Sitting of 7 July 1971

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  EDINBURGH CORPORATION ORDER CONFIRMATION (NO. 2) BILL
  Read the Third time and passed.

  CORNWALL COUNTY COUNCIL BILL [Lords]
  Ordered,
  That the Cornwall County Council Bill [Lords] be recommitted to the former Committee in respect of Clause 65 (Application of Act of 1963 to certain self-employed persons).—[The Deputy Chairman of Ways and Means.]

ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    Listed Buildings, Monuments and Trees (Unauthorised Removal)
    Mr. Hardyasked the Secretary of State for the Environment how many listed buildings, ancient monuments and trees, protected by preservation order or planning condition, have been removed without official approval or permission during the last six months.
    The Secretary of State for the Environment (Mr. Peter Walker): No ancient monuments protected by the Ancient Monuments Acts have been removed without official approval. The figures relating to ancient monuments protected by planning conditions, listed buildings and trees are not available in my Department.
    Mr. Hardy: I appreciate the difficulty of obtaining the figures, but would not
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    the right hon. Gentleman agree that there have been many reports in recent months of features of importance and consequence being demolished or removed? Would he not also agree that there seems to be a growing attitude on the part of some developers that if there is a feature of some importance the best course is to demolish it first and apologise later? Will he look at the matter more seriously?
    Mr. Walker: We have a good system of emergency listing under which, in one quarter, 700 buildings threatened with disruption were speedily listed. There is a good procedure here, but if I find loopholes that need to be filled I shall take the appropriate action.
    Mr. Selwyn Gummer: Would not my right hon. Friend agree that it would be much better if, instead of this emergency listing, we moved the need for planning permission back so that it had to be requested before demolition? If that were done, it would not be necessary to have people rushing round doing emergency listing.
    Mr. Walker: This is a matter of considerable complication. Such a measure would result in massive additional work, which would serve no real purpose.

    Housing Subsidies
    Mr. Skinnerasked the Secretary of State for the Environment whether he has now completed his consultations with the local authority associations regarding housing subsidy charges; and if he will make a statement.
    Mr. Meacherasked the Secretary of State for the Environment whether he can now give a precise indication of when he expects to conclude his consultations with local authorities, concerning his proposals to refashion housing subsidies.
    The Minister for Housing and Construction (Mr. Julian Amery): I will report to the House as soon as possible.
    Mr. Skinner: Is the right hon. Gentleman aware that when the consultations are finally over the implementation of the Act will be against the background of massive Labour majorities in most towns and cities? Does the right hon. Gentleman appreciate that in such a situation some of these authorities—I hope

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    many of them—will use every means at their disposal to avoid implementing a policy which means doubling and trebling rents by his Tory Government? In that kind of situation, can we expect the right hon. Gentleman to restrict the freedom of local action?
    Mr. Amery: I am sure that I can count on the co-operation of all local authorities, of whatever political colour, to implement a reform of housing finance which the Labour Party, had it been reelected, would have undertaken.
    Mr. Allason: Does my right hon. Friend find it likely that Labour councils would object to a fair rent scheme?
    Mr. Amery: No, Sir. I find it difficult to think that they would object to a fair rent scheme, since the fair rent concept was introduced by a distinguished Member on the benches opposite. Nor do I think they would resent a scheme which would give added resources for slum clearance.
    Mr. Crosland: I think we should clear this up. Is the right hon. Gentleman aware that in no circumstances would a Labour Government, if re-elected, have adopted the principle of fair rents in the public sector since, as the Prices and Incomes Board and many other bodies have made clear, there is no logical analogy between the private rented sector and the public rented sector? Will the right hon. Gentleman take my hon. Friend's question about' the date of announcement more seriously because, if as is rumoured, he proposes to force local authorities to raise rents under the new scheme in April next year, it is becoming a matter of the greatest urgency that they should know where they stand?
    Mr. Amery: I agree with the right hon. Gentleman about the importance of an early statement. I am interested to hear that had his party been returned to office it would not have proceeded to adopt fair rents. It opens up interesting speculation about what it would have done.

    Thomas Cook and Sons
    Mr. William Hamiltonasked the Secretary of State for the Environment what is the up-to-date valuation of the freehold properties of Thomas Cook and Sons; and whether he can now state when
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    the proposed Bill for their disposal will be introduced.
    The Minister for Transport Industries (Mr. John Peyton): I have written to the hon. Member about property valuation. On timing, I have nothing to add to the reply given to my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on 16th June.—[Vol. 819, c. 439.]
    Mr. Hamilton: Does the right hon. Gentleman recognise that the Transport Holding Company, which he said is handling the sale, is to issue a statement to prospective buyers? Will he give an assurance that the statement will be available to Members of this House and that this business will not be sold to any organisation which contributed to Tory Party funds at the General Election?
    Mr. Peyton: Of course I will gladly give the undertaking asked for in the first part of the question about making any statement on this subject available to Members of Parliament. As for the last part of the question, all I can say is that the hon. Gentleman has managed to contribute his own unique blend of suspicion and self-righteousness, which is wholly unjustified.

    Local Planning and Development
    Mr. Tilneyasked the Secretary of State for the Environment what action he has taken to urge local authorities to combine physical planning and development of the environment with other services such as nursery schools, day nurseries and community centres.
    Mr. Peter Walker: Current opportunities such as those presented by reorganisation, the preparation of structure plans and the initiatives taken to explore new forms of management are all tending to encourage local authorities to adopt the approach my hon. Friend favours. I intend to foster such developments.
    Mr. Tilney: Has my right hon. Friend seen the Shelter Neighbourhood project in Liverpool? Does he not agree that there is much to be said for bringing the community spirit to inner urban areas and satellite cities?
    Mr. Walker: I have visited the Shelter scheme in Liverpool on several occasions.

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    I think it has a great deal to offer, and I have encouraged other local authorities to go and examine the progress being made there.

    Green Belt
    Mr. Dykesasked the Secretary of State for the Environment whether he intends to use the interim protection measure for green belt land in areas other than those already announced for Hertfordshire, Kent and Surrey.
    The Minister for Local Government and Development (Mr. Graham Page): It is my general policy to safeguard all green bell proposals pending final decisions in the context of regional strategies.
    Mr. Dykes: While I welcome my hon. Friend's interim protection device—and this has been widely welcomed outside the House—may I ask him whether he recognises that there is a particular problem in respect of those threshold areas of green belt land which give on to existing developed land? I am thinking also of the metropolitan area green belt land, particularly in Middlesex and my constituency. Does he recognise the need for a special directive to local authorities making clear that this green belt land should be sacrosanct, too? Secondly, may I ask when we can expect the final definitive decisions on the overall green belt proposals?
    Mr. Page: The last part of my hon. Friend's question is well related to the first. The metropolitan area green belt proposals will be protected under these interim provisions, but the question of whether and when we shall receive final decisions is related to the preparation of the regional strategies and within them the preparation of structure plans under the 1968 Act. I am encouraging local planning authorities to prepare structure plans as soon as possible for confirmation by the Secretary of State. Green belt will be shown in those plans, for approval and confirmation by my right hon. Friend. I do not preclude the approval and confirmation of further areas of proposed green belt in advance of structure plans where this is clearly justified.
    Mr. Freeson: While fully supporting the general intentions with regard to green belt policy, may I ask the hon.
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    Gentleman to take care not to encourage any ideas of preventing Inner London boroughs which have grave housing needs from purchasing or having made available to them non-green belt land in such areas as Harrow to assist with London's housing problem?
    Mr. Page: We have to balance the housing requirements with the green belt policy. I do not think there is great difficulty in that. The local planning authorities are bringing forward land for housing development which is not affected by green belt policies.

    Rivers (Effluent Discharge)
    Mr. Arthur Jonesasked the Secretary of State for the Environment what procedures exist for consultation between planning and river authorities, regarding the existence and likely growth of effluent discharge into river courses, having regard to the increasing demand for water arising during the remainder of this century from the implementation of existing development plans.
    Mr. Peter Walker: There are well established arrangements for consultations on development plans and development control, but I have come to the conclusion that there are not sufficient, and that a more formal basis for consultation is, however, needed for development likely to cause pollution; and I am discussing the form that this should take with the associations of local authorities and river authorities.
    Mr. Jones: I am grateful to my right hon. Friend for that reply. Are we to have a White Paper on the whole question of water resources generally and, if so, when is it likely to appear?
    Mr. Walker: There will almost certainly be a White Paper on water resources, but I cannot give a definite date for its appearance.
    Mr. Crawshaw: I believe that the right hon. Gentleman is visiting Liverpool in the immediate future, when he will discuss this problem. Will he be sure to read a recent report which seems to suggest that such is the volume of effluent flowing into the river, and such is the projected inflow, that not only will the river become hazardous but health in the vicinity will be endangered?
    Mr. Walker: I am very much in favour of adopting controls and methods that will from year to year from now on ensure that our rivers are cleaned up.
    Mr. Scott-Hopkins: Is it not absolutely monstrous that my right hon. Friend has forced the Trent River Authority to lower its standards of acceptable effluent because of the premature closing of the Yardley, Birmingham, sewerage works? Will he take immediate action to rectify this?
    Mr. Walker: That is an interesting point, but I know that generally the pollution of the River Trent is improving substantially.
    Mr. Blenkinsop: Does the right hon. Gentleman not feel that the action he needs to take is on the lines recommended in the Jeger Report on sewage disposal, which really gives us the answer to the future?
    Mr. Walker: I certainly look upon that as an important report. We shall soon be publishing our comments on the Jeger Report.

    Building Land
    Mr. Evelyn Kingasked the Secretary of State for the Environment how many acres of land has been released for building purposes by county planning authorities in the counties of Hampshire, Dorset, Cornwall and Wiltshire since the issue of the Ministry's circular on this subject; and how much was released by the same counties in a comparable period in the previous year.
    Mr. Graham Page: Statistics in the form requested are not available. I suggest that my hon. Friend asks the local authorities concerned.
    Mr. King: Does my hon. Friend accept that the price of land, and, therefore, the price of housing units, depends very largely on the rate at which and is released? Is he satisfied with the progress being made?
    Mr. Page: Yes. I have not been able to assess the effect of Circular 10/70, in which we asked local planning authorities to release as much land as possible, but I am confident that by our policy we are achieving more harmonious cooperation than the Opposition did in attempting to use the Land Commission.

    Driving Tests (Appointments)
    Mr. Normantonasked the Secretary of State for the Environment whether he will now reconsider amending the Motor Vehicles (Driving Licences) Regulations, 1970, made under Section 25 of the Road Traffic Act, 1962, to allow discretion to be exercised by traffic area authorities administering the driving test appointment procedure, particularly where appointments had to be cancelled for reasons outside the control of the applicant.
    The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): No, Sir. My right hon. Friend has no power to do so.
    Mr. Normanton: Will my hon. Friend consider either taking powers or at least giving some general directions to the authorities to deal with cases where applicants for a driving licence, through unfortunate circumstances such as sickness, duly certified, are faced with a penalty through having to pay for but not receive the test?
    Mr. Griffiths: We take into account exceptional circumstances where applicants are not able to attend. Obviously, the cost of the administration of the scheme has to be borne by all the people and if too many exceptions were made the only result would be higher costs for the great majority.

    Shops (Change of Use)
    Mr. Worsleyasked the Secretary of State for the Environment whether he will amend the Use Classes Order so that planning permission would be required for a change of use from a shop to a restaurant or cafe.
    Mr. Graham Page: I am considering this suggestion as part of a review of the Town and Country Planning Use Classes Order, 1963, but I am not yet in a position to announce any final decision.
    Mr. Worsley: Is my hon. Friend aware that discussion of this matter has been going on for years, since I first raised it with the previous Government? Does he not think it is time that discussion ended and decisions were taken?
    Mr. Page: It may have been going on for years with the previous Government.

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    I initiated discussions with the local authority associations on this. I have received their replies, which are now being carefully considered.
    Mr. Ashton: Is the hon. Gentleman aware that a great deal of distress is sometimes caused when a shop changes hands and becomes a restaurant or a café and a juke box is installed which plays loud music from early in the morning until late at night? Will he in the necessary legislation see whether it can be backdated so that changes which have taken place over the last few years have to be renewed every 12 months or so?
    Mr. Page: It would be difficult to backdate it but I am conscious of the hardship caused when there is a change from an ordinary shop to a restaurant. I have under consideration other types of trade in shops which come under the same category, such as launderettes and fried food shops.

    A41 Bypass, Kings Langley—Tring
    Mr. Allasonasked the Secretary of State for the Environment whether he has decided to hold public inquiries on the various sectors of the A41 bypass, Kings Langley to Tring.
    The Under-Secretary of State for the Environment (Mr. Michael Heseltine): No, Sir. This is a matter for consideration after the objection period has ended in August.
    Mr. Allason: Is my hon. Friend aware that there is considerable local concern about some sections of this route where both private and public amenities are seriously threatened? Would he make it clear that his mind is not closed about the final line of the route but that he will consider alternative suggestions and is prepared to consider tunnelling in places where the route seriously threatens public amenities?
    Mr. Heseltine: My hon. Friend will know that those matters could be ventilated at the public inquiry should it be necessary. The objection period closes in about six weeks' time.
    Mr. Raphael Tuck: For this bypass, and, indeed, all bypasses, including motorways, will the hon. Gentleman consider the system adopted in Germany on
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    autobahnen where lorries are prohibited from travelling in the outside lane, resulting in increased safety? Would he consider this suggestion particularly for the killer stretches of the Ml?
    Mr. Heseltine: That is a different question from the Question under discussion, which concerns a bypass.

    Diesel-powered Vehicles (Exhaust Emissions)
    Mr. Michael McNair-Wilsonasked the Secretary of State for the Environment what discussions he has had with lorry makers about reducing exhaust smoke emissions from diesel-powered vehicles; and if he will make a statement.
    Mr. Peyton: Last December I published a draft regulation which would require new diesel-engined vehicles to comply with the strict smoke limit included in the British Standard for diesel engines. I hope to announce shortly the terms of the final regulation.
    Mr. McNair-Wilson: Can my right hon. Friend say how he intends to enforce the law when these vehicles get on the road and whether he has had any discussion with the vehicle industry about whether it would be possible to have a smoke meter installed in the cab to warn the driver that his vehicle was breaking the law?
    Mr. Peyton: I will take into account the helpful suggestion made in the latter part of my hon. Friend's supplementary question. He has raised the difficulty of enforcement, which, alas, is an abiding problem to which I cannot give an easy answer, but it continues to receive very thorough attention.

    Housing
    Mr. Robert Cookeasked the Secretary of State for the Environment what is the number of houses started in 1971 to the latest date for which figures are available; and what increase this represents in percentage terms over the figure for the corresponding period of 1970.
    Mr. Amery: In Great Britain 131,400 houses were started up to the end of May, 1971, as against 120,900 over the corresponding period in 1970, an increase of 8·5 per cent.
    Mr. Cooke: I congratulate my right hon. Friend on that reply. Can he say what progress it represents in the private sector?
    Mr. Amery: Yes—an increase of 23 per cent. over the corresponding period last year.
    Mr. Loughlin: Apart from the steps which were taken by the Labour Government, would the right hon. Gentleman tell the House what precise actions, except for advertising, the Government have taken to stimulate house building?
    Mr. Amery: Yes; they are not difficult to itemise. There has been the encouragement given to local authorities to provide mortgages; co-operation with the building societies; and the appointment of a good Minister for Housing and Construction.
    Mr. Crosland: Is the right hon. Gentleman aware that all of us, as we go round the country and visit our constituencies, are aware of the galvanic dynamic which he personally has induced? But would he give the House the starts for May this year compared with May last year, and, since they show a marked drop on May last year, will he be rather more modest in future about making these facile party polemical points?
    Mr. Amery: The May starts this year were an improvement on the April starts, and the April starts were an improvement on the March starts. The total showed a marked improvement. The only—[HON. MEMBERS: "Answer."]—reason which leads the right hon. Gentleman to put that question is that the seasonal adjustment shows that the upsurge in building came rather earlier this year than it did last year.
    Mr. Moyleasked the Secretary of State for the Environment whether he will set out the aspects of housing which he took into consideration when helping to prepare the White Paper on public expenditure and the estimated amount of expenditure allocated to each aspect.
    Mr. Peter Walker: I would refer the hon. Member to paragraph 35 of Cmnd. 4515.
    Mr. Moyle: I am aware that it has not been the previous practice, and I am
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    grateful for the compliment which the right hon. Gentleman has paid to his Labour predecessor. Would he not agree that it is about time we had another look at this matter? How are we to assess whether the Government are planning for local authorities to lend more on mortgages this year than last year if we do not have the figures? As for relying on the word of Ministers, does not our experience of 18th June show that that is a risky business?
    Mr. Walker: It is impossible accurately to predict the increase in local authority mortgages for this coming year but it is certain that it will be substantial. I have already announced a further £46 million increase in expenditure on improvement grants.
    Mr. Frank Allaun: Is it not a fact that we in Britain devote only 3·7 per cent. of our G.N.P. to housing, compared with 5·5 per cent. for the rest of Europe?
    Mr. Orme: Common Market?
    Mr. Allaun: And other countries—all 22 of them. As this explains why Britain is bottom of the list, with one exception, for the number of houses built per thousand of population, will the Government increase our share of the G.N.P. instead of cutting it by £150 million per annum, as they propose to do?
    Mr. Walker: I am very surprised at the hon. Gentleman's suggestion. The reason why other countries spend a greater proportion of their G.N.P. on housing than we do is that their rents are higher.

    Contractors (Orders)
    Mr. Geoffrey Finsbergasked the Secretary of State for the Environment what was the total value, seasonally adjusted and at constant prices, of new orders received by contractors during the first quarter of 1971; and what percentage difference this represents relative to the figure for the corresponding quarter of 1970.
    Mr. Amery: According to provisional figures collected by the Department, the value of new orders obtained by contractors in the first quarter of 1971 was £680 million at constant (1963) prices seasonally adjusted. This represents an

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    increase of 3 per cent. over the first quarter of 1970.
    Mr. Finsberg: Is my right hon. Friend—to whom all of us on this side of the House pay tribute as against the complacency shown by the right hon. Members who sit on the Opposition Front Bench—satisfied with this figure? What further attempts will he make to help the building industry to get on with the job of housing the people, which is its job and not the Government's job?
    Mr. Amery: I am not satisfied. We must do a great deal better. But there is a marked improvement in private sector housing. There is a marked improvement in public works—roads, schools and hospitals. There is a marked improvement in shops and offices. We have not yet achieved the improvement which we seek in industrial building or in the public sector, although I think that that will come when we announce, with the reform of housing finance, the improved grants for slum clearance.
    Mr. Freeson: Whatever view may be taken about the future White Paper on housing finance, the proposals in it are not likely to take effect for another couple of years. What does the Minister propose to do to increase public sector local authority housing in the meantime, because that is the kind of housing which will help the constituents of the hon. Member for Hampstead (Mr. Geoffrey Finsberg) and my constituents?
    Mr. Amery: I am already in the happy position of being able to say that public sector housing has not gone down in the way it did in the last two years of the previous Administration.

    House Prices (Selective Employment Tax)
    Mr. Urwinasked the Secretary of State for the Environment what estimate he has now made of the effect on house prices consequent upon the halving of selective employment tax payments.
    Mr. Peter Walker: It is estimated that the halving of selective employment tax will result in a decrease of between 1 and 2 per cent. in building costs. This represents about £60 on the cost of an average three-bedroomed house. The reduction in tax will affect public sector
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    housing prices in cases where the existing fixed price contract includes a tax fluctuation clause.
    Mr. Urwin: Is the right hon. Gentleman aware that his reply is, to some extent, at variance with informed opinion in the industry, which is that there is very little likelihood of the reduction in the tax being passed on to the consumer? What steps does he intend to take to ensure that it is passed on and that there is an effective reduction in house prices?
    Mr. Walker: I think it will result in an effective reduction in house prices and will certainly be of much more help than the action which the Labour Government took in increasing selective employment tax and putting the betterment levy on land.
    Mr. Marks: Has the right hon. Gentleman made an estimate of the percentage increase which builders made in the price of houses when selective employment tax was introduced?
    Mr. Walker: It was a very considerable addition to their costs.

    Piccadilly Circus
    Mr. Longdenasked the Secretary of State for the Environment what proposals he has under consideration for developing Piccadilly Circus; and if he will make a statement.
    Mr. Graham Page: I understand that the Westminster City Council has produced a revised planning brief for the owners of the sites around the Circus, which takes account of the comments made by the public at the exhibition held in July, 1968. It is hoped that the owners' architects will shortly produce a new scheme. I am sure that the local authorities concerned and I would be delighted to see progress towards presentation of an acceptable project.
    Mr. Longden: While thanking my hon. Friend for that answer, may I ask him whether I can persuade him and the Westminster City Council to agree with me that this famous rendezvous, once known as the heart of the Empire and still the mecca of tourists the world over, to whom London is presently the favourite capital city, is from every aspect a squalid eyesore—a place where every

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    prospect displeases and everything man-made is vile? If he does agree with me, what can he do about it?
    Mr. Page: I agree to some extent with my hon. Friend on the importance of getting the right scheme for Piccadilly Circus. But getting the right scheme involves careful consideration of it. There has been some progress recently, because the Greater London Council decided on 22nd June, subject to the agreement of the Westminster City Council, to propose to the Greater London Development Plan Inquiry that the G.L.D.P. should be amended so as to make Westminster responsible for the preparation of the action area plan for Piccadilly Circus. I hope that as a result of that progress will be made with the developers and the local authorities. It is their job in the first instance, and I hope that they will proceed with it—[Interruption.]—and, as a right hon. Gentleman opposite says, with public participation.

    Inner London Families (Movement to New Towns)
    Mr. Selwyn Gummerasked the Secretary of State for the Environment what is the total number of families which have left the Inner London boroughs during the past three years to take up residence in new or expanding towns.
    Mr. Amery: The number of families from the inner London boroughs who have moved to rented housing in the new or expanding towns in the years 1968, 1969 and 1970 is estimated at approximately 8,500. No information is available about those moving to private housing.
    Mr. Gummer: I thank my right hon. Friend for that answer, but does he not agree that many people are deterred from moving from Inner London boroughs to the new and expanding towns by the complication of the arrangements which are made, and that they find it difficult to get the necessary information? Will he please do something about this as a matter of urgency?
    Mr. Amery: My hon. Friend is right; it is not as easy as it should be. I have been working closely with the Peterborough new town to see how its connection with Lambeth can be strengthened and improved.
    Mr. McCrindleasked the Secretary of State for the Environment what assistance is being given by his Department to families from inner London wishing to have houses and jobs in new and expanding towns; and how much this is expected to cost to public funds in the current financial year.
    The Under-Secretary of State for the Environment (Mr. Paul Channon): The Industrial Selection Scheme helps people throughout London to find jobs in these towns and they are then eligible for a house. The main costs of operating the scheme fall on the Department of Employment and the Greater London Council.
    Mr. McCrindle: Will my hon. Friend keep in touch with his hon. Friends at the Department of Trade and Industry to make sure that we do not reach a situation where there are available houses in the new and expanding towns but fewer jobs to go with them than one would wish?
    Mr. Channon: Yes, certainly I can give that indication, and I take note of what my hon. Friend says.
    Mr. George Cunningham: Will the Minister recognise that although many people in Inner London wish to move to new towns, there are many people living on average earnings who wish to remain in Inner London? Does he recognise that his policies and the withdrawal of subsidies will make it increasingly difficult for them to do so?
    Mr. Channon: On the contrary, as I tried to explain—but the hon. Member refuses to understand—the whole purpose of changing the housing subsidies is to give more help to those people who are most in need.
    Mr. Allason: Is my hon. Friend satisfied that there are satisfactory opportunities for the unskilled, who can be trained to do semi-skilled jobs in the new towns, as opposed to the Industrial Selection Scheme, which tends to give opportunities to the skilled?
    Mr. Channon: My hon. Friend is quite right. It would be better if there were more opportunities of this kind, and I will certainly keep this under review.
    Mr. Speaker: Question No. 22.
    Mr. Tilney: On a point of order. Yesterday's Notices of Motions and Orders of the Day contained a Question in my name, between the Questions of my hon. Friends the Members for Billericay (Mr. McCrindle) and Westmorland (Mr. Jopling), asking the Secretary of State for the Environment what his policy is towards a combined approach to the multiple problems of inner city areas, such as is being undertaken by Shelter Neighbourhood Action project in Liverpool. This Question appears to have been left off the Order Paper. Could this matter be looked into, and could the Minister reply?
    Mr. Speaker: I much prefer to take points of order about Questions at the end of Question Time. I will look into the matter.
    Hon. Members: It is Question No. 66.

    Council House Sales
    Mr. Tebbitasked the Secretary of State for the Environment if he will take steps to ensure that local authorities, when reversing a previous decision to sell council houses, will in future be required adequately to reimburse and compensate any prospective purchaser who might previously have entered into negotiations with the local authority with a genuine view to purchase.
    Mr. Amery: It is a well established practice in this country, at all levels of government, for a new administration to keep the public faith when this has been committed by its predecessor.
    I am confident that authorities will remember this when considering the expenses incurred by people who had been negotiating in good faith to buy their council houses and are now told that the council has decided to sell no more houses.
    Mr. Tebbit: Will my right hon. Friend go so far as to write to local authorities reminding them of their moral obligation, as constituents of mine in the borough of Waltham Forest and the urban district of Waltham Abbey who have spent their savings on improving houses which they believed they would be able to buy are astounded at the ill-faith and the narrow partisan politics of those who deny them the opportunity of doing so? Is he aware that amongst my constituents are those
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    who sold their cars and cancelled their holidays so as to carry out these improvements, and that they need satisfaction?
    Mr. Amery:
    "I want to lead a campaign for a genuine property-owning democracy with the right of those who are on the housing list to be able to buy their own homes from the council."
    These are not my words. These are the words of the right hon. Gentleman the Shadow Patronage Secretary.
    Mr. Simon Mahon: Those of us who have been in local government for a long time have a high regard for it. Irrespective of political parties, are not most people who serve on local authorities highly honourable men? Will the Minister tell us how many such cases as described by the hon. Member for Epping (Mr. Tebbit) he has on his files?
    Mr. Amery: I am afraid it is rather more than I should like to see. [HON. MEMBERS: "How many?"] The hon. Gentleman has not given me notice of that question. I have seen a number of these cases, and I should like to see right hon. and hon. Gentlemen opposite endorse the views expressed by the right hon. Member for Bermondsey (Mr. Mellish) when he was Minister of Housing.
    Mr. Freeson: In view of that last observation, perhaps the Minister will consult his right lion. Friend who, shortly after taking office, forbade the building of houses for sale. This was the point my right hon. Friend the Shadow Patronage Secretary was making in the speech quoted by the Minister, which should have been quoted in full. Is the Minister aware that most local authorities which have this situation on their hands have pursued an honourable course and are arranging to pay compensation, including my own council governing Brent? It is wrong and misleading for this kind of smear campaign to be encouraged by the Minister.
    Mr. Amery: The hon. Gentleman is quite wrong in suggesting that I am quoting his right hon. Friend's words out of context. The passage about the desirability of building for sale came about 10 minutes later in the same speech, and the passage I have quoted was strictly relevant to the question of the sale of council houses. This is what

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    matters, and it is regrettable. I hope that I can interpret the not very buoyant but somewhat ambiguous phrase of the hon. Gentleman as indicating that he would hope that Labour councils which have gone back on previous arrangements will at least keep the contracts which have been made.
    Sir R. Thompson: Will my right hon. Friend tell me whether he has any statutory powers to lay down the scale of prices which local authorities should charge when they seek to sell their houses? Is he aware that in many cases prices are being pitched too high, and is not this frustrating the intentions of the Government?
    Mr. Amery: Regrettably, I have no powers in this matter, but the great majority of the councils have been prepared under covenant terms to sell houses at a discount of about 20 per cent.

    Heritage Coasts
    Mr. Joplingasked the Secretary of State for the Environment whether he will take steps to alter the name of Heritage Coasts.
    Mr. Peter Walker: My right hon. Friend the Secretary of State for Wales and I will be happy to consider all suggestions for alternative names.
    Mr. Jopling: Is my right hon. Friend aware that I had difficulty in hearing that answer? Is he also aware that the name "Heritage Coasts" is nonsense from a grammatical point of view, is likely to be highly misleading to people who visit those areas and has been widely opposed by a variety of organisations? Will he ask the Countryside Commission to think again and suggest a better name?
    Mr. Walker: If my hon. Friend had heard my reply, he would have heard me say that I shall be happy to consider all suggestions for alternative names.

    Sports (Financial Assistance)
    Mr. Dalyellasked the Secretary of State for the Environment what plans he has to give financial assistance to sports other than football and swimming.
    Mr. Eldon Griffiths: In recent years sports other than association football and swimming have received over 95 per cent. of the total grants given for sport by my
    1328
    Department, and I have no reason to think there will be any significant difference in the proportion this year. How grants are distributed after this year will be a matter for the new Sports Council.
    Mr. Dalyell: What consultations did the lion. Gentleman have with sports bodies, and, indeed, with the Sports Council, before slashing local grants?
    Mr. Griffiths: I had all the necessary consultations with the Sports Council on matters on which it could properly advise me. I thought it right that the House of Commons should be the first to hear about the use of Government funds for sports purposes.
    Mr. Scott-Hopkins: Is my hon. Friend aware that his announcement has caused considerable confusion among local authorities, particularly voluntary bodies, which have already raised considerable sums of money, for example, at Ashbourne in my constituency for swimming pools, and which are now left high and dry and do not know whether to proceed? Will he look at the matter again?
    Mr. Griffiths: I assure my hon. Friend that all local sports bodies which have had applications in the pipeline will receive grant if they have already received notification from my Department that they have been given the necessary priority. If they have not received that priority, they will be caught by the new policy.
    Mr. R. C. Mitchell: Will the hon. Gentleman seek powers to give financial assistance to chess as well as to the other sports and games to which reference has been made? Does he realise that chess is played in this country by more young people than any other game, apart from football?
    Mr. Griffiths: The definition laid down in regard to which sports and recreations are to be supported refers to "physical recreation" and, with the best will in the world, I would not describe chess as a physical recreation.
    Mr. Denis Howell: Is the hon. Gentleman aware that his decision to end these grants of £1 million a year to the ordinary sports clubs has caused widespread dismay throughout the whole of

    1329
    sport? The hon. Gentleman stated a moment ago that he consults the Sports Council on matters on which he thinks it can advise him. But since he never consulted that body or the governing bodies of sport about the effect of this catastrophic decision, and in view of the dismay it has caused, why does he act so arrogantly in not consulting the body set up to advise him on these matters?
    Mr. Griffiths: The hon. Gentleman knows a great deal more about catastrophe in sport than I do. At a time when the present Government have enhanced the status of the Sports Council, have widened its responsibilities and have given it a great deal more money, I am not prepared to be lectured by the hon. Gentleman.
    Mr. Howell: Is the Minister aware that the extra £1 million which the Department is to give to the independent Sports Council is being found from the money which has been slashed from grant? Is he not making a bogus point, and would he answer the simple question why in ending this scheme he did not consult the people appointed to advise him, the Sports Council?
    Mr. Griffiths: On the second point—[HON. MEMBERS: "Answer!"] If hon. Members opposite will listen, I will seek to give an answer. The hon. Gentleman asked two questions. The second part dealt with consultation. I was dealing with the funds of national Government, and it seemed to me right that the House of Commons should be the first to know this information. As to the first part of the question, the hon. Gentleman is totally wrong. He suggests that the additional £1 million to be made available to the Sports Council—which the hon. Gentleman was never able to obtain during his term of office—has somehow been found by slashing local capital grants. My right hon. Friend the Secretary of State for the Environment was able to find this additional money for sport because of the advantages of setting up the Department of the Environment and thus being able to make these new funds available for sport.
    Mr. Dalyell: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest possible moment.
    Mr. Speaker: Let us come to cooler waters—reservoirs. Mr. David Clark, Question No. 26.

    Reservoirs (Public Access)
    Mr. David Clarkasked the Secretary of State for the Environment if he is satisfied with facilities for public access to reservoirs; and if he will make a statement.
    Mr. Eldon Griffiths: Because I was not satisfied when I assumed responsibility for sport that everything possible was being done to make full use of the recreational potential of reservoirs, I asked all statutory water undertakings in England to review their policies in consultation with regional sports councils. I am glad to be able to say that no fewer than 34 water undertakings have recently made, or plan to make, increased provision for recreational use of their reservoirs, and I shall be considering what follow-up action might be called for on the basis of the regional sports councils' detailed reports.
    Mr. Clark: I thank the hon. Gentleman for his reply. Will he further press the water boards to give access to the public to the water's edge of these reservoirs? Does he realise that there is hardly any reservoir that allows the public this facility?
    Mr. Griffiths: Wherever it is possible for the public to be given safe access to reservoirs, then requests which have been made by my Department, followed up by the regional sports councils, are in that direction. The hon. Member will understand that there are certain reservoirs where matters of safety make it difficult to insist on such a course.
    Sir D. Renton: Apart from the matter of safety can my hon. Friend, who has knowledge of Grafton Water in my constituency, say why these magnificent facilities cannot be provided in most other reservoirs?
    Mr. Griffiths: My right hon. and learned Friend will know that Grafton Water had the advantage when originally planned of recreational considerations being taken into account at the beginning. This is not the case with some of the older reservoirs, where the problem is rather more difficult.
    Mr. Tinn: Is the hon. Gentleman aware that the Derwent Reservoir in the County of Durham, which was opposed by some conservationists on scenic grounds, is now a beauty spot with planned access and also with controlled access for boating? Will he urge on the responsible authorities for the older reservoirs the need to develop such facilities?
    Mr. Griffiths: Yes, indeed. I had the pleasure of visiting Derwent Reservoir, and I agree absolutely with what the hon. Gentleman has said. The efforts of the Government are directed to persuading and assisting other water undertakings to do the same sort of job where it is practicable to do so.

    Sports Council
    Mr. Ashtonasked the Secretary of State for the Environment what estimates he has made of the savings to Government funds and increased costs to local government funds with regard to his decision on the future of the Sports Council.
    Mr. Eldon Griffiths: There is no basis in fact for doing this. The Government's allocation to sport is being substantially increased, and will be distributed to better effect. Local government expenditure will depend on the use local authorities choose to make of their powers.
    Mr. Ashton: Is the hon. Gentleman aware that we are still not satisfied with the situation? Many hon. Members on this side of the House and certain sporting bodies believe that some clever duplicity is taking place over this matter. In view of the hon. Gentleman's statement that direct grants to local clubs will be discontinued, can he assure the House that local clubs will get the same or more money as easily as they did in the past?
    Mr. Griffiths: To a great extent local sports clubs ought to be supported by local funds. The advantage of the changes I have announced is that national funds, substantially increased, will be able to be distributed for the benefit of sport as a whole. I am sure that this is the right way forward.
    Mr. Denis Howell: Having regard to the fact that in making this announcement the Minister expressed the view that these grants should be paid by local authorities, and in view of the fact that
    1332
    he not only did not bother to consult the Sports Council but did not even bother to consult local authorities—and indeed, received no commitment from them to take over these local grants—is not his arrogance to the sports bodies matched by the impudence of his attitude to local authorities?
    Mr. Griffiths: The hon. Gentleman will be disappointed, because the sporting bodies have shown considerable enthusiasm for these proposals. I emphasise that the Sports Council, acting independently, will have substantially more money than the hon. Gentleman was able to get for it.

    Channel Tunnel
    Mr. Sheldonasked the Secretary of State for the Environment if he will make a further statement on the Channel Tunnel.
    Mr. Peyton: No, Sir.
    Mr. Sheldon: In a previous exchange the Under-Secretary of State referred to information showing that a road link would be uneconomic. Will the Minister publish this information?
    Mr. Peyton: I will certainly look at the point. Is the hon. Gentleman referring to a road tunnel?
    Mr. Sheldon: A road link.
    Mr. Peyton: I will certainly look at the point, and I shall be grateful if the hon. Gentleman will explain more fully what he means.
    Mr. Sheldon: The previous exchange referred to any form of road link across the Channel; and, although the Minister has many times said that he would provide information if requested, he has failed to do so in reply to a number of Questions I have put to him. Does that view apply to this matter also?
    Mr. Peyton: The hon. Gentleman is an habitual questioner. I do my best to provide exhaustive and constructive answers. I am sorry that I have disappointed him. I am not quite sure lo what he is referring. If he is referring to the possibility of a road tunnel, I am obliged to tell him that my advice is that ventilation problems, apart from anything else, would be an almost insurmountable barrier.

    Compulsory Purchase (Compensation)
    Mr. Costainasked the Secretary of State for the Environment whether he will give an assurance that he will announce the results of his review of the code of compensation for compulsory purchase before the end of this year and that he introduce legislation to improve compensation during the life of this Parliament.
    Mr. Peter Walker: As I told my hon. Friends the Members for Buckingham (Mr. Benyon) and Blackpool, South (Mr. Blaker) on 12th May, I shall announce details of our proposals when our review has been concluded and I hope to introduce legislation at the earliest possible date.—[Vol. 817, c. 359–61.]
    Mr. Costain: Will my right hon. Friend accept that when a house is compulsorily purchased, the occupant is giving up something for the benefit of the community? Is it not only reasonable to expect that he should receive enough compensation to allow him to buy a similar property? Does my right hon. Friend appreciate that the Chancellor is charging capital gains tax on these transactions, which makes this more difficult?
    Mr. Walker: This is a complicated matter. We are examining the problem in great depth, and we will publish proposals as soon as possible.
    Mr. Tinn: Would the Minister look at the powers and practices of some local authorities in encouraging house owners to move out of their property some weeks in advance of a visit by the district valuer, who visits the property after vandals have taken their toll, with the consequence that the resultant valuation inflicts a grave injustice on the owners?
    Mr. Walker: I have not been contacted about this particular practice, but if the hon. Gentleman would like to give me details, I will certainly look into it.

    Water Supplies (Devon)
    Mr. Carol Johnsonasked the Secretary of State for the Environment what was the purpose of the meeting which took place on 14th Tune, 1971, between one of the Under-Secretaries of State and
    1334
    the Devon River Authority and Southwest Devon Water Board; and if he will make a statement.
    Mr. John Hannamasked the Secretary of State for the Environment if, following the recent visit to the Southwest of the Under-Secretary of State, he is now able to make a statement regarding the water shortage in Devon.
    Mr. Peter Walker: My hon. Friend visited the South-West and met representatives of the Devon and Cornwall river authorities and water undertakers to hear and see something of their problems first hand, and to find out how central Government might help with the immediate problems, in particular of drought in parts of North Devon. In the event, rain has put off the need to use stand-pipes to restrict consumption. The North Devon Water Board is now exploring the practicability of partly filling the Meldon reservoir in advance of the completion of the dam so as to avoid shortages next year.
    Mr. Johnson: I thank the right hon. Gentleman for that very full statement. Would he give an assurance that the House will not be asked to reverse the decision of one of its Select Committees rejecting the proposal for a reservoir at Swincombe on Dartmoor?
    Mr. Walker: I have no power to give such an assurance, because if a Bill came before Parliament with any such proposal it would be up to Parliament to decide.

    Road Accidents and Licensing Hours
    Mr. William Priceasked the Secretary of State for the Environment what study has been made of the possible consequences of extended licensing hours on the level of road accidents.
    Mr. Peyton: None, Sir, but I am sure that this will be among the matters considered by Lord Erroll's committee on liquor licensing laws.
    Mr. Price: Is the Minister seriously suggesting that no study whatsover has been made of this matter by his Department? When he is reported to be considering changes in the breathalyser law and in many other road safety matters,

    1335
    is it not strange that the curious fellow at the Home Office is determined to turn us into a nation of all-night drinkers? Is it not time that the Minister got a grip of the Home Secretary?
    Mr. Peyton: The hon. Gentleman is living slightly in the past when he refers to "the curious fellow at the Home Office".
    Mr. Price: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to pursue the Home Secretary on the Adjournment.

    Local Government Boundary Commission
    Mrs. Kellett-Bowmanasked the Secretary of State for the Environment if he will make a statement about the rôle of the Local Government Boundary Commission and, in particular, whether the Commission will be able to adjust county boundaries in future.
    Mr. Peter Walker: My consultations with the local authority associations have shown there is very general agreement on the proposal to set up a permanent and independent Local Government Boundary Commission for England. It is intended that the Commission shall make recommendations about local government boundaries and electoral areas. The Commission's future work, after reorganisation, will accordingly cover all boundaries and it will be able to propose adjustments to county boundaries.

    A63 (Elloughton Bypass)
    Mr. Wallasked the Secretary of State for the Environment if he will make a statement about progress on the Elloughton bypass on the A63.
    Mr. Michael Heseltine: Work is on schedule and should be completed in October.
    Mr. Wall: Would my hon. Friend say whether compensation has now been paid to all the landowners and others concerned?
    Mr. Heseltine: I shall have to write to my hon. Friend with the details of that matter.

    Severnside Study
    Mr. Adleyasked the Secretary of State for the Environment when he expects to complete his discussions with local planning authorities and regional councils about the Severnside Study.
    Mr. Graham Page: As we are only just starting the consultations, it is too early to say when they will be completed. They will be pursued as quickly as possible with all parties concerned.
    Mr. Adley: Would my hon. Friend bear in mind that the pressures on the green belt to the north and east of Bristol are already extreme and that to many of us it is extraordinary that the Severnside Study did not even mention the shortly to be opened Avon Bridge? Would he please bear in mind that a final decision should not be made until the exact shape of Area No. 26 is decided.
    Mr. Page: I am grateful to my hon. Friend for raising these points. They will all be taken into consideration when examining the study.
    Mr. Roy Hughes: Would the Minister also bear in mind the fact that there are two sides of the Channel?
    Mr. Page: I presume that I know to which Channel the hon. Gentleman refers. The Welsh planning authorities and Planning Council will be brought into the study.

    M1, Yorkshire (Intersection Lighting)
    Mr. Duffyasked the Secretary of State for the Environment if he will take steps to equip all intersections on the M1 motorway in Yorkshire with lighting.
    Mr. Eldon Griffiths: No, Sir.
    Mr. Duffy: Is the hon. Gentleman aware that some such intersections of motorways in Yorkshire are so equipped and some are not? Does not this suggest a lack of policy on the part of the Department of the Environment? Is not some uniformity desirable on safety grounds?
    Mr. Griffiths: Where the connecting roads carrying traffic to and from these motorway interchanges are lit, it is perfectly reasonable coat the interchanges

    1337
    themselves should be lit. But, generally, where there is grade separation, it is not necessary.

    Pedestrian Crossings (Accidents)
    Mr. Clinton Davisasked the Secretary of State for the Environment if he will make a statement concerning the large number of fatal and other accidents which occurred on pedestrian crossings in England and Wales during 1970.
    Mr. Eldon Griffiths: It is safer to cross at a crossing than elsewhere but I share the hon. Member's concern about these casualties. My right hon. Friend announced yesterday new measures to improve the safety of zebra crossings.
    Mr. Clinton Davis: I thank the hon. Gentleman for that reply. Is he aware that there were no fewer than 1,722 serious casualties, including a number of fatal accidents, on pedestrian crossings last year? Is his Department giving full consideration to the possibility of more road islands being installed on pedestrian crossings as a means of ensuring a greater safety factor?
    Mr. Griffiths: My Department is considering all these possibilities. The short answer to the hon. Gentleman is that yesterday my right hon. Friend introduced a series of new safety measures which has been exceedingly well received.

    M18, Doncaster
    Mr. Harold Walkerasked the Secretary of State for the Environment (1) why the maps and diagrams published in connection with his proposed roads programme all show the proposed M1 8 extension as bypassing the County Borough of Doncaster when he has published proposals showing it going through the town;
    (2) if he is aware that traffic levels are such that Doncaster is now one of the most congested towns in Yorkshire and that Doncaster is one of the most ancient and historic boroughs in that county; and why he proposes to route the M18 motorway through the town in contradiction of the policy announced on 23 rd June.
    Mr. Graham Page: The lines on the maps illustrating my right hon. Friend's announcement of additions to the road
    1338
    programme were diagrammatic. Actual alignments are determined by statutory procedure. The inspector's report on the public inquiry into the proposed extension of the M18 is now under consideration. The decision will take into account the points made by the hon. Member.
    Mr. Walker: Irrespective of the lack of clarity of the maps and diagrams, is not the Minister's proposal to put the motorway through the heart of this county borough completely irreconcilable with his published policy of the week before last to bypass towns and boroughs? Will he look again at his proposal.
    Mr. Page: There has never been any suggestion of putting the motorway through the heart of Doncaster. The lines on the map show it touching the fringe. It goes through the outer area of the town.
    Mr. James Johnson: Will the Minister show the most indecent haste in this matter in view of the fact that, one of these days, we hope that the Ml8 will get us quicker to Hull?
    Mr. Page: I am anxious to settle the matter and to give the hon. Gentleman proper access to his town.

EUROPEAN COMMUNITIES (WHITE PAPER)
The Prime Minister (Mr. Edward Heath): With your permission, Mr. Speaker, and that of the House, I should like to make a statement on the subject of the European Communities.
The White Paper which I promised in my statement on 17th June is being presented to Parliament and published this afternoon. Copies will be available in the Vote Office at the conclusion of this statement. It is a comprehensive and detailed document, and inevitably long. The Government have therefore decided also to publish a short version next Monday.
The White Paper records the Government's conclusions as follows:

(1) The Government are convinced that our country will be more secure, our ability to maintain peace and promote development in the world greater, our economy stronger, and our industries and peoples more prosperous, if

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we join the European Communities than if we remain outside them;

(2) the Government are satisfied that the arrangements for our entry agreed in the negotiations will enable us to adjust satisfactorily to our new position as a member of the Communities and thus to reap the full benefits of membership;

(3) the Government will therefore seek the approval of Parliament in the autumn for a decision of principle to take up full membership of the Communities on the basis of the arrangements which have been negotiated with them.

Mr. Harold Wilson: While thanking the right hon. Gentleman for his statement, may I also express the thanks of hon. Members in all parts of the House for the arrangement that he has made that, in addition to the White Paper which hon. Members will want to study, extra copies will be available for hon. Members to disseminate to constituents and others that they may take part in the debate?
The right hon. Gentleman did not, as I hoped that he might, intimate to the House the arrangements for the debate. No doubt he will arrange for his right hon. Friend the Leader of the House to do that, perhaps tomorrow. On my understanding, the arrangements proposed for the debate are generous and will be acceptable to hon. Members, both as regards the "take note" debate this month and the definitive debate in October. Will the right hon. Gentleman arrange for the House to be given full details of those proposals?
The right hon. Gentleman said that the White Paper was long, detailed and would take a lot of deep study by hon. Members in all parts of the House. I am sure that the right hon. Gentleman will agree that, from that moment, we in this House and the country can have the great debate based on substance for which we have all called. It is a debate which could not really get off the ground until the terms of entry were known. Since we shall now be able to argue on the basis of facts which were not, and could not be, available until today—[HON. MEMBERS: "Come off it."] If hon. Members oppo-
1340
site do not agree, perhaps I might point out that I am quoting from the last issue of the Conservative Weekly News. Whatever views some hon. Members may have, I am sure that the Prime Minister wants to see a great debate on this issue and that he agrees with those wise words in the Conservative Weekly News.
The Prime Minister: I thank the right hon. Gentleman for his opening remarks. My right hon. Friend the Leader of the House will be prepared to make a statement tomorrow about details of the forthcoming debate, and the House will see that proper time is being allowed before the debate for study of the White Paper. There will be full opportunity for this exploratory debate before the House rises for the Summer Recess. I agree that it is right that the great debate should begin. The Government have endeavoured to set out as clearly as possible in the White Paper all the details of the arrangements negotiated in Brussels and our assessment of them.
Mr. Sandys: Is not it clear that the arrangements which have been negotiated are as favourable as any which this Government or their predecessors could possibly have hoped to obtain and, therefore, that no one who previously supported Britain's entry into the Common Market can now reasonably justify a change of mind on the grounds that the terms are unsatisfactory?
The Prime Minister: Those who have been able to follow the details of the negotiations stage by stage as they have been announced to the House by my right hon. Friend the Chancellor of the Duchy of Lancaster will agree that the arrangements that have been made are favourable. What the White Paper does is to enable the House and the public to look at these arrangements together as one piece. It will then be for every hon. Member to make up his mind about his attitude to them.
Mr. Thorpe: Is the Prime Minister aware that the House will be grateful for this very detailed White Paper? Whatever view is taken on the merits of the case, since this is one of the greatest decisions that Parliament will have had to take for a very long time, will the right hon. Gentleman not rule out the possibility of a free vote in the autumn when this matter is discussed?

1341
Can the Prime Minister say whether, during the negotiations to safeguard essential British interests, the approach of Her Majesty's Government differed in any material particular from that of their predecessors?
Is the Prime Minister aware that he will be supported by those who have consistently favoured entry into Europe if, to quote the words of the former Prime Minister on 2nd May, 1967, he carries on
"… with all the vigour and determination at our command"
to ensure our entry into Europe?
The Prime Minister: Certainly I am prepared to do that. I think that I have dealt with the right hon. Gentleman's first question previously in the House. What I have done today is to announce a very clear decision of the Government on this great matter. The Government, therefore, are fully entitled to ask their supporters to support the decision that they have taken. This is the constitutional position which the House will respect.
As for the actual arrangements, as is well known and is also stated frankly in the White Paper, when we came to power the first meeting for negotiations had been arranged by the previous Administration. They had stated what they considered to be the major problems. The present Government took over from that point, accepting that statement of the problems, and have negotiated on them since. Most commentators in this country, in Europe, in North America, and throughout the Commonwealth are agreed that the arrangements which have been negotiated are rather more favourable than were originally expected by those observing the scene.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. There is a long White Paper to be read. A long debate is awaited. I am told that there will be a liberal allocation of time for it. In the circumstances, I think that we must move on to the next business.

BRITISH STEEL CORPORATION
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies): With permission, Mr. Speaker, in view of the widespread speculation since yesterday in the Press, I should like to make it clear that neither my hon. Friend the Minister for Industry nor I in any way would wish, or have taken steps, to deprive Members of Parliament of any information from a nationalised industry which they might reasonably expect to have, subject always to normal commercial confidence.
Moreover, the nomination and appointment of officials of the British Steel Corporation are matters for the Chairman and nothing whatever to do with me.
Mr. Michael Foot: First, may I express the hope that the right hon. Gentleman will take an early opportunity of clearing up the discrepancy between the statement he has now made to the House and the statement which his Department handed to me about ten minutes ago which, in many respects, is quite different from the statement which he has just, made to the House?
The right hon. Gentleman can clear up the matter, but he gave a different account. [HON. MEMBERS: "Read it."] The right hon. Gentleman can clear up the matter in his own Department.
Hon. Members: Withdraw.
Mr. Speaker: Order. The hon. Gentleman must ask questions.
Mr. Foot: I propose, Mr. Speaker, if you will permit me, to put a question in a moment. However, I think that I am perfectly entitled to protest against a procedure which, so far as I know, is quite unprecedented in this House; namely, when a Minister comes and make a statement in different terms from that which has been handed to the Opposition only a few minutes before. I suggest that I might take up this matter with you, Mr. Speaker, to see whether we can avoid such questions in future.
First, we do not accept the right hon. Gentleman's statement. [HON. MEMBERS: "Oh."] We do not accept his statement because there is a plain conflict of testimony between what he said

1343
when he claimed—[HON. MEMBERS: "Read it."] We do not—[Interruption.]
Mr. Speaker: Order. This is a serious matter. The Minister was allowed to make his statement and the hon. Gentleman must be allowed to put his question without interruption.
Mr. Foot: Will the right hon. Gentleman understand that we do not accept his statement? That is my first question.
Will he understand that the reason we do not accept his claim that no representations have been made by the Government or Ministers to Lord Melchett about this question is that a meeting took place on 27th May, three days after we had the debate on the steel industry in this House, at which matters were raised by the Minister for Industry with Lord Melchett, so much so that Mr. William Camp was called upon by his superior in the British Steel Corporation to present the answer which he would offer to the objections, criticisms and representations which had ben made by the Minister for Industry?
Is the right hon. Gentleman further aware that I have in my hand—I see it now for the first time following the events of yesterday—the document which Mr. William Camp presented to his superior in the British Steel Corporation and that one of the major matters involved in that memorandum concerns the figures which were supplied to me at my request and which I used in that debate? Does not the right hon. Gentleman think that if a Minister objects to figures used in the House of Commons he should either try to answer them in the House or, indeed, that he might even have approached me on the subject? Does the right hon. Gentleman think that it is right that his Minister should have resorted to these disreputable backstairs methods for trying to deal with figures which he had not been prepared to answer in the House? Is he, therefore, prepared to agree that, in order to clear up this conflict of testimony in which the good faith of his Minister, and, it may be, of the right hon. Gentleman himself, is involved, there shall be an independent inquiry into all the facts which I have charged?
Mr. Davies: I should certainly apologise to the hon. Gentleman for the fact that my statement was not couched in the
1344
precise words of the statement which he had. However, I think that he will agree that the sense of what I said was identical with what was in the statement. [HON. MEMBERS: "Read it now."] I will certainly read it now. With permission, Mr. Speaker—
Mr. Speaker: Order. I remind hon. Members that a copy of a Minister's statement is supplied to the Opposition by courtesy. If this kind of interchange is to mean that that courtesy is no longer observed, it will be a great pity.
Mr. Davies: With permission, I should like to read the original statement.
Mr. John Morris: On a point of order, Mr. Speaker. May I ask your guidance on this matter? If, as is traditional, a Minister hands to an official Opposition spokesman an advance copy of the statement which he intends to make, is it not equally courteous, if the Minister intends to depart from it, for him to tell the House at the same time?
Mr. Speaker: It depends entirely on the time factor. I ask the House to cool down on this issue. This is an exchange of courtesies between the Front Benches whereby a copy of a statement is given as soon as convenient. I have known many occasions on which there have been minor changes. Providing copies of statements to be made is one of the more agreeable courtesies of the House. I think that this kind of exchange may threaten it.
Mr. St. John-Stevas: On a point of order, Mr. Speaker. Are not all hon. Members of this House equal, be they front of back benchers? Could not this courtesy, if it be a courtesy, of giving advance printed copies of statements be extended to all hon. Members at large?
Mr. Speaker: There may be something in what the hon. Gentleman says.
Mr. Davies: If there had been any difference in sense, Mr. Speaker, I would, of course, have said something beforehand. I will now read the original text and you will see that there is no difference in the sense.
"In view of the amount of public speculation, I should like to inform the House that the Government have made no representations to Lord Melcbett about information supplied by Mr. William Camp of the British Steel Corporation to Members of Parliament. The action taken by the Corporation in relation

1345
to his appointment was entirely within their responsibility and, as they have made clear, the Government have not been involved in any way."
I do not think that I went beyond that.
In answer to the specific question put by the hon. Member for Ebbw Vale (Mr. Michael Foot), I consider that there is simply no occasion to institute any special inquiry. The facts of the case are abundantly clear and bear out precisely what I have said.
Mr. Foot Mr. Foot rose—
Hon. Members: Withdraw.
Mr. Foot: Will the right hon. Gentleman now tell the House—
Hon. Members: Withdraw.
Mr. Heffer: Put a sock in it.
Mr. Foot: I know that hon. Gentlemen opposite do not care by what backstairs methods people are sacked from their jobs. Will the right hon. Gentleman now tell the House—[HON. MEMBERS: "Withdraw."]—whether the Minister for Industry had a meeting with Lord Melchett on 27th May and, if so, what occurred?
Mr. Davies: I am sure that my hon. Friend had a meeting on the date in question. Indeed, over that period I think that he was having almost daily meetings with the Chairman of the Steel Corporation, so nothing would surprise me less than that he met him on that occasion. I assure the hon. Gentleman that in the course of that meeting my right hon. Friend did not complain of any figures put to the hon. Gentleman by the Chairman.
Mr. Foot Mr. Foot rose—
Mr. Speaker: Not again, and again, and again.
Sir F. Bennett: Mr. Speaker, I was going to ask for your help, or that of somebody, to see whether we could have an explanation of what difference there was, or is, between the two statements. I am not pursuing the point of order that was raised. I should like to know what all this is about.
Mr. Foot: If the right hon. Gentleman—
Hon. Members: Answer.
Mr. Foot: If the right hon. Gentleman claims that at the meeting of 27th May between the Minister for Transport Industries and Lord Melchett the question of the figures which I had used in the House was not raised, could he tell mc why, in this memorandum, Mr. William Camp was called upon to explain why I had those figures in my possession?
Mr. Davies: That is not a matter for me. [Interruption.] That is a matter for the Chairman of the British Steel Corporation.
Mr. Harold Wilson: Since, presumably, the matter is not going to be left where it is, will the right hon. Gentleman say, in the light of the meeting which he thinks took place on 27th May, whether the Minister made any complaints about the officer of the Corporation who has been incontinently sacked?—[Laughter.] This is no—[Interruption.]— I have all day, Mr. Speaker. I hope that you have. This is no laughing matter, either as regards natural justice in the conduct of a nationalised industry, or the supply of information to this House. I put my question to the right hon. Gentleman. I hope that he will answer it.
Dame Irene Ward: I did not hear it.
Mr. Harold Wilson: The hon. Lady could not hear it because of the noise made by hon. Gentlemen opposite, who do not want this brought out.
Does not the right hon. Gentleman agree that it is the normal practice for officers of nationalised industries to supply information to hon. Members on both sides of the House? The gentleman in question used to supply it to the Minister for Transport Industries when he was Opposition spokesman on these questions, so will the right hon. Gentleman say what is the basis of any complaint that this should be done?
Third, will he say whether there is a new rule now that nationalised industries may not communicate with the Opposition? Will he ensure that a full statement is made on communications between another nationalised industry, the Bank of England, and the then Leader of the Opposition?
Mr. Davies: In the first place, I have the assurance of my hon. Friend that at any such meeting he had no complaint, and was in no position to make a complaint, against the work of an individual in the service of the Corporation. That is a matter entirely for the Chairman.
Second, the right hon. Gentleman apparently did not listen to what I said earlier. I made it abundantly clear that I am entirely in favour of information being made available to Members by nationalised industries, subject always to reasonable commercial confidence. I repeat that in case the right hon. Gentleman did not hear it the first time. Therefore, I doubt whether there is any need for me to answer the right hon. Gentleman's third question.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I think that we must proceed—
Mr. John Mendelson: On a point of order, Mr. Speaker, and we are not going to be deflected by the baying of the sheep on the benches opposite. However much the post-luncheon crowd may bay—
Mr. Speaker: Order. The House has a great deal of business to do today. May the hon. Member be heard in silence.
Mr. Mendelson: In these exchanges, which seriously affect the debate held on the steel industry, no back bencher from a steel constituency, or any other constituency, has been called to put a point of view. Surely it is customary that when a major industry of this kind is involved one or two Members from such
1348
constituencies are allowed to make a contribution? I put it to you, with respect, that as we have spent only a little time on two statements, you should now allow a back bencher or two from steel areas to ask whether, in view of the conflict between the two statements, the Minister will agree to an inquiry.
Mr. Speaker: I do not think that this is a debate, and in any case the point made by the hon. Member has already been raised. I have to try to safeguard the time of the House.
Mr. Foot: On a point of order, Mr. Speaker. May I give notice that in view of the plain conflict of testimony, which involves the good faith of Ministers in this House, particularly in their dealings with Members, we shall propose to return to this matter in the House.

BILL PRESENTED
  ANGUILLA BILL
  Secretary Sir Alec Douglas-Home, supported by Mr. Joseph Godber, Mr. Terence L. Higgins, Lord Balniel presented a Bill to make further provision with respect to Anguilla: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 208.]

BUSINESS OF THE HOUSE (FINANCE BILL)
Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of this House as to the interval between the stages of such a Bill.—[Mr. Barber.]

ORDERS OF THE DAY
  FINANCE BILL
  Not amended in the Committee and as amended in the Standing Committee, further considered.
  FINANCE BILL
    Clause 22

      CLOSE COMPANIES
      3.58 p.m.
      Mr. Joel Barnett: I beg to move Amendment No. 85, in page 20, line 13 leave out 'ending' and insert 'commencing'.
      Mr. Speaker: With this Amendment we can also take Amendment No. 27, in page 21, line 7, leave out 'ends' and insert 'commences'.
      Mr. Barnett: The Amendment seeks to remove the retrospective element in the Clause. Hon. Members who served on the Committee upstairs will recall what the Clause does when I refer to the retrospective element. What we are debating here is retrospective assistance of £500,000 to 30 close companies, in other words, family companies.
      In Committee upstairs we eventually elicited from the Minister of State that 30 small companies were being given £500,000 relief, going back to 1966. In other words, accounts had been submitted from as far back as that year. As far as one can understand, under the law as it stood £500,000 of lax would have been payable but the Government, by this Clause, are giving the companies that amount of relief.
      In Committee I moved a similar Amendment with a view to seeing just what this was all about. But it was only after the Minister of State had been asked three or four times that we eventually found out that just 30 companies were involved, that accounts had been submitted from as long ago as 1966 and that about £500,000 was involved. There may be a case for giving these 30 companies relief on accounts which have been submitted and not yet agreed, but the case was certainly not made by the Minister of State in Committee.
      1350
      I should have thought that, at the very least, the House is owed an explanation when these sort of sums are being given. I know that we frequently talk about much bigger figures, but this is no small matter. No one reading the report of our debates in Committee can be under any illusion that the Minister of State gave anything other than a totally inadequate reason—indeed, he gave no reason at all—why that relief was being given.
      This is a dangerous but very interesting precedent. For example, there is a case going through the courts at present which concerns a journalist's entertainment expenses, which at one time were held to be allowable as buying information. This decision was subsequently overturned and it is possible—we do not yet know: perhaps it has already been decided—that it will go to the House of Lords for a final appeal.
      There may be a case for preventing, through the courts, both the Revenue and the taxpayer from spending substantial sums of money if the Government's interpretation of a particular Clause of a Finance Bill is or appears to be different from what others imagine, because for a taxpayer it is particularly onerous. When he takes a case to court and the Revenue contests it right through, from the General Commissioners to the House of Lords, not only is it very expensive but it is not even an allowable charge on his expenses.
      Therefore, if the Government are now arguing that, where accounts have been submitted and there is some disagreement on interpretation, it should be a principle to bring in a new Clause in order to correctly interpret what the Government think should be the law, even if the local inspectors or anyone else—the General Commissioners or the Special Commissioners—think differently, then the Government are introducing a very interesting precedent. I would not necessarily say that I altogether disagree with it.
      This is an interesting situation. I am not one of those who like the idea of taking a particular Clause of the Finance Bill and pursuing a taxpayer year after year at considerable expense, when almost literally the taxpayer cannot win, because he has to go all the way through to the House of Lords if the Revenue insists. If the taxpayer eventually wins, it is always

      1351
      open to the Government to bring in a Clause to overthrow the position anyway.
      We saw in another part of the Bill what happens when the Government's interpretation of a part of it—on child tax allowances—was different from the decision of the courts. An individual court had found in favour of the taxpayer, and the Government then decided to bring in a Clause. No one has disputed that the Government have that right, but it is most interesting, because from now on it could mean that no taxpayer would bring a case of this kind.
      Indeed, it has always been very difficult for a taxpayer to bring a case knowing that the Revenue, if it is treated as a matter of principle, will take it right through to the House of Lords. But if it is now thought by a taxpayer that the Revenue has a particular point of view—in this case, the Government have decided in favour of the taxpayers; on another occasion they might decide the other way—all that will happen is that a Clause will be brought in so that the matter shall be interpreted precisely as the Government intended, and not as the courts decided.
      Therefore, I hope that the Minister of State will at least make it clear whether there is any change in the whole system, and especially in what way they propose to pursue the general cases of the type that I have described. This case is not the same as a normal case of the sort that I have described, where a taxpayer is in dispute with the Revenue and the matter is taken through the General Commissioners right to the House of Lords.
      In this case—again, we had totally inadequate information from the Minister in Committee—I understand that these accounts from these 30 companies were simply in the hands of the local inspectors of taxes and were in dispute. Cases sometimes drag on, but from 1966 to 1971 is certainly a very long time. Now, quietly, they write into the Bill this particular retrospective relief to settle the whole matter.
      If we had not queried the matter in Committee that would have been the end of it. Even when we did raise it, if we had simply left it to the Minister's reply, we still would not have known. It is only because my hon. Friend the Member for West Lothian (Mr. Dalyell) and I
      1352
      pursued the Minister of State at great length time after time that we eventually elicited not the reason why they had done it but at least what they had done.
      This whole matter is totally unsatisfactory. I hope that the Minister of State will be able to give us a better reply today than the non-reply that he gave us in Committee.
      The Minister of State, Treasury (Mr. Terence Higgins): I certainly welcome this opportunity to clarify the position. After our discussion in Committee, which seemed to me to give rise to some misunderstandings, I considered writing to the hon. Member for Heywood and Royton (Mr. Barnett) about it, but it seemed better that this matter should be raised on the Floor of the House, so that we could go into it in more detail.
      I should explain that Amendments Nos. 27 and 85 do not implement the point which the hon. Gentleman is seeking to make. They raise other and rather narrower issues. Of course, if he wants me to pursue the Amendments in the strict terms in which they are drafted, I should be glad to do so, but I think that the House would prefer that I should instead take up his basic point.
      When we discussed this matter in Committee the hon. Member for Heywood and Royton and the hon. Member for West Lothian (Mr. Dalyell) quite rightly wished to probe the particular situation. It was in no sense of reluctance that I gave any of the information that I gave, but I may not have spelled out the position as clearly as I might have done. As the hon. Gentleman pointed out, some of the events at issue here date back to 1966, and thus cover the period of the previous Government—the hon. Member's Government—as well as that of the present Government. It might be as well, therefore, if I were to recount the position as clearly as I can.
      There was one respect in which I may have inadvertently misled the Committee; in suggesting that these accounts had been kept open since 1966 as if this were a deliberate action from that date. That, as I shall explain, has not been the position. They have been open and were open in the initial period because of the normal mechanics of the Clause with which we are concerned.
      As the hon. Member for Heywood and Royton pointed out, a considerable time

      1353
      has elapsed since 1966. It is reasonable, therefore, to ask why there has been such a considerable lapse of time before any action has been taken on this and why, as I sought to explain in Committee, we believe this change should be made.
      I wish to make it clear that the retrospection applies to companies whose liability has not yet been finally determined. Whether or not they have submitted their accounts is immaterial, and I mention this because in Committee the hon. Member for Heywood and Royton seemed to make the point turn on the submission of the accounts rather than on whether the assessment had been determined.
      We are concerned here with the position of shortfall appertaining to financial concerns whose stock in trade, so to speak, is money. I will recount the history of the case as far as possible, because it covers a considerable period. Formal representations on the treatment for shortfall of income which financial concerns derive from their investments were first made by the British Insurance Association on 25th April, 1969. The gist of the Association's complaint was that the approach to the treatment of insurance companies for shortfall varied from one inspector to another. The Association urged that all income from investments received by insurance companies should be treated as trading income, and it took the view that this could be done within existing legislation.
      At the time when the representations were made, only one of the British Insurance Association's members on whose behalf they were made had suffered shortfall assessments for the years 1967–68 and 1968–69. This was a relatively small concern. In July, 1969, after a meeting with the B.I.A. at which the representations were discussed, instructions were issued to inspectors to submit to head office all cases of close companies carrying on a bona fide insurance business or the business of a bank or financial concern where, first, there was income from investments of the sort which would now qualify under Clause 22(3), and, secondly, where the required standard exceeded 60 per cent. of distributable income. These cases were to include any in which shortfall assessments had already been made.
      As a result of these instructions, in addition to the 17 B.I.A. members on
      1354
      whose behalf representations had been made, there were submitted three cases of insurance companies, six of banks and 10 of other financial concerns, a total of 36.
      Shortfall assessments had been made in only one case and the remainder were still open—open in the sense that accounts had not yet been submitted or that the inspector was questioning the extent of the requirements of the business. In 14 of them it looked as though the required standard would be above 60 per cent.—that there would be benefit from remedial legislation of the kind now contained in Clause 22.
      It follows that since April 1969 members of the B.I.A. will have been aware that action over shortfall has been suspended pending review of the treatment of investment income.
      Mr. Tam Dalyell Mr. Tam Dalyell (West Lothian) rose—
      Mr. Higgins: I will give way to the hon. Gentleman later. This is a somewhat complex point and I wish to complete my remarks on this aspect.
      As I was saying, they will have been aware that action over shortfall has been suspended pending this review. Before then, however, there was no question of holding up assessment or collection of shortfall while the treatment of investment income was reviewed. I repeat what I said in my opening remarks, that I may inadvertently have misled the Committee upstairs inasmuch as I suggested that the position had been deliberately kept open since 1966. That was not the case. It so happens that the position was open.
      The reasons for the failure to settle shortfall for any financial concern before 1969 were various. In some cases there were delays in submitting accounts. In others it was proving difficult to reach agreement on the quantum of business requirements. I fully understand the point made by the hon. Member for Heywood and Royton about there seeming to have been a considerable delay. However, on reflection he may feel that such a point is open to a good deal of argument because, among other things, the law allows companies 18 months in which to pay dividends to avoid shortfall, and there was only a limited period, from the coming into force of the shortfall legislation in April, 1966, to about the end of 1967, in respect of which assessments

      1355
      to shortfall could have been made before progress was suspended in July, 1969.
      4.15 p.m.
      If the position of these companies had not been held in suspense since 1969, it is possible that some of these cases would have been settled by now and that others might have gone to appeal. I understand, however, that the treatment of the investment income of financial concerns has been formally under consideration only since 1969. The House will appreciate that I am in some difficulty here because, as I say, it falls within the period of the Labour Government. However, for other reasons, shortfall had not been finally determined in any of these cases before the 1969 standstill was imposed.
      In response to the question which the hon. Member for Heywood and Royton asked in Committee, about not only whether the provisions were retrospective and excessive but also discriminatory in the sense that some final decision had been made for some companies and not for others, as I understand the position, and to the best of my knowledge—one would expect the Revenue to have heard of any such cases if any had arisen—there is no discrimination in the sense that the companies which fall into this category are in the situation where the shortfall liability had not been finally determined. Thus, on the question of discrimination, as far as I am aware it does not arise. I hope that my remarks have clarified the position, at least from the point of view of the chronology of the circumstances.
      Mr. Barnett: I believe that there has been one case.
      Mr. Higgins: We are in some difficulty because we are not in Committee and it is, therefore, not possible to jog back and forth making and answering points. The hon. Member for Heywood and Roy ton says from a sedentary position that there has been one case. I think he has in mind the case to which I referred earlier, and I do not believe that it would be affected by the change which we are discussing. I repeat that to the best of the Revenue's knowledge no discrimination is involved because all the companies in this group are in the same position.
      Mr. Dalyell: What sort of reasons were given to the inspector by these companies for the delay, which seems to have been inordinate?
      Mr. Higgins: That was my reaction initially. I, too, thought there had been a very long delay. However, the hon. Gentleman will recall that there was some delay before the provisions came into effect. There was a further delay, to which I referred, in relation to the period within which action may be taken by a company which would alter the position from the shortfall point of view. There was then the whole question of the necessary needs of the business, a point which must affect the final determination. For, say, a substantial insurance company, the question of what the actual needs of the business will be can be difficult to determine and may take a considerable time to determine. I shared the hon. Gentleman's initial reaction. However, in view of the various factors I have enumerated I am sure that he will understand that in this respect there was a very considerable delay. I am sorry that I did not in Standing Committee give the whole history, but I hope that I have now satisfied the hon. Gentleman and his hon. Friends, on the question of retrospection.
      There was also some confusion about the precise position of the companies with which we are concerned. Basically, there are two categories of companies—the trading company and the investment company, and we must quite clearly distinguish between them. The investment company may be a straight money box, and in that sense there may be a case for more stringent shortfall conditions. That will be common ground between us.
      The group with which we are concerned comprises companies which are trading companies, but it so happens that their stock in trade is, so to speak, money, investments, and the like. Again, I think that it will be common ground between us that those companies should be treated as trading companies rather than investment companies to which more stringent shortfall conditions would apply. If that is so, it seems to us wrong to assess them on the basis of the years which remain open.
      There is here no element of discrimination. It is a question, effectively,

      1357
      of treating a trading company as a trading company, rather than as an investment company merely because its stock in trade happens to be money or investments. So what we get, in effect, is a company whose position needs redefining in a way that I think has always been common ground between us in regard to the operation of this part of the law.
      I welcome the opportunity to clarify these points. We have here a complicated and in some ways unusual tale, so I thought it right to give the House a full explanation.
      The hon. Member for Heywood and Royton asked in Standing Committee whether there was not some other element of retrospection, so to speak, either side of Budget day, and why we have chosen a particular date in the Bill. If the hon. Gentleman wishes it, I will gladly pursue the exact wording of his present Amendment and the comparatively minor point about why we have chosen this date. The provision to which the Amendments relate does not contain an element of retrospection. Unlike the Amendment, it seeks to give a fair measure of relief in periods of an accounting period that fall either side of Budget day. However, that was not the hon. Gentleman's main point in Committee, and I hope that I have been able to satisfy him on the substance of the point he has now made.
      Mr. John Cronin: Before the Minister of State sits down, one point rather puzzles me. We are here dealing with a rather minute question of fiscal administration giving 30 companies only some preferential treatment. Would it not have been possible for the hon. Gentleman to have dealt with this administratively in his Department, instead of inserting a Clause in the Bill and having this rather complicated discussion?
      Mr. Higgins: These companies are not being given any preferential treatment. Further, I hope that the House will agree, particularly given the Public Accounts Committee's interest in such matters, that if such a change as this is to be made at all it is right and proper that it should be put in the Finance Bill, when it can be probed, as it has been rightly probed by hon. Members opposite. I fully appreciate what the hon.
      1358
      Member for Heywood and Royton felt about the precise content. These are quite complex matters, and I hope that my answer will help the House.
      Mr. Dalyell: I was perhaps a little churlish yesterday on the subject of L.P.G., but today I should like to express appreciation for the great trouble to which the Minister of State has gone. I am a great deal clearer now, at 4.30 in the afternoon, than I was in the Standing Committee some hours after midnight. Until the hon. Gentleman explained the position, I had imagined that the accounts had been kept open since 1966.
      I must say to my hon. Friend the Member for Loughborough (Mr. Cronin) that although to someone coming now into our debates this may seem a minor point, and that dealing with it is perhaps a bit of an abuse of our time, it did not look quite so minor a point in Committee. It is the purpose of the Finance Bill to enable the Government to be explicit on just this kind of matter.
      That being so, I feel justified in asking two questions. First, what has the Treasury learned about this whole problem of retrospection in such matters? Is anything to be done differently as a result of our discussion? Secondly, the Minister of State referred to variations in treatment between one inspector and another. This is a potential problem, because one appreciates that inspectors in one office can come to a different though equally legitimate conclusion from that reached by inspectors in another office. Has the Treasury any policy of creating a certain uniformity in these matters? This is of some consequence.
      Mr. Barnett: With your permission, Mr. Deputy Speaker, and that of the House, I should like to thank the Minister for his explanation. He has obviously gone to a great deal of trouble to inform himself on the subject. I do not wish to be in any way churlish, but one of the purposes in sending part of the Bill to a Standing Committee is to discuss these technical matters. I know that the subject came up rather late then, and one of the problems in Committee, despite the length of that stage, is the difficulty of pursuing such technical aspects at one o'clock or two o'clock in the morning. Nevertheless it seems rather

      1359
      a pity that, lacking a satisfactory explanation we should now have to return to the subject on the Floor of the House.
      I entirely accept the Minister of State's remarks on the general question of interpretation and on treating these companies as trading companies. I am clear now that as a result of the Clause, the Government's interpretation of what should be classed as trading income and what should be classed as investment income will go rather wider in future.
      4.30 p.m.
      The hon. Gentleman said that there is no discrimination. I accept that there is none as between companies. But there clearly has been discrimination as between companies and partnerships. In a similar sort of matter, it was found against the companies in the case of Bucks v. Bowers. The hon. Gentleman says that this is a different matter, but that was not a terribly dissimilar case. It was a case of treating trading income as investment income, I should have thought. I hope that on some other occasion the Minister of State will tell us the Government's approach and general attitude towards allowing cases to go through the courts at great length and at great expense both to the taxpayer and to the Inland Revenue. Clearly, it would be of enormous interest.
      One should declare an interest here, and I am interested because it would help many of my colleagues outside the House, in advising clients, to know whether or not the Government intend to introduce legislation in other matters where there is any misunderstanding. Where the Inland Revenue goes through the normal procedure of making assessment but a misunderstanding arises will the Government decide to save everyone expense and trouble by introducing a Clause to settle the matter? I am sure that most taxpayers and their advisers, particularly if the matter worked out as happily as this one, would like to know if the Government intended to legislate to clarify such situations. Of course, that clarification might be in the opposite sense of what they might have liked it to be, but at least they would get certainty. It is very expensive for a taxpayer to take a case against the Inland Revenue to the House of Lords. Most taxpayers cannot do it and have to accept the assessment. I
      1360
      would like the hon. Gentleman to reply to this point. Not only I but many people outside would like to know if there is a change of policy by the Government in this regard.
      Mr. Deputy Speaker (Miss Harvie Anderson): Order. I appreciate the hon. Gentleman's efforts, but they are extending beyond the scope of this Amendment. I hope that he will not extend them any further.
      Mr. Barnett: With respect, Mr. Deputy Speaker, I do not think that I am extending it. An important point of principle is involved. The cases we are talking about are cases that could have been settled, without this Clause, by normal procedure. It was decided, for reasons we have been given, not to do so. Surely that is relevant—probably more relevant in general principle than it is in the narrow case affecting a small number of companies. However, I leave the matter there. Perhaps the hon. Gentleman can enlighten us as to any change of policy.
      Mr. Higgins: I am clearly somewhat inhibited by your intervention, Mr. Deputy Speaker, but perhaps I can enlighten the hon. Gentleman the Member for Heywood and Royton (Mr. Barnett). There is nothing new in legislating to give relief retrospectively. There are a number of precedents. I would be going wider than the Amendment if I did more than mention this in general terms.
      The hon. Member for West Lothian (Mr. Dalyell) asked me to go very wide indeed and to discourse on what, if anything, the Treasury had learned in this matter. Only on the point of the inspectorate should I say anything. My hon. Friend the Financial Secretary was involved and his memory is better than mine and he recalls our raising this point on a Finance Bill, when the provision we are seeking to amend was first introduced. It is a position we took up then.
      I am grateful to the hon. Member for Heywood and Royton for his kind remarks. I did not take unkindly to the way he pursued the matter in Committee. It is right for the Opposition, if they detect a point worth pursuing, to do so with enthusiasm. That is their function. I am sure that the hon. Gentleman is doing no less than his duty in pursuing this matter. I am equally

      1361
      glad to have had this opportunity—perhaps this is the case for having both Committee and Report stages—to clarify the situation. I hope, therefore, that he will feel able to withdraw the Amendment. I will write to him on the more detailed points I have not covered.
      Mr. Barnett: I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      Mr. Barnett Mr. Barnett I beg to move Amendment No. 23, in page 20, line 24 leave out subsection (2).
      This, of course, goes back again to our discussions in Committee and again concerns a matter on which we had a totally inadequate reply—perhaps for different reasons because, clearly, there is a point of principle between us here. We were not able to persuade the Minister of State, despite our strong feelings. As the Clause stands, we believe that opportunities are opened up that are not open to the ordinary taxpayers. One could use the phrase which the hon. Gentleman himself has used—the opportunity to use companies as a sort of moneybox, the idea of allowing dealing companies, as they are culled, to have their investment income treated as trading income and therefore assessed as earned income for tax purposes. Clearly, this is of considerable benefit to a comparatively small number of individuals who have formed themselves into close dealing companies and take advantage of this Clause, thus creating an unfairness as between one taxpayer and another.
      I do not think that we are going to be able to persuade the hon. Gentleman, since we were not able to do so when we discussed this matter at length in Committee, but I repeat that this is a quite separate point from the argument pursued a few moments ago. Then we referred to insurance companies and banks which have incidental investment income which is not their whole income or mainly their income but is only part of their normal income. Therefore, it is not unfair that it should be treated as income. Here we are talking of a different thing altogether.
      The provision as it stands would create a loophole for some taxpayers to take unfair advantage and obtain considerable tax relief by setting themselves up as
      1362
      a dealing company. It is for this reason that I was not satisfied with the replies in Committee, and that I wish to press the Amendment—unless, as I hope, with my blind faith in human nature and the good sense of the hon. Gentleman, he has last recognised the massive case we presented and that he was wrong not to accept our Amendment in Committee upstairs. If he accepts this Amendment, I think that we can probably leave it at that. Otherwise I must advise my hon. Friends to join me in voting for the Amendment.
      Mr. Higgins: We have been discussing the philosophy of Oppositions. I suppose that for an Opposition any answer from the Government is unsatisfactory when it is short of outright acceptance of an Amendment, and even then there is sometimes a danger that accepting the Amendment will produce a situation more unsatisfactory than might have seemed likely.
      As the hon. Member for Heywood and Royton (Mr. Barnett) rightly said, this issue is different from that which we were discussing a moment or two ago. In Standing Committee, a number of hon. Members, certainly the hon. Member for Heywood and Royton and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and, in a narrower sense, the hon. Member for Dudley (Dr. Gilbert), suggested that an individual might seek to form himself into a company in such a way that there might be tax avoidance. This is clearly a matter of legitimate concern to both sides of the House.
      The Amendment would exclude from the provision companies whose trade consisted wholly or mainly of dealing in securities—and this issue was raised at column 401 of the OFFICIAL REPORT of the Standing Committee. It was argued that a company which turned over a few shares could convince the Revenue that is was a dealing company and could thereby avoid the 100 per cent. maximum required standard appropriate to investment income. Dealing companies would require rather more than to turn over a few shares to convince the Revenue that their activities consisted wholly or mainly of carrying on a trade—this is covered by subsection (2)(a)—and that the trade consisted wholly or mainly of dealing

      1363
      in securities, which is covered by subsection (2)(b).
      There are certain statutory requirements which a dealer must satisfy if he is to be accepted as such for the purposes of the Prevention of Fraud (Investment) Act, and the Revenue would be guided by them. Moreover, the object of the subsections is to treat as trading income the income which a trading company whose stock in trade is money derives from the use of that money. Therefore, a company which deals in securities is essentially a company whose stock in trade is money and it would therefore be entitled to the benefits of these provisions.
      We believe that there are adequate safeguards and certainly the Revenue feels that the matters which I mentioned a few moments ago provide adequate safeguard against avoidance of the kind which the hon. Gentleman envisages. Nothing said in Standing Committee or today would lead us to alter that view. But, as in all matters, if any hon. Member has in mind a particular device—and there is scarcely any limit to the ingenuity of those who look for new devices in these matters—no doubt he will let us know. Accountants may be better qualified in this respect than those of us who are economists and less able to become
      involved in such highly complex matters in a professional capacity.
      As I have given the hon. Gentleman a reasonable assurance, I hope that he will feel able to withdraw the Amendment.
      Mr. Barnett: By leave of the House; I am sure that I do not need to tell the Inland Revenue the devices which it is possible to use to form a dealing company for an individual. It would be almost impossible for the Revenue to do anything about it if an individual, or two individuals together, put their shares into a small company and bought and sold those shares during the course of the year. That is a dealing company; what else is it?
      Admittedly, if it turned over only one share, or two shares, in a year, the Revenue would be able to argue that it was not a dealing company. But either the hon. Gentleman is very naïve, which I do not believe, or he is prepared to accept a situation which we are certainly not prepared to accept, and for those reasons I advise my hon. Friends to divide the House.
      Question put, That the Amendment be made:—
      The House divided: Ayes 185, Noes 209.

      Division No. 412.]

      AYES

      [4.44 p.m.

      Abse, Leo

      Cronin, John

      Gordon Walker, Rt. Hn. P. C.

      Albu, Austen

      Crosland, Rt. Hn. Anthony

      Gourlay, Harry

      Allaun, Frank (Salford, E.)

      Cunningham, G. (Islington, S. W.)

      Grant, George (Morpeth)

      Allen, Scholefield

      Cunningham, Dr. J. A. (Whitehaven)

      Griffiths, Eddie (Brightside)

      Ashton, Joe

      Dalyell, Tam

      Hamilton, William (Fife, W.)

      Atkinson, Norman

      Davies, Denzil (Llanelly)

      Hannan, William (G'gow, Maryhill)

      Bagier, Gordon A. T.

      Davies, S. O. (Merthyr Tydvil)

      Hardy, Peter

      Barnett, Joel

      Davis, Clinton (Hackney, C.)

      Harrison, Walter (Wakefield)

      Beaney, Alan

      Davis, Terry (Bromsgrove)

      Healey, Rt. Hn. Denis

      Bennett, James (Glasgow, Bridgeton)

      Deakins, Eric

      Heffer, Eric S.

      Bidweill, Sydney

      de Freitas, Rt. Hn. Sir Geoffrey

      Hooson, Emlyn

      Blenkinsop, Arthur

      Dempsey, James

      Horam, John

      Boardman, H. (Leigh)

      Doig, Peter

      Hughes, Rt. Hn. Cledwyn (Anglesey)

      Booth, Albert

      Douglas, Dick (Stirlingshire, E.)

      Hughes, Robert (Aberdeen, N.)

      Bradley, Tom

      Douglas-Mann, Bruce

      Hughes, Roy (Newport)

      Brown, Ronald (Shoreditch amp; F'bury)

      Driberg, Tom

      Hunter, Adam

      Buchan, Norman

      Duffy, A. E. P.

      Irvine, Rt. Hn. Sir Arthur (Edge Hill)

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

      Dunn, James A.

      Jay, Rt. Hn. Douglas

      Dunnett, Jack

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

      Callaghan, Rt. Hn. James

      Eadie, Alex

      Jenkins, Hugh (Putney)

      Campbell, I. (Dunbartonshire, W.)

      Edwards, Robert (Bilston)

      Jenkins, Rt. Hn. Roy (Stechford)

      Cant, R. B.

      Evans, Fred

      John, Brynmor

      Carmichael, Neil

      Fernyhough, Rt. Hn. E.

      Johnson Carol (Lewisham, S.)

      Carter-Jones, Lewis (Eccles)

      Fisher, Mrs. Doris (B'ham, Ladywood)

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

      Castle, Rt. Hn. Barbara

      Fletcher, Ted (Darlington)

      Johnston, Russell (Inverness)

      Clark, David (Colne Valley)

      Foley, Maurice

      Jones, Barry (Flint, E.)

      Cocks, Michael (Bristol, S.)

      Ford, Ben

      Jones, Dan (Burnley)

      Cohen, Stanley

      Forrester, John

      Jones, Gwynoro (Carmarthen)

      Coleman, Donald

      Freeson, Reginald

      Jones, T. Alec (Rhondda, W.)

      Concannon, J. D.

      Galpern, Sir Myer

      Kaufman, Gerald

      Corbet, Mrs. Freda

      Gilbert, Dr. John

      Kelley, Richard

      Cox, Thomas (Wandsworth, C.)

      Ginsburg, David

      Kinnock, Neil

      Crawshaw, Richard

      Golding, John

      Latham, Arthur

      Lawson, George

      Moyle, Roland

      Silverman, Julius

      Lee, Rt. Hn. Frederich

      Murray, Ronal King

      Skinner, Dennis

      Leonard, Dick

      O'Halloran, Michael

      Small, William

      Lestor, Miss Joan

      O'Malley, Brian

      Smith, John (Lanarkshire, N.)

      Lever, Rt. Hn. Harold

      Oram, Bert

      Stallard, A. W.

      Lomas, Kenneth

      Orme, Stanley

      Steel, David

      Loughlin, Charles

      Oswald, Thomas

      Stewart, Donald (Western Isles)

      Lyons, Edward (Bradford, E.)

      Owen, Dr. David (Plymouth, Sutton)

      Stewart, Rt. Hn. Michael (Fulham)

      Mabon, Dr. J. Dickson

      Paget, R. T.

      Stoddart, David (Swindon)

      McBride, Neil

      Pannell, Rt. Hn. Charles

      Strang, Gavin

      McCann, John

      Pardoe, John

      Taverne, Dick

      McCartney, Hugh

      Parry, Robert (Liverpool, Exchange)

      Thomas, Rt. Hn. George (Cardiff, W.)

      Mackenzie, Gregor

      Pavitt, Laurie

      Tinn, James

      Maclennan, Robert

      Peart, Rt. Hn. Fred

      Tomney, Frank

      McMillan, Tom (Glasgow, C.)

      Pendry, Tom

      Torney, Tom

      McNamara, J. Kevin

      Pentland, Norman

      Tuck, Raphael

      Mahon, Simon (Bootle)

      Price, William (Rugby)

      Urwin, T. W.

      Mallalieu, E. L. (Brigg)

      Probert, Arthur

      Walker, Harold (Doncaster)

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

      Rankin, John

      Watkins, David

      Marks, Kenneth

      Reed, D. (Sedgefield)

      Weitzman, David

      Marquand, David

      Rees, Merlyn (Leeds, S.)

      White, James (Glasgow, Pollok)

      Marsden, F.

      Rhodes, Geoffrey

      Whitehead, Phillip

      Marshall, Dr. Edmund

      Roberts, Albert (Normanton)

      Willey, Rt. Hn. Frederick

      Mayhew, Christopher

      Rodgers, William (Stockton-on-Tees)

      Williams, Mrs. Shirley (Hitchin)

      Mellish, Rt. Hn. Robert

      Rose, Paul B.

      Wilson, Rt. Hn. Harold (Huyton)

      Millan, Bruce

      Ross, Rt. Hn. William (Kilmarnock)

      Wilson, William (Coventry, S.)

      Miller, Dr. M. S.

      Sandelson, Neville

      Woof, Robert

      Milne, Edward (Blyth)

      Sheldon, Robert (Ashton-under-Lyne)

      TELLERS FOR THE AYES:

      Mitchell, R. C. (S'hampton, Itchen)

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

      Mr. James Hamilton and

      Morris, Alfred (Wythenshawe)

      Silkin, Rt. Hn. John (Deptford)

      Mr. William Hamling.

      Morris, Charles R. (Openshaw)

      Silkin, Hn. S. C. (Dulwich)

      NOES

      Adley, Robert

      Dixon, Piers

      Kimball, Marcus

      Alison, Michael (Barkston Ash)

      Dodds-Parker, Douglas

      King, Evelyn (Dorset, S.)

      Allason, James (Hemel Hempstead)

      du Cann, Rt. Hn. Edward

      Kinsey, J. R.

      Archer, Jeffrey (Louth)

      Edwards, Nicholas (Pembroke)

      Knight, Mrs. Jin

      Astor, John

      Elliot, Capt. Walter (Carshalton)

      Knox, David

      Atkins, Humphrey

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

      Lane, David

      Awdry, Daniel

      Eyre, Reginald

      Legge-Bourke, Sir Harry

      Balniel, Lord

      Fell, Anthony

      Le Marchant, Spencer

      Barber, Rt. Hn. Anthony

      Fenner, Mrs. Peggy

      Lewis, Kenneth (Rutland)

      Batsford, Brian

      Finsberg, Geoffrey (Hampstead)

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

      Beamish, Col. Sir Tufton

      Fisher, Nigel (Surbiton)

      Loveridge, John

      Bennett, Sir Frederic (Torquay)

      Fookes, Miss Janet

      Luce, R. N.

      Berry, Hn. Anthony

      Fortescue, Tim

      McAdden, Sir Stephen

      Biffen, John

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

      MacArthur, Ian

      Biggs-Davison, John

      Gilmour, Ian (Norfolk, C.)

      McCrindle, R. A.

      Blaker, Peter

      Gilmour, Sir John (Fife, E.)

      Maclean, Sir Fitzroy

      Boardman, Tom (Leicester, S. W.)

      Glyn, Dr. Alan

      McMaster, Stanley

      Body, Richard

      Goodhart, Philip

      Macmillan, Maurice (Farnham)

      Boscawen, Robert

      Goodhew, Victor

      McNair-Wilson, Patrick (NewForest)

      Bossom, Sir Clive

      Gorst, John

      Maddan, Martin

      Bowden, Andrew

      Gower, Raymond

      Madel, David

      Braine, Bernard

      Gray, Hamish

      Maginnis, John E.

      Brinton, Sir Tatton

      Green, Alan

      Marten, Neil

      Brocklebank-Fowler, Christopher

      Grieve, Percy

      Mather, Carol

      Brown, Sir Edward (Bath)

      Gummer, Selwyn

      Maude, Angus

      Buchanan-Smith, Alick (Angus, N amp; M)

      Hall, Miss John (Keighley)

      Mawby, Ray

      Bullus, Sir Eric

      Hall, John (Wycombe)

      Meyer, Sir Anthony

      Burden, F. A.

      Hall-Davis, A. G. F.

      Butler, Adam (Bosworth)

      Hamilton, Michael (Salisbury)

      Mills, Peter (Torrington)

      Campbell, Rt. Hn. G. (Moray amp; Nairn)

      Harrison, Col. Sir Harwood (Eye)

      Mills, Stratton (Belfast, N.)

      Cary, Sir Robert

      Haselhurst, Alan

      Mitchell, Lt. -Col. C. (Aberdeenshire, W.)

      Channon, Paul

      Hastings, Stephen

      Mitchell, David (Basingstoke)

      Chataway, Rt. Hn. Christopher

      Havers, Michael

      Moate, Roger

      Molyneaux, James

      Chichester-Clark, R.

      Hayhoe, Barney

      Monks, Mrs. Connie

      Hawkins, Paul

      Churchill, W. S.

      Hicks, Robert

      Montgomery, Fergus

      Clark, William (Surrey, E.)

      Higgins, Terence L.

      More, Jasper

      Clarke, Kenneth (Rushcliffe)

      Hill, James (Southampton, Test)

      Morgan, Geraint (Denbigh)

      Clegg, Walter

      Halt, Miss Mary

      Morgan-Giles, Rear-Adm.

      Cooke, Robert

      Hordern, Peter

      Morrison, Charles (Devizes)

      Coombs, Derek

      Hornsby-Smith, Rt. Hn. Dame Patricia

      Murton, Oscar

      Cooper, A. E.

      Howe, Hn. Sir Geoffrey (Reigate)

      Nabarro, Sir Gerald

      Cordle, John

      Howell, David (Guildford)

      Normanton, Tom

      Corfield, Rt. Hn. Frederick

      Howell, Ralph (Norfolk, N.)

      Nott, John

      Cormack, Patrick

      Hunt, John

      Oppenheim, Mr. Sally

      Costain, A. P.

      Hutchison, Michael Clark

      Owen, Idris (Stockport, N.)

      Crouch, David

      Irvine, Bryant Godman (Rye)

      Page, Graham (Crosby)

      Curran, Charles

      Jenkin, Patrick (Woodford)

      Page, John (Harrow, W.)

      Davies, Rt. Hn. John (Knutsford)

      Kellett-Bowman, Mrs. Elaine

      Parkinson, Cecil (Enfield, W.)

      d'Avigdor-Goldsmid, Sir Henry

      Kershaw, Anthony

      Percival, Ian

      d'Avigdor-Goldsmid, Maj.-Gen. James

      Kilfedder, James

      Pike, Miss Mervyn

      1366

      1367

      Pounder, Rafton

      Speed, Keith

      van Straubenzee, W. R.

      Price, David (Eastleigh)

      Spence, John

      Vaughan, Dr. Gerard

      Pym, Rt. Hn. Francis

      Sproat, Iain

      Vickers, Dame Joan

      Raison, Timothy

      Stainton, Keith

      Waddington, David

      Rawlinson, Rt. Hn. Sir Peter

      Stanbrook, Ivor

      Walker, Rt. Hn. Peter (Worcester)

      Redmond, Robert

      Stewart-Smith, D. C. (Belper)

      Wall, Patrick

      Reed, Laurance (Bolton, E.)

      Stodart, Anthony (Edinburgh, W.)

      Walters, Dennis

      Rees, Peter (Dover)

      Stokes, John

      Ward, Dame Irene

      Rees-Davies, W. R.

      Stuttaford, Dr. Tom

      Warren, Kenneth

      Renton, Rt. Hn. Sir David

      Tapsell, Peter

      Whitelaw, Rt. Hn. William

      Ridley, Hn. Nicholas

      Taylor, Sir Charles (Eastbourne)

      Wiggin, Jerry

      Ridsdale, Julian

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

      Wilkinson, John

      Rossi, Hugh (Hornsey)

      Taylor, Robert (Croydon, N. W.)

      Wolrige-Gordon, Patrick

      Russell, Sir Ronald

      Tebbit, Norman

      Woodhouse, Hn. Christopher

      Sandys, Rt. Hn. D.

      Thompson, Sir Richard (Croydon, S.)

      Worsley, Marcus

      Scott-Hopkins, James

      Tilney, John

      Wylie, Rt. Hn. N. R.

      Sharples, Richard

      Traftord, Dr. Anthony

      Shaw, Michael (Sc'b'gh amp; Whitby)

      Trew, Peter

      TELLERS FOR THE NOES:

      Shelton, William (Clapham)

      Tugendhat, Christopher

      Mr. Hector Monro and

      Skeet, T. H H.

      Turton, Rt. Hn. Sir Robin

      Mr. Bernard Weatherill.

      Soref, Harold

    Clause 23

      REPLACEMENT OF BUSINESS ASSETS
      The Financial Secretary to the Treasury (Mr. Patrick Jenkin): I beg to move Amendment No. 28, That Clause 23 be transferred to the end of page 48, line 35.
      This was a Clause, moved by my hon. Friend the Member for Birmingham, Yardley (Mr. Coombs), which the Government felt able to accept. It would more appropriately find its place in the Bill in Part IV rather than in Part II where it now appears. The Amendment has the effect of transferring it to Part IV.
      Amendment agreed to.

    Clause 27

      EXCEPTIONS FROM SECTION 26
      Mr. R. Chichester-Clark: I beg to move Amendment No. 31, in page 27, line 33, at end insert:
      (10) Before making any regulations under sections 26 or 27 of this Act, the Board shall consult with such persons or organisations as appear to them to be representative of employers and trade unions in the construction industry.
      This is an important Amendment. I think I can earn the gratitude of the Committee by disposing of my side of the argument within a couple of minutes, although I felt rather less than grateful after being kept waiting until a quarter to One last night to move the Amendment only to find that my Front Bench had packed their bags and fled.
      This Amendment is self-explanatory, and deals with practical matters concern-
      1368
      ing both sides of the building industry. My hon. Friend the Financial Secretary should try to give us some of the assurances implicit in the questions which the Amendment asks.
      Mr. Patrick Jenkin: I express the apologies of myself and my hon. Friends that my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) had to sit here last night and was not able to move his Amendment. However, he has been able to do so this afternoon and I welcome the commendably brief way in which he did it. The Amendment deals with "the lump", charging to tax those self-employed sub-contractors in the building industry, where there has been a good deal of evasion in recent years. The Amendment would require the Board of Inland Revenue to consult representatives of both sides of the construction industry before making regulations necessary to implement the legislation contained in the Bill. As I am sure my hon. Friend knows from his great experience of these matters, it is the normal custom to consult interests directly affected before regulations on administrative matters are finalised, even where there is no requirement spelt out in the legislation.
      The Inland Revenue has already assured the National Federation of Building Trades Employers and the Federation of Civil Engineering Contractors that it will show them and other appropriate bodies copies of the draft regulations before they are laid. The Amendment refers to the trade unions and here again I can say that although by definition the trade unions have no direct interest in the legislation, since employees are not concerned—we are here concerned with

      1369
      so-called sub-contractors—it is the intention of the Board of Inland Revenue to let the trade unions see the draft regulations as a matter of courtesy.
      I urge the House not to insist on the inclusion in the legislation of an obligation to consult in those circumstances. There are many other instances, in the Income Tax Acts and other legislation, where Governments as a normal course will consult without there being any statutory obligation. If we begin to insert into the legislation an obligation to consult it would cast doubt on whether it is appropriate to consult in the other cases. I hope that my hon. Friend, having heard the undertakings I have been able to give on behalf of the Inland Revenue, will feel it unnecessary to press the Amendment.
      Mr. Eric S. Heffer: I am sorry that the hon. Member for Londonderry (Mr. Chichester-Clark) did not develop his case further, because when I looked at the debates which took place on "the lump" in Committee it seemed that they were very unsatisfactory. The problem is not really being dealt within the Bill. Here we are attempting to close a loophole in terms of taxation, but we are not tackling the matter from the point of view of the National Insurance contributions and other aspects which are equally as important.
      The Financial Secretary has dodged the issue of "the lump". In the last Parliament the Labour Government had a very clear policy on this issue and presented a Bill which was supported by hon. Members opposite.
      Mr. Chichester-Clark: It is true that i did not express condemnation of that Bill, but I criticised it and said that in certain circumstances I would withdraw support from it. If I were to go any further—and I think that I have already gone too far, as probably the hon. Gentleman has done—I should be out of order because the question whether "the lump" has been effectively dealt with in the Finance Bill cannot arise on this Amendment.
      5.0 p.m.
      Mr. Heffer: Whether or not the hon. Gentleman thinks that it cannot arise on this Amendment, we are essentially dealing with this point. The Financial Secre-
      1370
      tary said that the question of "the lump" was being dealt with. We are here concerned with sub-contracting; that is what it is all about. It is no good the hon. Gentleman saying that although he supported the Labour Government's Bill he was critical of it. It is one thing to be critical of a Bill; it is another thing to be in opposition to it. If we are in opposition to a Bill, we vote against the Second Reading and Third Reading.
      Mr. Chichester-Clark: At the time. I had introduced a Bill which would have been infinitely more preferable.
      Mr. Heffer: The hon. Gentleman cannot get away with that, because he introduced a Bill only to embarrass the Labour Government and to get them to speed up their Bill. I was in favour of getting the Bill through as quickly as possible. This underlines my point that now that the then Opposition are in Government they have totally abandoned the concept of a Bill, whether it was the Labour Government's Bill or the Bill introduced by the hon. Gentleman. The proposals in the Finance Bill do not adequately deal with the situation.
      I wish to know why the Financial Secretary opposes the Amendment. I cannot see anything wrong with it. It seems reasonable to me. I do not know whether the hon. Gentleman thinks that saying that the regulations will be shown to the employers' federation and to the trade unions deals with the point. Showing them regulations does not necessarily mean consultation. It is possible to show somebody something and say, ''This is what we are doing" and then go ahead and do it irrespective of what he says. Is that what the hon. Gentleman is saying, or is he saying that he will allow the unions and the employers' federation to put forward their points of view and will take them into consideration before the regulations are introduced?
      Mr. Patrick Jenkin: I can answer the hon. Gentleman's question with a categorical "Yes".
      Mr. Heffer: Then I do not understand why the hon. Gentleman does not accept the Amendment, because it is not a bad idea to have it written into the Bill to make the point specific. However, I shall not pursue the matter except to say that these Amendments are inadequate to

      1371
      deal with the situation, and the hon. Member for Londonderry knows that as well as I do. He has raised the matter in this way because there is no alternative to dealing partially with the question of "the lump" and because there are all sorts of tax evasion as a result of "the lump".
      I hope that the Government will not leave the matter as it is but that they will pursue it further and will introduce a comprehensive Bill dealing with the question of "the lump" and will eliminate this extremely bad practice in the building industry. It is time that "the lump" was eliminated from the industry. I realise that we cannot obtain complete satisfaction from the occupants of the Treasury Bench, because this is not their pigeon. They have wrongly been given the job. That is why the matter is being dealt with in a half-hearted way. It should be dealt with in a comprehensive Bill and "the lump" sub-contracting needs to be outlawed.
      Mr. Raymond Gower: I hardly think that the Finance Bill is an appropriate medium by which to accomplish the aims of the hon. Member for Liverpool, Walton (Mr. Heffer).
      Mr. Heffer: I have just said that.
      Mr. Gower: No. He said that this method was inadequate in the context of the Bill. I should have thought that this was a most inappropriate medium for putting in order what the hon. Gentleman regards as malpractices in the construction industry. A different medium is required for that purpose.
      Mr. Charles Loughlin: It is not we on this side of the House who say that this Bill will cure the problem of "the lump". It was said from the Government Front Bench that this was a method by which they would do it.
      Mr. Gower: My point is that this is not an appropriate medium to accomplish the aim, but what we are discussing represents a useful part of that job in the context of this Bill, and I should have thought that it would be welcomed by the Opposition.
      Ostensibly, what my hon. Friend the Member for Londonderry (Mr.
      1372
      Chichester-Clark) has proposed seems a good idea, but I think he will agree that if we specify the people to be consulted it may suggest that nobody else need be consulted. To that extent, my hon. Friend the Financial Secretary is on fairly solid ground. However, I wonder whether he could go a little further. I was not sure whether his undertaking extended as far as consultation. I imagine that we would not require the Amendment to be inserted in the Bill provided that what was done by the Revenue amounted to consultation.
      Mr. Patrick Jenkin: With leave, I should like to respond to the further points which have been made.
      I intervened in the speech of the hon. Member for Liverpool, Walton (Mr. Heffer) to give a categoric "Yes" to his question. I think that he accepted that I meant that there would be genuine consultation. I can reassure my hon. Friends on that point. There would be no point in the Inland Revenue or any other Government Department showing regulations in draft to trade associations and trade unions if it did not avail itself of the advice which it might receive on them. But consultation does not oblige a Government Department to comply with the advice it is given. However, that it should seek advice and take it into account with an open mind is usually accepted and is appropriate in this instance.
      I reinforce the point made by my hon. Friend the Member for Barry (Mr. Gower) that if we specify matters in the Bill it tends not only to have a restrictive effect as to whom should be consulted—circumstances change and legislation must stand for a number of years—but also to cast doubt on the desirability of consulting in other instances when comparable provisions do not apply. I therefore reassert my earlier advice that, on the whole, it would be preferable not to include these Amendments in the Bill. I am grateful to my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) for giving me the opportunity to state quite clearly that it is the intention of the Inland Revenue to consult the interests I have named.
      The hon. Member for Walton mentioned National Insurance. His hon

      1373
      Friends raised this question, very properly and fully, in Committee on 14th June, and I would refer the hon. Gentleman to what I hope he will regard as a reassuring answer which I gave in col. 436–7. I should probably be straying beyond the rules of order if I were to say more about that now.
      We believe that these Clauses will go a long way to cure the ills which have beset the building industry from the growth of bogus self-employed sub-contractors. We intend to watch this, and my hon. Friend the Under-Secretary of State for the Environment sat in Committee throughout the debates upstairs and listened to all the points made. The Government intend to watch the situation closely, and, if any further steps are necessary to cure what all sides have agreed is a thoroughly undesirable development in the building industry, we shall consider whether such steps should be taken. By tackling the tax evasion that has gone on through this method we shall be hitting at a peculiarly sensitive point and, if we can deal with this effectively, I believe that we shall succeed in making a considerable dent in this practice.
      Mr. Heffer: Would not the hon. Gentleman agree that an even better way of underlining the points he has made would be to accept the Amendment of my hon. and learned Friend the Member for Lincoln (Mr. Taverne) to the effect that there should be a register of such subcontractors to make it easier to deal with the matter?
      Mr. Jenkin: The Government considered this most closely but came to the conclusion that this would undoubtedly have led to a cumbrous and bureaucratic procedure. After the most careful consideration, we felt that a register was not the best way of doing it. I do not rule it out for all time. It may be that we shall be driven to it if we find that the measures we have taken so far, the measures which my right hon. Friend the Secretary of State for Social Services is contemplating in relation to National Insurance and other measures which are open to us do not deal with the problem. We may then have to reconsider the question of a register, but we shall do so with the greatest possible reluctance.
      Mr. Costain: Does my hon. Friend appreciate that "the lump" grew at a more rapid rate when S.E.T. was introduced, and the halving of S.E.T. will help to reduce it?
      Mr. Jenkin: I entirely accept my hon. Friend's point, but I equally accept the point made by the hon. Member for Walton in an intervention in a speech I made in the Budget debate when he said that "the lump" existed before the introduction of S.E.T., although there is not the slightest doubt that S.E.T. has exacerbated the problem.
      Having heard the explanations and assurances which I have given, I hope that my hon. Friend will feel it right to withdraw the Amendment.
      Mr. Loughlin: I am surprised at the turn of events in this debate. The Amendments are so narrowly drawn that I did not realise—perhaps because of my inexperience—that we could talk about the lump and relate the Clause to it. I should be abusing your tolerance, Mr. Deputy Speaker, if I were to develop the case that has been presented by the Financial Secretary.
      It is true that the hon. Member for Londonderry (Mr. Chichester-Clark) attempted at all stages to qualify his support for the Bill presented by the Labour Government, but I remind him that there was agreement between both sides of the Committee to get the Bill through in four sittings. That indicates at least some measure of approval and support for the Bill.
      On the intervention made by the hon. Member for Folkestone and Hythe (Mr. Costain), all the evidence that was submitted to the Phelps Brown Committee was collated before the introduction of S.E.T. The problem was acute before the Phelps Brown Committee sat, but it was accelerated by the introduction of S.E.T.
      This provision will not touch "the lump". I am delighted that the Financial Secretary has said that if the Government find it does not touch it they are prepared to reconsider the position and introduce legislation to deal with "the lump". I take it that this is an official promise. It is on the record, and I hope that the promise will be carried out. This Clause will not deal with "the lump", and if the

      1375
      Government take steps to deal with it I shall be highly delighted.
      5.15 p.m.
      Mr. Jenkin: If I may intervene, I did not go on record as saying that. The hon. Member and I can both examine the record tomorrow. I said that we should be prepared to consider it to see whether further steps would be necessary. I gave no undertaking to take any specific action.
      Mr. Loughlin: I shall be interested to see HANSARD tomorrow. At least I have given the hon. Gentleman the opportunity, if he inadvertently said something which he should not have said, to correct it. I am sorry that his promise is not stronger than it appears to be.
      Mr. Chichester-Clark: I find the speeches of the hon. Member for Gloucestershire, West (Mr. Loughlin) somewhat of an acquired taste, and my process of acqusition has not gone very far this afternoon. What he said was not very helpful to the case.
      I am much appeased by what my hon. Friend the Financial Secretary said and I am pleased that something is being done to tackle this problem. My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and I were pioneers in this subject. Until we introduced a Bill to get something done, we could not get the Labour Government to do anything. With those few observations, and welcoming what my hon. Friend said, I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.

    Clause 29

      INCOME TAX CHARGED AT BASIC AND OTHER RATES
      Mr. David Marquand: I beg to move, Amendment No. 34, in page 29, line 8, leave out paragraph (a) and insert:

      (a) in respect of earned income at such rate, to be known as basic rate, and in respect of investment income at such rate, to be known as the basic investment rate, as Parliament may determine; and.

      Mr. Deputy Speaker (Miss Harvie Anderson): I think it would be for the
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      convenience of the House to discuss also the following Amendments:
      No. 35, in page 29, line 14, leave out from beginning to end of line 18.
      No. 37, in page 32, line 32, after 'basic', insert 'investment'.
      No. 38, in page 33, line 10, leave out '30' and insert '20'.
      No. 39, in page 33, line 11, at end insert:
      'and the basic investment rate shall be 38·75 per cent.'.
      Mr. Marquand: Our purpose in putting down these Amendments is two-fold. First, we hope that even at this rather late stage it will be possible to persuade the Government to be more forthcoming than they have been hitherto about the way in which they intend to operate the Clauses to which these Amendments refer. Secondly, we believe that although the new system of personal taxation set out in these Clauses is in some respects a step forward in comparison with the present system, it is a step backwards in other respects. We believe that our Amendments would retain the advantages proposed by the Government while at the same time eliminating the disadvantages. I should like to say something about both these reasons.
      1 turn first to the question of information. There is wide agreement on both sides of the House, and indeed among an increasing number of outside commentators, that the House of Commons should be given more information than it has had in the past if it is properly to discharge its traditional function as the watchdog of the executive in economic and taxation matters. Both Governments have gone a long way to meet this point of view. The previous Government introduced a major change with the publication of the White Paper on expenditure. This Government carried that change further by setting up the Expenditure Committee, by publishing the two Green Papers on corporation tax and the value-added tax, and by setting up a Select Committee on corporation tax.
      I would be the first to pay tribute to the Chief Secretary for the Government's innovations in this matter. But the very fact that the present Government, like their predecessors, have been more forthcoming than used to be the case in

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      matters of this kind makes it all the more disappointing that in this and subsequent Clauses, which introduce a revolutionary change into the whole system of personal taxation, they have been so cagey about their precise intentions.
      We accept that the Chancellor of the Exchequer cannot be expected to tell us in 1971 how he intends to manage the economy in 1973. No one expects a precise statement of the rates and levels of taxation which he intends to introduce in 1973, but I cannot see why the Chancellor of the Exchequer is unable to say approximately how large the slice of investment income which is to be charged at the earned income rate is to be, and at least approximately how great will be the differentiation between the earned income rate and the investment income rate.
      In the debates in Committee which were taken on the Floor of the House, the Treasury Ministers explained their inability to give us this information as follows. The Financial Secretary said on 18th May:
      "It would not have been possible for any Government to have undertaken the major administrative work that needs to be done and, at the same time, to have announced the rates. It is because one must do it in stages, and therefore inevitably introduce legislation in one year and in the subsequent year announce the rates, that it has become possible to do it, and this is the price one must pay for doing it."
      In other words, he implied that the reason the Government were unable to say how large the slice was to be and how great the differentiation between earned and investment income was an administrative reason. There was some obscure administrative obstacle which prevented him disclosing that information to the House. But he did not say what the obstacle was.
      Later, the hon. Gentleman gave a different reason. He implied that he was reluctant to divulge this information, not on administrative grounds but because of the need for flexibility in matters of demand management. He said later in the same speech:
      "In this scheme the reform has such an impact on demand management that it would have been impossible for my right hon. Friend in any sense to have committed himself as to the higher rates of tax, the starting point for the investment income surcharge or the
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      level of surcharge."—[OFFICIAL REPORT, 18th May, 1971; Vol. 817, c. 1125.]
      But the basic rate for earned income also has a major significance for demand management—indeed, I would have thought it had much greater significance for demand management—yet the basic rate for earned income is spelt out in the Bill. It is to be 30 per cent. The Chancellor has said that his commitment to 30 per cent. is not inflexible and that in 1973, when he enacts the changes foreshadowed here, he may have to vary the rate according to the circumstances prevailing at that time. If it is possible for the Chancellor to say that the basic rate for earned income is to be 30 per cent., subject to the proviso that it may have to be changed to a different figure at a later stage if the economic circumstances dictate such a change, why cannot he do the same for the surcharge rates? What is the difference between the two?
      Even if it is impossible for the Chancellor to say what the rate is to be for investment income, I cannot see why it is impossible for him to say what the size of the slice is to be. If he were to tell us the size of the slice without telling us the extent of the differentiation in rates, he would disclose nothing that might impede flexibility in demand management, yet it would give us an opportunity to judge the significance of the proposals in the Bill a great deal more thoroughly than we have been able to do in debates on Second Reading and in Committee.
      The size of the first slice of investment income which is to be exempted from surcharge makes a major difference to the new system and to our attitude to it. If the first slice is to be large, then in our view it suggests that the Government will eventually be driven along the path which many of their own supporters wish to force them to pursue towards complete abolition of the distinction between earned and investment income. In our view that would be an intolerable path to tread and we would oppose it utterly. On the other hand, if the first slice of investment income were very small, and if the reason for exempting small investment incomes were simply an administrative one, we should perhaps have some doubts about it; but our opposition would not be anything like as passionate. This makes a major difference to our attitude to this

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      whole chapter of the Bill, and it is very unfortunate that the Government so far have been so cagey about their intentions. I hope that the Chief Secretary, whose record on the question of opening up Treasury operations to the public gaze has been remarkable, will feel able in his reply to be a little more generous in regard to the information which he and his colleagues are able to give.
      Mr. Gower: Does the hon. Gentleman not feel that the formula in the Amendment is somewhat inconsistent with his last point about equalising rates when he suggested that some supporters of the Government wanted the same rate for investment income as the basic rate?
      Mr. Marquand: As I was seeking to argue, it depends on how large the first slice is. Let us suppose, for the sake of argument, that the first slice which is exempted from the surcharge were to be £5,000 a year, a very large slice. Then the Government would be subject to immense pressure from their supporters, who would say, "If you have exempted £5,000 of investment income from the surcharge, what is the point of having a surcharge at all? Surely you should abolish the surcharge altogether because that would Le the logical thing to do. Maintaining the surcharge creates all kinds of anomalies.' That would be their line of argument.
      But if the first slice were a small one and if the Government were able to demonstrate that the reason they had adopted it was simply that there were administrative difficulties in collecting the surcharge from the recipients of small unearned incomes, that would be a different matter. The argument that might come from the benches opposite would then be very much less formidable. That is all I am trying to establish. It makes a fundamental difference how large the first slice is to be.
      The second reason why we put down the Amendments is that we wish to retain what we see as the advantages of the new system while eliminating what we regard as the disadvantages. We accept that the new system has advantages. We accept that the unification of income tax and surtax will enable a smoother progression. That is a point of view which my hon. Friend the Member for Heywood and Royton has pressed
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      for many years. We also accept that the abolition of the present cumbersome system by which a standard rate is combined with earned income relief will eliminate some of the misunderstandings which at present cause many people to believe that they pay a higher rate of tax than they are paying in fact. These are undoubtedly advantages.
      Most of my hon. Friends would probably say that the advantages are not quite as earth-shattering as some Ministers appear to believe, and we are rather sceptical as to whether they will, by themselves, generate the extra dynamism and initiative which some of the more naive supporters of the Conservative Party appear to believe. Nevertheless, we accept that they are advantages and we want to retain them.
      From our point of view, however, it is a major disadvantage that the Government apparently intend to erode the distinction between earned and investment income, which has been one of the cornerstones of our taxation system since 1907.
      If the Amendments were accepted, the existing discrimination in favour of earned income would be retained. The rate for unearned income would be 38·75 per cent. so that the differential in favour of earned income would remain as great as it is at present. Secondly, it would mean that the withholding tax on dividends would be at a rate of 38·75 per cent. instead of at 30 per cent., as is foreshadowed in the Bill. Thirdly, one of the Amendments would mean that at the bottom end of the income tax scale one would pay 20 per cent. instead of 30 per cent. We believe that this would make the taxation system more progressive and would reduce the disincentive effects at that end of the scale, which are at least as serious as the disincentive which is sometime alleged to exist at the higher end of the scale.
      I should like to comment briefly on these three points. The Committee stage debates revealed what is, in any case, well known: that we on this side of the House believe as a matter of principle that income from work ought to be treated more favourably than income from property. However, I do not intend to go into the somewhat theological arguments for and against that proposition which detained us in Committee because it

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      would be profitless to rehearse them yet again. Both sides of the House know where they stand on that point.
      The second reason why we believe that discrimination in favour of earned income should be retained is that it is clear that property incomes go preponderantly to the wealthy. If the first slice of investment income which is to be exempted from the surcharge is a large one—from what Government spokesmen have said, we have every reason to fear that it will be large—the taxation system will become even less progressive than it is, inequality in our society will be increased and social divisions will be magnified.
      The only hard, tangible argument which the Government have advanced for eroding the distinction between earned and investment income is that to do so will encourage savings. It is, in any case, a dubious proposition that blanket encouragement to savings should be given through the taxation system. The Royal Commission on the Taxation of Profits and Income looked at this matter in the 1950s. In its final report in 1955 it said at paragraph 76:
      "There is only one thing that remains to be said with regard to personal savings. If life assurance relief and the relief for national insurance contributions are retained, and if superannuation relief is developed to what we regard as its logical conclusion, we think that the tax system will be making as much concession to savings as it is reasonable or proper that it should. However desirable for economic reasons the encouragement of personal saving, measures adopted for its encouragement should lie outside the sphere of the income tax system, to the general equitable principles of which differentiation measured by saving is not, as we have said, either easily or closely related."
      In our view, that argument is as forcible as it was when the Royal Commission put it forward. In any case, it is not clear that increasing the rate of return on savings, which is the object of this change, will necessarily increase the level of savings. There is no exact correlation between the rate of return on savings and the level of savings. People save for all sorts of different reasons. One cannot say that, because the rate of return is increased, the level of savings will necessarily rise. Moreover, from the point of view of economic management, what counts is not simply the level of individual savings but the extent to which the community as a whole forgoes consumption in favour of investment. It is only
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      worth while to stimulate savings by means of tax concessions if savings increase by at least as much as the tax yield is reduced. There is no evidence that this will happen as a result of the change which the Government are proposing in this Clause.
      It may be that as a result of exempting the first slice of investment income from the surcharge, savings will go up by a certain amount. But the Government have given no proof that the extent to which savings will go up will be as much as or greater than the extent to which the revenue will go down and, if the loss of revenue is greater than the increase in savings, from a demand management point of view we gain nothing.
      I want now to say a word or two about the point concerning the withholding tax, to which I referred earlier. The effect of the Bill as it stands is that the withholding tax on dividends will go down from the present standard rate to the proposed basic rate of 30 per cent. That means that the recipient of dividend income will be in a significantly better position than he is at present from the point of view of the cash that he holds in his hand. It seems to us quite unjustifiable that the change should be made in this way. There will be a significant loss to the Revenue and a gain to the taxpayer in terms of view of cash flow for which there is no conceivable justification.
      There is also a narrower point in this connection which was raised in Committee and which the Financial Secretary was good enough to say that he would look at again. I should like to ask the Chief Secretary what the result has been of his hon. Friend's researches. The point concerned accumulation trusts. In Committee on 14th June, the Financial Secretary said:
      "To the extent to which—I think I must limit it to this—the reduction is from the standard rate of 37½ per cent. to a new basic rate of 30 per cent., this gives benefits to accumulation trusts which may not subsequently be recouped when money is then paid out by the trustees, and I certainly will look at that…. Without in any way minimising the administrative difficulties, I will look at this point again to see whether there is some possible loss of revenue of a size which would make it appropriate for us to legislate to cover the case."—[OFFICIAL REPORT, Standing Committee H, 14th June, 1971; c. 522–3.]

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      I should be grateful if the Chief Secretary would tell us what the result of that second look has been.
      Finally, we propose to lower the starting rate of personal taxation from 30 per cent. to 20 per cent. I do not think that there can be any doubt that the disincentive effect of the very large jump which the present system involves is considerable. The point at which many taxpayers begin to pay tax happens, for other reasons, to coincide—or almost coincide—in many cases with loss of benefits of one kind or another. It is now well established that the net result is that in some cases the marginal rate-of-tax-cum-loss-of-benefit experienced by people who are starting to pay tax can be very much higher than it is for the highest surtax payer. In our view and in the view of many authorities much more expert than I am, this has a disincentive effect. Indeed, we all know from the experience of talking to our constituents that it is at this point that the shoe pinches hardest in our system. We believe, therefore, that there is a powerful case on economic grounds for having a starting rate of 20 per cent. instead of 30 per cent.
      It would also help make the taxation system more progressive than it is at present. The change would not be inconsistent with the new system that the Government propose. Largely for procedural reasons in terms of tabling an Amendment, we have proposed a basic rate of 20 per cent. One could still have 30 per cent. as the basic rate, but with a lower rate of 20 per cent. for those starting to pay tax in a certain band of income. We think that this is a constructive proposal, and we hope that the Government will consider it favourably.
      I suspect that even the force and power of my arguments may be insufficient to persuade the Chief Secretary to change his mind about the need to retain the present differentiation between earned and unearned income. I hope, however, that he will be a little more generous with information and more forthcoming on the point about the starting rate than Ministers have been hitherto.
      5.45 p.m.
      Mr. Gower: The hon. Member for Ashfield (Mr. Marquand) suggests lower-
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      ing the rate from 30 per cent. to 20 per cent. I do not know whether the hon. Gentleman has made any estimate in gross figures of the consequences of that change.
      Mr. Marquand: I am sorry. Perhaps I should have detailed that point at greater length. Our Amendment is misleading to this extent. We have said that the basic rate should be 20 per cent. which rather implies that the vast majority of taxpayers should pay income tax at 20 per cent. instead of at 30 per cent. That is not our intention. Our intention is that taxpayers entering the tax net should pay at the rate of 20 per cent. instead of 30 per cent. and, therefore, that the rate should be lower for a narrow band at the beginning.
      Mr. Gower: That may be the case, but that is not what the Amendment says. The hon. Gentleman has moved an Amendment to do one thing and, in his speech, has described something completely different.
      Mr. Barnett: No.
      Mr. Gower: The hon. Gentleman—
      Mr. Barnett: Where does it say that the 30 per cent. rate covers a particular band—and, if so, what width?
      Mr. Gower: I am saying that the hon. Member for Ashfield did not give any indication of the consequences of reducing the rate from 30 to 20 per cent.
      The hon. Gentleman devoted the greater part of his speech to the encouragement of savings. However, he underestimates the size of the task of increasing the number of those who save regularly. That is a very difficult job in the inflationary society in which we have lived for some years. What is more, the hon. Gentleman underestimates the degree to which saving is desirable. Clearly, it is very desirable that we should increase significantly the number of those who are disposed to save. It is not an easy job. My right hon. Friend the Chief Secretary spent a great deal of time before becoming a Minister thinking about one or two aspects of the problem. During the term of office of right hon. and hon. Gentlemen opposite, the hon. Member for Ashfield will have learned how difficult it was for the previous Administration to persuade the

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      people to increase the contribution made by savings on a national scale.
      The hon. Gentleman went so far as to suggest that there may be little or no relationship between the rewards of savings and the amounts of saving. I hope that I do not do him an injustice. He seemed to imply that he could find no relationship between the two. I should think that there is ample evidence that this is not so. Indeed, the whole story of building society rates is based on their experience that, unless they keep their rates to their investors at certain levels, they lose to alternative forms or saving offered by other agencies. It is a constant battle for the building societies to sustain a satisfactory level of income unless they adjust their rates to attract the saver.
      Despite the moderation with which the hon. Member for Ashfield has worded his proposal, I think that he is underestimating both the need for saving and the size of the task which confronts successive Governments of both parties if we are to succeed in future in encouraging a more formidable contribution from savers and significantly enlarging the numbers of those who save.
      It is for that reason that I welcome the design of this valuable change which is likely in the years ahead to help to achieve an object which is close to the hearts of many hon. Members on both sides of the House. The obvious advantage of this basic rate is that it will be less likely to create in the minds of a large number of people the apprehension that they are paying an excessive amount of tax. This is extremely valuable. The hon. Gentleman referred to people being discouraged from extra effort at work by this feeling. We have often met constituents who have said that they have been dissuaded from extra efforts—through overtime and other forms of work—by this feeling. I believe that this change will go a long way to lessen that danger. It is in that spirit that I certainly welcome the change.
      Mr. Heffer: I should like to make a few comments on the points made by the hon. Member for Barry (Mr. Gower).
      First, the hon. Gentleman's point about savings had very little validity. The suggestion is that, as a result of reducing
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      the level from 38·6 per cent. to 30 per cent. for unearned income, those who receive this extra relief will use it for additional saving. There is no guarantee that this will happen. There is no guarantee that this money will be ploughed back into further investment. No one knows precisely what will happen.
      Concerning general savings, the hon. Gentleman overlooked the interesting fact that the savings of the masses are increasing. The reason is that people are living in a period of fear about the future more than they have felt since the end of the Second World War. That is the basic reason for working class people being more careful and keeping a little money aside. They fear unemployment and the future with this Government. This is a paradoxical situation. One would imagine that in this period of inflation there would be less saving; but there is more saving because of the situation into which we are being led by the Government.
      We ought to look closely at the Government's proposals The idea that those receiving unearned income should have the same taxation as those with earned income is a philosophy which we ought not to accept. It is totally alien to the ideas of taxation which we have had for a very long time. It means that those with better positions in society, those who can afford to invest, particularly those with large sums of money, will be receiving a greater benefit than those who do not have large sums of money to invest. That is the philosophy of right hon. and hon. Gentlemen opposite. It is perfectly understandable. This is what it is all about. I must say that they help their friends; they do look after them. I regret that sometimes we did not look after our friends quite as well as they look after theirs.
      Mr. Marquand: We have more friends.
      Mr. Heffer: We certainly have. That is all the more reason that we should look after more of them.
      I understand that the drop will be to 30 per cent. or thereabouts and that there will be an investment surcharge. We have no idea what the investment surcharge will be. We do not know when it will begin. I think that the Chief

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      Secretary has a lot to explain this afternoon. He must give us a clear understanding of precisely what is in the Government's mind and what they are playing at in this regard.
      Lastly, we are in a difficult situation because we do not know exactly what we are discussing. It is almost like putting one's hand into a mystery bag and not knowing what will come out. It is like many other things which the Government do. There is a great deal of mystery surrounding all kinds of things. We heard a bit of a mysterious story this afternoon about who said what and who did not in another matter. The Chief Secretary must explain this mystery to us.
      I say without fear of contradiction that if the British people fully understood what was involved and just how much the Government are helping their friends at the expense of the ordinary taxpayer they would certainly build up the Labour majority in Macclesfield a lot higher than it will be at the next by-election.
      6.0 p.m.
      Mr. Maurice Macmillan: In moving this group of Amendments the hon. Member for Ashfield (Mr. Marquand) said that there were two purposes to them. One was to get the Government to be forthcoming—a plea which has just been echoed by the hon. Member for Liverpool, Walton (Mr. Heffer)—and the other was to do what he referred to as retaining the advantages and eliminating the disadvantages of this group of Clauses. I noticed that he did not specify his bottom slice of income which would attract 20 per cent.
      The hon. Gentleman said that we had been cagey about these Clauses. His argument boiled down to the fact that he was concerned about the size of the slice of income. He admitted that it was not reasonable to expect my right hon. Friend to specify in advance the rates or the level of taxation, but he wanted to know the approximate size of the slice.
      The hon. Gentleman referred also to the possibility of specifying the basic rate for earned income as 30 per cent., and asked what was the difference between this and other rates. The difference is that the basic rate, as the Chancellor made clear, is the present standard rate
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      less earned income allowance and, therefore, is the basic rate for earned income. It is an expression of fact which exists, whereas the surcharge cannot be related to any existing rate of taxation, nor can the size of the slice of income.
      Mr. Marquand: I know that the Chancellor said that. I heard him say that during the debate, and I re-read it when preparing for this debate. But what we cannot see is why the hon. Gentleman cannot say what the difference between the investment income rate and that basic rate is going to be. The basic rate may not be 30 per cent. at the end of the day. It may have to be varied, because circumstances change. I do not see why that makes it impossible for the Government to level the extent of the gap between the earned income rate and the investment surcharge rate.
      Mr. Macmillan: It is because the surcharge is a new concept, and, as my right hon. Friend has made clear, he will decide its level in the context of the situation next year. The basic rate is not a new concept. It is simply a translation of the existing standard rate, less earned income allowance, into a straight percentage figure rounded off.
      We cannot go any further than we have gone in these debates, which I know will not satisfy the hon. Gentleman, which is to say that the Chancellor will decide on the rate of the surcharge and will, when this Measure becomes law, settle the size of the slice of investment income which is taxed at the basic rate. Various reasons have been given—the administrative one, the need to keep flexibility for demand management, and so on. My right hon. Friend, and I agree with him, regards this as a necessary freedom of action which he must retain.
      The Amendments taken together set out the skeleton of an alternative system of unification. Instead of the system that we have, which is constructed in terms of a basic tax, with an investment surcharge, the hon. Gentleman is putting it the other way round. He has a dual system, with separate rates of tax for earned and investment incomes. The "basic investment rate" would be the withholding rate—that is Amendment No. 37–and for 1973–74 would be fixed provisionally at 38·75 per cent., equal to the present standard rate, that is Amendment

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      No. 39. The tax on earned income would start at 20 per cent.—that is Amendment No. 38–though the hon. Gentleman made certain qualifications to that, and I shall deal with those in a few moments. One consequence of the Opposition's scheme would be that there would be no slice of income charged at the lower rate. As the hon. Gentleman said, a scheme of that kind is contrary to the Chancellor's purpose, and the purpose of this side of the House, of reducing the differentiation between earned and investment incomes.
      I could not help noticing that the hon. Gentleman used the word "erode", as though there were something time-hallowed and sacrosanct in the level of this distinction which has been a principle since 1907. I should not necessarily regard its age as being a guarantee of its relevance to any political objective of either side of the House.
      I should like to say a few words about the cost, although I do not want to refine on this because the hon. Gentleman made it clear that he was not being specific about the level at which the 20 per cent. should apply. The extra yield, taking 1971–72 levels of income, which would come from charging investment income at 38·75 per cent. would probably be about £200 million. The cost of reducing the basic rate of tax on earned income from 30 per cent. to 20 per cent., at 1971–72 levels, would amount to about £1,800 million, but the hon. Gentleman said that it was proposed to do this only for an initial slice of income.
      Mr. Marquand: I may have misheard the hon. Gentleman, but he seemed to say that he had made a judgment about the size of the slice, otherwise how can he tell what the increase in revenue would be from charging below the slice?
      Mr. Macmillan: I made it clear that I was talking about the hon. Gentleman's proposal and comparing it with 1971–72 levels of income. What I was saying was that if there were no slice and the tax on earned income were reduced from 30 per cent. to 20 per cent., there would be a loss of revenue of £1,800 million.
      Mr. Marquand: I should be the first to apologise if I have misunderstood the hon. Gentleman, but I thought he said that there would be a gain of revenue of a certain amount by charging all invest-
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      ment income at the 38·75 per cent. rate, and he then said that there would be a loss through charging earned income at a lower rate. If the hon. Gentleman is in a position to say that there would be a gain of such-and-such an amount because of charging all investment income at 38·75 per cent., instead of charging only some investment income at that rate, he must have made some judgment about the size of the slice. If he has not done so, how can he make the calculation?
      Mr. Macmillan: I am making no judgment about the size of the slice. I am saying what would happen if it were applied to the current situation before the proposals in the Bill were brought into action.
      To take the size of the hon. Gentleman's slice at the bottom end of the band, a reduced rate of £260, charged at 20 per cent., carved out of the basic rate band, would cost the Exchequer about £500 million. I find this plea from hon. Gentlemen opposite that we should go back to a reduced rate band at the bottom end of the tax scale a little strange because, after all, it was their Government who, some time ago, eliminated the marginal rate of tax at the bottom end of the scale.
      Mr. Barnett: Is it not intended, under the Government's proposals, that there should be a rate band all the way up the scale from 20 per cent. at different levels?
      Mr. Macmillan: I was merely saying that I thought it odd that in Opposition—
      Mr. Barnett: Answer the question.
      Mr. Macmillan:—hon. Gentlemen opposite were proposing a course of action which they were hasty to reverse when they were the Government.
      Mr. Barnett: Now answer the question.
      Mr. Macmillan: In the course of these Finance Bill debates the Opposition have criticised our methods of unifying the tax structure, while welcoming unified taxation in principle. They have asked a number of questions, most of which we have not been able to answer, such as the question of the structure and the level of the slice of income to be taxed at the basic rate, and the investment income surcharge.

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      The hon. Member asked one specific question about an undertaking which my hon. Friend the Financial Secretary gave him in Committee. That concerns the effect of the withholding tax level on accumulation trusts. My right hon. Friend gave an undertaking that this would be looked at. I am sorry to say that I cannot tell him any more except that we are looking at it. It has proved a matter of some considerable complexity. It is just not possible to say anything more at this stage except that, if necessary, the Chancellor will bring forward proposals in due course. I am sure that the hon. Gentleman will accept that this is not an easy matter to dispose of.
      The real point of dispute in this debate, as in previous debates, has been the propriety or otherwise of having a tax system unified at a basic rate with an investment income surcharge. The difficulty faced by hon. Members opposite is tailoring their remarks without knowing precisely what the surcharge will be. The implication in their speeches is that unless it is such as to represent a savage extra tax on unearned income, as they call it—investment income—they will be dissatisfied.
      They have shown that they expect and hope that the first slice of investment income tax at the basic rate will be very narrow indeed, confined virtually to that chosen for administrative reasons. It is true that this shows a different approach to the need for saving, to the desirability of encouraging investment and allowing those who save and invest, up to a level which the Chancellor will in due course decide, to receive the benefits of the lower rate of tax.
      This is not contrary to the Royal Commission's criticism of using the fiscal structure for encouragement of savings, although I admit that, from my previous activities in the Wider Share Ownership Council, I have never accepted the validity of that criticism anyway. But this shows a very different approach by right hon. and hon. Members opposite, which was made clear to us not least by the attitude of the hon. Member for Ashfield to savings, when his entire description of the effect of his Amendments on savings was couched in terms of demand management. He made it clear that to him it did not
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      matter whether the money was withheld from someone and invested by taxation or by savings. It is because we are in fundamental disagreement with this point that I would urge the House to reject these Amendments.
      Mr. Robert Sheldon: The Chief Secretary said that the Chancellor would be bringing forward his proposals in due course. What we have particularly at heart is that we are asked to pass legislation without knowing the shape of that legislation, just because the shape of that legislation and the levels of taxation are so inherently bound up together.
      Of course, many of my hon. Friends have viewed some of the advantages of the single rate structure with considerable pleasure. This is something which we have been advocating for years. What we do not wish to see, and what we are apprehensive about, is that, under the cloak of an attempt to produce a very useful reform of a single rate, an effort is being made to provide certain benefits for those people who, under this Budget and the various measures instituted by the Government, have already benefited considerably.
      6.15 p.m.
      The advantage of the single rate structure is obvious. In taxation, as in every aspect of life, it is foolish to let the person who is paying assume that he is paying more than he is in fact paying. It is foolish to let him assume that the standard rate is 8s. 3d. or, now 7s. 9d.—38¾ per cent.—when the true rate is much lower. That nonsense had to be ended. People had this wrong and thought that they were paying more tax than they were. Although the common commercial practice would be to get those who are paying to assume that they are paying rather less than they are, in fact they thought that they were paying more. This was a useful, though not shattering, reform, and I welcomed it in that light.
      But I do not wish to see it being used to change fundamentally the balance between those people who work for their living and those who draw large levels of investment income. What we have seen today is a continuation of so many of our previous debates, when we are not even given to understand the choice that the change involves. This is what causes so much disquiet.

      1393
      The Chief Secretary said today, as on previous occasions, that these are matters for which we have to wait. But I cannot help recalling that, on a previous occasion when a fundamental change in taxation was made—I am thinking of 1964, when the corporation tax was introduced—there was an undertaking by the Government of what that rate should be, so that the companies concerned should be able to make their calculations on the basis of the projected rate of corporation tax. No commitment was given as to the level of that tax, but it was said that, if the situation as it was at that time applied in future, the level of the tax would be so much. Despite all the explanations which the Government have offered, despite the explanation given by the Chief Secretary today, I have failed to understand why that same kind of undertaking could not be given now.
      The Government know how much they intend to raise by income tax. They have a system in their mind. I fail to see why they should not say, on existing assumptions, that the level will be so much, the amount of the slice so much and the amount of the investment so much. On the basis that they are trying to get, out of the whole system of income tax and surtax, the same amount of money, broadly, as they are getting today, I cannot understand why they do not follow that useful precedent of 1964 to enable people who have to understand these matters to have the advantages of knowing the facts.
      What caused me considerable anxiety was the statement by the Chief Secretary just now, when he described what he thought were the views of hon. Members on this side, that we wanted to increase savagely the extra tax on unearned income. I do not know what he means by this. The system of taxation which we left, roughly speaking the system which remains after the introduction of this Budget, was the one with which we thought we were not totally dissatisfied, although there would be changes all the time. But it is the Government who are introducing these changes.
      What does the Chief Secretary mean when he says that the system is too savage? Is there to be a massive change in the system of payment, away from those who cannot avoid paying because their income is earned to those with
      1394
      unearned income? Is the hon. Gentleman aware that he is not attacking any new proposals from us because we are not making any? He is attacking the existing system, and it is that which the Government intend to change. In view of the fierce language he used to attack the present system, he is in duty bound to indicate the changes the Government will be proposing.
      The Chief Secretary spoke of the need for flexibility in relation to demand management and the necessity for freedom of action which the Chancellor is maintaining. This is all accepted and obvious. If we take the need for demand management to be the same as it is now and couple with it the Budget judgment, which we know to be erroneous, we are entitled to ask how much tax the Chancellor will need to raise.
      What will be the level of the investment income surcharge and what are the other relevant details? I would be astonished to learn that the Chief Secretary did not have a close idea of these figures. A new tax system having been framed, he must have some idea of the figures, especially as he has denounced the existing system as a savage imposition. As on so many occasions when debating this Finance Bill, we are in need of more information.
      A new system calculated on the basis of comparability must be capable of being justified intellectually, and in this instance it cannot be done by the Minister referring to X, Y and Z. We want some figures put into the equation because only by that means can the system be made to come alive.
      We keep returning to this subject because of the fear that has been engendered by the sort of statements the Chief Secretary and his colleagues have been making. In view of the fundamental change that is likely to occur in relation to investment income, we fear that the earner of income will be placed in a declining position.
      In his speech of 12th January the Chancellor of the Exchequer said in a message that obviously had deep implications for his period in office that steep personal taxation was, in his view, a major factor in the poor economic growth of the nation. Every Chancellor since the war has made an effort to discover

      1395
      the reasons for our poor performance in economic growth terms, but this Chancellor gave a commitment in terms that has not been given previously.
      The level of surtax, which has been drastically reduced, the advantage given to those with large incomes, the advantage, still undisclosed, that will result from the change from the old system of unearned to earned income, along with the investment surcharge, is bound to put the earner of income in a declining and worsening position.
      Let us be clear that the present view of the Government was not always the attitude of the Conservative Party. Conservatives brought about some of the biggest tax differences between earned and unearned income. For example, in 1952 they raised the tax distinction between earned and unearned income to the highest level it had ever been. They did so rightly, because there should be a great distinction between those who work for their living and those who enjoy inherited wealth. It is hard enough nowadays for ordinary men and women to earn a decent living, and they should be accorded the advantage of differential rates of taxation for their efforts.
      When, in 1938, taxation went up to 9s. 6d. in the £ under the Tories, this distinction between unearned and earned income was enhanced. That was done by the Tories and I give them credit for doing it. Today we are witnessing the first fundamental change since long before the war in that system, to the detriment of the ordinary citizen. As a result, those who have will receive very much more than those who earn. This has been the message of this Budget, a message which is exemplified by this Clause.
      The other advantages which the Government are giving to those with large and unearned incomes we can calculate. The one with which we are now concerned, however, we cannot calculate, and the Government stand condemned for their failure to provide us with adequate information on this issue.
      Mr. Denzil Davies: The real point of seeking to have a higher basic rate for investment than for earned income is to restore some equity and sense
      1396
      of justice into a Finance Bill that is extremely favourable to supporters of the Conservative Party.
      By establishing in Clause 29 a basic rate of withholding tax which is based on the present standard rate, less earned income relief, and by then applying that rate to all kinds of income, earned or investment, the Government are conferring a major and substantial benefit on those who receive investment income. In terms of our present legislation, the effect of this will be for investment income to get the benefit of earned income relief.
      Hon. Gentlemen opposite have been clear about the reason why they are taking this step. It is because they believe that investment income should not be taxed at a higher rate than earned income. We disagree with them philosophically, but like my hon. Friends, I will not argue about this theologically or philosophically because ultimately it is a question of priorities.
      We must decide how much we want to allocate to public expenditure. Having taken that decision, we must decide from whom we will obtain the bulk of the money. We believe that it is more just and fair that those with the greatest wealth should make the greatest contribution to the national good, while people on lower incomes should pay less. Hon. Gentlemen opposite believe differently. They reduce tax on investment income and increase all sorts of charges and remove free school milk. They increase the means test on people who are less able to look after themselves. This clash of philosophy and priority will not go unnoticed in the country. My hon. Friend said that there was a bag here with something mysterious in it, but I beg to differ from him. There is nothing mysterious inside. The bag is full of goodies which will be distributed to the wealthy supporters of the party opposite.
      6.30 p.m.
      We have been told that one of the reasons for Clause 29 is the need for simplification, and no doubt we will be told this again before the debate is over. There may be some small simplification as a result of the establishment of one basic rate, but before we can decide whether that simplification is beneficial we should be told what it will cost the Treasury. Whatever else Clause 29 may do, it will

      1397
      cause a loss of revenue. In most cases, when Clauses involve a loss of revenue that loss is listed in the red book. In this case the cost is about £110 million in favour of the better off in our society.
      Mr. John Nott: What the hon. Member means by "loss of revenue" is that the Government are reducing taxes. I suppose that he is against that?
      Mr. Davies: No, I mean precisely that the Government are reducing taxes by £110 million in favour of those, basically, who earn £5,000 or more, and who live on capital or on inherited wealth. I do not shrink from that at all. That is what the Government are doing. At the same time they are increasing taxes on the less well-off.
      Mr. Nott: The Government have not increased taxes on those less well-off. They have substantially reduced them in the Budget. Because someone has investment income it does not mean that he has inherited wealth. He may have worked hard all his life and saved his money.
      Mr. Davies: If the hon. Gentleman were to ask those at the lower end of the scale whether the Government have increased their taxes or not, I have no doubt what their answer would be.
      The Clause benefits a number of groups of persons, and we should be told the cost to the Exchequer of that benefit. First of all, there are the individuals who will not be subject to investment surcharge. They will get earned income relief on their investment income, and because there is a reduction of £8 or more for every £100 of gross income the Government should tell us how much the loss of revenue will be.
      Next we come to companies. A number of hon. Members opposite were rather perplexed about this in Committee, but the fact is that by reducing the basic withholding tax rate on all dividends and other investment income the Government are giving a reduction, again, of just over £8 for every £100 of investment income which a body corporate receives. Some of the resulting loss of revenue may be recouped if the company passes on the benefit by means of another dividend to shareholders, but no doubt many companies will not do so. Again, therefore,
      1398
      we should be told how much loss of revenue the Government envisage.
      We also raised in Committee the subject of payments to overseas residents. A few countries do not have double taxation agreements with us. The result will be that all dividends that leave these shores and go to residents in those countries—companies or trustees—will now have a reduction of tax of £8 out of every £100. The Financial Secretary accepted that fact in Committee and said that there would be some loss of revenue but, again, we have not been told what the extent of the loss of revenue will be. It amazes me that the Government should frame a major Clause which is at the base of reforms and changes and yet have no idea, or will not tell us, what its cost will be.
      We also raised in Committee the question of trustees, and the Financial Secretary undertook to look at it, although I detected a certain feeling on his part that this was not a very major problem. But we are not talking about accumulation trusts in the narrow sense. Every trust where there is power to accumulate income—and that power can be extended for 20 years, and in certain circumstances for 80 years—and which does accumulate income will, again, benefit by £8 in every £100 of gross income. In addition, it will not pay any of the excess rates or the investment surcharge, but since we are concerned here with a withholding tax I will not go into that aspect.
      The Treasury Ministers should look at this, as it is a major problem. I suggest that at the end of the day they will only have been able to find some settlements and trusts, because in many cases they do not know whether or not they exist, since there is no registration of settlements and trusts.
      Mr. Peter Rees: The Amendment would benefit such accumulated settlements, as it seeks to reduce the basic rate of investment income, which means that less will be deducted and accumulation settlements will therefore benefit.
      Mr. Davies: I was not suggesting that they would not benefit. I am complaining that they will benefit. They will pay less tax, because the income they receive is never distributed, which means that it

      1399
      never goes into the hands of the individual and thereby gets taxed at excess rates and attracts the investment surcharge. It is turned immediately into capital and it will benefit by the reduction.
      Mr. Peter Rees: An Amendment in the name of the hon. Member for Ashfield (Mr. Marquand) seeks to reduce the basic rate from 30 per cent. to 20 per cent. That must benefit accumulated settlements, and I am delighted to hear that hon. Members opposite are converted to that thought.
      Mr. Barnett: The hon. Member for Dover (Mr. Peter Rees) has obviously not understood the Amendment, since it is also proposed that the basic investment rate should be 38·75 per cent. That would mean that there would not be a reduction.
      Mr. Davies: I was concerned, because the legislation proposes one basic rate. We propose two basic rates, one to apply to earned income and one to apply to investment income. We seek to maintain the differential between earned and investment income. If Clause 29 is enacted these accumulation settlements and trusts will benefit to the extent I have described. In addition they will benefit because they will not pay any of the excess rates or the investment surcharge.
      I therefore urge the Chief Secretary and the Government to look at the whole matter, because they may find a considerable loss of revenue resulting from their proposals. But they should not be doing this now: they should have done this before introducing the Clause. They should have worked out their sums before asking us to vote on the Finance Bill.
      The cost of the Clause is completely vague—we do not know what it will be—and the Amendment seeks to restore some equity in this respect. The Amendment will no doubt be voted down by hon. Members opposite who, in doing so, will again demonstrate where their sense of priorities lies.
      Mr. Loughlin: As I understood him, the hon. Member for St. Ives (Mr. Nott) claimed that the Government have been very generous towards the generality of taxpayers—the earned income tax payers, the lads who work in the factories
      1400
      —and have reduced their tax commitments. Nothing of the sort. I cannot understand how he arrives at that conclusion. What the Government set out to do and have successfully done is to introduce a change in the system of taxation from direct to indirect taxation. If we are considering the benefits to be derived by the generality of taxpayers, we must not only look at the increase in the child allowance or the 6d. reduction in income tax, because that reduction does not affect the vast majority of industrial workers. We must look at the total amount being paid in tax by the average person.
      One must bear in mind the various kinds of charges which have been imposed upon every household—for example, the amount allocated in the last agricultural Price Review to increased housewives' costs; the extra amount which housewives are going to have to pay through the ten levy Orders, and other measures. On that basis, one can see the fatuous nature of the hon. Gentleman's claim.
      I do not mean this in a nasty sense, but I felt that my hon. Friend the Member for Ashfield (Mr. Marquand) was being a bit naive when he said that the Government were in danger of being driven by their back benchers into eroding the differential between earned and unearned income, so that eventually it will cease to exist. I do not know why he imagines that there is a difference of opinion on this matter between the Government and their supporters. I believe that there is absolute unity among them on that issue, the unity of the Gadarene swine—I do not mean that in a nasty sense either. I believe that this is part and parcel of the Conservative Party's overall taxation strategy.
      Whenever there is the slightest criticism of dividends, the Tory Party claims that dividends are the barometer by which we measure people's success. If business is making higher profits, that is success. I do not mind that attitude but the trouble is that when industrial workers want to improve their own incomes and ask for wage increases, we are told that this is highly immoral. Apparently, it is the height of morality for dividends to increase but the height of immorality for earned incomes to increase. That is the Conservative Party's approach.

      1401
      I am under no illusions about Clause 29. There have been arguments about the non-disclosure of the estimated slice of the cake that will be given in consequence of the Clause. The Chief Secretary got himself entangled because, while he was able to give us a number of estimates, he could not give us the most important one. The Clause is drawn as it is precisely because it will give the Government the opportunity in 1973–74 to decrease the differential between earned and unearned income. That is the intention. They do not seek to deny it. They genuinely believe that unearned income should be given a more favourable status than earned income. I challenge the Financial Secretary to deny it. There is no need for us to be as naïve as my hon. Friend. He is only naïve because he is such a nice fellow. He still thinks that hon. Members opposite have the qualities of the angels they pose as. But I do not criticise him for being naïve.
      6.45 p.m.
      We have had references to savings. Perhaps the House can help me on this. I am always at a loss to understand what inducement one can make to get people to save. I have always maintained that people only have a given measure of disposable income after they have catered for their known requirements. Most of us live to a given standard. We cater for that standard and beyond it there is a part of our income that we can dispose of in the form of savings, be it 6d. or £6. It seems to me that there is no genuine reason why we should induce people to save. They will save only that which is surplus to their known requirements. There may be a margin in which they can cut down on their requirements in order to increase their savings, but it is a very small margin. I do not see how we can induce people to save more than it is possible for them to save.
      The other factor is the reason for which people save. It has been argued that the more we can get people to save, the less taxation we have to impose. One of the criticisms of the last Government was that people were not saving, that they were spending. It is now being recognised by a majority of economists that savings have gone up, particularly in the last six months, because people are beginning to fear the future. They are
      1402
      beginning to fear unemployment. They are beginning to fear runaway inflation. It can be argued that it is better to buy goods than to put money in the bank, but people do not act wholly rationally in circumstances of this kind. The reason why savings are going up is that people are afraid of what will happen on the morrow.
      I have listened throughout the debate and I am under no illusions. I do not think that the Chief Secretary, even if he seeks leave to reply again, will give us any more information, since the refusal to give information is based clearly on the desire to keep that information to himself, because at this stage he does not want to disclose that the next phase in the redistribution of income will be a further concession to those who live on unearned income.
      Mr. Cronin: I would like to preface my remarks, for a change, by saying something complimentary to the Government.
      Mr. Barnett: Hear, hear.
      Mr. Cronin: I must be fair, but it will be brief.
      I think that we all welcome this unified tax system. Certainly, it would work much more satisfactorily if applied by a Government composed of individuals from this side of the House. I do not know that we can trust right hon. and hon. Members opposite to work it.
      In principle, the whole idea of a unified tax is a considerable improvement and some of us on this side—and, possibly, some hon. Members opposite also—have pressed for it for many years. Even during the time of the last Conservative Government, we applied pressure for these changes, and I am glad to see that, at last, the party opposite have found a way of doing it.
      In dealing with this group of Clauses concerning income tax to be charged for 1973–74, I cannot understand why the Chief Secretary has been so lacking in frankness with us and so unforthcoming as regards proposals for taxing investment income. The Government have been quite straightforward in Clause 36. They have said that
      "The basic rate for the year 1973–74 shall be 30 per cent., unless Parliament otherwise determines."

      1403
      I cannot understand why the Chief Secretary could not today give us an indication of what the surcharge on investment income will be. He said that the investment surcharge would be decided later. At the same time, he said that the basic rate of 30 per cent. was purely notional and that it could easily be changed as the Chancellor of the day thought fit. I cannot understand why there cannot be inserted in the Bill an indication of the Government's ideas about the surcharge on investment income in the proposed unified tax.
      Naturally, we on this side must regard this with suspicion. I rather feel that we are being asked as a House of Commons to buy a pig in a poke. We are being asked to approve the scheme of unified taxation without having any idea of the Government's thinking on the important question of taxation of investment income.
      Colour must be lent to our suspicions by what the Government are doing in the Bill. We know, for instance, that businesses and corporations are being saved £105 million a year. So we know that big business is being looked after. We know that surtax payers will benefit to the extent of £38 million a year. Capital gains taxpayers will benefit to the extent of £15 million a year. There will be reductions in estate duty to the tune of £20 million a year. These and several other concessions of the same nature total about £200 million a year.
      That large sum is being handed back to the wealthier part of the nation, admittedly to the part of the nation which has given backing of a substantial financial nature to the Conservative Party. Presumably, this is the Government's way of showing their gratitude. This is a particularly unfortunate time to show gratitude, however, when it involves handing out about £200 million a year to the wealthiest members of the community and, at the same time, asking the lower-paid members of the community—the trade unionists—to moderate their wage claims. I cannot imagine a more unsuitable time to do this.
      The important thing, however, is the Government's extreme generosity to the wealthier sections of the community. It makes us wonder what will happen when, in due course, a Finance Bill is intro-
      1404
      duced to implement the changes envisaged in this group of Clauses for the unified tax of the future. That is what worries us.
      The Chief Secretary certainly added fuel to the flames of our suspicion, because he said that he would not regard as sacrosanct the differential treatment between earned income and investment income which has existed since 1907. Thus, we have the Chief Secretary saying, in words almost as plain as any Chief Secretary could say it, that when a Finance Bill is introduced to implement these changes in taxation, there will be preferential treatment for people who receive income from investments.
      Mr. Maurice Macmillan: If I recall correctly, I did not say that we regard it as sacrosanct. I said that we did not consider it sacrosanct because it had existed since 1907.
      Mr. Nott: I do not know why the hon. Member for Loughborough (Mr. Cronin) is going on about preferential treatment. Up to now, there has been discrimination against savings income. There is a possibility that, belatedly, a Government will remove it. That is what we are talking about. We are not talking about preferential treatment for investment income. We are talking about removing a discrimination which has existed for many years.
      Mr. Cronin: I am glad that the hon. Member makes that point, because it brings me to something with which I intended to deal later in my speech.
      I would like to refer to what the Chief Secretary said in his intervention. My hon. Friends will agree that he made it clear that he did not regard as sacrosanct the differential between earned income and investment income. When someone of the cagey breed of Chief Secretary makes a statement like that at the Dispatch Box, it implies to anybody who is familiar with the organisation of parliamentary business that there will certainly be preferential treatment for the receivers of investment income in the Finance Bill which eventually implements the unified taxation.
      I am not surprised that the Chief Secretary should take that view, because here we have the hon. Member for St. Ives (Mr. Nott) pressing for it. I have no

      1405
      doubt that a large number of hon. Members opposite will also press for it and I am sure that it would receive applause and immense thumping of feet in the 1922 Committee.
      Mr. Nott: It would also be applauded by all those retired people who live on savings which they have accumulated during their working lives.
      Mr. Cronin: The hon. Member is making some interesting points. The first thing to say in reply is that there is a case for having some band of investment income which pays a reduced rate of surcharge in future. But there is certainly no case for general preferential treatment for all receivers of investment income.
      Mr. Nott Mr. Nott rose—
      Mr. Cronin: I cannot allow the hon. Gentleman to keep interrupting.
      Mr. Peter Rees: Perhaps the hon. Gentleman would take us into his confidence and tell us what band of saving income he feels should be taxed at the same rate and receive what he calls preferential treatment.
      7.0 p.m.
      Mr. Cronin: That is either a rather naive question, or a stupendous tribute to my intellectual powers. These decisions are reached by the Chancellor of the Exchequer only after months of advice from his officials in the Treasury. Why should the hon. and learned Gentleman expect me to give such a figure across the Floor of the House at a moment's notice?
      Mr. Peter Rees: It is not a question of what the Chancellor's calculations would be. The hon. Gentleman is giving the House his opinion and I should be grateful if he would take us into his confidence and let us know what he would regard as fair—because he is talking about social considerations—as the band of savings income which should not be discriminated against.
      Mr. Cronin: I should say that there is a band of investment income which should reasonably be treated with some benevolence in the surcharge arrangements, but it would be absurd to attempt
      1406
      to say now exactly what that band should be. However, I have in mind that there are people who live on investment income when they retire, who receive investment incomes as modest pensions, and who are entitled to some reasonable treatment. I condemn the Government for their intention to give to all recipients of investment income substantial help in the form of reduced surcharge, reduced in the sense of comparing it with the tax now paid on unearned income. I hope that the Chief Secretary will bear in mind that if he and his right hon. Friend attempt to introduce substantial benefits for recipients of investment income, they will meet strong opposition from this side of the House and from the country as a whole.
      The Chief Secretary thought it rather odd that the Opposition had introduced Amendment No. 38 to reduce the basic rate from 30 to 20 per cent. No one would suggest that an Amendment, even from the Opposition Front Bench, must be taken as the tablets of stone coming down from Mount Sinai and therefore committing a future Government. It is generally accepted that the Amendment merely indicates that we feel that something should be done for those who pay income tax in the lower income bands. There is a considerable disincentive to those who start paying income tax at the very lowest level, because they lose social security and other benefits. This is something which the Government should consider, even if they do not accept the Amendment.
      The hon. Member for St. Ives (Mr. Nott) is vehement about the importance of reducing taxation on investment income as an inducement to savings. An important feature of encouraging people to save is the rate of interest. Inflation is another. But the most important is probably the real income and the wealth of the prospective saver. There is no doubt that propensity to save increases enormously as the income of the prospective saver rises. Any attempt to link assistance to those on investment income with increasing savings is, therefore, a direct attempt to benefit the higher income groups.
      The most important disincentive to savings is the appalling inflation which has rapidly increased since right hon.

      1407
      Gentlemen opposite took charge of the affairs of the country.
      Mr. Nott: Savings are going up.
      Mr. Cronin: I do not accept that.
      Mr. Nott: But they are.
      Mr. Cronin: The first thing the Government have to do if they are to increase the incentive to save is to cope with the steady increase of prices and at least to make some sort of attempt to implement their unscrupulous election promises.
      Mr. Barnett: We have had a reasonable debate with a brief and totally inadequate reply from the Chief Secretary to some excellent speeches from the Opposition, particularly from my hon. Friend the Member for Ashfield (Mr. Marquand), my hon. Friend the Member for Loughborough (Mr. Cronin), and my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin).
      An interesting point emerged from the Chief Secretary's reply. It appeared that he was able to cost our Amendment, although his own scheme, which, we have been told, was prepared with such loving care and work for six years, has not been given any kind of figure. Although the Amendment was selected only yesterday, the Government have been able to say that it would cost £1,800 million to reduce the 30 per cent. rate to 20 per cent.—on the assumption that we were proposing that everyone now taxed at the standard rate should be taxed at 20 per cent., an absurd idea in any case.
      The Chief Secretary criticised us for going back to a reduced rate band, but the Chancellor himself intends to have bands ranging, presumably, from 30 per cent. upwards, or at least so we understand to be the intention. It is difficult to understand why the Chief Secretary should have thought it strange that we should propose a rate band reduced from 30 per cent. to 20 per cent.
      We seek clearly to differentiate between investment income and earned income. The Government scheme introduced by the Bill would be more complex than our suggestion if they felt that a small exemption, a modest slice, to use the Chancellor's words, of investment income should be exempted. If they kept it low, the scheme would be more
      1408
      difficult and more administratively complex. The greater the exemption from the investment surcharge, the simpler it would be.
      Our scheme would get away from that dilemma because we would have two rates, one for earned income one for investment income. The Government are not prepared to accept this and the major reason came out clearly in the debate. It is that they wish to remove as far as possible the distinction between earned and investment income. This is really what it is all about. It is no use the hon. Member for St. Ives (Mr. Nott) talking about savings income. What we are talking about in terms of real relief if we remove this distinction are people with very substantial amounts of capital which certainly cannot be saved by an average working man. The average working man can save very little after he has paid his tax. We are talking about relief on a substantial scale.
      As my hon. Friend the Member for Llanelly (Mr. Denzil Davies) said this is a matter of priority. Even if there was some case, and I do not accept that there is, for encouraging savings on a blanket scale—this certainly was not accepted by the Royal Commission—the question of priorities as between earned and investment income remains.
      What has emerged today is how far we have got from the days when the Government used to speak about having more open government. Those days have gone because it is clear that if they had wanted to tell us what sort of differential they had in mind it was open for them to do so. The excuse given by the Chief Secretary was a little odd, to say the least. He says that it cannot be done because it cannot be related to anything. Why not? We have a basic rate of 30 per cent. Why cannot it be related to that? That 30 per cent. rate is not a hard and fast rate for 1973–74. If he had wanted to tell us it was open to him to do so.
      The hon. Gentleman used the argument about the need for more flexibility and demand management. It is interesting that the Chancellor needs more flexibility and room for demand management. With his present management of the economy he certainly needs some flexibility and he certainly needs to do something about demand management. When his judgment is proved wrong by everyone in the

      1409
      country he is still not prepared to be flexible and to reflate the economy in such a way as to remove the present absurdly high level of unemployment. Now we are told this by the Chief Secretary—the Chancellor was not here and maybe he will have a word with his hon. Friend later. The hon. Gentleman says that he must refrain from telling us what the differential is likely to be, what the slice of investment income to be exempt will be, because the Chancellor needs the flexibility in a few years' time. The right hon. Gentleman is not using the flexibility which he has now. This is doing away with the whole concept of open government to give the Chancellor flexibility in managing the economy.
      It is more than just flexibility that he needs, the Chancellor must recognise what is going wrong under the present management
      of demand. We on this side condemn the Government for using this scheme in this way. We condemn the secrecy, when everything that has been said means that they really know what their intentions are about the differentiation between earned and investment income. We can only assume that they are not telling us because it involves a massive increase in the redistributive effect of taxation and it would therefore make them even more unpopular when the country begins to realise just what they are doing under the cloak of reform. It is for these reasons that I advise my hon. and right hon. Friends to support the Amendment.
      Question put. That the Amendment be made:—
      The House divided: Ayes 181, Noes 197.

      Division No. 413]

      AYES

      [7.15 p.m.

      Abse, Leo

      Ford, Ben

      Lyons, Edward (Bradford, E.)

      Albu, Austen

      Forrester, John

      Mabon, Dr. J. Dickson

      Allaun, Frank (Salford, E.)

      Fraser, John (Norwood)

      McBride, Neil

      Allen, Scholefleld

      Freeson, Reginald

      McCann, John

      Ashton, Joe

      Galpern, Sir Myer

      McCartney, Hugh

      Atkinson, Norman

      Gilbert, Dr. John

      McGuire, Michael

      Bagier, Gordon A. T.

      Ginsburg, David

      Mackenzie, Gregor

      Barnett, Joel

      Gordon Walker, Rt. Hn. P. C.

      Mackie, John

      Beaney, Alan

      Gourlay, Harry

      Maclennan, Robert

      Bennett, James (Glasgow, Bridgeton)

      Grant, George (Morpeth)

      McMillan, Tom (Glasgow, C.)

      Bidwell, Sydney

      Griffiths, Eddie (Brightside)

      McNamara, J. Kevin

      Blenkinsop, Arthur

      Hamilton, James (Bothwell)

      Mahon, Simon (Bootle)

      Boardman, H. (Leigh)

      Hamilton, William (Fife, W.)

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

      Booth, Albert

      Hamling, William

      Marks, Kenneth

      Buchan, Norman

      Hannan, William (G'gow, Maryhill)

      Marquand, David

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

      Hardy, Peter

      Marsden, F.

      Callaghan, Rt. Hn. James

      Harrison, Walter (Wakefield)

      Marshall, Dr. Edmund

      Campbell, I. (Dunbartonshire, W.)

      Heffer, Eric S.

      Meacher, Michael

      Cant, R. B.

      Hooson, Emlyn

      Mellish, Rt. Hn. Robert

      Carmichael, Neil

      Horam, John

      Mendelson, John

      Carter-Jones, Lewis (Eccles)

      Huckfield, Leslie

      Millan, Bruce

      Castle, Rt. Hn. Barbara

      Hughes, Rt. Hn. Cledwyn (Anglesey)

      Milne, Edward (Blyth)

      Clark, David (Colne Valley)

      Hughes, Robert (Aberdeen, N.)

      Mitchell, R. C. (S'hampton, Itchen)

      Cocks, Michael (Bristol, S.)

      Hughes, Roy (Newport)

      Morris, Alfred (Wytnenshawe)

      Cohen, Stanley

      Hunter, Adam

      Morris, Charles R. (Openshaw)

      Concannon, J. D.

      Irvine, Rt. Hn. Sir Arthur (Edge Hill)

      Morris, Rt. Hn. John (Aberavon)

      Corbet, Mrs. Freda

      Jay, Rt. Hn. Douglas

      Moyle, Roland

      Cox, Thomas (Wandsworth, C.)

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

      Murray, Ronald King

      Crawshaw, Richard

      Jenkins, Rt. Hn. Roy (Stechford)

      O'Halloran, Michael

      Cronin, John

      John, Brynmor

      O'Malley, Brian

      Crosland, Rt. Hn. Anthony

      Johnson, Carol (Lewisham, S.)

      Oram, Bert

      Dalyell, Tam

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

      Orme, Stanley

      Davidson, Arthur

      Johnson, Walter (Derby, S.)

      Oswald, Thomas

      Davies, Denzil (Llanelly)

      Johnston, Russell (Inverness)

      Owen, Dr. David (Plymouth, Sutton)

      Davies, S. O. (Merthyr Tydvil)

      Jones, Barry (Flint, E.)

      Pardoe, John

      Davis, Clinton (Hackney, C.)

      Jones, Dan (Burnley)

      Parker, John (Dagenham)

      Davis, Terry (Bromsgrove)

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

      Parry, Robert (Liverpool, Exchange)

      Dempsey, James

      Jones, Gwynoro (Carmarthen)

      Pavitt, Laurie

      Doig, Peter

      Jones, T. Alec (Rhondda, W.)

      Pendry, Tom

      Douglas-Mann, Bruce

      Kaufman, Gerald

      Pentland, Norman

      Driberg, Tom

      Kinnock, Neil

      Perry, Ernest G.

      Duffy, A. E. P.

      Latham, Arthur

      Price, J T. (Westhoughton)

      Dunn, James A.

      Lawson, George

      Price, William (Rugby)

      Dunnett, Jack

      Leadbitter, Ted

      Probert, Arthur

      Eadie, Alex

      Lee, Rt. Hn. Frederick

      Rees, Merlyn (Leeds, S.)

      Edwards, Robert (Bilston)

      Leonard, Dick

      Richard, Ivor

      Evans, Fred

      Lestor, Miss Joan

      Roberts, Rt. Hn. Goronwy (Caernarvon)

      Fernyhough, Rt. Hn. E.

      Lever, Rt. Hn. Harold

      Rodgers, William (Stockton-on-Tees)

      Fisher, Mrs. Doris (B'ham, Ladywood)

      Lomas, Kenneth

      Roper, John

      Fietcher, Ted (Darlington)

      Loughlin, Charles

      Rose, Paul B.

      Ross, Rt. Hn. William (Kilmarnock)

      Stewart, Rt. Hn. Michael (Fulham)

      Weitzman, David

      Sandelson, Neville

      Stoddart, David (Swindon)

      White, James (Glasgow, Pollok)

      Sheldon, Robert (Ashton-untler-Lyne)

      Strang, Gavin

      Whitehead, Phillip

      Shore, Rt. Hn. Peter (Stepney)

      Summerskill, Hn. Dr. Shirley

      Willey, Rt. Hn. Frederick

      Silkin, Rt. Hn. John (Deptford)

      Taverne, Dick

      Williams, W. T. (Warrington)

      Silkin, Hn. S. C. (Dulwich)

      Thomas, Rt. Hn. George (Cardiff, W.)

      Wilson, Rt. Hn. Harold (Huyton)

      Skinner, Dennis

      Tinn, James

      Woof, Robert

      Small, William

      Tomney, Frank

      Smith, John (Lanarkshire, N.)

      Urwin, T. W.

      TELLERS FOR THE AYES:

      Stallard, A. W.

      Varley, Eric G.

      Steel, David

      Walker, Harold (Doncaster)

      Mr. Donald Coleman and

      Stewart, Donald (Western Isles)

      Watkins, David

      Mr. John Golding.

      NOES

      Adley, Robert

      Gower, Raymond

      Parkinson, Cecil (Enfield, W.)

      Allason, James (Hemel Hempstead)

      Grant, Anthony (Harrow, C.)

      Percival, lan

      Archer, Jeffrey (Louth)

      Gray, Hamish

      Pike, Miss Mervyn

      Astor, John

      Green, Alan

      Pounder, Rafton

      Atkins, Humphrey

      Grieve, Percy

      Powell, Rt. Hn. J. Enoch

      Awdry, Daniel

      Gummer, Selwyn

      Price, David (Eastleigh)

      Baker, Kenneth (St. Marylebone)

      Hall, Miss Joan (Keighley)

      Pym, Rt. Hn. Francis

      Balniel, Lord

      Hall, John (Wycombe)

      Quennell, Miss J. M.

      Barber, Rt. Hn. Anthony

      Hamilton, Michael (Salisbury)

      Raison, Timothy

      Batsford, Brian

      Hannam, John (Exeter)

      Rawlinson, Rt. Hn. Sir Peter

      Berry, Hn. Anthony

      Harrison, Col. Sir Harwood (Eye)

      Redmond, Robert

      Haselhurst, Alan

      Biffen, John

      Hawkins, Paul

      Reed, Laurance (Bolton, E.)

      Biggs-Davison, John

      Hayhoe, Barney

      Rees, Peter (Dover)

      Blaker, Peter

      Higgins, Terence L.

      Rees-Davies, W. R.

      Boardman, Tom (Leicester, S. W.)

      Holt, Miss Mary

      Ridley, Hn. Nicholas

      Body, Richard

      Hicks, Robert

      Ridsdale, Julian

      Boscawen, Robert

      Hordern, Peter

      Rossi, Hugh (Hornsey)

      Bossom, Sir Clive

      Hornsby-Smith, Rt. Hn. Dame Patricia

      Russell, Sir Ronald

      Bowden, Andrew

      Howe, Hn. Sir Geoffrey (Reigate)

      Sandys, Rt. Hn. D.

      Brinton, Sir Tatton

      Howell, Ralph (Norfolk, N.)

      Scott-Hopkins, James

      Brocklebank-Fowler, Christopher

      Hunt, John

      Sharples, Richard

      Brown, Sir Edward (Bath)

      Hutchison, Michael Clark

      Shaw, Michael (Sc'b'gh amp; Whitby)

      Buchanan-Smith, Alick (Angus, N amp; M)

      Irvine, Bryant Godman (Rye)

      Shelton, William (Clapham)

      Buck, Antony

      Jenkin, Patrick (Woodford)

      Sinclair, Sir George

      Bullus, Sir Eric

      Jessel, Toby

      Skeet, T. H. H.

      Burden, F. A.

      Kellett-Bowman, Mrs. Elaine

      Smith, Dudley (W'wick amp; L'mington)

      Butler, Adam (Bosworth)

      Kilfedder, James

      Soref, Harold

      Cary, Sir Robert

      Kimball, Marcus

      Speed, Keith

      Channon, Paul

      King, Evelyn (Dorset, S.)

      Spence, John

      Chapman, Sydney

      Kinsey, J. R.

      Sproat, lain

      Chichester-Clark, R.

      Knight, Mrs. Jill

      Stainton, Keith

      Clarke, Kenneth (Rushcliffe)

      Knox, David

      Stanbrook, Ivor

      Clegg, Walter

      Legge-Bourke, Sir Harry

      Stewart-Smith, D. G. (Belper)

      Cockeram, Eric

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

      Stokes, John

      Cooke, Robert

      Longden, Gilbert

      Stuttaford, Dr. Tom

      Coombs, Derek

      Loveridge, John

      Sutcliffe, John

      Cooper, A. E.

      Luce, R. N.

      Tapsell, Peter

      Cordle, John

      MacArthur, Ian

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

      Corfield, Rt. Hn. Frederick

      Maclean, Sir Fitzroy

      Taylor, Robert (Croydon, N. W.)

      Cormack, Patrick

      McMaster, Stanley

      Tebbit, Norman

      Costain, A. P.

      Macmillan, Maurice (Farnham)

      Temple, John M.

      Critchley, Julian

      McNair-Wilson, Patrick (New Forest)

      Thompson, Sir Richard (Croydon, S.)

      Crouch, David

      Maddan, Martin

      Trafford, Dr. Anthony

      Curran, Charles

      Madel, David

      Turton, Rt. Hn. Sir Robin

      Davies, Rt. Hn. John (Knutsford)

      Maginnis, John E.

      van Straubenzee, W. R.

      d'Avigdor-Goldsmid, Sir Henry

      Marten, Neil

      Vaughan, Dr. Gerard

      d'Avigdor-Goldsmid, Maj.-Gen. Jack

      Mather, Carol

      Vickers, Dame Joan

      Dixon, Piers

      Maude, Angus

      Waddington, David

      Dodds-Parker, Douglas

      Meyer, Sir Anthony

      Walder, David (Clitheroe)

      Douglas-Home, Rt. Hn. Sir Alec

      Mills, Stratton (Belfast, N.)

      Walker, Rt. Hn. Peter (Worcester)

      du Cann, Rt. Hn. Edward

      Mitchell, Lt.-Cot. C. (Aberdeenshire, W

      Walters, Dennis

      Eden, Sir John

      Mitchell, David (Basingstoke)

      Ward, Dame Irene

      Edwards, Nicholas (Pembroke)

      Moate, Roger

      Warren, Kenneth

      Elliot, Capt. Walter (Carshalton)

      Molyneaux, James

      Weatherill, Bernard

      Eyre, Reginald

      Monks, Mrs. Connie

      Wells, John (Maidstone)

      Farr, John

      Monro, Hector

      Whitelaw, Rt. Hn. William

      Fell, Anthony

      Montgomery, Fergus

      Wiggin, Jerry

      Fenner, Mrs. Peggy

      Morrison, Charles (Devizes)

      Wilkinson, John

      Finsberg, Geoffrey (Hampstead)

      Mudd, David

      Wolrige-Gordon, Patrick

      Fisher, Nigel (Surbiton)

      Murton, Oscar

      Wood, Rt. Hn, Richard

      Fookes, Miss Janet

      Nabarro, Sir Gerald

      Woodhouse, Hn. Christopher

      Gilmour, Ian (Norfolk, C.)

      Normanton, Tom

      Wylie, Rt. Hn. N. R.

      Gilmour, Sir John (Fife, E.)

      Nott, John

      Glyn, Dr. Alan

      Oppenheim, Mrs. Sally

      TELLERS FOR THE NOES:

      Goodhart, Philip

      Owen, Idris (Stockport, N.)

      Goodhew, Victor

      Page, Graham (Crosby)

      Mr. Tim Fortescue and

      Gorst, John

      Page, John (Harrow, W.)

      Mr. Jasper More.

    Schedule 6

      AMENDMENTS CONSEQUENTIAL ON NEW METHOD OF CHARGING TAX
      Mr. Patrick Jenkin: I beg to move Amendment No. 40, in page 77, leave out lines 17 to 28.
      In Committee, we amended paragraphs 67 and 68 of the Schedule which dealt with the proper treatment of covenants under the unified tax. As a consequence, we are now able to amend paragraph 26, which deals with net relevant earnings for the purposes of retirement annuities. This is a simplification, and I commend it to the House.
      Amendment agreed to.

    Schedule 7

      NEW METHOD OF CHARGING TAX—TRANSITIONAL PROVISIONS
      Mr. Patrick Jenkin: I beg to move Amendment No. 41, in page 88, line 20, leave out paragraph 2 and insert:
      2.—(1) Where any provision, however worded, contained in an instrument (of whatever nature) made on or after 3rd September 1939 or in a will or codicil taking effect on or after that date provides for the payment, whether periodically or otherwise,—

      (a) of a stated amount free of income tax other than surtax; or

      (b) of an amount which, after deduction of income tax at the standard rate, is equal to a stated amount;

      it shall have effect as follows.
      (2) If it is such a provision as is mentioned in sub-paragraph (1)(a) above it shall have effect as if it provided for the payment of the stated amount free of income tax other than such as exceeds the amount to which the person to whom the payment is made would be liable if all income tax were charged at the basic rate to the exclusion of any other rate.
      (3) If it is such a provision as is mentioned in sub-paragraph (1)(b) above, it shall have effect as if it provided for the payment of an amount which, after deduction of income tax at the basic rate, is equal to the stated amount.
      This is a complex matter with which I shall try to deal in two or three sentences.
      It refers to the question of covenants which are expressed in one form or another to be free of tax. Chancery lawyers in the House will be familiar with the hideous complications of what is known as the rule in re Pettit. As the Clause
      1414
      was originally drawn, it had the effect of turning all free-of-tax covenants into covenants which would be unaffected by the rule in re Pettit. This was not our intention. Therefore, we have redrawn the Clause so that the covenants will continue to be interpreted as though they were in re Pettit covenants or other covenants—for instance, expressed in the form of such a sum as after the deduction of tax at the basic rate would amount to the given sum.
      This is a technical matter which arises betwen annuitants and trustees. I think that the Clause as it will be if the Amendment is accepted will meet the purpose. However, I recognise that because this is a complex matter there may well be room for more than one view. We can, if necessary, have a second bite at it if during the year further consultations suggest that even now we do not have it absolutely right.
      Amendment agreed to.

    Clause 37

      APPLICATION OF NEW SYSTEM
      Mr. Maurice Macmillan: I beg to move Amendment No. 42, in page 33, line 25, leave out from 'person' to 'are' in line 28 and insert:
      'on the provision of second-hand machinery or plant if capital expenditure on providing the machinery or plant was incurred by another person before the said 27th October and—

      (a) he and that other person'.

      Mr. Speaker: It will be convenient also to discuss the Amendments Nos. 43 and 44.
      Mr. Macmillan: These Amendments slightly modify the starting rules for the new code of capital allowances.
      The general rule is that the new code applies to capital expenditure on plant and machinery incurred on or after 27th October and that this is so whether the plant and machinery is then new or second-hand. There is a need, therefore, to safeguard the Exchequer against artificial transactions in second-hand assets, and subsection (2) of the Clause provides those safeguards.
      The intention is that if second-hand plant and machinery is bought on or after 27th October in an arm's length

      1415
      transaction, the new allowances will apply. But if the plant or machinery on which the expenditure is being written down at the old rates is transferred to an associated or connected company, they will not apply.
      However, further examination of the Clause has revealed some minor defects. As it was drawn, a third company could be wrongly deprived of the benefit. Also, subsection (2) did not cover the possibility that a company owning machinery bought before 27th October might transfer it, not on an outright sale but by some other transaction, such as hire purchase, and it was necessary to bring hire purchase in as well as outright sale. Amendments Nos. 42 and 43 remedy these defects.
      Amendment No. 44 deals with another point. The new allowances do not apply where plant or machinery is being bought on hire purchase and where the first instalment has been incurred and the asset brought into use before 27th October, 1970, by the hire purchaser. But subsection (3), which provides for this, goes rather too far. It could unnecessarily deprive the hire purchaser of a second-hand asset of the new allowances because someone else had had it in use before 27th October. That is clearly wrong and Amendment No. 44 corrects it.
      These are tidying-up Amendments which restore to the Clause the function it was originally supposed to have.
      Amendment agreed to.
      Amendments made: No. 43, in page 33, line 30, leave out from 'the' to 'is' in line 31 and insert:
      'tranaction under which the first-mentioned expenditure is incurred, or with respect to transactions of which it'.
      Amendment No. 44, in page 33, line 41, leave out 'has not been used before' and insert:
      'is first brought into use by that person on or after'.—[Mr. Maurice Macmillan.]

    Clause 39

      FIRST-YEAR ALLOWANCES—RATES
      7.30 p.m.
      Mr. Cranky Onslow: I beg to move Amendment No. 45, in page 35, line 3, at end insert 'aircraft, or'.
      1416
      If I may paraphrase the famous remark, I have not had time to prepare a short speech, but I do not wish to make a long one. I am certain that, even on so important a matter as aviation, the House does not wish to be detained for long and I would hate to disoblige hon. Members. This is a subject on which my hon. Friend on the Front Bench and I have been in correspondence. My purpose in putting down the Amendment, which I am well aware is imperfect, as all my Amendments are, is to give him the opportunity to answer one or two questions.
      I am sure that he knows that the collective voice of aircraft manufacturers and British aerospace companies would welcome any Amendment to the Finance Bill which would give the United Kingdom operators a free hand in the depreciation of their aircraft. They take the view that it is illogical that aircraft operators should be treated less well than the shipping industry, which is now to be allowed free depreciation.
      This subject was considered by the Edwards Committee in a different context at a time when investment grants existed. The conclusions of the Committee in paragraph 831 of its Report were that the Committee understood that the airline industry was excluded from the investment grants scheme because about three-quarters of the industry was nationalised and all transport except shipping was excluded from the scheme. The Committee did not believe, even if it were right to exclude nationalised industries, that it was sensible that there should be this distinction. The Report said specifically:
      "We do believe that United Kingdom air transport, which is predominantly international in character, is more comparable to shipping than to other forms of transport."
      It is for this reason that I seek to persuade my hon. Friend to agree in principle at least that it is desirable for aviation and shipping to be treated on equal terms for the purposes of depreciation. If an Amendment were to be incorporated in a future Bill, supposing it cannot be made in this one, there would be a need for safeguards, and it would probably be necessary to restrict the enjoyment of free depreciation to aircraft which were employed solely on air transport services as defined under the Civil

      1417
      Aviation Bill, or something of that nature. Nevertheless, I hope my hon. Friend will understand that in the independent sector of British aviation there is a general desire that something should be done to increase its competitive ability around the world. If some additional financial advantage can be given to the independent sector comparable to that which is enjoyed by the United Kingdom shipowners this would be extremely welcome. It would, of course, be the independent operators who would principally benefit from it.
      My hon. Friend may say that a great deal has been done for the independents in the Civil Aviation Bill, but it is equally fair to remind the House that the consequence of that Bill and other recent developments, is that the costs which have to be borne by operators have increased. This is true in the sphere of international competition, and also domestically. Fuel costs have gone up and they may go up again. Operators face the burden of the administrative charges of the Civil Aviation Authority and of gradually working towards a situation where the whole share of air traffic control costs which is attributable to British operators will be borne by the airlines. There is in addition the considerable bill which will accrue for airport costs which—and I am sure my hon. Friend the Member for Horsham (Mr. Hordern) will not mind my reminding the House—are made all the greater by the fact that the new airport will be at Foulness instead of Gatwick.
      Faced with these considerable costs, some applying only in the United Kingdom sector, which are borne by United Kingdom operators and not by their competitors, I hope my hon. Friend will agree that it is illogical for the Government to encourage the spread of airline operation and at the same time fail to provide equal opportunities in this Bill for airlines and shipowners. I hope that my hon. Friend will give an encouraging response.
      Mr. Dalyell: I agree with the hon. Member for Woking (Mr. Onslow) that when one compares the advantages that accrue to certain foreign operators with those that accrue to British operators one realises that foreign Governments give help to their airlines which ours do not
      1418
      get. I therefore think that there is the beginning of a good case, but I also believe that the case should be carried a bit further.
      One of the troubles in the aircraft manufacturing industry in recent years has been that it has had hardly any interim payments from operators. Therefore, any advantage that can be given to the operators to enable them to make interim payments on time to manufacturers would help the liquidity of the manufacturers and prevent the manufacturers from using sub-contractors for banking purposes. One feature which emerged from the recent Rolls-Royce problems is the extent to which that company used its sub-contractors for banking facilities. This general problem that surrounds the whole of the aircraft industry could well be taken into account by the Treasury when it formulates policy in this area.
      Mr. Norman Tebbit: I will not repeat the arguments which my hon. Friend the Member for Woking (Mr. Onslow) has put so well. Reaching back in my memory to the time when I was an officer cadet and having the mysteries of the Royal Air Force Act, Q.R.s and A.C.I.s explained to me, I am reminded that therein is a classical definition of a horse. A horse, I discovered, was a horse or any creature doing the work of a horse. I ask my hon. Friend to look again at the Bill in that context and realise that whatever is good for a ship or for a shipping interest is equally good for an aircraft or an aircraft operating interest. Very often we find that the same operators are involved in operating those two different types of vehicle carrying similar payloads to similar parts of the world. In all common sense in 1971 there is no need for the implied distinction between one sort of horse and another.
      Mr. Stanley R. McMaster: The Bill has changed for the worse the position of aircraft operators. The change in the capital allowance pattern moves aircraft from the previous 50, 20 and 10 per cent. structure to a higher 60, 10 and 7½per cent. profile. I remind my hon. Friend that the aircraft industry is an internationally competitive industry. The operators, whether the State corporations or the independents, are competing

      1419
      against other airlines, often prestige airlines, which are supported for nationalistic reasons by their Governments. Their position is analogous to that of ships and any advantage which is provided for our shipping interests should equally be extended to aircraft operators. It is in the national interest not only of the aircraft operators but also of the aircraft manufacturers. The aircraft industry as a whole is going through a recession and there may, therefore, be no immediate advantage in the Amendment.
      I urge my hon. Friend to consider the long-term interests of the British aerospace industry. The fact that few profits are being earned at the moment is not relevant in the long term. One hopes that an increase in air traffic will mean an early return to profitability and that the allowances which we suggest will be of considerable benefit to our airline operators. For these reasons I strongly urge my hon. Friend to look sympathetically at this Amendment.
      Mr. Maurice Macmillan: My hon. Friend the Member for Woking (Mr. Onslow) said that some safeguards would be necessary in relation to this Amendment, and perhaps I could deal with that relatively minor point first. It will be recalled that we had considerable discussion in Committee about the benefit of accelerated depreciation allowances, and leasing arrangements in regard to foreign airlines. After some deliberation the Committee agreed that this was a matter which could be controlled through balance of payments means. What my hon. Friend proposes in his Amendment would considerably increase the incentive, and no doubt the complexity, in dealing with this particular problem. I thank him for recognising that there are difficulties involved in this problem.
      On the matter of principle, aircraft have never had free depreciation nor, unlike ships, have they qualified for investment grant. In making the comparison between aircraft and ships, one must remember that ships were first given free depreciation in 1965. That decision was related to the introduction of corporation tax in that year, the effect of which would, it was then considered, be especially unfavourable to shipping companies. But, quite apart from that, British shipowners are subject to competition from ships
      1420
      registered in flag-of-convenience countries whose owners are thereby in a position to enjoy special tax advantages.
      The hon. Member for West Lothian (Mr. Dalyell) suggested that foreign competitors of our airline operators were enjoying similar tax and other advantages, whether by direct or indirect assistance, through Government or in other ways. I agree that we must look into this matter to see whether there has been any unfair competition with which our British operators are faced, particularly in regard to freight-carrying, in the same way as flag-of-convenience and other methods provide unfair competition for our shipping operators.
      The hon. Gentleman also asked me to look further into the question of liquidity and any direct help that might be given to aircraft manufacturers in the form of interim payments. I would point out that the habit of larger businesses partially financing themselves by not paying their bills is not confined entirely to the aircraft industry.
      My hon. Friend the Member for Woking mentioned other special costs which were peculiar to airline operations, particularly in regard to the independent companies. He also referred to difficulties facing the United Kingdom operators.
      For all these reasons which have been given, I feel that this matter should be looked at in the coming months with considerable care. I am sure my hon. Friend will not expect me to give any sort of undertaking about this matter, but clearly the development of air transport is a matter of extreme importance for the future. It is equally important that our airline operators should not be faced with unfair competition, and this clearly is a matter that should be considered in relation to the whole fiscal structure.
      Mr. Onslow: I thank my hon. Friend for that reply, which is sympathetic in tone and encouraging in content. Since he shows such willingness to continue with the correspondence which has passed between us during the past months, I shall respond by bombarding him with many more tons of paper. I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      7.45 p.m.
      Mr. Peter Hordern: I beg to move Amendment No. 127, in page 35,

      1421
      line 19, leave out from ' purposes ' to end of paragraph (iii).
      This is a simple Amendment concerning free depreciation in the development areas. In the past it has been the practice in development areas to allow free depreciation on all new plant and machinery, respective of where it happens to be sited; but there is a bar in this Clause which confines such new plant and machinery to factories and industrial buildings generally. If the new plant and machinery happens to lie in dwelling houses, retail shops, showrooms, hotels and offices it does not qualify for free depreciation.
      I wish to ask my hon. Friend why it has been thought necessary to confine the objective of free depreciation to machinery in a factory or industrial building. I see no good reason for so confining it, and I hope that my hon. Friend will be able to explain the situation.
      Mr. Patrick Jenkin: I can respond to my hon. Friend's request by explaining the purpose of the provision. The first 100 per cent. first-year allowance applies to expenditure incurred by industrial firms in development areas broadly on industrial plant and machinery, that is to say plant and machinery for use in the productive processes carried on in development areas. It does not apply, and was never intended to apply, to plant and machinery used either in the service industries or in service activities of industrial firms.
      There are many manufacturing firms which carry out service activities or activities which overlap into the service sector, For instance, one has in mind sales and administrative organisations quite separate from the factory. There may be wholesale or retail showrooms; there may even be a chain of retail establishments for selling products directly to the consumer. These are all service activities and it is not the Government's intention that the 100 per cent. first-year allowance should apply to those activities.
      We need some relatively simple rule to determine whether a particular item of plant and machinery qualifies for the allowance as being industrial plant or whether it does not qualify in that it is being used in the service side of the firm's activities. Here we have adopted—this is where I part company with my hon. Friend—exactly the same rule which
      1422
      applied and, so far as I am aware, applied successfully and without creating any difficulties when free depreciation existed before 1964–65 in the development areas. The rule is to look at the nature of the building in which the plant or machinery is to be housed. If the building is an "industrial building"—I put those words in inverted commas because it is a term of art derived from Section 7 of the Capital Allowances Act—the 100 per cent. first year allowance applies. If the building is not an industrial building, the allowance does not apply.
      I have no reason to suppose that the application in this new context of the existing distinction between industrial and non-industrial buildings will cause any difficulties. If we were to abandon the distinction and accept the Amendment, we would arrive at the strange and anomalous result which I can best illustrate with an example. Let us suppose that in a town in a development area there is a factory which makes boots and shoes and which also, in the same town, runs two or three retail establishments which directly sell the boots and shoes to the customer. If there is then industrial plant and machinery in those shops, because it is an industrial concern it would receive the 100 per cent. allowance. But those shops might well be in direct competition with independent boot and shoe retailers which might have exactly the same pieces of plant and machinery, which, for instance, might be shoe repairing machinery of one sort or another, and yet, because they were not operated by an industrial concern operating in a development area, they would not be entitled to the first year allowance. Perhaps that is a homely and over-simplified example, but I am sure that my hon. Friend can readily think of other examples where the anomaly might be more serious.
      Therefore, we have to have a test which establishes whether or not the plant or machinery qualifies for this valuable 100 per cent. first year allowance. We do not consider it right that the fiscal system should be used to distort competition in the way I have described. It should be a test which is simple to administer. The test which is to be found in paragraph 3, which the Amendment proposes to leave out, is a satisfactory one which worked satisfactorily before

      1423
      when we had free depreciation, and we have no reason to believe that it will not work equally satisfactorily again with the new 100 per cent. first year allowance.
      Having heard my explanation, I hope that my hon. Friend will not wish to press his Amendment.
      Mr. Dalyell: I share the curiosity of the hon. Member for Horsham (Mr. Hordern) about this subject. Without making too much of an issue of it, I reflect that night after night we used to hear from the Conservative Scottish Opposition, as they then were, some pretty strident speeches about how the service industries were being discriminated against. In a sense, the then Opposition were right to make those speeches because it is undoubtedly true that some areas are almost by definition discriminated against by this kind of legislation, especially the Scottish Highlands. I do not pretend that it is a very serious matter in West Lothian. But if they were present, the hon. Member for the Western Isles (Mr. Donald Stewart) or my hon. Friend the Member for Enfield, East (Mr. Mackie), who knows the North of Scotland very well, would bear me out in saying that there are a lot of very small scale industries which do not function in a building the nature of which can be called "industrial" and which would not fit this kind of definition.
      Just as the Financial Secretary's hon. Friends had a point when in Opposition, so I suspect that in putting forward this kind of case I have a point tonight. It may be an administratively simple distinction to make, and having said more about administration in discussing the Finance Bill than practically any other back bench Member, I realise that this is a very real kind of argument.
      If we do not press it this year, I hope that the Treasury will at least reflect and will talk to the Highlands and Islands Development Board in the hope that in the coming year they can come up either with a more liberal attitude to these matters or some other definition to help those in small cottage industries, who are often the people who need the most help.
      Mr. James Dempsey: After listening to the Minister, I feel that there is a need for further
      1424
      clarification on the attitude that he has adopted. He went a long way to explain how this particular depreciation allowance applied to industry. He gave an illustration of the boot manufacturer also selling boots which aroused my curiosity.
      I found it very difficult to follow the argument at that stage, that although whatever was happening was in the manufacturing sphere and it involved a retail shop, I gained the impression that such would be entitled to free depreciation allowance. This should be made a little clearer, because it is a bone of contention in my area, which is a development area.
      I draw the Minister's attention to my experience in dealing with a somewhat similar problem. I was concerned with a manufacturing industry. I do not yet know whether the Minister's interpretation of an "industrial undertaking" applies to a manufacturing industry. He did not make that clear. He explained that industry was an industrial undertaking and that the depreciation allowance would apply to such an industrial form of activity if it were in a development area. But, rightly or wrongly, I understand that the allowance did operate for manufacturing industries. I am very much concerned with manufacturing activities, not necessarily industrial production. I have always had the impression that manufacturing qualified. I was surprised to learn that manufacturing did qualify, but provided that the equipment was installed in the manufacturing factory. I ask the Minister to consider this point.
      The equipment necessary for this manufacturing factory, which keeps scores of people in employment in my area, had to be installed in a retail unit. The purpose of installing it in a retail unit was so that it would come into operation if the equipment in the manufacturing factory broke down and threw 50 or 60 men out of work. The equipment was being used primarily for manufacturing purposes, although it was installed in the retail section of the operations. After a spate of meetings with Ministers in Scotland, and a Minister of my Labour Government, a very fine definition was given that, although the equipment would be used for manufacturing purposes, because it was installed in a retail unit it would not qualify for the allowances that were operating under the Labour Government.

      1425
      This is somewhat in conflict with what the Financial Secretary has just said. He spoke of a boot manufacturer and related it to the retail sale of such a commodity, saying that even if it was complementary, in so far as it manufactured for sale and was associated with the retail unit, it would qualify for the depreciation allowance.
      I should like the Minister to compare my experience with what he has said. I was told unequivocally by the then Minister that as this manufacturing plant was installed in a retail unit as a duplicate to that in the manufacturing unit, it did not qualify. The manufacturer lost a fair sum of money because he was refused the ordinary grants, for example, for equipment for this particular purpose. While the hon. Gentleman is dealing with depreciation allowances, I can understand it. But I am attempting to have defined the principle that equipment established in a retail unit for the purpose of manufacture qualifies for the depreciation allowances that we are discussing.
      When my constituent hears about the illustration given by the hon. Gentleman tonight, he will make further representations. Quite rightly, he will ask why, when he provides manufacturing equipment in the retail part of his business with a view to keeping men in jobs, he is not allowed financial assistance from the Treasury.
      I should be grateful if the hon. Gentleman would look at the point again and give me some further clarification about whether, on the illustration that he has just given the House, the manufacture qualifies for the allowance. Certainly that will enable me to explain to my constituent and others who have similar interests where depreciation allowances will be granted and where they will be refused.
      8.0 p.m.
      Mr. Patrick Jenkin: With the leave of the House, perhaps I might reply briefly to the points made by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) and the hon. Member for West Lothian (Mr. Dalyell).
      I deal first with the speech that we have just heard. Broadly, the position is as the hon. Member for Coatbridge and Airdrie has stated. If this was machinery installed in a retail establishment, it would be covered by the rule
      1426
      which I outlined a few moments ago. But that is not necessarily the end of the matter. The Inland Revenue is always prepared to look at a building with a view to seeing whether part might be treated as a retail establishment and part as an industrial building. If the industrial plant is in the part treated as an industrial building, it will qualify for the 100 per cent. first-year allowance. On the facts as stated by the hon. Gentleman, it is not possible to determine whether that would be right. But perhaps I might invite him to follow up the matter, as he suggested his constituent might, and to draw the case to my attention, in which event I shall ensure that it is looked at urgently and with sympathy. Naturally, we are anxious wherever possible to help firms in development areas to qualify for the allowances in respect of the industrial plant that they buy.
      In response to the hon. Member for West Lothian, it is fair to point out—I do it in no party sense—that the distinction between now and the period to which he referred is that, whereas the industrial plant in the development area was entitled to the higher rate of grant and to the depreciation allowances, the service plant in the development area lost the former investment allowances and got nothing else. It was reduced to the straight initial allowance of 30 per cent. and an ordinary depreciation. We have made sure, at any rate, that service industries and service plant in manufacturing industries is entitled to the 60-year accelerated write-off and the 25 per cent. after that. We have restored a valauble capital allowance to the service industries and, although there is still a margin between industrial plant which qualifies for the 100 per cent. first-year allowance and the rest, it is nothing like as wide as it was.
      I am glad to say that the change has been warmly welcomed by the service industries in the development areas and elsewhere. But I take the hon. Gentleman's point that there may be cases similar to that referred to by his hon. Friend where industrial plant is not in an industrial buildling. As I have said, the Inland Revenue is always prepared to see whether there is ground for justifying the division of a building into industrial and non-industrial parts, so that the plant in the industrial part qualifies for the allowance. Of course, if less than 10 per cent.

      1427
      of the building is used for service purposes, the whole building is treated as industrial.
      Mr. Hordern: My hon. Friend the Financial Secretary has been extremely helpful in providing an illustration. Obviously there will be anomalies and difficulties in carrying out this policy, but I am sure that they will be looked at sympathetically.
      As this is the last non-Government Amendment, perhaps I might be allowed to congratulate my right hon. and hon. Friends, the Chief Secretary, the Financial Secretary and the Minister of State and to thank them for their answers to the many Amendments that my hon. Friends and I have tabled. Indeed, we on this side of the House have tabled more Amendments than right hon. and hon Gentlemen opposite. We are grateful to my right hon. and hon. Friends on the Treasury Bench for their perseverance and for their helpful replies. We are perhaps even more grateful to the Whips for allowing so many Amendments to be tabled and discussed at such great length.
      In view of the reply of my hon. Friend the Financial Secretary, I beg to ask leave to withdraw the Amendment.
      Amendment, by leave, withdrawn.
      Mr. Maurice Macmillan: I beg to move, Amendment No. 46, in page 36, line 5, at end insert:
      '(d) in the construction, alteration or demolition of buildings or other fixed works of construction or civil engineering, including roads, or'.
      The purpose of the Amendment is to remove any possible doubt that the building and civil engineering industries will qualify for free depreciation on expenditure on immobile plant and machinery used in development areas and in Northern Ireland. Clause 39 provides for free depreciation for such plant and machinery used for industrial purposes in these areas.
      Mr. Barnett: Is not the phrase "free depreciation" something of a misnomer? It is not free depreciation at all.
      Mr. Macmillan: I was using a shorthand phrase for the 100 per cent. first year allowance.
      1428
      "Industrial purposes" are defined to include the purposes of any trade which consists in
      "… the manufacture of goods or materials or the subjection of goods or materials to any process".
      The scope of the latter words is very wide and would appear to include almost everything done in the course of building or civil engineering work. But doubts have been expressed on behalf of the industry whether all its activities are included, as was intended. For example, simple earth-moving could be argued not to be the subjection of any materials to a process. The Amendment removes these doubts and uses words which should make the position clear.
      Amendment agreed to.

    Clause 41

      WRITING-DOWN ALLOWANCES AND BALANCING ADJUSTMENTS
      Mr. Patrick Jenkin: I beg to move Amendment No. 48, in page 38, line 21, leave out from beginning to 'period' in line 23 and insert:

      '(a) belongs to him at some time in the chargeable period or its basis period, and

      (b) is in that period, or has at any previous time been, in use for the purposes of the trade, and

      (c) in that'.

      Perhaps it will be convenient to discuss at the same time the related points in Amendment No. 49.
      The Amendments are moved to correct a number of minor errors in drafting, and they deal with the "disposal value" of machinery and plant which ceases to be used in the taxpayer's trade.
      Amendment No. 48 covers the point where an asset can be taken out of use in one year with the intention that it should come back into use later. In fact, if it never comes back into use and is then sold, as the Bill stands, it would come into the pool, since it was not in use at the time of the disposal. Clearly, it should do, and the Amendment puts the position right.
      Amendment No. 49 makes it clear that disposal value has to be brought in only when the asset permanently ceases to be used. As the Clause stands, it implies that disposal value should be brought in

      1429
      on a temporary cessation of use. That was not our intention, and again the Amendment puts the position right.
      Amendment agreed to.
      Amendment made: No. 49, in line 25, leave out 'ceases (whether because of the permanent' and insert:
      'permanently ceases (whether because of the '.—[Mr. Patrick Jenkin.]

    Clause 42

      MACHINERY AND PLANT ON HIRE-PURCHASE ETC.
      Mr. Higgins: I beg to move Amendment No. 50, in page 40, line 31, leave out 'had' and insert 'has'.
      This is the Amendment which corrects a typographical error. I was one jump ahead on the last Amendment.
      Amendment agreed to.

    Clause 43

      MACHINERY AND PLANT ON LEASE
      Mr. Higgins: I beg to move Amendment No. 51, in page 40, line 32, after 'is', insert 'first'.
      I think that it would be for the convenience of the House if with this Amendment we took Amendments Nos. 53 and 54, if that is agreeable.
      Clause 43 reforms the rules for giving capital allowances on leased machinery and plant, giving the allowances on each asset to the person, whether lessor or lessee, who actually incurs the expenditure on it, a result which has not always followed, as I explained in Committee, under the existing law. Examination of the Clause has, however, revealed a defect in the new scheme which the three Amendments are designed to cure.
      Clause 43(2) provides for the case in which the expenditure is incurred by the lessee. The most common case of this is the long lease of a building with an obligation on the lessee to replace, as they wear out, various items of plant—for example, lifts, central heating boilers, and so on—installed in the building. Clause 43(2) gives the lessee the title to allowances on any item which he replaces by treating it as if it belonged to him so long as it is in use for the purposes
      1430
      of his trade. That is the crucial point. But in reality the replacement item does not belong to the lessee; it becomes the property of the lessor, to whom it has to be surrendered at the end of the lease.
      The Clause as it stood recognised this by providing that, on determination of the lease, no disposal value was to be brought into account against the lessee. So far as it went, that was right, but at the end of the lease the lessor has acquired a possibly valuable piece of plant or machinery which, if he wishes, he can dispose of. Since he had not incurred the capital expenditure on the plant or machinery, there was nothing in the Clauses as they stood to require him to bring into account any disposal value if he disposes of it.
      Amendment No. 54 remedies this situation by providing that, from the determination of the lease, the provisions about disposal value are to have effect as if the capital expenditure on the replacement had been incurred by the lessor, not the lessee. From that time anything which the lessor receives for the disposal of the plant or machinery will reduce the value of the "pool" on which the lessor's capital allowances are calculated; or, if he has no allowances, there will be a balancing charge on him. That is clearly right. The fact that the disposal value comes into the lessor's capital allowances computation is no more than the counterpart of the fact that it does not come into the lessee's.
      By itself, Amendment No. 54 would have been inadequate if the lessor came within Clause 43(1); that is, if his letting does not constitute a trade for tax purposes. The lessor of a building on a repairing lease is likely to come within Clause 43(1). His income from the letting falls under Schedule A, not under Case I of Schedule D. As subsection (1) of Clause 43 was drafted, or as it is drafted now, the trade which, under the subsection, is deemed to exist for the purpose of capital allowances to the lessor was brought to an end on determination of the lease; whereas it is after that point of time that, in the circumstances which I have just mentioned, it may be right to bring disposal value into account against him. The two amendments to Clause 43(1) permit this by prolonging the duration of the deemed trade from the time of the first letting of an asset

      1431
      by the lessor to the time when it permanently ceases to be let by him.
      I apologise for the length of that explanation, but it seemed right, as we were somewhat changing the situation which now exists, that I should spell it out. I hope that the House will agree to the Amendment.
      Amendment agreed to.
      8.15 p.m.
      Mr. Higgins: I beg to move Amendment No. 52, in page 40, line 34, leave out from 'used' to end of line and insert
      'for the purposes of a trade carried on by the lessee'.
      Mr. Deputy Speaker (Sir Robert Grant-Ferris): I understand that this is a paving Amendment and that it will be convenient to take with it Amendments Nos. 55, 56 and 57.
      Mr. Higgins: I think that would be agreeable, Mr. Deputy Speaker. We shall in due course come to the other two Amendments which we discussed a few moments ago. It will be convenient to discuss those Amendments with Amendment No. 52 to Clause 43. It is effectively a paving Amendment. It prepares the way for Amendments Nos. 55, 56 and 57, which arise on a subsequent Clause. Therefore, I think that it would be for the convenience of the House if we discussed those three Amendments at the same time.
      I must again apologise to the House for a rather lengthy explanation, but it will be as well to get the position on the record.
      These four Amendments essentially deal with a single point. Clause 43, which deals with the capital allowances on leased machinery or plant, reverses, as I said in Committee, in favour of the taxpayer a decision of the courts on the interpretation of the existing law. It was decided in the case of Macsaga Investment Co. v. Lupton which went to the Court of Appeal in 1967, that capital allowances could not be given on leased machinery or plant unless either the lessor or the lessee was using the asset in the carrying on of a trade.
      This has the absurd result that if the owner of an office block lets it partly to a trader and partly to a Government
      1432
      Department or local authority, the lessor cannot get full capital allowances on, for example, the lift system or something of that kind in the building, and the proportion of the allowances which he can get may vary as the tenancies in the building alter.
      I think that the House will agree that that is not a satisfactory situation. The opening words of Clause 43(1) reverse this situation. As the Clause now stands, it goes too far. It would open the door to leasing transactions entered into simply to exploit the capital allowances system. Hon. Members on both sides of the House have expressed concern about such possible loopholes. I will give a simple example, though there are more sophisticated variants. We might have two individuals who each buy a car which they lease to each other for a purely nominal rent, each using his car for private purposes. Each claims capital allowances, under Clause 43, on the car that he owns, and, as these allowances will greatly exceed the rent he receives, each will have a tax loss available to be set against his other income.
      We obviously need to remedy that position. The remedy is not to resile from the decision to give capital allowances where there is a genuine commercial transaction involving capital expenditure on plant and machinery between two parties neither of whom happens to be a trader. The root of the trouble is that, where the capital allowances exceed the rent, the resulting tax loss provides an incentive for artificial transactions.
      The Amendments, which are necessarily a little complicated, ensure that where neither the lessor nor the lessee is trading, any surplus of the capital allowances over the rent received is not made available for set-off against other income. The surplus allowances can only be carried forward against the income from the letting of the asset in respect of which they have been given. This will be sufficient to meet the case of the genuine commercial letting and will avoid opening the door to exploitation.
      There is one final point. Amendments Nos. 56 and 57 contain the substantive provisions. These are in Clause 45, which I mentioned, which governs the way in which allowances are given, including the set-off of surplus allowances

      1433
      against other income. The set-off is provided for by Section 71(1) and Section 74(4) of the Capital Allowances Act, and Amendment No. 57 frustrates these provisions in cases in which neither the lessor nor the lessee is trading. Amendment No. 52, which merely brings the wording of Clause 43 into accordance with that used in the Amendments to Clause 45, and Amendment No. 52 are consequential.
      I apologise for burdening the House with that explanation, but I felt that it should be on record.
      Amendment agreed to.
      Mr. Deputy Speaker: With the permission of the House, I will take Amendments Nos. 53 to 57 formally.
      Amendments made: No. 53, in page 41, line 1, leave out from 'trade ' to end of line 2 and insert:
      'from the time when the trade is treated as begun until the time when the lessor permanently ceases to let it otherwise than in the course of a trade, and then as permanently ceasing to be so used'.
      No. 54, in page 41, line 10, leave out from ' but ' to end of line 13 and insert:
      'as from the determination of the lease, section 41(5) above shall have effect as if the capital expenditure on providing the machinery or plant had been incurred by the lessor and not by the lessee'.—[Mr. Higgins.]

    Clause 45

      MANNER OF MAKING ALLOWANCES AND CHARGES
      Amendments made:
      No. 55, in page 42, line 2, at end insert:
      'subject to subsection (2A) below'.
      No. 56, in line 10, at end insert:
      (2A) Where an allowance falling to be made for any chargeable period by virtue of section 43(1) above is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that period or its basis period is not used for the purposes of a trade carried on by the lessee, that allowance or, as the case may require, a proportionate part thereof shall be available primarily against income from the letting of that machinery or plant only.
      No. 57, in line 17, at end insert:
      Provided that, where an allowance falling to be made for any chargeable period by virtue of section 43(1) above is in respect of expenditure on the provision of machinery or plant which for the whole or any part of that
      1434
      period or its basis period is not used for the purposes of a trade carried on by the lessee, the proviso to subsection (1) of the said section 71 or, as the case may be, subsection (4) of the said section 74 shall not apply to that allowance or, as the case may require, to a proportionate part thereof.—[Mr. Higgins.]

    Schedule 8

      CAPITAL ALLOWANCES
      Mr. Patrick Jenkin: I beg to move Amendment No. 58, in page 90, line 20, at end insert:
      (1A) Where a person enters into a contract under which, on the performance thereof, he will or may become the owner of machinery or plant which has been in use for the purposes of a trade carried on by the person to whom the machinery or plant belongs, and—

      (a) he and that person are connected with each other within the terms of section 533 of the Taxes Act, or

      (b) the machinery or plant continues to be used for the purposes of a trade carried on by that person, or

      (c) it appears with respect to the transaction, or with respect to transactions of which it is one, that the sole or main benefit which, but for this sub-paragraph, might have been expected to accrue to the parties or any of them was the obtaining of an allowance under Chapter I of Part III of this Act,

      a first-year allowance shall not be made in respect of any expenditure incurred by him under the contract so far as relating to that machinery or plant, or if made shall be withdrawn, and there shall be disregarded for the purposes of section 41 of this Act so much (if any) of the expenditure as exceeds the disposal value to be brought into account under that section by reason of the contract so far as so relating.
      I think that it would be convenient if, with this Amendment, we were to discuss Amendments Nos. 59, 60, 62 and 63, as these are all related Amendments.
      The purpose of the change that we are making to the capital allowances is to simplify the system, and the 25 per cent. writing-down pool enables us to dispose almost entirely with the old system of balancing allowances and balancing charges. Paragraph 3 of the Schedule prevents advantage being taken of this system by associated traders dealing with items of plant and machinery between themselves so as to secure a tax advantage.
      Amendments Nos. 58 and 59 extend this anti-avoidance provision to cover disposals by way of hire-purchase and assignments of hire-purchase contracts.

      1435
      This is necessary to make sure that the legislation is not abused by two firms that are associated with each other seeking to take advantage of it.
      The other Amendments are purely consequential upon the substantive Amendments, Nos. 58 and 59, and I commend the group to the House.
      Amendment agreed to.
      Amendments made: No. 59, in page 90, line 27, at end insert:
      (b) the machinery or plant continues to be used for the purposes of a trade carried on by him, or.
      No. 60, in line 42, leave out 'subparagraphs (1) and (2) above' and insert:
      'the preceding provisions of this paragraph '.—[Mr. Patrick Jenkin.]
      Mr. Patrick Jenkin: I beg to move Amendment No. 61, in page 90, line 43, at end insert:
      Further effects of disposal etc. before bringing into use
      (1) Subject to sub-paragraph (2) below, the following provisions shall have effect where a person has incurred capital expenditure on the provision of machinery or plant for the purposes of a trade and, by reason of any event, the machinery or plant ceases to belong to him without having been brought into use for those purposes—

      (a) if that expenditure exceeds the disposal value which by reason of the event that person would be required to bring into account under section 41 of this Act if he had previously brought the machinery or plant into use for the purposes of the trade, the amount of the excess shall, for the purposes of that section, be added to his qualifying expenditure for the chargeable period related to the event;

      (b) if the event is one such that, if that person had previously brought the machinery or plant into use for the purposes of the trade, any of the provisions of paragraph 3 above would have applied to the allowances to be made under Chapter I of Part III of this Act to another person, there shall be disregarded for the purposes of that Chapter so much (if any) of the expenditure incurred by that other person in acquiring the machinery or plant as exceeds the expenditure incurred by the first-mentioned person in providing it.

      (2) Where the event referred to in subparagraph (1) above is the assignment of the benefit of a contract—

      (a) paragraph (a) of that sub-paragraph shall have effect as if the expenditure there referred to were the total capital expenditure which the person in question would have incurred in respect of the machinery or plant if he had wholly performed the contract, and

      1436

      (b) paragraph (b) of that sub-paragraph shall have effect as if, for the reference to the expenditure incurred by the other person in acquiring the machinery or plant, there were substituted a reference to the consideration given by that other person for the assignment.

      (3) All such assessments and adjustments of assessments shall be made as may be necessary to give effect to the preceding provisions of this paragraph.

      On 15th June, in Standing Committee, the hon. Member for Heywood and Roy-ton (Mr. Barnett) raised the point that, under the present tax law, if a trader sells a machine which he has bought for use in his trade before having actually used it, he can get a balancing allowance for any loss that he suffers. Under the new code, the sale of one particular machine will not throw up a balancing allowance, and, as the Bill stands, the difference between the cost of the machine and what he gets for it on disposing of it, cannot be brought into account in the pool for writing-down allowances, since those allowances apply only for expenditure on assets that have been brought into use. Therefore, the loss he makes will be unrequited, and he will get no capital allowance for it. My hon. Friend the Chief Secretary recognised that that could well be inequitable, and he undertook to consider the point.
      We have considered it, and we have tabled the Amendment to provide a remedy. It allows the difference between the cost and the disposal value to be added to the qualifying expenditure in the pool on which the writing-down allowance for the year of the disposal, and subsequent years, will be calculated. In other words, the loss on the unused asset is written off along with the expenditure on the plant and machinery which has been brought into use. Perhaps I could add, in commending the Amendment to the House, that this matter was raised with us by the accountancy bodies also, and I understand that they are well pleased with the action that we have taken to deal with the point.
      Mr. Barnett: It would be discourteous were I not to thank the hon. Gentleman for one of the few concessions that he has made to the number of speeches that I made in Committee. I am grateful to the hon. Gentleman for accepting and recognising the point that I made.
      Amendment agreed to.
      Mr. Patrick Jenkin: I beg to move Amendment No. 83, in page 91, line 43, leave out from "as" to end of line 46 and insert:
      "may be just and reasonable having regard to all the relevant circumstances of the case and, in particular, to the extent to which the machinery or plant was used in that chargeable period or its basis period otherwise than".
      This is a somewhat technical Amendment, and I think that perhaps it is not really necessary for me to attempt to explain it to the House at length.
      All I need say is that paragraphs 4 and 5 of the Schedule deal with the case in which an item of plant or machinery—and often it is a motor car—is used partly for trade, and partly for other purposes. It also covers related cases where the user receives payment—perhaps from an employer—which covers only part of the cost, that is to say a mileage allowance which is not adequate to cover an appropriate share of the depreciation. Clearly the extent to which, in those circumstances, the employee can write down the car for tax purposes will be complex.
      What we originally sought to do in the Bill was to reproduce the existing law, but we are satisfied that the provision as drafted does not achieve that result. We have, therefore, put down the Amendment to give the Revenue power to make the necessary adjustments effectively to reflect the existing law on this slightly complex matter.
      Amendment agreed to.
      Amendments made: No. 62, in page 96, tine 26, leave out 'sale or assignment' and insert 'transaction'.
      No. 63, in line 33 leave out from 'incurred' to 'capital' in line 37 and insert:
      'on the provision of the motor car by the person disposing of it, and

      (b) the person acquiring the motor car shall be treated for the purposes of Chapter I of Part III of this Act as having incurred on its provision'.—[Mr. Patrick Jenkin.]

      Mr. Patrick Jenkin: I beg to move Amendment No. 64, in page 97, line 28 at end insert:
      Effect of successions to trades between connected persons
      Where a person (the 'successor') succeeds to a trade which was until that time carried on by another person (the 'predecessor') and
      1438
      the two persons are connected with each other within the terms of section 533 of the Taxes Act, those persons may by notice in writing to the inspector elect that the provisions of this paragraph shall have effect; and in that event—

      (a) for the purpose of making allowances andd charges under Chapter I of Part III of this Act, the trade shall not be treated as discontinued;

      (b) allowances and charges shall be so made to or on the successor as if everything done to or by the predecessor had been done to or by the successor, but with no account being taken of the sale or transfer from the predecessor to the successor of any machinery or plant which was in use for the purposes of the trade at the time of the succession.

      The Amendment is intended to cover the sort of situation which arises when plant or machinery is transferred from one company to another within a group when, on a reorganisation, the latter takes over the former's trade. The existing law has two provisions to deal with this situation, which I do not need to outline to the House, but what one aims to do is to make sure that in those circumstances the capital allowances, as it were, run through from the old company to the new so that no complicated transfer needs to take place on that reorganisation. The Amendment is intended to facilitate that and further to simplify the system that we have introduced in the Bill.
      Mr. Dalyell: There is a general issue which I think is relevant, and perhaps this is the appropriate place at which to raise it.
      There is a problem—or there has been in certain development areas—of what one might call soiled machinery. A grant goes to firm A for a building or machinery. For some reason firm A decides to close down, and the machinery or the building is handed over to firm B. Perhaps that happens after only three or four months, but during that period there is sufficient time to create an interregnum whereby firm B, the successor, does not get the advantages that had accrued to firm A, and would have continued to accrue to it had it continued in business.
      Perhaps I should have given the Treasury warning of this. I have a particular case that is more than five years old, but it is the sort of thing that could happen again. I think that this is the right place at which to raise the issue, but I leave it there, and perhaps the Treasury could correspond with me about it.
      Mr. Patrick Jenkin: With the leave of the House. I would ask the hon. Member to bring the particular details to my attention. One of the advantages of the new system is that, when items of plant are taken out of the pool—for instance, when a particular activity of the firm ceases, but the firm continues so the pool continues—there is no balancing charge or allowance on the old firm; the amount of the disposal proceeds is then taken out of the pool.
      This may simplify the transaction in the sort of situation which the hon. Gentleman has in mind, but if the whole firm closes down and sells its assets or transfers them to another firm in the group, balancing allowances and charges may well operate, because the pool itself may come to an end. I should like to consider this situation in the light of the new simplified system.
      Amendment agreed to.
      8.30 p.m.
      Mr. Patrick Jenkin: I beg to move Amendment No. 84, in page 99, line 35 at end insert:
      ( ) Section 177 of the Taxes Act shall be amended by adding the following subsection after subsection (3)—

      '(3A) Where a company incurs a loss in a trade in an accounting period for which one or more first-year allowances fall to be made to it under Chapter I of Part III of the Finance Act 1971 in respect of expenditure on the provision for the purposes of the trade of machinery or plant within section 39(2)(b) of that Act, subsections (2) and (3) above shall have effect in relation to so much of the loss as would not have been incurred if the allowance or allowances had been totally disclaimed as if the time specified in the said subsection (3) were a period of three years ending immediately before the accounting period in which the DSS is incurred'

      This is a much more significant and important Amendment than those which we have been considering. It is far more than a matter of mere detail. What we are doing is adding a significant improvement of the 100 per cent. first-year write-off allowance in development areas.
      Last October, the Government decided to provide a system of investment incentives for plant and machinery based on accelerated depreciation. One of the criticisms which has been advanced inside and outside the House against that is that it narrows the differential in favour of investment in the development areas.
      1440
      Much of this criticism has been misplaced, because it would be wrong to consider any particular measure in isolation. The whole package of my right hon. Friend's measures should be considered together, and on that, as has been said in many of our debates, the differential has been maintained.
      However, the criticism had validity in one respect. Where a tax allowance depends for its value on there being an adequate flow of profits against which the allowance can be set, clearly, if there is a period when the profits are inadequate, the allowance does not achieve its full purpose and its present value is reduced. We accept that the criticism has some justification and the Amendment is intended to go a long way to meet the criticism.
      It is possible, when making a claim for a 100 per cent. first-year allowance, to set it against the profits of either the current year or future years—if it has not been possible to write it off wholly against the first year—or alternatively one can go back for one year. It has been represented to us that there may be periods—certainly the current period and the months past have been one such—when the flow of profits to businesses has not been at the level that the managers or indeed the Government would have hoped and when there was an inadequate availability of profits to enable firms to take all advantage of this allowance.
      Because the present worth of the allowance would be significantly diminished if it had to be carried forward to be set against profits in future years, and because merely to set it against the profits of one year would not be adequate, the Amendment provides that the allowance can be carried back for a further two years before the year in which the expenditure was incurred.
      In other words, there can, for this particular form of investment—the 100 per cent. first-year allowance in development areas—be a carry back for two years to make sure that the allowance can be effectively given in the year in which the expenditure is incurred.
      This may mean that accounts will have to be reopened and tax repayments will have to be made, but it is an effective method of making sure that as much of the full value of this write-off can

      1441
      be given in the year in which the expenditure is incurred, despite the shortage of profits in that year.
      This will reduce the necessity for firms to lose part of the benefit of the 100 per cent. allowance by having to carry forward to a future year the unexpended balance of the allowance. So the Amendment creates a special rule in favour of the free depreciation allowance for plant and machinery in development areas in that it can be carried back, unlike any other cost, against the profits for two further years.
      The Amendment will give a valuable boost to those firms which are prepared to invest in the development areas and it can be accounted a significant addition to the package of the Government's measures intended to improve investment in the development areas.
      Mr. Nott: I welcome the Amendment and the principle enshrined in it. Am I right in interpreting it to mean that if a company made a profit in the years prior to the publication of the Bill, any capital expenditure which it now incurs will be eligible to be offset against those profits previously made?
      Mr. Patrick Jenkin Mr. Patrick Jenkin indicated assent.
      Mr. Nott: This is a welcome change, but if the Government are prepared to go this far, why could they not be more sympathetic towards the more major problem of mining expenditure? I raised this matter the other night and hon. Gentlemen oposite will recall a brief meeting that took place in the Lobby on this issue.
      The complaint in respect of mining expenditure has always been that under the old cash grant system a company was eligible for grant if it indulged in development expenditure on a new mine knowing that there would be no profits for a considerable time, and in some cases, in the development of a new shaft, no profits at all. In those cases the cash grant was available, whereas under the new tax allowance system, no allowance will be available because there will be no profits on the development of an unsuccessful shaft or mine.
      If the Government are prepared to make this important concession and tamper with the principle and say "Profits
      1442
      made in years prior to the publication of the Bill will be eligible to offset against allowances," why are they not able to tamper with the principle a little further and allow mining in the development areas a similar concession?
      Will it be possible in next year's Finance Bill to devise a system by which mining in the development areas—which has come off worse than any other activity as a result of the change from cash grants to tax allowances—is given a similar concession in view of the departure made here against the basic principle of Government legislation? In other words, will something be done next year to help this important industry in the development areas? In the debate the other night I referred to the potash side of the mining industry. I spoke of the development areas and Cornwall. I will not repeat those arguments now.
      Mr. Dick Taverne: Like the hon. Member for St. Ives (Mr. Nott) we welcome the Amendment. It represents an improvement, but as he said, it is nothing like as good as grants would have been for mining. The Government will increasingly come to realise that what they have offered is not good enough and that, in the end, only a grants system can help to solve the problem to which the hon. Member for St. Ives referred.
      Mr. Patrick Jenkin: I welcome the approval given to the Amendment by my hon. Friend the Member for St. Ives (Mr. Nott). I will not be drawn into the question of mining, except to say that plant and machinery used for mining in development areas will benefit from this proposal. The House has been informed that the Government have the problems of the mining industry under active review, but it would be wrong for me to anticipate the results of that review.
      The Amendment is designed materially to improve and enhance the differential that exists between the development areas and the rest of the country. I am glad that the hon. and learned Gentleman the Member for Lincoln (Mr. Taverne) welcomed it on behalf of the Opposition, and I know that it will be welcome to all hon. Members on both sides who represent constituencies in development areas.
      Amendment agreed to.

    Clause 56

      ABOLITION OF CHARGE TO CAPITAL GAINS TAX ON DEATH, ETC.
      Mr. Patrick Jenkin: I beg to move Amendment No. 75, in page 48, line 22, after 'occurring', insert 'or interest terminating'.
      Mr. Deputy Speaker: With this Amendment it will be for the convenience of the Committee to take the following Amendments:
      No. 76, in page 48, line 27, after 'individual', insert:
      and on the termination of certain interests'.
      No. 65, in page 48, line 22, leave out 'death' and insert 'disposal'.
      No. 66, in line 27, after 'individual', insert 'or on settled property'.
      Mr. Jenkin: The fact that Amendments Nos. 65 and 66 have been selected for discussion with this Amendment, Mr. Deputy Speaker, enables me to start by paying a very sincere tribute to my hon. Friend the Member for St. Ives (Mr. Nott), who put down those two Amendments, which deal, though in a slightly different way, with exactly the same point that we are attempting—I hope successfully—to deal with in our Amendments Nos. 75 and 76.
      We are dealing here with the abolition of the capital gains tax on deemed disposals, because as I have explained to the House, and to the Committee, we consider it inequitable that where assets are already charged to estate duty, often at very high rates, they should equally be charged concurrently to capital gains tax as well. The point was made that this should cover any question of a deemed disposal where a concurrent estate duty attaches. It should therefore cover assets which are given before death but which, because of the seven-year rule, come in to charge to estate duty and equally—and this is the point of the Amendments—it should cover the case where a life interest is terminated less than seven years before the death of the life tenant. This is an occasion when estate duty is charged on the assets of a trust to the extent of the life interest. We accept that it is wrong that the capital gains tax charge should apply concurrently.
      1444
      This was really always intended to take effect, but the Bill was defective as drawn. It did not give a proper effective starting date for the termination of the life tenancy and its exemption from capital gains tax. It is necessary to ensure that the provisions of the Schedule are well founded for terminations other than on death, as in the circumstances I have described, and our Amendments are apt to cover the case. I commend them to the House.
      Mr. Nott: I naturally welcome the Government Amendments. The Financial Secretary's kind tribute to me is no greater than that which I pay to him in accepting the point. It is much easier for a back bencher to put down Amendments than it is for Government to accept them. I am not sure that this should necessarily be the case, but it is so historically, and I am glad to see that in this instance there has been some shift from that position.
      The point is technical, but quite worth while. If the owner of a family business dies and the wife, say, is life tenant of the business, the Finance Bill as previously drafted would have prevented her from disposing of the shares in the company to, say, her sons who might be managing it. That clearly could not have been advantageous to the proper management of that business.
      I am delighted that my hon. Friend has taken the point. The Amendments are a major improvement, and I thank him for accepting the principle.
      Amendment agreed to.
      Amendment made: No. 76, in page 48, line 27, after 'individual', insert:
      'and on the termination of certain interests'.—[Mr. Patrick Jenkin.]

    Schedule 12

      ABOLITION OF CHARGE ON DEATH
      8.45 p.m.
      Mr. Patrick Jenkin: I beg to move Amendment No. 77, in page 110, line 47, leave out 'sub-paragraph (iii) or (iv) of'.
      I think it would be convenient to discuss at the same time Government Amendment No. 78.
      These Amendments provide that where a life tenant of a trust has released his

      1445
      interest and dies within seven years, so that estate duty is chargeable by reference to the value of the trust property at the date of his death, any unrealised capital appreciation on the trust assets at the date of his death is excluded from the charge to capital gains tax on a subsequent disposal by the trustees. This is closely related to the Amendments we have discussed.
      Amendment agreed to.
      Amendment made: No. 78, in page 111, line 1, after 'property' insert:
      'in a case where neither subsection (3) nor subsection (4) above applies'.—[Mr. Patrick Jenkin.]
      Mr. Patrick Jenkin: I beg to move Amendment No. 79, in page 111, line 14, at end insert:
      Gifts
      13A.—(1) After section 25 of the Finance Act 1965 there shall be inserted the following section:—
      '25A.—(1) Where, on the death of a person, estate duty falls to be charged, by virtue of section 2(1)(c) of the Finance Act 1894, on an asset comprised in a gift inter vivos, and at the time of the death the asset—

      (a) is owned by the donee; or

      (b) is property settled by the gift or property which for the purposes of section 38 of the Finance Act 1957 or section I of the Finance Act (Northern Ireland) 1957 is by virtue of subsection (9) thereof treated as property settled by the gift,

      then, subject to subsection (2) below, the asset shall for the purposes of this Part of this Act be deemed to be disposed of and immediately re-acquired at that time by the donee or trustee for a consideration equal to its market value; but no chargeable gain shall accrue on the disposal.
      (2) Where the value on which estate duty is so chargeable is reduced under section 35 of the Finance Act 1968 or section I of the Finance Act (Northern Ireland) 1968 the appropriate portion only of the asset shall be deemed to be so disposed of and reacquired and the consideration shall be deemed to be equal to the appropriate portion of the market value of the asset.
      For the purposes of this subsection the appropriate portion is the value on which estate duty is chargeable divided by the market value of the asset at the time of the death'.
      (2) Section 42(3) of the Finance Act 1966 shall cease to have effect.
      I think that it would be convenient to discuss at the same time Government Amendment No. 80.
      These Amendments provide that where a gift is chargeable to estate duty because the donor has died within seven years of
      1446
      making it, any gain which has accrued up to the date of death is excluded from capital gains tax. This removes what would otherwise have been an anomaly between the treatment of gifts and that of assets owned by the deceased at his death.
      Amendment agreed to.
      Mr. Patrick Jenkin: I beg to move Amendment No. 82, in page 111, line 25, at end insert:
      (2) Where the principal value has been reduced under section 35 of the Finance Act 1968 or section 1 of the Finance Act (Northern Ireland) 1968 the reference in subsection (1) above to the principal value as ascertained for the purposes of estate duty is a reference to that value as so ascertained before the reduction.
      This Amendment is consequential on the Amendments we have just dealt with and deals with gifts inter vivos. It ensures that the value of an asset for estate duty, which is to be binding as the market value of the asset for capital gains tax, is the value before the estate duty paper provisions are applied.
      Amendment agreed to.
      Amendment made: No. 80, in page 111, line 40, after '12', insert '13A'—[Mr. Patrick Jenkin.]

    Clause 65

      CITATION, INTERPRETATION, CONSTRUCTION, EXTENT AND REPEALS
      Mr. Higgins: I beg to move Amendment No. 69, in page 54, line 24, after '5' insert '6, 7'.
      This Amendment is consequential upon the acceptance in Committee of new Clauses, now in the Bill as Clauses 6 and 7, dealing respectively with relief from pool betting duty—[Interruption.] I understood, Mr. Deputy Speaker, that we were now on Amendment No. 69.
      Mr. Deputy Speaker: I am sorry to interrupt the hon. Gentleman. There was some question about whether I should have called the hon. Member for Bristol, West (Mr. Robert Cooke), but I understand that he does not wish to move his Amendment No. 114, in page 49, line 36, at end insert:

      (d) chattels not exempted from estate duty under the provisions of section 40 of the Finance Act 1930, if the condition stated in subsection (3) below is satisfied.
      Mr. Robert Cooke: I do not intend to move my Amendment No. 114, nor No. 115, in page 49, line 37, after 'subsection (2)(b)', insert 'and in subsection (2)(d)', nor No. 116, in page 49, line 40, after 'securities', insert 'or chattels', nor No. 117, in page 49, line 41, after 'securities', insert 'or chattels'.
      Mr. Higgins: As I was saying, Amendment No. 69 is consequential upon the acceptance in Committee of new Clauses, now in the Bill as Clauses 6 and 7, dealing, respectively, with relief from pool betting duty for payments to a charitable or sporting body which are a condition of entry in a pool betting competition and, secondly, continuation of the gaming licence duty in Scotland by reference to rateable values at pre-1971 revaluation levels.
      The Amendment arises from the need to have these provisions within the management and enforcement responsibilities of the Commissioners of Customs and Excise, as generally set forth in the Customs and Excise Act, 1952.
      Amendment agreed to.

    Schedule 14

      ENACTMENTS REPEALED
      Mr. Higgins: I beg to move Amendment No. 129, in page 119, column 3, leave out line 35 and insert:
      '"and section 166(1)" to "1970" and the word "together".'
      This Amendment corrects an error in the repeals consequential on the abolition of the short-term gains tax (Case VII). As the law stands, an individual's gift of a chargeable asset with a value not exceeding £100 is ignored for capital gains tax and Case VII; but the £100 is an aggregate limit for all the gifts made by the individual in the year.
      In view of the abolition of Case VII, the reference to that tax in the relevant provision needs to be repealed; but the Bill as it stands goes further than this and repeals the words which ensure that for capital gains tax the £100 limit applies to the aggregate gifts in the year. The result would be then an individual could make an unlimited number of tax-free gifts of £100 each—that is to say, he
      1448
      could give away a large holding in small parcels. The Amendment corrects this.
      Amendment agreed to.
      Amendment made: No. 81, in page 122, line 19, column 3, at beginning insert 'Section 42(3)'.—[Mr. Higgins.]
      Mr. Higgins: I beg to move Amendment No. 70, in page 126, line 11, at end insert:

      1965 c. 25.

      The Finance Act 1965.

      In section 33, in subsection (1) the words 'one and the same one, of;"; and subsection (4).

      I think that it will be convenient to take this Amendment together with Amendment No. 72.
      These are consequential Amendments on the inclusion in Committee of a new Clause to relax certain of the conditions in the capital gains tax "roll-over" relief for the replacement of business assets. The relaxations are affected by repealing certain words in the existing provision, and the Amendments add these repeals to the Repeals Schedule of the Bill. The Clause itself appears in the Bill, as amended in Committee, as Clause 23.
      Amendment agreed to.
      Amendments made: No. 108, in page 126, column 3, leave out lines 32 and 33.
      No. 71, in page 126, column 3, line 35, at end insert:
      'In section 498(4) the words "to the Commonwealth territories and",
      In section 500(1) the definition of "Commonwealth territory".
      In section 507, subsections (2) and (3).
      'No. 72, in page 126, line 44, at end insert:
      2. The repeals in section 33 of the Finance Act 1965 have effect with respect to acquisitions on or after 20th April 1971.—[Mr. Higgins.]
      8.54 p.m.
      Mr. Maurice Macmillan: Before we come on to Third Reading, Mr. Deputy Speaker, may I move the following verbal Amendments?
      Mr. Deputy Speaker (Sir Robert Grant-Ferris)Mr. Deputy Speaker (Sir Robert Grant-Ferris) indicated assent.

    New Clause 29

      DISABLED PASSENGERS
      Mr. Macmillan: I beg to move, in line 5, leave out '1962' and insert '1971'.
      These Amendments merely correct verbal errors in new Clause 29 which the Government accepted last night. The Vehicle Excise Acts were consolidated earlier this year and the reference in the Clause is to the pre-consolidation legislation. The correct title of the "Minister of Health and Social Security" is "Secretary of State for Social Services".
      Mr. Taverne: The Chief Secretary gives me the opportunity to put a correction on the record. In the course of his generous concession yesterday, the Chancellor of the Exchequer said that my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) had previously voted against the proposal which he was now supporting. He realised later that that was not so and he personally apologised, very generously, to my hon. Friend. I should like to make it clear that the reference in column 1166 of the OFFICIAL REPORT for yesterday's debate to the hon. Member for Wythenshawe voting against the new Clause in a previous year is incorrect, because my hon. Friend did not vote against it.
      Mr. Macmillan: I should like to thank the hon. and learned Gentleman. As he knows, there was an error. There was no reflection on the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) and I am happy to say that the record is now clear.
      Amendment agreed to.
      Further Amendments made: Clause (Disabled Passengers), line 9, leave out from 'by' to 'the' in line 10.
      Clause (Disabled Passengers), line 19, leave out '16(3) of that Act' and insert: '23 of the Vehicles (Excise) Act 1971'.—[Mr. Maurice Macmillan.]
      Order for Third Reading read.
      8.58 p.m.
      Mr. Maurice Macmillan: I beg to move, That the Bill be now read the Third time.
      What with Second Reading, Committee of the whole House, Standing Committee "H" and now three days on Report, the
      1450
      measures in the Bill have been fairly extensively debated. Some have been debated more than others. We have had some extremely interesting contributions from both sides of the House and both sides of the Committee, sometimes directly referring to the Bill and sometimes dealing with the underlying economics or philosophy which hon. Members in different parts of the House detected behind my right hon. Friend's Budget measures either with approval or disapproval.
      Sometimes we have had extremely interesting contributions from hon. Members with original and individual ideas of reform and new measures which they wished the Government to take up. Sometimes we have had repetitions of new ideas which have come before successive Committees on Finance Bills and which have been urged on successive Governments of both parties.
      Mr. Barnett: And resisted !
      Mr. Macmillan: And resisted by successive Treasury Ministers, as the hon. Member correctly observed.
      We have had fascinating dissertations from my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams), in a highly characteristic contribution to our debates, which have been taken up with almost equal expertise by hon. Members opposite. Some hon. Members, less well versed in the detail of this type of argument, have found themselves from time to time a little confused.
      We have covered all the relevant passages and points, and some were more relevant than others, if I may put it like that, and, without undue lateness, we have been fairly thorough. I am bound to admit that when debates were protracted, the blame for such protraction, if that is the right word in this context, could be fairly evenly divided between both sides. [HON. MEMBERS: "NO."] That may be a matter of judgment and opinion, sometimes subjective, depending on the length of time for which hon. Members have been sitting on the bench.
      1 would like to thank hon. Gentlemen opposite and the usual channels for the amicable arrangement on the whole which we have somehow sustained in planning our programme in Committee upstairs and in the House and on Report. I have not counted either the number of Amendments discussed or the column inches in

      1451
      HANSARD, but my impression is that my hon. and right hon. Friends have been more assiduous than usual in this Finance Bill. I am not sure that they have not been more assiduous in moving the Amendments and speaking to them than hon. and right hon. Gentlemen opposite.
      This Bill, as usual, does two things. It implements the Chancellor's Budget judgment and makes changes in the tax system. It is unique in one way, in that the changes which are made in the tax system and structure, the reforms which this Bill is bringing in, are projected further into the future than is usual in Finance Bills. We have the value-added tax in the autumn and a change in corporation tax, which is being discussed by a Select Committee. That is not unique but it is something which has not been used for some time. There are also changes in the personal tax system, starting with this Bill and working through to unification in 1973–74.
      The Chancellor has initiated and carried through a massive programme of tax reform and I am glad to say that in the process of putting this to the House and to the country we have been able to use some slight innovations and improvements in communication through the use of the Green Papers on value-added tax and corporation tax and the use of the Select Committee to discuss the details of the latter.
      I do not now want to go further into the question of the Chancellor's Budget judgment and the economic situation which we debated at some considerable length recently—a debate which went on in a slightly spasmodic fashion yesterday at Question Time. I would remind the House that this Bill introduces tax reductions totalling in a full year some £1,000 million and that in itself is a considerable change for the better compared with the pattern of the last six years.
      There is a time lag for these measures to have their full effect on the economy but in both the long and the short term they will lead to a more vigorous and efficient economy, as my right hon. Friend pointed out on 28th June when he gave some of the signs of the improvement he had detected. It has been said, and no doubt will be said again later this evening, that this is a rich man's Budget. It is not. The tax system as it is after
      1452
      this Budget, and as it will be when the reforms are complete, will still be progressive. That is one of the reasons which enable hon. and right hon. Gentlemen opposite to say that it benefits those who are better off more than those who are less well off. Any reduction in direct taxation in a system as progressive as ours is bound to benefit those who pay the most tax but it still leaves them paying a very large proportion of tax with a relatively high tax burden.
      Part of the package in this Budget was the new and considerable help given to the poorer families, the upgrading of social security benefits and the upgrading of pensions in the autumn. Part of it was the improved child allowances, helping a very large number of families, and the cut in selective employment tax which was demanded by my hon. Friends, by the country and by industry and commerce, who all sought to have it abolished. This year my right hon. Friend has been able to reduce it by half. Other elements in the Budget package were the proposals to help companies with their liquidity and profitability through corporation tax which even right hon. and hon. Members opposite felt were necessary.
      In the Budget debate, my hon. Friend the Financial Secretary pointed out that the 15 per cent. earned income relief above £4,005 a year earned income cost the Exchequer in taxation only £16 million—less than 3 per cent. of the total tax reliefs.
      Finally, in the package we have had the reforms of indirect taxation and the replacement of two taxes—purchase tax and selective employment tax—by one tax. On the other side, the reform of direct taxation—the one point on which the Committee and the House were in total agreement was that the unification of taxation makes it harder for people to assume that their tax burden is more oppressive than it really is. We have today discussed this aspect at some length and I need not go into it any further. Despite criticisms about not informing the House sufficiently of future intentions, I point out that my right hon. Friend has exposed more of his future tax intentions than any Chancellor of the Exchequer has done before.
      The tone of our discussion, particularly in Committee and on Report, has shown that the objections of right hon. and hon.

      1453
      Members opposite are sometimes more theoretical than practical and they have not been expressed with quite the vigour of the past. A lot of their criticism, even today, has reminded me of the title of a song which I remember from my younger days—" It ain't what you do, it's the way that you do it "—that's what really counts. The Opposition have criticised my right hon. Friend the Chancellor and the Government for doing the right thing in the wrong way. I reply by quoting another song title—"It ain't necessarily so". I sometimes thought that right hon. and hon. Members opposite were straining a little disagreement to go a very long way. I should be delighted to express my words in song were it not for the fact that even in church I am inclined to put the choir off by singing out of tune.
      We have had disagreements between the Government and their supporters and right hon. and hon. Members opposite and a certain amount of divergence of view between the Treasury Bench and my right hon. and hon. Friends. But I can, with more than conventional sincerity, thank hon., right hon. and right hon. and learned Gentlemen opposite for the cooperative nature of their opposition and criticism and, perhaps, thank my hon. Friends for the critical nature of their cooperation. As a result, we are now embarking on the Third Reading of a much improved Bill. It is the first of a series. It is bringing in a coherent and sensible pattern of tax changes and reform, a pattern of reform which was put before the country at the last election and approved by the electorate.
      9.10 p.m.
      Mr. Taverne: I do not propose to follow the Chief Secretary in his historical survey of the progress of the Bill through its various stages, except to say that it was on the whole an agreeable occasion, although some of the sittings were much too late. Nor do I intend to follow him in his game of song-titles.
      The reasons why we have asked for a Third Reading are twofold; first, because a Third Reading provides a chance to look back on the Budget, to see it whole and to see it in perspective; secondly, because it gives us on this side of the House a chance to register our opposition to the whole of the Bill as one which is
      1454
      economically irrelevant and socially unjust.
      The Budget had one good result. When it was introduced it was a personal success for the Chancellor of the Exchequer, and it certainly is no good for the country if the Chancellor does not command respect. The Budget raised the respect in which he was held, although it has perhaps again become a little worn since. The immediate effect of the Budget on the House was undoubtedly one of euphoria for the Government back benchers; the promises which they cared most about seemed to have been realised. Conservative remedies were being applied and, just as the Government are the most Conservative of post-war Governments, this Budget was the most Conservative of the post-war Budgets.
      The immediate reaction in the City and in industry was to welcome the Budget, to a large extent for much the same reasons, because there is a natural sympathy between the captains of industry and commerce and hon. Gentlemen opposite. At first the popular reaction to the Budget was favourable because the people were dazzled by the size of the tax cuts. There was a momentary recovery in the Government's standing immediately after the Budget which, shortly afterwards, resumed its plunge to deeper and deeper depths.
      I invite hon. Members opposite to look back at the original Budget debates. My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) quoted "Macleod's Law" with some foresight. He quoted Macleod's statement that a Budget that looks good in April is rarely a Budget that looks good in July. This law has proved true with a vengeance, because the euphoria of the benches opposite has evaporated. Only yesterday we heard from the Government's own back benchers widening and deepening rumbles of discontent, and that I think we shall hear more and more. The effect of the Budget was being criticised from the back benches opposite and the whole of the Budget judgment was being questioned.
      The mood of industry is now very different; it is a gloomy mood. If one looks at the popular reaction, the state of the opinion polls is not necessarily of enormous significance looked at over a long time span because the opinion polls go

      1455
      up and down. However, unpopularity has been achieved more quickly and to a greater extent than was achieved by any of the Government's predecessors.
      When one looks at the results of the local elections, who would have thought that one-and-a-half months after the Budget, which was the crowning piece of a programme which has given back £1,000 million in taxes, as the Chief Secretary has boasted, there would be such a disastrous landslide as the loss by the Tory Party of over 2,000 local government seats? Some of us predicted this. Indeed, if I may refer to my own speech in the Budget debate, I said:
      "So when all the smokescreen has been blown away these are the stark facts which emerge—higher unemployment, higher prices, worsening balance of payments, falling manufacturing investment."—[OFFICIAL REPORT, 5th April, 1971; Vol. 815, c. 156.]
      What lessons are to be learned from the Budget? One cannot yet give a final judgment, but certain fundamental flaws in the Government's thinking have become evident.
      The first of these flaws is the fallacy that tax benefits for the wealthy are a short-cut to economic health. When we were in Government the Opposition always told us that the key to economic prosperity and progress was confidence. We were told that confidence could arise only if there were a Conservative Government, and many lectures were delivered to us by the Conservative Opposition. As one moment I almost thought there was something in it. I thought that if business men believed that the measures were the right ones because they approved of them and they thought on similar lines to those who were taking the measures, this might influence their attitude to investment and might mean that the measures were made effective by the psychological reaction to them.
      For a moment it looked as if the Budget might do the trick. At the end of the Budget debate the Chancellor of the Exchequer pointed with glee to the monthly survey of business opinion which appeared in the Financial Times and which seemed to suggest that this was what was happening. When I challenged the right hon. Gentleman about the forecast of investment intention, he said:
      "That figure represents a cautious view, but I would certainly hope … that in the out-
      1456
      come we shall have a better figure for investment than that."—[OFFICIAL REPORT, 5th April, 1971; Vol. 815, c. 164.]
      Since he spoke the figure has gone down and down, and every successive survey from every angle has shown a more pessimistic picture.
      It is clear that this whole argument is based on a total fallacy. In the end business men are far more objective in their assessment of what is good for their investment intentions than right hon. and hon. Gentlemen opposite suppose. Business men look at what will be the demand for their products and an ideological boost is no substitute for proper economic management. That is the first of the Tory fallacies exposed.
      The second lesson from the Budget, and what has happened to the economy since, is that tax reform as such is no substitute for demand management. It is true that to a large extent tax reform has been a neglected subject and, as many hon. Members will know, I have an interest in this matter in more ways than one. Some of the tax reforms proposed in the Budget, and contained in the Finance Bill, were reforms of which we approved. Furthermore, we welcomed the publication of Green Papers following the tradition launched by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan).
      Clearly, tax reform has been the subject that has absorbed the energies of the new régime at the Treasury more than any other. It is an important subject. It is not totally irrelevant to growth, but it is only one of the several factors and not necessarily the most important factor. It certainly will not help if economic management is bad.
      I repeat a warning to the Government which I gave in the early hours of one morning in the Committee stage. The tax pattern for the future is a pretty unpleasant one. If one plots a full employment path for the next few years and if one looks at the pattern of public expenditure and how it is likely to develop on the basis of present plans, this will require an increase in the proportion of the gross national product that will go in taxation by the mid-1970s. I am sure that this is what the medium-term assessments will show the Treasury.
      But at present we have a position of unemployment. We are therefore at a stage where the tax burden has been

      1457
      reduced below the average trend which would be required if we were in a position of full employment. A number of back bench Members opposite have said from time to time that the Budget is splendid and gives a whole series of tax reforms exactly in line with good Conservative thinking, but that, unfortunately, there is one slight stain on the total picture and that is the amount of unemployment. They have said this as if somehow this were no accidental condition, as if there were an unfortunate link between the two conditions. But there is a direct link. It is precisely because the economy is slack and we face a recession that the Chancellor has had to give some boost—in the circumstances, an insufficient boost—and to lower taxation. If one looks at the requirement over the years if we return to a position of full employment, and if one looks at the added promises of further relaxations in the taxation of interest and on property income, the total burden of taxation which will have to be borne will be an increasing and a depressing one, unless the other way out is taken, that of intolerable restrictions on public expenditure.
      The third lesson from the Budget is that the Budget judgment has now been shown to be totally wrong. This subject has been extensively debated and I do not wish to refer to it at any length. It is clear that the base was wrong and that the amount, in any event, was insufficient; and we now face rising unemployment. What is especially disturbing is that it appears to have been based on a persistent bias towards over-optimism in the Treasury estimates. It is true to say that until the beginning of 1969, Treasury estimates were, perhaps, persistently under-estimating the amount of consumption. It is also true that since the beginning of 1969 there has been a constant bias towards over-estimating the amount of growth and the amount of consumption which we are likely to have.
      What is partciularly serious is that in the Buget the Chancellor took the wrong action on prices. We said so at the time, and there is now widespread support, again from certain hon. Members opposite, for this proposition. The Chancellor acted in a manner which provided the effects too late and in sufficiently. They were measures of the wrong kind. The Chancellor and the Treasury
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      Ministers were obsessed by their own propaganda on S.E.T. They whipped up a popular myth that S.E.T. had a big effect on prices. Now it is seen that the effect on prices was vastly over-stated and that a cut in S.E.T. has only a minimal effect on the cost of living. What is more, this a crucial mistake, because the total failure of the Government's policy on prices taints everything, inclding some of the most important things that the Government are trying to do.
      The last lesson is that social inequality is econmically harmful. I fear that the effects of the drive towards greater inequality contained in the Budget are still to come. There are still some chickens to come home to roost.
      I have not made much reference on Report to the inequality contained in the Finance Bill, since it was a constant theme of our debates in Committee. The other points that we have made from the beginning have made a considerable impact on some more discerning hon. Members opposite. For example, the whole question of the Budget judgment has gone home. On this line, we have made no impact so far. But it is clear that the Chancellor of the Exchequer cannot avoid a complete change of strategy in dealing with inflation, and that a voluntary incomes policy must be an important part of that change of strategy. It is also clear that the right hon. Gentleman cannot get within miles of that if he continues to pursue a policy which is so heavily biased towards the wealthy. That is why I say that the final lesson is that social justice is a central part of economic strategy.
      This, therefore, is a Budget which is irrelevant, except in so far as it is harmful. It is totally unjust, and I shall ask my right hon. and hon. Friends to vote against the Motion.
      9.27 p.m.
      Mr. John Farr: I hope that I shall be forgiven if I do not pursue many of the arguments of the hon. and learned Member for Lincoln (Mr. Taverne). He seemed to revel in a cloud of gloom and despondency. He spoke almost with relish about the prospects of unemployment and seemed to sense that, whichever Government were in office, there would be a need for increased taxation in 1974. He went on to say that there was a bias, anyhow,

      1459
      to over-optimism in the Treasury's estimates. Listening to the hon. and learned Gentleman the House may well conclude that, if ever the unfortunate day comes when he has a hand in the Treasury's esimates, one of his first actions will be to see to it that any misplaced bias to over-optimism is eradicated. The hon. and learned Gentleman will do that effectively, I am sure.
      We on this side of the House take a different view. We believe that it is a first-class Budget. It is fair to say that when my right hon. Friend introduced his Budget a few months ago, he did so as a man standing in the shadow of a great statesman. Today, as a result of this Finance Bill, my right hon. Friend stands in no one's shadow. Throughout the country there is a feeling of warm affection for all that he has done for all sections of the community in this Finance Bill.
      I want to specify three points which I find worthy of note. First, I congratulate my right hon. Friend on assessing husbands and wives separately for income tax. I know from personal experience that many wives would have gone back to their previous employments before the Budget if only they had found it worth while financially. I know, for example, of highly skilled physiotherapists, of whom the nation is in desperate need, who, being married with two or three children, would not return to their old jobs. They felt that it was unrewarding financially to go back to work since they would have to employ others to do their housework and look after their children. I congratulate my right hon. Friend warmly on what he has done in that direction.
      Another relief provided in this Finance Bill which has been welcomed by my constituents is the halving of selective employment tax. We hope to see the other half go next year. I know from personal experience what a tremendous amount of wasted time and damping down on initiative this tax has occasioned. For instance, those engaged in farming have had to go through the ludicrous procedure every month of paying S.E.T., which is then held by the tax collector for three or four months before it comes back in the form of a refund. It is difficult to conceive a more ludicrous time-
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      wasting performance for making a forced loan to the tax collector for three or four months before it comes back again. Only a Socialist Chancellor of the Exchequer in his heyday could have conceived such a nonsensical arrangement. I am glad that at least half of the S.E.T. has now gone.
      Thirdly, I should particularly like to congratulate my right hon. Friend on what he did last night. He proved that he and his colleagues on the Treasury Bench were humane enough to accept the critical and valuable new Clause, supported by hon. Members on both sides of the House, relating to disabled persons who, due to their disabilities, are unable to drive motor cars. The Chancellor showed compassion in accepting that valuable proposal which was tabled yesterday by hon. Members on both sides. I know from practical experience that this concession which we have now put into the Bill will make a substantial difference to disabled persons who, being unable to drive, have to rely, for instance, upon their wives, relatives or friends to drive for them.
      If I have any concern about the Bill, it is that the Chancellor has not been energetic enough in tackling the injustice of the application of the capital gains system. My fears about the justice and fairness of the system exist for the following reasons. The Bill contains marginal reliefs, but it does not attempt to tackle the basic injustice and unfairness of the capital gains tax system. It is basically unfair because, at the present rate of inflation, a person's liability for capital gains tax can be doubled within ten years without the slightest increase in the real value of his assets. Hon. Gentlemen opposite do not appear to be particularly concerned. I am thinking of how it affects many people who have relatively small assets and who, due to the rise in the cost of living and the decrease in the value of money, are year by year drawn into the capital gains assessment network. It means that, with stable values, capital gains tax liability is increasing by 10 per cent. per annum.
      Many thousands of holders of small assets have become liable to capital gains tax each year solely as a result of inflation without any increase in the real value of their assets. That is an unfair situation. I hope that the Government

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      will bring inflation under control. If not, then steps must be taken to correct this anomaly in the next Finance Bill.
      Inflation is having a serious effect on small family businesses. It can only hasten their departure from the scene. It may be that, in the interests of national efficiency, we should get rid of some family businesses, but I should hate to see them have to leave the scene in this way.
      On the whole, this is a fine Budget. After the dead hand of Socialist financial control for five or six years, with continually rising taxation, and with the usual Socialist devaluation, it is like a breath of fresh air to have a Bill containing a good measure of Conservative common sense.
      9.35 p.m.
      Mr. A. E. P. Duffy: The hon. Member for Harborough (Mr. Farr) claims that this is a fine Budget, but he must be blind if he cannot see the evidence on all sides that the Budget judgment is already being reconsidered by his right hon. Friend, and that a fresh stimulus to spending is on the way. The hon. Gentleman will feel foolish on the day when that is introduced.
      Whatever views may be entertained about the adequacy of the stimulus, there must be growing doubts among hon. Gentlemen opposite about the timing of it. It is surely now clear that the individual measures were badly chosen by the Chancellor, simply because their impact has been slow-acting, and has been too long delayed. Only now, in this week, are we beginning to enjoy the effects of fiscal boosts.
      As a result, total spending in the first half year is considered to be less than originally estimated by the Chancellor—according to the National Institute as much as £600 million less on consumer expenditure—and the disappointing behaviour of exports is playing just as large a rôle as the shortfall in consumption, and this is what I find especially disturbing. The duty of the Government, therefore, is to ensure, first, that a large part of any stimulus that may be forthcoming is directed towards the expansion of exports and, secondly, in that way to ensure that any stimulus will not stoke up inflation.
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      The behaviour of prices is crucial, and anything that the Chancellor can do, through the use of the regulator, to damp down prices will be widely welcomed because, as my hon. and learned Friend the Member for Lincoln (Mr. Taverne) said, the investment intentions that have been revealed since the first short-lived euphoria are now shocking. Investment follows, and not leads, and therefore there are further grounds for the use of the consumer tax regulator.
      There is also a case for making exporting profitable if a safe and continuing assault is to be made on unemployment. This is my major point this evening, and in the two or three minutes that remain to me I want to mention my own City of Sheffield. I am sorry that the Chancellor could not remain, because I was going to invoke our common Yorkshire background. I was going to remind him that though we may be broadly accustomed though by no means reconciled to higher levels of unemployment in some parts of Yorkshire, especially in the heart of the coalfield, than in other parts of the country, I am sure he would agree with me that never at any time, in our worst moods, until recently, would we have imagined that a city like Sheffield could have been the scene of such rising unemployment.
      The position now is that unemployment there is at its highest since 1939. It has doubled during the last year. Last week there emerged the prospect of 4,500 redundancies in the local steel industry. This week the Darnall firm of Cravens Homalloy, in my constituency, announced plans to make large-scale redundancies in the next few weeks, and 20 per cent. of the city's school leavers are expected to be on the dole before the summer is out.
      As a result, a spectre is haunting Sheffield tonight, a spectre of fear, the fear of unemployment. It will also be haunting the chambers of the City Council in its proceedings tonight, because the Council is debating the position, and I imagine that it will, as a result, ask me to join it in making representations to the Government for the granting to it of intermediate area status.
      The Chancellor has it within his power to relieve Sheffield of this fear. If only he will take the course of action that I have prescribed and provide some stimulus to our economy. Yet I recognise his

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      difficulties. I hope that he will do what we all want in Sheffield and give an impetus to exports. He could then safely use the regulator without worrying that he would also be stoking up inflation.
      9.41 p.m.
      Mr. Percy Grieve: I am happy and proud to welcome this Finance Bill in the very words used of it by the hon. Member for Lincoln (Mr. Taverne)—the most Conservative Finance Bill since the war. Perhaps I do not use the word in the same sense. It is Conservative in taking taxes off the backs of the people. It is Conservative in reducing taxes by £1,000 million a year. It is Conservative in initiating a great radical reform of the whole tax system such as no Government have undertaken since the war and such as we did not see in the six Socialist Budgets that I have seen since I became a Member.
      Indeed, this Finance Bill is Conservative in the sense that it is undoing many of the more vicious Socialist Measures which we had to suffer through six years of Socialist Government. I will not repeat the welcome which my hon. Friend the Member for Harborough (Mr. Farr) has already given to parts of the Bill, but there are some to which I wish to refer.
      The first is the abolition of capital gains tax on assets realised upon death. This was a vicious double swipe at the lifetime savings of men, who normally died before their wives, and whose wives are therefore left even poorer.
      I particularly welcome Clause 13, which does away with one of the most vicious Measures of the last Government—the aggregation of children's incomes with those of their parents. At the time that this was done, we were treated by the then Chief Secretary—now Diamond cutting diamond in another place—to a wonderful new principle, that family income should be treated as one, although of course this was not applied to earned income but only to unearned income.
      It seemed to revert to some form of tribalism which exists nowhere else in the world. We all knew that the true reason for that measure, which hit at children deriving incomes from legacies, was not in aid of some new principle of the unity of the family but in order to make it even more difficult for families
      1464
      to pay the school bills of their children when they were educated independently.
      I particularly welcome the disaggregation of the incomes of working husbands and wives. It has always seemed to me one of the most grossly unfair parts of our fiscal system that marriage should in many cases increase the tax burden of the couple. I was interested to note the other day the proposal of the Law Commission that we should now have a double form of marriage—a civil service and a religious service. I wondered whether that might not be a way of getting around this vice in our tax system, because it might be possible to be married in the eyes of God but not in the eyes of the State.
      But I also thought that, whenever such a measure is introduced, if a Conservative Government have not succeeded in abolishing altogether the aggregation of the income of husbands and wives, there might be some clause providing that one could not be married in the eyes of God without going through the State ceremony first—
      Mr. Loughlin: Has the hon. and learned Gentleman ever reflected that perhaps marriage is a contract between two people who do not trust each other?
      Mr. Grieve: I cannot speak for the hon. Gentleman's experience of marriage. It is not my own, and I would not so describe it.
      I am sorry that the Chancellor, in introducing a great and sensible measure of reform, did not feel able to go further and enable husbands and wives to opt for their incomes to be taxed separately, whether they are from earnings or investments. In leaving the investments of husbands and wives aggregated, as they are at present, there is a further element of discrimination in our tax system against investment income.
      Although I appreciate that to have disaggregated such incomes altogether would have been costly, I hope that in due course, in justice and fairness—indeed, in fairness to the institution of marriage—the time will come when the Chancellor will feel able to dis-aggregate both the investment income and earned income of husbands and wives.
      I will not reiterate what has been said by way of welcome to many of the other reforms in the Finance Bill, including

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      the halfway house to the abolition of S.E.T., a tax which penalised the service industries, industries which alone saved the revenues of this country and our foreign exchange in the last years of Socialist misgovernment.
      This is a first and substantial Measure of reform. When it has been carried into law it will go a long way to putting the country on its feet economically and restoring some of the damage that six years of Socialist misgovernment have done to our economy.
      9.48 p.m.
      Mr. Dalyell: For about two hours in Committee upstairs and for a short while on the Floor of the House yesterday we discussed the question of L.P.G. This is an important issue, partly because it typifies the Government's attitude towards the anti-pollution campaign and partly because it brings into question the whole business of Treasury advice.
      The information we have today is that devices for fitting to petrol engines are not suitable for leaded petrol which is necessary for the majority of cars. The lead, which improves the octane rating, poisons the catalyst in the device, making it ineffective. Alternative means of raising octane ratings include aromatics already suspected of contributing to carcinogenic compounds in exhaust gases. This may seem detail, but it is important that somebody puts it on the record and it is realised that the Treasury can be wrong.
      The reference of the Minister of State to diesel engines meant choosing one pollutant—a blatant selection of facts by Ministers and their advisers—in the selection of carbon monoxide, where diesel performance is outstanding. Other pollutants—hydrocarbons, oxides of nitrogen and unburnt carbon; in other words, soot—are ignored. However, industry has not ignored them so readily and, given the choice of diesel or L.P.G.-powered forklift trucks for use in a confined space, the exclusive choice is L.P.G.
      Further, the Minister of State referred to measures to prevent the emission of fumes from the crankcases of new cars. These fumes are unburnt hydrocarbons. Hydrocarbon emission from diesel exhaust may be 100 times greater than from the L.P.G. engine. Oxides of nitrogen may be 10 times greater. The carbon or soot which is familiar from
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      diesel exhaust is not measurable in the case of L.P.G. and, for example, buses in Vienna use 30 per cent. L.P.G. which is added to clean up exhaust gases.
      As a back bencher, even as an Opposition back bencher, one stands not a chance against the Treasury machine unless one is prepared to be specific and detailed. We have been both specific and detailed, and the hope is not that anything will be done in 1971, but that the function of a Committee stage and the hours we have spent in the Committee will be fulfilled by a facing up to the problem next year, and a shift of policy. That is why I have ventured once again to intrude in these debates.
      9.52 p.m.
      Mr. David Mitchell: I listened with fascination to the hon. and learned Member for Lincoln (Mr. Taverne) leading the Opposition's case against the Third Reading of the Bill. I thought he was a little uncharitable and did less than justice to the Budget. Perhaps that is to be expected from Opposition benches in any case, and I do not quibble about it.
      The hon. and learned Gentleman first talked about "Macleod's Law", and told us that a Budget that looks good in April does not look good in July. The quotation is perfectly fair, but I am not concerned about what it looks like now but about its effect, and the whole Budget is designed around a delaying effect which will not come into operation until later this year. If after 12 months the hon. and learned Gentleman can still maintain that his present Budget judgment is right I will be happy to concede the point, but I doubt whether his Budget judgment will prove any better than it was when he and his colleagues were on the Treasury Bench.
      Second, the hon. and learned Gentleman referred to the confidence factor. He said, quite rightly, that business men are hard headed; that they look at the demand for their product and at their profits, and are not concerned with the ideological boost. This is true, but the effect of the Budget has not so far been seen in the business world. Business looks at its post-tax profit, and when the cuts in corporation tax come into effect and busines men see themselves getting a lower tax bill at the end of the year, we shall begin to see the Budget's effect.

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      I believe that it is quite right to work on the theme of making profits hard to get but well worthwhile once they have been made. As I see it, this is part of the strategy which my right hon Friend the Chancellor of the Exchequer has followed here. How easy it would have been, and how popular, to latch on to the Opposition's demand to give a general boost to the economy; to feed out money which would merely find its way into satisfying wage inflation. That may be the desire of hon. Members opposite, especially those who are chuckling at that suggestion, but the reality is that the effect on costs would be devastating.
      Thirdly, the hon. and learned Member said that unemployment at its present levels is not accidental. I am glad that he recognises that it is not accidental. It is a direct result of inflationary wage settlements, many of which are being strongly supported by his colleagues on that side. From the contacts I have in industry, and the discussions I have had there, I see quite clearly two things happening at present. Because of inflationary wage settlements, industry is forced to look for economies. Some cost increases, though not all, are being passed on as price increases, but every time an increase has to be made there is first a search for economies. One of the principal economies sought for is in labour. If a firm can do without someone, that is one economy. Many industries are pricing themselves out of the market because of the high level of wage settlements they have been forced to accept. This applies particularly to assembly industries, such as shipbuilding.
      So I take this part of the criticism of hon. Members opposite and throw it back in their teeth and ask them whether they will go round the trade union conferences in the autumn and tell their friends there that the quickest way to increase unemployment is to press for inflationary wage settlements. Will they nave the courage in the national interest and not just in the party interest to urge on the union conferences a degree of moderation and restraint in order to ensure that one of the major costs, which lies in their hands, is not increased in a way which will reflect itself in escalating prices in the months ahead?
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      The hon. and learned Gentleman referred to a bias in the Budget judgment in favour of the wealthy. I say simply that one cannot help the poor by pulling down the rich; that one cannot help the wage-earner by pulling down the wage-payer; that one cannot create full employment by kicking the employer in the teeth. [An HON. MEMBER: "Why not?"] That sort of facile remark is an indication of the lack of reality which so often pervades hon. Members opposite. One cannot encourage investment without making it worth while for the investor. When looking at the Budget judgment, these are the things which the House should have in mind. For these reasons, I thoroughly welcome the Budget and look forward to more budgets reducing taxation further in the coming years of this Government.
      9.57 p.m.
      Mr. Barnett Mr. Barnett rose—
      Mr. Loughlin Mr. Loughlin rose—
      Mr. Speaker: Mr. Barnett.
      Mr. Loughlin: On a point of order, Mr. Speaker. I would like clarification. I understand that this debate is unrestricted in time and that even after my hon. Friend the Member for Heywood and Royton (Mr. Barnett) speaks no other hon. Member is prohibited from speaking afterwards. Can I have that Ruling?
      Mr. Speaker: Subject to the rules about the Closure and so on, this is unrestricted business, but it is a convention of the House that when a Front Bench speaker gets up the Chair calls him.
      Mr. Loughlin: I am sorry, but I must pursue this. I accept that once a Front Bencher stands up he is, in effect, attempting to exclude back benchers, not in the sense of time but by virtue of the very point you make when you say that it is subject to the moving of the Closure. I would like some guidance on this, because, apart from my own case now, it is important to back benchers that Front Benchers should not take to themselves the right of closure of debates. In view of the fact that I stood up after telling my hon. Friend that I was going to stand up, can I have your assurance that if the Closure is moved immediately he sits down you will refuse to accept it?
      Mr. Speaker: I have considerable sympathy with the hon. Gentleman's point of view. I think these are matters which must be ironed out on his side of the House. But he will not expect the Chair to give any undertaking as to when it will or will not accept the Closure. I will certainly bear in mind the general situation of the debate and whether I think it is right to allow the Closure. But this is really one of those House of Commons situations which usually are ironed out either on one side or the other.
      Mr. Barnett: I have considerable sympathy with my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). I certainly have no wish to shut him out if he wishes to speak afterwards. He is perfectly free to exercise that right and I would not seek to prevent him.
      The hon. Member for Basingstoke (Mr. David Mitchell) was a little audacious to suggest to us on this side that we should recommend trade unionists to co-operate with the Government in a prices and incomes policy in view of what the Government are doing in the Bill. When the Chief Secretary opened this debate, he gave us some song titles. He said that he would not sing them to us because he was generally out of tune. It is equally true, I suppose, that this year's Finance Bill is out of tune with realities, except the realities of the few hon. Members opposite who have spoken in the debate and have appeared to come from another world with some other kind of realities.
      The Chancellor's words on Second Reading have turned sour by the time we reach Third Reading. If anyone doubts that, one has only to look at the Chancellor's words on Second Reading, when he told us that he was creating
      "a nation which combines … fairness and success."
      It was interesting that the Chief Secretary certainly did not repeat those words tonight, because nobody in his right mind could imagine that the Bill creates either fairness or success.
      The Chancellor went on to tell us that he was giving
      "a modest stimulus to demand, and to … stimulate investment and assist the fight against inflation."
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      If anybody could believe that today, it would be very surprising. Once again, the Chief Secretary did not feel able to say anything about this.
      The Chancellor told us that
      "Business confidence should be helped".
      As my hon. and learned Friend the Member for Lincoln (Mr. Taverne) pointed out, if business confidence has been helped, it is not noticeable, because the last business survey indicated clearly that business men's confidence has certainly not been stimulated, to judge by their view of what is likely to happen to industrial investment.
      The Chancellor went on to tell us that
      "the reaction throughout the country has been one of approval".—[OFFICIAL REPORT, 28th April, 1971; Vol. 816. c. 439, 440, 441, 451.]
      If anyone could believe that after the Bromsgrove by-election and the local government elections, I would be very surprised. Certainly, we never heard the Chief Secretary say anything about it when he spoke on Third Reading.
      Thus, three months after the Budget, both the economic and the tax effects are disastrous, both in the short term and in the long term. Economically, it is now clear that the Chancellor's judgment was wrong in March. This in itself is no terrible thing. It would not have been terrible had the Chancellor conceded that at the time he made his Budget judgment he thought that that was the situation, but that within a few months, when the figures came out, it turned out that he was wrong, as everybody else now recognises. What is terrible is the failure of the Chancellor to admit that he was wrong when the figures are put before him, because that is what is happening today.
      We see inflation raging on, with no chance of the sort of co-operation with trade unions about which the hon. Member for Basingstoke spoke. Even with the belated measures that the Government propose to introduce, unemployment will still, at best, stick around the 800,000 or 900,000 level and output is unlikely to reach even our productive potential. Above all, however, industrial investment is in decline with appalling consequences for our long-term prospects. So much for the economy under the Tories 12 months after they won the Election.

      1471
      And so one comes to the Finance Bill and the new taxation philosophy of the Chancellor. On a previous occasion, I spoke about the bogus nature of the reform, the value-added tax and the corporation tax. The value-added tax is something new but it is certainly no simplification. As used by the present Government, it seems likely to be far from a progressive reform.
      It is now clear that our suspicions were well founded about the one genuine reform in the Bill—the unification of income tax and surtax. It is clear that the Chancellor's intention is to use this reform as a cloak for reactionary tax changes. There is no doubt, as we found in our debates both on the Floor of the House and in Standing Committee, that the whole of this unification proposal is intended to disguise the fact that it will be utilised in a way which will fall most harshly on the lower end of the income scale, because, without a substantial increase in economic growth and with rising public expenditure, paid for unfairly under the Government's proposals, any proposed reduction in tax on investment income at the higher income scales, as the Government propose under the unification system, can be only at the expense, not just of the lower end of the tax scale, but of the majority of tax payers.
      The only excuse there could have been for this Finance Bill would have been that it was worth temporarily widening the gap between the lowest and the highest ends of the income scale for some kind of longer-term incentive from this method. But it has all been done without any kind of evidence that it will have that kind of incentive effect. It is therefore not surprising that we see no sign yet of any incentive effect causing a massive upsurge in effort.
      Indeed, the only upsurge in effort resulting from the Bill has been that made available to all those who have the opportunity to use the Bill to obtain bigger and bigger tax reliefs from the additional tax avoidance opportunities left for them. If the philosophy in the Bill is that of a Conservative Government and if it foreshadows more of the same in a future Finance Bill, when the Prime Minister vacates No. 10 it will be a much less united country he leaves behind. We
      1472
      condemn this divisive philosophy, and I ask my hon. Friends to vote against it in the Lobby.
      10.8 p.m.
      Mr. Higgins: This is a reforming Finance Bill and it begins and foreshadows a transformation of the tax system which has grown complicated and oppressive. It thus redeems the Government's election pledge to reduce taxation and to simplify the tax system. The Government believes that by easing the pressures of taxation especially on families, they are making a contribution towards checking inflation; and that by simplifying the system and by getting rid of the indefensibly high marginal rates on the higher incomes, and by encouraging savings, they will encourage personal initiative, which is an essential ingredient of economic growth.
      It is worth recalling that the revenue cost involved is the biggest in any Budget since the war. When the hon. and learned Member for Lincoln (Mr. Taverne) says that it is irrelevant, except in as much as it is harmful, that is a quantitative assertion worth bearing in mind, because the Budget will mean a substantial increase in the size of the market available to our producers. This is bound to encourage investment, for it will be widely agreed that the prospect of a growing market is a most important condition for a healthy level of investment.
      But the question of timing is important and the major parts of the Budget with regard to the child allowances and the cuts in S.E.T. are only just beginning to take effect. Related to other measures, such as the cut in corporation tax and the cut in personal income tax announced earlier, these measures will do much to improve the economic climate.
      My hon. Friend the Member for Harborough (Mr. Farr) pointed out that the cut in S.E.T. would halve the forced loan of manufacturing industry and thereby increase company liquidity at a time when that was very important. Similarly, the Bill will make a contribution to the fight against inflation because the increase in the child allowances will raise the standard of living of families and the tax liability of a married man with two children will be reduced, if he is on average industrial earnings, by 60p a week. This is in addition to the tax cut on the standard rate which has already

      1473
      been made. Combined with the policy of de-escalation of inflationary wage claims which the Government are pursuing we shall have taken an important step towards curing what is undoubtedly the most pressing of our economic problems.
      We have, of course, had a number of fascinating debates, whether on the disabled or on the question of pollution. To answer the specific point raised by the hon. Member for West Lothian (Mr. Dalyell), in reaching a decision on the question of the use of gas for vehicles we were looking at all the various pollutants from vehicles and it was the question of total pollution, as I stressed at the time, which we regarded as important.
      The process of simplication, particularly with regard to close companies, will be important not only in reducing the burden on the revenue but also in reducing the burden of work which has to be done in a number of small firms. This will mean that they will be able to concentrate their efforts on running their businesses rather than seeking to solve complicated tax problems.
      Similarly we are now engaged on a major programme of tax reform of which the unification of income and surtax is the first step. The hon. and learned Member for Lincoln says that tax reform is no substitute for demand management and that we can accept. The change to unification will mean that people can more readily understand what is their tax burden. We shall be introducing provisions for charging the first slice of investment income at the earned income rate. That will be important in encouraging savings. We have introduced further Green Papers on the value-added tax and corporation tax and are engaged in a major programme stretching over a number of years.
      As to the accusation that the Bill is socially unjust I can only say that that is complete nonsense. Hon. Gentlemen opposite just will not recognise the very large range of measures which we have introduced over the last year to help those most in need. In our first year of office we have reduced the tax burden by some £1,000 million, which is in marked contrast
      to the Finance Bills we had under the previous Administration. This approach is embodied in this Bill and I ask my hon. and right hon. Friends to support it.
      Mr. Loughlin: Before the hon. Gentleman sits down—[HON. MEMBERS: "TOO late."]—I am not too late. There is no time limit. The hon. Gentleman talked about a reduction in income tax and this is something which we ought to examine in more detail. Using the figures given by the hon. Gentleman in the last two or three minutes it looks good. He said something about reducing the total burden of income tax by £1,000 million. He is talking about direct taxation. The Government are changing the system from direct to indirect taxation. It is easy for the Government to give tax reductions of £1,000 million to certain strata of society if at the same time they change the system of income tax levies so that more tax is paid indirectly than directly. That is what the Government are doing.
      If the 10 Orders which we discussed last week—and I protested that we had only one-and-a-half hours to discuss them—as a consequence of which the housewife has to pay a greater amount of tax over the counter—[Interruption.] I know that the Chief Secretary is not interested in indirect taxation. He is not interested in the housewife or in the average person. He is solely interested in people who have made contributions to the Conservative Party and who are now getting the payoff.
      The point is that this Bill tells only half the story. [An HON. MEMBER: "Tell the other half."] If the hon. Gentleman wants to intervene, I do not mind; we have all the time in the world. There is no point—[HON. MEMBERS: "Hear, hear."]—in claiming credit for a Bill which reduces the taxation burden on people who can afford to pay taxes if the Government's policy increases the taxation burden on those who cannot afford to pay taxes.
      Question put:—
      The House divided: Ayes 206. Noes 177.

      Division No. 414.]

      AYES

      10.18 p.m.

      Adley, Robert

      Archer, Jeffery (Louth)

      Awdry, Daniel

      Alison, Michael (Barkston Ash)

      Astor, John

      Baker, Kenneth (St. Marylebone)

      Allason, James (Hemel Hempstead)

      Atkins, Humphrey

      Balniel, Lord

      Barber, Rt. Hn. Anthony

      Grieve, Percy

      Owen, Idris (Stockport, N.)

      Batsford, Brian

      Gummer, Selwyn

      Page, Graham (Crosby)

      Bennett, Sir Frederic (Torquay)

      Hall, Miss Joan (Keighley)

      Page, John (Harrow, W.)

      Berry, Hn. Anthony

      Hall, John (Wycombe)

      Parkinson, Cecil (Enfield, W.)

      Biffen, John

      Hamilton, Michael (Salisbury)

      Percival, Ian

      Biggs-Davison, John

      Hannam, John (Exeter)

      Pike, Miss Mervyn

      Blaker, Peter

      Harrison, Col, Sir Harwood (Eye)

      Pounder, Rafton

      Boardman, Tom (Leicester, S. W.)

      Haselhurst, Alan

      Powell, Rt. Hn. J. Enoch

      Body, Richard

      Hastings, Stephen

      Pym, Rt. Hn. Francis

      Boscawen, Robert

      Hayhoe, Barney

      Rawlinson, Rt. Hn. Sir Peter

      Bossom, Sir Clive

      Hicks, Robert

      Redmond, Robert

      Bowden, Andrew

      Higgins, Terence L.

      Reed, Laurance (Bolton, E.)

      Boyd-Carpenter, Rt. Hn. John

      Holt, Miss Mary

      Rees, Peter (Dover)

      Braine, Bernard

      Hordern, Peter

      Renton, Rt. Hn. Sir David

      Brinton, Sir Tatton

      Hornsby-Smith, Rt. Hn. Dame Patricia

      Ridley, Hn. Nicholas

      Brocklebank-Fowler, Christopher

      Howe, Hn. Sir Geoffrey (Reigate)

      Ridsdale, Julian

      Brown, Sir Edward (Bath)

      Howell, Ralph (Norfolk, N.)

      Rossi, Hugh (Hornsey)

      Buchanan-Smith, Alick (Angus, N amp; M)

      Hunt, John

      Russell, Sir Ronald

      Buck, Antony

      Hutchison, Michael Clark

      Sandys, Rt. Hn. D.

      Bullus, Sir Eric

      Irvine, Bryant Godman (Rye)

      Scott-Hopkins, James

      Burden, F. A.

      Jenkin, Patrick (Woodford)

      Sharples, Richard

      Butler, Adam (Bosworth)

      Jessel, Toby

      Shaw, Michael (Sc'b'gh amp; Whitby)

      Cary, Sir Robert

      Joseph, Rt. Hn. Sir Keith

      Shelton, William (Ctapham)

      Channon, Paul

      Kellett-Bowman, Mrs. Elaine

      Sinclair, Sir George

      Chapman, Sydney

      Kershaw, Anthony

      Skeet, T. H. H.

      Chichester-Clark, R.

      Kilfedder, James

      Smith, Dudley (W'wick amp; L'mington)

      Clarke, Kenneth (Rushcliffe)

      Kimball, Marcus

      Soref, Harold

      Clegg, Walter

      King, Evelyn (Dorset, S.)

      Speed, Keith

      Cockeram, Eric

      King, Tom (Bridgwater)

      Spence, John

      Cooke, Robert

      Kinsey, J. R.

      Sproat, lain

      Coombs, Derek

      Knight, Mrs. Jill

      Stainton, Keith

      Cooper, A. E.

      Knox, David

      Stanbrook, Ivor

      Cordle, John

      Legge-Bourke, Sir Harry

      Stewart-Smith, D. G. (Belper)

      Corfield, Rt. Hn. Frederick

      Longden, Gilbert

      Stodart, Anthony (Edinburgh, W.)

      Cormack, Patrick

      Loveridge, John

      Stokes, John

      Costain, A. P.

      Luce, R. N.

      Stuttaford, Dr. Tom

      Critchley, Julian

      MacArthur, Ian

      Sutcliffe, John

      Crouch, David

      McCrindle, R. A.

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

      Curran, Charles

      Maclean, Sir Fitzroy

      Taylor, Frank (Moss Side)

      Davies, Rt. Hn. John (Knutsford)

      McMaster, Stanley

      Taylor, Robert (Croydon, N. W.)

      d'Avigdor-Goldsmid, Sir Henry

      Macmillan, Maurice (Farnham)

      Tebbit, Norman

      d'Avigdor-Goldsmid, Maj.-Gen. James

      McNair-Wilson, Patrick (NewForest)

      Temple, John M.

      Deedes, Rt. Hn. W. F.

      Madden, Martin

      Thompson, Sir Richard (Croydon, S.)

      Dodds-Parker, Douglas

      Madel, David

      Trafford, Dr. Anthony

      Douglas-Home, Rt. Hn. Sir Alec

      Maginnis, John E.

      Turton, Rt. Hn. Sir Robin

      Eden, Sir John

      Mather, Carol

      van Straubenzee. W R.

      Elliot, Capt. Walter (Carshalton)

      Maude, Angus

      Vaughan, Dr. Gerard

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

      Mawby, Ray

      Vickers, Dame Joan

      Eyre, Reginald

      Meyer, Sir Anthony

      Waddington, David

      Farr, John

      Mills, Stratton (Belfast, N.)

      Walder, David (Clitheroe)

      Fell, Anthony

      Mitchell, Lt.-Col. C. (Aberdeenshire, W.)

      Walker, Rt. Hn. Peter (Worcester)

      Fenner, Mrs. Peggy

      Mitchell, David (Basingstoke)

      Walker-Smith, Rt. Hn. Sir Derek

      Finsberg, Geoffrey (Hampstead)

      Moate, Roger

      Wall, Patrick

      Fisher, Nigel (Surbiton)

      Molyneaux, James

      Walters, Dennis

      Fletcher-Cooke, Charles

      Monks, Mrs. Connie

      Ward, Dame Irene

      Fookes, Miss Janet

      Monro, Hector

      Warren, Kenneth

      Fortescue, Tim

      Montgomery, Fergus

      Wells, John (Maidstone)

      Gilmour, Ian (Norfolk, C.)

      More, Jasper

      Wiggin, Jerry

      Gilmour, Sir John (Fife, E.)

      Morgan, Geraint (Denbigh)

      Wilkinson, John

      Glyn, Dr. Alan

      Morgan-Giles, Rear-Adm.

      Wolrige-Gordon, Patrick

      Goodhart, Philip

      Morrison, Charles (Devizes)

      Wood, Rt. Hn. Richard

      Goodhew, Victor

      Mudd, David

      Woodhouse, Hn. Christopher

      Gorst, John

      Murton, Oscar

      Wylie, Rt. Hn. N. R.

      Gower, Raymond

      Nabarro, Sir Gerald

      Grant, Anthony (Harrow, C.)

      Normanton, Tom

      TELLERS FOR THE AYES:

      Gray, Hamish

      Nott, John

      Mr. Paul Hawkins and

      Green, Alan

      Oppenheim, Mrs. Sally

      Mr. Bernard Weatherill

      NOES

      Abse, Leo

      Buchan, Norman

      Cox, Thomas (Wandsworth, C.)

      Albu, Austen

      Buchanan, Richard (G'gow Sp'burn)

      Crawshaw, Richard

      Allaun, Frank (Salford, E.)

      Callaghan, Rt. Hn. James

      Dalyell, Tam

      Allen, Scholefield

      Campbell, I. (Dunbartonshire, W.)

      Davidson, Arthur

      Ashton, Joe

      Cant, R. B.

      Davies, Denzil (Llanelly)

      Atkinson, Norman

      Carmichael, Neil

      Davies, S. O. (Merthyr Tydvil)

      Bagier, Gordon A. T.

      Carter-Jones, Lewis (Eccles)

      Davis, Clinton (Hackney, C.)

      Barnett, Joel

      Castle, Rt. Hn. Barbara

      Davis, Terry (Bromsgrove)

      Beaney, Alan

      Clark, David (Colne Valley)

      de Freitas, Rt. Hn. Sir Geoffrey

      Bennett, James (Glasgow, Bridgeton)

      Cocks, Michael (Bristol, S.)

      Dempsey, James

      Blenkinsop, Arthur

      Cohen, Stanley

      Doig, Peter

      Boardman, H. (Leigh)

      Coleman, Donald

      Douglas-Mann, Bruce

      Booth, Albert

      Concannon, J. D.

      Driberg, Tom

      1476

      1477

      Duffy, A. E. P.

      Kinnock, Neil

      Pendry, Tom

      Dunnett, Jack

      Latham, Arthur

      Pentland, Norman

      Eadie, Alex

      Lawson, George

      Price, J. T. (Westhoughton)

      Edwards, Robert (Bilston)

      Leadbitter, Ted

      Price, William (Rugby)

      Evans, Fred

      Lee, Rt. Hn. Frederick

      Probert, Arthur

      Fernyhough, Rt. Hn. E.

      Lestor, Miss Joan

      Rees, Merlyn (Leeds, S.)

      Fisher, Mrs. Doris (B'ham, Ladywood)

      Lomas, Kenneth

      Richard, Ivor

      Fletcher, Ted (Darlington)

      Loughlin, Charles

      Roberts, Albert (Normanton)

      Foley, Maurice

      Lyons, Edward (Bradford, E.)

      Roberts, Rt. Hn. Goronwy (Caernarvon)

      Ford, Ben

      Mabon, Dr. J. Dickson

      Rodgers, William (Stockton-on-Tees)

      Forrester, John

      McBrdie, Neil

      Roper, John

      Fraser, John (Norwood)

      McCann, John

      Rose, Paul B.

      Freeson, Reginald

      McCartney, Hugh

      Ross, Rt. Hn. William (Kilmarnock)

      Galpern, Sir Myer

      McGuire, Michael

      Sandelson, Neville

      Gilbert, Dr. John

      Mackenzie, Gregor

      Sheldon, Robert (Ashton-under-Lyne)

      Ginsburg, David

      Mackie, John

      Silkin, Rt. Hn. John (Deptford)

      Golding, John

      Maclennan, Robert

      Silkin, Hn. S. C. (Dulwich)

      Gordon Walker, Rt. Hn. P. C.

      McMillan, Tom (Glasgow, C.)

      Skinner, Dennis

      Gourlay, Harry

      McNamara, J. Kevin

      Small, William

      Grant, George (Morpeth)

      Mahon, Simon (Bootle)

      Smith, John (Lanarkshire, N.)

      Griffiths, Eddie (Brightside)

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

      Stallard, A. W.

      Hamilton, James (Bothwell)

      Marks, Kenneth

      Steel, David

      Hamilton, William (Fife, W.)

      Marquand, David

      Stewart, Donald (Western Isles)

      Harman, William (G'gow, Maryhill)

      Marsden, F.

      Stewart, Rt. Hn. Michael (Fulham)

      Hardy, Peter

      Marshall, Dr. Edmund

      Stoddart, David (Swindon)

      Harrison, Walter (Wakefield)

      Meacher, Michael

      Strang, Gavin

      Heffer, Eric S.

      Mellish, Rt. Hn. Robert

      Summerskill, Hn. Dr. Shirley

      Hooson, Emlyn

      Mendelson, John

      Taverne, Dick

      Horam, John

      Millan, Bruce

      Thomas, Rt. Hn. George (Cardiff, W.)

      Huckfield, Leslie

      Miller, Dr. M. S.

      Tinn, James

      Hughes, Rt. Hn. Cledwyn (Anglesey)

      Milne, Edward (Blyth)

      Torney, Tom

      Hughes, Robert (Aberdeen, N.)

      Mitchell, R. C. (S'hampton, lichen)

      Urwin, T. W.

      Hughes, Roy (Newport)

      Morgan, Elystan (Cardiganshire)

      Varley, Eric G.

      Hunter, Adam

      Morris, Alfred (Wythenshawe)

      Walker, Harold (Doncaster)

      Irvine, Rt. Hn. Sir Arthur (EdgeHill)

      Morris, Charles R. (Openshaw)

      Watkins, David

      Janner, Greville

      Morris, Rt. Hn. John (Aberavon)

      Weitzman, David

      Jay, Rt. Hn. Douglas

      Moyle, Roland

      White, James (Glasgow, Pollok)

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

      Murray, Ronald King

      Whitehead, Phillip

      Jenkins, Rt. Hn. Roy (Stechford)

      O'Halloran, Michael

      Willey, Rt. Hn. Frederick

      John, Brynmor

      O'Malley, Brian

      Williams, Mrs. Shirley (Hitchin)

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

      Oram, Bert

      Wilson, Rt. Ht. Harold (Huyton)

      Johnson, Walter (Derby, S.)

      Oswald, Thomas

      Wilson, William (Coventry, S.)

      Jones, Barry (Flint, E.)

      Owen, Dr. David (Plymouth, Sutton)

      Woof, Robert

      Jones, Dan (Burnley)

      Paget, n. T,

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

      Parker, John (Dagenham)

      TELLERS FOR THE NOES:

      Jones Gwynoro (Carmarthen)

      Parry, Robert (Liverpool, Exchange)

      Mr. James Dunn and

      Jones, T. Alec (Rhondda, W.)

      Pavitt, Laurie

      Mr. Ernest Perry

      Kaufman, Gerald

      Bill accordingly read the Third time, and passed.

CHILDREN (ACCIDENTAL POISONING)
Motion made, and Question proposed. That this House do now adjourn.—[Mr. Humphrey Atkins.]
10.27 p.m.
Mr. Greville Janner: I am happy to have the opportunity to draw to the attention of the House the monstrous and quite unnecessary suffering caused through the accidental poisoning of children. The problem is a very large one indeed. It is estimated that this year some 25,000 children will find their way into hospital suffering from accidental poisoning. This is nothing more than the tip of the poisoned iceberg. There are also thousands more children who are treated by their general practitioners or indeed by their parents.
The worst aspect of the problem is that it is so very unnecessary and its causes are obvious. The first cause is carelessness—carelessness on the part of the parents, and also on the part of those who welcome small children to their homes and who forget that anything that is available is likely to be popped into the mouth of a child under the age of five and to cause harm.
The figures for Leicester are quite shocking. Already this year some 139 children have been admitted to Leicester hospitals, mainly to the Leicester Royal Infirmary, suffering from poisoning, as opposed to 145 for the whole of last year. In other words, the figure appears nearly to have doubled.
The information provided by the Minister to my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden), shows that the figures have increased every year—17,171 in 1966; 20,616 in 1967; 23,409 in 1968. The increase shows in all types of poisoning, but medicinal poisoning is the most important and severe. In 1968, of 20,285 children under the age of five who were accidentally poisoned, nearly 14,000 cases resulted from the adverse effects of medicinal agencies.
The other cause of this poisoning has been the unhappy lack of Government action—and I do not attack the present Administration any more than past Ad-
1480
ministrations. This problem has been ignored by all Governments. A great deal can be done by parents, by health visitors and especially by the Government.
First, parents must learn to keep out of the reach of children not only pills and potions, not only those pills that they regard as dangerous—tranquillisers, antidepressants and the like—but also common pills like aspirin. Even more important, because this is so little known, they must keep out of the way of children products which have caused a considerable number of poisonings in the past year—paraffin, nail varnish remover, turpentine, travel sickness pills, toilet cleaners, Brasso, bleach, weed killers, ant killers, caustic soda and anti-freeze. Even ordinary detergents can cause grave harm to a child who drinks them. Parents do not take care to keep these substances away from their children. In general there is no indication on the canister, the box or the container that these articles are capable of poisoning.
I hope that it will not be said that the reason is that only perhaps 50 or 100 children die as a result of these poisons. That is still a considerable number; if the debate saves only one life it will have been worth while.
A considerable number of children are injured as a result of the poisoning and no one knows how many children there are with damaged kidneys and livers and, in certain cases, whose mental capacities have been damaged. These children must be considered. This is not just a question of cost.
Last Christmas, when I visited a hospital in Leicester, I saw a child come in with his parents after having taken an overdose of aspirin. Terror and anxiety had been caused to the parents, although the child did not know much about it. One only hopes and prays that he has returned to excellent health. No doubt he has, because he was detained for only a short time.
I understand that the majority of poisoned children are detained in hospital for only a day or two, but a number stay much longer. It depends on the nature and quantity of the poison. They stay in at great cost—not just in money but above all in suffering. This matter should be treated very seriously. Parents

1481
must learn that, when they bring the shopping home they must put the dangerous items out of reach.
Health visitors do a marvellous job, but the Minister might issue a circular advising them to keep an eye on the medicine bottles in the houses they visit and to advise people to make proper use of high cupboards and locked cupboards. They should help to keep an eye, along with the rest of us, on such toxic, dangerous and everyday items as common garden weed killers which are all too often left lying around on the table in the shed. They should be kept out of the reach of children at all times.
What can the Government do about this? First, through the Health Council or some other organisation or body, they should initiate a publicity campaign to draw these matters to the attention of children, of their parents, of their hosts, and of schools, but not in the way which is all to often adopted at the moment and which simply suggests to people that others are careless but not they themselves. Situations should be drawn to their attention. For example, thousands of people use empty soft drink bottles as containers for turpentine and other poisons. A child thinks that any liquid in such a bottle is a soft drink, and he swallows it. This practice is an act of gross stupidity, and people do not realise what they are doing. Kindly, good people are accidental poisoners, and they should be taught. The Government should initiate a campaign which effects that teaching.
Secondly, the Government should make it impossible for any more medicines or pills, which are the major source of poisoning, to be put on the market other than in child-proof containers. I understand that legislation is not necessary, so that I can raise this aspect of the matter in this debate. However, if the answer that I receive is not satisfactory, I am glad to say that I shall have an opportunity next week to ask leave to introduce legislation dealing specifically with this point.
The answers which my hon. Friend the Member for West Derby, and I have received to Parliamentary Questions indicate that the Government are not satisfied with these containers. At this hour, I shall not produce the large number of containers that I have in my
1482
possession, but, if I did, I hope that hon. Members would not succeed in opening them. The more expensive of them might well prove to be unopenable without strict instructions.
A child under five years of age should not have available medicines or pills in containers which he can open with one hand or, even worse, which will come apart or open in his mother's bag, the pills falling out and the child thinking that they are a well-known brand of chocolate bean. Young children believe them to be sweets. It is not their fault.
Very often, parents cannot buy safe containers from chemists. Even if they are prepared to pay extra, the containers are not available. I am glad to say that some are coming on to the market, some highly-priced and others very cheap, so that people will be able to buy them if they wish. At the moment, they are not available. They should not only be made available; their use should be made compulsory. Even if they are not perfect, they are a great deal better than the containers that people have to put up with at the moment.
According to the Department, the cost is likely to be about £500,000 a year. Assuming that 25,000 children reach hospitals and each of them spends two days there, adding to that the cost of ambulances and nursing, and leaving out of account the cost in human suffering, one still makes a national profit as a result of spending £500,000. If one takes into account the time that parents are off work because they are looking after their children when they leave hospital, an expenditure of £500,000 is very small.
If it means saving the lives of 25 children, if it prevents 1,000 children from being permanently physically or mentally injured, if it spares 50,000 parents day's and nights of misery worrying about their children, in the context of the national economy or in the context of the National Health Service, £500,000 is a small price to pay.
I hope that, in the circumstances, the Minister will indicate when he replies that he will change his mind and introduce regulations under the Medicines Act which would make it compulsory that child-proof containers, perhaps of varying designs, should be introduced and should be provided. Even if he is not prepared to do that, I hope that he will at least

1483
take such steps as are in his power to ensure that containers of this sort are made available to all chemists at all times and that where medicines are not sold in such containers and are dangerous, they will be sold otherwise in approved forms of sealed plastic strips or other dispensers which cannot be torn apart by small children and which cannot cause the sort of danger and damage which drugs are causing to so many children.
If we have a combined publicity drive from the Government, a new awareness from parents, teachers and grandparents and all those who love children and look after them of the dangers not only of pills and medicines, but of common household substances which should be kept out of the reach of children; if we also take the ordinary measures to make it more difficult for people to be careless—nothing will make it impossible, but we can make it more difficult and help people to keep their own children alive—the Minister will have made a significant contribution, and one which he and the Government can make at minimal expense. I hope that in that event he would have the support of hon. Members on all sides of the House.
10.42 p.m.
The Under-Secretary of State for Health and Social Security (Mr. Michael Alison): I can readily understand the concern for the safety of young children expressed by the hon. and learned Member for Leicester, North-West (Mr. Greville Janner). I assure him not only that I am quite certain that the whole House shares his concern but that I particularly and personally share it, because I fall into the category of those who indirectly have suffered in this way. At the age of 2½ my own little girl, now aged seven, opened her grandmother's handbag and extracted a packet of seasickness-pills. She swallowed half of them and had to be rapidly removed to hospital to have her stomach pumped. Luckily, she was all right and she returned home quickly. That illustrates my background of considerable personal sympathy towards the question raised tonight by the hon. and learned Member.
The problem is not, however, a straightforward one which admits of clearcut, simple and straightforward solutions. As I indicated in my recent Written Answer
1484
to the hon. Member for Liverpool, West Derby (Mr. Ogden), which the hon. and learned Member may have seen, some of the figures, for example, of deaths quoted in some sections of the Press have exaggerated the scale of the problem.
In default of further information on the incidence of poisoning, we tend to look to hospital admissions as the only certain guide, but these, again, tell only part of the story. In the first place, they reflect the changing attitudes of parents and doctors to the need for a hospital check as much as the actual numbers of poisonings.
Well over two-thirds of all children under the age of five who are admitted to hospital because of poisoning, or suspected or possible poisoning, are discharged within 48 hours. The steady increase in the numbers of admissions to hospital thus shows a growing awareness of the dangers whenever there is even the risk of poisoning.
Among the things that we need to know—and we are taking steps to find these things out in departmental sample surveys—are the extent of serious injury, the precise form in which the various drugs were taken in or ingested by the children concerned, whether any drugs concerned were prescribed items or bought over the counter as household remedies and, in general, the circumstances in which poisoning or suspected poisoning incidents occur. These things we are studying and investigating.
Although accidental poisoning accounts for only a small fraction—under 2 per cent.—of all accidental deaths of young children, however, we entirely agree with the point made by the hon. and learned Member that even one death is a disaster and that life should, if possible, be saved. What is a good deal less clear is how best it could, and should, be protected. This does not mean that we are declining to act until someone comes up with a 100 per cent. watertight, complete answer, because I am far from sure that there is likely to be a full and foolproof perfect solution, although we shall certainly continue to examine each remedy which is suggested. It would, however, be wrong for the Government to be hustled into taking ineffective or largely wasteful action out of, as it were, panic sympathies.

1485
It has been claimed that whilst we have been identifying the problem at home, authorities elsewhere have acted. There has, for example, been recent legislation in the United States, though the powers taken there are essentially no wider than those conferred in this country by Sections 85 and 87 of the Medicines Act. And I understand that no regulations have as yet been made in America. Certainly there have been reports of trials of various kinds, but on a small scale compared with the size of the National Health Service market.
We have considered all the evidence so far available, and I am bound to tell the hon. and learned Gentleman that I remain unconvinced either that industry should be urged to use particular types of packaging or that the extent to which various containers are claimed to be child resistant would be likely to reduce poisonings would justify the diversion of, on present estimates, at least £500,000 of scarce National Health Service resources from the treatment of patients.
Dr. Gerard Vaughan: Would the £500,000 to which my hon. Friend has referred be extra to the present cost of containers? If not, that figure would have to be set against the present cost. My hon. Friend might like to consider carrying out a trial in some part of the country to see what effect the introduction of this kind of container would have on the number of accidents amongst children, because this is a very serious problem.
Mr. Alison: Perhaps I could go on to refer to the trials that have taken place. The £500,000 that I have mentioned would be additional. I think that it would involve extra cost to introduce a particular kind of safety container for children.
Coming to the idea of experiments and trials to find a particular kind of container, I think it may be of interest to the House to know what has been done in this respect. In a trial carried out in Australia, about 40 per cent. of children aged 4½ were able to open a child-resistant container within five minutes, and the average lime taken with constant urging to open 10 tablets in foil-strip was eight minutes, so I think that we must not underestimate the ingenuity of even the youngest children in reacting to
1486
the challenge presented by an intriguing container which at first defies attempts to open it. They are extremely clever with their little fingers, as most parents know, in getting round devices which are meant to defeat them.
General matters of home safety are, of course, for my right hon. Friend the Home Secretary, but he has advised me that domestic bleaches—and I think that the hon. and learned Member originally had in mind some of the hazards arising from domestic bleaches—are not regarded by his medical advisers as a major toxic hazard, and as far as can be judged from the available information are not often concerned in child poisoning cases. In 1970, for example, out of 12,224 poisoning cases know to the Poisons Information Service, 183 were due to bleach—five adults, and 178 children. Most of the children were aged between one and 2½ years. None died, and the great majority were discharged from hospital after 24 hours.
Following a recommendation made by the Home Office in 1966, manufacturers are voluntarily labelling bleaches to the effect that they should not be mixed with other substances, in view of the risk of the generation of chlorine gas if this is done. In addition, there are warnings to avoid accidents, and advice on the action to be taken should one occur.
As a result of another approach from the Home Office, there is also a longstanding agreement among bleach manufacturers that bleaches shall not be marketed in containers likely to be associated by the public with food and drink. Bottles of bleach should already be appropriately labelled and packaged, therefore, but if this is shown not to be the case in respect of any particular brand, the Home Office will gladly take up the matter with the manufacturer concerned. I have no doubt that the hon. and learned Gentleman would draw to my attention any particular case that he can.
It is often suggested that all household substances, including bleach, should be subject to a statutory labelling requirement. Particularly harmful products are already required by law to bear warning labels of some kind. These controls do not apply to bleaches most of which are based on sodium hypochlorite, not itself a listed poison.

1487
The hon. Gentleman mentioned pesticides. The Ministry of Agriculture, Fisheries and Food administers what we know as the Pesticides Safety Precautions Scheme, with the help of the Advisory Committee on Pesticides and other Toxic Chemicals. All pesticides cleared under the scheme on sale in this country are labelled by the manufacturers with appropriate warnings and instructions.
As regards the general run of other household products with their varying degrees of toxicity and potential risk there are still difficulties in deciding which of these products should be labelled with a warning of some kind. If every product which might conceivably cause harm to a child were required to bear a warning of some kind, it would probably mean that a very large number of substances in use in the home would have to bear a warning. Any such proliferation of warning labels would ultimately defeat its own ends, as the warnings would tend to lose their impact. If, on the other hand, it was decided to confine the warnings to a selected range of products, chosen because of their toxicity or the frequency with which they were involved in accidental poisonings, there is a possibility that the public might be encouraged to assume that the other products which bore no warning label were completely harmless. The Pharmaceutical Society has pointed out that similar difficulties could apply to the provision of safety containers for medicines unless these were provided across the board; even the comparatively safe analgesics freely available for purchase may be lethal for the young children at risk if taken in quantity. Even with drugs in such containers there could be a false sense of security if they were left in accessible places or the closure was not secure.
Unfortunately, some people just fail to read warning labels, however prominent, and their value can also be lost if harmful substances used in the home are stored in containers other than those in which they are supplied by the manufacturers, or when industrial compounds such as cleaning fluids or concentrated weed-killers which are not normally on sale to the public are brought into the home. Containers such as soft drink bottles, specified by the hon. and learned Gentleman, are often used for the storage of these harmful liquids, the
1488
bottles being unlabelled or, even worse, still bearing their original soft drink labels. This creates a particularly dangerous situation.
In these circumstances, the Government are concerned to promote publicity designed to ensure that all household substances likely to cause harm are kept in a safe place out of the reach of children. The hon. and learned Gentleman touched on the need for publicity of that kind. The Home Office, for example, have made television-filler films on this subject which are shown quite often by the B.B.C. and Independent Television companies in breaks between programmes. The Royal Society for the Prevention of Accidents promotes frequent national campaigns covering various aspects of safety in the home and these usually include advice on the prevention of poisoning accidents. In addition, the Society produces and stocks a wide range of publicity material including posters and leaflets about accidental poisoning. These are made available to local authorities and local home safety committees throughout the country for use in local home safety campaigns. We understand that very good use is made of the material thus supplied.
Regarding the labelling of medicines, I have explained that there are already powers in the Medicines Act, although I regard this as being largely for the professions and a matter which they take most seriously. Inasmuch as labelling has an educative rôle, responsibility lies with the Health Education Council; but there is one recent professional development to which I should refer. The agreement between the medical and pharmaceutical professions that the medicine dispensed will be identified on the label of the container unless the prescriber indicates to the contrary may not prevent accidental poisoning, but it is likely to assist the speedy and effective treatment of some cases of poisoning. We have, therefore, welcomed the agreement and my Department is studying the implications for the National Health Service of implementing it.
Particularly in respect of medicines, we await the conclusions of researches which may throw up some fundamental pointers to the basic facts and problems involved and specifically to the comparative value of education and packaging.

1489
But I must stress that we continue to look at all the evidence, from whatever source it comes, either home or abroad, and that we appreciate and welcome the concern that has been expressed tonight. This debate has served an important purpose in drawing attention to the real and tragic hazards involved in allowing young children access to dangerous substances.
What we have been talking about in the main have been possible second and third lines of defence; and I hope that nothing which has been said will detract from what I believe to be the first line—or discourage the professional, local government, and voluntary bodies and, incidentally, the manufacturers of proprietary medicines, from continuing to advocate it—namely, the golden rule "Keep all medicines out of the reach of children".
I hope that parents and all who are in touch with young children will recognise the need for constant vigilance in this respect. As a result of all that is being done both nationally and locally, we trust that they will become increasingly aware of the need to keep other household substances, such as bleach, safely out of children's reach.
Young children are active, lively and curious, and it is for the rest of us to recognise this and see that they remain safe. In many ways I think we do. The bodies I have mentioned and parents themselves must be entitled to take credit for the fact that children's deaths from poisonings in this country seem to be low compared with some other developed countries.
I trust we shall keep it that way; and my Department will continue to review
1490
what more can and ought to be done in consultation with those organisations, including in particular the Health Education Council, concerned with home safety and other bodies representative of the pharmaceutical profession and industry.
Mr. Greville Janner: The hon. Gentleman will be aware of the considerable increase in the number of poisonings in this country over the years. What steps does he propose to take to deal with this matter? One naturally agrees with all he says about the first line, but he is in charge of the second and third lines. What is he doing about them?
Mr. Alison: I referred at the beginning of my remarks to the departmental pilot survey, which is in hand, into the real figures which lie behind the number of hospital admissions, many of which are ostensibly poisonings but in the event prove not to be. There are many facts that we do not know and the sort of figures which the hon. and learned Gentleman quoted prove to be very generalised and do not give a full insight into the size of the problem. Many of the facts and figures which are given are often substantially exaggerated. If the hon. Gentleman will read in the OFFICIAL REPORT the list of steps that are being taken, the number of bodies concerned with this matter and the various alternatives that are available—
The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at three minutes to Eleven o'clock.

ENVIRONMENT
  Canal System (Exchequer Contribution)
  Canal System (Exchequer Contribution)
  Rural Transport (Pilot Studies)
  Rural Transport (Pilot Studies)
  Underground Transport System, Manchester
  Underground Transport System, Manchester
  Heavy Goods Vehicle Testing Station, Alvaston
  Heavy Goods Vehicle Testing Station, Alvaston
  Bowling Greens, Liverpool
  Bowling Greens, Liverpool
  Road Traffic (Driving Instruction) Act, 1967
  Road Traffic (Driving Instruction) Act, 1967
  Motor Car Windscreens
  Motor Car Windscreens
  Railway and Traders' Conference
  Railway and Traders' Conference
  Motorways (Central Reservations)
  Motorways (Central Reservations)
  Vehicle and General Insurance Company
  Vehicle and General Insurance Company
  Unlicensed Motor Vehicles
  Unlicensed Motor Vehicles
  Transport Holding Company (Subsidiary Companies)
  Transport Holding Company (Subsidiary Companies)
  Pedestrian Crossings, Bootle
  Pedestrian Crossings, Bootle
  Contractors (Output)
  Contractors (Output)
  Private Housing Starts
  Private Housing Starts
  Thamesmead (Housing)
  Thamesmead (Housing)
  Housing Improvement (Grants)
  Housing Improvement (Grants)
  Firm Price Tendering
  Firm Price Tendering
  Peston New Town Corporation
  Peston New Town Corporation
  Direct Labour
  Direct Labour
  Hyde Park (Hours of Opening)
  Hyde Park (Hours of Opening)
  House Improvement Campaign
  House Improvement Campaign
  Council House Building Orders
  Council House Building Orders
  Housing Associations, London
  Housing Associations, London
  Housing Scheme, Newcastle-upon-Tyne
  Housing Scheme, Newcastle-upon-Tyne
  Bradford (Special Housing Facilities)
  Bradford (Special Housing Facilities)
  Royal Palaces (Costs)
  Royal Palaces (Costs)
  Bricks
  Bricks
  Housing Managers (Code of Practice)
  Housing Managers (Code of Practice)
  Construction Industry (Metrication)
  Construction Industry (Metrication)
  Homeless Persons, London
  Homeless Persons, London
  Private Housing Rents (Manchester)
  Private Housing Rents (Manchester)
  Home Ownership
  Home Ownership
  Pollution of the Sea
  Pollution of the Sea
  Motorway Light Barriers
  Motorway Light Barriers
  New Alresford (Bypass)
  New Alresford (Bypass)
  Smoke Control Orders
  Smoke Control Orders
  Derelict Land
  Derelict Land
  Willesden and Acton (Non-conforming Industries)
  Willesden and Acton (Non-conforming Industries)
  Public Buildings (Hours of Opening)
  Public Buildings (Hours of Opening)
  Investment Decisions
  Investment Decisions
  Landlords, London (Statutory Notices)
  Landlords, London (Statutory Notices)
  Road Programme
  Road Programme
  East Midlands-East Anglian Ports (Roads)
  East Midlands-East Anglian Ports (Roads)
  Industrial Noise (Bootle, Litherland and North Merseyside)
  Industrial Noise (Bootle, Litherland and North Merseyside)
  Residential Accommodation (Hostel or Hotel Use)
  Residential Accommodation (Hostel or Hotel Use)
  Rivers (Effluent Discharge)
  Rivers (Effluent Discharge)
  Inner City Areas
  Inner City Areas
  Building Land
  Building Land
  Beverley Bypass and Hull-Beverley Trunk Road
  Beverley Bypass and Hull-Beverley Trunk Road
  Twyford, Hampshire (Bypass)
  Twyford, Hampshire (Bypass)
  Planning Appeals
  Planning Appeals
  Hunton Bridge—M1 Motorway Link
  Hunton Bridge—M1 Motorway Link
  Sheffield—Manchester Motorway Line
  Sheffield—Manchester Motorway Line
  Planning Procedures (Ombudsman)
  Planning Procedures (Ombudsman)
  Oil Pollution
  Oil Pollution
  Road and Rail Facilities (Investment)
  Road and Rail Facilities (Investment)
  Local Authorities (Credit Stamp Duty)
  Local Authorities (Credit Stamp Duty)
  Felling U.D.C.
  Felling U.D.C.
  Humber Bridge
  Humber Bridge
  Box-Girder Bridges
  Box-Girder Bridges
  Fire, Long Eaton (Water Supply)
  Fire, Long Eaton (Water Supply)
  Stranraer—Euston Boat Train Service
  Stranraer—Euston Boat Train Service
  Transport Act, 1968 (Section 20)
  Transport Act, 1968 (Section 20)
  Motorways (Crash Barriers)
  Motorways (Crash Barriers)
  Seaforth Containers Berth (Dangers to Children)
  Seaforth Containers Berth (Dangers to Children)
  Town and Country Planning Act, 1968
  Town and Country Planning Act, 1968
SCOTLAND
  Fishery Protection Vessels (Design)
  Fishery Protection Vessels (Design)
  A80 (Traffic Flow)
  A80 (Traffic Flow)
  Glasgow (Lost Rateable Values)
  Glasgow (Lost Rateable Values)
  Road Schemes
  Road Schemes
  Natural Gas (Conversion Costs)
  Natural Gas (Conversion Costs)
  Primary Schools (Improvement and Replacement)
  Primary Schools (Improvement and Replacement)
TRADE AND INDUSTRY
  Building Industry (Bankruptcies)
  Building Industry (Bankruptcies)
  Brickmaking (East Flintshire)
  Brickmaking (East Flintshire)
HOME DEPARTMENT
  Palace of Westminster (Access)
  Palace of Westminster (Access)
NATIONAL FINANCE
  Malagasy Patrol (Cost)
  Malagasy Patrol (Cost)
  Foreign Currency Borrowings
  Foreign Currency Borrowings
  Works of Art (Estate Duty Payments)
  Works of Art (Estate Duty Payments)
  Bankers' Licences (Scotland)
  Bankers' Licences (Scotland)
AGRICULTURE, FISHERIES AND FOOD
  Kew Gardens (Admission Charges)
  Kew Gardens (Admission Charges)
  Food Prices
  Food Prices
  European Economic Community
  European Economic Community
  CIRCUIT JUDGES (SALARIES)
  CIRCUIT JUDGES (SALARIES)
DEFENCE
  West Freugh Bombing Range
  West Freugh Bombing Range
  Search-and-Rescue Helicopter Service
  Search-and-Rescue Helicopter Service
  Northern Ireland
  Northern Ireland
  Ulster Defence Regiment
  Ulster Defence Regiment
EDUCATION AND SCIENCE
  Teachers General Council
  Teachers General Council
EMPLOYMENT
  Hotels and Restaurants (Service Charges)
  Hotels and Restaurants (Service Charges)
FOREIGN AND COMMONWEALTH AFFAIRS
  Kenya (Aid)
  Kenya (Aid)
  International Development Association (Aid Programme)
  International Development Association (Aid Programme)
  European Economic Community
  European Economic Community
HOUSE OF COMMONS
  European Economic Community
  European Economic Community
POSTS AND TELECOMMUNICATIONS
  European Economic Community
  European Economic Community
SOCIAL SERVICES
  Disabled Persons (Interest-free Loans)
  Disabled Persons (Interest-free Loans)
WALES
  Doctor-Patient Ratio (Cardiganshire)
  Doctor-Patient Ratio (Cardiganshire)
  Hospital Beds (Cardiganshire)
  Hospital Beds (Cardiganshire)
  Mid-Wales
  Mid-Wales

Preamble
The House met at half past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Donovan):
The LORD CHANCELLOR on the Woolsack.

STERLING BALANCES AND THE BALANCE OF PAYMENTS
LORD BALOGH LORD BALOGH: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government how the statement of the Prime Minister (Commons Hansard, June 10, 1971, col. 1236) that the reduction of official sterling balances must be reconciled with "the avoidance of unacceptable burdens on our balance of payments" can be reconciled with his assurance "that it (the reduction of sterling balances) must not be done in a way which would at any time put a burden on the balance of payments" (col. 1243) and whether this means that the burden will be reduced at a stroke.]
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, the position of Her Majesty's Government is that, as the Prime Minister said in his original answer of June 10 in another place, any proposal to reduce the official sterling balances would have to avoid "unacceptable burdens" on our balance of payments. His latest supplementary answer was, as he made clear, intended to be read in the context of his original answer. How much, if any, burden would in fact prove to be "acceptable" to Her Majesty's Government would depend upon our external prospects at the time.
LORD BALOGH: My Lords, I thank the noble Earl for his courteous Answer. I should like to ask two further questions. The first is: what is "unacceptable" in this sense of the word? Secondly, does this include the movement of capital out
964
side England which will be necessitated by the rule of the Common Market not to have exchange control between its members?
EARL JELLICOE: My Lords, I thank the noble Lord for his courteous supplementary question. In reply, I would merely say that I think that if he reads carefully—as I am sure he will—the terms of my original reply he will see that "unacceptable" must depend upon our external circumstances at any time, and that will be a matter of judgment. It would be quite wrong for me to anticipate the discussions which are due to take place, I think in Brussels on Monday, July 12, where these questions of exchange movements and movement across the exchanges are, I believe, due for discussion. It would be quite inappropriate for me to anticipate those discussions in an answer to a supplementary question.
LORD HUGHES: My Lords, I am not in any way dissenting from the form of the Question, but may I ask whether it means that Scotland will be exempted from these perils?
EARL JELLICOE: My Lords, at one stroke I do not think that I would chance my arm on this. I should like to assure the noble Lord that the "perils" are probably much more imaginary than real, whether for Scotland, or England and Wales, or Northern Ireland.
LORD HUGHES: My Lords, may I ask the noble Earl whether, in this connection, "at a stroke" is a quicker thing than we are presently led to believe that it is?
THE EARL OF DUNDEE: My Lords, has not Scotland, by itself, always had a formidable balance of payments?
EARL JELLICOE: My Lords, I think that is a slightly different question.
LORD SHINWELL: My Lords, may I ask the noble Earl whether, if it is to be a matter of judgment, the judgment will be exercised before we enter the Common Market, or after, when it becomes irrevocable? Is that the situation? Putting it very shortly, if there is a reduction in the sterling balances after we enter the Common Market and that should be found to be unacceptable, what is our remedy then?
EARL JELLICOE: My Lords, I do not wish to get into a substantive debate on this question. I suspect that we shall be debating the subject of the Common Market at some length in the coming months; but I think that the word "unacceptable" is perfectly fair in what it means. I think that the past Government would have been very content with the sort of arrangement which is now provisionally agreed on in this areas by the present Government, and that they would have been equally good judges of what was unacceptable in the national interest.
LORD SHINWELL: My Lords, the noble Marquess has not answered my supplementary question. I agree that we can discuss the matter in detail when we are dealing with the Common Market in general. I am merely asking the question: when do the Government exercise their judgment? Is it before we go in, or is it when we are in and when it becomes irrevocable and we have no remedy?
EARL JELLICOE: My Lords, I must thank the noble Lord, Lord Shinwell, for promoting me in the hierarchy and I gratefully accept the promotion. The point is—this is perfectly clear, as I suspect the noble Lord knows equally well—that the detailed arrangements regarding this subject have still to be worked out, and they will be worked out if and when, but not before, we become a full member of the Community. Thus we shall have our full say in the working out of the detailed arrangements.
LORD ALPORT: My Lords, may I ask my noble friend whether it is not true that in the event of this country becoming a member of the Common Market we shall have the same rights as existing members of the Common Market to ensure the maintenance of our essential interests—rights such as have been insisted on by France, Germany and all the other members, right from the start of the Treaty of Rome?
EARL JELLICOE: My Lords, my noble friend is quite right in this, as in most other matters.
LORD CHAMPION: My Lords, may I ask the noble Earl if, in his capacity as Leader of the House, he will tell the House whether it is normally acceptable
966
for certain words in a Question to be italicised for the purpose of emphasis?
EARL JELLICOE: My Lords, I should like a lot of thought to consider the answer to the noble Lord's supplementary question. I think that he has put a very valid point and that it is one which, if need be, I am sure our very active Procedure Committee could well look at. Off the cuff I should not wish—in any event, it would not be possible—to venture a definite ruling.
LORD WYNNE-JONES: My Lords, would the noble Earl at the same time consider whether footnotes might be allowed?
EARL JELLICOE: My Lords, we are beginning to stray a little from the original Question.

BRITISH STEEL CORPORATION BOARD APPOINTMENTS
2.37 p.m.
LORD BALOGH LORD BALOGH: My Lords, I beg to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government on the basis of what qualifications the new part-time members were appointed to the Board of the British Steel Corporation.]
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN.): My Lords, if the noble Lord will read again the first section of the Iron and Steel Act 1967, he will see that it requires the Secretary of State to appoint the Corporation from among persons appearing to him to have had wide experience of, and shown capacity in, the production of iron ore or iron or steel; or industrial, commercial or financial matters; or applied science, or administration or the organisation of workers. Manifestly, the three part-time members recently appointed to the Board have had wide experience in, and shown capacity in, one or more of the fields specified, and my right honourable friend considers each of them in every way well fitted to serve as part time members of the Board.
LORD BALOGH: My Lords, I thank the noble Lord for his Answer. May I

967
ask him three supplementary questions? Does he realise that Sir Matthew Stevenson was responsible, as Permanent Secretary, for the Continental Shelf Act, and also for the negotiations with B.P., that both things cost the country thousands of millions of pounds by not taking care of the country's interests, and that the two other gentlemen have made violently partisan statements against nationalised industry? Finally, may I assume that the present political persecution which has broken out in the Steel Board—
SEVERAL NOBLE LORDS: Oh!
LORD BALOGH:—is one of the first consequences of these gentlemen joining the Board?
LORD DRUMALBYN: My Lords, my right honourable friend is quite satisfied—as I think we all are—that Sir Matthew Stevenson is a man of great integrity, and that the advice he gave to the Government at the time when he was Permanent. Secretary at the Ministry of Power was entirely appropriate. With regard to the second supplementary question, the two other part-time members, as I have said, are men of great capacity and have the appropriate experience; and my right honourable friend is satisfied, in the light of their experience, that they will make a valuable contribution to the Steel Board. With regard to the third question of the noble Lord, the Chairman of the Board has made it quite clear that the appointment in question was solely in the hands of the Corporation. The Secretary of State appoints only members of the Board. Responsibility for the appointment and termination of appointments of all officials is entirely a matter for the Corporation.
LORD OAKSHOTT: My Lords, is not the indignation over this matter rather synthetic'? Are memories really so short? Is it not a fact that only very recently the present Conservative Government appointed as head of British Rail, Mr. Richard Marsh, a former Labour Member of another place, and there was no question of political prejudice in that?
LORD DRUMALBYN: My Lords, I am grateful to my noble friend. I entirely agree with what he has said.
LORD BALOGH: My Lords, while thanking the noble Lord for his answer to my supplementary questions, may I ask whether the word "appropriate" is appropriate in a case where one can show that the consequence of actions is disastrous'?
LORD DRUMALBYN: My Lords, the advice I have in this matter is that the advice extended at that time by Sir Matthew Stevenson was very far from disastrous, and that it enabled the industry in question to get on its feet.
LORD SLATER: My Lords, would not the noble Lord agree that it has become the policy of the Government to give notice to those whom they have appointed as Chairmen of these Boards (I am thinking particularly of the case of the Chairman of the Post Office) of the termination of their appointments after they have been only a short period of time in office?
LORD DRUMALBYN: My Lords, I do not understand how the noble Lord can relate that observation to the Question on the Order Paper.
LORD HYLTON: My Lords, can the Minister say that it is not the general policy of the Government to eliminate from the nationalised industries those who have Labour feelings and wish to protect the nationalised industries from hiving-off, and, further, whether this process has not been accelerated in the last twelve months?
LORD DRUMALBYN: My Lords, I have already said that the Government had nothing to do with the action which was taken and to which the noble Lord, Lord Balogh, referred in his third supplementary question—nothing whatever.
EARL JELLICOE: My Lords, I wonder whether I may make a slight intervention. I am not in any way quarrelling with the terms of the original Question or with the terms of most of the supplementary questions: they were perfectly in order. All I should like to suggest to your Lordships is that questioning which takes a particularly personal form about public appointments is unusual in your Lordships' House. I would not wish to go further than that.
LORD BLYTON: My Lords, if we suspect that people who are of Labour feeling are being sacked because they refuse to hive-off, surely we are entitled to protest?
LORD DRUMALBYN: My Lords, if the noble Lord suspects such a thing, he is quite entitled to explore the matter. I hope that I have laid his suspicions at rest.
LORD SLATER: My Lords, am I to assume from the intervention of the noble Earl the Leader of the House that when appointments to the Boards of nationalised industries have been made by Ministers and when a sacking takes place, we are not allowed to ask questions and seek to get answers from Ministers about such actions?
EARL JELLICOE: No, my Lords. I think that the noble Lord, Lord Slater, is misinterpreting what I said and perhaps he would like to look at it in Hansard tomorrow. I was confirming that there was nothing said in your Lordships' House, either by way of Answer to the original Question or answer to supplementaries, which was in any way out of order. I think that answers the noble Lord's question. All I was saying was that the personal tone which questioning had taken was unusual in your Lordships' House. I would not go further than that.
LORD SHACKLETON: My Lords, I apologise for inadvertently having missed the Question. I am advised that it is open to noble Lords, if they wish to pursue this matter, to do so by a substantive Motion. It may well be that the extent to which questions and answers on a subject of this kind can be pursued, though wholly in order in another place, is not in order here. I think that the noble Earl the Leader of the House has been moderate in his approach, in that he has suggested that this is entirely in order. It could be a matter of profound importance for noble Lords not to deny themselves the right to probe into these matters. It well may be that noble Lords may wish to put down an actual Motion, but that is a matter for fuller consideration.
LORD BLYTON: My Lords, it is possible to put a substantive Motion on this
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point, but it is left to the usual channels whether this subject is picked or not.
EARL JELLICOE: My Lords, if the noble Lord is putting a question, I should like him to put it by way of a question. I do wish us to keep within the rules of our procedure.
LORD SHACKLETON: My Lords, we seem to have moved slightly into a discussion on procedure. I think that my noble friend should be allowed to make his point; all the more so since I think that there is an answer to it.
EARL JELLICOE: My Lords, I was not objecting to the noble Lord, Lord Blyton, making his point. I was merely asking, since we are at Question Time, that he should phrase it by way of a question.

SCOTTISH CHILDREN'S FREE SCHOOL MEALS
2.46 p.m.
LORD GARNSWORTHY LORD GARNSWORTHY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government the number of children in Scotland who are in receipt of free school meals.]
THE MINISTER OF STATE, SCOTTISH OFFICE (BARONESS TWEEDSMUIR OF BELFIELVIE): My Lords, on May 27 the number was 120,497.
LORD GARNSWORTHY: My Lords, while thanking the Minister for that reply, from which I understand that over 120,000 are taking up school meals, may I ask how that figure compares with the estimate of the number of those entitled to claim free school meals?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, there was no exact estimate, because it was expected that there would be a fall-off, as there always is after examinations and in the height of the summer period, but there has been an increase in free meals from 11·1 per cent. to 13·4 per cent. and a decrease in the meals that are paid for from 30·2 per cent. to 20·4 per cent. I think it is easier to give it in percentages. Therefore, the net decrease over the whole field is from 41·3 to 33·8 per cent.
LORD GARNSWORTHY: My Lords, may I ask the Minister whether the figure she quoted of 120,000 does not represent an extraordinarily rapid increase in the number of those obtaining free school meals, in the light of the information given in another place on May 15 which indicated that the number was roughly about 50,000?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I think that this is a very satisfactory increase in the number of those taking free meals, but of course at the time when the price was raised from 9p to 12p we increased certain social benefits, as no doubt the noble Lord will recall.
BARONESS SUMMERSKILL: My Lords, could the noble Baroness clarify this point? Are we using the same terms? I should like to know whether the first number the noble Baroness gave represented the number of those eligible. I want to know the difference between those who are eligible and those who consume.
LORD GARNSWORTHY: My Lords, before the noble Baroness replies, may I draw attention to the terms of my Question, which specifically asks for the number in receipt'? If the estimate is 120,000, then I should certainly be obliged to know the number taking up free school meals.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I wonder if the noble Lord and the House will look at the terms of my reply and at the Question on the Order Paper. The Question was whether I would give
" the number of children in Scotland who are in receipt of free school meals."
I replied that the number on May 27, when the special survey was taken, was 120,497.
BARONESS SUMMERSKILL: My Lords, when the noble Baroness says "in receipt of", is that equivalent to "eligible"?
BARONESS TWEEDSMUIR OF BELHELVIE: No, my Lords, it is not, but that was not the Question on the Order Paper. I regret that I did not answer the noble Baroness at the beginning.
LORD GARNSWORTHY: My Lords, may I then, with great respect, ask the noble Baroness whether she will indicate the number of those entitled to free school meals who are in fact in receipt of free school meals?—because I understand that it is claimed that there are 129,000 entitled, but we are not aware of the number who are in receipt.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I would say once again that I have exactly answered the Question on the Order Paper.

IMMIGRANT LABOUR REQUIREMENTS
LORD O'HAGAN LORD O'HAGAN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government when they will produce forecasts of the requirements by the United Kingdom of immigrant labour for the next few years.]
LORD DENHAM: My Lords, the Government will be able to make an announcement about the future intake of immigrant labour into Great Britain when they have completed their review of the relation between the current intake of overseas workers and our manpower needs.
LORD O'HAGAN: When, my Lords?
LORD DENHAM: My Lords, I am afraid that I cannot give the noble Lord that information.
LORD O'HAGAN: My Lords, is it not rather peculiar to be having to debate White Papers about the Common Market and an Immigration Bill without having these highly relevant figures? Could the noble Lord perhaps get some help from the noble Lord, Lord Rothschild?
LORD DENHAM: My Lords, my right honourable friend is quite right in having this review carried out to balance, on the one side, the unemployment problem in this country, and, on the other side, the wish of immigrants to come here. That is the sole purpose of the review that is being carried out. It is very much better that the review should be a

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thorough one to give my right honourable friend the information that he needs, rather than that he should set any time limit.
LORD O'HAGAN: My Lords, I accept that reply, of course, and I thank the noble Lord. But has it not been known for some time that the future manpower needs of this country would be being discussed, both when we were thinking about the Common Market and when we were thinking about the Immigration Bill? Would it not have been manageable to have got this forecast going and come to a conclusion by the time that your Lordships' House had to discuss these two important matters?
LORD DENHAM: No, my Lords. It is difficult to work out exactly what the manpower needs will be. Even this review will not produce a long-term forecast. It is most important that everything should be flexible on this matter.

EUROPEAN COMMUNITIES AND THE UNITED KINGDOM
LORD DENHAM: My Lords, with the permission of the House, my noble friend the Leader of the House will be making a Statement on the E.E.C. White Paper at a convenient moment after 3.30 p.m.

PROCEDURE
2.54 p.m.
LORD SHACKLETON: My Lords, before we leave Questions, may I ask the noble Earl the Leader of the House whether he will reconsider the—I hesitate to use the word "ruling" because, as I know, no Leader can give a ruling, but whether when the propriety or appropriateness of a question is under discussion, and the procedure that is to be followed is before the House, it is really necessary at that stage to frame one's remarks in the form of a question? I think the House will accept that I have always sought, and as Leader of the Opposition it is still my duty to uphold, the proprieties of your Lordships' House. But when my noble friend Lord Blyton raised a point just now, I do not think it was necessary to remind him of
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our custom, since his question related to procedure and not to the Question on the Order Paper. It may be that the noble Earl would wish to consider this point further, but if the House is to exercise its judgment in these matters without giving rise to a general debate, even if what is said does not relate to the particular Question on the Paper, I think noble Lords who are concerned should be able, however briefly, to express their opinion. It may be, as I have said, that the noble Earl, Lord Jellicoe, would wish to consider the matter further, but I think it rather important in the interests of the House to make this point.
EARL JELLICOE: My Lords, I am grateful to the noble Lord the Leader of the Opposition. I certainly should not wish—indeed as he said, I am not in a position to do so—to give a definitive ruling on this sort of matter; and I certainly was not wishing to give any definitive ruling on the question of substance. I made it absolutely clear that there was nothing out of order in the way we were proceeding. But I felt—and here I am just as anxious as any other noble Lord to safeguard our proprieties—that we were straying rather beyond our traditional areas. This may be right: I am not expressing an opinion; I am merely pointing it out. If I curtailed the debate unnecessarily and improperly by asking the noble Lord, Lord Blyton, to couch a further supplementary question by way of interrogation, I extend my apologies to the noble Lord. It is my impression that at Question Time we go by way of interrogation. If one interjects, as I did, then I am not certain what happens within the square brackets. This is perhaps something that we can look at. If I was unnecessarily terse towards the noble Lord, Lord Blyton, I extend to him my apologies, but I do not, if I may say so, resile at all from anything that I said on the point of substance.
LORD ALPORT: My Lords, may I ask my noble friend whether, when he is considering this matter, he will bear in mind that the House took 22 minutes this afternoon to dispose of four Questions, which in another place would probably have been sufficient for 20 questions or thereabouts?
SEVERAL NOBLE LORDS: Oh!
LORD ALPORT: May I also ask him whether he will not consider whether one of the reasons why we get into difficulties over Question Time is that we conduct ourselves so leisurely and give ourselves such latitude?
EARL JELLICOE: My Lords, I will certainly consider that point, but I will not add to the twenty-two minutes by considering it at length at this moment.
LORD SHINWELL: My Lords, is the noble Earl aware that it would not take long at all—it need not take twenty two minutes to answer the Questions—if we could be given satisfactory answers?
LORD BLYTON: My Lords, there was no need for the Leader of the House to apologise to me. All I was asking was this. I regarded the Question that was at issue as raising a serious problem, and I was told by my noble Leader that it could be dealt with by a substantive Motion. But can it? If one puts a Motion on the Order Paper, it is left to the decision of the Leaders on both sides as to whether it is taken or not, and one is in the lap of the gods.
EARL JELLICOE: My Lords, I am glad to hear the noble Lord, Lord Blyton, draw a close parallel between the Leaders of both sides and the gods.
LORD HUGHES: My Lords, is not the noble Earl doing very well this afternoon? First of all, he is given a Marquessate, and now he is given divinity.
LORD SLATER: My Lords, would the Leader of the House, in regard to the question asked by the noble Lord, Lord Alport, who, like many of us has had experience in another place, consider whether it is necessary to go into so much detail, because over the years such has been happening?
LORD GRENFELL: My Lords, is it not a fact that we have now moved away from Question Time and are having a debate on rules? Can we have a debate on rules, as we have been trying to do, during Question Time? We have Standing Orders in this House. I cannot believe it is right that we should have a debate on rules in Question Time, when
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Question Time for many years has been devoted to Questions.
LORD SHACKLETON: My Lords, perhaps I can close the discussion by saying that such is the nature of our affairs that now and again we get into slight difficulty; we throw it around for a minute or two, and then somebody says: "Refer it to the Committee on Procedure". I just wanted certain points to be on the record. I think that clearly, if propriety is under discussion, the House cannot ignore referring to it; but I think if it goes on for more than a couple of minutes, at that point we stop and perhaps think again.
EARL JELLICOE: My Lords, I think that this may be the moment at which to stop, because we have gone beyond the twenty-two minutes to which my noble friend quite rightly referred.

LONDON TRANSPORT BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.

TRENT RIVER AUTHORITY (GENERAL POWERS) BILL
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Earl of Listowel.)
LORD DAVIES OF LEEK: My Lords, I do not want to detain the House unduly, but when it comes to river authorities (some of us are specially concerned with this subject) I would draw the attention of noble Lords—this is a bit of publicity—to the river authorities' magnificent exhibition upstairs, outside Committee Room 10. I have had contentions with river authorities who want to build reservoirs and ponds in the Manifold Valley and Dovedale, but I think we should all see the marvellous work that they are doing. I am sure many of your Lordships will find it worth while.
On Question, Bill read 2a, and committed to the Committee on Unopposed Bills.

PRESCRIPTION CHARGES AND MEANS-TESTED BENEFITS
3.1 p.m.
BARONESS PHILLIPS BARONESS PHILLIPS rose to draw attention to the proposed introduction of cost-related prescription charges and to the increasing dependence of Her Majesty's Government on means-tested benefits as the basis of social services which segregate those in hardship from the rest of society and produce consequent problems of disincentive and inadequate "take-up"; and to move for Papers. The noble Baroness said: My Lords, I should first like to apologise for the fact that I am introducing this Motion on behalf of my noble friend, Lady Serota. Indeed, I feel that if I am going to make a speech every Wednesday I may need to make a further apology, but I at least have the reputation for being brief and I will see that that reputation is in no way damaged on this occasion. The noble Baroness, Lady Serota, is unfortunately ill.
My Lords, we are discussing this Motion on a day when there will be a Statement on another very important matter, and I selected from the Library one of the fact sheets on Britain and Europe which describes how Britain is similar to or unlike the countries of the Six. Under the reference to health we find this statement:
" In Britain the National Health Service is largely paid for by taxes. The British Health Services are available to the whole population and the range of treatment is virtually unlimited."
That is a proud boast and one which we frequently make. When visiting other countries it is one we are only too proud to reiterate. But if your Lordships will look at the White Paper that was presented earlier in this Parliament, Policies of Public Spending, you will see that measures will be introduced as soon as possible to enable prescription charges to be related more closely than now to a proportion of the cost of individual prescriptions, and there will be a ceiling to the amount of the charge. Meanwhile, the existing flat-rate charge of 2s. 6d. per prescription item will be raised to 4s., the arrangements for exemption remaining unchanged. There will also be increased charges for plastic surgery and charges for certain appliances issued
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by hospitals; and charges for dental services and spectacles will be increased. These charges will produce a gross saving of public expenditure which is estimated at £71 million in the year 1971–72.
Let us see how this will work. First of all, let us take the flat increase in prescription charges from 12½p to 20p. I know we shall be told by the Government that there are exemptions. Indeed, in the previous Government I was responsible for introducing one of the Bills which dealt with those exemptions. One, of course, relates to age, and I am going to put in a plea at once to the Minister to ask whether he can put right an anomaly which I failed to put right in trying to present this matter before the House, namely, that a woman who retires at 60 cannot claim exemption from the prescription charge until she is 65. At various stages in different debates we have raised the question of the magic figure. There is the magic figure at which one must retire, the magic amount at which one has a ceiling in relation to a particular charge, and even, within your Lordships' House, the magic hour at which one can turn on the lights in the Royal Gallery. These figures are plucked out of the air and often do not stand investigation. I am sure that it is so in this case. There is also the question of exemption of children, which ends at the age of 15. I would again ask that exemption should be extended at least to children who are still at school, because they will still be, as it were, a charge on their parents. There will be the exemption of the chronic sick, and we know here the limitation of the categories. There is the exclusion of those who have chronic bronchitis, asthma and heart diseases. All of those are diseases for which you may need constantly to have prescriptions filled and for which you constantly need attention. I know about the "season ticket" arrangement and the fact that this can be taken up. I should be interested to hear what proportion of those who are eligible do take up this privilege.
Now let us look a little more closely at the proposed charges proportional to costing. This scheme introduces a frightening new concept into medicine. There are many people living to-day who can remember when women, in particular, did not have the services of a doctor, not

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because they were not ill but because they could not afford to call in a doctor to deal with their condition. If charges are related to any State services there is always a danger that they will be provided not for those who need them but for those who can afford them. Indeed, I understand that in America it is said that a doctor looks at a patient to see what is wrong with him and also to assess which drugs he can afford to make him better. We in this country have made remarkable strides in the treatment of certain diseases by drugs, and it seems to me nothing less than a tragedy if anything is allowed to interfere with the opportunity which is presented to a doctor to prescribe a new and possibly expensive treatment. My Lords, how can this scheme work, and what right have we to impose yet another duty upon a greatly overworked medical profession? I think this debate is particularly important now because the Government have not actually introduced this measure; and that is why my noble friend wanted the debate to-day. I implore the Government to think again. How much money will really be saved? Every time there is an introduction of cost-related benefits it means more people to operate the scheme.
I have some of the leaflets here which have been issued in connection with these cost-related prescriptions and with the family income supplement. One of them says very gaily—it is a splendid leaflet—"Which of these are yours as a right free?" There is a list given—welfare foods, prescriptions, school meals, and dental and optical treatment. Then one is advised to look at the incomes guide inside. There one is told what to do to get the benefits. If it is welfare milk and foods you must ask for leaflet W11 at your local post office or social security office. If you want National Health prescriptions you must get leaflet PC11 from your local post office or social security office, and for school meals you need to contact your local education office or the education welfare office. In connection with dental and optical charges you ask your dentist or optician for a claim form. You can also ask for a claim form in connection with Family Income supplement.
Now this is rather complicated, and I would say at once that I have been read
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ing a Study on people with low incomes and low pay. Here we see very clearly that those who receive low pay, receive it for the obvious reason that, first, they are not very well educated, and secondly, they are not very healthy. These will be the people who will be asked to go through this complicated ritual in order to reclaim these benefits. In addition we are beginning to see how the Departments are already overloaded. There was a letter in one paper the other day making this point. The more we ask these already overworked people to do, the more we shall have either to slow up the whole operation, or introduce more staff and make it colossally expensive. Quite a number of people have asked the dentists and opticians, and they do not understand the arrangement. But why should they understand it? They are there to deal with your eyes and teeth, not the complicated arrangements which the State asks them to undertake.
We now come to the question of means-tested benefits, which is the second part of our Motion to-day, and to the apparently increasing dependence of the Government on them. The Minister will probably tell me that it was not the present Government which first introduced means-tested benefits. This is so. We see an increasing leaning towards these benefits and an increasing use of them. A very interesting question was put in the other place on May 25 last when the Minister was asked what investigations he was making to establish the disincentive registered by low-income families from the accumulation of means-tested benefits restricted to such families. This was his reply:
" We are aware of consequences which the withdrawal of means-tested benefits can have for man's net income. This is a complex problem and we are considering how the more extreme effects can be mitigated."—[OFFICIAL REPORT, Commons, 25/5/71, col. 61.]
It is certainly a complex problem, and it is a human problem. These forms of means testing are divisive, wasteful and degrading.
I think we may also look at some of the other measures mentioned in Policies of Public Spending. Some of your Lordships will have read yesterday that there are nearly one million fewer children taking school dinners since the price of dinners was raised. The Minister in another place said that it should not be

981
assumed that the drop in take-up was attributable only to the recent increase in price. Perhaps we may hear what is the reason for the drop in take-up. When I was concerned with school meals it was always noticeable that any increase in price was immediately followed by a decrease in the number of children taking them up. We have some further figures from the Department. Comparing the numbers with previous years, those taking school dinners are certainly far fewer than previously. This may or may not be a seasonal drop, but there is another factor which I should like your Lordships to consider. We see from an article in a newspaper to-day that about 60,000 people in low income families have lost their right to school meals because of the increase in child allowances in the Budget. Here is a piece of nonsense; you give with one hand and take away with the other. This is always with the expense of having more and more administration. Every fresh means-testing benefit needs more people to carry it out. I cannot repeat this too often.
We are going to have quite soon a Bill called—rather euphemistically—the Education (Milk) Bill. I do not propose to go into that Bill now because we shall have an opportunity to debate it. We understand that the purpose of the Bill is partly to enable us to switch our priorities to fill some of the gaps in educational provision, and particularly to improve and replace old primary schools. The Minister cannot be serious in this. Is the choice really between building more schools and allowing little children to have milk? I cannot believe that this is a choice that confronts us.
Here again we come to the magic figure of seven. It is presumed that from the age of seven a child does not need milk. Recent statistics show that many of these children do not have breakfasts. I know from my experience in school that the bottle of milk was often the first substantial intake of food of the child that day. We see the divisive factor: some children will receive free milk. We cannot imagine that this is not going to be known; children can be very cruel. This is where you divide those who have and those who have not.
It is not my intention to labour any of these points. There are speakers who
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will follow me who are very knowledgeable in all aspects of the Motion before your Lordships' House. I am making a genuine appeal to the Minister, whom I know to be a humane man, who likes and understands human beings and their problems. There is an old song, to the effect that:
" The rich get rich and the poor get poorer ".
My Lords, indeed this seems to be the case in the year of Our Lord 1971. I beg to move for Papers.
3.16 p.m.
LORD AMULREE: My Lords, when I first heard the words in the gracious Speech about the cost-related prescriptions I did not understand what this was going to be all about. I am not sure that I understand now because not a great deal has been published about it. I think that the amount of the prescription charge is going to be increased, or varied, according to the kind of drug which is prescribed. Quite apart from the drawbacks which the noble Baroness has referred to, there is this rather sinister drawback, that it looks as if the Minister, the Secretary of State, or whoever it may be, is trying to dictate to doctors what drugs they should prescribe for certain of their patients, in the sense that certain drugs that are expensive are going to carry a bigger prescription charge, and if a person has little money then he cannot afford to pay for the prescription. That seems a very peculiar and wrong point of view. This is something with which I do not think the National Health Service has tried to interfere before, except in the few cases where some doctors have been guilty of overprescribing; but that is not quite the same thing. If such a plan were put forward there would be a good deal of opposition to it.
I have never really liked prescription charges. There has been talk of quite a number of ways of modifying the National Health Service, lodging charges while in hospital and that sort of thing. They have all been dropped as being impracticable; but the prescription charge seems to have come to stay and it brings in about £30 million a year. I know that the National Health Service is a fairly expensive exercise. The disproportionate amount of money that is spent in this country upon the social services compared to the national income generally is

983
not really as big as all that. Quite a number of countries in Europe spend a great deal more than we do in this respect, such as France, Italy, West Germany and Sweden.
It is also said that the tax burden is heavy and must be reduced. But again, quite a number of countries in Europe seem to have far heavier tax systems than we have, and yet they do not get into terrible trouble. France and West Germany are examples; they are fairly prosperous and well developed countries. It is the tax structure which is wrong; it bears too strongly on those with marginal incomes. Supposing you are really poor; you can obtain supplementary benefits which help you. But supposing you are in a category which I might call "marginal", and which includes a large number of people, then you can obtain no relief at all. And it seems to me that if you are going to get your prescription charges varied in this kind of way, the lot of the people I have referred to is going to become worse than it was before.
It is said that the change will stop a good number of people from wasting the resources of the National Health Service; that they go to their doctors and hospitals when they have nothing visibly wrong with them. But, my Lords, they are people who need some kind of support. They may not have any gross pathological lesions visible (if I may use rather technical language) but they are people who feel unwell, and they want comfort. The Service was intended to take care of such people as these. When it is said that many people who are hypochondriacal—one might call them neurotic or all sorts of unkind things—are using the Health Service, my reply is that that is really what the Health Service is for: to take care of people like that who need some kind of support. If that is put forward as a reason for these charges, I do not think it is a good one.
I want to say one word about the means test. "Means test" is a wrong term now: it shows the dominance that the Poor Law still has in our lives. It is a good old Poor Law term and goes back to the evil days in the 'twenties and 'thirties, when people had everything taken from them before they received any relief at all. I would much rather use the word "selectivity", nasty and unattractive
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word though that may be, because it seems to me to mean rather more than "means test" at the present time. The question of selectivity sounds rather attractive; but if one goes into the matter carefully, one sees that it is not as attractive as it appears at first sight. The numbers who would be protected by selectivity are not very large—I am talking now about elderly people. It has been worked out that about 83 per cent. of retirement pensioners have an income of under £15 a week, so they would not be in the wealthy class. It is more efficient administratively to pay everybody the same benefit and to recover it by income tax, because the percentage of the cost of administering the benefit from the Supplementary Benefits Commission is about twice that of running the benefits under the National Insurance Scheme. So I do not think there is a great deal to be said for selectivity, or the means test, or whatever it might be called. I have always been attracted by the system adopted in France. I am never sure whether we have gone into that system very much. Under it, the patient pays the full amount but can recover 85 per cent. or more from the Social Security Department. That seems a reasonable way of approaching matters and, on the whole, a fairer way of doing so.
My Lords, before I sit down I should like to join the noble Baroness in making a plea that women of 60 should be treated as retired, as men are at 65, and that there should not be a general age of 65 when they get some relief from prescription charges. If there is to be a difference in pensionable age, I cannot see why the principle cannot apply to all sorts of further benefits. I am very pleased to support the Motion moved by the noble Baroness.
3.25 p.m.
THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE):
My Lords, I am grateful to the noble Baroness, Lady Scrota, for having put this Motion on the Order Paper today because it gives us an opportunity to discuss one of the most important aspects of our social provision. May I say how sorry I am to hear that she is unwell. I hope it is nothing that will take her more than a few days to recover

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from and be back in this House. And may I say that the noble Baroness, Lady Phillips, acted as her substitute in her usual eloquent, powerful and critical—rightly critical—way.
This is an immense subject and it is impossible to approach it without considering what our underlying objectives are, and I feel certain that our objectives are the same. In a comparatively rich country we wish to see that none of our citizens, of whatever age, is without the resources to lead a full life; that those who are sick receive the skilled care which they need to return to the community, and that those who are handicapped are provided with the facilities which will enable them to play their full part in the community. In other words, we are speaking about the transfer of resources from those who can afford it to those of our fellow citizens who require additional resources to enable them to attain such minimum standards. This transfer of resources can take place either by the provision of free benefits, or at least cheaper than cost benefits, or by the provision of cash which will enable the extra facilities to be bought. I am quite sure that these are objectives which we share on both sides of the House. But the Motion, and I think to some extent the noble Baroness's speech, seemed to imply that we on this side of the House had some special love for means-tested benefits, while her Party were opposed to them. This to my mind is an unfair comparison. When the facts are examined the picture of the Party opposite as one which regards means-testing with abhorrence is entirely unrecognisable.
As my right honourable friend the Prime Minister pointed out in another place a week ago, the system of means-tested benefits, found in many areas of social care to-day, is one which existed under the last Government. Not only did it exist under their Administration but, all credit to them, they significantly developed its scope. They introduced, as the noble Baroness opposite has told us, a system of relief from the payment of National Health Service charges, based on a means test. They instituted a scheme for means-tested rate rebates and recommended local authorities to grant means-tested rent rebates. Furthermore, they improved the old National Assistance scheme by substituting the supplementary
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benefits scheme—an excellent scheme, but again dependent on a means test.
What we have done is to go further in two directions. In the first place, we have introduced a new and, I suggest to your Lordships, a very good family income supplement which is not means tested in the old sense. It takes no account of capital, of the income of children or of income in kind. But it brings direct help to people in work with low incomes and dependent children; and, as was noted when the Bill passed through this House, it includes one-child families for the first time, and provides specially favourable treatment to one-parent families. The second thing we have done is to raise the exemption limits to ensure that more of those in need receive these benefits, at a cost estimated to be some £7 million a year.
Our view was summed up by my right honourable friend the Secretary of State for Social Services when he said, on May 5, that:
" there will continue to be scope for a healthy combination of the universal, the selective by category and the selective by means in the development of our social policies ".
The business of social security is to a great extent a question of helping those in misfortune, though this may not be its only sphere of activity. The Government believe that their social policies need to be a mix, as my right honourable friend's remarks made clear. From time to time the balance may change, both as regards the needs to be met and the resources available to meet them. We make no apology for regarding means testing (or selectivity, if the noble Lord prefers the word) as a valuable weapon in society's armoury, and we make no apology for doing our best to improve its efficiency.
We would, however, deprecate—and I am sure the noble Baroness would deprecate—anything that might suggest that there was any indignity involved in claiming the benefits available as of right. I would not deny for a moment that universal benefits have great advantages—they would avoid all need for discrimination, they are cheap to administer and easy to publicise. They are most useful when the object is to help everyone, or at least the majority, in a particular group—for example, retirement pen

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sioners. But there is no real possibility, and there never has been, of putting our whole social security system on a universal basis. For that we should need to enter not the European Economic Community but Utopia. The sensible view on which all Governments have acted is that the universal principle is useful for some purposes, while for others some form of selectivity is inescapable.
The first essential, in our view, in order to guarantee social advance is an expanding economy. If taxation is too high, this will lead to a lack of incentive, a lack of investment and a stagnant economy. To reduce taxation, as we believe is essential, again demands strict priorities. So not for any dogmatic reason, but in the interests of what is practical, we are driven to the conclusion that greater social justice will result from concentrating our limited resources where they are most required. And this inevitably lead, to the necessity of some test of means in order to determine where the greatest need lies.
All of us are used to an annual means test—all of us have to submit our annual income to the income tax inspector for his determination of our liability. All of us accept this as fair and that is the reason why the various concepts which are known as negative income tax, by which one annual means test would result in some paying income tax and others receiving income allowances, are so attractive. This was reflected in our Election Manifesto, and techniques of this character are among the matters being taken into account in the Government's study of family poverty. They are but one aspect of a complex set of issues to which we are determined to give the most thorough consideration.
So to start with, I cannot possibly agree with the words of the Motion that we are becoming increasingly dependent on means tests. In fact, our strategy for improving the system is likely to make it easier for the claimant. The noble Baroness mentioned this leaflet, to which I shall refer again later. It is true that there are a great number of benefits and a number of different places at which they have to be collected, but again this is no different from what it was under the last Government. What we are aim
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ing to do is to reduce the number of separate claims that have to be made by a person entitled to more than one benefit. We have arranged that the holder of a family income supplement book, like the holder of a supplementary benefit book, will be entitled to exemption or remission of charges for school meals, welfare milk, prescriptions, glasses and dental treatment. We have made it easier for people who supply information on one claim to obtain other benefits to which they are entitled, and we are continuing to examine such procedures so as to improve them where possible.
As a further step towards greater simplicity in making claims, we are exploring the possibilities of providing a single claim form for people applying for more than one benefit. My right honourable friend the Secretary of State for Social Services announced in reply to a Question on May 13 that an intensive study has been made in a preliminary way of a common form of inquiry for a wide range of means-tested benefits, administered both locally and centrally, and that the feasibility of such a procedure was being discussed with the local authority associations, whose co-operation would of course be essential, if the idea is to be taken further.
The Motion goes on to refer to the problems of disincentive and inadequate take-up. I would not for a moment deny that these are problems. But I would suggest that they are problems that have to be overcome, if we are to make the best use of our available resources. So far as incentives are concerned, not very much is known about the effect on the weekly wage-earner. It is true, however, that an increase in earnings in any given week is very unlikely to produce an immediate change in benefit entitlement, because assessment of benefits is based on income over a previous period of some length and different periods are used for different benefits. The problem is, of course, compounded by the income tax threshold, and in this respect at least we have improved on the situation which was left to us by the previous Government, by raising the tax threshold by means of increased child allowances.
On the question of take-up, we have made a real onslaught on this problem and we believe that we are succeeding.

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We have launched the largest ever campaign across the whole field of social services to seek out those who, for lack of knowledge, reluctance or for other reasons are not claiming benefits or exemptions to which they are entitled. This has cost over £340,000. It began in April and May with a campaign for take-up of free milk and welfare foods, prescriptions and dental and optical treatment for people in full-time work. So far we have received over 380,000 claims, and while many still remain to be processed we have already made over 175,000 awards. It was followed by a second campaign that is still in progress for the take-up of family income supplement. We have not only advertised in newspapers, on television and by posters, but we have also approached all local authorities and voluntary social workers to ask for their assistance.
I entirely reject, therefore, the latter part of this Motion and I am left with the first sentence on cost-related prescription charges. Once again we are concerned with a matter of priorities. We are continuing the wide exemptions for those people on whom prescription charges might otherwise bear heavily. But is it really right that all those who can afford to pay more towards the cost of their prescription should not do so, while there are so many other unmet demands in the National Health Service? The alternative is an escalating burden of taxation, and we have decided that this is wrong. We feel that those who can afford to do so without hardship should pay a charge more closely related to the cost of their prescription, and thereby enable scarce resources to be devoted to those aspects of the National Health Service, such as the care of the mentally ill, mentally handicapped and the old, where they are most desperately needed. We have, as your Lordships are well aware, already increased some charges. Without these increases and the further proposals for savings we have announced, we should not have been able to make available an additional £110 million over the next four years to assist those services in greatest need. But even so, with the wide exemptions well over half of all prescriptions are free of charge. If all prescription charges at the current rate of 20p per item were abolished, we should have to
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find some £40 million more in a full year.
There is an inevitable tendency for the drugs bill to rise and we must expect that with the development of modern medicines this will continue. The total gross cost of prescriptions in Great Britain in 1970 was of the order of £220 million, and the average cost of a National Health Service prescription is now about 75p, compared with a charge (where payable) of 20p. As the cost of the average prescription increases, the proportion of the drug bill which the charges save gradually falls and an increasing share has to be met from the limited resources available to the N.H.S. until the charges are next increased. In quite a number of other countries the share of the total pharmaceutical bill, contributed by patients, keeps pace quite smoothly with the total through a system of proportionate charges, which were mentioned by the noble Lord, Lord Amulree. We would not contemplate introducing proportionate charges without a ceiling to the charge, nor without the present very wide exemptions and the arrangements for season tickets which the last Government, if I may say so, so sensibly introduced. We have been in touch with the representatives of the professions concerned, and they have explained very fully the objections they see, including possible effects on treatment and the practical difficulties of operating such a scheme.
BARONESS SUMMERSKILL: My Lords, may I ask the noble Lord a question? He has, quite rightly, dwelt on the very important point that the doctors—when he talks about the professions concerned—oppose the scheme; the doctors who are going to be called upon to administer it are totally opposed to it. How can he therefore hope that this will be successful?
LORD ABERDARE: My Lords, the noble Baroness will be able to develop that point when she speaks. All I am saying is that we are well aware of the feelings of the medical profession; and we have been in touch with the pharmaceutical profession and we are well aware of their views, too. I was saying that we appreciate the genuine concern and

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we shall pay full attention to the representations that have been made.
The noble Baroness, Lady Phillips, asked me one or two more detailed questions. In view of the fact that an important Statement is expected, I will, if I may, speak at the end and answer her then. What I should like to suggest in ending is that we are all in the same difficulty. We all recognise the weak points in our social services. We know where additional resources are required. We are all of us aware from our own experience of the shortage of available finance and we have all therefore been driven, whether we be supporters of the Labour Party or the Conservative Party or the Liberal Party, into the necessity of using scarce resources where they are most required. Those are the hard facts which would be, I am sure, amply demonstrated in any Papers for which the noble Baroness has moved.

EUROPEAN COMMUNITIES AND THE UNITED KINGDOM
3.43 p.m.
EARL JELLICOE: My Lords, I apologise to the noble Lord, Lord Burin wood, for intervening at this point, but I should like, with permission, to repeat a Statement which my right honourable friend the Prime Minister has just made, I understand, in another place. The Statement is as follows:
" With permission, Mr. Speaker, I should like to make a Statement on the subject of the European Communities.
" The White Paper which I promised in my Statement on June 17 is being presented to Parliament and published this afternoon. Copies will be available in the Vote Office at the conclusion of this Statement. It is a comprehensive and detailed document, and inevitably long. The Government has therefore decided also to publish a short version next Monday.
" The White Paper records the Government's conclusions as follows:—

(1) The Government is convinced that our country will be more secure, our ability to maintain peace and promote development in the world greater, our economy stronger, and our industries and peoples more
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prosperous, if we join the European Communities than if we remain outside them;

(2) the Government is satisfied that the arrangements for our entry agreed in the negotiations will enable us to adjust satisfactorily to our new position as a member of the Communities and thus to reap the full benefits of membership;

(3) the Government will therefore seek the approval of Parliament in the autumn for a decision of principle to take up full membership of the Communities on the basis of the arrangements which have been negotiated with them."

My Lords, that concludes my right honourable friend's Statement.
LORD SHACKLETON: My Lords, we are grateful to the noble Earl for the short Statement, in contrast to the rather long Statement that had to be read on the last occasion. I do not think there is really anything to discuss now with regard to the Statement, beyond the matter of the arrangements. The Government have stated their views. We shall have full opportunity. I take it, to debate this White Paper, and it may well be that the noble Earl would care to say a word about what he sees with regard to arrangements. Your Lordships will need, I should have thought, three days, and quite clearly this is such an unusual occasion that, if I may, with respect, suggest it, it may be a good idea if noble Lords intending to take part in the debate give their names in rather early, so that the unfortunate managers of the House have some idea how much time to provide.
If I understand the situation correctly, we shall know in the next day or two the likely dates—this is a matter for discussion through the usual channels. Another place will be debating this matter before the end of July, and I take it that we shall be doing the same—not necessarily on the same days, though possibly we may have to overlap to fit in with other arrangements and matters that we have to discuss. I think that is probably all I need say now, beyond the fact that presumably we shall also have to consider when the final decisions are taken, when this will be, and whether it will be in the spill-over period or in the

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next Session. Here again, the Government may or may not be able, or wish, to give an indication.
LORD GLADWYN: My Lords, we on these Benches naturally welcome the first conclusion of the White Paper which was read out by the noble Earl, more especially since we have consistently maintained as a Party for the last twenty-three years that this is what should be done. Whether we can agree with the second conclusion, that,
" the Government is satisfied that the arrangements for our entry… will enable us to adjust ".
and so on, will naturally depend on our study of the White Paper. This we obviously cannot be expected to have undertaken in the few minutes that it has been at our disposal. But from what has already been announced by the Government it is extremely probable that we shall agree with it also, and, if so, it follows that as a Party we shall be behind the Government when it seeks the approval of Parliament in the autumn. For the rest, I would like to associate myself, as regards the arrangements, with what the noble Lord the Leader of the Opposition said.
EARL JELLICOE: My Lords, I am grateful to both the noble Lord the Leader of the Opposition and the noble Lord, Lord Gladwyn, for their reception of this Statement. I would tend to agree with what was implicit in what the noble Lord the Leader of the Opposition said and what was explicit in what the noble Lord, Lord Gladwyn, said: that it might be more sensible for us to reserve our substantive comments on the subject matter of the White Paper until your Lordships have had time to read, mark and inwardly digest this fairly weighty and not unimportant document.
I should like immediately to respond to what the noble Lord, Lord Shackleton, said about arrangements. As I see it, we have quite a massive timetable stretching ahead of us. There are the arrangements for the exploratory debate before the Summer Recess, and thereafter the debate on the matter of principle in the autumn. So far as our first debate is concerned, I would hazard a guess that a large number of noble Lords will wish to participate in a debate on what is a matter of cardinal importance, one way
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or the other, to the future of this country. It seems to me that the length of our debate, whether we need two or three days, for example, will depend upon the number of noble Lords who wish to take part. I would therefore echo what the noble Lord, Lord Shackleton, has said. It would be very helpful if we could have as soon as possible an indication of which noble Lords would feel inclined to participate.
As to the timing, I should like to keep our options open for a little while, and I imagine that this would suit the convenience of your Lordships. I think this is a matter to be handled through the usual channels, and I would wish to bear in mind also representations as to the convenience of individual Peers and the House. I think it would also be convenient to your Lordships' House if we were able to give an indication of the suggested timing as soon as may be. This I will have in mind. As regards the second debate, my assumption is that this would be—again it depends upon the future programme—some time in the early autumn; but at this stage I do not think I am in a position to go beyond that.
3.50 p.m.
LORD SHINWELL: My Lords, nobody can take exception to the noble Earl's suggestion that we should reserve our comments on the contents of the White Paper until the appropriate occasion emerges for a debate. I accept that it is quite proper that that should be so. However, I have just glanced at the White Paper, and I observe that there are two items which have a bearing on Questions that were asked earlier in our proceedings this afternoon. One was by my noble friend Lord Balogh, and the other by my noble friend Lord O'Hagan; one on the sterling balances, and the other on the subject of immigration. I observe that as regards the matter of sterling balances, what is contained in the White Paper is hardly consistent with the replies the noble Earl gave to my noble friend Lord Balogh and myself. What the noble Earl said was that the Government would exercise their judgment. It is quite obvious from paragraph 125 of the White Paper, that what the Government have agreed to, having had some discussion with the E.E.C., is to reserve the whole subject until after we have entered the

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Common Market. That is much like buying a pig in the poke, or pie in the sky. I could, of course, use more elegant language, but I have not had appropriate time to prepare myself. Anyway, that is how I regard it. It seems to me that when answers are given to the House—and I say this with the utmost respect to the noble Earl these answers should be consistent with what appears in the White Paper.
Then, on the subject of immigration and the free movement of labour. I observe that in paragraph 143 the Government has just dismissed this, leaving it entirely to the future. This is hardly consistent with the provision in the Treaty of Rome which makes it as implicit as it can possibly be that the matter of the free movement of labour is one for regulations to be devised by the Commission, and whatever regulations they decide upon, however adverse they may be so far as our immigration law and procedure are concerned, must be accepted by us.
I ask, with respect, that at least the Government might take note of the observations that I have just made, so that when the debate does arise we shall have more consistent and satisfactory replies; and in particular that it should be clearly understood that such vital subjects as sterling balances and the effect on our economic position, and the decisions taken by the E.E.C. on the subject of immigration, after we enter the Common Market, should receive further consideration. I think that in the circumstances, having observed what appears in the White Paper, I am justified in directing the attention of your Lordships' House to these matters.
LORD BALOGH: My Lords, before the noble Earl answers, may I put a supplemental question?
SEVERAL NOBLE LORDS: Order!
EARL JELLICOE: My Lords, I think it would be more helpful if I were to reply immediately to the noble Lord, Lord Shinwell. I believe that it would be sensible for all of us to reserve substantive comment until we have had time fully to digest the White Paper. All I should like to assure the noble Lord, Lord Shinwell—and I speak, as always,
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subject to correction—is that I do not believe that when he reads the White Paper carefully, and reads carefully what I said in answer to the first Question of the noble Lord, Lord Balogh, that he will find any inconsistency whatever between the two. I take note of what he has said on the point of immigration.
All I would say is that both matters are of considerable importance. On the question of the sterling balances, I should just like to say that what has happened is that at Luxembourg a broad agreement in principle was reached. The details have yet to be filled in. It seems to me that the line of the noble Lord's questions implies a lack of confidence in our ability, if and when we join the Community, to hold our own in the Community for our own national interests. I am sure that if the noble Lord has that lack of confidence, he is wrong in having it.
THE LORD BISHOP OF SOUTHWARK: My Lords, may I, as an individual member of the Episcopal Bench, say how much I welcome the Statement that has been read to us. As an enthusiastic European I supported the last Government in their efforts to go into the Common Market, and was disappointed when those efforts failed. I hope very much that the terms this time will be such as to commend themselves to people of all Parties, and that we shall soon find ourselves within Europe.
EARL JELLICOE: My Lords. I am grateful to the right reverend Prelate for his comments, of which I take due note. I hope he is speaking not only in his personal capacity but also in some of his other capacities as well.
LORD ST. HELENS: My Lords, is my noble friend aware that a great many of his noble friends behind him have entire confidence in Her Majesty's Government because of the way that they have conducted the negotiations so far, and indeed are heartily glad that they have achieved so much success? The fact that we do not propose to "jump the gun" by trying to debate a White Paper which we have not yet seen does not in any way imply that he has not got our overwhelming support.
EARL JELLICOE:My Lords, again I grateful to my noble friend. I will not

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attempt to "jump the gun". I happen to have read the White Paper, and perhaps have an unfair advantage. I am not wishing to debate the issue in any way, but however one views these negotiations, on whatever side of the fence one is on this issue, I would like, for my part, to pay a tribute—and I am not really thinking (although I include them) of my right honourable friends here to that determined team of British negotiators who have been engaged in Brussels and Luxembourg for the past many months, to whom we owe a very deep debt of gratitude, whichever way we feel about this particular issue.
LORD BALOGH: My Lords, may I ask the noble Earl how he considers that his statement to me that the full details of the problem of sterling balances, and of export of capital, can only be settled next week, can be reconciled with the Statement of the Prime Minister, which he so kindly repeated to us, that we have now all the details and conditions at our disposal in the White Paper? Are these two statements consistent?
EARL JELLICOE: My Lords, again I should like to clarify the position. When I said that there were negotiations still pending in Brussels—which I think are due to take place on this coming Monday, July 12, and I do not know what the outcome will be this will be on the question of capital movements. If I did not make that quite clear to the noble Lord, Lord Balogh, in answer to his supplementary question at Question Time, I should like to make it clear that this is what I was talking about on capital movements.
LORD BALOGH: My Lords, if that is so, does the noble Earl not think that if these negotiations are going to be conducted next week the Prime Minister is surely not quite entitled to say that all the conditions are at our disposal in the White Paper? Surely the capital movement is such a vital issue that a failure to fill in the details on that subject is not consistent with what the Prime Minister has said. While I congratulate everybody on their marathon attempt, I must confess that a little more candour would not be out of place.
EARL JELLICOE: My Lords, I am not at all clear to what paricular statement of my right honourable friend the
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noble Lord is referring. There is nothing in the Statement which I have just repeated which would bear on that matter. All I would say is that both my right honourable friend the Chancellor of the Duchy, and my right honourable friend the Prime Minister and this was very much the case when the Prime Minister was in charge of these negotiations some ten years ago—have been extremely forthcoming and have gone to great pains to keep Parliament informed of the conduct of the negotiations as they have proceeded. If I may say so, I resent what the noble Lord has said about lack of candour. I do not think that the testimony bears it out.
LORD BLYTON: My Lords, the noble Earl knows my opinion that it will be disastrous for England if we go in. But can he tell us whether there has been any secret diplomacy in the conditions which is not contained in the White Paper?
EARL JELLICOE: No, my Lords, there has been no secret diplomacy. There have obviously been, as is the case in any important negotiations, confidential discussions. But the agreement which has been reached up till now is set forth, and candidly set forth, in the White Paper which is now before Parliament and the country.
LORD BLYTON: My Lords, may we have an assurance from the noble Earl that everything that has been done is contained in the White Paper, and that there will be no repercussions afterwards from other happenings that we do not know about now?
EARL JELLICOE: My Lords, I can give the noble Lord an absolute assurance that the substantive agreements which have been reached between us and the Six are contained in the White Paper.
LORD AUCKLAND: My Lords, having, like many noble Lords and other people in this country, been apprehensive about the arrangements for New Zealand, may I ask my noble friend whether he is aware that what is contained in the White Paper, so far as I have read it, will give very much more relief to New Zealanders than was the case, say, a few months ago? Having said that, may I ask my noble friend whether there will

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be continuing discussions with the farming communities in New Zealand, through the New Zealand Government; and can there be a guarantee that if there is a need to make the transitional period for butter and cheese more flexible, that will be put in motion?
EARL JELLICOE: My Lords, I recognise my noble friend's connection with the Antipodes and with New Zealand, and it is a connection which I myself feel, having spent my earlier years in that country. I am grateful to him for what he has said about the outcome of the negotiations in Luxembourg as they have affected New Zealand. I share his impression about those negotiations. But I would remind my noble friend—I do not wish to go into the substance of this here—that, so far as butter is concerned, there is a three-year review provision. We shall remain, as always, in close touch with New Zealand—and I see no reason why our contact with New Zealand should be any less close in the future than it has been in the past. I am absolutely confident in giving my noble friend an assurance that if we receive any representations from New Zealand in the course of the coming years we shall pass on those representations and have them very much in mind if and when we become members of the Community, especially in relation to this review provision.
LORD HEYCOCK: My Lords, is there anything in the White Paper to allay the fears of the Australian Government?
EARL JELLICOE: My Lords, it is not for me to speak for the Australian Government, but the noble Lord might like to glance at paragraph 121 of the White Paper which deals with the Australian position. If I were an Australian, I should find very substantial reassurance in what is said there.
LORD SAINSBURY: My Lords, I should like to express from the Back-Benches on this side of the House the view of some of us that we shall give close consideration and sympathetic understanding to the White Paper, because we believe that
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it is in the long-term interest of the mass of people in this country, if their standard of living is to go ahead, that we should join the E.E.C. if the terms are reasonable.
EARL JELLICOE: My Lords, I am grateful to the noble Lord, Lord Sainsbury. Again without wishing to go into the substance of this matter, I cannot but say that I happen to share what I understand to be his point of view.
LORD GORE-BOOTH: My Lords, may I take up and generalise on a point already made by the noble Earl, and ask him whether he will agree that, whatever any of us may think, this whole discussion should be carried out on the basis that if we become members of the Community there should be no loose talk about British leadership, but that the British voice and British interests will be of great significance in the councils of the Community?
EARL JELLICOE: Yes, my Lords. I would entirely agree with the noble Lord, Lord Gore-Booth, speaking from his very great experience. If, as I hope, we join the Community, then I see us as partners in a continuing and great European enterprise.
BARONESS MACLEOD OF BORVE: My Lords, may I thank the noble Earl the Leader of the House for his momentous and historic Statement to-day? Also, may I assure him of the enormous welcome which I think this Statement will receive from practically everybody who has the future of this country at heart'?
EARL JELLICOE: Again, my Lords, I am grateful to the noble Baroness. In replying to her, I would say how much it means to me to be able to reply to the first supplementary, as it were, which I have received from that particular quarter. I have been a great admirer of her late husband and know the contribution which he made to the particular enterprise on which we are now embarking.
LORD SHACKLETON: My Lords, may I echo the noble Earl's personal remarks to the noble Baroness?

PRESCRIPTION CHARGES AND MEANS-TESTED BENEFITS
Debate resumed.
4.8 p.m.
LORD BURNTWOOD: My Lords, I now address myself to the matter of health, within the scope of the Motion before the House. I should have liked to mention various other matters in regard to the National Health Service and provision for health in this country. For instance, there is a need to bring before the attention of your Lordships the increasing anxiety by patients who feel that on being taken to hospital they lose contact with their general practitioners. I believe that the whole system of the somewhat unwieldy, though technically very efficient, district general hospitals may have to be modified sooner or later in favour of smaller hospitals under G.P. control. However, I now want to address myself to the first point in the Motion; namely, the question of cost-related charges for prescriptions.
I am second to nobody in admiring the courtesy and efficiency with which the noble Lord, Lord Aberdare, deals with these questions in the House, so I hope he will not take amiss what I am about to say. In any case, he has more than his fair share of charm. But I felt absolutely outraged by his speech this afternoon, for in essence his remarks about means testing in general, and more particularly about cost-related health charges, seemed to me to be so extreme and reactionary that I was as surprised about his remarks as I was about the original proposal on cost-related charges which was made some months ago by the Government. I do not want to spoil what I wish to do, which is to deploy what I think is a good case against the proposition, by exaggeration, but I am bound to say that if in one hundred years' time people read the noble Lord's speech they will react in much the same way as students of history now react when they read the Reports of Royal Commissions of 140 years ago on the employment of women and children in industry.
I feel that this proposition is outrageous; and I am most surprised at one particular omission in his speech. The noble Lord concentrated I think exclusively (though, of course, I should like
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to read his speech again) on the economic side of public finance in this matter. There was no enlargement that I detected in his speech on the question of the ethical considerations which should be given to this whole question. Indeed, when I first read about this proposal for cost-related prescription charges I thought it was a sort of sick political joke, and I do not think your Lordships can underestimate the sense of shock with which this idea was received by those of us who have had the Health Service much in our minds over the past 20 to 25 years. I speak with some feeling, because I think I am one of the only two Members in either House who were members of the Committee which in fact saw through the passing of the original, principal Act which established the National Health Service. Be that as it may, the only thing I do not find surprising about this is that the idea, the ethic of it, should be promulgated, if possible, or probably, by this Government. After all, the penalising of the weak and the sick has already been established on the justification that by reducing increased revenue in that way more money can be available for building what one might describe as the hardware in the provision of health facilities for this country.
But, my Lords, the Hinchcliffe Report of 1959 went into this question in very great detail. In point of fact, that Report was engendered by the Conservative Government of the day, and I am very surprised that the findings of that Report should even be questioned at this stage. If I may remind your Lordships, the arguments were deployed for instituting cost-related charges. It was said, for instance, that the patients would no longer want their doctors to prescribe extravagant quantities, since the larger the quantity the more they would have to pay. Nor would doctors be subjected to pressure from patients for necessarily expensive medicines. I do not want to go too far into the ethical question, because I see that there are distinguished members of the medical profession present to-day, and I hope that they will and I count on them to do so—object to the ethical concept of charges, which in point of fact will amount to paying for good health by the purse. But the Hinchcliffe Report threw out the idea of cost related charges, and cited the sort of results which would

1003
ensue were they so enforced. There were four main, principal objections, and I will mention the first two:
" A doctor might refrain from prescribing the more effective cure because it was expensive, or a patient might not present for dispensing an expensive prescription which a doctor might have given him. Those needing very expensive drugs would be hardest hit ".
The Report went on:
" The collection of a percentage charge by the pharmacists would impose an extra burden on them. They would have to work out the cost of every prescription. This would be much more onerous than collecting the shillings ",
as they were then,
" in respect of charges. Moreover, the amount of the charge would be liable to be challenged by patients ".
My Lords, prescription charges were bad enough, and I readily discard in the direction of Lord Aberdare the fact that it was the amending legislation of 1949, under the Labour Government, which ever permitted health charges to be made. I accept that. Many of us have been extremely upset and aggrieved that they were subsequently implemented by both Parties. But this is an entirely new concept. The administrative difficulties which have been submitted to the Minister by the chemists—the difficulties in administration not only in the actual dispensing, but the arguments which will follow with patients about the actual charges which are to be made—almost pale into insignificance against the picture that one can conjure up of patients not in the exempted classes, such as old people and young children, but the vast mass of the population, who are in fact in the very low income groups. Drugs nowadays tend to be much more expensive in the first few years after their introduction. Drugs which deal with high blood pressure and matters of that kind, which are extremely expensive, have to be used in large quantities by the lower income groups. They do not come under any provision for exemption; and I think that the whole idea that people should be penalised in this prescribing of medicines is, as I say, intolerable.
LORD ABERDARE: My Lords, I am sorry, but would the noble Lord allow me to interrupt him? He has not mentioned, of course, that there is a ceiling and there is a passport scheme, so that
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these vastly expensive drugs would not necessarily fall in their entire cost on anybody.
LORD BURNTWOOD: My Lords, it is more than probable that I have missed something announced in the Press. At the same time, when this matter was last raised in another place, in answer to a Question by Mrs. Shirley Williams, the Secretary of State said, in effect, that he had not really made up his mind but that he was engaged (it was some obscure language he used) in a dialogue on this matter with the interests concerned. If there is to be a ceiling, I am glad to hear it, although I comprehend from that intervention that these cost-related charges are now going to be enforced.
LORD ABERDARE: I am sorry to interrupt again, my Lords, but in my speech I said that we were still talking it over with the professions.
LORD BURNTWOOD: So we are now left with the position that, if they are to be introduced, there will be a ceiling?
LORD ABERDARE: Yes.
LORD BURNTWOOD: So we are making a little progress here. Nevertheless, the fact is that if these charges are to be introduced into our National Health Service procedures there will be a sense of public disquiet that a rich man can receive expensive and effective medication because he can afford to pay for these newly-developed drugs, while a postman, for instance, who does not normally come under the provisions for exemptions, will have to do with second best. Now this is a concept which is quite contrary to the original idea of the National Health Service, and I hope that the Government will have another think about it. Indeed, I had thought that, when the original, spontaneous objections were raised to this idea, the Government would gracefully withdraw, but I understand from the last statement which I have just quoted by the Secretary of State, and now the intervention by the noble Lord, Lord Aberdare, that it is still on. I can only say that there will be a great deal of trouble about this. We on this side of the House have struggled against any idea of exemptions per se. We believe that, according to the original concept of the National Health Service, health

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should not be a matter of any form of financial entitlement.
So, my Lords, I ask the Government to please reconsider this matter. The cost of drugs nowadays to some extent reflects the increasing cost in basic research. We all know the history of cortisone, the antibiotics and the new medicaments for possible conditions of cancer. I leave it to the members of the medical profession in the House now to deal with that. But the whole thing is so absolutely contrary to modern ideas that I ask the Government to reconsider the matter most urgently.
4.20 p.m.
LORD AUCKLAND: My Lords, owing to a long-standing engagement at New Zealand House this evening, I must apologise to the noble Baroness, Lady Phillips, to my noble friend and to the House for the fact that I may not be able to stay until the end of the debate. The noble Baroness need not apologise for having spoken on several Wednesdays, because I am sure I speak on behalf of the whole House when I say how much we enjoy her speeches, whether or not we agree with her, chapter and verse. I should like to associate myself with the sympathies conveyed to her noble friend Lady Scrota and to join in the hope that she will soon be back in fine fettle to contribute to our debates on this subject, about which she has had considerable experience.
The future of the National Health Service as a whole is of great concern to everybody in this country. Many noble Lords on all sides of the House—both those who practise in it and those who, like myself, serve on hospital committees and see what goes on—have a close interest in the National Health Service. My Lords, I must say that this Motion seems to show a curious lack of logic. Of course, prescription charges are something which could be described as anathema to anyone, for people do not become sick from choice, but there are one or two very basic if rather ingenuous facts that we have to face. The first is that the size of our population is greater than ever before. I do not wish to bring in any overtones of racialism, because as a nation we have always integrated people from all walks of life and have always been particularly anxious that they should
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get the best treatment in the social services, in health and elsewhere. But there comes a time when we must face the question of how we are doing to finance this Health Service, with the present shortage of doctors and of nurses, and with more and more people to look after.
I join with those who pay tribute to everyone who works under the egis of the National Health Service, be it on the medical side, on the nursing side or on the administrative side. I think that there is little in the problem of prescription charges other than that they are a necessary evil. I do not want to make the Party point that both Governments have had to impose prescription charges. In the circumstances, I think it was inevitable. But while it is arguable that cost-related charges set one side of the community against another, I make the contention that this method also ensures that there is some kind of watchdog on these charges. The exemptions from paying prescription charges are pretty considerable. I believe that something like 42 per cent. of the people in this country do not pay them.
There is just one point which I should like to put to my noble friend. It was brought out by the noble Baroness, Lady Phillips, and it is this question of the exemption age ceiling for the young. I understand from the White Paper, New Policies on Public Spending, that the age is 15. Leaving aside the contention of the noble Baroness that this affects school children, which it does, I think it is an accepted fact—and many of us who have teenage children will know this—that it is between the ages of 14 and 17 that children tend to pick up some quite distressing illnesses (and I am thinking of glandular fever and rheumatic fever) which need a fairly considerable amount of treatment. This may well mean the use of expensive but necessary drugs. I would ask my noble friend whether he will consult with his right honourable friend about the age ceiling. I think that 17 or even 16 would be a more practical limit.
My Lords, these services have to be paid for; and there is a crying need for new hospitals. Whether or not the saving of £71 million will contribute to building many of those new hospitals is a matter of conjecture, but those of us who have contact particularly with mental

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hospitals—as I know has the noble Lord, Lord Burntwood—will know how many very old, dilapidated buildings are now in use. An article in The Times the other day instanced two old hospitals where the staff were giving devoted treatment—and one must pay a tribute to the staffs of these hospitals—under extremely difficult conditions. We all want to see improvements made in these hospital buildings and in the amenities of the hospitals themselves, It seems to me that an increase in prescription charges must be looked at in the context of to-day's discoveries, when new drugs are being found: there is a chance now, so we read, of a possible breakthrough for some types of cancer, although one must not raise hopes too highly. If this is so, the question of Health Service charges must be seen in this context.
I would make just one observation about school meals. Of course it is right that children of families with low incomes should be provided with proper and, if necessary, free school meals; but I am not particularly convinced by some of these stories about children going to school without breakfast. This surely is a matter in which we cannot absolve the parents from responsibility. I know that it is argued that increased charges for school meals bring hardship to some families. They do. But there are, as I understand it, some quite considerable exemptions here.
So, my Lords, we must have some yardstick for the provision of these services. This document New Policies for Public Spending is at least a start towards trying to sort these out. One knows that the medical profession has objections to it. It is fair to say that there are medicines which can be obtained from the chemist, over the counter. If that were done it could save a considerable amount of time for the doctors. One hears a great deal about overworked doctors and nurses. Somehow that problem has to be solved. One appreciates the plight of the doctors and I am glad to hear that there is to be consultation. One hopes that it will be quick.
I should like, my Lords, finally, to reinforce the plea which I made earlier to my noble friend about the age limit for the imposition of prescription
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charges be they cost-related or any other kind of charges. It is important that before they start to earn wages the young should be afforded the best possible help and protection, and the elderly likewise. Having said that, I think that these plans of the Government are a step in the direction of trying to improve the Health Service facilities.
LORD GARNSWORTHY: My Lords, I hope that the noble Lord, Lord Auckland, will excuse me for intervening, but may I say, before he sits down, that he did indicate that he was leaving the debate early. That being so I should like now to address to him a question that I should normally have put later. As I understand it, the noble Lord is defending prescription charges, cost-related prescription charges, on the basis that they will help to meet the cost of the extension of the service. Is he really saying that a special form of taxation should be imposed on the sick to pay for this extension?
LORD AUCKLAND: My Lords, I do not accept that this is a special kind of tax. If we want proper services for the sick, and bearing in mind the number for which we must cater, unless we are to have large increases in direct taxation this seems to me a practical and less damaging way of providing them. But obviously, this is a contentious matter.
4.34 p.m.
LADY GAITSKELL: My Lords, I am grateful to my noble friend Lady Serota for bringing forward this very timely Motion and to my noble friend Lady Phillips for her valiant speech. No one would have guessed that she had to make it at such short notice. The Motion has been phrased in a very subtle way and goes right to the heart of the matter. Here I must disagree with the noble Lord, Lord Aberdare, who did not think that the Motion is phrased in the way I have indicated. The Motion shows that the Government have another peg on which to hang another series of means tests. I do not suggest that a means test is never justified, but I would say to the noble Lord, Lord Aberdare, that it is always a question of the amount, the degree and the trend. The recent series of charges, and increased charges, for various welfare benefits, and the way that

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it has been sought to justify them by an increase in the number of means tests, seems to me to be a hangover from the Poor Law mentality of the 19th century, and it puts the clock back in respect of our social welfare system in this country.
In the Economist this week there is one of those useful summaries of the different ways in which Britain and countries in the E.E.C. organise their social welfare services. There are differences both in philosophy and also in method. On the Continent the employers bear the major costs; in Britain it is the State. In France and Italy—I notice that the noble Lord, Lord Amulree, referred particularly to France and approved of the method adopted there—family allowances are higher and wages perhaps lower as a result of this system. In Germany, wage-related pensions leave pensioners better off than pensioners in this country, though widows come off rather badly. Because in this country the State bears the major burden the lower paid workers, when drawing benefits, tend to do better. This is a fair picture, despite lots of reservations that many of us might have had of the situation before the present Government took office; but it would not be so true today, despite Government protestations.
My Lords, the excuses are indeed lame and do not stand up to scrutiny. The proposed cost-related prescription charges are strongly opposed by the pharmaceutical and medical professions. The voice of the drug manufacturer is not heard, but perhaps this silence is a reproach to their favourite Government. With no support from those who deal with the prescriptions; with large categories of exemptions and the inevitable administrative costs which result, the economies hoped for by the Government appear to be very small. This will be another case where Tory doctrine does not work out, despite the good intentions.
After all, my Lords, four shillings (or 20p) is a pretty stiff charge for a large number of everyday prescriptions. Already this has increased the watch-dogs on over-prescribing by doctors and by regional medical officers; and to raise the charge even higher would make something of a mockery of a national health service. Various surveys by interested bodies show that the number of prescriptions
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per head of the population has been fairly constant since the beginning of the National Health Service. The percentage of the cost of pharmaceutical services in the National Health Service has remained stable for many years, although the total cost of prescriptions has risen. The increased costs are due not so much to price rises in the case of existing medicines but because new products have been prescribed. One analysis revealed that 58 per cent. of sales were for products launched since 1960.
It could be shown, my Lords, that prescription charges affect the number and cost of prescriptions. When charges were re-introduced in June, 1968, the number fell, but the average cost rose because doctors tended to prescribe larger quantities when patients had to pay. It appears that the per capita consumption of medicinal drugs is lower in Britain than in most Western countries. This was said by the noble Lord, Lord Amulree. If the Government remain obstinate about raising the charge for medicines still higher, I think that the health of the people might eventually suffer. The list of means-tested welfare measures seems to grow longer every day. Rent and rates have long been subjected to tests. Now, with the abolition of free milk and welfare foods for those under five years old, and the higher charges for prescriptions for dental and optical treatment, welfare measures are a headache for those who have to administer them. Also the variations in income limits for benefit, the different schemes by different authorities, complicate the whole of the new social security pattern and apparatus.
Perhaps the worst aspect of the Government's new style in welfare is the effect on those who have to apply for exemptions and benefits: the way they have to make themselves known. I think that this is where we on this side of the House differ from noble Lords opposite. This selectivity is really a throw-back to a primitive Poor Law attitude, and I am afraid that this is how Continental countries regard our selectivity system. No one can deny that all means testing can be something of an indignity. I feel that the noble Lord, Lord Aberdare, did not show understanding on this matter, when he said that it should not be an indignity. The

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fact is that people do feel it as an indignity, and that is what matters.
So far, the response, both from individuals and from local authorities, to some of the Government's measures has been something of a slap in the face, such as the revolt by various local authorities, both Labour and Tory councils, over free milk. It is really appalling to hear that in the short period of a year one million children have stopped taking school lunches because of the increased charge for them. The Minister of Education in another place must have found it somewhat difficult to sugar this particular pill.
When we come to the family income supplement for low-paid workers, the much publicised Tory policy to help families of lower paid workers, Conservative remedies have misfired lamentably. I remember the noble and learned Lord the Lord Chancellor (and I am sorry that he is not in the Chamber just now) replying for the Government, I believe at the end of the debate on the gracious Speech, with his usual brilliance and panache. He was indignant that we on the Labour side could accuse the Government of a lack of compassion. I am not setting a 100 per cent. store on Party labels—compassion for Labour and competition for the Tories. But the rigours and practice of Government in action often alters and erodes the credibility of both.
But let us look at what has happened to the proposed family income supplement for low-paid workers. According to the figures recently published by the Department of Health and Social Security, of the 160,000 families originally estimated in need of help who would benefit, 31,000 only have claimed, and of these under 10,000 have been awarded an allowance—that is, 6 per cent. of the original estimated number. Over 10,000 claims were rejected and the rest are being considered. This was the response after an expensive publicity campaign. Two offices had to be closed for lack of claimants. It was originally estimated that the family income supplement would cost £8·6 million. Up to date, spending has been £1·5 million, and I wonder how much of it has been spent on advertising. This is the response to the Labour Party's support for a more comprehensive
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range of social and welfare services. There is a feeling of indignity, amounting to humiliation, when the less fortunate in an affluent society have to apply and submit to a means test before they get help. This reaction to the family income supplement clearly demonstrates a revolt against the means test ideology. There is no incentive to apply for benefits. More damaging still is the damming up of incentive generally for low-paid workers. This is an indictment of any civilised affluent society.
The European countries can learn from one another, each copying the best of the welfare services in another country. The higher selectivity of the British system is not shared by other countries in the E.E.C., where there is a closer relationship between benefits and recipients' normal income level, according to the Economist again, which also states that the continental worker does better than the British worker on sickness, pensions and unemployment benefit. But apparently on health, the British national health system will tend to serve as an example for other countries to follow. If the Government continue in their means testing and in what I consider rather small, petty economies, I cannot see them setting an example to any European country. Increasing incentives for surtax payers is really no way to improve our welfare services.
4.47 p.m.
LORD PLATT: My Lords, I should like to join with other noble Lords who have expressed their thanks to the noble Baroness, Lady Serota, for initiating this debate, our sorrow that she could not be with us this afternoon and our hope for her rapid recovery. If I were speaking of anyone of less integrity, I might have wondered whether she had contrived the illness to build up a supply of expensive antibiotics while she could still afford them, but I do not think we could think that of the noble Baroness. I am also grateful to the noble Baroness, Lady Phillips, for opening the debate.
In an ideal world, I think most of us would agree, there should be no prescription charges. I think it is true to say that the medical profession was generally opposed to such charges from the beginning of the Health Service, but agreed to them on the ground that there was some truth in the statements that

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the public were demanding trivial benefits and domestic drugs from their practitioners, so wasting the doctor's time and a good deal of public money, and that a moderate charge might reduce this. I believe that there is still something to be said for that point of view, but I would hope that at this time, when the cost of everything goes up daily and when there is an enormous number of unemployed people, this Government will not still further increase the prescription charges, whether cost-related or otherwise.
I remember the days, to which the noble Baroness, Lady Phillips referred, in the 'twenties and 'thirties when there were really poor people in this country and a great many unemployed. There was the Lloyd George Health Scheme (so-called) for the workers, which did not include the womenfolk, who were also working, and the children. Many women did not go to their doctors or, if they went at all, did not go early enough and did not get treatment for themselves, because they felt that they could not afford it. Fortunately, nobody can say that we have got back to those times. But we are, I think, building up a new poor: not poor in the old sense, like the people I used to see in the out-patient departments, the children with no boots, and who really had not enough soap to keep themselves clean. We are not back to those days. But we are building up a new, large, under-privileged class of people, of low income, who are finding it more and more difficult to live at the standard of living which we nowadays, I think quite reasonably, expect, and who are appalled by the fear or the reality of unemployment, on the one hand, and by the high and mounting costs, on the other, to which they have already had added, as we know, certain charges, such as school meals, dental charges and so on, to be followed shortly by charges to museums. For all these reasons, I hope that we shall not have a higher prescription charge, which will deter people from going to the doctor and make it more likely that they will go and get some cheap, domestic remedy at the chemist's shop, thus putting off the day when they go to the doctor and get the treatment which they really require.
Before I come in detail to cost-related prescription charges, I should like to say that I realise that the Government have to take into account the enormous cost
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of the Health Service and of prescriptions. But this Government believe in private enterprise and collective bargaining, and presumably should be in a good position to get protection, through negotiation with the drug firms, against excessive charges on their part. As your Lordships know, a Committee was set up some years ago under the competent chairmanship of the noble Lord, Lord Sainsbury, which reported at length on the relationship of the National Health Service to the pharmaceutical industry. That Committee suggested certain measures, which I do not think have yet been fully carried out, as to how the Government might try to reduce the cost of prescriptions.
But let us not forget that a large number of the advances of medicine in my time have come from the drug companies. I have said this before in your Lordships' House, but it bears saying again. The eradication of pulmonary tuberculosis, which is the greatest advance of all in my time, depended originally on a drug produced by a pharmaceutical company. The whole range of antibiotics, after the initial penicillin, have depended on drug firms both for their discovery and for their development. Even penicillin did not become a practical possibility until the aid of the drug firms, or a drug firm, was called in. DDT was the discovery of a drug firm; and the eradication of malaria and other insect-borne diseases has become possible through discoveries by drug firms. The control, or the virtual elimination, of pneumonia, cerebrospinal meningitis and septicæemia—; killing diseases when I was a young man—has been brought about, first of all by the use of the sulphonamides discovered by a chemist working in a drug firm, and later by the antibiotics. New methods of X-ray investigation and anaesthetics have come from drug firms.
It is true that there are good drug firms and bad ones, but the good drug firms spend an enormous amount of money on research, and they run an enormous risk. Perhaps I should say, before going further, that I have no financial interest in any drug firm. But, as I say, they do run enormous risks. They may spend £1 million developing some drug which they think will sell in large quantities—it may be some antidepressant, or something like that, which a large number of people take. It may

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be that some other drug firm is also spending £1 million on its own drug, and if, for some reason, that drug turns out to be a little better or a little more free from side-effects, or, for reasons difficult to understand, more popular, the first firm may find that it has wasted an enormous amount of its money.
In any case, to control expenditure on prescribing by a cost-related device is, I think, both inappropriate and dangerous. It is bound to influence the doctor's prescribing; and although there are doctors who prescribe extravagantly—and perhaps a few who, one might say, prescribe irresponsibly—there are ways, as we have heard from other speakers, in which the cost of prescriptions by individual doctors is monitored. They can be warned if their average cost is much higher than that of the country in general, and they can be subjected to disciplinary proceedings. If you go to America and start discussing cases with medical colleagues over there, you find, to your utter surprise, because you are so unused to it in this country, that the conversation quite suddenly switches from what the patient needs in the way of investigation and treatment to whether the patient can afford it. I hope that nobody in your Lordships' House wants us to give up our principles and ideals, as embodied in the National Health Service, and go back—because it would be a backward step—to the jungle, as it were, of American medicine.
With a cost-related system there is bound to be a greater prescription and a greater taking of ineffective drugs from the chemists in order to save the patient the cost of the more expensive drugs, which are so often the specific ones which have a really potent antibacterial action or, in some instances, some other specific action. Occasionally you will thus lose the opportunity of avoiding chronic illness by prompt attention at the acute stage, and you will increase the length of quite a number of illnesses. When I was in North Africa during the last war, we had sulphonamide drugs, but there were no antibiotics. We had an enormous outbreak of bacilliary dysentry, and although we were overwhelmed with work we had not, luckily, as your Lordships will see, enough
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sulphonamides to go round. So I kept a careful note of the cases in which we gave the sulphonamides, and the cases in which we gave the old remedies, which were not so effective, but kept the patient going until nature cured him of his dysentry: and, amazingly, we had no deaths. The really big difference between the two cases was the speed with which we got the disease under control when using sulphonamide drugs and the speed with which we could discharge the patient from hospital and get him sent to a convalescent depot before he rejoined his unit. So I had personal experience of some hundreds of cases of an infective illness and I could see the number of man-days that were saved by the use of a specific drug—an experience which we rarely get on the same scale in civilian medicine.
I repeat, in winding up, that I understand the Government's concern with the cost of prescriptions, and I concede that some doctors are unnecessarily extravagant; but the introduction of a cost-related prescription charge is quite the wrong way to remedy the situation. In addition to the other objections, it cuts across the whole principles on which the Health Service was founded and the principle of the doctor's right to prescribe what he thinks to be right for his patient.
The noble Lord, Lord Aberdare, in his remarks, which he made with his usual patience and charm, referred to the transfer of resources from those who can afford them to those who are in need, and it all seems very reasonable, except that if you have any knowledge of history you remember, as the noble Lord, Lord Burntwood, has reminded us, that similar objections have been made to every single social advance in the last hundred years or more. Also it is an argument which, to my mind, may apply to a person with a fixed income who, whatever he does, is not going to get any more money, and therefore must budget within that amount of money, rather than to a nation like our own, in which no one can say what is the fixed amount that we must spend on health and above which we cannot go. I concede that a Government must watch and see that the amount does not rise too quickly. But, in any case, health is surely an area in which costs can be easily ascertained

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with some accuracy, whereas the savings and the gains are very difficult to estimate. Thus there is always a danger of false economy.
5.3 p.m.
LORD ILFORD: My Lords, I should like to begin, as other noble Lords have begun, by expressing to the noble Baroness, Lady Phillips, our appreciation of the very clear and lucid speech which she made this afternoon. I think we are coming to regard Lady Phillips as a very special exponent of the social services. This is not the first time that I have listened to her, and I hope that it will not be the last. May I also add a message of sympathy to the noble Baroness, Lady Scrota. Those of us who know the noble Baroness in other places know well what we have missed, and I hope that she will have an opportunity of moving another Motion concerning these circumstances a little later.
The noble Baroness, in framing her Motion, coupled the National Health Service with means-tested benefits. We have not heard very much about the means-tested benefits because this afternoon the debate, as these debates frequently do, has tended to creep into a discussion on the National Health Service. I regret that we have not heard a little more about the means-tested benefits. I hope that means that these benefits are not causing any great anxiety and that that view is merely being reflected in your Lordships' House.
I spent 10 years of my life administering various forms of means tests. I hope that what I did was right, but at any rate if my actions were wrong my critics were kind enough not to tell me so. None of us like means tests; but the fact is that the administration of social services, on a scale which is acceptable to-day, to the poorest section of the population is really not possible without a means test. It is not only that the burden of expenditure might otherwise unfairly rest upon other sections of the community, with benefits being paid to persons not requiring them, and it is not only that class of person who would benefit if such benefits were adminstered without a means test. Nothing annoys members of the public more—and I think one discovers this in administering these services—than to en counter some man who is said to be
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receiving benefits which he does not deserve. Indeed if that happens it brings the whole service into discredit. One has to frame the law so as to ensure that not only is unnecessary expenditure not incurred but also in order to be quite certain that the service is not exposing itself to the criticism that its administration is wasteful and extravagant.
The Labour Party at one time believed that it was possible to dispense with the means test altogether. When they found themselves in office they appeared to learn that certain benefits cannot be separated from a means test, and accordingly the Supplementary Benefits Commission was set up to undertake substantially the work which the National Assistance Board had been conducting. It is interesting to note that the Labour Party found that it is not possible, as they hoped before the Election, to dispense with the means-tested benefit altogether.
There are one or two matters of less importance which have arisen in this debate about which I should like to say something. First of all, there is the question of exemptions. I listened very carefully to the noble Baroness to see whether she could claim that in any one of these major social services there was no exemption, because it seems to me that so long as there are exemptions in a service it is really not possible or fair to claim that the benefit is not readily available to all sections of the population. It is. Although I listened to the noble Baroness carefully, I did not hear her indicate any service in which there was no exemption. Perhaps when the noble Baroness comes to reply she will let me know whether I have overlooked one of the services; otherwise we have to accept the position that the exemption is universal and that all these services are subject to exemption. If they are, it is not right to say that the social services are not extended to all sections of the population—they are. It may be that the exemption is sometimes inconvenient, and no doubt it frequently gives doctors and chemists more work. But when one looks behind those difficulties, the fact remains that the service is exempted in the case of those to whom it would be a hardship. That is one of the major principles to which we should cling in our approach to the social services. We should be sure that somewhere in some part of the service there is

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an adequate exemption for those who are not able to pay.
Now may I say a word about school meals. Yesterday, in another place, the Minister in reply to a Question gave a very long Answer dealing with the changes which have taken place in recent months in the consumption of school meals. The Minister's statement indicated a considerable drop in the number of meals taken in the schools. Everybody assumed that that drop was attributable solely to the fact that the parents were no longer able to pay the higher charges. Are we right in assuming that? Many of the children who ceased to have their dinners at school have done so because their parents thought that the higher charge was not worth it, and they would rather have the children at home. This is not because there was poverty in the home, but because the parents found it more convenient to have the children at home and did not want to pay the higher charge. Does not that explain why there was this drop in the number of school meals consumed? Of course there were other reasons. The Minister pointed out that it was not uncommon at this time of the year for a fall of that sort to take place, and there may be other reasons, too. But we must not ascribe the whole of that drop to the fact that parents were not able to pay the higher charge.
I should like to refer to the matter raised by the noble Lord, Lord Amulree. He suggested that there may be some form of universal benefit for all forms of social service available in all parts of the country, without the need for a means test. That is a most attractive proposition. It will not work for this reason. In the case of the applicant for supplementary benefits it includes practically the whole of his rent in most assessments. There is an enormous difference in rent levels in different parts of the country. Rents in the North are a great deal lower than rents in the South. The difference in the scale of rents in other parts of the country is even more marked. That fact alone prevents any universal form of benefit. It means that a benefit which may adequately meet the need in one part of the country will not meet the need in another part. In
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London, where rents are exceptionally high, the scale which would meet the need in other parts of the country would fall far short of what was required. Therefore these proposals, which always recur, about means tests are not practicable.
I wonder how many of your Lordships have realised the enormous size of the new Department which has been created. The Ministry of Pensions and National Insurance was created by the fusion of the old Ministry of Pensions and National Insurance and the National Assistance Board. The staff number something like 70,000 people. It is, indeed, a colossus. Yet this is a Department where success depends to a major extent upon sympathetic contact and cooperation between senior officers and the subordinate staff working in the field. Are we going to get sympathetic co-operation in a Department of this size? If the social services are to reach the poorest sections of the population they must be administered by a staff which has to have special training and special sympathy with the work which has to be done. What is most important of all is that there must be adequate contact between the senior members of the staff and the more subordinate members in the field. I have not the least doubt that the staff in the Ministry will work with the same devotion with which they worked for me when I was at the Board. But it will not be so easy to ensure those conditions in a department of this size. I am certain that the problems of decentralisation and staff handling will have to be studied. I do not suppose that this point will make a very strong appeal to my noble friend. Nevertheless, it is based on a long experience and I hope it will not be disregarded.
5.18 p.m.
BARONESS SUMMERSKILL: My Lords, I should like to join with noble Lords who have already congratulated my noble friend Lady Phillips. I am always charmed by the way that she manages to rise to the occasion when a colleague falls by the way. At very short notice she was asked to appear at the Despatch Box and expound on some complicated question, which she had learned about only the night before, and I congratulate her on her prowess. I am glad to follow the noble Lord, Lord Ilford, because he was Chairman of the

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National Assistance Board. He has heard the spokesman for the Government charge the former Government with having applied a means test in so many directions. The noble Lord will agree with me that there is a great difference between legislation and administration. You can have a measure on the Statute Book and two Governments can administer it in an entirely different way. Those of us who have served on local authorities well know that the administration of a certain group of councillors, who have a different political approach and who are there to administer the Statute, is entirely different from that of another group, although they have had to direct their attention to precisely the same matter.
First of all, I am going to deal with what I consider is a piece of harsh administration, something which I believe the social historians, when they review the effect of current social legislation on the lives of the people, will roundly condemn: I refer to the decision to abolish the supply of free school milk to children between seven to eleven, cheap welfare milk for expectant and nursing mothers, and for children under five. This was a reactionary decision. I cannot believe that the noble Lord who has just spoken, who administered the National Assistance Board, can possibly identify himself with this measure.
Nature has demonstrated that the most perfect food for a baby is milk. And to deny any expectant or nursing mother cheap milk at this most important time of her life, and that of her infant, indicates a callous disregard for the most helpless in the community. We are told that schoolchildren needing milk on grounds of ill health will receive it. How do the Government define "ill health"? The noble Lord opposite who answered my noble friend Lady Phillips glossed over this matter. If it is a pathological condition they are going to look for, presumably the child will be at home, and as poverty alone will not be a qualification for milk the Government can rely only upon a degree of malnutrition to attract attention. As malnutrition, unhappily, is not accompanied by a rash, it may well go undetected in a crowded school. We hear crowded schools described by teachers—forty or fifty in a classroom. Who is going to diagnose
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this condition, and when it is diagnosed, will gross malnutrition have developed, by which time the harm will have already been done? I was impressed by the Times Educational Supplement, which asked this question: How many medical officers can ever know enough about a child's background early enough to prescribe free milk?
I was glad to see that the Local Authorities' Association have indicated that if the school health service is not satisfactory they may appoint staff to improve its efficiency, in order if course to ensure that malnutrition will be detected in its early stages. This warning is in line with the Association's attitude to the Government's cheese-paring policy on school milk and school meals. Every local councillor brought up in a poor home is aware of the importance to children of adequate feeding. Therefore, it is not surprising that local authorities in touch with the realities of working-class life are protesting vigorously, and their protests occur all over the country. They are reported in all the papers, from what are considered Right-wing newspapers to Left-wing newspapers. They are protesting at the increase in the price of school dinners and the abolition of free milk for the over-sevens. It is significant that both Labour-controlled and Conservative-controlled councils—Newcastle is an example—want to pay for the milk from the rates. I was shocked to read in my newspaper to-day that in another place yesterday an attempt was made—and I hope it is only an attempt and that somehow it will be defeated—to stop these humane councils from raising a penny rate in order to provide milk and food for the children.
If I speak strongly on this subject it is because I spent four of the most satisfying years of my political life at the Ministry of Food, where I was concerned with prescribing food according to the biological needs of children, mothers, the aged and the sick, and not according to their capacity to pay. Curiously enough, in war time this was accepted. It was accepted that a Ministry should say that the nutritional needs of an individual are of paramount importance, particularly those of our children. We were given a free hand to ensure that the babies, the mothers, the schoolchildren, the sick and those with special diseases were given

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what they physiologically needed. If it was right then, why is it wrong now? This picture we have of children buying chips and cakes for their midday meal is of course familiar to those who years ago treated rickety children who were fed mainly on carbohydrates.
In the high street of every town in the country we see the lovely, straight legs of these girls in their mini-skirts—
A NOBLE LORD: Hear, hear!
BARONESS SUMMERSKILL: I am glad my noble friend realises it. They are proof of the success of the nutritional policy pursued in our schools during and since the war. In consequence, the hallmark of rickets, namely, bandy legs and knock knees, is found to-day only in the middle-aged and the elderly. That is not because the air has changed; that is not because housing has changed everywhere; it is because we in our great wisdom decided that the most helpless should be fed adequately.
It is suggested that a school means test should be disguised in order to avoid discrimination. It is difficult to believe that some, I suppose, highly intelligent civil servant devised this scheme. The scheme is that a child should take dinner money to school in a sealed envelope; the over-burdened teacher then returns it to the embarrassed child, who has already been informed by a harassed mother of every move in this cruel little game. This procedure is to be adopted in order that the most poverty-stricken—who are showing signs of malnutrition, of course—shall not be discriminated against. I should like those responsible for these variations on the means test theme to study some social statistics. The facts are that children in a small working-class family grow faster and gain more weight than those in large families. The average increase for London children was 2 in height and from 4 to 101b. in weight since the war. Before the war meals were given in schools to only 5 per cent. of children. In 1946, 42 per cent. received meals. It has been proved conclusively that we cannot separate education and child welfare if we are to produce the finest citizens, mentally and physically—and everybody here knows that so often the two go together.
The provision that certain categories—perhaps the noble Lord, Lord Aber
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dare, will tell me this—of very poor children can obtain free milk is an acknowledgment that children need free milk. But it is no guarantee that they will get it, because unfortunately children are sensitive little creatures and if they feel there is some discrimination in school, whether in the provision of milk or meals, it will be found that for one reason or another they will refuse; they will give some excuse in order not to be shown up in front of their friends. The poor, overworked mother, who I suppose is going to be asked to indicate why her children should have free milk or free food, is already told by the Government to "shop around" for cheap food. Surely, we should put no further difficulties in her way but should give free milk to these children without any further questions.
While the Government have demonstrated that they are out of touch with the needs of children, they have also revealed that they failed to understand the problems of the poor and the sick by the decision to increase charges for the National Health Service. On the subject of cost-related prescriptions, I was struck by the confidence shown by the Minister in another place in his reiterated statement that no charge would be introduced which would deter the patient from necessary treatment. How is the register of those who are deterred from securing advice and treatment to be compiled for his inspection? How is he to know? How can he go into the kitchen of a small home and know what a woman is considering when she says, "Shall I go to the doctor or not"?—because among those people will be the ordinary housewife who, with the rising cost of living, will be reluctant to pay a minimum of 20p and possibly much more, on the cost-related scheme. And when she finally visits the doctor, with a lump or a pain, and is quickly referred to the hospital for an operation, with a kindly reprimand (how well we know it!), "You should have come to see me sooner", it will be little comfort to her and to her family to be told that the Minister had said that no patient should be deterred from obtaining treatment. My Lords, these are just words! How can any Minister at Whitehall know what housewife in Durham has been deterred from getting treatment because of the cost?

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Again, how is it proposed to record the number of patients who will be deterred from taking to the chemist a prescription containing two or three expensive items? These people know. They look at the prescription, they know how many items are on it and they know that the crowded chemist at the corner may well contain some of their friends. They are faced with going to the chemist with this prescription which will cost them quite a considerable sum of money, and either paying money which they cannot afford or leaving the shop. They will look at the prescription and say, "I cannot afford this", and they will put it in the fire.
People who are ill cannot choose whether they have a cheap or an expensive illness, and a patient should not be punished for developing a disease which involves more expensive treatment. To be selective among those who are ill is illogical and unjust, and consequently the total cost of the treatment should be shared by the community. Surely it is not surprising that the General Medical Services Council of the British Medical Association has opposed this heartless scheme. And I find it difficult to know why, if all the doctors throughout the country feel that this really is unethical, a patient should either be denied a drug or be prescribed a drug which really is too expensive for him to pay for. How can the Government say that they will administer the scheme in such circumstances?
I believe that this scheme has been conceived because the widespread prescribing of expensive proprietary drugs has been permitted. I have heard the noble Lord, Lord Platt, say half a dozen times what he has just told your Lordships, and he has probably heard what I have said half a dozen times. But these things are written on our hearts. Successive Governments have allowed the prescribing of expensive drugs although a national formulary exists which sets out cheaper alternatives. When I spoke from the Dispatch Box in another place some years ago, I used to take with me what had been sent into my houshold of doctors on one day. I remember on one ocasion holding up at the Dispatch Box six boxes of sample pills and a pile of glossy advertisements. And still they come. Little is done about it. Why. I can never quite understand. I used then to appeal to the Treasury,
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and I cannot understand why the Treasury does not do something about it.
In 1967 the marketing and promotional practices of the pharmaceutical industry were examined by the Committee of Inquiry in conjunction with the industry and the National Health Service, and the conclusion was reached that the amount of advertising was excessive. Accordingly, it was recommended that a Medicines Commission should be set up to control advertising. The point is that the cost of advertising is met by the National Health Service. Although this Commission has been in existence for 18 months, expensive advertising continues unabated. I had four "glossies" this morning, and the glossy book that we have read about in The Times— the Book of Nobrium—is the illustration of the industry's contempt for the conclusions of the Commission's inquiry.
I listened carefully to what my noble friend told the House. He told us of everything that had been done by the various drug houses in the field of research. What are the facts'? In 1965—and these are the latest figures I have got advertising cost £15 million: a huge sum as compared with the £11 million spent on research. To-day we are asked to save £9 million through depriving children of their milk. Surely nobody can doubt that the milk is of infinitely more value to the welfare of the child than much of the output of the proprietary drug manufacturers that is peddled to the gullible. I want to sum up by saying that here is the striking contrast in the manner in which the Government retreat before the powerful pressure groups of the pharmaceutical industry and permit colossal profits to be made at the expense of the National Health Service, while the unfortunate children, powerless and inarticulate, are deprived of an essential food in the name of containing expenditure.
5.37 p.m.
LORD GARNSWORTHY: My Lords, I think that almost every speaker has expressed regret that the noble Baroness, Lady Serota, has been unable to be with us this afternoon because of illness, but I am quite sure we all feel indebted to her for having tabled this Motion. If I may, with humility and great respect, I would say that in my view the many tributes that have been paid to my noble

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friend Lady Phillips have indeed been well deserved. While she was speaking she touched on the position that used to obtain many years ago. She was going back certainly to the time when I was at home with my parents, and she said that in those days women could not afford the doctor. I recall that in our family the one person for whom the doctor was never called was my mother. My mother did not have the doctor because the cost would have meant that the amount spent on food or clothing would have had to be cut by the amount of the doctor's bill. Not for one moment do I think that the Government want to take us back to days like that, but certainly those of us who remember them feel fully justified in expressing concern at what appears to us to be the trend of this Government's policy.
The noble Lord, Lord Aberdare, speaking earlier in the debate, spoke in his usual model tones. He did his utmost to persuade us that there is little or no difference between the two sides in this House on this subject. I hope that this debate will make it clear that there is a difference, and that it will make clear that as far as some of us on this side are concerned we have learned a much needed lesson. It is that we ought to be careful before we introduce any policy for reasons of expediency which can be exploited by our opponents when they take office. I think no one will contend that when National Health charges were first introduced it was the intention of the Labour Government or the Labour Movement to maintain them. Indeed, at one point they were able to remove them, and many of us deeply regret that they were reintroduced, again, I think, at the time largely for reasons of expediency. As I say, there is a lesson that some of us have learned, and I hope it will be taken to heart by all those on the Benches behind me.
I should like to take up a point that I tried to get clear when we were dealing with Starred Questions this afternoon, and I hope your Lordships may excuse me for taking up your time. I should like right away to express my gratitude to the noble Baroness, Lady Tweedsmuir of Belhelvie, in that she has written me a note to confirm the figure she gave as to the number of
1028
children in Scotland receiving school meals. As I think the House understood at the time, I was after the shortfall as between those who it was estimated ought to be having school meals as compared with those who are in fact getting them; and if I am told that the 120,000 odd who are receiving school meals represent 100 per cent. of those entitled to claim, I shall indeed be surprised. I hope my point is clear. My experience as chairman of a board of governors that covers two secondary schools is that headmasters are concerned at the number of children who ought to be getting free school meals and whose parents, for one reason or another, will not apply.
If I may say so, while on the subject of school meals, both the noble Lord, Lord Auckland, and the noble Lord, Lord Ilford, touched on the 1 million drop in the number of children taking school meals. The drop that has taken place is indeed far beyond anybody's expectations; it goes way beyond the drop that took place in 1968 and 1970, when charges were raised on earlier occasions; and to assume that we are going to get, as it were, back into balance by September of this year is, I think, to express an optimism that is unjustified. May I say that I have been extremely interested in what has happened in my own county, and I find that there has been a tremendous drop, a record drop; and I am told that what has happened in Surrey is nothing like so bad as has happened in some other counties. If one refers to the details published in the Written Answer in another place the day before yesterday, to which the noble Lord, Lord Ilford, referred, it is pretty clear that there are pockets of the country where a very serious situation indeed has arisen in regard to the school meals service.
The noble Lord, Lord Auckland, made some reference to the responsibility of parents. I think we ought to take some note of the fact that a very substantial proportion of the work force in this country consists of married women, and they are not at home to feed their children at midday. They have many calls on their time, and I think it is a little unreasonable for the Secretary of State to suggest that we need have no concern on this; that their mothers know best. It

1029
is not so much a matter of their mothers knowing best; it is what their children do while mother is at work. I shall probably be returning to this subject presently. But I do want to make this point: that in so far as the drop in school meals in Surrey is concerned, alongside it there is a quite fantastic increase in the number of pupils bringing sandwich meals from home. May I give the figures that I have before me? In 1968, the number was 3,944; in September, 1969, 5,273; in September, 1970, 7.141 and in May, 1971, 24,014. I leave those figures to speak for themselves, because I think they are impressive, and provide the answer to what seemed to me to be a lack of concern on the part of the noble Lord, Lord Auckland, and the noble Lord, Lord Ilford.
Allowing for the need for some special benefits to ensure a minimum standard of living for all is one thing, but the introduction of means tests over what seems to me to be an ever-widening field is another matter; and the trend at present suggests that it is getting somewhat out of hand. Certainly the people who come just above the level of reduced cost services seem to catch an unfair burden, and I suspect that these include a great many people who struggle to maintain what are known as middle-class standards. I think it is time we showed some concern for those people whose incomes fall roughly between £1,000 and £2,500, because I have a suspicion that we are imposing upon those people who are struggling to maintain standards handicaps which they ought not to be called upon to bear. May I be quite clear about this? For my part, I should welcome a return to the concept of free treatment as of right in regard to all services vital to the maintenance of health, which includes optical and dental treatment, as well as medical, as indeed I would for free milk and welfare foods for expectant mothers and children under school age.
I have suggested that means testing is getting out of hand. It is also getting something of a maze. Two weeks ago I suggested that one needed to be almost a chartered accountant to understand how it all worked out, for each service has a different level of free benefit. My noble friend Lady Phillips referred to this leaflet, Which of these are yours as
1030
a right? Free, and, like my noble friend, I obtained a copy of that pamphlet from the Post Office. It shows four different levels. A married couple with one child can get free school meals at £17·25; for free prescriptions, the same family, the income level is £18·10; for free milk and welfare foods for expectant mothers and children under school age, it is £19·30; for free optical or dental treatment, £19·55. The disparities continue for families with children. I wonder how it is possible to justify these different levels? No one can be surprised that one should be asking the question, since they are all on the same leaflet which is handed out.
Whatever may be said in that respect, may I say that I am impressed by a paragraph that precedes those examples, which surely is a warning. It states that these are examples of income at which you "may" qualify. The significant word is "may". You have to till in a form; you have to wait to see what the answer is. You cannot be sure that you are going to qualify until it has been considered by somebody or other in some office. I am told that a quite large number of people think they are entitled and make application for benefit, only to be told that they do not qualify. Indeed, my noble friend Lady Gaitskell gave figures in one particular regard.
There is a different level of income again for a family income supplement. I take the point made by the noble Lord, Lord Aberdare, that if you are drawing that supplement you get all the other benefits, but it is again a different level. In regard to free milk for some children between the ages of 7 and 11, as my noble friend Lady Summerskill said, there is an entirely different standard, and I will come back to that a little later. The introduction of selectivity—as the noble Lord, Lord Amulree, said he preferred to call it—over a wide field, coupled with income tax reduction, has meant more for the childless and those in the higher income bracket (those over £4,000 or £5,000), and the crunch of these charges falls most heavily on those who just manage without entitlement to free benefits. I hope that we shall be inclined to show a little sympathy and understanding of their position.
Cost-related prescription charges have been pretty roundly condemned in this

1031
Chamber this afternoon. I have in my hand a copy of the Pharmaceutical Journal for May I. It reports widespread opposition to those charges, and in my contacts with those in the pharmaceutical profession—and I have no interest to declare—I find wholesale and deep felt opposition to them; opposition on grounds of imposed further hardship on the sick, and the burden of work it will impose, as they put it, even if it is workable.
The noble Lord, Lord Aberdare, said that the Government would pay full attention to what the doctors and pharmacists had to say. I hope that they will pay the closest possible attention to what the noble Lord, Lord Platt, has said. I think a fair question to put to the noble Lord is: what do the Government propose to do? Because the advice of the Association is clear. They have told the Government they do not like these charges, and have indicated in pretty clear terms—the pharmacists, at any rate, as I understand it—that they do not regard them as workable. In view of what I thought was a very powerful plea made by the noble Lord, Lord Platt, this afternoon, I think it is reasonable to ask, since the noble Lord, Lord Aberdare, said that the Government would pay full attention, what attention they propose to pay to what is the most serious criticism offered by the profession? As I see it, the extension of means-tested benefits means the further subsidence of inadequate earnings. In addition, it diminishes the incentive to earn more, because higher earnings result in loss of benefits. I really would like the noble Lord, Lord Aberdare, to reply to that point. Just what incentive does he think is afforded the wage earner living on family income supplements if any increase in earnings is lost as a result of loss of benefit? I think that question is very important and pertinent to this debate. It seems to me that, as a constructive and positive attitude, we ought to be encouraging those who seek earnings sufficient to support family needs. May I be excused for saying this in support of that proposition. It is high time that we had an incomes policy that dealt effectively with those at the bottom of the wages scales.
There is also the fact that many of those entitled to claim do not, or will
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not, claim. It may be that some of them just do not know of their entitlement. Certainly the Government have been spending a deal of money, as my noble friend Lady Gaitskell said, trying to inform people, with apparently not too good a return at the present time. Whatever the potential claimants may or may not know, we know that there are many in need who do not apply. It seems to me that when people get service as of right, there is far less risk of those in need suffering deprivation. By that, I mean that when we all get service as of right and there is no distinction as between one person and another, then those in need will run no risk of being left out.
I touched earlier on the subject of free milk for the seven to eleven-yearolds. Here incomes just do not count; it falls on the school medical officer to determine who gets free milk. As my noble friend Lady Summerskill again pointed out, it does not matter how poor you are: you do not get free milk because you are poor, only because the school medical officer has certified that you should have it. I wonder whether we shall have a school medical officer in some district who will have the temerity to say, "All children between the ages of seven and eleven in our schools ought to have free milk", and I wonder what the attitude of the Government would be if that was done, having regard to their declared intention of prohibiting I.L.E.A. from providing free milk because they think it is a wise and sound policy?
I hope that the Government will think again about this, and think again about it in the light of an article in the New Scientist for July 1 written by Dr. George Lynch and Dr. Sylvia De La Paz, members of the Social Nutrition Research Unit at Queen Elizabeth Hospital. They make the point that a significant proportion of children will be put at risk medically by the decision to withdraw free school milk from the seven to elevenyear-olds except those receiving "medical milk", which is the description given to it by the present Secretary of State for Education and Science. I hope that the warnings these two doctors give in this article will not be treated lightly, having regard particularly to the fact that in 1968 the Committee on the Medical Aspects of Food Policy advised that to

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withdraw milk from children below the age of eleven would result in nutritional detriment. I do not think that we can afford to ignore what Dr. Lynch and Dr. De La Paz have written, for they indicate that only 32 per cent. of children aged ten to twelve are satisfactorily fed. Some 18 per cent. of primary school children do not get enough calcium, and 28 per cent. lack riboflavin. Those statistics, again, are something of an answer to the noble Lords, Lord Auckland and Lord Ilford.
We are in danger of producing two nations; those who receive inadequate incomes and who are means-tested for essential services, and those whose incomes are above subsistence levels. But I think one ought to recognise that even among the latter there are many who just get by; on whom the burden of paying taxes, paying contributions and paying again when illness afflicts the home falls heavily. I believe that means-testing offends the sense of dignity of our people and, in addition, the varied pattern of scales now employed makes the whole business an off-putting puzzle to most people. If the Government persist, particularly in regard to cost-related prescription charges, I think that the necessity for a change of Government will be increasingly appreciated. I hope, however, that having regard to the risks involved the Government will not proceed with cost-related prescription charges and will not deprive the 7 to 11 year-olds of entitlement to free milk.
6.2 p.m.
LORD ABERDARE: My Lords, if I may have your Lordships' permission to speak again, I should like to refer to one or two of the speeches that have been made in what has indeed been an interesting debate. If I may go in the order of speaking, I said that I would try to take up one or two of the points made by the noble Baroness, Lady Phillips. One of her proposals was for free prescriptions for women, and she suggested that these should be given at 60, which is their retiring age. I think the noble Lord, Lord Amulree, agreed with that. The noble Baroness will undoubtedly be familiar with the answer: that 65 is the age at which it is considered people require more prescriptions, and it has no relation whatever to the age of retirement. I recognise that many people feel the same,
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but that is the distinction we make. One has to have regard to a magic figure in all these cases, and why one age is chosen rather than another is a matter for discussion. But the fact is that it is said' that people of 65 and over, whether they be men or women, should receive free prescriptions.
LORD AMULREE: My Lords, may I interrupt the Minister and ask him whether it is not really a question of capacity to pay? Presumably, a woman pensioner who has retired at 60 cannot pay as much as she could when she was in employment.
LORD ABERDARE: My Lords, as I said, the reason for the age which has been chosen is that they need more prescriptions at that time; not that they cannot afford it. But anybody who cannot afford to pay for prescriptions can apply to have free prescriptions, or for a refund of the charge.
The noble Baroness, Lady Phillips, also spoke about free meals, as did a great many others of your Lordships. To put one or two points right, so far as figures and the reasons for the fall-off in the take-up of school meals are concerned, my right honourable friend the Secretary of State for Education and Science made a very detailed Statement on July 5 in the other House, and gave a great number of reasons that are related to this question. Of course, she recognised at the same time that we naturally expected, as a result of increasing the charge, a fall-off in the take-up of school meals; and, indeed, this is exactly what happened when the last Government increased the charge for school meals.
I think the noble Baroness also referred to an article which appeared in the Guardian to-day, and that gives me an opportunity, which I welcome, to put right some of the facts. It was suggested in the article that the estimates had been wrongly made. This is not so. The fact is that the first estimate of 200,000 for the number of children who would benefit was made early this year, and took account of the reduction of sixpence in the standard rate of income tax which had already been announced by the Chancellor in October. But, of course, it could not be foreseen at that moment

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that the Chancellor would increase the child tax allowance in the Budget, and it is because the child tax allowance was increased in the Budget that certain families have been left with a higher net income than before. It is against that background that the estimate for those children who will benefit is now between 140,000 and 150,000.
But I should like to make this further point. There is no question, as the article implied, that 50,000 to 60,000 children already getting free meals will have them withdrawn. Free meals was a benefit in prospect for certain families which, on the basis of the April changes in remission scale and in child tax allowances, would not have materialised. However, the net income scale for remission of school meals charges will be raised again in September when the supplementary benefits scale is raised, and the 50,000 to 60,000 children referred to will then qualify for free school meals, plus many more.
BARONESS PHILLIPS: My Lords, I am not quite clear about that. Is the noble Lord saying that if you are lucky enough to be getting them already and you have a change in circumstances, you will continue to have the benefit?
LORD ABERDARE: No, my Lords. I am sorry, but it is very complicated and I was not saying that. What I was saying was that these predictions of the number of children who are going to benefit were made without taking into account the fact that there were to be increased child tax allowances. So the number who will benefit has fallen, because there will be that number of families who will be better off. The noble Lord, Lord Amulree, and I think the noble Baroness, Lady Gaitskell, made considerable and effective use of comparisons with European friends. I, too, read with great interest the article in the Economist. This is all very interesting, but it is very difficult to draw exact parallels in these cases. So many of the different benefits in other countries in Europe are covered by various types of insurance schemes, I think that any harmonisation which is going to take place will be a very long and complicated process, and one would hope that in the process of harmonisation it will be
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the best provisions made in the various countries that will become the harmony.
The noble Lord, Lord Amulree, alrm expressed the view that, in effect, it was better to pay allowances to everybody and recover some of them by means of tax. It is a nice thought, but it does not always work out quite so well as that, because tax does not take back all of the benefit, so that there are a number of people who benefit when they do not really need to. My noble friend Lord Ilford very effectively made the point that of course means-tested benefits of the supplementary benefit type take account of rents, which vary so widely and are such an important part of many people's budgets.
As to the noble Lord. Lord Burntwood, I had great sympathy, if I may say so, with his desire to raise all sorts of matters about the National Health Service. I, too, should have liked to have a debate on the Consultative Document on the National Health Service, but I recognise that this was not possible. I will merely say that I have every sympathy with him in his expressed hope that general practitioners will be more closely allied with the work in the hospitals. Perhaps it would be relevant to say that when we get a unified Health Service, with area health authorities that control the hospitals and the medical health administration, and organise the general practitioners' side, it may be that this will be easier of achievement. I thought he was a little hard in his comments on my speech. I did not think it was quite so reactionary as he seemed to think; and I felt that his speech was rather extraordinary, since he was a member, and a very distinguished member, of the previous Government, which did, after all, restore prescription charges and relied on many of these means-tested benefits that we are discussing this afternoon.
I hope that I have cleared up the matter of the cost-related prescription charge. The fact is that we have announced that we are to introduce a cost-related prescription charge, but we are now looking very carefully at this proposal, following the discussions that we have had with the professions. My right honourable friend has also said that any scheme which is introduced would retain exemptions, would have a ceiling on any single payment and would incorporate the passport

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scheme, which has worked very well hitherto.
LORD PLATT: My Lords, may I ask the noble Lord a question on that? I am sorry to see that the Government seem to have gone as far as this in their thinking, but when the noble Lord says that there is to be a ceiling, is this the total cost of the things prescribed or of each prescription? You see, to take the simple case of an eye condition, or something like that, it is very usual nowadays for the patient to be given something internally as well as something to be applied to the affected part, to say nothing of one or two accessories that may go with it. Extravagant though it seems, it is quite usual—and I am sure the noble Baroness, Lady Summerskill, will support me in this—to have three or four items on one prescription. So that if the total charge for one of them is (we will say) 30p, or something of that kind—an expensive one—the total cost of the whole lot might be approaching £1, or something of that kind.
BARONESS SUMMERSKILL: My Lords, may I put a supplementary to the noble Lord? We know that the minimum cost will be 20p. Now we are told that a ceiling is going to be fixed. May we know what the ceiling is; how much it will be?
LORD ABERDARE: My Lords, I purposely did not go into this scheme because, as I said, it is still under very deep consideration. We are still listening to the representations which are being made, and we do not wish to make a hasty decision in this matter because it is extremely important. So I do not wish to be drawn to-day into any further details of a scheme on which we have not yet decided.
LORD BURNTWOOD: My Lords, I am sorry to persevere in this matter, but do I understand now that the Government are going ahead with this scheme notwithstanding representations from all quarters, but with a ceiling on the charges to be made?
LORD ABERDARE: No, my Lords. I am awfully sorry; I do not seem able to make myself understood. We have announced that we wish, if we can, to find some means of relating what people pay for their prescriptions more closely
1038
to the cost of the prescription; but we have listened and are listening to representations made to us on this matter before we finally make any decision.
My Lords, I was very grateful for the speech of my noble friend Lord Auckland. I think he put very clearly what I had tried to make clear in my opening speech: the difficulty which we all face of making the provision that we should like to make for our social services within the limited resources available to us. The noble Baroness, Lady Gaitskell, as usual, I thought said some astonishing things in a very charming way. She began by taking us to task for the increase in the number of means tests. The increase is one: the family incomes supplement. All the rest were in operation under the previous Government. One other point I thought was not quite worthy of her, and that was when she implied that the reason why the drug manufacturers had not made any complaint was that in some way they were our friends and therefore they stood to benefit by cost-related prescriptions. But they do not. It is to their benefit that all the prescriptions should be free, so that everybody gets what they want however much it costs.
BARONESS GAITSKELL: They have not made their voice heard, my Lords.
LORD ABERDARE: They have not made their voice heard; but this is not for the reason that the noble Baroness thinks. What she never tackled, and what the noble Lord. Lord Garnsworthy, if I may say so, did not make clear to us, was how noble Lords on the other side would intend to pay for the rapidly increasing cost of these prescriptions. We have heard from all sides of the House, and from the noble Lord, Lord Platt, that more and more money is required to pay for more and more expensive medicines; and, somehow, these have to be paid for. Not only that, but the noble Lord, Lord Garnsworthy, went even further. He wanted all health benefits to be free, and a great many welfare ones, too. He must accept that this would increase taxation.
LORD GARNSWORTHY: My Lords, it is not a question of increasing taxation. The Government have chosen to reduce taxation, and in order to reduce taxation they are imposing additional charges on

1039
people, many of whom I suggest, can ill-afford them.
LORD ABERDARE: My Lords that is not putting it the right way at all. The reason for the charges is to find extra resources for the health and welfare services. But if the noble Lord is really considering having no prescription charges, no charges for health services and no welfare charges, I hesitate to think how much he is going to put on income tax when, if he ever does—and I hope he does not—he gets back into power.
My Lords, I took very careful note of the views of the noble Lord, Lord Platt, on prescription charges, and particularly on cost-related prescription charges, and I am grateful to him. I do not want to intervene between him and the noble Baroness, Lady Summerskill, on the question of the pharmaceutical industry, except perhaps to say that I find myself rather more in sympathy with the noble Lord, Lord Platt, on this matter than with the noble Baroness. Not only have these pharmaceutical firms done a great service in many ways, as the noble Lord, Lord Platt, described to us, in the development of new drugs but we ought not to forget that they have also been very considerable exporters, and have earned a lot of foreign currency for this country. But, having said that, of course, it is true that we still operate the voluntary price regulation scheme which was introduced under the last Government, and which keeps a check on the prices charged.
The noble Lord, Lord Ilford, from his long experience made his usual wise contribution to this debate. I was grateful for his assistance in pointing to the need for means tests provided that there are proper provisions for exemptions. He drew attention to the size of my Department, and rather thought that his remarks might not appeal to me. I must say that they rather did appeal to me. I am quite sure that there are very great advantages in Health and Social Security being amalgamated, because it means that the Secretary of State can take an overall view of cash arid care when dealing with this problem. I also take his point of the need for the human administration of
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social security benefits. I can assure him that this is very much in the mind of the Department. As he knows very well, it is very largely dealt with in local offices, and I have on many occasions paid tribute to the staff of those offices. I think that they deal with the claims on them in a most humane way.
The noble Baroness Lady Summerskill, made a powerful attack on what we did about school and welfare meals. She referred particularly to her experience when she was doing extremely good work at the Ministry of Food. She asked what was the difference. The difference was that in those days food was very desperately short. It had to be provided we had to see that those who needed it got it. Do we really now need to supply free milk to all children over the age of 7? We are a very well-fed community. Are there not other priorities? We can differ on this—
BARONESS SUM MERSKILL: My Lords, the noble Lord could argue as logically that in view of the fact that people are so very much better off to-day they should pay for their own education. Why do not the Government say that? The Government know that they cannot say that because education is of fundamental importance to the country. So are healthy workers. Welfare and education go together.
LORD ABERDARE: My Lords, as I said at the beginning, we believe in a mixture of benefits, some free where they apply to large classes of people—and everybody is in need of education. But I wonder whether all children over 7 really need milk? I do not know that all my children do. I wonder whether every child really does.
LORD RAGLAN: My Lords, I am sorry to interrupt and add to the number of questions which the noble Lord has to answer, but I think my noble friend Lady Summerskill has a point of substance here. I remember asking a question in your Lordships' House five or six years ago in relation to cases in Scotland, in Glasgow, which arose out of deficiency, cases of rickets—
SEVERAL NOBLE LORDS: Order, order!
LORD ABERDARE: My Lords, I am sorry, but the noble Lord has not made

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a speech in this debate and it is unfair of him now to do so. Would he like to ask a quick question?
LORD RAGLAN: My Lords, I was leading up to my question. How are the Department of Health going to ensure that deficiency diseases like rickets are not going to reappear with the abolition of free milk?
LORD ABERDARE: My Lords, I have made it clear that we are depending on the school health service in this. The Committee on the Medical Aspect of Food Policy has a watching brief on this.
The noble Baroness, Lady Summerskill, also challenged me on the fact that we had said we would ensure there was no deterrent on people going for their medicines on prescription. What my right honourable friend had in mind was a scheme under which there would be exemptions for those who could not afford it, or a maximum charge, so that certainly it would never be more than that maximum charge for that particular item. Furthermore, there is the season ticket system which is so effective at the moment, so that anybody can limit his prescription cost now to something in the region of 7p per week.
BARONESS SUMMER SKILL: My Lords, I am sorry to interrupt but this is a very important debate. Does the noble Lord realise that the season ticket system is attractive to individuals suffering from some chronic disease and to hypochondriacs? What we have to consider is the sort of person such as my noble friend Lord Garnsworthy referred to, his mother: the woman who every day will say, "I will not go to the doctor, for it will cost at least 20p, and perhaps 40p or 50p." How can the noble Lord opposite know whether they are deterred or not? They are the people who eventually become outpatients and wait to be seen by the doctor, only to be told that it is too late.
LORD ABERDARE: My Lords, the noble Baroness has made her point and I have made mine. I think that there are various safeguards by which we can continue to look at any new scheme. We shall provide for the noble Lord's mother.
LORD GARNSWORTHY: We do it ourselves.
LORD ABERDARE: My Lords, the noble Lord, Lord Garnsworthy, made various points. He went back to refer to the position in Scotland about which he had asked earlier. My figures for England and Wales show that something over 80 per cent. of those eligible for free meals are claiming them at the moment. He talked about National Health charges being introduced by his Party for reasons of expediency. I should not say that "expediency" is a very good word. I should say, "for practical reasons". But I would also say that nobody supports Health Service charges for their own sake. We do not believe in them as some sort of doctrine; that they are a good thing. But when looking at the priorities, when trying to provide health services and to make available the free services required, we are driven back partly on to taxation and partly on to charges—just as were the last Government. It is the balance between these that noble Lords are perfectly at liberty to criticise. I would suggest that we are always going to have a balance between how much one pays through tax and how much through charges.
The noble Lord made a great number of other interesting points. I have dealt with his desire for free treatment which I thought was a little Utopian. He mentioned the document that we both have and the different levels of income which ensure free provision. This again is what the Labour Party had: different levels of qualifications for different benefits. We have done better. We have increased the amounts. As I have tried to explain, we are bringing these benefits together so as to make the family incomes supplement the passport to the other benefits. We have tried to make simplification wherever possible. Finally, he mentioned some of the research by Dr. Lynch. We have not yet had all the details of his research; but my right honourable friend the Secretary of State said yesterday in the House of Commons that when this report is published it will be referred to the Committee on the Medical Aspects of Food Policy and fully and objectively assessed.
If I may end as I began, there are many demands on us. We need to use the resources we have to the best advantage. We have all had to rely partly on taxation, partly on charges and partly

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on the provision of free facilities to help those less fortunate. We can go on adjusting the balance between taxation and charges and free benefits as much as we like wherever we think the best balance lies. But in the end it comes down to a balance and we have to find the best one. My Lords, I very much welcome this debate.
6.30 p.m.
BARONESS PHILLIPS: My Lords, I should like to thank all noble Lords who have participated in the debate. There has been a great galaxy of that talent in which your Lordships' House is so rich. We have had speeches from ex-Ministers; people concerned with hospitals as governors, and people with knowledge in the medical profession. Each speech produced new ideas and confronted the Minister with questions to answer. I am sure that I speak for all noble Lords when I pay tribute to the noble Lord, Lord Aberdare, for his patience and the meticulous way in which he has answered everyone who put a point to him. We greatly appreciate it, and the fact that he spoke twice in the debate. I did not accept the explanation about the woman of 60 when it was given to me originally; I still do not accept it, and I shall come back to that later.
LORD ABERDARE: My Lords, perhaps the noble Baroness will accept it when she reaches the age of 60.
LADY PHILLIPS: My Lords, it seems more likely that it will be when I get to the age of 65, and I am sick.
I was heartened by the fact that the last debate which I had the privilege of introducing in your Lordships' House referred to retirement pensions, and shortly afterwards these were increased. I am now relying on my Patron Saint, who sees me in good stead in most things. Since the Government appear still not to have completely made up their mind about cost-related prescription charges, and are under heavy pressure, I hope that ultimately they will decide against such charges. I thank all noble Lords who have participated in this debate, and on behalf of my noble friend Lady Serota I ask leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.

RURAL WATER SUPPLIES AND SEWERAGE BILL
6.32 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF THE ENVIRONMENT (LORD SANDFORD): My Lords, I beg to move that this Bill be now read a second time. This is quite a straightforward Bill; its purpose is to enable us to keep on making new awards of grant under the Rural Water Supplies and Sewerage Acts. Very soon we shall have given pledges up to the limit of our existing statutory authority. We must therefore have further provision. At present we have authority to pay up to a total of £105 million in capital terms as Government contributions towards the cost of rural water supply and sewerage schemes in England and Wales. Where the Government pay a grant, this entrains a county council contribution, usually of the same amount.
The post-war programme was launched by the Act of 1944 which authorised Government grants up to a limit of £15 million. As the programme developed, this was increased by three successive additions, each of £30 million, under the Acts of 1951, 1955 and 1965. The total value of grant awards to date is approaching £104 million, and new awards are running at the rate of £6 million a year or more. Since the war, a total of £415 million has been spent on these two rural services. A sum of £115 million has been spent on rural water supply, and the proportion of the rural population with piped water has been raised from 70 per cent. to an estimated 97 per cent. A total of £300 million has been spent on rural main drainage, and recent returns by rural district councils in England and Wales show that 75 per cent. of their populations are now connected, or could connect, to public sewers. Something like 40,000 existing properties are brought within reach of sewers every year by means of these grant-aided schemes.
Looking to the future, my Lords, returns from water undertakings show that not much is proposed by way of mains extensions because, of course, the water programme is in its final stage. Some 10,000 properties will be supplied for the first time during the next few years, and

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the signs are that the proportion of the rural population supplied will finally settle down at somewhere between 97 and 98 per cent. But sewerage authorities still have a long way to go. Rural district councils in England and Wales reckon to spend more than £160 million—at 1970 prices—during the next ten years, and bring the proportion of the rural population within reach of sewers up to 85 per cent.
Had the Government followed the precedent set by the previous Rural Water Supplies and Sewerage Acts, I should probably now be asking your Lordships' House to agree that the limit on grants should be raised by a further £30 million, which would provide for a further four or five years. But, instead, I am asking for agreement that the limit be removed altogether—an approach which, I may say, is entirely in accordance with the trend followed in other legislation in recent years. Perhaps I should say, by way of explanation, that the inclusion of a statutory limit in respect of expenditure provided wholly from Votes duplicates formal Parliamentary control exercised at annual intervals through the normal supply procedure for the approval of Estimates, and that the procedure provided for here is somewhat unusual.
The removal of the limit does not mean that there will be unlimited awards of grant. The intention is rather to maintain the maximum freedom of action in this field at this time, when Parliament has yet to take decisions about the future organisation of the water services, in particular, and the reform of local government, in general. The financial relations between central and local Government are also being generally reviewed, and within that the financial arrangements for the water services also fall to be considered. We cannot say now, therefore, exactly what the future holds for the rural water supply and sewerage grants, and we do not want to anticipate the decisions of Parliament about these matters by proposing some particular amount by which the grant limit should be increased. But in this period of change we are seeking authority which, by enabling us to continue to make further grant awards, will help to keep the programme of rural water supplies and sewerage schemes going forward without any check to its
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momentum. My Lords, with that explanation I beg to move.
Moved, that the Bill be now read 2a.—(Lord Sandford.)
6.37 p.m.
LORD GARNSWORTHY: My Lords, I should like to express the regret of my noble friend Lord Greenwood of Rossendale that he has been called away and has been unable to stay for this debate. Secondly, I should like to thank the noble Lord, Lord Sandford, for his very clear exposition of the content of the Bill. I understand that when this Bill was before another place, apart from the Ministerial statement, there was no discussion; but sometimes we do a little better in your Lordships' House. I say that as a prelude to putting one or two points to the Minister. First, my Lords, let me make clear that we give the Bill a wholehearted welcome because, as the noble Lord has said, it will permit the continuance of a policy to take sewerage schemes to rural areas which have hitherto lacked a system.
The position of rural areas is very fully reviewed in the Report of the Working Party on Sewage Disposal, so ably chaired by Mrs. Lena Jeger, entitled, Taken for Granted. I hope that some thought may be given to it, and I should like to draw attention to what the Working Party had to say in paragraphs 289 and 292 of its Report. The Working Party touched on the cost of connecting up. There is little point in having a sewerage system unless householders connect up. Attention is drawn in the paragraphs to which I have referred to the very high cost to householders in some rural areas of connecting to the main drain. One wonders whether the local authorities that may be involved should decide that they would carry a proportion, or indeed the whole, of the cost of linking up; and whether then the schemes might fall within what is regarded as a right and proper figure for grant.
Finally, my Lords, I should say that a number of rural district councils have had to postpone carrying out small sewerage schemes, costing under £100,000, because insufficient capital is available to be borrowed after the allocation of the county area pool under the new scheme for loan sanctions in Circular 2/70 from the Department of the Environment. It would be

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reassuring if the noble Lord could indicate that sufficient additional money will be made available, either from the pool or by other means, so that the money made available under the Bill will be fully used for the benefit of local areas which are still unsewered. If the noble Lord is able to indicate that such an assurance can be given, it will be very much welcomed. If not, perhaps I could have a word with him later and it could be passed on to those who have made representations. In the meantime, I give this Bill our whole hearted support.
6.42 p.m.
LORD SANDFORD: My Lords, I am grateful to the noble Lord for his reception of the Bill. I would confirm that the Jeger Report, with its many virtues and merits, is receiving close consideration, together with other reports which bear on this matter. In particular, the factors in the Report to which the noble Lord has drawn attention will be fully considered. The noble Lord also asked about the operation of the new scheme for loan sanctions. I do not think that I can give the assurance which he asked for in the precise terms in which he would like to have it, because he will recall that the object of the whole scheme is to give local authorities wider discretion and freedom to decide their own priorities within locally determined schemes. This means that central Government cannot say that funds made available are going to be used in this or that way in locally determined schemes. The noble Lord will know that this year is the first in which this system has operated. The experience gained is being taken fully into account and some changes have already been announced as a result of the consideration of this first year's experience. I can assure the noble Lord that the provision of water supplies and sewerage in the countryside is something which we and the local authorities would like to see going forward, so far as possible unchecked.
On Question, Bill read 2a: Committee negatived.

LUTON CORPORATION BILL [H.L.]
Returned from the Commons agreed to.
TORBAY CORPORATION BILL
Returned from the Commons with the Amendments agreed to.
MERSEY DOCKS AND HARBOUR BOARD (ORE BERTH) BILL [H.L.]
Returned from the Commons agreed to, with Amendments: the said Amendments considered and agreed to.
  COURTS ACT: SALARY OF CIRCUIT JUDGES
  COURTS ACT: SALARY OF CIRCUIT JUDGES