Sitting of 10 July 1973

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

NEW WRIT (BERWICK-UPON TWEED)
Mr. Taverne: I beg to move,
That Mr. Speaker do issue his warrant to the Clerk of the Crown to make out a new writ for the electing of a Member to serve in this present Parliament for the county constituency of Berwick-upon-Tweed in the room of Antony Claud Frederick Lambton, Esquire who since his election for the said county constituency bath accepted the Office of Steward or Bailiff of Her Majesty's three Chiltern Hundreds of Stoke, Desborough and Burnham in the county of Buckingham.
An Hon. Member: Object.
Mr. Speaker: As the motion is opposed it will have to stand over until the time for raising matters of privilege.

SALFORD CORPORATION BILL [Lords]
As amended, considered; to be read the Third time.
GLASGOW CORPORATION (PARKS, ETC.) ORDER CONFIRMATION BILL
Considered; to be read the Third time tomorrow.
ORAL ANSWERS TO QUESTIONS
  EMPLOYMENT

    Sweatshop Labour
    Mr. Meacherasked the Secretary of State for Employment what evidence he has regarding the revival of sweatshop labour in London and elsewhere.
    The Under-Secretary of State for Employment (Mr. Dudley Smith): I am aware of the problem of small clothing factories housed in unsuitable premises in London and other cities. Inspectors of factories have been concerned about these poor conditions, and legal proceedings have been taken in a number of cases.
    Mr. Meacher: Will the Minister confirm that it is his belief that sweatshops are mushrooming in London's East End? Have checks been made in northern textile towns such as Bradford and Oldham? Is he aware that the law relating to safety and health regulations and the payment of tax and national insurance is being repeatedly flouted and that despite this there were only 10 prosecutions last year? Does he not agree that to have only five inspectors for 5,000 factories in inner London is grossly inadequate? What plans has he to increase the number tenfold?
    Mr. Smith: The hon. Member has asked a number of questions. I do not agree that these places are mushrooming. Probably they have been slightly on the increase. The Factory Inspectorate is well aware of this, and one of the reasons why we convened joint consultations with local authorities was to see what further action could be taken. I have asked them to report back to me. So far this year the inspectorate has brought 29 successful prosecutions in the tailoring and garment-making industry. A further 11 are awaiting a court hearing. This is a difficult area. Many of these people are fly-by-nights operating for short periods. The inspectorate is well aware of the problem and where its responsibilities lie it does everything it possibly can.
    Mr. Prentice: May I press the hon. Gentleman on the question of inspection? Will he confirm the figures given by my

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    hon. Friend and, if so, will he admit that this is totally inadequate in relation to the problem? Will he take urgent steps to increase the inspectorate to deal with this difficult problem?
    Mr. Smith: I cannot exactly confirm the figures, because the number of inspectors varies and they are moved around for different duties. The right hon. Member knows more than anyone that factory inspectors have a wide range of duties, of which this is one. If they devoted a disproportionate amount of time to so-called sweatshops, which is probably the wrong designation, other important areas would be neglected. All these questions come into focus in the Robens proposals and we shall undoubtedly be debating these in the course of future legislation.

    Construction Industry (Labour Force)
    Mr. Hardyasked the Secretary of State for Employment if he will take urgent steps to increase the labour force in the construction industry.
    The Minister of State, Department of Employment (Mr. R. Chichester-Clark): Although the principal responsibility should lie with the industry itself, the number of places available in construction trades under the Training Opportunities Scheme has been massively increased and we are still expanding our capacity.
    Mr. Hardy: Is the Minister of State not aware that unless even greater urgency is shown in dealing with this problem, unless there is effective and energetic action at an early date, all the proposals listed in the Government's various policy documents on housing and issued in the past year will turn out to be pious hopes and platitudes?
    Mr. Chichester-Clark: The hon. Gentleman can take that view if he likes. The facts are that the initiatives we have taken mean that the Training Opportunities Scheme now provides about a quarter of the intake of all skilled men in the industry and between 40 per cent. to 50 per cent. of the intake of bricklayers, which is pretty important. There is a limit to the extent to which the taxpayer can be asked to finance industry's needs.
    Mr. Idris Owen: While I recognise the concern expressed by the hon. Member
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    for Rather Valley (Mr. Hardy) about the desperate situation in the construction industry, I thought that there was a degree of implied criticism of my hon. Friend. Is my hon. Friend in a position to give me the figures for apprenticeship training in 1970 as compared with today?
    Mr. Chichester-Clark: I do not have the 1970 figures, but I can tell my hon. Friend that in 1972 the figure was over 27,000 compared with over 20,000 in 1971. The fastest fall in apprenticeships was between 1968 and 1969.
    Mr. Frank Allaun: But is the hon. Gentleman aware that in most of the schools for apprentices a very high proportion of the young men come from direct labour departments that train their own apprentices, which private firms do not do? Will he attend to this matter?
    Mr. Chichester-Clark: I take the hon. Gentleman's point; I am sure that he is absolutely right. Probably one of the greatest discouragements to apprenticeship was the introduction of selective employment tax. I well remember saying so in the House, and certain hon. Members opposite who were concerned about this facet of training, in particular in the construction industry, were notably absent from the Division that followed.
    Sir R. Cary: Is it not possible to shorten apprenticeship courses?
    Mr. Chichester-Clark: Yes. That is one of the matters under consideration. At present apprenticeships last for four years, and a proposal by the Construction Industry Training Board to reduce it to three years is being considered by the industry. If it were adopted, depending on the timetable for introduction it would produce a significant short-term increase in the number of skilled workers, and the effect on productive capacity to which the workers already contribute as apprentices would be much less.

    Hours of Work
    Mr. David Stoddartasked the Secretary of State for Employment if he will initiate talks between himself, the TUC and industry and commerce to consider hours of work in the United Kingdom and the effect of long hours of work on the health and safety of employees and upon industrial relations.
    Mr. Chichester-Clark: I see no reason to initiate talks at present, but I am prepared to take account of any particular points the hon. Member has in mind.
    Mr. Stoddart: That is a very unsatisfactory answer, bearing in mind all that we hear nowadays about stress at work. Is not the hon. Gentleman aware that long hours of work have an adverse effect on the health and safety of employees and on their productivity? Would it not be as well if the hon. Gentleman took account of the opinions now being expressed on the question of stress? Bearing in mind that people in this country are working longer hours than people anywhere else in Europe, cannot the hon. Gentleman do something substantial about this problem and have talks with the TUC so that people in this country may earn a decent living wage for working reasonable hours?
    Mr. Chichester-Clark: I do not think that my reply was unsatisfactory; I thought that it was sensitive. I said that I would take note of the hon. Gentleman's points, and I shall do so. However, there is no evidence to suggest that the working of long hours is a significant factor in causing accidents, although plainly excessively long hours may cause fatigue, which, I accept, could be a contributory factor in some circumstances. The main problem arises in situations in which people work in dusty atmospheres and other adverse environmental conditions where long hours of work result in a good deal more exposure to the hazards and require higher standards of environmental hygiene. My right hon. Friend is always ready to discuss these matters with the TUC.
    Mr. Redmond: Although the matter of safety and health is a cause for speed and pressure in the adoption of the proposals in the Robens Report, is it not remarkable that it should be said that the TUC, industry and the Government should get together in this matter? Is it not a matter for individual trade unions to discuss with individual industries? Does not the Question show a remarkable lack of confidence in the negotiating ability of the trade unions?
    Mr. Chichester-Clark: I shall not comment on that, except to say that I am sure that the trade unions should be paying great attention to it.

    Regional Employment Premium
    Mr. Willeyasked the Secretary of State for Employment what was the total of regional employment premiums paid to firms in the Northern Region in 1972.
    The Secretary of State for Employment (Mr. Maurice Macmillan): The estimated payments made in respect of regional employment premium for the Northern Development Area in 1972 were £29 million.
    Mr. Willey: Does the right hon. Gentleman accept that the Northern Region is dependent on this aid, that its withdrawal would be a disaster and that even the threat of withdrawal is harmful to the region?
    Mr. Macmillan: I do not accept the right hon. Gentleman's premise. The evidence is that the effect of regional employment premium differs as between different regions and may well differ within a region. I recently visited the North-East, and it was clear that the problems of Tyneside are different from those of Teesside. On Teesside, the problem in the near future may well be shortages not only of special skills but of semi-skilled labour. Discussion with the unions and industry about the phasing out of REP should take account of such factors and the question of the most effective way of giving help, including training help, to the regions concerned.
    Mr. Michael Shaw: Does my right hon. Friend agree that experience shows that general expansion of the economy is far more effective than such means as regional employment premium in providing additional work? Furthermore, does not experience show that if the money were spent more selectively it might provide a good deal more help than it has done?
    Mr. Macmillan: I agree. The most important aim is to maintain a continuous and steady rate of expansion. One factor which is a prerequisite of successful development in the Northern Region is confidence in the continued growth of the economy. Given that, there is a great deal to be said for applying central Government help in a more selective way, and in a way which Government policies have already begun to develop, in order to achieve the greatest possible effect.
    Mr. Fernyhough: Does not the Minister appreciate that certain large companies in the North-East, employing many men, would not have been viable in the last two or three years had they not received regional employment premium'? Is he aware that the evidence given to the Select Committee indicated that the withdrawal of regional employment premium might mean the loss of between 20,000 and 40,000 jobs? If some of those jobs are lost in the North-East, it will be a disaster. Will not the right hon. Gentleman review this decision?
    Mr. Macmillan: No. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer have made it clear that the phasing out of regional employment premium from the end of 1974 will be discussed. It was introduced in September 1967 for seven years. The evidence is that in the circumstances at that time and for a few years afterwards it was effective. However, during a phase when the economy is successfully expanding and massive investments are being made in parts of the Northern Development Area, it is not necessarily the most efficient way of spending equivalent sums of money.
    Dame Irene Ward: Before coming to a decision, will my right hon. Friend kindly have an analysis made of the firms that, last year or this year, would have been in the red if it had not been for the regional employment premium? If I may say so with great respect, I have not committed myself because I want to know a great deal more about the matter. I hope that my right hon. Friend will have an analysis made. because it is no good putting small firms out of work—
    Mr. Speaker: Order. This is not committal time; it is Question Time.
    Mr. Macmillan: I think that I can reassure my hon. Friend. The point of having discussions with industry on the phasing out of regional employment premiums is to provide the sort of information my hon. Friend is quite properly seeking
    Dame Irene Ward: I thank my right hon. Friend.
    Mr. John Smithasked the Secretary of State for Employment if he will make a statement on the implications, in employment terms, for the special development areas on the phasing out of the regional employment premium in the light of the latest employment figures.
    Mr. Maurice Macmillan: Discussions have been taking place with both sides of industry on the phasing out of the regional employment premium and it would be premature to make a statement until the outcome of these discussions has been considered. The possible effect on employment in these areas is one of the factors being taken into account.
    Mr. Smith: In these discussions with the TUC and the CBI, will the Minister take into account that the Government are the only people who want to phase out REP? The TUC and the CBI, which are recent converts, want to continue REP. What must be done to persuade the Government to withdraw this silly proposal?
    Mr. Macmillan: I do not accept that it is a silly proposal. The unemployment rate for Great Britain generally is 2·6 per cent. this year, compared with 3·7 per cent. in May 1972. In the special development areas unemployment is still too high, but it has fallen by 24·5 per cent. over the year and the percentage rate has dropped from 7·4 to 5·6. It is the expansion of the economy that is necessary for the development of the areas. The academic research which was undertaken indicated that the regional employment premium could have been responsible for the creation of between 20,000 and 50,000 jobs by 1970, but that was in the conditions which obtained in the years up to 1970. We are now dealing with the different situation of an expanding economy.
    Our discussions with the TUC and the CBI will centre not only on the effect which they assume could flow from the continuation of REP, but also on other measures which are now being undertaken and developed by Government policy for bringing more selective help to the areas concerned.
    Mr. Waddington: Has the Department any evidence that specific firms would leave the special development areas if REP were ended tomorrow? Is not it

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    obvious that the Industry Act provides far more specific and relevant aid and far fewer indiscriminate handouts to industry?
    Mr. Macmillan: That is true, and the Industry Act, unlike REP, does not give a subsidy to firms which have been in the region for the whole of their history, which have no intention of moving out and which have been doing very well.

    Hotel Staff (London)
    Mr. Worsleyasked the Secretary of State for Employment whether, before allowing work permits for hotel staff in London, he will ensure that the employers of such staff provide accommodation for them in order to avoid further overstraining the limited supply of furnished accommodation in London.
    Mr. Dudley Smith: No, Sir. Many employers of hotel staff already provide or assist in finding accommodation for their foreign workers.
    Mr. Worsley: Will my hon. Friend agree on reflection that this does not go far enough? Is he aware that men with work permits who are taken on by hotels often bring with them a great number of dependants who want to live in furnished accommodation, which is extremely short in central London? In my borough there are five such families in temporary accommodation which is provided for the homeless. Does not my hon. Friend agree on reflection that in this instance employers should pay the social cost of employing these people, including the cost of housing?
    Mr. Smith: With respect to my hon. Friend, what he suggests would not have much bearing on the amount of furnished accommodation available. A high proportion of the staff of the hotels in central London will wish to live in the surrounding area, whether they are foreigners or British citizens. If hotel employers were obliged to find accommodation for their staff, no doubt they would seek it in the open market, and this would not alleviate the shortage. I know that my hon. Friend has great difficulty in his area and there has been in central London recently a burgeoning of hotels. I hope in due course that things will settle down.

    Shipyards
    Mr. R. C. Mitchellasked the Secretary of State for Employment what is the total number of people employed in the shipbuilding and ship repairing industries at the latest available date; and how these figures compare with each of the previous five years.
    Mr. Chichester-Clark: It is provisionally estimated that there were 152,300 employees in employment in the industry in April 1973. I will, with permission, circulate in the OFFICIAL REPORT a table showing the comparable figures for earlier years.
    Mr. Mitchell: That reply is a little difficult to interpret. Is the Minister aware that in many parts of the country, including Southampton, there has been a drastic fall-off in the labour force in ship repairing over the last five or six years? Will he have urgent talks with his right hon. Friend the Secretary of State for Trade and Industry to consider what steps can be taken to remedy this situation?
    Mr. Chichester-Clark: I am aware of the fall-off in this respect. There are many reasons for it of which the hon. Gentleman, who takes an interest in these matters, will be aware. There is the trend towards very large vessels for which ship repairing facilities in the United Kingdom are not always adequate and the consequent reduction in the number of ships. There is the decline in the age of the United Kingdom merchant fleet with the consequent reduced need for repairs, and there are also many other factors.
    The hon. Gentleman will know of the developments in Southampton. Harland and Wolff sold its Southampton repair operation as a going concern to Vosper Thorneycoft which, according to Press reports, offered to continue the employment of 800 Harland and Wolff personnel. There are reports that about 20 senior staff are claiming redundancy payments on the ground that the jobs they have been offered are not comparable with their previous employment, and I am looking into this.
    Mr. Dell: Is the Minister aware that the withdrawal of REP would have a

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    serious effect on employment in the ship building and ship repairing industry? Despite any assistance that may be available under the Industry Act, is the hon. Gentleman aware that the level of employment in ship repairing on Merseyside has fallen substantially over recent years and is making a serious contribution to the high level of unemployment which continues there? Will the Minister have words with the Secretary of State for trade and Industry with a view to Merseyside being declared a special development area?
    Mr. Chichester-Clark: I have no doubt that my right hon. Friend the Secretary of State will have noted the words of the right hon. Gentleman. I think that the right hon. Gentleman understands the reasons—and I have given many of them—why there has been this decline in ship repairing. I cannot take it any further than that at the moment.
    Following is the information:

    GREAT BRITAIN

    Estimated Numbers of Employees in Employment in the Shipbuilding and Ship-repairing Industry

    Thousands Total

    April 1973 (Provisional)

    152·3

    April 1972 (Provisional)

    156·9

    April 1971

    160·8

    April 1970

    157·9

    June 1969 (b)

    153·2

    June 1969 (a)

    144·0

    April 1969

    144·8

    April 1968

    151·6

    Estimates for June 1969 (a) and earlier months are classified according to the Standard Industrial Classification (1958) and are not fully comparable therefore with the estimates for June 1969 (b) and later months which are classified on the basis of the Standard Industrial Classification (1968). Estimates for April 1972 and April 1973 are subject to revision when the results of the 1971 Census of Employment are available.

    Disabled Workers (Quota)
    Mr. Ashleyasked the Secretary of State for Employment if he has yet decided on whether to change the quota system for the employment of disabled people.
    Mr. Dudley Smith: No, Sir. The decision will be taken in the light of comments on the consultative document, which asks for considered views by the end of this year.
    Mr. Ashley: Does the Minister agree that, although the quota system is a relative failure, the interests of disabled people would be damaged if it were scrapped and they were thrown on the mercy of employers many of whom are prejudiced against them? Will the Minister assure the House that both the register and the quota system will be maintained until he can find a way of ensuring that all employers either provide jobs or pay an equivalent contribution?
    Mr. Smith: Reference to grants and subsidies was included in the document at the specific instance of the hon. Gentleman, and we are grateful for his views. I assure him that the procedure will not be scrapped in advance of our decision. As the hon. Gentleman knows, the whole subject is in the melting pot in consequence of the consultative document. All the options are open, from stricter enforcement to other possible measures. We want to get the best possible deal for disabled people. We also want comments and criticisms from all sides—not merely from the House of Commons—and I am glad that we are getting them.
    Mr. David Price: Will my hon. Friend consider in his deliberations on the Green Paper the possibility of extending the Queen's Award to Industry to an element in terms of the employment of the disabled? That would be a positive encouragement.
    Mr. Smith: That is an interesting suggestion. We are open to suggestions, and I will consider what my hon. Friend says. We need extra incentives for employers to carry out their duties to disabled people, but we should not underestimate the value of the work done by the vast majority of employers. They do it with a clear conscience and willingly.
    Mr. Harold Walker: I remind the hon. Gentleman that, in contrast to the way in which the Government have treated the House in connection with the Robens Report, we shall expect an adequate opportunity to debate the consultative document before the Government reach firm conclusions.
    Will the hon. Gentleman confirm that an employer within the scope of the quota system who fails to fulfil his quota and does not seek the permission of the Department to do so is in breach of the

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    law and committing an offence? If so, will he tell the House what he proposes to do about the 9,000 firms which are in clear breach of the law in this respect?
    Mr. Smith: The hon. Gentleman knows—we have had this out before—that it is not my responsibility to find time for a debate, but I will convey what he says to my right hon. Friend the Leader of the House.
    The hon. Gentleman referred to 9,000 firms. It is not the time to initiate a witch-hunt against firms which are probably in technical breach when we are to decide shortly what is to be the new policy for the employment of disabled people. The firms are not named in a list. They are detected from time to time by our experts as they go round. When failings are discovered they are pointed out. I have made special inquiries and in nearly every case where this has been discovered it is a matter of omission or ignorance rather than of deliberate policy. There has been a ready response by the people concerned, and we are making steady progress.

    Tourism and Catering
    Mr. Wyn Robertsasked the Secretary of State for Employment if he will operate the quota system for foreign workers in order to assist the tourist and catering trades, in view of the labour shortage in holiday resorts.
    Mr. Adleyasked the Secretary of State for Employment what representations his Department has received about the effect of EEC membership on the availability of non-EEC nationals for employment in the hotel and catering industry in the United Kingdom; and if he would make a statement.
    Mr. Dudley Smith: The hotel and catering industry already receives a special quota of 5,000 permits for overseas workers. My right hon. Friend has the needs of the industry in mind and will keep the administration of this quota under review. The subject of EEC membership has arisen in discussions between the industry and officials of my Department. There has been no effect on the availability of non-EEC nationals to work in hotels and catering in the United Kingdom.
    Mr. Roberts: I understand that it is Government policy to reduce the number of 5,000 who are available to the hotel and catering industry. Does he think that this policy is wise in view of the current shortage of labour in the resorts and the dearth of suitable people for training?
    Mr. Smith: Progress is being made on training. Later in the year consideration will be given to the changes in quota for 1974, and the labour supply position will be taken into account. At the same time the method of allocation will be reconsidered to strike as fair a balance as possible between the needs of employers who have recruited foreign workers in the past and those who have not. We are keeping the situation under review.
    Mr. Robert C. Brown: Does the hon. Gentleman feel it advisable to reduce this quota, or does he feel that it would be preferable to abolish it altogether, so that the hotel and catering industry will then have to face up to the fact that to attract staff it will have to pay adequate wages?
    Mr. Smith: No, Sir. What we are trying to do and I know that the trade unions have views on this matter—is to strike a happy medium. As The Times recently said, the main problem now facing the industry is that it is failing to attract British workers even when unemployment is high. The industry is now beginning to realise this. It is doing something about it and we are trying to help. We must not have too large a quota, but it would be disastrous if we cut off the supply entirely and harmed the tourist industry.
    Mr. Adley: While declaring an interest in the hotel industry, may I ask my hon. Friend whether he is aware that hardship is being caused particularly in those regions of the country where we are unduly dependent on tourism, and that regional economies can be in danger if employment of the traditional type is not brought forward? Since under the EEC provisions manufacturing industries have a system of transitional arrangements, should not the service industries enjoy similar transitional arrangements?
    Mr. Smith: Now that we are members of the EEC, there is nothing to prevent EEC workers from coming here and working without permits in this country

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    in the hotel and catering industry. The answer does not necessarily lie with other foreign workers coming in from the EEC area or from non-EEC countries. I very much agree with the Chief Executive of the British Hotels and Restaurants Association who recently said that the only way to overcome the situation is by an all-out campaign to get over to careers masters, parents and young people what employment in the industry involves. The industry is on the upgrade and is playing an increasingly important role in the life of this country.

    Industrial Relations Act
    Mr. Skinnerasked the Secretary of State for Employment how many people are engaged in the operation of the Industrial Relations Act; and what has been the total cost to date.
    Mr. Maurice Macmillan: The latest available figures are for the period up to 1st April 1973. At that date about 340 people were engaged in the operation of the Industrial Relations Act, and the total cost had been of the order of £2¼ million. The largest single component of the cost is the additional work of the industrial tribunals.
    Mr. Skinner: Is the Secretary of State aware that his figures show that it is costing more to administer the Industrial Relations Act, in terms of both staff and finance, than it is to man the Prime Minister's boat—[HON. MEMBERS: "Oh."]—"Land of hope and glory"—
    Mr. Speaker: Order. We cannot have that sort of thing at Question Time. Please ask a question.
    Mr. Skinner: Will the Minister accept that if local councils can be surcharged for refusing to raise rents, surely this is a case for a Government surcharge?
    Mr. Macmillan: The figures I have given cover the extra staff required by the Industrial Relations Act in the National Industrial Relations Court, in the Registry of Trade Unions and Employers Associations, in the industrial tribunals, in the Industrial Arbitration Board, in the Commission on Industrial Relations and within my own Department. This is a total of some 337 people, of whom 133 have been engaged in
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    hearing the 12,000 appeals made by work-people to the industrial tribunals.
    Mr. Ian Lloyd: Does my right hon. Friend agree that, however small this number may be and whatever it may cost, by comparison with the large number destructively occupied in ensuring that the industrial system does not work at all the number is a mere bagatelle?
    Mr. Macmillan: What my hon. Friend says underlines the point that the court and the Industrial Relations Act cannot be judged simply by the number of times people have recourse to the court. Apart from the 12,000 cases which have been dealt with, there have been a considerable number where the court and the tribunals have been instrumental in achieving settlement between workpeople and employers without bringing matters to court. This is one of the most valuable contributions they have made.

    Industrial Noise
    Mr. Michael McNair-Wilsonasked the Secretary of State for Employment what further advisory leaflets about industrial noise have been issued by his Department since the publication of the code of practice.
    Mr. Dudley Smith: Since publication of the code, the Department has issued a technical data note on noise in weaving sheds and a television filler on the use of ear protectors. Further publications are being prepared, and in particular the Noise Sub-Committee of the Industrial Health Advisory Committee is working on a further code on machinery noise.
    Mr. McNair-Wilson: I welcome my hon. Friend's reply, but does he not agree that the voluntary nature of these leaflets is no substitute for legislation to control noise in industry and to introduce ear protectors? When will such legislation be brought forward?
    Mr. Smith: I agree with my hon. Friend about the importance of noise control. I regard the reduction of industrial noise as a matter of great importance. I am asking the Noise Sub-Committee of the Industrial Health Advisory Committee to study and report on the problems involved in framing practical and effective noise legislation.
    Mr. Pavitt: In view of the fact that a court case has recently gone against the employers involving employers' liability in a case of deafness, does not the hon. Gentleman agree that this matter should now be made a scheduled complaint in industry? Will he do something about bringing in a system of medical coverage so that audiograms can be regularly taken to enable the Government to have the background knowledge against which legislation can be drafted?
    Mr. Smith: These are matters which have a bearing on possible legislation. The hon. Gentleman will know that this is a matter for my right hon. Friend the Secretary of State for Social Services. I understand that he has received and is now studying a report on the subject from his Industrial Injuries Advisory Council.
    Mr. Harold Walker: One of the firm and unambiguous recommendations of the Robens Committee was that there should be basic legislation on noise control included in the Bill which the Government are proposing to bring forward next Session and that there should be a specialised branch of a unified inspectorate to deal with the question of noise. Since the consultative document is completely silent on this matter, and in view of the Minister's comments today, does this mean that the Government have dropped that Robens proposal?
    Mr. Smith: No, Sir. What I said was that I am asking an expert advisory committee to look into the whole question with a view to framing practical and effective noise legislation. The hon. Gentleman will know that one does not just rush into these things without adequate consultation with those concerned. These are difficult and complex measures. We are moving on this matter—as opposed to what happened under the Labour Government, which did not move at all on this subject. What we are doing ties in effectively with the Robens proposals.

    Construction Industry (Safety)
    Mr. Hugh Jenkinsasked the Secretary of State for Employment what is the maximum penalty for breach of the safety provisions of the Construction Regulations 1961 resulting in the death of workpeople.
    Mr. Dudley Smith: A fine of £300. The Government have recently issued proposals for legislation on safety and health at work that suggest substantially higher penalties.
    Mr. Jenkins: Does the hon. Gentleman recall that in the case of a collapse of a bridge over the M4 last year, resulting in the death of three men, for which the firm concerned admitted responsibility the total fine was £150? Is not it clear that the recommendations which the Government propose to bring forward are urgent? Will the hon. Gentleman be placing legislation before the House in the immediate future?
    Mr. Smith: It would be improper for me to comment on the judicial decision in a specific case. But I agree that the present penalties are unsatisfactory, and that is one of the reasons why we are proposing to tackle them. Where an offence is tried on indictment, we propose an unlimited fine. It will be open to factory inspectors to seek trial on indictment if it is considered that the offence warrants it. Here again we are making good progress.
    Mr. Marten: Are there not already powers to prohibit work until conditions are safe, and should not these powers be used more frequently?
    Mr. Smith: Again this is a matter of judgment. It happens from time to time. My hon. Friend will be pleased to know that the factory inspectors will have very much wider powers over enforcement under the proposed legislation on Robens, if the House approves it.
    Mr. Rose: Is the hon. Gentleman aware that penalties for offences of this kind, like those in the Factories Act, are ludicrous? Is he aware, for example, that the loss of a finger due to the absence of a guard recently incurred the ludicrous penalty of £50? Does not the hon. Gentleman agree that, in addition to very stiff fines, we must have the equivalent in industry of what we have in road safety, namely disqualification, and that drastic measures are needed if employers are to fall into line?
    Mr. Smith: I said that the present penalties were unsatisfactory. That is why these proposals are being brought forward. Any further sanctions are matters

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    for debate when the proposals for new penalties come forward. They can be examined at the right time and place.

    Ranco Motors Limited, Tannochside
    Mr. James Hamiltonasked the Secretary of State for Employment whether he can give the number of people who were made redundant by Ranco Motors Limited, Tannochside, Glasgow, who are still not in employment.
    Mr. Dudley Smith: According to the latest information available to my Department, four men and 35 women of the 445 workpeople who became redundant as a result of the closure of Ranco Motors Limited are still registered as unemployed.
    Mr. Hamilton: The Minister will have got these figures from the Lanarkshire area, and I am sure he will agree that they do not take into account the number still unemployed in the Glasgow area. Is he aware that unemployment in Lanarkshire is still 5·5 per cent. and that, on that basis, it will be difficult for the people concerned to find other work which is suitable? Will the hon. Gentleman take up the matter with his right hon. Friend the Secretary of State for Trade and Industry, because this factory moved from my constituency to another development area, getting all the Government grants? If the Secretary of State is not prepared to do something about it, will the hon. Gentleman get his right hon. Friend the Prime Minister to do something about it?
    Mr. Smith: I read the hon. Gentleman's exchanges with my hon. Friend yesterday at Question Time, and I thought that the hon. Gentleman had adequate answers from my hon. Friend. I am concerned about the work aspect of the redundancies. Of the four men who are unemployed, two are registered disabled. I admit that there will be some difficulty in placing them. Most of the 35 women are married and want work in close proximity to their homes. I understand that there is a good chance of all of them being redeployed by the end of the summer.

    Departmental Offices (Cleaning)
    Mr. Ashtonasked the Secretary of State for Employment whether he will
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    state the percentage increase in expenditure of cleaning the offices of his Department since July 1963.
    Mr. Chichester-Clark: The information requested is not readily available and could be obtained only at disproportionate cost.
    Mr. Ashton: Why does the hon. Gentleman always give that answer when he is asked about the statistics of lady office cleaners in his Department or any other? Is he aware that there is a growing feeling that the way in which these ladies are employed by contractors as sweated labour is a national disgrace'? Will he set up a committee of inquiry to discover the statistics and to prove once and for all that the Government have made great savings by employing ladies at low wages and by taking advantage of contractors who now supply the labour instead of these ladies being directly employed?
    Mr. Chichester-Clark: I am afraid that I cannot answer the hon. Gentleman's question in full. The difficulty is that the records for 1963 and 1964 of salary payments made were unfortunately destroyed in October 1965 by the Labour administration. In any event the hon. Gentleman is misguided if he believes that this is wrong and seeks to blame the present administration for the movement towards contract cleaning. It was the Labour administration again, following devaluation in 1968, which effectively converted the bulk of cleaning of Government offices to a contract basis. One-third of the total area of Government offices was cleaned under contract in 1967 and two-thirds in October 1970. As for an inquiry, it is for my right hon. Friend the Chancellor of the Exchequer to decide whether an inquiry into the Fair Wages Resolution would be appropriate.

  COUNTER-INFLATION POLICY
  Mr. Meacherasked the Prime Minister if he will make a statement on his latest talks with the TUC and the CBI.
  Mr. Adleyasked the Prime Minister if he will make a statement on his latest meeting with the TUC and CBI.
  Mr. Duffyasked the Prime Minister if he will make a statement on his latest talks with the TUC and CBI on phase 3 of the Government's anti-inflation policy.
  The Prime Minister (Mr. Edward Heath): I refer the hon. Members and my hon. Friend to the reply which I gave to my hon. Friend the Member for Conway (Mr. Wyn Roberts) on 3rd July.—[Vol. 859, c. 246–9.] Further meetings have now been arranged with the TUC on 27th July and with the CBI on 30th July.
  Mr. Meacher: Since the Prime Minister is so fond of telling the TUC about the so-called fairness of his policy, will he explain what is fair about the fact that wages this year are subject to the average phase 2 ceiling of 7 per cent. while prices are 10 per cent. higher than a year ago and profits, according to Exchange Telegraph, are 19 per cent. higher than a year ago and rising fast? What is fair about the fact that the only thing rising faster than profits is the price of food?
  The Prime Minister: The hon. Gentle. man is referring to the situation a year ago. The latest figures of earnings, which are those for April, show an increase of 13·3 per cent. over the previous year, whereas the increase in the retail price index is only 9·2 per cent.
  Mr. Adley: Is not the hon. Member for Oldham, West (Mr. Meacher), as usual, simultaneously crying crocodile tears and talking arrant nonsense? Does not my right hon. Friend agree that in the first quarter of 1973 compared with the first quarter of 1972 expenditure on clothing went up by 15 per cent., expenditure on wines and spirits went up by 15 per cent., expenditure on motor cars went up by 35 per cent., and expenditure on radio and electrical goods went up by 22 per cent.? If that is not a sufficient indication of our increasing prosperity, perhaps my right hon. Friend can tell us the percentage of personal disposable income that people are saving now compared with the position in 1970.
  The Prime Minister: I cannot comment on the individual figures that my hon. Friend has produced, but as regards real personal disposable income the contrast between the last quarter of 1972 and the
  1252
  first quarter of 1973 shows an increase of 2·1 per cent.
  Mr. Duffy: Did the Prime Minister see the reported complaint in the Sunday Telegraph by members of the Price Commission that some industrialists had conned them that the price code was working for them and that they had not realised how cunning and ruthless some businessmen could be? Does not the Prime Minister think that the price code must be revised and tightened up before phase 3?
  The Prime Minister: I read those comments, and I also read the comment of a member of the Price Commission who was being interviewed to the effect that the commission was determined to be just as tough as any businessman appearing before it. I think that indicates that the commission itself is prepared to deal with prices in a tough manner. The commission has approved in full only one-third of the applications with which it has dealt. Nearly two-thirds have been rejected, approved after a reduction or withdrawn.
  Mr. Tom King: Are not the situations in world commodity prices and in the pound sterling two vital factors in concentrating the minds of the Government, the TUC and the CBI at the forthcoming talks on the vital necessity in the national interest to make every effort to speak as one nation and not to continue a partisan battle which in the end could jeopardise the standard of living of everyone in the country?
  The Prime Minister: I agree with my hon. Friend. That was the view taken by both the CBI and the TUC in the first meeting that we had in this series. That was why they agreed to the programme of work which is now in hand, and it is why we shall meet again on 27th July with the TUC and on 30th July with the CBI.
  Mr. Harold Wilson: When the right hon. Gentleman sought to avoid answering a question last week about prices and incomes in the freeze, was he not aware that the CSO was about to publish the following day the figures for the freeze period, in which real disposable incomes showed no change between the last quarter of 1972 and the first quarter of

  1253
  1973 even though the fourth quarter of 1972 included two freeze months? Is the Prime Minister aware that such increase in expenditure that there was was accounted for by dissavings? Is he aware further that, on his own figures, for which he must take responsibility, nearly half of even the maintenance of real disposable income was accounted for by increased dividends? How can the right hon. Gentleman now justify misleading the House last week? Did he have the figures, did he not know them, or did he conceal them?
  The Prime Minister: There was no misleading of the House last week, and I did not conceal any figures. The right hon. Gentleman knows that when figures are to be published by the Statistical Office no Minister at this Box gives any figures in advance because the day is notified in advance to the whole country. As a former Prime Minister, he knows that perfectly well.
  Mr. Wilson: Does the right hon. Gentleman confirm the question that I have just put to him about the CSO? Did he know these figures? In that case, why did he give so grossly misleading an answer to the House?
  The Prime Minister: There was absolutely nothing misleading about the answer I gave to the House.

  MRS. GANDHI (TALKS)
  Mr. Wilkinsonasked the Prime Minister whether he will make a statement on his discussions with the Prime Minister of India on the occasion of her recent visit to London on 25th June 1973.
  Mr. Stonehouseasked the Prime Minister if he will make a statement on his talks with Mrs. Gandhi.
  Mr. Norman Lamontasked the Prime Minister whether he will make a statement on his talks in London with Mrs. Gandhi on 25th June.
  The Prime Minister: I have nothing to add to the reply which I gave to my hon. Friend the Member for Keighley (Miss Joan Hall) on 5th July.—[Vol. 859, c. 714–6.]
  Mr. Wilkinson: Did my right hon. Friend remind Mrs. Gandhi of the
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  reaffirmation by the CENTO Ministerial Council, which his right hon. Friend the Secretary of State for Foreign Affairs attended, of Security Council Resolution 307 of 21st December 1971, which, in view of the cessation of hostilities at that time, called for the implementation of the Geneva Convention which, my right hon. Friend knows, demands the repatriation of POWs immediately war ceases? Did he also express the concern of many people in this country about the close relations between Russia and India as evidenced by the present visit of the Indian Defence Minister to Moscow?
  The Prime Minister: At Simla it was agreed between the three countries concerned that the whole question of prisoners of war and civilian detainees and allied questions should be dealt with together. Therefore, not only in my talk with Mrs. Gandhi but in correspondence that I have had with the political leaders of the other two countries I have tried to encourage them to carry through as speedily as possible what was agreed at Simla.
  Mr. Stonehouse: Did Mrs. Gandhi and her Minister of Trade and Commerce. who accompanied her, put forward a proposal for a permanent trade commission between India and Great Britain to improve trade? If so, why was that proposal turned down? Did the Prime Minister discuss with Mrs. Gandhi the prospects of improving exports from India to the EEC?
  The Prime Minister: Yes, we discussed this matter. I undertook to give all the help we could to India in the Council of Ministers and in the discussions which we have inside the Community. Mrs. Gandhi accepted that we would do this.
  Sir F. Bennett: The Prime Minister mentioned several facets of the Simla agreement. Did he find an opportunity to emphasise that the one bad catalyst which could damage relations would be any furtherance of the idea of the mutual trial of prisoners on political grounds?
  The Prime Minister: From the beginning I said that the whole. House would regret trials of this kind, though I know there are some people outside who take a different view. The Government's view is well known to all three leaders.
  Mr. Faulds: What representations did the Prime Minister make to Mrs. Gandhi about the mistreatment of the Nagas by the Indian Army?
  The Prime Minister: We did not discuss that matter.

  PRICE INCREASES (MINISTER'S SPEECH)
  Mr. John Smithasked the Prime Minister if the public speech by the Home Secretary to the Association of Conservative Clubs on 23rd June 1973 on price increases represents the policy of the Government.
  The Prime Minister: Yes, Sir.
  Mr. Smith: Is the Prime Minister aware that in his speech to the Association of Conservative Clubs on 23rd June the Home Secretary said:
  "Yes, prices have gone up horribly, in spite of all the action we have taken to limit the increases."?
  Does the Prime Minister agree with the Home Secretary?
  The Prime Minister: I agreed with my right hon. Friend when he also went on to say:
  "But wages and pensions and social service benefits generally have gone up even faster. Wholly new social services and benefits have been introduced."
  It would have paid the hon. Gentleman to quote the whole paragraph.
  Mr. Edward Taylor: As the Price Commission has restrained increased prices for prepackaged foodstuffs, where several applications have been refused, will my right hon. Friend take steps to ensure that no move towards the introduction of metric measures in prepacked foodstuffs will be allowed until it can be carefully monitored and rounding up and confusion can be prevented?
  The Prime Minister: That is a very important point that has been discussed with the food manufacturers. Of course, from the international point of view, which is important for exports—we have a very great interest in this—it is desirable in many ways that we should be able to export in metric terms. But if there is to be a change it is important that it should be governed in the way suggested by my hon. Friend.

  CENTRAL POLICY REVIEW STAFF
  Mr. Ashleyasked the Prime Minister what criteria he uses to appoint new members of the Central Policy Review Staff.
  Mr. Atkinsonasked the Prime Minister what is the present size of the Central Policy Review Staff.
  The Prime Minister: New members are appointed to the CPRS to maintain a balance of discipline and expertise. The CPRS has at present 18 members.
  Mr. Ashley: Will the Prime Minister ask the Central Policy Review Staff to examine the plight of one-parent families, many of whom are the poorest of the poor and even worse off than some pensioners? Will he also ask it to comment on the gross incompetence of the so-called Finer Committee which was set up in the 1960s and is still sitting on its collective backside'?
  The Prime Minister: I know that the hon. Gentleman is disturbed about the delay in the report of the Finer Committee on this matter. The committee had a very wide-ranging task. I understand that it now hopes to complete its report before the end of the year. In these circumstances, I do not think it is necessary to put this matter before the CPR S. Although there has been a long delay, I think we should await the Finer Committee's report.
  Mr. Ridsdale: Will my right hon. Friend ask the review staff to look into the position of pensioners, particularly in the lower income group, because it would be a practical way of helping such pensioners, especially with the steep rise in prices, if tax reductions could be made from time to time between annual reviews?
  The Prime Minister: If my hon. Friend is referring to the tax question of old-age pensioners, that is better conducted by the Treasury and the Inland Revenues which have all the information.
  The annual review of pensions is carried out by my right hon. Friend the Secretary of State for Social Services. By October, as the House knows, the increase in the old-age pension will have reached 55 per cent. during the life of the present Government.
  Mr. Atkinson: Will the Prime Minister ask his advisers to have another look at the whole question of wage restraint in phase 3 of the counter-inflation policy? In view of the anomalous position which has been created as a result of phase 2 wage restraint, may I ask whether the Prime Minister agrees that workers today are worse off than they were 12 months ago? Does he accept that, using his own figures, if the average gross increase is 7 per cent. at the moment—take-home pay must be less than that—and prices have increased on average by 9½ per cent., wage restraint must be a very unfair policy as the Government are now pursuing it?
  The Prime Minister: I do not agree with the hon. Gentleman on those figures. He is completely omitting the large settlements that were carried out before November, which are now operative. That was one reason for bringing in the standstill. All these matters are being discussed between the Government, the TUC and the CBI. The work is being done urgently by all three parties to the talks, and it will be carried further forward at the meetings on 27th and 30th of this month.
  Sir Gilbert Longden: Will my right hon. Friend tell us whether the review staff is concerned with foreign affairs? If so, has its advice been asked on how the common agricultural policy can be reviewed and hon. Members can best be elected to a directly elected European Parliament?
  The Prime Minister: I do not think that either of those matters is for the Central Policy Review Staff. The CAP is being reviewed in the Community by the Commission and by individual member Governments putting forward their own proposals. That can be handled by the Ministry of Agriculture, Fisheries and Food. Parliamentary affairs are for the House itself to study if it so wishes. In particular, it is for those who have been attending the European Parliament in Strasbourg to give the House the benefit of their advice.

  NEW ZEALAND PRIME MINISTER
  Mr. Dalyellasked the Prime Minister if he will now invite the Prime Minister of New Zealand to make an official visit to London.
  The Prime Minister: As I told the hon. Gentleman on 3rd April, Mr. Kirk is always welcome here. There are, however, no arrangements for a visit at present.—[Vol. 854, c. 227.]
  Mr. Dalyell: What explanation would the right hon. Gentleman give to Mr. Kirk about why he has been so inhibited in using his undoubted personal position with President Pompidou on the subject of nuclear testing?
  The Prime Minister: As Mr. Kirk does not take the view that I have been inhibited, no explanation is necessary.
  Sir G. Nabarro: Has my right hon. Friend observed this morning that the New Zealand frigate sent by the New Zealand Government to observe the nuclear explosions was 45 miles from the site? As this is an exceedingly dangerous international development, may I ask what action my right hon. Friend proposes to take to influence the future course of action by the French Government?
  The Prime Minister: The decision to send the frigate is entirely one for the New Zealand Government. They must be aware of any dangers that there may be in the area, and I cannot interfere with their responsibility.
  Mr. Harold Wilson: Unless the right hon. Gentleman is in a position to repudiate the account in The Times of the bestialities committed in Mozambique, would he not be wise to cancel the Portuguese Prime Minister's visit and substitute the Prime Minister of New Zealand?
  The Prime Minister: The answer to that is, "No, Sir." If ever there was an abuse of a question by the Leader of the Opposition, that was it.

PORTUGUESE PRIME MINISTER (VISIT)
Mr. Maclennan: 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 reported massacre at the village of Wiriyamu in Mozambique and the intended visit to this country of the Portuguese Prime Minister, Dr. Caetano".

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The facts are specific and as reported in The Times today—that on 16th December last at the village of Wiriyamu in West Central Mozambique there was an armed attack by the Portuguese Armed Forces upon the village, following which the troops systematically and with bestial ferocity massacred 86 named Africans—men, women and children—who were alleged sympathisers of the Frelimo fighters.
That the matter is important scarcely requires demonstration. That it is urgent and that the House should debate this question flows from the fact that Her Majesty's Government have issued an invitation to the Portuguese Prime Minister, Dr. Caetano, which is to be taken up next week.
It is, in my submission, suitable for urgent debate in the light of the imminent arrival of the Portuguese Head of Government, and this House should have the opportunity of expressing the utter abhorrence of the British people of the consequences of Portuguese policies in Africa and of making it clear that the alternative for the Portuguese people is to join the civilisation of Europe and abandon these policies forthwith.
I conclude by expressing the view that this is pre-eminently a matter of Government responsibility, as they have issued the invitation, and this House will wish to have the opportunity of expressing the view that it should be withdrawn.
Mr. Speaker: The hon. Member for Caithness and Sutherland (Mr. Maclennan) gave notice of his intention to make this application under Standing Order No. 9.
My decision is simply whether I think this matter should be debated in the House today or tomorrow under Standing Order No. 9. I rule against the hon. Member's application.
Mr. Harold Wilson: On a point of order, Mr. Speaker. While of course I am not questioning your ruling—and I do not question it—I give notice, following the statement that we have issued this afternoon, that my right hon. Friends and I will table a motion in the House in support of the line taken by my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan).

COMPLAINT OF PRIVILEGE
Mr. Speaker: I shall now give my Ruling on a matter of privilege.
Yesterday, the hon. Member for Brighouse and Spenborough (Mr. Proudfoot) drew attention to an article in the Sunday Times magazine entitled "Shell versus Parliament". I have carefully considered the article in relation to past decisions of the House and rulings from the Chair in such matters.
It is, of course, the duty of the House to deal with reflections upon Members which may tend to undermine public respect for the House as an institution. It is true that to some extent the article is, to use the hon. Member's own phrase, "a distortion of what happens", but my duty as Speaker is to consider whether, in all the circumstances, I should give the matter priority over the Orders of the Day.
I do not in any way wish to prejudice or to prejudge any action that the hon. Member may wish to take, but I do not think that his complaint falls so clearly within the ambit of privilege as to allow priority to be given to a discussion now.

NEW WRIT (BERWICK-UPON-TWEED)
3.38 p.m.
Mr. Dick Taveme: I understand, Mr. Speaker, that it would be right if I were to read once again the motion that I seek to move. I beg to move.
"That Mr. Speaker do issue his warrant to the Clerk of the Crown to make out a new writ for the electing of a Member to serve in this present Parliament for the County Constituency of Berwick-upon-Tweed in the room of Antony Claud Frederick Lambton, Esquire, who, since the election for the said county constituency, hath accepted the office of Steward or Bailiff of Her Majesty's Three Chiltern Hundreds of Stoke, Desborough and Burnham in the County of Buckingham."
Mr. William Molloy: Take it to Strasbourg, that bastion of democracy.
Mr. Taverne: At some time no doubt the hon. Member will wish to discuss whether he should go to Strasbourg, but that is not my concern today.
This is a serious matter which should concern all Members of Parliament

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because it concerns democracy and the representation of the people. It arises for a simple reason, namely, that we are concerned with procedure that is as archaic as it is absurd, that is spattered with anomalies, and that enables the interests of constituents to be sacrificed to the electoral interests of the parties. [HON. MEMBERS: "Hear, hear."] I should have thought that this was a matter that concerned every Member of the House.—[Interruption.]
Mr. Speaker: Order. The hon. Member is entitled to make his speech in reasonable silence.
Mr. Taverne: No doubt it will be noted outside the House how much concern has been shown in certain quarters for the interests of constituents.
I start with an anomaly that is fundamental to this motion. If the writ for Berwick-upon-Tweed is not moved before the recess, the by-election there cannot take place before November. That would mean that the seat would be left unrepresented for five months, and nothing could better illustrate the absurdity of the present practice.
If a Member dies, a writ can be moved during the recess. If a Member takes up an office of profit under the Crown during the recess, I understand again, that a writ can be moved during the recess. But if, as has happened in the present case, a Member applies for the Chiltern Hundreds while Parliament is sitting, the writ can be moved only while Parliament is sitting. The effective choice is therefore between a writ in July or in late October at the earliest, which would mean an election in November.
I want to make it clear to every hon. Member who is prepared to listen that what I am asking for is patently reasonable. I am not seeking to embarrass the Government by acting in a spirit of frivolity. If they are embarrassed, it will be because of their own actions. I understand that the Conservatives have not yet completed the procedure of selecting a candidate in Berwick-upon-Tweed. Very well—it is reasonable that they should have time to do so. I shall therefore be very willing to withdraw the motion if the Leader of the House clearly says that he will move the writ before the recess.
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What could be more reasonable? This will give time for the adoption procedure, it will not be forcing on the constituency an unduly early by-election, but it will not leave the constituency unrepresented for an unconsionable time. I therefore ask, as is right and proper in the circumstances, that the right hon. Gentleman should give an assurance that there will be an early writ. If he does not give what is clearly a perfectly reasonable undertaking, where will the duty of Members of Parliament then lie?
Mr. Arthur Lewis: Strasbourg.
Mr. Taverne: I would remind certain hon. Members that we are not now concerned with parlour games. A writ is not the property of a party. We are concerned with the question whether a writ shall be moved and constituents represented.
The background to this delay shows a disturbing position. Let us consider the other writs which were moved last Friday. The hon. and gallant Member for the Isle of Ely died on 21st May. The Prime Minister accepted the resignation of the hon. Member for Berwick-upon-Tweed as a Minister on 22nd May. It was therefore clear that in both these constituencies at the same time there would be a by-election. The hon. Member for Berwick-upon-Tweed actually resigned his seat on 1st June.
The hon. Member for Ripon died on 15th June, yet within three weeks of his death, the writs for two by-elections are moved—for Ripon and Ely—and not a writ for the by-election in Berwick-upon-Tweed.
The Chairman of the Ripon Conservative Association made a statement. Dismay had been expressed by members of the family of the late hon. Member for Ripon at the haste with which the writ was moved. According to the Yorkshire Post, they said:
"We were shocked and surprised. We are opposed to this move and unwilling to offer any support or help."
Whereupon, the Chairman of the local Conservative Association said that he hoped that everyone would recognise that
"… if this by-election is indeed held before the summer holidays, this would imply no disrespect to the memory of the distinguished

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Member … and servant of Yorkshire. We are sorry that Sir Malcolm's family feel so very strongly about this but we hope that for their part they will come to understand our position. We believe that it is important that Ripon should not be disenfranchised for months as many constituencies have been in the past."
There could be no more glaring contrast than that between Ripon and Berwick.
Indeed, there is a fundamental inconsistency. Either there has been an attempt to seek electoral advantage in Ripon in order to catch the other parties on the hop by rushing forward a by-election, even at the expense of the personal feelings of the family, or, if the Chairman of the Ripon Association is right, there is an attempt to derive electoral advantage by delaying the election at Berwick, even at the expense of leaving the seat without a Member for over five months. Either the interests of the electors require an early election, in which case the motion should be carried, or the feelings of the family should have been respected, in which case, the writ should not have been moved last Friday. The Government cannot have it both ways. In my view, the principle stated by the Chairman of Ripon Conservative Association is right. The interests of the electorate should prevail and there should be an early writ in this election.
It is worth noting that, when a similar situation arose 10 years ago, Mr. Profumo, then the Member for Stratford-on-Avon, resigned on 5th June 1963. In that case the writ was moved before the Summer Recess and the election was held on 17th August.
Mr. Andrew Faulds: The 15th.
Mr. Taverne: The 15th—even earlier. The haste then shown was phenomenal compared to the haste that the Government are now showing.
I declared on more than one occasion during the Lincoln by-election and since that I would seek to alter the absurd and archaic system that prevails today. I said that, as an independent, I would not be bound by the pact between the parties which has prevailed since 1911 and which apparently so many people in the House seem eager to preserve. I also said that I would seek to prevent the abuse, a serious abuse of Parliament and democracy, whereby constituencies can be left
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unrepresented for long periods because of manoeuvrings for party advantage.
[An HON. MEMBER: "You are not in Strasbourg."] If some hon. Members were interested in democracy they would be interested in seeing themselves represented in the forum of the Nine—[Interruption.] I realise that hon. Members on this side seem even more keen than Conservative Members to delay this writ. Some of them seem even less concerned with the interests of constituents. If they are not careful, they should beware of their intervention—
Mr. Stanley Orme: Why raise it now?
Mr. Taverne: I am raising this issue at the proper time and I raised it repeatedly in Lincoln, when it was—[Interruption.] The Patronage Secretary, for whom I have considerable respect, and who is normally a man of considerable judgment, on this occasion has made a statement that is not worthy of him. He has stated that, in his period as Patronage Secretary, there has not been a delay of more than four months in a by-election between the seat becoming vacant and a by-election being held. In this case, however, if the undertaking for which I am asking is not given, the delay will be between five and six months.
That is why I appeal, first, to the Leader of the House to have second thoughts and to change his mind and give a clear undertaking to move the writ this month. If not, I appeal to Members of Parliament who do not necessarily see themselves simply as members of parties to forget for a moment their role as members of parties and to realise that there are other duties than slavish obedience to the party whip. Every hon. Member has a duty to see that the electors of Berwick are not disenfranchised for an unconscionable time. We can fulfil that duty by passing this motion.
3.50 p.m.
Mr. David Steel: The hon. and learned Member for Lincoln (Mr. Taverne) has done the House a service in raising this matter. I am only sorry that he was subjected to a barrage of abuse from the supporters of the Government who sit on the Opposition side of the House.

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It has long been a convention that the writ for a by-election should be moved by the whip of the party which held the seat, but there have been too many cases in recent years where that convention has been abused by the party which held the seat. I suppose that the worse cases were Orpington, in 1962, where the election was held some six months after the vacancy occurred, and Lincoln, where the election was held some five months after the vacancy occurred.
The third case is the one to which the hon. and learned Member has referred, namely, Ripon. The writ in that case has been moved within three weeks of the death of the hon. and gallant Member.
I point out in passing that in the first two by-elections that I mentioned the electorate sought their revenge on the parties which attempted to manipulate them. They may well do so in the third case as well.
This matter has concerned my hon. Friends and I for some time. We believe that the convention ought to be maintained, but that, in view of past experience, it is right that the House should lay down a minimum and a maximum time within which the right of a party to move the writ ought to be exercised.
It is for that reason that I have sought to have the matter of the timing of by-elections included in the terms of reference of your conference, Mr. Speaker, on electoral reform, which is at present sitting. This matter was not contained in the original terms of reference. I ask the Leader of the House to confirm that it will definitely be in the terms of reference and that it has been agreed by the Opposition to be so included.
There is no need for me, therefore, Mr. Speaker, as I hope to raise the matter in detail during that conference, to repeat the arguments of the hon. and learned Member for Lincoln. However, I believe that the statement made by the Chairman of the Conservative Party in Ripon, to which the hon. and learned Member referred, was calculated to lead the electorate of Ripon to believe that the writ could not somehow be moved during the Summer Recess. As the hon. and learned Member made clear, it is precisely the other way around. That writ
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for Ripon could well have been moved during the recess, whereas the writ for Berwick-upon-Tweed cannot and must either be moved now or before the Summer Recess, otherwise the election will be delayed until the autumn.
Parts of the constituency of Ripon begin their traditional summer holidays during the very week when the Government have chosen to hold the by-election. Many people will be disfranchised as a result of being away on holiday.
The hon. and learned Member has already referred to the offence caused to the family of our late colleague in the House by this indecent haste. I was in Ripon yesterday and what struck me was the fact that difficulties have been caused to the officials responsible for organising an election at such short notice, and not least the fact that the Post Office, which traditionally installs telephones in the headquarters of the parties for candidates at General Elections or by-elections, was unable, until after I had contacted the Minister of Posts and Telecommunications late last night, to arrange for a telephone to be installed in the local headquarters of my party, long after the writ had been moved.
This sort of manipulation of the electorate will bring politics into disrepute. The hon. and learned Member for Lincoln has done the House a service in giving us a chance to discuss this matter today.
3.55 p.m.
Mr. Nicholas Winterton(Macclesfield): I shall intervene in the debate only briefly. It is sheer hypocrisy for the hon. and learned Member for Lincoln (Mr. Taverne) to move this motion today. When his party was in Government and when, perhaps, he was even in a position of responsibility, in 1969 when the respected former Member for Newcastle-under-Lyme, died in February, the hon. and learned Member did not then urge his Government to move a writ for a by-election to be held for almost nine months.
3.56 p.m.
Mr. William Hamilton: I have very little time for anyone who has spoken in the debate so far. I certainly disagree with my hon. and learned Friend the Member for Lincoln (Mr. Taverne). He is still a friend of mine,

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although we disagree violently about what he has done during the last six to 12 months. I believe that what he did was misjudged. One fights the fight that he has been fighting when one is inside rather better than one can fight it on the outside. But that is a matter for him.
The hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) comes to the House when he likes. He was not present last Friday to protest when the writ for Ripon was moved. I was present, and I made my protest.
Mr. David Steel: I do not live in London.
Mr. Hamilton: I attend the House five days a week, which is more than most hon. Members do.
As for the hon. Member for Macclesfield (Mr. Winterton), two wrongs never made a right, and a very important constitutional point is being raised.
The present position is completely indefensible. Both parties have used this traditional right, as they see it, to move the writ when they choose, for their party-political convenience, and it does not matter a damn about the inconvenience for the electorate concerned. That must stop. The House can bring a stop to it today. We can seek the assurance—it is a very reasonable request—from the Leader of the House that he will move the writ before we rise for the Summer Recess. That will give the parties the opportunity to get their candidates in order.
I understand that there is great competition for the seat, which is a very safe Tory seat—at least, it was; it is now highly marginal. Nevertheless, about 100 candidates think that they can make a go of it. The parties will have to sort the sheep from the goats. If they are neither sheep nor goats, the parties will have to get something or other. It takes time. So we give them three weeks. If we do not get that assurance, I am quite prepared to force this matter to a vote today.
I hope that I shall not be misunderstood by anyone present. We must dismiss the personalities concerned in considering those who have spoken so far. This is a very important constitutional point for the House as a whole. It is
1268
completely indefensible that the Government should have taken such action on Friday and now seek to disfranchise another constituency for upwards of five months. It is an intolerable situation which defies all logic and fairness. It is a contempt of the constituents of Berwick-upon-Tweed. The salt was rubbed into the wounds by the action of the Government last Friday in respect of Ripon. The House will be shown at its best this afternoon if it votes against the Government unless the right noises emanate from the Leader of the House.
3.58 p.m.
The Lord President of the Council and Leader of the House of Commons (Mr. James Prior): I very much regret that the hon. and learned Member for Lincoln (Mr. Taverne) has seen fit to take this step, which breaches the longstanding convention that the writ for a vacancy is applied for by the party which previously held the seat. The fact that this convention has continued to be honoured suggests that the House, over the years, has recognised its value.
It has been suggested that the time is due for a reappraisal. This is a matter that can be considered by the Speaker's Conference. It might suit the wishes of a large number of hon. Members in all parts of the House who, perhaps, have some unease over this subject that it should be considered by the Speaker's Conference. But, in refraining from independent action in the past, Members have no doubt borne in mind the possible effects of a motion for a writ which is disapproved by the House. Under our practice, a decision to this effect—to disapprove the motion—would hold for the remainder of the Session and would consequently prolong the period for which the constituency is unrepresented.
I turn to the criticism which the hon. and learned Gentleman has levelled at the head of the Government. In 1969 the Conservative Party voluntarily took a decision, which was publicly announced, that wherever practicable writs would be moved within four months of a seat becoming vacant. But in proceeding in that way it must be right to try to take account of the wishes of the constituency; and the long recess is inevitably an inhibiting factor

1269
in cases where the writ cannot be moved when the House stands adjourned. That is perhaps another matter that the Speaker's Conference would care to consider.
Although the hon. and learned Gentleman has drawn attention to the by-election at Stratford-on-Avon which took place at the beginning of August, I think it is generally accepted that August is not a very satisfactory month for electors to exercise their democratic rights. If I agreed with the suggestion of the hon. Member for Fife, West (Mr. William Hamilton) that the writ should be moved before the recess, that is precisely what would happen; the election would take place towards the end of August. I do not think that that would be very satisfactory.
The hon. Gentleman has made his point. It has been received with some sympathy, but also with mixed feelings. It is a matter which is best left for the Speaker's Conference to consider. I hope that the hon. and learned Gentleman will not press his point this afternoon, because all that he could achieve by doing so would be to remove the opportunity for an earlier by-election.
Therefore, I should like to suggest an amendment. and I beg to move to leave out from "That" to the end of the Question and to add instead thereof:
"this House do pass to the Orders of the Day".
Mr. Alexander W. Lyon(York): I understand that if there is a vote which is adverse to the motion, there is then a barrier for 12 months.
Hon. Members: No—until the end of the Session.
Mr. Jeremy Thorpe: Will the Leader of the House confirm that if the motion is defeated, and, therefore, cannot be reintroduced until next Session, that means that it will probably be introduced at the end of October? Will he confirm that that would probably mean an increased delay of three or tour weeks? Do we take it, therefore, that it is the Government's view that November is absolutely the right month for Berwick-upon-Tweed but that December would be a disaster? If that is their view, the hypocrisy of the whole of their argument is clear for everyone to see.
Mr. Prior: All that I am saying is that if the motion is moved it precludes having a by-election as early as would otherwise be possible.
Mr. R. J. Maxwell-Hyslop: Could we not avoid both alternatives by a procedural device? If the House were recalled for one day and if nobody opposed the motion, so that there was no Division, it would not fail for lack of a quorum. Therefore, only one hon. Member would need to be present, with Mr. Speaker, to move the motion.
My right hon. Friend's statement is possibly of convenience for hon. Members, but he will perhaps agree that it is not an accurate statement procedurally to say that if we do not move the motion before the House rises at the end of this month or the beginning of August it cannot be moved again until October or November. It could be, by what is frankly a procedural device to overcome a habitual embarrassment.
Mr. Prior: The position is clear. If the hon. and learned Member for Lincoln moves the motion it cannot be moved again this Session. If my hon. Friend is suggesting that the hon. and learned Gentleman should not move his motion but that the House should come back in the recess, albeit even if only one or two hon. Members turn up—
Mr. Maxwell-Hyslop: One.
Mr. Prior: —that is a possibility I should like to explore with him.
4.5 p.m.
Mr. Taverne: I oppose the amendment. The Leader of the House has given a totally unsatisfactory answer to the points raised from the Opposition benches. He has said that there may be marginal inconvenience in having an August election, and has said that for that reason the electors of the Berwick-upon-Tweed constituency will have to remain unrepresented until a writ is moved at the end of the Session.
The motion cannot be voted upon if the amendment is carried. Therefore, the electors of Berwick-upon-Tweed will, by the decision of the House if the motion is passed, remain unrepresented for that long period, unless the Leader of the House is willing to move the motion before the

1271
Summer Recess. He has clearly indicated that he is not willing to do so. We are, therefore, condemning—
Mr. David Waddington (Nelson and Colne): Many of us on the Government side have had some respect of the hon. and learned Gentleman, and have listened to what he has said this afternoon. But many of us are not only conscious that he was a member of an administration which on a number of occasions delayed the moving of by-election writs but also remember that he was a member of an administration which deliberately gerrymandered the whole electoral system by postponing the implementation of the Boundary Commission's reports. Does he not realise that some of us cannot forget those matters? Of course, two wrongs do not make a right, but is he really the right person to move the motion?
Mr. Taverne: It is only someone who is not tied by the pacts between the parties who is in a position to destroy this pact, or at any rate to challenge it. It is precisely because hon. Members are members of the parties that they feel themselves bound in many cases by something which has persisted over 60 years, for far too long.
It is clear that, unless the matter is raised again and again, which is a possibility, if the amendment is carried the electors in question will remain disfran-
chised. I hope that the motion and the record of those who supported it will be noted in the constituencies affected. I hope that they will note the disparity of treament between what has happened in Ripon and what is happening in Berwick-upon-Tweed.
In order that the matter shall be decided on a vote, I shall oppose the amendment.
Mr. John Wells: On a point of order, Mr. Speaker. When my right hon. Friend the Leader of the House moved his amendment I think he meant not that we should pass to the Orders of the Day and Notices of Motion but that we should move to the next business on the Order Paper, which is the Notice of Motion standing in my name. I am sure that that is what my right hon. Friend meant, but because of his amendment I shall be deprived of this most important opportunity of protecting consumers from the grave malpractices of the gas boards.
Mr. Speaker: I can set the hon. Gentleman's fears at rest at once. The phrase "Orders of the Day" is a generic term and includes the hon. Gentleman's motion.
Question put, That the amendment be made:—
The House divided: Ayes 194, Noes 25.

Division No. 192.]

AYES

[4.9 p.m.

Alison, Michael (Barkston Ash)

Clegg, Walter

Griffiths, Eldon (Bury St. Edmunds)

Allason, James (Hemel Hempstead)

Cockeram, Eric

Grylls, Michael

Archer, Jeffrey (Louth)

Cordle, John

Gummer, J. Selwyn

Astor, John

Corfield, Rt. Hn. Sir Frederick

Gurden, Harold

Atkins, Humphrey

Costain, A. P.

Hall, Miss Joan (Keighley)

Awdry, Daniel

Critchley, Julian

Hall, John (Wycombe)

Baker, Kenneth (St. Marylebone)

d'Avigdor-Goldsmid,Maj-Gen.Jack

Hall-Davis, A. G. F.

Baker, W. H. K. (Banff)

Dean, Paul

Hamilton, Michael (Salisbury)

Barber, Rt. Hn. Anthony

Deedes, Rt. Hn. W. F.

Hannam, John (Exeter)

Beamish, Col. Sir Tufton

Dixon, Piers

Harrison, Brian (Maldon)

Bell, Ronald

Elliot, Capt. Walter (Carshalton)

Harrison, Col. Sir Harwood (Eye)

Bennett, Dr. Reginald (Gosport)

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

Haselhurst, Alan

Biffen, John

Emery, Peter

Hastings, Stephen

Biggs-Davison, John

Eyre, Reginald

Havers, Sir Michael

Body, Richard

Fenner, Mrs. Peggy

Hawkins, Paul

Bowden, Andrew

Finsberg, Geoffrey (Hampstead)

Hayhoe, Barney

Bray, Ronald

Fisher, Nigel (Surbiton)

Heath, Rt. Hn. Edward

Brewis, John

Fletcher-Cooke, Charles

Higgins Terence L.

Brocklebank-Fowler, Christopher

Fookes, Miss Janet

Hiley Joseph

Bruce-Gardyne, J.

Fowler, Norman

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

Bryan, Sir Paul

Fox, Marcus

Holland, Philip

Buck, Antony

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

Holt, Miss Mary

Bullus, Sir Eric

Gibson-Watt, David

Hordern, Peter

Burden, F. A.

Gilmour, Sir John (Fife, E.)

Hornby, Richard

Butler, Adam (Bosworth)

Goodhart, Philip

Hornsby-Smith, Rt. Hn. Dame Patricia

Carlisle, Mark

Gower, Raymond

Howe, Rt. Hn. Sir Geoffrey

Cary, Sir Robert

Grant, Anthony (Harrow, C.)

Hunt, John

Channon, Paul

Gray, Hamish

Hutchison, Michael Clark

Chapman, Sydney

Green, Alan

Irvine, Bryant Godman (Rye)

Clark, William (Surrey, E.)

Grieve, Percy

James, David

Jenkin, Patrick (Woodford)

Murton, Oscar

Sinclair, Sir George

Jennings, J. C. (Burton)

Nabarro, Sir Gerald

Skeet, T. H. H.

Jessel, Toby

Neave, Airey

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

Johnson Smith, G. (E. Grinstead)

Nicholls, Sir Harmer

Speed, Keith

Jones, Arthur (Northants, S.)

Noble, Rt. Hn. Michael

Spence, John

Jopling, Michael

Normanton, Tom

Sprout, Iain

Wilkinson, John

Onslow, Cranley

Stanbrook, Ivor

Joseph, Rt. Hn. Sir Keith

Oppenheim, Mrs. Sally

Stewart-Smith, Geoffrey (Belper)

Kaberry, Sir Donald

Osborn, John

Stodart, Anthony (Edinburgh, W.)

Kellett-Bowman, Mrs. Elaine

Percival, Ian

Stokes, John

King. Tom (Bridgwater)

Peyton, Rt. Hn. John

Sutcliffe, John

Kinsey, J. R.

Pink, R. Bonner

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

Kitson, Timothy

Powell, Rt. Hn J. Enoch

Taylor, Robert (Croydon, N.W.)

Knight, Mrs. Jill

Price, David (Eastleigh)

Temple, John M.

Lamont, Norman

Prior, Rt. Fin. J. M. L.

Thomas, John Stradling (Monmouth)

Le Merchant, Spencer

Pym, Rt. Hn. Francis

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

Lewis, Kenneth (Rutland)

Raison, Timothy

Thompson, Sir Richard (Croydon, S.)

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

Ramsden, Rt. Hn. James

Tilney, John

Luce, R. N.

Rawlinson, Rt. Hn. Sir Peter

Trafford, Dr. Anthony

McAdden, Sir Stephen

Redmond, Robert

Trew Peter

MacArthur, Ian

Reed, Laurance (Bolton, E.)

Tugendhat, Christopher

McCrindle, R. A.

Rees, Peter (Dover)

Vickers, Dame Joan

McLaren, Martin

Renton, Rt. Hn. Sir David

Walker-Smith, Rt. Hn. Sir Derek

Maclean, Sir Fitzroy

Ridley, Hn. Nicholas

Wall, Patrick

Macmillan, Rt. Hn. Maurice(Farnham)

Ridsdale, Julian

Ward, Dame Irene

McNair-Wilson, Michael

Rippon, Rt.

Warren, Kenneth

Rt. Geoffrey

McNair-Wilson, Patrick (New Forest)

Roberts, Michael (Cardiff, N.)

Weatherill, Bernard

Mather, Carol

Roberts, Wyn (Conway)

White, Roger (Gravesend)

Mawby, Ray

Rodgers, Sir John (Sevenoaks)

Wiggin, Jerry

Mitchell, David (Basingstoke)

Rossi, Hugh (Hornsey)

Woodnutt, Mark

Moate, Roger

Russell, Sir Ronald

Worsley, Marcus

Monro, Hector

St. John-Stevas, Norman

Wylie, Rt. N. R.

Montgomery, Fergus

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

More, Jasper

Shelton, William (Clapham)

TELLERS FOR THE AYES:

Morgan, Geraint (Denbigh)

Shersby, Michael

Mr. Kenneth Clarke and

Morgan-Giles, Rear-Adm.

Simeons, Charles

Mr. Tim Fortescue.

NOES

Bennett, James (Glasgow, Bridgeton)

Kelley, Richard

Spearing, Nigel

Brown, Ronald (Shoreditch & F'bury)

Mackie, John

Stallard, A. W.

Cormack, Patrick

Maclennan, Robert

Steel, David

Crawshaw, Richard

Mayhew, Christopher

Thorpe, Rt. Hn. Jeremy

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

Money, Ernie

Tope, Graham

Feulds, Andrew

Mudd, David

Wilson, William (Coventry, S.)

Grimond, Rt. Hn. J.

Pardoe, John

Hughes, Mark (Durham)

Rose, Paul B.

TELLERS FOR THE NOES:

Jeger, Mrs. Lena

Smith, Cyril (Rochdale)

Mr. William Hamilton and

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

Mr. Dick Taverne.

Question accordingly agreed to.
Motion, as amended, agreed to.

CONSUMER PROTECTION (GAS AND ELECTRICAL APPLIANCES) BILL
4.19 p.m.
Mr. John Wells: I beg to move,
That leave be given to bring in a Bill to protect consumers in service agreements for the maintenance of non-portable gas and electrical domestic applianes.
It is a matter of general importance to consumers of all sorts that service agreements should be brought within consumer protection legislation. It is difficult for anyone to tell whether his car has been properly maintained, whether his watch has been properly repaired and whether his gas boiler or electric cooker
Resolved,
That this House do pass to the Orders of the day.
has been properly maintained. It is extremely difficult for consumers to tell whether they are getting value for money in such instances.
The Bill which I seek leave to bring in is a very modest measure which, despite the distaste of the House for giving Bills Second Readings on the nod, I believe is so modest that when hon. Members have heard what I have to say they may well allow it to pass through all its stages unamended and unopposed.
The Bill seeks to compel gas and electricity boards to show that a man who has reputedly gone into a house or flat to service an item of electrical or gas equipment has in fact entered the house. The Bill is as modest as that. It does not seek to say that the service has been

1275
carried out to anybody's satisfaction. It is merely a record as it were, that somebody has attended and has done something to the equipment.
I hope that the House will give the Bill a Second Reading in a fortnight's time and that it will be a first item on which we can build further consumer protection legislation for those who are using the services of gas or electricity boards. The new Director General of Fair Trading who is to be appointed can give a direction to any company or individual about its conduct, but the Director cannot give a direction to a nationalised board. It is for this reason that I have drafted the Bill in this way.
Clause 1 sets out that
"In all cases where a contract or agreement exists between a Board and a consumer providing for the servicing or maintaining of any cooker or other non-portable gas or electrical domestic appliance the servicing agent shall be obliged to provide the consumer with a certificate countersigned by that consumer or his authorised representative stating the date upon the service or maintenance was carried out."
I believe that at present a large number of gas boards and perhaps also electricity boards send in bills to members of the public for service reputedly carried out which has never been done. Therefore, this afternoon I aim to bring forward this very modest Bill. I hope that the House will give me leave to introduce it.
Question put and agreed to.
Bill ordered to be brought in by Mr. John Wells, Mr. W. H. K. Baker, Mr. John Gorst, Mr. James Scott-Hopkins, Sir George Sinclair, Mr. Edward Taylor, Sir Derek Walker-Smith, and Mr. Nicholas Winterton.

CONSUMER PROTECTION (GAS AND ELECTRICAL APPLIANCES)
Bill to protect consumers in service agreements for the maintenance of non-portable gas and electrical domestic appliances presented accordingly, and read the First time; to be read a Second time upon Friday 20th July and to be printed. [Bill 184]

WAYS AND MEANS RESOLUTIONS
Mr. Speaker: We come to the five Ways and Means Motions.
Mr. Nicholas Ridley: On a point of order, Mr. Speaker. I refer to the third and fourth motions under which, as I understand it, the House will empower the Government to pay out money to fulfil the obligations in the new clause to the Finance Bill which deals with subsidies to sugar refineries.
The purpose of the Finance Bill is to take in money and not to pay it out. If we allow the practice to pass whereby expenditure can be incurred on the Finance Bill we are indeed breaking with tradition in a considerable way. I submit that it is not in accordance with the rules of the House that a Finance Bill should be used for paying out subsidies to sugar refiners or anybody else.
Constitutionally it would be more proper for the Government to bring in a Bill dealing with sugar subsidies which could then go through its normal stages in the proper way. We should be quite wrong to agree to this change of procedure. After all, this is the Report stage of the Finance Bill. There will be no opportunity to consider the new clause in Committee. In fact, the new clause is a piece of legislation which will empower a major principle to be started—that is a new subsidy for sugar which is not so far part of our arrangements.
I therefore respectfully submit to you, Mr. Speaker, that these two motions should not be on the Order Paper and, indeed, that they are possibly out of order. I should be very grateful for your guidance.
Mr. Speaker: The hon. Member's point of order relates to the third and fourth motions. We must first deal with the first two motions.

STAMP DUTIES (STATUTORY EFFECT OF RESOLUTIONS)
Resolved,
That provision may be made for giving statutory effect to resolutions of this House relating to stamp duties.—[Mr. Patrick Jenkin.]

VALUATION OF UNQUOTED SHARES AND SECURITIES (ESTATE DUTY, CAPITAL GAINS TAX AND CORPORATION TAX)
Resolved,
That charges to estate duty, capital gains tax and corporation tax may be imposed by provisions about the valuation of shares and securities not quoted on a recognised stock exchange.—[Mr. Patrick Jenkin.]

FINANCE [MONEY] (No. 2)
Queen's Recommendation having been signified—
Motion made,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise any increase in the sums payable out of moneys provided by Parliament under section 7(2) of the European Communities Act 1972 which is attributable to any provision of the Act of the present Session for payments by the Sugar Board to sugar refiners.—[Mr. Higgins.]
4.18 p.m.
Mr. J. Enoch Powell: I wish to follow the point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and perhaps I can appropriately do it on this motion, which would be of no effect but for the two motions which follow it on the Order Paper—at any rate the fourth motion, to which I hope you will permit me also to refer:
"That notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for payments by the Sugar Board to sugar refiners."
Mr. Speaker: May I interrupt the right hon. Gentleman at this stage, because my original feeling about this is that the point put forward by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is not a matter of order but that it is definitely a matter of argument.
Mr. Powell: I have not sought to address you on a point of order, Mr. Speaker. I was speaking to a motion. I am sorry if the Question has not been proposed.
Mr. Speaker: I am obliged to the right hon. Gentleman. It is my fault.
1278
The hon. Member for Cirencester and Tewkesbury rose on a point of order. I do not think that it is a matter of order. It is a matter of argument. I intend to propose the question on the third motion.
Question proposed.
Mr. Powell: Perhaps I may now address you on the motion, Mr. Speaker, in support of my hon. Friend's contention and refer in the course of that, as I hope I am allowed to do, to the fourth motion, which follows it on the Order Paper and without which it would be impossible to give effect to the motion which you have just proposed to the House.
There is a fundamental distinction which our procedure has always drawn between Ways and Means and Supply. The Finance Bill is essentially, and with very few exceptions exclusively, a vehicle of Ways and Means. It is a Bill for imposing burdens upon the public. We have an entirely different procedure for authorising and controlling expenditure.
As I understand it, what my right hon. and hon. Friends propose to do in the present instance is, for the sake of convenience, to include what is essentially a provision for Supply in Ways and Means legislation and to include the authorisation of expenditures as well as certain other amendments which come under the fifth motion in a Finance Bill to which, as the terms of those motions openly acknowledge, it is not germane under the practice of the House. We shall no doubt be told how far there is precedent for such proceeding.
I draw the attention of the House to the extreme danger either of creating or of reinforcing such a precedent, since it enables a Government who have a Finance Bill, for instance, at a certain stage before the House to dispense with what would otherwise be the necessity of bringing in separate legislation or making provision in other legislation of the Session for other things which they wish to do and which have nothing to do with ex-and which have nothing to do with taxation.
My submission, therefore, is that it is a pernicious breach of our practice which

1279
we are being invited to authorise by these three motions taken together, and that, if it is to be done at all, both the exceptional nature of it and the fact that it is not to be drawn into a precedent should be frankly acknowledged by my right hon. and hon. Friends on the Treasury Bench.
What is more, I think that my right hon. and hon. Friends ought to be able to show quite exceptional grounds for what they are proposing, for unless there is something which distinguishes the necessity behind these motions from the ordinary necessities of government, the House may be perfectly sure that Finance Bills in the future will increasingly be hung about like Christmas trees with all sorts of adventitious matter which, though perhaps very convenient and, indeed, perhaps desired by hon. Members in all parts of the House, it is not part of our procedure to introduce in that way in Finance Bills.
I shall not detain the House long on this matter, though I regard it as of great importance for the House and one on which we should be very tender when we are considering a Finance Bill. The procedures of the House are at present under considerable challenge. Our right to grant taxation and to alter our law by the traditional procedures, and no others, has been gravely prejudiced by an Act of the previous session, and there are constant cases now in which our taxation and our law are being altered without due parliamentary procedure.
It would be improper for me to refer to that matter at great length in this context, but I mention it since it gives particular importance to the adherence and loyalty of the House to its own procedures, above all in matters of finance, and I think that it would be wrong if these motions were passed by the House without its sense of the impropriety of what we are doing being marked on this occasion and without as binding as possible an assurance being given from the Front Bench that there is no intention of the procedure being repeated.
4.33 p.m.
Mr. George Cunningham: I have great sympathy with the views just expressed by the right hon. Member for Wolverhampton, South
1280
West (Mr. Powell), though the conclusion I reach is to some extent different.
The right hon. Gentleman said, as I understood him, that because of the undesirability of this practice the Government ought at least to explain what is special or unique about the present case and justify the motion upon that basis. I would rather say that if even this once the Government propose to get the House to allow this to happen, it should follow that I, too, and any other Member, must be able to propose expenditure in a Finance Bill.
In effect, the Government are the only initiators, the only ones who can put down and have carried a motion of this kind. Therefore, if we got into the habit of proceeding in this way we should have the Government able to carry through expenditure proposals by means of a Finance Bill, but no one else, since no similar motion put down by a private Member would be voted upon. Upon that ground, I should certainly oppose the motion.
If, however, the motion is carried, as seems likely since the Government usually get what they want, it will be a sufficient breach of our normal practices, I submit, for the matter to go to the Procedure Committee for that Committee to consider whether the breach of practice in this respect is such as to introduce a new advantage for the Government vis-à-vis private Members and report to the House with a recommendation on whether the practice should ever be permissible in the future.
4.35 p.m.
Mr. Nicholas Ridley: I support what has been said on this matter, but I should point out to the hon. Member for Islington, South-West (Mr. George Cunningham) that whether expenditure be incurred by a procedure motion on a Finance Bill of this sort, backed up by a new clause. or whether it be incurred under new legislation, private Members cannot themselves move the financial motion in either case. Therefore, it is not as though we are being further denied the opportunity to move expenditure motions in this way.
The issue here is that when expenditure is proposed by new legislation there is a debate upon the principle, there

1281
are the Committee and Report stages, and there is Third Reading. In my view, if we are to subsidise sugar refiners, the question of principle as to whether that is the right thing to do should be debated by the House and we should then have the opportunity to consider and amend the details of the subsidy scheme, with a subsequent Report stage in the normal way.
I object to the bypassing of our normal processes of consideration by this technique. I think it particularly unfortunate that the motion should have been put down in time for the Report stage rather than Committee, because the House is thereby denied any opportunity to have a second look at either the detail or the principle.
I hope that the Government, however urgent the matter may be, will reconsider their decision. I hope that my right hon. Friend the Chief Secretary will consider whether it might be better to seek the approval of the House for a short Bill to be put through. For my part, I should expedite its progress, as I am sure other hon. Members would. The principle upon which this action is being taken has not yet, I believe, been explained to us. But it opens up most undesirable avenues for further expenditure to be incurred in later Finance Bills simply by an amendment or new clause on Report, and this could remove one of the basic rights of Parliament; that is, to take expenditure legislation through all its stages.
4.37 p.m.
The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I have listened with great interest and attention to what has been said on both sides about the two motions. I endorse what was said by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in response to the hon. Member for Islington, South-West (Mr. George Cunningham); namely, that under our Standing Orders only the Government can move a money resolution, whether the Bill be a Finance Bill or not. I entirely endorse what my hon. Friend said to the effect that there is, therefore, no derogation of back-bench rights occasioned on that account by what we propose.
1282
Equally, I take the point that, as a general rule, it is unusual, and may well be undesirable, for new additions to public expenditure to be sanctioned by the House by means of a clause in a Finance Bill. Without notice, I cannot cite precedents, but I believe that I am right in saying that it is by no means unknown for there to be money resolutions in connection with Finance Bills. In view of what has been said, I have instituted inquiries as to whether I have precedents to cite, but my recollection is that over the years, as well as a number of Ways and Means resolutions, there have been procedure resolutions and money resolutions on Finance Bills.
The purpose of the procedure motion on this Bill is to enable us to discuss new Clause 43, since it might be argued—it is not clear beyond a peradventure, but it might be argued—that matters relating to sugar, the sugar levy and a sugar subsidy would be outside the normal scope of a Finance Bill. For that reason, to put the matter beyond doubt, the Government thought it right to move a procedure motion to cover its inclusion in the Bill and in this way to preserve the proprieties.
Mr. Nigel Spearing: The right hon. Gentleman has explained why the Government are doing it, but he has said that he cannot, without notice, give precedents. Is he saying that, as far as he knows, there is no precedent for a procedure motion of this sort? If he is, that backs up the arguments against this procedure which hon. Members have already put. If, on the other hand, the right hon. Gentleman is saying that there is a precedent for his procedure motion, will he now give it—or does he not know?
Mr. Jenkin: There are precedents, and since I was on my feet a moment ago I have remembered that in connection with this year's Finance Bill we had a money resolution which provided for expenditure. So far as I know, the House accepted that without argument. It related to the payment out of moneys provided by Parliament of amounts relating to the repayment of tax to charities for the years 1971–72 and following. That was a question of tax repayment.

1283
We are here concerned with the on-payment of a levy which has been authorised by other legislation by the Sugar Board to the refiners. It is perhaps not appropriate that I should go into the full merits of the case, and my hon. Friend the Minister of State for Agriculture, Fisheries and Food will be dealing with the new clause when we reach it. However I can assure my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) that the cost of this subsidy to the sugar refiners does not involve a new net addition to public expenditure. It represents a part of the proceeds of the sugar levy going to the refiners instead of the Commission.
Mr. J. Bruce-Gardyne: My right hon. Friend the Chief Secretary has drawn our attention to a precedent concerning a money resolution passed at the end of the Budget debate. Surely, however, a money resolution of this kind inserted at the beginning of the Report stage is in a different category and, therefore, the precedent he has cited is not a strict precedent?
Mr. Jenkin: I cited that precedent because it was suggested at an earlier stage that there were no precedents for money resolutions on Finance Bills, and I was indicating that where it was a question of spending or passing on part of the proceeds of a tax—in that case a tax which had been paid by charities and in this case a levy on sugar—it would seem that there were precedents.
As for new clauses of whatever kind coming forward on Report, I should have thought that was by now a well established practice of Governments of all parties and that it was sometimes necessary because of the exigencies of business to introduce new matters into Bills, including Finance Bills, on Report. The clause has been on the Order Paper for some days and there will be an opportunity to debate it in a few moments. However, it would be out of order for it to be discussed and, if the House so decides, passed unless we first passed both the procedure resolution to put beyond doubt the propriety of discussing sugar in the Finance Bill, and, secondly, the money resolution to authorise payment of money
1284
to the sugar refiners in accordance with the clause.
I have taken careful note of the strictures of the House about any extension of the procedure of authorising expenditure through Finance Bills. The procedure in this case is amply justified. I understand that it was agreed with the House authorities, who were satisfied on the precedents that it was perfectly in order. I am told, for instance, that provision was made in last year's Finance Bill for public works loans and that sugar has been dealt with in three previous Finance Bills. However, we thought it right to proceed, perhaps out of an excess of caution, by having a procedure resolution as well as a money resolution, which would have been necessary anyway.
Mr. Tam Dalyell: Will the Chief Secretary amplify his remark that this was done with the agreement of the House authorities? Which House authorities?
Mr. JenkinThis is a matter which is dealt with frequently between Government Departments and the House authorities, and the Government will naturally act very closely in accordance with the views of those authorities when dealing with precedents in the House—with, I imagine, the Public Bill Office of the House.
Of course the Government take full responsibility for any action but I can assure the hon. Member that on matters of this sort we would not proceed with confidence if we had not consulted and secured the approval of the House authorities.
Mr. J. C. Jennings: Before my right hon. Friend the Chief Secretary sits down, will he agree when he is talking about the dangers of the future that this will be quoted as a precedent if the House agrees to the motions?
Mr. Jenkin: I cannot stop any future Minister or any other hon. or right hon. Member from quoting a precedent—
Mr. Jennings: That is the point.
Mr. Jenkin—but what we are doing today is in accordance with the precedent.
Question put and agreed to.
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise any increase in the sums payable out of moneys provided by Parliament under section 7(2) of the European Communities Act 1972 which is attributable to any provision of the Act of the present Session for payments by the Sugar Board to sugar refiners.

FINANCE BILL (SUGAR BOARD PAYMENTS)
Motion made, and Question proposed,
That notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for payments by the Sugar Board to sugar refiners.—[Mr. Patrick Jenkin.]
4.45 p.m.
Mr. J. Enoch Powell: I am sorry that my right hon. Friend the Chief Secretary came to the House to propose these motions without being properly armed and briefed with the precedents, if any, which justify them. It is difficult to form a view simply by listening to answers, but I am far from satisfied that the cases which he cited are on all fours with these motions and, in any case, the very wording of this and the next motion conveys, irrespective of whether there is a precedent, that something that we are here doing is a breach of our practice. I hope that my right hon. Friend will find the opportunity—for example, before the new clause is moved—to put the House in possession of the precedents which it should have before it before agreeing to this motion.
4.46 p.m.
Mr. Nigel Spearing: When I asked the right hon. Gentleman a short while ago for precedents he was able to supply them but I think that the precedents he quoted did not occur at this stage of a Bill but arose at the money resolution stage—for example after the Finance Bill had been read a Second time. If that is so, the precedents as he has quoted them do not appear to be valid.
He said that these motions concerned money being paid by the Sugar Board to refiners as a result of a levy and
1286
therefore it did not concern payments and expenditure of this House in the normal sense of the word. However, the resolution we have just passed says "money provided by Parliament." It may be that the money out of which this is paid is equivalent to moneys paid in by levy, but that money does not come from a levy fund but from the "moneys provided by Parliament". As this is an important procedural matter it should be put on the record.
The Chief Secretary to the Treasury (Mr. Patrick Jerkin): It seems that the hon. Member has misunderstood me. Of course, in terms of this House these motions relate to public expenditure. That is why we must have a money resolution. I was seeking to reassure the House, particularly my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), that because of the nature of the payment and the source from which it comes, it does not represent a net addition to public expenditure as it is understood in terms of the Public Expenditure Survey System.
I cannot confirm whether there are precedents for this happening on Report. There may be such precedents. But I can confirm that it is usual for clauses of all sorts and of great importance to be introduced either in Committee or on Report on the Finance Bill and other Bills and that the rules of the House have made provision for this for many years. It would be a novel doctrine if one were now to try to set up a new rule which said that there was a particular kind of clause which it was in some way inappropriate to bring before the House on Report.
Mr. Spearing: The right hon. Gentleman is right to say that there are new clauses on Report but I do not think that they are of this type.
The right hon. Gentleman has referred to the Select Committee on Procedure. Do I take it that, as there has been a debate, the Committee will look at this matter, or will it be necessary for hon. Members to draw it to the Committee's attention?
4.51 p.m.
Mr. Nicholas Ridley: I am not satisfied that the

1287
question of precedents takes us far in this case because here the Government are introducing a totally new topic into the Bill. Indeed, the presence of my hon. Friend the Minister of State for Agriculture, Fisheries and Food makes me wonder whether I am attending at the right time—whether we are considering the Finance Bill or an agriculture Bill. It seems odd to introduce an agriculture new clause of this sort incurring expenditure at this time.
But whatever the precedents, I do not believe that it is right in principle that the Finance Bill should be used for matters of this kind, which are basically agricultural and are undoubtedly expenditure. It is for that reason that in the previous debate I said that these provisions need detailed examination and that what the Government propose is undesirable, whatever the precedents. I should like to see us setting a precedent by not allowing this one to go through.
What is the reason for suddenly including this matter in relation to sugar at this stage of the Finance Bill? If there were a reason of obvious and overwhelming importance, no doubt the House would accept it. For example, supposing by a certain date we had to meet an obligation to the sugar refiners, Europeans or to our farmers, I am sure that in such circumstances the House would be persuaded to let it through. But we have not heard one argument for what is admitted by the Government to be a rather unusual and, indeed, possibly distasteful dose of medicine which the House is asked to swallow.
If my right hon. Friend could give us the justification for suddenly including this non-financial expenditure matter in the Bill at this late stage, the House would be more satisfied, but it would be a bad thing, whatever the precedents may have been, to confirm those precedents now unless we are convinced that, for some emergency reason or some reason of overwhelming importance, a separate Bill should not be brought in. It would be much more desirable if the Government did not proceed with the motion or with the new clause and instead introduced a short Bill to achieve whatever it is that they want to achieve.
4.54 p.m.
Mr. Patrick Jenkin: By leave of the House, I point out to the hon. Member
1288
for Acton (Mr. Spearing) that it is not for me to decide what should be recommended for Mr. Speaker's Conference or for the Select Committee on Procedure, but I will draw the matter to the attention of my right hon. Friend the Leader of the House.
I must explain to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that I deliberately eschewed earlier from becoming involved in the merits of the new clause because it seemed to me that they would be more happily dealt with on the new clause itself. But unless this motion is passed we shall be unable to discuss the new clause, and I can only advise my hon. Friend to await the arguments of my hon. Friend the Minister of State for Agriculture, Fisheries and Food, if and when we reach the clause. If my hon. Friend is not satisfied then that the new clause is necessary he has his remedies.
But perhaps I may say something by way of introduction. The matter is of importance and it is of urgency because, unless we confer upon the Sugar Board the power to make these payments to the sugar refiners, there will be very grave danger that we shall be unable to comply with what has been known as the Lancaster House Agreement on imports of sugar from sugar-producing countries of the Commonwealth. This is a cause in which the whole House takes an interest and I am sure that right hon. and hon. Members would wish to do all in their power to ensure that the Government were able to fulfil the undertakings.
As my hon. Friend the Minister of State will explain on the new clause, there would be a grave danger that we would not be able to fulfil these undertakings without the new clause. We would be unable to increase the sugar refiners' margins to the figure considered appropriate by making the payments provided for in the new clause. This is the urgency and importance of the matter, and I hope that the House will feel it right to let the new clause come forward,
Mr. J. Bruce-Gardyne: Perhaps my right hon. Friend can put the issue beyond doubt. If we do not have this new clause, what alternative method of achieving its objective is open to us—a new Bill or regulations?
Mr. Jenkin Mr. Jenkin It would require legislation. It cannot be done by order. I am sure that if it could have been done by order, it would have been, and no one would have been happier than I if it had been. We were advised that it would require legislation. There is no statutory power to make these payments and it was felt that it being a financial matter and the question of payment of money, part of the proceeds of an import levy, it was not inappropriate that it should be dealt with in the Finance Bill in this way.
Question put and agreed to.
Resolved.
That notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, and Finance Bill of the present Session may contain provision for payments by the Sugar Board to sugar refiners.

FINANCE BILLS (TRUSTEE INVESTMENTS ACT 1961)
Motion made, and Question proposed,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions for amending paragraph 10 of Part II of Schedule 1 to the Trustee Investments Act 1961 and any enactment or instrument modifying that paragraph.—[Mr. Patrick Jenkin.]
4.58 p.m.
Mr. J. Enoch Powell: I was surprised that my right hon. Friend the Chief Secretary to the Treasury moved this motion by nodding his head and chat, after the debate which has just taken place, he did not think that the House deserved even a few sentences by way of explanation of the motion and why the Government think it necessary to depart from the practice of the House in the matter of Finance Bills.
The suspicion of some of us has just been confirmed that the twisting of the
1290
procedure of the House to which we have just agreed has arisen out of our membership of the European Economic Community, but I hardly think that that can be the explanation in this case. It seems to me that the Government owe an explanation to the House of the urgency or, alternatively, of the oversight which necessitates the Trustee Investments Act 1961 being amended by a Finance Bill, contrary to the practice of the House.
4.59 p.m.
The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I assure my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) that I intended no discourtesy and I willingly respond to his request. I concede at once that the need for the new clause was due to an oversight, and perhaps when my right hon. Friend has heard the explanation he will agree that it was a pardonable oversight, by the Government of one of the consequences of our reform of corporation tax.
Perhaps I need not go into detail now except to say that without New Clause 42, which this procedure motion is intended to make possible, there would be a danger that many of the securities of water companies would no longer be within the narrower range of securities authorised by the Trustee Investments Act 1961. I shall be able later to explain the precise details. I hope that my right hon. Friend will agree that that would he an undesirable result and that it is right that we should take this step, albeit at a somewhat late stage, to avert that danger.
Question put and agreed to.
Resolved,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions for amending paragraph 10 of Part II of Schedule 1 to the Trustee Investments Act 1961 and any enactment or instrument modifying that paragraph.

ORDERS OF THE DAY

  FINANCE BILL
  As amended (in the Committee and in the Standing Committee), considered.
  5.0 p.m.
  Mr. Joel Barnett (Heywood and Roy-ton): On a point of order, Mr. Deputy Speaker. We have just heard from the Chief Secretary about the need for a particular financial motion because of the urgency involved in introducing a new clause. While I appreciate that I cannot argue about the selection of amendments and new clauses, I understand that you were not able to select the new clauses dealing with VAT. However, it would be perfectly open to the Chancellor of the Exchequer to move financial motions similar to those which we have been discussing to enable us to consider an equally urgent and important matter. There are on the Order Paper new clauses seeking to zero-rate such things as kidney machines and which are aimed at helping churches and charities—
  Mr. Deputy Speaker (Miss Harvie Anderson): Order. I think the hon. Gentleman will accept that this is not a matter for me.
  Mr. Barnett: I appreciate that. I was about to say that I was wondering whether you would be prepared to accept a manuscript financial motion. We have been discussing—
  Mr. Deputy Speaker: Order. The hon. Gentleman was, I believe, beginning to realise that that would not be possible.
  Mr. Barnett: I was about to say that I am sure it is possible that Treasury Ministers may have something to say in view of what has already been said about the urgency of this subject. One thinks of kidney machines, charities—
  Mr. Deputy Speaker: Order. I hope that Treasury Ministers will not feel so disposed because they would be out of order if they were to try to do so.
  Mr. Alexander W. Lyon: Further to that point of order, Mr. Deputy Speaker. There must be some way in
  1292
  which the House can express its resentment at the fact that the Government can come here and manage to put forward a financial motion, adopting a procedure which enables them to table another amendment, but that the House cannot use such a procedure to table amendments which are of considerable importance to many people. I am thinking particularly of the charity amendments, one of which I have tabled, which was requested by the churches to cover their activities. If the Government are so solicitous over the question of trustee investments in waterworks should they not be equally solicitous about the effect of VAT on churches?
  Mr. Deputy Speaker: Order. Much as the Chair may wish to do so, the hon. Member must realise that this is not something on which the Chair can take action. It would not be in order.
  Mr. Lyon: With respect, it would be in order for the Treasury Bench to move a procedure motion, similar to that which it has just moved, which would allow us to discuss VAT.
  Mr. Deputy Speaker: The matter is in the past tense. It would have been in order. We are now considering the Bill.
  Mr. Barnett: On a point of order, Mr. Deputy Speaker. Perhaps the Treasury Bench would prefer to adjourn while it tables a new financial motion because it has not yet said whether it would like to debate VAT. I may say that there are hon. Members on all sides of the House who wish to discuss amendments relating to such things as ambulances, kidney machines, sanitary pads—
  Mr. Deputy Speaker: Order. The Treasury Bench will have heard the hon. Gentleman's remarks. I do not see anyone making a quick response.
  Mr. Lyon: Further to that point of order, Mr. Deputy Speaker. I wonder whether you will reconsider the opinion you have given that such a motion could not be tabled now that we have embarked upon Report stages. Surely the Treasury Bench could move such a motion at any stage thus allowing us to discuss these amendments which have been ruled out of order because of the narrowness with which the Government framed the motion.
  Mr. Deputy Speaker: Order. I think that the hon. Member for York (Mr. Alexander W. Lyon) has misunderstood. I had intended to convey that he could not do so.
  Mr. Lyon: I accept that. What I am saying is that because of the narrowness of the motion the Treasury Bench is being allowed to rule out discussion on these important VAT amendments. It is therefore incumbent upon it, so that people can express their views, to introduce a motion somewhat similar to that which we have just been discussing which would enable these VAT amendments to he discussed. That surely would be in order. I am asking for your ruling whether it would be in order for the Treasury Bench to introduce a manuscript motion which would allow us to discuss the VAT amendments which have been ruled out of order by the Chair because they did not come within the financial motion.
  (1) Where the House of Commons passes a resolution which—

  (a) provides for the variation or abolition of an existing stamp duty other than estate duty; and

  5 (b) is expressed to have effect for a period stated in the resolution in accordance with the following provisions of this section; and

  (c) contains a declaration that it is expedient in the public interest that the resolution should have statutory effect under the provisions of this section;

  then, subject to subsection (3) of this section, the resolution shall for the period so stated have statutory effect as if contained in an Act of Parliament.
  10 (2) The period to be stated in a resolution is a period expressed as beginning on a date so stated and ending on, or thirty-one days or such less number of days as may be so stated after, the earliest of the dates mentioned in this subsection; and those dates are—

  15 (a) the twenty-fifth day on which, after the day the resolution is passed, the House of Commons sits without a Bill containing provisions to the same effect as the resolution being read a second time and without a Bill being amended (whether by the House or a Committee of the House or a Standing Committee) so as to include such provisions;

  20 (b) the rejection of such provisions during the passage through the House of a Bill containing them;

  (c) the dissolution or prorogation of Parliament; and

  (d) the expiration of the period of five months beginning with the day on which the resolution takes effect.

  25 (3) A resolution shall cease to have statutory effect under this section if an Act comes into operation varying or abolishing the duty.
  (4) The ending of the period for which a resolution has statutory effect under the provisions of this section shall not affect the validity of anything done during that period.—[Mr. Nott.]
  Brought up, and read the First time.
  The Minister of State, Treasury (Mr. John Nott): I beg to move, That the Clause be read a Second time.
  Mr. Deputy Speaker: With this we can also discuss the following:
  Amendment (a), in line 8, after '(3)', insert 'and (5)'.
  Amendment (b), in line 28, at end add:
  '(5) The net increase in the revenue arising from all such variation or abolition of existing
  Mr. Deputy Speaker: I think not, because notice would have to be given
  Mr. Andrew Faulds: Further to that point of order, Mr. Deputy Speaker. Would it be in order for a suggestion to be taken up by the Treasury Bench to the effect that it should move a manuscript amendment to bring into VAT exemption acquisitions by national collections since dealers are allowed to purchase these for foreign—
  Mr. Deputy Speaker: Order. I appreciate the hon. Gentleman's interest but he cannot go further on that point.

New Clause 23

  TEMPORARY STATUTORY EFFECT OF HOUSE OF COMMONS RESOLUTION AFFECTING STAMP DUTIES
  stamp duties other than estate duty shall not exceed in any one financial year the sum of £10 million'.
  Mr. Nott: This new clause and the associated Ways and Means Resolution will provide powers whereby changes in stamp duty may be given effect to by means of a Budget Resolution. I should explain that because the Provisional Collection of Tax Act does not apply to stamp duty, changes in those duties can in the normal course be given effect to

  1295
  only after the relevant Finance Bill becomes law. Suggestions have been made from time to time—and the hon. Member for Islington, South-West (Mr. George Cunningham) has been prominent in this respect—that an extension of the Provisional Collection of Tax Act should be made to cover stamp duty.
  There are serious difficulties in the way of any such extension because the essence of the arrangements under the Act is that rates of duty derived from its application are provisional in that their continuance in force depends on a series of contingencies. This gives rise to no problems in relation to taxes because the liability of the tax does not in any case have to be settled immediately and can be readjusted.
  Stamp duty must be levied in a final and certain amount on the execution of a document. This is because most dutiable instruments are documents of title which are ineffective unless appropriately stamped and also because of the severe practical difficulties which would arise if a duty once levied upon a document had to be retrospectively amended. We have, therefore, decided that the right way to solve the problem is to introduce a provision which gives a Budget Resolution bearing a stamp duty permanent statutory effect for a limited period. This is what the new clause is intended to achieve.
  Mr. Robert Sheldon: As the Minister of State pointed out, this new clause deals with the extension of the Provisional Collection of Tax Act. I agree with him and pay tribute to my hon. Friend the Member for Islington, South-West (Mr. George Cunningham) who in last year's Finance Bill drew attention to the need for this kind of provision. In the debate in Committee on 27th June my hon. Friend made a valuable contribution to this discussion.
  Our problem is that the Minister has embraced the suggestions of my hon. Friend rather too extensively. He has given the Treasury much greater power than might be thought absolutely necessary, providing an unlimited variation or abolition of stamp duties. In considering existing stamp duties my hon. Friend the Member for Islington, South-West was rightly concerned about conveyances on sales which brought in £47 million in 1971–72, but there are many
  1296
  other matters involved in which we would not like quite so large an authority to be given to the Chancellor of the Exchequer to move in this way. Our amendment seeks to limit the figure to £10 million in total.
  I am not wedded to the precise wording of the amendment. All that is necessary is that there should be some limitation of the kind which is not present in the new clause. I hope that the Minister, when he replies to this necessarily brief debate, will point out the reasons for so widely drawing the new clause and offer some hope of accepting an amendment of the kind which we suggest.
  It is unsatisfactory to introduce new clauses of this kind on Report. I am aware that precedents can be produced for all kinds of abuses of the type discussed a few moments ago, namely, the tacking on of clauses which should never be accepted in a Finance Bill. There has been over a year to discuss the simple point made by my hon. Friend the Member for Islington, South-West. Why, therefore, has it been necessary to bring this new clause forward on Report? The fact that it had to operate at so late a stage on what is substantially a simple matter, is a sign that the Treasury team does not seem to be on top of its job.
  Mr. George Cunningham (Islington-South-West): I feel rather like a dentist who has had to hold the patient down in the chair for some time and after finally managing to get the tooth out is inclined to say, "That did not hurt all that much, did it?" The Treasury Ministers have at least made a proposal which, in substance, takes care of a grievance which I raised last year. But I agree with my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that the manner in which this is being done, compared with the manner in which I originally suggested it, goes further than is needed to achieve the purpose. It is a pity that the Government have come forward with this on Report. This need not have happened, for it is well over a year since the matter was raised and the Treasury has had plenty of time to find a dozen ways of achieving the objective.
  The matter was not merely raised in Committee last year. There has also been correspondence about it between the

  1297
  Minister of State and myself since then. At the time I got an impression that I was having to nag Ministers into doing something. The difficulties they saw seemed to me to be unreal. I thought I had found a simple way of getting round the difficulties than the way which the Government are now proposing, but I am prepared to accept their legal advice.
  I was amazed to be told in a letter on 6th April, after I had asked why the Government were not coming forward with a proposal to achieve this objective, that
  "… amid the many serious preoccupations of Treasury Ministers over recent months I hope you will understand me when I suggest that by comparison the stamp duty problem is not of major importance or of immediate urgency. As such, I fear it has had to give way to matters of higher priority."
  The suggestion was that Ministers were much too busy on other matters to get their heads down to look at this one. There is no need for Ministers to get their heads down to look at it. It is a straightforward administrative problem which could have been dealt with, given proper instructions from Ministers, at an earlier stage. It should have been done in time for it to go to Committee upstairs and to be subjected to the more rigorous procedures which apply in Committee.
  5.15 p.m.
  However, the matter is being dealt with, and I welcome that. It will mean that in future when the rates of conveyance charges are effectively reduced, people will no longer have to pay £100 or £200 when they know that the Government do not want to collect the money. That was an irritating grievance which people had. Also, the administrative difficulties which that situation created for solicitors will no longer exist. The matter could have been dealt with more simply, and I should have preferred it to have been done, by extending the provisional principle rather than by saying that the resolution will have full statutory permanent effect for the period to which it relates.
  The Minister drew a distinction between stamp duty and income tax. But I invite him, as I have invited him before, to consider the comparison with import duty. When one brings whisky into the country—I cannot imagine why one would wish to do so—one pays the tax
  1298
  prevailing at the time. If the tax is later changed, no one chases the importer to charge the amended rate instead of the rate which applied when he imported it.
  I should therefore have preferred this device to have been built in to the Provisional Collection of Tax Act on a provisional basis rather than a permanent basis. I recognise that that would mean that whenever a provisional change in conveyance charges was made the House would have to exercise restraint about imposing administratively difficult retrospective changes by means of the Finance Bill on the system which has applied by means of the resolution.
  It is right that there should be some limit on the increase in revenue which might derive from this provision. I would go further and say that the provision should be used only for reductions in taxation. Although no amendment has been tabled so to provide, I hope that Governments would use the resolution procedure, at least in respect of conveyance charges, only for reductions and not for increases in the rate of tax.
  With those qualifications, I am grateful to the Government for what they have done.
  Mr. Martin McLaren: As one of the Members who supported the Ten-Minute Rule Bill introduced last Session by the hon. Member for Islington, South-West (Mr. George Cunningham), I should like to congratulate him on his success in persuading the Government largely to adopt his sensible suggestion. I am glad that the Government have accepted it and I therefore support the new clause. This is an example of what can be achieved by a pertinacious back-bencher.
  I hope, as the hon. Member hoped, that the procedure of the clause will be operated so as to reduce stamp duty and even to get rid of it altogether as an antiquated form of taxation on documents. In particular, now that we have gone into Europe, if we are serious about suggesting that London should be a leading European financial centre, it should be possible to buy securities free of tax, as other financial centres in Europe do. London should not be the only centre where stamp duty must be paid and a Government tax imposed.
  Mr. Denzil Davies: I welcome the new clause.
  My hon. Friend the Member for Islington, South-West (Mr. George Cunningham) rightly said that he would have preferred the matter to be dealt with under the Provisional Collection of Tax Act and not by turning the resolution into a semi-statute. Perhaps the Minister will say whether one reason for this is that the European Commission and the Common Market in general are very active in harmonising stamp duties. I assume that in this case the stamp duty includes capital duty and various other duties.
  Have the Government sought to introduce the clause in this form because often European directives state that they should become operative from, for instance, 1st January, whereas we could not introduce legislation normally to increase stamp duties or capital duty before a Finance Bill was put into effect and became law?
  Apart from the strictures which have been made about the need for a new clause of this kind, perhaps the Minister will say whether the clause was necessary because we are now in the Common Market. The European Communities Act provided that taxes would not be raised by means of the kind of order which it was envisaged would implement the Commission's directives. Possibly the Government could use the resolution or order to raise taxes, following on a directive of the Commission, without going through the parliamentary procedure of introducing a Finance Bill.
  Mr. Nott: With permission, I should like to reply to the points which have been made.
  I am glad that the hon. Member for Islington, South-West (Mr. George Cunningham) is satisfied with the substance of the new clause, because he was one of the principal promoters of the idea which underlines it. I am sorry that his approval is qualified. It is always disappointing, when we go out of our way to satisfy hon. Members, to find that they do not give unqualified welcomes to proposals which implement the object which they had in mind. However, we shall not hold that against the hon. Gentleman.
  1300
  On the question of timing, most of the hon. Gentleman's suggestions surrounded a suggested amendment to the Provisional Collection of Tax Act. It was that to which we looked initially as a means of overcoming the problem. I am sorry to say that we did not fully consider the matter and arrive at what we now believe to be the correct solution in time to bring forward a new clause in Committee. However, I hope that the hon. Gentleman will feel that now that we have dealt with it on Report we have met the points which concerned him.
  The hon. Member for Ashton-under-Lyne (Mr. Sheldon) raised a number of points about limiting the amount of duty which could be dealt with under a Budget resolution. His amendment would prevent the application of the Budget resolution procedure where the net increase in stamp duty effected by all the changes made by the resolution exceeded £10 million. It would permit a substantial increase to he made under one head of charge of stamp duty provided a reduction was made under another head of charge. However, that is purely a drafting point and I do not make much of it. Under the amendment, it would be possible to net off the amount involved and levy a considerable additional amount.
  The principal reason why the proposal to limit the amount is not feasible is that there is no way of telling how much a stamp duty will yield. That is the fundamental problem. Last year when we changed the rate of conveyancing duty we endeavoured to estimate how much the changes would involve, but we were rather far out. We are unable to estimate how much revenue would come in from an increase in duty or how much revenue would be lost from a decrease.
  The changes which are likely to be made by Budget resolution will be fairly simple in form, and in practice are unlikely to go beyond comparatively straightforward adjustments in the amount of duty payable. It would hardly be practicable to make a substantial change in the basis of duty or to introduce a new duty by means of a Budget resolution. We are looking to this procedure only to make variations in a duty, not major changes in the principle of a duty.
  My hon. Friend the Member for Bristol, North-West (Mr. McLaren) asked

  1301
  why we did not altogether abolish stamp duty. Some of us, when wearing other clothes, have advocated similar moves in the past. I am conscious of having said something along those lines on several occasions in debates on Finance Bills. Stamp duty yields more than £200 million—a considerable amount of revenue—and my right hon. Friend felt, reasonably, that there was no possibility of his forgoing that amount of revenue this year. It is possible to say that no Government would be able to forgo that amount of revenue in any year. I cannot go further than that.
  The hon. Member for Lanelly (Mr. Denzil Davies) spoke of the harmonisation of taxes within the Community. He served in Committee on the Finance Bill and he is therefore aware that the Bill contains clauses which bring our company duties into line with those of the Community. There are no proposals to harmonise conveyancing duty on housing. The Budget resolution would enable us to vary stamp duties, but we have already made changes to bring us into line with Community practice. In practical terms, so far as I can foresee, we would not wish to use the Budget resolution for that purpose in future.
  I hope that I have answered the questions which have been raised and that the House will agree to the clause.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 42

  TRUSTEE INVESTMENT ACT 1961—DIVIDENDS OF WATER COMPANIES
  (1) The Treasury may by order make such amendments in paragraph 10 of Part II of Schedule 1 to the Trustee Investments Act 1961 (under which a trustee's power to invest in certain securities depends on the amount of dividends paid) and in any enactment or instrument modifying that paragraph as appear to them required in consequence of the repeal by the Finance Act 1972 of the provisions relating to the deduction of income tax from distributions made by companies.

  (2) An order under this section may be varied or revoked by a subsequent order under this section, and any such order shall be made by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament.—[Mr. Patrick Jenkin.]

  Brought up, and read the First time.
  The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I beg to move, That the clause be read a Second time.
  I hope that I can introduce this clause fairly briefly despite its technicality. I outlined its purpose in the debate on the procedure resolution. Its purpose is to preserve the trustee status of certain securties issued by the statutory water companies. The need for the clause arises because of the reform of the corporation tax and in particular the ending of the system of deduction of income tax from distributions made by companies.
  In paragraph 10 of Part II of the First Schedule to the Trustee Investments Act 1961, certain securities of statutory water companies, that is to say, debentures, guaranteed or preference stock, qualified as "narrower-range investments" for the purposes of the Trustee Investments Act 1961 provided—and this is the point of the clause—that these undertakings have for ten years paid a dividend of not less than 5 per cent., or in some cases 4 per cent., on their ordinary shares.
  Of course, under the old system of corporation tax a dividend of 4 or 5 per cent. meant before the deduction of income tax—the gross dividend—but under the new system there is no deduction of income tax and a dividend is the actual cash amount going to the shareholder. It follows, therefore, that if a water company is to maintain the existing relativity in the distribution of profits between its various classes of shareholders it cannot in future meet the minimum requirements of 4 or 5 per cent on its ordinary share capital. Indeed, it would probably be quite inappropriate that it should try to do so.
  What we have to do, therefore, is to find the most appropriate equivalent in the new system of corporation tax of a 4 or 5 per cent. gross dividend under the old system. This is a complex matter and for that reason the clause gives the Treasury power by order to amend paragraph 10 of Part II of the First Schedule to the Trustee Investments Act 1961 so as to reflect the reform of the corporation tax. Any such order will be subject to the negative procedure of this House.
  I hope that I have made the position clear, and I shall be happy to answer any questions.
  5.30 p.m.
  Mr. Joel Barnett: I assume that Paragraph 10 of Part II of the First Schedule to the Trustee Investments Act 1961 to which the right hon. Gentleman referred covers also the Mersey Docks and Harbour Board. I understand from a letter sent by the Under-Secretary of State, Department of the Environment, to my hon. Friend the Member for Flint, East (Mr. Barry Jones) that the phrase "narrower-range investments" requiring advice also applies to the Mersey Docks and Harbour Board.
  Those narrower-range investments requiring advice apparently include 3½ per cent. War Loan and many other Government stocks. In the letter to which I referred the Minister says:
  "The fact of the matter is that the Government cannot accept responsibility for protecting the interests of investors at public expense."
  I do not know about that. Only recently the Chancellor of the Exchequer found a great deal of money to pay to the liquidator of Rolls-Royce to ensure that investors in that company were paid possibly 30p per share, or perhaps more. It is not true to say that at no time is the Chancellor prepared to look after the interests of investors at public expense. Nevertheless, he has not been prepared to look after the interests of the investors in the Mersey Docks and Harbour Board. Those investors have suffered a great deal. Many hon. Members must have received representations from elderly people who, through the Government's action, have lost almost all the savings they had invested for the purpose of supplementing their pensions.
  In the light of that, the Trustee Investments Act 1961 needs to be reconsidered.
  I have no doubt that those who gave advice to invest in the Mersey Docks and Harbour Board did so with the best intentions, yet the investors lost a great deal of money through the Government's failure to act.
  I ask the Chancellor to think again about the Mersey Docks and Harbour Board, the Trustee Investments Act 1961, the securities covered by it and the danger of others losing money in the same way as those who invested in the harbour board.
  Mr. Patrick Jenkin: I congratulate the hon. Member for Heywood and Royton (Mr. Joel Barnett) on having dragged into a discussion of a rather narrow and technical clause matters which have nothing to do with this provision at all. This concerns 31 statutory water companies and paragraph 10 of Part II of the First Schedule of the 1961 Act refers only to statutory water companies.
  However, the failure of the Mersey Docks and Harbour Board was not a failure of the Government but a failure of the board of the company. As for Rolls-Royce, there is no question of bailing out the shareholders. The matter involved paying a fair value for the assets of the company. The negotiations were long and difficult, but the Government are satisfied that a fair value has now been paid to the liquidator. I am very fond of the hon. Gentleman, but I must say that his remarks were wholly inapposite and bore no relation to the provision which we are discussing. Having said that, I welcome his acceptance of the clause.
  Mr. Joel Barnett: I apologise to the Chief Secretary, though I hate to think that the Chair was out of order in allowing me to speak as I did. However, I take the hon. Gentleman's point and I hope that he will consider looking at the point which I made.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 43

  PAYMENTS TO SUGAR REFINERS
  (1) If for any accounting period the revenues of a sugar refiner fall short of the total sums which are properly chargeable to revenue account for that period and the Minister of Agriculture, Fisheries and Food so directs, the Sugar Board shall make good the deficiency.

  (2) The Minister of Agriculture, Fisheries and Food may with the approval of the Treasury give directions as to the way in which the revenues of a sugar refiner are to be computed for the purposes of this section and as to the sums to be treated for those purposes as properly chargeable to revenue account.

  (3) In his section "sugar refiner" means a person other than the British Sugar Corporation Limited who carries on business in the United Kingdom as a refiner of sugar.—[Mr. Anthony Stodart.]

  Brought up, and read the First time.
  The Minister of State for Agriculture, Fisheries and Food (Mr. Anthony Stodart): I beg to move, That the clause he read a second time.
  Bearing in mind what was said a little earlier in our discussions I am sure the House will appreciate the delicacy of my position. I am aware of many precedents for new clauses on report stages on other Bills, and it is not unusual—although my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) ventured to suggest it was—for an agriculture Minister to be present on the Front Bench and indeed it has not been unusual in the past for such a Minister to be in charge of a clause on a housing Bill.
  I realise that I must deal only with the merits of the clause but I hope that I shall be allowed to say that there is a precedent for moving procedure resolutions on Report on a Finance Bill. I quote as an example the Finance (No. 2) Bill 1967. I am informed that my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) was at that time the Financial Secretary to the Treasury when every Bill carried a clause authorising advances to nationalised industries and that a procedure resolution was required each time.
  I shall try to explain to the House that the clause is necessary to provide an appropriate statutory basis for the supplementary payment to sugar refiners announced by my right hon. Friend the Minister of Agriculture in his statement to the House on 28th March. As announced in that statement, until now these payments have been made on a temporary basis from the contingencies fund. The provisions of this clause will enable my right hon. Friend to direct the refiners eligible for those payments to prepare revenue accounts in an appropriate way and to include only the necessary relevant details.
  Mr. William Baxter (West Stirling-shire): Could the Minister of State give the number of persons or companies involved and the estimated total amount?
  Mr. Stodart: I shall come to that matter in due course; I am trying to be brief.
  Once the accounts are approved and the amount by which the revenues fall
  1306
  short has been established, the Sugar Board will be directed by my right hon. Friend to make the payments to the refiners. The money paid by Parliament for this purpose will be paid to the Sugar Board under the terms of Section 7(2) of the European Communities Act 1972.
  It will be recalled that the supplementary payments are necessary because the refining margins resulting from the arrangements agreed by the Community in January have not been adequate to ensure the refining and marketing of the sugar that we are committed to take under the Commonwealth Sugar Agreement. I am certain the House will agree that it is essential that we have the wherewithal to honour an undertaking which we regard as of the highest importance.
  The payments are designed to bring the margin up to the level the Minister considers necessary to enable the Government to honour their commitments under the agreement. So far £3 million has been paid out of the contingency fund, and we estimate that a total of £11 million will be required. With that explanation, I hope that the clause wilt commend itself to the House because we believe that hon. Members on both sides of the House are sympathetic to its purpose.
  Dr. J. Dickson Mahon: I welcome the new clause. I appreciate that because of the heavy business before the House the Minister saw fit to curtail his remarks but I do not think we can leave the matter there. The Minister gave no idea how long he thought the present uncertain situation would persist. There are stories in the Press that the European Commission is taking a very dim view of the Government's announcement made on 28th March—in which announcement I heartily concur—and is pursuing the matter further, perhaps even to the point of taking legal action against the United Kingdom.
  Certainly the new clause is as wide as a clause can be. It has no time limit and it lays down no open process by which the margins should be calculated. The matter is to be computed in a way the Chancellor of the Exchequer directs. When the Queen in "Alice Through the Looking Glass" is asked for a definition, she says "Whatever I say it is, it is".

  1307
  I think I may have put that allusion a little inaccurately but, if I have, no doubt I shall be corrected when the Minister replies. The point I am making is that the clause could not be wider than it is. The second paragraph clearly leaves the matter of the computation of revenues to be decided by the Chancellor of the Exchequer. I do not object but I am merely underlining that the provision is as wide as wide can be. As I understand it, the first part of the clause leaves it to the Chancellor of the Exchequer at any time during a year to vary the monies. There is no guarantee that the refiners from one year to another or one month to another will know what the position will be.
  I have an interest in this matter because I have in my constituency the only two sugar refineries in Scotland. Those refiners are wholly dependent on the supply of cane sugar. Therefore, I speak in a rather selfish capacity since I represent 2,000 workers who directly and indirectly are involved in sugar production. I do not think I need apologise for that. Unless we are able as a country and as a Community to honour the Lancaster House agreement, we shall place in jeopardy the livelihood and wellbeing not only of the workers and their families in my constituency but of the millions of people in the developing countries of the Commonwealth who grow the cane sugar for us.
  For that reason the clause is very important, and I am glad that both sides of the House are in favour of it. At the same time the Minister should tell us how he intends to resist an attack upon the clause, if there is to be an attack, by individual Commissioners or parliamentarians in Strasbourg or even by the Commission itself.
  I hope, too, that the hon. Gentleman will give us some idea about when the power is likely not to be needed. I am thinking of the review in October of the common agricultural policy announced by the Minister of Agriculture which he said that he hoped would see some changes made. I hope that one of the changes will be the attitude of some Europeans, especially the French sugar beet producers, to our obligations to the Commonwealth.
  1308
  I hope that the Minister of State is willing to answer these two points.
  5.45 p.m.
  Mr. Nicholas Ridley: I begin by assuring my hon. Friend the Minister of State that I am delighted to see him on the Treasury Bench with Treasury Ministers. I should be much happier if Treasury Ministers were more often on the Front Bench when agriculture Bills were being discussed because their presence might achieve some economy in our affairs.
  I was not very impressed with the precedent which my hon. Friend produced. It was common practice to deal with the nationalised industries in Finance Bills but I always objected to the principle of bringing in a new subsidy of an agricultural nature as it were by a side wind. However I hope that the Government take the point and will not do it again.
  With the Lancaster House agreement having been concluded on 28th March, there was every opportunity for the Government either to have legislated separately for this or to have introduced their new clause in Committee when we should have had time to investigate the matter and to decide whether we approved of it. I do not feel as certain as the hon. Member for Greenock (Dr. Dickson Mabon) about the rightness of this. I agree that the accountability of the clause is very weak and that such matters as how much it will cost and on what basis the figure will be assessed leaves a great deal to be desired.
  I hope that my hon. Friend will say what margin we think that sugar refiners should achieve. This involves the Government in deciding what is a fair margin, as I understand it. Can my hon. Friend say what he believes to be a fair margin for a sugar refiner to achieve on his turnover or on his capital? It will be very interesting to have this figure. We shall be able to check it with the view of the Price Commission on what is a fair margin when controlling prices or that of any other food stuff under the counter-inflation policy.
  I think that there will be a tendency to say that here we are subsidising to keep up margins, whereas other parts of the Government are using the law to

  1309
  keep down the margins. We need a definition of a fair margin so that we know what it is that the Government are seeking to achieve. I imagine that this arises as a result of the protection of the beet industry brought about by the EEC which for the first time will make cane sugar less viable as it comes from overseas. If that is so, I should like to know the precise details whereby cane sugar has become uncompetitive and therefore has to be subsidised.
  I should also like to know whether the European Commission has agreed that we should now set forth on this piece of subsidy of our own sugar refiners. To say the least, it is against the spirit of the Treaty of Rome though it may not be against the law, but it seems curious that we should have taken action which can be thought of only as being hostile to the common agricultural policy. I am no great supporter of the CAP, but I believe in reforming it rather than in evading it. Perhaps my hon. Friend can give us a little more information about what is involved in relation to the Commission and our obligations under the CAP. This is a very difficult problem. I accept entirely that the desire of the French to grow too much beet and to ship it over here matched with the demands of the under-developed nations, is a difficult conundrum to sort out.
  We ought also to be given more information about the present situation. It makes me very uneasy that apparently we should be in breach of our European undertaking in bringing about this subsidy. I should much prefer my right hon. Friend the Minister to go to Brussels and to sort out the common sugar policy, which is really what is needed, so that we got an agreed solution which allowed for imports of cane sugar and a decent share of the market for European beet producers.
  At the moment I am not happy that we should let the clause go without a little more information.
  Mr. John Roper: Like the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), I welcome the clause, but I share some of his reservations about it and have one or two others of my own.
  1310
  It is important that in some legislation—and the Finance Bill is a convenient if not the appropriate place—we should ensure that we can give practical implementation to the pledges given to Commonwealth sugar-producing countries in the Lancaster House agreement and that we should maintain those commitments not only at the end of the present Commonwealth Sugar Agreement but beyond 1974 in whatever policy is developed by the Community.
  The hon. Member for Cirencester and Tewkesbury referred to the margin of the sugar refineries. What is an appropriate margin? What is appropriate to consider within the margin of a sugar refiner? How much of Mr. Cube's political advertising is it appropriate to include within the margin of a sugar refiner? I hope that we shall have some information about this because I am sure that many of my right hon. and hon. Friends would be unwilling to support a clause which merely provided Mr. Cube and his friends with more money for advertising expenditure of this sort.
  I turn now to another point raised by the hon. Member for Cirencester and Tewkesbury. I was very concerned to read in the Financial Times today the report of the Commission's investigation and the fact that Commission experts had completed a dossier against Britain for continuing to give special subsidies to its sugar refiners. According to the Financial Times, theoretically the way is clear for the Commission to tell the United Kingdom Government this week that we are in breach of the Rome Treaty. We need a clear assurance from the Minister that at the meeting of the Council of Ministers next week he will take action to ensure that we are permitted to continue what it was agreed we should be able to do under the Treaty of Accession and to import sugar from the Commonwealth. That has to be clear. I hope that we shall be told that the Minister intends to go to the meeting of the Council of Ministers early next week in order to get that clarified with the Commission and the Community as a whole.
  Finally, I should like to raise a detailed point on subsection (3) which defines a "sugar refiner" as
  "a person other than the British Sugar Corporation Limited who carries on business in the United Kingdom as a refiner of sugar."

  1311
  Presumably this refers to cane sugar producers. What happens if, for ex ample, one or more of the cane refiners merges with the British Sugar Corporation? Would the provisions of the clause permit that new body, if it continues to use the name British Sugar Corporation, the Corporation having taken over other bodies, to receive subsidies, or would it be necessary for new legislation to be introduced to permit such a merged body to receive these important payments?
  I hope that in reply the Minister will deal with that point which, although hypothetical at this stage, is none the less a matter of concern to some hon. Members.
  Mr. Baxter: This is a peculiar clause. It seems to be presenting a blank cheque to the Ministry and to the British Sugar Corporation of up to £11 million or thereabouts. That may seem a small amount to some people, but to others it is a large sum. We have not had a very satisfactory explanation.
  In introducing the clause the Government present themselves with some fundamental difficulties and questions which must and should be answered on the Floor of the House on how the subsidy for sugar will be in unison with the common agricultural policy. We are entitled to know the answer to that question. If the principle of a subsidy for, sugar is accepted by the common agricultural policy, would a subsidy for other products which may be of interest to consumers in this country be permissible under the rules and regulations which seem to apply to sugar?
  It is not right that a clause like this should be submitted to the House without more facts and figures and a better explanation so that we may understand what the Minister and the Government are trying to get at.
  I have considerable sympathy with my hon. Friend the Member for Greenock (Dr. Dickson Mabon) who rightly champions the inhabitants of that town, about 2,000 or more of whom are engaged in the refining aspects of the sugar industry, but, as he said, many more people in the underdeveloped parts of the world are also largely dependent on the sugar industry.
  1312
  Again, we should have a clear statement from the Minister of State for Agriculture, Fisheries and Food on why it is permissible for French farmers to increase their production of beet sugar without any apparent protest by the British Government.
  If, as the Government have indicated in discussions with the under-developed countries, they are concerned for their well being not only in the immediate, but the foreseeable future, we should have a better explanation of the full intent and meaning of the clause from the Minister of State.
  I apologise to my hon. Friends who wish to go on to other aspects of the Bill, but an important principle is involved. If we do not recognise it and get a proper explanation, then it will be extremely remiss on our part. However, if we get a satisfactory explanation we can follow it up on other aspects of food which are being priced out of the market for many people. A great principle is involved in the clause. I shall listen with interest to what I hope will be a more general explanation than has so far been given.
  6.0 p.m.
  Mr. Tam Dalyell: The Minister of State referred to the delicacy of his position in coming to take part in proceedings on the Finance Bill, but I am sure that all Finance Bill regulars welcome him to the debate.
  The Minister has the great good fortune to be my parliamentary neighbour. I should like to remind him of those hot months of May and June 1970 and the little matter of the sugar beet factory at Cupar. Those who know the hon. Gentleman's recent political history think that he has the most incredible nerve to bring in subsidies of £3 million now and eventually up to £11 million. It will be within the recollection of my hon. Friend the Member for Renfrew, West (Mr. Buchan), who at the time had responsibility for Scottish agriculture, that the hon. Gentleman and his hon. Friend the Member for Fife, East (Sir J. Gilmour) in particular went round Scotland during the General Election saying that the wicked Labour Government was about to close the sugar beet factory in Cupar, the only one we have,

  1313
  and that the Conservatives would maintain employment in that factory.
  Mr. J. Bruce-Gardyne: I was also very much concerned about this matter. However, in all fairness, the hon. Gentleman has made an allegation against the Minister of State which cannot be sustained. The statement that was always made on behalf of the then Conservative Opposition at the time of the General Election was that the future of the factory would be re-examined, and that re-examination, as the hon. Gentleman knows, was undertaken.
  Mr. Dalyell: The term "re-examined" is interesting. The fact is that the farmers in West Lothian and the Scottish NFU had the definite impression that "re-examined", or whatever the terminology was, meant that the sugar beet unit at Cupar would be reprieved.
  All I am asking is that some time in the near future, when it:s convenient, the Minister will go in sack cloth and ashes to the Scottish NFU, of which he was a distinguished member, and apologise for what he did in May and June 1970, because it is different from what is being done in July 1973.
  Mr. David Clark: The Opposition welcome the clause because it permits the Commonwealth Sugar Agreement to continue, at least for the time being.
  The clause does not introduce anything new, because the sugar subsidy to the refiners has taken place since 1928, when the agreed total was about £9 per ton. I understand that we are having to tackle the problem in this way because of our entry into the EEC. Some of my hon. Friends have referred to the way that the EEC is viewing our sugar industry. Will the Minister be more forthcoming on this point?
  We have a complicated sugar industry apparatus. One problem is that we divide the market. In the spring of this year all 16 of the European sugar refiners were fined £3¼ million for taking part in a cartel. Will the Minister assure us that this will not affect the British Sugar Corporation and the various sugar refiners in this country?
  Will the Minister also be more forthcoming about the use of the moneys
  1314
  arising from the clause? Are they to be used only for the refining margins? Are they to be used to help the Sugar Board, which buys sugar under the Commonwealth Sugar Agreement at a higher than open market price and then sells it to the refiners at the open market price, obviously at a loss? Will some of the money be used to support the British Sugar Board?
  We have heard a lot recently about sugar subsidies. A couple of weeks ago, at Question Time, the Prime Minister told us that there was a subsidy on sugar. It was ironic that in his speech at Sidcup on 29th June the right hon. Gentleman again referred to the subsidy on sugar, yet a day later the subsidy of £15 per ton was removed. Will the money raised under the clause be used to put back the sugar subsidy that was removed by the Government on 30th June, as a result of which, at a stroke, the price of a 2 lb. bag of sugar was put up by 11,p?
  I hope that the Minister will be a little more forthcoming and tell us something about the various refining companies. I hope, too, that he will deal with the question asked by my hon. Friend the Member for Farnworth (Mr. Roper) about a possible merger between one of the refining companies and the British Sugar Corporation. There are some rumours about such a move and we feel that the situation should be clarified, because if one of the interpretations put on the clause turns out to be true it might be found that a large part of the sugar refining industry is not able to receive Government support.
  Mr. Anthony Stodart: I shall do my best to be as forthcoming as I can. I felt that the House would wish me to make a short opening speech, following which hon. Members would have an opportunity to ask questions and I should then do my best to answer them.
  The hon. Member for Greenock (Dr. Dickson Mabon) asked about the length of time for which this money would be available. It cannot continue beyond the period of the present system, which is the end of 1974. That is the date on which the Commonwealth Sugar Agreement ends. As the hon. Gentleman knows, renegotiation is taking place and new arrangements will have to be made. I shall return to this in a moment

  1315
  I know only too well the hon. Gentleman's anxiety about his constituency. The origin of our difficulties over the refining margins is the completely different nature of the refining industries in this country and those in the Six. In the Six, the refining industries are relatively minor subsidiaries of enterprises engaged predominantly in the production of beet sugar, while in this country they are separate enterprises depending solely on refining. That means that the margin they need is essentially radically different. We accept that changes must take place in the United Kingdom industry to bring it more into line with the structure of that on the Continent, but that is a difficult thing to bring about, given that independent firms are involved.
  The reorganisation of the industry in this country has been under consideration for a long time. I hope that a conclusion will be reached in the reasonably near future, and that as a result of such reorganisation the subsidy can in due course be abandoned. We do not intend to retain it for any longer than is necessary to do what I regard as crucial, and that is to fulfil our obligations to the Commonwealth.
  My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) asked about the margin itself, as did the hon. Member for Farnworth. The level of the margin and the yield have been established after an independent investigation by a firm of accountants. The margin of £17 a ton is the minimum which the refiners would have received in 1973 as a result of the basis agreed upon following that independent investigation and embodied in an undertaking given to the Chancellor of the Exchequer by Messrs. Tate and Lyle in 1971. The margin that has been suggested by the Commission is about £12 a ton, and there is therefore a gap of £5 to be bridged in order to satisfy the commitment.
  The hon. Member for West Stirling-shire (Mr. Baxter) asked about the number of companies involved. There are four—Messrs. Tate and Lyle, Manbre and Garton, Ragus Sugars and Albion Sugars. Some of these companies have activities other than sugar refining, and I cannot emphasise too much that the payments are confined strictly to their refining activities.
  1316
  The hon. Member for Farnworth also asked what I thought was a highly practical question, namely, what would happen if, for example, the British Sugar Corporation were to become the dominant partner in the sugar industry. He asked whether we would have to re-legislate. The answer is that we should not, because the position of the corporation is safeguarded under Section 20 of the Sugar Act. That is why it is excluded on this occasion.
  Dr. Dickson Mabon: Could these advances be continued in some form under that section in order specifically to protect the cane sugar crop?
  Mr. Stodart: I should like notice of that question. I shall write to the hon. Gentleman about it. I am assured that legislation would not be necessary, and that is why the British Sugar Corporation is excluded from the clause. It is covered by what we are doing for the refiners.
  Mr. Roper: Will the hon. Gentleman examine the Sugar Act to see whether it covers the corporation with regard to cane sugar? I ask that because, as I understand it, the corporation was set up to deal with beet sugar and not cane sugar.
  Mr. Stodart: That is one point about which I inquired, because slightly unusually for me, I anticipated the question's being asked. My information is that it is covered, but I shall check the matter and let the hon. Gentleman know.
  The hon. Member for West Stirling-shire asked me to be more forthcoming about the opportunities that would arise as a result of the assurances given at Lancaster House. We expect that the Council of Ministers will shortly have to consider three important matters relating to sugar—the adherence to a new International Sugar Agreement, the arrangements to be made for a continuing supply of Commonwealth sugar to the Community after the Commonwealth Sugar Agreement terminates at the end of 1974, and the future of the Community's internal sugar régime after the present temporary quota system ends in the middle of 1975.
  These questions are all more or less inter-related, and they will have to be considered by the Community in relation to each other. We shall play a full part

  1317
  in those discussions, and our aim will he to ensure a continuing market in the Community at fair prices for the sugar producers of the developing Commonwealth, together with a fair share for our own producers of the opportunities to grow sugar beet, which I believe will be available. I do not want to go into off-the-cuff statistics, but I believe that there is a deficit on sugar in the Nine, that consumption is growing, that the Australian quota is being phased out, and that, therefore, by 1975 there should, by all our calculations, be complete room for the 1·4 million tons from the developing countries, together with a reasonable share for increased sugar beet growing in this country.
  6.15 p.m.
  But until the negotiations are complete, I am sure the House will appreciate that it is not possible to quantify precisely the size of the post-1974 beet acreage.
  Of course, I must deal with a point that was raised by at least three hon. Members—the alleged finding by the Commission that this subsidy is illegal. I have seen the report in today's Financial Times, and the Commissioners naturally know all about our subsidy, which was announced to the House and reported to them. They have been considering its compatibility with the Treaty of Rome, as it is their duty to do. They have not yet informed us of their conclusions, but we are naturally keeping in the closest touch with them.
  The Commission and our fellow member States are well aware of the connection between this subsidy and our need to honour our commitments under the Commonwealth Sugar Agreement until the end of 1974, when it finishes. The honouring of that commitment is enshrined in Protocol 17 to the Treaty of Accession and it is accepted by all the countries of the Community as an obligation on them, although in practice it falls to the United Kingdom to implement the commitment by taking the sugar. No one in the Community would wish to do anything that prevented that commitment from being fulfilled.
  Mr. John Biffen: My lion. Friend has clearly explained why there should be not the slightest shadow of
  1318
  doubt about this issue in the minds of the Commissioners. Therefore, will he say for how long the Commissioners have been considering this, and when he thinks they will reach their final conclusion?
  Mr. Stodart: It is alleged in the Press today that they have come to certain conclusions. But there will be meetings. My right hon. Friend is attending a meeting of Ministers next week at which this question will no doubt be raised. When the subject will be resolved, I cannot say, because if by any chance there were opposition in the Commission or the Community, the resolution that we are bound to show in order to fulfil the commitment, which I regard as sacrosanct, would of course make it take that much longer.
  We believe that this subsidy is completely compatible with those provisions of the Treaty of Rome that deal in national aids. But even if there were some doubt about that, given the good will that I believe exists in the Community on this matter, there are other provisions in the Treaty the use of which would enable the subsidy to continue to be paid.
  Mr. Baxter: It is surely a strange state of affairs if it is alleged in the Press—I did not see it—that agreement has been reached—[HON. MEMBERS: "No."] It has not been reached. Well, that is not so bad. If it had been reached, I should have been amazed that the Government were not aware of the fact.
  Mr. Stodart: I am sure that the hon. Member is as full of good will as he ordinarily is towards me.
  I think that I have answered the points put to me. To emphasise still more what I have said about the feelings within the Community, it is not without interest to have read in today's Guardian that the Community is determined to see this undertaking fulfilled.
  Mr. Dalyell: Will the Minister go in sackcloth and ashes or will he eat humble pie, or whatever agricultural Ministers do to show penance, on the subject of Cupar?
  Mr. Stodart: I did not wish to fall out with my next-door neighbour, but

  1319
  I thought that the hon. Members' intervention was of almost total irrelevance to the subject of this debate. I am bound to put it on record that what, at the last election, we understood to do—I feel that I shall be ruled out of order at any moment—was to examine the position, and examine it we did.
  I hope that I have answered all the questions put to me. I believe that the House has made it clear that it supports the Government's objectives, and I therefore hope that it will agree to the new clause.
  Mr. Norman Buchan: The situation now is slightly more ominous than when we started this debate. We are concerned with the future of the Commonwealth producers and I wish that the Minister had recognised the anxiety that still exists there.
  We have now been talking in terms of an agreement for the importation of Commonwealth sugar—1·4 million tons, if my figure is right—which will now be wholly supported by the existing subsidy, phasing out at the end of 1974. The Minister said that we need not worry, because good will exists in the Community, which has a net deficiency of sugar, and that the expectation is that this will continue. This, of course, is based upon two reactions of the Community. One was the famous aura à coeur and the other was the firm assurances, described in this House as "bankable" assurances. But those assurances were bankable a year ago; they have not yet been banked. That is what we are concerned about.
  I understand the problem facing this country—that it is our responsibility for the intake, but that the commitment relies now upon Community assurances. Now we are told that the Community is examining the question whether this premium is in order. The best information that the Minister has is that something is alleged in the Financial Times. If that is to be the kind of basis on which we have to accept bankable assurances for the future it is not a very good advocacy for our support of the clause.
  We support the clause because we think that it is necessary, but since the debate has ranged wide I must take the opportunity to express this anxiety. We
  1320
  still have no firm commitment of acceptance of involvement in the International Sugar Agreement, for example, by Commonwealth countries. We still have no continuing guarantee of the continuation after 1974 of the 1·4 million tons of cane sugar.
  It is not enough to argue that this will happen because of good will or a net deficiency. In 1972—certainly from 1968 to 1972—the Community was a net exporter of sugar. If the suggestion is that with the injection of the three—Denmark, Ireland and Britain—it has now ceased to be a net exporter and now has a net deficiency, this must have relevance to the gap between the amount by which they are now said to be deficient and the 1·4 million tons. If the gap of deficiency is less than the 1·4 million tons, it begins to place that importation in jeopardy. We must have an assurance upon this matter, and we have only two months in which to get it. The International Sugar Conference in Geneva will be reconvening at the end of August and going on into September, and we shall be leaving the House at the end of this month without that guarantee having been brought back from Brussels. We cannot rely on allegations, or otherwise, in the Financial Times.
  The second point that I want to emphasise was also referred to by my hon. Friend the Member for Colne Valley (Mr. David Clark). We must be perfectly clear that these are in no sense a direct consumer subsidy. They are a very necessary subsidy for the refiners, partly because of our concern about the needs of the producer countries, which are operating on a seven-year cycle. This is a very serious problem. When we deal with the question of food subsidies, the Prime Minister tells us that, after all, they have subsidies for butter, sugar and potatoes. Is this was he means? If it is, the Prime Minister is conning the British people. When he was assuring us that the food subsidies were an open question and that the Government would look at it openly and were willing to examine anything with the TUC, the consumer sugar subsidies were in the process of being scrapped, which is what we have been doing in statutory instrument after statutory instrument this year.

  1321
  I wish that the Under-Secretary, who has now enhanced and added grace to our Finance Bill discussions, would tell the Prime Minister that we shall no longer tolerate being conned by the suggestion of food subsidies at the very time when he is scrapping them.
  My next point is on the matter raised by my hon. Friend the Member for Farnworth (Mr. Roper), concerning a very important question, also alleged in the Financial Times apparently the fons et origo of information, for the House, of the possible merger between the British Sugar Corporation and the refiners.
  We are told that this will be taken care of by Section 20 of the Sugar Act. I should like more information about that. Subsectiton (3) of the new clause merely states that
  "In this section ' sugar refiners' means a person other than the British Sugar Corporation Limited."
  That seems to show an astonishing amount of trespass on the part of Section 20 of the Sugar Act if the Government have thought of this situation so closely as to cover it. This is very unexpected. I should prefer more assurance on this point.
  The other point was that the Minister said that he could not give an assurance about the post-1974 beet acreage crop. We are now in the situation that the Common Market, having been a net exporter of sugar—I should like to examine some of the figures—has a deficiency in sugar, presumably because of the injection of the three—Denmark, Ireland and Britain—but no assurance can be given about the sugar beet acreage. On the contrary, what is happening is that the beet acreage in Europe is being encouraged because of the level of prices being placed on beet, and the end price is beginning to shrink this 1·4 million tons importation. Therefore, we want assurances whether the Government are saying, "Because of the firm commitments that we as a Government, over the years and throughout the agreements of the last two years, including the Lancaster House Agreement. have given to the Commonwealth, at the Council of Ministers next week pressure for two things must take place; first, involvement in the International Sugar Agreement, and, secondly,
  1322
  the question of the end price of sugar in Europe and the sugar beet acreage within the Community as a whole." By that time it will no longer be a question of Britain alone.
  Finally, I revert to the point raised by my hon. Friend the Member for West Lothian (Mr. Dalyell). He referred to my role in this matter in relation to the Cupar factory. The Minister said that no assurances were given. I accept that they were merely re-examining the situation. First one re-examines the situation and then one kills it. That is what has happened. There is no doubt that the impression was given, and campaigning took place among farmers in Scotland—
  Mr. Dalyell: And the hon. Gentleman knows it.
  Mr. Buchan:—that the sugar beet factory would be continued. If the Minister has any doubt he should look at the vote cast by the hon. Member for Fife, East (Sir J. Gilmour) in the Scottish Grand Committee, when, on an extremely important vote, he did not vote with the Government because of his anger at the way that he had been let down. Having campaigned in his General Election campaign in connection with that factory, he was let down in respect of the Government's promises.
  The best that we can say about the promise is that the Government's attitude was the aura à coeur. If that is the firmness of aura à coeur, it is the reason for the present anxiety, too, about the Commonwealth aspect. In view of the unsatisfactory replies, perhaps we should make the gesture of voting on this matter, but we cannot, because we welcome the clause. It is necessary. I wish that I could find some other means of signifying our anxiety about the present position, while recognising that the clause must not only be supported but welcomed.
  6.30 p.m.
  Colonel Sir Tufton Beamish: I should like to take up the time of the House for only 60 seconds, to say that there is no reason whatsoever to doubt the good faith of the Community concerning the promise with regard to the 1·4 million tons.
  If there were to be any backsliding on this question, it would be of the gravest concern to all hon. Members, on

  1323
  both sides of the House. The national interest and the national honour are involved. We in the Conservative European delegation most carefully inquired about this from the Commissioner—M. Cheysson—and there is not the slightest doubt that he has this matter very much at heart.
  What a pity it is that right hon. and hon. Members of the Opposition make these speeches at Westminster and not in Strasbourg.
  Mr. William Hamling: I shall not detain the House for more than a minute. I represent a constituency in south-east London where there are people involved in the sugar refining industry. They are very concerned about this question. They would not have been satisfied with the sort of assurance that we have just had from the hon. and gallant Member for Lewes (Sir T. Beamish), or the assurance we had from the Minister.
  I do not want to add to any of the problems that the people concerned are facing. My hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) knows exactly what I have in mind. They are involved in very difficult negotiations. The firm for which they work in south-east London is very concerned. If the hon. and gallant Gentleman wants to Know how disturbed people are, he should talk to these workers and the representatives of that firm, and to sugar refiners in this country. They are extremely concerned about the future employment of thousands of people and a very profitable industry in Britain.
  Mr. Arthur Lewis: I should like to cross the "T's" and dot the "I's" of the speech of my hon. Friend the Member for Woolwich, West (Mr. Hamling). I should declare an interest. In my constituency and an adjoining constituency we have one of the largest sugar refiners in the country, and some of my constituents work there. I agree with my hon. Friend that it would be as well for some of the pro-Europeans, who spend the best part of their time in the so-called European Parliament—which is nothing more than a talking shop—to meet the workers in the factories and refineries, and some of the directors of the company, and discuss matters with them. They would find that they are not
  1324
  too keen to accept the word of Ministers at the Council of Ministers.
  Will the Minister now give an assurance that whatever discussions may ensue and whatever proposals may be made, he will consult the trade unions and the employers in the industry—and, if time permits, the House—asking for the views of those concerned, before he agrees to anything that might be detrimental to the workers in the industry? Unless he does, and if the hon. Member is so sure that everything is going to be all right, the Minister ought to be pleased to give us an assurance that he will come back, because he knows that the answer will be favourable.
  Mr. Anthony Stodart: I speak again with leave of the House. I am sure that the hon. Gentleman is aware, as is the hon. Member for Greenock (Dr. Dickson Mabon), that the Minister is having consultations with him and, I am certain, with the trade unions, and that he will undoubtedly take account of all these views.
  Mr. Lewis: The hon. Gentleman says that the Minister will take account of those views. We have had taking account—
  Mr. Speaker: Order. The hon. Member has made one speech, and he resumed his seat. I will allow a brief interjection only
  Mr. Lewis: Before the Minister sat down, I rose and was about to ask him whether he would give an assurance that whatever settlement is reached, he will, before agreeing with it, seek the approval of the unions and the employers.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 39

  DISCLOSURE OF INFORMATION FOR STATISTICAL PURPOSES
  (1) For the purpose of the compilation or maintenance by the Business Statistics Office of the Department of Trade and Industry of a central register of businesses, or for the purpose of any statistical survey conducted or to be conducted by that Office, the Commissioners or an authorised officer of the Commissioners may disclose to an authorised officer of that Office particulars of the following descriptions

  1325
  obtained or recorded by them in pursuance of Part I of the Finance Act 1972—

  (a) numbers allocated by the Commissioners on the registration of persons under that Part and reference numbers for members of a group;

  (b) names, trading styles and addresses of persons so registered or of members of groups and status and trade classifications of businesses; and

  (c) actual or estimated value of supplies.

  (2) Subject to subsection (3) below, no information obtained by virtue of this section by an officer of the Business Statistics Office may be disclosed except to an officer of a Government department (including a Northern Ireland department) for the purpose for which the information was obtained, or for a like purpose.
  (3) Subsection (2) above does not prevent the disclosure—

  (a) of any information in the form of a summary so framed as not to enable particulars to be identified as particulars relating to a particular person or to the business carried on by a particular person; or

  (b) with the consent of any person, of any information enabling particulars to be identified as particulars relating only to him or to a business carried on by him.

  (4) If any person who has obtained any information by virtue of this section discloses it in contravention of this section he shall be liable on summary conviction to a fine not exceeding £400 or on conviction on indictment to imprisonment for a term not exceeding two nears or to a fine or to both.
  (5) In this section expressions used in Part I of the Finance Act 1972 have the same meanings as in that Part and references to the Business Statistics Office of the Department of Trade and Industry include references to any Northern Ireland department carrying out similar functions.—[Mr. Anthony Grant.]
  Brought up, and read the First time.
  The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant): I beg to move, That the Clause be read a Second time.
  It is just over three years since I last participated in a Finance Bill debate. I am glad that the opportunity to do so again arises in connection with the clause, which I believe will prove advantageous to the small firms sector, for which I am particularly responsible.
  The Bolton Report made two important recommendations, which seemed at first sight to be irreconcilable. It recommended that the sector should be monitored and it drew attention to the fact that one of the most hated aspects of life for small firms was the practice of form-filling.
  1326
  We believe that in the new clause the solution to that problem has been found and that the arrangements proposed will prove a major contribution towards both objectives set out in the Bolton Report as well as being an improvement to the Government's statistical services as a whole.
  The object of the clause is to enable the Customs and Excise to pass to the Business Statistics Office the name and address, the industrial classification, the status, the VAT registration number, and the figures of annual turnover of individual businesses, obtained from the administration of VAT. The information would be passed to the BSO in computer-readable form at little cost and would be used only—I repeat, only—for statistical purposes.
  There are probably six advantages of this arrangement. First, many small firms would be exempted from statistical enquiries if the BSO knew their turnover and the nature of their business from VAT records. For example, if this VAT information had been available to the BSO before it sent out questionnaires for the 1971 census of distribution, about 100,000 small retailers could have been exempt from the census.
  Second, an up-to-date list of names and addresses of businesses with figures of turnover would permit the BSO to improve and extend the sampling systems used in its statistical enquiries. This would reduce also the burden of form-filling for individual firms.
  Third, the VAT information would enable the Department of Trade and Industry to monitor the small firms sector, as the Bolton Committee recommended, without introducing the new statistical inquiries directed to small firms, which would otherwise be necessary. We estimate that to monitor the sector in accordance with the Bolton recommendations would mean an inquiry being sent out to 20,000 firms. By the arrangements in the clause this would be avoided. Even for the normal statistical information that has to be obtained, by using this method we believe that it would be possible to relieve 50,000 wholesalers and 200,000 catering organisations and motor traders of the burden of filling up forms.
  Fourthly, if large numbers of firms could be excused from the inquiries because information was available about

  1327
  them, the BSO would need to devote less resources to following up non-respondents and would be able to publish the results of its major inquiries more quickly.
  Fifthly, the Bolton Committee recommended the development of a central register of businesses. Our investigations indicate that by far the most efficient way to create a central register and reduce the burden of statistical form filling would be for the BSO to use information obtained as a by-product of the administration of VAT.
  Sixthly, by reducing the burden of statistical form filling in this way, the arrangements would reduce costs to Government, industry and trade.
  I appreciate that some anxiety is felt on the question of confidentiality. I wish to make four short points. First, there has never been any suggestion that the BSO has been negligent in safeguarding the massive amount of information entrusted to it.
  Secondly, there is a precedent for passing revenue information. Section 58 of the Finance Act 1969 authorises disclosure by the Inland Revenue to the BSO of names and addresses, with suitable safeguards, which are also applied in this case.
  Thirdly, the BSO would use the information obtained from Customs and Excise purely for statistical purposes. The only information that would be published is aggregated information, and great care is always taken to suppress from published tables any information that could relate to individual undertakings.
  The fourth point on confidentiality is perhaps the most important one. Under the Statistics of Trade Act 1947 the BSO already has powers to obtain this information, with the exception of the VAT number. With that exception, the clause does not add to the range of information that the BSO and other statistics divisions can collect or obtain from firms under existing legislation.
  Finally, there has been widespread consultation about this proposal. The Confederation of British Industry and the National Chamber of Trade, which is very concerned with the small businessman, have publicly pronounced in favour.
  1328
  It is because I believe that the proposals in the clause will greatly alleviate the burden of the detested form filling—especially for small firms—whilst at the same time improving the quality of Government statistical services, that I confidently commend the clause to the House.
  6.45 p.m.
  Mr. Alexander W. Lyon: I know that the House is concerned to get on with its business today. Therefore, I shall detain it for only a few minutes.
  I should feel a certain unease if there were not some discussion about this subject. For many years I have been concerned about the protection of privacy. I have pondered at length on the problems that faces Government Departments in obtaining information about the person—information that could easily be distributed around Government Departments to make it more convenient to collect it on one form and distribute it to all and sundry within the Government machine. That would reduce form filling and lead to a much more efficient use of the available information.
  So far in our Government apparatus we have leaned heavily against that course, though it has much to commend it for the very reasons that the Under-Secretary used in introducing the clause. On the whole, I accept the balance that the Under-Secretary has suggested between convenience and confidentiality—that where the information can be circulated to another Department only in a form that will ensure that the particulars of individuals cannot be disclosed and that there is no way in which the information can be used to obtan a profile of any individual or firm that is sufficient safeguard.
  What worries me a little about the clause is subsection (3)(b) which contains the words:
  "with the consent of any person, of any information enabling particulars to be identified as particulars relating only to him or to a business carried on by him."
  The prefacing words—"with the consent"—rule out an intrusion into privacy; because there cannot be an intrusion to privacy which is consensual.
  In what way is the consent to be obtained? When we were considering, on the Younger Committee on Privacy,

  1329
  the question of the confidentiality of bank records—which one would think would be the most confidential thing there could be in business relationships—we found that the banks generally took a very cavalier view of the matter, namely, that if a customer had ever asked for a reference on himself to be obtained from the bank, that gave the bank carte blanche to give anybody information about the customer who had requested it. The banks did so without ascertaining on each occasion whether the customer consented. They took the view that once a customer had given his original consent it covered all kinds of information to be disclosed to anybody that the bank thought fit, rather than that the customer thought fit. We had strong words to say about that in our report.
  How is the consent to be obtained in this case? If it is to be obtained on each occasion when the information is to be disclosed to another Government Department, so that a personal profile can be obtained, I should be prepared to accept it, but I do not think for one moment that that is intended. I believe it is intended that there should be a note on a form to the effect, "I have no objection to the information going to such authorised bodies as" will perhaps be listed on the form, or are set out in some Act. That is such a general consent that there could be no check on the way in which the information is disseminated.
  On the whole, Government Departments keep a close check upon confidential information, and the number of breaches that have occurred have been relatively rare. But they occur. When they occur they are sometimes very embarrassing, as some recent cases have indicated. If we are to go further in our use of information that is obtained for one purpose and disseminated to another Government Department for another purpose, there should be a very close check upon the way in which it is done.
  I would much prefer that subsection (3)(b) were deleted and that the proviso contained in subsection (3)(a), together with subsection (1)(a) and subsection (1)(b) should be all that is required to allow the dissemination of information. Everything else would cover most of the information that was required. It would
  1330
  be a rare case indeed which would justify this extra power. I hope that the Government will reconsider this point.
  Mr. David Mitchell: I welcome the new clause. It appears to those of my hon. Friends and myself who watch the interests of smaller businesses that it is a welcome move, which will reduce the amount of form filling required in the future. Perhaps my hon. Friend will be good enough to tell us a little more about the amount of form filling that it is expected to save.
  As I understand it, the new clause will enable the Department of Trade and Industry to obtain information on the basis of which it will not thereafter have to ask firms under census and other arrangements to supply information that turns out to be quite useless. My understanding of the present situation—I do not think I am wrong—is that the Department frequently asks for information only to put it into the waste-paper basket, because a mere glance at the information is sufficient to reveal that the firm concerned is wholly ouside the scope of the inquiry being conducted.
  If the new arrangement will enable the DTI to recognise which firms can supply it with valuable information and enable it to leave alone the unfortunate firms that would otherwise be asked for information to no purpose whatever in the inquiry being carried out, it will be a most welcome addition to the Government's armoury in this respect.
  Form filling is often thought of in terms of the large company as something that someone in the office does—it is somebody's duty to fill in the return—but in a small business the working proprietor is the only person who knows the answers to the questions, and there are far more valuable things that working proprietors ought to be doing with their time than sitting down filling in unnecessary forms.
  I urge upon my right hon. and hon. Friends—I am glad to see the Chancellor of the Exchequer in his place on the Front Bench—the need to look again at the multiplicity of returns which have to be made to different Government Departments. It seems to me that the possibility opened up here of passing on a certain amount of information could well

  1331
  be extended, so that we cut down the mass of returns that have to be made in one form or another.
  For those reasons, I welcome the new clause as a first step, and I hope that it will lead to further extensions in the same direction.
  Mr. John Biffen: The hon. Member for York (Mr. Alexander W. Lyon) expressed in urbane and restrained fashion some anxiety about the disclosure of information to the Government and to public authorities. How different were the anxieties of yesteryear, so conditioned have we now become, I suppose, to the mass conveyance to the Government, in one manifestation or another, of information about our affairs.
  It might be well to read into the record on this occasion how the House felt about these things some distance back. When Mr. Potter brought in a Bill for taking and registering an annual account of the total number of people—this was on 30th March 1753—the records of the House show that Mr. William Thornton—who, I think, must have been the spiritual predecessor of the hon. Member for West Ham, North (Mr. Arthur Lewis), who has been waving around the front page of today's Evening Standard, which, I gather, carries a somewhat scarifying headline—said:
  "Sir, I was never more astonished and alarmed since I had the honour to sit in this House then I have been this day; for I did not believe that there had been any set of men, or, indeed, any individual of the human species so presumptuous and so abandoned as to make the proposal which we have lust heard …
  To what end should our number be known, except we are to be pressed into the fleet and the army, or transplanted like felons to the plantations abroad? And what purpose will it answer to know where the kingdom is crowded, and where it is thin, except we are to be driven from place to place as graziers do their cattle? If this be intended, let them brand us at once; but while they treat us like oxen and sheep, let them not insult us with the name of men.
  As to myself, I hold this project to be totally subversive of the last remains of English liberty".
  Mr. Jasper More: Hear, hear.
  Mr. Biffen: My hon. Friend says, "Hear, hear", and he may be a sceptic
  1332
  on regional policy, as Mr. William Thornton was those ages back. I must say that most of the alarms expressed by Mr. Thornton seem to have been fulfilled in one fashion or another.
  I am, however, delighted to welcome the new clause, very much on the ground expressed by my hon. Friend the Member for Basingstoke (Mr. David Mitchell), that one hopes that it will lead to a diminution of the amount of paper work that falls upon private industry, and upon the smaller companies comprising that sector in particular. Such a modest alleviation was never so needed as it is now, especially with the on-going consequences of the counter-inflation legislation that is subjecting these people to the prospect of all kinds of further domestic business bureaucracy that they would not otherwise have to undertake. I hope, therefore, that my hon. Friend the Under-Secretary of State will be fully vindicated in his assertion that there will be a substantial diminution in the amount of form filling which is required, and that the new clause will in that way fulfil some of the recommendations of the Bolton Committee.
  I hope, also, that the consultations that my hon. Friend has carried on will show themselves to have been as wide ranging, and be acknowledged to have been as wide ranging, as he claims them to have been, and as I have no doubt they were, for there is no question but that there is a growing resentment and weariness among businessmen who all too often feel themselves to be persecuted by the amount of form filling they have to undertake—and to what end?—for there is little indication that, with the growing amplitude of statistics, the quality of government is either more refined or notably more successful.
  None the less, I believe that the measure proposed by my hon. Friend the Under-Secretary deserves the widespread support that I am sure it will have in the House, though, in saying that, I feel that we ought quite properly to take account of the anxieties expressed by the hon. Member for York, even though, as I say, they were in somewhat less trenchant form than they might have been put by our predecessors were they present at this debate.
  Mr. Ridley: I understand the anxieties felt by the hon. Member for York (Mr. Alexander W. Lyon), and, if I may, I shall tell him a little story about the census of population in my constituency. I was astonished to discover that there were 221 female coal miners in my constituency. They eventually proved to be employees of the National Coal Board's research establishment there, which indeed employed 221 women. That shows how things can be falsely identified from crude statistics which purport to be impartial and reliable.
  When I had the job which my hon. Friend the Under-Secretary of State now has, I carefully investigated the matter to ensure that errors of that kind would not happen if the arrangements now proposed were made, and my only regret is that it has not fallen to me to commend the new clause to the House. None the less, I congratulate my hon. Friend on what he has done, and I am delighted that it should be he who has done it. I am convinced that the result will be not only a reduction in form filling but an improvement in the information available to business through the Business Statistics Office and, at the same time, a considerable saving of cost to public funds, which is something else we should all welcome.
  Therefore, I strongly support the clause and I congratulate all those concerned who have brought it to its present stage. May I also reinforce what my hon. Friend the Member for Basingstoke (Mr. David Mitchell) said and ask my hon. Friend the Under-Secretary to take the next necessary step and that is to knock together the heads of all those people in Government who send forms out to make them agree to one common form wherever possible because it is the duplication of demand for information which irritates the business man.
  7.0 p.m.
  Mr. Anthony Grant: I am grateful for the general welcome given to the clause, particularly the welcome by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) because it was he who started the work on this provision and if any congratulations are to be offered he should accept a substantial proportion of them.
  We are looking carefully into this point about the duplication of the forms sent
  1334
  out by Government Departments. We shall continue our work along these lines and if any hon. Member has examples from his constituents of firms or individuals who appear to have a duplication of forms, or a form which they do not understand, I should be only too delighted to look into the matter and to investigate it.
  I explained to my hon. Friend the Member for Basingstoke (Mr. David Mitchell) in my earlier remarks the large number of firms in the small firms sector which would be exempted by our proposals. For example, 100,000 retailers could have been exempted from the recent census. We hope to make much wider use of the sampling technique which in itself will eliminate many unnecessary forms.
  The hon. Member for York (Mr. Alexander W. Lyon) expressed anxieties in this respect and I hope that what I have said and what I shall now say to reinforce it will to some extent reassure him. Subsection 3(b) states that information can be passed
  "with the consent of any person"
  and I would expect that this power would be used rarely. We have sought in this clause to follow the provision which was passed by the House in almost identical terms in Section 58 of the Finance Act 1969. We have followed that wording because there may be circumstances, admittedly rare, in which it might be necessary to seek someone's consent in this respect. We would expect that consent certainly to be in writing and we should be most careful to try to avoid any of the pitfalls to which the hon. Gentleman referred. The Younger Committee found no complaint against the Business Statistic Office in this respect and I reiterate that its record has been good.
  Mr. Alexander W. Lyon: The Younger Committee could not find anything because it was not permitted to look.
  Mr. Grant: if there had been any complaints it would have been surprising if now after the many years of the work it has done they had not come to light, whether made to the Younger Committee or to Parliament. I maintain that the record of the Business Statistic

  1335
  Office is good. This information is needed for statistical not administrative purposes and therefore it will be concerned not so much with the individual as with information in the aggregate.
  I hope that the safeguards I have mentioned will reassure the House and I reiterate that we are taking no legislative powers that we do not already possess under the 1947 Act. We are simply using this procedure to minimise the burden which would otherwise be imposed if we had to operate under the previous statutes. I agree entirely with my hon. Friend the Member for Oswestry (Mr. Biffen) and with my hon. Friend the Member for Ludlow (Mr. More) who gave a splendid dissertation on freedom. I share his views entirely. The clause does not take away freedom. If anything it creates freedom—freedom from the oppressive barrage of form-filling which is such a curse to so many people.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 51

  OCCUPATION OF CHEVENING HOUSE
  Section 185 of the Taxes Act (accommodation occupied by holder of office or employment) shall not apply in relation to the occupation of Chevening House or any other premises held on the trusts of the trust instrument set out in the Schedule to the Chevening Estate Act 1959 by a person nominated in accordance with those trusts.—[Mr. Patrick Jenkin.]
  Brought up, and read the First time.
  Mr. Patrick Jenkin: I beg to move, That the clause be read a Second time.
  The purpose of the new clause is to achieve the intention of Parliament as expressed when the Chevening Estate Act 1959 went through the House by exempting the occupation of Chevening House from income tax.
  The House will have seen the Press reports of the statement made by my right hon. Friend the Chancellor of the Exchequer on Friday last, but perhaps I may very briefly rehearse the history. Before his death the late Lord Stanhope expressed the intention of giving the Chevening Estate in trust to the nation
  1336
  to be used by the Prime Minister or a Cabinet Minister or a descendant of King George VI as nominated by the Prime Minister. The estate is managed by a body of trustees in accordance with the terms of the trust. The maintenance of the estate and of Chevening House itself is a charge on the income of the trust. No public funds are involved.
  In 1959 Parliament passed the Chevening Estate Act which gave effect to the vesting deed and trust instrument relating to the estate and also conferred an exemption from Schedule A tax for land which a person is allowed to occupy having been nominated by the Prime Minister. This exemption, which was in much the same terms as that given to Chequers by the Chequers Estate Act 1917, was passed with all-party approval. The late Mr. Hugh Gaitskell said:
  "I have great pleasure in supporting the Bill, the character and purpose of which have been clearly explained by the Lord Privy Seal."—[OFFICIAL REPORT, 19th June 1959; Vol. 607, c. 789.]
  The Lord Privy Seal was my right hon. Friend Lord Butler. However, Schedule A tax was abolished in 1963 amid much rejoicing but at the same time what is now Section 185 of the Taxes Act was enacted. This charged Schedule E tax on the annual value of any premises which any one is permitted to occupy by reason of holding an office or employment. Through what we recognise was an oversight, the Finance Act 1963 did not confer the necessary exemption from this charge in respect of the occupation of Chevening.
  Mr. George Cunningham: Will the right hon. Gentleman clear up one point? Is it the case that before 1963 no Schedule E tax was payable in respect of the occupation of accommodation in that category?
  Mr. Jenkin: That is true, but before 1963 Schedule A tax was payable in respect of the occupation of property and when Schedule A tax was abolished it was necessary to raise a new charge under Schedule E in respect of property occupied by reason of holding an office or employment. The abolition of Schedule A tax was not intended to relieve persons occupying premises by reason of their employment.

  1337
  It was Parliament's intention that the same exemption should apply to the occupant of Chevening as applies and has always applied to the occupant of Chequers. The purpose of the new clause is to ensure that the exemption should be effective. I hope that, as in 1959, this will have the support of the whole House.
  I would only add that my right hon. Friend the Chancellor, who was recently nominated by the Prime Minister to be the first occupant of Chevening—the late Lord Stanhope died in August 1967—announced on Friday that he had asked the Prime Minister to withdraw the nomination because with his responsibility for the tax system my right hon. Friend did not feel it proper that he should benefit from the exemption conferred by the new clause.
  Mr. Dalyell: Is the Government's view that the Chancellor of the Exchequer needs some kind of country establishment like this? Surely this should be taken into account irrespective of what might be the personal views in the Treasury. Secondly, there is a widespread rumour that the house might go to a descendent of King George VI. Is that correct?
  Mr. George Cunningham: The right hon. Gentleman put the new clause forward as a rather technical matter raising no broad issues. He is doing a disservice to the subject if he restricts it so much. The whole business raises broad and, what is more important, sensitive issues. The provision of facilities having a monetary value without their being subject to tax must be sensitive when the House is considering conferring those facilities upon a Member of the House. We have to fall over backwards to ensure that we are above reproach in that respect.
  I recognise that the Chancellor of the Exchequer has fallen over backwards to ensure that he personally is not, in respect of the immediate future, subject to any accusation for the enjoyment of Chevening. I think that he has probably gone too far, as my hon. Friend the Member for West Lothian (Mr. Dalyell) implied. Either it is right that a Minister should enjoy Chevening without having to pay tax on it, in which case it does not matter which Minister introduces new Clause 51 or is currently responsible for taxation
  1338
  policy, or it is not right, in which case no Minister should enjoy it whether he is a taxation Minister or not.
  If the new clause goes through and some of the doubts I express are thought not to be of value, then the Chancellor and the Government should re-think the matter because of all people who need a nice quiet place in which to think the Chancellor of the Exchequer—I am not speaking in personal terms—probably needs it as much as anyone in his official capacity.
  But I have grave doubts about providing these facilities without their being subject to the normal law of the land, and that it what is involved here. I do not think that it is a sensible use of Chevening to make it available to an individual Minister. It was a generous gift by Lord Stanhope, for which everyone, quite rightly, has expressed gratitude. But is it right that one Minister for a very restricted part of the week or the month should have the use of this vast house and vast estate? In the country's interests, if the country has the use of the place we have to ask, "Is this the use we want to make of it?"
  In deciding that, one must naturally take account of what Lord Stanhope wished. He gave it to the nation for a certain purpose, but in so far as discretion is left to the Government in the use of the house I hope that full account will be taken of the fact that it may not be the best thing to do to say to one Minister, "You may for a small part of the month have the use of this enormous estate". It will continue to be made available to the public, as I understand it, but it could be available perhaps to the public more generally than would be the case if it were handed to the Chancellor or anyone else in the way that Chequers is handed to the Prime Minister.
  I have a personal interest in this because in May I asked questions about the taxation of Ministers' houses generally. The Daily Express accused me of trying to do down the Chancellor of the Exchequer. That was not my intention in making comparison between taxation and Chevening, but the two things are related.
  At least eight Ministers are currently enjoying an official residence—or at least a residence which they occupy by

  1339
  reason of their office and upon which, as far as I can make out, none of them pays tax. These include No. 10 Downing Street, No. 11 Downing Street, No. 1 Carlton Gardens—residence of the Foreign Secretary—Bute House, Edinburgh—residence of the Secretary of State for Scotland—three flats in Admiralty House, one said to be a pied-à-terre, although I am not sure how the Government Chief Whip would regard that, and a flat in the House of Lords occupied by the Lord Chancellor. Then there are Chequers, Dorneywood and Chevening, which fall into a rather different category because they are trust owned and managed.
  7.15 p.m.
  Then there is Mr. Speaker's residence in this building and also the residence of the Serjeant at Arms in this building. Both of them raise precisely the same taxation point. I have put down Questions about these matters and have received some information. The information concerning the enjoyment of Ministerial houses which I have mentioned is relevant background to the consideration of new Clause 51.
  On 24th May, I was told by the Parliamentary Secretary to the Civil Service Department, when I asked which Ministers were currently provided with tax-free residences as part of their remuneration, that the answer was, "None ", because it was held that the occupation of these residences
  "… is necessary for the performance of their duties and is not treated for tax purposes as an addition to salaries."—[OFFICIAL REPORT, 24th May 1973; Vol. 857, c. 134.]
  That is in conflict with the presentation of these matters in our Estimates, where the provision of an official residence is noted at the side of the salary payable to a Minister. On 21st May, the Minister of State, Treasury, told me the general principle upon which tax was not payable upon these residences. He said:
  "In general, where an employee is required for the proper performance of his duties to live in accommodation provided for him by his employer he ranks for tax purposes as the representative occupier of the accommodation"—
  whatever that might mean—
  "and is not taxable on its value. Ministers of the Crown are dealt with under the same rule."—[OFFICIAL REPORT, 21st May 1973; Vol. 857, c. 24.]
  I then pursued the matter in correspondence and I am sorry to say that, although I wrote to the Minister of State, Treasury, on 25th May asking him to brief me upon the general principles of taxation policy involved here, I still await his official answer about six weeks later, when that answer is relevant to new Clause 51. It would have helped me if I could have had his reply available to me for the debate. But I have had from the Parliamentary Secretary to the Civil Service Department a longish letter some points of which are deeply disturbing. First, it is said that the so-called pied-à-terre in Admiralty House—
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. I am listening carefully and I understand that the hon. Gentleman requires to make some points in order to make a background for his attack on new Clause 51, but he is not entitled to go into detail on various other residences which are not mentioned and are not concerned with the new clause. What he has done to show the background so far has been a border line case of order. If he goes any further, I shall have to stop him as going beyond the terms of the new clause.
  Mr. Cunningham: I accept that, Sir Robert. I do not intend to go much further into that line. But I point out that what we are doing here is to exempt Chevening from the normal operation of Section 185 of the Income and Corporation Taxes Act 1970. In considering whether it is right that we should do so, I am suggesting that it is right that we should look at the extent to which that provision applies to other residences occupied by Ministers. I assure you that I have no intention of going into detail on the residences occupied by Ministers, except to say that two of the residences I referred to are occupied by Ministers but not in their Ministerial capacity. These are the pied-à-terre for the Government Chief Whip in Admiralty House and the flat occupied by the Lord Chancellor in the House of Lords. I wonder whether it is possible for a Minister to occupy absolutely, as a result of the occupation of an office, accommodation which he does not occupy in his Ministerial capacity.
  Mr. Dalyell: Would my hon. Friend not agree that the paramount consideration in all of these discussions is that

  1341
  senior Ministers of the Crown of whatever party should be given the facilities to do their jobs properly?
  Mr. Deputy Speaker: Order. I think that the argument which the hon. Gentleman is using now on this clause is not a fair one. He ought not to pursue that line.
  Mr. Cunningham: In answer to my hon. Friend the Member for West Lothian (Mr. Dalyell) I would agree that that is a paramount consideration which I support as strongly as he does. It is also important that the taxation of Minister's residences should be on the same basis as the taxation of the residences of other citizens. We have to ensure that that is the case.
  If we do not allow the director of a company or the caretaker of a block of council flats to enjoy this facility tax free, except on the basis set out in the Income and Corporation Taxes Act 1970, we must ensure that the same rule applies to Ministers. Since you do not want me to do so, Mr. Deputy Speaker, I will not go on with the other houses, other than Chevening. It is necessary for this matter to be properly gone into.
  My impression, from looking into it, is that the question of taxation of Minister's houses has not been properly gone into in the past. It has been accepted too readily that these ought to be tax free. There has, for example, been a reference to the Select Committees of 1920 and 1930 which made some passing reference to the subject. On no occasion was it suggested by those Select Committees that the treatment of Ministerial houses should in any way be different from the treatment of such accommodation when occupied by other citizens. In any case, the views of a Select Committee do not constitute the law of the land.
  What I am suggesting is that the treatment of Ministerial houses other than Chevening, and the treatment of Chevening if this clause is approved, is and will be different from that set out for the generality of people in the 1970 Act. The Income and Corporation Taxes Act 1970 says quite clearly that this is the general law of the land. Section 185(1) says:
  "Where any premises in the United Kingdom are available to the occupier by reason
  1342
  of his wife's holding an office or employment, and—

  (a) he pays no rent for the premises, or

  (b) the rent which he pays for them is less than the annual value of the premises … the holder of the office or employment shall be treated for the purpose of tax under Schedule E as being in receipt (in addition to any other emoluments) of emoluments at an annual rate equal to the annual value of the premises …"

  That is the law of the land and we are saying that it is to apply to Chevening. We are saying that at a time when it does not apply to eight or 11 Ministerially-occupied residences. At the least it is a sensitive point worth looking at.
  Section 185 goes on to say something of great interest in subsection (2). It says:
  "Where the occupier of premises holds them … by the leave of the person from whom he or his wife holds an office or employment, or any other person with whom that person is within the terms of section 533 of this Act, connected, the premises shall be conclusively presumed to be available to him by reason of his or his wife's holding the office or employment."
  What I am suggesting is that but for this new clause there is no doubt that Chevening would be taxable upon whoever occupied it. That has been accepted. What we are doing is to say that whoever does occupy it is different. We are saying that it is different for a Minister but we will not say that it is different for the company director or the caretaker of the council flats. We are saying that it is different for the Chancellor. At the least that is an exceedingly sensitive point to put forward and the definition of a connected person in the Act is such that I do not think it could be held that the Prime Minister and the Chancellor were disconnected for the purposes of the Act.
  Mr. Dalyell: Is my hon. Friend aware that some of us think that it is a bit different for senior Ministers? Has my hon. Friend read the biography of the late Iain Macleod written by the hon. Member for Surbiton (Mr. Nigel Fisher) which gives the most appalling picture of what Mrs. Macleod had to do when entertaining many people from the colonies and Commonwealth? I suspect that a modern Chancellor has to entertain as many people as the Foreign Secretary.
  Mr. Cunningham: With respect to my hon. Friend that is not the point. Ministers should be provided with the remuneration and the facilities needed to

  1343
  do their jobs. I agree that they are not so provided at the moment.
  Mr. Deputy Speaker: Order. I do not think we ought to get involved too much in the argument about whether Ministers are given enough money to do their jobs. We could argue about that for a long time. The House will understand exactly what the hon. Member meant when he referred to the late Iain Macleod. But I do not think we can go into that now. We must try to keep strictly to the terms of the new clause.
  Mr. Cunningham: I was not intending to go into it but since the House is being asked to consider this clause and since the point has been advanced in support of it, I hope that I may be allowed to say that I do not think that this is a persuasive point. Of course Ministers must have the facilities to do their job. But we must do it according to the methods which apply to the rest of the country. We cannot say that we will not pay Ministers as much as they should be paid, which might be the view of my hon. Friend, but that we will exempt them from taxation in respect of the facilities which they enjoy. That is what is involved here.
  If a trust were set up to provide Lord Stokes with the enjoyment of a residence it would not be exempt from tax. He would be taxable upon it. If we want to say, in respect of the Chancellor or anyone else, that he needs extra facilities, we must meet the point by giving him extra money by which he can procure them, not by treating him differently for tax purposes from anyone else.
  I hope that I have said enough to suggest that there is something here which needs to be looked at. My main objection to this clause is not so much upon the taxation point. I do not think that it is a sensible use of Chevening to give it to any Minister. I believe that the broader issues that I have attempted, not altogether successfully, to raise need to be examined. I look forward with interest and impatience to a reply on this issue and I suspect it will be discovered that the manner in which Ministerial residences have been treated for tax purposes up to now is improper and perhaps illegal. That also applies to some of the Officers of the House. At least there is a question mark that needs
  1344
  to be resolved. When we are proposing to provide tax-free facilities to a Minister this is as good an occasion as any on which to raise these broader issues.
  7.30 p.m.
  Mr. Robert Cooke: I do not want to follow the remarks of the hon. Member for Islington, South-West (Mr. George Cunningham) through all the red books from which he has sought to quote. I shall make one or two observations on what I see to be the function of Chevening and Chequers. In a sense, they are public places. Although they will be enjoyed for the time being by Ministers of the Crown they will not be enjoyed by them as a private individual might, if he chose, exclusively to enjoy a great country house in the middle of a large landed estate.
  In passing, I would say that the number of people who own such places and keep them shut away from human gaze is very few. Most country houses in the middle of large estates are easily accessible to the public and at present shared by a great many people. The Chancellor, or whoever is to live at Chevening, will decide how he is to use the house. I am sure that it will be used for all manner of purposes other than simply a private residence in which the Minister of the day can shut himself away. We have only to read the newspapers to see the multifarious uses to which such places as Chequers are put, under sensible Prime Ministers. They are shared with a great number of people from this country and abroad.
  The hon. Gentleman made great sport of the suggestion that Ministers may in some way be enjoying a tax-free advantage. I do not object to the situation in which we under-pay our Ministers—and we certainly do that—and they are able to do the job we ask them to do because we provide certain facilities for them. That is what some of these houses represent.
  The hon. Gentleman twice returned to the subject of Officers of the House. I do not wish to stray out of order, but we must recognise that those who are entitled to a few rooms—and they are only a few rooms—in this Palace in order properly to discharge their duties can hardly be complained against. It must be realised that a vast amount of Mr.

  1345
  Speaker's residence is shared by hon. Members and that great chunks of it have been put to other use. Further, the Serjeant at Arms now occupies a residence that is only a third of its former size, and he shares that with a colleague. Part of this residence has also been chopped off to be used for other purposes. The hon. Gentleman is making a great deal of fuss over what are very small matters.
  Mr. George Cunningham: I hoped I had made it clear that I am not remotely suggesting that these facilities should not be available to the occupant. My contention is that they should be made available to the occupants according to the law that applies to everyone else, and that may mean a shuffling of income and taxation eligibility. I am not suggesting that Mr. Speaker should live in a flat across the road—
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. We must drop this point and keep to the terms of the new clause, about Chevening House, otherwise there will be no end to the discussion.
  Mr. Cooke: I have no wish to prolong the argument on this matter, but it must be put into proportion. I hope that I have put into proportion a matter which Opposition members have got out of proportion.
  Mr. Denis Healey: The House might feel that I was being a little presumptuous if I attempted to declare an interest in speaking in this debate, because there is no guarantee that a person who holds a responsibility in the Shadow Cabinet will continue to hold that responsibility, or any other responsibility, when the Opposition are in government.
  I recall what Sir Winston Churchill said at the meeting of the Conservative Shadow Cabinet that took place in 1952 just before the General Election, which he was rightly confident of winning. He said: "Well gentlemen, this is the last time we shall all meet together—some of us."
  I share the view of some of my hon. Friends that the Chancellor has, if anything, been over-scrupulous in renouncing any claim to the occupation of Chevening House—assuming that this
  1346
  House decides to accept the clause—but I very much respect the scruples he has shown.
  The hon. Member for Islington, South-West (Mr. George Cunningham) has raised a number of issues that deserve consideration, though perhaps not in the context of the new clause. I am sure that he would be the first to recognise that Ministers are often required to live in official residences when in fact, that is the last thing they want to do. I know of several occupants of No. 11, Downing Street who would have much preferred to live in their own homes. When I had to live in Admiralty House I found that in many respects it was less agreeable than my own home.
  I do not believe that Ministers who are required to live in certain places in order adequately to perform their duties—and this certainly applies to residences in Whitehall—are in a different position from hon. Members of this House are provided with offices in the House of Commons, free of rent and of all charges, on the understanding that they use the offices wholly, exclusively and necessarily in the pursuit of their occupation as Members of Parliament. In this respect, the difference in principle between the occupation of a Government residence by a Minister and the occupation of an office in this building by a member of Parliament is not essentially dissimilar.
  Problems arise to the extent that a weekend residence may occasionally be used for purposes that have nothing directly to do with the Minister's departmental duties. But if a Minister were expected to recompense the Exchequer for that part of the occupation of the residence which was purely on his personal account—and my hon. Friend was generous in recognising this point—he would require additional recompense to be able to fulfil that obligation.
  The Government should perhaps consider that side of the problem on another occasion, but the House would be wise to accept the new clause, because it would then be clearly acting in accordance with the wishes of the House when it passed the Act dealing with the Chevening Estate. It would make possible the occupation of Chevening in the

  1347
  same way as Chequers is occupied. I hope that the House will return on another occasion to the important issue raised by my hon. Friend.
  Mr. Patrick Jenkin: With leave, may I say that I do not wish to follow the paths which the hon. Member for Islington, South-West (Mr. George Cunningham) trod. I seek to take issue with him on only two or three points where, frankly, he got the matter wrong. He gave me the impression that he does not understand—and I think that he admitted as much—the principle of representative occupation. I am talking not merely about Chevening or Chequers but about other matters.
  A representative occupier is a person who occupies premises on behalf of his employer. He occupies them not individually or personally but as a representative of his employer. That is the case in respect of the Whitehall residences of Ministers. The law is exactly the same for Ministers as it is for everybody else. It applies to lock-keepers and park-keepers and to caretakers in council blocks. A Minister is a person who represents his employer and lives in his employer's premises for the purposes of his employment. There is no charge to tax, and exactly the same rule applies to the generality of taxpayers.
  The hon. Member for Islington, South-West said that the same rules should apply to Chequers and Chevening. If they did, no Prime Minister would ever occupy Chequers again unless, as the right hon. Member for Leeds, East (Mr. Healey) said, a substantial addition were made to his salary to enable him to afford the expenses of upkeep, staffing, and so on. Therefore, the House accepted in 1917 in relation to Chequers and in 1959 in relation to Chevening that residences of this kind, whether available for Ministers or available, under the Chevening Trust, to other people who might be eligible, should be enjoyed tax free. All that we are doing in the new Clause is making the technical change necessary to achieve this under the present law.
  The hon. Member for Islington, South-West suggested that the rules which applied to Ministers were "improper and illegal". I assure him that that is quite untrue and has no substance. The same
  1348
  rules apply to Ministers generally, apart from the Chequers and Chevening exceptions, as apply to the generality of taxpayers. The hon. Gentleman said that the situation was different for the Chancellor of the Exchequer. That must not be allowed to remain on the record uncorrected. A number of hon. Members said that my right hon. Friend was being over-scrupulous. Nothing is different for the Chancellor of the Exchequer. The hon. Gentleman was quite wrong about the point which he made.
  The hon. Member for West Lothian (Mr. Dalyell) asked whether a house for the Chancellor of the Exchequer was necessary. That clearly must rest with the Prime Minister, as must his question in connection with the members of the Royal Family. Such matters are for the Prime Minister to determine under the terms of the Chevening Estate Trust.
  I am grateful for what the right hon. Member for Leeds, East (Mr. Healey) said. He made a number of large assumptions, presumptive or prospective, in declaring his interest. He assumed not only his appointment but the possibility that he might even again sit on this side of the House.
  Mr. Healey: Quite the reverse.
  Mr. Jenkin: However, I am grateful for the right hon. Gentleman's support for the new Clause.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 50

  DETERMINATION FOR ESTATE DUTY AND CAPITAL GAINS TAX OF OPEN MARKET PRICE OF UNQUOTED SHARES AND SECURITIES
  (1) The provisions of subsection (3) below shall have effect in any case where, in relation to an asset to which this section applies, there falls to be determined:

  (a) by virtue of section 7(5) of the Finance Act 1894 (principal value for purposes of estate duty) the price which, in the opinion of the Commissioners, property consisting of the asset would fetch if sold in the open market; or

  (b) by virtue of section 44(1) of the Finance Act 1965 (market value for purposes of tax on chargeable gains) the price which

  1349
  the asset might reasonably be expected to fetch on a sale in the open market.

  (2) The assets to which this section applies are shares and securities which are not quoted on a recognised stock exchange, within the meaning of the Corporation Tax Acts, at the time as at which their principal value for the purposes of estate duty or their market value for the purposes of tax on chargeable gains falls to be determined.
  (3) For the purposes of a determination falling within subsection (1) above, it shall be assumed that, in the open market which is postulated for the purposes of that determination, there is available to any prospective purchaser of the asset in question all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by private treaty and at arm's length.
  (4) The provisions of Schedule (market value of unquoted shares and securities) to this Act shall have effect with respect to the application of this section.
  (5) This section and Schedule (market value of unquoted shares and securities) to this Act:

  (a) so far as they relate to estate duty, shall be construed as one with the Finance Act 1894; and

  (b) so far as they relate to capital gains tax, shall be construed as one with Part III of the Finance Act 1965.—[Mr. Nott.]

  Brought up, and read the First time.
  Mr. Nod: I beg to move, That the Clause be read a Second time.
  Mr. Deputy Speaker: We can discuss at the same time new Clause No. 18—Realistic basis of valuation for unquoted companies—capital gains tax—and new Clause No. 19—Realistic basis of valuation for unquoted companies—estate duty—both in the name of the hon. Member for Truro (Mr. Dixon), and Amendment No. 50, which is the new Schedule entitled
  "Market value of unquoted shares and securities"
  in the name of the Chancellor of the Exchequer.
  Mr. Nott: The new clause is concerned with the valuation of unquoted shares and securities for the purpose of estate duty and capital gains tax. In effect, it provides that unpublished information can be taken into account in arriving at the valuation. It thus ensures a more realistic basis of valuation than that which has obtained since the decision in the House of Lords in the Lynall case, the effect of which was to exclude unpublished information.
  1350
  Although in theory the exclusion of unpublished information in valuing unquoted shares could work either way, the effect in practice is normally to reduce value. Thus, the Lynall decision has meant that, for estate duty, duty is being paid on a lower value than before that decision, but for capital gains tax the Lynall decision imposed severe extra tax burdens on individual taxpayers. The Lynall decision, when applied to the determination of a value as at April 1965, could considerably reduce that value and correspondingly increase the amount on which capital gains tax is payable.
  The new rule, which will provide a more realistic basis of valuation, is in subsection (3) of the new clause. Its effect is to assume that certain information is to be available in arriving at the valuation. The subsection provides that it shall be assumed that there is available to any prospective purchaser of the asset all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by a private treaty and at arm's length.
  My hon. Friend the Member for Truro has tabled two new clauses on this general subject. I believe that the Government's new clause meets the objective he has in mind.
  Mr. Piers Dixon: The Government's new clause covers, in much more expert language, the points which I attempted to cover in my two new clauses. I therefore commend my hon. Friend the Minister of State on having introduced it
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

New Clause 2

  PERQUISITES OF OFFICE—ANTI-TAX AVOIDANCE
  In section 200 of the Income and Corporation Taxes Act 1970 at end add—
  "The said return shall include all expenses incurred in the United Kingdom, its colonies, Commonwealth or non-Commonwealth countries"'.—[Mr. Healey.]
  Brought up, and read the First time.
  7.45 p.m.
  Mr. Healey: I beg to move, That the clause be read a Second time.
  Mr. Deputy Speaker: It will be convenient also to discuss new Clause No. 54—Return of income not remitted to the United Kingdom.
  Mr. Healey: I was deeply moved by the appeal of the Chancellor of the Exchequer yesterday to me to do my best to help him in the extremities into which his policies have plunged him. These new clauses have no other purpose than that in mind.
  We have tabled the clauses, among a number of similar clauses, to assist the Prime Minister in improving what he called the unpleasant and unacceptable face of capitalism. In view of the Prime Minister's views and the talks into which the Chancellor of the Exchequer is shortly to enter with the TUC, I am astonished that the Chancellor of the Exchequer did not table these clauses himself.
  I am particularly surprised—in view of the exchanges we had when the Chancellor took extraordinary care to introduce agricultural matters into the Report stage of the Finance Bill by putting down resolutions for which, so far as we know, there is no direct precedent—that he did not at least put down a Money Resolution to cover the question of tax avoidance, to which the new clauses are directed, so that the House would have a chance to take action to improve this unpleasant and unacceptable face. If the House accepts the two clauses which have been selected—and we know that it is not possible to discuss clauses which involve the raising of additional taxation—although we shall not be doing a great deal about the face we shall at least be cleaning up a little the lower right eyelid.
  It is difficult to exaggerate the importance of immediate action to deal with the type of tax avoidance which was revealed during the so-called Lonrho affair. The whole of the Government's economic strategy depends upon the support, or at least the acquiescence, of ordinary working people in some form of prices and incomes policy when phase 2 comes to an end in the autumn. No one knows better than does the Chancellor how difficult it will be now to get that support.
  The latest figures published by the Government show that there was no rise
  1352
  in real disposable income after tax during the first quarter of this year. If there was no rise overall, for millions there must have been a fall in real income. Prices are now rocketing as they have done at no time earlier during the so-called prices and incomes policy. This rocketing of prices is further boosted by the 18 per cent. devaluation over which the Chancellor has presided. I challenge him to deny that over the whole year since phase 1 of his Prices and Incomes Policy began last November it is scarcely conceivable that the rise in earnings will have been higher than the rise in the cost of living, although this is a period during which—as the Chancellor is always reminding us—the nation's wealth will have increased at the rate of about 5 per cent.
  The Chancellor and the House must accept that, difficult as it will be to get the acquiescence of the working people in a prices and incomes policy after October, it will be impossible to do so if the Government continue to tolerate a tax system which literally involves one law for the rich and another for the poor, which is the position in our country today. The vast majority of the British people have their incomes rigidly controlled by the Government and under the PAYE system pay income tax on their earnings before they receive them. But for a minority of very wealthy people there is no effective control on earnings and their tax can be avoided quite legally in many cases. The House will recognise the stark brutality of the contrast if it looks at two individual cases which have recently come to light.
  I take first the case of Mrs. Dorothy Summerfield, a shop assistant working for the Co-operative movement. Before the freeze in November 1972 she received a weekly wage of £16·65, and in that she was typical of 50,000 other co-operative workers. Under an agreement made by her trade union USDAW and her employers in 1971 she was due for a rise of £1 a week on 31st December 1972. On 4th February the Government forced through this House an order which froze this increase and sought to freeze it retrospectively. On 4th July the county court found that the order had no validity for the five weeks before the date on which it was passed. According to that judgment Mrs. Dorothy Summerfield is

  1353
  due an additional £5. I understand—and I hope that the Chancellor will be able to deny this—that the Government or the Incomes Board hope to appeal against this decision and to rob her of the £5 which has been effectively awarded by the court and which her employers are only too ready to pay. In any case, £1·50 of that £5 will be taken by the Government in income tax.
  Under phase 2 of the policy that began in April Mrs. Summerfield's weekly wage has risen to £19·05. On this wage she will be paying £2·24 tax a week before she receives the residue. This lady, and millions like her, are trying to live on a take-home pay of less than £17 a week. She, like the vast majority of the British public, finds her earnings totally controlled by the Government and her tax collected by the Government before she receives her earnings.
  I pass to another case, that of a right hon. Member of this House. I gave him notice that I would raise this and he told me that he was obliged to attend an important meeting and would not be able to listen to our proceedings. I raise this case because it created great public interest when, entirely by accident, it came to light. I raise it not because anything which our fellow Member did was in any sense illegal. On the contrary, the whole point of my argument is that the law gives him the ability to avoid tax in this way and to avoid Government control of his earnings at a time when the overwhelming majority of his fellow-citizens have no possibility of earning more than the Government decide and are obliged to pay tax on their earnings before receiving them.
  The right hon. Member for Streatham (Mr. Sandys)—a very respected Member of the House and of the Conservative Party—was employed from 1968 as a consultant to a foreign subsidiary of the Lonrho Company, Lonrho South Africa, for a fee of £10,000 a year. On 1st September 1971 the fee which he received as a consultant was raised to £50,000 a year, and he was employed by the main Lonrho Company which is a British company. We do not know why this extraordinary increase in his salary was determined—we can only speculate—although The Sunday Times reported on 27th May 1973 that:
  1354
  "During an off-camera discussion at London Weekend Television last Sunday, Lonrho's South African managing director Sydney Newman remarked forcefully that group deputy managing director Gerald Percy knew perfectly well why Sandys was paid £50,000 a year and that this could not be publicised."
  The story develops. Sir Basil Smallpeice—at that time a fellow director of the Lonhro company with the right hon. Member for Streatham—at the court hearing on 8th May gave written evidence to the effect that in a letter of 9th February 1972 the salary of the right hon. Member for Streatham as a consultant of £50,000 a year was raised to £51,000 and £49,000 of this was to be paid overseas.
  On 4th April 1972, a couple of months later, the right hon. Gentleman was appointed chairman of Lonrho at a lower salary of about £40,000, but at the same time he was also offered by the Chief Executive the sum of £130,000 as compensation for this reduction in his earnings. So far as I can discover, the whole of this sum was paid to him overseas. If I am incorrect, then I will apologise. But when the accountants, Peat Marwick Mitchell, learned of the payment of the first instalment of £44,000 in relation to the sum of £130,000, through a firm called Consultancy Development Services, a subsidiary of Lonrho in the Cayman Islands, they also discovered that £23,000 of accrued fees had also been paid there for the right hon. Member for Streatham.
  It later emerged that the £130.000 of compensation which was offered was offered without the authority of the Lonrho board. The right hon. Member for Taunton (Mr. du Cann)—not as chairman of the 1922 Committee, but as a director of Lonrho and head of the firm Keyser Ullman advising Lonrho on financial matters—investigated the matter. Incidentally, I congratulate the right hon. Member for Taunton on making £30 million in a recent property deal. He investigated the matter on behalf of the board and he said that, although faults were committed in that the board's authority was not sought, the motives for not seeking that authority were proper—although, according to Mr. Rowland, Chief Executive of Lonrho, in a television interview, the motive was that it would be embarrassing if as many as 14 people knew about it. I was glad to see that the right hon. Member for

  1355
  Streatham when he heard that there had been no board authority for this compensation payment repaid the first instalment, which was all he had then received. to the company.
  That is the personal case which the House must put against the case of Mrs. Summerfield to which I first referred.
  8.0 p.m.
  The Chancellor of the Exchequer (Mr. Anthony Barber): The right hon. Member for Leeds, East (Mr. Healey) has referred to a number of sums of money which he alleges were paid to my right hon. Friend the Member for Streatham (Mr. Sandys). I have no knowledge other than what I have read in the newspapers. On these new clauses, as I understand the situation, the whole of the present debate was to be concerned with taxation. Would the right hon. Gentleman like to say, because I have no knowledge—the Inland Revenue does not give me the information—whether he has any idea of the extent to which taxation is payable in respect of any of these sums to my right hon. Friend, whether they were paid or not, because I have no knowledge.
  Mr. Healey: Exactly. It astounds me that the right hon. Gentleman the Chancellor of the Exchequer should ask that question. The purpose of these clauses is to give the Chancellor of the Exchequer the knowledge which he seeks. The law in its present form means that the Chancellor and the Inland Revenue have no means of knowing whether that proportion of a British resident's earnings paid overseas is rightly paid overseas because the whole sum is not necessarily declared to the Inland Revenue.
  Mr. Barber: I should like to ask the question: does the right hon. Gentleman know whether the circumstances of these payments were such as to render them liable to tax or not?
  Mr. Healey: No, of course I do not know. [HON. MEMBERS: "Oh."] No, with great respect. I have not for a moment suggested that the right hon. Member for Streatham acted in any way whatever illegally. I make the assumption that a Member of this House as respected as he is could not conceivably have acted illegally. My complaint is that he acted legally and that it is possible for a wealthy man to avoid taxation in
  1356
  this way, whereas a poor man working for a weekly wage has no such opportunity to avoid tax. This is the whole point of the debate, that there is one law for the rich and another for the poor.
  Mr. Bruce-Gardyne: I submit that that was not the precise point on which the right hon. Member for Leeds, East (Mr. Healey) started. What he said—I took careful note of his words—was that the law gave my right hon. Friend the Member for Streatham the possibility of avoiding control of his earnings. That presumably meant that the law at the same time controlled other people's earnings. The right hon. Gentleman is referring to events in 1971 and 1972. Will he say which law he has in mind?
  Mr. Healey: If the hon. Member for South Angus (Mr. Bruce-Gardyne) is pursuing that point, he is wise to drop the point raised by his right hon. Friend the Chancellor of the Exchequer which blew up in his face. The way in which these consultancy fees were handled would be perfectly possible at present under the prices and incomes freeze as it exists. It is possible to avoid control of earnings by changing the role in relation to which the earnings are paid. I would not deny that this type of avoidance can also take place at lower levels, but never without the connivance of the employer.
  Perhaps we can pass on, now that the Chancellor has clarified the point.
  Mr. Barber: I should like to ask the right hon. Gentleman this simple question. We are both in the same position in that each of us knows only what we have read in the newspapers about the circumstances of the case to which he referred. The right hon. Gentleman seems to be implying that there is some means of legal tax avoidance which he wishes to change, and he may be right in this in a general sense, but is he suggesting that any of these payments sent overseas escaped tax? I have no knowledge of an individual case, any more than he has, but is he or is he not suggesting that in this case?
  Mr. Healey: Again I have no more knowledge than the Chancellor has on this matter. One of the points of the clauses is to elicit knowledge on which the Chancellor and the Inland Revenue can form a judgment.
  Mr. Barber: If the right hon. Gentleman were successful in achieving the substance of what he sets out to achieve in the new clauses, it would still not be possible in the way we proceed in this country—and, thank goodness, we do proceed in this way—for any Chancellor of the Exchequer to know of the particular circumstances of any individual, even though the circumstances might have been disclosed to the Revenue.
  Mr. Healey: I appreciate the point with which the right hon. Gentleman is dealing, and I shall come to it in a moment. This is one of the purposes of the new clauses. I hope the Chancellor will take into account, when he considers the new clauses which have been selected, the new clauses which have not been selected because he did not give the House an opportunity to debate them by tabling the appropriate money resolution. I understand from the Chief Secretary last week in Question Time that this was to be a broad-ranging debate on the general problems of tax avoidance as raised by the Lonrho affair. I shall seek to deal with the specific points raised by the Chancellor in a moment.
  The point I was trying to make, when the Chancellor so helpfully intervened, was that if one contrasts the treatment of Mrs. Summerfield with the treatment of the right hon. Member for Streatham, which I assume was perfectly legal, one sees that the way the law operates in this country quite clearly means that there is one law for the rich and another for the poor. It is possible for the Chancellor of the Exchequer to maintain that Mrs. Summerfield might have made arrangements with the Co-operative society to have her salary, or 80 per cent. of it, paid in the Cayman Islands through a subsidiary of the Co-operative movement. But I suspect that even the ingenuity of the Chancellor of the Exchequer will not carry him so far as to suggest that she should have had recourse to this method of avoiding tax, although I know that the right hon. Gentleman has closed one loophole in the Cayman Islands by taking the Cayman Islands and other tax havens in the sterling area out of the sterling area thereby greatly complicating the problem for tax avoidance in terms of the exchange control regulations.
  Mr. Peter Tapsell: The right hon. Gentleman has not yet met my right hon. Friend's point. The right hon. Gentleman has again used some such phrase as "tax avoidance", but a moment earlier he admitted that he did not know whether tax avoidance was involved, because he did not know whether the payments in the Cayman Islands to which he referred were subject to tax under the present law. None of us knows. If these payments are liable for tax under the present law the right hon. Gentleman's whole argument breaks down.
  Mr. Healey: The Chancellor of the Exchequer told us that he did not know whether these payments were liable to tax. However, he ought to know whether tax has been paid on them—
  Mr. Bruce-Gardyne: On the contrary.
  Mr. Healey: No doubt they have had tax paid on them at the Cayman Islands rate. But if the Chancellor of the Exchequer or any of his supporters believes that those payments were made into a subsidiary of Lonrho in the Cayman Islands which existed because of the economic, cultural and social attractions of the Cayman Islands to the right hon. Member for Streatham, he is not quite as intelligent, sensitive and aware of the way in which the world operates as I thought.
  Life certainly is better under the Conservatives—for some. I must confess that having read this account in the newspapers I thought that it was hardly surprising that the right hon. Member for Taunton should have told the Lonrho shareholders when he was discussing strengthening the Lonrho Board:
  "Fortunately, there is no shortage of really suitable candidates."
  I bet they were queuing up with their tongues hanging out. I wonder why the right hon. Gentleman did not give Mrs. Summerfield a chance. I think that she would have done at least as well on the Lonrho Board as some of its recent members.
  Does the Chancellor of the Exchequer think that this story makes a suitable backcloth for his negotiations with the TUC on phase 3? If he does not think that, what is he doing about it? The Prime Minister was right about this, even if some of his back-bench supporters

  1359
  disagreed with him. This is the unacceptable and unpleasant face of capitalism. The Prime Minister was also right when he told the Conservative Women's Conference the other day that it was no part of his philosophy—it would have been less true two or three years ago, of course—that by one device or another vast sums of money should pass hands at the heart of our financial system as personal rewards—sums out of all proportion to the rewards available for high distinction in other professions and walks of life.
  The issue to which our clauses are directed is the avoidance of taxation by the payment of money into what are called tax havens like the Cayman Islands, in those days, and tax havens still in the sterling area like Jersey or the Isle of Man.
  There are many aspects of this type of tax avoidance in the Lonrho case. There is the story of Mr. "Tiny" Rowland's £350,000 house at Bourne End. Mr. Rowland was said to have broken his promise to the Lonrho Board to purchase the house and, according to the Sunday Telegraph, Mr. Rowland's counsel said that his client's tax position had some bearing on his failure to pay for the £350,000 company house. He went on:
  "I am not going to give evidence"
  —a very wise man—
  "about where Mr. Rowland is resident for tax purposes, but the ownership of a large house in this country might have a material bearing on where one's place of residence was said to be for tax purposes."
  This is the situation about which the Chancellor of the Exchequer refuses to do anything during the Report stage of this Bill, although he found time to import a debate on agricultural affairs and Commonwealth sugar. There are very few Departments of his colleagues which have not been represented earlier today in debates on various Government new clauses.
  No doubt it was for tax purposes that Mr. Rowland bought 31p worth of pork chipolatas from Harrods and asked Harrods to bill the Tweefontein United Collieries in South Africa for them. I am glad to see that right hon. and hon. Gentlemen on the Treasury Bench are sobered a little by this revelation.
  1360
  In this country today tax avoidance is big business. Even The Times newspaper which has printed philippics against Lonrho by Bernard Levin and Mr. William Rees Mogg in its centre pages, provides running advice on tax avoidance on its back pages. There was an article only last Saturday about how to use trusts to avoid estate duty.
  One of the biggest loopholes in our tax system is the right of British citizens, even if ordinarily resident in Britain, to avoid tax legally on their foreign earnings provided that they are not remitted to the United Kingdom—
  Mr. Bruce-Gardyne: No.
  Mr. Healey:—and providing such earnings are kept in a sterling area tax haven without falling foul of exchange control regulations—
  Mr. Bruce-Gardyne: No. The right hon. Gentleman does not understand the law.
  Mr. Healey: If I am wrong, I shall be delighted to have the Chancellor of the Exchequer put me right. No doubt that we shall see a sudden exodus of tax consultants to the Cayman Islands if I am proved wrong—
  Mr. Bruce-Gardyne: Of course the right hon. Gentleman is wrong.
  Mr. Healey: The fact is that there is no obligation on residents to declare such foreign earnings providing that they are held inside the sterling area, and if they are paid through a foreign subsidiary of a British company there is no means by which the Inland Revenue can discover them or decide, in a case where a proportion of such earnings is attributed to service abroad, that that proportion is the correct and honest one.
  I share the view held by many that the facts which came to light during the Lonrho case simply through the accident of a row between members of the board represent only the tip of the iceberg. I am fortified in that by a quotation from the tax correspondent of The Times, Miss Margaret Stone. She writes:
  "There is always a suspicion that anyone who works for a company with an overseas operation which enables him to take advantage of these rules will be tempted to receive a peppercorn salary for his work in this country and a fabulous sum for the work overseas

  1361
  This can happen, for there is no obligation to reveal income arising overseas (in the sterling area) which is not remitted."
  I believe that the only answer to this problem is to adopt the system which has always obtained in the United States of America—that is to say, to make all United Kingdom citizens liable to tax on their earnings world-wide unless they are permanently resident abroad or, under American tax law, unless they are resident abroad for 17 out of the 18 months which are relevant for tax. Even in those cases of permanent residence abroad or residence for 17 out of 18 months, American citizens escape taxation on their foreign earnings only on the first 20,000 to 25,000 dollars—£8,000 to £10,000—which is a very much smaller sum than those said to have been paid abroad in the Lonrho case, and again only if those earnings are made from foreign sources.
  8.15 p.m.
  Some of our new clauses would make such a change. Unfortunately, those new clauses are out of order because the Chancellor has chosen not to permit the House to discuss them by failing to put down a suitable Money Resolution. Therefore, we must be content today with new Clauses Nos. 2 and 54 which at least would compel the disclosure of income and expenses overseas and avoid some of the practices which came to light by accident during the Lonrho affair.
  Frankly, I cannot understand why, after what the Prime Minister said about these Lonrho practices revealing the "unpleasant and unacceptable face of capitalism", the Government have not already acted. All of us assumed that they would do so. They had a wonderful opportunity on Report stage of the Finance Bill. Indeed, they could have put down some amendments in Committee, but they failed to do so. I confess that, like millions of my fellow countrymen, I cannot resist the suspicion that one reason they have not sought to deal with these methods of tax avoidance Is that they have a direct interest in the continuation of such practices.
  It is a fact that the Conservative Party received £1½ million from big firms in Britain before the election. Those moneys were paid in the expectation of
  1362
  services to be rendered. Indeed, Mr. Ritchie, the chairman of Bowaters, a company which gave £10,000 to the Conservative Party during the 1970 election, told his company under a year later:
  "We have already saved £400,000 in tax since the Conservatives came into office, and I think this is a good return on our investment."
  He can say that again. A 4,000 per cent. return on the investment! The company could not have done better even out of property.
  Indeed, let us take a more recent case. Lord Chelmer, a senior official of the Conservative Party at the moment, writing in The Times a month ago, said
  "Surely the large companies which contribute to the Conservative Party do so because their boards believe that a Conservative Government provides the best conditions under which companies like theirs can operate to the benefit of both shareholders and employees."
  Amen, says "Tiny" Rowlands.
  The fact is that the "unpleasant and unacceptable face of capitalism" is the face of the Conservative Party. That is one more reason why the British people will sweep it out of power the first moment they have the chance.
  Mr. Barber: Although the principal purpose of raising taxation is to secure the necessary revenue to finance the activities of the Government, it is also important to remember that the maintenance of a fair, just and effective tax system is essential to the proper functioning of the democratic system. But there will always be those who engage in methods, old or new, of tax evasion or of tax avoidance, ranging from the small proprietor who collects 50p from his customer and puts it into his pocket rather than the till to the sophisticated operator who works out a highly complex avoidance device. However, it is of the utmost importance to recognise and to accept that the great majority of taxpayers conduct their affairs in a legal, straightforward and fair manner.
  Having said that, it is right that we should yet again review and re-examine the rules so that we can, if necessary, make any appropriate changes that are consistent with a proper degree of incentive, proper remuneration for tasks performed, and proper regard for personal freedom and the attainment of a prosperous society. I shall come back to this review in what I have to say later.

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  It is obvious from some of the remarks made by the right hon. Member for Leeds, East (Mr. Healey) that what really lies behind his comments this evening is not merely an abhorrence of one aspect of capitalism but a barely suppressed hatred of the entire system of capitalism.—[Interruption.] The country will note the jeers that come from certain hon. Gentlemen opposite. Most people in this country believe that capitalism, even with its imperfections that nobody can justify, is still the best and most effective system for Britain.
  There is one preliminary point with which I must deal in the light of what was said by the right hon. Gentleman. All Inland Revenue officials are bound by statute to keep an individual's or company's tax affairs completely confidential. This is of fundamental importance in our tax administration. I have not asked the Inland Revenue for a report about the tax affairs of particular directors or companies. I do not intend to ask, and, if I did, I should not be told. But it will be within the recollection of the House that the right hon. Gentleman has made it clear today that if he had the opportunity and were at this Dispatch Box he would change this fundamental rule of Inland Revenue confidentiality—[HON. MEMBERS: "Nonsense."] Of yes, and I shall quote the right hon. Gentleman's words later—and that a future Labour Government would ensure that, as happens in some countries, politicians could legally call for the tax file of any individual citizen.
  Mr. Healey: I am sure that the right hon. Gentleman, to whose scrupulous honesty I paid tribute previously when discussing an earlier clause, would not wish to misrepresent me. I made no such suggestion. I said that the Inland Revenue should have the right and power to discover what earnings were made by British residents anywhere in the world, just as the American tax authorities have that right and power, so that it is capable of judging whether a man has paid the right amount of tax. I do not think that the Chancellor will deny that under British law, as it now stands, it is not possible for the Inland Revenue so to judge payments that are made to sterling area tax havens by foreign subsidaries of British companies.
  Mr. Barber: Perhaps I may quote the words used by the right hon. Gentleman. If he did not mean them, I shall accept that. I intervened to explain to the right hon. Gentleman that I had no knowledge of the tax affairs of a particular individual, and the right hon. Gentleman said in reply—and this will be within the recollection of those in the House—that I ought to know whether tax was paid by him. If the right hon. Gentleman did not mean that the Chancellor of the Exchequer should know whether tax is paid by an individual, I hope that he will say so immediately.
  Mr. Healey: I confess to the House that the remark I then made was incorrect, but the Inland Revenue has the responsibility of recovering tax that is improperly withheld, and it also has a responsibility in major cases for prosecuting people who commit this type of offence. I believe that such prosecutions should take place far more often than they do, so that the Chancellor, the House, and the country can know that it does happen.
  Mr. Barber: I am grateful to the right hon. Gentleman for clarifying that important point. I accept what he said, but he seemed to suggest that I should have some knowledge of the particular tax circumstances of an individual, and when dealing with a particular individual the right hon. Gentleman rather gave the impression that he knew all the tax circumstances of that person. This is an important matter. This is of great constitutional importance, because we in Parliament, and successive Governments, must make the tax system as fair and as just as possible, but it is a great strength of the British system that there can be no political vendettas.
  Mr. Douglas Jay: Surely the Chancellor is making a false point. Everybody knows that information about an individual taxpayer by name is not made available to the Chancellor or to any other Treasury Minister by the Inland Revenue. We all know that, and nobody suggests that that should be changed, but surely the Chancellor must know in principle whether a particular type of income paid to an individual in certain circumstances in the Cayman Islands is or is not taxable. The Chancellor has only to ask his advisers that and they will tell him. If that is

  1365
  not known, what did the Prime Minister mean by talking about the unpleasant and unacceptable face of capitalism?
  Mr. Barber: I was coming to deal—as I should do, in the light of what the right hon. Gentleman said—with the substance of these matters and to explain the position to the House. I shall have to go into a certain amount of detail.
  The way in which we treat for tax purposes what I might call natives of this country—I cannot say "residents" because there are people domiciled overseas who are also residents, but I think the House knows what I mean—who go abroad to work for a while, and the way in which we treat nationals of other countries—technically persons who are not domiciled here but who come here to work for a period—is governed by legislation contained in the Finance Act 1956.
  The Act was based on—though, in the event, it did not entirely follow—the recommendations of the Royal Commission in its final report in June 1955. The Royal Commission's report was not unanimous. There was a minority report, but that report specifically endorsed the Royal Commission's recommendations concerning the rationalization and codification of the rules relating to foreign employments. That minority report was signed by three gentlemen whose names will be familiar to right hon. and hon. Gentlemen on the Opposition benches—Mr. George Woodcock, Mr. Herbert Bullock and Mr. Nicholas Kaldor. I mention that because it was not a question of the then Government launching out on their own.
  What the Royal Commission said can be spelled out in a reasonably short compass. It analysed the existing law under which a person resident in the United Kingdom was taxed on a remittance basis—that is, on the basis of income remitted to this country or received here—in respect of his income from foreign possessions. The Royal Commission explained that the phrase "foreign possessions" was a technical one, which could include income arising from a trade, profession or employment if it could be characterised as foreign, and it said it was plain that it was extremely difficult to say whether an employment that had an element of a foreign character was or was not to be treated as a foreign possession.
  1366
  Not only was the nationality, the domicile or the residence of the employer relevant, but account had to be taken of the country in which the contract of employment was made, the country in which the moneys earned by the employment were paid, and the country in which the work was to be done.
  This was obviously a wholly unsatisfactory state of affairs and the Royal Commission expressed the view that much the most important single test of the locality of an employment was the place in which the work was done. A test of this sort would, in the Commission's view, accord with the whole point of using a remittance basis at all where a resident had income from foreign employment—that is, that he would need to get money abroad for the expenses of working and living there and that it was only the money that he brought home that could be truly related to home income.
  The Commission therefore recommended that a resident here in the United Kingdom should be taxed on the remittance basis in respect of income from an employment that is wholly performed outside the United Kingdom, but should pay tax on the whole income from an employment performed wholly within the United Kingdom. That is the position that now governs the case of a normal United Kingdom citizen.
  8.30 p.m.
  These were the recommendations that one of my predecessors, Mr. Harold Macmillan, brought forward in his 1956 Budget. As many hon. Members may recall, there followed a considerable outcry, not about the consequences for United Kingdom natives but about the effect of these proposals on those who were domiciled abroad—in the case of the normal United Kingdom individual.
  The proposal would have resulted, for example, in American employees of American corporations who came here to work for a subsidiary company, as often happens, bearing tax on the whole of their earnings, notwithstanding that a large part of those earnings was never brought into this country and had, perhaps, to be spent in maintaining their families in their home country at costs reflecting the local levels of taxation and, of course, prices. It was represented with considerable force at the time that the

  1367
  effect of this proposal would be to drive away from this country employees of foreign companies living here and even the European headquarters of such companies, with considerable economic loss to this country.
  So the proposal was changed. In making the change, Mr. Macmillan was not opposed by the Opposition, although, having looked at the record, I think it fair to point out that some criticism was expressed that a simple remittance basis was being retained. But as regards the remainder of the proposals—those under which the pay for a job the whole of which was performed outside the United Kingdom was taxed only on remittances—there was no criticism at all.
  That is the position. The House should know what it is. If, like the generality of United Kingdom taxpayers, a person is domiciled here, has a job here, and the work is carried out here—or, indeed, even if the work is carried out partly abroad—it does not matter where the payment for that job is made; the whole of the pay is liable to United Kingdom tax, and that is the end of the matter. The law is clear, and it follows that the idea that all that is needed to pay no tax is to have a salary paid in a tax haven is without foundation.
  So much for the United Kingdom resident who carries out his work in this country, or partly in this country and partly abroad. Next, there is the case of the resident here who has a job the whole of the duties of which are performed outside the United Kingdom. In this case, the pay is liable to tax only on a remittance basis, in accordance with the unanimous recommendations of the Royal Commission.
  This obviously covers a range of cases, such as that of the man who goes abroad for, say, a year to act as an engineer superintending a particular contract but who, for tax purposes, remains technically resident in the United Kingdom during his absence, because the absence does not span a complete tax year. In his case, I should have thought, there were clearly arguments for saying that the remittance basis—I do not prejudge the matter, because all this is being reviewed—may be the right way to tax him. The tax treatment may, for example, have a bearing on the ability of employers to get suitable people to work
  1368
  in unattractive places and so affect their ability to win contracts in competition with firms from other countries.
  But there are many other cases. There is, for example, the case of the man who works regularly in this country for six months and regularly abroad under another employer for six months. There is, for example, the professional cricketer, who plays here in the summer and, perhaps wisely, coaches in the sun during the winter. He would come into this category.
  There can be different views on the question whether the remittance basis is justified at all, or whether it is justified in each of the cases that one can call to mind, but the Royal Commission recommended it, it was generally approved by the House and it is on the Statute Book. Having looked into this carefully, and not wanting to pre-judge the review that is now being undertaken, I doubt whether there are many cases in which the employment is not such that the application of the remittance basis is reasonably justified on the principle of the Royal Commission report. If one were thinking of getting rid of the remittance basis in this field, some careful thought would need to be given to the consequences if one were to get rid of it altogether.
  Then there is the man who is not domiciled here but who works here for a non-resident employer. I am not clear how the Opposition has it in mind to treat him. There is no doubt that the United Kingdom has benefited greatly from inward investment in recent years, and the way in which people who are posted here by foreign employers are taxed is obviously a relevant factor in this context. I should have thought that it was self-evident, therefore, that any consideration of a tightening up of the tax rules that at present apply to this category must include careful consideration of what it might mean in terms of the overall economic advantage of this country. I do not rule this out; I merely say that it has to be considered very carefully. Because these are very difficult and important matters and need to be fully considered, the Inland Revenue is looking into the whole question of the remittance basis of taxation.
  I should like to refer to certain aspects more specifically. First, there is the

  1369
  question of trades, professions or vocations that are carried on abroad. To get within the remittance basis of tax no part of such a trade has to be carried on here, and I am told that it is very difficult for an individual to order his affairs so that the remittance basis applies to a trade that he carries on alone. However, it may well apply to an individual here who is a member of a partnership carried on abroad, such as a partnership of accountants or solicitors. It is not, I think, necessarily wrong that the remittance basis should apply to such cases; there is at least an argument that if it did not, such persons, through having to bear our higher rates of tax, would be at a disadvantage compared to their locally-based competitors who were bearing only the local rates of tax.
  Then there is the question of compensation for loss of office. In fact, under the existing law the place of receipt of payments of such compensation is quite irrelevant. But there is under present law, an exemption for some cases, including payments received by an individual who is not domiciled in the United Kingdom, in respect of services to an employer who is not resident in the United Kingdom. Similarly payments for compensation for the loss of an office held under a contract which did not require any of the duties to be performed in the United Kingdom are exempted.
  It would be difficult to make a case that, for example, a foreigner who was here for a year or two as representative of his foreign company but who lost his job should have to pay tax here on the whole of any compensation that he received. We are talking about people who are resident in the United Kingdom for tax purposes. Similarly, it is difficult to argue that a man should pay tax here on compensation for the loss of a long-term job abroad, though different considerations may apply when the job is closely linked with another job which he held in the United Kingdom. But, naturally, if, as a result of the review that I have stated is being carried out by the Inland Revenue, there were to be changes in the scope of the remittance basis, the scope of these exceptions from the charge of compensation payments to tax might be affected and would certainly have to be considered. All this merely illustrates again that this is a far more com-
  1370
  plex and difficult subject than some seem to think.
  Mr. Dalyell: I have been listening to the Chancellor as carefully as possible marshalling a complex argument. But if what he says is true, should not the Revenue, if not the Chancellor, have been told about the loss-of-office compensation to the right hon. Member for Streatham (Mr. Sandys)? Is it in order to ask whether these facts were known to the Revenue?
  Mr. Barber: It is an absolutely fundamental rule in our constitution, which can be changed by the House if any party wishes to change it—unlike some other countries, and not just primitive countries—that the Chancellor of the Exchequer has no right and is not entitled to ask any question whatsoever about any individual citizen or taxpayer. I believe that that is of absolutely fundamental importance, and that that situation should continue. Therefore, I have no knowledge, any more than anyone else in the House, about the circumstances of any individual.
  The right hon. Member for Battersea, North (Mr. Jay) suggested that even if I, as Chancellor, had no knowledge of the tax circumstances of any individual, I surely knew what were the circumstances in the generality of cases rendering people liable to tax or not.
  I recognise that other hon. Members wish to speak and that other debates are to follow, and I have endeavoured to be as brief as I can. I have tried to cover the generality of cases but this is a very complicated matter and, in the light of what I have said, I hope that the House will agree that it would be wrong to anticipate the outcome of the review that is being undertaken by the Inland Revnue of taxing foreign income.
  When one begins to go into this in detail it becomes apparent that any decisions we may take as a result of the review could have other repercussions, which we should also have to take into account. For example, as those who have had experience on this Bench know, a whole network of double taxation agreements between this country and other countries might be affected. I am sure that the House will agree that the course I have proposed is the right one to follow in the circumstances.
  Mr. Denzil Davies: We have heard from the Chancellor that this is a complex problem. It is complex but no more complex than many other difficulties which Governments face in legislating for taxation. I do not believe that it is that difficult. I believe that it is fairly easy to lay down a simple proposition that a person resident and domiciled in this country shall pay British income tax on foreign earnings as they arise.
  At present the law is that if foreign dividends arise to people resident or domiciled in the United Kingdom they pay tax upon them immediately. I see no practical difficulties to stop the same rule applying in the case of foreign income arising to persons resident and domiciled in this country.
  I accept that there may be some difficulty about domicile. Therefore I exclude a person who is not domiciled. But a person resident and domiciled in this country, as are the vast majority of people who take advantage of this legislation, quite legitimately at the moment, I venture to guess are both resident and domiciled here.
  If the Government and the Prime Minister wish to mitigate what the Prime Minister professes to call "the unacceptable face of capitalism", I see no reason why the Government cannot accept at least the second new clause that we have proposed, that about giving information to the Inland Revenue.
  The point we have been trying to make is that the Inland Revenue does not—we accept that Chancellors should not be able to inquire into the tax affairs of individuals—have any power to inquire into income paid abroad in respect of an office or employment held in a foreign subsidiary where the work is carried out entirely abroad by the British resident. The Inland Revenue cannot ask questions and cannot be told about that income until it is remitted into this country—and most of it is not remitted into this country. I say that boldly although I do not know what the figures are. Most of the income is kept abroad, and it is converted into tangible assets, used to buy houses, to pay for holidays or to buy shares abroad. What income is remitted is in a form that is not taxable or by persons who are not then subject to taxation.
  1372
  We are then told that there are exchange control problems, but the Bank of England also comes to the rescue and assistance of those who work for foreign subsidiaries abroad. I am told that for exchange control purposes a British resident who receives income abroad has to convert that income into sterling. One would have thought that in the process of converting it into sterling he would have to remit it into the United Kingdom and hand it to an authorised bank or an authorised depositor which would turn it into sterling and that that would be an act of remittance for sterling purposes.
  8.45 p.m.
  However, that is not so, because the Bank of England makes it so easy for him. It has over the years designated more and more banks in the Channel Islands and the Isle of Man as authorised banks and authorised depositors for this purpose. A person who works for a foreign company can fulfil his exchange control obligations legitimately and lawfully without remitting his income into the United Kingdom for tax purposes. This was why one of the new clauses, which was not called, was tabled.
  We should not try to give the impression that the fiscal excesses in the Lonrho affair were isolated. I believe that the situation has changed since the Royal Commission. There are now more and more British companies with international trade which are setting up subsidiaries abroad, quite legitimately, and which are using those subsidiaries to pay their British directors some foreign remuneration at lower rates of tax which then will not have to be remitted to the United Kingdom.
  As we learned from the Lonrho affair, some people go to the tax havens. Some go to South Africa. What about the large number of British subsidiaries in South Africa? The directors of the parent companies in London are also directors of the subsidiaries in South Africa. They may be paid £3,000, £4,000 or £5,000 a year as directors of South African companies; and the rate of tax in South Africa may be 30 per cent. or 40 per cent. They do not have to remit that income here. They pay their South African tax and they get a substantial marginal benefit, a much greater benefit than they would get if that

  1373
  income were taxable on the horizon principle. The oil companies use the Middle East for this purpose.
  No one would suggest that some directors do not work hard for this purpose. Other directors fulfil their obligations, possibly, by flying to the Caribbean and staying there for a month and attending a few board meetings, or by going to South Africa and seeing to the company's trade there. For that they draw their remuneration. The Inland Revenue has no way of knowing whether the remuneration is legitimate and whether it is commensurate with the work that the director performs.
  I hope that the Government will not take too long about reviewing this matter. I do not believe that there is any great problem. The only problem is that many of the directors of most of the major companies which contributed to the Tory Party before the last General Election benefit from this rule. Most of the companies that contributed to the Tory Party and most of the companies with international trade have directors or subsidiaries abroad that benefit. Those who are directors of foreign subsidiaries benefit directly from this rule.
  As the General Election gets closer and as the treasurer of the Tory Party goes round the city looking for money for these companies, we shall see whether in next year's Finance Act the remittance basis will be changed. I do not believe that these people will invest in the Tory Party if they believe that their nest egg will be destroyed.
  The Prime Minister's credibility is destroyed. He said that he would reduce prices at a stroke. He said that he would not take Britain into the European Economic Community without the full-hearted support of the British people. He has now confessed that the face of capitalism is unacceptable. We shall see what the Government do about these remittance directors. If they fail to act now the Prime Minister's credibility, like the £sterling, will continue to go down.
  Mr. Dalyell: The Chancellor of the Exchequer—I am sorry that he is absent at present—has a habit of answering questions that are materially different from those that were asked. I think that he
  1374
  knew perfectly well that the question of mine that he answered just now was fundamentally different from the question that was asked.
  The question that was asked concerned compensation paid to the right hon. Member for Streatham (Mr. Sandys). We take this only as an example. I would rather have it that it was not personal, but this is an example. The question was not—."Did the Chancellor know about it?"—because I know full well, and all of my hon. Friends know full well, that the Chancellor does not have this knowledge. Of course we accept that explanation. The question which was asked—I put it again to the Chief Secretary—was simply this: Did the Inland Revenue know about it? Surely, the Chancellor can tell us whether the Revenue knew. [Interruption.] If that be the situation, the Chancellor has no right to give the House a long and complicated argument to the effect, as I interpreted it, that all is well in the best of all possible worlds. That whole passage of his speech, if that intervention from the hon. and learned Member for Dover (Mr. Peter Rees) is right, was irrelevant.
  Mr. Patrick Jenkin: As I do not intend to take the time of the House in replying to this short debate, perhaps I could answer the hon. Gentleman's question. That, too, would be covered by the Inland Revenue's oath of secrecy. The Revenue would not even be entitled to tell him whether it knew. I should have thought that the House would accept that that must be right in relation to the confidentiality of individual taxpayers' affairs.
  Mr. Dalyell: Then we are operating in the dark. If that is the situation which obtains in this country, the Mrs. Summerfields of this world have some right to their discontent.
  Mr. Joel Barnett: I emphasise what my hon. Friend the Member for West Lothian (Mr. Dalyell) has just said, that the examples used have been used only as examples. They happen to come from a case which caught public attention, to some extent because of the Prime Minister's own words, and none of us on this side—certainly not my right hon. Friend the Member for Leeds, East (Mr. Healey)—would expect the Chancellor to know about individual cases. It is worth

  1375
  adding, I think, that we should not have known of that case if there had not been a boardroom row.
  I found the Chancellor's speech very interesting, because he told us, in effect, that he does not know the extent of any avoidance, or whether there is any at all. He does not know how many others might or might not be trying to avoid tax. He does not even know whether the right hon. Member for Streatham (Mr. Sandys) was trying to avoid tax.
  We do not know whether there is a large or a small number involved in this sort of practice. We do not know whether it would make a great difference to the income tax yield if the law were changed as we suggest. Apparently, the Chancellor just does not know. What I find remarkable is that he tells us that he is not even aware of the background and circumstances underlying this sort of tax avoidance. It may only be a very small number—
  Mr. Patrick Jenkin: With respect, that was not what my right hon. Friend said. He said—I reiterated it a moment ago in answer to the hon. Member for West Lothian (Mr. Dalyell)—that no Treasury Minister is entitled to ask or to be told the details of any individual case. He is not entitled to ask questions about an individual case. The hon. Gentleman is putting words into my right hon. Friend's mouth.
  Mr. Barnett: This is too absurd. My right hon. Friend made the matter absolutely clear. What I find so remarkable is that it is possible that there is an enormous amount of tax avoidance going on in this way—I do not know the extent of it, but it is possible that an enormous amount is going on—but the Chancellor is not even aware that there is any tax avoidance.
  The issue goes far deeper than whether the Prime Minister considers these things to be the unacceptable and unpleasant face of capitalism, or whether he and the Chancellor are concerned with the abuse of the system. What we are concerned with here is the system. It is not enough to stop the abuse. I do not know whether the Chancellor meant that if the right hon. Gentleman had taken only £1,000 instead of £50,000, and the board had approved it, that would have been all right. But if that be what he is
  1376
  saying, we do not agree. We do not think it right for any British taxpayer resident in this country so to be able to manipulate his tax affairs as to pay no tax at all, or very little, by arranging for his income to be untaxed through receiving it in the Cayman Islands or any of the other tax havens.
  I do not know—I agree with the Chief Secretary to that extent—but what I find remarkable is that the Chancellor himself does not know. We are not talking about those who work abroad and are not resident in this country, whether British or otherwise. Such people are not and would not be allowed into tax. We are talking about those who work abroad regularly while UK residents and taxpayers.
  Mr. Dennis Skinner: Among the many groups of people who come into this category, is my hon. Friend thinking particularly of Members of this House who go across to the Continent as a result of our entry into the Common Market and who are now paid as Members of the European Assembly? Is he thinking in terms of those people salting their money away in Jersey or some other tax haven?
  Mr. Barnett: To be perfectly honest that is not what I had in mind but I leave my hon. Friend to make his point perhaps on another occasion.
  I accept that not all moneys earned abroad by people working abroad and not remitted are free from tax. Of course that is the case. This is covered by an involved and complicated section of our tax laws. But if anybody believes that there are British taxpayers who arrange to have their earnings sent to the Cayman Islands just because they like the Cayman Islands he will believe anything. I certainly do not believe it, but if the Chancellor and the Prime Minister do, what on earth were they talking about? I asked the Prime Minister once what he meant about the unpleasant and unacceptable face of capitalism but somehow he managed to avoid—one could even say evade—the question.
  I am aware of the recommendation of the Royal Commission, but I am also aware of all the problems that the Chancellor spelt out for us, problems of foreign workers and so on. But it is absurd to suggest that clauses could not be devised

  1377
  in the Finance Bill to safeguard that element in our taxpaying system.
  It is remarkable for the Chancellor to tell us that because something was contained in the Royal Commission Report therefore something contained in the Finance Act 1956 must be right. Anybody would believe that once we put Finance Bills on the Statute Book we never amended them. It is incredible that the Chancellor should believe that because it was true in 1956 it should remain so for all time, because that appeared to be his argument. He referred to the cricketer who pays tax in this country having toured abroad and he asked why that man should have to pay tax on his earnings. Why should a man in this country who works hard and pays tax on every penny of overtime pay that tax? He does, however, and we say that residents in this country—British taxpayers—should pay British tax on earnings wherever they are earned. Of course, there are exceptions. There are such things as unremittable income, but the Chancellor told us about compensation which may not be taxable.
  If the £130,000 had been received—and it would have been if the board had approved the payment—and if it had been paid into the Cayman Islands, I assume that someone had worked out a very careful scheme to deal with it. I am under no illusions about that. I doubt if the right hon. Gentleman in question suddenly hit upon the idea of paying £130,000 into the Cayman Islands. I have no doubt that there are fine tax lawyers advising Lonrho and any other British company that has subsidiaries abroad. As has been pointed out, a large number of British companies have subsidiaries abroad.
  9.0 p.m.
  One of the arguments might well be that those taxpayers who go abroad to do some work part-time during the course of the year would not be prepared to do it unless it were tax free. It would be sad if our cricketers decided not to do a tour of the West Indies or of Australia if they had to pay tax on it, but we should have to bear with that in order to make matters equal with those taxpayers who pay tax on every penny they earn. It cannot be right for one United Kingdom taxpayer to be taxed less than another
  1378
  for a normal week because he happens to be working for that week outside the United Kingdom.
  What was odd about the Chancellor's speech was that he did not refer at any time to the word "abuse". He did not even acknowledge that it might just be possible that there is abuse of the remittance system. I doubt whether he would deny that there is abuse of the remittance system, because of course there is. Everyone who has anything to do with it knows that there is. I may add that I do not blame those who, for professional reasons, advise how to do this sort of thing. That is one of the jobs for which they turn an honest penny, one might say. I doubt whether any hon. Member does not wish to avoid as much tax as he can. I doubt whether any hon. Member would refuse to take out a life assurance policy which would help him to avoid taxation. I would not blame him.
  But our function as legislators should be to ensure that the tax system does not lend itself to the maximum tax avoidance. It is hypocritical of the Prime Minister and the Chancellor of the Exchequer to talk of the unpleasant and unacceptable face of capitalism when the Chancellor creates a tax avoidance paradise when he once again allows loan interest to be allowable against tax. If he is not aware of that kind of tax avoidance, let him go into the tax counsellors' chambers not so far from here or speak to some of his hon. Friends who are perhaps more in touch with some of these matters. If he does, he will learn what sort of tax avoidance he has created.
  But what is particularly amazing is that the right hon. Gentleman did not in any way deal even with the amendments that have been allowed as being in order. Many of our amendments on the Order Paper are out of order because the right hon. Gentleman refused to put them in order by putting down the necessary financial resolutions, which, as we have seen earlier, he could easily have done. But it appears that now he is only just beginning to learn that there is the possibility of tax avoidance in the remittance system.
  It should not take the right hon. Gentleman too long to learn just how much goes on. Our amendments which are in order would help him to learn rather more

  1379
  quickly because we seek to ensure that the Inland Revenue would have the maximum possible information. We do not consider that to be sufficient, however. Nor do we consider it sufficient that this matter should be dealt with by the Companies Act. It is right that the Act should deal with one aspect but that is not the only aspect of the matter. The real problem here is the extent of the abuse of a tax system relating to remittances.
  That is a very complicated section of our tax law but that does not mean, just because it is complicated, that we should leave it as it is. If at the end of the day we have to amend that law and a few people suffer because of that amendment, I for my part would accept that in order to have a much more equitable tax system which taxed those under PAYE in no more harsh way than the rest.
  However, these two new clauses would mean at least giving the Inland Revenue information about whether a taxpayer has income earned abroad and not remitted it, because, as the Chancellor himself said, it may be the situation that some taxpayers have arranged schemes to earn some money abroad and pay it into the Cayman Islands or elsewhere but have not prepared the schemes adequately. The Revenue would know nothing at all
  about it. It would not know anything about it if the moneys were received by a British taxpayer who went abroad and earned it not only from a British subsidiary abroad but from a foreign company abroad. There would be no way whatsoever of the Inland Revenue knowing about it. These two clauses would at least give the Inland Revenue that power to know.
  I would urge hon. Members to vote for new Clause No. 2 and new Clause 54. I trust that these new clauses on information will be seen as symbolic telling the Chancellor this is but a first step. We on this side of the House certainly want a fundamental change in the tax system. Tonight we are talking only about this clause, but the Chancellor must surely recognise that it is a major part of any incomes policy. It is outrageous to expect an ordinary worker to be satisfied with £1 plus 4 per cent. less 30 per cent. tax knowing that this sort of thing is going on. Taxpayers will want maximum disclosure. If there is any chance of persuading ordinary workers to accept restraint they will need to know that that restraint is equally shared. I hope that, for a start, these clauses are accepted.
  Question put, That the clause be read a Second time:—
  The House divided: Ayes 221, Noes 248.

  Division No. 193.]

  AYES

  [9.8 p.m.

  Abse, Leo

  Concannon, J. D.

  Ewing, Harry

  Albu, Austen

  Crawshaw, Richard

  Faulds, Andrew

  Allaun, Frank (Salford, E.)

  Cronin, John

  Fernyhough, Rt. Hn. E.

  Archer, Peter (Rowley Regis)

  Crossman, Rt. Hn. Richard

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

  Armstrong, Ernest

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

  Fitch, Alan (Wigan)

  Ashton, Joe

  Cunningham, Dr. J. A. (Whitehaven)

  Fletcher, Ted (Darlington)

  Atkinson, Norman

  Dalyell, Tam

  Ford, Ben

  Bagier, Gordon A. T.

  Davidson, Arthur

  Forrester, John

  Barnes, Michael

  Davies, Denzil (Llanelly)

  Fraser, John (Norwood)

  Barnett, Joel (Heywood and Royton)

  Davies, G. Elfed (Rhondda, E.)

  Freeson, Reginald

  Baxter, William

  Davies, Ifor (Gower)

  Galpern, Sir Myer

  Benn, Rt. Hn. Anthony Wedgwood

  Davis, Clinton (Hackney, C.)

  Gilbert, Dr. John

  Bennett, James (Glasgow, Bridgeton)

  Davis, Terry (Bromsgrove)

  Ginsburg, David (Dewsbury)

  Bidwell, Sydney

  Deakins, Eric

  Grant, John D. (Islington, E.)

  Bishop. E. S.

  Delargy, Hugh

  Griffiths, Eddie (Brightside)

  Booth, Albert

  Dell, Rt. Hn. Edmund

  Hamilton, James (Bothwell)

  Boothroyd, Miss B. (West Brom.)

  Dempsey, James

  Hamilton, William (Fife, W.)

  Boyden, James (Bishop Auckland)

  Doig, Peter

  Hamling, William

  Broughton, Sir Alfred

  Dormand, J. D.

  Hannan, William (G'gow, Maryhill)

  Brown, Robert C. (N'c'tle-u-Tyne, W.)

  Douglas, Dick (Stirlingshire, E.)

  Hardy, Peter

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

  Douglas-Mann, Bruce

  Harrison, Walter (Wakefield)

  Brown, Ronald (Shoreditch & F'bury)

  Duffy, A. E. P.

  Hart, Rt. Hn. Judith

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

  Dunn, James A.

  Hattersley, Roy

  Callaghan, Rt. Hn. James

  Dunnett, Jack

  Hatton, F.

  Cant, R. B.

  Eadie, Alex

  Healey, Rt. Hn. Denis

  Carter, Ray (Birmingh'm, Northfield)

  Edelman, Maurice

  Hefter, Eric S

  Carter-Jones, Lewis (Eccles)

  Edwards, William (Merloneth)

  Horam, John

  Castle, Rt. Hn. Barbara

  Ellis, Tom

  Houghton, Rt. Hn. Douglas

  Clark, David (Colne Valley)

  English, Michael

  Howell, Denis (Small Heath)

  Cohen, Stanley

  Evans, Fred

  Huckfleld, Leslie

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Hughes, Mark (Durham)

  Mason, Rt. Hn. Roy

  Sillars, James

  Hughes, Robert (Aberdeen, N.)

  Meacher, Michael

  Silverman, Julius

  Hughes, Roy (Newport)

  Mellish, Rt. Hn. Robert

  Skinner, Dennis

  Hunter, Adam

  Mendelson, John

  Small, William

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

  Miller, Dr. M. S.

  Smith, Cyril (Rochdale)

  Janner, Greville

  Milne, Edward

  Smith, John (Lanarkshire, N.)

  Jay, Rt. Hn. Douglas

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

  Spearing, Nigel

  Jenkins, Hugh (Putney)

  Molloy, William

  Spriggs, Leslie

  John, Brynmor

  Morgan, Elysian (Cardiganshire)

  Stallard, A. W.

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

  Morris, Alfred (Wythenshawe)

  Steel, David

  Johnson, Walter (Derby, S.)

  Morris, Charles R. (Openshaw)

  Stewart, Donald (Western Isles)

  Jones, Barry (Flint, E.)

  Moyle, Roland

  Stewart, Rt. Hn. Michael (Fulham)

  Jones, Dan (Burnley)

  Mulley, Rt. Hn. Frederick

  Stoddart, David (Swindon)

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

  Murray, Ronald King

  Stonehouse, Rt. Hn. John

  Jones, T. Alec (Rhondda, W.)

  Oakes, Gordon

  Stott, Roger (Westhoughton)

  Kaufman, Gerald

  Ogden, Eric

  Strang, Gavin

  Kelley, Richard

  O'Malley, Brian

  Summerskill, Hn. Dr. Shirley

  Kerr, Russell

  Oram, Bert

  Swain, Thomas

  Kinnock, Neil

  Orme, Stanley

  Thomas, Jeffrey (Abertillery)

  Lamborn, Harry

  Oswald, Thomas

  Tinn, James

  Lamond, James

  Paget, R. T.

  Tomney, Frank

  Latham, Arthur

  Pardoe, John

  Tope, Graham

  Lawson, George

  Parker, John (Dagenham)

  Torney, Tom

  Leadbitter, Ted

  Parry, Robert (Liverpool, Exchange)

  Tuck, Raphael

  Lee, Rt. Hn. Frederick

  Pavitt. Laurie

  Urwin, T. W.

  Lewis, Arthur (W. Ham, N.)

  Pendry, Tom

  Varley, Eric G.

  Lewis, Ron (Carlisle)

  Perry, Ernest G.

  Wainwright, Edwin

  Lipton, Marcus

  Prentice, Rt. Hn. Reg.

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

  Lomas, Kenneth

  Prescott, John

  Walker, Harold (Doncaster)

  Loughlin, Charles

  Price, William (Rugby)

  Wallace, George

  Lyon, Alexander W. (York)

  Radice, Giles

  Watkins, David

  Mabon, Dr. J. Dickson

  Reed, D. (Sedgefield)

  Weitzman, David

  McBride, Neil

  Rees, Merlyn (Leeds, S.)

  White, James (Glasgow, Pollok)

  McCartney, Hugh

  Rhodes, Geoffrey

  Whitehead, Phillip

  McElhone, Frank

  Roberts, Albert (Normanton)

  Whitlock, William

  McGuire, Michael

  Roberts, Rt. Hn. Goronwy (Caernarvon)

  Willey, Rt. Hn. Frederick

  Machin, George

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

  Williams, W. T. (Warrington)

  Mackenzie, Gregor

  Roper, John

  Wilson, Alexander (Hamilton)

  Mackie, John

  Rose, Paul B.

  Wilson, William (Coventry, S.)

  McMillan, Tom (Glasgow, C.)

  Ross, Rt. Hn. William (Kilmarnock)

  Woof, Robert

  McNamara, J. Kevin

  Rowlands, Ted

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

  Sheldon, Robert (Ashton-under-Lyne)

  TELLERS FOR THE AYES:

  Marks, Kenneth

  Shore, Rt. Hn. Peter (Stepney)

  Mr. John Golding and

  Marsden, F.

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

  Mr. Donald Coleman.

  Marshall, Dr. Edmund

  Short, Mrs. Renée (W'hampton, N.E.)

  NOES

  Adley, Robert

  Churchill, W. S.

  Fox, Marcus

  Alison, Michael (Barkston Ash)

  Clark, William (Surrey, E.)

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

  Archer, Jeffrey (Louth)

  Clegg, Walter

  Gardner, Edward

  Astor, John

  Cockeram, Eric

  Gibson-Watt, David

  Atkins, Humphrey

  Cooke, Robert

  Gilmour, Ian (Norfolk, C.)

  Awdry, Daniel

  Coombs, Derek

  Gilmour, Sir John (Fife, E.)

  Baker, W. H. K. (Banff)

  Cooper, A. E.

  Glyn, Dr. Alan

  Barber, Rt. Hn. Anthony

  Cordle, John

  Gorst, John

  Batsford, Brian

  Corfield, Rt. Hn. Sir Frederick

  Gower, Raymond

  Beamish, Col. Sir Tufton

  Cormack, Patrick

  Grant, Anthony (Harrow, C.)

  Bell, Ronald

  Costain, A. P.

  Gray, Hamish

  Bennett, Sir Frederic (Torquay)

  Critchley, Julian

  Green, Alan

  Bennett, Dr. Reginald (Gosport)

  Crouch, David

  Grieve, Percy

  Benyon, W.

  Davies, Rt. Hn. John (Knutsford)

  Griffiths, Eldon (Bury St. Edmunds)

  Berry, Hn. Anthony

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

  Grylls, Michael

  Biffen, John

  Dean, Paul

  Gummer, J. Selwyn

  Biggs-Davison, John

  Deedes, Rt. Hn. W. F.

  Gurden, Harold

  Boardman, Tom (Leicester, S.W.)

  Digby, Simon Wingfield

  Hall, Miss Joan (Keighley)

  Body, Richard

  Dixon, Piers

  Hall-Davis, A. G. F.

  Boscawen, He. Robert

  du Cann, Pt. Hn. Edward

  Hannam, John (Exeter)

  Bossom, Sir Clive

  Dykes, Hugh

  Harrison, Col. Sir Harwood (Eye)

  Bowden, Andrew

  Eden, Rt. Hn. Sir John

  Haselhurst, Alan

  Hastings, Stephen

  Bray, Ronald

  Edwards, Nicholas (Pembroke)

  Hawkins, Paul

  Brew's, John

  Elliot, Capt. Walter (Carshalton)

  Hayhoe, Barney

  Brinton, Sir Tatton

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

  Hicks, Robert

  Brocklebank-Fowler, Christopher

  Emery, Peter

  Higgins, Terence L.

  Brown, Sir Edward (Bath)

  Eyre, Reginald

  Hiley, Joseph

  Bruce-Gardyne, J.

  Fell, Anthony

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

  Buck, Antony

  Fenner, Mrs. Peggy

  Hill, James (Southampton, Test)

  Bullus, Sir Eric

  Finsberg, Geoffrey (Hampstead)

  Holland, Philip

  Burden, F. A.

  Fisher, Nigel (Surbiton)

  Holt, Miss Mary

  Butler, Adam (Bosworth)

  Fletcher-Cooke, Charles

  Hornby, Richard

  Carlisle, Mark

  Fookes, Miss Janet

  Hornsby-Smith, Rt. Hn. Dame Patricia

  Carr, Rt. Hn. Robert

  Fortescue, Tim

  Howell, David (Guildford)

  Channon, Paul

  Foster, Sir John

  Howell, Ralph (Norfolk, N.)

  Chapman, Sydney

  Fowler, Norman

  Hunt, John

  1382

  1383

  Hutchison, Michael Clark

  Montgomery, Fergus

  Simeons, Charles

  Iremonger, T. L.

  More, Jasper

  Sinclair, Sir George

  Irvine, Bryant Godman (Rye)

  Morgan, Geraint (Denbigh)

  Skeet, T. H. H.

  James, David

  Morgan-Giles, Rear-Adm.

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

  Jenkin, Patrick (Woodford)

  Mudd, David

  Speed, Keith

  Jennings, J. C. (Burton)

  Nabarro, Sir Gerald

  Spence, John

  Johnson Smith, G. (E. Grinstead)

  Nicholls, Sir Harmer

  Sproat, Iain

  Jones, Arthur (Northants, S.)

  Noble, Rt. Hn. Michael

  Stainton, Keith

  Jopling, Michael

  Normanton, Tom

  Stanbrook, Ivor

  Joseph, Rt. Hn. Sir Keith

  Nott, John

  Stewart-Smith, Geoffrey (Belper)

  Kaberry, Sir Donald

  Onslow, Cranley

  Stodart, Anthony (Edinburgh, W.)

  Kellett-Bowman, Mrs. Elaine

  Oppenhelm, Mrs. Sally

  Stokes, John

  King, Tom (Bridgwater)

  Osborn, John

  Stuttaford, Dr. Tom

  Kinsey, J. R.

  Owen, Idris (Stockport, N.)

  Sutcliffe, John

  Kirk, Peter

  Page, Rt. Hn. Graham (Crosby)

  Tapsell, Peter

  Knight, Mrs. Jill

  Page, John (Harrow, W.)

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

  Knox, David

  Parkinson, Cecil

  Taylor, Frank (Moss Side)

  Lamont, Norman

  Percival, Ian

  Taylor, Robert (Croydon, N.W.)

  Lane, David

  Peyton, Rt. Hn. John

  Tebbit, Norman

  Langford-Holt, Sir John

  Pink, R. Bonner

  Temple, John M.

  Le Merchant, Spencer

  Pounder, Rafton

  Thomas, John Stradling (Monmouth)

  Lewis, Kenneth (Rutland)

  Powell, Rt. Hn. J. Enoch

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

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

  Price, David (Eastleigh)

  Thompson, Sir Richard (Croydon, S.)

  Luce, R. N.

  Prior, Rt. Hn. J. M. L.

  Trew, Peter

  McAdden, Sir Stephen

  Proudfoot, Wilfred

  Tugendhat, Christopher

  MacArthur, Ian

  Pym, Rt. Hn. Francis

  Turton, Rt. Hn. Sir Robin

  McCrindle, R. A.

  Ramsden, Rt. Hn. James

  Vaughan, Dr. Cerard

  McLaren, Martin

  Rawlinson, Rt. Hn. Sir Peter

  Vickers, Dame Joan

  Maclean, Sir Fitzroy

  Redmond, Robert

  Waddington, David

  McMaster, Stanley

  Reed, Laurance (Bolton, E.)

  Weider, David (Clitheroe)

  Macmillan, Rt. Hn. Maurice(Farnham)

  Walker, Rt. Hn. Peter (Worcester)

  McNair-Wilson Michael

  Rees, Peter (Dover)

  Walker-Smith, Rt. Hn. Sir Derek

  McNair-Wilson, Patrick (New Forest)

  Rees-Davies, W. R.

  Wall, Patrick

  Madel, David

  Renton, Rt. Hn. Sir David

  Ward, Dame Irene

  Marten, Neil

  Rhys Williams, Sir Brandon

  Warren, Kenneth

  Mather, Carol

  Ridley, Hn. Nicholas

  Weatherill, Bernard

  Maude, Angus

  Ridsdale, Julian

  White, Roger (Gravesend)

  Maudling, Rt. Hn. Reginald

  Roberts, Michael (Cardiff, N.)

  Wlggin, Jerry

  Mawby, Ray

  Roberts, Wyn (Conway)

  Wilkinson, John

  Maxwell-Hyslop, R. J.

  Rodgers, Sir John (Sevenoaks)

  Winterton, Nicholas

  Meyer, Sir Anthony

  Rossi, Hugh (Hornsey)

  Wolrige-Gordon, Patrick

  Miscampbell, Norman

  Rost, Peter

  Wood, Rt. Hn. Richard

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

  Russell, Sir Ronald

  Worsley, Marcus

  Mitchell, David (Basingstoke)

  Scott, Nicholas

  Wylie, Rt. Hn. N. R.

  Moate, Roger

  Scott-Hopkins, James

  Money, Ernie

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

  TELLERS FOR THE NOES:

  Monks, Mrs. Connie

  Shelton, William (Clapham)

  Mr. Kenneth Clarke and

  Monro, Hector

  Shersby, Michael

  Mr. Oscar Murton.

  Question accordingly negatived.

New Clause 9

  SUB-CONTRACTORS IN CONSTRUCTION INDUSTRY
  Section 29 of the Finance Act 1971 shall be amended in subsection (1) by leaving out the words 'is a company or'.—[Mr. Sheldon.]
  Brought up, and read the First time.
  Mr. Sheldon: I beg to move, That the clause be read a Second time.
  The clause deals with what we call the "lump". Although we have had many discussions in the House about certain aspects of it, we seem to be making very heavy weather of finding a fairly simple provision to end what has become an industrial monstrosity. The purpose of the creation of the lump arose primarily from the incidence of selective employment tax and the possibility of evasion of tax in other directions. I suppose that
  1384
  when we end the lump we shall have to turn to a measure similar to that proposed by my hon. Friend the Member for Liverpool, Walton (Mr. Heller) in his Bill on labour-only sub-contracting.
  The Labour Party is opposed to the lump as it operates, and we shall have to put the matter right. The clause deals with only one aspect of it, and probably not the most important aspect. It puts right an obvious anomaly. In the Finance Act 1971 provision was made, so it was thought, to end practices that were becoming prevalent. Provision was made so that payments other than those made to a contractor which was a company or was exempt by Section 30 would have to pay tax on labour provided. It was thought that that would end most of the practices then current. What was not appreciated was the ingenuity of the people involved, and in particular the way in which the operation of the lump would spread.

  1385
  There are a number of major reasons for the spread of this method of operation. The obvious one is the evasion of tax. The practice concerns large numbers of people who move around the country, and the tax collectors tend to be slower in their migrations than the work-people. Therefore, although the Chancellor of the Exchequer has put forward a number of proposals he has never been able to emulate the speed at which these gangs move from place to place.
  Another matter that is becoming important deals with the advantages to people working in labour-only subcontracting of coming under Schedule D rather than Schedule E. This is probably a more serious long-term matter than many of the other matters. The great advantages of coming under Schedule D as opposed to Schedule E are becoming more appreciated. As long as we had a large industrial working class who did not pay income tax and consequently were never knowledgeable about income tax, it was only right to expect that they would not be able to order their affairs and to pay the amount of tax required by law.
  Today, large numbers of ordinary people pay considerable sums of income tax, and it is only natural that they should start looking for methods of tax avoidance that are known to other people who are in a position to avoid paying tax. Such a method is available to those who come under the labour-only sub-contracting schemes. The advantages of Schedule D will not be limited to these groups of people. Unless the law is changed, it will apply to a wider range of people, who will say to themselves, "Why should we be taxed at source for every penny, with a minimum amount of offsets for expenses, and having money deducted in the precise and mechanical way for which Schedule E provides, when other people doing exactly the same work have the advantages which Schedule D provides?" The Chancellor of the Exchequer will have to face this problem increasingly in the years to come.
  This is the first bridgehead of the realisation that certain people will be able to avoid paying their share of income tax. There are serious disadvantages to the community in the spread of this method of operation. My hon. Friend the Member for Liverpool, Walton pointed out the
  1386
  disadvantages to training. Labour-only sub-contracting breaks down the industrial structure. Training, safety requirements and associated matters are not brought into effect as they are when people are working only for one firm and acquiring an understanding of the techniques and regulations that apply to that firm.
  I shall not go into the question of the disadvantage to trade unionists of the labour-only sub-contracting system. Those who feel that trade unionism is the best hope for industrial peace and progress cannot fail to be seriously concerned about the spread of labour-only sub-contracting.
  Sir Frederic Bennett: Has the hon. Gentleman computed the cost of the end product produced by these rival schemes? Apart from the matters he has been arguing, can he say whether the cost of the end product in building is lessened or increased by the continuance of the lump?
  Mr. Sheldon: The difficulty is in providing the proof. One can say from one's own experience in industry that, generally speaking, a stable work force undergoing the discipline of knowing what is happening within a firm, meeting the requirements of that firm and increasing its experience is likely to be more efficient. It is not easy to make a direct comparison.
  One matter that is frequently omitted from consideration is the workers' obligations to the community. The community loses because much of the taxation that should have been payable by workers in the lump is not paid. Even more important, people doing essentially the same kind of work are divided into two groups, one of which has tax advantages and the other of which does not. That aspect is likely to become increasingly important as more people realise the possibilities of tax avoidance.
  Mr. Charles Loughlin: Does my hon. Friend agree that the initial cost of work done by the lump system might be lower but that the total cost in the and, including the cost of maintenance, is higher?
  Mr. Sheldon: I am sure my hon. Friend is right. The responsibility that comes from a working force that can be held

  1387
  accountable by the company is a discipline that may well produce the sort of advantages that he claims.
  Despite all the efforts that have been made, the construction industry is still operating the lump and using lump gangs, even though this is the antithesis of the way in which the industry should be organised. This is only one aspect of the way in which the industry may move in response to individual pressure in trying to reduce taxation commitments. This is a serious matter, and the new clause makes only a small dent in the problem. The solution will lie in another direction, but in the meantime I commend this modest proposal to the House.
  9.30 p.m.
  Mr. Peter Trew: We debated the "lump" at length on the Second Reading of the Labour-Only Sub-Contracting Bill introduced by the hon. Member for Liverpool, Walton (Mr. Heller). However, I do not wish to rehearse the arguments that were employed on that occasion.
  I begin by declaring an interest in the construction industry. The term "the lump" is applied to two different types of activity—labour-only sub-contracting and self-employment. There is good and bad in both. There are employers who provide a service of labour-only subcontracting, fulfil their commitments in terms of training, safety and welfare, and provide work that is efficient and of a high quality. There are others who abuse the system. There has been a tradition of self-employment in the industry for many years—indeed, for hundreds of years—involving craftsmen carrying out work in repairs, maintenance and decorating. Again, they are working perfectly legitimately and they are often good craftsmen. However, there are undoubtedly abuses. Nobody would pretend otherwise.
  I want to confine myself to the remedies that lie within the scope of this debate, namely, fiscal remedies. I agree with the hon. Member for Ashton-under-Lyne (Mr. Sheldon) about Schedule D and the treatment of expenses. One of the biggest incentives to so-called self-employment is the ability to treat such things as travelling expenses as deduc-
  1388
  tible against tax, compared with the ordinary employee who cannot treat them in that way.
  The best way to tackle this matter is to look again at the definition of "self-employment". I am not sure that the Government do not already have the power to deal with this matter. There are two tests by which one can distinguish genuine self-employment from bogus self-employment. The first test is that the genuinely self-employed person offers his services simultaneously to a number of customers. We have to consider the doctor, the lawyer or the dentist who offers a service. Many people in industry who call themselves "self-employed" work for a considerable period of time for only one employer. That is one criterion by which one can judge whether the self-employment is genuine.
  The second test is whether the so-called self-employed person renders his service direct to the customer. Again, if we consider the doctor, the lawyer, the dentist or the accountant, the test is fairly easily fulfilled. The service is rendered direct to the customer. However, in the case of the self-employed person in the construction industry the service is not rendered direct to the customer but through another employer, namely, a main contractor. This is a criterion that, together with the first criterion, should be looked at. I do not know whether it requires to be looked at in terms of new legislation. Perhaps it can be dealt with under the existing rules.
  Mr. Eric S. Heffer: I agree entirely that the lump has a long history in the building industry. I was interested to read several references to it in a new Penguin book that has been published about Mayhew's London—a series of letters and articles written by Mayhew in 1850. The circumstances were somewhat different, of course. In those days the lump comprised people coming into London who pretended to be craftsmen. They undercut experienced, well-trained craftsmen and were used as cheap labour by employers against men who were then trying to form trade unions. The situation is different today, but very much the same principle is involved.

  1389
  The amendment goes only part of the way to meet the real problems that arise out of the operation of the lump. The Government had hoped that Sections 29, 30 and 31 of the 1971 Finance Act would pretty well catch for tax everyone working on the lump in the building and construction industry. The reality is that it has not caught them. Not only have we seen the growth of tax exemption certificates preventing people being caught at the end of the year; we have also seen the growth in the number of limited liability companies, which can and in many cases do wind up before the end of the tax year.
  How, then, is the Inland Revenue to find these people and get the tax that is owing to the country? It is a very difficult problem, which the Government have not solved and cannot solve with this type of legislation. It is obvious that we have to take definite, positive and speedy action about the operation of labour-only sub-contracting in the construction industry.
  We have a situation in London today in which a number of local authorities cannot continue with their building. They cannot obtain craftsmen because the craftsmen are operating on the lump, in many cases on luxury-type building, rather than on building houses and council flats required by the people of London.
  The system also operates in other parts of the country. I know of one man who comes from Blackpool. He goes round in his Rolls-Royce visiting various sites and collecting sums of money from workers whom he has placed on lump contracts. That is why he has a Rolls-Royce. Activities of this sort are undermining the whole collective bargaining system operating in the industry.
  I challenge the argument even that the initial cost is cheaper with the operation of the lump—
  Mr. Loughlin: I said that it may be.
  Mr. Heffer: I was arguing not with my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) but with a Government supporter who, from a sedentary position, said that it was cheaper.
  If a building worker is a member of a trade union and working under the
  1390
  agreement, he is caught under phase 2. If he is working on the lump lie can get two, three, four and even five times as much, and there is no control on him. That is an additional cost.
  Then something else happens. If these workers do not like the job after they have been on it for a week they move off and it is left unfinished. That puts up the cost of building. If hon. Members do not believe me, I suggest that they talk to clients who have been left in that situation. Other workers have to be found and brought in. Sometimes clients seek directly-employed workers, but finding such workers is becoming increasing difficult.
  One reason for the growth of the lump is the operation of phases 1 and 2. If a worker is told, "You cannot earn more than £1 plus 4 per cent.", and there is another outlet, he will seek that other outlet. That means tax avoidance and and many other problems—National Insurance contributions, and so on.
  Another serious aspect is that social responsibilities are not being faced and accepted by those who operate the lump. We had a debate earlier about the big cowboys who salt their money away in the Cayman Islands and elsewhere with their tax avoidance. These people are not in that category; they are the smaller cowboys. They represent the smaller ugly face of capitalism, but it is still the ugly face of capitalism. It means that our housing and hospital programmes, higher pensions and provision for the disabled are affected because thousands of people in the building industry, about a third, are on labour-only sub-contracting. I am not suggesting that the whole of that third do not pay their taxes, but a considerable proportion do not. The money that could be coming in and helping to provide people with better pensions. hospitals, housing, and so on, is not being collected. Therefore, social responsibilities are being avoided. Trade unionists who are on the national agreement and accept these social responsibilities feel somewhat bitter when they see this situation developing and nothing being done by the Government to stop it.
  The Government's complacency is absolutely amazing. I met the Secretary of State for Employment and got a sympathetic hearing. However, when I

  1391
  heard the speech by the Secretary of State for the Environment, I felt that my right hon. Friend was absolutely right to point out that he offered nothing and made no real contribution whatsoever to the solution of this problem.
  The clause will not solve the problem of the lump, but it will go some way towards it. I hope that the House will accept the clause.
  Mr. Lewis Carter-Jones: When my hon. Friend the Member for Liverpool, Walton (Mr. Heller) introduced his Labour-Only Sub-Contracting Bill, I estimated that the amount of tax lost to the Exchequer as a result of the lump was £50 million per annum. No one challenged my estimate on that occasion.
  With £50 million we can build a lot of houses and do a lot for the disabled. Indeed, perhaps the Minister could do something for pneumoconiosis sufferers in my constituency who are being denied aid because of lack of funds. That £50 million could be spent very wisely indeed.
  In effect, the debate on this clause is similar to that on the previous clause in that it concerns tax avoidance to the extent of about £50 million per year. That is the first point.
  The second point, which is of perhaps even more importance, is that, at a time when we need more bricklayers, the number being trained has dropped from 11,000 to 6,000 per annum. This is happening at a time when we need more men, and it is a direct consequence of the lump.
  9.45 p.m.
  The other loss of revenue arises from people not paying for their national insurance stamp. A considerable sum of money is involved, but lying behind the greedy people who want tax havens, and behind the greedy people who do not want to pay their national insurance contributions there are certain human tragedies.
  Some people who operate the lump are not paying for their stamps, and when they die as a result of an accident at work their families receive no benefits. The classic case was the London Bridge disaster. The families of a number of those who were killed or seriously injured received no benefits because the bread
  1392
  winners had not paid their contributions as they belonged to the lump. That is a good reason for the Financial Secretary to accept the clause.
  Mr. Leslie Huckfield: I rise to support my hon. Friend the Member for Liverpool, Walton (Mr. Heller) in the sustained campaign that he has been waging against the lump. I congratulate him on his emphasis and persistence.
  My second reason for taking part in the debate is to support the clause moved by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). When I was a member of the Birmingham Regional Hospital Board I was responsible for the insertion in the board's contracts of a clause that was supposed to outlaw the use of lump labour. It seemed to me an absolute travesty of justice to have people building hospitals and not paying their national insurance stamp. We thought, when we got that clause into the contracts, that we had stopped the practice, but now I hear from the UCAT organiser in Birmingham that despite that clause the lump is still in use on hospital sites. It is not an easy problem to deal with, and I accept that my hon. Friend's clause goes only some way towards putting things right.
  I want to refer to a slightly different aspect of the lump but one that has many of the characteristics referred to by my hon. Friend. I want to refer to the lump in lorry driving. The kind of characteristics that one finds on building sites, with Rolls-Royce and all the overtones, are now being found in lorry driving. One man—Lance Secretan—has made himself the nation-wide expert on employment and how to get jobs. One has to go through Manpower, his firm, to get them, and he is openly going about encouraging the spread of "agency drivers".
  The Minister of State may say that the abuses listed by my hon. Friend cannot happen in lorry driving. He will no doubt tell me that anyone who wants to operate a lorry must have an operator's licence, and that he cannot get that too easily. I hope the hon. Gentleman will note that less than 10 per cent of applications for an operator's licence are refused. The hon. Gentleman may also say that the definition of "operator" and "user" in the Transport Act means

  1393
  that in some way or other a man must be registered as an employer—in which case he must have an operator's licence—or as a user, and he may say that because a man has to be registered as one of those he cannot dodge his taxes, but that depends on the Inland Revenue's going round and checking on all those who have operator's licences.
  The ready-mixed concrete people, in a deliberate attempt to shovel off some of their tax responsibilities, have told their drivers to turn themselves into owner-drivers. They have told them that if they own their lorries and operate them they can get all the tax advantages of self-employed persons. The hon. Gentleman may say that all owner-drivers must have operator's licences, but again everything depends upon the officers of the Inland Revenue going round and checking on all licensed operators to see who actually holds the licence.
  In certain parts of the East End, one cannot get a job as a lorry driver or, if one is an operator, one cannot get drivers, unless one goes to one of these merchants. That is the crowd that Secretan wants to encourage—the agency men in the middle who are profiteering and encouraging the lump in lorry driving. Even if the Minister does not know much about this new and frightening aspect, I hope that he will talk to the Secretary of State for the Environment or the Minister for Transport Industries and find out something about it.
  Because of these agency men and the lump drivers, in future not only income tax and national insurance contributions but the enforcement of drivers' hours will be at risk. Manpower has already been prosecuted in the courts because it cannot enforce drivers' hours.
  There is a national shortage of heavy goods vehicle drivers. So acute is it that anyone with a PSV licence working for London Transport can go to some of these middle men in the East End and get a higher wage as a lorry driver. That is precisely the kind of device that is used to get around phase 2. If one works for two employers in a week, as many of these men do, one can get around phase 2. This is why the lump
  1394
  is growing on building sites and in lorry driving.
  I support my hon. Friend's campaign and urge the Minister to recognise that this problem is not confined to building. It is spreading throughout many small organised industries. It is a problem that will get much worse and the Government must do something about it. I hope that the Minister will say what they will do and what investigations he intends to make. It is not only the nation's house building but the nation's transport which is being held to ransom.
  Mr. Nott: Although the general criticisms of the lump in the construction industry fall more within the responsibility of my hon. Friend the Minister for Housing and Construction, I am aware of the allegations made against it. I have read the debate on the Bill introduced by the hon. Member for Liverpool, Walton (Mr. Heffer).
  I realise that it is argued that the lump does not train its successors, as firms should, that where the lump works, health, safety and welfare regulations are ignored, that the work done by the lump is shoddy and often left uncompleted and that the existence of a large lump leads to bad industrial relations and weakens the joint negotiating machinery for the industry. I appreciate these points, as I appreciate the arguments advanced by the National Federation of Building Trades Employers in the opposite direction.
  But although these are matters of great importance, they do not fall directly within the responsibility of the Treasury. I do not seek to evade the problem, merely to point out that the new clause is concerned with tax matters and that therefore I should confine myself to that aspect. As the hon. Member for Walton knows, the Government are considering many of the issues that he mentioned. Discussions are going on between the employers and the unions in the National Joint Council for the Building Industry, and they have been widely reported in the Press.
  If the hon. Member for Nuneaton (Mr. Leslie Huckfield) or any other hon. Member has evidence of what amounts to tax evasion in any industry—this applies to the transport industry as well—I hope that he will bring it to the attention of the Inland Revenue. Clearly, the kind of

  1395
  practice that he described needs to be investigated. If there is evidence of this kind of practice, that should be brought to the notice of the Inland Revenue. I shall certainly draw the hon. Gentleman's remarks to the attention of the Inland Revenue.
  Mr. Skinner: As the Minister is now inquiring about evidence that he may send to the Inland Revenue, will he take up the recent case of the two lorry drivers who smashed through picket lines, without number plates, registration marks or lights, and who, it has been reported in the Press, were paid substantial amounts of money for doing that, and in respect of whom, up to the present, we have no knowledge of any prosecutions?
  Mr. Nott: I felt that I had to answer a few of the general points in a very general way, but the House would not wish me to be drawn into that case. As I understand it, it is not a matter of tax evasion, which is what the new clause is concerned with.
  On the question of tax, the hon. Member for Walton said that the scheme which we introduced in the Finance Act 1971 had not been a success. That was broadly the tenor of his remarks. A variety of figures have been used for the tax loss that has been incurred. Indeed, the hon. Member for Eccles (Mr. Carter-Jones) talked about a figure of £50 million. That figure has been widely quoted as authoritative by normally responsible newspapers and others. But there is no foundation whatsoever for that figure. Indeed, before we introduced the 1971 legislation, the estimate of the loss was only about £10 million at the outside. There is no possible evidence or proof about the figure of £50 million. I make that point only in passing.
  I echo the words of the hon. Member for Ashton-under-Lyne (Mr. Sheldon). He said that it is very difficult to get proof in this area.
  Mr. Carter-Jones: If the hon. Gentleman can tell me that it is not £50 million, will he say how much money is paid out to labour-only sub-contractors in the construction industry?
  Mr. Nott: I am coming to that. Returns from contractors, giving details of deductions made by them during the
  1396
  year, are now coming in to local Inland Revenue offices. All that can be said at present is that returns received and processed up to the end of May show deductions made totalling £4½ million. It is not known what proportion of the returns this represents, but I believe that it is enough to show very clearly that the scheme is working. I admit that we shall not know until later in the year just how successful the scheme has been.
  Some individuals thought that they could avoid a 30 per cent. deduction by forming companies, and this is the supposed loophole which the new clause is designed to close. When a company is registered it is noted by the Inland Revenue and is immediately recorded, not only as a subject for assessment of its profits but also as an employer required to apply pay-as-you-earn to its directors and employees, and the Inland Revenue pressure on a company may thus begin within a month of its starting to operate. As soon as a company is registered it immediately comes to the notice of the Inland Revenue and pay-as-you-earn comes into operation very soon thereafter.
  Mr. Joel Barnett: How long does it take for the Inland Revenue to insist upon receiving accounts between the date of the company being registered and when it eventually receives its set of accounts or when it issues a notice to the Commissioner for an appeal? It is generally a very long time.
  Mr. Nott: That is a matter of corporation tax. I am merely saying that in the case of individuals who might be seeking to evade tax, if they register as companies in an attempt to do so they do net achieve that purpose, because the registration of the companies comes very quickly to the attention of the Inland Revenue and the employees and directors of the company are immediately put on pay-as-you-earn.
  10.0 p.m.
  The presentation of the accounts of the company may be later, but pay-as-you-earn becomes payable as soon as registration of the company comes to the notice of the Inland Revenue.
  Mr. Joel Barnett: If the company simply tells the Inland Revenue that there

  1397
  are no employees liable to pay-as-you-earn, surely that is the end of the matter.
  Mr. Nott: This is a matter between the company and the Inland Revenue. That is a hypothetical case. If the employees and the directors are employed by the company, they will be liable to pay-as-you-earn. I think that answers the main point in the amendment.
  The extension of the present scheme for individuals and partnerships to companies would be generally unworkable. A large part of the work in the industry, especially specialist work, is done by subcontracting companies. To require all of these to apply for exemption certificates would be nonsensical.
  It has been alleged, and it was mentioned by the hon. Member for Walton, that there has been a great increase in company registrations as a result of individuals registering companies and seeking to evade the lump. There was a large increase of company registrations, but there were other factors present to account for this, such as the considerable relaxations in the rules for the taxation of close companies. Since the objects of new companies are not recorded statistically, we do not know how far subcontractors were responsible for the increase in new company registrations, but there are indications to suggest that only a small proportion of the new companies were set up by subcontractors.
  Mr. Loughlin: The hon. Gentleman says there are indications to suggest that only a small proportion of the increased number of companies were associated with the lump. Will he say what those indications are?
  Mr. Nott: The principal reason why we believe the number of company registrations increased so greatly in that period is that it was due to a large increase following the close company legislation which we introduced.
  Mr. Loughlin: The hon. Gentleman said that in the first instance and went on to say that there were indications. I ask him to provide the House with the information which he says that he has.
  Mr. Nott: I cannot go beyond what I said. We believe that it was primarily due to the close company registrations
  1398
  and not due to registrations by subcontractors.
  We appreciated at the time of the 1971 legislation that during the first period of this deduction-at-source arrangement the system would not be 100 per cent. foolproof. That we recognise. It is only now that the returns are coming into the Inland Revenue. I can assure the hon. Gentleman and those who have supported the amendment that during the year we shall be reviewing the scheme set up under the 1971 legislation. If action needs to be taken to strengthen the Inland Revenue's powers in this area it will be taken as soon as we have the evidence upon which to base further action. At this stage I cannot reasonably go further, except to say that we are aware of the great concern that exists about the lump. We know that allegations are being made that tax is being evaded.
  We shall not be in a position to have sufficient evidence or proof about whether these allegations are correct until the returns have come in, but when evidence is available we shall review the position to see whether it is operating adequately, as indeed we intend that it should.
  Mr. Alfred Morris: The Minister referred earlier to the returns that had been received by May of this year. Is it possible to deduce from those returns whether stages 1 and 2 of the Government's income policy have been complied with? The Minister will recall that my hon. Friend made penetrating criticisms on this matter.
  Mr. Nott: I do not think that the House would wish me now to go into the whole question of incomes policy. The code applies to work within the construction industry. We are aware that in the case of the lump certain problems have been thrown up about the code. In recognition of the difficulty the Government proposed a special construction panel which has now been set up to advise the Pay Board and the Price Commission on how the price and pay code might be applied more effectively to construction. There are grounds for concern in this area, but the matter is under review and the special review body has been set up to advise the Price Commission and Pay Board.
  Sir Harmar Nicholls: The hon. Member for Heywood and Royton (Mr. Joel Barnett) said that if a company in reporting to the Inland Revenue said that nobody was on PAYE that ended the matter. That has not been my experience in dealing with the Inland Revenue. I have not found that a quick answer from somebody involved shuts the Inland Revenue up. It should not be left unchallenged on the record that the Inland Revenue is as gullible as all that.
  Mr. Sheldon: We have had a very interesting debate but I do not think that at the end of it any hon. Member could say that he was convinced by the Minister of State. The hon. Gentleman's comment that there is to be a construction panel to advise the Price Commission on how far the increases should be met was the last absurdity in a number of comments that did not do his reputation as much good as many of his hon. Friends would wish.
  What has been shown is that the scheme which the hon. Gentleman explained was far less than the 100 per cent. foolproof scheme which even he admitted that it was not. The hon. Gentleman said that he was aware of the tax that was being evaded. He offered hopes for the months to come. We on this side offer rather more than hope. We put a concrete and specific path of action before the House and ask for it to be approved.
  My hon. Friends the Members for Liverpool, Walton (Mr. Heffer), for Eccles (Mr. Carter-Jones) and for Nuneaton (Mr. Leslie Huckfield) made important points showing that the evasion of tax was far greater than the Minister of State was able to show. They pointed out, too, that the consequences for training and for safety were very serious.
  The Minister of State is reduced to the level of arguing that the Inland Revenue will make contact with new companies and investigate them in due course. Anybody with any knowledge knows full well that the kind of contact that is made by the Inland Revenue with firms newly registered is of the most perfunctory kind and the Revenue will not be able to undertake the examination that the lump requires.
  What is even more absurd, as anybody with knowledge knows, is that any company which finds that the Inland Revenue is getting a little too close to it for comfort can let that company go, move to another part of the country and set up all over again. This is what is happening. Everybody knows that the Revenue will never catch up with many of these practices and with those who carry out the practices.
  We on this side say that we must end the lump gangs. We are committed to that. Although there may be some small disadvantages in excluding certain kinds of operation, there will in the end be positive advantages for the construction industry and for those employed in it. For that reason, we shall divide the House on the new clause.
  Mr. Trew: My hon. Friend the Minister of State did not refer to the—
  Hon. Members: The hon. Gentleman has already spoken.
  Mr. Trew: By leave of the House, may I—
  Hon. Members: No.
  Question put, That the clause be read a Second time:
  The House divided: Ayes 223, Noes 240.

  Division No. 194.]

  AYES

  [10.10 p.m.

  Abse, Leo

  Booth, Albert

  Clark, David (Colne Valley)

  Allaun, Frank (Salford, E.)

  Boothroyd, Miss B. (West Brom.)

  Cohen, Stanley

  Archer, Peter (Rowley Regis)

  Boyden, James (Bishop Auckland)

  Conconnon, J. D.

  Armstrong, Ernest

  Bradley, Tom

  Crawshaw, Richard

  Ashton, Joe

  Broughton, Sir Alfred

  Crossman, Rt. Hn. Richard

  Atkinson, Norman

  Brown, Robert C. (N'c'tle-u-Tyne, W.)

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

  Bagier, Gordon A. T.

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

  Cunningham, Dr. J. A.(Whitehaven)

  Barnes, Michael

  Brown, Ronald (Shoreditch & F'bury)

  Dalyell. Tam

  Barnett, Joel (Heywood and Royton)

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

  Davidson, Arthur

  Baxter, William

  Callaghan, Rt. Hn. James

  Davies, Denzil (Llanelly)

  Bonn, Rt. Hn. Anthony Wedgwood

  Cant, R. B.

  Davies, G. Elfed (Rhondda, E.)

  Bennett, James (Glasgow, Bridgeton)

  Carter, Ray (Birmingh'm, Northfield)

  Davies, Ifor (Gower)

  Bidwell, Sydney

  Carter-Jones, Lewis (Eccles)

  Davis, Clinton (Hackney, C.)

  Bishop, E. S.

  Castle, Rt. Hn. Barbara

  Davis, Terry (Bromsgrove)

  Deakins, Eric

  Jones, Dan (Burnley)

  Radice, Giles

  de Freitas, Rt. Hn. Sir Geoffrey

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

  Reed, D. (Sedgefield)

  Dempsey, James

  Jones, T. Alec (Rhondda W.)

  Rees, Merlyn (Leeds, S.)

  Dormand, J. D.

  Judd, Frank

  Rhodes, Geoffrey

  Douglas, Dick (Stirlingshire, E.)

  Kaufman, Gerald

  Roberts, Albert (Normanton)

  Douglas-Mann, Bruce

  Kelley, Richard

  Roberts, Rt. Hn. Goronwy (Caernarvon)

  Duffy, A. E. P.

  Kerr, Russell

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

  Dunn, James A.

  Kinnock, Neil

  Roper, John

  Dunnett, Jack

  Lamborn, Harry

  Rose, Paul B.

  Eadie, Alex

  Lamond, James

  Pass, Rt. Hn. William (Kilmarnock)

  Edelman, Maurice

  Latham, Arthur

  Rowlands, Ted

  Edwards, William (Merioneth)

  Lawson, George

  Sandelson, Neville

  Ellis, Tom

  Leadbitter, Ted

  Sheldon, Robert (Ashton-under-Lyne)

  English, Michael

  Lester, Miss Joan

  Shore, Rt. Hn. Peter (Stepney)

  Evans, Fred

  Lewis, Arthur (W. Ham, N.)

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

  Ewing, Harry

  Lewis, Ron (Carlisle)

  Short, Mrs. Renée (W'hampton, N.E.)

  Faulds, Andrew

  Lipton, Marcus

  Silkin, Rt. Hn. John (Deptford)

  Fernyhough, Rt. Hn. E.

  Lomas, Kenneth

  Silkin, Hn. S. C. (Dulwich)

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

  Loughlin, Charles

  Sillars, James

  Fitch, Alan (Wigan)

  Lyon, Alexander W. (York)

  Silverman, Julius

  Fletcher, Raymond (Ilkeston)

  Mabon, Dr. J. Dickson

  Skinner, Dennis

  Fletcher, Ted (Darlington)

  McBride, Neil

  Small, William

  Ford, Ben

  McCartney, Hugh

  Smith, Cyril (Rochdale)

  Forrester, John

  McElhone, Frank

  Smith, John (Lanarkshire, N.)

  Fraser, John (Norwood)

  McGuire, Michael

  Spearing, Nigel

  Freeson, Reginald

  Machin, George

  Stallard, A. W.

  Galpern, Sir Myer

  Mackenzie, Gregor

  Steel, David

  Gilbert, Dr. John

  Mackie, John

  Stewart, Donald (Western Isles)

  Ginsburg, David (Dewsbury)

  McMillan, Tom (Glasgow, C.)

  Stewart, Rt. Hn. Michael (Fulham)

  Golding, John

  McNamara, J. Kevin

  Stoddart, David (Swindon)

  Grant, John D. (Islington, E.)

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

  Stonehouse, Rt. Hn. John

  Griffiths, Eddie (Brightside)

  Marks, Kennett

  Stott, Roger (Westhoughton)

  Grimond, Rt. Hn. J.

  Marsden, F.

  Strang, Gavin

  Hatton, F.

  Marshall, Dr. Edmund

  Summerskill, Hn. Dr. Shirley

  Hamilton, William (Fife. W.)

  Mason, Rt. Hn. Roy

  Swain, Thomas

  Hamling, William

  Meacher, Michael

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

  Hannan, William (G'gow, Maryhill)

  Mellish, Rt. Hn. Robert

  Thomas, Jeffrey (Abertillery)

  Hardy, Peter

  Mendelson, John

  Tins, James

  Harrison, Walter (Wakefield)

  Miller, Dr. M. S.

  Tourney, Frank

  Hart, Rt. Hn. Judith

  Milne, Edward

  Tope, Graham

  Fattersley, Roy

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

  Torrey, Tom

  Healey, Rt. Hn. Denis

  Molloy, William

  Tuck, Raphael

  Heifer, Eric S.

  Morgan, Elysian (Cardiganshire)

  Irwin, T. W.

  Hooson, Emlyn

  Morris, Alfred (Wythenshawe)

  Vartey, Eric G.

  Horam, John

  Morris, Charles R. (Openshaw)

  Wainwright, Edwin

  Houghton, Rt. Hn. Douglas

  Moyle, Roland

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

  Howell, Denis (Small Heath)

  Mulley, Rt. Hn. Frederick

  Walker, Harold (Doncaster)

  Huckfield, Leslie

  Murray, Ronald King

  Wallace, George

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Oakes, Gordon

  Watkins, David

  Hughes, Mark (Durham)

  Ogden, Eric

  Weitzman, David

  Hughes, Robert (Aberdeen, N.)

  O'Malley, Brian

  White, James (Glasgow, Pallok)

  Hughes, Roy (Newport)

  Oram, Bert

  Whitehead, Phillip

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

  Orme, Stanley

  Whitlock, William

  Janner, Greville

  Oswald, Thomas

  Willey, Rt. Hn. Frederick

  Jay, Rt. Hn. Douglas

  Parker, John (Dagenham)

  Williams, W. T. (Warrington)

  Jenkins, Hugh (Putney)

  Parry, Robert (Liverpool, Exchange)

  Wilson, Alexander (Hamilton)

  Jenkins, Rt. Hn. Roy (Stechford)

  Pavitt, Laurie

  Wilson, William (Coventry, S.)

  John, Brynmor

  Pendry, Tom

  Woof, Robert

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

  Perry, Ernest G.

  Johnson, Walter (Derby, S.)

  Prentice, Rt. Hn Reg.

  TELLERS FOR THE AYES:

  Jones, Barry (Flint, E.)

  Prescott, John

  Mr. Donald Coleman and

  Price, William (Rugby)

  Mr. James Hamilton.

  NOES

  Adley, Robert

  Bossom, Sir Clive

  Cooke, Robert

  Alison, Michael (Barkston Ash)

  Bowden, Andrew

  Coombs, Derek

  Archer, Jeffrey (Louth)

  Bray, Ronald

  Cooper, A. E.

  Astor, John

  Brewis, John

  Cordle, John

  Atkins, Humphrey

  Brinton, Sir Tatton

  Corfield, Rt. Hn. Sir Frederick

  Awdry, Daniel

  Brocklebank-Fowler, Christopher

  Cormack, Patrick

  Baker, W. H. K. (Banff)

  Brown, Sir Edward (Bath)

  Crituhley, Julian

  Barber, Rt. Hn. Anthony

  Bruce-Gardyne, J.

  Crouch, David

  Batsford, Brian

  Buck, Antony

  Davies, Rt. Hn. John (Knutsford)

  Bell, Ronald

  Bullus, Sir Eric

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

  Bennett, Sir Frederic (Torquay)

  Burden, F. A.

  Dean, Paul

  Bennett, Dr. Reginald (Gosport)

  Butler, Adam (Bosworth)

  Deedes, Rt. Hn. W. F.

  Benyon, W.

  Carlisle, Mark

  Digby, Simon Wingfield

  Berry, Hn. Anthony

  Chapman, Sydney

  Dixon, Piers

  Biffen, John

  Chataway, Rt. Hn. Christopher

  du Cann, Rt. Hn. Edward

  Biggs-Davison, John

  Churchill, W. S.

  Dykes, Hugh

  Boardman, Tom (Leicester, S.W.)

  Clark, William (Surrey, E.)

  Eden, Rt. He. Sir John

  Body, Richard

  Clegg, Walter

  Edwards, Nicholas (Pembroke)

  Boscawen, Hn. Robert

  Cockeram, Eric

  Elliot, Capt. Walter (Carshalton)

  1402

  1403

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

  Kirk, Peter

  Ridley, Hn. Nicholas

  Emery, Peter

  Knight, Mrs. Jill

  Ridsdale, Julian

  Eyre, Reginald

  Knox, David

  Roberts, Michael (Cardiff, N.)

  Fenner, Mrs. Peggy

  Lamont, Norman

  Roberts, Wyn (Conway)

  Finsberg, Geoffrey (Hampstead)

  Lane, David

  Rodgers, Sir John (Sevenoaks)

  Fisher, Nigel (Surbiton)

  Langford-Holt, Sir John

  Rossi, Hugh (Hornsey)

  Fletcher-Cooke, Charles

  Le Merchant, Spencer

  Rost, Peter

  Fookes, Miss Janet

  Lewis, Kenneth (Rutland)

  Royle, Anthony

  Foster, Sir John

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

  Russell, Sir Ronald

  Fowler, Norman

  Luce, R. N.

  Scott, Nicholas

  Fox, Marcus

  MacArthur, Ian

  Scott-Hopkins, James

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

  McCrindle, R A.

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

  Gardner, Edward

  McLaren, Martin

  Shelton, William (Clapham)

  Gibson-Walt, David

  Maclean, Sir Fitzroy

  Shersby, Michael

  Gilmour, Ian (Norfolk, C.)

  McMaster, Stanley

  Simeons, Charles

  Gilmour, Sir John (Fife, E.)

  Macmillan, Rt. Hn. Maurice(Farnham)

  Sinclair, Sir George

  Glyn, Dr. Alan

  McNair-Wilson, Michael

  Skeet, T. H. H.

  Gorst, John

  Madel, David

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

  Gower, Raymond

  Marten, Neil

  Speed, Keith

  Grant, Anthony (Harrow, C.)

  Mather, Carol

  Spence, John

  Gray, Hamish

  Maude, Angus

  Spreat, Iain

  Green, Alan

  Maudling, Rt. Hn. Reginald

  Stainton, Keith

  Grieve, Percy

  Mawby, Ray

  Stanbrook, Ivor

  Griffiths, Eldon (Bury St. Edmunds)

  Maxwell-Hyslop, R. J.

  Stewart-Smith, Geoffrey (Belper)

  Grylls, Michael

  Meyer, Sir Anthony

  Stodart, Anthony (Edinburgh, W.)

  Gummer, J. Selwyn

  Miscampbell, Norman

  Stokes, John

  Gurden, Harold

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

  Stuttaford, Dr. Tom

  Hall, Miss Joan (Keighley)

  Mitchell, David (Basingstoke)

  Sutcliffe, John

  Hall-Davis, A. G. F.

  Moate, Roger

  Tapsell, Peter

  Hannam, John (Exeter)

  Money, Ernie

  Taylor, Frank (Moss Side)

  Harrison, Col. Sir Harwood (Eye)

  Monks, Mrs. Connie

  Taylor, Robert (Croydon, N.W.)

  Hasethurst, Alan

  Monro, Hector

  Tebbit, Norman

  Hastings, Stephen

  Montgomery, Fergus

  Temple, John M.

  Hawkins, Paul

  More, Jasper

  Thomas, John Stradling (Monmouth)

  Hayhoe, Barney

  Morgan, Geraint (Denbigh)

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

  Hicks, Robert

  Morgan-Giles, Rear-Adm.

  Thompson, Sir Richard (Croydon, S.)

  Higgins, Terence L.

  Mudd, David

  Tilney, John

  Hiley, Joseph

  Murton, Oscar

  Trew, Peter

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

  Nabarro, Sir Gerald

  Tugendhat, Christopher

  Holland, Philip

  Nicholls, Sir Harmer

  Turton, Rt. Hn. Sir Robin

  Holt, Miss Mary

  Noble, Rt. Hn Michael

  Vaughan, Dr. Gerard

  Hornhy, Richard

  Normanton, Tom

  Vickers, Dame Joan

  Hornsby-Smith, Rt. Hn. Dame Patricia

  Nott, John

  Waddington, David

  Howe, Rt. Hn. Sir Geoffrey (Reigate)

  Oppenhelm, Mrs. Sally

  Warder, David (Clitheroe)

  Howell, David (Guildford)

  Osborn, John

  Walker, Rt. Hn. Peter (Worcester)

  Howell. Ralph (Norfolk, N.)

  Owen, Idris (Stockport, N.)

  Walker-Smith, Rt. Hn. Sir Derek

  Hunt, John

  Page, Rt. Hn. Graham (Crosby)

  Wall, Patrick

  Hutchison, Michael Clark

  Page, John (Harrow, W.)

  Ward, Dame Irene

  Iremonger, T. L.

  Parkinson, Cecil

  Warren, Kenneth

  Irvine, Bryant Godman (Rye)

  Percival, Ian

  Weatherill, Bernard

  James, David

  Peyton, Rt. Hn. John

  White, Roger (Gravesend)

  Jenkin, Patrick (Woodford)

  Pink, R. Bonner

  Wiggin, Jerry

  Jennings, J. C. (Burton)

  Powell, Rt. Hn Enoch

  Wilkinson, John

  Johnson Smith, G. (E. Grinstead)

  Price, David (Eastleich)

  Winterton, Nicholas

  Jones, Arthur (Northants, S.)

  Prior, Rt. Hn. J. M. L.

  Woirige-Gordon, Patrick

  Jopling, Michael

  Proudfoot, Wilfred

  Wood, Rt. Hn. Richard

  Joseph, Rt. Hn. Sir Keith

  Pym, Rt. Hn. Francis

  Worsiey, Marcus

  Kaberry, Sir Donald

  Ramsden, Rt. Hn. James

  Wylie, Rt. Hn. N. R.

  Kellett-Bowman, Mrs. Elaine

  Rawlinson, Rt. Hn. Sir Peter

  Kershaw, Anthony

  Redmond, Robert

  TELLERS FOR THE NOES:

  King, Tom (Bridgwater)

  Reed, Laurance (Bolton, E.)

  Mr. Kenneth Clarke and

  Kinsey, J. R.

  Rees, Peter (Dover)

  Mr. Tim Fortescue.

  Rhys Williams, Sir Brandon

  Question accordingly negatived.

New Clause 10

  VAT REGISTRATION—SMALL FIRMS
  'Schedule 1 of the Finance Act 1972 shall be amended so that £7,500 shall be substituted for all references to £5,000; £6,250 for all references to £4,250; £4,500 for all references to £3,000; £2,625 for all references to £1,750; £6,000 for all references to £4,000; £1,875 for all references to £1,250.'—{ Dr. Gilbert.]
  Brought up, and read the First time.
  Dr. John Gilbert: I beg to move, That the clause be read a Second time.
  I should like first to correct what I hope is a printer's error in the new clause, Mr. Speaker. The figure of £6,250 should be £6,375. I trust that that is indeed a printer's error and not an error on the part of the Parliamentary Labour Party's computer, or of those of my hon. Friends who may have drafted the amendment.
  I am not surprised that the Government have seen fit to phrase the financial resolutions in such a way that this will be the only debate on value added tax which will be in order. I understand why they have done so, the more particularly in view of some of the replies which the Chief Secretary to the Treasury gave at Question Time on Thursday as he inched his way from the Government's commitment to zero rate food. But I will not dilate on that for too long.
  The object of the new clause is straightforward—to compensate small traders for the inflation which has already taken place under the present Government. It would lift the lower exemption limit for value added tax in all respects by 50 per cent. from the amounts laid down in Schedule 1 of the Finance Act, 1972. Indeed—to be fair to the Government—I must point out that it slightly over-compensates for the amount of inflation which has taken place since the Act came into force and since the tax became operational. However, the overcompensation is only slight and at the rate the inflation is going small traders need not only new Clause 10 but probably a further lift in the exemption floor for VAT before the end of this Parliament.
  It would be very interesting to know from the Financial Secretary how many
  1406
  firms which are under the £5,000 limit have registered voluntarily already under the provisions of the 1972 Act enabling them to do so. What would be even more interesting and more important to know would be how many firms have been driven from business, which have been on the margin of the £5,000 limit and have been caught by it and, rather than go along with all the bookkeeping and additional burden of work which VAT involves, have finally decided to pack in the whole thing, that the game is not worth the candle and have with drawn from business. I do not pretend to know how many firms there are in that category. I am quite sure that the hon. Gentleman does not know. I suspect we shall never know how many firms have been driven from business as a result of value added tax.
  However, I should like to read a letter which I have received on this very subject, it is addressed to me from Cardiff and it says:
  "I was very interested to read your article about the effects of VAT on the small shopkeeper and I think you will be interested to learn of my experience here. We had a very good ironmonger here, with two brothers also in the same line of business a mile or two away, but in May they all three started to sell off their stock to avoid VAT—one in Rhiwbina village and one in Whitchurch, a mile away from that. By this time I think they have all closed, though one may still be open as they have moved stock from one shop to another and taken turns to help each other. All goods were sold at 33 per cent. discount and some people have got some bargains. but this leaves us without any hardware shop in a fairly large area. One of the brothers is said be near retiring age—69—but this would not lead to the closure of all three in normal times, and such a shop has so many different kinds of goods to sell that I can well understand their reluctance to tackle the new and superfluous task of VAT."
  Whatever the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) may think, it is not a laughing matter. It is not a laughing matter for small businesses and it is not a laughing matter for people who in village communities rely on small businesses for their supplies. Earlier the hon. Member for Oswestry (Mr. Biffen) and the hon. Member for Basingstoke (Mr. David Mitchell), whom I see in his place, were most eloquent when we were discussing new Clause 39 and the burdens placed by reporting requirements on small businesses. I agree with what the

  1407
  hon. Member for Basingstoke said on that clause. I am sure that he will agree that the burdens placed on small businesses by that clause are as nothing compared with the burdens placed on small businesses by VAT.
  This clause is not just an attempt to get a little leeway under the Finance Act 1972. It is much more than that. It is a plea for mercy from the Government for small firms. Something must be done along these lines. The Government know perfectly well that the £5,000 exemption limit was inadequate when it was first introduced, has been overtaken by events, and must be raised drastically in the immediate future.
  Mr. David Mitchell: I agree with the principle that the £5,000 limit should be reviewed from time to time in the light of changes in the value of money. I do not think the figures specified in the clause are realistic and I shudder to think what chaos there would be tomorrow morning if the clause were passed and traders in the middle of a quarter's VAT trading period found themselves suddenly removed outside the scope of VAT when they thought they were inside it. I cannot think that the hon. Gentleman's colleagues, who apparently worded this new clause for him, did their researches as well as he would have wished had he studied the matter first.
  10.30 p.m.
  There is one way in which an amendment along somewhat different lines would be of considerable value. I refer to the problem arising for the small trader in making quarterly returns when he is a small trader who does not do his own accounting— the sort of trader who at the end of 12 months goes to his accountant, hands him two spike files and says, "There you are, Charlie, get on with it". Charlie goes through these dusty pieces of paper and works out what the accounts of the business are.
  That sort of trader is quite incapable of making a quarterly VAT return. I hope my hon. Friend will allow him to make an estimated payment quarterly on condition that once a year his auditor presents a properly audited VAT return and makes the requisite balance payment to get it right. If my hon. Friend is not able to accede to this simple request I honestly believe that he will find himself
  1408
  making far more work for the already over-worked Department of Customs and Excise. I have the highest possible praise for the way in which it has introduced VAT.
  It has gone to great trouble to help traders in the difficult teething problems which they have had. If the Department is faced with inadequate and erroneous returns—as it will be under this system—from traders who are incapable of making proper returns there will be a great deal of additional work. It will be much better if the Government accept this suggestion.
  Mr. Higgins: I was a little puzzled by the initial remarks of the hon. Member for Dudley (Dr. Gilbert). He seemed to be seeking to relate this new clause to the question of inflation. Yet if we look at the report of the debates on this subject on 24th May, 1972 we find that his hon. and right hon. Friends on the Opposition Front Bench moved an amendment to increase the limit to £10,000. This year, however, they have come down to £7,500. I find it a little difficult to reconcile this with the hon. Gentleman's arguments that this new clause is motivated by thoughts of inflation.
  Mr. Joel Barnett: That was after consultation with the Financial Secretary.
  Mr. Higgins: Then I can only hope that by next year we shall be in complete agreement. We debated the merits of the case last year and we freely admitted that the level at which the limit had been fixed was necessarily to some extent arbitrary. We could not conclusively say that £4,999 was better than £5,001.
  What we were seeking to do was to establish a balance between, on the one hand, the loss of revenue which raising the exemption limit would have had, and on the other the reduction in the administrative burden which having a higher limit would bring about. I said last year, I repeat now, that I believe the limit of £5,000 is round about the right order of magnitude.
  We can certainly get variations but I believe that we can strike about the right balance. By and large the representations have tended to be from people

  1409
  arguing for a lower exemption limit rather than a higher one. The present level of exemption largely avoids the problems involved in moving from a position where one set of traders is exempt and another set is taxable. If we were significantly to raise exemption limit we would have a number of traders, all in a fairly substantial way of business, some of whom were exempt and others not exempt. This would create severe distortions.
  I believe that the kind of limit we now have is right. A taxable trader can deduct his input tax, whereas an exempt trader cannot. This means that the problems which arise at the borderline are not as great as they would otherwise be.
  Hon. Members have said that the limit is too low, but it is already well above the limit operating in many countries on the continent which employ the VAT system. As for changing the limit, in the initial period this would lead to a considerable amount of confusion.
  The hon. Member for Dudley referred to one or two technical errors in his arithmetic. There was another one the hon. Gentleman did not mention, but I shall make no particular point of it. I understand the purpose of the clause. When we consider all the factors involved
  and the fact that the clause would involve in a full year a loss of revenue of about £30 million, I am sure that my hon. Friends, concerned as they are about the level of aggregate demand and overheating, would not feel it right to accept the clause, based as it is on the inadequate arguments which have been put forward.
  My hon. Friend the Member for Basingstoke (Mr. David Mitchell) has on a number of occasions raised the question of estimated payments. I have written to him on this matter on previous occasions and I believe that on one occasion we debated this matter. I cannot accept his suggestion, for reasons which I am sure he knows. It is not true to say that the burden on the small trader is anywhere near as large as the Labour Party suggests. Whereas last year this kind of scaremongering was likely to worry people, it is now the case that small traders understand the working of the tax and that it has operated in a reasonably smooth and acceptable way.
  For all the reasons I have given the House, I ask my hon. Friends to reject the clause.
  Question put, That the clause be read a Second time:—
  The House divided: Ayes 219, Noes 236.

  Division No. 195.]

  AYES

  [10.43 p.m.

  Abse, Leo

  Crossman, Rt. Hn. Richard

  Forrester, John

  Allaun, Frank (Salford, E.)

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

  Fraser, John (Norwood)

  Archer, Peter (Rowley Regis)

  Cunningham, Dr. J. A. (Whitehaven)

  Freeson, Reginald

  Armstrong, Ernest

  Dalyell, Tam

  Galpern, Sir Myer

  Ashton, Joe

  Davidson, Arthur

  Gilbert, Dr. John

  Atkinson, Norman

  Davies, Denzil (Llanelly)

  Ginsburg, David (Dewsbury)

  Bagier, Gordon A. T.

  Davies, G. Elfed (Rhondda, E.)

  Golding, John

  Barnes, Michael

  Davies, Ifor (Gower)

  Grant, John (Islington, E.)

  Barnett, Joel (Heywood and Royton)

  Davis, Clinton (Hackney, C.)

  Griffiths, Eddie (Brightside)

  Benn, Rt. Hn. Anthony Wedgwood

  Davis, Terry (Bromsgrove)

  Grimond, Rt. Hn. J.

  Bennett, James (Glasgow, Bridgeton)

  Deakins, Eric

  Hatton, F.

  Bidwell, Sydney

  de Freitas, Rt. Hn. Sir Geoffrey

  Hamilton, William (Fife, W.)

  Bishop, E. S.

  Dempsey, James

  Hamling, William

  Booth, Albert

  Dormand, J. D.

  Harnan, William (G'gow, Maryhill)

  Boothroyd, Miss B. (West Brom.)

  Douglas, Dick (Stirlingshire, E.)

  Hardy, Peter

  Boyden, James(Bishop Auckland)

  Douglas-Mann. Bruce

  Harrison, Col. Sir Harwood (Eye)

  Bradley, Tom

  Duffy, A. E. P.

  Hart, Rt. Hn. Judith

  Broughton, Sir Mired

  Dunn, James A.

  Hattersley, Roy

  Brown, Robert C. (N'c'tle-u-Tyne, W.)

  Dunnett, Jack

  Healey, Rt. Hn. Denis

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

  Eadie, Alex

  Heffer, Eric G.

  Brown, Ronald(Shoreditch & F'bury)

  Edelman, Maurice

  Hooson, Emlyn

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

  Edwards, William (Merloneth)

  Horam, John

  Callaghan, Rt. Hn. James

  Ellis, Tom

  Houghton, Rt. Hn. Douglas

  Cant, R. B.

  English, Michael

  Howell, Denis (Small Heath)

  Carter. Pay (Birmingh'm, Northfield)

  Evans, Fred

  Huckfield, Leslie

  Carter-Jones, Lewis (Eccles)

  Ewing, Harry

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Castle, Rt. Hn. Barbara

  Faulda, Andrew

  Hughes, Mark (Durham)

  Clark, David (Colne Valley)

  Fernyhough, Rt. Hn. E.

  Hughes, Robert (Aberdeen, N.)

  Cohen, Stanley

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

  Hughes, Roy (Newport)

  Concannon, J. D.

  Fitch, Alan (Wigan)

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

  Crawshaw, Richard

  Fletcher, Ted (Darlington)

  Janner, Greville

  Cronin, John

  Ford. Ben

  Jay, Rt. Hn. Douglas

  Miller, Dr. M. S.

  Silverman, Julius

  Jeger, Mrs. Lena

  Milne, Edward

  Skinner, Dennis

  Jenkins, Hugh (Putney)

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

  Small, William

  Jenkins, Rt. Hn. Roy (Stechford)

  Molloy, William

  Smith, Cyril (Rochdale)

  John, Brynmor

  Morgan, Elysian (Cardiganshire)

  Smith, John (Lanarkshire, N.)

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

  Morris, Alfred (Wythenshawe)

  Spearing, Nigel

  Johnson, Walter (Derby, S.)

  Morris, Charles R. (Openshaw)

  Stallard, A. W.

  Jones, Barry (Flint, E.)

  Moyle, Roland

  Steel, David

  Jones, Dan (Burnley)

  Mulley, Rt. Hn. Frederick

  Stewart, Rt. Hn. Michael (Fulham)

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

  Murray, Ronald King

  Stoddart, David (Swindon)

  Jones, T. Alec (Rhondda, W.)

  Oakes, Gordon

  Stonehouse, Rt. Hn. John

  Judd, Frank

  Ogden, Eric

  Stott, Roger (Westhoughton)

  Kaufman, Gerald

  O'Malley, Brian

  Strang, Gavin

  Kerr, Russell

  Oram, Bert

  Summerskill, Hn. Dr. Shirley

  Kinnock, Neil

  Orme, Stanley

  Swain, Thomas

  Lamborn, Harry

  Oswald, Thomas

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

  Lamond, James

  Pardoe, John

  Thomas, Jeffrey (Abertillery)

  Lawson, George

  Parry, Robert (Liverpool, Exchange)

  Tinn, James

  Leadbitter, Ted

  Pavitt, Laurie

  Tope, Graham

  Lestor, Miss Joan

  Pendry, Tom

  Torney, Tom

  Lewis, Arthur (W. Ham, N.)

  Perry, Ernest G.

  Tuck, Raphael

  Lewis, Ron (Carlisle)

  Prentice, Rt. Hn. Reg

  Urwin, T. W.

  Lomas, Kenneth

  Prescott, John

  Varley, Eric G.

  Loughlin, Charles

  Price, William (Rugby)

  Wainwright, Edwin

  Lyon, Alexander W. (York)

  Radice, Giles

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

  Mabon, Dr. J. Dickson

  Reed, D. (Sedgefield)

  Walker, Harold (Doncaster)

  McBride, Nell

  Rees, Merlyn (Leeds, S.)

  Wallace, George

  McCartney, Hugh

  Rhodes, Geoffrey

  Watkins, David

  McElhone, Frank

  Roberts, Albert (Normanton)

  Weitzman, David

  McGuire, Michael

  Roberts, Rt. Hn. Goronwy (Caernarvon)

  White, James (Glasgow, Pollok)

  Machin, George

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

  Whitehead, Phillip

  Mackenzie, Gregor

  Roper, John

  Whitlock, William

  Mackie, John

  Rose, Paul B.

  Willey, Rt. Hn. Frederick

  McMillan, Tom (Glasgow, C.)

  Ross, Rt. Hn. William (Kilmarnock)

  Williams, W. T. (Warrington)

  McNamara, J. Kevin

  Rowlands, Ted

  Wilson, Alexander (Hamilton)

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

  Sandelson, Neville

  Wilson, Rt. Hn. Harold (Huyton)

  Marks, Kenneth

  Sheldon, Robert (Ashton-under-Lyne)

  Wilson, William (Coventry, S.)

  Marsden, F.

  Shore, Rt. Hn. Peter (Stepney)

  Woof, Robert

  Marshall, Dr. Edmund

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

  Mason, Rt. Hn. Roy

  Short, Mrs. Renée (W'hampton, N.E.)

  TELLERS FOR THE AYES:

  Meacher, Michael

  Silkin, Rt. Hn. John (Deptford)

  Mr. Donald Coleman and

  Mellish, Rt. Hn Robert

  Silkin, Hn. S. C. (Dulwich)

  Mr. James Hamilton.

  Mendelson, John

  Siliars, James

  NOES

  Adley, Robert

  Clegg, Walter

  Grant, Anthony (Harrow, C.)

  Alison, Michael (Barkston Ash)

  Cockeram, Eric

  Gray, Hamish

  Archer, Jeffrey (Louth)

  Cooke, Robert

  Green, Alan

  Astor, John

  Coombs, Derek

  Grieve, Percy

  Atkins, Humphrey

  Cooper, A. E.

  Griffiths, Eldon (Bury St. Edmunds)

  Awdry, Daniel

  Corfield, Rt. Hn. Sir Frederick

  Grylls, Michael

  Baker, W. H. K. (Banff)

  Cormack, Patrick

  Gummer, J. Selwyn

  Barber, Rt. Hn. Anthony

  Crouch, David

  Gurden, Harold

  Batsford, Brian

  Davies, Rt. Hn. John (Knutsford)

  Hall, Miss Joan (Keightey)

  Bell, Ronald

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

  Hall-Davis, A. G. F.

  Bennett, Sir Frederic (Torquay)

  Dean, Paul

  Hannam, John (Exeter)

  Bennett, Dr. Reginald (Gosport)

  Deedes, Rt. Hn. W. F.

  Harrison, Col. Sir Harwood (Eye)

  Benyon, W.

  Digby, Simon Wingfield

  Haselhurst, Alan

  Berry, Hn. Anthony

  Dixon, Piers

  Hastings, Stephen

  Bitten, John

  du Cann, Rt. Hn. Edward

  Hayhoe, Barney

  Biggs-Davison, John

  Dykes, Hugh

  Hicks, Robert

  Boardman, Tom (Leicester, S.W.)

  Eden, Rt. Hn. Sir John

  Higgins, Terence L.

  Body, Richard

  Edwards, Nicholas (Pembroke)

  Hiley, Joseph

  Boscawen, Hn. Robert

  Elliot, Capt. Walter (Carshalton)

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

  Bossom, Sir Clive

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

  Holland, Philip

  Bowden, Andrew

  Emery, Peter

  Holt, Miss Mary

  Bray, Ronald

  Eyre, Reginald

  Hordern, Peter

  Brewis, John

  Fenner, Mrs Peggy

  Hornby, Richard

  Branton, Sir Tatton

  Finsberg, Geoffrey (Hampstead)

  Hornsby-Smith, Rt. Hn. Dame Patricia

  Brocklebank-Fowler, Christopher

  Fisher, Nigel (Surbiton)

  Howe, Hn. Sir Geoffrey (Reigate)

  Brown, Sir Edward (Bath)

  Fletcher-Cooke, Charles

  Howell, David (Guildford)

  Bruce-Gardyne, J.

  Fookes, Miss Janet

  Howell, Ralph (Norfolk, N.)

  Buck, Antony

  Fortescue, Tim

  Hunt, John

  Bullus, Sir Eric

  Fowler, Norman

  Hutchison, Michael Clark

  Burden, F. A.

  Fox, Marcus

  Irvine, Bryant Godman (Rye)

  Butler, Adam (Bosworth)

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

  James, David

  Carlisle, Mark

  Gardner, Edward

  Jenkin, Patrick (Woodford)

  Carr, Rt. Hn. Robert

  Gibson-Watt, David

  Jennings, J. C. (Burton)

  Chapman, Sydney

  Gilmour, Ian (Norfolk, C.)

  Johnson Smith, G. (E. Grinstead)

  Chataway, Rt. Hn. Christopher

  Gilmour, Sir John (Fife, E.)

  Jones, Arthur (Norihants, S.)

  Churchill, W. S.

  Goodhart, Philip

  Jopling, Michael

  Clark, William (Surrey, E.)

  Gorst, John

  Joseph, Rt. Hn. Sir Keith

  Clarke, Kenneth (Rushcliffe)

  Gower, Raymond

  1412

  1413

  Kaberry, Sir Donald

  Nicholls, Sir Harmer

  Spence, John

  Kellett-Bowman, Mrs. Elaine

  Noble, Rt. Hn. Michael

  Sproat, Iain

  Kershaw, Anthony

  Normanton, Tom

  Stainton, Keith

  King, Tom (Bridgwater)

  Nott, John

  Stanbrook, Ivor

  Kinsey, J. R.

  Oppenhelm, Mrs. Sally

  Stewart-Smith, Geoffrey (Belper)

  Kirk, Peter

  Osborn, John

  Stodart, Anthony (Edinburgh, W.)

  Knight, Mrs. Jill

  Owen, Idris (Stockport, N.)

  Stokes, John

  Knox, David

  Page, Rt. Hn. Graham (Crosby)

  Stuttaford, Dr. Tom

  Lamont, Norman

  Page, John (Harrow. W.)

  Sutcliffe, John

  Lane, David

  Parkinson, Cecil

  Tapsell, Peter

  Langford-Holt, Sir John

  Percival, Ian

  Taylor, Frank (Moss Side)

  Le Merchant, Spencer

  Peyton, Rt. Hn. John

  Taylor, Robert (Croydon, N.W.)

  Lewis, Kenneth (Rutland)

  Pink, R. Bonner

  Tebbit, Norman

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

  Powell, Rt. Hn. J. Enoch

  Thomas, John Stradling (Monmouth)

  Luce, R. N.

  Price, David (Eastleigh)

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

  MacArthur, Ian

  Prior, Rt. Hn. J. M. L.

  Thompson, Sir Richard (Croydon, S.)

  McCrindle, R. A.

  Proudfoot, Wilfred

  Tilney, John

  McLaren, Martin

  Pym, Rt. Hn. Francis

  Trew, Peter

  Maclean, Sir Fitzroy

  Ramsden, Rt. Hn. James

  Tugendhat, Christopher

  Macmillan, Rt. Hn. Maurice (Farnham)

  Rawlinson, Rt. Hn. Sir Peter

  Turton, Rt. Hn. Sir Robin

  McNair-Wilson, Michael

  Redmond, Robert

  Vaughan, Dr. Gerard

  Madel, David

  Reed, Laurance (Bolton, E.)

  Vickers, Dame Joan

  Morales, Rt. Hn. Ernest

  Rees, Peter (Dover)

  Waddington, David

  Marten, Nell

  Rhys Williams, Sir Brandon

  Wader, David (Clitheroe)

  Mather, Carol

  Ridley, Hn. Nicholas

  Walker, Rt. Hn. Peter (Worcester)

  Maude, Angus

  Ridsdale, Julian

  Walker-Smith, Rt. Hn. Sir Derek

  Maudling, Rt. Hn. Reginald

  Roberts, Michael (Cardiff, N.)

  Wall, Patrick

  Mawby, Ray

  Roberts, Wyn (Conway)

  Ward, Dame Irene

  Maxwell-Hyslop, R. J.

  Rodgers, Sir John (Sevenoaks)

  Warren, Kenneth

  Meyer, Sir Anthony

  Rost, Peter

  Weatherill, Bernard

  Miscampbell, Norman

  Royle, Anthony

  White, Roger (Gravesend)

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

  Russell, Sir Ronald

  Wiggin, Jerry

  Mitchell, David (Basingstoke)

  Scott, Nicholas

  Wilkinson, John

  Moate, Roger

  Scott-Hopkins, James

  Winterton, Nicholas

  Money, Ernie

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

  Woirige-Gordon, Patrick

  Monks, Mrs. Connie

  Shelton, William (Clapham)

  Wood, Rt. Hn. Richard

  Montgomery, Fergus

  Shersby, Michael

  Worsley, Marcus

  More, Jasper

  Simeons, Charles

  Wylie, Rt. Hn. N. R.

  Morgan, Geraint (Denbigh)

  Sinclair, Sir George

  Morgan-Giles, Rear-Adm.

  Skeet, T. H. H.

  TELLERS FOR THE NOES:

  Mudd, David

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

  Mr. Paul B. Hawkins and

  Murton, Oscar

  Speed, Keith

  Mr. Hugh Rossi.

  Nabarro, Sir Gerald

  Question accordingly negatived.

New Clause 11

  REPLACEMENT OF ASSETS—NON-PROFIT MAKING BODIES
  'Section 33 of the Finance Act 1965 shall be amended in subsection (10) by leaving out (d) and insert—
  "(d) in relation to such activities of a body of persons whose activities are wholly or mainly carried on otherwise than for profit"'.—[Mr. Joel Barnett.]
  Brought up, and read the First time.
  10.45 p.m.
  Mr. Joel Barnett: I beg to move, That the clause be read a Second time.
  Mr. Speaker: I understand that with this clause it will be convenient to take new Clause 12—Replacement of assets—trade unions.
  Mr. Barnett: These clauses give the Treasury Bench an opportunity to show its generosity, because they are essentially reasonable clauses.
  1414
  It will be known that the clauses deal with roll-over relief. At the moment, without going into too much detail, a company or firm can sell a building or fixed asset, make a capital gain, buy another building to replace it, and set off the capital gain against the new building that it buys. That broadly is the situation, although there are many other smaller matters related to it.
  That situation does not apply to nonprofit-making bodies—for example, amateur clubs. There are many amateur clubs in my constituency, as there are no doubt in other constituencies. I have taken up this matter with the Treasury and, absolutely correctly, it cannot do anything about the situation as the law stands. But it is an odd situation, as I will illustrate by referring to a case to which I had my attention drawn concerning an amateur rugby club whose premises were subject to a compulsory purchase order. The club made a capital gain on the price paid under the compulsory purchase order. The premises which the club had to buy to replace those coming down cost more than it

  1415
  received, yet the club had to pay capital gains tax on the compulsory purchase order price. I cannot believe that any hon. Member regards that as fair. That is one aspect to which I hope the Treasury will extend the rollover relief.
  The other example is that of trade unions. In many respects, trade unions are similar to the Pharmaceutical Society. Last year, in my view quite rightly, the Chancellor accepted a new clause to enable the society to get roll-over relief for a building on which it had made a capital gain. All I am saying is that an almost identical situation applies to a trade union. Two trade unions have had discussions with the Inland Revenue about this, and their case is almost identical to that of the rugby club to which I referred.
  Mr. William Clark: Is the hon. Gentleman referring to all trade unions, or only to those that are registered?
  Mr. Barnett: I am talking about an organisation of workers that was known as a registered trade union before the introduction of the Industrial Relations Act. It seems unfair that an organisation of workers that is not registered for the purposes of the Act should be penalised by not being able to obtain this rollover relief.
  These are simple clauses. They would allow trade unions, if they sold premises, or were compelled to sell them because of compulsory purchase, and made a capital gain but replaced them with an asset of the same price or more, to obtain the kind of roll-over relief that is allowed to profit-making companies. The clauses would also apply to amateur clubs which find themselves in the kind of situation that I described.
  This is not a party political matter. Clubs and non-profit-making bodies are being penalised by the tax system as it stands, and I hope that the House will agree to the new clauses.
  Mr. Nicholas Winterton: When I entered the Chamber I had no intention of speaking to these new clauses, but having decided to do so I would direct the thoughts of my hon. Friend the Minister of State to the point made by the hon. Member for Heywood and Royton (Mr. Joel Barnett) about clubs
  1416
  and non-profit-making bodies which, for one reason or another, are forced out of their premises and need to purchase alternative premises. These clubs and bodies, because they sell their premises part of which are required for a road building scheme, for example, are charged capital gains tax on that sale, and that prejudices their chances of purchasing adequate alternative premises.
  The situation is unjust. Recently, I referred to my hon. Friend the case of the Macclesfield Sports and Rugby Club. I regret to say that I was so incensed by his reply that I wrote to him an absolute shorter. Nevertheless, I know that my hon. Friend will reply in a polite way. I believe that his officials in drafting such insensitive replies to fair and reasonable requests can only expect that sort of reaction from a Member of Parliament who is closely in touch with his constituents and the needs of his constituency.
  Too many areas are without adequate sporting facilities. In refusing to accept this sort of proposal, the Treasury is making no contribution to the community. I hope that my hon. Friend will show a little more sensitivity in replying to this debate than his officials showed in replying to my letter.
  Is it right that money should be paid to the Treasury when people are desperately seeking sporting facilities? The Government are perhaps taking it in in order to pay it out, but is this not a very expensive way to do it? Why could not the roll-over provision apply to these bodies? Then justice will be seen to be done.
  Mr. Nott: Both the hon. Member for Heywood and Royton (Mr. Joel Barnett) and my hon. Friend the Member for Macclesfield (Mr. Winterton) have particular constituency cases in mind, about which they have written to me. I greatly regret that on both occasions I have had to give a Treasury "No". I will certainly look at the manner in which I replied to my hon. Friend. I agree that there are good ways of saying, "No", and less good ways. I must look to my second reply with more care.
  The hon. Member for Heywood and Royton has argued for some time that trade unions and sports clubs are special cases, and should benefit from roll-over

  1417
  relief in the same way as trading and commercial organisations. But the general principle which underlies capital gains tax is that the accrued gain is charged whenever the ownership of an asset changes. When a person disposes of an asset, the presumption is that tax should be paid on that occasion. This applies whether the person concerned is an investor selling his shares, an industrialist selling his factory or a trade union or sports club selling its premises. It is only exceptionally that the code allows for the deferment of tax liability on the disposal of chargeable assets.
  Where roll-over relief is available, it is designed to meet special circumstances, since they over-rule the basic principle that tax is payable when an asset changes hands. Looking back at the 1965 Finance Act, which, after all, was introduced by the Labour Party, one sees that the intention was that the roll-over relief would ensure that the capital gains tax did not impede or discourage the necessary modernisation and re-equipment of British industry.
  In the debate on the 1965 Bill, the right hon. Member for Cardiff, South-East (Mr. Callaghan), outlining the terms of rollover relief, said:
  "I believe that by this means I shall secure that the tax will not impede desirable industrial and commercial development and the transfer of business out of congested areas."—[OFFICIAL REPORT, 6th May, 1965; Vol. 710, c. 246.]
  Several other quotations from those debates developed that theme.
  The extension in 1972 of roll-over relief to trade and professional associations was intended to be only a modest extension to include bodies representing those people who are already qualified. It simply made a small adjustment on the edge of the trading world. It cannot be taken as a precedent for extending the relief any further and certainly not as a precedent for extending it to other bodies, no matter how deserving the particular case may seem.
  Generally speaking, the sale of a sports club or premises of the kind mentioned will of course give rise to considerable capital gains. I appreciate the case of the Oldham Rugby Football Club and the case of the Macclesfield Sports and Rugby Club. These are special cases.
  1418
  With my hon. Friends I looked at this position with great care. As the hon. Member for Heywood and Royton said, this is not essentially a party matter but a question of where the line should be reasonably drawn.
  11.0 p.m.
  There are objections of principle to extending roll-over relief to trades unions and sports clubs. But I am aware of the points that have been made. We shall keep the legislation under review. We shall certainly keep under review decisions taken in 1971–72 to confine the extension to what we did last year in the 1972 Act.
  In any case, there are drafting difficulties on both new clauses, in that neither of them identifies the assets which should qualify for relief. For that reason, if no other, I ask the House to reject the new clauses.
  I have, however, some sympathy for the points made by my hon. Friend the Member for Macclesfield and the hon. Member for Heywood and Royton. I am not able to say more than that we shall keep under review the place where the line is now drawn. I hope that we can give it very much fuller consideration before next year's Budget. That is as much as I can say on this occasion.
  Mr. Joel Barnett: With the leave of the House, Mr. Speaker, I should like to reply.
  I am extremely disappointed, as would be anyone who had listened to the debate, that the hon. Gentleman talked about drafting difficulties when we are seeking to amend Section 33 of the Finance Act 1965 which refers to the assets in question. The hon. Gentleman could have drafted this properly had he wished. That answer was not good enough.
  I am surprised that the hon. Gentleman talked about the 1965 Act as though it were sent down from on high and must be right. If that is what he feels I shall remember that in future debates. The hon. Gentleman said that the code allows so-and-so. But the code is not incapable of amendment. No number of codes, even those introduced by the present Government, are incapable of amendment. The hon. Gentleman should not say, "The code says this, and therefore that is an argument." It is not.

  1419
  By accepting the new clauses, in the words of my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), one would not be impeding equally desirable ends in the case of sporting clubs which wish to move, for example, from one area to another, which would be helpful to the particular district. Very often they have to move through no fault of their own. In those circumstances it is most unfair to deny them the benefit of this relief.
  Finally, the Chancellor breached his own code last year—the hon. Gentleman did not reply to this matter—when he allowed this relief for trade and professional organisations, thus allowing it for non-profit-making organisations. The whole of the hon. Gentlemans' rebuttal of the new clauses is totally unsatisfactory.
  Mr. William Clark: I welcome the fact that my hon. Friend the Minister is to keep this matter under constant review. There are, however, two types of sale. Where a club, or whatever it may be, is compulsorily acquired there is justification for giving roll-over relief. There is a difference concerning taxation in that if a sports club, or whatever it is, sells an asset, that is a different kettle of fish in regard to capital gains tax. But where the premises of a sports club, a trade union or any organisation are compulsorily acquired and the organisation must move, it should have very sympathetic consideration.
  Question put and negatived.

New Clause 17

  TAX EXEMPTION FOR NON-REGISTERED TRADE UNIONS
  In section 123 (1)(a) of the Finance Act 1972 the words "before the end of 5th April 1972" shall be omitted.—[Mr. Brian Walden.]
  Brought up, and read the First time.
  Mr. Brian Walden: I beg to move, That the clause be read a Second time.
  The hon. Member for Surrey, East (Mr. William Clark), in an interjection in the previous debate, asked about registered and deregistered trade unions. This is an important new clause dealing with that matter. It is one which I hope
  1420
  the Minister of State, if he is replying, will find agreeable, because for once he does not have to worry about the studies which review bodies might be having or about chats he might find it necessary, at some future date, to have with Ministers.
  This relates to general principle and the rubric sums it up well:
  "Tax exemption for non-registered trade unions".
  I want to urge on the Treasury, whose responsibility it must be—and certainly not that of the Attorney-General, or the Department of Trade and Industry, or the Secretary of State for Employment—that it is wrong as a principle of taxation that non-registered trade unions within the meaning of the 1971 Act should forgo certain tax reliefs which were previously available to registered trade unions, under the old system.
  I want to argue that a fiscal penalty should not be attached to a political act on the part of the trade unions in de-registering. It was initially a political act on the part of the Government in introducing a completely new set of rules and regulations for trade unions, which were highly controversial—so controversial that when they were introduced the Opposition took the unusual step of saying that it intended to remove the legislation root and branch from the statute book.
  I want to argue the case for continued exemption, even if unions are not registered under that Act. There are technical differences associated with the new clause which my hon. Friend the Member for Chester-le-Street (Mr. Radice) wishes to mention and there are a number of points in relation to Corporation Tax, by far the most onerous of the taxes borne by trade unions. There are additional problems involved there. I recognise that, but, in what is expected to be a brief debate, I hope the House will not expect me to start on them. My hon. Friend does expect to do so.
  I want to get to the pith of the issue, an issue of general principle, and it will be a relief to the Minister of State to be able to talk on an issue of general principle. I want to explain how the whole matter comes about.
  If anybody cares to refer to Section 123 of the Finance Act, 1972, they will see that it gives exemption for all trade

  1421
  unions but makes it clear that the union has to be registered, or the relief ends at 5th April 1972.
  Perhaps 1 should read Section 123(1)(a) to make it clear. Subsection (1)(a) is on page 100 of the Finance Act 1972 and reads:
  "no organisation which immediately before 1st October 1971, was a registered trade union shall be treated for the purposes of section 338 of the Taxes Act (exemption of income and gains applied for the purpose of provident benefits) as having ceased to be such a trade union"—
  that is where we want to end it, but it goes on:
  "before the end of 5th April 1972;".
  Looking at the Industrial Relations Act 1971, I can say without fear of contradiction that in all the sections relating to registration in that Act—and I have looked at it with care, including Part IV—deregistered unions can most certainly meet all the criteria laid down.
  I say that deliberately, because obviously the Treasury was sure to protect itself against bogus organisations which were not subject to any measure of disciplinary control or qualification and would prove to be not bona fide trade unions or organisations of workers but claimed that they were for purposes of getting tax exemptions to which they had no entitlement. That would have been the old situation before the 1971 Act when the provision was that a union had to register with the Registrar of Friendly Societies. A very sensible provision that was. There could have been no objection to that. There was no objection to that on the part of unions.
  It is the Government who have changed the situation. The deregistered unions are in every sense classic trade unions. If they chose to apply for registration, I do not know one of them which would not get it. The reason that they are not registered is a political reason. They will not register. Indeed, the members of these unions have compelled the executives of certain unions which wished to register in order to conform to this section of the Finance Act to deregister. It is well known that the Trades Union Congress is advocating the expulsion from the TUC of any union that refuses to deregister.
  1422
  Hon. Members opposite are perfectly entitled to say that this is a very sad state of affairs and not at all what they intended in the Industrial Relations Act. I will say nothing about that—I do not wish to drift out of order—other than that I always told hon. Members opposite that this is what would happen. If they need to have it proved to them again, I repeat that the 1971 legislation is unworkable. The trade unions will never accept it.
  The issue tonight is whether, that being the unions' point of view—a perfectly legitimate point of view, supported by one major political party; a view opposed, admittedly, by the other and ruling political party—the Government should allow the tax system to penalise de-registered unions.
  The point urged from this side is that the Government should not if an organisation is a bona fide trade union. I do not greatly object for this purpose to the definitions in the 1971 Act. An organisation which is obviously of the kind specified in Part IV of the 1971 Act should receive tax exemption whether or not it is registered. I do not see why the principle of registration under the 1971 Act should affect the tax liability of a trade union.
  The Government can argue that a union is not a registered trade union. What is the difference? It is a trade union. The great majority of manual workers' unions are not registered and never will be registered under the 1971 Act: there is no prospect of that. I cannot say what will happen when the Prime Minister discusses with the CBI and the TUC future economic policy. It would be out of order for me to do so. However, it may well be that the Government will in the end wish to drop this provision as part of a package deal which the House of Commons will not be told about until the deal has been made and then presumably, as usual, we shall be expected to endorse it whether we like it or not, and that applies to Government back benchers as well.
  It would be much better if the Minister of State could say that, technicalities of the clause aside, the principle of the clause, appeals to him. I will re-state the principle. The deregistered unions are bona fide organisations of workers. If

  1423
  the Revenue wishes to check that to ascertain that they are bona fide, I have no objection to that.
  But it is wrong that the Revenue should discriminate against deregistered unions because of the farcical 1971 Act, a party political Act, anyway, an Act designed to force unions to do things they did not want to do and never will do. It cannot be good tax law that the fiscal system should be used to penalise such unions and it can have no justification other than coercion. The attempt is obvious—to coerce the unions into registering, because of the financial disadvantages that they will suffer if they do not register. It will fail, of course. No British people in any institution will be bullied. The Government will not bully them into registering, and in any case it is wrong that they should try.
  I hope to hear from the Minister of State the fiscal principle on which the present arrangement is founded. Does he argue that these organisations are not in every respect, except the fact of registration, identical with the registered unions? How can he possibly justify this coercive anomaly?
  11.15 p.m.
  Mr. Giles Radice: I support the new clause, and I speak as a trade union-sponsored Member. The tax position of trade unions is at present an utter mess. As my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden) said, the Industrial Relations Act has meant that only registered trade unions have tax concessions, and, as the vast majority of trade unions are deregistered, most unions have lost the concessions.
  The position is made more difficult by the changes in corporation tax introduced by the present Government and the effect which these have on the larger unions. Because unions do not and cannot distribute profits, they will be liable to pay the full rate of corporation tax. This is a classic anomaly, and the situation was fully recognised by the Select Committee on Corporation Tax. A company, because it is able to distribute profits, is able to avoid the full rate of corporation tax, but trade unions, like other public bodies, including both the Labour Party and the Conservative Party, are pre-
  1424
  vented by their very nature from taking advantage of the imputation system.
  It is true that small unions will have the specially reduced rate for small companies, but the large unions, which comprise over 50 per cent. of trade union membership, will have to pay the full rate. Large sums of money are involved. In the case of my own union, the General and Municipal Workers Union, we are talking here of corporation tax on the £300,000 in non-company investment income which it derives from rents, local authority loans, Government stocks and so on. It is an important disadvantage.
  In March 1972, the Government said that they would look into the matter, and it is true that the Inland Revenue has issued a consultative document. But both in that document and in the Treasury's reply in Standing Committee, they put all the emphasis on the difficulties of arriving at a definition of a public body which would be entitled to the relief. Thus, the situation is still very difficult for us.
  All hon. Members on both sides accept the importance of the Government's talks with the CBI and the TUC. If the Government want to show their good faith, if they want to show that they are no longer anti-union, they should accept the new clause.
  Mr. Nott: As we have explained several times in the past, the reason for requiring registration as a condition of allowing tax relief is that, where a particular category of organisation or fund is accorded special tax reliefs, some form of statutory control should be imposed to prevent abuse and to ensure that the purpose of the relief is met.
  For bodies such as trade unions or friendly societies, we think that the appropriate form of control is available through registration with the registrar of trade unions or the registrar of friendly societies. For approved pension funds the necessary supervision is exercised by the superannuation funds office of the Inland Revenue. For charities the primary oversight comes from registration with the Charity Commission and in each case there is a requirement that the rules of the body or fund shall be subject to critical scrutiny by the supervising authority. There is no reason why any trade union which seeks special

  1425
  tax relief should be exempt from this general requirement.
  It was suggested in the debate last year, which I read, that some special arrangement should be made by the Treasury for those trade unions which did not wish to register under the Industrial Relations Act. The hon. Member for Birmingham, All Saints (Mr. Brian Walden) made the same point again tonight. But, as was pointed out last year and during the debates on the Industrial Relations Act in 1971, an alternative to registration as a trade union is already available since there is the possibility of registration of the appropriate funds under the Friendly Societies Acts. I realise that there are practical difficulties in some cases in that for these purposes provident funds have to be alienated from the main union funds, and I believe that the hon. Member for All Saints said last year that his union had run into this difficulty.
  I am, therefore, aware that what I am now suggesting cannot apply or appears not to apply in every case. Difficulties of this kind highlight to some extent one aspect of the issue since in principle tax relief should not be available on funds which can be used without any form of outside supervision other than for the purposes of provident benefits. Before October 1971 entry on the old register enabled a union to qualify for the tax reliefs without such a close form of supervision, but the Industrial Relations Act strengthened the financial controls associated with registration.
  The hon. Member asked me under which principle this was laid down and I remind him that the Industrial Relations Act was intended to strengthen the financial controls associated with registration. For example, under Part III of Schedule 5 all but the smallest trade unions on the register need regular actuarial reports on the superannuation schemes that they run. It is not right, therefore, to say that this is a politically motivated act. We have set up different bodies to supervise different organisation and in this case the registrar of trade unions is the appropriate body.
  The hon. Member for Chester-le-Street (Mr. Radice) raised a point which might he dealt with more appropriately with
  1426
  the new clause 32 because it is concerned with unincorporated associations and their corporation tax arrangements. We debated this matter in Committee and on that occasion the hon. Member referred to the consultative document that has been sent out. Certainly the Select Committee on Corporation Tax recommended that we should come to special arrangements for unincorporated associations of the sort mentioned by the hon. Member. We are not trying to resist that recommendation, as the hon. Member knows. The problem is one of definitions, and we indicated to him in Committee that as soon as we can find a reasonable definition that brings in the right people and the right unincorporated associations and excludes others, we shall bring it forward. We are not trying to delay the matter, but this is an extremely technical and complicated point. The consultative document went out and we are only now beginning to receive the representations.
  Mr. Radice: When the Minister says "the right unincorporated associations" does he include trade unions, because that is what I am trying to find out?
  Mr. Nott: I cannot go further than I have gone except to say that the Select Committee recognised the problem. I recognise the corporation tax problem with trade unions, and trade unions are certainly one of the unincorporated associations that we have under close review as part of the review of arrangements following circulation of the consultative document.
  Mr. John Gelding: I understand the hon. Gentleman's argument relating to non-control of funds, although I disagree with it. But is he aware that not only are there general funds of trade unions but also political funds? The political funds, which can be invested, are closely controlled under the 1913 Act by the registrar. We make returns, our rules are subject to control and they meet the requirements laid down by the hon. Gentleman. Could it not be that the political funds of trade unions would be exempt from this tax?
  Mr. Nott: There is nothing in the requirement of registration to which any

  1427
  well-organised trade union could reasonably object. Accusations that registration means a State licence to operate, or that the registrar himself writes the rules of a registered trade union, are not true. There is nothing to stop an unregistered trade union from carrying on very effectively. What the registrar does is simply to make sure that the rules cover certain specific subjects. It is a principle of the Industrial Relations Act—and I appreciate that the Opposition do not agree with it—that the benefits and advantages it confers on unions are available only to those which, by registering, accept a degree of public accountability.
  The Government's position is simple. We have always maintained that the Act is a long-term measure of reform, and it is therefore too early to judge it after less than 18 months of full operation. But the Government have made it clear that they are willing to examine carefully any constructive suggestions for improving its operation. I understand that no suggestions of this nature have yet been forthcoming from the TUC, but it is aware that it may raise the matter, and I expect that it will do so during the tripartite talks on economic matters. No doubt on that occasion it will make some of the points hon. Members opposite are making on this occasion, and we shall listen with great care to what it has to say.
  Mr. Brian Walden: By leave of the House, I would like to comment on the hon. Gentleman's reply which was very unsatisfactory.
  I make it clear to the Government that the view of the trade unions and the Labour Party on the Industrial Relations Act is not one which can be encapsulated in which the hon. Gentleman calls "constructive proposals". Our view is that which we held of the Trade Disputes Act 1927. We shall obliterate it on our return to power. It will cease to exist. That is our suggestion for the 1971 Act.
  In that context, I say to the hon. Gentleman that he is being obtuse—I will not say deliberately, although one can cherish a suspicion. If a greater degree of financial accountability had been required, the trade unions would have agreed to the strengthening of the powers of the registrar of friendly
  1428
  societies. If what worries the Government is that there will be fly-by-night organisations calling themselves "trade unions" and claiming tax exemptions to which they are not entitled, I make the constructive suggestion that the Inland Revenue can undertake any sort of probes it wishes into deregistered unions to satisfy itself that that is not the case.
  The issue here is simple. Under the 1971 Act—a highly controversial Act—unions were given a choice. They have not broken the law by deregistering. They have deregistered not to avoid financial accountability, as the hon. Gentleman should know, but as a political act to show their bitter disapprobation of this type of legislation, which the Opposition are pledged to remove, in these circumstances, does it make any sense that they should not receive tax exemption? Simply to say that the Act is so designed that those who do not register under it do not receive the benefits that accrue from it is to give the entire case away.
  11.30 p.m.
  The unions concerned have broken no law by not registering. Those which have deregistered are in precisely the situation vis-à-vis the Revenue as they were in 1966, 1967 or 1968. The only difference is that the Government have changed their mind. What I am urging upon the Government is that changes which were brought about by the Act should not be given fiscal weight in Finance Bills. It is no job of the Treasury to reinforce the political prejudices of the Conservative Party in regard to trade unions, especially as on our return to power we shall restore the status quo ante anyway.
  We seem to have discussed nothing today that the Government are not reviewing. I worry about what next year's Finance Bill will bring up. To shorten the whole procedure of these endless reviews, I urge again that the deregistered unions be probed in any way that the Revenue suggest to establish their bona fides as organisations of workers. I think that I can promise that they will submit to the financial accountability. They do not intend to evade that. But they should not be penalised by the existence of legislation which says that they have the legal right to deregister but

  1429
  that if they do they will be fiscally punished. It is blatantly party political, and it is obtuse to pretend that it is not.
  Question put and negatived.

New Clause 20

  SHARE OPTION AND SHARE INCENTIVE SCHEMES
  Schedule 12 of the Finance Act 1972 shall be amended in accordance with the following provisions.
  (1) In Part II, paragraph 1, after the words "Under the scheme" there shall be inserted the following words—
  "provided that where the shares are in a company which is under the control of another company and are not quoted on a recognised stock exchange the scheme must be adopted by resolution of the holders of the ordinary share capital of a company controlling that company which is not itself under the control of another company".
  (2) Paragraph 3 of Part II shall be omitted and the following new paragraph shall be added after paragraph 6:—
  Disposal Price
  "7. Where the shares are in a company which is under the control of another company and are not quoted on a recognised stock exchange the following conditions must be satisfied—

  (a) the price at which the employee or director is entitled under the scheme to dispose of a share acquired by him under the scheme (together with shares or securities acquired by him directly or indirectly in right of such share) or of any interest therein must be computed by the auditors of the company and reported by them to the Board within one month of the consolidated profit and loss account and consolidated balance sheet ("the accounts") of the company having been approved in general meeting;

  (b) the manner whereby the price referred to in paragraph (a) above is to be computed must be stated in the scheme, and

  (i) must base the computation of the said price on the relevant items in the accounts adjusted as provided in sub-paragraph (ii) below;

  (ii) must require the auditors of the company to make the appropriate adjustment to any of the items referred to in sub-paragraph (i) above in the following circumstances:

  (A) If any such item is materially different from that which would have been shown in the account had the company not been under the control of another company;

  (B) If the period to which the accounts relates was longer than 53 weeks or shorter than 51 weeks;

  1430

  (C) If the accounting practice of the company has altered in such a way as to materially affect any such item after the date on which the employee or director acquired the share (or an interest in, or right to acquire the share).

  (iii) must define the manner in which the auditors shall make any adjustment pursuant to sub-paragraph (b)(ii)(A) in relation to—

  (A) issues of shares or securities in the company;

  (B) loans to or from the company;

  (C) any transactions in which the company is involved;

  (D) the company's dividend policy.

  At the inception of the scheme the manner in which the scheme requires the auditors to make these adjustments must be approved by the Board and a subsequent change in the aforesaid must be reported to the Board".
  (3) In Part V the following new paragraph shall be inserted after paragraph 2:
  "3. If the shares are in a company which is under the control of another company and are not quoted on a recognised stock exchange the employee or director must not dispose of the shares or interest therein (or of any shares or securities acquired directly or indirectly in right of such shares) at any time other than within one month of the Board giving notice in writing to the company that the price reported to them by the auditors pursuant to paragraph 7(a) of Part II of the Schedule has been computed in a manner which complies with the requirements of that paragraph save that the provisions of this paragraph shall not apply to such disposal which occurs—

  (a) at a time when the shares are in a company which is not under the control of another company or are quoted on a recognised stock exchange; or

  (b) as a result of an offer to acquire the whole of the share capital of the company other than any such offer by a company which at the time of the offer was associated with the company; or

  (c) as a result of the liquidation of the company other than a solvent liquidation."—[Mr. Trew.]

  Brought up, and read the First time.
  Mr. Trew: I beg to move, That the clause be read a Second time.
  The object of the clause is to make it possible to base share incentive schemes on the shares of unquoted subsidiary companies. The matter was discussed at length in the Committee consideration of last year's Finance Act and was touched on again this year.
  In the present situation, in which it is not possible to base incentive schemes on the shares of unquoted subsidiaries, there

  1431
  is inequity as between the executive in an independent quoted company and his counterpart in a company which is a subsidiary in a group. The first can participate in a share incentive scheme tailored to his own efforts, whereas the executive in the subsidiary company cannot do so.
  The executive in the subsidiary company can in theory participate in a scheme based on the shares of the holding company, but that is unsatisfactory for two reasons. First, he may be so far down the corporate hierarchy that he may not qualify for participation. Indeed, certainly in some cases, the number of people who can participate is fairly small. Even if an executive can participate, his activities in the subsidiary company of which he is an executive may well have little bearing upon the profits of the holding company. Everyone would agree that it is essential, if an incentive scheme is to be meaningful, that the participant must feel that there is some correlation between his efforts and the profitability of the company in whose shares he has an interest.
  There is a further problem. An independent quoted company in which the senior executives participate in a share incentive scheme could well be taken over by, or merged with, another company. In those circumstances the rules of the scheme generally provide that they should be liquidated. In other words, executives in those circumstances will tend to lose their rights in such schemes.
  We live in an age of mergers and takeovers, and the justification for them is that they increase efficiency. But if a consequence of them is that executives in the companies affected lose their rights in a share incentive scheme, that is a factor against efficiency rather than in favour of it.
  We heard in 1972 and we have heard again this year of the Revenue's objection to basing schemes upon the shares of unquoted subsidiaries. They express the real fear that the profits between one subsidiary and another may lend themselves to manipulation. The object of the new clause is to lay down conditions for the operation of such schemes which will enable the Revenue to satisfy itself that such abuses do not take place.
  There is now a gap in share incentive
  1432
  schemes. It is possible for people near the top of a company, whether an independent company or a group, to participate in executive schemes. It is now possible for people on the shop floor to participate in shop floor schemes. There are, however, many people in the middle executive ranks who cannot have any meaningful scheme suited to their needs. The new clause, if adopted, would enable firms to fill that gap. I hope that the Government will accept it.
  Mr. Patrick Jenkin: I listened to my hon. Friend with careful attention and with a great deal of interest. I can agree with a great deal of what he said. I can understand the desirability of trying to extend share incentive legislation to cover an executive or group of executives put in charge of an unquoted subsidiary company of a group and being given either options or incentives under the legislation in last year's Finance Act.
  My hon. Friend recognised that there are some pretty formidable difficulties in the way of administering such a scheme from the Inland Revenue's point of view. My hon. Friend has gone a long way in skilfully drafting the new clause to try to overcome those difficulties. However, without going into great detail, which perhaps would be inappropriate at this time of night, I am bound to tell him that many of the difficulties still remain.
  My hon. Friend's proposals would put great burdens on the auditors of a company. In many cases auditors would have to rewrite the accounts between a parent and subsidiary company to reflect fully the arms-length conditions which would need to exist if the accounts of a subsidiary company were to be genuine accounts for the purposes of a share incentive scheme. They would then have to settle that with the Inland Revenue. That would be extremely difficult because there is no agreement within the accountancy profession on some of the accounting techniques and standards which would need to be applied.
  I can see endless room for argument and disputation. It is not only that the accounts would be difficult to agree. A parent company is in a position to direct the flow of business between one subsidiary and another. It does not seem that any accountancy techniques would

  1433
  enable discernment and identification of the accretion in the value of the shares of a subsidiary company which owed itself not so much to the success of the company as to the decision of the parent board to steer business in that direction. In short, there are still—I regret having to say this—formidable difficulties which stand in the way of extending share incentive legislation to the unquoted subsidiaries of groups of companies.
  There is a great deal in the merits of what my hon. Friend is advancing, and in particular I see the case he makes about the gap between the schemes available for the top executive of the parent company and the legislation in the Finance Bill offering share savings schemes for the generality of employees. I repeat the undertaking I gave in Committee to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that we shall continue to search for some way of achieving the objectives which my hon. Friend and I share.
  I will not express optimism or pessimism about whether we shall find a solution. I can assure my hon. Friend that the search will be genuine and thorough. I hope that next year we shall be able to come forward with something which we can put before the House as a workable scheme. I must say this without commitment. It may be that in the circumstances of this country, which are different from those in America, we shall find the problems insuperable. If that is the case, that is not the end of the line. I said in Committee that it is perfectly proper for a scheme to be set up for the executives of a subsidiary company which relate the targets to the performance of the subsidiary, even though the shares which are the subject matter of the scheme are the shares in the parent.
  That view was challenged by Mr. Chown, writing in the Financial Times, but I am bound to say that I see no evidence upon which his challenge could stand. We have examined this carefully. There is a way round. The executives of the subsidiary company can participate in a group scheme in a way which links their performance with targets set for the parent company. We shall continue to search for a way in which we can make this link more direct by offering incentives in the subsidiary
  1434
  company. I hope that, given that assurance, my hon. Friend will not feel it necessary to press his new clause.
  Mr. Ridley: I find myself in the difficult position of agreeing with my hon. Friend for Dartford (Mr. Trew) and with my right hon. Friend, although they are not entirely in agreement about this new clause. I see the difficulties which have been put forward by the Chief Secretary. Equally I find my hon. Friend's argument extremely compelling. It has come about that since we have adopted share incentive schemes we are giving all sorts of tax-free remuneration—or certainly remuneration paying less tax—to those who have successfully developing businesses.
  These compare favourably with what is available to those who have to pay income and perhaps surtax on extra earnings because of successful activity. My hon. Friend has put the vital point, which is the way we motivate people in industry and make them feel that the results of harder, cleverer and sensible work will benefit them rather than some amorphous group of other people, the shareholders, who take the benefit and do no work.
  This is much the most effective form of participation. It is the same sort of principle which, in a primitive way, underlies piece rate or bonus schemes or some other form of management incentive. All these have worked well at certain stages in certain forms. They carry full income tax and surtax, if applicable. What is intolerable—now that the Government have moved into the area of tax concessions to those who can increase their incomes through improvement of share values—is that they have a far better tax position than those who increase their incomes through hard work but have to pay tax on the increment.
  I slightly question the argument, from the analogy I have drawn with piece rates and other forms of incentive, that it is likely that companies will manipulate orders or borrowings as between the parent and subsidiary simply for the purposes of magnifying the results of the subsidiary.
  We do not find this happening with management incentive schemes and bonus

  1435
  schemes. It is unlikely that a board of directors would say "Let us somehow shift our assets into this or that subsidiary so that Bill, Jack or Joe can get their shares at peak value in the market".
  That is conceivable, but I wonder whether the Chief Secretary is making a mountain out of a molehill in relying so much on that argument. It surely is difficult to envisage a situation in which that would work, particularly if the auditors were on the job and if the shares of the subsidiary were quoted. The clause relates only to unquoted shares.
  11.45 p.m.
  I am grateful to my right hon. Friend for saying that he will look at this matter. I only wish to emphasise that there are a good many hon. Members on the Conservative benches who attach great importance to his finding a solution to this problem. I see his difficulty, but I hope that he will take this matter seriously.
  Having started on the share option scheme in industry, we must make sure that there are not two classes—those who can get incentives of this sort and those who cannot. On the question of differences in taxation—especially in terms of management in relation to whom taxation can be a heavy burden—we are seeking fairness in the system. I am grateful to my right hon. Friend for undertaking to look at this matter, and I wish him all success in his endeavours
  Mr. Trew: I listened with interest to the argument put forward by my right hon. Friend the Chief Secretary. I am sorry that he does not feel able to accept the clause, but I am at least pleased that he accepts the need for something to be done. He has given a fairly firm undertaking that he will try to do something next year.
  I endorse what was said by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that my right hon. Friend the Chief Secretary should not make too much of a bogy out of the possiblity of abuse. It can be exaggerated.
  In view of my hon. Friend's undertaking, I beg to ask leave to withdraw the motion.
  Motion and clause, by leave, withdrawn.

New Clause 32

  MITIGATION OF CORPORATION TAX LIABILITY OF COMPANIES CARRYING ON MUTUAL INSURANCE BUSINESS
  Section 96 of the Finance Act 1972 shall be amended as follows:—
  (a) at end of subsection (2) add:—
  "(d) any company carrying on mutual insurance business";
  (b) at end add:—
  "(4) For the purposes of this section the income of a company carrying on mutual insurance business for an accounting period is its income arising from business other than life assurance business charged to corporation tax for that period as defined in section 85(6) above".—[Mr. Ridley.]
  Brought up, and read the First time.
  Mr. Ridley: I beg to move, That the clause be read a Second time.
  The clause deals with the corporation tax position of insurance companies. Section 96 of the Finance Act 1972 provides for a lower rate of corporation tax—40 per cent. instead of 50 per cent.—for industrial and provident societies which are registered as industrial and provident societies. This occurs because such societies do not make profits and do not make distributions in terms of the Income and Corporation Taxes Act 1970.
  There are, however, a certain number of insurance companies which happen to be registered as companies under the Companies Acts, though they behave in an identical fashion to the mutual societies, do not make distributions and are subject to corporation tax on unfranked investment income. There is a genuine difficulty in that this concession, which seems fair and reasonable in terms of mutual societies, extends only to those who happen to be registered as such, not those who behave as such and are registered under the Companies Act. The number of companies concerned is only about half-a-dozen and the amount involved in making these concessions is about £500,000. But in the interest of equity between two identical organisations, I hope that my hon. Friend will be able to accept the clause and I look forward to hearing him say that there is no difficulty in his so doing.
  Mr. Nott: As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) knows and as was mentioned in the last debate on trade unions, a consultative document was sent out by the Revenue last August, and, following the dispatch of that document, we have received representations on behalf of the mutual insurance companies in reply. The British Insurance Association and the Life Offices Association have put forward their views on the point which my hon. Friend raised.
  My hon. Friend was referring, as he said, only to a very narrow group of companies. The majority of mutual companies either fall within the small companies exemption or can register under the Industrial and Provident Societies Act. My hon. Friend is suggesting that we should now pick out this small group of companies and deal with them separately.
  The position is that we have sent out the consultative document in order to get views on how we should deal with unincorporated associations generally. We are now reviewing the replies which have come in and, pending our action on this matter, it would not have been appropriate to bring in special measures to deal with the very small number of companies involved.
  If the problems of definition can be overcome—and it is these which have been holding up the matter—in time for next year's Finance Bill, it will in practice take effect from the start of imputation, as the 1973–74 rate of tax will under normal Budget procedures be announced in the 1974 Budget.
  We are aware that this small number of mutual companies exist which are not registered under the Industrial and Provident Societies Act. I hope that we shall be able to deal with them, if they come within the definitions, when we bring forward our proposals in this respect.
  I hope that that will satisfy my hon. Friend. But if he has any further questions to ask, with the leave of the House I shall try to answer them.
  Mr. Ridley: My hon. Friend's explanation does satisfy me. I beg to ask leave to withdraw the motion.
  Motion, and clause, by leave withdrawn.

New Clause 34

  AMENDMENT OF SECTION 21 OF THE FINANCE ACT 1972
  In section 21 of the Finance Act 1972 after subsection (1) there shall be inserted the following subsection:—
  "(2) Where a company—

  (a) is eligible under subsection (3) of this section to be treated as a member of a group; and

  (b) acts as trustee of a fund providing pensions for employees of one or more other companies so eligible;

  then for the purpose of this section the business carried on by the fund shall if the company so elects be treated as carried on by the company".—[Mr. Peter Rees.]
  Brought up, and read the First time.
  Mr. Peter Rees: I beg to move, That the clause be read a Second time.
  The clause has a modest and limited objective, and it claims no special elegance of draftsmanship. It is designed to cover a situation where a group of companies has set up a pension fund with one of the companies in the group acting as trustee of that fund. As the law stands, the fund itself will not be treated as part of the group of companies because, on a strict view, the fund itself is separate and distinct from the companies which act as its trustee.
  It may happen in that situation that one of the companies in the group provides management services for the fund and will be obliged to charge VAT. It seems to me that that is a purely domestic matter, and it bears hardly on the fund that it should in effect suffer VAT in that situation. It is this hardship that the clause is designed to remedy. I hope that my hon. Friend the Financial Secretary will be able to offer some kind of relief.
  Mr. Higgins: I listened with great care to what my hon. and learned Friend the Member for Dover (Mr. Peter Rees) said because, when the new clause first appeared on the Notice Paper, naturally I gave it close attention. I have to confess that I had some difficulty in appreciating precisely what was the point at issue.
  In moving his new clause, my hon. and learned Friend has been commendably brief. But I am afraid that on this

  1439
  occasion his degree of brevity has resulted in some obscurity. Therefore it may be that even at this late hour he will wish to come back on the matter.
  As I understand it, the object of the clause is to allow a company which acts as trustee for a pension fund, and which is itself eligible to be included in a group registration, to treat the business of the fund as being carried on by the representative member of the group. The House will recall that we debated representative members of a group at some length last year. The pension fund is usually exempt from VAT and therefore not entitled to register or to deduct the tax on its inputs.
  So far so good. I am afraid that the story then becomes more complicated. When a person carries on a business both in his personal capacity and in the capacity of a trustee there are potentially two registrable persons. When a company which is one of a group of companies registered as a group acts as a trustee, the company, in its capacity other than as a trustee, is treated as part of the group and in its fiduciary capacity would, if registrable, be registered separately so that the business of the trust is kept entirely separate from the other business of the company or the various businesses of the group.
  I think that on reflection my hon. and learned Friend will appreciate that that is a desirable situation. The clause, as drafted, would enable the business of the trust to be treated as being carried on by the company in its own capacity—that is, as part of the group.
  The House will recall that Section 21(1) of the Finance Act 1972 provides that, in the case of a group of companies registered as such, the businesses of the various members of the group are to be treated for tax purposes as the business of one member, called the representative member, and that that company alone accounts for the total tax due from the group. However, all member companies of the group bear joint and several liability for the tax due, so that any member company may be sued for the tax liability of the whole group. I repeat, because it is a crucial point, that any member company may be sued for the tax liability of the whole group.
  That being so, under the present practice, a pension fund, of which a member
  1440
  company is the trustee, is not regarded as part of the group's business for VAT purposes. But the clause may—I stress the word "may", because I gather the point is not beyond doubt—have the effect of including it in that business and thus bringing it within the joint and several liability for the whole group's VAT.
  The point is not entirely free from doubt, but we think there is a real risk to pension funds if the clause is accepted. There are further additional complications, but I regret to say that the matter is not entirely clear. The clause, as drafted, does not require that the company acting as the trustee of a pension fund and the company for whose employees the pension fund provides shall both be members of the same group. It is conceivable that they may be members of different groups.
  None the less, I think that my hon. and learned Friend has appreciated the point which I am seeking to make. I apologise for having to spell it out at some length. If the effect of the clause is as we suppose, it means that the pension fund might find itself liable for the VAT liability of the entire group. I think my hon. and learned Friend will appreciate that is probably not a position in which a trustee would wish to find himself. Indeed, as I understand and am advised, it would be normal to keep the two operations entirely separate.
  Therefore, in seeking to achieve his objective, my hon. and learned Friend seems—I was about to say to have thrown out the baby with the bath water, but I am not sure that is the right way to put it—to have endangered what would generally be recognised as a basic principle—namely, that the two operations should be kept separate.
  12 midnight.
  There is perhaps a trio of final points that I should make. The clause is also objectionable because it discrimintes in favour of group corporate trustees. Pension rights would be accorded unequal treatment with regard to VAT, depending upon the choice of trustee.
  Having said all that, it may be that that my hon. and learned Friend would wish to comment further now or to pursue the matter with the otherwise.—At all

  1441
  events, for the reasons that I have given, I should not feel able to advise the House
  Mr. Peter ReesI confess that if the clause has strained the Financial Secretary, his explanation has somewhat strained me. I cannot accept that trustees would be at risk. No doubt my hon. Friend has received good legal advice, and at this late hour I shall not press him to ask the Solicitor-General to come here to elucidate nominees of this kind.
  I remain unrepentant about the merits of the clause, and the arguments advanced by my hon. Friend did not strike me as cojent. I see good reasons for discriminating in favour of pension funds. There is no reason why preference should not be given to pension funds which select companies inside the group. However, as we are both taxed by the implications of the clause it would be churlish to reject my hon. Friend's invitation to pursue it on another occasion in more depth, and on that basis I beg to ask leave to withdraw the motion.
  Motion, and clause, by leave withdrawn.

New Clause 41

  RELIEF FOR INTEREST ON SPECIAL CHARGE
  In relation to interest paid under subsection (3) of section 43 of the Finance Act 1968 after the end of the year 1972–73 subsection (5) of that section shall have effect as if the deduction allowable under it were a deduction in computing income for the purpose of ascertaining the excess of liability to income tax over what it would be if all income tax were chargeable at the basic rate to the exclusion of any other rate and as if for the reference to the standard rate there were substituted a reference to the basic rate.—[Mr. Peter Rees.]
  Brought up, and read the First time.
  Mr. Peter Rees: I beg to move, That the clause be read a Second time.
  I hope that this will not put my right hon. Friend the Chief Secretary to any great intellectual difficulty. The clause is designed to correct something that may be an oversight. Under the previous legislation, interest on an overdue special charge was allowable for relief both against income tax and surtax. When surtax was abolished and combined income tax was introduced, possibly through an omission, relief was preserved
  1442
  but only against income tax at the basic rate. That strikes me as inequitable.
  There seems to be no good reason why the position should have been worsened as against the taxpayer, and I hope that my right hon. Friend will be able to accept the clause which will continue to give the same measure of relief in respect of special charge as there was before the introduction of the unified system of tax.
  Mr. Patrick Jenkin: I think that my hon. and learned Friend the Member for Dover (Mr. Peter Rees) has made an unanswerable case. It was not due to an oversight that this was omitted from the legislation last year. It was hoped that by the time the unified tax came into operation virtually all the special charge assessments would have been completed and the sums paid. Regrettably, that is not the case.
  Although the special charge was imposed about five years ago, I am told that 4,000 to 5,000 assessments have still not been completed. As a result, it is right that we should now perpetuate into the unified tax system the relief for interest on special charge that was written into the original legislation in 1968. I therefore think that the new clause is appropriate, and I ask the House to accept it.
  Dr. Gilbert: I am grateful to the Chief Secretary for giving us that information in reply to his hon. and learned Friend the Member for Dover (Mr. Peter Rees). Can he give us a rough estimate of the amount involved? The number of cases—4,000 to 5,000—is staggering.
  Mr. Jenkin: If I may reply with the leave of the House, I have to say that I cannot give the amount, but if the hon. Gentleman tables a Question we shall do our best to give him an answer. I think the hon. Gentleman has to recognise that the legislation was immensely complex, and it was regrettable that because the 1968 Finance Bill was guillotined not one word of debate was addressed to the special charge. It may be that that is the reason why we are still suffering from the hangover five years later.
  Question put and agreed to.
  Clause read a Second time, and added to the Bill.

Clause 1

  ALTERATION OF REVENUE DUTIES
  Mr. Sheldon: I beg to move Amendment No. 44, in page 2, leave out lines 23 and 24.
  The Amendment concerns the Geneva Protocol, which we discussed at some length in Committee, when a situation arose which should never arise again. We passed a clause on an important matter, allowing the Government to change the drawbacks, because of a protocol of whose existence we had no knowledge. We did not even know what language it was in, where it was, or whether or not it applied to Geneva.
  It was a disgraceful occasion. Given the opportunity to withdraw the provision and bring it back on Report, the Government insisted on accepting a provision about which the Committee could know nothing because the Minister knew nothing. We must make sure that a Committee does not make such a mockery of itself again.
  Looking back, the Government might be sorry that they did not accept the Amendment and bring the provision back on Report. It would have expended no time and would have treated the Committee with the minimum courtesy to which it was entitled.
  We now know something more about this protocol. It is a means of fitting in with the requirements of the EEC. Now that we know this, I want only to draw the moral that in any future situation in which the Government cannot make out a case, cannot even, for lack of proper information, comment on the case, it must be their duty to leave out the provisions concerned until Report. Today's proceedings have shown that we are not short of additions, produced in the last few weeks, to the Bill. It is a great pity that one of those additions was not the matter to which the Amendment relates.
  Mr. Higgins: I remarked in Committee on 7th May that I should have been very surprised if a similar Amendment to that which we discussed then were not selected for discussion on Report, and I am not surprised that it has been.
  I understand very well the points made by the hon. Member for Ashton-under
  1444
  Lyne (Mr. Sheldon). At the time, I apologised to the Committee for the confusion which arose with regard to the Geneva Protocol. I do not accept, as the hon. Gentleman suggested, that it would have been right to delete this section at that stage because we did not have sufficient information on which to take a decision. But the hon. Gentleman is right that the text was not avail able. It was made available on 7th May, in the Committee and in the Library. I emphasised on 7th May, and, I think, on 2nd May, that the certified text had not been received from the country concerned with that certification, namely, Sweden. On 7th May I said that there was no reason to suppose that the text would differ significantly in any material particular from that which was eventually certified. The text made available to the Committee on 7th May does not differ in any material particular.
  The certified text has attached to it a list of minor textual corrigenda. To that extent the certified copy differs from the working text given to the Committee. But the corrigenda are minor and in no way relate to the United Kingdom regulations on revenue duties. That being so, I have taken very careful steps to ensure that copies of the certified text have been available in the Library and the Vote Office.
  I contemplated whether I should go around personally through the corridors to ensure that everyone was aware of this, but I do not think that hon. Members have had difficulties in obtaining it. It has not yet been printed—[HON. MEMBERS: "Oh."] I should make this clear. There will be no more corrigenda, but the text has not been printed because, as the House knows, there have been difficulties with printing and the document was received only a short time ago. However, the text now in the Library and the Vote Office is the certified text with the corrigenda attached to it so that hon. Members can see how it differs from the previous document.
  The hon. Gentleman was right to say that there is a lesson to be learned here. That lesson has been learned. I hope that an occasion does not again arise where a document related to a particular clause in a Finance Bill is not available in the way in which it ought to be.

  1445
  From what the hon. Gentleman said, I gather that he did not wish me to dilate at length on the technical details of the three lines which we pursued at considerable length. They relate to the protective element in customs revenue duties and are very limited not only in scope but also in time.
  With that in view, I hope that the hon. Gentleman will feel able to withdraw the amendment.
  Mr. Sheldon: With the leave of the House, Mr. Deputy Speaker, I should like to reply. I hope that the House has seen the chastened faces on the Government Front Bench. On this occasion the lesson has been learned. In view of the promise to do better, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

Clause 4

  RELIEF FOR TAX- OR DUTY-PAID STOCK HELD AT COMMENCEMENT OF VAT
  Mr. Higgins: I beg to move, Amendment No. 1, in page 4, line 40, after '1973', insert:
  'or, with the sanction of the Commissioners, at a later date'.
  Mr. Deputy Speaker (Miss Harvie Anderson): With this amendment we are to take Government Amendment No. 2.
  12.15 a.m.
  Mr. Higgins: The amendments relate to Clause 4 which, as it stands, makes no provision for the acceptance by Customs and Excise of a claim for rebate in respect of purchase tax and revenue duties received after 30th April 1973. The first amendment is designed to assist those traders who were unable to meet this time limit by enabling Customs and Excise to entertain bona fide claims received after that date.
  The clause as it stands provides for the amount of the rebate claimed to be included in the claimant's return for the first VAT accounting period. As a consequence of the first amendment the second amendment is needed to allow a taxable person who claims rebate after
  1446
  30th April and has already made his first VAT return to include the amount claimed as deductible input tax in a subsequent return.
  The House will be familiar with the point at issue here and would not wish me to expand it at great length.
  It would have been possible to make this change on an extra-statutory basis, on the basis of a Treasury Minute dated 31st December 1897 and I understand that extra-statutory concessions have been made for much larger amounts, but it is right and proper that such a matter should appear in the Finance Bill and my right hon. Friend and my Treasury colleagues thought it right to bring this before the House at this stage.
  The second point is one which I believe the hon. Member for Heywood and Royton (Mr. Joel Barnett) may be about to make, but this does not have the same effect as the Opposition amendment of 10th April which would have changed the deadline from the end of April to the end of June.
  Because we have the appropriate date in the Bill, the vast majority of claims have come in, but in the circumstances, we have thought it right to make this change so that those who, for various reasons—illness and so on—have been unable to complete the returns on time will have them accepted by the Customs and Excise who will be scrutinising them carefully.
  Mr. Joel Barnett: The Financial Secretary might have been a trifle more generous. He resisted our amendments which we tabled in order to help, particularly, small traders who had difficulty in submitting their returns, and who, I think he will find, are still having difficulties. He has now had to put down amendments. We understand the need for them, and I am only sorry that the Financial Secretary did not say that he had it in mind that he would need one day to come forward with these.
  I have had brought to my attention the fact that some of those small traders, in particular, who made claims at the end of the first month for repayment of tax where the input exceeded the output on the first month, are still awaiting repayment.

  1447
  I do not know how prevalent this is, but I understand—and I will let the Financial Secretary have the details—that this is not uncommon. Can he give any information about how many are waiting for repayment of tax on claims submitted at the end of the first month?
  Mr. Higgins: I hope the hon. Member appreciates that the effect of these amendments is not the same as the effect of those which he moved on the earlier occasion, not least because if his amendments had been accepted there would still have been a deadline at the end of June and there would still have been some people on the wrong side of the date. It is better to have a flexible approach of the kind we are now debating.
  On the question he raised about repayment of tax, the bulk of claims correctly completed are now being paid within 14 days of receipt. If hon. Members have any cases of this not being so, I hope that they will let me know, but this is not a widespread situation.
  Clearly, if there is some feature on the form which is wrong, there has to be some going back and forth while the matter is sorted out and there may be some delay, but it is not a general situation. If any hon. Member is aware of any undue delay, I should be glad to look at individual cases.
  If the hon. Member for Heywood and Royton has such a case, if he would write to me, I shall look into it.
  Amendment agreed to.
  Amendment made: No. 2, in page 5, line 7, after 'period', insert:
  'or, with the sanction of the Commissioners, in such a return made for a later period'.—[Mr. Higgins.]

Clause 12

  ALTERATION OF PERSONAL RELIEFS
  Mr. John Horam: I beg to move Amendment No. 3, in page 8, line 16, after '£100', insert:
  '(or £265 in the case of a dependent relative who though of working age is sufficiently incapacitated by infirmity to be unable to support himself.)'.
  Mr. Deputy Speaker: With this Amendment it would be convenient to
  1448
  take Amendment No. 4, in page 8, line 19, at end insert:
  '(or £265 in the case of a dependent relative who though of working age is sufficiently incapacitated by infirmity to be unable to support himself)'.
  Mr. Horam: I take no great pleasure in introducing this Amendment at this stage of the night and I blame the Government that we have gone so late. My hon. Friends would not have agreed to complete the Report stage in one day if they had known before hand how many Government new clauses would be moved and the amount of time to be devoted thereto. We seem to have gone down the highways and byways. However, in deference to the lateness of the hour I will be brief.
  The object of the amendment is to remedy a defect of the tax laws which is the cause of much bitterness amongst people who already have a hard enough time, namely, couples with a child who is so badly disabled that on his becoming an adult he is unlikely to be able to support himself. Until the age of 16 or while the child is in full-time education his parents, like all other parents, will receive the child allowance up to a top rate of £265 which gives a tax saving of £80 per annum.
  Upon the child leaving that category, however, the parents drop into the dependent relative allowance which is £100 under the unified system, giving a tax saving of £30, meaning a loss of £50.
  The effect of the amendment would be to uprate the dependent relative allowance. This would be a saving for those who have to support such children or approximately £50 a year or about £1 a week—not a great sum for couples who must support a relative who is disabled to this degree.
  I raise this general point because it was raised with me by a constituent who is in this position. His son, now 18, has ataxia and athetosis—a combination of disabilities similar in effect to, only worse than, a spastic condition. The son has no chance of ever working. This constituent did not seek to raise this case on his behalf alone—this is characteristic of the generosity of many people burdened with particular tragic problems of this kind—but wished the case to be

  1449
  raised on behalf of parents in general who are in this position.
  Earlier this year I raised the general point with the Minister of State. In a letter to me dated 26th March 1973 he said:
  "This allowance"
  —that is, the dependent relative allowance—
  "is of course less than the child allowance and this is the substance of your constituent's complaint. But I think it is only fair to say that when a child over 16 continues to depend on his parents because he suffers from physical disability his case is very similar to that of other dependants and the appropriate relief is the dependent relative allowance."
  In reply to that, an adult of the type that such a child becomes is not similar to other dependants. He has no income. We know that many dependent relatives—for example, retirement pensioners—have an income as of right. Secondly, the degree of dependence of this category of dependent relative is far greater than any other kind. No one can imagine the extent of the commitment of supporting a person throughout his life who is unable to work in any form, who is indeed in many cases unable to communicate properly, who in every physical action must be helped or supported by his parents who must give him some attention. It is the lifelong attention and financial strain which makes this case exceptional and unlike any other kind of dependent relative.
  That is not the only point the Minister of State made. He went on to say:
  "I realise that at first sight this may seem hard but it must he remembered that 16 is also the age at which the State can step in with direct help by giving a child who is unable to work an income in his own right irrespective of the means of his parents. Taken together with the dependent relative allowance, the position then normally compares favourably with the benefit to parents from the income tax child allowance which would have been due had the child been able to stay on at a school or educational establishment."
  It is true that my constituent, for example, now an adult, receives supplementary benefit to the tune of £5·20 a week. But that is not income as of right. We have not yet introduced the disability income. I agree that if we had I probably should not be pressing this amendment, but we have not, and the position
  1450
  remains most unsatisfactory on that account.
  Second, even with some supplementary benefit, the position of the parents still compares unfavourably with that of parents of a normal child who, by definition, will have gone out to work and be earning his or her own living, with no drain, either emotional or financial, on the parents. Again, therefore, the parents of a disabled child are penalised as compared with the parents of a normal child.
  What would have been the position if the parents had not accepted their responsibility, as they are legally entitled to do? If the parents of the boy in my constituency, at some stage in his life, had done as they are quite entitled to do, that is, handed him over to the State and said, "We cannot bear this load any longer. He is yours. You must look after him", what then would have been the cost to the State of looking after such a terribly paralysed child? I do not know what the estimates are, but I imagine it would cost £20, £25 or £30 a week to cover a lifetime's care of a child in that predicament.
  It goes strongly against the grain that a couple who, with enormous courage, have rejected that alternative and chosen to care for the child throughout his crippled life should be penalised by the operation of this part of the income tax law.
  My amendment would help to rectify the position in a small way. It would mean that parents would not drop from the child allowance to the dependent relative allowance as it now is. There would be some small help, and I hope that the Minister of State has an encouraging reply to give.
  Mr. Joel Barnett: I am sure that the House congratulates my hon. Friend the Member for Gateshead, West (Mr. Horam), as we do from this Front Bench, on his persistence and on the wonderful way in which he described a case of which many of us were not aware. I very much hope that the Minister will give sympathetic consideration to the amendment, which would give some small help to meet an important need.
  Mr. Nott: I am aware of the particular case which the hon. Member for Gateshead, West (Mr. Horam) brought to my

  1451
  attention in his letter, and, naturally, I offer my great sympathy to the parents of that child.
  I appreciate that the hon. Gentleman's main purpose in these amendments is to draw attention to the reduction in allowances which the parent of a handicapped child may suffer when the child reaches 16 years of age. Perhaps I should say that if the child is in an educational establishment or a school, the child tax allowance continues beyond the age of 16. We made a change in these arrangements recently, because certain schools for handicapped children were outside the definition of school or educational establishment. We have now brought them within the definition, so that if this particular child were at a school for handicapped children or something of that sort, the parents would continue to receive the child tax allowance. However, over the age of 16 or where the child is not receiving full-time instruction at a school, the child allowance is no longer due and at this point the dependent relative allowance comes into play and may then be claimed.
  12.30 a.m.
  I agree that the dependent relative allowance of £100 is a good deal less valuable than the £265 child allowance but there are fair and reasonable grounds why the higher child allowance should not be payable. At 16 the mentally handicapped child can qualify for direct assistance from the supplementary benefits scheme, and the hon. Member pointed out that his constituents' child was benefiting from supplementary benefits. These benefits are available for mentally and physically handicapped children according to their own means irrespective of the means of the parents and that is important because it means that at 16 the child who is mentally or physically handicapped becomes independent of the parents in financial terms and therefore in the majority of cases probably will be entitled to supplementary benefits by virtue of that independence.
  Taken together with the dependent relative allowance the position of someone in this category compares favourably with the benefit to parents from the income tax child allowance which would be due in respect of a normal child over
  1452
  the age of 16 at school or in another education establishment. The amendment would create curious and indefensible anomalies. The full dependent relative allowance for a taxpayer who maintains a dependent relative under working age would be £265 under the hon. Member's amendment, but would be only £100 for an elderly relative over 65 in receipt of an income. At present no allowance is due when the relative's income reaches £478. The amendment would raise that to £643 for a relative of working age but where a relative's income for tax purposes substantially exceeds the basic amount payable to a retirement pensioner it can hardly be said that he is dependent upon someone else. A single person entitled to the basic personal allowance begins to pay income tax when his income exceeds £595 and it would be difficult to defend giving someone an allowance for supporting a relative whose income is signficant enough to be taxable.
  I have sympathy for the case mentioned by the hon. Member but it is relevant for me to point out as I did in my letter that the child will be independent of his parents and therefore will be independently assessed on his income. For that reason he is receiving supplementary benefits. I do not know the full circumstances of the case, but, as the hon. Member is aware, we have taken a number of measures to improve the position of the invalid. There is the invalidity allowance which we have introduced for the chronically sick and disabled person, and being over the age of 16 the child would rank in his own right not only for supplementary benefits but for social security allowances.
  Generally speaking the Government feel that this sort of problem is more usefully and more efficiently dealt with through the social security system than through the tax system, so that although I have sympathy for the case, I point out that the child in question is no worse off for being in receipt of supplementary benefits than he would be if the hon. Member's amendment were accepted.
  Mr. Horam: I accept that the right way to solve the problem is through the creation of a disability increment, as the Disablement Income Group advocates.

  1453
  But until that situation arrives, these people have to live as they do and the income tax laws affect them in this way. Apart from stating a number of technical disadvantages of my amendment, which I accept, the hon. Gentleman did no more than repeat the arguments made in his letter, which I must again refute. Therefore, I cannot withdraw the amendment.
  Amendment negatived.
  Mr. Nott: I beg to move Amendment No. 8, in page 8, line 31, leave out from following to end of line 39 and insert
  'subsections:—
  (2A) Subject to subsection (2B) below, for the purposes of this section 'the basic retirement pension' for any year means the aggregate of the payments to which a person is entitled in that year on account of a Category A retirement pension under subsection (1) of section 24 of the Social Security Act 1973 if, throughout that year—

  (a) he fulfils the conditions in paragraphs (a) and (b) of that subsection; and

  (b) none of those payments is reduced under section 26(1) of that Act (by reference to his earnings) or increased under any provision of subsections (4) to (7) of the said section 24 or under any other provision of that Act.

  (2B) In relation to any time before the coming into force of section 24 of the Social Security Act 1973, subsection (2A) above shall have effect as if the words from 'Category A retirement pension ' to 1973 ' there were substituted the words 'retirement pension under subsection (1) of section 30 of the National Insurance Act 1965 where the pension is payable by virtue of his own insurance' and as if for paragraph (b) there were substituted the following paragraph'.
  Clause 12(2) provides that the dependent relative income limit for full dependent relative allowance is to be equal to the basic national insurance retirement pension for the time being. The basic retirement pension is defined by reference to the National Insurance Act 1965. This amendment incorporates the definition in terms appropriate to the Social Security Bill. The existing definition is retained to cover the period until the Social Security Bill is brought into operation.
  Amendment agreed to.

Clause 15

  PENSIONS AND PAYMENTS ON RETIREMENT ETC.—CONTROLLING DIRECTORS
  Mr. Joel Barnett: I beg to move Amendment No. 45, in page 9, line 38, at end add:
  '(c) providing that where a claim is made in respect of a director under this section, he shall be excluded from entitlement to claim under section 227 of the Taxes Act 1970 (Nature and amount of relief for qualifying premiums)'.
  Clause 15 was slipped in towards the end of Committee stage when the Government had decided that they ought to throw an occasional sop to hon. Members opposite, and this one has been very well received. The insurance companies are preparing for it. The amendment would ensure that a director who benefits under the Clause should not also benefit under Section 227 of the Taxes Act 1970, whereby he is empowered to spend up to £1,500 a year, depending on the size of income, to take a pension policy—which has itself been improved by the Chancellor to enable him also to take a lump sum as well as a pension.
  Things are looking up for the directors of close companies. We were told earlier how much better it was for a close company under the present Chancellor—for example, under the new corporation tax. But that is another matter. The amendment seeks at least to limit the amount of relief that a controlling director of a close company would be able to obtain. It is reasonably fair that he should not be able to obtain both benefits.
  Mr. Nott: The amendment is unnecessary since what it seeks to achieve is already established law. If a former controlling director is admitted to his company's pension scheme, under the new practice his employment will necessarily become pensionable employment from that time. Under the statutory provisions relating to retirement annuity relief, that relief is not available in respect of earnings from a pensionable office or employment, so the point is already covered.
  Mr. Barnett: I am obliged to the hon. Gentleman. I would not have dreamt that the Chancellor would be so far-seeing.
  In the circumstances, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

Clause 16

  CHARGE TO ADDITIONAL RATE OF CERTAIN INCOME OF DISCRETIONARY TRUSTS
  Mr. Nott: I beg to move Amendment No. 46, in page 10, line 28, at end insert:
  '(4A) For the purposes of this section amounts paid or credited to trustees in any year of assessment in respect of dividends or interest payable in respect of shares in or deposits with or loans to a building society with which arrangements under section 343 of the Taxes Act are in force for that year shall be treated as income for that year received by the trustees after deduction of income tax from a corresponding gross amount.
  In this subsection expressions used in section 343 of the Taxes Act have the same meanings as in that section.'.
  Mr. Deputy Speaker (Miss Harvie Anderson): With this amendment we are to discuss Government Amendment No. 47.
  Mr. Nott: The clause imposes an investment surcharge on the income of accumulation and discretionary trusts. Clause 17, to which Amendment No. 47 relates, is concerned with the taxation of distributions of income by the trustees of such trusts.
  The purpose of the amendments is to make clear the treatment of building society interest received by the trustees of a trust within this legislation. It is proposed in the amendments that interest credited to trustees within the legislation should be deemed to have suffered tax at the basic rate, so that the additional rate of 15 per cent. will be payable on the amount of income credited. grossed up at the basic rate.
  I hope that that is sufficient explanation.
  Amendment agreed to.

Clause 17

  PAYMENTS UNDER DISCRETIONARY TRUSTS
  Amendment made: No. 47, in page 11, line 44, at end insert:
  'but tax on any income represented by amounts paid or credited as mentioned in section 16(4A) of this Act after the end of the year 1973–74 shall be taken into account under paragraph (a) above only on production of a certificate from the building society con-
  1456
  cerned specifying those amounts and stating that an amount representing income tax on that income calculated at the basic rate has been or will be accounted for.'.—[Mr. Nott.]

Clause 19

  SHARE OPTION AND SHARE INCENTIVE SCHEMES
  Mr. Patrick Jenkin: I beg to move Amendment No. 14, in page 12, line 23, leave out "Section" and insert ' Sections 78 and'.
  The amendment is a paving amendment for Government Amendments Nos. 32 and 33, to which we come later, which are designed to meet points made on both sides of the Committee that the ages of the participants in profit-sharing schemes and share incentive schemes and the conditions for participation should be narrowed so as to make the qualification for the scheme somewhat less onerous.
  Mr. Dalyell: As one of those who spoke on the matter in Committee, I should like to thank the Treasury, granted that we may have reservations about the scheme as a whole.
  Amendment agreed to.

Clause 20

  CLOSE COMPANIES: LOANS FOR PURPOSES OF APPROVED SHARE INCENTIVE SCHEME
  Mr. Patrick Jenkin: I beg to move Amendment No. 15, in page 12, line 37, at end insert:
  'unless the shares or interests are acquired from, or under arrangements made with, a participator in the company who acquired them neither under an approved share incentive scheme nor, without consideration, as the holder of shares acquired under such a scheme.'.
  This amendment, and Government Amendment No. 16, which it will be convenient to discuss with it, were tabled to meet criticisms of the clause that were made in Committee.
  Amendment agreed to.
  Amendment made: No. 16, in page 13, line 18, leave out subsection (4).—[Mr. Patrick Jenkin.]

Clause 21

  AMENDMENTS RELATING TO CLOSE COMPANIES
  Mr. Nott: I beg to move Amendment No. 9, in page 13, line 45, after 'of', insert 'Part I of'.
  Mr. Deputy Speaker: With this amendment we shall discuss Government Amendments Nos. 10 to 13.
  Mr. Nott: The purpose of this rather complicated series of amendments is to deal with problems which some close companies are facing on the transition from the old system of corporation tax to the new imputation system. They arise because profits which were earned while the old system was in force may be passed on to shareholders by way of dividend under the new imputation system. Difficulties can also arise directly out of the transitional provisions in last year's Finance Act dealing with the setting off of advance corporation tax against corporation tax.
  We have placed an explanatory note about the amendments in the Library. I shall be happy to send special copies bearing a Treasury crest if hon. Members would wish to receive them tomorrow morning.
  Amendment agreed to.
  Amendment made: No. 10, in page 13, line 47, leave out ' Schedule ' and insert:
  'Part of that Schedule, and the transitional provisions in Part II of that Schedule shall have effect with respect to accounting periods of close companies beginning before 6th April 1973'.—[Mr. Nott.]

Clause 31

  PARTNERSHIPS INVOLVING COMPANIES: EFFECT OF ARRANGEMENTS FOR TRANSFERRING RELIEF
  12.45 a.m.
  Mr. Patrick Jenkin: I beg to move Amendment No. 36, in page 23, leave out lines 38 to 42 and insert:
  (3) In subsection (2) above "relevant accounting period of the partnership" means any accounting period of the partnership ending on or after 6th March 1973 in which any such arrangements as are specified in subsection (1) above are in existence or to which any such arrangements apply; but, in
  1458
  relation to any such accounting period which begins before that date, any reference in subsection (2) above the company's share in the profits or loss of the accounting period or in any such charges on income as are referred to in subsection (2)(a) above shall be construed as a reference to such proportion only of that share as the part of that period beginning on 6th March 1973 bears to the whole of that period'.
  Mr. Deputy Speaker: With this it will be convenient to take Government Amendments Nos. 37 and 38.
  Mr. Jenkin: Amendment No. 36 corrects a drafting defect in that Clause 31 by an oversight did not contain a starting date. The amendment is designed to repair that omission. Amendments Nos. 37 and 38 meet points raised in Committee by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and my hon. and learned Friend the Member for Dover (Mr. Peter Rees). It is necessary to extend the protection given to capital allowances on expenditure under artificial contracts from the effects of the more restrictive rules now being introduced for group relief and similar relief in partnerships involving companies. I hope that these amendments will be acceptable.
  Amendment agreed to.
  Amendment made: No. 37, in page 24, line 23, leave out from 1968 ' to end of line 24 and insert:
  'or, as the case may require, Chapter I of Part III of the Finance Act 1971, in respect of expenditure incurred by the partnership on the provision of machinery or plant'.—[Mr. Patrick Jenkin.)

Clause 38

  TERRITORIAL EXTENSION OF CHARGE TO INCOME TAX, CAPITAL GAINS TAX AND CORPORATION TAX
  Mr. Patrick Jenkin: I beg to move Amendment No. 48, in page 28, line 36, at end insert:
  '(4A) In relation to exploration or exploitation rights disposed of by a company resident in a territory outside the United Kingdom to a company resident in the same territory or in the United Kingdom, sections 273 to 275 and 278 to 279 of the Taxes Act (transfer within group and company ceasing to be member of group) shall apply as if in section 272 of that Act (definition of "group" etc.) subsections (1)(a) and (2) were omitted'.
  The amendment provides that, with appropriate modifications, the existing

  1459
  capital gains tax "roll-overs" available to groups of companies for transfers of assets within a group shall also be available to non-resident groups for transfers within the scope of Clause 38. If "carved-out royalties" or interests in the Continental Shelf are transferred between companies within a group in the circumstances specified, roll-over relief should be available in those cases.
  Mr. Joel Barnett: The Treasury can find time to table amendments to help carved-out royalties but it will not help the Oldham Football Club and other amateur clubs more deserving of rollover relief. It is quite remarkable that the Treasury can find time for this.
  Mr. Dalyell: How does this affect the oil industry?
  Mr. Jenkin: With the leave of the House, this is to meet a case that was made by the oil industry and pressed in Committee. It was felt that if the tax jurisdiction were extended to cover the exploitation of oil in the North Sea it would be a bit hard to charge the capital gains if all that a group were doing was transferring a share in the licence or in some other royalty interest from one company in the group to another. We have to take account of the fact that some of these companies may be nonresident. The amendment provides for the roll-over relief to apply when we are dealing with ex-resident members of the group if they are both resident in the same overseas country. There is a danger otherwise that transfers will take place between a company which has a double tax convention with this country and a company and a country which does not. In that way capital gains tax would be avoided in circumstances in which it should not.
  Mr. Dalyell: I have the suspicion that this matter might be a good deal more important, especially in the light of licences being given in the counties of Dunbartonshire, Lanarkshire, Stirling-shire and West Lothian to companies such as Candecca in circumstances without either the county convener or the county council being told about it. I will not regale the Treasury with these
  1460
  problems at this time of night, but it can expect some letters from me.
  Amendment agreed to.

New Schedule

  MARKET VALUE OF UNQUOTED SHARES AND SECURITIES
  1. In this Schedule "the principal section" means section (determination for estate duty and capital gains tax of open market price of unquoted shares and securities) of this Act.
  2. So far as the principal section relates to a determination falling within paragraph (a) of subsection (1) thereof, the principal section applies in the case of deaths on or after 6th July 1973.
  3. So far as the principal section relates to a determination falling within paragraph (b) of subsection (1) thereof, the principal section applies, subject to paragraph 7 below, on the disposal of any asset on or after 6th July 1973.
  4. Subject to paragraphs 5 and 6 below, if the market value of an asset or any part of it at the time of its acquisition is material to the computation of any chargeable gain accruing on a disposal of the asset on or after 6th July 1973 then, notwithstanding that the acquisition may have occurred before that date or that the market value at that time may have been fixed for the purposes of a contemporaneous disposal, subsection (3) of the principal section shall apply for the purposes of the determination of the market value of the asset or, as the case may be, that part of it at the time of its acquisition.
  5.—(1) This paragraph applies if, in a case where the market value of an asset at the time of its acquisition is material as mentioned in paragraph 4 above,—

  (a) the acquisition took place on the occasion of a death occurring after 30th March 1971 and before 6th July 1973, and

  (b) by virtue of section 26 of the Finance Act 1965, the principal value of the asset for the purpose of estate duty on that death would, apart from this paragraph, be taken to be the market value of the asset at the date of the death for the purposes of Part III of that Act.

  (2) If the principal value referred to in subparagraph (1)(b) above falls to be determined as mentioned in section 55 of the Finance Act 1940 or section 15 of the Finance (No. 2) Act (Northern Ireland) 1946 (certain controlling shareholdings to be valued on an assets basis), nothing in the principal section shall affect the operation of section 26 of the Finance Act 1965 for the purpose of determining the market value of the asset at the date of the death.
  (3) If sub-paragraph (2) above does not apply, section 26 of the Finance Act 1965 shall not apply as mentioned in sub-paragraph (1)(6) above and the market value of the asset on its acquisition at the date of the death shall

  1461
  be determined in accordance with section 44 of that Act and paragraph 4 above.
  6.—(1) In any case where—

  (a) before 6th July 1973 there has been a part disposal of an asset to which the principal section applies (in this paragraph referred to as "the earlier disposal"), and

  (b) by virtue of any enactment, the acquisition of the asset or any part of it was deemed to be for a consideration equal to its market value, and

  (c) on or after 6th July 1973 there is a disposal (including a part disposal) of the property which remained undisposed of immediately before that date (in this paragraph referred to as "the latter disposal"),

  sub-paragraph (2) below shall apply in computing any chargeable gain accruing on the later disposal (but not so as to affect the amount of any chargeable gain accruing on the earlier disposal).
  (2) Where this sub-paragraph applies, the apportionment made by virtue of paragraph 7 of Schedule 6 to the Finance Act 1965 on the occasion of the earlier disposal shall be recalculated on the basis that subsection (3) of the principal section was in force at the time, and applied for the purposes, of the determination of—

  (a) the market value referred to in subparagraph (1)(b) above; and

  (b) the market value of the property which remained undisposed of after the earlier disposal; and

  (c) if the consideration for the earlier disposal was, by virtue of any enactment, deemed to be equal to the market value of the property disposed of, that market value.

  7. In any case where—

  (a) before 6th July 1973 there has been a disposal of an asset to which the principal section applies, and

  (b) immediately before that date the amount of any gain or loss accruing on the disposal has not been finally determined for the purposes of Part III of the Finance Act 1965, and

  (c) the application of this paragraph would result in a smaller gain or a greater loss accruing on the disposal than if this paragraph did not apply.

  then, notwithstanding that any market value material to the determination referred to in paragraph (b) above may have been fixed for the purposes of any acquisition which was contemporaneous with the disposal, this Schedule shall have effect as if for any reference in paragraphs 3, 4 and 6 above to 6th July 1973 there were substituted a reference to the date of the disposal.
  8. If, apart from this paragraph, section 26(3) of the Finance Act 1965, as originally enacted (market value determined for capital gains tax purposes on a death to be treated as principal value for estate duty purposes), would apply in a case where, by virtue of paragraph 4, paragraph 6 or paragraph 7 above, subsection (3) of the principal section
  1462
  applies for the purposes of the determination of the market value (for the purposes of tax on chargeable gains) of an asset on the date of a death occurring on or before 30th March 1971, the said section 26(3) shall not apply and the principal value of the asset for the purposes of estate duty on that death shall be determined as if that section had not been enacted.—[Mr. Patrick Jenkin.]
  Brought up, read the First and Second time, and added to the Bill.

Schedule 8

  SHARE OPTION AND SHARE INCENTIVE SCHEMES
  Mr. Patrick Jenkin: I beg to move Amendment No. 17, in page 52, line 19, leave out from 'allow' to 'to' in line 21 and insert:
  'every full-time employee of the company concerned who—

  (a) has been a full-time employee of that company for a continuous period of not less than five years; and

  (b) is chargeable to tax in respect of his employment under Case I of Schedule E; and

  (c) is not less than twenty-five years old.'.

  Mr. Deputy Speaker (Miss Harvie Anderson): With this we can also discuss Government Amendment Nos, 25, 26 and 27.
  Mr. Jenkin: I apologise to the House, because when we took the earlier paving amendment I had misremembered. I thought that it was a paving amendment to this group when it was a paving amendment to another group.
  This group of amendments deals with the question of the conditions of membership of, in one case, a profit-sharing scheme which will be exempted from the share incentive legislation, and, in the other, the share savings scheme introduced under this legislation for the profit-sharing scheme.
  We now propose that it should be available to full-time employees with continuous service of not less than five years, that it be chargeable to tax in respect of his employment under Case I of Schedule E—I think it is a better test than United Kingdom residence—and that he should be not less than 25 years old. This is to meet criticisms of my hon. Friends. Any profit-sharing scheme that complies with these tests would be a genuine profit-sharing scheme

  1463
  to which we seek to confine the exemption.
  The other three amendments are concerned with the minimum entitlement for membership of an employee share-saving scheme. Here again, it is United Kingdom employees chargeable under Case I of Schedule E, the minimum age of 25, and five years' service. I stress that this in no way excludes any company producing such a scheme from making eligible for membership employees with fewer years service or with a lower age, or who are serving overseas, if it wishes. It is merely that the scheme must, at any rate, have the minimum entitlement of these categories to qualify for approval.
  Mr. Dalyell: At this time of night I simply acknowledge the points the right hon. Gentleman has made.
  Amendment agreed to.
  Mr. Patrick Jenkin: I beg to move Amendment No. 18, in page 52, line 36 [Schedule 8], after 'if', insert '(a)'.
  Mr. Deputy Speaker: With this we can also discuss Government Amendments Nos. 20 and 22.
  Mr. Jenkin: This group of amendments is intended to modify paragraph 4 of Schedule 8 to reflect undertakings I gave in Committee about the drafting. There were two points that had become confused in the drafting by compression into one paragraph. We have separated them. One deals with restrictions on shares and the other with the so-called Stock Exchange companies, which are controlled by employees. I will be happy to answer any questions that hon. Members may have.
  Mr. William Clark: I wish to speak to Amendment No. 22. Paragraph (a) deals with
  "the deposit of the shares with trustees as security for a loan repayable not later than seven years after … acquisition …"
  I believe that a period of seven years is far too short for this purpose. I refer particularly to loans of over seven years.
  I do not understand why my right hon. Friend believes that a loan of shares in a share option scheme should be restricted to only seven years. One is entitled to invest four times one's annual salary in a share option scheme. If somebody is earning, £2,000, then four times
  1464
  the annual salary comes to £8,000. If the employee has to repay that in seven years, he must pay out of his £2,000 a year earnings over that period a figure of £1,143.
  I tabled an amendment, which was not selected by the Chair, suggesting that the period should be 20 years rather than seven years. I do not mind whether the period is 20 or even 14 years, but I certainly regard a period of seven years as a nonsense. I do not think the Government should expect employers who enter such schemes to pay over £1,100 out of gross salary. Therefore, I hope my right hon. Friend will look at the matter again to see whether the period of seven years can be extended. I regard seven years as an arithmetical nonsense.
  Mr. Jenkin: With the leave of the House, perhaps I may reply briefly to my hon. Friend the Member for Surrey, East (Mr. William Clark). It was always the Government's intention to let out from the requirements of approval any employee who acquires shares on normal terms. With regard to the extended definition of restrictions, provided an employer grants a loan to an employee to buy shares and hold the shares as security on repayment of the loan, that restriction would bring the transaction within the legislation with all the consequences that would apply.
  1.0 a.m.
  It was argued that this was unreasonable and that a mere loan to buy shares with none of the other features of a stock option or a share incentive scheme was not such that it should be brought within this legislation. That was accepted. But it would be highly anomalous if we imposed the seven-year rule for the removal of "clogs" under an approved share incentive scheme while allowing a very much longer period to operate for the exemption on a normal purchase. That is why we have included a provision that the loan should be paid off within seven years if the transaction is to have the benefit of the normal term's exemption.
  My hon. Friend asked where was the sense in having that rule if under an approved scheme a man was entitled to have shares up to the value of 4 years of his regular emoluments. The answer is that under an approved scheme it is only

  1465
  a maximum. No one is bound to go up to the maximum. Clearly the amount of stock option or share incentive shares that an executive will take, if he has to do it through a loan, will bear some reference to the amount, availability and terms of any loan that he may get from his employer. Furthermore, it is recognised that in many cases employees who take the maximum will do so knowing that when the time comes and they become full shareholders they will be able to dispose of part of their holdings to pay off the loan on the balance.
  If we were now to extend the normal term's exemption beyond the 7-year period we should create anomalies which it would be very difficult to justify. While I shall look again at what my hon. Friend says, I hold out no hope that we shall be able to meet his argument.
  Mr. Clark: Before my right hon. Friend sits down, why is seven years sacrosanct? What difference does it make if a person is entitled to invest four times his annual salary, which, on my example, means that he has to pay £1,143 out of £2,000 a year? Why do we say that he can have four times his salary? Why not twice his salary? It is illogical for the Government to say that we are having a share incentive scheme with four times the salary if, on a 7-year repayment basis, no one can possibly take advantage of it. It is so much window dressing. Would not it be better if we set it at twice the salary?
  Mr. Jenkin: With respect, my hon. Friend is wrong. If the scheme is an approved scheme the normal term's exemption does not apply. Under the approved scheme and the legislation that this House accepted last year, it was recognised that it was desirable that all the "clogs" should be removed by the end of seven years and that this was a reasonable time limit on the maturity of an option or an incentive arrangement. Therefore we put in seven years.
  We are now extending the exemption for the normal term's purchase arrangements and, furthermore, not treating as a "clog" a case where the shares are held by trustees as security for the loan and no more—a bare loan to the employee to buy the shares but the trustees or some-
  1466
  one holding the shares simply as security for the repayment of the loan.
  In the circumstances, it is not unreasonable to have regard to the same sort of term. Twenty years may be all right when paying off a loan on a house or some major purchase of that kind. But for the purchase of shares out of income, I think that a seven-year period is a reasonable period of a loan.
  As I said, it would create anomalies as between the normal purchase arrangement, if it had exemption for a very much longer period, and the approved scheme where all the "clogs" have to be paid off within seven years. While I see my hon. Friend's point, I do not think that it is a very good one, and while I shall look at what he said, I do not hold out any hope of being able to meet it.
  Mr. Clark: Again before my right hon. Friend sits down, there will be two different types of employees—
  Mr. Deputy Speaker: Order. I understood the Chief Secretary to have sat down. We are not in Committee.
  Amendment agreed to.
  Amendments made: No. 19, in page 52, line 37, leave out from beginning to end of line 15 on page 53 and insert:
  "(c) the acquisition was an acquisition of shares and either of the following conditions was satisfied immediately after the acquisition, namely

  (i) that the shares were not subject to such restrictions as are specified in subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired otherwise than as mentioned in subsection (1) above; or

  (ii) that the shares were not subject to such restrictions as are specified in paragraph (a) or (b) of subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class were acquired by persons who were or had been employees or directors of, or of a body controlled by, the body in which they were shares and who were together able as holders of the shares to control that body.

  For the purposes of this paragraph shares in a body are available shares if they are not held by or for the benefit of an associated company of that body; and shares are exchangeable for other shares if (whether by one transaction or a series of transactions) they can be exchanged for or converted into the other shares"; and

  1467
  (b) the following were inserted after subsection (2):—
  "(2A) The restrictions referred to in subsection (2) above are—

  (a) restrictions not attaching to all shares of the same class; or

  (b) restrictions ceasing or liable to cease at some time after the acquisition; or

  (c) restrictions depending on the shares being or ceasing to be held by directors or employees of any body corporate (other than such restrictions imposed by a company's articles of association as require shares to be disposed of on ceasing to be so held): "and

  (c) in subsection (6)(c) for the words from any restriction "to" class "there were substituted the words" such restrictions as are specified in subsection (2R) above.".'.
  No. 20, in page 53, line 15, at end insert—
  '(2) Subsection (4) of the principal section shall not apply, and shall be deemed never to have applied, to an acquisition of shares made before 23rd March 1973 if the condition specified in sub-paragraph (ii) of subsection (2)(c) (as substituted by sub-paragraph (1) of this paragraph) was satisfied immediately after the acquisition'.—[Mr. Patrick Jenkin.]
  Mr. Patrick Jenkin: I beg to move Amendment No. 21, in page 53, leave out lines 17 to 22 and insert:
  '5. Subject to paragraph 6A below, in determining for the purposes of the principal section, the principal Schedule and this Schedule (including any valuation made for those purposes)'.
  Paragraph 5 of Schedule 8 defines what is to be regarded as a "restriction attaching to shares". The amendment provides that such "deemed" restrictions shall be taken into account in valuing the shares. This seems a necessary improvement. I hope that the House will accept it.
  Amendment agreed to.
  Amendment made: No. 22, in page 53, line 47, at end insert:
  '6A. For the purposes of subsection (2)(c) of the principal section, shares acquired by any person shall not, by virtue of paragraph 5 above, be regarded as subject to any restriction by reason only of any contract, agreement, arrangement or condition providing for either or both of the following, that is to say—

  (a) the deposit of the shares with trustees as security for a loan repayable not later than seven years after the acquisition nor later than the time when that person ceases to hold the office or employment by virtue of which he obtained the right or was given the opportunity to acquire the shares; and

  (b) the disposal of the shares, when that person ceases to hold that office or employment, to a person nominated in accordance
  1468
  with the contract, agreement, arrangement or conditions;

  if, in the case of sub-paragraph (a) above, he acquired the shares at market value and, in the case of sub-paragraph (b) above, he is required to dispose of them at a price not exceeding their market value'.—[Mr. Patrick Jenkin.]
  Mr. Patrick Jenkin: I beg to move Amendment No. 23, in page 54, line 9, at end insert:
  Minimum price of shares
  8. In paragraph 5 of Part IV of the principal Schedule the words from "and where part of the price" to the end of sub-paragraph (1) and, in sub-paragraph (2)(b), the words "and that price" and the words from "both" to "thereof and" shall be omitted'.
  Mr. Deputy Speaker: With this amendment it will be convenient to take Amendment No. 34.
  Mr. Jenkin: This amendment is inserted to correct the Bill. The effect would be that the acquisition price of a partly-paid share acquired under an approvable share incentive scheme would be treated as equal to the price of a share fully paid on acquisition.
  We are meeting the demand, pressed very heavily upon us both on Second Reading and in Committee, to get rid of what is called the reverse discounting. Where part of the price of a share is postponed, the accounting rule would require a discounting for the right to delay the payment of the balance of the purchase price. Representations were made to us—not only by my hon. Friends but by a number of representative bodies outside—that this imposed a severe disincentive on the adoption of incentive schemes. On reflection, it seemed best to abandon this concept, with the result that the full discount will be available for share incentive schemes without having to operate the reverse discount for the delay of the balance of the purchase price.
  Mr. Dalyell: May I ask which bodies outside particularly pressed this point?
  Mr. Jenkin: With the leave of the House—certainly the CBI, the chambers of commerce and other bodies that have taken an interest in the legislation made this point very strongly to us both last year and this year.
  Mr. Ridley: I thank the Government for having made these concessions on

  1469
  Schedule 8. It is very satisfying, when good points are made in Committee, that the Government try to accommodate them. I have noticed that there is general acclamation outside the House for this group of amendments. Therefore, it is right that we should thank by right hon. Friend the Chief Secretary for taking this action.
  There is one point about which I have heard nothing from my right hon. Friend. My hon. Friend the Member for Surrey, East (Mr. William Clark) made some fairly powerful inroads on the question of the way in which the accounting is to be done in the balance sheets of companies entering into such transactions. I know that this is not the moment to expect an answer, but I hope that the Chief Secretary will bear it in mind and perhaps issue some guidance. I thought that my hon. Friend was very convincing on this point, and it would be nice to feel that the companies will not be left in confusion if they enter into some of these transactions.
  Mr. Jenkin: With the leave of the House, I will respond to that point. I think my hon. Friend recognises that this is not the moment to go into this matter in detail. I have written to my hon. Friend the Member for Surrey, East (Mr. William Clark) and I will write to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) giving him the same information.
  I shall consider whether it would be appropriate for the Inland Revenue to issue some form of guidance, but I think that this is probably more a matter for the accountancy bodies than for the Inland Revenue.
  Mr. William Clark: May I make it clear that I do not agree with the last letter that my right hon. Friend wrote to me.
  Amendment agreed to.
  Mr. Patrick Jenkin: I beg to move Amendment No. 24, in page 54, line 14, after 'which', insert 'directors or'.
  Mr. Deputy Speaker: With this we are to take Amendments Nos. 30 and 31
  Mr. Jenkin: The effect of the amendments is to enable directors to partici-
  1470
  pate in savings-related share incentive schemes—that is to say schemes for the generality of employees—but it is made clear in the Bill that if they do they will not be eligible to participate in any executive-type share incentive scheme. They are mutually exclusive.
  There seems no reason why, because a company may not have introduced an executive scheme, directors should not participate in a scheme available for the generality of employees in the company.
  Amendment agreed to.
  Amendments made: No. 25, in page 54, line 26, after ' company insert:
  'who is chargeable to tax in respect of his employment under Case I of Schedule E'.
  No. 26, in page 54, line 27, leave out 'eighteen' and insert 'twenty-five'.
  No. 27, in page 54, line 29, leave out 'two' and insert 'five'.
  No. 28, in page 54, line 33, leave out 'disregarded' and insert 'treated'.
  No. 29, in page 54, line 34, at end insert:
  'as issued otherwise than under a scheme approved under that Schedule'.
  No. 30, in page 55, line 25, leave out 'his employer' and insert:
  'the company of which he is a director or employee'.
  No. 31, in page 55, line 40, after second 'the', insert 'director or'.—[Mr. Patrick Jerkin.]
  Mr. Patrick Jenkin: I beg to move Amendment No. 32, in page 55, line 45, at end insert:
  'and to which Part III of this Schedule does not apply'.
  Mr. Deputy Speaker: With this we are to take Amendment No. 33.
  Mr. Jenkin: Amendment No. 32 is consequential upon the amendment to allow a director to participate simultaneously in a savings-related share incentive scheme and a savings-related share option scheme. It excludes a director who is a member of an executive-type share option or share incentive scheme.
  Amendment No. 33 is a major new addition to the Bill and extends the SAYE share savings scheme to include share option schemes. The case for doing this was pressed hard in Committee, notably by my hon. Friend the Member

  1471
  for Dartford (Mr. Trew) who felt that there was a much greater chance of companies being prepared to introduce SAYE share savings schemes if we could extend them to option schemes and not have them only for share incentive schemes.
  We undertook to look at that argument and I think that in these amendments we have devised a scheme that will allow companies to introduce their SAYE employee share saving schemes in the form of option schemes rather than in the form of the more traditional share incentive schemes.
  Mr. Dalyell: Can the right hon. Gentleman remind us of the cost to public funds of doing this?
  Mr. Jenkin: We have said all along that it is impossible to quantify the cost to public funds because it is impossible to estimate the extent to which these schemes will be taken up. I think that there is a greater probability of the SAYE schemes being adopted if they include option schemes as well as the sort for which the Bill originally made provision.
  Mr. Trew: As my right hon. Friend was kind enough to refer to me, may I express my appreciation of the Government's having made it possible to extend share option schemes to shop floor schemes? This, coupled with the ending of the discounting penalty, will increase the flexibility and value of these schemes.
  1.15 a.m.
  Dr. Gilbert: Since this is the last opportunity to say anything about the amendments to Schedule 8, I would not want to disappoint hon. Members opposite by letting it be thought that the attitude of this party to share option and incentive schemes has changed in the last few weeks, although we have kept silent on this series of amendments.
  One of the reasons that the Chief Secretary found it difficult to answer the question of my hon. Friend the Member for West Lothian (Mr. Dalyell) about the cost to the Exchequer is that not only is it difficult to know how many companies will set up such schemes: it is also difficult to know how many will have to dismantle them as soon as we form the Government.
  Mr. Jenkin: It is important to know whether the Labour Party will pledge itself to abolish the employee savings-related schemes. It has made its position clear on the option and incentive schemes, but does this position extend to schemes available to the generality of employees and to shop floor schemes? We have read with interest its proposals for compulsory employee participation, which it envisages will, in 50 years, involve employees owning all the companies for which they work. That scheme requires more working out, but it would be interesting to know whether the Labour Party proposes to repeal the legislation in the Bill.
  Amendment agreed to.
  Amendment made: No. 33, in page 55, line 48, at end insert

PART III

  SAVINGS-RELATED SHARE OPTION SCHEMES
  Application of Part III
  21. This Part of this Schedule applies to any share option scheme under which—

  (a) directors and employees pay for the shares acquired by them in pursuance of rights obtained under the scheme out of repayments made to them under a certified contractual savings scheme within the meaning of section 415 of the Taxes Act; and

  (b) subject to paragraph 22 below, the rights obtained under the share option scheme are not capable of being exercised earlier than at the time when repayments under the certified contractual savings scheme are due.

  22. A right obtained by a director or employee under the share option scheme may he capable of being exercised earlier than mentioned in paragraph 21(b) above if he ceases to hold the office or employment by virtue of which he is eligible to participate in the scheme—

  (a) not earlier than three years after obtaining the right, or

  (b) by reason of injury, disability, redundancy or death.

  23. For the purposes of paragraph 21 above—

  (a) repayment under a certified contractual savings scheme may be taken as including or as not including a bonus or interest; and

  (b) the time when repayment is due shall be, where repayment is taken as including the maximum bonus, the earliest time at which the maximum bonus is payable and, in any other case, the earliest time at which a bonus is payable under the scheme;

  and the question what is to be taken as so included must be required to be determined at the time when rights under the share option scheme are obtained.
  24. In relation to a scheme to which this Part of this Schedule applies the principal Schedule shall have effect subject to the following provisions of this Part of this Schedule and section 78 of the Finance Act 1972 shall have effect as if subsections (2) and (3) thereof were omitted.

  SAVINGS-RELATED SHARE OPTION SCHEMES
    Participants
    25. Paragraph 6 of Part II of the principal Schedule shall have effect as if at the end there were added the words "and every full-time employee of that company who is chargeable to tax in respect of his employment under Case I of Schedule E must be entitled to participate in the scheme to a reasonable extent if he is not less than twenty-five years old and has been a full-time employee of that company for a continuous period of not less than five years."
    Issue of shares
    26. Paragraph 5 of Part II of the principal Schedule (limitation on issue of shares) shall not apply and any shares issued in pursuance of rights conferred under the scheme shall be treated for the purposes of that paragraph as issued otherwise than in pursuance of such rights.
    Limitation of rights
    27. Paragraphs 1 to 3 of Part III of the principal Schedule shall not apply.
    Exercise of rights
    28. Paragraph 4 of Part III of the principal Schedule shall have effect as if for the reference to seven years after a right is obtained there were substituted a reference to six months after the time which, under paragraph 23(b) above, is for the purposes of paragraph 21 above the time when repayment is due.
    Minimum price of shares
    29. Paragraph 6 of Part III of the principal Schedule shall have effect as if the word "90 per cent. of" were inserted before the words the market value"
    Further condition for approval
    30. The conditions mentioned in paragraph 1 of Part I of the principal Schedule shall be deemed to include the condition that the scheme must provide for a participant's contributions under the certified contractual savings scheme to be payable under arrangements made with the company of which he is a director or employee and to be of such amounts as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained by him under the share option scheme; and for this purpose the amount of the repayment under the contractual savings scheme shall be determined as mentioned in paragraph 23 above.
    Further condition to be complied with by director or employee
    31. The conditions specified in Part V of the principal Schedule shall be deemed to include the condition that the director or employee must not, while participating in a scheme to which this Part of this Schedule applies, participate in any share option scheme which is approved under the principal Schedule but to which this Part of this Schedule does not apply nor in any share incentive scheme which is approved under the principal Schedule and to which Part II of this Schedule does not apply.
    Commencement
    32. This Part of this Schedule shall come into force on such day as the Treasury may by order made by statutory instrument appoint'.—[Mr. Patrick Jenkin.]
  Schedule 9

    APPORTIONMENT OF INCOME ETC. OF CLOSE COMPANIES
    Amendments made:
    No. 11, in page 56, line 12, after 'amended', insert 'subject to paragraph 8 below'.
    No. 12, in page 56, leave out lines 28 to 38 and insert:
    '2.—(1) Subject to sub-paragraph (2) below, in the application of paragraph 7 of Schedule 16 to the Finance Act 1972 (consequences of apportionment: advance corporation tax) to a close company which was in liquidation on 6th April 1973, sub-paragraph (6) of that paragraph (the excess of the apportioned amount which remains after making certain deductions to be recoverable as if it were advance corporation tax) shall be omitted.
    (2) If at any time the winding-up of a close company which was in liquidation on 6th April 1973 ceases to be proceeded with, subparagraph (1) above shall not apply with respect to any accounting period ending at a time when the company is no longer being wound up.
    (3) For the purposes of this paragraph a company is in liquidation on 6th April 1973 if, as a result of its being wound up, the new accounting period referred to in section 247(7) of the Taxes Act (commencement of new accounting period where a company is wound up) began before that date and the winding-up was not completed on or before that date'.
    No. 13, in page 58, line 5, at end add—

    PART II TRANSITIONAL PROVISIONS
    5.—(1) The provisions of this paragraph shall apply if—

    (a) franked investment income (within the meaning of section 240 of the Taxes Act) forms part of the distributable profits of a close company for an accounting period

    1475
    which ends on or after 6th October 1971 and before 6th April 1973 (in this paragraph referred to as "the relevant accounting period");

    (b) the total of the distributions of the company for the relevant accounting period determined as at the beginning of 6th April 1973 falls short of the required standard, as determined under section 290 of the Taxes Act; and

    (c) on or after 6th April 1973 a dividend is paid which falls to be included in the distributions of the company for the relevant accounting period.

    (2) Subject to sub-paragraph (4) below, for the purpose of determining in a case where this paragraph applies whether there is a shortfall in the company's distributions for the relevant accounting period, the company's distributable investment income for that period, as determined under section 291(3) of the Taxes Act, shall be reduced by a sum equal to whichever is the less of—

    (a) 30 per cent. of the amount by which the franked investment income included in that distributable investment income exceeds the total of the company's distributions referred to in sub-paragraph (1)(b) above; and

    (b) three-sevenths of the total of all dividends paid on or after 6th April 1973 which fall within sub-paragraph (1)(c) above.

    (3) For the purpose of sub-paragraph (2) above, the franked investment income included in a company's distributable investment income for the relevant accounting period means the amount of the franked investment income which, by virtue of subsection (2)(a) of section 291 of the Taxes Act, is included in the company's distributable profits for that period, less—

    (a) the amount which, by virtue of paragraph (a) or paragraph (b) of subsection (3) of that section, is deducted from the distributable income of the company for the relevant accounting period in determining its distributable investment income, and

    (b) any amount of that franked investment income which, by virtue only of subsection (2) of section 25 of the Finance Act 1971 (companies carrying on insurance, banking, money lending and investment businesses etc.), is treated as estate or trading income in arriving at the required standard as mentioned in that subsection.

    (4) If, in a case where this paragraph applies, the close company concerned is neither a trading company nor a member of a trading group and the required standard for the relevant accounting period, as determined under section 290 of the Taxes Act, is equal to so much of the company's distributable income for the relevant accounting period as is not attributable to estate or trading income, subparagraphs (2) and (3) above shall have effect as if—

    (a) for any reference to the company's distributable investment income there were
    1476
    substituted a reference to the required standard;

    (b) for the reference in sub-paragraph (2) to section 291(3) of the Taxes Act there were substituted a reference to section 290 of that Act; and

    (c) in sub-paragraph (3) the word "less" and paragraphs (a) and (b) were omitted.

    (5) In any case where, for the purpose specified in sub-paragraph (2) above, a company's distributable investment income or the required standard itself is reduced by virtue of subparagraphs (2) to (4) above, the reduction shall have effect also for the purposes of the other provisions of Chapter III of Part XI of the Taxes Act relating to shortfalls in the distributions of a close company other than section 298(2) of that Act (power of Board, if they see fit, to make a surtax apportionment of the whole of a non-trading company's income up to the amount of the required standard).
    (6) Expressions used in this paragraph have the same meanings as in the provisions of Chapter III of Part XI of the Taxes Act relating to shortfalls in the distributions of a close company.
    6.—(1) In any case where franked investment income received by a close company before 6th April 1973 forms part of the distributable profits of the company for an accounting period which begins before 6th April 1973 and ends after 5th April 1973 (in this paragraph referred to as a "straddling period") the provisions of this paragraph shall apply, subject to paragraph 7 below, in determining the company's relevant income for the straddling period.
    (2) If the whole of the company's relevant income for the straddling period falls to be apportioned by virtue of paragraph 2 of Schedule 16 to the Finance Act 1972, then for the purpose of that apportionment, but not otherwise, the company's distributable investment income for that period, as determined under Part II of that Schedule, shall be reduced by a sum equal to 30 per cent. of the amount of the franked investment income included in that distributable investment income.
    (3) If the franked investment income falling within sub-paragraph (1) above exceeds the total of the company's distributions for the straddling period which are paid or made in such part of that period as falls before 6th April 1973, then except, in a case where subparagraph (2) above applies, for the purpose of the apportionment referred to in that subparagraph, the company's distributable investment income for that period, as determined under Part II of the said Schedule 16, shall be reduced by a sum equal to 30 per cent. of the amount by which the franked investment income included in that distributable investment income exceeds the total of those of the company's distributions for that period which are so paid or made.
    (4) For the purposes of this paragraph the franked investment income included in a company's distributable investment income for the straddling period means the amount of the franked investment income falling within

    1477
    sub-paragraph (1) above which, by virtue of paragraph 10 of the said Schedule 16, forms part of the company's distributable profits for that period less—

    (a) the amount which, by virtue of paragraph (a) or paragraph (b) of sub-paragraph (3) of the said paragraph 10, is deducted from the distributable income of the company for that period in determining its distributable investment income, and

    (b) any amount of that franked investment income which, by virtue only of subparagraph (5) of the said paragraph 10 (companies carrying on insurance, banking, money lending and investment businesses etc.), is treated as estate or trading income in arriving at the company's relevant income as mentioned in that sub-paragraph.

    (5) References in this paragraph to franked investment income (being references to such income received before 6th April 1973) shall be construed in accordance with section 240 of the Taxes Act, and other expressions used in this paragraph have the same meanings as in Schedule 16 to the Finance Act 1972.
    7.—(1) If, in a case where paragraph 6 above applies—

    (a) the close company concerned is neither a trading company nor a member of a trading group, and

    (b) the company's relevant income for the straddling period, as determined under paragraph 8 of Schedule 16 to the Finance Act 1972, is equal to so much of the company's distributable income for that period as is not attributable to estate or trading income,

    paragraph 6 above shall have effect subject to the following provisions of this paragraph.
    (2) Subject to sub-paragraph (3) below, where sub-paragraph (1) above applies,—

    (a) for any reference in paragraph 6 above to the company's distributable investment income there shall be substituted a reference to its relevant income; and

    (b) in sub-paragraph (4) of that paragraph, the word "less" and paragraphs (a) and (b) shall be omitted.

    (3) If, in relation to a close company, paragraph (b) of paragraph 2(2) of Schedule 23 to the Finance Act 1972 (restriction on advance corporation tax available for set-off in transitional period) has effect as set out in paragraph 5(1) of that Schedule (modifications in relation to close companies in certain cases) then, notwithstanding that paragraph 6 above applies in relation to that company subject to the modifications in sub-paragraph (2) above, in determining for the purposes of the said paragraph (b) (but not for any other purpose) the amount which is to be taken, in accordance with paragraph 9 of Schedule 16 to that Act, as the company's relevant income for the straddling period or any part of that period, sub-paragraph (2) above shall not apply.

    (4) In this paragraph "straddling period" has the same meaning as in paragraph 6 above and sub-paragraph (5) of that para-
    1478
    graph shall apply in relation to this paragraph as it applies in relation to that.
    8. If, in a case where sub-paragraph (6) of paragraph 5 of Schedule 16 to the Finance Act 1972 applies (subsequent distribution to an individual of income of a close company which has been previously apportioned to him to be deemed not to form part of his total income),—

    (a) the later accounting period referred to in that sub-paragraph is an accounting period which begins before 6th April 1973 and ends after 5th April 1973, and

    (b) the distribution of apportioned income referred to in that sub-paragraph is made before 6th April 1973,

    the amendments of the said paragraph 5 effected by sub-paragraphs (2) and (3) of paragraph 1 above shall not have effect but the said sub-paragraph (6) shall have effect as if for the words "total income" there were substituted the words "income for the purposes of surtax".
    9.—(1) In any case where—

    (a) the amount of advance corporation tax actually paid by a close company in respect of distributions made in that part of a straddling period following 5th April 1973 exceeds the amount of advance corporation tax which, by virtue of paragraph 1 of Schedule 23 to the Finance Act 1972, the company is treated as having paid for the purposes of section 85 of that Act, and

    (b) the company makes a claim in that behalf,

    then, for the purpose of determining the distributable income of the company for the straddling period, the amount of any profits on which corporation tax for that period falls finally to be borne (which, under paragraph 10(2) of Schedule 16 to that Act is one of the amounts comprised in the company's distributable profits) shall be treated as reduced by an amount equal to the excess referred to in paragraph (a) above.
    (2) If, in a case where paragraph 7 of Schedule 23 to the Finance Act 1972 applies in relation to a close company instead of subparagraphs (2) and (3) of paragraph 1 of that Schedule,—

    (a) the amount of advance corporation tax actually paid by the company in respect of distributions made in an accounting period which includes the whole or any fraction of the second part of the notional straddling period exceeds the amount of advance corporation tax which, by virtue of the said paragraph 7, the company is treated for the purposes of section 85 of that Act as having paid in respect of distributions in that accounting period, and

    (b) the company makes a claim in that behalf,

    then, for the purpose of determining the distributable income of the company for any accounting period falling within paragraph (a) above, the amount of any profits on which corporation tax for that period falls finally to be borne (which, under paragraph 10(2) of Schedule 16 to that Act, is one of the

    1479
    amounts comprised in the company's distributable profits) shall be treated as reduced by an amount equal to the excess referred to in paragraph (a) above.
    (3) In this paragraph "distributable income" and "distributable profits" have the meanings assigned to them by paragraph 10(2) of Schedule 16 to the Finance Act 1972; in sub-paragraph (1) above "straddling period" has the same meaning as in paragraph 6 above; and in sub-paragraph (2) above "the second part of the notional straddling period" has the same meaning as in paragraph 7 of Schedule 23 to the Finance Act 1972'.—[Mr. Patrick Jenkin.]

  Schedule 12

    GROUP RELIEF
    Mr. Patrick Jenkin: I beg to move Amendment No. 6, in page 64, line 9, leave out 'quoted on stock exchanges in the United Kingdom' and insert:
    'listed in the Official List of The Stock Exchange'.
    Mr. Deputy Speaker: With this amendment it will be convenient to discuss Amendment No. 7.
    Mr. Jenkin: The amendments are consequential on a new clause added in Committee.
    Amendment agreed to.
    Amendment made: No. 7, in page 64, leave out line 31 and insert:
    'listed in the Official List of The Stock Exchange'.—[Mr. Patrick Jenkin.]
    Mr. Patrick Jenkin: I beg to move Amendment No. 39, in page 64, line 32, at end add:
    'but subject to sub-paragraph (7) below'.
    Mr. Deputy Speaker: It will be convenient to discuss at the same time the following Amendments:
    No. 35, in page 64, line 35, after 'company', insert:
    'other than new consideration provided by way of a normal commercial loan'.
    Government Amendment No. 40.
    Mr. Jenkin: This group of amendments is intended to correct what might have been a perverse effect of paragraph 1(6), to give an exception for normal bank lending where a bank might lend to a leasing company and then, in a separate and completely unconnected transaction, lease from the company a piece of office equipment. As the
    1480
    schedule stands, such a transaction would be caught, and this clearly was not the intention.
    Mr. Ridley: I am grateful for these amendments, which meet a case that I made in Committee, but there is one further matter on which I should like clarification. I understand that if an asset is purchased by one company and leased to another—for instance, a shipping company might purchase a ship and charter it to another shipping company—the leasing company will not be allowed to help with the financing of the asset, either by making a loan to or by guaranteeing part of the loan of the main company.
    Amendment No. 35, in my name, to insert
    "other than new consideration provided by way of a normal commercial loan"
    was intended to clarify that that is not the case. If my right hon. Friend could help on this point, which is still causing some anxiety in the shipping world, I should be most grateful.
    Mr. Jenkin: With the leave of the House, Mr. Deputy Speaker, I should like to reply. I can understand my hon. Friend's concern. As I understand it, this is a situation where, for example, a bank has lent money to a leasing company in the normal course of its business and then, in a separate and unconnected transaction, leases from it a piece of office equipment, or, indeed, a ship, where the bank could be treated as an equity holder in the company to the extent of the loan. This could materially affect the company's relationship with other members of its group for the purpose of group relief.
    My hon. Friend's amendment to solve this difficulty would make subparagraph (6) virtually ineffective. The avoidance arrangement at which the subparagraph is aimed could most commonly involve the provision of a normal commercial loan as defined in subparagraph (5).
    Amendments Nos. 39 and 40, which are designed to meet the case of genuine hardship, provide that in the situation as I have just described it the bank's equity interest shall be deemed to be equal only to the cost of the equipment leased if this is less than the loan. It is considered necessary to retain this safeguard in order to avoid abuse. The sort of abuse

    1481
    that we have in mind is that groups of companies would set up a bank which would then make the loan to both the parties and seek to argue that these were normal commercial loans.
    In those circumstances we think it wrong that the group relief should apply.
    Amendment agreed to.
    Amendments made: No. 40, in page 64, line 46, at end add:
    '(7) In any case where sub-paragraph (6) above applies in relation to a bank in such circumstances that—

    (a) the only new consideration provided by the bank as mentioned in paragraph (a) of that sub-paragraph is provided in the normal course of its banking business by way of a normal commercial loan as defined in sub-paragraph (5) above; and

    (b) the cost to the company concerned of the assets falling within paragraph (b) of that sub-paragraph which are used as mentioned in that paragraph by the bank or a person connected with the bank is less than the amount of that new consideration,

    references in sub-paragraph (6) above, other than the reference in paragraph (a) thereof, to shares or securities in the company shall be construed as a reference to so much only of the loan referred to in paragraph (a) above as is equal to the cost referred to in paragraph (b)above'.
    No. 38, in page 70, line 4, leave out from '1968' to 'or' in line 6 and insert:
    'or, as the case may require, Chapter I of Part III of the Finance Act 1971, in respect of exenditure incurred by the surrendering company on the provision of machinery or plant'.—[Mr. Patrick Jenkin.]
    Mr. Patrick Jenkin: I beg to move, Amendment No. 41, in page 71, line 23, leave out from 1973 ' to 'above' in line 26 and insert:
    '(2) Sub-paragraph (2) of paragraph 8 or, as the case may be, sub-paragraph (2) of paragraph 9 above shall not apply if, during the period referred to in that sub-paragraph, the relevant company ceases to carry on a trade, in whole or in part, and a successor company begins to carry it on.
    (3) In sub-paragraph (1) and (2)'.
    Mr. Deputy Speaker: With this amendment we are to take Government Amendments Nos. 42 and 43.
    Mr. Jenkin: The purpose of this group of amendments is to relax some of the transitional rules governing the introduction of the new provisions on group relief contained in Clauses 28 to 32 and Schedule 12. I could give an explanation if any hon. Member wishes that, but I
    1482
    think that the clauses are reasonably clear.
    Mr. Ridley: If the claimant company is, for example, in the general retail trade, would a transfer of the outlets of a particular part of the trade to a subsidiary give rise to disallowance of group relief? It seems rather arbitrary that if there is a change in any activity of this sort it could affect perfectly normal transactions lower down the scale. Perhaps my right hon. Friend is prepared to correspond with me on that point.
    Mr. Jenkin: I gladly accept my hon. Friend's offer.
    Amendment agreed to.
    Amendments made: No. 42, in page 71, line 32, after 'above', insert:
    '(i) if the claim for group relief is attributable to an allowance falling within paragraph (a) or paragraph (b) of sub-paragraph (1) of that paragraph and the machinery or plant to which the allowance relates is brought into use on or before 6th March 1978, the company claiming group relief; and
    (ii) in any other case'.
    No. 43, in page 71, line 41, leave out 'paragraph (c) of sub-paragraph (1) 'and insert sub-paragraph (2)'.—[Mr. Patrick Jenkin.]

  Schedule 15
    TERRITORIAL EXTENSION OF CHARGE TO TAX—SUPPLEMENTARY PROVISIONS
    Amendment made: No. 49, in page 76, line 2. after 'was', insert 'substantially'.—[Mr. Patrick Jenkin.]
  Schedule 19

    STAMP DUTY ON DOCUMENTS RELATING TO CHARGEABLE TRANSACTIONS OF CAPITAL COMPANIES
    Mr. Ridley: I beg to move Amendment No. 58, in page 92, leave out lines 29 to 31, and insert:
    'shall not exceed 10 per cent. of the nominal value of the shares which make up the balance of the consideration plus 10 per cent. of any amount transferred to the share premium account of the acquiring company in respect of such shares'
    Mr. Deputy Speaker: With this amendment it will be convenient to take
    Amendment No. 59, in page 92, line 48, at end insert:
    'or
    (iii) by a transfer not forming part of a chargeable transaction which is exempt from stamp duty by virtue of section 42 of the Finance Act 1930 (which exempts from duty conveyances and transfers complying with subsection (2) of that section between companies with limited liability, where one owns 90 per cent. of the issued capital of the other or a third owns 90 per cent. of the issued capital of each) so long as during the period of five years referred to in this subparagraph the acquired company remains a 75 per cent, subsidiary or a 90 per cent. subsidiary within the meaning of section 532 of the Taxes Act of the acquiring company or of another company of which the acquiring company is itself such a 75 per cent. subsidiary or 90 per cent. subsidiary'.
    Mr. Ridley: These are the penultimate amendments, which I am sure we can deal with very briefly. They deal with exemptions from stamp duty in cases of takeovers.
    The first is to correct the position which seems to have arisen under an obligation to the EEC. Where a takeover takes place, up to 10 per cent. of the value of the purchase of shares can be in cash without stamp duty being charge able, but that 10 per cent. is based on the nominal value of the shares and not on the market value. This seems unrealistic, and the amendment seeks to change it.
    Amendment No. 59 relates to the case of the exempt takeover of the sort I have just described and under the Bill, if there is a second transfer of shares within five years, stamp duty could become payable.
    This can frustrate reorganisation and slow it down. It should not be like that, and the amendment seeks to change the position. Will my hon. Friend accept the principle of these two amendments to alleviate a position that appears to be cramping on business reorganisation?
    Mr. Nott: The first amendment attempts to substitute actual value of the shares of the acquiring company for the nominal value, in determining how much of an offer may be made in cash. My hon. Friend is right in saying that the
    1484
    requirements embodied in the schedule arise from an EEC directive. The fact is that the nominal value basis which he is seeking to change is a rule arrived at by international agreement by the members of the EEC.
    Our negotiators have obtained substantial amendment to obtain relief for mergers and we do not feel that there is a special United Kingdom interest which would justify us in holding out in the negotiations for an actual value basis.
    We secured many objectives in the negotiations and they have worked out well for us. We feel that to go back on the narrow point would not be appropriate, having secured our objectives thoroughly in the talks.
    I appreciate that in Amendment No. 59 my hon. Friend is seeking to facilitate reorganisations among groups of companies. This is obviously a desirable objective. I can only say that I do not mean to sound obtuse—a word that is being used about me—and I have listened to what my hon. Friend has said. I have taken due note of it. We will look into the point raised under Amendment No. 59.
    Mr. Ridley: I beg to ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.

  Schedule 21

    ENACTMENTS REPEALED
    Amendment made: No. 34, in page 98, line 54, column 3, at end insert:
    'In Schedule 12, in paragraph 5(1) of Part IV the words from "and where" onwards, and in paragraph 5(2)(b) of that Part the words "and that price" and the words from "both" to "thereof and"'.—[Mr. Patrick Jenkin.]
    Bill to be read the Third time this day.

  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—(Mr. Gray.]

  MR. T. V. LAWRENCE (PENSION)
  1.29 a.m.
  Mr. Eric Cockeram: I am pleased to have this opportunity of raising an important matter concerning the pensions of all pensioners in this country, albeit at an hour at which all good pensioners will be tucked up safely in their beds.
  The matter was brought to my attention by Mr. T. V. Lawrence of 11 Dodd Avenue, Greasby, Wirral. He retired on Friday 4th September 1970. This fact is confirmed in a letter from the Department of Health and Social Security to me dated 15th January 1971. All people who retire on a Friday receive from their employer, in addition to the wages due to them, a bonus of some sort.
  I seek to establish that whatever Mr. Lawrence may have received on the day of his retirement was due to him for all the loyal service he gave his employer over the best part of the previous half century. Any salary plus bonus that he received on that date related solely to past service and was not in any way payment, wages, salary or otherwise for the week after his retirement.
  It is important to establish that when a person works he offers his service to an employer; he performs that service for a week and at the end of the week he is reimbursed by wages. Wages are paid in arrears. On the other hand, the State pension scheme operates a week in advance, and the National Insurance stamp is due on a Monday and in the hypothetical case of a person who works merely for one day in the week, namely, the Monday, the stamp is due because the contribution week starts at midnight between Sunday night and Monday morning. By the same argument, the State pension is due on a Monday for the ensuing week because the State works on a week commencing on a Monday, for both contributions and benefits, and a pension is paid in advance.
  Mr. Lawrence retired on a Friday and was somewhat taken aback to discover that he did not receive a pension until the following Thursday. He was further taken aback when he discovered that the pension he received on the following Thursday was in respect of a week com-
  1486
  mencing on that day. Mr. Lawrence felt that the gap between retiring on Friday and commencing to draw his pension on the Thursday was a void of five days, for which his employer was not expected to pay him. He had ceased employment on the Friday and in his view he was entitled to a pension from the date of retirement. This is a principle that applies to all pensions. Although I am raising the matter because it has been brought to my attention by Mr. Lawrence, it is nevertheless a matter that applies to all pensioners.
  Mr. Lawrence has been in work for many years, as is the case with anyone retiring, and he was in work in 1926 when the national pension scheme commenced. At that time it was a voluntary scheme and he opted to join it. He opted to pay contributions each week on a contribution week starting on Monday, fully expecting that when he retired at the end of a particular week he would draw a pension from the following Monday morning onwards. He contributed regularly. He had good health. He had the minimum of absence for one reason or another. His contributions were kept up in full. In short, he considers himself to be the kind of contributor that any pension scheme would like to have.
  Mr. Lawrence was therefore most surprised, on drawing his first pension, to find that he had not been allocated any pension for the days between leaving his employment and the following Thursday. The matter is even more an anomaly than merely the pension, because he did not receive any graduated pension for that period. He was upset about this and wrote to the Department of Health and Social Security. Indeed, he conducted correspondence with the Department over a period of 12 to 18 months. He was informed that up till 1968 the pension was paid on a Monday. That seemed to him to be the correct procedure and what he would expect to be the case, namely, a pension paid on a Monday for the following seven days. However, by a measure passed by the last Labour Government, the pension date was altered in 1968 to the Thursday, and pensions from then on have been paid weekly in advance, commencing on a Thursday.

  1487
  When Mr. Lawrence inquired why this change had been made he was informed that the Post Office was inundated with callers and payments of one sort and another on a Monday and it had sought to spread the load of its work, and the last Government had acceded to its request by altering the pension payment day to the Thursday. If the pension date is altered for the convenience of the Post Office, that is one factor, but it should not be at the expense of the contributors.
  One of the arguments advanced by the Department during the correspondence with Mr. Lawrence was that its procedure of paying pensions on a Thursday weekly in advance may work to the advantage of the pensioner. It gave as an example the case of a pensioner who goes into hospital and, having been in hospital for eight weeks, has a reduction in his pension in accordance with the terms of the contract. If a pensioner has drawn his pension on a particular Thursday a week in advance, and the eight weeks, happen to elapse a few days afterwards, he nevertheless keeps his pension at the full rate for that week for which he has already received it.
  But, just as it works to the pensioner's advantage on that occasion, on the terminal date the reverse is true. These things have a habit of sorting themselves out over a period of time, and it is a purely temporary advantage, which is cancelled out at the end of the period in hospital.
  Therefore, the argument that it may work to the benefit of the pensioner is ill founded. And even if it worked in that way on the odd occasion, so what? Even if some pensioner at some time may have an advantage because the pension is paid weekly in advance on a Thursday, what about the general mass of pensioners to whom that advantage does not apply?
  Lest it be thought that I am seeking to reverse the provision in the 1968 Act and have all pensions paid on a Monday, to the inconvenience of the Post Office—incidentally, I see no reason why the Post Office should not be inconvenienced; it is our servant, not our master, even though it is a monopoly—I say at once that it is not necessary to go back on the change made in 1968 and revert to the Monday payment date. It is quite
  1488
  possible to continue paying on a Thursday but to make the first coupon in a pensioner's book worth more than the normal weekly face value, that is, worth the equivalent of 12 days' pension, taking into account the five days between leaving employment at the end of the preceding week and the Thursday of payment.
  If that be thought too complicated for the Department or the Post Office, it should not be beyond the ability of man to post to each pensioner beginning to draw his pension for the first time an additional voucher to the value of the entitlement which he should receive, namely, the five days' pension in question.
  Neither Mr. Lawrence nor I is seeking to revert to a Monday payment date. What we seek to do is to ensure that the State honours its contract and pays pensioners for the missing five days. Any private pension scheme or insurance company which sold a contract on the basis that on 1st January in the relevant year a pension would be paid, and which then, if that 1st January happened to fall on a Friday, said, "We are sorry, but it is inconvenient for us to make payments on Friday, so you will have to wait till the following Thursday, 5th January", and on that date commenced to pay the pension weekly in advance would quickly be taken to court and rightly accused of not honouring its contract.
  Similarly, any employer who offered a job that commenced on Monday and told the new employee on the following Thursday that wages were paid weekly in advance on a Thursday would soon be exposed, and rightly so. This is a bad law, and bad law should not be condoned by good government. Good government should rectify bad law. It may be argued that everything ultimately comes out in the wash and that in the end everything is balanced up, but that is not so. We must assume that when pensioners eventually die one-seventh of them will die on a Saturday, one-seventh on a Sunday and so on throughout the week. Only if a pensioner dies on a Friday, as we must assume one in seven do, does he gain anything from the present method of payment. If he dies on a Saturday he is on level pegging. If he dies at any time from Monday to Wednesday the following week he loses.

  1489
  If he dies on a Thursday he is a borderline case. The majority of pensioners lose to the tune of three days' pension on that assumption. That may not be considered a significant point, but in view of the millions of pensioners and in view of their entitlement to receive a pension—they have contributed for the best part of half a century—we are here considering a substantial sum.
  I am not seeking to raise this matter because it involves DC million, whatever X may be—and it would represent a formidable figure over the course of a year. I am seeking to raise it on a point of principle. People are now compelled to join a pension scheme, but in the past it was voluntary. Those retiring today joined the scheme voluntarily in most cases. They joined because they felt that they were taking part in a social contract which the State would honour in due course. They felt that when they came to retire at the end of a week, as 99 per cent. of people do, they would receive from their employer a substantial bonus, which was their entitlement for long years of service to the employer. But they felt, and rightly so, that when that day arrived it was their entitlement to benefit from the pension scheme to which they had contributed all their working lives.
  It comes as a shock to pensioners to discover that because they are in a State scheme there is a void between the day of retirement and the day on which they are paid a pension. They realise that had they insured with a private scheme they would have received what they expected—a pension from the first day of retirement. It comes as a further shock to know that this is because of a measure passed by the previous Labour Government for the convenience of the Post Office, for the convenience of administration.
  I submit that this is not a procedure which a Conservative Government would seek to condone or endorse.
  1.45 a.m.
  The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): I am grateful to my hon. Friend for raising this matter and particularly the case of Mr. Lawrence, which he has pursued
  1490
  with great zeal and on which there has been a good deal of correspondence with the Department. I am also glad, in spite of the hour, to have the opportunity of discussing the method by which payment of pension is made, because very often in this House in discussing the pension we are discussing its level and whether or not it is adequate. It is useful to be able to deal with the method of payment.
  Understandably, my hon. Friend has looked at this matter from the point of view of the individual pensioner. I do not complain of that. It is proper to do so. But I also want to put to him that an equally important consideration is to have a method which will ensure that the pension is put into payment as speedily at possible, and in order to do this we have to have some simple general rules. In saying that, I do not want to sound bureaucratic but to remind my hon. Friend that no fewer than 15,000 new awards are put into payment each week. In view of this very large number, it really is in the interest of the individual pensioner that the rules should be as simple as they can possibly be.
  The retirement pension is a weekly benefit normally paid weekly in advance on a fixed pay day. The first payment is due on the pay day coinciding with or next following the accepted date of retirement. The retirement pension is designed for the time when earnings cease on retirement. Since generally it follows after employment, for which wages or salary are paid at regular intervals, it is appropriate that the pension too should take the form of regular weekly payments. Thus, a person gives up work, receives the last payment of wages or salary, and then, on the appropriate pay day within the seven ensuing days, is able to draw the first payment of the full week's pension. In the majority of cases the general pattern is that there is no break between the wages or salary and the pension.
  My hon. Friend suggested that when entitlement to retirement pension first arises provision should be made for days intervening before the first pay day is reached. This, in effect, would change the nature of the pension from weekly to daily benefit. I want to put to my hon. Friend some of the disadvantages that would flow from that.

  1491
  One disadvantage would be that the first payment following retirement would in many cases be for less than a week. There is no dispute that subsequent payments would be for a full week but they would have to be made in arrear.
  The present arrangements, apart from ensuring a full week's payment within one week of retirement, often work to a pensioner's advantage because any change of circumstances resulting in a reduction in rate of pension does not take effect until the following pension pay day. If the pension were to be paid in respect of each day for which conditions were satisfied—as is the case with sickness benefit, for example—then any change in the rate of pension would have to take effect forthwith from the next day.
  Examples of such changes in circumstances, which can affect the rate of pension, are admission to hospital or ceasing to be entitled to an increase of pension for a dependant. So I put it to my hon. Friend that there are genuine advantages in the majority of cases in the concept of a weekly pension rather than a daily rate of pension, which is the logic of what he has suggested.
  Mr. Cockeram: I never sought to suggest that there were no advantages in weekly payment in advance, but does my hon. Friend accept that Mr. Lawrence is correct in saying that he has not received a pension between the date of retirement—the Friday—and the following Thursday? Although he receives a weekly pension, he has not received any pension for those five days.
  Mr. Dean: I am not disputing what my hon. Friend says on that. What I am saying is that that is not the basis of the contract on which the pension is paid. The pension is a weekly pension which is payable within a week of the person's ceasing work, and therefore takes over from the final earnings or the final salary, although that means that in some cases there is a gap of some days before the first payment is due. It means equally that in other cases, when the pensioner goes into hospital or his wife dies or he himself dies, the pension does not suddenly cease in the middle of the relevant week, but carries on to the end of the week. It is a swings and round-
  1492
  abouts effect. Our judgment is that on balance the arrangement is both simple to administer, which is an important consideration when dealing with large numbers of pensioners, and to the advantage of pensioners as a whole.
  I come to the days of payment and the reason for them. They are governed by regulations made by the Secretary of State under Section 52 of the National Insurance Act 1965. My hon. Friend referred to the arrangements which are now in operation whereby some of the payments are made on a Thursday and some on a Monday. I shall remind my hon. Friend of the precise arrangements and the reasons for them. Thursday was the pay day for retirement pensions prior to January 1958, but, in order to spread the load on the Department and the Post Office, Monday was laid down as the pay day for persons becoming entitled to pension during the period from January 1958 until January 1968. With the passage of time the number of retirement pensioners with a Monday pay day increased and the number of pre-1958 pensioners with a Thursday pay day declined. Although there is no necessity for pensioners to cash their pensions on the day on which they are due, there is in practice a tendency for them to do so on that day or the following day. The number paid on Mondays had nearly trebled, whereas the number paid on Thursdays had declined by nearly one-third.
  To assist the Post Office to achieve a more even balance in the interests of staff and public, including pensioners, and also to help the Department's own plans for paying retirement pensions by computer, it was necessary to change the pension pay day to counter the imbalance. Consultation with the Post Office led to Thursday being chosen as best meeting the situation.
  It must, of course, be acknowledged that the Post Office has other heavy demands on its services which, of themselves, rule out consideration of certain days for such a massive task as the payment of retirement pensions. The stage has now been reached where payments on Thursday have slightly overtaken the number paid on Mondays. We have no proposals for change, but the situation will obviously be kept under review in consultation with the Post Office.

  1493
  My hon. Friend has said that this has been done for the convenience of the Post Office, but that it is the Post Office's job to see that pensions are paid, and that that should be the prime consideration. I accept his point, but if we are to have the services to pensioners concentrated on one day the ultimate cost to the Post Office, and therefore to pensioners, will increase. Therefore, it is in the interests of everyone to try to spread the load throughout the week. That is why there are two pay days. Before regulations providing for the Thursday pay day were made the National Insurance Advisory Committee reported in 1967 that after considering representations made to them, it was satisfied that the proposal would be
  "the most suitable in all the circumstances."
  There is one other point about which I should remind my hon. Friend—namely, that people retire at different times during the week. There is nothing universal about the day of the week on which they retire. Sometimes retirement takes place on a man's 65th birthday or a woman's 60th birthday.. In other words, retirement takes place on the first day on which a person can retire. Persons who defer retirement are deemed to have retired, even though they are still working, when they reach the age of 70, in the case of a man, or 65 for a woman.
  Other people retire on the last day of a month. Administrative action is taken to ensure that persons in receipt of daily benefits, such as sickness and
  1494
  invalidity benefit, or unemployment benefit, appreciate that their technical first day of retirement needs to be a Thursday to correspond with the pension pay day. It is open to anyone approaching retirement, if he is able to do so, to arrange for his retirement to take effect from a day that will minimise the interval between ceasing work and drawing pension. An approach is made to all prospective pensioners about four months before they reach pensionable age and they are provided with a leaflet that explains the provisions concerning retirement pensions.
  My hon. Friend has referred to cost. He fairly agreed that the proposal that he has made would increase the cost of pensions. Again, we are inevitably up against the harsh reality of priorities. If we spend more in this direction there will be less for other areas of need. My hon. Friend will probably agree, looking at the matter in that light, that it is perhaps the older pensioners or those who are disabled who demand higher priority for additional expenditure rather than those in the early days of retirement when, in the majority of cases, the last wage or the last salary is available.
  I believe that the provisions have been properly applied in Mr. Lawrence's case. Further, I believe that the provisions that have been followed by successive Governments are both fair and reasonable in all the circumstances.
  Question put and agreed to.
  Adjourned accordingly at two minutes to Two o'clock.

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  Mr. Gerald Hawkesworth
NATIONAL FINANCE
  Caravans (Vehicle Excise Duty)
  Caravans (Vehicle Excise Duty)
SCOTLAND
  Rents
  Rents
  Traffic Lights (Phasing)
  Traffic Lights (Phasing)
  Glasgow Sheriff Court
  Glasgow Sheriff Court
  Sheriffdoms and Sheriff Courts
  Sheriffdoms and Sheriff Courts
  North Sea Oil (Company Contracts)
  North Sea Oil (Company Contracts)
WALES
  Baglan, Port Talbot (Pedestrian Bridges)
  Baglan, Port Talbot (Pedestrian Bridges)
  Welsh National Water Development Authority
  Welsh National Water Development Authority

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

INSURANCE OF FOREIGN GOODS VEHICLES
LORD HALE: 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 the provisions for compulsory insurance of motor vehicles on British roads are fully applicable to commercial vehicles registered abroad; and whether such insurance is effected with insurance companies approved by the Department of Trade and Industry and provides a cover not capable of invalidation by the vehicle being used in a defective condition, whether the defect be latent or not, or by the vehicle being over-loaded.
LORD MOWBRAY AND STOURTON: My Lords, I must apologise for a rather lengthy Answer. The law on compulsory motor vehicle insurance is substantially the same for all motor vehicles using our roads. The major difference in practice is that visiting vehicles—whether private or commercial—may be insured under the internationally agreed system of green cards issued by their own insurers instead of by a policy issued by a British insurer. A green card gives insurance cover to the extent required by the law of the country visited. It is a provision of our law, which applies equally to green card insurance, that compulsory insurance cannot be invalidated so far as a third party is concerned by conditions in policies relating, inter alia, to the conditions of the vehicle or the weight or physical characteristics of the load. Apart from this, arrangements exist with Motor Insurers' Bureaux under which payment of any liability which is com
628
pulsorily insurable is guaranteed if for any reason the relevant insurance is ineffective or non-existent.
LORD HALE: My Lords, while thanking the noble Lord for that comprehensive Answer, I gather that it really means that the real answer to my Question is "No", and that victims have to go to their solicitors to try to find out, through a long and arduous process—made much more difficult, of course, because the lorry may have come from one of the more distant countries—the position with regard to insurance, as to the cover and as to the company. Is this not a matter at which the noble Lord might look again, to see whether the protection is as adequate as it could possibly be and that Her Majesty's subjects will have some additional protection when using Her Majesty's roads?
LORD MOWBRAY AND STOURTON: My Lords, with very great respect to the noble Lord, his initial phrase that my answer meant, "No" is totally inaccurate. What I said (I will not repeat the lengthy Answer I gave him) is that the British Motor Insurers' Bureau are in alliance with the Motor Insurers' Bureaux abroad. The British Motor Insurers' Bureau undertake to repay any insurance liability; and they, in their turn, get it back from the Motor Insurers' Bureaux abroad. There is no question of anybody in Britain having to go hunting round Continental countries.
LORD OAKSHOTT: My Lords, I wonder whether my noble friend could say what is the significance of a report in the papers this morning, if it is true, that this country has now come into line with regard to green card insurance with the other six countries—Benelux, France, Germany and Italy—of the old Common Market.
LORD MOWBRAY AND STOURTON: My Lords, what my noble friend Lord Oakshott says is true. On January 1, 1974, the green card will be abolished for E.E.C. members because all E.E.C. countries will then have to be insured with each other. It will make little practical difference, except that we shall not be examining their green cards; but the Motor Insurers' Bureaux abroad then compulsorily have to meet any claim through our Motor Insurers' Bureau. If,

629
as the noble Lord, Lord Hale, fears, a Motor Insurers' Bureau abroad do not meet a claim at the moment, our Motor Insurers' Bureau will do so. After January 1 all will have to do it.
THE EARL OF ONSLOW: My Lords, how many vehicles are coming into this country from countries where third party motor insurance is not compulsory? Secondly, in that event the British taxpayer is presumably subsidising noninsured foreign motor cars.
LORD MOWBRAY AND STOURTON: My Lords, my information is that third party personal liability is compulsory in all these countries.
LORD GARNSWORTHY: My Lords, may I ask the noble Lord to state whether, as from January next, motorists entering this country will be checked to ascertain that they do have insurance cover of any kind?
LORD MOWBRAY AND STOURTON: My Lords, after January 1, 1974, any vehicle from a country outside the E.E.C. will be checked. Those from countries within the E.E.C. will not be checked, because the position will be exactly the same as for our vehicles going abroad; all the E.E.C. countries will have the same compulsory insurance.
LORD GARNSWORTHY: My Lords, may I ask the noble Lord what the position of a third party will be in the event of a motorist coming from any of the E.E.C. countries not possessing insurance, as we know some people who drive motors cars in this country do not possess it?
LORD MOWBRAY AND STOURTON: My Lords, if that were the case, he would be in criminal default in his own country and the Motor Insurers' Bureau of his country would have to meet our motor insurance claim.
LORD BALFOUR OF INCHRYE: My Lords, in the event of legal action in the courts, would the remedy lie in suing the foreign insurance company or in suing the British insurance group that had guranteed the foreign insurance obligations?
LORD MOWBRAY AND STOURTON: My Lords, I am not clear whether the
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noble Lord is asking about the position before or after January 1, next?
LORD GARNSWORTHY: My Lords, I wonder whether I could be of assistance, and ask the noble Lord to state what the position is up to January 1 and what the position is after January 1?
LORD MOWBRAY AND STOURTON: My Lords, I cannot do more than emphasise that the British Insurance Bureau at this moment undertake to cover everybody who has a claim. The Continental (E.E.C.) Motor Insurance Bureaux at this moment meet all claims automatically for our Motor Insurance Bureau for those who have a green card. After January 1, with or without a green card, they will compulsorily have to meet the E.E.C. claims. If there is a question of tracing an unknown rogue driver, that of course will be a question for enforcement of an order against persons unknown, which comes more under my right honourable and learned friend's Department.
LORD SHINWELL: My Lords, does the noble Lord realise that what one wants to know is whether, where there is a heavy Continental vehicle coming into this country, carrying insurance or not, and inflicting damage on a British citizen, that British citizen has any means of redress?
LORD MOWBRAY AND STOURTON: My Lords, I can only repeat, for the umpteenth time, "Yes".
LORD HALE: My Lords, does the noble Lord recall how many British companies have been insolvent and unable to meet their claims? If I correctly recall, on one occasion, involving a very large firm, the British Insurance Bureau said that they could not meet the claims against that company. Will the noble Lord bear in mind that it is extremely difficult for a Man of Kent, or a Kentish Man, to plan the date of his death by accident before January 1, 1974?
LORD MOWBRAY AND STOURTON: My Lords, I cannot deal at the moment with what happened in the past, or at least I am not willing to deal with it, but what is happening now is all right.
LORD BALFOUR OF INCHRYE: My Lords, I apologise to the Minister for not

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hearing his question to me. I meant of course if, after an accident, the aggrieved party went to law, against whom would his action lie?
LORD MOWBRAY AND STOURTON: My Lords, the insurance companies undertake liability. The British Motor Insurance Bureau will undertake any work that needs to be done in countries in the E.E.C., and also other foreign countries. There are many countries outside the E.E.C. which already have agreements with the Motor Insurance Bureau. Noble Lords do not need to worry about this point where personal liability is concerned.

HOUSING: THERMAL INSULATION STANDARDS
2.46 p.m.
LORD ORR-EWING: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government on what dates they started and finished consulting local authorities about thermal insulation standards for new dwellings; and when they expect to circulate recommendations.
LORD MOWBRAY AND STOURTON: My Lords, the advice which my right honourable friend the Secretary of State for the Environment hopes to issue on this subject has now been further revised and amended but has now reached the stage of preparation where the local authority associations can be consulted. These consultations will begin before the end of this month.
LORD ORR-EWING: My Lords, while thanking my noble friend for that reply, may I ask whether he would agree that the United Kingdom building regulations at present laid down are between two and three times as wasteful of heat through loss through the ceilings and walls as the Continental standards? Therefore, in view of the need to conserve our energy in this country, is there not a great need of urgency to line up with Continental standards and lay down improved regulations?
LORD MOWBRAY AND STOURTON: My Lords, between the cold of West Germany and the heat of Southern Italy there are vast extremes of climate. I am aware that thermal insulation will conserve heat and can be a good investment, but we do not want to do anything mandatory in this way; we want to have consultations and get councils to act on their own.
LORD GARNSWORTHY: My Lords, is the noble Lord saying that if this matter is dealt with at all it will be dealt with by way of by-laws or regulations drawn up by the local authorities?
LORD MOWBRAY AND STOURTON: No, my Lords, I was suggesting that it would be dealt with by way of advice.
VISCOUNT HANWORTH: My Lords, in view of the fact that this matter was considered urgent in January, would the Minister say why it has taken so long to produce this document for consultation? Would he further say whether the document is similar to the information given in the Department of the Environment's construction bulletin?
LORD MOWBRAY AND STOURTON: My Lords, I will deal with the second question first. That was a document which would have come out last January after the noble Viscount asked his Question of me. It has been superseded by the later advice that we have been taking within the Department, as I said to my noble friend, which dealt particularly with condensation and thermal comfort. The document the noble Viscount was referring to did not cover this point.
LORD GARNSWORTHY: My Lords, I wonder whether I could ask for a little more information. I asked the noble Lord whether local authorities would be dealing with this matter by way of regulation. I used the word, "by-laws". I understood him to say, "No, by way of advice." May I ask the noble Lord what will be the value of advice unless local authorities have some power to enforce it?
LORD MOWBRAY AND STOURTON: My Lords, I think the noble Lord knows already that over 30 per cent. of local authorities go above the minimum statutory requirements of thermal insulation. Our advice to have a bit more insulation

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might be given rather more strongly than before. It is advice that we seek to give, and we wish to go along by agreement.
LORD SHACKLETON: My Lords, before the noble Lord gives up on this matter, may I ask whether he would again consider the urgency to which his noble friend drew attention, and perhaps come back with a little more positive information and a little more positive urgency?
LORD MOWBRAY AND STOURTON: My Lords, I did say that consultations will begin before the end of this month. I regard that as treating the matter as fairly urgent.
BARONESS SUMMERSKILL: My Lords, can the noble Lord say how many people have died from hypothermia during his long long years of consultation?
LORD MOWBRAY AND STOURTON: My Lords, I think that is another question.

AIRCRAFT NOISE AND "HUSH KITS"
2.50 p.m.
LORD ORR-EWING: My Lords, I bee leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will give financial support to encourage British airlines to fit "hush kits" to civil aircraft so as to speed up the reduction of noise for those living near busy civil airports.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, no requests have been received from British airlines for this purpose.
LORD ORR-EWING: My Lords, will my noble friend agree that, irrespective of whether or not Maplin proceeds, there are millions of people living around busy international airports in this country who will have to put up not just with present-day noise but with increased noise, because of the increased number of flights? Therefore is it not desirable, in the interests of the environment, that the Government should perhaps take an initia-
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tive? Because no action will be taken by the airlines without some initiative, and no one will spend money voluntarily on quietening their aircraft, unless some action is taken. Will the Government therefore initiate a conference of all those who are interested—the Civil Aviation Authority, the British Airways Board, the British Airports Authority and the manufacturers of aircraft—in order to see whether some action can be taken, which will at least ameliorate the noise around these very busy airports?
LORD DRUMALBYN: My Lords, I am most interested in my noble friend's suggestion. It may well be that the range of people to be invited to the conference should be wider still, because, after all, this is essentially an international matter. At the same time, of course, it will be some time before the British airlines are in a position to fit "hush kits". I am told that the manufacturers and the British Airways Board are making studies at the present time, but no early outcome can be expected. However, it may well be that it would be a good idea to get together to see what will happen when the "hush kits" are available.
LORD HARVEY OF PRESTBURY: My Lords, will my noble friend say what state of efficiency these "hush kits" have reached? Also, does he not agree that it would be an incentive to airlines if they were allowed to land at night at Heathrow or elsewhere if such a kit were fitted? Finally, may I ask whether any research is being carried out at Farnborough or at any other Government establishment?
LORD DRUMALBYN: My Lords, in answer to the last question, research is being carried out by the National Gas Turbines Establishment near Farnborough, and also by Rolls-Royce. So far as the first part of the question is concerned, I think it is premature to consider exactly what should be done in this case until the "hush kits" are available.
THE EARL OF ONSLOW: My Lords, what is to happen in the event of a foreign airport saying that no Speyengined aircraft can land until they are fitted with "hush kits"? Also, will the Minister confirm whether or not these

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"hush kits" could be fitted within two years with the injection of £20 million or so of Government money?
LORD DRUMALBYN: My Lords, I am afraid that I am not in a position to confirm the second question which the noble Lord has asked. I think it was estimated that it would cost about £20 million, or perhaps a little more, to fit "hush kits" to British-made aeroplanes in service in this country, but I am afraid that I cannot go further than that.
LORD ORR-EWING: My Lords, am I correct in understanding that my noble friend took on board my point that he might initiate a conference in order to bring about some progress in this area? This Government, and successive Governments, have shown that they are interested in the environment, and are spending large sums of money on cleaning rivers and on getting purer sewage. Noise is just as detrimental to the wellbeing of our environment as dirt, so should not some action be taken now?
LORD DRUMALBYN: My Lords, I should not like my noble friend to think—I am sure he does not think—that no action is being taken. We are taking action, particularly with the restrictions on night arrivals and take-offs, and these are being progressively applied. What I said was that I thought my noble friend's suggestion was a most interesting one, and I shall most certainly convey it to my right honourable friend the Minister for Aerospace.
THE EARL OF ONSLOW: My Lords, would the Minister like to comment on the progress made by Boeings in fitting "hush kits" to their aircraft?
LORD DRUMALBYN: My Lords, it is not really for me to comment on this point, but I am informed that Boeings intend to make "hush kits" available in about a year or so for their 707s, and that their 727s and 737s can now be ordered with built-in "hush kits".
BARONESS SUMMERSKILL: My Lords, may I ask the noble Lord whether any research has been made into the cost to the National Health Service of tranquillisers, particularly the notorious Valium and Librium, in these areas?
LORD DRUMALBYN: My Lords, I am afraid that that is not a question on which I informed myself arising out of the Question on the Order Paper, but I shall see whether an answer is available.
LORD SHACKLETON: My Lords, can the noble Lord tell us whether the Government are likely to publish some comprehensive statement on a very complicated matter, which ought not to be related only to "H.Ks", if I may so call them, and should cover the whole subject? Also, am I right in assuming that a great deal of work is being done by the Government? If so, it might be useful if at some time we had a full statement on the progress, informing us when some results are likely to be seen, even though it may be speculative.
LORD DRUMALBYN: My Lords, there are really two sides to this matter. First, there is the work which the Government are doing on research, or which they are assisting in doing; and, secondly, there is the work which the manufacturers themselves are doing. May I look into that question to see whether it is possible to combine them in a single statement?

COMMONWEALTH UNIVERSITIES' CONGRESS
2.56 p.m.
LORD BARNBY: 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, with regard to the forthcoming Congress of the Association of Commonwealth Universities in Edinburgh next month and the reported demand by Tanzania, Kenya and Uganda that the University of Rhodesia should be banned, what action (since they claim continuing responsibility for Rhodesia) they are taking to oppose this injustice towards the multi-racial University of Rhodesia.
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE): My Lords, the University of Rhodesia have informed the Associa-

637
tion of Commonwealth Universities that they have withdrawn their delegation to this Conference. We regret that this has been necessary, because we believe that multi-racial institutions in Rhodesia should be encouraged. Attendance at the Conference is entirely a matter for the Association.
LORD BARNBY: My Lords, arising out of that reply may I ask the Minister—since perhaps I failed to use the correct emphasis—whether she is able to Rive a categorical affirmation that the University of Rhodesia is multi-racial in the fullest sense? May I also ask whether the Minister is aware that when I was in Rhodesia this Spring, finding myself in a conversation, unsought, with a high member of the Faculty, I learned for the first time the extent to which the University is multi-racial, not only domestically but also internationally, in that among the student population there is a very large proportion of students from a variety of countries, because the Faculty and the Diploma are so highly regarded abroad?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I confirm that the University of Rhodesia is entirely multi-racial.
LORD CONESFORD: My Lords, cannot this Association appreciate that it is generally far better to allow those who threaten boycott to withdraw? Would it not have been far better for the Association to have followed the excellent example of the Wimbledon Tennis Club?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I am sure that the Association of Commonwealth Universities will take note of what my noble friend has said. Of course it is not for Her Majesty's Government to take part in the internal affairs of this Association.
LORD GRIMSTON OF WESTBURY: My Lords, can my noble friend say why the University of Rhodesia withdrew their application to attend?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I understand there were several countries who said that they themselves would withdraw, unless
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the universities in South Africa and Rhodesia withdrew.
BARONESS GAITSKELL: My Lords, although I personally deplore this banning of delegates either from racialist countries or from authoritarian countries, is it not true to say that banning has some effect on some racialist countries, particularly South Africa, and especially in sport?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I think there is another view, that where an institution is generally multi-racial it should be encouraged.
BARONESS LLEWELYN-DAVIES OF HASTOE: My Lords, is the noble Baroness aware that many of us who do not always share the views of the noble Lord, Lord Barnby, regret that the University of Rhodesia will not be present, since the exchange of ideas and ideals is of particular importance and especially so in education?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I would agree with the noble Baroness.
LORD FRASER OF LONSDALE: My Lords, in view of my noble friend's statement that she has no status in suggesting anything to Rhodesia, how does she justify the view that we govern the country?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I think that the Question I was asked was whether Her Majesty's Government had any responsibility for the internal affairs of the Association of Commonwealth Universities. I said that we had no responsibility. We have responsibility for Rhodesia in a technical sense, but we do not have responsibility for the Association of Commonwealth Universities.
LORD SEGAL: My Lords, would not the noble Baroness agree that all honour is due to the devoted anti-apartheid fighters still remaining in Rhodesia and in South Africa, in line with the honorary degree recently conferred by the University of Oxford on Mrs. Helen Suzman? Can she say whether the distinguished Vice-Chancellor of the multi-racial university of Cape Town, Sir Richard Luyt, has been allowed to attend the Edinburgh conference?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, so far as Her Majesty's Government are concerned, we informed the Association of Commonwealth Universities that we would admit the proposed multi-racial delegates to this country. That is as far as our responsibility goes. It is the University's decision to withdraw from the conference.
LORD SEGAL: My Lords, will Her Majesty's Government adhere firmly to that policy in spite of any opposition from any other African sources?
BARONESS TWEEDSMUIR OF BELHELVIE: Yes, my Lords. We have frequently given travel facilities to members of universities, European and African, when they wished to travel on academic business; and we shall continue to do so.
LORD HANKEY: My Lords, in view of the excellent work done by the Association of Commonwealth Universities, may we take it that the Foreign and Commonwealth Office is giving all the help in its power to resolve such regrettable difficulties when they occur?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, we have given travel facilities for those who wish to attend; but if circumstances arose—as they did in this case—whereby these universities sought to withdraw their applications, there is nothing we can do to prevent it.
LORD ANNAN: My Lords, would the noble Baroness agree that these regrettable withdrawals are influenced by the fact that in universities the whole question of racial relationships and apartheid is in the minds of many of the academic staff and of the students, comparable to what they would have felt in the 'thirties about the persecution of Jews by the Nazis, and that these matters necessarily colour the views which other universities in the Commonwealth, particularly those in Africa, hold on this subject?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, it may be that other universities in other Commonwealth countries have the feelings described by the noble Lord, but the fact remains that the university which is the subject of this Question is multi-racial and also has frequently been against the policy of the Rhodesian régime.
LORD ANNAN: My Lords, I agree. While I entirely accept what the noble Baroness has said and deeply regret that this multi-racial university is not going to be present at this conference, is it not nevertheless the fact that the policy of the illegal Government in that country necessarily inflames opinion in other parts of the world?
BARONESS TWEEDSMUIR of BELHELVIE: Yes, my Lords, but it does little to encourage those within a multi-racial university who are trying their best to overcome the prejudices in question.
LORD CONESFORD: My Lords, is it the view of Her Majesty's Government that the motive behind Uganda's demands was liberalism?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I did not mention Uganda. I said that several countries have made their views known.
LORD CONESFORD: It is mentioned in the Question.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, that may be so.

GREATER LONDON COUNCIL (MONEY) BILL
Read 2a, and committed to the Committee on Unopposed Bills.

LOCAL GOVERNMENT (SCOTLAND) BILL
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Polwarth, I beg to move the Motion standing in his name on the Order Paper.
Moved, That it be an Instruction to the Committee of the Whole House to whom the Local Government (Scotland) Bill has been committed that they consider the Bill in the following order, viz.:—

Clause 1,

Schedule 1,

Clauses 2–11,

Schedules 2–3,

Clause 12,

Schedule 4,

Clauses 13–20,

Schedule 5,

Clauses 21–28,

Schedule 6,

Clauses 29–43,

Schedule 7,

Clauses 44–97,

Schedule 8,

Clauses 98–122,

Schedule 9,

Clauses 123–128,

Schedules 10–11,

Clauses 129–131,

Schedules 12–13,

Clause 132,

Schedule 14,

Clause 133,

Schedule 15,

Clause 134,

Schedule 16,

Clauses 135–147,

Schedule 17,

Clauses 148–149,

Schedule 18,

Clauses 150–153,

Schedule 19,

Clauses 154–161,

Schedule 20,

Clauses 162–163,

Schedule 21,

Clauses 164–172,

Schedule 22,

Clauses 173–184,

Schedule 23,

Clauses 185–188,

Schedule 24,

Clauses 189–209,

Schedule 25,

Clauses 210–213,

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Schedule 26,

Clauses 214–226,

Schedule 27,

Clauses 227–234,

Schedule 28,

Clause 235. — (Earl St. Aldwyn.)

On Question, Motion agreed to.

POWERS OF CRIMINAL COURTS BILL [H.L.]
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLEBONE): My Lords, I rise to move very shortly that the Powers of Criminal Courts Bill be now read a second time. It is a purely consolidating Bill, consolidating the major enactments dealing with the power of courts to deal with adult offenders which are at present to be found mainly in the Criminal Justice Acts 1948, 1967 and 1972. It includes enactments affecting the powers of courts with respect to young offenders where those powers are closely related to powers to deal with adults, but in general special provisions for young offenders are excluded because they are currently subject to review. I need hardly say that the Bill will be examined by the Joint Committee in the usual way. I beg to move that it now be read for a second time.
Moved, That the Bill be now read 2a.— (The Lord Chancellor.)
On Question, Bill read 2a and referred to the Joint Committee on Consolidation Bills.

NORTHERN IRELAND CONSTITUTION BILL
3.6 p.m.
THE LORD PRIVY SEAL (LORD WINDLESHAM): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Northern Ireland Constitution Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
I beg to move that this Bill be now read a second time. I do not intend to speak at great length in introducing this measure to-day. What the Bill does is to give legislative effect to the proposals

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contained in the White Paper, Northern Ireland: Constitutional Proposals (Cmnd. 5259), which your Lordships approved after a full debate on March 28, 1973. These new arrangements will replace those provided by the Government of Ireland Act 1920.
Since our debate on the White Paper, that part of the legislation needed to elect a new Assembly has been enacted and, as your Lordships will know, the elections to the new Assembly took place successfully on June 28, 1973. There are, therefore, now 78 representatives of different groups of opinion in Northern Ireland, each newly elected, and each with a distinct degree of individual responsibility to try to work towards the achievement of more stable and peaceful conditions. That, at least, the people of Northern Ireland, as well as of the United Kingdom as a whole, are entitled to expect.
We shall listen with particular interest to what the noble Lord, Lord Dunleath, has to say in the debate to-day, since he is one of the 78 people who have just been elected as Members of the new Assembly. Noble Lords will also follow with the greatest attention the remarks of my noble friends Lord O'Neill of the Maine and Lord Moyola, both of whom made such valiant and courageous attempts to create a better future for all the people of Ulster during the time that they were responsible for the Government of Northern Ireland.
The White Paper set out the conclusions reached by the Secretary of State and the Government collectively as to the sort of constitutional system which is most likely to contribute to reconciliation. I must emphasise that these proposals did not emerge from some back room in Whitehall. They are, and should be recognised as, the results of a continuous appraisal of the situation as it is in all its stark reality on the ground in Northern Ireland. One of the consequences of the Temporary Provisions Act which prorogued the Parliament at Stormont fifteen months ago and transferred to Westminster direct responsibility for the Government of the Province was that, for the first time for half a century, British Ministers have been based in Northern Ireland, operating as a central part of the Irish political scene.
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Like any other political society, Ulster politics call for study and for understanding. I think most people would credit Mr. Whitelaw and his team (of which I was proud to have been a member until recently) as having accepted this imperative and acted upon it to the best of our ability. Thus these proposals, following on over a year of consultation with a wide range of interests, represent a considered judgment as to the framework of government best suited to the distinctive needs of the Province.
Northern Ireland, my Lords, is of course a Province, a part of the United Kingdom for which laws are made by The Queen in Parliament, and in respect of which measures of the Northern Ireland Assembly will be approved by the Queen in Council. Not only do we exercise sovereign rights but also we are bound by the pledges on the status of Northern Ireland as part of the United Kingdom which are incorporated in Clause 1 of the Bill. There was some controversy in another place about whether it was necessary for these pledges to appear in the Bill and whether there should be machinery for determining the consent of the majority of the people in Northern Ireland by means of a poll. My right honourable friend, the Secretary of State explained why it is that the Government take the view that the pledge on the territorial status of Northern Ireland should be included in the Bill. Following extensive discussions which he recently held in Northern Ireland on this matter, the Secretary of State concluded that he should ask Parliament to take account of the strongly expressed view that there should be a provision in the Bill giving effect to the undertaking of the Prime Minister on March 24, 1972; namely, that there should be periodic plebiscites on the Border.
My Lords, in places the constitutional proposals contained in this Bill may at first sight look a little unfamiliar. It may not be immediately apparent to some of your Lordships why certain aspects of the Government's policies towards Ireland—for example, plebiscites, proportional representation, a broadly based Executive, legislation against religious and political discrimination and so on—are necessary. What I must therefore underline at the outset is that we have tried to build on what common ground there

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is in Northern Ireland and to develop new institutions which are capable of taking root and operating effectively in the quite different political conditions which apply in Northern Ireland.
The most distinctive feature of the situation in Northern Ireland is undoubtedly the deep divide between the two communities, far deeper than many people in Britain can envisage. There are many reasons for this—economic, social, and above all traditional reasons, as well as political and religious divisions, but some way has to be found to try to bring the communities closer together. Thus the principle which lies at the heart of the Bill is that of power sharing. Clause 2 of the Bill, in particular, interprets and puts into statutory form what was said in paragraphs 52 and 53 of the White Paper.
The Government recognise that there are considerable difficulties associated with the principle of power sharing which the provisions of Clause 2 are designed to achieve. No one would underestimate the problems facing those who have to work this new system. The important thing is to see this provision not only as a constitutional formula but also as a practical recognition of an inescapable fact. For unless the communities in Northern Ireland are prepared and able to work together, there cannot be any prospect of long-term peace and stability.
In the search for stable political institutions in Northern Ireland there are really only two approaches. One is to build upon a majority Government of the kind we have grown used to in Britain. But it is a fact that, for whatever reason, institutions modelled very closely on those at Westminster (the noble Lord, Lord O'Neill of the Maine, has in the past, I recall, argued that they have been too closely modelled on Westminster, giving the appearance of far greater independence than was the case) did not bring peace or government by consent in Northern Ireland over the last 50 years. If this is accepted—and who can dispute it?—then the only real alternative is some form of power sharing. There may legitimately be arguments—there will be arguments—as to how this can be achieved, but that it must be attempted is, I believe, something that none of your Lordships would wish to deny.
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Democracy has many meanings, my Lords, but whatever else it means, it certainly does not just mean majority government. It is a whole complex of principles and relationships which permit free men to be governed with their general consent. What is suitable in a homogeneous society may be inappropriate in a divided one. Thus the Bill provides for a broadly based Executive, within the meaning of Clause 2, before power can be devolved to Northern Ireland institutions; and that the new institutions should incorporate provisions for consultative committees which will enable all interests in the Assembly to participate in government in Northern Ireland.
My Lords, if I may move on to Clause 8 of the Bill, this clause provides for an Executive comprising of Heads of Depart-muffs and a Chief Executive Member. Heads of Departments will in the normal way be responsible to the Northern Ireland Assembly for what they are doing and it will be necessary for the new Executive to get its business through the Assembly in a way similar to the practices with which we are familiar in Britain. Further, the business which will have to be conducted is of considerable importance. Once the broadly based Executive is set up, all functions other than those concerning the"excepted" and "reserved" matters which are set out in Schedules 2 and 3, can be transferred to Northern Ireland. We have deliberately left ourselves freedom to devolve further functions set out in Schedule 3 when stable government returns in Northern Ireland and when this Parliament thinks it proper to do so.
There is, however, another principle behind the proposals contained in the Bill. This is that the constitutional arrangement should be cast in a form which provides for a good deal of flexibility. It has always been our intention that elected representatives of the people of Northern Ireland should play as large a part as possible in deciding how a basis of government by consent can be established. The Bill incorporates this principle. What has to be found is some way of exercising executive power in Northern Ireland in relation to these transferred matters which is broadly acceptable throughout the community. Noble Lords will see that the Bill does not specify any precise provisions for weighted majorities and so

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on. The detailed procedures are left for the parties in the Northern Ireland Assembly to work out with the Secretary of State, but the criteria contained in Clause 2 must be met before any of the powers contained in the Bill can be devolved to Northern Ireland institutions.
My Lords, Part III of the Bill concerns discrimination. These clauses, Clauses 17 to 23, prohibit legislation which discriminates on political or religious grounds, and provides machinery to determine the validity of any such legislation. It also makes unlawful any actions in the public sector which are discriminatory on religious or political grounds. A Standing Advisory Commission on Human Rights will be set up to advise the Secretary of State on the adequacy and effectiveness of the law, and the practice of certain persons and bodies, in preventing discrimination. Clause 21 makes it unlawful for specified authorities and public or local bodies in Northern Ireland to require a person to take an oath or make an undertaking or declaration as a condition of his appointment to such an authority or body. No oath is required of members of the Assembly, and indeed the only requirement contained in the Bill concerning oaths or making a declaration is contained in Clause 8(10). This applies solely to members of the Executive and to two or three other members of the Assembly with executive functions. The wording is contained in a Schedule to the Bill, Schedule 4. Since oaths have played such a long and contentious part in Irish history, and since the form of words is quite brief, I shall read the Schedule to your Lordships. It reads as follows:
"I swear by Almighty God [or affirm] that I will uphold the laws of Northern Ireland and conscientiously fulfil [as a member of the Northern Ireland Executive] my duties under the Northern Ireland Constitution Act 1973 in the interests of Northern Ireland and its people."
My Lords, I have not repeated to-day any of the tributes which we have expressed so often, and with such deep feeling, to Mr. Whitelaw, to the Army, and indeed to all of those in Northern Ireland (and there are many of them) who have made such great efforts to bring this tragic conflict to an end. They are determined, and will continue to be determined—my noble friend Lord Belstead not
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least—to try to come to terms with a most complex situation, and one that is deeply rooted in history. Nor have I referred again to our total rejection of, and contempt for, the campaign of violence which has been waged by extremists on both sides with such terrible consequences in terms of personal suffering, injury and death. These thoughts are for other occasions. To-day we are considering a Bill which we must earnestly hope represents a new beginning. I beg to move.
Moved, That the Bill be now read 2ª.—(Lord Windlesham.)
3.23 p.m.
BARONESS WHITE: My Lords, I speak for all my noble friends on this side of the House in welcoming this Bill and also in welcoming the spirit of the speech with which it has been introduced by the noble Lord, Lord Windlesham. We, too, look forward very much to the speeches which we hope to hear from the noble Lord, Lord O'Neill of the Maine, and the noble Lord, Lord Moyola; and perhaps more particularly, as the noble Lord, Lord Windlesham, himself indicated, from the noble Lord, Lord Dunleath, because he is in a particularly responsible position as a newly-elected member of the Assembly.
In offering general support for this Bill we are of course perfectly consistent, because we also warmly supported the White Paper on which it is based. I think there is only one matter of principle, to which I shall come a little later on, in which we seriously differ from the Government, and that is the question of enshrining in the Bill provisions for a Border poll. But, apart from that, we fully accept that legislation is required on the lines set out here, first of all for the position of Northern Ireland as set out (with the exception that I mentioned) in Clause 1. And because it will not be possible to provide for the activation of Part II without Parliamentary approbation, we should like to make it quite clear that we will do everything in our power to expedite the passage of this Bill through the House. I am empowered by my noble friend the Leader of the Opposition to say that, if it seems necessary or desirable, we should be happy to take all further stages of this Bill on one day.

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I should also like to draw attention to the remarks made by my right honourable friend the Leader of the Opposition in another place concerning—if necessary, unpopular as it might be—a recall of the House if it proved impossible to obtain the necessary arrangements for the power-sharing Executive before we rise for the Recess. We hope very much that such arrangements can in fact be made, because we think very firmly that it would be in the general interests that they should be made as soon as possible, but we should not wish the Government to feel under any sort of constraint in their timing of any future action by the fact that Parliament normally goes into Recess I trust a little earlier this year than at least we did last year. It is only right that we should refer to the offer of co-operation made by my right honourable friend in another place, although we very much hope that it will not be necessary to take advantage of it. My Lords, we, as I am sure everyone in this House at least, look forward to an early announcement that discussions have resulted in the formation of an acceptable Executive. We do so in the feeling that, difficult as it must be in the situation which has arisen as a result of the last election, nevertheless the people of Northern Ireland, contrary to expectations, I think, in certain quarters, did show by their participation in that election that they are concerned that progress should be made in dealing with the political ordering of the Province. We have also all been very much impressed by the comments which have come in recent days from the Prime Minister of the Republic, because this surely must have some influence on both sides in the North. Things really have moved a very long way, I should have thought, when one has the Prime Minister of the Republic not any longer asserting the right to jurisdiction in the North. This is a most historic change, and one of which I hope everyone will take cognisance and full advantage.
It seemed to me it was also particularly important that Mr. Cosgrave did not substitute one dogmatism for another. His attitude is one which I hope we shall all share: that in Ulster we are feeling our way forward towards a new dispensation, that it is extremely difficult to see precisely how the new
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machinery will evolve, but that we should move forward. In the words of Mr. Cosgrave himself:
"Let us trust that the process itself will determine the outcome".
In other words, if in order to try to make the new machinery work people exercise the good will, the patience and the tolerance which has been so much lacking in Ulster in the past, then, in a spirit of pragmatism and trial and error, we shall, I hope, find that these new institutions will prove successful. It is of course of outstanding importance that Mr. Cosgrave should have accepted the principle of consent, and should have accepted it as publicly and officially as he has done. This, again, is a new departure. We have seen some slight evidence of it before in the South, but I think this is the first time it has been put in such categorical terms as have been used by Mr. Cosgrave. Therefore, so far as the relationship with the Republic is concerned, it should be much easier for the Parties in Northern Ireland to work out their own salvation.
In saying that, I am only too well aware that things do not go by logic in any part of Ireland and that one cannot therefore take it for granted that these very sensible and wise words of Mr. Cosgrave will have the effect we should expect them to have. Nevertheless, one hopes they may make things easier far everyone of good will who is genuinely trying to make the new constitution work. We are acutely aware that there are persons in Ulster and persons who have been elected to the new Assembly whose declared policy it is to ensure that the new arrangements do not work; but there is, so far as one can judge in the shifting sands of politics, a majority of those, of very widely differing views, in the new Assembly who do wish from their respective viewpoints to secure the success of the new arrangements. Within those arrangements we certainly hope that a sufficient basis of agreement will be reached for the power-sharing machinery to come into effect.
It is, of course, true that in the Bill itself there are provisions which do not find their place in the working of government and politics in this country, but I think we should all entirely accept the proposition of the noble Lord, Lord Windlesham, that what is suitable in our

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own more homogeneous society may not be appropriate in a society in which divisions are so very deep and of such long standing. Therefore, so far as we on this side of the House are concerned, we are happy to go along with the sections of the Bill which deal with proportional representation, with the broadly-based Executive, with the legislation against non-discrimination, with the standing advisory Commission on human rights, with the change in the form of oath or affirmation—indeed, that has a long history in Ireland—and therefore we entirely accept all these changes.
The one matter on which, my Lords, we have quite serious difficulty and which we may wish to discuss in greater detail on the Committee stage of the Bill is the provision in terms in the Bill for the holding of a referendum, plebiscite. Border poll—whatever you like to call it—at stated intervals of not less than ten years. This, frankly, we find ill advised. It is quite true that one Border poll has been held, but that was in exceptional circumstances when there was no elected body for the entire Province of Ulster by which opinions could have been expressed. The circumstances were unique; they will not hold good with the election now of an Assembly and we think that it is undesirable to have a provision of this kind enshrined in this legislation.
It is quite true that in another place when objections were made to this provision the Secretary of State, Mr. Whitelaw, explained that the results of a Border poll would not themselves automatically change the situation in any way. Very pertinent questions were put to him: what kind of majority would one need in a Border poll for it to be regarded as effective, because one could visualise a situation where a mere handful of people might be in a majority which might affect the entire status of the Province for another 10 years. This would not be regarded as good sense, I think, by anyone in any Party. Mr. Whitelaw pointed out, as I said, that there would be no immediate automatic effect; that the matter would have to be brought to Parliament at Westminster for determination if there were to be any change and, as he also very rightly emphasised, it would be subject to what the Republic might think, so that there would be no immediate
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effect. That being so, which of course is absolutely true, we feel that it is all the more undesirable to have this provision in the Bill. We appreciate that there was a pledge given by the Prime Minister in 1972 and that therefore the Government may feel that the Bill is bound to include such a provision. But of course we are not bound by any such pledge. Therefore, in spite of our general support for the Bill, we are not under any obligation to the Government to support them in this particular matter.
My Lords, there are others who wish to speak and I should not wish to take up the time of your Lordships' House in going into details which would be more appropriate at later stages of the Bill. I can only reiterate that we all hope—and some of us at least would pray—that the legislation that we are being asked to pass may be a step towards bringing to a close a very sad chapter indeed in the history of Northern Ireland. The Bill, we believe, provides hope for the people of the Province if they will endeavour to work it with good will and good sense; and we therefore wish it well.
3.37 p.m.
LORD MOYOLA: My Lords, being new to your Lordships' House I hope it is in order if I start my remarks by saying how very much many of us who live in Northern Ireland regret the departure of the noble Lord, Lord Windlesham, who introduced this Bill, from the Northern Ireland scene. I can only say that he has been a tower of strength to us there; he has listened to many problems patiently and courteously, and has successfully dealt with very many of them, and I can assure him that there are very many people in Northern Ireland who are both grateful to him and very sad that he has left.
I have not, my Lords, very many points to make about the Bill. The only questions in my mind are: will it work, or is there anything that can be done that will make it work? I would say at this moment that it is certainly not possible to dwell on what happens if it does not work; and threats as to what may happen, that the troops may withdraw or whatever action might be thought appropriate to take in this country, will probably in fact do more harm than good, because on the one side they simply

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encourage the I.R.A. and the terrorists who think, "One more heave and we will push Northern Ireland over the cliff", and on the other I think they probably bring out the very worst streaks of Ulster obstinacy: people dig in their toes, dig them first into positions which in the ultimate they know and we all know are bound to be untenable. I think we should be looking at the ways and means of making work the things that are proposed in this Bill.
My Lords, there are two or three difficulties. Perhaps I may deal with the first, as I see it. As we know, the Assembly Elections are over, and many people I think feel that the result, which to us in Northern Ireland was fairly predictable, has been somewhat of a disappointment. The centre Parties have not done as well as they hoped to do, and the more extreme have done rather better. But be that as it may, at least we in Northern Ireland now know who speaks for the electorate. That in fact is a considerable advance. However, the extreme people on both sides have done well because of the continuing violence, and until the security situation improves —and I am the first to recognise that it is enormously better than it was even a few months ago—and we reach what a distinguished Member of another place referred to as an "acceptable level of violence", and assassinations and all that sort of thing cease, the extreme elements are going to be in the ascendancy. I am afraid that means that the prospects for this Bill and the new Assembly are bound to remain somewhat bleak. Having said that about the security situation, I hasten to add that it is in no way intended as an implied criticism of the Army, for whom I have nothing but the highest praise. If I were to be asked what more I thought ought to be done, I really could not answer; and, thank God! I should be out of order if I did. I would simply say that security does have an influence, and a very big one, on the likely actions of the Assembly.
My Lords, if I may touch on one more general point of that kind which I think has a hearing on the workings of this Bill and the Assembly, it is simply that we still need more help and co-operation from the Government of the Republic. I am not thinking particularly of chasing terrorists, but more in terms of the extra-
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dition of known terrorists who are wanted in the North. No doubt the noble Lord who is going to reply to the debate will be able to tell us how many extradition applications are outstanding. The fact is, so far as I am aware, that only one case of extradition has so far been granted, and between the North and the South that has become an extremely emotive issue. All I would say on that is that no extradition Northwards hardens one side of the political spectrum, just as assassinations harden the other. So far as I can see, these hard-line actions will go on until these things go right and the Army has won the battle. Once that has happened, things will settle and I believe that this Bill and the Assembly have a chance of working.
Then I think that the success or failure of the Bill also depends very much on the personalities involved, rather than on the contents of the Bill we are considering to-day. From the Northern Ireland point of view, as I see it, the crux of the whole matter is power-sharing: to try to persuade, somehow or other, the majority of the population to share with those whom they believe would wish to join Northern Ireland with the Republic, and whom they therefore think have not the slightest interest in the good Government of the country; and to persuade, on the other side of the coin, the S.D.L.P., who may have been brought up to believe, in my view quite wrongly, that oppressors are the cause of most of Northern Ireland's troubles that they can work with the Unionist Party. For this reason, the Leaders of both these Parties, in my view, will have quite a number of defectors when the power-sharing crunch comes; and it is therefore uncertain, to say the least, whether those who are willing to share power, or, as I would rather put it, to govern together, will command a majority of the Assembly even with the help of the Alliance Party, which I do not doubt will be forthcoming. All I can say on this matter is that whomsoever is to be the chief executive must have the right to choose the individuals with whom he is to govern. There must be no attempt, either from here or by the Parties in Northern Ireland, to try to force this issue. I personally think this system can work, but that it can only work provided we do not go too fast at it, and

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provided the chief executive is allowed to choose from the various Parties those with whom he feels able to work and who feel able to work with him.
My Lords, I should like to mention one matter within the Bill, and that is the question of the Border Poll. We have already heard the noble Baroness, Lady White, say that this is something which might well be omitted from the Bill. I hesitate to disagree with anyone who knows this House so much better than I do, but all I can say is: for God's sake leave it in! My view is that if it is accepted in Northern Ireland that from time to time public opinion can be tried out by a poll along the lines that we had on March 8 last, there is a hope that the Border will be taken out of Northern Ireland politics, and thereby you take cut the most controversial issue, the issue that gets tempers running highest. That issue will then be removed, I hope, both from elections and from the working of the Assembly. I believe that if the poll remains in the Bill there is a much greater possibility of really constructive work of a kind that will be of benefit to all, being done in the Assembly. As I see it, if you take it out, then Northern Ireland will have reason once again to go back to the old type of politics that we have known for so long, and which, in my view, are, and have been, totally unpopular.
Reverting to the present position and my original theme of whether this Bill and this new Assembly can work, I can only hope that the new Members of the Assembly will follow their own consciences and will not be told by outside influences what they have to do. Under this Bill they are asked (and let us not underestimate it) to do something which is extremely difficult. Unionist and the S.D.L.P. Parties look to be the key to the situation, and it certainly seems that one's remarks can be most usefully addressed to them. I have spent all of my political life in Northern Ireland as a member of the Unionist Party. It is a Party that has been criticised and vilified in a most extravagant way, but I would say that it contains many honourable people who have given good service to Northern Ireland. I would say to them, through your Lordships' House, that Parties have many different policies and objectives,
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but there sometimes comes a crucial point when one must make up one's mind about what comes first; when one must decide what, above all else, one's Party is for. I have always believed that, above all else, the purpose of the Unionist Party is to maintain the Union, and that, in order to save the Union, it is necessary to set aside some cherished ideas and policies. I would urge that course as being for the greater good of Ulster. But let no one think that this can be done on a one-sided basis. If there is to be a political contribution to the task of ending the violence—and that is what everybody in Norhern Ireland wants to see—it has to come from both sides. The S.D.L.P. have been returned in a position of some strength. If they seek to use that position to make demands and insist on conditions which are wholly unacceptable, and indeed deeply offensive, to others, then no progress can be made. They, too, have to remember that their new strength ought to be accompanied by a new sense of responsibility.
My Lords, we could argue for hours and days about the form of the new Constitution for Northern Ireland. To my mind, this Bill is as good a fist at it as it is possible to make. I will accordingly gladly support it.
3.50 p.m.
THE EARL OF LONGFORD: My Lords, following one Prime Minister and preceding another, I rise with my habitual diffidence. I recall that a great poet told us that:
"Heard melodies are sweet,but those unheard
Are sweeter".
It might be thought that the fewer speeches made to-day the better; but there are things which clearly must be said. The noble Lord, Lord Windlesham—incidentally, I find myself congratulating him on so many things that he may become tired and so my tributes to him may become counter-productive—I must insist on congratulating once again. He told the House, I am sure with justice, that three speeches would be listened to with special attention: those of the noble Lord who has just spoken, of the noble Lord, Lord O'Neill of the Maine, and the noble Lord. Lord Dunleath, who has won a signal victory in the Elections. Assuming that Front Bench

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speeches are always listened to with special attention, that leaves only the noble Lord, Lord Lyell, and myself who will not be listened to! However, I know that some degree of toleration will be extended to the noble Lord, Lord Lyell, and myself.
With two qualifications, which I shall mention in a moment, I should like to support the Bill very strongly, and in doing so I should like to pay a tribute not only to the noble Lord, Lord Windlesham, but to Mr. Whitelaw downwards—that is to say, all those who have made this situation possible. Again subject to qualification, I look upon this as a measure which points the way to reconciliation in three senses: reconciliation within Northern Ireland between the two parts, the Six Counties and the 26, and reconciliation between the island of Ireland as a whole and this British island. I believe that at long last the policy of the British Government is on the right lines. I entirely agree with what the noble Baroness, Lady White, has said about the fine response to Mr. Cosgrave, Prime Minister of the Irish Republic. Gently and respectfully, I must correct her on one point. It would be quite wrong to suppose that Mr. Cosgrave has been the first Prime Minister in recent times who has said that the principle of consent must be adopted. To go no further back than Mr. Lynch, that gentleman has repeatedly said that there can be no Irish unity without consent. While I join in the applause for Mr. Cosgrave's notable speech, I think it would be unfair to Mr. Lynch not to put the record right in that respect at least.
There are many encouraging features in the recent Election results for Northern Ireland. The men of violence have been temporarily squashed. One cannot think that they have been permanently disposed of, but at any rate they had a poor Election result. I suppose for some of us here, and also for some outside this Chamber, the main regret will be that the Northern Ireland Labour Party fared so badly and the respected Leader did not win a seat. The Leader, Mr. Simpson, was the first to bring forward the idea of a Coalition Government, as it then was. It has passed from the idea of a community Government to power-sharing now; but it was
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he who four years ago first put forward this idea. I venture to recall that I followed him very quickly, but it was Mr. Simpson who first brought the idea forward and I do not think that that should be forgotten at this moment.
The Bill in general, based as it is (as the noble Lord, Lord Windlesham, said) on the idea of power-sharing, must commend itself to all of us here and, if I may say so with all modesty, I myself have been suggesting the idea for quite a number of years now. If I may here make my first qualification—and I hope it will not be regarded as a criticism—it seems to me that if one took this Bill on its own without any White Paper or Government Statements, and so on, surrounding it, it would be quite inadequate. If one takes power-sharing, one may well say that this Bill is perfectly compatible with power-sharing and, taken with the pronouncements and commitments made by the Government, certainly it can be used to give effect to that. But if your Lordships look at perhaps one of the most crucial clauses, Clause 2(1)(b) says that there has to be an executive, and that this must be likely to be widely accepted throughout the community. I suppose it could be said that here in Britain the present Government are widely accepted throughout the community. It is a rather vague and ambiguous phrase and would not in itself be a demand for a special arrangement for power-sharing. I should like to point out that that in itself does not give explicit effect to the idea of power-sharing.
I must express a little alarm at something which was said by the distinguished Prime Minister who preceded me, and which might perhaps be repeated by the distinguished Prime Minister who will follow me. The noble Lord, Lord Moyola, said that he hoped the chief executive would be allowed to choose his own colleagues. That hardly appears to be the intention laid down in the Bill. Clause 8(3) tells us:
"The chief executive member and the heads of the Northern Ireland departments shall be appointed by the Secretary of State on behalf of Her Majesty …"
and so on. So we must presume that the ideas of the noble Lord, Lord Moyola, have been rejected. I hope they have. When the noble Lord, Lord Belstead, winds up, I hope he will make it plain

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that the Bill as it stands means what it says and that the suggestion of the noble Lord, Lord Moyola, is not the policy of Her Majesty's Government, because if it were adopted the whole idea of power-sharing would be defeated.
Also, one would have liked to see in the Bill, taking it on its own, an explicit reference to the Council of Ireland. Again, I am not criticising, because I do not imagine that the Government of the Irish Republic would have expected or wished to see a reference to the Council of Ireland here; but unless one knew already that that was the policy of the Government, one would have been very much concerned about the absence of an explicit reference. Speaking for myself, and indeed for probably many other people, I should have thought that the policy of reconciliation would amount to nothing unless there is a Council of Ireland or some similar body. We must recognise that everything will depend on this practical co-operation growing ever more between the two parts of Ireland in the years ahead. What I call the threefold reconciliation depends on that at every point. Therefore, while not criticising the measure here, I should like to point out that, taken by itself, the Bill would be gravely insufficient. Dare I say that there are two qualifications there?—but I can understand why the Government have drafted the Bill in the way they have.
LORD SHACKLETON: My Lords, I wonder whether I might interrupt my noble friend. Is he quite correct in saying that there is nothing in the Bill? There is no reference to the Council of Ireland, but it seems to me that Clause 12 of the Bill is intended to enable the creation of that kind of institution.
THE EARL OF LONGFORD: My Lords, of course I have not neglected Clause 12, and if the Government had wished to put a reference in the Bill to the Council of Ireland that is clearly where it would have occurred. It makes it possible, but it deliberately refrains from a reference, probably in view of the White Paper, in which the Government accepted the policy of a Council of Ireland. We must assume that, for whatever reason, the Government have refrained from including it. One excellent reason for not
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including it, of course, which will occur to all of us, is that it would be laying down a plan for dealings with another Government, the Government of the Republic. One can see why it might not be included. Compared with the White Paper there is a rather noticeable omission here, and therefore I am labouring the point that to appreciate this Bill we must take it in the context of the other Government commitments. On that basis I am favourable towards it.
Now I come to something which has been already criticised by one of my noble leaders, the noble Baroness, Lady White, and, on the other hand, it has been praised by the noble Lord, Lord Moyola: the referendum. Perhaps it is worth pausing for a moment to look at this provision rather more closely. It is not just a provision for a referendum. I am not particularly in favour of referenda. They had one recently in Ireland which turned out very well, in which the Party under Mr. Lynch and the special position of the Roman Catholic Church were removed. On the other hand, we did not have a referendum here when we might have thought it suitable at the time of our entry into the Common Market. Who will say what might have happened if we had had a referendum then?
I am not laying down a great principle in favour of a referendum. It might well turn out to be a good way of determining opinion when the time comes, but it is a great pity that this provision should be included here. It is not so much a pity that there should be a reference to the referendum. What is a grave defect in the Bill—and I speak plainly, it is a serious defect; it is no good saying it is fatal, but it is a serious defect—is the fact, explained in Schedule 1, that these referenda can take place only at intervals of ten years, and the first one cannot take place earlier than March 9, 1983, ten years from now. According to this Bill, for ten years, even if the people of Northern Ireland by a large majority, so far as one can judge—and one usually judges by elections and other indications—want the unity of Ireland, they are prevented by this Bill. Extremists could say, "We are not going to allow this unity". Suppose 25 per cent. were still opposed to Irish unity, they could say that nothing could happen for

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ten years. What an opportunity for the I.R.A. or other dangerous bodies in the meanwhile! It is not only that there cannot be a referendum for ten years, but there cannot be another one for another ten years.
Supposing after ten years opinion moved a long way and the people in favour of a united Ireland were not far short of those who wanted the status quo; and supposing a little further on from that, another two or there years, judging by elections the majority wanted a united Ireland, they would still have to wait for another seven or eight years after that. The more you look at it the more deplorable this rigidity appears. I shall be told that we are practical people in this country and always find the right answer on the night; but it might be the night of the long knives. It could be a dangerous moment if the majority of the people wanted a united Ireland and were being stopped by the restrictions of this ultra-rigid Schedule. Whatever we try to do here, this Bill is likely to become law, and I regard this as a lamentable provision. It may not last for ever; it may be disposed of if things move in the direction that I hope. I wish to see this provision opposed by every constitutional means open to us.
My Lords, I have finished. I do not flatter myself that any words of mine, in spite of my long connection with this question, are likely to have any particular effect with any particular section of opinion in Northern Ireland. But so far as I have read or studied at all, I should like to implore all those who might be in any position to influence opinion in Northern Ireland to play their part in taking advantage of the greatest opportunity that has ever come up till now to their tormented but indomitable Province.
4.5 p.m.
LORD O'NEILL OF THE MAINE: My Lords, as others in your Lordships' House have done, I should like to congratulate the noble Lord, Lord Dunleath, on his recent success in gaining a seat in the Assembly. I could not help thinking that if by any chance some of the rumours we have seen in the Press are true, that he may be elected as Presiding Officer of the Assembly, he will be unable to speak in that Assembly but will be able to speak in this one. He will be in rather a special position, Another thing which I think is
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particularly helpful these days is that both the Leader of the House and the Leader of the Opposition have knowledge of Northern Ireland. I should think this is probably the first time in the history of your Lordships' House that this has been the case. The Leader of the Opposition's knowledge of Northern Ireland is perhaps (I say this with all due respect) a little out of date; although he has lived there for longer than the Leader of the House, nevertheless, it is valuable that this should be common to both sides of the House. I wanted to say that in passing.
My Lords, I hope that this Bill will be given a smooth and swift passage, and then—and this is most important—time must be given. That is why I am so glad to hear the noble Baroness, Lady White, expressing the willingness of the Opposition in certain circumstances not to press for anything to be done before Parliament rises. Time must be given. In no circumstances should decisions be pressed for in July, to suit the convenience of the Westminster Parliament. I speak with some knowledge about these affairs. The whole of Northern Ireland is on holiday this week and next week. I can remember in the old days the Upper House in Northern Ireland used to complain, just as your Lordships House does, about being brought back in August to complete unfinished business from another place. I remember on one occasion saying to the Upper House in Northern Ireland, "If you object to being brought back in August, why not finish it off in July?" I found that that was even less acceptable.
If the Secretary of State is able to have successful and fruitful conversations with members of the Assembly this month and he is seeing them to-day and to-morrow—nothing would be more welcome to me. At the same time, if it is necessary to have these discussions in August I do not think they should be pressed ahead merely for the convenience of the Parliament at Westminster. It would be far better, if necessary, to have a recall in September—but let us hope that will not be necessary. The House should realise that the whole of Ireland closes down in the month of July and it would be unwise to press on with something which happens to suit us here. If, however, no agreement can be reached by, let us say, the end of August, then

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it is not for me to say what should happen at that point in time. I am merely stressing that nothing should be done in a hurry at the moment.
As I see it, the most precious thing we have had in the past four years has been the bipartisan policy at Westminster. I should like to pay tribute to the present Opposition spokesman on Northern Ireland affairs in another place. I often think that, coming from Wales, he understands these problems better than the English. If, perchance, the "unworkables", as they have come to be known in Northern Ireland, win, if these wreckers win, and the Assembly cannot and does not function, then I fear, my Lords, that I can see the great patience of the British people starting to ebb away. So, in so far as anybody has any interest in what my views are at home in Northern Ireland, I hope that the Members of the Assembly will realise how important it is that they should behave with moderation and statesmanship at this vital point in the history of Northern Ireland's affairs. I trust, too, that the present Secretary of State, especially now that he has lost his right-hand man—and from the point of view of your Lordships' House we are very glad that he has—will be allowed to stay in his present Office at least until Christmas. It is possible that even an extremist in Ulster might prefer the devil he knew to the one he did not. So, from all points of view, I very much hope that he will be allowed to stay in Office until we can find out whether the Assembly is going to work or whether it is not.
So far as the Office of the Secretary of State is concerned, it seems to me quite admirable in every way. Scotland has a Secretary of State and is an integral part of the United Kingdom. Why on earth should not Northern Ireland have a Secretary of State? What is more, I would myself, at any rate for the foreseeable future, look upon such a man as an umpire, as it were holding the scales of justice in his hands; and I believe that if any effort were made to remove this Office—I am sure there will not be—there would be a backlash of a different nature from the one that has been questioning the existence of Westminster control taking place in this manner.
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My Lords, I should like now to mention once again a subject with which I dealt before in this House and which the noble Lord the Leader of the House himself touched on because in my view it is so important. That is the question which might be described as nomenclature. The question of names in the old Stormont was at the root of part of the trouble. It would be true to say that for fifty years many ordinary people in Northern Ireland have quite genuinely believed that Stormont was a sovereign Parliament. It was not until the noble Baroness, Lady White, advised me to read a section of her father's diaries dealing with Northern Ireland that I fully understood how this had all taken place in 1920, 1921 and 1922—which, incidentally, is a horrifying parallel to 1970, 1971 and 1972.
At that particular time, what the Irish wanted (I am not referring now to the Northern Ireland people) was Dominion status. At that time we had the British Empire, India; and Lloyd George's attitude was that if Ireland were given Dominion status it would lead to the break-up of the British Empire. But being a man of considerable agility—possibly aided by the noble Baroness's father, I do not know—he hit on the idea of giving them Dominion titles without Dominion status. As someone who has been to Canada on many occasions I have discovered that in Canada, where there are I suppose 10 or 11 "Northern Irelands", it is perfectly possible for Canadian citizens to distinguish between their Federal Parliament in Ottawa and their Provincial Parliament in, shall we say, British Columbia—I am taking that as an example because that had 52 Members of a Legislative Assembly, and Stormont, with far fewer powers, had 52 Members of Parliament.
This makes a tremendous difference. In Northern Ireland they had a Prime Minister. I should never have been a Prime Minister; I should have had a different name from that of the top man in London. In Canada he is called a "Premier". In Canada there is only one Minister of Finance; he is in Ottawa. In British Columbia, or one of the other Provinces, the man is called "Provincial Treasurer". And, far more important than anything else, there are no Members of Parliament; there are only M.L.A.s.

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In this way the ordinary Canadian people can understand that power resides in the Federal Parliament and not in the Provincial Parliament.
Your Lordships may say that this is all a lot of rubbish; it does not matter at all. My Lords, I beg you to believe that it matters a great deal. It is essential that the man in the street in Northern Ireland should understand where power resides; and it resides here in London. Under the Government of Ireland Act 1920, I think I am right in saying that there was not to have been a Cabinet in Northern Ireland; there was to have been an Executive Committee of the Privy Council. But in the course of time it became a Cabinet. It could well be—and I am being hopeful now in assuming that the Assembly will work at all—that in the months that lie ahead the Chief Executive will start calling himself "Prime Minister"; the Presiding Officer calling himself "Speaker"; the Assembly will start calling itself "a Parliament" and before you know where you are you will be back again to where you were before: the ordinary man in the street will be totally bemused as to where power really lies. Therefore, at the risk of being a first-class bore on this subject, I would say that I hope your Lordships have understood that these names are really very important indeed.
As I see it, the most important point is that the Assembly should somehow or other be made to work—I do not want to use the phrase about "the last chance", but nevertheless, it is a great turning point in Northern Ireland's future. I am sure that the Secretary of State will be firm and fair and, moreover, flexible. The Government were very much criticised for not laying down everything in the Bill we are considering to-day. They would have been highly unwise to lay everything down. There must be some flexibility left for the man on the spot who is dealing with this appallingly difficult subject. I wish him well. I wish the Government well. I hope, above all else, that the bipartisan policy which has existed for the last four years will still be in operation by Christmas. And I appeal once again to the people of Ulster: For Heaven's sake! make this Assembly work, because
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the patience of the great British people is not going to go on forever.
4.19 p.m.
LORD DUNLEATH: My Lords, I should like to thank the noble Lord, Lord O'Neill, the noble Lord, Lord Windlesham, and the noble Baroness, for their kind words towards me. I would assure the noble Lord, Lord O'Neill, that things have not changed since he was in power. There is much speculation in the Press and elsewhere and usually there is not a word of truth in it. But in fact they were right—and I may say it was to my complete surprise and partial dismay—in that the week before last I was elected to the Northern Ireland Assembly as a representative for the Alliance Party. I was going to start my speech this afternoon by declaring an interest because I suppose it could be said that the smooth passage of this Bill through your Lordships' House is worth £2,500 a year to me. Incidentally, there has been widespread speculation as to what we are going to be called. Obviously not "M.P." I have heard it suggested that it might be "M.A.", but the universities took a poor view of that, so what it will he remains to be seen.
However, there are more important reasons why I am anxious to see this Bill passed through its various stages without impediment. My noble friend Lord Windlesham has already mentioned quite a number of them. I welcome the proposal that there should be a standing advisory Commission on human rights. I recall that my friend in Northern Ireland, Miss Sheila Murnaghan, put forward a Bill of Human Rights in Stormont, but at that time it was felt that it was unnecessary and irrelevant. But if the Party which I represent had been in Stormont at that time I am sure that we should have supported her. However, I am glad it is coming up now.
So far as Clauses 17 to 24 are concerned, already quite a bit of action has been taken over any risk of discrimination in the public sector of employment. This is good, and I am glad about it, but I think the Alliance Party would feel that what has been done has by no means been before time: indeed, it could well have been done sooner and with more expedition. What seems now to be needed is swift action to make the private sector

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of employment consistent with the public sector. As I have said, already a structure has been formed; there is the machinery and this can be built on. But, important though I consider it to be, it is possibly even more important that it should be done in a sensitive manner. Discrimination has a different meaning in Northern Ireland from what it has in the rest of the British Isles, I am afraid. I suppose there are employers who deliberately decide, "I am not going to have a Protestant working in my firm", or "I am not going to have a Catholic working in my firm". I do not know any myself but I accept that there may be some. There are probably far more who, for geographical reasons, find their company in either a predominantly Protestant or predominantly Roman Catholic area, and for that reason most of their employees are of one religion or the other.
Then also there is the matter of convenience. A manager knows that if a certain climate of opinion exists in his company and his work force is predominantly Protestant, and he suddenly introduces into it a number of Roman Catholic workers, this may cause industrial unrest. He does not want that: he wants continuity of production. So where discrimination exists it is often circumstantial. The Northern Ireland Board of the British Institute of Management (of which I am a member) discussed this matter some little time ago, and whereas in principle we heartily welcomed any move to eliminate discrimination, we found it difficult to envisage how any measure could he drawn up that would not be too much of a blunt instrument. However, since then a report has been presented a few weeks ago and it may be that a formula has been found. I sincerely hope so, for I look forward to seeing action being taken on this problem.
I was presumptuous enough to be one of the first people in your Lordships' House to propose the Border poll, and I still think it is right that this should take place at periodic intervals. My original suggestion was for 15 years, and a minimum period of ten years has now been laid down. I still think that the important thing is that the Border should be taken out of Northern Ireland politics. The noble Earl, Lord Longford, said that
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things might develop in between the ten year polls which would cause injustice. I can only say that past experience does not indicate to me that this is likely to happen; and I think it would do much to get rid of many of the myths that at present drag down politics in Northern Ireland if the question of the Border could be settled for a ten-year period at least, so that there is no point in arguing about it in between. Let us get down to the practicalities and realities of the things that really matter, such as housing, employment, the economy, et cetera.
Power sharing has been another bone of contention. Again, it is rather a peculiar situation that we have in Northern Ireland. We should not have to look to any such compromise as this elsewhere in the United Kingdom. I can only say that power sharing is not perfect, but at least it is practicable, and if there were to be a bit of generosity—which is needed—I am sure we should make it work.
There is just one thing in the Northern Ireland Constitution Bill which I deeply regret. I did not contemplate tabling an Amendment, for two reasons: one, that I knew it was too late to do anything about it, and, two, that I did not want to impede the progress of the Bill. But what I deeply regret is the fact that it has not been possible to find, or it has not been thought fit to seek, any formula whereby the Office of the Governor of Northern Ireland could be continued. I know the explanation that has been given: that it is constitutionally impossible to have a Governor of Northern Ireland and a Secretary of State. I can only say that if one is convinced that something is right and one is determined to achieve it, there are ways of getting round any obstacle to it. My regret is multiplied by the calibre and personality of the noble Lord, Lord Grey of Naunton, who last occupied that office. The wit and wisdom of his public utterances, the understanding and profundity of his private counsel when one asked him for advice, was something the like of which I had never before seen, and perhaps never will again. He was a man dedicated to the welfare of Northern Ireland; he was a man loved by all his people and he was a real giant. Northern Ireland can ill afford

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to lose people of this calibre who are dedicated to its service.
Finally, I wish to move to my principal point. To your Lordships who live on this side of the water (as we call it) the Northern Ireland situation must frequently look depressing. This is an opinion that I have not been able to resist myself from time to time, but my morale is now a great deal higher. There were depressing features about the results of the Assembly election but there were also some very encouraging ones, if one went to look for them. My tame statistician tells me that 62½per cent. of the electors voting in the election voted in favour of candidates who were pledged, even if with some detailed qualification, to make the provisions of the White Paper work. So that means that there are quite a few of us around, and, apart from the quantity, one of the things that has heartened me most has been the quality of the people that I found working in the recent election. I speak, of course, from my own personal experience in my own Party.
I have found them to be an enthusiastic, dedicated, young and sizeable band of people—I say "young "; from their late teens to their middle forties would tend to be the average age. They have their own jobs to do, their own families to look after, but they have really got down to this election. Why? Because they want to see Northern Ireland pulled out of its present trouble. I was most encouraged by this. I have mentioned the necessity for generosity. I will practice what I preach and say that it is most likely that in the official Unionist Party, in the Northern Ireland Labour Party and in the Social Democratic Labour Party there are a great many similar young people dedicated to what I have just said. I am sure that although we do not agree with their views, in many ways we agree with their opinions as to what the end should be, although perhaps we do not always agree as to what the means to that end should be. That is why I have much more confidence for the future than I have had for quite a while. I think that with the assistance of such people we can make Northern Ireland work—in fact, we jolly well will make it
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work! That is the mood of these people. We will isolate the wreckers. We will make their efforts as unrewarding as it is for an aspiring heckler to go to a political meeting with a view to embarrassing the speaker, only to find when he gets there that that same speaker is receiving one standing ovation after another. We will make their efforts as ineffective as it would be to try to shout abuse at an aircraft carrier when it gets in the way of your 14-foot dinghy.
My Lords, I am most grateful—we are all most grateful—to the noble Lords, Lord Windlesham and Lord Belstead, for all they have done and are doing for Northern Ireland. We are also grateful to our right honourable and honourable friends in another place. So I say to-day that my morale is much raised, and in the light of what I have said, I would say to your Lordships, "Lift up your hearts." We can make Northern Ireland work, and, by Christ—I do not blaspheme; I speak deliberately and thoughtfully as a committed Christian—we will make it work.
4.32 p.m.
LORD LYELL: My Lords, how refreshing we must all find it, first of all, to hear the views of so many distinguished leaders and politicians from Northern Ireland—Lord Dunleath, Lord O'Neill, Lord Moyola, and the noble Lord the. Leader of the House who has done so much in recent months and years to help Northern Ireland. Secondly, it must give us all a great deal of satisfaction to discover the relative success of the recent elections for the Northern Ireland Assembly, because this Assembly was only suggested or outlined in the Green Paper of 1972. This Assembly was to be the creature of Northern Ireland alone because it is far more flexible than anything which could be imagined elsewhere in the United Kingdom. I think the Assembly will be able to make its own rules of procedure so long as the responsibilities with which it is entrusted can be carried out to the satisfaction of the people of Northern Ireland. But at the same time I think the most important clause of the Bill is that which sets out the responsibilities and duties of the Secretary of State for Northern Ireland. We must all pay tribute to our right honourable friend in another place who has still to search

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for solutions in what is completely unexplored territory. His guidance and tolerance will go a long way towards smoothing the problems which will appear during the first few months of the new Assembly's work. There are bound to be difficulties, since never before has such a complicated and sophisticated system of democratic institution been tried in the United Kingdom, or in precious few other countries in the world.
My Lords, all of us have been very impressed by the forbearance and good will of the people in Northern Ireland who have studied and listened to the scheme for proportional representation and who have then tried to make it work. No one can doubt there is a need to try new institutions where politics are so far removed from consensus policies, sadly approaching tribal and divided policies. It remains a mystery to many of us, when so many reasonable men and women strive to see that the Northern Ireland Assembly will work, that a substantial part of the Loyalist population are at the moment declaring their intention of making the Assembly unworkable. To those of us who have been relatively unfamiliar with the tricky currents of Northern Irish political waters, it is unbelievable that after so much effort, time, trouble and money has been spent by the United Kingdom Government, such relative political success can still be obtained by the extremists.
However, it is not our homes, our shops, our factories and towns which are being bombed and continually put at risk by a small minority of terrorists. We must have increasing sympathy with the people there. They look to some solution of this problem. I believe that the Members of the new Assembly could do a great deal not only for their own electors, but also for the population of the remainder of the United Kingdom were they to bring about some kind of reconciliation between the political leaders of Northern Ireland. It is this aspect of power-sharing which must succeed if Northern Ireland is to have any chance of extracting itself from the bleakness which now surrounds the life of the province.
My Lords, the noble Lord, Lord Moyola, drew attention to the problems of extraditing suspected murderers and
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terrorists. I wish to add my support to his comments. It is quite certain that nothing would brighten the prospects of co-operation between Eire and Northern Ireland more than the successful extradition of known terrorists. Sadly, there is at least one person that the United Kingdom courts in Scotland wish to extradite from the Republic, with not much success yet. As the noble Earl, Lord Longford, pointed out, he and I are the two outsiders in this debate—I am a lot worse, not being in any way Irish; I am proud to declare myself a Scot. At the same time, I take this opportunity of congratulating the noble Lord the Leader of the House and the Secretary of State for what they have so far produced for Northern Ireland. I think the good wishes of the whole of the United Kingdom must go out to the Members of the Northern Ireland Assembly as they seek for solutions to these new problems that are arising in that country. Let us hope that the gloomy prophesies of the noble Lord, Lord O'Neill, will not come true just yet, since I am afraid that I, too, fear the patience and tolerance of Englishmen, Scotsmen and Welshmen could be tested even so far as breaking-point. It seems quite clear that the success of the recent elections for the Assembly show the merest glimmer of realisation by the people of Northern Ireland that they cannot be expected to live again through the nightmare of the last four years. For our part we shall not fail the people of Northern Ireland. All we ask is that they will redouble their efforts to make the Assembly work, and that they will not fail themselves. My Lords, I add my support to the Bill.
4.38 p.m.
VISCOUNT AMORY: My Lords, we have listened to some wonderful speeches from noble Lords who know well the Northern Ireland problems and I would say only one word as one who dces not know Northern Ireland well, but feels deeply about this problem. I want to congratulate Mr. Whitelaw and his team, my noble friend Lord Windlesham, and all who have co-operated with them to enable them to bring forward this constructive measure.
My Lords, I should like to say how much I agree with the noble Baroness, Lady White, when she referred to the

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present much more helpful attitude in Dublin. I am sure that the new attitude of the authorities in Dublin makes us feel we are very fortunate in the restraint and moderation, and the personal attitudes on the part of both Mr. Lynch, when in office, and the present Prime Minister, Mr. Cosgrave. I think we were all deeply moved at the fine speech made by my noble friend Lord O'Neill, and for the hopeful note he struck in that magnificent speech. I am sure that all of us who are not in close touch with Northern Ireland would like to wish the noble Lord, Lord Dunleath, and his colleagues every passible success in the work that lies before them.
4.40 p.m.
LORD SHACKLETON: My Lords, this debate has moved rather rapidly, because, after all, it is not long ago that we debated the Government White Paper. I have very little to add to what I had to say on that occasion. I am glad that the noble Lord, Lord Windlesham, opened, because I have always attached great importance to our debates on Northern Ireland. I think it is important that this House should show that we are discussing matters of very deep importance to Northern Ireland and that senior Ministers should participate. I am glad, therefore, that he spoke, and it is no reflection on the noble Lord, Lord Belstead, when I say that I hope that the Leader of the House will continue to do so, except on those occasions when he lets the noble and learned Lord who sits on the Woolsack loose on an issue such as the subsequent and rather more controversial Bill, to which the noble and learned Lord will bring such great knowledge. Indeed, if I may say so, there have been some prophetic qualities about the speeches of the noble and learned Lord the Lord Chancellor, and since I do not intend to speak in that particular debate I am equally very glad that he is conducting that Bill.
There is always a danger, when bipartisanship breaks out or is established, that we appear to be far too self-congratulatory; and although it is satisfactory that there is a degree of agreement we ought not to suppose—and I am sure no noble Lord thinks it—that because there is harmony in this House we have as yet made much progress.
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Indeed, the history of the last few years, under successive Governments, but particularly, if I may say so, under the present Government, was a story of missed opportunities. I do not say this in order to spoil the bipartisan approach, but with a consciousness that until the noble Lord himself and Mr. Whitelaw appeared on the scene we were missing out very badly indeed. That is one of the reasons why we on this side attach such importance to getting a sense of urgency, a sense of urgency which I am sure rests in the minds of noble Lords and Ministers who are concerned with Northern Ireland.
We wish to strengthen their efforts, and it is for that reason that my noble friend Lady White emphasised that, so far as we were concerned, we would seek to get this Bill into law at the earliest possible opportunity. Although there are certain things that will have to be said in Committee, we want this Bill to be on the Statute Book, not because we wish the Government to behave in a precipitate way, but because we do not want (and I know the noble Lord, Lord O'Neill of the Maine, is conscious of this) to miss the tide if there is a particular opportunity. Therefore, in their judgment of the timing of the implementation of this Bill, we want the Government to have it in their pocket as an Act of Parliament.
I am sorry that my noble friend Lord Brockway is not taking part in this debate, because so much of what is contained in this Bill was urged by him on earlier occasions and resisted by us, by noble Lords, including myself. It is satisfactory that there are provisions which amount to some considerable extent to a charter of human rights, which will be supplemented by the Bill on private employment. I would not criticise the noble Lord, Lord Dunleath, whom we all admire, for the initiative and the decision he took, coming as he did from an historically Unionist family, moving across and into the Alliance Party. I do not know whether, as the sole representative of the Alliance Party in this House he hopes to gather others around him and possibly into his own Whip one day. Nevertheless I am bound to say that the difficulty about private employment, is that it is a fact—and I think he will agree that the majority of the employers in Northern Ireland have been largely the

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middle class and upper middle class, who have been more predominantly Protestant than Catholic. There is no doubt that industrialists, like the trade union leaders, have an important part to play. There is always the danger when one comes to discussing discrimination, of somehow feeling—and I know the noble Lord does not feel this—that this happens anyway, and that is what people tolerate. It means a consistent, a determined, fight of the kind that he and the noble Lord. Lord O'Neill, and others have made, to get rid of discrimination, the full extent of which, I must confess, despite a good deal of knowledge of Northern Ireland, I was certainly unaware.
We have had an interesting debate. I hope that the reputation of the noble Lord, Lord Moyola, has not been damaged by the inadvertent implication of my noble friend Lord Longford that he might be a latter day reincarnation of Loyola.
THE EARL OF LONGFORD: My Lords, I meant that he was loyaller than anyone else.
LORD SHACKLETON: I was thinking of Ignatius at that point. None the less, certain points of disagreement here and there did arise. I must admit that I, like my noble friend Lady White, am unhappy about Clause I and the requirement of a poll to be held not sooner than 10 years' time. It is noteworthy that when this was debated in another place there were some fairly strange alliances; the more strongly Unionist M.P.s there voted with the Labour Party against this provision on the ground that it was not worth the paper it was written on. Of course, to some extent—and I have to choose my words carefully—indeed, not merely to some extent, no provision of this kind can be entrenched; the important part of Clause 1 is that no transfer should take place without the consent of the majority of the people of Northern Ireland; and in a sense it is perhaps unfortunate to spell out the particular method of assessing this.
I accept that we shall pursue this matter in Committee and that a number of people in Northern Ireland—and we have to remember this all the time in dealing with the Irish situation—attach very great importance to it. Although I
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suspect that the noble Lord, Lord Windlesham, and other Ministers may have wondered whether this was in fact a good undertaking to give, they have given such an undertaking. At any rate, we shall be able to explore this at the Committee stage, though not necessarily by means of an Amendment. We shall want to consider that further. I stress this point about the consent of the majority of the people of Northern Ireland because, as my noble friend Lady White made clear, this has been constantly emphasised in recent years by the Government of the Republic. I agree of course that Mr. Lynch, in difficult circumstances, showed a good deal of courage in this matter, none the less, it has been reiterated with even greater force by the present Government of the Republic. I commend to noble Lords the interview that the Minister for External Affairs, Mr. Garrett FitzGerald, gave when he spelled out time and again that they did not want to bring the people of Northern Ireland into the Republic unless they were really willing partners. It depends on the consistent acceptance of this—and it will need to be repeated again and again by the Government of the Republic—if the deep, dark suspicions of the more extreme Ulster Unionists are to be overcome.
There are one or two aspects of the Election and the results about which we have grounds for regret. I am deeply sorry that the Northern Ireland Labour Party, to whom tributes have always been paid impartially from both sides of this House, did not do better. We are glad that the Alliance Party did as well as they did. The Northern Ireland Labour Party have followed a firm non-sectarian line, and their leaders, many of them young people, have shown great courage. I trust that they will accept that the great majority of Members of your Lordships' House hope that they will continue in the same way. The time may come one day in Northern Ireland—or perhaps within a different context, in a Republic or a European union—when we shall see something that conforms more closely to the pattern that we know in this country of a Labour Party, a Conservative Party —and, need I say, a Liberal Party? No, I need not say a Liberal Party. I was particularly interested in the points made by the noble Lord, Lord O'Neill of the Maine, about the importance of the name.

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Aided by the education that he received from the father of my noble friend Lady White, he emphasised again the great importance of getting this right. It is a matter to which the Government will no doubt devote attention. It will not be just a matter of no importance; it will be a matter of real importance.
My Lords, I do not think there is more that I need to say to-day, beyond referring to the point that my noble friend Lord Longford made about the Council of Ireland. No one has shown a greater interest and concern with Ireland than my noble friend. How far this is a consciousness of the ancestral guilt that many Anglo-Irish feel (perhaps less so in my Anglo-Irish family, because they were Quakers), I do not know; but his consistency in this matter entitles him on all occasions to press his views. I hope that the noble Lord, Lord Beistead, will be able to confirm that Clause 12—and after all, this is a Bill and not a White Paper—could be the vehicle, if discussions come to a fruition with the Government of the Republic, for some of the working machinery of the Council of Ireland. When we come to Clause 12 in Committee it may be useful to have some sort of a discussion on it, rather than attempt to explore the matter to-day. I repeat again that this is a Bill of the greatest importance. We hope that it goes rapidly into law, with the support of the great majority of the people in both Houses of Parliament—although with perhaps a declining support in the United Kingdom. I hope that at last there is a growing acceptance, as the noble Lord, Lord Dunleath, and others have pointed out, of the fact that, while I hesitate to say this is the last hope for Northern Ireland, this is certainly the best hope in the present generation. We shall look forward to the Bill's receiving the Royal Assent at the earliest possible moment.
4.55 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, NORTHERN IRELAND OFFICE (LORD BELSTEAD): My Lords, the significance of the Bill which your Lordships are debating today has already been amply demonstrated by the speeches which noble Lords have made during the course of this afternoon —and made by noble Lords who are all very much better qualified to speak on
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this subject than I am. It is a Bill of the highest importance, both to Northern Ireland and to the United Kingdom as a whole. It is a Bill which displaces the existing Constitution of Northern Ireland, a Constitution of more than fifty years' standing. It is this Bill in which we earnestly aim to provide a new mechanism for the successful government of this most important part of the United Kingdom. On behalf of my noble friend the Leader of the House, I am glad to be able to thank the noble Lord. Lord Shackleton, and the noble Baroness, Lady White, for their helpful remarks, and particularly about the forthcoming timetable.
I am sure that noble Lords will understand that, as only a fortnight has passed since the date of the Northern Ireland Election, I have no information to give this afternoon on the timetable for appointing the Executive, except to say that my right honourable friend will press on with discussions as rapidly as is prudent. My right honourable friend will, in the phrase of the noble Lords, Lord Moyola and Lord Dunleath. "do everything to try to make it work". As my noble friend Lord Lyell said. I think that all of us in this House would wish him and those who are going to form the Assembly and the Executive well, and not least the noble Lord. Lord Dunleath. Although the noble Lord is well versed in Northern Ireland affairs, there is one little hit of the small print that he has missed in the Bill he is already a candidate for his £2,500 per annum as a member of the Assembly.
My noble friend the Leader of the House has spoken of the outstanding difference between this Bill and the 1920 Act that it displaces. Some other means of government by consent really is required in Northern Ireland than the one that we have traditionally enjoyed in this country. This the Billl seeks to provide, but seeks at the same time not to tie the hands of those responsible for operating the new machinery of government. As my noble friends the Leader of the House and Lord O'Neill of the Maine emphasised, it would be wrong, for instance, for the Bill to seek to impose upon future generations in Northern Ireland any fixed formula about the membership of the forthcoming Executive. It would indeed nullify consultation with political interests in seeking to reach solutions about the Executive.

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When the noble Lord, Lord Moyola, and the noble Earl, Lord Longford, differ about the chief executive appointing his own Executive members, may I say that the noble Earl is perfectly right and interprets Clause 8 correctly. Appointments are the Secretary of State's appointments on behalf of Her Majesty, but it is implicit in everything that my right honourable friend has done to bring this Bill before both Houses that power sharing means consent, and consent will refer to selection rather than appointment, with which the Secretary of State will not try to dictate but will try to help.
This flexible approach to the future Government of Northern Ireland is the second central principle to which I would draw attention. In some places the Bill is complex, but the complexities flow from the Government's belief that it would be wrong to provide for formulæ and procedures which are too rigid and too inflexible. For instance, Clause 3 provides for the future devolution of additional powers on the Northern Ireland institutions or even for the transfer of the Northern Ireland Government's powers, in some cases, perhaps, back to the United Kingdom Government. And the Assembly is given a qualified power under Clause 5 to legislate on matters which are primarily "reserved" under Schedule 3 for the United Kingdom Government. This is, of course, a significant departure from the 1920 Act, and while Clause 6 maintains Parliamentary control over Assembly measures on "reserved" matters, I hope your Lordships might agree that the opportunity for legislation presented by Clause 5 is a constructive approach to the scope which the Assembly may achieve in the future.
May I say a very brief word about what the Green Paper called, The Irish Dimension? Clause 12 of the Bill is a simple provision providing that the Northern Ireland authorities will be able to join in discussions with their opposite numbers in the Republic and to introduce legislation, if that is necessary, to give effect to any agreements or arrangements which they may make. Because of its international aspect, the legislation is "reserved" and paragraph 7 of Schedule 3 has this effect so that Parliament may have an opportunity to consider such legislation before it is submitted to Her Majesty for confirmation.
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This clause is not, however, a provision for a Council of Ireland, although the noble Lord, Lord Shackleton, was perfectly right to refer to this clause in that context. It is a provision to enable the new Government of Northern Ireland to enter into sensible co-operation with the Government of the Republic. Whether any Council of Ireland should be established, or any other form of international institution, will be a separate matter which, as the Government announced in the White Paper, can be discussed at the conference which Her Majesty's Government propose to hold in due course.
THE EARL OF LONGFORD: My Lords, may I ask the noble Lord one question'? I gather that the Council of Ireland is generally understood to be set up without further legislation? Is that the position?
LORD BELSTEAD: My Lords, I think that that is the position, provided of course that it does not in any way need legislation. Of course, as soon as it needs legislation that becomes immedi-ately "reserved". Representatives of the Government of Northern Ireland and of the Government of the Irish Republic will he invited to that conference and will be invited to discuss there the three objectives which the Government set out in the Green Paper last autumn, which I do not think I need to repeat.
One of those three objectives was the basis for concerted action against terrorist organisations, and my noble friend Lord Mayola asked me a cluestion about extraditions. There have been 26 requests for extradition for offences of violence made to the Republic since the beginning of 1971. Of these 26, one is not being proceeded with by us, one man is in prison in the Republic and five have been arrested in Northern Ireland. Of the remaining 19. one has been discharged by a Republican court, 10 are before courts in the Republic contesting their return, and in 8 cases the R.U.C. are resubmitting their warrants. But in giving these statistics to my noble friend, may I also say, on the other side of the coin, that I, and I think my noble friend the Leader of the House, listened carefully to what the noble Baroness, Lady White, said about the very constructive approach which the Prime Minister of the Republic has taken in public and, in the words of

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the noble Baroness, this is something with which we would most certainly agree.
It is of course true that we must bear in mind that in the same Bill are included both Clause 12 and Clause 1. The Border issue was the dominant subject when your Lordships debated the Green Paper last December, and it occupied a little of the debate on the White Paper four months ago. Perhaps at this stage I may simply answer the noble Lord, Lord Shackleton, the noble Earl, Lord Longford, and the noble Baroness, Lady White, in this way. In his opening speech, my noble friend the Leader of the House referred to the Government's view expressed by my right honourable friend the Secretary of State on Report in another place, that we think it is right to include the pledge on the territorial status of Northern Ireland in the Bill.
The machinery provided by Schedule 1 may not be perfect, but it has two advantages. First, the ten-year period—which is permissive and not mandatory—will not necessarily coincide with Assembly elections; indeed, it almost certainly will not. So that the Border need not be a specific issue in a General Election in Northern Ireland politics. This is something which my noble friend Lord Mayola, with his long experience, mentioned in the debate on the White Paper and again to-day, as did the noble Lord. Lord Dunleath. Secondly, at the same time it could allow people to express periodically and in a constitutional form their views on the issue. As I said, I know that the arrangements may not necessarily be perfect, and doubtless your Lordships will want to look at this point again before the Bill goes very much further. But the Government believe that the provisions of Clause 1 and Schedule 1 are the best method that can be devised for advance. They remove uncertainty for at least ten years yet. at the same time, there is flexibility in that a poll will be held only if one is obviously wanted, and of course the final decision is reserved to Parliament as to whether a poll would be right.
Perhaps I might, in the few minutes remaining, say a little about human rights in Northern Ireland and the elimination of discrimination which has played a prominent part in your Lordships' con-
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sideration of these problems in the past few years. I think it is fair to claim that the Government have consistently recognised the crucial importance of this issue. The Green Paper last autumn observed that there was a wide body of opinion which thought that further provision was required in Northern Ireland, and commented that it was essential to incorporate in legislation provisions which would not only have a declaratory effect but be practical as well. That is why there was a Part IV in the White Paper and that is why we now have Part III in the Bill. Clause 17 makes it clear that legislation which discriminates on religious or political grounds will be prohibited, and even if such legislation is made under the provisions of this Bill it will still be possible to challenge it before the courts as being unlawful. And Her Majesty will have power to refer to the Judicial Committee of the Privy Council any Northern Ireland measure or draft measure which it appears may contain a discriminatory provision. Similarly, discriminatory actions by public bodies are prohibited by Clause 19.
In addition to this, there is the proposal to establish a Standing Advisory Commission on Human Rights in Northern Ireland. What I should like to make clear is that the Commission's hope is far more than just hacking up Clauses 17 and 19 of the Bill. The Government attach the greatest importance to this Commission, with its task of constantly surveying the existing protections against discrimination and of considering and recommending improvements both in practice and in the law. Finally, as we announced in the White Paper, the Government intend in due course to bring forward legislation to prevent discrimination in private employment in Northern Ireland, to which the noble Lord, Lord Shackleton, and the noble Lord, Lord Dunleath, have both referred.
Your Lordships may remember that a working party, with representatives drawn from industry and from the trade union movement, has recommended some far-ranging changes in the law and the establishment of a new agency to police them. I think it is fairly obvious from what both noble Lords have said, that the Government will consult the appropriate organisations in Northern Ireland with a view to bringing forward legislation

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on this matter. I do not know whether I am right, but it strikes me that it would be wrong not to bear in mind the steps which have been taken in the past, not least by both former Prime Ministers of Northern Ireland who are in the House to-day, to try to work towards an end to discrimination. But the important factor in the provisions in this Bill is that the prohibition of religious or political discrimination builds on, and does not supplant, existing legislation and existing bodies. Indeed, Clause 17 goes further and makes it clear that former Acts of the Northern Ireland Parliament and future measures of the Assembly shall both be tested against the criteria of Part III of this Bill. I hope that your Lordships will consider that these clauses are a step forward, and it is in that hone that I commend them to the House.
Perhaps I may say that in the speech in which the noble Lord, Lord Dunleath, made his position clear, and which I think very much interested the House, he expressed considerable regret about the departure of the Governor of Northern Ireland. Your Lordships will already know of the many tributes which have been paid to Lord and Lady Grey, and how rightly. Their departure from Northern Ireland is indeed a blow to people who are there; but, as has been explained before, the new constitutional arrangements for Northern Ireland really do not offer a place for an Office of the dignity and importance which we have come to associate with the Governor of Northern Ireland. Broadly speaking, my Lords, this is true. The functions of the Governor will be exercised by the Secretary of State; but, more than that, I think that political interest must now be taken by Westminster in Northern Ireland in ways rather different from those in which it has been taken before—for instance, interest, perhaps, in ways in which the Assembly will want to become involved in reserved matters. And, of course, Her Majesty will be identified more closely, if anything, with affairs in Northern Ireland not least because Royal approval is needed for every measure of the Assembly.
The noble Lord, Lord O'Neill of the Maine, referred to what he called nomen-
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clature. He is of course entirely right when he points to the significance of names, as the noble Lord, Lord Shackle-ton, stressed at the end of his speech. The Government recognise this in the Bill, although I realise from what Lord Shackleton said that there are probably still quite difficult problems ahead on this point. We have sought to provide titles which are appropriate to the new form of devolved government in Northern Ireland. The noble Lord, Lord O'Neill, mentioned some of the new terms; but it must not be thought that the new titles indicate a weak or unimportant Government in Northern Ireland. The Assembly and the Executive will have important responsibilities for what the noble Lord, Lord Dunleath, described as the things that matter—employment, housing, social welfare, the economy; and perhaps your Lordships will understand if I add education.
My Lords, my noble friend the Leader of the House was deeply involved with my right honourable friend in preparing this Bill with other Ministers after careful and prolonged discussions with the many interests in Northern Ireland. The noble Lord, Lord Shackleton, and his colleagues on the Front Bench and other Benches opposite have, I know, consistently given constructive advice in the many Northern Ireland debates over the last 15 months, and he and the noble Baroness, Lady White, have said to-day that, reserving of course any right to disagree on details, they and their Party share the convictions upon which the provisions of the Bill are based. Further, of course, your Lordships, many expert in Northern Irish affairs, have recognised in the speeches this afternoon the importance of the Bill which we are now debating. It is a Bill which is founded as far as possible upon an analysis of what the people of Northern Ireland themselves declare that they wish to have. Following Darlington and the Green Paper, there then came, of course, the White Paper, and this Bill has grown from that. As is consistent only with the urgency and importance of the situation with which we are to-day confronted in Northern Ireland, this Bill has been prepared and brought before Parliament with quite considerable urgency. As my noble friend explained, the considerations which underly the Bill and the principles to which it seeks to give effect,

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themselves represent the most deeply considered views of Her Majesty's Government. The Bill seeks to achieve a new constitutional framework within which people of different views may work, so that, after a tragic period in which so many have died, there may be a community in which all may be secure to live.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

EDUCATION (SCOTLAND) BILL
Brought from the Commons; read 1ª, and to be printed.

NORTHERN IRELAND (EMERGENCY PROVISIONS) BILL
5.15 p.m.
THE LORD CHANCELLOR: My Lords, I rise to move the Second Reading of this Emergency Provisions Bill. The other Bill which we have been discussing all afternoon is concerned with the future, and therefore, I pray, with hope. This Bill is concerned with the present, and therefore with desperate and urgent, present necessity. But both Bills have the same purpose: the substitution of peace and the rule of law for the disorder and the terror which now prevail. Your Lordships will observe that the present Bill has its genesis in the Diplock Commission. This Commission was appointed last year, in October, to consider what arrangements could be made for the administration of justice in the Province to deal more effectively with terrorist organisations, and particularly those who manipulate and contrive terrorism from a safe distance without themselves participating in the more dangerous activities.
The Commission originated in the desire of my right honourable friend to get rid of the old Special Powers Act, which had caused so much controversy and bitterness, with its provision for internment, which was thought to be a major obstacle to constitutional progress, and at the same time to use to the maximum degree possible the ordinary courts and normal legal processes in place of imprisonment without trial. This Bill will
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have the effect of achieving both purposes. It will get rid of the Special Powers Act and, following the advice of the Commission, it will repeal and reenact in a proper statutory form and with fresh safeguards the temporary Detention of Terrorists Order, which your Lordships will remember was introduced last December as a temporary and urgent measure pending legislation and following the Commission's Report.
My Lords, perhaps I may say this about the Commission itself. Its members are probably known individually to almost every Member of this House. My noble and learned friend Lord Diplock, Sir Rupert Cross, Mr. George Woodcock and Sir Kenneth Younger could hardly have been better fitted to command the respect of Parliament and the nation, not merely as the result of the wide range of experience they represent but also for the reputation each bears for an enlightened and liberal understanding of the constitutional basis of our liberties. The House and the nation owe to each one of them, and I think I should express, a deep sense of gratitude, both for their public spirit in accepting a difficult and unpalatable task and for the zeal with which they have carried it out, producing, as your Lordships will remember, a Report of ten chapters and an appendix between October 18, when their appointment was announced, and early December, when their Report was published.
The basic problem with which the Commission were confronted was formulated and identified in Chapter 4 of their Report, and they identified it as the problem of intimidation—the intimidation of witnesses and the intimidation of jurors. I hope to show that although some of the provisions can be justified and necessitated on other grounds as well each of the provisions of this Bill is related to the requirements of this central problem. All acts of terrorism, which the Commission defined as "the use or threat of violence to achieve political ends" are of course illegal, and they always have been illegal, under the law of this country and of every other civilised country. But the law of this and every other civilised country also provides for the minimum requirements to protect the individual against unjust conviction. These minimum requirements are set out in Article 6 of the European Convention on Human Rights.

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These requirements, however, are not always compatible with the suppression of terrorism in extreme situations. All civilised countries, including our own, also allow derogations from the minimum requirements in time of emergency, as is also recognised, by Article 15 of the Convention on Human Rights. And no one, I think, could doubt, and the Commission did not doubt, that the conditions justifying such derogation are present in Northern Ireland to-day. But as the Commission pointed out, where derogation is made from the minimum requirements, procedures before a tribunal which do not comply with Article 6 are not procedures before a court of law. The minimum requirements are based on the assumption which all legal processes demand, that witnesses to a crime will be able to give evidence in a court of law without risk to their lives, their families and their property. Moreover, the same assumption has to be made about juries if we are to prosecute offences effectively before our peculiarly British institution, the jury. Unfortunately—and I think this can be accepted—neither assumption can be made in the conditions in Northern Ireland to-day. Witnesses are being intimidated in one way or another; witnesses are being murdered. Even a year ago the noble and learned Lord, Lord Diplock, in his Report, gave one scarifying example which had taken place. Jurors have been terrorised. They are sometimes perverse, and many are actually afraid of the danger to their families and themselves or to their property.
Both the Diplock Commission in their Report and my right honourable friend the Attorney General, in introducing this Bill to the House of Commons, gave hair-raising descriptions of both types of intimidation. In these circumstances, I ask the House to agree that, practical considerations apart, it is unreasonable to expect witnesses to testify voluntarily, and morally wrong to try to compel them to do so. The same, of course, applies to jury service. Startling and poignant examples were given of intimidation of both witnesses and jurors alike in the Report of the Commission and by the Secretary of State and the Attorney General during the passage of the Bill through another place. But I am sorry
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to say that, owing to the lapse of time since April, the situation, particularly in regard to juries, but also as regards witnesses, has sharply deteriorated since the matter was first brought before Parliament, and this makes it urgently necessary that the Bill has a more rapid passage through this House than we had originally hoped.
The philosophy of the Bill can thus be stated in two propositions. In the first place we desire to use, and must use, legal processes as much as possible, but for this purpose, owing to the intimidation of jurors and witnesses, certain modifications of normal procedure are necessary. Nevertheless, we have stuck strictly to the requirements of Article 6 so that what is proposed remains at all stages and in all respects a civilised legal trial in which the charge has to be brought home to the accused. Secondly, we have been compelled to recognise, with the Commission, that extra legal procedures remain necessary in the disturbed situation that obtains. We think that we are right in not dressing up this extra legal procedure as a legal trial. We have sought to contain it within the narrowest bounds possible. We do not wish it to remain a moment longer than necessary. We have sought to engraft upon it the greatest possible safeguards against injustice.
The first proposition is embodied in Part I of the Bill; the second in Part II. But, before I embark upon a discussion of them, I should like to deal shortly with Clause I which abolishes the punishment of death for all forms of murder. This, as the House will be aware, was inserted in another place in Committee of the Whole House, on a free vote, but commended by my right honourable friend. Although my views on capital punishment are not precisely those of my right honourable friend, I too commend it on a personal basis, though if there is a vote here, which I hope there will not be, I shall personally vote for the clause as it is now embodied in the Bill. I hope that no one will say, as in a recent incident in this House, that by doing so I am departing from Government impartiality—because the vote will be an absolutely free vote, if there is one.
My reason for saying this is that, short of the imposition of martial law, or something like it, I do not think it possible

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morally to impose the death penalty anywhere in the United Kingdom for crimes in respect of which the right to trial by jury is taken away. I have already given some reasons for explaining why this Bill takes away trial by jury in respect of scheduled offences which include terrorist murders. It follows that I do not think death as a penalty for terrorist murders is, short of martial law, an acceptable penalty. Secondly, the effect of removing it for terrorist murders and leaving it for "ordinary murders" (if there is such a thing) would be to create two classes of murder in the province of Ulster and leave death for the one which is the less dangerous, and perhaps the less serious. I do not think this acceptable.
Thirdly, although I would recognise that the situation in Ulster is exceptional and may deserve exceptional treatment, in a matter affecting the sanctity of human life I do not think it acceptable to have two differing penalties for murder in two different parts of the United Kingdom.
Fourthly, it is the opinion of my right honourable friend that the actual execution of the death penalty in the special circumstances of the Province would be counter productive from the point of view of security in the Province. I must say that, so long as he has to bear his heavy responsibility, I think we must leave him to be the judge of this. Fifthly—and I am sorry to labour this but I feel bound to express my view on Clause 1—I do not wish this House to differ from the House of Commons in this respect, and I do not want public opinion in Britain to be divided crucially every time a convicted murderer is sentenced in Ulster. As a convinced supporter of capital punishment in principle, I am quite sure that this reasoning is conclusive.
I now return to the Government clauses in the Bill. It is obvious that special measures are necessary, indeed overdue. Nevertheless, my right honourable friend and the Commission have made, and intend to make, every effort to use due process of law and even, where this is impossible, to provide safeguards for the protection of the detained which are altogether different from and better than the protection afforded under the old form of internment.
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My right honourable friend would have liked to do without detention altogether. But neither he nor the Commission felt able to do so. May I quote the Commission in this connection? They said:
"The only hope of restoring the efficiency of criminal courts of law in Northern Ireland is by using an extra judicial process to deprive of their ability to operate in Northern Ireland those terrorists whose activities result in the intimidation of witnesses. With an easily penetrable border to the South and West the only way of doing this is to put them in detention by an executive act and to keep them confined until they can be released without danger to the public safety and to the administration of criminal justice".
My Lords, this is the object of Part II of the Bill and of Schedule 1 which repeals and replaces, with additional safeguards, the provisions of the Detention Order approved last December. Under these provisions, no suspected terrorist can be detained under the order of the Secretary of State for more than 28 days without reference to an independent, legally qualified commissioner who has to inquire into any case referred to him to see whether the person has been concerned in terrorism, and, if so, whether his detention is necessary for the protection of the public. That is two conditions, both of which must be fulfilled. My Lords, the procedure before the Commissioner is no mere formality. Of 538 persons referred by July 5, that is a few days ago, no fewer than 118 have been released. That is by no means the end of the matter, because if the Commissioner orders the detention of the person concerned, that person has the right of appeal to another independent tribunal which is presided over a former Lord Justice of Appeal, Sir Gordon Willmer, and two English Q.C.s, and that is no formality, either. I do not know the exact figures, but I think that they allow a quarter of the appeals in front of them.
Furthermore, after a year, and thereafter at six-monthly intervals, each case must be reviewed and the Secretary of State can review it intermediately. In each case the nature of the charge has to be served. I of course use the word "charge" in inverted commas in this connection. Usually the respondent has a right to be present and to give evidence, and to be represented, although the latter right may be suspended for adequate reasons which are defined in the

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Schedule. I do not see how, in the absence of a complete public trial, greater safeguards could have been introduced. We have done our best to ensure, so far as is humanly possible, that we have lived up to the prescription of the Commission when they said, and again I am quoting from the Report:
"If there is any process by which members of terrorist organisations can be identified with certainty, their detention in custody does not involve the punishment of an innocent man or even one who is called guilty of what could properly be called only a political crime'. It means depriving of his liberty, albeit by an extra-judicial process, a criminal who has committed an offence which has been punishable by the common law of England and Northern Ireland for upwards of two centuries before the current emergency arose."
My Lords, I turn now to Part I of the Bill, which is new. First of all, I must justify the necessity. Speaking as a lawyer, I must tell your Lordships that however carefully we may frame the safeguards, detention can never be a substitute for the ordinary process of law and this for two quite separate reasons. In the first place, it is vital, in my judgment, that where a crime can be brought home to someone, the terrorist, by persuasive evidence of the ordinary kind, it is vital that he should be tried for it in public, convicted for it in public and sentenced for it in public, in as nearly as possible the ordinary way, so far as the circumstances engendered by terror permit. Extra-judicial processes can lead to detention indefinitely, but they do not lead to punishment; and this is unsatisfactory, both in the interest of private liberty and also of public policy.
The second reason which I give is that given by the Commission when they said (and I agree with them) that however careful one may be in the imposition of safeguards, a process which is normally in private, a process which can exclude the accused from the hearing and can permit the possibility of denying to the "accused" the identity of the source of the information on which he is being accused,
"can never appear to be as complete a safeguard that none but the guilty will be deprived of their liberty as in the safeguard which is provided by a public trial in a court of law at which the actual witnesses can be produced in person and their evidence tested by cross-examination on behalf of the accused."
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It is for this reason that we must find, wherever we possibly can, a method of trial, despite the imposition of terror and intimidation, which conforms with the minimum requirements of publicity; the right of identification of witnesses; the scrutiny of evidence in examination and cross-examination in the presence of the accused which is required in every civilised country in the world. That is the purpose of Part I and your Lordships will see that it corresponds pretty closely to the Diplock recommendations. The object of those recommendations is to preserve the reality of public trials before the ordinary courts in every way so as to satisfy the full report and requirements of Article 6 of the European Convention, and with only the minimum departure from the more rigid requirements of English criminal law as it applies in Northern Ireland.
The case for the individual provisions of Part I are argued fully and in detail in the Report. But, my Lords, I think it right that I should summarise them in the few moments that remain. Before I begin on that task, I should like to make three general observations. In the first place, it will be seen that the provisions are temporary; indeed, almost the whole Bill is temporary. It will expire at the end of a year unless it is prolonged with the express approval of both Houses of Parliament. In the second place, the special provisions of Part I are limited in scope to those trials for the terrorist offences which are carefully limited and defined in Schedule 4 to the Bill. In the third place, I emphasise again that the whole purpose of Part I is to limit the use of detention, which involves imprisonment without public trial, to the minimum possible. Any abridgement of the provisions of Part I would, of course, result only in a greater use of detention than is necessary, because in each case, where any of them are used, they are used because with them cases can be brought in the ordinary way in the Northern Ireland courts which otherwise would have to be dealt with by extra legal means.
My Lords, Clause 2 of the Bill suspends trial by jury for the scheduled offences. This has been necessary because, even by the time of the Commission's investigations, trials by jury ware

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threatened with breakdown. Apart from actual cases of intimidation this, as the Committee explain in paragraph 36, was because only Protestant jurors tended to convict Catholics, and vice versa. In other words, quite apart from intimidation, a jury is in effect, or tends to be, either potentially biased or perversed; because, quite apart from the terror of intimidation, or potential intimidation, frightened jurors will more often fail to convict obviously guilty persons even of the opposite persuasion. I am bound to say that, according to the information I have here which is quite voluminous, the situation has deteriorated since the Commission's Report, which to some extent was prophetic.
The Commission recommended the substitution for jury trials, trial by a single judge; and, my Lords, the Government endorse that advice. At one time the Commons Committee recommended a collegiate trial by three judges. This has been expressly rejected, after consideration, by the Commission, and I will ask the House to take the same view. The reasons for the Commission's view are set out in paragraph 39 of their Report and I can personally endorse them. I want to put this delicately, because I have been told that if I say what I propose to say, I shall be thought to be casting doubt on the talents of the Northern Irish Bar, which I do not wish to do. It is, in fact, one of the few institutions in Northern Ireland which has worked without breaking down despite the fact that it is composed of members from each of the communities. But, my Lords, there are only 17 practising Silks at that Bar; there are only eight juniors of ten years' call, and there are, at the moment, enormous arrears of work for the Judiciary to complete. I could give details of that. The criminal arrears are rising spectacularly, and have been reduced only by allowing the civil work, which includes important personal injury cases and cases arising out of the situation of personal injuries compensation, to mount up beyond what is tolerable.
The Bench which has to be manned at present is composed of three Lords Justices who have to deal with appeals and cases at first instance because they go on assize, five puisne judges of the High Court and nine county court judges
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apart from the resident magistrates, and in my opinion it really would not be possible to man a collegiate trial of three judges for all the terrorist offences when one bears in mind that terrorist offences, as scheduled to this Bill, amount to 90 per cent. of the work at present coming on indictment before the courts of Northern Ireland. I hope therefore that I shall not be considered to be in the least derogatory or critical of the Northern Irish Bar if I simply say that the situation could not be contained with a collegiate trial, but I am bound to say that I agree with the Commission—and I am quoting from them again:
"that a single judge trial is probably certainly as good as and probably better than a collegiate trial".
They say:
"Our oral adversarial system of procedure is ill-adapted to the collegiate conduct of a trial of fact."
In other words, a collegiate trial is actually less satisfactory, and they give some reasons for thinking that, and I know that the Lord Chief Justice of Northern Ireland has reasons of his own for saying that a one-judge trial is likely to be more in the interests of civil liberties than a trial by three.
Clause 3 of the Bill restricts the right to bail. This is directly related to the intimidation of professional judges after the horrible murder of Mr. Stainton. Your Lordships will remember that absolutely heartbreaking poem by the child when the father was lying at death's door and ultimately died. It is obviously plainly indefensible to give judges or magistrates the discretion to admit to bail in these cases. It is plain to me, and to the authorities, that probably as a result of intimidation bail has been granted to alleged terrorists on trial in circumstances in which it would never have been given elsewhere in the United Kingdom. Speaking for myself, I cannot conceive of any ordinary case in which it would be proper to admit an alleged terrorist to bail, and the House will remember that neither in the Angry Brigade case here nor in the case of those accused of bombing the Old Bailey were the accused in fact admitted to bail. In effect, the conditions referred to in Clause 3(2) only make mandatory the status quo here in the use of discretionary powers.

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My Lords, Clause 5 makes witnesses' statements available in evidence if they have been made formally and if the witness is not available by reason of death or illness or non-availability, or if he simply disappears. The case for this is argued in paragraph 93 of the Report. It clearly reduces the incentive to intimidate or murder, and your Lordships will have fresh in your minds the terrible case of the murder of the bus driver spoken to by my noble and learned friend when we debated the matter some months ago; and the fact that evidence will not come before a jury but before an experienced judge unlikely to give it probative value greater than it possesses in the absence of cross-examination strengthens the case enormously. The rule is limited, as your Lordships will see, to signed statements by identified persons and the Report describes it as needed in the following words:
"A minimum but immediate alteration to meet the problem that witnesses to terrorists crimes may be killed or so injured as to be incapable of going to court, or may flee from Northern Ireland or go into hiding in fear for their own safety, with the result that it is impracticable to produce them to give oral evidence in court."
Clause 6 deals with admissions. This excludes admissions obtained by torture or inhuman or degrading treatment—and your Lordships will see that the burden of proof is upon the prosecution to exclude that—but admits other admissions subject to any adverse criticism going to its weight or reliability. This removes technical rules which have been interpreted by the Northern Trish courts perhaps even more rigidly than in England. The Commission reported here—and I agree with them:
"We consider that the detailed technical rules and practice as to the 'admissibility' of inculpatory statements by the accused as they are currently applied in Northern Ireland are hampering the course of justice in the case of terrorist crimes and compelling the authorities responsible for public order and safety to resort to detention in a significant number of cases which could otherwise be dealt with both effectively and fairly by trial in a court of law."
Possibly the most important of the changes in the conduct of the trial is contained in Clause 7, which deals with the onus of proof in cases where the gist of the offence is the possession of arms or explosives. I know that the Lord Chief Justice of Northern Ireland attaches
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great importance to this, as did the Commission, who indeed put it first in their list of desirable alterations under this head. My Lords, it is a technical matter, argued in detail in Chapter 8 of the Report, where examples are given of the ludicrous results which follow from a strict application of the present rule. The simplest case is where two or more persons are travelling together in a mini-car at night surrounded by bombs, guns or explosives. Since it is not possible to say with certainty which of the persons was in possession of the car or of the objects in it, each is entitled to an acquittal on the direction of the judge, without ever entering the witness box, on the ground that he has no case to answer. It really is rather extraordinary what muddles lawyers can sometimes get themselves into for want of a little common sense. A further and perhaps even more ludicrous example is given in paragraph 69 of the Report, and I ask the House to endorse the verdict of the Commission that it really is—
"intolerable that the scales should be weighted so heavily in favour of guilty men",
while
"so much suffering is caused to innocent citizens by terrorist use of firearms and explosives."
My Lords, I am aware that I have spent a little time on this Bill, but it does entrench very closely on human liberty and therefore I hope that your Lordships will be indulgent to me for my long-windedness. I do not think I need deal on Second Reading with the other provisions of the Bill, except perhaps to point out that a further safeguard is contained in Clause 26 by limiting prosecutions under the Bill to those instituted with the consent of the Northern Irish Director of Public Prosecutions and by Clause 30 which, as I said, renders the whole Bill, with few exceptions, temporary for one year only unless continued in force by the Secretary of State with the approval of both Houses of Parliament. My Lords, I beg to move.
Moved, That the Bill be now read 2ª.—(The Lord Chancellor.)
5.48 p.m.
LORD GARDINER: My Lords, the whole House will be grateful to the Dip-lock Commission for their Report and to

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the noble and learned Lord, the Lord Chancellor, for his careful explanation of it to us. We support the Bill in general and we believe that nearly all the proposals of the Diplock Commission, however draconian, were justified by the exceptional conditions in Northern Ireland. Perhaps the next thing I should say is that we also accept the need for this Bill to pass into law before the end of this Session. I was at one time a little apprehensive, when I observed that the Committee stage was intended to be taken on Thursday, the 19th, and the Report stage on Monday the 23rd, that we might be veering towards the European Communities' situation in which it was understood that there could be no amendment because there would be no time for the Bill to go elsewhere; but, as I understand it, there is a slot reserved in the other place if that became necessary. We hope, therefore, that if we have a few Amendments to put down they will receive the Government's careful consideration.
There are only four or five points which we should wish to raise. I personally, of course, would strongly support the view of the noble and learned Lord, the Lord Chancellor, on Clause 1. On Clause 2, I should, I think, say a word about a one-judge court or the alternative. We are persuaded by the Diplock Commission's Report that the case for not having juries is made out. The noble Lord, Lord Windlesham, will remember that when he moved a Motion on March 28 to improve the Government's White Paper I made a few observations then on the Diplock Report, and I said then that I should have preferred a judge and two legal assessors. The reason was really this. Ordinarily, I think a jury is better at saying who is telling the truth than one lawyer. They mix with all kinds of people. There can, of course, be a "crackpot" on a jury, but majority verdicts take care of that. In much the same way, I think justices of the peace, coming from different occupations, used to meeting different classes of people, all putting their heads together, are better at deciding who is telling the truth than one lawyer. I am hopeful that the noble and learned Lord the Lord Chancellor will agree with me that if one asks anybody who has been both a recorder (that is, a judge sitting alone)
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and a chairman of quarter sessions (a judge sitting with justices) which he prefers, he invariably says that he much prefers sitting with justices, because it is a great help to be able to talk something over, and so often the justices suggest points which would never have occurred to himself. It was for that reason that I suggested on March 28 that we should have a judge and two assessors.
The main reason why the Diplock Commission were against a court of more than one is given in paragraph 39 of the Report, where they say:
"In criminal proceedings, in particular, immediate rulings on admissibility of evidence and other matters of procedure have constantly to be made by the single judge when sitting with a jury. It would gravely inconvenience the progress of the trial and diminish the value of oral examination and cross-examination as a means of eliciting the truth, if a plurality of judges had to consult together, albeit briefly, before each ruling was made."
That was not at all what I had suggested. I was suggesting a judge who would rule on all questions of law, but who would have what I think would be the great advantage of being able to talk it over with the legal assessors.
Since then, my view has been supported by the Bar of Northern Ireland, who have said this:
"The Bar of Northern Ireland strongly recommends three judges and not a single judge as the composition of the court to try scheduled offences.
Reasons:

(i) The change from a jury trial to a single judge is too drastic and could undermine public confidence in the courts.

(ii) The three-judge court would spread the responsibility for decisions and accordingly reduce the risk of personal danger to individual judges.

(iii) The existence and efficient working of a three-judge court in the Republic would reduce criticism of the change from jury trial here.

(iv) Manpower difficulties should not be allowed to determine such an important issue and experienced resident magistrates and/or Queen's Counsel should be used, if necessary. In any event, non-jury trials should save a considerable amount of time."

Substituting one judge and two legal assessors for three judges, I should have thought was right; and that was what the other place in Committee decided. They threw out the one-judge trial and substituted a judge with two assessors. But with the assistance of the Government's Whips, the position was

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restored to a one-judge court on the Report stage of the Bill in another place. My Lords, I say no more than this: this is a point which we should wish to consider on the Committee stage of the Bill, as we have not seen this Bill and it is the first opportunity this House has had of expressing any opinion about it.
My Lords, the second point arises under Clause 5, which provides that a written statement may be put in evidence, although the maker of the statement is not called, if he,
"is dead, or is unfit by reason of his bodily…condition to attend as a witness; or he is outside Northern Ireland and it is not reasonably practical to procure his attendance; or all reasonable steps have been taken to find him, but he cannot be found."
All that seems to me to be quite justifiable. Then it provides for the same thing if the man is unfit to attend by reason of mental illness. I can see that if there was some supervening mental illness after he had made the statement there might be a case for that; but I cannot think it right that a statement, which cannot be cross-examined to because the witness is not there, should be used although the reason for his not being there is some permanent mental condition. In other words, putting it quite shortly, if the police knew that he was "bats" when he made the statement, it ought not to be admissible at all.
The third point arises under Clause 6, which provides that a confession may he put in evidence so long as it was not made when the accused
"was subjected to torture or to inhuman or degrading treatment".
Of course the reason why these words are chosen is that they are in the European Convention of Human Rights. That Convention, as your Lordships know, laid down certain requirements which those who are party to the Convention have to keep in relation to those in custody. Some of those obligations can be derogated from if there is a State of Emergency: and of course at all material times there has been a State of Emergency in Northern Ireland. But the one which, even in a State of Emergency, cannot be derogated from is if
"the accused was subjected to torture or to inhuman or degrading treatment".
I think that we are, as a country, getting into a little difficulty about this. The
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House will remember that at the time the Committee of Privy Counsellors were appointed to inquire into what I might call the Compton methods of interrogation (not of course invested by that Committee: and I mean only ascribed by that Committee)—that is to say, hooding, use of a noise machine, wall standing, deprivation of food and deprivation of sleep—we knew that the Government of the Republic had laid a case before the European Commission contending that the Compton methods of interrogation did amount to
"torture or…inhuman or degrading treatment"
within the meaning of the Convention.
We all thought that it would be most undesirable that we should express any opinion about that, because the United Kingdom Government's case was that none of those, separately, or all taken together, amounted either to torture or to inhuman or degrading treatment. It was not, as it turned out, necessary, so far as I was concerned, in any case to express any opinion on the issue, because, as I said—and nobody since has contradicted it anywhere—the Compton methods were illegal by the law of England and were illegal by the law of Northern Ireland. Therefore, once that was accepted, the Government's choice was either that we should introduce a Bill to provide that in emergency conditions a certain amount of ill-treatment not then legal was to be made legal, or to stop these methods of interrogation.
I was not very surprised, having regard to the difficulties presented by such a Bill, when they decided to stop these methods of treatment. But what Clause 6 means now, as I understand it, is that if a confession is obtained by deprivation of sleep, deprivation of food, the noise machine and wall standing, that will be admissible, because it is still, I take it, the United Kingdom's case that those methods do not amount to torture or to inhuman or degrading treatment. I cannot think that, even in the emergency conditions of Northern Ireland, that can be right. The police would of course be acting both illegally and contrary to instructions if they did this, because the Government have said that the Compton methods are not to be used again. One has seen reports—I do not know how

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reliable they are—that some of these methods are perhaps sometimes still used by the police: and I know that my noble friend Lord Stow Hill wants to say an additional word about this. I think that some better formula could be found. Moreover, this does not cover threats. A confession can perhaps sometimes be more easily induced by a threat to do something than by actually doing it.
There is this further point. If I remember rightly, in explaining what they had in mind the Diplock Commission made it clear that they did not envisage the use of physical violence. But one can certainly have physical violence which does not amount to torture, and if it does not amount to torture or to inhuman or degrading treatment, then the confession will be admissible though physical violence has been used.
Lastly, as to Clause 7, we fully accept that some such draconian law as this is necessary, where an article such as a gun is found in the possession or on the premises of the accused; and the mere fact that it is there—even though it was quite reasonable—should constitute a prima facie case for saying that he knew it was there. But this is not limited to articles found on his premises or premises which he occupies: it applies to any premises at all. Therefore, as I understand it, if a man goes into a public house—one where he often goes for a drink—and in some room in that public house there is a gun, there is a prima facie case for saying that he knew it was there and it will be up to him to prove the opposite. This illustrates again, I think, the need for having the best possible fact-finding tribunal, because I am afraid that there are on both sides in Northern Ireland men and women with a score to pay off; and it is not difficult to plant a gun and then inform the police. If the man is guilty he will tell a lie and say that he did not know the gun was there, and if he is innocent he will tell the truth and say that he did not know the gun was there, so that the difficulties of ascertaining the truth are obviously considerable.
Finally, if I may say so, I am very glad that the noble and learned Lord the Lord Chancellor is, going to reply, because I
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should be most grateful if he could help us on one point in particular. We have recently had a sad example of something which admittedly the Government did not explain in detail. We did not spot it, and we really passed it under a misapprehension; and we do not want to do that again. I refer to Schedule 1. Under the Bill, as I understand it, the case of whether there is interim custody will go before a commissioner, who may release the man or make a detention order. He may make a detention order in perhaps a border-line case, and the Secretary of State may think, "I am rather surprised that he made a detention order there," but he has power to release a man, either with or without conditions. He may say, "I will release him on conditions." One of the conditions may be that the man does not leave the town he is in without notifying the police, and so on. Then, some time later, there may be an informer of some kind, or at least the Secretary of State may be informed that the man has left the town, and he can then be recalled.
I do not at all complain of his being recalled without having had the opportunity to defend himself against the charge that he was in breach of conditions, but what I find puzzling is that, first of all, there does not seem to be any provision anywhere for his ever being able to test the question of whether he had broken his condition or not; or for instance, to prove that he had actually left the town. It was suggested by an Amendment in another place that he should be able to take this issue to the commissioner. The Government said—and I quite understand why, because it is the Secretary of State who releases the man, subject to conditions, and he is higher up of course than the commissioner—that it would not look right if, in effect, the commissioner was the court of appeal from the Secretary of State. I fully accept that; but surely there ought to be some way in which the man could contest the question of whether or not he had broken his condition.
The other point is this. In Schedule 1, paragraph 36(3) it is provided that—
"The Secretary of State may recall to detention a person released subject to conditions under sub-paragraph (2) above, and a person so recalled may be detained under the original detention order."

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I wonder whether the noble and learned Lord the Lord Chancellor could tell us what is meant by the words:
"may be detained under the original detention order".
It may be that the commissioner makes a detention order, and the Secretary of State thinks, "This is rather a borderline case and I do not know whether he should have made a detention order there. I think I will release him on condition; I can always recall him." So he releases the man on condition, and after three months the man is recalled. If only he had never been released at all, that man would have a statutory right to appeal from the commissioner's detention order to an appeal tribunal, but he has to do that within 21 days of the detention order being made, so he has lost that right and is in a far worse position than if he had never been released at all.
It would appear to me—although I may be missing something—that the Government have not really applied their minds to this question of recall. It may be that it was something which was thought of at the last minute and so the Secretary of State was given the right to recall a man on condition. I am not opposing that in the slightest; but nobody seems to have asked what exactly is the position of somebody who is recalled. A man in that position does not appear to be given any chance of showing that he never broke the conditions at all; his time for appealing to the tribunal has expired and he has lost that. I wonder whether the noble and learned Lord on the Woolsack will be able to help us on that point.
As I have said, we have not had an opportunity of considering this Bill before. We certainly support its Second Reading, and it does not follow that we shall put all these points down later as Amendments or that, if we do, they will be carried to a Division. It depends on what is said in reply both by the noble and learned Lord, Lord Diplock, now, and later by the noble and learned Lord the Lord Chancellor. Subject to those points, we support the Second Reading of the Bill, and I should like to make it plain that we do not intend to do anything whatever to hold up its passing into law this Session.
6.7 p.m.
LORD DIPLOCK: My Lords, this Bill is based in part upon the recommendations contained in the Report of the Commission of which I had the honour to be Chairman, and from which my noble and learned friend on the Woolsack has quoted so copiously in his remarks to-day. Seven months have passed since that Commission's Report was published and there have been developments in Northern Ireland since that time. Further, the Bill has been fully debated in another place and I have studied with care the arguments which have been marshalled there in criticism of some of the proposals of the Report. A few of them have been echoed by my noble and learned friend Lord Gardiner this evening. Those arguments were not partisan at all. They were imbued with a sincere endeavour to find how best justice and a fair trial could be preserved in the unhappy situation which still exists in Northern Ireland. I have some sympathy with some of the criticisms of the provisions of the Bill. It seemed to me that I owe an explanation to this House why it is that the events of the last seven months in Northern Ireland, the criticisms and arguments marshalled against some of the provisions of the Bill have not caused me to change my mind.
It is perhaps inevitable that a Report becomes known by the name of the Chairman of the Commission. But this Report ought to be called the CrossDiplock-Woodcock-Younger Report, because it was the unanimous Report of all of us. It may be that judges, because of their familiarity with crime, have a reputation for being rather "hawkish" on that subject. But my old friend, Sir Kenneth Younger, who is the Chairman of the Howard League for Penal Reform, is more likely to be numbered among the "doves" than the "hawks", and we all agreed that what we recommended was essential for the task which we were set.
The noble and learned Lord the Lord Chancellor has mentioned the genesis of this Report, of how when we started we hoped to find a way by which the procedure of the regular courts could be modified to deal with terrorist crime. Until I had been to Northern Ireland and

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seen what was happening, and talked to those concerned in the administration of justice, it was impossible to realise how terrorism could corrupt and ultimately destroy the administration of justice in courts of law. Witnesses risked their lives, families and properties if their identity could be guessed let alone their names known—guessed perhaps from the evidence they were giving. In the result, it was impossible to call to justice before the courts anyone in cases where sufficient evidence could not be obtained by police and army evidence, by confession, or by evidence by people whose safety could be guaranteed.
The courts of Northern Ireland have a reputation, and have maintained throughout these troubles a reputation, for impartiality which is remarkable in that country and reflects the greatest credit on those who sit in the seat of justice there. They will continue when, pray God!terrorist crime is over. They must continue day-to-day to deal with ordinary crime and with their civil jurisdiction. It is essential in the happier future that we all hope is coming for Northern Ireland that nothing will have happened which will sully that reputation. That is why we set ourselves a criterion not to ask regular courts of justice in Northern Ireland to adopt any procedure which fell short of compliance with the requirements of the Human Rights Convention.
There is the power to derogate from that in a public emergency which threatens the life of the nation. No one can doubt that that emergency is there, and that is why we have been driven inescapably (and how reluctantly!) to the conclusion that detention otherwise than as a result of trial in the regular courts of justice, must be retained. When this matter was debated in this House, I think in December, I said that I had satisfied myself from my own investigations in Northern Ireland that the risk of detention of an innocent man was indeed slight. At that time the Commissioners and the Appeal Tribunal were only starting to have experience of operation. I have had the opportunity since then of talking to one of the distinguished judges, and the former distinguished ex-Lord Justice, who have served on those tribunals. What I heard from them confirms the opinion I had formed and expressed in December.
I have already said that we came to
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the conclusion that only where evidence from police and army witnesses, or confessions, was sufficient was it possible to bring terrorist crime in the ordinary way before the courts of law. But if courts of law are going to try terrorist crime, even under those conditions, if requires jurymen free from intimidation and free from pressure. I gather that it is accepted on every side now that the time has come when the jury system must be replaced in the case of terrorist crime. It had not happened by the time we reported that:
"The jury system as a means for trying terrorist crime is under strain. It may not yet have broken down, but we think that the time is already ripe to forestall its doing so."
There was some criticism of that recommendation at the time on the grounds that it was not supported by the statistics of perverse verdicts. When I see a fire starting, and indeed we saw a fire starting then, I send for the five brigade not a statistician. What has happened alas!in those seven months that has passed has shown how unhappily right we were in our prophecy of what was likely to occur when Protestant terrorism began to grow.
May I turn to the substitute for jury trial, and the proposal of the Commission, which is accepted in this Bill, that trial should be by judge alone and not as some think—and I well understand their reasons—three judges, or two judges and assessors. The Commission gave anxious consideration to the alternative possibilities. We discussed the matter with great care with the Chief Justice, and I consulted other judges who would have to operate the non-jury trial. Even if it had been practicable in Northern Ireland to man three-judge courts, we should not have recommended that. The first question we asked ourselves was, what is the best way to be sure that the right decisions will be obtained? The opposition to the one-judge trial, if I may be permitted to say so, does not come from anyone with judicial experience of trying criminal or civil cases. Our procedure, oral and adversary, needs, as my noble and learned friend Lord Gardiner said, to have one judge in control of the conduct of the trial. It would be wrong to think that there is any analogy between our procedure and the Continental system, inquisitorial as it is, which has collegiate

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courts. It would be wrong to suppose that it has any analogy with appellate courts; and, if I may venture to say so, it would be wrong to suppose it has any analogy with a chairman of quarter sessions sitting with magistrates. His alone is the responsibility of summing up to juries. The matter on which he can get valuable assistance from magistrates is the most difficult thing of all, sentencing, and that under a jury system is done by judge alone.
Single judges are experienced in finding facts in civil cases, nearly all civil cases in this country to-day, where very important issues may be involved. In Canada and in the United States, or in those States where there is a power trial waive a jury in a criminal trial, trial is always by judge alone. Decisions of fact in criminal cases are easier to arrive at than in civil. In civil you may have great difficulty in deciding where the balance of probability lies—for that is the test. But in a criminal case all one has to ask oneself is: Is there any doubt that this man is guilty? And if the answer to that is, "Yes", then he is entitled to be acquitted. I had ten years' experience of summing up to juries, of listening to criminal trials. I cannot remember any one of them in which there was any difficulty in deciding which way the verdict should go; and after I had achieved experience in summing up to juries I do not recall any case where I was wrong in my estimate of what the jury would decide. In some ways the provisions of the Bill for trial by a single judge offer a safeguard which is impossible in trial by jury because there are provisions which require a judge, as a jury never can, to give a reasoned judgment, a right of appeal as of right to the Court of Appeal; and this presents in my view a safeguard which avoids all risk of injustice in the case —of trial by a single judge.
My Lords, may I add just this? It is in fact wholly impracticable to institute three-judge trials in Northern Ireland. It is a small Judiciary—numbers have been given; it is a small Bar, and of that small Bar two-thirds have been called since 1969, so that only one-third have more than four years' experience of practice at the Bar. Furthermore, if justice is to be done, just as
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you cannot, dare not, dilute the Judiciary, so too it is essential that there should be proper legal representation for the prosecution and in particular for those who are accused, so that even if we had felt that it was a narrow balance between single judge and three-judge trials, which we did not, we should have been compelled by practical necessity to say, "In Northern Ireland that is impossible". Naturally we had very much in mind the possibility of risk to judges. I consulted closely, and have since the Report was made, with the Chief Justice of Northern Ireland and he is satisfied that there will be no greater risk to judges than there is at present where the summing-up, the sentence, and often the decision to admit or to refuse a confession, have as great an effect upon the accused as they will have when the decision is his alone.
Finally, may I say on this point that though I would respect and pay attention to public sentiment in Northern Ireland, if there were such public sentiment in favour of a collegiate court, my own impression, from the sources that I have heard so far as the public is concerned, is that there is no strong feeling either way as to which way this new system of trial should operate.
My Lords. I shall probably not have an opportunity of being in this House at the Committee stage. May I deal rapidly with the other points which my noble and learned friend Lord Gardiner made? First as to evidence, the written statement, it is I think important to realise that trial will be by a single judge, and if any single judge paid any attention to any statement from someone suffering from mental illness I should be indeed surprised. May I say why "mental health" was added? There have been cases—and this is the result of terrorism where after the statement has been made to the police a nervous breakdown has followed from the fear that has been installed. That is why mental health was put in. Of course, no judge will give weight to any such statement. On confessions, I express no views about matters which may be under consideration in the European Court. I think those who have read the Report can gather by inference what our views were about certain conduct. May I say just this about threats? In the Report we referred to threats of

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torture, but we regarded it in the context of other inhuman or degrading conduct, and I personally would have regarded threats of torture as being within the expression, "inhuman or degrading conduct"; certainly so far as we were concerned it was intended to be included and it looks to me as if the Parliamentary draftsmen have taken the same view as we did in our Report.
Finally, on the possession point in Clause 7 I would point out that this is not making the possession of firearms in any sense an absolute offence. Its only purpose is to ensure that when there are firearms or explosives in joint possession —and this is so common in Northern Ireland because terrorists operate in groups—they will go into the witness box and give their explanation of why the arms or explosives were in their immediate vicinity, and if that explanation is satisfactory there is no danger that they will be convicted.
These are minor changes in the rules of evidence: rules which are peculiar to this country and are unparalleled in any other European nation. I am confident that these changes involve no risk of the conviction of an innocent man, and with human life and property so gravely at risk from terrorist crimes it is a small price to pay for the protection of those who are the victims. I fear that this Bill offers no solution to the basic problems of Northern Ireland—let us pray that the Bill which has just received a Second Reading may perhaps do that—but I believe that this Bill will make the position of innocent citizens in Northern Ireland, who represent the great majority, safer, without detriment to fair trial and without any damage to the high reputation of the Northern Irish courts.
6.32 p.m.
LORD STOW HILL: My Lords, my name appears upon the list of speakers but it appears after two Lord Chancellors and one Lord of Appeal, and before I rose to speak I wondered very much whether, in those circumstances, I should be able to add anything of use to what they would have said. Having listened to them, I felt still more doubtful as to whether I should venture to intervene in this debate. If I may say so, their speeches were admirable—the well-informed and well-documented speeches
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that we should have expected from them —and if I rise, one of the purposes of my so doing is to pay tribute to the noble and learned Lord, Lord Diplock, and his colleagues for their work in producing, in such a short time, the extremely valuable Report which in effect we are now discussing, embodied as it is in the terms of the Bill before the House.
That I wish to say, and I would add this. I think we must all have been very much moved when we listened to the sincere terms in which the noble and learned Lord expressed his feelings and his reactions when he visited Northern Ireland and acquainted himself at firsthand with the problem with which he and his colleagues were confronted. Speaking as a judge of enormous experience and distinction, he explained why he thought it right to do what in effect he has done—and I think he would agree with me about this—to decide to recommend to your Lordships, albeit for a very limited period, that in the exceptional circumstances with which he had to deal it was necessary to some extent to dismantle or render less effective those safeguards which over centuries we in this country have evolved largely for the purpose of ensuring that that nightmare of every lawyer does not take place—that an innocent person be convicted of a crime.
If the question before your Lordships in a sense is, and may be put, as follows: are the exceptional circumstances such as to justify a departure from the maintenance of those safeguards, I would most certainly and without any hesitation answer that question in the way in which the noble and learned Lord has answered it. But I know that both he and the noble and learned Lord the Lord Chancellor would wish that the Opposition, as is their duty, should investigate this question: whether in any particular respect the terms of the Bill depart further than is necessary in the exigencies of the existing situation from the maintenance of those safeguards for the administration of justice and the prevention of the conviction of an innocent person. As my noble and learned friend Lord Gardiner said, the Opposition clearly must examine, by appropriate testing and amendment, the various provisions of the Bill on which possibly doubts could be raised as to whether they go a little too far away from the maintenance of those precautions

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which we apply in the administration of justice in this country and which we have come to regard as essential.
My noble and learned friend said that I might wish to add to what he had said with regard to the wording of Clause 6, which deals with the admission of confessions or statements by an accused person, and he said that I might wish to add something to what he had already said with regard to the test required in that clause, namely the test whether the accused person had been subjected to torture or to inhuman or degrading treatment. If I may say so to him, he treated of the matter so fully himself that I do not think there is anything I wish to add. However, I hope noble Lords and noble and learned Lords will agree with me that perhaps those words are too widely drawn and it is at least desirable that we should think very carefully whether some words could be substituted by way of definition of the kind of pressures which are not to be exercised, which would limit to some extent the scope of the definition at present in that clause.
I am quite conscious of the fact that that clause, as it has emerged from another place, is now extremely carefully worded and delicately balanced, and if a confession is sought to be adduced as evidence then if there is some evidence that it may have been obtained by the kind of conduct that is described in the clause it will not be admissible unless the prosecution proves beyond reasonable doubt that it was not so obtained. The argument proceeds—and the noble and learned Lord, Lord Diplock, reminded us of it this afternoon—that supposing you have a case in which the confession is not excluded because it was obtained by that conduct which perhaps I may categorise as extreme pressure, nevertheless obviously it will not be regarded as credible by a learned judge, and particularly a learned judge sitting without a jury.
May I say that there is obviously force in that argument and I entirely accept it, but I still doubt whether it goes far enough to justify the words in the clause as it stands. I am conscious, of course, of the fact that they came from the European Convention on Human Rights; but they really are so extreme in character, so I
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would submit: "torture, inhuman or degrading conduct". I would put it for your Lordships' consideration that we should perhaps not draft our Statutes in such a way as even by implication to seem to give the impression that we will tolerate conduct falling short of that extreme conduct, but nevertheless being conduct of which we in this country would very strongly disapprove. My noble and learned friend Lord Gardiner gave examples of it. One might consider cases where the grossest deception is practised upon an accused person so as to bring pressure on him, but which nevertheless cannot be regarded as torture or a threat of torture, or as degrading or inhuman conduct. I quite accept the argument of the noble and learned Lord, Lord Diplock, that a threat of torture would presumably fall within the scope of the definition "degrading or inhuman conduct". If there had been a threat of torture this would result in making a confession inadmissible. I simply put the point as one which, in my submission, should be further investigated in Committee for the general reasons that I have given.
My Lords, my noble and learned friend referred to the question of majority verdicts. I do not know whether he did that, in a sense, to tease me because I think he knows how very much I personally dislike the idea of majority verdicts. I dislike them because I think if one alters the law so as to make it possible to accept the verdict of ten out of 12 people, one is pro tanto, perhaps not very much but to some extent, making it more likely that an innocent person may be convicted. The noble and learned Lord said that the dissident juror or jurors may be cranks. The reason given by those who supported that measure was that they might be cranks, or might have been got at by the sophisticated criminal. That is a change in the law which certainly I still dislike; because it is a provision which makes it more likely—I do not say very greatly more likely, but more likely—that an innocent person may be convicted. But it is after all now a permanent feature of our legislation. It is not one limited to a period of a year in a wholly abnormal situation such as that which obtains in Northern Ireland. It is the normal

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situation for which we legislate in this country, and we have enacted that as part of our legislation for good and all until Parliament may choose, as I hope one day it will, to amend the appropriate Statute. If we are justified in changing our legislation in that sense in normal conditions, I think it becomes much more easy to accept the view propounded by the noble and learned Lord, with which I personally identify myself completely and absolutely, that for a short period in these wholly abnormal situations in which juries and witnesses are intimidated we should dismantle to some extent the safeguards which we have erected in this country, and which have been erected in Northern Ireland, by our combined experience over the centuries to see to it no innocent man ever has the stain of a criminal conviction visited upon him.
My Lords, those I think are the points I would principally desire to make. I personally have very much doubted the wisdom of the recommendation of the Criminal Law Revision Committee that we should introduce into the criminal law the provision of our civil law making hearsay statements admissible in criminal cases. I opposed that proposal, and still oppose it. In criminal cases I think it is so essential that the jury or judge alone, if there is a judge alone, should have the opportunity of observing the witness who they or he, as the case may be, are invited to trust and in whom they must place their complete confidence if there is to be a conviction. Now, that provision, namely, that hearsay evidence is to be admissible in a criminal trial, is now introduced by this Bill on the recommendation of the Commission over which the noble and learned Lord presided. I accept it. I would not oppose it in the exceptional circumstances that one is considering and in relation to which the noble and learned Lord was making his proposal, but I still must say I dislike it. I am sure I speak with the assent of the noble and learned Lord the Lord Chancellor and the noble and learned Lord, Lord Diplock, and of my noble and learned friend Lord Gardiner when I say that I feel sure we all dislike a number of these proposals, but the situation is forced upon us. Lawyers must give way to reality and, faced, as I think we all are, with a possible breakdown of the whole administration of criminal law in
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Northern Ireland, we have to be prepared to go a long way to depart from that system of law which in the normal conditions in which I hope we still are in this country, we think is indispensable.
My Lords, as I have said, we wish to examine this Bill more closely in Committee although, of course, we entirely accept it must soon pass into law—and the sooner the better. For these reasons, I hope your Lordships will think it right to give to the Bill a Second Reading.
6.48 p.m.
THE LORD CHANCELLOR: My Lords, I am greatly indebted to all three noble Lords who have participated in this debate, both for what they said and for the way in which they said it, and if I do not say so again may I begin by thanking my noble and learned friend Lord Diplock for his most impressive speech which was listened to with rapt attention, and which, so far as I was concerned, carried full conviction. But if I may I will handle the questions one by one as they arise.
My Lords, I greatly welcome the acceptance of the noble and learned Lord, Lord Gardiner, of the fact that for the time being at any rate the jury trial has really become unreal. If in fact one has two warring communities—let us forget for the moment about terrorism, which is a very real fear to any juror—and one has the situation in which in order to get a conviction of a Catholic one has to have a Protestant jury, and if one wants a conviction of a Protestant one has to have a Catholic jury, and if one has a mixed jury they do not agree, I think that, quite apart from terrorism, this has become a farce and we have to stop it for the time being, much as we may adhere to jury trial in this country in conditions with which we are familiar. I had some startling figures to support what I have been saying, and even reports about the situation which obtained at particular Assizes recently. I do not quote them only because all the noble and learned Lords who have spoken have really recognised that the situation has come, and we need to pass this Bill into law in one form or another before the judges go out on Assize again in October, when the situation will, of course, be repeated with these enormous arrears in prospect.

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The noble and learned Lord, Lord Gardiner, then said that he would have originally preferred three judges. I know that that is not the view of the Northern Ireland Judiciary. I have tried to show why for practical reasons it is not "on" in the present situation, and the noble and learned Lord, Lord Diplock, has explained why in our system a single judge is, in his view, preferable. I would say only this to the noble and learned Lord, Lord Gardiner, about that. I personally like the thought, in England, of a judge and two lay people with him to judge questions of fact. I have not much experience of it outside the magistrates' courts; I do not think many of us have, because it does not take place much outside magistrates' courts. But I find this an attractive proposition in England. I do not have any affection whatever for a trial before three judges, except on points of law. When I say three judges, I mean three legal, professional judges. I find that a most unattractive proposition in any circumstances, especially on questions of fact.
The noble and learned Lord, Lord Gardiner, postulated a judge and two legal assessors. I think that that would have almost all the disadvantages of a trial before three judges without any of the advantages of a trial before a judge and two laymen. And I must just say this to him, only amplifying what my noble and learned friend on the Cross-Benches said. There are, as I think I said in opening, only seventeen Northern Irish Silks altogether, and only eight juniors of ten years' call. Everybody, of course, in that little community is known very well to everybody else, even the laymen. Of those seventeen Northern Irish Silks, fourteen are habitually used by the Director of Public Prosecutions to prosecute by rota. The remaining three, I think, specialise in defence, unless they do not go into the criminal courts at all. I really cannot see any advantage in putting any one of those fourteen or any one of those three on to a Bench with a High Court Judge and saying that this is preferable to trial by a High Court Judge. It seems to me to be unreal. If and in so far as you did it, I wonder how far you would be improving the security from intimidation of any one of those people on that Bench. You
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can provide for the security of a High Court Judge, who is identified and can be protected up to a point. But if you are a counsel defending or prosecuting, trundling round the Assizes and the county courts, I wonder whether, if you had given an adverse decision, you would be at all safe or free from danger if you were put on a tribunal of that kind.
My conviction is that once you have got away from trial by jury, for the time being, you had far better get to the only attractive—to me professionally attractive —proposition, which is a single judge giving reasons for his decision, exercising discretion about which evidence he believes and which he does not, and subject to the overall control of a court of appeal consisting of three judges, which can criticise his reasoning on fact just as much as his rulings on points of law. I do not hesitate to say that I prefer, in the circumstances of this Bill, in the conditions of the Province, the option which the Commission chose and which the Government have insisted upon in another place. I think it is the right option. We can, of course, discuss this further on Committee, if need be.
A further point was raised by the noble and learned Lord, Lord Gardiner —and I am taking his adverse points because I think it is on those he would like my answer. He criticised the provision in Clause 5 which dealt with mental illness, the admission of a signed statement by a person suffering from mental illness. I think it is a fairly unreal point. The reason we put it in was that which was given by the noble and learned Lord on the Cross Benches. Somebody who has been subject to terrorism can have a nervous breakdown, or appear to have a nervous breakdown, or a psychiatric condition which renders him quite incapable of giving rational evidence, and this is just as much a result of the terrorism as if he were rendered physically incapable by way of physical illness of attending the trial. In both cases I should have thought that one was justified in saying that that statement should be admitted before a single judge, for what it is worth or what he thinks it is worth, and to that extent the incentive to terrorism should be removed from the potential terrorist.
The noble and learned Lord then goes on to say, "But supposing this witness

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has been mad from the beginning; is he to be excused attendance and his evidence used?" We can, of course, consider this point further on Committee, if he feels it is of importance, but I would say two things to him which I think render the point an almost academic one. In the first place, there is the point, to which I will revert and which has been mentioned more than once already in this connection and in another, that when you are dealing with trial before a judge alone, as distinct from trial before a judge and jury, quite different considerations ought to apply when you come to consider the question of admissibility of evidence as distinct from weight of evidence. On the whole, we keep away from a jury, which is not accustomed to evaluate weight so cautiously as a judge, the things which might have emotional content but which have either been improperly obtained or which have not been duly scrutinised. A judge can, on the whole, apply his mind to weight by reflecting on the degree to which the reliability of the statement is affected by the fact that it cannot be probed by cross-examination, and he can also reflect upon the extent to which any impropriety in obtaining the evidence reflects upon its reliability.
That, of course, leads me to the question of Clause 6, which was mentioned both by the noble and learned Lord, Lord Gardiner, and by the noble Lord, Lord Stow Hill. I do not think I ought to attempt any expression of opinion as to what is inhuman or degrading treatment. That would be, under the Bill, a question for the courts of Northern Ireland. I share the respect for the Northern Irish judges which has been voiced by the noble and learned Lord, Lord Diplock. They have been appointed without regard to sectarian affiliations by successive Lord Chancellors. Some, I think, of the earliest were appointed before that régime came in, but, even so, without regard to sectarian affiliations, and they have maintained the highest traditions of their office in conditions of considerable difficulty. I do not at all accept the view that they would hold that what has been prohibited as a result of the Committee of three, of which the noble and learned Lord, Lord Gardiner, was a member, would not necessarily be within the terms of this clause. I do
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not express a view upon it. I know some of the judges concerned, and I doubt whether either they would admit evidence of that kind, or, if they did, they would pay any attention to its truth.
But, of course, what this clause is really dealing with is a situation which is very far removed from that kind of thing. These judges are great sticklers for the nicer points of procedure. Their Judges' Rules are dated before our own present Judges' Rules; they follow an earlier pattern of Judges' Rules. If you are to pursue them very exactly, being a police constable or perhaps a soldier on patrol, you really need to have a set of Law Reports about you at the time. It might be inconvenient, in the circumstances of the conditions in Northern Ireland, to carry that set of Law Reports about with you so that you could refer to the appropriate decisions in order to administer the caution at exactly the right moment of time. What this Bill is designed to do is not to admit confessions which have been procured by methods either near to torture, or by actual torture, or the threats of it; Clause 6 is designed to make admissible, but not necessarily to make acceptable, things which, under the Judges' Rules, might be excluded in a jury trial.
As the noble and learned Lord, Lord Diplock, pointed out in his Report, the very nice distinctions about what might conceivably be a promise of favour, or might possibly be a threat of disfavour, which have arisen in the courts, arose very largely in order to protect defendants in the old days from the handicap that they were under when they were not allowed either to give evidence on their own behalf, or even sometimes to have counsel or call witnesses. Therefore, they were quite unable to deny allegations of admissions when they were made by the prosecution. Even in England this is not universally thought to be a set of Rules which ought universally to be applied at the present time. If they are to be applied in England, the justification for them really rests upon the fact that juries have to judge these things, and when in fact you have a trial before a judge alone in conditions of terrorism, I am bound to say that I found the original arguments of the Diplock Commission's Report wholly persuasive, although I fully agree with the noble and learned Lord, Lord Gardiner, in his detestation

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of physical or mental cruelty, or degrading treatment.
Still on the same subject but turning to what the noble and learned Lord, Lord Stow Hill, said I think that it is important to use the actual words of the European Convention, and that for two very good reasons. First, we must make our law compatible with the Convention. The trials we give must not use different language, but must use the same language as the Convention. The noble and learned Lord, Lord Stow Hill, will reflect, I am sure, that if we retain the present form of words a person who claims to have been subjected to such treatment will still have his right of recourse to the Commission, even if the court took the contrary view. The court, in applying its view to the facts of a given case, will have regard to the fact that it is not a court of last resort in that sense.
I do not go the whole way with the noble Lord, Lord Stow Hill, in what I thought he was saying at the end of his remarks on that topic. I go along absolutely with the Bill and with the Convention, that evidence obtained by inhuman or degrading treatment or, worse still, by torture, ought to be altogether excluded. Not, as a matter of fact, because if it were admitted before a single judge it would necessarily alter the single judge's decision, because I think that the single judge, having admitted it, would probably be able to discount it for what it was worth, but as part of the campaign to stop that kind of thing going on at all. I would go along with the noble and learned Lord, Lord Stow Hill, about that.
But I think the bounds of what is intolerable go very much beyond inhuman or degrading treatment, and actual torture or the threats of it; they cover a wide range of improprieties of one sort or another, some of them slight and some of them not so slight. When such improprieties are committed. I am not prepared to say that before a judge alone it is altogether wrong to admit evidence, for what it is worth, which has been obtained by some kind of persuasion, or without administering a caution, or by some breach of a technical rule which renders it excluded in front of a jury. On the contrary, I think that an experienced professional judge is entitled to look
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at the evidence, to examine the circumstances in which it has been obtained—and, if need be, to report those responsible for obtaining it if he thinks it is a serious case for administrative or disciplinary action—but at the end of the day to ask himself, "Can this admission be relied upon as a statement of fact? How can it be relied upon, if at all?" Therefore, I am not prepared to say that the provisions of Clause 6 are not necessary in the terms of the Bill.
I am glad that the noble and learned Lord, Lord Gardiner, at any rate endorsed the principle of Clause 7. He asked me some questions about Schedule 1, and I have endeavoured to obtain answers of a kind in the short time I have had available. No doubt he will want to revert to this at the Committee stage. The point which he put to me was in fact a somewhat rarified one. I think that the actual circumstances he put to me are unreal and unlikely to occur. The actual circumstances he put to me were that the Secretary of State, on receiving the report of the Commissioner, thought, "This is a marginal case. I am surprised that he ordered detention, and I will therefore let the man out on conditions." I do not think that that can happen in the way in which it is presented, because before the matter goes to the Commissioner it has to be referred to the Commissioner by the Secretary of State as a case in which the man has been involved in terrorism, in the opinion of the Secretary of State, and that his detention is necessary for the protection of the public. If, in fact, the Commissioner then endorses that opinion, it is not likely that without supervening facts the Secretary of State will then say, "Well, I was wrong all along, and so was the Commissioner. We will let him out on conditions." I do not think that that is a real situation. What one is concerned with is supervening facts.
Of course the detainee, if he is released on conditions, can appeal against the original detention order at any time within 21 days. If he feels there is any doubt about the case, and if he is legally represented or advised—which he is entitled to be—that is the course which he ought to pursue. It is not uncommon in our penal law, where a person is recalled from a sentence—although of

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course this is not a sentence—to leave the executive decision as final, and not as one which was to be subjected to the independent scrutiny of a court. When you are dealing with the recall of a detainee or, in our penal treatment, of a convicted man, you are not dealing with an innocent person; you are dealing with somebody who has been the subject of a detention order (if need be on appeal), because he was a terrorist and had been involved in terrorist activities, and because his detention is necessary for the protection of the public. When you are dealing with such a man I do not feel that you ought to deal with him in quite the same way as if the order had not been made in the first place.
On the other hand, the noble and learned Lord will see that there is in the Bill provision for reference at any time to the Commissioner by the Secretary of State, even if the period of a year has not elapsed. It may be that if there was a challenge of fact as to whether the conditions had been broken in the way suggested, the Secretary of State would think it right to refer such a case. Whether he should be compelled is a narrow subject which we may have to discuss further.
I have taken a good deal of time in this debate on the Bill. I am very much encouraged indeed by the reception which it has received. I cannot pretend enthusiasm for it, but I am very much encouraged by the fact that its necessity has been so widely recognised.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

APPROPRIATION (No. 2) (NORTHERN IRELAND) ORDER 1973
7.11 p.m.
LORD BELSTEAD LORD BELSTEAD rose to move, That the Draft Appropriation (No. 2) (Northern Ireland) Order 1973, laid before the House on June 12, be approved. The noble Lord said: My Lords, the purpose of this Order is to authorise the issue from the Northern Ireland Consolidated Fund of sums to meet the balance of the Estimates for 1973–74, and three amounts which arose as ex-
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cess Votes in the 1971–72 financial year, which are shown in Part I of Schedule (B) and which have been considered and cleared by the Public Accounts Committee at Westminster. The total amount of the Estimates for 1973–74 is £561,551,000, of which £203,630,000 was appropriated on account under the Appropriation Order which was agreed to in this House on April 10 last. I should mention that the Estimates were compiled some six months ago and do not reflect any changes which will arise out of the revised constitutional proposals for Northern Ireland which we have been debating this afternoon. However, the details of the Estimates are as set out in the Order and in the Estimates Volume, which is in the Printed Paper Office. Comparison with the figures for 1972–73 shows that this year's total is some £95 million higher than last year's, but of this approximately £60 million results from local government reorganisation. So that this sum represents purely a transfer of expenditure within the public sector. This Order has also been fully debated in another place. Perhaps it is the wish of the House that I say no more, but I shall be happy to answer any questions. My Lords, I beg to move.
Moved, That the Draft Appropriation (No. 2) (Northern Ireland) Order 1973, laid before the House on June 12, be approved.—(Lord Belstead.)
LORD SHACKLETON: My Lords, this is a matter which would not normally be debated in your Lordships' House at all. Clearly, it provides an opportunity for querying certain aspects of expenditure and could give rise to important discussions on the conduct of affairs in Northern Ireland. But unless any of our Northern Irish colleagues who know the situation wish to join in, I do not see very much point in my raising matters on this Order. But I should like to ask the noble Lord this question, and if he thinks it is too hypothetical I shall not press him on it. It may well be that this is the last time that we shall see a Draft Appropriation Order of this size. This is almost the equivalent of a Budget and if the Assembly and our work earlier in the day are successful, many of these matters will not come before Parliament but will be dealt with in the Northern Ireland

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Assembly. It may be that the noble Lord is not in a position to answer, and he may prefer to think about it and tell us about it on another day—it may even be at a later stage of the Northern Ireland Constitution Bill—but I should like to be told something about the control of finance from the Parliamentary end. This is a matter which has been dealt with in another place and it is not particularly appropriate for us—not because of a lack of interest, but because of our general role in the Lords—to go deeply into it.
LORD BELSTEAD: My Lords, I believe that the noble Lord, Lord Shackleton, is right. An Order of this size will not be seen again at Westminster, because although a Consolidated Fund of Northern Ireland will continue under the Constitution Bill, it will of course be considered in the Northern Ireland Assembly. If, by chance, I have made a mistake in answering the question in that way, I shall attempt to put it right when the House next considers Northern Ireland business on Monday of next week. But I am fairly sure that the noble Lord is right and that my answer is correct.
On Question, Motion agreed to.

ENTERPRISE ULSTER (NORTHERN IRELAND) ORDER 1973
7.16 p.m.
LORD BELSTEAD LORD BELSTEAD rose to move, That the Draft Enterprise Ulster (Northern Ireland) Order 1973, laid before the House on June 19, be approved. The noble Lord said: My Lords, the purpose of this Order is to establish on a statutory basis a direct labour organisation in Northern Ireland as one of a number of steps being taken to combat unemployment. The new organisation, which will have a life of at least five years, will carry the name of a successful non-statutory pilot project, Enterprise Ulster, which will be run by a board drawn from the community at large. We owe a debt of gratitude to those who have been running the non-statutory pilot project so far. This body will now be charged with the task of creating employment in Northern Ireland by promoting work of —in the words of the Order—environ-
724
mental, amenity, cultural, community or social value. It will thus not only be offering those at present unemployed the prospect of steady jobs, but, by enhancing the environment, should improve the quality of life for everyone in Northern Ireland. In other words, it is envisaged as a true community enterprise.
May I draw the attention of the House to one article only—Article 4—although I shall of course attempt to answer any observations or questions from noble Lords. That is the heart of the Order and it sets out the objectives and functions of the new body. The necessary powers have been drawn in such a way that Enterprise Ulster will have the flexibility to exploit employment opportunities as they arise in the fields of activity defined in the Order. Its main role will obviously be that of a large employer—recruiting, training and, above all, providing steady employment for men who would otherwise be unemployed. It should also constitute a valuable source of trained labour for industry. However, in addition to undertaking work directly itself, it will be able to give assistance, financial or otherwise, to bodies which wish to carry out schemes of work in the amenity field and in so doing to create employment. The Order deals with other things which Enterprise Ulster can do. It can delegate work and it can also indulge in research. It is in the spirit of the wide and flexible powers which Article 4 gives to Enterprise Ulster, to enable it to tackle effectively the problem of unemployment in Northern Ireland, that I commend the Order to the House. My Lords, I beg to move.
Moved, That the Draft Enterprise Ulster (Northern Ireland) Order 1973, laid before the House on June 19, be approved.—(Lord Belstead.)
7.18 p.m.
LORD SHACKLETON: My Lords, we wholeheartedly welcome this Order, which perhaps ought to be called Public Enterprise Ulster. One of the ironies about the noble Lord, Lord Moyola, and others who have operated in Northern Ireland, is the extent to which the Unionists were prepared to go in for Socialist solutions which would otherwise be regarded as a deplorable interference with private enterprise. Here is a quite striking example. The direct labour system has in the past been condemned

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by Conservatives as an inefficient and expensive way of doing things, but I am very gratified to see that when confronted with the realities of Northern Ireland Ministers rise above such prejudices—perhaps prejudices are less on the Government Front Bench in this House—and adopt a proposal which I think is clearly in the interests of Northern Ireland.
I am just a little worried at the extent to which more is expected of this Order than in fact will be achieved. I should like to pay tribute to those who have pioneered the pilot scheme; and it is extremely important that the enthusiasm which one will find in a scheme of this kind should be given full scope and that the Government and, it may well be, the new Assembly—we have not got any Assemblymen left here; our one Assemblyman has gone—should ensure that there is real continuity in this matter. I have always been inclined to think that both sides, politically, have on occasion attached too much importance to one particular type of ownership as opposed to the motivations which go into it. Clearly you will get an enthusiastic, driving public enterprise of this kind, and clearly the enthusiasm in the remarks of the noble Lord, Lord Belstead, will be reflected in those who are going to run this very interesting experiment.
Even so, there have been one or two criticisms that it will be impinging on the field of private enterprise, and obviously there is a danger that, gradually, it will be found that in certain areas individual contractors and others will say, "We can do it more cheaply". It is important that they should have a really good run at this. Perhaps the noble Lord can tell us how far they will be able to discharge their training function as a reservoir for industry. I am not quite clear. They talk about recruiting from the unemployed. I am not sure how far there will be skilled activities. Clearly a certain amount of the work will in fact be labouring, which calls for skills to-day —the operation of machinery and so on. I also notice there are powers to do research. Altogether it is an ambitious project, and one which I am quite sure we all wish well. I hope that it will also be able to build up enough good will in Northern Ireland to be regarded as something in which people have pride in the same way as they have
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pride in various public and voluntary bodies; and that they will in fact succeed also—this is quite obvious, and I think must be implicit in what is proposed—in working with other organisations, whether they are local authority, Government or volunteer organisations. A great deal of the work on the amenity side will not bring them against amenity organisations —naturalist trusts, conservation volunteers and so on—but they may be able to lend great strength. We know that the conservation volunteers are doing a great deal of work in this country, but obviously a certain under-pinning by a public authority, perhaps bringing skilled men and machinery into helping to clear a particular area, could be very valuable indeed.
My Lords, the noble Lord need not reply to my earlier teases if he does not want to. I say only that we strongly support this proposition and certainly wish the new Enterprise Ulster a great deal of success and a very long life.
7.24 p.m.
LORD BELSTEAD: My Lords, I am grateful to the noble Lord for the interest which he takes in being here when both these Orders are introduced at the end of what, for him, has been quite a long day. Perhaps I could answer the noble Lord in this way. The estimate, of course, is that the future of Enterprise Ulster, as seen at the moment of introducing this Order, will be five years, for which £15 million has been earmarked. I would hope that the Article in the Order providing for reports to go to the Assembly will give some continuity—the thing which the noble Lord put his finger on—and will show people who are in public life in Northern Ireland how Enterprise Ulster is getting on; and, if they feel that certain things are perhaps not going along the lines that they hoped they would, this will be seen from the reports.
Lastly, on the specific points which the noble Lord made about a training function and also getting on with other people who are in the same field, perhaps I could draw the noble Lord's attention once again to the power which Enterprise Ulster will have under, I think it is, Article 4 to give help to other organisations which are working in the same field. I think the sort of thing which is envisaged is where Enterprise Ulster might wish to grant aid—and this can be

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up to 50 per cent.—to a voluntary body like, for instance, a tenants' association, which might well have plans but not the financial resources to get them started. On the other hand, Enterprise Ulster might want to go into co-operation with a local authority carrying on direct labour; and in this sense, not only will Enterprise Ulster have enough powers to see that it can get on in sensible cooperation with other people working in the same field, but it will also be able to bring to bear its good offices to improve the training and expertise of those who are working in environmental work. I hope that, with those few words of explanation, the House will agree to the passing of this Order.
On Question, Motion agreed to.

(Formerly ANTI-DISCRIMINATION BILL [H.L.])
7.27 p.m.
THE LORD CHANCELLOR: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Sex Discrimination Bill, has consented to place Her prerogative and interest so far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.
BARONESS SEEAR: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3£. —(Baroness Seear.)
LORD SHACKLETON: My Lords, before we leave the Bill, I think we should congratulate the noble Baroness, unless she is going to make her speech on the Motion, That the Bill do now pass. Perhaps she is, in which case I shall sit down again. But if she is not, I think
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we should congratulate her. I believe she has had a bit of help from us all; and I hope that this will be a firm encouragement to the Government to do at least as well as, if not better than, we have done in the case of this Bill.
BARONESS EMMET OF AMBERLEY: My Lords, may I, from this side of the House, echo what the noble Lord from the Front Bench opposite has just said? We on this side are also delighted to hear that the Bill is now about to be passed.
BARONESS SEEAR: My Lords, that was as agreeable as it was unexpected.
On Question, Bill read 3ª.
An Amendment (Privilege) made; Bill passed, and sent to the Commons.

  WELSH NATIONAL WATER AUTHORITY
  WELSH NATIONAL WATER AUTHORITY