Sitting of 18 July 1969

Preamble
The House met at Eleven o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

ELECTRICITY SUPPLY INDUSTRY (REORGANISATION)
11.4 a.m.
The Minister of Power (Mr. Roy Mason): With permission, Mr. Speaker. I wish to make a statement on the reorganisation of the electricity supply industry in England and Wales.
I have been giving a great deal of attention to this matter in the light of the industry's present and future needs and of developments since the review by the Herbert Committee in 1956. For this purpose I have had extensive consultation with the leaders of the industry, including representatives of the employees, and with various interested organisations.
I have come to the conclusion that the central direction of the industry needs strengthening and that the present degree of autonomy of the C.E.G.B. and area boards is not acceptable in an industry which is vital to the economy, makes heavy calls on national resources and has to take many far-reaching decisions on technical and financial issues of great complexity.
I propose, therefore, to reconstitute the Electricity Council and rename it the Electricity Authority, with new powers to plan and control the policy of the industry as a whole. The Electricity Authority will have the duty to promote the maintenance and development of electricity supply throughout England and Wales, and to secure the efficient use of resources by the industry. To discharge this duty, it will settle, subject to my approval, the capital development programme for the industry as a whole, including the programme of each of the constituent boards, and will be empowered to give instructions to boards on strategic issues relating to the policy of the industry generally. It will be responsible for keeping under review the
1092
performance of the individual boards. It will also keep under review the structure and organisation of the industry, and will advise me if changes are needed. And also, generally, it will carry on the present responsibilities of the Electricity Council, including those for research and for labour relations.
The Authority's power to give instructions on strategic policy to boards needs to be made wide enough to enable it to carry out its statutory functions properly without, however, leading to interference in ordinary management. I propose, therefore, that it should cover classes of issues specified by me under Statutory Instrument subject to the negative Resolution procedure. The most important issue on which I envisage that the Authority should be able to give instructions from the start is on the principles to be followed in framing tariffs and special agreements.
The Central Electricity Generating Board and the area boards will remain statutory bodies appointed by me, responsible for the generation, transmission, distribution and supply of electricity, with a statutory obligation to make ends meet. They will, however, discharge these duties within the framework of a broad policy for the industry as a whole which will be settled by the Electricity Authority.
By this reorganisation, I hope to obtain the advantages of the central direction of major policy which is at present lacking, while at the same time retaining the advantages in terms of managerial responsibility and local initiative which is the feature of the present system of largely autonomous boards.
These changes will require legislation, which I hope to be able to introduce during the next Session.
Sir J. Eden: Any move that helps to end the split between generation and distribution is to be welcomed. While the proposed inter-relationship between the Authority and the area boards may be clear enough, will the Minister say what exactly are to be the sanctions which the Authority will exercise over the C.E.G.B.? How will it end the major weaknesses of the C.E.G.B., such as overmanning, which were identified by the P.I.B. and the Wilson Committee?
The right hon. Gentleman said that the Authority's powers should cover classes

1093
of issue to be specified by him under Statutory Instrument. Other than the structure of tariffs, what has he in mind? Will he amplify that statement? Is there not a danger that the Minister is to perpetuate the wasteful duplication of the industry's capital programme by weakening the responsibility of management?
Finally, will the right hon. Gentleman say what the future holds for the present Chairman, both of the Electricity Council and of the C.E.G.B.; and who is to head the new Authority?
Mr. Mason: As to the C.E.G.B., flowing from the examination of the Reports of the P.I.B. and the Wilson Committee, most of the recommendations have already been dealt with. I have had a long series of discussions with the Chairman of the C.E.G.B. and some recommendations have already been put into effect.
I thought it right and proper on this occasion to use the negative Resolution procedure, because hon. Members who are aware of the structure of the electricity industry will know that it has been changed twice before. In giving the new Authority its new powers, which will he very much stronger and, of course, will include the overseeing of the C.E.G.B. and the twelve area boards, if the powers need to be strengthened instead of my having to introduce a new Bill to Parliament, I thought that I would be able to legislate through the negative Resolution procedure. Parliament will still, therefore, have an opportunity if I want to strengthen or weaken the powers of the Authority, to question it.
I brought in Sir Norman Elliott as Chairman of the Electricity Council for an interim period. Whether or not he will be a member of the future Authority is still in question, but I will be looking for a new Chairman of the Authority, who will be seen to be the chief spokesman of the industry as a whole.
Mr. Palmer: May I put two points to my right hon. Friend? Whilst paying full and warm tribute to him for the wide consultations he has had, particularly with the trade unions, who are grateful to him, may I ask whether he does not think that it would be valuable to opinion generally if a White Paper could be published? Secondly, does he think that, in fact, these proposed
1094
changes go far and deep enough to reorganise the industry to meet the increasingly competitive conditions which it now has to face?
Mr. Mason: On the latter point, because of the negative Resolution procedure which I wish to introduce, I shall have the opportunity quickly to strengthen the powers of the Authority if, in retrospect, we feel that they are not strong enough. As to a White Paper, I would have thought that my statement and the answers to questions that will flow from it may be sufficient to inform the industry as a whole of our plans for it. I will, however, keep an open mind on the question of a White Paper.
Concerning consultations, a lot of people in the industry are aware of what is being generally proposed. I have consulted the Electricity Council, the 12 area board chairmen, the C.E.G.B. and trade union representatives. To allay any anxieties about the future, I thought it desirable to make a statement as quickly as possible.
Mr. Lubbock: While agreeing that there is need for a greater degree of central co-operation on such matters as capital expenditure, for the reasons given by the Minister, may I ask what consideration he gave to replacing the present structure of the C.E.G.B. and the area boards by a number of bodies on the lines of the South of Scotland Electricity Board which would handle generation, distribution and sale?
Secondly, will the Minister include in the Bill the principal matters on which he proposes to give statutory directions, so that a full debate can take place on the Floor of the House at the time of the Bill, leaving only subsidiary matters on which he has not yet made a decision to be covered by Statutory Instruments?
Mr. Mason: On the latter point, I would welcome suggestions from hon. Members. I have mentioned that general principles on tariffs will be one of the first matters to be dealt with by the Authority. They will also include computer policy, purchasing policy and matters of that kind, on which there will be specified issues affecting the industry as a whole, so that the new Authority will be able to lay down—and, indeed, issue—directions to the C.E.G.B and the area boards on those matters.

1095
We considered joint generation and distribution but on the generation side we are now beginning to reap the benefits of the economies of scale. The C.E.G.B. is by far the largest integrated electricity supply network in the world and because of the introduction of the 600 MW generating sets and 2,000 MW stations, I thought it best to leave it alone at this stage. Again, however, the Authority will have the right to be able to look at structure and advise me accordingly.
Dr. John Dunwoody: Does my right hon. Friend think that his proposals will have any effect on the cost of electricity to the consumer? Does he, for example, think that these changes will mean the end of the regional variation in electricity costs?
Mr. Mason: I would have thought that this was a sensible move, at least to stabilise, if not reduce, costs, because the Authority will be able to oversee the whole of the industry and use its large national resources much more effectively and efficiently. When one recognises that the industry has a turnover of £1,200 million a year and spends £600 million a year, there is urgent need for an overseeing authority to control this.
Mr. Ridley: In welcoming the general tenor of the Minister's statement, may I ask whether his desire to achieve central control of electricity generation and supply will be extended to Scotland, where he has small, fragmented supply and generation units in one? Does his statement mean that he will be able to make Orders about the future structure of the industry under the powers which he proposes to take in the Bill?
Mr. Mason: Initially, I had in mind that the negative Resolution procedure would be used to look at the powers of the Authority and whether it was necessary to increase or decrease its powers according to how plans work out. I would hope that the negative Resolution could be used so that if the Authority,
1096
in looking at the structure of the industry, wished to make some sort of change, instead of having to prepare a major Parliamentary Bill, the negative Resolution could be used and, although Parliament would be able to debate it, it would not necessarily mean going through the whole rigmarole of a major Bill.
This was not examined for Scotland where, as the hon. Member knows, electricity supply is different, being based partly on water power and with sparsely populated areas to cover. I would, however, hope that we would be able to increase the consultative procedures between England and Wales and the Scottish boards.
Mr. Emery: The Minister will realise that there are two major omissions. Will he, therefore, say what consideration he has given for the overall manpower situation in the industry? Does he envisage its being reduced? What are the financial implications? Does he foresee a saving or does he envisage extra cost factors within this arrangement? Will the powers which the right hon. Gentleman is taking by Statutory Instrument mean that he could give directions for a single tariff structure for electricity throughout the whole of England and Wales?
Mr. Mason: I cannot at this stage say whether there will be any great effect on manpower. As to financial implications, the hon. Member will know that I have not yet established the financial objectives for the industry, although I hope to do so quite soon. When the Authority is established. I shall then be getting advice from a body overseeing the whole of the industry and, therefore, in that respect, I will be better advised.
Concerning tariffs, I thought it right from the start that the Authority should be able to lay down principles on tariffs and be able, if necessary, to give guidance and instruction to the C.E.G.B. and the area boards about tariffs for high-load factor users, big industrial load users, and so on.

ORDERS OF THE DAY

  FINANCE BILL
  Order for Third Reading read.
  11.18 a.m.
  Sir Cyril Osborne: On a point of order. May I seek your guidance and help, Mr. Speaker, and ask you to be good enough to give a Ruling as to the scope of Third Reading of the Finance Bill? I sought the advice of the Clerk of the House, who referred me to page 825 of Erskine May, which states:
  "Debate and amendment on the second and third reading of bills introduced on ways and means resolutions are governed by the ordinary rules of relevancy."
  I have always understood that Third Reading was confined very closely to what was in the Bill and that nothing outside it could be dealt with. This leads, however, to a sterile debate and it means that Third Reading is taken almost "on the nod" and loses its value.
  This is the most important Bill throughout the whole year, affecting the lives of ordinary citizens. I submit for your consideration, Mr. Speaker, that a wider debate on Third Reading would be more helpful to the House and to the country. It would enable hon. Members to bring in other issues which affect the citizen. If you can help me, I shall be grateful.
  Mr. Speaker: The hon. Member reminds me of the Merchant of Venice, in which the judge was asked to do a great right by doing a little wrong. I am, however, tied by the procedure of the House.
  I am grateful to the hon. Member for his courtesy in letting me know that he proposed to raise this point of order. What he proposes, however, runs counter to the rules of order which have so recently been examined by the Select Committee on Procedure. The evidence given to the Select Committee in its Sixth Report of 1967 showed that the equivalent of about four and a half days per Session could be saved if the Question on Third Reading were to be decided without Amendment or debate. The Committee accepted the force of that submission in recommending that debate on
  1098
  the Third Reading of any Bill—that is to say, not excluding the Finance Bill—should be permitted only if there is a six-month or reasoned Amendment against it signed by at least six hon. Members. The rule of the House, which I must enforce, is that even on those occasions debate must be restricted to what is in the Bill.
  I regard that as sound because at this late stage all opportunities for amendment have been exhausted and the only Question before the House is whether the Bill should be accepted or rejected as it now stands.
  Therefore, I am not able to accept the submission of the hon. Member that I should widen the ruling governing the Third Reading of the Bill. I might remind the hon. Member that in looking up some of my earlier Rulings on this issue, I find that at col. 1829, on 4th July, 1968, he supported the point of view which I am putting to the House.
  Mr. James Dickens: Further to that point of order, Mr. Speaker. You have given a most important Ruling this morning. You have also drawn attention to the Ruling which you gave on 4th July last year when some of us were called to order for discussing the wider aspects of the economic situation, in which the Third Reading of the Finance Bill plays an integral part. When the Bill was debated in this House last year, the Chancellor and the right hon. Member for Enfield, West (Mr. Iain Macleod) both made wide-ranging speeches covering the entire economic situation. I make no complaint about that, but I submit to you, Mr. Speaker, that it is in the interests of back-benchers in all parts of the House that when we catch your eye we should be given the same rights and opportunities as Front Bench Members to debate the economy. So I hope that now you have made this Ruling this morning it will be applied as rigorously to Front Bench speakers on both sides, as you apply it to the rest of us.
  Mr. Speaker: Order. I cannot recall how rigorously or non-rigorously I have applied it to the Front Benches in the past, but I recall to the House that the Chair when it makes a Ruling does treat all hon. Members equally, even if some are "more equal" than others.
  11.22 a.m.
  The Chancellor of the Exchequer (Mr. Roy Jenkins): I beg to move, That the Bill be now read the Third time.
  We have had a series of interesting and mainly constructive debates at the various stages of the Bill, as a result of which the Bill has, I believe, in many ways been strengthened and improved, but its essential structure has survived unchanged. From the Treasury Bench the main burden has certainly fallen to my right hon. Friend the Chief Secretary, ably assisted by my hon. Friend the Financial Secretary and my hon. and learned Friend the Minister of State.
  My strong impression from the debates I have heard and the reports of those at which I could not be present, is that the balance of measures has stood up pretty well to intensive and detailed examination and scrutiny. It has certainly been subjected, as a Finance Bill should be, to detailed examination and scrutiny. Although in revenue terms we have had to be sparing in concessions, we have been able to make a considerable number of Amendments, especially on gaming and loan interest, which have had the effect of mitigating certain proposals which might otherwise have been over-severe, without doing any damage to the principle underlying them. The revised procedure this year has, I think, been generally regarded as an improvement.
  I turn now, as is traditional when a Chancellor speaks on the Third Reading, to the main purpose of the Bill and its relation to our present economic position. This year's Budget, which the Bill en-shines in legislative form, was intended to accelerate our progress towards the substantial balance of payments surplus we need. It may be helpful if I indicate briefly to the House how I see the economic position at present and how this fits in with the object of the Bill. The latest available information suggests that there has been only a modest recovery in consumer spending since the first quarter. Sales of new passenger cars remained at a relatively subdued level, though export production has been very high, and indeed in May it was, for the first time in many years higher than home production. This shows that a vigorous export policy, as well as being of inestimable benefit to the balance of payments, can also help manufacturers to
  1100
  iron out temporary dips in home sales. Thus in May the increase in export production just offset a decline in home market production, making the total the same as in April.
  The policy of restraining consumer expenditure through fiscal and monetary measures is also showing results in the field of instalment credit. Although new credit extended by durable goods shops has fallen very little since the end of 1968, there has been a more substantial fall in the new business of finance houses. I have no doubt that this fall is to a considerable extent due to the provisions on loan interest—Clauses 18 and 19 of the Bill—about which there has been so much debate and controversy during the passage of this Bill. There has also been an encouraging fall in bank advances to individuals other than for house purchase—from £616 million last November, to £562 million in May. Personal savings recovered in the first quarter of 1969 after the fall in the preceding quarter. This is also reassuring—and I hope the recovery will be reinforced when the Save-As-You-Earn scheme comes into operation in the autumn.
  But although we have maintained the squeeze on private consumption, by no means all the burden has fallen on consumers. In the last 18 months public expenditure also has been rigidly controlled within published targets. It continues to run within those targets, and I intend that it should stay there. I know that there are worries about the level of investment, which arose on the Clause relating to corporation tax, and some weeks ago by a number of alarming predictions were made. Since then information has become available that the trend is still strongly upwards, even though less markedly so than at the end of last year.
  So much for the home economy. I can also report reasonable progress on the balance of payments. The visible trade figures for March, announced on Budget day, were disappointing; the figures for April were even more so, though the current very high level of invisibles, together with the under-recording of exports, probably means that even in these two bad months, we were not far from balance on current account; and that is taking account of the separate and adverse item of U.S. military aircraft.

  1101
  But if March and April were bad, May and June were both very good months. An average visible deficit of only £21 million before taking account of the under-recording, if it were to be maintained, would give us a very healthy current account surplus. Exactly how healthy depends of course on how invisible earnings keep up. In the first quarter they averaged £47 million a month. There is no reason to suppose that they will not continue at a very high rate. People who talk glibly of devaluation having failed, pay insufficient regard to the strong and progressive improvement in the invisible account since the end of 1967. This does not mean that we can disregard a deficit on visible trade: we need a surplus there too. But it does mean that in judging our progress we ought to look at the trade account as a whole, invisibles as well as visibles. This gives a much more realistic as well as healthier, picture of our true position than can be got by concentrating on the monthly trade figures.
  Indeed I very much wish that it was possible to publish each month, at the same time as the trade figures, a statement of the invisible account during the same month. If we could do so, it would dispel a lot of gloom. Unfortunately it is not possible. The figures do not become available in time—indeed some of the components become available quarter by quarter rather than month by month. All one can say is that invisibles have responded particularly well to devaluation; that the invisible surplus in the first quarter was particularly high; and that there is no reason to believe that the trend will not continue to be very favourable.
  But we ought not to go to the other extreme and put up with a still fairly sizeable visible deficit on the grounds that it is balanced by an invisible surplus.
  Mr. Robert Sheldon: In view of the importance of what my right hon. Friend has said about invisible earnings, could not an estimate, even if not up to date, be given together with the trade figures so that a more accurate perspective could be given?
  Mr. Jenkins: It really would not be possible to make a meaningful estimate month by month. All that can be done is to keep in mind, as I think informed commentators do increasingly, the aver-
  1102
  age of the preceding quarter. This cannot tell us exactly what is happening in the actual quarter but it is the best guide that we have. I should say that there is the counter item—very much smaller—of the separate U.S. military aircraft transaction. Those are broadly the three components of the current balance—the visible deficit, the invisible balance, generally very favourable, and the U.S. military aircraft item.
  Mr. John Nott: In order to try to cut down the neurosis about the trade figures, may I ask the right hon. Gentleman whether he has given some consideration to a radical change whereby the figures themselves might be published quarterly together with the invisibles? Has this possibility been considered?
  Mr. Jenkins: Yes, I have thought of that. There are considerations both ways. I am not sure that the advantages of moving to a quarterly system are as great as is sometimes thought. I would be doubtful about depriving ourselves, the country and the world of as much up-to-date information as can be given. I am not sure that this would be a wholly desirable move. At any rate, it is one which I and my right hon. Friend the President of the Board of Trade do not propose to make at the present time.
  Because the visible deficit remains important it is encouraging that exports, which earlier gave some signs of being stuck on a ledge, even though a fairly high ledge, seem now to be surging upwards again, particularly to Europe. One cannot rely on an increase every month, but the flow of new orders has been and remains most encouraging.
  This does not mean that we are through our difficulties, or that I shall shortly be able to announce the premature termination of the two years' sustained effort, or that the provisions in this Bill are not necessary. We have to ensure that we have the capacity and energy to deliver the export goods which the competitive edge of devaluation, which has by no means disappeared, has given us. There are still too many reports of firms failing to meet delivery deadlines, of poor workmanship and inadequate after-sales service. We have a lot to learn about aggressive export salesmanship, and too many industries

  1103
  Still think primarily of the home market and regard export sales as a sort of filler-in. Those which do so are remarkably shortsighted. Export markets have expanded and will continue regularly to expand a great deal more than the home market itself. That applies as far as all countries are concerned.
  It is not a question of any relative rate of growth. Export sales add to the profits of a company, and, whether or not they are reckoned as more profitable than home sales, one can normally be pretty sure that total sales and total profits will be considerably increased by a successful export drive. I am, therefore, not at all despondent about our progress towards our balance of payments objectives which this Bill is designed to underpin.
  Sir C. Osborne: Does the right hon. Gentleman maintain his hope of reaching a £300 million surplus during the current year?
  Mr. Jenkins: Yes, I certainly make no variation from what I have said on that—the current financial year. I take it that the hon. Gentleman meant that.
  It is only when we have secured and have shown ourselves capable of maintaining a sizeable balance of payments surplus that we can look forward with confidence to a period of sustained economic growth and prosperity. I have always emphasised that a balance of payments surplus is not an end in itself. We need it for severely practical reasons. We still have debts which are formidable but which are in no way unmanageable. We must not dismiss our indebtedness as though it were of no account. Equally we must not become obsessed by it. Nor should we over-estimate its size.
  Some grotesque estimates have been made. The right hon. Member for Stafford and Stone (Mr. Hugh Fraser)—I let him know that I would refer to this matter this morning—speaking in the debate on the Letter of Intent, made some wild allegations about the figure of official borrowing other than from the I.M.F., given in Table 7 of the Budget Report. I am glad to be able to tell the House that the right hon. Gentleman was talking nonsense. The figure given in the Budget Report disclosed the whole position as it was at the date to which the Report
  1104
  referred. Of course, it is a very big sum, but it is not unmanageable, and since then the position has improved. So far this calendar year, our net repayments of external debt have been on a very substantial scale. They have amounted to very nearly one billion dollars—1,000 million dollars. There is still a long way to go, but this figure shows that there is no question of the problem being insurmountable.
  The Government intend to continue with the present economic policy. This Bill is consistent with and essential to that policy. It lays certain further burdens on taxpayers, but does so in a way which I believe is fair and equitable. It helps those most in need. In several fields it makes a modest but worth while contribution to the reform of our tax system. It removes certain anomalies. It has stood up to the intense scrutiny of the House, and I now ask that it should be given a Third Reading.
  11.36 a.m.
  Mr. Terence L. Higgins: If I may take up the final point made by the Chancellor of the Exchequer, that the Bill has stood up to the scrutiny of the House, I feel bound to say that I totally disagree with him. The fact is that the Bill which we are now considering is very different from the Bill which was introduced on Second Reading. I think it is abundantly clear that the Bill has not stood up to the scrutiny of the House. It has, in fact, been radically altered in many respects.
  When my right hon. Friend the Leader of the Opposition spoke in the Budget debate he described it as
  "a dead-end Budget by a fag-end Government."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781. c. 1045.]
  I do not think that at that time we had fully appreciated just how badly thought out was the Finance Bill which was to embody the Chancellor's Budget. If we look at the way in which it was ill prepared, we find that both in concept and in drafting it was quite clearly prepared by a Government who were completely exhausted both in ideas and so far as the implementation of those ideas was concerned. Therefore, when we look at the Bill on Third Reading, considering what is in the Bill, I do not have the slightest doubt that it is now a great deal better than it was at the time, but that

  1105
  it really ought never to have been as bad as it was in the first place. In almost every respect the provisions of the Bill have had to be altered. It is probably true that there have been few Finance Bills, if any, which have been more amended in Committee and on Report than has this present Bill.
  There is a point here which ought to be made. A number of people on both sides of the House, and indeed outside the House, have said that there is a strong case for having a Select Committee, perhaps, or some other forum, where the proposed changes in taxation can be examined before they come to the House. I am not surprised that there is an increasing move in this direction, and I feel that it is an innovation which might well be considered with very great seriousness indeed. The matter of the actual rates and so on must be for the Chancellor himself, but it is glaringly apparent, particularly on the disallowance on interest Clauses, that there are a number of things which any Government ought to be able to see should never have been included in the Bill.
  In my view, we have been somewhat fortunate in the way in which the debates have taken place. I still have some yearning for the traditional system under which the Bill is taken in Committee and on Report on the Floor of the House, but certainly the procedure that we adopted this year of having part of the Committee stage on the Floor of the House and part in Committee upstairs was a vast improvement on the situation last year. Remembering the detailed discussions on disallowance, and particularly the sitting which extended from 10.30 one morning till 5 o'clock the next morning, I think it is true that we made a very great deal of progress in discussing extremely detailed points.
  The trouble has been that the Government have given way on so many points that the pressure on the Chair, if I may say so, and its advisers as well as on the Opposition has been very great because of the considerable delay in the Government's putting down their own Amendments on Report consequent upon the proceedings in Committee.
  I come now to the so-called concessions. The Chancellor says that measures have been taken which have altered proposals which were over-severe without damaging principles. In fact, the spec-
  1106
  tacle has been remarkable to behold. I entirely endorse what the Chancellor says about the tremendous amount of work which the Chief Secretary has done on the Bill, but the fact remains that the right hon. Gentleman has been in an extraordinary position. One could almost say, "You cannot flap Jack", but the Chief Secretary has never been at a loss for a new principle to replace the principle which he previously advocated, and he has never had the slightest hesitation in throwing the first batch into the wastepaper basket. Particularly on the question of disallowance of interest, once they had rightly excluded loans for business purposes and for house purchase, the Government could not find a stopping place at which they could settle on any principle enabling them to take a firm stand.
  Under pressure from the Opposition, there have been several improvements in this part of the Bill. I enumerate them briefly: the question of loans for estate duty, which ought never to have been in the Clause; the question of loans for buying partnerships and machinery for partnerships; the question of existing loans already made on the basis of the previous legislation; the question of property companies; and then the defeat of the Government Amendment in Committee which was designed to tighten up some of the provisions of the Clause, on some of the absurdities of which, at least, the Government gave way.
  The trouble is that these changes are heralded in the Press at a later stage as concessions, whereas, in fact, they were changes made to correct absurdities which ought not to have been there in the first place and on which the Government gave way as a result of pressure from the Opposition.
  On these matters, it is our view that the Government's proposals are totally wrong in principle and ought never to have been introduced in the first place. If I may make a point on detail, I am concerned still about the question of interest paid on loans advanced for house purchase by insurance companies and the question whether payments are made gross or net. This means that people will have to find extra money until they receive the tax relief. I urge the Government to speed up the procedure for revising P.A.Y.E. assessments in order to remove that by-product of their legislation.

  1107
  The complexities which ordinary accountants will have to deal with as a result of this part of the Bill, on top of all the other changes in corporation tax, capital gains tax, close companies and the rest, are quite terrifying. We started with two Clauses and a Schedule. Then we had six new Clauses tabled and vast Amendments made to the two original Clauses and the Schedule. Plainly, the Government came before the House with a fundamental change in the law without having thought the situation through.
  The Chancellor said in his Budget speech that the intention was to help to cut bank advances. It is abundantly clear now that the tight credit policy which was originally adopted is becoming increasingly less necessary as a result of his adoption now of a tight money policy, that is to say, the Chancellor is restricting the credit base rather than trying to restrict advances. Thus, in the situation as it now exists, the need for that proposal, if that was the rationale behind it, has almost vanished, and it will become even less necessary in the future.
  I hope, therefore, that the Government will have second thoughts about the entire matter, and, apart from the question of tax avoidance and gilt-edged which we fully appreciate, will entirely alter their approach. It is just loading the Statute Book with pages and pages of almost unintelligible gibberish to achieve a result which is no longer necessary and which is wrong in principle.
  Now, the other so-called concessions. I take, first, the amusement tax. We were perfectly right in Committee to describe this as an annihilation tax. That is what it was. At the rates fixed, it was clear that those concerned would go out of business and not only would the Government fail to collect their revenue under that measure but they would not collect on selective employment tax, purchase tax or corporation tax which would otherwise be paid by such people.
  I pay tribute here to the Financial Secretary for the great trouble he took to look into the accounts and to introduce new proposals. For many operators who diverge slightly from the average, how-
  1108
  ever, it will still be not so much an annihilation tax but a slow death tax. At the same time, there has been a change here, but, once again, the proposal should never have been in the Bill in the first place at the level of tax which the Chancellor proposed. If he had done the least homework beforehand, he would have realised that.
  There have been other changes, for example, in the so-called "Beatles" Clause. There are some improvements there, but it is still far from perfect. In our debate yesterday, my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) emphasised the importance of the changes which the Government were proposing with regard to estate duty. In all those areas there have been improvements either because of the wrong drafting of the Bill in the first place or because the Government have at least seen sense on points which we have pressed upon them for a long time.
  I come now to a major question on provisions of the Bill which have not been adequately changed, in particular, the question of selective employment tax. The selective employment tax is causing greater and greater concern not only outside the House but among right hon. and hon. Members. It is significant that on the relevant Budget Resolution the Government's majority slumped to no more than 28, and then, after a change of Chief Whip to improve the situation, it improved to only 29. That reflects the agitation which is felt throughout the House on this matter.
  I shall not weary the House with further argument on the reasons why we consider that the selective employment tax ought to be abolished. I mention only two. The Chancellor completely gave way on the argument which he put in his budget speech about the effect of the selective employment tax on the cost of living, and he admitted that it largely resulted from the way in which the cost of living index is compiled, falling as it does on the lower income groups and concentrating upon them. He revised his estimate of only one-third being passed on to something more than half. I guess that that figure grossly underestimates the true extent to which the cost of living is affected by the S.E.T. increase which

  1109
  is still contained in the Bill and which continues to give grave concern.
  Not least important is that the S.E.T. remains a tax which cannot be remitted on exports. The Chancellor made great play this morning of the importance of invisible exports, yet he is still imposing a heavy tax on many of those responsible for invisible exports, not only export houses, for example, which we sought to exclude from the tax in Committee, but also the hotel and tourist trade. If it is true that our balance of payments now is being greatly helped by invisible exports, and if it is true that those exports are going up, the Chancellor can take no credit for it. In fact, he is doing a number of things, in particular, in the selective employment tax increase, which are deterring the growth of invisible exports rather than encouraging them. He ought to be condemned for it. I repeat that we propose to abolish this tax with all its absurd anomalies.
  Now, just a postscript on selective employment tax before I come to my peroration. In our debates on the tax over the years, the Government have gone to great lengths in drawing the Money Resolution as tightly as possible on each occasion in order to prevent the House debating the matter in detail. This is a deplorable procedure. We should have thought that this was a matter which should be discussed as freely as possible.
  None the less, over the years, the Opposition have managed to get Amendments into order, so that these points can be debated. We started years ago by reducing the tax to ½d., rather than abolishing it, and a number of these devices have been necessary to get Amendments into order. This has become something of a game between the Opposition and the Government draftsmen. But people outside do not realise the extent to which discussion has been deliberately inhibited by the Government on these subjects.
  This is reflected in the extraordinary fact that, recently, I have had a number of letters asking what my position is on selective employment tax. After four years debating it in the House, and I do not know how many speeches outside, it is a little hard to get letters asking what my position is on this tax. To some
  1110
  extent, this reflects the working of the Money Resolution. But what we were disturbed about—
  Mr. Dickens: In replying to this entirely proper questions from his constituents, I hope that the hon. Gentleman will explain to them how he and his party will produce £600 million of revenue either from taxes on services or in some other ways.
  Mr. Speaker: Order. The hon. Gentleman will not be able to do that this morning.
  Mr. Higgins: As the hon. Member for Lewisham, West (Mr. Dickens) has made that intervention about nine times and is invariably told that I cannot reply, he might consider making it when we can reply, which would be an advantage.
  Among the letters to which I referred, there have been great representations about the unfair competition which many retailers concerned with electrical or gas appliances have suffered because the nationalised industries at retail level have been exempt from selective employment tax. My hon. Friend the Member for Wanstead and Woodford was right to refer last night to the Chancellor's announcement that S.E.T. would be imposed on the nationalised industries as a sly manoeuvre. For years now, we have, inside and outside the House—my hon. Friend the Member for Bournemouth, West (Sir J. Eden) only a few days ago—emphasised the unfairness of this.
  Why did the Chancellor not make the change in his original Budget speech—he must have been aware of this anomaly long since—or in earlier Budgets, instead of not even mentioning it throughout these debates? Then a Question is miraculously put down—perhaps that puts it a little high and I should say no more than "conveniently put down"—for Written Answer yesterday and the Chancellor mentions this matter, which is of great concern to retailers, on another Amendment, irrelevantly concerned with milk rounds-men. That is a deplorable device. We should have been able to discuss this in our debates.
  It is not enough to say that our Amendment on this subject, to relieve other retailers rather than impose the tax on the nationalised industries, which was a better way of doing it—
  Mr. Speaker: The Amendment to which the hon. Gentleman refers is not in the Bill, because it was defeated.
  Mr. Higgins: No, Mr. Speaker, it was not defeated, it was not even called. This is a matter of dispute between the Chancellor and myself. I thought that it was in order and he thought otherwise. But he could have found an opportunity of debating this extremely important matter instead of resorting to that device.
  This tax should be abolished. We do not think that, because Professor Reddaway's terms of reference are so circumscribed, there is any need to await a report on this subject before doing so.
  The Chancellor touched on the economic situation. In our present situation, the balance of payments is gradually improving. We are all glad to see that, and hope that it will continue. The right hon. Gentleman says that people are wrong to say that devaluation has failed. That is the wrong way to put it, because it suggests that devaluation was a deliberate act of policy, which it clearly was not. But whether it has failed or not, it is no fault of the Government, because by their own measures they have done everything possible to frustrate devaluation.
  It is interesting to see in The Times Business News today the headline:
  "I.M.F. agrees to count 'lost' exports for £300 million target"
  Not only do we abandon the £500 million target, but we then take this nice device of changing from the calendar year to the financial year. We will now include this amount of miscalculation in deciding whether the £300 million is achieved or not.
  But these statistics reflect only part of the reality. The important question is whether we needed an improvement of £300 million in the existing situation. It is not valid to say that we will knock it off from both sides of the equation, because clearly the £300 million was the amount of improvement needed in the situation and not the amount needed, given what the statistics happened to say, and happened to say wrongly. Anyway, the figure is far below what the Chancellor advocated earlier. We hope that this will all prove all right, and that we shall get a significant improvement.
  1112
  This Bill is yet a further massive increase in taxation—£954 million in last year's Budget, an autumn Measure which was bigger than any Conservative Budget, and now £315 million or so in this Budget, plus the further massive increases in National Insurance charges, which we now know to be much greater than was thought at the time of the Budget speech. All of these reflect a failure of policy which we can only deplore.
  We believe that the Bill is better than it was, but it should certainly never have been as bad as it was in the first place. Therefore, while recognising that the Government must necessarily have a Finance Bill, we feel that this one it totally inadequate, that it reflects a poverty of policy and an inadequacy of implementation. Therefore, we cannot regard it as a Measure about which we can be enthusiastic, so far as the country and its economy are concerned.
  Several Hon. Members rose—
  Mr. Speaker: Order. The House may perceive that there is a goodly number of would-be orators. Reasonably brief speeches will help.
  11.58 a.m.
  Mr. James Dickens: The Finance Bill forms an integral part of the Government's economic strategy. In his speech this morning, the Chancellor dealt with the economy, and before I come to the details of the Bill I too should like to follow him in this respect. I find in debating these matters that my right hon. Friends all have certain characteristics in common. They are able, they are amiable, they are well-meaning, and they are also utterly wrong.
  My right hon. Friend drew attention to certain apparent improvements in the country's economic position. He has discussed the target of £300 million surplus on current and long-term capital account in the current financial year. If one takes into the reckoning the under-recording of exports, and which, apparently, the I.M.F. will accept as part of the target for 1969–70, this may now be attained, but I draw the attention of the House to the cost of all this, which is prodigious.
  This Bill is the sixth successive deflationary Measure which this Government have introduced since devaluation

  1113
  in 1967, and the total effect of these deflationary steps, either in cutting the level of public expenditure, in tightening credit restrictions, or in raising higher taxation—this Budget is designed to increase revenue by £340 million in a full year—has been to take out of the domestic economy, in one form or another, £2,500 million over the past 18 months.
  Moreover, the effect of this on the rate of economic expansion has been such that, in the current financial year, we shall be roughly £1,000 million down, taking the gross domestic product at 1958 factor cost, than if we went for a higher and more sustained rate of economic growth, of 6 per cent. per annum, which the country could attain if we are prepared to take steps to protect the balance of payments. The effect of this, taking this year and next year combined, is roughly £3,000 million.
  If we go further back and look at the position since 1966, since the deflationary measures of 20th July of that year, and compare the rate of economic growth attained between 1966 and 1969, add to that the estimated rate of economic growth this year and next and compare this figure with the National Plan forecast for 1966–68, plus the T.U.C.'s economic review forecast for 1969 and 1970 together, we find that over the five years in question the country will lose something like £6,500 million in lost national output as a consequence of all the deflationary steps taken over the past three years or so.
  This Bill is the culmination of all that. The effect for the British economy has been that in the 1970s we shall have not only all the problems of funding the short-term debt which we have incurred in recent years, but the problems thrown up by the policy of low economic growth. The effect of this on long-term investment on imports and on the level of unemployment will, I think, be extremely serious.
  Having said this about the general economic background to the Finance Bill, I should like to make one or two comments about some of the principles embodied in its Clauses. There is, I think, a clear and growing tendency on the part of the Government to regard increases in indirect taxation as being more politically acceptable than increases in direct taxation in one form or an-
  1114
  other. I think this is undesirable. I am not saying that all indirect taxation is wrong. What I am saying is that when we are faced with a situation in which people on average weekly earnings are paying roughly 20 per cent of their total household income in indirect taxation and, according to a recent article in the Treasury's Economic Trends, people earning £3,104 and above pay 17 per cent. of their total household income in indirect taxation, we have to have a regard to social equality.
  I do not believe that there is any further justification for the sort of increases in indirect taxation contained, for example, in purchase tax and, in some respects, in selective employment tax in the Bill.
  Mr. John Biffen: When the hon. Member refers to household income, is that income net of direct taxation and national insurance contributions?
  Mr. Dickens: I am quoting from Table E in the article in Economic Trends for February last, which produces figures of the effect of indirect taxation on household incomes as a percentage of income after direct taxation and welfare benefits. This shows the position that in 1967—and the position has worsened since then, relatively speaking—people on average weekly earnings were spending roughly 20 per cent. of income in indirect taxation whereas those on £3,104 and above were spending 17 per cent. of their income in indirect taxation.
  It is clear that a wide range of items on which purchase tax is payable bear very heavily on the lower-paid in our community. I hope we should aim at the abolition of purchase tax on all essential household goods, for example, in the lower and medium ranges.
  If one argues that case, and if it is argued, as, for example, hon. Members opposite are likely to argue during this debate, that we should review the incidence of S.E.T., one is bound to postulate what the alternatives are for the Government in broadening the tax base. My right hon. Friend the Chancellor has taken steps, both in the present Bill and in last year's Bill, to seek to do this. In 1968 we had the special contribution, which was a step in the right direction. I submit, however, that we should be

  1115
  looking increasingly at taxation on capital as to one source of income.
  Mr. Speaker: Order. We cannot amend the Bill at this stage. The hon. Member may denounce what is in it. He must not suggest that other things should be in it.
  Mr. Dickens: I leave it at that, Mr. Speaker. I simply make the point in passing that in the Finance Bill which the House considered in 1939, 30 years ago, taxation on capital raised roughly 8 per cent. of all the revenue derived through that Bill which Sir John Simon presented to the House. Today, the proportion is 4 per cent. There is obviously considerable room for improvement here.
  I turn next to what I regard as the Chancellor's correct step in raising the exemption level for estate duty to £10,000. I hope that in the course of future Finance Bills, we will be able to raise this level still further. I very much believe that one of the great defects of our tax system and our tax structure generally is that we spend far too much time trying to collect comparatively small amounts of money from far too many people. This applies not only to the level of estate duty, but also to the level of income tax.
  I am glad that in this year's Budget my right hon. Friend was able to raise the lower levels in both those respects. I look forward to further developments in this direction. I hope, too, that we shall be able to increase the incidence of estate duty at the higher levels to take account of the massive capital accumulation in recent years.
  I think that the effect of this year's Finance Bill will be to the country's long-term detriment. I have no doubt that my right hon. Friend will find, in the course of the current financial year, that he will obtain a balance of payments surplus of between £200 million and £300 million. If he is seeking to do that, he must bear in mind the long-term consequences of this. Those consequences are as I have described them. I was powerfully reinforced by the arguments of my right hon. Friend the Financial Secretary in recent speeches which he has made outside the House, where he has argued for the funding of the country's short-term debt and not for its re-
  1116
  payment, in part at least, from Budget surpluses.
  Having made those few comments, I fear I cannot give the Bill a welcome. I have criticised it in accordance with the Rules of Order. I hope that in the course of the next 12 months the Government will change to an economic policy which will put economic growth, full employment and a higher level of investment before a bookkeeping surplus in the balance of payments.
  12.9 p.m.
  Sir Cyril Osborne: You said a few moments ago, Mr. Speaker, that the hon. Member for Lewisham, West (Mr. Dickens) could denounce what was in the Bill.
  Mr. Speaker: That is a statement of a very obvious truth on Third Reading.
  Sir C. Osborne: To cover myself, that was what I proposed to do.
  Your other instruction to us, Mr. Speaker, was that we should have short speeches. I thought that this debate could run until 4 o'clock, and since this is—
  Mr. Biffen: Some of us have to catch trains.
  Mr. Speaker: Order. The hon. Member for Louth (Sir C. Osborne) is not getting many murmurs of approval from those around him who also want to speak. It is true that the hon. Member himself could speak until 4 o'clock. All I was pointing out was that other hon. Members wanted to speak.
  Sir C. Osborne: In justification of what I would like to do, I regard this as the most important Bill of the year. It touches the ordinary people in their pockets at home, in every family, more than any other Bill. Therefore, discussion within reason should not be curtailed.
  My complaint is this. First, I would like to vote against the Bill. My constituents do not understand a good deal of the hifalutin argument that goes on in this Chamber, but they certainly understand the taxes they have to pay. They regard this Finance Bill as imposing upon them the greatest burden of taxation which they have ever had to bear in war or in peace. On their behalf I protest against these enormous taxes which are

  1117
  being imposed by the Government on the ordinary people whom I have the honour to represent. [Interruption.] My people would not take very kindly to that sneer.
  The total burden being imposed by this Bill amounted to £14,464 million, last year under the finance legislation it came to £12,888 million. So that there is an increase in this Finance Bill as compared with last year of £1,576 million. These are colossal figures, and when looked at in terms of the tiny items which people have to buy in grocery shops, drapery shops, and so on, it hurts the people who have to pay.
  If I may give the House a few figures, the last Tory finance budget in the year 1963–64 totalled £6,649 million—far less than half the figure now being imposed by the Government. In the 1964 Budget the figure amounted to £7,070 million. It is costing the taxpayer of this country twice as much in taxes to live under a Labour Government as it did under the Tory Government. My constituents would like to see the good old Tory days back again when taxes were not so high. I am entitled to make this protest on their behalf.
  The heaviest Finance Bill even during the war in 1944–45 was only £3,135 million. The nation fought a war against Hitler and also met its civilian requirements on a sum only a quarter of the figure the Government are now extracting from the pockets of ordinary people. Today we have nothing more to fight, our three fighting services have been reduced to skeletons. But this Government are taxing the ordinary people by these colossal sums and people feel that money is being wasted and they are not getting value for what is being taken away from them.
  What makes it worse for the ordinary people is that they read in the Press all the time that even these large sums are not enough and that we have to keep on borrowing from abroad. They cannot understand it. Why is it all these colossal sums which are taken from the pockets of ordinary people do not meet our needs? What are the Government doing with the money?
  To break down these sums so that ordinary people can understand them £14,464 million, which the Bill imposes
  1118
  on them, represents about £40 million every day—Saturday, Sundays, Bank Holidays, Good Friday and Christmas Day. It is a colossal burden. Instead of arguing all the niceties of taxation, we are saying that this tax should be reduced. We want it down very considerably. The people I represent hate paying taxes, they hate this Government for imposing so many heavy taxes upon them, and they will be glad to get rid of this Government on that ground alone.
  It is said from time to time from the Government Benches, "But these taxes are not that great. Other nations are taxed more heavily than we are." The people in my constituency do not believe this. Even if it were true, it is no comfort to them when they have to pay their taxes to be told that other people are taxed more heavily than we are. They argue that these taxes, which they abhor, should be reduced. I deeply regret that we are not able today to vote against the Bill. I regret that this stage is now taken as a formality.
  I should like to give one or two examples affecting ordinary people. Let us take the duty on spirits, beer and tobacco. Although no increase is contained in this Bill, it consolidates the 10 per cent. increase which was imposed last November so that it is relevant that we should discuss it now. Under the last Tory Finance Act the tobacco duty was £3 17s.1½d.; last year it went up to £4 11s. 8½d.; and this year by this Bill it is up to £5 0s. 10d. That means that every time the ordinary man or woman buys a packet of cigarettes today he or she is paying 4s. 9d., as against 4s. 4d. last year, and 3s. 8½d. under the Tories. It was bad enough then, but 4s. 9d. is a monstrous amount of tax.
  Every time a man or woman smokes a cigarette he or she is paying nearly 3d. in tax. It is a wonder they do not "chuck its". Again I protest on their behalf. After all this is what the House of Commons is for, to protest on behalf of our constituents, especially when we have such an incompetent Government. The total tobacco tax under this Bill amounts to £1,125 million—a colossal sum. Last year it was £1,105 million, and in 1964 under the Conservatives £982 million. It is an enormous increase over that period of time.

  1119
  Let us take the whisky drinkers as a further example. They have no idea how much they are having to pay. [An HON. MEMBER: "The hon. Member can say that again!"] The duty on a bottle of whisky today is 44s.; last year it was 40s.; under the Conservatives it was 30s. I am not an expert in these matters, but I am told that there are 16 "doubles" to a bottle of whisky. This means that every "double" costs nearly 3s. in duty. It is almost like drinking gold. It is quite extraordinary. If the ordinary people realise this they would revolt as I am sure they will at the next General Election. It will not be because of international considerations, but because of these things that touch their pockets. This is what will cause them to turn this Government out.
  A great deal more wine is now being drunk in this country. The duty on light wine under the Conservative Government was 2s. 6½d. per bottle; last year it was 4s. 3d; now under this Bill it will be 5s. 4½d. On heavy wine the duty in 1964 was 5s. 1d.; in 1968 8s. 3½d; and today it is 9s. 0½d.
  I come lastly to the working man's beer—the one thing he claims as his luxury. In 1964 the duty under the Tories was 8·4 pence a pint; last year 10·3 pence and this year it will be 11·3 pence under the Bill. The working man is paying nearly a shilling duty to a Socialist Government every time he has a pint of beer. By heaven, they will vote against the Socialists on that! I am telling you that!
  That is the side of the Finance Bill that the ordinary man in the street will understand. He may not have been able to understand the high falutin arguments we have had so far, but he understands this, because it affects his pocket. The total tax on spirits, wines and beer under the Bill is £844 million. That is a tidy increase on last year, when it was £778 million. In 1964, under the Conservatives, it was £576 million. Now people are saying "How much higher is it going?"
  My last example is petrol. The motor car is no longer the rich man's luxury. Anyone who employs a large number of people in a factory knows that the first thing he must do is to provide a car park for the workers to bring their cars. They
  1120
  come either singly, or club together to get to work. In 1964 the petrol duty was 2s. 9d. per gallon. Last year it was 4s. 4d. Under the Bill it is 4s. 6d. The total duty in respect of hydrocarbon oils and petrol in 1964 was £674 million. Last year, it was £1,123 million. This year, under the Bill, it is £1,309 million. These are colossal figures for the ordinary people to have to find. They hate paying these sums, and they would like to be rid of the Government who impose them upon them.
  The other thing that affects the ordinary people is purchase tax. The range of purchase tax five years ago was from 10 per cent to 25 per cent. It has now been increased to 13¾ per cent. to 55 per cent. Under this heading I remind the House that the Chancellor tried to slip through unnoticed in his Budget Speech the new tax on textiles, soft furnishings, tissues, sewing threads and knitting wools. Only next day was it discovered that that tax would be imposed. That tax affects the poorest of our housewives. It is a disgrace that such a tax should be imposed upon poor people and that this House should make no protest about it and cannot vote against it. I am utterly against it.
  Mr. Nott: We did vote against it.
  Sir C. Osborne: Not today. It is today that I want to vote against it.
  Mr. Nott: Why should you not do so?
  Sir C. Osborne: Because we have not the leadership on our Front Bench. That is the reason. If three or four back benchers on this side vote against it it will look ridiculous—half a dozen votes against such an important Bill. I protest against this enormous taxation.
  Finally, as a businessman I must say how much I oppose corporation tax, income tax and surtax. Taken together, in an extreme case where profits are all distributed, 84 per cent. would go in those three taxes. I go to Communist Russia quite a lot. There, the highest earnings attract income tax and surtax at the rate of 13 per cent.—and the Russians pay very high salaries to their top people. We impose a tax of 84 per cent. on our people. The 16 per cent. that is left for the businessman is not enough to encourage him to take risks

  1121
  and do his best. This tax will help to destroy incentive and hinder the working of the economy.
  Mr. Dickens: Is the hon. Gentleman arguing that our businessmen should migrate to the Soviet Union in order to take advantage of lower taxation?
  Sir C. Osborne: There are one or two other considerations to bear in mind—but at least we should get away from a Socialist Government to a Government who believe in rewarding those who work hard. If I could take my liberties there as well—but that is a big "if". The Financial Secretary is a first-class businessman and he knows that this combined direct taxation is a great hindrance to an improvement in our economic position.
  Like many other hon. Members, I receive an enormous number of letters from my constituents complaining about the effect of S.E.T. The little shopkeeper and businessman say, quite rightly, that between S.E.T., the high Bank Rate and the difficulty of obtaining bank overdrafts, they are being squeezed to death. Many of these small businessmen are being driven to the verge of bankruptcy. They complain quite justifiably that this Bill taxes them unreasonably. They ask for these taxes to be reduced. I am voicing their views. I wish that I could carry my vote with my voice.
  12.26 p.m.
  Mr. Robert Sheldon: Unlike the hon. Member for Louth (Sir C. Osborne) I do not believe that the importance of the Bill is due to its effect on the drink trade. I consider its importance to be due to the fact that it represents a fundamental change in our economic thinking, and gives voice to that new thinking. To me the importance of the Bill is the acceptance of a new principle—the principle of money supply. We see this in a number of Clauses. My right hon. Friend the Chief Secretary, both in Committee and on Report, introduced many principles. I do not wish to denigrate them; indeed, they had a great deal of sense, and they helped the understanding of many of the Clauses. But the principle of domestic credit expansion underlines the Clause on loan interest in particular as well as other aspects of the Bill.
  One passage in the speech of my right hon. Friend the Chief Secretary on 15th
  1122
  July shows this clearly. Speaking about the reason for introducing Clause 18 he said that:
  "the main argument put forward when the Chancellor announced these proposals is the demand effect, which was expected to be considerable. That was the major argument in the proposals, and we see no reason to change our views about that aspect."—[OFFICIAL REPORT, 15th July, 1969; Vol. 787, c. 481.]
  We see this throughout the Bill. The question was how the Bill would reduce the amount of money available and would affect domestic credit expansion—how the principles enunciated in the May issue of Economic Trends could be brought into effect. I do not expect a change of this magnitude to be made, on so insufficient a basis, for such an important economic change-over. We know that domestic credit expansion omits anything to do with building societies, the vast debt of hire purchase and the vast increase in importance in finance houses. Under Clause 18 and other provisions the rôle of the finance houses will greatly increase, but all of this is outside the concept of D.C.E.
  We see ourselves committed to a theory which we are not sure will work. Although the right hon. Member for Leeds, North-East (Sir K. Joseph) showed his approval of our ready acceptance of new economic theories and pointed out, by contrast, how slow we are to understand the importance of some of them, I suggest that that is not the real problem we face. The problem we have is our too ready acceptance of the latest economic theories and our failure to appreciate when, and the limits within which, they can he of use.
  The Treasury should, of course, always take an interest in economic theory, but acceptance of any new theory should come after close examination of certain aspects of it and only then should it commit itself. We have seen an extension beyond this. We have seen that the Government are prepared to accept a precise evaluation in advance not only of a full understanding of the theory but also in advance of the theory being worked out as it applies to this country.
  I am grateful that the Bill has sent us back to our textbooks to find out what these theories are all about. The Bill is based fundamentally on the D.C.E. theory, and our acceptance of that theory

  1123
  results from two major articles which appeared in I.M.F. staff papers. Polak in November, 1957, and Polak and Boisonneault in April, 1960, tried to show how the theory of credit expansion would work. They made some assumptions and tested them out in Latin America. They found that the theory worked quite well there; and that is fundamentally why we are committed to D.C.E.
  They found that in certain Latin American countries there was a degree of constant velocity of money, and a similar assumption was made for Britain. This has been utterly misleading and if one studies Economic Trends one finds that the velocity of money has moved by between 2·5 per cent. and 3 per cent. I will not go into this matter technically, except to say that this movement can have an effect of hundreds of millions, if not thousands of millions of £s. What was acceptable for certain Latin American under-developed, very limited, small-scale economies cannot be transplanted on to one of the most highly sophisticated financial centres of the world. But this is exactly what has happened.
  The absence of debate before acceptance of these proposals is to be deplored. Although I accept that there is some justification for D.C.E. in that taxation is not sufficient to reduce inflation, and that one must have some control over money supply, this attempt by the Government to quantify it and commit us excessively and with precision to the theory should not have been accepted so far in advance of the theory being widely tested and examined.
  If one reads the articles by Polak one sees the crucial points which have become attractive to the I.M.F. and to certain elements in the British Treasury. I refer to "certain elements" because I do not think that the Treasury is fully convinced of the arguments. This is shown by an article in Economic Trends in which it is said, in a footnote concerning D.C.E.:
  "It should be noted, however, that given the size of money G.N.P., a change of 0.1 per cent."—
  it has varied and the change has been as high as 0·5 per cent.
  "in the G.N.P. money supply multiple is at present arithmetically equivalent to a change of some £500 million in the money supply."
  1124
  That is the theory to which we are committed, and are also committed to the I.M.F. The way in which this has formed a basis of the Bill has not been sufficiently examined, either in the House or elsewhere.
  The Government and the I.M.F. have found the D.C.E. theory particularly interesting as it has applied to Latin America, which is the I.M.F. test bed where these theories are worked out because the Latin American countries are not only close to Washington but have a wide range of peculiar economies which can be examined in the way that a botanist likes to examine lush byways where all sorts of things are growing. They found in certain countries that there is a ratio between money supply and—
  Mr. Speaker: Order. I hope that the hon. Gentleman will not pursue this Latin American argument too far.
  Mr. Sheldon: I appreciate your ruling, Mr. Speaker, and I was merely attempting to point out the reasoning behind the Bill.
  The ratio of money supply to imports is the crucial factor which they claim to have discovered. Naturally this is attractive to Her Majesty's Government, for if one can find a way of cutting down imports—which many people consider to be one of our most important tasks—that will mean that Eldorado is not too far away. It is more important than import quotas, but it is not as realistic. I will not develop the import quota argument, partly because I have adduced it on many occasions.
  This was one of the most important reasons why the Government were attracted to the money supply and D.C.E. theories. Thus, under Clause 18 and elsewhere in the Bill they have tried desperately to cut down the volume of money available, simply because they were attracted to this theory.
  Mr. Michael Alison: I suggest that the hon. Gentleman is not drawing a sufficiently clear distinction between D.C.E. and money supply. Is he aware of the point the Chancellor made; that if exports are increased one gets an increase in money supply? That is what the Government are trying to do.
  Mr. Sheldon: I accept that D.C.E. is, in certain respects, more sophisticated than money supply, but the hon. Gentleman should appreciate that D.C.E. alone is a bit of a nonsense because it omits the factors of building societies, hire purchase and finance houses. The finance houses in particular comprise the sector where the great growth is coming; and to have omitted these elements—there are many others and I have mentioned only the most obvious—is to omit what is extremely important.
  The result is that we have an imperfect theory imperfectly applied. In other words, we are compounding an error. Moreover, we are compounding an error which we cannot understand because it has not been worked out from the point of view of its application to this country.
  There are two questions I wish to put to my right hon. Friend. First, what is the relationship between D.C.E. and the growth of the economy? Second, what is the rôle of D.C.E. in our economic policy? We must know how far we are committed to the new system and at which stage we pull out if the predictions are not fulfilled. At what stage do we pull out or reduce our dependence on the theory?
  The Treasury have regarded themselves as being very modern in their outlook—and justifiably so, for there are some outstanding economists in the Treasury. But we should not give them ready approval for the way in which they have suddenly gone overboard for the latest theory without a full understanding of it. It needs further examination.
  May I turn to a question which has arisen throughout the discussions on the Finance Bill—the difference between capital and income. We have faced this problem before and we shall face it increasingly every year, for it becomes more difficult as the ingenuity of various people is set to work to transmute income into capital. We see in the Bill, particularly in Clause 25, the latest episode in the continuing saga, and obviously it is not the last episode.
  The trouble is that even with capital gains tax we are in a situation in which taxes on capital are utterly different from taxes on income. I recall the brave words spoken on the 1965 Finance Bill when the then Chancellor of the Ex-
  1126
  chequer, the present Home Secretary, stated that what was important was to tax increases in wealth. He earned my whole-hearted approval, and I am sure that of many other hon. Members, for that statement, because this is the point to which taxation should be related—increases in wealth. The capital gains tax then introduced was a means of bridging the gap between profits made on capital and income. To me, as well as to almost everybody else, the two represent increases in wealth; whether wealth is increased by one means or by the other is irrelevant. What we then saw was a narrowing of the gap between the taxation of the one and the taxation of the other.
  What we have seen recently has certainly not been a narrowing of the gap. Indeed, in some instances there has been a widening of it as people have been less and less prepared to accept the high taxation on income at marginal levels and have sought, with the help of their taxation advisers, means of paying the lower taxes on capital gains. That is one of the big changes. We have had a peculiar situation in that at a time when incomes have been rising all over the country, the yield in surtax has been falling—and it has been falling because people are not prepared to pay the marginal rate of tax of 18s. 3d. in the £on their income and instead have tried to find other ways of handling their money. We have had the flotation of companies by which people can make millions of pounds and pay tax at a rate of 30 per cent. without, of course, paying tax at the highest rate of 18s. 3d. in the £. That will continue.
  I welcome the capital gains tax as a means of bridging the gap between the 91¼ per cent. rate of tan on income and the 30 per cent. rate on capital. I should like to see an increase in capital gains tax over a period of time and a reduction in the high levels of surtax to bring the two rates nearer to each other so that we do not face this problem again and again. Among the most important elements in the Finance Bill is that of trying to discourage the transfer of income to capital. So complex is the situation that over the long period the Inland Revenue would always be some paces behind those who advised new methods for transmuting income into capital.

  1127
  I congratulate my right hon. Friends on the Treasury bench on the very great patience which they have shown to me and to many other hon. Members who have, perhaps, not been wholly satisfactory back-bench Members from the Government's point of view. They have shown us patience throughout our discussions. I also thank them for the changes which they have made. I think that they are right to call them concessions, in that they were changes in the considered and accepted view of the Front Bench, on Clause 18 in particular. There were a number of elements in Clause 18 which caused serious worry. My concern has not been completely put at rest, but the Government made genuine concessions for which I am thankful.
  The Finance Bill is in rather better shape than at the beginning of our debates. I commend the method by which we conducted our affairs this year and look forward to the Bill going through the House as satisfactorily and as well next year.
  12.45 p.m.
  Sir Charles Mott-Radclyffe: I will not follow the hon. Member for Ashton-under-Lyne (Mr. Sheldon) very far in his interesting speech except to comment that he apparently discovered that those who have high earnings react violently against punitive taxation. Surely the first priority for any Chancellor of the Exchequer is to try to increase the nation's wealth in both the public and private sectors. Having done that, he can argue afterwards how to carve it up. To impose punitive taxation on the man of exceptional capacity three-quarters of the way up the ladder of his career seems a very unwise policy for any Chancellor of the Exchequer, of whichever party, to pursue. Nothing could have brought out more clearly the difference between our attitude and that of the Government than did the speech of the hon. Member for Ashton-under-Lyne.
  I agree with my hon. Friend the Member for Worthing (Mr. Higgins) that this is a hastily drafted Finance Bill. It is one of the most hastily drafted Finance Bills I have seen since I have been in the House. Amendments have succeeded each other with almost kaleidoscopic rapidity and at times it was difficult to discover what was going on. Frequently
  1128
  Amendments were tabled which appeared almost to cancel each other out, as we discovered in the late night sitting on Wednesday.
  I was not a Member of the Standing Committee, but I read the reports of the debates in Committee and I have, of course, read the Clauses. I formed the impression that the Chancellor and his colleagues were like a crew on a ship in a very rough sea when most of the controls had been lost because of the gales. They did not agree about the port to which they were trying to steer and none of them knew how to set a compass.
  The themes in the Finance Bill have, of course, gone overboard. First, there was the theme that there would be a restriction of credit. That was accompanied by the theme that at all costs the cost of living was to be held. The third theme was an attempt, not very successful, to bluff the I.M.F. There was an admirable phrase used by the Chancellor in the Budget debate about trying to simplify the tax system, but that proposal went into the wastepaper basket long ago.
  As hon. Members know, I am not an expert in these matters, but it seems to me that if we want to restrict credit and to hold the cost of living, the last thing to do is to increase S.E.T. By increasing S.E.T. we are bound to increase the demand for credit, for the simple reason that the employer who pays increased S.E.T. on behalf of his employees is bound to ask for extra facilities from the bank to carry him over the intervening months before he gets a repayment—if he qualifies for a repayment. That is certainly the case in agriculture. Where the industry or the business does not qualify for repayment, the extra S.E.T. is passed on to the consumer, and that, in turn, results in increasing the cost of living in the various commodities in respect of which prices are raised. By the Clauses on loan interest, the Government have created a field day for the legal profession and the chartered accountants. I think that aspirin does not carry purchase tax but wet towels do, and these Clauses will bring in a fruitful yield of purchase tax in this respect from the professional societies.
  One cannot draw a rigid line between an overdraft and a loan or mortgage, and if one tries one gets into a maze of

  1129
  anomalies. Nothing more clearly brought this out than the very shallow and rather shabby answers which the Chief Secretary gave on the agricultural Amendments. It was clear that he did not understand the problem. If one finances maintenance from an overdraft on an agricultural estate—
  Mr. Speaker: Order. We have had that debate, which I recollect, and we cannot have it again.
  Sir C. Mott-Radclyffe: I am talking about what is in the Bill, Mr. Speaker. If one finances maintenance from an overdraft and improvements out of other capital, one gets no tax relief, but if one does it the other way around one is all right. On the repayment of a long-term mortgage by 1975, with perhaps 20 years to run, great upset will be caused, particularly for agriculture, which may result in the fragmentation of agricultural units—exactly what the Government say, in their next breath, that they are trying to avoid.
  The Bill's whole attitude is negative. It does not create a single extra £ of weath. It only adds several hundred thousand man hours of unproductive work for the professional societies and for the Inland Revenue inspectors, in a kind of ghastly all-in wrestling match, trying to weave their way through a series of unintelligible, anomalous and ambiguous provisions.
  It does not increase incentives and it discourages the investment of any risk capital. It has encouraged ingenuity in many undesirable ways. If one cannot save, one spends, which is inflationary, and if one cannot retain a reasonable amount of one's salary, the extra burden of responsibility on promotion is not worth it, and that is a very dangerous trend.
  The Government have produced a situation over the last five years by which the black marketeer and the spiv are laughing but the man who has worked honestly and hard all his life now finds, on his retirement, that his savings have been eroded and his pension is inadequate. This is thoroughly undesirable, and the Government know it. The sooner that they put their policy into reverse or we succeed them, the better.
  12.54 p.m.
  Mr. Charles Fletcher-Cooke: The Chancellor gave us one of his optimistic speeches today. Whenever I hear them, my heart sinks to my boots. They are very effective—much more so than those which the right hon. Member for Belper (Mr. George Brown) used to make, because they are less ebullient—but, so far as they are effective, they are very dangerous. Today, we had another in the series. The right hon. Gentleman took great comfort from the fact—this is perhaps a reflection on the affairs of our times—that there was a fall in the new business which the finance houses were doing. I understand why, in the modern world, that is taken as a sign of success, but it is a pretty fair commentary on the state of affairs in which we are that it should be so.
  Last year, the Chancellor predicted that domestic consumption, which must be his main consideration, consumer expenditure, would fall by 1·9 per cent., and, of course, it rose by 1·2 per cent. He expected that imports would rise by 0·6 per cent., whereas they rose by 7·9 per cent. I suggest, and indeed he suggested, that the Budget strategy was framed to prevent this happening again. We must ask ourselves whether this Bill will do better than the last Budget to secure this absolutely essential task.
  Although exports are good, or much better than they have been, one cannot help feeling that we are going up against the ceiling in exports—not only in absolute terms, but also as regards the North American market, where we are clearly in some very choppy water. Therefore, all has to he concentrated on the question of reducing our imports and on reducing domestic consumption if we are to continue with the figures, which are not all that good, but are at least not as bad as they used to be.
  On these very high figures for imports it is clear that the fiscal policy which has been adopted in previous Budgets has done nothing to meet the problem of domestic consumer expenditure. First of all, have these imports, which have risen so considerably in value, according to the recent trade figures, also risen in volume, or does it mean that the terms of trade are beginning to turn against us? If it is the latter, the strategy which was much attacked by

  1131
  the only two Government back benchers who have spoken today cannot do any good at all.
  Is it that the advantages which both this Government and its predecessor have had for 10 years, of cheap raw material prices, are beginning to change, and that we shall see—I believe that there are indications—that that advantage will soon be going? As a subsidiary point, has not the time come for us to dispense with the generosity by which, in the past, we have given prices well above the market prices to those who supply us with raw materials? The Chief Secretary will remember the article in a learned financial journal fairly recently, which showed that we pay for our raw materials far above the market rate under various international agreements.
  Sir C. Osborne: Sugar, for instance.
  Mr. Fletcher-Cooke: My hon. Friend mentions sugar and I believe that the same applies to copper. He has instanced the example of Canada, which pays almost half the price for her copper for her industries that we do, and there are various international agreements into which we entered in the days when we were flush. If we are to help the raw material producing countries, we should do it obviously and by means of the Ministry of Overseas Development, rather than conceal it in the trade figures in this way.
  Mr. Speaker: Order. We cannot proceed to modify international agreements on the Third Reading of the Finance Bill. There may be some other opportunity.
  Mr. Fletcher-Cooke: What I was hoping to do was to show that all the strategy of the Finance Bill is likely to be set at naught—because it is directed, and rightly directed towards reducing the import bill—if the terms of trade are moving against us. If so, the Government will have to find some means other than the fiscal weapon and the monetary weapon for doing that. I hope that they will do so urgently.
  As to the two weapons which the Finance Bill uses, it is a pity that the Government have now really shot every single possible bolt in their locker, in the sense that we are using every theory
  1132
  and not merely the theory that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) so particularly suspected—that of restricting domestic credit. We are using that old fiscal weapon which has failed to work in the past, and there is really nothing else left. That being so, it seemed to me that the Chancellor's optimism today was even more misplaced than it has been in the past.
  The Chancellor is quite frank about these things. He said that he did not need for expenditure purposes any of the additional money he is raising. In his Budget speech, he said:
  "The measures I have to propose are not called for by the very small growth in public expenditure. That could have been looked after quite comfortably by the natural buoyancy of the revenue."—[OFFICIAL REPORT, 15th April 1969; Vol. 781, c. 1004.]
  This additional taxation, to which my hon. Friend the Member for Louth (Sir C. Osborne) so rightly objects, is not being used because the Government are spending the money on the social services or anything like that. But it is simply being used for what I hoped had become the exploded theory that by using the fiscal weapon and taxing people's expenditure unnecessarily we reduce demand.
  The whole history of the last four years shows that that is not so; that the result of the reduction of incomes by high taxation, and particularly by S.E.T., merely produces irresistible wage demands. When one looks at the figures of successful wage demands over the last months it is quite clear that they have considerably outstripped any hope the Government might have of reducing consumer expenditure by means of the fiscal weapon. In spite of that, the fiscal weapon is still being used by the imposition of very heavy new taxes. Let me repeat, at the risk of boredom that merely, to use the old expression, to cream off excess purchasing power never has worked.
  Sir C. Osborne: Cripps's mopping up.
  Mr. Fletcher-Cooke: Mopping up—creaming off; whatever it may be.
  This year, we have the additional weapon of Clauses 18 onwards in an attempt to reduce domestic credit and to reduce money supply. This is at least a novelty. The hon. Member for Ashton-under-Lyne thought that it was too much

  1133
  of a novelty. He said that the Government did not know what they were doing, and had not thought it out; that it was a passing fashion derived from some visiting economists to South America, and would not be applicable to this country. I do not agree with him there so much. I think that in this case, although it is clumsily and inequitably done, the Government may be right. Anyhow, it is better than the old fiscal policy which has been proved year after year to be wrong.
  My own view is that we should get back as soon as possible to the theory that Government revenue should be used to meet Government expenditure and not used for the mopping up process at all; that we should rely more and more on the monetary weapon to restrict consumer demand and, if necessary, take the consequences.
  The Budget strategy as it emerges in the Bill is weak and variegated. It is variegated because it relies on too many weapons, and it is weak because it has abandoned any attempt to rely on the restraint of consumer demand through legislation in the sphere of labour. The one weapon which, in his Budget statement, the Chancellor said was the most important of all, has been lost, and sunk without trace, between 15th April and today. It would never, of course, have appeared in the Finance Bill so I cannot expatiate on the point, but such legislation was undoubtedly the weapon on which he placed most dramatic emphasis on 15th April. Where is it now? It has sunk beyond trace.
  All we have now is the fiscal weapon, on which I do not rely because it has failed in the past, and a new essay into the monetary field. It is a feeble essay, because it does not deal with the institutions which the hon. Member for Ashton-under-Lyne listed and which are the great creators of credit. All it does is to hit at a few people who have been using their overdrafts more than the Chancellor likes. It is a very small essay into this field; as it stands, so small that I do not think that it will have the optimistic effect which the right hon. Gentleman once more has indicated it will have.
  The Government are drifting into the use of higher and higher imports. In spite of the measures they are taking,
  1134
  they are drifting once again into higher and higher consumer expenditure—in spite of some figures relating to the car trade which the Chancellor produced as an example that the squeeze was working. If that process goes on, the Government will eventually be driven, if they cannot take their courage into their hands over labour relations, to do what they do not want to do, what we do not want them to do and what the world does not want them to do but which will inevitably happen, and that is to impose import controls. They have made one little foray with import deposits, and we should like to know how those are working. But what they will be driven to is the sort of thing that most hon. Members would deplore. To judge from his earlier speech, the hon. Member for Lewisham, West (Mr. Dickens) might applaud import controls, but all right-thinking members would deplore them. That is where the Government will go unless they do something about the import bill, and I do not think that at present they know quite what to do or how to do it.
  1.8 p.m.
  Mr. Emlyn Hooson: I am very conscious of the fact that the speech I make will really be the speech that would have been made by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright). He was the sole Liberal member of the Committee, and made a very valuable contribution to its debates. He would have been glad to have been here today to speak on behalf of the Liberal Party, but is prevented from doing so by a longstanding constituency engagement.
  This Bill is presented against a background of a tremendous backlog in our tax offices. It must be a matter of concern to all hon. Members that when we have this very complicated Bill we have, at the same time, evidence of an unprecedented scale of resignations in the overburdened top grades of the tax inspectorate. That being so, it is certain that this Bill can be guaranteed to add to the existing delay and chaos in the tax offices, and that must be a very serious matter for the whole country. A friend of mine, who is probably as skilled as anyone outside the Inland Revenue Department—and, perhaps, also inside it—is in despair over the structure of the

  1135
  Bill and the burdens which it will add to those who have to advise on tax matters. It is a matter of great social concern, and should be for the country, that on an ever-increasing scale so many people are occupied full time in advising on tax matters.
  It has been rightly said that the Government have been extremely accommodating to their critics over the Bill and have fulfilled promises made in Committee. That is right, but they had a great deal to be accommodating about. It must be unprecedented for a Government to have moved 87 new Clauses in Committee and on Report to have six long Government new Clauses and 129 Government Amendments. That shows that the Bill was originally presented in a thoroughly undigested form. The Bill's main provisions, whether they were right or wrong in intent, are classic illustrations of the mess which results from inadequate prior consultation.
  It is necessary for the whole House to consider whether there ought to be a Select Committee to deal with the impending provisions of a Finance Bill before they are presented so that we could have adequate prior consultations and not get into the mess the Government have been in throughout discussions on this Bill. It seems the oddest way of going about things to have provisions in the Bill for S.E.T. increases without the Government even waiting for their own Reddaway Committee's Report on the structure and changes of selective employment tax.
  Although the Government have given way greatly, and rightly, on provisions for disallowance of loan interest as a deduction from income, we and the country are left with a very considerable mess, and that one of extreme complexity. Enough thought had not been given, and still has not been given, by the Treasury Department to these very important provisions which will so change business habits in the country in future.
  It seems that considerable improvements have been achieved by amendment in the provisions for catching sales of income from personal activities in return for capital sums to avoid the manifest unfairness which would have resulted from the earlier drafting. The first provisions had to be hastily withdrawn
  1136
  and I grant that they are now much less offensive, but this again shows the inadequate consideration given to many aspects of the Bill before it was presented.
  Then there has been the last-moment improvement regarding Clauses 30 and 31 with reference to the new estate duty on discretionary trusts. Otherwise executors and trustees would be involved in impossible feats of memory. The Revenue would have had quite arbitrary powers. This has been a last-minute change; a change which is welcome nevertheless. It underlines the great concern of the majority of rather detached people who perhaps had expected to see a change in Government intent or strategy on the financial side but who have been greatly dismayed at the apparent lack of adequate consideration given by the Government to the effect of the changes. Professional people have been dismayed by the apparent incompetence and the tax Bar has been greatly concerned. The Chief Secretary's profession, the accountants, have been greatly concerned about the lack of consultation on these matters.
  With the new provisions for betterment levy on land transaction, how can even experts comprehend these changes? I am not an expert, but I am told by those who are experts that these provisions are very difficult to comprehend and it is difficult at the moment to estimate what the effects of the provisions will be.
  So we end with a Bill which has been greatly changed and modified. The team at the Treasury have shown a welcome attitude towards their critics and everyone has been grateful for that. We are still left with a Bill of which very few people can estimate what its consequences will be. It imposes a vastly increased strain on the already over-taxed departments. It is a Bill which, if there was to be a Division, I certainly would vote against on Third Reading.
  1.15 p.m.
  Mr. David Howell: I confess that of the speeches we have had so far in this debate the one to which I was most attracted was that by my hon. Friend the Member for Louth (Sir C. Osborne), who has now gone to lunch but who told us that he will come back.
  Although he would be the first to recognise that his speech did not attempt

  1137
  to grapple with the complexities of money supply or domestic credit expansion, it reflected with a sort of salty tang the realities of incompetent finance, incompetent economic policy and poor financial legislation as they impinge on ordinary citizens. His speech was a graphic protest at the way in which taxation is rising. It was a protest which my constituents would certainly echo.
  I know it is said again and again that in general terms and taking a global figure, compared with other countries taxation here is not too high, but in the minds of those who say that there should be at least a question mark to why that is so. There is a very general feeling in this country of widespread protest at the way in which taxes are levied and paid. This Finance Bill, if it does no more, will stand as an answer to that query, an answer simply given by noting that it is a Bill of labyrinthine complexity but yet of only marginal relevance to the economic problems we face.
  I have not had the pleasure of attending all the debates on the Bill. I am told that some of the debates could not be exactly described as a pleasure in Committee. What is clear is that at every point from the beginning to Third Reading it is the almost suffocating complexity and complications being introduced into legislation by the reforms proposed by the Government which have been the chief feature. The plea for simplification is not one which arises merely from a desire to have everything neat and tidy, because behind that plea lies also the plea for administrative reform. One cannot follow without the other.
  Unless we move in the direction of tax reform and go towards a much more simplified system based much more squarely on the one hand on direct income and personal tax and transactions with the State and, on the other, consolidation of indirect taxes into something like value-added, we cannot begin thinking about the crucial question of reform of administration of taxation. With complicated and varied rates and the vast range of different levels of assessment, with a situation in which very few citizens are in a position to assess their own tax liability or even their taxable income; we have a situation in which no electronics machine however subtly designed, can come to
  1138
  grips with the varieties and levels of taxation and thus the reform of the administrative system of tax collection simply cannot be tackled.
  I can only succumb to the temptation to repeat at this point that we must look in tax reform to the staggering comparisons between our staff requirements in tax collection and those in the United States.
  We must note that in the United States a staff of about the same size as the staff of the Inland Revenue here—that is, headquarters and branches throughout the United States—managers to collect ten times as much Revenue and manages not only to collect revenue on the income tax side, but to do also Customs and Excise work, which occupies another enormous department over here, whose work will be greatly multiplied by the Bill. The American staff manage to do this, I think I am right in saying, in dollar terms, at slightly under three times the cost of the Inland Revenue budget but only about twice the budget of the Inland Revenue and the Customs and Excise combined. Those figures are a sobering comparison from which to start in understanding the desperate need to go for simplification rather than complication as the Bill has done.
  I should like to say a word on the two aspects, touched on by the Chancellor, of effects on the home economy and effects on the external side. As my hon. Friends have said, there is no point of contact in the Bill—this is no new feature—with the key problem of the British economy, the slow, inadequate rate of wealth creation. There is no point of contact, except of a negative kind, with the need to encourage the accumulation of wealth, to stimulate innovation and to bring the young management cadre, which exists and has great ability, into the position where it can apply all its abilities and its capacity to innovation and investment in new processes techniques and methods.
  The only negative point of contact is in Clause 18, where, as a result of a lot of to-ing and fro-ing, as a result of the complex Amendments introduced by the Government, the one certain fact is that men and women who would like to buy a small share in some way in the enterprise in which they are involved—by "small" one means much less than 5

  1139
  per cent., unless it is a very small concern—are to be further penalised. This, the one negative point of contact with the process of innovation in the economy hits it sharply on the head.
  The second point where the important effect on the home economy needs to be noted arises from the question of the size and level of public spending and the contribution which it makes to demand and to the Chancellor's calculations. There is something of a mystery, or, perhaps, a misunderstanding, here about what we mean by the level of public spending being too high.
  The Chief Secretary is wont to say that it is under control and on target. He has said so many times. It is true that if one is a money supply fanatic and thinks entirely in terms of credit expansion, the level of public expenditure is under control in the sense that as a result of zero borrowing requirement and repayment by the Government, the level of public expenditure is under control in not aggravating the money supply problem. That, however, is not what one necessarily means in saying that public expenditure is too high.
  It is an interesting but rather irrelevant fact that the level of public expenditure is such that it is all covered by taxation. The proposition that my hon. Friends and I have advanced, and will continue to advance, is that the level of public expenditure as a percentage of gross national product and the size of the public sector which gives rise to decisions which generate public spending is far too big. Not only is it too big, but, despite the assurances about slow 1 per cent. growth rates, and so on, there is fairly clear evidence that it is beginning to creep up again.
  There is fairly clear evidence that the inevitable lack of proper management control and data about the cost of Government activities is leading to the inexorable bubbling upwards in the cost of Government activities which pushes the Estimates up and up. The signs are all there. If the signs are not enough on the Whitehall front, we hear at the same time rather sinister noises from Transport House about the new plans for increasing public expenditure still more rapidly in the near future should the
  1140
  party which have its headquarters there get the chance.
  The public sector side of the demand calculation and the contribution that the appetite of the public sector makes to the overall strategy towards economic stability is far from being settled by our being told by the Chief Secretary that the matter is under control. It is under control only if one thinks entirely in money supply terms. While it is right that we should, perhaps, be more concerned with money supply questions than were the economic policy thinkers and debaters a few years back, the formal doctrinaire approach to the problem—the import from Chicago—is not one of my favourite United States imports. We should be wary and aware of the need to temper these highly formalised theories which have been tried out in laboratory conditions and which simply do not exist in an economy of the kind in which we live. We should be wary of adopting them too readily and rapidly and be careful to modify them and mix them in with other factors which are having an influence.
  I conclude on the public sector side by saying that the claim that it is all under control and that we need not worry is a conjuring trick, a diversion or sleight of hand which hypnotises those who think only in terms of money supply. The public sector is not under control. It is too big and it is increasing once again at a rate which is under nobody's control.
  I very much doubt whether it will be brought under control again until we have two things. One is a Government who are prepared to question the whole range of Government activities which are now carried on with a view to stopping them or transferring them from the public to the private sector. The second requirement is a change in the form of financial planning and control, at present operating in our Whitehall system, of a kind which will begin to provide, possibly inside the Treasury or alongside it, the sort of Bureau of the Budget mechanism which is familiar in the American Federal Government and which would provide the degree of control over the real costs of Government activities which we simply do not at present possess. It is that kind of Treasury reform of a radical kind towards which the minds of those who wish to

  1141
  bring the public sector again under control should be turning.
  The Chancellor's most frequent reference on the overseas side was to the marvellous way in which invisibles have performed. The Government have made a tremendous discovery about what goes on in invisibles. Every speech now is larded with much-deserved praise for the performance of this part of the private sector. This is all very encouraging, because it shows that the dangerously wrong-slanted emphasis which Government spokesmen seemed to be giving in the past to the balance of payments and the way in which they appeared to see the problem is now giving way to a more realistic understanding of the balance of payment components which matter and which do not matter and take us away from the obsession which Treasury Ministers at one time seemed to have with the narrow export/import balance.
  I do not know whether this has yet come across the Chief Secretary's desk, but I see that the Committee on Invisibles has commissioned a study on world invisible trade, a copy of which reached me this morning. A very interesting table—admittedly, the figures are only up to 1966—gives an enormous list of the balance of trade, invisible and visible, of 31 countries during that year.
  No. 1 by far on the list is the United States. No. 2 is Italy and No. 3, just by a short head, is the United Kingdom in a list of the 31 leading economies. This is the balance of invisible and visible trade added together. This highly favourable position for Britain arises from the enormous balance of invisible trade. If there is an economic miracle in the making it is that despite this very favourable situation and despite the fantastic performance of the commercial sector and the vast strength and buoyancy of our invisible earnings, there has, nevertheless, persisted an atmosphere of no confidence and doubt about the British economy. What this shows is that if we are worried as to why the British economy seems such a poor investment, and why it has become such an object of derision around the world, the answer is not to be found by blaming the basic ability and energies of the commercial sector, or the merchandising sector of the economy. The miracle is that these sectors have performed so marvellously well, despite the aura of
  1142
  gloom and doom and the persistent clobbering of management by the Government of this country, and despite the attempt to enlarge and build upon the tax base provided by the selective employment tax legislation which, of course, discriminates against the service sector from which most invisible earnings spring.
  This, again, is a strong argument—the strongest of all, in a way—why we must move on from the consolidation of S.E.T. as embodied in the Finance Bill, to the kind of indirect taxation which allows remission for exports and points the way to a tax on value added. I should like to know what addition to the revenue the proposals to extend S.E.T. to the nationalised industries will bring. I share the views of my hon. Friend the Member for Worthing (Mr. Higgins). This seems an odd way in which to spring this proposal on the House and on the public. But I suppose it would be churlish not to recognise that at least it evens out a grossly unfair situation which existed beforehand in regard to competition between private retailers of electrical equipment, gas appliances and so on, and the nationalised industries. At least that is remedied and, although we have not had a chance to discuss it, it would be nice to know what addition to the revenue that will lead to.
  The point about the balance of paymants side of the equation is that, because of the past obsession with current visible trade, there has been this danger that somehow everything must be solved by urging people to export more and by preventing people from importing, and that the real issues, the real components of the balance of payments about which we should be worried, get neglected. The most fundamental issue, and the one which the Finance Bill understandably neglects, is the problem of external exchange rates and the movement throughout the financial world towards the realisation that we shall have to come to some system of managed rates, and the danger in believing that we do not have to face that issue. The real danger is that this problem, if neglected, will lead to a settlement of the world's exchange rate difficulties between the United States and Germany over our heads, and will place us in a position where our action finally has to spring from other people's views and decisions

  1143
  which may be even more painful than many of the remedies already applied.
  Having sounded thoroughly critical, and feeling thoroughly critical, in protesting about the approach behind this Bill, I confess that as one goes around the country things are certainly not all black. The ability is there. The energy and readiness to go ahead on new designs, new investments and new methods is there. The ability to apply vast ingenuity to further expansion on invisibles and to provide the world with an even larger proportion of the total invisible earnings than the United Kingdom does already, is there. It is rather like the workers of Hamburg or Hanoi after the bombing. The able people of England creep out from the rubble of Government incompetence and go about their work.
  But, of course, this is the tragedy. It is unnecessary. It could be transformed by an entirely different tax framework and an entirely different attitude of central government policy which would restore the greatness, viability and richness of this country.
  1.35 p.m.
  Mr. John Nott: I should like to begin with a short quotation from Blackstone, because it seems to me to be appropriate both to the contents and the handling of this Finance Bill during the current year. In his commentaries, which in their time were the favourite reading of the British public, Blackstone claimed that
  "No subject of England can be constrained to pay any aids or taxes even for the defence of the realm or for the support of the Government but such as are imposed by his own consent or that of his representatives in Parliament."
  My first comment is that this constitutional principle which has stood the test of time has, to my mind, been eroded further during the proceedings on this Bill.
  I should like to comment on the Chancellor's remark that, in his view, the revised procedure—referring to the procedure of dealing with the Bill this year—has been generally considered as an improvement. Although the procedure this year was an experiment, and we all recognise it has having been worth while as such, I think that the method of
  1144
  splitting the Bill into two halves and not requiring the author of the Bill to answer in Committee and in detail for his measures, has diluted the capacity of hon. Members to speak their part, and has also lightened the constitutional obligation upon the Executive to answer in detail and in substance for their taxing of the subject. Parliament and its procedures are more important than the convenience of the great. I make that remark without any heat but just in passing.
  I also make no criticism of the Chief Secretary, who at all times has been courteous and fair—sometimes in the face of provocation, perhaps, from hon. Members like myself—and I can assure him that those who are new to this House admire very much the way in which he has managed to steer a vast Bill through the House. We do not agree with what he says and there is, of course, a great unbridgable gulf which exists between his philosophy and my own. Nevertheless, he has been courteous and fair, and I wanted to say that in my opening remarks.
  I make no criticism either of my right hon. Friends because I think they were right to agree to a very useful experiment this year in taking the Finance Bill in a different way. It was a useful experiment. As for my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), he has sat through every speech on Second Reading, in Committee, on Report and Third Reading, and I know that my hon. Friend the Member for Acton (Mr. Kenneth Baker) and all those who served on the Committee admire him very much for the way in which he has listened intentively to every word that has been spoken on the Bill. It contrasts, I am afraid, rather strangely with the attitude of the Chancellor.
  If we take this Finance Bill in this way and we split it once again—I am not saying that I am against the procedure that we adopted; I make this point for my right hon. Friend—I think we need to have a larger Committee than we had this year. Taxation is not only a matter for the so-called experts, even on the arbitrarily chosen technical subjects of the Bill. It is a subject for those more normal and, perhaps, more admirable souls who can give a judgment as to its comprehension to the ordinary man. Although my hon. Friend the Member

  1145
  for Louth (Sir C. Osborne) is an expert in this field and many others, the Committee would have had great benefit from the type of speech which he made today on Third Reading. I do not believe in a Committee of experts upstairs considering the technical details of the Bill. Parliament should have a healthy scepticism towards the expert.
  The failure to understand and the failure to discuss are two instances of the way in which the theoretical assent of the taxpayer through his representative in Parliament may be made unreal. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) on Second Reading, I think, referred to last year's proceedings on the Finance Bill as being rather like a magistrate's court in Calcutta 100 years ago. He had a valid point there, but I make the contrary remark that it was a feature of the British Raj that, although its quarters may have been over-heated and unduly cramped, it was nevertheless noted for its well ordered and conducted administration, and its justice which was seen to be done on every occasion.
  My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) is a director of one or two of our most important companies, but, because of the size of the Committee, he could not serve upon it. As a director of some of Britain's leading companies, he should have had the right to speak about corporation tax. Because we did not have a corporation tax debate on Report, however, his only opportunity was either on Second Reading or on Third Reading, neither of which is a really appropriate occasion to speak in detail about an increase in corporation tax. I make that point also in support of my view that the Committee should be widened.
  I come now to the two measures which have been the most controversial, the Clauses concerning interest on borrowing and the anti-avoidance provisions of Clause 25. For £20 million to £25 million of additional revenue a year and a marginal reduction, perhaps, in the size of personal borrowing, the area of uncertainty in our tax system has been unnecessarily extended. The boundary between allowable and disallowable borrowing will choke the Revenue with work, with a further bad effect on the
  1146
  Revenue's efficiency. Quite arbitrarily, business has been raised into a privileged position over the personal borrower. One type of individual borrower will be approved—for instance, the man raising a second mortgage on a new house—while another type of individual borrower—the man raising a second mortgage on his present house—wil not be allowed to offset his interest against taxation. Likewise, a loan for the purchase of shares in a close company will be allowable but not in a non-close company. A man will be deemed a privileged proprietor for borrowing purposes where he holds 5 per cent. of a close company but an unprivileged proprietor if he holds 4 per cent.
  With all this muddle and the anomalies which are being put on the Statute Book, the two categories of person for whom one might expect from any Government a privilege rather than a discrimination, namely, the employee who wishes to buy, or who has already bought, a small stake in his own company and the holder of an insurance policy undertaken as a means of saving against old age, sickness or the education of his children or just to meet a rainy day, are specifically singled out for discrimination because they are inhibited from borrowing. It is the strangest notion, unintentional originally, perhaps, on the part of the Chancellor, which has led to these measures in the Bill which, on the face of them show a lack of foresight and preparedness.
  Now, Clause 25 and, in particular, Amendment No. 204 inserted by the Government yesterday. The Amendment is in terms which give the Revenue the power to probe into a taxpayer's moral intentions when it says
  "(c) the main object, or one of the main objects, of the transaction or arrangements was the avoidance or reduction of liability to income tax."
  The Chief Secretary told me that the Amendment's purpose is to safeguard the taxpayer. It is no such thing. The only reason for its insertion was that the Government found it essential because of the wide-ranging nature of the original Clause. An important point is raised here. Is it avoidance of tax or the Government's anti-avoidance measures which are the greater evil in this country? When I speak of avoidance of tax, I do not mean evasion. I am not referring to those who break the law.

  1147
  I refer to avoidance, the arrangements made by those who legally conduct their tax affairs so as to reduce their liability to tax by the maximum amount.
  The worst that can be said against avoidance of tax is that there are instances in which it offends against the spirit of the law even if not against the letter. But, since the Revenue presses home its demands according to the letter of the law and without regard to its spirit, the odds are fairly even on that score. The law reports are laden with cases in which the Revenue has pressed its case, against all equity, right up to the House of Lords. I cite Abbott v. Philbin and Inland Revenue v. Luke as two cases in which the Revenue pursued its point up to the House of Lords although one would not have thought that the spirit of the law was being transgressed.
  The balance as between the Executive, the Inland Revenue and the taxpayer in this country is not right. I take the doctrine of discovery, which is closely relevant to the Bill. The law entitles an inspector of taxes, even where the taxpayer has made a full and accurate return, to make a new assessment even when he, the inspector, has failed to take note of a fact or a relevant proposition of the law. More and more, and notably in this Bill, the weight of legislation passed by the House is burdened against the taxpayer rather than set in his favour.
  At best, anti-avoidance measures are a proper exercise of the power of the Legislature, but in practice, on the presumption that avoidance is inherently evil and the needs of the Revenue are paramount, anti-avoidance has become an instrument for the erosion of the law. This ought to be noted by the House.
  Although he is not a popular man, the avoider of tax, the man who legally so arranges his tax affairs to reduce his liability is under our Constitution an upholder of the rule of law. I think that the Financial Secretary will understand my point. I am referring to the tax avoider, not the evader. He upholds the rule of law, arranging his tax affairs by the strict letter of the law. Moreover, what he does underlines the policies of confiscation which we have been seeing in the past four years' Budgets, with taxation of people's incomes up to and
  1148
  over 90 per cent., and last year over 100 per cent.
  It is worth recalling Lord Clyde's judgment in the context of Clause 25:
  "No man is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest shovel into his stores."
  That judgment is still the law of the land. Lord Atkin has said:
  "The subject, whether poor and humble or wealthy and noble, has the legal right so to dispose of his capital and income as to attract upon himself the least amount of tax."
  That is the law of the land, and in proposing an Amendment yesterday which referred to the main object, or one of the main objects, of the transaction or arrangements being the avoidance or reduction of liability to income tax, the Chief Secretary went wholly contrary to that cardinal principle of our Constitution.
  I come, finally, to the Chief Secretary's claim that every man has access to appeal to the courts. That sounds convincing, but it is less and less related to reality. I do not know whether the Financial Secretary can comment, but yesterday, quite by chance, I received a letter from a very reputable accountant in my constituency which said:
  "I understand that the Clerks to the General Commissioners for Income Tax have received a letter from the Chancellor of the Exchequer stating that they must make every endeavour to reduce the number of outstanding tax appeals. The General Commissioners are supposed to be an impartial body of men standing between the taxpayer and the Revenue, and if my information is correct, it would appear that the Chancellor is trying to unduly influence the Commissioners so that the statistics relating to income tax appeals for 1968 and 1969 can be improved."
  I have put down a written Question to the Chancellor about this, but perhaps the Financial Secretary could say whether the Chancellor has sent such a letter to the Clerks to the Commissioners for Income Tax. This is a most important constitutional point.
  The Financial Secretary to the Treasury (Mr. Harold Lever): Is this what I am being asked—has the Chancellor encouraged the Commissioners to deal as speedily as possible with outstanding appeals? Is that the gist of what has been said?
  Mr. Nott: No, the allegation is being made—I have no means of knowing

  1149
  whether it is true or not until I receive an answer to my Question—that a letter has gone from the Chancellor to the Clerks to the General Commissioners saying that they must make every endeavour to reduce the number of outstanding appeals—
  Mr. Lever: It is the same point.
  Mr. Nott: I think that it is a very different point and if the Financial Secretary—
  Mr. Lever: Would the hon. Gentleman make it clear what he is complaining about? What does he think is improper in seeking to reduce the number of appeals? I am not quite clear.
  Mr. Nott: If the hon. Gentleman is saying that all that is being asked is that the outstanding appeals should be hurried along, which was the point of his earlier intervention, and that the whole process should be speeded up, there is, of course, no objection to that. No, what I am saying is that, if the Chancellor is asking that the tax inspectors should try to persuade people not to go to appeal, then that, of course, is wholly wrong.
  Mr. Lever indicated dissent.
  Mr. Nott: Well, if the hon. Gentleman can give an assurance, that is fine.
  Under Section 28 of the 1960 Act, the Revenue can impose income tax without stating its grounds. The taxpayer may state his case, saying why he thinks that the Section does not apply to him, but only then does the Revenue state its case to the tribunal, the taxpayer has no right of reply, and the tribunal then adjudicates. This is the type of Measure which is going on the Statute book, so I do not accept the Chief Secretary's answer yesterday, that a man can simply go to appeal.
  I should like to end with four questions relating to Clause 25, which have been asked in an excellent article in the British Tax Review by Mr. Monroe, one of our leading tax counsel. First,
  "Is the departmental ruling today an inevitable development alongside the departmental concession?".
  Second,
  "Must fiscal legislation become so obscure that inevitably, the executive has a wide discretion as to its scope and operation?"
  1150
  Third,
  "Is the only practicable way to deal with tax avoidance to accept a curtailment of constitutional liberties?"
  I have referred to that, and I think that that is what is happening in Clause 25. Last,
  'If a wider discretion in the executive is inevitable in the twentieth century, can the taxpayer be given more adequate opportunities to confront the executive, to ascertain his position and to plead his case?"
  My last quotation is another from Blackstone:
  "The third absolute right inherent in every Englishman is that of properly; which consists in the free use, enjoyment and disposal of all his acquisitions without any curtailment or diminution save only by the laws of the land."
  I believe that it is in fiscal policy and in the type of legislation which we find in Clause 25 and in the wider and wider discretionary powers given to the executive and the Inland Revenue that the traditional liberties of the subject are being infringed.
  I do not want to exaggerate the point, but it is a trend which we should speak up against. It is in conformity with the decline in the traditional freedoms of the subject, which is characterised also by the removal of passport rights from citizens under the Commonwealth Immigration Act and the removal of their rights to exercise their vote in the manner recommended by an impartial commission under the Parliamentary Redistribution of Seats Bill. I hope that, when my right hon. Friends come to power, they will reform and simplify the whole taxation system and, more important still, will create a system of detailed and open scrutiny of new taxation proposals, so that their application and its fairness may be studied before they are introduced.
  1.57 p.m.
  Mr. Hugh Jenkins: We have just heard two extremely interesting speeches from hon. Members opposite. It seems that hon. Members of the Conservative Party who have joined the House recently are even more traditional in their outlook than the older Members. The association which the hon. Member for St. Ives (Mr. Nott) drew between liberty and property is an extremely old Conservative doctrine. One understands that, for them, property is liberty and liberty is property, but to hear that

  1151
  proposition enunciated so clearly in this debate by an hon. Member opposite is extremely interesting. We do not take that view, which stems from about 1645, at the time of the English Civil War.
  My view about the Bill is that it fails further to intervene in the maldistribution of property. What needs to be done is that property should be more effectively distributed. I also criticise the Bill because it does not go far enough in tackling income redistribution.
  The hon. Member for Guildford (Mr. David Howell) also made an interesting point, drawing a distinction between the American taxation system and our own. I have failed to discover, among my American acquaintances, that admiration for the American taxation system to which he gave voice. American citizens, staggering as they frequently are under state taxation, federal taxation and city taxation—all of them sometimes both direct and indirect—find complexity in their tax laws, and not the simplicity which the hon. Gentleman affected to discover.
  The complexities of our system are for the purpose of creating greater fairness. I would look very carefully at any changes in the Bill which sought to give greater simplicity to our tax laws only at the cost of making them more unfair. There are two lacunae in the Bill, two points which I wish were in it but which are not there. One is the question of political contributions. I understand that it is not in order—
  Mr. Deputy Speaker: Order. I think that the hon. Gentleman knows what the rule of order is on Third Reading.
  Mr. Jenkins: I was about to say that it was not in order to say anything about the subject. It is, however, with your indulgence, Mr. Deputy-Speaker, proper for me to express a simple statement of regret that it is not there, and to pass straight on.
  I understand that the reason is that it was not felt proper in a Finance Bill to deal with a matter which should properly be dealt with in a Companies Bill. However, there is reference in the Bill to selective employment tax. It is technically possible to introduce into the Bill references to selective employment tax, which
  1152
  might be said to be properly referrable to the Selective Employment Payments Act rather than to this Bill. So in some circumstances it is proper to change a Bill by means of Clauses in a Finance Bill.
  I welcome the changes which are being made with a view to making selective employment tax more selective. The great advantage that the selective employment tax has over the value-added tax which is so popular amongst hon. Members opposite but under which I hope that our citizens will never have to groan is that that tax is a bludgeon as compared with the selective employment tax, which could, if my hon. Friends chose to be a little more rapid about it, be shown to be a rapier, a tax which could be utilised very selectively.
  I repeat that I welcome the steps which the Bill makes towards making selective employment tax more selective. In so far as the Bill fails to deal with the glaring anomaly of the maintenance of selective employment tax on theatres, I deplore it. I hope that it will be proper for my right hon. Friend the Financial Secretary to indicate that it is the Government's intention to proceed rapidly to rectify the other anomalies which are occurring in the implementation of the tax.
  The Finance Bill is a Bill which, generally speaking, refines, furthers and maintains our present broad taxation system. It does not greatly improve it, nor does it worsen it to the degree that hon. Members opposite wish to do. To this extent I give a modicum of reserved congratulations to the Government.
  2.3 p.m.
  Mr. Kenneth Baker: I find the diffidence of the hon. Member for Putney (Mr. Hugh Jenkins) agreeable. He said in one throw-away line that there is a reference in the Bill to the selective employment tax. There certainly is: the Bill increases the burden of the tax by 28 per cent., as everybody who has to pay it has known from last week. The hon. Gentleman went on to call the tax a rapier. It is indeed a rapier: like the rapier, it has the effect of killing what would otherwise be useful activity. Like so many supporters of the selective employment tax on his own side of the House, as soon as it affects his own interests in his own industry the hon.

  1153
  Gentleman throws up his arms in horror and says that his industry must have a rebate.
  Mr. Hugh Jenkins: Is the hon. Gentleman defending the continued imposition of the tax on the theatre?
  Mr. Baker: The attitude of my right hon. and hon. Friends to the tax is well known: we intend to abolish it at the first opportunity.
  I am particularly worried about one aspect of the Bill that partially concerns selective employment tax. Under Clauses 44 and 45 relating to the tax, and under Clause 9 which concerns corporation tax, the penalty put upon business activity is about £200 million a year. In addition, although it is not part of the Bill, industry will have to bear a substantial extra burden from October as a result of the higher national insurance contributions.
  This is very worrying, but it is all part of the Government's policy. I am sure that the effect will be depressant upon industrial activity later this year and early next year. I know from my own businesses and from my connections with colleagues and friends that people are concerned about the sluggish volume of trade in a wide variety of industries. If the Government live, they will live to regret this Budget and its strategy.
  I turn now to the question of the legislative method used in the Bill. The Bill makes three major changes in our tax law. The first relates to the disallowance of interest, the next is the very complicated change in estate duty, and the third is the complicated series of changes in capital gains tax.
  I know that these are technical matters, but they have a wide general effect. There will hardly be any person in Britain who will not feel some effect—a long, wide-reaching, ripple effect—from these three groups of tax changes. Yet we have devised a complicated and inefficient method of bringing in such changes. The Chancellor, in a ringing Budget speech, said that various things would be done in these areas. He was not present in Committee to hear the arguments as to how difficult it would be to implement the intentions within our tax laws. As a result, the Bill was badly drawn and it has been fundamentally changed on Report.
  1154
  Last Friday and this Monday was the first opportunity that many of us had to study the fundamental and wide-ranging changes made in the Bill by the Government. We had little time to consider them. I have little doubt that these changes and new Clauses are as badly drafted and as confusing as the original parts of the Bill. The way in which they were introduced by Treasury Ministers on Tuesday and Wednesday was staggering. Ministers came as repentant sinners expecting the gratitude of the House for appeasing the hardship which they had previously inflicted.
  I could not help recalling the words of Sydney Smith, the eighteenth century cleric:
  "The liberality of ministers"—
  he said "churchmen"—
  "is like the content of matter in a cone. The higher they go the less it becomes."
  The so-called concessions made by the Government are not very wide or deep. They are certainly inadequate. One lesson from the Bill is that when established tax procedures are to be changed, such as the disallowance of interest or the provisions relating to estate duty, it should be done by publishing a green paper first so that people can comment upon it; possibly a Select Committee should consider the proposed change. In that way we could get better tax laws and not the mess we have had this year.
  Clause 18 is the most important Clause in the Bill. It introduces the principle of the disallowance of interest. I know that the Treasury was concerned to stop some very obvious abuses of this principle, but it cast its net so wide that it caught in its net, and will continue to catch in its net, many small and medium-sized people and businesses. The very rich will be able to evade the Clause. Suggestions have been made to me, not that I am very rich, as to how it can be done.
  The whole effect of the Clause and of such legislation is to widen the gap between the very rich and the rest of us. The Financial Secretary, of all Ministers in this Government, appreciates the truth of what I am saying.
  The basic difference between the Tory Party and the Labour Party is highlighted by Clause 18, because what justice can there be in a Clause which allows

  1155
  somebody to borrow as much as he wants to build a swimming pool, to lay out a croquet lawn, or to establish a deer park, but does not allow a young executive to borrow money to buy a small stake in his business. This shows the difference between the attitude of the Labour Party and that of the Conservative Party. We are concerned with the creation of wealth and with oiling the wheels to create wealth. The Labour Party is not so concerned and is proud of it.
  I believe the Treasury and Treasury Ministers are preoccupied with tax avoidance to the point of paranoia. The Clauses on tax avoidance in the Bill were debated for many hours, but the amount of money involved is very small. This continues the battle that goes on each year between a huge army of private accountants and a huge army of tax experts in the Treasury and the Inland Revenue. It is a battle without honour in which only wounds can be won and it is about time we decided upon a truce.
  The Treasury Ministers should take their eyes from the small print and realise with a broader vision that a fundamental tax reform is needed in the country. The rulers of this country in Tudor times built mazes and hedges. We in our age build our maze with tax laws. In Tudor times mazes were an ingenious diversion. In this age they are an expensive and tiresome pursuit. The broad body of people in this country see a need for tax reform. Any Government or Party which offers the prospect of a reform will deserve well of the electorate and will do well by the country.
  2.12 p.m.
  Mr. Michael Alison: I wish to reinforce the eloquent and acid comments of my hon. Friend the Member for Acton (Mr. Kenneth Baker), particularly in regard to Clauses 18 and 19 of the Bill. The way in which the proposals of the Government on disallowance of interest on borrowed money have been handed out will go down in history as a classic example of how not to handle an admittedly difficult financial situation and how not to react to an emergency.
  The sad and worrying thing is that they have played disallowance of interest as though it is some sort of tragi-
  1156
  comedy, in the same way as the Government have acted over a whole range of other emergency situations which have arisen. The way in which they have reacted on this occasion reminds me most of all of their reaction to a different situation, the Anguilla crisis. It was a shot in the night.
  The sudden realisation seemed to float across the Government's mind that the fact that people were borrowing for relief of taxation was the clue, the vital new discovery, as to how we could get out of all our economic difficulties. There is a sudden, massive over-reaction to a situation, a mobilisation of everything and everybody in one enormous gargantuan proposal to deal with the economy. The whole thing is followed by a clumsy, piecemeal, extravagant costly, and in some ways humiliating, withdrawal to a position into which they should never have got themselves in the first place.
  This over-reaction, this panic measure, without any serious thought behind it, is seen most clearly when one works out the financial implications of the toing and froing of the Government over Clauses 18 and 19. One must remember that this year the net yield from these Clauses on disallowance of interest, as announced by the Chancellor of the Exchequer on 15th April, is £7 million and he said that it would be £25 million in a full year. But it is not the full year which is of relevance in the disallowance of interest. It is this present financial year in which the fight is to take place.
  It is this financial year in which we are committed by the I.M.F. letter of intent to secure a surplus on balance of payments of £300 million. It is this financial year in which consumption has to be restricted and next year, the full year, in which £25 million might accrue is not strictly relevant in this context. Taking the full year involving £25 million as the estimated yield, one must take into account all the further offsets which will occur since public expenditure in this period is scheduled to increase quite considerably. This is a panic measure with all the subsequent ludicrous fiascos involved in withdrawals in all sorts of different sectors in order to produce an in-flow of £7 million.
  The provision is all the more questionable when one recalls that on 15th July,

  1157
  a few days ago, the Chief Secretary came to the House to announce concessions, part of the withdrawal from Anguilla, part of which will cut the yield of the disallowance of interest by £3 million. This is 50 per cent. of the figure which he hopes to obtain in the full year. Pro rata it reduces the total yield from £25 million to £12 million.
  There could never have been an occasion when a serious and significant change has been proposed in our taxation system, involving major fiscal reforms, in which a concession has been advanced two days before Third Reading to cut by 50 per cent. the expected yield of this major change, which reduces inflow by £3 million. As we know from the Budget speech, this is only part of the story. The concession relates only to the concessions made in respect of estate duty and close companies.
  The Chief Secretary explicitly stated that the concession he was making of £3 million did not include his proposals in relation to the five-year extension of bank lending and overdrafts. One does not know what the full concession may be. It could be as much as 50 or 75 per cent. of the precise yield. If that is the fact, what is the point of this whole proceeding?
  The situation is made even more ludicrous when one considers the rational justification made by the Chief Secretary for this proposal and the series of concessions. In order to appreciate this matter, one must reflect on the extraordinarily bizarre transformation of the Chief Secretary from what one might call "fiscal practical man" into "philosophic man". The Financial Secretary may not be able to visualise the transformation of the Chief Secretary from practical man into pholosophic man. It is as if he were transformed from his normal grey suit into the garb of an astronaut, inflated suit, helmet and the rest. That is his philosophic guise and it is so ludicrous as to defy description.
  The Chief Secretary, in his rôle as philosophic man, tried to justify this change in the taxation system by the distinction he drew between expenditure for business purposes and expenditure for personal purposes. I leave aside the fact that he immediately introduced into what at first sight was rational distinction a
  1158
  colossal exception in regard to expenditure in connection with the acquisition or development of land straddling business and private expenditure, which therefore must be discounted. We must also discount the colossal exception to the exception that he made when, having allowed development and acquisition expenditure, he disallowed maintenance.
  But we must allow the Chief Secretary, as philosophic man, to have this little distinction between business and personal expenditure. I hope that the Financial Secretary will appreciate how crazy this philosophy is if we work out its real implications. The Chief Secretary justifies the discrimination between business and personal expenditure, or expenditure by way of borrowing, on the ground that it was quite legitimate that personal borrowing of money should bear a differential rate of interest—a slightly higher rate. I am sure that the right hon. Gentleman will appreciate that the corollary to that is that we wish to encourage business expenditure by giving it a relatively lower rate of interest.
  If we extend the logic and encourage rates of interest throughout the whole economy to drop—I am sure that the right hon. Gentleman would wish avidly to see the Bank Rate fall by ½ per cent. or 1 per cent. and to have a lower rate of interest to encourage businesses—we see the ludicrous nature of the Chief Secretary's differentiation.
  Table No. 29 shows that the volume of bank advances outstanding to the end of March this year amounts to about £17,000 million. Let us imagine that the public were paying 10 per cent. on that, or £1,700 million. If we cut the rate of interest by 1 per cent. we should save the economy about £150 million.
  The Government are making a massive sea-change of fiscal policy designed to produce less than £3 million in savings, and the logic behind it is the need to encourage investment in the business sector. This will almost certainly give a bonus to borrowers of every sort of probably over £100 million a year, in other words, ten or 15 times as much as is saved on this Measure. The whole thing is ludicrous. I cannot imagine why the Government do not scrap the whole thing and reintroduce at least a measure of sanity into the Bill.

  1159
  At all times I found the Chief Secretary to be an extremely agreeable and lucid exponent of Government fiscal policy—in this I echo what was said by my hon. Friend the Member for St. Ives (Mr. Nott)—but he must not allow himself to be diverted into philosophic ways in trying to justify some of the nonsense that we have had in the Bill.
  2.24 p.m.
  Sir Henry d'Avigdor-Goldsmid: Having sat through the three months or more during which this Bill and its associated matters have been through the House, and being conscious of the fact that I have contributed as much to these discussions by my silences as by my speeches, I do not intend to spoil my record at this late stage. I am conscious that the House wants to hear my right hon. Friend and come to a decision on this matter, and I do not propose to delay proceedings. But when I compare what happened on Budget day—when, to crowded benches, the Chancellor adumbrated the proposals on which we are now coming to a final decision—with the scene today, I remember the words of T. S. Eliot:
  "This is the way the world ends Not with a bang but a whimper."
  This year we tried a procedure which, to those most experienced in Parliamentary matters, seemed to be likely to prove the most desirable, namely, a divided Committee stage, partly on the Floor—in respect of Clauses on which there was most political mileage, if I may put it that way, and partly upstairs—where the more technical matters were dealt with. It was partly successful. It made for a much better atmosphere at all stages, and was conductive to the proper conduct of business. I wonder whether, in the end, business was properly conducted, however, considering that the Bill has been in front of us for three months and that nevertheless many of the most important Clauses came before the House for the first time only a day or two ago. One is tempted to ask, "What have we been up to?"
  I would have thought that an extension of the principle of pre-discussion was useful. This extremely involved disallowance of interest question could have been dealt with much more advantageously if there had been previous dis-
  1160
  cussion. There could have been no question of hon. Members beating the gun it the subject had beers discussed in Committee or on the Floor of the House on the basis of a Green, Paper, where both sides could have consulted the kind of authorities that are necessary in these matters. We have not yet evolved the perfect procedure. This years' was an improvement on previous years, but we could go a long way further yet.
  My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) suggested that the question of estate duty could have been discussed in advance. I wish that the ingenuity of Ministers, instead of being bent to the defence of indefensible causes and new principles, had been turned to methods of procedure. It that had happened we would have got on better and would also have served the interests of the country much better. We would have had adequate discussion instead of a bang followed by a whimper.
  2.28 p.m.
  Mr. Iain Macleod: I shall be brief. Apart from a few traditional remarks at the end of the Third Reading debate on the Finance Bill, I shall concentrate on one important matter—the question of disallowance. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) commented on our procedure this year. I like to think that I hold most of my views fairly consistently, but I have changed my view over the years as to the proper conduct of Finance Bills—not depending on which side of the House I sit but purely on the question of the best way to serve the House of Commons.
  With one or two reservations, I believe that the procedure this year—by which, in effect, the Opposition had four economic Supply Days on the Floor of the House to put forward their views followed by a detailed discussion in Committee, followed by the Report stage—while not the perfect answer was a great improvement on anything that had happened before.
  The two reservations are these. First, I agree with my hon. Friend the Member for St. Ives (Mr. Nott) that the Committee was too small. Looking back, that is clearly so, and my hon. Friend mentioned a number of hon. Members—for

  1161
  example, my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith)—who would have been very much welcomed to our counsels. A Committee of 30, meaning that with the present representation in the House the Conservative Party has 12, is too small for this operation.
  Secondly—this is important, particularly when, as this year, a large number of concessions, or whatever one cares to call them, were made—there must be more time between the end of the Committee stage and the consideration by the whole House of the Bill on Report. I emphasise that by this I am not referring to more time for the Treasury to think out what it is going to do. I mean more time for the House to consider the results of the Treasury thinking, for it is clear that it was at this point that this year's procedure became difficult for hon. Members, and particularly for my hon. Friends who naturally must hoist in complicated new Clauses but who wish to consult interests outside the House who are enormously affected by the proposals of the Treasury.
  In an idle hour in the middle of the night recently I counted up the Government Amendments on Report and I reached the total of 134. While some are put together, each one must be put individually by the Chair to the House. Some of them were not particularly important, but some were of vast importance and it is vital that more time should be given for consideration.
  We, the Opposition and the Committee, achieved a great deal during the time we considered the Bill. For example, in Clause 25 the Chancellor originally set out to shoot the Beatles, probably not a particularly estimable thing to do since the Beatles make a lot of money for this country, much of it in foreign exchange. Whatever the merits of the operation, it was abundantly clear that the Chancellor, aiming at a fairly narrow target, had scattered his shot so widely that a whole range of ordinary business activities became affected.
  The Chief Secretary was wrong about this. Even yesterday, when attempting to justify new Amendments, he said that the situation was now plain to the layman. I rarely criticise the civil servants' pride in authorship, but I found it rather puzzling and not conducive to the
  1162
  conduct of good business in the House. After all, there are people outside the Government Service who are just as well informed and able in their legal judgments as those inside it. There can be no doubt that Clause 25 was extremely badly drawn and that, as a result of our investigations in Committee, it has been vastly improved.
  Before leaving these traditional observations I wish, apart from expressing my gratitude for the civilised conduct of these affairs by the Treasury Ministers, to pay particular tribute to my hon. Friend the Member for Worthing (Mr. Higgins) and my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) who has borne so much of the burden of opposition. I also pay tribute to my hon. Friends who joined me in Committee upstairs.
  I come to the only matter on which I shall comment today: the major innovation of the Chancellor on disallowance. Linking these remarks to my previous comments, it is clear that we were right not to take disallowance as one of the economic Supply days on the Floor of the House but to have first given it the most detailed turning over in Committee. That we certainly did, for we had a morning, an afternoon and an evening followed by an all-night session on the subject. We were much helped by the sympathetic understanding of the Chair, which appreciated our wish to make our main demonstration on this point. The proof of the pudding is in the Bill, with all the new Clauses that were inserted on Repot.
  I was criticised a little for welcoming these new Clauses—on the ground that, when in opposition I suppose, one should never welcome anything that appears from a Government. I do not take that view. I believe that there is more joy in the Parliamentary heaven over one Socialist sinner that repenteth than ninety and nine just Tories who need no repentance. I therefore welcome what was done.
  I tried at all stages of the Bill to consider the difficult problem of disallowance from the point of view of equity, as did the Government, up to a point; but the point came when we parted company. We are naturally pleased that, as a result of our pressure in Committee, so many

  1163
  Amendments have been made. However, nobody who listened to our debates—for example, on estate management and on borrowings against insurance policies—could conclude that the position can be left as it is. Indeed, the position now is more confused and less logical than it was before the new Clauses were tabled.
  The Chief Secretary told us that the Government had looked at the experience and legislation of other countries, notably the United States, Canada and Australia. So have we. There may be, as some countries have concluded, an argument for looking at cases where money is borrowed for the purposes of an artificial transaction, and I think it right that we should reserve our position on this.
  However, the principle of these Clauses is not acceptable to us. We believe, as all other previous Chancellors have held, that the charge to tax should be made on net income after allowing expenses necessary to obtain it. We believe that relief should be available, as in the past, for interest on borrowings for all normal personal, family, professional and business purposes; and, accordingly, when we form a Government we shall repeal these Clauses.
  When I made some preliminary remarks on this matter the Chief Secretary said that this was a point of view which he found entirely respectable. Indeed, he could say no other from the experience of some of the countries I have quoted. Thus, while I may not have his agreement, I have his understanding. The Financial Secretary has been mute on this matter, not of malice but perhaps of embarrassment, and I have a feeling that he may have raised a silent cheer as I spoke a moment ago.
  My hon. Friend the Member for Louth (Sir C. Osborne) made an excellent speech. It is entirely right to question the effects of the Bill on the ordinary citizen. As a senior Parliamentarian, my hon. Friend knows that a vote against Third Reading is a vote against everything in the Bill, including not only the things one dislikes but some of the things one may like and some of the machinery of Government. It is well understood, however, that when, as last year, we had a formidable weight of taxation
  1164
  added—it was over £900 million—then, even with that reservation, it was not possible for us to give a silent hearing to the Third Reading, and we voted against it. This year, the position is different and I think that, in the statement which I have just made, I have been able to remove one considerable anxiety of my hon. Friends. I must make it clear that the fact that we do not vote against the Bill does not mean that we view it with approval. I agree very much with my hon. Friend the Member for Guildford (Mr. David Howell), that we must move towards a vastly simpler method of legislation on Finance Bills.
  Mr. Speaker, you have a copy of the Bill and in a few moments you will hold it up and suggest that it be now read a Third time. There are 200 pages in it. Some of it is consolidation—Schedule 20, for instance—and that is welcome. Some of it is useful. Some of it is an addition—an ill-digested and, for all our work over the last three months, still ill-considered addition—to all the mass of legislation which has gone before. Could I invite your attention to the very last page of this Bill, which contains the words:
  "Ordered, by The House of Commons, to be Printed, 26 th July, 1969."?
  We have not yet reached the 26th of July. The Government cannot even get that right.
  I am not sure whether, on a point of order, I cannot ask for the Bill to be thrown out at this stage. The Chancellor is checking. He will find that I am right. The date of 26th July, incidentally, is a Saturday, when very few Bills are printed—or it will be, when we reach it. They mean, I suppose, 26th June, but it is a pleasing thing to see that, as an epitaph among the last words on the Bill, it comes from a Government who do not know what day of the week it is, or which month it is. I suppose that we should be grateful that they have got the year right.
  Mr. Speaker: I do not know whether the hon. Gentleman is raising a point of order, and, if so, whether it was "indefeasible" or "indefensible".
  2.42 p.m.
  The Financial Secretary to the Treasury (Mr. Harold Lever): I must leave the Opposition to make what mileage they can out of misprints in the Finance

  1165
  Bill and other documents produced by the Stationery Office. This is a perfectly legitimate method of argument.
  It would be churlish if I were not, in winding up the Third Reading debate, to acknowledge, on the Government's behalf, the great courtesy, the great intellectual effort and the great contribution made by the Opposition throughout our debates in helping to improve the Bill. It is a little unfortunate that, when we take note of what they say and respond to what is said, not merely from that side but from critics on our own side, in order to perfect the original proposals put before the House, this is taken as a ground for criticism of the Government. No one is asking for gratitude for making these concessions. It is simply what one would expect from an intelligent Government that they should be responsive to intelligent criticisms, and nothing should be said which discourages this virtue, which is not to be taken for granted in Governments.
  I am glad that we have made progress in our discussions, greatly helped by Front Bench and back bench Opposition speakers, in Committee and on the Floor of the House. They are entitled unreservedly to these tributes. They were a first-class Opposition on the Bill and I have not the least difficulty in envisaging many years of success for the Opposition in a similar capacity on future Finance Bills, and much to the public advantage. One could anticipate that with reasonable confidence.
  On our methods of procedure, now that the Chancellor has returned, I have to repress my own heretical tendencies. I feel that we must look again at some of the procedures which we have adopted on Finance Bills always seeking to make an improvement. I agree with the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) that we feel the need increasingly, as legislation on Finance Bills gets more and more complex, to seek a means for protracted study, where possible, and where nothing secret is involved, in advance of the more formal decisions, in discussions of a more restricted character, upstairs and downstairs. How we achieve that is a matter on which we must take counsel together. I also see the difficulty created by the short gap between the end of the Committee stage and the beginning of the Report
  1166
  stage. We operate on a very short time scale, which has circumscribed the time available.
  I do not propose to attempt to turn over again the arguments on the Finance Bill, and I do not think that any hon Member will think me discourteous, because no one expects, on Third Reading, that an argument of special novelty is likely to be uncovered. All the points raised have been thoroughly discussed it previous stages and many hon. Members made their points again today more by way of demonstration than in a desire for a detailed response at this late stage.
  The main purpose of the Bill was the economic purpose outlined by the Chancellor in his Budget statement and in his speech today. I think that it has been successful in its main purpose. The alarmists who thought that it was too much, the pessimists who thought it was too little, seem, as events unfold, to he increasingly discounted. More and more is it becoming obvious that the Chancellor's broad strategy in the Bill was right.
  The hon. Member for Walsall, South complained that the Budget begins with a bang and ends with a whimper, but this is partly inevitable because of our style of handling these things, in which the Chancellor is cast, in making his Budget speech, by the Press and organs of publicity, rather in the rôle of Moses descending from Sinai to find the Israelites making merry before a golden calf and obliged to take appropriate action. My right hon. Friend, cast somewhat surprisingly in this patriarchal rôle, fulfils it dutifully in his opening statement and thereafter we can, through the more routine processes, give calm and detailed consideration to all the Finance Bill proposals.
  We have done so, and we have come to the end of our labours. Whatever differences of opinion we may have had on different items, both sides have contributed to the anxious and detailed discussion and we can now put the Bill to bed, so to speak, with an agreed Third Reading.
  Question put and agreed to.
  Bill accordingly read the Third time and passed.

  PUBLIC WORKS (LOCAL AUTHORITY LOANS)
  2.48 p.m.
  The Financial Secretary to the Treasury (Mr. Harold Lever): I beg to move,
  That the Local Loans (Increase of Limit) Order, 1969, a draft of which was laid before this House on 20th June, be approved.
  This Order increases the limit on the amount of money which the Public Works Loan Board can lend, which used to be done by means of a Public Works Loan Bill and is now done by means of this Order. I do not know whether there is any exhaustive and detailed interest in the technical processes of the Order, but if any hon. Member wants to raise any point I shall be happy to deal with it.
  2.49 p.m.
  Mr. John Nott: The Order increases the borrowing powers of local authorities and it comes immediately after the Third Reading of a Finance Bill which contains a Clause to enable local authorities to borrow abroad. These two matters are, in their way, directly related. I know that the Financial Secretary has been an enthusiastic sponsor of the idea that local authorities should be allowed, within their increased borrowing limits, to borrow abroad. When the Treasury, under the allowance given, enable a local authority for the first time to borrow abroad, may we have an assurance that the local authority concerned will bear a name which will set high abroad the credit of local authorities generally—for example, the Greater London Council, or the Manchester or Birmingham Corporation? When local authorities go abroad to borrow for the first time, we must ensure that a name is offered which is creditworthy in the eye of the lender.
  I make this appeal because recently in the Press there have been indications that some county councils might be the first to lead local authorities in borrowing abroad. They are highly reputable and undoubted borrowers, but foreign lenders do not understand our system. This, I believe, would set the whole notion which the Financial Secretary adopted off in the wrong way. I appeal to him to ensure that the first borrower, within the limits set out in the Order, will be a name which will establish the credit of local authorities borrowing
  1168
  abroad. Let it be a good name for technical borrowing purposes. In my opinion it can be only one of three.
  2.51 p.m.
  Mr. Terence Higgins: When we debated the National Loans Bill, under which this Order is tabled, we tried to move an Amendment to ensure that we should have an opportunity of debate whenever the Government increased the limit by £500 million rather than every time they increased it by £1,000 million. On that occasion, the decision was taken only by the Chairman's casting vote. At the end of a week in which we have had no fewer than four days on the Finance Bill, it is not surprising that anxiety for such a debate has been somewhat diminished and that even the Financial Secretary's enthusiasm for reading a large and detailed brief has somewhat diminished.
  There is one point on which perhaps he would be good enough to give me information, if he has it available. In Committee on the National Loans Bill he pointed out that the limit imposed was on the gross amount, taking no account of the amount of repayment which had taken place from local authorities to those who had given them the loan in the first place through the Loan Commissioners. If he has that figure, perhaps he would give it now or, if not, perhaps he would let us have it on a future occasion. Effectively that increases the limit in the same way as that in which an overdraft might be increased, without making any significant difference to the amount actually advanced to the local authority.
  We do not feel it necessary to divide against this Order, but perhaps the Financial Secretary will tell us at which stage we are likely to be up against the limit. In Committee the Financial Secretary suggested that probably he would have to come to the House in respect of the limit every 18 months whereas my hon. Friends suggested that it might be necessary every two years. In fact, it has taken almost exactly 18 months, but, of course, the Financial Secretary is in a position to determine whether his forecast was right or whether our forecast was right. We ought to know how near we are to the limit. Perhaps he would give some idea at which stage we shall pass the gross figure of

  1169
  £1,000 million set under the present legislation.
  2.53 p.m.
  Mr. Harold Lever: The hon. Member for St. Ives (Mr. Nott) appreciates that he raised a rather technical point and that it is not appropriate for me to answer it across the Floor. He wants the biggest and most powerful name, from the technical point of view, to be presented in the initial borrowing. Beyond registering that point, I cannot usefully discuss with him the mechanics of the operation abroad for raising the money. I am prepared to discuss it with him privately at any time.
  I will inform the hon. Member for Worthing (Mr. Higgins) that we have had repayments of £170 million from local authorities and that we are within £250 million of the limit. In the financial year 1968–69 the Public Works Loan Board lent £597 million. So far in this financial year they have lent about £142 million. That means that there is a balance of about £260 million available for further lending by the Board. It ought to be made clear that what is occuring is not an increase in local authorities' borrowing powers. This is an authorisation to the Public Works Loan Board to lend more to local authorities and it has nothing to do with the total borrowing powers of local authorities.
  By tradition, I have the pleasant task of a concluding comment on a proposal of this sort by asking hon. Members to join me in expressing thanks to the Public Works Loan Commissioners for the services which they have continued to render with such skill and, of course, as we all know, on an entirely voluntary basis.
  Question put and agreed to.
  Resolved,
  That the Local Loans (Increase of Limit) Order, 1969, a draft of which was laid before this House on 20th June, be approved.

  MEDICAL BILL [Lords]
  Not amended (in the Standing Committee), considered; read the Third time and passed.

  NURSES BILL [Lords]
  As amended (in the Standing Committee), considered.
  Mr. Speaker: I have selected all the Amendments on the Order Paper and consequently have not published a list of selections. They are all Government Amendments and I suggest that we take them all together.

Clause 2

  CONSTITUTION OF GENERAL NURSING COUNCIL FOR ENGLAND AND WALES
  2.56 p.m.
  The Under-Secretary of State for the Department of Health and Social Security (Mr. Julian Snow): I beg to move, Amendment No. 1, in page 3, line 25, leave out from 'registered' to 'prescribed' in line 26 and insert:
  'general nurses or nurses registered in any part of the register'.
  I understand that we are taking all the Government Amendments together. They are all merely drafting Amendments consequential on Amendments accepted in Committee. The Amendment to Clause 2, which relates to the General Nursing Council for England and Wales, changes the remaining references to nurses registered in the general part of the register and enrolled in the general part of the roll to read:
  "registered general nurses and enrolled general nurses."
  The Amendments to Clause 3, which relate to the General Nursing Council for Scotland, are made to bring the Scottish provisions into line with the amended Clause 2.
  The Amendments to Schedule 1 introduce consequential definitions of registered general nurse and enrolled general nurse.
  Mr. Maurice Macmillan: I do not wish to detain the House but I wish to thank the Under-Secretary of State for making these Amendments, which were consequential upon representations made in Committee. They will help to meet the doubts and difficulties which were expressed by some sections of the nursing profession about the previous wording of the Bill.
  Amendment agreed to.
  Further Amendment made: No. 2, in line 40, leave out from 'enrolled' to 'prescribed' in line 41 and insert:
  'general nurses or nurses enrolled in any part of the roll'.—[Mr. Snow.]

Clause 3

  CONSTITUTION OF GENERAL NURSING COUNCIL FOR SCOTLAND
  Amendments made: No. 3 in page 5, line 42 leave out from 'be' to 'shall' in line 43 and insert 'registered general nurses'.
  No. 4, in line 43 leave out 'nurses so registered' and insert:
  'registered general nurses or nurses registered in any part of the register prescribed under section 2(2)(f) of this Act;'.—[Mr. Snow.]

Schedule 1

  MINOR AND CONSEQUENTIAL AMENDMENTS
  Amendments made: No. 5, in page 10, line 19 at end insert:
  5. In section 34 of that Act the following definition shall be inserted at the appropriate place:—
  'registered general nurse' means a nurse whose name is included in the general part of the register.
  No. 6, in page 11, line 7, at end insert:
  'enrolled general nurse' means a nurse whose name is included in the general part of the roll.
  No. 7, in page 11, line 16, at end insert:
  'registered general nurse' means a nurse whose name is included in the general part of the register.—[Mr. Snow.]
  Bill read the Third time and passed, with Amendments.

  JUDICIAL OFFICES (SALARIES)
  2.59 p.m.
  The Attorney-General (Sir Elwyn Jones): I beg to move,
  That the Judicial Offices (Salaries) Order, 1969, a draft of which was laid before this House on 11th July, be approved.
  The object of the Order is to increase the salaries of the recorders of Liverpool and Manchester, the county court judges and the Metropolitan magistrates following the salary increases for the higher civil servants recommended by the Standing Advisory Committee on the Pay of Higher Civil Servants—the Plowden Committee. The Order is made by the Lord Chancellor, with the concurrence of the Treasury, under powers contained in the Judicial Offices (Salaries and Pensions) Act, 1957, and the County Courts Act, 1959.
  As the House will be aware, the Plowden Committee recommended increases for Civil Service grades of Under-Secretary and above in three stages. The Government have decided to implement the first stage increases from 1st July, 1969, and these are in the range of 12·7 per cent. to 14·3 per cent. over the 1st September, 1969 rates:
  It has been accepted since the war that the salary levels of the lower judiciary should be kept in step with the salaries of the higher civil servants. It is, therefore, the Government's intention, in seeking the approval of Parliament to this draft Order, to increase these judicial salaries in line with the Plowden recommendations. The average increase is one of 13·5 per cent. over the last increase, which was made by a similar Order in May, 1966. The last increase was, however, related to Civil Service salary increases which were made in September, 1965, nearly four years ago. The annual rate of increase for the judicial officers is, therefore, 3·4 per cent., which is within the Prices and Incomes ceiling.
  The result of the increases will be to raise the salaries of the recorders of Liverpool and Manchester from £6,550 to £7,400. The salaries of county court judges will be raised from £5,775 to £6,550, and the Chief Metropolitan Magistrate will get the same increase. The salaries of the other Metropolitan magistrates will be increased from £5,300 to

  1173
  £6,050. There are now 100 county court judges and 35 Metropolitan magistrates, in addition to the Chief Magistrate. The gross cost of the increases in the salaries proposed by the Order will be about £106,000 a year.
  It is the view of the Government that the proposed increases are an appropriate consequence of the increases that are being made for the higher Civil Service, and I invite the House to approve the Order.
  3.2 p.m.
  Sir Peter Rawlinson: I certainly do not intend to oppose the Order or to controvert anything which the Attorney-General has said, but I am glad that the Order has not gone through wholly on the nod because it is of importance that the House should look at proposals for an increase in the salaries of the lower judiciary As the right hon. and learned Gentleman has said, the lower judiciary bear a relationship to the higher civil servants, and in recent years it has always been held, with the agreement of all, that when there are these revisions of the salaries of the higher civil servants the members of the lower judiciary should, as it were, go along with them.
  We are here dealing with the salaries of 100 county court judges and 35 Metropolitan magistrates who are, apart from the great body of non-professional magistrates, the professional judges to whom so to speak, most people come into contact, either in their minor civil claims or in minor criminal offences. The standard of justice depends on the standard of these men, and it is only right that, as we demand, and get, a high standard from the lower judiciary, they should be paid appropriate and proper salaries. This proposal sees to it that their salaries are properly increased, so I join with the Attorney-General in commending the Order to the House.
  Question put and agreed to.
  Resolved,
  That the Judicial Offices (Salaries) Order, 1969, a draft of which was laid before this House on 11th July, be approved.

  ANTI-DUMPING DUTY (ALARM CLOCKS)
  3.5 p.m.
  The Minister of State, Board of Trade (Mr. William Rodgers): I beg to move,
  That the Anti-Dumping Duty (No. 1) Order, 1969 (S.I., 1969, No. 895), dated 2nd July, 1969, a copy of which was laid before this House on 3rd July, be approved.
  This Order has been made under the Customs Duties (Dumping and Subsidies) Act, 1969. It imposes an anti-dumping duty of 2s. 0d. each on mechanical alarm clocks of a value less than 12s. 0d. each originating in the People's Republic of China. In accordance with normal practice there is provision for relief under Section 2 of the Act in respect of any imports which are shown to the satisfaction of the Board of Trade not to be dumped or not to be dumped to the full extent of the duty.
  An application was received from the British industry in July, 1968, alleging dumping by China. Czechoslovakia, Hungary, Poland and the U.S.S.R. with consequent material injury. Following discussions with the British industry and the provision by them of certain essential additional information, the Board of Trade were satisfied that a prima facie case had been made for an investigation, and a public announcement that the Board of Trade were considering the application was published on 22nd November, 1968 in which representations from interested parties were invited.
  The Board of Trade established fair market prices for alarm clocks from each of the countries named in the application. To do this, use was made for the first time of the powers granted to the Board of Trade in the Customs Duties (Dumping and Subsidies) Amendment Act, 1968, which has since been consolidated in the Customs Duties (Dumping and Subsidies) Act, 1969. These powers enable the Board of Trade to determine fair market prices, in the case of state-trading countries, by reference to the price of identical or comparable goods exported to the United Kingdom from another country.
  In this case the fair market prices were established by reference to the price of similar alarm clocks from the Federal Republic of Germany. The fair market prices were found to be higher than the

  1175
  c.i.f. prices of imports from each of the countries named in 1968 by amounts, varying according to country, between 2s. and 3s. 9d. per clock.
  The House will not expect me to go into details of our findings in relation to dumping and consequent material injury which were based on financial and other information given to the Board of Trade in strict confidence. But, I can assure the House that the case was investigated very thoroughly and our findings were based on a careful study of all the evidence.
  Following discussions with the countries concerned, the trading organisations of the U.S.S.R., Poland, Hungary and Czechoslovakia decided to raise their prices for all shipments entering the United Kingdom from 4th July to the fair market levels determined by the Board of Trade. These assurances have been accepted; we shall see that they are implemented, but otherwise no further action is to be taken.
  Discussions were also held with representatives of the Chinese Government. No corresponding assurances were received, and an Order has therefore been made. If satisfactory assurances are received at some future time, we will, of course, consider revoking the Order.
  The anti-dumping duty in the case of the People's Republic of China took effect from 4th July and I invite the House to approve the Order.
  3.7 p.m.
  Mr. Peter Blaker: On behalf of hon. Members on this side of the House, I welcome this Order. This is a long-standing application. The Minister referred to the application put in on behalf of the industry in July, 1968, but the matter goes back further than that. I take it that the reason that the application he referred to was made in 1968 was that that was the date when the new Act came into effect, but the application had been made on behalf of the industry a number of years before.
  I should like to put to the Minister a number of questions because, as he said, this is the first Order made under these powers. I therefore think it is of general interest to industry as a whole and not only to the makers of alarm clocks.
  Mr. Speaker: Order. This is a debate which has to do with anti-dumping measures against Chinese alarm clocks.
  Mr. Blaker: I am very sensitive to that point, Mr. Speaker, and I hope I may persuade you that what I am about to say is in order and I think that all my questions will be.
  A long time has elapsed since the application was made. It was put in in July, 1968, but already at that time the Ministry had considered two previous applications made by the industry on what must have been very similar facts. Nevertheless, it has taken a year before the Government were able to lay this Order. I recognise that in most cases of a definitive anti-dumping Order six months or thereabouts elapses, but in this case there was a longer period. This was in a situation where I should have expected the time taken to have been shorter because of all the spade-work the Ministry must have put in in relation to applications to the same effect which had already been submitted. Perhaps, therefore, the Minister can explain why such a long time has elapsed.
  How does the new procedure which the hon. Gentleman has explained and which is contained in the 1968 Act, now consolidated in the 1969 Act, differ from the former procedure concerning imports from a State trading country? The Minister will, no doubt, be aware of correspondence with my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) which was referred to in Committee on the 1968 Bill, when the Minister of State, the right hon. Member for Sheffield, Hillsborough (Mr. Darling), explained the practice then adopted by the Department in dealing with applications from State trading countries before the new procedure provided in the Act was available. He said that the Government normally preferred to operate within the framework of bilateral trading agreements with State trading countries and that the Government normally found it easier and quicker to proceed in that way.
  Explaining the way in which the degree of dumping was established, the right hon. Gentleman said:
  "In considering such allegations, we base our decision on a comparison of the landed price…with the ex-works prices of comparable British products and the landed prices

  1177
  of comparable goods imported from other market-economy sources."—[OFFICIAL REPORT, 29th April, 1968; Vol. 763, c. 882.]
  That, I understand, is exactly the same procedure as has been used in this case and as laid down in the 1969 Act.
  In other words, to establish whether there is dumping and the degree of dumping, a comparison is made with the prices of comparable goods imported from other market economy sources. The Minister has said that the goods chosen for comparison this time were from the Federal Republic of Germany. I should like to know from the Minister how the new procedure, which has been used in this case, compares with the former method.
  My third question relates specifically to China. I understand that these alarm clocks have been coming in from China at remarkably low prices, something like 5s. 6d. or 6s. a clock, to which 2s. is to be added as a result of the Order, in addition to the tariff of 2s. 6d. per clock. This is obviously a very low figure, with which it is difficult for the home industry to compete. Can the Minister say what has been the effect in general terms of these dumped clocks on home manufacturers? He has, of course, had to establish that material injury to them has been caused, and I wonder whether he can say to what extent their sales have suffered.
  I observe that there is already a quota for mechanical alarm clocks from the Republic of China amounting to about £20,000 worth of such clocks a year. The yearly import figures for clocks of this class for the last four years have been approximately £20,000 or a little below. In 1965, the value was £21,000 and in 1968, £19,500. That is relatively a small quantity of imports. In spite of this fairly small quota, however, it is still possible for material injury to be caused to British manufacturers by dumping. This is an indication of the sensitivity of the market.
  My next question is very brief: why was West Germany chosen for purposes of comparison? My last question relates to the policing of these arrangements. Under Article 3 of the Order, as the Minister has rightly pointed out, there is provision for remission of duty in certain cases. This will require policing in relation to China, and there is also the question of policing in relation to Eastern European countries which have given
  1178
  assurances. It will be necessary, presumably, to see that their assurances about the future prices which will be charged for their clocks are maintained. It would be helpful to the industry if the Minister would say how this policing is to be done. Subject to those questions. I welcome the Order.
  3.16 p.m.
  Mr. William Rodgers: I will try to help the hon. Gentleman, and, in so far as I fail to answer all his questions, I shall certainly do so by correspondence. I think they are important and relevant to this application.
  I am sorry that it has taken some time to bring forward this Order but, as the hon. Gentleman said, this is the first case under the Act and, whereas there was an application in September, 1963 for an anti-dumping Order, at that time we did not feel it was justified and so, in a sense, it was necessary in different circumstances to begin our inquiries all over again.
  As the House knows, five countries were involved, and in addition it was necessary to carry out further elaborate technical assessments in order to establish precisely what the position has been. I am sorry that it has taken some time. I am sure that it is our wish to bring forward these Orders as fast as possible consistent also with a proper investigation of the facts of the case made.
  The hon. Gentleman asked for a comparison between the present procedures and past procedures, and referred to the correspondence between my right hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) and the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). Under the old procedure it was a question of enabling dumping to be established by reference to domestic prices in the country of export or, alternatively, the costs of production, or prices to third markets. None of these was suitable for eastern area countries. That is why the new method of comparison of imports into the United Kingdom of comparable goods imported from other, market-economy, sources is now used. There is a significant difference here.
  The hon. Gentleman also asked why West Germany was chosen. West Germany is the traditional supplier of

  1179
  comparable alarm clocks. There are very few from other sources except the sources examined on this occasion. I note what the hon. Gentleman says about the quota not being enough, but I think the case has been fairly made here.
  The hon. Gentleman asked about the degree of material injury. Confidential information has been given to the Board in the course of its investigation. I can say that the injury was very serious, but I cannot give the actual figures on this occasion and I do not believe that it would be in the interests of the industry, with which the hon. Gentleman is concerned, that I should do so. The goods are subject to licence, and steps are being taken to ensure that assurances are carried out by the inspection of records by Board of Trade officials and in other ways. We shall do all that we can to ensure that there is no breach.
  I hope that, given those assurances, the House will be prepared to accept the Order.
  Question put and agreed to.
  Resolved
  That the Anti-Dumping Duty (No. 1) Order, 1969 (S.I., 1969, No. 895), dated 2nd July, 1969, a copy of which was laid before this House on 3rd July, be approved.

  CARRIAGE BY AIR ACTS (AMENDMENT ORDER)
  3.20 p.m.
  The Minister of State, Board of Trade (Mr. William Rodgers): I beg to move,
  That the Carriage by Air Acts (Application of Provisions) (Amendment) Order, 1969, a draft of which was laid before this House on 3rd July, be approved.
  This Order amends the Carriage by Air Acts (Application of Provisions) Order 1967, which, among other things, extended to air mail the principles of the Warsaw Convention as amended at The Hague and of the Quadalajara Convention, which impose liability in respect of carriage of goods and limit a carirer's liability in the event of loss or damage occurring during air transport.
  At the time the 1967 Order was made, air mail services were run by the Postmaster-General, who enjoyed certain exemptions from liability in relation to the postal services. In order to preserve these exemptions, the 1967 Order con-
  1180
  tained provisions ensuring that it imposed no liability on the Postmaster-General. The House is aware that, if the Post Office Bill is enacted, we expect the new Post Office to take over the running of the postal services from 1st October next. This House and another place have recently debated the Post Office Bill at length and have decided that the new Post Office should have the same exemptions from liability as the Postmaster-General. It is, therefore, necessary to make a consequential amendment to the 1967 Order so that it will cover the new situation. The Order at present before us, therefore, amends the 1967 Order so that it will cover the new Post Office when it begins operating.
  I should, perhaps, add that Clause 29(3) of the Post Office Bill, if enacted, may well necessitate further amendment of the Carriage by Air Acts (Application of Provisions) Order 1967. That. however, is a more complex issue which will involve prior consultation with those concerned and does not in any way affect the immediate necessity for the present Amendment Order which, I repeat, is designed solely to ensure that any authority established to provide postal services shall enjoy the same immunity as the Postmaster-General at present enjoys in respect of carriage of mails by air.
  Question put and agreed to.

  OBSCENE PUBLICATIONS
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
  3.22 p.m.
  Mr. E. S. Bishop: I am pleased to have opportunity today to draw attention to the operation of the Obscene Publications Acts. I should refer at the outset to the circumstances of an Adjournment debate on a Friday, when numbers in the Chamber are inevitably limited, and the consideration that if one is to exercise freedom the House might possibly have to consider the matters raised without the public being present, with the consequence, I understand, that nothing of what I have to say would appear in HANSARD. These considerations make me very sensitive to the situation and force me to accept the

  1181
  presence of the public, with the restrictions which that may place on hon. Members. None the less, I shall have regard to the people who are present today, and I hope that those who are not here but who read our proceedings will bear in mind that there have been some understandable inhibitions in the presentation of the case.
  The matter which I am raising follows upon correspondence which I have had for some time with the Solicitor-General and the Home Office, to whom I have made representations concerning two magazines. Lest some may wonder whether I am rather sensitive, I say now that my wife and I have been magistrates for many years and we have a family of teenage and 20-year-old daughters. I can fairly say, therefore, that we are not unduly shocked by what we hear or see, and I think that I am sufficiently "with-it" to know that a rolling stone is not just a loose cobble in the ancient market place of Newark.
  I have sent copies of publications to the Ministers to whom I have referred. I regard these publications as not only shocking and disgusting but liable to corrupt and deprave, as specified in the Acts. The Ministers have accepted that, although they may shock and disgust, they cannot be regarded as tending to corrupt or deprave. I understand that this advice has been taken with the guidance of the Director of Public Prosecutions.
  I can well imagine the reluctance which there is to take action in the courts in case the action fails and the publishers of such literature can then feel much safer and freer in their publication. If legislation is such that it is not operated, then the purpose of the Act fails. There is another aspect. If there is legislation and no action is taken, the public, including young people in particular, will feel that there is an unofficial stamp of approval and many will say, "It must be all right to buy such stuff, because otherwise the authorities would stop it being sold." This is a very important point. There is the implied approval to stuff which is continuing to be sold.
  I shall refer in this brief debate only to magazines and not to a wider range of publications, as one could easily do, where there may be some literary merit of sex and its associations being an aspect
  1182
  of a continuing story, although I suspect that the spicy parts of some of our books are concocted first and the whole thing is then wrapped up into a story to ensure good financial returns. The publications to which I refer were not bought at seedy Soho bookshops, where some customers may already be depraved, but from the ordinary kind of High Street shop of good repute, where smokers buy their tobacco, children may buy sweets and workers buy their newspapers. There one can see these magazines which, for obvious reasons, I shall not name. They are piled up next to copies of reputable local and national newspapers.
  Of course, it is important to say this because, in dealing with the Obscene Publications Acts, it is essential to have regard to the people buying them, the circumstances in which they were bought, the reasons for which they were bought and so on, so as to ensure that there is a right definition of the need to recognise the tendency to deprave and corrupt.
  In the particular publications which I have sent to the Minister, there is on one page a series of drawings featuring a man, a rather slobbering, slithering, drooling-at-the-mouth creature, expressing signs of wanting sexual satisfaction as he sees a girl pass by. The series ends with him chasing her with obvious intentions into an alleyway, and he is shown brought abruptly to a halt as he sees her bending down, completely exposed at the back, and even he falls to the ground in shock. One can well imagine what the effect is on decent readers.
  On another page in the magazine there is a fully erected black male sex organ, about nine inches in length, and along its length are four sketches of women in various states of undress. I should have thought that these two illustrations were such that action should have been taken. No one can say that these particular illustrations are in any way a part of any literary or artistic effort. They are, indeed, quite out of place. So far as one can see, their only intention is to sell the magazine in future.
  The dilemma facing Parliament and, of course, the police, is the definition of obscenity and corruption as specified in the Obscene Publications Acts of 1959 and 1964, for on that rests not only the degree of control which may be exercised, but

  1183
  also other Acts which are supplementary to them.
  The test of obscenity in the 1959 Act is given in Clause 1, which says that an article shall be deemed to be obscene if
  "…its effect…is, if taken as a whole, such as to tend to deprave and corrupt persons who are likely, having regard to all the relevant circumstances, to read, see or hear the matter contained or embodied in it."
  This matter has caused a great deal of concern, and the 1964 Act followed a Select Committee Report on the workings of the 1959 Act. The problem of definition was apparent then as it is today, for the Select Committee considered it carefully and its recommendations were embodied in the 1964 legislation.
  Unless we can decide at what stage an article, not merely shocks or disgusts, but has a tendency to corrupt or deprave other measures dependent on definition become useless.
  Section 1 of the Children and Young Persons (Harmful Publications) Act, 1955, says that the
  "Act applies to any book, magazine, or other like work which is of a kind likely to fall into the hands of children or young persons and consists wholly or mainly of stories told in pictures (with or without the addition of written matter), being stories portraying—

  (a) the commission of crimes; or

  (b) acts of violence or cruelty; or

  (c) incidents of a repulsive or horrible nature;

  in such a way that the work as a whole would tend to corrupt a child or young person into whose hands it might fall."
  In an answer to a Parliamentary Question a few days ago which I addressed to the Secretary of State for the Home Department, I was told that there had not been any cases brought under this Act for five years, which was the point of my Question, and I understand that it is also true that no prosecutions have been taken under this Act since its enactment in 1955.
  I suppose that the House should be delighted that this Measure, introduced mainly, I understand, to deal with the flood of horror comics from abroad, has not been operated, because it is thought that no publications considered likely to corrupt children and young persons have fallen into their hands. I should like to think that; because this is the implication from the fact that no action has been taken since 1955.
  1184
  Here I suggest that there may be problems of definition as to whether the material under consideration is liable to corrupt or deprave those who read it. This Act becomes rather pointless unless we are clear on that point. What a blissful situation suggesting that children read only of Mr. Plod the Policeman and that Enid Blyton is their patron saint. I fear that this is far from being true and that in fact if only some of the adult publications came within their range the Act would have been violated, in which case I wonder why proceedings were not brought. Is it not accepted that what may deprave adults may have an even greater tendency often to deprave young people?
  I want now to refer briefly to some correspondence which the hon. Member for Barkston Ash (Mr. Alison) has kindly handed to me and which he has received from the Chief Education Officer of the County Council of the West Riding of Yorkshire. In the correspondence the Chief Education Officer expresses very grave concern about the problems which teachers have to face in schools nowadays. I understand that there has recently appeared in some of the sixth forms in schools in the area a publication whose name I will not give. It is obviously produced by young people and for young people, and it is concerned with protest, and so on. It also advertises a number of publications commercially produced but also aimed at young children. I shall be referring to the publications in a moment. They include the ones on which I have had correspondence with the Minister. Two of them are published in this country. I understand that the Education Officer obtained copies of these papers from a shop in Leeds named as selling them. He has taken extracts from them. If one looks at the extracts one is made aware of the grave problems that face parents and teachers.
  A writer states:
  "One must assume that the Director of Public Prosecutions decided that it was not appropriate to take action against these publications because, although they may shock and disgust, he might find it difficult to prove that they deprave or corrupt."
  Later the letter says:
  "If this is so, there must be many education officers whose imagination would be stretched to the limit wondering what must be committed in order that something may be judged to have a tendency to deprave."

  1185
  The writer goes on to give a photostate copy of some of the advertisements in a publication, and they are identical to the ones with which Ministers and I have been concerned.
  There are a number of these advertisements and it is difficult, in the circumstances in which I am placed this afternoon, not to spread the kind of gospel with which they are concerned. I will only say, summarising them, that they invite young men and women to partake in situations where homosexuality, lesbianism and even bestiality is involved. They even mention some of the paraphernalia with which sexual malpractices may be performed.
  The whole phraseology of these advertisements is designed to arouse the interest of children in these practices. I suggest that the impression is given that these things should appeal to young people who, these days, are really "with it" and that they give the impression that anyone who does not conform to this standard of practice, outlook and activity is a prig, when the reverse is really the case.
  There are a number of advertisements for young men to share flats, as long as they have a certain outlook, and the same for women—students and so on—for initiation into all sorts of sexual experiences, straightforward and otherwise. There are also photographs of women called "Pussycats", "Dandy Jims" and others. Hon. Members will be familiar with these names, and I need not give others.
  There is an extract about the incidence of lesbianism among "Groupies", giving the impression that they think nothing of it and saying that they prefer homosexual and bisexual boys and emphasing that if one can be bisexual that is better still. There is reference to certain practices, including bestiality. The whole tone is disgusting, and I can imagine the problems that face teachers and others dealing with children who may be subject to the corrupting and evil influences to which the publication refers.
  I urge the Minister to recognise that in these publications we are concerned not merely with four-letter words but with some of the advertisements urging people to partake in practices. Although I had every intention of speaking frankly
  1186
  today, I fear, since the Public Gallery is occupied, that my remarks must be very much at a Sunday school level compared with the correspondence that I have received, particularly correspondence received this morning. This causes me and many hon. Members who have seen it very grave concern. We fear that this advertising may encourage people to think that these are normal practices and that they should take part in them. Do these matters come within the confines of the Acts?
  If I can pursue the logic of that, I am saying that if we cannot define clearly what is liable to corrupt and deprave, it brings other Acts into disuse, to some extent—or at least causes difficulties in operating it. I refer to the Post Office Act of 1953 which provides, in Section 11, that a person shall not enclose
  "any indecent or obscene print, painting, photograph, lithograph…book, card or written communication"
  in material to be sent by post. If there is no clear definition of obscenity little can be done by the Post Office to prevent our postal services being used to transmit indecent mail.
  That may account for some of the mail-order literature of a doubtful character. Many hon. Members have recently received order forms sent out by the Julian Press, in which the recipient is offered a 60s. book called "Variations an a Sexual Theme" in which 40 posed photographs of unclothed human models illustrate variations of positions possible in sexual intercourse
  "including basic coital positions …portrayed in intimate detail for full sexual ecstasy"
  Even movements and caresses are included in the "bargain deal". I know that many hon. Members have received this literature which comes from the Julian Press, and I also know how widespread is the concern about this literature.
  It is noted on page 1 that
  "This is a book that dare not be published ten, five, or even one year ago."
  Hon. Members would not protest, possibly, if it were apparent that the book came from reputable medical publishers and was part of a wide range of medical books, but the suggestion is that this book is offered purely—if that is the word—as a commercial proposition. I know of the deep concern of many of my hon. Friends about this firm.

  1187
  A constituent sent me a leaflet offering him
  'unspoilt and uncensored art productions"
  and films at prices ranging from 35s. to £13 for all-male photographs and films of "boy and girls". The letter was sent to a certain address, and the name on the envelope was rather different from that of the occupier. Clearly, this literature is sometimes sent out quite discriminately.
  In a Parliamentary Question to the Chancellor of the Exchequer this week, I asked if he would
  "take steps to restrict further the amount of foreign currency spent abroad on the import of pornographic literature; and what action he is taking to prevent such spending, especially from Scandinavian countries".
  The reply was that
  "The importation of obscene matter is prohibited, and the prohibition is enforced by H.M. Customs."—[OFFICIAL REPORT, 14th July, 1969; Vol. 787, c. 48.]
  That reply gave me the impression that no obscene or pornographic literature comes into the country, and that all the stuff we see on bookstalls is produced here. I can hardly believe that that is true in regard to a situation which we all know exists at present and has done for some time. Here again, I would have thought that greater control could have been exercised about the flood of literature now coming into the country. It will be noted that most of the laws which are designed to protect men, women and children from depravity and corruption are fairly recent, and take into account changing trends. Some hon. Members who may have other ideas about the future of this kind of legislation should bear in mind that it has been brought up to date in fairly recent times.
  Many hon. Members will recognise the problem as arising from, the on the one hand, desire to prevent the circulation of obscene material and, on the other, the need to reduce restraints on personal liberty. But these terms are relative, for excessive liberty can easily become licence. In a society where people have gradually thrown away traditional safeguards, where moral standards are less easily defined, and where basic principles are not held in such high regard, the community must look to Parliament for protection, and that means that at least we should enforce the legislation
  1188
  that we have and perhaps consider what changes should be made in legislation generally—
  Mr. Deputy Speaker (Mr. Sydney Irving): Order. With that remark, the hon. Member goes beyond the scope of the Adjournment debate.
  Mr. Bishop: I appreciate your help, Mr. Deputy Speaker. I am concerned today with the enforcement of the present legislation.
  Those who talk glibly about the liberty of the subject must ask what liberty there is for our young people if society does not protect them from the grossly lowered standards and dangers which seem to be springing from our failure to enforce some of our present laws. What liberty is there for the young girl who, product of an over-permissive society, is bearing a child whose father she does not know and who will be restricted in normal girlhood by being an unmarried mother living on State benefit, or is struggling to maintain a child on the pittance of an affiliation order, or is desperately wanting an abortion she cannot have, or is afflicted with V.D.?
  The figures in the last few years show clearly that the incidence of V.D. is rising, illegitimacy is increasing and the number of abortions which have taken place have certainly risen. This is the price society has to pay for not operating some of the legislation which is in existence as it could be operated. The situation makes a very great demand on the social services.
  The phrase "Publish and be damned" may be a fine one, but it depends who is publishing and who is being damned. With depraving publications the reader may pay the price in the fullest sense of the word. We should be concerned not only with the terrible risks we are taking in the effects on children and young people, but on the chronic misuse of our resources. Although we are to some extent restricting increasing expenditure on education and on school books, we are at the same time spending hundreds of thousands of pounds on this disgusting trash. We are right to ask where the priorities lie.
  Above all, this is a matter concerning people's dignity and anything that lowers and degrades human beings below the level of what their creator intended them

  1189
  to be is to be decisively rejected. I urge the Minister to use his influence to have the Act considered afresh.
  Mr. Speaker: Order. The hon. Gentleman cannot deal with that on this debate, which is an Adjournment debate. He cannot propose changes in legislation. He can only criticise the administration of the present legislation.
  Mr. Bishop: Thank you, for your guidance, Mr. Speaker. I was making the point that we should have another look at the enforcement of the present legislation and was not suggesting that we should necessarily change the law.
  Some will say that we need freedom for young people to make choices. These days the word "freedom" is bandied around a good deal. The morally weak and those without firm principles need our help when the choices have to be made. When they come to the crossroads of life, as they do every day, they are entitled to expect guidance and help from the legislation which is now on the Statute book. If we fail them today as they deal with these problems, then they will be right in the future to curse us for our failure to look after them.
  Although we expend much energy on tackling grave economic and other industrial problems today, I feel that the biggest dilemma facing the country is a moral one. I hone that the Minister will be able to assure us that he will examine the legislation with a view to giving guidance to those who have to take decisions, to make sure the legislation is enforced, and that we have a clear definition of the meaning of the Act. I am sure the country will come to value the steps that we then take.
  3.49 p.m.
  Sir Douglas Glover: I shall not detain the House for many moments this afternoon. I rise prinicpally to congratulate the hon. Member for Newark (Mr. Bishop) for raising this matter in a very responsible way. It is a matter which ought to cause great concern to all hon. Members of this House and we are indebted to the hon. Member. I am sorry that there were so few hon. Members in the House to listen to what he had to say. We have the Obscene Publications Acts on the Statute Book. There can be little doubt in the minds of hon. Members who heard the hon. Member for Newark
  1190
  that some of the publications to which he referred were designed with only one purpose—to corrupt and deprave. That is how they achieved their circulation. I think that in the courts there would have been little difficulty in bringing prosecutions under the Acts which would stand. I ask the Under-Secretary of State to give an indication of how many prosecutions under these Acts there have been in recent years. How are the Acts operated? What advice has been given on their operation?
  The last Act brought about a great reduction in the flow into this country of literature from America for children. But it did not stop the flood of equally dangerous matter arriving in its place. If we were able to stop one type of literature it seems to me that we ought to be able to stop another type on similar grounds.
  Many of us are disturbed by what we see in the bookshops and on periodicals stalls and at street corners, particularly in London. We are disturbed by the sort of publication which is being produced. But they appear to me to be almost ready for the Sunday school collection compared with some of those mentioned by the hon. Member for Newark, which shocked and appalled me, for they are way beyond anything which appears on the ordinary bookstalls. Apparently these publications can be advertised, and presumably sold, through the Press—a publication designed to advertise other publications which are produced purely to deprave and corrupt. That seems to me to offer a classic case in which the courts could have stepped in and taken some action. I ask the Under-Secretary of State whether action will be taken through the courts or whether advice will be given by the Home Office, because it seems to me that the hon. Member for Newark has painted a picture which needs action and not just words.
  3.52 p.m.
  Mr. Kevin McNamara: First, I apologise to the House and to my hon. Friend the Member for Newark (Mr. Bishop) for having been a few moments late for the start of the debate.
  I was much impressed by what my hon. Friend said on a subject which is causing worry to many people, including teachers, parents, leaders of society and

  1191
  others who are concerned about the moral attitudes of the nation. My hon. Friend has not raised a question simply involving curtailing people's liberty or range of choice. Indeed, I am the first to agree that individual responsibility is what matters in these cases. But the individual responsibility of a parent or a teacher must at times be backed by legislation and by the enforcement of existing legislation. We must, therefore, be grateful to my hon. Friend for having raised this point and we look forward to seeing the legislation being more rigorously enforced, if that is possible.
  At times it is very difficult for the police to enforce this type of legislation as so much depends upon legal decisions, on points of law. On occasions much criticism can be levelled against the police if, for example, in one area they seem to be enforcing the law while in another area offenders go scot free. There is bound to be criticism if a publication is banned in town A with the result that its sales rocket by 5,000 in town B. It is a most difficult situation for the police, and we are almost driven to the conclusion that if we are to have a law is should be enforced and that if we do not enforce a law, there is not much purpose in its being on the Statute Book.
  May I turn from the immediate problem which my hon. Friend raised to a problem which is somewhat akin to it and which concerns not only young people but the whole range of our society at every age level. This is something to which he referred in mentioning the Julian Press. He went into detail, saying what the Julian Press stated that it was offering. The first criticism here must cause great difficulties in people in legitimate postal sales business. That is the way in which this organisation seems to have worked. It has engaged in indiscriminate postal advertising throughout the nation. So far as I can gather, it has been working either with telephone books or with electoral registers for the names and addresses of people to whom it sends this publication.
  Mr. Hugh Delargy: Would my hon. Friend repeat the name of that press, since we did not catch it?
  Mr. McNamara: The Julian Press.
  It is one thing to say that a person is entitled, if he wishes, to go into a book-
  1192
  shop and buy a particular volume. It is another thing if, as a result of this type of indiscriminate advertising there is an invasion of his privacy and something which can cause great distress to people in his home if they receive an envelope containing an advertisement.
  These can go to all sorts of people. My wife received a telephone call yesterday from a woman who had been widowed for 23 months who had received an advertisement advising her on how to get a book on sexual techniques. It has come addressed to young people as well, some of whom had just reached adolescence, and who had the same initials as their parents. It came addressed to me, yesterday morning, which shows a certain lack of discrimination by the organisation; after all, I had put down Questions earlier this week on the subject. It went to registered celibates, to ministers of religion and even to the chief detective superintendent of my local police force—
  Mr. Speaker: Order. The hon. Gentleman must tell us what the Minister can do about indiscriminate posting.
  Mr. McNamara: Yes, Mr. Speaker, I was coming on to that.
  Because of this, the Minister should consider this situation very carefully. The objection here is not only to the intrusion of privacy but also on the grounds which my hon. Friend mentioned when he was talking about the standards which we expect in our society, and the lead which we should be giving to people.
  The thing which I find most objectionable about this type of literature and advertising is this, printed in red in one of their publications:
  "For only with the universal acceptance that the path to a complete and enduring human relationship lies through the fullest sexual ecstasy between a couple in love does this book have such immediate relevance."
  I find this particularly appalling. Obviously, sexual relationships have a most important part to play in the relationship between married people, but it is not the only part. It is, perhaps, of major importance in some relationships, but it is not in others.
  But the whole feeling behind this type of advertising is that only if a person reaches a degree of sexual perfection in what are commonly termed "techniques"

  1193
  will there be a lasting or a happy marriage. This is not what marriage is completely about. It is also about raising children, about tolerance and respect for individuals and about understanding of their dignity and their nature. The attitude of these books is the sort of atmosphere which says that sex, and sex alone, is the key. It is this literature that I find most objectionable —
  Mr. Speaker: Order. I am not questioning anything which the hon. Gentleman has said, but he must come to what the Minister can do about it without changing the law.
  Mr. McNamara: Yes, Sir. This is where I can see that the police may have a difficulty. If one enforces the Post Office laws, as my hon. Friend said, it is an offence only if the material is sent through the post. It is doubtful whether an invitation sent through the post to treat for these articles creates an offence. The police are therefore in a very difficult position—
  It being Four o'clock, the Motion for the Adjournment of the House lapsed, without Question put.
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]
  Mr. McNamara: If the police were to send £3, and received this publication through the post, would they, while trying to protect society, be inciting other people to commit a crime or procure the committal of a crime? I wonder what sort of advice the Home Office will give to chief constables about advertisements of this nature which tread the tightrope between legality and illegality with such delicacy.
  This whole matter has caused tremendous concern throughout the country. It was raised at a public meeting on a local housing estate in my constituency last Friday evening. A great number of hon. Members have had correspondence on the subject. People are at a loss to know what they can do to protect themselves, their homes and their families against this invasion of privacy. My advice to them is to tear up the advertisement and post it back in the prepaid business reply envelope they receive from
  1194
  the firm, so showing their contempt and putting the firm to some expense.
  The case of the Julian Press has come up because it was published and has been written about, but the Under-Secretary knows that hon. Members have written to the Department on many occasions, and have sent examples, of the sort of thing sent through the post which has caused offence. We have never raised the subject on the Floor of the House because we have not wished to give these people cheap publicity. After all, if one publicises small boys throwing bricks over railway bridges as a result of which an engine driver is killed, someone else may follow their example. This is a serious matter, and it deserves the attention of the House.
  4.3 p.m.
  The Under-Secretary of State for the Home Department (Mr. Merlyn Rees): Before I make any comment on the subject raised by my hon. Friend the Member for Newark (Mr. Bishop) and spoken to by other hon. Members, I should like to make the Home Secretary's position quite clear. My right hon. Friend is responsible for the form of the law relating to obscene publications but he has no responsibility for the enforcement of that law. Enforcement is entirely a matter for the police and for the Director of Public Prosecutions. This is not only true of the matters raised by my hon. Friend the Member for Newark, but answers the question posed a moment ago by my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara). Although, therefore, I can say without hesitation, as a parent and as a former teacher, that I agree with my hon. Friend's view of much of the material to which he has referred, it is not for me, as a Minister, to give any opinion in the way in which the law is enforced.
  Here, perhaps, I may correct the impression given by my hon. Friend the Member for Newark when he said, in effect, that Ministers have accepted that though this material may shock and disgust it does not corrupt or deprave. Ministers could not express any opinion on the material: they could merely give information about the current interpretation of the law by the courts, the Director of Public Prosecutions and the police.

  1195
  I should like to give as much information as I can about enforcement proceedings to help the hon. Member who is particularly concerned about magazines which are displayed at, and can be readily bought at, ordinary bookshops and bookstalls. In raising this issue he focused attention on material which offends against the present law.
  I think it relevant to mention that a great many foreign magazines which otherwise might find their way on to our bookstalls are prevented from doing so by the operation of Section 42 of the Customs Consolidation Act, 1876. This prohibits the importation of obscene prints, paintings, photographs, books, cards lithographic or other engravings or any other indecent or obscene articles.
  If Customs officials come across material subject to this prohibition, they have power to detain it under the Customs and Excise Act, 1952. The hon. Member was given information about the number of books and magazines seized in this way during the past 10 years in a Written Answer yesterday to a Question put by him to the Chancellor of the Exchequer. Perhaps, because it is important, I would take the opportunity of correcting the report of this information given on page 2 of this morning's Times, in case it misled my hon. Friend and other hon. Members. All the material seized was forfeited and probably destroyed, but in every case of seizure the importer is sent a notice which gives him the right to show that the goods are not liable to seizure.
  When such a claim is made, the case can be taken to a magistrates' court for the magistrates to decide whether or not the material in question is indecent or obscene. In 1968–69 and 1960–61, no such claims were made. In 1964–65 proceedings were undertaken as a result of claims and 152,254 books and magazines were forfeited after the proceedings in addition to the material destroyed without proceedings being taken. Because I think it important to develop this point, I will broaden the Answer given to my hon. Friend. In 1966–67 165 trade seizures involved 1,280,292 magazines, in 1967–68 245 trade seizures involved 611,917 magazines and in 1968–69 164 seizures involved 792,211 magazines. I have dealt only with magazines, although
  1196
  of course there are relevant figures for books as well. I hope this clears up any possible misunderstanding as to the scope of this part of the legislation.
  The essential purpose of the Customs legislation is to deal with commercial consignments of pornography and most of the material seized in this way consists of trade consignments, shipped in bulk, usually from publishers in the United States sent to booksellers in this country. This brings me to the point made by my hon. Friend about the operation of the Children and Young Persons (Harmful Publications) Act, 1955. My hon. Friend said that the fact that no proceedings were brought under that Act since its enactment suggested that it has not been properly operated, but the primary purpose was to supplement the Customs legislation by deliberately prohibiting the importation of large numbers of horror comics. This was totally successful in that the mischief ceased immediately the Act was passed.
  There has subsequently been little attempt to import horror comics, and there has been no prosecution for publishing them here. Generally, the kind of magazines to which my hon. Friend has referred would not be covered by the definition of "harmful publications" contained in the 1955 Act, since its main concern was with books or magazines consisting wholly or mainly of stories told in pictures. If these magazines are considered to be harmful, therefore, it would be more appropriate to prosecute under the Obscene Publications Act, 1959 and 1964, than under the 1955 Act; and that is why it has not been necessary to use the latter.
  The prevention of the importation of indecent and obscene magazines deals with only one part of the problem. As regards material published in this country, the Obscene Publications Acts, 1959 and 1964, make it an offence to circulate, sell, let on hire, give, lend, or offer for sale or for letting on hire any obscene article. If the magazine to which my hon. Friend referred are obscene, proceedings can be taken.
  I have already said that the enforcement of the law is a matter for the police. It is open to anyone who thinks that a particular magazine or book or any other article is obscene to give full particulars

  1197
  to the police, who will decide whether proceedings should be instituted. In most instances the police will consult the Director of Public Prosecutions, who will be able to advise them as to whether action under the Obscene Publications Acts would be appropriate. In giving this advice, the Director takes into account his knowledge of the general attitude of the courts and the consideration that the publicity attending an unsuccessful prosecution may well result in an even greater distribution of the kind of material complained of.
  My hon. Friend quoted from a publication that he said had been found in the West Riding and which, I think he said, had been purchased at or which came from—I am not quite certain—premises in my own city of Leeds. Because this is now, as I understand it, in the hands of the Director of Public Prosecutions, it is not a matter on which I should comment today.
  Whatever view the Director holds, it is also open to any individual to initiate a private prosecution, although, for a variety of reasons, this is rarely done. I cannot say how many proceedings are taken under the Obscene Publications Acts against the kind of magazines at present in question, because books and magazines are not recorded separately for statistical purposes. However, the number of people prosecuted under these Acts in 1966 was 115, in 1967 it was 105, and in 1968 it was 124. Therefore, there can be no doubt but that action is being taken to enforce the Acts, but whether publishers of those particular magazines are prosecuted must depend on whether the magazines are thought to be obscene within the meaning of the Acts.
  This brings us to the central issue. What hon. Members, my hon. Friend the Member for Newark in particular, have been saying is that there is a difference of opinion over what constitutes obscenity for the purpose of the criminal law. It is, therefore, the definition of "obscenity" to which we must look. The definition is as follows, and it is this that we have to take into account:
  "an article shall be deemed to be obscene if its effect…is, if taken as a whole, such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it."
  1198
  This definition in the 1959 Act follows the recommendation of the Select Committee on Obscene Publications which reported at the beginning of 1958. The Committee based its definition on the ruling of Chief Justice Cockburn in 1868 that the test of obscenity should be
  "whether the tendency of the matter charged as obscenity is to deprave and corrupt those…into whose hands a publication of this sort may fall."
  As Mr. Justice Stable pointed out in Regina v. Secker in 1954, the charge is not that the tendency of the article is to shock or disgust, but to deprave and corrupt. The Committee considered that, although the expression "deprave and corrupt" was difficult to define with academic precision, it would be preferable to retain it in default of a better alternative. They considered the possibility of starting afresh with a completely new definition but agreed with the Society of Authors that this would be merely "swapping horses", and that we should find ourselves in the courts forced back on the use of dictionaries and, following the inevitable circle, come right back to where we began. This is why the basic definition of obscenity—the tendency to deprave and corrupt—was left unchanged.
  The Committee recommended that the common law definition should be clarified in two respects. In the first place, they agreed that in determining whether the tendency of the material was to deprave and corrupt the work should be judged "as a whole". This means that the courts cannot look at a single illustration of the kind described by my hon. Friend and decide on the basis of that one picture that a whole magazine is obscene or indecent under the Act. This may seem over-liberal, but the alternative, under which the work could be judged obscene by reference to isolated passages without considering the total effect would, as the Committee pointed out, if taken to its logical conclusion, deprive the reading public of the works of Shakespeare, Chaucer, Fielding and Smollett, except in expurgated versions.
  The second clarification was to require that all the circumstances should be taken into consideration when deciding who would be likely to read or hear the material concerned. This requires the court to look at the circumstances in

  1199
  which any article is circulated or distributed, and enables a narrower view to be taken of obscenity where direct distribution to young people is concerned. A special safeguard is thus provided for them. This means that the fact that a magazine has been on sale in a shop in which children can buy sweets and comics—the situation which was of particular abhorrence to my hon. Friend—would be a relevant consideration in any criminal proceedings.
  I have spent some time describing the definition of obscenity and have taken advantage of the little extra time that we have because this is the important matter in the answer to my hon. Friend and in the wider discussions that are taking place. The definition is wide and enables proceedings to be taken against these magazines under the Obscene Publications Acts, if they have a tendency to deprave and corrupt. This brings me back to that central issue.
  The definition contained in the Acts is wide enough to cover anything which may be considered obscene, but it is for the courts to decide in any particular instance whether any material is obscene, whether it has a tendency to deprave and corrupt. It was the deliberate intention of Parliament that this should be so.
  I should point out that what may be considered indecent or obscene in one context may not be in another. What may be acceptable in a medical text book may not be acceptable in a teenager's magazine. That is why it is essential that the courts should be able to decide, as a matter of fact, in the circumstances of each case, whether the material complained of is of such a character as to make it criminally obscene.
  But it is not only a question of facts. The concept of what is likely to deprave and corrupt changes rapidly. When George Eliot's novel "Adam Bede" was first published in the last century it was considered as indecent and likely to corrupt because it gave a detailed description of the experiences of an unmarried mother. Such condemnation would be unthinkable now. In the last 10 years concepts of indecency and obscenity have changed perhaps more rapidly than ever before. That is a matter in which it
  1200
  is impossible to arrive at objective criteria.
  May I quote the leader in The Times last Wednesday, which commended itself to me and perhaps it will do so to the House:
  "There will probably never be a truly satisfactory law of obscenity. Its application will always depend to some extent upon subjective judgment and therefore on prevailing fashions of thought."
  I think it would be relevant if in this debate I mentioned that the Select Committee specifically said that in drafting their amended definition they had been particularly careful to avoid increasing the existing difficulties in dealing with the trade in pornography while making sure that there should be no undue interference with the free expression of opinion and the rights of the individual, which characteristically my hon. Friend the Member for Kingston upon Hull, North used as the starting point in what he had to say. The Select Committee was treading the difficult path between total permissiveness and unjustifiable restriction. It was attempting to achieve a rational balance between the views of those who believe in complete freedom of expression and those who believe that expression should be more strictly regulated. This question is now moving into the field of current discussion, but that is what the existing legislation is based upon.
  It would be outside the scope of this debate to comment further on definitions. I have tried to show that the definition does bite in a good many cases which, I think, concern hon. Members. At the same time, we have to remember that what we are dealing with is conduct which should be a criminal offence. We are not dealing with immorality. Immorality as such is not an offence against the law. We are dealing with an area in which it is necessary to draw a line between what is simply offensive and what is so offensive and harmful as to justify involving the sanctions of the criminal law to eliminate it.
  There are no objective criteria which show where that line is to be drawn. The function of the present law is not to lay down an immutable standard of test but to provide means of proscribing material where it can be shown that such material is harmful because of its tendency to deprave or to corrupt.

  1201
  I come now to the point raised by my hon. Friend the Member for Kingston upon Hull, North, who complained that his constituents had received distasteful circulars through the post without having asked for them. The same matter has been raised by other hon. Members in recent months. My hon. Friend mentioned one of the publications, and there is another which hon. Members have written to me about as well.
  It is possible to take action against material sent through the post if it comes within Section 11 of the Post Office Act, 1953, which prohibits, among other things, the sending of a postal packet containing anything indecent or obscene. This enables me to reply also to my hon. Friend the Member for Newark on a similar point. Use is made of that provision. In 1968, about 6,000 postal packets were found to be in contravention of it. Most of the material was detained and destroyed, and successful prosecutions were taken by the Director of Public Prosecutions in 21 oases. The Obscene Publication Acts, 1959 and 1964 also may have some bearing if the material tends to deprave or corrupt anyone likely to read it.
  We have referred the circulars to the Director of Public Prosecutions, who has decided that the circulars themselves cannot be considered either indecent or obscene, even if the books which they advertise are indecent or obscene. There would, therefore, be no action which could be taken against the circulars. In view of the Director's opinion that pro-
  1202
  ceedings should not be taken against these circulars, I have advised other hon. Members, and I advise my hon. Friend, that their constituents should write to the publishers of the circulars telling them that they do not wish to receive any more material of that kind. Also, I think, the variation on that theme suggested by my hon. Friend the Member for Kingston upon Hull, North might commend itself to other hon. Members.
  My hon. Friend the Member for Newark has rendered a valuable service in raising this subject. I am inclined to think that a social climate in which issues of this kind are seen as subjects for serious concern and discussion is a healthier one than when debatable issues are thought to be soluble in, so to speak, absolute terms, and I think that it is healthy also that the subject can be discussed at all, as it might not nave been in some circles 10 or 15 years ago. There is no doubt that the question of how far the criminal law should control what we can or choose to see and read is exercising many people. I hope that I have made it clear that the solution to the present difficulties inevitably involves some subjective judgment, which can only be left to the determination of the courts in individual cases. This is a responsibility which the police and the courts are continuing to discharge.
  Question put and agreed to.
  Adjourned accordingly at twenty-five minutes past Four o'clock.

AGRICULTURE, FISHERIES AND FOOD
  Farne Islands (Seals)
  Farne Islands (Seals)
  WELSH COURTS OF LAW (INTERPRETERS)
  WELSH COURTS OF LAW (INTERPRETERS)
MINISTRY OF DEFENCE
  Procurement
  Procurement
  Standardisation and Variety Reduction
  Standardisation and Variety Reduction
  Contracts Directorate
  Contracts Directorate
  Defence Force Officers, Trinidad and Tobago (Training)
  Defence Force Officers, Trinidad and Tobago (Training)
  CIVILIAN AND CRIMINAL TRIALS (DELAYS)
  CIVILIAN AND CRIMINAL TRIALS (DELAYS)
ECONOMIC AFFAIRS
  Severnside Development (Green Paper)
  Severnside Development (Green Paper)
EDUCATION AND SCIENCE
  Musicians, Scotland (Employment)
  Musicians, Scotland (Employment)
  Teachers (Recruitment)
  Teachers (Recruitment)
  Speech Therapists
  Speech Therapists
EMPLOYMENT AND PRODUCTIVITY
  Industrial Accidents
  Industrial Accidents
  Industrial Health and Welfare Regulations (Implementation)
  Industrial Health and Welfare Regulations (Implementation)
  Farmers (Agricultural Training Board Levy)
  Farmers (Agricultural Training Board Levy)
  Road Transport Training Scheme
  Road Transport Training Scheme
  Cost of Living
  Cost of Living
  Service Industries, Scotland (Employment)
  Service Industries, Scotland (Employment)
  Self-Employed Persons (Scotland)
  Self-Employed Persons (Scotland)
  Employment Statistics (Scotland)
  Employment Statistics (Scotland)
  Redundancy Payments
  Redundancy Payments
FOREIGN AND COMMONWEALTH AFFAIRS
  Mediterranean (N.A.T.O. Naval Force)
  Mediterranean (N.A.T.O. Naval Force)
  Space Activities (Conference)
  Space Activities (Conference)
  Overseas Civil Service
  Overseas Civil Service
  Gibraltar (Fishing Rights)
  Gibraltar (Fishing Rights)
HOME DEPARTMENT
  Speed Recording Equipment
  Speed Recording Equipment
  Mr. Letlakha
  Mr. Letlakha
  Crime (Statistics)
  Crime (Statistics)
  Civilian Prison (South-West)
  Civilian Prison (South-West)
LOCAL GOVERNMENT
  Construction Materials (Bulk Purchase)
  Construction Materials (Bulk Purchase)
HOUSING
  Council Houses
  Council Houses
  Houses (Compulsory Purchase)
  Houses (Compulsory Purchase)
  New Towns
  New Towns
OVERSEAS DEVELOPMENT
  Overseas Aid
  Overseas Aid
WIRELESS AND TELEVISION
  Licence Fees
  Licence Fees
  Ships and Aircraft (Distress Signals)
  Ships and Aircraft (Distress Signals)
POST OFFICE
  Welsh Post Offices (Bilingual Signs)
  Welsh Post Offices (Bilingual Signs)
SCOTLAND
  Kyle of Lochalsh—Kyleakin (Ferry Service)
  Kyle of Lochalsh—Kyleakin (Ferry Service)
  Service Industries (Employment)
  Service Industries (Employment)
SOCIAL SERVICES
  Industrial Accidents
  Industrial Accidents
  Supplementary Benefit
  Supplementary Benefit
  Product Design
  Product Design
  Seebohm Report
  Seebohm Report
  Procurement
  Procurement
  Contracts Directorate
  Contracts Directorate
  Standardisation and Variety Reduction (Staff)
  Standardisation and Variety Reduction (Staff)
  Nursing Home New Cross Road (Abortions)
  Nursing Home New Cross Road (Abortions)
  Departmental Staff (Pay)
  Departmental Staff (Pay)
  Local Authority Welfare Services (Charges)
  Local Authority Welfare Services (Charges)
HOSPITALS
  Casualty Departments (Staff)
  Casualty Departments (Staff)
  Bacterium E coli 0.114
  Bacterium E coli 0.114
HEALTH
  Doctors and Dentists (Disciplinary Procedures)
  Doctors and Dentists (Disciplinary Procedures)
  Leprosy
  Leprosy
  Rural Dispensing (Northumberland)
  Rural Dispensing (Northumberland)
TECHNOLOGY
  Lattice Transmission Towers (Construction)
  Lattice Transmission Towers (Construction)
MINISTRY OF POWER
  Nationalised Industries
  Nationalised Industries
  Telecommunications Satellites (Launcher)
  Telecommunications Satellites (Launcher)
BOARD OF TRADE
  Advance Factories, Scotland (New Jobs)
  Advance Factories, Scotland (New Jobs)
  Fruit Pulp and Fruit Products (Imports from East Europe)
  Fruit Pulp and Fruit Products (Imports from East Europe)
AVIATION
  Independent Airlines (Scotland- Europe Services)
  Independent Airlines (Scotland- Europe Services)
TRANSPORT
  Procurement
  Procurement
  Contracts Directorate
  Contracts Directorate
  Snow-Clearing Equipment
  Snow-Clearing Equipment
  Driving Licences (Suspension)
  Driving Licences (Suspension)
ROADS
  A38 Road
  A38 Road
  Minor Roads (Maintenance Expenditure)
  Minor Roads (Maintenance Expenditure)
NATIONAL FINANCE
  A.A. and R.A.C. (Representations)
  A.A. and R.A.C. (Representations)
  Surtax
  Surtax
  Gold Coins
  Gold Coins
  Selective Employment Tax
  Selective Employment Tax
  Civil Servants (Car Mileage Allowance)
  Civil Servants (Car Mileage Allowance)
  Treasury (Staff)
  Treasury (Staff)
  Senior Executive Officers, Treasury (Secretarial Services)
  Senior Executive Officers, Treasury (Secretarial Services)
  Imports (Public Account)
  Imports (Public Account)
WALES
  Migration
  Migration
  National Parks (Public Signs and Notices)
  National Parks (Public Signs and Notices)

Preamble
The House met at eleven of the clock: The Lord Grenfell on the Woolsack.
Prayers—Read by the Lord Bishop of Leicester.

BIOLOGICAL AND CHEMICAL WARFARE: U.N. DRAFT CONVENTION
Lord BROCKWAY: My Lords, I beg leave to ask the Question which stands in my Dame on the Order Paper,
[The Question was as follows:
To ask Her Majesty's Government what proposals they are making to the Disarmament Committee at Geneva for the prohibition of biological and chemical warfare and what has been the response.]
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Shepherd): My Lords, as my right honourable friend the Minister of State for Foreign and Commonwealth Affairs with special responsibility for disarmament said in another place on July 10, he tabled on that day in the Eighteen-Nation Disarmament Committee at Geneva a draft Convention for the Prohibition of Biological Methods of Warfare, with an associated Security Council resolution; these documents have now been published as Command 4113. We are hopeful that urgent consideration will now be given to our draft Convention in the Eighteen-Nation Disarmament Committee and we look forward to receiving the comments of other countries on it.
Lord BROCKWAY: My Lords, while thanking my noble friend for that reply, may I ask him whether he is aware that many of us want to congratulate Her Majesty's Government and our Minister of Disarmament on bringing this Convention forward? I should like to ask just two questions. The first is this. Is it still necessary to separate biological and chemical warfare in the Convention?
562
While, in the first instance, the Report says that international opinion requires this, is it not the case now that there has been an extraordinary advance in international opinion; in the United Nations resolution extending "chemical" to "biological" and in the extraordinary decision by the United States Senate Armed Services Committee to abolish all expenditure on both chemical and biological warfare? In view of this new open atmosphere, could not this Convention be extended to chemical as well as biological warfare?
Lord SHEPHERD: My Lords, my noble friend will remember that in a recent debate on this subject I explained some of the difficulties that confront us in regard to chemical agents. The view of Her Majesty's Government was that we were more likely to make progress if we treated these two as separate subjects. We think there is perhaps a greater need to deal with biological than with chemical agents, in view of the consequences of biological warfare. But my noble friend will see that if the draft Convention was accepted the countries would undertake to proceed and continue with discussions and negotiations in the chemical field.
Lord BROCKWAY: My Lords, I thank my noble friend again. My second question is this. In view of the apparent fact that Soviet Russia is disinclined to support this Convention because of its fears of the absence of China from the Disarmament Conference, would it not be possible to take, through the British representation in China, independent diplomatic steps to try to secure the support of China for this Convention?
Lord SHEPHERD: My Lords, is to what is or may be the future attitude of Soviet Russia towards this Convent on I should not wish to speak, because we are in the very early stages of negotiations. Clearly, China is a country which we should wish to see one day associated with this Convention as also with other forms of the United Nations Charter. But I should not have thought that at this present stage such an approach would bring the results that we should wish to see. However, we must certainly bear this in mind.

SUPPLEMENTARY BENEFIT (DETERMINATION OF REQUIREMENTS) REGULATIONS 1969
11.10 a.m.
Baroness PHILLIPS: I beg to move that the Supplementary Benefit (Determination of Requirements) Regulations 1969, the draft of which was laid before this House on June 17 be approved. I have already had occasion, when moving the Second Reading of the National Insurance (No. 2) Bill the day before yesterday, to explain the general purpose of these Regulations, and I will therefore speak on them very briefly today. The main increases in supplementary benefit rates proposed are 5s. for the single householder and 8s. for the married couple: as I explained to your Lordships, this ensures parity over the period since 1967 with the main National Insurance increases. Appropriate increases are proposed in the rates of benefit for other adults and for children. The increases proposed will benefit over 2½ million claimants and, when dependants are included, some 4 million people in all, representing, in the main, the most vulnerable members of our community: the elderly, the sick and disabled, widows, fatherless families and others who are not in a position to support themselves.
The cost of these increases, taken by themselves, would be an additional £42 million in the first full year; but because of the higher increases in National Insurance and other benefits which will be received by some three-quarters of all supplementary benefit claimants, there will be a net saving (on supplementary benefits alone) of some £23 million. This has to be seen in the context of an estimated cost, taking all these changes into account, of some £470 million for supplementary benefits as a whole. I beg to move.
Moved, That the Draft Supplementary Benefit (Determination of Requirements) Regulations 1969, laid before the House on 17th June, be approved.—(Baroness Phillips.)
Lord DRUMALBYN: My Lords, this is the customary consequence of any uprating of National Insurance benefits, and we certainly would not seek to disagree with the steps that have been taken in this regard. I am right in thinking (am
564
I not?) that the ultimate effect of these Regulations will be to leave the supplementary benefits 4s. behind the National Insurance rates for a single person, and 5s. for a married person. Of course, at the same time, there is the long-term addition of 9s., which in the case of those eligible for supplementary pensions, and those of a lower pension age who have been receiving supplementary allowance for two years, is added to their requirement in calculating their needs.
I should like to ask one or two questions here. First, what alteration is being made in the allowance for personal requirements in the case of people in local authority homes and hospitals? The allowance was 18s. a year ago, according to the Ministry of Social Security Report published in July, last year. I ask this question because this is a point that is a little apt to be overlooked, and it seems to me logical that the allowance for personal requirements in these circumstances should be increased at the same time.
The second question I should like to ask is on the disregard of earnings, which is at present £2. Here again, when we have rising costs of living, rising prices, this figure ought also to be varied from time to time. I was wondering whether it is the intention to move it on this occasion. After all, the exemption limit for payment of National Insurance benefits is now being moved, and it would seem to me possibly justifiable also to move the disregard of earnings. There is also the disregard of other income, which has stood at the figure of £1 for some time. We always have to have regard to these levels when we are considering rates. The amount which the noble Lady has just given to this House, £470 million, is a very considerable amount and well over double what it was in 1964–65.
We all want to make certain that the poorest people in the country are looked after, but I think it is only fair to point out that in the past Governments have been attacked because of the size of this amount, and it has been argued that the size of the amount is due to the fact that the National Insurance levels were not adequate. It is remarkable how these amounts have increased over the years, and one has also to bear in mind that there are some people who are entirely dependent on supplementary benefits.

565
For example, I understand, that in 1967 there were still 183, 000 people over pension age who were entirely dependent on supplementary benefits. I wonder whether the noble Baroness can tell us what that figure is today. This again is a figure to which we must have constant regard.
11.16 a.m.
Lord ILFORD: My Lords, I shall detain your Lordships for only a very few moments. There are one or two comments I should like to make. Naturally, I have followed the progress of the Supplementary Benefits Commission with particular interest. I spent ten years of my life on the National Assistance Board. I am still not convinced that the best way of administering this service is not through a separate Department enjoying a considerable measure of independence, as I did when I was Chairman of the Board. That is a matter of opinion, and at present the system is completely transformed and integrated much more closely than it was in my day with the Ministry of National Insurance.
There is only one point that I should like to put to the noble Baroness, and I apologise to her for not having given notice of this. In the memorandum which she has circulated she refers to the addition of 10s. a week which is made to the requirements of people over pension age, and to others apart from the unemployed, who have received supplementary benefit for two years. That is not altogether a new payment. I remember that when I was at the Assistance Board we dealt with this matter of an additional allowance to certain classes of person in a rather different way. We paid what we called, "exceptional needs grants". Unlike the uniform payment of 10s., which is made now, the exceptional needs grants were assessed upon the actual needs of the individual who received the grant. That resulted in some cases in a supplementary grant a good deal less than 10s. But there were cases—very many cases indeed, and I should almost go so far as to say there were more cases where this happened than not—where the exceptional needs exceeded the 10s. payment which is made now.
I do not know whether the Minister has power to make an additional exceptional grant if one is required. If the
566
Minister is not able to make a supplementary allowance in a case where the need exceeds 10s., it is a little difficult to see how he meets these very difficult cases where the exceptional needs are high. In some cases they were quite extraordinarily high, particularly in cases of crippled persons.
The other matter I should like to refer to very shortly is this. Every increase in supplementary benefit rate results in a good deal of disappointment when it is accompanied by the increase in the insurance rate, as it will be in the case of this increase. I am not saying for one moment that this disappointment is justified—it is not—but my experience was exactly the same as I expect the Minister is experiencing it now. A person who expects to get an increase in his pension of 10s. finds he gets only an increase of 5s. It is perfectly true he had the other 5s. six months age, but six months is a long time and that is forgotten. There is nothing you can do about this.
I was confronted with this problem for many years. I made sure that my visiting officers thoroughly understood what was going to happen in each case, and when they paid their calls they explained it as fully as possible to the pensioner. It may be that since I left the Board some other method has been found of enlightening the pensioners as to what they are really getting. On the face of it, they are getting only half the increase in the pension which the popular Press told them they would receive. I hope the noble Baroness will be able to tell us that something if; now done to allay the disappointment—unjustified, but nevertheless very real—which many of these beneficiaries will feel when they find that they are not to receive the full amount of the pension increase.
Baroness PHILLIPS: My Lords, if I may take the last speaker first, using the term in the biblical sense, I should like to thank the noble Lord, Lord Ilford, for his contribution and to pay great tribute to his work, which I recall reading about and still read of when dealing with these documents. I would assure the noble Lord that the visiting officers make every effort to explain these matters to the beneficiaries. I know personally from my work with old

567
people, especially the retirement pensioners and those on supplementary benefits, what a marvellous relationship is established between them and the visiting officers. They regard the visiting officers as their friends whom they can ask for advice, not only on matters of pension benefits but on other matters, and I assure the noble Lord that this is a splendid relationship that I have seen at first hand. I would also point out, as I am sure the noble Lord will know, that the special leaflet explaining the changes in supplementary benefit is sent to all these people and is explained, as necessary, by the visiting officer.
Lord ILFORD: My Lords, unfortunately these people do not read leaflets very carefully. The noble Baroness will receive a lot of letters from Members of Parliament for whom the leaflet is more appropriate.
Baroness PHILLIPS: I am sure the noble Lord will agree with me that many leaflets which are issued to the general public need a certain amount of explanation, but in this particular case the visiting officers recognise that this is part of their function.
I would assure the noble Lord—although he has not mentioned it this morning I know he is particularly concerned about the non-pensioners—that more work is being done in an effort to bring into the net the people who are entitled to benefit but who often do not claim it because they do not know about it. I trust the noble Lord has seen the new leaflet called The Right to Help, which is very good and which clearly explains the principal benefits which they may have.
I feel I owe an apology to the noble Lord, Lord Drumalbyn, because I am afraid I did not adequately deal with his excellent speech the day before yesterday, which was even better when I read it than when I listened to it. The fact that I did not deal with all the points was largely due to pressure of business, which we are under again this morning, as the noble Lord will know. First, with regard to his point about the people in residential homes; there is an increase from 18s. to £1. This is not dealt with by this Order but by another Order. The noble Lord then made a point about the number of people over
568
pension age who are entirely dependent on supplementary benefit (in the sense of having no retirement pension or other benefit): the figure is 166,000.
As the noble Lord will appreciate, the disregards can be altered only by main legislation, not by Regulations—I know it is not necessary to tell the noble Lord that. In 1966 the Government made it clear that they considered the disregards should be increased less often than the benefit rates. Any disregarded income will mean, of course, that the people concerned are above the basic supplementary benefit levels. I think those were the factual matters raised by the noble Lord but if there were any others I will reply to him in writing. I think there is general acceptance that these Regulations, as the Bill itself, are a genuine attempt to obtain better living standards for the most vulnerable members of our community, and I hope noble Lords will accept that Her Majesty's Government are well aware of their responsibility in this connection.
On Question, Motion agreed to.

IRON AND STEEL BILL
11.36 a.m.
The Lord PRIVY SEAL (LORD SHACKLETON): My Lords, I beg to move that this Bill be now read a second time. A little more than two years ago I moved the Second Reading of another Iron and Steel Bill, which nationalised the bulk of the steel industry, and I repeat now, as I said then, that I was grateful for the co-operative way in which the Opposition dealt with the Bill. We had some useful discussions and a good deal of agreement, granted of course that there was some fundamental difference of approach. At that time I explained—and everything that has occurred since I think has confirmed—the need for a drastic and urgent reorganisation of the industry. That Bill, which became the Iron and Steel Act 1967, provided for that reorganisation by bringing the major part of the industry under the single ownership of the British Steel Corporation. The Bill before the House today is essential if full advantage is to be taken of the reorganisation and if the movement of the industry towards full efficiency and competitiveness is to continue.

569
During the two years since nationalisation took place the British Steel Corporation has been reviewing all the fundamental policies of the nationalised sector of the industry to make them fit both the needs of the new organisation and the changing nature of the steel industry itself. This Bill is the outcome of the Corporation's work and the Government's consideration of it.
I will briefly describe the Corporation's work and how the Bill fits into it. It is concerned with three main areas of policy: capital structure, long-term developments and management organisation. Dealing with capital structure, I would point out that the first area of policy and probably the primary purpose of the Bill is to provide for a new and more appropriate capita] structure for the British Steel Corporation. The present capital structure of the Corporation consists entirely of fixed interest debt and loan capital. It assumed on vesting date, July 28, 1967, a commencing capital debt to the Government of just under £834 million, reflecting the cost of the securities vested in it and loans transferred to it. In addition it was given borrowing powers of up to £300 million which were increased in July of last year by Resolution in another place to the maximum of £400 million.
A fixed interest structure is, by its nature, inflexible, and the Corporation found itself operating in a market which was not only highly competitive but also highly cyclical, giving rise to marked fluctuations in returns. Had the Corporation started life at the top of the cycle this might have been tolerable. Unfortunately 1967-68 was a time when the industry's fortunes were on the ebb and the Corporation was faced with the daunting prospect of servicing a large capital debt out of inadequate profits and without reserves. A heavy loss would necessarily result. More generally, the Corporation has emphasised that as long as it is financed entirely by loan capital, interest on which is a deduction before profits, its results will not be comparable with those of its competitors, nearly all of whom have a substantial element of equity in their capital. The Corporation believes that if there were no change in its capital structure its relationships with its customers would be marred and unnecessarily so, and the morale of the industry would suffer. It has therefore
570
asked that £700 million of the commencing capital, or some two-thirds of its total long-term debt, should take the form of public dividend capital such as was adopted for B.O.A.C. as an experiment in 1966.
May I remind your Lordships' House about the Government's thinking and policy on this form of capital? This is that it is appropriate only for those nationalised industries which are fully viable but which are subject to fluctuating returns because of their trading conditions and the nature of their assets. Noble Lords can immediately see the great difference between an industry like the steel industry and some of the other nationalised bodies. The Government consider that the British Steel Corporation meet both these conditions, and that the Corporation presents a suitable case for development and further experiment in this kind of capital. The Government have therefore accepted the British Steel Corporation's proposal to convert £700 million of the commencing capital debt into public dividend capital. Further, the Government consider it important that the new capital structure should operate effectively from vesting date so that the Corporation's position is clearly shown from the start.
I Wish to make it clear to the House that the proposed capital reconstruction is not a write-off in disguise. The Minister has declared the policy he intends to follow regarding dividends. Initially, he will expect that as a minimum all profits after clearance of any past lasses, shall be paid as dividends until the Government have received, by way of dividends and corporation tax, a sum equivalent to the interest which would otherwise be paid on the public dividend capital had it been in the form of fixed-interest capital. Thereafter the Minister will be prepared to consider on merits proposals from the Corporation for the allocation of some amounts to reserve against contingencies other than fluctuation of dividends; otherwise profits should continue to be paid as dividends.
The Memorandum on the Bill gives details of the provisions for this capital reconstruction. In essence, Clauses 1 and 2 provide power to invest sums in the Corporation otherwise than by way of loan—that is to say, in the form of public dividend capital, subject to the limit set by Parliament which will apply

571
in future not only to borrowing but also to any future payments of public dividend capital. They convert £700 million of the commencing capital debt into public dividend capital by deeming that sum to have been paid on vesting date instead of lent to the Corporation and by declaring the commencing capital debt to consist of the remaining £134 million. They also provide for the Corporation to make a proposal about the payment of a dividend on public dividend capital each financial year, though the final determination will rest with the Minister after agreement with the Treasury. It is important that these dividends should be related to a proper, realistic capital base. The Bill, in Clause 4, therefore provides for the notional capitalisation of the reserves of both the Corporation and the publicly owned companies by empowering the Minister to direct, after consulting the Corporation, that some or all these reserves shall be deemed to be public dividend capital and to which the provisions regarding dividends will apply.
As a consequence of the adoption of public dividend capital, Clause 5 replaces the general financial duty placed upon the B.S.C. by Section 16 (1) of the 1967 Act with a more specific duty to be expressed in terms of a rate of return on net assets over a given period to be determined by the Minister after consultation with the Corporation and with the approval of the Treasury. It may be that experience will show some other form of objective to be more suitable, so provision is made for the Minister to change the form of the financial duty by order, subject to Parliamentary approval. Parliament will have the opportunity to review this reconstruction after it has been tested over a reasonable period of time before the provisions could be made permanent. Clause 6 therefore provides that the powers I have just outlined shall terminate in 1974 unless the Minister, by order, directs that they shall continue in force either permanently or for one further trial period. Any such order will, however, have to be approved by an Affirmative Resolution of both Houses of Parliament.
I should like to turn briefly to the long-term development to which I have already referred. The Corporation's long-term planning will of course be absolutely vital to its success, and they have
572
therefore devoted a special effort to their work in this field. Detailed decisions on the nature and size of future investments remain to be taken, and the Corporation certainly do not intend ever to have a fixed blueprint for future development; they wish to be free to take account of changing circumstances. But already the shape of the industry over the next few years is clear. To meet the expected growth in home demand and to take full advantage of export opportunities, the Corporation's output of crude steel will be increased from its present 25 million tons a year to between 30 and 34 million tons by 1975. This expansion will be accompanied by an extensive programme of modernisation. The bulk of crude steel production will, by the mid-1970s, be based on a comparatively small number of large plants situated on or near the coast, all using the most modern techniques and all based on high standards of labour productivity and all able to compete on equal terms with the similar plant now in operation or being built in America and Japan. Of course this programme of expansion and modernisation will lead to heavy capital expenditure. Legislation is therefore necessary to increase the Corporation's financing limit, and this is the second of the main functions of this Bill.
My Lords, the present position, and the Government's proposals for increasing the limit, which will now be broadened to include any future sums invested as public dividend capital, are fully explained in the Memorandum on the Bill (Cmnd. 4022). As your Lordships will see, by the end of the Corporation's first financial year at September 30, 1968, the Minister had loaned to the Corporation £179½ million and had given his statutory consent to temporary borrowings of up to a maximum of £155 million, of which £54 million remained available. This means that the Corporation had used £334 million of its borrowing powers and had £66 million in hand before reaching the present borrowing limit of £400 million.
The Corporation's plans for development will, however, require heavy capital investment. The Government have considered that it would be prudent and reasonable to allow for an estimated requirement of about £315 million of external finance over the five and a half years from September, 1968 to March,

573
1974, £150 million of which will be wanted during the first three years to September, 1971. With £66 million in hand (and I apologise for giving all these figures), we are, therefore, in Clause 3 of the Bill, proposing to increase the borrowing powers by £100 million, in the first place, to a limit of £500 million, and to empower the Minister to raise this limit by up to a further £150 million as necessary by Order subject to an Affirmative Resolution in the House of Commons. It will be for the Government to decide, according to the circumstances at the time after consultation with the Corporation, whether the additional finance should be provided in the form of fixed-interest loans or further public dividend capital or a mixture of both.
The Corporation outlines its case for an increase in borrowing powers in pages 7 and 8 of its brochure, Finance for Steel, which I am sure the noble Earl, Lord Bessborough, has read. Their figures may seem at variance with those put forward by the Government. The main reasons why this has arisen—and this was explained in another place—are that there is a difference of six months in the time base, and because they refer to a further need for substantial additional sums but do not allow a specific sum. The Government Memorandum has quantified this last amount as an allowance of £150 million for contingencies. The Ministry of Power have prepared an explanatory note reconciling differences in the figures, and this note has been made available to your Lordships.
It is, as your Lordships know, the Government's policy to permit the nationalised industries to take advantage of favourable opportunities to borrow in foreign currencies if they so wish. Appropriate powers have already been given to the Air Corporations and to the Gas and Electricity industries. Clause 7 of this Bill extends these powers to the British Steel Corporation. Such foreign borrowing will of course count against the financing limit, and each borrowing will be subject to the Minister's consent and the approval of the Treasury, and will be eligible for Treasury guarantee.
The last point with which I want to deal is management organisation. Since nationalisation the Corporation has been examining this aspect of its affairs also,
574
and I should like to pay tribute to the really tremendous energy and effectiveness with which it has examined these problems: it is a great tribute to the noble Lord, Lord Melchett, who is known to us all, and to the members of the Corporation. In its Second Report on Organisation, laid before Your Lordships' House in March, the Corporation made an important recommendation on the future of the nationalised companies. The 1967 Act left the companies in existence and affected nationalisation by vesting the ownership of the securities in the Corporation. But of course the whole point of nationalisation was that the Corporation and not the companies should subject to the Minister and Parliament, be in full control of the nationalised industry. Moreover, the companies were very small by international standards and the boundaries between them cut across: the rational patterns of production for the industry. As a result they have ceased to play any real part in its management. They have, however, continued as nominal owners of the industry's assets, and their existence has involved the Corporation in the formalities of the Companies Acts, which means considerable work, as there are over 150 companies. This is pointless and the Corporation therefore recommended in its Second Report on Organisation that the companies' undertakings should be transferred to itself. Without legislation, and with so many companies involved, this transfer, and the consequent dissolution of the companies, would be an enormous and quite unproductive operation, distracting the Corporation from its real work of making and selling steel. Clause 8 of the Bill therefore empowers the Minister of Power to transfer the undertakings of the publicly-owned companies, and to dissolve them, by Order, subject to Parliamentary procedure.
To facilitate the early dissolution of the companies and ensure that financial or fiscal penalties are not incurred in the process, the Bill, in Clauses 9 and 10, provides for accumulated tax losses and allowances of the companies in respect of any trade taken over by the Corporation from those companies to become available to the Corporation—and for any capital losses of companies which are dissolved to be set against chargeable gains of the Corporation. Similarly, Clauses 11 and 12 provide for payment

575
to the Corporation of the equivalent of investment grants which would otherwise have been payable to any of the companies had they not been dissolved or their undertakings and assets transferred to the Corporation. The Bill also contains two additional minor provisions. One is to permit a greater measure of flexibility for fixing the end of the British Steel Corporation's financial year and the other is to permit the Corporation's seal to be authenticated by the signature of the Corporation's Secretary or some other authorised person instead of by the Secretary or such a person jointly with a member of the Corporation. Both are common-sense provisions designed to ease administration. They are contained in Clauses 13 and 14.
I am sorry to have taken up so much time; I have tried to cut my speech as much as possible. But this is an important and technical measure, even though it is embodied in a comparatively small Bill. It is an important Bill, and it is designed to put British Steel in a position from which it can face the challenges, the very real challenges, which face it with very much greater confidence, and accordingly I have no hesitation in commending this Bill to your Lordships for approval.
Moved, That the Bill be now read 2a.—(Lord Shackleton.)
11.45 a.m.
The Earl of BESSBOROUGH: My Lords, we must be grateful to the noble Lord the Leader of the House for explaining the contents of this Bill to us, especially after his rather rough ride last night. I am glad he has surfaced again and is in such good form. "Once more unto the breach", I might say, except that perhaps "Oh God of Battle, steel my soldiers' hearts" might be more appropriate.
My Lords, this certainly is a very important Bill. I much regret that it should come to us on a Friday morning towards the end of the Session, and that the Committee stage should be put down to be taken so soon afterwards—that is to say, I understand, on Tuesday. In another place there was a long Second Reading debate, 11 sittings in Standing Committee, as well as further debates on Report stage and Third Reading, lasting alto-
576
gether from early May well into July. We have to deal with this on a Friday morning and on Tuesday.
There are many features of the Bill about which we on this side of the House are unhappy. I hesitate to give all the adjectives which have been used to describe the Bill; I am sure the noble Lord will already have read them. Accordingly, a number of Amendments were put down, both in Committee and on Report in another place. There was one Amendment put down on Report to which we attach considerable importance. I deal with it first because we should have liked to see it as a new Clause 1, although perhaps on reflection it might go better at the end of Clause 5, on the Corporation's financial duty. It concerns the information to be published in the report of the British Steel Corporation; and I hope the noble Lord, who must have been through the various stages of the Bill elsewhere (although I do not know how he could have found the time) will be able to give us some assurance on this, either today or in Committee.
The effect of the new clause would have been to require the Corporation in its annual statement of accounts to present details of the returns both on the total net assets of the Corporation itself and on the net assets of each of its principal regional product groupings. The arguments in support of this were cogently put, and I will not repeat all of them here, except to say that when a Corporation is virtually a monopoly and is dividing itself up into monopolistic groupings, customers of the Corporation will want some insight into the trading activities of the group. A public company would have subsidiary companies each of which would give separate returns, and I would particularly ask the noble Lord whether, on the dissolution of the companies, as provided for in Clause 8, as we have heard, separate accounts for each product group will be published. Fuller disclosure of information is today a general trend, and I should like this to be spelt out and written more fully into the Bill. At the least, I should like, for the record, to obtain an undertaking from the noble Lord that full information will be made available. The point is: are the Government satisfied, as guardians of the public

577
purse, that sufficient information will be made public?
However, this apart, I must proceed this morning to summarise as briefly as possible some of our main objections to the Bill as a whole. This is not easy with a Bill on which long speeches had to be made in another place. Our first criticisms concern the present Clauses 1 and 2, regarding the conversion of the £700 million of the loan capital into public dividend capital—p.d.c. We on this side of the House do not like, I must admit, the fudging effect of public dividend capital. It has been widely censured, both in regard to the Air Corporations Bill and during debates on the present Bill. The fact remains that the concept of public dividend capital will not of itself make a corporation competitive, and there is no true equality with private companies or public companies. No matter how anxious a Corporation such as British Steel may be to model itself on the private sector, it can never be regarded as a normal joint stock company. We on this side strongly approve of the Corporation's desire to become fully commercial, but unfortunately, as noble Lords opposite know only too well, the Act of nationalisation is passed and steel has fallen a victim to Socialist dogma.
Public dividend capital has been described as the merest window dressing, as a sort of bastard equity, a bogus equity, a sham equity. The essence of equity is that the shareholders own the business. It is the function of shareholders to take the chance of profit, the risk of loss, and to exercise discipline on management. They may not always do so, but there have been some encouraging instances of late. It is no use the Government's saying that the taxpayer is an equity holder in British Steel. That, as my right honourable friend has said, is so diffuse a truth that it loses all bite. If the Corporation had equity in the proper sense it would have to seek finance from the market and satisfy its shareholders that management was effective. These initials, p.d.c., public dividend capital, were indeed described by one of my honourable friends as meaning "payment deferred constantly". It is, after all, the taxpayer who will have to find the money which is represented by this public dividend capital.
578
I understand that the basic idea (I am sorry to labour this whole question but it seems to me very important) of p.d.c., is to introduce an element of challenge to management by giving an appearance of similarity to private enterprise, and that the size and regularity of the dividend is supposed to be an overt and public test of the success, or otherwise, of the Corporation. The Government have even described it as a spur to efficiency and morale, and as an incentive. We on these Benches very much favour incentives, whether they be to management or to staff, but there is a danger that p.d.c., may convey a false impression of efficiency or inefficinecy, of success or lack of success. We just do not believe that public dividend capital meets this requirement or is anything like analogous to the equity holding in a private company. The dividend paid on this capital may be positively misleading as a basis of comparison with privately-owned industry.
We on these Benches hope that at least the Minister will fix a realistic target rate of return on assets at which the Corporation should be required to aim during the year. The Minister has power to impose a target but is not required to publish it. Nevertheless, we believe that the Minister should tell the public the target he gives to the Corporation, because unless that is known we cannot judge whether the Corporation's investment decisions are sound. If the target is not realistic, the Corporation will be allowed to trade with the benefit of subsidy and there will be unfair competition with the private sector.
Another matter which concerns us is Clause 3, the financial effects of the Bill and the extension of the limit on the borrowing powers of the Corporation to include all public dividend capital issued to the Corporation. We know that under the principal Act the aggregate of borrowings by the Corporation was not to exceed £300 million sterling—I take these items from memorandum "Financial Effects of the Bill", and the noble Lord mentioned them. Then in July, 1968, the limit was raised to £400 million. Now Clause 3 fixes a new limit of £500 million, and Clause 3 also empowers the Minister to raise this limit to £650 million—another £250 million—by Order requiring approval by Resolution in another place.

579
My Lords, when is this going to stop? I must say that when I read this I wondered whether we ought not to move an Amendment reducing, rather than extending, this borrowing; and I shall say something more of this later. Even in regard to the monies which the Corporation has already borrowed, Ministers have seemed unable to account for the way they have been spent. This hardly reassures us on their responsibility and effectiveness as guardians of the public purse.
Moreover, in spite of all the efforts of my honourable friends to get at the truth, we still do not know (the noble Lord has partly explained it to us this morning, but I am still not quite clear about it) the extent of the Corporation's long-term borrowing. I understand about the six-months difference in time base, but I am still not completely clear in my mind whether it will be £157 million, as given in a Written Answer on June 10, or £176 million, as appears in the Corporation's publication which the noble Lord mentioned, Finance for Steel, or indeed £200 million, which was the figure given by the Minister in Standing Committee. But I will not labour this point further, because the noble Lord went some way to try to explain this discrepancy.
However, one thing is certain. This Bill enables yet another nationalised industry to have a substantial part of its capital debt reduced; £700 million of the liabilities arising out of the Act of nationalisation are to be converted in variable interest capital. One of the reasons the Government give for this is that the industry operates in an internationally competitive atmosphere. We on this side of the House find this rather strange when we recall that, during the passage of the 1967 Act, one of the principal justifications for nationalisation was the Government's claim that there was no competition in the steel industry. So they created a State monopoly. Now, two years later, the Government are asking Parliament to pass a Bill to help them enable their own State industry to take on as many trappings—but only trappings—of private enterprise as may be convenient to them. Very strange! "Curiouser and curiouser", as Alice would say.
580
In regard to Clause 5, the financial objective of the Corporation, we are particularly concerned with the rate of return which it is laid upon the Corporation to earn over a given period of time on the Corporation's net assets. We must know the rate of return on capital investment. I fear that the use of public dividend capital is likely to be a step in the wrong direction, because the reason why we should invest money and therefore be able to pay dividends on the investments in steel is not that it is a good idea to have a steel industry or because it saves imports, but because it is a profitable thing to do. Therefore, to give the British Steel Corporation the type of capital which enables it to shirk the profit aspects of what it is doing is a mistake.
I know that the Corporation is subject to the 8 per cent. discounted cash flow test on all new investments; but what we on this side of the House do not understand—I asked the noble Lord, Lord Beswick, about this only the other day—is why this same test should not apply to the investment of new public dividend capital rather than just to the making of investments in general. Supposing the percentage of 8 per cent. were the correct one, which patently it is not, then we should be told in advance that the Steel Corporation should not make investments, even in the medium of public dividend capital, unless they can yield 8 per cent. At a time when there is a capital famine and capital is costing up to 11 per cent. in the markets, here are the Government solemnly pushing through this Bill and going through the paraphernalia of trying to raise the borrowing powers of the Corporation by a further £250 million, as I said, from £400 million now to a possible £650 million—millions of scarce capital—to make investments for political reasons without knowing what return we shall get.
The 8 per cent. test rate continues, as the noble Lord, Lord Beswick, told me on May 22, and he told me then that the result of the Government's review would not be known before the autumn. In the circumstances, I find this quite extraordinary. If rates for borrowing go up, surely you must adjust the rate of flow at a time when it is more expensive to borrow money.

581
Just a word about Clause 7, the power of the Corporation and the publicly-owned companies to borrow money in foreign currency—overseas borrowing. I should like the noble Lord to give me an answer on this question because no adequate answer was given in another place. This country has borrowed enough at home and more than enough abroad. Our total indebtedness abroad now amounts to over £6,000 million, which has to be repaid within the next seven years. This is a monumental strain on the country and is far beyond the capacity of this Government to achieve. We should think most carefully before allowing the Government any further powers to borrow abroad, and I feel strongly that the power to borrow overseas should be in the control of Parliament and permitted only with Parliamentary approval.
An Amendment tabled by my honourable friend on the Report stage would have made such borrowing accountable to Parliament and would have made it necessary for Ministers to justify any departures in Treasury economic thinking or in Government policy. Indeed, the Chancellor of the Exchequer recently felt it necessary to explain the significance of the commitments we were undertaking in respect of applications entered into by this country to the International Monetary Fund.
Only last Wednesday the Financial Secretary to the Treasury sprung on us news that he thought that Britain's short-term debts should be paid on a long-term basis or, according to the jargon, funded. In a speech to the European Monetary Conference he admitted that it was high time to recognise openly that Britain was in no position to repay her debts to the I.M.F. and the Central Banks on schedule. What a terrible admission to have to make! And what, for example, is the attitude of the Germans to this? It was reported only yesterday in The Times that the Electricity Council Bond Issue on the German Market, which has been hanging fire since April, is likely to be only half the 300 million Deutschmarks originally discused. The Germans did in fact react unfavourably to the first issue by a nationalised British industry, the Gas Council's 300 million Deutschmarks, in March. I gather that the Electricity Council hope that they may be
582
able to go back to the German market at a later date and thus make up the 300 million Deutschmarks in two separate tranches. I wonder what their attitude will be to similar approaches by the British Steel Corporation—also a nationalised industry.
It seems in fact that the Government are casually taking steps to organise matters so that we should suffer an increase in the money supply at a time when we are in deficit in our balance of payments. I do not think that the Government's argument that to the extent that the Corporation borrows abroad it will borrow less from the Government holds any water at all. The Corporation does not borrow only from the Government; it borrows also from the banks and from the public on its own stocks.
In regard to Clause 8, we on this side of the House are concerned about the dissolution of the companies, which was mentioned by the noble Lord the Leader of the House—the companies which were in public ownership on April 30, 1969. These companies must go because the Bill gives the Minister power to authorise the Corporation to abolish them as well as all their trading names. We are not saying that every company and every trading name should be preserved, but in many cases there are links of loyalty between companies and managers and men, and some of the products of some of the trading names are world renowned. Everywhere I go in the world I am asked about the Spencer Steel Works. I hope that the noble Lord will reassure us that he will not allow the Corporation before the new organisation has been decided, to abolish the companies and their names without seriously considering the damage which may be done.
I note what the Minister of Power and the noble Lord have said about the dissolution of these companies: that it would have no real effect on the industry's operations or policy; that it would not affect its productions policy, selling policy or labour relations. The Minister has said that the companies have already ceased to play any real part in the management of the industry, so that their disappearance would not affect these matters, and that he saw the dissolution of the companies as having two effects. First, and as the noble Lord said, it would give the Corporation direct ownership of the

583
industry's assets as well as effective control of the industry's operations; and secondly, it would free the Corporation from the costly and time-consuming administration involved in maintaining the companies. I admit that there may be some truth in this, but I am still not happy about scrapping these famous names. I would also ask the Government when they intend to fix the financial objectives for the Corporation. I know that the Minister believes that this will be done as soon as possible after enactment of the Bill, but I should like to know from the noble Lord how long he thinks it will be after enactment before these financial targets are fixed.
On the subject of the reorganisation of the industry, I was interested to learn of the new development of steel-making facilities at Scunthorpe and the ore terminal at Redcar on Tees-side; and also to learn that the proposals, which were announced on July 11, would require the Minister's approval because they form part of the capital investment programme. This, again, is most strange. I do not know where I am. Apparently, the proposals which have been announced still require the Minister's approval, despite the fact that he has announced them. Are the proposals approved, or are they not approved? I should like to know about this. I find it hard to have confidence in a Minister in another place who makes such an extraordinary remark. Who has jumped the gun on this?
Lord SHACKLETON: I wonder whether the noble Earl could restate his question. His fervour is rather confusing my understanding of what he is trying to ask me.
The Earl of BESSBOROUGH: My Lords, I am sorry to be so fervent, but I do feel rather fervent about this Bill. On July 11 the Minister announced that there were to be these further steel-making facilities at Scunthorpe and on Tees-side, and yet he said that they required the Minister's approval. What I do not understand is how you can announce a development of this kind without approval having yet been given. In connection with these new developments I might also ask whether we must now say goodbye to thoughts of a large new
584
£300 million steelworks on Humberside or Clydeside?
Finally—and I really have come to the end—I would emphasise, that in regard to the management of the Corporation we on this side of the House in no way blame my noble friend Lord Melchett or his staff for the numerous criticisms which have been made of this Bill. We are merely advocating that the Minister, rather than the industry, should ensure that the taxpayers' money is being properly invested, and in my view, the Minister should impose sufficient discipline on the Corporation to see that this happens. I would say only this: we dislike the Bill because it may well be that there will be inadequate disclosure of information in regard to the accounts of the product groupings. We dislike this Government's use of public dividend capital; we dislike the extension of the borrowing powers, and especially further overseas borrowing; we are concerned about the rate of return which the Corporation is to earn over a given period. We cannot understand why the test discount rate has not been raised, and we are concerned about the dissolution of the companies and their trade names. It may well be that we shall have to put down certain Amendments at Committee stage.
12.12 p.m.
Lord SHACKLETON: My Lords, I congratulate the noble Earl. I am not sure that his speech would not have been better delivered in the debate yesterday, and I can understand his rather regretting that it is Friday when he has not a bigger audience for the enormous fervour he brought to bear on this question. I will try to answer some of his questions. I am sure he knows the answers to some already, but he is just trying to test whether I understand the answers. I am not sure whether either of us will succeed in clarifying one another's mind on some of the complications of the details of the borrowing, and on this particular point I would ask the noble Earl to read rather carefully what I said. I shall read rather carefully what he said; we can then see whether we have reached agreement. On this particular point I believe the Government have done all they can to explain, but there are some things which it is beyond the capacity of lesser mortals

585
to understand. I am not just singling out the noble Earl, because I would perhaps bracket myself there in respect of some of these matters.
I am a little sorry that the noble Earl spoke quite in these terms. He says that it is not the fault of the Corporation that these things have to be done, and he exonerates them, but when it comes to matching the judgment and experience of the people who run the Steel Corporation (who are men of great experience in business) and who have put forward these proposals, with the experience and views expressed by the noble Earl and some of his honourable friends in another place, I back the Steel Corporation every time. I must say I thought he made very heavy weather of the public dividend capital issue. We have never attempted to suggest that it was identical with equity in private industry—it would be absurd to do so. I will not go through the differences, but to call it "fudging "I think is rather unfair. There are arguments in favour, and if the noble Earl wishes, either on the Committee stage or later, I will give them.
I do not myself attach such great importance to this question of whether it should be fixed interest capital or public dividend capital, but there are good arguments for having a certain amount in public dividend capital. I hope that what the noble Earl has said is not an indication of the Conservative Party's attitude in this field in the long run in case, by any chance, they should happen to find themselves in charge of nationalised industries. There were some very long debates in another place. I do not think they have done the Conservative Party much good in the eyes of those who know the steel industry, and it is probably as well if we do not bother to go into this subject in the detail they did in another place.
The noble Earl asked me a number of questions. I shall answer a few of them now and will certainly do my utmost to answer others when we come to the Committee stage. Let me say something on the information in the accounts. First of all, I think it is fair to say in this matter that the nationalised industries are ahead of rather than behind private industry. Let me admit straight away that there have been shining examples in private industry, and
586
many of the leading firms have gone well beyond the requirements of the Companies Acts. This is admirable and wise, and it is good business and enlightened self-interest. I would only say of the particular point the noble Earl raised with regard to the financial results of the companies and to the question of providing something equivalent to this for the product groups, that certainly I will convey his further point to my right honourable friend. I do not know how far we can do this. I think it is a matter for the British Steel Corporation. I am sure, having seen their publications and the amount of information they have already given, that they will do their utmost to provide all the information possible.
I was asked a question on foreign borrowing. The real effect of this foreign borrowing is to make it possible to convert short-term debt into medium-term debt, which I am sure is to be welcomed. This is a matter which has been carefully considered and which has applied elsewhere. It is a matter, I do not doubt, that we shall debate in the future, and quite rightly so. It is a complicated issue. In addition to the foreign debt question, there is the allegation of its effect on domestic credit expansion, and so on. I have noted what the noble Earl has said, but I am satisfied that this is a proper thing to do. However, as I say, I expect my noble friend Lord Beswick and others will be having exchanges on the general principle in the future.
I was asked about the companies' names. It will of course be for the British Steel Corporation to decide this, not for Ministers, and I am quite sure that noble Lords will agree that in this matter it is for the Corporation to judge what its own interests are. It can continue to use the names if it wishes and if it considers it is the right thing to do. I do not doubt that they will in fact continue to use some of these world famous names, but I can assure the noble Earl that in this matter the Corporation will obviously have regard to its own best interests; and in this matter the national and the Corporation's interests clearly run together.
The noble Earl asked me one rather tricky question in connection with the announcement about Scunthorpe and Tees-side. The announcement was not

587
made by the Minister, it was made by the British Steel Corporation. The British Steel Corporation has approved the development at Scunthorpe and at Tees-side, but the investment programme of which these form part does require the Minister's approval.
The Earl of BESSBOROUGH: It is somewhat confusing.
Lord SHACKLETON: I can well see how the noble Earl could get confused. It is very easy to get confused; but I hope that I have clarified this. I would add that the Corporation have said that they think it unlikely that any entirely new green field development—for example, at Humberside or Clydeside—will need to be in operation in the period up to 1975.
There were a number of other interesting points which emerged under the great flow of eloquence we had, and I shall look forward to discussing them at the Committee stage. I think that quite a number of the points raised today were advance warning of points which the noble Earl intends to make in Committee. I should say something about the rate of return and the test discount rate. I noticed that when the noble Earl was speaking his noble friend Lord Goschen was looking very worried indeed, especially when reference was made to discounted cash flow. I was not quite clear myself in what way the noble Earl was referred to d.c.f. in this matter, but the test discount rate of 8 per cent. referred to is not applicable to the British Steel Corporation. As the White Paper (Cmnd. 3437), entitled Nationalised Industries—A Review of Economic and Financial Objectives, said, this rate is designed to allow for the fact that other nationalised industries do not receive investment grants on their main activities. The British Steel Corporation, as a manufacturing industry, receives these grants, and the test discount rate to be set for them will allow for this. It is hoped to settle the rates for the British Steel Corporation shortly.
The Government's policy on financial obligations is set out in the Command Paper I have mentioned, and is intended to follow from sound investment and pricing policies and to reflect the appropriate discount rate. The financial objec-
588
tive which will be fixed for the Corporation under Clause 5 will reflect these policies, and we intend it should be a stiff incentive to the Corporation which they must gear themselves over a period to achieve. I assure noble Lords that there is no question of either "fudging" or providing an easy option in these matters. Indeed, any noble Lord who has had dealings with the Treasury—and the Treasury exercise a tight and continuing interest in these matters—knows that nobody is going to get away with a soft option here. Nor, indeed, would the British Steel Corporation wish to do so.
My Lords, I do not claim to have answered all the noble Earl's points. I will study closely what he has said, and either on the clauses or on particular matters which he may wish to raise I will do my best to answer them. I think this has been, although short, a useful debate. I hope we shall gradually come to a degree of understanding in these matters. Our interests are similar. The British Steel Corporation is of tremendous importance to this country, and I hope that the proposals which are contained in this Bill and which they so strongly support will receive, in the end, general approval.
On Question, Bill read 2a and committed to a Committee of the Whole House.

CHILDREN AND YOUNG PERSONS BILL
12.24 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Stonham): My Lords, I beg to move that this Report be now received.
Moved accordingly, and, on Question, Motion agreed to.
Clause 1 [Care proceedings in juvenile courts]:
Lord STONHAM Lord STONHAM moved Amendment No. 1:
Page 1, line 19, at end insert—
("(aa) it is probable that the condition mentioned in the preceding paragraph will be satisfied in his case, having regard to the fact that the court or another court has found that that condition is or was satisfied in the case of another child or young person who is or was a member of the household to which he belongs; or").
The noble Lord said: With this Amendment I should like also to discuss Amendment No. 4 and Amendments Nos. 25 and 26, which are all on the same point. These Amendments are designed to deal with an important point which has been put to us by some children's officers and others. The existing definition of the situations in which a child or young person may be found to be in need of care, protection or control includes as part of the definition the fact that any one of a number of offences has been committed against him. It is clear that if any of these offences is committed against a child or young person he will be covered either by paragraph (a) or by paragraph (b) of subsection (2). That is why the subsection contains no express reference to the commission of these offences.
The existing law, however, also includes in the definition a child or young person who is a member of the same household as another child or young person against whom one of these offences has been committed. In relation to sexual offences, paragraph (b) already covers the position. If a sexual offence is committed against one girl in the household another girl in the same household may be "exposed to" the same danger. To find that a girl is "exposed to" moral danger, it is not necessary that an offence should already have been committed against her. In the case of ill-treatment, however, the position is different. If one child has been ill-treated, it does not follow that other children in the household come within paragraph (a), the paragraph covering proper development being prevented or neglected, or their health being likely to be impaired.
But there are, however, situations where the treatment of one child is such that the risk to other children of the household is so great that it ought to be possible for the court to make an order in respect of them. In particular, there are some "battered baby" cases where, if nothing is done, there is a real danger that the same thing will happen to another baby in the household, who may be seriously injured and may even die as a result. The object of the new paragraph (aa) is to give the court power in such cases to make an order, as a preventive measure. But first there has to be a finding that condition (a) has been satisfied in the case of another child
590
who is, or was, a member of the same household as the child before the court—and the word "was" covers the situation where the first child has died. Second, the court has to be of opinion that, having regard to that finding, there is a probability that condition (a) will be satisfied in the case of the second child.
Amendment No. 4 to Clause 2 is to make it clear that since the new condition rests on a finding of probability this probability must be assessed on the basis of what would probably happen to the child if no order were made. The Amendments to Clause 26 are consequential. Their effect is to extend the powers to take a child or young person to a place of safety so as to include cases covered by the new paragraph (aa) of subsection (2). Without my Amendment, Clause 26 would not be satisfactory in relation to the condition specified in the new paragraph (aa). If I may put it in this way, my Lords, the question whether the condition is satisfied in relation to baby George may depend upon the court finding that baby Victor has been ill-treated. The Amendments to Clause 26 therefore provide that a person seeking to take baby George to a place of safety must have reasonable cause to believe that a court would find paragraph (aa) satisfied in his case. All the existing paragraphs of subsection (2) relate to factual situations and not to court findings, and the Amendments are required only in relation to the new paragraph (aa).
Noble Lords may be worldering whether it is the Government's in: ention that the juvenile court should have power to make an order on the grounds specified in paragraph (aa) alone. In consequence of the Amendment to subsection (2), which was moved by the noble Earl, Lord Jellicoe, and carried against Government advice, any one of the situations described in paragraphs (a) to (e) of this subsection, and in the proposed new paragraph (aa), would by itself be sufficient grounds for court proceedings and a court order, irrespective of whether an order was necessary so as to secure the care or control which the child needed. The words which the Amendment deleted are—as I have made very clear, the words which ensure a double test—essential to the achievement of the main principles of this Bill. Amendments to delete these words were moved

591
twice in another place, and on each occasion the Amendment was negatived on a vote. The arguments deployed in support of the Amendment made in this House were essentially the same as those which had been very fully deployed in the other place; no new considerations were advanced.
In the circumstances it would be surprising if the other place were to agree to the Amendment which this House made in Committee; and it is the Government's intention to invite them not to agree with it. In making this announcement of the Government's intentions I have no wish to reopen the full discussion which we had in Committee. It now seems unlikely, however, that the Lords' Amendments to the Bill will be considered in another place before the Summer Recess, and it may be that we in this House will not take the Third Reading before the Recess. This may accordingly be the last opportunity before October for a Government statement on this issue. This is one of the most crucial issues which has arisen on the whole of this Bill, and it would be most undesirable if everyone concerned, in Parliament and outside, were to be left in a state of uncertainty about the Government's intentions for another four months. I thought it would therefore be for the general convenience if I were to make this statement now, so that everyone concerned, whatever his own views on the matter, may know where the Government stand and what our intentions are. I beg to move.
EARL JELLICOE: My Lords, I think I can be very brief. First may I take up the last point with which the noble Lord was dealing.. I have noted what he had to say about the Government's intentions. I do not wish to become involved in the argument over that particular issue at this stage. I should like to say only that, in the circumstances, if the Government take that view I think they are absolutely right to have made the announcement now. Secondly, I should like to say that the group of Amendments which the noble Lord moved seemed to me to be important and necessary. I think it is true to say that the 1963 Act extended its protection to all the children of the family and I am very willing to concede—although it
592
is not really a concession—that in certain sad, rare cases (for example, the "battered baby" cases to which the noble Lord referred) these provisions will be necessary. I should like to say that in principle I agree with them.
On Question, Amendment agreed to.
12.33 p.m.
Earl JELLICOE Earl JELLICOE moved Amendment No. 2:
Page 1, line 20, after ("is") insert ("falling into bad associations or is")
The noble Earl said. My Lords, this Amendment is the same as that which my noble friend Lady Brooke of Ystrad-fellte—who unfortunately is not able to be here this morning—moved during the Committee stage. It was an Amendment which attracted a great deal of support from both sides of the Committee. I am moving the Amendment again because I believe that it is addressed to a real point. I was far from persuaded by the arguments deployed by the noble Lord, Lord Stonham, in Committee. The Amendment would reintroduce into the Bill phraseology with which many of us are familiar because it appeared in the 1963 Act, in the 1948 Act and also I believe in the 1932 Act. I am not suggesting that this phraseology should be re-imported into the Bill out of mere conservatism (with a small "c") but for two straightforward practical reasons.
The first is that I can think of a number of instances in which a girl or boy should be in care when the court might not be able conscientiously to find that the existing provisions of subsection (2) of this clause were satisfied. For example, the court might not be able to find that the provision of paragraph (e) was satisfied or that a child was not receiving full-time education under paragraph (d), or that he was "beyond the control of his parent or guardian" under paragraph (c), or that paragraph (a) applied. The court might not be in the position to substantiate the case that the child was in moral danger. Nevertheless it might be perfectly clear to the people concerned with the child's welfare, the children's officer of the authority concerned, that the boy or girl was heading for absolutely certain trouble in that he was "tagging along" with or "mucking in" with a group of highly undesirable adolescents, very possibly older than he

593
himself. Nevertheless it might be extraordinarily difficult to substantiate that he was in moral danger.
"Moral danger" is very much a matter of subjective judgment. It is not a very tangible sort of phrase. I know that "falling into bad associations" also involves a question of subjective judgment, but it is a much more tangible thing and a much more ascertainable criterion. Secondly, I understand that the phrase "moral danger" has a rather special ring in the ears of many juvenile magistrates. The noble Lord, Lord Stonham, was inclined to argue that there was not much difference between "moral danger" and falling into bad associations", but for the courts "moral", in this sense, has often acquired a sexual meaning. Very often girls have been found by the court to be in need of care, protection or control because they were in "moral danger" in the sense that they were exposed to sexual danger. This applies also to boys. This phrase in the ears of many juvenile magistrates, may well imply that the boy was consorting with a group of homosexuals. Indeed, there is some justification for this common belief in that the definition of "moral" in the Oxford English Dictionary of 1803 is "virtuous with regard to sexual conduct".
I believe that it is desirable to reimport this phrase "falling into bad associations" into the Bill, first, because it will give an added tangible test or criterion whether a child is in need of care, and secondly, because it would be helpful for the guidance of the courts because "moral danger" has for many juvenile magistrates this rather special connotation. At the Committee stage the noble Lord, Lord Stonham, argued with surprising vehemence that not only was this Amendment unsatisfactory but also it would be dangerous. He instanced the case of four children, three of whom might have committed an offence (for example, a small theft) who were brought before the court and for whom a care order was made. The noble Lord argued that the care order would apply also to the fourth child, who was not guilty of any offence but who was known to be associating with the other three. I find this point a little difficult to concede to the noble Lord. As the noble Lord, Lord
594
Kilbracken, said, it was conceivable that the fourth child might in any case be held to be in need of care since he was in moral danger as a result of his association with the other three.
Lord KILBRACKEN: My Lords, I am grateful to the noble Earl of attributing that remark to me. I agree with it; but in fact I never made it.
Earl JELLICOE: My Lords, I did not dream it up; it was in my recollection, and my noble friend Lord Brooke of Cumnor has come to my help. The noble Lord might have been like a former Duke of Devonshire who dreamt that he was making a speech in the House of Lords and woke up to find that he was; because at col. 758 I find this remark:
"Lord KILBRACKEN: Would that not be possible already, because the boy in question would be exposed to moral danger through his association with the other three?"—[OFFICIAL Report, 3/7/69.]
Lord KILBRACKEN: My Lords, I thank the noble Earl for reminding me of the very wise words I spoke on that occasion.
Earl JELLICOE: My Lords, I am very grateful to the noble Lord, Lord Kilbracken, for reinforcing my argument so poignantly. But I think the point that he was making was an absolutely valid one; and in any event this phraseology is already in our legislation. I would ask the noble Lord, Lord Stonham, whether it has given rise to the sort of practical difficulties which he was anticipating?
I am not claiming that this is of absolutely cardinal and vital importance; that by not adopting this Amendment one of the main props of the Bill, or a prop that is absolutely vital to it, will be knocked out. But I am claiming that it is far better in this case that we should leave the old phraseology undisturbed and this will make things a lot clearer for the people on the ground, the people with whom the children really count; magistrates, children's officers, probation officers, the police and so on. My Lords, I beg to move.
Baroness WOOTTON of ABINGER: My Lords, at the time when the noble Earl moved this Amendment in Committee stage, I was disposed to support him. At that time I was hoping that I

595
could persuade the Government to remove paragraph (e) from subsection (2)—that is the offence condition—and substitute, along with some such expression as the noble Earl proposes to put into the Bill, some vaguer phrase covering undesirable social behaviour. Not having succeeded in that objective, my enthusiasm for the noble Earl's Amendment has, I am afraid, diminished. For the purposes of the record I should like to say that I do not feel able to support it so long as the offence condition remains in the Bill.
12.43 p.m.
Lord STONHAM: My Lords, when the noble Baroness, Lady Brooke of Ystradfellte, moved this Amendment in Committee, in the course of my reply I explained that the existing separate paragraphs of subsection (2) already covered all the situations in which society was justified in interfering compulsorily with the lives of children and the rights of their parents. The noble Earl, Lord Jellicoe, has said that he could think of quite a few instances—that is what he said—where children were falling into bad associations in such a way that they ought, in his view, to be brought before a court; but they would not be covered by any one of these situations. Unfortunately, the noble Earl did not give us any of the instances to which he referred and so I am unable to judge, but I ask your Lordships to think for yourselves.
We are asked to consider that we should add the words, "falling into bad associations" and that they should be of such a nature that a child who could not be taken to court should be taken to court; and that the Bill does not provide for it. The things provided for in the Bill are, if he is:
avoidably prevented or neglected or his health is being avoidably impaired or neglected or he is being ill-treated; or … he is exposed to moral danger; or … he is beyond the control of his parent or guardian; or … he is of compulsory school age … and is not receiving—"
proper education; or he has committed an offence.
I have done a lot of reading, and a lot of thinking also, over this particular point; I have tried to think of one case which would not be covered by one or
596
other of these provisions, and I have failed. All the examples I can think of, and all those that other people have mentioned to me already, fall under the provisions in paragraphs (a), (b) or (c). In all these cases, whether the child's bad associations were part of the cause of his problem, or merely a symptom, the actual problem with which the court proceedings would really be concerned would be the prevention or neglect of proper development, or exposure to moral danger or being beyond control.
In our previous discussion I was taken strongly to task for describing the effect of this Amendment as "guilt by association". Perhaps your Lordships would prefer another way of putting the point; namely, the Amendment wants us to judge a child by the company he keeps. I was thinking of this when the noble Earl referred to my noble friend Lord Kilbracken, who it well known to your Lordships as a very considerable and extremely well-informed expert on gaming; and my noble friend did not get that experience by just sitting on the sand by the seaside. No one could have a higher opinion than I of my noble friend, Lord Kilbracken, but he obviously must have been in very bad associations at times and it has left him unimpaired.
I like to think that I have a great many personal friends on the other side of the House and that we mix on terms of very warm personal friendship. But there are people in this world who would think that in so doing I was falling into bad associations. I hope it would not be a case for calling me before a court. The point is, my Lords, that this is an entirely wrong approach. We are against this Amendment because we do not want to take a single child before a court unnecessarily. The noble Earl asked whether the use of these words had given rise to practical difficulty in the courts, and I am bound to say that they have not. But that is partly because this provision is so very little used; people do not like using it.
I am also bound to say this—and I think it will impress the noble Earl because he said that these words, the phraseology already in our legislation, had a special use and a special significance for magistrates. Well, neither in the comments on the Memorandum

597
which we sent out nor in comments received since the Bill was published has there been any evidence of a general view that the expression "bad associations" ought to be retained. On the contrary, a very large majority of those who have commented have accepted that this phrase should disappear.
Earl JELLICOE: My Lords, I do not wish the noble Lords to make a false point any more than I should wish to do so myself, and I think that he may have misheard what I said. I said that the phrase "in moral danger" had a special sense or meaning for magistrates.
Lord STONHAM: I thought that the noble Earl was referring to the words in his Amendment. But, of course, we have "exposure to moral danger" in the Bill. That is one of the provisions on which I rely heavily in saying that the noble Lord's Amendment is unnecessary and, as I still feel, harmful.
Let me mention the bodies which have accepted the removal of these words as being right. At the top of the list is the Magistrates' Association; next, the Inner London Juvenile Court Chairmen; next, the Justices Clerks' Society, and also a number of experienced juvenile court magistrates and justices' clerks; children's officers, child care officers, chief constables and the Police Federation. As the noble Lord, Lord Brooke of Cumnor, will agree, we could rarely have as important a collection of bodies and people as that in support of something we were going to do. In the face of such overwhelming support for the Government from people who know, I think there is no point in pressing the Amendment. I would add, though, that I am conscious of the danger that if we have these words in the Bill, we may have children going to court who ought not to be taken to court. That is very important. I mentioned that the Magistrates' Association are quite happy about these words not being in the Bill, although like everybody else magistrates vary and some, of them find these words of value and importance. In view of what I have said and of the consideration I have given to this Amendment, I hope that the noble Earl will feel able to withdraw it.
12.51 p.m.
Lord KILBRACKEN: My Lords, I was relieved to hear from my noble friend that he did not think that, because I was of appropriate age, an order should be made in my own case. The noble Earl said that I reinforced his argument on one point. I should like to retract that reinforcement for a moment to take issue with him on his suggestion that the word "moral" has this particular sexual implication. In support of this, he had to go back to a dictionary dating from the year 1802. I suggest that he might consider the situation in 1969. Surely the word "moral", when used nowadays, never really can be considered only to have that specific sense of "sexual". It is a word we can argue about a great deal but I should have thought that it was a very wide road indeed. I new feel that if a child is falling into bad associations, he must certainly be in every case exposed to moral danger as well.
Lord BROOKE of CUMNOR: My Lords, ten days ago my noble relative was kind enough to substitute for me when the House was considering the Housing Bill, and perhaps I may reverse the position, because she is not able to be here today. I cannot understand why the Government are being so obstinate about this. The noble Lord, Lord Stonham. says that he cannot conceive a case where this issue would be important. I want to ask him how he thinks a case such as the following should be handled.
There is in the neighbourhood a gang of boys who have been in trouble with the courts, who have been committing offences and who are well known to the police and to those in the neighbourhood as an undesirable gang. A boy, who has not come to notice before but who is not of very strong character, joins up with this gang. It is perfectly clear to anybody who knows boy life that sooner or later that boy is likely to be led into committing an offence. My concern is to try and save that boy before it is too late and I should have thought that the sensible course was to make it possible by law for the juvenile court to consider whether any sort of order should be made in his case. "No", say the Government, "Certainly not. That is bringing a child into court unnecessarily. We must let this run." That means that we must wait until the boy actually does commit

599
an offence, whether in the old or the new meaning of that word.
It is this sort of feature which unfortunately has convinced me that parts of this Bill are likely to be an encouragement to juvenile delinquency. Parts of the Bill I welcome warmly but the Government seem to me to be slow in understanding boy life and in appreciating that a sharp warning needs to be given at an early stage if there is to be any chance of saving a boy from going (so to speak) over the edge. I do not believe that a boy like that would be judged to be in moral danger because, in spite of the arguments of the noble Lord, Lord Kilbracken, who may be perfectly right so far as general literature is concerned, I am fairly sure that the ordinary juvenile court would consider that "exposed to moral danger", normally meant a girl in some form of sexual danger and would not think that in the normal case it would be applicable to boys. That is my question to the Government. How do the Government visualise the kind of case I have mentioned should be handled to prevent the boy from going further down hill? The easy course to do so would be to accept this Amendment. If the Government have some other ideas, I think we are entitled to hear them.
Lord ROWALLAN: My Lords, I can corroborate every word the noble Lord has said. This Amendment gives an opportunity of influencing youths before they have come entirely under the influence of the gangster. I have seen it over and over again in my own experience and I do hope that noble Lords will stand firm about this Amendment.
Lord STONHAM: My Lords, the noble Lord, Lord Rowallan, is utterly determined to get every child into court, if he possibly can. The main object of this Bill is to avoid taking children into court, if it is unwarranted; to avoid, as my noble friend Lady Brooke of Ystrad-fellte said the other day, getting them into court waiting rooms, where more criminals are made than can be cured in the courts. Please, my Lords.
The noble Lord, Lord Brooke of Cumnor, said that we are slow in understanding boy life. I am afraid that the
600
noble Lord is a bit slow in understanding this Bill. He asked: must we wait until a boy commits an offence? Of course, we do not have to wait until he commits an offence. This is only one of the five conditions which would justify an authorised person in bringing a child before the court. I would suggest that the noble Lord, Lord Rowallan, should read Clause 1 (2) of the Bill and he, too, would have a better idea of this. The noble Lord, Lord Brooke of Cumnor, asked how the Government want this sort of case handled. These cases are now being handled by local authorities under Section 1 of the 1963 Act. It is not a new problem. The local authority first encourage parents to take the matter in hand. They give the parents help in dealing with the child, on a voluntary basis if need be, and then, if that does not work, if the fears which the noble Lord thinks are inevitable are justified, there would be sufficient evidence to take action under subsection (2) of this clause.
What we have to ask ourselves is this. On what ground are we in Parliament entitled to say that a child is to be put in danger of court proceedings, removed from his home and his parents, his brothers and sisters, not because there is anything about the child's own behaviour in the circumstances which gives cause for concern, but because his associates are said to be bad? I have a little more faith in human nature. I believe that human beings frequently have a remarkable facility for resisting bad influences. I believe that we can learn from our contacts with all kinds and conditions. I believe that those regarded as bad can benefit from contact with others who are not bad, provided that we in Parliament do not pass laws based on the implicit assumption that the bad ought to be segregated and kept apart. No case has been made out for this Amendment, and I hope that the noble Earl will withdraw it.
Lord SILKIN: My Lords, I should like to say a few words. First, I think this is in any case a bad Amendment from the point of view of draftsmanship, because it says "falling into bad association". What is the meaning of "is falling"? Has he fallen; is he going to fall? It is a little doubtful, and anyone who has to interpret this would find the greatest difficulty.

601
Secondly, the Bill already provides for this: it says "is exposed to moral danger." I should have thought that, in the popular sense a young person who is associating with others, and is in bad company, is certainly exposed to moral danger. The only thing that the noble Lord, Lord Brooke, could say was that "moral danger" had a sexual connotation. I do not agree. In these days, "moral danger" means the danger of stealing, the danger of violence and all sorts of dangers of that kind. It certainly does not primarily connotate sex. Therefore, on two grounds I would say that we ought not to accept this Amendment: first, that it is badly drawn; and secondly, in so far as it has any significance, it is already covered.
Viscount ST. DAVIDS: My Lords, I have considered this Amendment with great care, and though at times I wondered whether I agreed with the noble Earl, I have come to the conclusion that I cannot possibly agree with him. I live surrounded, more or less, by youngsters. Some are good; some are bad, and some are indifferent—or possibly good and bad in turn. I should loathe to see anything on the Statute Book which more or less insisted that the bad children had to be kept away from the others, or that some had to be labelled bad and the others kept away from them. I think it is important that they should all be able to run together. In my view, the Amendment is far too sweeping, and if it were put into the Bill we might get far more children into court than ought to be there. Therefore, in spite of my wish to get children who need help to such help at the earliest possible moment, I feel that, on balance, we must come down against this Amendment.
Earl JELLICOE: My Lords, I am grateful to the noble Lord, Lord Stonham, for the care and good humour with which he has addressed himself to this Amendment. I should like to take this opportunity of thanking the noble Lord, not only on my behalf, but on behalf of all noble Lords, for the communications which he has sent us between the Committee and the Report stage. This has been extremely helpful
602
to all of us who are dealing with this complicated legislation.
But, that said, I cannot agree wi: h the case that he and a number of his noble friends have put forward, because they have not really met the case which I, at least, sought to deploy: that the importation, or re-importation, of these words into the Bill would be a useful reinforcement, and would give an ascertainable criterion which would be lacking if the Bill went forward as it stands at the moment. The noble Lord, Lord Silkin, has pointed to defects in the drafting of the Amendment. I am no lawyer, and I take note of what he has said; but I merely point out that these words have stood the test of 37 years: they have been in our legislation ever since 1932, and have been re-imported into two Children and Young Persons Acts since then. On the question of the interpretation of the word "moral", I, like my noble friend Lord Brooke of Cumnor, would agree with the noble Lord, Lord Kilbracken, that "moral" has a far wider connotation than that of the purely sexual. All I was seeking to point out was that it has acquired this special sexual connotation for many magistrates in juvenile courts. I think this is too restrictive, and one needs a wider criteria.
On the final point that the noble Lord, Lord Stonham, and others have made—that adoption of this Amendment would mean that a great many children would be hauled up before the courts unnecessarily—all I would say is that I do not think this is the case, and I do not see how noble Lords can possibly argue that it is. The noble Lord, Lord Stonham, has in emphatic terms assured us that it is the Government's firm intention, using their majority in another place, when this Bill is considered there, to strike out the Amendment that we carried on the Committee stage which reintroduced the second criterion. If, as he says, this is the Government's intention, that surely straight away knocks his argument to the ground. I am not persuaded by the arguments which the noble Lord has deployed. I am not one for dividing the House unnecessarily, especially on a Friday morning, but in this case I must stand by my Amendment.
1.6 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 40; Not-Contents, 41.

CONTENTS

Ampthill, L.

Emmet of Amebrley, Bs.

Merrivale, L.

Auckland, L.

Falkland, V.

Milverton, L.

Berkeley, Bs.

Fraser of Lonsdale, L.

Mowbray and Stourton, L.

Bessborough, E.

Goschen, V. [Teller.]

Rankeillour, L.

Boston, L.

Gray, L.

Rowallan, L.

Brooke of Cumnor, L.

Gridley, L.

St. Aldwyn, E.

Conesford, L.

Grimston of Westbury, L.

St. Oswald, L.

Craigavon, V.

Ilford, L.

Sandys, L.

Cromartie, E.

Jellicoe, E.

Selkirk, E.

Daventry, V.

Jessel, L.

Sempill, Ly.

Denham, L. [Teller.]

Lauderdale, E.

Somers, L.

Derwent, L.

Lothian, M.

Strathclyde, L.

Drumalbyn, L.

MacAndrew, L.

Terrington, L.

Effingham, E.

NOT-CONTENTS

Addison, V.

Gardiner, L. (L. Chancellor)

Royle, L.

Archibald, L.

Garnsworthy, L.

St. Davids, V.

Arwyn, L.

Henderson, L.

Samuel, V.

Balogh, L.

Kennet, L.

Segal, L.

Bowles, L. [Teller.]

Kilbracken, L.

Shepherd, L.

Buckinghamshire, E.

Listowel, E.

Silkin, L.

Burden, L.

Llewelyn-Davies of Hastoe, Bs.

Sorensen, L.

Champion, L.

Lucas of Chilworth, L.

Stonham, L.

Chorley, L.

McLeavy, L.

Stow Hill, L.

Clwyd, L.

Mitchison, L.

Strabolgi, L.

Cork and Orrery, E.

Morrison, L.

Wells-Pestell, L.

Crook, L.

Phillips, Bs. [Teller.]

Wise, L.

Douglass of Cleveland, L.

Plummer, Bs.

Wootton of Abinger, Bs.

Gaitskell, Bs.

Ritchie-Calder, L.

Resolved in the negative, and Amendment disagreed to accordingly.
[The Sitting was suspended at 1.16 p.m. and resumed at 2 p.m.]
2.0 p.m.
Lord STONHAM Lord STONHAM moved Amendment No. 3:
Page 2, line 15, after ("court") insert ("may make orders in pursuance of paragraphs (c) and (d) of the preceding subsection but subject to that").
The noble Lord said: My Lords, with this Amendment I should like to discuss Amendment No. 66 in the 5th Schedule. Subsection (4) of Clause 1 provides that the courts shall not make more than one of the orders mentioned in subsection (3), but it has been represented to us by the County Councils Association and by a number of children's officers that while in general this provision is sound it may occasionally be desirable to make both a care order and a hospital order. The court may rightly consider that a hospital order is appropriate, but the child may have no parents, or no effective parents, so there will be nobody to visit him while in hospital, or to receive him when the hospital order is discharged.
The Government think there is merit in this argument, and the Amendment therefore enables a care order and a hospital order to be made at the same time. The hospital order will naturally prevail over the care order as regards the place where the child is to reside for so long as the hospital order is in force. Hospital orders and fit person orders can coexist under the present law, and no practical difficulties need arise from having two orders in force. Section 10 of the Mental Health Act 1959 provides that where a child or young person in the care of a local authority under the Bill is admitted to a hospital or nursing home in England and Wales, the authority shall arrange for visits to be made to him on behalf of the authority and shall take such steps in relation to the patient while in the hospital or nursing home as would be expected to be taken by his parents. Local authorities will have this duty where a child subject to a hospital order is also subject to a care order. The power to make a hospital order in criminal proceedings is in Section 60 of the Mental Health Act 1959. This provision is amended by Schedule 5. The Amendment to that Schedule enables a court to make a care order as well as a hospital

605
order in criminal proceedings in respect of a young person. I beg to move.
Earl JELLICOE: My Lords, I am grateful to the noble Lord for his explanation of this Amendment, which seems to me to be quite right and I have no quarrel with it whatsoever.
On Question, Amendment agreed to.
Clause 2 [Provisions supplementary to Section 1]:
Lord STONHAM: My Lords, I beg to move.
Amendment moved—
Page 3, line 46. at end insert—
("(6A) In determining whether the condition mentioned in subsection (2) (aa) of the preceding Section is satisfied in respect of the relevant infant, it shall be assumed that no order under that Section is to be made in respect of him.")—(Lord Stonham.)
On Question, Amendment agreed to.
Earl JELLICOE Earl JELLICOE moved Amendment No. 5:
Page 5, line 28, leave out ("twenty-five") and insert ("fifty")
The noble Earl said: My Lords, this Amendment was moved by my noble friend Lord Brooke of Cumnor at our Committee stage. It affects the amount of recognisance that a parent or guardian may be required to enter into. At present the limit is set at £25. On the whole, we should be inclined to argue that this is a matter which could well be left to the discretion of the court, but alternatively, if that is not thought right, it should be set at a figure somewhat higher than £25. That is the figure which is the maximum for a recognisance which a young person might be asked to enter into under Clause 3 (7), and we believe that in any event it would be a good thing that some distinction should apply between the maximum which is applicable in the case of a parent or guardian and that which is applicable in the case of a young person. There is, of course, plenty of scope for argument over how high to pitch this sum. In another place the Opposition, I believe, argued un successfully that the maximum might be put at £100, and I should have thought there was a good deal to be said for that.
When this point was argued in Committee in your Lordships' House I believe there was some disposition on the
606
part of the Government to reflect again on this matter, and if the Government feel unable to accept £100—which seems to me to be reasonable—I hope on reflection they will be prepared to accept £50, because by accepting that, and therefore by accepting this Amendment they would be accepting the principle of drawing some distinction between the maximum which applies in the case of a young person and that which would be applicable in the case of a parent or guardian. I beg to move.
Lord STONHAM: My Lords, as the noble Earl has said, in Committee the noble Baroness, Lady Brooke of Ystrad-fellte, argued persuasively in favour of a higher maximum limit for the binding over of parents than for the binding over of young persons. My noble friend Lady Serota undertook to look at the matter again. We think that the considerations are nicely balanced, but we see the force of the argument that there should be different maxima for parents and for their children, and I would advise the House to accept this Amendment.
Earl JELLICOE: My Lords, may I just thank the noble Lord for that forthcoming attitude, more especially alter his Napoleonic victory just before lunch. I am delighted to find a spirit of magnanimity reigning on the part of the victors.
On Question, Amendment agreed to.
Clause 3 [Further supplementary provisions relating to Section 1(2) (e)]:
Lord STONHAM Lord STONHAM moved Amendment No. 6:
Page 6, line 45, leave out from ("1952") to ("then") in line 3 on page 7.
The noble Lord said: My Lords, I ask the House to consider with this Amendment also Amendment No. 8. My munificence knows no bounds, because these are two rather technical Amendments to meet a point raised by the noble Viscount, Lord Colville of Culross, in Committee. Your Lordships will recall that in Committee I moved an Amendment to secure that compensation could be ordered in care proceedings in respect of an offence of malicious damage falling within Section 14 (1) (b) of the Criminal Justice Administration Act 1914. Having considered the arguments put forward by the noble Viscount at our Committee

607
stage I agree with him that the Amendment which I then moved can be improved upon. This Amendment removes the words inserted in Clause 3 (6) by the Committee Amendment and they are replaced by the words inserted at the end of Clause 3 (6) by the Second Amendment. I beg to move.
Earl JELLICOE: My Lords, on behalf of my noble friend Lord Colville I should like to express my appreciation for these two Amendments, which I think substantially meet the point raised by my noble friend at Committee stage.
On question, Amendment agreed to.
Earl JELLICOE Earl JELLICOE moved Amendment No. 7:
Page 7, line 9, leave out ("one") and insert—

("(i) in the case of an offence under section 14 (1) (b) of the Criminal Justice Administration Act 1914 (which relates to malicious damage amounting to five pounds or less) five pounds, and

(ii) in any other case, four")

The noble Earl said: My Lords, I think this case has partly been met by the last Amendment, but there is still another leg to this Amendment upon which I should like to advance an argument. The House having accepted the last Amendment, I am not quite clear whether in fact this Amendment would be valid as it stands, and I should like to look at its drafting in any event. I address my argument to the question of £100 or £400—and this point was argued with a great deal of ability and legal agility by my noble friend Lord Colville of Culross at the Committee stage. What we should be attempting to do by our new subsection (2)—and I think the Amendment would achieve that objective—would be to draw a clear distinction between the power to award compensation for indictable offences and the equivalent power to award compensation for summary offences—that is, the Section 14 (1) (b) offences. In the latter case, where the damage does not exceed £5, my Amendment would restrict the compensation to £5, and I think this would be right; but in the former cases, the more serious ones, the maximum limit would be raised from £100, the present limit in the Bill, to £400. This was discussed in our Committee at some length
608
and I do not want to go at great length into the arguments for raising the maximum. I should like to summarise them under four heads.
In the first place, I should like to remind noble Lords that £500 is a maximum for compensation for which an adult is liable under the Criminal Law Act 1967, and this would be the same amount. Secondly, we do not see why there should be a different maximum in these cases. After all, as my noble friend pointed out at our Committee stage, it will be the parents who in most cases will be liable for paying the amount of compensation ordered. That may well be right, because the parents may well have a measure of responsibility in the matter. Thirdly, although some may say that £400 is on the high side, I think your Lordships should recall that the £100 limit goes back for at least 99 years, to the Forfeiture Act 1870, and I suspect that the value of money has decreased by a factor of more than four since that date. It is also perfectly obvious that young persons, like adults, are capable of doing damage—for example, to a motor car—which could run up to the £400 limit. My fourth reason for suggesting that we should raise this maximum to £400 is that that would in fact be the maximum, but there is no reason why the court should necessarily award the maximum sum. It would be in the court's discretion.
For all those reasons I believe it would be right to raise the maximum figure for compensation under this clause from the present £100 limit to £400. I hope very much that the noble Lord will agree that this is right, even though he may not feel, in view of the Amendment we have just made, that the wording is absolutely right. I beg to move.
Lord STONHAM: The noble Lord's Amendment would make subsection 6 (a) of Clause 3 read thus:
"section 34 of that Act (which relates to compensation for loss of property or damage to it) shall apply as if the finding were a finding of guilty of the offence and as if the maximum amount of the award under that section were:

(a) in the case of an offence under section 14 (1) (b) of the Criminal Justice Administration Act 1914 (which relates to malicious damage amounting to five pounds or less) five pounds, and

(b) in any other case, £400"

609
I think the noble Earl is right in taking the view that the Amendment just accepted, and No. 8 which I discussed with it, would affect the viability of what he has now moved. That will not prevent us from discussing the sense of the two points which are embodied in the Amendment, namely, to increase the maximum of compensation from £100 to £400 and to fix a lower maximum of £5 in the case of an offence under section 14 (1) (b) of the 1914 Act which relates to malicious damage amounting to £5 or less.
May I deal with the second point first? The amount of compensation is automatically limited by the amount of the damage. Compensation is compensation, and if the amount of the damage is £25 compensation for it cannot exceed £25. If the amount of the damage is £4, the court can award up to £4; if it is £50, the court can award up to £50; but if it is £120, as the Bill stands at present the court cannot award more than £100. The upper limit, whatever it is, comes into play only where the amount of the damage is more than that limit. In the Government's view a special limitation in respect of damage of £5 or less is unnecessary. If it were, it would be equally necessary to provide that if the damage was less than £10 the amount of compensation should not exceed £10, and so on right up the scale. It is also undesirable because it carries the implication that, above £5, it is all right to include a punitive element in compensation and to award £50 when the damage is £30.
Turning to the upper maximum, which the Amendment would raise to £400, the Government remain of the opinion that £100 is adequate. We are dealing here with damage by children under 14. Few children of this age have the ability to pay compensation themselves, except where the damage can be measured in a few pounds, the clause makes provision for payment by the parents and there can be little doubt that in the great majority of cases it is the parent who would find the money. The question is, how far should one place such a vicarious liability on the parents?
Obviously, liability must attach to them. There is no general provision in the law enabling people to recover from parents damage which they suffer as the
610
result of the acts of children. A child can commit damage without committing a criminal offence—as a negligent cyclist or a negligent pedestrian or a negligent ball-player, not intending to kick the ball through the window. In none of these cases has the injured party any remedy except by suing the child in the civil courts, if he is worth it, which is unlikely. He cannot sue the parent unless the parent has instigated the act which caused the damage, or been negligent himself. Whether he should be able to sue the parent is not an easy question and is outside the scope of this Bill. From the point of view of the victim, the law is capricious, his chance of compensation depending on whether the act was a criminal offence, whether there are court proceedings, whether the court thinks it right to make a compensation order, whether the parents are able to pay and so forth.
The question comes down to how far it is desirable to impose on the parents a financial liability for the act of their child in situations where the parent has no direct responsibility. The effect on the relationship between parent and child has to be considered, particularly where the amount has to be paid by weekly sums stretching over a period. A good deal of harm might be done to this relationship if the parents suffer from a sense of grievance over having to pay a considerable sum for something done by a child in a situation where they had no direct opportunity to avert it. In the Government's view this is not a situation in which one can simply apply the maximum of £400 laid down for adults, and that is why, taking all the factors into account, the Government are of the opinion that the sum of £100 is right. I am sure the noble Earl is aware that his right honourable friends and honourable friends in another place put this matter forward. The Amendment was accepted there by the Government, and they expressed themselves as well satisfied with this maximum of £100. It boils down to this. The relationship between parent and child is a special case, and often the damage is done in circumstances where the parent was not negligent, did not instigate it and could not possibly have stopped it. In those circumstances, although one has sympathy with the person who has suffered

611
damage in excess of £100 in this way, we think on balance that that figure is right.
Earl JELLICOE: The noble Lord prefaced his remarks by saying that this was on the whole a fairly evenly balanced argument, one way and the other, and I agree with him. I am fully aware of the attitude taken by my friends in another place, although I do not feel under any total compunction necessarily, and I am sure the noble Lord does not, to take the identical view our respective friends do in another place. On balance and on considering this matter, I had come to a different conclusion from that to which the noble Lord has come. We know only too well that even children under 14 are fully capable of doing well over £100 worth of damage if they set their minds to it, and I think there was a strong case for allowing the maximum compensation in these cases to be raised to the same as for adults in the Criminal Justice Act 1967; but this would, of course, remain very much within the discretion of the court. That said, I endorse the noble Lord's view that this is a pretty evenly balanced argument, and I certainly should not wish to press it. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Lord STONHAM: My Lords, I beg to move Amendment No. 8.
Amendment moved—
Page 7, line 28, at end insert—
("For the purposes of this subsection an offence under section 14 (1) of the Criminal Justice Administration Act 1914 (which provides for damage committed wilfully or maliciously to be punishable on summary conviction) shall be treated as an indictable offence within the meaning of the said Act of 1952.")—(Lord Stonham.)
On Question, Amendment agreed to.
Clause 5 [Restrictions on criminal proceedings for offences by young persons]:
Lord STONHAM: My Lords, I beg to move Amendment No. 9. This is purely drafting.
Amendment moved—
Page 8. line 40, leave out from ("either") to second ("not") in line 41 and insert ("have notified the informant that they do not wish to make such observations or have").—(Lord Stonham.)
On Question, Amendment agreed to.
Clause 10 [Further limitations on publication of particulars of children and young persons]:
2.22 p.m.
Lord STONHAM Lord STONHAM moved Amendment No. 10:
Page 14, line 6, after ("section") insert—

("(a) the references to a young person concerned in the proceedings as to the person in respect of whom they are taken shall be construed as including references to any person who has attained the age of seventeen but not eighteen and against or in respect of whom the proceedings are taken and, in the case of proceedings under Part I of this Act, any other person in respect of whom those proceedings are taken; and

(b) the references to a juvenile court shall, in relation to proceedings in pursuance of the provisions of sections 15 and 16 of this Act or on appeal from such proceedings, be construed as including a reference to any other magistrates' court or, as the case may be, the court in which the appeal is brought; and

(c)")

The noble Lord said: My Lords, I would ask your Lordships to consider with this Amendment Nos. 11 and 18. The first Amendment, No. 10, replaces subsection (4) of Clause 15 of the Bill, which the third Amendment proposes to omit. This subsection was inserted by an Opposition Amendment moved on Report in another place and accepted by the Government. It was appreciated at the time both by those who moved the Amendment and by the Government, that some re-drafting would be necessary to give a practical effect to the proposal. The object of the Amendment made in another place was to apply the restrictions on publicity in juvenile court cases to cases where the adult court discharges, or make a minor variation in, a supervision order in force in respect of a person over 18. So we are dealing only with the question of publicity. It applies only to proceedings under subsection (3) of Clause 15. It was felt that since the person had been protected from publicity when the supervision order was made by the juvenile court, it would be wrong for him to be exposed to publicity if an adult court subsequently varied or discharged the order because he had been satisfactory under supervision. When the practical difficulties were considered, however, they appeared more complicated than was expected. The difficulties are two.
First, a reporter in the adult court cannot be expected to distinguish the proceedings to which the restrictions apply. He may not be sufficiently knowledgeable to know the difference between a probation order made after 17 years of age and a supervision order made before 17. It is necessary, therefore, to provide that the court shall announce that the restrictions apply. The second difficulty is that complicated provisions would be required to enable reporters to distinguish between proceedings under subsection (3) and proceedings under subsection (5). For example, the supervisor might apply under subsection (5), because the supervised person was not reporting, but the court might take the view that it was not a case for a fine and that the best course was to discharge the supervision order. Or the supervisor might apply for discharge under subsection (3), saying that although the supervised person was not reporting he had not broken the law and was in steady employment; but the court might take a different view and consider that it was a case where the supervisor should apply under subsection (5), and this would be done.
Although the Bill sets out the powers of the court under two separate subsections it may not be so easy to distinguish them in practice. It would be necessary for the clerk to make two announcements to the Press: first, at the outset, that these were proceedings to which the restrictions might apply; and secondly, at the end of the proceedings, on whether they did apply. This seems too complicated a provision to deal with what was recognised in another place as a minor change in the law and which relates to proceedings which are in any event seldom sufficiently newsworthy to be reported. The Government have therefore come to the conclusion that the simplest way to deal with the matter is to apply the juvenile court restrictions to all proceedings in the adult court relating to supervision orders. The new paragraph (b) contained in the first Amendment does this.
There is a further complication because the existing restriction on the reporting of the names of those appearing in juvenile courts applies only to children and young persons—that is to say, those under 17. If a person over 17 appears before a juvenile court—for example in connection with a probation order or fit
614
person order made by that court—there is no restriction on publicity, although in practice the Press do not distinguish between those over 17 and those under 17 in juvenile court proceedings. However, if the juvenile court restrictions are to apply to supervised persons over 18, it would be odd not to apply them to persons against or in respect of whom proceedings are taken in a juvenile court when, for example, criminal proceedings "straddle" his 17th birthday or adoption proceedings are brought in respect of him between his 17th and 18th birthdays. It would also be odd not to apply them to proceedings in a juvenile court in respect of a person over the age of 17 who is subject to either a care or supervision order. The new paragraph (a) contained in the first Amendment therefore applies the existing restrictions on publicity to all persons aged 17 to 18 against or in respect of whom proceedings are brought in a juvenile court and to all persons in respect of whom proceedings are so brought under Part I of the Bill.
The new subSection inserted by Amendment No. 11, at page 14, line 10, places on the adult court a duty to announce the fact that Section 49 applies to supervision proceedings in that court. The words after the semi-colon are necessary because it would be wrong for a newspaper to be liable to prosecution for publishing the name of a person appearing before an adult court if the court failed to carry out this duty. I beg to move.
Earl JELLICOE: My Lords, I must frankly say that I find this an extraordinarily complicated area of the law and, not being a lawyer, all I will say is that what the noble Lord has said sounds right to me, but I should like very much to look at his statement in the Report of our proceedings. It is my understanding that the procedure which he is now suggesting and which would be embodied in the Bill by these Amendments, is satisfactory.
On Question, Amendment agreed to.
Lord STONHAM: My Lords, I beg to move Amendment No. 11.
Amendment moved—
Page 14, line 10, at end insert—
("( ) Where by virtue of paragraph (b) of the preceding subsection the said section 49

615
applies to any proceedings, it shall be the duty of the court in which the proceedings are taken to announce in the course of the proceedings that that section applies to them; and if the court fails to do so that section shall not apply to the proceedings in question.").—(Lord Stonham.)
On Question, Amendment agreed to.
Clause 12 [Power to include requirements in supervision orders]:
2.31 p.m.
Earl JELLICOE Earl JELLICOE moved Amendment No. 12:
Page 15, line 8, after ("but") insert ("subject to the next following subsection")
The noble Earl said: My Lords, I think it would probably be for the convenience of the House if we were to discuss this Amendment together with my Amendment No. 14 and Lord Wells-Pestell's Amendment No. 13. I do not know if that is agreeable to the noble Lord, Lord Wells-Pestell, but all the Amendments bear closely on the same subject—indeed, the wording of my Amendment is extremely close to that of the noble Lord, Lord Wells-Pestell.
We discussed this matter at quite considerable length at the Committee stage, and I think there is here a great deal of common ground between us: we are all anxious to preserve a wide amount of flexibility for the supervisor. For example, he may have authority under the terms of a supervision order to give directions to a child or young person to live for 90 days in some particular place—a hostel, for example: and after 45 days the supervisor may come to the conclusion that if this direction were to be carried out in full, to the full 90 days, this could lead to the young person concerned becoming completely "browned-off" and then the direction would, as the Americans say, or as we are tending increasingly to say, be merely counter-productive.
I think we all wish to preserve this degree of flexibility for the supervisors. I would readily concede that in many-cases—indeed, most—it is the supervisor rather than the court who knows most about the child, being in close and constant touch with him. I have no quarrel with that. Nor have I any quarrel with the general principle of the variation and discharge of supervision orders which is part of Clause 15. I readily
616
recognise that here we are dealing with highly responsible people. But what worries us is the supervisor's ability, it would seem, under the Bill as at present drafted, entirely to ignore, or do nothing at all about, a particular supervision order. That is why my two Amendments, taken together, would make it obligatory on the supervisor, if within six months he has not given directions which he is empowered to give under a supervision order, to go back to the court and seek the discharge or the variation of the order. It will then be up to the court to decide whether it is going to vary the order, or discharge it, or say that the order shall still apply. Only in the last event will it be obligatory on the supervisor to give the necessary direction.
I am not wishing to claim any special expertise in drafting here, more especially since this is not my drafting but that of my noble friend Lord Colville of Culross. The wording is extremely close to that of the Amendment which the noble Lord, Lord Wells-Pestell, has down, although in one small respect I think it is a little more flexible, since my Amendments would give the supervisor a chance to ask the court not to issue a direction at once and to explain his reasons why that was so.
To sum up, my Lords, I should like to make it clear that the power of the court to discharge or vary supervision orders would not in any way be affected by acceptance of these Amendments. It is only on the rather exceptional cases that they would bite. But we feel that in certain exceptional cases it is desirable that there should be this particular power which is written into our Amendments. In essence, we entirely agree that the supervisor should have considerable flexibility. What we are anxious about is that the present law prohibits his having complete carte blanche. This is what my Amendment is designed to avoid. But I am not worrying in any way that there should be great flexibility. I beg to move, and will listen with great interest to what the noble Lord, Lord Wells-Pestell, has to say in view of the considerable similarity between the two Amendments.
Lord WELLS-PESTELL: I apologise to your Lordships for having down an

617
Amendment on Report stage. I was here on the first day of the Committee stage when I had these Amendments down, but due to circumstances beyond my control I could not attend on the second day. The noble Viscount, Lord Colville of Culross, dealt most effectively with this matter on the second day of the Committee stage and there is not a great deal that I want to add to what the noble Earl, Lord Jellicoe, has just said. What exercises my mind is that this clause appears to allow conditions of various kinds to be inserted in a supervision order. In fact, the Bill empowers the supervisor to give directions of a specified kind to the person under supervision. The supervisor, however (and the noble Earl made this point a moment or two ago)—has a complete discretion—I quote:
"to decide whether and to what extent he exercises any power … conferred on him."
I think there are two related grounds for objection. First, as a matter of principle (and I believe it to be a matter of principle) the court should be able to order a certain form of treatment with some certainty that it will be given. It may well be that my noble friend the Minister may say that this is no longer going to be the function of the court; that this is to be left to the supervisor. There is, however, some danger in this, because I believe that the court must assume responsibility for considering and determining the kind of treatment that is to be given to the person to be supervised. That is why I think the court should be able to order a certain form of treatment with some certainty that it will be given.
The way the new scheme for intermediate treatment will operate makes it necessary to give the supervisor some discretion; and I accept what the noble Earl said; that he must have discretion. But it will give the supervisor some discretion over precisely what form of treatment the supervised person receives, and some discretion about starting dates to fit in with the arrangements of those who run the schemes. Nevertheless, if a supervisor takes the view that it would not be right for him to make any use of the powers given to him by the courts, I feel that he should justify this to the court direct, and this is primarily my concern.
Secondly, if a supervisor can be given powers which he is under no obligation
618
to use—and I understand this to be the position—it may be tempting to add these powers to a supervision order as a normal practice, just in case they are needed; and I think that would be a mistake. In my view it would be better if the court were asked to vary the original order if the supervisor thought he needed powers which were not envisaged when the original order was made.
I realise that this is not an easy situation. My noble friend the Minister, with his customary courtesy and helpfulness, has written to me quite a long letter on the subject, and I find myself in sympathy with the difficulties which he sets out. But I want to make these points because I still hope that it will be possible to put something into the Bill whereby the supervisor will be under the obligation to go back to the court within a specified period and indicate to the court what has been done. It is very important that in the last analysis the court should have the responsibility for seeing that certain things are done and accept the responsibility for treatment.
2.43 p.m.
Baroness WOOTTON of ABINGER: My Lords, if I understand these Amendments, and I am not quite sure that I do, I view them with some dismay. I have expressed the view that the powers given to supervisors may be excessive. I think I expressed that view at the Committee stage. My fear is rot so much that the supervisor will do too little as that possibly he may be tempted to do too much. As I read these Amendments, their effect is to say that when a supervision order is made, if the court gives the supervisor power at some time to tell the child to go and live in a hostel, or to go and live with Auntie May, or to attend a youth club, or to take part in some activities approved as part of the regional scheme, it is up to him to exercise it or not to exercise it. I think it would be a great mistake that the supervisor should have to go back to the court and explain why he has not exercised any of these powers.
I agree with my noble friend Lord Wells-Pestell that it may well be that this whole list of powers will be put into supervision orders almost automatically, because, who knows, when this child is put under supervision for several years,

619
in the unforeseen future it may be necessary to send him to live in a particular place or direct him to take part in certain activities. So as to safeguard the future, I think it likely that most of these powers will be written into supervision orders. But when time goes on, the supervisor is the only person who is in close contact with the child, and it would be a great mistake if he felt himself in any way obligated to exercise some of these powers if the child was in fact doing perfectly well without them.
If he has to go back to the court and ask for a variation of the order, or to be relieved of some of the powers, he is putting on the court a responsibility that it is in no position to discharge. The court, six months later, or after an even longer interval, is quite out of touch with the child and really can act only on what the supervisor says, and I do not think that the court ought to take the responsibility of, so to speak, interfering in the future control of the child once it has made this supervision order and has given discretion to the supervisor. I should like the supervisor perhaps to have to consult somebody before he exercised positive powers; I would much rather see some Amendment that way round. I do not think he ought to be called upon to explain why he has not sent the child to a hostel; why he has not sent it to live with Auntie May; why he has not sent it to join a youth club; why he has not said that it must take part in certain forms of social service. This seems to me to be an imposition that it would be improper to lay upon him, and one on which the court is not in a position to give a sensible judgment.
2.48 p.m.
Lord STONHAM: My Lords, my noble friend Lord Wells-Pestell was kind enough to refer in friendly terms to the fact that I had sent him a long explanatory letter—one of many long explanatory letters I wrote between Committee and Report. I think the one he referred to ran to some five foolscap pages. That will teach me, because we are still having it discussed! I was grateful to have the support of my noble friend Lady Wootton of Abinger. It is rather surprising that we are having this discussion in this way, because my
620
noble friend Lady Wootton is putting the point of view—and she speaks with enormous experience as a magistrate—with which I agree, whereas my noble friend Lord Wells-Pestell—a former probation officer—is putting exactly the kind of case that I thought he would not have put arising from his experience.
The noble Earl, Lord Jellicoe, said that these Amendments are addressed to exactly the same point, and I agree with him. The point is whether it is right that subsection (2) should leave a supervisor who has been empowered by the court to issue directions, with discretion to issue no directions at all. There are differences of detail in the Amendments, but they are very similar in approach. I think they are both subject to the same objections.
The whole scheme of Clauses 12 and 19 in this Bill is that it is for the court to decide whether to confer on the supervisor power to issue directions, and it is for the supervisor to decide—within the fairly fine limits allowed by the court—what use to make of those powers. Ask yourselves, why do we have these highly trained, dedicated people, with their vast experience, acting as supervisors unless we expect them, and give them reasonable freedom, to do the job according to their judgment and according to their discretion. These Amendments would cut right across that and right across the whole principle of the scheme. They would leave the supervisor with full discretion how to use his powers, provided he made some use of them within six months of the making of the supervision order. If he then did not do so, my noble friend wants us to give the court power to instruct him to use his powers.
This is absolutely wrong, and I am thinking again not of the supervisor but of the child, because I want the supervisor to give the child, within the limits imposed by the court, the treatment that he needs. If it is thought that if the supervisor were to give him no directions he would then be flouting the court, and that this would be improper or an affront to judicial dignity, well, I must reject it, because under subsection (2) the court has no power to give instructions to the supervisor or to the supervised person. Its powers are purely enabling powers, and there is no question of its being flouted if these powers are not used.

621
It seems to me illogical to trust the supervisor with the decision precisely how and when to use the power the court has given to him, but not to trust him with the decision that after all he need not use his powers at all. Once we accept as reasonable the division of function between the court and the supervisor which I have described, I think it is inconsistent to attempt, as the Amendments do, to give back to the court an area of decision which properly belongs to the supervisor.
Let us consider, as my noble friend Lady Wootton did, what the supervisor might do. He has been given these powers and he might want to direct the boy to join a youth club or undertake some form of activity, but the boy says, "I will do it anyway"; he volunteers. So the supervisor does not use his powers, I think quite wisely. Has he to go back to the court and say, "The boy is doing this and I have not told him to"? That does not seem to me to be a reasonable kind of thing to suggest. The supervisor might want to gain the boy's confidence before putting the relationship between them to the test, and this might take some time. The youngster might not be co-operative at first, whereas after a time, after he has got confidence in his adviser, he might. Suppose, again, the order was made in the autumn and the supervisor thought that the boy ought to go to an early summer holiday camp, beyond the six-month period. He would have to go back to the court and ask whether this was right.
Courts are not likely to empower supervisors to issue these directions except in cases where enquiries into the child's background have shown that this power is likely to be valuable to the supervisor. I think we agreed in our discussion in Committee that it will be in only a minority of cases that no directions are issued; and if all these cases had to be taken back to the court. I have no doubt that in nearly all of them the court would agree with the supervisor's judgment. In fact, I will go so far as to say that I personally, as a matter of principle, would take the supervisor's judgment against the court's, because the supervisor is the person who is treating the child. It is the court that issues directions and decides the framework; it is the supervisor who fits the lyric to the music.
622
I concede that there might be a small number of cases where the court did not agree with the supervisor. Under the Bill as at present drafted, however such situations could not arise, because the respective roles of the court and the supervisor are clearly defined, and thus there is no area of potential conflict. I believe it would be most unfortunate to create an area of potential conflict, as the Amendments would. Also the Amendments propose that such conflicts should be resolved by the court instructing the supervisor to do something which he considers to be, at best, unnecessary, and which may perhaps be positively damaging. What kind of situation is that? We ought not to have supervisors if we thought that that was going to happen; because either the supervisor would have to ask to be relieved of his responsibility for the child or he would be forced to discharge that responsibility in a manner which, in his experienced judgment, was wrong.
My noble friend Lord Wells-Pestell referred to the danger of conditions being inserted as a habit by the court in case they are needed. That did not seem very complimentary to the court, but I suppose it is true that it could happen. I think it is quite unlikely that courts would be so undiscriminating in their choice of what to include in a supervision order. It is much more likely that they will say to the supervisor, "If you think you need these powers later, come back to us and ask". That would be the normal and proper thing to do. I suppose the difference between the points of view lies in the way in which one looks at this particular Bill and this particular section of the Bill. But I think that an enormous responsibility for the success of this particular scheme is going to rest on the supervisors. I hope that we shall express our confidence in them by leaving them, once the court has taken the decision and created the framework, to do the job professionally and properly within the limits imposed by the Bill.
Lord WELLS-PESTELL: My Lords, I do not know what the noble Earl is going to do in this matter but I certainly do not want to press the Amendment. However, I want to comment on something which my noble friend said.
Lord SHEPHERD: My Lords, I feel I ought to intervene. This is Report

623
stage. Only the mover of an Amendment has the right to speak twice unless the permission of the House has been obtained. I think the noble Lord should take that into account.
Earl JELLICOE: My Lords, I am sure the House would extend that courtesy to the noble Lord, seeing that on this very point he has an Amendment down which, had he not agreed that mine should be taken with it, he would in fact have moved.
Lord WELLS-PESTELL: I am much obliged to your Lordships. The only comment I want to make is that my noble friend the Minister referred to the skill and competence of the supervisors. He may have had in his mind when he said that the Probation Service; but I would remind the noble Lord, as I am sure he knows, that the bulk of the supervisors will not be, and may not be when the new Act comes into force, probation officers. They may well be, in the main, supervisors who have not had the skill and the experience of dealing with delinquents.
Lord STONHAM: My Lords, that is something I really cannot accept. It is a reflection on children's officers and others, and I cannot accept it. Many of the supervisors will of course be probation officers, and I did have them in mind; but I think they will all be skilled and proper persons for the job.
Lord CHORLEY: My Lords, I should just like to say a word about this matter because I have been a magistrate for a very long time.
Viscount GOSCHEN: My Lords, I think the noble Lord is out of order in speaking from the Bishops' Bench.
Lord CHORLEY: I beg your Lordships' pardon. I should just like to say that although I sympathise tremendously with what the Minister said in answer to the Amendment put forward by the noble Earl opposite, there was one point at which I thought he went, perhaps, a little too far. After all, magistrates are the people who have to decide about these things, and he was suggesting that in effect the supervisor would know more than the magistrates. At the time when the magistrates deal with a case they
624
give great care and consideration to it. There are several of them, and they discuss these matters most carefully. From time to time it is fairly clear that there is a difference of opinion between them and the probation officer. I am talking in a rather old-fashioned way because my experience has been in the past, but in that situation I must say that my court never had any doubt at all as to the fact that what they said "went".
Certainly at that time, if it had been clearly indicated to the probation officer that the court expected him to take a certain line, and if he felt that this was a wrong line, he would say, "I would rather one of my colleagues took over this case". It seems to me altogether wrong that, in effect, the supervising officer is deliberately to go against what the magistrates have decided is the best treatment for a particular child. I am not saying that the Minister said this in so many words, but he seemed to me to be getting very close to it. That would be an altogether wrong principle to lay down because, at the end of the day, it is the magistrates who ought to be in control of these cases.
Baroness BIRK: My Lords, it seems to me that we are putting magistrates in a rather elevated position, so far as judgment is concerned, compared with a probation officer or children's officer, who would in fact have more detailed knowledge of a child. The magistrates would do the best they can—they would have all the reports before them, and they would see the child—but surely the person under whose supervision the child comes is the person who will be in direct contact with the child. I hope that these Amendments will be rejected.
Lord DONALDSON of KINGS-BRIDGE: My Lords, I must support this point of view. My noble friend Lord Chorley seems to me to be reversing the correct way to look at this. The magistrates make the decision that a certain form of treatment is best for the child, and then hand the child over to the person who is to give the treatment; that is, the supervisor. It is absolutely fatal if one is to start interfering with that man. I think the point has been well made, and I will not make it again. The whole system depends, it seems to

625
me, on the magistrates' having confidence in the people who are doing the treatment, on there being mutual confidence on both sides and, above all, on the supervisor's being given a free hand to carry out his job.
Earl JELLICOE: My Lords, I wish to say only a few words on this Amendment. Unlike the noble Lord, Lord Wells-Pestell, and the noble Lord, Lord Chorley, I am still in order. I think we should keep a sense of proportion here as to what these Amendments are about. There is No intention on my part to drive a horse and cart through the principle of the Bill, as one would almost assume from the forcefulness of some of the language used from the Front Benches opposite. I agree—and I made this clear—that there should be considerable discretion vested in the supervisors. I agree with what the noble Lord, Lord Stonham, said: that they should be given great discretion on the use they may make of their powers. I do not query that.
The only point—and it is quite a narrow one—is whether or not there should be some check or control if they make no use whatever of those powers. That is the sole point to which my Amendments are addressed. I think that there should be some further arbiter. It is wrong to confer powers when there is no obligation to use them. That may lead to the position that the noble Baroness, Lady Wootton, thought may arise of powers being unnecessarily built into supervision orders. If the procedure in these Amendments were adopted I think it would be a very rare event for a court to go against the considered judgment of the supervisor. After all, he is the person closest to the child concerned; he sees most of the situation on the spot. But I do not go as far as the noble Lord, Lord Stonham (and here I agree with the noble Lord, Lord Chorley), in thinking that one should back one against the other. The court may not have the precise knowledge of the situation, but it may have more judgment. I believe that there should be this ultimate responsibility vested back in the court. That said, if the noble Lord, Lord Wells-Pestell, does not wish to press this Amendment I find myself in some agreement with him. We have ventilated this subject very thoroughly and I should
626
be willing to withdraw my two Amendments.
Amendment, by leave, withdrawn.
Clause 13 [Selection of supervisor.]:
3.5 p.m.
Earl JELLICOE Earl JELLICOE moved Amendment No. 15:
Page 17, line 1, leave out from ("unless") to ("a") in line 3.
The noble Earl said: My Lords, I think the point at issue is quite a narrow one. At Committee stage my noble friends moved an Amendment which would have struck out subsection (2) altogether. Now we should like to remove only two lines in it; namely the words:
"the local authority of which the area is named or to be named in the order, in pursuance of section 18 (2) (a) of this Act so requests and"
The subsection would then read:
"A court shall not insert in a supervision order a provision placing a child under the supervision of a probation officer unless a probation officer is already exercising or has exercised … "
and so on. I should like at the outset to make it clear that I am in no way wishing to attack the general philosophy of this Part of the Bill which is, I understand, to place the primary responsibility for children up to 14 with the local authority children's service, whether one is dealing with a child under Section 1 of the 1963 Act or with a child to whom some form of court order might apply. What I find hard to accept is the way in which the Bill as drafted would take away all discretion from the court in this area.
The Bill recognises that, as an exception, the probation officer should be the supervisor for children of this age where the probation service is already working with the family. I believe that this is right. The probation officer concerned has got to know the family well, and its circumstances, and probably already knows the child concerned and its problems; he knows the whole family dilemma. I believe the principle is right, that the probation officer should in those circumstances be looked to—but not always. I think it is also desirable in order to avoid duplication of services, whether they are court or local authority services, concerned with a particular family.
Under the Bill, however, even this rather exceptional provision of the Probation Service being called in can apply, under the Bill as drafted, only if specifically the local authority so requests. It is that particular qualification, that particular "if or unless" clause which my Amendment is designed to remove. There might be a whole variety of reasons why the local authority should not so specifically request. It might be as a result of some mishap or accident that there was no objection at all on the part of the local authority to the probation officer dealing with a particular child; but, through some mischance, the specific acceptance or agreement of the local authority was not notified to the court. Secondly, local authorities—indeed, all institutions—depend on people, and people are fallible. And it is quite possible that, for good reasons or bad reasons, the children's department or some department of the local authority may have run up against this family in the wrong sort of way. They may have had some sort of brush and there may be between the family and the local authority a continuing friction. In such circumstances it might be best if the Probation Service were to deal with the child. Just because one side or the other has got a bit "bloody-minded"(if I may use that term) the local authority might not give this specific permission.
This is not a very wide point, but I think it is of some importance. I believe that the court should have this discretion, in the exceptional case where the Probation Service has already been involved with the family, of making the probation officer the supervisor without the express permission of the local authority. It is only a discretion that I am seeking to preserve, and one which would be exercised only in that particular specified circumstance. I beg to move.
Lord STONHAM: My Lords, as the noble Earl said, during the Committee stage the noble Viscount, Lord Colville of Culross moved, and subsequently withdrew, an Amendment designed to remove the whole of subsection (2) of Clause 13. This Amendment is on a much narrower point: that the court need not ask whether the local authority
628
approves, but may appoint a probation officer as a supervisor of a child under 14 if the probation officer has previously worked with the family or the child. It seems to me that here there are two things. One is that there is a suspicion of the local authority in the matter, and the second, a failure to appreciate the comprehensive overall responsibility of a local authority for children under 14. The power now in the Bill, by implication, for a local authority to decline to give its consent is not a power of veto. The responsibility of local authorities is positive, to consider in every case whether supervision would be best undertaken by a probation officer who had an established relationship with the family or by the authority.
The terms of this subsection are wide enough to cover cases where no probation officer has any longer any such relationship; and there will be cases in which, despite the existence of such a relationship, it would be desirable that the child should not be supervised by the same officer who is supervising the same member of the family. I wonder whether the noble Earl has considered that point in relation to this Amendment. For instance, I am sure that everyone will agree that a child care officer would normally be the right supervisor for a very young child. There are cases where an officer is supervising another member of the family. Suppose, for example, the probation officer is supervising the father of the family and is experienced with the family. Should the court appoint the same officer to supervise a child of the family who has come before the court? It is by no means an unlikely or improbable circumstance. Or perhaps a child might be under supervision to prevent further ill-treatment by his father. I suggest that there are quite a number of such cases where it would not be right for probation officers to discharge the function; indeed, they would not wish to do so.
The reason this subsection places on the local authority the preliminary decision whether to suggest the appointment of a probation officer is simply that it is part and parcel of the authority's responsibility towards all children under the age of 14. I believe that when we discussed this point in Committee noble Lords accepted my argument that this

629
should be the primary responsibility of local authorities, irrespective of whether or not a child has been before the court. Once this is accepted and given effect to by legislation, it seems right that the local authority, which has the general responsibility for all work with children of this age, should have the function of deciding whether to recommend to the court that the supervision of a particular child should be undertaken by a probation officer. The authority is in the best position to judge.
I could not agree with any suggestion that local authorities cannot be expected to discharge this responsibility sensibly. That is the reason for subsection (2), which invites Parliament to make absolutely clear that local authorities have the main responsibility for all work with children under 14, including the responsibility of deciding when such work can best be undertaken by someone else. The Amendment would derogate from this principle. Under the Amendment, Parliament would at one and the same time be laying down the principle and saying that in some cases the courts may depart from it. This would be undesirable. The Amendment would, for instance, enable a court to name a probation officer as the supervisor of any child, of any age, one of whose parents happened to have been on probation at any time in his or her life, even if this had been years or decades previously.
May I tell your Lordships, briefly, the history of this subsection? Paragraph 24 of Children in Trouble said this:
"The supervision of a child under 14..will be by the local authority; in cases where the probation service was already working with the child's family, arrangements could be made for the probation officer concerned to supervise the child".
What we had in mind was that the local authority should always have the formal responsibility for supervision under the court order but that authorities would, in suitable cases, make arrangements for the actual supervision to be undertaken by a probation officer already working with the family. We then received representations from the Probation Service that probation officers were accustomed to working directly to the court and would not wish to act as agents of local authorities. When the Bill was drafted, we provided that, instead of the local authority being able to arrange for the Probation
630
Service to act in some cases as their agents, they should be able, in defined circumstances, to suggest to the court that a probation officer should be lamed in the order. This is simply a piece of machinery to meet the representations by the Probation Service while preserving the principle of the original proposal in the White Paper. It has always been a key feature of the Government's proposals that, whatever might be the detailed machinery, the initiative for proposing that a probation officer mould supervise a child under 14 should be placed squarely with the local authority as part of its general responsibility towards all children of this age.
Earl JELLICOE: My Lords, again I am grateful to the noble Lord for his explanation, but I would say that although much of what he said I found persuasive, he did not answer my question about what I would call a case going by default—that is, the possibility of the Probation Service not being called in through some mishap, through the matter not coming to the attention of the court. This is something which, in circumstances not difficult to conceive, could happen, and I should have thought it would be better to safeguard against this possibility, even if we accept the principle which the noble Lord has just enunciated: to redraft this subSection in such a way that in cases where a probation officer is already exercising or has exercised duties in connection with the family the court would be able to call in the Probation Service, unless there was specific objection to this from the local authority. I wonder whether the noble Lord would be prepared to consider this, because it seems to me that it would effectively safeguard against the possibility of this going by default as the result of some accident or mischance.
Lord STONHAM: My Lords, I will of course consider what the noble Earl has said.
Earl JELLICOE: My Lords, in view of what the noble Lord has so kindly said, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
Clause 15 [Variation and discharge of supervision orders]:
3.18 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 16:
Page 17, line 25, after ("may") insert—
("(a) make no order, but remind the supervised person of the requirement of the supervision order and of the power of the court to vary or discharge the order under this section; or (b)")
The noble Lord said: My Lords, I beg to move Amendment No. 16. Clause 15 (1) deals exclusively with the variation and discharge of supervision orders. As I read it, it means that the court would have either to vary an order or discharge it. During the consideration of the Bill in another place, questions were raised about the steps which it would be possible to take in the event of a person under supervision failing to comply with the terms of the supervision order. The provisions which have applied in the past to probation orders are not applicable to supervision orders. I am satisfied that the power of the court to reconsider a case on the application of the supervisor, to vary an order and make a care order will enable most situations to be dealt with.
But I believe that there will be occasions—and this is the real reason for my Amendment—when the court will wish an existing order to continue but will want to have the child or young person before it so as to indicate clearly to the young person who is under supervision that if he will not co-operate with the court, the court will be obliged to consider whether some other form of order would be more satisfactory. I believe I am right in saying that in the Commons Committee the Under-Secretary of State for the Home Department referred to the possibility of a court warning a young person and giving him a second chance without varying or discharging the order. What I want to suggest to your Lordships, and in particular to my noble friend the Minister, is that such a possibility should be given formal recognition in the Bill. I beg to move.
Lord STONHAM: My Lords, as my noble friend has said, in another place, in Committee, in the course of discussion of Clause 15 my honourable friend Mr. Elystan Morgan said that when a supervised person was brought back before the court under subsection (1) of this clause,
632
the court might decide that it was not necessary on that occasion to use any of its powers under the subsection but might give a warning to the supervised person very much on the lines suggested by my noble friend in this Amendment. Subsequent to the statement by my honourable friend, the National Association of Probation Officers put the suggestion to the Home Office that this possibility should be written explicitly into the Bill. But it is not necessary; and the Amendment is not necessary. It is likely that sometimes a child or young person will be brought before the court under Clause 15 (or indeed under Clause 1), and the court will decide not to make an order on that occasion, but to issue a warning instead. This is something the courts will be able to do as the Bill is now drafted. There is no need to amend the Bill to make this possible. But having considered this matter further, I would assure my noble friend that the proposed Amendment would go a great deal further than is necessary to give express recognition to the possibility of the court issuing a warning; the Amendment would have far wider implications which may not be obvious at first sight.
One of the main objects of this Bill is to ensure that a child or young person is not brought before a court at all unless the person bringing him believes that a situation exists in which a court order is required so as to ensure that he receives the care or control which he needs. It is then for the court to decide whether an order is necessary for this purpose. It is true that this House has amended the Bill so that it no longer fulfils that object, but, as I explained earlier, the Government intend to suggest to another place that they should not accept this deletion of one of the main principles of the Bill. The Amendment proposes a substantial departure from this approach. It proposes that supervisors should bring cases to court where they do not believe that an order is necessary. It would therefore mean more cases going to court. I am sure that this point has escaped my noble friend, and he has not realised that this will be one of the consequences.
It may be suggested that the Amendment would provide a useful means of supporting the authority of the supervisor. In my view it would have the

633
opposite effect, because the impression would be created that the supervisors lacked authority and needed bolstering up by the courts. I hope that I have convinced my noble friend that what he mainly desires can be done now and that it is not necessary to write this provision into the Bill. Secondly, if we did it, it would run counter to the main principle of the Bill, which I know he fully supports. In those circumstances, I hope that he will feel able to withdraw the Amendment.
Lord WELLS-PESTELL: My Lords, I do not altogether accept what my noble friend has said. I should think that if it was desirable for a supervisor to bring before the court a young person who is not fulfilling the task of the supervision order so that the young person could be warned, it would be desirable that this should still happen. Having heard my noble friend on this matter, and having regard to the fact that he says it can be dealt with as the Bill is constructed at the moment, with your Lordships' permission I beg leave to withdraw the Amendment.
Amendment by leave withdrawn.
Lord STONHAM: My Lords, I beg to move Amendment No. 17, which is a drafting Amendment.
Amendment moved—
Page 18, line 16, at end insert ("or").—(Lord Stonham.)
On Question, Amendment agreed to.
Lord STONHAM: My Lords, I beg to move Amendment No. 18.
Amendment moved—
Page 18, line 35, leave out subsection (4).—(Lord Stonham.)
On Question Amendment agreed to.
Clause 16 [Provisions supplementary to Section 15]:
Lord STONHAM Lord STONHAM moved Amendment No. 20:
Page 20, line 17, leave out ("or reference").
The noble Lord said: My Lords, there is no mention of a reference in subsection (1) of Clause 16, and the inclusion of the words "or reference", which the Amendment deletes, is not appropriate. I beg to move.
On Question, Amendment agreed to.
Clause 24—[Powers and duties of local authorities etc. with respect to persons committed to their care]:
3.27 p.m.
Lord STONHAM Lord STONHAM moved Amendment No. 21:
Page 29, line 30, at end insert—
("(4A) If at any time a person subject to a care order has throughout the preceding twelve months been accommodated by virtue of the order in an establishment where care, treatment and education are given wholly or mainly on premises forming part of the establishment and it appears to the local authority to whose care he is committed by the order that during that period—

(a) communication between him and his parent or guardian has been so infrequent that it is appropriate to appoint a visitor for him; or

(b) he has not visited or been visited by either of his parents or his guardian,

it shall be the duty of the authority to appoint an independent person to be his visitor for the purposes of this subsection; and a person so appointed shall—>

(i) have the duty of visiting, advising and befriending the person to whom the care order relates; and

(ii) be entitled to exercise on behalf of that person his powers under section 21(2) of this Act; and

(iii) be entitled to recover from the authority who appointed him any expenses reasonably incurred by him for the purposes of his functions under this subsection.

In this section ' independent person' means a person satisfying such conditions as may be prescribed by regulations made by the Secretary of State with a view to securing that he is independent of the local authority in question and unconnected with any community home.
(4B) A person's appointment as a visitor in pursuance of the preceding subsection shall be determined if the care order in question ceases to be in force or he gives notice in writing to the authority who appointed him that he resigns the appointment or the authority give him notice in writing that they terminate it; but the determination of such an appointment shall not prejudice any duty under the preceding subsection to make a further appointment.")
The noble Lord said: My Lords, this Amendment arises out of the discussion which we had on July 9, which I am sure the noble Earl will recall, because it arose on an Amendment which he himself moved, and subsequently withdrew, to restrict the care order to three years at a time. I undertook to consider, in the light of what he said, whether it would be possible to propose any alternative Amendment to meet the main anxieties which he, and indeed others, had expressed. As the Amendment which

635
I have now moved indicates, the Government accept that an additional safeguard is desirable and feasible in some cases. I know that the noble Earl has later on in the Order Paper an alternative to his original Amendment, but we feel—and I hope the House will forgive me if I explain this—that this meets his point, and indeed provides a really valuable safeguard and assistance for children.
In formulating this Amendment we have taken great pains to identify the particular situations in which additional safeguards are desirable, and to devise machinery which will be effective, and sensitive to the individual needs of each child concerned. Obviously, this is very important. In Committee I explained the very considerable safeguards which the Bill already contains. These safeguards will be adequate in the great majority of cases. It would not be desirable to set in motion additional safeguarding machinery in cases where this is not really necessary. To do so might well be upsetting to the children concerned, in addition to causing extra but unnecessary work for the staff. It is important that we should hit the right nail on the head with the right hammer, rather than using a mallet to hit a larger number of nails, less effectively in cases where safeguards are really needed, and unnecessarily in other cases.
Accordingly, the opening words of my Amendment define as precisely as we are able the kinds of cases where we believe that an additional safeguard is necessary and will be valuable. These words define two factors, both of which have to be present. The first is that the child or young person should be accommodated for an appreciable period in an establishment where care, treatment and education are given wholly or mainly on the premises. Thus the Amendment is directed at establishments such as the present approved schools, and will mainly affect older children; this is in accordance with the views expressed in our debate on July 9. The Government do not believe there is a need to apply these extra safeguards on behalf of children who are living with foster parents or in ordinary children's homes or hostels and going out daily to the local school or to work. The need for an additional safeguard arises with
636
children who spend virtually all their time in the establishment where they are accommodated, with very little contact with the world outside.
Secondly, the Amendment is limited to cases where the child has little or no contact with his parent or guardian. If a child has parents or a guardian who are in touch with him and visiting him, we believe that it would be wrong to interfere with the relationship between the child, his parent and the local authority. It should be left to them to decide whether and when an application should be made to the court for revocation of the care order. Any automatic requirement for a court hearing would to a considerable extent take the matter out of their hands, and would mean cases going to court even when the child, his parents and the local authority all agreed that this was wholly inappropriate and that the child should remain in care. I should, however, like to stress that we have very much in mind the need to ensure that the child, if he is old enough to understand, and his parents, are made fully aware of the nature of a care order and of their right to apply at any time for its revocation. How far this can best be done by the court when making the order, and how far by the local authority or the staff of the community home where the child is accommodated is a matter which we shall be discussing with those concerned. This may best be dealt with by advice in a circular, or it might also be appropriate for rules of court. We certainly intend to ensure, by appropriate means, that parents and children know their rights in this regard.
Having thus defined the situations in which an additional safeguard is desirable, the Amendment does not simply say that all these cases must be taken to court. It requires the local authority to appoint an independent person as the child's visitor. The authority will have some discretion to judge whether the contact between the child and parents is so infrequent that a visitor should be appointed. But we have put a "long-stop" there because we have made it the duty of the local authority to appoint a visitor—a friend—if the child has not visited or been visited by his parents or by a guardian over a period of 12 months. This will be a moving period of 12 months; that is, once the child has been

637
accommodated for 12 months in an establishment of the kind in question, the local authority will be under a continuing duty, so long as he remains in that establishment, to consider whether to appoint a visitor.
This independent visitor will have not only the right to take the case to court at any time if he thinks that desirable, but also the duty to visit, advise and befriend the child. This means that he will be doing some of the things which the child's absent or ineffective parents might otherwise have done—visiting him, discussing his case with the staff of the establishment and of the local authority, and generally giving what help he can. I believe that this is a valuable feature of this scheme. It will ensure that cases go to court when they should; and it will also provide a source of outside help and guidance to the child, whether or not an application is made to the court. It may then mean—in fact I think it will mean—that many children who have no parents, or who have ineffective parents, may gain a friend for life.
I hope noble Lords will agree that this Amendment will cover those cases where the need for an additional safeguard has been felt, and will provide not only an effective safeguard but also one sensitive to the needs of the individual child, going beyond mere machinery to get cases before the court where necessary. I beg to move.
Baroness WOOTTON of ABINGER: My Lords, I very much welcome this Amendment, which I think is a necessary protection for children who may have been virtually abandoned by their parents or guardians. I have been asked by the noble Baroness, Lady Emmet of Amberley, who is unable to be here, to express on her behalf her appreciation of the fact that the Government have accepted the suggestion which I think originated with her. I am, however, a little disturbed that this provision does not go further.
I do not see that the distinction between the child who is in a residential institution, and who goes to school there but does not go into the outside world officially for any purpose, and the child in a residential institution who goes out to school overrides this situation in which the child has been virtually abandoned
638
by his parent or guardian. I should have thought that in the second case, as much as in the first case, there ought to be somebody who occupies the position of parent or guardian and in particular has a right to see that application may be made in certain circumstances for the care order to be discharged. I should have thought that all children in care should have either a parent or guardian who maintains contact with them, or an independent person who occupies that place in lieu of the parent or guardian.
Earl JELLICOE: My Lords, I, too, should like to welcome this Amendment. I am grateful to the noble Lord for the attention he has given to the arguments fully ventilated at Committee. I and a number of other noble Lords were then expressing, as he has mentioned, very real anxiety for the adequacy of our safeguards in this respect. There is he six months' review by the local authority. The child can apply for discharge of the order and the parent or guardian can apply, but we felt that there was here a major loophole, or loopholes, and that this was a very important area, given the fact that care is now covering such a wide spectrum of possibilities. I am grateful to the noble Lord for this Amendment and the care which, typically, he has taken in looking into this matter.
To a certain extent my doubts and anxieties are removed by this Amendment, though I still have some residual anxieties. I have the anxiety which the noble Lady has expressed that this is still restricted to the residential establishment. I hope that by cudgelling our brains, and with the amount of time we have available for this Bill (and we may have a little more than we first thought was available to us) it might be possible to devise a formula which would cover all children in care, as the noble Baroness has suggested.
Further—this is not really a doubt but a query in my mind—I wonder whether the noble Lord can explain a little more about the type of independent persons whom the Government have in mind for the discharge of what will be very important functions. I notice that the person concerned should be "independent of the local authority" in question. I was wondering what precisely that means. It may be a term of art of

639
which I am not aware of the precise meaning. It seems to be highly desirable that the persons concerned should know the locality pretty well, and how that is compatible with "independent of the local authority" I do not know. Perhaps the noble Lord would say a little more about what lies behind those words.
That said, I should like, in the light of what the Minister has said, to think rather carefully over the Amendment which we had drafted, No. 24. As a result of our previous discussion on that Amendment, and in the light of the noble Lord's remarks at our Committee stage, we have tried to restrict it; and I shall be considering between now and when we come to that Amendment the extent to which the noble Lord's Amendment renders it superfluous. My Lords, I think it would be churlish of me not to say again that I am very grateful to the noble Lord for this constructive Amendment. I think it advances matters quite considerably. Nevertheless, I hope—and I come back on the point made by the noble Baroness—that we shall be able to devise a fully effective safeguard of this kind for all children in care.
Lord STONHAM: My Lords, I am very grateful to my noble friend Lady Wootton of Abinger and to the noble Earl. Frankly, I feel rather excited about this Amendment. I think it is going to open new possibilities and new fields. Of course, it is a common fate of anybody doing anything new that one of his noble friends get up and says that it does not go quite far enough. My noble friend may be quite right, but I am sure she will agree that the child in the open situation (she said that all children in care should have this opportunity) does not need the kind of friend I am talking about, with statutory rights of access to the court. He needs friends; and it is good child care practice to help him to find them.
Baroness WOOTTON of ABINGER: My Lords, I am sure my noble friend will forgive me if I point out that I have just said that I do not agree with this point of view. He said he was sure I would agree with what he is saying, but my speech was entirely directed to disagreeing with it.
Lord STONHAM: My Lords, that is a situation I shall be coming to. I was hoping that my noble friend would agree with this. In any case, I submit that many of these children will be with foster parents. Imagine the situation if we insisted that they should also have a friend, when they are living with people acting as parents to them. No doubt we shall have experience of this and shall be able to see whether it needs to be extended at all.
The noble Earl asked me about "independent". "Independent" means that the person must not be a member or an officer of the local authority, or anyone in the authority's employment, direct or indirect. The kind of people we have in mind would be local in the sense that they would be available to the local authority—magistrates, teachers, retired clergy, citizens of good repute of all kinds: and not only good repute, but of good intent and willing to take on this work.
Baroness BIRK: My Lords, I wonder if my noble friend could explain this. I agree with my noble friend Lady Wootton. I think she was referring to cases where the child was not necessarily with foster parents but was in an institution or children's home and going out to school. Although the child would be in establishments, it would not be wholly in one establishment. I do not think the way the Amendment is worded covers that case. I do not know whether it could be worded so that wherever a child is in an institution, even though not being educated in the same institution, it would have these opportunities. I should have thought that where the child was with foster parents and the arrangement was working well, it would not appear to the local authority that this would be necessary.
Earl JELLICOE: My Lords, may I, with the permission of the House, put one further question to the noble Lord on this Amendment? I was wondering why the period of the preceding twelve months has been introduced. Is the purpose to establish whether there is communication with the parent or not? I should have thought a shorter period might have been more appropriate.
Lord STONHAM: My Lords, I am sorry that I did not make this clear. I

641
used the expression "twelve months" as a "long-stop". It is mandatory on the local authority; if a child has not received a visit from his parents within twelve months the authority must appoint a person to be his friend. But it can, under the clause, appoint a visitor in less time than that. It is a matter of discretion.
On Question, Amendment agreed to.
3.45 p.m.
Lord STONHAM Lord STONHAM moved Amendment No. 22:
After Clause 24 insert the following new Clause:M
Transfers between England or Wales and Northern Ireland
".—(1) If it appears to the Secretary of State, on the application of the welfare authority or the managers of the training school to whose care a person is committed by a fit person order or by virtue of a training school order, that his parent or guardian resides or will reside in the area of a local authority in England or Wales, the Secretary of State may make an order committing him to the care of that local authority; and while an order under this subSection is in force it shall have effect as if it were a care order and as if sections 20 (2) and (3) and 21 (1) and (5) of this Act were omitted and in section 29 (3) (a) of this Act for the reference to section 20 (3) there were substituted a reference to subsection (3) of this section.
(2) If it appears to the Minister of Home Affairs for Northern Ireland, on the application of the local authority to whose care a person is committed by a care order other than an interim order, that his parent or guardian resides, or will reside in Northern Ireland, the said Minister may make an order committing him to the care of the managers of a training school or to the care of the welfare authority in whose area his parent or guardian resides or will reside; and the provisions of the Children 1968 c. 34. (N.I.). and Young Persons Act (Northern Ireland) 1968 (except sections 83 (3) (a), 88 (3), 90 and 91 (3)) shall apply to an order under this subsection as if it were a training school order made on the date of the care order or, as the case may be, a fit person order.
If an order under this subsection commits a person to the care of the managers of a training school, the contributions to be made in respect of him under section 161 of the said Act of 1968 shall be by such
642
council as may be named in that order, being the council within whose district his parent proposes to reside or is residing at the time of the order.
(3) When a person is received into the care of a local authority or welfare authority or the managers of a training school in pursuance of an order under this section, the training school order, fit person order or care order in consequence of which the order under this section was made shall cease to have effect; and the order under this section shall, unless it is discharged earlier, cease to have effect—

(a) in the case of an order under subsection (1), on the earlier of the following dates, that is to say, the date when the person to whom the order relates attains the age of nineteen or the date when, by the effluxion of time, the fit person order aforesaid would have ceased to have effect or, as the case may be, the period of his detention under the training school order afore-said would have expired;

(b) in the case of an order under subsection (2), on the date when the care order aforesaid would have ceased to have effect by the effluxion of time or—

(i) if the person to whom the order relates is committed by it to the care of a welfare authority and will attain the age of eighteen before that date, when he attains that age;

(ii) if the order has effect by virtue of subsection (2) as a training school order and the period of supervision following the detention of the person in question in pursuance of the order expires before that date, When that period expires.

(4) An order under this section shall be sufficient authority for the detention in Northern Ireland, by any constable or by a person duly authorised by a local authority or welfare authority or the managers of a training school, of the person to whom the order relates until he is received into the care of the authority or managers to whose care he is committed by the order.
(5) In this section 'training school', 'training school order' and ' welfare authority' have the same meaning as in the said Act of 1968, and 'fit person order' means an order under that Act committing a person to the care of a fit person."
The noble Lord said: My Lords, I beg to move Amendment No. 22. This new clause provides for transfer to

643
Northern Ireland of persons subject to English care orders and for the transfer to England or Wales of persons subject to Northern Ireland training school orders or fit person orders. These transfer provisions operate, as with the transfer provisions between England and Scotland which will be moved later, only where the parent or guardian of the child resides or will reside in the other country. This can arise where, after an order has been made in relation to the child, the parents move to the other country and it is desirable that the child shall be moved there also. Or it can arise, more exceptionally in the case of Northern Ireland, where a child resident in one country comes before a court in the other. I beg to move.
Lord BROOKE of CUMNOR: My Lords, I am sure it is right to introduce this new Clause into the Bill. With memories of my Home Office experience in the background, I know how important it is to get the law right on this question of transfer. Sometimes it requires a good many words to do so. I only hope that the Government have got it right, because from my recollection it is extremely easy to make a slip and find that one of these permutations and combinations is not satisfactorily covered. But, having said that, I certainly welcome the attempt by the Government to amend the Bill so as to cover these cases.
On Question, Amendment agreed to.
Lord STONHAM Lord STONHAM moved Amendment No. 23:
After Clause 24 insert the following new clause:
Transfers between England or Wales and the Channel Islands or Isle of Man
".—(1) The Secretary of State may by order designate for the purposes of this section an order of any description which—

(a) a court in the Isle of Man or any of the Channel Islands is authorised to make by the law for the time being in force in that country; and

(b) provides for the committal to the care of a public authority of a person who has not attained the age of eighteen; and

644

(c) appears to the Secretary of State to be of the same nature as a care order other than an interim order;

and in this section 'relevant order' means an order of a description for the time being so designated and 'the relevant authority', in relation to a relevant order, means the authority in the Isle of Man or any of the Channel Islands to whose care the person to whom the order relates is, under the law of that country, committed by the order.
(2) The Secretary of State may authorise a local authority to receive into their care any person named in the authorisation who is the subject of a relevant order; and while such an authorisation is in force in respect of any person he shall, subject to the following subsection, be deemed to be the subject of a care order committing him to the care of the local authority.
(3) This Act shall have effect, in relation to a person in respect of whom an authorisation under this Section is in force, as if sections 20 (2) and (3), 21 and 29 and in section 25 (4) the words from 'and if' onwards were omitted; and it shall be the duty of a local authority who propose, in exercise of their powers under section 13 (2) of the Children Act 1948, to allow 1948 c. 43. such a person to be under the charge and control of a person residing outside England and Wales to consult the relevant authority before exercising those powers.
(4) An authorisation given to a local authority under this section shall cease to have effect when—

(a) the local authority is informed by the Secretary of State that he has revoked it; or

(b) the relevant order to which the authorisation relates ceases to have effect by the effluxion of time under the law of the place where the order was made or the local authority is informed by the relevant authority that the order has been discharged under that law; or

(c) the person to whom the relevant order relates is again received into the care of the relevant authority;

and if a local authority having by virtue of this section the care of a person to whom a relevant order relates is requested by the relevant authority to make arrangements for him to be received again

645
into the care of the relevant authority, it shall be the duty of the local authority to comply with the request."
The noble Lord said: My Lords, I beg to move Amendment No. 23. This clause provides for the accommodation in the care of local authorities in England and Wales of children and young persons subject to court orders made in the Channel Islands and the Isle of Man. The existing law, which is Section 83 of the Children and Young Persons Act 1933—and it will be of some comfort to the noble Lord, Lord Brooke of Cumnor, that a lot of this is based on the existing law—provides that if the insular law enables children or young persons under 17 years of age to be sent to approved schools in England, a child or young person with respect to whom such an order is made may be received into such approved school as the Secretary of State may direct. He is then treated as though he was subject to an approved school order under our law. With the abolition of the approved school order in England or Wales this will no longer be possible. It is therefore necessary to make other arrangements. The insular laws, in addition to empowering courts to make approved school orders, also empower the courts to make fit person orders committing to the care of an insular authority. It is possible that the islands may make adaptations to their law on fit person orders or introduce new orders similar to care orders. The Clause is designated to cater for these different possibilities by enabling the Secretary of State to designate an insular order which appears to him to be of the same nature as a care order. A child or young person subject to an order so designated may then be received into the care of a local authority in England or Wales. I beg to move.
Lord BROOKE of CUMNOR: My Lords, I appreciate, likewise, the need for this new clause. I will not repeat the random comments that I made on the last new clause, though many of them will be equally applicable here. I would only say that members of the general public have No idea of the additional complications necessarily existing because
646
of the separate Administrations in the Channel Islands and the Isle of Man, although our law and their law in the normal case satisfactorily overcome those complications.
On Question, Amendment agreed to.
Clause 25 [Children to whom Part II applies]:
3.50 p.m.
Lord BROOKE of CUMNOR: My Lords, the next Amendment, No. 24, concerns a matter of some importance, and it was referred to indirectly by my noble friend, Lord Jellicoe, in his speech on Amendment No. 21. In his speech he indicated that he would like to consider whether, in the circumstances, he wished to move Amendment No. 24. I wonder whether the noble Lord would be willing to agree at this time that the House should now adjourn, because we might be able to save time in the long run if, in fact, my noble friend Lord Jellicoe does not wish to move this Amendment. I know it is agreed to stop our proceedings at about this time. I think that the Opposition have made sufficiently clear their desire to make progress with the Bill and not to hold it up. It is only too clear that we cannot finish today.
Lord STONHAM: My Lords, I wish to be quite accommodating. I am not quite clear what the noble Lord, Lord Brooke of Cumnor. means. Does he mean that it is in any case not his intention to move Amendment No. 24 now on behalf of his noble friend; because, if that is the position, I should be grateful if we could just stay another five minutes, when I think we might get another dozen or so Amendments done.
Lord BROOKE of CUMNOR: My Lords, in that case I must reserve the right of my noble friend Lord Jellicoe to put down this Amendment again on Third Reading, because he clearly has not had sufficient time to consider the effect which Amendment No. 21 has had on the purpose underlying Clause 24. I cannot help thinking that it might be better if we were to end now. I do not think that it will make very much

647
difference in the long run to our completion of this Bill, and I repeat my noble friend's assurance that he is anxious not to hold up progress.
Lord STONHAM: My Lords, I put that query because I was not quite sure what the noble Lord had in mind, but, in the circumstances he has now explained, I think it would be convenient if we adjourned the further consideration of the Report stage of the Bill, and when we resume we resume with the Amendment of the noble Earl, Lord Jellicoe.

FINANCE BILL
Brought from the Commons; read 1a, and to be printed.
DEVELOPMENT OF TOURISM BILL
Reported from the Committee, with Amendments, and re-committed to a Committee of the Whole House; Bill to be printed as amended.
  UNITED KINGDOM TRADE WITH DENMARK
  UNITED KINGDOM TRADE WITH DENMARK