Sitting of 22 July 1974

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    TORQUAY MARKET BILL [Lords]
    Read a Second time and committed.
ORAL ANSWERS TO QUESTIONS
  ENERGY

    Offshore Oil and Gas
    Mr. Pardoeasked the Secretary of State for Energy what is the projected rate of return on capital for each of the oil and gas fields that are currently being considered for development, and those already being exploited, around the United Kingdom.
    The Secretary of State for Energy (Mr. Eric G. Varley): The purpose of the measures I announced on 11th July was to secure a fairer share of profits for the nation while leaving the oil companies a suitable return on their capital investment. But it is not possible to estimate with any certainty the detailed figures requested by the hon. Member.
    Mr. Pardoe: I thank the right hon. Gentleman for that reply. Is his Department doing any work to try to ascertain the answer to the question which the right hon. Gentleman does not appear to have? Does the Minister accept that, even under his current proposals, the rate of return may be as high as 65 per cent? Does the right hon. Gentleman not agree that, far from nationalisation being the answer, the real solution lies in having a tax structure tailored to each field which will allow no more than 25 per cent. profit?
    Mr. Varley: We are entering into discussions with the oil companies, and it is not possible or wise at this stage to lay down what we regard as a reasonable rate of return. It will vary substantially according to the price of oil and the value of the field, but the profit could be as much as 60 per cent. to 70 per cent. if nothing were done.
    Mr. Patrick McNair-Wilson: Does the right hon. Gentleman realise that, regardless of the rate of return, a dangerous myth is being circulated that North Sea oil will solve Britain's economic problems? That is not likely to be the case. It will not be cheap oil, and it will not save Britain from taking the really hard decisions that will have to be taken if our economy is to survive.
    Mr. Varley: It is true that North Sea oil will not be an answer to all the problems of Britain, but it will be a valuable asset. In terms of trade and balance of payments, the return from the oil will be enormous. It depends how we use this opportunity.
    Mr. Alexander Fletcherasked the Secretary of State for Energy what are the reasons for the current slippage in exploration and production targets in the North and Celtic Seas.
    The Under-Secretary of State for Energy (Mr. Gavin Strang): I am unaware of any slippage from exploration targets. On production, I would refer the hon. Member to the reply I gave to the hon. Member for South Angus (Mr. Bruce-Gardyne) on 5th July.
    Mr. Fletcher: In view of that statement, will the Under-Secretary state what is the relevance of the Government's participating in the oil business? I take it from what he says that he is quite satisfied with the way in which the oil companies have carried out jobs in the North Sea and Celtic Sea. What reason have the Government to interfere in exploration as well as development?
    Mr. Strang: My right hon. Friend spelt out clearly the objectives of our North Sea policy. I ask the hon. Gentleman to discriminate between the mechanics of getting the oil out and the State's responsibility to secure an adequate share of profits and control of this basic national resource.
    Mr. Sproat: Will the Under-Secretary accept that future slippage may be caused by a lack of housing in the North and North-East of Scotland? Is the Under-Secretary aware that a report out last week by the Joint Regional Planning Advisory Committee and Aberdeen University said that unless there is more drive behind housing projects in the area, many oil-related expansion plans would have to be postponed or cancelled?
    Mr. Strang: I agree that there is an urgent need to increase house building in the Aberdeen area. This is a matter for my right hon. Friend the Secretary of State for Scotland, who is giving it high priority.
    Mr. William Hamiltonasked the Secretary of State for Energy if he is yet ready to make a full statement on the Government's policy on North Sea oil.
    Mr. Ioan Evansasked the Secretary of State for Energy what proposals the Government will make to bring the North Sea and Celtic Sea oil and gas interests into public ownership.
    Mr. Wrigglesworthasked the Secretary of State for Energy if he is yet ready to make a full statement on the Government's policy on North Sea oil as it relates to the North of England.
    Mr. Varley: I would refer my hon. Friends to the statement I made in the House on 11th July. I reiterate the Government's intention of ensuring that the regions in need of development will receive particular benefit from the exploitation of our indigenous petroleum resources.
    Mr. Hamilton: In view of the almost instant hostility to that statement in some parts of the House, notably on the Opposition benches, will my right hon. Friend say what the reaction has been in the country, and particularly in Scotland, since Scotland is most directly affected by these policies?
    Mr. Varley: I believe that the statement has been widely welcomed, particularly in Scotland, where people realise that they will get a proper benefit and a proper share only by the policy that I have outlined.
    Mr. Tom Boardman: Does the Secretary of State, if he takes a maximum controlling participation, intend to entrust the management of these large funds to the oil companies, or does he intend to assume for himself the ultimate responsibility for the management of these highly technological projects?
    Mr. Varley: The British National Oil Corporation will co-operate with management in the existing oil companies. There will be understanding and the closest cooperation between the Gas Corporation and British Petroleum in this respect.
    Mr. Evans: Does my right hon. Friend realise that although his statement was welcomed there is a body of opinion which feels that we should have gone further and which hopes that he will go further in future? Does he believe that the oil and gas finds off the coasts of Scotland, Wales and England should be developed for the people of Britain as a whole and not for selfish commercial interests or for the benefit of one section of Britain?
    Mr. Varley: I agree with my hon. Friend. When oil comes ashore—as it will—from the Celtic Sea, comparable arrangements will be made in Wales to those that we are making in Scotland.
    Mr. Grimond: As for participation, as outlined in the document, has the right hon. Gentleman made any estimate of the cost of this participation? For instance, on the assumption that 51 per cent. in future licences and 51 per cent. in past licences is taken by the Government, what is the total amount of capital that will have to be put in?
    Mr. Varley: I cannot say at the moment because we are entering into discussions with the oil companies as soon as possible, but the Government's return on any investment will be enormously greater than the outlay a year or two after the start of production—as will the return for the oil companies.
    Mr. Gordon Wilson: What proportion of the oil revenues from the Scottish sector of the North Sea will be used for the selective improvement of old-age pensions and other benefits in Scotland?
    Mr. Varley: The hon. Member will recall that on 11th July I told him that we were not waiting until oil revenues

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    started before setting up the Scottish Development Agency. That is what we are doing. Of course, the people of Scotland will benefit substantially over the years—they are already benefiting—from North Sea oil.
    Mr. Wrigglesworth: I welcome my right hon. Friend's statement, but is he aware that many people in the North of England are deeply disturbed to find no specific proposals for the dispensing of oil revenues for regional development in the North of England? Will he now make an announcement that he is to establish a North of England development agency comparable to the Scottish and Welsh development agencies already announced?
    Mr. Varley: We are determined that Scotland, Wales and the older industrial regions of Britain will benefit from offshore oil and gas.
    Mr. Patrick Jenkin: Is the right hon. Gentleman aware that, far from his proposals being widely welcomed, he got a lousy Press for his statement the next day? On the question raised by the right hon. Member for Orkney and Shetland (Mr. Grimond), surely the point is the incremental value that the taxpayer will get from a massive investment, over and above anything that he gets from taxation. Will the Secretary of State now explain what real benefits could conceivably flow to the taxpayer which cannot be achieved by taxation and by strengthening the controls?
    Mr. Varley: I am sorry that the right hon. Gentleman should be so sour. On any objective assessment of the Press and the other media, my proposals were widely welcomed. Even in his own party there is a great split about this. There is a letter in today's Daily Telegraph from the prospective Conservative candidate for Newham, North-East, in which he says:
    "I would like to state my agreement in principle with Labour's proposal for a 51 per cent. shareholding by the State in North Sea oil."
    So the right hon. Gentleman is out of touch with his own party

    Coal Miners (EEC Aid)
    Mr. Jim Lesterasked the Secretary of State for Energy whether he will make a statement on the contribution of the
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    European Community to the existing national scheme of assistance for redundant or redeployed coal miners.
    Mr. Hollandasked the Secretary of State for Energy what discussions he has had with the Commission of the European Communities regarding the establishment of a convention under the European Coal and Steel Community treaty regarding rehabilitation aids to British coal miners.
    The Under-Secretary of State for Energy (Mr. Alex Eadie): Following discussions with officials of the European Commission, I hope that formal agreement on a convention will very shortly be reached. It will apply to men made redundant or transferred after 1st January 1973, and the Commission will contribute to the cost of the existing Government schemes for the mining industry. The Commission will also contribute to the cost of deploying redundant men from mining to other industries and the retraining of ex-miners at Government training centres. I expect that the total contribution will be about £4 million for all redundancies or transfers occurring during the first year.
    Mr. Lester: I thank the right hon. Gentleman for that reply. Does he not agree that this illustrates the practical side and benefit of the Community, rather than the rich man's club suggestion which we hear made so often?
    Mr. Eadie: It is well known that hon. Members on both sides of the House have different views on this matter. It is as well to tell the hon. Gentleman that the agreement that I outlined in my answer to his Question was the result of long and protracted negotiations. The standards imposed by the Commission are different from those that we have in this country. For example, the Commission provides a maximum grant element of £300, whereas in this country it is a lump sum of £1,250. In addition, the Commission does not take into consideration the fact that the scheme should last for three years, but says that it should be for 24 months. Further, the Commission does not take into consideration national health and social security benefits. But, as the hon. Gentleman said, this convention will be of some advantage.
    Mr. Holland: Will the hon. Gentleman say what proportion of the European subsidy it is proposed will be used by

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    the Treasury and the National Coal Board to recoup cash already committed to the existing scheme, and how much of it may be used to extend the existing scheme or improve on it? In other words, to what extent will British miners benefit directly, financially, from European money coming in to support the reorganisation scheme?
    Mr. Eadie: As I informed the hon. Member for Beeston (Mr. Lester), our scheme is much more advantageous than that proposed by the Commission. Although the total sum will be £4 million eventually, the 1973 levy on the NCB was about £2½ million.
    Mr. Marten: In addition to the levy, have we not also, as a country, had to pay into the fund 57 million units of account? Therefore, on balance, are we not getting out only a proportion of the units and the levy we have paid in?
    Mr. Eadie: The hon. Gentleman is right to the extent that as well as getting benefits we have to pay in substantial sums so as to pay for the benefits.
    Mr. Rostasked the Secretary of State for Energy whether he will detail the terms of the EEC loan to the National Coal Board for the modernisation of housing for mineworkers.
    Mr. Eadie: The board has applied to the Secretary of State and to the Treasury for the necessary formal consent to borrow from the ECSC, and for the Treasury guarantee which is required by the ECSC. The conditions of the loan, which is a sterling one, are as follows: £1·66 million at a rate of interest of 1 per cent. per annum, repayable in 25 equal annual instalments commencing in December 1975.
    Mr. Rost: Is that not a further example of the tangible advantage derived from our membership of the Community? Why does the Government propaganda machine deliberately try to suppress good news coming out of the Community? Is it because anti-Common Market Members on the Government side are afraid of letting the public know the truth?
    Mr. Eadie: I do not see anyone on this side of the House trying to withhold the truth. If the hon. Gentleman wants more information I can tell him that benefits
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    which will accrue in regard to modernisation of National Coal Board houses will mean that tenants will gain some advantage in relation to rent.
    Mr. Skinner: Does not my hon. Friend agree that £1·66 million, even at 1 per cent. rate of interest, is minuscule by comparison with the current trading deficit of £2,000 million which this country is now running with the rest of the Common Market?
    Is my hon. Friend aware, with regard to the housing loan, that the BBC "Nationwide" team is currently running a propaganda stunt? It has gone to my constituency and has talked about money being allocated to parts of my constituency where houses have been modernised, despite the fact that rents were drawn up, as a result of a tribunal with which I was involved, three years ago, before we entered the Common Market.
    Will my hon. Friend—
    Mr. Speaker: Order. That is enough.
    Mr. Eadie: My hon. Friend draws comparisons involving sums of money relating to our balance of payments, but this does not bear any relationship to the scale involved in the matter with which we are concerned here.
    With regard to the "Nationwide" programme and my hon. Friend's constituency, I am sure that my hon. Friend is capable of taking care of anything that might arise from that.
    Mr. Maxwell-Hyslop: Will the Minister confirm that this is an example of tied houses of which the Government thoroughly approve?
    Mr. Eadie: The hon. Gentleman is wrong. The National Coal Board has a great deal of compassion for people who have to leave the industry because of difficulties.

    National Nuclear Corporation
    Mr. Andrew F. Bennettasked the Secretary of State for Energy if he will take steps to bring the National Nuclear Corporation under public control.
    Mr. Palmerasked the Secretary of State for Energy what action he is now taking to extend the area of public participation in the National Nuclear Corporation.
    Mr. Varley: The future shareholding structure of the National Nuclear Corporation is at present under discussion.
    Mr. Bennett: Does not my right hon. Friend agree that the present holding in the National Nuclear Corporation is completely inadequate in order for the State to have control; that we should have at least a 51 per cent. holding; and that it would be far better if the corporation were wholly owned by the State, and therefore wholly controlled by us?
    Mr. Varley: These matters are under discussion. As my hon. Friend will know, the General Electric Company has suggested that it wants to get rid of some of its shareholding in the NNC. I shall be discussing this matter with the GEC and I shall bear in mind my hon. Friend's suggestion.
    Mr. Tom Boardman: Is there any proposed change in the agreement for the management of the company which was associated with the 50 per cent. holding by the GEC?
    Mr. Varley: The GEC has told me that it hopes to and will indeed maintain a full management commitment to the nuclear programme.
    Mr. Palmer: Does not my right hon. Friend agree that the wish of GEC to withdraw somewhat its proposed holding is an unrivalled and almost painless opportunity for the State to obtain a majority shareholding? Will my right hon. Friend bear in mind the fact that the Select Committee on Science and Technology, at the time that there was a Conservative majority, recommended a doubling of the State holding in the National Nuclear Corporation?
    Mr. Varley: In the discussions which I have said I shall be having I shall bear in mind the point made by my hon. Friend, as well as the views of the Select Committee.
    Mr. Patrick Jenkin: Is it right that these matters are dealt with in the report of the Nuclear Power Advisory Board? When are we to see the report, which was promised when the right hon. Gentleman made his statement on this matter?
    Mr. Varley: I hope that the report will be published before the end of the
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    month. Speaking from memory, I do not think that the structure of the NNC is covered in the report, but if that is not the case I shall get in touch with the right hon. Gentleman.

    Coal Mining (Safety and Health)
    Mr. Skeetasked the Secretary of State for Energy what financial aid is being provided by the European Community for British research projects on safety and health in the mining industry.
    Mr. Eadie: In 1973 the European Communities authorised financial assistance totalling £287,400. Applications for further assistance are at present under consideration. The results of all research aided from Community funds are, of course, freely available to member countries.
    Mr. Skeet: Does not the hon. Gentleman agree that the large contributions from the Common Market are a further reason why we should remain a member? Will he do his best to persuade all his colleagues that we should remain inside the Community? Will he also indicate where funds would come from if not from the Community source?
    Mr. Eadie: There is no doubt that the sums of money allocated are going towards a very important function—some sums dealing with safety and some with health. The hon. Gentleman has made up his mind about the Common Market question, but perhaps the British people will have an opportunity to make up their minds as well.
    Mr. Edwin Wainwright: Will my hon. Friend consider expending more and more money on research into pneumoconiosis? Is he not aware that this disease is a deterrent to young people who might wish to enter the mining industry, and that the more we can do in this field the better?
    Mr. Eadie: I could not agree more strongly with my hon. Friend about allocating sums of money to carry out research into this disease. A slice of the money mentioned in my main answer has been allocated for this purpose. What the National Coal Board has recently put on at the Dust Control Exhibition shows how much attention the board has given to this disease.
    Mr. Brewis: Will the hon. Gentleman confirm the statement by his former colleague, Mr. George Thomson, that the British coal industry has received £23 million in the past three months to modernise equipment and improve safety? If that is the case, will the hon. Gentleman bring it to the notice of the National Union of Mineworkers?
    Mr. Eadie: I am not in a position to confirm statements made by other Members of this House, or by people outside the House. No doubt what the hon. Gentleman has said will arouse interest.

    Coal Resources
    Mr. Edwin Wainwrightasked the Secretary of State for Energy what is the estimated number of tons of proven coal in the United Kingdom at the latest available date.
    Mr. Eadie: The National Coal Board's latest estimate of known deposits of coal in the United Kingdom is 97·3 thousand million tons, of which some 3·8 thousand million tons were considered to be economically recoverable. This estimate is currently being re-evaluated in the light of changed circumstances, but it is too early to give a definite figure.
    Mr. Wainwright: Does my hon. Friend agree that in spite of the welcome finds of oil in the North Sea the amount there may last only one or two decades at the most? Does not this mean that the proven amount of coal far outweighs that of oil? If so, will my hon. Friend consider increasing the amount of coal from our industry and making certain that the manpower is available to work future coal? Will he give greater consideration to wages and conditions and a good superannuation scheme, so that we can encourage people not only to remain in the industry but to enter it?
    Mr. Eadie: My hon. Friend is right. There is more coal available than any other fossil fuel. The estimates of reserves to which I referred were given in October 1973—a significant date. The recoverable figures are now probably twice that estimate, although only a tentative examination has so far been made. As for coal production and miners' conditions, we are carrying out an examination and will shortly submit a full report to the nation and Parliament.
    Mr. Redmond: In view of those figures, why was there any talk of redundancy among miners in reply to Question No. 2?
    Mr. Eadie: We need all the coal and all the miners we can get.

    Power Production
    Mr. David Steelasked the Secretary of State for Energy whether he is satisfied with the present structure of the power producing industries.
    Mr. Varley: I announced on 11th July the change which I consider most urgent—the creation of the British National Oil Corporation. I have no further plans for immediate change but recognise that adaptations may be required to meet new situations.
    Mr. Steel: Has the right hon. Gentleman considered the possibility of a new Electricity Act, which would encourage both local authorities and private industry to generate electricity and enable both them and the present electricity boards to sell heat as well as power?
    Mr. Varley: That is an interesting suggestion, which I shall consider.
    Mr. Tugendhat: Reverting to the answer about the British National Oil Corporation, do the Government believe that there is a place for United Kingdom-owned and United Kingdom-based private enterprise concerns in the North Sea? In view of the "ring fence" provisions in the White Paper—obviously the Secretary of State will have to flesh them out a good deal—there is grave concern among many private enterprise concerns that the Government intend the BNOC to have a monopoly of the British stake in the North Sea.
    Mr. Varley: That is not the case initially. Certainly the corporation will take charge of whatever participation can be negotiated in existing licences. It will be the Government's agent when we take participation in future licences, and I envisage that it may well have licences in its own right, but that will probably take time.
    Mr. David Stoddart: With regard to the electricity industry, is not the present situation in which we have a board responsible for generation and other boards responsible for distribution a most

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    unsatisfactory way of running the industry? Will my right hon. Friend consider the unification of the industry?
    Mr. Varley: Certainly over the last four months we have been busy on coal industry policy, North Sea oil and gas policy, and nuclear policy. I hope that in the months ahead I shall be able to turn my attention to some of the suggestions made by the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) and by my hon. Friend.

    Natural Gas (St. Fergus)
    Mr. Gordon Wilsonasked the Secretary of State for Energy if he will make a statement of policy on the availability to the public sector of natural gas to be landed at St. Fergus.
    Mr. Strang: Gas from the Frigg field will be landed at St. Fergus. All of this gas will be supplied to the British Gas Corporation, which will dispose of it in accordance with its marketing policy.
    Mr. Wilson: Is the hon. Gentleman aware that in relation to the gas to be landed at the Cruden Bay area there was an agreement between the South of Scotland Electricity Board and British Petroleum, which was vetoed by the British Gas Corporation? In his consideration of access to natural gas, will he undertake to make sure that some nationalised industries are not favoured over others and that natural gas is available for use for the generation of electricity where appropriate?
    Mr. Strang: I am sure that the hon. Gentleman is aware that no Scottish power station is at present equipped to burn natural gas. However, this is a matter which falls within the responsibility of my right hon. Friend the Secretary of State for Scotland, who will take all factors into account in taking decisions on these matters in the future.
    Mr. Skeet: Is the Minister aware that he is paying well below the market price for Frigg gas at 2·3 pence per therm? If it runs out of availability by 1979–80, where will it come from if he is not prepared to escalate the price?
    Mr. Strang: The Government are confident that there will be adequate supplies of gas in the foreseeable future.

    Conservation
    Mr. Hannamasked the Secretary of State for Energy what action is being taken by the Government to promote conservation of fuel and energy following the Rothschild Report on the energy situation.
    Mr. Varley: In a recent public speech I outlined the Government's programme for action. It covers a wide cross-section of energy consumption, such as industry, building design and construction, energy efficiency in the public sector, and motor vehicles, as well as research and development and international co-operation. This is just a beginning, and the Government's aim is to build up a long-term programme which can be sustained over the years.
    Mr. Hannam: Is the right hon. Gentleman aware that there is a great need for action in the short term in this respect? In America and other countries there are intensive campaigns by Governments to educate people about the seriousness of the fuel situation and the need for conservation and adaptation. No action seems to be being taken by the present Government in this respect. Will the right hon. Gentleman do something about this immediately?
    Mr. Varley: Certainly we want to turn our attention to this matter as quickly as possible. I agree with a good deal of what the hon. Gentleman said. He will know that we have set up an Energy Advisory Council, under an independent chairman. I hope to get the other members appointed fairly quickly, so that work can begin.
    Mr. Roy Hughes: Does my right hon. Friend agree that, irrespective of the Rothschild Report, the discovery of oil around our coasts is the biggest boost that the British economy has received for a very long time? Does he further agree that there would be grave resentment in the country if there were any intention on the part of the Government to sell out our oil interests in order to gain some paltry concessions in the renegotiation of the terms of entry to the Common Market?
    Mr. Varley: There is no intention of selling our interests in the North Sea.
    Mr. Patrick Jenkin: Do the Goverment accept the EEC's target for conservation of a 10 per cent. saving of energy by 1985? If so, how do they intend to achieve it?
    Mr. Varley: We intend to achieve it by the programme which I outlined in my speech on 26th June. No doubt the right hon. Gentleman had an opportunity of studying that speech. If he does not have a copy, I shall send him one.
    Mr. Palmer: Apart from the conservation issue as such, what is the exact standing of the Rothschild Report—which is an interesting report, although many think it to be somewhat eccentric?
    Mr. Varley: I do not think that it is an eccentric report. It is an extremely good one, which contains many valuable suggestions. I think that the Government should be given credit, because this is the first time that a Central Policy Review Staff document has been published.

    Coal Production
    Mr. Biffenasked the Secretary of State for Energy if he will make a statement on current and prospective rates of productivity in the coal industry.
    Mr. Varley: Output per manshift overall was 43·8 cwt in June.
    The tripartite examination of the future rôle of the coal industry considered that the National Coal Board target of a 4 per cent. annual increase in productivity should be attainable with a major effort from all concerned.
    Mr. Biffen: Is the right hon. Gentleman aware that the National Coal Board is at present able to supply only about 85 per cent. of the total coal requirements of the British Steel Corporation? Is this not a very unsatisfactory state of affairs? Will the right hon. Gentleman give us some idea of the factors that make for the rather disappointing levels of current productivity? In particular, does he think that if we could get away from the centralised wage structure, which was the unhappy legacy of Lord Robens, there might be some better prospects?
    Mr. Varley: One of the reasons why output has been disappointing is the delays in development work during last year's industrial trouble. On the ques-
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    tion of getting away from centralised wage bargaining, I understand that the NCB and the mining unions consider that appropriate incentive schemes could make a major contribution to productivity.
    Mr. Crouch: Will the Secretary of State confirm that the wage award that has been made to the National Union of Mineworkers has not produced an increase in productivity? In view of that, will he initiate talks between the NCB and the National Union of Mineworkers with the intention of producing this incentive of a new pay structure?
    Mr. Varley: I understand that discussions between the NCB and the mining unions are at a developed stage. On the question of working up the productivity scheme, I am confident, as they are, that productivity can be improved in the industry.
    Mr. Cryer: Will my right hon. Friend assure the House that no productivity scheme which will endanger the safety of men working in the mines will be embarked upon? Does he accept that there is a danger that if we disregard safety in a blind attempt to seek productivity there may be a lowering of safety standards?
    Mr. Varley: I am confident that the NCB and the mining unions are interested in maintaining a high level of safety within the industry. I feel sure that they would not embark on any productivity scheme which would endanger lives.

    Gas Supplies (Metering)
    Mr. Martenasked the Secretary of State for Energy why he wishes the use of gas to be calculated in metric units rather than cubic feet.
    Mr. Strang: There are no plans to change from registration of gas consumed in cubic feet to metric volume.
    Mr. Marten: May I, then, ask what are the meanings of Statutory Instruments Nos. 847 and 848, as they say that accounts may be rendered in metric units rather than cubic feet? Is this something to do with integration in the Common Market? If so, why has this happened—in view of the Labour Party manifesto—before we have had the result of the referendum? Or is it to do with the

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    world-shattering draft directive of the Common Market which proposes to harmonise the scales of charges for the testing of gas meters?
    Mr. Strang: The regulations to which the hon. Gentleman refers are designed to facilitate the use of meters registering in metric units and to remove any barrier to trade in gas meters between EEC countries. The important point is that they do not affect British gas industry plans.
    Mr. Redmond: Will the Minister assure the House that there is no going beyond the terms of the White Paper on metrication issued by the previous Government after a lot of pressure from their back benchers?
    Mr. Strang: I can give the hon. Gentleman that assurance. As things stand, British Gas has no plans to change to metric-reading meters.

    Millbrook (Power Station)
    Miss Fookesasked the Secretary of State for Energy what are the considerations he will take into account when he makes his decision as to whether to permit the building of the oil-fired power station at Millbrook to go ahead.
    Mr. Eadie: We shall be concerned with all relevant considerations, including the estimated total requirements of the Central Electricity Generating Board for new generating capacity, the requirements for power in the South-West of England, the available sites including Millbrook, Inswork Point, which have been or may be found suitable for power stations, and financial and fuel policy considerations.
    Miss Fookes: Will the hon. Gentleman bear in mind that there is now grave doubt about the accuracy of the forecasts made when the decision in principle was made to go ahead, and that they are likely to be in a downward direction? If a power station is proved to be necessary, will the hon. Gentleman consider nuclear power rather than the use of oil?
    Mr. Eadie: My right hon. Friend has made a statement about nuclear power. There was a full public inquiry into this aspect. The Department has asked the CEGB to review all its capital investment plans in the light of the Government's
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    decision on nuclear reactor choice and other considerations. I cannot anticipate the outcome of that review as it may affect particular stations.

    Coal Industry (Powered Roof Supports)
    Mr. Michael Lathamasked the Secretary of State for Energy what loans the European Community is making to the National Coal Board towards expenditure on powered roof supports.
    Mr. Eadie: The board has been offered two ECSC loans to finance the purchase of powered roof supports. One is of 10 million dollars at 8¼ per cent. repayable in March 1979, and the other of 15 million dollars at 9¼ per cent. repayable in May 1982.
    Mr. Latham: Will the Minister ensure that this helpful EEC loan, as the National Coal Board itself has described it, will not be renegotiated—unless it be, perhaps, to increase it?
    Mr. Eadie: The question of the loan and any renegotiation are matters for Treasury approval. So far as I am aware, the Treasury is likely to give approval.
    Mr. Lee: What on earth is wrong with our own credit facilities? Why must we use the EEC as a banker instead of using our own facilities?
    Mr. Eadie: Apparently the financial terms are fairly satisfactory.

    Electricity Boards (Security Deposits)
    Mr. MacFarquharasked the Secretary of State for Energy if he will issue a general direction to electricity boards to cease the practice of demanding security deposits from their customers.
    Mr. Eadie: No, Sir. The boards have a statutory right to demand security.
    Mr. MacFarquhar: Is my right hon. Friend aware that his answer will cause considerable concern to my constituents, some of whom face demands for deposits ranging from £15 to £30, or about one-third of the estimated consumption of electricity, and that the manner in which the system is operated by the East Midlands Electricity Board means that if a customer is articulate, stubborn and preferably has a bank account, the

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    demand for a deposit will be waived, but that poorer people who have every intention of paying their electricity bills but cannot raise a deposit are precisely those from whom the deposit is demanded? Will my hon. Friend assure me that he will investigate the criteria used by the East Midlands Electricity Board in assessing the need for a deposit and any cases where hardship is caused by this system?
    Mr. Eadie: It is a matter for the board's own commercial judgment as to how it should operate in accordance with its statutory powers. The board works in conjunction with the related consultative councils. If my hon. Friend has any particular cases which he wishes to draw to my attention, I shall be happy to look into them.
    Mr. Woodhouse: if the hon. Gentleman will not accept the suggestion made by his hon. Friend the Member for Belper (Mr. MacFarquhar), will he at least insist that this practice should not be carried on on a discriminatory basis? Will he give a direction that security deposits, if demanded from anybody, should be demanded from all new customers and not merely from those who are likely to find it most difficult to pay them?
    Mr. Eadie: As I explained to my hon. Friend, we have no statutory power to do what the hon. Gentleman is suggesting. I have said that there are consultative councils that work in conjunction with the boards in the areas. As I said to my hon. Friend also, if the hon. Gentleman has any particular cases that he wants to draw to my attention, I shall be delighted to receive details.

    National Coal Board (Assets)
    Mr. Newensasked the Secretary of State for Energy if he will make a statement on his policy on renationalisation of assets hived off from the National Coal Board, in cases where these have been closed down.
    Mr. Eadie: As I have told my hon. Friend in reply to earlier Questions, we shall consider what action is needed in the light of the outcome of our examination of the future rôle of the coal industry. This must have priority in our work.
    Mr. Newens: Will my hon. Friend confirm that the brickworks which were sold
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    by the National Coal Board to private enterprise in accordance with the doctrinaire policies of the previous Government were profit-making bodies and that they have now been closed? Is it not a disgrace that assets such as the Whittlesey Central Brick Company should be dissipated? Does it not indicate that there is a much greater need for urgency about renationalising these assets if we are to be able to have them back into the hands of public ownership before they are completely gone?
    Mr. Eadie: My hon. Friend is right. Hiving off was one aspect of the previous administration's policy. They hived off the assets that my hon. Friend has mentioned. My hon. Friend will agree that it is very important that we carry out the examination into the mining industry. We want to get that examination right first. No doubt we shall then come to the question that my hon. Friend has raised.
    Mr. Skeet: As the hon. Gentleman is hiving off the assets of the National Coal Board in the North Sea, may we expect to see the end of all the argument about the hiving-off of assets?
    On the question of the brickworks, will he take into account the ideas of the Chairman of the National Coal Board and others involved? He will probably then find that it is not a good idea to take the brickworks over again.
    Mr. Eadie: I shall certainly bear in mind what the hon. Gentleman said, but it is stretching credibility too far to suggest that hiving off from one public industry to another public industry is equivalent to hiving off from the public sector to the private sector. If the hon. Gentleman was espousing a new philosophy from the Front Bench, my right hon. and hon. Friends and I shall very interested to take note of it.

  OVERSEAS DEVELOPMENT

    EEC Aid
    Mr. Hooleyasked the Minister of Overseas Development what pi ogress she has made in her discussions in the EEC Council of Development Ministers on obtaining a world-wide approach to the distribution of aid.
    Mr. Spearingasked the Minister of Overseas Development if she will make a statement concerning the recent meeting of EEC Overseas Aid Ministers.
    Mr. Blakerasked the Minister of Overseas Development if she will make a statement about the proposed EEC contribution towards the special United Nations Fund for developing countries worst hit by the oil crisis.
    The Minister of Overseas Development (Mrs. Judith Hart): The Development Council that met on 16th July took three important steps. It agreed in principle to financial aid from the Community to non-associated States and it asked the Commission to complete its draft aid framework. I hope and believe that the concept of distributing aid according to need, both within and outside association, is beginning to take root. Thirdly, the Development Council agreed, at my suggestion, to meet again in September to try to reach a decision on the release of the Community's contribution to the United Nations emergency measures. I told the Council that although I thought a Community response would be more effective it was essential that our own contribution should begin to flow by the autumn, if necessary on a bilateral basis. In my view, the urgency of the need will not permit further delay.
    Mr. Hooley: Will my right hon. Friend accept my congratulations on pressing upon Community Ministers the need to base aid on the criterion of need and not on quirks of history or geography? Will she continue to press that the maximum amount be devoted to international agencies and not on the Common Market special association basis?
    Mrs. Hart: As I think my hon. Friend will know, I aim to achieve approximately a 50–50 breakdown of Community aid. It was good to have the resolution on aid to non-associates, but I stress that this nevertheless gives us only a starting point for the real negotiations that I have in mind.
    Mr. Blaker: Is the right hon. Lady aware that the emphasis which she places on spreading aid more on a world-wide basis than solely to associate States will be welcome to this side of the House, because it is continuing an emphasis which the previous administration established
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    from our entry into the Community and, indeed, as far back as October 1972? Now that the EEC has agreed in principle, as I understand it, to provide 500 million dollars of aid to the developing countries which are most severely hit, will the right hon. Lady bend her efforts to persuading other members of the United Nations to play their part?
    Mrs. Hart: Yes. The virtue of the Community contribution is that, if we can achieve it, it will ensure the maximum contribution from the other European members of the Community. That is why I prefer that as the way of making our contribution. Nevertheless, I think that it is true that there are a number of hurdles to be overcome before we reach that position. One of those is the extent to which other States are prepared to play their part.
    Mr. Spearing: I thank my right hon. Friend for that encouraging statement. Did the Ministers discuss the European Development Fund? If they did, did she draw their attention to a certain disequilibrium in the grants within that fund, as noted by the last Parliament's Select Committee on Overseas Aid?
    Mrs. Hart: One of my problems in this area is that in a sense one is operating in two arenas of renegotiation. One is the European Council of Development Ministers; the other is the whole area of negotiation concerning Protocol 22 and the European Development Fund. I expect to be in Jamaica later this week on Protocol 22 and European Development Fund matters. These are at an early stage, and it is not possible to envisage exactly how the discussions will develop.

    Developing Countries (Oil Prices)
    Mr. Molloyasked the Minister of Overseas Development what steps she is taking to give special assistance to developing countries severely affected by the increase in oil prices.
    Mrs. Hart: My hon. Friend will be aware that we hope to make our main response to the emergency needs of the oil-poor developing countries through the EEC contribution of 500 million dollars to the special programme of the United Nations. This, however, is conditional on other responses. I told the Council

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    of Development Ministers in Brussels last week that if the EEC contribution has not begun to flow by the early autumn, we shall wish to ensure that our own does so, in the light of the extreme urgency of the needs which are arising.
    Mr. Molloy: Does my right hon. Friend not agree that we can make efforts on our own without being tied to any part of the EEC? Bearing in mind that, to a degree, many of the oil-producing countries are, or have been, developing countries, we, as a generous nation in the past, have the right to point out to them on a unilateral basis—as Great Britain speaking to them—that they ought to make special concessions to the developing countries, which can be hit very hard by increases in oil prices.
    Mrs. Hart: May I take separately the two points which my hon. Friend has raised? First, on the question of the Arab contribution, there is certainly a lack of clarity about the present Arab position. On the one hand, we have the United Nations Special Programme and, on the other, a number of bilateral responses which the Arab nations have been making. Indeed, it is imperative that by the September meeting of the EEC Development Council we have a very clear understanding of the relative contributions made in various forums, from the Arab nations and others. I have asked that that should be done, and I think it will be done in September.
    Secondly, it is true that we have a tremendous bilateral responsibility. Indeed, among the countries which are suffering more severely, India, Bangladesh and Sri Lanka are traditionally those with a close association with us—we have already done a certain amount to help them bilaterally—but I emphasise that apart from the pro- and anti-Common Market arguments which rage here, it would be better if we could get this contribution through the EEC, because that is likely to produce better results from other countries which might otherwise be a little reluctant.
    Mr. Wood: Will the right hon. Lady say whether she herself has made any specific approaches to the Arab countries and, if so, what has been the response?
    Mrs. Hart: No, I have not, although I must tell the right hon. Gentleman that
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    I have contemplated doing so in the last month or so. As I am sure the right hon. Gentleman will appreciate, there have been a number of almost fortnightly meetings of various international bodies, in some of which the Arabs were involved. There was, for example, a meeting a week ago in New York at which the Arabs were present, when it was hoped that a clear position would emerge. But between the World Bank, the Developing Assistance Committee and the United Nations, there have been so many opportune moments to get the matter clearer that I have hesitated to make any direct initiatives, although I do not rule them out.
    Mr. James Johnson: Will my right hon. Friend comment on the happenings at the last Organisation of African Unity conference in Mogadishu and say whether this is one of the chief causes of the dissension about the appointment of the Secretary-General? The Arab States have not pulled their weight here. Will my right hon. Friend—as she was asked a few moments ago—in some way intercede with the Arab States, with which we have some influence, to do something in this field for the developing nations of the Third World, namely, the black States?
    Mrs. Hart: I think that I should mention the other aspect of this matter—the Witteveen proposal for the recycling of money, in which the Chancellor of the Exchequer has been extremely involved. At this moment it is a very delicate decision as to how much one should take bilateral initiatives and how far one should rest on the United Nations and the other procedures which are continuing. I certainly do not rule out independent approaches, and there are one or two other donor countries which feel as I do.
    Mr. Brocklebank-Fowler: The right hon. Lady will be aware that a Select Committee of the House is considering this matter. Will she undertake that when she receives that Committee's report she will respond to it more quickly than she has been able to respond to the earlier report of the Select Committee considering overseas development, in the light of Britain's membership of the Community? Furthermore, will she say whether her Department has considered

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    whether there is a rôle for private capital and private investment in assisting the developing countries most badly hit by the oil crisis to reach higher standards of development?
    Mrs. Hart: On the last point, I hope to be able to make my own position clear before too long.
    On the hon. Gentleman's second point, I hope to respond to the Select Committee's report very quickly indeed, although it is an ever-changing situation and it is likely to be so for the next two or three months.
    In reply to the hon. Gentleman's first question, which asked why I had not responded more quickly to the report of the previous Select Committee, of which I was a member, I should have thought that my response would have been seen in action rather than in words.

    Famine Relief (Aircraft Landing Charges)
    Mr. Christopher Priceasked the Minister of Overseas Development what is the policy of her Department in respect of landing charges on military aircraft flying trucks and medical supplies to famine-stricken countries.
    The Parliamentary Secretary to the Ministry of Overseas Development (Mr. William Price): The Governments of famine-stricken countries are expected to waive all landing charges in respect of British military aircraft which carry relief supplies, and wherever possible they are asked formally to declare their intention to do so before airlifting of any supplies takes place.
    Mr. Christopher Price: The hon. Gentleman says that they are expected to do so. Have they, in fact, done so? Will the hon. Gentleman give an assurance that no Government to which famine supplies are being shipped are trying to make a profit by imposing landing charges on those supplies?
    Mr. William Price: I can certainly give that assurance. One of our problems is that of having to deal with journalists who go to disaster areas to write critical stories from the security of the most expensive hotel. That is what happened in Ethiopia. We have paid no landing charges at all on any military aircraft
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    carrying supplies, and we have no intention of doing so.
    Mr. Churchill: Is not the direct flying in of medical and food assistance to areas stricken by famine the most effective form of aid that the United Kingdom is in a position to give? In that case, is the Minister satisfied with the situation in which the greater part of our aid to any country goes to India—a country that has embarked not only on a nuclear programme for military purposes but, indeed, if recent Press reports are to be credited, on a major rocket programme?
    Mr. William Price: That is a separate question. On the first part of the supplementary question, wherever we see starving children we shall attempt to bring them whatever help we can regardless of the internal politics of any country, whether it is Left or Right, military or non-military. We think that is our first responsibility.

    Crown Agents
    Mr. George Cunninghamasked the Minister of Overseas Development if she will make a statement on the extent of the involvement of the Crown Agents in property speculation.
    Mrs. Hart: The Crown Agents have made investments and loans in connection with the development of property over a number of years. I hope to make a statement on the structure of the Crown Agents very shortly, which will also cover related matters.
    Mr. Cunningham: Has the Minister noticed that over the last year or so many companies engaged in property speculation in this country have gone broke or nearly broke? They have been in financial difficulties. Is she further aware that in many of those cases it has transpired that money, either on a loan basis or on an equity basis, or both, has flowed from the Crown Agents into those companies? Will she give an assurance that she will soon issue new guidelines to the Crown Agents about the kind of activities which they ought to avoid?
    Mrs. Hart: Yes, I can give my hon. Friend that assurance. I intend to make a statement before the recess, and when I do so it will include the type of guidelines which I would expect the Crown

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    Agents to observe. It will also include mention of their property investments.

    British Executive Services Overseas
    Dr. Hampsonasked the Minister of Overseas Development what is the size of British Executive Service Overseas; how much of its money comes from Government sources; and how many executives it has sent abroad in comparison with equivalent organisations in the United States and Canada.
    Mr. William Price: The British Executive Service Overseas—a joint enterprise between private industry and Her Majesty's Government started as a pilot scheme in 1972—has a staff of five. Within an agreed maximum, 50 per cent. of the reasonable expenses of operating the scheme is met from Government sources.
    Ten executives have so far gone abroad, all since June 1973, with more in the pipeline. The similar United States and Canadian organisations, which have been operating for much longer, have, naturally, sent many more executives overseas.
    Dr. Hampson: Is there not an extraordinary contrast between our programme and those of Canada and the United States? May we have an assurance that the Government have no plans to reduce their programme, or even to terminate it, as has been rumoured? Does not the hon. Gentleman agree that this scheme creates good will and helps the developing countries to increase their trading potential, and that from it there is a marvellous spin-off for British firms? Will the Minister take a more positive approach to the scheme?
    Mr. Price: We are doing just that. The figures I gave were those laid down by the previous Government. This year we shall be reaching a figure of 24 executives, and we hope that it will increase in future years.

CYPRUS
The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): With your permission, Mr. Speaker, and that of the House, I shall make a further statement about Cyprus
Hon. Members will have been following with great anxiety the very serious situation in the eastern Mediterranean following the decision of the Turkish Government to land forces on Cyprus in the early hours of Saturday 20th July. Fighting has been continuous since then, including fighting between the communities, and the House will have heard with great relief that the Governments of Greece and Turkey have agreed that a cease-fire should become effective from 3 o'clock today, London time. In view of the assurances that have been given. I trust that the fighting still going on in Cyprus will now die down and that the suffering of the Cypriot people will be ended.
During the weekend, and in a period of intense diplomatic activity, our main purpose was to achieve a cease-fire at the earliest possible moment, to prevent the fighting from spreading or escalating, and measures to safeguard the lives of British dependants of our troops, British residents and British tourists. Dr. Kissinger and I held continuous discussions throughout Saturday and Sunday separately with the Prime Minister of Turkey and the Foreign Minister of Greece. I remained in touch with M. Sauvagnargues, the current President of the Nine, with the Secretary-General of the United Nations and with the Secretary-General of NATO, who supported our efforts.
It is now very important to look to the future. Under paragraph 2 of the Security Council Resolution No. 353 which was passed on Saturday, a call was made for a cease-fire and for maximum restraint. If things go well, that provision is now in the process of coming into effect Under paragraph 5 of the same resolution, there was a call for talks between the three guarantor Powers, and we must get on with them urgently. I have this morning invited the Governments of Greece and Turkey to meet with me urgently. The Foreign Minister of Greece has informed me of his willingness to attend talks in Geneva, and shortly

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before I came to the House the Prime Minister of Turkey spoke to me and indicated his agreement to Geneva as the meeting place. I trust that these talks will begin either tomorrow or on Wednesday.
The safety of British citizens in Cyprus has been given the highest priority by Her Majesty's Government since the crisis began. My hon. Friend the Minister of State at the Foreign and Commonwealth Office was put in direct and personal charge of their welfare. My hon. Friend the Under-Secretary of State for Defence for the Royal Air Force has been in the sovereign base areas since Saturday. A large proportion of the British citizens together with a considerable number of other foreign nationals are now concentrated in the sovereign base areas.
Those British citizens still scattered about the island, and particularly those near Kyrenia, should now gain respite if the cease-fire holds. We are, however, continuing to make urgent arrangements for their protection and removal if they so wish.
I am sure that the House would like to pay high tribute to the excellent work of the British forces in Cyprus, the British High Commission and the United Nations forces—[HON. MEMBERS: "Hear, hear."]—and to the good co-operation between them. Among many outstanding operations, yesterday's convoy from Dhekelia to Nicosia and back was a remarkable achievement. The good sense and the good spirits of the British dependants themselves, the British residents and the British tourists have helped greatly the efforts to ensure their safety.
The House will have heard with sorrow the news of the death of the son of a British Service man in Cyprus and the accidental death of one of the British soldiers serving with the United Nations forces. We send our sympathy to their families, and, indeed, to the families of all those in Cyprus, Greek Cypriot and Turkish Cypriot alike, who have suffered death, injury or loss in the tragic events of the last three days.
A great deal has to be done to ensure the return to constitutional rule in Cyprus, which was destroyed last Monday, and to devise arrangements
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which will produce the necessary confidence among all concerned that this will be maintained in future. We are at the beginning of the process of consultation and negotiation to that end. I assure the House that the British Government will continue to work strenuously and urgently in every way to achieve it.
Sir Alec Douglas-Home: The right hon. Gentleman will understand that, through no fault of his, I have not had time to read his statement, but I have listened with attention. I echo the tribute which he paid to our forces in Cyprus. The evacuation from the country areas into our base areas was carried out by them in the most impeccable fashion.
There will be great relief in the House, following the critical days, that there is now better news. The right hon. Gentleman, seconded by Dr. Kissinger, the Secretary-General of NATO and others, worked very hard with the parties so that diplomacy could come into its own. This is the stage for which we have been waiting, when diplomacy can take charge. We hope that Greece and Turkey will recognise the fearful penalties which follow obstinacy over an internal political issue carried too far for too long. The penalty has been very high indeed.
One hopes that the three-Power talks—from what the right hon. Gentleman said. this seems likely—will begin in Geneva soon. That the Greeks and the Turks have agreed to that is good. I hope that when the talks take place it will be recognised by the right hon. Gentleman that the core of the matter is better treatment of the Turkish Cypriot minority in the island. Unless this is achieved and treatment is better than it has been over the past few years, we shall live with this trouble for a long time.
I must raise one matter with the right hon. Gentleman. It has been said that British tourists in the island were not warned as soon as tourists of other countries were warned and that, following the coup, tourists of other countries were able to get out before the invasion began whereas ours were not. I should be grateful for the right hon. Gentleman's comment on that.
Mr. Callaghan: I am much obliged to the right hon. Gentleman. I agree that the core of the problem is to ensure that

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the Treaty of Guarantee, as well as the full constitution of Cyprus, is worked properly. There is no doubt that over a number of years now it has not been worked properly, and in any discussions in which I take part it will be my aim at any rate at the start to begin from those documents, which are on the table and which provide a basis for progress in Cyprus.
As regards our tourists, I have heard the criticism which the right hon. Gentleman has raised but, having examined the situation carefully, I do not believe that it is at all justified. There are nationals from many countries now gathered in the sovereign base areas. I remind the House that the airport itself was closed on Monday, Tuesday and Wednesday and part of Thursday last week, and it was opened on Thursday afternoon and the whole of Friday, being closed again on Saturday and Sunday and today. A large number of tourists accepted advice to leave in the day and a half when the airport was open. A number chose, no doubt for good reasons, not to do so, but I am satisfied that the tour operators and the Foreign Office gave proper advice in the circumstances, without compelling people to leave. I am glad to say that the tour operators themselves have no complaint about the advice which the Government offered.
Mr. Stonehouse: While the United States—and Mr. Sisco, in particular—deserves congratulation for the successful negotiations which ended in a cease-fire, is it not a matter of regret that the American Secretary of State appeared to be withdrawing support from the legitimate régime in Cyprus some days ago? In the debate in the Security Council, will the Foreign Secretary take steps to ensure that there is no censure of Turkey for the invasion of Cyprus, which was not only legal but in the circumstances entirely justified?
Mr. Callaghan: I agree with my right hon. Friend that Mr. Sisco and the United States administration, including, of course, Dr. Kissinger, have worked extremely hard and effectively during this weekend. As regards events during last week, I have no knowledge of the United States withdrawing support from President Makarios. Indeed, as far as my information goes, that was not the position.
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As to the future, I do not know whether there will be a debate in the Security Council. My regret is that the diplomatic possibilites were not exhausted at the time of the invasion by Turkey. There was still room for talks, talks had been arranged, and they could have gone on. However, there is no point in looking back unduly on that now. We must start from where we are, which is that a ceasefire has been declared, and I hope that all sides will take advantage of it.
Mr. Amery: I wholeheartedly welcome the right hon. Gentleman's action in convening the guarantor Powers. He will remember that the Republic of Cyprus is a member of the Commonwealth. Will he assure us that at the appropriate point the legitimate leaders of Cyprus—namely, the President and the Vice-President, Greek Cypriot and Turkish Cypriot—will he called into consultation? When the London talks took place Cyprus was still a colony but nevertheless Archbishop Makarios and Dr. Kutchuk took part in the talks. Will the right hon. Gentleman give an undertaking that the interests of this Commonwealth country will not be overlooked?
Mr. Callaghan: I will give that absolute undertaking. I have made clear that it is the Cyprus people we are talking about. The action we are taking is under paragraph 5 of the Security Council's resolution which calls on the guarantor Powers to meet first. I am taking an early opportunity of informing President Makarios and our Ambassador at the United Nations of the meeting that I trust will take place within the next 48 hours. I shall keep the Archbishop informed of what happened at that meeting. I will certainly take up the right hon. Gentleman's suggestion. I had not thought of that, but it is a very valuable suggestion and I will take it into account.
Mr. Russell Johnston: The Foreign Secretary expressed regret that the Turks had invaded before diplomatic possibilities were exhausted. Will he say, first, how much of Cyprus Turkey now controls, and what, if any, indication have the Government given to both Greece and Turkey of action by the United Kingdom in the event of the cease-fire not being sustained? Will the Foreign Secretary assure the House that in his view any

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long-term solution of the Cyprus problem can be achieved only if we so arrange matters that neither Greece nor Turkey is directly physically represented on the island?
Mr. Callaghan: As for the area now controlled, I understand—I have no more information on this than has appeared in the newspapers, which appears to be accurate—that the Turks now control an area around Kyrenia, not necessarily the harbour. They have not secured control of Nicosia airport so far. As to what happens if the cease-fire breaks down, I have not got round to thinking about that yet. I am trying to make the ceasefire work. As for the future, in a conversation literally less than a hour ago with Mr. Ecevit we discussed whether it would be possible for the United Nations forces to play a greater part in enforcing the cease-fire. We would need to consider what additional support they might require in doing that. Perhaps I may reserve my judgment about the longer-term future until I have met the Greek and Turkish representatives.
Mr. Lee: Is not the real effect of the cease-fire to entrench the odious régime that took over last week, and to that extent is it not a matter of great regret that there has been a cease-fire?
Mr. Callaghan: My hon. Friends idiosyncratic views are well known, but I cannot join him in hoping that the bombardment, which up to 45 minutes ago was continuing in Nicosia and killing women and children, should be continued.
Sir Derek Walker-Smith: I welcome the cease-fire. May I ask two questions? First, will the Foreign Secvretary ensure that every effort is made and every precaution taken to safeguard the British in Kyrenia and the adjacent villages, so far from the sovereign bases, where the problem is not solely or mainly one of tourists but of the 500 or so British residents? Secondly, will he undertake that the consultations called for under Article 5 of the United Nations resolution are not confined to the three treaty Powers but extend to consultation within Cyprus, particularly to men of moderation and good will, both Greek Cypriot and Turkish Cypriot, with a view to resuming as quickly as possible intercommunal talks, hopefully leading to a successful outcome?
Mr. Callaghan: The situation of British residents and other subjects in Kyrenia is the most serious in the island. There were proposals which have not been carried through. If the cease-fire holds, many of our anxieties will be relieved. The latest information I had a short time ago was that a number of residents were intending individually to make their way to the sovereign base area at Dhekelia. On the second part of the question, the right hon. and learned Gentleman will have noted that paragraph 5 of the resolution is in two parts. First, it calls upon us to enter into negotiation over the restoration of peace, and secondly it calls for the restoration of constitutional government in Cyprus. That must involve consultation with the constitutional authorities in Cyprus.
Several Hon. Members rose—
Mr. Speaker: Order. In view of other business we must move on.

ECONOMIC SITUATION (GOVERNMENT'S PROPOSALS)
The Chancellor of the Exchequer (Mr. Denis Healey): I said in my Budget Statement in March that the action I was then taking must be provisional and that a further Budget would be necessary in the autumn. I have also made it clear that I would make fresh proposals at any time if they were required. I consider that the time has come to take some further action. I hope the House will feel it is convenient that I should summarise my proposals in a statement today in advance of the debate on the economic situation which starts tomorrow.
The first and main objective of the proposals I shall now describe is to attack inflation at its source. The General Council of the TUC has recently issued guidelines for collective bargaining which have been welcomed on both sides of the House. Those guidelines envisage that pay will rise in line with the cost of living. Threshold agreements already operate to this effect. So, by cutting the increase in the cost of living I can also reduce the rise in industrial costs, assist-both company liquidity and the competitiveness of our exports.
Retail prices have risen 16 to 17 per cent. in the past year. The threshold has now been triggered six times. The main

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reason has been the unprecedented increase in the price of commodities—above all oil. There now seems at last to be hope of relief from the upward pressure of import prices, perhaps by the end of this year. My aim is to steady the rate at which our cost of living increases before then and so to reduce the number of threshold payments, each of which produces further price increases within six months or so.
The threshold arrangements mean that price reductions now are likely to generate less extra demand in the short run than would otherwise be the case. Given the likely extent of threshold agreements I estimate that the demand effect of price reductions by the end of this year may be only three-quarters as high as is normal.
Now a word on the economic background to my proposals. In the four months since the Budget the balance of supply and demand in the economy as a whole has become a little clearer. The volume of exports has been higher than seemed likely early in the year and the latest estimate of industrial investment in the first quarter is also encouragingly high. Personal consumption seems to have been roughly in line with what I expected, a little higher in the first quarter and a little lower in the second. The rundown of stocks in the three-day week proved less than expected. Pressure in the economy as a whole is easing a little. Because there is less need to replenish stocks in the months ahead home demand will be lower and there will also be less demand for imports than seemed likely in March.
World-wide reactions to the oil crisis justify some concern that the prospect further ahead is for recession. Some recent domestic indicators must increase this concern. As I said in my Budget speech, if Britain were a closed economy my inclination would be to do more about domestic demand.
But Britain is part of the world economy, heavily dependent on the actions and attitudes of her partners in world trade. I must therefore ensure that action on prices does not upset the gratifying progress we are making on the balance of payments. The increased price of the oil we import has accounted for two-thirds of our total current account deficit so far this year. Apart from the extra cost of oil, our trade
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deficit was running in the second quarter of this year at a rate 40 per cent. lower than in the last quarter of 1973. Since the terms of trade seem to be steadying and the volume of our exports has been rising faster than the volume of imports, we can look for further improvement.
So far we have been able to finance our remaining deficit without having to maintain large interest rate differentials so as to attract funds to London. I want to keep interest rates as low as possible both for domestic reasons and to minimise the cost of servicing our debts. I do not expect difficulty in financing the deficit in the months ahead. I have not had to draw on the 2,500 million dollar loan, which was negotiated at the time of the Budget. And I am now able to tell the House of another welcome source of funds for public sector borrowers.
The Imperial Iranian Government has offered to provide the United Kindgom with a line of credit of 1,200 million dollars, to be drawn on in the form of three separate loans by public sector bodies within three years from now. We have reached agreement on this offer, and I hope that arrangements for the first loan will be made in the very near future.
I know that the willingness of the Iranian Government to enter into an arrangement of this kind reflects the concern of His Imperial Majesty the Shah of Iran over the difficulties facing the world economy and his constructive attitude to the problems at present facing the international monetary system. I believe that the House will join me in welcoming this development.
Against this background, I am introducing the following measures. First, a reduction of the rate of VAT from 10 per cent. to 8 per cent. with effect from next Monday, 29th July. An order will be laid later today under the VAT regulator powers contained in Section 9 of the 1972 Finance Act. A further order will be laid by my right hon. Friend the Secretary of State for Energy to reduce the maximum retail price of road fuel in line with the VAT reduction. This reduction in VAT will enable manufacturers and retailers to reduce prices of a very wide range of goods and services. It should initially cut the cost of living by about 1 per cent., and because of its effect on threshold agreements, by perhaps a further½per

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cent. in 1975. The direct reduction in revenue this year is estimated at about £140 million, though the full-year revenue effect would be £510 million.
Second, we shall introduce an immediate relief for those domestic ratepayers whose rates go up by more than 20 per cent. this year—a relief equivalent to 60 per cent. of the excess over 20 per cent. My right hon. Friend the Secretary of State for the Environment will publish details, and the necessary Supplementary Estimates will be presented to the House tomorrow. The estimated gross cost of this measure will be of the order of £150 million, but there will be some small offsetting savings on rate rebates. In addition to this special measure of domestic rate relief from the beginning of October, there will be an increase in the needs allowance which is used for calculating rent and rate rebates and rent allowances. The details of this measure are being placed in the Vote Office by my right hon. Friend and the necessary regulations will be laid. The normal full-year cost of this measure would be £60 million.
The part-year cost in the present year is further reduced by the fact that special arrangements have already been made for pensioners, and is thus no more than £15 million. The effect of these measure on rate relief and the needs allowance will be further to reduce the retail price index by a little under½per cent.
Third, a further amount will be made available from the £500 million provided in my March Budget for food subsidies but not so far committed in full. This amount will be £50 million in a full year. The details of this measure, which includes the proposed subsidy for household flour, will be announced by my right hon. Friend the Secretary of State for Prices and Consumer Protection as soon as possible. This does not, of course, add to the public sector borrowing requirements since it was included in the Budget Statement. Indeed, there will still be something over £100:pillion of that provision still availabe for further subsidies to food.
These immediate actions on VAT, on rates and on food subsidies taken together should have a direct impact on retail prices of over 1½ per cent. within
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the next three months with more to come as the rest of the food subsidies are allocated. They will certainly avoid one threshold payment, and possibly two, by the end of October. This will bring substantial advantage both to private companies and to public sector employers, including the nationalised industries and local authorities. The eventual effect, bringing in all indirect savings on labour costs, should reduce the retail price index by about 2½ per cent.
My fourth measure is aimed not primarily at domestic prices, where it is helpful, but only marginally and in the longer term, but at the effective use of resources in the regions. The regional employment premium, which has remained unchanged at £1·50 per week for a male employee since it was introduced in September 1967, will be doubled as from 5th August. A draft order to this effect will be presented later today.
This step, which I know will be welcomed by both sides of industry, will have long-run beneficial effects both on regional employment and—through export prices—on the trade balance. It will also assist company liquidity. The expenditure cost in a full year will be roughly £118 million, but the cost this year is estimated at only about £60 million, and a Supplementary Estimate to provide for this will be laid tomorrow. Its eventual cost in resource terms will be much less than its money cost, since it brings into use unemployed resources.
The measures I have announced so far will not only help to cut the cost of living and to increase employment. They will also help industry both in their effect on demand and by reducing labour costs through their effect on thresholds, and through the REP.
In addition, I want to help industry to raise funds in the market to finance the new investment which is essential to preserve future employment and the competitiveness of our exports. For this reason, and in the light of the inflation since the last Government imposed the 5 per cent. limit early in 1973, I am modifying the dividend control to raise the limit on increases in distribution to 12½per cent. An order in this sense will be laid this evening. The rule permitting higher distribution where there is a ease

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for special treatment on investment grounds will be applied flexibly.
I should add that it is my intention to review the existing control comprehensively next year, and to seek assistance from the Royal Commission on Income Distribution in assembling some of the factual information for this review. This relaxation in dividend control will also help many retired people and assist the life insurance and pension funds which look after the savings of millions of people of modest means.
The total economic effect of all these measures reflects a careful balance of the considerations I set out at the beginning of this statement, and I will be reviewing the position again in the autumn. They will have an immediate and beneficial effect in slowing the rate of price increases and thus lessen the pay increases needed to maintain real earnings. The level of prices next year will for both reasons be significantly lower than would otherwise have been possible. This will help our exports to remain competitive.
The measures will help industry and employment by taking up some slack, especially in the development areas, without putting any strain on the economy as a whole, and their demand effect is likely to be under £200 million by the end of 1974. They will add only a relatively small amount—some £340 million—to the estimated public sector borrowing requirement in 1974–75. I am satisfied that this can be achieved without in any way jeopardising my objective of keeping the rate of growth of the money supply under control. Part of this sum will accrue to the corporate sector and thus improve the overall financial position of companies. But above all, these measures will help us to face the difficulties arising from the massive wave of imported inflation which has not yet spent its force. By emphasising and strengthening the social contract between the Government and the unions, I believe they will help to reinforce our overall economic position, both at home and abroad.
Mr. R. Carr: I am sure that the whole House will welcome the fact that the Chancellor of the Exchequer has made his statement today in advance of the economic debate. May I thank the right hon. Gentleman for doing so. I am sure that the House will realise that we need
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time to consider what he has said before making our final judgment both in total and in detail. That applies all the more since, it being a Budget Statement—of course I do not make any complaint about this—we had no knowledge beforehand of anything that he was going to say.
Perhaps I shall be allowed to make a few preliminary comments and to combine those comments with a few questions. First, it is quite clear that there is a big contrast between what I might call the 21-day model Healey and the 21-week model Healey. The right hon. Gentleman has gone into direct reverse on many of the things that he told us were necessary for the country less than four months ago. Whatever one may say about his economic forecasting, it seems that what he has said today gives a pretty good forecast of the date of the General Election. That shows how right my right hon. Friend the Leader of the Opposition was to warn the country this morning about the need to fear politicians bringing gifts.
I believe that the first question that the majority of people will want to apply to the measures that the Chancellor has announced—these measures combined with those that he announced in March—is whether they reduce Britain's inflationary expectation and trends. Therefore my first question, which I hope the Chancellor will answer specifically, is what will be the net effect of both his Budgets on the cost of living index this year? He now talks about the need to restrain the triggering of threshold agreements. It is a pity that he did not think about that in March. It was the direct effect of his Budget that caused threshold agreements to be triggered three times in one month. The effect of his previous Budget was undoubtedly to put up the cost of living index this year by nearer 3 per cent. than 2 per cent. What we need to know is the overall effect of both Budgets.
Secondly, I ask the right hon. Gentleman to be fairly specific about the effect of these new measures on the public sector borrowing requirement. He will recall that in March he laid great stress on the need, if we were to contain inflation, to reduce the borrowing requirement and therefore to cover extra Government expenditure with taxation. As we understand it, that was his main reason

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for introducing increases in direct taxation. He has now announced, on the one hand, a considerable increase in Government expenditure since the Budget both today and previously, and, on the other hand, a substantial decrease in the revenue that he will collect from taxation. I ask the right hon. Gentleman to give us some information about the effect on the borrowing requirement.
Next, I ask the right hon. Gentleman to say something about the effect that these measures are expected to have on the reduction of our non-oil balance of payments deficit. We note the new borrowing requirement and we note that we now have to look after the gnomes of Teheran as well as the gnomes of Zurich. Once again we note that under a Labour Government this country is building up an increasing overseas loan debt. Would the right hon. Gentleman please tell the House about the terms of the loan? He did not mention the terms in his statement.
Finally, I ask the right hon. Gentleman to tell us about the effect that he believes these measures will have on business confidence and the level of industrial investment. It is our view that while the change in dividend restraint will have a healthy effect on the market and the opportunity to raise capital, he has done nothing to replace the £1,100 million that he took out of industry's cash flow this year. Does he not realise that investment plans for the future depend on cash and confidence, that he has taken away the cash and that his right hon. Friend has destroyed the confidence?
Mr. Healey: I forgive the right hon. Member for Carshalton (Mr. Carr) for his rapidly improvised comments on my proposals. I forgive him also for the chagrin which was so evident in his earlier remarks that I have produced a package which is likely to help the future of Britain's economy and to prove popular with those whom it will affect. I cannot help reflecting on the fact that during our discussions on the Finance Bill in recent weeks he and his hon. Friends tabled, and sometimes carried, amendments which would have added £500 million to the public sector borrowing requirement. They would have done so
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by methods calculated to help only landowners, land speculators, pools promoters, the wealthy and company directors.
I shall deal with some of the specific points that the right hon. Gentleman raised. The first is the net effect of all my measures on the cost of living this year. The increase in the cost of living flowing from the measures that I announced in March depended wholly on the 2 per cent. increase in the prices of the products of nationalised industry. That is the increase which the previous Chancellor undertook to introduce and which Opposition Front Bench spokesmen did not contest in the House although they have increasingly made capital of it in the country. Nevertheless, the number of thresholds triggered since March until now is six, precisely the number forecast in the Treasury estimates which I inherited on taking office at the beginning of March and which were presumably also available to the Conservative Government.
The measures I have announced today will eliminate all but 0·14 per cent. of the increase in the cost of living arising from the March measures, an increase which was wholly due to the increase in nationalised industry prices.
The next question which the right hon. Gentleman asked me—[Interruption.]—I think that the Leader of the Opposition, if he could contain himself, might hear something to his advantage in a moment—was about the increase in public expenditure since the Budget. There have been a number of increases due to increases in pay. All these were taken into account in the Budget estimates of the public sector borrowing requirement this year. There have been well under £100 million of increases, due to other causes like, for example, agricultural subsidies, which the Opposition strongly supported. There has been a cut in public expenditure of £17 million due to the decision not to proceed with the Maplin project, announced last week.
Mr. Goodhew: On a point of order, Mr. Speaker. Is it not customary for Ministers to address the Chair and not members of the Tribune group who are only a limited number of Members of this House?
Mr. Speaker: That is a matter I leave to individual Ministers.
Mr. Healey: Many of us will regard that intervention by the hon. Member for St. Albans (Mr. Goodhew) as characterising the bankruptcy of the Opposition.
The last question put to me by the right hon. Member for Carshalton concerned the terms of the Iranian loan. He should know that the right hon. Member for Altrincham and Sale (Mr. Barber) was seeking to arrange a number of loans before he left office, and the whole world knows that it would be impossible for this country to bridge the whole of the balance of payments gap caused by oil and the inherited non-oil deficit without attempting by some means to finance the residual amount. In the context of the Iranian loan, the terms of each of the three loans will be negotiated individually, but it has been settled that the first loan will be for just under five years with the terms in line with those in the markets.
Mr. Pardoe: Is the Chancellor aware that the overall impact of his package may well be rather too little than too much, since he has one arm tied behind his back by his paymasters, with no control over incomes? Is he further aware that we welcome his measures on the regional employment premium, which we have urged upon him? We also welcome his conversion to parliamentary democracy in his acceptance of the rate relief. Can the right hon. Gentleman say what level of unemployment he thinks will result by the end of this year from his measures? Does he now think that wage inflation is running at a higher rate than price inflation?
Mr. Healey: I am delighted that one consequence of my measures has been to destroy the possibility of a coalition of the Liberal Party with either of the major parties after the next General Election. The measures I have announced will increase employment by about 20,000 by the end of next year.
Mr. Duffy: I congratulate my right hon. Friend on reflating demand, on easing the strain on companies, on slowing the rise in prices, on boosting employment in development areas and on generally rejecting the advice of monetarists. Is my right hon. Friend sure that his demand-reflationary measures can counter the demand-deflationary con-
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sequences of continued cost-inflation combined with fiscal drag, and prevent our economy from sliding into that recession which he said was now feared on the international scene?
Mr. Healey: I appreciate the concerns which my hon. Friend has mentioned, and I share them to some extent. But the central problem with which we are faced and which the House must recognise—it is not a party issue—is the risk that too many countries will seek to achieve too fast a balance in their trade at a time when we know that there will be a currency surplus owed to the oil exporting countries this year of 70 billion or 80 billion dollars. I believe that it is right for me to wait a little longer to see whether the arguments I am now having with some of my friends and colleagues abroad have effect before deciding on a larger package to deal with this specific problem.
Mr. Hordern: Will the right hon. Gentleman confirm that the overall borrowing requirement has increased by £440 million since his Budget—that is to say, as a result of those measures and the £100 million extra carried out since the Budget? Will he also say exactly what the net effect is in the cost-of-living index as a result of his proposals, bearing in mind that there were no proposals under the Conservative Government for food subsidies? Does the right hon. Gentleman recognise that the one element that industry required was an easing on profit margins and that there are no such measures in his announcement today?
Mr. Healey: The hon. Gentleman must not simultaneously ask for bigger reductions in the cost of living and an easing of profit controls, which would inevitably be based on an increase in prices. He cannot have it both ways.
The hon. Member asked about the increase in the borrowing requirement. I made it clear that my measures today will increase in themselves the borrowing requirement this year by some £340 million. How the borrowing requirement will look by the end of the year will depend on innumerable other factors—for example, the extent to which tax revenues are increased by fiscal drag, and the speed with which authorities carry out the expenditure proposals announced in the Budget. I remind the hon. Gentleman

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that last December, two-thirds of the way through the last financial year, the aggregate error in the Conservative Government's estimates of the public sector borrowing requirement was £2,400 million, although a great deal of this cancelled out because in some respects they underestimated and in others over-estimated. It is not possible to make an estimate of the whole effect on the public sector borrowing requirement until the whole year is at an end.
Mr. Arthur Lewis: Is my right hon. Friend aware that we on this side of the House pay tribute to him for both the content of his measures and the fact that they will assist the poorer sections of the population, who are those in whom we are most interested? My right hon. Friend says that his measures will mean a reduction in prices of 1½ per cent. Will he explain how he intends to ensure that this reduction will be passed on to the consumer? Previous Governments have claimed that that would be done but have never actually seen that it was done. Will my right hon. Friend give an assurance that he will take action to see that price reductions are passed on to the consumer?
Mr. Healey: Yes, Sir. My right hon. Friend the Secretary of State for Prices and Consumer Protection will be making a statement on these matters. I must point out that to take direct action to deal with inflation in this way depends on having effective price controls, and the strengthening of price controls, particularly at the retail end of the chain of distribution, is absolutely indispensable if these measures are to have their full effect.
Mr. Tugendhat: Will the right hon. Gentleman accept that it is impossible to make forecasts so precise as an increase in employment of 20,000? Does he not also agree that the emphasis of his measures, giving, as they do, a consumption bias, leads one to believe that, although there will be a short-term improvement in the cost-of-living index, there will be a substantial long-term deterioration in employment?
Mr. Healey: The hon. Gentleman has raised two quite separate matters. First, I would be the first to admit—and every
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former Treasury Minister from either side of the House would agree with me—that absolute precision in these matters is impossible. But it is my duty to give the House the best estimate that can be made, and that is what I have done.
Secondly, I am deeply concerned about the long-term prospects for employment in the economy, but I regard it as my job in my autumn Budget to make any major corrections that may be required in the light of developments in the world situation in the interval.
Several Hon. Members rose—
Mr. Speaker: We are to have a two-day debate on these matters tomorrow and Wednesday.

HARLAND AND WOLFF
The Minister of State, Northern Ireland Office (Mr. Stanley Orme): With your permission, Mr. Speaker, and with that of tile House, I wish to make a statement on Harland and Wolff, on behalf of my right hon. Friend the Secretary of State, who is at this moment in Northern Ireland, where he will be speaking to representatives of the firm's management and labour.
The firm is facing increasingly serious financial difficulties. The right hon. Member for Cambridgeshire (Mr. Pym) informed the House on 21st December 1973, before the completion of detailed discussions with Harland and Wolff, about proposals to provide further financial support to the company. My right hon. Friend investigated the matter in March 1974.
Subsequent discussions revealed the company's continuing inability to meet its production targets and the inadequacy of the previous proposals for providing it with further assistance. Revised figures were received on 5th July this year. The financial consequences of these are quite clear. If the company is to continue trading, further Government financial support is required urgently. The amount involved, which cannot yet be calculated precisely, is likely to be very substantially in excess of that considered necessary last December. The proposal then was that £10 million of debt owed to the Government should be replaced by the issue to the Government of shares, and that the

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Government should provide guarantee facilities for up to £10 million as needed up to the end of 1976.
Harland and Wolff occupies a unique place in the Northern Ireland economy. It is the largest single manufacturing employer, providing between 5 per cent. and 6 per cent. of all jobs in the manufacturing sector. Since 1966 the company has received financial assistance totalling £68 million from both the United Kingdom and the former Northern Ireland Governments, by way of standard and special grants, loan and equity participation.
It is against the special Northern Ireland background that the Government's proposals for dealing with the present situation should be viewed. The Northern Ireland Department of Commerce already holds 47·6 per cent. of the company's equity. With a view to providing additional finance and in order to bring about the changes which the Government believe to be necessary, we have decided to extend that holding.
This will be achieved, subject to the approval of the shareholders, by the acquisition of additional shares in the company to give the Government a substantial majority in an expanded equity; this will be effected under Section 7 of the Industry Act 1972. It is not envisaged that this will involve acquisition of shares from existing private shareholders.
The Industrial Development Advisory Board has been informed of the general situation. Because of the urgency of the matter, we are adopting this relatively simple course, but the possibility of proceeding to full public ownership in Northern Ireland at a later date is not precluded. Meanwhile, we shall have a large enough stake to ensure control. Initially, the additional equity will need to be held by Her Majesty's Government, but it is clearly most desirable that in the longer term the responsibility for this Northern Ireland registered company, which is such a prominent feature of the Ulster economy, should rest completely in Northern Ireland. The detailed arrangements are being worked out in consultation with the company and its advisers, and I would hope to report further to the House in due course.
The Government intend that there shall be a comprehensive review of Harland's management structure and
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resources, a full examination of the order book, a temporary moratorium on any new shipbuilding orders, strenuous action to reduce overheads and the implementation of realistic manpower policies and training arrangements capable of securing any necessary increase in the labour force in a manner compatible with the manpower needs of the rest of industry in Northern Ireland and with the untapped resources of the Northern Ireland labour market. For example, it will be important to increase greatly the volume of apprentice training in order to ensure a succession of skill in the yard and spread the opportunity for the acquisition of skill more widely within the community.
To achieve these changes and improvements we need to advance towards genuine worker participation in all the decision-making processes of the company. I have already talked at length to management and unions, and it is my intention, in consultation with the management, the shop stewards in the yard, the Northern Ireland trade unions and the TUC, to consider full participation in management by representatives of all employed in the firm. I shall begin the detailed discussions tomorrow in meetings with the 200 or more shop stewards in the yard and with a similar number of men from the middle management of the company, I am convinced that if we can achieve this participation in management, along with a return to full free collective bargaining, we shall be laying a solid foundation for the introduction of whatever measures are needed to obtain the increases in productivity which are essential to the company's survival. Comprehensive machinery will be instituted to monitor progress in implementing all these developments.
I emphasise to the House that this is a rescue operation. The consequences for Belfast and Northern Ireland of allowing the yard to close, as it would have to do if the Government did not intervene, would be disastrous. Nevertheless, this must not be regarded by those working for the company as an open-ended Government subvention. This is being done for the sake of Northern Ireland, and the only way it can be done is by finding, to the extent necessary, compensating offsetting savings in public expenditure from within the Province. These will be achieved without departing

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from parity in the cash social services and without detriment to the Government's social and economic objectives for the areas of especially severe unemployment.
While earlier expectations in regard to the performance of Harland and Wolff have not been fulfilled, the modernisation and re-equipment programme has proceeded apace and the shipyard is now one of the best equipped in Europe. It remains to harness the skill, pride and latent enthusiasm of all those employed in the firm to achieve the immense potential of the undertaking.
Mr. Heseltine: The House fully understands the presence of the Secretary of State in Northern Ireland. My right hon. Friend the Member for Chesham and Amersham (Mr. Gilmour) asks me to apologise to the House for his absence in Northern Ireland.
We understand that in the special circumstances of Northern Ireland the Secretary of State had to seek political solutions, and it is against that background that what the right hon. Gentleman had to say must be judged. As the Government have been so deeply involved during the past few years, why is it impossible for the right hon. Gentleman to give more detailed figures of the sums of money that are to be committed? Secondly, does it not show a lack of commercial foresight to impose a total moratorium on all future orders for the yard, regardless of the conditions and terms upon which those orders might be offered by potential customers? Thirdly, the right hon. Gentleman referred to certain economies that will take place in Northern Ireland to compensate for this additional expenditure. Would it not be appropriate for him to spell out now the areas in which the Government are seeking to make those economies?
Mr. Orme: I thank the hon. Gentleman for what he said and for not seeing fit to compliment the Government on using the Conservative Government's Industry Act. We have found the Act extremely useful in the difficult circumstances that face us.
The hon. Gentleman asked about the sums of money involved. As I said, the full calculations of the amount of
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money involved are not yet available. We had a remit from the company as late as 5th July. We inherited this situation, and the previous Government must have been aware of the difficulties the yard was in at that time. The previous Government promised a subvention of about £10 million in December if that should be necessary. Unfortunately, it is necessary. Without damaging the prospects of the company by giving figures that might not be absolutely accurate, I can say that the sums of money involved are far in excess of those I have given to the House. That is how serious the situation is.
There is a full order book. I could give details if the hon. Gentleman wants me to do so, or I could put the details in the record. There are orders for about 19 ships amounting to about 2½million tons. That is sufficient if there is an increase in the steel throughput, which is the crucial factor. In 1972 the steel throughput was running at about 90,000 tons a year, and it is now running at 60,000 tons per year. One can see the problems that face the unions, management and the people of Northern Ireland. Having talked to the unions and management, I am convinced that that throughput can be dramatically increased, and I know that the workpeople are prepared to co-operate in securing that increase.
The moratorium on the shipbuilding does not apply to the engine works, which, as the hon. Gentleman probably knows, sells engines separately, apart from making them for the yard. The engine works has orders from the United States, Japan and South America. It has a good order book and a good record of meeting commitments. We want to bring the yard up to the standard that exists within the engine shops.
The hon. Gentleman asked where the economies will be made. The Government felt that the expenditure might appear to people in Northern Ireland as an open-ended commitment and that Northern Ireland should take some responsibility for this. Therefore, there have to be cuts in certain Government expenditure in Northern Ireland to cover it. These matters are now being discussed. The cuts will not be made in the social services or in areas of high unemployment, but fuller details will be given when they have been worked out.
Mr. Craig: No one will dispute the need to mount a rescue operation. On behalf of all Northern Ireland Members I congratulate the Government on their willingness to do so. We regret that there is not sufficient information to enable us to pass judgment on the need to economise. We accept what the Minister says and we thank him for his readiness to help.
Mr. Orme: I thank the right hon. Gentleman for what he said. The Government are not hiding the figures. The seriousness of the situation is apparent to all. It will be possible later to give full figures, and people will then be able to judge the economies that will be needed in Northern Ireland. The figure I have given is not a false figure.
Mr. McNamara: I congratulate my right hon. Friend on his use of the Industry Act 1972 in mounting this operation. Government supporters welcome the full extent of his statement, in terms not only of the discussions he is having with all the people employed in the firm but of worker participation in the running of the industry and also of the opening of employment prospects in the industry to people to whom it has been denied in the past.
Does this decision mean that there will be a change in the nature of the craft at present being built by Harland and Wolff? Does it also mean that we shall have from the Minister itemised accounts of where cuts have been made to meet the increased expenditure on Harland and Wolff? Finally, will the Minister give us an assurance that he will throughout go hand in hand with the trade unions of Northern Ireland?
Mr. Orme: I thank my hon. Friend for his remarks. There will be no need to change the nature of the craft being built. There is pressure away from large tankers towards much smaller medium-sized tankers because of the oil situation. That has already been anticipated at Harland and Wolff, which has a large number of smaller tankers on order.
I welcome what my hon. Friend said about training. I had nothing but cooperation from the trade unions when I discussed this matter with them. At present there are facilities for training about 500 apprentices. The yard has potential to train 1,500, and that will and
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mean drawing people from a wider area than East Belfast. I believe that the work force is prepared to accept this. By training such a large number of people we shall help other industry in Northern Ireland as well as Harland and Wolff.
My hon. Friend asked about details of the cuts that will be made in Northern Ireland. Details of those will be published, and the matter is being discussed at the moment. We have no precise details and I should not like to hazard a guess because the Ministers who are responsible for Departments in Northern Ireland have to do that job. They have to face a difficult financial situation. It is not a sleight of hand, it is a real saving, but it will be effective only as long as Harland and Wolff remains in the red. Immediately it pulls out not only will the economies stop but the profitability will go to Northern Ireland, and that will be welcomed by the people of Northern Ireland. As for the trade unions, as I said, I intend to go hand in hand with the trade union movement, and that process starts tomorrow.
Captain Orr: Am I right in thinking that largely the money for the rescue operation will come from central funds but that a proportion will come from what would normally be the Northern Ireland budget? Alternatively, is the whole of the money to come from the Northern Ireland budget? The situation is a little obscure and it is difficult to understand to what extent Northern Ireland will benefit until there is some precision on the figures.
Mr. Orme: I should have thought that the hon. and gallant Gentleman would have welcomed the fact that the yard will continue to exist. The alternative is for it to go into liquidation. That is unthinkable in present circumstances. I welcome what the hon. and gallant Gentleman said about that.
A large measure of the cost—not the total cost—must be offset against Northern Ireland's current and future expenditure. The idea behind this is to make sure that the people of Northern Ireland will know exactly what is involved.
Mr. Delargy: I remember once saying in this House that the only question one was allowed to ask on Northern Ireland was about the position in Harland and Wolff. We are back where we started.

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When my right hon. Friend is carrying out the rescue operation and having consultations with management, shop stewards and others, will he look into the disgraceful discrimination in employment practised in Harland and Wolff for more than 50 years?
Mr. Orme: My hon. Friend will see from the statement that the Government believe that the right way to tackle the question is in the form of genuine apprentice training which will involve people from both communities. At the moment there are not the skilled trained people in the community about which my hon. Friend is concerned. I believe that the unions are realistic in this matter and I do not believe there will be any difficulty. The matter will have to be discussed with the company, and this is part of the Government's statement.
Mr. Beith: Does the Minister agree that the rescue operation is a considerable act of faith in the Ulster workers and calls for some indication from the Ulster workers that they are prepared to put their weight behind stable government in the Province and not throw away that prospect, or future prospects, for their own yard? We welcome the commitment of worker participation in the decision-making processes, but will he spell out to the Ulster workers that this House requires genuine participation by the Government of Northern Ireland in all sections of the community and that baby and bath water are very much linked together?
Mr. Orme: I thank the hon. Gentleman for his comments. I am sure that the workers in Northern Ireland, and not least those at Harland and Wolff, will recognise from the way in which the Government have introduced the proposals that there is no idea of harking back to recent disputes. We want this shipbuilding yard to survive. It is one of the best equipped yards in Europe and its work force is among the most skilled and capable in the world. If the workers participate as we hope they will, there will be political advantages to be gained as well as economic advantages.
Mr. John Davies: Bearing in mind that the Industry Act 1972 was specifically devised to assist areas in industrial decline, surely there should be no surprise
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that it is used in such a case as Harland and Wolff. However, how does it come about that, the Act having been devised to use the advice of the Industrial Development Advisory Board, we are now told in the statement that it has only been informed? An essential factor of the Act was consultation, not information. May I have an explanation?
Mr. Orme: Yes. We have had so little time—[HON. MEMBERS: Rubbish."] If the Government had not acted today, the firm could not have opened today. The right hon. Gentleman gave the impression that we had months in which to take action. It took us until 5th July to obtain the latest realistic figures. We have kept strictly to the terms of the Industry Act and we have had no complaint from the Industrial Development Advisory Board.
Mr. Heseltine: If the Government had the latest figures on 5th July, what has happened between then and now to preclude their alerting the advisory board to the situation?
Mr. Orme: In that period the Government had to adopt their policies and consider what action they would take. There were other factors.
Mr. Heseltine: It is disgraceful.
Mr. Orme: It is not. The Conservative Party should not start nit-picking. The situation at Harland and Wolff fits every part of Section 7 of the Industry Act. The Government acted in good faith and in the interests of the company.
Mr. Dalyell: Could the House be told why the December forecasts seem to have gone so significantly wrong? Was this due to the fact that they were ludicrously optimistic in the first place, since what has happened seems extraordinary?
Mr. Orme: I would hate to make party political points on the statement. One of the problems was the steel throughput, together with a conflict on wages, counter-inflation policy, phase 3, and the fact that the boilermakers were unable to negotiate, which led to a blockage in the steel throughput. We are hoping to clear that situation. It is not sufficient just to take action on wages. Unfortunately, the situation has grown far more serious.
Mr. Ian Lloyd: The Government have given the House a most astonishing and

1069
alarming statement. Despite the investment of £66 million in the yard, the throughput of steel has dropped from 90,000 to 60,000 tons. Since the figure of capital investment is comparable to the investment in its most competitive yard, Kockums in Sweden, is there not a far more serious conclusion which the Government should draw from the incident—namely, that there is a distinct and possibly disastrous stranglehold on productivity being exercised by those responsible for output at Harland and Wolff? Is it not time that the country, and Harland and Wolff in particular, examined this question, because to pour in millions after millions into what was an obsolete yard and what is now a modern yard which still does not work seems questionable? What is the country to conclude?
Mr. Orme: Before the hon. Gentleman makes such remarks he should look at the yard.
Mr. Lloyd: I have done so.
Mr. Orme: He should talk to the work-people and see what is the potential of that yard. Undoubtedly, because of bad industrial relations in the past there has been a failure of communications and many other difficulties. But the important problem is the steel throughput. We are now resorting to control over the company to expand the industrial potential. I hope that the TUC's proposals for a two-tier board, involving full participation of elected representatives to run the company, will make it the pride of Europe.
Mr. Tom KingIs the Minister aware that his answer about the Industrial Development Advisory Board will not wash? Everybody knows the substantial sums of Government money involved in Harland and Wolff, and the Northern Ireland Office has a particular interest in that company. If this is an indication of how the Government monitor the situation and seek informed advice on their investment, this gives little encouragement to further actions of this kind. Is this not in direct contradiction to the statement made by the Minister of State, Department of Industry that, although there was no time to consult the advisory board on the Court Line, in any future cases the board would be consulted?
1070
But within a very short period of time we find that undertaking not being honoured.
Mr. Orme: I do not know what the hon. Gentleman is hoping to rescue from this operation. Is he saying that we should not have used the Industry Act?
Mr. Tom King: No: that you should use it correctly.
Mr. Orme: We have used the Act and we have informed the board and have had no complaint from that body. We are not obliged by law to consult but it has been informed in the proper manner. We have needed to move with speed, as was the case over the Court Line. I do not accept the hon. Gentleman's argument.
Mr. SelbyOn the question of the transfer of work from Govan to Belfast, I understand that was done to increase productivity. Obviously, that move has not been successful, so who is at fault? Obviously, the management is incapable of running the concern whether at Govan or in Belfast. Surely the Government should take it all over because nobody else seems capable of running it.
Mr. Orme: The reason why the Government did not take over the yard completely was that legislation would have been needed and time was not available. I said in the statement that the Government would have a large holding in the company, and it does not preclude a 100 per cent. holding. We shall have enough of a holding to create the type of management which will be satisfactory and which will meet my hon. Friend's point.
Mr. Heseltine: May I press the Minister on the question of the Industrial Development Advisory Board. It has been said that the Government were right to become involved in Harland and Wolff. That is not the point at issue. What is important is that the advisory board should feel that it has a valuable job to do. If the hon. Gentleman reads the Act he will see that the Government are compelled to consult, and if the advisory board disagrees, the fact must be published that it did disagree. It is difficult for the House to understand why consultation did not take place. Since it is the second time in two weeks that

1071
this has happened, the Minister will antagonise people who give their time to helping the industry.
Mr. Orme: I have the Act here, and I have looked at Section 9. One does not have to consult. One is in order in asking the advisory board to advise. That is what it is there for. The board is there not to dictate to the Government but to give advice. The Government sent this information to the board and received no objection to what was proposed. I wonder why on earth the Opposition are raising this matter.
Several Hon. Members rose—
Mr. Deputy Speaker (Mr. George Thomas): Order. There is a lot of business before the House and we must get on.

BUSINESS OF THE HOUSE (FINANCE BILL)
Ordered,
That each further stage of the Finance Bill may be proceeded with at the conclusion of the preceding stage, notwithstanding the practice of the House as to the interval between the stages of such a Bill.—[Mr. Joel Barnett.]

ORDERS OF THE DAY
  FINANCE BILL
  As amended (in the Committee and in the Standing Committee), further considered.
Clause 17

  CASES I AND II OF SCHEDULE E
  4.52 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move Amendment No. 16, in page 12, line 26, leave out from 'deduction' to 'was' in line 27 and insert:
  equal to their whole amount'.
  Mr. Deputy Speaker (Mr. George Thomas): With this we are to take Government Amendments Nos. 17, 18, 19 and 20.
  Mr. Terence Higgins: On a point of order, Mr. Deputy Speaker. I wonder whether I might have your guidance. I am not clear at what stage the recommittal motion is taken.
  Mr. Deputy Speaker: That comes later.
  Mr. Barnett: The first two amendments, Nos. 16 and 17, are consequential on the adoption by Standing Committee A of Government Amendment No. 420, which redrafted paragraph 1 of Schedule 2. These amendments are needed to take account of the new form of that paragraph. They do not change the substance of Clause 17.
  Amendments Nos. 18, 19 and 20 are complementary to Amendments Nos. 421 and 422 to Schedule 2 which were tabled in Committee and provide for relief to be given, among other things, for employee contributions to unapprovable foreign pension funds. The present amendments affect Clause 17, and as Clause 14, as it was then, had already been debated in Committee of the whole House these amendments have had to be tabled on Report. I hope that these amendments will be accepted.
  Amendment agreed to.
  Amendments made:
  No. 17, in page 12, line 28, after 'allowable', insert:
  'under paragraph 1 of Schedule 2 to the Finance Act 1974'.
  No. 18, in page 12, line 31, after 'but', insert 'either—(a)'
  No. 19, in page 12, line 35, at end insert or—
  (b) those emoluments are foreign emoluments within the meaning of paragraph 1 of Schedule E and the Board are satisfied, on a claim made by the employee, that the payments in question are made pursuant to a scheme or to a fund which corresponds to such a scheme or fund as is mentioned in subsection (1) or (2) above'.
  No. 20, in page 13, line 3, at end insert
  'or where the emoluments from the employment are foreign emoluments within the meaning of paragraph 1 of Schedule E, and the Board are satisfied, on a claim made by the employee, that the retirement benefits scheme in question corresponds to such a scheme as is mentioned in paragraph (a), (b) or (c) of subsection (1) above'.—[Mr. Joel Barnett.]

Schedule 2

  DEDUCTIONS OR EXCEPTION IN RESPECT OF CERTAIN EMOLUMENTS
  Mr. Joel Barnett: I beg to move Amendment No. 38, in page 51, line 22, leave out one-tenth 'and insert one-quarter'.
  Mr. Deputy Speaker: With this we are to take the following amendments:

  No. 194, in page 51, line 22, leave out 'one-tenth' and insert 'one-half'.

  No. 59, in page 51, line 22, leave out 'one-tenth ' and insert 'two-fifths'.

  No. 60, in page 51, line 65, leave out 'one-quarter' and insert 'two-fifths'.

  Mr. Barnett: The effect of the amendment would be to increase from one-tenth to one-quarter the special deduction to be allowed under paragraph 1 in charging to tax the earnings of a director or employee who works overseas for less than a continuous period of 365 days. The hon. Member for Worthing (Mr. Higgins) will recall that I told the Committee upstairs that I would be putting down an amendment of this nature on Report. The effect of the amendment was discussed in connection with Government Amendment No. 420 in Committee on 24th June.
  I hope it will be recognised that we are going a considerable way towards
  1074
  giving relief to those who go abroad to work for fewer than 365 days. We have indicated that we have no wish to make life particularly difficult for this type of employee who goes abroad to bring back foreign earnings but, at the same time, that must be balanced against the problems of abuses that we have been trying to eliminate by means of the foreign income clauses in the Bill. We all know what led to these items being put into the Bill. This started as long ago as the Lonrho affair last year, when the then Chancellor of the Exchequer said that he was extremely concerned about these matters. We took action to deal with the problem by removing the remittance basis which was the cause of so much of the trouble.
  We feel that with 25 per cent. relief there will be sufficient to ensure that there is no particular hardship for those who seek to work abroad for the benefit of this country. I know that a number of other amendments are being taken with this Government amendment, and it may be for the convenience of the House if I delay my reply to them.
  The Opposition have tabled one amendment to increase the proportion to 40 per cent. or two-fifths. Another Opposition amendment, although being taken with the Government amendment, is not precisely related to it in that it concerns non-United Kingdom residents working in this country for longer than 9 to 10 years.
  I hope the House will accept that the 25 per cent. relief that we have given is more than adequate. Indeed, I regard this as a very reasonable concession, and I hope that the House will accept the amendment.
  Mr. Higgins: You have said Mr. Deputy Speaker, that with this amendment we are taking Amendments Nos. 194, 59, and 60. I have previously had occasion, and I gladly repeat it now, to pay a tribute to the tremendous amount of work that has been done by those who have produced the Xerox amendment paper and the Bill, with the enormous amount of work that that must have entailed in checking, and so on. It is also the case that this has placed a considerable strain upon the Government and, I feel bound to say, on the Opposition, too.
  It was understood in Committee upstairs—and I hope that a similar understanding prevailed on the Floor of the

  1075
  House—that if necessary a manuscript amendment could be moved from time to time, and perhaps I may for a moment address you on that matter.
  As you will have noticed, Mr. Deputy Speaker, in a sense Amendments Nos. 59 and 38 cover a range of options from one-quarter to two-fifths, while another Opposition amendment suggests one-half. Normally, the appropriate thing to do would be to amend the Government amendment if we wanted to substitute two-fifths for what the Government propose. But that has not been done and, as a result, we have two amendments which, in a sense, are mutally exclusive.
  It would be possible for the Opposition to vote against the Government amendment, and if, as seems not impossible, we were to carry the vote against the Government, we should then vote on Amendment No. 59. I think you will agree, Mr. Deputy Speaker, that that would be a somewhat clumsy procedure. The normal practice is to table an amendment to the Government amendment, and if one cannot get one's own amendment, let the Government amendment go through on the nod rather than waste 20 minutes of Government time on having an unnecessary Division.
  I do not expect you to give me an immediate reply, Mr. Deputy Speaker, because no doubt you will wish to consider the matter. I wonder whether, in the interests of the general efficiency of the House, you would be prepared to accept a manuscript amendment to Government Amendment No. 38 in precisely the terms of Amendment No. 59 that is, to leave out one-quarter and insert two -fifths. I do not expect an immediate answer. It is a question, of what is convenient for the House. Perhaps we might return to this point later in the debate.
  5.0 p.m.
  Mr. Deputy Speaker: I am obliged to the hon. Gentleman. I had been attracted to what he describes as the cumbersome system, but further thought will be given to this matter and we can come to it a little later.
  Mr. Higgins: I am grateful to you, Mr. Deputy Speaker. There is no difference in substance involved in what I have in mind. I am concerned about the number of times we shall have to troop through
  1076
  the Lobbies. Normally we would have hoped to have caught this matter earlier, but alas we have not done so on this occasion.
  I turn now to the substance of what is under discussion. The amendment moved by the Chief Secretary would change the fraction from one-tenth to one-quarter, so that, instead of 90 per cent., only 75 per cent. of the earnings of a person who goes abroad to work for less than a year would be taxed. This matter has been debated at considerable length in the Committee upstairs and on the Floor of the House, particularly on 13th June.
  As the Chief Secretary pointed out, the origin of the clause was concerned with the original Lonrho affair. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) and my right hon. Friend the Leader of the Opposition, in a memorable phrase, rightly condemned the fact that to some extent the remittance basis system was open to abuse. That is common ground between both sides of the House and, therefore, the Government have taken steps to deal with the matter. In Committee we expressed the view that the right approach would be to publish a Green Paper so that the whole matter could be gone into in great detail and discussions could take place. We regretted that that did not happen. We can reasonably claim, however, that the House of Commons has done a good job so far as it can in the circumstances, and there is no difference in principle between us and the Government. The only point at issue, as shown in Government Amendment No. 38 and our Amendment No. 59, is the question of the rate that should be charged. This is a matter of quantitative estimate and we regard what we propose as the appropriate amount
  As the Chancellor has made clear in Committee, it was not his intention to deter people from going abroad. The total cost of our amendment in terms of fiscal revenue cannot be great. On the other hand the effect upon incentive for people to go and work abroad would be considerable. It is a question of what rate should be chosen. Amendment No. 194 suggests a figure of 50 per cent. while in our Amendment No. 59 we suggest two-fifths and the Government in their Amendment No. 38 suggest one-quarter. The

  1077
  question arises whether the figure which we have selected is preferable to that proposed by the Government.
  I have received many representations on this issue. It has some effect on the country's balance of payments to the extent that a consultant engineer, for example, might go to a country abroad and might, as my hon. Friend the Member for Guildford (Mr. Howell) pointed out in Committee, encounter unpleasant climates. Such unpleasant factors must be taken into account and allowance made for them. We must also consider how our overseas earnings might be affected by the proposals we are considering. I have the impression that a number of the measures that the Chancellor announced in his mini-Budget this afternoon will add considerably to our import bill burden. Therefore, anything we can do to cover this by greater exports is likely to be important. That point did not come out in the abbreviated exchanges earlier this afternoon, but it needs to be considered later.
  A number of different groups of people were mentioned in connection with this matter in our earlier debates. I have mentioned engineers. People going abroad to work in this way are taking their expertise to other countries, and there can be returns arising from this to our economy. They may sell goods when abroad or undertake work which will help our exports.
  We have also debated at length the question of academics working abroad for a period of time, as well as consultants, economists and others. There are many different groups which have been brought to the attention of the Committee and the House.
  We are trying here to achieve a package. The Chief Secretary will recall that there were previously other amendments which suggested reducing the period of one year to perhaps six months. There is also the vexed question of expenses, which will be dealt with when we consider the next set of amendments. On consideration we do not feel it right to press the point about the length of time, but we think it right to pursue the matter of the rate and to try to reduce it from 75 per cent. to 60 per cent. For the reasons
  1078
  I have adduced, we believe this to be the right figure rather than the figure which the Government are adopting in what is now a more flexible attitude.
  I have also received representations pointing out that a number of people who go abroad to work on Government contracts as part of the overseas aid programme often find themselves in unpleasant climates.
  Amendment No. 60 concerns a different point in many ways but it is convenient to debate it with this set of amendments. It is concerned not with people who go to work abroad from this country but with those from abroad who come to work here. The two cases are not symmetrical. Different considerations arise in each case, but the people who come here to work from abroad bring considerable benefit to our economy. The number of people involved cannot be large.
  The amendment relates to people who have been here a considerable number of years and who may wish to remit much of their earnings to this country and therefore find those earnings taxed at whatever rate is set. Such people are often the most senior executives of foreign firms with staff in this country. It is desirable—the Government have to some extent recognised this—that we should not do anything to drive those firms away and possibly lead them to establish bases in other European centres instead of this country.
  Representations have been made to us regarding tax as a percentage of gross income at the rate of 75 per cent. and for a group of people on incomes of £1,000 a year.
  Despite the statement that the Chief Secretary issued on 21st June about the taxation of foreigners living in the United Kingdom, it appears that the rate for the United Kingdom on the basis I mentioned compares with a rate in Belgium for someone from overseas of 18 per cent,. in France of 14 per cent., in Germany of 25 per cent. and in the Netherlands of 19 per cent. So the figures appear to be lower generally in Europe than in this country. Although the difference is not always great, there is some danger of these senior executives deciding that there are advantages in operating from, say,

  1079
  Brussels or elsewhere in Europe than from this country.
  That being so, I hope that the Chief Secretary will feel able to make a further move in the direction of Amendment No. 60. My suggestion should get us out of the procedural problem that I mentioned earlier. I hope that the Chief Secretary will accept our amendments.
  Mr. Deputy Speaker: Before I call the next speaker, I should say that I shall be prepared in due course to accept a manuscript amendment, as was suggested by the hon. Member for Worthing (Mr. Higgins). Perhaps his hon. Friend the Member for Guildford (Mr. Howell) will be able to move it formally since the hon. Gentleman himself has exhausted his right to speak.
  Mr. David Howell indicated assent.
  Mr. Higgins: On a point of order, Mr. Deputy Speaker. I am sure that that would be convenient. It clearly cannot make any difference of substance. I am grateful for the careful consideration which you, Mr. Deputy Speaker—no doubt with your officials—have given to the matter.
  Mr. Deputy Speaker: Somebody did.
  Mr. David Lane: I support my hon. Friend the Member for Worthing (Mr. Higgins). I know that there was a full debate in Committee on these issues. I am grateful to my hon. and right hon. Friends who served on the Standing Committee for the changes, or promised changes, which they have already secured. Obviously, the Government's ears were not wholly closed. I hope that they will be able to open them a good deal wider now.
  There is undoubtedly still a feeling that, compared with the treatment of people from overseas working here, we do not yet have satisfactory arrangements for our own people working overseas. The problem is familiar, as the Chief Secretary said. We have to take care, in stamping out abuses, not to penalise legitimate activities and the various overseas efforts of the majority of people which are entirely above-board and laudable.
  Examples have been mentioned earlier of business men, civil engineers and so on,
  1080
  working overseas in areas like the Gulf. My hon. Friend said, rightly and relevantly, that they make an important contribution to our invisible earnings, thus benefiting our balance of payments. My own concern is mainly with the academics who work overseas for varying periods. The Government must realise from the representations made to them that at the time of the Budget there was consternation on the Cam. I cannot quote any of the views which reached me at that time from my constituents, because they were all lost in the fire after the bomb explosion here, but there will be copies in the Treasury.
  It is no exaggeration to say that the whole arrangement of sabbatical academic visits would have been jeopardised by the original proposals. The Government now realise, I think, more than they did that considerable additional costs are involved here to the individuals concerned—in terms of keeping two homes going, extra expenses overseas, family costs, education and so on. This kind of academic visit has never been seen as a money spinner or fortune-maker, but neither should it be regarded as something which should put the people concerned out of pocket. We must find a fair balance.
  Without amendments going further than the Government have so far been prepared to go, there would be a strong disincentive to these visits in future. This will be a serious matter not simply for those concerned but for the whole range of international academic contacts by which I believe the whole House sets great store.
  5.15 p.m.
  I hope that we shall reach a reasonable and fair solution. This is a matter of judgment. It will not involve a great additional loss of revenue, whatever figure we reach. In this kind of case, it would be proper for the Government to lean on the generous side. I hope that the House will agree at least the two-fifths amendment, if not the 50 per cent. amendment.
  Mr. Peter Rees: I hope that I shall not be thought censorious if I start by deprecating the constant references by the Front Bench to the Lonrho affair. If this is meant to convey to the House that, by reason of their

  1081
  official position, they know of facts unknown to us, that would be grossly improper. That could not be the reason for doing so. If it is meant to suggest that, by reason of their professional contacts, they know of details unknown to us, that again would be improper. Knowing, as I do, that the Chief Secretary is a person of scrupulous rectitude, I doubt that it is for that reason. I can only suspect that he wishes to introduce an emotive element into what should be a calm and rational debate on an important subject. Therefore, while we are considering the clause, I hope that there will be no more references to Lonrho. We do not know all the facts, so it would be worth while deferring any judgment on the case until we do know them—if indeed we ever do.
  Mr. Higgins: I understand my hon. and learned Friend's point. If he reads the OFFICIAL REPORT when it is eventually printed, he will find that I referred to what the Chief Secretary said about Lonrho. I think that I was careful not to fall into the error that he has just pointed out.
  Mr. Rees: Of course, nothing that I have said was in criticism of my hon. Friend, who has been most scrupulous in these matters and, it may be, had a considerable responsibility when he was in office. I merely deprecate the constant references to that case, which do not advance our debates and might suggest to the world outside, which perhaps does not read our debates with the care that we would like, that facts are still to come out which are known to the Chief Secretary and on which he is passing a considered judgment. We know that it is a strong administrative convention that the affairs of individual taxpayers are never made the subject of debate. No doubt the Chief Secretary will correct me if I am wrong on that point.
  It would be churlish of me not to acknowledge that the Government have gone a little distance, in deference, I hope, to the points that my hon. Friends and I made in Standing Committee and to the representations which we passed on to the Government—which, surprisingly enough, they did not appear to have received. I would draw the attention of my hon. Friend the Member for Cambridge (Mr. Lane) to the surprising statement in Standing Committee that the Government
  1082
  were unaware of the tremendous indignation which, in his experience and mine, has been building up not only in the City but in the distinguished academic campuses—or should it be "campi"?—which he frequents more than I do.
  At any event, whether the Government had received those representations or not at that stage, it was our prime duty to make the Government well aware of them. It seems that at least part of the force of our representations has struck home. However, I regret that the Chief Secretary did not approach the problem slightly differently. It may be—we know that he is a modest man—that he realised that he had stumbled with heavy-booted feet into a field in which fiscal angels like my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) had feared to tread. It may be that, with the reluctance to which I am afraid perhaps all people in our honourable career are prone, he did not want to admit that he had gone too far and would prefer to start again. Perhaps on that basis we have to view with a certain charity the present reliefs that the Chief Secretary is offering us. After all, we are told that we are to have yet another Budget in the autumn, and there is still plenty of time for concentration on the Government Front Bench.
  Perhaps the Chief Secretary is approaching this matter from the wrong principle. He is saying" All right, we shall increase the number of days that an employee may spend in this country without exposing himself to fiscal penalties, and we shall increase the deduction that he may claim from his emoluments. "Is that the right approach? For instance, why does not the Chief Secretary adopt the suggestion that the deduction which he may claim should be proportionate to the amount of the working year that is spent abroad? Inevitably, where one takes a simple fraction there will be cases of hardship falling on the wrong side of the line.
  I return to the question of leave which I raised in Standing Committee—perhaps a little misguidedly, because I doubt whether I had time sufficiently to digest the new subparagraph (4) which the Chief Secretary had promised us. I do not know whether I fully appreciate the consequence of that. I am not certain whether the Chief Secretary has yet

  1083
  entirely dealt with this point. I should like to uncover my anxieties to him and the House.
  It seems that the basis underlying Clause 17 and Schedule 2 is that the Government wish to bring within the United Kingdom fiscal net those people who have two employments or two offices, one in this country and one abroad. The Government said that in an era of easy travel there is no longer the same justification for the remittance basis. None the less, surely there is still the same justification for treating with a degree of liberality those who have only one office or employment and where the duties of that office or employment are performed exclusively abroad. Surely it does not matter whether it is a question of fiscal morality or economic judgment and so on if a person comes back and spends more than 63 days in this country. Surely the person whom the Chief Secretary is wishing to entrap, if that is the right word, is the person who has a rather nominal job abroad and whose real centre of economic activity is in Britain.
  I put it to the Chief Secretary that he is not seeking to catch the person who genuinely has a full-time occupation for many months of the year. or his only occupation. in some unsalubrious part of the world and who returns for two, three or four months' leave to this country. Surely the Chief Secretary will concede that a person who works—dare I say it, after the Chancellor's announcement?—in the Persian Gulf is entitled to four months' leave here, because the climatic pressures on him are very great. Therefore, to penalise him if he spends more than 63 days here would be unfair.
  I notice a look of anxiety on the Chief Secretary's face—perhaps it was not a look of anxiety but a look of utter confidence, which one inevitably hopes to see on the face of a Treasury Minister when debating a complex point. Perhaps he feels that the point was covered by paragraph 1(4) of the schedule which was introduced by Standing Committee. I ask him to look again at that, because although that says that emoluments paid for a period of leave immediately following a period of continuous absence from the United Kingdom shall be treated for tax purposes as paid for that period of absence, it does not say that the period
  1084
  of leave is to be treated as part of that absence.
  I may have misunderstood the point, but it seems to me that if a person comes back after an arduous eight or nine months in the Persian Gulf and spends three months in this country on leave, he will be immediately cut down to the one-tenth or, now, the one-quarter relief proposed by the Government's amendment. I cannot feel that the Chief Secretary intended that consequence. He is a man of understanding and generosity and I feel that he would like to do a little better by those of our compatriots who work abroad in unattractive situations.
  Moving on, there is the question of expenses. It may be that the Chief Secretary feels that this matter has been adequately covered by the extra-statutory concession he announced in Standing Committee and by the deduction he now proposes by his newest amendment. My right hon. and hon. Friends and I are not at all happy about an extra-statutory concession. We shall be debating a later amendment in our names and looking very closely at what the Chief Secretary has to say in that debate. As it meshes in with this debate, however, I hope that the hon. Gentleman will have a further thought about the particular fraction he is suggesting because if that, coupled with the extra-statutory concession, is all that he is prepared to concede, I hate to say this but I must tell him that he is being uncharacteristically ungenerous. The hon. Gentleman shakes his head. Therefore, we look for great things when we come to debate the amendment to which I have referred, which seeks to embody the extra-statutory concession that he has announced.
  Even if the extra-statutory concession were applied with the force and consistency of law, it would not go far enough. It does not deal with subsistence or the question of taking a wife and family to foreign parts. If the hon. Gentleman will not give any concession on that front, he must be much more generous in the fractional deduction that he allows.
  The next point that the hon. Gentleman should consider is this. He moved with enormous rapidity, so rapidly—although, perhaps, one should not complain about that, because rapidity on the

  1085
  part of the Government is usually a virtue—that it was not possible to digest the full argument on Amendment No. 19, which I do not think is applicable only to foreign emoluments. If a non-domiciled employee of a foreign company working over here is to have relief for his or his firm's contributions to some foreign pension fund which corresponds to the amount of pension funds which would be approved by the Revenue here, why should not a United Kingdom resident who goes abroad have some relief for any contributions by his firm which may be made abroad—it may not necessarily be a United Kingdom pension fund—to a foreign pension fund on his behalf?
  There is here unjustified discrimination against our compatriots and in favour of those who work here. I do not complain about Amendment No. 19. Perhaps the point is covered. If not, however, why should not the principle underlying it be extended to United Kingdom residents who go and work abroad?
  I come finally to Amendment No. 60 which, as my hon. Friend the Member for Worthing (Mr. Higgins) correctly pointed out, sits uneasily in harness with the other amendments in this group. Here we have to consider foreign executives and the emoluments of those who may be resident here but are not domiciled and are the employees of a foreign company. By the new paragraph 3 of the schedule the Chief Secretary has sought to reintroduce by the back door a certain part of what was Clause 18. I commend him warmly for having dropped Clause 18, but I qualify that commendation when I look at paragraph 3. I am delighted that he should not have penalised those who, for the best possible reasons, have chosen to make their residence here for many months of the year but are not domiciled here. I am very glad that the burden of United Kingdom tax—it is a burden by comparison with most other countries—is not to rest on their foreign income. I am, however, a little alarmed to see that at least part of the principle has crept back again in paragraph 3.
  I do not understand why non-domiciled employees of foreign companies should be penalised after nine years of continuous residence here. If we wish to encourage these people to stay and work here and to make their companies' headquarters
  1086
  here, why are we not consistent and why do we not afford them the same measure of relief in this respect? It is illogical and a little mean that after nine years the chopper should fall and they should get only half of the relief that they have enjoyed up to that point in time.
  If we want to welcome these people, why do we not welcome them consistently, whether they stay here for two years, for five years, for 10 years or for 20 years? I do not see any great virtue in driving them away after nine years, but that is what I suspect will happen. I believe that if they make their contribution to Britain and its economy for nine years, we should go on welcoming them thereafter. I believe that it is illogical for this paragraph to have found its way into the schedule.
  Finally, in view of the extremely interesting announcements made by the Chancellor of the Exchequer about an hour ago, I put it to the Chief Secretary that, possibly as a delicate compliment to the Shah of Persia and as a response to the generous financial assistance he is affording Britain, there should be a special category of relief for those Iranian residents of domicile who choose to make their careers here. This would be only fair in view of the outstanding contribution to our economic difficulties that the Shah is apparently about to make. I am sure that the Chief Secretary will see the point of that, and perhaps in the autumn Budget which his right hon. Friend is to introduce we shall find a yet further measure of relief.
  5.30 p.m.
  Mr. Joel Barnett: To deal first with the problem of United Kingdom citizens, the burden of the case made by Opposition Members, particularly by the hon. Member for Worthing (Mr. Higgins), was that there should be relief at 40 per cent. instead of at 25 per cent.
  I think that the hon. and learned Member for Dover and Deal (Mr. Rees) has been a trifle touchy on these matters. I am surprised at his sensitivity. When I referred to the Lonrho affair I did so in quotes. It was, after all, the cause of a very remarkable statement by the then Prime Minister, the Leader of the hon. and learned Gentleman's party. That is all I was referring to. As the hon. and learned Gentleman knows only too well, I know nothing of the tax affairs of any

  1087
  individual taxpayer, so he should not be so touchy.
  The reason why I mentioned that and what lies behind these provisions is that it is important that we have before us all the time the reason why the Government decided to introduce them—namely, to cut out what has been generally recognised to be a considerable abuse of our tax system.
  The hon. and learned Gentleman and his hon. Friends suggest that either 40 per cent. or 50 per cent. should be the relief. The hon. Member for Worthing said that there is no difference in principle between us. I see that the hon. and learned Gentleman is agreeing. I always begin to worry when I hear that said. There would be a considerable difference if 40 per cent. or 50 per cent. of earnings abroad were to be allowed. If a man were to go abroad for, say, six months and earn £10,000 there, I cannot believe that it would be right that he should have £5,000 or £4,000 of that tax-free as opposed to a fellow United Kingdom taxpayer who would have to pay tax on the whole of his income in the United Kingdom. Therefore, there is a considerable difference between us. However, I believe that we have been, if anything, very generous in agreeing that 25 per cent. should be the proportion.
  Much has been made of the problem of disincentives created by the fact that 75 per cent. of income earned abroad—I emphasise "income earned abroad"—where the work has been performed abroad for less than 365 days will be taxed. Let us be clear. The earnings of all those who go and work abroad for more than 365 days—that is better than it was before, when it had to be for a fiscal year—remain wholly tax-free. I cannot accept that it will be a disincentive because people will have to pay tax on 75 per cent. of their income earned abroad in a comparatively short spell.
  The hon. Member for Worthing mentioned a number of types of individual who could go abroad for less than 365 days and said that for them this rule would be a serious disincentive. He mentioned the example of those under ODA contracts. Those contracts are generally for a minimum period of 21 months, so there would not be any problem in that respect.
  1088
  Once again we had arguments about consultant engineers and others who go abroad for less than 365 days. It was said that this would be a disincentive to their going abroad and earning foreign income for Britain. It must be recalled that we are talking about the man who goes abroad for a comparatively short period. If he went abroad for 365 days he would, because of the amendment we have agreed, be able to have up to 63 days' home leave and still obtain the full tax-free relief.
  I believe that we have been extremely generous in the amendments we have agreed. I cannot help thinking that hon. Members opposite seek to go much too wide in their amendments by seeking to say that as high a proportion as 40 per cent. or 50 per cent. of earnings accrued abroad on a comparatively short stay should be tax-free.
  Mr. Lane: The Chief Secretary mentioned two examples. Will he put into the balance of judgment, before he makes up his mind finally, the case of academics who go abroad for perhaps eight or nine months and where there is no question of home leave? There are complications—reduced salary here, not very large salaries at the other end. I assure the hon. Gentleman that there is a serious element of disincentive here. It was with this thought particularly in mind that I asked him to lean, if anything, on the generous side.
  Mr. Barnett: I accept that. This is amongst the reasons why we made the concessions we did, including the concession on travelling expenses which we shall come to on a later amendment. We have had discussions with the organisations principally concerned. They believe that we have gone very far in dealing with this and they are pleased with what we have done so far.
  If an academic—or anybody else for that matter—goes abroad for less than 365 days, is it right that he should have more than 25 per cent. relief compared with his fellow academic back in the United Kingdom? I argue that 25 per cent. relief should be more than adequate. I will deal with the exception later, when I hope to show that we have been generous in the solutions we have to deal with this type of problem, which I accept is a real one.

  1089
  The hon. and learned Member for Dover and Deal put to me the problems of a man who goes to a very difficult climate and has to return for leave for two, three or four months. If he is working abroad for more than 365 days and he returns for two months, he will still get the 100 per cent. relief because he will be classed as a person working abroad for more than 365 days. It is a matter of judgment about what more than that amount of relief one should allow. That was the amendment which we accepted in Committee relating to the 63 days. To go beyond that would be more than unusually generous even for the hon. and learned Gentleman. I do not accept that we are penalising such a man, as he put it.
  Mr. Peter Hordern: Has the Chief Secretary received representations, as some of us have, about United Kingdom citizens working abroad—particularly in climates such as my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) referred to—where there is no facility for them to remit any payment of their salaries home to this country? Is it not therefore very hard on that category of person who is physically debarred from sending his earnings back to Britain? He is, under the Government's proposals, taxed as to 75 per cent. of his earnings.
  Mr. Barnett: I think that the hon. Gentleman might have temporarily nodded off in Committee, though I do not blame him for that. I said there that there were already arrangements in existence in countries where it was not possible to remit to this country.
  The hon. and learned Gentleman then put to me the problem of terminal leave pay. I hope I got his question right. If I did not, no doubt he will rapidly tell me. In a Press notice issued by the Inland Revenue on 4th July, paragraph lb stated:
  "Under an amendment made to the Bill, terminal leave pay will be 'attributed' to the period of continuous absence from the United Kingdom. This will have the effect that if the latter was for 365 days or more the terminal leave pay would qualify for the 100 per cent. deduction; if the absence was less than 365 days the terminal leave pay would qualify for the one-quarter deduction.…But the terminal leave periods spent in the United Kingdom cannot of course count as days spent overseas."
  1090
  I hope that answers the question.
  I should like to turn to another of the hon. and learned Gentleman's questions. He said that we were discriminating against United Kingdom residents working abroad if we did not allow deductions for foreign pensions, as opposed to non-United; Kingdom citizens working here who under Amendment No. 19 would be allowed a deduction if the foreign pension was approvable by the Board of Inland Revenue. In fact it was not Amendment No. 19; it was an amendment which has not been selected, to which, Mr. Deputy Speaker, you will allow me to refer—Amendment No. 197.
  The answer is quite simple. We are talking about a man who goes abroad for less than 365 days—a comparatively short period. That kind of man is not likely to have a permanent job abroad. Indeed, if he had a permanent job abroad a 100 per cent. deduction would be allowable because it would be likely to be for more than 365 days. We are talking about people who go abroad for comparatively short stays, for less than 365 days. I should have thought that that kind of person would not be likely to take out a foreign pension.
  Mr. Peter Rees: I still derive the impression that the Chief Secretary is not impressed with the facts of modern life. There are people who have regular jobs with companies abroad, or even with United Kingdom-based companies, and who, because of climatic conditions or the type of work they do for eight or nine months of the year, come back here for three months or more on leave. It is that kind of person I have in mind. The hon. Gentleman brushes that example aside and says that it does not exist. I can assure him from representations made to me and other hon. Members that such people exist in relatively large numbers.
  I do not think that the hon. Gentleman has grasped the dimension of the problem. That kind of person, who is regularly abroad for seven, eight or nine months a year, for the nicest of possible motives wants to come back to his native country to spend his leave. I am not thinking merely of the person who flies out to do a quick job in Monrovia. That is not the sort of person I am worrying about. I am concerned with Amendment

  1091
  No. 19. Suppose that such a man works for a foreign company which has set up a pension fund abroad. What then? Are these United Kingdom employees, if they are unfortunate enough to come back within nine or 10 months, to be assessed on the payments made into the pension fund on their behalf?
  Mr. Deputy Speaker: Order. The hon. and learned Gentleman has already spoken at length on this matter. He exhausted his right to make another speech on the subject. I thought that he was intervening to ask a question.
  Mr. Rees: With great respect, Mr. Deputy Speaker, I was.
  Mr. Barnett: I am obliged, Mr. Deputy Speaker.
  5.45 p.m.
  I entirely take the point made by the hon. and learned Gentleman. Indeed, I took it earlier and I did not agree with it. There may well be United Kingdom citizens working abroad, generally for many years, who want to come back to this country for three or four months in every year. I am sure that is very pleasant. But the fact is that there would also be people who would want to go abroad for eight months, and if this amendment were accepted all their earnings for that period of eight months would be wholly tax-free. I do not accept that that should happen. I would not be prepared to recommend my hon. Friends to support that suggestion. I hope they will support me it the matter is pressed, and I hope that the hon. and learned Gentleman will appreciate that what he seeks to do would be excessively generous.
  I do not deny that the hon. and learned Gentleman may well have received representations, but that does not mean that we have to accept them. For the reasons I have given, I am afraid that I cannot recommend acceptance of the Opposition's proposals. All the time one must bear in mind that the comparison must be made between the type of worker who under our proposals receives 25 per cent. of his income tax-free and the ordinary United Kingdom worker in this country who is taxed on 100 per cent. of his income. I would not agree that
  1092
  the concession should be extended any further.
  I come to the other amendment relating to non-United Kingdom residents working here for more than nine to 10 years. As we have no wish to see that type of person leave the United Kingdom, because we recognise that he is valuable to the United Kingdom, we have made a considerable concession in allowing 25 per cent. of his income to be tax-free.
  The hon. Member for Worthing made comparisons with other countries. Relief of 25 per cent. may not seem very great compared with other countries, but there is a bigger difference. In most countries to which the hon. Gentleman referred the levels of taxation of which he spoke apply to non-United Kingdom citizens or foreign nations long before nine or 10 years. What is more, they are taxed on the whole of their investment income. We are not suggesting that we should do that. I should have thought that we were being very generous. The hon. and learned Member for Dover and Deal said that we were being ungenerous. Indeed he has accused me of a lack of generosity on half-a-dozen occasions. He is unusually repetitive. It must be that we are coming to the end of the Finance Bill, and I can forgive him. He did not do that in Standing Committee. He must be getting a little tired.
  To say that I am being ungenerous in imposing tax on 75 per cent. of a person's income after he has worked in this country for more than nine to 10 years is unacceptable. It could well be argued that that person should be taxed in the same way as any other worker in this country, on 100 per cent. of his income. It is only because we do not wish that kind of person to work elsewhere, because we recognise his value to this country, that we have made this concession. It is an important concession.
  Mr. Higgins: I have naturally been listening with great care to what the hon. Gentleman has said. He said a moment ago, as well as in the Treasury statement on 21st June, that even on this new basis foreigners in this country would, generally speaking, be better off for tax purposes than in most other countries. While that may be true in most other countries,

  1093
  it is not necessarily true for the major European countries. I wonder whether the hon. Gentleman would comment on that. Clearly the major European countries are more relevant than taking all the countries together. The expression "most other countries" is not the most ideal comparison to make, bearing in mind the common ground between us.
  Mr. Barnett: I would be happy to quote from the statement I made and my answer to the Question, although many have criticised my statement on the ground that these comparisons are odious because of all kinds of ways in which taxpayers can avoid paying tax in different countries. However, the hon. Gentleman has asked me for the information and I will give it to him.
  Here are the comparisons. A foreign national working in Germany—one bears in mind the other concession which we have made, that world investment income will not be taxed unless remitted—on £10,000 a year will be taxed as to 25 per cent. of his gross income. The corresponding United Kingdom figure is 22 per cent. At £15,000 the figure for Germany is 31 per cent. and for the United Kingdom 28 per cent. Germany is certainly one of the major countries of Western Europe, and such a foreign national taxpayer would in that case be better off under the United Kingdom arrangements.
  The corresponding figures for France are as follows: on £10,000 14 per cent. compared with 22 per cent. in the United Kingdom; and on £15,000 20 per cent. compared with 28 per cent. One could go through a long list of countries, but I am sure that it would be easier for hon. Members to look at the answer which I gave to a Question on this subject.
  As I say, on top of that we have given the further concession that such taxpayers will not be liable to tax on their world investment income unless it is remitted.
  I hope I have shown that we have been as generous as it is reasonable to be and that the Opposition amendments would be excessively generous. I see that I even carry with me the hon. Member for Cornwall, North (Mr. Pardoe) and the whole of the Liberal bench. I hope, therefore, that the House will agree to accept the Government amendment.
  Mr. David Howell: I beg to move, as a manuscript amendment to the proposed amendment, to leave out "one-quarter" and insert "two-fifths".
  You were kind enough, Mr. Deputy Speaker, to suggest this means by which we might press the spirit of our amendment. Various of my hon. Friends have put forward other points dealing with foreign nationals, but I suggest that our main concern here is for United Kingdom citizens working overseas. In considering what the Chief Secretary has said, therefore, I suggest that we address our minds to what would have been Amendment No. 59, which has now come before us as the manuscript amendment.
  The most telling remark in our short debate came from my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) that the Chief Secretary and his advisers are out of touch and that they are unaware of the pattern of work which has to be followed by business men going abroad to Arabia, North Africa, Asia or wherever it may be for three or four months at a time and who have to do it several times a year. They have a tough time. They cannot take their families, and they have difficulty in keeping contact with them, although no doubt they can telephone from time to time. On the whole it is a tough and unpleasant life. They are not now to be taxed to the extent of 90 per cent. but they are still caught by the 75 per cent. provision as it will stand under the Government's proposal.
  This does not meet the fair and just needs of an important sector of the overseas earning community, a sector bringing valuable benefits to this country. On later amendments we shall come to the equally valuable benefits brought by partnerships and the contribution they make to our overall invisible earnings, which in 1973 were running at a surplus over the whole year of £2,000 million. We shall be coming also to the question of those in receipt of pensions from overseas. For the moment, however, we are concerned with the business man who, under the present provision, will have 75 per cent. of his income taxable. This takes no account of the realities, and I urge the House to recognise the fully justifiable case for making the figure 60 per cent.

  1095
  The Chief Secretary implies that 75 per cent. would be all right and there would be no abuse but that at 60 per cent. abuse would begin. That is an absurd argument. It cannot be right that at one level there will be no abuse but at 15 per cent. less abuse will suddenly appear. That is not a serious argument to put to the House.
  There is no difference of principle here, as the hon. Gentleman tried to imply, putting words into the mouth of my hon. Friend the Member for Worthing (Mr. Higgins). We have always said that we recognise the need for changes in the tax régime governing overseas earnings, but equally we have always said that for goodness' sake we must ensure that the remedy does not kill, that it does not, as it were, cut the head off the animal. We must ensure that in seeking to close loop
  holes we do not destroy a valuable part of British overseas earning capacity. What the Government propose, on the other hand, presents a serious threat, and I predict that before long a Chief Secretary or Treasury Minister in one Government or other will ask the House to disentangle the problems which are at present being created and try to recreate the necessary incentive and easement in the tax position of this important sector.
  I strongly recommend my hon. Friends, therefore, to join in support of our manuscript amendment to Government Amendment No. 38 which affects the overseas earnings of United Kingdom citizens.
  Question put, That the manuscript amendment to the proposed amendment be made:—
  The House divided: Ayes 255, Noes 273.

  Division No. 96.]

  AYES

  [5.56 p.m.

  Adley, Robert

  Crouch, David

  Hayhoe, Barney

  Aitken, Jonathan

  Crowder, F. P.

  Heath, Rt. Hn. Edward

  Alison, Michael (Barkston Ash)

  Davies, Rt. John (Knutsford)

  Henderson, J. S. B. (Dunbartonshire, E.)

  Allason, James (Hemel Hempstead)

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

  Higgins, Terence

  Amery, Rt. Hn. Julian

  Dean, Paul (Somerset, N.)

  Hill, James A.

  Ancram, M.

  Deedes, Rt. Hn. W. F.

  Holland, Philip

  Archer, Jeffrey

  Dodds-Parker, Sir Douglas

  Hordern, Peter

  Atkins, Rt Hon H. (Spelthorne)

  Dodsworth, Geoffrey

  Howe, Rt. Hn. Sir Geoffrey (Surry, E.)

  Awdry, Daniel

  Douglas-Home, Rt. Hn. Sir Alec

  Howell, David (Guildford)

  Baker, Kenneth

  Drayson, Burnaby

  Howell, Ralph (Norfolk, North)

  Balniel, Rt. Hn. Lord

  du Cann, Rt. Hn. Edward

  Hunt, John

  Banks, Robert

  Durant, Tony

  Hurd, Douglas

  Barber, Rt. Hn. Anthony

  Dykes, Hugh

  Hutchison, Michael Clark

  Bell, Ronald

  Eden, Rt. Hn. Sir John

  Iremonger, T. L.

  Bennett, Dr. Reginald (Fareham)

  Edwards, Nicholas (Pembroke)

  Irvine, Bryant Godman (Rye)

  Berry, Hon. Anthony

  Elliott, Sir William

  James, David

  Biffen, John

  Emery, Peter

  Jenkin, Rt. Hn. P. (R'dge W'std & Wfd)

  Biggs-Davison, John

  Eyre, Reginald

  Jessel, Toby

  Blaker, Peter

  Fairgrieve, Russell

  Johnson Smith, G. (E. Grinstead)

  Boardman, Tom (Leicester, S.)

  Farr, John

  Jones, Arthur (Daventry)

  Body, Richard

  Fell, Anthony

  Jopling, Michael

  Boscawen, Hon. Robert

  Fenner, Mrs. Peggy

  Kaberry, Sir Donald

  Bowden, Andrew (Brighton, Kemptown)

  Finsberg, Geoffrey

  Kellett-Bowman, Mrs. Elaine

  Braine, Sir Bernard

  Fletcher, Alexander (Edinburgh, N.)

  Kershaw, Anthony

  Brewis, John

  Fletcher-Cooke, Charles

  Kimball, Marcus

  Brittan, Leon

  Fookes, Miss Janet

  King, Evelyn (Dorset, S.)

  Brocklebank-Fowler, Christopher

  Fowler, Norman (Sutton C' field)

  King, Tom (Bridgwater)

  Bryan, Sir Paul

  Galbraith, Hn. T. G. D.

  Kirk, Peter

  Buchanan-Smith, Alick

  Gardiner, George (Reigate & Banstead)

  Kitson, Sir Timothy

  Buck, Antony

  Gardner, Edward (S. Fylde)

  Knight, Mrs. Jill

  Budgen, Nick

  Gilmour, Sir John (Fife, E.)

  Knox, David

  Bulmer, Esmond

  Glyn, Dr. Alan

  Lamont, Norman

  Burden, F. A.

  Goodhew, Victor

  Lane, David

  Butler, Adam (Bosworth)

  Gow, Ian (Eastbourne)

  Latham, Michael (Melton)

  Carlisle, Mark

  Gower, Sir Raymond (Barry)

  Lawson, Nigel (Blaby)

  Carr, Rt. Hn. Robert

  Grant, Anthony (Harrow, C.)

  Lester, Jim (Beeston)

  Chalker, Mrs. Lynda

  Gray, Hamish

  Lewis, Kenneth (Rtland & Stmford)

  Channon, Paul

  Grieve, Percy

  Lloyd, Ian (Havant & Waterloo)

  Chataway, Rt. Hn. Christopher

  Griffiths, Eldon (Bury St. Edmunds)

  Loveridge, John

  Churchill, W. S.

  Grist, Ian

  Luce, Richard

  Clark, A. K. M. (Plymouth, Sutton)

  Gurden, Harold

  MacArthur, Ian

  Clarke, Kenneth (Rushcliffe)

  Hall, Sir John

  McCrindle, R. A.

  Clegg, Walter

  Hall-Davies, A. G. F.

  Macfarlane, Neil

  Cockcroft, John

  Hamilton, Michael (Salisbury)

  MacGregor, John

  Cooke, Robert (Bristol, W.)

  Hampson, Dr. Keith

  McLaren, Martin

  Cope, John

  Hannam, John

  Macmillan, Rt. Hn. M. (Farnham)

  Cordle, John

  Harrison, Col. Sir Harwood (Eye)

  McNair-Wilson, Michael (Newbury)

  Corrie, John

  Harvie Anderson, Rt. Hn. Miss

  McNair-Wilson, Patrick (New Forest)

  Costain, A. P.

  Hastings, Stephen

  Madel, David

  Critchley, Julian

  Havers, Sir Michael

  Marshall, Michael (Arundel)

  Marten, Neil

  Prior, Rt. Hn. James

  Stewart, Ian (Hitchin)

  Mather, Carol

  Raison, Timothy

  Stodart, R. Hn. A. (Edinburgh, W.)

  Maude, Angus

  Rathbone, Tim

  Stokes, John

  Maudling, Rt. Hn. Reginald

  Rawlinson, Rt. Hn. Sir Peter

  Stradling Thomas, John

  Mawby, Ray

  Redmond, Robert

  Tapsell, Peter

  Maxwell-Hyslop, R. J.

  Rees, Peter (Dover & Deal)

  Taylor, Edward M. (Glgow, C'cart)

  Mayhew, Patrick (Royal T' bridge Wells)

  Rees-Davies, W. R.

  Taylor, Robert (Croydon, N.W.)

  Meyer, Sir Anthony

  Renton, Rt. Hn. Sir David (H't' gd' ns' re)

  Tebbit, Norman

  Miller, Hal (B'grove & R'ditch)

  Renton, R. T. (Mid-Sussex)

  Temple-Morris, Peter

  Mills, Peter

  Rhys Williams, Sir Brandon

  Thatcher, Rt. Hn. Margaret

  Miscampbell, Norman

  Ridley, Hn. Nicholas

  Thomas, Rt. Hn. P. (B'net, H'den S.)

  Mitchell, David (Basingstoke)

  Ridsdale, Julian

  Trotter, Neville

  Moate, Roger

  Rifkind, Malcolm

  Tugendhat, Christopher

  Money, Ernie

  Rippon, Rt. Hn. Geoffrey

  van Straubenzee, W. R.

  Moore, J. E. M. (Croydon, C.)

  Roberts, Michael (Cardiff, N.W.)

  Vaughan, Dr. Gerard

  Morgan-Giles, Rear-Adm.

  Roberts, Wyn (Conway)

  Viggers, Peter

  Morris, Mitchell (Northampton, S.)

  Rodgers, Sir John (Sevenoaks)

  Waddington, David

  Morrison, Charles (Devizes)

  Rosel, Hugh (Hornsey)

  Wakeham, John

  Morrison, Peter (City of Chester)

  Rost, Peter (Derbyshire, S.E.)

  Walder, David (Clitheroe)

  Mudd, David

  Royle, Sir Anthony

  Walker, Rt. Hn. Peter (Worcester)

  Neave, Alrey

  Sainsbury, Tim

  Walker-Smith, Rt. Hn. Sir Derek

  Neubert, Michael

  St. John-Stevas, Norman

  Wall, Patrick

  Newton, Tony (Braintree)

  Scott-Hopkins, James

  Walters, Dennis

  Nicholls, Sir Harmar

  Shaw, Giles (Pudsey)

  Warren, Kenneth

  Normanton, Tom

  Shaw, Michael (Scarborough)

  Weatherill, Bernard

  Nott, John

  Shelton, Willam (L'mb'th, Streath'm)

  Wells, John

  Onslow, Cranley

  Shersby, Michael

  Wiggin, Jerry

  Oppenheim, Mrs. Sally

  Silvester, Fred

  Winterton, Nicholas

  Orr, Capt. L. P. S.

  Sims, Roger

  Wood, Rt. Hn. Richard

  Osborn, John

  Sinclair, Sir George

  Worsley, Sir Marcus

  Page, Rt. Hn. Graham (Crosby)

  Skeet, T. H. H.

  Young, Sir George (Ealing, Acton)

  Page, John (Harrow, W.)

  Smith, Dudley (W'wick&L'm'ngton)

  Parkinson, Cecil (Hertfordshire, S.)

  Spicer, Jim (Dorset, W.)

  TELLERS FOR THE AYES:

  Pattie, Geoffrey

  Spicer, Michael (Worcestershire, S.)

  Mr. Paul Hawkins and

  Percival, Ian

  Sproat, Iain

  Mr. Spencer Le Marchant.

  Pink, R. Bonner

  Stainton, Keith

  Price, David (Eastleigh)

  Stanbrook, Ivor

  NOES

  Allaun, Frank

  Crosland, Rt. Hn. Anthony

  Garrett, W. E. (Wallsend)

  Archer, Peter

  Cunningham, G. (Isl'ngt'n, S & F'sb'ry)

  George, Bruce

  Armstrong, Ernest

  Cunningham, Dr. John A. (Whiteh 'v' n)

  Gilbert, Dr. John

  Ashley, Jack

  Dalyell, Tam

  Ginsburg, David

  Ashton, Joe

  Davidson, Arthur

  Golding, John

  Atkins, Ronald

  Davies, Bryan (Enfield, N.)

  Gourlay, Harry

  Atkinson, Norman

  Davies, Denzil (Llanelli)

  Graham, Ted

  Bagier, Gordon, A. T.

  Davies, Ifor (Gower)

  Grant, George (Morpeth)

  Barnett, Guy (Greenwich)

  Davis, Clinton (Hackney, C.)

  Grant, John (Islington, C.)

  Barnett, Joel (Heywood & Royton)

  Deakins, Eric

  Griffiths, Eddie(Shetfield, Brightside)

  Bates, Alf

  Dean, Joseph (Leeds, W.)

  Grimond, Rt. Hn. J.

  Baxter, William

  de Freitas, Rt. Hn. Sir Geoffrey

  Hamilton, James (Bothwell)

  Beith, A. J.

  Delargy, Hugh

  Hamilton, William (Fife, C.)

  Benn, Rt. Hn. Anthony Wedgwood

  Dell, Rt. Hn. Edmund

  Hamling, William

  Bennett, Andrew F. (Stockport, N.)

  Dempsey, James

  Hardy, Peter

  Bidwell, Sydney

  Doig, Peter

  Harper, Joseph

  Bishop, E. S.

  Dormand, J. D.

  Harrison, Waloter (Wakefield)

  Blenkinsop, Arthur

  Douglas-Mann, Bruce

  Hart, Rt. Hn. Judith

  Boardman, H.

  Duffy, A. E. P.

  Hattersley, Roy

  Booth, Albert

  Dunn, James A.

  Hatton, Frank

  Bottomley, Rt. Hon. Arthur

  Dunnett, Jack

  Heffer, Eric S.

  Boyden, James (Bishop Auckland)

  Dunwoody, Mrs. Gwyneth

  Hooley, Frank

  Bradley, Tom

  Eadie, Alex

  Horam, John

  Broughton, Sir Alfred

  Edelman, Maurice

  Howell, Denis (B'ham, Sm H)

  Brown, Hugh D. (Glasgow, Provan)

  Edge, Geoff

  Howells, Geraint (Cardigan)

  Buchan, Norman

  Edwards, Robert (W'hampton, S.E.)

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Butler, Mrs. Joyce (H'gey, WoodGreen)

  Ellis, John (Brigg & Scunthorpe)

  Hughes, Mark (Durham)

  Callaghan, Jim (M'dd'ton & Pr'wch)

  Ellis, Tom (Wrexham)

  Hughes, Robert (Aberdeen, North)

  Cant, R. B.

  English, Michael

  Hughes, Roy (Newport)

  Carmichael, Neil

  Ennals, David

  Hunter, Adam

  Carter, Ray

  Evans, Fred (Caerphilly)

  Irvine, Rt. Hn. Sir A. (L'p'I, Edge HI)

  Carter-Jones, Lewis

  Evans, Ioan (Aberdare)

  Irving, Rt. Hn. Sydney (Dartford)

  Castle, Rt. Hn. Barbara

  Faulds, Andrew

  Jackson, Colin

  Clemitson, Ivor

  Fernyhough, Rt. Hn. E.

  Jay, Rt. Hn. Douglas

  Cocks, Michael

  Fitch, Alan (Wigan)

  Jeger, Mrs. Lena

  Cohen, Stanley

  Flannery, Martin

  Jenkins, Hugh (W'worth, Putney)

  Coleman, Donald

  Fletcher, Ted (Darlington)

  Jenkins, Rt. Hn. Roy (B'ham, St'fd)

  Colquhoun, Mrs. M. N.

  Foot, Rt. Hn. Michael

  Johnson, James (K'ston upon Hull, W)

  Concannon, J. D.

  Forrester, John

  Johnston, Russell (Inverness)

  Conlan, Bernard

  Fowler, Gerry (The Wrekin)

  Jones, Barry (Flint, E.)

  Cook, Robert F. (Edinburgh, C.)

  Fraser, John (Lambeth, Norwood)

  Jones, Dan (Burnley)

  Cox, Thomas

  Freeson, Reginald

  Jones, Gwynoro (Carmarthen)

  Craigen, J. M. (G'gow, Maryhill)

  Galpern, Sir Myer

  Jones, Alec (Rhondda)

  Cronin, John

  Garrett, John (Norwich, S.)

  Judd, Frank

  Kaufman, Gerald

  Newens, Stanley (Harlow)

  Stewart, Rt. Hn. M. (H'eth, Fulh'm)

  Kelley, Richard

  Ogden, Eric

  Stoddart, David (Swindon)

  Kerr, Russell

  O'Halloran, Michael

  Stonehouse, Rt. Hn. John

  Kilroy-Silk, Robert

  O'Malley, Brian

  Stott, Roger

  Kinnock, Neil

  Orbach, Maurice

  Strang, Gavin

  Lambie, David

  Ovenden, John

  Strauss, Rt. Hn. G. R.

  Lamborn, Harry

  Owen, Dr. David

  Summerskill, Rt. Hn. Shirley

  Lamond, James

  Padley, Walter

  Swain, Thomas

  Latham, Arthur (City of W'minster P'ton)

  Palmer, Arthur

  Thomas, D. E. (Merioneth)

  Lawson, George (Motherwell & Wishaw)

  Pardoe, John

  Thomas, Jeffrey (Abertillery)

  Leadbitter, Ted

  Park, George (Coventry, E.)

  Thorne, Stan (Preston, S.)

  Lee, John

  Parker, John (Dagenham)

  Thorpe, Rt. Hn. Jeremy

  Lever, Rt. Hn. Harold

  Parry, Robert

  Tierney, Sydney

  Lewis, Arthur (Newham, N.)

  Pavitt, Laurie

  Tinn, James

  Lewis, Ron (Carlisle)

  Peart, Rt. Hn. Fred

  Tomney, Frank

  Lipton, Marcus

  Pendry, Tom

  Torney, Tom

  Loughlin, Charles

  Phipps, Dr. Colin

  Tuck, Raphael

  Loyden, Eddie

  Prentice, Rt. Hn. Reg

  Urwin, T. W.

  Lyon, Alexander W. (York)

  Prescott, John

  Varley, Rt. Hn. Eric G.

  Lyons, Edward (Bradford, W.)

  Price, Christopher (Lewisham. W.)

  Wainwright, Edwin (Dearne Valley)

  Mabon, Dr. J. Dickson

  Price, William (Rugby)

  Wainwright, Richard (Colne Valley)

  McCartney, Hugh

  Radice, Giles

  Walden, Brian (B'm'ham, Ladywood)

  McElhone, Frank

  Richardson, Miss Jo

  Walker, Harold (Doncaster)

  MacFarquhar, Roderick

  Roberts, Gwilym (Cannock)

  Walker, Terry (Kingswood)

  McGuire, Michael

  Robertson, John (Paisley)

  Watkins, David

  Mackenzie, Gregor

  Roderick, Caerwyn E.

  Watt, Hamish

  Maclennan, Robert

  Rodgers, George (Chorley)

  Weitzman, David

  McMillan, Tom (Glasgow, C.)

  Rodgers, William (Teesside, St'ckton)

  Wellbeloved, James

  McNamara, Kevin

  Rooker, J. W.

  Whitehead, Phillip

  Madden, M. O. F.

  Roper, John

  Whitlock, William

  Magee, Bryan

  Ross, Stephen (Isle of Wight)

  Wigley, Dafydd (Caernarvon)

  Mahon, Simon

  Ross, Rt. Hn. William (Kilmarnock)

  Willey, Rt. Hn. Frederick

  Mallalieu, J. P. W.

  Sandelson, Neville

  Williams, Alan (Swansea, W.)

  Marks, Kenneth

  Sedgemore, Bryan

  Williams, Alan Lee (Hvrng, Hchurch)

  Marquand, David

  Selby, Harry

  Williams, Rt. Hn. Shirley (H'f'd & St'ge)

  Marshall, Dr. Edmund (Goole)

  Sheldon, Robert (Ashton-under-Lyne)

  Wilson, Alexander (Hamilton)

  Mason, Rt. Hn. Roy

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

  Wilson, Gordon (Dundee, E.)

  Mayhew, Christopher (G'wh, W'wch, E)

  Silkin, Rt. Hn. John (L'sham, D'ford)

  Wilson, Rt. Hn. Harold (Huyton)

  Meacher, Michael

  Sillars, James

  Wilson, William (Coventry, S.E.)

  Mellish, Rt. Hn. Robert

  Silverman, Julius

  Wise, Mrs. Audrey

  Millan, Bruce

  Skinner, Dennis

  Woof, Robert

  Milne, Edward

  Small, William

  Wrigglesworth, Ian

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

  Smith, Cyril (Rochdale)

  Young, David (Bolton, E.)

  Molloy, William

  Smith, John (Lanarkshire, N.)

  Moonman, Eric

  Snape, Peter

  TELLERS FOR THE NOES:

  Morris, Alfred (Wythenshawe)

  Spearing, Nigel

  Mr. Walter Johnson and

  Morris, Charles R. (Openshaw)

  Spriggs, Leslie

  Mr. Ernest G. Perry.

  Mulley, Rt. Hn. Frederick

  Stallard, A. W.

  Murray, Ronald King

  Steel, David

  Question accordingly negatived.
  Amendments made: No. 38, in page 51, line 22, leave out 'one-tenth' and insert 'one-quarter'.
  No. 38A, in page 51, line 46, leave out 'or' and insert:
  'but as absent from the United Kingdom on any day on which he '.—[Mr. Joel Barnett.]
  Mr. David Howell: I beg to move Amendment No. 236, in page 52, line 7, leave out 'paragraph 6' and insert 'paragraphs 6 and 7'.
  Mr. Deputy Speaker: With it we may also discuss Amendment No. 237, in page 52, line 15, at end insert:
  '7. Where the holder of an office or employment to which paragraph 1 above applies incurs and defrays out of the emoluments thereof the expenses of travelling from his home or a place of work in the United Kingdom to a place outside the United Kingdom wholly exclusively and necessarily for the purpose of enabling
  1100
  him to perform the duties of such office or employment and of travelling back to his home or place of work in the United Kingdom there may be deducted from the emol uments to be assessed the expenses so incurred and defrayed by the holder of the office or employment.
  8. If the expenses of travelling mentioned in paragraph 7 above are paid by the person under or by whom the said office or employment is held and the holder of such office or employment is, but for this provision, chargeable to tax in respect thereof as a perquisite of the office or employment he shall be entitled to make a claim for a deduction under paragraph 7 above in respect thereof.'
  Mr. Howell: These amendments arise from lengthy debates in Committee about expenses for business men travelling abroad to their place of work and the way in which such expenses should be treated under the proposed new tax régime. After a considerable amount of debate and after a number of amendments were moved by my hon. Friends, the Chief Secretary came forward with the proposition that something should be done for these people.

  1101
  He proposed an extra-statutory concession. There are comments fairly to be made on the propriety of producing an extra-statutory concession to meet these new needs arising from other statutory proposals being brought forward by the Chief Secretary.
  On the whole, I think that my hon. Friends and I would deplore the idea of an extra-statutory concession. Maybe the Chief Secretary will tell us that it is the only way of doing it. It ought to be possible, given good law-making, to ensure that if a new set of laws is proposed to govern a new tax régime for those earning overseas, travelling expenses should also be covered by that law. It ought not to be necessary to have an extra-statutory concession. If there must be one we should like to hear what it is and how it would work. The Chief Secretary differentiated, when we discussed this in Committee, between a number of different categories. It was not entirely clear then, and it is not now after reading HANSARD, which are the categories which will be helped in being allowed to set off travelling expenses against tax.
  There are those who have a job here but whose duties keep them abroad. Will they be covered by this concession? There are those who have a second job overseas, those with one or more jobs overseas when the overseas job is not with the same company as is the job which they perform in the United Kingdom. There are other categories too. The Chief Secretary said he believed that something should be done for these people.
  Could we know which people the hon. Gentleman has in mind? May we know what category of expenses are to be covered? We have talked mainly about travelling expenses and they are obviously significant. There are, however, many other expenses. There are many additional, unavoidable and extra expenses involved in performing a hard and good job abroad. Such expenses may be incurred when travelling abroad to fulfil services, to take part in a construction project and so on. Could we have an exposé from the Chief Secretary about how this concession will meet the real problems identified in Committee by my hon. Friends?
  Mr. Joel Barnett: At the behest of the hon. Member for Guildford (Mr. Howell)
  1102
  I am happy to expose myself on the subject of the taxation of foreign income. It was generally accepted in Committee that there should be some relief for an academic or other person who travels abroad for less than 365 days and who, if something had not been done, would have had his travelling expenses taxed. That would have been most unfair. In Committee I proposed an extra-statutory concession. I shall explain exactly what I mean. I did so in answer to a Written Question on 16th July but I realise the problems about the printing of HANSARD. There was an Inland Revenue Press notice which I believe is in the Library.
  6.15 p.m.
  The concession we are proposing would exempt from tax the travelling expenses reimbursed to the employee or borne by the employer on his behalf. It would be a clear-cut and simple matter to administer, as I believe has generally been recognised. That is why there have been a number of extra-statutory concessions made before now under successive Governments.
  Mr. Higgins: May I ask the Chief Secretary whether he can give us any example of an extra-statutory concession being announced at a time when there was an opportunity for legislating?
  Mr. Barnett: I suppose it is fair to say that it is possible to legislate for almost anything and that the extra-statutory concessions which are published today and have been used by both Governments could have been put into legislative form. There was one called
  "A5: (Directors' Travelling Expenses.)"
  There is another called
  "A6: (Expenses Allowances and Benefits in Kind.)"
  It would have been perfectly possible to have put those into legislative form. It was considered appropriate to make them in the form of extra-statutory concessions. The previous Government never thought of changing them. I willingly concede that it would usually be preferable to have them in legislative form. Let me read out the extra-statutory concession.
  The further concession will be that
  "where the employer reimburses the employee the expenses incurred by the latter in travelling (whether alone or with his wife and family) to the place of employment overseas and returning to the United Kingdom, the Inland Revenue will

  1103
  not seek to tax the reimbursement as income in the hands of the employee. This concession will also extend to directorships."
  The amendment would be less helpful to a taxpayer and his family than the concession. The concession goes further in that reimbursements of the family's travelling expenses would not be taxed. If the amendment were to be carried, reimbursements other than those in respect of the director or employee would have to be taxed. In other words, if the amendment were carried, as opposed to the concession, the taxpayer and his family would be that much worse off.
  Mr. Hordern: Will the Chief Secretary cover the point about the position of partners in partnerships travelling abroad? I understand from the terms of the proposed, concession that only employees and directors are so covered, and not partners in overseas partnerships.
  Mr. Barnett: I will come to that point in a moment. The amendment would enable a director or employee with an overseas job to claim tax relief on the travelling expenses he incurs in getting to the place where the duties are carried on and back to the United Kingdom. These expenses do not qualify for tax relief under Section 189 of the Companies Act 1948—that is, the Schedule E expenses rule—as they are not incurred in the performance of the duties of the office or employment. That is the problem, the Schedule E rule.
  We recognise that the 25 per cent. relief that has been given for incomes which have been earned abroad when a person has gone abroad for fewer than 365 days is a considerable concession that goes some way towards helping with travelling expenses. We have now gone further with the extra-statutory concession. It is an extension of a concession. It must be recognised that the person who is offered an overseas job for a continuous period of fewer than 365 days on terms under which he has to pay his travelling expenses to get there and back would not benefit under the concession. However, it would be rather surprising if an arrangement were made with the employer so that a person going abroad would be reimbursed his expenses by a reduction in his actual salary rather than him having to pay more on his salary.
  1104
  I can tell the House that the proposed extra-statutory concession has been discussed by the Inland Revenue with a body representing university teachers. It has been welcomed because of the many cases in which it is likely to be applicable. I hope that it will be seen that we have gone pretty well all the way towards making the sort of concessions for which some Conservative hon. Members have been asking. I hope that they will understand that in this way we can better help those whom the amendment seeks to help.
  I willingly concede that this is not an entirely satisfactory measure. We would rather introduce legislation but we recognise that under the Schedule E rule, which we consider is in need of being reconsidered—in fact, we are doing so—a United Kingdom taxpayer working in the United Kingdom and travelling from home to work is not allowed the expenses of that travel as an allowable deduction.
  Mr. George Cunningham: Hear, hear.
  Mr. Barnett: I share the view of my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham). Enormous difficulties would be created if such expenses were to become an allowable deduction. We all know the problems and we all know why successive Governments have not felt able to change that rule. It would be terribly expensive and it would be unfair between one taxpayer and another. It was impossible to change the rule itself and so we came up with the idea of the extra-statutory concession, which fortunately helps those whom the House wants to help.
  Mr. A. P. Costain: But how is the ordinary man in the street going to appreciate the terms of the concession? Where is publicity given to the concession? It is not in the Bill.
  Mr. Barnett: There has been an Inland Revenue Press notice. That is the customary method of putting out this sort of information. It is a method that is well known to most members of the accountancy profession. The hon. Member for Folkestone and Hythe (Mr. Costain) can rest assured that the extra-statutory concession will be very well

  1105
  known. It will be published in the appropriate professional journals, and it will be generally understood by those concerned. It is understood by academics. I know that many hon. Members are concerned about that particular group of taxpayers who go abroad for short periods during the year. They have had the concession brought to their attention and they recognise that it will be available.
  Mr. David Howell: Is the hon. Gentleman referring to the Inland Revenue statement of 4th July 1974? Is he referring to the statement which mentions travelling expenses but does not mention anything about the wife and family aspect? I think that my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) has a good point when he talks about the additional aspects which are not mentioned in the statement of 4th July and which need properly publicising.
  Mr. Barnett: There is another Press statement—namely, the Inland Revenue Press notice of 16th July—which reads:
  "This further concession is required because there are—in the context of the Government's proposals for the taxation of foreign incomes—two categories of person who are outside the scope of the Board of Inland Revenue's existing concessions relating to the taxation of travelling expenses …".
  Those are the two categories to which I have referred. The notice continues:
  "… A5 (Directors' travelling expenses) and A6 (Expenses allowances and benefits in kind). First, there is the person who takes up a new employment abroad lasting loss than a year, and, as will usually be the case, retains his place of abode in the United Kingdom. Second, there is the person with a continuing United Kingdom job and one or more overseas directorships or employments which are not within the same group as the company he works for in the United Kingdom."
  I think that answers the matter raised by the hon. Member for Fareham (Dr. Bennett). Both categories would come within the scope of the further concession to which I have referred.
  I hope that hon. Members will recognise that we have gone a long way towards helping the kind of person about whom concern has been expressed. The extra-statutory concession goes further than the amendment. I hope that the hon. Member for Guildford will feel able to withdraw the amendment.
  Mr. Graham Page: I am sure that we are all grateful for the concession. It goes a long way towards satisfying those who have raised the matter earlier, but an extra-statutory concession is an extraordinary way in which to proceed when a Bill is passing through the House.
  I was astonished to hear that the Chief Secretary was saying to the public in general "You will find this concession in a Press notice dated 16th July." After he had said that his Parliamentary Private Secretary presented my right hon. and hon. Friends on the Opposition Front Bench with copies of the notice. They are the only people who know what this legislation by Press notice is all about. This is an extraordinary way of dealing with the matter. Those of us one bench behind the Opposition Front Bench have not yet seen the notice.
  Where is the general public to find the extra-statutory concession? It is a very important matter to anyone who is going overseas. Such people do not always go to their accountants to find out how they will be relieved of tax or what concessions they will receive. When planning an overseas trip not everyone considers such matters. Even the Chief Secretary did not know what people the concession covered when he started to address the House. He had to receive further information from elsewhere as to whether it covered partners.
  I happen to know that the terms of the extra-statutory concession hang on a notice board in an Inland Revenue corridor. I suppose that accountants know that as well. However, that is the only publicity that it is given. For how long does a Press notice remain in a permanent form? It is useful to have an extra-statutory concession when a Bill has passed through Parliament and when it is found that the Bill does not cover the benefits that it was intended to cover. I recollect that in the Land Commission Act 1967 extra-statutory concessions were given frequently, but in that case there was an annual report, a blue book, that set out clearly the concessions that were being given, because the Act had not given the benefits that the House intended.
  When a Bill is going through Parliament it is very bad to say to the House "We cannot be bothered to legislate. We

  1107
  cannot find the right words for it. We do not want to alter the Schedule E rule. We do not want to write an exception to it so we shall make a concession for which there will be insufficient publicity." Unless somebody goes to his accountant to find out what it is all about, the average person may find it difficult to get adequate information. I know that the Chief Secretary is expecting to return to his profession after October. He will then be able to advise everyone from his accountancy desk exactly what the concession means. To ask the House to accept the concession when a Bill is going through Parliament is to treat the House with disrespect.
  6.30 p.m.
  Mr. George Cunningham: Now that the right hon. Member for Crosby (Mr. Page) is in Opposition again, he seems to have resumed the rôle he was fond of performing when he was in Opposition before—that of opposing all legislation other than by measure passed through this House. I can recall reading passages in HANSARD where he objected to legislation by circular, a point to which he attached great importance, and rightly so. I must say that during his period in Government the Department in which he served was notorious for the fact that it legislated by circular. I would only say to him that I think that his views in Opposition are always better than the way he acts when he is in Government.
  On the substance of the matter, I entirely agree with the right hon. Gentleman that any rule which can be written down is better written down in statute and not in a Press notice, and since there is no rule which can be applied in a matter like this, where consistency is essential, other than after it has been written down, it should be reduced to writing either in statute or in an order.
  However, I really rise to say that, in face of what appears to be unanimity of the Members who served in Committee in favour of the proposal, I find it a rather objectionable one. As I understand it, if I am invited to deliver a month of lectures in Aberdeen, and the University of Aberdeen pays my travel costs to Aberdeen, in the normal way I shall be chargeable for tax on that income. But if I am invited to give the same series of
  1108
  lectures in Paris and I am repaid the costs of the travel to Paris by the University of the Sorbonne, that will be treated not as income but as expenses on which I do not have to pay tax.
  I think that that is an unjustifiable distinction to draw. I cannot see any tax principle which would justify it. I shall not oppose it, not least because the present state of our printing has not allowed me to study the exchanges which took place in Committee upstairs, but on the face of it I think that it is an objectionable suggestion, and I hope that it might be looked at again and not built into our practice without second thoughts being given to it.
  Mr. Peter Rees: The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has made a powerful contribution, and I regret that he was not a member of the Standing Committee, where no doubt he would have made equally valuable contributions, particularly on this point. The whole tenor of his complaint goes to the scope of the Schedule E rules. He will have noticed the undertaking, if that is what it was, by the Chief Secretary to have a fundamental review of the Schedule E rules. If the Chief Secretary is privileged to support a Budget introduced by the present Chancellor of the Exchequer in the autumn, no doubt the hon. Member for Islington, South and Finsbury and I will look for some substantial amendment reconstructing the Schedule E rules, which I agree are long overdue for reform.
  Earlier, the Chief Secretary complained, a little tetchily, that I had accused him of meanness on more than one occasion today. in contrast with the dulcet words I used in Committee upstairs. I cannot go so far as to concede the hon. Gentleman generosity on this occasion, but I will concede at least flexibility because he has accepted this time, by contrast with previous discussions, the point we were making about expenses in relation to those employed or in posts overseas. He has been thinking about the problem since Committee, because the concession he has now announced goes a little further than the one he announced in Committee.
  However, the hon. Gentleman has not covered one substantial point. Do expenses of travelling cover subsistence expenses? I can see at once that if a

  1109
  person is permanently stationed abroad and is unfortunate enough to come back for more than 63 days, so that he only gets one-quarter or one-fifth reduction, it might be unreasonable to claim the whole expense of maintaining his house in Kuwait, for example, but if he goes abroad only to discharge the functions of some employment in Buenos Aires, and is there for only a month because he holds that office concurrently with a post here, will the Inland Revenue take a broad view of his travelling expenses and concede the expenses of his hotel accommodation for himself, and, indeed, for his wife, should she accompany him?
  Beyond that, I have no complaint about the scope of the extra-statutory concession as it has now been uncovered. My complaint is the same as that of my right hon. and hon. Friends—that we have been reduced to an extraordinary pass if, concurrently with the enacting of a Finance Bill, we are to have extra-statutory concessions on points which should be more properly covered by that Bill but are announced to the House and the country in Press notices. Extra-statutory concessions and Press notices are no substitute for well-thought-out legislation.
  Will the hon. Gentleman give an undertaking that this extra-statutory concession will he applied uniformly and consistently—in other words, that there will be no capricious administrative discretion? Will he also undertake that it will not be withdrawn or amended without being made the subject of debate in this House? My right hon. Friend the Member for Crosby (Mr. Page) argued powerfully that it is improper, particularly in finance, for the executive to proceed by fiat, as it were, laid on the Table or put in the Library or announced by Press notice, not being properly debated or voted on by the House. The proper way to proceed is by legislation and not by extra-statutory concession.
  My amendment was designed to translate into legislative form the extra-statutory concession which the Chief Secretary announced in Committee upstairs. One of the disadvantages of extra-statutory concessions has been made clear. Between the time we debated upstairs and now, a further extra-statutory concession has been produced, the details of which have not been properly appreciated by the House. This reinforces my plea for translating the
  1110
  provision at the earliest possible moment into proper legislative form.
  Since the Chief Secretary has gone further than my amendment, I shall not press it to its proper conclusion. However, I hope that what he has done will not be a precedent. I hope that come the autumn Budget and Finance Bill, he will have been able to complete a fundamental review of the Schedule E rules and will be able to translate them into civilised legislative form so that we can debate them and approve them properly in this House.
  Mr. Joel Barnett: By leave of the House, I will reply briefly. I cannot promise that we will review the whole question of the Schedule E rules in time for the autumn Finance Bill, but we shall be introducing many more Finance Bills, of course, and will take the opportunity to review the Schedule E rules.
  One recognises the problem with extra-statutory concessions, but it is not new. We do not want to have any more than is necessary—that the Government accept. But we are dealing with the tricky problem of the Schedule E rules and it would not be right to amend them on an ad hoc basis, as the hon. and learned Member for Dover and Deal (Mr. Rees) recognised.
  Following our earlier debates, and in the light of representations we received, the Government agreed that it would be right to make a concession. I take the point put by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), who said that there is an unjustified distinction between giving relief for the employee who takes a job in Paris as against one who takes a job in Aberdeen. I admire the facility of the hon. and learned Member for Dover and Deal. My hon. Friend took a place at random, and chose Aberdeen. The hon. and learned Gentleman took a place at random, and chose Kuwait.
  Of course one recognises that there are problems of expenses for some people who are going to work abroad. I am thinking in particular of academics, whom we do not wish to discourage from going abroad to lecture. In some of these cases, the expenses will have been paid by the employee and probably reimbursed later, but it would have been taxed in the hands of the employee in these circumstances. That

  1111
  may be thought to discourage such a man from going on a job abroad. That is why we felt it appropriate to make this kind of concession.
  The hon. and learned Member for Dover and Deal asked for an undertaking that the concession would be applied uniformly. Naturally, one assumes that inspectors of taxes handling these matters will apply the concessions unformly. I cannot guarantee that every inspector in the land will do so, but they will have the instruction and they will need to apply it uniformly in the terms of the concession.
  That brings me immediately to the definition of travelling expenses. I assure hon. Members that it will include in all cases reasonable hotel expenses necessarily incurred; that is to say, the subsistence element of the travelling expense. That will be applied uniformly in accordance with the instructions given in the extra-statutory concession.
  I do not know why it should be thought that one inspector would regard it differently from the others. In all tax law there are sometimes variations between one inspector and another on a variety of matters where there is some discretion, but the discretion here is inside the terms of the wording of the concession as published.
  Mr. Peter Rees: Everything that the Chief Secretary has said for the past 30 seconds has alarmed me considerably. One knows that inspectors of taxes have discretion—they are responsible people and that is right and proper. However, is the hon. Gentleman saying that if in a case falling fair and square within the extra-statutory concession the inspector refuses to allow the expense—and this is only an administrative matter—and that decision is taken to the Board of Inland Revenue, the board will back the inspector or the citizen?
  Mr. Barnett: I specifically said that the inspector would have to deal with it on the basis of the wording of the concession. That concession makes clear that travelling expenses as I have defined will be an allowable deduction when reimbursed by the employer. I do not know why the hon. and learned Gentleman should make such heavy weather of it. There is no problem.
  Mr. Higgins: Is it not the case that if there is some dispute of this kind with statutory concessions there is some appeal against the decision, whereas in this instance there is not?
  Mr. Barnett: Certainly the extra-statutory concession is not part of the legislation. At the same time, in all kinds of expenses—for example under Schedule D or Schedule E—one inspector may interpret a form of expenses differently, even when that is part of the legislation, and hon. Members know that very well. It is often a matter of judgment whether an expense is allowable, because the dividing line with many items of expense is fudged.
  Mr. Peter Rees rose—
  Mr. Barnett: I would rather not give way to the hon. and learned Gentleman again. I hope that he will agree that I have been more than generous in giving way to him throughout the course of our debates, for what seems an interminable time. I hope that he will agree that I have been excessively generous. Some of my hon. Friends think that I have been over-generous in the latitude that I have allowed the hon. and learned Gentleman. I hope that he will accept that in this instance he has no cause for alarm. The extra-statutory concession is clear; it has been circulated in all the appropriate technical journals and there is no problem about it.
  Mr. Geoffrey Finsberg: In his former incarnation the Chief Secretary may have read the professional journals, but some taxpayers may not wish to pay fees to accountants, which they cannot claim as allowable to tax, for telling them what the extra-statutory concession says. If a taxpayer asks an inspector for a full list of extra-statutory concessions, will it be supplied to him?
  Mr. Barnett: Of course. Inspectors of taxes are very reasonable people. Indeed, I should like to pay tribute to them. Anyone who knows the working of inspectors of taxes will know that to be a fact.
  6.45 p.m.
  I hope that the hon. Gentleman will feel able to withdraw his amendment, which does not go so far as the concession. The concessions do a job that

  1113
  is generally recognised in our tax law and they meet a purpose constantly pressed on me in Committee. I am sorry that hon. Members still seem not satisfied, but that is one of the facts of life and I suppose that I shall have to learn to live with it for many years on the Treasury Bench.
  Mr. David Howell: I should like to say a few words in reply to the Chief Secretary. The House is profoundly uneasy when proposals of this kind come forward in an extra-statutory form, for taxpayers will have to go to the appropriate corridors of Somerset House to find out what is going on. I recognise, now that the new terms of the extra-statutory concession have been unveiled, that it goes rather wider than our amendment, but the purpose of the amendment was simply to elucidate—and this is the way in which we have to go about these things when there is an extra-statutory concession—the terms of the concession rather than force our proposals into the Bill. It is clear that the concession goes a little wider than our proposals, particularly in connection with wives and families.
  However, I remain uneasy, and I suspect that my hon. Friends do, about the Schedule E aspect and the position of the person who pays for his own travel. There may be instances—I can think of one or two myself—when academics or free-lance consultants may make a journey, as it were, "on spec", or to arrange business when they arrive, or to arrange lectures when reaching the United States, or wherever it is, and such people will be hurt because the Chief Secretary is not willing to open up the wider area governed by the Schedule E rule, although he has said that he will look at it.
  We recognise that, provided that people learn what is contained in the Inland Revenue Press notice, they will see that it goes a little wider than our amendment, but we remain uneasy about the extra-statutory nature of the concession. I strongly defend the right of my hon. and right hon. Friends to safeguard constituents and to ensure that matters binding upon us or affecting the interests of the citizen are properly discussed in the House and, where possible, open to appeal. There is no ground for sug-
  1114
  gesting that they should not be free to set out matters of this kind at length. I urge the Chief Secretary to make sure that the publicity about the concession is effective, rather more than it seems to have been to date. On that note I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

Clause 18

  FOREIGN PENSIONS OR ANNUITIES
  Mr. David Howell: I beg to move Amendment No. 61, in page 13, line 17 leave out 'one-tenth' and insert 'two-fifths'.
  Mr. Speaker: With this I have selected Amendment No. 62, in page 13, line 21, leave out 'one-tenth' and insert 'two-fifths'.
  Mr. Howell: These are amendments dealing with the new régime for remittances from overseas, a matter discussed at great length in Committee. In Committee our point was that the new proposals had the effect of suddenly imposing a new burden on those in receipt of overseas pensions, a burden involving making 75 per cent. of their pension liable to tax. We argued in Committee that a particular unfairness arose for those who had made arrangements before Budget day of this year. After a long debate our point of view was rejected by the Committee.
  In bringing this matter forward again on Report we have attempted to appeal to the Chief Secretary's understanding and sympathy from a different angle. We say simply that we think that pensions should be treated in the same way as we should like to see all overseas earnings and earnings from partnerships overseas treated; namely, that only 60 per cent. of all pensions should be liable to tax. That is the purpose of the amendment.
  The arguments on either side are familiar. We believe that there is an unfairness here particularly relevant to past pensioners and those who have made arrangements. If the concession could be extended to reducing to 60 per cent. the part of the pension liable to tax, that would help past pensioners in making adjustments of a less drastic kind than the higher

  1115
  percentage would demand and would also help present and future pensioners.
  In Committee the Chief Secretary said that these people could afford to live in this country without the additional pension remittance. My hon. Friends and I challenge him strongly on that, because the life pattern of many of these people is designed to ensure that they live six or eight months of the year here, and they have so organised their affairs that they can more cheaply live for the remaining four months on the pension being remitted overseas. That is a familiar pattern. It affects people who are by no means wealthy or rich, or even what the Labour Party calls rich, which seems to mean anyone who earns more than £60 a week. These are people of modest means who have served this country well overseas and have possibly served the overseas country bravely and sufficiently as well. We think that they deserve a little more than they get from the new tax régime. I ask the Chief Secretary to look again at the placing of new and additional tax burdens on overseas pensioners in this category.
  Mr. Joel Barnett: I do not suggest for one moment that the people we are talking about are rich, and that is the burden of the case I presented in Committee. Let us be clear what we are talking about. We have virtually abolished the remittance basis under which a man who lived in this country and remitted his pension from abroad to this country to enable him to reside here was taxed on 100 per cent. of the pension remitted. If he did not remit that pension he was not taxed on it at ill. If a man who lives here does not remit the pension he has abroad, it is self-evident that he has enough income, or considers that he has enough income, on which to live here without having to remit the pension. He need not necessarily be a rich man. That was the situation.
  The situation now, with the virtual abolition of the remittance basis, is that the pension, whether or not it is remitted, is taxable in the same way as the pension of any other United Kingdom citizen. The question is not whether the man is rich but whether in equity that taxation of United Kingdom pensioners resident in the United Kingdom should be the
  1116
  same whether the pension arises overseas or in the United Kingdom. That is the ground on which I resisted the amendment in Committee.
  We recognise that there was a problem in that these people had not been paying tax, perfectly legitimately. They avoided tax by not remitting the pension, and that was perfectly proper. There was no need for them to pay the tax and they did not do so. But others, because they could not live without remitting the pension, had to pay tax on 100 per cent. of the pension.
  It is a matter of priorities. What relief should one give here? For the reasons I have given I think that the 10 per cent. relief is sufficient—not the 25 per cent. suggested by the hon. Gentleman. The 25 per cent. relief was on incomes, not pensions.
  I therefore feel unable to suggest that the House should accept that the pension of one person living in the United Kingdom is taxed as to 60 per cent. whereas the pension of another person is taxed as to 100 per cent. We have given a small relief which I think is sufficient. There cannot be real hardship involved here, otherwise the pension would be remitted to the United Kingdom.
  I appreciate that the life pattern of some of these people is such that they like to spend three or four months abroad each year and live on their unremitted pension. That is perfectly reasonable. I should not mind living abroad for a few months each year. I can think of better things to do than some of the things I have been doing in the last few months, and I should very much like to spend a few months abroad in the sun. However, that should not be taken into account in our tax system. We have been more than fair in the suggestion of a modest relief, but to go further would be unfair to other United Kingdom pensioners resident in this country who pay tax on the full 100 per cent. I am therefore, unable to advise my hon. Friends to accept the amendment.
  Mr. Hordern: I do not agree with the Chief Secretary. It is wholly unreasonable that someone who has spent the greater part of his life in employment overseas, perhaps with a British company, should be allowed relief of only 10 per cent. That person is not in the

  1117
  same position as the pensioner in the United Kingdom. The person who has spent many years overseas has made friends overseas and wishes to spend part of the year in the country in which he worked, or, perhaps, in another country where he has affiliations and friendships. He is not at all on the same basis as the pensioner in the United Kingdom, because he may spend only nine months here instead of the full year. The Chief Secretary said that he does not need the full amount of his pension because he is so well placed that he can afford to go overseas for two or three months, but that is not so. The person is here for only nine months and, therefore, does not need such large pension receipts in this country, but he plainly needs his pension where he spends the other three or four months of the year.
  In addition, the pension arrangements are entirely different from those applying to a United Kingdom pension. The United Kingdom pensioner has the facility of making deductions in the contributions to his pension funds which count for taxation relief, but the overseas pensioner in all probability has no such facility. Consequently, his contributions to his pension overseas will have to be met out of his net income, which does not apply to the United Kingdom citizen. Quite properly, the contributions which have been made in this country have been greatly facilitated for relief against taxation, starting under your excellent leadership, Mr. Speaker, in your Budget of 1962, in which taxation relief was given for the contributions of self-employed persons to pension funds. That sum has been increasing. No such facilities have been allowed for overseas pensioners. For these reasons it is inappropriate that the only relief they should get is 10 per cent. I support the amendment and I trust that we shall vote upon it.
  7.0 p.m.
  Mr. Norman Lamont: I support the amendment and what has been said by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). I have had a number of letters on this topic from constituents. I, too, plead with the Chief Secretary to make a concession on this point. When the Government have made concessions all round it is extraordinary that they have made no concessions for this small group of
  1118
  overseas pensioners. They seem to be taking up a totally asymmetrical position—to use a word which I know the Financial Secretary would have used had he been taking part in this discussion.
  The Government are adopting an extraordinary position, and in honour they should exempt those who have already retired. I refer to people who as a result of the Bill will face a sudden change in their circumstances. They could not have foreseen what was to happen and are innocent people caught in the backlash of the Lonrho affair. They are not the people the Government had in mind when they proposed to end the remittance basis. Having made reasonably generous concessions on the remittance basis generally for people at work, surely the Chief Secretary can be a little soft-hearted to those who have already retired.
  I ask the hon. Gentleman to look at the matter again. I personally would be prepared to accept a concession for existing pensioners, namely, for those who have already retired. Many elderly people will be confronted with a drastic change in their circumstances. I can see no economic argument why the Chief Secretary should not give way on a matter which will cause unnecessary hardship to one group of people who should not be dealt with in this way.
  Mr. Costain: I, too, wish to support the amendment. I have a number of constiutents who have now retired having served for many years in hot countries. The burden of the Government's argument on this amendment is that those people use their pensions as pin money. But many of the people have to go abroad for three or four months a year because they cannot stand the vagaries of the English winter. If the Government take this concession from them, they will condemn that body of people to death in this country because of our hard winter, or they will force them to leave the country altogether to live overseas. I appeal to the Chief Secretary to do something for existing pensioners who have settled the pattern of their lives.
  Mr. Peter Rees: I rise with some trepidation following the harsh things that were said about me in my personal capacity by the Chief Secretary. We have noticed that the hon. Gentleman has lost a little of his personal buoyancy since

  1119
  the beginning of the Finance Bill proceedings. However, I assure him that we wish him well personally. We hope that during the Summer Recess he will recover his former high spirits.
  The Chief Secretary appears to glory in the fact that he has abolished the remittance basis. I contrast that with his plaintive cry that it will not be possible to have an ad hoc adjustment—that is the hon. Gentleman's phrase, not mine—or the rules relating to expenses for the purpose of Schedule E. If it is possible to have an ad hoc adjustment of the whole scope of Schedule E and the basis of taxation of the pensions and emoluments of overseas employees, surely it would not be impossible to reconsider the rules on Schedule E.
  I pass to the matter we are now considering—namely, the subject of overseas service. The distinct impression I derived from the Chief Secretary's intervention upstairs in Committee on this topic was that he regarded the provisions as a kind of favoured treatment conceded to the rich who could afford to leave their pensions abroad so that they could spend their time in the Bahamas on holiday. That attitude annoyed me on the earlier occasion and I still see no virtue in it as an argument. There are many people who have retired to the bracing climate of the East Coast of England who, because they have spent some years of service to the country in hot climates, like to spend some of the winter months overseas. For that purpose they keep their pensions overseas. It depends on one's standards whether one regards them as wealthy. By the standards of most of my constituents—and no doubt this applies to the constituents of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain)—they are not rich in any sense of the word.
  There are other reasons why this group of people needs more sympathetic treatment than the Chief Secretary seems to be disposed to concede. He seems to have a blind spot about the fact that many of our countrymen, generation after generation, served the nation overseas. He seems to be unaware of the good work they did and the kind of benefits which in the long run they have contributed to our economy. One of the disadvantages of their service overseas is that for
  1120
  many years they were separated from kith and kin and, having retired, they found it necessary to reconstitute their lives in this country. Therefore, they are not in as favourable a position as the Chief Secretary would have us believe.
  I have received as many representations on the question of pensions as I have on the whole subject of foreign emoluments. I am not saying that there is insupportable hardship in these cases, but there will be a great deal of adjustment and inconvenience. The Chief Secretary seems not to have a great deal of understanding of the problem. The result may be that those who are affected will go overseas and spend the rest of their days in a warmer climate. That would be a pure loss to this country.
  I would prefer to see a postponement of the Government's provision. Indeed, I tabled an amendment on this score upstairs in Committee, and since I felt that I had fully aired the subject on that occasion I did not feel justified in seeking to reintroduce the amendment on report. The least the Chief Secretary can do is to be more generous in his provision for this group of people.
  The Chief Secretary may glory in the abolition of the remittance basis, but at the end of the day we should seek to ease the tranisition from one fiscal state to the other; otherwise it will involve drastic alteration in the life style of people who have given of their best in foreign climates.
  Mr. Joel Barnett: I appreciate that the hon. and learned Member for Dover and Deal (Mr. Rees) does not like my arguments. It would be fair to say that I am not exactly in love with his arguments. But that is not the reason why I take the view I do on the amendment. I do not resist the amendment just because I do not like the hon. and learned Member.
  The hon. Member for Folkestone and Hythe (Mr. Costain) said that some of these pensioners cannot stand the rigours of an English winter. Nor can I. I am sure that the same must be true of pensioners in many of the constituencies represented by my hon. Friends, yet they do not have the opportunity of spending winters in the Bahamas. I wish that they could have that chance. If any relief were available, I should like to give it to them.

  1121
  There is a gross misconception about the amendments. The hon. Member for Kingston-upon-Thames (Mr. Lamont) said that I had accepted certain amendments relating to earnings but had not accepted amendments dealing with pensions. The hon. Gentleman is normally a reasonable man, and I am sure he will accept that there is a difference between pensions and earnings.
  The hon. Gentleman talked about this provision being a great burden on those who had retired. The hon. Gentleman should remember that people who retired and remitted their pensions here because they needed them to live on had to pay 100 per cent. tax. We are talking now about pensioners who do not like our winters and, therefore, leave their pensions abroad. It is perfectly legitimate for them to do that—and I am not talking about the very wealthy, although there are some people in that category. The fact is, however, that they have not paid tax on their pensions.
  I do not think that the situation is necessarily fair as between one pensioner and another in this country. The hon. and learned Member for Dover and Deal said that I was unfair and that I kept talking about the rich. I am not doing anything of the kind in this instance. All I am saying is that it would not be fair to give any greater concession than has already been provided.
  I do not think that there is any point in pursuing the matter any further. The hon. and learned Member for Dover and Deal and I take leave to disagree with each other, but I am sure that if Opposition Members think about this a little more carefully they will see that if the amendment is carried concessions will be given to pensioners who are not in the same category as those who have paid 100 per cent. tax on their pensions.
  I should like to give this kind of relief to all pensioners, but that is not what the amendment is proposing. It is proposed to give relief only to those pensioners who live here for the most part of the year and have left their other pensions abroad. I do not believe that that is the right way to go about it, and I must, therefore, ask my hon. Friends to resist the amendment.
  Mr. Norman Lamont: What is the revenue consideration at stake in this concession?
  Mr. Barnett: Not much is at stake. I rested my argument not on the cost but on the equity of the matter as between pensioners, and I hope that the Opposition will feel able to accept what I have said.
  Mr. David Howell: The cost is not large, and that is why it is absurd to talk about the cost of making a concession for all pensioners. The Chief Secretary's replies seem to get more and more extraordinary as we go along. We are now to have an amendment resisted on the ground that the Chief Secretary was not sufficiently in love with the amendment moved in Committee by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), or perhaps with my hon. and learned Friend himself. Anyway, this is feeble stuff.
  The Chief Secretary keeps on talking—and his voice rises when he does so—about the rich and about people spending winters in the Bahamas. The Bill, the Chief Secretary's brief and the policy of the Labour Party are full of talk about the rich. One feels that Government Members talk about nothing but the mythical rich who are to be made to squeal and to be squeezed in every way to bring massive benefits to other people.
  The debate raises a fundamental consideration which we may have missed in Committee. It is that this bit of the Bill which says "Let us get the overseas pensions people" contains a completely different line of thought from that which one finds in the proposals for dealing with foreign emoluments and overseas earnings. One wonders how it is that the people who are to be hit in this way, if the Chief Secretary has his way, came to be the victims designated in the Bill.
  These are not people who spend winters in the Bahamas. They are people who have worked for perhaps 40 years on secondment to the civil services of developing countries. Some of them have worked in technical and various economic and development services in very poor countries. They are people who have spent a long time serving this country and the broader interests of Britain overseas, often in unpleasant conditions. They are people who have served their country

  1123
  in every sense of the word, and they are not to be compared, except lightly and frivolously—and that is what the Chief Secretary is doing—with other pensioners.
  It will not do to ask why these people should not be treated in the same way as everyone else. These overseas pensioners are in a different situation. My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) asked for a concession on retrospection, but the answer was a lemon. We had no joy on that. We now suggest that overseas pensioners in this category should have at least the same treatment as we should have wished to have for overseas earnings. But they are not to have the kind of treatment that the Chief Secretary is offering for overseas earnings. The only allowance is one-tenth.
  The pensioners about whom we are talking are to be penalised. Many old people will now wonder, when they see
  another little brown envelope drop through their letter boxes, what they have done to this country to make it so vindictive towards them. This proposal will upset younger people who have decided to dedicate themselves to a career overseas. I hope that it will not discourage them, but if they go on with their present work it will be no thanks to the Government who are after them. This is a vindictive piece of legislation, and I am sure that my hon. Friends share that view. We pressed in Committee upstairs for the Bill to be modified. The Chief Secretary has shown not the slightest inclination that he understands the plight of these people or the deserts or merits of their case, and I therefore urge my hon. Friends to press the amendment to a Division.
  Question put, That the amendment be made:—
  The House divided: Ayes 255, Noes 270.

  Division No. 97.]

  AYES

  [7.18 p.m.

  Adley, Robert

  Cormack, Patrick

  Hall-Davies, A. G. F.

  Aitken, Jonathan

  Corrie, John

  Hamilton, Michael (Salisbury)

  Alison, Michael (Barkston Ash)

  Costain, A. P.

  Hampson, Dr. Keith

  Allason, James (Hemel Hempstead)

  Critchley, Julian

  Hannam, John

  Amery, Rt. Hn. Julian

  Crouch, David

  Harrison, Col. Sir Harwood (Eye)

  Ancram, M.

  Crowder, F. P.

  Harvie Anderson, Rt. Hn. Miss

  Archer, Jeffrey

  Davies, Rt. Hn. John (Knutsford)

  Hastings, Stephen

  Atkins, Rt. Hn. Humphrey (Spelthorne)

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

  Havers, Sir Michael

  Awdry, Daniel

  Dean, Paul (Somerset, N.)

  Hawkins, Paul

  Baker, Kenneth

  Deedes, Rt. Hn. W. F.

  Hayhoe, Barney

  Balniel, Rt. Hn. Lord

  Dodds-Parker, Sir Douglas

  Henderson, J. S. B. (Dunbartonshire, E.)

  Banks, Robert

  Dodsworth, Geoffrey

  Higgins, Terence

  Barber, Rt. Hn. Anthony

  Douglas-Home, Rt. Hn. Sir Alec

  Hill, James A.

  Bell, Ronald

  Drayson, Burnaby

  Holland, Philip

  Bennett, Dr. Reginald (Fareham)

  du Cann, Rt. Hn. Edward

  Hordern, Peter

  Berry, Hon. Anthony

  Durant, Tony

  Howe, Rt. Hn. Sir Geoffrey (Surry, E)

  Biffen, John

  Dykes, Hugh

  Howell, David (Guildford)

  Biggs-Davison, John

  Eden, Rt. Hn. Sir John

  Howell, Ralph (Norfolk, North)

  Blaker, Peter

  Edwards, Nicholas (Pembroke)

  Hunt, John

  Boardman, Tom (Leicester, S.)

  Emery, Peter

  Hurd, Douglas

  Body, Richard

  Eyre, Reginald

  Hutchison, Michael Clark

  Boscawen, Hon. Robert

  Fairgrieve, Russell

  Iremonger, T. L.

  Bowden, Andrew (Brighton, Kemptown)

  Farr, John

  Irvine, Bryant Godman (Rye)

  Braine, Sir Bernard

  Fell, Anthony

  James, David

  Brewis, John

  Fenner, Mrs. Peggy

  Jenkin, Rt. Hn. P. (R'dge W'std & W'fd)

  Brittan, John

  Finsberg, Geoffrey

  Jessel, Toby

  Brocklebank-Fowler, Christopher

  Fletcher, Alexander (Edinburgh, N.)

  Johnson Smith, G. (E. Grinstead)

  Bryan, Sir Paul

  Fletcher-Cooke, Charles

  Jones, Arthur (Daventry)

  Buchanan-Smith, Alick

  Fookes, Miss Janet

  Jopling, Michael

  Buck, Antony

  Fowler, Norman (Sutton C'field)

  Kaberry, Sir Donald

  Budgen, Nick

  Fox, Marcus

  Kellett-Bowman, Mrs. Elaine

  Bulmer, Esmond

  Galbraith, Hn. T. G. D.

  Kershaw, Anthony

  Burden, F. A.

  Gardiner, George (Reigate & Banstead)

  Kimball, Marcus

  Butler, Adam (Bosworth)

  Gardner, Edward (S. Fylde)

  King, Evelyn (Dorset, S.)

  Carlisle, Mark

  Gilmour, Sir John (Fife, E.)

  King, Tom (Bridgwater)

  Carr, Rt. Hn. Robert

  Glyn, Dr. Alan

  Kirk, Peter

  Chalker, Mrs. Lynda

  Goodhew, Victor

  Kitson, Sir Timothy

  Channon, Paul

  Gow, Ian (Eastbourne)

  Knight, Mrs. Jill

  Chataway, Rt. Hn. Christopher

  Gower, Sir Raymond (Barry)

  Knox, David

  Churchill, W. S.

  Grant, Anthony (Harrow, C.)

  Lamont, Norman

  Clark, A. K. M. (Plymouth, Sutton)

  Gray, Hamish

  Lane, David

  Clarke, Kenneth (Rushcliffe)

  Grieve, Percy

  Latham, Michael (Melton)

  Clegg, Walter

  Griffiths, Eldon (Bury St. Edmunds)

  Lawson, Nigel (Blaby)

  Cockcroft, John

  Grist, Ian

  Lester, Jim (Beeston)

  Cooke, Robert (Bristol, W.)

  Grylls, Michael

  Lewis, Kenneth (Rtland & Stmford)

  Cope, John

  Gurden, Harold

  Lloyd, Ian (Havant & Waterloo)

  Loveridge, John

  Orr, Capt. L. P. S.

  Spicer, Michael (Worcestershire, S.)

  Luce, Richard

  Osborn, John

  Sproat, Iain

  MacArthur, Ian

  Page, Rt. Hn. Graham (Crosby)

  Stainton, Keith

  McCrindle, R. A.

  Page, John (Harrow, W.)

  Stanbrook, Ivor

  Macfarlane, Neil

  Parkinson, Cecil (Hertfordshire, S.)

  Stewart, Ian (Hitchin)

  MacGregor, John

  Pattie, Geoffrey

  Stodart, Rt. Hn. A. (Edinburgh, W.)

  McLaren, Martin

  Pink, R. Bonner

  Stokes, John

  Macmillan, Rt. Hn. M. (Farnham)

  Price, David (Eastleigh)

  Stradling Thomas, John

  McNair-Wilson, Michael (Newbury)

  Prior, Rt. Hn. James

  Tapsell, Peter

  McNair-Wilson, Patrick (New Forest)

  Raison, Timothy

  Taylor, Edward M. (Glgow, C'cart)

  Madel, David

  Rathbone, Tim

  Taylor, Robert (Croydon, N.W.)

  Marshall, Michael (Arundel)

  Rawlinson, Rt. Hn. Sir Peter

  Tebbit, Norman

  Marten, Neil

  Redmond, Robert

  Temple-Morris, Peter

  Mather, Carol

  Rees, Peter (Dover & Deal)

  Thatcher, Rt. Hn Margaret

  Maude, Angus

  Rees-Davies, W. R.

  Thomas, Rt. Hn. P. (B'net, H'den S.)

  Maudling, Rt. Hn. Reginald

  Renton, Rt. Hn. Sir David (H't' gd' ns' re)

  Trotter, Neville

  Mawby, Ray

  Renton, R. T. (Mid-Sussex)

  Tugendhat, Christopher

  Maxwell-Hyslop, R. J.

  Rhys Williams, Sir Brandon

  van Straubenzee, W. R.

  Maybew, Patrick (Royal T' bridge Wells)

  Ridley, Hn. Nicholas

  Vaughan, Dr. Gerard

  Meyer, Sir Anthony

  Ridsdale, Julian

  Viggers, Peter

  Miller, Hal (B'grove & R'ditch)

  Rifkind, Malcolm

  Waddington, David

  Mills, Peter

  Rippon, Rt. Hn. Geoffrey

  Wakeham, John

  Miscampbell, Norman

  Roberts, Wyn (Conway)

  Walder, David (Clitheroe)

  Mitchell, David (Basingstoke)

  Rodgers, Sir John (Sevenoaks)

  Walker, Rt. Hn. Peter (Worcester)

  Moate, Roger

  Rossi, Hugh (Hornsey)

  Walker-Smith, Rt. Hn. Sir Derek

  Money, Ernie

  Rost, Peter (Derbyshire, S.E.)

  Wall, Patrick

  Moore, J. E. M. (Croydon, C.)

  Royle, Sir Anthony

  Walters, Dennis

  Morgan, Geraint

  Sainsbnry, Tim

  Warren, Kenneth

  Morgan-Giles, Rear-Adm.

  St. John-Stevas, Norman

  Weatherill, Bernard

  Morris, Michael (Northampton, S.)

  Scott-Hopkins, James

  Wells, John

  Morrison, Charles (Devizes)

  Shaw, Giles (Pudsey)

  Wiggin, Jerry

  Morrison, Peter (City of Chester)

  Shaw, Michael (Scarborough)

  Winterton, Nicholas

  Mudd, David

  Shelton, Willam (L'mb'th, Streath'm)

  Wood, Rt. Hn. Richard

  Neave, Airey

  Shersby, Michael

  Worsley, Sir Marcus

  Neubert, Michael

  Silvester, Fred

  Young, Sir George (Ealing, Acton)

  Newton, Tony (Braintree)

  Sims, Roger

  Nicholls, Sir Harmar

  Sinclair, Sir George

  Normanton, Tom

  Skeet, T. H. H.

  TELLERS FOR THE AYES:

  Nott, John

  Smith, Dudley (W'wick & L'm'ngton)

  Mr. Spencer Le Marchant and

  Onslow, Cranley

  Spence, John

  Mr. Michael Roberts.

  Oppenheim, Mrs. Sally

  Spicer, Jim (Dorset, W.)

  NOES

  Allaun, Frank

  Cook, Robert F. (Edinburgh, C.)

  Fletcher, Ted (Darlington)

  Archer, Peter

  Cox, Thomas

  Foot, Rt. Hn. Michael

  Armstrong, Ernest

  Craigen, J. M. (G'gow, Maryhill)

  Forrester, John

  Ashley, Jack

  Cronin, John

  Fowler, Gerry (The Wrekin)

  Ashton, Joe

  Crosland, Rt. Hn. Anthony

  Fraser, John (Lambeth, Norwood)

  Atkins, Ronald

  Cryer, G. R.

  Freeson, Reginald

  Atkinson, Norman

  Cunningham, G. (Isl'ngt'n, S & F'sb'ry)

  Galpern, Sir Myer

  Bagier, Gordon, A. T.

  Cunningham, Dr. John A. (Whiteh 'v' n)

  Garrett, John (Norwich, S.)

  Barnett, Guy (Greenwich)

  Dalyell, Tam

  George, Bruce

  Barnett, Joel (Heywood & Royton)

  Davidson, Arthur

  Gilbert, Dr. John

  Bates, Alf

  Davies, Bryan (Enfield, N.)

  Ginsburg, David

  Baxter, William

  Davies, Denzil (Llanelli)

  Golding, John

  Beith, A. J.

  Davies, Ifor (Gower)

  Gourlay, Harry

  Benn, Rt. Hn. Anthony Wedgwood

  Davis, Clinton (Hackney, C.)

  Grant, George (Morpeth)

  Bennett, Andrew F. (Stockport, N.)

  Deakins, Eric

  Grant, John (Islington, C.)

  Bidwell, Sydney

  Dean, Joseph (Leeds, W.)

  Griffiths, Eddie (Sheffield, Brightside)

  Bishop, E. S.

  de Freitas, Rt. Hn. Sir Geoffrey

  Grimond, Rt. Hn. J.

  Blenkinsop, Arthur

  Delargy, Hugh

  Hamilton, James (Bothwell)

  Boardman, H.

  Dell, Rt. Hn. Edmund

  Hamilton, William (Fife, C.)

  Booth, Albert

  Dempsey, James

  Hamling, William

  Bottomley, Rt. Hn. Arthur

  Doig, Peter

  Hardy, Peter

  Boyden, James (Bishop Auckland)

  Douglas-Mann, Bruce

  Harper, Joseph

  Bradley, Tom

  Duffy, A. E. P.

  Harrison, Walter (Wakefield)

  Broughton, Sir Alfred

  Dunn, James A.

  Hart, Rt. Hn. Judith

  Brown, Hugh D. (Glasgow, Provan)

  Dunnett, Jack

  Hatton, Frank

  Buchan, Norman

  Dunwoody, Mrs. Gwyneth

  Heffer, Eric S.

  Butler, Mrs. Joyce (H'gey, WoodGreen)

  Eadie, Alex

  Hooley, Frank

  Callaghan, Jim (M'dd'ton & Pr'wch)

  Edelman, Maurice

  Horam, John

  Cant, R. B.

  Edge, Geoff

  Howell, Denis (B'ham, Small Heath)

  Carmichael, Neil

  Edwards, Robert (W'hampton, S.E.)

  Howells, Geraint (Cardigan)

  Carter, Ray

  Ellis, John (Brigg & Scunthorpe)

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Carter-Jones, Lewis

  Ellis, Tom (Wrexham)

  Hughes, Mark (Durham)

  Castle, Rt. Hn. Barbara

  English, Michael

  Hughes, Robert (Aberdeen, North)

  Clemitson, Ivor

  Ennals, David

  Hughes, Roy (Newport)

  Cocks, Michael

  Evans, Fred (Caerphilly)

  Hunter, Adam

  Cohen, Stanley

  Evans, Ioan (Aberdare)

  Irvine, Rt. Hn. Sir A. (L'p'I, EdgeHI)

  Coleman, Donald

  Faulds, Andrew

  Irving, Rt. Hn. Sydney (Dartford)

  Colquhoun, Mrs. M. N

  Fernyhough, Rt. Hn. E.

  Jackson, Colin

  Concannon, J. D.

  Fitch, Alan (Wigan)

  Jay, Rt. Hn. Douglas

  Conlan, Bernard

  Flannery, Martin

  Jeger, Mrs. Lena

  Jenkins, Hugh (W'worth, Putney)

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

  Spearing, Nigel

  Jenkins, Rt. Hn. Roy (B'ham, St'fd)

  Molloy, William

  Spriggs, Leslie

  Johnson, James (K'ston upon Hull, W)

  Moonman, Eric

  Stallard, A. W.

  Johnson, Walter (Derby, S.)

  Morris, Alfred (Wythenshawe)

  Steel, David

  Johnston, Russell (Inverness)

  Morris, Charles R. (Openshaw)

  Stewart, Rt. Hn. M. (H'sth, Fulh'm)

  Jones, Barry (Flint, E.)

  Mulley, Rt. Hn. Frederick

  Stoddart, David (Swindon)

  Jones, Dan (Burnley)

  Murray, Ronald King

  Stonehouse, Rt. Hn. John

  Jones, Gwynoro (Carmarthen)

  Newens, Stanley (Harlow)

  Stott, Roger

  Jones, Alec (Rhondda)

  Ogden, Eric

  Strang, Gavin

  Judd, Frank

  O'Halloran, Michael

  Strauss, Rt. Hn. G. R.

  Kaufman, Gerald

  Orbach, Maurice

  Summerskill, Hn. Dr. Shirley

  Kelley, Richard

  Ovenden, John

  Swain, Thomas

  Kerr, Russell

  Owen, Dr. David

  Thomas, D. E. (Merioneth)

  Kilroy-Silk, Robert

  Padley, Walter

  Thomas, Jeffrey (Abertillery)

  Kinnock, Neil

  Palmer, Arthur

  Thorne, Stan (Preston, S.)

  Lambie, David

  Pardoe, John

  Tierney, Sydney

  Lamborn, Harry

  Park, George (Coventry, N.E.)

  Tinn, James

  Lamond, James

  Parker, John (Dagenham)

  Tomney, Frank

  Latham, Arthur (City of W'minster P'ton)

  Parry, Robert

  Torney, Tom

  Lawson, George (Motherwell & Wishaw)

  Peart, Rt. Hn. Fred

  Tuck, Raphael

  Leadbitter, Ted

  Pendry, Tom

  Tyler, Paul

  Lee, John

  Perry, Ernest G.

  Urwin, T. W.

  Lestor, Miss Joan (Eton & Slough)

  Phipps, Dr. Colin

  Varley, Rt. Hn. Eric G.

  Lever, Rt. Hn. Harold

  Prentice, Rt. Hn. Reg

  Wainwright, Edwin (Dearne Valley)

  Lewis, Arthur (Newham, N.)

  Prescott, John

  Wainwright, Richard (Colne Valley)

  Lewis, Ron (Carlisle)

  Price, Christopher (Lewisham, W.)

  Walden, Brian (B'm'ham, Ladywood)

  Lipton, Marcus

  Price, William (Rugby)

  Walker, Harold (Doncaster)

  Loughlin, Charles

  Radice, Giles

  Walker, Terry (Kingswood)

  Loyden, Eddie

  Richardson, Miss Jo

  Watkins, David

  Lyon, Alexander W. (York)

  Roberts, Albert (Normanton)

  Watt, Hamish

  Lyons, Edward (Bradford, W.)

  Roberts, Gwilym (Cannock)

  Weitzman, David

  Mabon, Dr. J. Dickson

  Robertson, John (Paisley)

  Wellbeloved, James

  McCartney, Hugh

  Roderick, Caerwyn E.

  Whitehead, Phillip

  McElhone, Frank

  Rodgers, George (Chorley)

  Whitlock, William

  MacFarquhar, Roderick

  Rodgers, William (Teesside, St'ckton)

  Wigley, Dafydd (Caernarvon)

  McGuire, Michael

  Rooker, J. W.

  Willey, Rt. Hn. Frederick

  Mackenzie, Gregor

  Roper, John

  Williams, Alan (Swansea, W.)

  Maclennan, Robert

  Ross, Stephen (Isle of Wight)

  Williams, Alan Lee (Hvrng, Hchurch)

  McMillan, Tom (Glasgow, C.)

  Ross, Rt. Hn. William (Kilmarnock)

  Wilson, Alexander (Hamilton)

  McNamara, Kevin

  Sandelson, Neville

  Wilson, William (Coventry, S.E.)

  Madden, M. O. F.

  Sedgemore, Bryan

  Winstanley, Dr. Michael

  Magee, Bryan

  Selby, Harry

  Wise, Mrs. Audrey

  Mahon, Simon

  Sheldon, Robert (Ashton-under-Lyne)

  Woodall, Alec

  Mallalieu, J. P. W.

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

  Woof, Robert

  Marks, Kenneth

  Silkin, Rt. Hn. John (L'sham, D'ford)

  Wrigglesworth, Ian

  Marquand, David

  Sillars, James

  Young, David (Bolton, E.)

  Marshall, Dr. Edmund (Goole)

  Silverman, Julius

  Mason, Rt. Hn. Roy

  Skinner, Dennis

  TELLERS FOR THE NOES:

  Mayhew, Christopher (G'wh, W'wch, E)

  Small, William

  Mr. J. D. Dormand and

  Meacher, Michael

  Smith, Cyril (Rochdale)

  Mr. Laurie Pavitt.

  Mellish, Rt. Hn. Robert

  Smith, John (Lanarkshire, N.)

  Millan, Bruce

  Snape, Peter

  Question accordingly negatived.
  7.30 p.m.
  Mr. Joel Barnett: I beg to move Amendment No. 215, in page 13, line 20, at end insert:
  (2) Where any income chargeable in accordance with subsection (1) above arises from a pension payable under any special provision made by the law of the Federal Republic of Germany or any part of it or of Austria for victims of National-Socialist persecution, the deduction to be made under that subsection shall be equal to one-half instead of one-tenth of the amount of the income.
  Mr. Speaker: It will be convenient to discuss at the same time Amendment No. 177, in page 13, line 34, at end add:
  (5) The foregoing provisions of this section shall not apply to annuities payable under the laws of the Federal German Republic or any part thereof or the Republic of Austria relating to the compensation of victims of National Socialist persecution, being annuities which
  1128
  under any such laws relating to the taxation of such compensation are not specifically exempted from tax of a character similar to that of income tax.
  Mr. Barnett: The two amendments relate to victims of Nazi persecution and taxation of their pensions in this country. Perhaps I should declare an indirect interest in so far as I have many friends and former clients who were victims of Nazi persecution. One can have nothing but sympathy for such people. I said in Committee that, athough the logic of the new tax system in relation to pensions was right, I thought that on grounds of compassion there should be a concession here. I have considered the matter closely to see how to make the best concession.
  Amendment No. 177 seeks to revert to the remittance basis. It would be wrong—this is not the only ground on which I

  1129
  would resist that amendment—to deal with one small section of taxpayers on the remittance basis while everyone else was on the new system. But there is another reason. My amendment would make 50 per cent. of the pension tax-free. As I said on the previous group of amendments, the pension paid by Germany and Austria to victims of Nazi persecution was subject to 100 per cent. tax under the remittance basis when remitted here—[Interruption.] I am sorry if I have not made myself clear, but it is a fact that 100 per cent. of pensions remitted here were liable to tax.
  On the other hand, there were some, as I have said, who perfectly legitimately did not remit either in full or in part and to that extent did not pay tax. But those who had either nothing else or very little else remitted the whole of their pension and would have paid tax on the whole of it.
  Amendment No. 177 would revert to the remittance basis, and would mean that those who were in the greatest need because they needed to remit all their pension would still have to pay tax on the whole of that pension. Under my amendment, those whom we want to help most would get 50 per cent. relief. That part of the pension which would not have been remitted would now be taxed as to 50 per cent. So we are giving considerable relief. It would not have been reasonable to give more than 50 per cent. relief in many cases to pensioners who have been paying tax until now under the remittance system on the whole of their income.
  I hope that it will be recognised that I have gone a long way to meet the arguments presented in Committee. Although in logic I did not feel able to accept them, on the ground of compassion for people for whom we all have sympathy I felt that something should be done. That is the reason for the concession in Amendment No. 215, and I hope that it will be acceptable.
  Mr. Geoffrey Finsberg: I gather that my Amendment No. 177 is being discussed with Amendment No. 215. The Government's amendment is belated and grudging. If the proceedings in Committee, which were conducted in a great fit of speed at certain times, had speeded up even more last week, we could have
  1130
  been discussing a Government starred amendment, if there were such a thing, because the Government could not make up their minds how far their compassion should extend.
  Since the Budget decision there has been constant pressure on the Government to act in a fair manner and not a prejudiced and doctrinal manner. My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) pressed this matter strongly in Committee and got the Chief Secretary to agree to look at it again. This he has done, but, in a phrase which has been used to me by numerous correspondents. I can only call this Budget proposal "blood money".
  These pensions are compensation to victims of Nazi persecution, both Jew and non-Jew—
  Mr. Joel Barnett: The hon. Member has it absolutely wrong. This is not compensation for victims of Nazi persecution. That compensation is now and always has been wholly tax-free under Section 377. What we are now talking about is a pension taxable in Germany.
  Mr. Finsberg: If the Chief Secretary will allow me, although I do not have quite as good a brief as he has, I will come to that point. I shall contend that these pensions are compensation and that this has been recognised in other countries. I may now have to spend more time on the matter since the Chief Secretary implies that I do not know what I am talking about.
  These pensions are compensation, whether one uses the word in the broad or in the narrow sense, for Jew and non-Jew in Germany and Austria. Only the fortunate survived to claim them. This compensation can in no way be compared to the pensions paid to people who have been able to retire in good health after many years' service overseas. These people may well have suffered torture and humiliation; no wonder they chose to live here. Chancellors try to equate their suffering with the experience of people who were employed and get benefits. That cannot be morally right.
  Let us consider the tax treatment of these foreign pensions. On my information, from the Association of Jewish Refugees in Great Britain, there is a problem in the reference in Amendment

  1131
  No. 215 to "law". The amendment is quite clear and has been drafted by better draftsmen than I could use.
  The amendment refers to
  "the law of the Federal Republic of Germany".
  My information is that there are at least three West German laws involved. There is the Federal Compensation law of 1961. I gather that payments under that law will continue to be exempt. There is a social insurance pension, which has a capital compensation element in it. That is the point I was trying to make earlier when the Chief Secretary so uncharacteristically tried to tell me that I was not right. That is for the victims of Nazi persecution who had been able to make social insurance payments until 1933 and who were then unable to continue their payments. The third matter involves former civil servants, who are dealt with under a yet further West German law on the compensation of former public servants in Germany. Are all these cases covered by the Chief Secretary's use of the word "law" rather than "laws"?
  As I said, the position is difficult because an element of these pensions is capital compensation by virtue of the payments which the victims were not able to make. It seems that the problem with which these people are faced is whether they should accept half of what is right out of fear of losing everything or whether they should try to get what they believe is right.
  Sir Raymond Gower: Surely the phrase is meant to be "by the general law of the Federal Republic". The amendment says "the law" but the next part of it seems to bear that out because it says
  "or any part of it."
  I have good reason for believing that this would cover any part of the law of West Germany.
  Mr. Finsberg: I am asking the Chief Secretary, however, because it is his tax inspectors, in extra-curricular activities or in some documents, who will have to decide in the end the extra-statutory regulations. I should like to be clear from the Chief Secretary that in this instance the singular includes the plural.
  1132
  What is the cost of the concession that the Chief Secretary has made by increasing the tax-free basis from 10 per cent. to 50 per cent.? How much will the extra 40 per cent. cost? Are there any other similar pensions in payment which are in such a form of compensation that part of them is a capital sum?
  My information is that in the United States two of the categories of pensions that I have mentioned—those of public servants and the social insurance pension—are, because of the large element of compensation included in them, entirely exempt from tax. In this country up to 1973–74 the remittance basis provided some protection to the pensioners in question. If the United States is able to recognise the large element of compensation in these and say that this payment should be entirely exempt from tax, why does not the Chief Secretary feel able to go as far as the Americans in this instance?
  I find this a very difficult problem. I cannot quantify in percentage terms my feeling of compassion. It has to be either compassion or nothing. One cannot have half compassion. I suggest to the Chief Secretary as dispassionately as I can that although he has recognised that there is a very difficult problem here, as most people recognise, and he has gone a long way towards meeting it, I genuinely do not think that he has gone as far as the victims feel he should have gone. There are several thousand of them who feel unhappy about this matter.
  Is the Chief Secretary in a position to say quite categorically that if the House accepts his amendment and my hon. Friends and I decide not to vote down his amendment in order to vote our amendment in, he will look, in the context of the next Finance Bill, at whether the concession that he has given is in all circumstances sufficiently generous? If he felt able to go at least that far, in the circumstances it would probably be possible for me to feel no need to try to vote down his amendment and try to persuade the House to support Amendment No. 177.
  7.45 p.m.
  Sir Raymond Gower: I received as a deputation a small group of these pensioners a week or two ago. They explained to me the very special nature of the benefit they now receive—if one can call

  1133
  it that—from the Governments of West Germany and Austria. One of the people who came to see me is a man who is well-established in industry today, but the other two have had a fairly rough time over the years. I know from their history that they had a very rough time in Germany at the outset of the last world war.
  The Chief Secretary and the Government, by the nature of their amendment, have recognised that this is a special case. My hon. Friend the Member for Hampstead (Mr. Finsberg) will accept that they have gone as far as that. Their amendment gives recognition to the fact that this is different from any other kind of pension. But this is not merely a special case or a very special case; it is a truly unique case. I plead with the Chief Secretary to accept the principle set out in Amendment No. 177. This is a case in which there should not be this kind of impost on this benefit. My hon. Friend the Member for Hampstead went as far as to call it blood money. That is not entirely an exaggeration.
  We recognise that the Chief Secretary has tried to make some concession, but it is not adequate in the special circumstances of this problem. I hope he can accept what my hon. Friend has put to the House—that it should be not merely a half but should be based on the kind of principle which has been accepted by other legislatures, including that of the United States, in respect of at least a proportion of these pensions.
  Mr. Peter Rees: I hesitate to intervene in the debate because the case for Amendment No. 177 has been so eloquently put by my hon. Friend the Member for Hampstead (Mr. Finsberg) and my hon. Friend the Member for Barry (Sir R. Gower). My hon. Friend the Member for Barry was disposed to say that this is a unique case. I hope that it is, but if it is not I shall be very proud and pleased to have helped to establish a precedent, because it would be a very good precedent. T say that because I played a small part in Standing Committee in bringing this problem to the Chief Secretary's attention.
  As my hon. Friends have so eloquently remarked, this is a question of compassion. I am glad, therefore, that the Chief Secretary has, to a degree at any rate, on this occasion allowed his heart to over-
  1134
  rule his head. I shall only say, as some small consolation to him, that in these cases there is more joy in Heaven over one sinner who repenteth. I hope that on this basis the Chief Secretary will take up the hints made to him by the Opposition.
  Mr. Joel Barnett: With the leave of the House, Mr. Deputy Speaker, I should like to reply. I am not astonished by what was said by the hon. Member for Hampstead (Mr. Finsberg), because I know that he represents Hampstead and I can understand the reasons for his speech. However, to call what I have done "belated" and "grudging" I took a little harshly. The hon. and learned Member for Dover and Deal (Mr. Rees) will at least know that when the amendment was first moved in Standing Committee I said immediately that I recognised that, although in logic, given the new system that we have, I would not be entitled to accept the amendment, on the ground of compassion I wanted to look at ways of helping. I did not say that belatedly. It took some time to work out the best way of helping. I decided that the remittance basis was not the best way.
  I take it a little hard that the hon. Gentleman felt inclined to use such strong language. I understand that there are strong feelings on this subject, but it was nonsense for him to use such emotive language as "blood money". Before the Bill those victims of Nazi persecution who remitted their pension because they needed it to live on paid not on 50 per cent. but on 100 per cent., so that would have been double blood money, according to the hon. Gentleman. It was, of course, nothing of the sort. It was our tax system. They, like any other group of pensioners, paid tax on the pension. I therefore take strong exception to the language the hon. Gentleman used.
  The hon. Gentleman argued that this is compensation. There could be argument about this. It was a form of payment to someone who, it was assumed, often, if lie had continued living in Germany or Austria, would have had a pension as a public servant. That man will already have had compensation which in this country will have been wholly tax free as a result of Section 377.

  1135
  In certain instances, under German tax law certain classes of pension are not taxable. That concerns the German tax law. It does not concern the fact that the pensioner was a victim of Nazi persecution. It is because the German tax law differs from ours.
  The hon. Gentleman asked whether "the law" meant laws. The answer is that it does.
  The cost of the concession is negligible. It depends on what was remitted before. I have said before that amendments are not resisted merely on the ground of cost. One resists them on the ground of equity as between two classes of pensioner residing in the United Kingdom. Because of the compassion we all have for these people, I have agreed to help not only those who previously would not have paid tax because they did not remit but those who had to remit because they had to live on the money.
  In the amendment we are going much further than the situation before the Bill. We are giving relief as to 50 per cent. of income. In view of that, I am obliged to say that all three hon. Members, by talking about "this grudging amendment", are being more than churlish, because I have made a considerable concession.
  Sir Raymond Gower: I tried to express the matter in moderate terms. The Chief Secretary has fairly stated that in Germany the tax laws are the determining factor. Will he deal with the situation elsewhere? I gather from my reading that in the United States it is not the tax law, but these people have been treated in a very special way because of the nature of the pension.
  Mr. Barnett: I was coming to the question put to me about the United States. It depends on the double taxation agreements. I have not, in the time at my disposal, had an opportunity to look at them. It is true that the tax system in other countries, in a whole variety of tax areas, will be different from ours. We have to look at our tax system for pensioners resident and domiciled here. The amendment will afford a greater amount of relief than was previously the case to those pensioners who were living here and remitted the whole of their income. I hope that it will be agreed that that class
  1136
  of pensioner was more likely to be in need than the other, though I am not saying that the others are rich.
  I am asked to look at the matter again in the autumn Finance Bill. I cannot make a commitment, because all manner of things are considered in the next Finance Bill and this matter will be considered together with others. I can give no commitment that I shall be able to go further than what I consider to be a very considerable relief to many pensioners in this class, for whom we all have considerable sympathy because of the suffering they endured during the war and after—indeed, sometimes before the war.
  That is why I felt able to bring forward this concession—neither belatedly nor grudgingly—because I recognise that there are strong feelings in the House and outside that something should be done to help these people.
  Mr. Geoffrey Finsberg: In reply to the point raised by my hon. Friend the Member for Barry (Sir R. Gower) and myself about America, the Chief Secretary said that in the time at his disposal he had not had time to study the double taxation agreements. Surely he has received a document dated 17th June from the Association of Jewish Refugees in Great Britain which raises this point. Is he saying that five weeks was not a sufficient period for his advisers to advise him on this point?
  Mr. Barnett: We have not looked at every tax system throughout the world. In the United States these people may be slightly better off; I am not saying that that will not be the case. In other countries these people may be worse off. The hon. Gentleman does not argue his case in relation to those countries where these people may be worse off. We have to argue the case on the basis of the country whose tax laws we are discussing—namely, the United Kingdom. For the reasons that I have given, I think that I have gone a long way, and I hope that the House will accept the amendment.
  Mr. Anthony Fell: It is clear that the Chief Secretary has been as fair as he can in his own mind, much fairer than anybody has been previously. As a reason for not being able to go further, he said that in equity he could not go further. Is not the very point

  1137
  that there is no question of equity here? These people are so extraordinary and, one hopes and prays, so few in number that there is no equity about it. They can be equated with no one—at least, I hope not, unless it be with people who were in the hands of the Japanese during the last war. Surely the hon. Gentleman is in no difficulty from the point of view of possible claims from any other class.
  8.0 p.m.
  The hon. Gentleman uses as his reason the matter of equity. He also said in reply to my hon. Friend the Member for Hampstead (Mr. Finsberg) that the cost was negligible. He went even further and said that it was "a mere nothing". Even if it was twice the amount, it could only still be negligible and "a nothing", or very little. Therefore, I am at a loss to understand him. Although I am absolutely certain of his good faith and that he has done everything he could, I have a feeling that somebody has got him by the legs or the tail and is not allowing him to go as far as he would like to go. Therefore, I make the plea that, although one cannot expect him to do very much more this evening, he will think about this very seriously if he ever has the misfortune to battle through another Finance Bill.
  Mr. Barnett: With the leave of the House, the hon. Gentleman must understand that compensation as such for Nazi persecution is wholly exempt. We are now talking about a pension which, in the hands of a United Kingdom citizen, is wholly taxable. That is the comparison, and that is why I say "in equity." I mean, in equity as betwen taxpayers domiciled in this country. I can assure the hon. Gentleman that my legs are not being pulled in any direction by anyone. I of my own violation wanted to make this concession. I believe it is an important concession. It goes beyond what the position was previously, and I hope it will be acceptable.
  Amendment agreed to.

Clause 19

  INCOME FROM TRADE, ETC. CARRIED ON ABROAD
  Mr. Joel Barnett: I beg to move Amendment No. 21, in page 14, line 11, leave out 'one-tenth' an insert 'one-quarter'
  Mr. Deputy Speaker: With this amendment we are to take the following:

  No. 198, in page 14, line 11, leave out 'one-tenth' and insert 'one-half'.

  No. 83, in page 14, line 11, leave out 'one tenth' and insert 'two fifths'.

  Government Amendment No. 22.

  No. 199, in page 14, line 17, leave out 'nine-tenths' and insert 'one-half'.

  No. 84, in page 14, line 17, leave out 'nine tenths' and insert 'three fifths'.

  Mr. Barnett: The first of these amendments increases from one-tenth to one-quarter the special deduction to be allowed under subsection (3) of Clause 19 in charging income, including a balancing charge, arising from an overseas trade, profession or vocation. Amendment No. 22 correspondingly reduces from nine-tenths to three-quarters the amount of relief to be given for losses or capital allowances. These are similar amendments to the one we debated a little earlier today applying to individuals. These relate to trades, professions and vocations.
  Mr. David Howell: These amendments improve the existing provisions, and in that sense they are welcome, but it will be no surprise to the Chief Secretary to learn that my Friends and I are not by any means convinced that these amendments go far enough. I should like to spend a little time analysing exactly what is implied.
  As the Chief Secretary says, he has enlarged from one-tenth to one-quarter the part of the income that can be deducted before tax liability is computed for partnerships. This may sound all right on the face of it. Further, the hon. Gentleman has an amendment about losses of overseas trade, so that relief for losses in any trade, profession or vocation may be given against any other foreign-earned income for the year of loss or the following year.
  However, we are dealing here with groups and organisations which set up as foreign partnerships—not subsidiaries of British firms, but partnerships set up in a country, possibly in response to local national pressures for a partnership to be set up with a local partner from the country where the earnings have been

  1139
  generated. This is the form in which architects, consulting engineers, accountants, solicitors and other professions have found it desirable and in many cases necessary to set up operations to provide the basic services which often precede and form the spearhead for the generation of major projects which lead to substantial orders for exports from this country.
  One has only to think of some of the vast public works projects and town developments, of bridges and roads built by British construction firms across the face of the globe, and the preparatory and legal work which may well have been done by partnerships of this kind, to realise what a substantial business we are talking about and what a substantial amount of invisible earnings is generated by activities of this kind.
  These partnerships take time to build up. This is a point which was pressed in Committee, and the Chief Secretary thought that there was substance in it. He has made some concession about losses made in one year being set off against earned income in that year or the following year. But there are many cases which will not be helped. A typical case is the following. In the first year there is a loss of £20,000 as new offices, typewriters and other equipment are acquired, all of which has to come out of the partnership income and produces a net loss. In the second year there may be a net loss. In the third year one may expect to be going into profits, but under the amendment this will not help people of that sort.
  I suspect that the kind of example I am giving is much more typical than the one which would have to come forward to qualify under the amendment, which is an example where the profits or income move into surplus in the second year and the losses in the first year could be set off against it. That is the first reason why we must look at this proposal with a jaundiced view.
  The second reason is this. The amendment has reduced from 90 per cent. to 75 per cent. the amount of the partnership income liable to tax. It is arguable that if the partners are away for more than 365 days with the necessary leave provisions they do not pay tax at all. But the essence of the operation I am describing is one where the partners are
  1140
  necessarily travelling to and fro. There are bound to be constant matters to attend to at either end. There are bound to be needs arising for constant, hard-wearing and tough trips to make to and from the new partnership which may be set up in Africa or Arabia or wherever it may be. In the very nature of the kind of operation I am describing, the 365-day rule, when the partnership income becomes liable at the 75 per cent. rate, is of very little use at all.
  Why tax it at all? Why hit on this area where everyone will accept—I suspect that the Chief Secretary is amongst them—that there are considerable benefits to British exports, to British construction companies, to the establishment of British supplies after the project may have been built up and to the general building-up of an infrastructure which will produce a feeling of trust, reliance and confidence in British goods, British firms and British professions backing up the supply of these goods and the carrying forward of those projects? This is an important area which generates a massive benefit to our balance of payments. Invisibles is one of the areas where there has been a remarkable and continuing success story. Perhaps it is because of their success that they have attracted a swipe across the cheek. That, in effect, is what even the 75 per cent. rate does.
  Our Amendment No. 83 would have reduced the fraction to 60 per cent.: in other words, enlarging the deduction to two-fifths. We feel strongly about this. I recognise, however, that there is a difficulty—which the Chief Secretary will point out if I do not—that since the House has seen fit to reject our earlier amendment to reduce to 60 per cent. the amount of foreign earnings liable to tax for the individual, there would obviously be a problem, or illogicality, to put it no higher, if we were to press the partnership amendment now. It would create impossible situations and, no doubt, a strong incentive for people to invent partnerships in every direction enabling them to get a relief which they would not have as individuals now that the House, urged on by the Government, has rejected, wrongly in our view, the earlier amendment dealing with individuals.
  I have to say, therefore, that I do not advise my hon. Friends to press our

  1141
  amendment, but I do this purely for that technical reason. It should not be assumed that we do not feel strongly that the Government's approach is quite wrong and that they are attacking a vital area of Britain's overseas earning capacity and British export capacity in the future. This is a far cry from the original objective of doing away with the remittance basis for overseas earnings. The Government are having a go at a quite different sector involving quite different aims and activities. They are hitting at the wrong target.
  I should have dearly liked to suggest to my hon. Friends that we press the matter, but I recognise that a contradiction would be created if we did. None the less, we feel strongly about it—and I have no doubt that my hon. Friends will wish to express great concern.
  Mr. Bryant Godman Irvine: I offer strong support to my hon. Friend the Member for Guildford (Mr. Howell). I had the privilege for many years to be associated with just such a firm as the one he had in mind. About three-quarters of its work was done abroad. It was done through a number of partnerships and firms in other parts of the world in arrangements with local partners.
  People of this kind do a great deal of valuable work in various parts of the world, but, in the nature of things, a great deal of their work has to be done in London. The partners are constantly flying to other parts of the world. I should have expected the Chief Secretary and the Chancellor of the Exchequer to wish to encourage that sort of activity.
  Although I was not a member of the Standing. Committee and I have not heard the earlier discussions on this topic. I give strong support to everything my hon. Friend the Member for Guildford said.
  8.15 p.m.
  Mr. Peter Rees: The Chief Secretary moved his amendment in rather summary fashion, because he has had enough of the work on this Bill—we recognise that time has taken its toll of his cheerful nature—or, more particularly, I suppose, because he thought that the measure of relief which he proposes would be welcomed.
  1142
  I have spent a good deal of time in Committee and on the Floor of the House looking in the mouth the gift horses which have been brought before us, and I must say that, after examination, they all too often turn out to be no good for much of a ride. The present amendment is another example.
  I welcome the relief for losses. It was conceded in Committee, and I make no point about that. But I am concerned about the whole scope and nature of this clause, the effect of which was so ably analysed by my hon. Friend the Member for Guildford (Mr. Howell). We have to ask ourselves two questions. First, are we putting those who go from this country to trade abroad in a worse position vis-à-vis their foreign competitors? However much the Chief Secretary may deny it, it is a fact of life that the burden of taxation in most other countries is less than it is here.
  Second, are we putting the United Kingdom resident partner of a foreign partnership—I take the case of partnerships because it is assumed, probably rightly, that this clause relates to foreign partnerships—in a worse position than his foreign partners? In other words, when the call comes for more capital, will he find that, because he is bearing the burden of United Kingdom taxation, he has less capital to contribute than his foreign partners have? Neither of those questions has been satisfactorily answered by the Chief Secretary's amendment.
  Two points in particular worry me. It may have been assumed by some hon. Members that the 365-day rule which applies in relation to employees applies in this case. Unless I have misread the clause—I am quite capable of doing that at this stage of the Bill—I do not find that concession embodied in relation to foreign trades. In other words, a person may be engaged in a foreign trade as a member of a foreign partnership for the whole of a fiscal year but because he retains domicile here he will be assessed on his share of the partnership profits with whatever deduction may be conceded by the Chief Secretary. In other words, he will be in a worse position than he would be if he were an employee assessable under Schedule E and the various concessions which have been embodied in Schedule 2.

  1143
  I ask the hon. Gentleman, therefore, to justify that difference in treatment. Why should the sole trader or partner be in a worse position than an employee?
  My second question has, in a sense, been well brought out by others of my hon. Friends. What about the question of expenses? Are we to have another extra-statutory concession for United Kingdom residents who trade abroad? At present, it seems that in computing their foreign earnings they will have no relief for the cost of travelling out there and the cost of subsistence abroad. This is a gross and unwarranted hardship. If they fly out to do a job, as architects, doctors or, perhaps, even as lawyers or accountants, in foreign climes, why should they not be permitted to deduct the cost of travel'? How will the Chief Secretary meet that problem?
  Has the hon. Gentleman been keeping up his sleeve another extra-statutory concession to be produced to dazzle us at this late stage? Although we have heard a good deal about the impossibility of treating ad hoc the expenses rule relating to Schedule E, it is no good the hon. Gentleman now asking the House to embark on a fundamental revision of the rules not only of Schedule E but of Case I and Case II of Schedule D without a demonstration that the Government have thought through all the problems which arise in practice.
  I remain entirely unconvinced by what I have heard both in Committee and on the Floor that the Chief Secretary has grappled in any conscientious way with the problems which have been put to us by our constituents or have been brought out by us with our own native wit and intelligence. I know that the hon. Gentleman thinks that I have treated him hardly during the passage of the Bill, but I can only do the best I can with the material presented to us and, frankly, I find the material extremely unattractive, unpalatable and only partly cooked. With those hard words I sit down, hoping that the Chief Secretary will be able to do considerably better than he has managed thus far.
  Mr. Joel Barnett: I do not object to hard words from the hon. and learned Member for Dover and Deal (Mr. Rees). That I find him the most cantankerous Member I have ever come across is just
  1144
  one of the facts of life. I suppose that it is one of the facts of life which a Chief Secretary has to put up with—if I may adopt that well known form of words. I accept it, and I take it in the spirit in which it is given. I hope that I have been as courteous as possible to the hon. and learned Gentleman, bearing in mind the considerable difficulties with which, as he puts it, I have had to grapple. I have tried my utmost to do my grappling with good humour, though I confess that it has been rather difficult at times. I shall continue to do my best.
  Let us be clear about what we are discussing. I shall not use the argument on this amendment which the hon. Member for Guildford (Mr. Howell) anticipated from me. I oppose the amendment on its merits, not simply because another amendment was carried which allowed employees a deduction of only 25 per cent. Admittedly, it would be nonsense to have a 25 per cent. deduction for employees and a larger one for sole traders and partners and so on.
  The hon. Member for Guildford spoke about the problems of a partnership taking time to build up and needing to make frequent visits abroad, no doubt to harsh clinics like Kuwait and the Persian Gulf. I am sure that is an extremely difficult activity, and that is precisely why we made the concession of 25 per cent. Of course, it is not all that easy for a consultant engineer to have to travel around the United Kingdom, leaving his wife and family. That even applies to a Member of Parliament or a Chief Secretary, and we do not have the 25 per cent. concession.
  Nevertheless, we recognise that there are problems here and we gave the concession in recognition of the hardship of frequent visits to unpleasant climates. However, most consultant engineers and sole traders working abroad would go abroad and have a business there permanently—that is, for more than 365 days—and, therefore, they would have a 100 per cent. deduction—wholly free of tax.
  The hon. and learned Member for Dover and Deal tells me that the sole trader is put in a worse position than the employee. After my experience of the tax system, that is the last thing in the world I would suggest was true of the taxation of an employee compared with

  1145
  that of a sole trader and professional man, although as a professional man I do not pretend that I have not been taxed up to the hilt. I do not complain about that. That is the way the tax laws work, and I do my best to pay the least possible amount. That is perfectly and legitimately within the rules.
  The Bill ensures that the tax system is as fair as possible between taxpayers, and that is why we have this clause. With the 25 per cent. concession, therefore, we have been just about as fair—indeed more so—as it is possible to be. I must tell the hon. and learned Member for Dover and Deal that the sole trader is no worse off than the employee. The Schedule E rule and the Schedule D rule on expenses are supposed to have exactly the same effect. Travel from home to work is taxable under both. The relief, therefore, ensures that there is no difference in principle between the employee and the businessman.
  I do not accept the hon. and learned Gentleman's argument that we have been excessively harsh on the sole trader or partner. We have been most reasonable.
  Mr. Peter Rees: I am grateful to the Chief Secretary for giving way, especially after his previous strictures. He seems to have failed to grasp the point. He has dealt with the case of a person who has to fly from this country, where he is resident, to a foreign country to perform the duties of an office or employment there, by an extra-statutory concession, and we will not reopen that particular argument. What does he propose for a person who is normally resident here and flies, say, to Kuwait to perform his functions as a partner in a civil engineering partnership? Will that man get relief for the cost of travel and subsistence?
  Mr. Barnett: The hon. and learned Gentleman is talking about a man who goes there for fewer than 365 days, and in most cases that man will have a partnership here and a partnership in the foreign country too. If he travels in those circumstances, the overseas professional firm is related to the firm here, and in that circumstance relief would be allowed—
  Mr. Peter Rees: As an extra-statutory concession or not?
  Mr. Barnett: There is absolutely no need for an extra-statutory concession. I am sure that the hon. and learned Gentleman, with his great knowledge of these matters, will, when he is less tired, appreciate that there is no need for such a concession. Travel between businesses, whether abroad or at home, does not require an extra-statutory concession, because it is not taxable now. I am glad that he is looking for something to come down to him like some kind of manna from heaven.
  I hope that the House will feel able to accept the Government amendment in preference to the others.
  Mr. David Howell: I will, with permission, make further comments on the amendment. The more I heard of the Chief Secretary's cast of mind—this was best revealed not by his comments on his brief but by those little asides and bits of local colour that he adds as he proceeds—the more dismayed I became about the country's economic strategy and the way it is being handled.
  There was one point in the hon. Gentleman's remarks which betrayed a complete contempt for what I thought was the main thrust of the country's economic strategy. He talked about consultant engineers travelling around the country and having a hard time, and somehow he compared them and their problems with the problems and difficulties facing consultant engineers and other professional people going overseas. He seemed to go on to imply that it was therefore very generous of him to make any concession at all for them. The fact that the Bill greatly damages the position of such people is, it seems, neither here nor there.
  If we are to survive as a nation—when we hear pronouncements of that sort it begins to be in question—we have to get export-led growth. That means not only selling more manufactures but putting more incentive into earning overseas by professional services which produce the massive surplus on our invisibles. It requires a cast of mind by the Government, by the professions, by salesmen and by manufacturing to put export earnings out in front. That is what we should be doing, yet the Chief Secretary says that it is a generous consideration that such people earning overseas in a partnership should have any concession at all. It is particularly galling just now when there

  1147
  is a desperate need, in view of the vast oil deficit we have to pay for, to earn back some of that deficit from the hands into which it is passing.
  There is just a hope, if we are not too pessimistic, that we can earn back from the Arab oil producers a substantial amount of that deficit over and above the shorter-term problems of financing it. That is because throughout the Arabian Gulf, throughout the oil-producing world, there are to be found British firms and, part-British partnerships setting the pace, paving the way for massive construction projects carried out by British construction engineers and civil engineering firms, ensuring that in country after country in the Middle East there is an enormous potential whereby we may earn back the money we have to pay out for higher-priced oil.
  8.30 p.m.
  That is all going on now. It was going on quite nicely before this Bill. Along comes the Finance Bill and the Chief Secretary says that he is making a concession because he is not hitting these people harder. To us that kind of approach seems absolute madness. It would be absolute madness at any time, but at this time, with the country in its present state, it seems total madness.
  It is a regrettable but unavoidable fact that to press the amendment could mean the creation of a technical nonsense, a contradiction, an illogicality, because earlier amendments were rejected by the Government. Therefore, without in any way detracting from the strength of our feelings or the clear expression of opinion that we believe this to be a totally misplaced and damaging piece of legislation, I beg to ask leave to withdraw the amendment.
  Mr. Deputy Speaker (Mr. Oscar Murton): We are discussing Government Amendment No. 21. To put the record straight, the hon. Gentleman should have asked leave to speak again. Although we are discussing a group of amendments we are concentrating upon Government Amendment No. 21.
  Amendment agreed to.
  Amendment made: No. 22, in page 14, line 17, leave out ' nine-tenths ' and insert ' three-quarters '.—[Mr. Joel Barnett.]
  Mr. Joel Barnett: I beg to move Amendment No. 167, in page 14, line 37, at end insert—
  (7) Where tax on the income from any trade, profession or vocation is chargeable for the year 1974–75 in accordance with subsection (1) above and would not, apart from this subsection, be computed on the income arising in that year, then, if the person charged so requires by notice in writing given to the inspector not later than six years after the end of that year, the tax shall be computed on the amount of the income so arising, and such adjustments shall be made, whether by repayment of tax, assessment or otherwise, as may be necessary to give effect to this subsection.
  This amendment adds a further subsection to Clause 19. The new subsection allows a person whose 1974–75 assessment on his income from an overseas trade, profession or vocation would otherwise be on the income arising in the preceding year—that is, 1973–74—to elect to be assessed for 1974–75 on his income arising in that year. This follows an undertaking I gave in Committee. I hope that it will be acceptable.
  Amendment agreed to.

Clause 29

  TRANSFER OF BUSINESS ON RETIREMENT
  Amendment made: No. 39, in page 20, line 21, leave out be substituted' and insert
  ', as regards disposals made after 2nd July 1974, be substituted references to'.—[Mr. Joel Barnett.]

Clause 33

  CERTAIN DEVELOPMENT GAINS FROM LAND TO BE TAXED AS INCOME
  Mr. Joel Barnett: I beg to move Amendment No. 40, in page 22, line 28, leave out from ' made ' to ' and ' in line 31.
  This amendment seeks to delete the 53 per cent. maximum rate for individuals inserted into the Bill by the Opposition in Committee. Perhaps I should amend that and say "by the Conservative Opposition". The Liberal Opposition abstained on that round.
  What we seek to do is to revert to the original intention of the Bill, the intention of the former Chancellor of the Exchequer, the right hon. Member for Altrincham and Sale (Mr. Barber), and

  1149
  the intention of the Conservative manifesto of February. I said in Committee that I felt that I had not only to look after the interests of the Labour Party but had to be the guardian of the Conservative manifesto. According to the Conservative manifesto, it was intended that development gains tax should be up to the highest level of income. [Interruption.] It is no use the hon. Member for St. Ives (Mr. Nott) denying that because that is what he said.
  Mr. John Nott: There was no question of the rates having been settled by the Conservatives. That is quite untrue.
  Mr. Barnett: As there appears to be some disagreement at least on the part of the hon. Member, perhaps I can quote the manifesto. I thought he would have read it but in case he has not and in case other hon. Gentlemen did not I will read it. The Conservative Party manifesto of 1974 reads:
  "We have announced the severest financial penalties ever on property profiteering, with special reference to empty office buildings. Gains by individuals from the development value of property will now be subject to income tax, up to the top rate … "—
  that is the top rate as it then was—
  "of 75 per cent.…".
  I am grateful to the hon. Member for St. Ives for his withdrawal from his intervention.
  Mr. Nott: I have not withdrawn. It depends on how
  "up to the top rate…"
  is defined.
  Mr. Barnett: The top rate was 75 per cent., and specific reference is made to that figure. The manifesto reads:
  "up to the top rate of 75 per cent."
  That is instead of the former flat rate of 30 per cent. That is stated specifically in the Conservative Party manifesto.
  All I am trying to do is to help right hon. and hon. Members revert to the commitment which they put forward when they fought the General Election in February. They fought the election on the basis that they would tax development gains up to the highest rate of income tax. The amendment seeks to allow them to do precisely that. I feel confident that the right hon. Member for Carshalton (Mr. Carr), having given further thought
  1150
  to the matter, will recognise that the commitment on which he fought the last election should now be fulfilled.
  Not only was there that commitment in the Conservative Party's' Manifesto, but, as the House will know, there was a commitment in the statement of the right hon. Member for Altrincham and Sale (Mr. Barber) on 17th December. The right hon. Gentleman recognised the many problems that would apply if this measure were not brought into effect. The right hon. Member for Carshalton justified the departure from his party's manifesto on two grounds. His first ground was the representations that he had received, and his second was the economic situation. I shall deal with both his arguments.
  I do not think that any of us will be surprised to know that representations have been made about the new levels of taxation on development gains. Those who are liable to pay that tax will obviously be concerned. It should not surprise us if landowners and others who are likely to be paying tax up to the highest level complain and make representations to the right hon. Gentleman. That is understandable as obviously they would not have been able to make representations if his right hon. Friend the Member for Altrincham and Sale had still been Chancellor. Presumably his right hon. Friend would have wished to carry out the commitment that he told the House he wanted to put into effect. The right hon. Member for Carshalton would have been aware of the contents of his party's manifesto as early as February.
  I am sure that Conservative hon. Members had in mind that builders, given the current situation, would complain about being unable to obtain supplies of land. It is true that that is the position, and the right hon. Member for Altrincha.m and Sale recognised precisely that situation. He said that he wanted to tax windfall gains of this description up to the highest level of income tax for the benefit of the community. He was prepared to balance that against the inadequacy of the taxation of development gains.
  Despite the problems that landowners, builders and others would put forward in their representations, the Conservative Party still felt that it was vital that something should be done to improve the taxation of development gains. It was felt

  1151
  that the greater part of windfall gains, as they were described by the then Chancellor, the right hon. Member for Altrincham and Sale, should accrue to the community and not to the landowner who made the substantial gain purely and simply because the community decided to give planning permission and, therefore, to bring about an enormously enhanced value.
  Mr. Michael Latham: Since my right hon. Friend made his statement on 17th December, does the Minister agree that the housing situation has not stayed the same but has deteriorated? Is it not a fact that there has been a deterioration in the housing situation and that that is one reason for the builders' representations being all the more powerful and all the more worthy of acceptance by the House?
  Mr. Barnett: I do not dispute that the situation has become worse. The right hon. Member for Altrincham and Sale dealt with precisely that argument. He said that windfall gains received by landowners should not be taxed at only 30 per cent. He felt—in my view rightly—that a higher level of taxation should apply, but apparently the right hon. Member for Carshalton and other Conservative Members now disagree.
  Let us remember that the situation was very bad in February, when the Conservative Party went to the country on a manifesto which included a proposal to tax these people up to the highest level of income tax. Hon. Members know that the reason for the trouble lay in the financial policies of the Conservative Government, in competition and credit control, which led to the excessive growth of money supply and, therefore, to the problems of housing and land.
  Now the Conservative Party has changed its mind, but without any good reason as far as I can see. I am now trying to enable the Opposition to live up to the manifesto on which they fought the election. They should be grateful to me because in Committee upstairs 19 Conservative Members committed the Conservative Party to a reversal of a major plank in its platform. It was quite disgraceful, and I am now giving
  1152
  the Opposition an opportunity to renounce what the right hon. Member for Carshalton and his colleagues did upstairs on their behalf. I look forward to hearing hon. Members opposite telling us how terrible they feel about this renunciation of a basic part of their election manifesto.
  Mr. David Mitchell: I was not a member of the Standing Committee and am, therefore, not as familiar with the picture as are other hon. Members. The Chief Secretary says that a 30-plus per cent taxation was unacceptable to the Conservative Party. I, too, find it unacceptable. But I understand that the Government now propose a figure of 53 per cent., which is considerably more. How far do the Government think they can go in taxation without totally inhibiting the availability and supply of the article concerned? Secondly, would this taxation apply at income tax rates or at income tax plus surtax? Does it s
  apply at unearned income rate, in which case it would go up to 98 per cent?
  Mr. Barnett: It is at the earned income rate. I assume that the hon. Gentleman must have dropped off to sleep earlier in my speech—I understand it. I have quoted the Conservative Party manifesto for the last General Election—a manifesto on which the hon. Gentleman himself fought the election. The manifesto proposed that the tax should be not at 53 per cent. but at the highest level of income tax, then 75 per cent. and now 83 per cent.
  Mr. David Mitchell indicated dissent.
  Mr. Barnett: I am glad that the hon. Gentleman is nodding. I assume, therefore, that he will support the amendment.
  We are discussing a simple point—that any profits from the development gain brought about not by the fact that the owner of the land has done anything to deserve it but because the community, through the local authority, has decided to give that land planning permission should be properly taxed. I believe that it is right, and the Conservative Party believed as recently as February that it was right, that we should impose such tax. I cannot think of what could have happened since February to make the Opposition change their minds. It could be that

  1153
  they have changed their minds because they have lost office and are now in opposition. If that is the reason, they will be sitting in opposition for a long time, because we shall be happy to go to the next election on the issue of whether development gains accruing to landowners should be taxed up to the highest level of income tax or at some rather lower figure. I am happy to rest on that. Indeed, I should have thought that hon. Members opposite would be, but I see that they are not. Nevertheless, I urge my hon. Friends to support the amendment.
  8.45 p.m.
  Mr. David Mitchell: I am very disturbed by the proposition that the Chief Secretary has put to the House. It is the proposition that any gain made by an individual as the result of disposing of land with an increase in value brought about by a local authority giving planning permission should be fixed at 83 per cent.
  My concern is twofold. The first is on behalf of those who wish to become owner-occupiers. The level of land prices, especially in the South of England, because of the imbalance of supply and demand over recent years has been forced up to a point where it is dangerously high, and I use that phrase in terms of the sort of property-owning democracy in which I believe and in which there is an opportunity for people to become owner-occupiers and participate in the wealth of the country by having a stake in it by owning the house in which they live. In the South-East, in my constituency of Basingstoke and in Hampshire, Surrey, Sussex and so on, prices have been forced very high because supply and demand have been out of balance, because there has been more demand than supply.
  I put to the Chief Secretary the question that I hope he will have in mind when he replies to the debate, and I put it also to my hon. Friends. What effect will there be on the supply of land if up to 83 per cent. of the gain in the value of land is to accrue to the Chancellor of the Exchequer? I do not think that any dispassionate person considering that proposition would take other than the view that it will reduce the number of people prepared to sell. That will inevitably worsen the supply of land for build-
  1154
  ing and make prices even higher. Therefore, I should have thought that, because of its effect on the supply of land and subsequently on the price of land and therefore the prices of houses, this was a proposition unacceptable to people of common sense.
  I turn to the second consideration. I go along with the Chief Secretary in believing that it is wrong that because a local authority has given planning consent, somebody should overnight make a vast fortune. In their posture of their local planning authority, the public have done something to increase the value of land and it is perfectly reasonable that society should "take a cut" of that increase. But there is a vast difference between a cut of 30 per cent. as it was—I would take the view that that was not high enough—or a cut of more than a half, as my hon. Friends inserted in Standing Committee, which seems to be considerable, and a cut of 83 per cent., as the Chief Secretary now proposes. That is so high a cut that one is bound to ask what will be the effect on the individual who sells.
  In the South-East the land that is available for housing is not the farmer's field but the large garden of the old Victorian house. If the local authority says that this land should be used for a housing estate, it may put on it a compulsory purchase order. The unfortunate house-owner then finds himself in the wholly disadvantaged position of losing the privacy of his house and garden and of getting precious little of the value of the garden which has been taken away. Further, the value of his house will be substantially reduced, because instead of being surrounded by a delightful garden he will find that there will be a housing estate on what was formerly the garden.
  Justice applies to those who are better off as well as to those who are poor. The better-off are entitled to protection in front of the law. They have committed the sin of working hard, saving and buying a property for their retirement, and they are just as entitled to justice in front of the law and of the tax authorities as are those who have not.
  If we pass the clause in its present form, the value of that land will be taxed at 83 per cent. and the value of the house will also be depreciated. It is legalised robbery. Therefore, I urge my right hon.

  1155
  Friend and hon. Friends to see that instead of the extortionate rate of 83 per cent. there is inserted a figure of just over half, which is high enough to assure that the State has a fair share of any capital gain without the figure being so high as to be legalised robbery and without preventing people from being willing sellers, thus forcing up land prices.
  Mr. Michael Latham: May I first, for the avoidance of doubt, declare that I have no interest in this matter? Before I came to the House I was director of the Householders Federation but I no longer have any interest in the building industry except a purely journalistic one in that I write for building trade magazines and avoid mentioning myself in so doing.
  Clause 33 deals with several conflicting strands of thought. The first is the creation of betterment, what the Chief Secretary called the windfall gain. As he says, that is the function of the planning system set up by Parliament. If there was no planning there would be no betterment except in the purely locational sense of one place being nicer than another. The basic principle of the Town and Country Planning Act 1947 is that all development rights in effect belong to the State and that no one can carry out development of his propertly without planning permission. The planning system exists because the peace of mind of everyone requires it to exist, so that developments cannot crop up just anywhere.
  The second strand of thought, which is becoming confused with the first strand, is the question of the apportionment of betterment. Here the House has had a uniquely disastrous record since the war. First we had the Town and Country Planning Act 1947 which tried to take all the betterment and was a failure. Secondly we had the Town and Country Planning Act 1954 which took all the public sector betterment but not the private sector betterment, and that was a failure.
  We then had the 1959 Act, which took none of the betterment and was a failure in that there followed a substantial increase in land prices. Following that was the 1967 Land Commission Act, which took a figure of 40 per cent. When the Chief Secretary talks about a dis-
  1156
  gracefully low figure of 53 per cent., he should remember that under the Land Commission Act the figure was only 40 per cent. But the figure of 40 per cent. in that Act also was a failure.
  A further strand in the expectation of the land vendor relates to the argument whether a rate of tax of 83 per cent. will induce him to sell his land voluntarily for development. In my judgment it will not induce him to sell his land voluntarily, but I feel that a 53 per cent. rate would be fair and reasonable.
  The hon. Member for Cornwall, North (Mr. Pardoe) made a thoughtful speech in Committee on this topic. He believes in the neo-Ricardian analysis of land—in other words, that land is a residual matter. He believes that a builder buys land according to what he believes will be the market price of the houses on it. The better the price of the houses, the dearer the price of the land. There is a certain amount of truth in that but, as my hon. Friend for Folkestone and Hythe (Mr. Costain) well knows, one must sort out the different strands of landowner when looking at a figure of 53 per cent. or whatever it might be.
  First there is the large landowner, such as the Duke of Omnium, who does not have to sell his land if he does not want to. The cows can graze on it, apple trees can grow there and that situation can go on for ever. Whether the figure is 53, 63 or 83 per cent., it is a residual matter for such a person. But there are other landowners for whom the situation is different. For example, a farmer may not wish to sell a field which may be of assistance in the village plan because he does not want to create death duty problems for his wife. A further example is Mrs. Smith who has a bungalow with a large garden. She does not want to sell that land because she does not want to be troubled by having the builders all over the place.
  Those landowners will not follow the market forces in land if they do not choose to do so. Therefore, the residual argument breaks down and it is a matter of judgment for the House to decide whether those people will sell their land in present circumstances. My personal belief is that they will not.
  Mr. David Mitchell: Does not my hon. Friend agree that a farmer may not

  1157
  wish to sell not only because of possible estate duty implications but also because of the fact that the removal of one field may lead to the farm becoming uneconomic as a unit, and it will have no higher value for that reason. If the farmer is to be taxed at 83 per cent. on that field, the possibility of his selling land is even less attractive.
  Mr. Latham: My hon. Friend is right. That is why it is impossible to lay down general rules on this topic.
  On an earlier amendment the Chief Secretary spoke of equity. In any consideration of land and its development, equity and emotion are important. More important, however, is the stability and strength of the housing programme, which is a matter that is strictly germane to this discussion. At present the land market is totally paralysed. Few transactions in land are taking place, partly because of uncertainty over development gains tax, partly because there is little knowledge of what will happen in respect of wealth tax and partly because of the total absence of any Government proposals on land nationalisation—a subject which has been mentioned in general but not spelt out in detail. Nobody at present is making any profit out of land.
  9.0 p.m.
  I interrupted the Chief Secretary to ask whether the situation today was the same as it was on 17th December. The answer is that it is not the same, because last autumn and during 1972 people were making large profits out of land, whereas at present nobody is making any profit out of land. That fact alone should induce the House to pause in its consideration.
  The second thing is that in normal circumstances housing developers buy 80 per cent. of their land not from pension funds, local authorities or other builders but from private individuals, by the normal trading methods in the market. If the housing programme is to be continued properly the people selling land must be willing sellers. Land nationalisation and compulsory purchase are not the answer because they take years and because they are based on the assumption that there are up-to-date structure plans and local plans. That is not a true assumption, because these plans do not exist.
  Thirdly, so far from getting better—I made this point when I interrupted the
  1158
  Chief Secretary—the private housing programme is getting worse. In two answers from Ministers today, one from the Minister for Housing and Construction and the other from the Secretary of State for Wales, I learned of the extent of the Government's cash flow programme for the acquisition from developers of dwellings under construction. Up to 11th July only 2,471 houses had been bought. That is peanuts, the situation is getting worse, and there was nothing in the mini-Budget this afternoon to revive the housing programme.
  Fourthly, housing starts are falling still further. This year there are likely to be only half the number of starts that there were last year, and the situation is getting worse because of the uncertainties to which I have referred.
  The mortgage situation is getting better, and so are other things. There is a need for more confidence by the house purchaser to buy, and for more confidence by builders to start more houses. There will not be that confidence so long as there is an 83 per cent. level of tax, and I hope that the House will see fit to resist the amendment.
  Mr. Norman Lamont: The Chief Secretary banged hard on the Dispatch Box—rather harder than at any other stage of the Bill—hut his arguments were as thin as any that we had heard during the debate on the Bill. Both today and in Committee upstairs the Chief Secretary failed to address himself to the effect that this would have on the housing market. We had the same knockabout stuff.
  I am pleased to learn that the Chief Secretary is the most careful reader that I have ever met of the Conservative Party manifesto. His entire case seems to rest, first, on our manifesto, and, secondly, on the statement by the then Chancellor of the Exchequer on 17th December, and I shall come to those in a moment. The Chief Secretary ought, on one of the two opportunities that he has had of speaking on this subject, to have said something about the effect of the amendment on the housing market, but he said almost nothing today, and he said nothing about it in Committee.
  When my right hon. Friend raised a point about the representations that we had had on the effect of this proposal on,

  1159
  the supply of land, the Chief Secretary said "It is not surprising that you get representations from people who are affected by this measure. It is not surprising that you get representations from the owners of land about the effect that this will have on their personal financial position."
  But that is not the point. The representations that we received were not from those who were selling but from those who were building houses and who have to buy the land. They have been making representations to us because they fear the consequences that this rate of tax will have on the supply of land for residential housing.
  I think I am right in saying that house builders such as Wimpey and other large firms that are engaged in the construction of private dwellings buy a large part of their housing land from private individual. About 80 per cent. of those who have made representations are worried about the effect of an 83 per cent. rate upon their industry. They have also made representations to the Chancellor of the Exchequer. I happen to have a copy of the Press notice issued by the House-builders Federation about the representations that it made when the development gains tax was first outlined in all its details in the Finance Bill.
  We do not know what the Chancellor of the Exchequer said to the federation, or whether he even bothered to reply to it. The Chief Secretary has not given a single argument, either today or in Committee, why the objectives put forward by the federation were likely to prove unfounded. Does he think that the federation was acting out of its own financial self-interest and was making it all up? What does the Chief Secretary think about the argument as it applies to the house building industry? He must address himself to this and not fall back on a few catch phrases from the Conservative Party manifesto or talk about land speculation.
  Land speculation has nothing to do with the matter. During the Committee stage upstairs the Chief Secretary admitted, following pressure from our side, that land speculation would continue to be taxed at the same rates as previously. But that situation is not affected by the amendment.
  1160
  I hope that the Chief Secretary will address himself to the serious points put forward. The Government's proposal will have a severe effect on land supply. There have been discussions, relating to another part of the Bill, about the effect of it on mineral rights. In that respect the Chief Secretary was prepared to make a concession. We were told how Lord Diamond, a Minister in a previous Labour Government, had pointed out that a high rate of marginal taxation giving a small yield—when a person sold land—was likely to have a harmful effect on the supply of land containing mineral rights for public use and exploration. If the principle applies with regard to mineral exploration it should also apply to land for private housing.
  It will not do for the Chief Secretary to rest his case on the Press notice of 17th December or on the Conservative Party manifesto. The housing market situation has altered drastically since that time. I understand that it is forecast that the number of housing starts this year will work out at about 120,000 compared with 215,000 for 1973. It is now more important than ever not to do anything which would further undermine confidence in the housing market.
  Surely the Chief Secretary can afford to move a little on this point. He says that the Government proposals are in accordance with the Press notice of 17th December, but there is no reason why we should be bound to every letter, every comma and every dot of that Press notice, any more than we should be bound to every detail of the Chancellor of the Exchequer's first announcements about taxation of foreign income.
  It is a well-known principle that when new taxation proposals are drawn up there should be maximum public discussion. When representations are made a serious Government bow before them, particularly those which are manifestly in the public interest.
  Mr. Brian Sedgemore: I sat on the Committee which considered the Finance Bill and listened for 27 hours to the assault by members of the Opposition on the development gains tax, a tax which they introduced. At that time most of them—I exempt the hon. Member for Kingston-upon-Thames (Mr. Lamont)—made speeches concerned not with the

  1161
  supply of housing land but with the difficulties which certain property companies were finding themselves in.
  I have refreshed my memory on many of the speeches by members of the Opposition, and the gravamen was that since 17th December last year a large number of property companies found themselves in difficulties and it behoved the Government to get them out of those difficulties. I am sure that the House will wish to send its condolences and felicitations to the Lyons and Stern property groups and Guardian Holdings and Mr. Harry Hyams, who last week told a court of law that keeping a building empty was not in his own personal interest but was for the public good.
  I am sure that we all accept those arguments and understand why property companies find themselves in difficulties. There have been a rise in interest rates, some reckless borrowing, some strange auditing, dubious connections with dubious secondary banks and some uncertainties created by the actions of this Government.
  I understand that the right hon. Member for Finchley (Mrs. Thatcher) put down a Question to the Secretary of State for the Environment about the control of business rents. I subsequently put down a Question to my right hon. Friend the Member for Dulwich (Mr. Silkin). The purport of both answers seemed to be that the control of business rents would be ended by March 1976, but it was not clear and property companies have been worrying. They can rest easy tonight. I have made further inquiries about the Government's intentions. As I understand it, those statements were just a holding operation and the Government are examining the options. One of those options may be to continue the control after March 1976 or there may be a new form of property tax or perhaps we shall indulge in some form of municipal or public ownership.
  When the House is considering this tax on property developers, those with investments in property companies, those who are considering investing in them and those property companies which themselves may think that after March 1976 their responsibilities and liabilities will be eased should think again, because it is not happening that way. The whole
  1162
  matter is under active examination by the Government.
  The Chief Secretary was right to mention the Press release on 17th December 1973 by the right hon. Member for Altrincham and Sale (Mr. Barber) about the way in which property profiteers would be taxed. He was right to say that in February, just to show that there had been no mistake, the matter was re-emphasised in the Conservative Party manifesto. As he said in Committee, these clauses are carbon copies of the clauses that the Treasury drew up on the instructions of the right hon. Member for Altrincham and Sale.
  Some hon. Members have asked how we know that, since no Government are allowed to see the papers of the previous Government. But we have the Chief Secretary's assurance. Whatever his faults, they do not lie in misleading the House. He knows that they are carbon copies of the proposals drawn up on the right hon. Member's instructions.
  Mr. Norman Lamont: Would the hon. Gentleman not agree that the Government have already given way on one or two points which were specifically included in the announcement on 17th December 1973? For example, they have given way on the exemption of pension funds from development gains. Does that not at least suggest to the hon. Gentleman that where there is a good case for making some change it should be examined on its merits?
  Mr. Sedgemore: One can distinguish between the detail and the principle of the tax. This proposal strikes at the heart of the announcement on 17th December. The exemption of pension funds was given because certain property companies found themselves in difficulties, but it was almost meaningless. The amount that it would have cost pension funds was very limited. It was almost a political amendment for political reasons, so that we could enamour pension funds of our intentions.
  Mr. Nicholas Ridley: Does the hon. Gentleman accept the case made by my hon. Friends that this tax at a rate of 83 per cent. on the individual will result in a drastic fall in land coming on to the market for house building? Does he, therefore,

  1163
  put the supply of houses for people before his prejudice against people making profits, or the other way round?
  9.15 p.m.
  Mr. Sedgemore: I am coming to that point. It is germane and important to the argument. But it is important to point out that when a political party makes a statement in December, backs it up in February and presents it to 50 million electors, but then turns turtle when it comes to the House, that is the sort of deceit and corruption which has brought British politics into disrepute.
  I am asked about the supply of housing land. Not only have I been on the housing committee of a local authority; I have also worked as a civil servant for four years in the Ministry of Housing and Local Government. When hon. Members of the Opposition say that reduced starts in this year's housing programme are due to the supply of land drying up, all that I can say is that they do not know what they are talking about. As evidence that that is a ridiculous statement, not one of them has produced a single figure to show that the supply of land has reduced starts in this country.
  I go further. The supply of land as affected by this property tax cannot conceivably affect the number of starts either this year or next year. The important thing for the public to know is that the supply of land will be dealt with after October in the public ownership proposals for development land which will be put forward by the Government. What hon. Members of the Opposition cannot accept is that the present Government have thought out the whole policy towards property companies, land and the housing programme, and it is a consistent and coherent programme.
  Mr. Michael Latham: The hon. Gentleman should not fling around these accusations of ignorance. It is not hon. Members of this House but the building industry which has specifically referred to what he has said cannot happen. The building industry has said that the supply of land is being threatened by these proposals and that they have a grave effect on confidence at present.
  Mr. Sedgemore: I know of a number of builders just outside my constituency who stand to make a fortune if this
  1164
  amendment is passed. That is one very good reason for resisting it. It certainly affects builders who happen to own green belt land on which they have been speculating, as hon. Members know.
  Mr. Ridley: On a point of order, Mr. Deputy Speaker. The amendment deals with private individuals who may or may not wish to sell land. How could it possibly be in order to discuss the question whether builders will make a profit out of the amendment.
  Mr. Sedgemore: That is not a point of order, Mr. Deputy Speaker, and the hon. Member well knows it.
  Mr. Deputy Speaker: Order. I have yet to rule on the matter. It is, in fact, a matter of debate.
  Mr. Sedgemore: The hon. Gentleman well knows that this is quite possible for directors of building firms who own chunks of land in the green belt. The hypocrisy of the argument of Opposition Members is shown by the fact that in Standing/ Committee, they not merely objected to the 75 per cent. and the 100 per cent. details of this tax but voted against the tax altogether. Indeed, there was a split between hon. Members on the Opposition Front Bench—the right hon. Member for Carshalton (Mr. Carr) and the hon. Member for Worthing (Mr. Higgins)—and their back benchers. On the Question "That the clause stand part of the Bill", the vote was 18 to eight. Eight Opposition Members voted against the tax altogether. It was their intention to exempt these people. They did not succeed. The Opposition Front Bench supported the amendment. But they succeeded in ratting on their election manifesto.
  Mr. Norman Lamont: On a point of order, Mr. Deputy Speaker. Is it in order for an hon. Member to give a totally erroneous record of a vote—which I do not think ever occurred?
  Mr. Deputy Speaker: I think that that is a matter of debate and of opinion.
  Mr. Sedgemore: One of the features of the Standing Committee was the way that the arguments of the right hon. Member for Carshalton were repeatedly ignored by his back benchers. They were ignored not only in the vote but in the argument. Hon. Members who have been

  1165
  in the House longer than I have agree that they have never known a Front Bench spokesman to be so bullied and roughly handled from behind.
  It will be a sorry day for politics it all hon. Members opposite collectively rat on their manifesto, and it will be a sorry day for the people if we decide that we can help property developers, the friends of hon. Members opposite, in this respect. Perhaps it was symptomatic that in that discussion the 27 hours of hypocritical foray which these people made against this tax was led by people who were directors of property companies and advise property companies.
  Mr. Ian MacArthur: I have not hitherto taken part in the debate on this Finance Bill. I came with joy to listen to the Chief Secretary. I remember the many affable and agreeable speeches he used to make in opposition. I must tell him tonight that behind his cold exterior he hides a heart of stone. I want to bring the hon. Gentleman down to earth, to the real earth of my constituency in Scotland. I will give him a specific example of what his proposal will do to a small community in Perthshire.
  I hope that the hon. Gentleman will not laugh any more, because what I am about to say affects a burgh of several thousand people who depend largely on a development which his amendment will frustrate.
  All my hon. Friends who have spoken in this debate have suggested that the Government amendment, which seeks to reject the proposal carried successfully by the Opposition in Standing Committee, would dry up the supply of land. Up to this point my hon. Friends have been referring primarily to the supply of land for building. I want to tell the Chief Secretary of a case which has arisen in my constituency in the last few days and of which I think he should have some information.
  A farmer owns a small amount of land on the fringe of a small burgh in Perthshire. The burgh is reasonably prosperous but it is badly in need of a small industry which will employ men. There is a shortage of employment for male labour. At last, after a long period of search, a company has been found that wishes to build a factory in this small burgh. The land is available. It is a quite
  1166
  small site. Outline planning permission exists. The town council wants the factory to be built. The owner of this small piece of land wishes to sell his land for this purpose The whole community wants the development to take place.
  At this point we come to the second question. Is it worth while for the farmer to sell that small piece of land? The answer is that if he is to be taxed on the proceeds at the rate of 83 per cent. it is simply not worth his while. This gentleman, who is not a constituent of mine but who owns the land in my constituency, has told me that with his accountant he has done some sums. If he sells the land, which is a matter of five or six acres, for this industrial development, he will be left, on the Government's proposals, with 17 per cent. of the proceeds. If he invests that 17 per cent. his return will be considerably less than the return he gets from keeping the land in farming use, because those few acres carry a crop of soft fruit which fetches a large price and has done for a considerable time, taking one year with another.
  It would be madness for the farmer to sell that land to retain only 17 per cent. of the proceeds, if he has to give up the profitable enterprise which he conducts and which, so far as one can judge, will continue to be a profitable enterprise for many years to come. It is no wonder that this gentleman said to me that if the rate of tax is 83 per cent. he cannot sell the land because, whatever his affection for the local community, he does not see why he should carry that affection to the point where he loses a very large annual income, as he would if he paid this penal rate of tax.
  That is a fact. It is an example of how the tax proposed by the Government would deny a small burgh in Scotland the opportunity of new male employment which it anxiously needs. I hope that the Chief Secretary will stop talking in hypothetical terms and will come down to the real instances, of which this must be only one, in which much-needed development will be frustrated if this crippling rate of tax is accepted by the House.
  I hope that the hon. Gentleman will put aside his doctrinaire approach to land matters, will accept that a rate of 53 per cent.—although, my goodness. 53 per cent. seems a bit high to me—is reasonable enough and will drop this crippling

  1167
  rate of taxation which will prevent communities like the one I have mentioned from drawing the benefit of industrial development which they need.
  Mr. Graham Page: I have already declared to the House on other occasions that I am one of those villains and am a director of a property holding company, although I have no share in the capital of the company in any way.
  The Chief Secretary based a lot of his argument on the Conservative manifesto. It is always good fun to quote from any manifesto issued during a General Election and accuse the party which wrote it of not keeping its promises. But the Government themselves have completely changed the situation. A Conservative Government are not in office, but the top rate of tax has changed. The housing market has changed.
  The real change, however, is that the present Government have threatened nationalisation of development land. This is a completely new situation. It is not a situation in which a Government are merely taxing the development gains out of land. As the hon. Member for Luton, West (Mr. Sedgemore) told the House, it was already in draft or in blueprint stage. The Chief Secretary laughs. It has been publicly said that the Government intend to nationalise development land. To that extent they have reduced the value of that land and have produced a completely different picture. By that very fact, I find myself released from anything I may have said about development gains in the manifesto. I am in a completely new situation now.
  We have talked so far of the individual who sells the land. I want to mention the shareholder in a close company. The shareholder in a close company will have added on to his income the development gains which are made in that company, even though it may be a first letting and not a sale of the property, and the shareholder will be charged up to the highest rate of income tax on those notional gains which have occurred in a company in which he holds shares. This will be a grievous hardship on many comparatively small shareholders in close companies.
  In this amendment we are not talking of the land speculator. The speculator is
  1168
  a dealer in land. One cannot have a speculator in only one piece of land. He is always a dealer in land, and one catches him on the full income tax rate. We are not talking about that man. He already pays and, whatever we decide on this amendment, will continue to pay the full rate of tax.
  9.30 p.m.
  We are talking here about the casual sale of land, so to speak, about the person who is prepared to make his land available for development and who then finds that he may be taxed at a very high rate on any gain which he makes. In such circumstances he will not bring that land forward. This has already been shown through the threats about the high rate of tax and about land nationalisation.
  I hope that the House will respect the decision made in Committee to limit this tax to 53 per cent., which is almost the same as the 52 per cent. corporation tax. I think that that is why we chose that figure in Committee; it is approximately the same as the corporation tax which companies will be paying. I urge the House to hold to that decision of the Committee.
  Mr. John Pardoe: This tax gave rise to many interesting debates in Committee. In fact, it is one of the higher lunacies of the age. It is a test-tube baby implanted in the womb of the present Government by the Conservative Government, and it has betrayed its lack of honest parenthood throughout all our debates as they have meandered along their course.
  I can understand the Conservative Party's shamefaced approach to its progeny. I should be shamefaced too if I had given parenthood to this thing, because it is a ludicrous instrument for dealing with the land problem. The land problem, as one or two hon. Members have already said, is one of the most formidable and impractical problems which we face in this country today. We are discussing the most important commodity, if commodity it be, with which we can concern ourselves. It has an effect on the cost of housing, because in most cases land makes up one-third of the cost of a roof over a family's head, and in some parts of the country substantially more than that. It is the source of half our food at least. I wish it were more than half.

  1169
  How did each of us come to the ownership of land? How did ownership come about in the first place? Lloyd George believed that God gave the land to the people. But that does not get us very far. John Locke believed that we came to the ownership of land by mixing our labour with the soil. But that does not get us much further either.
  In their latter stages the last Government, faced with this appalling problem, realised that something had to be done. The question was, what? They went to the Treasury. The Treasury dusted off an old brief and handed it out to the right hon. Member for Altrincham and Sale (Mr. Barber). That is what we are now debating—in essence, in almost every detail, what was then handed down from the Treasury shelf and accepted lock, stock and barrel by the Conservative Chancellor not so very long ago.
  The result of this tax is entirely predictable. It will be exactly the same on the supply of land and the price of land as the result of the four other attempts this century to deal with the land problem in closely similar ways. There is no need to go through them, but one thinks of the Town and Country Planning Act 1947 and the Land Commission Act. All they did was to dry up the supply of land, and in spite of all the forecasts they increased the price of land as well, especially the price of development land.
  There is no getting away from the fact that this tax was invented by a Tory Government. The idea that the idiocies in it have somehow been grafted on by the present Chief Secretary in the intervening months is nonsense. The Conservative Government were committed—the Chief Secretary has quoted the passage in the Tory manifesto—to taxing development gains at the then top rate of income tax, 75 per cent. I have heard nothing tonight to deny that that was the clear and stated intention of the last Government.
  What is the purpose of a land policy and, therefore, of a land tax? As I say, this is the most serious subject with which we can concern ourselves. First, we want the best use of land. There is a desperate shortage, and there will remain a shortage in these overcrowded islands. We want the best use for agriculture. We
  1170
  want the best use for building and development.
  Second, we want the community to get back the gains in the value of land which the community itself creates. I would leave to the landlord only the gains directly attributable to him and not a penny more. The tax will not recover the gains at whatever rate it is levied. Perhaps it might if it were levied at 99 per cent., but not even the Government are proposing that. Thirdly, the policy should bring far more development land on to the market.
  Fourthly, it should aim to overcome a sense of injustice—I accept that it exists, and the right hon. Member for Altrincham and Sale said so in introducing the tax—about high profits from land. Many of these high profits are already taxed, as the right hon. Member for Crosby (Mr. Page) said and as the Chief Secretary pointed out in Committee. Many of these so-called windfall gains would not escape taxation even if we never passed the tax. The tax was introduced primarily for political purposes. It was designed to do something about property profiteers and speculators, but it affords us no real method of dealing with the central problem of land taxation.
  I am not sure what the tax is meant to do. I suppose it is meant to hit property speculators, but the Chief Secretary admitted that existing tax laws already cover most types of speculation. If the aim was to get back for the community part of any increase in land values which the community creates, I would have thought that it failed manifestly to do that. A development gains tax taxes only the increase in value on the disposal of land, and that will lead to the withholding of land. That is inevitable. We therefore need to tax land not at its disposal at all. We should tax the annual value of land.
  This brings me to the point raised by the hon. Member for Melton (Mr. Latham) about a large landowner such as the Duke of Omnium. It would not matter to such a man whether we had this tax or any of the other four taxes which have been attempted this century if he hung on to it, allowed cows to graze on it or whatever else he did with it. But a tax on the annual value of land would hit the Duke of Omnium, Harry

  1171
  Hyams, the owner of a bungalow with a large garden and the owner of the Victorian house in an inner London suburb. The great thing about the tax on the annual value of land is that it forces those who wish not to develop their land to pay the full price of leaving it fallow and undeveloped.
  Mr. Michael Latham: I accept the hon. Member's point about the Duke of Omnium. As he is explaining the Liberal Party's policy of site value rating, will he confirm that the widow with the large garden will pay site value rating?
  Mr. Pardoe: It is Liberal Party policy that the widow with the large garden, the owner of the large plot in inner London, the Duke of Omnium et al will pay site value rating on the land. If at the end of the day it was decided to exempt certain categories of land, such as agricultural land—[HON. MEMBERS: "Ah."]—that is a different argument. That is an argument for derating. Whether or not one believes that food should be taxed is an argument which was decided in 1928, and that can of beans has not been opened since. Perhaps it is time that it was, but this is hardly the moment to suggest putting a tax on food.
  In my view the community should get back a major part of the increase in the land value. The development gains tax applies only to the increase in value at disposal and it will therefore not achieve that end. All land taxes have dried up the supply of land and raised its price. This tax will do precisely the same thing. I challenge the Chief Secretary to deny that.
  It would be interesting to know what the Conservative Party thinks now, having fathered this ghastly bastard of a tax. I understand, reading the speeches in Committee and those made since, that the Conservative Party's view is that something has changed in the land market, something absolutely fundamental which makes this tax totally unnecessary, and it is a terrible shame that the Government have not recognised that things have changed.
  The right hon. Member for Crosby (Mr. Page) said that it was the Government's proposal for land nationalisation which changed everything. Others said that it was the fall in the value of land.
  1172
  I say frankly that this is a short-term palliative. That is all it was designed as. It was not sold to us at the time as being a short-term palliative. It was sold to us by the right hon. Member for Altrincham and Sale as a major reform of land taxation designed to tackle the whole long-term land problem. It never will do that, and it never would have done.
  Land is unique. The supply cannot be increased. But planning gives it an enhanced value. So we have to tax that value. Whatever the Labour Party says about the nationalisation of development land—I must admit that I am not entirely unsympathetic to proposals in that direction—it will be hideously expensive, and I warn Labour Members that they are being had for suckers. It will always be too expensive for any Labour Government to implement.
  Next time, if there is a next time and another Labour Government, with a majority or without it, the Prime Minister will appear before his party conference and say "Look, we introduced this development gains tax. Is it not a splendid thing. It has knocked all those terrible property speculators for six, so we do not need this hideously expensive reform in Labour's manifesto. Anyway it is only in the small print. We will not quarrel with that."Land nationalisation will be left to fester for years. This will be used as the excuse for putting it on the shelf and keeping it well dusted. The only way in which we can advance is to bring in land value taxation.
  This brings me to the question of the rate at which it should be levied. This is a bad tax and it is a palliative. I do not think that the rate makes any great difference to its effect. I cannot really accept that the widow with the bungalow with the slightly larger garden than she needs will be encouraged to bring that garden to the market and overcome all her natural inhibitions about having builders trampling over the ground just because the rate is 53 per cent. or 50 per cent. rather than 75 per cent. or even 83 per cent.
  Mr. MacArthur: Will the hon. Gentleman take it from me that the farmer I referred to would sell his land for the development we need if the rate were 53 per cent.? He most certainly will not sell if it the rate is 83 per cent.
  Mr. Pardoe: There may be one farmer somewhere who may be influenced by the amount. The argument about the rate confuses the whole issue. It is a device to disguise the embarrassment of the Conservative Party at having fathered this appalling tax. I believe that this is a bad tax, but if it is to be introduced it might as well raise some revenue. It might as well be a tough tax. We might as well have it at the top rate. The Chief Secretary knows that I withheld my vote in Committee. If we are to tax capital and development gains it is because we believe they are part of income.
  9.45 p.m.
  Mr. Ronald Bell: We have heard a remarkable speech from the hon. Member for Cornwall, North (Mr. Pardoe). He finished by saying that capital gains are to be regarded as part of income and should be taxed up to the hilt. It will be interesting to know whether that is the policy of the Liberal Party.
  Let us examine the proposition that has been put forward. How are capital gains part of income? When a man earns income by performing services he exerts himself. The energy, whether it be mental or muscular, that he exerts is concluded at the end of the day and he starts another day with a new supply of energy. However, the man who sells his garden or field has parted with an asset, and the morrow will not bring it back. There is a total difference between disposing of a capital asset and disposing of daily labour. Taxation should take that difference into account.
  The Chief Secretary is defending a policy which I consider to be insane. If the best thing that he can say in its favour is that it was put forward by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), I do not regard that as a very good defence. It was always an insane proposal. If it appeared in 50 party manifestos it would not be any better. Had we won the last General Election, as we should have done, and my right hon. Friend had tried to put this policy into effect, I can assure him that I would have opposed it at every stage. The only thing to be said in its favour is that it is a lot better than the policy of taxing site values.
  1174
  The hon. Member for Luton, West (Mr. Sedgemore) appeared to be under the impression that this was a tax on developers. He said so repeatedly. In fact it has nothing to do with developers. It may be perfectly proper to disclose an absence of interest in stating that one is not a company director of a property company or to declare an interest as such a director, but development companies have nothing to do with this tax. Perhaps it would be proper to declare an interest as the owner of a large garden. That is the sort of person that this tax may affect. The far-aver who has a field might also be affected. It has nothing to do with development.
  This tax arose because there was an awful flap and a lot of excitement about people making large profits out of property development. It was a panic reaction to Centre Point. So we in politics generally proposed a tax which has nothing to do with developers. We proposed it—this was even more absurd—when even developers were ceasing to make any profit. Why has there been all this furore about speculative development and speculative profits? Why do people think that it is bad that there should be speculative builders? Do people want all building to be bespoke? They buy motor cars which are made speculatively. Motor car manufacturers have no idea who will buy their products. People buy washing machines that are made by speculators. They buy shirts which are made by speculators. The whole of our standard of living and our civilisation depends on the activities of speculators.
  This attack on speculation is absolute rubbish. This is a tax on the person who owns land and decides to sell it. The amendment seeks to reverse an amendment made in Standing Committee. It is directed only at the private individual who has land and decides to sell it. Who is he? He may be the owner of a large garden or he may be a farmer. He is the source of supply of all the development that can rightly be called infilling. It is the policy of both main parties—I do not know about the Liberals—that as much housing development as possible shall be by way of infilling and rounding off and as little as possible by green field development. We have now devised this tax, the effect of which must be to tie up land for

  1175
  infilling and rounding off and to encourage green field development.
  It is unrealistic for the hon. Member for Cornwall, North to say that it does not matter what rate the tax is levied at once one has decided on it, that it does not matter whether it is 90 per cent. or 10 per cent. It makes all the difference in the world. A person deciding whether to sell the end of his garden may decide to sell it if he has to pay 10 per cent. and can keep 90 per cent., but if he knows that he will have to pay 90 per cent. to the tax gatherer and keep only 10 per cent. himself he will not sell. Somewhere there is a point at which the matter hangs in the balance. It is a matter of common sense that at 83 per cent. no one is going to sell land except in desperation. There is even a material difference between 25 per cent. and 17 per cent. in this respect. I never thought that 75 per cent. was right. It was far too high. But 83 per cent. is killing the market.
  It is right, as the hon. Member for Luton, West said, that at the moment the supply of land is not the operative factor in holding up building. There are very few sellers of land in the market and even fewer buyers because the liquid position of builders and property developers is so bad that they are not in the market. Just at the moment, therefore, the apprehension of the tax is not having a material effect, but the moment the logjam ends and the appalling backlog in house building begins to be taken up, as we all hope it will be, this tax will instantly be a serious impediment to the kind of development we want.
  have said that this tax was adopted by the Conservative Government for bad and panic reasons. It is being advocated by the Labour Government for bad reasons, partly on a tit-for-tat basis—" You thought of it and we are carrying it out "—and partly in playing to the gallery, consisting of those who envy other people's windfalls and like their own. It is put forward for bad and unworthy reasons.
  I understand that the Chief Secretary cannot now retreat. He cannot consult his senior colleagues and get their permission to be swayed by the debate. But that does not alter the fact that this is a bad tax, and after the next General Election—
  1176
  which, it seems from the Chancellor's statement, we are to have shortly—I hope that whichever party wins will, in the national interest, think about this matter again and do something a lot more sensible about profits from land.
  Mr. Ridley: I repeat the remote and distant interest which I declared on these clauses in Committee. I am astonished by what the hon. Member for Cornwall, North (Mr. Pardoe) said. To all the clauses dealing with this tax, the Liberal Shadow Cabinet has appended an amendment to leave them all out, and the whole tenor of the hon. Gentleman's speeches in Committee was to that effect. What he said tonight reinforces his view that the tax is bad and should be omitted. Yet it is now his considered judgment that, bad though the tax is, the rate should be levied at the highest possible amount—a piece of logic that I find hard to follow and which seems to involve a piece of Liberal U-turning.
  The hon. Gentleman is right to say that it is a bad tax. Whether we are prepared to accept his alternative of site value rating is a contentious proposition.
  Mr. Graham Page: Apparently site value would also be at the highest income tax rate.
  Mr. Ridley: Of course we do not know the proposals for site value rating, but I think that the Liberal Party has chosen a particularly unfavourable moment to introduce a proposal for a more vicious form of rates on the eve of the election which we are told may be coming. I wonder how much it will be welcomed by the general public. People are not too happy when they hear the word "rates". That is a slightly sensitive political term, and treating capital as income, as the hon. Member for Cornwall, North described, is a vicious form of rating that may not be the best election platform for him to fight on. With the little persuasion that I can command, I advise the hon. Gentleman to follow his own amendments into the Lobby and to vote against this amendment, just as he is going to vote—and I shall vote with him—to leave out the clauses when that time comes.
  Even more ridiculous is the Chief Secretary, who says that this is a Conservative idea and that he commends it to his own side on the basis that it is a

  1177
  good Conservative tax. However, his hon. Friend the Member for Luton, West (Mr. Sedgemore) let him down. The Chief Secretary should never allow the hon. Member to speak, because he always puts both his feet in it when he does.
  What the hon. Member for Luton, West said was true. He said that the Labour Party had thought out the problem of land profits and gains and had a perfect blueprint for dealing with the problem, and that if it were not for the tiresome fact that there had to be an election the party would be romping ahead with it already. He said that the Labour Party plan was to nationalise building land. If that is Labour Party policy, why introduce a piece of Conservative legislation in the short interim between now and October when, the Labour Party believes, it will be back with a majority sufficient to institute land nationalisation?
  The two conflict. What is the point? There is a point and it is of great interest. If the Labour Party were to win the election and bring in a Bill to nationalise development land, presumably those owning development land would be paid compensation based on the district valuer's valuation. Does anybody deny that the district valuer's valuation would be the basis of fair compensation? No hon. Member on the Government side denies it. That would result in much bigger profits, which would escape the scope of the tax because there would have been no change of use, nothing to trigger off this tax.
  Nothing will be paid under this tax, not a penny if the Labour Party wins the election and proceeds with land nationalisation. Therefore, it is futile for the Labour Party to proceed with this tax.
  My final point is that the behaviour of a person who has land that he may wish to sell is conditioned by a number of political factors. One must weigh the chance of the hon. Member for Cornwall, North being Chancellor of the Exchequer in October. That is not a political risk, perhaps, that one rates very high when wondering how to deal with one's property. One has to weigh the risk of the hon. Member for Luton, West being Chancellor.
  Mr. Sedgemore: That is more likely.
  Mr. Ridley: I do not think so. One has to weigh the risk of the hon. Member becoming Chancellor and introducing his land nationalisation proposals. One has to weigh the risk of one of my hon. Friends taking that job and bringing in a provision that says 53 per cent. is the rate at which the individual will pay tax.
  One has to weigh whether the whole lot of them will not persist for ever and that there will be somebody who understands the land market and who realises that there is a shortage of land for building, that the whole lot will then be swept away and that perhaps one had better wait and hold one's land off the market until there is a Government who understand how markets work and how supply and demand equate.
  10.0 p.m.
  All the political threats which have been bandied about in arguing the three policies I have described will cause most people to wait for better things to come. We should be wise to consider carefully whether to have this tax at all. If we are to have it, at least we should have the 53 per cent. rate, which would not have the effect of totally drying up the supply of land and would allow some building to go forward.
  I hope, therefore, that my right hon. and hon. Friends will press the Government to leave the Bill as it is and that the hon. Member for Cornwall, North will return to his usual pristine logic and vote against that which he is against rather than seek to make worse a tax which he admits is a bad one.
  Mr. Robert Carr: A long time ago the Chief Secretary moved the amendment in an ebullient mood, which was very enjoyable but did not bring much seriousness to the subject under debate. Since then, apart from the intervention of his hon. Friend the Member for Luton, West (Mr. Sedgemore), we have had a serious debate of high quality.
  I felt from time to time that the arguments were widening out from the amendment before us to a fundamental consideration of land policy generally, which gave the hon. Member for Cornwall, North (Mr. Pardoe) the opportunity once again to air his ideas about site value taxation. I will not follow him down that line, except to say that I have never understood how it could apply to my

  1179
  constituency and how my constituents could find the money to pay this annual taxation before they were able to sell the land and raise the money.
  Mr. Pardoe: Does the right hon. Gentleman recall that on that point in Committee he invited me to come and speak to his constituents? I have been waiting for a written invitation, but I have not yet received one. Does he intend to issue that invitation?
  Mr. Carr: I was tempted on several occasions to invite the hon. Gentleman to come and speak in my constituency. When the Liberal Party appeals to my constituents and tries to entice them from the proper straight and narrow path of voting for me, I feel that it would do my constituents good to find out what the hon. Gentleman believes—which is opposite to the argument used by his party to entice my supporters away from me.
  I should be interested to know how my constituents would pay the site value tax with no apparent resources with which to pay it—and apparently being taxed up to the hilt, whether it be on capital or income. I am being led astray into these wider spheres. I will return to the amendment, which I shall deal with briefly.
  The Chancellor of the Exchequer made some grossly misleading remarks earlier today and on other occasions both inside and outside the House about the result of the amendment passed in Committee being to pay money to land speculators. We specifically established in Committee that the amendment which we pressed and won, and which the Government are trying to wipe out tonight, in no way reduced the amount of tax which would have to be paid on the fruits of land speculation. The amendment has nothing whatever to do with land speculation, and the Chief Secretary in Committee, admittedly after some pressing, made this absolutely clear in a categorical statement. The fact remains that if our Committee stage amendment remained in the Bill land speculation would still be taxed up to the full rate, possibly up to 98 per cent.
  Let us be clear that the amendment has nothing to do with land speculators. What we are dealing with here is land
  1180
  held for investment, but where a windfall profit can be made because of planning decisions in the community's interest we are dealing with a development gains tax—a tax proposed on that windfall. That is a very different matter from land speculation, as the Chief Secretary acknowledged, and indeed as my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), as the then Chancellor of the Exchequer, made clear last December. My right hon. Friend then said that in the then circumstances that was something we would support.
  My right hon. Friend in December proposed that when an individual sold land which he held for investment he could be taxed up to a maximum rate of 75 per cent. on the development gain element in his sale. That was a proposal which we repeated in our manifesto. In Committee upstairs we changed that figure of 75 per cent. to 53 per cent. That is not in dispute, and I am not seeking to deny it. I want to make clear that at 53 per cent. we would still be carrying out the basic promise we made in our manifesto—namely, that the development gain should be taxed much more severely than ever before. A figure of 53 per cent. is not far from double the rate of 30 per cent., which was the old capital gains tax rate, and it is much higher than the 40 per cent. proposed by the then Labour Government who introduced the Land Commission scheme. Therefore, the figure of 53 per cent., although lower than the 75 per cent. maximum proposed, is still much more severe than any tax on development gains proposed by any previous Government. This matter must go clearly on the record.
  Why did we change from 75 to 53 per cent.? The arguments have been fully put by many of my hon. Friends in this debate. We changed essentially for two reasons. The first is that conditions have wholly changed since the end of last year and the beginning of this year. They have changed for three reasons. Firstly, they have changed because the economic circumstances in the property market have changed dramatically. Secondly, they have changed partly because of the existence of a Government who are committed to land nationalisation, and that situation has basically altered the context in which we were considering the matter. Thirdly, the conditions have changed because the

  1181
  top tax rate under the present Government will no longer be 75 but 83 per cent. In those changing circumstances the representations which weighed with us were not so much the representations made by those who will pay the tax, the sellers of the land, but those made by the potential buyers of the land in order to build houses on that land. In those wholly changed circumstances, the representations from those who need to buy land on which to build houses made sense. That is why we proposed 53 per cent. as the top rate rather than the 75 per cent. which we previously had in mind.
  What we have to face in this matter is a choice. We can either, if we are feeling in a generous mood, have the satisfaction of extracting 83 per cent. out of such land sales as are made voluntarily and say that this is a proper sacrifice to the general community conscience and interest, or we can take the view that it is better to lower the level to a maximum at which there is a much better chance of people voluntarily coming forward and selling their land rather than have the long delay that is involved in a whole series of compulsory purchase actions, which is the only alternative.
  Our judgment is that the community interest is better served by giving people more encouragement voluntarily to sell their land and thereby bring more land on to the market at a lower price. This will help home building and help potential home owners, which we believe is in the national interest. In these circumstances, we suggest that 53 per cent. is a much better rate than the old maximum of 75 per cent.
  We believe that the lower rate will still take a substantial amount of the development gain and return it to the community whose planning decision brought that gain into being. At the same time, it will not be such a high rate as to prevent people from putting land on to the market voluntarily. That is a proper course to adopt because it is in the overall community interest. I hope, therefore, that my hon. Friends will vote to sustain the amendment that we made in Committee.
  Mr. Joel Barnett: I have rarely seen the right hon. Member for Carshalton (Mr. Carr) so embarrassed, and one can
  1182
  understand why. He tried very hard to show why he was disagreeing with the former Chancellor of the Exchequer but he failed abysmally. The right hon. Gentleman and many of his hon. Friends have said that their main concern was for the buyer and not for the seller. They are not concerned with the landowner who they agree should pay tax up to the hilt, as the hon. Member for Cornwall, North (Mr. Pardoe) put it.
  Opposition Members are concerned about the buyers of land. They want the supply of land to continue. But there is no problem about the supply of land. That is not the cause of the shortfall in housing starts. There are many other reasons for it which Opposition Members would have to admit if they were being honest.
  Reference has been made to the small farmer, to the widow, and to the elderly lady of 80 who did not want to sell her piece of land and pay tax at 83 per cent. The fact is that those people would not like to sell their piece of land to be taxed at 53 per cent. either.
  Mr. MacArthur: The hon. Gentleman must accept what I said, which is that in Perthshire we are awaiting a new source of employment This is an urgent need, and it will not be met if the Chief Secretary maintains the tax at this crippling rate.
  Mr. Barnett: I do not accept that.
  Mr. MacArthur: It is true.
  Mr. Barnett: The hon. Gentleman should not get so excited. He must control himself. He told us about this constituent of his who is greatly concerned about the community and desperately wants to supply land for the building of a factory. The gentleman concerned would not be prepared to sell the land if he were left with only 17 per cent. more than the current use value. That was what the hon. Gentleman said. It is perfectly true that people will not be prepared to sell their land, whatever the tax rate. The answer will be, first, to have compulsory purchase and, secondly, as my hon. Friend the Member for Luton, West (Mr. Sedgemore) correctly pointed out, to introduce public ownership of development land, which is what we proposed to do.

  1183
  I do not wish to be churlish, but the hon. Member for Cornwall, North has changed his mind from when he abstained upstairs and allowed his Conservative colleagues to pass an amendment on this matter. But he has always given his Liberal solution of the taxation of site values. I hope that no one in the House or outside will be under any illusion about this matter. I hope indeed that none of the hon. Gentleman's Liberal colleagues will be under any illusion about what they will have to tell their constituents. The hon. Gentleman's solution would mean having to establish a hypothesis for site value rating. It would be necessary to decide who was to bear the rate.
  There is one matter here in which I am in agreement with the right hon. Member for Carshalton, in that a situation could arise involving a man who got planning permision to convert his house into, say, a sweets and tobacco shop. It would not be possible to tax him under the site value proposal. It would involve a tremendous administrative task. However, the hon. Gentleman's solution does not matter because his coalition colleagues are not interested in it, and neither are we. It is not, therfore, ever likely to appear on the statute book.
  I do not rest my case on the Conservative Party manifesto. I hope that Members of the Opposition might, but I
  do not. I rest my case on the need for taxation of windfall gains on land. I do so because windfall gains accrue to the landowner from nothing that he has done. They accrue, as the right hon. Member for Altrincham and Sale (Mr. Barber) said some time ago, from a decision made on behalf of the community. It is right that such a decision should not put excess profit into the landowner's hands. That is the only reason why I am in favour of this tax, as a temporary measure. When we have public ownership of development land in full operation there will not be the extra 17 per cent. accruing to the land owner. He will get current use value, and that is all. That is our policy. I do not apologise for it. I am delighted that it is our policy.
  I therefore advise my right hon. and hon. Friends to vote for our amendment. They realise that there should be taxation of windfall gains on land up to the highest rate of income tax. I ask my right hon. and hon. Friends to reverse what the Opposition did upstairs in Committee and put back what the former Chancellor of the Exchequer intended, and what we intend.
  Question put, That the amendment be made:—
  The House divided: Ayes 279, Noes 260.

  Division No. 98.]

  AYES

  [10.18 p.m.

  Allaun, Frank

  Carmichael, Neil

  Dempsey, James

  Archer, Peter

  Carter, Ray

  Doig, Peter

  Armstrong, Ernest

  Carter-Jones, Lewis

  Douglas-Mann, Bruce

  Ashley, Jack

  Castle, Rt. Hn. Barbara

  Duffy, A. E. P.

  Ashton Joe

  Clemitson, Ivor

  Dunn, James A.

  Atkins, Ronald

  Cocks, Michael

  Dunnett, Jack

  Atkinson, Norman

  Cohen, Stanley

  Dunwoody, Mrs. Gwyneth

  Bagier, Gordon, A. T.

  Coleman, Donald

  Eadie, Alex

  Barnett, Guy (Greenwich)

  Colquhoun, Mrs. M. N.

  Edelman, Maurice

  Barnett, Joel (Heywood & Royton)

  Concannon, J. D.

  Edge, Geoff

  Bates, Alf

  Conlan, Bernard

  Edwards, Robert (W'hampton, S.E.)

  Baxter, William

  Cook, Robert F. (Edinburgh, C.)

  Ellis, John (Brigg & Scunthorpe)

  Beith, A. J.

  Cox, Thomas

  Ellis, Tom (Wrexham)

  Benn, Rt- Hn. Anthony Wedgwood

  Craigen, J. M. (G'gow, Maryhill)

  English, Michael

  Bennett, Andrew F. (Stockport, N.)

  Cronin, John

  Ennals, David

  Bidwell, Sydney

  Crosland, Rt. Hn. Anthony

  Evans, Fred (Caerphilly)

  Bishop, E. S.

  Cryer, G. R.

  Evans, Ioan (Aberdare)

  Blenkinsop, Arthur

  Cunningham, G. (Isl'ngt'n, S & F'sb'ry)

  Faulds, Andrew

  Boardman, H.

  Cunningham, Dr. John A. (Whiteh 'v' n)

  Fernyhough, Rt. Hn. E.

  Booth, Albert

  Dalyell, Tam

  Fitch, Alan (Wigan)

  Bottomley, Rt. Hon. Arthur

  Davidson, Arthur

  Flannery, Martin

  Boyden, James (Bishop Auckland)

  Davies, Bryan (Enfield, N.)

  Fletcher, Ted (Darlington)

  Bradley, Tom

  Davies, Denzil (Llanelli)

  Foot, Rt. Hn. Michael

  Broughton, Sir Alfred

  Davies, Ifor (Gower)

  Ford, Ben

  Brown, Hugh D. (Glasgow, Provan)

  Davis, Clinton (Hackney, C.)

  Forrester, John

  Brown, Ronald (H'kney, S. & Sh'ditch)

  Deakins, Eric

  Fowler, Gerry (The Wrekin)

  Buchan, Norman

  Dean, Joseph (Leeds, W.)

  Fraser, John (Lambeth, Norwood)

  Butler, Mrs. Joyce (H' gey, Wood Green)

  de Freitas, Rt. Hn. Sir Geoffrey

  Freeson, Reginald

  Callaghan, Jim (M'dd'ton & Pr'wch)

  Delargy, Hugh

  Galpern, Sir Myer

  Cant, R. B.

  Dell, Rt. Hn. Edmund

  Garrett, John (Norwich, S.)

  Garrett, W. E. (Wallsend)

  Mabon, Dr. J. Dickson

  Sheldon, Robert (Ashton-under-Lyne)

  George, Bruce

  McCartney, Hugh

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

  Gilbert, Dr. John

  McElhone, Frank

  Silkin, Rt. Hn. John (L'sham, D'ford)

  Ginsburg, David

  MacFarquhar, Roderick

  Sillars, James

  Golding, John

  McGuire, Michael

  Silverman, Julius

  Gourlay, Harry

  Mackenzie, Gregor

  Skinner, Dennis

  Graham, Ted

  Maclennan, Robert

  Small, William

  Grant, George (Morpeth)

  McMillan, Tom (Glasgow, C.)

  Smith, Cyril (Rochdale)

  Grant, John (Islington, C.)

  McNamara, Kevin

  Smith, John (Lanarkshire, N.)

  Griffiths, Eddie (Sheffield, Brightside)

  Madden, M. O. F.

  Snape, Peter

  Hamilton, James (Bothwell)

  Magee, Bryan

  Spearing, Nigel

  Hamilton, William (Fife, C.)

  Mahon, Simon

  Spriggs, Leslie

  Hamling, William

  Mallalieu, J. P. W.

  Stallard, A. W.

  Hardy, Peter

  Marks, Kenneth

  Steel, David

  Harrison, Walter (Wakefield)

  Marquand, David

  Stewart, Rt. Hn. M. (H'eth, Fulh'm)

  Hart, Rt. Hn. Judith

  Marshall, Dr. Edmund (Goole)

  Stoddart, David (Swindon)

  Hattertley, Roy

  Mayhew, Christopher (G'wh, W'wch, E)

  Stonehouse, Rt. Hn. John

  Hatton, Frank

  Meacher, Michael

  Stott, Roger

  Healey, Rt. Hn. Denis

  Mellish, Rt. Hn. Robert

  Strang, Gavin

  Heffer, Eric S.

  Millan, Bruce

  Strauss, Rt. Hn. G. R.

  Hooley, Frank

  Milne, Edward

  Summerskill, Rt. Hn. Shirley

  Horam, John

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

  Swain, Thomas

  Howell, Denis (B'ham, Small Heath)

  Molloy, William

  Taverne, Dick

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Moonman, Eric

  Thomas, D. E. (Merioneth)

  Hughes, Mark (Durham)

  Morris, Alfred (Wythenshawe)

  Thomas, Jeffrey (Abertillery)

  Hughes, Robert (Aberdeen, North)

  Morris, Charles R. (Openshaw)

  Thorne, Stan (Preston, S.)

  Hughes, Roy (Newport)

  Mulley, Rt. Hn. Frederick

  Thorpe, Rt. Hn. Jeremy

  Hunter, Adam

  Murray, Ronald King

  Tierney, Sydney

  Irvine, Rt. Hn. Sir A. (L'p'I, Edge HI)

  Newens, Stanley (Harlow)

  Tinn, James

  Irving, Rt. Hn. Sydney (Dartford)

  Ogden, Eric

  Tomney, Frank

  Jackson, Colin

  O'Halloran, Michael

  Torney, Tom

  Jay, Rt. Hn. Douglas

  O'Malley, Brian

  Tuck, Raphael

  Jeger, Mrs. Lena

  Orbach, Maurice

  Tyler, Paul

  Jenkins, Hugh (W'worth, Putney)

  Ovenden, John

  Urwin, T. W.

  Jenkins, Rt. Hn. Roy (B'ham, St'fd)

  Owen, Dr. David

  Varley, Rt. Hn. Eric G.

  Johnson, James (K'ston upon Hull, W)

  Padley, Walter

  Wainwright, Edwin (Dearne Valley)

  Johnson, Walter (Derby, S.)

  Palmer, Arthur

  Wainwright, Richard (Colne Valley)

  Johnston, Russell (Inverness)

  Pardoe, John

  Walden, Brian (B'm'ham, Ladywood)

  Jones, Alec (Rhondda)

  Park, George (Coventry, N.E.)

  Walker, Harold (Doncaster)

  Jones, Barry (Flint, E.)

  Parker, John (Dagenham)

  Walker, Terry (Kingswood)

  Jones, Dan (Burnley)

  Parry, Robert

  Watkins, David

  Jones, Gwynoro (Carmarthen)

  Pavitt, Laurie

  Watt, Hamish

  Judd, Frank

  Peart, Rt. Hn. Fred

  Weitzman, David

  Kaufman, Gerald

  Pendry, Tom

  Wellbeloved, James

  Kelley, Richard

  Phipps, Dr. Colin

  Whitehead, Phillip

  Kerr, Russell

  Prentice, Rt. Hn. Reg

  Whitlock, William

  Kilroy-Silk, Robert

  Prescott, John

  Wigley, Dafydd (Caernarvon)

  Kinnock, Neil

  Price, Christopher (Lewisham, W.)

  Willey, Rt. Hn. Frederick

  Lambie, David

  Price, William (Rugby)

  Williams, Alan (Swansea, W.)

  Lamborn, Harry

  Radice, Giles

  Williams, Alan Lee (Hvrng, Hchurch)

  Lamond, James

  Richardson, Miss Jo

  Williams, Rt. Hn. Shirley (H'f'd & St'ge)

  Latham, Arthur (City of W'minster P'ton)

  Roberts, Albert (Normanton)

  Wilson, Alexander (Hamilton)

  Lawson, George (Motherwell & Wishaw)

  Roberts, Gwllym (Cannock)

  Wilson, Rt. Hn. Harold (Huyton)

  Leadbitter, Ted

  Robertson, John (Paisley)

  Wilson, William (Coventry, S.E.)

  Lee, John

  Rodgers, George (Chorley)

  Winstanley, Dr. Michael

  Lestor, Miss Joan (Eton & Slough)

  Rodgers, William (Teesside, St'ckton)

  Wise, Mrs. Audrey

  Lever, Rt. Hn. Harold

  Rooker, J. W.

  Woodall, Alec

  Lewis, Arthur (Newham, N.)

  Roper, John

  Woof, Robert

  Lewis, Ron (Carlisle)

  Ross, Stephen (Isle of Wight)

  Wrigglesworth, Ian

  Lipton, Marcus

  Ross, Rt. Hn. William (Kilmarnock)

  Young, David (Bolton, E.)

  Loughlin, Charles

  Rowlands, Edward

  Loyden, Eddie

  Sandelson, Neville

  TELLERS FOR THE AYES:

  Lyon, Alexander W. (York)

  Sedgemore, Bryan

  Mr. Joseph Harper and

  Lyons, Edward (Bradford, W.)

  Selby, Harry

  Mr. J. D. Dormand.

  NOES

  Adley, Robert

  Biggs-Davison, John

  Chalker, Mrs. Lynda

  Aitken, Jonathan

  Blaker, Peter

  Channon, Paul

  Alison, Michael (Barkston Ash)

  Boardman, Tom (Leicester, S.)

  Chataway, Rt. Hn. Christopher

  Allason, James (Hemel Hempstead)

  Body, Richard

  Churchill, W. S.

  Amery, Rt. Hn. Julian

  Boscawen, Hon. Robert

  Clark, A. K. M. (Plymouth, Sutton)

  Ancram, M.

  Bowden, Andrew (Brighton, Kemptown)

  Clark, William (Croydon, S.)

  Archer, Jeffrey

  Braine, Sir Bernard

  Clarke, Kenneth (Rushcliffe)

  Atkins, Rt. Hn. Humphrey (Spelthorne)

  Brewis, John

  Clegg, Walter

  Awdry, Daniel

  Brittan, Leon

  Cockcroft, John

  Baker, Kenneth

  Brocklebank-Fowler, Christopher

  Cooke, Robert (Bristol, W.)

  Balniel, Rt. Hn. Lord

  Bryan, Sir Paul

  Cope, John

  Banks, Robert

  Buchanan-Smith, Alick

  Cordie, John

  Barber, Rt. Hn. Anthony

  Buck, Antony

  Cormack, Patrick

  Bell, Ronald

  Budgen, Nick

  Corrie, John

  Bennett, Sir Frederic (Torbay)

  Bulmer, Esmond

  Costain, A. P.

  Bennett, Dr. Reginald (Fareham)

  Burden, F. A.

  Critchley, Julian

  Berry, Hon. Anthony

  Carlisle, Mark

  Crouch, David

  Biffen, John

  Carr, Rt. Hn. Robert

  Crowder, F. P.

  Davies, Rt. Hn. John (Knutsford)

  Kellett-Bowman, Mrs. Elaine

  Rawlinson, Rt. Hn. Sir Peter

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

  Kershaw, Anthony

  Redmond, Robert

  Dean, Paul (Somerset, N.)

  Kimball, Marcus

  Rees, Peter (Dover & Deal)

  Deedes, Rt. Hn. W. F.

  King, Evelyn (Dorset, S.)

  Rees-Davies, W, R.

  Dodds-Parker, Sir Douglas

  King, Tom (Bridgwater)

  Renton, Rt. Hn. Sir David (H't' gd 'ns' re)

  Dodsworth, Geoffrey

  Kirk, Peter

  Renton, R. T. (Mid-Sussex)

  Drayson, Burnaby

  Kitson, Sir Timothy

  Rhys Williams, Sir Brandon

  du Cann, Rt. Hn. Edward

  Knight, Mrs. Jill

  Ridley, Hn. Nicholas

  Durant, Tony

  Knox, David

  Ridsdale, Julian

  Dykes, Hugh

  Lamont, Norman

  Rifkind, Malcolm

  Eden, Rt. Hn. Sir John

  Lane, David

  Rippon, Rt. Hn. Geoffrey

  Edwards, Nicholas (Pembroke)

  Latham, Michael (Melton)

  Roberts, Michael (Cardiff, N.W.)

  Elliott, Sir William

  Lawson, Nigel (Blaby)

  Roberts, Wyn (Conway)

  Emery, Peter

  Le Marchant, Spencer

  Rodgers, Sir John (Sevenoaks)

  Eyre, Reginald

  Lester, Jim (Beeston)

  Rossi, Hugh (Hornsey)

  Fairgrieve, Russell

  Lewis, Kenneth (Rtland & Stmford)

  Rost, Peter (Derbyshire, S.-E.)

  Farr, John

  Lloyd, Ian (Havant & Waterloo)

  Royle, Sir Anthony

  Fell, Anthony

  Loveridge, John

  Sainsbnry, Tim

  Fenner, Mrs. Peggy

  Luce, Richard

  St. John-Stevas, Norman

  Finsberg, Geoffrey

  McAdden, Sir Stephen

  Scott-Hopkins, James

  Fletcher, Alexander (Edinburgh, N.)

  MacArthur, Ian

  Shaw, Giles (Pudsey)

  Fletcher-Cooke, Charles

  McCrindle, R. A.

  Shaw, Michael (Scarborough)

  Fookes, Miss Janet

  Macfarlane, Neil

  Shelton, William (L'mb'th, Streath'm)

  Fowler, Norman (Sutton C'field)

  MacGregor, John

  Shersby, Michael

  Fox, Marcus

  McLaren, Martin

  Silvester, Fred

  Galbraith, Hn. T. G. D.

  Macmillan, Rt. Hn. M. (Farnham)

  Sims, Roger

  Gardiner, George (Reigate & Banstead)

  McNair-Wilson, Michael (Newbury)

  Sinclair, Sir George

  Gardner, Edward (S. Fylde)

  McNair-Wilson, Patrick (New Forest)

  Skeet, T. H. H.

  Gilmour, Sir John (Fife, E.)

  Madel, David

  Smith, Dudley (W'wich & L'm'ngton)

  Glyn, Dr. Alan

  Marshall, Michael (Arundel)

  Spence, John

  Goodhew, Victor

  Marten, Neil

  Spicer, Jim (Dorset, W.)

  Gow, Ian (Eastbourne)

  Mather, Carol

  Spicer, Michael (Worcestershire, S.)

  Gower, Sir Raymond (Barry)

  Maude, Angus

  Sproat, Iain

  Grant, Anthony (Harrow, C.)

  Mawby, Ray

  Stainton, Keith

  Gray, Hamish

  Maxwell-Hyslop, R. J.

  Stanbrook, Ivor

  Grieve, Percy

  Mayhew, Patrick (Royal T' bridge Wells)

  Stewart, Ian (Hitchin)

  Griffiths, Eldon (Bury St. Edmunds)

  Meyer, Sir Anthony

  Stodart, R. Hn. A. (Edinburgh, W.)

  Grist, Ian

  Miller, Hal (B'grove & R'ditch)

  Stokes, John

  Grylls, Michael

  Mills, Peter

  Stradling Thomas, John

  Gurden, Harold

  Miscampbell, Norman

  Tapsell, Peter

  Hall, Sir John

  Mitchell, David (Basingstoke)

  Taylor, Edward M. (Glgow, C'cart)

  Hamilton, Michael (Salisbury)

  Moate, Roger

  Taylor, Robert (Croydon, N.W.)

  Hampson, Dr. Keith

  Money, Ernie

  Tebbit, Norman

  Hannam, John

  More, J. E. M. (Croydon, C.)

  Temple-Morris, Peter

  Harrison, Col. Sir Harwood (Eye)

  Morgan, Geraint

  Thatcher, Rt. Hn. Margaret

  Harvie Anderson, Rt. Hn. Miss

  Morgan-Giles, Rear-Adm.

  Thomas, Rt. Hn. P. (B'net, H'den S.)

  Hastings, Stephen

  Morris, Mitchell (Northampton, S.)

  Trotter, Neville

  Havers, Sir Michael

  Morrison, Charles (Devizes)

  Tugendhat, Christopher

  Hawkins, Paul

  Morrison, Peter (City of Chester)

  van Straubenzee, W. R.

  Hayhoe, Barney

  Mudd, David

  Vaughan, Dr. Gerard

  Heath, Rt. Hn. Edward

  Neave, Airey

  Viggers, Peter

  Henderson, J. S. B. (Dunbartonshire, E.)

  Neubert, Michael

  Waddington, David

  Higgins, Terence

  Newton, Tony (Braintree)

  Wakeham, John

  Hill, James A.

  Nicholls, Sir Harmar

  Walder, David (Clitheroe)

  Holland, Philip

  Normanton, Tom

  Walker-Smith, Rt. Hn. Sir Derek

  Hordern, Peter

  Nott, John

  Wall, Patrick

  Howe, Rt. Hn. Sir Geoffrey (Surrey, E.)

  Onslow, Cranley

  Walters, Dennis

  Howell, David (Guildford)

  Oppenheim, Mrs. Sally

  Warren, Kenneth

  Howell, Ralph (Norfolk, North)

  Orr, Capt. L. P. S.

  Weatherill, Bernard

  nt, John

  Osborn, John

  Wells, John

  Hurd Douglas

  Page, Rt. Hn. Graham (Crosby)

  Wiggin, Jerry

  Hutchison, Michael Clark

  Page, John (Harrow, W.)

  Winterton, Nicholas

  Iremonger, T. L.

  Parkinson, Cecil (Hertfordshire, S.)

  Wood, Rt. Hn. Richard

  Irvine, Bryant Godman (Rye)

  Pattie, Geoffrey

  Worsley, Sir Marcus

  James, David

  Percival, Ian

  Young, Sir George (Ealing, Acton)

  Jenkin, Rt. Hn. P. (R'dge W'std & W'fd)

  Perry, Ernest G.

  Jessel, Toby

  Pink, R. Bonner

  TELLERS FOR THE NOES:

  Johnson Smith, G. (E. Grinstead)

  Price, David (Eastleigh)

  Mr. Adam Butler and

  Jones, Arthur (Daventry)

  Prior, Rt. Hn. James

  Mr. A. G. F. Hall-Davis.

  Jopling, Michael

  Raison, Timothy

  Kaberry, Sir Donald

  Rathbone, Tim

  Question accordingly agreed to.

Schedule 3

  PROVISIONS SUPPLEMENTARY TO SECTION 33
  Mr. Norman Lamont: I beg to move Amendment No. 241, in page 55, line 13, at end insert—
  '( )The carrying out of operations for, or the use of the land for, car parking, provided that such use shall not exceed three years'.
  I think that this will become known as the famous car parking amendment. It raises a point which was drawn to my attention of my hon. Friend the Member for Gillingham (Mr. Burden) and which was not covered in Committee. It is a simple amendment which strikes new ground in these debates. It seeks to exempt from development gains tax any development for use of the relevant land as car parking space when that is the main temporary use of that land between different permanent uses.
  There are some provisions in the schedule which cover temporary use of land for one purpose and when that land reverts to the original purpose no development gain arises. That is in accordance with paragraph 7(g). The amendment relates to the situation when there is temporary use of land and the land does not revert to its original use but is then used for another purpose. When land in the middle of a city is to be used for development—when it is derelict for a period or when it is open space for a period—the land can frequently be used as car parking space. I think that the Financial Secretary would want to encourage the provision of more car parking space. I do not think that it is the intention of the legislation that land which is used temporarily as a car park in the middle of a development should give rise to development gain.
  There is a parallel situation with advertisement hoardings. Paragraph 7(d) of the schedule spells it out that when advertisement hoardings are put up on a derelict site no development gain attaches.
  As long as there are to be any cars in cities, facilities for car parking will be needed. The legislation as it stands may, inadvertently, discourage the use of sites as car parking sites.
  Dr. Gilbert: The arguments of the hon. Gentleman are as persuasive as they are
  1190
  eloquent, and I am happy to advise the House to accept the amendment.
  Amendment agreed to.
  Dr. Gilbert: I beg to move Amendment No. 41, in page 55, line 34, at end insert—
  '(2) In determining for the purposes of subparagraph (1)(a) or (b) above whether or not the cubic content of the original building has been exceeded by more than one-tenth, the cubic content of the building after the carrying out of the works in question shall be treated as reduced by the amount (if any) by which so much of that cubic content as is attributable to one or more of the matters mentioned in the following sub-paragraph exceeds so much of the cubic content of the original building as was attributable to one or more of the matters so mentioned.
  (3) The matters referred to in the preceding sub-paragraph are the following, that is to say—

  (a) means of escape in case of fire;

  (b) car-parking or garage space;

  (c) accommodation for plant providing heating, air-conditioning or similar facilities'.

  Mr. Deputy Speaker (Mr. Oscar Murton): With this we are to take the following Amendments:
  No. 143, in page 54, line 49, leave out "one-tenth" and insert—
  "the amount set out in paragraph 8 below".
  No. 144, in page 55, line 5, leave out "one-tenth" and insert—
  "the amount set out in paragraph 8 below".
  No. 145, in page 55, line 34, at end insert—
  "8. The amount referred to in paragraphs 7(a) and (b) above is the sum of

  (i) 110 per cent. of the cubic content of the original building, and

  (ii) the cubic content of means of escape, car parking or garage space, plant rooms for heating or air conditioning equipment, or similar facilities which are contained in the building after the carrying out of the works referred to in the said paragraph 7(a) and (b)".

  Dr. Gilbert: Paragraph 7(a) of Schedule 3 provides that the carrying out of works for the maintenance, improvement, enlargement or other alteration of any building, so long as the cubic content of the original building is not exceeded by more than 10 per cent., is not material development. Paragraph 7(b) provides that subject to certain conditions, the carrying out of works for the rebuilding of any building shall not constitute material development provided that the cubic content of

  1191
  the original building is not exceeded by more than one-tenth.
  The purpose of the Government amendment and Amendment No. 145 in the name of the right hon. Member for Crosby (Mr. Page) is to provide certain exemptions from the cubic formula with respect to fire escapes, car parking, accommodation for heating and ancillary services. The basic difference between the Government amendment and the right hon. Gentleman's amendment is that while we would both say that fire escapes and services of that sort can be included in the new building without any limit without reference to the cubic capacity of the old building, the right hon. Gentleman goes a little further and would include in the cubic capacity of the basic new building 10 per cent. extra office space on the old building, inclusive of the ancillary services. We think our amendment goes a long way to meet the case made by the right hon. Gentleman.
  I commend Amendment No. 41, but I have to say to the right hon. Gentleman that his group of amendments Nos. 143, 144 and 145, go a little further than we intended, but the difference between us is not very great.
  Mr. Graham Page: I am grateful to the Financial Secretary for going some way to meet the proposition put forward in Committee. We are certainly in agreement, in that such matters as fire escapes, lifts and so on need special consideration. I believe it was the Chief Secretary who said in Committee that this was all covered by appendix A to the Central Land Board's Practice Note, 1st series. As nobody seemed to have a copy of it in Committee at the time, I took the opportunity of looking it up later, and no doubt the Financial Secretary found the same as I did, that it had nothing whatever to do with the point. That is why these amendments are on the Paper.
  There are two differences between Amendment No. 41 and the group of amendments which I put down. First, I have added the whole of the cubic content of means of escape and other matters—not merely the increase. This was to avoid the additional work of having to measure up those things in
  1192
  the old building. It would be extremely difficult from a practical point of view.
  The second difference is more important than that. I have suggested that 110 per cent. of the cubic content of the old building should be calculated and that the cubic content of means of escape and so on added on. The Government amendment provides that the cubic content of the new building should be reduced by
  "so much of that cubic content as is attributable"
  to the increase of the cubic content of the means of escape. As the cubic content of the building is to be ascertained by external measurements—that comes in another part of the schedule—it seems doubtul whether it is possible to attribute part of the cubic content of the building to specified internal areas.
  I think that that will give rise to some difficulty in practice. My Amendment No. 145 avoids those practical difficulties, and although it gives a little better concession to the developer, I have thought it a far more practical proposition than the Government Amendment No. 41, and I had hoped that it would be accepted.
  Dr. Gilbert: It would be churlish of me not to respond to the right hon. Gentleman. I have to agree that the relevance of the code to which reference was made in Committee was somewhat doubtful. In many respects, the code is not applicable to present-day circumstances.
  All I can add at this stage is that we take on board the point which the right hon. Gentleman makes. We are considering setting up a working party with the interests involved which will survey all these questions, bringing the code up to date, and I hone that that will in time meet the practical and constructive objections which the right hon. Gentleman has raised. I cannot, however, advise the House to go beyond the Government amendment.
  Dr. Gilbert: I beg to move Amendment No. 42, in page 56, leave out line 17 and insert—
  Amendment agreed to.
  '(b) storage purposes (whether or not involvthan storage purposes ancillary to a purposeing use as a warehouse or repository) other falling within Class B or C'.
  The purpose here is to enlarge Class E sub-paragraph (b) of paragraph 8 of Schedule 3, as drafted, which is confined to use as a wholesale warehouse or repository, so as to cover use for storage purposes other than retail storage. This amendment fulfils an undertaking which my hon. Friend the Chief Secretary gave in Committee. It will have the effect of bringing into account all forms of industrial storage other than retail; in other words, it will include general commercial and industrial storage, and the restriction in the unamended schedule will, therefore, be considerably relaxed.
  Amendment agreed to.
  Mr. Graham Page: I beg to move Amendment No. 142, in page 56, line 33, at end insert—
  "(3) For the purpose of sub-paragraphs (2) and (3) above a change of use shall be deemed to take place on the later of the dates that planning permission for the change of use was granted or the date that the land is last occupied for the original use, provided that, if at that time the land is held out as still being available for the original use, the change of use shall be treated as taking place at the time when it ceases to be so available".
  Basically, this is the amendment which was moved in Committee, but I have altered it by the insertion of the words
  "the later of the dates that planning permission for the change of use was granted."
  This takes account of some of the Government's objections to the original amendment.
  We are dealing here with the question of change of use being material development. Change of use can itself constitute material development, without any physical or constructional development, as the schedule is drawn. This gives rise to both development gains tax and to the charge to tax on a first letting. Accordingly, it is vital to be able to establish when a change of use takes place, and the amendment is an effort to make that precise.
  The need for a precise date is of particular importance where, for example, refurbishment not amounting to material development takes place. It may be some time, perhaps some months, between the time when the building ceases to be occupied for the old use and becomes occupied for a new use.
  In Committee the Chief Secretary said of the original Amendment:
  1194
  "The trouble with the right hon. Gentleman's suggestion is that it could lead to the kind of land hoarding that the previous Government once thought of dealing with by way of a land hoarding charge. If that amendment were accepted and it was allowed that there was no development simply from the point where the land was vacated and no longer in its original use it could be left for some considerable time."
  10.45 p.m.
  That argument was illogical in this way: if the land ceases to be used at all surely that would not constitute a change of use. The Chief Secretary suggested that if an owner gave up use of the land he somehow gained. But there would not be a change of use. If there was there would be a change every time a tenant moved out of a building unless a new tenant moved into it immediately.
  If land has been used for one purpose and is now to be used for something else the taxpayer would not cease to use it for the first purpose and then delay using it for the new purpose in order to avoid tax. If he wanted to avoid tax he would continue to use the land for the old purpose. He said that the amendment would let out from development gains tax many cases where development had not really begun before 18th December. The new amendment would not allow the claim that a change of use had occurred when the owner ceased to use the land for the old purpose but was still awaiting planning permission at 18th December.
  Where both planning permission had been obtained and the land had ceased to be occupied for the old use before 18th December, there is no logical reason for saying that development had not begun at that stage, bearing in mind that no work needs to be carried out for material development to take place under "change of use". In drafting the amendment I have taken into account all the objections made to the drafting of the previous amendment in Committee. It is vitally important to be precise over when a change of use takes place. As far as I can make it fair to both the Revenue and to the taxpayer, I think I have done so in the amendment.
  Dr. Gilbert: I certainly pay tribute to the moderate way in which the right hon. Gentleman moved the amendment, and I take his point that he has attempted to meet the objections of my

  1195
  hon. Friend the Chief Secretary in Committee by the insertion of the words
  "the later of the dates that planning permission for the change of use was granted."
  However, under the Bill it is clear, though it sounds tautological, that change of use takes place when a new use commences. Our proposals are somewhat less stringent than those originally anticipated by the right hon. Member for Altrincham and Sale (Mr. Barber) in so far as we have made it clear that development gains are not to be charged if the development had been started under all sorts of definitions before 18th December. The effect of the right hon. Gentleman's amendment is to exclude from the charge to development gains, not where the development had started, but where the land had ceased to be used for its original use before 18th December.
  The right hon. Gentleman is saying that, even though there has been no effective development before the date in question, the gain shall be relieved from tax because the previous use was no longer that in question. That undermines the philosophy behind the development gain charge. For that reason I advise the House not to accept the amendment.
  Amendment negatived.
  Dr. Gilbert: I beg to move Amendment No. 43, in page 57, line 18, leave out 'purpose of this Part' and insert 'purposes of paragraph 7(a) and (b)'.
  Mr. Deputy Speaker: I think that it will be convenient to take at the same time amendment No. 44, in line 23, at end insert:
  'For the purposes of this sub-paragraph two or more buildings shall not be treated as included in a single development unless they are or were comprised in the same cartilage'
  and the amendment to the proposed amendment, to leave out "comprised in the same curtilage" and insert:
  "in the immediate vicinity of one another".
  Dr. Gilbert: Not for the first time in this series of debates we find ourselves discussing a Government amendment and in tandem an amendment tabled by the right hon. Member for Crosby (Mr. Graham Page). Paragraph 10 of Schedule 3 provides that:
  "where two or more buildings are included in a single development the whole of that development may be regarded as a single
  1196
  building, and where two or more buildings result from the redevelopment of a single biulding the new buildings may together be regarded as a single building."
  There are two associated amendments on this provision. The first is a drafting amendment to make it clear that paragraph 10(3) is concerned only with the rules of paragraph 7(a) and (b) of Schedule 3. The second amendment provides that two or more buildings should not be treated as within a single development unless comprised in the same curtilage. "Curtilage" is a fairly technical legal term, and I have with me a legal definition of it, if the House wishes me to read it.
  We are saying that where one has more than one building on a site—to use a non lawyer's term for "curtilage"—so long as one keeps within the cubic capacity, plus the given permitted increment of 10 per cent. on the original cubic capicity, it does not matter how many buildings one redevelops, given those constraints, so long as they fall within the same curtilage.
  The effect of the right hon. Gentleman's Amendment (a) is to lift the restriction that the buildings have to be within the same curtilage and merely to require that they are in the immediate vicinity of one another. We believe the effect of his amendment would be to relax the restriction in such a way that it will be possible to clear a large site outside the original curtilage—a series of continuous sites—and put a massive development on the new aggregation of sites and still escape the development gain charge. The effect of agreeing to the right hon. Gentleman's amendment would be extremely expensive and would also in certain circumstances seriously undermine the development gains charge.
  Mr. Graham Page: I am shocked by the Government amendment. I thought that they accepted the Opposition amendment in Committee on this subject, but this amendment demolishes that.
  The Government amendment is too narrowly drawn. For example, it would prevent the exemption of two adjacent shops. One cannot say that buildings of that sort are in the same curtilage. The amendment restricts paragraph 10(3) to cases where two or more buildings are included in a single development, or are comprised in the same curtilage.

  1197
  The Financial Secretary said that "cartilage" was a very technical expression t it is not. It is a common phrase perfectly well understood in legal circles. It means the sort of property expected to be included in the sale of another property—the garden of a house, the garage of a house, the yard or shop premises, those things within the curtilage of the main premises. There is nothing very technical or complicated about it. It is frequently used for ordinary commonsense purposes and it certainly would not include two adjacent shops, the example I have given.
  I thought that the Government wanted to exclude major redevelopment projects from the provisions about 10 per cent. material development, but this amendment excludes virtually all development covered by paragraph 10(3), a paragraph that the Committee accepted on, I thought, the Government's acknowledgement that they did not wish to deter major redevelopment. There is no loss to the Government in our proposal. We are considering merely whether when developing the full site, a whole row of shops or a whole row of offices, for example, the 10 per cent. excess may be switched from over the original site to one end of the block and not divided accurately among the several properties concerned in the development.
  There is no tax to be lost. The Financial Secretary said that our proposal would create a loss, but it would not. The Government amendment will be more inconvenient for development. It will lead to farcical situations in design as attempts are made to show when, in my example, a row of shops is being developed, the increase of a particular shop is not more than 10 per cent. The Government amendment is a wrecking amendment.
  Mr. Costan: I support my right hon. Friend the Member for Crosby (Mr. Page). We shall get some extraordinary planning decisions and proposals as a result of the Government amendment. This is like going back to the window tax. The amendment will produce planing abortions.
  Mr. Mark Hughes indicated dissent.
  Mr. Costain: I see the Parliamentary Private Secretary indicating dissent. I
  1198
  would rather have that dissent from the Government Front Bench.
  11.0 p.m.
  Dr. Gilbert: The right hon. Gentleman is right in saying that two shops side by side would normally be in separate curtilages and, therefore, under the Government amendment, would not be exempt from the tax. It is a question of drawing the line.
  The right hon. Gentleman had in mind a row of cottages or terraced houses. They would be within the same vicinity under any definition. One could make a tidy development gain by demolishing a long terrace of houses, either of the poorer type or of the more expensive old Victorian or Edwardian type with high ceilings. The terraced houses could be demolished and a large block of flats with lower ceilings could be erected. With the same cubic footage plus 10 per cent. considerably increased density could be obtained and higher rentals—all the gains to be expected from a large-scale development. Under the right hon. Gentleman's amendment developments of that sort would be relieved of the charge, and it is no purpose of ours that they should be relieved.
  I grant the right hon. Gentleman that there may be certain difficulties where there are two properties side by side. If the two are taken together anomalies arise with the third. The argument is capable of indefinite extension. It is another exercise in line-drawing which has to be undergone when drafting legislation.
  Under our proposals it will still be possible, for example, to replace an old factory, together with all its outhouses on a widely dispersed site, by a modern factory which is much more productive, and, so long as the 10 per cent. tolerance is observed, relief from the tax is available.
  Mr. Graham Page: I do not follow the hon. Gentleman's mathematics. There can be a 10 per cent. increase in the cubic capacity of the new building compared with the old, and there is no material development. If there are ten buildings the size of each can be increased by 10 per cent., but one cannot increase the area of one of the 10 buildings by 100 per cent. and by not more than 10 per cent. of the whole. The Financial Secretary said that there might be a development

  1199
  with increased density which would not be material development, but his mathematics are not right.
  Dr. Gilbert: I am sorry if I have not made myself clear. Let us forget the development gains charge for the moment. If a big old building is pulled down and if there is put in its place a new building, less rambling and with lower ceilings, a higher population density can be achieved within the same cubic capacity as before. That is why so many handsome old buildings built in a generous style are pulled down and replaced by modern blocks of flats. The Bill does not refer to the number of people but to cubic footage. The right hon. Gentleman's proposals are far more generous than I can recommend the House to accept.
  Mr. Ridley: Will the hon. Gentleman go over this again? If there is a row of terraced houses and they are to be replaced by a block of flats, is the hon. Gentleman saying that the 10 per cent. increase in the total volume of the block of flats is not adequate to protect one from the gains tax, that one is, so to speak, assessed on the increase to each of the original terraced houses? I did not get it quite clear, and it is important. I should be glad if the hon. Gentleman would repeat the argument. If one pulls down 10 terraced houses and replaces them with a single structure containing 10 or more units of accommodation, how is the 10 per cent. to be reckoned in such a case?
  Dr. Gilbert: It all depends on whether they are within the same curtilage under the amendment. That is the point at issue between the right hon. Member for Crosby and myself. We say that, as long as they are within the same curtilage, they can be composited and one can get a 10 per cent. increment or tolerance on the total within the same curtilage. The right hon. Gentleman is seeking to establish the same 10 per cent. tolerance but over a much wider area, since he would apply it over different properties within the same area. We believe that that would be to go too far.
  Mr. David Howell: Would the hon. Gentleman not be wiser if he were to
  1200
  accept the argument of my right hon. Friend the Member for Crosby (Mr. Page), or at least its spirit? The hon. Gentleman seems to have got into mathematical nonsense. The Government's argument seems to be that where there are 12 units there can be a 10 per cent. addition to each unit within its own curtilage as defined—in other words, in the area of the backyard and so on—but that if someone proposes that there shall be a 10 per cent. increase overall to the entire area covered in the first place, and the 10 per cent. comes at one end or at a particular point convenient to or making sense in architectural or planning terms, then the Government say, "That bit at the end is not in the curtilage of the 12 but is only attached to it. It exceeds the curtilage of the 12, and the whole thing becomes liable for tax". Is that what the hon. Gentleman is saying? If so, it seems a recipe for muddle and confusion.
  Dr. Gilbert: I think that we have agreement as to the workings of the formula in either set of circumstance. I think that the hon. Gentleman has taken that point accurately. The distinction is that we are saying that one could aggregate the cubic capacity within a given curtilage and increase it by 10 per cent., and that, up to that point, one is free of development gains charge and can composite as many buildings as are within that curtilage and get the benefit of the 10 per cent. tolerance.
  The right hon. Member for Crosby is seeking to say that, within a much wider area, which could comprose several curtilages, one could do precisely the same thing and aggregate. As long as one kept under the 10 per cent. tolerance limit, one would still be free of the development gains charge.
  The hon. Member for Guildford (Mr. Howell) is suggesting that one could get planning anomalies as a result of our amendment. But one has to draw the line somewhere. The right hon. Gentleman refers to the "immediate vicinity", which is a phrase capable of fairly elastic interpretation. The point at issue is that if one extends the amount of individual curtilage, one is allowing, without any further constraint, to be free from development gains charge very considerable

  1201
  development of the sort I am suggesting One could get a very considerable increase in density of occupation. Obviously one could not go above 10 per cent. in terms of cubic capacity—there is no dispute about that—but if one increased the amount of the curtilage one could get an increase in density.
  Mr. Higgins: We seem to be having some problem in communication. I intervene only because it seems that the point is transparently clear to us but not to the hon. Gentleman. Suppose there are 10 identical houses, each with a back garden. As I understand it, if the volume of the building that is put on one of those properties is less than a 10 per cent. increase, it is free of development charge. The same is true of the second, third, fourth and all the other houses down to the tenth. At that point the Government will not collect any development charge.
  I suspect that both my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and my right hon. Friend the Member for Crosby (Mr. Page) know infinitely more about this area than I do and, I suspect, the hon. Gentleman does. The fact is that one could take these 10 houses and expand the accommodation by 10 per cent. and there would be no loss to the Revenue because this could have been done on an individual basis anyway—one to 10. All that happens is that there is a certain amount of flexibility. The development may be larger, but one could have got an equally large development split into 10 sections with no development charge.
  The point made by my hon. Friend the the Member for Folkestone and Hythe that if we accept the Minister's view we get the situation that anyone planning development has to do it in this little itsy-bitsy way, instead of having a sensible development. The Minister cannot come back to us on this Finance Bill, but I hope that he will give further thought to the matter because it seems to be something of an absurdity. No Revenue consideration is involved. One could have the same kind of extension of accommodation without paying the development charge. The only reason that someone pays a development charge is that he wants a sensible development rather than one that is fragmented. I hope we can persuade the Minister that
  1202
  there is a point that he ought to consider again.
  Dr. Gilbert: At least there is no dispute between the Opposition and myself about the interpretation of what the two amendments are seeking to achieve. Like the hon. Member for Worthing (Mr. Higgins), I bow to the technical expertise in these matters of the right hon. Member for Crosby (Mr. Page) and the hon. Member for Folkestone and Hythe (Mr. Costain).
  The point is that if there is a single large terraced house one would be unlikely to try to redevelop that on its own. If, however, someone wanted to do so he could estimate the gains charge if he kept within the 10 per cent. tolerance rule. But where there is a long row of houses—and this is a question of degree which becomes one of kind—the situation is different.
  The hon. Member for Worthing has some magnificent rows of terraced property in his constituency—that is my recollection from attending Labour Party Conferences in the past; the only occasions on which I have had the pleasure of visiting the hon. Gentleman's constituency—with high ceilings, and four or five storeys high. If someone were to pull down the whole row of properties—perish the thought—he could put up a much higher density within the 10 per cent. tolerance on to the buildings and get a huge development gain.
  Theoretically the hon. Gentleman is right. It could be done separately with each property and the mathematical effect would be the same, but the practical effect would be a nonsense, because no one would pull down one house in a terrace. It is clear that we are talking about a difference in kind. The Opposition amendment is drafted widely and talks about "in the immediate vicinity", whereas the Government amendment is intended to be restrictive.
  Mr. Costain: Suppose there are 10 individual houses in a row. For proper planning, one of those houses may need a boiler house. What worries me is whether, in that curtilage, one of these individual houses can have the extra area to have the boiler house for the new block of flats.
  11.15 p.m.
  Dr. Gilbert: Perhaps I should point out that I am not seeking to detain the House in any way—[Interruption.]
  Mr. Deputy Speaker: Hon. Members must not make interruptions from sedentary positions when a Minister, or any other Member, is speaking.
  Dr. Gilbert: I take on board the point made by the right hon. Member for Crosby (Mr. Page) and the hon. Members for Folkestone and Hythe (Mr. Costain) and Worthing (Mr. Higgins). I undertake to see before the next Finance Bill whether there might be some relief in this direction.
  Amendment agreed to.
  Amendment made: No. 44, in page 57, line 23, at end insert:
  'For the purposes of this sub-paragraph two or more buildings shall not be treated as included in a single development unless they are or were comprised in the same curtilage'.—[Dr. Gilbert.]
  Dr. Gilbert: I beg to move Amendment No. 45, in page 57, line 36, leave out 'mentioned in' and insert 'given by'.
  Mr. Deputy Speaker: With this amendment it will be convenient for the House to consider the Government amendments Nos. 46, 54 and 55.
  Dr. Gilbert: This group of amendments is designed to improve the drafting of paragraph 11(3) and 12(2) of Schedule 3 and paragraph 5 of Schedule 6. No point of substance is involved.
  Amendment agreed to.
  Dr. Gilbert: I beg to move Amendment No. 122, in page 59, line 3, leave out 'after 6th April 1965'.
  This amendment is designed basically to correct a minor drafting defect in paragraph 12 of Schedule 3 which affects the interaction of paragraph 12 with paragraph 15 of Schedule 3 and paragraph 6 with Schedule 6. It is a little wider than the drafting but the actual effect is not great. It adds to the current use value expenditure on a house or property whether or not expenditure took place before 6th April 1965, a date that will be burned into the minds of hon. Members who are present at this hour.
  By adding to the current use value at the date of acquisition all the costs
  1204
  that were incurred before 6th April 1965 it will reduce the current use gain and to that extent increase the development gain. While the amendment tightens on gains, it relaxes the situation with regard to losses. The amount of money involved is unlikely to be great. I hope that the House agrees that this is the right way to approach the matter.
  Amendment agreed to.
  Amendment made: No. 46, in page 59, line 11, leave out 'mentioned in' and insert 'given by'.—[Dr. Gilbert.]
  Dr. Gilbert: I beg to move Amendment No. 47, in page 61, line 5, after '1965' insert:
  'or paragraph 17A(4) of this Schedule'.
  Mr. Deputy Speaker: With this amendment it will be convenient for the House to consider Government amendments Nos. 49 to 51.
  Dr. Gilbert: The purpose of this group of amendments is to enable certain taxpayers to defer payment of part of the tax on development gains if the disposal proceeds are reinvested in new business assets other than land. I have a massive and imposing brief, but would not wish to weary the House with it unless hon. Members wish it.
  Mr. Graham Page: I am sorry but Amendment No. 51 is not a drafting amendment, but a substantial one. It carries out an undertaking in Committee by the Chief Secretary that there should be roll-over provisions, but it would act capriciously. I had hoped that I might have been able to amend it a little.
  An example would be the quickest way of explaining the difficulty. Suppose that a manufacturing company sells a factory and reinvests part of the proceeds in acquiring a new factory and part on acquiring land a mile away as a car park for its transport fleet. The new factory will be a qualifying asset but the land for the car park will not come within these provisions. A number of those who might have thought that they were entitled to the roll-over provisions would be disappointed in such a case.
  It would have been reasonable to delete the requirement that some of the new assets must include land. For example, suppose that the factory is sold and the vendor wishes to reinvest some of the

  1205
  money in plant in another factory. The roll-over provisions would not apply to that because no land would be involved. I do not see why, logically, they should not. Nor will relief be given if the new asset is bare land and is retained as bare land. Finally, the roll-over provisions do not provide that the excess over 30 per cent. of the tax on a development gain which is reinvested in the new asset can be paid in instalments.
  These petty restrictions should not have been included. We were grateful when the Chief Secretary told the Committee that these provisions would be made. I compliment the draftsmen of Amendment No. 51 on covering so much ground. Perhaps I am being niggling, but these are practical defects, and may cause great disappointment to those who are baulked by some small point like this.
  Dr. Gilbert: I am grateful to the right hon. Gentleman for his exposition. I did not suggest that these were drafting amendments. I am grateful for his compliments to the Chief Secretary. I am always a little diffident about taking on the right hon. Gentleman on his own ground, but he may be unduly pessimistic. Under the proposed paragraph 17A a trader will be able to claim relief in respect of a development gain arising on disposal of land and buildings which have been used for his trade if the disposal proceeds are reinvested in new trade assets other than land. Reinvestment in land will not be excluded, however—I think that this meets some of the right hon. Gentleman's point—if the land forms the site of the building or is ancillary to the use and occupation of the building. I think that that will cover the case of a car park—certainly not one at some remove, but within the same curtilage at least.
  Mr. Graham Page: I did not say the same curtilage. Again, in view of what the hon. Gentleman has said about "ancillary", it could be at some distance and not necessarily within the same curtilage.
  Dr. Gilbert: I was jesting when I said that. I think that it could probably go beyond the same curtilage. That is why we have the word "ancillary" in the Bill. I think that this will go a considerable way to meet the difficulties which the right hon. Gentleman fears.
  1206
  On the other hand, word reaches me that the purchase of a site for a transport park will not attract the relief. But as that is a new word that has just reached me, the best thing that I can say at present is that as it is too late for the right hon. Gentleman to move amendments, I shall obviously take very seriously what he has said, and if we have any practical problems it will be quite easy to remedy them on the next Finance Bill.
  Amendment agreed to.
  Amendments made: No. 94. in page 61, line 9, after 'reduced', insert 'or further reduced'.
  No. 50, in line 11, after '(2)(b)' insert:
  'or the said paragraph 17A(4)'.
  No. 51, in line 12, at end insert:
  'Replacement of business assets
  17A.—(1) If the consideration which a person carrying on a trade obtains for the disposal of. or of his interest in, assets (in this paragraph referred to as "the old assets") used, and used only, for the purposes of the trade throughout the period of ownership is wholly or partly applied by him in acquiring other assets, or an interest in other assets (in this paragraph referred to as "the new assets") which on the acquisition are taken into use, and used only, for the purposes of the trade, and—

  (a) the old assets and new assets are within the classes of assets listed in subsection (6) of section 33 of the Finance Act 1965 (replacement of business assets) and the old assets consist of or include land in the United Kingdom; and

  (b) some or all of the new assets are qualifying assets; and

  (c) development gains accrue to the person carrying on the trade in respect of the disposal; and

  (d) the amount of the consideration for the disposal applied as aforesaid is greater than the difference between the whole of that consideration and the amount of those development gains, then, if the person carrying on the trade makes a claim as respects those development gains, the provisions of sub-paragraphs (2) to (5) below shall apply.

  (2) There shall be ascertained the following amounts, that is to say—

  (a) the amount by which so much of the consideration for the disposal as has been applied as described in sub-paragraph (1) above exceeds the difference mentioned in sub-paragraph (1)(d) above; and

  (b) the amount of the consideration for the disposal which has been so applied in acquiring qualifying assets; and in the following provisions of this paragraph "the material amount" means whichever of those amounts is the smaller (or, if

  1207
  they are equal, the amount which is equal to each of them).

  (3) The income tax or corporation tax to which the person carrying on the trade is chargeable for the chargeable period in which the disposal was made shall be reduced by an amount equal to whichever of the following amounts is the smallest, that is to say—

  (a) 30 per cent. of what is, under subparagraph (5) below, the appropriate amount;

  (b) 30 per cent. of the amount; if any, by which the development gains accruing to him in that chargeable period exceeds the development losses, if any, accruing to him in that period (so that if the amount under this head is nil, no reduction will fail to be made under this sub-paragraph);

  (c) the total amount of the income tax for which he is liable for that chargeable period or, in the case of a company, the total amount of the corporation tax for which the company is liable for that chargeable period after setting against that liability the amount of any advance corporation tax falling to be set against it under section 85 of the Finance Act 1972, but before any set-off under subsection (5) of section 240 of the Taxes Act (income tax on distributions etc. received by United Kingdom company).

  For the purposes of paragraph (b) of this sub-paragraph a man and his wife living with him shall be treated as one person if the result of so treating them is to increase the amount given by that paragraph.
  (4) Where a reduction falls to be made under the preceding sub-paragraph, the person carrying on the trade shall be treated for the purposes of Part III of the Finance Act 1965 as if the consideration for the acquisition of, or of the interest in, such of the new assets as are qualifying assets were reduced (or further reduced) by what is, under sub-paragraph (5) below, the appropriate amount; but this subparagraph shall not affect the treatment for those purposes of the other party to the transaction involving the old assets of or the other party to the transaction involving the new assets.
  (5) For the purposes of sub-paragraphs (3)(a) and (4) above

  (a) if the material amount is equal to or greater than one-half of the development gains accruing in respect of the disposal, the appropriate amount is the full amount of the development gains so accruing;

  (b) if the material amount is less than one-half of the development gains so accruing, the appropriate amount is an amount equal to twice the material amount.

  (6) The following provisions shall, with any necessary modifications, apply for the purposes of this paragraph as they apply for the purposes of section 33 of the Finance Act 1965, namely—

  (a) subsections (3), (5) and (7) to (11) of that section; and

  (b) paragraph 3 of Schedule 12 to the Finance Act 1968.

  (7) Without prejudice to the provisions of Part III of the Finance Act 1965 providing generally for apportionment, where consideration is given—

  (a) for the acquisition or disposal of assets some or part of which are assets in relation to which a claim under this paragraph applies and some or part of which are not; or

  (b) for the acquisition or disposal of assets some or part of which are, in relation to a claim under this paragraph, qualifying assets and some or part of which are not, the consideration shall be apportioned in such manner as is just and reasonable.

  (8) For the purposes of this paragraph assets are, in relation to a trade, qualifying assets if they are within the following classes of assets, that is to say the classes listed in section 33(6) of the Finance Act 1965, excluding assets within paragraph (b) of head A in class 1 other than land constituting the site of any asset within paragraph (a) of that head (including in the site any land in the immediate vicinity of the asset which is occupied for purposes ancillary to the occupation and use of the asset).
  Replacement of business assets: depreciating assets
  17B.—(1) Paragraph 16 of Schedule 19 to the Finance Act 1969 (replacement of business assets: depreciating assets) shall have effect in relation to the preceding paragraph as it has effect in relation to section 33 of the Finance Act 1965, subject to the modifications specified in the following provisions of this paragraph and any other necessary modifications.
  (2) For sub-paragraph (1) substitute:
  "(1) Paragraph 17A of Schedule 3 to the Finance Act 1974 shall have effect subject to the provisions of this paragraph in which—

  (a) the 'tax reduction' means the reduction in the income tax or corporation tax to which the person carrying on the trade is chargeable which is made under subparagraph (3) of the said paragraph 17A in connection with a disposal of an asset (called 'asset No. 1');

  (b) the 'expenditure reduction' means the related amount by which, under subparagraph (4) of that paragraph, and apart from the provisions of this paragraph, the expenditure allowable in respect of another asset (called 'asset No. 2 ') is reduced;

  (c) any reference to an expenditure reduction of any amount being carried forward to any asset is a reference to a reduction of that amount in expenditure allowable in respect of that asset".

  (3) In sub-paragraph (2)—
  (a) for the words from the beginning to "until" substitute—
  "(2) If asset No. 2 is a depreciating asset, the expenditure reduction shall not be carried forward, but when—";
  (b) after "comes first" add "an amount equal to the tax reduction may be assessed to tax and recoverable accordingly.
  Any assessment to income tax or corporation tax under this paragraph shall be made under Case VI of Schedule D.".
  (4) In sub-paragraph (3)—

  (a) for "section 33" substitute "paragraph 17A";

  (b) for "the gain held over from asset No. 1 "substitute" the expenditure reduction".

  (5) In sub-paragraph (4)—

  (a) for the words from "the time when" to "accrue" substitute "the occurrence of whichever of the events mentioned in subparagraph (2) above comes first";

  (b) for "the postponed gain" substitute "the expenditure reduction".

  (6) Omit sub-paragraphs (5) and (8) and, in sub-paragraph (9), for "section 33" substitute "paragraph 17A".'.
  No. 86, in page 61, line 19, leave out 'or debentures in' and insert 'in or debentures of'.—[Dr. Gilbert.]
  Dr. Gilbert: I beg to move Amendment No. 87, in page 61, line 21, at end insert:
  '(2) Where, in the case of a disposal of shares in or debentures of a company made in the circumstances mentioned in the preceding sub-paragraph, the amount of any development gain accruing in respect of that disposal falls by virtue of that subparagraph to be computed as if the said paragraph 6 did not apply in relation to the exchange, the provisions of paragraph 14 of Schedule 9 to this Act (postponement of payment of tax), excluding sub-paragraphs (2) and (4), shall, with any necessary modifications, apply in the case of that disposal as they apply in the case of a disposal of an interest in land which is deemed to have been made as mentioned in sub-paragraph (1) of the said paragraph 14, but as if in the said sub-paragraph (1) for the reference to the total tax chargeable in respect of a gain accruing on the disposal there were substituted a reference to such part of that total tax as is equal to the amount by which that total tax exceeds the tax which would have been chargeable but for sub-paragraph (1) of this paragraph'.
  Mr. Deputy Speaker: With this we are to take Amendment No. 146, in page 61, line 21, at end insert:
  "(2) Where in subsection (1) above the company issuing shares or debentures, the person to whom the shares or debentures are being issued, and the company whose shares or debentures are being exchanged are all members of a group as defined in Section 272 Income and Corporation Taxes Act 1970, subsection (1) above shall not apply".
  Dr. Gilbert: Here again, the House finds itself debating simultaneously a Government amendment and an amendment in the name of the right hon. Member for Crosby (Mr. Page). The effect of our proposal is that for capital gains tax purposes a form of roll-over
  1210
  relief is provided for shareholders where shares of another company are issued to them in place of their original holdings on the occasion of a take-over or under a scheme of reconstruction or amalgamation. What we are proposing is to allow the payment of tax on a development gain in situations of this sort to be spread over a period of eight years.
  We think that we are going a long way to meet what the Opposition asked us to do in Standing Committee, particularly with respect to the Amendment No. 93 then moved by the hon. and learned Member for Dover and Deal (Mr. Rees), who, unfortunately, is not in the Chamber at present. The Chief Secretary, while not accepting Amendment No. 93 in all its fullness, undertook to bring forward an amendment that would go some way to meet the hon. and learned Gentleman's proposals.
  Amendment No. 146 in the name of the right hon. Member for Crosby would go a good deal further than we are proposing to go and would leave the door open to tax avoidance on a considerable scale. I am not suggesting for a moment that that is the purpose of the right hon. Gentleman's amendment, but I am advised that that would almost inevitably be its effect. Therefore, I have to advise the House against accepting the right hon. Gentleman's amendment.
  11.30 p.m.
  Mr. Graham Page: I was accused of putting down an amendment calculated to avoid an immense amount of tax. I expected to get the answer to Amendment No. 146 that it was not necessary and that it was already in the law. I was merely clarifying the law. I should like to address my remarks particularly to Amendment No. 146, because I agree with Government Amendment No. 87, and I am grateful to them for putting it down, which applies the eight-year spread of tax on development gains to a tax arising on a company in amalgamation—that is, where all or part of the consideration is satisfied by the issue of shares. I am please to have that as part of the law.
  Amendment No. 146, however, is a very specific and narrow one. It was on the Amendment Paper in Committee but somehow it was grouped with other amendments and it was never discussed. If I may stick fairly closely to my notes

  1211
  I shall get through the point much quicker than waffling over it—provided I am not interrupted by the hon. Member for Gloucestershire, West (Mr. Loughlin). I would ask him to let me get through this or perhaps to go somewhere else and wait until I have finished.
  My amendment deals with a specific situation in a group of companies. To take an example, suppose that A Ltd. has a number of subsidiaries, one of which is B Ltd. which owns land with development value. A Ltd. decides to rationalise its group structure and in the course of this purely internal reorganisation it transfer its shares in B Ltd. to a now company C Ltd. in exchange for the issue of shares in C Ltd. C Ltd. is a wholly-owned subsidiary of A Ltd.
  For capital gains tax purposes no tax would be payable by A Ltd., the first company, on the disposals of its shares to B Ltd. by virtue of the share exchange provisions. If the share exchange provisions do not apply for development gains tax purposes. it may be that the reorganisation would crystallise development gains tax in respect of the disposal of the B Ltd. shares.
  It may be—this was what I thought would be said to me in reply to the amendment—that the exemption for intergroup transactions in Section 273 of the Taxes Act 1970, with which I am sure everybody in the House will be familiar, would apply. It is not clear, however, that it does apply. It is possible that the specific provision of paragraph 18 of Schedule 3 would have the effect of overriding the more generous rules in Section 273 of the 1970 Act.
  All I want to do in the amendment is to clarify the fact that it applies. I was hoping that this was such a simple, little, specific amendment that the Financial Secretary would say that it was welcome and that he would accept it.
  Dr. Gilbert: I followed as best I could the learned remarks of the right hon. Member for Crosby (Mr. Page) through the very helpful commentary of my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). All I would say at the moment is that I am grateful that the right hon. Gentleman appreciates the thrust of Amendment No. 87 and that he welcomes it as a step towards what the
  1212
  Opposition were seeking to achieve in Committee.
  I think we could agree on both sides of the House that the whole question of inter-corporate liability for taxation on capital gains is an extremely complex one. As I understand it, the provisions of the law are already adequate and the Bill in its present form does not hinder internal reorganisations as between companies.
  However, possibly it will be as well if we can leave it at this. As the right hon. Gentleman will be aware, there is a working party already in existence consisting of representatives from the various accountancy bodies, the Confederation of British Industry and the Association of British Chambers of Commerce which is looking into this whole complex of technical questions concerning capital gains tax in groups of companies. We will be looking at the recommendations of that working party in due course and, in the light of those recommendations, will wish to consider whether further amendments to existing legislation, or even to the Bill, should be brought forward. I do not think that there is any prospect of any legislation being brought forward before the 1975 Finance Bill at the earliest.
  Mr. Norman Lamont: I am listening to the hon. Gentleman with great interest. Am I not right in saying that on the first letting charge there is an exemption of a parallel kind to that suggested by my right hon. Friend for Crosby (Mr. Page), which is lettings within a group of companies? Why cannot those principles of exemptions be translated to company reconstructions where a development gain would accrue? I cannot see why they are not parallel situations.
  Dr. Gilbert: The hon. Member is right. There is a roughly parallel provision under the first letting charge proposals. However, at this stage we would not wish to change the development gains situation until we have had a chance to see how it operates in practice and until we have the report of the working party. As I have said, I would not wish to lead the House into thinking that there was a commitment to legislate in the 1975 Finance Bill, but as soon as the working party has reported I think that it will be generally agreed that we could make progress.
  Amendment agreed to.
  Dr. Gilbert: I beg to move Amendment No. 154, in page 61A, line 45, at end insert:
  'arising for general annuity business and'.
  Mr. Deputy Speaker (Mr. George Thomas): With this we are to take Government Amendments Nos. 149 to 152 and Nos. 155 to 158.
  Dr. Gilbert: These are Government amendments which give effect to the Government's decision to exempt life insur

  'Computation of development gain in respect of disposal of interest in land with planning permission for the winning and working of minerals

  23.—(1) Without prejudice to any other provisions of this Schedule as to the computation of the amount given by subsection (3)(c) of the principal section, this paragraph shall apply in relation to a disposal of an interest in land to which the principal section applies if at the time of the disposal there is in force, as regards the land or any part of it, planning permission authorising material development consisting of the winning and working of minerals.

  (2) For the purpose of computing the amount given by subsection (3)(c) of the principal section, the amount of the chargeable gain accruing on the disposal shall be taken to be what it would be if the amount which, in the computation of that chargeable gain, falls to be taken as the consideration were reduced to the sum of the following amounts, that is to say—

  (a) the market value of the interest at the time of the disposal calculated on the assumption that it was at that time, and would continue to be, unlawful to carry out any material development of the land consisting of the winning and working of minerals; and

  (b) one-half of the amount by which the actual consideration for the disposal exceeds the said market value.

  In this sub-paragraph "the actual consideration for the disposal" means the amount which, in the computation (apart from this paragraph) of the chargeable gain accruing on the disposal, falls to be taken as the consideration.

  (3) Sub-paragraph (3) of paragraph 1 of this Schedule shall apply for the purposes of this paragraph as it applies for the purposes of paragraph 1; and in this paragraph "minerals" has the meaning given by paragraph 10(1) of this Schedule.

  (4) For the purposes of this paragraph the winning and working of minerals includes the carrying out of any ancillary operations requisite therefor.'

  Mr. Deputy Speaker: With this we are to take the following amendments to the Government amendment No. 243—
  (a), in line 5, leave out from beginning to 'this' in line 7.
  (b), in line 8, at end add:
  'or the carrying out of ancilliary operations requisite thereto'.
  (c), in line 13, leave out sub-paragraphs (2) and (3) and insert:
  '(2) Where the principal section applies in relation to the disposal of an interest in land the development gain accruing on the disposal shall be reduced to one-half of the amount calculated, in accordance with subsection (3) of the principal section'.
  Dr. Gilbert: We are now discussing a Government amendment and an amendment thereto in the name of the official
  ance companies from the charge for development gains tax in respect of their pension business. This relief will correspond with the exemption granted in respect of gains made by self-administered pension funds. I commend the amendments to the House.
  Amendment agreed to.
  Dr. Gilbert: I beg to move Amendment No. 243, in page 61B, line 5, at end insert:
  Opposition as well as two amendments to the Government amendment in the name of the right hon. Member for Crosby (Mr. Page).
  The purpose of the Government amendment is to limit the development gains charge in the case of a disposal of land with mineral rights if at the time of disposal planning permission is in force to win and work the minerals. Our amendment provides, in effect, that one-half only of the development gain attributable to the mineral rights is to be taxed as income.
  I am advised that the official Opposition amendment is unnecessary in that its effect is subsumed by the Government amendment, which I hope will be

  1215
  welcome to the hon. Member for Worthing (Mr. Higgins) who I understand is to reply to the debate.
  The proposals of the right hon. Member for Crosby go considerably wider and would exempt a situation where the land is sold with planning permission for mineral development and could also have been sold for an alternative use—for example, housing—at a price in excess of its current use value.
  As I understand the right hon. Gentleman's amendments, where there is a parcel of land which has attached to it a gain part of which can be attributable to the mineral rights and part of which can be attributable to some other use—as, for example, where one has been digging a certain sort of clay and subsequently the site, when it has been cleared, is used for housing development—the effect of the amendments would be to extend the relief to the entire development gain, whereas the effect of our amendment would be to restrict the relief to that slice of the gain that was applicable to the development of the mineral rights.
  Our amendment originated from some remarks made by my hon. Friend the Chief Secretary in Standing Committee, and, in our view, that is as far as we should go in those circumstances. The right hon. Gentleman's amendments would merely increase the distortions which would be involved.
  Mr. Higgins: I should like to say a word about sub-amendment (b). The Financial Secretary said that this point is covered by the clause. I wonder whether he would spell it out a little more clearly so that we can be sure that that is, in fact, the case.
  Very often a site of this kind may be for a proposed mine and it may belong to several landowners. As the Government amendment stands, my impression is that only the landowner who owns the area on which the shaft of the excavation of the intended mine is likely to be sited will enjoy the reduction, whereas the person who owns an immediately adjoining piece of land for the site of the winding gear or the engine house or something of that sort will not.
  Having looked quickly through the Government amendment in the light of
  1216
  what the Financial Secretary has said, I am not entirely clear whether that point is covered. He says it is, but obviously we want to be certain. Therefore, I shall be obliged if he will spell out precisely how it is that in cases of multiple ownership of the entire site the relief extends to all the landowners who happen to have an interest.
  Dr. Gilbert: It may help the hon. Gentleman if he were to cast his eye on sub-paragraph (4) of the amendment which was placed on the Paper recently and was intended to meet the point made by the hon. Gentleman.
  Mr. Graham Page: I do not see why I should be regarded as such a villain and a rogue for putting down my amendments which are intended to exempt mineral owners from paying the full development gain in cases which the Financial Secretary suggested. As I understand it, the Government Amendment is intended to carry out the undertaking given in Committee for the 50 per cent. reduction of the development gain on the sale of mineral rights. I thought the development gain in such a case would be calculated in the same way as one calculates any other gain, as in Clause 33(3) where there are three different ways of calculating the gain. In the Government Amendment it applies only where the development gain is calculated under Clause 33(3)(c). It does not allow for the calculation under subsection (3)(a) or (b).
  It was the intention of my amendments to include within the 50 per cent. reduction the calculation of the gain under those other heads. I do not know whether the suggestion is that, by doing that, I have flung the door wide open. I do not see that I have done anything of the kind. I have merely left it to the discretion of those who have to calculate the development gain to use any of the three systems of calculation.
  11.45 p.m.
  Dr. Gilbert: This is one of those oocasions on which I shall require some inspiration from on high before I am able to deal adequately with the Point which the right hon. Member for Crosby (Mr. Page) has raised. Again, it seems to me, this is one of the occasions when, even unconciously and ingenuously—I emphasise that I do not say disingenuously—the

  1217
  right hon. Gentleman, turning his mind to the construction of an amendment, has allowed generosity to flow from his pen to an extent greater than he had, in fact, expected.
  I am informed that the effect of the right hon. Gentleman's amendments would be, first, that a vendor offered the same price for his land by a builder, on the one hand, and by somebody who wanted to set up a mineral enterprise, on the other, would be bound to prefer the offer of the mineral enterprise. I recognise that that distortion will to some extent exist under our proposal, but the effect of the right hon. Gentleman's amendment would be to make this inducement even greater than it is under the Government amendment.
  It might take some time if I were to take the right hon. Gentleman's amendment line by line. I have a lengthy brief on the subject—
  Mr. Higgins: I bet you have.
  Dr. Gilbert: I feel that I should rest on the advice that I have given, that the effect of the right hon. Gentleman's amendment would be to exempt a considerable amount of development from the development gains charge even if there were only a peripheral gain associated with the mineral rights.
  I m advised that the right hon. Gentleman is quite right in saying that the effect of our amendment is to bring in only the third of the three tests. The reason is that it was not possible to bring in the other two tests in paragraphs 33(3)(a) and (b) without halving the whole of the development gain rather than just the mineral element. I hope that the right hon. Gentleman is satisfied with that clarification, as far as it goes.
  Amendment agreed to.

Schedule 4

  TRANSITIONAL PROVISIONS RELATING TO DEVELOPMENT GAINS
  Mr. Joel Barnett: I beg to move Amendment No. 52, in page 63, line 11, at end insert:
  'or, if they so differ, are not more beneficial to the said owner'.
  The purpose here is to extend the relief afforded by paragraph 4 of Schedule 4 which exempts from the capital gains
  1218
  charge certain sales which were in an advanced state of negotiation on 17th December 1973. The amendment lets out those cases where the price paid to the vendor is less than that contemplated in some arrangements made before 18th December 1973. It arises out of an undertaking which I gave in Committee.
  Amendment agreed to.
  Mr. Joel Barnett: I beg to move Amendment No. 53, in page 63, line 18, at end insert:
  'Disposal to authority exercising compulsory powers where notice to treat was served before 18th December 1973.
  5.—(1) Where a disposal of an interest in land to which the principal section applies is made to an authority exercising compulsory powers, then, if notice to treat in respect of that interest was (or is by virtue of any enactment deemed to have been) served before 18th December 1973 on the person making the disposal, the disposal shall be treated for the purposes of this Chapter, as having been made before that date.
  (2) In this paragraph "authority exercising compulsory powers" means, in relation to any disposal of an interest in land, a person acquiring the interest compulsorily or who has been authorised to acquire it compulsorily (whether for himself or some other person)'.
  The amendment is designed to extend the transitional provisions of the Schedule to cover the case where an authority with compulsory powers had issued a notice to treat before 18th December 1973. This again fulfils an undertaking that I gave in Committee.
  Mr. Graham Page: The House will not want me to rise on every occasion that the Chief Secretary carries out an undertaking, but I should like to thank him for the last two, and perhaps my thanks will cover the rest of the undertakings he will carry out.
  Mr. Peter Rees: I am glad to see that in the amendment the Chief Secretary has taken to heart the point made to him in Committee. I only regret that he was not able to extend the amendment to take account of the far-reaching debate we had on disposals under threat of compulsory purchase powers. It might be too late to raise this point now, but I hope that in his autumn Budget the Chancellor will take more account of the points made in Committee than the Chief Secretary appears to have done so far. I am, however, grateful for small mercies.
  Amendment agreed to.

Clause 35

  DEVELOPMENT LOSSES
  Mr. Joel Barnett: I beg to move Amendment No. 126, in page 24, line 56, leave out from beginning to 'shall' and insert:
  'Without prejudice to subsection (3) of section 36 or subsection (3) of section 37 of this Act, nothing either of those sections'.
  Mr. Deputy Speaker: With it we may also discuss the following amendments:
  No. 220, in page 24, line 56, leave out subsection 6.
  No. 185, in Clause 36, page 25, line 20, leave out from ' exceed ' to end of line 23 and insert:
  such part of the amount attributable to the share disposed of by him calculated in accordance with subsection (4) below.
  (4) The part mentioned in paragraph (b) of the preceding subsection shall be such part of the development gain, which would have accrued as stated in paragraph (a) of the said subsection, as the amount of such development gain bears to the gross value of land owned by the company at the time of the disposal'.
  No. 221, in Clause 36, page 25, line 20, leave out from 'exceed' to end of line 23 and insert:
  'one half of such part of the amount mentioned in subsection 3A below as is attributable to the shares disposed of by him.
  3A. The amount mentioned in paragraph (b) of subsection (3) above is such part of the chargeable gain as the net development gains that would have accrued as mentioned in paragraph (a) of that subsection bears to the aggregate of the net development gains and net chargeable gains that would have accrued to the company on the assumptions made in the said paragraph (a). For the purpose of this paragraph net development gains means the excess of the total development gains over the total development losses and net chargeable gains means the excess of the total chargeable gains over the total allowable losses'.
  No. 223, in Clause 36, page 25, line 23, at end insert:
  '(4) Where an allowable loss accrues to a person on a disposal of shares in a company to which subsection (1) above aplpies, the development loss accruing to him in respect of the disposal shall be the lesser of—

  (a) the amount of such allowable loss; and

  (b) such part, if any, of the excess of development losses over development gains of the company as is attributable to the shares disposed of by him. and for this purpose the amount referred to in paragraph (b) above shall be calculated in the
  1220
  same manner as an excess of development gains over development losses attributable to the shares disposed of would be calculated for the purpose of subsection (3) above if a gain had arisen instead of a loss'.

  and Government Amendments Nos. 127 to 134.
  Mr. Barnet: Some of the Government amendments relate to Clause 36, which deems a disposal of shares by a shareholder with a material interest in a close land-owning company to be a disposal of land, and where a chargeable gain arises treats it as a development gain.
  The purpose of this group of amendments is to reduce by one-half the amount of unrealised development gains of a close land-owning company or of a land settlement which is attributed to a material shareholder or beneficiary on the disposal of his shares or his interest. The amendments also ensure that any unrealised development losses of the company or trust are deducted in determining the amount of the unrealised development gains to be attributed to the shareholder or beneficiary.
  During the Committee stage debate on an amendment designed to restrict the charge under Clause 36 to the first disposal only of the relevant shares I announced that I was prepared to put forward a concession on Report to relieve the double taxation of development gains in the hands of the company and the shareholder. I said then that I thought it was inequitable that the limitation in Clause 36(3) took no account of the potential corporation tax liability of the companies. The amendments seek to meet that undertaking.
  Amendment No. 220 seeks to delete Clause 35(6), and the right hon. Member for Crosby (Mr. Page) has a point here. In replying to the debate in Committee I explained that the Government had decided that the proposals for development losses should not be extended to such indirect disposals or to those covered by Clause 37 since it was unlikely that the disposal of shares to which Clause 36 applies, or trust interest, to which Clause 37 applies, would give rise to a development loss.
  I asked the right hon. Gentleman at the time to give some examples of what he had in mind, either in correspondence

  1221
  or orally, and I said that I should be happy to consider them and table amendments on Report. No doubt the right hon. Gentleman has been rather busy in the meantime, but I have not yet had examples. If it is possible for the right hon. Gentleman to explain to me the point I was not able to grasp at the earlier stage, I should be happy to consider doing something at a later stage.
  I turn to Amendment No. 221. The amendment aims to cut down the development gain attributed by Clause 36 to a shareholder disposing of shares in a close company. It is a more complicated version of Amendment No. 363, which was tabled but not moved in Committee.
  The effect of the amendment, so far as I can follow it—and it is somewhat complicated—is to arrive at a fraction, being the land companies' net unrealised development gains over their net unrealised total land gains, to apply that fraction to the shareholder's gains on his share disposal, and to charge the shareholder to development gains tax only on the part of the amount he would get if it were shared out among all the shareholders on a winding-up.
  It is not clear why it should be thought equitable first to arrive at a development gain element in a particular shareholder's gain on a share disposal and then attribute this notionally to all the shareholders in a winding-up. I do not see any real merit in the proposal.
  Then there is Amendment No. 223. It is intended to provide for development losses incurred indirectly on a disposal of shares in a close company. Again, if I had been shown some examples of potential cases, I would have considered them.
  I refer next to Amendment No. 185, which seeks to restrict the unrealised development gains apportioned to shareholders within the charge to tax under Clause 36. The amendment aims to restrict the gain on the disposal of shares still further by reducing the apportioned gain in the ratio which the unrealised development gain bears to the gross value of the land owned by the company at the time of the disposal. It is not clear why such an apportionment should be thought to be equitable. At any rate, the drafting of the amendment is obscure and it is uncertain what effect it would have.
  1222
  I have tried to deal with the vast array of amendments and I hope that the Government amendments will be accepted.
  Mr. Graham Page: Amendment No. 220 relates to development losses. It seeks to deal with development losses which arise on a disposal of shares in close land-owning companies. Amendment No. 223 seeks to provide that development losses deemed to arise on a disposal of shares in close companies should be calculated in the same way as development gains.
  In Committee the Chief Secretary asked me to give examples. There are plenty of examples, although I cannot give specific "live" cases, so to speak. However, I can give examples of what may happen. I start with the feeling that the Chief Secretary is under a misapprehension that close companies which own land are always formed solely for the purpose of tax avoidance. That is the impression I gained from the hon. Gentleman in Committee. But that is not the case. There are many close companies formed not for tax avoidance purposes, and it is those companies which I seek to protect against swingeing taxation by these provisions. Where the shares in a close company are owned by several members of a family, they are all likely to have a material interest because since they are related they come in as associates, and thus every transaction that takes place in the shares of the company will be within the scope of Clause 36.
  12 midnight
  Many such transactions will not be carried out for tax avoidance purposes. For example, some of the shares may be held in a family settlement of trust for children who become absolutely entitled to shares on attaining the age of, say, 18. The trustees will have a deemed disposal when the beneficiary becomes absolutely entitled to the shares, but they will not be able to postpone the disposal until the company has realised its development gains. That is one instance where there may be hardship unless an amendment such as No. 223 is included.
  Another example is when four individuals combine together to form a company to develop land. It is not unknown where four join together like that for

  1223
  them to fall out with each other. One may sell his shares to the others on a formula based on the value of the assets. Clause 36 may catch a vast number of ordinary commercial transactions and it is inequitable to allow the clause to bite on only successful transactions.
  What I seek to do in Amendments Nos. 220 and 223 is to say that if there is a loss, as there may well be in the instances that I have cited, the benefit should be given to the taxpayer, as it is in other parts of the Bill relating to development gains. If a company has made a loss because, for example, it has bought land at prices reflecting hope value and that hope value never materialises, the shareholder should be allowed relief for that loss in the same way as he would have paid tax had there been a gain.
  I come now to Amendment No. 221, to which the Chief Secretary alluded. He said that he could not understand it. It is not very difficult. It provides a more equitable method of apportioning development gains to the shareholders of a close land-owning company. The effect of paragraph (3)(a) of the amendment is to treat as a development gain the proportion of the shareholder's capital gain that the company's development gain bears to its total gain instead of treating the whole of the shareholder's capital gain as development gain up to the amount of the company's development gain. It retains the 50 per cent. reduction that appears in the Government's amendments, but it is an effort to be a little fairer to shareholders in the close company in these circumstances.
  I hope that, without asking me for any specific live cases, the Chief Secretary will take the examples I have given and that, if amendments cannot be made at this stage, he will give some assurance that the matter will be considered later. I have come to the conclusion that Opposition Members should be addressing not the Chief Secretary but the working party that has been set up, because it seems that the working party will accept and put forward for legislation the amendments that we are now putting forward in the hope that they will be included in the Bill.
  Mr. Norman Lamont: I am sorry that the Chief Secretary finds our amendment obscurely worded, and I accept his criticisms. I am sure he will recognise that the principle behind Amendment No. 185 is the same as the principles behind some of the amendments we tabled in Committee, particularly Amendment No. 363 which was not selected but which was discussed in the "Clause stand part" debate.
  An important point is raised in Amendments Nos. 185 and 221. Leaving aside what the Chief Secretary said about the amendment not being properly worded, I am a little puzzled by his question why we thought it necessary to put forward an amendment which would apportion a development gain rateably to a sale of shares in a close company. In Committee I gave two precise and detailed mathematical examples of the unfairness of a person being taxed on the sale of shares in a close land-owning company to a much greater extent than the development gain, within the company, increased the price of the shares being disposed of. I put it like that a a simple principle. That is a fairly clear principle, and in equity it is fairly clear that a development gain should be apportioned rateably in any assessment of a deemed gain in a disposal of shares.
  I have files outside and I could produce many mathematical examples, but I do not wish to detain my hon. Friends longer than is necessary. Specific examples were given in Committee, and I thought that the Chief Secretary had taken the point. He did not comment on the examples in Committee, but I thought that he had understood them. I was a little disappointed when he said that he could not see why a development gain should be apportioned rateably. We can go into greater detail on another occasion, but the argument on equity is clear.
  Mr. Joel Barnett: When I said that the amendment was obscure I was not intending to be difficult. Without going into mathematical examples, the net result of what the hon. Gentleman suggests could be that where there was a gain of £20,000 only £4,000 of the gain would be treated as a development gain in the hands of the shareholders. When we look at this

  1225
  again, if we find that the hon. Gentleman is right, we shall be happy to do something about it in the autumn Finance Bill.
  Mr. Graham Page: If this is corrected retrospectively in a future Budget, I shall not complain about retrospection.
  Mr. Barnett: I am delighted to hear that the right hon. Gentleman would not in those circumstances complain about retrospection. I noted with interest the right hon. Gentleman's examples, and when we have had an opportunity to look at them in greater detail, if he is right, I will do as I have suggested. Meanwhile, I hope that the House will accept the amendment.
  Agreement agreed to.

Schedule 6

  DEVELOPMENT LOSSES
  Amendments made: No. 54, in page 64, line 59, leave out 'mentioned in' and insert 'given by'.
  No. 55, in line 60, leave out 'mentioned in' and insert 'given by'.
  No. 157, in page 64A, line 35, after 'loss' insert 'arising from general annuity business and'.
  No. 158, in line 43, leave out ' or pension business'.
  No. 159, in line 44, leave out from ' in ' to end of line 46 and insert:
  'subsection (2) of section 313 of the Taxes Act (general annuity business), after paragraph (a) there shall be inserted as paragraph (aa)—
  "(aa) development losses shall not be taken into account;":—[Mr. Joel Barnett.]

Clause 36

  DISPOSALS OF INTERESTS IN LAND EFFECTED INDIRECTLY
  Mr. Ridley: I beg to move Amendment No. 218, in page 24, line 58, leave out Clause 36.
  My supporters on this amendment, members of the Liberal Party, are noticeable for their absence. I can see none of them present. But it is past midnight and I gather that it is standard for them to melt away. I must also confess that my confident expectation was that an earlier amendment fixing the rate of tax at 53 per cent. for the individual would
  1226
  be carried, as it would have been if my supporters had not just melted away but melted into the Government's lobby on that occasion. This all makes it difficult for me to press Amendment No. 218 because it would have been consequential upon the passing of that earlier amendment.
  I will not, therefore, detain the House for long, nor seek to press Amendment No. 218. I merely ask the Chief Secretary one question. It concerns spreading the tax liability for persons who have made gains by transactions in shares—paper transactions, as they came to be known in Committee. The hon. Gentleman indicated then that there was a case for spreading liability to pay tax over a number of years and said he would consider tabling an amendment on Report enabling the spreading of the tax. I cannot see such an amendment and perhaps the hon. Gentleman will now explain the Government's intentions about allowing tax liability to be spread in these cases.
  I take this opportunity to say how grateful I am for the concession which the Government have made on tax liability for the shareholdder, but I must record my disapproval of Clause 36 and the underlying thought behind it—that shareholders who in no way have been party to a transaction in land can be put in a position where they have to pay tax on dividend which they may not have received due to the apportionment rules. There is no precedent for legislation of this sort.
  I do not think that it would be possible to make the tax watertight without some provision of this sort if one accepts that taxation must be at income and surtax rates upon such gains. But that only reinforces what we said earlier—that 53 per cent. is enough. It is this attempt to treat these capital gains as income and surtax which has led us to legislation of which we should be ashamed, as is the case with Clause 36.
  I hope that the Chief Secretary will accept from me that it is only the desertion of the other half of the coalition which prevents me from pressing this amendment.
  Mr. Peter Rees: Although I cannot hope in my person to compensate my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) for the

  1227
  desertion of his other allies, I think he is making a point here on extreme importance. He says that there is no precedence for such a clause, but in fact there is one, and it is not very attractive.
  Why is it necessary to have Clause 36 along with section 488 of the Income and Corporation Taxes Act, which was originally introduced by the present Home Secretary when he was Chancellor of the Exchequer? It seems to me in any case that where a person, to avoid development gains tax, puts land into a company and then sells his shares in that company, he will almost inevitably be caught by Section 488. Once again the Treasury is going for overkill. I shall not weary the House by relating the hardships and anomalies which will arise under Clause 36 if it is enacted, but simply ask the Chief Secretary why we have to have Clause 36 as well as Section 488.
  12.15 a.m.
  Mr. Joel Barnett: The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) must have missed it, but about an hour ago we passed Amendment No. 87 which gave the deferment for which he asked in Committee.
  The hon. and learned Member for Dover and Deal (Mr. Rees) asked whether the clause is necessary. It is true that Section 488 covers many cases, but it does not cover every case that is covered by this clause. It does not cover cases where shares were acquired for some reason other than realising a gain. They would be caught by the clause if they were shares of a material shareholder in a close land-owning company and by reason of the sale the shareholder was realising indirectly a development gain. I am sure that that is clear to my hon. Friends, and I know that it will be to the hon. and learned Gentleman.
  Amendment negatived.
  Amendments made:
  No. 127, in page 25, line 11, leave out 'a development gain' and insert:
  'an excess of development gains over development losses'.
  No. 128, in line 20, leave out from ' exceed ' to ' that ' in line 21 and insert:
  'one-half of the excess of the total development gains over the total development losses'.
  No. 129, in line 22, leave out 'such part of that amount' and insert:
  'one-half of such part of that excess'.
  No. 130, in line 23, at end insert:
  'If a claim under section 35(2) of this Act could have been made in respect of any disposal which is to be assumed for the purposes of this subsection, that claim shall for these purposes be assumed to have been made.'—[Mr. Joel Barnett.]
  Mr. Joel Barnett: I beg to move Amendment No. 71, in page 25, line 46, leave out 'one-half' and insert 'three-quarters'.
  Mr. Deputy Speaker: With this we are to take Government amendments Nos. 72 and 73.
  Mr. Barnett: The first two amendments relate to undertakings that I gave in Committee. Clause 36(6) provides that a land-owning company is a company owning an interest in land valued at more than half the value of its total net assets. These amendments substitute three-quarters for one-half.
  Dealing with Amendment No. 73, Clause 37(8) provides that a settlement is a land settlement if the settled property consists of interests in land valued at more than one-half of the net value of all the settled property. The amendment substitutes three-quarters for one-half, and follows similar amendments to Clause 36.
  Amendment agreed to.
  Mr. Joel Barnett: I beg to move Amendment No. 74, in page 26, line 6, at end insert:
  'if in the said subsection (6) for "5 per cent", in both places, there were substituted "10 per cent." '.
  Mr. Deputy Speaker: With this we are to make Amendment No. 75, in page 27A, line 5, leave out from ' if ' to end of line 7 and insert:
  'for "'10 per cent.'"there were substituted" '20 per cent.' "
  Mr. Barnett: Amendment No. 74 again relates to an undertaking that I gave in Committee. Only shareholders who have a material interest in a company are liable under the clause to development gains tax on gains arising from the disposal of their shares in that company. Subsection (6) defines "material interest" in a company by reference to

  1229
  the conditions in Section 285(6) of the Taxes Act. One of these is that the holding in question amounts to more than 5 per cent. of the shares issued. This amendment increases the 5 per cent. limit to 10 per cent.
  Amendment No. 75, too, relates to an undertaking that I gave in Committee. It increases the 15 per cent. limit to 20 per cent. in the case of portfolio shareholders and certain public quoted companies.
  Amendment agreed to.
  Amendments made:
  No. 72, in page 26, line 8, leave out 'one-half' and insert 'three-quarters'.
  No. 131, in page 26, line 14, leave out 'a development gain' and insert:
  'an excess of total development gains over total development losses'.—[Mr. Joel Barnett.]
  Mr. Joel Barnett: I beg to move Amendment No. 63, in page 26, line 33, leave out 'subsection (8)' and insert 'subsections (8) to (8B)'.
  Mr. Deputy Speaker: With this we are to take Government Amendments Nos. 64, 65, 66, 67, 68, 69, 70 and 85.
  Mr. Barnett: These are further amendments which relate to an undertaking that I gave in Committee. Subsection (8) contains the rule under which buildings occupied and used for the purposes of a trade carried on by the company are disregarded in determining whether a company is a close land-owning company. The intention of the amendment is to exclude from the definition of relevant land any building which the inspector or the commissioners concerned are satisfied the company acquired with the intention of occupying within three years. The let-out also extends to the intended occupation by another member of the same group of companies.
  Dealing with Amendments Nos. 69, 70 and 85, subsection (10) of Clause 37 contains the rule which has the effect of excluding from the definition of relevant land, for the purposes of determining whether a settlement is a land settlement, buildings occupied and used for the purposes of a trade carried on by the trustees of the settled property. The purpose of the amendments is to exclude from rele-
  1230
  vant land buildings which a trust acquired with the intention of occupying within three years.
  Amendment agreed to.
  Amendments made: No. 64, in page 27, line 35, leave out 'and this subsection' and insert—
  '(8A) If, in the case of a building or part of a building in which a company has an interest, it is established to the satisfaction of the inspector or, on appeal, of the Commissioners concerned that the company or, in a case where the company is a member of a group of companies, some other member of the group intends within three years of the relevant disposal of shares to occupy and use that building or part as mentioned in paragraph (a) or, as the case may be, paragraph (b) of the preceding subsection, that paragraph shall have effect as if the company were so occupying that building or part.
  (8B) Subsections (8) and (8A) above—'.

  No. 65, in line 39, leave out it applies ' and insert 'they apply'.

  No. 66, in line 47, leave out 'it applies' and insert 'they apply'.

  No. 67, in line 48, at beginning insert 'and'.

  No. 68, in line 50, leave out 'this subsection' and insert 'those subsections'.

  No. 75, in page 27A, line 5, leave out from if ' to end of line 7 and insert:
  'for" '10 per cent. ' "there were substituted" '20 per cent.' "'.—[Mr. Joel Barnett.]
  Mr. Joel Barnett: I beg to move Amendment No. 163, in page 27A, line 23, at end insert—
  '(11) A disposal of an interest in shares in a company which under paragraph 3 of Schedule 7 to the Finance Act 1965 (capital distributions by companies) a person is treated as having made in consideration of a capital distribution from the company in the form of an interest in land shall be disregarded for the purposes of this section if the distribution is made or due in respect of share capital in the course of a dissolution or winding-up of the company'.
  Where a company on a winding-up distributes land with development value to its shareholders, the Bill as it stands provides for a development gains charge on the company under Clause 33 and also a development gains charge on the shareholders under Clause 36. This amendment removes the double charge by taking away the charge on the shareholders.
  Amendment agreed to.

Clause 37

  DISPOSALS OF INTERESTS IN SETTLED PROPERTY
  Amendments made:
  No. 132, in page 28, line 17, leave out 'a development gain' and insert
  'an excess of development gains over development losses'.
  No. 133, in line 28, leave out 'the amount of the development gain' and insert
  'one-half of the excess of development gains over development losses'.
  No. 134, in line 30, at end insert:
  'If a claim under section 35(2) of this Act could have been made in respect of any disposal which is to be assumed for the purposes of this subsection, that claim shall for those purposes be assumed to have been made'.
  No. 73, in page 30, line 16, leave out 'one half' and insert 'three-quarters'.
  No. 69, in page 30, line 43, leave out 'Subsection (8) '
  'and insert subsections (8) to (8B)'.
  No. 70, in line 43, after 'Act', insert
  ',except paragraph (b) of subsection (8) and so much of subsection (8A) as refers to, or relates to the case mentioned in, that paragraph,'.
  No. 85, in line 44, leave out it applies 'and insert they apply'.—[Mr. Joel Barnett.]

Clause 38

  SPECIAL RATES OF CHARGE FOR DEVELOP MENT GAINS ACCRUING TO TRUSTEES, PERSONAL REPRESENTATIVES OR UNIT TRUST SCHEMES
  Amendments made:
  No. 149, in page 31, line 11, leave out subsections (2) to (4).
  No. 150, in line 43, leave out from second 'of' to 'one-tenth' in line 44 and insert
  'section 38(2) of the Finance Act 1965 (unit trusts for exempt unit holders)'.
  No. 151, in page 32, line 7, leave out from be ' to and ' in line 8 and insert
  'exempt from income tax or corporation tax'.—[Mr. Joel Barnett.]

Schedule 7

  TREATMENT OF DEVELOPMENT GAINS UNDER THE TAX ACTS
  Mr. Joel Barnett: I beg to move Amendment No. 76, in page 65, line 17, after 'participators', insert
  'or could be so apportioned apart from subparagraphs (2) and (3) of that paragraph'.
  This amendment to paragraph 4(1) of Schedule 7 makes clear that a close company can set off advance corporation tax against liability to corporation tax on development gains even if it is relieved from apportionment for a particular accounting period. It corrects an oversight in the Bill.
  Amendment agreed to.
  Amendments made:
  No. 155, in page 66, line 13, leave out 'or pension business'.
  No. 156, in line 13, leave out from in' to end of line 23 and insert
  subsection (2)(a) of section 313 of the Taxes Act (general annuity business) for the words "and group income" there shall be substituted the words "group income and income attributable to development gains"
  No. 152, in line 36, leave out paragraph 8.—[Mr. Joel Barnett.]

Schedule 8

  ADAPTATIONS AND AMENDMENTS OF PROVISIONS RELATING TO THE TAXA TION OF CAPITAL GAINS
  Mr. Joel Barnett: I beg to move, Amendment No. 164, in page 69, line 46, at end insert:
  7.—(1) If in a case where paragraph 15 of Schedule 19 to the Finance Act 1969 applies, any development gains accrue to the transferor in respect of his disposal (referred to below as "the original disposal") of the assets included in the business, then, if the transferor makes a claim under this paragraph as respects the transfer, the following provisions of this paragraph shall apply.
  This paragraph shall be construed as one with the said paragraph 15.
  (2) For the purposes of this paragraph—

  (a)"the net development gains" means the development gains accruing to the transferor in respect of the original disposal, as reduced by any development losses deducted from or set off against those gains under section 176 or 179 of the Taxes Act in accordance with paragraph 4 of Schedule 6 to this Act;

  (b)"the qualifying amount"—

  (i) if the business is transferred wholly in exchange for shares issued by the company

  1233
  to the transferor, means the amount of the net development gains;

  (ii) in any other case, means the amount by which what would have been the amount determined under sub-paragraph (4) of the said paragraph 15 if this Chapter had not been enacted exceeds the amount actually determined under that subparagraph, or the amount of the net development gains, whichever is the smaller;

  (c) the qualifying amount shall be apportioned between the new assets (that is to say, the shares received by the transferor in exchange for the business) as a whole, and, if those shares are not all of the same class, the apportionment between them shall be in accordance with their market values at the time they were acquired by the transferor.

  (3) The profits or gains chargeable to tax under Case VI of Schedule D on the transferor for the year of assessment in which the original disposal is made shall be reduced by the qualifying amount.
  (4) If the transferor disposes of shares comprised in the new assets, being all the shares of a particular class which are so comprised, then the amount apportioned to those shares under sub-paragraph (2)(c) above shall be treated as a development gain accruing to him in the year of assessment in which that disposal is made and as constituting profits or gains chargeable to tax under Case VI of Schedule D for that year.
  (5) If the transferor disposes of shares comprised in the new assets, being some but not all of the shares of a particular class which are so comprised (so that the disposal constitutes a part disposal), then a fraction only of the amount apportioned to all the shares of that class under sub-paragraph (2)(c) above shall be treated as mentioned in the preceding paragraph, and that fraction shall be the fraction of the sums mentioned in the following subparagraph which is allowable as a deduction in computing under Schedule 6 to the Finance Act 1965 the amount of the gain accruing on that part disposal.
  (6) The sums referred to in the preceding sub-paragraph are the sums which, if all the shares of the class in question comprised in the news assets and remaining undisposed of immediately before the time of the part disposal in question had been disposed of at that time, would be allowable by virtue of paragraph 4(1)(a) and (b) of the said Schedule 6 as a deduction in computing under that Schedule the gain accruing on the diposal of all those shares.
  (7) Where an individual to whom a development gain is treated as accruing by virtue of this paragraph makes a claim under paragraph 2 of Schedule 7 to this Act as respects that gain, sub-paragraphs (2) to (4) of that paragraph shall have effect in relation to that claim subject to the following modifications, that is to say—

  (a) the references to the interval between the claimant's acquisition and disposal of the asset on the disposal of which the development gain accrued to him shall be read as
  1234
  references to the interval between the date when he acquired any of those assets of the business which caused development gains to accrue to him in respect of the original disposal and the date of the original disposal; and

  (b) the references to "the date of the disposal" shall be read as references to the date of the disposal of shares comprised in the new assets which is mentioned in subparagraph (4) or (5) above, as the case may be.'

  The purpose of this amendment is to enable an individual who incorporates his business and transfers the assets of the business to the company in exchange for shares to defer any charge on development gains.
  Mr. Graham Page: I thank the Chief Secretary for this amendment, which will be most beneficial for those who wish to put their business into company form. It is a welcome amendment.
  Amendment agreed to.

Schedule 9

  SUPPLEMENTARY PROVISIONS ABOUT DEEMED DISPOSALS UNDER SECTION 40
  Dr. Gilbert: I beg to move Amendment No. 90, in page 70, line 54, leave out '£2,500' and insert '£5,000'.
  Mr. Deputy Speaker: It will be convenient to discuss at the same time Amendments Nos. 91 to 98.
  Dr. Gilbert: The amendments will raise the exemption limit on small rents earned by someone on a first letting charge from £2,500 to £5,000.
  Amendment agreed to.
  Mr. Deputy Speaker: I will now put the Question on all the amendments on page 145 of the amendment paper.
  Amendments made:
  No. 160, in page 71, line 2, at end insert—
  'For the purposes of this and the following sub-paragraph a relevant person who on any date occupies not less than 90 per cent. of the floor area of the relevant chargeable building shall be deemed to occupy on that date the whole of so much of the relevant land as is then subject to his interest (and references to occupation in this and the following subparagraph shall be construed accordingly)'.
  No. 91, in line 12, leave out '£2,500' and insert '£5,000'.
  No. 92, in line 20, leave out '£2,500' and insert '£5,000'.
  No. 161, in line 21, at end insert
  'or, if this sub-paragraph would to any extent apply to a relevant person's interest on the last-mentioned date but for his occupation on that date of not less than 90 per cent. of the floor area of the relevant chargeable building, the date (if any) within the five-year period on which he first occupies less than 90 per cent. of that floor area'.

  No. 93, in page 72, line 15, leave out '£2,500' and insert '£5,000'.

  No. 94, in line 18, leave out '£2,500' and insert '£5,000'.

  No. 95, in line 30, leave out £2,500' and insert '£5,000'.

  No. 96, in line 32, leave out £2,500' and insert '£5,000'.

  No. 97, in line 49, leave out £2,500' and insert '£5,000'.

  No. 98, in line 52, leave out '£2,500' and insert '£5,000'.—[Mr. Joel Barnett.]

  Mr. Deputy Speaker: We come next to Amendment No. 118.
  Dr. Gilbert: I have No. 160 next, at the top of page 145.
  Mr. Deputy Speaker: I put the question on it, but I must give the Minister the opportunity to speak. I must be fair; I know that it is very difficult—
  Mr. Graham Page: On a point of order. I am perfectly happy that No. 160 has gone through on the nod. We have already done that; it was a very welcome amendment. But I should like No. 118 to be called, so that I can speak to my two amendments to that amendment.
  Mr. Deputy Speaker: We have reached No. 118. Perhaps the Minister would move it formally.
  Dr. Gilbert: It may help the right hon. Member for Crosby (Mr. Page) if I say that I am prepared to accept his Amendment No. 226.
  Mr. Higgins: On a point of order. We are all for rapid progress and we are happy that amendments should be moved formally if they have already been discussed. But if an amendment is totally new, we do not want the Financial Secretary simply to move it formally. I think that we are now on Amendment No. 118, on which my right hon. Friend
  1236
  the Member for Crosby (Mr. Page) wants to say something.
  Dr. Gilbert: There has been a misunderstanding, for which no doubt I am responsible.
  I beg to move Amendment No. 118, in page 73, line 6, at end insert—
  '(5) Where—

  (a) the preceding sub-paragraph would apply to a person's interest in the relevant land but for the fact that the rent or aggregate of the rents there mentioned can be made to reflect the value or part of the value of the relevant development; but

  (b) that rent or the aggregate of those rents cannot be made to reflect that value (or part of it) until a date as from which the rent or one or more of the rents in question could be increased under provisions for the review of the rent contained in any relevant lease or agreement, then, if that person makes a claim under this sub-paragraph, subsection (1) of the principal section shall in the case of that interest apply as if the last reference therein to the material date were a reference to the date mentioned in paragraph (b) of this sub-paragraph.'.

  The amendment allows an individual to claim that the first letting charge on him shall be deferred until a day on which the rent in question can be increased. It may help the right hon. Member for Crosby (Mr. Page) to know that I intend to advise my hon. Friends to accept his amendment to the amendment.
  Question proposed that the proposed words be there inserted in the Bill.
  Mr. Graham Page: I beg to move, as an amendment to the proposed amendment, Amendment (a), in line 17, after 'interest', insert
  'or, if in the rent or rents which can be increased as mentioned in paragraph (b) above extend to part only of a person's interest that part of his interest'.
  Perhaps we can discuss at the same time Amendment (b), at end add
  'and where the rent or rents which can be increased at that date extend to part only of a person's interest, as if his interest in the relevant land were limited to that part'.
  Dr. Gilbert: They are incorporated in Amendment No. 226, as I understand it.
  Mr. Page: I do not think that they are called Amendment No. 226. They are simply amendments to Amendment No. 118.

  1237
  While hon. Members are looking for them, perhaps I could explain that the object of the amendments is to provide that where there are two or more leases comprised in a person's interest, the reaching of the rent review date for the first would not precipitate a tax charge in relation to them all but would only precipitate a tax charge to the extent that it related to that lease.
  Amendment to the proposed amendment agreed to.
  Amendment to the proposed amendment made: At end add
  'and where the rent or rents which can be increased at that date extend to part only of a person's interest, as if his interest in the relevant land were limited to that part'.—[Mr. Graham Page.]
  Proposed words there inserted in the Bill.
  Amendment made: No. 162, in page 74, line 50, at end insert—
  '(4) For the purposes of this paragraph a person who on any date occupies not less than 90 per cent. of the floor area of the relevant chargeable building shall be deemed to occupy on that date the whole, and not to have ceased on that date to occupy any part, of so much of the relevant land as is then subject to his interest and references to occupation and ceasing to occupy shall be construed accordingly) '.—[Dr. Gilbert.]
  12.30 a.m.
  Dr. Gilbert: I beg to move, Amendment No. 99, in page 75, line 12, leave out 'two' and insert 'three'.
  Mr. Deputy Speaker: With this we are to take Amendment No. 186, in page 75, line 12, leave out 'two' and insert 'five'.
  Dr. Gilbert: This amendment increases the period during which the exemption from a first letting charge applies if a interest in the property, originally from two years to a period of three years. Amendment No. 186, in the name of the hon. Member for Kingston-upon-Thames (Mr. Lamont), seeks to extend the same period from two years to five years. This is simply an exercise in line drawing. I cannot advise my right hon. and hon. Friends to go beyond three years but I hope that the hon. Member for Kingston-upon-Thames will concede that we have moved some distance to try to meet his case.
  Mr. Norman Lamont: I am grateful to the Financial Secretary for at least moving some way along the line that we
  1238
  have suggested. As he says, this is an exercise in line drawing, and it is obviously difficult to know how far to go. The reason we suggested going as far as five years from two years was the whole question whether one ought to raise the tax on a building which was subsequently sold for less than it was valued at and where there was a loss.
  The Financial Secretary will remember from the Standing Committee that great objections were raised against an amendment which I put forward which would have made it obligatory for the Inland Revenue to refund tax where a building was subsequently sold for less than it had been assessed to tax on a deemed letting. I saw the argument which the hon. Gentleman put against that but, at the same time, he fell back on the other provision of extending two years to three years as an alternative, arguing that a three-year period, where one would measure an actual sale against a deemed disposal, would iron out the fluctuations in the property market. I see his argument as an alternative to the more far-reaching amendment we put forward in Standing Committee. Nevertheless, I feel that a five-year period, from the point of view of the other amendment plus this amendment, would have met the point more satisfactorily.
  Dr. Gilbert: There is obviously a division of view between the hon. Gentleman and myself. I am grateful to him for recognising that we have gone some way to meeting him. He will agree that on a rising market the difference is not very significant. It is a question which arises in a situation in which property values are falling. As I am sure the hon. Gentleman will recognise, in general neither income nor capital losses can be carried back to earlier years, and to do so by means of his amendment would be to introduce totally new provisions in the taxation system with regard to the first letting charge. I cannot advise my right hon. and hon. Friends to go further than I have gone.
  Amendment agreed to.
  Dr. Gilbert: I beg to move, Amendment No. 153, in page 75, line 34, leave out 'two' and insert 'three'.
  Mr. Deputy Speaker (Mr. Oscar Murton): With this we are to take

  1239
  Amendment No. 187, in page 75, line 34, after 'years' insert:
  'or such longer period as the Board in writing may allow'.
  Dr. Gilbert: As the Bill stands, paragraph 9 of Schedule 9 extends the occupation exemption to any part of the property which the holder of the interest intends to occupy provided he goes into occupation within two years of the date of first letting. He is then deemed to have been in occupation throughout the period, and if he remains in occupation during the balance of the five-year period he will not be charged in respect of the part of the building he has occupied. This amendment increases the period in which the property must be occupied from two to three years. It is essentially a relieving amendment.
  Amendment No. 187, in the name of the hon. Member for Kingston-upon-Thames (Mr. Lamont) seeks to give a degree of discretion to the board in circumstances of this sort by adding the phrase
  "or such longer period as the Board in writing may allow".
  This is one of the circumstances in which the board itself resists the discretion because it feels it not to be the sort of situation in which discretion should be given to the board in excess of the care and maintenance provisions it already has under the Taxes Management Act.
  I hope that the hon. Member will again concede that we have gone in the direction in which he would wish us to go and, I should think, in a great many cases have gone even further than he had in mind.
  Amendment agreed to.
  Dr. Gilbert: I beg to move Amendment No. 123, in page 75, line 48, after '10', insert '(1)'.
  Mr. Deputy Speaker (Mr. Oscar Murton): With this amendment it is proposed to take Government Amendment Nos. 124 and 125.
  Dr. Gilbert: This group of Government amendments amends the transitional provisions contained in paragraph 10 of the schedule which excluded a reversioner from the first letting charge if before 18th December 1973 he has granted a lease or
  1240
  entered into an agreement to grant a lease for a rent or a premium which did not depend wholly or mainly on the value of the completed building.
  These amendments effect two changes. First, they provide that the rules in paragraph 10 shall apply only when a taxpayer has made a claim that they shall apply. Secondly, they bring this transitional rule into line with paragraph 4 of Schedule 4 in that it now covers arrangements which fall short of binding contracts. In other words, they cover the gentleman's agreement type of situation.
  Amendment agreed to.
  Amendments made: No. 124, in page 75, line 50, after 'land, insert:
  'on his making a claim'.
  No. 125, in line 61, at end insert:
  (2) Where, in the case of a relevant chargeable building, a person having an interest in the relevant land had before 18th December 1973 arranged (without entering into a binding contract)—

  (a) to grant to another person a lease of the whole or part of so much of the relevant land as is subject to that interest; or

  (b) to enter into with another person such an agreement as is mentioned in sub paragraph (1)(b) above,

  and—

  (i) the arrangement was made in writing, or is evidenced by a memorandum or note thereof so made before that date; and

  (ii) he grants such a lease to or (as the case may be) enters into such an agreement with that other person before 18th December 1974 on terms which do not differ materially from the terms of the arrangement or, if they so differ, are not more beneficial to the first-mentioned person, then the lease or agreement shall be treated for the purposes of sub-paragraph (1) above as if granted or entered into before 18th December 1973.—[Dr. Gilbert.]

  Dr. Gilbert: I beg to move Amendment No. 88, in page 77, line 30, after 'and', insert:
  'subject to the following sub-paragraph'.
  Mr. Deputy Speaker: With this amendment, Government Amendment No. 89 is to be discussed.
  Dr. Gilbert: These amendments are needed to put right a defect in the provisions of paragraph 14 of Schedule 9 in relation to part disposals. As the House will be aware, we have provided for an eight-year spreading of the tax liability on the first letting charge. Under

  1241
  the Bill as it stands, any subsequent disposal extinguishes the right to the spreading provision. The effect of these amendments is a relieving one which will be roughly to pro-rate the extinction of those rights so that they are not wholly lost on a part disposal.
  Amendment agreed to.
  Amendment made: No. 89, in line 35, at end insert:
  (3A) Where a subsequentdisposal such as is described in the preceding sub-paragraph is a part-disposal of the interest in land deemed to have been disposed of as aforesaid, a fraction only of the tax for the time being unpaid shall, with interest to the date of payment, become due and payable forthwith, and that fraction shall be the fraction of the sums mentioned in the following sub-paragraph which is allowable as a deduction in computing under Schedule 6 to the Finance Act 1965 the amount of the gain accruing on the part disposal.
  (3A) The sums referred to in the preceding sub-paragraph are the sums which, if so much of the interest in land there mentioned as immediately before the time of the part disposal in question remained undisposed of had been disposed of at that time, would be allowable by virtue of paragraph 4(1)(a) and (b) of the said Schedule 6 as a deduction in computing under that Schedule the gain accruing on that disposal of that much of that interest.—[Dr. Gilbert.]

Clause 43

  DISPOSALS OF INTEREST IN LAND IN UNITED KINGDOM REFLECTING DE VELOPMENT VALUE
  Mr. Joel Barnett: I beg to move Amendment No. 56, in page 38, line 27, leave out 'and'.
  Mr. Deputy Speaker: With this amendment it is proposed to take Amendment No. 242, in page 38, line 7, leave out 'carried out' and insert 'begun.', and Government Amendment No. 57.
  Mr. Barnett: As the Bill stands, Clause 43(3) leaves uncertain the treatment of a case in which the material development took place both before and after 18th December 1973. Amendments Nos. 56 and 57 provide that where there has been material development the April 1965 valuation rule is to apply only if material development started on or after 18th December 1973. I think the hon. Member for Kingston-upon-Thames (Mr. Lamont) will see that the Government
  1242
  amendments meet the point he had in mind in his Amendment No. 242.
  Amendment agreed to.
  Amendment made: No. 57, in page 38, line 30, at end insert:
  '; and
  (e) paragraph 14 of the said Schedule 3 (meaning of material development "carried out after" a particular date) shall apply as it applies for the purposes of paragraph 11 to 13 of that Schedule" '.—[Dr. Gilbert.]

Clause 44

  INCREASE OF CERTAIN STAMP DUTIES
  Dr. Gilbert: I beg to move Amendment No. 77, in page 38, line 38, leave out 'except that such provisions' and insert:
  '(2) As from 1st August 1974 (but without prejudice to their operation as regards the period before that date) the said provisions, so far as they increase any stamp duty,'.
  Mr. Deputy Speaker (Mr. George Thomas): With this we are to take Government Amendments Nos. 78 and 58.
  Dr. Gilbert: This group of amendments is attached to amendments which were moved in Standing Committee by the right hon. Member for Carshalton (Mr. Carr) and his hon. Friends and which were written into the Bill after a Division. The effect of the amendments was to relieve from the doubling of the stamp duty proposed by the Budget any conveyance, transfer or letting made to a charity.
  These Government amendments seek to tidy up certain points of detail in the right hon. Gentleman's amendment. They in no way seek to attack its principle. I make it clear that they have three provisions. The first is restrictive in the sense that they provide that the more favourable régime for charities should start from 1st August 1974, instead of from 1st May 1974, for administrative reasons. I hope that hon. Members opposite will accept that this is not just a piece of petty Treasury meanness. It is for the convenience of the charities themselves, and we are talking of only three months loss of relief.
  The amendments also include provision for adjudication. More importantly, they provide that charities will get the benefits

  1243
  of any reductions in the Bill. The inclusion of the right hon. Gentleman's amendment made some charities worse off than otherwise they would have been. The effect of these amendments is to protect them from this unfortunate and obviously totally unintended consequence.
  Amendment agreed to.
  Amendment made: No. 78, in page 38, line 43, at end insert:
  'Provided that no instrument not stamped with the duty to which it would apart from this subsection be liable shall be treated as duly stamped by virtue of this subsection unless it has in accordance with the provisions of section 12 of the Stamp Act 1891 been stamped with a particular stamp denoting that it is duly stamped.
  (3) In any case where by virtue of the preceding subsection any provisions of Schedule 11 to this Act do not apply, such of the repeals contained in Parts III and IV of Schedule 14 to this Act as are consequential on the provisions in question shall also not apply.'—[Dr. Gilbert.]

Schedule 11

  INCREASE OF CERTAIN STAMP DUTIES
  Mr. Charles Morrison: I beg to move Amendment No. 107, in page 81, line 26, at end insert:
  '(3) This part of this Schedule, so far as it increases any duty chargeable under or by reference to the heading "Conveyance or Transfer on Sale" in First Schedule to the Stamp Act 1891, shall not apply in any case to transfers of debenture stocks and bonds issued or to be issued by the Agricultural Mortgage Corporation Limited and the Scottish Agricultural Securities Corporation'.
  The amendment has the double honour of being the last amendment to be selected for debate and the occasion of my maiden speech on this year's Finance Bill. I therefore hope that at this late hour and in these remarkable circumstances the Government will apply their generosity. The moment has arrived for magnanimity.
  As the amendment is concerned with agriculture, I must register a protest that yet again there is no agriculture Minister sitting on the Government Front Bench. This is an indication of the Government's lack of interest in agriculture. The Government protest that they are in favour of agriculture, more particularly of agricultural expansion. Only too often their words, unfortunately, have been belied
  1244
  by their actions. Even in the absence of an agriculture Minister, or perhaps because of it, the Government now have the opportunity to show willing and to do agriculture a good turn.
  The objective of the amendment is simply to exempt the Agricultural Mortgage Corporation Limited and the Scottish Agricultural Securities Corporation from the increase in stamp duty proposed for this year—in other words, to retain the stamp duty at 1 per cent. instead of 2 per cent. In fact, there are very good arguments for total exemption of the AMC and the SASC from stamp duty. The AMC is the only company in the near-gilt market, and that privilege has been accorded to it in deference to its mandate to lend on the most favourable terms, but the benefit of that privilege has been considerably reduced by the incidence of stamp duty.
  12.45 a.m.
  Then again the AMC is virtually the only borrower, and certainly the only regular and substantial borrower, in the near-gilt market whose stocks are subject to transfer duty. That means that if it is to compete and get the best from the market it has to bear the duty itself, the cost of bearing the duty is a capital item for tax purposes and, therefore, the AMC has to raise loan capital, not for capital investment which could be expected to yield profit, but as a stock in trade. This means that any increase in incidental costs to be retailed on to borrowers, grossed up for corporation tax.
  I could expound at greater length on the case for total exemption, but I will not do so at this late hour. I know that some of my hon. Friends wish to make some comments in a moment, but because the case for total exemption has been made by the AMC and turned down in the past on no fewer than eight occasions, it did not seem to me that it would be wise to press the Government for total exemption on this occasion. Therefore, my amendment has the much more limited objective which I have described.
  However, I think it is important to recall that, as it seems to me, in the past the case for exemption has been turned down for fear that exemption might create some sort of band wagon effect, but I do not think that case is particularly strong any longer because some of

  1245
  the others who might have been exempted have been exempted already. Local authorities were exempted in 1963 and others which might be exempted now include virtually only the SASC, which, in any case, is included in this amendment, and a few harbour and other public boards. They, in fact, borrow infrequently and relatively insignificant sums.
  At the annual general meeting of the AMC—and perhaps I should declare an interest here—[An HON. MEMBER: "About time."] I have not got an interest in the AMC, but the chairman is one of my constituents. He said:
  "Because AMC borrows in the section of the market in which these other borrowers are exempt from stamp duty, AMC has for long been advised it can borrow more cheaply by paying the stamp duty itself. This is done by compounding the stamp duty payable at a rate of 20 pence per cent. per annum on the nominal amount of its outstanding borrowings. it has undertaken that £216 million of its debenture stocks and bonds already issued will be transferred free of stamp duty in this way."
  Therefore, the increase in stamp duty, in the light of what the chairman said, means that about £1 million of AMC's income before tax will be required to meet the burden of stamp duty.
  In consequence, new borrowers from the AMC—this is an important matter—will have to bear not only the cost of the stamp duty incurred in the raising of funds from which their loans are made but also the cost of the increased duty on past issues of debentures the proceeds of which have already been lent at fixed rates to past borowers. Therefore, the AMC lending rate for new borrowers will for the foreseeable future have to include no less than 0·64 per cent. on account of this item alone.
  If the Government accept the amendment, they will help reduce the charges on capital improvement. They will help to reduce the charges on farmers' working capital. They will make it easier for farmers to expand their acreage, and they will make it easier for tenants to purchase their farms. They will make it easier for farmers to buy new farms. They will make it easier for farmers to repay their loans from other sources.
  The amendment is plainly worth while, and the cost to the Treasury would be small, though the benefit in its effect on farm production would be valuable, and that ultimately means a benefit in terms
  1246
  of indirect economic effect from the Treasury's point of view. The amendment would have beneficial results, and I very much hope that the Government will accept it.
  Sir Raymond Gower: I strongly support what has been said so clearly and effectively by my hon. Friend the Member for Devizes (Mr. Morrison). This is a most inopportune time even to contemplate increasing a duty of this kind. On both sides of the House, we recognise that agriculture has many difficulties. In my experience, one of the limiting factors in many instances preventing farmers from helping themselves is the shortage of capital. It is highly desirable that the maximum help should be available from a corporation of this kind which, although not a public body, is closely analogous to a public authority.
  The same principles as have permitted certain concessions to be made in respect of local authorities, for example, should be extended in toto to the AMC. What we are asking for here is merely half what should be sought. I strongly support the amendment and I hope that the Government will accept it.
  Mr. Peter Mills rose—
  Hon. Members: Hear, hear.
  Mr. Mills: I am grateful for that welcome to my brief intervention. I support my hon. Friend the Member for Devizes (Mr. Morrison) in this amendment. I must declare the extent of my interest. I have never had a loan from the AMC. I have had to find my loans from other sources.
  My hon. Friend gave a technical explanation. I shall not be technical. I shall put the practical case and show how farmers will be affected. The AMC will have to alter its lending rate to new borrowers. That will be unfortunate at this time because agriculture is already bearing heavy burdens, especially financial burdens. There is no good purpose in adding to those burdens even by this small amount.
  We have had to cope with record rates of interest, although I admit that they are a world problem, but why make matters worse? Finance for agriculture is extremely difficult and I see no point in adding to the problems. That would act as a disincentive to invest more capital

  1247
  in the industry. It would hold back increased home production since farmers must borrow money for buildings and improvements if they are to increase their production. I am not overstating the case. Labour Members may well be feeling the pinch in months to come.
  Mr. Jerry Wiggin: Labour Members are for ever complaining about the rate of interest at which people have to borrow money to buy their own homes, but they have no sympathy for people buying businesses even of the most basic nature like agriculture.
  Mr. Mills: My hon. Friend is correct. Whether we like it or not, home production must be increased on products like milk, butter, cheese, cream, cereals, sugar beet, pigs and even beef. There may be a surplus of beef now, but in the months ahead we shall need to increase production.
  I am also concerned about the effect of the Bill on young farmers. It is already difficult enough for young men to start in farming. They may have to borrow from the AMC to pay out their fathers if they are going to take over the farms. It it, therefore, in the interest of the country for the Government to look into this matter carefully.
  Whether we divide on the amendment depends upon what the Minister says in reply, but if there is a Division I shall follow my hon. Friend the Member for Devizes into the lobby.
  1.0 a.m.
  Mr. Michael Jopling: This is an auspicious occasion because the Chief Secretary, who, I understand, will reply to the debate, and I first entered the House on the same day and this is the first time we have ever debated together from the Front Benches. He was my loyal pair, and I hope I was loyal to him, for the first six years we were in the House. I hope that in view of that he will show his well-known benevolence and generosity tonight in a helpful answer. I hope that my hon. Friend's speeches will have softened his heart. I sometimes wonder whether the Treasury understands the problems.
  I am rather surprised that nobody is present on the Front Bench from the
  1248
  Ministry of Agriculture. I am surprised that the Whips have not gone out to fetch a Minister from that Department. The 'Minister of State at the Ministry was standing at the Bar of the House about five minutes before the discussion on agriculture began, but he seemed to slink away just before the debate started.
  Mr. Wiggin: On a point of order, Mr. Deputy Speaker. Although it is a thin House, I find it difficult to hear what my hon. Friend is saying. Would you please do something about the seated interventions from the Labour benches?
  Mr. Deputy Speaker: The Chair will intervene, if that becomes necessary.
  Mr. Jopling: I hope that the Financial Secretary in reply will not say that the Government cannot afford to meet the amendment. Within the last week the Government have saved a great deal of money on what they thought they had been let in for. The House will recall that when we debated agriculture on 26th June last, the right hon. Gentleman the Minister of Agriculture announced that in future the price of beef would not fall below £18 per cwt. for clean cattle. I understood that the Government were going to stand the price of that arrangement. But when the Minister came from Brussels last Wednesday, he said that the Community would pay for a great deal of the scheme to support beef. In regard to new slaughtering premiums, the Minister said that Her Majesty's Government would have to pay at the low rate and that the Community would pay 50 per cent. against the new scheme in November, rising to 70 per cent. in February. Therefore, the Government are not committed to spending as much money on agriculture as they thought. I hope the Minister will not say that the Government have not the money available, for they have had a bonanza in the last week and the money must be there.
  Nobody is seeking to claim that the amendment will cure all the industry's problems. The effect of the Bill, as it stands, is that new borrowers—those wanting to buy farms for themselves and expand—will be paying additional stamp duty in dealing with the Agricultural Mortgage Corporation or its Scottish counterpart in respect of debentures originally floated to finance existing borrowers. It cannot be fair that as a

  1249
  consequence of the Bill those waiting to borrow money now should have to finance the effect of the Bill since they borrowed the money in more prosperous days.
  Nobody would argue that this is a time to stamp on people who want to expand their economic activities. Indeed, I read a ministerial speech last week stating that it was Government policy to encourage expansion. It is strange that the Government should now be seeking to stamp hard on people who do not have their own resources and have to go to the Agricultural Mortgage Corporation.
  I shall not weary the House with a full list of how the money lent by the corporation is used. Suffice it to say that 9 per cent. of the money goes on capital improvement schemes to farms; 8 per cent. to extending working capital; 29 per cent. on the purchase of extra land; and 10 per cent. on the purchase of land for newcomers to farming. A good deal goes to sons of farmers, and so on. These are just the people whom the Government should be helping at present. I hope the Government will not be piqued by the success of the Opposition over small businesses last week. I cannot understand why these new starters and people who are keen to expand should be forced to pay an extra 0·64 of 1 per cent.
  I end by explaining what that means. It does not sound very much.
  Mr. George Cunningham: No.
  Mr. Jopling: If the hon. Member for Islington, South and Finsbury (Mr. Cunningham) will contain himself, I shall explain in fairly dramatic terms what it means.
  Nowadays it is not a very big farm, certainly not in my part of England, the North-West, that is 150 acres. A man with 150 acres is not a farming tycoon. If a man wants to buy a farm of 150 acres at £600 and acre and wants to borrow £90,000, which is a very considerable risk, he is forced by the Bill to pay an extra 0·64 per cent., which means that he will have to pay an extra £576 per annum in interest. That is an extra charge on his farming of almost £4 per acre, and to a working farmer that is a great deal of money. That is the extent to which this part of the Bill will penalise people with moderate sized farms.
  1250
  There are not enough people in agriculture, thanks to the ministrations of the present Government, who have the bravery to want of expand at this time, and surely this is not the moment to discourage the few geese we have who are prepared to lay a few golden eggs. We shall listen to the Financial Secretary with great care and then decide our course of action. I very much hope that he will encourage these people. This is not time to penalise them. We shall listen carefully to what he has to say and then decide what action to take at the end of the day.
  Dr. Gilbert: It is something of a novel experience for me to venture into what is developing into an agriculture debate, although I cannot pretend to match the expertise in these matters of those hon. Members who have spoken so far. The hon. Member for Devizes (Mr. Morrison) was candid enough to say that an amendment not in precisely these terms but seeking to relieve debentures of these two corporations from duty entirely had already been moved on eight occasions in the past with a singular lack of success. So I accept at once that he is not trying to make a partisan point.
  Cost is not an argument that I would advance in resisting the amendment, and no doubt cost was not a factor on those previous occasions when somewhat more modest amendments along these lines were moved by the hon. Member or one of his hon. Friends. As the cost is not particularly great, it follows that the benefit to agriculture is not very great.
  I have to tell the hon. Member that there is a considerable technical defect in his amendment concerning the people he is trying to help, but I shall not rest my objection to his proposal on that technical defect. However, he should be aware of it in case he seeks to move an amendment with this aim on another occasion.
  I am advised that the issued debentures and bonds of the AMC total some £246 million and that no less than £216 million worth is covered by compounding arrangements, with which I am sure the hon. Member is familiar. The duty has been doubled on transfers of debentures whether or not they come under compounding arrangements.

  1251
  The effect of the amendment is to relieve from the increase in the duty only that sector of about £30 million of the £246 million not covered by the compounding arrangements. No doubt unintentionally, the effect of the amendment is much narrower than the hon. Gentleman originally had in mind. I do not rest on a technical defect, and the hon. Gentleman would be right in saying "At least let us have this even if it does not go as far as we had hoped."
  The root of the difficulty is that the near-gilt market is not a self-contained compartment which can be dealt with in isolation—just the AMC and the Scottish Agricultural Securities Corporation. The near-gilt market is a spectrum that, as soon as one leaves local authority and gilt-edged stock, ranges through the Agricultural Mortgage Corporation and the Scottish Agricultural Securities Corporation to small corporations, which may be less frequent borrowers on the market but are comparable in status with the two corporations we are discussing, such as the ports and harbour boards, water companies, the Manchester Mortgage Corporation, and the Commonwealth Development Finance Corporation. The difficulty is that, once one breaches the principle, the dam is breached in revenue terms and is capable of almost indefinite extension.
  Mr. Charles Morrison: Do not the other institutions to which the hon. Gentleman referred, particularly the Commonwealth Development Finance Corporation and the Scottish Agricultural Securities Corporation, and one other, collectively enter the market in a very small way in comparison with the Agricultural Mortgage Corporation?
  Dr. Gilbert: I am not suggesting that the bodies I have listed are as big as or such frequent borrowers as the two bodies we are discussing. The point is how they are selected. Once the principle is breached, the "salami" problem arises, and a bit more is nibbled away each year. That is the difficulty which the Conservative Government found in trying to meet this point.
  Closely ranged behind the bodies I have mentioned is the Industrial and Commercial Finance Corporation Ltd., a
  1252
  company under the Companies Act owned by the clearing banks which borrows in the market for on-lending to industrial enterprises. Its operation is similar to the financial operation in which the two institutions engage.
  I have taken very seriously the points raised by the hon. Member for Devizes and his hon. Friends. I do not rest on the technical weakness in the amendment. nor on the fact that the amendment does not go so far as the hon. Member for Devizes would like, nor on the cost, but I advise the House that because of the principle involved the amendment should not be accepted.
  Amendment negatived.
  Amendment made: No. 58, in page 81, line 35, leave out sub-paragraph (4).—[Dr. Gilbert.]
  Dr. Gilbert: I beg to move Amendment No. 178, in page 87C, line 13, at end insert:
  'Provided that nothing in this sub-paragraph shall be taken to require any person who has acted as counsel or solicitor for any person to disclose any privileged communication made to him in that capacity'.
  The amendment ensures that any person who has acted as counsel or solicitor for a person shall not be required to disclose any privileged communication made to him in that capacity. The need for the amendment arises consequentially from the other provisisons for doubling stamp duty.
  Amendment agreed to.

Clause 49

  POWER TO AUTHORISE AMENDMENT OF TAXI FARE BYELAWS
  1.15 a.m.
  Dr. Gilbert: I beg to move Amendment No. 208, in page 40, line 45, after 'and' insert '(a)'.
  This amendment gives the Secretary of State power, in making any order relating to local authorities power to change taxi fares by resolution, to include requirements about publicity for any such resolution. It meets a point raised by the right hon. Member for Crosby (Mr. Page) in Committee.
  Amendment agreed to.
  Amendment made: No. 209, in page 40, line 46, at end insert:
  ';and
  (b) may include provision for securing that appropriate steps are taken to publish any resolution passed in pursuance of the order and to make copies available to the public'.—[Dr. Gilbert.]

Schedule 14

  ENACTMENTS REPEALED
  Amendments made: No. 58A, in page 93, line 16, at end insert:
  'In section 338(2), the word "registered" '.
  No. 58B, in page 93, line 26, at end insert:
  'section 123 '.—[Dr. Gilbert.]
  Dr. Gilbert: I beg to move,
  That the Bill be re-committed to a Committee of the whole House in respect of the new Clause (Vehicle excise duty—disabled persons) standing on the Notice Paper in the names of Mr. Robert Carr, Mr. Terence L. Higgins and Mr. David Howell.
  As the House is aware, the Opposition moved a new clause on the first day of the Report stage intended to extend relief from vehicle excise duty to disabled passengers who might be able to travel in vehicles which have not been conspicuously and permanently adapted for the purpose. The Government were—and are—happy to accept the principle of the new clause, but suggested a rather shorter and perhaps more effective form of words. Since the rules of the House are such that it was too late to table a revised form of the new clause, the Opposition withdrew their clause on the understanding that the Bill would be recommitted at the end of the Report stage to enable a revised version to be considered in Committee.
  Question put and agreed to.
  Bill immediately considered in Committee.
  [Mr. OSCAR MURTON in the Chair]

New Clause

  VEHICLE EXCISE DUTY—DISABLED PERSONS
  In section 7 of the Finance Act 1971 for the words "specifically and extensively adapted" there shall be substituted the word "suitable"
  1254
  and the words from "conspicuous" to "and where" shall be omitted.—[Mr. Higgins.]
  Brought up, and read the First time.
  Mr. Higgins: I beg to move, That the clause be read a Second time.
  As the Finance Secretary has said, the object of the clause is to give relief from vehicle excise duty to a wider group of people than has previously been covered—in particular, disabled people, sometimes known as disabled passengers, who travel in vehicles not conspicuously adapted. We debated the matter earlier on Report, and, as the hon. Gentleman mentioned, he felt that the form of words now proposed would be more effective than our original clause. I thank the Government for their acceptance of the principle and for the clause.
  Question put and agreed to.
  Clause read a Second time and added to the Bill.
  Bill, as amended on recommittal, considered.
  Mr. Robert Carr: I shall keep the House for only a moment, but I do not think that we ought to come to the end of our debates on the Finance Bill without my saying a few words. The Bill will make history in one respect, in that it must be the most amended Finance Bill in my lifetime.
  I feel that it is appropriate for me to thank, first, all my right hon. and hon. Friends who, both in Standing Committee upstairs and in Committee and on Report on the Floor of the House, have done an enormous amount of work on what is in parts a complicated measure. In spite of certain passages of arms from time to time, I am sure that my hon. Friends would wish me to thank the Chief Secretary and the Financial Secretary for their patience, for the good temper that they have shown and, indeed, for their flexibility. We know that at times they were under an irresistable force to be flexible, but they were flexible, and we are grateful for that.
  I think that everybody would wish to thank the many officials and staff who, because of certain printing difficulties, have had an enormous task to keep us serviced with papers. These have not always been easy to follow, but it is miraculous

  1255
  that in the circumstances we have had documents which we have been able to use and thus conduct our proceedings. I am sure that those thanks should be on the record.
  Mr. Joel Barnett: I never thought that we would reach this stage. I thank the right hon. Member for Carshalton (Mr. Carr) for his kind remarks about my hon. Friend the Financial Secretary and myself. I think that we sometimes surprised ourselves that we managed to retain our good humour in all the circumstances over the last few weeks.
  I thank my hon. Friends, not forgetting the Whips, for the support that they have given us during these long days.
  I join the right hon. Gentleman in paying tribute to the officials of the House, which includes yourself, Mr. Deputy Speaker and Mr. Speaker. Perhaps I might be allowed to thank the Inland Revenue for all the work that it has done over these difficult weeks and months. We on the Government benches are most grateful to the Inland Revenue staff. I conclude by again saying thanks to all concerned.
  Bill read the Third time and passed

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

  EDUCATION (ADMINISTRATION)
  1.24 a.m.
  Mr. Bob Cryer: I am most grateful for the opportunity to speak in an unusually crowded House at this hour, with everybody listening, on the question of the administration of primary, secondary and further education. I am concerned not with the outside material supply but with the actual organisation of the institutions of education.
  The present system of administration is ingrained and traditional. It is one of hierarchies in both schools and colleges, and promotion within the framework of teaching is essentially out of the classroom to administrative positions. Yet head teachers, for example, are trained as teachers, not as administrators. The larger
  1256
  the school, the less teaching the head does. In very large schools he does not teach at all. I should make clear that there are many excellent devoted heads, but the system whereby we are fixed with a rigid hierarchical system is mistaken.
  Heads have too much power. They provide references for members of staff and can easily blight a person's career by a half-hearted recommendation and by wielding their power over promotion. A head may, for instance, present an unfair picture to a board of managers or governors. This view is not entirley my own. In the debate on the Queen's Speech the hon. Member for Aylesbury (Mr. Raison) said on 8th July, 1970:
  "I want to say another word about headships. It is difficult to get heads for these very big schools, but there is another problem we have to face, and that is security of tenure of heads. It is a fact at the moment that once a head is appointed he is there for life. Anybody who knows schools will realise that occasionally this can be very harmful. We know that there are lots of heads who are absolutely first-rate, but there are a few who are not.—[OFFICIAL REPORT, 8th July 1970; Vol. 803, c. 715.]
  That view is shared by a number of people.
  I can quote another example to the House. A head teacher went to a board of managers and presented a report. There was no other member of staff present at the meeting of the board of managers and there had been no consultation whatever with the staff. This involved a school taking pupils up until the age of 11 years. Part of the head's report to the board of managers stated:
  The junior classes present a different and very serious problem. There will not be any quick easy return to what I consider a satisfactory state of affairs but rather a systematic building up from the boettom with the cooperation, dedication and if necessary direction or replacement of teaching staff. I estimate that three years may be required before results appear obvious. The easy part of pulling the school round has started in the following directions:—

  1. All members of staff have been asked to make an effort to improve the standard of work.

  2. Special attention paid to discipline both inside and outside school.

  3. Bad time-keeping has been more or less eliminated.

  4. By visiting every class daily and supporting any decision that has been made by the teacher. Examining books and make sure the children know that they face a united staff and also the staff know that I

  1257
  am determined to see there is no relaxing on their part.

  5. In future all equipment and school supplies will be the best quality available.

  6. The posts available carrying allowances above the basic scale go to enthusiastic ambitious teachers who are prepared to be guided by myself and take part in courses run by the County."

  That report was presented in a school which had not been subject to any previous complaint, nor would there have been any complaint following the meeting had I not, fortunately. happened to be present. The illustration I am giving is that of a headmaster who is not faced with a member of his own staff on the board of governors. He can give an entirely coloured and prejudiced opinion of his school, without any consultation with the staff, and he can present a highly distorted view. I am satisfied that the report I have mentioned was a total distortion.
  The members of staff who may say that the report is a total distortion—as some might reasonably do—would normally not be the people to whom the posts available carrying allowances above the basic scale would go. They would not be ambitious teachers "prepared to be guided by myself". A head teacher carries this enormous power of totally preventing the career advancement of someone who happens to disagree with him.
  This head decided, again without consultation, to abandon the initial teaching alphabet put forward by the previous head and members of staff with great enthusiasm and adopt the "Breakthrough to Literacy" scheme promoted by the Schools Council. There may be pros and cons of these two systems, but in this case a unilateral decision was made without consultation.
  Since 1968 there has been more widespread recognition by local authorities that teachers should be on boards of governors and managers. When this happens, head teachers cannot present a partial view representing only their prejudices and not the situation as a whole. However, this should be a requirement on local authorities and not optional. I recall vividly one Conservative councillor on a Conservative-controlled local authority describing all members of staff who stood for election as "potential troublemakers". I need hardly add that that
  1258
  local authority did not adopt, and was not even prepared to investigate, a scheme to allow primary school teachers to stand for election to boards of governors or managers. Local authorities should be required to allow this sort of democratic participiation.
  Even when such representation has been allowed, only one teacher is put on a board with 14 or 15 governors comprising the head teacher and people of standing appointed by the local authority. This can be intimidating. I know of one member of staff of a comprehensive school who was elected to a board of governors. His head insisted that he meet him before every board meeting so that they could present a united picture. In other words, the free discussion and fresh information which staff representation was designed to introduce is in that case to some degree prevented because the head ensures that the teacher thinks along much the same lines. I know that he is annoyed if the staff representative brings up anything which has not had the head's prior approval.
  That is not the sort of democracy we should be talking about. Democracy means that teachers should be able to take their places on boards of managers and governors free from intimidation. To this end they should not be isolated and have to face such large bodies by themselves.
  It is also worth remembering what I have said about a teacher depending so much on a head's recommendation for promotion either within the school or outside. Therefore, if a teacher representative on a board of governors chooses to ignore any suggestions of a headmaster, his career can be thrown into jeopardy.
  Boards of governors frequently do not meet often enough. They are our democratic safeguards. There are cases where boards meet very infrequently and work goes on. I know of another case in which a board of governors has not met for several months, yet during that period several pupils have been suspended and one boy has been refused part-time education following a brain operation because the head said simply that it was not an invalid home. Those decisions have not been able to be challenged because the board of governors has not met,

  1259
  there being, so it is said, no urgent business.
  In colleges of further education the same topsy-turvey system of advancement is present whereby promotion is dependent not on teaching ability but on administrative ability, and where the salary system is geared not to the time spent in lecture halls or classrooms but to the time spent in administration. For example, the assistant lecturer in a college of further education is presumably new and, therefore, raw when required to be in class contact for more or less 24 hours a week with six hours' preparation, whereas he is the very person who needs more preparation time than anyone because he is new to the job. But the older hand, who has gone through the various scales to become, for instance, a senior lecturer, will probably have only about 14 hours a week class-contact time, yet 16 hours a week administration and preparation work. In other words, the experienced person has the excessive amount of time to prepare for class, with which he probably has a great deal of experience.
  Principals, vice-principals and heads of departments are not trained to administer. They are trained to teach. But they are taken out of the lecture room and class room and put in administrative positions for which they have absolutely no training.
  It is a great irony that our education institutions should provide, for example, management courses, but that those selfsame institutions are often run by people who have great quantities of money and large numbers of people to control, but have no training of any formal nature in these skills. I believe that the unions and the Government should negotiate a system whereby promotion should be for teaching and not for administration.
  However, the question of administration still arises. What are the solutions one can suggest for administration in primary, secondary and further education institutions? First, in further education institutions, under the Education Act (No. 2) 1968 academic boards of elected representatives have been established. These are often effete, ineffective talking shops, and they bring democratic participation into disrepute. If academic
  1260
  boards could function without the principal's veto and if they had genuine power, it would be the reality of democracy instead of the facade which, alas, occurs in too many institutions.
  I raise the question: why confine academic boards to colleges of further education? They could well be introduced into secondary and primary education. It would mean that over a period, no doubt with adequate salary safeguards, headmasters and principals of colleges could be phased out and allowed to go back into the class room from where they started, for which they have, presumably, a vocation, and where their real cause for life lies. They would no longer be involved in the routine chores of administration. In small schools all the staff would be on the board, and any formal functions which would be carried out normally by a head, such as taking assembly, could be taken over by an annually elected chairman.
  Teachers often have mach more to contribute than that which they are allowed to contribute. Some heads already encourage the fullest participation, but this is a quirk—although something which is welcomed as a gem among a torrid sea of conformity. It is the system which needs to be changed, because the democratic procedure which one head allows might well be changed with a change of headmaster.
  Again, it is difficult for teachers to talk about democracy when they face possibly an arbitrary and bureaucratic headmaster themselves. It is difficult for teachers to talk to young people about democracy in a society when they have no sense of democratic participation themselves. In my view, democracy does not consist of putting a cross on a piece of paper every three or four years.
  Neither should democracy begin at the age of 18. For most people, democracy means participation from an age when reason can prevail. Certainly students participate in a modest way in colleges of further education, and there is no reason why this participation should not extend to secondary education. A number of free schools are already demonstrating to a modest degree that participation can be all-embracing. Those experiments should be looked at with interest. In the immediate future, however, there is no reason why participation by

  1261
  pupils at secondary schools should not become a reality. I understand that the Derbyshire education authority has considered this and is likely to implement it in the near future.
  If there is to be participation—I hope that my hon. Friend the Under-Secretary will welcome sympathetically the idea of participation by pupils in administration—it must be borne in mind that this should not be confined in secondary education simply to sixth formers. We know that with the recent raising of the school leaving age a number of problems exist. One of the things we do not want to do is to exclude the 16-year-olds of all sorts of ability—or, for that matter, the 14-and 15-year-olds—from an opportunity to participate in the administrative decisions of schools and other education. institutions.
  In my view, democratic participation in decision-making is something we should start with at an early age. It is something we should start with with schoolchildren and students, and we should not ignore it when we talk about democracy in industry as regards teachers. Teachers occupy a very important place in our life. Too often they are denied the right to discuss participation in decision-making. I hope that the tide of democracy is sweeping through education and will bring a refreshing current of vigour and new ideas to our education system.
  1.43 a.m.
  The Under-Secretary of State for Education and Science (Mr. Ernest Armstrong): I am grateful to my hon. Friend the Member for Keighley (Mr. Cryer) for raising this very important subject. I assure him that it has been on our minds and receiving consideration for a considerable time. We have had representations and delegations from teachers and their associations and from the National Association of Governors and Managers. We are indeed considering the situation.
  It is easy to get things out of perspective and to work up a sense of grievance. The picture of head teachers painted by my hon. Friend bears little relationship to my experience as a former chairman of an education authority. Indeed, as a former headmaster for 12 years I did not recognise myself in the heads he was talking about who had too much power.
  1262
  Nevertheless, I have always been of the view that the appointment of head teachers in schools is perhaps the most important job that an education authority does. At the same time, however, I think we are mindful of the fact that all education institutions are concerned with people, and people are different. They have different attitudes and, therefore, no blueprint that is laid down either in the Department or in the local education office can ensure the kind of democracy we all want. I propose to deal with some of the points that my hon. Friend has raised.
  There is no doubt that attitudes in society have changed in all kinds of ways. We support the demand for people to be involved in the decisions that affect their daily lives. What could be more natural than, for instance, parents—my hon. Friends did not make much mention of parents—asserting their right to have a say in the education of their children? What could be more natural than teachers working in a school wanting to take part in the decision-making on the day-to-day organisation?
  What is taught in school, the methods we use to teach and the way we organise education depend very much on, and indeed reflect, our view of society and the individual child growing up in that society. Staffs, parents and pupils have a vital part to play. I acknowledge the rights of each group and remind the House that the assertion of rights carries with it a willingness to accept responsibility for the orderly and proper running of the institution to which those making the assertion belong. Each group, whether it is a group of parents, teachers or students, has its own legitimate special interests, but all must have some regard to the general interests of the school, and all have a responsibility to the outside community where the school operates.
  Democracy has become more difficult to exercise as we have come to recognise the rights of all concerned to be involved in the decision-making process. Surely if democracy is to have any meaning at all, and certainly if it is to succeed, we must begin in school. Democracy implies a readiness to consult, to listen, to give and take, to share responsibility.

  1263
  In 1945 a new pattern of maintained school government was introduced under the Education Act 1944, which laid down the basic framework for managing and governing bodies. This was followed by a White Paper—"Principles of Government in Maintained Secondary Schools". In the following year, model instruments and articles of government put these principles into a precise practical form. The model articles were the result of protracted and extensive consultation with all the main interests involved. This was almost 30 years ago.
  The instruments which lay down the constitution of governing bodies of voluntary schools and the articles which determine the conduct of secondary schools, both of which are subject to the control of the Secretary of State, have closely followed the pattern of the 1945 models. There have been variations. Local authorities have made use of their freedom to introduce any particular elements in the constitution of governing bodies which they have thought right for their own schools.
  Many, including my hon. Friend, think that the time has come for major changes and for departures from those models. For example, some authorities have provided direct representation for parents and for teachers, and some have provided for direct representation for pupils. Some want this to be made obligatory.
  In the past few months the new local authorities have had their problems with trying to harmonise the different arrangements they have inherited in different parts of their own new areas.
  This debate has given a valuable opportunity to open up this subject for discussion. The wider and the more vigorous the discussion up and down the country, the better the decisions will be. We have had pressure for membership of teachers on the governing bodies of their schools. At present this is not permitted in voluntary schools and is at the discretion of local education authorities in county schools.
  I want to make it quite clear that there is no bar to the appointment of a parent as a governor of any school. I believe that parental involvement will grow substantially in the years to come, and I welcome this involvement. At one time in my teaching career it was thought that
  1264
  the last people to have any say in the education of children were parents. Parents have every right to be directly involved.
  A few authorities have made provision for pupil membership of governing bodies. This raises difficulties in discussion and decisions concerning members of staff, and we are watching this development with interest.
  Consultation with assistant teachers by heads in the exercise of the latter's functions is very much a matter for discussion, and of course, coupled with this is the whole question of the control of the curriculum in schools and in colleges.
  I assure my hon. Friend that we are reviewing with urgency all aspects of school management and school government. We are eager to listen to and to discuss with interested groups the changes which are necessary. We see school as a vital part of the life of any community. We believe that democratic involvement will be a healthy development in the life of the school and of the neighbourhood.
  With regard to the colleges of further education, the government and conduct of establishments of further education was laid down by the Education Act 1968, followed by Circular No. 7/70. Here we want a balance between all the various interests—local authorities, the governing body, the principal, the academic board, students and student affairs. We want an attitude of good will and common sense in all these matters because we want to strike a balance between the various conflicting interests.
  There is no perfect way of deciding a teacher's potential in the matter of administration and headships. It is the most difficult job in the world to make the right appointment. I commend to my hon. Friend some of the experiences that I have noted in the country. There are various in-service courses for potential head teachers. I think that, with big schools in particular, there is a need for more staff training, so that administration and so on, which is a vital part of the school organisation, can become more familiar to those who have been expert in the class room and then are promoted to take charge of a school.
  Mr. Bryan Davies: I think the point which my hon. Friend made, and which we would like to be

  1265
  considered, is the question of the hierarchy in the educational institution, and particularly whether we can change the situation in which promotion for the best teachers is defined in terms of an administrative rôle. Many of us feel that we could learn a great deal from the universities, where the teaching in service rôle is important and administration could be a definitely separate activity rather than related to the career prospects of a good teacher.
  Mr. Armstrong: That is a very important matter and I am grateful for the intervention. On the other hand, some
  1266
  first-class teachers would look forward to becoming heads of schools. They make first-class heads. It is a matter of balance. All I would say to my hon. Friend is that we have this matter under very urgent review. We want to see more democracy and more involvement by those—
  The Question having been proposed after Ten o'clock on Monday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
  Adjourned at six minutes to Two o'clock.

ENERGY
  Coal Imports
  Coal Imports
  Electricity Tariffs
  Electricity Tariffs
  Consumption
  Consumption
  Gas Leak Fatalities
  Gas Leak Fatalities
  Offshore Oil and Gas
  Offshore Oil and Gas
  Coal Resources
  Coal Resources
  Conservation
  Conservation
  North Sea Oil
  North Sea Oil
  Nuclear Power Stations
  Nuclear Power Stations
  Coal Industry (Powered Roof Supports)
  Coal Industry (Powered Roof Supports)
  Policy and Planning
  Policy and Planning
  Drilling Technology (Study Centre)
  Drilling Technology (Study Centre)
  Oil Industry (Health Service)
  Oil Industry (Health Service)
WALES
  Milford Fishing Industry
  Milford Fishing Industry
  Concessionary Fares (Pensioners)
  Concessionary Fares (Pensioners)
  Housing (Loan Sanction)
  Housing (Loan Sanction)
PRICES AND CONSUMER PROTECTION
  Tobacco
  Tobacco
  Central Heating Appliances
  Central Heating Appliances
  Food Subsidies
  Food Subsidies
TRADE
  Nylon
  Nylon
  Airline Services
  Airline Services
  Paper and Board Making
  Paper and Board Making
  George Kent Ltd.
  George Kent Ltd.
  Food Imports
  Food Imports
AGRICULTURE, FISHERIES AND FOOD
  World Food Conference
  World Food Conference
  Sugar
  Sugar
  Sugar Beet
  Sugar Beet
  Beef (EEC Negotiations)
  Beef (EEC Negotiations)
  Beef (Price Guarantee)
  Beef (Price Guarantee)
  Production
  Production
  Eggs and Poultry
  Eggs and Poultry
  Meat Distribution (EEC Stocks)
  Meat Distribution (EEC Stocks)
DEFENCE
  Royal Navy (Welfare Services)
  Royal Navy (Welfare Services)
  Pensioners (Liability to Recall)
  Pensioners (Liability to Recall)
  Bands
  Bands
  Recruiting (Advertising)
  Recruiting (Advertising)
  Fylingdales (Contracts)
  Fylingdales (Contracts)
  Suez Canal
  Suez Canal
  Low-Flying (Wales)
  Low-Flying (Wales)
  Civilian Personnel (Scottish Bases)
  Civilian Personnel (Scottish Bases)
OVERSEAS DEVELOPMENT
  Vietnam
  Vietnam
  Tanzania
  Tanzania
  Windward Islands
  Windward Islands
  Disasters (Aid)
  Disasters (Aid)
  EEC Aid
  EEC Aid
  International Development Association
  International Development Association
  "CROSSBOW"
  "CROSSBOW"
  TREASURY COUNSEL
  TREASURY COUNSEL
CIVIL SERVICE
  Population
  Population
  Parliamentary Papers
  Parliamentary Papers
  Civil Service College (Edinburgh)
  Civil Service College (Edinburgh)
EDUCATION AND SCIENCE
  Handicapped Children (Inquiry)
  Handicapped Children (Inquiry)
  Harwich (Bathside School Replacement)
  Harwich (Bathside School Replacement)
  Subnormal Children
  Subnormal Children
  Teachers' Council
  Teachers' Council
  Museums and Galleries
  Museums and Galleries
  Concrete Roofs
  Concrete Roofs
  Teachers' Pensions Branch, Darlington
  Teachers' Pensions Branch, Darlington
EMPLOYMENT
  Industrial Tribunal (Appeals)
  Industrial Tribunal (Appeals)
  Training
  Training
  State Employees (Nationalisation)
  State Employees (Nationalisation)
  Government Printers (Industrial Dispute)
  Government Printers (Industrial Dispute)
  Income Per Head (International Statistics)
  Income Per Head (International Statistics)
  Local Government Staff Dispute (Southwark)
  Local Government Staff Dispute (Southwark)
  Family Allowances
  Family Allowances
  Drilling Technology (Study Centre)
  Drilling Technology (Study Centre)
FOREIGN AND COMMONWEALTH AFFAIRS
  North Sea Oil Installations (Soviet Ship)
  North Sea Oil Installations (Soviet Ship)
  Rhodesia
  Rhodesia
  Pakistan (Ahnadiyya Muslims)
  Pakistan (Ahnadiyya Muslims)
  Frelimo
  Frelimo
  Muscat and Oman
  Muscat and Oman
  World Food Conference
  World Food Conference
  Law of the Sea Conference
  Law of the Sea Conference
  Middle East (Geneva Conference)
  Middle East (Geneva Conference)
  United Nations Peacekeeping Forces (London Memorial)
  United Nations Peacekeeping Forces (London Memorial)
  United Nations Conference on Trade and Development
  United Nations Conference on Trade and Development
  Outpost Titles (Canada)
  Outpost Titles (Canada)
  Falkland Islands
  Falkland Islands
  Passports (North Sea Oil Rigs)
  Passports (North Sea Oil Rigs)
HOME DEPARTMENT
  Children and Young Persons Act 1969
  Children and Young Persons Act 1969
  Vandalism and Violence
  Vandalism and Violence
  Psychiatric Prisoners
  Psychiatric Prisoners
  Police (Staffordshire)
  Police (Staffordshire)
  Political Asylum
  Political Asylum
  Incitement to Disaffection Act 1934
  Incitement to Disaffection Act 1934
  Post Mortem Examinations
  Post Mortem Examinations
  Guerrilla Festival
  Guerrilla Festival
  Departmental Correspondence
  Departmental Correspondence
  Prisoners (Grants on Discharge)
  Prisoners (Grants on Discharge)
  Treason
  Treason
INDUSTRY
  George Kent Ltd.
  George Kent Ltd.
  West Highland Free Press
  West Highland Free Press
  Instrument Makers
  Instrument Makers
  Norton Villiers Triumph Ltd.
  Norton Villiers Triumph Ltd.
  Court Shipbuilders
  Court Shipbuilders
  Edinburgh
  Edinburgh
NATIONAL FINANCE
  Local Government Expenditure (Tax Equivalent)
  Local Government Expenditure (Tax Equivalent)
  Estate Duty
  Estate Duty
  Income Tax (Trusts)
  Income Tax (Trusts)
  Middle East Oil States
  Middle East Oil States
  Pharmaceutical Industry (Corporation Tax)
  Pharmaceutical Industry (Corporation Tax)
  Value Added Tax
  Value Added Tax
  Meal Vouchers
  Meal Vouchers
  £ Sterling (Value)
  £ Sterling (Value)
  Developing Countries (Loans)
  Developing Countries (Loans)
  Banks (Money Circulation)
  Banks (Money Circulation)
  Gold Coins (Imports)
  Gold Coins (Imports)
  Public Expenditure
  Public Expenditure
  Gross National Product
  Gross National Product
  Budget Pamphlet
  Budget Pamphlet
  Mortgage Interest Relief
  Mortgage Interest Relief
NORTHERN IRELAND
  Killynether Castle
  Killynether Castle
  Public Sector Receipts and Payments
  Public Sector Receipts and Payments
  Scrabo Tower
  Scrabo Tower
  Prisoners (Assaults)
  Prisoners (Assaults)
  Internment and Detention
  Internment and Detention
  Primary School Enrolments
  Primary School Enrolments
  Potatoes
  Potatoes
  Ships (Dumping of Sludge)
  Ships (Dumping of Sludge)
PALACE OF WESTMINSTER
  Fire Precautions
  Fire Precautions
  POPULATION
  POPULATION
  ROYAL COMMISSIONS
  ROYAL COMMISSIONS
SOCIAL SERVICES
  Hospital Consultants' Pay
  Hospital Consultants' Pay
  One-Parent Families (Earnings Rule)
  One-Parent Families (Earnings Rule)
  Works Officers (East Anglia)
  Works Officers (East Anglia)
  Haemophiliacs
  Haemophiliacs
  Psychiatric Consultations (Waiting Times)
  Psychiatric Consultations (Waiting Times)
  Agoraphobia
  Agoraphobia
  Dispensing Accounts and Practice Fees (Payment)
  Dispensing Accounts and Practice Fees (Payment)
  Private Health Provident Schemes
  Private Health Provident Schemes
  Hernia Operations
  Hernia Operations
  Chiropody (Poor Persons)
  Chiropody (Poor Persons)
  Social Security Benefits (Analysis)
  Social Security Benefits (Analysis)
  Mental Disorder (Lost Working Days)
  Mental Disorder (Lost Working Days)
  Mental Illness
  Mental Illness
  Elderly Persons (Services)
  Elderly Persons (Services)
  Psychiatric Patients (Information)
  Psychiatric Patients (Information)
  Goole (Hospital)
  Goole (Hospital)
  Christmas Bonus
  Christmas Bonus
  Radiographers (Pay)
  Radiographers (Pay)
  Pension Increases (Payment)
  Pension Increases (Payment)
  Family Allowances
  Family Allowances
  Local Councillors' Expenses and Allowances
  Local Councillors' Expenses and Allowances
  National Insurance Stamps
  National Insurance Stamps
ENVIRONMENT
  Transport (Energy Factors)
  Transport (Energy Factors)
  Rent Scrutiny Boards
  Rent Scrutiny Boards
  Pollution Control (European Economic Community)
  Pollution Control (European Economic Community)
  Water Consumption and Supply
  Water Consumption and Supply
  Sporting Activities
  Sporting Activities
  Esher Bypass
  Esher Bypass
  Water Supplies (Metering)
  Water Supplies (Metering)
  M11
  M11
  Rent Rebates and Allowances
  Rent Rebates and Allowances
  Merseyside (Road System)
  Merseyside (Road System)
  M18 (Armthorpe-Hatfield)
  M18 (Armthorpe-Hatfield)
  Rate Rebates (Pensioners)
  Rate Rebates (Pensioners)
  A38 (Derby-Lichfield)
  A38 (Derby-Lichfield)
  Speed Limits
  Speed Limits
  Dutch Elm Disease
  Dutch Elm Disease
  Road Surfaces
  Road Surfaces
  Hadleigh Road Roundabout, Ipswich
  Hadleigh Road Roundabout, Ipswich
  District Heating
  District Heating
  Construction Industry Suppliers (Cash Flow)
  Construction Industry Suppliers (Cash Flow)
  Water Supply (North-West)
  Water Supply (North-West)
  Road Traffic (M3, Sunbury)
  Road Traffic (M3, Sunbury)
  Architecture (Property Services Agency)
  Architecture (Property Services Agency)
  House Buying (Local Authorities)
  House Buying (Local Authorities)
  Channel Tunnel
  Channel Tunnel
  Historic Buildings (Public Attendances)
  Historic Buildings (Public Attendances)
  Housing (Psychiatric Persons)
  Housing (Psychiatric Persons)
  Transport Planning
  Transport Planning
  Central Lancashire New Town
  Central Lancashire New Town
  A12 (Chelmsford)
  A12 (Chelmsford)
SCOTLAND
  High-Rise Buildings
  High-Rise Buildings
  West Highland Free Press
  West Highland Free Press
  Licensing Law (Clayson Committee's Report)
  Licensing Law (Clayson Committee's Report)
  Schools (Religious Instruction)
  Schools (Religious Instruction)
  Social Work
  Social Work
  Inverkip Power Station
  Inverkip Power Station
  National Health Service
  National Health Service
  Drumbuie
  Drumbuie
  Electricity Supply (England)
  Electricity Supply (England)
  Council Houses Improved
  Council Houses Improved
  South of Scotland Electricity Board
  South of Scotland Electricity Board
  Tay Road Bridge
  Tay Road Bridge

Preamble
The House met at half past two of the clock: THE LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Leicester.
The Earl of Strathmore and Kinghorne—Took the Oath.

GIBRALTAR: HOUSING
LORD MERRIVALE: 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 whether they will initiate discussions with the Gibraltar Government, concerning manpower, materials (standard amenities), a financial contribution ("along the lines of the provisions of Section 16(1) of the Housing Act 1969), with a view to easing the situation regarding sub-standard Gibraltarian households, as outlined in the Census held in September, 1970.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE(LORD GORONWY-OBERTS): My Lords, following the Aid Talks, to which the noble Lord referred in his last Question on this matter on April 4, 1973, Her Majesty's Government made available the services of the Commonwealth Housing Corporation to advise the Gibraltar Government on Housing. We hope to have talks with the Gibraltar Government later this year on their next development programme. This will provide an opportunity for them to raise the subject of improvement grants, if they wish.
LORD MERRIVALE: My Lords, I am very grateful to the noble Lord for what is, to some extent, an assurance. But does he feel that Her Majesty's Government could take the initiative to a greater degree? Will he agree that in the list of defined domestic matters—in particular, under the heading of housing—there is no reference to financial assis-
1410
tance towards the cost of improvements and conversions, which are covered in Part I of the Housing Act? Would not the Minister agree that possibly, as there are certain defined domestic matters which overlap, Her Majesty's Government could take some degree of initiative with a view to assisting the Gibraltar Government to ease the problem, as approximately one-third of the houses in Gibraltar are of sub-standard condition?
LORD GORONWY-ROBERTS: My Lords, constitutionally the Gibraltar Government have full self-government in internal matters, of which housing is one. I do not think it would be appropriate for us to take an initiative in regard to internal policy, but we hold ourselves ready at all times to discuss with them any way in which we might be of even greater assistance—for instance, in housing—than we already are.

GIBRALTARIANS: HOSPITAL CARE IN UNITED KINGDOM
2.40 p.m.
LORD MERRIVALE: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many citizens of Gibraltar benefited this year (up to the end of June) from the provisions of paragraph (4) of the Agreement Cmnd. 5604 headed Hospital Care in the United Kingdom for Gibraltarians.
LORD GORONWY-ROBERTS: My Lords, 26 Gibraltarian sponsored patients had been sent to the United Kingdom under the terms of paragraph (4) of the Agreement up to the end of June, 1974.
LORD MERRIVALE: My Lords, first of all, would not the Minister agree that there are a number of Gibraltarians who might well find it difficult to afford the £80-odd return air fare to this country? Can the noble Lord say what provisions exist to enable the poorer members of the community in Gibraltar to travel here for hospital care, bearing in mind that the Agreement to which the noble Lord referred does not extend to the payment of any travelling expenses between the

1411
two countries? The second question is this. As the provision in the Agreement is for a maximum of only 40 Gibraltarian citizens visiting this country for hospital treatment in a year, may not the figure of 40 be too small in view of the number sent during the six-month period that has already elapsed?
LORD GORONWY-ROBERTS: My Lords, on the second point, the Agreement, the exchange of dispatches, specifically provides for a review of that figure which is quoted in paragraph (4) (a) and (b). On the first point, the Agreement specifically excludes travel expenses between the two countries; but these are met by the Gibraltar Government, who also grant a maintenance allowance in the case of out-patients in need. I understand that the Gibraltar Government also meets the cost of passages and, if necessary, a maintenance allowance for one relative apart from patients.
LORD MERRIVALE: My Lords, do I understand the Minister aright that in fact in cases of need the Gibraltar Government does pay for the air fare of Gibraltarians?
LORD GORONWY-ROBERTS: My Lords, that is so.

GOVERNMENT STATEMENTS
BARONESS LLEWELYN-DAVIES OF HASTOE: My Lords, with the leave of the House my noble friend Lord Goronwy-Roberts will be making a Statement on Cyprus at a convenient moment after 3.30 p.m., and this will be followed by a Statement by my noble friend Lord Donaldson of Kingsbridge on Northern Ireland.
I would remind the House that we shall be sitting next Friday from 11 a.m. I should also like to inform your Lordships that dinners will be available tonight and to-morrow.

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

TRADE UNION AND LABOUR RELATIONS BILL
2.44 p.m.
THE LORD PRIVY SEAL (LORD SHEPHERD): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord Shepherd.)
On Question, Motion agreed to.
House in Committee accordingly.
[THE EARL OF LISTOWEL in the Chair].
LORD HANKEY LORD HANKEY moved Amendment No. 1:
Before Clause 1, page 1, line 4, at end insert:

PART I INTRODUCTORY
General Principles
(1) The provisions of this Act shall have effect for the purpose of promoting good industrial relations in accordance with the following general principles, that is to say:

(a) the principle of collective bargaining freely conducted on behalf of workers and employers and with due regard to the general interests of the community;

(b) the principle of developing and maintaining orderly procedures in industry for the peaceful and expeditious settlement of disputes by negotiation, conciliation or arbitration, with due regard to the general interests of the community;

(c) the principle of free association of workers in independent trade unions, and of employers in employers' associations, so organised as to be representative, responsible and effective bodies for regulating relations between employers and workers; and

(d) the principle of freedom and security for workers, protected by adequate safeguards against unfair industrial practices, whether on the part of employers or others.

(2) With a view to fulfilling that purpose those principles shall be regarded as guiding principles—

(a) by the Secretary of State, and by all other persons upon whom duties are placed by and under this Act, in the performance by them respectively of their functions under this Act, and

(b) by industrial tribunals, in the exercise of the jurisdiction conferred by or under this Act on those tribunals.")

The noble Lord said: I think that it is very desirable that the Trade Union

1413
Bill or, for that matter, any legislation which governs our trade union relations in the way that this Bill does, should state somewhere what trade unions are really expected to do. This Bill states their rights and also what they must not do, but nowhere does it give a forward looking and constructive appearance to their functions, and I believe that this is overwhelmingly important.
I do not think that this is simply a psychological question. If one takes an embassy, for instance, behind the Iron Curtain—where embassies are treated like licensed spies and are not able to entertain very much the people in the country, and the ambassador can see the head of the State he is accredited to only with the greatest difficulty—they are really not able to exercise any useful function. Because they are regarded as licensed spies, many members of the embassy tend to behave like licensed spies. The same happens on this side, and what else could happen? It is the same with any organisation, including a trade union. If we regard trade unions as a licensed conspiracy—which is the traditional basis of British law about trade unions—the employers tend to think, "These people are dangerous. Let us have as little to do with them as we can."
The real position which a trade union ought to occupy is quite clearly seen in other countries, on both sides of the Iron Curtain, where they have a big and constructive role to play. Trade unions ought to act not only in the interests of their members—and I stress this—but one of their functions is to give the workers in any industry the absolute confidence that their interests are well protected. If they know that their interests are well protected they are much more likely to work happily and there can be better industrial relations. It is also important that the trade unions should have respect for the public interest, because otherwise what one trade union does damages the interests of workers in other industries and, for that matter, other industries themselves. Therefore, one wants responsible action on the part of the trade unions, and, I maintain, speaking strictly from the middle of the road, that this idea ought to be enshrined, stated and explicitly set forth somewhere in our legislation.
This Amendment which, with great humility, I ventured to set down is, in fact, a redraft of the initial article of the Industrial Relations Act 1971. I think your Lordships will have noticed it crossed out at the beginning of Schedule 1 for a reason which, in the absence of Hansard, I cannot explain. I have taken that text out because I think that it is an excellent statement of what trade unions ought to do. I believe that, provided we have that idea adequately set forth in our legislation, it would facilitate fruitful contacts between the workers in any industry and the heads of that industry, and the people with whom they have to conduct their daily relations. So I should like—again speaking strictly from the middle of the road—to commend this clause to both sides of the House. I should have thought that it might prove to be uncontroversial. Indeed, I cannot imagine anybody objecting to it unless they were, or (shall I say?) might be people of some evil intent. I think that this clause is so transparent that I recommend it to your Lordships' approval.
LORD SLATER: I am interested in the observations of the noble Lord, Lord Hankey. He talked of being "middle of the road" about the constitution of trade unions, how they operate and what can really happen between one trade union and another. I hope he has not overlooked the fact that rules and regulations governing trade unions in this country are drafted by their membership, with the consent and approval of the Registrar-General who must give his stamp of approval.
I come from the mining industry, and as far back as 1937 we had to draft and redraft the rules and regulations of the Durham Miners' Association, as it was before it became a member of the N.U.M. We spent weeks and weeks, with legal advice at our disposal, deciding the rules and regulations governing our trade union for the benefit of the membership. The terms and objects of those rules are to govern and to seek to look after the interests of the membership to the best of their ability, so far as the head office and its Executive are concerned. The rules are applied not only to one section but to all sections within that type of industry and that trade union.

1415
I sincerely hope that the noble Lord, Lord Hankey, will give further thought and study to these facts. I can appreciate his observations as a diplomat and with his experience of embassies. Many of us have met ambassadors from abroad. In conversation we have found that some of them even had to depend on the layman's information and attitude of mind to put them on the right track. Therefore, the drafting and the workings of a trade union are not so much a cause of difference between one trade union and another. What we must remember is that there is not just one trade union for the mining industry; we also have the engineering industry and the warehouseman's side. There are all these different trades and grades of operation and employment within this country, who are governed by their parent body for trade unions in seeking to look after the interests of their members.
LORD SHEPHERD: Like my noble friend, I was slightly taken aback the first time the noble Lord, Lord Hankey, referred to himself as being "middle of the road". I was even more taken aback when he repeated it. My memory is sufficiently long to remember his speech on Second Reading. It was so far to the Right that I even suspected that the Cross-Benchers might have found difficulty in finding a place for him. How ever, he has moved the Amendment with moderation. There is no doubt that in the distant past it was the practice to include in legislation what one might call the long title of a Bill, in the sense that it set out the general purposes and principles that governed the legislation. That is no longer the practice, whether right or wrong. The noble Lord admitted that the Amendment which he has tabled has been copied from the 1971 Act. At the beginning of this Committee stage I do not wish in any way to raise the temperature of the Chamber—
LORD HANKEY: On a point of correction, the Amendment is considerably and very well redrafted. I was only trying to explain that it was not redrafted by myself.
LORD SHEPHERD: The principle is there. A few words here and there may have been changed, but the substance
1416
of the noble Lord's Amendment is that of Section 1(1) of the 1971 Act. In the Second Reading debate, I sought to explain to the House that, as a freely admitted consequence, the Industrial Relations Act had created great harm and great discord in the entire field of industrial relations. What we sought was a new concordance, a new sense of cooperation between Government and the trade union movement, and also within the C.B.I. itself. This is the first of a series of pieces of legislation. It is of a limited character but is none the less important. I cannot imagine anything that would be more contrary to the desire of the Committee than to include the first subsection of the 1971 Act in a new piece of legislation dealing with the trade union movement, whatever the merits of the words in the Amendment. We are seeking a new era. Therefore it is right and proper that we should keep as far away as possible from the general construction of the 1971 Act.
My understanding is that in the other place the official Opposition tabled an Amendment in similar terms. Whether it is right to say that a deal was done I do not know, but that Amendment was not proceeded with by the official Opposition, because an understanding was reached with the Government that the code of practice should remain within the piece of legislation. The code of practice is a useful and practical piece of doctrine on which trade unions and employers can operate. This set of principles, whether worthy or not, will create great disturbance in the minds of those who will be called upon to operate this new piece of legislation. The noble Lord will find that a number of the so-called principles do not appear in any form of provision in the Bill itself. Therefore, even if one were to regard it as the long Title, it would seem strange to set it out at the beginning of the Bill as its purpose and intention, when there are no clauses within it to fulfil what are the intentions of the principles set out.
In conclusion, I think that when the noble Lord, Lord Hankey looks at subsection (1) he will agree that he then needs to follow carefully subsection (2). If he does that he will find that the principles which are set out in subsection (1) of the 1971 Act do not in any way refer or require implementation by trade

1417
unions. If the noble Lord has not read it perhaps I should refer to it. Subsection (2) says:
"With a view to fulfilling that purpose those principles shall be regarded as guiding principles (a) by the Secretary of State, the Commission on Industrial Relations, and the Chief Registrar of Trade Unions and Employers' Associations, and assistant registrars, to be appointed under this Act, in the performance by them respectively of their functions under this Act, and (b) by the National Industrial Relations Court to be established under this Act, and by industrial tribunals, in the exercise of the jurisdiction conferred by or under this Act on that Court and on those tribunals".
My understanding is that, apart from the Secretary of State all those referred to in subsection (2) disappear with the repeal of the Industrial Relations Act.
LORD HANKEY: I apologise for interrupting the noble Lord again. If he will look at the Amendment he will see it does refer to none other than the Secretary of State and the industrial tribunals which do continue.
LORD SHEPHERD: But in setting out the principles one needs some form of provisions and some kind of organisation to whom they are directed. Having dealt with the point I hope the noble Lord will feel that I have covered it adequately. While I am not against the principles as such it would be inadvisable at this stage for these to be included in new legislation which is to be regarded as a new effort to bring about a new concordant, a new understanding and degree of co-operation between the Government, trade unions and every side of industry.
THE EARL OF GOWRIE: When one hears mention of the term "the 1971 Industrial Relations Act", the likelihood is that someone from these Benches will bob up. I think we are in a slight difficulty already, despite the fact that the warm words uttered by the noble Lord the Leader of the House about the Code of Practice were music to my ears as one who has read the account of the fight over retaining the Code of Practice in Standing Committee in another place. I am very glad that he has been converted so quickly; and I think that may make for good augury on all sides for the rest of the Committee stage. Of course. I think it would be as well—I say this to the noble Lord, Lord Hankey—to get out
1418
of the way at the very beginning of this Committee stage, as he has tried to do, the casting of the Industrial Relations Act in the role of primary villain in industrial relations. I do not think this will be very helpful.
I know that for political reasons, for reasons of trying to introduce it on May 1, and the like, the opening words of the present Bill state the desire of the Government to repeal the Act, and yet, that notwithstanding, it keeps some 27 provisions, I think, the unfair dismissal ones being the most notable in point. I hope that we can, and I appeal to your Lordships that we should, spend this Committee stage without attacking the Act, because I think that it attempted to solve on a comprehensive basis (perhaps too comprehensively, perhaps too quickly) many important issues in industrial relations which are still with us and with which this Bill, this Government, the next Government, whoever, will still have to deal. We know that the Act provided a means for dealing with recognition disputes and disputes as to bargaining rights with the help of the C.I.R., and it provided a means of ensuring that unions behaved fairly towards their own members. It provided machinery for determining the relative shops—closed shops or agency shops—and how they should be allowed. All of these, I think, were fairly constructive points; but for our part, we have, as your Lordships' Committee will know, formally abandoned any commitment to reintroduce the Industrial Relations Act. We accept that it may have made the situation difficult, though my own view—and it is only my own view—is that any attempt at industrial relations legislation in an atmosphere of raging inflation, with what that does to the relative positions of workpeople in our society, is bound to fail on that score alone.
However, this said, I am enormously grateful to the noble Lord, Lord Hankey, and am very glad that he has brought up these principles. It is, I believe, sometimes a matter of controversy between lawyers and laymen as to whether principles—cheer-leading provisions, if one may so describe them—should be in Bills; but when Bills are dealing with such a wide area of national life as in industrial relations, regardless of whether they are dealing with them in the way we tried to

1419
or the way in which the present Government are trying to, then I think it is right in many ways—it is tempting, certainly—to try to insert some cheer-leading provisions, some statements of intent.
I do not see how anyone who reads the Amendment put down on the Marshalled List by the noble Lord, Lord Hankey, could fail to agree with those principles or refuse to comply with them. I do not think, of course, that the Government would want to disagree with them. Surely we all want better industrial relations. As I said on Second Reading—and the noble and learned Lord the Lord Chancellor was kind enough to quote me on this—it is the domestic issue of our time, our central issue. We want to encourage everybody who is concerned in this sphere to follow good principles of industrial relations, and, following the noble Lord, Lord Hankey, I should like to outline some of the ways and some of the principles by which differences in this sphere could be resolved. I will then turn to the question of, "Why not put them in this Bill?", because, despite in principle being so much on the side of the noble Lord, Lord Hankey, I agree with the noble Lord the Leader of the House that they perhaps should not be in the Bill at this time.
It seems to me that it is important in a Bill such as this to deal with rights, and later on there will be many Amendments on which one will be talking about rights. When you try to establish what your rights are, you immediately have to ask yourself the ways in which you can enforce them. It is when you can enforce them, when you can appeal to law about them, that, of course, the law is involved. If people reach the stage where they cannot agree and they have to ask, "Where are my rights? What are they? How can I enforce them?", and there are disagreements about that, then that brings in the law, because the answer can be given only in law. That, I think, is why we were and are so keen to have a coherent framework of law for industrial relations, and why we wish to see the Bill put into a framework which is to us more coherent than as it now stands, if that is possible. In short, we want to agree about the general principles, and that is why we tried to persuade the Government to accept the Code which the
1420
noble Lord, Lord Shepherd, mentioned quite warmly at the beginning of his speech.
It is because the Government saw reason about this matter, because they agreed with the majority in Standing Committee that the Code should be retained, that we feel that there are not merely cheer-leading provisions and principles but also a point of reference for good principles in the Bill. I think that the fact that the Code is there enshrined by Statute or will be there if the Bill goes through, is important, because it means that when we in Parliament debate industrial relations we can appeal to the Code just as if, we, too, were engaged, perhaps, in disputes about it. If the Bill goes through, its legal status will remain relevant in evidence and the industrial tribunals will continue to have regard to it. I therefore ask the noble Lord, Lord Hankey, to recognise that a very considerable victory has been won here—or, if that is somewhat too militaristic a term, that very considerable sense has been shown by the Government here—and I hope that he will not press his Amendment.
LORD DOUGLASS OF CLEVELAND: I thank the noble Earl, Lord Gowrie, for the good speech that he has made in respect of this matter at the beginning of our discussions. I hope his tone will be carried through the debates on this Bill, because it is a short Bill. It is not intended to deal with all the aspects of human relations which exist inside industry. I am moved to ask the noble Lord, Lord Hankey, when he talks about general principles, why he wants to offend all the moderate trade unionists in this country. Governments have done that time and time again, which has led us into an industrial impasse and made things almost impossible in the country. Now Lord Hankey does precisely the same thing by setting down the general principles as though they were something which had not previously been observed by moderate trade unionists in this country.
I will put just one brief question to the noble Lord. In these general principles he does not refer at all to the right to strike. This is a significant omission. The fact is that the wording of this Amendment will be interpreted not by what is in it but by what is left out of it. If

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Lord Hankey had included in these principles the right to strike, which everybody in this Chamber has reiterated time and time again, and had given some indication as to any limit he might like to put upon the right to strike, then the Amendment would have been more understandable. As it is, when all these general principles are set down and the one on the right to strike is left out, then the whole Committee is entitled to be suspicious of the motives of putting down an Amendment of this character.
LORD HANKEY: I note the feeling of the Committee. I am surprised at the opinion of the noble Lord the Leader of the House about the undesirability of referring to the Industrial Relations Act at the beginning of the new Bill; for that is certainly what the present text does. I think it is quite pathetic to start repealing the 1971 Act and then to go on to list whole chunks of it which are to be retained. As a matter of fact, it is obvious which chunks are to be retained; but it seems to me that the Bill is doing precisely what the noble Lord, Lord Shepherd, said that he did not like us to do.
Regarding the observations of the noble Earl, Lord Gowrie, I should like to say how much I share his opinion about the Code of Practice. It is extremely important that that should be retained. I was not aware that there had been an understanding in order to get it retained—and, if so, I should think that as important as anything we have done—and in that case I should not want to press my Amendment. However, I should like to observe that the Code of Practice can be amended at any time by the Secretary of State with the approval of Parliament, so that it is not quite so stable a statement of principle as is contained at the beginning of an Act.
The noble Lord, Lord Douglass, made an important and interesting point with which in many ways I agree. If one reads this Bill as a whole there is so much in it about strikes and immunities and that sort of thing that it is a little unbalanced. I should have liked to put in something like this Amendment in order to set the record straight; although, of course, one cannot put everything into one compendious Bill, for it would then be so long as to become a waste of time. I think it would have been valuable to have a statement of principle and I do not believe
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that anybody would want to disagree with any of the principles. But if there has been an understanding arrived at then, with the approval of the Committee, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
Clause 1 [Repeal of Industrial Relations Act 1971 and re-enactment of certain provisions]:
3.13 p.m.
LORD SANDFORD LORD SANDFORD moved Amendment No. 2:
Page 1, line 17, leave out ("118").
The noble Lord said: On behalf of my noble friend Lord Belstead, I beg to move Amendment No. 2. I should like at the outset to explain that this is a preparatory Amendment to two probing Amendments, Nos. 39 and 40, which relate respectively to paragraphs 19 and 20 of Schedule 1. On reflection, my noble friend and I feel that perhaps the right place at which to debate this matter would be on the Motion that Schedule 1 stand part of the Bill; but, on the other hand, I think it might be helpful at this stage—because it is necessary in any case to put down the Amendment—to take the opportunity to set out the thoughts that we have in our minds, so that the noble Lord the Leader of the House and the Government may reflect on the points I am about to make and can be ready to deal with them when we discuss Schedule 1.
The thinking behind the Redundancy Payments Act has always been that the blow of redundancy must be cushioned by the award of the equivalent of two years' pay. The 1971 Industrial Relations Act adopted this solution (which is to remain on the Statute Book) for unfair dismissal and laid down a maximum compensation of £4,160, computed at £40 a week salary for a period of two years. This Bill carries on the principle of the 1971 Act, but increases the maximum amount of compensation for unfair dismissal to £5,200; that is to say, a salary of £50 a week for two years. This is done in Schedule 1, Part II, paragraph 20. The points we want to make are, first, that the comparison between redundancy pay and compensation for unfair dismissal is a false one; and, secondly, that in a number of cases—and I am thinking particularly of the situation of a head

1423
teacher—the maximum compensation will be inadequate.
Perhaps I could deal with the first point, that of false comparison. Unlike redundancy, dismissal—albeit it unfair—involves the loss of status. In some occupations or professions this may not be disastrous, but in the teaching profession—and, as I have said, it is the head teacher that I have particularly in mind—the stigma attaching to dismissal can be disastrous. The fact that it is unfair dismissal is really beside the point. A head teacher may have devoted his or her entire life to the profession culminating with a headship, and it must be realised that where unfair dismissal causes the loss of a head teacher's position it can be extraordinarily difficult to regain an equivalent position. The head teacher's professional training and experience will scarcely fit him for an equivalent position outside teaching. So much by way of illustration of how the comparison between redundancy and compensation for unfair dismissal breaks down.
I now come to the second point, in which I seek to show to the Committee that the compensation—at any rate, for people like head teachers—may often prove inadequate. For the reasons given, the position of a head teacher is particularly vulnerable under the provisions of Schedule 1, paragraph 20, where the maximum compensation figure is £5,200. Certainly, this is a figure which takes some account of inflation; for since 1971 there has been the increase that I mentioned from £4,160 to £5,200. But inflation, even if we succeed in reducing the rate at which it is growing, will, I fear, remain with us. I do not believe that this figure compensates for the injustice of unfair dismissal of a person like a head teacher.
To illustrate that point, it is probable that 70 per cent. of the schools in this country are classified as Group 4 on the Burnham scale; and a two-year salary for a head of a Group 4 school would range from £6,048 to £6,848. Let us compare that with the maximum of £5,200. Furthermore, the head of a moderately large secondary school would receive from £9,570 to £10,362 over two years. I hope that that demonstrates clearly enough that the maximum compensation
1424
that can be paid under this Bill is already quite inadequate. There is quite a bit more that could be said on this issue. I thought that it might be helpful to the Committee merely to make those points now, on the understanding that if 1 withdraw this Amendment my noble friend and I have it in mind to return to the subject when we start debating Schedule 1.
LORD SHEPHERD: I would respond to the intention of the noble Lord, Lord Sandford, and make a little longer intervention at this stage than perhaps is needed. I do so in order that the noble Lord, Lord Sandford, may avoid the necessity of raising the matter later in the Committee stage. I think we should be clear we are not now dealing with those who may be wrongfully dismissed, because they have their rights at court; nor are we dealing with those who may be unfairly dismissed but who are subject to a fixed contract. We are dealing with those who may be unfairly dismissed and who are on a short term form of employment.
The present provisions of paragraph 20 of Schedule 1 limit the tribunals' awards of compensation for unfair dismissal to an amount not exceeding 104 weeks' pay in the claimant's last job, or £5,200, whichever is the less. The Secretary of State has, however, power to raise the latter limit by Order, subject to the approval of both Houses of Parliament. These Amendments would remove paragraph 20 in its entirety and delete all reference to it. The only remaining restriction on tribunals' freedom to dispense unlimited sums in compensation would be the provisions of paragraph 19 which require them to award such amounts as they consider just and equitable in all the circumstances, on the basis of the loss sustained by the complainant as a result of dismissal.
It is important to be clear at the outset that industrial tribunals are designed to deal quickly and informally with the claims presented to them. They are not equipped to deal with the complex legal issues which may arise over the dismissal of highly paid executives where very large sums of money are involved. The Donovan Commission expected tribunals to have the most importance for the lower paid worker, perhaps in less strongly unionised sectors of the economy. There is little evidence that the present

1425
limit has forced tribunals to reduce their awards of compensation.
It may be thought that the more highly paid employees are at an unfair disadvantage because they can be awarded only £4,160, whereas lower paid workers can get two years' pay. This might be a problem if compensation awards of two years' pay were commonplace, but this is not the case. The Department's statistics indicate that in the whole period from the beginning of the unfair dismissal jurisdiction on February 28, 1972, to the end of 1973, tribunals awarded more than £4,000 in only 10 cases out of 1,428 awards of compensation for unfair dismissal, and the Department is aware of only six cases in which it is clear that the tribunals would have awarded substantially more than that sum had they not been constrained by the upper limit. Nor do the Government accept the theory that the upper limit of £40 a week may have deterred employees earning more than that amount from bringing cases to the tribunals, and that may be the reason why so few complainants have been awarded the present maximum. The Department's statistics indicate that in 1973, for example, nearly a quarter of male applicants recorded their basic wage at over £40 a week, nor did it seem that tribunals found the limit of 104 weeks' pay unduly restrictive. Cases where complainants have received less than the sum necessary to compensate them for their losses because of the application of the 104-week limit have been known, but there is no reason to suppose that they occur frequently.
In the Government's view, the reason for the low amounts generally awarded is that the tribunals are required to assess the amount of compensation strictly according to the loss suffered by the complainant. The real question is, therefore, whether it is right that compensation should be assessed purely on the loss due to the dismissal. This is a question which the Government are already studying as part of a much more fundamental review of the unfair dismissal provisions for the Employment Protection Bill. In the context of that review, the present limits on compensation will be reconsidered but, while the basis remains unchanged, there does not seem to be any need to alter the present provisions.
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I hope that, with that explanation, and recognising that the Government are aware of the problem but feel the need to look at the matter in a more fundamental way than in present legislation, the noble Lord will feel that the point which he has in mind is understood and, it is hoped, will be met by the Government when the Employment Protection Bill is presented to Parliament.
BARONESS SEEAR: Is it possible to consider—though I know it is not in terms of the Amendment—leaving the two-year limit but omitting the financial upper limit? With the present rate of inflation the figure may not have been too low in the past, but it is very likely to be so in the future and, if there is the limit of two years' salary, it imposes a kind of limit within which the tribunal can operate without having an actual figure which may before very long seem very unrealistic.
LORD SHEPHERD: I will certainly take note of what the noble Baroness has said. But I hope that she will remember that I said earlier that there is power in the Bill for the Secretary of State by Order to lift the limit for the industrial tribunals. This would deal with the valid point which the noble 3aroness has made about the consequences of inflation.
LORD SANDFORD: I am grateful to the noble Lord for that first response to my first statement on this issue. My noble friend and I will study carefully what the noble Lord has said before we come to the next opportunity for debating this matter during this or the next stage of the Bill. However, I very much agree with the noble Baroness, Lady Seear. While it is perfectly true, as the noble Lord, Lord Shepherd, has said, that there is power in the Bill as drafted for the Secretary of State by Order to raise the upper limit, I submit that that is not the same thing and is not as good a way of dealing with it as giving power or discretion to the tribunals—which is the effect of my Amendment and is the effect which the noble Baroness, Lady Seear, would like to see—to go above the fixed limit. I should have thought that that would be a better way of doing it, and that is what the Amendments seek to do. However, as I indicated at the beginning, I think that the right thing to do is to

1427
leave this for the time being because the substantive discussion fits more aptly and appropriately into the discussion of Schedule 1 and, if the Committee agree, I should prefer to study what the noble Lord has said and to withdraw the present Amendment.
LORD SHEPHERD: Before the noble Lord withdraws the Amendment, would he consider whether he would think it right to give the tribunals greater discretion than that which Parliament is prepared to give to the county courts? At the present moment, the limit for county court awards is £750, though I believe that in a few months' time it is to be raised to £1,000. It is true that these industrial tribunals have a legally qualified chairman, but they have lay members and I wonder whether it would be right, as the noble Lord has suggested, to give such wide powers, with no limits and well above anything that Parliament has given to the county courts. This is a point I would ask the noble Lord to consider between now and the next stage.
BARONESS SEEAR: The figures which the noble Lord quotes show that the tribunals have already been given the power to award more than the county courts and, in any case, if there is the limit of two years, that puts an appropriate limit on the matter. The figure for the county courts is lower than that which has been allowed to the tribunals in the Bill.
LORD SANDFORD: I think that that is enough to illustrate that there is a good deal in this matter which still needs consideration. I am grateful to the noble Lord, and my noble friend and I will consider these matters. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Status of trade unions]:
3.30 p.m.
THE EARL OF GOWRIE THE EARL OF GOWRIE moved Amendment No. 3:
Page 2, line 40, after ("corporate") insert ("by virtue of section 74 of the 1971 Act").
The noble Earl said: On behalf of my noble and learned friend and myself I
1428
should like to move this Amendment. Under the terms of Section 74 of the 1971 Act a trade union which registered under the Act, if it was not already a body corporate, became one. I understand that the trade unions of this country wish to reverse that position, and while we do not agree with that we, of course, understand why it should be so. Clause 2(4) is designed to do just that. On the present wording it might possibly de-incorporate—and I apologise for that use of language, but I cannot think of a better term—and make incorporeal or corporated people who wanted to remain so, who felt that corporate status was advantageous to them and to others, and that it was a perfectly reasonable thing to retain. Our Amendment would restrict this de-incorporation to those who had originally been incorporated against their will. I beg to move.
THE LORD CHANCELLOR (LORD ELWYN-JONES): It is not known to the Government whether any such bodies as have been hypothetically indicated by the noble Earl do, in fact, exist, but if he is able to identify any we would certainly be glad to look at them. There are two possible cases which might conceivably be covered: first of all, trade unions which happen to be corporate bodies otherwise than by virtue of the 1971 Act but are not on the special register and so enabled to retain their corporate status. We do not know of any such bodies but if the noble Earl does we will certainly consider the matter. Secondly, there are corporate bodies which do not at present fall within the definition of trade unions and so are legitimately incorporated, but who would, because of the slightly wider definition of "trade union" in the Bill, fall within the definition and so have their corporate status rendered void. It seems unlikely, though perhaps not absolutely impossible, that there are any such bodies. All I wish to say is that if it becomes possible between now and Report stage to identify any bodies we will certainly be willing to look at the point.
THE EARL OF GOWRIE: The noble and learned Lord has made a very handsome offer and, in the light of his giving us more time to look at this matter, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR: I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

CYPRUS
3.33 p.m.
LORD GORONWY-ROBERTS: My Lords, with the permission of the House I should like to repeat a Statement being made in another place by my right honourable friend the Foreign and Commonwealth Secretary. The Statement reads as follows:
"I will with your permission, Mr. Speaker, and that of the House, make a further Statement about Cyprus.
"Members of the House will have been following with great anxiety the very serious situation in the Eastern Mediterranean following the decision of the Turkish Government to land forces on Cyprus in the early hours of Saturday, July 20. Fighting has been continuous since then including fighting between the communities and the House will have heard with great relief that the Governments of Greece and Turkey have agreed that a cease-fire should become effective from three o'clock today (London time). In view of the assurances that have been given I trust that the fighting within Cyprus will now die down and that the suffering of the Cypriot people will be ended.
"During the weekend and in a period of intense diplomatic activity our main purpose was to achieve a ceasefire at the earliest possible moment, to prevent the fighting from spreading or escalating and measures to safeguard the lives of British dependents of our troops, British residents and British tourists. Dr. Kissinger and I held continuous discussions throughout Saturday and Sunday separately with the Prime Minister of Turkey and the Foreign Minister of Greece. I remained in touch with M. Sauvagnargues, the current President of the Nine, with the Secretary General of the United Nations and with the Secretary General of NATO who supported our efforts.
"It is now very important to look to the future. Under paragraph 2 of
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the Security Council Resolution number 353 which was passed on Saturday a call was made for a cease fire and for maximum restraint. If things go well that provision is now in the process of coming into effect. Under paragraph 5 of the same Resolution there was a call for talks between the three guarantor powers and we must get on with them urgently. I have this morning invited the Governments of Greece and Turkey to meet with me urgently. This morning the Foreign Minister of Greece informed me of his willingness to attend talks in Geneva, and shortly before I came to the House, the Prime Minister of Turkey spoke to me and indicated his agreement to Geneva as the meeting place. I trust that these talks will begin either tomorrow or on Wednesday.
"The safety of British citizens in Cyprus has been given the highest priority by Her Majesty's Government since the crisis began. My honourable Friend the Minister of State at the Foreign and Commonwealth Office has been put in direct and personal charge of their welfare. My honourable Friend the Under-Secretary for Air has been in the Sovereign Base Areas since Saturday. A large proportion of the British citizens together with a considerable number of other foreign nationals are now concentrated in the Sovereign Base Areas. Those British citizens still scattered about the island, and particularly those near Kyrenia, should now gain respite if the ceasefire holds. We are however continuing to make urgent arrangements for their protection and removal if they so wish. I am sure the House would like to pay high tribute to the excellent work of the British Forces in Cyprus, the British High Commission and the United Nations Forces and to the good co-operation between them. Among many outstanding operations yesterday's convoy from Dhekelia to Nicosia and back was a remarkable achievement. The good sense and the good spirits of the British dependents themselves, the British residents and the British tourists have helped greatly the efforts to ensure their safety. The House will have heard with sorrow the news of the death of the son of a British Serviceman in Cyprus and the accidental death of one

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of the British soldiers serving with the United Nations Forces. We send out our sympathy to their families and indeed to the families of all those in Cyprus, Greek Cypriot and Turkish Cypriot alike, who have suffered death, injury or loss in the tragic events of the last three days.
"Mr. Speaker, a great deal has to be done to ensure the return to constitutional rule in Cyprus which was destroyed last Monday and to devise arrangements which will produce the necessary confidence among all concerned that this will be maintained in future. We are at the beginning of the process of consultation and negotiation to that end. 1 assure the House that the British Government will continue to work strenuously and urgently in every way to achieve it."
My Lords, that is the end of the Statement.
3.41 p.m.
LORD CARRINGTON: My Lords, not for the first time in the last few days we are grateful to the noble Lord for repeating a Statement in this House. We are particularly grateful on this occasion for the news that he has told us about the ceasefire, which is very welcome. It certainly looks as if we may now be able to avert a conflict between Greece and Turkey which, of course, was the all-important thing in this situation. If I may, I should like to congratulate the Foreign Secretary and the Government for the part that they have played in bringing about this ceasefire.
As the Statement said, we must now look to the future and to the meeting which is to take place in Geneva between the Foreign Secretary and the other two guarantor Powers. I wonder whether I may ask the noble Lord opposite how it is intended to associate the people of Cyprus with this meeting? We must never forget that it is not just the three guarantor Powers who are concerned in this matter—it is equally the people of Cyprus. It may very well be that there are a large number of Greek Cypriots who do not wish to be so closely associated with Greece as they have been in the past, and who may in future give more dramatic demonstrations of that
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wish. Perhaps I could ask the noble Lord that question.
Other than that, I do not think that I should like to comment, because these meetings will be very important and I do not think it is helpful to make a series of statements at this stage.
Finally, I should like to associate myself with what the noble Lord has said about the British Services in Cyprus who do, as always, what we expect of them but perhaps too often take for granted.
LORD GLADWYN: My Lords, I should like to associate my colleagues on these Benches with what the noble Lord, Lord Carrington, has said about the great satisfaction we all have in the armistice and to express likewise the most sincere congratulations to the Foreign Secretary for his part in bringing it off. I should also like to say that we sympathise very much with the families of the two victims. It is indeed lucky in the circumstances that there were not more of them. And that, I believe, was largely due to the very successful action of the British Army in evacuating so many people from Nicosia under extremely difficult circumstances, something for which we must be profoundly grateful to the Army.
I should like to ask two questions: where at the moment are Sampson and his fellow conspirators? Are they somewhere in the island? Have they also agreed to the ceasefire, or is it only the Greek Government? Because if the Greek and Turkish Governments have agreed to a ceasefiere and Mr. Sampson has not, what is the resulting situation? It must be rather embarrassing for both. But perhaps he also agreed to the ceasefire? In that case, I hope there is no possibility or suggestion that there will be any negotiations with Sampson or with anybody associated with him. The situation in this respect seems to be a little confused and perhaps we may have more clarification about it.
Secondly, I imagine that in the forthcoming negotiations in Geneva the object so far as we are concerned will surely be to reconstitute some kind of democratic régime in Nicosia—the alternatives being either a dictatorship or partition, both of which are bad. I should be glad to hear that the Government do not share such objectives in any way. Finally, since the

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injunction of the United Nations Security Council in favour of a ceasefire has happily been obeyed by the principal parties concerned, is it now going to fade out of the picture, or has it any further rôle in the settlement of the dispute?
THE LORD BISHOP OF LEICESTER: My Lords, it is hardly necessary to say how much we on these Benches appreciate all that has been done and the relief that we feel at the cessation of hostilities. But I should like to express my appreciation of the latter part of the Statement which laid stress on the restoration of constitutional rule in Cyprus, and to say that I greatly hope that this will not be one more example of a successful military revolution.
LORD GORONWY-ROBERTS: My Lords, not for the first time may I, without presumption, commend the noble Lord, Lord Carrington, for the statesmanlike quality of his comments on the Statement in a very difficult and dangerous situation—one of continuing danger and difficulty—and to join him once more in commending the exemplary services which our men in Cyprus have rendered during these past terrible days. May 1 also thank him for the sympathy which he and the noble Lord, Lord Gladwyn, expressed to the relatives of those who, unfortunately, were killed in these happenings. As to the future composition of the conference in Geneva, I understand that it will be for the three guarantor Powers, who will meet in the first instance, to decide as to who in an added capacity—whether participatory in the full sense of the term, or in an observing capacity—should be admitted. I think we can leave that to the first session of the conference.
In relation to what the noble Lord, Lord Gladwyn, said, I have no know ledge of where Sampson and his—I believe the noble Lord described them as "confederates"—
LORD GLADWYN: Fellow conspirators.
LORD GORONWY-ROBERTS: I bow to superior vocabulary—fellow conspirators are at the moment. In regard to who has agreed to a ceasefire, may I say that it is the Government of Greece and the Government of Turkey and, I am sure, the lawful Government of Cyprus in
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the person of the Archbishop Makarios. That is good enough to start with. I would thank the right reverend Prelate for echoing what the noble Lord, Lord Gladwyn, said about the—
LORD GLADWYN: I asked about the Security Council.
LORD GORONWY-ROBERTS: The important point in regard to the continuing interest and rôle of the Security Council is that we have kept very closely in touch with the Secretary-General, and in that way with the Security Council, throughout, from the start, and this will undoubtedly continue. I was on the point of commending, if I may do so, the right reverend Prelate for echoing what the noble Lord, Lord Gladwyn, said about the need to restore constitutional and democratic Government to Cyprus.
LORD DUNCAN-SANDYS: My Lords, I warmly welcome the decision of Her Majesty's Government to assume what I believe is essentially a British responsibility as the neutral member of the three guarantor Powers; that is, the role of mediator. I also welcome the convening of this conference of the three Governments concerned. May I ask the noble Lord whether the Government recognise—as I am sure they do—that very quickly it will be necessary to negotiate very difficult and delicate negotiations on the spot, not just between the three Governments at Geneva but on the spot between the four parties which are concerned in the fighting, for the practical implementation of the ceasefire agreement, as I myself had to do in 1963? May I also ask whether a senior Minister will be sent as soon as possible to Cyprus to do what he can to help to consolidate the ceasefire?
LORD GORONWY-ROBERTS: My Lords, certainly every means will be taken to ensure that we have full information about the situation in the island. Whether or not it takes the form of sending out a Minister, I cannot say to-day. But we are seized of the very important point just made by the noble Lord, Lord Duncan-Sandys; namely, that there is a continuing danger here because of the inter-communal strife which is proceeding—and may, for all we know, be escalated—even though there is a ceasefire among Governments and official forces. I would

1435
not wish to minimise the difficulty and danger of the situation. I will certainly pass on to my right honourable friend the suggestion—I took it as a suggestion—that a Minister might be sent to Cyprus.
3.50 p.m.
LORD SHINWELL: My Lords, may I ask my noble friend whether there is any information available about the attitude of those associated with the so-called new régime under Sampson? Surely some information must be available? Are they accepting the ceasefire? Are they remaining quiet and not causing any trouble at all? Would he also answer this question: Is it not true what the guarantors guaranteed was independence for Cyprus, and can we understand that that is to be the attitude of my right honourable friend the Foreign Secretary and Her Majesty's Government?
LORD GORONWY-ROBERTS: My Lords, on the first point, we are not in touch with Sampson and his confederates. The ceasefire has been agreed by the Governments of Greece and Turkey. In relation to the Government's view of how things should proceed in Cyprus, I can give an unqualified assurance that it will be in the form of a restoration of constitutional democratic government.
LORD MAYBRAY-KING: My Lords, is the noble Lord aware that many of us wish to join in congratulating the Government and all who brought this ceasefire about, and would especially congratulate the Army on the brilliant evacuation yesterday of so many civilians from Nicosia? Is he also aware that some of us are still worried about the British citizens in the Eastern part of the Island? There was some talk in earlier reports that we had to withdraw the evacuation efforts that we were seeking to make to get to the British citizens scattered in the Eastern part of the Island. Can the noble Lord assure us that these efforts will go on?
LORD GORONWY-ROBERTS: My Lords, every effort we have made—and we have been assiduous right from the start of this affair—to safeguard the lives of British tourists and residents, has been dictated by the paramount need to ensure their safety. The truly remarkable achievement of the Army in organising
1436
over 60 miles a convoy which brought safely into haven some thousands of tourists and others will certainly be emulated regarding the 200 or so British citizens which I understand are scattered along the Northern coast of Cyprus. Whether the safest way to do it is by maritime evacuation or to have another convoy-type overland operation, must be carefully decided on the advice of those on the spot. How to complete "operation safety", as I would call it, is uppermost in our minds.
THE EARL OF LAUDERDALE: My Lords, can the noble Lord enlarge on his reply to my noble friend Lord Duncan-Sandys about the inter-communal strife? Is it a case of scattered sporadic incidents, or something better described as a general flare-up?
LORD GORONWY-ROBERTS: My Lords, my right honourable friend used the phrase "… is now dying down." This is an exact description of what is happening as the ceasefire takes hold. Inter-communal strife was a feature of the general crisis and proceeded parallel with the international action. While we expect a diminishing incidence of local affrays of that kind—and I do not want to put this too high—one is optimistic that there will be a diminishing number of such incidents. Those on the spot, with the influence of the Turkish and Greek Governments behind them, will surely endeavour to ensure that inter-communal strife, equally with international hostilities, will now cease.
LORD BROCKWAY: My Lords, is my noble friend aware of the deep appreciation we have of the role of the Government during the past two or three days when there has been great pressure from one direction or another? All of us want to congratulate the Government on what they have achieved. Is my noble friend also aware we are tremendously appreciative of what the military forces have done in enabling the residents to leave the Island?
The Conference at Geneva will be between the three Governments which have guaranteed independence and integrity. May I repeat the question of the noble Lord, Lord Carrington: What is to be done to obtain communication with the people of Cyprus themselves? After all,

1437
they are the main element. In view of the fact that the constitutional Government has been overthrown by a coup, will the Conference at Geneva be followed up by some contact with the representatives of the people of Cyprus to decide their democratic and, if they desire, unaligned future?
LORD GORONWY-ROBERTS: My Lords, I appreciate what my noble Lord has said in his first two comments. As to participation in the Conference, I will repeat what I said to the noble Lord, Lord Carrington. In the first instance, as required by the Treaty of Agreement of 1960, the three guarantor Powers should come together in Geneva. It will be a matter for them to decide who in addition should attend, either in a fully participatory or in an observing capacity. 1 note what has been said by my noble friend as well as by the noble Lord, Lord Carrington, about the essential importance of consulting the people of Cyprus on their future.
LORD GORE-BOOTH: My Lords, may I from a special position express to Her Majesty's Government and our Forces my deep congratulations on what has been done? There has been so much suggestion in recent days that Her Majesty's Government were doing the wrong thing, that the American Government were doing the wrong thing and that the United Nations were doing nothing. It is a source of great gratification that through the efforts of the Foreign and Commonwealth Secretary, and others, not only has a ceasefire been achieved, but a resolution of the Security Council was passed which enjoined the parties to do something, and they did it. This is encouraging for those who have the future of the United Nations at heart. Could the Minister expand on the matter of Nicosia in this sense: Many people who have business connections in that city are still anxious about the situation there. Is it safe to say that, so far as we know, other than the two casualties which the Minister mentioned, no British subject has come to harm? I imagine it is difficult to say where everybody is, but can one be fairly sure that this is right?
LORD GORONWY-ROBERTS: My Lords, to the best of my knowledge and that of my Department, no other British
1438
subject has come to any appreciable harm. I say "appreciable harm" because many thousands have suffered more than inconvenience. Many have suffered from sickness and illness during the past few days. But, regarding fatalities, I can give my noble friend that assurance. May I say how glad I was to hear the noble Lord pay tribute to the United Nations, because the passage of Resolution 353 was followed by decisive action. This is of great encouragement and hope for the future.
LORD SHEPHERD: My Lords, I did not intervene earlier because this is an important Statement, but I was hoping that we might, through the usual communications, get news that there had been clearance for the Statement to be made about Northern Ireland. I am now informed that this will not now be made until after the Chancellor of the Exchequer's Statement—and I have no idea how long another place will take on that. I do not wish to intervene in the course of a speech by the noble and learned Lord, Lord Hailsham, but I wonder whether the usual channels might have a look at the Statement and decide whether it should be made in your Lordships' House. If it is not made, clearly we can avoid yet another intervention in an important Committee stage and one that may be of considerable length. I am entirely in the hands of the House in this respect.
LORD WINDLESHAM: My Lords, I am sure it is the wish of the House not to have a second interruption during the Committee stage proceedings on the Trade Union and Labour Relations Bill. Since the noble Lord the Leader of the House is not able to give us an indication of when the Statement on Northern Ireland is likely to be made, I think it would be better, subject to the views of any other noble Lord who is interested in this matter, to include the Statement in Hansard. As it happens, I have had an opportunity to study the Statement on the subject of Harland and Wolff. It is an important one, but relatively speaking in terms of Northern Ireland it is one of detail rather than of principle, and might be handled in the way suggested.
LORD BYERS: My Lords, I and, I think, my colleagues would agree with that course of action and that we should

1439
get on with the Committee stage of the Bill.
LORD SHEPHERD: My Lords, in the light of what noble Lords opposite have said, and if it is the wish of your Lordships' House, we will not take the Statement.
Following is the Statement referred to:

NORTHERN IRELAND: HARLAND AND WOLFF
"With your permission, Mr. Speaker, and with that of the House, I wish to make a Statement on Harland and Wolff, on behalf of my right honourable Friend the Secretary of State, who is at this moment in Northern Ireland, where he will be speaking to representatives of the firm's management and labour. The firm is facing increasingly serious financial difficulties.
"The right honourable Member for Cambridgeshire informed tie House on December 21, 1973, before the completion of detailed discussions with Harland and Wolff, about proposals to provide further financial support to the company. My right honourable Friend investigated the matter in March, 1974. Subsequent discussions revealed the company's continuing inability to meet its production targets and the inadequacy of the previous proposals for providing it with further assistance. Revised figures were received on July 5. The financial consequences of these are quite clear. If the company is to continue trading, further Government financial support is required urgently. The amount involved, which cannot yet be calculated precisely, is likely to be very substantially in excess of that considered necessary last December. The proposal then was that £10 million of debt owed to the Government should be replaced by the issue to the Government of shares; and that the Government should provide guarantee facilities for up to £10 million as needed up to the end of 1976.
"Harland and Wolff occupies a unique place in the Northern Ireland economy. It is the largest single manufacturing employer, providing between 5 per cent. and 6 per cent. of all jobs in the manufacturing sector. Since 1966 the Company has received financial assistance totalling £68 million from both the United Kingdom and former Northern Ireland Governments, by way of standard and special grants, loan and equity participation.
"It is against the special Northern Ireland background that the Government's proposals for dealing with the present situation should be viewed.
"The Northern Ireland Department of Commerce already holds 47·6 per cent. of the company's equity. With a view to providing additional finance and in order to bring about
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the changes which the Government believes to be necessary, we have decided to extend that holding. This will be achieved, subject to the approval of the shareholders, by the acquisition of additional shares in the company to give the Government a substantial majority in an expanded equity; this will be effected under Section 7 of the Industry Act 1972. It is not envisaged that this will involve the acquisition of shares from existing private shareholders. The Industrial Development Advisory Board has been informed of the general situation. Because of the urgency of the matter we are adopting this relatively simple course; but the possibility of proceeding to full public ownership in Northern Ireland at a later date is not precluded. Meanwhile, we shall have a large enough stage to ensure control. Initially the additional equity will need to be held by Her Majesty's Government, but it is clearly most desirable that, in the longer term, the responsibility for this Northern Ireland registered company, which is such a prominent feature of the Ulster economy, should rest completely in Northern Ireland. The detailed arrangements are being worked out in consultation with the company and its advisers and I would hope to report further to the House in due course.
"The Government intend that there shall be a comprehensive review of Harland's management structure and resources, a full examination of the order book, a temporary moratorium on any new ship-building orders, strenuous action to reduce overheads and the implementation of realistic manpower policies and training arrangements capable of securing any necessary increase in the labour force in a manner compatible with the manpower needs of the rest of industry in Northern Ireland and with the untapped resources of the Northern Ireland labour market. For example, it will be important to increase greatly the volume of apprentice training in order to ensure a succession of skill in the yard and spread the opportunity for the acquisition of skill more widely within the community.
"To achieve these changes and improvements we need to advance towards genuine worker participation in all the decision making processes of the company. I have already talked at length to management and unions, and it is my intention, in consultation with the management of the company, the shop stewards in the yard, the Northern Ireland trades unions and the T.U.C. to consider full participation in management by representatives of all employed in the firm. I shall begin the detailed discussions to-morrow in meetings with the 200 or more shop stewards in the yard and with a similar number of men from the middle management of the company. I am convinced that if we can achieve this participation in management, along with a return to full collective bargaining, we shall be laying a solid foundation for the introduction of whatever measures are needed to obtain the increases in productivity which are essential to the company's survival. Comprehensive machinery will be instituted to monitor progress in implementing all these developments.
"This is a rescue operation. The consequences for Belfast and Northern Ireland of allowing the yard to close, as it would have to do if the Government did not intervene, would be disastrous. Nevertheless, this must not be regarded by those working for the company as an open-ended Government subvention. This is being done for the sake of Northern Ireland and the only way it can be done is by finding, to the extent necessary, compensating off-setting savings in public expenditure from within the Province. These will be achieved without departing from parity in the cash social services and without detriment to the Government's social and economic objectives for the areas of especially severe unemployment.
"While earlier expectations in regard to the performance of Harland and Wolff have not been fulfilled, the modernisation and re-equipment programme has proceeded apace and the shipyard is now one of the best equipped in Europe. It remains to harness the skill, pride and latent enthusiasm of all those employed in the firm to achieve the immense potential of the undertaking."

TRADE UNION AND LABOUR RELATIONS BILL
4.4 p.m.
LORD SHEPHERD: My Lords, I beg to move that the House do now resolve itself again into a Committee on the Bill.
Moved accordingly, and, on Question, Motion agreed to.
House in Committee accordingly.
[The BARONESS WOOTTON OF ABINGER in the Chair.]
Clause 2 [Status of trade unions]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved Amendment No. 4:
Page 2, line 43, after ("this section") insert ("and section 4 below").
The noble and learned Lord said: If your Lordships agree I think it will be convenient to take Amendments Nos. 4 and 6 together. These are purely technical Amendments consequential on the introduction into the Bill in another place of a new clause which is now Clause 4. Previously the provisions of that clause were to be found in Ciauses 2 and 3, but for convenience they have been assembled in Clause 4. I beg to move.
On Question, Amendment agreed to.
THE EARL OF GOWRIE THE EARL OF GOWRIE moved Amendment No. 5:
Page 3, line 12, leave out from ("voidable") to end of line 16.
The noble Earl said: It might be for the convenience of the Committee, while in our conventional manner I move this Amendment and Amendment No. 7 separately, that we should debate them together as they deal substantively with the same point. The key point in these Amendments is our view of this Trade Union and Labour Relations Bill as it stands. There is, of course, a fairly radical difference of viewpoint between the two sides of the Committee here. Our view is that the Bill limits the rights of courts to provide Common Law remedies in favour of individuals who are arbitrarily excluded or expelled from trade unions. We feel that the position is at very best not clear. But our position is clear. It is that when there is any doubt in a matter of this kind, that doubt should be resolved in favour of the individual.
We accept of course the point that noble Lords opposite have frequently made in general debates on the subject, that trade unions rarely misuse their powers against individuals: trade unions are organisations which grew into being to protect individuals who had few powers themselves and therefore it is hardly likely that they would make a great practice of trampling on rights. But we feel that in any human organisation fallibility and error can occur, and that the Bill provides a loophole for abuse. We believe that any loophole should be stopped up. We recognise the point made by the Minister of State for Employment in Committee in another place, that individuals can be unreasonable and can have unreasonable recourse to law and involve organisations in tedious and expensive litigation. Even in organisations which are there to represent the best interests of their members, one can of course have difficult members. But the Minister also said—and perhaps this is the important point—that the Bill does not and is not intended to reduce Common Law rights. We feel that that is a fine statement of intent, but we do not see that intent backed up by legal opinion on the Bill as it stands.
The Law Officers of the previous Government, the Government of my noble friends, regularly attended debates on the Industrial Relations Bill, and I believe that if the present Law Officers had been given a run over this course we might have been clearer on the point.
But it was not to be, and we have had to rely on the Minister's reply. I should therefore very much like to hear what the Government have to say on this point at this stage.
THE LORD CHANCELLOR: As the noble Earl, Lord Gowrie, has said, the effect of these Amendments, Nos. 5 and 7, is to remove the provision that a rule of a trade union or of an employers' association shall not be unlawful or unenforceable by reason only that it is in restraint of trade. Clauses 2(5) and 3(5) maintain the protection which is at present afforded by Section 135 of the Industrial Relations Act 1971 against prosecution for civil conspiracy or the invalidation of agreements in trust on the ground only that the organisation is in restraint of trade. This protection was, as the Committee will know, originally conferred by Sections 2 and 3 of the Trade Union Act 1871, and in the case of Faramus v. Film Artistes' Association of 1963, the House of Lords (which is still, after all, the final court of decision, as the noble and learned Lord, Lord Hailsham, said in such clear terms in a case not so long ago) upheld a majority decision by the Court of Appeal that Section 3 of the 1871 Act protected the rules as well as the purposes of a trade union. However, the noble and learned Lord, Lord Denning, took the minority view that Section 3 did not leave unions free to make any rule however unreasonable it was in restraint of trade. And in the subsequent case of Edwards v. Society of Graphical and Allied Trades in 1971, the noble and learned Lord, Lord Denning, and Lord Justice Sachs, again in the Court of Appeal, offered obiter which implied that the protection of Section 3 might be set aside determining that certain purposes in the rule were not proper to a trade union.
The provisions which would be deleted by these two Amendments were added to the general protection in order to remove any uncertainty which may have resulted from this previous case law to which I have referred. While it is arguable that with the repeal of the 1971 Act, and the authority of the judgment of the House of Lords in Faramus, the additional provisions may not be essential, it is the feeling of the Government that it is wise to remove a potential area
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of uncertainty and desirable in order that rules which reflect the wishes of a majority of members are not rendered ineffective.
Perhaps I ought to reassure the Committee by saying that members will of course continue to enjoy the protection the courts will give them by reason of the application of the principles of natural justice which have been declared and propounded so clearly since the war, and the words would not necessarily prevent a court from nullifying a rule which it found to be unlawful on some ground other than restraint of trade. So in my submission the words which the noble Earl by these two Amendments is seeking to omit do no more than make explicit what has already been decided authoritatively by the House of Lords.
I do not know that I need to traverse the familiar ground of the protection which the Common Law and the courts give to the individual who may be affected by capricious or arbitrary interference with his right to work either by admission rules, which are capricious or arbitrary, or alternatively by expulsion rules or practice which would be a denial of justice to him. The courts can intervene, and have intervened very readily, if the rules themselves are unlawful or have not been adhered to or if, in applying the rules, the principles of justice have not been observed. The noble and learned Lord, Lord Hailsham, and I have been in a number of cases where these principles have been so determinedly asserted by the courts and they have shown a willingness to adopt a searching approach in regard to possible breaches of rule. I do not want, therefore, to give the impression that the individual trade unionist in a given case is exposed and unprotected. The Common Law provides protection, and, as we shall hear in debate on further Amendments, the Government are looking anxiously, and will do so between now and the next phase of the package on industrial relations, at appellate procedures which might be appropriate and suitable to provide even more protection.
THE EARL OF GOWRIE: I am grateful to the noble and learned Lord for citing the case of Faramus and the case of Edwards v. The Society of Graphical and Allied Trades because I was going to ask him whether he could tell us a little about them. On many occasions

1445
when working in your Lordships' House I have regretted my own lack of legal training At this point, had I been a lawyer no doubt I should have eagerly leapt in to draw attention to the case of Nagle v. Fielding in which a woman who had been refused a licence to train horses applied for a declaration against the stewards of the Jockey Club. That may have made a lively parenthesis to our debate and no doubt the noble Lord, Lord Wigg, would have come into the debate at that point.
Away from the legal side, our problem is that the 1871 Act limits the Common Law rights of individuals in favour of unions and we accept that; but we find that the limitation under Section 3 of the Act applies to "purposes" and not to "rules". The Bill explicitly extends that proteotion to rules—a vital difference. Not all rules are necessarily covered by the word "purposes". Therefore there is in the Bill a distinct extension of the principle and we are worried, as noble Lords will know, about the extension of rights under this Bill. We believe that legislation should as clearly as possible enshrine the principles upon which the whole of society and not just a sectional interest, however important or powerful, is based.
If the Government had altered the Bill along the lines suggested, an important principle would have been strengthened. As I said earlier, when in doubt I think that we should err on the side of the individual. We feel, therefore, that there is an unfortunate wording here and we should like to place that on the Record. However, at this stage we shall not press the Amendment, which I beg leave to withdraw.
Amendment, by leave, withdrawn.
Clause 2, as amended, agreed to.
Clause 3 [Status of employers' associations]:
LORD SHEPHERD: I think that my noble friend spoke to this Amendment when he moved Amendment No. 4. I beg to move.
Amendmentmoved—
Page 3, line 43, after ("this section") insert ("and section 4 below").—(Lord Shepherd.)
On Question, Amendment agreed to.
Clause 3, as amended, agreed to.
Clause 4 agreed to.
4.15 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE LORD HAILSHAM OF SAINT MARYLEBONE moved Amendment No. 8:
After Clause 4 insert the following new Clause
"(1) Subject to the provisions of this Section every worker shall have the right not to be—

(a) excluded from membership;

(b) expelled from membership

of a trade union or a branch or section of a trade union by way of arbitrary or unreasonable discrimination.

(2) The exclusion or expulsion of a worker from membership of a union, branch or section shall not be deemed to be arbitrary or unreasonable if the worker is of a description different from that or those of the majority of the members of that union, branch or section (as the case may be) or does not possess the appropriate qualifications for such membership.

(3) A worker aggrieved by his exclusion or expulsion from any trade union, branch or section may apply to an industrial tribunal in accordance with industrial tribunal regulations for a declaration that he is entitled to be a member of that union, branch or section.

(4) Where any such declaration has been made and has not been implemented by the union, branch or section concerned within any period specified in the declaration or if no such period is specified within a reasonable period, the worker may apply to the High Court or in Scotland the Court of Session for an injunction, interdict or such other relief (including compensation) as the Court may think just and expedient in all the circumstances of the case.

(5) Nothing in this Section or otherwise in this Act contained shall prejudice or in any way reduce the Common Law rights of a person who has applied to join but not been given membership of or who claims to be and to remain a member of or who has been expelled from a trade union."

The noble and learned Lord said: Such is the state of the papers in this case that I am not sure whether I shall be moving the right new clause or whether, if I do, anybody else will have read what I propose. The one which I am going to move is the one about exclusions and expulsions. As, in fact, the condition of the papers is such that I cannot assume that all noble Lords will have read it, I had better just rise to explain what the new clause is about.
Subsection (1) of the proposed new clause gives to every worker the right not to be excluded from membership of a trade union, or a branch or a section of a trade union, and the right not to be expelled from membership of the same

1447
bodies by way of arbitrary or unreasonable discrimination. Subsection (2) of the new clause is a saving clause which is designed to make it clear that this right of non-exclusion or non-expulsion for arbitrary or unreasonable discrimination does not apply to members who are otherwise unsuitable either by reason of a want of qualification or by reason of being a different type of worker. Subsection (3) provides that if a worker wants to assert his right and claims that he has been aggrieved by his exclusion or expulsion he can apply to an industrial tribunal for a declaration that he is entitled to be a member. That is the effective right of reference to an impartial body—in this case the industrial tribunal. Subsection (4) provides the only effective sanction. If he obtains the declaration that he is right and if, in fact the union proves intransigent, he can be given an injunction—"interdict" is a purely Scottish term which means the same thing—and such other relief, including compensation, as the High Court, or in Scotland the Court of Session, may think just and expedient in all the circumstances. Subsection (5) saves the worker's Common Law rights which, as the noble and learned Lord who has now disappeared below the firing step was explaining a moment or two ago, are not entirely negligible although, in our view, they are inadequate.
If I may give the history of this new clause in a sentence or two, it was discussed in another place on Report, and the other place divided 301 for the Amendment and 302 against it. It might not be in order for me to inquire whether, of that 302, one was the elusive Mr. Lever whom we read about in the Press because we do not seek to probe into the mysteries of the private procedure of another place; but it was the same day of the week as those episodes which we all read about in the newspaper took place. At any rate, with a Division in another place so closely balanced as 302 to 301, the subject is one which clearly deserves and merits consideration by this House, and it may be that if noble Lords will, as I hope, accept the Amendment and this House agrees to put it in, then another place may welcome a chance to consider the matter afresh, possibly with a different result in the light of your Lordships' opinions.
With respect, I would regard this as a real test of the Government's good faith in this matter. Nothing was more remarkable during the course of our extremely friendly Second Reading debate upon this hotly-contested subject, than the Government's insistence, and the insistence of the Government's supporters on the Back-Benches opposite, upon the unimpeachable authority of the late Lord Donovan, his person and his Report. If there is one certain fact about the late Lord Donovan's opinion, it is that he would have supported this Amendment, since unless I am mistaken this was one of the matters about which the Donovan Report was unanimous; that given the power of a union over the future chance of the individual worker of earning a living, either by excluding him from membership or, alternatively, by expelling him from membership if he already had it, some recourse to an independent body in the case of arbitrary and unreasonable discrimination ought to be given to the worker to save his livelihood. That was in the Donovan Report and, unless I am very much mistaken, it was in In Place of Strife and I cannot conceive of any good reason for not putting it in this Bill.
The excuse which the Government and the noble and learned Lord, who has not yet emerged from the firing step, gave on Second Reading was that something is coming. We were not exactly told what, but we were told that something is coming in the second stage of this so-called "package". I hope the Committee will think that that is not quite good enough. No doubt if noble Lords get a chance to introduce the second stage of their package, they sincerely intend to put in something really good. But we are not told what it is to be and, in the meantime, there seems to be no reason why something should not be there as from the date when this Bill will take effect in law.
There does not seem to me to be any reason in merit against our proposal and if there were I—speaking for myself and I expect for my colleagues—should be perfectly willing to put it right. We propose that a worker should not be excluded arbitrarily or unjustly, or discriminated against. We suggest that he should not be expelled arbitrarily and I suppose that very few people in this

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House would come to a contrary view. If that be the view of the Committee, I submit that there can be no reason at all why he should not put his case before an independent tribunal.
The industrial tribunals are expressly preserved by this Bill as being suitable for, I would have thought, this type of dispute. Therefore, between the two sides of the Committee at least there can be no real challenge as to their impartiality or capacity to handle this type of dispute, and the provision in subsection (4) for the High Court or the Court of Session to implement the decision of the industrial tribunal represents the minimum degree of justice to which I should have thought a worker in that position would be entitled. In those circumstances, I do not think I need paint the lily; good wine needs no bush. I beg to move.
4.25 p.m.
LORD HOUGHTON OF SOWERBY: I am wholly in sympathy with the purpose of this clause. Nevertheless, I think it would be unwise for the Committee to write this new clause into the Bill. During the tripartite talks to which I referred in my maiden speech last Tuesday, a number of us strongly pressed the Trades Union Congress to accept a provision of this kind, but they raised numerous difficulties, both of application and enforcement. Moreover, they felt somewhat slighted that we should insist on provisions of this kind applying to trade unions, without at the same time doing something about the disciplinary procedures of some of the professional bodies.
We failed to get agreement then with the T.U.C., and the Secretary of State has stated in another place that the Government have failed to get agreement with the T.U.C. since then. Indeed, the Secretary of State said that the Government had it in mind in the first place to include in the Bill an opportunity for reference to an independent tribunal by a trade union member who felt seriously aggrieved at expulsion or exclusion from membership, but he said that the T.U.C. had objected. I think there comes a time when Parliament has to insist on certain rights being established for the citizen, even though interested parties object. Nevertheless, I think it would
1450
be wise of your Lordships to give the Government an opportunity to pursue this matter further with the T.U.C.
If there were not a further Bill promised to deal with protection of employment, I myself would vote in favour of this new clause. But a second stage in the trade union legislation has been promised, and in another place the Secretary of State asked for an opportunity to discuss the matter with the trade unions with a view to the inclusion in the Statute Law at a later stage of some code of practice. I think it would be a mistake to insist in the meantime on this new clause forming part of this Bill.
Experience has shown how difficult it is to enforce the law on masses of workers, and some of the clauses in the Industrial Relations Act 1971, though theoretically sound, were in practice ineffective. Indeed, a great deal of the trouble that arose under that Act was because of an attempt at enforcement of what on paper seemed to be reasonable provisions in that Act, which shows how important it is to try to legislate by agreement on matters affecting large numbers of workers who have considerable collective power, and upon whom some very reasonable provisions cannot be imposed without considerable good will on their part to make them effective.
Trade union members are not compelled to work with workers whom they feel have not fulfilled their obligations as workers and trade unionists, and we have seen how impossible it is to compel workers to accept inter-union membership of those whom they feel are unsuited for it, or are disqualified from it. I think that this is a matter of wisdom rather than of principle. The principle is clear, and I am sure it is a principle that should be accepted by the trade union movement. As I said earlier, if there is failure to reach agreement, then Parliament has to decide to impose its own will, but we have not reached that stage yet. I believe that in the next phase there will be an opportunity to put this matter right. This is one of the babies that goes out with the bath water with the repeal of the Industrial Relations Act, 1971. But so much that was good in the 1971 Act is unacceptable in the context of that Act, and must be renewed and brought into the law—if it is to be brought

1451
into the law—in a new relationship unconnected with an Act of Parliament which in toto the trade union movement found reprehensible, punitive and unacceptable.
I beg your Lordships not to write this new clause into the Bill. It would be unwise to do so. It will not achieve its purpose. It will deprive the T.U.C. of an opportunity of negotiating further on this matter, and the Government, if they are strong enough to insist that something should be done, will be able to reach agreement with the T.U.C. I respectfully suggest that your Lordships should be wise and should not blindly adhere to a matter of principle. There should be an opportunity for this matter to be dealth with by the process of further discussion and negotiation, rather than precipitating it into the Bill at this stage.
4.30 p.m.
LORD SHINWELL: I should have thought that everybody accepts the submission made by my noble friend Lord Houghton, that Parliament is supreme. There can be no question about that. Indeed, the noble and learned Lord, Lord Hailsham of Saint Marylebone, admitted that Parliament was supreme, even by a majority of one. I think it was the late Sir Winston Churchill who said. "A majority of one is enough". We can accept that, not necessarily because it was the view of the late Sir Winston Churchill, but because of the fact that in another place there is a majority of one—and we can leave out the Lever episode and other episodes for further consideration. Nevertheless, I support the submission that we have just heard.
If it is our desire to improve industrial relations, the last thing we ought to do is to leave the trade union movement and the T.U.C. at this stage with a sense of grievance. If the noble and learned Lord, Lord Hailsham, thinks it fit to listen to the submission I am making, I should like to repeat it. It would be a mistake to leave the T.U.C. and the trade union movement with a sense of grievance. So far as I am concerned, I do not object—
LORD HAILSHAM OF SAINT MARYLEBONE: I was trying to find out what the noble Lord, Lord Shinwell, said. The noble Lord usually speaks quite plainly,
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but on this occasion, for some reason which I cannot explain, what he actually said did not reach our corner of the House.
LORD SHINWELL: I am responsible for many misdemeanours, but not for the acoustics of your Lordships' House, for which the blame must be laid elsewhere. I dislike repetition, either from myself or from other Members of your Lordships' House; we are all too familiar with it, and we object. However, on this occasion I repeat that it is undesirable at this stage, in a matter of this kind, to leave the T.U.C. and the trade union movement with a sense of grievance. Obviously, there will be such. Personally, 1 do not object to having a variety of grievances. I recall the debate in another place on a proposition to reform your Lordships' House. I found myself in the position of rejecting every argument for reform. My principal argument was—and this has a bearing on the subject under review—that the Labour Party must have a grievance. If anything goes wrong, blame the House of Lords. So I would not object to a grievance system; it would be very handy, particularly at election time, and for propaganda purposes.
I should like now to address myself to the argument adduced by the noble and learned Lord, Lord Hailsham. The noble and learned Lord said, in effect, that he would not mind accepting what is contained in this proposed legislation, provided the second part of the package could rectify what might be regarded as a grievance. I should have thought that was the last argument he should have adduced, because the noble and learned Lord has said over and over again that there is not a chance for the Labour Party to be returned at the next election, so why should he worry? If the Conservatives are returned, he can put it right. Is that not enough. On the other hand, if by some political misadventure the Labour Party is returned, the assurance has been given that the matter will be rectified. The noble and learned Lord, Lord Hailsham, wins either way. If the Tory Government return to power, they put the matter right; if the Labour Government come in they have promised to put it right, so there you are.
One further point. The noble and learned Lord, Lord Hailsham, referred

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to action that is arbitrarily taken against some person who was expelled from a trade union. What is meant by "arbitrarily"? What is the definition? Es it not open to a variety of interpretations It depends on the point of view of what is arbitrary. What is regarded as arbitrary by someone who is adversely affected might differ substantially from a definition acceptable to those who undertake the Act. Therefore, I do not believe that the question of what is arbitrary action has anything at all to do with the case.
I support my noble friend Lord Houghton in asking your Lordships' House not to press this matter. Not that we will trouble about a Division. We understand there is a majority in this House for anything the Conservative Party wants. We have no levens in your Lordships' House; no trouble of that kind is likely to occur. If those on the Opposition Benches want to defeat the Government, they are open to do it; there is nothing to prevent them. They do not have a majority in this Chamber at the present time, but they have a majority in the precincts of the building. Over and over again I have seen scores of Opposition Members, who have not heard a word of the debate, come rushing in, inquiring, "What's it all about?" I have heard them time and time again. Then they vote accordingly, not according to the merits of the question. The noble and learned Lord, Lord Hailsham, talked about dealing with the merits of the question. How seldom do those Members of your Lordships' House who assist in a Division against the Labour Party—whether or not we are on the Opposition or Government side—take note of what has actually been said in the course of the debate! Therefore, I support my noble friend Lord Houghton, and I ask your Lordships not to press this matter. If they insist on ventilating a grievance, then we have just got to accept it.
4.39 p.m.
LORD FEATHER: May I support what has been said by my noble friends Lord Houghton and Lord Shinwell. May I give further substance to the appeal to the noble and learned Lord, Lord Hailsham of Saint Marylebone, about this particular clause. I would have gone on to Clause 9(2) using similar words, but I understand that is out of order at this stage. I hope that what I am saying will
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be borne in mind in relation to Amendment No. 9. I should like this new clause much better if it said,
"Subject to the provisions of this section every worker is expected to be a member of a trade union".
and then went on to say
"and shall have the right not to be excluded from membership or expelled from membership".
I want to point out that in the rules of the overwhelming majority of unions it is explicitely stated that people have the right of appeal in respect of these matters; even in respect of being excluded from membership. When an application is made to a branch and the branch rejects the application, the workman is entitled, notwithstanding that he is not a member, to proceed by way of the rules and to ask for the matter to be examined by the appeals committee of the union. In general, it is not the function of trade unions to-day to exclude people from becoming members or to expel them from membership, except for non-implementation of the rules in particular circumstances. It is the intention of unions to gain members. Therefore, this clause is a little bit tautological in its attitude, if I may say so.
On the other hand, I accept the general principle, in that here set out in Amendment No. 8 is what, in practice, is done by unions to ensure natural justice. I query this reference to "arbitrary or unreasonable" discrimination, because most union executive committees, and certainly most branch committees, do not accept that when they exclude someone from membership or expel them from membership they are doing anything arbitrary or unreasonable. It is a conflict between what is reasonable and unreasonable, perhaps as between the branch committee and the person under discipline.
As I see it, there are four stages here. First of all, in the natural sequence of events, the member will have a right of appeal within the union rules, within the union machinery. In many cases, in order to try to establish a sense of fairness, which is obvious, unions have put the appeals machinery outside the union membership itself; they have transferred that responsibility for listening to appeals to the T.U.C. or to people they have nominated. The Electrical Trades Union,

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under its new title, has afforded this responsibility to the T.U.C. to nominate people who are not members of the E.T.U. at all. There is a right of appeal in the Musician's Union ultimately to people who are not members of that union, but they are, of course, of the trade union movement in the wider sense. I could mention several unions with similar provisions.
Here, as I see it, when a person has gone through the appeals machinery of his own union, which can be extensive, he can then proceed to an industrial tribunal, if that is his opinion; that is, the opinion of the member and not of the union. There is then provision for him to go to the High Court, if he is still aggrieved, and if he does not get judgment in his favour he will still be aggrieved. Then he can go further to make claims under Common Law. That seems to me to be a procedure which is extensive. I am not querying the sense of justice which is there, but it seems a little heavy for shop stewards, or people involved in these matters, to understand.
I think a much simpler sort of proposition could be put down—and undoubtedly will be put down—in the consideration and advice given by the T.U.C. on these matters. As a matter of fact, prior to the Industrial Relations Act 1971, the T.U.C. were engaged in precisely this kind of operation, to ensure not only that there was fairness—because that was generally applicable—but that the fairness was seen by everyone, devising methods whereby members could appeal and whereby people who were excluded from membership could appeal. Those were, in general, people who were appealing to be allowed to be members of a union, where the closed shop was operative as a pre-entry arrangement.
I should like to support the noble Lords, Lord Houghton and Lord Shin-well, in asking the noble and learned Lord, Lord Hailsham, to take this Amend"ment back and not to press it at this stage. I do not think there is any need to press it. There will be a later stage and the principles, if not the exact wording, can be looked at by the unions. There is nothing in this Amendment which departs from the general principles of fairness which the trade unions themselves want to enforce.
4.45 p.m.
LORD ROCHESTER: I can well understand the difference of opinion to which this Amendment gives rise. As a Liberal, I suppose I should be utterly opposed to the whole principle of a closed shop. I do not find it as easy as that, because for a number of years I was responsible for negotiating with trade unions on behalf of a large industrial organisation, and I saw some of the advantages of the closed shop, or, at any rate in appropriate cases, 100 per cent. union membership. But, as I see it, we are now in a different situation, because for the first time under this Bill the law is coming into play and the closed shop is to have the sanction of the law.
In these circumstances, it seems to me that common justice demands that the law should also provide for some machinery under which union members who are expelled, or people who are excluded from a union, should have the right to make an appeal against a union's decision. In my own experience on this question of union membership, I can recall cases affecting both general worker unions and craft unions, and indeed even including supervisors, in which the absence of any machinery for appeals within a union would have penalised unfairly the person concerned, and would have made much more difficult the task of management in intervening with the union on that person's behalf.
It will be said—indeed, as I understood the noble Lord, Lord Feather, he has said—that all this simply goes to show that within the trade union movement there is appeals machinery. I know that there often is. The difference now is that the closed shop is to have legal backing, and it therefore seems to me that there should be some legally enforceable and independent machinery by which in all cases there is this opportunity to appeal against a union's decision. As the noble Lord, Lord Houghton, said, it is of course possible, whatever the state of the law, that people will decide to take, or will threaten to take, industrial action on this issue of the closed shop. I do not accept that as an argument against this Amendment. In my experience, there are a number of reasons why people decide to take industrial action or, in the last resort, to withdraw their labour. One of the things they take into account is

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what might be called the general climate of opinion on the particular question. My view of is that the state of law at any given time still has an effect on the action which people take in that way.
I should like to mention a body for which I have a good deal of respect, and I know Members on all sides of your Lordships' House have a similar respect for it; that is, the Industrial Society. That is mainly because it is run by a council which consists not only of employer representatives but also of union representatives. The Industrial Society decided to set up a working party to consider the implications of this Bill, and that consisted of employer, trade union and independent members. It seems to me significant that they concluded that there should be an amendment to the Bill on the lines that we are now discussing.
From what I first said, I hope it will be understood that I understand, and I have some sympathy for, the feelings of trade unionists on this subject, but it seems to me that now the law is being brought into play we should not reject this Amendment. We should not leave it to another time on the grounds that discussions may be proceeding between the Government and the unions; on the grounds that an employee protection Bill is now coming into play; on the grounds that it may cause embarrassment to the T.U.C., and so on. On the contrary, it seems to me that we should amend the Bill in this way, and thus preserve a sense of justice for the individual in what I acknowledge is a very difficult area. For these reasons I should like to support the Amendment.
LORD SLATER: In view of the noble Lord's advanced knowledge regarding the trade unions in this country, and the amount of work and forms of association that he had with them in the course of negotiations from the position that he held on the side of industry, would he continue to impress on noble Lords, or express his opinion, in regard to company trade unions—trade unions that have been organised and set up by companies within this country—and also not forgetting the B.M.A.?
LORD ROCHESTER: I am not sure that I altogether follow the noble Lord's point. As I see it, we are dealing now
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not with companies but with trade unions. This is the Trade Union and Labour Relations Bill, and it was with that in mind that I took the liberty of saying what I did.
4.52 p.m.
LORD ALPORT: The noble Lord, Lord Shinwell, said that there were a large number of occasions on which noble Lords on this side of the House are called up from the recesses of the Palace of Westminster to vote on something, the arguments about which they have never heard and the merits of which they do not fully understand. The noble Lord, his remarks, has invited quite a different thing; he has invited those of us who are here, after having listened to the arguments, to reject this Amendment not on its merits (having heard all the merits explained to us by my noble and learned friend), but as a matter of expediency, along the same lines as the argument of the noble Lord, Lord Houghton of Sowerby.
Of all the Members of this House, although I have no personal experience of the affairs of trade unions, I recognise as well as anybody else the vital importance of the Trades Union Congress and the trade union movement, and the importance of good industrial relations. However, I wonder whether, on this occasion, the advice that has been given to us on behalf of the trade unions by the noble Lords who have spoken opposite is, in fact, in the interests of the trade union movement. The trade union movement is no longer a struggling movement in this country attempting to establish itself in positions of power and influence in order to carry out its duties and responsibilities to its members; we acknowledge that it is now the most powerful organisation outside Parliament. Indeed, so far as two Governments are concerned, the trade union movement, the T.U.C., has had its way against the policies of the Government of the day.
My noble and learned friend Lord Hailsham has mentioned that the provision that is represented in this Amendment was reflected in In Place of Strife. It was also, if I am right in understanding him, a protection given in the last Industrial Relations Bill. We are now advised that this is something that we, as Parliament, should not insert in this Bill

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because it is something still to be negotiated with the trade unions. There is, however, no guarantee that the T.U.C., or the weight of opinion within the trade union movement, will necessarily accept this provision, for reasons which the noble Lord, Lord Houghton, and, I think, the noble Lord, Lord Shinwell, would agree were perhaps not reasonable or rational in the circumstances of this Bill, but which are based upon long-established prejudices, particularly in the context, as it was originally, of the 1971 Act. However, surely it is in the interests of the trade union movement as a whole—this powerful movement which can coerce, and has coerced, Governments in this country—that non-trade union public opinion should see that justice is done.
If the noble Lord, Lord Houghton, agrees that this is something that should be in the Bill and which, if it is left out of the Bill as a result of the pressure—as indeed it would be—of trade union influence on Parliament both in the other place and in this place, then surely a great many people (non-trade unionists, and perhaps trade unionists as well), will feel that the influence which the trade unions are able to bring to bear upon the legislature of this country is such that it can prevent reasonable measures being taken in the interest of individual people, just as it can ensure that important improvements are made in the general standards of living and employment of its members.
I would suggest to the House, and to noble Lords opposite who have long experience of the trade union movement, that they are not doing a service to that movement at the present time by allowing it to be treated by Parliament as though it were still a struggling movement, endeavouring simply to improve the conditions of life of its members both as individual unions and the movement as a whole. It is, in fact, one of the great power centres in this country, which must be in a position to ensure that the action which it takes, and the policies it puts forward, enable not only justice to be done but justice to be seen to be done, as I understand is the purpose of my noble and learned friend's Amendment.
LORD DOUGLASS OF CLEVELAND: I have listened to the noble Lord, Lord
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Alport, with the greatest interest. When he talks about the trade unions coercing Governments, my mind goes back over the past half centry when it has been the accusation of the trade union movement that it is the financiers who have influenced Governments. What is happening to-day is that the influence is swinging away. It may, on occasion, swing too far, I would not dispute that. My noble friend Lord Houghton made it quite clear that, at the end of the day. Parliament must make the decisions.
I come back to the noble and learned Lord, Lord Hailsham of Saint Mary-lebone, because I remember all the arguments that he put forward when the Industrial Relations Bill was going through, and I pay him the tribute of being absolutely sincere in all the arguments he put forward, much as I disagreed with him on many occasions, and wrong as he proved to be. Let me give you one instance. When they inserted the cooling-off period into the Industrial Relations Bill it had my support. I had seen this work in different countries, and had seen two-thirds of the disputes settled with the application of the cooling-off period in the United States of America. I wanted it in: I still want it in. However, I do not see how you can get it in now because the first thing that the Conservative Government did was to apply that cooling-off period legislation in such a manner that it could not possibly work. What they have not taken into account is inertia, and what both the trade union leaders and Parliament are fighting at the moment is the inertia of workers who are determined rot to accept something. We have to find the method of overcoming that. When you had the cooling-off period their inertia overcame that.
I come back to the Industrial Disputes Tribunals to which matters of this kind would be referred. I have sat on those since the Act came into force against the advice of some of my own people, because I saw how effective they could be and how they could give effect to the general desire of this House to look after the rights of the individual, which I considered to be paramount on all occasions. The individual has these rights. They come within community rights as a matter of course, because people could not live together if they were just to live as

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anarchists. There have to be rules about this, but they have their individual rights, and those are what I want to see preserved.
When it comes to dealing with redundancy, with unfair dismissal, these courts have quietly gone ahead doing an excellent job. I pay tribute to them. There is usually a lawyer at the head—I am commending it, not criticising it on this occasion—who is so sympathetic to the applicants who understand nothing about the law, that it is a pleasure to see them recover the confidence which they have often lost when they sit before the court and simply state the case and allow the lawyer to tell them how the law will affect their position. Of course, they have a right to have a lawyer with them if they wish. Some have trade union officials with them. When they do, the industrial tribunal operates not only effectively but satisfactorily, even to the losers. When we have dealt with cases of unfair dismissal employers have gone out sadly disillusioned.
The reason I mention the industrial courts is because I am afraid that if we are not careful they will go the same way as the cooling-off period. Before you get them working properly, resentment of them being included in this Act, now quite unnecessarily, will destroy the effect of those courts. That is what I want to avoid.
I wish to draw the attention of the Committee to the annual conferences of trade unions which have taken place over the past few months. I will not identify them; that would be unfair, but sometimes on a very close vote decisions have been made to accept the social contract, its penalties and its reward. The great difficulty inside trade unions is not that you have annual conferences, where these matters are accepted; it is that you have the unofficial movement inside the trade union movement which causes disruption around the country. What we have to do is to find the method to deal with that situation.
People who feel aggrieved still have the right under the Common Law to have their grievances put right. I want to build something in industrial relations, so far as Parliament is concerned, that will give optimism for the next decade, not something that will give political
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victory for the next few months. It may well be that when the Party of the noble and learned Lord, Lord Hailsham, return to power after the next Election, as he would hope, it may well have destroyed something in this Act which it would rather not have destroyed because it is a foundation on which something can be built.
It is not something that will put right overnight all the wrongs of the trades unions, employers and industrial relations world. It is the first faltering step that has been accepted by the Trades Union Congress and not disapproved by the C.B.I., although it has its own opinion on that point. Let us get it on the Statute Book. If I may be bold enough, I would say: get the General Election out of the way and return to an Industrial Relations Act that will not be destroyed by thoughtless action simply for the sake of political prestige.
LORD PARGITER: I am concerned with the technicalities rather more than the general principles. The Amendment says:
"Subject to the provision of this Section every worker shall have the right not to be—
(a) excluded from membership …"
The first question concerns the definition of a worker. Is he a person who is in work or one who might be out of work? I want that to be clear. If he is a person not within work, so far as my union is concerned—the Union of Engineering Workers, of which I have been a member for 57 years—unless he is in work he cannot be proposed for membership. Equally he has to find someone or someone has to approach him to ask him whether he wishes to join the union. If so, he has to be duly proposed. This goes through the procedure of the branch and a person who proposes another person to be a member of the union has to state that he believes him to be a fit and proper person to be a member of that union. How does the clause affect that position?
How will the worker who is not in work, but who wants to join my union, be able to do that? Can he claim he has been excluded from membership because there was no one to propose him? If he happens to be in work and none of his fellow workers are prepared to propose him, what happens then? Is he allowed to say that he has been

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improperly excluded from membership? Or is a person obliged to propose him for membership? What sort of compulsion is that on the individual who does not happen to be in favour of proposing another person to be a member of the union because he does not want him in and does not think he would be a good member?
This is the sort of problem that can easily arise from the clause. The question of expulsion is entirely different. We are concerned with excluding a worker from membership. First, if he is not in work, is he a worker? If he is not in work he cannot be proposed for membership of my union. If he is in work and no one is prepared to propose him in accordance with rules of the union, have the rules of the union to be altered to say that the union or some person must be compelled to nominate this person to be a member of the union? Is that the intention? If it is, I am sure that my union will not accept it for one moment.
LORD REDCLIFFE-MAUD: I wonder whether a Cross-Bencher might make a short intervention; one who is a recent Member of this House and has had no first-hand dealings with the trade union movement from either side? In listening to the debate, the noble and learned Lord, Lord Hailsham of Saint Marylebone, seemed to me to make an unanswerable case within the limits of his speech for doing what the amendment suggests. The noble Lord, Lord Alport, touched on the point which was in my own mind in eloquently making the case that the world outside the trade union movement would perhaps be much encouraged, as well as many members in the trade union movement, if there was this clear reassertion of the right and duty of Parliament if it failed to get the agreement of a large section of the population to do what Parliament thought right.
I must share with your Lordships my feeling that having heard Opposition speeches which were in themselves convincing, I cannot but admit that it seems to me it would be a great mistake if we did not listen to the argument that has been eloquently given by the noble Lord, Lord Houghton, and the noble Lord who spoke last but one. I think the question before the Committee is: do we do better by the country if we have a Division
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and win the Amendment, which would be in one sense a triumph for principle, or would we be doing something that was not in the public interest? My own view is that the assurance which the Government have almost given us, and which I hope we shall have before the debate on this Amendment finishes, shows that they accept the principle of the Amendment. They do not think it should be in the Bill but it will be their earnest endeavour to press on with the negotiations and get the agreement of the trade union movement—not only the T.U.C. but individual unions—so that if it lies in their power they can complement what is done in this Bill by something in the next complementary Bill. As a Cross-Bencher, that seems to me the way I should like the Committee to go. I greatly hope that in the end we shall not be forced to a Division.
5.9 p.m.
LORD SHEPHERD: If I may, I will intervene now and say a few words on behalf of the Government. What I have to say can be relatively limited in the light of the speeches made with far greater knowledge than mine by the noble Lord, Lord Houghton of Sowerby, who was chairman of the liaison committee between the Labour Party while in Opposition and the Trades Union Congress, and also the speech of the noble Lord, Lord Feather, who was, as we ali know, recently head of the T.U.C. To a certain extent—this is no way critical of noble Lords opposite—I very much regret that, if there is to be a Division, there were not more present to hear the case that was made by my noble friend Lord Feather.
To the noble Lord, Lord Alport, in regard to his reference to trade union influence over this Government, and in relation to the view that has just been expressed by the noble Lord, Lord Redcliffe-Maud, I would say that I have always regarded our society as being based upon three pillars: the Government and the organised sections of industry—the T.U.C., on the one hand, and the C.B.I., on the other. Unless those three pillars stand together, the whole edifice of our economic society, and all that goes with it, just will not stand up. I am in no way seeking to be partisan or critical, but I think that no one will deny that over the last three years things

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have gone disastrously wrong in the relationship of Government with one of the other two pillars. When this Government came into Office we sought to put that situation right. Whether we are right or wrong, only events will prove; but we take the view that in the new situation we should seek to consult and to seek a consensus before we embark upon legislation. That does not in any way detract from the soverignty of Parliament. Parliament can pass laws, but unless those laws are enforceable and acceptable they are of less value than the paper upon which they are written.
At the end of the day, I think that what is between the noble and learned Lord, Lord Hailsham, and the noble Lord, Lord Houghton, and the Government is really a question of timing. I looked through my brief when the noble and learned Lord, Lord Hailsham, was speaking about Donovan. Of course, Donovan stressed the importance of provisions of this kind, but he did so within the context of a closed shop and its consequences. The Amendment that is now before us, of course, deals with the whole situation, and not necessarily with the closed shop. But—I come to the question of timing—is there a pressing need? The Donovan Commission thought it unlikely that abuse of power by trade unions over individuals was widespread, and I have to say this: that nothing has emerged since March, 1972, when the tribunals were first empowered to consider complaints against unions, that has shown this to be untrue. Over this period, during which some 20,000 complaints of unfair dismissal have been brought against employers, the number of complaints against unions by members, former members or applicants has been of the order of only some 200.
Until the end of 1973, 14,500 complaints of unfair dismissal had been dealt with, and, of these, over 5,600, or nearly 40 per cent., were successful. Over the same period, out of some 190 complaints against unions dealt with by the industrial tribunals, only some 30, or about 15 per cent., have been upheld. These are the statistics of the Department; and I would have thought that they would indicate that the unions are operating their rules in a statesmanlike way. From those figures—and bearing in mind
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what I said earlier, that one is seeking co-operation and consent—I would have thought that there was an indication that time could be given to the Government; that events are not so pressing that an Amendment of this nature is immediately required.
In reply to the noble Lord, Lord Redcliffe-Maud, who asked, "What is the Government's position?" perhaps I could read to him what my right honourable friend the Secretary of State said in another place on May 7, when speaking of this matter. He said:
"The T.U.C. has taken steps to try to ensure that proper procedures are available to trade unionists and people generally who may be affected. It has taken elaborate steps to try to ensure that rules, provisions and protections shall prevail throughout the trade union movement. This is not necessarily a satisfactory solution, and I am not saying that it is. There will still have to be discussions in preparation for dealing with this matter in the subsequent Bill, along with picketing and other matters which I have mentioned."—(OFFICIAL REPORT, Commons, 7/5/74, col. 231.)
My honourable friend the Minister of State went some way further on May 23, when he said that we were seeking to know whether it was possible to include certain provisions in this Bill, but that he recognised—and I hope the Committee will appreciate this—that we are confronted with very considerable difficulties. Those difficulties still exist. It is not only a question of drafting: it is a question of getting a general agreement.
It is the Government's intention to see that some provisions of this nature, if they can be agreed—and I believe they can be obtained—shall be included in the Employment Protection Bill. As I said on Second Reading and as I said earlier, this is the first stage of legislation in the trade union field. I hope that the Committee will accept that what is between us is not a question of principle or fact: it is a question of timing. I hope that the Committee will learn many of the lessons of the last three years and will accept that what we should do; if we are to have good law—law that can be implemented and which will be worked in a constructive sense by all those involved—is to ensure that it should be law that is based upon consent and agreement. It may take time, but at the end it is worth it.
BARONESSSEEAR: It seems that there are three major reasons why this Amendment cannot be accepted by the Government, although it is quite clear from the speeches that have come from the Government Benches that they accept the fundamental Tightness of the proposition contained in the Amendment before the Committee. It is said that it is an inopportune time to press for this Amendment to be included in legislation, and that it is necessary for the Government to govern on the basis of consensus. Of course it is necessary to govern on the basis of consultation, but consultation and consensus are not the same thing. To equate the two is, I think, exceedingly misleading. Consultation, Yes; but consensus only if agreement is on those things which the Government accept as being right, not those things which are forced upon them.
We have said before, and we said in the Second Reading debate, that it is extremely unsatisfactory that we are being asked to debate these most important matters in stages; that we do not know what is coming in subsequent legislation. All we can do, however, is to debate what is before the Committee, because this is indeed all that we have. It is at the heart of the Bill which is before us—and there can be no question about this—that it greatly strengthens the power of the trade union movement. If it adds great power to the trade union movement, then it behoves Parliament to ensure that minority groups are protected. I am appalled when I hear the noble Lord the Leader of the House say that offences against individuals do not matter because there are not very many of them. This was the implication.
LORD SHEPHERD: I am sure the noble Baroness wishes to be fair. She has put words into my mouth that I never uttered. What I said was: is there such a pressure of time that it would be right to include this Amendment and deny the Government the opportunity to seek this consensus through consultation?
BARONESS SEEAR: The point of the statement was that there had not been very many cases taken and therefore the implication was that there was no need for action now. Our point is that in this legislation we are greatly strengthening the power of the trade unions, and this is all the more reason why we should take
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strong action to protect the minority adversely affected by this increase in power. There is no question about it but that as a result of the legislation now before us certain individuals can be, and no doubt will be in due course, deprived of their livelihood or forced to take jobs contrary to their own will, and jobs they do not wish to take. The noble Lord shakes his head but that is the nature of the legislation before us. This Amendment seeks to safeguard the small number of people likely to be affected—and I know that it will be a small number. I accept that the trade unions in the main are taking proper steps to see the position of the minority protected, but there will be a residue of people who need the kind of protection that has been suggested.
I know that the noble Lord, Lord Feather has said that the trade unions make provision for appeal within their own rules. Of course they do! This is right and proper; and without doubt more unions will do so and will improve their procedures. But that is not sufficient. That is an appeal inside the trade union movement and is not an appeal to an independent body. It is of the essence of appeals that, at the end of the day, they must be taken away from interested parties and put before independent bodies. This is why we urge that there should be appeals not just through trade union machinery but to outside bodies. Only in this way can that minority of people who need protection be given it.
LORD HAILSHAM OF SAINT MARYLEBONE: I will endeavour to answer the debate because I think it has been an important one and because I do not think that the Committee would wish to part with this Amendment without having considered the arguments which have been given. Let us be quite clear about what we are discussing. We are discussing the right of an individual not to be excluded from a trade union arbitrarily or unjustly by way of discrimination, or expelled from a union arbitrarily or unjustly by way of discrimination. The Government ask for time. They have had a lot of time. The Donovan Committee was unanimous—and that was nearly ten years ago—that this right ought to be given. I know the point that the noble Lord the Leader of the House was making about it being done in the context of the closed shop.

1469
I am quite sure that that is a most important context; but it is not the only context. The noble and learned Lord the Lord Chancellor said on the previous Amendment that he had known cases in his practice at the Bar in which there had been unjust discrimination even under Common Law. So have I. They have not all been closed shop cases. They have been very unjust in many cases; and there are not quite so few of them as I think the noble Lord the Leader of the House seems to think.
When a person is excluded from a union or, still worse, expelled he does not only lose his means of livelihood if it is a closed shop. He may find he may lose it independently of the shop being closed. Moreover, if he is expelled he loses all his paid-up contributions and accumulated rights as a member. That may include the right to a provident fund to which he may have contributed for forty years. We are not just talking about the closed shop. As I have said, the Donovan Committee was unanimously in favour of it and so was In Place of Strife—and that was five or six years ago! The Government have had plenty of time. The noble Lord, Lord Houghton, said that he was chairman of the liaison committee between the Labour Party and the Trades Union Congress and he apparently hammered it hard because he was in favour of the principle of this clause. But he did not get there because they resisted him. There has been plenty of time. It is not as if people have not been trying to persuade them.
The next point is that the noble Lord does not want to leave the trade union movement with a grievance. Neither do I. But what is the grievance? We have not been told—except that they are being asked to do something that they are doing their best not to have thrust upon them. That is not a grievance; that is dragging your feet. The noble Lord, Lord Houghton, is a very eloquent and persuasive speaker; but the best argument that he could put forward was that the trade unions were very much slighted that professional bodies, too, were not brought in. I have no objection in principle also to bringing them in; except that it is outside the Long Title of the Bill. But I must point out to the noble Lord, Lord Houghton, and to the trade union move-
1470
ment if they care to listen to what I have to say, that the position of the professional bodies is quite different. The professional bodies by and large—except for some of the very oldest ones, including the Church which is among the oldest—have special procedures which have to be approved by the Privy Council, that is, by the Government. That puts them on a quite different footing from that of the trade unions, which do not need approval at the moment from anybody. It means that a Prelate must go to the Privy Council—although a Measure has now been passed giving some other kind of tribunal. They have an appeal to the Privy Council as well as having a statutory body. Solicitors have an appeal from the disciplinary body to the courts. I cannot off hand give a complete list; but barristers can certainly go to the Judges. That puts them in a quite different position from the trade unions.
All that we are suggesting is that the trade union member, too, shall have an appeal to the courts; and because it is a relatively expensive business to go to the courts we thought it better to go to the industrial tribunal. I do not think that that is a bad thing in cases of this kind. They are both informal bodies and I think they are suitable bodies. There has not been much criticism of that. The noble Lord, Lord Shinwell, said that one is enough. I suppose that one is enough. It is a majority in Parliament—even if that one was having dinner in Belgrave Square when the Division was called. One is enough! But we cannot impose our will on Parliament. All that we can do is to write an Amendment into the Bill which we think reasonable, and if the House of Commons does not agree with it they will send it back. We have no right to impose our will on Parliament; but when a Division is called and the result is as close as 302 to 301 it is reasonable to ask the House of Commons to think again in the light of the arguments deployed in this debate. This is what this House is for. I should think that this is a supreme example of the kind of thing which it is for.
What really worried me about the speech of the noble Lord, Lord Feather, is that he could have made it at any time in the last 150 years—even against

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Common Law rights. He does not seem to be happy about doing it. He is like St. Augustine who prayed to the Good Lord to make him chaste—but, he added, "Not now!" I am afraid that Lord Feather's prayer is of the same order as that of the Father of the Western Church. Of course it is true that the T.U.C. is doing its best to put its house in order, and also that the majority of the branches of the majority of the unions act decently and not discriminately. But this can be said about any laws that you are trying to pass. Laws are not aimed at people who behave decently but at the minority who do not.
It would be a very bold man, with a trade union with millions of members and branches all over the country, who would say that all its branches behaved decently. I think that it is very unlikely. Also, not every union is affiliated to the T.U.C. This Bill, when enacted, will apply to every kind of union, affiliated and not affiliated, trying to put its house in order and not trying to put its house in order. Communist-dominated and not Communist-dominated. So I do not think that that was a very good reason, nor was it a very good reason to say that the clause is complicated; it is not. The saving of the Common Law procedure in subsection (5) refers to a different set of rights altogether. It is not additional to the rights given in the sense that one has to do this as well as the other matters under this Clause.
I was glad off the support of the Liberal Party, both from the noble Lord, Lord Rochester, and from the noble Baroness, Lady Seear, as I was of the support of my noble friend Lord Alport. The noble Lord, Lord Douglass, I think cast his net a little wide. I do not know that this is on the same footing as the cooling-off period, for which I think I had probably less enthusiasm than he displayed, at any rate this afternoon, although I do not remember that during the debates in 1971 he was quite so enthusiastic as he sounded this afternoon. At any rate, I think that the point was a slightly different one.
LORD DOUGLASS OF CLEVELAND: For once, the noble and learned Lord may have a faulty memory.
LORD HAILSHAM OF SAINT MARYLEBONE: I should accept the noble Lord's assurance whatever it was, because we have known each other for a long time and I am quite prepared to believe that my memory is at fault in this respect and, indeed, I should welcome it if it were. However, I think that that is rather a long way from the point which we were discussing. Nor do I think that the social contract has much good to say about this. The noble Lord, Lord Pargiter, asked me what a "worker" meant. That is in the definition clause in the Bill and, presumably, unless we put a special definition clause into this clause, the expression "worker" will be covered by that definition clause. He asked me a hypothetical question as to whether anyone could be compelled under the clause to propose someone as a fit and proper person if he did not think so. The answer to that is. No.
LORD PARGITER: Could the noble and learned Lord carry that point a little further? If no one in a particular factory is prepared to propose a person as a fit and proper person, would that be regarded as discrimination?
LORD HAILSHAM OF SAINT MARYLEBONE: I should have thought not; but 1 think that instant law is usually bad law, and I am very sales-resistant to giving legal opinions when I am on my feet. I usually like to do it at my desk in my library. However, I should have thought that the answer was, clearly not.
I was not able to follow with enthusiasm the speech of the noble Lord, Lord Redcliffe-Maud, because he seemed to think that, just because those concerned do not want something to happen, they are more likely to want it to happen if the Government wait another six months with negotiations the nature of which we do not know resulting in a legislative proposal which they have not yet divulged to us. They have not, I should have thought, produced a single argument that this Amendment is bad or unworkable. If it can be improved at the next stage of the package, I should be delighted; but I see no argument against it and, in those circumstances, I do not think I should be justified in withdrawing it. I therefore adhere to my proposition and beg to move.
5.36 p.m.
On Question, Whether the said Amendment (No. 8) shall be agreed to?
Resolved in the affirmative, and Amendment agreed to accordingly.
Their Lordships divided: contents, 96: Not-contents, 67.

CONTENTS

Aberdare, L.

Gowrie, E.

Rankeillour, L.

Allerton, L.

Grenfell, L.

Reigate, L.

Alport, L.

Hailes, L.

Rochester, L.

Amherst, E.

Hailsham of Saint Marylebone, L.

Ruthven of Freeland, Ly.

Amherst of Hackney, L.

St. Aldwyn, E. [Teller.]

Annan, L.

Hankey, L.

St. Davids, V.

Auckland, L.

Hanworth, V.

Salisbury, L.Bp.

Barnby, L.

Hawke, L.

Salisbury, M.

Berkeley, B.

Henley, L.

Sand ford, L.

Byers, L.

Hood, V.

Sandys, L.

Carrington, L.

Hornsby-Smith, B.

Savile, L.

Cathcart, E.

Killearn, L.

Seear, B.

Colville of Culross, V.

Kilmany, L.

Selkirk, E.

Cork and Orrery, E.

Kilmarnock, L.

Sempill, Ly.

Cowley, E.

Lauderdale, E.

Shannon, E.

Crathorne, L.

Lloyd of Kilgerran, L.

Sharples, B.

Croft, L.

London, L.Bp.

Somers, L.

Daventry, V.

Long, V.

Stamp, L.

de Clifford, L.

Lyell, L.

Strathclyde, L.

Denham, L. [Teller.]

Macleod of Borve, B.

Strathmore and Kinghorne, E.

Derwent, L.

Mancroft, L.

Strathspey, L.

Drumalbyn, L.

Margadale, L.

Terrington, L.

Dundee, E.

Massereene and Ferrard, V.

Trefgarne, L.

Ebbisham, L.

Merrivale, L.

Vivian, L.

Eccles, V.

Monck, V.

Wade, L.

Emmet of Amberley, B.

Mountevans, L.

Ward of Witley, V.

Exeter, M.

Mowbray and Stourton, L.

Wigoder, L.

Fraser of Lonsdale, L.

Northchurch, B.

Windlesham, L.

Gainford, L.

Oakshott, L.

Wise, L.

Geoffrey-Lloyd, L.

Orr-Ewing, L.

Wolverfon, L.

Gladwyn, L.

Perth, E.

Young, B.

Glasgow, E.

Platt, L.

Younger of Leckie, V.

Goschen, V.

Porritt, L.

NOT-CONTENTS

Arwyn, L.

Gaitskell, B.

Pannell, L.

Bacon, B.

Gardiner, L.

Pargiter, L.

Balogh, L.

Garnsworthy, L.

Peddie, L.

Bernstein, L.

Gore-Booth, L.

Phillips, B.

Beswick, L.

Goronwy-Roberts, L.

Rathcreedan, L.

Birk, B.

Greenwood of Rossendale, L.

Redcliffe-Maud, L.

Blyton, L.

Gordon-Walker, L.

Royle, L.

Brayley, L.

Hale, L.

Rusholme, L.

Brockway, L.

Hall, V.

Sainsbury, L.

Buckinghamshire, E.

Harris of Greenwich, L.

Segal, L.

Burton of Coventry, B.

Henderson, L.

Serota, B.

Castle, L.

Houghton of Sowerby, L.

Shepherd, L.(L. Privy Seal)

Champion, L.

Hoy, L.

Shinwell, L.

Clwyd, L.

Jacques, L.

Slater, L.

Collison, L.

Leatherland, L.

Snow, L.

Crook, L.

Lee of Newton, L.

Stow Hill, L.

Donaldson of Kingsbridge, L.

Llewelyn-Davies of Hastoe B.[Teller.]

Strabolgi, L.[Teller.]

Douglas of Barloch, L.

Summerskill, B.

Douglass of Cleveland, L.

Lloyd of Hampstead, L.

Taylor of Mansfield, L.

Delacourt-Smith, L

Lovell Davies, L.

Wells-Pestell, L.

Elwyn-Jones, L. (L. Chancellor.)

McLeavy, L.

Wootton of Abinger, B.

Feather, L.

Maelor, L.

Wynne-Jones, L.

Fiske, L.

Melchett, L.

5.44 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE LORD HAILSHAM OF SAINT MARYLEBONE moved Amendment No. 9:
After Clause 4, insert the following new clause:

"(1) The rules of every trade union and employers' association shall contain provisions in respect of the matters mentioned in the following subsections of this section.

(2) The rules must specify the name of the trade union or employers' association, the address of its principal office and the objects for which it was established.

(3) The rules must make provision as to the purposes for which, and the manner in which, any property or funds of the trade union or employers' association are authorised to be applied or invested.

(4) If any financial benefits are to be available for members of the trade union or employers' association out of its properly or funds, the rules must make provision as to the amounts of those benefits and the circumstances in which they arc to be available to members.

(5) The rules must specify the manner in which any rules of the trade union or employers' association can be made, altered or revoked.

(6) The rules must make provision for the election or appointment of officers and for the manner in which officers can be removed from office.

(7) The rules must make provision: —

(a) for the election of a governing body and for its re-election at reasonable intervals;

(b) for the manner in which members of the governing body can be removed from office.

(8) If the trade union or employers' association has officials (whether they are shop stewards, workplace representatives or other officials) who are not officers of the trade union or employers' association, the rules must make provision for their election or appointment and for the manner in which they can be removed from office.

(9) The rules must make provision as to the manner in which, for any purposes of the trade union or employers' association, elections are to be held or ballots taken, including the following: —

(a) notification of vacancies and qualification of candidates;

(b) making of nominations;

(c) canvassing or content of election addresses, where these are permitted;

(d) eligibility for voting in any such election or ballot;

(e) procedure preparatory to any election or ballot;

(f) the procedure for counting and scrutiny of the votes and ballot papers; and

1476

(g) the procedure for the declaration or notification of the result of any such election or ballot.

(10) The rules must specify the descriptions of persons who are eligible for membership of the trade union or employers' association or a branch or section of the trade union or employers' association and the procedure for dealing with applications for membership, including provision for appeals against decisions of the committee or other body responsible for determining such applications.

(11) The rules must specify: —

(a) the offences for which the trade union or employers' association is entitled under the rules to expel a member or take other disciplinary action, and the penalties applicable for each of those offences;

(b) the procedure for the hearing of cases in which offences against the rules are alleged; and

(c) the procedure with respect to appeals against any decision on any such hearing.

(12) The rules must prescribe a procedure for settling disputes between a member and the trade union or employers' association or an officer of the trade union or employers' association.

(13) In making provision for any hearing or a determination of any question, whether in relation to an alleged offence, an appeal or a dispute, the rules shall be so framed as not to depart from, or permit any departure from, the rules of natural justice."

The noble and learned Lord said: This is Amendment No. 9, the doctor's favourite so I hope I shall be successful. Like the last one it is a great test for the Government to face. I am glad to see that the noble and learned Lord has now resumed his place on the firing steps, so we hope to hear a salvo very soon.
The purpose of this Amendment is to ensure a number of matters upon which the unions should make some provision in their rules. When I say "the unions" I include in that wide phrase employers' associations, because this is a matter in which very likely, mutatis mutandis, what is sauce for the goose is sauce for the gander. I say that the Amendment is a test of the Government's good faith for this reason: the noble and learned Lord on Second Reading was at pains to say—and he said it both persuasively and eloquently—that his object was to get through a repeal of the 1971 Act, as a sort of emergency measure, so that everything after that would go smoothly and happily and all would be as merry as the proverbial marriage bell.
He made one little mistake about that. This is repealing not the 1971 Act, but

1477
the 1871 Act. Ever since 1871 there have been a number of minimum requirements for trade union rules and the noble and learned Lord really cannot get away in this House with saying, as he attempted to do on Second Reading—or perhaps it was the noble Lord the Leader of the House who erred in this respect, though I am sure they are of one mind sitting together in almost connubial bliss on the Government Front Bench—that it would be a gross interference with the rights of trade unions to make these provisions. If it be a gross interference it is a gross interference which has been the law, until now, for 103 years, so it is one which they have borne with comparative equanimity. I cannot pretend that we are simply putting back the 1871 Act, but if that is what the Government prefer we might consider it at a later stage of the Bill. We thought, and in this respect we agreed with the Government, that some of the 1871 language could be brought up to date.
Moreover, we on this side did not wish to disregard the findings of the Donovan Report on this matter, as the Government appeal to him so confidently as an authority, because Donovan's Report, although not specifying in detail what the clause now says, said in paragraph 648:
"We have said that it is very desirable that trade union rule-books should be clear and unambiguous, but that they generally fell far short of a satisfactory standard in these respects."
And then they went on to spell out certain provisions. Paragraph 650 reads:
"The rules should also state who has the power to consider and decide applications for admission; that applicants refused admission should have a right of appeal to the executive committee of the union and should be so informed at the time of refusal …; and that the executive committee has the power to admit applicants where an appeal is upheld."
Paragraph 651 goes on to—
"set out the offences for which the union "—
or employers' association—
"is entitled under the rules to expel "
a member—
"… and the penalties applicable for each of those offences."
and provides that the rules must make specific provision in those respects.
The result is that we have put these provisions into our new clause, which I am afraid is rather too long to read out
1478
even in summary. The only extent to which we limit the absolute freedom of unions to do what they like, apart from saying that they must deal with the matters which are listed, is that in subsection (13) we simply say:
"In making provision for any hearing or a determination of any question, whether in relation to an alleged offence, an appeal or a dispute, the rules shall be so framed as not to depart from, or permit any departure from, the rules of natural justice."
Whatever else may be said about this linking new clause, I would hope that no one will say that that is an unreasonable fetter upon the union's freedom and discretion in the matter. We have dealt with it in this respect because one would think that, whatever else a new union would wish to do, it would wish to cover in its draft rules a large number of matters, and that this would provide a useful check list.
The Amendment covers the name of the union—and when I say "union", in each case I am talking equally about an employers' association—the purposes of the union; the manner in which its property or funds are authorised; the financial benefits which are available; the manner in which the rules can be made, altered or revoked; the rules must make provision for the election of a governing body, and their removal if necessary; they must make provision for the election or appointment of officials who are not officers, and for the manner in which they can be removed; the rules must make provision as to the manner in which, or the purposes for which, elections are to be held or ballots taken, including the notification of vacancies, and so on. Incidentally, a lot of people think that it would be a good thing if unions held their elections by ballot, but this Amendment does not go so far as that. It leaves them freedom to make their own decision about that matter. Whether or not that was wise on our part, that is the course which we have taken.
The Amendment then goes on to cover descriptions of persons who are eligible for membership of the union or employers' association, or the branches; the procedure for dealing with applications for membership; the offences which render a person liable to disciplinary action and the penalties applicable for the offences; the procedure for hearing cases; the procedure with respect to

1479
appeals; and the procedure for settling disputes between a member and the union or its officers. We do not say what view the unions should take about these several matters. We accept, for the purposes of this Amendment, that they can take their own decisions. We say only that any reputable body will make provision for them, and we consider that this is a very modest proposal. With those few words, I would only add that once again the Amendment was debated fairly exhaustively in the other place with a fairly close result. The other place divided and the votes were 303 to 304, again a majority of one, and again on the fateful evening of that dinner party in Belgrave Square. I beg to move.
LORD SHEPHERD: Since the noble and learned Lord referred to Amendment No. 9 as a medicine, and presumably he is suggesting that we should get a move on, I will intervene at this stage. I cannot help but reflect that the difference between the noble and learned Lord and this side of the House in terms of industrial relations is that, while he has moved this Amendment with care and has taken a soft approach, he keeps referring to my noble and learned friend as not being in the firing step. If that is at the back of his mind as he deals with industrial relations, perhaps we can well understand why the previous Administration, of which he was such an illustrious Member, got into so much difficulty.
LORD HAILSHAM OF SAINT MARYLEBONE: That is a metaphor borrowed from the late Sir Winston Churchill, of which he was particularly fond. I do it out of piety.
THE LORD CHANCELLOR: Did not Sir Winston Churchill say that one was enough for general purposes?
LORD SHEPHERD: I have to tell my noble and learned friend that if he had been present earlier no doubt he would have heard that referred to. I must say that if ever I have the misfortune to be on the Benches opposite when we have another close vote in similar circumstances in another place, I shall certainly call upon your Lordships' House to support me if I have the nerve to make a case when the merit of my argument rests upon one vote. But I must not waste
1480
time, and I must get on with the Amendment.
We should concede that the Opposition have gone a long way in this Amendment, compared with that which was originally placed on the Marshalled List. It is absolutely true to say that it is pure Donovan. Nevertheless, there are two reasons which I should like to put to the Committee why it should not be accepted. First of all, there has been a good deal of progress since the Donovan Commission reported in June, 1968. It is perfectly true that Donovan criticised very severely the trade union rule books as being far from clear and unambiguous, and the Commission considered that, without impairing the unions' freedom to frame rules to meet their own circumstances, the minimum requirement was for the rules of registered unions to be revised to ensure better safeguards for members. The Commission recommended new statutory requirements for rules to govern admission, discipline, disputes between union and members, and elections, including the provision for the election of shop stewards.
The initial reaction of the T.U.C.'s General Council to these and other proposals was given in an interim report, Action on Donovan, published in November, 1968. The General Council found little evidence of serious problems arising from the shortcomings of rule books, but undertook to consider the case for formulating certain basic principles for rules. Also, in November, 1968, the Council issued a questionnaire to affiliated unions about their rules on admission and discipline, the replies to which were to reveal a general absence of any right of appeal against non-admission and a tendency to scatter rules on offences and penalties throughout different parts of the rule book.
Following the publication in January, 1969, of the White Paper, In Place of Strife, which took up the Royal Commission's recommendations on rules in the context of a proposed system of compulsory registration, a special congress was held at Croydon in June, 1969, and it endorsed alternative proposals put forward by the T.U.C.'s General Council in a programme called Programme for Action. Among other matters, this programme recorded the General Council's

1481
intention to draw up basic principles concerning admission, discipline, expulsion and election procedure which affiliates would be expected to incorporate in their rules. The General Council further undertook to consider whether a new Congress rule would be needed to cover these matters, and whether it should define criteria for incorporation in union rules relating to the calling of strikes. It accepted the need for unions to consider how best to integrate shop stewards more effectively in the process of union government.
Within three weeks of the Croydon congress approving its policy, the General Council issued the first of three circulars setting out recommended principles for union rules. The first circular dealt with rules on admission and discipline. The second circular issued in December, 1969, covered strike procedures and the duties and responsibilities of shop stewards. The final circular in April, 1970, on the need for clear rules about determining when contributions are unpaid, was not anticipated in the Programme for Action but was apparently prompted by a High Court judgment. From that I hope the Committee will see that the T.U.C. and the affiliated unions are seeking, on a voluntary basis, to deal with this important issue which arises on this Amendment.
I accept that there is need for some provision of this sort, but I am doubtful whether at this moment the statutory approach is right as a consequence of its being so prejudiced by the 1971 Act. As I said on a previous Amendment, psychologically and emotionally, the union attitude is deeply suspicious of statutory rules and we should seek to avoid them if we can. This does not mean that, at the end of the day, Parliament needs to introduce legislation. This is the first stage in a long and complicated discussion, because of the complexity of the matter and because of the deep suspicion of a democratic society. The trade unions are in themselves democratic societies, but we need further time in these discussions and I hope that the noble and learned Lord will give us time, having satisfied himself with one blood-letting this afternoon.
6.2 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE: I wonder whether the
1482
noble Lord has answered my arguments. He began by confessing—and I was grateful to him for his candour, which I expected—that this Amendment proposes nothing more than what he described in his own words as "pure Donovan". That is fair. I should have thought, as a small concession to reason, the Government might then have gone on to accept the Amendment, but not so. The noble Lord said that there were two reasons why not. One was progress since Donovan, which I neatly noted and marked "(a)"on my notes, but I never got as far as "(b)". I am not sure whatever became of "(b)".
LORD SHEPHERD: To refresh the noble and learned Lord's memory, I referred to it with the greatest of possible delicacy, because I did not want to ruffle noble Lords opposite. I referred to "(b)"as the general attitude towards the 1971 Act,
LORD HAILSHAM OF SAINT MARYLEBONE: I did not realise that was "(b)". We shall deal with it in due course, all the same. We shall deal with "(a)"first. Of course I do not deny that under the influence of Donovan the Trades Union Congress has begun to put its house in order very seriously, and this is very good. Trade union rules are not by any means as bad as they were when Donovan reported that they generally fell far short of a satisfactory standard in these respects. The Government, in In Place of Strife six years ago, considered at that time that the legal requirements—which were stronger than they are now proposing, because they included the 1871 Act—relating to the rules of trade unions were inadequate and should be extended, in the interests both of the unions and of their members. I do not believe very much progress has been made about that.
I must point out to the Government that this new clause is designed to apply to employers' associations, too, and no amount of progress made by the Trades Union Congress can make me think it ought not to apply to employers' associations, because they do not usually follow the Trades Union Congress. As I said in relation to the last Amendment, this clause does not apply only to unions affiliated to the Trades Union Congress. It applies to new unions, splinter unions, any kind of small body that wants to call itself a trade union, about which the

1483
"top brass"of the trade unions, whether those I see now arrayed on the other side of the House or elsewhere, usually have some pretty rough words to say. So I do not think there is very much in that.
Then, going on to "(b)", as we now know its proper label, it is said that we must do it now because the trade union movement is so prejudiced against the 1971 Act. But I understood that this Bill would repeal the 1971 Act in all its works, so they cannot be prejudiced against anything in this Bill. What the noble Lord the Leader of the House meant was the 1871 Act, because we are not actually proposing that anything in the 1971 Act should be put back in this Bill by this
Amendment. I am suggesting that the 1871 Act should be reinstated and that a few modernising proposals, all of which are pure Donovan, should be added to it.
I would yield to the noble Lord's plea to have no more blood let this evening, if only he was a little more reasonable. So far he has not given any reasons, and he has only bared his breast for the next incision of the surgeon's knife which I feel I must now ask my noble friends to insert.
6.7 p.m.
On Question, Whether the said Amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents 92; Not-Contents, 64.

CONTENTS

Aberdare, L.

Glasgow, E.

Rankeillour, L.

Allerton, L.

Gore-Booth, L.

Redcliffe-Maud, L.

Alport, L.

Goschen, V.

Reigate, L.

Amherst, E.

Gowrie, E.

Robertson of Oakridge, L.

Amherst of Hackney, L.

Hailes, L.

Rochester, L.

Auckland, L.

Hailsham of Saint Marylebone, L.

Ruthven of Freeland, Ly.

Barnby, L.

St. Aldwyn, E. [Teller.]

Berkeley, B.

Hankey, L.

St. Davids, V.

Boothby, L.

Hanworth, V.

Salisbury, M.

Brougham and Vaux, L.

Hawke, L.

Sandford, L.

Byers, L.

Henley, L.

Sandys, L.

Cathcart, E.

Hornsby-Smith, B.

Savile, L.

Colville of Culross, V.

Killearn, L.

Seear, B.

Cork and Orrery, E.

Kilmany, L.

Selkirk, E.

Cowley, E.

Kilmarnock, L.

Sempill, Ly.

Crathorne, L.

Lauderdale, E.

Sharpies, B.

Daventry, V.

Lloyd of Kilgerran, L.

Somers, L.

de Clifford, L.

Long, V.

Stamp, L.

Denham, L. [Teller.]

Lyell, L.

Strathclyde, L.

Derwent, L.

Macleod of Borve, B.

Strathspey, L.

Drumalbyn, L.

Mancroft, L.

Terrington, L.

Dundee, E.

Margadale, L.

Trefgarne, L.

Ebbisham, L.

Massereene and Ferrard, V.

Vivian, L.

Eccles, V.

Merrivale, L.

Wade, L.

Elles, B.

Monck, V.

Ward of Witley, V.

Emmet of Amberley, B.

Mountevans, L.

Wigoder, L.

Exeter, M.

Mowbray and Stourton, L.

Windlesham, L.

Fraser of Lonsdale, L.

Northchurch, B.

Wise, L.

Gainford, L.

Oakshott, L.

Wolverton, L.

Geoffrey-Lloyd, L.

Orr-Ewing, L.

Young, B.

Gladwyn, L.

Platt, L.

Younger of Leckie, V.

NOT-CONTENTS

Arwyn, L.

Delacourt-Smith, L.

Hale, L.

Bacon, B.

Donaldson of Kingsbridge, L.

Hall, V.

Balogh, L.

Douglas of Barloch, L.

Harris of Greenwich, L.

Bernstein, L.

Douglass of Cleveland, L.

Henderson, L.

Beswick, L.

Elwyn-Jones, L. (L. Chancellor.)

Houghton of Sowerby, L.

Birk, B.

Hoy, L.

Blyton, L.

Feather, L.

Jacques, L.

Brockway, L.

Fiske, L.

Leatherland, L.

Buckinghamshire, E.

Gaitskell, B.

Llewelvn-Davies of Hastoe, B. [Teller.]

Burton of Coventry, B.

Gardiner, L.

Castle, L.

Garnsworthy, L.

Lovell Davies, L.

Champion, L.

Gordon Walker, L.

Maelor, L.

Collison, L.

Goronwy-Roberts, L.

Maybray-King, L.

Crook, L.

Greenwood of Rossendale, L.

Melchett, L.

Milner of Leeds, L.

Rusholme, L.

Summerskill, B.

Morris of Kenwood, L.

Sainsbury, L.

Taylor of Gryfe, L.

Pannell, L.

Segal, L.

Taylor of Mansfield, L.

Pargiter, L.

Shepherd, L. (L. Privy Seal.)

Wells-Pestell, L.

Peddie, L.

Shinwell, L.

Winterbottom, L.

Phillips, B.

Slater, L.

Wootton of Abinger, B.

Rathcreedan, L.

Snow, L.

Wynne-Jones, L.

Royle, L.,

Strabolgi, L. [Teller.]

Resolved in the affirmative, and Amendment agreed to accordingly.
6.15 p.m.
BARONESS SEEAR BARONESS SEEAR moved Amendment No. 10:
After Clause 4, insert the following new clause:
"Every member of a trade union, or branch or section thereof, shall have the right, on giving reasonable notice and complying with any reasonable conditions, to terminate his membership at any time of the trade union or branch or section thereof."
The noble Baroness said: This is a brief Amendment which is in fact complementary to Amendment No. 8 which your Lordships' Committee has just passed. To put it briefly, if it is improper to prevent people from entering a union or arbitrarily to expel them, a fortiori it is still worse to lock them in against their will. That is at present an unusual practice but it does exist. There is a trade union rule that a member may not leave except with the permission of the executive council of his particular union. In order that this practice should not spread but be banned, I beg to move this Amendment.
LORD SHEPHERD: I am rather surprised that the noble Baroness has moved this Amendment because my understanding—and I see the noble and learned Lord, Lord Hailsham, sitting opposite and my noble and learned friend the Lord Chancellor behind me at the firing step—is that the position is well covered by Common Law. The noble Baroness draws particular attention, however, to a member who, because of the rules of his union, is prevented from resignation. I understand that if there was any question of the rules being ultra vires then this would be a question, again, for the court. When a person joins a union, or for that matter any other organisation, with the full knowledge of what the rules are of the union or organisation, he enters into some form of contract—does he not?
What the noble Baroness is suggesting in this Amendment is that a person, having accepted a contract with a union
1486
in order to obtain all the benefits of the union, should be able as of right to say: "Despite all I may have gained as a consequence of joining the union, it now suits me and I wish to leave." I should have thought, speaking as a union member, that that was quite unacceptable. I can think of a number of organisations where equally it would still be regarded as unacceptable, particularly if the person, having exercised his right of leaving which the noble Baroness would give, would still be able to enjoy all the opportunities and privileges that the union will obtain or has obtained in the past.
I have always regarded my union membership as a form of contract with my other colleagues within the union. It is a democratic society and I should have thought that here was a case where, if there were to be changes in the rules, they should come from within and one should not seek to bring them about in a statutory, legislative form. We have always said (have we not?) about your Lordships' House that we have our own Rules; we are governed by them, and would deeply resent anyone in another place speaking there about how we should change our Rules. If our Rules are wrong, we would look to ourselves to seek to change them democratically. That is what I suggest should apply in the field of the trade union movement.
LORD BYERS: Before the noble Lord leaves that point, will he tell the Committee whether, in the case of his own union, he has the right to terminate his membership if he wishes to do so? He He talks about "enjoyment", but is not the enjoyment of something from which you cannot escape rather like the enjoyment which you get in prison?
LORD SHEPHERD: So far as my own union is concerned, yes, I have that right. Secondly, when I use the word "enjoyment", I think of all the benefits which the trade union movement has achieved for that workforce in a particular factory or a particular industry. Those are the "enjoyments" to which I am referring.

1487
I well remember—although I fear that noble Lords on the other side did not appreciate it—the deep sense of hostility among working folk about their strivings in order to achieve certain social advances; the feeling that there are certain sections of the community who are prepared to live off them but who are not prepared to put their own backs into achieving those results, or even better results.
LORD BYERS: With all respect to the noble Lord, I think that he is fighting the wrong battle here. We used to have that argument, but what my noble friend Lady Seear is asking the noble Lord is whether he agrees that every member of a trade union, or a branch or section thereof, shall have the right, on giving reasonable notice and complying with any reasonable conditions, to terminate his membership. We all know that things can happen; one can be in a union, association or organisation for 20 or 30 years and then something happens which makes membership of that union, association or organisation intolerable. All we are saying is that in those circumstances one ought to be in the position of being able to resign after reasonable notice. I do not think that there is any relevance in what the noble Lord has said about the strivings of the union. That is accepted; there is no hostility towards the unions. But there are cases where people find that it is intolerable to remain members, and after reasonable notice they should, in my view, be allowed to terminate their membership.
LORD SHINWELL: I am bound to say that I cannot understand what the Liberal Party are up to. It is all very well to provide absolute freedom or partial freedom for a person who is a member of a trade union, who derives all the benefits of association with that trade union and who operates on the shop floor, or in some other capacity, to decide, for some reason or another, to leave. It is very difficult to define accurately what is meant by "reasonable". All kinds of interpreations could be furnished in order to justify reasonable action. But what happens? What are the consequences? Let us suppose that a man who is a member of a trade union suddenly decides that he wants to continue to operate in a particular factory. Let us further suppose
1488
that although he is no longer a member of the trade union he still desires to associate himself with those with whom he was associated while he was a member of the trade union, but not to be a member of the union and not to pay his contributions, although deriving all the benefits which are provided by association with the others. If the shop floor decides "We are going on strike", is that what the Liberal Party want? Do they want to provoke more trouble?
I cannot understand their attitude in this matter. Obviously, they have not operated in a factory; they do not know what happens on the shop floor; they do not know what difficulties face shop stewards. There has been much castiga-tion of shop stewards, but the Liberal Party do not realise what are the responsibilities which are placed upon shop stewards. But here the position is as clear as it can be. Somebody who is a member of a trade union and working along with a thousand other men in a particular factory decides to leave the union for some reason or another. Therefore those who were associated with him decide to go on strike. What happens then? Is that what the Liberal Party want? That is the kind of thing which has been happening.
Advantage was taken of this by several people under the previous Act. Time and again cases were referred to the Industrial Court—some on religious grounds and others on conscientious grounds. We know how easy it is to spread "conscience"; it is very elastic-sided. It is some time since I was associated officially with the trade union movement, but many years ago I was associated with the seamen and I know what happened. If, for example, the majority of the main deck and below joined the union and paid their contributions, but somebody said, "No, I am not going to be in the union", the men would not sail and in consequence many ships were held up. Is that the kind of thing they want? It could still happen.
May I say further that we have had two Divisions this evening. I can understand many of my noble friends being aggrieved by this. I am not at all aggrieved by it. Leaving the Liberals aside for the moment and turning to the Tories, they have always been a bit stupid. I am not the

1489
only one who says that. Disraeli said it long ago, and even Churchill said it—and sometimes even the noble and learned Lord, Lord Hailsham, has said it. Shall I furnish an instance? There was an occasion when he abandoned his hereditary Peerage. Probably there were sound reasons then for abandoning his Peerage. However, it was on the occasion when the question arose about who was likely to be the next Leader of the Tory Party.
The noble and learned Lord is right to blow his nose. That is the only thing which is left to him to do. This is one of his physical acts. However, let me develcp what happened for a moment, because it is a matter of political history. Nobody was more resentful about the Tory Party than the noble and learned Lord. He denounced them with bell, book and candle. He is not the only one; and they are still being a bit stupid. I cannot imagine anything more stupid, almost on the eve of another General Election when it is very dicey about who is going to win. It may be half-a-dozen each way.
I can imagine what the militants in the trade unions are now saying: "Away with your moderation!" An atmosphere of moderation has been emerging recently. I welcome it, and I am sure that the majority of the Members of your Lordships' House welcome it, too. We want to improve industrial relations, but when it is announced in the newspapers tomorrow morning that the House of Lords have defeated the Labour Government again, what then? Do you think that they will bother about the merits of the case? The noble and learned Lord has been speaking about the merits of the case. They will not bother at all about the merits of the case. The House of Lords, they will say, is down on the Labour Government upon a matter affecting the trade unions. Therefore they are more likely to vote for the Labour Party at the next Election than otherwise.
Very well; they can carry on in this fashion, but I wish they would not. They are wrecking their own chances and also making it very difficult to improve industrial relations. Let the Opposition have their own way, but I beg the Liberals, who are a bit better than the Tories—not very much but a bit better—not to associate with the Tories either now or after the Election. Take my advice. If
1490
you carry on in this fashion you will do the Labour Party an awful lot of good. For my part, I have never voted more delightedly in those two Divisions. Why? Because the Whips told me to vote. Otherwise, I would not have cast a vote against the Tories this time. The more they vote against us in the House of Lords, the better it will be.
LORD FEATHER: I know that the object of this Amendment is to protect some person who, as the noble Lord, Lord Byers, has said, has a strong conscientious feeling about some particular aspect. Any union is prepared to allow someone to resign his membership of that union. However, the people that this Amendment seeks to protect are those people who want to resign their membership but who want to continue to have the protection of the conditions, the wages and the general atmosphere for which the union has negotiated. If I thought that somebody wanted to leave a union and wanted, as it were, to disavow all the things from which he was benefiting as a consequence of union action I would regard that man as being honourable. But I am sorry to say that most of them are not like that: they want to leave the union, but they want to get the increases and the conditions that the union has obtained for them.
I should like to ask the noble Baroness, Lady Seear, whether she wants to encourage the philosophy of "something for nothing". I should have thought that she does not want that, and indeed I should have thought that nobody in this Committee would want to encourage the philosophy that there is something for nothing in life. There is not something for nothing; there is only something if somebody else is paying more than their fair whack. If noble Lords believe in the philosophy of something for nothing, then they should support this Amendment, but if they believe that people should accept their full responsibility in this society it seems to me the Amendment should be rejected, and I should like to see it withdrawn on those grounds.
LORD HAILSHAM OF SAINT MARYLEBONE: Perhaps I might intervene for a moment, because it seems odd that the noble and learned Lord has not uttered something. The noble Lord the Leader of the House said that this matter

1491
was dealt with by Common Law and from that I drew the inference that the Amendment was unnecessary. The inference I draw from the speech of the noble Lord, Lord Feather, is that the Amendment is abominable, not that it is unnecessary. It cannot be both. I really think the Committee is entitled to a little legal advice from its senior legal representative. Which of them is right: the noble Lord, Lord Feather, the noble Lord the Leader of the House or the noble Baroness, Lady Seear?
I wonder how serious the noble Lord, Lord Feather, really is. The noble Baroness, Lady Seear, told us that this was practically non-existent; very few unions intend to hold people against their will. Most societies allow resignations. I know that according to some tenets of some Christian bodies marriage is indissoluble, but should unions be the same as regards their membership? Are you there "till death us do part"? Are you there even if you do not want to stay any longer, and what good will come out of such a rule, and how can it be enforced? Supposing a union member says, "I am not going to be a member of this union any longer; I am not going to pay any subscriptions; I give you six months' notice"—what is the effect in law?
The noble and learned Lord is sitting there, obtaining a reputation for wisdom by his taciturnity, but I want to tempt him to his feet. The Committee is entitled to know the answer to these questions before it votes on the Amendment. What did the noble Lord the Leader of the House mean when he said that the problem was dealt with by Common Law and is it really true that such a rule, if it exists, can be enforced by any legal process whatsoever? I think the Committee is entitled to know the answer from its great expert.
LORD SHEPHERD: If I may say so, the noble and learned Lord is being very mischievous. My noble and learned friend is going to be fielded when we come to the more complex legal matters of the Bill. As I understand it as a layman, this matter is not legally complex. I understand that in the absence of any express rule about resignation it seems clear from case law that a member is
1492
free to leave his union if he chooses to do so. Indeed, in all probability a union would be acting ultra vires if it sought to prevent him from leaving. If the union has a rule which requires him to give so much notice of his intention, then the law requires that he gives that notice to make his resignation effective. The proposed new clause recognises that this is only fair.
However, if a union tries to adopt a rule depriving members of all freedom to resign, or at least restricting that freedom unreasonably, the courts could be expected to declare such a rule void as being against public policy. This would be the case, for example, where the rules gave the union Executive an overriding discretion to refuse resignation which the Executive proceeded to exercise in an unrealistic manner. My understanding is that that is the law as it applies to this issue. I oppose the Amendment because in one respect it is unnecessary, but also, if it were put into the Bill in its present form, it would appear to give an exaggerated right which, as my noble friend Lord Feather said, would be quite undesirable within the trade union movement.
BARONESS SEEAR: The arguments we have heard are, of course, the traditional arguments which are always produced in support of the closed shop and compulsory trade union membership. We accept that normally speaking and in most circumstances a man will belong to the union and will contribute to the union from which he gains benefits, and the objections to his leaving for exceptional reasons are covered in this Amendment, in that we say that he must give reasonable notice and must comply with any reasonable conditions. We are simply saying that, in certain places, this limitation is creeping into the rules of the union. It may or may not be true, but as the noble and learned Lord, Lord Hailsham of Saint Marylebone, has said, we have not had a legal ruling on this, and I am not aware that the courts have ever given a judgment on it, that it is, in fact, ultra vires for that rule to exist. If it is ultra vires, then indeed the organisations which are doing this are presumably acting unlawfully, but I do not understand that this is, in fact, established and, for that reason, I wish to press the Amendment.
6.40 p.m.
On Question, Whether the said Amendment (No. 10) shall be agreed to?
Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 5—[Lists of trade unions and employers' associations]:
6.47 p.m.
THE EARL OF GOWRIE THE EARL OF GOWRIE moved Amendment No. 11:
Page 5, line 2, after ("68(4)") insert ("or 85(3)").
Their Lordships divided: Contents, 76; Not-Contents, 68.

CONTENTS

Allerton, L.

Hailes, L.

Rankeillour, L.

Amherst, E.

Hailsham of Saint Marylebone, L.

Reigate, L.

Amherst of Hackney,

Rochester, L.

Barnby, L.

Halsbury, E.

Ruthven of Freeland, Ly.

Berkeley, B.

Hanworth, V.

St. Aldwyn, E.

Brougham and Vaux, L.

Hawke, L.

St. Davids, V.

Byers, L.

Henley, L.

Salisbury, M.

Colville of Culross, V

Hornsby-Smith, B.

Savile, L.

Cork and Orrery, E.

Killearn, L.

Seear, B. [Teller.]

Cowley, E.

Kilmany, L.

Selkirk, E.

Crathorne, L.

Kilmarnock, L.

Sempill, Ly.

Cullen of Ashbourne, L.

Lauderdale, E.

Sharples, B.

Daventry, V.

Limerick, E.

Stamp, L.

Davidson, V.

Lloyd of Kilgerran, E. [Teller.]

Strathclyde, L.

Denham, L.

Long, V.

Strathspey, L.

Drumalbyn, L.

Lyell, L.

Terrington, L.

Dundee, E.

Macleod of Borve, B.

Trcfgarne, L.

Eccles, V.

Margadale, L.

Tweedsmuir of Belhelvie, B.

Elles, B.

Merrivale, L.

Vivian, L.

Emmet of Amberley, B.

Monck, V,

Ward of Witley, V.

Exeter, M.

Mountevans, L.

Wigoder, L.

Gainford, L.

Mowbray and Stourton, L.

Windlesham, L.

Gladwyn, L.

Northchurch, B.

Wolverton, L.

Gore-Booth, L.

Oakshott, L.

Young, B.

Goschen, V.

Orr-Ewing, L.

Younger of Leckie, V.

Gowrie, E.

Platt, L.

NOT-CONTENTS

Arwyn, L.

Gardiner, L.

Pargiter, L.

Bacon, B.

Garnsworth, L.

Peddie, L.

Balogh, L.

Goronwy-Roberts, L.

Phillips, B.

Bernstein, L.

Gordon-Walker, L.

Rathcreedan, L.

Beswick, L.

Hale, L.

Royle, L.

Birk, B.

Hankey, L.

Rusholme, L.

Blyton, L.

Harris of Greenwich, L.

Robertson of Oakridge, L.

Brockway, L.

Henderson, L.

Sainsbury, L.

Buckinghamshire, E.

Houghton of Sovverby, L.

Segal, L.

Burton of Coventry, B

Hoy, L.

Shepherd, L. (L. Privy Seal.)

Castle, L.

Jacques, L.

Shinwell, L.

Champion, L.

Leatherland, L.

Slater, L.

Clwyd, L.

Lee of Newton, L.

Snow, L.

Collison, L.

Llewelyn-Davies of Hastoe, B. [Teller.]

Somers, L.

Crook, L.

Stow Hill, L.

Donaldson of Kingsbridge, L.

Lovell Davies, L.

Strabolgi, L. [Teller.]

Douglass of Cleveland, L.

McLeavy, L.

Summerskill, B.

Delacourt-Smith, L.

Maelor, L.

Taylor of Mansfield, L.

Elwyn-Jones, L. (L. Chancellor.)

Maybray-King, L.

Wells-Pestell, L.

Evans of Hungershall, L.

Melchett, L.

Winterbottom, L.

Feather, L.

Milner of Leeds, L.

Wise, L.

Fiske, L.

Morris of Kenwood, L.

Wootton of Abinger, B.

Gaitskell, B.

Pannell, L.

Wynne-Tones, L.

The noble Earl said: With the leave of the Committee, I wish to speak to Amendments Nos. 11, 12 and 13 together. These are simply alternatives and their purpose is simple. All other unions and bodies which are listed, as we now do it, in Clause 5(2) will automatically go on the list to be kept by the Registrar of Friendly Societies. We feel that the special register bodies which, in the first instance, were being excluded but which

1495
are now to be included, should also have the right to go on the list automatically if they so wish. It is a question of choice.
The reason why we did not press this Amendment in Standing Committee in another place was that there was then some question as to whether the bodies concerned wanted that to happen. We felt we should not push something intended to be for the benefit of a particular group of people, unless they themselves wished it. No doubt the noble Lord has had some notes from the British Medical Association, speaking for itself and the other bodies with whom it has jointly made representations, saying it would like to go on the list automatically. Any of the Amendments Nos. 11, 12 or 13 would produce that effect and would give pleasure, I imagine, to the B.M.A. The neatest one in our view is No. 11. Speaking for myself, I do not in the least mind which of the methods is employed. I hope the Government will find it possible to accept one of them.
LORD SHEPHERD: I think we should be quite clear what is involved. If an organisation does not appear on the Registrar's list, then the question of tax relief on provident income arises. This is not a significant problem for the organisations referred to by the noble Earl, Lord Gowrie. When we discussed the Industrial Relations Act, it was very clear that those who were to be put on to the Register would be vetted. They would go through a particular "hoop". One of the basic requirements for going through that "hoop" was that the organisations were principally involved in industrial relations. Therefore, I do not think there will be any difficulty in those organisations, trade unions or employers, getting on under Clause 5(2).
But there are some organisations, and the noble Earl himself referred to them, that are not principally involved in industrial activity. They have not been vetted to that extent. They are involved in many other aspects of public life, but industrial relations is not a principal activity. This does not preclude them from appearing on the register, but it does require that they should go through the provisions of subsection (3) and satisfy the Registrar accordingly. I myself do not believe that there will be any difficulty
1496
for those organisations to go through this particular "hoop". I hope the noble Earl will agree that it is right that we should keep the two subsections quite separate. Those that have been vetted, those that are clearly involved principally in industrial relations, should go through one "hoop" and should appear under one subsection, but those which have other activities, where industrial relations are not a principal activity, should be treated separately and should appear under Clause 5(3).
THE EARL OF GOWRIE: I had, of course, hoped that the noble Lord the Leader of the House would have found it possible to accept one of these Amendments, which seem to be mild. If the Government do not accept any of them, while professing to wish to include such organisations, they will nevertheless be treating them quite differently. The noble Lord's friends in another place have intimated to us that one reason for not making changes was that some bodies might not come within the definition of a "trade union" and might not be entitled to be registered. For bodies wanting to register in the future that might be a relevant consideration. But, surely, it would be contrary to the spirit of the Amendments accepted to Clause 2 in another place. There are, therefore, practical difficulties and practical considerations which we should be thinking about, and I fear we are not. But I am most anxious to avoid the accusation by the noble Lord, Lord Shinwell, of not being co-operative. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD SHEPHERD: I think this might be an opportune moment to propose that we should adjourn the Committee stage, and I therefore beg to move that the House be resumed in order to take the Second Reading of the Railways Bill. I do not know how long your Lordships will require on that Second Reading. I would suggest that if it should finish earlier than eight o'clock the House should then be adjourned during pleasure, in order that those of us who have slaved so hard on this Trade Union Bill this afternoon should have the opportunity for a meal. I beg to move that the House do now resume.
Moved, That the House do now resume.—(Lord Shepherd)
On Question, Motion agreed to and House resumed accordingly.

RAILWAYS BILL
6.55 p.m.
LORD GARNSWORTHY: My Lords, the purpose of this Bill is to provide a proper system of financial support and control for the British Railways Board, so that they can continue to operate a national passenger network and maintain services essential in the public interest. There is no escaping the fact that the cost of the railways to the taxpayer is very high, and is increasing. Last year the Government paid over £170 million in cash support to British Rail, and we expect that in future they will need annual support on revenue account of the order of some £300 million. But this situation is by no means unique to this country; railways all over the world have chronic financial difficulties and to the best of my knowledge there is no large passenger railway system anywhere which is not in substantial deficit.
There have been two main attempts in recent years to put railway finances on a sound basis. In 1962, the Transport Act wrote off or suspended interest payments on most of the debt to the Government and provided for deficit grants to be paid for up to five years. The money ran out well before the end of the period, despite substantial productivity improvements achieved by way of reductions in the network and manpower. The 1968 Transport Act was the first recognition that the railways would always need some Government support. The Act therefore provided for grants for individual passenger services which were loss-making but which needed to be kept open for social reasons. It was, however, assumed by both the Railways Board and the Government that most of the system—the Inter-City services and freight—could operate commercially.
But although the railways made a small book profit for the first few years, it soon became evident that their financial position was again deteriorating. A thorough review of policy was therefore put in hand in 1972 to try to establish whether there was a viable railway network at
1498
all, and to identify what size and kind of network should be provided in the public interest. The main conclusio from this review was that rail passenger operations as a whole are basically unprofitable, and that the only way of significantly reducing the amount of support they need would be to cut down the scale of railway operations quite drastically and possibly to withdraw all rail services from whole areas of the country. The only alternative is to recognise, as this Bill does, that the railways are a public corporation, that is to say not a normal nationalised industry, which provides social and environmental benefits as well as giving an economic service, and that if the country needs a rail network of something like the present size it has to pay for it.
Clauses 3 and 4 are the heart of the Bill. They provide the basis for a comprehensive system of support by enabling the Government to place a general obligation on British Railways to provide passenger services and to compensate them for doing so. There is to be a limit on the total amount of grant which may be paid of £900 million initially, which may be increased to £1,500 million, if Parliament agrees by Affirmative Resolution, after which there would need to be fresh legislation.
The significant change made by Clause 3 is that the grant is to be paid for the whole network of passenger services and will no longer consist of a large number of specific grants for particular services. The 1968 Act system suffers from the disadvantage that it is very difficult to allocate the joint costs of track and signalling and other facilities to the many services which use them. Although there may be some individual services—for example, heavily-used long distance services between main centres, or commuter services—which could show a book profit, their so-called "profitability" is an arbitrary calculation which is determined largely by how these joint costs are shared out. Support for the whole passenger business also recognises that the bulk of the costs of providing and maintaining expensive, high quality track and signalling arises from the needs of passenger services. It would be possible to run a much lower cost railway for freight operations only, but that, of course, is not our situation.

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The Bill will also assist the Board through a financial reconstruction. Clause 1 reduces the Board's debt to the Secretary of State from the present £439 million to £250 million. This reflects a change in accounting procedures whereby most investment in track and signalling will in future be charged to revenue account, not capital account as at present. It also recognises that most investment of this kind is essential replacement instead of remunerative capital investment; it is therefore sensible to write it off as it occurs and to meet much of the cost through the passenger grant, rather than saddle the railways with historic and future debt charges. Expenditure on new routes of major electrification schemes, which are, of course, remunerative investment, will, however, continue to be treated as capital items, as will all rolling stock, stations and freight investment. Clause 2 increases the Board's borrowing powers to £600 million, extendable to £900 million by Affirmative Resolution. These figures include the capital debt to the Secretary of State remaining under Clause 1. But they do not represent the Board's total investment programme since, as I have said, much of that will in future be financed from revenue.
It is essential that the Government and Parliament should be given adequate control over, and opportunities to review, the expenditure of such large sums of money. Since 1972, the Government have been meeting British Rail's increasing losses through cash shortfall payments without specific statutory authority. The Bill replaces this open-ended drain with a considered régime of control and review. Clause 4 of the Bill requires the Railways Board to act on lines settled from time to time with the approval of the Government in formulating policies and plans for the general conduct of its business. It also strengthens the Secretary of States's powers to obtain information from the Board. Clause 3 enables the Secretary of State to determine the conditions under which the grant shall be paid. It is not the Government's intention in seeking this power to reduce the responsibilities of the Board and its managers. The Government cannot manage railway services directly, and have no intention of trying to do so. At the
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same time, we need a system which will enable the Government to influence the direction of railway policy, to monitor expenditure and to assess whether the community is getting value for money.
Before I turn to the other provisions of the Bill, the House may wish to know how the Government see the future of railway investment. The whole field of public expenditure is at present being reviewed and so specific figures for railways investment cannot be given at present. The Government accept in general the strategies put forward by British Railways last year, and will provide an appropriate level of investment to implement them, subject, of course, to the general economic situation. In practical terms, this means that we accept that the railway's network should be of roughly its present size and that passenger services should be improved with new rolling stock, including high-speed diesels and the advanced passenger train, modernised terminals and better interchanges. The Government attach particular importance to the improvement of commuter services. These are the trains that most of British Rail's customers use, and there is an urgent need to ease the lot of the long suffering commuter.
Freight services will also continue to be improved. One of the aims of the Government's policy is to encourage suitable freight to transfer from road to rail, and the Bill will assist railway freight in two ways. First, the new support sys-stem recognises that the bulk of the joint cost of the railway's system is attributable to passenger operations. The grant under Clause 3 will therefore be so structured that freight operations will have to bear only a relatively small, though fair, share of the joint costs of track signalling and administration. Secondly, Clause 8 provides for a new grant from Central Government, to assist the construction of private sidings, including associated depots, access roads and equipment, where this will encourage industry to send suitable traffic by rail. These grants will be paid where it be desirable from a local environmental point of view to get the traffic on to rail, but where this would not occur normally since it would require additional investment by industry.
There are limits to the extent to which freight can be transferred. The support for freight provided by the Bill should

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assist the Board to continue the considerable success it has already achieved in increasing its carryings of such commodities as coal, iron and steel and aggregates and transporting them efficiently, safely and economically.
The remaining important purpose of the Bill is to bring about a long-needed rationalisation of the arrangements for financing the Board's pension obligations. At present these have a serious effect on the railway's finances, because they have inherited inescapable pension obligations from the past which simply cannot be financed from current revenue. The Bill, therefore, provides in Clauses 5, 6 and 7 for these obligations to be funded over a period by the Board, with the help of grant from the Government, and also for grant for repayment of money invested in the railway's business by the pension funds. The Bill is concerned only with the arrangements for financing the Board's historic obligations in respect of pensions; it does not in any way affect the actual pensions which railwaymen receive. It will involve the Government in a commitment over the years to provide finance of over £1,000 million. Finally, Clause 9 enables salaries to be paid to the chairmen of transport consultative committees, as is already the position in other nationalised industries.
In all, the measures set out in the Bill will give British Railways support as never before. They result from a comprehensive review of the railway's business which showed that, if the country is to continue to have a railways system of any significant size, substantial Government support will be needed for the foreseeable future. It is now up to all concerned—management, workers and customers alike—to demonstrate in practical terms that they share the faith which the Government have shown in the long-term future of a national rail network by running it efficiently, making the most of the opportunities provided by higher investment to increase productivity, and by using the services the railways provide. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Lord Garnsworthy.)
7.10 p.m.
LORD MOWBRAY AND STOURTON: My Lords, the noble Lord, Lord Garnsworthy, has put us all in his debt by the careful and painstaking way he
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has moved the Second Reading. In general, the Opposition welcome the Bill as necessary, although there are one or two aspects of it which still slightly worry us. The Government, like the Opposition before them, had the findings of the British Railways Board before them which they had been asked to undertake by my right honourable friend Mr. Peyton. The first point they made was that no railway network is viable, but they added:
"Any significant reduction in size of the present system of some 11,500 miles would actually require greater financial support."
This led them to the second point that the "necessary railway" could be defined only in the context of an overall national transport policy as decided by Governments. They said that in their opinion the present size was about right.
Most noble Lords in the House to-night will probably welcome the fact that both the last and the present Government accept these premises. The Railway Board's third point sensibly was that the capacity of our under-used railway system should be exploited to the maximum. I shall return to that matter in a moment. The fourth point was that personnel on the railways are likely to decline by about 2 per cent. per year. The fifth point was that over the next nine years capital investment of some £1,787 million would be required, which is almost double the present rate of investment.
My first point is about the Board's reference to overall transport policy. As noble Lords know, had the Conservatives been returned to power, our Bill would have been accompanied by a White Paper on our overall transport strategy. This Government have already not only cut what we considered vital to the nation's economic health—that is, the 3,500 mile network of major trunk roads by the early 1980's which has been reduced to 3,100 miles—but also the standard of the roads being built has been lowered as well.
We had planned substantially higher investments in four key railway centres. We intended to achieve it by switching resources within the transport section, mainly from lesser urban roads to the railways. The Railways Board, with road, air and water transport authorities, would have all seen their place within a larger framework and therefore could have planned their long-term strategy in unison

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instead of having to plan as now in ignorance of the future long-term Government strategy of the overall picture.
That leads me to another point. What will be British Rail's capital investment programme now for improvements and modernisation? I know that the noble Lord, Lord Garnsworthy, said that this programme would be up to standard and so on, but I see nothing in the Bill to tell us what the Government's plans are in this respect. Yet it is on such matters as the improvement of the fast Inter-City services, with the prospect, as the noble Lord said, of high-speed diesel trains and later on advanced passenger trains, that rail popularity with the travelling public will largely depend.
The long-term investment in traffic signalling and similarly the improvement of commuter services will now, I am happy to be told by the noble Lord, be met out of revenue. 1 say I am happy because it means that they know where they are on this and that the future investment programme will be able to be met without it having to come out of capital investment monies.
To return to what is in the Bill, the figures are, 1 think we will all agree, frightening, the more so when one remembers that in the last ten years there has already been some £3,000 million of Government assistance to the railways. The £1,500 million awarded under Clause 3—I agree that this is a maximum figure—to subsidise passenger services over a period of the next five years will not, I trust, be assumed by British Rail to be a recurring exercise. I should like the noble Lord to confirm that such is not the Government's intention.
In 1972 British Rail's actual trading deficit was some £26·2 million. Last year it was £51·6 million. I would hope that with the new subsidy in five years' time they will have been able to largely stabilise this position. It is vitally important that this money should not be frittered away. There will be no one to gainsay me on that, but with the Cooper Brothers formula now scrapped I sincerely hope that the Secretary of State will use the powers in Clause 4 to make British Railways accountable to him. More Parliamentary supervision will now be necessary. It will bring us a problem: how to equate the necessary in-
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creased Parliamentary scrutiny against British Railways very necessary freedom of management responsibility. The trust and good will on the part of those concerned will be necessary. I was glad to hear what the noble Lord, Lord Garnsworthy, had to say about that.
Clauses 5, 6 and 7, dealing with pension funds will be unreservedly welcomed by all in the House. I also welcome Clause 8. In this House we have continually heard how your Lordships would like to see more goods taken off the road and put on rail. If rail is to double or treble its load of freight it must make its services for freight and parcels more attractive to industry. Provision of more freight facilities is essential. With the long-term opening up of the North-East of Scotland and the likelihood of the Channel Tunnel, British Rail's freight section has a chance opening up before it which never existed before. I hope sincerely that they will seize the opportunity with both hands.
I have spoken for long enough. I have indicated that, although we greet the Bill, we do so with reservations, because although it wills many means it leaves much unsaid. Nowadays, transport has to take into account not only economics but environments and sources of energy. I suggest to your Lordships that only if the Bill is quickly followed by other information, advice and action will it be as useful as is intended.
7.19 p.m.
LORD LLOYD OF KILGERRAN: My Lords, may I presume to associate myself with the noble Lord, Lord Mowbray and Stourton, in welcoming the Bill and congratulating the noble Lord the Minister upon his clear, sympathetic and statesmanlike approach to these railway matters. I was delighted to hear the noble Lord differentiating the functions of the Railways Board from that of nationalised industry, and emphasising that, unlike nationalised industries and their functioning, from the financial point of view the railways were a public corporation providing environmental and social assistance to the community. Therefore we on these Benches welcome the fact that, as the noble Lord said, the attitude of the Government towards the railways is "as never before." Therefore we would support all the measures which are introduced in the Bill.

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We particularly welcome the noble Lord's assurance that he accepts and will be supporting a strategy of the Railways Board as put forward last year. In this connection may I presume to say that that will probably mean that the railway in North Wales—so many of us know about the Cambrian Railway—will continue to survive. We welcome his reference, of course, to improving the conditions of the commuter services. I should like to support what was said about Clause 8. We too would welcome Clause 8, in the hope that it can be effective in improving the freight arrangements of the railways, so inducing more freight to come on to the railways and away from the roads.
There is one matter which we on these Benches always find somewhat disconcerting, and something about which we are usually a little unhappy. We are always unhappy about the procedures which may be set up, and which indeed may exist, in order to deal with regional matters. We hope that, particularly in regard to the rural areas of Wales and Scotland, the voices from those areas will be heard and dealt with as sympathetically as the whole matter has been dealt with by the noble Lord, Lord Garnsworthy, this evening.
7.21 p.m.
LORD BERNSTEIN: My Lords, I am overwhelmed by the excitement of this debate. I was here about ten days ago when there were ten of us in the Chamber. I have not counted to-night, but we have less, I think, to-day, at 7.20. What is it about British Railways which makes everybody run away?
LORD LLOYD OF KILGERRAN: My Lords, I can count at least 15 in the House at the moment.
LORD BERNSTEIN: I am delighted, my Lords. It was 10 o'clock when I spoke on the previous occasion. I have no doubt that the noble Lord, Lord Garnsworthy, has been clear in reading out the purposes of the Bill and explaining the Bill itself; but I am very surprised that while it comes from the Department of the Environment, yet not a word is said about the environment in this particular Bill. I do not know who thinks that is important. I think it is. The noble Lord, Lord Mowbray and Stourton, on the other side of the House talked about "exploitation to the
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maximum." Is that what we want nowadays—exploitation to the maximum? I thought that was something that we did not want nowadays.
LORD MOWBRAY AND STOURTON: My Lords, with great respect to the noble Lord, I said exploitation of under-capacity.
LORD BERNSTEIN: My Lords, I have not really worked out the figures at all. All I know is that every successful railway organisation in Europe is nationalised. At what cost we have not been told, and I have not worked out our figures. I am not opposed to the nationalisation of British Railways: I am opposed to the people who are responsible for the running of British Railways. It is not only a question of whether a train comes in on time, but whether the people concerned are accepting to the full their responsibilities as a national organisation. I do not think they are.
In the Explanatory and Financial Memorandum they are given powers for the "general conduct of their business" subject to the approval of the Secretary of State. The Secretary of State concerned is the Secretary of State for the Environment. It also places on him and the British Railways Board a general obligation to operate the passenger system. Should there not be powers to do more than that? Should the Secretary of State not have powers to make sure that from the national point of view British Railways us their land to better advantage? Should he not be given powers to make sure that new railway lines get the same kind of attention as new motorways do? No new motorway has been built in recent years without the permission and the co-operation of the local authorities. Under this Bill and all previous Bills British Railways can do what they like irrespective of the local authorities.
I should like the noble Lord, Lord Garnsworthy, to tell us a few things. Will he give us a promise that no money will be spent on the Channel Tunnel railway development until the Board has received approval, publicly, from the other place? British Railways have poisoned the centres of many of the cities in this country, as I pointed out on the previous occasion, when we had a maximum audience of ten. You have only to see the railway lines and the arches on

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the Southern side of the Thames to realise that: There are nine railway arches crossing roads in Manchester City which have had no trains over them since 1960—14 years ago. Are we going to allow these British Railways people to go on doing what they have done in the past?
In Clause 4, subsection (3), it says:
"The Railways Board shall furnish the Secretary of State with such information as he may specify in writing …".
I want him to specify in writing what they are going to do when they develop the railway system, and its relationship to the local authorities through whose areas the lines are to be built. Then, in subsection(4) it says:
"…the Railways Board shall, as soon as possible after the end of each accounting year of the Board and in accordance with subsection (5) below, make to the Secretary of State a report on the exercise and performance by them of their functions during that year and on their policy and programme and the Secretary of State shall lay a copy of every such report before each House of Parliament".
I suggest they should also list the land which has been sold, the price of the land and to whom it has been sold. They should also say whether the local authorities had wished to buy such land. Will the noble Lord, Lord Garnsworthy, give those undertakings—
LORD TAYLOR OF GRYFE: My Lords, if I may interrupt on a matter of fact in relation to the disposal of land belonging to nationalised industries, I understand that it is the practice that local authorities and Government Departments are advised of the availability of such land before it is offered on the open market.
LORD BERNSTEIN: I hope the noble Lord is right, but I can tell the noble Lord of an incident where it was not so. The Manchester City Corporation walked to the offices of the British Railways Board with a cheque made out for £2,500,000 to buy the Central Station, and they refused it. A few weeks later it was sold to a private organisation, who in turn sold it again. The full story is available in the Sunday Times.
LORD TAYLOR OF GRYFE: My Lords, I am sorry to interrupt again. I do not want to pursue it, but the fact I wanted to establish was a general fact
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affecting all nationalised industries. I am sorry to interrupt the noble Lord.
LORD GARNSWORTHY: My Lords, I think my noble friend Lord Taylor of Gryfe ought to be a little careful because of his position.
LORD TAYLOR OF GRYFE: I am sorry, my Lords, if I have offended against the practices of the House. I am a member of the British Railways Board, and I was not answering a question in relation to British Railways; I was con-finning a general principle on land belonging to nationalised industries. But I take the point of the noble Lord, Lord Garnsworthy, and thank him for it.
LORD BERNSTEIN: My Lords, is the noble Lord, Lord Taylor, saying that the British Railways Board did not comply with general principles in this matter? May I continue. I should like to have that undertaking; and I should like to make one further point in connection with the Channel Tunnel. The Secretary of State, Anthony Crosland, said in the other place:
"The object of proceeding with phase two of the Channel Tunnel is to keep our options open. It does not prejudge any decision on the project beyond the present phase."
Will this Bill in any way allow the British Railways Board to continue with their ideas of a Channel Tunnel railway line without their having to go back to the other place?
7.28 p.m.
VISCOUNT DE L'ISLE: My Lords, I do not want to keep your Lordships from the main subject of discussion in this House to-day, but I think all your Lordships should realise—I am sure we all do—that in bringing the Bill before Parliament the Government and British Rail are asking us to agree to an enormous burden on our total economy. The problem of transportation is always a difficult and complex one. Perhaps in some ways we in our generation, thanks to all, may have gone too fast. We have had difficulty with airlines; we have had difficulty with the railways; we never have enough money for our roads. If British Rail is to receive this enormous subvention, mainly for passenger traffic, it will necessarily be a drain on all the other resources in this country.

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Since the making of a profit year by year, which used to be the guiding principle, no longer subsists, what are the guidelines? It is very difficult to say, but the Bill takes rather an obvious course. It says that it shall be subject to the Minister, the Secretary of State or whoever is the Minister of the day, who has charge of the British Rail system. The powers of any Minister or his advisers are limited in technical matters and this places an enormous responsibility on the British Railway Board. They are not accountable for pofit. They are accountable in detail and for policy; but they are accountable to a Minister who, in the nature of things, being busy with other enormous Departments, finds it difficult to fulfil adequately. I think that we in Parliament should take a continuing interest in all Departments of State which are large spenders of public money. The kind of anomaly which occurs to me—and I am not a learned economist but I am in business—is that we subsidise the fares of season ticket holders into the City of London because the cost of the fares is not covered by the payment from the passengers, ex hypothesi what the noble Lord told me. At the same time, we limit the building of office space in the City because we do not want to overburden it. In fact we are subsidising the rent of City properties by this process. This is the difficulty which all institutions and Governments and organisations get into when the price system does not work. I am not going on to speak of the great problem which no Government in any country have solved; but we lose the guidelines.
The British Railways Board are sitting in a seat of great power. They have received their subsidy; and when the information is available, and it is generally later than sooner, they report to a Minister who lays a report before Parliament and he is also susceptible of detailed questions. I am not going to revert to the Question I asked in the House the other day but, like the noble Lord, Lord Bernstein, I have great doubts about the confidence of a board like that of British Rail to deal with all the social and environmental aspects of the problem. Since Parliament is over-burdened and local authorities to a large extent are ruled out; since it appears that such forms of inquiry as planning permission
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inquiries are no longer applicable to statutory bodies; and since environment is not people but perhaps certain stretches of the countryside, we must watch that British Rail (in their wisdom, as may be, but with their eagerness to compete with Japan and France in higher and higher speeds) do not intrude more and more on our environment by louder and louder and faster and faster trains. We must watch that by allowing British Rail to get power through Parliamentary procedures and hybrid Bills and so on which are not a popular form we are not really subsidising the destruction of our own environment.
7.35 p.m.
LORD HAWKE: My Lords, I shall be brief. I agree that amputation is no solution to railways; you must either subsidise or shut down; and I think that shutting down is completely impracticable. For years I have heard successive Governments talking about a co-ordinated transport policy but not one has ever emerged, and I do not think one can emerge because it is too complicated a business for the human mind to manage. I think there are one or two instances of wasteful competition. One of them is short-distance air travel against the Inter-City liner. London to Scotland is a practicable air travel proposition; but when businessmen hop on to planes to Manchester and Leeds and so on, when one knows well that they can go just as quickly by train, I do not think that they are using our best facilities. Half of them go only because it is a matter of prestige and the thing to do. Our new trains are wonderful and we must be grateful to the designers in the Southern Region for having produced at last commuter trains which are extremely comfortable and extremely good. One must beware of railway enthusiasts. I have known at least two general managers of railways who in their spare time played trains in their own house. It is the besetting vice of railway men that they get too enthusiastic. I am dubious about the tremendously high-speed trains as to whether the enormous expense can be justified. I still cannot see how they can spare the track for 120 to 130 miles an hour trains.
My Lords, the last time I spoke on this subject I spoke about land. That was on a Bill where we wrote off £400

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million of the railways' debt. I said that in return for this £400 million we should make the railways hand over to the Government their surplus land of which they then had an immense quantity. I do not know that progress has been made in disposing of it privately but they, like every landowner, think that everybody has a divine right to put office blocks on every bit of land that they own. They will sit on it until the last minute in the hope that they will be able to do so; whereas the land only too often is in the most strategic places for urban housing. One of the greatest needs of this country is more urban houses for London service personnel including their own railway-men. I repeat my plea that in return for another large write-off we, as taxpayers and general citizens, should demand the handing over of railway surplus land to be used for housing.
7.39 p.m.
LORD GARNSWORTHY: My Lords, we have had an interesting and wide-ranging debate even if the Chamber has not been over full. My noble friend Lord Bernstein made reference to attendance at the last debate on the railways and to attendance this evening. I think it is generally appreciated that the Members of this House have been here in unusual numbers this afternoon and have been working very hard. In fact, they have gone to get the sustenance which those who have been responsible for the measures they have been considering greatly need. Speaking as one who is often in his seat at debates in the House between seven and eight at night, I may say that the attendance at this debate is higher than normal. Those who normally sit in as I do will appreciate the accuracy of what I am saying.
My Lords, the noble Lord, Lord Mowbray and Stourton, put one or two questions to me. First, he asked why there was no Transport White Paper. Does it need repeating again and again that this Government have not been in Office very long? I think that in the five months we have been in office we have not done too badly. We have made a statement on the roads programme—and we are not the architects of the economic situation which determined our approach to these matters—and we have introduced this Railway Bill. I do not think this is a
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bad record. We want to see this Bill enacted as soon as possible so that the present ad hoc system of deficit financing can be replaced by a proper system of suport and control and we want to see that system operating from January 1 next year. To have waited for the issuing of a White Paper would not have been a good thing. It would merely have delayed this essential measure.
I am not too sure that the House was aware that a White Paper would have been issued had the previous Administration introduced a Bill. I have made some research and I must say that I can find nothing positive, but the one point I am very certain about is this: if we are to have sensible consideration of an overall transport policy, we must be very careful not to rush at it and make decisions on the basis of inadequate information. There are a number of issues which need to be settled before any Government can face up to the consideration in depth required to produce a viable overall transport policy.
My Lords, on the question of investment income, I think that, at this stage, perhaps I had better limit myself to saying that what we hope to see here is concentration on bulk night traffic and trunk haul parcels—a point which the noble Lord himself was making. We hope to see concentration on the need urgently to improve commuter services, development of inter-city passenger services of which the noble Lord, Lord Hawke, has spoken so ably, and concentration on the need to maintain and improve track and signalling to increase efficiency and safety and reduce operating costs. However, I have to say that actual investment levels have to be considered as part of the general review of current expenditure programmes, and that is bound to take some time. If it is possible as the Bill proceeds to give more information, I will do my best to do so, but I can say this: so far as inter-city passenger services are concerned, at the moment, as the noble Lord indicated, I think that this growth is welcome to the Board—and it is indeed a major growth area—and we are hoping that the services will be improved in quality and speed. We hope that highspeed trains will be introduced on The London-Bristol-South Wales line in 1976, and the Government are at present considering the Board's proposal to introduce

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them on the East coast main line. Proposals to construct four advanced passenger train prototypes are also being considered. There is a continuous programme of rolling stock and terminal modernisation. If I can be of further assistance as the Bill goes through, I will be; or, alternatively, I shall be very happy to pass on to the noble Lord such information as I can.
My Lords, my noble friend Lord Bernstein asked questions about the Channel Tunnel and I have to say, and indeed it was said in the debate in this House the other evening, that no decision has been taken about the Tunnel or the rail link to it. The two issues will have to be considered together. There is no question of the link being subsidised. If it comes, it will have to pay its way, and the link will be subject to a Private Bill and to planning procedures. In regard to the environment, I do not want to suggest that I did deal at any length with environmental questions, but I think that my noble friend suggested that I did not even use the word "environment". I think that I am correct in saying that I did make reference to the environment.
LORD BERNSTEIN: My Lords, I apologise for interrupting. My noble friend certainly did, but it is not in the Bill and we are considering the Bill.
LORD GARNSWORTHY: My Lords. I appreciate what my noble friend says about what I said and what I read and what is in the Bill, but I am making the point that I did use the word "environment", whereas I think—and I think anybody listening would have felt—that the noble Lord was implying that I had shown no regard for the environment. Let me say that I did not feel it right that I should cover ground that we covered the other evening in the debate on the Unstarred Question. I would remind the House that I then said that we should have consultations with the planning authorities, and I think that we have shown considerable regard to what the planning authorities will have to say about a possible route for a link to the Channel Tunnel.
I am sorry that my noble friend speaks as he does about mistrust of the Railways Board, because I think it will tend to create a difficult situation in that the
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Board will feel that there is soms prejudice there. But I do say to my noble friend that I will see to it that my right honourable friend's attention is drawn to what he has had to say, and I am sure that he will have some regard to my noble friend's words.
My Lords, I listened with interest as I am sure did the whole House, to what the noble Viscount, Lord De L'Isle, had to say. I think he will not want me to cover a great deal of ground much of which—and indeed more—was covered in our debate the other evening. I thank the noble Lord, Lord Mowbray and Stourton, for the limited welcome he gave to the Bill and the noble Lord, Lord Hawke, for what he had to say, and I am very glad of the welcome which he gave to the Bill. I also greatly appreciated the comments of the noble Lord, Lord Lloyd of Kilgerran.
My Lords, this country cannot afford to lose its railways. I do not think that anyone would deny that. But it is not until a railway track is torn up that people really appreciate the social or the environmental consequences. There has been a very great deal of environmental damage following destruction of railway services in parts of the land. As the Bill proceeds through Committee, I hope that we shall give it the speedy passage which I believe it deserves, for the railways need to know where they are; and so far as the railway pensioners are concerned, what is proposed in the Bill is nothing other than justice.
LORD MOWBRAY AND STOURTON: My Lords, before the noble Lord sits down, may I ask him whether he is aware that on November 28 last year, in another place, my right honourable friend Mr. Peyton said:
"The necessary powers to provide appropriate financial support will be taken in a Bill to be presented to Parliament shortly. This will be supported by a transport White Paper, which will underline the greater emphasis the Government are giving to railways and other forms of public transporc."—[OFFICIAL REPORT (Commons), 28.11.73; c. 399.]
LORD GARNSWORTHY: My Lords, I am grateful. I would say that I have also been reading what the noble Lord's right honourable friend said in the other place on January 16, 1974, and I could not see that he was being as specific in

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January as on the earlier occasion. I quote one sentence:
"I prefer to wait until there has been clarification of the energy problem."—[OFFICIAL REPORT (Commons), 16.1.74; c.519.]
My Lords, I do not think that anybody will say that that problem has been cleared up entirely.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

CONSUMER CREDIT BILL [H.L.]
Returned from the Commons, agreed to with Amendments; the said Amendments to be printed.

CONTROL OF POLLUTION [H.L.]
Returned from the Commons, agreed to with Amendments; the said Amendments to be printed.
LORD GARNSWORTHY: My Lords, I beg to move that the House be adjourned during pleasure until eight o'clock.
Moved accordingly and, on Question, Motion agreed to.
[The Sitting was suspended at 7.50 p.m. and resumed at 8 p.m.]

TRADE UNION AND LABOUR RELATIONS BILL
House again in Committee.
THE EARL OF GOWRIE THE EARL OF GOWRIE moved Amendment No. 14:
Page 5, line 37, after ("association") insert ("or that its rules do not comply with the provision of this Act").
The noble Earl said: This Amendment leads us into a slight quandary. We carried an Amendment, a new Clause 2 of the Bill, and my noble and learned friend Lord Hailsham of Saint Maryle-bone conducted the debate on that occasion. Effectively, Amendment No. 14 is consequential, and therefore it seems to me that the most useful thing I could do is to see whether the Government agree with me on this and then return to
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it if they do not agree. I think it is very much a matter for the Government, having accepted the will of the Committee in terms of the debate on the previous Amendment, to recognise that perhaps this one, being consequential, should be accepted.
LORD SHEPHERD: We are opposed to this Amendment, just as we are opposed to the new clause dealing with union rules which has been inserted in the Bill. This Amendment seeks to turn the list into a punitive device, just like the register under the 1971 Act. Let there be no doubt about it; we were firmly opposed to that. Bearing in mind that the Committee has already agreed to the new clause about union rules, and bearing in mind that the clause would be ineffective without the Amendment to Clause 5, we do not propose to divide the Committee, but we shall seek to negative the Amendment because we are opposed to it. It may be that in that way we are registering our opposition and reserving our position, and at the same time saving the time of your Lordships.
THE EARL OF GOWRIE: I do not want to be in any sense abrasive, but it seems to me that the Government have presented this in a slightly spurious manner. It happens that the Committee has carried an Amendment, the new Clause 2, which was moved with great verve by my noble and learned friend. As I said earlier, this Amendment is effectively consequential on that and I do not expect the Government to like it. They did not like the clause, but the fact is that we are considering this clause in my contention not as Opposition v. Government or as Government v. Opposition, but as a Committee committed to sanity in consequence of having carried an earlier Amendment. I beg to move.
LORD SHEPHERD: The noble Earl surely does not expect me to acquiesce to the passage of an Amendment of which I thoroughly disapprove. I said that I would seek to negative it; that I would not divide against it, but would express my opposition to it and reserve the right of the Government to deal with the issue when it goes to another place.
LORD HAILSHAM OF SAINT MARYLEBONE: I hope we are not going to have a great row about this. In

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fact, the noble Lord is saying that he recognises that this Amendment is consequential on the earlier one but that he does not want to yield on the principle of the earlier one. He recognises that this goes with it and having expressed that view he will let it go through without a Division.
LORD SHEPHERD: The noble and learned Lord knows the position. When I used the word "negative", it means that I shall object. When it is called a second time I shall remain silent. The noble and learned Lord should know the procedure of the negativing of an Amendment. It is one stage by which we can show our dissent and our objection without putting the House to the difficulty of going through the Division Lobby.
On Question, Amendment agreed to.
Clause 5, as amended, agreed to.
Clauses 6 to 9 agreed to.
Clause 10 [Acts in contemplation or furtherance of trade disputes.]:
8.7 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE LORD HAILSHAM OF SAINT MARYLEBONE moved Amendment No. 15:
Page 9, line 9, leave out subsection (1) and insert—
"(1) An act done by a person in contemplation or furtherance of a trade dispute shall not be actionable in tort on the ground only:

(a) that it induces another person to break a contract of employment; or

(b) that it consists in his threatening that a contract of employment (whether one to which he is a party or not) will be broken or that he will induce another person to break a contract of employment to which that other person is a party."

The noble and learned Lord said: This Amendment is a great deal more complicated than anything we have been discussing hitherto, and I am not at all sure that I can put it to the Committee both shortly and plainly, though I will seek to do so. I hope that eventually we may not only have the pleasure of seeing, but if possible even the increasingly unexpected pleasure of hearing, the noble and learned Lord who normally sits on the Woolsack addressing the Committee on this highly technical matter.
This is a matter which I should like to put in fairly simple layman's language.
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I am confining myself to the clause which I am moving, and not the more complicated new clause which follows. They are not, strictly speaking, alternatives; that is to say, both could be passed or both could be rejected—it is open to the Committee to take the view it will—depending rather on what the noble and learned Lord may tell us about the law. Assuming that this Amendment, the more modest and simply drafted of the two, were passed, it might be that after consulting my colleagues I would not feel so much disposed to press the second as well, not because it will not stand together technically but it might be that the Committee would think that I was acting reasonably in the general circumstances of the case.
In Clause 10 of the Bill we are dealing with the protection which is given—I am glad to see the noble and learned Lord; I was beginning to feel that something might have happened to him.
THE LORD CHANCELLOR: It would seem that progress is much faster in my absence than in my presence.
LORD HAILSHAM OF SAINT MARYLEBONE: But not nearly so pleasantly. At any rate, it enables me to go a little faster. I was saying—and perhaps I had better say it again so that the noble and learned Lord may catch up with the customary rapidity of mine—that of these two Amendments I am discussing only the first, No. 15. They are, strictly speaking, not alternatives; that is to say, I am advised that they can both live together. They are not strictly alternatives, but I was saying that is rather dependent upon what the noble and learned Lord or the Government tell us, that if we pass Amendment No. 15, I might not be disposed to move Amendment No. 16, although they can live together, for reasons which I will explain, because there is a division of principle which separates them.
When one turns to Clause 10 one is dealing with a new topic, restrictions on legal liability and on legal proceedings, and one is discussing the kind of immunity and privilege that one gives to trade union officials, to members of the public or to other people when acts are done—and I am now using the ritual words—in contemplation or furtherance of trade

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disputes. On Second Reading, when the noble and learned Lord was justifying this measure against the onslaught which I attempted to make upon it, he was disposed to say, "Well, we have to get rid of the 1971 Act and that will be one thing and then we can proceed with"—what I think he called—"our 'package', stage by stage and at greater leisure, provided we are given a chance, to perfect the law "which we have mutilated in this way. He did not use that last phrase, but that was the argument.
Amendment No. 15 restores the law so far as I can do it to its pristine condition before 1971 and, therefore, for the purposes of Amendment No. 15 I am taking the noble and learned Lord at his word. I am saying to him, "All right, you have decided to get rid of the 1971 Act. Well, get rid of the 1971 Act but do not go and under cover of that do something different, because that is not good enough; that casts doubt upon the good faith of the Government". I am using the words in inverted commas as if addressing him personally.
However, I am addressing the Committee and I would say this to the noble and learned Lord and to the Government: You said when we were seeking to introduce harmless Amendments to the law relating to admission to membership of a trade union or expulsion from a trade union, that the important thing was to get rid of the 1971 Act and all that. For the purposes of Amendment No. 15 we have taken you at your word and we expect you to keep your word and not to do something different, because that is what the Bill will do unless Amendment No. 15 is carried or, I hope, far better than carried, agreed to by the Government. We agree with you that the law as it is defined in Amendment No. 15 is not perfect, and in order to improve it we have suggested Amendment No. 16 which has a more complicated set of provisions designed to take account of improvements, partly suggested by Donovan and partly by the nature of the case. But for the purposes of this Amendment No. 15, we are saying that if you want to go back to pre-1971 then go back to pre-1971 and do as you said you were going to do, were trying to do and wanted to do. Leave the improvement of the law, as it was
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pre-1971, to a later stage in the proceedings.
If I may elaborate that with relation to this particular clause, I would do so as follows. We are dealing now with immunity for individuals in respect of acts done in contemplation or furtherance of a trade dispute. In particular, in Clause 10, we are dealing with breaches of contract; that is to say, when somebody commits or induces or threatens the commission of a breach of contract in contemplation or furtherance of a trade dispute, shall he be immune from legal process and effect, or shall he not? The 1906 Act, and the 1906 Act as amended I think by the 1965 Act—but I will not overburden the argument—said, "Yes, he shall be immune provided that the breach of contract involved is a breach of contract of employment". In other words, if you want to call a strike you cannot of course be sued by the mere fact that the strike is or may be on the part of some or all of the strikers a breach of contract of employment.
That is what it did. I think myself in some ways that it is unsatisfactory, but that is the situation which the noble and learned Lord has committed the Government to wanting to do as a result of this particular piece of legislation. He has said—and noble Lords on the Back Benches, perhaps not knowing what was to be decided in this Amendment, have reiterated it again and again in the debate this afternoon—"Get rid of the 1971 Act, and leave all else to subsequent perfection in the light of the social contract by Sections 2, 3, 4 or 5 of our package".
THE LORD CHANCELLOR: I am a little surprised that the noble and learned Lord is beginning to talk of good faith in this matter. It has never been said by the Government that they would restrict this Bill to mere reinstatement of the pre-1971 position. That has never been declared. It was stated that certain Amendments to bring the law in line with the needs of the situation would be embodied in this Bill. There is more to come in the package, but there was never any commitment to limit this stage of the operation to mere reinstatement of the pre-1971 position.
LORD HAILSHAM OF SAINT MARYLEBONE: If the copies of

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Hansard were in a handleable condition at all, which they are not, I would at this stage read a passage from the noble and learned Lord's speech in reply to my speech on Second Reading. As it is, I can only think of it. But, none the less, as I meditate upon that passage, I feel that even he, when he meditates upon it, too, will reflect that he probably went a little too far and was led away by the enthusiasm of advocacy on that particular occasion. But I do not want to take advantage of the noble and learned Lord, as I am sure he does not want to take advantage of me.
This Committee stage is being conducted in the friendliest possible way, but there can be no doubt that even this afternoon—although the noble and learned Lord has been extremely discreet in his replies, having not so far as yet opened his mouth except to intervene against me—we have heard again and again from the Benches opposite, both in the presence and in the absence of the noble and learned Lord (although I thought he might have been hiding his head under the Dispatch Box, he was in fact conducting public business elsewhere as I have subsequently ascertained) that this is a simple little Bill, just to get rid of the wicked Tories' bad work in 1971. Once that has been done, the suspicion of the trade unions will be removed, there will be a happy situation rather like the Garden of Eden with little birds twittering, everybody will be friends, there will be a social contract and no more bad industrial relations and everybody will live happily ever after.
But, no, the fact is that what the noble and learned Lord's Government or his friends are doing, is a little more complicated than that. The Act of 1906 restricted the immunity to acts done in contemplation or furtherance of a trade dispute which were or threatened to be in breach of a contract. They limited the words by saying, "a contract of employment". These words are not limited and owing to the other phrases I in the Act, as I ventured to point out on Second Reading, what the Government are doing is allowing anybody, Renta Crowd, if you please, Renta Thug, if you prefer it, Student Demo, if you like it better, to do an act which is in contemplation of any contract provided it
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is done in contemplation or furtherance of a trade dispute. That trade dispute can be outside this country, for example in Chile. You will not know the merits of it. You will not know whether it is a trade dispute concerned with the conditions of employment, or whether it purports to be in furtherance of conditions of employment, or is basically a protest against the undemocratic nature of the present Chilean or any other Government.
This would be all right, I suppose, but for the fact that we are talking about breaches of contract with innocent third parties. Of course one recognises that strikes are called in breaches of contract with an employer, and sympathetic strikes are probably the same, but then they are in contemplation or furtherance of a trade dispute which are limited to contracts of employment and which have hitherto been limited to contracts of employment in furtherance of a trade dispute which takes place in this country. But the Labour Government in pretending to abolish the 1971 Act, and in fact doing a great deal more, are removing the limitatioins and saying "any contract at all, whether commercial or not; simply a contract of employment." It is as well for Parliament to know what it is being asked to do under cover of the repeal of the 1971 Act because it is a covert thing which is now being done.
An innocent third party may have entered into a contract for the sale or supply of goods. Upon that contract may depend the question whether he has to go into liquidation, whether he goes bankrupt, if he is not a limited company; whether he pulls down a lot of shareholders with him, if he is a limited company. Just because there is a trade dispute, the Government are now going to license not only the trade union officials concerned, but anybody, whether he is directly concerned with the dispute or has no interest in it at all except a desire to stir up trouble. Anybody is going to be allowed to break this contract, to bring pressure on third parties to break this contract, and threaten them with ruin unless they do so. That contract is one which may have no relationship to the trade dispute at all, and the trade dispute may be something which is not even a trade dispute taking place in this country but may, on the contrary, be a

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trade dispute taking place on the other side of the world.
When he was trying to defend this nonsense on Second Reading, one noble Lord, speaking for the Government (I think it was the noble and learned Lord the Lord Chancellor) attempted to justify it by talking about multi-national companies and saying that you get these big oil companies or chemical firms that have branches in different countries. Why should you not have a sympathetic strike in contemplation or furtherance of a trade dispute so as to bring some kind of pressure upon them? The fact is that this Bill as it is now proposed is not limited to multi-national companies. Any kind of a trade dispute in Chile, Saudi Arabia. Israel, Greece, Germany, France or the United States of America, will do in order to enable the immunity to bite. So far from limiting it to trade union officials, as was suggested by Lord Donovan, he has let it open to the world—to Renta Crowd, Renta Student, Renta Thug. Anybody can do it in contemplation or furtherance of a trade dispute.
What Lord Donovan said—and I am quoting from his statements in this House and not simply from his Report—was this:
"If unoffical elements and ephemeral combinations which are here to-day and gone to-morrow are to have the same licence"—
that is to say, the same licence given to trade union officials of responsible organisations—
"then a prospect is opened out which I find alarming. Yet this is apparently what is contemplated. I find it all the more alarming because it is true, as the noble Lord, Lord Cooper, said, there are those who have a vested interest, not in industrial peace but in industrial unrest. Here we give them another opportunity for exploiting a licence they should never have."
I recognise that a return to the 1906 Act is perhaps not the ideal solution. I seek very much to look for a modus vivendi of amending the 1906 Act in an outward direction. The 1971 Act amended it in an outward direction. When we come to Amendment No. 16 we may again discuss whether or not we can do that. Whether or not I move the Amendment depends on what the noble and learned Lord says and on the fate of this Amendment.
I am taking the noble and learned Lord and his Government broadly at their
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word. They say they want to get rid of the 1971 Act. This Amendment says it will get rid of it. Go back to the 1906 position and if you have a proposition to suggest, outline or adumbrate as to how you can give effect to what we tried to do in 1971 in other words or by other means or more limited devices; the second stage of the passage can do that. But in the meantime you are trying to do what is not justifiable because of the alleged purposes of this Act; what is not justifiable on the merits of what is proposed to be effected, and what will produce the situation which Lord Donovan, upon whom so much reliance was laid in Second Reading debate, said was alarming. I beg to move.
8.28 p.m.
THE LORD CHANCELLOR: I am greatly flattered by the encouragement that I have received from the noble and learned Lord to participate more actively in the discussions in this Committee. I am afraid that I shall take him at his word and do so for a considerable length of time from now on. Whether that will be to the benefit of the Committee or the noble and learned Lord remains to be seen. Perhaps I may say at the outset that in the opinion of the Government there is nothing sinister about what is proposed in Clause 10 and that with one or two exceptions, which do not go to the heart of the matter, the provisions in Clause 10 have a very respectable paternity indeed.
Without embarking upon the interesting matters which the noble and learned Lord has developed with his characteristic colourfulness and fancifulness in relation to contracts of employment which have implications regarding multinational companies, which will be the subject of a debate later in the course of no doubt the small or early watches of the night, let me endeavour to indicate the effects of Amendment No. 15. They will be twofold: first, to restrict the protection of Clause 10 to inducing and threatening to induce breaches of contract of employment only, and, secondly, to remove the protection for interference with the performance of any contracts.
The most important effect of the unqualified reference in Clause 10 to "contract" is that inducement for breaches of commercial contracts will also now be

1525
protected. That, I concede, is an important step. The Donovan Report has been cited, and, as the noble and learned Lord said recently about quotations from Winston Churchill, it has the quality of quotations from The Bible: you can always find what you want there. But in relation to this matter where Donovan has been cited, it is the case that Donovan proposed an extension of, and indeed the Industrial Relations Act of 1971 itself extended, protection for inducing breaches of employment contracts to commercial contracts. I at once take the point which has been made by the noble and learned Lord that both Donovan and the 1971 Act couple that with restricting the protection to registered unions and their authorised officials. Although the previous Government had confined the immunity in this way to registered unions, it was I think the case that they hoped—and hoped wrongly—and indeed intended, that all unions would register and thus be immune from actions for inducing breach of contract, commercial contract included. As Donovan has been cited in this connection, perhaps it is right that I should say that the recommendation on this part of the Report was by no means unanimous, and indeed a substantial minority was opposed to restricting the immunity to registered unions.
However, in the Government's view to confine the immunity to unions, whether or not registered, would mean that unofficial strike leaders could be sued by employers for inducing strikers to break their contracts. That is the great denial which the noble and learned Lord complains is involved in Clause 10. But let us face the reality of the industrial scene over the last two or three years. Experience since the 1971 Act came into force, during which time all unofficial leaders and indeed most trade unions of any consequence have been liable for inducing breaches of contract under the strict language of the 1971 Act, does not suggest that this is likely to reduce the number of strikes or to improve industrial relations. Experience has shown that the great majority of employers are just not prepared to sue trade unions or leaders, official or unofficial, and when they have done so their actions have normally only inflamed the industrial scene and done no good at all. That is why there has been massive failure and restraint in
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exercising these theoretical powers. 3ut, quite apart from this provision, which I agree is controversial, unions and union members regard this immunity as the main bulwark of their freedom to carry out their legitimate activities.
The inducement of a breach of contract other than an employment contract may occur in the context of sympathetic strikes—that is the usual field—or as a means of bringing indirect pressure on an employer during a dispute. It also arises when an attempt is made to induce a contractor to break his contract with a labour-only sub-contractor, since the contract between them is not regarded as a contract of employment. Persons who induce someone to break a contract other than a contract of employment—that is to say, for example, a commercial contract—have not been protected, even if such a contract is breached in the course of a trade dispute, unless the induced breach of commercial contract was indirect and achieved by lawful means. That was the classic position of the courts.
In this connection, some judges took the view that a breach of commercial contract indirectly induced in a trade dispute by means of induced breach of an employment contract was perfectly lawful because inducement to break employment contracts, being "not actionable" by virtue of the 1906 Act, was considered not to constitute unlawful means. For many years the courts treated with a good deal of reserve claims based on alleged liability for inducing a breach of commercial contract. For example, it was established that the defendant must act "knowingly"—that is to say, knowing of the commercial contracts. In the case of Thomson v. Deakin the Court of Appeal appeared to demand that a close knowledge of the contract broken was necessary and that unionists or other defendants were unlikely to have had the knowledge to make them liable. But in the case of Stratford v. Lindley the House of Lords considerably reduced the extent of the knowledge of the commercial contract which union officials had to have. In this case they held that in all the circumstances it was "reasonable to infer that they did know" and that there was "considerable indication that they had the knowledge". Then the case of Emerald Construction Company v. Lowthian also widened the possibility

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of liability. Here the Court of Appeal said that:
"ignorance of the precise terms of the contract is not enough … to show absence of intent to procure its breach".
All this, I submit, means that the pre-1971 law was uncertain. The Donovan Commission drew attention to that uncertainty; and uncertainty in the law in this field is obviously something to be avoided. They pointed out that a union official could thread his way through this legal maze and induce a breach of commercial contract between an employer in dispute and one or more of his customers without committing a tort by, first, advising the customer that he should reconsider his business relations with the employer in the light of the dispute, and even calling attention to the possible dangers for the customer of continuing to deal with the employer. Donovan pointed out that advice on those lines did not constitute inducement to breach of contract. And then, no tort would be committed by persuading the customers' employers to give due notice under their contracts of employment and to strike on expiry of the notice, because that would be the use of lawful means. To that extent sympathetic strikes and other forms of indirect action were regarded as perfectly legitimate under the law as it existed before 1971.
However, Donovan went on to point out that there were certain other types of action which a trade union official could lot take without risk of committing a tort. For example, he may not threaten a customer that his own employees will be called out on strike, thereby directly inducing a customer to break a commercial contract. Again, he may not persuade the customer's employees to strike without giving due notice under their contracts of employment, thereby indirectly inducing a customer to break a commercial contract; that is to use unlawful means.
The threading of this legal maze which the Donovan Report suggested was made even more difficult by the decision of the Court of Appeal in Torquay Hotels v. Cousins, where a much wider notice of "inducement" was used. In that case the area of "warning" or "advice" was narrowed and that of "inducement" widened to cover interference with the
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performance of a contract without causing a breach. This, together with the Scottish case of Square Grip Reinforcement Ltd. v. MacDonald—a good Scottish case if ever there was one—suggested that union officials might not even avoid liability by merely "advising". I apologise for trotting out these cases.
However, the conclusion of Donovan was that
"the law upon the subject ought not to be left in such a state that all persons, whether they be employees, employers or trade union officials should be so uncertain of their position";
that liability for breach of commercial contract can be incurred if the complications of the law are not appreciated; and that the law must therefore be clarified. Their recommendation was therefore to extend the protection of Section 3 of the 1906 Act, to which the noble and learned Lord has referred, to cover all contracts. It is true that only registered unions and their authorised officials could have had the protection under Donovan; but as I understand it, the Opposition Amendments would not even extend protection to them. All are to lose it—unions and everybody else.
Judicial extension of the tort of inducement, particularly in the last 20 years, to inducement and procurement of breaches of commercial contracts by direct or indirect means, and the concept of interference with the performance of contracts falling short of breach, together with the accompanying complexities relating to the lawfulness or unlawfulness of the means employed by the promoters of industrial action, has put such actions at risk which were not, I submit, in contemplation in 1906. Clause 10 puts the matter into a clear and satisfactory position.
It is undoubtedly the case that some employers have objected (it has not been stated in terms but perhaps it has been stated in the florid flow of the language of the noble and learned Lord, although sometimes I miss the precise purpose of what he is saying) to the present extension of protection, on the ground that it will encourage strike action. The whole purpose of this Bill is to seek to improve industrial relations and to reduce the incidence of strike action which at the end of the day is a product of a breakdown in good industrial relations. I concede that it is possible thta sympathetic strike

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action will be made easier by the proposed change. However, the alternative to clarifying the law by extending the immunity as proposed is, in effect, to outlaw sympathetic strikes altogether, and in the Government's view that would be wrong, because it would greatly weaken the strike weapon which is a legitimate weapon when legitimately used in the hands of employees. Unions have a long tradition of relying upon the solidarity of union members working in different places, and in the view of the Government it would be wrong to attach legal penalties to the practical expression of this. Furthermore, it would be likely to have little practical effect. Indeed, the effect would probably only be to exasperate and worsen industrial relations.
As I have ventured to say, the experience of two years' operation of the Industrial Relations Act confirms the fact that employers are, and have been, reluctant to sue unions. If I may say so, all my professional experience in that field shows that, generally speaking, they have produced nothing but misfortune in terms of industrial relations for the employer. Moreover, it is well for the House to remember that even the Industrial Relations Act did not propose restrictions upon sympathetic strikes as such.
I come now to the second aspect of the impact of this Amendment if it is carried; namely, its effect upon the proposition that interference with performance of contract should also be protected. The reason for the references to interfering with the performance of a contract in Clause 10 is to make it clear that individuals are protected not only in the case of breach of a contract, but also in the case of interference with its performance without causing a breach. If the greater action—the breach—is to be protected, it would indeed seem logical that the lesser action of mere interference with performance without a breach should also be protected.
The extension of immunity in this way is necessary because of the development of potential liability in tort by the courts. Stating the law as it was generally accepted to be in 1968, the Donovan Report stated that
"mere interference [with another's business] by itself is not actionable anyway".
However, in the Court of Appeal the noble and learned Lord, Lord Denning,
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the Master of the Rolls, in Torquay Hotels v. Cousins, said that
"the time has come when the principle [of inducement of breach of contract …] should be further extended to cover deliberate and direct interference with the execution of a contract without that causing any breach".
In effect, I submit that the noble and learned Lord, Lord Denning, was propounding a new tort and I hope that I shall not be deemed impertinent if I say not for the first time—which, it should be noted, the previous Government recognised in the drafting of the 1971 Act.
The reference to interference with per-formancy of a contract in Clause 10 makes it clear that such action is protected. To return to the formulation in Section 3, limb 1 of the 1906 Act, without such an amendment, would fail to recognise the way in which the courts have since 1906 developed the tort of inducement and extended it to include prevention of performance of a contract without a breach. In my submission, the effect of Clause 10 has been to clarify the law and to bring it to a position where the developments which have taken place judicially shall be considered, and Parliament should now remedy the morass which has tended to grow by the clarication that is contained in the new clause. Whether in the light of my long discourse the same enthusiasm for hearing me again would be expressed by the noble Lord remains to be seen.
LORD HOUGHTON OF SOWERBY: May I bring the Committee back to the realities of this clause and the Amendment, because we are dealing with a very important question of human affairs and trade union action? The noble and learned Lord, Lord Hailsham, said that if the Government are proposing to get rid of the 1971 Act, let them get rid of it—and no more than get rid of it—and then start afresh with new trade union legislation. However, in the speech which I made last Tuesday I explained that so far as the T.U.C. were concerned they would have been content to get rid of it and do no more for the time being. However, we discovered—and I doubt whether any noble Lord will challenge this—that it was impossible just to get rid of it. Something had to be put in its place, even for the time being. Also, I explained that when the T.U.C. found that it was impracticable to repeal

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the 1971 Act in a two-clause Bill, they took the opportunity to look at areas of uncertainty and difficulty in trade union activity which they wanted to be put right or beyond doubt in the interim.
This is one of the matters that we are discussing now in Clause 10. This was part (may I say?) of the so-called "social contract". It was not a contract; it was not even a compact; it was a clear understanding. If it is now elevated and accepted as a compact or contract, so much the better, but it was the basis of a clear understanding. If the noble and learned Lord, Lord Hailsham of Saint Marylebone, is saying, "You have bought this contract at too high a price", let him say so, because this is part of the price. Part of the price was to remove uncertainties regarding the provisions of the 1906 Act on breach of contract of employment or inducement to breach of contract of employment.
It had been shown—and my noble friend has just explained—that, in a number of cases taken to the courts, doubt existed as to the true interpretation of the term "breach of contract of employment". If inducing workers to be in breach of contract of employment led to a breach of contract, was that lawful or was it not? Cases have been cited by my noble and learned friend which showed the doubts that existed on this point. The troublesome question was the indirect breach of contract by inducing workers to be in breach of contract of employment: was that lawful or was it not?
The Labour Government of 1970, in their industrial relations Bill—which was never debated in the House of Commons or passed into law—went no further than to make lawful inducements for breach of contract of employment in cases of "labour only" contracts. It did not go beyond that. But when we came to consider this matter in the discussions to which I referred earlier, we found that the Trades Union Congress was seriously disturbed at the effect of the 1971 Act on activities of this kind and we saw what a turmoil and chaos ensued from the attempts to apply the provisions of that Act.
The more I hear of the learned lawyers talking about strikes and what is lawful and what is not, the more I am convinced that a civilised community must get rid
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of strikes. All strikes are a breakdown in industrial relations. They are all a breakdown, on one part or another, of reasonable approaches to problems of employment and matters in dispute. I profoundly hope that the new Conciliation and Arbitration Service will be fully utilised and that it will become the authority in the land to decide questions in dispute between employer and trade union. I sincerely hope that nothing will be barred from this Conciliation and Arbitration Service—recognition disputes, disciplinary matters. I hope everything will come within it and I trust that the trade unions will have enough confidence in the creation of their own movement (because that is what it is) to resort to it to solve disputes which might otherwise lead to industrial action.
Nevertheless, we know that disputes are likely and may result in industrial action, and we have to be fairly clear about what the law is concerning them. I stress again the difficulties of enforcement of the law on mass action. We saw what happened when a union was fined. We have seen what has happened in other countries, particularly Australia, when unions have been fined or when damages have been awarded against them. It is extremely difficult to get the right balance between the law and the mass movements in the community which have now assumed such importance and power. This power is not going to be curbed by the law. This power can be curbed by public attitudes towards an attempt to get a better understanding in industrial relations, with more opportunities for solving disputes. When arbitration and conciliation are regarded as common form in industrial relations, and strikes a matter of last resort—and rare at that—then I think we shall approach some degree of civilisation in industrial relations.
For the time being, at any rate, it seemed to us who are concerned in these matters to agree with the T.U.C. that these doubts should be removed: the interpretation of the 1906 Act, Section 3; an extension of the 1965 Act, which was a Labour Act of Parliament; to consider the problems and pitfalls and chaos which resulted from the 1971 Act and to try to bring the law into a clearer state, removing these problems of the indirect

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breach of contract resulting from an inducement to be in breach of a contract of employment, and to get the position clear and plain.
I think that is what it amounts to, and in the background the whole time is the understanding between the Government and the trade unions. If the Conservative Party or the Conservative Government think they can get on with their economic policy, their social policy, their industrial policy, while being at complete loggerheads with the trade union movement, surely the experience of the last two or three years is plain evidence that they could not. Indeed the Conservative Government were destroyed because of their inability to work with the great mass trade union movement of Britain, and the Labour Party and Labour Government have had to learn from those dreadful experiences. As I said last Tuesday, the Labour Party started off after 1970 very much under the suspicion of the trade union movement, but they themselves were not really strong and pure in their attitude towards the trade union movement. They harked back to the events of 1969 and In Place of Strife and other matters related thereto. So the Labour Party, in conducting the discussions with the T.U.C. had to try to reach the firmest possible understanding that in return for making the position of the trade unions clear—or clearer than it had been—we could expect a reciprocal gesture from the trade unions when it came to the implementation of Government economic policy.
There were certain other social policies which were involved in the discussions, but I wish to bring your Lordships back to the essential condition of what this is about. If the noble and learned Lord, Lord Hailsham of Saint Marylebone, says that this is a price we cannot pay, then it seems to me that what he is doing is to say that we must revert to the conditions under which his own Government were destroyed.
8.59 p.m.
LORD HANKEY: I must congratulate the noble Lord, Lord Houghton of Sowerby, on the really monumental good sense of a tremendous amount of what he has said. I regret that I cannot go along with his conclusion, but I think there is a vast force of experience and knowledge—inner knowledge, too—of
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recent events in what the noble Lord has said.
I cannot equal the fascinating expertise of the noble and learned Lords who have discussed this most complicated question on both sides of the Committee, but like the noble Lord, Lord Houghton, I want to bring this back to the realities of the situation. The realities of the situation are that the Act of 1906 was a disaster. It has brought our country into growing contempt throughout the world, because we cannot fulfil our contracts. It does not matter which export industry or import industry one takes, we are constantly dogged by strikes, because this is the permissive society utterly run to seed. Time after time the courts have begun to put matters rights. Time after time Parliament has come back and has redefined the 1906 Act in terms of ever greater permissiveness, the last time being the 1965 Act, to which noble Lords have referred. If things go on like this, our country will continue to go downhill.
We must decide whether we are going to produce some sort of order in labour relations, or whether we shall go on with complete chaos. I was horrified when I saw the draft of Clause 10 of this Bill. I think it gives too much power to the people who want to make trouble. When I first saw it, I said to myself: "Good Lord! this and the succeeding clauses can only have been drafted by someone whose object was to extend trouble." This is not something which Parliament ought to allow. Therefore, I recommend your Lordships to give further consideration to the much more restrictive wording of the Amendment of the noble and learned Lord, Lord Hailsham.
I am in agreement with the noble Lord, Lord Houghton. One cannot expect to enforce good industrial relations by passing laws. I know that quite well. I agree with the noble Lord entirely that the attempt to do this just by action through the courts, and so on, has been shown to be ineffective. It has not worked in Australia; the law in British Columbia has been withdrawn. It does not work unless trade unions co-operate, as they do in Germany and Sweden. It is obvious that our trade unions are not going to be co-operative in that way. In fact, the noble Lord said so, and I agree with him. But if we pass this Amendment (which I think we ought to do) then I hope it will induce the Government to

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have another look at our industrial relations in general.
May I say once again how much I agree with the noble Lord in saying that we are much in arrears with a proper system of conciliation and arbitration, with some sort of inducement—I would not like to use the word "enforcement". If we could have some sort of inducement, if we could have better participation in industry, we would go some way to reducing the number of disputes, and with the Conservative Amendment, we would have a framework of law which I think to some degree would be discouraging to the troublemakers.
I want to say one other thing. Has it occurred to your Lordships that in practice we have to pay increases in wages to our workers to keep up with the cost of living? We cannot reduce their standard of living as we go along. They cannot take it. They cannot pay for their motorcars or their television sets, or anything of that sort. One must pay the going rate, taking account of the effects of inflation. If one carefully analyses the situation at present, one finds that the workers are on strike because they really have no alternative. There is not so much "water under the keel" as with, say, a lawyer or a doctor. They have to keep themselves alive; they go on strike, and the result is that we do what we were going to have to do anyway. What is the good of having a system whereby the productivity of our industry is reduced to a state where we lose our position in world trade because we cannot bring ourselves to pay something we will have to pay anyway after there has been a damaging strike? It does not make sense.
We ought to pass the Amendment because it is a sensible basis of law. We ought to lay much more stress on conciliation and arbitration. We should have sensible arrangements for better participation in industry, as exists on the Continent. Above all, we should have some system of inflation compensation. I know a lot of economists do not like this, but it works in some countries, though not in others. I press the Government quite strongly, although it is not relevant in this debate, properly to examine this question to see how a solution can be found, because it would rectify a situation which I agree will not be much improved by passing this Amendment.
9.5 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE: I cannot look both ways at once. This is something which only more experienced politicians can achieve. Perhaps I might be allowed to comment on the various speeches which have been made. I am very grateful to the noble Lord, Lord Hankey, from the Cross-Benches for supporting my Amendment. I agree with a good deal of what he said. However, I should like to deal in more detail, although I hope not very great detail, with the two speeches from the Opposition Benches.
I was delighted that the noble and learned Lord the Lord Chancellor decided to break his self-imposed Trappist vow, and I can assure him, from this side of the Committee at least, that the more often he delights us with his learning, the happier we shall be. Undoubtedly he was doing the Committee a great service by his exposition of the legal background to this Amendment—and I do not think anyone could have done it better, or perhaps as well—but I am rather sorry, in a way, to say that I cannot resist the impression that he was really speaking to a brief, and not disclosing his innermost thoughts. I hope that next time we may have them, because they will be of great advantage to us in making up our minds.
Perhaps I may deal with what the noble and learned Lord was saying, and also in passing with what was said by the noble Lord, Lord Houghton. This is not a question simply of lawyers talking about the law. I was a little disappointed that noble Lords should say: "Let us get back to reality". What we are talking about is the ruin of innocent third parties, and I do not call that a technical legal question; I call it an important social question. Those of us who are very keen on talking about social justice, as some Members of this House are, should remember that when you drive an innocent third party with no interest in a dispute—a dispute which may not even have originated or occurred in this country—into bankruptcy, or drive a limited company into liquidation, with ruin to the shareholders involved, you are not just talking about some arid technical question of law; you are talking about social justice. It is just worth while thinking a little about what you are doing when you are driving on a course

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that will have that result, and which is intended to have that result.
The purpose of this Amendment, as distinct from those which follow, is to restore the position as it was before 1971. That is what the Government say they want to do. Instead, they have done something which Lord Donovan said caused him alarm. It does, as I say, licence not trade unions or trade union officials but any persons who choose to intermingle themselves in industrial affairs, who were described with great restraint but still accurately by Lord Donovan in the passage I quoted, to do anything to ruin innocent third parties, even about foreign disputes and even if they have no interest themselves in whatever disputes they are.
The noble and learned Lord said that the 1906 Act, to which this particular Amendment would revert, had faults. Of course it had faults. But when he says the only alternative to what he proposes is to render illegal all sympathetic strikes, which he well knows this Amendment does not propose to do, I would venture, with the utmost of circumspection and the utmost of respect, and I hope with complete courtesy and Christian charity, to say that he is talking nonsense, because the fact is that the state of the law which would be achieved by this Amendment is one with which the trade unions have lived in the utmost prosperity since 1906—very nearly 70 years. Nobody has suggested that it rendered illegal sympathetic strikes, and they have not suffered very much.
When we learned from the noble Lord, Lord Houghton, that the T.U.C. would have been content to get rid of the 1971 Act, I must say he really gave me my case on this particular Amendment, because that is exactly what this Amendment was designed to do. When he went on to say, as he did with complete accuracy, that the 1970 Bill of the Labour Party—not In Place of Strife, but after they had capitulated to the Trades Union Congress—limited their immunity to labour-only contracts, which I suppose is much the same as the "Lump", although I understand the former phrase rather more easily than the second, then he gave me my case again, because it was quite clear that at that time the Labour Government, which had capitulated to the Trades Union Congress,
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actually thought that that was the right way in which to do it.
A lot of talk has been given—and I do not complain, because I invited him to do so—by the noble and learned Lord the Lord Chancellor, citing the cases of Torquay Hotels v. Cousins and Stratford v. Lindley and one or two others like Emerald, which I think derived from the Emerald Isle, and may therefore have been a labour-only contract; I do not know why it should seem to be a logical conclusion to draw from that premise, but I suspect it is none the less the case. So far from creating chaos, so far from worsening labour relations, so far from doing any of the things which the noble Lord, Lord Houghton, suggested this Amendment would do, the trade unions accepted these decisions and accepted them loyally.
Although I shall not at this hour of the night go into details of the cases— and if I tried I should get them wrong— I suggest quite frankly and firmly to the noble and learned Lord, who has not so far expressed an opinion to the contrary, that whatever may be said in general about the courts, or what may be said in particular about Lord Denning, who is in fact a very enlightened and progressive judge—and the noble and learned Lord I thought rather unjustly cast a cer tain amount of criticism upon his reputation—
THE LORD CHANCELLOR: I am merely saying that the noble and learned Lord was creating a new tort. Sometimes judges do it, and sometimes they are discouraged in the House of Lords or by Parliament itself, because Parliament thinks that it is the place where law should be changed. I was not criticising him.
LORD HAILSHAM OF SAINT MARYLEBONE: The noble and learned Lord is an old enough practitioner to know that a judge has not the right to create a new tort; only Parliament can do that. The noble and learned Lord was saying in his usual urbane, suave and courteous manner that the Master of the Rolls was doing something that no judge has the right to do. He knows that, and nobody knows it better, and that was why I was entitled to say every word that I did. What I would have said, if I had been allowed to reach the main verb of a rather complex sentence, was that the noble and learned Lord has

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not said that those decisions were wrong. Anybody of a fair and independent mind who read those three cases of Stratford v. Lindley and Torquay Hotels v. Cousins—or at any rate two of them, and I think all three—would have come to the same conclusion that any civilised man would have come to on those facts if he had been free to do so. Therefore, to suggest that these facts justify an abomination like the present Bill, which goes back on the whole of the Government's philosophy, is to suggest what is frankly nonsense.
There is only one other thing that I would say about the noble and learned Lord's speech. We all listened to it with great pleasure and interest and, so far as I was concerned, with considerable profit. But the conclusion which I inevitably drew from his complex, but perfectly accurate, statement of the law was that I was perfectly right at the outset in proposing this Amendment by saying: by all means let this clause in this Bill be used to get rid of the 1971 Act.
Let us start from the status quo, and if some complicated new provisions are thought up by the noble and learned Lord between now and the next stage of his so-called package, well by all means we will consider them on their merits.
LORD GORE-BOOTH: Would it be in order for me to ask the noble and learned Lord a question in order to help us? Could he deal with a point made by the noble and learned Lord? To my non-legal mind it seemed to me that the facts of the situation include the legitimate trade union activity of interfering with commercial as well as employment contracts. I hope that is what the noble and learned Lord was raising in part.
LORD HAILSHAM OF SAINT MARYLEBONE: I would perfectly accept that, but I thought that I dealt with it in my opening. Obviously, my Amendment No. 17 is designed to give effect to that very argument. Therefore, I shall not try to contradict it because that is what Amendment No. 17 is about.
Where we are now is that Donovan said that if you are going to extend it to commercial contracts you must extend it only to trade unions and their officials; you must not go beyond that, because, he said, if you go beyond that you will allow RentaCrowd, RentaThug, Maoists, and what have you, troublemakers, to do things which are utterly intolerable in British society. Therefore, whereas I would be the first to admit that what I am proposing in this Amendment is the status quo, (I have other Amendments that I will put forward), so far as this is concerned it is consistent with the Government's philosophy of the Bill, which is to get rid of the 1971 Act. It creates a situation which the trade unions have lived with perfectly happily for 70 years and which, in so far as the courts have interfered with it, they have interfered with it justly and in accordance with the provisions of the 1906 Act. That is as far as I am prepared to go at this stage. In those circumstances, I would ask anybody who has been convinced by my arguments, including, I hope, my noble friends, to divide on this Amendment.
9.19 p.m.
On Question, Whether the said Amendment (No. 15) shall be agreed to?
Their Lordships divided: Contents, 63; Not-Contents, 57.

CONTENTS

Aberdare, L.

Emmet of Amberley, B.

Long, V.

Allerton L.

Ferrers, E.

Lyell, L.

Atholl, D.

Gladwyn, L.

Macleod of Borve, B.

Balerno, L.

Gore-Booth, L.

Margadale, L.

Berkeley, B.

Gowrie, E.

Monck, V.

Byers, L.

Hailes, L.

Mowbray and Stourton, L.

Cathcart, E.

Hailsham of Saint Marylebone, L.

Northchurch, B.

Cowley, E.

Oakshott, L.

Crathorne, L.

Hankey, L.

Pike, B.

Cullen of Ashbourne, L.

Hanworth, V.

Rankeillour, L.

Denham, L. [Teller.]

Henley, L.

Rochester, L.

Drumalbyn, L.

Hornsby-Smith, B.

Ruthven of Freeland, Ly.

Duncan-Sandys, L.

Kilmany, L.

St. Aldwyn, E. [Teller.]

Dundee E.

Lloyd of Kilgerran, L.

St. Davids, V.

Elles, B.

Limerick, E

Salisbury, M.

Sandford, L.

Sempill, Ly.

Wakefield of Kendal, L.

Sandys, L.

Strathclyde, L.

Wigoder, L.

Savile, L.

Trevelyan, L.

Windlesham, L.

Seear, B.

Tweedsmuir of Bclhelvie, B.

Young, B.

Selkirk, E.

Vivian, L.

Younger of Leckie, V.

Selsdon, L.

Wade, L.

NOT-CONTENTS

Ardwick, L.

Gaitskell, B.

Parnell, L.

Arwyn, L.

Gardiner, L.

Pargiter, L.

Bacon, B.

Garnsworthy, L.

Peddie, L.

Bernstein, L.

Goronwy-Roberts, L.

Raglan, L.

Bessborough, E.

Greenwood of Rossendale, L.

Rusbolme, L.

Beswick, L.

Gordon-Walker L.

Sainsbury, L.

Birk, B.

Hale, L.

Segal, L.

Blyton, L.

Halifax, E.

Shackleton, L.

Buckinghamshire, E.

Hall, V.

Shepherd, L. (L. Privy Seal.)

Burntwood, L.

Harris of Greenwich, L.

Shinwell, L.

Burton of Coventry, B.

Henderson, L.

Snow, L.

Castle, L.

Houghton of Sowerby, L.

Stow Hill, L.

Champion, L.

Hoy, L.

Strabolgi, L. [Teller.]

Collison, L.

Jacques, L.

Taylor of Gryfe, L.

Crook, L.

Llewelyn-Davies of Hastoe, B.[Teller.]

Tavlor of Mansfield, L.

Davies of Leek, L.

Wells-Pestell, L.

Delacourt Smith L.

Maelor, L.

Wigg, L.

Elwyn-Jones, L. (L Chancellor.)

Melchett, L.

Wootton of Abinger, B.

Milner of Leeds, L.

Wynne-Jones, L.

Feather, L.

Morris of Kenwood, L.

Moved accordingly, and, on Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.
9.27 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE,LORD HAILSHAM OF SAINT MARYLEBONE, Before I move the next Amendment, No. 16, I do not know whether the noble and learned Lord is in command of his battalions but I should like to discuss, if it may not be out of order, exactly how we are getting on. I think we are getting on quite well. This Amendment, No. 16, is one which I would be quite content, as I think I indi cated in my speech, not to move if it would help the Government. I do not think it is absolutely necessary to my case to do it. But Amendment No. 17 will yield a very considerable debate, which might result in a Division—nobody can tell. I am rather wondering whether we should be wise to go much further than this. As I say, I am quite willing to drop No. 16 if it would help the Government, but No. 17 will produce a substantial debate. Both the noble and learned Lord and I seem to be losing numbers, although the Government have kept their—
BARONESS LLEWELYN-DAVIES OF HASTOE: We are not.
LORD HAILSHAM OF SAINT MARYLEBONE: Yes, you are: do not
1542
make any mistake about that. The noble Baroness must not exaggerate her charms, great as they undoubtedly are; she must not exaggerate her powers. But I am really rather wondering whether we should be wise to embark upoun another major debate. If I may say this, although of course the Committee will make its own decisions in reliance on its own convenience, I have been working continuously since very early this morning, and I am rather wondering whether I am doing your Lordships' Committee quite the service I would be if I were a little fresher. I rather wonder whether the noble and learned Lord, who has to bear the heat and burden of the day on his side of the front, would not prefer to sing "The Last Post". He is a Welshman, and would sing it beautifully. I am just wondering whether we could not agree to start again to-morrow. I would have thought, to be quite honest, that we were doing better than bogey at the moment.
THE LORD CHANCELLOR: Having "crossed the Rubicon" or whatever dreadful offence (apparently against the Lord Chancellor) that I have made in making the dreadful traverse, for which I apologise, I turn to the genial suggestion that we should now rise. I am afraid that there is a good deal left to be done and

1543
it is imperative that we should not risk not completing the Committee stage tomorrow. I would suggest that we finish Amendment No. 16 (if the noble Lord seeks to move it) and then Amendment 17. If I may say so, a good deal of the ground contained in Amendment 17 has already been traversed in the debate that we had on Amendment 15. We were forewarned that we should be sitting late and I would expect that we could finish Amendment No. 17 in about one hour's debate. Therefore, I think we owe it to ourselves and to the progress of Business that we should go that far.
LORD HAILSHAM OF SAINT MARYLEBONE: May I resume the discussion for a moment? Naturally, I will stay up as long as the Committee would desire me to do so; but unless something new has happened since I entered the Chamber, unless some new Amendments have gone down, I do not think there is a full day's work for us to do to-morrow. I have heard some rumours that the Government have put down some controversial Amendments since I entered the Chamber. If they have not done so, I do not know what there is to discuss. I feel that the Amendment on which we are about to embark is both complex and difficult, perhaps the most complex and difficult that we have embarked on to-day. Of course, if the Government insist I can only make my suggestions; but I think that there is practically nothing after this that can take any time. There are a good many Amendments, but nothing that will take up the time of the Committee.
THE LORD CHANCELLOR: I was going to say that I have made the best assessment that I can and that the matters in the Bill are controversial. Since we have eminent Members of your Lordships' House who are very properly stimulated to speak and since there are several areas of potential controversy still left, I hope your Lordships will think it a reasonable course to conclude Amendment No. 17 to-night.
EARL ST. ALDWYN: I hesitate to intervene at this stage, but when I was Government Chief Whip there were
1544
many occasions when there were appeals from this side of the Committee that we should stop, although the agreement had been that we should go much further. I would then acquiese either because Members on this side of the Committee were tired or because it was felt that we could complete the work required within the allotted period. In other words, I would guarantee that we complete this Committee stage to-morrow. On that basis I hope that perhaps the noble and learned Lord would consider that we might now adjourn.
BARONESS LLEWELYN-DAVIES OF HASTOE: After what the noble Earl has said, there is rather a different case before us. It is absolutely essential that, if necessary, we should sit until midnight to-morrow; but if we have a "guarantee, in so far as this can be delivered, that the Committee stage will be concluded at a reasonable hour then, of course, it makes a great deal of difference. If the noble Earl can guarantee that people will not talk too long—and this is a very tricky thing and includes the noble and learned Lord—I should be prepared to finish at this point. I had not wanted to do so because I think it of primary importance when the Chamber is absolutely full—Look at the time! Look at the House!—to carry on. The interest and the passions concerned to-night are very great and I should not like to give up the end of the debate unless I was absolutely certain that we should have a proper debate with a proper ending to-morrow.
LORD BYERS: I should like to say to the Government that I really think there is a case for taking Amendment No. 17 first thing to-morrow. I have a feeling that, in the mood of the Committee to-night, we might spend two hours on something which could be disposed of in three-quarters of an hour to-morrow. Speaking from my experience in both Houses, though nobody can give a real assurance that people will not speak too long, I should have thought that the sense of the Committee was that we should break now.
THE LORD CHANCELLOR: I should like to ask the noble Lord a question. Do I understand that he, too, gives an undertaking that we shall finish

1545
the Committee stage by a reasonable hour to-morrow night so far as the Liberal Benches are concerned?
LORD BYERS: I do not really think that the noble and learned Lord the Lord Chancellor should put that question to me. We have been meticulous in not wasting the time of the Committee and we have a reputation for very short speeches, very much to the point, and we shall continue to live up to that to-morrow. I do not think that we shall take up very much time.
THE LORD CHANCELLOR: In view of the assurances that have been given, I am certainly not one to go into the watches of the night. I have also been employed a certain amount in the course of the night and the day and therefore I should be quite happy, in the light of the undertaking, to accept the suggestion which has been made by the noble and learned Lord.
EARL ST. ALDWYN: In fairness, I think that I must make it absolutely clear that I shall do my utmost to ensure that speeches on this side of the Committee are as brief as can reasonably be expected. I cannot take responsibility for other parts of the Committee. The only thing that I do guarantee is that we shall finish this Committee stage to-morrow. I hope that it may be at a reasonable hour and I am sure that wc shall all endeavour to achieve that objective.
BARONESS LLEWELYN-DAVIES OF HASTOE: Those assurances ring with a faintly hollow tone in my brain, remembering that, when people are tired, they do not speak for quite so long as they will to-morrow when they are fresh, and I still have some doubts. But because I think that the feeling of the Committee is that we should conclude for to-night, I think I should move that the House do now resume.
House resumed.

  ROAD SURFACES AND NOISE
  ROAD SURFACES AND NOISE
  POPULATION POLICY
  POPULATION POLICY