Sitting of 9 May 1972

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

HON. MEMBERS FOR MID-ULSTER, FERMANAGH AND SOUTH TYRONE AND BELFAST, WEST
Mr. Speaker: The House will recall that on 20th April I read to the House the terms of two letters which I had received from the Resident Magistrate of Eniskillen in which he informed me of sentences of imprisonment passed respectively upon the hon. Members for Mid-Ulster (Miss Devlin) and Fermanagh and South Tyrone (Mr. McManus). I now have to inform the House that I have received a letter, dated 3rd May, from the Secretary of State for Northern Ireland in the following terms:
" By virtue of Section 1(1)(a) of the Northern Ireland (Temporary Provisions) Act and Section 8(2) of the Government of Ireland Act, 1920, I, as Secretary of State for Northern Ireland, am empowered to exercise the Royal Prerogative of Mercy in Northern Ireland. I am formally drawing your attention to the fact that on 27th April, 1972, I exercised these powers to remit all sentences of imprisonment (including suspended sentences) and any fines imposed in respect of offences of organising or taking part in marches or processions held contrary to law between (and including) 25th December, 1971, and 27th April. 1972.
"This act of clemancy will apply to Mr. F. McManus, Member of Parliament for Fermanagh and South Tyrone, and Miss B. Devlin, Member of Parliament for Mid-Ulster, both of whom were convicted of such offences and sentenced to six months' imprisonment as notified to you by the Resident Magistrate in his letters of 17th April, 1972."
I should add that I am informed that the act of clemancy also applies to the hon. Member for Belfast, West (Mr. Fitt).

PRIVATE BUSINESS
CLYDE RIVER PURIFICATION BOARD BILL
Lords Amendments agreed to.
LLOYDS & BOLSA INTERNATIONAL BANK
BILL [Lords]
Read the Third time and passed, with Amendments.
SEAHAM HARBOUR DOCK BILL
Read the Third time and passed.
NEATH CORPORATION BILL
[Lords]
UNITED KINGDOM OIL PIPELINES BILL
[Lords]
Read the Third time and passed, without Amendment.
LIVERPOOL CORPORATION BILL
Read the Third time and passed.
OXFORDSHIRE AND DISTRICT WATER
BOARD BILL [Lords]
SALOP COUNTY COUNCIL BILL
As amended, considered.
To he read the Third time.

ORAL ANSWERS TO QUESTIONS
  SOCIAL SERVICES

    Nurseries and Play Groups
    Miss Lestorasked the Secretary of State for Social Services how many children are currently attending day nurseries, residential nurseries and play groups, respectively.
    The Under-Secretary of State for Health and Social Security (Mr. Michael Alison): The latest available figures are that the number of places in local authority and private day nurseries is about 41,000, and in play groups about 260,000. The number of children in residential nurseries is about 3,600.
    Miss Lestor: Does the hon. Gentleman agree that there is something wrong with a system of administration that divides pre-school children between the Department of Social Services and the Department of Education for no reason other than facilities that may be available in a particular area? Will he ask his right hon. Friend to hold discussions with

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    the Secretary of State for Education and Science to see whether a joint authority can be established whereby educational responsibility can play some part in the care of the children in these areas?
    Mr. Alison: I am not aware that there is any failure in the provision of services as a result of this division of responsibility. However, my right hon. Friend is in the process of having consultations with my right hon. Friend the Secretary of State for Education and Science about the development of the future provision.
    Sir T. Beamish: Is everything possible being done to encourage the admirable voluntary work done by the pre-school play groups whose work fills an important gap until more money can be afforded for State nursery schooling?
    Mr. Alison: Yes. We give the most sympathetic consideration to any approaches they make to us for special help or encouragement.
    Mrs. Renée Short: Does the hon. Gentleman realise that the development of play groups has taken place simply because there is not enough State provision of nursery education? Does the hon. Gentleman also understand that if the provision is not adequate or up to standard, mothers who want some kind of activity for their children will find many alternatives, many of which are not adequate or suitable? This matter is of great concern to many people involved with young children. Will the hon. Gentleman see what he can do to persuade his right hon. Friend to accept full responsibility and to find more money for the care of pre-school children?
    Mr. Alison: The question about nursery education belongs to my right hon. Friend the Secretary of State for Education and Science. I take the point the hon. Lady made about the undesirable fringe developments which may occur in this sphere. I do not want to play down the vital contribution which voluntary organisations can make. The hon. Lady will be glad to know that expenditure is increasing quite dramatically in both the private and public sectors on this front.

    Welfare Payments (Unemployed Persons)
    Sir G. Nabarroasked the Secretary of State for Social Services what steps he is considering, for inclusion for this year's review, for adjustment of social welfare payments in such fashion as to encourage unemployed males to accept employment offers, when available, and end the situation that unemployed males receive larger weekly welfare payments, including unemployment pay, than wages on offer for a return to work.
    The Secretary of State for Social Services (Sir Keith Joseph): None, Sir. I consider the conditions governing the payment of social security benefits, in the circumstances outlined, to be generally adequate, though there is sometimes a difficulty in those cases where the job offered is low paid and the man has several dependants.
    Sir G. Nabarro: Is it not a fact that these circumstances are now proliferating and that there is increasing evidence from all parts of the country that it pays a man to remain out of work for long periods because the job opportunities offered to him do not reflect the return on the extra effort required to work as opposed to remaining on the dole? Surely this is a topsy-turvey condition of social welfare and economic affairs.
    Sir K. Joseph: There is a difficulty where the man concerned has several dependants, is a low earner when in work, and lives in an area where there are not many job opportunities. It is possible in certain cases that a man may be tempted not to make the great effort which we would expect of him, but if there are not many jobs available that cannot always be accounted for by motivation. To alter the level or conditions of benefit to meet these cases would, first, prejudice the children concerned and, secondly, be unfair to the vast majority of unemployed and sick who are only too anxious to obtain work and to go back to work.
    Mr. Ashley: Will the Secretary of State go further and condemn the outrageous nonsense implied in his hon. Friend's Question? Does he agree that such doctrinaire campaigns are damaging to industrial relations?
    Sir K. Joseph: The House knows that I do not agree with my hon. Friend on everything. However, I think that he is entirely justified in raising this very worrying dilemma which faces any Government. We have not yet discovered a way round it.
    Mr. Fell: Does my right hon. Friend realise that, in replying to my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), he gave the impression that he thought that these cases were unusual? Does he further realise that in areas of low pay, such as East Anglia, these cases are not uncommon but are very common? Whatever hon. Gentlemen opposite may say, the gap is so narrow between what people may get when unemployed and what they may get when employed that it is not worth their travelling even 10 miles for a job.
    Sir K. Joseph: There is some truth in what my hon. Friend says, subject to two points: first, the family income supplement encourages the low earner to go back to work when he can because it supplements his earnings; and, secondly, the overlap between benefit and earning is particularly large for men who have three or more children.
    Mr. Stonehouse: Surely the answer to the problem is to have a basic minimum wage which is higher than the social security benefit which is being paid to those who are not employed? Will the Secretary of State suggest this to his right hon. Friend the Secretary of State for Employment?
    Sir K. Joseph: The last Government presided over the publication of a very detailed inquiry into the implications of the minimum wage and rejected it.
    Mrs. Castle: No.
    Sir K. Joseph: This is outside my Department. I withdraw that comment if it was inaccurate. However, there are difficulties in the way of doing what the right hon. Gentleman suggests.

    Pay Beds
    Mr. Ashtonasked the Secretary of State for Social Services what action he intends to take following the Expenditure Committee Report on pay beds in hospitals; and whether he will make a statement.
    Sir K. Joseph: I am considering the report and shall be replying to it in due course.
    Mr. Ashton: Will the Secretary of State take notice of the fact that we have a situation where consultants are organising the queue for operations and people can jump that queue if they are prepared to pay? Will he also take notice that the report shows that people have to wait on average 18 months for a tonsillectomy under the National Health Service whereas they have to wait only two weeks if they are prepared to pay?
    Sir K. Joseph: The House is aware that the Government take seriously the length of waiting lists in many parts of the country. This is a subject on which I hope to make a statement later this year.
    Dr. Summerskill: Will the right hon. Gentleman bear in mind that the subject of pay beds in the National Health Service is highly controversial among not only members of the Expenditure Committee and hon. Members but people outside this House? Will he ensure that the report is not shelved, that we shall have an early debate on this important subject in Government time, and that the Government will make quite clear their policy towards private beds in the National Health Service?
    Sir K. Joseph: The question of a debate is not for me. I believe that there are infinitely more important matters for the benefit of patients than this issue, on which I have already made my position abundantly clear.

    Heating Allowances
    Mr. R. C. Mitchellasked the Secretary of State for Social Services whether he will now introduce special heating allowances of at least 50p a week for all pensioners receiving supplementary benefit.
    The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): No, Sir. The ordinary level of supplementary pension, which will be increased substantially in October, provides for all normal heating expenses. Where there is need for extra heating, special allowances are already provided by the Supplementary Benefits Commission.
    Mr. Mitchell: Is the Under-Secretary aware that that is almost the same answer as that which I received when I first asked the Question last September? Since then we have had a very long and cold winter in which a number of old-age pensioners have suffered severely from the cold. Will the hon. Gentleman treat this matter seriously? Large numbers of pensioners cannot at the moment afford to heat their premises properly. Will he make sure that something is done about this situation before next winter?
    Mr. Dean: All supplementary pensioners will have an increase in both the scale rates and the long-term addition in October this year—in other words, before next winter—which will amount to 85p for a single person and £1·30 for a married couple. In addition, the special addition for heating is being increased by 20 per cent. in October.
    Mr. Heffer: Does the hon. Gentleman agree that no Government—I emphasise no Government—over the past few years have done enough for our pensioners? Is it not clear that the increase which will become effective later this year will not meet the needs of pensioners and that, in particular, there is a need, as my hon. Friend said, for extra money for heating? In my constituency, young people have carried out a survey among the old and have discovered that elderly people are living in sheer misery during the winter months. Will the Under-Secretary look at the problem again and do something about it?
    Mr. Dean: Yes. I assure the hon. Gentleman and the House that my right hon. Friend takes this long-standing problem extremely seriously. In addition to the cash improvements, about which I have just given the House information, my right hon. Friend is also concerting activity with those who have undertaken surveys to ascertain the possibilities of other methods of assisting those who may require extra heating—for example, better insulation in their homes.

    Agoraphobia
    Mr. Greville Jannerasked the Secretary of State for Social Services if he will cause additional studies to be made into the causes and cure of agoraphobia; and whether he will provide appropriate finance.
    Mr. Alison: My Department is able and prepared to consider proposals for research related to the provision of services for psychiatric disorders, including phobias, within its normal research programme.
    Mr. Janner: I thank the Minister for that Answer. Is he aware that more than a quarter of a million people suffer from this sad and disabling disease and that more than 10,000 are totally disabled? Will he specifically undertake to devote resources to the diagnosis and cure of this particular unhappy and almost forgotten area of mental illness?
    Mr. Alison: I share the profound sympathy which the hon. and learned Gentleman has expressed for those who suffer from agoraphobia. A good deal of work is going on. The hon. and learned Gentleman will presently get information about it in answer to another Question which he has down. I believe that the facilities which exist, either through general practitioners treating patients at home or in the ordinary psychiatric departments of hospitals, are adequate at present.
    Mr. Russell Kerr: Is the Minister prepared to use the publicity facilities of his Department to make local councils and other authorities aware of the facilities which exist? I agree with my hon. and learned Friend that this is a greatly under-publicised affliction which could do with some publicity by the Department.
    Mr. Alison: Though I am prepared to look sympathetically at what the hon. Gentleman said, I think that most sufferers from agoraphobia will have brought their condition to the notice of their general practitioners and, through them, to hospital departments. If publicity will help in this respect, we shall certainly consider it.

    Special Investigations
    Mr. ClintonDavis asked the Secretary of State for Social Services why it has been found necessary to increase substantially the number of special investigators employed by his Department since June, 1970.
    Sir K. Joseph: They were appointed in order to enable more cases of suspected fraud, of the various types which can

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    be practised in connection with supplementary benefit, to he investigated by officers specialising in this work.
    Mr. Davis: Does the Secretary of State not agree that inquiries about cohabitation frequently go too far? Does he realise that inquiries are made of children, of neighbours and of employers all within the terms of the handbook? Is this justified and do the results justify it, and should not far more emphasis be put on the financial relationship between the man and the woman rather than on the alleged cohabitation?
    Sir K. Joseph: The investigators are performing a necessary if distasteful duty in order to safeguard public funds from fraud. As for any allegations that children are questioned by the investigators, I should be most grateful if the hon. Member would send details to the Chairman of the Commission who—as I do—would take such cases very seriously indeed. My belief is that, subject to the occasional inevitable human error in a difficult job, they perform their duties in a decent, honourable and conscientious way. Only just over one-third of their time is spent investigating cohabitation, the vast bulk of it being devoted to detecting other forms of fraud such as fictitious desertion and undisclosed earnings.
    Mr. Waddington: Does my right hon. Friend agree that nothing is more likely to infuriate the decent, hard-working citizen than the knowledge that some of his neighbours are battening on the State and drawing benefits, paid for out of his taxes, to which they are not entitled? Does not my right hon. Friend think it extraordinary that all too often hon. Members of the Opposition try to suggest that, for some reason which I do not understand, a man who is living with a woman and sharing her bed should not be responsible for keeping that woman but that the State should? Will he rest assured that we on this side of the House will welcome any steps to tighten up the present system and to stop abuses?
    Sir K. Joseph: I agree with a great deal of what my hon. and learned Friend said but, to be fair to him, the hon. Member for Hackney, Central (Mr. Clinton Davis) did not, as I understand it, attack the whole cohabitation rule but the
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    methods which he alleges are sometimes used in order to investigate alleged cases. That is a perfectly legitimate point to make to the Government. But I am sure that the rule, which is intended to ensure that the unmarried couple who live together as man and wife do not get more favourable treatment than the married couple is in accordance with public sentiment.
    Mrs. Castle: The remarks by the hon. and learned Member for Nelson and Colne (Mr. Waddington) intensify the alarm that we have felt on this side of the House about the attitude to women involved in these cases. The Secretary of State's reply is not very reassuring either. Is the House not entitled to know what methods are used and what instructions are given to the investigators? Are we not indebted to the Daily Mail for having obtained a copy of these instructions and can we now have them officially? 'Will the Secretary of State please answer the question by my hon. Friend the Member for Hackney, Central (Mr. Clinton Davis) whether the definition of cohabitation is one which distinguishes fairly and clearly between sleeping together and financial support? Can we therefore have the instructions and the definition published so that the House can express an opinion?
    Sir K. Joseph: I must refer the right hon. Lady and the hon. Member for Hackney, Central to the very careful paper on cohabitation published last year by the Supplementary Benefits Commission which spells out in 11 pages the evidence for which they look in deciding where cohabitation exists. Their emphasis is the whole time upon the existence of a stable union. In a short answer I cannot give all the details set out in the paper. As for publishing the instructions to the investigators, there are a very small minority of people who are only too willing to embark upon frauds against the public and to publish the instructions would facilitate their lives.

    Far East Prisoners of War
    Mr. Blakerasked the Secretary of State for Social Services to what extent he discussed at his meeting in April with the deputation from the National Federation of Far East Prisoners of War Clubs and Associations the modification of the

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    over-seven-years' rule; and if he will make a statement.
    Mr. Dean: The meeting to which my hon. Friend refers took place only yesterday afternoon. I promised then to consider a number of points raised with me by the deputation, including the operation of the seven-year rule.
    Mr. Blaker: It was evident at the national service of remembrance and reunion held by the Federation last month in my constituency that the number of Far East prisoners of war are diminishing fast. Is my hon. Friend aware that Australia, the United States and Canada have consistently treated their Far East prisoners of war and their widows more sympathetically than we have in this country? Will he take these points into account in the review?
    Mr. Dean: I would not accept entirely what my hon. Friend says about the treatment afforded by the United States, Canada and Australia, but I recognise that there are special problems here. I am taking steps to improve the arrangements which I think will reassure the Federation.
    Mr. Simon Mahon: Many of the troubles and illnesses of Far East prisoners of war are just coming to light today, sometimes after 30 years. Is it not basically essential that each case of a FEPOW who has been in the hands of the Japanese should be treated on its individual merits? Is it not essential that these men are examined by medical practitioners who know something about what the Japanese did to them and not by people who have little cognisance of the matter?
    Mr. Dean: I agree with the points which the hon. Member made and we must ensure in every case that where there is doubt, that doubt goes in favour of the claimant. The new steps which I am working out are designed to achieve this.
    Sir H. Harrison: I speak as one of these men. Is the Under-Secretary aware that the meeting took place only yesterday and that as a whole we have great confidence in him and in Ministers in the past? These are new facts that have come to light, and we look forward in due course, now that he has heard the repre-
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    sentations, to the Under-Secretary making another statement to the House.
    Mr. Dean: I am obliged to my hon. and gallant Friend for his comments and I will inform the House as soon as the details are worked out.
    Mr. Alfred Morris: Will the Under-Secretary agree to reconsider the terms of his original reply and to make a full and further statement to the House at the earliest possible date?
    Mr. Dean: I have assured the House that as soon as more information is available and the details are worked out I will see that they are made available to the House in the most appropriate form.

    Health Education Officers
    Mr. Dormandasked the Secretary of State for Social Services what is the number of health education officers employed by local authorities; and what is the number of local authorities employing them as a percentage of those local authorities empowered to appoint such officers.
    Mr. Alison: The local authorities with the major responsibility for health education are the local health authorities; these are mainly the counties, county boroughs and London boroughs. Of these about 60 per cent. are employing a total of about 200 full-time health education officers.
    Mr. Dormand: These are very interesting figures, but would the Under-Secretary agree that much greater emphasis needs to be placed on more preventive measures in health matters either by the appointment of additional health education officers or by some other means? Would he further agree that the climate of opinion is such that these measures would be accepted? If these things were done the saving might amount even to millions of pounds if we are to adopt the old adage that prevention is better than cure.
    Mr. Alison: I share the hon. Member's enthusiasm for the value of preventive medicine. It has to be borne in mind that not only full-time health education officers but also the normal run of health professionals—doctors, dentists, health visitors, district nurses and so forth—have their part to play in health education. In the context of National Health

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    Service reorganisation, we shall be looking again very closely at developing this side of preventive medicine.

    Dental Services
    Mrs. Renée Shortasked the Secretary of State for Social Services what proposals he has for the development of National Health Service dental services; and in particular whether he intends to maintain the full list of dental treatments now on the schedule.
    Sir K. Joseph: When I met representatives of the British Dental Association on 16th March they accepted my invitation to participate in a Joint Working Party with representatives of the Health Departments to consider how best, having regard to the availability of resources, to secure the long-term development and improvement of National Health Service dental services. The first meeting of the Working Party will be held on 19th May. I have no proposals for restricting the range of treatments available under the General Dental Services.
    Mrs Short: I thank the right hon. Gentleman for that reply, but may I remind him that there is an urgent need in many parts of the country for National Health Service dentists—I have raised this with him before—and that from the last amending regulations, produced earlier this year, it is quite clear that some of the new fees being paid to dentists, especially for restorative work, bear no relation to the amount of work they must do with the patient, and should be revised? In particular, where work must be put out to dental technicians the return for the dentist is minimal. This does not encourage more students to enter the profession. Will the right hon. Gentleman look into the matter?
    Sir K. Joseph: I should be grateful it the hon. Lady would put down a precise Question on the points which she has in mind. In general, because I am worried about the distribution of dentists, I have embarked on talks with the profession. The numbers of dental places and students in schools are rising.
    Mr. Scott-Hopkins: Does my right hon. Friend agree that in some parts of England, particularly Derbyshire, there is a grave shortage of dentists in the National Health Service? My constituents find it
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    extremely difficult to obtain dental treatment. Will he use his utmost endeavours to see that the supply of dentists going into the National Health Service is increased as rapidly as possible?
    Sir K. Joseph: The dental schools are expanding under the policies of previous Governments, and the present Government are continuing the expansion. There will be rising numbers of dentists, but there is a big problem of distribution, which I am discussing.

    Living Standards
    Mr. Duffyasked the Secretary of State for Social Services what steps he is taking to arrest the widening gap between the living standards of the poorest in work and those earning the medium wage.
    Sir K. Joseph: The available information in the articles published each year in Economic Trends on the incidence of taxes and social service benefits do not suggest that there was a widening gap up to 1970 between the incomes of the poorest in work and those earning the medium wage, so far as families with children are concerned. Since 1970 the present Government have provided additional help to low-income families designed to safeguard and improve their position.
    Mr. Duffy: Is the right hon. Gentleman aware that other evidence, notably that provided by the Child Poverty Action Group, suggests that the gap between the living standards of the poorest in work and those earning the medium wage has widened over the years and is wider now than at any time since 1945? Only in 1906 was the position worse than it is today. Yet all that his Government are doing by way of relieving the low-paid workers is further to ensnare them in a trap of so-called ameliorative measures.
    Sir K. Joseph: I do not accept those generalisations. The raising of the tax threshold in two successive Budgets has made a remarkable difference to the spending power, even in real terms, of the lowest-income families, on to which must be added the family income supplement, take-up of which has sharply increased since the recent advertising.
    Sir B. Rhys Williams: Is it not obvious that a rise in the cost of living has a much

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    more adverse effect on a man with a family to support than on single persons? Is not that an unanswerable case for increasing family allowances, even if only in the interests of wage stability?
    Sir K. Joseph: I hope my hon. Friend will agree that the tax credit scheme which was proposed in the Budget by my right hon. Friend the Chancellor, and which is shortly to be the subject of a Green Paper, meets a great part of the case he is putting.

    Fluoridation
    Sir G. Sinclairasked the Secretary of State for Social Services, in view of the fact that the Swedish Parliament has now repealed the law permitting fluoridation, and, after 17 years of trial, the only fluoridation in Germany has been stopped, whether he will now give further consideration to the advisability of fluoridation in the United Kingdom.
    Sir K. Joseph: No, Sir. I see no reason to question the advisability of fluoridating water supplies. I understand that in Sweden the repeal of the legislation was not based on medical or scientific evidence and that in Germany fluoridation was suspended because of doubts about its legality, doubts which the Federal Government are seeking to remove with amending legislation.
    Sir G. Sinclair: Will not my right hon. Friend take note that the Governments of the countries about to form the enlarged European Community—France, Germany, with my right hon. Friend's modifications, Italy, Luxembourg, Norway and Denmark, and many other countries in Europe, including Sweden, Austria, Spain, Yugoslavia and Greece, have decided against fluoridation?
    Sir K. Joseph: Enthusiastic European though I have always been and am, that does not mean that I must agree with every view of every country in Western Europe. But may I reassure my hon. Friend by telling him that I have no plans at present to introduce legislation on this matter?
    Dr. Dickson Mabon: I welcome the right hon. Gentleman's answer, but will he confirm that the incidence of dental caries in this country is among the highest in the Western industrial nations, and that this kind of experiment, which has
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    never been extensive in Great Britain, is an experiment to which we should give a fair wind?
    Sir K. Joseph: I know that dental decay is a big problem in this country, but I think the hon. Gentleman should put down a Question on that.

    Stoke Park Hospital
    Mr. Mayhewasked the Secretary of State for Social Services what action he has taken following the report of the Hospital Advisory Service on Stoke Park Hospital; and in what form he proposes to make the contents of the report available to the hospital staff.
    Sir K. Joseph: Copies of the report were distributed to the Regional Hospital Board and their chief officers and to the Hospital Management Committee. All senior staff at the hospital received copies; the report was also made available to all nurses in charge of wards and a summary of the main recommendations was shown to junior staff. As a result of policy decisions before the Hospital Advisory Service report and of its recommendations, revenue for the Stoke Park Group has risen in real terms by 29 per cent. since March, 1969. In addition capital improvements to the value of about £1 million have been or are being made at hospitals in the Group. Present conditions in the older wards are however still very unsatisfactory. New beds at Gloucester and temporary wards in the Stoke Park Group are being provided to relieve overcrowding in them. Staffing has steadily improved and the Board expects to maintain the rate of increase.
    Mr. Mayhew: Is the right hon. Gentleman aware that conditions in some of the wards, which were described to viewers in a remarkable BBC film recently, are utterly disgraceful and unacceptable? Why was the report with the right hon. Gentleman for six months before he took action on it? Why was it left for a small group of hospital nurses to raise the matter publicly?
    Sir K. Joseph: The right hon. Gentleman falls far below his usual standards of fairness on this question. The overcrowding in the wards that I understand were shown on television is very severe. That is why new temporary wards in

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    the hospital and further beds outside the hospital are being urgently provided as part of the £1 million extra capital expenditure of which I spoke, in order to relieve the worst of the overcrowding. As for action on the report, extra revenue and capital have been allocated, and were starting to be spent before the report, and both were stepped up after it.
    Mrs. Castle: After that great eulogy of his of what is being done, can the right hon. Gentleman tell us how many of the report's 60 proposals for dealing with what it described as squalid and unhygienic conditions have been or will be implemented, and when?
    Sir K. Joseph: Up-grading and new building is going on to relieve overcrowding. Extra medical and nursing staffing is available and is increasing. Ventilation is being considered. Laundry, clothing and food have been improved. I could go through many of the smaller items. But there is a flood of HAS reports, trying to catch up with a huge backlog of neglect in these services, and everything cannot be done at once.
    Mr. Mayhew: On a point of order. In view of the unsatisfactory nature of the right hon. Gentleman's reply, I propose to raise the matter again

    Private Medical Practice
    Mr. O'Halloranasked the Secretary of State for Social Services if he will make a statement about the extent to which private medical practice has increased in the National Health Service during the past five years.
    Sir K. Joseph: Between 1966 and 1971, the number of private in-patients treated in National Health Service hospitals in England and Wales rose from 101,696 to 114,856, an increase of the same order of magnitude as in the number of hospital in-patients in general. The proportion therefore of private in-patients to inpatients as a whole has remained roughly the same at 2 per cent. from 1968 to 1971.
    Mr. O'Halloran: I thank the right hon. Gentleman for that reply, but will he say that, whatever encroachment there is by the private medical service into the National Health Service, National Health Service patients will not suffer in regard to admission to hospital?
    Sir K. Joseph: I have no evidence of acute need for hospital care being impeded in any way by private patients. If any such cases can be brought to my notice, I hope that hon. Members will send them to me.
    Mrs. Renée Short: Perhaps the right hon. Gentleman will read the evidence that has already been submitted. He will find in it quite a large number of such cases cited by patients and people working in National Health Service hospitals. Does not he accept that the fact that private practice exists in the Service provides an enormous loophole through which there can be all kinds of abuses, and that that is the main objection to private practice?
    Sir K. Joseph: I am due to reply to the report and I would rather reserve my answers until then.
    Mr. Kenneth Lewis: As a great many people who are using private beds in hospitals do so through private insurance schemes, and as the trade union movement has its own private hospital for its own members, is it not time that the Opposition stopped this criticism of what is a legitimate and useful service?
    Sir K. Joseph: I hope that the Opposition are not taking up arms against the freedom of citizens to secure non-acute treatment at their convenience.
    Mr. Russell Kerr: Is the right hon. Gentleman aware that the British United Provident Association in particular is widely regarded as a queue-jumping organisation and as such is deeply offensive to the majority of people?
    Sir K. Joseph: The hon. Gentleman is not taking the point that the access to treatment at convenience is not intended to allow any interference with access as needed and at once for acute need.

    Prescription Charges
    Mr. Dempseyasked the Secretary of State for Social Services if he will introduce free prescriptions for a person in the long-term sick category whose sole income is £6·50 weekly invalidity allowance: and if he will make a statement.
    Mr. Alison: Anyone whose income is, on supplementary benefit standards.

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    insufficient to enable him to afford prescription charges, is already entitled to exemption or refund.
    Mr. Dempsey: Is the hon. Gentleman aware that I have a decision in writing from the manager of the Department of Health and Social Security in Coatbridge informing me that this person is not qualified to receive free prescriptions? Yet the sole income of the individual concerned is only £6·50 per week and out of that meagre sum he has to pay 60p for prescription charges. Is it not a national scandal that a person living on such an allowance should have to pay prescription charges? When is the hon. Gentleman going to introduce some compassion into the National Health Service to ensure that people of this type are exempted completely from prescription charges?
    Mr. Alison: It sounds a distressing case as related by the hon. Gentleman. If he will send me full details I will look into it. The exemptions are available not only for those on supplementary benefit but for those whose income is less than 50p above the supplementary benefit level.

    Long-stay Mental Hospitals
    Dr. Summerskillasked the Secretary of State for Social Services what representations he has received asking for changes in the Government's 15-year plan for long-stay mental hospitals; and if he will make a statement.
    Sir K. Joseph: I assume that the hon. Member is referring to the memorandum on hospital services for the mentally ill issued last December or to the Command Paper on "Better Services for the Mentally Handicapped" published last June. No specific time limit was set for completion of the redevelopment of either set of services, although we hope to make very substantial progress within the next 15 years. I have not received formal representations though I am aware that there are differing views on some aspects of these policies.
    Dr. Summerskill: Will the right hon. Gentleman bear in mind that both the National Society for Mentally Handicapped Children and the Royal Society of Health are deeply concerned about these proposals and have expressed their
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    concern in public? Is he satisfied, before he goes ahead with these plans, that he will have the co-operation and support of all the doctors, nurses and local authority servants who work for the mentally ill, as success depends on their co-operation?
    Sir K. Joseph: Yes, Sir. I am anxious lo work very closely with all the professions. I had a session with the NSMHC recently, when I asked its representatives to come and discuss with me any gap there might be between us.
    Mr. Carter-Jones: Will the right hon. Gentleman view the film, which had its premiere today, called "Like Other People ", which shows the emotional and sexual needs of disabled people and of mentally handicapped people? Will he look at the film before other Questions are tabled and also read the authoritative report by Ann Shearer, brought out today, on the emotional needs of mentally handicapped people?
    Sir K. Joseph: I will try to see the film.

    Elderly Persons (Hospital Treatment)
    Mr. Michael McNair-Wilsonasked the Secretary of State for Social Services whether he is satisfied with the procedures adopted by hospitals within the National Health Service for examining elderly persons who have been involved in accidents, and for their after-care; and if he will make a statement.
    Mr. Alison: Yes, Sir, but if my hon. Friend is concerned about a particular case and will send me details I will gladly look into it.
    Mr. McNair-Wilson: Is my hon. Friend aware that some hospitals, at least in the London area, have an inexplicable rule by which, even if a person over 80 years old is admitted after a fall in an accident in which a bone may well have been broken he is not automatically X-rayed? In a recent well-publicised case, an elderly person had to wait four days before the family doctor got to him, meanwhile suffering a great deal of agony because the bone was, in fact, broken.
    Mr. Alison: I will consider the matter, but the use of X-ray equipment must be

    1121
    a matter of judgment by the clinical technician.

    St. Cross Hospital, Rugby
    Mr. William Priceasked the Secretary of State for Social Services when he expects a start on the next phase in the development of St. Cross Hospital, Rugby.
    Mr. Alison: It is too early to forecast the date.
    Mr. Price: Is the hon. Gentleman aware that my constituents are normally patient people but that they are fed up with year after year of waiting for desperately-needed improvement? Can we have fewer promises from the regional hospital board and the Department and a little more action? If we do not get it, 80,000 people are going to come marching down the M1.
    Mr. Alison: The hon. Gentleman knows that I know that his constituents are normally patient people because I paid a prolonged and enjoyable day's visit to Rugby, when the people were assured that they would have their new hospital at St. Cross by the year 1974–75.

    DISABLED DRIVERS AND SPASTICS
    Mr. Alfred Morrisasked the Prime Minister if he will now arrange a further meeting with the representatives of the Disabled Drivers' Association and the Spastics Society further to the deputation he received on 7th December, 1971.
    Mrs. Castleasked the Prime Minister if he will fix a date for a further meeting with the representatives of the Disabled Drivers' Association and the Spastics Society whom he met on 7th December, 1971.
    The Prime Minister (Mr. Edward Heath): As a result of my previous meeting, my right hon. Friend the Secretary of State for Social Services announced improvements in the invalid transport scheme on 21st February. In addition, Lady Sharp has accepted my right hon. Friend's invitation to conduct a comprehensive inquiry into ways of helping those who are immobilised by severe physical disablement, and is already in touch with the Disabled Drivers' Association and the
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    Spastics Society. I have at present no plans for a further meeting.—[Vol. 831. c. 213–5.]
    Mr. Morris: While acknowledging the recent changes affecting haemophiliacs and disabled mothers, may I ask the right hon. Gentleman whether he recalls the emphasis which we placed last December on the mobility needs of those who are too severely disabled to drive themselves? Why are they still waiting for help?
    The Prime Minister: This matter is to be considered by Lady Sharp because it is set out specifically in the terms of reference of her inquiry. As the hon. Gentleman and my hon. Friend the Member for Banbury (Mr. Marten) were both present at the meeting, they will recall that those present agreed with me that we could not deal with all the problems at once and that there must be an order of priorities. My right hon. Friend the Secretary of State for Social Services has set out that list of priorities and I am glad that we have been able to do as much as we have in the time.
    Mrs. Castle: Is the right hon. Gentleman aware that he offered this deputation tea and sympathy but precious little else'? Is he further aware that the improvements to which he has just referred are being paid for not by the Government but by other disabled invalid vehicle users, who have forfeited certain concessions in order to pay for the improvements? Can he tell us what increase in expenditure there has been, as a result of these talks, on vehicles for the disabled?
    The Prime Minister: I cannot accept what the right hon. Lady said, which is very grudging and is certainly not borne out by the letters which I have had from those concerned—namely, the members of the organisations I met. The right hon. Lady says that nothing has been done. Five major improvements have been introduced by my right hon. Friend. Those qualifying for a vehicle will in future be able to forgo it and to receive instead an allowance of £100 a year tax free. This was specifically asked for in order to introduce flexibility into the scheme. It is no longer necessary for those individuals unable to walk because of a lung or heart condition to show that they need a vehicle to get to work in order to qualify for one. That is another

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    group for which help was asked. Mothers who qualify for vehicles can have a car instead of a three-wheeler if they have young children. That was another case put to us. Disabled people living alone in their own households, who would normally have to have full-time employment to qualify, will be able to have a vehicle even if they are not working. That was a further major point put to us. Any vehicle issued by the Department or run with the assistance of the new allowance will be exempted from vehicle excise duty. The question of the haemophiliacs has already been mentioned. These are all valuable steps which the Labour Government could not take and which we have taken.
    Mr. Marten: As a vice-president of the Disabled Drivers' Association, I can say that we are grateful to my right hon. Friend the Prime Minister for receiving us and for all that has stemmed from that meeting. But much more remains to be done and the great need is to put the case to Lady Sharp and her Committee.
    The Prime Minister: I agree entirely with my hon. Friend. The two major organisations mentioned in this Question are already in touch with Lady Sharp. We are anxious to hear views from any who have proposals to put forward. We have already shown that we are prepared to take practical action. When Lady Sharp reports—she has been asked to do so within the year—we will consider her recommendations.

    PRESIDENT POMPIDOU
    Mr. Skinnerasked the Prime Minister what communications he has had with President Pompidou since 23rd April.
    Mr. Raphael Tuckasked the Prime Minister what communications he has had with President Pompidou since 23rd April.
    The Prime Minister: My communications with President Pompidou are confidential.
    Mr. Skinner: Is the right hon. Gentleman aware that the French President remembers only too well a previous seige in Vietnam? Will the Prime Minister
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    now pick up a telephone and ask President Pompidou whether it is in order to tell President Nixon that the British people want him to stop this crazy war adventure that he has embarked on in the last few hours?
    The Prime Minister: The British Government are, of course, in touch with President Nixon. If President Pompidou wishes to express views to him, I have no doubt that he will do so.
    Mr. Raphael Tuck: Since President Pompidou has recognised the fact that in a democracy people must decide their own destiny, is there any reason, as we are supposed to live in a democracy, why the Prime Minister should not take a leaf out of President Pompidou's book and allow the British people to decide their own destiny on the most momentous issue that has ever faced this country? Or is he afraid to do so?
    The Prime Minister: The entry into force of the Treaty of Accession, to which the hon. Gentleman is referring, is dependent on its ratification by all member States in accordance with their respective constitutional requirements. It is open to each of the member States to decide how they should do this. There is no reason why we should argue particularly for a referendum, such as they had in France, nor is there any reason why instead of a referendum, we should not pursue parliamentary methods, as they do in Germany. The matter has been discussed in this House and the Amendment was rejected by a considerable majority.
    Sir Gilbert Longden: Will the Prime Minister persuade President Pompidou to take part rather more closely in the affairs of the North Atlantic Treaty Organisation, because it is likely that it will not be long before the Americans have left Europe, and if the European people wish to defend themselves against Communism, they had better get together.
    The Prime Minister: I do not entirely agree with the mood of the second part of my hon. Friend's question. French policy in NATO is a matter for France, although we have always expressed our desire that, if they find it possible, the French should play a larger part in NATO.

    STRIKES
    Mr. Ashleyasked the Prime Minister if, at his next meeting with officials of the Trades Union Congress, he will discuss the measures the Government have taken to reduce the number of strikes.
    The Prime Minister: I expect that there will be further discussions about what has been done and what more could he done to promote the peaceful and rational resolution of industrial disputes.
    Mr. Ashley: Is the Prime Minister aware that the irrational handling of the railways dispute will result in an increase in the already high number of working days lost under this Government since they took office? Is he further aware that the Government and the Board are responsible for creating confusion about which offer has been made, when it will be paid and who is speaking to whom? Would it help the Prime Minister if Sir Sidney Greene were to invite him and the Chairman of the Railways Board to a beer and sandwiches session to help them sort out the confusion?
    The Prime Minister: I do not think there is any confusion among those dealing with this difficult matter. The hon. Gentleman spoke about reducing the number of strikes. It is to be noted that in the first three months of this year there were 448 strikes and in the first three months of 1970 there were 1.212. If the hon. Gentleman is asking about the railway negotiations, these were not discussed at my meeting with the TUC. It was not appropriate to do so.
    Mr. Churchill: Is it not a scandal—[HON. MEMBERS: "Reading."]—that the ordinary citizen is being required[" Reading."]—through his personal taxation to finance and enable strikers—
    Mr. William Price: Go hack to reading!
    Mr. Churchill: —to be in a position to hold the nation to ransom? Will the Prime Minister seek to take measures to redress the balance of misery as between the community as a whole and the strikers so that it is not always the community that suffers most?
    The Prime Minister: Under existing law the families of those who require
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    assistance can obtain supplementary benefit. I agree with my hon. Friend that it is not justifiable, through a work-to-rule, to put the community to the inconvenience that we have seen, or to cause economic dislocation to the country as a whole.
    Mr. Harold Wilson: In view of the many speeches the right hon. Gentleman made before the Election pledging himself to reduce the toll of man-days lost through disputes, will he tell the House the total number of man-days lost under this Government in the 21 months up to 31st March, 1972?
    The Prime Minister: If the right hon. Gentleman wants figures for specific periods which he selects, I am prepared to send them to him. [HON. MEMBERS: "Answer"] What is true is that the major loss in man-days has been due to two very large strikes, the Post Office strike and the miners' strike. What is also noticeable is that in the rest of industry the number of strikes is approximately one-third of what it was when the right hon. Gentleman was in power.
    Mr. Wilson: If the right hon. Gentleman either does not know the figures for his own period of office or has not the guts to give them in the House—[Interruption.] Will he confirm that man-days lost from all causes add up now to 35,225,000—[Interruption.] The right hon. Gentleman used to offer to help me with figures when he was on this side of the House. I am helping him. Would he agree with that figure and agree that it represents 150 per cent. of the total man-days lost during the whole period of the Labour Government?
    The Prime Minister: If the right hon. Gentleman is so concerned about it, why did he not pass his own industrial relations legislation and get something done about it?

    PRIME MINISTER OF IRISH REPUBLIC
    Mr. Stratton Millsasked the Prime Minister if he will now seek an official meeting with Mr. Lynch to discuss border security.
    The Prime Minister: I have no plans for a meeting with Mr. Lynch, but we

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    remain in close touch through diplomatic channels about matters of mutual interest, including border security.
    Mr. Stratton Mills: Is my right hon. Friend aware that there is considerable disappointment that since the initiative, while Mr. Lynch is prepared to engage in fancy words, he does not follow them up with action in dealing with IRA activity in Southern Ireland? Is my right hon. Friend satisfied that the Government are doing everything they can to tabulate and follow up each incident and trail, and constantly to remind Mr. Lynch of his responsibilities?
    The Prime Minister: I can assure my hon. Friend that information on every incident on the border of which we have details is passed to the Government in Dublin. They know full well our views, and we look to them for co-operation in dealing with cross-border incidents.
    Mr. Biggs-Davison: While I fully appreciate Mr. Lynch's problems, might I ask my right hon. Friend whether it is not the case that the economy, the well-being and the reputation of the Irish Republic are suffering from the IRA? Is it not in the common interest of the United Kingdom and the Irish Republic to tackle this problem together? Cannot something be done to get nearer to a joint control of the Irish border?
    The Prime Minister: Of course it is in the common interest of both countries that we should deal with violence. I made this plain to Mr. Lynch at the meetings we had, the first at Chequers last September and the second with the Prime Minister of Northern Ireland, when the three Prime Ministers met for the first time in 50 years. We have taken every step possible to deal with this question and to emphasise that it is a common interest.
    Mr. Tapsell: Have the Government of the Republic been made aware of the strength of public feeling in the United Kingdom that, while we are doing everything in our power to create a just and peaceful society in Northern Ireland, we are entitled to expect greater co-operation from the Government in Dublin, particularly in the control of gunmen across the border?
    The Prime Minister: Yes, Sir. The Republican Government now have their ambassador back in London and we have our ambassador in Dublin. I am certain that the Government of the Republic are well informed about the state of British public opinion.

WEST MIDLANDS (POLLUTION)
Mr. StonehouseQ6. Mr. Stonehouse asked the Prime Minister if he will appoint an additional Minister in the Department of the Environment particularly to deal with the problems of pollution in the West Midlands.
The Prime Minister: I would refer the right hon. Gentleman to the answer I gave on 25th April to a Question from the hon. Member for Birmingham, Northfield (Mr. Carter).—[Vol. 835, c. 1271–2.]
Mr. Stonehouse: Is the Prime Minister aware that industrial pollution in the West Midlands is the worst in the United Kingdom and that there is widespread disgust in the West Midlands that the area is low on the list of priorities in the Department of the Environment? Now that there are Labour-controlled councils in the West Midlands, such as Birmingham, West Bromwich and Walsall—
Mr. Faulds: And Warley!
Mr. Stonehouse: —Yes, who are anxious to get on with the job of clearing up the environment, will the Prime Minister strengthen the Department of the Environment so that those councils can be given more help?
The Prime Minister: The hon. Gentleman's accusation that industrial pollution has low priority in the Department of the Environment is completely unfounded. It is true that the practical action which the Department of the Environment asks should be taken is in fact taken by a variety of local authorities, not only Government authorities but river boards, and so on. My right hon. Friend the Secretary of State for the Environment has made it plain that he believes that there is no longer any justification for holding back smoke control in the Midlands; and major capital investment programmes for sewerage have been approved. This is not a low priority, and a large part of the resources available is being used for it.
Mr. Jennings: Is my right hon. Friend aware that what is needed is not an additional Minister—of whom there are plenty in the Department—but additional work on the River Tame area to prevent the wholesale pollution of the River Trent? A lot has been done, but will the Prime Minister try to persuade his right hon. Friend the Secretary of State for the Environment to concentrate further on the cleansing of the filthy River Tame?
The Prime Minister: Since its inception in 1966, the Upper Tame Main Drainage Authority has spent £15 million on capital works. During the five-year period from 1971–72 to 1975–76, for which the Government have made allocation, the Authority is spending another £22 million on this problem. Nobody can say that it has a low priority when in these years about £37 million will be spent by the Upper Tame Main Drainage Authority.

BRIXTON PRISON (REMANDED PERSONS)
Mrs. Shirley Williams (by Private Notice)Mrs. Shirley Williams (by Private Notice) asked the Secretary of State for the Home Department what action is being taken to relieve overcrowding among men on remand at Brixton prison, making possible a reduction in the 22/23 hours a day these men currently spend in their cells; and to make a statement on the recent demonstrations at the prison.
The Secretary of State for the Home Department (Mr. Reginald Maudling): Since 3rd May there have been four demonstrations at Brixton by prisoners who sat down during exercise and refused to return to their cells. The number of prisoners involved ranged from 50 to just over 200. The demonstrations, which have been peaceful, lasted for periods ranging from 40 minutes on the first occasion to some 8½ hours last night, and were designed as a protest against the conditions for unconvicted prisoners in the prison.
I accept that conditions at Brixton are not satisfactory. Some relief is given by diverting prisoners to other London prisons, but these prisons are themselves overcrowded; no complete solution is possible until more accommodation becomes available under the accelerated
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prison building programme, details of which I gave to the House on 27th April. In the meantime I have asked the Regional Director to make a visit to Brixton to consider what improvements might be made, for example, in the arrangements for open visits or by allowing the use of personal radios.
I am also pressing on with the review of conditions for unconvicted prisoners generally, which I authorised recently, and I hope to announce my conclusions shortly.
Mrs. Williams: I thank the Home Secretary for his statement. I pay tribute to the restraint which has been shown by the Governor and the prison officers at Brixton in handling this difficult situation. My hon. Friend the Member for Brixton (Mr. Lipton) six weeks ago drew to the attention of the Home Secretary the conditions in Brixton prison which were likely to lead to trouble, as these are men who have been convicted of nothing, who are spending 23 hours a day in their cells, some of whom have been there not just for weeks but for several months awaiting trial. Will the Home Secretary consider drawing the attention of the courts to the conditions prevailing for remand prisoners in Brixton so that the courts may take them into account in deciding whether or not to grant bail? Will he also consider emergency action to provide extra accommodation, because for a man to have to wait four or six months for trial in these conditions makes a mockery of British justice?
Mr. Maudling: This is certainly a problem, but it is not a new one. The Government have greatly increased the programme for providing prison places. It takes some time to complete the building of new prisons, but we have done a great deal. As the hon. Lady knows, we are also pursuing new ways of lessening the problems of remand prisoners. The right way to tackle the problem is to provide more accommodation and to ensure that the remand system is adjusted to lessen the problem.
Mr. St. John-Stevas: Whatever my right hon. Friend does in the short term, is not the only solution in the long term the demolition of Brixton Prison, which is one of the worst in the country, and its replacement by modern buildings?
Mr. Maudling: In the long term perhaps, yes, but, after all, the Government face a situation where there is great overcrowding in the prisons. When there is already great overcrowding we cannot demolish existing accommodation.
Mr. Lipton: Six weeks ago I wrote to the Home Secretary drawing attention to the unsatisfactory conditions affecting prisoners on remand in Brixton. I drew attention to prisoners being on remand month after month before trial and being kept in their cells for 23 hours out of 24 because of the shortage of prison staff. Why has the Home Secretary taken no action but allowed the situation to develop until the present demonstrations have taken place?
Mr. Maudling: I cannot accept that at all. I do not accept that prisoners spend 23 hours in their cells, although I agree that the period that is spent in cells is far too long. A few months ago I authorised a review of the problem of prisoners on remand, and I hope to announce my conclusions shortly. This is something which the previous Government did not do.
Mr. Evelyn King: When my right hon. Friend builds new prisons, will he bear in mind the necessity for building new accommodation for prison staff to go with the prison? Is he aware that there are difficulties about the accommodation of prison staff in Portland, Dorset, and in other prisons, too?
Mr. Maudiing: Yes. I should have thanked the hon. Member for Hitchin (Mrs. Shirley Williams) for her tribute to the prison staff, who throughout the country work extremely well in difficult conditions. One reason for the accelerated building programme is to meet the difficulties of the prison staff.
Mr. Driberg: The right hon. Gentleman did not answer that part of the supplementary question of my hon. Friend the Member for Hitchin (Mrs. Shirley Williams) in which she mentioned bail and the prevalence of the refusal to give bail by courts, sometimes automatically without inquiring why the police oppose it. Will the right hon. Gentleman consider circularising the courts?
Mr. Maudling: As I have told the House, a study is being made of the question of bail. There is the question of reducing the number of people who are remanded in prison. We have to bear in mind also the belief held by many that sometimes people are released on bail who should be remanded in custody.
Mr. Thorpe: Since prisoners on remand are by definition innocent unless and until they are proved guilty, is the Home Secretary satisfied that remand prisoners are occupying the best prison buildings available rather than, as in this case, some of the worst?
Mr. Maudling: Rightly, the conditions of remand prisoners are different from those of convicted prisoners. It is precisely because of the difference between remand prisoners and convicted prisoners that the Government have given priority to a study of the problem.
Mr. John Morris: Will the Home Secretary give an indication of the length of time people have to stay in Brixton on remand? Does it not tend to be much longer there than it is in the rest of the country?
Mr. Maudling: I cannot give the figures without notice. The length of time on remand is one of the problems we are studying.

VIETNAM (BRITISH SHIPPING)
Mr. Orme (by Private Notice)Mr. Orme (by Private Notice) asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the danger to British ship ping near Vietnam.
The Secretary of State for Foreign and Commonwealth Affairs (Sir Alec Douglas-Home): All British shipping is being warned of the danger of entering North Vietnamese ports at the present time. According to the information available to me, there may be two or three British ships in the vicinity.
Mr. Orme: Were the British Government consulted by President Nixon, and did we in turn make representations to the United States Government following President Nixon's statement? Is the Foreign Secretary aware that this dangerous escalation in South-East Asia

1133
could lead to the possibility of a third world war? Would he take note of widespread opinion throughout the United States, including the view of people like Senator McGovern, which has condemned this action? Will not the right hon. Gentleman condemn such irresponsible action and call for the withdrawal of American forces from South-East Asia?
Sir Alec Douglas-Home: The hon. Gentleman asked me a Question about shipping and I have answered on the question of shipping. He is now seeking to widen the discussion into the matters which we discussed yesterday. The answer to his wider question is: no, we were not consulted; we were informed of the American action. This is a situation of danger, and I think Her Majesty's Government's action in this matter would be most effective if we tried to bring about conciliation under the procedure of the Geneva Conference. As I said to the House yesterday, the Russian Government have said that this is inappropriate, but I am asking to see the Soviet Ambassador tomorrow and I hope they will change their mind.
Rear-Admiral Morgan-Giles: Is it not a fact that practically no British merchant ships have visited Haiphong following the voluntary ban imposed by the British Chamber of Shipping? Is it not ironic to see Labour Members so alarmed about the security of British shipping when the Labour Government by their east of Suez policy did their utmost to play ducks and drakes with the ability to protect our shipping throughout the world?
Sir Alec Douglas-Home: I shall confine my reply to the question about which I was asked; namely, shipping. The fact is that there are very few British ships in this area.
Mr. Frank Allaun: Is it not quite correct for my hon. Friend the Member for Salford, West (Mr. Orme) to want to widen this question since this could finish up on our doorstep? Does the Foreign Secretary agree that, although neither the United States nor the Soviet Union wants a world war, it must be evident that such brinkmanship could lead—possibly by accident—to precisely that taking place, particularly if this week a Soviet ship is bombed or mined in Haiphong harbour? Despite the sympathies of the
1134
present Government with the Americans, should we not now speak out for the sake of the British people to avoid the possibility of becoming involved in a third world war?
Sir Alec Douglas-Home: The way to avoid a third world war is to set in motion the processes of conciliation. Since the Russians and Chinese have blocked any action by the United Nations, it seems to me that the machinery of the Geneva Conference is the kind of machinery which should be invoked and which would meet the situation described by the hon. Gentleman.
Mr. Kilfedder: Is the Foreign Secretary aware that there are many people in this House and in the country who have nothing but the greatest sympathy with President Nixon in arriving at this grave decision and, indeed, with all the people in the United States who are trying to seek a reasonable way out of this terrible problem?
Sir Alec Douglas-Home: We went over some of this ground yesterday. The present North Vietnamese offensive involves crossing recognised international frontiers of Laos and Cambodia and also the de-militarised zone which was defined by the Geneva Conference of 1954. Yes, I have a great deal of sympathy for the predicament in which the United States finds itself.
Mr. Callaghan: I agree with the Foreign Secretary that our aim should be to attempt to reach some solution to the fearful predicament as it has been called, in which the United States finds itself and I acknowledge that the Foreign Secretary intends to approach the Soviet Union again about a Geneva Conference. If that approach fails, will he consider the possibility of a further international control commission, perhaps taking up the path of conciliation which was proposed by India, Canada and Poland, and especially bearing in mind the fact that one of the proposals made by the United States in asking for the release of its prisoners is that there should be an internationally supervised cease-fire. Since the right hon. Gentleman obviously wants to pursue every avenue in a situation in which Britain's influence is limited, will he consider this prospect which might offer some hope for peace? Furthermore, will he in private representations—whatever he

1135
may say publicly to the United States—indicate that, although the people of this country have every symptahy with the situation in which the Americans find themselves, they feel that the Americans are following the wrong course?
Sir Alec Douglas-Home: No, Sir; I would not convey either publicly or privately the last part of the right hon. Gentleman's exhortation. I will consider the question of the control commission. This was first set up in 1954, and again in 1962 when I negotiated the Laos agreement on behalf of the Government. The control commission has not been effective because it has been blocked both in Laos and in Vietnam. Nevertheless, we shall pursue this proposal to see whether a more effective control commission could be set up, but the machinery of the Geneva Conference would have to be used and Russian consent is necessary.
Sir Gilbert Longden: Since I could not be present in the House yesterday when this matter was raised, might I ask my right hon. Friend to remind hon. Members opposite just who is invading whom?
Sir Alec Douglas-Home: I think I made clear yesterday that the North Vietnamese invasion is quite different from what has happened before in this war. On the previous occasion this action was to support guerillas, but now there is a massive invasion over the international frontier, supported by 500 to 600 Russian tanks.
Mr. Fernyhough: Does the right hon. Gentleman recall that in 1956, when the then British Government embarked on an indefensible war, the Americans in a firm but friendly way advised them that what they were attempting should cease immediately? Could not we now, in the same friendly but firm way, advise the Americans that a present they are embarking on a war which is as stupid and as indefensible as that upon which the Tory Government embarked in 1956?
Sir Alec Douglas-Home: Just because the Americans gave bad advice in 1956 I do not see why we should give it now.
Mr. Sproat: Would not my right hon. Friend agree that the main point is that American arms are being used to defend
1136
and protect internationally agreed frontiers, whereas the arms supplied by the Soviet Union are being used in an attempt to destroy South Vietnam in flagrant disregard of the Geneva Agreements?
Sir Alec Douglas-Home: Yes, Sir; that is so. I would rather concentrate, as I am sure the House would, on the processes of conciliation which are open to us.
Mr. Prescott: I agree with the condemnation of American action in Vietnam, and wish to address two questions to the Foreign Secretary about British shipping. First, since British seamen are once again in the front line of confrontation in a situation similar to the Cuba affair, will the right hon. Gentleman give assistance to British seafarers in those instances where possibly British ships may call for assistance to be guided through the mined areas? Secondly, if British seafarers refuse to go on such ventures into these waters, will he guarantee that they will not be prosecuted by the British shipowners for disobeying orders?
Sir Alec Douglas-Home: I think we should wait until the situation arises. We shall certainly do everything we can to advise British shipping. I repeat that British shipping would do well to keep away from Vietnam ports at this time.
Mr. Cormack: Is my right hon. Friend aware that the sympathetic understanding that he is showing towards the Americans is widely appreciated by most people in this country? Is not it fitting in seeking to reconvene the Geneva Conference, to remind the Russians that President Nixon is only too ready to withdraw completely if only the aggression can end and peace can be brought to Vietnam?
Sir Alec Douglas-Home: President Nixon has said in the past that he will enter negotiations without conditions. He repeated that in his speech yesterday, filling in more detail.
Mr. Harold Wilson: Reverting to the point raised by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), does the right hon. Gentleman not agree, as we learned, that the Russians are not exactly enthusiastic

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about recalling the whole Geneva Conference, including the Chinese? In the circumstances, has not the right hon. Gentleman been pressing the idea which has been put forward from these benches and was originally proposed by the Polish Minister, Mr. Rapacki, for a conference between the parties in the fighting, plus the control commission?
Secondly, in view of the fact that from these benches the right hon. Gentleman together with the then leader of the Opposition invariably asked whether we supported the United States in particular actions and always insisted on an answer, will the right hon. Gentleman now say whether he supports the statement by President Nixon or whether, as we did in the case of the bombing of Hanoi and Haiphong, the right hon. Gentleman dissociates his Government from it?
Sir Alec Douglas-Home: I distinctly remember the attitude taken by the right hon. Member for Fulham (Mr. Michael Stewart) when he was on these benches as Foreign Secretary in the Government led by the right hon. Member for Huyton (Mr. Harold Wilson). The right hon. Gentleman took a very careful and very responsible attitude on this matter. From my knowledge, I never pressed the right hon. Gentleman on this matter in order to embarrass the Americans or the right hon. Gentleman in any way. I will not be drawn into a discussion of whether I can give answers condemning the United States Government. If there is condemnation, it is of those who started this offensive and made it almost impossible to conduct peaceful negotiations through the United Nations.
Mr. Wilson: But does not the right hon. Gentleman remember his comments on our dissociation from the bombing of Hanoi and Haiphong, when we had given long advance notice, privately and publicly, to President Johnson of what would be our position if there were bombing of Hanoi and Haiphong? Is the right hon. Gentleman aware that in the past month, in addition to the statement issued this morning by our party which is very clear, I myself have publicly deplored both the invasion from the north and the resumption of American bombing which was stopped by President Nixon. [HON. MEMBERS: "Facing both ways."] It is possible to condemn invasion from
1138
both sides, which has been the attitude of successive Governments in other situations. Is the right hon. Gentleman aware that we have made this condemnation and that it was as a result of pressure by many Governments, including our own, that the bombing of the north was stopped by President Johnson in March. 1968?
Sir Alec Douglas-Home: I very much doubt the last proposition that the right hon. Gentleman has advanced. I must differ from him when he describes this as invasion from both sides. It is not. The South Vietnamese asked for American assistance. This is an invasion from North Vietnam.
Mr. English: Does not the right hon. Gentleman think that he is confusing the issue by referring constantly to "an international frontier". Does he mean the line of military demarcation between the British and Chinese in what was always a single State before it became French protectorate and what even now wishes to be a single State? There is no question, surely, of a bit of Ostpolitik in Vietnam.
Sir Alec Douglas-Home: By "international frontiers" I mean those of Laos and Cambodia. By "the demarcation line ", I mean the one laid down by the international conference. All these have been violated.

NEW MEMBER SWORN
Norman Stewart Hughson Lamont. esquire, for Kingston-upon-Thames.

BRITISH RAILWAYS (DISPUTE)
Mr. Speaker: Order. I have three applications under Standing Order No. 9. I propose to take them in the order in which I received them. Mr. Hastings.
Mr. Hastings: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"The present course of the railway dispute and its possible consequences."
In all conscience, it is difficult to be specific about anything to do with industrial relations in this country. But at

1139
least this matter is specific to the extent that the dispute has continued now for over a month and caused great inconvenience to a large number of people, and that there is now the imminent threat of the situation deteriorating again.
Its importance lies not only in the risk of further disruption, loss and inconvenience to many people, but in the effect which a settlement could have on the future course of wage bargaining in the country as a whole. Moreover, there is the importance of its psychological effect upon the Government, Parliament and people.
I think that its urgency is self-evident. The cooling-off period has ended without an agreement. Whatever meetings may or may not be taking place, the present position seems entirely unclear on the basis of such information as is available publicly.
I submit that all those directly concerned, together with the country as a whole, should hear the voice of Parliament upon this matter without further delay.
Mr. Speaker: The hon. Member for Mid-Bedfordshire (Mr. Hastings) was kind enough to give me considerable notice of his intention to make this application today. I have considered it very carefully in all the circumstances. I have exercised my judgment as best I can. I am afraid that I cannot grant that application today.

NORTHERN IRELAND
Mr. Kilfedder: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"The need for an inquiry following the Government's announcement in today's OFFICIAL REPORT that the Irish Republican Army has been guilty of torture in many cases where the victims have been murdered."
This matter is specific. We have had today for the very first time Government confirmation of gruesome rumours which have been rife for a considerable period in Northern Ireland about the ruthless behaviour of the IRA towards its victims, many tortured before death and in some
1140
cases mutilated after death. Until now, official spokesmen have always denied allegations of such behaviour by the IRA.
The matter is important because the House can easily understand the immediate effect that such official confirmation will have upon public opinion in Northern Ireland at this time of great tension. It will add to the feeling of anger and resentment that such bestial behaviour is being perpetrated by the IRA. Such evil conduct highlights the importance of the struggle against the IRA as more and more of its true character is revealed.
The matter is of the utmost urgency. There has been a serious deterioration in the morale and patience of the law-abiding people of Northern Ireland who have borne the infliction of so many outrages with remarkable forbearance. Today's admission by the Government that torture has taken place makes it necessary immediately to establish a tribunal of inquiry to prevent a violent reaction in Ulster and to get at the truth, for it is the truth for which the people of Northern Ireland cry out. What is more, such a tribunal of inquiry is needed to dispel as quickly as possible those rumours which are untrue. No doubt there are many which are untrue, but they will grow if the Government refuse to give the truth.
Finally, my hon. and gallant Friend the Member for Down, South (Capt. Orr) and my hon. Friend the Member for Antrim, North (Rev. Ian Paisley) have raised the case of Corporal Elliott, of the Ulster Defence Regiment, who is believed to have been tortured before being murdered, but they have been unsuccessful in getting a statement from the Government. I therefore ask you to give full consideration to this application.
Mr. Speaker: Again I am obliged to the hon. Gentleman for having given me considerable notice of his intention to make this application. As I said yesterday in reply to a similar application, my decision in no way reflects upon the importance of the matters that have been raised.
I have considered the matter, and I do not think that it should be pursued by means of an emergency debate under Standing Order No. 9. I add the postscript, however, that I am considering

1141
urgently the points raised as points of order yesterday about the way to deal with these matters.
I cannot accept the application.

VIETNAM
Mr. John Mendelson: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, in order to raise a matter of definite public importance for urgent debate, namely,
" The decision of the United States Government to mine the ports of the Republic of North Vietnam and to stop ships on the high seas without any legal right to do so and without the backing of the United Nations."
I have three points to submit very briefly without in any way going into the substance of the matter, which would be the subject of the subsequent debate.
First, I have to show that it is urgent. The United States Government have announced—and it has been reported in the British Press this afternoon—that the mines which have been laid will become active on Thursday morning. Therefore, without the ability of either the President of the United States or the general in command of that theatre to withdraw the mines, they will, by their own device, become active on Thursday morning. That makes the matter decisively urgent. I say in passing that it makes the matter urgent in a new way, in that the disastrous out come of this decision may be produced automatically, without any intervention by a human being between now and Thursday morning.
Secondly, I submit that this is directly the responsibility of the right hon. Gentleman the Foreign Secretary, the Prime Minister, the British Government and Parliament. We are one of the principal
1142
allies of the United States, and we are their allies with the broad support of the House of Commons and the British people. It is therefore clear that anything which happens which might involve the United States people and United States Government and their armed forces in serious conflict with any other major power may bring into play the alliances which are in existence, with the approval of Parliament, between the United Kingdom and the United States, and between their Governments. It would therefore be monstrous if the House of Commons had no opportunity to debate this matter before Thursday morning.
Thirdly, and finally, it is clear that an appeal was made to the conscience of mankind by the President of the United States in his speech, which some of us heard at 2 o'clock in the morning. The President is entitled to make an appeal if he sees fit to do so, but the British people have a right to expect that their elected representatives will try to formulate a reply to that appeal before it is too late so that their voice may be heard through their elected representatives.
Mr. Speaker: I am grateful to the hon. Member for having given me notice of his intention to make this application. I have considered carefully what he has said. I have also considered the exchanges in the House yesterday and today. I must confess that I find the exercise of this discretion under Standing Order No. 9 extremely burdensome, but I must say again in this case that I do not think that a debate under Standing Order No. 9 is the right way to pursue this matter.
I am afraid that I have to reject the application.

DOORSTEP SELLING
4.6 p.m.
Mr. Arthur Davidson: I beg to move,
That leave be given to bring in a Bill to regulate doorstep selling.
In view of the generous trailer which you allowed me during my supplementary question yesterday, Mr. Speaker, I can be very brief today.
The purpose of the Bill is to give greater protection to the consumer against the operation of salesmen who gain entry into private homes by pretending, through a skilful use of words, that they have called for a totally different purpose. Once inside the home they proceed, by another carefully prepared piece of chatter which again is carefully designed to conceal what they are really up to, to sell the householder expensive goods often involving hundred of pounds worth of commitments. Even after that, the householder is so beguiled and bemused that he thinks he is taking part in some worthy educational project or some piece of useful social research.
The practice, which is on the increase, has been condemned in a series of articles recently in the Daily Mirror, which has shown beyond doubt that great hardship has been inflicted on innocent people as a result of this particularly nasty and dubious form of selling. The Consumers' Association has also condemned the practice and, indeed, has infiltrated these organisations in order to learn at first hand the techniques used.
Very simply, the salesmen are taught deliberately to conceal the true object of the visit in every case. One firm says "We are calling on all the householders in the area and it is just a matter of interviewing you and your wife together for a few moments. It is about brand indentification." It is not about brand identification. It is about selling encyclopedias.
Another firm, which sells expensive record and stereo equipment, instructs its salesmen to use the following opening gambit "I am doing some research work in this area this evening, and there are a few question which I have to ask husband and wife together." He does not have any questions to ask the husband
1144
and wife, either together or separately. He is out to sell inferior stereo equipment.
Yet another firm has instructed its salesmen to say "We are not actually selling anything. We just want to show it to you." What they want to show, and what they want to sell, is a TV magnifying screen.
Another firm instructs its salesmen to say "I am in this area discussing fire prevention. Do not worry; it is not about insurance." If it were about insurance, the householder might be better off.
In all cases the approach is thoroughly dishonest. The householder is left without any protection and often lands himself in considerable debt. The first thing my Bill seeks to do is to make it obligatory for a salesman to reveal that he is a salesman. This would mean that the firm which deliberately coached its salesmen in these techniques would be encouraging them to commit an offence and the law would, therefore, be able to catch the real victims, who are the firms themselves, rather than merely the salesmen.
The second protection the Bill would give would be to enable the householder, the consumer, to have the same four-day cooling-off period as exists under any normal hire-purchase agreement.
I agree that the Bill is not perfect. It will not stamp out completely this sort of technique. It will, however, at least make it more difficult for these dishonest types of sales techniques to continue.
Mr. Alan Williams: On a point of order. Are you aware, Mr. Deputy Speaker, that a difficulty has arisen in that my hon. Friend has raised a matter of considerable importance to the public and the House, yet there is not in his place a Minister to represent the relevant Department? Will you arrange for this debate to occur again at a time when a Minister is present at least to hear the arguments before closing his mind to them?
Mr. Deputy Speaker (Sir Robert Grant-Ferris): I think the hon. Gentleman is under a slight misapprehension. It is not necessary on the raising of a Ten-Minute Rule Bill for a Minister to be present, and frequently Ministers are not present on these occasions. It is for the House to decide, having heard the hon.

1145
Member presenting the Bill, whether to grant leave for its introduction. If another hon. Member wishes to rise to make a short speech opposing the Bill, that is in order. Other than that, I now only have to ask whether the hon. Gentleman has the leave of the House to bring in his Bill.
Sir Harmar Nicholls: On a point of order. So that the record will not be lopsided on this matter, may I draw your attention, Mr. Deputy Speaker, to the fact that my right hon. Friend the Chancellor of the Exchequer, who is one of the most senior Cabinet Ministers, has been present to hear the case adduced by the hon. Member for Accrington (Mr. Arthur Davidson)? To suggest that the hon. Member's comments have not been noted by the Government is a wrong and stupid thing to counsel from the benches opposite.
Mr. Deputy Speaker: I do not wish to enter into any argument on this subject. It is up to the House to decide whether to give the hon. Member for Accrington (Mr. Arthur Davidson) permission to introduce his Bill.
Question put and agreed to.
Bill ordered to be brought in by Mr. Arthur Davidson, Mr. Charles Morrison, Mr. Alan Williams, Mr. Wellbeloved, Mr. Goodhart, Mrs. Doris Fisher, Mr. Cormack, Mr. Alfred Morris, Mr. Carter, Mr. Crouch, Miss Fookes and Mr. Robert C. Brown.

DOORSTEP SELLING
Bill to regulate doorstep selling, presented accordingly, and read the First time; to be read a Second time upon Friday, 16th June and to be printed. [Bill 136.]
ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 1, 9, 12, 63, 64, 71, 73, 110, and 112 and Schedule 4)
  Considered in Committee.
  [Sir ROBERT GRANT-FERRIS in the Chair]
  Ordered,
  That the provisions of the Finance Bill committed to a Committee of the whole House be considered in the following order, namely, Clause 1, Clause 9, Clause 12, Schedule 4, Clause 64, Clause 110, Clause 71, Clause 73, Clause 63, Clause 1l2.—[Mr. Barber.]
  Clause 1
  VALUE ADDED TAX
  Question proposed, That the Clause stand part of the Bill.
  4.15 p.m.
  The Chancellor of the Exchequer (Mr. Anthony Barber): Before coming to the main principles which are involved in the consideration of Clause 1, I wish to point out that there has been a genuine misunderstanding about the way in which subsection (2) of the Clause is expressed.
  There was on the Notice Paper an Amendment, which has not been selected, which drew to my attention the misunderstanding which has arisen and it may he for the benefit of the House if I briefly explain what the misunderstanding is. It is that the Clause as drafted would import all the powers, including enforcement, in respect of all duties of the Customs and Excise. In fact, it does not do this. The VAT enforcement powers are specifically set out in the Finance Bill and there will be opportunity for these to be debated in Committee upstairs.
  Clause 1 simply imports the general powers of management under the Customs and Excise Act, 1952, which the Commissioners have in respect of all "assigned matters ", as they are called, and it follows a purchase tax precedent which has given rise to no complaint over the years.
  Nevertheless, I think that, as put here, it could give rise to misunderstanding—indeed, it has done so—and I therefore believe that it would be right to amend

  1147
  subsection (2) in due course by deleting all the words after "Commissioners" in line 2 on page 2; and in due course we will take steps to ensure that such an Amendment is made. I thought it might be helpful to clear that comparatively minor point out of the way at the outset.
  A debate on Clause 1 of the Finance Bill is a debate on the general merits of VAT and Government policy governing indirect taxation. It follows, therefore, that any suggestion that Clause 1 should not be adopted would be designed to make all the VAT legislation inoperable. It would, in fact, be a rejection of the entire VAT concept, and one can only assume that those who take this view would be reasonably well satisfied with the taxes which VAT is designed to replace; namely, purchase tax and SET.
  It is right that I should start by referring to some words which were contained in our election manifesto. We said:
  "We will abolish the Selective Employment Tax, as part of a wider reform of indirect taxation possibly involving the replacement of purchase tax by a value added tax."
  During the early months after I became Chancellor of the Exchequer I gave detailed and long consideration to whether we should introduce a VAT, and eventually, as the Committee will recall, I announced in the Budget of 1971 that I had decided that we should.
  It is right to recall—I said this last year in the course of our Budget debates —that when I became Chancellor I certainly, in the light of what was in our manifesto, had not then made up my mind whether we should switch over to VAT. It seemed to be highly desirable on all counts not merely to have all the advantages that one gets of being in office of finding out the way in which VAT operates in other countries but to have the benefit and advice of the expertise of the Customs and Excise on the mechanics of what was involved in introducing VAT.
  Furthermore—and I know that the House will accept my word on this—I came to the conclusion that it would be right to move over to VAT whether or not we joined the EEC. Indeed, I announced the decision several months before the negotiations were complete.
  VAT has an essential place in our far-reaching programme of fiscal reform which, as the Committee knows, extends
  1148
  into all parts of the tax system. From the days of Mr. Gladstone onwards indirect taxation has largely relied on a few selective revenue duties which single out various areas of consumption for heavy taxation, and in some cases very heavy taxation.
  Our list of revenue duties of this kind is short, and it is interesting when one looks back over the history of indirect taxation to find that it has grown shorter in recent times, I suppose because in this way one acknowledges the dominance of the major duties while Governments have surrendered those of comparative unimportant revenue yield.
  I believe it right that there should be a few major revenue-raisers of this kind, but alongside these well-tried money-spinners, which present few problems, our need is for a wide-ranging tax on the remaining field of consumer goods and services. Purchase tax, born of war and austerity in 1940, was a step in that direction. Selective employment tax, born of planning delusions in 1966, attempted to bring in the service industries as well, and attempted to force what was, in some mysterious way, supposed to be a desirable reshuffle of the country's labour force. I should like to say, first, something about those two taxes, which will go when VAT comes into operation.
  Purchase tax, after 30 years, has reached the end of its useful life. Whatever its advantages, the fact is that its intrinsic defects have remained ineradicable despite a great many changes and despite many attempts both to simplify it and to eliminate the anomalies of which it has more than its fair share.
  Sir Gerald Nabarro: Hear, hear.
  Mr. Barber: My hon. Friend says "Hear, hear". No single Member of the House has done more to highlight the anomalies of purchase tax than has my hon. Friend over the years.
  The simple fact is that any significant reform of purchase tax has become impossible. The tax applies to only a limited range of goods, with particular emphasis on consumer durables and semi-durables, and not at all to services. It is in that respect grossly unfair on particular industries and particular products. Furthermore, a sizeable area of consumer expenditure, on goods used both by consumers

  1149
  and by business and industry, could not be subjected to purchase tax without at the same time imposing a burden on industrial costs.
  This is a defect of purchase tax which is, as I think is accepted by both sides of the Committee, inherent in the very nature of the tax. The distinction between business and consumer items under purchase tax has often involved, as we know from previous Finance Bill debates, very arbitrary borderlines, often depending merely on the size of an article. To give just two instances, refrigerators are taxable if their storage capacity is not more that 12 cu. ft., but larger refrigerators are not taxable although they are the same in every other respect. Similarly, electric water heaters are taxable up to a capacity of 50 gallons, but beyond that they are free of purchase tax.
  There again, purchase tax has been bedevilled by its multi-rate structure, which has inevitably given rise to an even larger host of anomalies and administrative difficulties. On Second Reading, my hon. Friend the Chief Secretary pointed out many of the nonsenses that we have had to put up with over the years on this score. I need repeat only a few. Toilet soap is taxed at a high rate, yet toilet paper is exempt. Cutlery is taxed at the bottom rate. [Interruption.] It is very interesting that that is apparently what the Opposition really believe to be good sense. But that is not so with most people in this country. I ask the Opposition whether they believe that it is right that cutlery should be taxed at the bottom rate but that light bulbs should be taxed at a high rate. Is it right that an old person's television set should be taxed more heavily that the Paris fashions? This is inherent in the very nature of purchase tax.
  However, what troubles me most about purchase tax is the difficulty in arriving at any convincing rationale for the distortion of choice which it imposes. The correction of one inconsistency inevitably gives rise to another, and the continual tinkering which has taken Place over the years only serves to establish the inherent defects of the tax. During 1971 we had to make no fewer than six Treasury orders amending the purchase tax tariff. This frequency of alteration, after 30 years of operation of the tax, provides an element of instability which is bound to
  1150
  create, and has created, uncertainty in the minds of manufacturers planning for production for the years ahead. If the yield of the tax is to be worth while, its rates have to be relatively high, because of the narrow base, and so the whole market is distorted in favour of goods fortunate enough to be outside its scope.
  Mr. Joel Barnett: Will the Chancellor guarantee that there will be fewer Orders and Regulations under VAT?
  Mr. Barber: VAT will be far less discriminatory than purchase tax—without any doubt. The only way of ensuring that it was not discriminatory at all would have been to ensure that there were no exceptions of any kind. I shall come to the reason why I chose to provide for the special reliefs.
  Mr. Brian Walden: One is rather puzzled by the Chancellor's argument. Let us consider his example about refrigerators and their capacity. Is it not a fact that if a refrigerator is built into a house it will not be liable to VAT, whereas otherwise it will? Is this not exactly the sort of anomaly that the Chancellor is now condemning purchase tax for containing?
  Mr. Barber: The hon. Gentleman makes that assumption, but I think he had better wait until the discussion in Committee elsewhere on the way in which this is to be dealt with. All that I can say to the hon. Gentleman—I think he will accept it, because he is an intellectually honest person and a man of great ability; we welcome him to the Opposition Front Bench—is that it is accepted by everyone, whether they think that changing to VAT is a good thing or a bad thing, that it is far less discriminatory than purchase tax. It is true that if one provides for any special reliefs of any kind, inevitably borderlines arise. But we most certainly will not have with VAT the sort of borderline problem which has bedevilled purchase tax throughout its history.
  Another disadvantage of purchase tax is that, while retailers have always welcomed cuts in the rates, of the kind which they did not experience under the previous Government, whenever we have cut the rates there has been the perennial

  1151
  problem which has arisen concerning tax-paid stocks. Furthermore, it is well known and accepted—no one would deny it—that the tax is disliked by exporters. The reason is that it increases their export prices, through their overheads on stationery, office requisites and the like, and makes them that much less competitive than their tax-free competitors overseas. As a regulator of the economy, purchase tax is far from perfect because it has only a limited coverage.
  Nonetheless, purchase tax does at least have some pretension to being a tool of economic management. If SET, on the other hand, is such a tool, it is certainly of the blunt instrument variety, the crudest of bludgeons. Even now it is not at all clear what SET was intended to achieve. But it is only too clear what it has achieved over these years.
  So long as the main indirect tax was the purchase tax, which by its nature was confined to expenditure on goods, it could, perhaps, be claimed that the incidence of indirect taxation on service industries was lighter than on manufacturing industries. But I should have thought that no justification for saddling service industries with a tax riddled with as many absurdities as the SET is riddled with. After all, its selectivity created wholly artificial borderlines. The inequities that flowed from trying to differentiate between three classes of employer are too numerous to mention. One nonsense in particular will be familiar to all hon. Members, and that is the wholly artificial distinction between manufacturers, who get refunds, and wholesalers, who do not. So the result is that the manufacturer who orders his affairs in the artificial manner which is encouraged by SET will get refunds in respect of any wholesale activities he carries out. What justice or sense is there in that? The Opposition will agree, I think, that if SET had been kept, certainly this aspect would have had to be dealt with. Does anyone wish, as an act of Government policy, to drive wholesalers out of business? That is the direction in which SET was operating. The same kind of anomaly hits our specialist export houses and the retailer who tries to offer his own repair service.
  There is only one consistent thread in all this, one which was apparently not
  1152
  intended and certainly not one that commends itself to the present Government, and that is discrimination against the small manufacturer who cannot do, or prefers not to do, his own wholesaling or exporting.
  4.30 p.m.
  Mr. F. A. Burden: One of the worst aspects of SET was that buying houses, which were set up in this country purely and simply to buy merchandise for export abroad, had to pay SET on their staff. That caused them to cut back their staff and in many instances to cut back their purchases.
  Mr. Barber: My hon. Friend is quite right. Those cases are also well known. It is true that any tax generates difficult cases. The peculiar feature about SET was the impossibility of establishing general rules laying down that degree of consistency which is the hallmark of a fair taxation system. Slight and wholly natural alterations in their activities could move firms in and out of the tax. What we had in SET was a tax which was anomalous in its very nature. Its economic effects were certainly no better. It heavily taxed essential services while rewarding the manufacture of the most trivial article. It pushed up industrial costs and added a further layer on export prices by taxing all kinds of services connected with exports.
  The mere fact that VAT allows us to get rid of purchase tax and SET, is a powerful argument in its favour. However, its virtues are much more positive than that. Its principal advantage is its breadth of application. It is designed in principle to fall on all consumer expenditure on goods and services. Relief is allowed only for good reasons and in carefully defined areas. This broad base enables a large revenue yield to be obtained by means of a modest rate of tax. The wide coverage limits the distortive effect of high taxes on patterns of personal expenditure and therefore on trade.
  In consequence, the allocation of productive resources will be more in accordance with real demand. The neutrality of VAT as a revenue raiser is, I should think, a commendation in the eyes of those even who oppose it. Moreover, the VAT system of deduction of input tax ensures that the tax bears

  1153
  only on the ultimate consumer with the minimum burden on industry. At the export stage, all the VAT which has previously been paid can be completely rebated.
  Whatever view may be taken of the principle of VAT, I think that everyone will accept that as an economic regulator the potential of VAT is considerable. Because of its broad base, any rate adjustment required will be much smaller than is the case with purchase tax. As a result firms can look forward to more stability and feel more confidence in the future level of demand for their product. These are crucial matters when it comes to investing large sums in capital equipment.
  I think it will also be universally accepted at the other end of the chain of production and distribution, whatever views may be taken about whether the tax should be applied in this country, that the retailer will no longer have the problem of tax-paid stock if the rate is changed, because under the VAT system his tax liability is reduced by the actual tax paid on his purchases, even if it were at a different rate. In effect, his stocks are held tax free.
  All these are advantages inherent in value added taxation in general. The particular system proposed for this country has some special advantages. All along we have attached particular importance to keeping the tax simple. This we have done by deciding to have only a single rate of tax; by adopting a generous exemption limit for small traders; by providing for the use of existing commercial procedures as far as possible; and by preparing special simplified systems of accounting to help retailers.
  As the Committee knows, we have also been at pains to cushion the impact of the tax on lower income families, by zero-rating or exempting a number of important items of expenditure. Some hon. Members tried at one point to raise a scare about the effects of VAT on food distribution costs, but that has now been scotched by my hon. Friend the Financial Secretary in his reply to the hon. Member for Walthamstow, East (Mr. Deakins). The VAT system ensures that no VAT enters into the price of zero-rated foods; moreover, the food distribution industry now bears a significant amount of SET
  1154
  which will disappear. As a result, the overall effect will be a reduction in the tax on food.
  Mr. Denis Healey: The whole country will be interested in this: can the Minister assure the House and the country that the Government will in no circumstances introduce a positive VAT rating on food as a result of the harmonisation to which they are committed under the Treaty of Rome?
  Mr. Barber: There is no obligation under the Treaty of Rome, and as a result of the decisions which have been taken by the Six to impose VAT on food.
  Mr. Healey: Will the Chancellor answer the question.
  Mr. Burden: Give him time.
  Mr. Barber: I am trying to answer the right hon. Gentleman.
  Furthermore, when we enter the Community we shall have a say in these matters. The right hon. Gentleman knows perfectly well that I cannot, regarding any future decision concerning any form of taxation, give an absolute assurance, any more than the right hon. Gentleman could give an assurance if he were the Chancellor of the Exchequer in a Labour Government that he would not put up these taxes as his predecessors have put up taxes when they have been in office.
  Mr. Healey: The right hon. Gentleman has made the point that the British Government have the right to veto any steps towards harmonisation of which they disapprove. I am asking the right hon. Gentleman a question that is within his competence, that is to give an assurance that he will not agree in discussions which take place when we are in the Community, to the imposition of a VAT rating on food.
  Mr. Barber: I am not prepared to do that. I believe everybody would agree that it would be wholly irresponsible and intolerable to give an assurance about future taxation of any items in this country. If the right hon. Gentleman would like to give an absolutely firm assurance, whether we have purchase tax, VAT, or SET, that in the event of a future Labour Government they will not under any circumstances allow any of those rates to increase, we shall be interested to hear it.

  1155
  I hope that the House, in considering these matters, will not overlook the pervasive effects of SET in all sorts of sectors for which they express concern, whether it be housing and rents, repairs and improvements, entertainments and catering. Although there will be changes in the incidence of tax on particular commodities or transactions, particularly those which have been heavily taxed in the past, overall, as I have pointed out before, there are no grounds for thinking that the changes in taxation resulting from the introduction from VAT will be regressive.
  The case in favour of VAT rests firmly on its own fiscal and economic merits. Those merits have, of course, already led a number of European countries in the same direction as we are now proposing to take. Most of these countries are existing or potential members of the EEC —but not all, for Sweden and Austria have also chosen VAT on its merits, although they are not candidates for membership for the EEC. I might add that in Austria there is the first majority social democratic Government since the war. What was one of the first actions taken by that Government? They decided to introduce a value added tax.
  Consider also the example of Sweden, regarded by some as a Socialist Utopia. At present, the Swedish Government are proposing to raise their value added tax to 20 per cent. because they feel that this is the best and fairest way of raising the revenue.
  The adoption of the VAT system is required by EEC Directives, and the decision to introduce a VAT in this country as a means of improving our tax system means that we shall not require any transitional period in this particular sphere. However, I hope that some of the misapprehensions stemming from the EEC overtones have now been put to rest.
  So far—I should like to repeat this, because it should be made clear—the member States of the EEC have agreed only to introduce the system of VAT. They have not agreed on the harmonisation of rates or of coverage. Until such time as they do, they remain free to determine their own rates and coverage.
  1156
  As a member of the enlarged Community, we shall naturally have a voice in the discussions about harmonisation. What is even more important, under Articles 99 and 100 of the Treaty of Rome, decisions of this nature must be unanimous. These discussions on the harmonisation of coverage and rates, which does not necessarily mean complete equalisation, still have a long way to go.
  Mr. William Baxter: On VAT, I think that the Chancellor would concede that the heavier part of the burden will be borne by the poorer sections of the community. They will have to bear a considerable part of the value added tax. If it is on goods and various things which people use, it must affect the poorer sections of the community. Will the right hon. Gentleman give reasonable consideration to the possibility of a minimum income wage and allowances for the poorer sections of the community, because I think that should run in unison?
  Mr. Barber: That raises a much wider question which I could not deal with on consideration of the Clause.
  I should like to repeat what I said earlier. Taken overall, because of the special reliefs which we have provided, it is not true that this tax is regressive. This is a very important consideration. It arises because we have taken certain decisions, which I announced in the Budget Statement, which came as a considerable surprise to the right hon. Member for Leeds, East.
  Mr. Healey Mr. Healey indicated dissent.
  Mr. Barber: I do not know why the right hon. Gentleman shakes his head, because he was surprised. He surely must admit that.
  Mr. Healey: I was not surprised.
  Mr. Barber: The right hon. Gentleman says that he was not surprised. I do not know where it is, but I am sure that I can produce for him his election address in which he specifically stated that the tax would be applied to fuel and fares.
  Mr. Healey: Not in my election address.
  Mr. Barber: That is interesting. We shall have it on record and bring forward his election address on another occasion.
  The point is that it is time that indirect taxation in this country was spread in a less discriminatory fashion. Our particular form of VAT has been hammered out in intensive open consultation with those who are primarily affected. It has been well received by business men and industrialists who can see the solid merits of the system. It also meets the canons of social justice. It will replace two taxes which, to put it mildly, have been tested and found wanting. In short, it is the best instrument available for raising revenue from a broad sector of consumer expenditure.
  I should add that there will inevitably be those outside this House who, very naturally, will be concentrating on interests or activities with which they are especially concerned. It is understandable that, before the introduction of the tax, they should not be fully alive either to the great advantages of a less discriminatory tax or to the very great disadvantages of making particular exceptions with the inevitable consequences for the rate and the inevitable anomalies and non-senses which have so bedevilled our taxation system in the past and which would follow if we were to go down that slippery slope.
  Mr. Burden Mr. Burden rose—
  Mr. Barber: But our duty in this House is to take account of these broader considerations. It is in the very nature of the reform of taxation that it does not leave matters where they were. When I became Chancellor, I was urged by my right hon. and hon. Friends not to flinch from the reform of taxation merely because it posed problems. I accepted that advice. I, in my turn, now ask my right hon. and hon. Friends to support the Government in the task to which together we have set our hands and which, if we have the resolve and courage not to be diverted from our strategy, will be of great benefit to our country.
  Mr. Burden: Before my right hon. Friend sits down, will he advise me on one point? He made the point that when VAT is introduced the retailer will be holding his stocks without tax having
  1158
  been paid. In fact, now that purchase tax is being paid the retailer has already paid tax and he puts his profit on the cost of the article plus the tax. In future, valued added tax will be charged by the retailer and his profit will be put on the prime cost of the article without tax so he will not be able to hide the fact that he is charging profit on the tax as well as on the prime cost of the article. Is it not also a fact that, because he will not have paid the tax, he will not he subjected to the problem of having purchase tax reduced and having to cover in his profit the loss which he makes because he has already paid the tax?
  Mr. Barber: Certainly the conclusion of my hon. Friend's question is perfectly valid. It follows from the fact that, in effect, his stocks are held tax-free.
  [Mr. E. L. MALLALIEU in the Chair]
  4.45 p.m.
  Mr. Healey: As the Chancellor has pointed out, this discussion on "Clause 1 stand part" is, in effect, a Second Reading debate on the principle of the proposals for value added tax. I regret that we cannot treat this part of the Finance Bill as a piece of legislation in its own right by having a proper two-day debate, followed by a Committee stage, followed by the normal procedure. At least, the Chancellor will agree that the proposal for a value added tax represents the biggest change in our tax system for a generation. Until now it has been very little discussed in the House. We have only just been given an idea of the broad shape of the tax as the Government see it. Many details are still unknown; so we hope to learn more in Committee upstairs.
  The Bill gives the Commissioners of Customs and Excise unprecedented powers of both enforcement and definition. It also gives the Government the right to triple the yield of the tax within 12 months, if they so decide. By this time next year the Government could be raising £3,000 million from this tax rather than a simple replacement of the yield from purchase tax and SET. I know that the Financial Secretary will agree that we can go up to 12½ per cent. before the tax comes into operation, arid that the moment it is in operation it can be

  1159
  increased by a further 20 per cent., bringing it up to 15 per cent. in all, and, under another Clause, everything at present zero-rated can be removed and subjected to the full value of the tax. If the Government had no intention of removing things from the list in Schedule 4, presumably they would not have given themselves the power to do so by order.
  A great deal of the previous discussion on a value added tax has turned out rather irrelevant to the specific proposals which we now face. The Chancellor rightly pointed out that this tax must be seen in relation to its rate, its coverage, and its yield, on the one hand, but, on the other hand, and more important still, as forming part of a total structure of direct and indirect taxation. Indeed, we find value added tax performing different functions in some countries which have already adopted it.
  For example, in France value added tax was adopted largely because there was large-scale evasion of income tax at every level in the State and an extremely complicated and easily evaded form of sales tax. As a result the French have introduced an extremely complex form of VAT which fulfils very few of the criteria laid down by the Chancellor. It is highly discriminatory, there are four rates and there is very large-scale evasion. I will come to that later.
  In Sweden, on the other hand, there is very high and very progressive direct tax on income, and, in addition, there is a range of taxes on wealth which we do not have in this country. There are a tax on wealth and a tax on gifts, and there is a tax on inheritance which starts at £2,400—one-tenth the starting level of the British tax—and begins at a rate of 45 per cent. It cannot be evaded because of the effective gifts tax. If we had a system of taxation of income and wealth like Sweden's, we might decide that there was a case for a value added tax as our main form of indirect taxation. But it will not be any surprise to the House to know that the Government are not introducing the value added tax against this background.
  When the last Conservative Government considered introducing it the then Chancellor, now the Home Secretary, considered it as a possible replacement for
  1160
  purchase tax and for all or part of the profits or corporation tax. He was particularly concerned with whether or not our exports would be helped by a move from purchase tax and corporation tax to value added tax. The Richardson Commitee on Turnover Taxation, which he set up, came to an unequivocal conclusion which the Conservative Government of the day fully supported. Incidentally, all the criticisms of purchase tax by the Chancellor this afternoon and all the advantages which he claimed for value added tax as against purchase tax were directly repudiated and rejected by the Richardson Committee. I quote only paragraph 303:
  "The purchase tax system in fact affords a more logical, efficient and economic means of consumer taxation than a value added tax. The administration of the purchase tax is established and well tried in this country, and the tax is capable of medication and extension. We can see no countervailing advantages which can justify the introduction of a value added tax in its place."
  I am glad to see that the Government have sufficient confidence in Mr. Richardson's economic judgment to have made him Chairman of the new Industrial Development Executive.
  The Government are introducing value added tax for a completely different set of reasons which the Chancellor summarised in part in his remarks a few moments ago. The introduction of the value added tax is an essential part of the Government's general disengagement from the responsibility previous recognised by British Governments to control the economy according to certain social, as well as purely economic, objectives. The Chancellor has chosen the value added tax, as he told us this afternoon, because it is what he called "neutral and undiscriminatory", because it does not involve the sort of distortions of consumer choice involved in the multiple rates of purchase tax, and because it does not involve any fiscal interference with the laws of supply and demand which the Government claim to hold sacred. This is the theory, but the practice is very different.
  The Chancellor asked whether I was surprised at the large number of zero ratings and exemptions which he has permitted. I said I was not. I expected earlier that the Government would introduce a value added tax which would tax

  1161
  food and fares. The Chancellor did everything this afternoon to suggest that my belief was justified by his total failure to answer my question about what the Government would do when it came to the job of harmonising coverage and rates with other members of the Common Market. But, as we all know, the Chancellor is very sensitive not only to the laws of supply and demand but to the laws of the ballot box.
  Mr. Barber Mr. Barber rose—
  Mr. Healey: When the Government talk about Conservatives wearing a human face, it means they share at least one very common human feeling—a dislike of losing power. In order to get the Bill through the House at this stage, the Government have introduced a large number of changes in the elegant administrative structure of value added tax as described by the Chancellor this afternoon, and, like every other aspect of their economic policy where they have tried to temper Tory dogma with political expediency, it has ended in a ghastly muddle. If we look at the proposals in practice —
  Mr. Barber Mr. Barber rose—
  Mr. Healey: —we find the present proposals in their present form fall heavily between two stools and give the worst of all worlds.
  Mr. Barber: Will the right hon. Gentleman confirm that in his election address he stated—[Interruption.] I was not intending to intervene again, but when the right hon. Gentleman speaks about the Ballot Box will he confirm that he said that the Conservative Government would put a 20 per cent. tax on coal, gas and electricity?
  Mr. Healey: Yes, I will confirm that, and I am asking the Chancellor to say that he will not impose such a tax. I asked him earlier in the debate. I asked him for an assurance that he would not increase the rates and extend the coverage by order as he has given himself the power to do under cover of harmonisation. He refused to give any assurance on this point, and I shall return to it later.
  Let us look at this tax as it is presented to the House and not the Platonic idea of a value added tax. First, as
  1162
  the Chancellor said, it is intended simply to replace purchase tax and the selective employment tax and to produce roughly the same yield. In the form in which it is produced it is a retail sales tax collected in bits and pieces from consumers. But nearly half of consumer expenditure is zero-rated. On top of that there is a 10 per cent. standard rate applied to 1,500,000 registered taxable persons and there are another 500,000 persons exempted. So already there are three effective rates of tax for VAT—zero rate, standard rate, and a very difficult to define rate for those traders who are exempted. In addition, other indirect taxation is imposed at different rates. There are excise taxes on oil, petrol, alcoholic beverages and tobacco, and a special rate which is unique on motor cars.
  There is very little left here of the elegance and economy attributed to value added tax by the Chancellor of the Exchequer this afternoon, and I shall seek to show that in the form in which it is presented to us in the Bill the tax is infinitely less economic than the taxes it replaces. It is open to evasion on a colossal scale, it is teeming with ridiculous anomalies and it is likely to be highly inflationary in its effect. I would like to deal with these points in turn.
  5.0 p.m.
  First, even the Chancellor will not deny that it is appallingly expensive and inefficient to collect. Purchase tax collected very nearly as much money with 2,000 officials from about 68,000 traders. Under the right hon. Gentleman's VAT there will be 500,000 traders who are zero-rated. But they have to keep invoices at every stage. They must be subject to spot checks by the Customs and Excise and the Inland Revenue, but at the end of the day they do not contribute a penny to the yield of the tax, because the tax is passed on at every stage. Zero-rating under VAT from this point of view is bureaucracy for bureaucracy's sake. It produces no advantage to the country. It is simply a form-fillers' paradise, and it affects 500,000 people.
  I turn to the 1,500,000 taxable persons. They must invoice transactions at every stage, passing the tax on at every stage, with the 10 per cent. of the last stage being passed on to the consumer. The Chief Secretary attempted to dispute

  1163
  the figure I quoted of 50,000 additional persons required in business to operate this tax. I just ask him to give his own figure if he thinks it will be smaller, if he does not agree that the 50,000 larger firms out of the 1,500,000 involved are likely to require at least one extra person each to operate the tax.
  The Chief Secretary to the Treasury (Mr. Patrick Jenkin): When the right hon. Gentleman asks the same question as he asked on Second Reading, I can give him the same answer. We are having a great deal of déja vu in the right hon. Gentleman's speech. When the Customs put questions to firms in countries where the value added tax is already operating, asking them how many people they would save if they were relieved of the obligation of the administration, the answer was virtually none.
  Mr. Healey: With great respect, that is not the question at all, because all those countries here VAT has so far been introduced suffered from extremely inefficient forms of turnover tax, cascade tax, or retail sales tax. The analogy between those countries and Britain, which, as the Richardson Committee pointed out, has an extremely efficient purchase tax, is totally irrelevant.
  The burden on the Civil Service, I gather from the Daily Telegraph, is already becoming intolerable. There are talks of a strike against excessive overtime in the London area, even on the preparation of the tax. The Government claim that only 6,000 extra civil servants will be required to operate the tax. How do they arrive at that estimate? As I pointed out, purchase tax, which stops at the wholesale stage, requires 2,000 to deal with 68.000 taxable units.
  The Neddy report says that about 7,000 would be required to administer an invoice-based system, even if initially it is extended only as far as the wholesale stage. In other words, the Neddy estimate was the estimate of those needed to operate the VAT at the wholesale stage, involving a very much smaller number of persons than the VAT being introduced by the Government. If it takes 2,000 to operate a purchase tax effectively for 68,000, why does it not require about 40,000 to operate a VAT with equally detailed and effective con-
  1164
  trol? I am certain that the answer is that the figure the Government quote is possible only if they are prepared greatly to drop the standard of control and to rely on random checks rather than the sort of continuous control which now operates.
  I should like to quote the remarks of the Deputy Chairman of Customs and Excise, Mr. Radford, at a recent Financial Times seminar on the VAT, when he said:
  "It will not be possible for our staff to visit VAT traders anything like as often as they visit the purchase tax trader."
  Sir G. Nabarro: The right hon. Gentleman is surely omitting to consider the enormous impact of one new factory since Richardson, the proliferation in automatic calculating machinery, of a type often attuned specially to the value added tax, notably the electronic machines, and the fact that the overwhelming majority of small traders will use relatively inexpensive calculating machines, very often a single machine, to carry out work that would earlier have occupied many hands in their offices.
  Mr. Healey: The hon. Gentleman will gladden the Chief Secretary's heart, because he is doing some good advertising for those who sell calculating machines. But the fact is that the type of invoicing required is in many respects not suitable, especially with the small traders, for calculating machines, and the introduction of calculating machines is bound, at least in the short run, to increase the costs of production.
  I am sure the answer is that, to ensure that control does not collapse completely, the Government have given the Customs and Excise powers of enforcement which have been described by the Chairman of the Bar Council and the President of the Law Society as constituting a substantial infringement of the liberty of the subject. We have the extraordinary situation that under Clause 38 the Commissioners have the power to convict and fine a man without knowing the offence he has committed, without establishing the particulars of the offence. That is a juridical innovation into the system of British law which will appal all lawyers all over the country and anyone with a sense of common justice.

  1165
  The Commissioners do not only have the power to convict and fine without knowing in detail what offence has been committed. They also have the right to enter premises at will, without a warrant, to inspect goods, even if the business concerned is not subject to VAT, which is absolutely astonishing.
  Mr. Barber: I make no complaint about the right hon. Gentleman raising these questions on enforcement. It is not for me to do so. The Clause is concerned with the basic principle of VAT, but it is worthwhile pointing out for the record and the benefit of those outside the House that it is on a later occasion that all these matters can be debated. The right hon. Gentleman knows this perfectly well, and knows that if a good case should be made out for any changes in the enforcement or the penalty provisions changes will be made. The right hon. Gentleman was consulted about the Clauses which we should take on the Floor of the House and those which we should take upstairs. These matters will be considered upstairs, no doubt in great detail.
  Mr. Healey: I would not accuse the Chancellor of being frightened to face the facts, but he pointed out in opening that this is in the nature of a Second Reading debate on a Bill which constitutes the biggest change in our tax system since the Second World War, if not since the First World War. We are now discussing a Clause which specifically refers to the establishment of a value added tax and deals with the rôle of the Commissioners in carrying out its functions. I know that the Chancellor wants to redraft the subsection in question as defined later in the Bill.
  Just as the Chancellor has the right to pick the little things out of VAT which appeal to him, I have the right and duty—and I know that the Chair will call me to order if I am out of order—to point out that the Chancellor's claim that this tax is more economic and efficient than the taxes it replaces is a ludicrous opposite of the truth. I am seeking to prove not only that it will require many more people by far, but that they will not be able to supervise and control the calculation of the tax unless the Government give them the powers they have given, which I am glad
  1166
  to note the Chancellor now seems to be rather frightened of having given them. I hope we can rightly assume from the rather nervous interjection that he has just made that he is having second thoughts on the matter.
  Mr. Ian Percival Mr. Ian Percival (Southport) rose—
  Mr. Healey: I must get on. I do not want to upset the Chancellor by spending too long on particular issues that we shall be dealing with later upstairs.
  I want to turn to the mountain of anomalies and injustices in the Bill. The right lion. Gentleman made fun of the anomalies in purchase tax. Anyone can do so. The hon. Member for Worcestershire, South (Sir G. Nabarro) has done it, and we know such anomalies exist. But they will be nothing to those which will be created by VAT because they will in many cases go to the heart of people's livelihoods. They are not the difference between tax on toilet paper and tax on toilet soap. They are the difference between survival and failure for many businesses.
  My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) referred to some of the anomalies on Second Reading. He pointed to the fact that if one buys fish and chips one will pay VAT if one eats them inside the shop but will not pay it if one eats them outside in one's car. The same goes for chop suey and chow mein bought at the increasing number of Chinese shops in this country.
  Let us take first the question of the right to exemption for traders with a turnover of less than £5,000 a year. This cut-off of £5,000 falls right in the middle of one of the most thickly populated points in retailing. A man who is able to show that his turnover was £4,999 will be exempt. It is is £5,001 he will be subject to VAT. I shall come in a moment to the enormous temptation to fiddling and deceit which a cut-off at this point raises. This is a very serious matter because the Government themselves reckon that some 500,000 traders are under the £5,000 turnover limit. I would not be surprised to find that another 500,000 are between the £5,000 and £10,000 turnover limit. I should be interested to hear the Government's figures.

  1167
  Also, of course, every trader who wants to be exempt and whose turnover might be a little over the £5,000 a year would have a tremendous incentive to fiddle various elements in his input or sales and not register them. It is still an open question, nevertheless, whether the value of exemption to the small trader—or rather the cost of exemption to him, because he has to pay on all his inputs—is greater than the misery of filling out all the forms if he decides after all to be subject to VAT.
  Let us take the whole clutch of anomalies and injustices involved in the Government's decision that building shall be zero-rated, whereas maintenance and repair and the services of architects, lawyers and surveyors, whose operations are an integral part of the building process, are not. Again, we shall return to this matter in more detail later, but I want now to point out two or three major problems.
  The Financial Secretary to the Treasury (Mr. Terence Higgins): It is right to point out, if the right hon. Gentleman is to pick out, as he has done, points concerning the regulator, enforcement and the £5,000 limit, that he has been dead wrong in a number of his remarks. No one should take as correct what he has said until we have discussed it on the appropriate Clauses.
  Mr. Healey: I find that interjection almost the feeblest I have ever heard. I do not know whether the Financial Secretary proposes to reply to this debate. If he intends to do so, perhaps he will do the Committee the courtesy of answering the points then.
  Let us take the three anomalies arising from the distinction between new building, repairs and maintenance. How is it possible to distinguish, when a builder is doing development on an old house, between putting in a new floor—is that improvement?—and repairing the gutters —is that repairs and maintenance? Will not a builder be tempted to load all his overheads in every case on the zero part of what he is doing and not pay tax on the VAT-ed part?
  5.15 p.m.
  Then we have the development of a whole new industry of building activities, such as the installation of new furniture,
  1168
  carpets, and so on, into a house so as to escape VAT. There is the certain fact that the Government are to tax the services of architects, lawyers and surveyors, and to VAT repairs and maintenance done by established builders with a turnover of over £5,000 a year. This will mean an enormous amount of "fly by night" little firms offering to do repairs and maintenance without proper qualifications, houses built without proper services, without proper achitects' designs, and the general degradation of the whole standard of housing as a direct result of the distinction which the Government are seeking to draw in the housing sections of the Bill.
  Then there are the injustices and unfairnesses. The Government claim simply to be replacing purchase tax and selective employment tax, but they are reintroducing entertainment tax over a whole range of enterprises which have been free of it for many years. Hundreds of small football clubs, for example, will have to go out of business if they have to pay VAT as proposed here.
  Mr. Patrick Jenkin: Rubbish.
  Mr. Healey: The hon. Gentleman may say "rubbish ". Again, we shall be discussing this in more detail when he will have the chance, if he is here, to answer the serious points put by the Football Association.
  Entertainment tax is being introduced on theatres. Many theatres struggling to survive are likely to go under as a result. There will be a crippling blow at all the most enjoyable leisure activities of the people—sport, theatre and, indeed, music, which is something which should appeal to the Prime Minister even if it appeals less to some of his colleagues.
  I will not make much at this time, because we shall have a full day on it perhaps later in Committee of the House, of the brutal and offensive affronts to social justice. How can the Government excuse putting children's clothes and shoes up by 10 per cent. next April while bringing fur coats down by 13 per cent.? The Chancellor claims that this is not a regressive tax; yet he is taxing crisps and ice lollies but is leaving caviar and smoked salmon free. Anomalies and injustices on this scale are an invitation to evasion.
  Mr. Patrick Jenkin: The right hon. Gentleman is having his fun, but we are narrowing the difference between taxation on potato crisps and caviar.
  Mr. Healey: That is a very good-humoured interjection which the Committee will treat in the spirit with which it was made. But I am sure that if the difference between the cost of crisps and caviar is narrowed from £4 10s. to £4 9s. 11d.—or 49p—the Committee will be absolutely delighted.
  Mr. Patrick Jenkin Mr. Patrick Jenkin indicated dissent.
  Mr. Healey: We get a lot of general statements from Ministers but no facts and figures. I hope that we shall get them later. Perhaps the hon. Gentleman will tell us whether what I have said is true.
  Anomalies on this scale are an invitation to evasion, especially when there is inadequate control. Under VAT we shall have 1,500,000 taxable persons instead of the 68,000 involved in purchase tax. We all know from Continental experience of the scale of evasion which VAT suffers. I assure the Committee that I have picked these examples from public print because I would not want it to be thought that I was encouraging anyone to defraud the Customs and Excise.
  First, there is enormous scope for false invoicing—for selling more to the consumer than one actually declares—so that one can pocket the VAT oneself. There is enormous scope for forging invoices in order to get rebates. There is enormous scope for partially exempt traders to load all their inputs on to VAT-able sales, and in the service industries, as we know from experience abroad, many clients will conspire with the providers of services to conceal the real cost in order to avoid or reduce liability to VAT. This happened on a colossal scale in France. In France last year the estimate is that £1,000 million worth of VAT was lost through evasion.
  In Belgium, much smaller, the estimate was £125 million worth of VAT lost through evasion. So much for the change to administrative simplicity and efficiency of which the Chancellor was talking a moment ago. This tax is an invitation to a general loosening and lowering of social morality. This is one
  1170
  of the heavy factors to be weighed in the scales against some of the advantages to which the right hon. Gentleman referred and which I would not dispute.
  Many of the disadvantages of this Bill are due to the speed with which the Government are introducing this tax. In making his first speech on the first Clause the Chancellor had to admit that the second paragraph was wrongly drafted and said he would introduce an Amendment to replace it later. Already he has said that he is unhappy with the enforcement Clauses. There are innumerable uncertainties still left open.
  We know that drink will carry VAT next year, but we do not know whether the excise duty will be reduced accordingly, or what will happen to stocks which the poor wine merchants or brewers have left on their hands on which full excise has been paid.
  The situation is similar with secondhand cars. These form one of the most important items of expenditure for most ordinary people. I have never owned a new car in my life! We do not know how this item of expenditure will be dealt with. It will be handled somehow between the dealers and the Customs and Excise over the next year. A great deal of discretion is left after that to the Commissioners by way of definition which is far more than civil servants should be given in a matter of this importance.
  Decimalisation was a far simpler change in our arrangements; yet it was given three years to take effect. The Government are trying to introduce this new tax system in 12 months, and yet they are under no pressure to do so. Maybe the Government would argue that we must have VAT when we join the Common Market, so the sooner we get on with it the better. We are under no obligation to introduce VAT before the end of the transitional period in 1978. Italy, which has been a member of the Market for 14 years, is still three years late in introducing VAT and has had permission to have an extra year's grace. I have no doubt that by 1978 the Italians will still be repeating that it is inconvenient to do it at that particular moment.
  We must ask why the Chancellor is doing this in such a half-baked way, in such a rush—
  Mr. Burden: Could I draw the right hon. Gentleman's attention to a statement made by his right hon. Friend the then Prime Minister on 8th May, 1967, when speaking about VAT:
  " The agreement was that by 1st January, 1970, existing turnover taxes would be replaced by the value aded tax system."—[OFFICIAL REPORT, 8th May, 1967; Vol. 746, c. 1090.]
  He obviously accepted on behalf of the Labour Party that if we went into the Common Market we would have to give effect to this.
  Mr. Healey: I have given way too often. The hon. Member has made the point that the regulations of the Common Market originally laid it down that member countries should introduce VAT by 1970. The Belgians were a year late, the Italians have not yet done so and Britain was under no obligation to do so. The Prime Minister signed up this Government to bring it in by 1978. What the previous Prime Minister and the last Government always said was that this was a bad tax but that if we could join the Community on acceptable terms in other respects we would wear VAT.
  Mr. Burden: Not at all.
  Mr. Healey: With great respect.
  Mr. Burden: With great respect, I have it here in HANSARD.
  Mr. Healey: The then Prime Minister was quoting the Treaty of Rome, not the policy of the Government. It is well within the recollection of the House that my party has always taken the view that it is against VAT but would be prepared to accept it if other terms of entry were acceptable. That still leaves open what sort of VAT we introduce and how fast. That is the issue with which I am dealing, and it is a question to which we must address ourselves.
  Why is the Chancellor doing it in this half-baked way in such a rush when he gets nothing out of it which he would not get far cheaper and easier through purchase tax and SET, especially when, as the Richardson Report pointed out, purchase tax can easily be extended and it was proposed by the last Government to turn SET into a general pay-roll tax, had they won the last General Election? There can be only one reason why the Government are introducing VAT now in this form—because they think they will
  1172
  get it on the Statute Book with the minimum political fuss.
  But they have the firm intention of changing the yield, the coverage and the rate in the coming years and to do it under the protection of the argument that they are pledged to harmonise the rates of coverage with the other Market countries. When that time comes—and it could start next year—the Government have given themselves the power to take all trades at present zero-rated out of that rating by order the moment the Bill is law. They have the power to increase the rate to 12½ per cent. before it comes into operation and to increase it to 15 per cent. the following week, again by order with no effective discussion here.
  I believe—I could be wrong [Interruption.] If the Minister thinks so, he has every opportunity to reply later and quote relevant Clauses. What the Government intend is to produce a massive shift away from direct to indirect taxation. What they intend doing is what was contemplated by the Government in which the present Home Secretary was Chancellor but which carried out instead the recommendations of the Richardson Report—to cut income tax and profits tax in favour of a highly regressive system of indirect taxation. The Government have given themselves the power to do this. The Government have the right on the first day of operation of the tax to raise the rate to 15 per cent. as the standard rate and to increase the coverage by taking trades at present zero-rated and applying standard rating to them.
  I estimate that the combination of the cuts in zero-rating and the increases in standard-rating could allow the Government to raise £3,000 million more next year from this tax, if they so wish. As they have given themselves the power it is not beyond the bounds of possibility that they may wish to do this, without any parliamentary discussion other than what is permitted on the affirmative order procedure at the end of a tiring day dealing with another issue.
  The Government blame it all on the Common Market. Although there has been no agreement on harmonisation there has been agreement to harmonise and the Government have accepted the need to do this. The highest rate is 33⅓per cent. The only country which has a

  1173
  rate as low as the proposed British rate of 10 per cent. is Luxembourg, whose argements are not likely to carry the greatest weight when these matters are considered in the Community. We know that the Commission has made proposals as to what it wants. It wants two rates, the first being a lower rate of 5½–7½ per cent. covering food, at present zero-rated. The chancellor absolutely refused even to indicate the Government's intention on this matter when I asked him a question earlier. The Commission also intends to have a rate of 12 to 18 per cent. for the rest.
  5.30 p.m.
  The Chancellor can rightly claim that in its present form VAT is not as regressive as many of us had feared because of the large number of zero ratings and exemptions covering about 45 per cent. of the total consumer expenditure, and because of the low rate. But if we move to the French or German system, according to the calculations of Professor Brown the poor are likely to lose 3 per cent. of their living standard and the rich are likely to add 2 per cent. to their living standard. In other words, the introduction of harmonisation along the French or German lines would widen the gap between rich and poor by 5 per cent. That, of course, is what the Bill is about, and that is why the Chancellor is able to make these general remarks about the virtues of VAT although the Bill does not bear him out.
  The real view of the Tory Party was well expressed by the hon. Member for Truro (Mr. Dixon) on the second Reading of the Finance Bill when he said:
  "I would not be in the slightest disturbed if the rate of value added tax rose from the proposed level of 10 per cent. to perhaps, 12 or 15 per cent., because this would give us a wonderful opportunity of reducing the rate of direct taxation."—[OFFICIAL REPORT, 20th April, 1972; Vol. 838.]
  He was widely cheered by the benches opposite when he made those remarks. In other words, the proposals in their present form are a case of "Softly, softly, catchee Monkey." The Government get us on to the hook of the tax through the Bill and give themselves the power to hoist us on the hook by increasing the rates and coverage under cover of harmonisation.
  Mr. Dan Jones: Could I persuade my right hon. Friend to ask the
  1174
  Chancellor whether he would care either to subscribe to that theory or to deny it?
  Mr. Healey: My experience of getting the Chancellor to make a positive statement of intention on anything in the discussions on the Bill have so far been so disappointing that I do not want to submit myself to the risk of a further disappointment, although I have no doubt that my hon. Friend will take any opportunity that is offered to him to see whether he can do any better.
  In their present form the VAT proposals are a feast for fiddlers and form fillers; they are expensive and inefficient; they are crammed with anomalies and are an invitation to evasion. Although at this stage they are not as regressive as many of us feared, they will nevertheless prove to be considerably inflationary. Most of the work done on this subject suggests that these proposals would lead to an automatic increase of at least 1 per cent. next year, but if we get the normal ratchet effect—that is to say, people not deducting when taxes are taken off but increasing to the highest permissible level when increases are put on—the increase is likely to be substantially higher and to have a serious effect not only on inflation but on the general prospects for our exports.
  The proposals contain inside them a mechanism to change the whole structure of the tax so as to render it highly regressive and highly inflationary, as it already is in many Continental countries, to introduce a tax on food, housing, fares and fuel if the Government wish to do so, and to raise the rate across the whole board. This would be absolutely intolerable unless it were accompanied by a drastic improvement in social benefits and the introduction of highly progressive taxation on both income and wealth. But we know from the rest of the Bill before us that the intentions of the Government in this respect are exactly the opposite. The rest of the Finance Bill shifts the burden from the rich to the poor, from unearned income to earned income, from the prosperous areas to the depressed areas of the country.
  The value added tax before us represents one more bloody sacrifice to the primitive gods of the market place to whom the Chancellor so regularly gives obeisance. I ask the Committee to

  1175
  reject Clause 1 and to reject with it the whole principle of the tax as constructed in the Bill. If, as I suspect, we fail to win the Division, I assure the Chancellor and the Committee that we shall fight every inch of the way on the Floor of the House and upstairs to try to make the best of an appalling job.
  Mr. Percival: I do not propose to follow the right hon. Member for Leeds, East (Mr. Healey) in his tedious repetition of inaccuracies and exaggerations.
  As a result of the generous indication given by my right hon. Friend in his opening remarks that he intends fully to meet the points which led my hon. Friends and me to table Amendment No. 79, yet another most cogent and convincing speech is destined to the nearest waste paper basket in the Library.
  I am grateful to my right hon. Friend because I would not have been happy to support Clause 1 with subsection (2) as it stood.
  I disagree with almost everything the right hon. Member for Leeds, East said, except for some of what he said about the enforcement provisions. Even there he was guilty of gross inaccuracy and overstatement. I tried to put him right, but he had not the courtesy to give way and be corrected, perhaps because he had been corrected so many times already that he did not want to be corrected again. He referred to the Commissioners as having "power to convict and fine ". The first time he said it I thought it might be a slip of the tongue, but when he said it again I thought it should be corrected because it is nonsense. The Commissioners have no power to convict or fine anyone.
  Nevertheless, my hon. Friends and I who tabled Amendment No. 79, together with the CBI, the Law Society, the Bar Council, the Finance Committee of Conservative back benchers, the Legal Committee of Conservative back benchers, the Society of Conservative Lawyers and others are seriously concerned about the enforcement provisions. However, the detailed discussion of them will come later, and I have not the slightest doubt that my right hon. Friend will then show the same degree of interest and readiness to consider points of view as he has shown on Amendment No. 79.
  1176
  As to the Clause that we are discussing, we felt that Subsection (2) might might be interpreted as bringing in not only powers of management but powers of enforcement. My hon. Friends and I wanted to make it clear right from the outset that we are most anxious to see a proper balance between the duties and convenience of the administrators on the one hand and the rights and convenience of the "administrated" on the other hand. We did not think that balance was properly struck in subsection (2). However, all is well, and my right hon. Friend has put Clause 1 right. I hope this generosity augers well for the future when we get to Clause 30 and thereafter, but for the moment I can only, and I do, thank him most warmly for having so speedily and fully met the point which my hon. Friends and I felt required consideration on this Clause.
  Mr. Dick Douglas: I listened with great attention to the speech of the Chancellor of the Exchequer and that which was made by my right hon. Friend the Member for Leeds, East (Mr. Healey). I was bemused by the Chancellor's plea that there had been wide consultation to achieve agreement on the structure of the tax which is proposed in Clause 1 and also as to the rate of exemption and zero-rating to be embodied in the Bill. If he has had extensive consultations about the procedures to be adopted in the Bill, I wonder how it was that he asked his officials to draft Clause 38 in the way in which it has been drafted. I appreciate that we shall be debating that provision on a later occasion, but I feel that we should be told why it is necessary to draft that Clause in that way.
  The point to be remembered about VAT relates to the distinction between theory and practice. Theoretically it is a tax on the factors of production, but for practical purposes the tax as we now see it is a tax on consumption. If the theory of the tax is carried through, it would be a system which would increase efficiency. But in practice it is a tax which will be passed on to the final consumer and, depending on the relative strength of the trade union movement's bargaining power in the Community and the demand for its skills and products, VAT will be divisive, inflationary and

  1177
  regressive. If we examine the present form and structure of the tax, we see that it embodies in its essential ingredients for indirect taxation purposes the taxation system of France.
  My right hon. Friend has pointed to the reasons for the EEC members wishing to adopt the French tax structure. Many of the EEC countries have taxation systems which are inferior to our own in terms of indirect taxation. It could be argued that the tax is an acceptable price to be paid for entry into the EEC, and, indeed, many people will argue the case for the tax on that basis. However, we know that the Conservative Government accepted the basis of VAT before the terms of entry were known, and, indeed, the Chancellor made great play in his speech with the fact that this was one of the proposals in the Conservative election address. It has been said that Labour might have given a similar undertaking.
  I make no apology for the fact that I am a pro-European, but I have been essentially sceptical about the VAT. I supported the Labour Party manifesto which entered two caveats, one relating to CAP and the other to VAT. If a Labour Government had wanted to introduce this tax as an acceptable price of entry into the EEC, we should certainly wish to examine in great detail the nature and structure of the tax.
  5.45 p.m.
  The Chancellor emphasised the fact that the exemptions and zero-ratings appear to have come as a surprise to some of us, but he should have recognised that many Opposition Members were pressing him last year to indicate his policy with particular regard to foodstuffs. The Chancellor's usual phraseology was that food would be relieved of VAT, and we are pleased to see the zero-rating in this respect.
  My right hon. Friend said that pressures in the Community to harmonise the structure of the tax, as well as the rates of tax, might force the present Government or any future Government not to have a zero-rating for food, but to include foodstuffs within the rating structure of the tax proper. Therefore, it is right that we should now be searching the Government's mind in order to discover their intentions and to see whether
  1178
  they wish wholeheartedly to continue to adhere to the policy of zero-rating of foodstuffs and to impose their veto on further discussion of rates of tax within the Community. It is right that we should get their intentions quite clear. It will be too easy to accept the structure of the tax and the rates of tax laid down in the Bill and then in future to find ourselves imposing a rate of tax on foodstuffs which is unacceptable and which would make the tax even more regressive than it is at present.
  The Community countries introduced VAT because they already had a sales tax down to retail level and a cascade system of taxation within the general structure. However, Her Majesty's Government have made great play with the fact that they are replacing the two forms of taxation, SET and purchase tax, which have many deficiencies. I do not accept the case that the Chancellor has made against purchase tax or SET, but as a Co-operative Member of Parliament I must point out that much criticism has been levelled against SET. We argued that SET could have been adopted to produce a payroll tax. If we were to have a payroll tax and a corporation tax and if we got the agreement of our European partners, we could have had these two devices for taxing the same thing both in theory and in practice as we are in theory taxing under the value-added system. With a payroll tax and a corporation tax we would be taxing value added. Therefore, although in terms of nomenclature the situation is different, operating the two more acceptable devices in terms of administration and not passing on the tax to the final consumer would have operated in a much more beneficial manner to the Community in general.
  Mr. Patrick Jenkin: I follow with interest what the hon. Gentleman says, but I would point out that one serious disadvantage of proceeding in that way is that there would be no way of putting a tax on imports or of giving relief on exports in the pattern he is seeking to describe.
  Mr. Douglas: The Chief Secretary rightly points out that there is an administrative difficulty, but there could be a possible agreement with our European partners. If our European partners have a structure and rate of tax which better

  1179
  suits their tax systems historically, there is no reason for us to accept that pattern. Our pattern of historical development in terms of taxation is better than, for example, the French system. There is no reason why we should follow them if it is possible to secure agreement for remitting a proportion of the tax on exports. If we were to agree that our corporation tax plus our payroll tax amounted to the same as a 10 per cent. value added tax, it ought to be possible to make such a remission.
  Mr. Christopher Tugendhat: It is not only the Common Market countries about which we are thinking. There are also the other members of GATT. One of the advantages of a value added tax is that it is possible to favour exports under the rules of GATT. The hon. Gentleman's proposal may have many merits, but it would be very difficult to get other members of GATT, especially the United States, to agree to this kind of modification simply to meet our own convenience.
  Mr. Douglas: I quite agree. However, the United States is showing extreme misgivings under the GATT about the operation of the VAT. We have Italy, for example, which has huge remissions of taxation in relation to exports and which does not have the VAT. So the difficulty that the hon. Gentleman suggests arises whether we have the VAT or not. The difficulties in relation to GATT are enormous, and I could instance the problems that we have in looking at the tax system of Japan. However, that is a much wider topic, and I should be out of order if I attempted to pursue it now.
  In criticising selective employment tax the Chancellor of the Exchequer said that large sums were collected in the form of revenue which were paid back to certain sectors of the economy in the form of rebates. That is exactly what will happen under the VAT as it exists at present. A large number of retailers will be zero-rated. But they are within the VAT system. They will have to show by their invoices the tax levied on their inputs, and they will have to reclaim it. I hope that we shall be told what calculations have been made of the cost of collecting each £1 of revenue.
  1180
  The VAT is a more costly tax to collect than selective employment tax and purchase tax. In real terms, there is no additional flow in this sector to the Treasury. It is a nightmare for those who will have to administer it. Therefore, I cannot see any merit in rushing into introducing the tax before the end of the transitional period.
  Mr. W. Baxter: While I agree with my hon. Friend that the tax will be a nightmare for those who have to administer it, it will be an even bigger nightmare for those who have to collect the tax in the course of operating their businesses. There is an incredible number of rules and regulations laid down by the Commissioners about the way in which records must be kept. It will necessitate a large number of additional people being employed by firms paying the tax.
  Mr. Douglas: I accept my hon. Friend's point, and I have no doubt that from his own considerable business experience in Scotland he will seek an opportunity to expand upon it.
  I turn, then, to the £5,000 exemption. As I understand it, the first time that the figure was mentioned was in 1963 in an article by Professor Prest. Has the Treasury made any calculation of what would be the equivalent value of a turnover of £5,000 in 1972 terms as against the time when it was first proposed in 1963? It strikes me as a very low figure. However, I do not intend to argue the case of the small retailer. No doubt my right hon. and hon. Friends will seek to raise the matter on some future occasion.
  If the Government intend to introduce the tax, it is incumbent upon them to explain the facts and what they intend doing. When the tax was introduced in France the Government—not other private concerns or academic institutions— undertook to explain it throughout the country. If right hon. and hon. Gentlemen opposite think that the tax is so fair, I hope that they will try to explain it in the country and thus, if it is to be introduced, remove some of the difficulties from the minds of those who will have to operate it.
  Sir G. Nabarro: I am very pleased to be called immediately after listening to the speech of the hon. Member for East

  1181
  Stirlingshire (Mr. Douglas) because there is an extraordinary contrast in our views on this important matter of the value added tax. The hon. Gentleman proclaims himself a supporter of Britain's entry into Europe but an opponent of the VAT. My position is exactly the opposite: I am an opponent of Britain's entry into Europe but a proponent of the VAT.
  In those halcyon days when I was assaulting Treasury Ministers on the purchase tax, my efforts were all designed to lead to a single objective, which was the standardisation of the rate of tax and the spread of the tax over a much wider base. What I always objected to about the purchase tax was the relatively confined base and the multiplication of rates of tax, with the corrollaries which flowed from them.
  On Second Reading I reminded the House that in 1950 and 1951 there were about seven different rates of purchase tax ranging from 100 per cent. at the top on electric fires down to 5 per cent. at the bottom. The latter rate excluded the zero rate which applied to a number of important exclusions from purchase tax. Over the years between 1951 and 1964, stage by stage the Tory Government contracted the number of rates until by 1964 there were only three, with a top rate of 25 per cent. and a bottom rate of 10 per cent.
  I have no doubt that had the Tory Government been re-elected in 1964 they would have introduced not a value added tax, perhaps not a turnover tax, but a sales tax in one form or another which would have conformed to the twin desiderata that I have always supported in this matter: first, that there is no such thing as luxury in peacetime when goods and services abound, and, secondly, that all manufactured goods and services contribute to the nation's export trade, directly or indirectly. Thus, in my view, any sales or turnover tax which generally conforms to those twin desiderata is a form of tax which I support.
  [Sir STEPHEN MCADDEN in the Chair]
  6.0 p.m.
  In the first Green Paper on VAT, Command 4621, published in 1971, it was made perfectly clear that VAT, as then promulgated in general outline by Her
  1182
  Majesty's Government, was a sales or turnover tax. It was for that reason that I gave my support to the general principle, though in a few moments I shall have a good deal to say about the operations of the tax, and I quote the exact words of the Green Paper at that time because I think that the Government have honourably implemented what they then wrote. They said on page 5:
  "VAT is a form of turnover or sales tax. Like purchase tax and some other forms of turnover tax, VAT is a tax on final consumer expenditure in the domestic economy."
  That is exactly what I have always struggled to attain.
  For myself, I want to urge on the Chancellor of the Exchequer that he does not submit to any special pleading at all during the passage of the Bill in Committee. I do not want to see cricket clubs put on zero-rating. I do not want football clubs to be put on zero-rating. I recognise that this small incidence of tax on sporting clubs of that kind may be represented as a resumption of entertainment duty, but I believe fervently in the simply principle that the wider the spread of the tax the lower the rate can be. Taken to an extreme, as I said on the Second Reading of the Bill, I should myself follow the European system of applying VAT to all food, fuel, transport and all essential services, because in that event the rate of tax—nobody can say precisely, save only after detailed Treasury scrutiny—would probably be half or less of the proposed 10 per cent. rate of tax in the Bill.
  Mr. Tam Dalyell: Has the hon. Gentleman calculated the effect of his proposals on what he is often pleased to call the bureacracy?
  Sir G. Nabarro: I shall deal in a moment with this question of the increase in bureaucracy, because it is greatly exaggerated in the context of VAT. What I object to is the proliferation of unnecessary Government officials brewing up tea, occupying office space, and so on. I do not think there need necessarily be any huge increase in bureaucracy arising directly from VAT.
  The wider the base of VAT, the better the opportunity for reducing the rate. I give an example in the context of fuel. Coal is specifically zero-rated as fuel, but fuel oil is taxed very heavily though it is a competitive fuel, and later on I

  1183
  shall move an Amendment for the removal of the fuel oil duty. Fuel oil and coal should both be zero-rated if we are to deal with fuel at all in the Bill, though I should myself prefer all these items to be brought into VAT in order to reduce the rate to the lowest possible level.
  Under the old purchase tax arrangements which we are seeking to replace, the element of discrimination was disastrous in industry, trade and commerce. Take, for example, a case which is rarely quoted within the motor trade. We tax motor cars very heavily.
  Mr. David Madel indicated assent.
  Sir G. Nabarro: I am glad to see my hon. Friend the Member for Bedfordshire, South (Mr. Madel) nodding assent. He has the Vauxhall-General Motors works in his constituency. As I was saying, motor cars are heavily taxed, but the three other major constituent parts of the motor industry are exempt from purchase tax. There is no purchase tax on motor lorries, which is the second of the four parts of the motor industry. We place no purchase tax on tractors, which is the third major part of the motor industry. We place no purchase tax on components and spares, which is the fourth major part of the motor industry. All those four essential ingredient parts of the motor industry contribute equally to the huge volume of motor industry exports and the large scale employment of our people within that industry.
  Under VAT it may be argued that if tractors are applied to the production of food—and they often are—they will be zero-rated, while tractors used for industrial purposes will not be zero-rated but will attract VAT. But there will be this element of equity, that the four parts of the motor trade will all contribute equally to this form of indirect taxation. There will not be the violent discrimination that there is under the purchase tax system.
  I give another example connected with the internal combustion engine. We are all familiar with the expensive and luxurious power boat or cabin cruiser.
  Mr. Denis Skinner: Yacht.
  Sir G. Nabarro: Yes, if it is a motorised yacht. These items have always been excluded from purchase tax. I see no reason for excluding from purchase tax a cabin cruiser which is sold at £8,000 but placing purchase tax of 30 per cent. on a Rolls-Royce motor car.
  The Temporary Chairman: May I draw the hon. Gentleman's attention to two things? First, he should address the Chair, and not back benchers on the Government side. Secondly, it is not in order for him to move his place while he is addressing the Committee.
  Sir G. Nabarro: I shall stand rigidly to attention and address you, Sir Stephen. Perhaps you would prefer that. But I have always perambulated up and down below the Gangway when I am not treading on the toes of my hon. Friends behind me.
  The Temporary Chairman: I hope that the hon. Member will not question my ruling. It is out of order for an hon. Member to move from his place while he is addressing the Committee.
  Sir G. Nabarro: I shall stand rigidly to attention and address you, Sir Stephen.
  As I was saying when I was interrupted by the Chair, this violent form of discrimination inherent in the purchase tax system will disappear entirely with the introduction of VAT on the major industrial products with which we ought principally to be concerned in the Bill, and that, by itself, I regard as a major reason for supporting VAT at a constant rate. which is the rate of 10 per cent. proposed in the Bill, though it may be varied by 2½per cent. up or down—
  Mr. Joel Barnett: What about the regulator?
  Sir G. Nabarro: The regulator, for economic managerial reasons, has always been accepted by the two major parties in the House, and this minor latitude or variation in VAT is something which I do not regard as particularly significant. Later on we may legislate to vary VAT by even wider margins, but that must depend on considerations of economic management.
  I now propose to say something about the allegation that VAT will create an enormous fiscal bureaucracy both in Government Departments and in industry,

  1185
  trade and commerce. That was possibly true at the time of Richardson and his report, but it is not true today. Every workshop, every office and every accounts department of every firm of any size has calculating machinery readily available. The fact that VAT is calculated on each invoice is of no consequence at all given adequate electronic and other types of office machinery to deal with it.
  Mr. W. Baxter: Although adding machines may assist one to make various calculations for invoice and other purposes, machinery for keeping records will be vital in view of the instructions of the commissioners. For example, we are told in Clause 34(6):
  " A statement contained in a document produced by a computer shall not be admissible in evidence by virtue of subsection (4) of this section ".
  Will the hon. Gentleman direct his attention not so much to adding machines but to what will be required to keep the necessary records mentioned in the Bill?
  Sir G. Nabarro: It may be more convenient to discuss this matter when we come to the Clause to which the hon. Gentleman referred. I accept that it is not only a question of adding or calculating machines or computers. We are creating a vast, complex new system of tax assessment or collection. The Customs and Excise is being charged with this responsibility and will attune its requirements to the needs of industry, trade and commerce in such a way as to create the least possible dislocation and to entail the smallest amount of labour to make the returns that will be necessary. That is axiomatic in all the proposals in the Bill about VAT.
  The number of bureaucrats, as they have been called, required to operate VAT has been grossly exaggerated. The SET system is cumbersome, wasteful and has created thousands of new jobs for collecting relatively small sums of revenue, especially having regard to the repayment, part-time worker, old-age pensioner and other facilities. As yet we have no reliable estimate of how many people will be saved on SET alone, and they all have to be set against the hypothetical increase in the bureaucracy arising from the introduction of VAT.
  I favour this form of taxation, whether or not we join the EEC. Though com-
  1186
  plicated, it is much fairer and capable of considerable enlargement in the years ahead in such a way that it will spread the burden of taxation over a wider base more equitably. Once the system has been made acceptable and consumers are accustomed to the calculatioins within it, it will prove popular.
  I shall vote tonight with enthusiasm, for a sales or turnover tax, in support of Clause 1, which I regard as progressive, harmonious, happy and relatively acceptable to the great majority of traders.
  6.15 p.m.
  Mr. A. E. P. Duffy: I agree with the hon. Member for Worcestershire, South (Sir G. Nabarro) that whether or not we were joining the Common Market, the House was moving in the 'sixties to the point when one day there would be introduced VAT or a turnover or sales tax.
  Although tax reform has taken other forms, which have undoubtedly been an expression by Parliament of the need for new ways of encouraging, for example, investment—we all know of the disappointments and frustrations that have been felt on that account right up to the present—both parties when in Government have subscribed to rising levels of public expenditure and have known the problems of raising the corresponding revenue.
  Hon. Members on both sides are also well aware of the disincentive effects of the existing rates of taxation. To that end Governments of both parties altered the tax structure in the 'sixties. When my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) was in office he was hailed as a reformer and his first Finance Bill was regarded as epoch-making. Yet we have since witnessed Finance Bills, some more than others, which have been a good deal more comprehensive and far-reaching in their proposals.
  The scene seemed to have been set by the end of the 'sixties for a consideration of some such measure as is now before the House of Commons. I agree with the hon. Member for Worcestershire, South that this would have happened whether or not we joined the Common Market. Here I declare my interest as the hon. Gentleman declared his. He said he was an opponent of Europe but

  1187
  a proponent of VAT. Like my hon. Friend the Member for East Stirling-shire (Mr. Douglas) I am a European, but I hope I am not uncritical of any features of the EEC or any of its institutions. Tonight I shall try to take a balanced view of VAT. I do not say that in a patronising sense and I hope that my hon. Friends in particular will not take exception to my phraseology.
  We must reckon on the nomination of VAT now, whatever reservations we may have, and we must consider it on its merits. There seems to be a good deal of support for the view that on both economic and social grounds VAT is admirably designed for a consumption-oriented society. It is argued on its behalf—on more than one side, and not merely by the Chancellor; it is argued elsewhere and especially by specialists—that it is neutral and that it does not discriminate against particular products as do purchase tax and SET. I spoke in favour of SET in the Finance Bill debates a year ago. If occasion required I would do so again now. I am an unrepentant supporter of SET and I dissociate myself from the remarks made about it by the hon. Member for Worcestershire, South.
  It is said next on behalf of VAT that it will restrict tax avoidance, and especially tax evasion, while its impact on the taxpayer should be less harmful from the economic standpoint than those taxes which fall directly on income or capital. It is also claimed that it is simple in structure yet broad based in application and will prove a useful instrument of economic management.
  It is highly probable, as I say, that if Britain were to remain outside the EEC we would still adopt VAT, just as Sweden and Austria are doing. Growing interest is being shown in it by the United States and Canada. I think the same interest would be evident here even if we were not joining Europe because we could not be indifferent to the introduction of VAT in those countries which were among our trading partners.
  After a while value added tax will become a common feature of the whole of the Western world, quite irrespective of identifiable trade blocs. Moreover, if we are to enter the EEC, with its uniform
  1188
  custom dues, harmonisation must follow. I do not see how we can have one and not the other. Furthermore, as the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) reminded us, it is an appropriate tax as well, especially appropriate for a country like ours, to assist exports and to discourage imports.
  They are reasons, among others, that are being put forward on behalf of VAT. There is much merit in them, more in some than in others. Certainly they have to be argued out and cannot just be dismissed. But I believe that VAT should not be regarded as a miracle worker, especially in regard to the last point I made on its behalf. In my judgment, any spill-over benefits to exports would be small and, despite what the hon. Member for Worcestershire, South said, would still be controversial for some time.
  Perhaps the strongest argument for VAT in Britain today is the need to raise more revenue as painlessly as possible. If we in the Opposition do not subscribe to VAT as strongly perhaps as the hon. Gentleman, we should be less than honest if we did not admit that VAT's potential as a means of raising revenue is greater than that of any other tax except income tax. The United Kingdom has long lacked a general tax which raises money right across the board from a wide range of goods and services. In my judgment, drink and tobacco duties have very little buoyancy left. Purchase tax and oil duties are levied at different rates and cover an arbitrary set of commodities. With the Government set on abolishing SET, services would escape the tax net altogether unless a substitute were to be brought forward.
  Finally, there is no blinking one's eyes, certainly on the Opposition benches, to the discontent provoked among many working men by direct taxation rates—
  Sir G. Nabarro: Hear, hear.
  Mr. Duffy: —nor the welcome they would accord to any proposals, even in the direction of indirect taxation, that would provide relief of those direct taxation rates, especially as they apply to overtime.
  On the other hand, value added tax as proposed in the Bill amounts to nothing less than blatant tax switching. Our

  1189
  taxes are effective in reducing inequalities of income before tax only at the point of surtax; that is to say, they become progressive only at the highest levels of income. We know that the lowest levels —we have had reason to know because of the sterling work of some of my hon. Friends in this Parliament, notably my hon. Friend the Member for Oldham, West (Mr. Meacher)—are quite progressive, not only on account of the tax threshold but also in respect of indirect taxation because of the very high specific duties on drink, especially beer, and tobacco, and the way in which they bear on low-paid workers. Over a large band of income in the middle reaches, the total burden of taxation is only proportional to income. That is why I advance the view that only in the higher reaches is our structure truly progressive.
  I wonder, therefore, whether the tendency in this Parliament for, first, social benefits to be means-tested and, more recently, for rents to be means-tested will not soon be reinforced by value added tax, which could bear hardest on the mostest with the leastest, because value added tax, indirect, broad-based and indiscriminate though it may be, when applied to the consumer of goods and services could strike hardest at those who have nothing to spare in their weekly budgets.
  The National Economic Development Council, in a national survey of industrial views, found no general consensus in favour of the tax—contrary to what the Chancellor said this afternoon—except that its introduction might help to clear up the present tax jungle and reduce taxation in certain spheres of higher purchase tax. On the other hand, there will be administrative costs and difficulties, as was pointed out by my right hon. Friend the Member for Leeds, East (Mr. Healey), as well as a proliferation of anomalies, which he also indicated and which suggests to me that my right hon. Friend is correct when he asks for more safeguards.
  Unless the Government can show that reductions in taxation elsewhere are reflected in more stable prices—given stable import prices—they will find it very difficult to escape the charge that they have given yet another twist to the inflationary spiral in our society and that, moreover, they have also given our tax
  1190
  structure a regressive shift. There is, therefore, all the greater obligation on the CBI to persist in its present form of price restraint beyond July.
  Secondly, by way of safeguards the Government must mount a massive information and education campaign. This is a matter of utmost urgency. After all, large sums have been spent by the Government on the Common Market campaign; but there is little evidence of such publicity being given to VAT. Yet the need is stark if the public, simply as consumers of goods and services, are to have any basis for measuring the comparative prices and alternative costs that will follow the introduction of value added tax.
  I make five points in conclusion. Despite my attachment to the European case I find it very difficult to rid my mind of the suspicion that value added tax as envisaged and as likely to be applied will prove to be a regressive tax. Secondly, I do not see how it will be regarded by the public as anything else but an additional tax, given the present want of publicity and explanation, and that this therefore will not generate further inflationary pressure in our economy.
  Thirdly—I shall not go into all the details as I did on Second Reading—it will increase the administrative costs not merely of government but especially of industry, and it will make its biggest impact on the small retailer and the small trader, of whom there are so many in our economy and to whom record-keeping does not come instinctively, Fourthly, it will constitute an additional burden on the tax-paying morality of our society. Unless the greatest care is exercised and, moreover, further publicity is provided, Clause 12 will create a new black market, an area of evasion.
  Finally, I subscribe to the closing words of my right hon. Friend the Member for Leeds, East, though in different language, when I say that VAT, again given the experience of other countries in Western Europe, is being introduced in this country too soon and too fast in an inflationary situation.
  Mr. David Mitchell: I have listened with fascination to the hon. Member for Sheffield, Attercliffe (Mr. Duffy). When he claimed that one of

  1191
  the first essentials today is for the Government to raise more money in taxation, I could see even more clearly demonstrated the great gulf that lies between Labour Members and Conservative Members.
  Mr. Duffy: I apologise for interrupting the hon. Gentleman so soon, but I said "raise more revenue ". The difference is not merely subtle but also very important, and it is one which I thought did not separate the parties.
  6.30 p.m.
  Mr. Mitchell: I am grateful to the hon. Gentleman for his clarification. The reason that it will draw yet more revenue from a nation which is already over-taxed is not something to which I wish to subscribe. If value added tax were proposed by the Government as an additional tax, I should oppose it. This tax is to replace purchase tax, and selective employment tax. The straightforward question for hon. Members, in deciding whether to support or oppose this tax, is whether it is preferable to purchase tax and selective employment tax.
  As this tax replaces purchase tax, it will mean a number of price reductions. As it will not apply to rents, rates and fuel, which together with food are the main components in the budget of the pensioner and the elderly person. it will obviously have a very limited effect on the cost of living.
  I turn to the question of which tax—selective employment tax or value added tax—is better for Britain's economy at this time. The selective employment tax operated selectively, and principally on the service industries. In so doing it had a serious effect on the pattern and level of employment. Its purpose, which was clearly stated in the Budget debates on its introduction, was to drive people from the service industries into the manufacturing industries. It stemmed from the old world concept that belongs to the cloth cap trade union image of the last century, and which lingers in some parts of the Labour Party, that all workers in the service industries are carried on the backs of those who work in manufacturing and who produce the country's wealth.
  The reality is that in a more advanced economy employment in manufacturing
  1192
  is fairly static. As production demand increases, new methods and new machines —electronic equipment, and so on—enable the increase in production to take place without a great increase in employment. The one sector of the advanced economy in which there is prospect of continuing and sustained growth of employment is the service industries.
  Therefore it was a great tragedy when the Labour Government introduced a tax to apply selectively to employment and to that part of employment in which there was the main prospect of growth in demand for labour. The selective employment tax made a substantial contribution to the present very serious level of unemployment.
  It is also necessary to consider the impact that the tax had on types of employment and the type of people who were paid off. Not only has there been a net reduction in employment and a massive growth in unemployment, much of which can be attributed to the selective employment tax, but those who were paid off because of the tax were such people as the disabled and pensioners, the marginally employable. These were the type of people who could have been done without before but who had been given jobs because they could be useful and because employers wanted to help them. They were the first people to be paid off on the introduction of selective employment tax.
  Today, time and time again in shops, restaurants and such places one can find no service. One cannot tell whether the place is a self-service establishment. The common experience of people who sit down in restaurants is that they are so under-staffed that the customers do not know whether they have to go and get the food for themselves. When inquiries are made, time after time the statement is made that the selective employment tax increased the cost of employment to such an extent that employers deliberately tried to reduce the numbers employed.
  Mr. Brian Walden Mr. Brian Walden rose—
  Mr. Mitchell: I have already given way once. No doubt the hon. Gentleman will have the chance of making his own speech in his own way.
  Mr. Walden: Not on this point.
  The Temporary Chairman: Order. We cannot have two hon. Gentlemen on their feet at the same time. If the hon. Member for Basingstoke (Mr. David Mitchell) does not wish to give way, the hon. Member for Birmingham, All Saints (Mr. Brian Walden) must resume his seat.
  Mr. Mitchell: Very well—I will give way.
  Mr. Walden: The hon. Gentleman is quite wrong. If he has any evidence from the employment figures to sustain his case that the increase in employment has come from servicing rather than from manufacturing, I should be delighted to hear it. The figures that I have studied prove, for all the regions for which I have seen figures, entirely the reverse. The decline in employment is in manufacturing. Employment in the service industries is not being affected in the way the hon. Gentleman claims, whatever the intentions of those who originally introduced the selective employment tax may have been. This is a strong point in favour of SET.
  Mr. Mitchell: That has convinced me that I should not give way. Obviously the hon. Gentleman failed to hear clearly what I said. He will see from the OFFICIAL REPORT tomorrow that I did not say that SET caused a reduction. I said that service industry was where the natural growth in employment would have taken place, should have taken place and in fact takes place in the more advanced economies, but it has failed to do so in Britain to anything like the extent that it has done in other economies at the same stage of development in Western Europe.
  For confirmation of that let the hon. Gentleman go round some London shops and note how long he must wait for a shop assistant to come to serve him. Gone are the days when an assistant would come up to a customer and say "What can I get you, sir?" or "Can I help you, sir?". Now customers must queue at the cash desk to pay. This is one of the effects of selective employment tax, and it was stated to be an intended effect when the Bill was introduced.
  Today we are asked to choose between that tax and the value added tax. It is a condition of our joining the European Economic Community that we accept the value added tax. The member States of the EEC had already chosen
  1194
  the value added tax because of its inherent advantages. The United States is now introducing such a tax—[Interruption.] This tax, at much higher rates, if the hon. Gentleman wants it that way, in some European countries, has been accepted as having substantial advantages. One of the principal advantages of the tax is that it is remitted on exports and is, therefore, an encouragement to exporters. As we enter Europe and opportunities for British exporters increase, we shall need something which will give a greater encouragement to our exporters.
  I congratulate the Treasury Ministers on having fixed as low a level as 10 per cent. I hope that during the later stages of the Bill they will not accept Amendments to the Clause that would in any way set at risk the low level of 10 per cent. It is only by having a wide spread of tax that one can have such a low level at which to base it.
  We are moving from taxing on earnings to taxing on spending. That must be to the benefit of the community at large. However, there is a question to which I am most anxious to secure an answer from my hon. Friend the Minister. As I understand the position, the tax applies when one of three things occurs: when the goods leave the premises of the vendor, when the goods have been available for collection for three months by the purchaser but have not left the premises, or when the goods have been invoiced. Does the further logical concomitant follow that during the transition period goods to which those transactions do not apply will not incur value added tax? If goods have already been paid for, invoiced or made available to the purchaser but have not been removed from the premises before value added tax operates, will they be exempt?
  There are many people in the trading community who are anxious to know where they stand. Many members of the public who have purchased commodities which they do not propose to put into their homes at present are anxious to know exactly what the position will be. I hope we can have clarification from my hon. Friend.
  Mr. W. Baxter: I think it will be agreed on both sides of the Committee that whatever tax is imposed or altered will bring

  1195
  acclamation and condemnation. I cannot think of any tax which could be imposed which would receive universal approval and acclamation. It is true to say that whatever a Chancellor of the Exchequer introduces is bound to be criticised and condemned.
  The Chancellor, like the hon. Member for Basingstoke, (Mr. David Mitchell), devoted a great deal of his speech to the selective employment tax. I agree with much that has been said about that tax. It had great limitations. It did not add to the economy what its architect expected it to add. However, there is no need to go over that ploughed field again and harrow and re-harrow it. We can leave it as it is.
  The question is one not only of selective employment tax but of replacing purchase tax. Purchase tax has a great deal to commend it and successive Chancellors of the Exchequer have found it a valuable tax with which to tax those luxurious items that the richer among us are capable of buying, leaving the tax off goods that the poorer members of the community require for their day-to-day life. There was not much wrong with the principle involved in that tax. That is why Chancellors of the Exchequer, of both parties, have kept it in operation for such a long time.
  6.45 p.m.
  It is now suggested that there should be a considerable revolution in our tax system. There is no doubt that value added tax has much to commend it, but it also has much to condemn it. If we were a more equitable society where there were not so many lower paid workers in our midst or underpaid old-age pensioners, their incomes would be such that they would have some degree of surplus in their purse to pay the extra tax that they will be called upon to pay even on household goods. The tumbler from which the Chancellor sipped his water will carry tax. That tax will be paid by rich and poor. That is the problem of value added tax.
  Before we impose such an obligation upon the poorer sections of the community we should seek ways in which to overcome the difficulties: for example, as I suggested in an intervention to the Chancellor, a minimum wage or income
  1196
  taking into consideration not only value added tax but many aspects of our social services.
  I believe that the day is opportune for a complete revolution of our tax and social service system. I give full marks to the Chancellor for devoting a good deal of his time and energy to trying to find a method whereby we can bring about this revolution. However, he has not got far enough. He has stopped midway and imposed a tax which will fall upon the least fortunate, the poorer section of the community.
  Mr. Burden: I recall that it was the hon. Gentleman's right hon. Friend who imposed a tax on potato crisps. I would have thought that crisps were bought as much by poorer people as by the wealthy.
  Mr. Baxter: That is an unfortunate example of the peculiarity of the House of Commons which brings it into disrepute. We are continually looking at the past and trying to score points from what somebody has said at a particular time in different circumstances. Many people, young and old, are beginning to lose faith in the House of Commons because of the sheer stupidity of Members in always harping on things that have happened before and making quotations out of context.
  I appeal to hon. Members not to focus their attention and great ability on the past but to devote a little of their time, energy and brains—let us call them little grey cells—to what can be done in future for the well-being of our country. That may save any interruptions about what somebody said 20, 30 or 40 years ago.
  The Bill has certain limitations and problems, for example, many people will need to be employed by the Government to put value added tax into operation. Of course we must give the Government the tools to do the job they seek to do. There is nothing to be gained by saying that a large number of civil servants will be required to carry out this onerous task.
  However, that is not the end of the problem; it is only the beginning. Industry carries a great burden of responsibility which should be carried by Government Departments. Anyone who has a business and tries to operate the pay-as-you-earn or other tax systems knows that he has to employ a number of

  1197
  people for the sole purpose of carrying out the Government's rules and regulations vis-à-vis the tax system which may be introduced. There can be no question that under the Bill it will be necessary for private enterprise to add quite considerably to its staff to carry out the duties and responsibilities which will be placed upon it.
  I pointed out to the hon. Member for Worcestershire, South (Sir G. Nabarro) that it was not just a question of adding machines being required. Even if computers were intoduced into a business —this is not evidence acceptable by the Commission—records of great intricacy and accuracy would still have to be kept so that no mistake could be made. If a mistake were made, considerable penalties would be likely to be imposed upon a firm or its managing director if perchance it could be proved to have been intentional. It is an extremely fine line of demarcation in a complicated Finance Bill to say that a man did or did not understand the exact implications of the measure which he was asked to implement.
  We are not all lawyers. Many business people do not employ lawyers. We perhaps have part-time accountants. Ordinary people must try to find out their obligations under the law, and this law is very complicated in composition.
  I need only draw attention to how the Bill will affect the building industry, in which I have some interest. It is very difficult to understand. On page 98, Schedule 4, under "Construction of Buildings, etc.", we see:
  "Item No. I. The granting, by a person constructing a building, of a major interest in, or in any part of, the building or its Site."
  Can anyone tell me what that means? I have to give an interpretation of that. Can anyone tell me what Items Nos. 2 and 3 mean? I should like to know what my VAT obligations are in that respect.
  Under "Notes" is it stated that
  "(1) Item 2 does not include any work of repair or maintenance or the supply of any services to a person who himself supplies such services as are mentioned therein."
  Again, would someone be kind enough to explain to a layman what is required there? [An HON. MEMBER: "That is why we employ lawyers."]
  Mr. Burden: On a point of order, Sir Stephen Would it not be wrong for anyone to give an explanation, since this does not come within the debate on Clause 1?
  The Temporary Chairman: That is not a point of order. However, I am glad to have the opportunity of saying that I do not want to interrupt the hon. Member for West Stirlingshire (Mr. Baxter), but I well recall his interrupting the hon. Member for Worcestershire, South (Sir G. Nabarro) and drawing his attention to the wording of Clauses 34 and 37. I did not interrupt then because it was an intervention. However, it would be wrong to pursue the interpretation of Clauses 34 and 37 at this stage. I do not object to the hon. Gentleman making reference to those Clauses, but their interpretation should be left to consideration of the Clauses when we come to them.
  Mr. Baxter: I could not agree more, Sir Stephen. I did not expect an explanation to be forthcoming. I merely posed the difficulties which I as a layman see in the Bill.
  Clause 5(6) provides that
  "The granting, assignment or surrender of a major interest in land shall be treated as a supply of goods."
  I contend that all this is extremely complicated. Surely an obligation will rest on the Chancellor of the Exchequer to give a more simplified version so that ordinary people will not be put into the unenviable position of not wanting to break the law but, by some mischance, breaking it unintentionally and being liable to have heavy penalties imposed upon them or their firms.
  I do not want to go further into the matter as there are many hon. Members who wish to speak. However, I believe that direct tax as such will be weighted heavily against the poorer sections of the community. Therefore, we must have regard to that aspect of the matter.
  If we as a Parliament do not relate income to expenditure—value added tax adds to the expenditure of not only the higher-paid but the lower-paid worker —and consider a whole new set-up of income structure based upon an entirely new concept, on which it would be out of order for me to give my ideas this evening, we shall be doing a great disservice.

  1199
  I welcome the fact that the Chancellor is exercising his brains and ingenuity to find a more simplified method of tax. I agree with the principle that our tax system requires a complete overhaul. It has many limitations and there is room for great improvement. Irrespective of how we improve it, however, we shall never make tax as such a thing to cheer about and to be welcomed with open arms. I suggest that we should go further than has been attempted in the Bill.
  Sir Robin Turton: I have great sympathy with the hon. Member for West Stirlingshire (Mr. Baxter). He, like myself, thinks that SET was a mistake and that it should be abandoned. He too wants to devise a new system of taxation which is not regressive in character and is easy to operate.
  I have reluctantly come to the conclusion that the Government are right to use a form of value added tax. My reason is that this is the age of the value added tax. It is a non-tariff barrier. When certain countries have a value added tax which is aiding exports, it is impossible for other great trading nations like ourselves to opt out. We have to get into it. Unless the GATT succeeds in defeating the evasion of free trade by the use of value added tax, I do not think that we can stay out of the party.
  Under our system of purchase tax we are always at a disadvantage in trading compared with a country which has a value added tax. If we are to change from purchase tax to a value added tax, should we have it, as my right hon. Friend the Chancellor has chosen, at one rate with a certain amount of zero rating, or should we have two rates? I disagree with my right hon. Friend here. I prefer two rates. There is a difference between the luxuries and the necessities of life.
  Mr. John Pardoe Mr. John Pardoe (Cornwall, North) indicated dissent.
  Sir Robin Turton: The hon. Member for Cornwall, North (Mr. Pardoe) shakes his head. No doubt to him there is no difference, but to my constituents, to the old people, there is a difference. It is only if they have a win on the pools
  1200
  or a good bet on the races that they can afford a luxury. Their normal everyday expenditure is on the necessities of life.
  7.0 p.m.
  Mr. Pardoe: I shook my head because I wanted to challenge the right hon. Gentleman about this. This is one of the myths that has spread around the House of Commons on all sides. Will the right hon. Gentleman focus his attention on the problem of distinguishing between luxury and non-luxury goods on any level of income? Does he consider that a motor car is a luxury or is essential to a man living 40 miles from his work in a poor rural area such as Cornwall? Does he consider that tobacco smoked by old-age pensioners, attracting a very high rate of tax, is a luxury, or is it one of the essential commodities of life for them? Does he consider that a television set for an old-age pensioner—
  The Deputy Chairman: The hon. Member for Cornwall, North (Mr. Pardoe) must not give too many illustrations in an interruption.
  Sir Robin Turton: There are certain things which are quite clearly luxuries. Drink and tobacco are in the luxury class whether the person buying them has a low income or not. Equally, jewellery and fur coats come in the luxury class. But somehow we must get a lower rate for the necessities of life, and this has not been done. I appreciate the reasons of my right hon. Friend the Chancellor for doing what he has done but he must bear in mind that the other countries which apply value added tax, like France, make this differentiation and they have more thin one rate of tax.
  We come to the major issue, the proposal by the Chancellor to zero-rate food. I think that a good part of my objection to having only one rate of tax is met if all food is zero-rated, but here again my right hon. Friend has made the mistake or following too slavishly one of his predecessors, in this case the right hon. Member to Birmingham, Stechford (Mr. Roy Jenkins), who in a most unfortunate Budget selecthed certain items of food and said that potato crisps, for example, were a luxury, and we now have the curious arrangement whereby some food attracts purchase tax and some does not. I think the matter should be looked at

  1201
  again. If the Chancellor is right to exempt food, as I am sure he is, it cannot be right to be bound by the definition laid down by the right hon. Member for Stechford in a previous Budget. I hope that this matter will be reopened.
  The right hon. Member for Leeds, East (Mr. Healey) interrogated the Chancellor about what would happen if we joined the Common Market—which I hope we will not—and had to harmonise. We should be told before this debate ends what the Common Market countries are doing about food. As far as I know, five of those countries have value added tax on food and Italy, which of course does not operate value added tax yet, proposes to apply it to food. This should be explained in the course of the debate and we should be given more information about the committee of the Commission which is looking into harmonisation. Last year when I discussed this matter with members of that committee they told me they were proposing sometime next year to put harmonisation into effect. I asked whether, if we adopted the value added tax and excluded food, we would be bound to change with harmonisation. They gave me the unfortunate assurance that that was bound to be the case.
  We should be clear about whether this is right or wrong, because there was a certain amount of doubt in the cross-play between the right hon. Member for Leeds, East and my right hon. Friend the Chancellor of the Exchequer this afternoon.
  [Sir ROBERT GRANT-FERRIS
  in the Chair]
  Mr. David Crouch: Would my right hon. Friend take into account that harmonisation can work both ways and that when we are in the Common Market it is possible that those five can see the wisdom of not applying VAT to food and might harmonise with us?
  Sir Robin Turton: Five of the members of the EEC operate value added tax at the moment and one is planning to operate it. My hon. Friend the Member for Canterbury (Mr. Crouch) is one of the great optimists. He is what the French call "la gouvernesse Anglaise". He believes that when Britain goes in,
  1202
  everyone will follow her. That is a wonderful thought and a good old Colonel Blimp idea but I often wonder whether it is so well regarded abroad as it is in the House of Commons.
  Mr. Barber: Perhaps I should clarify the position. Under Articles 99 and 100 of the Treaty of Rome decisions con-concerning coverage and rates have to be unanimous. This means that value added tax could not be applied to food without the consent of the British Government.
  Sir Robin Turton: I am grateful for that assurance.
  My only other point is a quite different one. I accept the value added tax for the GATT reason and also because of convenience because we have to move over to some other form of indirect taxation. But how will we deal with the transitional period? This is of vital importance to many traders. My right hon. Friend the Chancellor of the Exchequer said that
  "For other goods,"—
  that is, not goods on sale or return—
  "purchase tax will be ended by Treasury Order a short time before the introduction of VAT, so as to help traders to dispose of existing tax paid stocks and to re-stock ready for VAT."—[OFFICIAL REPORT, 20th April, 1972; Vol. 894, c. 778]
  The difficulty over this is the use of the words "short time". This has worried people. The requirements vary according to the trade. In my constituency I have the headquarters of one of the greatest clothing firms in the country. The period for the turnover of stocks is five months. Unless this period is made so elastic that it caters for all different goods, trade will be harmed because traders will not stock up with their needs for fear of double taxation.
  I appreciate that this is not a simple problem. It is quite an easy matter to deal with it, in the Chancellor's words, for an enterprise with a short stocking-up period. But when dealing with clothing, including men's suits and women's skirts, for which there is a five-month turnover period, I cannot see how the Chancellor can surmount the problem in the terms of what he said on 20th April.
  Mr. Dalyell: The right hon. Gentleman has raised a very urgent issue. At Gleneagles at the weekend I was a guest of the cake and biscuit manufacturers at their annual conference. They were

  1203
  extremely concerned because the vacation time from tax is to be two weeks. May I, through the right hon. Gentleman, ask the Chancellor how flexible the Treasury will be as regards the amount of time it will give in the clothing industry, in the cake and biscuit industry and in other industries?
  Sir Robin Turton: I am grateful for the support of the hon. Member for West Lothian (Mr. Dalyell). We must have some reassurance for traders, because it is vital for the Chancellor to say something before it is too late and before people refuse to stock up because of the fear of double taxation. Up to now, although I have been in correspondence with the Treasury on the matter, we do not have sufficient reassurance for the trade. Therefore, I hope that some reassurance will be given to traders generally on this transitional period, tonight or at an early date in Committee.
  Generally, I welcome the Clause. I was not persuaded by the argument of the right hon. Member for Leeds, East, and I wish my right hon. Friend the Chancellor every success in his endeavours.
  Mr. Pardoe: My colleagues and I intend to support the value added tax in principle and to vote for the Clause. It is by no means a new part of Liberal policy to do this. It has been part of Liberal policy for 10 years, and was included in a report of the Liberal Party's Tax Commission in 1962 as part of a package for tax reform which was described by the present Chairman of the Parliamentary Labour Party, the right hon. Member for Sowerby (Mr. Houghton), as the most significant outline of major tax reforms published in recent years and breathaking in its sweep. It takes the Conservative Party 10 years to catch up with Liberal policy and the Labour Party rather longer, but no doubt it will get around to it eventually.
  As for the speech of the right hon. Member for Leeds, East (Mr. Healey), I think he will look back on it as perhaps not one of his most honest efforts. It was the speech of a man of great intellect and natural honesty constantly having to employ that intellect in seeking to justify the twists and turns he is being forced to take. I found it a lamentable spectacle, a waste of a considerable mind.
  1204
  I did not find it an honest speech. I found it a carping speech. It is always possible to find such points as he made about any reform of taxation. Almost all the points he made against VAT today were made, some just as irrelevantly, about any changes in taxation over the past 10 years.
  The basic philosophy behind the Liberal Party's espousal of VAT 10 years ago was contained in a memorandum of the time which said that we wanted to cut the burden of direct taxation on individuals and spread the burden to indirect taxation. We wanted to compensate those individuals and groups who might lose through higher indirect taxation by introducing a far more effective social security system to help them when they were really in need. The Chancellor has now announced new studies of negative income tax which may well help in this direction.
  Mr. Robert Sheldon: The hon. Gentleman said that the speech of my right hon. Friend the Member for Leeds, East (Mr. Healey) was not an honest speech. I expected that after that sweeping denunciation we should hear some evidence to explain why he thought so. If he is not going to adduce it, will he at least accept that his particular concern for an increase in indirect taxation is obviously quite counter to the views of my right hon. Friend?
  Mr. Pardoe: I intend to deal with the points the right hon. Gentleman made on the question of the increase of income tax and the transfer as between direct and indirect taxation.
  We also wanted to compensate for cuts in tax on those with high earnings by more effective taxation of transfers of wealth. Even then, we wanted to align our tax system with the Common Market, and we also wanted a far more effective distribution of income through the tax system to overcome poverty. I make no bones about this: I am a member of a distributivist party. I want to redistribute income. I do not believe our tax system so far has done so.
  It was not just a matter of our wanting to go into Europe and, therefore, accepting those tax proposals that went with the European package. I believe, with the Chancellor, that this country would

  1205
  necessarily have come out in favour of a value added tax whether or not we were going into Europe.
  7.15 p.m.
  The Chancellor dealt first with the inadequacies of the taxes which VAT replaces: purchase tax and the selective employment tax. That is a perfectly legitimate argument, but it is not conclusive. There are always anomalies in any tax. The right hon. Gentleman point out that as we have known over the years there are masses of anomalies in purchase tax. There will inevitably be anomalies in the VAT, as the right hon. Member for Leeds, East said. He will no doubt have plenty of opportunities in future years to justify that forecast. But in certain parts of the country, particularly regions with a high incidence of service industries, such as the far South-West and some other development areas, especially Scotland and Wales, SET weighed very heavily, and a value added tax will put a smaller burden on them.
  Therefore, I deal not with the disadvantages necessarily inherent in those two taxes but primarily with the advantages in the new tax. We can see it only in the context of all taxes and benefits. I am therefore very glad that a Committee of the House is to assess the whole incidence of benefits and taxation right across the board for the first time, because it is impossible to look at the effect of taxation on poverty and distribution alone without looking at what is coming in on the other side of the ledger.
  I want to dispose first of all of one or two myths about our present taxation system that have been with us over a long period. First, it is generally assumed in the House and outside that we have a progressive taxation system which is effective in redistributing income. I challenge that view completely. Our tax system is not progressive. It has had virtually no effect over the years on the redistribution of income, still less on the redistribution of wealth.
  I was first brought to awareness of this problem way back in the late 1950s by a review of a book by Professor Titmuss. The review, which appeared in the New Statesmen, was written my the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). It clearly pointed out—and I went to the source material, to Professor Titmuss's book—that by using
  1206
  the income tax figures it was impossible to say how far redistribution had taken place, and that the official statistics tended to over-egg the pudding and very much to exaggerate the redistribution that had taken place. Since then a great deal of more sophisticated work has been done by people outside the Socialist way of thought. I hope that at least some other members of the Labour Party will read some of it.
  An article in Economics and Statistics in August, 1966, by Merrett and Monk confirmed my view that our tax system was in no sense progressive. One of the conclusions they came to was that:
  "It would be possible to replace the whole of Britain's taxes (other than surtax and the taxes excluded from our analysis) and replace them by a uniform sales tax at around 28 per cent., and if anything leave the lower incomes groups rather better off than they are under our present tax system."
  That absolutely challenged received opinion such as I have been led to believe it was then. It was confirmed in an article in the New Statesman in the same year by Robin Marris, who concluded:
  "… Professor Merrett has made a very radical suggestion indeed. It flies in the face of socialist orthodoxy, but I am forced to confess that, despite my lifelong assumptions. I find it difficult to disagree with him."
  That was at least one Socialist view.
  In another article, in New Society in 1970. Robin Marris also concluded:
  "it is easy to make the British indirect tax system less regressive. All you have to do is increase purchase tax in a neutral pattern, or increase SET and or substitute a general sales tax or value-added tax".
  I agree with him, and I think a value added tax is by far the best way of tackling the problem that I have set out. The Opposition should start questioning their assumption about the way in which our taxes have worked over the years on the distribution of income and wealth. I want to redistribute income and to redistribute wealth, and I do not believe that our present tax system will do either.
  Then, of course, the question arises: will VAT redistribute income? The National Economic Development Office, in its earlier study, concluded that a value added tax would have very little net effect on the distribution of income. The tax proposed in the Bill will. I believe.

  1207
  have very little net effect on the distribution of income, and I regret that. I would like it to have a much greater effect, and if it replaced more than two taxes, as I believe it should do—it might even be necessary to have a higher rate than 10 per cent. in order to do so—we could achieve a very substantial redistribution of income and perhaps wealth.
  The right hon. Member for Leeds, East said that the Chancellor was in the process of "softly, softly, catchee monkey" in relation to the change-over from income taxes to expenditure taxes, and he was assuming, probably rightly, that at some future date a Government of one political complexion or another—probably a Conservative Government, because I expect it will be sooner rather than later—will use an increased rate of VAT in order to reduce income taxes. Why not? It is not long ago that the right hon. Member for Birmingham, Stechford, as Chancellor of the Exchequer, made it known openly that he was looking for ways of moving from the burden of taxes on income to a greater burden of taxes on expenditure. That, I think, is a perfectly acceptable means of reforming our tax system.
  There are considerable grounds for switching from direct to indirect taxes. It would have been an extremely beneficial effect on the poverty problem. First, what is the effect of progressive income tax on incentive to work? I do not think that it can really be measured, but it must have some effect, and what is perhaps more important is that it is popularly supposed to have some effect. All of us have encountered this in the attitude of ordinary people to the problem of high rates of tax, as they think, on their earnings from overtime.
  Income tax is a very unpopular tax. This is because it comes out of the pay packet. It can so easily be seen and challenged. The popularity of a tax is not absolutely conclusive, but radicals have to argue continuously against a low taxation philosophy. I take issue with the view that we are an over-taxed society. It is bunkum, since we are not over-taxed by comparison with any of the other industrialised societies with which we compete, but the one fact which is unique to this country is that out of
  1208
  our total tax burden income taxes take up a high proportion of the total, and have done over years. Since radicals want to get more revenue for their social purposes, and since we need more taxation and more tax revenues, it is better to take it from a less beneficial method of taxation than from a more beneficial one.
  Secondly, a further reason for moving from indirect taxation to expenditure taxation is that we need a stimulus to savings, in the long term if not particularly in the short term. Direct taxes fall both on savings and consumption, while indirect taxes fall on consumption only. Savings redistribute wealth, which is one of the things I want to bring about, and they are also anti-inflationary.
  Thirdly, indirect taxes can be rebated on exports and direct taxes cannot. Fourthly, we can far more easily control consumer expenditure in the economy in macro-economic terms through this broadly based consumer tax than we can with the panoply of purchase tax and other taxes now available to us. After all, purchase tax is only incidental on a fairly narrow range of the economy, on consumer durables, presumably those which the right hon. Member for Thirsk and Malton (Sir Robin Turton) would declare luxuries. I am not entirely certain how many of these things really are luxuries in the modern economy or to most ordinary people.
  I am no longer certain, for example, that a washing machine is really a luxury to a housewife with children. I do not think that a motor car is a luxury. I am not sure that the television set is a luxury to an old couple stuck in the wilds of Cornwall, where there are no bus services because they have been removed by various Governments. I do not think that one can really categorise tobacco as a luxury, because it is one of the essentials of life to many old people —and that statement comes from one who detests tobacco smoke, does not smoke and has not done so since the age of 10.
  I think it is far better to replace the taxes we have—purchase tax and selective employment tax—simply from the point of view of controlling the economy and it will be the better off for that reason. So my view is that VAT will not be a regressive tax, certainly not at the rate of 10 per cent. It would be a

  1209
  progressive tax if it replaced, for instance, such things as the very heavy incidence of taxation on petrol and on beer and tobacco because this ensures that the bottom 15 per cent. of income groups pay a higher proportion of their income in tax than do the broad band of the middle class.
  That is why it is nonsense for Socialists to talk of reform of taxation which moves us from income taxes to expenditure taxes by saying that it is regressive. It is not regressive. Our present taxation system is regressive, and I want to make it more progressive. I believe that having a broadly based tax of this sort on consumption, which is a magnificently efficient revenue raiser, will enable us to go from replacing just two taxes to replacing many more, and finally redistributing income and wealth.
  Mr. Peter Hordern: When I read the newspapers today I saw that the Opposition were to mount a full-scale attack on the value-added tax, to be led by the right hon. Member for Leeds, East (Mr. Healey). I looked forward to his speech with considerable interest, but I must say that, for one who talked about opposition to the tax and fighting it to the last man, the right hon. Gentleman, as a former Secretary of State for Defence, concealed his forces very well. One has detected in the debate all the usual signs of the hurrying and scurrying of the Whips to find more hon. Members opposite to speak. While I do not say that the comments we have heard so far have not been very good, they have been few, I think that the right hon. Gentleman's critique of the tax was very much concerned not with a broad criticism of the tax itself but with small and minor anomalies and difficulties that could occur with the tax.
  The right hon. Gentleman referred in particular to anomalies, fiddles and fly-by-night firms. [Interruption.] If any hon. Member opposite cares to read HANSARD tomorrow he will find that this is largely what the right hon. Gentleman spent his speech in doing. He referred at one point to the fact that there was in the VAT proposals a considerable distinction between the tax to be levied on crisps and that to be levied on caviare. He obviously had not been told that it was the Labour Government which placed purchase tax on crisps and, in-
  1210
  cidentally, on pet foods, at the rate of 22 per cent. The present Government have narrowed the differential. I do not think that was a particularly happy point for the right hon. Gentleman to mention. As I understood it, his principal point was that the tax was likely to be regressive and that we ought to follow the example of Sweden, where direct taxes were very much higher than taxes on expenditure.
  Mr. Healey: And on wealth, too.
  [Mr. Crawshaw in the Chair]
  7.30 p.m.
  Mr. Hordern: And on wealth. I take that point. That is the position in Sweden, but we shall not have a tax anything like that in Sweden, nor would there be any conversations or negotiations within the Community suggesting that we should.
  Indeed, every one of the European countries has a lower rate of direct taxation than ourselves. We also have a higher rate of indirect taxation than any of the European countries. If the right hon. Gentleman doubts that, I have the figures here. The indirect taxation is made up largely of the heavy Customs and Excise duty already referred to on hydrocarbon oils, alcohol and tobacco
  Mr. Eric Deakins: Would the hon. Gentleman not regard the social security payments by employers on the Continent as a form of indirect taxation?
  Mr. Hordern: I have the figures nere and they include the social security contributions. I could read them out but I would ask the hon. Gentleman to accep from me that taxes on incomes and expenditure are higher in this country than in the European countries.
  Mr. Healey: Would the hon. Gentleman not agree that the present Government under these proposals propose to levy a lower percentage of their total revenue through VAT than any of the present or prospective members of the Market?
  Mr. Hordern: Not only do I agree with the hon. Gentleman, but I say that it is a point in favour of the tax.
  Mr. Healey: It is a good debating trick, but what the hon. Gentleman was

  1211
  discussing was the consequence of harmonisation with the rates of the other Continental countries. He was purporting to show that harmonisation would not involve an increase in the yield and coverage, and he has now confessed that the opposite is the case.
  Mr. Hordern: Through no fault of his own the right hon. Gentleman was not present when the Chancellor made a brief intervention on this point. There has to be complete agreement on harmonisation by all member countries, so that there is no demand that we should harmonise our rates.
  Mr. Healey: Nonsense.
  Mr. Hordern: This is the position. My right hon. Friend made the point during an intervention, and, with respect, I prefer my right hon. Friend's version of the Treaty of Rome and the freedom which this Government have under it to that of the right hon. Gentleman.
  That brings me to the point of the Opposition's position over VAT and our entry into Europe. I do not believe that the Labour Party could have been serious about entry into the European Community in 1967 unless it had then been prepared to adopt VAT. It is true that some hon. Members opposite were serious about it. I thought that the right hon. Gentleman was serious when he wrote that article in the Daily Mirror. Of course there were some hon. Members opposite who were serious about joining the Community then, but they are no longer on the Front Bench.
  When the right hon. Member for Dundee, East (Mr. George Thomson) said that the terms brought back from Brussels by the Chancellor of the Duchy were satisfactory and would have been recommended to the Labour Government had they been in office, that must have implied an acceptance of the principle of VAT. They must have known that was the case. It is not as if VAT is a new proposal, produced out of thin air. The French have had it since 1954 and the Council of Ministers had decided to have a common form of VAT as long ago as 1967. It was the declared intention that VAT should be in force by 1st January, 1970. The right hon. Gentleman is right to say that Italy has yet to adopt the tax and it
  1212
  may be some time before it does so. We do not know. It is true that Belgium was a year late in adopting it. But it is also the case that Germany, France, Holland, the Netherlands and Luxembourg have all adopted the tax and did so by the due date.
  There was never any possibility that we could join the Community without adopting VAT, and everyone knows this. The truth is that the attitude of the Labour Party towards VAT is a difficult one to understand. I understood from what the right hon. Gentleman said that his party is in favour in principle of joining the Community and accepting VAT, but not on the terms negotiated. The attitude of hon. Members opposite towards VAT seems to be "Yes perhaps sometime but not just yet."
  In a negative way it is rather like St. Augustine, who said:
  "Give me chastity and continency, but do not give it me yet."
  There is this different—that, whereas St. Augustine could at least have been assumed to have been enjoying whatever it was he was doing, there is no such guarantee that the Labour Party is enjoying anything at all. I gather that the Labour Party would rather have stuck to purchase tax and SET. That is the inference that must be drawn. What was SET if it was not a tax on employment adding directly to costs? I know of no other tax which was so hastily produced and which has caused so much confusion. Everyone knows that is the case.
  VAT is a very different matter. The right hon. Gentleman knows that many associations I believe 300—were consulted about its form. Not only that but a Green Paper was published and then a White Paper with the frame of the Bill within it. There is no question but that on the issue of consultation and fairness VAT is to be preferred to SET. Then no one could say that purchase tax was free from objection. It has anomalies such as toothpaste being taxed more highly than confectionery. Whenever rates are increased—and they were increased frequently by the Labour Party—more anomalies appear. The Labour Party complains that VAT is a regressive tax, but all expenditure taxes are regressive

  1213
  and the degree to which they are regressive depends on the rates and the coverage.
  It does not lie with hon. Members opposite to accuse this Government of regressive taxation when they put a 22 per cent. purchase tax on pet-foods, increased every single rate of purchase tax and even introduced a new rate of 55 per cent. The central point is that before the reductions in purchase tax made by this Government the yield was almost £1,500 million. That is enough to cover VAT by itself without taking into account SET. If one comes to discuss the real contribution the Government have made towards reducing taxation and lightening the burden on those who can least afford it, then it will be seen that not only are the Government proposing to do so by taking out purchase tax altogether but SET is thrown in as a bonus.
  It is true that VAT will cover some items which were not chargeable before. On the other hand, it will not cover some items which were liable to SET, such as food and housing, lighting and heating. This point was put very fairly in a Labour Party "Talking Point", No. 6 of 20th March, 1970. It said:
  "It is generally agreed that the main advantage of the value added tax is its universality. It is not confined to certain goods—tobacco, petrol—or to certain services. It is also important to bear in mind that the more exemptions there are to the tax the more expensive it is to administer."
  I thought that was a very fair point, well put by the Labour Party just before the General Election.
  My hon. Friend the Member for Dartford (Mr. Trew) has shown in a most illuminating piece of research that more than 60 per cent. of people with incomes up to £15 a week will escape VAT, and of those earning up to £25 a week more than 50 per cent. will also escape it. Surely the way to deal with the regressive aspect of VAT is to raise the tax threshold on incomes and to increase the child allowance, the married person's allowance and the single person's allowance. This is just what was done by my right hon. Friend in his last Budget, which allowed about £1,200 million in a full year to be devoted to this aspect. My right hon. Friend referred to the tax not being regressive, and these are the clear advantages which have to be
  1214
  balanced with the disadvantages of the tax.
  One thing is clear. Not only are we to have one single rate compared with different rates, all of them much higher, in the European countries, but the revenue from the tax as a proportion of the total will be significantly lower than that of all the other countries. It will take up 7½ per cent. in this country compared with 24 per cent. in France and 16 per cent. in Germany. The reason why we can afford to have such a low rate of VAT is that we have such a high rate of Customs and Excise duties on hydrocarbon oils, alcohol and tobacco. We derive 20 per cent. of our revenue from duties on those items, whereas all the other countries in Europe derive under 10 per cent. This is a particular advantage in that we can concentrate taxes on expenditure on the relatively narrow field of what would not be considered to be essentials—for example, tobacco and alcohol—and we can spread VAT very widely at a low rate on other forms of expenditure.
  Our traders therefore stand at an advantage compared with European traders both as to the rate and as to the operation of the tax with only one rate. The right hon. Member for Leeds, East mentioned the Richardson Committee, but that Committee was not considering this form of VAT. The question of zero-rating was not dealt with by the Committee. Compared with our European competitors, our exporters will have a direct advantage in being zero-rated, and another advantage in being able to claim their inputs after one month has elapsed instead of the regular three-monthly period. So this is not only a fair tax but a helpful tax both in the way in which it will raise revenue and in its incidence.
  For that reason I cannot see how any exemptions can readily or easily be made. While I have the greatest sympathy with some of the causes which have been the subject of Amendments to the Bill, it is inevitable that if any exceptions are made the same results will occur as occurred with purchase tax and SET. They will be followed by appeals for further exemptions and further zero-ratings, which will make the tax administratively more difficult and will he bound to increase the rate. It is

  1215
  not right to isolate VAT from the other tax reforms. It is a notable achievement to have secured a single expenditure tax at a single low rate. It accords well with the Conservative Party's attitude to taxation, which is that taxes should be fewer, lower and simpler.
  7.45 p.m.
  Mr. John Cronin: The hon. Member for Horsham (Mr. Hordern) has made an interesting and amusing speech and I hope later to cover some of the points he made. He suggested that our proper anxieties about the regressive nature of value added tax could be assuaged by the circumstance that the Chancellor gave away substantial benefits to the low income groups in the last Budget, but he overlooked that, at the present rate of inflation, those benefits will hardly be worth anything by the end of the year. That is not, therefore, a complete reassurance. The VAT will have a continuous built-in regressive effect on low income groups.
  The Chancellor's speech contained no mention of the effect of the tax on the cost of living. I can understand the Chancellor being shy about this because one of the most deplorable aspects of the Government's record since they have been in office is the steady spiralling of costs which has bedevilled our economy. I hope, therefore, that the Financial Secretary will tell us what effect the tax will have on the cost of living, because we are very much concerned about it.
  The effect of value added tax in other countries has been to produce a considerable increase in the cost of living. For instance when the Netherlands brought in VAT there was a 5 per cent. increase in the cost of living in three months. When Norway brought in VAT there was a 6 per cent. increase in six months. In Denmark there was a 9 per cent. increase in six months. These are all massive increases which occurred within a short time.
  Mr. Togendhat: I am sure the hon. Member for Loughborough (Mr. Cronin) is aware of the danger of taking isolated figures. Since he has given those figures, will he tell us what was the rate of inflation in the countries concerned immediately prior to the introduction of
  1216
  VAT and immediately after the period he has mentioned, so that we can see the figures in context and not merely in vacuo?
  Mr. Cronin: I do not carry around with me reference books containing these figures, and one cannot produce the figures out of one's head. It is important to remember what has been the direct effect of the introduction of VAT and there can be no doubt that in those countries it was extremely inflationary.
  Practically all the troubles from which this country has suffered in the last year or two have been caused by the increase in the cost of living. The industrial unrest, the miseries of the coal miners' strike and the railway go-slow have all been direct effects of the rise in the cost of living. We should be glad to know that there will be no further large increase in the cost of living which will increase industrial unrest, cause more strikes and increase the misery of the low income group.
  One important aspect of VAT is that its collection has a built-in inefficiency compared with purchase tax. As my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, purchase tax was collected by about 2.000 civil servants from about 68,000 firms, but the collection of VAT will involve supervising the records of about 2 million firms. About half a million of those firms will be paying no tax whatsoever because they will be exempted and about1½ million firms will be paying tax. We understand that a further 6.000 civil servants will be required, but what tends to be overlooked is that a lot of the work of the Civil Service will be taken over by employees of the firms paying the tax.
  The great objection to having more and more civil servants is that we should be paying people for non-productive work. Exactly the same consideration applies from the point of view of economics if a clerk in ICI or Unilever is paid to do a totally unproductive job. If we take 50,000 of the largest firms which will be paying VAT, they will each require at least one full-time employee, probably even up to two or three employees, to be engaged on this work. We can think in terms of at least a further 50,000 people who will be employed simply on carrying out the clerical

  1217
  work and the calculations involved in the VAT. It does not matter whether the 50,000 extra people are civil servants or are employed by private industry; they will still be doing unproductive work. They could be engaged in adding to the wealth of the country instead of being employed to fill in forms and make calculations purely for the collection of the tax.
  What strikes me when I look at this system is the enormous number of anomalies and difficulties that will arise from the tax. First, one cannot help being impressed by the dilemma of the small trader with a turnover of less than £5,000 a year. He has to choose either to accept exemptions and to be free from tax, or to pay the tax. But if he accepts exemptions, he must absorb the tax paid by his suppliers which must in turn increase his costs.
  Mr. Robert Boscawen: Does not the same thing happen today with purchase tax when a small trader has to decide either to increase his trade above £500 or to avoid paying tax by keeping it below a certain figure?
  Mr. Cronin: That is not the same thing. Purchase tax is fixed on definite parts of stock, whereas this tax is based on turnover. I suggest that the small trader will find his competitive value greatly eroded by VAT and will come out of it very badly indeed.
  I turn to the sort of anomalies which will be created in terms of the television rental provisions. These arrangements play an important part in the leisure life of the country. What will happen to them when VAT comes into operation since these contracts are based on the assumption that purchase tax has been paid? How will these contracts work after April, 1973, when VAT comes in? This will cause all kinds of anomalies.
  I suggest that the Financial Secretary should direct attention to the position of the retailers of food. A medium size supermarket probably deals with around 40,000 items per week. It may be said that since food is zero-rated this will be no problem, but it must be borne in mind that one-quarter to one-third of all goods sold in a supermarket are non-food goods. How will those establishments cope with the enormous problem of deal-
  1218
  ing with all the form-filling and clerical work involved in this tax?
  Then we have the problem of the fitted carpet effect. House buyers who wish to avoid paying VAT and who have houses with built-in central heating, kitchen furniture, cupboards, cookers, carpets or any other fittings will find that they are free of VAT, but if they buy those things separately after they have bought the house extra tax will have to be paid. I am wondering how this will work in practice. Will it drive up the cost of houses even higher than it is at present? This must surely be the general effect.
  Mr. Peter Trew: If the hon. Gentleman looks at Schedule 4, Group 7, he will see that zero-rating relates to items of
  "builder's hardware… of a kind ordinarily installed by builders as fixtures".
  Fitted carpets are not ordinarily installed by builders as fixtures.
  Mr. Cronin: I accept that as a helpful contribution. I was thinking that such things as central heating, refrigerators and kitchen furniture might be installed by the builder. I agree that fitted carpets would not come into this category. However, this does not detract from what is known as the fitted carpet effect which will cause extraordinary anomalies.
  What will happen to a firm with a turnover of more than £5,000 which wishes to avoid paying VAT? It will simply break itself into several smaller firms each dealing with specific items of production. For example, a boat builder could break up his firm into separate segments, one part making hulls. one making engines and yet another manufacturing rigging and sails. What will happen to a person who seeks to avoid tax on that basis? This could be done in numerous areas of industrial life. I have mentioned only a few of the difficulties, but it seems to me that we shall look back on the days of purchase tax as being relatively free of difficulty compared with the sort of difficulties which hang over our heads in regard to VAT.
  Finally I wish to say a few words about the regressive effects of the tax which embarrass hon. Members on this side of the Commitee. The Chancellor of the Exchequer said today that VAT was less discriminatory and indeed was

  1219
  neutral in its effect. We rather liked purchase tax because it was discriminatory and not regressive in its effects. Certainly we feel that VAT will be regressive. People who have any kind of social conscience take pride in the discriminatory nature of purchase tax, which can be used to some extent to redistribute income. Value added tax will have no such effect; it will be uniform in its effect in spite of the zero rating of some commodies and the exemption of others.
  Purchase tax as employed by the Labour Government had a socially desirable effect. It is much more satisfactory that a mink coat worn by a successful actress should attract a higher rate of taxation than a wollen vest worn by a retirement pensioner. Surely it is better that jewellery should attract a much higher rate of taxation than, say, children's shoes and clothes. Even with zero rating, the poor will be proportionately much worse off under VAT.
  We should be thankful that the Chancellor has introduced zero rating, but I should like to know why he has introduced in the Bill powers to abolish such rating. Has this some sinister significance for the future? Does he eventually intend to put VAT on foodstuffs? I think there can be little doubt that this is the first stage in achieving this discriminatory, reactionary and anti-social effect. I say without hesitation that the VAT will be a weapon in the hands of the present reactionary Government, a Government which my colleagues and I regard with the utmost distress. I shall vote with enthusiasm against this tax tonight.
  8.0 p.m.
  Mr. Christopher Tugendhat: First, perhaps I might revert briefly to a point made by the hon. Member for Loughborough (Mr. Cronin) early in his remarks when, in reply to an intervention of mine, he said that he did not carry all the relevant figures in his head and was not a walking encyclopaedia. I sympathise with the hon. Gentleman. I, too, do not carry all these figures in my head.
  But I have been disappointed by the arguments that we have heard from the benches opposite, of which the hon.
  1220
  Gentleman's speech was typical, and the bringing out of the air of certain figures about certain foreign countries without putting them in context. It is possible that prises rose by X or Y per cent. in a given country after the introduction of a value added tax. That is all very fine and interesting. But if one does not know at what rate prices were rising beforehand and at what rate they rose afterwards it is difficult to see the significance of the figures being put forward in evidence.
  The hon. Member for Loughborough may be right, but this constant bringing out of the air of foreign examples without putting them into context does not carry the argument about what will happen with the introduction of a value added tax in this country one way or the other.
  Mr. Brian Walden: In view of the hon. Gentleman's wise caution against doing that, is not it foolish to cite foreign examples of how firms have been able to cope with the tax given a tax structure different from our own? Does not the Chief Secretary continually do that in these debates?
  Mr. Tugendhat: If my hon. Friend the Chief Secretary did as the hon. Gentleman suggests, he would be running that risk. But there is a difference between what my hon. Friend has been doing and what the hon. Gentleman alleges. My hon. Friend the Chief Secretary spoke about the results of questions which had been asked of firms in countries which now have VAT. They were asked whether, if the VAT were abolished, they would be able to reduce their administrative staff. My hon. Friend reported that they had said, "No ". I think that that is fair. They were not asked whether the introduction of VAT had led to an increase in the number of people whom they had to employ. They were not asked to compare the position now with what it had been. They were asked what would be the position now if VAT were removed. I think that that is a reasonable pointer in this context.
  Mr. Brian Walden: I accept that, but it cannot be used as an example for saying that the introduction of the tax in this country will not lead to an increase in administrative staff in business. That is such palpable nonsense that it

  1221
  is no example, and I am sure that the hon. Gentleman will concede that gladly.
  Mr. Tugendhat: The hon. Gentleman and I are in danger of running into a dialogue, but I cannot let that pass as the hon. Gentleman put it. I think that the remark of my hon. Friend the Chief Secretary about the position here and the position as it would be on the Continent was fair. It suggests, therefore, that VAT as such does not lead to a great increase. I think that that is a reasonable deduction to draw.
  I do not suggest that one can draw any profound conclusions for this country from that statement. But I think that it is a reasonable point to make, and, in any event, in this country we must also think in terms of the taxes that it is reducing. Without going into detail, I am sure that the hon. Member for Birmingham, All Saints (Mr. Brian Walden) will agree that the introduction of SET and the handling of it led to an increase in the number of people employed by companies for these purposes. To some extent, the hon. Gentleman is comparing apples and pears and not factors which are totally alike.
  The other point which disappointed me about the arguments of right hon. and hon. Members opposite on VAT was the position of the Common Market. Here I revert to a point made by my hon. Friend the Member for Horsham (Mr. Hordern). There is no point in trying to hide the fact that the Labour Party was in favour of joining the Common Market on the right terms and that it remains in favour of joining if the right terms can be secured. Right hon. and hon. Gentlemen opposite have always said that they did not like VAT and that they would introduce it as one of the prices of going into Europe but not on its merits. I appreciate the caveats entered by Labour Party spokesmen. Nonetheless they said that they would introduce VAT if the right terms were agreed. It was not a matter like Commonwealth sugar or New Zealand butter, being put forward as a sticking point in the negotiations. The idea that VAT would be introduced if we joined was always accepted. Therefore, when we argue about VAT now, it is difficult to see the great point of principle dividing us. Had Labour secured the terms that it wanted, it would have introduced the
  1222
  tax. The tax cannot be that bad, otherwise it would have been elevated to the primary position of Commonwealth sugar, New Zealand butter and the other considerations which played such an active part in the conversion of the Leader of the Opposition away from Europe.
  Mr. Dalyell: What baffles some of us who voted in favour of the principle of British entry is why the Government feel it necessary to bring VAT in so quickly. If the hon. Gentleman will tell us why it has to be introduced so quickly, he will do us a great service.
  Mr. Tugendhat: The enlightenment is likely to be brighter or more illuminating if it comes from the Treasury Bench than from a mere back bencher. But it seems to me that there are substantial arguments in favour of doing it now rather than later. When a Government have committed themselves publicly to a certain course of action, there is much to be said for getting on with the job with a reasonable degree of haste—though not over-hastily. If traders, business and industry know that the Government are committed to introducing VAT and that the Opposition are committed to it if they get the terms that they want in the Common Market, delay only leads to difficulty and uncertainty. Once one is committed to a course of action, it is right to get on with the job and remove the uncertainty attending it. Hanging about in the way that some suggest will do no good and will lead to the kind of uncertainty that we see in the steel industry, which does not know its future because it cannot know the result of the next General Election. Having made their position clear, I believe that the Government were right to move reasonably rapidly.
  I am afraid that I have been diverted from my two main points The first is that, whether or not this country joins the European Community, there are substantial arguments in favour of a value added tax. At present, some 40 per cent. of our export trade is with countries which either have a VAT or are proposing to introduce one. What it more, those countries constitute our most rapidly growing markets. When right hon. and hon. Gentlemen opposite were in power they used substantial and sensible arguments in favour of metrication on the

  1223
  ground of international standardisation, because of our trade being with countries which were largely metric. Similar arguments apply to a value added tax.
  That apart, the fact, that VAT encourages exports and its lack inhibits a country in that regard is an important consideration. Voices are now being raised in the United States in business and industrial communities in favour of a value added tax which they feel gives Europeans an unfair advantage over them in export markets. This is an argument which deserves to be heeded in this country. Given the fact that so many of our principal trading partners are adopting this form of tax, it is a pity that we should gratuitously put ourselves at a disadvantage compared with them.
  The other substantial point, which has been dealt with fully by many hon. Members on this side of the Committee and by some hon. Gentlemen opposite, including the hon. Member for Cornwall, North (Mr. Pardoe), is that in many ways VAT will enable indirect taxation to be more evenly and fairly spread. At present about 70 per cent. of consumer taxes in this country fall on tobacco, alcohol and the running of a motor car. This is a heavy concentration, and it bears particularly hard on the poorer section of the community. Of the remainder of our consumer taxes, a heavy burden is borne by a certain limited number of consumer durables such as refrigerators. Clothing, too, is taxed, and this bears very heavily on the less-well-off section of society.
  Hon. Gentlemen opposite have frequently quoted the Richardson Report and made play of the fact that Mr. Richardson produced a report which was hostile to VAT but is now lending his considerable services to the Government. It is fair to point out that the excellent report on VAT produced by the National Economic Development Office when Sir Fred Catherwood was running it at the time of the Labour Government made a number of substantial points in favour of VAT, and the point that I have made about our present system of taxes bearing heavily on the less-well-off is one of the most important points in that excellent document.
  I know that the right hon. Member for Leeds, East (Mr. Healey) is new to
  1224
  financial affairs. Perhaps it is fair to tell him that, rather than study the Richardson Report which came out so many years ago, the report published only three years ago when his Government were in power might provide a better source of information and ideas for him. I am glad to see that the hon. Member for Birmingham, All Saints shares that view. The point that I have made is a substantial one in favour of the tax, and it means that when the regulator is used it will cover a much wider segment of the economy and will not bear so hardly, unevenly and unfairly on certain industries.
  VAT has been widely praised outside the House, and it is generally accepted within the House, whether or not one is in favour of the tax as such, that the particular VAT which my right hon. Friend the Chancellor of the Exchequer has produced is a good example of the tax. The single rate and the relatively low rate have both been praised. I wish to participate in the praise that has been lavished upon my right hon. Friend, but there is one point that I must make on that score.
  I appreciate that my right hon. Friend has consulted many outside interests and that many industries, trade associations, and so on, have had an opportunity to put their views. I appreciate that this has perhaps arisen out of more consultation than has ever been known before. Hon. Members on both sides of the Committee approve of the Green Paper system of consultation and all the rest of it, but I find myself rather unhappy at the implications of some of the speeches of Treasury Ministers and of reports in the newspapers arising out of the guidance given by Treasury Ministers about their attitude towards the possibility of making changes in the tax as it goes through the House, and their attitude towards exemptions.
  Much as I support the idea of consultations with outside interests, and glad as I am that Green Papers should be published, we must not forget—and I say this in all humility as a relatively new Member—that laws are made here and not in consultation with outside interests. I very much admire the elegance and simplicity of the proposals which the Chancellor has put forward, but I am sure that he would not wish to claim that

  1225
  they are perfect in any way and incapable of improvement.
  There are some important anomalies concerned with the position, for instance —to give only one example—of those who write books, such as myself, who will be well treated, and I am grateful for that, and people who paint and participate in the plastic arts. I mention that as one example. There are many difficulties, and I hope very much that the mere fact that considerable consultation has taken place with outside interests will not be put forward by Ministers as an argument for not making changes in the place in which, after all, changes are supposed to be made.
  With that one caveat, I praise the Chancellor for the simplicity and elegance of his tax and say that if he makes changes we shall take that as a sign of strength and not as a sign of weakness.
  8.15 p.m.
  Mr. R. B. Cant: I shall be brief and make reference to only two points. I must confess that I am pro-Common Market and pro-VAT, but I shall faithfully follow my right hon. Friend into whichever Lobby he goes tonight.
  I agree with all those who have said that in the world in which we live, in which other countries are not only applying VAT but are expressing interest in it, we have no alternative but to follow suit whether the tax is a good tax or not. The General Agreement on Tariffs and Trade will never have any great influence even on behalf of the economic masters of the world in the context of the reduction of non-tariff barriers.
  We have been told that the changeover from purchase tax and SET will not have any effect on the redistribution of income. That may be the case although, from what I have heard, I do not think that that is altogether proven. Certainly the Government will be faced with a serious decision in the future when, whatever hon. Gentlemen opposite may feel, the need to gather in increasing amounts of revenue, for one purpose and another presents itself.
  Although I am quite happy about the 10 per cent. with zero ratings, exemptions, and so on, I and, no doubt, many others on this side of the Committee will watch carefully to see precisely what the Gov-
  1226
  ernment do in the future, because I do not feel that increasing rates of VAT will make a contribution to the welfare of the poor—far from it. If the Government start increasing the rates of income tax or reducing the rates of corporation tax, then I, perhaps for a change, will join the critics on this side of the Committee on this issue.
  I am not a smoker but I drink beer, and I am worried in case VAT is superimposed on the existing enormous excise duty on beer. If that were to happen, the lot of the beer drinker would be very unhappy indeed and I do not think that the Chancellor has as yet given us anything that would offer consolation. The main point on this is that when future Budgets come around we shall be asking in Written Questions for some calculation of the gini co-efficient of income distribution as a consequence of increasing VAT.
  My second point is one that has been made by many others. Why 1973? I have no desire to save the Prime Minister from electoral defeat. I think he must have a fairly well-defined masochistic streak in him if, for whatever reason, he proposes to introduce VAT at the very time when he is impressing upon us that inflation is public enemy No. 1. Although there is a nice equation between purchase tax, SET and VAT we know from the introduction of decimalisation that somehow or other traders will make a profit out of it and prices are bound to go up.
  Cannot the Government be persuaded to make at least a little contribution towards winning the battle against inflation? As we know, inflation leads to wage increases, strikes and the rest. Cannot the Government follow a modified Italian example, so to speak? This is my request. If the hon. Member for Horsham (Mr. Hordern) were in his place, knowing his almost pathological interest in the state of the money supply I think he must certainly endorse the view that to agree to the introduction of VAT at a time when the Government seem bent on doing everything possible, through the money supply, to increase prices is folly. My concern is simply for the effect that all this will have on the people.
  Mr. Burden: I find the attitude of hon. Gentlemen opposite rather amusing because it has been evident that those

  1227
  who took part in our Common Market debates in 1967 have all been swept aside. They have gone and in their stead we have an entirely new Labour Front Bench now discussing this issue.
  Although the previous occupations have been swept aside, their views cannot be swept under the carpet. It was strange to hear the hon. Member for Stoke-on-Trent, Central (Mr. Cant) say that although he agreed with the introduction of VAT he nevertheless intended to vote with his colleagues against its introduction. This is an almost farcial state of affairs.
  On a personal note, I welcome the promotion to the Opposition Front Bench of the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I have listened to his speeches on many occasions with great interest. He is always most articulate, and I am sure he will prove a formidable addition to the Opposition Front Bench.
  However, the hon. Member for All Saints made an unfortunate intervention earlier when, as one of my hon. Friends was discussing SET and pointed out that the right hon. Member for Cardiff, South-East (Mr. Callaghan), when Chancellor of the Exchequer, introduced it to drive excess labour out of service industries and into manufacturing, he leapt hurriedly to his feet and rather denied that that was the original purpose of SET. I trust that the hon. Gentleman now agrees that SET has absolutely failed in its objective.
  Mr. Brian Walden Mr. Brian Walden indicated assent.
  Mr. Burden: I am glad that the hon. Gentleman assents to that proposition. It has been a shockingly bad tax in every way.
  Instead of stimulating employment in manufacturing, SET made everybody in the distributive trades see how much staff they could cut and there was enormous growth in self-service activities almost immediately after the introduction of this shocking tax. Above all, it showed the bad judgment of the Labour Party in fiscal matters of great importance.
  Bearing that in mind, perhaps the speech of the right hon. Member for Leeds, East (Mr. Healey) was not surprising. In the past he has been greatly involved in defence matters, matters com-
  1228
  pletely different from those with which he has now become involved. Perhaps the Labour Party has had some difficulty finding men of Cabinet rank who are not committed to supporting the introduction of VAT. On this score, the right hon. Member for Leeds, East is clean, as are most of the present occupants of the Opposition Front Bench in this debate. Although they are clean on this score, they have a lot of explaining to do because we want to know exactly where they stand on various other matters.
  When the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) was Chancellor he made it clear that in his view VAT would have to be introduced if we entered the EEC. But his colleagues on the benches opposite now imply that purchase tax is sacrosanct. We have gained the impression this afternoon that, whatever happens in Europe. the Labour Party will hang doggedly on to purchase tax.
  Do hon. Gentlemen opposite appreciate that we are the only country with purchase tax and that a considerable number of countries have introduced VAT? Why, if we are so right—presumably those other countries have examined these matters—and if purchase tax is so much better than VAT, have they not introduced purchase tax into their fiscal systems?
  I trust that the spokesman who winds up the debate for the Opposition will tell us the present view of the right hon. Member for Stechford on VAT. May we also be told the views of those financial spokesmen on the benches opposite who were at one time negotiating for Britain to enter the Common Market?
  VAT becomes chargeable only at the point of ultimate sale to the retail customer. Although there are intervening charges, they are all paid back, until the final and ultimate point of sale to the customer is reached. Indeed, it has other advantages over purchase tax. I know from considerable experience that one of the advantages is that now, when the value added tax is applied, the retailer does not have to lay out large sums of money in tax before he sells the article. He collects it, and it is then paid to the Government. Indeed, there is also the other extremely valid point that it does not

  1229
  mean that if an article does not sell readily he has paid tax at a rate considerably above the real selling value of the article.
  Another point is that under VAT it is not possible for the retailer, as now happens with purchase tax, to charge his retail price not only on the price of the article but also on the tax, because with VAT tax is imposed afterwards, and this should help to some extent to keep down prices.
  [Mr. E. L. MALLALIEU in the Chair]
  8.30 p.m.
  I refer for a few moments to the present attitude of the Labour Party. Are they in favour of entering the Common Market?
  Mr. Deakins: No.
  Mr. Burden: There we have "No ". I should be happy if the right hon. Member for Leeds, East would intervene and say whether it is still Labour Party policy to enter the Common Market if they consider the terms reasonable.
  Mr. Healey: Of course it is, and we have said so a million times. What the hon. Member seems incapable of recognising is that, just as he and his hon. Friends regard the common agricultural policy as a ludicrous nonsense which they have to accept for the sake of what they see as the benefits of entering, we regard VAT also as a ludicrous nonsense which we would have to accept if we could get satisfactory terms on other issues, including, above all, the common agricultural policy.
  Mr. Burden: That is a very interesting admission. Until the right hon. Gentleman intervened, the hon. Member for Walthamstow, West (Mr. Deakins) said, "No, we do not want to enter the Common Market—full stop". Then, when I offered the question to the right hon. Gentleman, he said, "Yes, it is still our policy to go in if we can negotiate the right terms". No one in the country, certainly no one in the House, has heard one word from the Labour Party about what they would consider to be acceptable terms.
  Mr. Deakins: Rubbish.
  Mr. Burden: It is no good the right hon. Member for Leeds, East screwing up his eyes, because that is so. He has also, this afternoon, launched an absolute all-out attack on VAT. Yet a moment ago he said" If we could get the right terms in other directions, then we would accept VAT ". He has also said that if a Labour Government could get the right terms in other directions, they would accept the common agricultural policy.
  The previous Prime Minister stated emphatically—it is no good the right hon. Gentleman swinging about—that this is one of the prices of entry to the Common Market, that the common agricultural policy is not negotiable and that it was accepted by the Labour Party. Equally, he said that VAT was one of the things that they would have to assume. Earlier today, when I intervened during the right hon. Gentleman's speech he tried very hard to write-off something that his right hon. Friend the then Prime Minister had said about the whole question of VAT. Of course, we accept that it depended upon getting the terms that the Labour Party considered were right. But which part of the Labour Party? Quite a few right hon. and hon. Members of the Labour Party sitting below the Gangway say "We would not go in in any circumstances".
  Mr. Healey: What about differences on the hon. Gentleman's side?
  Mr. Burden: No, the right hon. Gentleman must just take it. Quite a number of hon. Members opposite say "In no circumstances will we go in". There is certainly a considerable number of influential right hon. and hon. Members of the Opposition, who were involved in the negotiations conducted by the Labour Government, who say "The terms now are absolutely right and we could get no better". There are also other hon. Member of the Opposition who say "Yes, but because it was the Tories who negotiated these terms, we shall say that we shall go back to try to get some better ones".
  So for which part of the Labour Party does the right hon. Gentleman speak? What his right hon. Friend the then Prime Minister said about VAT is in no doubt. I hope that the right hon. Gentleman will forgive me for having the

  1231
  temerity to suggest that if he is to take on the task of shadow Chancellor, he should take an early opportunity of looking up some of the things which some of his predecessors have said, both in office and as shadow Chancellor. If the right hon. Gentleman were to do so he would find that in the debate on the European Communities in 1967 the then Prime Minister said:
  "Here we are talking about Article 99 of the Treaty of Rome"—
  this refers to VAT—
  "which provides for the harmonisation of turnover taxes, excise duties and other forms of indirect taxation. In making this provision, the immediate concern of the countries of the Community was to get rid of the distortions to trade which resulted from the existence in some of the countries of what are called cascading or cumulative turnover taxes for which only arbitrary allowances could be made as the goods concerned passed from one country to another.… It was only a few weeks ago… that agreement was reached on even the first step towards this harmonisation. The agreement was that by 1st January, 1970, existing turnover taxes would be replaced by the value added tax system. The agreement at present allows exemptions for particular categories of goods."—[OFFICIAL REPORT, 8th May, 1967; Vol. 746, c. 1089–90.]
  It is no good the right hon. Gentleman saying that there is no need now to do anything until 1978. In 1967 the right hon. Member for Huyton (Mr. Harold Wilson) was negotiating to join the Common Market and, had he succeeded, he tacitly accepted in those remarks that this would have to be introduced by 1970.
  Mr. Healey: Oh, no.
  Mr. Burden: Oh, yes, he did. The right hon. Gentleman accepted that VAT would have to be introduced. The Opposition Front Bench, which has been fulminating about VAT all day long and how they will retain purchase tax, now admit that, if their aims to go into the Common Market had succeeded, they would have introduced VAT and that it must be introduced if we go into the Common Market.
  I feel sure that the hon. Gentleman who is to wind up will make it perfectly clear that, whatever arguments may have been advanced today, the Labour Party, if it succeeds in its aim of going into the Common Market on terms which Opposition Members still say that they
  1232
  will negotiate, will automatically accept that which Opposition Members have today stated is completely unacceptable —namely, VAT.
  In any case, what is VAT? What is the difference between purchase tax and value added tax? In effect, although the range of articles may differ, the taxes do precisely the same thing. Purchase tax increases artificially the basic price of the article to which it is applied. The value added tax ultimately does precisely the same.
  The value added tax will be of great advantage in many ways. It will certainly be of great advantage to British exporters. The removal of SET will be acclaimed by the many overseas buying houses in Britain which have only one object—namely, to buy British merchandise for export—and whose costs here have been escalated by the imposition of SET. The removal of SET will ease their costs in Britain and help our exports.
  I believe that the introduction of VAT will do away with something which has for a long time been a blight on manufacturing industry. I refer to the uncertainty which is created in manufacturing industries and in wholesaling by possible changes of purchase tax. It will give confidence to manufacturers and will not increase the cost of living.
  The argument that it is going to bite very hard on the poorer members of the community is completely fallacious. If we look at the range of goods on which purchase tax is already placed it will be found that the Opposition have already increased the cost of living through taxation and increases of purchase tax on a great many of the poorer members of the community on whom the proposed value added tax will have far less impact than purchase tax has had.
  Mr. Dalyell: I do not know whether the hon. Member for Gillingham (Mr. Burden) was fulminating, but his fulminating was not entirely in the direction of Clause 1.
  I was rather curious about what was going on in the head of the Minister of State, Treasury whom my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden) and I were interrupting. As the hon. Member for the Cities

  1233
  of London and Westminster (Mr. Tugendhat) said, there is a real issue here and if the only defence his hon. Friends can give is that we must not hang around, there is a very real question to be asked.
  My right hon. Friend the Member for Leeds, East (Mr. Healey) asked "What is all the hurry about?" I can understand an obligation to introduce VAT by 1978 but it seems extraordinary, when there are so many corrections to be made in the legislation, that we have to have it this year. Is there no more to be said on this issue than was said by the hon. Member for the Cities of London and Westminster that, once having decided to do it, it must be done quickly? If there is such a hurry, what thought is being given to the transitional period?
  The right hon. Member for Thirsk and Malton (Sir Robin Turton) and other hon. Gentlemen have been asking through out the day about the transition period for certain industries. British industry is extremely concerned about what will happen. I have no knowledge of the clothing industry but many of us have constituency interests in the food industry. To what extent has any thought been given to the food industry in the amount of flexibility the Government are to offer in relation to the so-called holiday period?
  I will return to a subject I raised in an intervention. Manufacturers in the cake, biscuit, chocolate and confectionery industry, as my hon. Friend the Member for Birmingham, Northfield (Mr. Carter) knows very well, are desperately concerned. I speak on behalf of a firm in Livingston new town and a number of other new firms but he speaks of a wider industry. There was a conference during the week-end, the annual general meeting of the Cake and Biscuit Alliance, where it was spelled out in some detail exactly what would happen. I give this as one example for time reasons but there are many other examples.
  At present, with few exceptions all these goods bear some degree of purchase tax as they leave the manufacturer. So, without special action, all stocks in the hands of wholesalers and retailers on 1st April will have borne purchase tax and will have to bear VAT.
  To avoid this the so-called holiday period from taxation, needs to be
  1234
  announced, first well in advance, and, secondly, from 1st January, 1973, for special Easter goods, and from 1st February, 1973, for other goods.
  This is perhaps not the time to go into the details of the problems of the confectionery industry. However, for how long are we to be told by the Tory Front Bench "It is all a matter of negotiation. Nothing has been decided, there has to be consultation with people outside the House, and then we will tell you"? There seem to be issues of considerable substance involved. There is no reason why we should not be told at a very early stage precisely what kind of tax holiday period the Government Front Bench have in mind. If the Financial Secretary shakes his head knowingly, will he take this opportunity of clearing the matter up? There may be a good reason but none of us have been told throughout the day the reason for the hurry or what is to be done about the transition period. If I am making invalid or lightweight points, let us be told, because it will shorten my speech and possibly some of the proceedings in Committee.
  I can only take it, from the silence of the occupants of the Government Front Bench on a fairly easy matter on which they should be forthcoming, that either they do not know or there is no good will. If this is to be their attitude throughout these proceedings, some of us will be more long-winded than we otherwise would be.
  8.45 p.m.
  Mr. Sheldon: We heard my hon. Friend the Member for West Lothian (Mr. Dalyell) ask whether his points were invalid or lightweight. Those of us who have had the pleasure of knowing him over many years know that those are adjectives which we would least ascribe to points or questions which he puts before this Committee or any other body before which he argues. His point was important. We have not had an answer to it so far from either Ministers or backbenchers opposite.
  What is the reason for the hurry with the introduction of this legislation? We know, with some degree of certainty, that the Chancellor of the Exchequer has a great yearning to go down in history as one of the fundamental reformers of the tax system in this country. I should be

  1235
  the last to wish to deny him that position, as this is a matter in which I have been most interested over many years.
  Suggestions are frequently made that the reform of the tax system is the prelude to the improvement of the economy. When arguments of that kind are put forward I have to voice my scepticism.
  Looking at successful economies throughout the world, I seem to find that they owe little to the tax laws within which those countries operate. I will give one example which might serve as a remind of the limitations of tax upon economic performance. I refer to Germany. At the time of Germany's economic miracle, at the time when it was expanding at a faster rate than any other country in Europe, it had to suffer the enormous problems, complexities and injustices of its cascade tax, when it put tax upon tax upon tax as goods made their way from one industry to another and finally to their consumers. At that time Germany was undergoing its own economic miracle.
  It is important for us to be clear that at the end of the day it will be little distinction for the Chancellor if he busies himself with these tax reforms while at the same time we endure the problems of 1 million unemployed, low investment, and minimal growth.
  I mention this not in any carping spirit but because it is important to see tax reform in its proper perspective. Although this is a matter of great importance which requires our close attention, it cannot be a substitute for economic strategy, only a supplement to it.
  I do not have a frantic like or dislike of the value added tax. It is supposed to be a tax on consumption. However, like many taxes, it can be looked at in different ways. After all, it is a tax on added value. The value added, as goods pass through any particular firm or factory, is a combination of both the payroll and the profits tax. It is the payroll—all the salaries and wages—and the profits taken by an enterprise. Therefore, we could call it a payroll and profits tax, because that is what we are taxing.
  What makes the value added tax different from a payroll and profits tax? Many of my right hon. and hon. Friends
  1236
  would have no quarrel with a payroll and profits tax. The Committee will recall that I and my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) have, year after year, put forward proposals for a payroll tax to replace SET. But what makes it different from the kind of payroll and profits tax that so many of my hon. and right hon. Friends would like to see is the emphasis by the Government that the tax must be passed on, or may be passed on, and this makes it a consumption tax. If we think in terms of manufacturers doing their best to minimise the tax by efficiencies of labour and modest restraint in profits, it can be seen that the difference is in the emphasis rather than in the design.
  Mr. Geoffrey Rhodes: I am following my hon. Friend's point closely, but is it not a fact that there is no real evidence from the use of VAT within the Common Market that what he is suggesting has happened? Any close examination of the incidence of VAT within the Common Market and I spent a lot of time in the Community countries when the tax came in—shows that it was passed on to the consumer. Those hon. Members on the Conservative benches who opposed selective employment tax on the ground that it was passed on to the consumer are inconsistent now in supporting VAT. I can speak with a clear conscience on this because in eight years on these benches I have never voted in favour of SET.
  Mr. Sheldon: My hon. Friend's record on this matter is well known and he is amplifying the point I was making that the value added tax to be introduced by the Government is a tax on consumption because they are clearly urging that the tax be passed on. But, if in the alternative form it was urged that the tax be not passed on the same method would be used to tax payroll and profits. This is the point I was making, and my hon. Friend quite rightly says that the way in which the value added tax has been operated and the way the Government will operate it will pass it on to the consumer.
  I look for a number of qualities in any new form of taxation, and for me there are four simple tests. A good tax

  1237
  should raise money according to the ability of the individual or the organisation concerned to pay. It should be fair and preferably should help towards a greater redistribution of wealth. It should have beneficial effects upon the economy and it should have ease of administration. In this last respect we must consider the additional 6,000 civil servants who will be needed.
  The Chancellor of the Exchequer said that the value added tax had been praised because it was neutral. He said that this was a commendation for the tax even in the eyes of those who opposed it. To me this is not an advantage. I do not see any benefit from a tax which is neutral in its effect. A good tax should have some social purpose as an essential ingredient in it. There cannot be anything apparently more neutral than a poll tax, and that is hardly a good tax.
  As my hon. Friend the Member for East Stirlingshire (Mr. Douglas) said, this VAT is regressive. If it is desired that an essential ingredient of a tax system is that it should have some social purpose it must discriminate. Where there is discrimination there must be categorisation, and once there is categorisation there are anomalies. This is an inescapable element of a fair tax. If a tax does not have a social purpose and it is neutral it can be efficient but it will also be unfair. What I have against the value added tax is that it has no social purpose and is neutral. Worse than that, it has gross anomalies.
  With purchase tax we had a system which was basically fair, because it was discriminatory. Of course there were anomalies, because there was an attempt to redistribute, to charge more for certain articles held to be luxuries and less for those held to be necessities. But the anomalies of purchase tax were an essential price for the fundamental fairness that underlay the system. We find that the value added tax is unfair; it is not discriminatory, yet it has the added bonus of giving anomalies as well. At least the anomalies of purchase tax were there for a social purpose. The anomalies of value added tax are inherent in the tax, and it offers no advantages in compensation.
  Therefore, we on this side say that we should have made a neutral value added tax discriminatory in other ways.
  1238
  We should have attempted to introduce changes in other kinds of taxation to alter the neutral effect and provide discrimination of the kind we had in purchase tax, by an amount that would bring about a reduction in the prices of those goods which we hold to be essential for the wellbeing of the people of this country.
  The odd thing is that the principle that there should be some discrimination is one which the Government have accepted in the end. But, most peculiarly, they felt it was unique and could apply only to motor cars; they conceded the principle that purchase tax should go in hand with value added tax but said that it would apply only to motor cars. We on this side should ask why the tax was exclusively reserved for motor cars. Why was it not considered for any other article of a high luxury kind?
  Let us look at some of the anomalies. We can have a lot of fun with them. I shall mention just one or two now. Under the tax we have anomalies which have nothing to do with fairness, which either result from bad drafting or are inherent in what is an unsatisfactory tax. For example, we are now to tax small matters like distilled water, even the water that goes into iced lollies. Those from the north who come up for the Cup and charter an aeroplane will have to pay tax, but if they go to Paris they will pay no tax. Those who finally depart this life depart from it in a partially-taxed coffin, wrapped up in a wholly-taxed shroud. We can go on and on with the anomalies. The important point is that they are obtained without any improvement in the redistributive effects of a tax and without any attempt to relieve some of the very important elements that should be free from tax in the way that any socially-just economic policy should be able to provide.
  I do not believe, and nothing I have heard in the debate has led me to believe, that the economy will be improved now or in the next few years as a result of the introduction of the value added tax. Therefore, we must ask, as my hon. Friend the Member for West Lothian asked, why it is being introduced now. The value added tax and the car tax are to bring in about £1,600 million in a full year. The old purchase tax and selective employment tax, taking the reduction in the 1972 rates of tax, brought

  1239
  in slightly more. So there is no increase in revenue on an annual basis. The sums are roughly the same. Comparing the £1,600 million with the £16,000 million-plus that was to be raised in taxation in 1972–73, one must ask why the Government are juggling about with a tax whose yield is not large by comparison with the total revenue raised by other forms of taxation.
  9.0 p.m.
  We have the inconvenience of this Bill. Do not let anyone be under the impression that the part dealing with VAT is only 50 Clauses and so many Schedules. A whole host of regulations and orders are not included in the Bill when many of them should have been. Had they been included, there would have been a mammoth Bill. Part of what should have been included in the Bill has been left out, just as so much has been left out of the European Communities Bill in a manner which we find unsatisfactory.
  Even accepting that the Government believe the price to be worth paying, we must ask what their final intentions are. They have not gone to all the trouble of engaging 6,000 extra civil servants merely to deal with the problems of evasion which my right hon. Friend spoke about, nor just to replace one tax with another. That cannot be what it is all about. The new tax will not improve the economy. It is unnecessary for entry into the EEC. So we must probe the Government's true intentions.
  We get a clue in the rate of the tax—10 per cent. It is a round number, and an easy number to start with—and an easy number to raise during the years to come. We did not get a satisfactory answer even when the Chancellor intervened to say that that could not be applied to food without the consent of the United Kingdom Government. He did not give us the views of the United Kingdom Government. Are they firmly against taxation on food? Is it their intention to resist the taxing of food? Of course we know that it could not be applied to food without their consent, but what are their intentions? This is a suspiciously easy entry into the EEC, and the new tax is something that we should watch with great care because it is clear that the Government, with all the effort and discussions of the last year or so, have
  1240
  not gone to all this trouble just to get a replacement for purchase tax. There is more to it than that. We ask the Government to tell us and not keep us in the dark as they have kept us in the dark on a number of other matters.
  The Bill manifestly needs considerable amendment. The Financial Secretary to the Treasury told us in the debate on the Budget when talking about the staff of the Customs and Excise:
  "They have received more than 700 representations about VAT and have discussed it with more than 300 groups, in some cases on a number of occasions. As a result, we have been able to meet many of the points made."
  Later, he said:
  "This means that we cannot, having accepted the principle, reasonably at later stages begin to accept this or that Amendment to include or exclude this or that detailed item."— [OFFICIAL REPORT, 23rd March, 1972: Vol 833, c. 1803–5.]
  As final confirmation of the view of the Government we have today's article in the Financial Times over the by-line of John Bourne, Lobby Editor, The heading is:
  "Barber to stand firm on VAT".
  We know that the Government will resist all these Amendments. I find it insufferable that the Government should consider that because this Bill has received the scrutiny of industry and commerce, because it has been inspected by the Civil Service, it is so perfect that it need not be looked at or amended here. If the House of Commons cannot change the Bill I do not know what is the purpose of bringing it to this Committee. We are not experts no one here ought to claim to be experts—but what we ought to know, what we ought to repre. sent, is what the British people consider to be a fair tax on any of these matters.
  The Government take a grave risk if they ignore the opinion of the people in the final formulation of this tax. There must be the acceptance of an understanding that this Bill, like any other which comes before the House or a Committee, will be amended in the light of argument and discussion. In considering this Bill with its massive allocation of orders and regulations of a kind rarely seen and reminiscent of the European Communities Bill it may be that our scrutiny will show our procedures to be rather inadequate. It is clear from some of the

  1241
  things said by members of the Government about the Bill that what they were thinking about was not what was in the Bill but what was in the regulations and the orders which they have discussed but which this Committee has not yet seen.
  One of the saddest aspects of this Bill for me has been the way in which the House of Commons has been excluded from discussion. Like many others, I have had discussions with industry on various topics to do with the Bill. On one occasion I was discussing this with a number of people from an industry and they asked me whether I had read the discussion paper circulated by the Government. I was ashamed to admit that I had not seen it because I was not allowed to see it. This veil of secrecy which the Government have thrown over their proceedings extended to refusing to give me permission to see a document which was freely circulated within industry. There have been a number of such documents. I have tabled Written Questions and I have asked the Financial Secretary whether I could see those documents and he has refused. So we come to a debate of this kind when the Government say they have had representations from industry and discussions with it, when it is said that there has been scrutiny by the Civil Service, but the House and this Committee have been excluded from it. It is sheer effrontery to come to this Committee and say that there will be no Amendments. This is intolerable and unacceptable.
  There is a need to amend their Bill more than most Bills. This arises simply from the points of contact which it has with the community at large. There are a number of matters which we discuss in Finance Bills which have limited application. This Bill applies to every man, woman and child in the country. It deals with children's clothing, with people who feel ill and go to the chemists, with every small shopkeeper, and when the Chancellor talks about his generous tax exemption limits for traders there will be a hollow laugh from the cigarette and tobacco kiosks which will find themselves having to pay VAT and having to organise themselves for it.
  In this connection I want to quote from a letter in The Times Business News of 3rd May dealing with this generous
  1242
  exemption limit for small traders. It said:
  "Not many retail businesses are making much of a living for their owners on a turnover of less than £5,000. So when MPs buy their next packet of cigarettes from a little old lady in their station kiosk, they should spare a thought for the VAT problems she will have next year. And the thousands like her."
  This generous exemption limit will produce not only problems for those people but also the difficulties of evasion and avoidance to which my right hon. Friend the Member for Leeds, East (Mr. Healey) referred.
  We must remember the last words spoken in the House of Commons by the right hon. John Boyd-Carpenter in a speech to which many of us listened with affection. He said that any Chancellor of the Exchequer must come to the House prepared to make some concessions. The Chancellor of the Exchequer would be flying in the face of precedent if on an important new tax he failed to accept some of the arguments put to him which by their very nature he will not hear from industrialists and civil servants. He should be prepared to keep an open mind and not close it as he seems to have closed it before coming to the Committee.
  The VAT is a new and complex tax. There is no immediate requirement for it and we of the Opposition—and I am hopeful that many others in Committee will join us in this—will seek to amend the Bill during our long discussions. I do not believe that a case has been made out for VAT in this form at these rates and at this time, and I shall ask my hon. and right hon. Friends to oppose it.
  Mr. Higgins: In replying to the debate on the Motion "That the Clause stand part of the Bill" I will first comment on one or two of the speeches made by right hon. and hon. Gentlemen opposite. Many hon. Members on both sides of the Committee have said that they believe the time is ripe for reform of our indirect tax system, and the principle of the tax which we are debating has been endorsed by several hon. Members on both sides of the Committee.
  The hon. Member for Sheffield, Attercliffe (Mr. Duffy) said that we should consider VAT on its merits. He said

  1243
  that it is admirably designed for a consumption-oriented tax; that it is nondiscriminatory; that it will restrict avoidance and evasion—a point which is somewhat in conflict with what the right hon. Member for Leeds, East (Mr. Healey) said in opening the debate; that it is simple in practice and broadly based in application; that it will be a useful instrument for economic management—a point which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) does not seem to appreciate and that we should adopt VAT even if we were outside the EEC. The hon. Member for Attercliffe went on to make points of criticism of which I have taken careful note and to which I shall come presently, but I agree very much with what he said and there is merit in the reasons he gave for VAT. The hon. Gentleman went on to say that VAT is not a miracle. I am even prepared to agree with him on that. Nevertheless it is a major part of the reform of taxation in which the Government are engaged, a reform which is generally recognised as the most important this century.
  9.15 p.m.
  Some points have been raised which are based on misunderstandings and will be more appropriately taken up when we discuss the details of the various Clauses. I would not in any way wish, as the hon. Member for Ashton-under-Lyne has said, to anticipate those debates. We hope that there will be careful scrutiny of the Bill. I agree with the hon. Gentleman that this is a matter in which the House of Commons has a vital role to play. I hope we shall be giving this matter detailed scrutiny as it proceeds on the Floor of the House. I made this absolutely clear in the course of the speech to which the hon. Gentleman referred. I said that I would not wish to anticipate the views expressed in Committee or on Report.
  Having started on that non-partisan note, I turn to the speech of the right hon. Member for Leeds, East. I must confess I cannot promise to be non-partisan about that speech, which bore a remarkable resemblance to the speech delivered by the right hon. Gentleman on Second Reading. Apart from one or two passages, it was almost identical.
  Mr. Healey: Why not?
  Mr. Higgins: The right hon. Gentleman asks "Why not?" I hope we are not going to have the same speech on every Clause. I hope we shall have careful detailed scrutiny based on sound homework. I cannot say that the right hon. Gentleman's speech seemed to reflect any great depth of homework. I am sorry to say I found some of his remarks in many ways irresponsible. He suggested that I should take up these matters in my winding-up speech and I propose to do so.
  I intend to deal with the right hon. Gentleman's comments on enforcement. I will read carefully what he said, but my hon. and learned Friend the Member for Southport (Mr. Percival) drew attention to one of the right hon. Gentleman's statements that the Commissioners will have the power to convict and fine. This is simply not the case. It is irresponsible for any hon. Member, particularly a right hon. Member on the Opposition Front Bench, to seek to put forward early in the opening stage of our debate that kind of remark, for which there is no foundation. This is a serious debate and this is why I considered it right to intervene in the right hon. Gentleman's speech to put on record that I thought he was wrong on a number of points.
  Mr. Healey: The hon. Gentleman will recall that his right hon. Friend the Chancellor of the Exchequer was deeply uneasy about Clause 38. Of course the Commissioners themselves do not constitute the court, but they present the case for prosecution. The powers given to the courts by the Bill are totally without precedent in the jurisprudence of this country and have come under the most serious attack from the Presidents of the Bar Council and the Law Society. This is a serious point and I hope the hon. Gentleman will not try to ride away from it with a totally irrelevant piece of debating detail.
  Mr. Higgins: The right hon. Gentleman is wriggling and he knows it. The fact is that he made an irresponsible statement this afternoon. We can return to this point at a more appropriate stage in the Committee. The right hon. Gentleman also seeks to put into my right hon. Friend's mouth words which he did not utter. In my view the right hon. Gentleman was irresponsible, and again we

  1245
  shall be happy to answer his points later in the proceedings on the Bill.
  The second point I wish to take up is the extraordinary misapprehension of the right hon. Gentleman about the position of potato crisps and caviare. It was the Labour Government which put the tax on potato crisps in the first place, and it is the present Government which are reducing the tax. The change to VAT will reduce it still further.
  Mr. Joel Barnett: Will the hon. Gentleman allow me to intervene?
  Mr. Higgins: No; I should like to finish this point. We have not taxed caviare and the right hon. Gentleman when in Government never put forward a proposal to do so. I wondered why this should be so. I recall the statement by Hamlet, in talking to the players:
  "The play, I remember, pleased not the millions; twas caviare to the general."
  No doubt the right hon. Gentleman was more preoccupied at the time with generals than with caviare. However, as I say, we have narrowed the differential between the tax on potato crisps and the tax on caviare.
  I also take up the more important point that the right hon. Gentleman made—
  Mr. Barnett: Before the hon. Gentleman goes on—
  Mr. Higgins: No. I shall not give way. I have a great deal to say. The right hon. Gentleman—
  Mr. Barnett: Will not the hon. Gentle. man give way?
  Mr. Higgins: No. The right hon. Member for Leeds, East made a very serious point about the ability in the Bill to increase taxation by order. He made a number of statements, and he repeated the point that he had made on Second Reading. I take it up now because I do not wish there to be any misunderstanding.
  In his Budget Statement my right hon. Friend the Chancellor of the Exchequer explained that in order to help forward planning he proposed to announce a year in advance the rate which the tax was likely to be. He prescribed in the Finance Bill a rate of 10 per cent. But in order to allow for the needs of
  1246
  economic management between now and the time when the tax comes into operation Clause 9(2) provides for a once-for-all power to substitute by Treasury order before 1st April, 1973, a rate not lower than 7½ per cent. nor higher than 12½ per cent. There may have been a misunderstanding of this provision. I make it clear that it is a once-for-all provision as distinct from the VAT regulator power contained in Clause 9(3).
  The once-for-all power in Clause 9(2) can be used only before the tax has started. Unless economic circumstances require the operation of the power, the starting rate will be 10 per cent. If there needs thereafter to be a change my right hon. Friend has taken power to do that. The regulator power in Clause 9(3) will enable the rate of VAT to be altered by order up to 20 per cent. of the existing rate after the tax has been introduced.
  On Second Reading the right hon. Member for Leeds, East said that the Government were giving themselves power continually to increase the rate of VAT by Statutory Instrument. The right hon. Gentleman said:
  "They are giving themselves power in the Bill to make the rate 121 per cent. even before the tax comes into operation, to go up to 15 per cent. in 1974 and up to 18 per cent. in 1975. They propose to take power to do this simply by Statutory Instrument, debated at the fag-end of a busy day in this House…"—[OFFICIAL REPORT, 20th April, 1972; Vol. 835, c. 809.1
  That is not the case, and we ought to be clear what the position is. If one studies the Bill the once-for-all power could, if the economic management necessitated, raise the rate to 12½ per cent. before the tax came into operation. In theory if it in turn became necessary to use the regulator power during 1974 to increase the rate of tax, a 12½ per cent. rate could be increased to 15 per cent. But such an increase would have to be consolidated in substantive legislation before any increase could be made under the regulator power. This would give the fullest opportunities to discuss the matter in Finance Bill debates. There can be no question of a second increase under the regulator power in the way that the right hon. Gentleman suggested. If that is so, I presume that the right hon. Gentleman will wish to withdraw what he said on Second Reading.
  Mr. Healey: Certainly I do. I admit I was mistaken on Second Reading. However that was not the point I made today. My point today was one that the hon. Gentleman has confirmed, which is that it is open to the Government under the powers that they are giving themselves in the Bill within a year from now and within a week of the coming into operation of VAT to impose a rate of 15 per cent. over all, and, furthermore—
  Mr. J. Bruce-Gardyne: Or 5 per cent.
  Mr. Healey: —to increase the coverage so that it covers all the items at present zero rated. The hon. Gentleman is not disputing that, and that was the whole burden of the point I was making this afternoon.
  Mr. Higgins: The final point made by the right hon. Gentleman arises on another Clause, and no doubt we shall debate it at length when we get there.
  I wish to clarify the position, and I am grateful to the right hon. Gentleman for saying that he was mistaken on Second Reading. We are glad to have his correction on the record. The point I want to make is a simple one. It is that the powers are symmetrical. They are there both to increase tax by this amount and to decrease it by this amount.
  If the public are concerned about this, I can only tell the right hon. Gentleman that we on the Government side of the Committee are happy to stand on our record of tax changes between 1951 and 1964 and between June, 1970, and today. Whether the public would feel the same confidence in the right hon. Gentleman's record, I leave them to decide. It is extraordinary that the right hon. Gentleman should put up this enormous bogey man when our record is as good as it is and that of the party opposite is just the reverse.
  I now turn to some other points which have been made. Whatever the views about the economic merits of VAT, since the publication of the White Paper there has been widespread recognition of the way in which the VAT system has been discussed with the parties involved. I do not accept the point made by the hon. Member for Ashton-under-Lyne. There is a strong case for doing this in advance
  1248
  of introducing legislation so that the legislation is in the best form possible by the time that it comes to the House, which can then scrutinise it in the normal way.
  The preparation for this change has been the most thorough in modern times. The consultations are continuing because many technical questions have to be ironed out and we are doing as much work as possible on this. If the House approves the Bill, by the end of the summer explanatory literature will be sent to as many firms as possible setting out the mechanism, scope and coverage of the tax and what people will have to do. Hon. Gentlemen opposite have urged that we should give the maximum publicity to this tax so that people will understand it, and that is what we intend to do.
  What I find extraordinary this evening is the way in which hon. Gentlemen opposite say that the whole thing is being rushed. The right hon. Member for Leeds, East said that this was all being introduced within a year. The fact is that we set out our proposals quite clearly in a Green Paper issued a considerable time ago. It is incredible that right hon. and hon. Gentlemen opposite should say that this is all being done in a rush when we have published the White Paper and we have brought in the Bill. This change will not be introduced until April, 1973. Selective employment tax was introduced by the previous Government out of the hat, without a moment's warning, without any consultation and with all its faults upon its head. I find the right hon. Gentleman's argument extraordinary.
  Mr. Dalyell: If it has all been so carefully thought out, why is it that we do not know more about the transitional period?
  Mr. Higgins: The question of the transitional period does not arise on this Clause. My right hon. Friend spelled out the position in his Budget speech. It is a matter on which we shall need to have consultations. The time when the transitional period is announced will have to be judged in the light of the economic situation and after taking into account how long a period seems to be appropriate in the circumstances.

  1249
  [SIR ROBERT GRANT-FERRIS in the Chair]
  9.30 p.m.
  I wish to take up some other points that have been made about the VAT machinery. There are some aspects of the working of VAT that I should perhaps particularly mention because they have not been fully understood. One point about which there has been a good deal of misunderstanding is the operation of what is known as the VAT credit mechanism, which is the system for the deduction of input tax.
  Perhaps some people have been misled by published examples which follow the tax through on a single article from the point of manufacture, through to the wholesaler, on to the retailer and eventually to the customer. As I look at the Green Paper I see that there could have been an appropriate improvement in that it gave an example of one item passing down the chain, and in many ways this might have been misleading. We should have placed more stress not on the position of the individual item but on the question of the accounting period.
  Some people seem to have been led to think, mistakenly, that they will have to wait until they have sold a particular batch of goods before being able to claim the input tax paid on that batch at the time of purchase. This is not so. Input tax paid on goods bought in any tax period can be deducted in the tax return for that same period, even if the goods are still in stock.
  This means, in effect, that the stock will be held tax free, so that the retailer's money is not tied up in goods on his shelves, as now happens with purchase tax. This is a somewhat technical point which I wish to get over clearly. In other words, traders will not have to wait until they have sold their goods before being able to claim the input tax.
  This brings me to some concern which has been expressed about cash flow. It is true to say that, given the arrangements which exist on dates of settlements and so on, a number of traders will find that their cash flow improves. They will also have the benefit, as compared with SET, of not having to make a forced loan to the Government, which was in many ways one of the more iniquitous features
  1250
  of SET, which, unlike VAT, had an adverse effect on companies' cash flow.
  The same principle applies to capital equipment, services and so on. The buyer takes the tax deduction right away and any effect on his cash flow should, in general, be positive. These are some of the advantages which have not yet been fully appreciated.
  It is this credit mechanism which is the distinguishing feature of VAT and which makes it different from a cumulative or cascade tax, which applies at each point of production or distribution with no relief given for tax paid at earlier stages. The disadvantages of cascade taxes are well known. A number of Continental countries have tried them but have replaced them with VAT.
  A cascade tax discriminates between different methods of marketing, taxing some things once or twice but others several times over, so that it favours vertical integration. In principle, VAT is different in that it does not have any built-in incentive to vertical integration of production or distribution. It has the virtue that a very efficient producer or distributor pays a lower rate of tax whether or not he is vertically integrated.
  It might be helpful if I commented on the accounting periods. The White Paper explains that the prescribed accounting periods will usually be three months, with a period of grace of up to one month for the purpose of calculating the amounts of input and output tax and sending in the tax return. Some people may have accounting systems which are not based on calendar months, and we shall be seeing what we can do to tailor the tax periods to fit their accounting practices more closely.
  Where the input tax is expected to be more than the output tax as a general rule, perhaps because the trader's outputs are zero-rated foodstuffs or exports, the accounting period will normally be one month, and the Committee will appreciate that this is to the advantage of the trader.
  The Customs will not delay making repayments, still less hold back repayments to credit them against future tax liabilities. If a trader is due to be repaid money, he will get it promptly, unless, for example, there is a sudden claim for substantial refund, when normally he will

  1251
  be a trader who pays tax. In designing the machinery of the tax as a whole, it has been our concern that there should be as little interference as possible with normal trade practices.
  I turn to one or two more general points which stem perhaps from the remarks made by the hon. Member for Ashton-under-Lyne. No doubt in the debates on later Clauses we shall have a great deal of special pleading of one kind or another. There are three points. I should like to make on matters which arise about the principle embodied in this Clause.
  First, a number of representations which we have received and deputations which have come to make representations have argued that VAT will discriminate against a particular service or product. But apart from the broad blocks of expenditure which my right hon. Friend proposes to relieve from the tax—which everyone, I think, would agree cover the basics of life—VAT is a comprehensive tax. The point I was seeking to make on Second Reading was that if one accepts the principle of the comprehensive tax, that is something which will obviously influence one's decisions about exemptions. But in proposing to charge particular items to VAT we are not discriminating against them but refusing to discriminate in favour of them. If one has a comprehensive tax pleas for special treatment or discrimination must, I think, be looked at in the light of this.
  If we are to broaden the tax base and have the advantages of this for economic management—and they are very considerable, as I spelt out on Second Reading—it will mean that some items will be taxed which have not hitherto been taxed. This is a necessary result of having a tax which is comprehensive and having a broader base and economic advantages will flow from it.
  I make two other very quick points before I conclude. With regard to VAT, the broad blocks of expenditure which I have mentioned have been given relief by my right hon. Friend. This means, because we have not got a completely comprehensive tax, that we are bound to have some borderline problems. But the lines which have been drawn are lines which, to coin a phrase, are at the saddle point. Generally speaking, if one tries
  1252
  to move any of those lines a little further on a particular border, one is likely to slide a long way before one could call a halt at a sensible point. The early history of purchase tax demonstrates what an anomalous and inequitable system emerges once one begins to slide down such a slippery slope.
  For that reason it is not meaningful to ask what will be the cost of this or that concession. In answering that, one would need to take account of all the other concessions which would then be pressed. As my hon. Friend the Member for Basingstoke (Mr. David Mitchell) and my hon. Friend the Member for Horsham (Mr. Hordern) have pointed out, once such a process begins the standard rate would have to be raised higher and higher. Eventually one would be raising no revenue at all.
  Mr. Brian Walden: I hope the hon. Gentleman will give us a little more on that point, because if the Committee took him at his word on that, there would be virtually no purpose in having any discussion on zero rating or exemptions.
  Mr. Higgins: The point I am making is very simple. It is that if one accepts the principle of a comprehensive tax, obviously the House will need to look at all the various debates and reach a decision accordingly. I am seeking to establish that one would need to look at the consequences of having this or that particular concession. I stress as strongly as I can that on this matter one will need to look at the consequences. and no doubt we shall do that in great deail in the forthcoming debates in the Chamber.
  Mr. Healey: The hon. Gentleman keeps calling this a comprehensive tax. The fact is that it covers only 55 per cent. of consumer expenditure, because he has zero rated or exempted another 45 per cent. A very large number of the proposals for zero rating which the Committee will be discussing in the next few days could not conceivably make a difference of more than 2 or 3 per cent. in the total of consumer expenditure. It really will not be good enough for either side of the Committee if Treasury Ministers in dealing with these points say "We are not prepared to concede £5 million here because that would mean that we had to concede £1,500 million altogether". It is just as possible to quantify

  1253
  the consequences of making concessions on the individual items proposed in our Amendments as it has been for the items which the Government have already zero rated or exempted.
  Mr. Higgins: I am surprised to see an ex-Chancellor on the opposite side of the Committee nodding in agreement with that. It is an extraordinary proposition that we should consider making this or that concession without paying regard to the consequences flowing there-from. No doubt we can go into that in great detail later.
  The hon. Member for Loughborough (Mr. Cronin) raised in particular the question of the cost of living. At the time of the announcement in the 1971 Budget of the decision to introduce VAT much was made of the supposed effect on prices. Indeed, the Leader of the Opposition held forth at great length in the Budget debate last year.
  The effect of the switch would depend on the rate and coverage of the tax and any consequent effect that would have on prices. We now know that the tax will be levied at a rate of 10 per cent. and that food, rent, fares and housing will be relieved. Last year's prediction of the serious effect this tax will have on the cost of living can be seen to be unfounded.
  In this context it is worth pointing out that, looking at the overall effect of the reform of indirect taxation which we began in the 1971 Budget, this is estimated to reduce prices in that period, not to increase them.
  Much has been said about the social effects of the substitution of VAT for purchase tax and SET. During the debate the point was made from this side, and not only from the Front Bench, that there are no grounds for supposing that the changeover will be regressive. This is in sharp contrast with the assertions which have been made by hon. Members opposite.
  On 23rd March my hon. Friend the Member for Dartford (Mr. Trew) quoted —I refer to c. 1738—figures which strongly support the view which I am now putting forward. The research division of the Library had calculated what proportion of family budgets in the 1970 Family Expenditure Survey would have been free of VAT. The figures given
  1254
  by my hon. Friend were broadly correct, and I will remind the Committee of them.
  The figures show that the proportion of family budgets escaping VAT is higher for those with incomes in the range £10 to £15 a week than for those in the range £20 to £25 per week, and higher for those in the range £20 to £25 a week than for those in the range £35 to £40 a week. The figures show that the change does not benefit high income families relative to those with lower incomes. This is not surprising because, as I said earlier, we have gone to considerable lengths to zero-rate items such as food, fuel and fares and to relieve housing as far as practicable, exactly in order to avoid a regressive result from the changeover.
  Finally, to take up a point made by the hon. Member for Ashton-under-Lyne and a number of other hon. Members, there is a vast distinction between the two sides of the Committee as to whether to discriminate, in the way that purchase tax does, by having a multitude of rates. We on this side believe that there is great virtue in having a single rate. The proposals for a single rate have been very widely welcomed.
  We accept that there is this difference of philosophy between the two sides. What I find incomprehensible is the way in which the right hon. Member for Leeds, East and his predecessor and the hon. Member for Ashton-under-Lyne seem to feel that the present purchase tax in some way achieves its objective. It is well known that a great many items which nowadays no one would regard as luxuries were charged at very high rates of tax, though they may have been regarded as luxuries in 1940. The opinions expressed by the right hon. Gentleman's predecessor and by the right hon. Gentleman are extraordinary. Does the right hon. Gentleman suppose that only the rich buy television sets and washing machines? Does he think that electric and paraffin space heaters, electric irons, light bulbs, radio sets, proprietary drugs and medicines, all of which were previously at 30 per cent., are purchased only by the opulent? Does he suppose that gramophones, cosmetics and other items which were charged at the top rate of purchase tax are only possessed by the well-off? The answer is

  1255
  that the distinction which purchase tax makes between luxury and essential goods no longer holds. For virtually every so-called luxury item there is a cheaper version. There are cheap cameras as well as dear cameras. There are expensive record players and cheap ones, and so on.
  The discrimination of which right hon. and hon. Gentlemen are apparently in favour is discrimination which has not worked in practice, and it is not justified. What I want to be clear about this evening, and I believe the Committee should be clear about it as well, is that we are carrying out a major reform of our indirect tax system. That will be of great benefit to the country and the management of the economy.
  The Opposition's alternative is to stick with purchase tax and selective employment tax. Both those taxes have been completely discredited. It is high time we moved to a more rational system.
  9.45 p.m.
  Mr. Deakins: Most taxes in this country are not imposed on the basis of their contribution to social justice. But at least it may be said of purchase tax and SET that they did not have and do not have the socially regressive effects which are likely to flow from value added tax at 10 per cent. or any other rate that is imposed.
  The Financial Secretary to the Treasury has told us that this is going to be the most comprehensive tax ever introduced. Although the hon. Gentleman has excluded food, transport and education, he is bringing in a lot of goods and services which have never been taxed before, such as holidays, entertainment, communications and many other aspects of everyday life which affect ordinary people. They have never been taxed before directly or indirectly, whether through purchase tax or SET.
  I will put the record straight since a number of my hon. Friends have spoken in this debate in favour of value added tax. Their dispute with the Government is merely on the question of timing and the propriety of introducing value added tax in advance of our entry into the Market. I assure the Government benches that there is a considerable body of opinion on this side, which was rather
  1256
  unrepresented in the debate, which fervently believes that direct taxation is a far more progressive form of taxation than indirect taxation. Far from increasing the burden on the poorer section of the community through an extension of indirect taxation and relief of direct taxation, the way we should go in future —I hope the next Labour Government will take this to heart—is to increase direct taxation not only on income but on wealth, and steeply reduce the rates of indirect taxation, if not cut them out altogether.
  The major difference of principle which divides the two parties has for some reason not come out in debate. It may be that a number of my hon. Friends who are pro-Marketeers happened to be in favour of value added tax. There is no doubt about it that we have no assurance from the Government that the burden of this tax will be relieved on poor people by a consequent raising of social security benefit. Pensioners, the disabled, widows and the unemployed will be the people who suffer. They are not the people who are affected at the moment by direct or indirect taxation, purchase tax to any large extent, or SET. However, they will be affected very directly one way or the other by the burden of this iniquitous tax. Although few working-class people complain about the level of direct taxation, for every one who complains about direct taxation on overtime there are 100 who complain about price rises and the cost of living. It is that that we should have in mind.
  Let the Conservative Party, if it wishes, and as it has done in the last Budget, have the interests of surtax payers and high direct tax payers at heart. The Labour movement stands or falls on its devotion to the cause of the people who sent us here and whom we represent. If we accept this tax we are betraying their interests, because it will raise the cost of living and they will not be compensated for it. Therefore, I hope that on a matter of principle my right hon. and hon. Friends will divide the Committee, marching into the Lobby really believing what they are saying and voting for.
  Mr. Crouch: I am not sure whether the hon. Member for Walthamstow, West (Mr. Deakins) was speaking for the official Opposition, but he has made his views extremely clear on this tax. I could not

  1257
  take a more opposite view. During the several hours of the debate we have not heard those views expressed by other hon. Gentlemen. In fact, we have heard an extremely muddled expression of views, not a strong expression against the tax. [Interruption.] I do not want to discuss where I have been all day, but I have been here throughout the debate. [Interruption.] I went out at one time to have some supper, but I did not have caviare or potato crisps.
  The point of my brief intervention is to say that I welcome the advent of value added tax to replace the uneven, arbitrary, and thoroughly unequal purchase tax and selective employment tax.
  We have heard exclamations of disgust and dismay from the Opposition that we are rushing to impose this tax on the country. However, my hon. Friend the Financial Secretary has given a clear answer: that the Government allowed well over a year for discussion and consultation with interested parties throughout the country. I have found this period extremely valuable for discussing this subject with traders, manufacturers, retailers and others who are particularly concerned at the advent of a change in our taxation system. I welcome the Government's approach and the Green Paper which gave us so long for consultation.
  Consultation is not a matter which must be confined to people outside the House of Commons. Suggestions have been made on both sides that consultation must now take place in Committee of the whole House and in Committee upstairs because we want the opportunity now, and in the next two days, of examining and consulting with the Government some of the details of the application and administration of this tax.
  I have some sympathy with the right hon. Member for Leeds, East (Mr. Healey) who, in an intervention at the end, made the most constructive remark of any which he has made all day when he pointed out that there might be some further exceptions and exemptions and zero-ratings which should be considered in Committee. I hope that my right hon. and hon. Friends on the Treasury Bench will not prove inflexible. We know that the Chancellor is never inflexible. He has a ready ear when we express our views
  1258
  to him. I hope that he and his colleagues will continue to be flexible.
  I do not entirely agree with my hon. Friend the Member for Horsham (Mr. Hordern), who, perhaps reflecting an almost official Treasury view—[Interruption.]—perhaps in the shadows of that great Department—said that he hoped that there would be no more exceptions and exemptions because we could not afford to extend them too far.
  Some pressures are being brought to bear on hon. Members, which will be considered at a later stage in our Committee deliberations, for further zero-rating and exemptions. I hope that my right hon. and hon. Friends will listen to them and that we shall have consultation and debate upon them.
  I am concerned about one point of administration on which I believe we should have consultation and which I hope will be looked into very closely. I refer to the failure of the value added tax section of the Finance Bill to allow for any relief of bad debts incurred. This is a concession allowed under the purchase tax system. I have had some consultation and correspondence with the Financial Secretary on this matter. I understand the view of the Treasury to be that it cannot allow both the customer and the supplier to enjoy a tax credit in the case of value added tax as this would mean virtually allowing a double taxation relief.
  The Exchequer maintains that if the Treasury now allowed a claim for a tax refund to the supplier—that is credit in respect of the supply of goods or services for which he has not been paid—this would mean that it would be suffering a double loss of tax. I do not believe the Treasury need suffer such loss of tax. Why cannot the Customs and Excise debit the account of the person who has gone bankrupt and has not paid for the goods and services he has received by the amount of input tax already credited to him in respect of his purchase of goods and services? If the debtor has become insolvent the Customs and Excise will already have top priority in claiming money owed to them and will be in a much better position than any other creditors. If Clause 41 VAT is given such priority over other debts in the event of bankruptcy on winding up.
  Question put, That the Clause stand part of the Bill:—
  The Committee divided: Ayes 232, Noes 200.

  Division No. 170

  AYES

  [9.56 p.m.

  Adley, Robert

  Green, Alan

  Oppenheim, Mrs. Sally

  Alison, Michael (Barkston Ash)

  Grieve, Percy

  Osborn, John

  Astor, John

  Griffiths, Eldon (Bury St. Edmunds)

  Page, Graham (Crosby)

  Atkins, Humphrey

  Gummer, J. Selwyn

  Page, John (Harrow, W.)

  Awdry, Daniel

  Hall-Davis, A. G. F.

  Pardoe, John

  Baker, Kenneth (St. Marylebone)

  Hamilton, Michael (Salisbury)

  Parkinson, Cecil

  Baker, W. H. K. (Banff)

  Hannam, John (Exeter)

  Percival, Ian

  Barber, Fit. Hn. Anthony

  Harrison, Brian (Maldon)

  Pike, Miss Mervyn

  Beamish, Col. Sir Tufton

  Haselhurst, Alan

  Pink, R. Bonner

  Bell, Ronald

  Hastings, Stephen

  Pounder, Rafton

  Bennett, Dr. Reginald (Gosport)

  Havers, Michael

  Powell, Rt. Hn. J. Enoch

  Biffen, John

  Hawkins, Paul

  Price, David (Eastleigh)

  Biggs-Davison, John

  Hayhoe, Barney

  Proudfoot, Wilfred

  Blaker, Peter

  Heath, Rt. Hn. Edward

  Pym, Rt. Hn. Francis

  Boardman, Tom (Leicester, S.W.)

  Hicks, Robert

  Quennell, Miss J. M.

  Body, Richard

  Higgins, Terence L.

  Ramsden, Rt. Hn. James

  Boscawen, Robert

  Hiley, Joseph

  Redmond, Robert

  Bossom, Sir Clive

  Hill, John E. B. (Norfolk, S.)

  Reed, Laurance (Bolton, E.)

  Bowden, Andrew

  Hill, James (Southampton, Test)

  Rees-Davies, W. R.

  Bray, Ronald

  Hordern, Peter

  Renton. Rt. Hn. Sir David

  Brocklebank-Fowler, Christopher

  Hornby, Richard

  Rhys Williams, Sir Brandon

  Bruce-Gardyne, J.

  Hornsby-Smith.Rt.Hn.Dame Patricia

  Ridsdalo, Julian

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

  Howell, Ralph (Norfolk, N.)

  Rippon, Rt. Hn. Geoffrey

  Buck, Antony

  Hunt, John

  Roberts, Michael (Cardiff, N.)

  Bullus, Sir Eric

  Hutchison, Michael Clark

  Roberts, Wyn (Conway)

  Burden, F. A.

  James, David

  Rossi, Hugh (Hornsey)

  Campbell, Rt.Hn.G.(Moray&Na!rn)

  Jenkin, Patrick (Woodford)

  Russell, Sir Ronald

  Carlisle, Mark

  Jessel, Toby

  Scott-Hopkins, James

  Chapman, Sydney

  Johnson Smith, G. (E. Grinstead)

  Sharpies, Richard

  Chataway, Rt. Hn. Christopher

  Jopling, Michael

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

  Chichester-Clark, R.

  Kellett-Bowman, Mrs. Elaine

  Shelton, William (Clapham)

  Churchill, W. S.

  Kershaw, Anthony

  Skeet, T. H. H.

  Clark, William (Surrey, E.)

  Kilfedder, James

  Smith, Dudley (W'wlck & L'mingtom

  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, Iain

  Coombs, Derek

  Kitson, Timothy

  Stanbrook, Ivor

  Cooper, A. E.

  Knight, Mrs. Jill

  Steel, David

  Cordle, John

  Knox, David

  Stewart-Smith, Geoffrey (Belper)

  Corfield, Rt. Hn. Frederick

  Lamont, Norman

  Stokes, John

  Cormack, Patrick

  Legge-Bourke, Sir Harry

  Stuttaford, Dr. Tom

  Costain, A. P.

  Le Marchant, Spencer

  Sutcliffe, John

  Critchley, Julian

  Lewis, Kenneth (Rutland)

  Tapsell, Peter

  Crouch, David

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

  Taylor, Sir Charles (Eastbourne)

  Crowder, F. P.

  Longden, Sir Gilbert

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

  Davies, Rt. Hn. John (Knutsford)

  Loveridge, John

  Taylor, Frank (Moss Side)

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

  MacArthur, Ian

  Taylor, Robert (Croydon, N.W.)

  Dean, Paul

  McCrindle, R. A.

  Tebbit, Norman

  Deedes, Rt. Hn. W. F.

  McLaren, Martin

  Temple, John M.

  Digby, Simon Wingfield

  McNair-Wilson, Michael

  Thatcher, Rt. Hn. Mrs. Margaret

  Douglas-Home, Rt. Hn. Sir Alec

  Maddan, Martin

  Thomas, Rt. Hn. Peter (Hendon, S.)

  Orayson, G. B.

  Madel, David

  Thompson, Sir Richard (Croydon. S.)

  du Cann, Rt. Hn. Edward

  Maginnis, John E.

  Thorpe, Rt. Hn. Jeremy

  Dykes, Hugh

  Marten, Neil

  Trafford, Dr. Anthony

  Eden, Sir John

  Mather, Carol

  Trew, Peter

  Elliot, Capt. Walter (Carshaiton)

  Maude, Angus

  Tugendhat, Christopher

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

  Mawby, Ray

  Turton, Rt. Hn. Sir Robin

  Emery, Peter

  Maxwell-Hyslop, R. J.

  van Straubenzee, W. R.

  Eyre, Reginald

  Meyer, Sir Anthony

  Vickers, Dame Joan

  Farr, John

  Mills, Peter (Torrington)

  Waddington, David

  Fenner, Mrs. Peggy

  Miscampbell, Norman

  Walder, David (Clitheroe)

  Fidler, Michael

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

  Walters, Dennis

  Flnsberg, Geolfrey (Hampstead)

  Mitchell, David (Basingstoke)

  Ward, Dame Irene

  Fisher, Nigel (Surbiton)

  Moate, Roger

  Warren, Kenneth

  Fookes, Miss Janet

  Molyneaux, James

  Weatherill, Bernard

  Fortescue, Tim

  Money, Ernie

  Wells, John (Maidstone)

  Foster, Sir John

  Monks, Mrs. Connie

  White, Roger (Gravesend)

  Fox, Marcus

  Monro, Hector

  Winterton, Nicholas

  Fry, Peter

  Montgomery, Fergus

  Wood, Rt. Hn. Richard

  Gardner, Edward

  More, Jasper

  Woodhouse, Kn. Christopher

  Gibson-Watt, David

  Morrison, Charles

  Woodnutt, Mark

  Gilmour, Ian (Norfolk, C.)

  Mudd, David

  Wylie, Rt. Hn. N. R.

  Gilmour, Sir John (Fife, E.)

  Murton, Oscar

  Younger, Hn. George

  Godber, Rt. Hn. J. B.

  Neave, Airey

  Gorst, John

  Noble, Rt. Hn. Michael

  TELLERS FOR THE AYES

  Gower, Raymond

  Normanton, Tom

  Mr. Victor Goodhew and

  Grant, Anthony (Harrow, C.)

  Nott, John

  Mr. John Stradlins Thomas

  Gray, Hamish

  Onslow, Cranley

  NOES

  Albu, Austen

  Golding, John

  Oakes, Gordon

  Allaun, Frank (Salford, E.)

  Gordon Walker, Rt. Hn. P. C

  Ogden, Eric

  Allen, Scholefield

  Gourlay, Harry

  O'Halloran, Michael

  Archer, Peter (Rowley Regis)

  Grant, George (Morpeth)

  Oram, Bert

  Armstrong, Ernest

  Hamilton, William (Fife, W.)

  Orbach, Maurice

  Ashley, Jack

  Hamling, William

  Oswald, Thomas

  Ashton, Joe

  Hannan, William (G'gow, Maryhill)

  Paget, R. T.

  Atkinson, Norman

  Harper, Joseph

  Panned, Rt. Hn. Charles

  Bagler, Gordon AT.

  Harrison, Walter (Wakefield)

  Parry, Robert (Liverpool, Exchange)

  Barnes, Michael

  Hart, Rt. Hn. Judith

  Pendry, Tom

  Barnett, Guy (Greenwich)

  Haitersley, Roy

  Pentland, Norman

  Barnett, Joel (Heywood and Royton)

  Healey, Rt. Hn. Denis

  Perry, Ernest G.

  Baxter, William

  Heffer, Eric S.

  Prescott, John

  Benn, Rt. Hn. Anthony Wedgwood

  Houghton, Rt. Hn. Douglas

  Price, J. T. (Westhoughton)

  Bennett, James (Glasgow, Bridgeton)

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Probert, Arthur

  Bidwell, Sydney

  Hughes, Mark (Durham)

  Reed, D. (Sedgefield)

  Boardman, H. (Leigh)

  Hughes, Robert (Aberdeen, N.)

  Rees, Merlyn (Leeds, S.)

  Booth, Albert

  Hughes, Roy (Newport)

  Rhodes, Geoffrey

  Boyden, James (Bishop Auckland)

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

  Richard, Ivor

  Bradley, Tom

  Janner, Greville

  Robertson, John (Paisley)

  Broughton, Sir Alfred

  Jenkins, Hugh (Putney)

  Roderick, Caerwyn E.(Br'c'n&R'dnor)

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

  Jenkins, Rt. Hn. Roy (Stechford)

  Rodgers, William (Stockton-on-Tees)

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

  John, Brynmor

  Roper, John

  Buchan, Norman

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

  Rose, Paul B.

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

  Johnson, Walter (Derby, S.)

  Ross, Rt. Hn. William (Kilmarnock)

  Callaghan, Rt. Hn. James

  Jones, Barry (Flint, E.)

  Sheldon, Robert (Ashton-under-Lyne)

  Cant, R. B.

  Jones, Dan (Burnley)

  Shore, Rt. Hn. Peter (Stepney)

  Carter, Ray (Birmingham, Northfield)

  Jones, Gwynoro (Carmarthen)

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

  Carter-Jones, Lewis (Eccles)

  Judd, Frank

  Silkin, Rt. Hn. John (Deptford)

  Castle, Rt. Hn. Barbara

  Kaufman, Gerald

  Silkin, Hn. S. C. (Dulwich)

  Clark, David (Colne Valley)

  Kelley, Richard

  Silverman, Julius

  Cocks, Michael (Bristol, S.)

  Kerr, Russell

  Skinner, Dennis

  Cohen, Stanley

  Kinnock, Nell

  Small, William

  Coleman, Donald

  Lamborn, Harry

  Smith, John (Lanarkshire, N.)

  Concannon, J. D.

  Lamond, James

  Spearing, Nigel

  Conlan, Bernard

  Latham, Arthur

  Spriggs, Leslie

  Corbet, Mrs. Freda

  Lawson, George

  Stallard, A. W.

  Crossman, Rt. Hn. Richard

  Leadbitter, Ted

  Stewart, Rt. Hn. Michael (Fulham)

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

  Lee, Rt. Hn. Frederick

  Stoddart, David (Swindon)

  Cunningham, Dr. J. A. (Whitehaven)

  Leonard, Dick

  Stonehouse, Rt. Hn. John

  Dalyell, Tam

  Lestor, Miss Joan

  Summerskill, Hn. Dr. Shirley

  Darling, Rt. Hn. George

  Loughlin, Charles

  Taverne, Dick

  Davidson, Arthur

  Lyon, Alexander W. (York)

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

  Davies, Ifor (Gower)

  Mabon, Dr. J. Dickson

  Thomson, Rt. Hn. Q. (Dundee, E.)

  Davis, Clinton (Hackney, C.)

  McCartney, Hugh

  Tinn, James

  Davis, Terry (Bromsgrove)

  McEthone, Frank

  Tomney, Frank

  Deakins, Eric

  McGuire, Michael

  Torney, Tom

  Dempsey, James

  Mackenzie, Gregor

  Tuck, Raphael

  Doig, Peter

  Mackintosh, John P.

  Urwin, T. W.

  Dormand, J. D.

  Maclennan, Robert

  Varley, Eric G.

  Douglas, Dick (Stirlingshire, E.)

  Mahon, Simon (Bootle)

  Wainwright, Edwin

  Duffy, A. E. P.

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

  Walden, Brian (B'm'ham, All Saints)

  Dunnett, Jack

  Marks, Kenneth

  Walker, Harold (Doncaster)

  Eadle, Alex

  Mason, Rt. Hn. Roy

  Wallace, George

  Edwards, William (Merioneth)

  Mavhew, Christopher

  Weitzman, David

  Evans, Fred

  Mellish, Rt. Hn. Robert

  Wells, William (Walsall, N.)

  Ewing, Henry

  Mendelson, John

  White, James (Glasgow, Pollok)

  Faulds, Andrew

  Mikardo, Ian

  Whitehead, Phillip

  Ferny hough, Rt. Hn. E.

  Millan, Bruce

  Wiltey, Rt. Hn. Frederick

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

  Miller, Dr. M. S.

  Williams, Alan (Swansea, W.)

  Fletcher, Ted (Darlington)

  Milne, Edward

  Williams, W. T. (Warrington)

  Foley, Maurice

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

  Wilson, Alexander (Hamilton)

  Foot, Michael

  Morgan, Elystan (Cardiganshire)

  Wilson, William (Coventry, S.)

  Forrester, John

  Morris, Alfrad (Wythenshawe)

  Woof, Robert

  Freeson, Reginald

  Morris, Charles R. (Openshaw)

  Galpern, Sir Myer

  Moyle, Roland

  TELLERS FOR THE NOES

  Gilbert, Dr. John

  Mulley, Rt. Hn. Frederick

  Mr. James Hamilton and

  Ginsburg, David (Dewsbury)

  Murray, Ronald King

  Mr. James Wellbeloved.

  Question accordingly agreed to.
  Clause 1 ordered to stand part of the Bill.

Clause 9

  RATE OF TAX
  Mr. Brian Walden: I beg to move Amendment No. 2, in page 8, line 17, leave out ' ten ' and insert seven and a half
  The Chairman: With this Amendment we can take for debate the following Amendments, all standing in the name of the right hon. Member for Leeds, East (Mr. Healey) and the names of his hon. Friends:
  No. 3, in page 8, line 25, leave out ten ' and insert ' seven and a half';
  No. 4, in line 26, leave out ' seven and a half ' and insert ' five';
  No. 5, in line 26, leave out ' twelve and a half ' and insert nine';
  No. 7, in line 28, after ' increase insert:
  'the rate for the time being in force by such percentage thereof, not exceeding ten per cent. ';
  and No. 88, in page 8, line 30, leave out ' 20 ' and insert 10 '.
  standing in the name of the hon. Member for South Angus (Mr. BruceGardyne).
  Mr. Walden: The intention of this group of Amendments should be quite clear. We are seeking not to diminish the capacity of the Government to lower the rate of the value added tax but to diminish the rate at which the Government say they will introduce it and also their regulative power to increase it. I shall answer the constant invitations from the Government, who are sparing in the information they give us, for us to define more clearly our attitude. I welcome the chance on this narrow set of Amendments to do just that.
  First, however, I want to make a technical point which arises from my experience—and I need to declare a financial interest here. It is of great interest to the business community. Obviously, at some stage the rate of VAT will be varied and I hope that the present or any future Government, if they decide to vary it, will not do so beyond two places of decimals. It is a technical point but important.
  1264
  If accounting machines have to be sold on the assumption that they have to deal with three or four places of decimals, it makes a great deal of difference to the business equipment industry. If it sells machines on the basis that that is likely to happen and it does not happen, it will be put in the position of having appeared to have defrauded those it has supplied. On the other hand, if it supplies machines which calculate up to two places of decimals and then there is need to calculate up to four places, palpably the job will have to be done all over again and the industry will find itself in an invidious position. I begin therefore with what is, I hope, a fairly non-controversial point. From the Treasury Bench point of view I shall get worse but I begin by drawing the Minister's attention to this and asking for some reassurance.
  I want to say a little about regressive and progressive taxation. I at least am unhappy about how these words are being used and defined. Every direct tax is by its nature regressive. There is only one really progressive form of taxation and that is Utopian. It is the old slogan of "From each according to his ability". In this case it is his ability to pay. People would pay differently for the same commodity in proportion to their income which would have the effect of equalising incomes. That cannot be done in the real world. That is the only really progressive form of taxation.
  With all indirect tax the issue is "How regressive?" That brings us to the point that worries us when we look at Clause 9, to our suspicions about what is likely to happen in future if the Clause is passed unamended. We do not like the virtue that hen. Members on the Government side so frequently praise about the tax, namely that by being widely based and having a single rate it is non-discriminatory. We like discriminatory taxation. If there is to be regressive taxation, and indirect taxation is regressive, we prefer a discriminatory tax. What for hon. Members opposite is a virtue is for us a vice.
  We believe the Tory Party when it says that it prefers a system in which a much greater proportion of revenue is raised from indirect taxation and there is a decline in direct taxation and taxation of corporations. That sincerely expresses the philosophy of hon. Members opposite.

  1265
  It is a highly regressive philosophy but it is one in which they believe and, given the basis for their support, that is understandable. That is what makes us suspicious about the rates laid down in Clause 9.
  However beautiful an instrument the Chancellor says he has devised for the nation and however many people he claims to have consulted and—I noticed this leaking into his briefs and those of this colleagues—however much he regards this as being so perfect as to make any changes unnecessary, we cannot agree. We do not really believe this, being suspicious men or at least not being naive men. We cannot really believe that the Government intend to employ an additional 6,000 of their own servants plus a minimum of 50,000 people in industry to cope with this tax to raise in perpetuity exactly the same amount of revenue as is raised by purchase tax and SET.
  We do not buy it. We do not think it is a likely proposition. What we think is likely is that a singularly nasty pill will be sweetened, at least in its presentation. The country will be told that everything has been worked out with full consultation although there has been no consultation with the vast majority of people who pay tax, namely the consumers. Their views have certainly not been requested.
  [Sir STEPHEN MCADDEN in the Chair]
  10.15 p.m.
  Despite all the consultative mechanism, we do not believe that the Government would go to all this trouble and philosophic nicety just because the Tory Party has decided that rather than reform purchase tax it is ideologically purer to introduce VAT. We think that the VAT rate will go up, as it has done in every country in which VAT has been introduced. I am delighted to see that my old friendly enemy the hon. Member for Oswestry (Mr. Biffen) agrees with me on that. He knows, I know and the Chancellor knows that no country which has introduced VAT has kept to the rate at which it was introduced.
  It would be a purposeless and farcical exercise if, simply because hon. Gentlemen opposite have scruples towards pur-
  1266
  chase tax, which they never had during the 13 years they were in power in the 1950s and 1960s, and because they excessively dislike SET, they felt it necessary to produce the massive provisions which appear in the early part of the Bill.
  We notice—and this was conceded by the Financial Secretary to the Treasury —that in accordance with Clause 9(2) and (3) it is an indisputable fact, although only obliquely confirmed by the Treasury Bench, that the tax could be operating a year from now at 15 per cent. I am not even taking into account, as it would be out of order on this series of Amendments, that the zero ratings could also be changed. We could have a 15 per cent. rate. The Government have given themselves power to do that. I think it was the Financial Secretary who said that the rate will be 5 per cent. Pigs could fly. It will not be a 5 per cent. rate and in our judgment it will not be 10 per cent. for very long either.
  The Chancellor has given himself power by subsections (2) and (3) to put the rate up to 15 per cent. If there is no intention to do that, and if the regulative powers are not needed to do that, our series of Amendments could easily be accepted. We are not taking away from the Chancellor his ability to use the regulator; what we are seeking to take away from him is the chance to put up the rate to 15 per cent. If he has no intention of doing that, if no thought could be further from his mind, he should accept the Amendments. The Financial Secretary said in a memorable phrase that the Conservative Party would be prepared to run on its taxation record. We shall remember those words and we shall see whether or not the rate goes up. If it is not the intention to do that, it will not be difficult for the Chancellor to come to the Box and say—so that his intentions shall not be misunderstood, and standing as he always does on his record—that he is not prepared to take sweeping regulative power of this kind which will enable him to increase the rate of tax simply, as my right hon. Friend the Member for Leeds, East (Mr. Healey) said, by means of an order at the fag end of a day. We are inviting the Chancellor not to take those powers but to take the more limited powers we are suggesting in our series of Amendments
  Harmonisation is relevant to our Amendments and it is another suspicion

  1267
  in our minds. The Chancellor can always dispel these suspicions by giving guarantees that will stick instead of running on his record by filling out the bare bones of the tax that we have been given.
  Despite all that is said about Green and White Papers, the fact remains that the VAT provisions give us a flimsy framework and a devil of a lot of regulations. Although it may be true that the Customs and Excise will be involved in the most profound talks on these regulations with interested parties outside the House, very few inside the House will have the opportunity to be privy to any of these talks or to discover what we have let ourselves in for until we have passed these various Clauses.
  We want to vent our suspicions. We do not believe that the Chancellor has given us any assurance that is worth having. The hon. Member for Horsham (Mr. Hordern) said the Chancellor had assured the House that harmonisation could come about only by a unanimous decision in the Community. He felt that was an absolutely sufficient guarantee from the Chancellor in respect of all our fears about a rising rate. It would be a guarantee if he knew that our iron Chancellor would fight against any harmonisation proposals which would cause him to have to raise the rate in this country. We do not believe that for a moment. We do not believe that will happen. We think the Chancellor will welcome the chance to put up VAT rates and will run it in on the pretext that he has to do this to harmonise with regulations inside the Common Market. I say to the hon. Member for Oswestry—who like the Opposition Front Bench was not born the day before yesterday—that we are in agreement on this matter.
  I say to the hon. Member for Horsham, whom I have known and liked for a long time, whatever our political differences, that we have not had any assurance on this matter. We have no guarantee to give to our constituents. What we can tell them is simply that we are passing a Bill which might mean that the rate of VAT, when it starts to operate, will be 10 per cent; on the other hand, it might mean that it will be 15 per cent. Again it might mean that it will be 6 per cent., but nobody seriously believes
  1268
  that and it is thrown in only as a debating point. The amount of tax is so broadly based that the amount that can be raised by giving the Government regulative powers under Clause 9 is colossal. I do not recall any Government on a narrow tax of this kind ever asking to be given regulative authority of this kind. I suggest that the Government would do well to consider the Opposition Amendments and to examine whether they want to go back to their constituents and say that the tax might be at 10 per cent., 12½ per cent. or 15 per cent. Will they say that the people should be content to accept the Chancellor's belief in the long run in the record of the Conservative Party on taxation?
  Mr. A. E. Cooper: I would point out to the hon. Gentleman that in the six years of Labour Government taxation was increased by £3,000 million and that in the two years we have been in power we have reduced taxation by £3,000 million.
  Mr. Walden: The hon. Gentleman must feel that I have been under an anaesthetic for a very long time if he thinks that is the first time I have heard that chestnut. If I wanted to hold up the progress of the Committee, which I do not, I would talk about the respective rates of balance of payments at various times when one side or the other was in power and would deal with the rate of demand in the economy and so on. We can all make these points. I am less interested in what we did in six years of government or in what the Tories did in their 13 years than I am in worring about the rate of VAT once the tax comes into operation.
  Our Amendments give the Chancellor the chance to come clean. They give him the chance to say that he does not need a regulative power which could
  bring him in such a large additional sum in revenue and, bearing in mind many people's just and proper apprehensions about the intentions of the Treasury, to say that he is prepared to accept these Amendments.
  Mr. Trew: Any Amendment proposed by the party opposite which has the effect of reducing taxation is one which we ought to welcome—and examine.
  The hon. Member for Birmingham, All Saints (Mr. Brian Walden) gave an innocuous reason for introducing the

  1269
  Amendment. He said that it was to reduce the freedom of action of the Government to increase the rate of VAT in the future. In effect, the hon. Gentleman proposes a reduction in revenue of £360 million, and really he must say where he proposes—[Interruption.] The Amendment is to reduce the provisional rate of VAT by 2½ per cent., which has the effect of reducing the revenue by £360 million.
  Mr. Walden: But all the consequent Amendments give the Chancellor of the Exchequer the chance to recoup back to the 10 per cent. rate if he wishes to.
  Mr. Trew: But the Amendment reduces the band within which my right hon. Friend can act in a way equivalent to reducing revenue by £360 million. However, the hon. Gentleman gave a clue about the way in which he would like to see the additional revenue made up. He disapproved of the fact that we on this side wanted to shift the burden of taxation from earning to spending. In that, of course, he disagrees with his right hon. Friends the Members for Birmingham, Stechford (Mr. Roy Jenkins) and for Manchester, Cheetham (Mr. Harold Lever), who are on record as acknowledging the disincentive effect of high direct taxation. Presumably they are in sympathy with the principle of shifting the burden of taxation from earning to spending.
  When the hon. Member for All Saints hinted darkly at the Government's intention to increase the rate of VAT in order to bring in more revenue, he overlooked a very important aspect of VAT, which is its buoyancy. To leave the rate at 10 per cent. is not to raise the same amount of revenue for ever. It is a buoyant tax because it is a comprehensive one and, therefore, extends automatically to every new process, technology and service coming on to the market. But in addition the rate of revenue increases faster than consumer expenditure for one important reason. Those goods and services relieved from VAT, which are the necessities of life, each year form a progressively smaller proportion of total consumer expenditure. Therefore the tax base for VAT increases year by year. That is why it is a buoyant tax and very different from the tax favoured by the party opposite, purchase tax.
  1270
  From 1959 to 1969 consumer expenditure increased by 78 per cent. But the yield from purchase tax increased by only 59 per cent. Purchase tax is not a buoyant tax because the base for it shrinks year by year. It cannot be extended to services which each year form a greater part of consumer expenditure. Just as the tax base for VAT increases relatively year by year, so the tax base for purchase tax decreases relatively year by year. Therefore, if it is to yield the same revenue as VAT it has to have a running mate. The chosen mate of the Labout Party is SET. They are the two terrible twins of Socialist indirect taxation policy.
  SET has never been a popular tax. It has been introduced in this country in various forms. It so greatly incensed a distinguished former constituent of mine, Wat Tyler, that he rebelled against it in 1381. It was a long time before any Government were so foolish as to introduce such a tax again.
  There are no alternative indirect taxes which in any way match VAT as a revenue raiser. I consider that 10 per cent. is eminently fair. It represents an overall tax of 5 per cent. on consumer expenditure. By no stretch of the imagination can that be called harsh.
  It is not regressive. It is worth referring again to the figures referred to by my hon. Friend the Financial Secretary in the previous debate. The analysis of the 1970 family expenditure survey showed that 40 per cent. of the average household expenditure would be exempt from VAT, rising to over 65 per cent. for the poorest households. That is not a regressive tax but a fair one. The rate of 10 per cent. is eminently reasonable and the lowest in Europe, and I therefore oppose the Amendments.
  10.30 p.m.
  Mr. Bruce-Gardyne: I do not intend to go quite as far back as my hon. Friend the Member for Dartford (Mr. Trew) in his reference to a distinguished former constituent. I want to say a few words in particular about the Amendment in my name, No. 88, and Opposition Amendment No. 7, which is really the pair to it.
  Before doing that I feel impelled to say something about the introductory

  1271
  remarks of the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I think that on the whole the hon. Gentleman made a somewhat more impressive case than did his right hon. Friend the Member for Leeds, East (Mr. Healey) earlier this afternoon, but that is not surprising. That is what we should expect of the hon. Gentleman, particularly on these matters.
  Nevertheless I felt that the hon. Gentleman brushed aside too easily embarrassing comments from this side of the Committee about the tax records of the two sides of the Committee during their respective terms of office. The hon. Gentleman sounded rather like the confirmed alcoholic who turns to his abstemious friend and says "I say, old fellow, we will put the hard stuff out of reach ", because that is ostensibly what the Amendments are designed to do. That will not wash in view of the Labour Party's record.
  The hon. Gentleman expressed all sorts of concern about the evil intentions which my right hon. Friend the Chancellor of the Exchequer might have about harmonisation in the European Community. I am bound to tell the hon. Gentleman that what concerns us on this side of the Committee is nothing of that kind. What concerns us is what, in the improbable event of the electorate returning them to power, another Labour Government would do by way of confirming their reputation of using regulators invariably in an upward direction. How the hon. Gentleman can have the nerve to talk about the Tory Governments of 1951 to 1964 using the regulator upwards without mentioning that only last summer the Government used it not merely downwards, but downwards doubly, is past belief.
  The fact is that we were all surprised that my right hon. Friend was able to announce a 10 per cent. standard rate. We had all expected something substantially higher. As my right hon. Friend said, in his election address, the right hon. Member for Leeds, East forecast something substantially higher. If the right hon. Gentleman was not surprised at a 10 per cent. rate—and he confessed that he was not—one can only assume that he does not believe anything in his
  1272
  election addresses, and on his past track record he would be well advised to take that view.
  There is a double hypocrisy about the Opposition's attitude on Amendment No. 2 and the other principal Amendments. As my right hon. Friend said on Second Reading, the position is that there is a total conflict between the desire of hon. Gentlemen opposite, in these Amendments, to go for a lower rate of VAT and their determination to demand all sorts of extensions of zero-rating under Schedule 4.
  In his first intervention on Second Reading in his new appearance as Opposition spokesman on financial matters, the right hon. Member for Leeds, East said that if we were worried about extending concessions on zero-rating, we could always put up the rate of VAT. That being his view, what hypocrisy it is for hon. Gentlemen opposite to call for a lower standard rate. We can treat Amendment No. 2 and the Amendments that go with it with the contempt they deserve.
  I come to Amendment No. 88 which stands in my name and Amendment No. 7 which stands in the names of hon. Gentlemen opposite, though the hon. Member for All Saints paid scant attention to it. For the benefit of hon. Members who have not followed these matters in detail, perhaps I should emphasise that the purpose of Amendment No. 7 is to empower the Government to use the VAT regulator to 20 per cent. downwards but to only 10 per cent. upwards. The purpose of my Amendment No. 88 is to restrict the freedom of the Government to use the regulator to 10 per cent. in either direction, which conforms to the existing regulator on purchase tax.
  Mr. Douglas: The hon. Gentleman lays great stress on hypocrisy. If he has such endearing concern for the veracity of the statements of his colleagues in the Government, may I ask him to explain why he is proposing in Amendment No. 88 to restrict their freedom of action to reduce the tax?
  Mr. Bruce-Gardyne: If the hon. Gentleman will have patience I will come to that. He must let me make my speech in my own way.

  1273
  I use the word "hypocrisy" again. For hon. Gentlemen opposite, who in six years used the regulator twice in an upward direction but never in a downward direction, to demand that we, who have already used the regulator doubly downwards, should restrict ourselves not to nut up the rate by more than 10 per cent. but to be free to put it down by 20 per cent. is a hit hard to swallow.
  Why do I suggest that we limit the use of the regulator to 10 per cent. in either direction? I am increasingly an agnostic about the use of the regulator for purposes of fine tuning because I doubt whether it is given to man to manipulate the economy almost from week to week by substantial adjustment in the fiscal system. I sometimes think that if we devoted to what we might call the monetary choke half the loving care and attention that we devote to the fiscal accelerator and brake mechanisms we might find ourselves more successful in managing the economy.
  There is one very good case for the use of the regulator in a downward direction, and that is as a weapon against inflation. I hazard a guess that the historians of our affairs may come to the conclusion that the decision of my right hon. Friend to reduce purchase tax by 20 per cent. last year was more effective in fighting inflation than the so-called CBI price initiative, which I believe to have had some disadvantageous effects in other spheres, a matter which I cannot develop without straying out of order. If, however, one wishes to adjust rates of indirect taxation downwards in order to combat inflation, one does not need a regulator for that purpose. One of the curious things about the remarks of the hon. Member for All Saints was that he showed no awareness of the fact that last year it was not the regulator that was used but the power to issue an order under the Purchase Tax Act, 1963.
  As I understand it—my hon. Friend the Minister of State will correct me if I am wrong—the only purpose of having a regulator is to enable the Government to adjust the rates of indirect taxation when the House of Commons is not in session, because when the House of Commons is in session it is open to the Government to introduce orders on the same lines as the order introduced last July to reduce the rate to 20 per cent.
  1274
  Perhaps my hon. Friend the Minister of State will clear up a point that arises on this matter. The power to make such an order existed under the Purchase Tax Act, 1963. May we take it that a similar power would exist under the Bill for VAT? I think that this is probably correct but it needs clarification. If it is correct, clearly the only reason for having the regulator must be for purposes of fine tuning for the four months of the year when the House of Commons is not sitting. Abstemiousness from fine tuning for four months of the year would not help very much. So. whether or not we have the regulator in existence is not a matter of overriding significance in the management of the economy. But perhaps we should have an explanation from my hon. Friend the Minister of State as to why it has been decided to put the regulator power at 20 per cent. as opposed to the 10 per cent. on purchase tax. We have not had such an explanation to date.
  In his Budget Statement my right hon. Friend the Chancellor said that there would be a VAT regulator. He did not explain precisely what it would be. But in the Budget debate on 23rd March, my hon. Friend the Minister of State said:
  "There is one important advantage of VAT and the 20 per cent. regulator power which has not yet been fully recognised and to which I should like to refer. The coverage of purchase tax is limited. Consequently changes in the rates of purchase tax intended to stimulate or restrict demand in the economy as a whole are concentrated upon a relatively small slice of consumer expenditure. The introduction of VAT will reduce the scale of this problem." —[OFFICIAL REPORT. 23rd March, 1972; Vol. 833. c. 1810.]
  This afternoon my right hon. Friend the Chancellor again drew attention to precisely this advantage when he said that the wide sweep of the VAT meant that rate adjustments for purposes of managing the economy—I think I have his words correctly—can be "much smaller" than they were in the case of purchase tax. In that case, why do we go to a 20 per cent. regulator from a 10 per cent. regulator?
  Mr. Douglas: It is suggestive.
  Mr. Bruce-Gardyne: The hon. Gentleman keeps saying that these things are suggestive and he gets tremendously excited about all the awful things that may happen. He must have been listening to his right hon. Friend the Member

  1275
  for Leeds, East this afternoon, when my right hon. Friend pointed out that in his election address the right hon. Gentleman forecast a 20 per cent. VAT on fuel and so on. The right hon. Gentleman said "No, you have not got it now, but you will have it." If the right hon. Gentleman were to accuse his neighbour of beating his wife and his neighbour were to sue him for libel, one can imagine the right hon. Gentleman saying in court "I agree that there is no evidence that he is beating his wife, but I know damned well that he will and I make the accusation against him."
  Mr. Walden: Is it not the case that one is always more disposed to believe that a right hon. Gentleman will not beat his wife if he is not seen to be carrying rods and canes into his house? We are inviting the Chancellor not to carry so many sticks. Then we shall believe that the right hon. Gentleman's matrimonial intentions are as he said.
  10.45 p.m.
  Mr. Bruce-Gardyne: As I thought I had explained to the hon. Gentleman, his record and that of his party in this matter is so dubious that protestations of anxiety about our future conduct come ill from them.
  What worries me slightly, as one who is a complete agnostic about the virtues of attempting to fine-tune the economy, about the Clause as it stands is that the instrument we appear to have in mind to use could be better described as a hay rake than a tuning fork. If we have to use these instruments at all, I should like to know why we could not stick to a more modest tuning fork.
  To report Progress and ask leave to sit again.—[Mr. Barber.]
  Committee report Progress; to sit again tomorrow.
  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fortescue.]

  DORNOCH FIRTH (BRIDGE)
  10.46 p.m.
  Mr. Robert Maclennan: I am glad to have the opportunity provided by this short debate to put before the Government, at rather greater length than has been possible in letters and parliamentary Questions, the imperative reasons why I believe that the Government should authorise the crossing by road of the Dornoch Firth and why I believe they should do so now.
  The proposal to bridge the Dornoch Firth at the Meikle Ferry is not new. Indeed there are extant plans drawn up by the great Telford well over 100 years ago for this bridge. I hope that the Under-Secretary will not regard that fact as providing any justification for the Government's further delaying in coming to a decision.
  I am conscious that Ministers have on a number of occasions expressed interest in, understanding of, and even sympathy for the proposal, but tonight I hope that we shall have evidence from the Under-Secretary that the Government intend to take action.
  The more recent history of this proposal stems from the decision of the Sutherland County Council in October, 1967, to raise in its county development plan the question whether this scheme should be included and to go ahead. In November, 1968, an approach was made to the Scottish Development Department suggesting that the preliminary studies should be put in hand. This was in the context of the economic strategy of the Highlands and Islands Development Board for the development of the northern Highlands based, with the approval of the then Labour Government, upon the development of two areas—the area which came to be known as the Wick-Thurso axis in Caithness and the area known as the Moray Firth Development Area.
  The Highlands Development Board and the then Government believed that these areas could be the foundation of major industrial growth, in the one instance based upon the possibilities and needs associated with the prototype fast reactor development in Caithness and in the other instance based upon observed natural advantages of the Moray Firth area with

  1277
  its flat land and deep water which would provide suitable harbours for major industry and the back-up for the then Government's decision at that time to locate an aluminium smelter there.
  It is not necessary—indeed I do not wish so to take up the short time available to me—to rehearse all the exchanges which have taken place since that time between myself and members of successive Governments. The Minister will be aware that this has been a matter which I have constantly sought to bring to the attention of successive Governments and Ministers. I want to find out in a clear and unmistakable way where the Government stand today in this matter.
  The arguments in favour of the bridge must, however, be briefly repeated. First, the principal argument is that for the northern Highlands communication is a paramount factor in its development. Air communication is enormously useful and growing in importance but it has a limited capacity for freight. Coastal freight transport has a minor rôle to play. The railway in recent years has shown an unwillingness to take on the job of ferrying freight from the North to the markets in the South. British Rail has proved singularly uncompetitive with road transport. For example it decided, about six years ago, not to take livestock any more and appeared unwilling to foster the development of rail transport for freight purposes.
  The roads are the most vital lifeline for the northern communities. The proposal to bridge the Dornoch Firth is part of a scheme which has been universally advocated throughout the northern Highlands for bridging the three Firths—the Beauly Firth, the Cromarty Firth and the Dornoch Firth—to compensate for the geographical obstacle of distance which these northern communities face in seeking to promote industrial development.
  Looked at from the perspective of the North, not from the angle of vision with which the Under-Secretary of State undoubtedly views these matters from within St. Andrew's House, the proposal to bridge the Dornoch Firth is of at least equal importance to my constituents in Caithness and Sutherland as the schemes to bridge the two crossings further south Indeed, the saving in time which would be effected by bridging the Dornoch Firth
  1278
  would be substantially greater for my constituents travelling from Caithness than would be the saving effected by the bridging of the two firths further south which is now to go ahead.
  The importance of this communication link to all industries, not merely to manufacturing industry, cannot be too strongly stressed. However I must particularly single out agriculture, as the store markets and the transport of livestock require large and growing numbers of animals to be transhipped annually out of my constituency south over a road which is singularly ill-equipped and unsuitable for the purpose. I refer to Struie, the A836. Indeed it must be remembered that for many of my farming constituents, their markets lie not in the central belt but in areas north of Inverness. Therefore important as improvements are to the A9 further south, this improvement is of paramount need.
  Some estimate of the benefits which would be derived from these savings is shown by the following figures. On the journey between Wick and Invergordon there would be a saving of 19 miles if the bridge were built across the Dornoch Firth, which is 22 per cent. of the total journey. On the journey between Golspie and Invergordon there is the same saving but this time it is 44 per cent. of the total journey. If the three firths were bridged the saving in total journey from Wick to Inverness would be 31 miles, which is 22 per cent. of the total journey.
  I need hardly stress to the Minister the shortcomings of the A386. It is hazardous in winter with precipitous inclines and sharp turns. I need not stress its unsuitability for the carriage of all freight but particularly the carriage of livestock. The benefit of a road which avoids this hazardous route is immeasurable. It cannot be measured by any of the conventional cost-benefit analysis techniques.
  The benefit would be not only to those going south, but also to those going north, particularly the tourists. It would be of benefit to the Burgh of Tain which at present, because of the existence of the A836, loses out on the tourist trade. It and the whole of the area would be benefited by the construction of the trunk road. When the Orkney roll-on, roll-off ferry is completed and is sailing from Scrabster in May, 1974, the motor link with the Orkneys will be considerably

  1279
  improved. The tourist traffic, which is growing at an annual rate of about 25 per cent., will be enormously assisted, as will be those living in the northern isles who wish to travel south. It should be said in passing that with the growth of tourism on that road there is no fear that Bonar Bridge and places north and west would be cut out by the existence of such a bridge. The main tourist interest continues to be in the North and West and one would expect that traffic to continue.
  But none of these factors brings urgency to the debate. They are continuing and good reasons for treating this matter as important, but not necessarily with the high degree of urgency which I would ascribe to it tonight. The situation has been made critical by the economic development which has taken place in the Moray Firth under the impetus of the Labour Government and the Highlands and Islands Development Board in the first instance and continued by the present Government with the exploitation of oil resources in the Moray Firth.
  The Minister must agree that this development has proceeded at a pace quite in excess of anything that could have been estimated two years ago. The build-up of jobs in the Easter Ross area and further south in the Moray Firth has been simply phenomenal and it can be expected to continue at an increasing rate. The Jack Holmes Planning Group when it produced its report about three years ago predicted that the growth of population in that area by the end of the century would be about 250,000 to 300.000. I have it on the best of authority—from the Highlands and Islands Development Board—that it is expected that there will be 6,000 new permanent jobs in the area by 1974. This has massive consequences for the development of the infrastructure of the whole region, consequences which I believe the Government have not as yet fully taken into account or adequately responded to.
  The planning officer of Ross and Cromarty has pointed out that by next year there will be in Easter Ross a requirement of 4,700 new houses to deal with an influx of 6,100 workers—indeed, that the infrastructure costs in Easter Ross to take account of the growing oil industry developments will soar in the
  1280
  next three years to about £50 million, which is about £8,000 per job. So we are talking about massive development of a kind which is not, I believe, paralleled in any other part of Scotland at this time. It is in this context that the Government should be looking at the costs associated with the relatively minor infrastructure project of bridging the Dornoch Firth.
  There are economic reasons why the Government should consider this scheme immediately. Not only are these developments taking place which will throw some light on the total cost factor, but we are faced with a serious economic situation in Sutherland and in particular where the population has dwindled over recent years to something below 13,000 for the first time in its history. We are also faced with an unemployment rate in my constituency of 10·3 per cent. We face the prospect of a population drift. The situation is quite encouraging at present in Caithness because of the work associated with the Atomic Energy Authority's reactors there.
  The number of school leavers is rising annually both in Caithness and Sutherland, and in the region as a whole it is about 450 this year and is expected to rise to about 650 in three years' time. These young people have to have jobs provided for them. An immediate source of jobs to hand lies in the developments of the oil industry in Easter Ross and this is of particular importance and of potential benefit to those living in the eastern part of Sutherland. the catchment area that extends at least as far north as Golspie in the east and as far west as Lairg.
  To enable us to take advantage of these employment opportunities, the bridge over the Dornoch Firth would be critical. I believe also that it would ease to some extent the immediate problem of Ross and Cromarty. It is important to note the anxiety that has been expressed by the chief planning officer not about the possibility of dealing with this question in the long term but about the problem of meeting the needs of the industry that is there now in the short term. These needs, I believe, can be met by opening up some of the jobs at least to those now living in Sutherland. Also, the advantage to those living and working in Easter Ross of being able to travel

  1281
  north to Sutherland and enjoy recreation there hardly needs underlining.
  What about cost? The figure put on this project in 1968 by the Scottish Development Department was £1 million for the crossing, including the approach roads. It has to be admitted that the cost has probably escalated in the time which has elapsed to something nearer the £1,800,000 calculated by the development officer of Sutherland on the basis of the costs of bridging the Kyle of Tongue. It is not for me to spell out how the project might be carried out, but it might be by causeway and bridges or by a dam with sluices. The cost might be approximately the same in each case but it is partly to discover that that the Government should embark on an engineering study straight away, to carry out the necessary preliminary inquiry into the most economic way of bridging the Dornoch Firth.
  On costs, I should make a minor debating point. If the Government are prepared to spent £30 millon on a gunnery range at Tain, it is not too much to ask them to spend £1.8 million on this new bridge, which would be of lasting and inestimable value.
  The matter is put into perspective by the admirable assessment in the Glasgow Herald by Aeneas Allen who estimated that by the end of the century £1,000 million would have been invested by industry in connection with the oil industry in the area. The Highlands and Islands Development Board considered this a matter of importance and the Secretary of State has told me that it regarded it as a project having the highest priority which should be considered as early as possible.
  The secretary to the Board wrote as follows:
  "The Board's attitude to the proposed bridge remains as before. We regard it as second in priority to Ballachulish. We feel that the provision of a bridge over the Dornoch Firth at Meikle Ferry will be a logical and important development both for East Sutherland and Caithness and, in a few years' time, for Orkney when the roll-on/roll off ferries are operating. Now that Ballachulish has been accepted and the Secretary of State has approved the crossings over the Beauly and Cromarty Firths we now regard the Dornoch Bridge as the next major improvement to be secured."
  1282
  What is the attitude of the Government? It remains somewhat obfuscated In 1970, just before the General Election, the then Minister of State, my hon. Friend the Member for Greenock (Dr. Dickson Mabon), said that the Dornoch Firth crossing was principally a communication question with planning and developmental advantages which were largely self-evident. He said that an engineering investigation was needed with a cost benefit evaluation.
  I agreed with that then and I agree now. That is the situation and the Government should get on with it. What are they doing? It is unclear from the various parliamentary replies I have had from the Government what their intentions are. It was suggested in the Under-Secretary of State's letter to me of 4th February, 1971, that we might do well to wait to take advantage of the development of technology in bridge building, but if that is what we have to wait for we shall have to wait a long time and population drift will have become so disastrous that Sutherland's future will be in question. Do we have to wait for the growth of the tourist traffic rate to justify this in cost benefit terms? That would be a long time.
  Do we have to wait until the A9 road to Inverness is completed? If so, we shall have to wait until the end of the decade before the envisaged bridge can be built. Surely the Government do not believe that to be advisable. Do we have to wait until the Cromarty and Beauly bridges are completed? That would not be in the best interests of the northern Highlands as a whole. It will not be before 1978 at the earliest.
  I hear that the Government have let the cat out of the bag. It was reported in The Press and Journal of 30th April, 1971, that the deputy chief road engineer of the Scottish Development Department, Mr. R. A. H. Allen, spoke of there being:
  "just a possibility that some time later"—
  that is after the Beauly and Cromarty Firths were bridged—
  "there would be a crossing of the Dornoch Firth."
  That was headed:
  "Over the Firths by 1980."
  If that is the position, will the Minister come clean tonight and say that not until

  1283
  1980 can we expect to have that firth bridged? Then we can make our plans accordingly. If that is not the position, will he say that we are to be able to take advantage of the economic developments taking place in the oil industry in Easter Ross and give us a proper estimate of when this will happen?
  11.11 p.m.
  The Under-Secretary of State for Development, Scottish Office (Mr. George Younger): I am grateful to the hon. Member for Caithness and Sutherland (Mr. Maclennan) for raising a matter of great importance, particularly to his constituents. He has raised this matter often in the House but, as he has said, this is perhaps a better time to have a rather longer debate than usual. In thanking the hon. Member for raising this subject and particularly for the way in which he has put the matter tonight, may I accept absolutely his assessment of the general desirability of the bridge.
  Both I and my right hon. Friend the Secretary of State accept that this is a desirable project, from the point of view of the people of Sutherland and the people on both sides of the Firth who would make use of such a bridge and also from the point of view of the far north of the Highlands. As the hon. Gentleman will know, my right hon. Friend said as recently as 20th April:
  "I have myself for some years past been aware of arguments in favour of such a scheme and called attention publicly to them." — [OFFICIAL REPORT, 20th April 1972; Vol. 835, c. 141.]
  There is no doubt in the Government's mind that a crossing at Meikle Ferry would bring considerable benefits to Caithness and Sutherland both directly by shortening the main north-south lines of communication and indirectly by making a whole range of economic activities easier. I assure the hon. Member that we look upon it as a most desirable scheme, particularly bearing in mind the present and prospective developments in the oil industry and at Easter Ross and the Highland area to which he has referred.
  Because a proposed road scheme can be shown to be desirable from the point of view of the people living in an area, this does not mean it necessarily must or indeed can be put in hand straight away.
  1284
  Although much valuable work in improving the Scottish main road system has been and an expanded road programme is at present being implemented, many schemes of modernisation or reconstruction are still urgently needed in many parts of Scotland.
  Present funds available now and in future are limited in view of the vast demands made upon them. I emphasise the large amount of work either being done or planned on the strategic routes serving north and north-eastern Scotland particularly with a view to the development of the oil industry. For the A.9 as the main route northwards from central Scotland we have published draft orders for a new route between Inverness and Invergordon, while south of Inverness preparations are in hand for bypasses at Dunkeld and Ballinluig and the replacement of the Almond Bridge north of Perth is being prepared. A comprehensive range of improvements is planned about which we hope to make further announcements shortly.
  Similarly the work already started to improve the main route between central Scotland, Dundee and Aberdeen—that is, the A.85 and A.94—is to be accelerated. Further south the recently completed M73 link road between the Glasgow-Carlisle and Glasgow-Stirling roads—
  Mr. Maclennan Mr. Maclennan rose—
  Mr. Younger: I do not have much time.
  Mr. Maclennan: It is not good enough—
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order.
  Mr. Maclennan Mr. Maclennan rose
  Mr. Younger: I must ask for a little courtesy from the hon. Gentleman. I listened with great patience to his speech.
  Mr. Maclennan: It is an absolute scandal.
  Mr. Deputy Speaker: Order. The hon. Gentleman must kindly keep to his seat.
  Mr. Younger: I am trying to answer courteously a courteous debate started by the hon. Gentleman. It is rather hard that we should have—
  Mr. Maclennan: No information.
  Mr. Younger: Whose fault is that? I have a speech planned to last a quarter of an hour. I am not complaining—
  Mr. Maclennan: I am.
  Mr. Younger: The hon. Gentleman should complain to himself.
  It may bring the point home more clearly if I name a few major schemes in the Highlands which are being prepared for inclusion in the road programme during the next two or three years. There is the bridging of the Loch Leven narrows at Ballachulish, planned to begin before the end of this year, the improvement of lengths of the Ballachulish-Oban and Lochgilphead-Oban roads, the continuing reconstruction of the Fort William-Mallaig road—
  Mr. Maclennan: On a point of order. Is it in order, Mr. Deputy Speaker, for the Minister to use the opportunity that I have provided by raising the subject of this narrow crossing of a stretch of water in my constituency to describe the entire roads programme for the whole of Scotland?
  Mr. Deputy Speaker: The hon. Member knows that that is completely and exactly an example of a bogus point of order.
  Mr. Younger: I absolutely despair of the hon. Member. If he had wanted to give me full time to answer the debate he could have finished after a quarter of an hour. I have a lot of interesting information to give the House and I am trying to give it. I have now wasted much of the little time that I had. I am normally not a difficult person in these matters.
  We are sure in the Government that in giving each of these projects—and others that I could mention—priority over a Meikle Ferry crossing we are doing something that is right for the Highlands. I am sure that the money available is used in the most effective way for the Highlands. I ask the hon. Member to reflect upon what he might have been saying by way of justified criticism if we had been putting the priorities in reverse and had been improving part of the northern stretch of the A9—
  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 sixteen minutes past Eleven o'clock.

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

C.E.N.T.O.: BRITISH SUPPORT
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what assurances have been given to the Iranian officials of CENTO that British support for the military alliance will be maintained.
THE SECRETARY OF STATE FOR DEFENCE (LORD CARRINGTON): My Lords, all members of CENTO are well aware that Britain is continuing with her contribution to all the military activities of the Alliance.
LORD BROCKWAY: My Lords, while thanking the noble Lord for that Answer, may I ask him this question? Has not the validity of CENTO decreased, first by the earlier departure of Iraq, which was its headquarters, and now by its denunciation by President Bhutto of Pakistan? Is it not now serving as a cause of doubt in the Middle East and in the Indian subcontinent, rather than as one of stability?
LORD CARRINGTON: No, my Lords; I would not agree with the noble Lord. I think CENTO continues to contribute to the security and stability of the area and I believe that its members would agree with that.
LORD BROCKWAY: My Lords, would it not be possible to replace it by bilateral agreements with countries for the defence of their frontiers? Would they not be preferable to the military Alliance? Furthermore, could the noble Lord say whether the Secretary of State for Foreign Affairs is going to Pakistan to discuss these matters with the President?
LORD CARRINGTON: My Lords, of course it would be possible to do that, but whether it would be desirable is another matter. As to whether my right honourable friend is going to Pakistan, perhaps the noble Lord would put down a Question. I am afraid that, off-hand, I do not know what his movements are.

PICCADILLY CIRCUS REBUILDING SCHEME
2.33 p.m.
LORD VIVIAN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will call in any planning scheme for the rebuilding of Piccadilly Circus prior to any commencement of work.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF THE ENVIRONMENT (LORD SANDFORD): My Lords, I would refer the noble Lord to the Answer given in another place last Friday by my right honourable friend the Secretary of State for the Environment.
LORD VIVIAN: My Lords, while thanking the noble Lord, Lord Sandford, the Minister, for his Answer, may I further ask him whether he realises that in that short Answer he has given both myself and many other people a relief from our nightmare?
LORD SANDFORD: My Lords, I am delighted to hear that my right honourable friend's Answer has assured the noble Lord sweet dreams.
LORD SHACKLETON: My Lords, is the noble Lord aware—and I address my remarks particularly to the noble Earl the Leader of the House—that in my experience it is unprecedented in this House to answer a Question by means of a reference to an Answer given in another place? Is the noble Earl aware, furthermore, that, although this is a well-known procedure in the House of Commons, it is practically unknown in this place, and I hope very much that we shall not adopt it here? With the greatest respect to the noble Lord, Lord Sandford, it might help the House if he were now

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to give the Answer that was given in another place, of which we have no official cognisance.
LORD SANDFORD: My Lords, I shall be delighted to do that. It was the convenience of the House that I had in mind, as in fact the Answer given by my right honourable friend has been there for all to read over the weekend and yesterday. But if it is the wish of the House, I will certainly give the full Answer. On Friday, my right honourable friend replied to a similar Question as follows:
"The arrangements made with the Westminster City Council, including the issue of short-dated office development permits which were legally pre-requisite to the planning applications, were designed to put the whole redevelopment scheme on public view at the earliest possible stage. I am most grateful to the city council for making this possible. But the issue is of such public importance and interest that I am consulting the Westminster City Council about referring the applications to me now without going through the ordinary planning procedures, which are bound to take time."—[OFFICIAL REPORT, Commons; 5/5/72, col. 228.]
LORD SHACKLETON: My Lords, I hope that the noble Earl will take note of what I think was a clear reaction from your Lordships on this matter. I acquit the noble Lord of discourtesy to the House, but this is an important point of principle for us.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, the noble Lord the Leader of the Opposition has invited me to say a word on this matter. He said that this procedure was unprecedented. I should be a little chary about agreeing with that, because precedents are usually to be found for things that happen in your Lordships' House. Nevertheless, there are more normal procedures than the one of which the noble Lord has reminded us, and I am certain that my noble friend has taken due account of that.
LORD SHACKLETON: My Lords, I am very grateful to the noble Earl. I shall be very glad to know what precedents he finds for it.
EARL JELLICOE: My Lords, I shall search the scriptures.

DEFENCE EQUIPMENT: TRADE WITH UNITED STATES
LORD ORR-EWING: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what has been the value in dollars of defence equipment bought from the U.S.A. in the period 1964 to 1971 and how does this compare with the value of defence equipment bought by the U.S.A. from the United Kingdom over the same period.
LORD CARRINGTON: My Lords, in the eight financial years up to and including 1971–72 expenditure from Defence Votes for United States equipment is estimated at some 1,100 million dollars. In addition, repayments still outstanding from Defence Votes to the National Loans Fund for equipment delivered in this period are estimated at some 400 million dollars, including interest. The corresponding figure for exports of military equipment to the United States is some 230 million dollars.
LORD ORR-EWING: My Lords, in view of the very considerable imbalance against the United Kingdom, will my noble friend make these figures available to our diplomatic representatives in the United States, so that the case for buying Harriers and other equipment here, rather than manufacturing them in the United States, is made that much stronger?
LORD CARRINGTON: My Lords, I naturally agree with my noble friend that this is what we want to see happen. We have made strong representations to the United States in all these matters that we should have a share in any manufacture of any equipment of that kind. I can also assure my noble friend that I will draw the attention of my noble friend the British Ambassador to these figures.
LORD SHACKLETON: My Lords, may I ask the noble Lord how far the "Buy American" Act and the 50 per cent. special notional addition to the price of foreign equipment still applies in these matters?
LORD CARRINGTON: It does apply, my Lords. I think I am right in saying that in the case of defence equipment it is something in the region of 50 per cent. The large figures which I quoted to the House of 1,100 million dollars and 400 million dollars still outstanding are mostly in regard to the Phantoms and Hercules aircraft and Polaris submarines.

HOVERCRAFT AND DISPERSAL OF OIL SLICKS
2.39 p.m
THE EARL OF KINNOULL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether consideration has been given for the use of hovercraft in the dispersal of oil slicks around the coast; and what conclusions have been reached.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, consideration has indeed been given to this application of hovercraft, and some preliminary investigations have begun using a Hovermarine HM2 sidewall craft belonging to the Department of Trade and Industry. This type of craft is considered more suitable than the fully amphibious types because its water screws and other immersed parts agitate the water, oil and dispersant. Further research has recently been approved, and experiments will continue in parallel with other trials on the craft. These will investigate the best techniques from the point of view of both efficiency and the effects on the hovercraft.
However, even though the technical feasibility may be proved satisfactorily, the absence of large numbers of easily available hovercraft does somewhat detract from their utility for the purpose, and it remains the general policy to provide widely disposed means for dispersal which can be applied at short notice to any available vessel in the affected area, which might be anywhere on our many thousand miles of coastline.
THE EARL OF KINNOULL: My Lords, while thanking my noble friend for that
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reply may I ask him whether any actual trials have been carried out on oil slicks and, if so, what results have come from them? Secondly, how soon will the deliberations be completed? Finally, what numbers of hovercraft does he anticipate?—because he used the expression "a large number".
THE EARL OF LIMERICK: My Lords, my noble friend has asked three questions, the answers to which are as follows. First, specific trials have indeed been undertaken and have been reasonably successful. Second, my noble friend then asked when will the next trials be taking place, and the answer to that is to fit in with the other commitments of our craft but at present it is planned that it should be some time between the end of July and early October. As to the number of hovercraft that would be required, all I can say is that their range is not great and our coastline is very long.

VIETNAM: PRESIDENT NIXON'S STATEMENT
2.41 p.m.
LORD SHEPHERD: My Lords, with the leave of the House I should like to ask Her Majesty's Government a Question of which I have given them Private Notice; namely,
Whether they will make an immediate approach to the Soviet Union, as Co-Chairman of the Geneva Conference, urging the re-convening of the Geneva Conference on Vietnam, in view of the grave escalation of the war in Vietnam as a consequence of the statement made yesterday by the President of the United States of America?
THE MARQUESS OF LOTHIAN: My Lords, my right honourable friend the Foreign and Commonwealth Secretary, as Geneva Co-Chairman, will summon the Ambassador of the Soviet Union to discuss the situation. However, in face of the Communist escalation of the war and the refusal so far to take part in serious negotiations, counter-measures by the United States of America were inevitable.
LORD SHEPHERD: My Lords, I am most grateful for the reply given by the

903
noble Marquess and I hope that the representations made by the Foreign Secretary will produce a more helpful answer than previous approaches have done. However, would the noble Marquess not agree that if the Soviet Government is to give any real consideration to this matter then clearly time is of great importance? Would it not be wise to consider an approach to the United States Government so that the date of activation of the mines that we believe have been placed around Haiphong could be delayed? That would give us more time in which efforts could be made to approach the Soviet Government, and perhaps for other parties to be involved in seeking the beginning of negotiations. The consequences of what may happen in Haiphong could be very grave, not only in South-East Asia but throughout Europe as well.
THE MARQUESS OF LOTHIAN: My Lords, I am grateful to the noble Lord for those remarks. I think we all realise the potential dangers in the situation as it is at the moment, and I will certainly undertake to pass on to my right honourable friend what the noble Lord has said with regard to any possible postponement of the blockade, and so on, although of course the noble Lord will realise that I cannot promise him anything in this regard. I know that my right honourable friend hopes to see the Soviet Ambassador at the earliest possible moment and I am sure that he will press him again to reconvene the Conference.
LORD BROCKWAY: My Lords, while supporting the advocacy that Soviet Russia should reconvene with us the Geneva Conference, would Her Majesty's Government also approach the Government of the United States of America, whose recent actions are creating a very dangerous situation in the world? Also, is it not the case that while it is often spoken of as an invasion of South Vietnam by North Vietnam, the Geneva Conference declared the whole of Vietnam to be one nation and the demarcation line to be only provisional before unification took place?
THE MARQUESS OF LOTHIAN: My Lords, I do not think that I should comment on the last part of the noble Lord's
904
question at the present time. What we are most anxious to do is to see peace restored. There are two ways of doing this: one, by reconvening the Geneva Conference, and the other, I suggest, in Paris; and if the North Vietnamese and the Americans in Paris can restart their negotiations I think there will possibly be some hope.
BARONESS SUMMERSKILL: My Lords, may I, knowing the noble Marquess's own background, ask him how we can say to-day, on moral grounds, that the United States of America is justified in escalating the war?
THE MARQUESS OF LOTHIAN: My Lords, I should have thought that the escalation of the war had been going on for the past few weeks.
LORD ORR-EWING: My Lords, can my noble friend tell me whether an invasion is not an invasion when it is done massively by Communist Powers over another State?
LORD DAVIES OF LEEK: My Lords, it is with some diffidence that I intervene, and I apologise to the House, but having looked at this question for the past thirty years I should like to ask the noble Marquess whether he is aware that if we reconvene the Geneva Conference we are not likely to get any Asiatic Powers there whatsoever? Further, is the noble Marquess aware that it is difficult for us now not to be emotional about this matter, because of the origins, which are explained clearly in Anthony Eden's book, Full Circle, which denounces the brinkmanship of Dulles from which this position has sprung? It is a dishonour to the Christian and the white world.
THE MARQUESS OF LOTHIAN:
My Lords, I think we are getting into rather deeper water than the original Question, which was to do with urging the Soviet Union to reconvene the Geneva Conference.
LORD SLATER: My Lords, can the noble Marquess tell us whether the House will be kept informed of the outcome of such talks as are to take place between his right honourable friend and the Soviet Ambassador in regard to this important matter?
THE MARQUESS OF LOTHIAN: Yes, my Lords, I can certainly give that assurance to the House.

CONSOLIDATED FUND (No. 3) BILL
2.48 p.m.
EARL JELLICOE: My Lords, in rising to move the Third Reading of this Bill, since noble Lords opposite are rightly attentive of these matters of procedure I think I should draw the attention of your Lordships to the fact that the Bill has got a little higher up on the Order Paper than it is really entitled to be. It should have been printed after and not before the Private Bills, and to that extent it is above its station. But a glance at Standing Order No. 38(2) will show your Lordships that this is in fact in order. That said, my Lords, I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Earl Jellicoe.)
LORD SHACKLETON: My Lords, following that cryptic remark I shall look at the Standing Order concerned. The noble Earl is almost in sackcloth and ashes but none the less says that he is innocent, and we accept his word on the matter.
On Question, Bill read 3a, and passed.

BATH CORPORATION BILL
Read 2a, and committed to the Committee on Unopposed Bills.
DEVON RIVER AUTHORITY (GENERAL POWERS) BILL
Read 2a, and committed to the Committee on Unopposed Bills.

DEPUTY CHAIRMEN OF COMMITTEES
THE CHAIRMAN OF COMMITTEES (TILE EARL OF LISTOWEL): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved That the Lord Maybray-King be appointed to the panel of Lords to act as Deputy Chairmen of Committees for this Session.—(The Earl of Listowel.)
On Question, Motion agreed to.

BRITISH LIBRARY BILL [H.L.]
2.50 p.m.
THE PAYMASTER GENERAL (VISCOUNT ECCLES): My Lords, I beg to move that this Report be now received.
Moved, That the Report be now received.—(Viscount Eccles.)
On Question, Motion agreed to.
Clause 1 [Independent Television Authority to be renamed Independent Broadcasting Authority]:
BARONESS LEE OF ASHERIDGE BARONESS LEE OF ASHERIDGE moved Amendment No. 1:
Page 7, line 1, leave out paragraph 6.
The noble Baroness said: My Lords, in asking you to consider removing from the Bill the paragraph which disqualifies Members of another place under the House of Commons Disqualification Act 1957, I have of course consulted the Leader and the Deputy Leader of the Opposition in the other place, who as a former Secretary of State for Education will be in charge of this measure in the other place. But although our own Leader in the Lords and the Leader in the other place agree that it would be better that this paragraph should not be included, we are not raising this as a narrow Party issue. Obviously room exists for differences of opinion on both sides of the House. But many of us are disquieted by the thought that your Lordships' House should disqualify the elected representatives of the people of this country without very sound reasons indeed.
We are all in favour of the general principles of the Disqualification Act 1957, but of course in listing the organisations which fall under that Act the distinguished Members responsible for it would be the first to agree that mistakes are possible. We are not living in the reign of George III. We are all totally opposed to corruption in any form. We all respect the fact that, whether speaking in another place or in your Lordships' House, if we have interests to declare we declare those interests. Sometimes they are interests in business, or of trade union members who have expenses paid by the union—financial interests. Sometimes, as when the noble Lord, Lord Trevelyan, spoke on the British Museum he was not speaking because he has a large salary but because he thought it proper to declare that he

907
was Chairman of the Trustees of the British Museum. We are all agreed that we want to be careful in the extreme when we are dealing with Members of another place and that disqualification should take place when that is proper. Nobody is going to argue about the chairmen of nationalised boards and so on. There are white areas and black areas where the issue is quite clear; on the other hand, there are in between grey areas where we have to look at the matter very carefully indeed.
I should like to see the British Library Bill pass both Houses with all flags flying, as a measure agreed to by everyone. It is a most exciting and important measure. But some of us are still deeply disquieted about two elements in it, one of which is this automatic disqualification of Members of another place. Put in the simplest terms, if this is to be done I think we might leave the decision to the other place. Part of my anxiety arises from the fact that I consider that a great national library falls within the same area of public activity as looking after our great museums and galleries, the same area as looking after our national theatre. These are fields where traditionally distinguished men and women have given their services, and some of these distinguished men and women have come from the other place. One of the most effective features in all my experience there, an experience I have shared with many other Members of your Lordships' House, was that some Members of the other place had spent a lifetime in the service of special interests, sometimes having great experience of docks and transport or of health and education, and it seems to me extremely arbitrary that we should say that although a Member of another place may have spent many years in education at any level of education, or in library service, he or she should automatically be disqualified.
May I take a parallel example, not from the world of education, including libraries, but, for instance, the medical service? I have the permission of one of my colleagues in the other place to instance his situation. The Member to whom I refer is Mr. Laurie Pavitt. The Medical Research Council, under the chairmanship of the Duke of Northumberland, wanted so much to have a Member of the other place serving on their com
908
mittee, and so they invited him. He was not able to receive the honorarium something like £750 or £1,000, but they wanted him badly because of his special qualifications. He serves on this corn-mince. This same Member has had a lifetime of experience in working with aural aids. Again, as a member of the Hearing Aid Council he is not allowed to receive the same small fee as other members. I have deliberately selected an example not from the universities or the world of education but from the world of people who are concerned with health. I could give a number of other illustrations where Members, although excluded from accepting an office of profit under the Crown, are nevertheless considered so valuable that they are invited to participate. It does seem to me a little odd that when someone in the other place has this kind of experience he or she cannot serve on the Board on the same terms as everyone else.
I believe that when we last discussed this matter one Member of your Lordships' House said, "Members of the House of Commons are too busy to do anything else". I consider that the other place would be a much poorer place if it were not for the fact that some Members earn their living in the City, some have trade union contacts, some are barristers and some journalists. I am a passionate Parliamentarian. I think one of the most dangerous trends in our country at the present moment is to denigrate the elected representatives of the people of Great Britain. Far too many of the young ones are turning away from Parliament. There is a great deal of industrial unrest. A great many working class people are turning away from it, saying that it does not count. The most effective Members of the other place are those who bring into it their experience in other fields. Surely if there is someone in another place who has had a lifetime interest in education or in libraries it is utterly wrong that that Member should be disbarred.
I am particularly concerned about this world of libraries, because the library has been almost the Holy Grail for working class people throughout the centuries, when they had nothing to help them after a hard day's labour apart from our free libraries, lending libraries, research libraries and the rest. Some people are extremely experienced and well-informed

909
in this field. Possibly Members of another place would be exactly the type to be part-time members of this Board. I do not want to belabour the point, and I have said that I am not at the moment raising the question of remuneration. My views on this are very clear. I do not believe that part-time members ought to be paid salaries; I think they ought to be paid expenses, by way of travel expenses and subsistence allowance. The Hearing Aid Council is a very good example. The members receive a fee of £10 when they meet. However, when we are asking people to serve as part-time members of the Library Board we have to realise that they may have other duties and responsibilities. With the best will in the world they may find that they have to go abroad for a period of months, or maybe longer. How we pay them is another issue, but a related issue.
We have no problem at all if we simply eliminate this paragraph. I think that would be a gracious thing to do and thus leave this matter to be reconsidered by the other place, as it so definitely affects their interests. If the problem is "offices of profit under the Crown", I think it is rather ridiculous that if Members of the other place are so valuable when they are asked to serve they have to do so under terms different from other people. I see no insuperable difficulty. I believe that it is honourable that if Members come along to serve they should not be out of pocket, and that they should have an honorarium is splendid.
I hope that no Member of your Lordships' House will consider that this issue is related to the present argument about whether or not local councillors should be paid. We know perfectly well that there are wage earners who cannot serve on local councils if to do so means that they have to sacrifice their day's wages. That argument is totally irrelevant to this paragraph. Obviously professional workers, if they are librarians, professors, or vice-chancellors, are not going to have their pay docked if they have to come to London for one or two days, a week or a month. This is a real issue for wage earners, but it is totally irrelevant to what we are now discussing.
I think it would be a matter of grace that we should leave this matter to another place where, I assure your Lordships, it will be considered at length. If I may call the Paymaster General's atten
910
tion to this fact, he himself, speaking on March 28, said, perfectly properly:
"Much is going to happen which we cannot now foresee so we think it would be unwise, at the outset, to lay down a hard and fast pattern of the Board's composition."—[OFFICIAL REPORT, 28/3/72, col. 957.]
We have to press the Paymaster General to tell us how often the Board or the advisory committees of the Library would meet. We have stressed that we would rather have a larger than a smaller number of part-time members as there will be so much work and so many different aspects to be considered. We have not pressed any of those matters. There is much about which we are in agreement. But I think that it would be gracious that your Lordships' House should agree to an Amendment which eliminates the disqualification of Members of the other place so that this matter may be fully discussed there, and if some of the considerations which I consider relevant weigh with them then I think we would accept their judgment. I feel it desirable that this Amendment should be accepted and this paragraph eliminated from the Bill.
3.5 p.m.
LORD TREVELYAN: My Lords, I have considerable sympathy for the views expressed by the noble Baroness, Lady Lee of Asheridge. I do not know whether I understand the situation entirely correctly, but if I do not I have no doubt that the noble Viscount the Paymaster General will correct me. As I see it, paragraph 5 of the Schedule does not require the Secretary of State to pay non-executive members of the Board. It is only permissive. But read with paragraph 6 of the Schedule it creates a strong presumption that all the members should be paid. I believe that we should not throw away too hastily the principle of voluntary service. I certainly see no objection to Members of the other place being members of the Library Board. We have a most useful Member of the other place on the Board of the British Museum. I therefore think that we should not in this question close our options unnecessarily. I would add that this is not an example of the pernicious doctrine of equation of misery arising from the fact that I am myself an unpaid member of a comparable body. In general I support the views of the noble Baroness.
LORD MAYBRAY-KING: My Lords, as your Lordships will have recently noted, I am still a very inexperienced Member of this Chamber, learning my way with difficulty. I think that the noble Baroness, Lady Lee of Asheridge, has made out a powerful case for this Amendment, which I am happy to support. I have always wanted to see many of the disqualifications mentioned in the Act of 1957 reconsidered. For instance, the Act disqualifies: a soldier, a policeman, members of the I.T.A., the National Coal Board, the United Kingdom Atomic Energy Authority, Directors of Remploy, the officials of Chelsea Hospital, town clerks, county council clerks, and a Schedule of over 100 officers and persons from becoming Members of Parliament. If this Amendment is not accepted we shall add yet another to the list of disqualifications.
I speak from long experience of being disqualified. During the quarter of a century that I was a teacher I was ineligible to hold one of the precious rights of a citizen, that of standing as a candidate for the town council, because I was employed by the town council. That was a disqualification that I shared with all municipal or local government workers.
There was a curious idea that this group of workers, if they had their full civic rights, might somehow be corrupted and use their position as elected members corruptly. I am proud to belong to the cleanest democracy in the world; incorrupt and incorruptible. I would never support anything which in any way led to the possibility of corruption coming into our public life, of which I am so proud. However, I refuse to believe that when the Minister is instructed to select for the Board persons,
"who appear to him to have knowledge and experience of library or university affairs, finance, industry or administration"
he should be compelled to reject automatically any such person with any one or some of those qualifications simply because he happens to be a Member of Parliament. To be a Member of Parliament ought not to be a disqualification for an office, unless it can be clearly shown that in such an office his being a Member of Parliament would lay him open to corruption, or to act corruptly.
912
I hope that the noble Viscount will accept this Amendment.
LORD ROBBINS: My Lords, may I add a footnote to the speeches which have been made, which I support 100 per cent.? The emphasis so far has been laid, quite properly, on the disadvantage of exclusion. I would rather emphasise the disadvantage of impoverishment. It surely is not beyond the reach of imagination that there may be in the other place people whose services would be more valuable than the alternatives. Automatically to debar availing ourselves of such services seems to me to be an unnecessary sacrifice. I choose my examples indiscriminately from the history of the past. Surely the noble Viscount will agree that a Board of this sort would have been embellished by the presence in its numbers of, let us say, the late Earl Balfour when he was still Mr. Balfour, an ornament of science and learning, the late Lord Morley, when Mr. Morley, one of the most celebrated literary men of the time, or the late Mr. Burns who himself was a great bibliophile. It seems to me that reflecting on possibilities of that sort lends a certain amount of support to the Amendment of the noble Baroness.
BARONESS WOOTTON OF ABINGER: My Lords, I am sorry to disagree with my noble friend, and I can only repeat shortly what I think I said on the Committee stage when the noble Baroness moved a somewhat similar Amendment. The first duty of Members of the other place is to the other place, and as time goes on those duties become increasingly exacting. I do not think that references to distinguished men such as the noble Lord, Lord Morley, have great relevance now, since in his time Parliament was very much more a part-time occupation than it is to-day. There may be occasional exceptions, but my experience, serving on a number of departmental and inter-departmental committees, is that Members of Parliament nearly always have to give priority to their Parliamentary duties, and it is very difficult for them to be effective, regular attenders at the meetings. This is going to be a very important and specialised job which I think is going to call for continuous attention, and I believe the time has now come when we must recognise

913
that Members of Parliament are not able to give that kind of attention to duties outside their Parliamentary duties.
LORD ALPORT: My Lords, I have come to your Lordships' House this afternoon uninstructed in the issue which the noble Baroness was going to raise. I should like to make one point which I think is important from the point of view of Members of another place. It is true that with the increasing pressures of business in the other place on their energies a great deal of their time must necessarily be occupied with the business of the House of Commons, but one of the disadvantages which many of us who served in another place felt was the fact that we were disqualified from and unable to take part in many other branches of public life which were of particular interest to us. Those who are destined for high ministerial office naturally wish to give the whole or most of their time to the work of Parliament, but there are many Members with great experience who are not destined for high office and who have a personal contribution to make to many of the matters in which they have experience outside their political life.
I think it would not be to the disadvantage of another place if this disqualification were not applied in this case. I think it would be to the advantage of that House if Members were allowed to take part in the work of this body from the point of view of their membership of the House of Commons. Further, I believe that a Member of Parliament who has a fairly wide view of the various public issues which come before Parliament in the course of his Parliamentary career can make to the work of a highly specialised body of this sort a special contribution which is sometimes not available from others, however expert in the narrower field of the work of libraries. They cannot give the same sort of service in advice and guidance to a body of this importance.
LORD LEATHERLAND: My Lords, I think we are getting on to rather dangerous ground. We are pretending that we have the right to say what kind of people shall be elected to the other House. That is rather outside the scope of our privileges. I do not want to argue about offices of profit under the Crown. whether it is right that they
914
should be accepted by Members of the other place or whether the present list of proscribed offices is too wide or too narrow. All I want to say is that we are here as a non-elected House attempting to dictate how Member of the elected House shall conduct themselves and whether they shall or shall not be able to accept one kind of post. If this Bill had come from the other place with this clause in it, thereby signifying that the other place had given it its approval, I should be inclined to say that we had every right to discuss it. But this Bill originated in this House and here are we, non-elected people, daring to say to the elected House of Parliament that its Members shall do this or shall not do that. The best thing would be to cross the provision out of the Bill and let the other place put it in if they want it; and we could then accept it with the graciousness which is a characteristic of your Lordships' House.
3.18 p.m.
VISCOUNT ECCLES: My Lords, this is a very interesting point and I am grateful for the variety of views we have had, both this time and on the Committee stage. On the Committee stage, in addition to advice from the noble Baroness, Lady Wootton of Abinger, we had the advice of the noble Lord, Lord Fletcher. He reminded us that he took a prominent part when the House of Commons Disqualification Bill was going through Parliament. I must say that the sentiments which have been expressed to-day are very different from those which were expressed when Parliament agreed, I think without a Party Division—though I may be wrong on this—to the House of Commons Disqualification Act. The fact that the paragraph is in this Bill merely reflects the precedent that has been followed since the Act was passed when public bodies were set up which were of a management type supplying services to the nation, which is the case with the British Library.
I think we want to look at what sort of Board this is. In previous debates we looked, I think, at the two possible models. We could have nut all the executive emphasis into the full-time staff and had as the governing body a body of trustees which would have been, no doubt, a much larger body than that now proposed and which would have been

915
representative of a number of interests. That your Lordships discarded in favour of the proposal in the Bill which is to set up a management Board. I do not wish to weary your Lordships with all the arguments I have made before, but I think the type of institution which we are now creating is one in which it is much better that the policy-making and the responsibility for the execution of that policy should rest on a number of full-time members of a comparatively small Board supported by a comparatively small number of part-time members who will none the less have a very real function to perform.
That being the case, we agreed on previous clauses in the Bill that the Secretary of State should have the power to pay a salary both to the full-time members and to the part-time members. That was no new precedent. That has been done in a large number of cases, some of which are very similar to the kind of institution we are setting up now. I quoted instances on the Committee stage and I will not do so again. But once we have done that and have settled for a management Board where the Secretary of State can pay every member, I think it becomes extremely difficult, in terms of the debates in another place on the House of Commons Disqualification Act, to make an exception of this Board.
Of course it is possible that some men and women who are invited to join as part-time members may say, "I do not wish to be paid." But I do not see that the principle of voluntary service is in any way affected, because when someone wishes—and I hope that there may be many with the appropriate experience—to serve part-time without being paid, all he or she has to do is to say to the Secretary of State, "I wish to do this as a voluntary service." On the other hand, as we have found out in many instances already, there will be men and women who perhaps do not wish to go on in their full-time jobs but wish to do some public service and who will say, "I should like to be a part-time member of this Board. How much work is there?" They will undoubtedly be told that there is a very considerable amount of work for them to do, and they will say, "I am afraid I cannot accept that, with my family responsibilities and so on, unless I
916
have a small salary." That is nothing new; it is what is already done in the case of ten, twenty or thirty boards, and I am bound to say that I think we are right to follow that principle.
If the principle had not been well established, I could quite understand the force of the argument of the noble Lord, Lord Leatherland, that since this Bill has begun in the House of Lords and this is a paragraph affecting Members of another place we ought to leave it to them to put it in. But as the principle is so well established I do not think that that is a valid argument. Furthermore, in almost all of these cases there have to be two Members, one from each side, which makes the position very difficult with so small a Board. I do not think that this is the type of management Board, providing services to the public, where membership of another place is appropriate. Therefore, I must ask the House to reject the Amendment.
3.24 p.m.
LORD SHACKLETON: My Lords, this has proved to be an extremely interesting debate, and different views have been expressed regardless of the nature of the Parties to which we belong. I must admit that when my noble friend discussed with me the possibility of putting down this Amendment I had a number of doubts very much along the lines of those which the noble Viscount, Lord Eccles, has expressed. But I am now bound to say that I think there is a case for letting the other place decide on this matter. To some extent, I am led to that view by the noble Viscount's own speech. I give him a great deal of credit in regard to the British Library, more so than I do in regard to museum charges, and therefore I do not start with a pre-justice in this matter. But if I may make my case in general terms, my criticism of the way this Board is formed is that it follows too closely the pattern of a nationalised industry; and it is quite normal for hard-worked civil servants to look for satisfactory precedents. Furthermore, I am not very wedded to the idea of the British Museum Trustee solution, which has in the past sometimes led to some excitement in your Lordships' House. In relation to this particular institution, I feel that we are really looking for something which is halfway

917
between the board of a nationalised industry and the national museums.
The noble Viscount referred to Clause 2 and the composition of the Board. I see his point about a management board. I am sorry that there is no reference to representation of the Royal Society or the British Academy, but I shall not raise that issue now. But having heard the argument to-day, I do not see why we need specifically to exclude Members of another place. I should like to take up the point which my noble friend Lady Wootton of Abinger, and others of my noble friends, mentioned, of the ability of Members of Parliament to undertake a duty of this sort. I strongly agree with my noble friend Lady Lee of Asheridge that at this stage in our development—and as the Second Chamber we are entitled to discuss this matter—we do not wish to see Members of Parliament being employed full-time elsewhere. As the noble Lord, Lord Alport, pointed out, one of the problems which increasingly confronts Parliament with modern developments is its loss of contact with the difficulties which Governments and Members have to face. So I think there is a most powerful case for involving Members of Parliament, where possible, in public service.
On the question of offices of profit, I am bound to say that the views of a former Speaker of the House of Commons carry very great weight with me. Our concern to prevent corruption in public life dates from an earlier age and, in certain respects, I believe that we are seriously handicapping ourselves by the way in which the offices of profit constraint is applied. But, in any case, the noble Viscount, Lord Eccles, himself gave the answer to this, by saying that there is no obligation on anybody to receive remuneration. Indeed, this bar does not apply to members of advisory councils who are also entitled to receive fees which I should have assumed were technically honoraria of the kind to which my noble friend referred. Therefore, in the context of the Board as I conceive it to be, I should have thought there was a place for the widest possible choice. I was once asked to retire from a hoard because, although there was no pay attached to the job, it suddenly became a disqualified board.
918
Although this is very much a matter for another place, I think it is slightly absurd. In any case, I question whether the noble Viscount has accurately described this body as a small management board. A management board in industry generally refers to a board of full-time executives operating below board level, which usually contains a number of part-time directors. Since there is provision for such part-time members of the Board I am bound to conclude, unless the noble Viscount tells me that they will all be engaged in some sort of executive action on two or three days a week, that depending on their time and energy, their activities will be confined to something like one meeting a month or one meeting a fortnight, which service it is fully within the capacity of Members of another place to give if they wish.
I give full credit to the noble Viscount's energy and to the way in which he has come to his conclusions. But the value of a debate such as this is that it opens up new ideas, and I hope very much that he may see his way to accept my noble friend's Amendment and to let the matter go to another place. It will then be for the Government to consider further what is appropriate in this difficult matter. Personally, I should like to see this question of office of profit raised; and since we know that another place are extremely remiss in looking after their own interests, as we have seen in the way they have suffered under low pay and their opportunity for service, I think there is much to be said—and I have come to this view only on balance—for making this useful Amendment, which still leaves it open to another place to take a further look at the matter.
LORD SLATER: My Lords, I sincerely hope that the Minister will have second thoughts on this Amendment and will be prepared to accept it, because I should be most interested in the debate that would follow in the other place if such an Amendment went into that Chamber for debate and discussion. I followed the point of view expressed by the noble Lord, Lord Alport, and there is quite a lot behind it. I well remember many years ago travelling with a Member from the other place on a delegation. The salary which was fixed at that time

919
was running at £1,000 a year, and I remember his saying to me, "Joe, £1,000 a year is no use to me; I shall have to take another job". And what was he looking for? He was looking for a job as a director of a particular firm or firms, as the case may be. This sort of thing operates on both sides of the House, so far as the other place is concerned, just as it operates in your Lordships' House. Some people endeavoured to get me to take over a directorship, but I said, "I am an old-age pensioner, and I want nothing to do with it." Therefore, I am an old-age pensioner living just on my retirement pension and superannuation.
But I could not agree with one part of the sentiment expressed by my noble friend Lady Lee in regard to the part-time member. The part-time member of any board, whatever board it may be, can play a very useful part in debate and discussion on the running of the particular organisation. Many of them are there for consultation, and in their consultative capacity are able to give sound advice on the running of a particular industry, or whatever it may be. I am all on the side of the part-time member receiving a form of recognition, but not in the way cited by my noble friend, of a subsistence allowance for coming down to London from, say, the North-East, or from Scotland, or from wherever else it may be, spending two or three days here and then going away back, while other people may be sitting upon that particular board and, because they are full-time members of the executive, may be receiving a fabulous salary. I do not agree with that type of policy. I believe that the part-time member, if he is qualified to sit there and be recognised because of his abilities, ought to receive adequate remuneration for the services that he is rendering in the running of that particular organisation. I sincerely hope that the Minister, as he considers what has already been said by my noble friend the Leader of the Opposition, will let this matter go to the other place and will let the people along the corridor "have a go" at it, because I should be most interested to read some of
the speeches which would be delivered should such an Amendment go there for debate and discussion.
BARONESS LEE OF ASHERIDGE: My Lords, I was hoping that this modest Amendment could be accepted by the entire House, but as there is obviously some disagreement I am afraid that, as we have not managed to convince the Paymaster General that it would be gracious to leave this paragraph out, in those circumstances I must press the Amendment to a vote.
VISCOUNT ECCLES: My Lords, I feel I must say just one more word, because I think there is some misunderstanding here. The precedent is to put this paragraph in. If your Lordships were to take it out, it would be your Lordships who would be interfering with the precedent which has in recent years been established in another place. I have been told by several noble Lords that we ought to leave this paragraph in so that the other place may have an opportunity to debate it. What a suggestion to the other place! All they have to do in another place, if they care about it, as certain noble Lords on the Front Bench opposite have said they do, is to move to leave it out again there and to have their discussion. There is nothing that we can do to limit the discussion in another place. It sounds, listening to some of your Lordships, as though we were pre-empting the discussion on disqualification of Members of Parliament. We are doing nothing of the kind; and since the precedent is to have this in the Bill—and I am prepared to believe that precedents should sometimes be overruled—let the other place, whose business it is, move to leave this paragraph out and discuss that on their Amendment. I see no reason whatever, in consideration of the duties of another place, why we should move this paragraph out of the Bill.
3.39 p.m.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 59; Not-Contents, 105.

CONTENTS

Alport, L.

Birk, Bs.

Clifford of Chudleigh, L.

Archibald, L.

Blyton, L.

Colyton, L.

Ardwick, L.

Brockway, L.

Crook, L.

Avebury, L.

Brown, L.

Davies of Leek, L.

Diamond, L.

Hylton-Foster, Bs.

Segal, L.

Douglass of Cleveland, L.

Jacques, L.

Shackleton, L.

Evans of Hungershall, L.

Leatherland, L.

Shepherd, L.

Feversham, L.

Lee of Asheridge, Bs.

Slater, L.

Fiske, L.

McLeavy, L.

Stamp, L.

Fulton, L.

Maybray-King, L.

Stocks, Bs.

Gardiner, L.

Nunburnholme, L.

Strabolgi, L.

Garnsworthy, L.

Phillips, Bs. [Teller.]

Summerskill, Bs.

George-Brown, L.

Platt, L.

Taylor of Mansfield, L

Granville-West, L.

Popplewell, L.

Thorneycroft, L.

Greenwood of Rossendale, L.

Reay, L.

Trevelyan, L.

Gridlev, L.

Robbins, L.

Walston, L.

Hale, L.

Rusholme, L.

Wells-Pestell, L.

Hall, V.

Sainsbury, L.

White, Bs.

Henderson, L.

St. Davids, V.

Williamson, L.

Hoy, L. [Teller.]

Samuel, V.

NOT-CONTENTS

Aberdare, L.

Elgin and Kincardine, E.

Mansfield, E.

Albemarle, E.

Elliot of Harwood, Bs.

Mar, E.

Amherst, E.

Emmet of Amberley, Bs.

Massereene and Ferrard, V.

Amulree, L.

Falkland, V.

Milverton, L.

Ashbourne, L.

Fortescue, E.

Mowbray and Stourton, L.

Atholl, D.

Fraser of Lonsdale, L.

Moyne, L.

Balfour of Inchrye, L.

Goschen, V.

Napier and Ettrick, L.

Balogh, L.

Gowrie, E.

Nugent of Guildford, L.

Beauchamp, E.

Greenway, L.

Oakshott, L.

Belhaven and Stenton, L.

Grenfell, L.

Ogmore, L.

Belstead, L

Grimston of Westbury, L.

Penrhyn, L.

Berkeley, Bs.

Guildford, L. Bp.

Perth, E.

Bethell, L.

Hailsham of Saint Marylebone. L. (L. Chancellor.)

Portsmouth, L. Bp.

Blackford, L.

Rankeillour, L.

Bourne, L.

Hankey, L.

Redcliffe-Maud, L.

Brabazon of Tara, L.

Hawke, L.

Redesdale, L.

Brooks of Cumnor, L.

Henley, L.

Reigate, L.

Brooke of Ystradfellte, Bs

Howard of Glossop, L.

Ridley, V.

Camoys, L.

Ilford, L.

Robertson of Oakridge, L.

Carrington, L.

Jellicoe, E. (L. Privy Seal.)

Rowallan, L.

Clwyd, L.

Killearn, L.

Ruthven of Freeland, Ly.

Coleraine, L.

Kilmany, L.

Sackville, L.

Colville of Culross, V.

Kindersley, L.

Sandford, L.

Cork and Orrery, E.

Kings Norton, L.

Sempill, Ly.

Cowley, E.

Latymer, L.

Stonehaven, V.

Craigavon, V.

Limerick, E.

Strang, L.

Cranbrook, E

Long, V.

Strange of Knokin, Bs.

Crathorne, L.

Lothian, M.

Strathcarron, L

Daventry, V.

Loudoun, C.

Sudeley, L.

de Clifford, L.

Lucas of Chilworth, L.

Thomas, L.

Denham, L. [Teller.]

Luke. L.

Vernon, L.

Derwent, L.

Lyell, L.

Vivian, L.

Digby, L.

MacAndrew, L.

Willingdon, M.

Drumalbyn, L.

Macleod of Borve, Bs.

Wootton of Abinger, Bs.

Dulverton, L.

Mancroft, L.

Young, Bs. [Teller.]

Eccles, V.

On Question, Motion agreed to.

Clause 2 [Provision by Authority of local sound broadcasting services]:
3.45 p.m.
VISCOUNT ECCLES VISCOUNT ECCLES moved Amendment No. 2:
Page 7, line 37, leave out from ("collections") to end of line 45 and insert ("but subject to the following sub-paragraphs.
(4) The power of the Board to dispose of an article transferred to them by section 3(1)(a) of this Act shall be exercisable only if—

(a) it is a duplicate of another article in the Board's collections (whether or not so transferred), or

922

(b) it appears to the Board to have been printed not earlier than the year 1850, and a copy of that article made by photography or a process akin to photography is held by the Board, or

(c) in the opinion of the Board it is unfit to be retained in their collections and can be disposed of without detriment to the interests of students;

but the Board may transfer such an article to the trustees of the British Museum (Natural History) where they are satisfied that it would be more appropriately held with the collections of that Museum.
(5) Where any property in the hands of the Board (whether or not transferred to them under section 3(1)(a) of this Act) is subject to any trust or condition—

923

(a) they shall not dispose of or deal with it in any manner inconsistent with the trust or condition; and

(b) it shall be subject to the same trust or condition in the hands of any person acquiring it from the Board.")

The noble Viscount said: Your Lordships will remember that on Committee stage I accepted an Amendment which moved into the Bill words from the British Museum Act 1963, with the idea that the Board of the British Library should have precisely the same powers and obligations in respect of the disposal and the lending of objects as the present Museum Trustees. I find that that Amendment was defective in wording, and I am therefore asking your Lordships to replace it with the words which appear on the Order Paper. These make the necessary Amendments from the British Museum Act 1963 which are consistent with a board which is managing only the Library and not the antiquities as well. Further, my noble friend Lord Cranbrook, with his usual perspicacity, pointed out that there was another section in the 1963 Act, Section 9(1), under which the Trustees of the British Museum had power to transfer objects to the Natural History Museum. He asked us to bring those powers into this Bill so that the new Board would be in exactly the same position as had been the Trustees of the British Museum. That we do in subsection (5) of my Amendment. I hope that this meets the wishes of the House, and I beg to move.
THE EARL OF CRANBROOK: My Lords, I should like to thank the noble Viscount for having with this Amendment met the points I raised. On the other hand, it does not go quite so far as Section 9 of the Act, in so far as the Trustees of the Natural History Museum will have no power (save to lend for research purposes) of transferring anything from their Library to the British Library. The Library in the Natural History Museum was originally intended, and is still intended, to provide the working tools of the scientists who work there. A great many of the books were printed before 1850 and are as important now as the day they were printed. But here I should say I am speaking of my own opinion and not necessarily that of my colleagues. There are a number of books there which would be far more appro
924
priately held in the British Library, where they would be readily accessible to students other than biologists, but I think the Trustees at the Natural History Museum would not have the power to transfer them to the British Library; although they would still have the power to transfer them to the British Museum at Bloomsbury. Perhaps the noble Viscount can consider this point between now and the Third Reading. It could be important. There are books there of great interest to bibliophiles purely as bibliophiles, and also to people interested in the history of science, who would in future find them in the scientific part of the British Library, where they would be much more readily accessible. Perhaps the noble Viscount could consider this matter and slightly extend this Amendment to put the British Library in relation to the Natural History Museum on all fours with the present position of the British Museum at Bloomsbury.
VISCOUNT ECCLES: My Lords, I confess that this is a new point to me. I did not know that the Library of the Natural History Museum contained books which perhaps would be better kept in the British Library. Certainly it is something we ought to look at, and I assure my noble friend that I will look at it between now and Third Reading.
LORD STRABOLGI: My Lords, I should like to say a few words from the Opposition Bench in support of the Amendment. I think we are indebted to the noble Earl, Lord Cranbrook, who raised this matter on Second Reading and in Committee. He mentioned particularly the Banks Papers. I hope that this matter will soon be resolved and the question whether or not they should be part of the main collection will be decided. I agree with the noble Earl that the Government Amendment, which we welcome, does not go far enough. Section 9 of the British Museum Act 1963, to which the noble Earl, Lord Cranbrook, drew attention during the Committee stage, is much more flexible and fluid. It allows transfers not only to the Natural History Museum but also to all the institutions listed in the National Gallery and Tate Gallery Act 1954. These include the Victoria and Albert Museum. I should have thought that here there was a case for certain transfers back. The Victoria and Albert Museum has a large holding of Dickens material. It was bequeathed

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to the Museum and has been looked after admirably. It made the nucleus of a most wonderful Dickens Exhibition a year or two ago. But there well may come a time, a few years hence, when it will be thought that this important holding of one of our greatest authors should be part of the main British Library reference section. That is just one of the problems with which we are faced.
There is also the question of duplicates. The Amendment says that the Board will have the right under sub-paragraph (4)(a) to dispose of any article if it is a duplicate. I hope that they will proceed with considerable caution. There is a fashion growing up of thinking that libraries should dispose of duplicates, and I think it very important to ensure that one does not dispose of items which are not duplicates but only variants. The Newberry Library in Chicago disposed of a great deal of its holding recently. It is, of course, a very fine library, but it is mainly a research library and not a complete reference library like the reference section of the British Library. I am sure that we may all have confidence in the Board not to dispose of anything not thought to be a duplicate.
On the other hand, one has no quarrel with the disposal of material not earlier than 1850. I remember very well the noble Earl, Lord Dundee, telling us during the passage of the British Museum Act that this will refer mainly to material printed after 1850 which is on wood pulp and not rag paper and deteriorates much more quickly, so it is better kept on microfilm. I am rather surprised that the last subsection of the British Museum Act, Section 5(3), has been left out. Under the British Museum Act, for any disposals of that kind the trustees can reclaim the money to acquire other items, and that seems to me a most laudable idea. In the present Bill this would go against the provision in Clause 5(2) requiring any moneys received by the Board in any financial year to be paid into the Consolidated Fund. There may be good reasons why the British Museum Act allowed the Trustees to keep money raised from disposals which do not apply to the Board of the British Library. I shall be interested to hear from the noble Viscount why that is so. Apart from that point, I should like to say that from this side of the House we support the Government Amendment.
VISCOUNT ECCLES: My Lords, if I may have your Lordships' indulgence, I can perhaps answer the last point raised by the noble Lord, Lord Strabolgi. I think it is that when the British Museum Trustees were building up their library they did not have these large acquisition grants every year, now more than £600,000. Therefore nowadays the retention of the money when they sell a few books does not mean very much. What they want all the time is larger sums granted to them for the purchase of books of all kinds that they do not receive by deposit. So probably the reason for that has been overcome by the great increase in their grants for acquisition. I will look at the other point raised by the noble Lord, but on the whole I think there will not be very much chance of a transfer between one institution and another.

SOUND BROADCASTING BILL
3.53 p.m.
LORD DENHAM: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Denham.)
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 1 [Independent Television Authority to be renamed Independent Broadcasting Authority]:
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 1:
Page 1, line 5, leave out subsection (1) and insert—
("(1) For section 1(1) of the Television Act 1964 (in this Act referred to as "the Principal Act") there shall be substituted the following:—
'(1) There shall be an Authority to be called the Independent Broadcasting Authority (in this Act referred to as "the Authority") which shall consist of the Chairman two deputy Chairmen and such other members not being less than seven as the Minister of Posts and Telecommunications may from time to time determine:
Provided that unless and until the Minister otherwise determines by notice, in writing to the Authority, a copy of which shall be laid before each House of Parliament, the number of the said other members shall be ten.'")
The noble Lord said: We now come to the Committee stage of this Bill which had a rather chequered career in Committee in another place. I think the Government were defeated twice. It is true that, from the Government point of view, the matter was put right when the Whips exercised their control, perhaps more efficiently, during the Report stage. Then, as we know, the Government had some slight difficulty with the Bill on Second Reading in your Lordships' House. I think that my noble friend the Leader of the Opposition was more than charitable to the Government Chief Whip when he expressed sympathy to him. I have never thought that it was the responsibility of the Opposition to provide a quorum in your Lordships' House. Nor do I think it right that noble Lords opposite should deny to noble Lords who may sit not on the Front Bench but on Back Benches or the Cross Benches the opportunity to vote on the Second Reading of a Bill. The noble Lord, Lord Denham, is getting restive, I see, but of course the Government did on that evening deny them opportunity to vote. if there had been a vote, I suspect that the Government might well have lost the Bill, which no doubt would have caused grave constitutional difficulties between the two Houses.
I made my position quite clear on Second Reading. I regard this as a squalid and rather horrid Bill. There is a touch of irony in the situation, in that we have recently been debating the British Library Bill, designed to enrich the nation and to find ways and means by which the assets of this country may be conserved and used. Yet I cannot believe there is any question but that in this Bill we are seeking ways and means of allowing national assets to be used by a small minority of people whose only motivation in acquiring those assets is the profit motive. I declared my position, that I was not going to vote against the Bill but that, if the House wished to proceed with the Bill, on Committee stage I would seek to be constructive. I hope that the noble Viscount, Lord Colville of Culross, whatever he may think of my drafting, which may be imperfect, will recognise that my approach has been to improve the Bill.
We paid tribute on the Second Reading to the I.T.A., the Authority under
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my noble friend Lord Aylesford. I do not think there is any doubt that many of the worst fears that some of us held in regard to commercial television have not been fulfilled; and I have no doubt that this is due to the leadership of the Authority under a number of chairmen, and also to the members and the way in which they have tackled a fairly onerous and certainly difficult task. The Television Act requires that the Authority should consist of a Chairman, a Deputy Chairman and not less than five other members, but that the Postmaster-General (or, as he now is, the Minister for Posts and Telecommunications) may increase the number. And, so far as the Act is concerned, the initial number was to be eight members. That is not a very large Authority, considering its responsibilities. I do not think there is any question that radio provides a different problem. First of all, we are not going to have some 12 or 15 contractors: we may well have some 60 contractors. Therefore from the point of view of sheer size the task and duties of that Authority are bound to be much greater.
I think we shall all agree, too, that the problems of the Authority in carrying out a general surveillance and understanding of the medium will be much greater in radio than in television. In the case of television, there is a good deal of interchange of programmes, so that even though viewers may not leave London they can see many of the products of other companies; but in radio, of course, the situation will be different. True, there may be some selling of programmes one to another; but I have a suspicion that in the main most of these radio companies will operate quite separately and, except in the case of news, there will not be a great deal of transfer of material. Therefore the task of the members of the Authority to watch over and seek to understand radio programmes will be much greater. I accept, however, that the basic functions of the Authority—the manner in which contracts are considered—will be much as they are in the case of a television company.
There is no doubt that some people would argue that there is a case for having a separate Authority for television and a separate Authority for radio. I believe that some of my noble friends

929
thought that, if there was to be commercial radio and commercial television, there ought to be four authorities: one for B.B.C. sound, one for B.B.C. television and two for commercial. I am not a very ardent supporter of this idea. It seems to me that there is a great deal to be said for the concentration of knowledge and experience within these two fields. So I, for one, would go for the two authorities. Certainly in this new venture, with all the new difficulties that will clearly arise, I should very much welcome the idea that the existing I.T.A., which already has considerable experience and, I believe, the respect not only of those who operate but also of those who view, should be the organisation and should provide the individuals who have the initial responsibility for setting up commercial radio.
The point I am trying to get across to the noble Viscount is that the responsibility, the amount of work involved, the ability to be able to listen and to understand, is going to be much greater if the members of the Authority are to perform their functions properly. The question I had in mind when I looked at the Television Act was whether the constitution as set out in that Act was sufficient. I would again remind the Committee that, according to the Act the present Authority must have a Chairman, Deputy Chairman and such other persons not being less than five. I felt that there was a good case for an increase in the size of the Authority. I do not agree, as may be suggested, that one should double the number as a consequence of the increased responsibility. I thought that an increase of three would be about right so far as the constitution required in the Act is concerned. I therefore suggest in my Amendment that the Authority should consist of a Chairman, two Deputy Chairmen (I will come to that point in a moment) and "such other members not being less than seven", and so on. So the noble Lord, Lord Denham, cannot accuse me of exaggerating the difficulty or of being extravagant in my recommendation.
The Television Act also says that the Minister responsible may increase the number of persons on the Authority, and, as I understand it, the number is now eight. Your Lordships will see that in my Amendment I suggest that the num
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ber should be increased to ten. In other words, I seek to increase the minimum statutory number required—that is, a Chairman, Deputy Chairman and five others, which is seven—to ten. I have sought to recognise the new responsibilities of this Authority, and to suggest that its composition should be increased in recognition of that responsibility. I hope the Government will see that this is not only a helpful Amendment but also one that is well worth making.
4.9 p.m.
LORD PLATT: Considering the obvious lack of enthusiasm on all sides of the House for the Second Reading of this Bill, when the Government failed to get a quorum and had to adjourn it to be read again and voted on by people who had not heard the arguments either in favour or against, I think the Amendment proposed by the noble Lord, Lord Shepherd, which I have pleasure in supporting, is an extremely modest one, and is an Amendment which the Committee might well accept. If I were convinced that the majority of the people whom I know and respect (in parenthesis I may say that this House is perhaps better than an elected House to give its opinion on matters of public taste and argument) really wanted their programmes interrupted by the selling of soap and so on I might be persuaded to keep silent, even if my vote was cast against the Bill. But as I am not convinced that the majority of my friends really hold that view, I have added my name to this Amendment.
The noble Lord, Lord Robbins, made an important contribution to the debate during Second Reading (which of course many noble Lords did not hear) when he asked whether it was any more obnoxious to have one's broadcasting interrupted by advertisements than for the newspapers to be studded with advertisements—to which one or two answers were given. My answer was that if you take up a newspaper you need not look at the advertisements, whereas if you are listening to a broadcast it is very difficult to keep your ears closed and let your attention go elsewhere while someone is selling his soap. For those and other reasons, I support this Amendment.
THE MINISTER OF STATE, HOME OFFICE (VISCOUNT COLVILLE OF CULROSS): I wonder whether I might

931
take a slightly unusual step? The noble Lord, Lord Shepherd, in moving his Amendment, said that he was just going to "come on" to the two deputy chairmen. He did not actually do so and he said nothing about them. As I want to do justice to his Amendment, and at the moment I believe we have only half of it, I wonder whether he would like to say something more?
LORD SHEPHERD: I am beginning to hope that there may be some success achieved in this Committee in view of the very helpful question which the noble Viscount has put to me. In fact as soon as I had sat down I remembered the point that I had been meaning to come to, and clearly I did not get there. It seems that in this Authority either the Chairman or the Authority itself may seek to set up a two-committee system—although in the end of course the Authority would be entirely responsible—and this may have the effect of dividing the responsibility in the Authority: one side for television and one for radio. In that case there would be some advantage in having two deputy chairmen who could lead on both these sub-committees. I would not myself insist that there should be two deputy chairmen: I can recognise some difficulty here. But I should like to have some recognition that the Authority is being called upon to perform two rather different tasks and that there might be a case for having two deputy chairmen—one who could lead on one committee and the other who could lead on the other. That was the point that I was seeking to make.
VISCOUNT COLVILLE OF CULROSS: I am sure we are all obliged to the noble Lord for his explanation. I was also grateful for the reference to some of the finer points on the Second Reading debate that the noble Lord, Lord Platt, reminded us of. Those of us who were not present will no doubt have been pleased to have their memories of Hansard refreshed by what he said. We should also like once again to pay tribute to the magnanimous efforts of the noble Lord, Lord Shepherd, which, whatever his views on the Bill may have been, were displayed on that occasion.
May I just get out of the way the inevitable and tedious drafting point
932
which I am perfectly certain the noble Lord does not mean and on which I shall say very little more? I do not think that one can put it in quite in the way he has done, because the effect of the Amendment would be to wind up the existing I.T.A. and start all over again. I think that we want to continue the I.T.A., otherwise all sorts of technical difficulties would arise and this would actually cause mayhem in the world of television as it exists at present. I will say no more of that.
The noble Lord then went on to two substantive points. The number of members of the Authority, as he says, is set out in two parts of the existing Television Act. There is a statutory minimum and then there is a proviso written in concerning the number that the Minister was going to start by appointing. That number has fluctuated a good deal over the years, and in fact the present number of ordinary members, other than the chairman and deputy chairman, is nine. That has been so since June, 1969, when the present Opposition Party were in power. The number has been up to eleven and I think it has never been less than eight, except when there was one vacancy. The point is that my right honourable friend the Minister for Posts and Telecommunications can suit the requirements of the Authority and appoint more if any are required.
As we understand it—and I know that the noble Lord, Lord Aylestone, is bound by an irrevocable oath of silence while he holds his office: it is certainly unfortunate but not his fault of course—for the way in which this new Authority will he working, it will be adequate to retain the present number of members. Of course the noble Lord may find that he needs more, in which case he has but to ask and the matter can be considered. Under the Television Act 1964 as at present drafted, quite apart from this Bill, the Minister has powers to appoint more members. Therefore, while I do not want to say that the present number is irrevocable or definitely right—it plainly is not—I suggest to the Committee that the existing powers are flexible enough to deal with exigencies as they arise.
The noble Lord, Lord Shepherd, has drawn attention to the extra need for surveillance, supervision and a great deal

933
more detail, not only in terms of programmes but also in terms of locality. I entirely take the point and I would not be surprised if the noble Lord, Lord Aylestone, has not thought about this very carefully with his existing Authority while getting ready to undertake his new duties under the Bill. I have no strong feelings on this question, but in view of the fact that we can, if necessary, alter the set-up to suit circumstances I wonder whether it is worth while putting this into the Bill. I rather think not; but if the noble Lord wants to make another speech on it, of course I will listen.
As to the two chairmen, I am not so happy about this suggestion. It would be invidious to suggest what might happen supposing one had two divisions of the I.B.A., one dealing with sound broadcasting and one with television. Everybody on that Authority, I am sure, is far too sensible ever to get into a position where there would be any sort of clash. But it is just conceivable that when one is considering two deputy chairmen and two divisions, as it were, one is not quite taking account of the position of the I.T.A. as it now is, or the I.B.A. as it will be, by comparison with the world of the B.B.C. As I understand it, in the B.B.C. the Board of Governors are not divided although they deal with both television and radio broadcasting. Below them is the complete staff of the Corporation, which inevitably is divided because they deal with entirely different aspects of broadcasting. In the I.B.A. there will only be the former situation, that is, the equivalent of the Board of Governors. One would hope that they would tend to look at the range of broadcasting services as a whole, both television and sound. There may have to be, as there are now on finance, specialist members; but I would again suggest to the Committee that to lay down in the Statute that there must be two deputy chairmen, with the inevitable problem of which one takes the chair if the chairman is not present, and so on, could detract from the flexibility with which I would hope the Authority would be able to run its business.
What impressed me most about the speech of the noble Lord, Lord Shepherd—and I am sure that this is the foundation of a useful Committee stage—was the tribute he paid to the I.T.A. as it
934
now exists and what it has achieved since it was set up. He spoke about its functions and applauded the fact that they were going to be the same for sound broadcasting as they are for television. He also applauded the idea of concentrating their knowledge and experience in one body rather than splitting it up into more than one corporation. I suggest to the Committee that that argument also applies to deputy chairmen. It could be divisive; I am sure that it would never be meant to be so. None of the members or the deputy chairmen would ever intend in any way to cause divisions; but purely organisationally I can foresee the possibility of difficulty here. In view of the fact that the noble Lord trusts the Authority as it now is (and as I hope it will be) I hope he will feel that he need not press the Amendment.
4.20 p.m.
LORD BEAUMONT OF WHITLEY: On the two substantive points in this Amendment which have been commented on so far the noble Viscount had a good answer with regard to the number of members of the Authority. Under the present legislation it can be altered and be enlarged; but I am delighted that the noble Lord, Lord Shepherd, called the attention of the Committee to the size of the Authority, because it is important that we take seriously the fact that there will be a great cleat more work to do. The present legislation enables the size to be regulated and, if necessary, enlarged. I do not entirely follow the noble Viscount in his argument against two deputy chairmen; but I see some force in not having it laid down that you must have two deputy chairmen and that you must organise the Authority in this particular way. It may be that it is the better way to organise it; it may be that it is not. Under the present legislation, if I read it aright, there is no possibility of having two deputy chairmen should the Authority so wish or should the Postmaster General (as he then was) so wish. I wonder whether the noble Viscount would consider more favourably an Amendment, possibly at a later stage, which wrote in the possibility of the appropriate Minister, if he sees fit, appointing a second deputy chairman, something he cannot do at the moment?
VISCOUNT COLVILLE OF CULROSS: The noble Lord, Lord Beaumont of Whitley, is perfectly right: there are a chairman, a deputy chairman and other members of the Authority, and I think that by Statute there may not be more than one deputy chairman. I have not thought about the possibility of having an optional extra deputy chairman. I suppose that one could also think in terms of leaving out any reference to deputy chairmen if one wished to do so. Rather than my giving an answer off the cuff, possibly the noble Lord would consider it more suitable if I went away and thought about this to see whether one or other or either of these suggestions would meet the approval of those who are much more concerned with this Bill, as the noble Lord will appreciate, than I am. I will think about this matter.
LORD SHEPHERD: The noble Lord, Lord Beaumont of Whitley, thought that the noble Viscount had a good answer. The trouble is that the noble Viscount, whether he has a good case or a bad case, always makes it sound good because he is so persuasive. Sitting on this side of the Committee one cannot helping feeling that the advent of the noble Viscount—just one noble Lord—has doubled the ability of persuasion of the entire Front Bench opposite. I wonder whether the noble Viscount would consider the point made by the noble Lord, Lord Beaumont of Whitley. I accept the difficulties that might arise from adopting my Amendment. But perhaps the noble Viscount would also consider whether subsection (1) of the parent Act should be amended to increase the number of members, in addition to the chairman and deputy chairman, front five to seven, as a recognition of the fact that the new Authority has a greater responsibility and therefore should be of a size capable of carrying out those responsibilities. If the noble Viscount will undertake to give those matters consideration, without in any way giving an undertaking, we will agree to withdraw the Amendment.
VISCOUNT COLVILLE OF CULROSS: Yes; of course I will consider the matter.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Provision by Authority of local sound broadcasting services]:
4.25 p.m.
BARONESS PHILLIPS BARONESS PHILLIPS moved Amendment No. 2:
Page 2, line 9, at end insert—
("() It shall be the duty of the Authority in respect of Sound Broadcasting after entering into an initial contract—

(a) to publish a statement within the locality concerned setting out the criteria under which the contract has been awarded, such statement to include the proportion of matter to be broadcast including news and news comment, features which shall have local origin or be of particular local interest, and the number of minutes in any one hour during which advertisements are to be permitted; and

(b) to publish a statement from time to time of what changes in the criteria may have been made.")

The noble Baroness said: I beg to move this Amendment on behalf of my noble friend Lord Shepherd. The Minister is almost bound to have written in his brief that this Amendment is defective; but perhaps he can make the points on principle as he has done before. The noble Viscount indicates that what I have suggested is not so. That is all to the good. As I see this Bill, it is in the nature of a prospectus; the Minister is placing before the Committee something which we are being invited to accept in the same way as we might be invited to take up shares in a company. That being so, we have to examine carefully whether the prospectus gives all the things that it purports to do.
The Bill was put forward as a local sound broadcasting Bill although it is not called that. This point was emphasised during the Second Reading, not only by the Minister who opened the debate but also by the noble Lord who wound up the debate and all noble Lords who participated, including one noble Lord who has some experience in another media. That noble Lord is not present to-day but he made the point that people in Britain now have made it clear that they want their voices heard at a local level and want to develop their own way of life. That is quite true. He went on to tell us how we could have local choirs and drama groups on local radio, and he made it sound rather splendid. At present the local radio stations which are operated by the B.B.C. do just that: I am sure many of your Lordships have had the privilege, as I have, of broadcasting on these local broadcasting stations. When

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one looks at the daily programmes that are presented on, for example, Radio Merseyside or Radio Nottingham, one finds that the content is very local. All kinds of purely local material is introduced.
When we come to this Bill, which deals with sound broadcasting that is going to be handled by a programme contractor, we have an entirely different proposition. The commercial contractor is concerned, as he must be, with obtaining revenue, so he has a very different starting point. He wants to get not only a regular listening audience but, so that the advertisers will be attracted, a large regular listening audience. Sufficient control does not seem to he laid down, either over the programme content or over the amount of advertising. One has a horrific idea that one might be listening to a local sound broadcasting station operated by a programme contractor giving as much as 30 minutes of advertising to 30 minutes of whatever he likes to put over.
I am sure that the noble Viscount will say at once that this will not happen; but there is nothing in the Bill which indicates that it could not happen. Nor is there any clear definition—and this was said on Second Reading—of "local" as opposed to "regional". There is a gloriously vague statement—and this comes up in a later Amendment. But "local" to me means precisely that, and if a radio station operates from London and I am listening in the Borough of Hammersmith, to me "local" means what is happening in Hammersmith. I do not see that as being of great interest to a programme contractor who wants a vast listening audience. We feel that it is essential that the points which we have made in the Amendment should be in-chided in the Act, not merely in a statement of intent.
The Minister said on Second Reading—and he has repeated it to-day—that there must be a measure of flexibility; but when we are dealing with such an important matter as mass communication any changes in criteria for granting contracts must also be under some kind of sanction. That is why we have included the provision that the Authority should publish a statement of the changes of the criteria under which the programme contractor has been accepted. In the White Paper, An Alternative Service of Radio
938
Broadcasting, which was the forerunner of the Bill, we read this:
"The task before the I.B.A. stations will present them with a formidable challenge. They must bring in new listeners. They must compete with Radio 1 and Radio 2, to which the majority of present radio audiences now listen. These programmes will therefore need to maintain wide appeal. They will not within the channel space available to them be able to provide a broadcasting range of different audiences as can the B.B.C. with its four national services and its local network."
So it seems to me that we are absolutely schizophrenic in this Bill. We are telling the stations on the one hand that they must be purely local, but we know from the financial and indeed some of the technical reasons that they will have to make an appeal to a much larger audience. Therefore it seems to us utterly essential that in the Bill itself there should be not only a declaration of the criteria under which the programme contract is granted but a requirement imposed to broadcast local, purely local, news and matters of local interest, and also the number of minutes of advertising should be definitely stated, so that those of us who are going to listen to these stations will at least be getting a fair deal under the prospectus. I beg to move.
4.32 p.m.
VISCOUNT COLVILLE OF CULROSS:I made the point at Second Reading (and I am afraid that it is one that probably appeals to me as a lawyer rather more than it appeals to other noble Lords in this Committee) that one must look at the Bill, which the noble Baroness has described as a "prospectus", and read it together with the Television Act 1964. This in the discussion of the Amendment which she has just moved is really most important. I should like to draw the attention of the Committee to the specific points which the noble Baroness says should be set out in the criteria and which the Amendment mentions. The three points picked out for special attention are news and news comment; features which have local origin or particular local interest; and the number of minutes in any one hour during which advertisements are to be permitted. The noble Baroness Wants something in the Bill about it. The answer is that it is already in the Television Act 1964, and I wonder whether I may show the noble Baroness where. There is one preliminary point to which

939
I would draw your Lordships' attention, and that is to the whole question of merit which the noble Baroness touched on, a little vaguely, but I know it concerns her very much. The noble Baroness must not forget that the first section of the 1964 Act says: "It shall be the duty of the Authority—to secure a wide showing for programmes of merit."
That is one point upon which I place a good deal of emphasis.
We then come to particular points which the noble Baroness refers to in her Amendment. The first point is news. So one looks at Section 3, where it says:
"It shall be the duty of the Authority to satisfy themselves that, so far as possible, the programmes broadcast by the Authority comply with the following requirements, that is to say…that a sufficient amount of time in the programmes is given to news and news features and that all news given in the programmes (in whatever form) is presented with due accuracy and impartiality".
That is a fairly powerful criterion. It is in the Act; it will be read with the Bill. Whereas there is in the Television Act a reference to "watching", there needs to be an Amendment in this Bill to say "and listening", or something of that kind. I think that is a pretty solid criterion to go on and it will apply to all programme contractors.
BARONESS PHILLIPS: I wonder whether I might interrupt the Minister. I think the first words of the Amendment are
"to publish a statement within the locality concerned".
VISCOUNT COLVILLE OF CULROSS: I will come on to that. I wanted to deal with the substance of the criteria first, before we go on to the individual publication and its effect. I should like to get the background of the basic criteria first, if I may.
We then have local origin or particular local interest. As the noble Baroness will know, we have here in Section 3(1)(d) of the existing Act the provision that it shall be the duty of the Authority
"that the programmes broadcast from any station or stations contain a suitable proportion of matter calculated to appeal specially to the tastes and outlook of persons served by the station or stations and "—
a point for the Welsh and I suppose the Gaelic speaking Highlanders, if the noble Viscount, Lord Thurso, is not listening—
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"where another language as well as English is in common use among those so served, a suitable proportion of matter in that language."
We have not left it at that in the Bill because we have added a new paragraph (dd) in the Schedule and reinforced the local content of this particular duty. There is also going to be a duty in the case of local sound broadcasting services that the programmes broadcast from different stations for different localities do not consist of identical or similar material to an extent inconsistent with the character of the services as local sound broadcasting services. That comes in Section 3 of the 1964 Act. So we have a double-barrelled duty here to ensure the localness and real appeal to local interest and the sort of thing the noble Baroness was speaking about. I hope she will again recognise that we have gone as far as I think we can to lay down the general principle which I am sure she is after.
Then one wants to turn to the question of advertising time and the possibility that there will be thirty minutes of soap and thirty minutes of pop, or whatever it is that is being suggested. Here one goes to Section 8 of the 1964 Act. If one looks at Section 8(4)(a) one sees that the Authority has power to give directions under this section, either general or specific, qualified or unqualified, and directions may in particular relate to the greatest amount of time to be given to advertisements in any hour or other period. That of course is the criterion that has so far applied to television. To the best of my knowledge, there has never been half an hour of solid advertisements, except in the case of the advertising magazines, which were knocked out a long time ago and there has been nothing to replace them. I cannot see why there should be any difference in the standards applied by the Authority to radio from what they have already proved they can do under those powers for television. There the powers are set out for them and read into the Bill. I think that the background, the underpinning of these criteria, is pretty well covered by the legislation as it already exists.
I should now like to go on to the point which I know is also important to the noble Baroness about publication of criteria for a specific station and, as it were, the prospectus upon which the programme contractor got his programme

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contract. Here I am bound to say that one is on rather delicate ground. I expect that the I.B.A. would want to have from a programme contractor a pretty full account of the kind of service that he proposes, or his group proposes, to provide. The fuller the details they have—and particularly if there are a number of competitors—the more easy it is for them to make up their mind. They do not, so far as I remember, having looked at the advertisements which they put out inviting people to apply for contracts, at the moment specify criteria in those advertisements. I believe it comes at the next stage when the first indication of the type of programme appears in the response from the would-be programme contractor. Discussions then take place and in some cases, certainly in the past, it has not been the whole of that group that has won the contract; two groups have been amalgamated or something of that kind has happened. So, again, there would not necessarily be one single set of criteria upon which the application that succeeded was based; there might be an amalgamation of two. I think that the noble Lord, Lord Aylestone, and his Authority would consider, as I have said, that they need the fullest information possible.
But if the criteria upon which the contract was awarded are to he published, what is likely to be the effect of this? Will it not first of all be to restrict the frankness with which the would-be programme contractors approach the I.B.A.? Will it not also make it more difficult for the I.B.A. to judge the merits of the rival concerns who are seeking a licence? Above all—and I think this is perhaps the most dangerous thing of all—if you then have public scrutiny and reference hack to these criteria afterwards (and I think they would be fairly flimsy and fairly general criteria, for the reasons that I have explained) are you not all the time going to have both the contractors and the Authority looking over their shoulders and saying, "My goodness! I wonder whether I have infringed subsection (2) of Clause 23 of the application that I made? Perhaps I ought to play safe; perhaps I ought not to experiment; perhaps I should not take a step forward; perhaps I should not do that programme after all." I believe this is going to be restrictive and I do not believe that it
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will help the Authority in trying to decide who best to give the contract to in the first place.
I do not think any of us knows exactly how this will work, but we have experience—and this of course comes back to the point made by the noble Lord, Lord Shepherd, about how I.T.V. has worked —on the actual allocation of programme contracts to applicants. We know that there have been conversations about the way in which a station should be run. This has been in the Press, and everybody knows that there have been dialogues between the applicants and the Authority. We also know that from time to time the Authority has been on the tail of some of the programme contractors about what is in their programmes; what should be and what should not be in them. This is an on-going process, and if you put down those criteria and then you have to change them it takes away all the flexibility; you are stuck with a beastly legal piece of paper. Everybody looks at it, everybody sticks to it, and I believe it would be damaging to the service. Although I understand the doubts which have been expressed by the noble Baroness, I believe we can trust the I.B.A. to get this matter right. I hope that goes some way to satisfy the noble Baroness, although I appreciate very much the problem she has raised.
4.42 p.m.
LORD AVEBURY: I do not think that that is really a satisfactory answer, if I may say so to the noble Viscount. Perhaps I may take up his concluding point, the fact that there is not a piece of paper and there is no way in which compulsion can be brought to bear on a programme contractor. As the noble Viscount is aware, there has been considerable discussion about the allocation of contracts for television. One can foresee the same thing happening with sound broadcasting, that applicants will put forward ideas which seem reasonable and desirable to meet the objectives laid down in the Act but then as soon as they have a "legal piece of paper", as the noble Viscount has said, they can tear up whatever has been submitted in the form of undertakings of the kind mentioned in this Amendment.
I do not see how the noble Viscount can justify the kind of criticism that he was making on the effects of publication.

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He said, for example, that it would restrict the frankness of would-be contractors. Why on earth should it? The noble Viscount did not argue this case; he merely asserted that proposition without any sort of evidence to back it up. I think it might make the programme contractors a little more careful about what they put into these documents, and that would be no bad thing at all, because there would be no guarantee that they were going to meet their obligations subsequently. If they said, for example, that there was to be a proportion of locally written drama and that was put down in black and white for anyone to see, then as soon as it was posible to add up the number of hours of locally written drama during the course of the year it would be for the general public to see that the criteria laid down by the contractor himself were being followed and pressure could be brought to bear to restore the situation. After all, the contractor has said that he is going to do a certain thing in the first place.
The noble Viscount has said that it would make it more difficult for the I.B.A. to judge the rival merits of competitors. To me the very reverse seems to be true, to the extent that the contractors will be more careful in the wording and more precise, even though the document has no legal force. This is going to make it easier rather than more difficult for the I.B.A. As to the reference back afterwards and the arguments that might take place, if the document is clear in the first place there cannot be the kind of doubts on interpretation mentioned by the noble Viscount.
To take the matters specifically mentioned in this Amendment, one has news and news comment. I do not think that that phrase needs further definition or that those words would result in arguments taking place later on as to whether a particular item was in fact news or news comment. Surely critics of the system will not be so difficult as to argue about whether a particular programme falls into this or that category? That is a matter that can be settled between the programme contractor and the Authority. Similarly, in theory there may be differences of interpretation as to what is an item of local origin or of particular local interest. This is not something
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that one is going to argue about, and I think it is reasonable to assume that such criticism as would be expressed would be responsible and would come from local newspapers and even from the committee which I suppose we shall discuss under a later clause, which is supposed to ensure that matters of local interest are properly dealt with. If the criticism which is to be made subsequently is by responsible committees of that kind, then I believe the noble Viscount's fears are groundless. In any case, why should we take the attitude that we want to conceal everything from the public? Surely the presupposition should always be that we want to give the maximum amount of information so that people can form their opinions for themselves, and not to say to them, "You run away and play. What do you think we set up this I.B.A. for?—so that we can allocate the contracts behind the scenes. You take what you are given and remember that there is a committee which is appointed by the local authority to look after it on your behalf. You shut up; it is none of your business." Is that the kind of attitude we are going to take in setting up local sound broadcasting, or are we going to try to involve the people right from the start in the decisions that will affect them so deeply?
VISCOUNT COLVILLE OF CULROSS: The difficulty with which I am faced in dealing with what the noble Lord, Lord Avebury, has said is twofold. First, I do not understand how this would work. Is he suggesting that at the stage when the I.B.A. advertise for applicants for a local radio station, for instance, on Merseyside or in Nottingham (incidentally, I was very pleased to hear the noble Baroness, Lady Phillips, say that she thought those were local. I think that if it could be done in a place the size of Merseyside and satisfy the noble Baroness, Lady Phillips, that it is local it is the most encouraging thing I have heard in the debates in this House on the Bill), the Authority is going to say, "We now advertise for applicants for Radio Merseyside. They shall put out in the course of the week not less than 35 minutes and not more than 45 minutes of sport North of the Mersey and not less than 25 and not more than 35 minutes of sport originating South of the Mersey. There shall be two and a half hours of

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locally written drama, by which is meant written by somebody residing for the last three years in the county of Lancashire, Cheshire, Denbigh and Flint and the county boroughs of Warrington, Wigan Preston, Bootle, Barrow-in-Furness, Wallasey, Birkenhead and Chester"—and other matters of that calibre; or is he going to leave it to the applicants to put that sort of detail in for themselves? Or is there to be some sort of intermediate stage when the I.B.A. and the applicant between them thresh out that sort of matter?
I assume that the way it will work is that the document containing this sort of information having been produced, the public will then be invited to ask the I.B.A. whether it is satisfied that Mr. Smith (shall we say?), who wrote the drama that was put out on the radio the previous Saturday had in fact lived in Preston for the last two and a half years. I do not believe that this is the way to get constructive public criticism. I believe that under this Bill there will be continuing publicity and criticism in the Press. There has been no lack of publicity and criticism, in the Press and other sources, and in Parliament, about the programmes shown on Independent Television. I just wonder whether the I.B.A. will find it helpful to have the public picking up detailed points of tiny bits of the criteria where there may or may not have been infringement. The I.B.A. will have to adjudicate; it will have to say to the programme contractor, "It is very naughty; the man was only there two and a quarter years; you have broken the criteria; we shall have to have a revision and publish the change." I do not understand what the noble Lord, Lord Avebury, wants, and I do not understand how it would work. I believe that there will be sufficient public interest, sufficient public criticism, sufficient channels of public criticism without going through all this rigmarole. That is why I find it so difficult to accept the Amendment.
LORD AVEBURY: May I answer the question of the noble Viscount? I think that any would-be programme contractor who tied himself down to such a rigid framework as the noble Viscount described would be extremely foolish. But that would be a matter for the contractor to decide. He puts up his proposals to the I.B.A., and if he chose to say there
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should be two and a half hours of drama by a person resident in Preston (I think the noble Viscount said) for a minimum of two and a half years, obviously that would be extremely foolish, and I doubt whether he would get the contract on the basis of saying something like that. But it would be a matter for him to say what he was going to do to meet the criteria laid down in this Amendment; what sort of proportion would be local news and local comment, what sort of proportion would consist of matter of local origin or particular local interest. One could have extended this list.
I am certainly not suggesting to the noble Viscount that one should lay down a rigid framework within which the would-be programme contractors would have to operate. They put forward their suggestions, and the contract would be awarded because the I.B.A. considered that those suggestions were the best among those competing. That having been done, then, in a similar way to what happens under Clause 10(2), as soon as the broadcasts begin to be transmitted the statement put forward by the particular programme contractor is published, and listeners and those representing them on the local committee and the newspapers circulating in the area covered by the transmitter will all be able to make comments in the light of what they know the programme contractor said he was going to do. The procedure is simple, and I cannot understand why the noble Viscount makes such heavy weather of it.
4.54 p.m.
LORD SHEPHERD: The noble Viscount did not need to remind us that he is a lawyer because he adopted the customary practice of the lawyer, "If in difficulties, attack." What he did was to seek to attack the noble Lord who sits on the Liberal Benches in, I thought, a quite unnecessary way; and, if I may say so, we are not going to make the progress I should like to see on this Committee if he adopts this attitude. But since I am not a lawyer I cannot attack the noble Viscount. I expected that the noble Viscount's basic case against this Amendment, if he was not going to accept it, was that it was not necessary because the point is already covered in Clause 10 of the Bill. But in fact he made no reference to Clause 10.

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One is in some difficulty in discussing Clause 10 now, because we have yet to reach it; but the Committee will see that subsection (1)(c) says:
"…subject to the next following subsection, a copy of so much of that contractor's application for such a contract as related to the character of the local sound broadcasts which he proposed to provide if his application were accepted by the Authority."
Then subsection (2) states that the copy shall not be made available until after the local sound broadcasts have begun to be transmitted. It seems to me that much of the information, the criteria that we are seeking in this Amendment, is likely to be found in this copy of the application, and perhaps a copy of the contract. That meets us some of the way. Perhaps the noble Viscount could confirm that this is the sort of material we may expect to find as a consequence of Clause 10.
Clause 10, however, limits the recipients of the information referred to to those who go to the Authority and make the application; and presumably such people would need to have a particular interest and would also be required to pay a sum of money—how much we do not know. It seems from Clause 10 that if a person is in an interested position he would be able to get this information. What we are seeking in this Amendment is that this information, which we expect to be available to an interested party, should be made available as a matter of course within the locality to the general public. It is quite clear that this will be provided only after the contract has been entered into; so we shall not get the question of. "Who knows what?" I think I must press this point, because there is a matter of considerable importance here. If this is to be local radio, as the White Paper says, it should be deeply entrenched into the locality. If those words mean anything, it must be that the people in the locality should know what are the criteria on which commercial sound broadcasting is being made available to them. If the noble Viscount is willing to look at Clause 10 and say whether he can meet us on the principle that the information there available will be more widely known by a statement published by the Authority in the Press. I will not suggest to my noble friend
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that she should press this Amendment. But unless he can give an undertaking to consider this, I think we ought to test the opinion of the Committee.
VISCOUNT COLVILLE OF CULROSS: I did not refer to Clause 10 because I knew the noble Lord, Lord Shepherd well, and I knew that he would have read the legislation we are discussing, and I assumed that what he found there was not adequate for his purposes—though I am not quite sure why. Clause 10(1) reads:
"…the Authority shall, on request made by any person and on payment by him of such sum (if any) as the Authority may reasonably require…"—
which I would expect to be copying costs in the usual way of local authority documents—
"provide the information set out there."
The noble Lord, I assume, was not satisfied with that.
LORD SHEPHERD: Correct.
VISCOUNT COLVILLE OF CULROSS: The copy of the contract, I am bound to say, is probably mostly a matter of legal drafting, and a document which will ensure that the Authority has the proper powers that it needs under the legislation to control the programme contractor. Subsection (1)(b) says:
"a statement of the number of applications…".
That is not likely to have the details of what they said so I think that it would depend on Clause 10(1)(c) as to whether or not the information the noble Lord thinks the public should have would be available to the public. I cannot say exactly what will be the precise details under 10(1)(c), but it does refer to "the character of the local sound broadcasts", and I should have thought that the Committee might consider that that would do. The Amendment seeks to go further than that.
I am sorry; I did not mean to attack the noble Lord, Lord Avebury. I was trying to clarify his position. I did not understand how the Amendment would work; and I still do not. I suggest that Clause 10(1)(c), plus the general provisions to which I have drawn attention, are adequate safeguards. If the noble Lord wants to test the opinion of the Committee, he must do so. I cannot go any further.
LORD AVEBURY: May I ask a question before the noble Viscount sits down? He said that the publication of such details as are referred to in the Amendment would have various undesirable consequences; that it would restrict the frankness of would-be contractors, and so on. He made three points there. If he is now saying that under Clause 10(1)(c) this information will be made available to the general public, how can he reconcile that with his earlier criticism of the effects of the Amendment?
VISCOUNT COLVILLE OF CULROSS: As I understood it, the noble Lord, Lord Avebury, wanted every nut and every bolt of the proposals that the applicant was putting before the I.B.A. to be set out seriatim and published for everybody to look at, scrutinise and pick holes in, and see whether they were abided by all the time that the sound broadcasting contract lasted. If that is not what the noble Lord wants, then presumably there is enough in Clause 10(1)(c). I do not understand how there can be any difficulty about this matter unless the noble Lord, Lord Avebury, wants a good deal more information than is likely to appear under Clause 10(1)(c). If he does want that information, then I do not believe that one would get all the full thought that the I.B.A. needs to have before they allocate the contracts. I am afraid I do not see the noble Lord's difficulty in this matter.
LORD BEAUMONT OF WHITLEY: In that case, I wonder whether the noble Viscount would tell us what is excluded from Clause 10(1)(c). It says:
"a copy of so much of that contractor's application for such a contract as related to the character of the local sound broadcasts.. "
What is there that is excluded by that, which need not be produced and which belongs to the contractor's application? If we were told a little about that, it might clarify the matter a little further.
VISCOUNT COLVILLE OF CULROSS: My difficulty is that I have only ever seen one application for a contract under the existing Television Act, and I am wholly debarred from saying what was in it. All I can say is that it was a document that was drafted with the most colossal care, and I do not think it was wholly confined to matters which were—well, in this case it perhaps was not particularly
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local—the local character of the broadcast. There was a good deal more than that in it, and a good deal more that needed to be. The difficulty about the Amendment is that the statement only includes the proportion of various matters that are set out in it. There is no restriction upon what the statement might have to put in in addition to that. I do not know to this moment exactly what it is that noble Lords want to have in. They used the word "include", but it could be a good deal wider than that.
LORD SHEPHERD: I am going to persuade my noble friends and my colleagues not to divide on this Amendment because we are still in the early stages of this Bill. Since we have an undertaking from the noble Viscount to consider some aspects of the first Amendment, clearly we are going to have a Report stage, so we shall be able to come back to it. I hope that when we come to Clause 10 of the Bill the noble Viscount will give us a detailed explanation of what is meant by the words,
"related to the character of the local sound broadcasts…"
My understanding, again as a non-lawyer, is that the character of the programmes to be provided clearly would have to embrace a description of the times for news. the quantity of news, the amount of time permitted for advertisements, and all the sorts of things that we have placed in our Amendment. I should have thought that the character of a programme would embrace this. If that is the case, having got on Committee from the noble Viscount that explanation as to what the character means, then at a later stage we could perhaps amend Clause 10 to see that that information is made more widely known by the initiative of the Authority, and not leave it entirely to individuals to go into the office and seek a piece of paper. I agree with the noble Lord that if this is to be local radio the local people should fully participate in all that is going on within that station.
VISCOUNT COLVIL LE OF CULROSS: I have been warned.
LORD BEAUMONT OF WHITLEY: May I add just one last point which I think is worth making? The noble Viscount really should consider this point about the initiative coming from

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the Authority, because remember that if this Bill goes through we are setting up a situation in which local newspapers are going to he partners of the contractors, and it is not necessarily going to he in the interest of the local newspapers, one would normally expect, to apply for and publish copies of the application. Therefore there is all the more reason why there should be some initiative from the Authority to sec that these matters are known.
BARONESS PHILLIPS: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.6 p.m.
BARONESS PHILLIPS BARONESS PHILLIPS moved Amendment No. 3:
Page 2, line 9, at end insert—
("() It shall be the duty of the Authority in respect of sound broadcasting to ensure that, in addition to the duties set out in section 1(4) of the Principal Act, such programmes shall include programmes of merit and that a reasonable proportion of broadcasting time each day shall be devoted to matters of interest to those in the locality and, in respect of advertising time available, to local advertisers.")
The noble Baroness said: I beg to move the Amendment standing in the name of my noble friend, Lord Shepherd. I think here we are on a similar point, to which no doubt the Minister will give me a similar reply. However, there is an additional point here, particularly in relation to local advertisers. I think we must continually emphasise the word "local".
I thought that the Minister, in replying to the previous Amendment, did not give particularly good examples when he quoted "drama written by Mr. Smith in Preston". It would surely be drama which was about Preston, which would be the deciding factor when you are talking about local character.
VISCOUNT COLVILLE OF CULROSS: Again I do not want to interrupt, but I was simply taking up the specific argument. "Locally written drama" were the words used by the noble Lord, Lord Avebury, and I was simply dealing with that. I take the noble Baroness's point.
BARONESS PHILLIPS: My understanding of local material is that it would not necessarily have to be written by somebody who was still living in the immediate vicinity. Some of the occu
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pants of Chelsea undoubtedly started in Liverpool and still write about Liverpool. I thought we were getting into a slightly ridiculous situation. I still say that there can be no great disadvantage in displaying more about what is happening. One of the features of the present age is surely that we know more about the operation of big companies. I am intrigued to see, when passing certain drapery stores, that at the moment they are appealing to the public to take an interest in the fact that they might be taken over by another large drapery store. This can all be read about in the Financial Times 1/16/2007; one can read exactly and precisely the balance sheets and about who is concerned in the companies. This is all to the good and it is the way that society operates. Therefore it seems that there can be no real disadvantage if the same criteria are exercised in relation to the programme contractors in this very important media.
The Minister has quoted the case of the television companies. I should like to emphasise that there is a difference in this media. Anybody who has had the misfortune to listen to some of the commercial stations will know that there is a vast difference in the way the message is plugged from the way in which the message is put over by advertisers on television. The media are different; therefore we cannot always quote the example of one as compared to the other.
May I refer here to what we are asking for, which is an additional point. The Television Act says:
"It shall be the duty of the Authority—(a) to provide the television broadcasting service as a public service for disseminating information, education and entertainment;".
It is not "local information, local education and local entertainment". This may be taken very generally, as indeed it is. A great deal of the entertainment is certainly "canned" and comes from the other side of the world; a great deal of the educational material is "canned" and comes from the other side of the world. We must emphasise all the time that if this is to be a local broadcasting service it must be local and very much in character with the region, with the international participants taking a second place.
The Act also says that the Authority shall:
"ensure that the programmes broadcast by the Authority in each area maintain a high

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general standard in all respects, and in particular in respect of their content and quality, and a proper balance and wide range in their subject matter, having regard both to the programmes as a whole and also to the days of the week on which, and the times of the day at which, the programmes are broadcast."
It is a pretty wide definition. It gives quite a lot of leeway to the Authority, so we should like it tied up, particularly in relation to the advertising. General advertising does not have the same appeal as local advertising if you are dealing with a local situation, as I know from my consumer work. It was useless to tell people to shop around for a product if they lived in Eastbourne, where it was unobtainable, and one was talking about something obtainable in London. Local advertising must be purely local in character, and it will not be unless it is more carefully tied up in the measure with which we are dealing now. I beg to move.
LORD DENHAM: I am glad to say that there is no difference in principle between noble Lords opposite and ourselves over this. I think that in her opening speech the noble Baroness admitted that almost all the points covered by her Amendment were either in the original Act or in the Bill. I have gone through these very fully. I have read the noble Baroness's Amendment and I cannot find a single instance where it will add anything to what is already in the Act. Schedule 1 of the Bill, at page 16, line 14, paragraph 1(4)(c) of the principal Act—which requires the Authority to secure a wide showing of what was then a television programme of merit—is adapted so as to apply to sound broadcasting. It adapts the provision as to television programmes in the original Act to sound broadcasting.
The noble Baroness's second point—
"a reasonable proportion of broadcasting time each day shall he devoted to matters of interest to those in the locality"
is covered by Section 3(1)(d) of the principal Act which stipulates—
"that the programmes broadcast from any station…contain a suitable proportion of matter calculated to appeal specially to the tastes and outlook of persons served by the station…"
That paragraph, of course, applies to sound broadcasting as much as to television, but in relation to broadcasting it is reinforced by the addition in Schedule 1 of the Bill, Section 3, of a new paragraph (dd) which my noble friend has
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already read out. I think if noble Lords opposite will look at that they will find that the points are already covered.
Finally, as to time being reserved for local advertisers, I would refer to Schedule 2, paragraph 9 of the principal Act as amended by Schedule 2 of the Bill, which requires that if there appears to be enough local demand provision must be made for "a reasonable allocation of time for local advertisements". My Lords, I think that probably goes far enough. I think I can say that all these provisions that are already in the Bill go as far as the noble Baroness's Amendment would go. Your Lordships may say, "Why not spell it out in this place as in this Amendment?" Of course there is the feeling—and your Lordships will have heard time and time again in this House—that if something is repeated twice in a Bill one of two things, and possibly both, can happen. Either because the same thing is repeated twice somebody will try to give a different meaning to it when it appears in different words the second time, or because one thing is repeated twice other things which may be of equal importance but which are not repeated twice, such as the duty of the Authority to provide a particular balance in the programme, are thought to be of slightly less importance.
I am sorry, this is a very complicated matter referring from the Bill and the Schedule to the Bill back to the Act and the Schedule to the Act. If the noble Baroness will look at this she will find that everything she wants is covered very thoroughly by the Act and the Bill as they now stand.
BARONESS PHILLIPS: The Minister said, "by local demand". Who would be the people demanding—consumers, advertisers, shopkeepers? I am never very happy with these phrases. It is rather like those in the Trade Descriptions Act where marking orders are introduced subject to there being a demand. How do you stimulate spontaneous demand?
LORD DENHAM: This is for the Authority to judge, and it has been judging in regard to television. Admittedly, television is regional, rather than local, whereas radio is to be local. I think it is for the Authority to judge.
LORD SHEPHERD: I am grateful to my noble friend for moving this Amendment. I should like to make it clear to the Committee that she is in no way responsible for the drafting of it, which is entirely my own homework—some may say inadequate homework. The noble Lord, Lord Denham, has recognised that this is a rather complicated matter, and it was only after I had put the Amendment down that I spotted that some of the points that I had in mind had already been covered. I am grateful to the noble Lord for his very clear explanation. If the clarity of his explanation and the explanation of the noble Viscount had been more evident in another place by Ministers responsible for the bill, we should probably not have put these Amendments on the Order Paper.
In support of my noble friend may I say that I am a little worried as to whether the phrase, "if there is local demand" is entirely adequate. We are going to have local radio in London, and this will be a fairly large station. It will need to earn a fairly sizeable income, but it will still be providing a local service. It will need to recover quite considerable sums from advertising. It may well be that what we call the national advertisers will find this a useful medium, and the national advertisers may well be willing to pay fairly large sums of money—sums well beyond the capability of local advertisers. I wonder whether this phrase which puts responsibility on the Authority means that it is merely a question of payment and that in fact a local advertiser will be denied an opportunity merely because he is unable to pay the rates that national advertisers are willing to pay for advertisements on sound radio.
This may occur either in London or in some of the other greater conurbations. One can understand that the sound radio companies will seek first that advertising which is easy to acquire, perhaps through the various agencies. But it may be that such advertisers will be willing to pay much higher rates for the time permitted on sound radio, to the exclusion of local advertisers. So that if this is to be local radio, we must ensure that local advertisers are not excluded solely because of the rates charged for advertising on a medium which has been set up to provide them with a service.
LORD DENHAM: I am grateful to the noble Lord, Lord Shepherd, for going, a little further into this matter. May I say to the noble Baroness that the people who will create the demand locally are the people who pay—the advertisers themselves. Of course we shall look very carefully at what the noble Lord, Lord Shepherd, has said, and I am sure that the Authority itself will look at that, too. The rates of advertising at any one time will of course be set by the programme contractors, who will be under the general auspices of the Authority. It will be up to the Authority to decide, according to the demand, whether it should specify how much time should be available for local advertisers. It is very difficult to define exactly a "local advertiser." I know that on regional television programmes one sees quite a lot of advertising by the larger local shops, and I am sure that that will be quite possible on radio. But it will be up to the Authority to decide whether to set aside a specific amount of time for local advertising; and if it does so it may be necessary to ensure that the rates are such that local advertisers can fill the time available. I think I have gone as far as I can at the moment, and I hope that the noble Baroness will not press this Amendment.
BARONESS PHILLIPS: The noble Lord has made such an appeal to my tender heart that I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD SHEPHERD: This is a probing Amendment. I wonder whether the noble Lord, Lord Denham, with his expert advice, can tell us what is meant by the words "in normal circumstances". I beg to move.
Amendment moved—
Page 2, line 13, leave out ("in normal circumstances")—(Lord Shepherd.)
LORD DENHAM: I am grateful to the noble Lord for explaining that this is a probing Amendment. In the opinion of Her Majesty's Government, these words serve a useful purpose. Radio waves vary in their behaviour from time to time according to a number of different factors, some of which vary with the locality. So that there can arise freak conditions in which, because of

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atmospheric changes, the reception is either diminished by interference from distant stations, or increased by particularly good propagation conditions. If the definition depended upon adequate reception being ensured in all circumstances, normal or not, the transmissions in normal conditions would often be excessive; that is to say, the area which they cover would be much larger than the exigencies of local radio would justify. I hope that what I have said covers the noble Lord's point, and that he will therefore be able to withdraw the Amendment.
LORD SHEPHERD: I am most grateful to the noble Lord. As I said, this is a probing Amendment and my purpose in putting it down was to help me when I move my next Amendment. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.25 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 5:
Page 2, line 14, leave out ("throughout a particular locality") and insert ("to natural communities")
The noble Lord said: On Second Reading, noble Lords on all sides of the House, particularly the noble Lord, Lord Orr-Ewing, were genuinely concerned about whether as a consequence of this Bill, we should get regional sound radio as opposed to local sound radio. Some of the fears may be a consequence of the White Paper, where we have to go to paragraph 6 before the first reference is made to local commercial radio. Then there were the numerous speeches of the previous Minister in another place, when he was asked to define what he meant by "local radio". He hedged and evaded on every occasion, as did the noble Lord, Lord Denham, when he wound up on Second Reading. The fears of those who believe in local sound radio, as opposed to regional sound radio, were further strengthened by the announcement of the first five stations which all represent major conurbations. It is significant that the White Paper states:
"…the IBA will be encouraged to experiment in the early stages with the establishment of relatively small stations in order to determine the minimum size of community capable of sustaining a worthwhile local radio station."
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Certainly none of the five stations already announced falls within that description. It could be said that we are in fact moving to a form of regional sound radio.
On Second Reading, I said that it had come to my knowledge from fairly responsible sources that, in the case of London, it was intended that the stations should have such power of transmission that the service would be picked up in Dover, Guildford, Harlow and Chelmsford; and that the Birmingham station would be picked up in Coventry and Wolverhampton. The noble Lord, Lord Denham, said, "This is perhaps going too far" and thought that I was exaggerating the position. But when I asked him how far was I exaggerating it, he was not prepared to say. If the noble Lord chooses to accuse me—one who very rarely exaggerates—of exaggeration, then I think he ought to tell us what the Government have in mind as the transmission limits of, say, the London stations. Will they cover the G.L.C. area in normal circumstances, or will they go beyond? I should like the noble Lord to give a specific reply on this matter. If he can set our minds at rest and can say that this will be purely local radio, then we shall be very much happier.
I have suggested in my Amendment that the word "locality" should be omitted. I have looked it up in the dictionary, and we are not given any clear definition of "locality". In fact, as used in the Bill it could mean pretty well anything. I have therefore used the phrase used by the previous Minister in another place, and have said that these services should be directed towards what we could call "natural communities". I think one would now call the G.L.C. area a natural community; and I think one could think of other such areas. If there was a station in Norfolk covering an area perhaps down to the coast, one would think of that as basically a natural community. Therefore I suggest to the noble Lord that perhaps this would be a tighter definition for the benefit of the Authority than the rather loose phrase of "a particular locality". I hope the noble Lord will understand that we are trying to be helpful here. We have avoided all the other suggested definitions involving size and distance, which I

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personally believe to be impractical. If we are to have local radio I think it would be better if it were beamed towards and deliberately provided for communities as opposed to localities, and I hope the Government will agree with this view. I beg to move.
LORD ORR-EWING: I should like to support this Amendment. It seems to me that if you just leave "adequate reception", you have the right instinct. I have a feeling that if you say that you must have perfect reception throughout a particular locality, you will find that the power of the station needs to be very much greater than it would be in normal circumstances, which could lead to interference with Continental stations and other undesirable consequences. Also, does this mean throughout a particular locality both during the day, on M.F., and night, on V.H.F.? If so, again you would have to have reinforcements, or even satellite stations, to make sure that there is blanket coverage.
I have never accepted the concept, which Government Ministers of all persuasions seem to accept, that you have to have perfect blanket coverage of B.B.C.I throughout the country' before you bring in B.B.C.2; that you have to have perfect coverage of I.T.A.1 before you can contemplate I.T.A.2; and, similarly, that you must have, in this instance, perfect local coverage in normal circumstances throughout a particular locality. If that sort of concept had ruled our legislation while gas was being replaced by electricity, we should never have had electricity in our homes: the theory would have been that you must have a gas main throughout the country before you dare supply an alternative form of power in the form of electricity. It seems to me a ridiculous concept, and I think that in this particular phraseology it would be a happier arrangement if the Amendment were accepted. I see no difficulty about it; and it would allow the I.B.A., in due course, to keep the power of the stations down and not to provide the blanket coverage which could mean, as the noble Lord said in moving this Amendment, coverage from a London station in places as remote as Dover, which by no stretch of our imagination could possibly be called local broadcasting.
LORD AIREDALE: I should like to support this Amendment, too. It seems to me that in this connection the phrase "a particular locality" is rather woolly, because whenever you set up a broadcasting station you at once create a particular locality; that is to say, the locality which is served by that broadcasting station, wherever it may be. But if the idea of local sound broadcasting is to serve natural communities, then surely the expression "natural communities" at this place in the Bill is much preferable to the woolly expression "a particular locality".
LORD AVEBURY: One certainly cannot quarrel with the theory that one should serve natural communities, as in the Amendment, but I do see one difficulty in that the natural communities as one might like to define them are not necessarily of a regular shape. For instance, Greater London has been mentioned. If one thinks of the mass of Greater London, it is a good deal longer from East to West than it is from North to South. Therefore, if in normal circumstances (to use the phraseology we were discussing on the previous Amendment) your transmitter is of sufficient power to cover these two extremes in the East and West, then obviously it is going to be also reaching people beyond the edges of Greater London in the North, such as Watford, or in the South, perhaps going down as far as Sevenoaks. I cannot see any way around that, or, unless the natural community happens to be of a perfectly circular shape, which may be unusual, what you can in fact do about this. The noble Lord, Lord Orr-Ewing, should be satisfied by what was said on the previous Amendment about "in normal circumstances", and that we are net going to have stations which will transmit from London as far as Dover. As the noble Lord, Lord Denham, said, this could happen. The particular meteorological conditions, I suppose, could be such that the reception might suddenly be good for a few minutes, or perhaps for half an hour; but, normally, if one has a station confined to Greater London, it would not go very much beyond the boundaries except to take in the kind of point I was making about the shape.
While on this subject, I should question whether Greater London is in fact a

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natural community. I do not think that the interests are entirely identical between people who live in my part of the world, in Orpington, say, and those who live North of the river. For example, we do not have an Underground system extending down to the South as yet. Ultimately, we shall have the Fleet Line, and so on, but it will not come out anywhere like so far as the place where I happen to live. Obviously, news of the Underground system might be of extreme importance to people who live in Hampstead, with the prospects of a "Go-slow", for example, but a natural community, if one is thinking in terms of transport, is comprised of people who are served by that Underground system. The difficulty here is that one has different natural communities for different purposes. The people who commute from far beyond the edges of Greater London are interested in the operation of the railways. The red buses, on the other hand, are confined, I think, entirely within the limits of Greater London. Therefore, although one would like to see this concept of the natural community written into the Bill, it may be rather difficult to say how it is going to be applied for particular purposes. If the noble Lord will say that he will think about this, and perhaps put in a definition of what a natural community is, I think that would be useful and we could discuss it at a later stage. But I am not quite sure that to insert the phrase as it stands, without realising what we are talking about, would be of great value.
LORD DENHAM: I am most grateful to noble Lords who have taken part in this discussion. There are a number of difficulties here. I know that the noble Lord, Lord Shepherd, and other noble Lords—the noble Lord, Lord Avebury, and my noble friend—have worries about this Bill. I do not think many of their worries are justified, and I am not quite clear, whether those worries are justified or not, to what extent this change of wording will have the effect they require. I think the noble Lord, Lord Shepherd, was worried first of all about the fact that the first five of the stations announced were conurbations. I think he thought that, therefore, the next ones announced might be of the same size or bigger. I imagine that the thinking behind my right honourable friend and the Authority in this was that this is an
962
experiment that has got to get off the ground; and, obviously, when you are starting you want to go to a place where there is the greatest chance of success. Various factors about the way the first stations have run and the difficulties that have come up are going to be helpful in working out how the next one should be organised. Therefore, it is rather more sensible if you start with the larger groups, where there is possibly a greater chance of success and of the thing running smoothly, and to go on from there. I do not think that the noble Lord, Lord Shepherd, need have any worries that the others are going to be so much bigger. I know that the noble Lord is particularly worried about the Greater London area. He said that my right honourable friend was evasive and that I was evasive. Neither of us intended to be so. The answer is that we could not tell the noble Lord or his right honourable friends because the decision had not been taken—and has not yet been taken.
The basic intention behind the London station is to cover the Greater London area—though I think that I am probably going too far in saying that. The difficulty is that first you have to get the sites and then work out the coverage from there. It is going to be impossible to say, for instance, whether Croydon will be included in the London area. All that I did say—and I am afraid it did not go very far—was that Dover was an exaggeration. But I cannot go further that that. As soon as the decision is taken it will be quite possible for noble Lords to question this.
The difficulty here is really one of wording. I cannot see that a change of wording will make much differenece. As I read it, the noble Lord's preferred words refer to human beings whereas the wording in the Bill refers to geographical location. Obviously, one wants to cover the right sort of local area. But, as Lord Avebury said, you must reconcile this with the fact that there are technical difficulties; for a radio wave in one direction will go a certain distance and in another direction, because there are some hazards, will not go so far. You are not going to get a nice geometrical pattern on the ground and be able to say that this is the area. Unless you are very, very lucky in choosing your area you are bound to go beyond or to fall short of a

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theoretically nice line drawn on the map. I do not think that the wording is going to make a lot of difference. I think that the noble Lord and his friends are worried overmuch about this. The definite intention is for local radio and not regional radio.
LORD AIREDALE: Is the Minister suggesting that every local radio station is going to be served by one transmitter only?—because, obviously, in the case of an irregularly shaped community (such as the one about which my noble friend Lord Avebury spoke) you cannot hope to serve it with one transmitter. The answer is to have a second, subsidiary, perhaps lower-powered transmitter which will cover parts of the natural community not served by the main transmitter. It is hopeless to pre-suppose that it will be possible to serve every natural community by one transmitter, irrespective of the shape of the ground covered by that community.
LORD DENHAM: Of course, this is the case. Equally, however many transmitters you have, you are not going to be able to get an absolutely perfect line drawn on the map. In some places the natural community may be bisected by a river which goes in a wavy line. You cannot expect to make sure that your transmission goes up to the banks of that river and not beyond it. These are things that must be reconciled by the Authority and by my right honourable friend.
BARONESS PHILLIPS: The Minister said that we could question the matter of station locations, and so on. How do we do that? Will not such inquiries evoke the usual reply, that this is the responsibility of the I.B.A.? Is this not the only opportunity we shall have to question these matters?
LORD DENHAM: In so far as the matter is one for the I.B.A., the noble Baroness will probably get the answer that she is accustomed to getting in this House. My right honourable friend is answerable to Parliament in so far as the matter is within his responsibility.
LORD SHEPHERD: I find the reply of the noble Lord rather unsatisfactory. There is no doubt at all that there is considerable concern among those who are interested in commercial sound broadcasting—interested in it and per
964
haps through it—that the Government are moving towards regional sound broadcasting. Despite what the noble Lord has said, I do not think he has removed the genuine fear that exists. He could remove that fear if he were to accept my Amendment. This would mean that the Authority in deciding the area in which a broadcast was to be made or could be made would select a natural community, a community of recognisable people, rather than an abstract and undefined "locality". If the noble Lord will look at his own White Paper he will see in paragraph 8:
"The station should as far as possible serve recognisable communities."
That was the intention when the White Paper was published. It seems to me that there has been a shift in the attitude of the Government, perhaps a recognition that these communities may not be large enough to sustain commercial sound radio. They therefore rest on this ill-defined word "locality" which would make it possible, in order to provide a financially viable station, to go beyond the "locality" as most of us understand the word and into a form of regional sound radio. I should myself like to test the views of the Committee on this important matter, and unless the noble Lord is willing to concede this point I shall invite the Committee to divide.
LORD ORR-EWING: I wonder whether we could have a compromise. Like the noble Lord, Lord Avebury, I have a feeling that the first part makes absolute sense and that "throughout a particular locality" is asking too much because you cannot ensure that this is so if you are in the shadow area. There will be communities who are outside the range of a V.H.F. station. It is the fourth power law over the horizon, for those noble Lords who are mathematically-minded. This fades quickly and the only way to get by is to put up the power and fill in the shadow. Radio waves bend round and over obstacles; and with enough power you can fill the shadows. As it stands there will be a tendency to put up the power in order to fill in the shadow and I think this is undesirable. Like Lord Avebury, I am not completely happy about the substitution of the words "to natural communities" because I think that we go along well with the idea of a London station of itself. There are

965
20 or 30 natural communities in the Greater London area, so I do not think that the proposed substitution is very sensible in that context. I hope that my noble friend might just take out the first part and then look at this problem before we come to Third Reading, to see whether it is acceptable; whether it would assure those of us who have some anxiety about regionalisation rather than the local stations and still sustain the Government's argument.
LORD BEAUMONT OF WHITLEY: I think there is a real difference of emphasis between noble Lords on different sides of the Committee and the Government Front Bench. It is a difference of emphasis which I see running through the whole Bill. I noted that on a previous Amendment the noble Viscount, when replying to my noble friend Lord Avebury, said that it would not be helpful to the I.B.A. if members of the public locally behaved in a particular way. I refrained then from saying that what we want is that the I.B.A. should be helpful to local members of the public and local communities. Although it may not secure a tremendous practical difference, this Amendment is important for the emphasis that it lays: that we are trying to produce broadcasting for local communities, and not trying to carve up areas as may best suit the contractors or the convenience of the I.B.A. I think there is an important psychological point here and I hope that the Amendment will be conceded.
BARONESS WOOTTON OF ABINGER: I have very great sympathy with the intention behind my noble friend's Amendment but I tremble at the idea of writing into an Act of Parliament the words "natural communities" and leaving that to be interpreted, as it must be, by the legal profession. For that reason I should find it very difficult to support my noble friend's Amendment in its present form, though I have every sympathy with the intention.
BARONESS STOCKS: I support the intention of the Amendment and if it is pressed to a Division, I shall vote for it. We shall be defeated because the Party which allowed itself to be caught napping on Second Reading is
966
not going to be caught napping to-day. I believe that those who are financially responsible for the Bill, and who have been behind it for a very long time, fully intend, as soon as possible, to produce regional commercial broadcasting; and that their ultimate aim is a national commercial radio system in competition with the B.B.C.
LORD DENHAM: I will certainly look at everything that has been said this afternoon and in particular the suggestion of my noble friend. But, for the reasons I have given—and in this the noble Baroness, Lady Wootton of Abinger, was very helpful—I do not think the new words suggested by the noble Lord, Lord Shepherd, will be practicable or achieve what he wants to do. I cannot, therefore, give any undertaking that Her Majesty's Government may be able to accede to the Amendment.
LORD AVEBURY: It has just occurred to me that it would help to relieve some of the anxieties about how the phrases are to be interpreted—and we could go on arguing all night over regional broadcasting or a national commercial system—if the noble Lord would agree to consider before the next stage whether there should be a limited service here; that those localities which have been referred to should in no case be larger than the units of local government to be defined under the Local Government Bill. This would at least mean that you could not get a station covering a bigger unit than Greater London or one of the new counties. Though that may not go so far as some would like in keeping down the size of localities to a local level it would at least help to secure that we did not have, for example, stations in London reaching as far as Dover.
LORD LEATHERLAND: I hope that the Government will not accept that suggestion from the noble Lord, Lord Avebury. Within the recollection of all of us we have had many reorganisations of local government since the war. We are destined to have far more, and if we adopted that suggestion we should be chopping and changing the areas of the stations about every six months. I hope the Government will say, "No" to that.
5.56 p.m.
On Question, Whether the said Amendment (No. 5) shall be agreed to?
6.4 p.m.
LORD SHEPHERD LORD SHEPHERD moved Amendment No. 6:
Page 2, line 21, after ("locality") insert ("provided that the signal level at the boundaries of the locality are restricted to the internationally recognised limits of transmission")
The noble Lord said: On the previous Amendment the noble Lord, Lord Orr
Their Lordships divided: Contents, 57; Not-Contents, 89.

CONTENTS

Airedale, L.

Gardiner, L.

Platt, L.

Archibald, L.

Garnsworthy, L. [Teller.]

Popplewell, L.

Ardwick, L.

Granville-West, L.

Ritchie-Calder, L.

Auckland, L.

Hall, V.

Sainsbury, L.

Avebury, L.

Hale, L.

St. Davids, V.

Balogh, L.

Henderson, L.

Samuel, V.

Beaumont of Whitley, L.

Henley, L.

Segal, L.

Beswick, L.

Heycock, L.

Shackleton, L.

Birk, Bs.

Hoy, L.

Shepherd, L.

Blyton, L.

Jacques, L.

Slater, L.

Boothby, L.

Janner, L.

Snow, L.

Brockway, L.

Kennet, L.

Stocks, Bs.

Brown, L.

Leatherland, L.

Stow Hill, L.

Burntwood, L.

Maelor, L.

Summerskill, Bs.

Champion, L.

Mais, L.

Swaythling, L.

Collison, L.

Morris of Kenwood, L.

Taylor of Mansfield, L.

Delacourt-Smith, L.

Norwich, V.

White, Bs.

Diamond, L.

Nunburnholme, L.

Wright of Ashton under Lyne, L.

Douglass of Cleveland, L.

Phillips, Bs. [Teller.]

Foot, L.

NOT CONTENTS

Aberdare, L.

Falkland, V.

Lyell, L.

Abinger, L.

Ferrers, E.

Macleod of Borve, Bs.

Albemarle, E.

Fisher, L.

Mancroft, L.

Alport, L.

Forres, L.

Mansfield, E.

Ashbourne, L.

Fortescue, E.

Massereene and Ferrard, V.

Astor of Hever, L.

Gainford, L.

Milverton, L.

Barnby, L.

Goschen, V.

Mowbray and Stourton, L. [Teller.]

Belhaven and Stenton, L.

Gowrie, E. [Teller.]

Belstead, L.

Greenway, L.

Napier and Ettrick, L.

Berkeley, Bs.

Grenfell, L.

Northchurch, Bs.

Bledisloe. V.

Gridley, L.

Nugent of Guildford, L.

Brooke of Cumnor, L.

Grimston of Westbury, L.

Oakshott, L.

Brooke of Ystradfellte, Bs.

Hailes, L.

Orr-Ewing, L.

Brougham and Vaux, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Rankeillour, L.

Caccia, L.

Reigate, L.

Clifford of Chudleigh, L.

Harvey of Tasburgh, L.

Ridley, V.

Colville of Culross, V.

Hawke. L.

Ruthven of Freeland, Ly.

Colwyn, L.

Hood, V.

St. Aldwyn, E.

Colyton, L.

Howard of Glossop, L.

Sandys, L.

Cowley, E.

Inglewood, L.

Selkirk, E.

Craigavon, V.

Jellicoe, E. (L. Privy Seal.)

Sempill, Ly.

Cranbrook, E.

Killearn, L.

Stonehaven, V.

Daventry, V.

Kilmany, L.

Strang, L.

de Clifford, L.

Kindersley, L

Strange of Knokin, Bs.

Denham, L.

Lauderdale, E.

Sudeley, L.

Derwent. L.

Leicester, E.

Swansea, L.

Digby, L.

Limerick, E.

Thomas, L.

Drumalbyn, L.

Long, V.

Vivian, L.

Eccles, V.

Lothian, M.

Windlesham, L.

Elgin and Kincardine, E.

Lucas of Chilworth, L.

Young, Bs.

Elliot of Harwood, Bs.

Resolved in the negative, and Amendment disagreed to accordingly.

Ewing, raised the question of a radio contractor, in order to be able to cover a blind spot in a particular locality, raising the power of transmission and consequently putting out a transmission that went well beyond the area of the locality. This would cause hardship to persons outside the locality, because there would be interference. It is recognised in Europe, where there is a problem on the medium wave length band, that no transmission from a station should be above a particular level

969
at boundaries of the area in which the service is to be provided. This Amendment seeks to provide that the signal level at the boundaries of the locality are restricted to the internationally recognised limits of transmission.
In the appendix to the White Paper there is a definition of what should be the power transmission. This Amendment again is seeking to be helpful and to ensure that stations do not broadcast beyond their localities except at the prescribed level, and therefore do not interfere with other stations that may also be operating in the locality and, for that matter, in Europe. I beg to move.
LORD DENHAM: I think I can probably help the noble Lord on this matter. There are two separate levels of transmission that are talked about internationally. First of all, there is the agreement between countries, so to speak, that a particular station shall not transmit above a certain amount, so as not to interfere with another country. I am advised that none of the local stations will come anywhere near that level, so there would not be much point in putting the provision into the Bill. What I think is causing a little confusion is that in the White Paper there are the other levels recommended by the International Radio Consultative Committee. These are not in order to stop one station from interfering with another: they are the recommended standards that should apply within the area served by a particular radio station. Those given at the back of the White Paper would not help as being limits, as they are just standards of reception at the outer band of an area that is being served by a particular local station. I do not think this Amendment would achieve very much, because if the noble Lord is talking about the international agreements, those levels are going to be way outside the strength of the local broadcasts.
LORD SHEPHERD: I am not sure whether the noble Lord, Lord Denham, quite understood what I said. I referred to the figures in the White Paper only to illustrate that certain standards are recognised internationally, and a station must not exceed a certain level at the perimeter of a locality. That is the advice that I have received. What I am seeking here is that where the Authority has agreed to the particular locality to
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which transmissions may be made, provision should be made that a contractor cannot transmit above an agreed level, so that he will not be able to transmit outside that locality as a deliberate act of policy. This is a technical matter. I have had the advice given to me, but I will look at it myself. However, I hope the noble Lord will understand that the point I am making is to establish that the station will not broadcast above a certain power at the perimeter of the locality. If we have this provision, I think it will be found that we shall avoid some of the problems of interference between various stations.
LORD DENHAM: I am glad that the noble Lord is going to have another look at his advice: I will of course do the same. My advice is (or at least I think it is) that the international figures, the maximum standards beyond which one should not go, are way above anything that is going to be used in local radio, and therefore would not apply. The figures at the back of the White Paper are not maximum standards but the minimum ones for adequate reception, and so they would not be suitable for use as maximum figures. I will look at this matter again, and probably after we have both reconsulted our advisers we shall be able to come to an agreement.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Clause 3 [Local advisory committees for local sound broadcasts.]:
6.11 p.m.
LORD ARDWICK LORD ARDWICK moved Amendment No. 7:
Page 3, line 11, at end insert ("constituting a fair balance of the sexes and of age groups.")
The noble Lord said: In the Second Reading debate I spoke with unwonted vehemence about the local advisory committees and suggested that for once these should be composed of at least 50 per cent. of women, and perhaps even a majority of women, and that they should also contain representatives of younger people. This is partly a matter of principle and I think it should apply to all advisory committees except those which demand special and rare qualifications; but we know that it does not apply and

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that the general rule is to have a preponderance of men. In this case there is not only a general principle involved but also, I think, a special argument. At night the audience disappears into television. The most important hours for commercial radio are in the daytime, and although large numbers—several million—of housewives go out to work, the fact remains that there are far more women at home in the daytime than men. Indeed, all programme contractors will tell you that they are looking for a preponderantly "housewife" audience, plus an audience of young people late at night. The insomniac young are a peculiar breed to-day: they cannot concentrate on an essay or a calculation or even a love letter unless they are at the same time distracted by pop music. So the audience will be both feminine and preponderantly young, and I think the advisory committees ought to reflect this in their composition.
I may be asked what I regard as a fair balance. I have avoided in my Amendment the vehemence that I showed in my general argument. I think it is in fact a very reasonable and innocuous Amendment. I think that a fair balance might be worked out in this way: if you had a committee of nine people and three were of one sex and six of another, that would not be a fair balance. But if you had four of one sex and five of the other it would not matter which sex predominated. I think that would constitute roughly a fair balance, and unless we write something of this kind into the Bill many local advisory committees will be appointed which follow the usual course of English life—they will be preponderantly male and preponderantly elderly. I beg to move.
BARONESS WOOTTON OF ABINGER: When I saw this Amendment on the Marshalled List I had it in mind to ask my noble friend if he would give a definition of "a fair balance of the sexes". In moving the Amendment I think he has given two definitions, not exactly the same. He started by saying there should be at least 50 per cent. of women, and perhaps more, and he ended by saying that 6 to 3 would not be a fair balance. I think we can correctly settle this matter once and for all, if I
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may venture so to put it. The proportion of females to males in the United Kingdom is of the order of 14 to 13. Therefore to have a fair balance—meaning fair in proportion to population—there should be a slight preponderance of women on all the advisory committees. I hope that my noble friend will confirm that this is his intention.
6.16 p.m.
LORD AVEBURY: I certainly support this Amendment in principle, but I would point out to the noble Baroness that we should look not at the proportions in the United Kingdom but at the proportions in the localities served by the stations, and I hope that we shall not quibble about the last decimal point of a woman in a particular area. We could leave it to the common sense of these who were appointed to advisory committees to do what is right and proper in their local areas. I think that there would be disadvantages which we must look at in the later part of the clause, if we are to achieve what the noble Lord wants. Local authorities are responsible for appointing one-third of the members of a committee, and it would be rather a curious situation if it were left to the I.B.A. to redress the balance where most of the members appointed by the councils were men. Therefore only a very small proportion of those appointed by the local authorities can be men. if a 50 per cent. balance is to be achieved.
If there is to be a rule of this kind in subsection (2) it would have to apply also to members who were appointed by the local authorities and not be an overall requirement laid on the I.B.A. We may be in difficulties because, as we know, local authorities have their own way of making their appointments to bodies such as these. Usually they do it as a kind of political patronage towards a person who has retired from the council or who has been an alderman for some time—and they will be looking for jobs for the aldermen when they are eliminated under the Local Government Bill. I see this kind of thing in my own Borough of Bromley. They always appoint their political friends to the boards of school governors, hospital management committees and so on. You never get a person who is not a Tory appointed to any of these

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bodies in the London Borough of Bromley, and I am afraid the same will be true when we come to the local advisory committees. I am not saying that this is the point of the Amendment: I am just drawing your Lordships' attention to the fact that appointments of this kind are made by local authorities in a highly idiosyncratic way. They do not take into account the needs of the local community or of achieving a fair balance. I am certainly supporting the noble Lord, but I think that he should go further and say that not only should this requirement be written into subsection (2) but that also at a later stage it would be desirable to amend subsection (3) so as to lay the same duty on the local authorities who have the right of nominating one-third of those who serve.
LORD NUNBURNHOLME: The noble Lord, in moving this Amendment, mentioned age groups. I should like to know if he would tell us how these should be concentrated.
LORD LEATHERLAND: The noble Lord, Lord Avebury, has seen fit to criticise the way in which local authorities select people for appointments such as these. He gave us an instance of the area in which he lives—presumably a rather uncivilised area. When I was leader of the Essex County Council I did this in a much better way.
LORD AVEBURY: It is not an uncivilised area, but it is an uncivilised council.
LORD LEATHERLAND: The council is a microcosm of the people in the area. I used to say, "We have 60 Labour members and 40 Tory members so we will make our appointments in exactly that proportion." I would say to the leader of the opposition, "You have so many nominations to make" and he would proceed to make them. Furthermore, we adopted the same procedure with respect to the appointments of our aldermen. We appointed them on a proportional basis, which is something that should appeal to the Liberal Party.
Now I come to what was said by my noble friend Lady Wootton of Abinger. She suggested that there are 13 or 14—
BARONESS WOOTTON OF ABINGER: Nearly 14 women and 13 men.
LORD LEATHERLAND: Nearly 14 women? I wonder which bit is missing! Fourteen women to 13 men. I have heard sex discussed from many angles but never from the angle of mathematics. I do not wholly agree with my noble friend Lord Ardwick, although there was a time when I dared not disagree with him. In moving this admirable Amendment he stressed that he wanted to see something approaching an even balance between men and women. I would not go quite so far as that. There has to be a mixture of the sexes, if I may put it, rather clumsily, like that. It may so happen that the best selection of people in one area may show a majority of women, whereas the best selection of people in another area may show a majority of men. I am wholeheartedly in favour of the precise words used in the Amendment; namely, that these Committees should constitute
'"a fair balance of the sexes and of age groups."
I suppose that means that if we have three women on a committee we would have one mini-skirted teenager, one respectable married woman in the 'thirties and a dowager or grandmother. We have to judge these as people, not as classes. The kind of people who might be selected in one area might differ considerably from those in another area.
I think my noble friend has in mind the point that we do not want people from the statutory lists that are observed in Whitehall appointed to these posts. We know what they are: professors, lecturers in this, that and the other, retired civil servants—and I apologise to any of those who may be here. We get too many such people put on to committees to the exclusion of the ordinary "bloke". The ordinary "bloke" and the ordinary woman have a good deal of common sense about them, particularly when it comes down to saying what radio programmes they would like to hear. Although casting aside my noble friend's suggestion of a mathematical equality between the two sexes, I wholeheartedly agree with the suggestion that there should be
"a fair balance of the sexes and of age groups "
and I hope that the Government will see their way to accepting this Amendment.
6.23 p.m.
LORD DENHAM: I shall not at this stage join in the argument between the noble Lord, Lord Avebury, and the noble Lord, Lord Leatherland, over the merits of local authority lists. If necessary, perhaps we could discuss this matter at a later stage in the passage of the Bill. I sympathise with the feelings of the noble Lord, Lord Ardwick, with regard to his Amendment. I think that everybody will agree with his motive.
However, I believe that the noble Lord's Amendment stems from a misunderstanding of the nature of the local advisory committees as the Government see them: it is the Government's intention that the membership of each committee shall reflect the tastes and interests of the area as a whole; the members will not participate as representatives of particular religious, political, social, ethnic or even age groups, though the points of view of such groups will, in the nature of things, be reflected in the tastes and interests of the area as a whole.
I think it is a mistake to say that if you are going to have a particular interest—using the word in its larger sense—reflected on a committee you must have on the committee a person who is part of that interest. The intention is to have a broadly based committee that is going to reflect all interests. It is rather interesting to have a look at the membership of some of the other committees—regional rather than local committees—of the sort that the Independent Television Authority has already. For instance, there are the regional lists. There is the Northern Ireland Committee, which has a fairly widely based list of eight people, five men and three women. The Scottish Committee has five men and three women. Probably most people would be satisfied with that. How one can work out the exact proportions that the noble Baroness would like out of a committee of eight I am not quite sure.
BARONESS WOOTTON OF ABINGER: I am not asking for an exact mathematical proportion—I gave that as the ideally correct solution. I wonder if the noble Lord can tell us whether there are any of these committees in which there is a predominance of women.
LORD DENHAM: Yes, I can tell your Lordships; the answer is, "No, there are
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not." The committees are formed to be broadly based. For instance, there is the General Advisory Council of the I.T.A. I will tell your Lordships its membership, though I will not refer to any names. It includes three journalists, two architects, two professors, two company directors, two Members of another place, a former Governor-General, a town clerk, a pharmacist, a trade union official, a schoolmaster, six housewives, and I think that the noble Lord, Lord Avebury, figures on the list; and there is also a consultant psychiatrist.
I believe that the local committees will best serve their purpose if the I.B.A. is allowed a flexible approach so that it can be free to determine for itself what size and composition of local committee will best reflect the tastes and interests of the area served. Surely this is the type of point that is best left to the I.B.A. We do not want to dot every "i" and cross every "t". As the right honourable Member of another place, who is the Deputy Leader of the Party of the noble Lord opposite, said when he was in the place occupied by my right honourable friend:
"' My conception of a public body like this is that once we have got them together we must either back them or sack them and not continually muck them about."
This is the type of situation in which they must be given a free rein.
BARONESS WOOTTON OF ABINGER: Perhaps I may make one final and rather more serious intervention. This is a question of representing people's tastes and interests in broadcasting. I should have thought it was predominantly a matter on which people are much better qualified to speak for themselves than to allow other—the noble Lord used the term. "broadly based people" to speak for them.
LORD SHEPHERD: I wonder whether the noble Lord, Lord Denham, will undertake to look at this matter. I agree with my noble friend that these committees are to represent the tastes of the people within the locality. On the list which the noble Lord, Lord Denham, read out, the only ordinary "blokes" (to use the phrase of my noble friend Lord Leatherland) on the committee were six housewives. The noble Lord, in his Second Reading speech, stressed that this local service was going to be attractive to the housewife, to the person who uses

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his car or who drives a lorry, or who may be at work; it would not be these higher stratum characters from the professions. They probably have very little to go on to know what the tastes of the ordinary fellow are likely to be. Would the noble Lord look at the Amendment again to see whether a definition can be found which will make it quite clear that these committees are to be broadly based to represent not just those people who we think may be able to guide us in the right channel but the tastes of the local community? If he will do that, I am quite certain my noble friend will do what is right and not press his Amendment to a Division.
LORD DENHAM: I will certainly have a look at it again; and I assure the noble Lords, Lord Shepherd and Lord Ardwick, that there is no difference in principle between us on this point. We both want to achieve exactly the right kind of balance on these local committees. The only point we are worried about is that if we go too far into detail it will not allow the flexibility that is desirable. We feel that if we go into small details such as this we shall not achieve the end but shall possibly make it even more difficult to get a local committee of the right sort. The noble Lord asks me to look at the matter again. and I will certainly do so, in view of all that has been said in the debate; but of course I cannot commit myself.
BARONESS PHILLIPS: I would press this point on noble Lords. I have suffered from being invited on to bodies and then told that I was the typical housewife. A number of these bodies were somewhat disconcerted when I was elevated to the Peerage because they pointed out that I could no longer be a typical housewife—presumably because a Baroness is not a typical housewife. We were all with my noble friend Lord Ardwick until he quoted that rather stupid definition of six housewives. The point is that if you are really looking at people as people you do not allocate places for housewives; you allocate places for people and you look at their tastes and their personalities.
LORD DENHAM: I am most grateful to the noble Baroness. That is just the point I had in mind. If you go too closely into this definition you are liable
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to get, as the noble Baroness implies, six housewives and six something else. This is why we want to leave a certain amount of freedom to the Authority to choose a really broadly based list of people. This is the worry behind our thoughts and why I cannot give the noble Lord, Lord Shepherd, or the noble Lord, Lord Ardwick, any sort of promise that we will do more than look at the noble Lord's suggestion.
LORD SLATER: Since the Minister made reference to the late Postmaster General who happened to be in office when I was in the other place, may I say that we had a most difficult task in formulating the committees for local broadcasting? I realise the seriousness of this position, and I am more or less backing up the recommendation that has been presented by my noble friend Lord Ardwick. However, I should like to ask the noble Lord what conversations or talks have taken place on this issue between the I.T.A. and the Minister of Posts and Telecommunications. If there have not been such talks, surely there ought to be talks to see whether the Authority and the Minister can come up with an answer on the point raised by my noble friend. The Minister might then be in the position to come to the House and present a proposal which would be more or less acceptable to all sides. I believe that, if it is at all possible, all sections of the community ought to be represented in some way or another on bodies such as this which will carry a great responsibility in regard to sound broadcasting.
LORD DENHAM: I will of course look at the suggestion of the noble Lord, Lord Slater, but I imagine that my right honourable friend is already in close touch with the I.B.A. about this matter.
LORD BEAUMONT OF WHITLEY: Before my noble friend replies, I should like to check on something the Minister said. He said there was nothing in principle between him and the noble Lord, Lord Ardwick, and that he and the Government were in favour of achieving this balance. Does this mean that the noble Minister is on record as saying that he is in favour of achieving a fair balance of age groups? I think that this will be much more difficult than securing a fair balance of sexes.

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If the Minister is on record as saying this, it is a very important advance.
LORD DENHAM: I am sorry that I gave the wrong impression to the noble Lord, Lord Beaumont of Whitley, about this. When I referred to achieving a fair balance I was talking about what this Committee will achieve, and not about an absolutely firmly laid down balance of its constituent members.
LORD ARDWICK: I was somewhat mystified in any case. However, I did not think that the noble Lord's argument took his case very far. If that was the best he could do, with committees consisting of five men and three women, assuming that he took the best example to hand—
LORD DENHAM: I wonder whether the noble Lord would give way. We have found a slightly better committee. It is the Representatives of the Programme Company Advisory Committee and it consists of three women and one man.
BARONESS PHILLIPS: That is a good committee.
LORD ARDWICK: That may rejoice a few hearts, but it is a pretty rare thing to find. I think there must have been some accident. I was even more appalled at this recital of the regional committee (was it?) for which a number of professions were enumerated: architects, journalists, pharmacists, and housewives.
LORD DENHAM: And the noble Lord, Lord Avebury.
LORD ARDWICK: And the noble Lord, Lord Avebury. But are we to assume from this that all the architects, journalists and pharmacists were men? Surely, if you are going into professions of that kind, I should have thought that some kind of parity between the sexes inside the professions would be a very reasonable thing to have. It looks as if an all-male committee has been chosen and then it has been said "Good heavens! We haven't any women on it. Go out and get six housewives!" That is the kind of thing that happens.
I was rebuked by my noble friend for having two standards of fairness. She thought first of all that I was asking for 50 per cent., or more than 50 per cent., and then perhaps for less than 50 per cent.
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This was not so at all. What I was doing was contrasting the vehemence of my rhetoric where I was asking for 50 per cent., or even more, women and the modesty of my drafted proposal to-day, in which I am not suggesting any arithmetical figures at all, but am proposing simply a fair balance between the sexes and between the age groups, which the Authority could interpret in the broadest possible way. Nobody is going to tie them down to arithmetical calculations on a clause of this kind.
Finally, the noble Lord, Lord Avebury, spoke about the problem that some of the members of these committees are to be chosen by local authorities. As I read it, the selection is made by the radio and television Authority on the nomination of the local authorities, and all the Authority will have to do will be to warn the local authorities that in making their nominations they should have regard to this principle of the fair balance of the age groups and the sexes. However, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 3 shall stand part of the Bill?
6.39 p.m.
LORD SHEPHERD: May I raise one matter and put it perhaps to the noble Viscount, Lord Colville of Culross, since he is a lawyer? May I direct his attention to subsection (4) on page 3? It says:
"Before appointing a person to be a member of a local committee the Authority shall satisfy themselves that he"—
and there follow the provisions about financial interest, and then the words I particularly want to refer to:
"and the Authority shall also satisfy themselves from time to time that each member of a local committee has no such interest as is described in paragraph (a) or paragraph (b) of this subsection ".
My question is: How do the Authority ascertain this? It might be acceptable if they merely sent out a questionnaire and said: Have you any interests to declare? But these words might well mean that the Authority, in order to satisfy themselves, should carry out some form of investigation of the background and circumstances of a person on a committee—in other words, snooping into the lives of persons who are willing to give some public service. I think I know

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what the Government are after here, but it could be construed that the Authority have a responsibility and that in order to carry it out they would undertake inquiries that would be regarded as not in the best interests of the relationship of an authority with those who give voluntary public service.
6.41 p.m.
LORD AVEBURY: Perhaps I might put my question to the noble Viscount before he replies, then he can answer both at the same time. If I may revert to the subject that I was touching on in the course of the last Amendment, with reference to the behaviour of local authorities when they have to nominate people to committees such as these, and the noble Lord, Lord Denham, said that we would consider it at a later stage. However I must raise it now because I think that unless one is contemplating the tabling of an Amendment it is appropriate to discuss it on the Question, Whether the clause shall stand part of the Bill?
The situation is that one-third of the members of each local committee are going to be nominated by the local authority. The noble Lord, Lord Ardwick, seemed to think that the I.B.A. could exercise some control over the type of persons they nominate, merely by saying to them: "We would expect you to put forward a reasonable balance as between the sexes and as between the ages." If the I.B.A. in fact have such a power it would be open to them to suggest to the local authorities that a reasonable balance of opinion as between the various political Parties should also be reflected in their nominations. I do not see any powers of this kind conferred on the I.B.A. under the Bill, and if they were to do that it seems to me that it would have to be on an entirely informal basis. The pressures that are brought to bear on local authorities in the case of similar appointments to the boards of school governors, for example, or the hospital management committees are not effective. It is as simple as that.
Perhaps I may quote the case of my own local authority, the London Borough of Bromley. We have an overwhelming Tory majority and they appoint their own friends to these committees. I do not see how a local committee can be
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constituted so as to ensure that we reflect the range of tastes and interests of persons residing in that area. One-third of them are all drawn from a majority Party and when that Party only has a bare majority of votes in the area served by the station, we shall have the same type of blatant "carve up" as we have with aldermen in different parts of the country.
I do not think this Bill should be allowed to remain in its present form without our making sure that we shall not get a repetition of the kind of thing that I have described. The noble Viscount may ask why I have not put down an Amendment. I think it is extremely difficult to draft an Amendment in a form which would avoid the gerrymandering which is known to take place. I hope the noble Viscount will say that he appreciates the problem and that he will consider whether it can be dealt with at Report stage. I should then feel much happier.
LORD LEATHER LAND: I have a feeling that the noble Lord, Lord Avebury, is probably magnifying the difficulties that might arise in cases of political discrimination, such as he has mentioned in the case of the London Borough of Bromley. Let us look at the position. Bromley is a Tory council. He says that Bromley might nominate three Tories—three Tory men, let us say—to the advisory committee. It still remains the prerogative of the advisory committee to say whether it will appoint those three, or whether it will appoint one or two out of those three. This committee will consist of more than three people, so the advisory committee might say. "We have had three Tory men nominated by Bromley, and as our area is the area of Greater London let us have six Labour housewives from Poplar". Surely the position is not so serious as the noble Lord seems to suggest. If the broadcasting area were simply the area of Bromley it would be difficult; but we know that the broadcasting area is the area of Greater London, so there would be an opportunity to restore the balance when the names ultimately came before the advisory committee.
LORD AVEBURY: If I may interrupt the noble Lord, it may be possible to do as he suggests in the case of London,

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where there are 32 boroughs plus the Greater London Council. but if we take a city such as Birmingham, which is covered by a single authority, we could not arrive at a balance by having more Labour members from one authority and more Tories from another because there is only the one authority from which to make the appointment.
LORD LEATHERLAND: The case of Birmingham is very much in the public eye just now. The Tories were all swept out by an indignant populace and a Labour majority was put in. But let me take a more simple case. Let me take a place which was also in the news for a similar reason a few months ago. It is a town with which I am conversant—Macclesfield. Let us assume that the Macclesfield Council is under Conservative rule. It still is, but with a much reduced majority since last Thursday. Let us suggest that it puts forward to the advisory committee three hoary old Tory aldermen. The committee has many other members to appoint, in addition to the three who have been put forward by the council, so it goes out and gets somebody from the Wesleyan chapel, somebody from the parish church, somebody from the Labour Party, somebody from the Round Table and somebody from the Rotary Club. As I have said, the difficulty does exist but I think the noble Lord has magnified its proportions.
Perhaps I may now proceed to the point that I wanted to raise. We see in the first subsection of Clause 3 that local advisory committees are to be appointed, but we also see at the top of the next page that:
"each such committee shall be appointed for an area consisting either of one such locality"—
that is to say, a locality for which local sound broadcasting is provided by the Authority—
"or of two or more such localities."
From time to time my noble friend Lord Shepherd and others have suggested that they have a suspicion that what we shall get under this Bill, ultimately if not immediately, is something like regional broadcasting. If the Bill specifically lays down that one of these advisory committees can be set up either for one such locality or for two or more such locali
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ties merged together, that looks as though regional broadcasting may not come accidentally at some future date but is specifically provided for according to the terms of this Bill. I should like the noble Viscount to give us an assurance on this point; otherwise I feel that this is a bad blemish, and is a reflection of how local sound broadcasting might develop into regional sound broadcasting.
LORD SLATER: May I ask a simple question'? Who will be responsible for appointing the chairmen of these advisory committees?
LORD DAVIES OF LEEK: First, I should declare an interest. When I ran a magazine called the New Gladiator for a little company which consisted of three of us, I put in an application for a licence for sound broadcasting (if ever local broadcasting should come), and I am sure that if I had received it we should have had a decent bit of local broadcasting. The question I want to ask is, first, for how long are these committees to be appointed? Are they there in perpetuity, and what possibilities are there of removing these committees when they are appointed? Second, it is quite obvious—never mind imagining—that people might be appointed who could never be moved. Let us take a case against my own Party. If Labour is in control of a local authority in perpetuity, then the Conservatives or the Liberals may not like it. We should in this matter try to get some kind of fair formula. I believe that subsection (3) of Clause 3 and the length of time should be reconsidered, both as a matter of fairness and of trying to improve what, after all, is going to be a very important part of British public life in the future. I could make a long speech, but it would be unfair to do so. I hope that the Minister will see what I am driving at. I would like to know for how long these committees are to be set up, and if a formula could be found where there would not be perpetuity of occupation of these committees.
6.51 p.m.
VISCOUNT COLVILLE OF CULROSS: This clause has produced a number of little points; I will try to deal with them in order and see what I can do, without much notice, by way of answering them. The noble Lord, Lord Shepherd, asked

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about Clause 3(4) on the general subject of snooping. There is a fairly respectable precedent for this provision in that it appears in Section 9 of the Television Act 1964. Precisely the same disqualifications are there present, and so is the same method of assuring the I.T.A. from time to time that in between the appointment and the time the assurance is sought the prohibited interests have not been acquired. I cannot imagine that in any circumstances the I.B.A., having chosen people—particularly after the discussion we have had of the sort of people they should be—as being suitable to sit on these advisory committees, would then go in an underhand way behind people's backs in order to discover whether they have gone in for some advertising interest they should not have. In my own personal experience there have been times when it has been necessary for me to be asked by somebody whether I owned shares in a company for the purposes of some transaction. What usually happens is that somebody writes me a letter and says, "Do you own any shares in this company?", and it may happen more than once. One sits down and writes back and says "No" or "Yes", as the case may be. I think the noble Lord can take comfort from the fact that this method has worked perfectly well now under the Television Act for something like 15 years. On the question of the local authorities, the first thing that I think I ought to tell the Committee is that the provision in the Bill in subsection (3) does not require the person nominated by the local authority to be a member of that local authority.
LORD SHEPHERD: I have not suggested that.
VISCOUNT COLVILLE or CULROSS: No, but I want to be certain that the Committee is aware of it. So we are not stuck with the situation where, to take a mythical county borough with a local broadcasting station, with 100 per cent. Conservative or Labour or Liberal or Independent membership of the council, one is inevitably stuck with members of the local authority who must be ex hypothesi be of one political persuasion. Whom the local authorities nominate is, therefore, at large. The Government thought it right to bring in local authorities as active contributors towards the choice of people to sit on these commit
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tees. Somebody may say something about Bromley and another noble Lord may say something about the admirable practices in the county of Essex; I am sure there are infinite varieties of all sorts between the practices of the local authorities. But on the whole what happens in local government is that the tendency in appointing to committees is to appoint members of the local authority to serve—for instance, on a river authority or joint sewerage board or something of that sort. I should be surprised if there were many occasions under Statute where the local authority had complete discretion to appoint anybody.
LORD AVEBURY: School governors.
VISCOUNT COLVILLE or CULROSS: The noble Lord, Lord Avebury, may be right about that; it is not a subject I have myself had to deal with. But I should have thought that here we had as wide a discretion as it was possible to give local authorities. If they do behave in a foolish way and appoint people the I.B.A. considers to be rather homogeneous in their views, this may be a pity. I suspect that there will be channels of communication open between the I.B.A. and the local authorities in the area, and it may be that a little gentle persuasion could be exerted there, as I promise your Lordships it is exerted by the I.T.A. elsewhere, rather nearer at home and possibly on slightly more difficult ground. One thing I should be prepared to guess is that an Amendment to try to ensure what the Committee has been suggesting should come about is totally undraftable. At least I would be very interested to see the efforts of any noble Lord, and I will try myself, but I think it would be very difficult indeed. I hope noble Lords will think that this is a flexible arrangement and not likely to be exploited in an unfair way by the local authorities.
I come to the second of Lord Leatherland's points. It is perfectly true that subsection (1) provides that an advisory committee could be appointed for more than one broadcasting area. I do not want to suggest that noble Lords are looking for regionalism everywhere, but I assure the Committee that this is not a pointer in that direction. If there are two towns very close together—I think that in another place we had the example

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of Sheffield and Rotherham—and supposing that there is a separate local broadcasting station in each of those towns, the I.B.A. might find it difficult, in order to get the sort of cross-section of the local community that the Committee has been talking about, to draw from Sheffield and Rotherham respectively (I take those purely as an example) a suitably selective committee from both. There might be considerable interlocking of interest among local inhabitants. The I.B.A. might think that on this occasion it would be better to have a joint committee. All that is being given is power for them to consider the matter. I do not think this is a sinister or underhand method of bringing in regional broadcasting, because if there is a committee which covers the two areas we still have two areas of broadcasting and two broadcasting stations, even if there is only one committee. Therefore, unless noble Lords think this is so objectionable that it ought to be taken out, it is another point where I hope that the I.B.A. will be trusted.
The noble Lord, Lord Slater, asked about the chairman of the committee. I looked at the Television Act to see what happened about the other advisory committees. I suspect that the chairman is appointed by the I.T.A. at present, and in future will be appointed by the I.B.A. If I am wrong about that I will let the noble Lord know. Finally, the noble Lord, Lord Davies of Leek, asked how long people serve and how they get removed. I suppose it is unfair for me to ask the noble Lord, Lord Avebury, how long he has been on the General Advisory Council. Perhaps the noble Lord will be able to help us on this point, because, to be perfectly truthful, he probably knows more about it than I do.
LORD AVEBURY: The answer is that one is invited to serve on the Advisory Council for three years. I do not know whether that is in the Act or simply an informal arrangement which has evolved.
VISCOUNT COLVILLE OF CULROSS:
The noble Lord has confirmed what I thought. There is not anything in the Act. That is exactly the sort of arrangement that I should have expected. One has to bear in mind that this Act runs out in 1976 anyway, so that for the pur
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poses of this Bill it can only be for three years, because nothing can happen before 1973. The noble Lord, Lord Avebury, has told us what happens under the existing legislation, and I hope Lord Davies will accept that the same will apply under this Bill. I hope I have answered all the questions on Clause stand part.
Clause 3 agreed to.
Clauses 4 to 7 agreed to.
VISCOUNT COLVILLE OF CULROSS:
I wonder whether this would be a suitable moment, being half a minute short of the witching hour, for me to suggest that the House resume.
LORD SHEPHERD: I would certainly agree, but I do so with a certain degree of disappointment. We were making very good progress until we got on to sex and various local authority matters and Tory committees, and now we seem to have come to a grinding halt. The sentiment I had in proceeding quickly was really of catching the Chief Whip with no Business on Thursday. That might have been rather amusing. But I certainly accept the suggestion of the noble Viscount that this is a suitable moment to adjourn.
VISCOUNT COLVILLE OF CULROSS: I am obliged to the noble Lord. I am sure that he would not have suggested that I should do anything but answer with full thoroughness the questions that were asked of me. I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

HOUSING FINANCE BILL
Brought from the Commons; read 1a, and to be printed.
DEFECTIVE PREMISES BILL
Brought from the Commons; read 1a, and to be printed.
MATRIMONIAL PROCEEDINGS (POLYGAMOUS MARRIAGES) BILL
Brought from the Commons; read 1a, and to be printed.
EMPLOYMENT MEDICAL ADVISORY SERVICE BILL
Returned from the Commons, with the Amendments agreed to.

FURNITURE DEVELOPMENT COUNCIL
7.2 p.m.
LORD BROWN LORD BROWN rose to ask Her Majesty's Government whether they will reconsider their decision that the Furniture Development Council shall cease to exercise its function on December 31, 1973, and be dissolved. The noble Lord said: My Lords, before commenting on this Question, may I declare a past interest, because from 1949 until 1963 I was an independent member of the Furniture Development Council. The position is a complex one. The Furniture Development Council was established in 1948 under the Industrial Organisation and Development Act 1947, and it established a research and information committee. In 1961 this became the Furniture Industry Research Association, popularly referred to as "FIRA". Most of the functions of the Council were passed over to FIRA. In fact the main function of the Furniture Development Council—which, if I may, I shall refer to in the rest of my comments as the "F.D.C."—now is to collect their statutory levy on the furniture industry, which they are entitled to do under the Act. The income of F.D.C. and FIRA collectively to-day is £326,000 annually. That was the income last year. Of that amount the levy amounts to 34 per cent. They also receive a grant from the Department of Trade and Industry, which is the normal grant given to research associations, and that amounts to 18 per cent. The striking feature is that they earn 48 per cent, of their total revenue in the services provided largely to suppliers of material and other things to the furniture industry. There are 1,532 companies paying levy under the Act, but 200 of these pay less than £5 per year, and a very substantial number pay fairly trivial sums. I draw attention at this early stage in what I have to say to the fact that the whole of the levy is collected by two women in the employ of the Furniture Development Council. They have the job computerised.
Mr. Nicholas Ridley decided at the fifth quinquennial review, which had to decide whether the Furniture Development Council continued under the Act, to terminate it at the end of 1973. There had been a number of previous quinquennial reviews. I am aware of the detail of these because I happened on at least two occasions to be a member of the triumvirate from the F.D.C. which argued the case for continuance before the Government of the day. On each occasion when I went there we had to report that a majority by number of the furniture manufacturers who had to pay this levy were against a continuance. But a wise Government, in the form, I remember, on at least one occasion of the noble Lord, Lord Erroll of Hale, decided that this body was performing its functions so excellently that despite the results of the referenda that had been conducted it should continue. In fact I think I am safe in saying that on every occasion when the quinquennial review has come up there has been a majority of manufacturers against continuance, and yet this body has gone on and grown in strength from year to year. It has continuously received the support of the trade unions concerned, the National Association of Retailers, and other bodies.
I think one is safe in saying, without knowing precisely, that the majority of the larger firms in the furniture industry show a high appreciation of the F.D.C. and FIRA, and wish it to continue. At any rate, this was so in the days when I was a member of the Council. Because of the unfortunate situation where it is believed that the voting in the B.F.M. is based on one vote per firm, which takes no account of the size of the firm—and I say that this is believed to be the position, because the matter is so complex that it is difficult to discover what the real position is—this adverse vote has come up in the past and has been rejected by the Government of the day, but was accepted by Mr. Nicholas Ridley.
I should like to quote from the Cabinet Maker and Retail Furnisher on this subject. This is from their edition of 1971. They say:
"Now, however, he"—
referring to the Minister at the time—
"says the industry's views should he put through the chairman of the F.D.C., Sir Roger

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Falk, who has agreed to see this through. This is going to place a heavy responsibility on the chairman and his council members. Neither the chairman nor the seven manufacturers, seven trade unionists, three independents and the lone retailer are themselves in a position. or empowered, to give a representative view. Even though the council and the board of FIRA consist mainly of furniture people, they would lay themselves open to accusations of bias because, merely by holding office, they must be research-minded. So how does anyone obtain a representative view? A straight referendum does not seem to be the answer. A counting heads operation takes no account of the size of the bodies which the heads control, and whether one measures height, weight or girth there will be ail kinds of anomalies. To obtain the views of various organisations is to become enmeshed in trade politics and jealousies. What might appear a majority opinion may in practice be the view of a small but active lobby—something not confined to the furniture industry! There is the added problem that an individual who says now he will support a voluntary system may be less keen to sign the cheque when the time comes, especially when he does not know the amount in advance, and also whether there is going to be a down-turn in trade."
FIRA, a body which depends to a very large extent on this statutory and compulsory levy, is in danger. This is an institute which is not exampled in any other country in the world. Germany, Italy, and the U.S.A. have nothing equivalent to it; Czechoslovakia, Denmark and Sweden have small national institutes, but they are not of the importance of FIRA. In other words, FIRA is unique and it is the envy of the furniture industry in every other country in the world. May I quote Doctor Ullmann who has a substantial furniture business in Holland. He writes to the trade press, saying:
"In your country you have a most efficient instrument for aiding the furniture industry… Why give up such an asset at a moment which may be critical for some members of the industry and at a time when you can use it to defend your position on the home market and to strengthen your efforts for export? While in the weaker countries within the E.E.C. (France and Holland) Government and industry are planning to set up instruments to support the industry, you are planning to demolish the existing organisations."
What about the work FIRA does? It tests virtually all materials which the furniture industry uses, in the interests of the furniture industry and the general public—chipboard, fibre board, various plastics, upholstery, lacquers, joints—and it ensures that these are up to standard and suitable for furniture. In the course
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of its many years of work it has caused many materials and lacquers to be withdrawn from the market because they are not up to standard. This is a voluntary service given to suppliers. It has cut out the manufacture of matchstick furniture in this country such as used to be prevalent before the war. People who, when they got married, invested their savings in furniture for their homes were buying rotten furniture which broke down and collapsed in a short period of years. Today, when one goes into a shop to buy furniture one is probably buying furniture which has been put through dynamic performance tests in the FIRA laboratories before being put on the market. They have given a service to manufacturers which assures them that the panels they use will not warp; they have taught the furniture industry how to make better joints and what are the best glues to use. They have looked after the interests of 200 suppliers in ensuring that supplies are up to standard.
The suppliers are paying FIRA about £150,000 per year for these services, not under statutory levy but by voluntary payment. FIRA deals with 6,000 technical queries each year. It is involved on 40 committees of the British Standards Institution. It is also involved in the International Standards Organisation to ensure that decisions are not taken in the International Organisation which are against the interests of the British furniture manufacturers. It carries out consultancy activities in marketing, economic surveys, costing, industrial engineering, stock control, wage systems and so on—the list is too long for me to quote it all. It produces all the basic trade statistics for the furniture industry. It conducts study tours overseas so that British furniture manufacturers can see what others are doing and can explore export markets. It employs 78 people in an extremely good building which the F.D.C. financed at Stevenage. Of those 78 members of staff, 30 per cent. are university graduates. That is a brief recital of the importance of this Institute.
If we move, as is envisaged by Her Majesty's Government, to a situation where the Furniture Development Council is being abolished, then the only basis of support from the industry itself would either be voluntary, with all the dangers that voluntary payments give rise to, or,

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as has been envisaged by Mr. Ridley and indeed by the noble Lord opposite in a letter to me, the introduction of what is known as a Section 9 Order which would re-introduce a compulsory levy on the industry, if the industry wanted it and if Parliament agreed to pass the Order. I would put it to your Lordships that as things stand at the present moment—and the compulsory levy exists and is supported by all except a large number of small firms in the furniture industry—the statutory levy is efficiently collected by two women in the furniture industry.
If the intention of the Government is to abolish the Furniture Development Council, with the intention of using the 1947 Act to introduce a Section 9 statutory levy, then I would say, with great respect, that this is an utterly stupid thing to do. Noble Lords will agree that all this would mean is abolishing an effective instrument for collecting the levy, and the Government would then have to put an order through the House and the levy would have to he collected by the Ministry of Trade and Industry—probably less efficiently than the experienced people on the Furniture Development Council who are doing it now. The purpose of the abolition, if the statutory levy is to be continued, completely eludes me. There is no logic in it. One must therefore assume that the purpose of bringing the Furniture Development Council to an end at the end of 1973 is not with the intention of substituting for the current statutory levy an alternative statutory levy, but with the object of opening up the way for abolishing the statutory levy altogether. This is the clear writing on the wall which the trade Press and most members of the industry assume the Governments intention to be. This places the future of FIRA at risk
The Government may reply that there is no reason why a voluntary levy should not take the place of a statutory levy. My Lords, like many other Members of your Lordships' House, I have been in industry for a very long time, and one knows the history of important bodies which had to rely on voluntary payments. As soon as there is a down-turn in trade some of the bigger people feel, "We are paying this voluntary levy and many smaller firms are not paying the levy. We cannot in our dire straits go on pay
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ing a large voluntary levy to support services which are enjoyed by everybody." This is the pattern which inevitably emerges.
Members of the staff of FIRA are not available straight from university. They have to be taken in as engineers, chemists and so on, and trained to the needs of the furniture industry; they have to learn this job in FIRA. They are valuable and need to be kept there. One knows in advance the effect on members of the staff of a body like FIRA of banishing the statutory levy. Jobs are immediately at risk, and the more adventurous—and perhaps the best—members of the staff consider leaving. This has happened with similar bodies over and over again in history. Her Majesty's Government know this perfectly well.
The dissolution of this council is in my view a highly retrograde step, because of its effects not only on the future of the industry, and on the exports and the quality of goods, but also on society itself. The Furniture Development Council and the parent body, FIRA, have made a profound contribution to the improvement of the quality of furniture in this country over the years of their existence. There is no doubt about that. My Lords, surely Her Majesty's Government have already paid due obeisance to their idol of vanishing institutions. They have abolished the I.R.C., which could have helped with Rolls-Royce and U.C.S. They have abolished the Prices and Incomes Board, which could have helped them in this wage inflationary period through which we are passing. They abolished investment grants and have had to bring them back in a different guise; and they are going to abolish the regional employment premium, which is needed to provide help in areas of high unemployment. They have abolished the Land Commission which would have been a great help at this stage. Is it really necessary to go on and abolish yet another institution? The Furniture Development Council is much smaller than the ones I have mentioned, but it has a record of service to the industry and to the community which is second to none for its size.
The action which has been taken menaces it, and I suggest that if the Government proceed to settle the issue of

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the Furniture Development Council, and with it FIRA, by the process of listening to the counting of heads conducted by the British furniture manufacturers, then, as I said in this House last week, they are resorting to the use of the referendum technique. We in this House know that that is not the right way; it is shrugging off a responsibility of Government which they should shoulder. If the furniture industry is to be subject to this process of counting of heads, then its institutions will disappear, as other institutions have disappeared in the past in similar circumstances. I sincerely put it to the Minister that second thoughts should prevail in this matter, and I am quite sure that in saying that I speak for a large and important section of the furniture industry.
7.21 p.m.
VISCOUNT HANWORTH: My Lords, as the noble Lord, Lord Brown, has said, what is at issue here is the future of FIRA, the Furniture Industry Research Association. What strikes one as extraordinary is that the Government should, first of all, decide to abolish the Furniture Development Council, which has been funding FIRA, before finding out what can be done in the way of voluntary funding of FIRA. A questionnaire has now been issued and it may well appear, on paper at any rate, that the difference can be made up and that a similar amount of money can be provided on a voluntary basis. But why on earth have the Government said that they will abolish the Council before finding out whether FIRA can be funded on a voluntary basis? We do not know what the answer will be and, though we may get from this questionnaire an assurance that for three years a certain amount of money will be provided, my experience of industry when trade is not so prosperous is that very soon people look to the economies which they can make. So I should like an assurance from the Government that if at any time in the immediate future the voluntary funds fail to provide the income which FIRA is getting at the moment—and preferably more—they will then invoke Section 9 of the Industrial Organisation and Development Act which provides for a compulsory levy.
Not all industries have a development council; it is rather exceptional to have
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one. I presume that it was started in the furniture industry because it is a fragmented industry. It has a large number of small firms and, without being unkind, I may say that a good many of them are still living in the past and have not come to terms with modern methods. Therefore, it is all the more important that there should be a research association which is as alive as FIRA is to helping the industry in the many ways it has done. It is particularly important at the moment when we are thinking of competing in the Common Market. Unfortunately, though FIRA has done a great deal in finding different methods of measuring performance and a lot is being done to standardise such methods internationally, the furniture industry as a whole has decided that it is not in its interests to pay the small contribution necessary to the B.S.I. to continue this work on an international basis. That may give your Lordships some idea of how inward-looking are certain sections of the industry.
From my personal experience, I can confirm what the noble Lord, Lord Brown, has said about the immense good which FIRA has done. It is certainly one of the liveliest of the research associations. The best study of the use of computers in small firms which I have ever read was produced by FIRA. It has done absolutely pioneering work on methods of measuring performance, and now has proposals for the strength and stability of certain types of furniture. I think one can say that in the furniture industry there is a special case for continuing to fund a research association adequately. I must say that the Government's decision to run down research associations is one of the gravest mistakes that has ever been made. Here is an opportunity to get modern techniques into many of our firms which are still far from being competitive in this modern age. The mere £4 million which the Government paid out for this is chicken-feed compared with the money which they waste in their own larger research establishments with far less effect. Furthermore, this is happening at a time when we think it is important to he competitive in Europe and other foreign markets. Even if their policy is not wholly reversible. I appeal to the Government at least to show that they still feel that something can be done for the furniture industry.
7.27 p.m.
LORD DIAMOND: My Lords, I want to support as strongly as I can the wholly persuasive case put forward by my noble friend Lord Brown and by the noble Viscount, Lord Hanworth. In fact, I want to ask the Government what has changed since they, as the Government of the country during the 13 years from 1951 to 1964, continued with this Development Council, when FIRA was established and flourished? Your Lordships have not heard to-day, and I have not heard—I have no direct knowledge, but I have a good deal of contact with this Development Council and with FIRA—of any complaint about the usefulness of its work. Indeed, so far as I know the Government do not allege that FIRS is without use as a development association. The only question is: In which form will the work be continued? Its use has been well-established and relates to something as basic as holes in furniture and what goes into them.
We all know what an enormous improvement has taken place in the design as well as in the structure and strength of materials. I cannot think of anything else which is more felt by the ordinary man and woman and the family than the furniture in the home. Nobody will suggest that research in this industry is overdone, so I repeat that the only question before the Government is: What is the best way of financing this research which has had valuable results and should continue, as it continued throughout the period of the Conservative Government from 1951 to 1964, and which, so far as my recollection goes, was subject to ups and down within that period? I am told that there has always been a story of less than 100 per cent. support within the industry for this Council, and for the research element in it. There has always been less than 100 per cent. support. It is not unusual at all, and it did not happen for the first time in recent years.
LORD BROWN: Less than 50 per cent.
LORD DIAMOND: It did not happen in recent years that, for the first time, a large number of the smaller firms were anxious not to continue it. It is a very familiar situation in industry generally, and it is a familiar situation in this particular industry, which the previous Conservative Government knew about
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and nevertheless decided, on the advice of its then chairman and of the Departmental Ministers concerned, to continue. So where you have a good thing and where you have, as a matter of policy, continued it, it is very difficult to understand why the Government should be thinking of prejudicing its continuation. I would go much further and say that it is not merely going to prejudice its continuation: this step by the Government would make it almost certain that it would not continue, because one knows that in industry there are any number of small firms who in the nature of things, if I may be forgiven for saying so, are not managed by very far-sighted people, who have to consider their annual profit and loss accounts and whose point of view is a short-term point of view, and they will be concerned to save expenses wherever they can save them. Yet here is something which redounds to the long-term benefit of the industry and to the long-term improvement of our homes.
I should like to suggest to the Government that, unless the Development Council is continued, we will undoubtedly see FIRA coming to an end. Pressures from the small firms will build up; and voluntary organisations always have difficulty in collecting money for such unidentifiable things as research associations. You can always see the benefit of research looked at over the past, but it is very difficult to demonstrate it as the research is being carried on. Therefore I should have thought that without doubt if the Government continue in this attitude a most valuable research organisation will be brought to an end. So I endorse what my noble friend Lord Brown said about this being a very retrograde step, and I invite the Government to think again. I invite the Government to recollect the history. So far as I am aware, it is the only Development Council stemming from the 1947 Act, which I recollect because it was the first one of which I had the privilege to be the chairman in Standing Committee a very long time ago. I have that kind of paternal affection for it, but I have no closer connection than that. I have been concerned for a very long time with an industry which is not very different from the furniture industry, and I therefore know, from those sources, how useful FIRA has been and the organisation generally. The

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argument is very clear. There has been a very solid reason for keeping this organisation going, notwithstanding the continual rumbling that has gone on. We invite the Government to show the necessary leadership and to show their beliet in research and in this sensible method of maintaining research.
7.34 p.m.
THE EARL OP SHANNON: My Lords, I shall be making only a very small contribution to this short debate on Lord Brown's Unstarred Question. In doing so, I must make my usual declaration of interest in so far as anything to do with research associations is concerned. We are very much indebted to Lord Brown for raising this matter by way of an Unstarred Question; and, like others who have spoken, I am appalled at the shortsightedness of this decision if it in fact means cancelling or terminating the levy. This comes at a time when, as I know only too well from the position I occupy, our research associations are arousing great interest abroad. I get a large number of inquiries from abroad asking how they work. People want to know more about them, and it is for the very simple reason that they envy them, as your Lordships have been told. Yet here we are starting to put some of our major institutions at risk. My Lords, we are here worrying about a comparatively small amount of money—and this when, on the Continent, many similar institutions are in fact being funded very heavily, not by levies on industry within the country but out of levies on imported goods in those categories. A classic example of this is the French levy on leather. Leather goods are very heavily dutied into France—and what happens to the money? It goes straight to the French equivalent of the Leather Research Association. My Lords, it is going to be a very traumatic time for British industry when we enter the Common Market. It is going to be a time when British industry will need all the help it can get, as the noble Viscount, Lord Hanworth, has already brought to our notice. This decision may he in line with "True Blue" philosophy, that industry must pay for what it wants, and if it does not want to pay for it then it does not need it. That is very nice, neat, tidy, political
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thought; but economically it is very shaky. The state of this particular industry is very well brought out by the fact that whereas the average research association has around 500 members—that is a simple calculation: the total number of members divided by the number of research associations—FIRA has 1,400 members. That shows how fragmented this industry is—more than any other—and we have heard how small some of the members are. Therefore it becomes all the more important to the philosophy that goes behind such a decision as this that, as I remarked to your Lordships during the research debate on February 28 [OFFICIAL REPORT, Col. 884]:
"…the customer should be in a position
to understand and define his needs ".
My Lords, if we have such a small, fragmented industry, surely these small companies are going to be in no position to know exactly what the customers need.
These small companies happily use all sorts of standards—standards that were created by FIRA. They often do this completely unknowingly, and if they do they say. "The standards are there: why can we not use them?" They are going to make use of things in the future for which probably they will not be prepared to pay their fair share. We are talking about taking away 30 per cent. of FIRA'S income. I am not so pessimistic as to think that just because 30 per cent. of FIRA's income is going to be taken away. that means the end of FIRA. I do not think it does at all. But it does mean that if 30 per cent. of its income is removed, something is going to happen at FIRA. These small companies may go on happily for a bit, but when they want FIRA's services again FIRA may not be there; it may not be there in the form in which they have it now and in the form that they require it. And, probably, almost worst of all, we shall have lost to foreign predominance in this field. We have heard that this is one industry at least in which we hold a lead. For goodness sake, let us try to hang on to it! Short-sighted decisions such as these, I believe, can have very detrimental, far-reaching effects.
The noble Lord, Lord Brown, gave details of the record of FIRA, and I think that this in itself is a sufficient tribute to FIRA for the Government to reconsider

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this decision very seriously. But I would ask that their own publication, New Technology. London edition, No. 57, April, 1972, be required reading for Ministers in the Department of Trade and Industry. On the front page is an excellent article, written by Mrs. Shuttleworth of the Research Division of the Department of Trade and Industry. I think that if the Ministers would read that (and it mentions FIRA) they would seriously reconsider this decision.
We all appreciate that research associations, by the very nature of co-operative research, cannot necessarily be wholly attractive to industry, especially when times get a little hard and some companies are inward-looking. As an example, suppose that FIRA were to produce a better and cheaper chair. All the member companies would receive details of this. They would all start making this new, better and cheaper chair. But they would say, "As we are all doing it, none of us is individually going to get any benefit vis-à-vis the others. The benefit will accrue to the customer." Granted. But the whole of that section of British industry will be so very much more competitive internationally, even if not among themselves. This is a very important point and one that is often not appreciated by industry when it comes to paying something towards a research association. Like the noble Lords, Lord Brown and Lord Diamond, I strongly urge the Government to reconsider what I consider to be a highly retrograde decision.
7.42 p.m.
BARONESS GAITSKELL: My Lords, may I apologise to the noble Earl, Lord Shannon, for attempting to rise before him? I did not see him jump to his feet and I wondered whether he was here. There is very little to add to the support given by everyone who has spoken to my friend Lord Brown's Unstarred Question. All the arguments lead me to the same question: Why are the Government doing this? The Furniture Development Council is now nearly 25 years old; it has had a high reputation and is of very great benefit to the furniture industry. Undoubtedly it is also of great benefit to the consumer, although the co-operative scientific research in which it engages works for the whole domestic furniture
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industry. Why are the Government seeking to change the rules after 1973? The cost of the Research Council, as has been said to-day, is a tiny levy on the industry, and the result of changing the statutory levy for a voluntary one will mean that those who do not pay will get the same benefits as those who do. This makes no sense or justice to me.
This brings us to the philosophy and psychology of Tory politics. It seems that consumer protection organisations have to be voluntary, pay-for-it-themselves organisations. This goes for the F.D.C., and it has gone for the Consumer Council. What is the virtue of a voluntary levy? One result of introducing it is that it opens the door to the use of shoddy materials and bad workmanship. In this case women especially suffer from the danger of falling standards, for women spend so much of their lives within the precincts of their home, in their kitchen, in their living rooms, in their bedrooms. The home is a great source of pride and satisfaction. The important thing in a home is that the furniture should be good-looking and lasting. So I ask again: why are the Government acting in a way that will cause the disappearance of the Furniture Development Council? is it a belief in the homely maxim, "Take care of the pence and the pounds will take care of themselves"? They save £240,000 a year on the abolition of the Consumer Council and about £150,000, I believe, by the dissolution of the Furniture Research Development Council. Set this beside the profligate cost of Concorde, which is likely to end as profitably as "the biggest aspidistra in the world"! I believe that on this issue the Government are very misguided. I hope that they will listen to everything that has been said to-day by people who know very much more about it than I do. I hope that the Government will change their minds about this and will continue with the statutory levy and so with the research body.
7.46 p.m.
Loan GRANVILLE OF EYE: My Lords, at this late hour I hesitate to intervene in this debate. I must declare an interest. I have been associated with the industry for most of my life and I am at the present time a director of a

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group of furniture manufacturing companies. I think that the House is grateful to my noble friend Lord Brown for having introduced this subject and, if I may say so, he made out a very powerful case which I think the Government are going to find extremely difficult to answer.
There are probably three views held at the present time in the furniture industry. There are those who perhaps want FIRA to lapse; there are those who want to see a statutory levy; and there are those who say that it should be voluntary. As my noble friend Lord Brown has said, there is a questionnaire going round the industry at the present time to try to gather their views. My own considered opinion about this, having seen this industry with its ups and downs over a number of years, is that the Government will make a great mistake if they do not go on with the support they have recently given to the industry. I suppose that the furniture industry has always been extremely difficult to organise and to rationalise. As Lord Brown has said, it is a conglomeration of small firms and a number of larger ones. It has never been led by consensus; it has never depended on consensus for any advance it has made in the field of design. It has depended vitally on the leadership of one or two leading firms who had money to spend. We have had great advances in the furniture industry since the Kite standard was established many years ago—advances certainly in design, in quality control and in research and we owe a great deal to men like Sir Gordon Russell and the Design Centre, the Colleges of Art, the technical colleges and their seminars for the progress which has been made.
A few weeks ago I visited the Cologne International Furniture Fair which is the largest of its kind in the world. When we go into the Common Market this industry will have to face some of the toughest competition in the whole of its history from the Germans, the Italians and the Scandinavians. The competition is here now. So when the advantages of the Common Market enable the Germans, the Italians and the Danes to import into this country without restriction, the furniture industry in the home market will face one of the toughest fights it has ever had. Last year France
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increased her export of furniture by 160 per cent.; we increased ours by 42 per cent. This is the industry which once led the world—Chippendale. Adams, Hepplewhite, Sheraton—and still leads on reproduction or traditional furniture. But the only real design in furniture in modern times is by Scandinavia in the use of teak. We have a lot to do if we are to compete.
My Lords, a great deal will depend on observing what the Germans and the Italians are doing. As my noble friend, Lord Brown said, it will depend on efficiency in the industry and on its technology. I think that Stevenage, FIRA and the Furniture Development Council are doing a very good job. It will be a tragedy if Stevenage lost those graduates and research workers over which they have taken time and trouble. I hope the Government will listen seriously and reconsider the question of the grant which has been made in the past.
7.52 p.m.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, this debate, following upon the Unstarred Question by the noble Lord, Lord Brown, really concerns the decision to abolish the Furniture Development Council. The noble Lord has asked that we should reconsider that decision. We are not debating whether or not FIRA should continue—that is not the issue. The noble Lord, Lord Brown, has linked the two and has gone so far as to say that if we were to stop the compulsory levy the continuance of the Furniture Industry Research Association would be placed at risk. But this is not the question that we are considering. The noble Lord made quite clear that if the industry were of that opinion it would be possible to make a Section 9 Order under the Act which would make it possible to continue the compulsory levy. This is not the issue we are considering at the moment.
The noble Baroness, Lady Gaitskell, seemed to think that the two bodies were identical, the Furniture Development Council and the research body. But this is not so. The issue we are considering to-night is purely the question of the Furniture Development Council. Perhaps I may be allowed to give a little of the background. The Council was set up on January 1, 1949, under the Industrial

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Organisation and Development Act which was passed in 1947 to deal with the special problems facing industries of many kinds at that time. It is now the only council that remains, apart from one set up in 1966 to deal with apples and pears in a very different situation. Originally, the Council was given 18 specific functions to be exercised, as the Act says, in such a way as to increase efficiency and productivity in the industry within its scope, to improve the service that the industry renders to the community and to enable the industry to render that service more economically.
My Lords, it is not in question that the Council has done a great deal of valuable work of benefit to the furniture industry, notably in the early days as regards standards, and scientific and technological research. But, little by little, it has ceased to exercise those functions as other organisations have taken them over—for example on export promotion—and as the functions ceased to be appropriate; for example, encouraging people to enter the industry. In particular, the Council was instrumental in 1961, with the support of the Department of Scientific and Industrial Research of that time and the British Furniture Manufacturers' Federated Associations in setting up the Furniture Industries Research Association to take over the research and information work which the Council had been doing up to that time.
Virtually the only function that the Council now exercises is that of collecting the levy. The Council collects the levy and pays over to the FIRA almost the entire proceeds, amounting to a little over £100,000 a year, retaining only enough to pay its administrative expenses. The Act lays down that there should be a continual review—this is in Section 8(3)—and that it is the duty of the Minister (there may be different Ministers for different industries, and in this case it is the Department of Trade and industry) to consult the interests concerned. This is not a question of counting heads; this is a question of consultation—a very different matter. This is what the Department did and I am assured that it found there was very little support for the continuance of the Council. This is quite separate from FIRA—
LORD BROWN: MY Lords, may I ask—
LORD DRUMALBYN: My Lords, I hope that the noble Lord, Lord Brown, will allow me to develop my argument. On FIRA and the method of financing it there has been a division of opinion. It is to deal with that division of opinion that the Chairman, in association with British Furniture Manufacturers and FIRA, and in consultation with the Department, has sent out a circular, a questionnaire, to all members to find out what they thought should be done, whether FIRA should be financed by a compulsory levy or by a voluntary levy. Does the noble Lord wish to intervene?
LORD BROWN: My Lords. I want to suggest to the noble Lord that he has been misinformed. He said that it is not a question of counting heads. May I read a short sentence from the letter written by Mr. Nicholas Ridley to the Furniture Industry Research Association. He says:
"I hope that the industry can express to me through the Chairman of the Furniture Development Council a clear majority view as to whether after 31st December, 1973, effective research"—
et cetera. et cetera. "A clear majority view." That is the counting of heads.
LORD DRUMALBYN: My Lords, that may be interpreted in different ways. The noble Lord is himself an accountant and no doubt he knows what happens, for example. with debenture holders. The majority view does not necessarily mean the majority of debenture holders. But I do not want to rely on any kind of abstruse accounting argument over this. The fact of the matter is that the questionnaire sent out gives detailed information and. I may add, this debate will add greatly to the importance that the manufacturers will attach to the continuance of FIRA. I think it may serve a very useful purpose and to some extent determine the way in which the members decide to express their opinion.
The circular is a pretty large document and it is intended to enable the members of the industry to see what issues are involved and then to decide whether they are in favour of a voluntary membership subscription—the amount is stated—and, if so, whether they are prepared to contract for a period to make

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this voluntary subscription, or whether they would prefer a statutory compulsory levy. That is the position as it is now. I repeat that if there is a preponderance of opinion in favour of a voluntary system, then the Minister will want to be satisfied that an effective system can be worked out if grant is to continue to be paid. If, on the other hand, the weight of opinion is in favour of a compulsory levy, the industry will be able to apply for a Section 9 Order; and Mr. Ridley was careful to leave enough time for the industry to make up its mind and for the financial arrangements to be worked out—because, of course, an Order requires to be laid in draft before both Houses of Parliament and it requires an Affirmative Resolution.
I should make it clear, so that there is no misunderstanding about this, that a decision to impose a levy does not automatically follow upon an application; but the Minister would certainly consider an application sympathetically. And he would consider it in the light of the questionnaires. From this questionnaire, which is signed—it is not just a tick and sent off anonymously—indicating the firm from which it emanates it will be possible to afford due weight to the various opinions expressed.
I do not for one instant dispute that the Council has served the domestic furniture industry well in the past. The noble Lord. Lord Diamond, said that he wondered what had changed. The fact of the matter is that at the last quinquennium but one there was a majority of opinion in favour of the continuance of the Council. At this last quinquennial review there was very little support indeed for the continuance of the Council. That is one thing that has changed. The other thing that has changed over the years has been the fact that here we have a Council set up under an Act with a wide variety of functions and the only function that remains is the collection of levy, and that object can be achieved in other ways. I really do not think that it would be appropriate to keep in existence against the wishes of the majority of the industry—against the weight of opinion in the industry if you like—a Council which was set up to exercise this wide range of functions, merely to collect a compulsory levy which
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could be collected by other means should it be decided that a compulsory levy was still necessary.
LORD DIAMOND: My Lords, I am sorry to interrupt the noble Lord. I have listened carefully to what he has said, and he is not dealing with the essence of the matter at all. The decision of the Government may be expressed as merely bringing to an end an association which no longer carries out the 19 possible functions which the Act originally provided. The decision of the Government brings to an end the Research Council unless something is done. Is the noble Lord telling us that the Government undertake that, even if there is not a strong majority of the members—which would not be surprising—they will bring in a compulsory levy? If not, the act of the Government in bringing the Association to an end is determining the life of the Research Council.
LORD DRUMALBYN: My Lords, I thought that I had covered that point. It does not follow that they will be determining the life of the Research Association, because it will be possible to deal with this by voluntary measures if the industry so desires. I have indicated the type of question that has been put. I must put this to noble Lords, because I feel that, whatever we may think of this at the present time, it is the final consideration at the moment. The noble Lord is asking the Government to reconsider their decision. Supposing I were to say to-night, "Yes, the Government will reconsider their decision". What on earth is the industry going to think of that? Here they have just been asked to express their opinions, not on whether they want FIRA to be brought to an end, but whether they want it to continue to be financed by voluntary or by compulsory means. And supposing we were to say "We are sorry. We should not have sent out that questionnaire. The Government will reconsider the matter, and it does not matter what you may think." Is that a tenable thing for us to do at the present time? I must say to noble Lords that in the present circumstances surely the right course is to wait and see what the result of the initiative taken by the Chairman of the F.D.C. is before we take any further action.
LORD BROWN: My Lords, the noble Lord has asked a question and perhaps I may have the temerity to answer it. He said: "What would the industry think if we now said that we would reconsider the matter, when a questionnaire is in their hands?" Fair enough. The effect of my question is this: in the event of there being a majority against the renewal of the Furniture Development Council or some other means of introducing a statutory levy, will the Government, when they have received the questionnaire, overlook a majority against, in the light of the fluctuating view for and against in the past? We are not children in this House. The Minister knows very well that what we are after is an assurance that some form of statutory levy will continue in the furniture industry. We do not want to embarrass the Government by having them to go to the industry at this stage and say that they have changed horses. We want the Government to say that they will await these questionnaires, and see what happens when the answers to them come in. But we want the Government to resolve in their minds, in the light of what has been said about this Council in the House to-night, that they will not take too much notice of a mere numerical majority against.
LORD DRUMALBYN: My Lords, the noble Lord has shown how difficult it is to keep to the point in this matter. It may have been a slip of the tongue, but the industry is not being asked in this questionnaire about the continuance of the Development Council: that is a matter that the Government have already decided. It is being asked about the method of financing the Research Association. All I can say now is that it is only right—we are bound in any case to consult before there can be a Section 9 Order—that we should await the outcome of this questionnaire, find out what people think in the industry—that is what "consultation" means—and then try to think out the best way of ensuring (and that is what we want to do) that the Research Association will continue in existence. Because everybody appreciates the valuable work that they are doing and have been doing and the importance of their continuing in existence.

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