and so the law will remain unamended; the legal doubt will persist, and cyclists will still be seen carrying their machines along footpaths because of a fear that, if they wheel the machine, they may be stopped and prevented from using that path.

  LORDS AMENDMENT
  [No. 7]
  After Clause 26, insert the following new Clause
  Wheeling of pedal bicycles on footpaths
  ". Any member of the public shall, subject to any orders made by a local authority, and to any byelaws, have the right to wheel a bicycle, not being a motor vehicle, on any footpath."
  The Commons disagreed to this Amendment for the following Reason:
  Because of lack of evidence of need for legislation on this subject.
  LORD KENNET: My Lords, I beg to move that this House doth not insist on its Amendment (No. 7) to which the Commons have disagreed. As the noble Lord, Lord Brooke, has said, this hangs together with the last two Amendments.
  Moved, That the House doth not insist on its Amendment (No. 7) to which the Commons have disagreed.—(Lord Kennet.)

  LORDS AMENDMENT
  [No. 8]
  Clause 45, page 41, line 15, at end insert ("except that Parts III and IV of Schedule 3 shall come into force on such day as the Minister may by order, made by statutory

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  instrument, appoint and such an order shall not be effective until approved by a resolution of each House of Parliament.")
  The Commons disagreed to this Amendment for the following Reason:—
  Because it is desirable that all the provisions of the Schedule should take effect as soon as possible.
  LORD KENNET: I beg to move that the House doth not insist on its Amendment (No. 8) to which the Commons have disagreed. This was an Amendment introduced by Lord Chesham, I think for the main purpose of enabling consultations to take place between himself and myself about the interests of the motoring organisations in the "roads used as public paths" provisions of the Bill. These consultations have now taken place, and I believe I am right in saying that all difficulties have been removed.
  Moved, That this House doth not insist on its Amendment (No. 8) to which the Commons have disagreed.—(Lord Kennet.)

  LORDS AMENDMENT
  [No. 9]
  Schedule 4, page 51, line 38, at end insert—
  ("() At least one of the members of a joint board or joint advisory committee or a planning committee or sub-committee of a planning committee referred to in sub-paragraph (1) of this paragraph, who is appointed by each county council, shall be a county district councillor from a county district wholly or partially included in a National Park.")
  The Commons disagreed to this Amendment for the following Reason:
  Because adequate representation of county district councils can he and is arranged under the provisions of existing legislation.
  LORD KENNET: My Lords, I beg to move that this House doth not insist on its Amendment (No. 9) to which the Commons have disagreed. This was the Amendment to require representation by county district councils on National Park planning committees. It was fully debated at an earlier stage, and I do not think I need go through the machinery of the matter. Again the Commons take another view.
  Moved, That the House cloth not insist on its Amendment (No. 9) to which the Common s have disagreed.—(Lord Kennet.)
  LORD BROOKE OF CUMNOR: My Lords, in this case I must ask the noble
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  Lord, Lord Kennet, a number of questions arising out of the Commons Reason. The Commons Reason is here printed as
  "Because adequate representation of county district councils can be and is arranged under the provisions of existing legislation."
  "Can be," certainly. The question arises whether it is true to say that adequate representation of county district councils is arranged under the provisions of existing legislation. When we debated this matter on May 13 the reason this Amendment was carried was that your Lordships were satisfied that at present adequate representation of county district councils is not arranged under the provisions of existing legislation, and if this Commons Reason is valid there must have been radical changes in the last two months.
  We all know that the Dartmoor Park Planning Committee makes wise arrange-merits for representation on the Committee of both the urban district councils and the rural district councils. But in view of the Commons assurance, that adequate representation of county district councils is now arranged under the provisions of existing legislation, I should like to ask the noble Lord these questions. How many county district councillors serve on the Northumberland Park Planning Committee? How many serve on the Yorkshire Dales Joint Advisory Committee? How many serve on the North Yorkshire Moors Park Planning Committee? How many serve on the Lake District Park Planning Board? How many serve on the Peak District Park Planning Board? How many district councillors serve on the Snowdonia Joint Advisory Committee? How many on the Brecon Beacons Joint Advisory Committee? How many on the Pembrokeshire Coast Park Planning Committee? How many on the Exmoor Joint Advisory Committee?
  The Commons Reason says, in terms, that there is adequate representation of county district councils on all those planning bodies. What is that representation now which did not exist on May 13? It was because of its non-existence at that date that your Lordships passed this Amendment.
  LORD KENNET: My Lords, with the greatest respect to the noble Lord, the Commons Reason does not say in terms that it is arranged in respect of all these

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  bodies. It says only that adequate representation
  "can be and is arranged under the provisions of existing legislation."
  The question therefore is what is adequate representation? It would not have been true if the Commons had said, or indeed if anybody had said, "adequate representation can be arranged but is not in any case." It is arranged in some cases and in the judgment of the Government the arrangements for representation are adequate when left to the agreement of the National Park Planning Board and the local authorities concerned.
  I think perhaps the noble Lord is dwelling excessively on words. The issue here is whether or not we should write it into the Statute that there must be district council representation on every National Park Planning Board, rather than leaving it to the arrangements and the will of those concerned in each case either to arrange it, as has happened in Dartmoor, or not to arrange it, as has happened in other cases.
  LORD BROOKE OF CUMNOR: If I had the right to speak again, I would say that that explanation is absurd.
  LORD KENNET: I think one has the right to speak again.

TRANSPORT BILL
8.36 p.m.
House again in Committee.
Clause 60 [Users of certain goods vehicles to hold operator's licence]:
LORD BURTON LORD BURTON moved Amendment No. 147L:
Page 85, line 35, after ("a") insert ("public")
The noble Lord said: I am confident that there is a small drafting error in this case, but one that could have substantial repercussions. I hope that the Government will accept this Amendment or, failing this, will give a satisfactory definition of "road" which we can add to the Bill when we reach Clause 149. At the moment in this definition Clause there is no definition of "road". One of the most recent Acts on licensing is probably the Vehicles Excise Act 1962. This
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Act repeats the word "public" in defining "roads" in very many places. One of the largest Acts on vehicles licensing and roads is probably the Road Traffic Act, 1930. This refers to "road" but defines it as any highway and any road on which the public has access; and in another place I find that the definition of "highway" is roads which are repairable at the public expense.
If the Bill is allowed to pass as it stands, I can see endless complications. For instance, what is to prevent fork-lift trucks in factories or builders' yards requiring supervision by someone with an operator's licence? Cranes in sawmills and certain agricultural vehicles are subject to various Amendments which follow and which I hope will be pressed. It may be that some wording could be devised to confine the operators' licence requirements to vehicles requiring licences under the Vehicles (Excise) Act 1962, and if this were the case I dare say that some alteration could be made. Meanwhile, as it stands, the Bill is not satisfactory and I believe that this small Amendment would improve it. I, therefore, beg to move.
LORD HUGHES: I am afraid that this Amendment is misconceived. The phrase "public road" has no defined or precise meaning. One meaning which does attach to it is a road which is maintained at public expense. It certainly is not a definition of a road as that type of road to which the public have a right of access. So that if we were to include it in the Bill as is suggested it would create uncertainty in place of present certainty in the use of the word "road". The word "road" is defined by virtue of Clause 91(1), page 121, lines 19 and 20, as in the 1960 Road Traffic Act. Section 257(1) of that Act defines a road as:
"any highway and any other road to which the public has access, and includes bridges over which a road passes."
Perhaps the noble Lord, Lord Burton, has in mind a point which is already covered by this definition, and that is that licences should be required for all vehicles used on roads to which the public has access. This is a principle with which the Minister would agree, especially when the emphasis of licensing is being charged to ensure higher vehicle safety standards.

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I know that the noble Lord also has in mind the question of roads in forests and on private estates. It is not possible to generalise about this: each case would have to be examined separately. If the road were a highway—that is, if it were a road which the public can use as of right, or one to which the public has access—then licences would be needed for the use of pods vehicles on that road for hire or reward, or use on own account. If difficult cases arose in practice the Minister would, in appropriate circumstances, consider whether an exemption ought to be made.
I might also add that the word "road" has been used in a similar context in relation to the existing carriers' licensing system since the passage of the 1933 Road and Rail Traffic Act, and in all that time it has not given rise to any difficulty whatsoever. If we did what the noble Lord is asking us to do, we should definitely be exchanging for the present certainty attaching to the word "road" the uncertainty which must inevitably attach to the use of the words "public road".
LORD BURTON: I am not at all satisfied with the Minister's answer. He referred to the 1960 Act, but if we were still going on the 1960 Act why is the position so different in 1962, since the Vehicles (Excise) Act makes constant reference to "public road"? If it is valid for that Act, then it is surely valid for the Bill which we are now discussing. I am afraid that I cannot follow the Minister's reasoning. I have searched through the Bill, but I can find no definition of "a road". Could the noble Lord help me?
LORD HUGHES: It is defined in Clause 91(1), on page 121, in lines 19 and 20, as in the 1960 Road Traffic Act. Section 257(1) of that Act defines a road as
"any highway and any other road to which the public has access, and includes bridges over which a road passes".
8.42 p.m.
LORD NUGENT OF GUILDFORD: I thank the noble Lord for trying to elucidate the position, but I think that my noble friend has a point. I have been looking at the Vehicles (Excise) Act 1962 which is, of course, subsequent to the 1960 Act to which the noble Lord
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referred. I agree that the 1960 Act is very clear in its definition of road ", but Section 24 of the 1962 Vehicles (Excise) Act defines "public road" as being
"a road which is repairable at the public expense."
My noble friend may have a point when he says that these definitions in the Acts of 1960 and 1962 may not necessarily completely coincide. Cm the noble Lord clear up this point?
LORD HUGHES: I pointed cut that the definition of "a public road" is a road which is maintainable or repairable at the public expense. There are roads on which the public have rights, and roads to which the public have access, which are not repairable at public expense. If we use the term "public road", we confine the operation of the Bill to those roads which are repairable or maintainable at public expense. That is all that the 1962 Act concerns itself with in this definition of "a public road". A road, in the sense in which the word is being used in this Bill, is a road where it is important that safety provisions shall apply, and it is a wider definition that "a public road" is in the 1962 Act.
Nothing would please me more than, just for the sheer fun of it, to accept that the Conservative Government had been inconsistent in what they did in 1960 and in 1962, but I must acquit them of any such defect. They knew what they were doing in 1960 when they defined "a road", and they knew what they were doing in 1962 when they defined "a public road". They were perfectly well aware then what the position was. I appreciate the motives of the noble Lord in seeking to make the matter clear since one would have thought that "public road" was a better definition than "road", but, because of the way these things work in law, it is not so.
LORD BURTON: This is a licensing operation, and the 1960 Act is not. The Vehicles (Excise) Act definitely relates to licensing. The noble Lord has said that it is reasonable for licensing in one sense. Surely it is reasonable for licensing in another sense. I cannot follow the arguments on this. I know that there is a good deal of difficulty

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over public roads. It also applies where district councils have to repair roads. This is a great difficulty because there is no definition. It is probably time that there was a strict definition of what "a public road" is.
LORD HUGHES: All I can add is that the 1962 Act is an excise Act. Excise is traditionally raised on roads which are maintained at the public expense. It is because of that that the term "public road is used in that Act but is not used in any of the other Road Traffic Acts. The word" road "goes back to 1933, and has presented no problem whatsoever during all these years. We should be foolish to abandon something which has worked when it is quite unnecessary to do so.
LORD ST. OSWALD: Can the noble Lord think of a type of road which is not covered by "public road" in this definition to which he would wish to extend the implementation of this Bill? My noble friend's point sounds very reasonable to me.
LORD HUGHES: There are many of them. In Scotland we talk about a road which has not been taken over by the local authority, and we call it a private road. There is a totally different term in England and Wales, which escapes me at the moment. But where the local authority have not taken over the road responsibility for its maintenance remains with the frontagers, although the public may have right of access to that road. That is not "a public road" in terms of the 1962 Act; it is "a road" in terms of the 1930 Act. It is a road on which it is necessary that this definition should apply. In my home town there is a road of this kind which has not yet been taken over by the local authority and on which buses run. This can happen in many places, and is one example of the sort of case which can arise.
LORD NUGENT OF GUILDFORD: I would advise my noble friend Lord Burton to accept the interpretation of the noble Lord, Lord Hughes, as it appears in Section 257 of the 1960 Act. The 1960 Act makes its definition in terms of a road "to which the public has access" —that is the test; and the 1962 Act "a road repairable at the public expense", and that again is the test. But as the
288
noble Lord rightly says, a road to which the public has access is the wider definition. Although I realise that there will be certain roads in some places where it will be difficult to determine whether the public has a right of access although they use it, this may have to depend on the merits of each case. The general definition is one we should now accept.
VISCOUNT SIMON: Would the noble Lord consider whether, for the avoidance of doubt, it might not be a good idea to put a specific definition of "road" in Clause 91? At present it is covered by the curious omnibus clause at the end which does not refer to roads at all.
LORD HUGHES: But it refers to a definition in another Act which is quite specific. This is quite common practice. Where Parliament has defined something, we do not redefine it in the same terms in every succeeding Act in which it is necessary to make reference to it. We refer to the statute in which it has been defined. The definition is as wide as it could possibly be. We could not improve on the situation by altering the definition. All we could do is to repeat it in this Bill. That has not been the practice up to now.
VISCOUNT SIMON: I do not think that the noble Lord has looked at Clause 91 recently. The point is that "road" is not mentioned in Clause 91. The definition is covered by an omnibus provision which says:
"…any expression not defined above which is also used in the Act of 1960 has the same meaning as in that Act."
It seems to me that it would be for the avoidance of doubt if there were a definition of "road" in the clause.
LORD HUGHES: What I will certainly undertake to do is that if the Bill does not include a proper reference to the definition as it exists in previous legislation, I will ensure that there is a proper reference back to this wide definition. If it is not clearly in the Bill at present, it ought to be and I will ensure that it is put in.
LORD NUGENT OF GUILDFORD: The noble Viscount, Lord Simon, is right. It is referred to only in these general terms:
"…any expression not defined above which is also used in the Act of 1960 has the same meaning as in that Act."

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Perhaps, in all the circumstances, it would be just as well if "road" did have its own definition by direct reference to the 1960 Act.
LORD BURTON: I should like to thank the noble Lord for at last conceding a little on this, and I hope that when he is drawing up this definition, as I hope he will, he will look at the broader definition of the word. I think he gave two different definitions. This being a licensing matter it is tying people down, and the broader we can make it the better. As regards his remarks about Scottish roads, if in fact such a road as lie mentioned was to be considered the district council would have a right to spend money on it. It may not be taken over by the county council, but they would in fact have that right. Therefore, I think it would be a road on which public expenditure could be legally made. Consequently. I think that argument is not quite valid, but in view of his assurance, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
8.52 p.m.
LORD ST. OSWALD LORD ST. OSWALD moved Amendment No. 147M:
Page 86, line 3, at end insert—
("() to the use of tractors and machines registered under the Vehicles (Excise) Act 1962, at the agricultural rate of duty and used within the conditions specified therein; or
() to the use of any mechanically propelled vehicle exempted from the duty chargeable under the Vehicles (Excise) Act 1962 in accordance with the provisions of section 6(6) of that Act; or").
The noble Lord said: We are now on Part V of the Bill, the clauses on quality licensing, and we on these Benches open with an Amendment in fact far less complicated than it reads in the nature of things on the Marshalled List. I should make it plain, as has been done before, that we on this side approve of quality licensing in principle and where it contributes to road safety. We have certain differences with the Government as to some of the methods they have selected, and sometimes as to the extent of the measures they propose to bring in. We do not oppose in itself the idea of an operator's licence. The effect of this Amendment would be to exempt from the requirements of an operator's licence
290
certain vehicles which scarcely ever use the public roads. They scarcely do so, either because they cannot be usefully employed on a road or because they are strictly limited already by existing law as to the distance they are permitted to travel on public roads.
These exemptions would be, of course, in addition to those listed, in equally and inevitably complicated form, under paragraphs (a), (b) and (c) of subsection (4) of this clause, and in addition to any others which might be brought in under the present paragraph (b) of this subsection. I also have with me a copy of the Vehicles (Excise) Act, which we have quoted this evening. I trust no noble Lord will wish me to quote extensively or descriptively. The first class which we would wish the Government to exempt under this Amendment is described in the Third Schedule of that Act. Those vehicles which are not purely and exclusively useful as working rather than travelling machines—digging, hauling, threshing, mowing, lifting and other earthy activities—are only permitted to travel a maximum of 15 miles along a public road to another property, normally another farm in the occupation of the vehicle's owner. These pay a £5 tax, and they are in a clearly defined category. They cannot sensibly be equated with the types of vehicles for which an operator's licence is designed.
The second class of vehicles referred to in this Amendment comprises those which might use the public roads with somewhat greater frequency but which are also strictly limited to passing from one piece of land in the owner's occupation to another and for a distance not exceeding a total of six miles in any one week. The owner already has to satisfy the county council under Section 6(6) of that Act that this is the purpose for which the vehicle is used. If it should be otherwise used, the exemption from road licence is withdrawn, and with that withdrawal would come also the withdrawal of the exemption conferred by this Amendment.
This may appear at first sight to be mainly for the benefit of farmers, but in fact it wilt also assist other types of vehicle—dumpers and cranes, for instance, crossing a road from one construction site to another. This would seem a sensible and natural alliance. I

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cannot think that the Government will have any great objection to it, and I do not suppose the Committee would therefore wish me to argue it any further. I beg to move.
LORD BELSTEAD: This Amendment, of course, is in two parts. May I just add a word to what the noble Lord, Lord St. Oswald, has said? The sort of agricultural vehicles to which the noble Lord has been referring and which are over 30 cwt. unladen are most of the tractors of the large manufacturers—Massey Ferguson, David Brown, Fordson and Nuffield; certain four-wheel drive tractors, which are generally conversions; and, indeed, crawlers, just before they become (I think it is) 7¼ tons and become a locomotive. It is true that under subsection (2)(b) of this clause the Minister has power to exclude certain vehicles, but the Thirteenth Schedule of the Road Traffic Act, 1960, excludes agricultural vehicles from carriers' licensing, so I feel the noble Lord, Lord St. Oswald, has been consistent in proposing this exemption from the new licensing.
We are not attempting to write an exclusion into the Bill for farmers' goods vehicles, although it is to be hoped that the Minister will consider them favourably for regulations. But agricultural machines, as the noble Lord, Lord St. Oswald, has pointed out, really are an exception, and their exclusion would not jeopardise the real aim of quality licensing as outlined in the White Paper, paragraph 44—namely, road safety. The maximum speed of tractors is low; the distances travelled compared with the rest of the motoring public are short; and these vehicles, although not subject to the Ministry of Transport test, are covered by an absolute host of Construction and Use Regulations. This latter point is a small one to which the noble Lord did not refer.
The second half of the Amendment, if I may say so with respect to the noble Lord, Lord Hughes, takes on a considerably more serious attitude in the light of what has just gone before on Lord Burton's Amendment. I echo the words of the noble Lord, Lord St. Oswald. I cannot imagine that the Government wish to include vehicles exempted from licensing in Section 6(6) of the 1962 Act in quality licensing. We shall only know this
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now if the noble Lord will kindly give us some kind of assurance from the Government Front Bench about it. It would mean, if this was not accepted, that a farmer with something like a mobile slurry tank for pumping out pig and cow houses would require the whole paraphernalia of an operator's and transport manager's licence. I suppose a combine would be included: it has a goods carrying capacity.
The acceptance of this part of the Amendment will, as the noble Lord, Lord St. Oswald, said, help not just agriculture but forestry, horticulture and industry. To my great surprise. I discovered about two days ago (I believe this is correct) that of the major interests availing themselves of Section 6(6) agriculture makes the fewest applications. This Amendment really would not alter the Government's main objective in quality licensing—road safety—and perhaps in this spirit the Amendment may be acceptable.
THE DUKE OF BUCCLEUCH AND QUEENSBERRY: The Government are aware that when this Bill was in another place, and when it left another place, there was very much concern among farmers and timber growers, even more than in other industries, that Parts V and VI would add seriously to the costs of their operations and to the movement and delivery of their produce. Many representations have been made to the Government by organisations on their behalf, stating clearly how this would be and the effect on costs and prices and on competition with imports from overseas. I should like to ask whether Her Majesty's Government have fully considered the various objections and recommendations which were submitted to them, and whether they are able to give an assurance on this Amendment and on this Part of the Bill which will be helpful to the industry.
On the matter of obtaining licences to own and use vehicles for farm and forestry requirements and production, I should like to know that the Government agree that individuals will be put to much more trouble than before—and to trouble which seems to be needless; and to trouble for people who are already very hard worked on all the details of their businesses and in keeping within the laws which already affect them. I do not wish to take up the time of the Committee on Parts V and VI; but I

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think that at the beginning of the discussions on them it would be helpful if we could have some recognition from the Government of the serious anxiety among persons in agriculture and forestry and if they would give some assurance about modifications in the Bill.
9.2 p.m.
LORD HUGHES: The Government are very conscious of the fact that there is anxiety on the part of farmers and others engaged in agriculture about the possible effect of this clause, although I would submit, having regard to what was said in another place when an Amendment similar to this was discussed, that there is no cause for that anxiety to continue on the scale that it does. When this was discussed in the Commons Standing Committee on March 27 (cols. 2233 to 2237) the Amendment was withdrawn after an assurance had been given by my honourable friend the Minister of State to the effect that representations for exemptions would be considered when regulations under Clause 60(2)(b) were being drafted.
I would not quarrel with the way in which the noble Lord, Lord St. Oswald, stated the classes to which his Amendment would apply. It is true, as has been said, that both of these classes of vehicles have been exempted from carrier licensing: the first under paragraph 1 of Schedule 13 of the Road Traffic Act 1960 and the second class under the Road and Rail Traffic Act Exemption Regulations 195'7. But it by no means follows that they should be exempted from quality licensing; for this is a different thing from carrier licensing. Quality licensing is related to safety, which is different altogether from the provisions from which exemptions were given in the past.
I would re-emphasise, for it has been pointed out already, that all those vehicles which do not exceed 30 cwt. unladen weight, or 3½ tons gross, will be exempted under the Bill. Secondly, despite what has been said, some farmers' vehicles are used to carry goods substantial distances to market. It is at least doubtful—we ought to look at the question—as to whether there is justification for excluding such vehicles from quality licensing. It may be that few or none of these would be covered by the Amend-
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ment proposed by the noble Lord. Lord St. Oswald.
But, finally, I would point out that quality licensing will not apply to specialised farm vehicles unless they are goods vehicles. If some of the specialised pieces of farm equipment are in fact being used to carry goods—a purpose for which they are not designed—then there can hardly be argument if in so doing they place themselves in the position of being regarded as goods vehicles. But so long as they are being used for their primary purpose, the purpose for which they were designed, they are not covered by quality licensing at all.
I would repeat what my honourable friend the Minister of State said in another place: that the question of the exemptions from quality licensing which should be given to farmers' vehicles is a matter for consideration in the light of the factors to which I have referred, and in connection with the drafting of any exemption Regulations, for which there is ample provision in subsection (2)(b) of Clause 60. I will give this definite assurance: that in preparing these regulations account will be taken of representations made by organisations representative of the users, including farmers. Beyond that, it is not possible for me to go; beyond that it is not reasonable for me to go; because the regulations are the place where this should be done and not the Bill.
LORD NUGENT OF GUILDFORD: I must thank the noble Lord for the answer that he has given to us, and for referring us to what was said in the Committee stage in another place. I am bound to say that I did not myself feel satisfied by what the Minister of State said there. I feel that these categories that are dealt with in our Amendment No. 147M really should be in the Bill, as, indeed, they have been in previous legislation. The kind of assurance which the noble Lord, Lord Hughes, gives us, with regard to quality licensing not applying to agricultural vehicles unless they are goods vehicles, really does not get us out of the difficulty; because many agricultural vehicles, like agricultural trailers or dung-spreaders, are carrying goods; they are being used as trade vehicles; and they may run on the road for a short dig Lance. The kind of exemptions to which my noble friend Lord St. Oswald referred and

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which occur in the Vehicles (Excise) Act 1962 are really essential for the working of the farms.
The other point the noble Lord, Lord Hughes, referred to was about farmers' vehicles going to market. This is a different point. If the vehicle is under 30 cwt. then we are not concerned with its exemption; if it is larger, say, a vehicle of 3½ tons plated weight or over, then, in my judgment, it should come in as any other road vehicle comes in. We are concerned here with taking out of the Schedule to the 1962 Act the farmers' vehicles going about the business of the farm or, as my noble friend mentioned, working several holdings. This is, after all, on the Statute Book now; and for the sake of certainty it should be on the Statute Book here. It is not good enough to ask the farming world or the forestry world, or the world of builders and contractors, who are governed by these matters, to wait and see what the Regulations say because the Minister has power to give them exemptions. As the noble Lord, Lord Hughes, has had to say, the Minister could not permit himself—and the noble Lord could not permit himself—to do more than to say that these things will he considered and representations from farmers and others will be considered when the Minister is drawing up the regulations. I must say that I do not think that is good enough. In previous Acts this has been a provision. It has been recognised that these categories of vehicle need this exemption. Many of these vehicles could not begin to conform with the safety considerations of the quality licensing that we are concerned with here. We are really in a special category. For that reason, we feel that this ought to be in the Bill.
I recognise the noble Lord's difficulty that these are what he told us are the limits of his brief; but we feel strongly about this. For the sake of certainty and for the sake of the clarity of the Bill, it ought to be in the Bill. That would be better than waiting for it to be put in regulations afterwards, with all the uncertainty that goes with it. I would ask the noble Lord to take this away and discuss it with his right honourable friend in another place and point out the cogency of this case and how strong the precedents are. This should not be left to
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regulations but should be in the Bill. If the noble Lord would say that he will do that, then I would advise my noble friend Lord St. Oswald that we should return to this on the Report stage.
LORD BEAUMONT OF WHITLEY: I agree with the noble Lord, Lord Nugent, about this. I think the noble Lord, Lord Hughes, betrayed a slight inconsistency in his case. He seemed to be relying too much on the necessity for applications for exemption under the regulations. I could see the logic of his case if there were not considerable exemptions in this Bill already. The mere fact that small goods vehicles, very intricately defined, are excepted seems to strengthen the case, where you can find two classes of vehicles, such as are in this Amendment, which seem to me would come equally clearly into exemption clauses, as to why they should come into the Bill and not just be liable to representations from interested parties and the will of the Minister. I sincerely hope that we shall be able to have this put either by the Government or by ourselves at Report stage.
LORD HUGHES: The noble Lord, Lord Nugent, has put forward what I admit is a reasonable plea. If I thought there were any prospect of my being able to say something different at Report stage then I would certainly take it back. But I would be misleading the Committee it I were to have you believe that it would be any different at Report stage. Having had this discussion, if noble Lords feel strongly, then the Committee might as well divide now as do so later.
This is a matter related to quality licensing, and the Government believe that the primary consideration is that of safety. They will have regard to that primary consideration, and in doing so will so seek to frame regulations as to exempt anyone who can properly be exempted. Under past Acts that has been done frequently. This is a matter which is better done by regulation, with the flexibility of regulations, than by being included in the Bill itself. I do not think that if I were to wait until the next stage, and were to attempt to persuade noble Lords again that this is the case, I should have any better success. They will still be of the same opinion as

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now. If they feel strongly about it, then we might as well save time by dividing now.
LORD ST. OSWALD: I am grateful to the noble Lord for the kindness with which he has treated my Amendment. It has really been rather an unproductive form of kindness from our point of view. I think that his firm and quiet refusal to accept the Amendment would
Resolved in the affirmative, and Amendment agreed to accordingly.
9.18 p.m.
LORD ST. OSWALD LORD ST. OSWALD moved Amendment No. 148:
Page 86, line 14, at end insert ("or is a dual-purpose vehicle with an unladen weight not exceeding two tons").
The noble Lord said: This is another exempting Amendment. It is designed to
leave the owners of these categories of vehicles with a quite unnecessary and heavy burden on them. I think that, almost on the noble Lord's invitation, I should like to divide the Committee.
9.12 p.m.
On Question, Whether the said Amendment (No. 147M) shall be agreed to?
Their Lordships divided: Contents, 82; Not-Contents, 35.

CONTENTS

Ailwyn, L.

Falkland, V.

Newton, L.

Airedale, L.

Falmouth, V.

Nugent of Guildford, L.

Albemarle, E.

Ferrier, L.

Oakshott, L.

Amory, V.

Foot, L.

Penrhyn, L.

Arbuthnott, V.

Gage, V.

Rankeillour, L.

Ashbourne, L.

Gisborough, L.

Redmayne, L.

Auckland, L.

Glentanar, L.

Rochdale, V.

Audley, Bs.

Greenway, L.

Sackville, L.

Bannerman of Kildonan, L.

Grenfell, L.

St. Aldwyn, E.

Barnby, L.

Grimston of Westbury, L.

St. Helens, L.

Barrington, V.

Harcourt, V.

St. Just, L.

Beaumont of Whitley, L.

Headfort, M.

St. Oswald, L.

Belstead, L.

Henley, L.

Sandford, L [Teller.]

Boston, L.

Horsbrugh, Bs.

Selkirk, E.

Bridgeman, V.

Ilford, L.

Simon, V.

Buccleuch and Queensberry, D.

Inglewood, L.

Sinclair of Cleeve, L.

Buckton, L.

Kilmany, L.

Stamp, L.

Burton, L.

Latymer, L.

Strange of Knokin, Bs.

Carrington, L.

McCorquodale of Newton, L.

Strathclyde, L.

Conesford, L.

Massereene and Ferrard, V.

Swinton, E.

Cork and Orrery, E.

Merrivale, L.

Terrington, L.

Craigmyle, L.

Mersey, V.

Tweedsmuir, L.

Cranbrook, E.

Mills, V.

Verulam, E.

Denham, L. [Teller.]

Milverton, L.

Vivian, L.

Dilhorne, V.

Monk Bretton, L.

Wade, L.

Ellenborough, L.

Mottistone, L.

Wakefield of Kendal, L.

Elliot of Harwood, Bs.

Mowbray and Stourton, L.

Ward of Witlcy, V.

Windlesham, L.

NOT-CONTENTS

Addison, V.

Henderson, L.

Rhodes, L.

Arwyn, L.

Heycock, L.

Rowley, L.

Beswick, L.

Hill of Wivenhoe, L.

St. Davids, V.

Blyton, L.

Hilton of Upton, L. [Teller.]

Serota, Bs.

Bowles, L. [Teller.]

Hirshfield, L.

Shackleton, L.

Brockway, L.

Hughes, L.

Shepherd, L.

Champion, L.

Kilbracken, L.

Snow, L.

Collison, L.

Milner of Leeds, L.

Stonham, L.

Gaitskell, Bs.

Peddie, L.

Strabolgi, L.

Gardiner, L. (L. Chancellor.)

Phillips, Bs.

Taylor of Mansfield, L.

Hall, V.

Plummer, Bs.

Walston, L.

Raglan, L

Winterbottom, L.

complete one which was moved by the Government at the behest of the Opposition in another place. The concession made then was to describe a small goods vehicle, inter alia, for the purpose of paragraph (a) of subsection (2) of this clause, as having a carrying capacity not exceeding 3½ tons and an unladen weight of not more than 30 cwt. My noble friend and I had considered widening this Amendment to raise the carrying capacity

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to 4 tons, in addition to the concession on unladen weight which we are seeking. But in view of the Government's earlier help in another place we agreed between us not to touch the laden weight but to restrict ourselves to making one consistent with the other, in a way which we think the Government themselves would wish. At the moment, under the concession granted the 30 cwt. limit excludes certain farm vehicles which, because of the nature of the land over which they work and the type of work which they are designed for have to be more heavily built and include a capacity not required on the open road. At the moment on the market there is, so far as I know, only one obvious category of such vehicle, the long wheelbase 109 ins. or 110 ins., or forward-drive Land Rover. This is a fine vehicle, we all know, of British manufacture, which has proved its worth and won popularity in far rougher and more exotic terrain than we find in these Islands. But it is extremely popular, and indeed essential, among farmers in Britain, for its dual-purpose character enables it to be used in mud and mountain and also on the main road for general runabout purposes.
There is a legal definition of dual-purpose vehicle already, so that this need not be written into the interpretation clause. It means a vehicle constructed or adapted for the carriage of both passengers and of goods or other burden. The legal definition in fact goes a great deal further than that in narrowing the description, but it does in fact also set a ceiling of two tons unladen weight, which we are repeating here. I have said that there is probably only one make of dual purpose vehicle now on the market which falls obviously outside the 30 cwt. limit. In this I may be understating certain others, including the Bedford range of 30 cwt. vans, the Morris 11-ton van, which may all benefit from our Amendment, especially if they have adaptations for special work or heavy work. There have certainly been others in the past, such as the Humber Snipe conversion, once extensively used on farms, and some of which may well be used still to-day. Also other models may be developed and brought on to the market in future of an equally good export potential as the Land Rover. All these vehicles are at present caught by
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the 30 cwt. limit, and one cannot suppose that this would be the Government's intention, having brought in the previous concession. I therefore beg to move.
LORD BELSTEAD: I should like to add a word or two to what my noble friend, Lord St. Oswald, has said. He has dealt exhaustively with the vehicles which form the basis of our hopes and fears on this Amendment, but perhaps a brief word on the Government's dividing line of 3½ tons basic weight and 30 cwt. might be in order. It is, I think, perfectly understandable to anyone, on whichever side of the Committee he sits, that the Government are not keen on writing exemptions into the Bill which would upset the dividing line which was described by the Minister of State, Mr. Stephen Swingler, in another place as an equation of 30 cwt. unladen equalling 3½ tons gross which equals 2 tons carrying capacity.
This Amendment would not upset this equation, because a dual purpose vehicle will not carry over 1½ tons. Putting it another way, if a dual purpose vehicle were to be plated, which it will not be, no dual purpose vehicle of 2 tons would be plated at over 3½ tons, because among goods-carrying vehicles dual purpose ones have this unusual construction which puts them over 30 cwt., or, at least, it puts the Land Rover and the vehicles my noble friend, Lord St. Oswald, was talking about over 30 cwt. unladen. But I assure your Lordships that below 3½ tons plated, if they were to be plated, these are the most deserving exceptions, and their exclusion would not give many other interests the opportunity to clamour for exemption as well.
Noble Lords will realise that there would be merit in this exemption. My noble friend, Lord St. Oswald, referred to the fact that the whole idea of quality licensing is to improve road safety. The White Paper referred to excluding light delivery vans and tradesmen's vehicles. This Amendment seeks to help the Government to achieve this, since the goods carrying capacity of dual purpose vehicles does not exceed that of light vans.
Also there is one social reason behind this Amendment. For many people the Land Rover, the old estate car and other vehicles mentioned by my noble friend, Lord St. Oswald, is their sole vehicle,

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subject to the Ministry of Transport tests and to the provisions which the Government make for construction and use, safety and roadside checks, and indeed everything resulting from road fund licensing. I respectfully suggest that this Amendment does not upset the aims of the Government and that it would remove many well founded fears throughout the country.
9.31 p.m.
LORD HUGHES: I am grateful to the noble Lord, Lord St. Oswald, and to the noble Lord, Lord Belstead, for the reasonable way in which they have put forward these proposals. It is really a matter of regret to me that I cannot agree with them, for the reasons I stated on the previous Amendment. The Government firmly believe that the place in which this should be done is in the regulations. We are not in fact asking the Opposition to do something in this Bill which they have not themselves clone in the past. In fact now we have come to this Amendment it gives me the opportunity to point out that the existing exemption for dual purpose vehicles—these are dual purpose vehicles, used by commercial travellers for the carriage of samples, or vehicles used for tools, apparatus and so on required by the driver or the passenger for his trade, business or profession, or vehicles used by farmers for agriculture or ancillary purposes—were not defined in an Act of Parliament but in regulations made by the Government in 1957. For the life of me I cannot see why, if it was proper for a Conservative Government to make these definitions subsequently in regulations, it is essential that in 1968 they must be written into this Bill.
LORD BELSTEAD: With great respect to the noble Lord, possibly before the Conservative Government made the regulations, they gave some assurances.
LORD HUGHES: I have given some assurances too. I cannot give an assurance that any particular vehicle will be exempted, and I doubt very much whether any Government in the past gave a firm assurance as to what was to be in regulations. I am certain that the most any Minister would have done previously is what I am doing now, to give a firm assurance that this is the sort of case that would be considered. But it
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would be wrong for me, particularly when the primary purpose is safety rather than carriers' licensing, to give a firm assurance. I am taking it as far as I can honestly take it, and if I were to go further than that I would cease to be honest with the Committee. We are sympathetic with the objects of this Amendment but I cannot go further than to say that this is the sort of thing which will be considered for exemption in due course.
My main point is that the proper place for exemption is in regulations, and I found that similar regulations which exempt for this particular type of vehicle, were made by a previous Government.
THE EARL OF SELKIRK: Can the noble Lord say whether in fact any vehicle will be exempted?
LORD HUGHES: I do not think we would have gone to all the bother of making provision for exemptions if in fact we had not intended that there should be exemptions. Governments may be accused of being devious in their ways but surely the suggestion is not being made that we are just plain daft.
LORD NUGENT OF GUILDFORD: The precedent which the noble Lord quoted with approval, of the 1957 Act, does not really quite meet the case here. What we are asking for is something more than that. We are asking for a slight adjustment in the starting point of quality licensing for the purposes of the operator's licence. This is really something of more fundamental importance than actual regulation-making matters to which the noble Lord has referred. This operating licence which we are now discussing in Part V of the Bill is a completely new concept. Noble Lords have not yet had the chance to have a general debate on the Motion, That the clause stand part or any such occasion, but as I am sure the noble Lord, Lord Hughes, would agree, there are great implications for all trade vehicles in the operator's licence. While we accept the gener21 principle as being a wise one and one which will promote road safety, we still think it is extremely important to set the de minimis level at the right point, and we are not far out, as my noble friend Lord Belstead said, in accepting, as we are willing to do, the 3½ ton plated weight.

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After all, if the noble Lord's honourable friends in another place are capable of making a concession, which they did in translating the 30 cwt. unladen into 3½ tons laden, it seems to me not beyond the bounds of possibility that they might make a further concession here. We are not asking for increased carrying power. What we are asking for is an increase in the unladen weight, to the scope of the vehicle; in other words, it covers such an immense range of vehicle, and it does include quite a number in the 30–40 cwt. range.
My noble friends Lord St. Oswald and Lord Belstead dealt with this very effectively and showed that this is a real practical problem. We are really asking for something more than exemptions on regulations; we are asking for a slightly different definition of the starting point, and this is something of rather more fundamental importance than is normally covered in regulations. We do not want to press this Amendment to a Division, but we do want the noble Lord to take this back to his right honourable friend in another place. We are not asking for concession on weight here; we are asking for concession on construction, because we know what a very wide range of vehicles exists in this field. I hope the noble Lord will be willing to look at it in those terms.
VISCOUNT MASSEREENE AND FERRARD: Might I ask the noble Lord, Lord Hughes, a question? The noble Lord made great play about safety; it has really been the cornerstone of his argument. Has he got any great evidence that a vehicle of unladen weight of 2 tons is so very much more dangerous than a vehicle of unladen weight of 30 cwt.? I really cannot understand that such a vehicle of 2 tons unladen weight, and particularly a dual purpose vehicle, as regards its goods carrying capacity, is in reality any different from a 30 cwt. vehicle in this connection. I cannot see where the argument of safety comes into it all.
LORD HUGHES: It is not a case of my making great play of safety. This is the primary purpose of this part of the Bill, and the noble Lord, Lord Nugent of Guildford, has been good enough to say on more than one occasion that in this aspect the Opposition are at one with the Government. So it is not
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a question of just making use of the argument for the purpose of answering Amendments. I must admit the validity of the part of the argument that is put forward in which noble Lords seek to separate the two things, the unladen weight and the laden weight. As I understand it—I have no extensive experience in these matters at all—the 30 cwt. unladen weight is a figure which has existed as a sort of dividing line now for many years.
In another place this has been tied up with the gross weight of 3½ tons, and I presume that the 30 cwt. vehicle will normally be capable of carrying a load of approximately 2 tons of goods. At that 30 cwt. level almost a million vehicles are exempted because they are 30 cwt. or less. But I accept the point which I think is being made, that this particular type of dual-purpose vehicle also having an unladen weight of more than 30 cwt. is not capable of carrying a load of anything like 2 tons, and that to take it up to 2 tons for this particular type of vehicle would not take it beyond the other limit of 3½ tons gross.
What I am not in a position to satisfy myself about is whether there are any perils in raising it at the one end, and whether we would in fact create an impetus for manufacturers to design vehicles so as to bring them in at less than 2 tons, when in fact it would not be the proper thing to do, simply for the purpose of bringing in something which would get through the regulations. I do not want to avoid a Division on this any more than on the previous Amendment by giving any false promise, but I think it would be wrong, without committing myself in any way, if I refused to look at the question as to whether or not this can be done without creating problems in other directions. If it can be so done, then obviously there is a very special onus on the Government to look at it and to produce, if they so wish, at least some valid reasons for refusing to do it. If, on the other hand, it cannot be done without unwelcome repercussions in other fields, and I so advise the reasons for this, then I certainly would not expect noble Lords opposite to seek to pursue this at a later stage. I think the obligation is definitely on me, if this Amendment is withdrawn, to write to the noble Lord,

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Lord St. Oswald, about the matter in ample time for him to consider it at Report stage, and then if we are in disagreement I do not think it would be necessary to waste any time in re-arguing the matter then. We could have a quick Division.
LORD ST. OSWALD: In the light of the noble Lord's remarks, I think it would be extremely churlish of me to do anything but withdraw the Amendment. What we were trying to do was to offer the Government an opportunity to be consistent with what was done in another place, and if the noble Lord finds in the light of the proviso referred to that this is not as reasonable as it looks to us I shall quite understand. I am grateful to him for what he has said.
Amendment, by leave, withdrawn.
LORD ST. OSWALD LORD ST. OSWALD moved Amendment No. 149:
Page 88, line 25, after ("centres") insert ("or an applicant with operating centres in more than one licensing authority area shall be permitted to make application to one licensing authority in respect of all his operating centres")
The noble Lord said: I appreciate this may be a somewhat more controversial Amendment in the eyes of the Government than the previous two I have put forward, but I think it is necessary, to conform with good commercial practice. For that reason, I do not see it as an issue of principle though it may be a contrast in approach. As I see it, Clause 62(1) of the Bill requires an operator to apply for and obtain a licence in each of the areas in which he has an operating centre and an operator's licence. Here is a measure which affects only the larger companies, those with a number of branches and depots, and who for efficiency and administrative convenience, have most of their transport work, and in particular their licensing work, handled within a centralised transport depot. This is what most of them do at present because they find it, logically enough, most efficient.
Under the new system and the "new look", this is to be frowned upon. They are to be prevented from operating as they prefer to do at present, that is under the present system, applying for one central "C" licence. Here, unless we can alter the Bill, they will have to go
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separately to each licensing authority in whose territory they have a depot. I understand that the Government's case is that licence applications may require investigation by the licensing authority on the ground and that this precludes one central application. But does this make sense? My understanding is that the factors governing the granting or refusal of a licence are not geographical, or are very seldom so. They depend far more on the reputation, the standards maintained, the ability and the record of the company concerned. Such factors can best be investigated, not in widely scattered depots across the country, but in the area of the central depot, where the organisation of command and control is best.
As I have said, this is not an issue of principle; nor is it an issue of practicality. So far as I know, there is nothing to prevent the internal mechanism of a licensing authority from functioning outwards, even if investigation is required, even if it is called for. The issue, I submit, is different. It is a question of whether all administrative work and inconvenience and onus, here created, is to be borne by "officialdom" or unloaded upon trade or industry. This is a sad thing which the Government must watch out for and deny with deeds, not words, if they disagree. It is suspected, even assumed, that if there is going to be extra work imposed by the central Government, as much as possible of that work will have to be done by those on the receiving end of the new legislation, often enough, as in this instance, by those who deem it unnecessary in the first place.
I suggest that a Government which really looks for the co-operation of trade and industry should have regard to their interests. If the Government really require a system, a network to carry out widespread investigation, then let the Government provide the wherewithal, the specialists to do it. We do not consider that it is necessary; but if it is, it could be made a responsibility of Government servants, not an extra chore laid upon the industry. It is because we consider the application methods for transport operators' licences as they stand at present in this clause to be wasteful, and even disruptive, that we have set down this Amendment which I beg to move.
9.47 p.m.
LORD MERRIVALE: I should like to support my noble friend with regard to this Amendment, and in particular to draw the attention of the noble Lord, Lord Hughes, to the case of an existing "C" licence operator and to the problems of one industry, the construction industry, where new sites are constantly being opened and existing sites closed as work is completed. I feel that possibly the Government might be able to see their way to accept this Amendment, in view of their definition of "operating centre" and because of their allowance in another place that three months may elapse before an application for a new licence may be made by an operator who is moving into a new licensing authority area.
While this latitude of three months is helpful, I feel that it does not go far enough. Let us take the case of a temporary building site which, in effect, for the purposes of the Bill becomes a permanent operating centre. In this case the contract may last ten months. In that case, will the contractor need to apply for a special licence in respect of the lorries on that site, despite the fact that his main operating centre may be in a completely different part of the country? I understand that the particular point I am raising was not satisfactorily replied to in another place, and I thought it appropriate to raise it here again in the hope that the noble Lord, Lord Hughes, can answer the specific point.
LORD WAKEFIELD OF KENDAL: Again and again, quite rightly, the Government have stressed the importance of increasing productivity in the country. But here again in this Bill we have another example of the Government acting contrary to the way they urge again and again upon the country. The clause we are now discussing does exactly the reverse, as we have just heard from the noble Lord who has just sat down and who has quite clearly pointed out how, if the Bill remains as it is, productivity will be not increased but decreased. So I urge the Government to have a really good look at this Amendment and see what can be done to stop increasing administration costs, to stop decreasing productivity, and to try to help industry carry out what the Government are again
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and again urging them to do, namely, increase productivity. If the Government can do this they will then be carrying out in legislation what verbally, quite rightly, they have been urging the country to do.
LORD BELSTEAD: The noble Lord, Lord St. Oswald, asked whether information could not be interchanged between licensing authorities, as is done with "C" Licences on some occasions now. I think it is worth following that point for one second and looking at the Bill and seeing whether, in fact, this can be done. In Standing Committee F in another place, column 2301, the Minister of State said:
"We cannot have a system whereby licensing authorities on a local or regional basis are given responsibility which would compel them to go ranging on a nationwide scale in making their inquiries and investigations."
If one looks at Clause 62 and at the sort of things which the licensing authority may look into, one sees there are particulars of vehicles and trailers, a statement about the transport manager, purposes of the vehicles, particulars of the servicing, and how drivers' hours and normal loading will be complied with, past history of the applicant, and particulars of financial resources. I presume these things will be notified to the licensing authority on paper—on a form. Surely it is not too much to ask that this form should be a standard form, and that it can be done through one licensing authority. The noble Lord, Lord St. Oswald, put the difficult point to the noble Lord, Lord Hughes, that perhaps his answer may be that there is something of a geographical nature, a local nature, which needs to be inquired into. One realises on looking at the Bill that the appointment of a transport manager, perhaps the most obvious thing that springs to mind, is one of these difficulties. No doubt the noble Lord, Lord Hughes, will point this out if he thinks fit.
I do not think it can be said too many times that this Amendment will not upset the procedures which were touched on by the noble Lord, Lord Merrivale, that there must be different licences for different licensing areas. All we are trying to do is to reduce bureaucracy and expense for both applicants and licensing

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authorities, and possibly, in those circumstances, the noble Lord, Lord Hughes, may look on this Amendment with favour.
LORD FERRIER: I am tempted by what the noble Lord, Lord Belstead, has said to take part in the discussion on this Amendment, especially guided by what the noble Lord, Lord Wakefield of Kendal, said over this question of productivity. I am lot sure that this Amendment goes far enough, although indeed we may have an opportunity of going further with the point I am going to make when we come to Amendment No. 207. My point is this. There are industries—and there are two in my native city of Edinburgh—which produce products which are very tricky ones to transport. They are products which the producers would on no account agree to send by rail. They are products which —I am talking about pharmaceuticals—are of a delicate character. They are dangerous, perhaps poisonous, and subject to problems which cannot be dealt with properly by rail travel. The other is the bronze wire industry connected with the paper trade, which produces very heavy and very costly and extremely precise material for the paper trade, and is sent all over Britain. I have no interest in either of these business. I am not in the pharmaceutical industry now, and I have no interests in the bronze wire industry, but I am informed that it would be out of the question to permit such products to go otherwise than by road.
This point should be carefully considered in term; of the productivity to which the noble Lord, Lord Wakefield, referred if proper facilities are to be given to the delivery of good order of a delicate, expensive, heavy product. If consideration is to be given to that, then the conditions of this clause which we are endeavouring to amend interfere with that element of productivity. I should be delighted if the noble Lord in his reply would clear my mind on this matter. This is a point which should be considered in the whole context of what we are discussing.
LORD HUGHES: The point which is being dealt with here is relatively simple. I accept what the noble Lord, Lord St. Oswald, said, that there is no difference in principle between us on this
310
matter. I must disagree with him when he went on to say that there is no difference in practicality. The complete objection to this is on grounds of what is and what is not practical. It is part of a licensing authority's duty to be satisfied that, among other things, adequate maintenance facilities exist at the base or bases of the applicant. The licensing authority cannot fulfil his undertaking because he is not able to do this job at bases throughout: the country for himself. It ca mot be delegated to someone else in some other part of the country. It is for that reason, and that reason alone, that on this aspect I cannot accept the practicability of this Amendment. One must remember that the requirement to make a decision is placed upon the licensing authority. He has to be satisfied as to whether or not the licence should be granted. If it is argued, "You have refused this because the base is not satisfactory, and you have not even seen the base", it would not be accepted as reasonable to say, "I have been told by someone, who did this on my behalf somewhere else, that he is not satisfied that it is a proper base". It is as simple as that, and I cannot accept this Amendment.
The noble Lord, Lord Merrivale, spoke about the difficulties of building sites, as also did the noble Lord, Lord St. Oswald. It is true that I used to be a builder. I am tempted to remember that, but even so it does not help me to accept the Amendments. The Government have gone a fairly considerable way to deal with this situation by allowing the temporary base to which the noble Lord, Lord Merrivale, referred. The three months is about as far as we can go. The Government are constantly being exhorted by noble Lords opposite and by Opposition Members in another place to cut down the number of civil servants, and that is quite reasonable. I am not arguing that this is a case where we are seeking to save civil servants by transferring responsibility somewhere else. It may have that incidental effect, but that is not the purpose. The purpose is that the job is required to be done where the base is, and not that we are seeking to transfer the cost of the operation to the transport operator rather than to the licensing authority and to the people who will be required for that purpose. I cannot advise your Lordships to accept this Amendment.
LORD ST. OSWALD: Again, I am grateful to the noble Lord for the way in which he has given thought to this matter. He thinks it is simple and I think it is simple, but in fact we see simplicity in different lights. He seems to ask: how can the central licensing authority involved be satisfied that the maintenance facilities are satisfactory in all the depots? I suggest that the standards maintained by the central company should be a touchstone of some kind, and if, in spite of those standards,
Resolved in the affirmative, and Amendment agreed to accordingly.
THE DEPUTY CHAIRMAN OF COMMITTEES (LORD AIREDALE): I must point out to the Committee that the Marshalled List makes it appear that the Amendment that has just been decided is an Amendment to Clause 60. It is, in fact, an Amendment to Clause 62. I have omitted to put the Questions, That Clause 60 stand part and Clause 61 stand part. I must now put those Questions to the Committee.
the central authority is not satisfied, then there must be means of finding out. But, unhappily, I do not think the noble Lord and I are going to agree on this to-night, and I think I am none the less, despite his persuasion, inclined to divide.
10.6 p.m.
On Question, Whether the said Amendment (No. 149) shall be agreed to?
Their Lordships divided: Contents, 69; Not-Contents, 32.

CONTENTS

Abinger, L.

Ellenborough, L.

Mowbray and Stourton, L. [Teller.]

Ailwyn, L.

Elliot of Harwood, Bs.

Airedale, L.

Falkland, V.

Newton, L.

Albemarle, E.

Falmouth, V.

Nugent of Guildford, L.

Aldington, L.

Ferrier, L.

Oakshott, L.

Arbuthnott, V.

Gisborough, L.

Penrhyn, L.

Ashbourne, L.

Glentanar, L.

Rankeillour, L.

Auckland, L.

Greenway, L.

Redmayne, L.

Audley, Bs.

Grenfell, L.

Rochdale, V.

Barnby, L.

Grimston of Westbury, L.

Sackville, L.

Belstead, L.

Harcourt, V.

St. Aldwyn, E.

Boston, L.

Horsbrugh, Bs.

St. Helens, L.

Boyd of Merton, V.

Ilford, L.

St. Just, L.

Bridgeman, V.

Inglewood, L.

St. Oswald, L.

Buckton, L.

Kilmany, L.

Sandford, L.

Burton, L.

Latymer, L.

Sinclair of Cleeve, L.

Carrington, L.

McCorquodale of Newton, L.

Strange of Knokin, Bs,

Conesford, L.

Massereene and Ferrard, V.

Strathclyde, L.

Craigmyle, L.

Merrivale, L.

Terrington, L.

Cranbrook, E.

Mills, V.

Tweedsmuir, L.

Denham, L. [Teller.]

Milverton, L.

Verulam, E.

Dilhorne, V.

Monk Bretton, L.

Wakefield of Kendal, L.

Drumalbyn, L.

Mottistone, L.

Ward of Witley, V.

Windlesham, L.

NOT-CONTENTS

Addison, V.

Headfort, M.

Ritchie-Calder, L.

Arwyn, L.

Henderson, L.

Rowley, L.

Beswick, L.

Heycock, L.

St. Davids, V.

Blyton, L.

Hill of Wivenhoe, L.

Serota, Bs. [Teller.]

Bowles, L.

Hilton of Upton, L.

Shepherd, L.

Champion, L.

Hirshfield, L.

Simon, V.

Collison, L.

Hughes, L.

Stonham, L.

Gaitskell, Bs.

Milner of Leeds, L.

Strabolgi, L.

Gardiner, L. (L. Chancellor.)

Peddie, L.

Taylor of Mansfield, L.

Hall, V.

Phillips, Bs. [Teller.]

Walston, L.

Plummer, Bs.

Winterbottom, L.

Clause 60 agreed to.
Clause 61 agreed to.
LORD HUGHES: Although we have not reached nearly as far on with Part V as we might have hoped earlier in the proceedings, I do not think the responsibility for that can be laid on the Committee. Therefore, I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

GREATER LONDON COUNCIL (MONEY) BILL
Brought from the Commons; read 1a, and referred to the Examiners.
DURBAN NAVIGATION COLLIERIES BILL [H.L.]
Returned from the Commons agreed to, with Amendments; the said Amendments considered and agreed to.

SAINT JAMES AND SAINT PAUL, PLUMSTEAD BILL
Returned from the Commons agreed to.
House adjourned at twelve minutes past ten o'clock.