Sitting of 10 June 1974

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

  BRITISH RAILWAYS BILL
  Order for consideration, as amended, read.
  To be considered tomorrow.

ORAL ANSWERS TO QUESTIONS
  TRADE

    Trade Balance
    Mr. Carterasked the Secretary of State for Trade if he will make a statement on Great Britain's current trading position.
    The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): The figures up to April show that the worsening caused by increases in the price of oil had been partly offset by improvement in the balance of trade in other goods.
    Mr. Carter: My right hon. Friend will be aware that a large part of our current trade deficit is with the rest of the EEC. Does he think that that is a permanent or temporary situation? Further, will he tell the House why the much prophesied export boom consequent upon Britain's entry into the Community has not yet come about?
    Mr. Shore: My hon. Friend has made a fair point. There is a massive British trade deficit with the EEC. That deficit stands in sharp contrast to the confident expectations which were held some two years ago about how our trade with the EEC would benefit and improve. I now turn to the longer-term prospects. I hope that our visible trade with the EEC and
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    with all other trading areas will improve now that the general strength of demand in the economy has been regulated. There is now a considerable possibility of increasing our exports to all markets.
    Mr. Peter Walker: Does the right hon. Gentleman agree that last year, unlike what was suggested by his hon. Friend the Member for Birmingham, Northfield (Mr. Carter), exports to the Common Market rose by 37 per cent. compared with a rise of exports to the rest of the world of 26 per cent., and that now nearly a third of our exports goes to the Community?
    Mr. Shore: The right hon. Gentleman should know better than that. Our exports to the Common Market rose last year, but what the right hon. Gentleman should know, and what he so persistently ignored when he had ministerial responsibilities, is that our imports rose even faster. Our deficit with the EEC grew from £500 million in 1972 to over £1,000 million in 1973.

    European Economic Community
    Mr. George Gardinerasked the Secretary of State for Trade if he will seek discussions with leading British exporters on the effect that a British withdrawal from the European Community would have on their European sales.
    The Under-Secretary of State for Trade (Mr. Eric Deakins): I am ready to discuss export prospects with British industry at any time.
    Mr. Gardiner: Is the Minister aware that there will be some surprise that such discussions have not already been taken further with exporting firms? Will he get his right hon. Friend the Secretary of State to undertake to have discussions with ICI, whose chairman recently reported that his company's exports to the EEC increased by 63 per cent. during our first year of membership of the Common Market? I urge the Minister and the Secretary of State not to be deflected from having these discussions by the certain knowledge that the verdict that they will receive is that it would be disastrous for British exports and employment if we were to withdraw from the EEC.
    Mr. Deakins: I shall deal first with the second part of the hon. Gentleman's question. I am aware of the claim that is made by the CBI. However, I think that British industry is sympathetic towards the Government's declared intention of getting improved terms. There is also the point that the views of the British people will have to be taken into account before the issue can be resolved.
    I now deal with the first part of the hon. Gentleman's question. We have had discussions with the CBI representing British industry, but we are prepared in any particular case and in any particular market to have discussions with the exporting firms concerned.
    Mr. Blakerasked the Secretary of State for Trade what assessment he has made of the likely effect on trade with Commonwealth countries which would result from British withdrawal from the EEC.
    Mr. Shore: Such an assessment would be premature, but I have no reason to believe that our trade with Commonwealth countries would in any way suffer.
    Mr. Blaker: Will the right hon. Gentleman say whether he has asked the Commonwealth countries for their views on the merits of Britain's remaining in the Community and whether any Commonwealth country has expressed a preference for our leaving it?
    Mr. Shore: What I have discussed with a number of Commonwealth countries is the question of the access of their goods to Britain as a result of Britain's membership of the EEC. I can assure the hon. Gentleman that nearly all the countries to which I have spoken are very anxious that that access should be broadened and that Britain should therefore be able to achieve under this Government a fundamental renegotiation of the terms.
    Mr. Churchill: The right hon. Gentleman seems peculiarly evasive this afternoon.
    Mr. Speaker: Order. That was a statement, not a question.
    Mr. Churchill: Will the right hon. Gentleman now answer my hon. Friend's question, namely, have any representations been received from Commonwealth
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    Governments requesting Britain's withdrawal from the EEC?
    Mr. Shore: I think that Commonwealth Governments very correctly take the view that just as it would be improper for them to express the view that we should stay in so it would be equally improper for them to express the view that we should leave. What they wish to do is to leave it to the British Government to handle the renegotiations. They hope that their interests will be better looked after than they have been in the past few years and that the matter will be finally resolved by the British people.
    Mr. Moateasked the Secretary of State for Trade when he next expects to visit Brussels to discuss British trade with the European Economic Community.
    Mr. Shore: I have no immediate plans for trade talks with the Commission, but I hope to attend the meeting of the Council of Ministers on 25th June.
    Mr. Moate: Does the right hon. Gentleman recall the recent statement by the French President and the West German Chancellor expressing opposition to the protectionist trade measures taken in the Community? If it should prove necessary to negotiate British withdrawal from the EEC, does not that type of statement offer further encouragement of the belief that free trade in Western Europe could be retained?
    Mr. Shore: Regardless of the weight one puts on the declaration by the German Chancellor and the new French President, I have always taken the view that it is in the interests of all Western European countries, and, indeed, more widely, to establish as near as possible genuine free trade in the modern world. Whether Britain is in or out of the Common Market, I hope that we shall have success in the forthcoming multilateral trade talks and that we shall move forward to that international free trade régime which the hon. Gentleman wants to see.
    Mr. Body: Will the right hon. Gentleman confirm that in his talks with the OECD that opinion was expressed?
    Mr. Shore: The OECD is very much in favour of creating and broadening

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    international trade. We are pleased that in the past fortnight there has at last been settlement of the Article XXIV.. 6 negotiations affecting GATT, opening the way for the American trade reform legislation and, one hopes, the multilateral trade reform talks later this year.
    Mr. Martenasked the Secretary of State for Trade if he will make a statement about British trade with the EEC.
    Mr. Shore: In January-April 1974, on a seasonally adjusted basis, exports to the other members of the EEC were £1,681 million fob and imports from them £2,310 million cif.
    Mr. Marten: Is there any reason to expect that if we had a free trade area instead of the Common Market there would be much difference in our trade with Common Market countries? Is the Minister aware of the campaign that is being built up by the European Movement and its supporters in various places that for this country to withdraw from the Common Market would be disastrous to us? Is he further aware that the European Movement in Norway, and its supporters, said precisely the same and were proved wrong? Will the Government take action to counter this totally misleading propaganda by the European Movement and its many supporters.
    Mr. Shore: The hon. Gentleman tempts me, and I shall yield to temptation. I deeply deplore the propaganda efforts that are being made to resurrect this European dogma. The people who embarked upon that dogma in the past did this country no service. I very much hope that in the period that is now beginning British industry will put far more effort into winning markets in Europe, whether in a free trade area or in the Common Market, than in trying to persuade the British people that it is in their interests to become part of a European union.
    Mr. Jay: Will my right hon. Friend observe that with the original EEC Six —the great home market which we were exhorted to join—in the first four months of this year our visible trad': deficit has been running at an annual rate of £1,600 million a year.
    Mr. Shore: I am only too deeply aware of that. This is part of a progression,
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    from £500 million a year in 1972, to over £1,000 million a year in 1973, and at the rate of £1,600 million a year in 1974. One simple equation is that if any Conservative Front Benchers thought, during the negotiations, that we could somehow manage to shoulder the burden of our membership fees of the EEC out of the improved balance of payments position which they hoped we would get from our trade with the EEC, they must now be profoundly disillusioned.
    Mr. Tom Boardman: Will the Secretary of State confirm, after the consultation which he has no doubt had, that British industry, almost without exception, is opposed to withdrawing from the Common Market?
    Mr. Shore: It is typical of the hon. Gentleman to confuse British industry with the CBI. British industry also consists of many millions of workpeople, who do not take the same view about the advantages of membership of the EEC.
    Mr. George Lawson: Will my right hon. Friend consult the steel industry before he says too much about the attitude of British industry? Is my right hon. Friend saying that the skill of British management and men is so inferior that we cannot stand on our own feet before the Germans, the Italians or anyone else? Why are we doing so badly, if my right hon. Friend is saying that we are doing badly?
    Mr. Shore: I very much hope that we can and will stand on our own feet. It is like the old business of swimming the Channel. We are not afraid of swimming the Channel, but if we put the ball of the CAP round one ankle and our budgetary contributions round the other we should not be surprised if we sink.
    Mr. Peter Walker: Does the right hon. Gentleman agree that about one job in seven in British industry is dependent on exports to the Community? Is he aware that all his anti-Common Market remarks this afternoon are in complete contrast to the most recent statement of the Foreign and Commonwealth Secretary?
    Mr. Shore: I suggest that the right hon. Gentleman reads with rather more care what my right hon. Friend had to say.

    Australia
    Mr. Shersbyasked the Secretary of State for Trade if he will examine ways of speeding up the deliveries of British exports to Australia.
    The Under-Secretary of State for Trade (Mr. Clinton Davis): I am aware that in recent months there have been delays in shipments of goods to Australia. This is a problem that can be solved only by the commercial interests involved. They are already in close touch with each other but my Department has had discussions with the United Kingdom/Australia Conference and the lines concerned to ensure that everything possible is done to resolve the present difficulties.
    Mr. Shesby: Is the Minister aware that the Export Times today described this matter as the "Scandal of the 'shipping shambles'"? Will he be having any discussions with the British Shippers Council to try to alleviate the problem in the next three months?
    Mr. Davis: The Government appreciate the difficulty. We have had many letters expressing concern. The fact remains that we have no powers which enable us to force anyone to do anything. As I have already indicated, we have discussed the matter with the United Kingdom/Australia Conference and with the lines concerned. I believe that everyone is fully aware of the situation. It is not wholly of the making of British interests, because there are difficulties in Australia which have led to congestion in the ports, about which the hon. Ge leman knows.
    Mrs. Chalker: In view of the Minister's answer and the breakdown of negotiations in the port of Liverpool last Friday between the Transport and General Workers' Union and the port authorities, will he indicate what steps he intends to take to get the grain terminal working in the port of Liverpool?
    Mr. Davis: That is not a matter for my Department.

    Supersonic Flight Paths
    Mr. Adleyasked the Secretary of State for Trade if he will make a statement on his Department's negotiations with foreign Governments concerning supersonic flight paths.
    Mr. Clinton Davis: My Department is pressing forward as rapidly as possible in discussions with the countries concerned. We are making progress, but, as the hon. Gentleman will appreciate, it is not desirable to specify details of these discussions while negotiations are proceeding.
    Mr. Adley: I accept the latter point, but has the hon. Gentleman seen the reports in weekend newspapers that certain American politicians, notably in Boston and New York, seem again to be trying to use Concorde, by opposing it, to further their own political ends? Will he have discussions at an early date with his colleague in the French Government so that the Americans can be left in no doubt that playing this game is dangerous?
    Mr. Davis: I cannot be answerable for the actions of certain American politicians. The House has sufficient difficulty with some British politicians. Discussions of the nature to which the hon. Gentleman has alluded are a matter for my right hon. Friend the Secretary of State for Industry and not for my Department.
    Mr. Stonehouse: What representations have we made to the American authorities about allowing Concorde to fly into New York, for instance?
    Mr. Davis: I have already indicated that at this stage we are not prepared to divulge such details of discussions which are proceeding. I ask my right hon. Friend the Member for Walsall, North (Mr. Stonehouse) to accept my assurance that discussions have proceeded and that my Department is in no way dragging its feet.
    Mr. Heseltine: Will the hon. Gentleman explain why, on this one aspect of Concorde, we are told nothing, whilst all the unfavourable aspects are widely publicised?
    Mr. Davis: The hon. Gentleman should know better, having been involved himself in this form of discussion, but he seems to have learnt nothing from his own experience. For me to embark now upon detailed disclosure of the proposals which have been made could only harm the situation, and could not possible benefit it. I cannot believe

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    that the hon. Gentleman really thinks that it would be helpful for me to go into greater detail now.

    Company Law
    Mr. Dixonasked the Secretary of State for Trade whether he will make a further statement about the reform of company legislation.
    Mr. Shore: My Department is currently undertaking a wide-ranging review of companies legislation and of the machinery for enforcing it, and will take account of recent studies, including the proposals in the report on the reform of company law published on the reform of Party. This review will extend to the arrangements for supervision of the securities market, about which there have already been consultations with the Bank of England, and also to my own Department's policies and powers on enforcement; it will be undertaken on a wide scale in consultation with interested outside bodies, and will be published.
    Mr. Dixon: Does not the right hon. Gentleman agree, however, that if, as he has indicated, the Government's policy in these matters is going to correspond to the views of the left wing of the Labour Party, all they will be doing is erecting such a mass of complication in this country that no foreign investor will conceivably contemplate investing here in future and every Englishman, if he possibly can, will seek to invest abroad?
    Mr. Shore: The hon. Gentleman has misunderstood the degree and scope of the criticism that there has been from many sources—including, certainly, the Labour Party—about the way in which a number of these matters have been looked after in recent years. There is a widespread view that there is need for change and for increasingly vigorous enforcement in this sector.
    Mr. Skinner: Does not one of the reasons for company law reform lie in certain examples in recent months, including the rather strange case of London and County Securities, bailed out in an exercise in community politics by the leader of the 1922 Committee, the right hon. Member for Taunton (Mr. du Cann), and the equally strange subsequent affair in which the First National Finance Corporation, which assisted in bailing out.
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    London and County Securities by taking over some of its debts, has now found itself in almost as difficult a position? Does not my right hon. Friend also agree that, when we hear an important group chairman talking about investing in cash, something badly needs doing?
    Mr. Shore: Many criticisms could legitimately be made about certain aspects of affairs in the City, including the secondary bank problem. The range of matters on which we are now starting an inquiry does not, however, include secondary banks, which are being looked at in a different context. In my view, this will lead to serious consideration of proposals which should bring about significant improvements.
    Mr. Redmond: What special provision in company legislation will the right hon. Gentleman make for small firms?
    Mr. Shore: The question of small firms in terms of the securities market, the Stock Exchange and other matters, does not come first to mind. As the hon. Gentleman knows, what we are concerned with is the way in which take-overs take place and the way in which the present machinery of investigation is operating.

    Exports
    Mr. Gryllsasked the Secretary of State for Trade what consultations he has had with the Confederation of British Industry with regard to improving British exports.
    Mr. Shore: I have discussed a number of matters with the Confederation of British Industry, including exports and related trade issues. The British Overseas Trade Board has had similar discussions.
    Mr. Grylls: Has the right hon. Gentleman had discussions about arms sales to Chile? Will he come clean, stop hiding behind a smoke screen of secrecy and tell us how many hundreds of millions of pounds' worth of exports are being lost by the Government's silly ban when we need all the exports we can possibly get at present?
    Mr. Shore: The hon. Gentleman's figures are grossly exaggerated and are based upon his own rather heated imagination rather than upon any facts available to us. He knows the situation with

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    regard to arms sales to Chile. It has been stated in this House.
    Mr. Carter: Will my right hon. Friend tell us how many millions of pounds in trade this country might have lost if arms sales to Chile had gone ahead?
    Mr. Shore: That is another aspect of the matter.
    Mr. Tom King: In discussions with the CBI, what was the right hon. Gentleman able to say about any ideas he has for promoting British exports?
    Mr. Shore: I have had considerable talks with the CBI, both directly myself and through my officials and officials of the CBI. One of the main focuses of our talks has been how far the British Overseas Trade Board's activities can promote British exports and how its work and the work of the CBI can be brought closer together and made more effective
    Mr. Heseltine: Will the right hon. Gentleman comment on reports that among the activities he has been indulging in is to tell the ECGD, two weeks ago, that it should not give further support to certain countries of which he disapproves? Does he think that such activities help our trade?
    Mr. Shore: The hon. Gentleman should not believe all that he reads in the Press.
    Mr. Grylls: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.
    Mr. Stanleyasked the Secretary of State for Trade whether he is satisfied with the financing assistance available to the purchasers of British exports.
    Mr. Shore: Yes. Sir. The financial facilities available for British exports are at once extensive and broadly competitive.
    Mr. Stanley: In view of the oblique reply to my right hon. Friend a few moments ago, will the Secretary of State give the House a categorical assurance that it is not the Government's intention to make ECGD finance available on a politically selective basis?
    Mr. Shore: If I am asked for a categorical assurance in relation to an article that appeared in the Economist alleging that I had asked for a list of export deals covering a number of countries and that I had prevented them from going ahead, the answer is "No".
    Mr. Stanley: Answer the question.
    Mr. Tom Boardman: Will the right hon. Gentleman now answer the question? Will he give a categorical assurance that no instructions are being given affecting credit facilities for exports to countries of whose Governments the right hon. Gentleman does not approve? Will he answer that?
    Mr. Shore: I am not prepared to give an answer in those terms. As the Minister responsible for the ECGD, it is not right for me to limit my rights in relation to the ECGD. What I am able to give the House is a categorical assurance that the article that appeared in the Economist was false.
    Mr. Hugh Fraser: The right hon. Gentleman can clear up this matter quite easily if he will assure the House that he will make a statement to the House about any individual case in which he decides to take political action against an exporter or importer. If not, by administrative action he will be doing what he is accused of doing by the Economist. If he will assure the House that he will tell us if he takes such an action, we shall be able to debate it.
    Mr. Shore: I am happy to give the right hon. Gentleman that assurance. If, with my colleagues, I decide to restrict ECGD transactions in relation to particular countries, I have no doubt that I shall want to make a statement to the House about that.
    Mr. Loughlin: Is not the right hon. Gentleman aware that successive Conservative administrations have taken decisions about financing and about trade itself on the basis of political opinions, and have done so over the whole postwar period?
    Mr. Shore: Of course there have been many occasions when Governments have had to intervene in trade matters. Anyone who knows the ECGD Act and who studies it carefully will appreciate that

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    certain provisions provide that there has to be an element of judgment about what kind of credit facilities should be available.
    Mr. Heseitine: Will the right hon. Gentleman tell the House whether he has had conversations with officials in the ECGD in order to put himself in a position to take action enabling him to discriminate against countries of whose regimes he disapproves?
    Mr. Shore: I shall certainly not tell the hon. Gentleman about conversations that I may or may not have had with members of my own Department.
    Mr. Heseltine: Open government!
    Mr. Shore: Not at all: that does not relate to the issue of open government. The right hon. Member for Stafford and Stone (Mr. Fraser) made the perfectly reasonable request that if we made changes in ECGD we should inform the House. I shall be glad to do that.

    China
    Mr. Berryasked the Secretary of State for Trade if he will publish the latest figures for trade with China; and if he will make a statement.
    Mr. Deakins: For the four months ended April 1974 exports were provisionally estimated at £22 million fob and imports at £25 million cif. Our trade with China continues to grow.
    Mr. Berry: Is the Minister aware that as I was present when my right hon. Friend opened the exhibition in Peking last year, I naturally welcomed that improvement Will he bear in mind the conversations between my right hon. Friend the Leader of the Opposition and the Chinese leaders recently, when the Chinese made it clear that our membership of the Community was an important factor in our relations with China? As the hon. Gentleman wishes our trade to improve, will he bear that in mind in reference not only to China but to other countries?
    Mr. Deakins: That is a matter not of Chinese trade policy but of Chinese foreign policy. All relevant considerations will be borne in mind. We all want an expansion of trade with what may be one of the most important markets for our exports.
    Mr. Buck: What is the Government's attitude to the supply of Harriers to China?
    Mr. Deakins: No firm proposals have yet been put to the company, but we hope that there are longer-term prospects for the sale of other types of aircraft.

    Foreign Companies
    Mr. Michael Morrisasked the Secretary of State for Trade what estimate has been made of the effect on the balance of trade of recent Government measures discouraging foreign firms from establishing themselves in Great Brittain.
    Mr. Shore: The Government have taken no measures to discourage foreign firms from establishing themselves in Great Britain.
    Mr. Morris: Is not the right hon. Gentleman aware of what was in the Budget? That was an extraordinary statement when, in fact, there are international companies which feel that the Budget acted against them—and I shall be happy to provide the right hon. Gentleman with a full list. In the light of the views of these companies, will he now listen to representations and, if he then thinks that the companies are adversely affected, will he consider alternative proposals and make amendments in the autumn Budget, to which we all look forward?
    Mr. Shore: Naturally, the Government will consider reasonable criticisms, but this matter has been debated in the House on a number of occasions in the context of the Finance Bill, and certain amendments have already been made.
    Mrs. Dunwoody: I dissociate myself entirely from the incoherent rubbish mumbled by the hon. Member. However, will my right hon. Friend remember that his Department is responsible for the film industry and that if we lose markets in countries whose nationals have contributed greatly to our cultural life and who have often come here precisely because at home they were subject to political pressures, we shall badly damage our own interests? I hope that my right hon. Friend will impress on his colleagues in the Treasury our fear that we may, unfortunately, lose some of these great opportunities if some provisions in the Finance Bill are not changed.
    Mr. Shore: I always listen to my hon. Friend with attention. If there are specific matters affecting the film industry that she thinks should be brought to the attention of myself and my right hon. Friend the Chancellor of the Exchequer, I invite her to make sure that we receive her submissions.
    Mr. Heseltine: Does not the right hon. Gentleman understand that if he had defended his actions, at least we should have been able to question them, but that it is far more serious when he does not understand that the Government's actions have harmed our trading position? May I help him? Is he not aware that the dramatic increase in taxation, the threat to withdraw from Europe, and the incredible antics of the Secretary of State for Industry have had the most damaging effects on the prospects for investment in this country by overseas investors?
    Mr. Shore: Not for the first time, the hon. Member is talking a lot of nonsense. The plain truth is—
    Mr. Heseltine: Look at the investment figures.
    Mr. Shore: —that the increase in investment in Britain for last year and the year before shows every sign of continuing in 1974. To date, I have received no information to show that anything we are alleged to be doing is discouraging investment in British industry.

    Italy (Import Deposit Scheme)
    Mr. Michael Lathamasked the Secretary of State for Trade what general advice his Department is giving to British exporters about difficulties caused by the Italian import surcharge.
    Mr. Deakins: Details of the import deposit scheme were sent to subscribers of the Export Intelligence Service on 7th May, and were also published in Trade and Industry on 9th and 23rd May. General advice was likewise published on 6th June.
    My Department has also given advice to individual firms in the light of their particular problems.
    Mr. Latham: I thank the hon. Gentleman for that reply and for the advice that has been given by his officials to my constituents. What is his Department
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    doing to get this unfortunate and discriminatory measure removed as soon as possible?
    Mr. Deakins: We have made our views clear through the Council of Ministers of the EEC. At the same time, we understand the severe difficulties imposed on the Italian economy by the tremendous rise in oil prices in the past six months. We must hope that the measures currently being taken will enable the import deposit scheme to be ended as quickly as possible in the interests of a further expansion of world trade.
    Mr. Kenneth Clarkeasked the Secretary of State for Trade what representations Her Majesty's Government have made to the Government of Italy about their new import deposit scheme.
    Mr. Shore: These measures have been discussed at meetings of the EEC, OECD, and elsewhere, where the views of the United Kingdom Government have been put.
    Mr. Clarke: Does the right hon. Gentleman agree that the main danger is that other countries which do not have Italy's grave problems will nevertheless follow their lead, and "beggar-thy-neighbour" policies will be adopted by developed countries trying to pass the results of their balance of payments problems on to their trading competitors? If the right hon. Gentleman agrees with that, will he give an assurance that there is no question of the British Government's contemplating equivalent measures to deal with their present balance of payments situation?
    Mr. Shore: There is a grave danger this year, probably more than in any year since the war, that if nations begin to restrict their trade for balance of payments reasons in the face of the incredible oil deficit, which virtually the whole of the developed world faces, this could produce a downturn—indeed, a slump. It is therefore absolutely essential that nations should not follow the example of the Italian Government—although I understand their very special difficulties— in pursuing policies which restrict trade. I can give the hon. Gentleman the assurance for which he asks in respect of this country for at least this year.
    Mr. Skinner: Is it not a fact that when any of the States within the Common

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    Market finds itself in extreme financial or other difficulties it tends to do its own thing, and that that applies not merely to Italy, with its import deposit scheme and import surcharge scheme, but to France and some of the other so-called giants of the Common Market? Will my right hon. Friend bear in mind that he should not be dogmatic in his replies about what Italy has done, because in the not too distant future he may well have to adopt physical and financial controls which may be similar in effect?
    Mr. Shore: I said that I was not considering this matter primarily in the EEC context, because I do not believe that the Common Market provides a substantial enough forum for solving major international trade and monetary questions. My answer was couched within the context of the international trading community as a whole, in respect of which we have to restrain ourselves this year in the interests of all.
    Mr. Tugendhat: Will the right hon. Gentleman pay particular attention to what the hon. Member for Bolsover (Mr. Skinner) has said? The oil situation is only one factor affecting the Italian economy. What marks the Italian economy off from other European economies is the extreme rate of price inflation, the avariciousness of its trade unions and the lack of profitability of its industry.
    Mr. Shore: No doubt we can all produce our own list of reasons for marking the Italian nation off from other countries. But the avariciousness of Italian industry and Italian capital——
    Mr. Tugendhat: Trade unions.
    Mr. Shore: —not just of Italian trade unions, and the great internal political difficulties of the Italian State, are important factors which affect the whole situation.

    Air Crews (Flight Time Limitations)
    Mr. Tebbitasked the Secretary of State for Trade when he expects to bring forward legislation concerning flight time limitations, following upon the report of the Committee of the Civil Aviation Authority published in June 1973.
    Mr. Clinton Davis: The Civil Aviation Authority has conducted wide-ranging.
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    discussions about the recommendations of the Bader Committee and has prepared drafts of revised legislation and related requirements. It is circulating these drafts to interested parties for comment, and proposals for changes to the legislation will be submitted to my right hon. Friend as soon as this process is complete.
    Mr. Tebbit: While thanking the Minister for that answer, may I urge upon him the necessity for taking early action? Unless legislation is introduced into the House this year it will not be possible to put it into effect in time for next summer's schedules of British airlines. Is the hon. Gentleman aware that I believe that this is necessary and long overdue?
    Mr. Davis: I am grateful to the hon. Member, who, I know, has a real interest in this matter. It is hoped that the legislation will have been introduced and implemented by the end of the year. The CAA has already followed one of the recommendations made by the committee, by the setting up of the Flight Time Limitations Board, which I think will be valuable.
    Mr. Leslie Huckfield: Will my hon. Friend accept that many of the problems of flight time limitations for the flight deck also affect cabin staff? Is he able to say anything about the progress of the committee which is reviewing the flying schedules of cabin staff?
    Mr. Davis: My hon. Friend will be aware that the working party which was established following the recent dispute is looking carefully into questions affecting cabin staff. It would be premature for me to make any statement at this stage about that.

    Chile
    Mr. Neubertasked the Secretary of State for Trade what recent steps his Department has taken to encourage trade between Great Britain and Chile.
    Mr. Shore: Apart from military supplies, which are embargoed, the normal range of services to exporters is available in respect of trade with Chile.
    Mr. Neubert: Some encouragement can be taken from that answer but will the right hon. Gentleman undertake. in connection with Chile, to advise his colleagues in the Labour Party and the

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    upper reaches of the engineering unions that before involving themselves in other countries' affairs they should have regard not to their own personal and highly selective prejudices but more widely to this country's interests as a trading nation?
    Mr. Shore: What my hon. Friends have to balance and what, as a Minister, I have to balance, are the interests of this country as a trading nation with our views about unacceptable political behaviour on the part of some other Governments. This becomes a matter of major concern when it affects the supply of armaments.
    Mr. Jay: Have not every Government of this country since the war maintained a list of countries to which they did not sell arms?
    Mr. Shore: My right hon. Friend is absolutely correct.

    Heathrow (Security Checks)
    Mr. Leslie Huckfieldasked the Secretary of State for Trade what is the current practice relating to the searching of passengers and their baggage at London Airport, Heathrow.
    Mr. Clinton Davis: Passengers and baggage at Heathrow and other United Kingdom airports are being searched by both British and overseas airlines to the extent recommended by the Government.
    Mr. Huckfield: Will the hon. Gentleman accept that the staff morale situation was considerably aggravated by the previous administration's being favourably disposed to the employment of private security firms? Will he accept that there is now an acceptance that he is taking a more helpful attitude? Can he also see that the best boost to staff morale and to public accountability generally would be if there were no private security firms at Heathrow?
    Mr. Davis: My hon. Friend will recognise that I have asked for a departmental examination of the role of private security organisations employed at Heathrow by the airlines. It would be premature of me to make any observation about this examination at this stage. Since it involves questions of security, the
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    report will not be published. My hon. Friend will realise that I shall be taking the appropriate action when the report is in my hands.
    Mr. Maxwell-Hyslop: What action is being taken about the failure of whoever conducted the search to inform the police in time that within the last couple of days a passenger was found in illegal possession of ammunition and was allowed to continue on a flight to Dublin?
    Mr. Davis: This is a matter for my right hon. Friend the Secretary of State for the Home Department. If the hon. Gentleman wishes me to pursue his inquiry I shall certainly do so if he will write to me.

    Price Commission
    Mr. Ridleyasked the Secretary of State for Trade what estimate he has made of the increase in visible trade, both in and out of the United Kingdom, arising out of the activities of the Price Commission, since November 1972 to the present date.
    Mr. Deakins: No estimate has been made but I think it unlikely that the activities of the Price Commission have had more than a marginal influence.
    Mr. Ridley: Since the price of many goods is much higher on the Continent, is it not obvious that price control is causing a large diversion abroad of goods which then have to be bought back at higher prices? Why do the Government not realise that there cannot be price control of industrial materials in a world which is free and where goods can move freely? Why do they not realise that in the end we have to live in the; world market place and not in a sheltered little island, as the hon. Gentleman and his hon. Friends seem to think?
    Mr. Deakins: It will be difficult, if not impossible, to prove one way or the other whether what the hon. Gentleman asserts is true. The strong rise in demand in 1973 and three-day working in part of 1974 have had such a large impact on the levels of trade that they mask the influence and significance of the small factors which he has mentioned.
    Mr. Bruce-Gardyne: Is the hon. Gentleman really asking us to believe—to take

    1217
    one example—that the increase of two thirds in the volume of imports of excavating machinery last year and the increase of one third in the volume of exports of excavating machinery last year had nothing to do with the distortion created by price control?
    Mr. Deakins: I thought it was generally accepted that an expansion of international trade is a two-way process and that one country does not exclusively export goods of one type and import goods of another type. We export motor cars but we also import motor cars. We export excavators and, equally, we import excavating equipment. I see no reason to be concerned about the figures the hon. Gentleman quotes.

    Navigation Charts
    Mr. Robin F. Cookasked the Secretary of State for Trade whether he is satisfied that the navigation charts available to the Merchant Navy for territorial and international waters are adequate.
    Mr. Clinton Davis: Yes, Sir, although all charts have their limitations, as is pointed out in "The Mariner's Handbook" issued by the Hydrographer of the Navy. My Department is continuing to keep in close touch with the Ministry of Defence and the Chamber of Shipping on the needs of merchant shipping in this respect.
    Mr. Cook: While thanking my hon. Friend for that reply, may I ask him whether he recognises that this situation does not permit complacency? Is he aware that most navigation charts were drawn up at a time when no one could have envisaged the colossal draught of the modem super tanker? Does he not realise that there is a serious risk of a major collision incident as a result of a tanker colliding with an uncharted hazard? Does he not agree that if oil companies are to inflict super tankers on the world for reasons of economy they should be compelled to plough some of their obscene profits into the preparation of charts which would protect the world from these tankers?
    Mr. Davis: I have said that the question of the preparation of these charts is a matter for the Hydrographer of the Navy. There is no doubt that he is
    1218
    fully aware of the factors to which my hon. Friend has alluded. This has been fully exemplified by the statement he has made.

    Insurance Companies Act 1973
    Mr. McCrindleasked the Secretary of State for Trade if he is satisfied with the operation of the Insurance Companies Act 1973.
    Mr. Clinton Davis: The Act will not be fully operative until a number of detailed regulations have been made, but good progress is being made in the complex task of preparing them. While in many respects the Act appears to be working satisfactorily, it is premature to come to a conclusive judgment.
    Mr. McCrindle: Is the Minister satisfied that the main purpose of the Act, namely, to protect policy holders from insecure companies, is being achieved without preventing the formation of viable new companies or unnecessary control of existing institutions?
    Mr. Davis: With the co-operation of the British Insurance Association and of the whole insurance business, policy holders have been protected—for which, in the present very difficult situation, we should be grateful. Obviously risk-taking is involved in this business, and no form of supervision can eliminate the chance of failure, but the fact that this co-operation has taken place has been most satisfactory.

    Luton Airport (Passenger Traffic)
    Mr. Allasonasked the Secretary of State for Trade what was the percentage increase in air passenger transport movements at Luton Airport in 1973 over 1970 and 1971, respectively.
    Mr. Clinton Davis: On the basis of the figures I gave the hon. Member in my reply of 7th May, the percentage increases in commercial air transport movements at Luton Airport in 1973 over 1970 and 1971 were about 37-5 and 10 respectively.—[Vol 873, c. 141.]
    Mr. Allason: Does the Under-Secretary of State recollect that at the Luton public inquiry in 1972 the inspector said that the 1971 figures for aircraft noise were excessive? Therefore, with a 10 per cent. increase in traffic, they

    1219
    will be even more unacceptable. What are the Government doing to reduce air traffic pollution, which is causing so much misery to people around Luton?
    Mr. Davis: The question of a breach or otherwise of an undertaking given by Luton Corporation is a matter not for my Department but for the Department of the Environment. My right hon. Friend wrote to the hon. Gentleman on 7th June offering a meeting to discuss these matters, in the hope that some of the difficulties and complexities which have arisen, perhaps due to misunderstanding, can be erased.

    Concorde
    Mr. Michael McNair-Wilsonasked the Secretary of State for Trade what further discussions he has had with British Airways about operating Concorde.
    Mr. Shore: I discussed British Airways' Concorde appraisal with representatives of British Airways and of the British Aircraft Corporation on 17th May. Copies of the appraisal have since been made available to the House.
    Mr. McNair-Wilson: Is the right hon. Gentleman aware of the concern arising from the fact that the British Airways figures seem to suggest that that airline is firmly convinced that it cannot make a profit from Concorde, whereas Mr. Freddie Laker seems equally convinced that he can? In view of this disagreement between the two operators, will the right hon. Gentleman give either an assurance that no subsidy will be paid to British Airways without an impartial inquiry into its figures or a promise that if the aircraft goes into service with British Airways no subsidy will be paid until it has been in service for at least a year?
    Mr. Shore: The hon. Gentleman misunderstands the position. We have not yet reached the stage when we need to consider whether assistance is needed for British Airways to fly Concorde—nor do I accept the hon. Gentleman's statement, which preceeded his supplementary question, that British Airways is being wholly pessimistic about the prospects of Concorde. British Airways had to put forward a range of estimates and, naturally, put forward that central esti-
    1220
    mate which it felt obliged to put forward as a result of its present studies.
    Mr. Heseltine: Does not the Minister understand that the only reason British Airways published those figures was in reply to the statement made by his colleague the Secretary of State for Industry, largely without consultation? Is not the effect of forcing British Airways to make that statement damaging to the prospects for Concorde wherever salesmen of the British Aircraft Corporation appear?
    Mr. Shore: I do not think so. That is neither what we intend nor how British Airways views the matter. The Government, in the whole matter of Concorde, have started on a policy of encouraging as much informed public discussion as possible, and as part of that discussion it was incumbent upon the Government to ask British Airways to put forward its best estimate of the financial factors——
    Mr. Heseltine: The worst estimate.
    Mr. Shore: If the right hon. Gentleman believes that we asked British Airways to put forward its worst estimate I can only say that his head should be examined.

    Aircraft Noise
    Mr. Jesselasked the Secretary of State for Trade what action he proposes to take to mitigate aircraft noise following the publication of the Noise Advisory Council's report on so-called "Minimum Noise Routes".
    Mr. Matherasked the Secretary of State for Trade what measures he is considering to relieve those living on the Mole Valley route from aircraft noise.
    Mr. Clinton Davis: A consultation document about the recommendation in the report for splitting the Mole Valley route will be circulated very shortly to hon. Members and others concerned. Other relevant recommendations are being carefully considered.
    Mr. Jessel: Is the hon. Gentleman aware that to people living under them, minimum noise routes are maximum noise routes and that the concentration of aircraft noise is intolerable? Before deciding whether to split the Mole Valley route. will the right hon. Gentleman enter

    1221
    into the fullest consultation with the groups of people affected—both those who might benefit and those who might suffer? Will he also consider whether the Northolt air space can be used for the Woodley route on the east-bound take-off, and whether sound-proofing grants can be extended to the borough of Richmond-upon-Thames?
    Mr. Davis: The Government are aware that noise constitutes pestilence for many people. I give the hon. Gentleman the assurance for which he asks on the question of consultation. The question of Northolt air space is under review at present. I am aware that some people describe minimum noise routes as maximum noise routes.
    Mr. Mather: Is the Minister aware that the noise is more than a pestilence to my constituents, and has become quite intolerable? They have waited long enough for measures to be introduced to alleviate the noise. Will the change of route which was introduced temporarily in July 1972 and which adversely affects my constituents who live along the Mole Valley now be reversed?
    Mr. Davis: I have already said that this matter is the subject of review and will be the subject of consultation. I can go no further at this stage.
    Mr. Leslie Huckfield: Does my hon. Friend agree that he would have been able to give even better answers to the questions on aircraft noise if the previous administration had been prepared to spend one tenth of what it proposed to spend on the third London airport on research and development on quieter aeroplane engines?
    Mr. Davis: The previous administration was irresponsible in many ways. The question of retrofit and other matters to which my hon. Friend has alluded are matters of careful scrutiny by the Government. It is a pity that the previous administration did not do more.

    Shipbuilding (Exports)
    Mr. Teddy Taylorasked the Secretary of State for Trade what was the total value of ships exported by British merchant and naval shipbuilders in the most recent annual period for which figures are
    1222
    available; and what were the comparable figures in each of the previous five years.
    Mr. Deakins: For 1973 exports of ships and boats, as published in the December 1973 issue of the Overseas Trade Statistics, totalled £123 million; figures for earlier years are published in the appropriate annual Statements of Trade.
    Mr. Taylor: Does the Minister agree that these and other recently published figures show that after a major reorganisation, assisted by previous Governments, and improved labour relations, the shipbuilding industry is doing fairly well and providing more secure employment for the men in the yards than ever before? Will the Minister tell his colleagues to let the industry get on with the job instead of going through the upheaval and uncertainty of nationalisation?
    Mr. Deakins: One of our objectives in bringing shipbuilding into public ownership will be to make it even more efficient. This will help rather than hinder exports. This is the declared policy on which the Government were elected, and my right hon. Friend is undertaking to go ahead with this. We have no intention of reneging on our election commitments with regard to this issue.
    Mr. Blenkinsop: Does not my hon. Friend agree that the very disappointing share in the increasing world orders for shipbuilding strengthens the case for a major change in the whole shipbuilding industry?
    Mr. Deakins: Yes. The performance of the British shipbuilding industry has not been very good since the Second World War, and other nations have improved their share of world shipbuilding trade to the detriment of our own industry and workpeople. Any reorganisation—by way of nationalisation or otherwise—which can improve it will be to the overall benefit of the British economy and of the British people, and we all want to see that.
    Mr. Heseltine: Will the hon. Gentleman explain how many of those countries succeeded in improving their efficiency by nationalising the' shipbuilding industry?
    Mr. Deakins: If private enterprise does not work successfully, nationalisation is the only answer. That is the policy cf this Government.

IRA DEMONSTRATIONS (LONDON)
Mr. Prior (by Private Notice)Mr. Prior (by Private Notice)asked the Secretary of State for the Home Department if he will make a statement on the IRA demonstrations in London during the last few days.
The Secretary of State for the Home Department (Mr. Roy Jenkins): In the
Isle of Wight and in London on 7th and 8th June a number of supporters of the IRA accompanied the funeral procession of Michael Gaughan. Some of those who took part in this procession and a number of people who took part in a demonstration in London yesterday wore black berets, dark glasses and other dark clothing. I understand from the Commissioner of Police of the Metropolis that reports are being submitted to the Director of Public Prosecutions at the earliest possible moment for consideration of prosecutions under Section 1 of the Public Order Act 1936.
Occasions of this kind present great difficulties for the police. Their primary duty is to prevent public disorder, and it is a matter of difficult judgment to know what is the best way to prevent a provocative procession from turning into a riot. In fact, the demonstrations of the past few days—substantial though is the public reaction to and repugnance for them, feelings which I strongly share —have not resulted in disorder.
It would not be proper for me to comment further on the possibility of prosecutions. That is not a matter for me. But I think it right to say that in my view what took place is deeply and rightly resented by the overwhelming majority of British opinion. As a propaganda exercise it was wholly counterproductive. Part of the object was no doubt to intimidate. That, I believe, will not succeed either. I will consider urgently with the Commissioner of Police and other authorities whether any strengthening of law or procedure is necessary. The issues are not wholly straightforward, but I can assure the House and the country that whatever measures are necessary to frustrate any sustained campaign of paramilitary demonstrations, will be taken.
Mr. Prior: Is the Home Secretary aware that the whole House will applaud the
1224
remarks that he has just made in his statement? Is he aware, further, of the indignation and anger that this episode has caused and that the fact that a military-style funeral should have been organised for a convicted criminal in the streets of our capital city is an affront to the nation, especially to the families of those soldiers and civilians who have lost their lives upholding freedom in Northern Ireland? Is the right hon. Gentleman aware also that he will have the full support of the House in any measures that he feels it necessary to bring forward?
Can the right hon. Gentleman answer one question? What efforts did he make, and what efforts could he have made, to have the body sent direct to Ireland instead of having it paraded through the streets of London? Will he also comment on the fact that had the facts been reported to the Attorney-General consideration would have been given to the use of his powers under Section 1(2) of the Public Order Act 1936?
Mr. Jenkins: Dealing with the right hon. Gentleman's question about whether the body could have been flown direct to Ireland, I had no legal control over the body once it passed from the possession of the coroner. The Home Office could not have conveyed the body to the place of burial except with the agreement of the relations. It was not within my power to take the action which the right hon. Gentleman has, understandably, suggested.
As for the right hon. Gentleman's second question, I have no doubt that my right hon. and learned Friend the Attorney-General will consider the matter.
Mr. Grimond: Is the Home Secretary aware that his condemnation of this deplorable incident will be warmly welcomed throughout the country, as will his assurance that if further measures are needed he will introduce them? Will he assure the House that no bargains will be struck about the return of convicted criminals from this country to other countries through the use of blackmail?
Mr. Jenkins: No deals were made. This is a different matter; but I issued a statement more than a week ago which commanded a fair amount of support and agreement. In no way do I contradict that statement.
Mr. Jay: Does not the 1936 legislation to which my right hon. Friend has referred clearly prohibit the wearing of uniforms by private armies in this country?
Mr. Jenkins: Yes, it does prohibit it. But there is a question as to what constitutes a uniform. I agree that the common sense of the matter seems to be that the three factors which I described in my a statement constitute a uniform. However, there was a case in 1972 when the police took names and submitted them to the Director of Public Prosecutions and proceedings were not taken. I am not attempting to judge whether that was right or wrong, but the police were bound to have that in their minds, along with other considerations, in deciding whether to arrest as opposed to taking names.
Mr. Deedes: On the point about intimidation, and further to the question asked by the right hon. Member for Orkney and Shetland (Mr. Grimond), can the Home Secretary give a firm assurance that the termination of the Price sisters' hunger strike carries no implications for the other 30 or so prisoners in this country who wish to return to Ireland?
Mr. Jenkins: This is wholly wide of the question that I am answering. If the right hon. Gentleman wishes to put down a question on this matter, I assure him that I shall be very glad to answer it.
Mr. Flannery: Does my right hon. Friend agree that it is similarly an affront to the dignity of the British people to see massive paramilitary forces demonstrating as they did recently in Northern Ireland and similar massive demonstrations of Orangemen with fife and drum bands and regalia in the streets of Britain such as we saw over the past weekend?
Mr. Jenkins: I deplore paramilitary demonstrations of any sort.
Mr. St. John-Stevas: Does the Home Secretary agree that, although any individual who wishes is entitled to the private ministrations of the clergy, the use of the church for the occasion of a public political demonstration by the enemies of the United Kingdom falls into quite a different category? On behalf of the Government and of this House, will the right hon. Genetleman express the hope to the Westminster archdiocesan authori-
1226
ties that this kind of incident is never allowed to happen again?
Mr. Jenkins: I take great note of what the hon. Gentleman has said, and so no doubt will the authorities of the Church to which he belongs.
Mr. George Cunningham: Will my right hon. Friend confirm that neither he nor the Commissioner of Police for the Metropolis was asked for or gave consent under Section 1(1) of the Public Order Act 1936 to the wearing of these uniforms, and does my right hon. Friend agree that it is right to attach great importance to this first provocative action by the IRA in London, because the Public Order Act does not apply to Northern Ireland where these uniforms have been worn frequently in the past? Does my right hon. Friend agree also that, provided that the Attorney-General is satisfied that the purpose was a political one, it would be right for prosecutions to take place so that the law is not flouted with impunity?
Mr. Jenkins: There is no question of any consent under the Public Order Act 1936 being sought or given. Regarding the point about my right hon. and learned Friend the Attorney-General, he will no doubt take note of that. But it would be inappropriate for me to comment because, as a prosecuting authority, he is not in an exactly similar position to a colleague, a position in which one can speak for the Government as a whole. My right hon. and learned Friend has a judicial function and not a political function in this respect.
Mrs. Knight: Will the Home Secretary confirm that the wording of Section 1 of the Public Order Act 1936 makes it clear that it is an offence for any person to wear in any public place or at any public meeting a uniform signifying his association with any political organisation or with the promotion of a political object? If that is so, whatever view might be taken of the clothes worn by the marchers at the demonstration on Saturday, surely there can be no doubt that they were signifying their allegiance to a political association. If that is so, will the right hon. Gentleman note that, possibly due to the impunity with which the marchers operated on Saturday, a much bigger march took place yesterday at which money was collected for the IRA? Will

1227
[MRS. KNIGHT.] the Home Secretary now consider the possibility of making the IRA an illegal organisation?
Mr. Jenkins: On the first point, the hon. Lady gives an interpretation of Section 1 of the Public Order Act 1936, which she has clearly carefully read. I was not sure, however, whether she listened equally carefully to the exchange which took place between myself and one of my hon. Friends, because I think that I covered the point made by the hon. Lady in that exchange almost precisely and almost exactly. There was also the difficulty relating to the decision taken in 1972, when the police considered prosecution, by the then Attorney-General and the then Director of Public Prosecutions. However, these are all difficult matters of judgment for anyone concerned.
Concerning the banning of the IRA, the position of the present Government, as of their predecessors, has always been that they would consider this matter on the basis of whether it would assist in the preservation of public order. The view of the previous Government was that it would not so assist. That, I believe, continues to be the view of the police. The Commissioner of Police is an extremely experienced and balanced officer in these and in all matters. I think that view has been generally supported hitherto. There is not great advantage in banning an organisation. They reappear under a multiplicity of different names. Nor does what occurred in the Republic of Ireland yesterday, where the funeral was completed and where the IRA is banned, suggest that banning the IRA would automatically prevent demonstrations of this sort. I assure the hon. Lady that nothing that I have said in any way underestimates—I think that it is clear to the House—the seriousness which I attach to the whole issue.
Mr. Biggs-Davison: How can we criticise what happens in the Republic of Ireland when events such as those we have seen in London have taken place? Is it not entirely unfair to the Dublin authorities, who are trying to deal with organisations which are illegal there, to say blithely that it is likely that we shall not propose to make them illegal in England? Is it not vital to the continuation of good relations, which we all want
1228
to see, between British and Irish people living in this land, and for relations between the United Kingdom and the Irish Republic, that we should now see that those who march in political uniforms are brought to book, whatever their opinions, and that we should give fresh consideration to the banning of the IRA? Is the right hon. Gentleman aware that I still disagree with the previous Government and with the present Government and with the Commissioner of Police on this matter?
Mr. Jenkins: I take note of that, but I should have thought that it was apparent, even to the hon. Gentleman, that I was not saying anything blithely. Nor was I endeavouring to apportion any blame to the Government of the Republic of Ireland. Of course we want the closest relations with them in these difficult circumstances. But we still have to consider whether a course of action proposed would assist the ends we have in view. I will consider any action, but I shall not be rushed into it by the hon. Gentleman telling me that it is his view, against a great balance of other judgment.
Mr. Thorne: Is the Secretary of State aware that another interpretation of the events to which he has referred is possible, that many may consider the deceased to have been a political prisoner and that the funeral to which the Secretary of State has referred was organised by the deceased's political friends? Does he condemn that?
Mr. Jenkins: To be honest, I found my hon. Friend's question a little difficult to follow and to understand. I certainly condemn what took place on Saturday and Sunday.
Mr. Heath: The Home Secretary's outright condemnation of these events commends itself to the whole House and will commend itself very much to the whole country. On the question of the banning of the IRA, the Home Secretary is right. This matter has constantly been considered by successive administrations. For a variety of reasons—some of which are not usually discussed in public—it has been considered in the public interest that this should not occur. My hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) knows that this was the view of the previous administration.

1229
I put one point to the Home Secretary. He said that the responsibility of the police is mainly for the preservation of law and order or to prevent public disorder. But surely the responsibility of the police is also to enforce the law, and Section 1(1) of the Public Order Act 1936 is quite clear about the law. I think that what the country wants is an assurance that these events will not be allowed to recur. The right hon. Gentleman said that the marchers did not succeed in their objective of causing public disorder. That is true. But a further objective must have been to affront the British people, and in that they have succeeded. What the public want to know is that clear action will be taken to prevent any such recurrence of these events.
Mr. Jenkins: I agree fully with what the right hon. Gentleman says about the affront. I think that British opinion has been deeply affronted and is right to be deeply affronted. It is the duty of the police to enforce the law as well as to prevent public disorder. Balances sometimes have to be struck in this respect. I have already referred to the 1972 position concerning this matter. But I know that the Commissioner of Police and other chief police officers have this matter very much in mind.
In reply to the last general part of the right hon. Gentleman's question, I reiterate what I said at the end of my statement—that whatever measures are necessary to frustrate any sustained campaign of paramilitary demonstrations will be taken.

ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 5, 6, 7, 9, 10, 11, 13, 14 and 19, and new Clauses relating to the matters
  referred to in the Order of the House [9th May].)
  Considered in Committee. [Progress 21st May.]
  [Mr. GEORGE THOMAS in the Chair]
  Ordered,
  That consideration of the new Clause relating to exemption for trade unions be postponed till after consideration of other new Clauses.— [Mr. Joel Barnett.]

Clause 10
  PAYMENTS IN ADDITION TO ADVANCE CORPORATION TAX DUE IN FINANCIAL YEAR 1974
  Question, That the clause, as amended, stand part of the Bill, put and agreed to.
Clause 11

  ALTERATION OF PERSONAL RELIEFS
  3.50 p.m.
  Mr. John Cope (): I beg to move Amendment No. 35, in page 8, line 29, leave out '£865' and insert' £943'.
  The Chairman: I think it would be convenient to discuss at the same time Amendment No. 36, in page 8, line 32, leave out '£625' and insert '£724'.
  Mr. Cope: In accordance with the new rules of the House, I should start by declaring my interest. I pay income tax and I claim the married allowance which is the subject of Amendment No. 35. (AN HON. MEMBER: "And children's allowance? "]. I have claimed it in the past and I hope to claim it again in the future. However, I have no interest in Amendment No. 35, which relates to single allowances.
  Clause 11 alters the personal reliefs granted to taxpayers. I recognise that the Chancellor's purpose is to increase the personal allowances and thus help all taxpayers above the minimum limits. That

  1231
  is something, I suppose, for which we should be grateful, but I maintain that the Chancellor should be more grateful because the allowances would have been much higher if they had taken account of inflation.
  One disadvantage of the amendment is that it covers only one inflation-related point. We have had debates, and no doubt will have others, about inflation and taxation. But another disadvantage is that my proposal of £943 for married people is an awkward sum to calculate. The Chief Secretary and I share the profession of accountant and realise the difficulties involved in awkward calculations for our profession and for those of its clients who may be less nimble at mental arithmetic. But the Chancellor's proposal of £865 is also inconvenient. It has no noughts and is not readily divisible by other figures.
  I should be interested to know how that figure was arrived at. I arrived at mine by asking the Library by how much these allowances should be increased to keep pace with inflation since they were first introduced. There is a slight complication because of the changeover to the unified tax system, but the present married allowance of £775 and the single allowance of £595 were introduced upon that changeover in 1973. They were then equivalent to the old allowances of £600 and £460 which had been introduced in 1972.
  I therefore thought it right to apply inflation from 1972 to date, rather than from last year when these precise figures were introduced. The resultant figures of the size of personal allowances required in March 1974 to preserve their value in April 1972 are the figures in the amendments. No doubt many hon. Members will be surprised at the size of these figures. That reflects the amount of inflation since 1972. I am not making a party point, particularly as the figures that I have taken are those up to or just before Budget Day.
  My proposal of an increase of £168 in the married man's allowance is nearly double the Chancellor's proposal of £90. My proposed increase in the single allowance is £129, more than four times what the Chancellor proposes. That shows how his increases favour the married man
  1232
  against the single person. We shall be returning to this point later, no doubt, particularly with regard to single parent families, who are in a difficult position these days. I am not sure whether it is right to attack them by comparison with married people, but we can return to this matter.
  The main disadvantage that the Chief Secretary will see in the amendments is their expense. I hope he will be able to give us a precise figure. I have not tried to cost the amendments myself, but the figure must run to thousands of millions of pounds. This may make the amendment unacceptable, particularly to those who believe that reliefs and the increase of reliefs are a means of giving money away. However, the red book which fills in the details of the Budget proposals shows that without the changes in income tax proposed in the Budget there would have been an increase of £2,400 million in the amount of income tax collected. That reflects almost entirely the effect of inflation and much of it is exactly the same money as is dealt with in the amendment.
  So the onus is on the Treasury to explain why it wants to collect so much more as a result of inflation and not just to say, as the Chancellor did, "Are we not kind? We are giving you some of that £2,400 million back."
  4.0 p.m.
  I hope the Chief Secretary will say how many people would be taken out of the tax net altogether if these amendments were accepted. I have no doubt that a large number of people would escape tax altogether or move into a much lower tax bracket. We should be told how many people the Chancellor of the Exchequer proposes to bring into the tax net—in other words, by allowing the inflationary situation to bring them in.
  I have made the point in earlier debates that the Chancellor had not been as honest as he might have been in some respects in the way in which he has used inflation to gather more tax. I do not entirely exonerate Conservative Chancellors from this charge, but it seems to me that in a way inflation makes liars or dishonest men of us all since we tend to believe that a pound this year is the same as a pound was last year. This is no

  1233
  longer the case. Until the Chancellor and indeed all of us—recognises that a pound is no longer worth what it was last year, and until we begin to allow for this factor and appreciate the full extent to which inflation and rising prices attack the basis on which we found our financial decisions, we shall find it much more difficult to gather public support for the difficult decisions which will be required if we are to beat rising prices.
  I tabled this amendment not so much to deal with the precise amounts involved but to air the matters which I have attempted to put forward. I hope that the Chief Secretary will be able to say how much money the Government will take additionally if they refuse to increase allowances in line with inflation.
  Mr. Terence Higgins (): It has long been a principle of Conservative Oppositions—certainly one which we enunciated between 1964 and 1970—that one does not shoot Santa Claus. This is our feeling about Clause 11. We shall not vote against the clause as such since it increases certain tax allowances. None the less, it has also been a principle of our opposition that we have thought it right to table certain amendments which will enable us to isolate particular issues so that they can be debated in an orderly and proper manner.
  I am sure that the Committee is most grateful to my hon. Friend the Member for Gloucestershire, South (Mr. Cope) for tabling these amendments and for speaking to them so eloquently. The main point advanced by my hon. Friend is becoming increasingly important, and indeed is central to a great deal of our economic management. It relates to the extent to which fiscal drag, if I may use that inelegant phrase, should be offset by an increase in various tax allowances. The clause raises only some allowances, and amendment No. 35 is related to two of them. I refer to allowances for married couples and single persons, rather than to the specific allowances to which we shall return on subsequent amendments.
  In an inflationary situation when Government Ministers from the Chancellor of the Exchequer downwards are saying that they expect inflation to continue at a very high rate, the attitude taken by the Government to these allowances is
  1234
  extremely important. I hope that the Chief Secretary will clarify the precise position on these allowances because it may be that the value of the provision in the Bill on this occasion is not as great in real terms as at first sight may appear. Since my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) took action on this matter, inflation, alas, has proceeded and is likely to continue to be with us. The first question we must ask is whether or not the increase in allowances put forward in Clause 11 as it stands is sufficient to compensate for the effect of inflation. My hon. Friend mentioned the research he had undertaken in the Library, but since then there have been increases in the cost of living, part of which reflects the Chancellor's Budget measures. This may also be a relevant matter in this context.
  A further question which we must put to the Chief Secretary is: "What increase in the allowances would be necessary to restore the real position since the date of last uprating?" I hope that we shall have clear and unequivocal answers from the Chief Secretary on these points. They are related to the much wider question of indexation, and I have in mind the interesting and in some ways unprecedented remarks made on this topic by the right hon. Gentleman the Chancellor of the Duchy of Lancaster. I hope that the Chief Secretary will give us a clear view on the matter.
  I come to a further important point which is reflected in an article which appeared in The Economist on 27th April. It concerns the relationship between various personal allowances for married couples and single people and the question of family incomes supplement. We heard a great deal from the Labour Party in opposition about the various effects of FIS, but we now find a situation in which the tax allowances have been increased by a certain amount and FIS by nearly £2 a week. The article in The Economist brings out a series of arguments on the poverty trap, arguments with which the Committee will be familiar. I was astonished to discover at an earlier stage of the Committee's proceedings that the Chancellor of the Exchequer apparently was unfamiliar with the arguments on the poverty trap. He seemed unaware of the high rates of

  1235
  marginal tax and the tax paid by people on low incomes, and even those around or below the tax threshold. I think that is quite true, even though the hon. Gentleman the Minister of State, Civil Service Department, appears to find it amusing.
  The point which The Economist makes is:
  "The combination of Mr. Healey's budget and Mrs. Castle's generous increases in family income supplement will have one quite disastrous result, when the FIS increases come into effect in July. By raising the FIS eligibility limits (so that the average family on FIS will get nearly £2 more a week) very much more than the personal tax allowances—"
  the matter which we are now discussing
  "—and at the same time increasing the basic rate, the Government has created a marginal tax rate for the extra £1 earned by a broad band of poor families which is a good deal higher than the 83 per cent. rate it has introduced on the extra £1 earned over £20,000 a year."
  The crucial point here is the relationship between the family income supplement and the tax changes which the present Government are introducing, with regard to both these matters which we are now debating on the amendment and the related question of the increase in the standard rate of income tax. The net effect of having this kind of overlap is apparently to make this situation worse. We should have a clear statement from the Chief Secretary.
  The Chancellor of the Exchequer earlier apparently stated that he was unaware of the point whether it is or is not the case that the poverty trap, or the poverty surtax as we may call it, is made worse than it was by the proposals which the Government have introduced. I should like a clear statement by the Chief Secretary whether this is the case. The amendment which my hon. Friend the Member for Gloucestershire, South has put forward would do something to ameliorate this situation albeit at, no doubt, significant cost, for the reasons he has set out. To be more specific, it appears that there are a large group of people eligible for family income supplement who are also above the tax threshold. The FIS figures for those with one, two and three children under 11 years are £25, £28 and £31, whereas the corresponding tax threshold figures are £21.25, £25.85 and £30.48.
  1236
  There is a considerable overlap which means, in effect, that those who are needy enough to attract income support from family income supplement are on the other hand apparently regarded as sufficiently affluent to pay tax. This is an important point and I hope that the Chief Secretary can confirm whether I have understood the position correctly and whether with this poverty surtax the Government have made matters worse.
  The reality of the situation is that for a considerable range of people there is little gain in net income for a significant increase in net earnings. People will get very little extra net income for a considerable increase in earnings at this crucial level where they are beginning to approach, or may have passed, the tax threshold. If that is so, there must be considerable disincentive for people in this group to earn more. This is a matter of great importance. The Opposition have always believed that the tax system should be a system of giving incentives for people to work harder rather than one of causing them to feel that if they work harder they will not be any better off. The matter should be clarified. We want to know whether the Government's measures, taken as a whole, make the situation worse by reducing incentives. I hope that we shall have a clear statement on this from the Chief Secretary.
  I turn to Amendment No. 36 and the question of the single person allowance. Here the same arguments about the effect of inflation apply. The Government have raised the threshold for this group of people but apparently the rise is nowhere near enough to compensate for inflation. I hope the Chief Secretary will say whether this is the case and whether this amendment will offset the situation so that inflation is taken account of so far as the limit is concerned. I have already suggested that it does not perhaps go sufficiently far to have that effect. I hope that we shall be given the figures on the cost involved.
  4.15 p.m.
  We should also take issue with the Government on the statement made by the Chancellor of the Exchequer in his Budget speech. He devoted a comparatively small part of his Budget speech to this matter, which he announced as good news. I think I am right in recalling that he said that he was giving the good

  1237
  news first and would then turn to other matters less palatable to the House. Anyhow, as my hon. Friend has suggested, the good news did not seem to be as good as it appeared to be on the face of it. The Chancellor of the Exchequer qualified the position by saying that perhaps a single person had done rather well under the changes made by my right hon. Friend the Member for Altrincham and Sale and that, therefore, he would give a substantial increase to married couples but significantly less, proportionately, to single people. I think I am right in saying that the Government have increased the allowance to single people by merely £30, which, allowing for fiscal drag, is very small. Is it the case that my right hon. Friend the Member for Altrincham and Sale had got the balance wrong between married couples and single people? I would not take that view.
  We understand the great importance rightly attached to married couples and, in particular, we understand the problems of family poverty for married couples with a large number of children. Nevertheless, a great many single people feel that they are to a considerable extent subsidising those who are married or those with large numbers of children, and, that being so, it is right that we should raise the question of whether the single person allowance has been increased by a reasonable level by the Chancellor in his present proposals. We know that it is not sufficient to offset for inflation, but, leaving that on one side, is it right even in relation to the increase made in the married couple's allowance? Again I hope that we shall have an explanation from the Chief Secretary.
  The threshold has been raised. While successive Governments raised the thresholds and took a number of people out of taxation altogether, it has been found that, with inflation, these people have reappeared among the legion of taxpayers. This is perhaps something which in present circumstances we have come to recognise as a fairly typical phenomenon, but while we were in office We reduced the standard rate of tax, whereas it was almost the first action of the present Government to increase the standard rate of tax. Therefore, for those people still within the tax paying
  1238
  group, or, those taken out only to reappear among the legion of taxpayers, the step is that much more acute, and to that extent a higher rate of tax is paid. It is important, therefore, that we should get the threshold right, as well as ensuring that the step is as small as it can reasonably be made.
  We must look also at the effect of the threshold on different groups. In his Budget speech the Chancellor of the Exchequer said that a married man with two children would have some benefit from the Government's proposals up to the level of £54 a week. I am far from clear whether that statement comprehended all the changes announced or foreshadowed in the Budget speech, which covered a great many items some of which were implemented by order and some of which were implemented by increases in nationalised industry crises —I mean "nationalised industry prices"; a good Freudian slip, perhaps —or whether it contemplated only the narrow range of items embodied in the Finance Bill. However, be that as it may, it was asserted that the married man with two children would be better off up to £54 a week. I have some doubts about that.
  For other categories, for just the married couple, for example, the figure was a great deal lower, and the single person taxpayer—this is the crux of the matter—begins to be worse off on an income of only £18 a week. This being so, there is obviously a considerable bias in the measures as a whole in favour of the married couple compared with the single person. Therefore, the question again arises whether it is right that the balance between the two allowances should be of the kind which the Chancellor has proposed in the Bill, or whether a more sensible balance should be struck.
  The reality of the matter—I shall return to this on later amendments, and I hope to say a word about it in the debate on the clause—is that all these allowances could be better dealt with within the framework of the tax credit scheme which we in the Conservative Party put forward, which has been much debated both on the Floor of the House and in Select Committee, rather than piecemeal as the Government have sought to do, or, in the case of certain

  1239
  of the allowances, not at all. I hope to return to that matter later.
  For the moment, my hon. Friend the Member for Gloucestershire, South has rightly isolated some of the arguments which call for a clear statement of policy from the Government, and we hope to elicit that clear statement during this debate.
  Mr. A. J. Beith ()Mr. A. J. Beith (Berwick-upon-Tweed) Being surrounded by accountants, I feel at some disadvantage in not being able to declare that interest and having to speak very much as a layman.
  I support these two amendments, and I endorse what has been said by both the hon. Member for Gloucestershire, South (Mr. Cope) and his hon. Friend the Member for Worthing (Mr. Higgins) about the desirability of gearing our tax system to cope with inflation. However, as a good deal has been said about that by my hon. Friend the Member for Cornwall, North (Mr. Pardoe), I shall say no more about it on this occasion.
  For some time I have been much concerned—if I had not been, my constituents would have made me so—about the effect of low tax thresholds on the incentive and encouragement to work among those who have either small superannuation pensions or small widow's pensions. I have in mind here those who are particularly affected by the proposed married and single person allowances, and I direct special attention to Amendment No. 36, which deals with the single person's allowance.
  Since I became a Member of Parliament, no item has added so much to my postbag as has the position of the working widow who is hit by the relatively low single person's allowance and who will not, in my view, have her position sufficiently eased by the present proposed increase. For that reason, I strongly support Amendment No. 36. Widows with a small pension and earning by their endeavours small sums of, perhaps, £10 or £20 a week in relatively low paid jobs, such as in catering, frequently write to me to say that they find it difficult to understand why they should be allowed so poor a rate of earnings before they are taxed, and they make comparisons between their position and that of married women. They find their position
  1240
  difficult to understand partly because of the effect of their pension in relation to taxation, and I think that tax officers might well do more to explain this aspect of the matter. However, the fact remains that the single person who is a widow finds herself particularly disadvantaged if, for example, she has a house which was chosen and bought at a time when the family was together and her husband's earnings were coming in. She has the same level of household expenses as does the married woman alongside whom she works, and she finds that the burden of tax on her small income bears very heavily.
  The Chief Secretary ought not to underestimate the resentment which this causes, or the feeling among many widows that it is just not worth their working. Without doubt, many widows are doing extremely valuable work, work without which some of our public services would find it hard to continue.
  This problem could be dealt with in a number of ways, but it seems to me that the easiest and most immediate opportunity is to ease the single person's allowance. It could be argued that this method of dealing with the problem would bring within its scope not just widows but single persons living at home who did not have the same level of household expenditure. One of my constituents suggested in this connection that a householder's allowance might be a way forward, and I hope that the Treasury will consider that in due course. For the moment, however, some immediate relief should be given to the single person bearing heavy household expenditure, the sort of person who is seriously discouraged from working by the present tax thresholds and who will not be greatly helped by the proposed increase in the personal allowance, and I press the hon. Gentleman to provide for a higher level of single person's allowance.
  Mr. David Price (): It seems to me that these two amendments to Clause 11, bringing together the question of these personal allowances, raises the whole subject of the effect of inflation on the taxpayer and, hence, on the standard of living of our people. Indeed, the amendments represent the linchpin of the matter before us under Clause 11.
  The Committee will recognise that the two amendments are designed to raise

  1241
  both the married person's allowance and the single person's allowance and, hence, the starting point of income tax. In my view, it is this aspect of the matter rather than the sheer social justice of it which at this point in our affairs is the important question to be considered by the Committee.
  In this year we face problems of inflation of a different order from those which the country has faced certainly in the lifetime of all of us present in the Chamber, including yourself, Mr. Thomas. On whichever side we happened to be, we have in the past many times discussed the problem of inflation and fiscal drag and the need to keep allowances up in an endeavour to avoid the taxpayer being punished by having to pay in real terms more taxation than he would have paid had it not been for inflation. Now, however, we face inflation which mounts month by month. We hope that it will settle and that the rate will come down but the trend certainly continues upwards at the moment. Today we have had the review by the National Institute of Economic and Social Research, which, I am sure, all hon. Members will at least have looked at. Its prognostications certainly appear to be the same as those to which I have inescapably been driven. We have not yet reached the peak. Even if the present Government are completely successful, which I doubt, in their counter-inflation policy, the peak of the curve has by no means yet been reached.
  In wage and salary terms, as the Committee knows, many people benefit from what are called threshold agreements, as do many others who are not themselves subject to threshold agreements but who work in the same organisation as people with threshold agreements. Obviously, if a number of the workers in a company or organisation have threshold agreements and this month will receive their £1.20 a week increase, many others whose unions may not have negotiated such agreements will find that their employers, public or private, necessarily extend a similar threshold increase to them on cost of living grounds.
  However, there can be points in the income curve where one hits the starting point of income tax or where one hits the mounting point in the curve, and unless the allowances are adjusted in parallel with the cost of living so that the tax
  1242
  starting point is raised, even where gross income is increased under a threshold agreement the taxpayer will be worse off. I shall not detain the Committee by developing that further, since to do so would call for a lot of statistics, and even blackboard and chalk would be of assistance. Those familiar with these concepts will understand that if gross incomes increase under threshold agreements and if the starting point of income tax is not raised the point comes at which the individual taxpayer begins to be squeezed. Of the amendments put down for Clause 11 this group is the most critical. As my hon. Friend the Member for Worthing (Mr. Higgins) pointed out, we do not necessarily expect the Government to accept the amendment as it stands but we should be grateful for their views on it because it deals with a continuing problem. Even the National Institute in its optimism did not think that we could get to less than 5 per cent. inflation in under two years. When I first came to this House 5 per cent. a year inflation was regarded as extravagant, and when you first came, Mr. Thomas, the figure was a good deal lower than that.
  4.30 p.m.
  So, even if the Government were to be as successful as the National Institute hopes they can be—and that will need many policy changes—for the next two or three years we shall be faced with this problem in quite an extravagant form. We cannot talk in a different context about social justice, about social contracts, about equality, and about broad shoulders and narrow shoulders unless we deal with this problem of the starting point of income tax, because the shape of the curve follows from it.
  The Chief Secretary and I spent nearly a year discussing this matter in the Select Committee on Tax Credits, and I think that the brilliant gentlemen of the Inland Revenue, with all their curves, persuaded the Chief Secretary that it is possible to have a basic rate of income tax and still have a progressive curve of income tax. That being so, the amendment not only affects the starting point of income tax; it affects the subsequent tax curve which, therefore, affects real rate of income tax for all taxpayers. I believe that this group of amendments is far more important than the numbers of hon. Members present would seem to suggest.
  Mr. Julian Ridsdale (): 1 intend to make only a short intervention following up what was said by the hon. Member for Berwick-upon-Tweed (Mr. Beith). I am concerned to get more people like widows who are able to work doing a job in industry. If the Chief Secretary were to accept the amendment or if he were able to make a sympathetic gesture towards this group of people he would be helping both the widows and industry.
  In my constituency there is a grave shortage of labour, and the only potential source is the large number of widows who could earn the money but have been given no incentive. Perhaps the best way to deal with this matter is to abolish the earnings rule. I was dealing yesterday with the case of a clothing factory which wants 50 workers. If it could get them it could increase its production by 100 per cent. The incentive just is not there. Perhaps the earnings rule could be abolished in selected areas. At one time there were 5,000 widows in my constituency who wanted to work but did not have the incentive, and I therefore ask the Chief Secretary to examine the problem.
  Mr. Tony Newton (): I rise to support my hon. Friend the Member for Harwich (Mr. Ridsdale) and the hon. Member for Berwick-upon-Tweed (Mr. Beith) in what they said about widows and others concerned with the incentive effects and relatively low levels—certainly inadequate levels—of personal tax allowances in view of the rate of inflation. I, too, know of many cases where people are desperately needed—for example, the hospital services and other parts of our social services—but those people are more or less consciously deciding not to work because the return is not worth while. That cannot make sense to anyone. Although the amendment would not solve the problem, at least in the short term it would ease it and enable us to consider how it might better be tackled in the longer term. I therefore support very much what has been said on the point.
  I wish to press the Chief Secretary very hard on the underlying point which is highlighted by the amendment. I missed the first few minutes of the speech by my hon. Friend the Member for Gloucestershire, South (Mr. Cope), but I
  1244
  have no doubt that he said that to some extent this amendment was similar to others we have discussed in Committee on the Bill. There has been one significant development since our previous debates which is that we have now heard from the Chancellor of the Duchy of Lancaster—who has not been here in Committee and who, according to Press reports, has gone a great deal further outside the House than Ministers have at the Dispatch Box on the question of increasing allowances and the effect of inflation on the tax system.
  As a new and ordinary hon. Member I should like to hear from the Chief Secretary precisely what we should read into the right hon. Gentleman's remarks about the Government's thinking on these matters. It may be that the Chief Secretary is not privy to the thoughts of the Chancellor of the Duchy. If not, that is another matter we should raise. If he is, we should like to hear from the Chief Secretary a fuller explanation of what we may expect from the Government as a result of the right hon. Gentleman's remarks. Many of my hon. Friends have a good deal more sympathy with the relatively forthcoming approach of the Chancellor of the Duchy than with the secretive, bureaucratic and putting -everything - off - for - consideration - in -l0-years'-time arguments that we have heard so far from the Government Front Bench.
  I attach great importance to this because I do not believe that measures to protect people openly and explicitly against the effects of inflation are themselves inflationary. That argument has been about for a long time. It has been a classic Treasury argument against doing anything about index-linked bonds or anything which would admit to the existence of inflation. The argument has always been that such action would only make inflation worse. That argument was used by Treasury Ministers when inflation was at 2 1/2 per cent., 3 per cent. and even 5 per cent. Now, according to the National Institute, it is running at about 17 per cent. a year, but Treasury Ministers still tend to fall back on the same old argument that it will get worse if we do anything to protect people from the effects of it.
  Ordinary observation and conversation with people on the factory floor, in clubs

  1245
  and in pubs, and with all the people one meets in the course of being an MP shows that this belief flies in the face of the common sense and logical way in which people behave. Many believe, rightly or wrongly, that they have been losing out to the forces of inflation, and that is leading them to increase their demands beyond what they would otherwise have been. We should make a significant contribution to the long-term fight against inflation if we could simply convince more people that they are being effectively safeguarded against the constant erosion of their standard of living. This and other amendments could make a contribution towards that if they were accepted.
  My hon. Friend the Member for Worthing (Mr. Higgins) has already touched on the subject of the poverty tax or the wages trap or whatever we wish to call it. That is one aspect on which we should like some elaboration from the Chief Secretary. The trap has been getting worse, and the Budget accentuated that trend in some respects. It is likely to go on getting worse so long as the situation exists in which Governments feel a duty, and in some cases actually have a legal duty, to increase these benefits in line with inflation while they have no such duty in relation to the tax system. More and more people who are receiving social benefits will also be caught up with the tax system, and, by definition, that makes the problem of the poverty surtax worse and extends it to new groups.
  We are debating important matters. We cannot expect to solve all the problems in a discussion on one amendment, but we are entitled to know more about the Government's thinking than we have heard so far. In particular, we are entitled to know more about their thinking in the light of the remarks made by the Chancellor of the Duchy of Lancaster recently.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): We have had a very interesting debate. It would be interesting to debate the mind of my right hon. Friend the Chancellor of the Duchy of Lancaster. But the amendment is about possibly indexing the married and single allowances. I do not think that that was precisely what my right hon. Friend was talking about in what was no doubt a very enlightening speech.
  Mr. Higgins: My hon. Friends and I were relying on Press reports, which may have taken the remarks of the Chancellor of the Duchy of Lancaster rather more widely than he intended. Is a copy of the speech available in the Library? If so, we shall perhaps have a more accurate report than the Press interpretation. Many of my hon. Friends and I thought that the right hon. Gentleman's speech went beyond index-linked bonds and so on, that it related to the general question of indexation, and went a great deal further than any ministerial statement had gone previously.
  Mr. Barnett: We are all fascinated by the thinking and the remarks of my right hon. Friend. If there is no copy of his speech in the Library, he will no doubt note what the hon. Gentleman said and make sure that it is placed in the Library. But it is not always possible to put a Minister's thoughts in the Library.
  I was about to deal with the specific question of the cost of the amendments. I am advised that it would be £740 million in a full year and £590 million in 1974-75. I gather from the speeches of Opposition Members in this very pleasant debate that they do not consider that to be a very large sum.
  Mr. Newton: Does the hon. Gentleman realise that the counterpart of that comment is that the process of inflation alone has taken £740 million from taxpayers in less than two years?
  Mr. Barnett: I shall come to indexation and the points made in the debate, but I was giving, as I was asked, the cost of the amendments this year—not last year or two years ago, but what they would cost now in a full year and in 1974-75. I hope that that will enable the Committee to understand what acceptance of the amendments would mean, although I gather that the Opposition do not propose to vote on them.
  We have already, under the clause, increased the married allowance by £90 and the single person's allowance by £30, at a cost in a full year of £489 million. That did not go as far as Opposition Members wanted, but it was a substantial and costly increase both in 1974-75 and in a full year thereafter.
  4.45 p.m.
  The hon. Member for Worthing (Mr. Higgins) and many other hon. Members

  1247
  [MR. BARNETT.] asked "Why not more? Why not go back to 1972 levels?" Hon. Members also referred to the poverty trap—the poverty surtax, as it has become known—and asked whether what has been done in the clause has made the position worse. It is a somewhat complicated matter. The figures for family income supplement make-up levels are £25 a week for a one-child family, £28 for a two-child family, and £31 for a three-child family. The tax starting points are £21.25, £24.86 and £28.48 respectively.
  The differences between those figures and those quoted by the hon. Member for Worthing are accounted for by his having overlooked the clawback deduction. I do not criticise him for that, because the clawback is very complicated and has often been criticised. However, it cannot be denied that if the basic rate goes up it is obviously higher at the point of poverty surtax. I do not dispute that; the hon. Gentleman is absolutely right. But that does not alter the fact that if we are increasing allowances, even if not by as much as Opposition Members would like, we are to that extent taking some people out of tax altogether.
  I shall come to the whole question of how much further we might have gone or should have gone in terms of indexation. I notice that most hon. Members referred not to fiscal drag but to inflation, and there is a difference between fiscal drag and inflation fiscal drag, as I am sure every hon. Member present will be aware. Before coming to the question of indexation, I want to deal with the disincentive arguments.
  Mr. Higgins: 1 am sure that the hon. Gentleman is right in what he said about my not allowing for clawback, but the figures he has just given seem to me to reinforce rather than to detract from my argument that the overlap is greater rather than less than I had supposed. That being so, it would appear that the poverty surtax effect is worsened, although the Chancellor of the Exchequer seemed to think a few days ago that he had made it better, or, at any rate, had not made it any worse. Does the Chief Secretary agree that a change to a tax credit scheme would overcome that difficulty?
  Mr. Barnett: Whether we can deal with it by a tax credit scheme is an
  1248
  entirely different matter. We debated it at great length in a Select Committee, of which the hon. Member for Eastleigh (Mr. Price) has spoken. It would depend on the kind of tax credit system. All that I and a number of my right hon. and hon. Friends said in the Select Committee was that the tax credit scheme that the previous Government sought to introduce was wholly unsatisfactory to us in many ways. However, that is not what we are dealing with now. It is certainly true that a form of child endowment, which was envisaged in that tax credit system, would help. But it was made clear in the Select Committee that there is no need for a tax credit system to have a child endowment. That was made clear when it was recognised that the child grant cash payments would be made payable to the mother and would not be part of the tax system. Therefore, it can be done. Indeed, the previous Government accepted and recognised that point. They had in mind to introduce the child endowment system before the tax credit system was introduced. The two matters are separate and nothing necessarily to do with a tax credit system.
  Mr. Higgins: It is true that they are separate matters, but the Minister has introduced an extraneous red herring— namely, child endowments. I am making a simple point about the threshold. Is it not the case that an overlap and a corresponding poverty surtax can be avoided by introducing a tax credit system?
  Mr. Barnett: I shall expand a little on what I have already said. We can deal with one part of the tax system by having a tax credit system, but that must depend on the effect elsewhere. If in the process of having such a system we created a regressive tax system across the board, which I believe the scheme proposed by the previous Government would have created, I would consider that to be unsatisfactory.
  Mr. William Clark (): Surely the Minister is wrong. The evidence that we received from the Inland Revenue proved conclusively that the tax credit system need not be regressive. Lower income bands can be introduced. Such a system would be administratively a little more costly but it is untrue to suggest that we proposed was certainly not regressive.
  Mr. Barnett: The hon. Member for Croydon, South (Mr. Clark) will know only too well, as he was the Chairman of the Select Committee, that the matter was discussed in detail. I was not convinced. I know that I was unable to convince the hon. Gentleman.
  Mr. William Clark: The hon. Gentleman was wrong.
  Mr. Barnett: That is a fact of life. Who is right and who is wrong will be found in due course. Meanwhile, we are not having the tax credit system proposed by the previous Government.
  Perhaps I may revert to the amendments. There is a disincentive element at this level that applies particularly to widows, as the hon. Member for Harwich (Mr. Ridsdale) mentioned. No one has ever doubted that there is a disincentive effect of some kind. There is such an effect at all kinds of taxation levels. That matter is raised constantly by the Opposition. They refer particularly to the highest rates of taxation.
  I know that many hon. Members have referred to the disincentive effect for widows and others at the lower levels of taxation, but, as has been fairly pointed out, much of that is to do with the earnings rule. That has now been increased, and we shall have to consider whether we can increase it much more. Of course, the cost will have to be considered but such a course would be almost certainly more helpful than anything we can do in the present context.
  I recall the former Chief Secretary, the right hon. Member for Wanstead and Woodford (Mr. Jenkin) once saying when we were debating the disincentive effect, and especially at the higher levels of income, that although there was such an effect at the poverty surtax level it did not seem to be effectively a disincentive to most workers. I have no doubt that in some instances there will be a disincentive effect but we are also faced with the problem of just how much tax relief we can give.
  I have already pointed out how much we have given in the clause as it stands and how much it would cost to do what has been suggested in this group of amendments. We cannot afford that now.
  Perhaps I might deal with the principle of the argument that the hon.
  1250
  Member for Gloucestershire, South (Mr. Cope) and many other hon. Members made—namely, the need to index personal allowances. The idea was to take the indexing back to 1972 levels.
  Mr. Beith: I do not wish to disturb the Minister's intellectual train, but before he leaves the disincentive effect will he note that I was referring primarily to widows below pensionable age who would not benefit in any way from the relaxation of the earnings rule? That is a separate but important point. Widows will not be impressed when they are told that the fact that they stay on at work— often they do so as they value the company which they enjoy while working as much as the small financial gain— means that it is not necessary to increase the allowance.
  Mr. Barnett: The hon. Gentleman is wrong. We have increased the allowance generally. That concerns widows and many others. I do not dispute that widows have a specific problem, and I have a great deal of sympathy for the problem of many widows, but we must consider the amount of revenue that.we, need to raise to do many of the sort of things that we have done already, which, as I understand it, no hon. Member has yet wanted to see undone. The amount that we can do at any given time is dependent upon the circumstances. That is the point that I am making. I am not saying that there is no need to help widows or any other deserving group of taxpayer.
  Mr. James Dempsey (): Such as the pensioners.
  Mr. Barnett: We have given considerable help to the pensioners this year by a direct increase in pensions and in personal allowances. My hon. Friend is tempting me to go wide of the amendments. I know, Mr. Thomas, that you would frown on me for going so wide.
  I now turn to the arguments that have been advanced on behalf of indexation. The hon. Member for Gloucestershire, South pointed out the need to revert to certain levels and to tie allowances to any increase in inflation. We debated this matter rather late one night and I made one or two remarks which were not entirely acceptable to all hon. Members. I do not know whether those

  1251
  [MR. BARNETT.] remarks were acceptable to the Opposition Front Bench. I should be interested to know whether it is in favour of indexation. That has not yet been made clear.
  For the reasons that I have given, I do not think that it would be possible to index without substantial cost.
  Reference has been made to honesty. I am not sure whether it is necessarily more honest to index allowances, assuming that it is desired to retain the same amount of revenue, and thereafter to increase the rates of tax. Conservative hon. Members may say that they would rather not increase or retain the amount of revenue that any given Chancellor has decided to raise in a particular year. 1 assume that would mean—and I am now forgetting the economic aspects—that it would be necessary to change some other taxes or to reduce the level of public expenditure, which again, I imagine, would appeal to some Conservative hon. Members. However, they are never specific as to which taxes they would reduce.
  For these reasons, I believe that it would be just as dishonest, although I accept that one can make out a case in many ways for indexing threshold wage agreements, savings, and so on. But we are here talking not about the general question of indexation across the economy but about indexing personal tax allowances. I am not yet convinced of the merits of indexation in their case, given that there is need to obtain a certain yield from taxation.
  5.0 p.m.
  Mr. Nigel Lawson ()Mr. Nigel Lawson (Blaby) We listened to the hon. Gentleman on the subject of indexation in the late-night debate to which he has referred. Once again we are hearing him putting the point in his customary good-natured obscurity. What he seems to be advancing as the greatest objection is the loss of revenue; but loss of yield also occurs as a result of bringing down the rate of inflation. Does he advance the same argument, therefore, against a reduction in the rate of inflation in that such action would reduce the yield to the Inland Revenue?
  Mr. Barnett: I am sorry that I am obscure to the hon. Gentleman. I am sorry that I do not make myself clear. Of course we want to bring down the
  1252
  rate of inflation, but we are talking about tax yield and expenditure in this year. The hon. Gentleman may well argue—1 do not know whether he will—that if we reduced the yield in 1974-75 by the amount required to increase personal allowances in the way suggested in the two amendments this would help reduce the rate of inflation. I doubt it. A case might be made out that indexation over a long period could have the same effect. But we are talking now about personal allowances and the effect on the tax yield in 1974-75. I do not believe for a moment that one could prove that indexing personal allowances in this way would help reduce inflation in 1974-75 or in 1975-76. I suggest that it is not easy to show that the indexation of personal tax allowances would necessarily reduce the level of inflation.
  Another point made by the hon. Member for Gloucestershire, South concerned the fact that the figures of tax allowances would become somewhat complicated and that those who were not accountants, or, one might say, mathematicians, might not so easily be able to check their personal allowances. That might well be the case. Canada has started a system of indexation. In the 12-month period ended September 1973, to get the new indexed allowances needed a factor of 147.200 divided by 138.025. In such circumstances, it becomes complicated. I am quoting these figures to show the difficulties. I know that it would be easier for some hon. Members than for others, but there has been considerable criticism of the system in Canada.
  Mr. Higgins: I have some sympathy with the way in which the hon. Gentleman is struggling on this last point, because clearly there is a relationship here between whether, effectively, indexation has an influence, let us say, on wage claims, on the one hand, and whether the revenue that is being raised by the Government has, on the other hand, an effect on demand. It is a fairly tangled web which is not easy to disentangle without the aid of a blackboard, as my hon. Friend the Member for Eastleigh (Mr. Price) has said. But what the hon. Gentleman has not covered in this context is what the figure would be to restore the real value of the allowances. I am sure that it must be in his brief.

  1253
  What would be the figure which would have the effect of restoring the true value of the allowances? We have all asked for the figure. We want to know whether the amendment is merely adequate to have this effect or, given the recent inflationary effect of the Budget, whether it would be effective now despite the substantial figures suggested.
  Mr. Barnett: I would be keen to pursue a debate on this with the hon. Gentleman if only he would tell us where he himself stands on it. Does he support the principle behind the amendment, or does he not? If we could know that, we could have a more reasonable debate. I have made my position clear, and I would be happy if he would make his clear.
  Mr. Higgins: It is not unusual for the Opposition to ask for factual information which only the Government have. My hon. Friend the Member for Gloucestershire, South (Mr. Cope) asked a specific question. Does this amendment simply allow for the effect of inflation, or is it inadequate to do so, or is it too great to do so? That is a simple, factual question of the sort which Oppositions have reasonably asked over the years. It is a question of asking for facts and not of stating opinions. We await with interest the hon. Gentleman's answer to this simple question. I am sure that his brief contains it. There is no need to stonewall on the issue.
  Mr. Barnett: I have the answer here. but I was interested to know whether the hon. Member for Worthing agreed with the hon. Member for Gloucestershire, South. The answer is that, taking inflation levels up to April this year, the increase would be 26·9 per cent., which would put the allowance at £983. That is the figure that would be required.
  Mr. Higgins: That is not a very good answer. The hon. Gentleman will have to consult his officials further. We are discussing two amendments one concerning the married allowance and the other the single allowance. The hon. Gentleman cannot produce just one figure for both. We must have the figures for the married allowance and the single allowance. Nor is it any good quoting the figure for April. The effects of the Budget
  1254
  were reflected in a substantial increase in the cost of living. The figure for April is not good enough. Can we have a more up-to-date figure?
  Mr. Barnett: The answer is "No, you cannot". The figure for the single allowance is £753. I hope that that helps the hon. Gentleman to make up his mind about what he is in favour of, but I doubt it.
  I turn now to the relativities of the single and married allowances. The hon. Gentleman made the point that we may have the balance wrong. I will give him the relative percentages we have now with the increase in the allowance made by my right hon. Friend. It becomes 1.38 to 1 compared with 1.30 to 1. I do not know whether the hon. Gentleman would consider this over-generous to a married man, but there is clearly an argument about what is the correct balance of relativities between an allowance which should be given for a married man and an allowance which should be given for a single man. I would not necessarily say that 1.38 to 1 is precisely right, or that 1.30 to 1, as it was before, was precisely right.
  In 1972, for operational reasons, the same increase in personal allowances had to be given for the married allowance as for the single person's allowance. Whether the balance is right between the two, I do not know. I would say that there is at least an argument that a slightly bigger margin to the married person is more reasonable than not. That is all I say in favour of that case, and no more, because it is impossible to say whether the balance is right. The hon. Member may be able to say that 1.30 to 1 was the right balance, but I do not believe that that is possible.
  Mr. Nigel Lawson: A moment ago, after persistent questioning by my hon. Friend the Member for Worthing (Mr. Higgins), the Chief Secretary produced these figures showing that in order to keep pace with inflation the married and single allowances should be increased to £983 and £753 from £865 and £625 respectively, as they now appear in the Bill. Can he tell the House how many people are being brought into taxation who would otherwise not be taxed because of the figures being what they are in the

  1255
  Bill and not the figures that he said would be necessary to keep pace with inflation?
  Mr. Barnett: The number of people who would be taken out of tax if we increased the allowances in this way would be about 2 million. But if the allowances were increased by even larger figures, 5 million people could be taken out. I do not see the strength of that argument. Clearly, the amount of tax paid could be reduced by increasing personal allowances. Equally, the level of direct taxation could be reduced by reducing the standard rate of tax.
  Mr. Nigel Lawson: As the Chief Secretary says that he does not understand the argument, may I put it more simply? The argument is that if allowances do not go up at the same rate as inflation, the number of people taken out of taxation at the beginning of the year is smaller than the number who go into taxation during the course of the year, so that one ends up with more people rather than fewer being taxed.
  Mr. Barnett: I hope that what the hon. Gentleman has just said is obvious to every hon. Member present. It is certainly obvious to me. Perhaps the hon. Gentleman will put it in writing if he wants to make it clearer, but it is perfectly clear to me that he is right and I do not dispute it. It is equally true that, given the present level of inflation, during the course of the year more people will be brought into tax. That is a fact, and I do not dispute facts of that kind.
  The only question is whether, given the cost of the amendments, the Opposition wish to press them to a Division and to reduce the yield from taxation by this very large sum of £740 million in a full year. If they do, I can only advise my hon. Friends to vote against them.
  Mr. Norman Lamont: As one who supporting the original indexation amendment late the other week, I should like to support my hon. Friend the Member for Gloucestershire, South (Mr. Cope). Since our first historic debate on this subject, the argument has moved a little forward and there has been increasing public discussion of the indexation of taxation allowances. It does not make much difference
  1256
  whether one has de facto indexation, as proposed in the amendment today, or the de facto indexation that was operated when my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) was Chancellor of the Exchequer and when so many of his so-called tax cuts and tax handouts to better-off groups were merely indexation and merely allowed certain groups to stay where they were. As a result of the increasing debate, today there is more understanding of the effect of inflation on tax thresholds.
  The Chief Secretary has put forward three arguments against the indexation of allowances and tax thresholds. He put forward some of them the other night. The first is the argument that to index allowances or thresholds would reduce the Government's room for manoeuvre That is how he put it the other night. Today it appeared that what he meant by that was that it was difficult for the Government to have the same level of expenditure if thresholds and allowances were indexed. If they were indexed, there would have to be tighter control of public expenditure.
  Is that such a bad thing? Is it such a bad thing that we should move from a system in which increases in public expenditure can be financed by inflation, as is happening now? We should have increases in public expenditure consistent with what we can afford, and what we can afford should be consistent with maintaining our living standards. That is what indexation is all about.
  5.15 p.m.
  The second argument was that it would not be honest to index tax allowances and thresholds if at the same time we had to put up the tax rate. I do not know that that is more dishonest than the present system. Some might regard it as a more realistic expression of the taxation relationships of different groups What is surely dishonest is the present situation in which the Chancellor of the Exchequer can pretend to cut tax when, in fact, he is doing nothing of the sort, when he is running hard to stay in the same place. That is what is dishonest, not the approach that the Chief Secretary criticises.
  The third argument, which the Chief Secretary used the other night but which.

  1257
  I note, he did not repeat today—I am glad of that, because it struck me as a rather dangerous argument—was that the Government of his party did not regard the present distribution of income as fair. As he was responding to arguments about indexation, what he appeared to be near to saying was that one should use inflation as a means of redistributing income within society. If one wants to argue about the distribution of income in society, one should do so openly in the House of Commons and not by any back-door method, not by any concealed method.
  The Chief Secretary also said today that indexation would not necessarily reduce inflation. No one is suggesting indexation as the panacea for curing inflation. However, when one has the policy, advocated this morning by the National Institute for Economic and Social Research, that we ought to allow wages to increase by the same percentage as prices increase during the coming year, it is important that that should be combined with indexation.
  If we simply say that wages are to increase by the amount that prices increase, that will not mean that living standards are kept constant. As my hon. Friend the Member for Eastleigh (Mr. Price) pointed out, unless the tax thresholds and allowances are indexed, increases in pre-taxed incomes bigger than the rate of inflation are required to keep living standards constant. That is where people are being swindled and that is where there is so much pretence. It is pretended that if there is a 10 per cent. increase of salaries or wages that will keep pace with a 10 per cent, rise in inflation. In fact, that is not so, and the effect is more marked the higher one goes up the salary scale.
  Indexation would help towards a more rational economic policy in two ways. First, indexing the thresholds would ensure that living standards remained constant, and in an incomes policy one could prevent or discourage people from acting on assumptions about their living standards that might prove to be unfounded. Secondly—and this is the main reason why I am in favour of indexation —the relationship of one income group to another in our tax system should be defined in legislation so that income is
  1258
  not redistributed by the back door, by stealth, or by inflation.
  Mr. Cope: I recognise that in this debate we have not, as yet, convinced the Chief Secretary about the arguments in favour of this amendment. I did not think that we would. I hope that we have clarified the issues and some of the arguments about the effects of inflation. I had not realised, Mr. Thomas, that you had been in the House such a long time as my hon. Friend the Member for Eastleigh (Mr. Price) seemed to imply. If that is the case, you must have seen many arguments come and go, some of which take many years to sink into Governments. This is an argument which will not go away.
  The Chief Secretary asked whether it was more honest to phrase things one way or another. He knows and I know that there are people in our profession who deal in degrees of honesty. I was taught that a thing is either honest or is not honest. I do not think that there are degrees. It is an absolute condition. It seems that it is dishonest for the Government to say that they are giving money to taxpayers when that is not what the Chancellor is doing. What he is doing is failing to compensate for inflation. It would be more honest, if we are to use such a term, for the Chancellor to say "I regret to say that inflation is going on. Therefore, we need to pay more for Government expenditure, and, therefore, we have to increase the personal allowances relative to their real value."
  I was surprised that the cost was as low as £740 million in a full year. This argues in favour of the amendment. The changes being made by the Finance Bill will cost £489 million in a full year, and I thought that my amendments would at least double that. It is an indication, at any rate, of the amount of money which is being taken away. The Chief Secretary told us that 2 million people would be relieved from tax altogether as a result of these amendments. To put it another way, that means that there are 3,000 people in every constituency—in Heywood and Royton if it is an average constituency, which I am not implying it is in any way—who will have to pay tax this year as a result of inflation and as a result of the Government failing to accept these amendments.

  1259
  [MR. COPE.]
  I forget what the Chief Secretary's majority is but 3,000 will certainly dent it a little. The Chief Secretary said he did not know what the right ratio was between married and single people. That rather goes against what the Chancellor said in his Budget speech when he seemed quite certain of what he was doing in proposing to alter the ratio.
  The crux of what the Chief Secretary has to say in resisting the amendment was that we cannot afford this at this time. The question really is whether taxpayers can afford this increased tax bill at this time. That is what we should look at. There was some argument between those concerned with the Select Committee about whether the tax credit system was or needed to be progressive. The kind of tax which we are now debating is not only progressive in operation but, because of inflation, progressively progressive. All the time it is eating further down into incomes and affecting the way in which people pay tax.
  Of course these are awkward figures, and I entirely accept the complexity argument put forward by the Chief Secretary. This was his strongest argument against indexation in terms of an applied formula automatically operating each year. The tax system is sufficiently complex. Nevertheless there can be de facto indexation at any rate, which would get round the complexity argument. That is the way in which the amendments suggest it should be done. It is the Government's duty to decide how much tax should be raised. I wish that they would be more honest about it, in the terms used by the Chief Secretary. 1 recognise that they do not wish to allow for inflation in this way, that they do wish to bring 3,000 people in Heywood and Royton and elsewhere into the tax system. That being the case, I beg to ask leave to withdraw the amendment.
  Amendment by leave, withdrawn.
  Mr. Newton: I beg to move Amendment No. 49, in page 8, line 32, at end insert:
  "(c) provided that if a married claimant proves that at any time within the year of assessment he or his wife with him reaches the age of 65 years or upwards for the figure £865 shall be substituted the figure £950. And if a single claimant proves that at any time within the year of assessment he reaches the age of 65
  1260
  years or upwards for the figure £625 shall be substituted the figure £675 '.
  This amendment seeks to raise the personal allowance for those aged over 65 in the case of married claimants from a figure of £865 as provided for in the Bill to a figure of £950 and for single pensioners from the £625 proposed in the Bill to £675. It will readily be appreciated that the effect of this in round figures, in respect of retired elderly taxpayers, would be to give married couples an extra tax reduction of around £30 a year and the single taxpayer a reduction in taxation of around £18 a year.
  I am happy to respond to a demand from the Labour benches, since during the course of the Chief Secretary's speech on Amendment No. 36 his hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey), the solitary occupant of the benches below the Gangway, said something from a sedentary position which sounded like "What about the pensioner?" This amendment is designed to give some additional help to pensioners through the tax system.
  It is no new departure to have special treatment for elderly taxpayers in the tax system. Apart from the existing age exemption, to which the Chief Secretary will no doubt refer, and which is the subject of a later amendment, there is the old-age relief, designed to give elderly taxpayers some relief from taxation on investment income. The only reason why we no longer have such a provision is that my hon. and right hon. Friends, when last in Government, took action to extend relief on investment income to all taxpayers. This more than compensates elderly taxpayers for the loss of the age relief provision.
  The amendment was not tabled specifically as an indexing amendment along the lines of Amendment No. 36, although on the figures given by the Chief Secretary it would, I suppose, in rather broad terms, take the personal allowances for married and single pensioners to around the level which would be appropriate on the figures he gave us to keep pace with inflation over the past two or three years. The main reason why the amendment has been tabled is that it is the elderly in our society who suffer most through inflation and who have had a very difficult time over the past year and will continue to have a difficult time. This is one way

  1261
  in which we can help some of them— rather more than are helped by the Finance Bill proposals or those put forward by the Secretary of State for Social Services.
  In my speech on the last amendment I referred to figures spoken of quite commonly for the rate of inflation this year. This morning the National Institute is suggesting rises in prices of around 17 per cent. for this year. We have had figures of anything between 15 per cent. to 20 per cent. mentioned by hon. and right hon. Members opposite, including, I think, the Secretary of State for Prices and Consumer Protection. There is no doubt that we shall have the worst inflation, the worst single rise in prices this year, that anyone in this House can remember. That will have serious effects on many elderly people.
  5.30 p.m.
  No doubt the Chief Secretary will refer to the increase in pensions proposed by the Government. As has been said, none of us wants to shoot Santa Claus. We are delighted about the proposed increase. But it has not been paid, and we do not know when it will be paid. I very much doubt whether the Secretary of State for Social Services knows when it will be paid, because the social compact does not operate in this respect. The civil servants in the Department of the Secretary of State for Social Services have refused to do the necessary work and the pensioners do not know when they will get the increase they have been promised. All that is clear is that it is unlikely to be paid as early as 22nd July, the date originally promised.
  Meanwhile, pensioners see many other people benefiting from the threshold provisions introduced under the pay and prices policy of the Conservative Government. They see other people receiving help in solving the problems of inflation. The only thing which has happened to some elderly people in the past few months is that their taxes have been increased by the Budget. I recognise that that does not apply to all pensioners, but the incomes of many elderly people living on retirement incomes have decreased as a result of what has been done by the Government. That will remain true for a number of retired people even after the pension increase has been paid.
  1262
  I cannot accept the implicit argument of right hon. and hon. Members opposite and of some of the people in my constituency who have criticised me for advocating a higher threshold for the investment income surcharge in relation to elderly people that we are talking only about very wealthy people, the Charles Clores of the retirement world. Some of the people paying extra tax and facing extra burdens as a result of the Budget are not the poorest of pensioners but they are a long way from being the wealthiest members of society.
  It is important to recognise that even people who may not be poor by the standards of, say, the supplementary benefits scheme can suffer real hardship if as a result of the changes made by the Government their standard of living starts to fall. That is the effect of some of the events which have happened to some pensioners in the last few months. At an earlier stage of the Committee proceedings I recalled the Chancellor of the Exchequer talking at the Labour Party conference last year about extracting howls of anguish from wealthy taxpayers. I said that, judging from the people I saw in my constituency, the only people who had been howling with anguish in the last few months as a result of the tax changes were the elderly and retired people who did not know how they would meet the bills with which they were faced, including the bills arising from the basic problem of inflation.
  It has to be said, even in a debate which I would not want to turn into a political assault on the Chief Secretary, that that is different from the impression given to elderly taxpayers when the Labour Party was in opposition. The impression given then was that if taxation was increased it would be on the very wealthy and on those with higher incomes. There was no suggestion about people with relatively modest retirement incomes having to bear part of the burden. Therefore, these people legitimately feel that they have been let down and misled as a result of what has happened since the election.
  Some of the people who come to see me are facing rates increases of about 100 per cent. or even more this year. I recognise that the Chief Secretary cannot personally be blamed for that, but it is

  1263
  part of the situation which we are discussing. However, something for which his colleagues can be blamed is that these people are also facing a 70 per cent. increase in the charge for the electricity which they use for heating their homes through the increase in off-peak rates for night storage heaters. I have talked to enough elderly people to know that the propaganda for this form of heating was particularly attractive to old people. They were offered a form of heating which was, allegedly, economic to install and to run.
  No doubt the Chief Secretary will argue that the amendment would help elderly taxpayers all the way up the scale regardless of how wealthy they were. The increases which I propose perhaps would not mean much to the wealthiest taxpayers, but they would help those who are not particularly well off. That is where the bulk of the relief would go, and that is where the shoe is pinching.
  The amendment would help to fill a significant gap in the Government's policies. They are doing something to help basic national insurance retirement pensioners and supplementary pensioners and to help those who benefit from the age exemption, but they are doing nothing to help—in fact they are increasing the tax burdens on—people who have a little bit more than that but can by no means be described as wealthy. It would be appropriate to fill that gap and to recognise an ordinary basic fact of life, which is that elderly people tend to have a more difficult time than the rest of us. It is reasonable that that fact should be recognised in the tax system by giving them a higher personal allowance.
  My proposal would help in two other respects. First, it would help those who live in part or wholly on fixed incomes and are in the most difficult position of all. I am talking primarily of people on older types of pension schemes which have no effective inflation-proofing. They are dependent on their pensions for a significant part of their standard of living, and their standard of living is being significantly eroded. This is a problem to which neither side of the House has given significant attention in recent years. The amendment would help to benefit some of these people.
  Secondly, the amendment would help to reduce the great resentment about the
  1264
  fact that pensions are taxed. By reducing the tax on many pensions we would lessen that resentment.
  The amendment would not be enormously costly to implement. Perhaps the Chief Secretary would say precisely what it would cost. It would fill a gap in the Government's policies in a cause which we all support. It would help a number of people who are having a very difficult time. I hope that the Chief Secretary will consider the amendment sympathetically.
  [Sir M. GALPERN in the Chair.]
  Mr. Higgins: I was concerned when during the debate on the last amendment one of my hon. Friends declared an interest by saying that he was in receipt of a marriage allowance. I suppose that I should have done the same. The Chief Secretary did not declare his interest either. That illustrates the interesting complexity of the motion which the House recently passed on the subject of the declaration of Members' interests.
  Mr. Joel Barnett: Will the hon. Gentleman declare an interest on this amendment?
  Mr. Higgins: No, because I am not over 65. Whether I should do so because I have parents and because of the constituency which I represent I do not know.
  I congratulate my hon. Friend the Member for Braintree (Mr. Newton) on the originality of the amendment. Various allowances have been made for elderly people over the years, but I cannot recall an amendment of this sort being proposed before, still less implemented by a Government. The Committee would do well to consider the amendment carefully. I am not sure that it is not one that the Government should be asked to adopt and which I should ask my hon. and right hon. Friends to support. That will depend on the answer given by the Chief Secretary.
  The first question we must ask the Chief Secretary is: what is the cost of the amendment? I imagine that the cost will not be so great as was the cost of the previous amendment, but it may be quite a substantial sum. In this context the Committee finds itself in some difficulty. Over the years it has been normal for Oppositions, acting responsibly, to

  1265
  take account of the amount of money which any particular amendment may cost. On the other hand, Oppositions normally operate within the framework of a set of forecasts provided by the Chancellor of the Exchequer. This year for the first time in several years the Chancellor has failed to give a forecast for the first half of next year.
  Speculation in the Press and recent statements by the Chief Secretary—he cannot hide behind the Chancellor of the Duchy of Lancaster on this amendment— suggest that further reflation is necessary. The National Institute of Economic and Social Research also takes the view that perhaps aggregate demand will lag in the latter half of this year. Therefore, on grounds of equity and compassion and also on the ground of economic management the Committee should accept the amendment. We should like to know the cost of the amendment and whether the amendment is consistent with the line which the Secretary has taken in the last few days on the management of the economy. I hope that the Chief Secretary will be able to give a sympathetic answer.
  I wish to put forward several arguments in support of my hon. Friend the Member for Braintree. Most hon. Members have long regarded the social contract as a figment of the Prime Minister's imagination. The position is becoming bizarre when, on the one hand, the TUC is said to be in favour of higher pensions and, on the other hand, trade union members responsible for paying higher pensions are refusing to do so on the date announced by the Government. That is a remarkable situation which confirms the view we have always taken about the social contract. Pensioners will not only suffer from the effect on prices of inflationary wage claims but will suffer from this industrial action. There is, therefore, a case for considering whether we should operate through the tax system as well as through the pensions scheme whenever an increase proposed by the Government is implemented.
  In their election manifesto the Government put forward proposals for increasing the level of national insurance pensions paid to married couples and individuals. It is true that the Chancellor of the Exchequer made speeches to the effect that there would be increases in
  1266
  taxation, but the Government did not bring together their two policies of increasing pensions and increasing the rate of tax paid on pensions by pensioners who pay income tax. To that extent the real value of the pension has been reduced.
  5.45 p.m.
  We should give special attention to pensioners who are on fixed incomes. The crucial point is whether some sections of the community suffer a reduced standard of living as a result of the Government's action. I know from experience in my constituency that that is often so for people who are in receipt of a national insurance pension plus some other income. Pensioners below the tax threshold are covered if necessary by the supplementary benefit provisions. There is another group who are in receipt of a national insurance pension but are given age exemption from income tax. They are covered in Clause 4. There is also the group who are above that limit who receive a national insurance pension—or a part pension if they are over 80—and pay income tax. It is that group at which the amendment is directed. I think I am right in saying that this group has become neglected. These people will be paying tax at a higher rate.
  Despite the complexity of the matter, and although it might be better to deal with it by a tax credit scheme, I feel that we should give attention to this group of people. There is an inter-relationship of the three groups—the below-the-threshold supplementary benefit group, the above-the-threshold age exempted group and those who are above the age exemption limit but pay tax.
  Mr. Ridsdale: Does my hon. Friend realise that the group to which he is referring is the group that is hardest hit by the great increase in rates? Would not this be an excellent way of helping them?
  Mr. Higgins: I agree. I was tempted to dub this a Dame Irene Ward amendment. I might equally have dubbed it an hon. Member for Harwich's amendment. The people in this group are those who are worst hit by increases in rates and other measures. It is a group to which the Committee should be sympathetic. The people in this group will not receive threshold payments under the

  1267
  counter-inflationary policy. They are the people whose standard of living is going down significantly because they are on fixed incomes and because of the effect of inflation.
  Although those who are below the age exemption limit will benefit from Clause 11(4), the amendment is necessary to benefit those who are in receipt of a national insurance pension, are above the age exemption limit and are paying income tax. I hope that we shall have a clear answer from the Chief Secretary because we want to know the exact position.
  The benefit which would flow from the amendment extends right across the incomes scale. We must recognise that as a result of inflation many retired people face difficulties, and the bulk of the cost will go to those at the bottom end of this group. I believe that there was an earlier allowance which was subsumed when we brought in the provision for earned income allowance extending the investment income provisions so that any sums were paid only at earned income rate. We must look at Amendment No. 49 in relation to our long-term proposals in the tax credit scheme. The amendment emphasises the importance of dealing fairly with a group of people in the community who on the whole in present circumstances are being unfavourably treated.
  I hope that the Chief Secretary will be forthcoming in his reply and will say that the sums involved in implementing the amendment are not an impossible burden. If he accepts the amendment, I am sure that progress in Committee will be greatly accelerated.
  Mr. Peter Rees (Dover and Deal): The present Government have effected considerable generosity to the old. I am sure that we welcome the increase in the old-age pension, although perhaps the Labour Government underestimated the practical difficulty of implementing the increase in July—and they have encountered further difficulties on which I shall not dwell at this moment. It remains to be seen whether their generosity will be sustained. I tend to doubt it. I doubt whether their action compares well with the various measures introduced by the Conservative Government. Indeed, the generosity
  1268
  of the present Government has been of a limited and partial kind. It has not extended to consideration of the burden of tax borne by the old.
  I must agree that there is a measure of relief in Clause 11 for those over the age of 65 on small incomes, but there are many who come just above that level and, by today's standards, in no sense could be called wealthy. They may have a small income from savings in addition to their old-age pensions and pensions from the firms for which they worked; they might even have some income from small sums inherited from forebears. I know that this aspect of the matter will be considered sympathetically by the Chief Secretary, although I am not so sure about the reception it will receive by many of his Labour colleagues. The class of person to which I refer has been hit particularly hard in the last few years and is likely to go on being hit in succeeding years. Such persons have been heavily hit by inflation and will be considerably affected by the increase in the cost of the products of and the services given by the nationalised industries.
  In my constituency I find considerable concern about the increase in electricity charges, and my constituents well appreciate how prices of domestic coal will rise in the autumn. The effect of increases in rates has already been eloquently dealt with by some of my hon. Friends. I do not think the Chief Secretary appreciates the impact of the rate increase on the class of persons to whom I refer. We all feel the effects of the increase, but I must emphasise that they feel it particularly badly.
  Then we must also consider the increase in direct taxation. The people in the bracket covered by the amendment face the threat of a real cut in their standard of living. The kind of projections they made when they retired are proving to be utterly false; in many cases they are having to contract rather than expand their expectations. Amendment No. 49 is designed to help this class of person.
  I have no doubt that the Chief Secretary will produce some estimates of the cost. We are anxious to hear how he costs the amendment. I am always a little sceptical about specious costing exercises produced at the Government Dispatch Box, but I shall be interested to

  1269
  hear what the hon. Gentleman says. I do not think that the exercise will be as expensive as he no doubt will lead us to believe. Whatever the cost, the amendment seeks to give elementary justice to a class of the community who have suffered and are likely to go on suffering, particularly as a result of the Chancellor's measures.
  Therefore, I hope that, whatever the cost, the Chief Secretary will be a little more generous this evening than he was when a similar amendment to Clause 5 was dealt with on the first day of the Committee's proceedings. On that occasion, despite eloquent speeches from both Conservatives and Liberals, the Government treated our provision with callous disdain. I hope that the Chief Secretary may have mellowed a little over the recess. Perhaps his contact with constituents has given him a little more appreciation of the impact of the Chancellor's proposals in the country as a whole. I hope that he will be a little more generous this evening.
  Mr. Nicholas Ridley (): I was sorry to see that during the speech of my hon. and learned Friend the Member for Dover and Deal (Mr. Peter Rees) the hon. Gentleman the Chief Secretary was grinning with glee at the thought of the plight of the elderly. He shook his head violently when my hon. and learned Friend suggested that he might have visited his constituents during the recess. I hope that I misinterpreted the hon. Gentleman's physical gestures and that when he replies he will be a little more sympathetic to our arguments.
  I wish to emphasise one point with great sincerity. In the 15 years I have had the honour to be a Member of this House I have never before met so many elderly people who have such fears about the future. They are reaching a point close to despair in view of what the present Government have done and also as a result of the general inflationary situation and the economic storm clouds on the horizon. Although the young can emigrate and can adapt to the new situation, the elderly are trapped. They have their incomes such as they are, but little or no means of increasing them. An elderly couple may have their house, and it may be a rather bigger house than they.
  1270
  should have, but no doubt when they retired they thought that they could afford that property. However, they now find that rates and taxes are piling on to them and menacing them to a point when they are almost unable to maintain any sort of standard of living at all, especially when they now learn of all the extra burdens which are to be imposed upon them. An increase of 50 per cent. in the rates in my constituency has had a catastrophic effect on the confidence of many old people. At a time when incomes are controlled and their pensions are rising by only small amounts, they do not understand why they are being asked to bear extra burdens of 50 per cent. on rates and perhaps 30 per cent. on electricity charges. My hon. Friend the Member for Braintree (Mr. Newton) was perfectly right when he said that we had to do something to help them.
  6.0 p.m.
  My hon. Friend the Member for Braintree is being very modest in asking only for what I calculate to be a £33 tax remission for people over 65, and then only for those who do not come within subsection (4)—the people under the £1,170 limit if they are married. Even if the amendment were accepted, it would not cover some of the rate increases that my constituents and others will have to bear.
  In supporting my hon. Friend the Member for Braintree, I urge the principle of the amendment upon the Chief Secretary. Whatever the amount may be and whatever the economic consequences, we shall no doubt hear from him. But in principle it seems to be more sensible to adopt the suggestion contained in the amendment than to adopt the principle of the old-age relief.
  In the case of someone who is under 65 we do not say "If your income is less than £1,000 you pay no tax, but if it is more than £1,000 you start paying tax from the first £1 that you earn." We give a personal or married allowance, and the deduction of tax starts after the total allowances have been exceeded. So, if we wish to give special help to the elderly, it seems to be infinitely preferable for it to be done through a system of higher personal allowances than people under 65 receive than by resorting to the over-65 relief.

  1271
  The latter method means that someone whose income is £1,080 will be suddenly brought up against a very steep marginal increase in the tax that he has to pay. It also means that in the end it is a certain small amount which is, so to speak, free of tax and that anyone who seeks to achieve a greater income, even in old age, is especially hard done by. So, whatever the Chief Secretary may have to say on this occasion, I should prefer him to give thought to the principle behind the amendment that the elderly should be helped by higher personal allowances rather than by any system of over-65 relief.
  Mr. Ridsdale: I congratulate my hon. Friend the Member for Braintree (Mr. Newton), and I do so warmly in view of the fact that I happen to represent an Essex constituency. My hon. Friend understands very many of the problems of the elderly in Essex. Like my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), I support the principle behind the amendment. This is an excellent way of helping some of the elderly people who are suffering great anxiety at the present time.
  I agree with my hon. Friend the Member for Cirencester and Tewkesbury, who said that during his 15 years in the House he had never known a time when there had been greater anxiety. I can just top my hon. Friend's period here. I am in my 21st year as a Member of this House. I have never received such anxious letters from elderly people as those that have been in my postbag recently. Many of them refer to this as being "another nail" in their coffins. It is most disturbing to read their letters and the anxious expressions that they use, realising that they have to face a possible annual rate of inflation of 17 per cent.
  I contrast them with a group of people I saw a few minutes ago who were advocating a 30 per cent. increase in their wages. We must not forget that it is the effect of vast increases in wages which has caused a great deal of the inflation that we see at present.
  By means of the principle suggested in the amendment, we shall be able to introduce what might be called a threshold agreement into the tax system
  1272
  similar to that in the wages system. I think that it is only right for the Chief Secretary to accept the amendment.
  My hon. Friend the Member for Worthing (Mr. Higgins) talked about this "special group" of people. They are people who have been hit hard by the Budget itself. They face an additional tax bill, and anything which can be done to help them should be done. I hope that the Chief Secretary will be sympathetic to the amendment, because I can assure him that many elderly people are in great despair.
  Mr. Ian Gow (): I want briefly to support the amendment and to agree wholeheartedly with the speeches made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and my hon. Friend the Member for Harwich (Mr. Ridsdale).
  The constituency which I have the honour to represent contains as high a proportion of retired people as any in the country, with the possible exception of that of my hon. Friend the Member for Worthing (Mr. Higgins). Anyone who fought the last General Election knows the extent to which inflation is a cause of real anxiety and despair among the elderly. It lies within the power of the Government to give the elderly some grain of hope that this administration understands the really serious effects that inflation has upon them.
  Even if this modest amendment is accepted, given the rate of inflation which is in prospect of 15 or 17 per cent., it will be of only comparatively little help to the retired people who will benefit. I urge the Chief Secretary to accept the amendment. It will give some help to people who by definition are just above the line at which the basic retirement pension operates, who have probably saved during a lifetime of work, and who are precisely the people who need encouragement from the Government.
  I hope that the Chief Secretary will accept the amendment and thereby give some hope to those who are being driven to despair by this Government and by the rate of inflation that is in prospect.
  Mr. Joel Barnett: I want first to congratulate the hon. Member for Braintree (Mr. Newton) on moving an ingenious amendment of the kind that we have not

  1273
  previously discussed, as the hon. Member for Worthing (Mr. Higgins) said.
  I say at once that of course I recognise the problems of the elderly. No one could not be aware of them, even if he were not mellowed after a two-week recess, although I assure the hon. and learned Member for Dover and Deal (Mr. Rees) that I was not able to spend even two whole days in my constituency. I was at the Treasury for the bulk of the time.
  I should dearly love to take up the argument of the hon. Member for Worthing about the economics of the situation and the help that this amendment might or might not give to it. But, apart from the fact that it might be considered to be going a little wide of the subject matter of the amendment, I know that we intend to have an economic debate in Committee upstairs on Monday. For those reasons I resist the temptation to discuss the speech that I made a few days ago or the increases in rates and nationalised industry prices, which of course I am aware will hurt elderly people. However, those factors are not caused by the extent to which we increase personal allowances and how we increase them.
  I want to take the two points. First, if we are to increase personal allowances for the elderly, is this the best method? Secondly, having given the allowances that we have in the Budget, is this the best way and should we spend the additional cost of the amendment by additional relief to the elderly or in some other way, if those funds were available? The cost in a full year would be £50 million. It would be £30 million in the year 1974-75. [Interruption.] I heard an hon. Member say "Peanuts". One can get a lot of peanuts for £50 million. But I shall return to that matter.
  I want first to deal with the method adopted by the hon. Member for Brain-tree in the amendment and whether this is the right way to go. As the hon. Gentleman pointed out very clearly, what he is proposing to do is to give the relief not by increasing the age exemption but by giving a special increased personal allowance for the elderly, those over 65. As the hon. Member for Worthing rightly said, this has not been done previously. Since the date when it was decided to give relief, it has been done through age ex-
  1274
  emption. The problem of doing it in the way proposed is that it would seriously add to the complexity of an already complex tax system in relation to the elderly. With age exemption there is the tapering relief, the marginal relief that we know. Many elderly people find this very misleading. We shall be coming to that matter shortly on another amendment, so I shall not pursue that point. But elderly people find age exemption and the marginal relief somewhat complicated.
  To that extent, I can understand the point made by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), that it would be a simplification to have, simply, an increased personal allowance for the elderly. That is absolutely true. But successive Government have preferred to give the relief by way of an age exemption with tapering relief, for the fairly obvious reason (hat by doing it in that way one directs one's assistance to those at the comparatively lowest end of income groups and gives nothing to the highest income groups—not only nothing to the highest groups but nothing above a fairly low level. If the amendment were accepted, we would have the two side by side. We would have an increased personal allowance for the elderly but we would still have the age exemption.
  The hon. Member for Worthing questioned me on who would benefit from this and to which particular level the benefit would go. My answer will give an indication of just how complicated it would become and how very difficult it would be for elderly people to understand.
  Elderly people with incomes somewhat above the age exemption income limit may benefit from marginal age exemption relief. But increased personal allowances for the elderly would reduce the point at which marginal age exemption relief runs out. Those with incomes above the run-out point would benefit, but those who, despite the proposed increase, would still benefit by having their liability calculated by reference to the marginal fraction would neither gain nor lose.
  In other words, those with incomes above the current run-out point would get a constant benefit—unless they are higher rate payers. If their incomes

  1275
  come within the current run-out point— that proposed by the amendment—they will get a variable benefit. If they remain within the marginal zone, there will be no changes. I hope that that is clear to the hon. Member for Worthing. However, it only goes to show how complicated it would be. The system is already complicated enough with the relief, but if we added this provision many elderly people would find it very difficult to know whether to choose not to claim the age exemption.
  6.15 p.m.
  Mr. Newton: I hope that the hon. Gentleman will forgive me for saying so, but it is becoming increasingly obvious that he spent the recess in the Treasury. I am not sure that it would not have served him better to spend more time in his constituency. This seems to be exactly the kind of argument which is always put up against doing anything of this kind. We all know that the tax system is complicated. That is why the Conservative Government wanted a tax credit scheme to simplify it. But the fact that the present Government are to delay any simplification cannot be used also as an argument for doing nothing to ease the position of people who are suffering from the present tax system. I hope the hon. Gentleman will forgive me for speaking with some heat on this matter. I spent a fortnight in my constituency during the recess, I saw many people in this age group who are desperately worried. Most of them would have settled for a little more complication and £30 less tax this year.
  Mr. Barnett: I had not indicated whether I was accepting the amendment or whether we would be increasing relief for the elderly. I was talking of the principle of the amendment. I hope that the hon. Gentleman will acquit me of anything other than trying to deal with the principle of what he is trying to do in an ingenious suggestion. If one wants to give relief to the elderly, is this the best way to go about it? That is all that I am dealing with at this point in the argument. It would have been made no simpler or more difficult if, instead of spending some time in the Treasury during the recess, I had spent even more time in my constituency. That would not
  1276
  have affected the amendment or how it would be understood or fail to be understood by elderly people.
  Mr. Cope: If the Chief Secretary's point was that those with marginal relief were the people who would not benefit by the amendment, he can rest assured that we have not forgotten this matter and that Amendment No. 70, to which we shall come later, deals with people in that category.
  Mr. Barnett: I should be happy to have an omnibus debate on all the amendments to the clause, but I am afraid that I have to deal with this particular amendment, and it was this amendment with which I was dealing. I have tried to help the Committee by saying that if one is trying to help the elderly this is not necessarily the best way of doing it. As to whether, having decided which way one wants to help the elderly, one has the funds available to do that, that is another question. As I have said, in a full year this would cost £50 million.
  I have heard many speeches from Conservative hon. Members who are obviously very sincere on this matter. The hon. Member for Eastbourne (Mr. Gow) and others represent a large number of elderly people living in their constituencies who are finding life very difficult. No one disputes that. It is only a question whether, on top of what we have already done in the Budget, we should take another £50 million to help that particular group rather than some other group. That is all that this matter is about in terms of cost and priorities. As will be known, in the Budget we have increased the income limits for age exemption by £110 for single persons and £170 for couples. In addition, we have given a very substantial increase in national insurance pensions.
  I am informed that the tape at 17.23 hours stated that the Civil and Public Services Association's committee today decided to suspend its ban on uprating pensions and social security benefits increases. I hope, therefore, that it will be possible to pay the substantial increase in pensions in July.
  Mr. Dempsey: Will this increased allowance prevent any part of the increased retirement pension from being clawed back?
  Mr. Barnett: What we are talking about is giving an increased personal allowance over and above what every married or single person gets. That does not affect the point that my hon. Friend has in mind.
  Mr. Dempsey: Perhaps I could make it a wee bit clearer. Will this allowance prevent any of the increase in pension from coming within the tax bracket?
  Mr. Barnett: I do not think that my hon. Friend is talking about the amendment; he is talking about the increased pension, which is entirely different. There is no clawback on the increased pension as such.
  I must regretfully tell the Committee, despite my considerable sympathy with the points expressed, that, because of all we have done already for the elderly and in view of the cost and the great complexity involved, I am afraid that I cannot recommend that the amendment be accepted.
  Mr. Robert Carr (): The Chief Secretary does not seem to have mellowed much. I fear that he comes into the category of people and articles like walnut trees—the more you beat them, the better they be. Since the mellowing effect of the recess does not seem to produce the desired results, we shall have to try some harsher treatment, but we shall do so with great regret and in the best of spirits.
  I think everyone will welcome the news that the Chief Secretary has just given us, that the CPSA is calling off the action which looked likely to delay payment of higher pensions. While one realises that these staff have a very difficult time, in view of what is at stake it is about time that they called off that action and we are glad that they have. It would not have been acceptable to the country as a whole.
  However, this does not bear on the amendment. What we are saying is that there is a need to help people above the age exemption limit. Nothing that the Chief Secretary has said alters that fact. Certainly I am not greatly impressed by the cost argument. We shall be told on Tuesday of next week that it is all right to repay about £10 million of taxation to trade unions which probably need
  1278
  never have paid it in the first place. There is obviously considerable margin for error in all these matters. However, I do not believe that £30 million this year and £50 million in a full year should be taken so seriously by my hon. Friends as to make them refrain from pressing the amendment.
  Equally, we shall be unimpressed by the argument about complexity. We on this side want to simplify the tax system as well as making it more just and more effective in meeting social need. That is why we invented the tax credit system and why, had we still been in power, we should this year have been legislating for it. So it is unsatisfactory to turn down the amendment on the ground of temporary complexity. We must get around to making the whole system less complex, and the way of doing that has been prepared and would have been put into effect if we had still been in power.
  The Minister's other argument was also unimpressive. He asked whether, if we wanted to help the elderly, this was the best way. When, in answer to an intervention, he rather sharply told one of my hon. Friends that he had not yet rejected the amendment, I thought that if he were going to reject it he would at least be putting forward a better suggestion. But at the end of his speech he made it clear that he has no better way. In the absence of a better way, we should try to insist on this way.
  As I said, there is a need to help people above the age exemption limit. My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) rightly said that the kind of projection that people make for their retirement has been wholly falsified by the scale of inflation which we now have and which, we are told by the NIESR, and almost told by the Government, will be bigger this year than ever before. My hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and Harwich (Mr. Ridsdale) both said, I am sure accurately, that elderly people have never before had such fear about how they will live out the rest of their lives.
  It is true that younger people can take steps to change their position, but elderly people are largely trapped. While the amendment would help those who are not among the poorest pensioners, we should remember that because so many

  1279
  of these people are trapped they cannot adjust their way of life to meet the effects of inflation. If, when someone retires, he has a particular sort of house, he is at an age when he cannot easily change it. The provision is not there. One is trapped in the position in which one found oneself on retirement and for which one had planned, reasonably enough, before retirement.
  These are the people who are being most hit, for example, by the enormous rates increases, particularly in country areas, which this Government have deliberately brought about. They cannot adjust to meet the problems that inflation brings. That is why, as well as anything
  that we do to improve pensions, we should consider the whole spectrum of people above 65. It is time to introduce the concept contained in the amendment of a special personal allowance for these people.
  I congratulate my hon. Friend the Member for Braintree (Mr. Newton), on having invented this amendment. I believe that it is right, that it meets the need and that, unless the Chief Secretary can find some better way of meeting it, it should be pressed in the Lobby.
  Question put, That the amendment be
  made:—
  The Committee divided: Ayes 227, Noes, 250.

  Division No. 32.]

  AYES

  [6.29 p.m.

  Adley, Robert

  Eyre, Reginald

  Kershaw, Anthony

  Aitken, Jonathan

  Fell, Anthony

  King, Evelyn (Dorset, S.)

  Alison, Michael (Barkston Ash)

  Fenner, Mrs. Peggy

  King, Tom (Bridgwater)

  Allason, James (Hemel Hempstead)

  Finsberg, Geoffrey

  Kitson, Sir Timothy

  Ancram, M.

  Fisher, Sir Nigel

  Knox, David

  Archer, Jeffrey (Louth)

  Fletcher-Cooke, Charles

  Lamont, Norman

  Atkins, Rt.Hn. Humphrey (Spellhorne)

  Fookes, Miss Janet

  Lane, David

  Awdry, Daniel

  Fox, Marcus

  Latham, Michael (Melton)

  Baker, Kenneth

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

  Lawrence,Ivan

  Banks, Robert

  Freud, Clement

  Lawson, Nigel (Blaby)

  Barber, Rt. Hn. Anthony

  Fry, Peter

  Le Marchant, Spencer

  Bell, Ronald

  Gardiner, George (Reigate&Banstead)

  Lewis, Kenneth (Rtland & Stmford)

  Bennett, Dr. Reginald (Fareham)

  Gardner, Edward (S. Fylde)

  Lloyd, Ian (Havant & Waterloo)

  Benyon, W.

  Gilmour, Sir John (Fife, E.)

  Loveridge, John

  Berry, Hon. Anthony

  Glyn, Dr. Alan

  Luce, Richard

  Bitten, John

  Godber, Rt. Hn. Joseph

  McAdden, Sir Stephen

  Boardman, Tom (Leicester, S.)

  Goodhart, Philip

  MacArthur, Ian

  Body, Richard

  Goodhew, Victor

  McCrindle, R. A.

  Boscawen, Hon. Robert

  Goodlad, A.

  Macfarlane, Neil

  Boyson, Dr. Rhodes (Brent, N.)

  Gorst, John

  MacGregor, John

  Braine, Sir Bernard

  Gow, Ian (Eastbourne)

  Macmillan, Rt. Hn. M. (Farnham)

  Bray, Ronald

  Gower, Sir Raymond (Barry)

  Madel, David

  Brittan, Leon

  Grant, Anthony (Harrow, C.)

  Marshall, Michael (Arundel)

  Brocklebank-Fower, Christopher

  Gray, Hamish

  Mather, Carol

  Bruce-Gardyne, J.

  Grieve, Percy

  Maude, Angus

  Buchanan-Smith, Alick

  Griffiths, Eldon (Bury St. Edmunds)

  Mawby, Ray

  Buck, Antony

  Grimond, Rt. Hn. J.

  Maxwell-Hysiop, R. J.

  Budgen, Nick

  Grist, Ian

  Mayhew, Patrick (RoyaiTbridgeWells)

  Bulmer, Esmond

  Hall, Sir John

  Meyer, Sir Anthony

  Burden, F. A.

  Hall-Davis, A. G. F.

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

  Carlisle, Mark

  Hamilton, Michael (Salisbury)

  Mills, Peter

  Carr, Rt. Hn. Robert

  Hampson, Dr. Keith

  Miscampbell, Norman

  Channon, Paul

  Hannam, John

  Mitchell, David (Basingstoke)

  Chataway, Rt. Hn. Chrisiopher

  Havers, Sir Michael

  Moate, Roger

  Churchill, W. S.

  Hawkins, Paul

  Money, Ernie

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

  Hayhoe, Barney

  Monro, Hector

  Clark, William (Croydon, S.)

  Heath, Rt. Hn. Edward

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

  Clarke, Kenneth (Rushcliffe)

  Henderson, Barry (Dunbartonshire, E.)

  More, Jasper (Ludlow)

  Clegg, Walter

  Higgins, Terence

  Morgan, Geraint

  Cockcroft, John

  Holland, Philip

  Morgan-Giles, Rear-Adm.

  Cooke, Robert (Bristol, W.)

  Hooson, Emlyn

  Morris, Michael (Northampton, S.)

  Cope,John

  Hordern, Peter

  Morrison, Charles (Devizes)

  Corrie, John

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

  Morrison, Peter (City of Chester)

  Costain, A. P.

  Howell, Ralph (Norfolk, North)

  Mudd, David

  Crowder, F. P.

  Howells, Geraint (Cardigan)

  Neave, Airey

  Davies, Rt. Hn. John (Knutsford)

  Hurd, Douglas

  Neubert, Michael

  Dean, Paul (Somerset, N.)

  Hutchison, Michael Clark

  Newton, Tony (Braintree)

  Deedes, Rt. Hn. W. F.

  Irvine, Bryant Godman (Rye)

  Normanton. Tom

  Dodsworth, Geoffrey

  James, David

  Nott, John

  Douglas-Home, Rt. Hn. Sir Alec

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

  Onslow, Cranley

  Drayson, Burnaby

  Jessel, Toby

  Oppenheim, Mrs. Sally

  Durant. Tony

  Johnston, Russell (Inverness)

  Orr, Capt. L. P. S.

  Dykes, Hugh

  Jones, Arthur (Daventry)

  Page, John (Harrow, W.)

  Eden, Rt. Hn. Sir John

  Jopling, Michael

  Pardoe, John

  Edwards, Nicholas (Pembroke)

  Joseph, Rt. Hn. Sir Keith

  Pattie, Geoffrey

  Elliott. Sir William

  Kellett-Bowman, Mrs. Elaine

  Percival, Ian

  Pink, R. Bonner

  Shersby, Michael

  van Straubenzee, W. R.

  Price, David (Eastleigh)

  Silvester, Fred

  Vaughan, Dr. Gerard

  Prior, Rt. Hn. James

  Sims, Roger

  Viggers, Peter

  Quennell, Miss J. M.

  Skeet, T. H. H.

  Waddington, David

  Raison, Timothy

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

  Wakeham, John

  Rees, Peter (Dover & Deal)

  Spence, John

  Walder, David (Clitheroe)

  Renton.Rt. Hn. SirDavid(H't'gd'ns're)

  Spicer, Michael (Worcestershire, S.)

  Walker, Rt. Hn. Peter (Worcester)

  Renton, R. T. (Mid-Sussex)

  Sproat, lain

  Walker-Smith, Rt. Hn. Sir Derek

  Rhys Williams, Sir Brandon

  Stanbrook, Ivor

  Wall, Patrick

  Ridley, Hn. Nicholas

  Stanley, John

  Wealherill, Bernard

  Ridsdale, Julian

  Steen, Anthony (L'pool, Wavertree)

  Wells, John

  Rifkind, Malcolm

  Stewart, Ian (Hitchin)

  Winstanley, Dr. Michael

  Rippon, Rt. Hn. Geoffrey

  Stokes, John

  Winterton, Nicholas

  Roberts, Wyn (Conway)

  Stradling Thomas, J.

  Wood, Rt. Hn. Richard

  Rodgers, Sir John (Sevenoaks)

  Taylor, Edward M. (Gl'gow, C'cart)

  Worsley, Sir Marcus

  Ross, Stephen (Isle of Wight)

  Taylor, Robert (Croydon, N.W.)

  Young, Sir George (Ealing, Acton)

  Rossi, Hugh (Hornsey)

  Thatcher, Rt. Hn. Margaret

  Younger, Hn. George

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

  Thomas, Rt. Hn. P. (B'nel.H'dn S.)

  Shaw, Giles (Pudsey)

  Thorpe, Rl. Hn. Jeremy

  TELLERS FOR THE AYES:

  Shaw, Michael (Scarborough)

  Trotter, Neville

  Mr. Adam Butler and

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

  Tyler, Paul

  Mr. Cecil Parkingson.

  NOES

  Abse, Leo

  Dunn, James A.

  Jones, Alec (Rhondda)

  Allaun, Frank

  Dunnett, Jack

  Judd, Frank

  Archer, Peter (Warley, West)

  Dunwoody, Mrs. Gwyneth

  Kaufman, Gerald

  Ashton, Joe

  Edelman, Maurice

  Kelley, Richard

  Atkins, Ronald (Preslon, N.)

  Edge, Geoff

  Kerr, Russell

  Atkinson, Norman

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

  Kilroy-Silk, Robert

  Bagier, Gordon, A. T.

  Ellis, John (Brigg & scunthorpe)

  Kinnock, Neil

  Barnett, Guy (Greenwich)

  Ellis, Tom (Wrexham)

  Lambie, David

  Barnett, Joel (Heywood & Royton)

  English, Michael

  Lamborn, Harry

  Bates, Alt

  Ennals, David

  Latham, Arthur(CityofW'mlnsterP'ton)

  Benn, Rt. Hn. Anthony Wedgwood

  Evans, Fred (Caerphilly)

  Lawson,George (Motherwell&Wlshaw)

  Bldwell, Sydney

  Evans, loan (Aberdare)

  Leadbitter, Ted

  Bishop, E. S.

  Ewing, Harry (St'ling,f'kirk&G'm'th)

  Lestor, Miss Joan (Eton & Slough)

  Blenklnsop, Arthur

  Faulds, Andrew

  Lever, Rt. Hn. Harold

  Boardman, H. (Leigh)

  Fernyhough, Rt. Hn. E.

  Lewis, Arthur (Newham, N.)

  Booth, Albert

  Fitch, Alan (Wlgan)

  Lewis, Ron (Carlisle)

  Boothroyd, Miss Betty

  Flannery, Martin

  Lipton, Marcus

  Bottomley, Rt. Hn. Arthur

  Fletcher, Ted (Darlington)

  Lomas, Kenneth

  Boyden, James (Bishop Auckland)

  Foot, Rt. Hn. Michael

  Loughlin, Charles

  Bradley, Tom

  Ford, Ben

  Lyon, Alexander W. (York)

  Brown, Hugh D. (Glasgow, Provan)

  Forrester, John

  Lyons, Edward (Bradford, W.)

  Buchan, Norman

  Fowler, Gerry (The Wrekin)

  McCartney, Hugh

  Buchanan,Richard(G'gow,Springb,-n)

  Freeson, Reginald

  McElhone, Frank

  Butler, Adam (Bosworth)

  Garrett, John (Norwich, S.)

  MacFarquhar, Roderick

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

  Garrett, W. E. (Wallsend)

  McGuire, Michael

  Campbell, Ian

  George, Bruce

  Mackenzie, Gregor

  Cant, R. B.

  Gilbert, Dr. John

  Maclennan, Robert

  Carmichael, Neil

  Glnsburg, David

  McMillan, Tom (Glasgow, C.)

  Carter, Ray

  Gourlay, Harry

  Madden, M. 0. F.

  Carter-Jones, Lewis

  Graham, Ted

  Magee, Bryan

  Castle, Rt. Hn. Barbara

  Grant, George (Morpeth)

  Mahon, Simon

  Clemltson, Ivor

  Grant, John (Islington, C.)

  Mallalieu, J. P. W.

  Cocks, Michael

  Griffiths, Eddie (Sheffield, Brightside)

  Marks, Kenneth

  Cohen, Stanley

  Hamilton, James (Bothwell)

  Marquand, David

  Coleman, Donald

  Hamilton, William (Fife, C.)

  Marshall, Dr. Edmund (Goole)

  Colquhoun, Mrs. M. N.

  Hamling, William

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

  Concannon, J. D.

  Hardy, Peter

  Meacher, Michael

  Conlan, Bernard

  Harrison, Walter (Wakefield)

  Mellish, Rt. Hn. Robert

  Cook, Robert F. (Edinburgh, C.)

  Hart, Rt. Hn. Judith

  Mikardo,Ian

  Cox, Thomas

  Hatters ley, Roy

  Millan, Bruce

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

  Hatton, Frank

  Miller, Dr. M. S. (E. Kilbride)

  Crosland, Rt. Hn. Anthony

  Heffer, Eric S.

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

  Cryer, G. R.

  Hooley, Frank

  Morris, Charles R. (Openshaw)

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

  Howell, Denis (B'ham, Small Heath)

  Morris, Rt. Hn. John (Aberavon)

  Cunnlnflham,Dr.JohnA.(Whiteh'v'n)

  Huckfield, Leslie

  Moyle, Roland

  Davidson, Arthur

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Mulley, Rt. Hn. Frederick

  Davies, Bryan (Enfield, N.)

  Hughes, Mark (Durham)

  Murray, Ronald King

  Davies, Denzll (Llanelli)

  Hughes, Robert (Aberdeen, North)

  Newens, Stanley (Harlow)

  Davies, Ifor (Gower)

  Hughes, Roy (Newport)

  Oakes, Gordon

  Davis, Clinton (Hackney, C.)

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

  Ogden, Eric

  Deaklns, Eric

  Irving, Rt. Hn. Sydney (Dartford)

  O'Malley, Brian

  Dean, Joseph (Leeds, W.)

  Janner, Grevllle

  Orbach Maurice

  de Freitas, Rt. Hn. Sir Geoffrey

  Jay, Rt. Hn. Douglas

  Ovenden, John

  Delargy, Hugh

  Jeger, Mrs. Lena

  Owen, Dr. David

  Dell, Rt. Hn. Edmund

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

  Padley, Waiter

  Dempsey, James

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

  Palmer, Arthur

  Dolg, Peter

  Johnson, Walter (Derby, S.)

  Park, George (Coventry, N.E.)

  Dormand, J. D.

  Jones, Barry (Flint, E.)

  Parker, John (Dagenham)

  Douglas-Mann, Bruce

  Jones, Dan (Burnley)

  Parry, Robert

  Duffy, A. E. P.

  Jones, Gwynoro (Carmarthen)

  Peart, Rt. Hn. Fred

  1282

  1283

  Perry, Ernest G.

  Sillars, James

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

  Phipps. Dr. Colin

  Silverman, Julius

  Walker, Harold (Doncaster)

  Price, Christopher (Lewisham, W.)

  Skinner, Dennis

  Walker, Terry (Kingswood)

  Price, William (Rugby)

  Smith, John (Lanarkshire, N.)

  Watkins, David

  Radice, Giles

  Snape, Peter

  Weitzman, David

  Richardson, Miss Jo

  Spearing, Nigel

  Wellbeloved, James

  Roberts, Albert (Normanton)

  Spriggs, Leslie

  White, James

  Roberts, Gwilym (Cannock)

  Stallard, A. W.

  Whitehead, Phillip

  Robertson, John (Paisley)

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

  Whitlock, William

  Roderick, Caerwyn E.

  Stoddart, David (Swindon)

  Willey, Rt. Hn. Frederick

  Rodgers, George (Chorley)

  Stonehouse, Rt. Hn. John

  Williams, Alan (Swansea, W.)

  Rodgers, William (Teesside, St'ckton)

  Strang, Gavin

  Williams.Rt.Hn. Shirley (HTd&St'ge)

  Rooker, J. W.

  Strauss, Rt. Hn. G. R.

  Williams, W. T. (Warrington)

  Rose, Paul B.

  Summerskill, Hn. Dr. Shirley

  Wilson, Gordon (Dundee, E.)

  Ross, Rt. Hn. William (Kilmarnock)

  Swain, Thomas

  Wilson, William (Coventry, S.E.)

  Rowlands, Edward

  Taverne, Dick

  Wise, Mrs. Audrey

  Sandelson, Neville

  Thomas, D. E. (Merioneth)

  Woodall, Alec

  Sedgemore, Bryan

  Thomas, Jeffrey (Abertillery)

  Woof, Robert

  Selby, Harry

  Thome, Stan (Preston, S.)

  Wrigglesworth, Ian

  Shaw, Arnold (Redbridge, llford, S.)

  Tierney, Sydney

  Young, David (Bolton, E.)

  Sheldon, Robert (Ashton-under-Lyne)

  Tinn, James

  Shore, Rt. Hn. Peter (S'pney&P'plar)

  Tuck, Raphael

  TELLERS FOR THE NOES:

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

  Urwin, T. W.

  Mr. Laurie Pavitt and

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

  Variey, Rt. Hn. Eric G.

  Mr. Joseph Harper.

  Silkin,Rt.Hn.S.C.(S'hwark,Dulwich)

  Wainwright, Edwin (Dearne Valley)

  Question accordingly negatived.
  Mr. John MacGregor (): 1 beg to move Amendment No. 34, in page 8, line 40, at end insert—
  ' (4) In section 10(5) (restriction on child allowance by reference to the child's income) for the reference to £115 there shall be substituted a reference to £215 '.
  The amendment would increase from £115 to £215 the amount of income which a child may earn before his parent begins to have his child allowance reduced. At the outset, perhaps I ought to declare that I have no personal interest here.
  In one sense this might be described as another indexation amendment, and on that theme I must say that I have been fascinated by the frequency with which the concept of indexation has arisen in our debates on the Bill thus far. I suspect that outside the Chamber it is not yet recognised how many of our amendments have dealt with that concept, although I imagine that that situation will shortly change. In that sense I believe that the Committee is leading informed opinion in the country.
  Two months ago I put a Question to the Chancellor of the Exchequer, to which he replied on 8th April, asking when the present limit of £115 was fixed and what the new figure should be, the effects of inflation being taken into account. The limit was last fixed in 1963-64, and by February 1974 the figure should have risen to £216. I have rounded it down to £215. Account has thus been taken of inflation.
  I advance three main reasons in support of the amendment. First, there is
  1284
  the question of equity. Unlike several of the other matters covered by the indexation amendments which we have discussed, this limit has not been raised for a long time. Few other allowances have been allowed to remain static in these inflationary times as this one has. I stress also that we are talking here of comparatively modest amounts of children's capital. In 1963-64, assuming a return of 5 per cent., one was speaking of capital of about £2,000. Today we are considering about £1,000 or less, having regard to the increase in interest returns, and that sum of about £1,000 means a great deal less in real capital terms than did the £2,000 in 1963-64.
  It is a not dishonourable wish on the part of grandparents or others to give children a certain amount of capital for their future, and when they make these gifts they do so out of much more heavily taxed capital, especially with the prospective wealth and gift taxes. As I say, it is not dishonourable to wish to pass on a modest amount to children, but in so doing the donor penalises the parents of the children through the effect on the child allowance.
  1 agree very much with what was said by my hon. Friend the Member for Brain-tree (Mr. Newton) on Amendment No. 49 when he pointed out that a proposal of this kind would equally benefit people with very large amounts of capital and, therefore, much higher levels of income from children's capital, but the benefit is proportionately much higher for those who are only just above the income level

  1285
  of £115. In other words, the proportionate benefit really bites in respect of those for whom the amendment is intended. That, therefore, is my first argument, on grounds of equity in time of inflation.
  Second, I address myself to the question of students' earnings. In effect, every extra £1 above the £115 which a student earns at present during his vacations is charged at his parent's highest rate of tax. I recall earning modest sums myself as a student during the vacations to help me through university, running seaside summer shows for visitors. I was always extremely careful to keep my total net earnings, after taking expenses into account, below the figure at which I knew my family would start to be taxed. Today, however, it is far easier to earn a great deal more than £115 in the summer vacation.
  6.45 p.m.
  At that time the child's income allowance which we are here discussing was much more in step with the child tax allowance than it is now. Yet today, as a result of this Finance Bill, the child tax allowance has been increased to £305 for children over 16 years of age. I submit, therefore, that the £115 is well below what it should be.
  This is of special importance in relation to students' earnings. We want to encourage more children to go on to higher education, but we cannot yet, for reasons of cost, apparently, abolish the parental means test, although I should very much welcome it if we could. Thus we are hitting the student who has a family with an income above the parental means test level and who is willing to support himself by work during the vacations. In effect, we say that in many cases the student, or the family as a whole, will pay a very high marginal rate of tax on his earnings which result from his desire to make a contribution towards paying his way through university. The amendment would at least help in that sort of situation. A number of constituents have drawn my attention to their problems in this respect.
  I have written to the Chief Secretary about a particular case of that kind, namely, students' earnings on thin sandwich courses. It appears from the evidence available to me that those who go through university or technical college full time with grant from their employer
  1286
  or from the local authority—1 am especially concerned about those with grant from the employer—do not have their families' child allowance affected in any way. On the other hand, those on thin sandwich courses, in which they work for six months with an employer, obtaining earnings plus expenses, and in the remaining six months have a grant from the local authority, find that the first six months' earnings are regarded as earned income, and this bites on the child allowance. I regard this as an anomaly which ought to be remedied. It could be tackled in various ways, perhaps, but the amendment would at least help.
  Third, again unlike some of the other matters which we have discussed with reference to indexation, the cost here would, I am sure, be comparatively slight. I understand from the reply to a Question which I put to the Chancellor of the Exchequer that it is not possible accurately to assess the cost, and I recognise the reasons and the difficulty there. But the cost cannot be great.
  I move the amendment, therefore, on those three grounds: on grounds of equity, on the effect on students' earnings, and on the comparatively small cost. I urge the Chief Secretary to give it sympathetic consideration.
  Mr. Norman Lamont: I support my hon. Friend the Member for Norfolk, South (Mr. MacGregor) in his amendment to raise from £115 the level to which a child's income is allowed to go before the child allowance is reduced pound for pound. As my hon. Friend said, there is no doubt that this allowance has not kept pace with inflation. In 1952-53 the figure was £85. In 1957-58 it was raised to £100. In 1963-64 it was raised to £115. It has not been raised since, and in that time the real value has been almost halved. It seems to me, therefore, that, if we are to have this allowance at all, there is a strong case for increasing it.
  In supporting the amendment I wish to put a question to the Chief Secretary. How will this child's earnings limit and its effect on the child allowance be affected by the proposals which the Government intend to bring in for aggregation of children's and parents' incomes? As I understand it, the allowance here relates purely to children's income—in their own

  1287
  right, excluding scholarships and bursaries, for example. When we had aggregation before 1971 the child's income was treated as the income of the parent and did not affect the child allowance.
  I should be grateful if the Chief Secretary would tell us whether in the effect that the £115 or the improved allowance will have on the child allowances the Government are intending to revert to the pre-1971 situation. I hope his answer will be "Yes", but even if it is there is still a strong argument for increasing the allowance in terms of inflation alone.
  Mr. Joel Barnett: I am obliged to both hon. Members for the way they have spoken to the amendment, but particularly to the hon. Member for Norfolk, South (Mr. MacGregor) who moved it. Obviously we have a great deal of sympathy for the proposal because, as he rightly assumed, the cost is small. It would be only about £3 million in a full year—I say "only", but if I could find many amounts of £3 million I would have many people asking for them—and about £2½million in 1974–75.
  I do not want to resist the amendment on grounds of cost. I should like to see the allowance increased because it has been well overtaken by inflation over the years, but there is a problem. Perhaps I may here deal with the point raised by the hon. Member for Kingston-upon-Thames (Mr. Lamont) about aggregation, because that is the central point of my reply to the amendment. Whether we shall go back precisely to the pre-1971 situation has not been decided, but it will be similar to that situation on aggregation.
  When that happens the earnings of students or any other youngsters will not be left open to the sort of abuse which is unfortunately available through the use of covenants. Successive Treasury Ministers have argued this case, but invariably it is not altogether understood. If the amount that a child may earn or have as income is increased to the level mentioned in the amendment or to any other reasonable sum, it is open to grandparents and others, through the use of a covenant, to abuse the system. That argument has been used in the past and it is a most persuasive one. Although the cost of agreeing to the amendment would
  1288
  be small, the abuse could grow substantially and I am sure that that is not what the Committee wants.
  With the sort of aggregation which we are proposing to introduce, the investment income for a youngster would fall to be aggregated. That would be the time to allow an increase of the amount suggested in the amendment. Whether it would be that actual amount is something we should have to consider, but to do what the hon. Members wants in advance of aggregation would be a little incongruous. We should be giving the benefit to children with investment income only to move in the other direction with aggregation. I know that that does not altogether please Conservative Members, who do not like aggregation, and I understand that there is a clear difference of political view on that. There is some abuse here and it could grow considerably if the amount of income that a child could have were to be increased. That is the only reason why I should want to resist the amendment.
  Mr. MacGregor: Irrespective of the merits of the gift tax, would not that bite on the point the Chief Secretary has in mind?
  Mr. Barnett: I was referring not to the gift tax but to aggregation. Nevertheless, I take the point that if the grandparent was caught by the gift tax that might dissuade him from making any transfers. Therefore, that again might be the occasion for increasing the allowance.
  I am sympathetic to increasing the allowance, and if the Committee accepts my point I shall certainly be willing to consider that increase when we introduce aggregation. I cannot accept it now.
  Mr. Higgins: I have listened with great interest to the debate. It is true, as the Chief Secretary suggested, that there are profound points of principle at stake on the question of aggregation of children's income. We debated them at great length in Standing Committee under the last Labour Government before 1970 and subsequently. There is always the danger in matters of this kind that we engage in what might be called switchback politics. One party says that it will do one thing and the other party says that it will do the opposite when it comes to power, and the matter

  1289
  switches back and forth. On the general principle, we must relate the position at any given moment to any factors which may have altered since the matter was last debated. If the position is that the Labour Party says it will reverse everything that the Conservatives have done without the Conservatives adopting a similar attitude, the result will be a steady move to the far left. That is not a situation which the Conservative intend to accept.
  We have taken considerable exception to the line adopted by the Government, particularly on the gifts tax which has rightly been described as prospective retrospective legislation, and also to the announcement in the Budget by the Chancellor of proposals which will not take place until the autumn. Consequently we have no opportunity in the intervening period to debate such matters and remain in order. I cannot therefore try your patience, Sir Myer, by discussing the
  overall question of aggregation except to say that the points we made previously remain valid.
  I found the Chief Secretary's answer most unconvincing. It is based on the premise that what he proposes for the autumn will come to pass. I do not believe that that will be the case. He might have produced something more substantial. It is quite some time since the income limit was increased. There are frequently good reasons why it is not increased, but if those reasons exist the Chief Secretary has totally failed to produce them. It seems to me that my hon. Friends are on to a good point and I advise them, if they feel so moved, to press the matter to a Division, in which I shall support them.
  Question put, That the Amendment be made: —
  The Committee divided: Ayes 221, Noes 245.

  Division No. 33.]

  AYES

  [6.59 p.m.

  Aitken, Jonathan

  Deedes, Rt. Hn. W. F.

  Holland, Philip

  Alison, Michael (Barkston Ash)

  Dodsworth, Geoffrey

  Hooson, Emlyn

  Allason, James (Hemel Hempstead)

  Douglas-Home, Rt. Hn. Sir Alec

  Hordern, Peter

  Ancram, M.

  Drayson, Burnaby

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

  Archer, Jeffrey (Louth)

  Durant, Tony

  Howell, Ralph (Norfolk, North)

  Atkins, Rt.Hn. Humphrey (Spelthorne)

  Dykes, Hugh

  Howells, Geraint (Cardigan)

  Awdry, Daniel

  Edwards, Nicholas (Pembroke)

  Hurd, Douglas

  Baker, Kenneth

  Elliott, Sir William

  Hutchison, Michael Clark

  Barber, Rt. Hn. Anthony

  Eyre, Reginald

  Irvine, Bryant Godman (Rye)

  Bell, Ronald

  Fell, Anthony

  James, David

  Bennett, Dr. Reginald (Fareham)

  Fenner, Mrs. Peggy

  Jessel, Toby

  Benyon, W.

  Finsberg, Geoffrey

  Johnston, Russell (Inverness)

  Berry, Hon. Anthony

  Fisher, Sir Nigel

  Jones, Arthur (Daventry)

  Bitten, John

  Fletcher-Cooke, Charies

  Jopling, Michael

  Boardman, Tom (Leicester, S.)

  Fookes, Miss Janet

  Joseph, Rt. Hn. Sir Keith

  Body, Richard

  Fowler, Norman (Sutton Coldfield)

  Kellett-Bowman, Mrs. Elaine

  Boscawen, Hon. Robert

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

  King, Evelyn (Dorset, S.)

  Boyson, Dr. Rhodes (Brent, N.)

  Freud, Clement

  King, Tom (Bridgwater)

  Braine, Sir Bernard

  Fry, Peter

  Kitson, Sir Timothy

  Bray, Ronald

  Gardiner, George (Relgate&Banstead)

  Knox, David

  Brittan, Leon

  Gardner, Edward (S. Fylde)

  Lamont, Norman

  Brocklebank-Fowler, Christo-cher

  Gilmour, Sir John (Fife, E.)

  Lane, David

  Bruce-Gardyne, J.

  Glyn, Dr. Alan

  Langford-Holt, Sir John

  Buchanan-Smith, Alir.k

  Godber, Rt. Hn. Joseph

  Latham, Michael (Melton)

  Buck, Antony

  Goodhart, Philip

  Lawrence, Ivan

  Bidgen, Nick

  Goodhew, Victor

  Lawson, Nigel (Blaby)

  Bulmer, Esmond

  Goodlad, A.

  Le Marchant, Spencer

  Burden, F. A.

  Gorst, John

  Lewis, Kenneth (Rtland & Stmford)

  Buller, Adam (Bosworlh)

  Gow, Ian (Eastbourne)

  Lloyd, Ian (Havant & Waterloo)

  Carlisle, Mark

  Gower, Sir Raymond (Barry)

  Loveridge, John

  Carr, Rt. Hn. Robert

  Grant, Anthony (Harrow, C.)

  Luce, Richard

  Channon, Paul

  Gray, Hamlsh

  McAdden, Sir Stephen

  Chataway, Rt. Hn. Christopher

  Grieve, Percy

  MacArthur, Ian

  Churchill, W. S.

  Griffiths, Eldon (Bury St. Edmunds)

  Macfarlane, Neil

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

  Grimond, Rt. Hn. J.

  MacGregor, John

  Clark, William (Croydon, S.)

  Grist, Ian

  Macmillan, Rt. Hn. M. (Farnham)

  Clarke, Kenneth (Rushcliffe)

  Hall, Sir John

  Madel, David

  Clegg, Walter

  Hall-Davis, A. G. F.

  Marten, Nell

  Cockcrott, John

  Hamilton, Michael (Salisbury)

  Mather, Carol

  Cooke, Robert (Bristol, W.)

  Hampson, Dr. Keith

  Maude, Angus

  Cope, John

  Hannam,John

  Mawby, Ray

  Cormack, Patrick

  Havers, Sir Michael

  Maxwell-Hyslop, R. J.

  Corrie, John

  Hawkins, Paul

  Mayhew,Patrick(RoyalT'brldgeWelIs)

  Costain, A. P.

  Hayhoe, Barney

  Meyer, Sir Anthony

  Crowder, F. P.

  Heath, Rt. Hn. Edward

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

  Davies, Rt. Hn. John (Knutsford)

  Henderson,Barry (Dunbartonshire, E.)

  Mills, Peter

  Dean. Paul (Somerset, N.)

  Higgins. Terence

  Miscampbell, Norman

  Mitchell, David (Basingstoke)

  Rees, Peter (Dover & Deal)

  Stradling Thomas, J.

  Moate, Roger

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

  Tapsell, Peter

  Money, Ernie

  Renton, R. T. (Mid-Sussex)

  Taylor, Edward M. (Gl'gow, C'cart)

  Monro, Hector

  Rhys Williams, Sir Brandon

  Taylor, Robert (Croydon, N.W.)

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

  Ridley, An. Nicholas

  Thatcher, Rt. Hn. Margaret

  More, Jasper (Ludlow)

  Rifkind, Malcolm

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

  Morgan, Geraint

  Rippon, Rt. An. Geoffrey

  Trotter, Neville

  Morgan-Giles, Rear-Adm.

  Roberts, Wyn (Conway)

  Tugendhat, Christopher

  Morris, Michael (Northampton, S.)

  Ross, Stephen (Isle of Wight)

  Tyler, Paul

  Morrison, Charles (Devizes)

  Rossi, Hugh (Hornsey)

  van Straubenzee, W. R.

  Morrison, Peter (City of Chester)

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

  Vaughan, Dr. Gerard

  Mudd, David

  Royle, Sir Anthony

  Viggers, Peter

  Neave, Airey

  Shaw, Giles (Pudsey)

  Waddington, David

  Neubert, Michael

  Shaw, Michael (Scarborough)

  Wakeham, John

  Newton, Tony (Braintree)

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

  Walder, David (Clitheroe)

  Normanton, Tom

  Shersby, Michael

  Walker-Smith, Rt. Hn. Sir Derek

  Onslow, Cranley

  Silvester, Fred

  Walters, Dennis

  Oppenheim, Mrs. Sally

  Sims, Roger

  Weatherill, Bernard

  Orr, Capt. L. P. S.

  Sinclair, Sir George

  Wells, John

  Page, John (Harrow, W.)

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

  Winstanley, Dr. Michael

  Pardoe, John

  Spence John

  Wood, Rt. Hn. Richard

  Pattie, Geoffrey

  Spicer, Michael (Worcestershire, S.)

  Worsley, Sir Marcus

  Percival, Ian

  Sproat. lain

  Young, Sir George (Ealing, Acton)

  Pink, R. Bonner

  Stanbrook, Ivor

  Younger, Hn. George

  Price, David (Eastleigh)

  Stanley, John

  Prior, Rt. Hn. James

  Steen, Anthony (L'pool, Wavertree)

  TELLERS FOR THE AYES:

  Quennell, Miss J. M.

  Stewart, Ian (Hitchin)

  Mr. Marcus Fox and

  Raison, Timothy

  Stokes, John

  Mr. Cecil Parkinson.

  NOES

  Abse, Leo

  Deli, Rt. Hn. Edmund

  Hughes, Robert (Aberdeen, North)

  Allaun, Frank

  Dempsey, James

  Hughes, Roy (Newport)

  Archer, Peter (Warley, West)

  Doig, Peter

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

  Atkins, Ronald (Pre3ton, N.)

  Douglas-Mann, Bruce

  Irving, Rt. Hn. Sydney (Dartford)

  Atkinson, Norman

  Duffy, A. E. P.

  Janner, Greville

  Bagier, Gordon, A. T.

  Dunn, James A.

  Jay, Rt. Hn. Douglas

  Barnett, Guy (Greenwich)

  Dunnett, Jack

  Jeger, Mrs. Lena

  Barnett, Joel (Heywood & Royton)

  Dunwoody, Mrs. Gwyneth

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

  Bates, Alt

  Edelman, Maurice

  John, Brynmor

  Benn, Rt. Hn. Anthony Wedgwood

  Edge, Geoff

  Johnson, Walter (Derby, S.)

  Bennett, Andrew F. (Stockport, N.)

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

  Jones, Alec (Rhondda)

  Bidwell, Sydney

  Ellis, John (Brigg & Scunthorpe)

  Jones, Barry (Flint, E.)

  Bishop, E. S.

  Ellis, Tom (Wrexham)

  Jones, Dan (Burnley)

  Blenkinsop, Arthur

  English, Michael

  Jones, Gwynoro (Carmarthen)

  Boardman, H. (Leigh)

  Ennals, David

  Judd, Frank

  Booth, Albert

  Evans, Fred (Caerphilly)

  Kaufman, Gerald

  Boothroyd, Miss Betty

  Evans, loan (Aberdare)

  Kelley, Richard

  Bottomley, Rt. Hn. Arthur

  Ewing, Harry (St'ling,F'kirk&G'm'th)

  Kerr, Russell

  Bowden,Andrew(Brighton,Kemptown)

  Fernyhough, Rt. Hn. E.

  Kilroy-Silk, Robert

  Bradley, Tom

  Fitch, Alan (Wigan)

  Kinnock, Neil

  Brown, Hugn D. (Glasgow, Provan)

  Flannery, Martin

  Lambie, David

  Buchan, Norman

  Fletcher, Ted (Darlington)

  Lamborn, Harry

  Buchanan,R'.chard(G'gowSpringbrn)

  Foot, Rt. Hn. Michael

  Latham, Arthur(CityofW'minsterP'ton)

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

  Ford, Ben

  Lawson,George(Motherwell&Wishaw)

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

  Forrester, John

  Lestor, Miss Joan (Eton & Slough)

  Campbell, Ian

  Fowler, Gerry (The Wrekin)

  Lever, Rt. Hn. Harold

  Cant, R. B.

  Freeson, Reginald

  Lewis, Arthur (Newham, N.)

  Carmichael, Neil

  Garrett, John (Norwich, S.)

  Lewis, Ron (Carlisle)

  Carter, Ray

  Garrett, W. E. (Wallsend)

  Lipton, Marcus

  Carter-Jones, Lewis

  George, Bruce

  Lomas, Kenneth

  Castle, Rt. Hn. Barbara

  Gilbert, Dr. John

  Loughlin, Charles

  Clemitson, Ivor

  Ginsburg, David

  Lyon, Alexander W. (York)

  Cocks, Michael

  Gourlay, Harry

  Lyons, Edward (Bradford, W.)

  Cohen, Stanley

  Graham, Ted

  McCartney, Hugh

  Coleman, Donald

  Grant, George (Morpeth)

  McElhone, Frank

  Colquhoun, Mrs. M. N.

  Grant, John (Islington, C.)

  MacFarquhar, Roderick

  Concannon, J. D.

  Griffiths, Eddie (Sheffield, Brightside)

  McGuire, Michael

  Conlan, Bernard

  Hamilton, James (Bothwell)

  Mackenzie, Gregor

  Cook, Robert F. (Edinburgh, C.)

  Hamilton, William (File, C.)

  Maclennan, Robert

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

  Hamlfng, William

  McMillan, Tom (Glasgow, C.)

  Crosland, Rt. Hn. Anthony

  Hardy, Peter

  Madden, M. 0. F.

  Cryer, G. R.

  Harper, Joseph

  Magee, Bryan

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

  Harrison, Walter (Wakefield)

  Mahon, Simon

  Cunningham,Dr. JohnA. (Whiteh' V'n)

  Hart, Rt. Hn. Judith

  Mallalieu, J. P. W.

  Davidson, Arthur

  Hattersley, Roy

  Marks, Kenneth

  Davies, Bryan (Enfield, N.)

  Hatton, Frank

  Marquand, David

  Davies, Denzll (Llanelli)

  Heller. Eric S.

  Marshall, Dr. Edmund (Goole)

  Davies, Ifor (Gower)

  Hooley, Frank

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

  Davis, Clinton (Hackney, C.)

  Horam, John

  Meacher, Michael

  Deakins, Eric

  Howell, Denis (B'ham, Small Health)

  Mellish, Rt. Hn. Robert

  Dean, Joseph (Leeds, W.)

  Huckfield, Leslie

  Mikardo,Ian

  de Freitas, Rt. Hn. Sir Geoffrey

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Millan, Bruce

  Delargy, Hugh

  Hughes, Mark (Durham)

  Miller, Dr. M. S. (E. Kilbride)

  1292

  1293

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

  Rodgers, George [Chorley]

  Thomas, D. E. (Merioneth)

  Morris, Charles R. (Openshaw)

  Rodgers, William (Teesside, St'ckton)

  Thomas, Jeffrey (Abertillery)

  Morris, Rt. Hn. John (Aberavon)

  Rooker, J. W.

  Tierney, Sydney

  Moyle, Roland

  Rose. Paul B.

  Tinn, James

  Mulley, Rt. Hn. Frederick

  Ross, Rt. Hn. William (Kilmarnock)

  Torney, Tom

  Murray, Ronald King

  Rowlands, Edward

  Tuck, Raphael

  Newens, Stanley (Harlow)

  Sandelson, Neville

  Wainwright, Edwin (Dearne Valley)

  Oakes, Gordon

  Sedgemore, Bryan

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

  Ogden, Eric

  Selby, Harry

  Walker, Harold (Doncaster)

  O'Malley, Brian

  Shaw, Arnold (Redbridge, lllord, S.)

  Walker, Terry (Klngswood)

  Orbach, Maurice

  Sheldon, Robert (Ashton-under-Lyne)

  Watkins, David

  Ovenden, John

  Shore, Rt. Hn. Peter (S'pney&P'plar)

  Weitzman, David

  Owen, Dr. David

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

  Wellbeloved, James

  Padley, Walter

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

  White, James

  Palmer, Arthur

  Silkin,Rt.Hn.S.C.(S'hwark,Dulwich)

  Whitehead, Phillip

  Perk, George (Coventry, N.E.)

  Sillars, James

  Whitlock, William

  Parker, John (Dagenham)

  Silverman, Julius

  Willey, Rt. Hn. Frederick

  Parry, Robert

  Skinner, Dennis

  Williams, Alan Lee (Hvrng, Hchurch)

  Pavitt, Laurie

  Smith, John (Lanarkshire, N.)

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

  Peart, Rt. Hn. Fred

  Snape, Peter

  Williams, W. T. (Warrington)

  Perry, Ernest G.

  Spearing, Nigel

  Wilson, William (Coventry, S.E.)

  Phlpps, Dr. Colin

  Soriggs, Leslie

  Wise, Mrs. Audrey

  Price, Christopher (Lewisham, W.)

  Stallard, A. W.

  Woodall, Alec

  Price, William (Rugby)

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

  Woof, Robert

  Radice, Giles

  Stoddart, David (Swindon)

  Wrigglesworth, Ian

  Richardson, Miss Jo

  Strang, Gavin

  Young, David (Bolton, E.)

  Roberts, Albert (Normanton)

  Strauss, Rt. Hn. G. R.

  Roberts, Gwilym (Cannock)

  Summerskill, Hn. Dr. Shirley

  TELLERS FOR THE NOES:

  Robertson, John (Paisley)

  Swain, Thomas

  Mr, J. D. Dormand and

  Roderick, Caerwyn E.

  Taverne, Dick

  Mr. Thomas Cox.

  Question accordingly negatived.
  Mr. Norman Mr. Norman Lamont: I beg to move Amendment No. 70, in page 9, line 3, leave out from '£565' to end of line 6.
  In replying to Amendment No. 49, the Chief Secretary said that one reason for his being unable to accept it was that it did not help adequately the elderly people in the marginal age exemption bracket. I very much hope that on this occasion the Chief Secretary will be able to accept my amendment, because it is designed to help those within that bracket.
  The effect of the amendment would be to extend the band of income up to which elderly people would be better off to opt for the marginal aid exemption relief. Under the present arrangements a person pays no tax up to the age exemption limit. Beyond that limit a person pays tax for each extra pound, under the proposals in the Bill, at 55 per cent. instead of 50 per cent. last year. Many people in this category are not well off, and 55 per cent. seems to be an extraordinarily high marginal rate of taxation. It is the same marginal rate that someone earning £8,000 a year would have to pay.
  The purpose of the amendment is to raise the point at which it becomes to a person's advantage to opt for the marginal age exemption. As a result of the changes made in the Budget the limit at which that point occurs for a single person has increased this year from £856
  1294
  to £1,025. That is an increase of 20 per cent. For a married person the limit has increased from £1,337 to £1,528, an increase of 14 per cent. If the rate of taxation levied on the marginal aid exemption had remained at 50 per cent. the cut-off point, at which it would have become to a person's advantage to opt for the relief, would have risen to £1,095 for a single person—an increase of 28 per cent.—and to £1,644 for a married couple, an increase of 23 per cent.
  There is thus a strong case for giving elderly people who have incomes beyond the age exemption limit some additional relief. The marginal rate of taxation of 55 per cent. seems an extraordinarily high rate to levy on someone with an income which may be only half the level of average earnings. Many elderly people in my constituency are in that position. Many have incomes from savings, and some have part-time jobs. They are the people who have been very hard hit by increased rates and increased electricity charges as well as all the other increased items. Often they have to pay their bills by instalments. They are hit more and more by rising prices. They find their living standards being crushed. They cannot afford to buy clothes, and it is becoming more and more difficult for them to buy food.
  When my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) referred to the twilight of the middle

  1295
  classes, I felt that that category included many people in the marginal age exemption bracket. They are the most defenceless of all. I feel strongly that there is a case for not raising the tax rate from 50 per cent. to 55 per cent.
  I appreciate that in most cases when taxation is increased it is necessary to spread the increase throughout the whole system, but it seems extraordinary that such a high rate of tax should be levied on people who are suffering more than any other group. They have fewer resources to cope with the increased burden and their resources are being eaten up as time goes by. I hope that the Government will feel able to accept the amendment.
  7.15 p.m.
  Mr. Higgins: My hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) has raised an important point which was foreshadowed in the Chancellor's Budget Statement on 26th March. The Chancellor said that the age exemption income limit for single persons was to be increased by £85 from £700 to £785 and for married couples by £130 from £1,000 to £1,130. The right hon. Gentleman then said:
  "The marginal fraction, by which the relief is withdrawn when a pensioner's income slightly exceeds these limits, will have to be increased slightly in order to avoid an unreasonably wide marginal band. It will go up from 50 per cent. to 55 per cent."— [OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 322.]
  On an earlier amendment, the Chief Secretary talked at considerable length about the complexity of the existing age exemption limits and especially about the marginal provisions. It seems that his remarks on the age exemption limit were ill directed. The hon. Gentleman sought to attack the amendment whereas the complexity of the age exemption limit would have continued whether or not the amendment had been accepted.
  As has been pointed out in the course of earlier debates, it is our view that the tax credit scheme provides a better solution to this sort of problem. The people with whom we are dealing are involved in considerable complexities if they fall within the marginal band.
  I had some sympathy with the Chief Secretary's reflex reaction. Probably over
  1296
  the past three or four years I have signed more letters than he has in the past few months relating to this issue. No doubt some of his colleagues and some of my hon. Friends have signed precisely the same sort of letter explaining how marginal relief on the age exemption limit operated. It is a complex matter which taxpayers, once they cotton on to what is going on, do not understand. To make an explanation takes about three pages of Treasury letter.
  That being so, I have some sympathy with the Chancellor's argument that there is a danger of creating an unduly wide band. None the less, as has been pointed out earlier, I do not think that taxpayers necessarily prefer simplicity to money. They may well feel, even though it is a complex matter and even though they find themselves in a complexity which they were not in before, that if they gain financially they will not mind all that much.
  It is right that my hon. Friend should probe to find why the Chancellor feels that he should raise the limit. To do so clearly reduces the width of the band of people falling within marginal relief, but at the same time it raises the marginal rate of tax. We now find ourselves in the curious position that there are people who pay high rates of tax at the top end of the scale, that there are people in the poverty surtax bracket and that there are now people in the lower middle income group—I avoid carefully the word "class"—who pay tax at the rate of 55 per cent.
  Perhaps the Chief Secretary will tell us at what income level a person would be required to pay tax at the rate of 55 per cent. I presume that that would apply to someone in the £8,000 to £9,000 range. Is that the case? If so, can the hon. Gentleman justify people paying at the rate of 55 per cent. when their incomes are just above the age exemption limit and they are worse hit by inflation than those in the £8,000 to £9,000 range?
  I hope that the Chief Secretary can give better justification than was contained in the rather brief remarks of the Chancellor of the Exchequer in his Budget Statement as to why this provision should be included in the Bill. Surely the situation might well have been left where it was.
  Mr. Joel Barnett: We have had two very interesting speeches from which we have at least learned something. We have had a clarification of what the right hon. Member for Leeds, North-East (Sir K. Joseph) meant by his reference to the middle income groups, although I thought that he referred to the middle classes. The hon. Member for Kingston-upon-Thames (Mr. Lamont) thought that he was referring to the middle income groups, but I gather that the hon. Member for Worthing (Mr. Higgins) thought that he was referring to the lower middle income groups. It is understandable because of the extra relief we have now given in the Budget.
  Under the Bill the income limit for the single person is increased to £810 and for a married couple to £1,170—that is to say, from £700 and £1,000 respectively. Thereby, either the middle income groups or the lower middle income groups are starting at a fairly low level today. But that is not the main burden of my argument. The cost of the amendment would not be very great. It would be £8 million in a full year and £5½million in 1974-75. Although, obviously, a sum of £8 million is important, I would not wish to rest my case on cost.
  Mr. Higgins: I must express some slight surprise at that figure. Am I to understand that as a result of this provision in the Bill, which affects only people at the age exemption limit within the marginal band—no doubt the hon. Gentleman will say which groups he is concerned with—an extra £8 million will be involved?
  Mr. Barnett: I am telling the hon. Gentleman that the cost of the amendment in reducing the figure of tax on the tapering figures above the age exemption relief would be £8 million in a full year.
  Mr. Higgins: It is also the cost of going up from what it was to what the Chancellor proposes.
  Mr. Barnett: I will put it the other way round. I agree that it is yielding £8 million in a full year to have it at 55 per cent. instead of 50 per cent. I will assume for the benefit of argument that the complex provisions of the tapering relief on age exemption marginal relief are fully understood. I am sure
  1298
  that hon. Members who have spent so many long hours in this Committee will be fully aware of the complexities.
  What the hon. Member for Worthing said in referring to my right hon. Friend's statement is right. The point is that if we had left it at 50 per cent,. a very wide band of taxpayers over the age of 65 would have been eligible for marginal relief in the tapering income groups. Perhaps I can explain that. If the marginal fraction of 50 per cent. had been retained for 1974–75, marginal age exemption relief could, in the extreme case, have given some small benefit to an elderly single taxpayer with an income of up to £1,169 and to an elderly married couple with a joint income of as much as £2,477. These are £359 and £1,307 respectively above the relevant income limits. That reflects the width of the band.
  I take the point made by the hon. Member for Kingston-upon-Thames, on which I think there may be some misunderstanding. I am talking now about marginal relief and where age exemption runs out. The figures quoted by the hon. Gentleman on this were those that would have applied had the income limits originally proposed by the Chancellor prevailed. But a revised resolution was later put down raising the income limits still further. I referred to that in my own speech during the Budget debate.
  If we accepted the amendment, the limits and the band would be very wide. This was the point which the hon. Member for Worthing understood. The net result would be that a large number of people would gain by it if they understood what to claim. I have no doubt that some would not know what to claim because of this complexity.
  I have mentioned the ingenuity of the idea of having a special allowance for elderly people. The trouble is that that would go all the way up the income scale, whereas age exemption restricts it to a particular level of income. That is the basic reason why we do not feel able to accept the amendment. By having a 55 per cent. rate, the benefit of the marginal relief will, in the extreme case, run out at £1,087 for the single person and £1,733 for the married couple. That is to say, the width of the marginal zones will become £277 and £563 respectively. I

  1299
  do not say that this is necessarily a happy situation. But I think that it is better than having a very wide band of income in the tapering relief.
  Both hon. Members complained about a high marginal rate of 55 per cent. Indeed, there has been Press comment about it. But it is somewhat misleading —and I am not blaming anyone—to talk about a high marginal rate of tax, because it is always open to someone to opt for the ordinary single person's or married allowance. A point which old people often find difficult to understand is that there is a marginal rate when they have had the relief of the age exemption. But it is not a high marginal rate in the true sense of the word.
  I could go on at greater length, but I think what I have said explains roughly the reasons why I do not feel able to accept the amendment. I hope that my arguments will be acceptable to the Committee.
  Mr. Newton: Having been involved in an earlier amendment, I find that the remarks which the Chief Secretary has made in reply to the debates today, during which we have tried to get some extra relief for elderly taxpayers, have become more and more profoundly unsatisfactory. For example, we were told that the objection to my amendment earlier was that the tax system would be made rather too complicated if we introduced the additional personal allowance for elderly people. Now we are told that it is not really as complicated as old people may think because they do not really look at it in the right way, that it is not really a marginal tax rate, and so on. But the end result of the hon. Gentleman's argument is that he does not want to do anything to help old people this year in this or any other way simply because he does not want to do it. This is not good enough.
  We have put forward a series of amendments, each of which would be economical in itself. Even the £30 million which would have been involved in an earlier amendment is a small sum. It is well within the margin of error of most of the sums we have in the Red Book. I am willing to bet that, of the estimates in the Red Book of the yield of taxation for the coming year, hardly one will not be at least £30 million out
  1300
  because of mis-estimation or because the rate of inflation has changed in the coming year. It is not enough for these proposals to be shot down by the argument that they will cost £30 million.
  7.30 p.m.
  As soon as we find a proposal that is cheap enough for the hon. Gentleman to accept, he finds some standard, hoary, old Treasury reason for not accepting it. We have met that in debate after debate. We all appreciate the reasons for not having a band as wide as would arise from the amendment of people subject to the marginal rate of 50 per cent. However, we have met part of the argument against earlier amendments, when the Chief Secretary said that the Government did not want to help people all up the scale, for we have now suggested a cheap amendment that would help only those with a little above average earnings. But he does not want to help them, either.
  I have a feeling that, however cheap, however simple, however neat, however attractive any amendment we devise may be, the hon. Gentleman will find some reason for rejecting it. No doubt the Treasury will be well able to dream up reasons for rejecting any proposals that we may make. But it is a shame. I do not want to turn this into any kind of lighthearted debate, and I say quite seriously that it will not go unnoticed in the country that the Government have turned down all these attempts to help a group of people who come to us day after day and week after week to draw our attention to their many problems.
  The hon. Gentleman should not underestimate the strength of that feeling. It is a widespread feeling among the groups we have been discussing. I am genuinely sad that the Chief Secretary has not been able to accept even the most modest amendment to help those suffering from the hardships that we have explained. The amendment suggested by my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) would have helped some of these people to some slight extent.
  Mr. Cope: I should like to correct my hon. Friend in one small respect. It is not a matter of the Chief Secretary accepting ways in which to help this group of people. It is a matter of our trying to

  1301
  prevent the Chancellor of the Exchequer from damaging them. We have been proposing amendments to a provision increasing the tax upon these people. We are trying not to improve their situation but to prevent the Chancellor from making it worse.
  Mr. Newton: I am grateful for that correction. In my hasty notes, against the word "cost"—I had assumed that the Chief Secretary would resist the amendment on that ground—I have written "no cost at all", for it would not cost the Chief Secretary anything. The amendment would merely prevent his grabbing money from old people. It illustrates my observation on an earlier amendment that all that had happened so far this year—and I emphasise "so far", because pensions have not yet been paid—the only effect of Government policy that the pensioners have noticed, has been that the Government have increased the taxation of the incomes of many pensioners.
  I conclude by emphasising what has been said about the 55 per cent. marginal rate. Regardless of what may be said about the objections, about the administrative difficulties of having a very wide band of people subject to marginal relief, all the problems pale into insignificance against the resentment that will be felt by these people every time they get a small increase of income, whether from a private pension or a State pension, when they will have to pay 55p in every pound at the margin.
  Whatever arguments we use when we try to explain the tax system to elderly people, the resentment will remain. Whatever the reality of having a larger income or paying less tax, the old people will resent having to pay at the marginal deduction rate of 55p in every pound. There will be not only widespread misunderstanding but widespread resentment and anger, and the Government would have been sensible to go a long way to avoid that.
  Amendment negatived.
  Mr. Cope: I beg to move Amendment No. 42, in page 9, line 6, at end insert:
  ' (5) In section 12 (widower's or widow's housekeeper), section 13 (relative taking charge of unmarried person's young brother or sister) and section 14 (widows, other single persons and husbands with disabled wives with
  1302
  children) for the references to £100 there shall be substituted a reference to £150, and for the references to £130 there shall be substituted a reference to £180'.
  The Deputy Chairman (Mr. Oscar Murton): With this we are to take the following amendments:
  No. 47, in page 9, line 6, at end insert:
  ' (5) In section 16 (dependent relatives) for the references to £100 there shall be substituted references to £150, and for the reference to £145 there shall be substituted a reference to £200'.
  No. 58, in page 9, line 6, at end insert:
  ' (5) In section 16 (dependent relatives) for the reference to £145 there shall be substituted a reference to £175 '.
  No. 65, in page 9, line 6, at end insert:
  '(5) In section 12 (widower's or widow's housekeeper), section 13 (relative taking charge of unmarried person's young brother or sister), section 14 (widows, other single persons and husbands with disabled wives with children), section 16 (dependent relative), and section 17 (claimant depending on services of daughter), for the references to £100, £130, £145 and £55 there shall be in each case be substituted references to £150'.
  No. 66, in page 9, line 6, at end insert:
  ' (5) In section 18 (blind persons), for the references to £130 there shall be substituted references to £150, and for the references to £260 there shall be substituted references to £300'.
  Mr. Cope: These amendments relate primarily to the housekeeper and related allowances. No. 47 relates to dependent relative allowance. They propose increases in allowances that would not otherwise be affected by the Finance Bill.
  I should say at the start that I used to have an interest in these provisions. It arose because my mother died of cancer when I was two, and my father had to struggle to bring up children in the war years and in the years immediately after the war, and he needed the assistance of a housekeeper to do so. The problems for the single parent family are difficult whether the single parent is the father or the mother, although the problems of each are different.
  Those of us happy enough to be married and to have children and not in need of a housekeeper often forget the amount of work that our wives do as housekeepers and in looking after the children, although we are sometimes reminded of it. However, the single

  1303
  parent is brought up against these problems and fully appreciates the amount of work that a wife or husband has done. These people are affected in their different ways by this series of allowances. I am talking particularly about allowances for widows and widowers which arise under Section 12 of the Income and Corporation Act 1970.
  The increases that I propose are very modest. I propose an increase in Amendment No. 42 of £50 in each of the allowances mentioned there. In Amendment No. 47 I propose an increase of £50 to the £100 figure and an increase of £55 to the figure of £145 in order to round it off to £200. I should say, particularly in view of an earlier amendment concerned with married and single allowances, when I referred to inflation, that I have described these proposals as modest because they are far less than would be required to bring these allowances to the level at which they would be keeping pace with inflation.
  I am told that the housekeeper allowance, which stands at £100 and which I am proposing to increase to a mere £150, would need to be increased to £210 to maintain the value it had when it was first introduced. The modesty of my proposal will be seen when inflation is taken into account. No one should think that these amendments will make anyone rich. It is the tax on £150 with which we are concerned—£50 a year, £1 a week roughly speaking, which does not go far these days. Some of my hon. and right hon. Friends have been even more modest in their proposals which are included in the amendments we are also discussing. These give the Chief Secretary, if he objects to the cost of mine, the chance to take a less expensive route.
  One point which is not covered in Amendments Nos. 42 and 47 is covered in Amendment No. 66 and deals with blind persons. The blind persons' allowance is well known. The proposal in Amendment No. 66 is to increase it from £130 to £150 for a single blind person. For a husband and wife both of whom are blind, the reference to £260 applies and the amendment would alter it to £300. These are very modest increases but they are important to those concerned. Such amendments would show
  1304
  that the Committee and the Government care about these people.
  I accept that these allowances are complicated, but they are not quite at complicated as the allowances we discussed in an earlier amendment. It is a rather ramshackle system of allowances. It has been sorted out a little since I first began to study the tax system. There has been a great improvement. Nevertheless it is a ramshackle system, and I accept that my amendment does not assist in sorting out that system. This argues more strongly for the tax credit system which was proposed but which now seems to have been abandoned or at least shelved sine die.
  The tax credit system could take account of these things. If it were coming along in the reasonably near future that would be an argument for not accepting amendments of this kind aimed at improving the lot of the disadvantaged in society. The fact that the tax credit system is not coming along makes it important to look at these allowances, ramshackle as they are, and to make the Government examine them and ask whether they are sufficient or whether inflation should eat into them until they become worthless so that the groups whom they are meant to help are gradually driven into the ground.
  These are not complicated amendments. They are modest in amount. They argue for themselves. It is for the Treasury, if it can, to try to argue against them. All that they do is to try to restore the position a little to where it was in earlier years.
  7.45 p.m.
  Mr. Norman Lamont: I want to address my remarks to Amendments Nos. 65 and 66 standing in my name. As my hon. Friend the Member for Gloucestershire, South (Mr. Cope) has said, the different allowances which are the subject of these amendments form something of a ramshackle structure. It is almost impossible to find any logic in the way the different allowances have been adjusted over the years. Amendment No. 66 takes the five allowance groups—widow's or widowers; housekeeper; relative taking charge of an unmarried person's young brother or sister; widows, other single persons and

  1305
  husbands with disabled wives with children; dependent relatives; and claimants depending on the services of a daughter—and makes them into one single allowance of £150.
  There is a case for simplification and putting some sense into the system. These allowances have not kept pace with inflation in recent years. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) when he was Chancellor made the last decent increase when he increased them by nearly 30 per cent. Notwithstanding that, they have still not kept pace with inflation.
  Comparing the value of the allowances today with their value in 1962–63, it will be seen that the allowance covering a relative taking charge of an unmarried person's young brother or sister stood at £75, which in today's purchasing power terms would be £144. The value of the allowance today is a mere £100. It is dramatically behind the rate of inflation. We find that the housekeeper's allowance was £75 in 1962–63. Its current purchasing power would be represented by £144 whereas it stands at only £100.
  The allowances have moved differently over the years. The dependent relative allowance shows a slight increase over the 10 years. The allowance for widows, other single persons and husbands with disabled wives with children has also kept ahead of inflation. The others have all lagged behind.
  There is a case for a fairly dramatic increase, and there is also a case for amalgamating these allowances. They deal with groups of people who have similar needs. One can imagine some situations in which a person might conceivably move from one allowance to another. There is therefore, a strong reason for consolidating them. Such a step would also have anticipated the development of the tax credit system. We would be expecting something like this to happen if, as would have been the case under the last Government, the tax credit system had been introduced with this year's Finance Bill. That is an added reason for merging the allowances.
  1306
  Amendment No. 65 simply proposes an increase in the blind person's allowance, which also has dramatically fallen behind the rate of inflation. In 1963–64 the allowance was £100, which at today's purchasing power would be over £190 in value. There is, therefore, a strong case for increasing the allowance because it has lagged behind inflation. One thing which has always annoyed me about that allowance is that it is wrong that it should be apportioned for a period of a year. If a person becomes blind during the year, he gets the allowance only for the remainder of the year, as though becoming blind was not penalty enough in itself. I wish that we could do away with the apportionment provision.
  The main reason why I urge my hon. Friends to support the case for a substantial increase in the allowances, is to enable them to keep pace with the rate of inflation.
  Mr. Newton: Having had something to do with the preparation of the amendments, I wish to add my support to what my hon. Friends have said. As we are proposing that the allowances should be increased, plainly we believe that the allowances are proper. It is worth stating that because we do not want simply to draw attention to the anomalies in order to expose the situation. We all accept that the case for having allowances to fulfil the purposes which they set out to achieve is very strong, and we should like to see them extended in some respects. The amendment which we shall next discuss deals with the possible extension of the allowances to people who do not qualify for them.
  We are talking about groups of people who, because they have additional expense arising from their disability, or extra responsibilities for children, or problems arising from widowhood or widowerhood, have extra burdens loaded on them. It follows that they are people who have been finding life far from easy in the last few years, partly because of inflation. The problem of inflation underlies most of the amendments. On that ground alone there is a strong case for reviewing the level of the allowances. It is time that some of them were increased.
  There is, however, a strong case for putting some of the allowances together

  1307
  and creating a uniform additional personal allowance within the existing tax system or, as we would hope, within a tax credit system having an additional personal tax credit covering a range of the problems we are discussing. From the point of view of moving towards a tax credit system or of simplifying our existing system, which I am sure the Chief Secretary dearly has at heart, it would make a great deal of sense to bring some of the allowances together at a single standard sum.
  In many respects the situation is absurd. Like many other harassed taxpayers, I subscribe to Money Which? and study it with great assiduity when my income tax return arrives. This year it said in relation to the special allowance for the housekeeper or person looking after children:
  "A widow or widower with a child, who has a woman relative living in the house as housekeeper or looking after the child, will do better to give up the housekeeper allowance."
  That sounds odd until one reads on and finds:
  "He or she can claim, instead, the (higher) additional personal allowance for children and —if the relative qualifies—the dependent relative allowance as well."
  It seems absurd that if a person has a housekeeper living in the house for one purpose he can get one allowance and what is, in effect, a housekeeper living in the house for another purpose he can, by a complexity in the tax system, virtually choose to have a higher tax allowance.
  Money Which? says about a blind person allowance:
  "You cannot have both this allowance and a daughter's services allowance. Claim the larger one—normally the blind person's. But a widow or widower could have both the blind person's and a housekeeper allowance."
  On the allowance relating to the daughter on whose services a person is compelled to depend it says:
  "If you are a widow or widower who qualifies for this allowance you would do better to class your daughter as your housekeeper and claim the (higher) housekeeper allowance of £100 instead—you cannot have both."
  It is entirely proper that people who in effect use their daughters as housekeepers should be told to classify their daughters as housekeepers if they can get a substantial increased tax allowance. How
  1308
  ever, a tax system which causes men and women to classify their daughters as their housekeepers is open to argument.
  The amendments would cost a modest amount and would help to remove some of the anomalies. They would simplify the tax system and would pave the way to what I would describe as an additional personal tax credit in some future reform of the system and, perhaps most important, would help the people with the problems which we have been discussing to cope with life. On those grounds, it would be well worth the Chief Secretary giving at least some of the amendments serious consideration.
  Mr. Higgins: I support what my hon. Friends have said. It is right and proper that we should take this opportunity to debate these matters. The Chancellor of the Exchequer has taken action on the married person's allowance and the single person's allowance, though not on a sufficient scale to offset the effects of inflation. The amendments cover groups of people who we have always felt it right should be given special consideration.
  It would be more appropriate to deal with the broad principle of the present system and the alternative of a tax credit scheme on the Question "That the clause stand part of the Bill". But it is right that we should consider the allowances individually because, as I know, having spent three or four years in government, we have a ramshackle arrangement. When we were in office, my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) and his colleagues considered all the allowances to see what changes were appropriate. However, they felt that fundamental reform of the system was necessary.
  This year the Chancellor of the Exchequer—no doubt he was rushed for time and we appreciate that he had to construct his Budget in a hurry—has not taken effective action to help the people whom the amendments seek to help. That should surely give us considerable cause for concern. I hope that on each of the amendments the Chief Secretary will tell us the cost and the amount that would reflect the effect of inflation so that the real value of the allowances would be maintained from the date when they were last increased.

  1309
  8.0 p.m.
  The people involved, like the old, are among those least able to protect themselves. They include the blind, widows and single women with a dependent relative. These are people who are least able to help themselves, and the House of Commons has in the past rightly given attention to them.
  In normal circumstances we would say that the Budget judgment has been made and that the Chancellor has said that he can give only so much to the blind or to this or that group. But no increases have been given, and we are told that the Government might find it necessary to take reflationary measures in the autumn. I hope that' the Chief Secretary will not hide behind the argument that he made a speech outside the House of Commons and he does not want to go into it tonight.
  It appears that the Chancellor has not taken a firm view. It is not simply a question of being concerned with the margin of error in forecasts. It is becoming increasingly apparent that the bias is in the direction of lack of aggregate demand rather than excess of it. Whether that is so on the wages front is another matter. I hope that the Chief Secretary will be able to express sympathy for these groups of people and tell us whether we can hope for some changes in the near future.
  I have been associated in the past with the subject of Amendment No. 58, which deals with single women with dependants. It was some years before the plight of this group came to our attention, and eventually we succeeded in making provision to help them. That provision has been reviewed from time to time. Whereas the children's allowance goes up to £305, £275 or £240, depending on the age of the child, the dependent relative allowance remains unchanged at £145 for the single woman taxpayer. The job of looking after a dependent relative is every bit as difficult as looking after a child. Therefore, it is difficult to understand why the Chancellor feels it right to give an increase to the former and not to the latter group.
  I invite the Chief Secretary to give us a sympathetic reply and to express the Government's view on whether there is a case for standardising the allowances. I leave the broader question of the tax
  1310
  credit system until we come to the debate on the Clause. The Government have now had more time to consider these matters, and I shall be grateful to hear their view on these groups who are among the most vulnerable in the community.
  Mr. William Hamling (): I should like to say a word or two on Amendment No. 58 which deals with a matter on which I have spoken on several occasions during the last eight or 10 years. I hope that my hon. Friend will give the Committee an assurance that single women with dependent relatives will be treated more generously under the Labour Government than they have been in the past. When my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) was Chancellor, he made a significant change in the arrangements.
  Those of us who are associated with the National Council for the Single Woman and her Dependants have made representations to successive Chancellors over several years. I have no doubt that if the council consisted of a body of men backed by a powerful trade union it would have received far more generous treatment from Chancellors of both parties. Without being patronising, one can say that the cause of women has not received from the House of Commons the attention that it should have received, and it is about time that it did.
  Mr. Joel Barnett: It has been an interesting brief debate, and I am obliged to hon. Members for raising many of the matters that have been raised. I am sure that members of the Committee will be sympathetic to the case put forward by the hon. Member for Gloucestershire, South (Mr. Cope), particularly when he gave the instance of his mother having died of cancer when he was two years old. I am sure that all members of the Committee will have sympathy with single parent families. I certainly have.
  Things have been said about me during these debates of which my late mother would never have dreamt. It has been said that I have at heart the simplification of the tax system. It was said in earlier debates that I had not got a heart, but that is not true. I have, and I am sympathetic, but I am not necessarily always sympathetic to

  1311
  simplification as such. Simplification is not always the best method of approach to a tax system. It is not necessarily the fairest way to go about it.
  It is right to say that the system of allowances is ramshackle. These so-called secondary allowances have grown up over the years and there is a clear need to examine them. But we have to ask ourselves whether the best way to go about it is by this group of amendments.
  The cost of Amendments Nos. 42 and 47 would be £23 million in a full year and £18 million in 1974–75. I am speaking of the amendments concerned with the widow's or widower's housekeeper allowance, the child minder allowance, the additional personal allowance, and the single woman's dependent relative allowance and other dependent relative allowances. It is proposed in the amendments that these shall be increased.
  It has been said that the present system is rough justice. Indeed, it is, because the allowances grew up and they are anomalous, different allowances being applicable in each case. The present allowance for a dependent relative maintained by a single woman is £145. The widow's or widower's housekeeper allowance is £100 and the child minder allowance is £100. To deal with the matter in that way is rough justice and not necessarily the best way to go about it. I believe that we should look at the matter much more carefully than is sought to be done in these amendments.
  Mr. Cope: I think there is some slight confusion. Amendments Nos. 42 and 47 do not attempt to alter the framework of the allowances. I have sought to increase them all by £50. The amendment which seeks to iron out the situation is Amendment No. 65.
  Mr. Barnett: There are so many amendments in this group that it makes life a little difficult. The hon. Member for Gloucestershire, South seeks to increase the secondary allowances. I believe that there is a case for an increase in secondary allowances, but I wonder whether the hon. Gentleman's suggestion is the best way to go about the matter.
  Let us take as an example the child minder's allowance. Very few people
  1312
  are aware of this allowance because it is not very much used. The child minder's allowance is for a single person who maintains a widowed mother or other female relative to look after a young brother or sister. I am told that it is a specialised type of allowance that is rarely claimed. Then there is the widower's or widow's housekeeper allowance. That allowance has long been considered anomalous, and I imagine that that is one of the reasons why our predecessors did not seek to increase it.
  I think I should correct one point made by the hon. Member for Kingston-upon-Thames (Mr. Lamont), who said that the previous Chancellor of the Exchequer, the right hon. Member for Altrincham and Sale (Mr. Barber), had increased all the secondary allowances. I would remind the hon. Gentleman that that was concerned with an uprating following unification. There was no all-round increase, but that related to the removal of earned income relief. Incidentally, the Radcliffe Commission recommended that the widower's housekeeper allowance should be abolished. There are a number of anomalies in regard to secondary allowances. I believe that there is a case for reviewing these personal allowances, but not in a haphazard, crude sort of way by simply lumping the lot together or by taking particular allowances regardless of whether they have merit on their own account.
  I should like to refer to Amendment No. 58, to which attention was drawn by my hon. Friend the Member for Woolwich, West (Mr. Hamling). It refers to the single woman who supports a dependent relative, and proposes an increase in the allowance from £145 to £175. Again the cost is not the important matter in deciding whether the Committee should accept the proposition. The cost amounts to about £2½ million in a full year and about £2 million in 1974–75. I willingly concede that the figure is not large, but even in that case the situation is not as simple as it looks. The allowance was first introduced by my right hon. Friend the present Foreign Secretary when he occupied the office of Chancellor of the Exchequer in 1967. That occurred at a time when it was recognised that single women faced a serious burden in terms of tax.

  1313
  The question now is whether that allowance should be increased. The Committee should recall that my right hon. Friend the Chancellor in his Budget increased generally all personal allowances. This has helped the single woman in the category to which the amendment refers as well as everybody else. It has been said that a strong case exists for increasing allowances, and in many instances that is so, but this is not to say that the Chancellor has done nothing at all about the situation. My right hon. Friend has made substantial increases in personal allowances generally.
  8.15 p.m.
  Mr. Higgins: With respect to the Chief Secretary, he seems now to be deploying a bad argument. The increase in the allowance for the single person is significantly less proportionately, as the Chancellor in his Budget speech admitted, than is the allowance for the married couple. Therefore, the single person relatively gains less. The single woman with a dependent relative is in a vulnerable position, and such a woman is hit particularly hard by inflation. We are saying that the Government should take account of that situation. I stress that this is not a partisan matter. A married woman who looks after a child receives an increased allowance but the single woman who looks after a dependent relative of 80 or 90 years of age receives no increase in her allowance. I hope that the Chief Secretary will be a little more forthcoming, and I know that his hon. Friend the Member for Woolwich, West (Mr. Hamling) will support him if he says that he will look at this matter before the Bill reaches its Report stage.
  Mr. Barnett: I have already said that I am not unsympathetic to some of these secondary allowances. However, I suggest that the way in which this group of amendments seeks to cover the situation is not the right one. I am not saying that on consideration—and I hope that we shall be able to consider it—we shall not be able to find some way of helping the situation.
  I come to Amendments Nos. 65 and 66 in the name of the hon. Member for Kingston-upon-Thames. The hon. Gentleman seeks to increase the allowances in both cases to £150.
  1314
  As I said earlier, I do not think that it is necessarily right to take allowances which have been set differently relative to one another and to argue that they should all be increased to the same figure merely because they are simpler to understand.
  Mr. Norman Lamont: But will the hon. Gentleman be a little more specific? It seems that all the people covered in those allowances are in very similar circumstances. Although the hon. Gentleman says that it does not make sense to put them all up to one level and that one may have a calculated relationship with another, it appears that they all affect the same sort of people in much the same circumstances.
  Mr. Barnett: The hon. Gentleman is not proposing that they should all be increased proportionately. He is bringing them into line. The main reason for the complication of the present personal allowance structure is the number of different personal allowances that there are. It has been described as a ramshackle structure, and no one disputes that. But to say in this crude way that because they are all different allowances, without looking into why they are different and why they started differently, one should therefore bring them all into line regardless of why they started off differently surely is not what this Committee would wish to do. Surely the better way of dealing with it would be to examine each of them on its merits. The real way is to look at a system by means of which we can do away with this large number of personal allowances.
  We have had several references to the fact that a tax credit system would do this. We did not like the tax credit system suggested by the previous Government, and I do not go back on that—
  Mr. Hamling: I am sure that the Committee is very sensible of the logic of my hon. Friend's case in saying that the whole system should be simplified, but is my lion. Friend saying that the Government intend to do just what he has said?
  Mr. Barnett: No. I shall come in a moment to what we intend to do.
  I have given the reasons why we believe that it would be wrong to deal with the allowances in this haphazard way simply

  1315
  because there are relative, different figures as between one class of allowance and another, and that is why I am afraid that the Government cannot accept the amendments as they stand.
  There have been all kinds of reasons for the implementation of particular allowances like the one which the then Chancellor of the Exchequer introduced in 1967 for single women and why, when that was introduced, it was different from other allowances obtaining at the time—
  Mr. Newton: I think that it would help the Committee if the hon. Gentleman explained in one concrete case why the differences exist. Obviously his argument stands up as a logical Treasury-type argument that it does not make sense to sort it out. That is an argument that we all understand, even if we do not agree with it. But can the hon. Gentleman explain why a widower employing a female other than his daughter to look after him gets a tax allowance of £100 but that if he employs his daughter he gets an allowance of only £55? I am not sure that my figures are correct, but, even if I have gone wrong somewhere, the figures that I have quoted are close to being the situation.
  Mr. Barnett: I shall give an example. However, I do not know why it is a typical Treasury argument simply because it is logical—
  Mr. Newton: I am not attacking the hon. Gentleman's officials, still less himself. The point is that it is an argument that is pure logic, without regard to the practicalities. We all understand that there is no reason why all these allowances, in an abstract world, should be at the same level. But, looking at them in a practical world and considering the circumstances in which they apply, it is not possible to think of any reason for having different levels. The hon. Gentleman is trying to simplify the tax system, and we all pay lip service to trying to do that. We have here an amendment which will help the hon. Gentleman down that road.
  Mr. Barnett: I am obliged to the hon. Gentleman for his help. Perhaps I may give an example of the indiscriminate nature of the proposed increases in the
  1316
  various amendments that we are discussing. In one case the amendment would abolish any differential in the amounts of secondary allowances, although some of these have become fairly specialised. One example is the daughter's services allowance or what was the housekeeper allowance for the single person who maintained his widowed mother to look after a young brother or sister. It is difficult to see the logic of a proposal which would increase the daughter's services allowance by £95 but the allowance for the single woman supporting a dependent relative by only £5.
  All these amendments are indiscriminate. We have great sympathy for the single woman who has not gone out to work and not married but instead has looked after her mother. But the amendments are so indiscriminate that they are not the way to go about it.
  We also know that the Finer Committee on the one-parent family will be publishing its report fairly soon. We believe that it will indicate that there is need for relief in many directions. Therefore, I should like, with the Committee's permission, to reconsider all the secondary allowances, especially the additional personal allowance, after the Finer Committee has reported. I believe that that will be before we reach the Report stage of this Bill. I assure the Committee that I shall give very serious consideration to these secondary personal allowances, not least the additional personal allowance, and that it will be my hope to make a concession on those grounds, although obviously I cannot go any further than that at the moment.
  Mr. William Clark: The hon. Gentleman has referred to the Finer Committee. Are we to take it that he will accept the recommendations of the Finer Committee? If the Finer Committee says that it would prefer one-parent families to be absorbed in a tax credit scheme, will the Government accept that recommendation?
  Mr. Barnett: The hon. Gentleman should know better than to ask such a question. I have no idea what the Government will decide about the Finer Committee's report. I have described the way that I hope to approach this whole problem. With that, I hope that the Committee will accept the matter and allow these amendments to be withdrawn—
  Mr. William Clark: But cannot the hon. Gentleman go any further? He prays in aid the report of the Finer Committee. This Committee gets the impression that, in the light of what the Finer Committee says, the secondary allowances will be increased. Is that right?
  Mr. Barnett: The hon. Gentleman has been here a long time. I have said that I am prepared to consider the matter in the light of the Finer Committee's report, and I hope that that will be available before the Report stage of this Finance Bill. When the Finer Committee's report is available, I shall give consideration to all the secondary allowances, not least the additional personal allowance.
  Mr. Higgins: We are making some progress, but the clear implication of what the Chief Secretary has said is that he will read the report of the Finer Committee and will come forward with proposals on Report. Other than that, I do not see that the hon. Gentleman has said anything at all. Is that what we are to understand, or is he simply saying, as a matter of interest to the Committee, that he will have read the Finer Committee's report before the Bill's Report stage, which is a different kettle of fish? We should be clear about what he is saying. The implication was that, having read the Finer Committee's report, the hon. Gentleman will come forward on Report with proposals, or at least some amendments will appear on the Paper. Am I that wrong? If so, what was the hon. Gentleman talking about?
  Mr. Joel Barnett: I want to make it absolutely clear. I am not saying at this stage whether or not the Government will accept what appears in the Finer Committee's report. What is perfectly understood, however, is that the Finer Report will deal among other things, with single parent families, and in the light of that I am saying that I shall look at the secondary allowances. I cannot go beyond that.
  [Mr. GURDEN in the Chair]
  8.30 p.m.
  Mr. George Cunningham (): As the Chief Secretary has undertaken to examine all these secondary allowances, may I ask him to give particular attention to an anomaly relating to the dependent
  1318
  relative allowance? At present, any person claiming the dependent relative allowance has two limitations to the relief that it brings. There is first the limitation in the deduction from income which is taxable, and there is the limitation on the income of the dependent relative, which must be only that of the retirement pension at the time.
  Anyone who knew enough to adopt the alternative procedure would make a deed of covenant in favour of the dependent relative and by that means escape both limitations. We have, therefore, a system under which a person who is sophisticated enough to be able to do that and to put up with the inconveniences—and there are some—which result from using a deed of covenant can get a higher relief than someone who uses the straightforward tax allowance, about which most people who are entitled to it know.
  I do not ask the Chief Secretary to respond to that matter now, but if we are reviewing these things, because of the alternative possibility of the deed of covenant provision, at least the limitation in respect of the recipient's income ought to be made more generous or, perhaps, removed.
  Mr. Hamling: I welcome what my hon. Friend the Chief Secretary has said about the Finer Committee's Report. Those of us who have been concerned with these matters have awaited that report for a long time with great interest. We are concerned not only with single women with dependent relatives but with a great number of people, such as widows, who have been neglected for too long. I am delighted to hear from my hon. Friend that the report is expected so soon. I am delighted to have his assurance that the Government will look at it in relation to the secondary income tax allowances.
  With regard to what my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) has just said, we are concerned not only with people who have incomes and who are able to make covenants but also with the very large number of cases in which there is no income as such. The parents might be on social security. What we have been concerned about in the past in these debates is that the single woman who has no income of her own—perhaps because she has given up her employment or has

  1319
  been unable to obtain employment— should also, in order to look after the dependent relative, be given some consideration. That is outside the scope of this Finance Bill but is something which should be put on record.
  Mr. Cope: i also welcome the Chief Secretary's announcement of a review of the secondary allowances between now and Report stage.
  Mr. Joel Barnett: I said that I would consider the question of secondary allowances in the light of the Finer Committee's report and this debate. That was all. I did not say that it would be anything else.
  Mr. Cope: I do not think I said that it would be anything else. I welcome the fact that the Chief Secretary is to consider or to review the secondary allowances, or whatever phrase the hon. Gentleman cares to use. I am a new Member of the House and I probably do not appreciate its finer points.
  Mr. Hamling: We did not hear that when Conservative Members were in Government.
  Mr. Cope: These are matters for debate. It would have been helpful, however, if the Chief Secretary had told us about this an hour ago. We might have saved a little time. However, in view of what the hon. Gentleman has just said about a review or consideration, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Mr. Norman Lamont: I beg to move Amendment No. 52, in page 9, line 6, at end insert—
  ' (5) In section 18 (blind persons), for the references to "registered blind person" or "registered blind persons" there shall in each case be substituted "registered blind person or registered disabled person" or "registered blind persons or registered disabled persons"'.
  This is a probing amendment to discover the arguments, which will no doubt be advanced by the Chief Secretary again, against enlarging the blind person's allowance to cover disability in general. A similar amendment has been moved in previous years and I am familiar with some of the arguments against it. but it
  1320
  is not without reason that the matter has come up several times.
  Whatever the administrative arguments, it is now generally recognised that the blind person's allowance was based on an out-of-date concept, when blindness was an obvious and visible form of disability. It is only in recent years that there has been an increasing awareness of the general problems of disability within society.
  I appreciate the administrative argument that blindness is an easily identifiable disability, but tax treatment for the disabled should be determined by source and degree of disability rather than by administrative convenience. We now have much more experience in assessing disability, under the industrial injuries scheme and the administration of the constant attendance allowance, and we have more sophisticated methods of assessment.
  The amendment would give the Inland Revenue certain tasks in assessing disability which would have to be done through the normal social services organisation. In this sense it paves the way towards the tax credit system and, through that, to the creation of a disability income which is what organisations for the disabled like the Disablement Income Group have always wanted. If we could get a tax allowance for all the disabled and from that move into a tax credit scheme, we could then progress to a disability income. That is all the more urgent because there is no specific tax allowance for disabled people.
  Many people are not covered by our present social security arrangements, particularly those who are born disabled and disabled married women at home. Many people who deserve help are not capable of working but can look after their families and therefore do not benefit from the constant attendance allowance.
  The amendment might be expensive, and the Chief Secretary will probably say that the extent of disability within society is largely unknown. One argument might be that the registered disabled are only the tip of the iceberg. But the feeling is growing that the disabled have not been adequately served by our tax system. Something like the amendment will one

  1321
  day be necessary if we are to move forward, as we will have to do, to a disability income.
  Mr. Hugh Dykes: I wish to intervene only briefly following the comprehensive explanation of the rationale of the amendment by my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont), and to support wholeheartedly what he said and to add my plea to the Chief Secretary that he should consider the amendment and its full implications.
  My hon. Friend the Member for Kingston-upon-Thames was modest in saying that it was a probing amendment and presumably, therefore, the intention is to go no further than to probe, but I would like to aim for more than that, although this is entirely a personal view, because this has now become an urgent and important matter.
  I warmly endorse what my hon. Friend said and I shall add some additional points. The administrative argument which might be constructed against extending from the obvious and tangible category of the blind person to a special allowance to disabled persons as a whole, as a generic category, can be gainsaid by our increasing practical experience in many ways, including work by local authorities and central departments, particularly the Department of Health and Social Security, and also because even in a legal sense the concept of the disabled person has moved from being just a fairly vague conceptual impression in the mind of many people to a definitive legal concept, the concept of a registered disabled person as now endowed and approved by Parliament in the Private Member's legislation originally introduced several years ago.
  I do not think that the administrative arguments which might be deployed by the Chief Secretary in his pre-Finer mood will necessarily carry the weight which would contradict the valid argument for the Government deciding to take action on this substantial front. This is an important category of people, and it may be that there are important differences to be ironed out between those who are in a formal sense registered disabled persons and those who are not, between the various gradations of disability, whether congenital or created physically during
  1322
  a person's life. There are all sorts of admittedly complex details to be ironed out. But in talking with members of DIG and other disabled persons in my constituency, and with those working with the disabled, including those in local voluntary associations for the disabled, I find that there are, not on intermittent occasions but fairly frequently, now articulate blind people who say that although they are blind, which is a severe disability, they know many disabled people whom they regard as being much more disabled intrinsically than they are. There are innumerable examples of active blind people who still do a virtually full-time job or perhaps a part-time job in their homes, and we admire them for this. We know also of sighted people severely disabled from other causes. One example is a woman, a constituent of mine, who tries to do an eight-hour day in her home flat on her back, doing a writing or telephoning job, which is a tremendous tribute to her tenacity, but she does not qualify, except for any special assistance which may be available under separate legal provisions, for special treatment. This is increasingly an old-fashioned anomaly.
  Many associations and organisations for blind people would welcome an extension to cover disabled people in general. This would be perhaps a mirror image of the inception of a national disability income, transcending party lines, which more and more people in the House of Commons want. There was an important rally connected with this in Trafalgar Square yesterday.
  For all these reasons, and for many others which could be raised except that the debate would go on too long, I hope that the Chief Secretary will be able to say a little more, bearing in mind what he said previously, which was a welcome indication of his willingness to look at anomalies which worry hon. Members on both sides. This particular problem needs to be resolved in the fairly foreseeable future.
  8.45 p.m.
  Mr. Joel Barnett: I am always obliged to the hon. Member for Kingston-upon-Thames (Mr. Lamont) for the way in which he moves his amendments, because he saves us the need to reply by giving the reply in his own remarks. He

  1323
  has just done the same on this amendment.
  As was evident from the fact that the hon. Gentleman called it a probing amendment, this proposal goes far wider than did the amendment on the fairly narrow question of investment income dealt with on another occasion by my hon. Friend the Financial Secretary. Both the hon. Member for Kingston-upon-Thames and his lion. Friend the Member for Harrow, East (Mr. Dykes) touched on the question of defining the nature or extent of disability. One may have on the register the type of disabled person suffering severe disability—the hon. Member for Harrow, East gave some examples— whose case is, in fact, worse than that of a blind person. There are such terrible cases, and one would always wish to help. Equally, however, one may have on the register a person whose disability is nowhere near so severe; his disability might be regarded as fairly modest, although I readily agree that not one of us would wish to suffer it.
  Thus, the whole question is most complex, and this is why we are worried about the whole problem of identifying classes of disability. I believe—I am sure that most hon. Members, on reflection, will agree—that it is best to deal with the disabled through the social security system. The Government are under a statutory commitment, under Section 36 of the Social Security Act 1973, to review our social security provision for chronically sick and disabled persons and to lay a report on that review before Parliament by 31st October 1974. I cannot comment on the progress made so far, save to say that the Government wholly accept that commitment and intend to abide by it.
  I submit that that is the best way to deal with the matter, because it would reach those disabled people who do not have sufficient income to pay any tax at all. That is the way we have in mind to deal with it. Indeed, I know that this is the view taken by the hon. Member for Worthing (Mr. Higgins), because, when he was Financial Secretary in 1973, he said:
  "It is none the less true, by and large—I would not wish to generalise absolutely—that
  1324
  help is more efficiently directed if it is done through the social security system than through giving taxation relief of one kind or another." —[OFFICIAL REPORT, Standing Committee H, 23rd May 1973; c. 697.]
  I agree with the hon. Gentleman—that is the way to deal with it—and I imagine that most hon. Members on both sides will accept that line of argument.
  For those reasons, I am not able to accept the amendment so reasonably moved by the hon. Member for Kingston-upon-Thames. I hope that the hon. Gentleman will accept that what we have in mind is to provide help for the disabled through the social services and through the work of my hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who is now the Minister responsible for these matters. I know that all hon. Members and disabled people outside the House will be only too well aware of how much my hon. Friend has done, of how much more he will hope to do, and, indeed, of how much more the Government will hope to do. I am sure that that will be the best way to go about it.
  Mr. Norman Lamont: I beg to ask
  leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Question proposed That the clause stand part of the Bill.
  Mr. William Clark: The Chief Secretary has told us that about 2 million people have been taken out of the tax bracket. I do not doubt that figure as it stands, but I think it a little dishonest of the Government to say that 2 million are taken out of the tax bracket when we know only too well from all the problems of inflation that we have discussed that as a result of rising incomes a good many more people will come back into the tax bracket. I am pretty sure that by the end of the fiscal year—perhaps the Chief Secretary will comment on this—there will be not a net reduction but an increase in the number of people in the tax bracket.
  We have discussed all the various allowances, and on both sides of the Committee we are well aware of the anomalies and differences. Some of them are pretty archaic, and, what is more, they are unfair because they give a benefit to one person but not to someone else who should be equally entitled to it.

  1325
  Under our tax system it is all very well giving a tax allowance to someone but that affects only the person who is actually paying tax. The person we want to help is possibly not in the tax bracket. That is why I regret, as do my hon. Friends and, I am sure, hon. Members on the Labour side, that the Government have set their minds against a tax credit system. Such a system would at least help the person on a lower income. We have been talking about a housekeeper allowance and a dependent relative allowance and so on. Under the tax credit system the dependent relative would be covered. That person would have an income in his own right, and it would mean that he, could pay the daughter or son to look after him. That is much better and far more dignified.
  We have just had a debate on the disabled. The Chief Secretary said that the Financial Secretary would look at the question of investment income for disabled persons. I look forward to him accepting our view that they should get an extra allowance, or at least the same allowance as a retired person. The Chief Secretary said that the best way of dealing with the disabled is to give them a cash payment. I could not agree more. It is all very well giving a disabled person a tax allowance, however, but that allowance will benefit only people in the tax bracket. The Minister suggests a cash payment through social security, but I differ with him on that. The tax credit system included machinery to cover the disabled person.
  One could attribute the same economics to blind persons who at the moment get an allowance. If a blind person is paying tax the allowance is of some value. If he is not it does not matter whether the allowance is £500 or £1,000 a year, because it will not benefit him. That is one of the advantages of the tax credit system. The system has various side effects. For example, it cuts out the nonsense of not taxing all income, under which some people can get an income from social security or elsewhere which is not taxable and can in some instances for two, three or four weeks after having stopped working end up with more take-home pay than when they are in full-time employment and assessed under PA YE.
  I want to know why the Socialist Party is against the tax credit system. In the
  1326
  Select Committee, which had four Socialist members, there was a division. Three of the four—the Chief Secretary, the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and the present Secretary of State for Social Services—voted against the tax credit system. But the man who was at one time Chairman of the Parliamentary Labour Party, the former right hon. Member for Sowerby, voted for it. I am delighted that the Liberals supported the main report. It is all very well for the Chief Secretary to say, presumably speaking for his party, "We thought that the tax credit system was not the right one." I do not think that is true. The man who voted with us on the main report has had promotion and has gone to another place. I am told that life there is easier than it is here.
  One of the arguments against a tax credit system is that it is not sufficiently flexible. Never has so much nonsense been spoken. The Chief Secretary and the Financial Secretary know, and the Chancellor of the Exchequer should know, that the flexibility within the tax credit system is equal to that in our present PAYE system, but I do not intend to pursue that matter.
  The Temporary Chairman: Order. I take it that the hon. Gentleman was referring to the tax credit system so far as it affects personal reliefs, and nothing more.
  Mr. Clark: I am referring to it only as it affects personal reliefs and secondary allowances, Mr. Gurden. Those are the sort of reliefs and allowances that one can bring into a tax credit system.
  We have been arguing about whether the married and single persons' allowance should be increased. They are mirrored within the tax credit system, in that a married man will receive £6 cash allowance each week and if his income were such that he did not have to pay £6 tax he would receive the balance from the Inland Revenue. The Chief Secretary wants simplification in our tax allowances. That is one way in which we can have it.
  Year after year successive Governments talk about whether they should increase the earned income relief—though that has now gone because of the action of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber). They

  1327
  talk about increasing the married allowance, the single allowance and the child allowances at different ages and they argue about whether they should increase the dependent relative allowance and whether they should give the blind and the disabled an allowance. It is high time that hon. Members and the country realised that the sooner we have a tax credit system, giving positive benefits to the low paid, the blind, the disabled and so on, the better.
  That is why I very much regret the negative approach of the Chief Secretary and the Treasury to the tax credit system. I understand that, under the previous Government, the Treasury and certainly the Department of Health and Social Security were in favour of a tax credit system.
  I hope that the underlying reason why the Labour Government do not want a tax credit system is not political. I also hope that it is not sour grapes because they did not think of it themselves.
  9.0 p.m.
  Mr. Higgins: The Committee will have listened with considerable interest to my hon. Friend the Member for Croydon, South (Mr. Clark), because he was the Chairman of the Select Committee which was particularly concerned with the proposals for a tax credit system.
  We have now been debating for some hours and in considerable detail the proposals in the Bill and the amendments that my hon. Friends and I have pressed upon the Government. I think that there is universal agreement that the present system of so-called secondary allowances is ramshackle and full of anomalies. It is clear from the answers of the Chief Secretary that it has not sustained the value of the allowances in real terms, allowing for the effect of inflation.
  Many of the secondary allowances are of benefit to the hard-hit groups with which the Committee rightly has sympathy. There has been no agreement concerning them even in money terms. It has been the constant thread of our debates that a better system should be devised. The fact is that a better system was devised by the previous Conservative Government. We put forward our proposals for a tax credit scheme. We had hoped that it would be possible to make
  1328
  that a matter on which there would be all-party agreement. It was for that reason that my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) proposed that the matter should be discussed as widely as possible within the House. In due course a Select Committee was set up which considered the matter in considerable detail.
  The previous Government hoped that it would be possible to proceed on a sensible and all-party basis. It was an immense disappointment to my right hon. and hon. Friends and myself when in the Budget Statement the Chancellor of the Exchequer came up with the proposals in the clause which we are now considering.
  The Chancellor, when referring to the tax credit system, said:
  "Before describing my direct tax proposals, I should outline very briefly the Government's position on a tax credit system.
  We believe, as we explained at length in opposition, that there are serious drawbacks to the tax credit scheme proposed by the previous administration. They were fully described in the Minority Reports of the Select Committee. We have not taken any decision against the principle of a negative income tax, which was the subject of considerable study under the previous Labour Government, but our immediate priority has been to carry out the major increase in national insurance benefits which I have referred to."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 312.]
  That being so, it must be said that the previous Labour Government did not produce anything as well worked out as the proposals in the Green Paper. The tragedy is that the present Government, instead of asking whether their advisers were ready by way of a tax credit scheme—they would have received the answer that legislation was well advanced and could be produced immediately—produced the statement which I have just quoted.
  The result is that we have a hotchpotch of measures which are inadequate protection against inflation. They do not cover a great many of the hard cases that we have been discussing. They have been introduced instead of announcing proposals for a tax credit scheme. The previous right hon. Member for Sowerby, Mr. Houghton, who is now in another place, found in favour of such a scheme. The Committee will recognise that his experience of social security benefits was of long standing and that he brought

  1329
  great expertise to bear. 1 do not think that anyone would dispute that.
  Many of us felt that the arguments put forward at that time by the hon. Member for Heywood and Royton (Mr. Joel Barnett) and his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and the somewhat different arguments put forward by the present Secretary of State for Social Security were not well founded. I believe that if they asked their present advisers they would be told that they were not well founded.
  It is regrettable that we are not able to proceed on that basis. The fact is that there were considerable advantages in the scheme which had we been in office we would have most certainly legislated for in our Finance Bill. It is inevitable that the lead time for a reform as radical as a tax credit system is considerable. Such a system cannot be introduced overnight. It takes a considerable time to prepare such legislation and then a considerable time to implement it. As a result of the Government having decided not to introduce such a scheme this year we shall lose a year at least. That will be to the disadvantage of the British people.
  The tax credit system would have excluded certain groups—the self-employed, for example, for whom other arrangements would have been made, and families mainly dependent on supplementary benefits, who would have needed something in addition to the system. But it would have covered about 90 per cent. of cases of the kind we have been discussing today. It would have been of very considerable advantage, for example, to one-parent families and to the married woman. There was some misunderstanding originally about credits being given to the children, but my right hon. Friend the Member for Altrincham and Sale made it clear that they would be paid to the mother.
  There were, therefore, considerable advantages in the tax credit system which this clause does not give. It would have got us over the problem of the poverty trap situation, where the family income supplement is continued at the same time as there is an overlap with the tax threshold. I shall not go over that argument again, but nevertheless there is a difficulty, which the hon. Gentleman clearly recognised and to which he had
  1330
  no solution other than to admit that the tax credit system would have provided a solution. It would have reduced greatly the need for means testing. It would have been of considerable advantage which we are unfortunate not to have the opportunity to approve at present.
  The tax credit system would also have benefited not only taxpayers but those below the tax threshold, particularly the pensioners whose case we have already debated. Taking all these amendments, and covering an even wider area, the tax credit system would have given the opportunity to improve the way in which the Government are able to deal with the very real social problems we are faced with. Moreover, it would have been a simplified system, and would have reduced greatly the number of civil servants required.
  For all these reasons, it is a matter of great regret that we do not have the tax credit system before us today. It is an opportunity delayed at the very best. 1 hope that it is not an opportunity missed. I said earlier that it was not the policy of the Opposition to shoot Santa Claus, so we shall not vote against the clause. At the same time, we are very sad that we do not have a more comprehensive and sensible proposal, which had been worked on, developed and was ready for legislation, and from which the Government have run away. I hope that the hon. Gentleman will let us know precisely what the Government's position is on this issue now. I hope that he will confirm that the Government are prepared to go ahead with such a scheme.
  Mr. Joel Barnett: In this clause we are discussing personal reliefs, and that is as good a reason as any why it does not include a tax credit system. A number of points have been made passionately, as always, by the hon. Member for Croydon, South (Mr. Clark). He and I have debated tax credit systems upstairs and downstairs for a long time.
  I make it clear that the Government are not opposed to any tax credit system. They are opposed to the tax credit system suggested in the Green Paper of the Conservative Government. It is that system to which we are opposed, not a tax credit system of itself. It may well be possible to devise a comprehensive tax credit

  1331
  system which is fair as between one taxpayer and another. I am far from convinced, as I showed when we discussed the matter in the Select Committee, that the tax credit system proposed by the Conservative Government was anything like fair.
  The hon. Member for Croydon, South said that by a tax credit system we would help the disabled and the lowest income groups and all sorts of other people by means of cash grants. That is true. He went on to say, however, that there would be some side effects. He mentioned some that would be beneficial—the fact that there would be, for example, a £6 cash allowance weekly. But he forgot to mention the not insubstantial side effect that the whole lot would have cost £1,300 million, and we have never been informed how that money would be found. The hon. Gentleman also forgot to mention the side effect that the vast majority of taxpayers, more than 90 per cent. of them, would be stuck with the same basic rate one with another. I do not consider that to be the best way in which to provide a progressive tax system, and I stick by everything I said at the time of the Select Committee.
  When the hon. Member for Worthing (Mr. Higgins) talks about a tax credit system and providing extra allowances and bigger net incomes, it has to be remembered that there is no miracle in a tax credit system or anywhere else. If incomes net of tax are increased by the tax credit system, or in any other way, the money must come from somewhere. It can be provided by printing paper, as happened all too frequently during the course of the past nearly four years.
  But the £1,300 million is one side effect that somehow neither hon. Member cared to mention. If a tax credit system costing £1,300 million is introduced, how that sum is to be financed is important, because its method of financing could affect all those who would greatly benefit, as the hon. Gentleman told us, from the tax credit system.
  Mr. William Clark: Whatever the figure, whether £1,300 million or £650 million, would the hon. Gentleman care to say who would benefit from such a reduction in taxation?
  Mr. Barnett: When taxation generally is reduced, and that is what the tax credit system is intended to achieve, the individuals who benefit most are those with the largest incomes.
  Mr. Clark: I could not agree more, but the Chief Secretary is missing the point. Under the tax credit system, the people who are not in the tax bracket also get a cash benefit. As he knows, the figure of £1,300 million was illustrative. But whatever the figure, whether £1,300 million, £650 million or anything else, who would benefit from that reduction in revenue?
  Mr. Barnett: It is the hon. Gentleman who is missing the point. If we give a benefit of £650 million, or whatever the figure is, given that there is a revenue neutral situation, the money must come from somewhere. If it is taken from indirect taxation, that will certainly hurt most those whom the hon. Gentleman claims will be helped by the tax credit system. The money cannot be taken from direct taxation, because it is precisely the direct taxation system which is hurt most by the tax credit system proposed in the Green Paper.
  Clearly I am stepping miles out of order, Mr. Gurden, and I hope that you will forgive me, but I have been trying to reply, if only briefly, to some of the issues raised in this debate. The clause provides personal reliefs totalling £684 million. I think that it will be acceptable to the Committee, and I therefore commend the clause.
  Question put and agreed to.
  Clause 11 ordered to stand part of the Bill.

Clause 13

  SHARE OPTION AND SHARE INCENTIVE SCHEMES
  Mr. Maurice Macmillan: I beg to move Amendment No. 29, in page 10, line 34, leave out from beginning to end of line 43, and insert:—
  ' (a) section 78 of the Finance Act 1972 (approved share option schemes) except:

  (i) in its application to cases where a right obtained as mentioned therein was exercised before 27th March 1974, and

  1333

  (ii) in relation to schemes to which Part III of Schedule 8 to the Finance Act 1973 applies; and

  (b) subsections (2)(a) and (3X«) of section 79 of that Act (which excludes the application of subsections (4) and (7) of that section in cases of acquisitions made under approved share incentive schemes) except:

  (i) in their application to cases where the acquisition was made before 27th March 1974, and

  (ii) in relation to schemes to which Part II of Schedule 8 to the Finance Act 1973 applies; and'.

  I should declare a very long-term interest. For many years I have been concerned with an organisation known as the Wider Share Ownership Movement. After a great effort, denied by administrations of both parties, it finally succeeded in getting accepted a concept of a property-owning democracy that extended beyond that of home ownership. That effort was supported by my right hon. and hon. Friends, by right hon. and hon. Members on the Liberal benches here and in another place, and by right hon. and hon. Members on the Labour benches, and it had a lot of help from individuals within the trade union movement.
  9.15 p.m.
  The object of the movement was to turn "earners into owners". It was to extend the whole concept of a property-owning democracy. The idea had a great deal of support but it also came up against a lot of opposition from the Inland Revenue and to some extent the Treasury. I remember some time ago being told at some meeting, or reading in a paper, that although there might be a case for encouraging personal savings through the tax system, this was possible only if the personal saving was for socially acceptable reasons, such as saving against a rainy day, for the education of one's children, home ownership and old age. It was not to be encouraged, however, if the purpose of the savings was to increase the wealth of the saver.
  That was a long time ago. I thought it was a silly argument even then. It is even sillier now with the advances we have made through save-as-you-earn and, until this clause came into the Finance Bill, own-as-you-earn. It is clear that in putting this clause in the Bill the Treasury has accepted the spirit of that strange doctrine that saving must
  1334
  not be encouraged through the tax system if it benefits the saver. Because of what has been done recently by the last Conservative administration, of share schemes, both selective and those applying to all employees, have become firmly established.
  Over the last few years 700 companies have developed schemes for their executives and managements following the Finance Act 1972. In the past six months employee schemes, own-as-you-earn schemes, have been announced or instituted by such companies as ICI, Allied Breweries, National Westminster Bank, Cadbury-Schweppes, P and O, Legal and General Assurance and so on.
  The own-as-you-earn scheme came into being with the 1973 Budget of my right hon. Friend the Member for Altrin-cham and Sale (Mr. Barber). The scheme was released from the pay freeze on 1st December 1973. Since then it has developed and covers 13 companies and about 500,000 workers. It has been estimated that a further 150 schemes are in the pipeline involving 1½million employees. This is considerable evidence and shows the great demand by companies and those who work for them for such a scheme. It is this that the Chancellor has chosen to discourage in the Budget.
  Clause 13 is directed at preventing selective schemes, whether employee share incentive schemes or executive stock option schemes. It also prevents the operation of the own-as-you-earn scheme. My amendment seeks to deal with that. We are seeking to restore that scheme to the statute book, whatever else may happen to the clause. The system introduced by the Bill not only damages the selective scheme but is unfair in its double taxation impact on the employer.
  I need not go in detail into the operations of the own-as-you-earn scheme; they are part of the save-as-you-earn scheme. An employee in the scheme contributes through the save-as-you-earn contract for five or seven years and at the same time acquires the opportunity to use the proceeds of the save-as-you-earn contract to purchase ordinary shares in his company.
  Some of the criticisms of the scheme are not well founded. It is argued that it is not in the best interests of employees

  1335
  to risk both their livelihoods and their savings in the future of one company. There would be much in that argument if it were not for the own-as-you-earn link with the save-as-you-earn scheme. The argument that the employee's savings are at risk under the own-as-you-earn scheme ignores the fact that during the savings period the employee is protected from loss and at the end of that period he must, under the legislation, be free to sell his shares if he wishes to do so.
  Employees who go in for these schemes will normally have a series of overlapping savings contracts. They will, therefore, constantly have a stake in their company, and even if they realise their gains at the earliest opportunity they will have a stake which is protected by part of it always being in the save-as-you-earn element of the total scheme. It is this element of protection which has done a great deal to counter the arguments put forward on earlier ideas which others and I have had rejected by successive Governments.
  A second argument put forward against the own-as-you-earn plan is that it is restricted to employees in the private sector. It is worth noting that several schemes, some of which have been submitted to the Treasury for consideration, have been developed to provide similar benefits for those employed in the public sector. I admit that they would require the enactment of legislation, but it is apparent that the more widespread the adoption of own-as-you-earn schemes in private industry the greater will be the incentive to adopt them in the public sector. My right hon. and hon. Friends and myself would very much welcome this extension of public ownership in the public sector.
  Right hon. and hon. Members opposite have frequently expressed views about employee participation, but they seem to me to lack concern about employee participation in ownership. The Chancellor of the Exchequer said that he was not opposed to share schemes, but he did not see why they should be assisted by the tax system. I hope to show when we deal with the next amendment that the tax system as altered by the clause discriminates against those schemes. If the Government's argument is seriously that this objective should not be en-
  1336
  couraged, they must think again about their priorities, unless they wish the Opposition to believe that their objections to employee shareholding are purely political.
  We have tax incentives through life insurance premium relief, through tax exemption on pension funds, through capital allowances on investment in plant and machinery and through grants to companies in development areas, and we have, even under the Chancellor's present proposals, some forms of relief on mortgages for home ownership. The tax system is used as an incentive for many objectives, and I suggest that the spread of ownership among the workpeople through participation, protected under the own-as-you-earn scheme, in the ownership of their companies is as socially acceptable and desirable an objective as any of the others for which the tax system is used to provide an incentive.
  I hope, therefore, whatever the Government's view on the rest of our amendments, that they will accept this amendment which specifically excludes from Clause 13 the own-as-you-earn scheme, and enables and encourages companies and individuals through the tax system to operate the scheme to the advantage of the country, the company and the employee.
  Mr. MacGregor: I warmly support my right hon. Friend on this amendment. I should, perhaps, declare a dual interest. First, I am a supporter and member of the Wider Share Ownership Council. Secondly, the company for which I work has a subsidiary in another part of the group which is concerned with schemes of the own-as-you-earn type and, indeed, was partly responsible for the conception of the scheme. I have no interest in that other company beyond my general belief in own-as-you-earn schemes.
  The amendment rightly concentrates on own-as-you-earn schemes, but I am also concerned about share option and share incentive schemes, which have many advantages. However, we are discussing only the own-as-you-earn schemes.
  It is right to put forward an amendment to restore the present position of own-as-you-earn schemes not only because of their attractiveness but because, whereas prior to the Finance Bill share option

  1337
  and share incentive schemes were not able to be put into operation, own-as-you-earn schemes were, and they were proving to be extremely popular. In the four short months from 1st December 1973 in which they could operate there was clear evidence that more than 150 schemes were being prepared, involving 1½million employees.
  Those schemes have been hit by the Finance Bill. Whereas under the Bill own-as-you-earn schemes will be subject to income tax and, therefore, to a rate of 33 per cent., previously, when only capital gains tax applied and it was likely that many schemes would produce returns which could be released at £500 charges at a time, no tax would accrue to the employees on the share element.
  The second reason why own-as-you-earn schemes are now difficult to introduce is that many institutional investors have taken the view that while the schemes are subject to income tax they will vote against them in the companies concerned. I regret this attitude of the institutional investors, and if the amendment were carried that objection would be removed.
  9.30 p.m.
  It is worth briefly recording why these schemes are so attractive. They are attractive to the employee because they give him an opportunity to build up capital and savings in ways other than simply through ownership of his own house. In my judgment that is one of the most desirable things which we should try to achieve among groups of employees who can benefit from the scheme. Secondly, they guarantee a minimum benefit through tax in respect of the SAYE element so that there is not the same risk for employees as for the higher income groups who might have taken part in share option or share incentive schemes. I agree with my right hon. Friend the Member for Farnham (Mr. Macmillan) that these schemes give a sense of participation in a company which is more attractive than is the theoretical argument about worker participation or a 49 per cent. participation on supervisory boards.
  Furthermore, these schemes actively encourage savings. If the own-as-you-earn scheme had been built up, it was calculated that the inflow to the building societies through SAYE would have
  1338
  amounted to £60 million per annum and would have risen to a higher figure in later years. This would have provided a steady flow of savings into the building society movement, which would have been given greater assistance in facing its present and future difficulties. The scheme would also help to encourage an employee to build up a sum of money in a building society which he could use either to buy his own house or in other ways. The employee would do so with the active encouragement of his employer. It would provide an extra advantage from the savings point of view in that there would be an additional incentive, and the employer would be the person who would encourage the employee to save.
  From the employer's point of view the scheme would add to the range of benefits to be offered to employees and would be related to results without affecting profit and loss in the short term. It also gave a man greater identification with his company, and in many cases it would have helped in the reduction of labour turnover.
  I do not wish to overestimate the benefits of the scheme, but I believe that, although perhaps not very large in the economy as a whole, there would have been benefits in terms of a person's identification with a company since the company's success would be linked with the outcome for the employee. It would also add an extra area of benefit since it would be less inflationary than would additional wage demands.
  My right hon. Friend referred to two criticisms, and I share his views on both matters. The first criticism was that such a scheme would tend to put all the eggs in one basket. I believe that the employee would be protected because he need not necessarily take up the shares at the end of the save-as-you-earn period. We could have developed other schemes to deal with the eggs-in-one-basket argument.
  The second criticism is that the scheme applied only to the private sector and was not available to employees in the public sector. There is strong merit in that criticism, but again it would have been possible—and still is—to evolve a scheme to overcome this criticism. What we can at least do in meeting these two criticisms is to restore the position of the own-as-you-earn scheme to the point at which it rested before the Finance Bill came along.

  1339
  For these reasons I warmly support the amendment.
  Mr. John Pardoe: It seems to me that in discussing this amendment—and I wish to reserve most of my remarks on this subject for a later discussion—we are at the heart of the argument whether one is on the side of popular ownership or public ownership. I hope that we shall have some idea on which side the Government stand in this argument. I had originally supposed that the Government were not totally sold on the idea of monopoly public ownership and still had lingerings of some Liberal attitudes towards the spread of ownership. However, in Clause 13 they finally dispense with all such lingerings.
  The Chancellor of the Exchequer gave some broad and brief reasons why he was opposed to these schemes, and I know that this amendment is very limited. In his Budget Statement the right hon. Gentleman said that he had no antipathy to share schemes as such but felt that employees should not get special tax privileges because they received their remuneration in one form rather than in another. He went on to say that any respectable share incentive scheme should be able to stand on its own feet without relying on the crutches of tax.
  Precisely the same argument applies to pension schemes. I have just negotiated a very generous scheme for my company, and the Government are handsomely making the company and the employees —on both sides' contributions—a tax-free present. I think that they should go further. In the past the Liberal Party has urged that all share incentive and share option schemes and own-as-you-earn schemes should receive from the Government 110 per cent. of the tax.
  I think that the Government can and do use the tax system to encourage schemes which are not strictly within the terms of the Inland Revenue—in other words, not strictly a method of getting revenue in the most efficient way. The Government simply encourage schemes which they think desirable. It is for that reason that all Governments have encouraged pension schemes by tax remissions. They consider pensions desirable. The Chancellor of the Exchequer says that he has no antipathy to share schemes. If the
  1340
  Government think that popular ownership is desirable, why do not they use the tax system to encourage such schemes?
  Although this is a limited amendment and although I support it, I am opposed to Clause 13 as it stands. I hope that the Committee will not only pass this amendment but, at a later stage, throw out Clause 13.
  The Financial Secretary to the Treasury (Dr. John Gilbert): We have had a short but very interesting debate on this amendment, the purpose of which is to exempt so-called own-as-you-earn schemes from the provisions of Clause 13 which seeks to bring profits under stock option and share incentive schemes generally into charge under Schedule E for income tax rather than, as at present, allowing them merely to attract capital gains tax treatment.
  The right hon. Member for Farnham (Mr. Macmillan) will agree, I am sure, that these matters were discussed at length in the proceedings on the 1973 Finance Bill and that there is a fairly clear division of opinion, if not of philosophy, between the two sides with respect to the generality of these schemes. For that reason I shall not weary the Committee with tedious repetition of the arguments which we rehearsed at the time of the 1973 Bill.
  I take issue with the right hon. Member for Farnham when he suggests that the present Government are in no way seeking to encourage savings. Many steps were announced by my right hon. Friend in his Budget Statement to improve the return on various types of savings instruments which were available to the general public, and that will continue to be our policy. The difference largely is in the incentives available for the discretionary use of taxed income going into savings, and by and large we have kept the arrangements which we inherited from the previous administration.
  The right hon. Member for Farnham advanced a great many arguments in favour of the principle of own-as-you-earn schemes, and they were all perfectly proper arguments. I do not seek to refute them in detail, though I have some reservations about certain of them, and the hon. Member for Norfolk, South (Mr. MacGregor), in what I thought was

  1341
  an extremely candid and reasonable speech, referred to various weaknesses in our present schemes. What the right hon. Member for Farnham signally failed to do, however, in all his eulogies about the desirability of these schemes was to advance any argument as to why they should receive preferential tax treatment. That is the nub of the difference between the two sides of the Committee.
  We have made it clear time and again that there is no intention on the part of the Government to try to attack incentive schemes of any sort or even employees' share purchase schemes. As has been pointed out, many companies are still going ahead with them. But I repeat what my right hon. Friend said in his Budget Statement. It is our view that these schemes, if they are worth saving, should be able to stand on their own feet without the support of tax concessions. The general rule as we see it still applies and should apply. Any employee should be taxable under Schedule E on all taxed emoluments from office or from employment.
  I remind the Committee that where employees acquire shares under genuine profit-sharing arrangements—the sort which arc of interest to members of the Liberal Party—in other words, where the value of the shares that an employee receives is taxed as part of remuneration, those schemes are not affected by the provisions of the clause. Any growth in the value of the shares after they have been acquired by the employee will continue to be exempt from income tax and will be treated for capital gains tax as before.
  The hon. Member for Norfolk, South mentioned certain advantages to these schemes. He said that they gave an employee an opportunity to build up his savings. If the employee is fortunate, that is true. I am talking about the element in the schemes which is related to changes in the price of shares. If the employee it not fortunate, this is not true to any extent over and above the amount that he has paid in by regular instalment. There is, therefore, an enormous element of arbitrariness about the reward that the employee would get in this way.
  Much more interesting, however, was the fact that the hon. Gentleman, in his very candid speech, adduced as being attractive to the employer the introduction of these schemes. He said that they
  1342
  added to the benefits that the employer could offer his employee without affecting his profit and loss account. That is true. What these schemes amount to is that they produce, or will have produced before the provisions of the clause take effect, a reward to the employee if he is fortunate in regard to the price of the shares of the company for which he works, a benefit which costs the employer absolutely nothing, although the cost is borne by the generality of taxpayers. That is a matter to which we shall return.
  Mr. Peter Rees: The hon. Gentleman has concentrated on the advantages, so called, to the employer. Does he recognise that many employers have incurred considerable expense and undergone considerable trouble to set up these schemes, which are to be completely stultified by the provision which he and his right hon. and hon. Friends have now introduced? Will he concentrate a little on the disadvantages likely to flow from this ill-thought-out provision rather than the somewhat hypothetical advantages on which he is enlarging?
  Dr. Gilbert: I shall come to that point shortly. I was still addressing myself to the remarks of the hon. Member for Norfolk, South.
  One of the objections that we take to the principle of these schemes is that they enable the employer to produce additional net remuneration to the employee, if the price of the shares goes up. without any cost to the employer. The hon. Gentleman is perfectly right when he says that they amount to a very cheap way in which the employer can reward a lucky employee rather at the expense of the general body of taxpayers.
  9.45 p.m.
  In answer to the hon. and learned Member for Dover and Deal (Mr. Rees), yes, of course I am aware that many companies have incurred expense in introducing these schemes since the 1973 Finance Act. But any such company was put on notice during the passage of that Act that my party found many elements of those schemes obnoxious and that we intended to legislate as early as possible against any preferential tax treatment that they received. Therefore, anyone who has invested time and money in preparing such schemes cannot complain of retrospection. He has been clearly

  1343
  at risk since the proceedings on the 1973 Act, in which the hon. and learned Gentleman played a distinguished part. Our position has remained unchanged since then. I invite my hon. Friends to resist the amendment.
  Mr. Maurice Macmillan: I advise the Committee to support the amendment. The Minister did not give a satisfactory answer. He said that the employer benefited from the concessions in operating the own-as-you-earn scheme. But precisely the same situation applies to pensioners. We regard it as equally desirable to help the employer who helps his employees to save in this way as it is to help those who contribute towards their pensions. There is no logical distinction.
  The position is quite different in the case of profit sharing, because there the profit is partly remuneration and the
  employee is taxed as if it were earned income; it is the gain that is tax free. In this case we are talking about an option which requires a saving by the employee out of his earnings rather than an addition by the employer to them.
  I can only agree with the hon. Member for Cornwall, North (Mr. Pardoe), who said that the Labour Party is against what he calls popular ownership, and with my right hon. Friend the Leader of the Opposition, who on the first day of the Budget debate described the Chancellor's discouragement of these schemes as purely doctrinal. I ask my right hon. and hon. Friends to vote for the amendment.
  Question put, That the amendment be made: —
  The Committee divided: Ayes 221, Noes 249.

  Division No. 34.]

  AYES

  19.47 p.m.

  Adley, Robert

  Durant, Tony

  Hurd, Douglas

  Aitken, Jonathan

  Dykes, Hugh

  Hutchison, Michael Clark

  Alison, Michael (Barkston Ash)

  Eden, Rt. Hn. Sir John

  Irvine, Bryant Godman (Rye)

  Allason, James (Hemel Hempstead)

  Edwards, Nicholas (Pembroke)

  James, David

  Ancram, M.

  Elliott, Sir William

  Jenkin, Rt.Hn.P. (R'dgeW'std&W'td)

  Archer, Jeffrey (Louth)

  Eyre, Reginald

  Jessel, Toby

  Atkins, Rt.Hn. Humphrey (Spelthorne)

  Falrgrleve, Russell

  Johnston, Russell (Inverness)

  Awdry, Daniel

  Fenner, Mrs. Peggy

  Jones, Arthur (Daventry)

  Banks, R. G.

  Finsberg, Geoffrey

  Joseph, Rt. Hn. Sir Keith

  Barber, Rt. Hn. Anthony

  Fisher, Sir Nigel

  Kellett-Bowman, Mrs. Elaine

  Belth, A. J.

  Fletcher, Alexander (Edinburgh, N.)

  Kershaw, Anthony

  Bell, Ronald

  Fletcher-Cooke, Charles

  King, Evelyn (Dorset, S.)

  Bennett, Dr. Reginald (Fareham)

  Fookes, Miss Janet

  King, Tom (Bridgwater)

  Benyon, W.

  Fox, Marcus

  Kitson, Sir Timothy

  Berry, Hon. Anthony

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

  Knight, Mrs. Jill

  Bitten, John

  Freud, Clement

  Knox, David

  Boardman, Tom (Leicester, S.)

  Fry, Peter

  Lamont, Norman

  Boscawen, Hon Robert

  Gardiner, George (Relgate&Banstead)

  Lane, David

  Boyson, Dr. Rhodes (Brent, N.)

  Gardner, Edward (S. Fylde)

  Langford-Holt, Sir John

  Braine, Sir Bernard

  Gilmour, Sir John (Fife, E.)

  Lawrence, Ivan

  Bray, Ronald

  Glyn, Dr. Alan

  Lawson, Nigel (Blaby)

  Brittan, Leon

  Gcdber, Rt. Hn. Joseph

  Lewis, Kenneth (Rtland & Stmford)

  Brown, Sir Edward (Bath)

  Goodhew, Victor

  Lloyd, Ian (Havant & Waterloo)

  Bruce-Gardyne, J.

  Goodlad, A.

  Loveridge, John

  Buchanan Smith, Alick

  Gorst, John

  Luce, Richard

  Budgen, Nick

  Gow, I. R. E. (Eastbourne)

  McAdden, Sir Stephen

  Bulmer, Esmond

  Gower, Sir Raymond (Barry)

  MacArthur, Ian

  Burden, F. A.

  Grant, Anthony (Harrow, C.)

  McCrindle, R. A.

  Butler, Adam (Bosworth)

  Gray, Hamish

  Macfariane, Neil

  Carlisle, Mark

  Grieve, Percy

  MacGregor, John

  Carr, Rt. Hn. Robert

  Grimond, Rt. Hn. J.

  McLaren, Martin

  Chataway, R;. Hn. Christopher

  Grist, Ian

  Macmillan, Rt. Hn. M. (Farnham)

  Churchill, W. S.

  Hall, Sir John

  Madel, David

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

  Hall-Davis, A. G. F.

  Marshall, R. M. (Arundel)

  Clark, William (Croydon, S.)

  Hamilton, Michael (Salisbury)

  Marten, Nell

  Clarke, Kenneth (Rushclitfe)

  Hampson, Dr. Keith

  Mather, Carol

  Clegg, Walter

  Hannam,John

  Maude, Angus

  Cockcroft, John

  Hastings, Stephen

  Mawby, Ray

  Cooke, Robert (Bristol, W.)

  Havers, Sir Michael

  Maxwell-Hyslop, R. J.

  Cope,John

  Hawkins, Paul

  Mayhew, P. (Royal T'brldge Wells)

  Cormack, Patrick

  Hayhoe, Barney

  Meyer, Sir Anthony

  Corrie, John

  Henderson, Barry (Dunbartonshire, E.)

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

  Costain, A. P.

  Higgins, Terence

  Mills, Peter

  Crowder, F. P.

  Holland, Philip

  Miscampbell, Norman

  Davies, Rt. Hn. John (Knutsford)

  Hooson, Emlyn

  Mitchell, David (Basingstoke)

  Dean, Paul (Somerset, N.)

  Hordern, Peter

  Moate, Roger

  Deedes, Rt. Hn. W. F.

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

  Money, Ernie

  Dodsworth, Geoffrey

  Howell, Ralph (Norfolk, North)

  Monro, Hector

  Drayson, Burnaby

  Howells, Geraint (Cardigan)

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

  More, Jasper (Ludlow)

  Ridley, Hn. Nicholas

  Taylor, Robert (Croydon, N.W.)

  Morgan, Geraint

  Rifkind, Malcolm

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

  Morgan Giles. Rear-Adm.

  Rippon, Rt. Hn. Geoffrey

  Thorpe, Rt. Hn. Jeremy

  Morris, Michael (Northampton, S.)

  Roberts, Wyn (Conway)

  Townsend, C. D.

  Morrison, Charles (Devizes)

  Rodgers, Sir John (Sevenoaks)

  Trotter, Neville

  Morrison, Peter (City of Chester)

  Ross, Stephen (Isle of Wight)

  Tugendhat, Christopher

  Mudd, David

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

  Tyler, Paul

  Neave, Alrey

  Shaw, Giles (Pudsey)

  van Straubenzee, W. R

  Neubert, Michael

  Shaw, Michael (Scarborough)

  Vaughan, Dr. Gerard

  Newton, Tony (Braintree)

  Shelton, William (L'mb'th.Strealh'm)

  Viggers, Peter

  Onslow, Cranley

  Shersby Michael

  Waddington, David

  Oppenheim, Mrs. Sally

  Silvester, Fred

  Walnwright, Richard (Colne Valley)

  Orr, Capt. L. P. S.

  Sims, Roger

  Wakeham, John

  Page, John (Harrow, W.)

  Sinclair, Sir George

  Walder, David (Clilheroe)

  Pardoe, John

  Skeet, T. H. H.

  Walters, Dennis

  Parkinson, Cecil (Hertfordshire, S.)

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

  Weatherill, Bernard

  Pattie, Geoffrey

  Spence. John

  Wells, John

  Perclval, Ian

  Spicer, Michael (Worcestershire, S.)

  Winstanley, Dr. Michael

  Pink, R. Bonner

  Sproat, lain

  Wood, Rt. Hn. Richard

  Price, David (Eastlelgh)

  Stanbrook, Ivor

  Worsley, Sir Marcus

  Quennell, Miss J. M.

  Stanley, John

  Young, Sir George (Ealing, Acton)

  Raison, Timothy

  Steen, Anthony (L'pool, Wavertree)

  Younger, Hn. George

  Redmond, Robert

  Stewart, Ian (Hitchin)

  Rees, Peter (Dover & Deal)

  Stokes, John

  TELLERS FOR THE AYES

  Renton.Rt. Hn. SirDavid(H't'gd'ns're)

  Stradling Thomas, J.

  Mr. Michael Jopling and

  Rhys Williams, Sir Brandon

  Tapsell, Peter

  Mr. Spencer Le Marchant

  NOES

  Abse, Leo

  Dell, Rt. Hn. Edmund

  Hughes, Robert (Aberdeen, Norlh)

  Allaun, Frank

  Dempsey, James

  Hughes, Roy (Newport)

  Archer, Peter (Warley, West)

  Doig, Peter

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

  Ashton, Joe

  Dormand, J. D.

  Irving, Rt. Hn. Sydney (Dartford)

  Atkins, Ronald (Preston, N.)

  Douglas-Mann, Bruce

  Jackson, Colin

  Atkinson, Norman

  Duffy, A. E. P.

  Janner, Greville

  Bagler, Gordon, A. T.

  Dunn, James A.

  Jay, Rt. Hn. Douglas

  Barnett, Guy (Greenwich)

  Dunnett, Jack

  Jeger, Mrs. Lena

  Barnett, Joel (Heywood & Roylon)

  Dunwoody, Mrs. Gwyneth

  John, Brynmor

  Bates, Alf

  Edelman, Maurice

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

  Benn, Rt. Hn. Anthony Wedgwood

  Edge, Geoff

  Johnson, Walter (Derby, S.)

  Bennett, Andrew F. (Stockport, N.)

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

  Jones, Barry (Flint, E.)

  Bidwell, Sydney

  Ellis, John (Brigg & Scunthorpe)

  Jones, Dan (Burnley)

  Bishop, E. S.

  Ellis, Tom (Wrexham)

  Jones, Gwynoro (Carmarthen)

  Blenkinsop, Arthur

  English, Michael

  Jones, Alec (Rhondda)

  Boardman, H. (Leigh)

  Ennals, David

  Judd, Frank

  Booth, Albert

  Evans, Fred (Caerphilly)

  Kaufman, Gerald

  Boothroyd, Miss Betty

  Evans, 1. L. (Aberdare)

  Kelley, Richard

  Bottomley, Rt. Hn. Arthur

  Ewing, Harry (St'ling.F'klrk&G'm'th)

  Kerr, Russell

  Boyden, James (Bishop Auckland)

  Faulds, Andrew

  Kilroy-Silk, Robert

  Bradley, Tom

  Fernyhough. Rt. Hn. E

  Kinnock, Neil

  Broughton, Sir Alfred

  Fitch, Alan (Wlgan)

  Lamble, David

  Brown, Hugh D. (Glasgow, Provan)

  Flannery, Martin

  Lamborn, Harry

  Buchan, Nornvin

  Fletcher, Ted (Darlington)

  Latham, Arthur(Cityo(W'minsterP'toi-)

  Buchanan, Richaif (G'gow.Springbrn)

  Foot, Rt. Hn. Michael

  Lawson, George (Motherwell&Wlshaw)

  butler,Mrs.Joyci'H gev.WoodGreen)

  Ford, Ben

  Leadbltter, Ted

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

  Forrester, John

  Lestor, Miss Joan (Eton & Slough)

  Campbell, Ian

  Fowler, Gerry (The Wrekln)

  Lever, Rt. Hn. Harold

  Cant, R. B.

  Freeson, Reginald

  Lewis, Arthur (Newham, N.)

  Carmlchael, Neil

  Garrett, John (Norwich, S.)

  Lewis, Ron (Carlisle)

  Carter, Ray

  Garrett, W. E. (Wallsend)

  Loughlin, Charles

  Carter-Jones, Lewis

  George, B. T.

  Lyon, Alexander W. (York)

  Castle, Rt. Hn. Barbara

  Gilbert, Dr. John

  Lyons, Edward (Bradford, W.)

  Clemitson, Ivor

  Ginsburg, David

  McCartney, Hugh

  Cocks, Michael

  Gourlay, Harry

  McElhone, Frank

  Cohen, Stanley

  Graham, Ted

  MacFarquhar. Roderick

  Colquhoun, Mrs. M. N.

  Grant, George (Morpeth)

  McGuire, Michael

  Concannon, J. D.

  Grant, John (Islington, C.)

  Mackenzie, Gregor

  Conlan, Bernard

  Griffiths, Eddie (Sheffield, Brighlrfde)

  Maclennan, Robert

  Cook, Robert F. (Edinburgh, C.)

  Hamilton, James (Bothwell)

  McMillan, Tom (Glasgow, C.)

  Cox, Thomas

  Hamilton, William (Fife, C.)

  Magee, Bryan

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

  Hamling, William

  Mahon, Simon

  Crosland, Rt. Hn. Anthony

  Hardy, Peter

  Mallalieu, J. P. W.

  Cryer, G. R.

  Harper, Joseph

  Marks, Kenneth

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

  Harrison, Walter (Wakefield)

  Marquand, David

  Cunningham, D r. John A. (Whiteh'v'n)

  Hart, Rt. Hn. Judith

  Marshall, Dr. Edmund (Goole)

  Davidson, Arthur

  Hattersley, Roy

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

  Davies, Bryan (Enfield, N.)

  Hatton, Frank

  Meacher, Michael

  Davies, Denzll (Llanelli)

  Heffer, Eric S.

  Melllsh, Rt. Hn. Robert

  Davies, Ifor (Gower)

  Hooley, Frank

  Mikardo, Ian

  Davis, Clinton (Hackney, C.)

  Horam, John

  Millan, Bruce

  Deakins, Eric

  Howell, Denis (B'ham, Small Heath)

  Miller, Dr. M. S. (E. Kilbride)

  Dean, Joseph (Leeds, W.)

  Huckfleld, Leslie

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

  de Freitas, Rt. Hn. Sir Geoffrey

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Molloy, William

  Delargy, H. J.

  Hughes, Mark (Durham)

  Morris, Charles R. (Openshaw)

  1346

  1347

  Morris, Rt. Hn. John (Aberavon)

  Rose, Paul B.

  Tinn, James

  Moyle, Roland

  Ross, Rt. Hn. William (Kilmarnock)

  Torney, Tom

  Mulley, Rt. Hn. Frederick

  Rowlands, Edward

  Tuck, Raphael

  Murray, Ronald King

  Sandelson, Neville

  Varley, Rt. Hn. Eric G.

  Newens, Stanley (Harlow)

  Sedgemore, Bryan

  Wainwright, Edwin (Dearne Valley)

  Oakes, Gordon

  Selby, Harry

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

  Ogden, Eric

  Shaw, Arnold (Redbrldge, llford, S.)

  Walker, Harold (Doncaster)

  O'Malley, Brian

  Sheldon, Robert (Ashton-under-Lyne)

  Walker, Terry (Kingswood)

  Orbach, Maurice

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

  Watkins, David

  Ovenden John

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

  Weitzman, David

  Owen, Dr. David

  Silkin,Rt.Hn.S.C.(S'hwark,Dulwlch)

  Wellbeloved, James

  Padley, Walter

  Sillars, James

  White, James

  Palmer, Arthur

  Silverman, Julius

  Whitehead, Phillip

  Park, George (Coventry, N.E.)

  Skinner. Dennis

  Whitlock, William

  Parker, John (Dagenham)

  Smith, John (Lanarkshire, N.)

  Wigley, Dafydd (Caernarvon)

  Parry, Robert

  Snape, P. C.

  Willey, Rt. Hn. Frederick

  Pavitt, Laurie

  Spearing, Nigel

  Williams, Alan (Swansea, W.)

  Peart, Rt. Hn. Fred

  Spriggs, Leslie

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

  Phipps, Dr. Colin

  Stallard, A. W.

  Williams, W. T. (Warrington)

  Price, Christopher (Lewisham, W.)

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

  Wilson, William (Coventry. S.E.)

  Price, William (Rugby)

  Stoddart, David (Swindon)

  Wise, Mrs. Audrey

  Radice, Giles

  Stonehouse, Rt. Hn. John

  Woodall, Alec

  Richardson, Miss Jo

  Strang, Gavin

  Woof, Robert

  Roberts, Albert (Normanton)

  Strauss, Rt. Hn. G. R.

  Wrigglesworth, Ian

  Roberts, Gwilym (Cannock)

  Summerskill, Hn. Dr. Shirley

  Young, David (Bolton, E.)

  Robertson, John (Paisley)

  Swain, Thomas

  Roderick, Caerwyn E.

  Thomas, D. E. (Merioneth)

  TELLERS FOR THE NOES:

  Rodgers, George (Chorley)

  Thomas, Jeffrey (Abertlllery)

  Mr. Ernest G. Perry and

  Rodgers, William (Teesside, St'ckton)

  Tierney, Sydney

  Mr. Donald Coleman.

  Rooker, J. W.

  Question accordingly negatived.
  It being Ten o'clock, The CHAIRMAN left the Chair to report progress and ask leave to sit again.
  Committee report progress.

BUSINESS OF THE HOUSE
Ordered,
That the Motion relating to Ways and Means may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Coleman.]

FINANCE BILL
Again considered in Committee.
Mr. Maurice Macmillan: I beg to move Amendment No. 64, in page 11, line 10, at end add—
' (3) Where a person becomes liable to tax as a result of this section or of section 79(4) or 79(7) of the Finance Act 1972 as amended by Schedule 8 to the Finance Act 1973 and this section his employer shall be entitled to deduct for the purpose of calculating his liability to corporation tax a sum equal to the sum chargeable to tax in the hands of that person '.
In moving the amendment I am merely asking the Chancellor of the Exchequer to practise what he preached in his Budget speech and on the Second Reading of the Finance Bill when he said:
"We have no antipathy towards share schemes as such.… All we say is that the employees of such companies should not get privileged tax treatment because they happen to receive their remuneration in one form and not another. That goes for the managing director and for the shop floor worker.… Any respectable share incentive scheme should be able to stand on its own feet without relying on crutches in the shape of tax privileges."—[OFFICIAL REPORT, 9th May 1974; Vol. 873, c. 610.]
In answering our earlier debate the Financial Secretary repeated that he had no intention of attacking incentive schemes or share purchase schemes; but that is exactly what the Bill as it is now drafted does. The Chancellor missed the point, as the Financial Secretary missed the point, that as the law now stands the companies are at a disadvantage by operating a scheme of this sort.
The Temporary Chairman (Mr. Mur-ton): Order. May I ask those hon. Members who do not wish to listen to the right hon. Gentleman to withdraw quietly?
Mr. Macmillan: This is a highly technical point, but that is no excuse for the Financial Secretary to miss it. A stock option is taxable at full income rates to the individual and yet, unlike other forms of remuneration which are taxable at full income rates, there is no corresponding deduction in computing the profit for tax purposes of the company concerned. That is in marked contrast, for example, to the United States, where legislation specifically provides that if the employee's profit on the exercise of an option is taxed as regular income, that amount is deductible from the firm's profit for the corresponding tax year. If the Financial Secretary is so keen on equitable treatment of share incentive and share purchase schemes he should accept the amendment.
Dr. Gilbert: As the right hon. Member for Farnham (Mr. Macmillan) so clearly said, the purpose of the amendment is that where there is an increase in the value of shares taxable in the hands of an employee the company shall be allowed to deduct an equal amount in computing its taxable profits. The right hon. Gentleman advanced that proposition in the name of equity, on the basis that a distinct cost to the company was involved. That is where the Government take immediate issue with him.
In computing its profits, a company can deduct those expenses that are wholly and exclusively laid out for the purposes of trade. The sums referred to in the amendment are neither expenses nor sums incurred by the employing company. There is no direct connection with expenditure by the company, and on the face of it there is no reason why the company should be entitled to deduct the growth in the market value of its shares as an allowable expense. There could hardly be a more arbitrary way of trying to assess profits.
The right hon. Gentleman prays in aid United States legislation. But we have made it clear that, in our opposition to any tax benefits for such schemes, we do not accept United States legislation as a model.
The gain to the employee arises in all these cases because the shares have

1351
appreciated over a period. It would be artificial to regard such sums as an outlay by the employer.
Mr. Peter Rees: Does not the hon. Gentleman agree that share option schemes may result in the dilution of the capital of the company concerned, so that in a broad commercial sense it suffers a corresponding disadvantage? With his wealth of experience of Canadian law, for instance, does not the hon. Gentleman feel that a corresponding advantage should be conceded to the company?
Dr. Gilbert: I accept what the hon. and learned Gentleman says about dilution of equity. There might be a modest cost there, but there would be no means of quantifying it in terms of the amendment. That is why I invite my hon. Friends to resist the amendment.
A mendment negatived.
Question proposed, That the clause stand part of the Bill.
Mr. Maurice Macmillan: I ask the
Committee to reject the clause, largely for the reasons given in the debate on Amendment No. 29, on which we divided the Committee. The Opposition do not think that the clause should apply to selective schemes, whether stock option schemes for management and executives or share incentive schemes for employees generally, any more than it should apply to the all-employee scheme, the own-as-you-earn plan that we have so recently debated.
I should like to draw the attention of the Financial Secretary to an anomaly. Under subsection (l)(a) and (b), the benefit obtained by an individual under an approved share option or share incentive scheme will, as of 27th March this year, be taxable as part of the emoluments of the individual. An anomaly arises in respect of the different treatment of share option schemes and share incentive schemes that are already in operation. Clause 13(1)(6) excludes certain portions of Section 79 of the Finance Act 1972 except when the acquisition was made before that date. No such concession has been given under Clause 13(l)(a) if the option is exercised after 27th March 1974.
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I do not believe that it can be the intention to produce such an anomaly. If the intention is to tax as income any benefit derived by an individual as a result of his employment, then those individuals who have share options under an approved scheme will be brought within the scope of Clause 13 whereas those who have rights under a share incentive scheme will be excluded. I make that point for the consideration of the Financial Secretary in case we do not succeed in defeating the whole clause.
My main argument is that share incentive schemes for workers and management are desirable in themselves. Therefore, the arguments which applied to the previous amendment apply also to the provisions of the clause as a whole. I must point out that because such schemes are selective and need not apply to all employees they do not necessarily apply to top management only. There are a number of schemes which have been frustrated by stages 1, 2 and 3 and which will be permanently frustrated by the clause. Many people regard such schemes as extremely valuable for some of their shop-floor employees.
I have had representations from a fairly wide band of opinion within industry. It is considered that what the Government are doing by means of the clause is damaging to industry's relationships with its workpeople. It is now having to go back on schemes which have been discussed with the unions and others concerned and which have received full approval.
We should not underrate the importance of that part of the clause which relates to management. British management in productive industry is probably paid less and taxed more than in any other industrialised country in the world. When the Bill becomes an Act that total situation will be exacerbated. It is hard enough to get good people to take responsibility considering the rewards that they will get. It is hard enough for those who are working in manufacturing industry to acquire any capital in the course of a long working life. It is hard enough for them to enjoy any benefit from any savings that they might make owing to the high marginal rates of tax on investment income and, indeed, on high earnings.

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In inserting this clause the Chancellor of the Exchequer is denying the proposition that able executives should be encouraged, as they are in the United States and in Europe, to build up capital during their working lives so that they can, if they wish, change their careers in the 30s and 40s and perhaps—dare I mention it to the right hon. and hon. Members?—go into business in a small way on their own account.
The arguments that have been put forward for many years by those of us who have been working together in the Wider Share Ownership Movement have been both economic and, it might almost be said, philosophical.
10.15 p.m.
Successive Governments, mainly Labour Governments, have created a situation in which the reward for the dealer is better than that for the earner and creator of real wealth. The Opposition argue that we damage our society by failing to encourage those who have the talent and ability not merely to earn a lot for themselves in high income management but to create wealth in the wa> which is essential if our mixed economy is to survive—to create it by savings, by starting small businesses and building them up and passing them on eventually into the larger companies on which we depend.
We impose a burden by our tax system, a burden to which the Chancellor of the Exchequer is adding by this clause. To those who have the capacity to create real wealth in the forms of machines, investment and companies, we are giving an incentive and an encouragement to sell out because that is the only way in which they can get a better reward. We are doing this instead of encouraging them to build up their business, to continue to create wealth—for themselves, yes, but for the community as well.
Of all the damage that the Bill does to talent and ability and to the creation of wealth, this clause is perhaps the most serious of all. It will help to prevent the transformation of the earner into the owner, the manager into the entrepreneur. Yet it is on ability to make such a transformation that a capitalist free enterprise society and a mixed economy must ultimately depend. We
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need our most able people to start new concerns which add to the real wealth of the country. We must encourage those who do so to retain their investments rather than provide them with incentives to get out.
This clause is, therefore, disastrous in a political as well as an economic sense to a mixed economy. I do not believe that all hon. Members opposite want to damage the creative element in private enterprise to that extent. The only point of damaging it so much is to be able thereafter to criticise private enterprise for failing to deliver the goods when, in fact, the Government's own measures are causing that failure.
Stock option schemes, share incentive schemes, share ownership through own-as-you-earn, schemes giving management and employees generally a stake in the ownership of their firms, or giving people the capacity to build up capital to start out on their own, are all useful first steps in spreading wealth in the way we Conservatives want to spread it—into the hands of the people and not into the hands of the Government.
Mr. Pardoe: I endorse almost every word that the right hon. Member for Farnham (Mr. Macmillan) has spoken in support of his view this evening, both on the amendment and now on the clause. The Finance Secretary in his replies to the amendment did not answer any of the major, though some of the incidental, points in that short debate.
One of the Financial Secretary's comments struck me as extraordinary. He said that the Government had absolutely no intention of damaging investment. He said that the Government had done several things to encourage savings. It would be nice to hear from him this evening what those several things are.
I suppose that one could say that increasing income tax was an encouragement to saving, in that if one put money into a pension fund one did not have to pay so much tax, and so I suppose the higher the rate of tax the more encouragement there is to save. But I do not think that that is what the Financial Secretary was thinking of. Nevertheless, it is the only way in which the Finance Bill might encourage anyone to put his money into anything.

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Why not let us have the answer on a personal basis? We know that the Secretary of State for Employment believes that he is overpaid, so presumably plenty of that money is available for saving. May we have a list of all those things into which members of the Government have put their money since they got their so-called excessive salaries? May we be told where the Financial Secretary has been putting his money in the past few weeks since he came into his new job? I hope that he will give us a long list of these things and a list of all the savings that have been encouraged by the Budget.
Far from that, all the Finance Bill seems to have done in the cause of savings is to create the situation in which the man who more than anyone else in the past 10 years has proved that he knows how best to use money to make money, Mr. Jim Slater, would advise people to put their money into the piggy bank. That does not seem to indicate that the Government have been able to encourage saving, or to encourage the motivation that leads to it.
Clause 13 sweeps away one of the few encouragements to saving that any Government have actually introduced in the past few years. I must immediately make it clear in opposing Clause 13 that I do not want to go back to the previous scheme. There is a new clause that makes certain proposals for replacing Clause 13. The 1972 Finance Act scheme was far too narrow, and we said so at the time. Indeed, it positively encouraged those accusations of class and privilege bias that the Labour Party, then in Opposition, was only too keen to pour on the head of the then Conservative Government. In 1973 the Conservative Government extended the scheme somewhat, and it certainly became better. But in essence the most important aspect of any such scheme is that it must be equally available to all employees on an equal basis. The new clause would go some way to meeting that.
In reply to the amendment, the Financial Secretary answered the observation about companies that had spent the past two years building up such schemes and that would now find that all their effort had been wasted. The effort put into devising new pension schemes to
1356
some extent can be said to have been wasted for the same reasons.
The hon. Gentleman excused the Government's actions on the ground that in opposition the Labour Party fully warned companies that it would reverse this legislation. Good heavens!If companies had to take account of everything that Oppositions said they opposed when Governments proposed nobody would ever take any notice of any legislation.
In our bonkers adversary system of Government anything that the Government are for the Opposition are always against and vice versa—not because it is good or bad but simply because the Government propose and the Opposition oppose. This is one of the reasons why 6 million people voted Liberal at the last General Election and why double that number will vote for us next time. The Minister gave no answer to the point which I made and which the right hon. Member for Farnham supported from the Opposition Front Bench about popular ownership versus public ownership.
Is the Labour Party in favour of spreading wealth? Is it in favour of private ownership, or does it wish to take all private ownership away and put it in the hands of the State? I and my hon. Friends believe that private ownership is a good thing from almost every point of view. What the Government are endeavouring to do is to build a nation of wage slaves.
Mr. Peter Rees: I have been privileged to take part in debates in Committee on the tax system dealing with share option schemes and share incentive schemes since 1972. The case against them has almost uniformly been put by the hon. Member who now occupies the position of Financial Secretary to the Treasury. It has been noticeable that there have been few other contributions from the Labour benches. It has struck me, as I have listened to the hon. Gentleman, that there is an unbridgeable gulf of incomprehension between these two parts of the Committee.
The hon. Gentleman has always put the case against share option and share incentive schemes on two grounds. The first is that if all cannot participate, none should. In conformity with the spirit of the great resolution we passed before the

1357
recess, I must declare a lack of interest in that I am a professional man and do not, and am unlikely to, benefit from a share option or share incentive scheme. None the less I am entirely in favour of them and I cannot follow the rather mean and squalid approach of the hon. Gentleman.
Secondly, the hon. Gentleman has made the point on previous occasions and tonight that there is no case for putting employees who may benefit from a share option or share incentive scheme into a privileged position. If he and the Committee will allow me to say so, it is at this point that I often wonder whether he has truly grasped the brief which no doubt the devoted gentlemen in the Official Box have placed into his eager hands before the debate.
I hope the Committee will forgive me if I go into a little detail on this point. I know that my hon. Friends grasp the point and that it is entirely clear to them. But the hon. Gentleman who holds this highly important office concerned with our tax affairs seems to be unaware of what, on a previous occasion, his right hon. Friend the Member for Cardiff, Soulh-East (Mr. Callaghan) did to these schemes. The truth is that before the Finance Act 1967 an employee who was privileged to participate was taxed when he was granted his option on the value of the option at that point of time. But he paid no tax when he exercised his option even though, as one would expect, the shares had gone up. That would strike me, and, I hope, my hon. Friends, as perfectly fair, because, although he may have contributed to the rise in the value of the shares that rise in value did not constitute, in any true sense, remuneration for his services.
What the hon. Gentleman's right hon. Friend did, and what he is attempting to do now, was to ensure that an employee would not be taxed when he participated in the scheme but would pay capital gains tax and income tax at the basic and higher rate on the difference between the value of the shares at the date he was granted the option and the value of the shares at the date he exercised his option —an entirely penal provision.
It puts him in a far worse position than an employee who might, at least prior to this Finance Bill, have borrowed money and invested it in his own company. The
1358
combination of these two measures makes it virtually certain that an employee without any capital resources will be unable to acquire a stake in the company for which he works. One asks oneself: why is it that hon. and right hon. Gentlemen opposite have this obsessive concern with share option and share incentive schemes? Are they totally opposed to any form of capitalism, any form of capital stake acquired by employees? Are they afraid that employees might become too closely identified with the fortunes of the companies for which they work? Do they in their heart of hearts want to see all employees become the employees of nationalised industry? Is the shadow of that earnest, eloquent Marxist the right hon. Member for Bristol, South-East (Mr. Benn) to be cast over these debates, too? Or are hon. and right hon. Gentlemen opposite frightened that if employees become too closely identified with the capital structure and fortunes of the companies for which they work the influence of the trade unions in them may be undermined?
10.30 p.m.
I was not over-enamoured of the measures introduced in 1972 and 1973. The rules were too complex and too strictly drawn, and more generosity could be injected into them. But they were a modest start. That modest start is to be swept away. I am sure that the Committee and the country will have noticed the arrogant reply of the Financial Secretary to an intervention of mine when I pointed out that many companies have invested considerable amounts of money and thought in starting these schemes, and now they are to be entirely stultified by the ill-thought-out, obsessional measure we are debating.
I hope that my right hon. and hon. Friends and members of the Liberal Party will agree that this clause is based on petty doctrinal spite, and I hope that the country, and particularly employees of companies which have had the forethought to introduce schemes in the past two or three years, will notice it. I shall vote against the clause with absolute enthusiasm.
Mr. John Nott: I hope that the Financial Secretary's reply on this clause will be more reasonable and conciliatory than his reply on the last amendment. If it is not, I intend to continue

1359
debating this clause for a very considerable time.
I have heard the Financial Secretary speak on the subject of share options over the last three years, and I accept that he holds a different view from ours. What is not acceptable is the kind of arrogance which the hon. Gentleman displayed when answering the debate on the last amendment. There is no excuse for that kind of arrogance on a matter which is of deep concern to both sides of the Committee.
My right hon. Friend the Member for Farnham (Mr. Macmillan) made an admirable speech. This country is in competition with every other country, particularly with the United States. That may be a very boring statement to the Financial Secretary. He may regard every statement made from this side of the Committee as boring. By the way in which he raises his eyes to the roof he displays his arrogance once again. I have had to reply to debates from the Government Front Bench, and one thing which I learned, and which the hon. Gentleman still has to learn, is that if one wants to curtail debate one had better accept that other people may occasionally have different political views from one's own.
We no longer have a capitalist society. The people who run the big companies of this country are not capitalists. They are managers. As such they are entitled to ask for the same consideration from the Government, of whatever political complexion, as managers receive in France, Germany or the United States.
If the Financial Secretary insists on supporting the clause, as no doubt he will do, I make only one small request of him. In answering the debate surely he will recognise that there is a genuine and sincerely-held point of view opposite to his own. If he shows that, I shall be happy to go through the Division Lobby and vote against the clause, but if he shows the kind of arrogance that he showed in answering the debate on the previous amendment, I shall keep the debate going until 4 o'clock in the morning by making a five-hour speech.
Mr. Tom Boardman: I ask the Financial Secretary not to adopt the arrogant approach he adopted on previous occasions by suggesting that these schemes were for the benefit of
1360
wealthy company directors and high executives, but to direct his mind to the schemes that are to be condemned by the clause, which, as my right hon. Friend the Member for Farnham (Mr. Macmillan) said, is one of the most damaging clauses in the Bill.
To turn from the general to the particular, I will give a specific example. In a company of which I am a director a scheme was devised, in which I cannot participate, which made available to all employees of the company, of whatever salary or income level, a share incentive scheme of the own-as-you-earn type. That scheme will fall under the axe of the clause. The scheme was put to and approved by the shareholders of the company without dissent. It was welcomed by employees on the factory floor, lorry drivers and the like, who wished to have the opportunity to participate in the company in which they worked and had confidence.
Such a scheme should be welcomed by a Government which wanted to encourage investment and participation. Yet the clause condemns it. How can the Financial Secretary justify that position if he really wishes to see worker participation and investment, on which the economy of the country depends? The clause operates in completely the reverse direction.
Dr. Gilbert: It would be idle to deny that there is a difference of opinion between the two sides of the Committee on this clause, as will be clear to anyone who has sat through the succession of debates on stock options ever since the 1972 Finance Bill.
I will deal first with a relatively minor matter before coming to the general point of principle. I concede immediately to the right hon. Member for Farnham (Mr. Macmillan) that he is right in saying that there is a minor anomaly under Clause 13 of which we were aware. The profit made by someone who, under a share incentive scheme, already owned his shares before Budget day will continue to attract capital gains tax.
The right hon. Gentleman believes passionately in the value of schemes of this sort. He adduced in support of his claim the argument that great segments of industry were in favour of introducing these schemes for all the reasons which

1361
are familiar to both sides of the Committee. He did not observe, as is also the case, that there is division of opinion in industry on these matters. There was division in 1972, as I am sure is known to him. There is still division of opinion in industry as to the value of schemes of this sort.
I recognise the right hon. Gentleman's good faith and the work he has done, by his lights, in the Wider Share Ownership Council. But if, as he says, it is necessary for the most able people in this country to get a bigger return—and by "the most able" he talks largely of those fortunate enough to be at executive level in their companies—to do their job properly, surely it is up to the companies to pay it to them out of their profit and loss accounts and not to seek to get a subsidy for the net return to their employees such as would be given to them by the main body of taxpayers out of schemes of this sort.
Mr. Peter Rees: Would the hon. Gentleman be kind enough to explain what subsidy companies will be getting from schemes of this kind?
Dr. Gilbert: Certainly. I shall be happy to explain. I thought the hon. and learned Gentleman was well acquainted with these matters. If a company has to pay a much larger amount of money, as suggested by the right hon. Gentleman, in order to retain the services of its employees or to keep them keen, as it were, to do their jobs more effectively, it has to pay that out of its profits.
Mr. Peter Rees: Before tax.
Dr. Gilbert: Whichever it is, we are talking about a net return, which is really what is at stake here—the additional net return to an employee. If it is paid by way of income to him, he will have to pay up to his marginal rate of tax on the full amount of that additional emolument. That additional amount of tax will be available to reduce the tax burdens of everyone else. It is simple. The hon. and learned Gentleman is being disingenuous if he does not recognise that. It is obvious, because if we do it the other way, through share incentive schemes whereby the net gain to the employee is treated for tax purposes only
1362
by the capital gains tax route, he will get the same amount of net gain for a far smaller tax burden.
This point was raised, though indirectly, by the hon. Member for Norfolk, South (Mr. MacGregor) in the most reasoned contribution we have had to the debate. It is clear that the same amount of net advantage would be given to an individual employee for a much smaller contribution to the general body of tax which is collected.
Mr. Nott: I am sorry to trouble the hon. Gentleman but, as I say, we have suffered from him for too long to allow him to get away with this. The fact of the matter is that a share option scheme is nothing more nor less than the shareholders of a company agreeing, in an ordinary general meeting, to give up part of their shareholding to the managers of the company in which they have an investment, and no subsidy is involved whatever. All that is happening is that the shareholders of the company, if the shares rise, are forgoing capital gains tax on their part and are transferring that capital gains liability to the managers of the firm in which they have invested. No subsidy is involved whatever.
Dr. Gilbert: I am sorry to take issue with the hon. Gentleman, who has considerable knowledge of these matters. But the objective of these schemes is quite clearly to get a given net return to an employee at the cheapest possible cost to the company. That has been pointed out by the hon. Member for Norfolk, South. That is what is involved. The net effect is that an employee, usually a senior executive employee, will get an equivalent net return at a much lower tax cost. If it is not that, why are hon. Members opposite making such an objection?
Mr. MacGregor: The hon. Gentleman was kind enough to refer to my remarks but he has misinterpreted what I said. The point I made was that this had a neutral effect on the profit and loss account. That is a different matter from subsidy. From the way the hon. Gentleman interprets "subsidy", it would seem that if tax were reduced by any small amount it could be interpreted as a reduction of a subsidy. It is a funny play with words.
10.45 p.m.
Dr. Gilbert: Not at all. The hon. Gentleman was quite clear in what he said. He said that a contribution made to an employee in this way would have no effect on the profit and loss account in the short run. That is why this clause touches such a raw nerve among hon. Gentlemen opposite. If it were not for the fact that tax incentives were so important in schemes of this kind, the Opposition would not be putting up such a resistance to the clause—
Mr. Tom Boardman: The Financial Secretary is saying that there is a subsidy to the company. However, the subsidy comes from the shareholders. There is further taxation paid by the emoluments of the employees coming out of the shareholders instead of coming out of profits which would otherwise be subject to tax.
Dr. Gilbert: I made it clear in reply to an earlier intervention by the hon. and learned Member for Dover and Deal (Mr. Rees) that there was an element of cost to a company in the degree of share dilution involved in any scheme. I said also that it was a minor element in the cost of such schemes. It is perfectly clear that what is really attractive about these schemes is the capital gains tax treatment of the gains accruing to senior executives if the shares go up in price.
I am surprised that the Opposition make quite so much heavy water about these schemes, because not only are they, by and large, in suspense at the moment, but the fact is that the Opposition have been very keen to point out—and presumably this was the reason for stock option and share incentive schemes at all, regardless of the tax treatment that they are given— how the maintenance of a thread between the effort of an employee and the price of the shares of the company in which he works is a very important element in keeping his loyalty to the company, in giving him a sense of participation in the affairs of the company, and also in giving him a greater incentive to work harder and more productively in the interests of that company.
Mr. Peter Hordern: The hon. Gentleman should tell the Committee the purpose of the clause. It has been demonstrated by my right hon. and hon. Friends that the cost of the contribution to stock option
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schemes is borne entirely by the shareholders. There is no cost to the taxpayer at all. Furthermore, there must be some reason for the clause. Under present arrangements, there is some revenue to be derived in capital gains tax. Under Clause 13 there will be no revenue because there will be no more stock option schemes. What is the purpose of the clause?
Mr. Nott: Political spite.
Dr. Gilbert: The point is that if greater rewards are necessary in order to keep keen employees in this country, those greater rewards must come in the salaries paid to them. On those salaries there will be income tax paid up to the marginal rate of each employee, and that is where additional tax will come to the Exchequer.
It is a little surprising to see the Opposition so enthusiastic still in supporting a principle that the efforts of a senior employee can be closely correlated with movements in the price of the stock in his company. When one sees what has happened to the price of shares on the London Stock Exchange over the last two years, I should have thought that that amounted to a serious slander on the main body of senior British management. As will be well known to Opposition Members, since early 1972 the price of shares on the Stock Exchange has fallen by a virtually unprecedented amount, the vast proportion of that fall having taken place while they were still in office. Taking account also of the fall in the value of money over the same period, the fall in the real value of shares on the Stock Exchange has, I believe, been rather greater than that which occurred between 1929 and 1931.
Anyone, therefore, who suggests—it follows immediately from the proposals put forward by hon. Members of the Opposition—that that fall in the value of shares is due to a sudden excess of sloth or incompetence on the part of senior management is making a proposition so implausible that no one would support it. It is a preposterous suggestion. Surely it follows that the converse is equally true. There is no connection between the movement of the price of shares of a company in which an individual is employed and the efforts that an employee puts into his work for

1365
that company. We suggest that the correlation is totally spurious and that the reason why the Opposition are getting so worked up about the clause is that the very tax privileges that the clause seeks to take away are particularly dear to their hearts.
This is a privilege which we on the Government side of the House have repeatedly made clear that we find unacceptable. I invite my right hon. and hon. Friends to support the clause.
Mr. Nolt: We are concerned not so much with general tax privileges granted to senior management but with the fact that the clause also covers those wage-earners in companies who, until the clause was published, were entitled to receive a benefit up to a limit of £1,500. The whole purpose of the legislation which the Conservative Government brought forward was to enable ordinary people working in British industry to participate in some small way, under the Workers Share Incentive Scheme, in the business in which they worked.
I quite understand that the hon. Gentleman does not agree that the man working on the shop floor in British industry should participate in ownership. But it is no use the hon. Gentleman answering the debate by implying that share option schemes are relevant only to managers, because they are not. We introduced the Workers Share Incentive Scheme as a genuine attempt to try to make ordinary people in British industry feel that they had an opportunity to participate in the firm in which they worked. The maximum benefit that they could have obtained was £1,500. Because of an ideological obsession on the part of the hon. Gentleman and some of his hon. Friends—I do not believe it can be many of them—against the word "options", he is seeking now to deny
the working man in industry an opportunity to obtain a share of his own firm. This is very shabby and cheap. The hon. Gentleman should be ashamed of what his party is doing.
Mr. Maurice Macmillan: I heartily support my hon. Friend the Member for St. Ives (Mr. Nott). If he was making heavy water of it, that is probably because the Financial Secretary generated considerable steam.
The Financial Secretary is wrong. There is no effect on the profit and loss account in the short term of the firm which would have paid capital gains tax, but in the longer term there is a transfer of ownership from the existing shareholders who would have paid capital gains tax on their shares to the management, who also should pay capital gains tax, as we provided, but not income tax, as the clause provides.
The hon. Gentleman talked a great deal about shares quoted on the Stock Exchange. I hope that he will remember his words when we discuss the new clause about capital gains being expressed in real and not just inflationary terms.
The clause will be destructive, not just for the employees of large, quoted companies, but for the greater number of employees of those smaller firms which offer participation in ownership and which in many cases retain their good senior management through such participation. The Financial Secretary should not lead such a blinkered life when dealing with matters like this affecting the realities of the shop floor and management—in fact, the whole of our industry.
Question put That the clause stand part of the Bill: —
The Committee divided: Ayes 239, Noes 202.

Division No. 35.]

AYES

(10.57 p.m.

Abse, Leo

Blenkinsop, Arthur

Carter, Ray

Allaun, Frank

Boardman, H. (Leigh)

Carter-Jones, Lewis

Archer, Peter (Warley, West)

Booth, Albert

Castle, Rt. Hn. Barbara

Ashton, Joe

Boothroyd, Miss Betty

Clemitson, Ivor

Atkins, Ronald (Preston, N.)

Bottomley, Rt. Hn. Arthur

Cocks, Michael

Atkinson, Norman

Boyden, James (Bishop Auckland)

Cohen, Stanley

Bagler, Gordon, A. T.

Bradley, Tom

Coleman, Donald

Barnett, Guy (Greenwich)

Brown, Hugh D. (Glasgow, Provan)

Colquhoun, Mrs. M. N.

Barnett, Joel (Heywood & Royton)

Buchan, Norman

Concannon, J. 0.

Bates, Alf

Buchanan, Richard(G'gow,Springbrn)

Conlan, Bernard

Benn, Rt. Hn. Anthony Wedgwood

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

Cook, Robert F. (Edinburgh, C.)

Bennett, Andrew F. (Stockport, N.)

Campbell, Ian

Cox, Thomas

Bidwell, Sydney

Cant, R. B.

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

Bishop, E. S.

Carmichael, Neil

Crosland, Rt. Hn. Anthony

Cryer, G. R.

Janner, Greville

Price, Christopher (Lewlsham, W.)

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

Jay, Rt. Hn. Douglas

Price, William (Rugby)

Cunningham,Dr. JohnA. (Whiteh'v'n)

Jeger, Mrs. Lena

Radice, Giles

Davidson, Arthur

John, Brynmor

Richardson, Miss Jo

Davies, Bryan (Enfield, N.)

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

Roberts, Albert (Normanton)

Davies, Denzil (Llanelli)

Johnson, Walter (Derby, S.)

Roberts, Gwilym (Cannock)

Davies, lfor (Gower)

Jones, Barry (Flint, E.)

Roderick, Caerwyn E.

Davis, Clinton (Hackney, C.)

Jones, Dan (Burnley)

Rodgers, George (Chorley)

Deakins, Eric

Jones, Gwynoro (Carmarthen)

Rodgers, William (Teesside, St'ckton)

Dean, Joseph (Leeds, W.)

Jones, Alec (Rhondda)

Rooker, J. W.

Delargy, Hugh

Judd, Frank

Rose, Paul B.

Dell, Rt. Hn. Edmund

Kaufman, Gerald

Ross, Rt. Hn. William (Kilmarnock)

Dempsey, James

Kelley, Richard

Rowlands, Edward

Dolg, Peter

Kerr, Russell

Sandelson, Neville

Dormand, J. D.

Kilroy-Silk, Robert

Sedgemore, Bryan

Douglas-Mann, Bruce

Kinnock, Neil

Selby, Harry

Duffy, A. E. P.

Lamble, David

Shaw, Arnold (Redbridge, llford, S.)

Dunnett, Jack

Lamborn, Harry

Sheldon, Robert (Ashton-under-Lyne)

Dunwoody, Mrs. Gwyneth

Latham, Arthur(CityofW'minsterP'ton)

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

Edelman, Maurice

Leadbitter, Ted

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

Edge, Geoff

Lestor, Miss Joan (Eton & Slough)

Silkln,Rt.Hn.S.C.(S'hwark,Dulwich)

Ellis, John (Brigg & Scunthorpe)

Lever, Rt. Hn. Harold

Sillars, James

Ellis, Tom (Wrexham)

Lewis, Arthur (Newham, N.)

Silverman, Julius

English, Michael

Lewis, Ron (Carlisle)

SKinner, Dennis

Ennals, David

Loughlin, Charles

Smith John (Lanarkshire, N.)

Evans, Fred (Caerphilly)

Lyon, Alexander W. (York)

Snape, Peter

Evans, loan (Aberdare)

Lyons, Edward (Bradford, W.)

Spearing, Nigel

Ewing, Harry (St'ling,F'kirk&G'm'th)

McCartney, Hugh

Spriggs, Leslie

Faulds, Andrew

McElhone, Frank

Stallard, A. W.

Fernyhough, Rt. Hn. E.

MacFarquhar. Roderick

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

Fitch, Alan (Wigan)

McGuire, Michael

Stoddart, David (Swindon)

Flannery, Martin

Mackenzie, Gregor

Stonehouse, Rt. Hn. John

Fletcher, Ted (Darlington)

Maclennan, Robert

Strang, Gavin

Foot, Rt. Hn. Michael

McMillan, Tom (Glasgow, C.)

Strauss, Rt. Hn. G. R.

Ford, Ben

Madden, M. 0. F.

Summersklll, Hn. Dr. Shirley

Forrester, John

Magee, Bryan

Swain, Thomas

Fowler. Gerry (The Wrekin)

Mahon, Simon

Thomas, D. E. (Merioneth)

Freeson, Reginald

Mallall, J. P. W.

Thomas, Jeffrey (Abertlllery)

Garrett, John (Norwich, S.)

Marks, Kenneth

Tierney, S.

Garrett, W. E. (Wallsend)

Marquand, David

Tinn, James

George, Bruce

Marshall, Dr. Edmund (Goole)

Torney, Tom

Gilbert, Dr. John

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

Tuck, Raphael

Gourlay, Harry

Meacher, Michael

Varley, Rt. Hn. Eric G.

Graham, Ted

Mellish, Rt. Hn. Robert

Walnwright, Edwin (Dearne Valley)

Grant, George (Morpeth)

Mikardo, Ian

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

Grant. John (Islington, C.)

Millan, Bruce

Walker, Harold (Doncaster)

Griffiths, Eddie (Sheffild, Brightside)

Miller, Dr. M. S. (E. Kilbride)

Walker, Terry (Kingswood)

Hamilton, James (Bothwell)

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

Watkins, David

Hamling, William

Morris, Charles R. (Openshaw)

Weitzman, David

Hardy, Peter

Morris, Rt. Hn. John (Aberavon)

White, James

Harper, Joseph

Moyle, Roland

Whitehead, Phillip

Harrison, Walter (Wakefield)

Mulley, Rt. Hn. Frederick

Whitlock, William

Hart, Rt. Hn. Judith

Murray, Ronald King

Wigley, Dafydd (Caernarvon)

Hattersley, Roy

Newens, Stanley (Harlow)

Willey, Rt. Hn. Frederick

Hatton, Frank

Oakes, Gordon

Williams, Alan (Swansea, W.)

Heffer, Eric S.

Ogden, Eric

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

Hooley, Frank

O'Malley, Brian

Williams, W. T. (Warrington)

Horam, John

Orbach, Maurice

Wilson, William (Coventry, S.E.)

Howell, Denis (B'ham, Small Heath)

Ovenden, John

Wise, Mrs. Audrey

Huckf'ield. Leslie

Owen, Dr. David

Woodall. Alec

Hughes, Rt. Hn. Cledwyn (Anglesey)

Palmer, Arthur

Woof, Robert

Hughes, Mark (Durham)

Park, George (Coventry, N.E.)

Wrigglesworth, Ian

Hughes, Robert (Aberdeen, North)

Parker, John (Dagenham)

Young, David (Bolton, E.)

Hughes, Roy (Newport)

Parry, Robert

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

Peart, Rt. Hn. Fred

TELLERS FOR THE AYES:

Irving Rt. Hn. Sydney (Dartford)

Perry, Ernest G.

Mr. James A. Dunn and

Jackson, Colin

phipps, Dr. Colin

Mr. Laurie Pavitt.

NOES

Adley, Robert

Biff en, John

Carlisle, Mark

Alison, Michael (Barkston Ash)

Boardman, Tom (Leicester, S.)

Carr, Rt. Hn. Robert

Allason, James (Heme! Hempstead)

Boscawen, Hon. Robert

Chataway, Rt. Hn. Christopher

Ancram, M.

Boyson, Dr. Rhodes (Brent, N.)

Clark, William (Croydon, S.)

Archer, Jeffrey (Louth)

Braine, Sir Bernard

Clarke, Kenneth (Rushcliffe)

Atkins, Rt.Hn. Humphrey (Spelthorne)

Bray, Ronald

Clegg, Walter

Awdry, Daniel

Brittan, Leon

Cockcroft, John

Banks, Robert

Brown, Sir Edward (Bath)

Cooke, Robert (Bristol, W.)

Barber, Rt. Hn. Anthony

Brown, Ronald (H'Kney.S.& Sh'dltch)

Cope, John

Beith, A. J.

Bruce-Gardyne, J.

Corrie, John

Bell, Ronald

Buchanan Smith, Aiick

Crowder, F. P.

Bennett, Dr. Reginald (Fareham)

Budgen, Nick

Davies, Rt. Hn. John (Knutsford)

Benyon, W.

Bulmer, Esmond

Dean, Paul (Somerset, N.)

Berry, Hon. Anthony

Bull'er, Adam iBosworth)

Deedes, Rt. Hn. W. F.

1368

1369

Dodsworth, Geoffrey

Kershaw, Anthony

Ralson, Timothy

Drayson, Burnaby

King, Evelyn (Dorset, S.)

Redmond, Robert

Durant, Tony

King, Tom (Bridgwater)

Rees, Peter (Dover & Deal)

Dykes, Hugh

Kltson, Sir Timothy

Rees-Davies, W. R.

Eden, Rt. Hn. Sir John

Knight, Mrs. Jill

Renlon, R. T. (Mid-Sussex)

Edwards, Nicholas (Pembroke)

Knox, David

Rhys Williams, Sir Brandon

Elliott, Sir William

Lamont, Norman

Rifkind, Malcolm

Eyre, Reginald

Lane, David

Rippon, Rt. Hn. Geoffrey

Fairgrieve, Russell

Langford-Holt, Sir John

Roberts Wyn (Conway)

Fenner, Mrs. Peggy

Latham, Michael (Melton)

Rodgers, Sir John (Sevenoaks)

Fisher, Sir Nigel

Lawrence, Ivan

Ross, Stephen (Isle of Wight)

Fletcher, Alexander (Edinburgh, N.)

Lawson, Nigel (Blaby)

Rossi, Hugh (Hornsey)

Fletcher-Cooke, Charles

Lloyd, Ian (Havant & Waterloo)

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

Fowler, Norman (Sutton Coldfield)

Loveridge, John

Shaw, Giles (Pudsey)

Fox, Marcus

Luce, Richard

Shaw, Michael (Scarborough)

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

McAdden, Sir Stephen

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

Freud, Clement

Macfarlane, Neil

Shersby, Michael

Gardiner, George (Reigate&Banstead)

MacGregor, John

Silvester, Fred

Gardner, Edward (S. Fylde)

McLaren, Martin

Sims, Roger

Gilmour, Sir John (Fife, E.)

Macmillan, Rt. Hn. M. (Farnham)

Sinclair, Sir George

Glyn, Dr. Alan

Madel, David

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

Godber, Rt. Hn. Joseph

Marshall, Michael (Arundel)

Spicer, Michael (Worcestershire, S.)

Goodhew, Victor

Mather, Carol

Sproat, lain

Goodlad, A.

Maude, Angus

Stanbrook, Ivor

Gorst, John

Mawby, Ray

Stanley, John

Gow, Ian (Eastbourne)

Maxwell-Hyslop, R. J.

Steen, Anthony (L'pool, Wavertree)

Gower, Sir Raymond (Barry)

Mayhew,Patrick(RoyalT'bridgeWe!ls)

Stewart, Ian (Hitchin)

Grant, Anthony (Harrow, C.)

Meyer, Sir Anthony

Stokes, John

Grieve, Percy

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

Stradling Thomas, J.

Griffiths. Eldon (Bury St. Edmunds)

Miscampbell, Norman

Tapsell, Peter

Grimond, Rt. Hn. J.

Mitchell, David (Basingstoke)

Thatcher, Rt. Hn. Margaret

Grist, Ian

Moate, Roger

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

Hall, Sir John

Money, Ernie

Thorpe, Rt. Hn. Jeremy

Hall-Davis, A. G. F.

Monro, Hector

Townsend, C. D.

Hampson, Dr. Keith

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

Trotter, Neville

Hannam, John

More, Jasper (Ludlow)

Tugendhat, Christopher

Hastings, Stephen

Morgan, Geraint

Tyler, Paul

Havers, Sir Michael

Morgan-Giles, Rear-Adm.

van Straubenzee, W. R.

Hawkins, Paul

Morris, Michael (Northampton, S.)

Vaughan, Dr. Gerard

Hayhoe, Barney

Morrison, Charles (Devizes)

Viggers, Peter

Henderson,Barry (Dunbartonshire,E.)

Morrison, Peter (City of Chester)

Waddington, David

Hlggins, Terence

Mudd, David

Walnwright, Richard (Colne Valley)

Holland, Philip

Neubert, Michael

Wakeham, John

Hooson, Emlyn

Newton, Tony (Braintree)

Walder, David (Clitheroe)

Hordern, Peter

Nott, John

Walters, Dennis

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

Onslow, Cranley

Weatherill, Bernard

Hurd, Douglas

Oppenheim, Mrs. Sally

Wells, John

Hutchison, Michael Clark

Page, John (Harrow, W.)

Winstanley, Dr. Michael

Irvine, Bryant Godman (Rye)

Pardoe, John

Worsley, Sir Marcus

James, David

Parkinson, Cecil (Hertfordshire, S.)

Young, Sir George (Ealing, Acton)

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

Pattle, Geoffrey

Younger, Hn. George

Jessel, Toby

Percival, Ian

Johnston, Russell (Inverness)

Pink, R. Bonner

TELLERS FOR THE NOES:

Jopling, Michael

Price, David (Eastleigh)

Mr. Hamish Gray and

Joseph, Rt. Hn. Sir Keith

Quennell, Miss J. M.

Mr. Spencer le Marchant.

Question accordingly agreed to.
Clause 13 ordered to stand part of the Bill.
To report Progress and ask leave to sit again.—[Mr. Harper.]
Committee report Progress: to sit again tomorrow.

WAYS AND MEANS

  CAPITAL GAINS TAX
  Motion made and Question proposed,
  That the rate of capital gains tax provided for by section 113 of the Finance Act 1972 shall be increased to 161 per cent.— [Dr. Gilbert.},
  11.8 p.m.
  Mr. Terence Higgins: I presume that this is a paving amendment
  1370
  for a Government amendment which will appear at a subsequent stage, but I should be grateful if the Financial Secretary would be courteous enough to give an explanation.
  11.9 p.m.
  The Financial Secretary to the Treasury (Dr. John Gilbert): I was not
  quite sure when I had to rise to my feet. I had intended no discourtesy to the hon. Member for Worthing (Mr. Higgins), as I am sure he recognises.
  The resolution authorises an increase in the rate of capital gains tax payable by certain unauthorised unit trusts and by common investment funds for funds in court. The rate is at present 15 per cent.; for 1974–75 it is to be 16 ½ per cent. The need for the motion results

  1371
  from an oversight when the Bill was published, for which I apologise.
  Capital gains tax rates are like income tax rates in so far as they are fixed in advance. Accordingly, it is necessary to fix the rate for these analogous funds in this year's Finance Bill. The need to increase the present rate of 15 per cent, to 16 ½ per cent. arises as a result of the increase in the basic rate of income tax from 30 per cent. to 33 per cent.
  If there are any other points the hon. Gentleman would like to raise, I shall do my best to answer them.
  Mr. Higgins: I understood from what the hon. Gentleman said that the motion was related to a clause in the Finance Bill for which no Ways and Means Resolution had previously been passed, although it should have been moved. Which clause is covered by the motion?
  Dr. Gilbert: I am informed that a new clause will be tabled in due course, which will show the hon. Gentleman why we are introducing the motion now.
  Mr. Higgins: With great respect to the hon. Gentleman, that is not good enough. First, the hon. Gentleman tells us that the motion is moved now because there had been an oversight, the clear implication being that it was something in the Finance Bill already. When I pressed him he said that there was a new clause to be considered in Committee upstairs. He cannot have it both ways. I hope that the hon. Gentleman will give rather more convincing explanations on what is a fairly simple matter.
  Dr. Gilbert: There is a misunderstanding here. Before one can introduce a new clause one must have a motion. The motion is being moved now, and the new clause will be introduced later.
  Mr. Higgins: The hon. Gentleman's first explanation was that this was a Ways and Means motion which was tabled because of an oversight—that it should have been tabled before and was not. If it is to cover a new clause to be introduced in Committee upstairs, there is no reason why it should not be tabled at that stage. That would be perfectly reasonable, in which case there is no oversight. What I find difficulty in understanding is why the hon. Gentleman thought that there had been an oversight on something to
  1372
  be done in Committee upstairs on a future occasion.
  Dr. Gilbert: I do not wish to be discourteous to the hon. Gentleman. I thought that I made it clear that the oversight was that the new clause itself had not been tabled, and, therefore, the motion is needed. We are chasing our own tails here. I made it clear that it was an oversight, for which I apologised. I cannot see that it is in any way inconvenient to the House to deal with the matter now. What I said could not be more open.
  Mr. Higgins: I now understand what the hon. Gentleman is saying—that both the new clause and the Ways and Means motion were an oversight. If that is so, of course the House will gladly accept it. But we are still put in a rather odd position, finding ourselves with both a new clause and the motion, which has not been mentioned before, without the hon. Gentleman giving a full explanation. But I am grateful for what the hon. Gentleman has now said.
  Question put and agreed to.
  Resolved,
  That the rate of capital gains tax provided for by section 113 of the Finance Act 1972 shall be increased to 16½ per cent.

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

SEWERAGE CHARGES
11.14 p.m.
Sir John Langford-Holt: I wish to delay the House for only a short time. Like every other hon. Member, I care a great deal for its reputation and the reputation of its Members.
I am sure that all of us have been told by our constituents, both during the General Election campaign and at many other times, that the trouble with the House is that it is out of touch. That hurts not only hon. Members but the whole system.
I shall mention three irritants. One of the three does not come within the Minister's departmental responsibility but

1373
I feel that I must mention it because, like the two other irritants, it brings the whole concept of honest government into question. The vexed question of storage heaters and the publicity that has gone with it drives my constituents absolutely mad. I have two electricity board pamphlets which mention half-price electricity. Those are not my words. The Government have recently—
The Minister of State, Department of the Environment (Mr. Denis Howell): On
a point of order, Mr. Deputy Speaker. Is it in order to ask for an Adjournment debate on water sewerage and then to talk about electricity charges?
Mr. Deputy Speaker (Mr. George Thomas): I think that it was a remark in passing and that the hon. Member for Shrewsbury (Sir J. Langford-Holt) is coming to sewerage and rates.
Sir J. Langford-Holt: That is right, Mr. Deputy Speaker. I think that I am entitled to raise anything I like on an Adjournment debate.
The next matter which is little short of an irritating swindle—
Mr. Deputy Speaker: Order. I am
sorry to interrupt the hon. Gentleman but for the sake of other hon. Members who are in the House I should tell him that, although technically he is right and he can talk about whatever he likes, there is a firm understanding in the House that on an Adjournment debate we stick to the subject.
Sir J. Langford-Holt: I now propose to do so, Mr. Deputy Speaker. I mentioned that first matter in passing. First, I wish to refer to the variation of the rate relief order. I knew that the rates were to go up. There is no point in denying that. However, my constituents complain that their rates have been more than doubled. I am still awaiting a reply to a letter that I wrote to the Minister's Department a fortnight ago seeking to find out the figures for my constituency. It is felt that the rate increases were a political move, and the constituents of rural constituencies are thoroughly resentful.
The inclusion of sewerage and other services within the rates is a matter which was not invented by the present
1374
administration but has been in existence for a long time. However, what is now taking place has become absolutely clear. One of my constituents said "Any commercial enterprise which levied charges for services that it did not provide would be liable to criminal charges under the Trade Descriptions Act." That may or may not be true. However, I doubt whether a judge would accept as a plea that we the suppliers of whatever it may be do not know exactly to whom we are supplying our goods and that, therefore, we must charge everyone. That is precisely what was stated in a Written Answer on 7th May. The Minister said that it was intended to do something about the matter. He then added that nothing can be done until the water authorities can identify the properties without main drainage.
But when will that happen? It is not a matter which can be left indefinitely. One of my constituents who has no main drainage received a bill only last April for £27 for such services. We must remember that the rural areas do not have the services which people who live in urban areas are entitled to expect. Their dustbins are collected weekly perhaps, they have no main sewerage, no mains water; they have no pavements, lighting or transport.
The machinery of government is notoriously slow, but there is one thing the Minister can do, and I ask him to do it. What makes people angry is that they are asked to pay for services which they do not receive. When a person is not on the main drainage system, he has to install a septic tank. What happens when the time comes for that tank to be cleaned? The person concerned goes to the sewerage authority and asks for the tank to be cleaned. What astonishes that ratepayer is that he is then charged for the performance of a function which should be carried out free of charge. I hope that the hon. Gentleman will look at this point pending an examination of the whole problem.
Finally, I must make the point that nobody who fought the last General Election could be unaware of the dislike expressed throughout the country of our whole rating system.
Mr. Paul Tyler: Before the hon. Gentleman concludes, will he direct his attention to the fact that it was his

1375
Government—a Tory Government— who introduced the Water Act about which he is now complaining. I note from the OFFICIAL REPORT of the Third Reading debate on 2nd May that the hon. Gentleman was not present on that occasion, which was perhaps fortunate, but the rest of his Conservative colleagues supported the Water Act and we are now reaping the consequences.
Sir J. Langford-Holt: I thought I made it clear that I was not saying that the Labour Government had invented all the ills to which I referred. I admit that this problem has been with us for many years.
Mr. John Pardoe: No, not for many years—only recently.
Sir J. Langford-Holt: I am saying that the whole rating system has caused a great deal of complaint. It would be quite wrong in this debate, since it would be out of order, to advocate any form of legislation. Some people suggest that there should be a local income tax: some suggest the earmarking of a percentage of general taxation as a way in which local government finances can be carried on; others suggest that the education services should be transferred to the Exchequer. Whatever happens, whichever alternative is chosen, the solution must be drastic— and that solution must be reached as quickly as possible.
11.23 p.m.
The Minister of State, Department of the Environment (Mr, Denis Howell): I am in many ways grateful to the hon. Member for Shrewsbury (Sir J. Langford-Holt) for raising these matters tonight, some of which he was kind enough to suggest were not the responsibility of the Labour Government. I will return to that point in a moment.
I was delighted that in his opening remarks he asked for honest government. I was grateful for the realistic intervention from the Liberal benches to draw his attention to the fact that we are being plagued at the moment by the outrageously high rate increases which flow directly from the method of local government reorganisation and water reorganisation imposed upon the country by the Conservative Government. We as the then Opposition, and also the Liberals, said this at the time. If every local
1376
government area was to have two treasurers where one had done the job previously, two clerk's departments where one existed before, and duplication of other government posts, those things obviously had to be paid for. We also drew attention to the increased salaries on the basis of which the reorganisation was to be carried out.
When the hon. Gentleman speaks of honest government, he should draw the attention of his ratepayers and taxpayers to where exactly the responsibility for the present situation lies. I have before me a message to all ratepayers in the hon. Gentleman's constituency which appeared in the Shropshire Star on Monday 20th May, containing photographs of the hon. Gentleman, and also of his two hon. Friends, the hon. Members for Oswestry (Mr. Biffen) and Ludlow (Mr. More), neither of whom is present tonight. The message went as follows:
"We want to send a message to all ratepayers in Shropshire. We thank those who have written to us. Like most of the rural areas and smaller towns of England. Shropshire ratepayers are being faced with enormously increased rate demands. The amount of the increase varies in different districts; among the worst hit are the former Clun RDC and the Wrekin area. A number of factors have contributed to the present position; the latest blow has been the present Government's sudden alteration in the Domestic Rate Relief. A protest debate took place in the House of Commons on the 25th March, when we all voted against the Government's action. We have also signed a Motion of Protest."
It will be seen that there is no honest approach in this campaign which the hon. Gentleman is conducting. There was no suggestion that the rate increases in Shropshire are the direct result of his Government's actions in forcing through this local government reorganisation measure. There is no mention of the creation of the monolithic Severn-Trent Water Authority, stretching across the whole of England and part of Wales, too. This is bound to increase administrative costs.
Mr. Tim Renton (): As the hon. Gentleman reminded us, we are talking specifically about the sewerage charges. The Water Authorities (Collection of Charges) Order 1974 was made on 13th March this year, laid before Parliament on 26th March and came into operation on 27th March. Will the hon.

1377
Gentleman consider a specific amendment to the order under which hereditaments not connected to the main drainage will be relieved of all or part of the general services charge levied by the water authority?
Mr. Pardoe: In the quotation which the Minister read out there was the phrase "we all voted against". Does he recognise that there is a clear implication there that the whole of the Conservative Party voted against that when, in fact, 90 Conservative Members abstained on that occasion and the Government achieved a majority of 75?
Mr. Howell: I am grateful to the hon. Gentleman for that historical and, I believe, factually correct account of our proceedings.
I turn to the main question which the hon. Gentleman has raised, which is that of charges for sewage disposal services levied through the general rate system and the problem which arises when people are not connected to the sewerage system. This is something which very few people would find possible to defend. It is a system which has operated in this country for generations. The one advantage which has so far emerged from the Water Act 1973 is that it has highlighted this deficiency.
That Act has brought this to a head. Sewerage services have always been financed on the basis that they are a community service. One of the things we have to consider is whether the system should continue to be so financed. I draw particular attention to Section 30(1) of the Act, which enables a water authority to levy such charges as it thinks fit for services performed, facilities provided and rights made available.
There is an obligation on the water authorities and the local authorities to provide the opportunity for householders to link up with sewers. But there is no corresponding obligation to ensure that householders always do so. When we discuss future arrangements this must be resolved. It creates an enormous sense of grievance and injustice when people do not have the opportunity to link up with the main drainage system. It adds to their dismay when they also have to pay for the emptying of cesspools and suchlike.
1378
I come to the practicality of the matter. I have already said—and I think that my hon. Friend the Under-Secretary said it during an earlier Adjournment debate—that this administration wants to do something about it. We accept that it is monstrously unfair that people who are not enjoying services, not because they are not linked up with them—such people are a separate case—but because they do not have the opportunity to take advantage of the main drainage system, should be expected to pay. The difficulty is how to identify those people and get some system of direct charging.
I have to tell the House that our early estimates are that there are certainly no fewer than 800,000 households whose premises are in this situation of not being able to link up with the sewerage system. It is a formidable number. I am advised that they are not necessarily all in rural areas, although many are.
When we came to office, we found that the previous administration—and I have had to continue to support this system, for otherwise there would have been financial chaos in the water authorities— had decided that the first year's financing at any rate should be done through the existing rate collection system. There seemed to be no other system that could apply. Therefore, it was quite clear that it was impossible to make exemptions this year, especially having regard to the fact that it was not just the great change in water administration with which we had to contend but the phenomenally difficult administrative task of the re-organisaion of the whole of local government, which had also been imposed on the country at one and the same time.
Water authorities took over responsibility on 1st April, and effectively that meant that water authorities had only eight months to establish themselves, to review their situation and to decide their costings and estimates, get into operation and start obtaining the finance through the rating system for their operations. I can tell the House, and I am sure that hon. Members will appreciate this, that, although there are many things that the new administration would like to do, in many of the discussions that we had with the water authorities we found it virtually impossible to obtain the information within the time scale available to us. We have been in office for only

1379
three months and we have started to ask for this information in order to make sensible and intelligent decisions, but the water authorities simply cannot obtain the information.
Some of the old local authorities are very good about being able to say exactly what capital allocation has been committed to this task and what revenue costs were, but we have discovered many local authorities where it has been impossible to distinguish, either on capital account or on revenue account, between water and sewerage and other services, because they were all linked under a multiplicity of different heads of local government finance.
It will be seen that, although we wanted to move in this direction, there could be no question of paying relief or rebates in this year's situation. I am informed that in 1972 the previous administration discussed the whole question of paying rebates in the sort of case that has been mentioned. I do not think that this information has been given before, but I am informed that, although the previous administration discussed whether to pay rebates in these cases, it rejected the possibility, and so we are having to start from scratch. That adds considerably to my difficulties.
Mr. John Cope: Did the hon. Member say, as I thought, that there was now no question of repaying this year's payments? That is not the impression that the Under-Secretary gave in the last Adjournment debate on this subject, when the Liberals were not present but many of us were. He then gave the clear impression not only that this matter would be looked at for future years but that the Government would consider rebating this year's payments.
Mr. Howell: That is a fair point. It is quite true that my hon. Friend the Under-Secretary said that we were actively looking at the situation this year because the anomalous and unfair position had been drawn to our attention. We have looked at it this year but, for the reasons which I have unfolded to the House—at least 800,000 premises are affected—the local authorities and the new water authorities do not have the
1380
information on which to take any such practical action this year. Although, as the hon. Member has said, my hon. Friend said that we would investigate the position, I am sorry to have to say that we have done so but that we find it impracticable to act this year.
Mr. Cope: I apologise for interrupting the Minister again but, frankly, the large number of people involved—the Minister has given a figure of 800,000, and I do not disagree—is no reason for not doing anything on this occasion. Indeed, it is added reason why something should be done.
Mr. Howell: I hope I have made it clear to the House, and I am being frank in giving as much information as I can, that the size of the problem administratively to identify the premises is colossal. With the added fact that the new authorities have only just started work, and in a sense all their rating demands are estimates, it is practically impossible to do anything this year. While that is a regrettable state of affairs, it is no different from every previous year when these people have paid for services which they have not received.
What the House will want me to do, and what I undertake to do, is to move as rapidly as possible to a situation where the water authorities can identify these dwellings and can exempt them from payment for services which they are not enjoying. That is what I wish to do.
Mr. Cope: Can the exemption be backdated?
Mr. Howell: It cannot be backdated. Why should that be done in one year when in some cases this has been happening for 50 years? The logic of retrospective relief is impossible to apply. It is attractive to say that we should do it for this one year, but why stop at one year when the people have been paying for these services and local government has been financed on this basis for a large number of years?
Mr. Stephen Ross: 1 apologise for intervening but I should like to correct the hon. Member for Gloucestershire, South (Mr. Cope). I heard the summing up in the earlier debate on rating which came on unexpectedly one night and about which great

1381
play has been made by the Conservative Opposition. The information concerning properties which have septic tanks could be obtained easily from valuation officers, who make the assessments and know which properties have septic tanks and those which do not.
Can the Minister please answer a point put by the hon. Member for Shrewsbury (Sir J. Langford-Holt) when he spoke about the charge for emptying septic tanks? This is certainly an affront to ratepayers, and surely something can be done. Many authorities had not budgeted for this money in their accounts because they were under the impression that the water authorities would pay for it. Surely this could be underwritten by the Government and septic tanks at least be emptied free of charge. Will the Minister deal with this before he concludes?
Mr. Howell: I will do my best in the time that remains. The cleaning of cesspits and septic tanks is a function of district councils, which is an added complication. It is not a function of the water authorities. It is for the district councils to decide whether to charge or to empty the tanks free. Water authorities have no power to pay district councils to empty septic tanks.
A further complication is that, even if these domestic dwellings could be identified, there is some doubt whether it would be legal or ultra vires for water authorities to refund charges properly demanded and collected under the collection of charges order. This is one of the questions which I discussed with my legal advisers today. They are not entirely united, but the best advice I can give the House is that most of them
1382
think that it would be ultra vires to implement a refund charge such as this.
We shall do the best we can. I very much hope that it will be possible to put this matter right for next year. I give the House the assurance that I shall do my very best to ensure that we speed up the administrative arrangements necessary to identify these properties. We want to have them excluded from payment if they are not enjoying the services. I trust that the House will rely upon me to bring that about.
But it must be faced—this is the main fact—that the reorganisation of the water services was carried out far too quickly by the previous administration for proper administrative arrangements to be made for direct charging and certainly for proper administrative arrangements to be made in the time available to the water authorities, which was eight months from the moment they were set up to the moment they took over the responsibility for these major services. To impose that sort of administrative nonsense, which I believe it to be, at the same moment as local government reorganisation on an unprecedented scale was going on is a condemnation of the manner in which the Conservative Government carried out their important duties.
We shall do our best to retrieve the situation as soon as we can. I am grateful to the hon. Gentleman for raising the matter because it has given me the opportunity to highlight where the shortcomings in these matters should firmly rest.
Question put and agreed to.
Adjourned accordingly at eighteen minutes to Twelve o'clock.

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Preamble
Reassembling after the Whitsun Recess, the House met at half past two of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.
The Lord MacDermott—Took the Oath.
The Lord Wrottesley—Took the Oath.

HIS ROYAL HIGHNESS THE DUKE OF GLOUCESTER
THE LORD PRIVY SEAL (LORD SHEPHERD): My Lords, I know that the House will have learnt with deep regret of the death earlier this morning of His Royal Highness the Duke of Gloucester. I am sure your Lordships would wish to join with me in expressing our deep sympathy with Her Majesty the Queen on the death of her uncle, and also with other members of the Royal Family, especially of course his widow the Duchess of Gloucester and his son and daughter-in-law Prince and Princess Richard of Gloucester. And in mentioning Her Royal Highness we would recognise her own contribution to public service, supporting her husband, and, in recent years, alone—a service I have no doubt she will wish to continue.
The Duke had not been well for some years and had therefore not been very much in the public eye. Some therefore tend to forget what great public service His Royal Highness rendered this country, especially during the war years. The Duke was born in 1900 and, as the last surviving child of King George V, lived through the reigns of five Monarchs. He saw two of his elder brothers succeed to the Throne, and his younger brother the late Duke of Kent killed in an air crash during the last war. His sister the late Princess Royal died in 1965, and in 1972 he suffered the grievous loss of his elder son Prince William, who was also killed, as the House will recall, in an air crash.
The Duke's great interest throughout his life was of course the Army, which he
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joined in 1921, rising progressively through the ranks until lie became a Lieutenant-General in 1941 and a full General in 1944. I have no doubt that there are many other noble Lords more qualified than I to speak of his career in the Army and of his very great concern and interest for those with whom he served. His war service was as Chief Liaison Officer in France to the British Expeditionary Forces, when he was mentioned in dispatches. He was of course especially proud of the Gloucestershire Regiment, of which he became Colonelin-Chief. He was able in 1952 to present the Regiment with new Colours, not long after their heroic efforts during the Korean war where they won such honour and fame.
There is one further aspect of his public service to which I would make particular reference. Shortly before the end of the war, in 1944, he became Governor-General of Australia, a post which he held with great distinction for three years. I know with what great affection and good will he was regarded by Australians, who greatly welcomed the King's brother being appointed as his Representative in Australia. It was a very fitting gesture that the Duke should have accepted this appointment at the time when the Commonwealth was sending its young men to join us and our allies in the battles of the Pacific.
My Lords, like all members of the Royal Family, the Duke fulfilled many public engagements and he did so with a warmth and a kindness and an interest which was much appreciated. Illness had prevented him from discharging these public duties for some time, but I know your Lordships would not wish this opportunity to pass without our paying tribute to what he did for the nation. He was a very great man.
2.41 p.m.
LORD WINDLESHAM: My Lords, from this side of the House I should like to echo what the noble Lord the Leader of the House has said about His Royal Highness the Duke of Gloucester. Although the Duke of Gloucester, as the noble Lord has reminded us, was prevented by illness over the last six years from playing an active part in public life, he had a very long record of service to the public, and that is something we should remember to-day. The Duke of

225
Gloucester gave up his early career as a soldier, and as a soldier who was highly regarded, I understand, by his contemporaries, in order to support his elder brother the Duke of York when he took the Throne as King George VI.
As one of the evening papers reminds us to-day in a happy phrase, the Duke became known as "the Duke of Work" because of the conscientious and thorough way in which he took on so many of the less glamorous and unpublicised engagements. It cannot have been easy for a man who was rather shy in character and who preferred to avoid the limelight. But in this work he was, as the noble Lord the Leader of the House has just said, very much helped by his wife, Her Royal Highness the Duchess of Gloucester, who, like so many members of the Royal Family, has continued to perform a wide range of public engagements with dignity and presence right up to the present time. The noble Lord the Leader of the House, the noble and learned Lord, Lord Gardiner, and others in the House were present only last week at a service in Westminster Abbey in support of "Help the Aged" at which the Duchess of Gloucester was present.
I hope the Leader of the House will inform the Duchess of Gloucester, and also Prince Richard of Gloucester, of these tributes in the House to-day. We should like them to know the affection in which the Duke of Gloucester was held by all Members of this House, some of whom knew him personally. Others of us did not have that privilege, but we all recognise the enduring quality of the work which he performed so unsparingly for many good causes. My Lords, the public as a whole has good reason to be deeply grateful for his life and work.
LORD BYERS: My Lords, from these Benches I should like to endorse the sentiments which have been expressed by the noble Lord, Lord Shepherd, and the noble Lord, Lord Windlesham, concerning the death of His Royal Highness the Duke of Gloucester, which occurred to-day. We wish to express particular sympathy for the Duchess of Gloucester who in the past few years has suffered so much and so bravely, and for whom we have a great deal of affection. The Duke will be remembered by many serving soldiers as an officer who concerned himself in some
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depth with the wellbeing of the Army and those who belonged to it, and I believe from what I saw of him in those days that many of his happiest hours were spent with the troops both in the United Kingdom and overseas. My Lords, we wish also to express our condolences to Her Majesty the Queen and the Royal Family on this very sad bereavement.
THE LORD ARCHBISHOP or CANTERBURY: My Lords, we on these Benches join in the grief and in the tributes which have been expressed. Each of us who knew the late Duke will have his own special memories. I have one very vivid memory. It was when, a few years ago, the Duke fulfilled his duty as the Lord High Commissioner to the National Assembly of the Church of Scotland, residing at Holyrood at the time. Although at the time he was in failing health, he threw himself into the religious and the national significance of that occasion with great courage and outgoing kindness. That was typical of his width of sympathies and courage and care for what he believed to be good and right. We think of him as a man of faith who bore with courage both his own sickness and many sorrows. It is as such that we salute his memory and grieve with his brave widow and all his family.

CONTINENTAL SHELF LICENSING AREAS
2.45 p.m.
THE EARL OF LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when they propose to open negotiations for the delimitation of Continental Shelf licensing areas—

(a) North of the 62nd Parallel;

(b) in the Northwest Approaches.

THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD GORONWY-ROBERTS): My Lords, Her Majesty's Government have not yet decided when they wish to propose negotiations with the Governments concerned for these areas.
THE EARL OF LAUDERDALE: My Lords, may I thank the noble Lord for his Answer and ask him whether it may not be of some importance to get negotiations going before the areas in question become too interesting in terms of geophysical surveys and the possible identification of areas of resource, possibly even of controversy and ultimately of conflict, and that therefore there is an urgency about approaching this matter?
LORD GORONWY-ROBERTS: My Lords, I take full note of what the noble Earl has said. These are considerations which are very much present in the mind of the Government in dealing with this important matter. At the moment I will not engage in detail, but I can give the assurance that this matter is being carefully examined.

ABACO
LORD BELHAVEN AND STENTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what representations they intend to make to the Government of the Bahamas urging them to cease their harassment of the people of Abaco.
LORD GORONWY-ROBERTS: My Lords, the Abaco Islands are an integral part of the Commonwealth of the Bahamas, which became an independent sovereign State on July 10, 1973. It would not therefore be appropriate for Her Majesty's Government in the United Kingdom to seek to intervene in the internal affairs of the Bahamas.
LORD BELHAVEN AND STENTON: My Lords, I thank the noble Lord for that reply and appreciate what he says. I think that certain people on the other side of the Atlantic may possibly think that the content of what he has said is rather regrettable. However, may I ask whether or not the noble Lord considers that within less than a year of the independence of the Bahamas Her Majesty's Government still have an obligation to the inhabitants of a group of Islands who, by a quite clear majority before independence, declared their wish to remain British subjects?
LORD GORONWY-ROBERTS: My Lords, I appreciate what the noble Lord has said. Of course we have the obligation of friendship, of co-membership of the Commonwealth and of being, in fact, two sovereign States under the same Queen, and at any time we are ready to confer with and, indeed, to advise and help the Government of the Commonwealth of the Bahamas in any matter about which they think we can be helpful. However, your Lordships' House will recall that both Houses of Parliament last year very fully debated this question of particularist interests in the Abaco Islands, before it was decided that independence should be granted. It was then found that the overwhelming opinion of the people of the proposed Commonwealth of the Bahamas was in favour of an integral State of the kind which I have described.
LORD ORR-EWING: My Lords, would the noble Lord remember that the people of Abaco particularly desired to remain a Crown Colony? This was against the wishes of Her Majesty's Government at the time. Surely now that they are being persecuted and harassed, and more particularly so the coloured people in that Island, is it not reasonable that we should make representations that this should cease and that they should be given proper justice, as they deserve?
LORD GORONWY-ROBERTS: My Lords, I must repeat that it would be inappropriate for this country to intervene in the internal affairs of an independent member of the Commonwealth. In any case, I have no evidence of the kind of harassment which the noble Lord has in mind. I think we should proceed fairly carefully here. Possibly this exchange, together with many things which were said in the two debates held last year, will be taken note of in a friendly way by the Government of the Bahamas.
THE EARL OF LAUDERDALE: My Lords, would not the noble Lord agree that while enunciating the doctrine which we on this side of the House certainly respect, of non-intervention in the internal affairs of other sovereign States, it would be well that such a doctrine should be applied equally elsewhere, for example in South America or in Greece or in South Africa?
LORD GORONWY-ROBERTS: My Lords, I think it is a question, ceteris paribus, in respect of which we must proceed from case to case; and certainly the Commonwealth of the Bahamas is not to be equated with any of the countries listed by the noble Earl.
LORD REIGATE: My Lords, while agreeing that we must proceed from case to case, can the noble Lord say in what respect this case differs from that of Anguilla?
LORD GORONWY-ROBERTS: My Lords, this is the case of an independent country, whereas Anguilla is still in special relationship to this country.
LORD BELHAVEN AND STENTON: My Lords, is the noble Lord aware that I do know that there is harassment and persecution of the supporters of the Abaco Independence Movement in Abaco? But in regard to his very reasonable reply to my Question, could he not urge upon the Government of the Bahamas that conciliation and consultation with the people of Abaco in order to solve this particular problem would, in the long run be in the interests of the Bahamas, rather than the rather stupid and petty persecution and harassment in which they are indulging at the present time?
LORD GORONWY-ROBERTS: My Lords, I can do that now. I am quite sure that every Member of both Houses of Parliament would strongly hope that the new Member State of the Commonwealth of the Bahamas (as it calls itself), a democracy under the same Queen, will keep in mind the need, especially in the first few crucial years of independence, to cohere as fully as possible all elements within its territory and its peoples.
LORD BARNBY: My Lords, in recognising the difficulty of definition, in the case to which my noble friend has just drawn attention, would the Minister agree that there have been many incidents raised in this House which seem to be of less importance than this one? Particularly would the noble Lord recall the case of an English boy being apprehended in Turkey? I recollect that twelve minutes of the time of the House was taken in vehement denunciations of
230
the Turkish Government, and from my recollection action was taken. Would not that be an indication of the necessity to consider this matter in the way indicated by my noble friend?
LORD GORONWY-ROBERTS: My Lords, I think this really reinforces what I have said about proceeding from case to case. The case mentioned by the noble Lord affected a United Kingdom national. I have no evidence of any harassment, certainly of United Kingdom nationals, in the Commonwealth of the Bahamas.
LORD BARNBY: My Lords, in the case of the incident in Turkey, would not the noble Lord recognise how improper the action taken turned out to be? The boy was a thoroughly unsatisfactory boy, a member of a most reprehensible family, and therefore the action taken was wrong. However, of course I recognise the difficulty of the noble Lord.
LORD SLATER: My Lords, would not my noble friend agree that while it may be proper to listen to many supplementary questions on this particular matter, after the decision taken by the Government of this country to give a particular form of independence to these people so that they could decide for themselves what ought to be done within their own territory, is it not time that we were prepared to climb clown instead of trying to nullify even the action which we have already taken on behalf of these people?
LORD GORONWY-ROBERTS: My Lords, independence is independence. Of course we have the obligation of friendship. I stress this, and this is really the relationship between us and any other Member State, especially of the Commonwealth.
LORD BELHAVEN AND STENTON: My Lords, I apologise for intervening, for the last time, but is the noble Lord aware that I think his noble friend has the wrong end of the stick? These people were denied—
LORD SHEPHERD: My Lords, I suspect we are now entering into a debate. We have been dealing with this Question for nine minutes. I have expressed appreciation that we have a clock, and I think we ought now to move to the next Question.

SCHOOLCHILDREN AND LEAVING DATES
2.57 p.m.
BARONESS PHILLIPS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government why children who have attained the school leaving age of sixteen years are required to continue to attend school until the end of the summer term.
LORD GARNSWORTHY: My Lords, the school-leaving dates in England and Wales are governed by Section 9 of the Education Act 1962, the effect of which is that a pupil who attains the age of 16 between the beginning of September and the end of January cannot leave before the end of the following spring term. One who attains that age after the end of January cannot leave before the end of the summer term.
BARONESS PHILLIPS: My Lords, I thank the noble Lord for that reply, which did not really add anything to the knowledge I already had of this matter. I would ask him whether lie is aware that there are children in schools who have taken examinations and who are serving no useful purpose in remaining there, and there are children who would like to leave school to seek employment. In the present situation, will the noble Lord accept that it would probably be more sensible to have some flexibility in this matter?
LORD GARNSWORTHY: My Lords, when I read it, I suspected that my noble friend knew the answer to her Question. With regard to the second part of her supplementary comments, may I say that to permit pupils to leave on their sixteenth birthday, or indeed after they have taken examinations, would require new legislation. It would result in a constant disruption of classes and courses, and would clearly be prejudicial to the organisation of a fully integrated five-year secondary course, or a comparable course in a system of middle and upper schools.
VISCOUNT AMORY: My Lords, will the noble Lord consider very carefully the point raised by the noble Baroness, Lady Phillips? The objections he has given are administrative and organisational
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ones, but is not the welfare of the individual still more important? Is it not a fact that before the school-leaving age was raised it was highly encouraging to see the steady increase in the number of those who remained at school voluntarily? But will the noble Lord also bear in mind that there are some youngsters for whom it is probably of no great benefit to be kept at school against their will after the age of sixteen?
LORD GARNSWORTHY: My Lords, as I have indicated there is also a legislative programme. My right honourable friend is very well aware of the situation, which is not an easy one. Not all children take examinations, and if some are allowed to leave school earlier than others difficulties can also arise on that score. My right honourable friend has had consultations with local authorities and with teachers' organisations but I understand that there is no agreement at the present time on the present position or on what might be done to change it. My right honourable friend is studying the replies he has received, but he is certainly in no position to make any proposals. He is aware of the situation and has been consulted.
LORD MAYBRAY-KING: My Lords, while we believe that the raising of the school-leaving age to 16 was a very great reform indeed, may I ask the noble Lord to look at the points raised in these questions to see whether it is not possible to modify the Acts to which he referred so that a boy or girl aged 16 may leave when he or she is 16?
LORD GARNSWORTHY: My Lords, I am very grateful for the noble Lords comments. I think we have to be a little careful before we rush into a decision. We have had the school leaving age of 16 in operation for only a year. It seems to be rather early days to be making final decisions.
BARONESS GAITSKELL: My Lords, in supporting my noble friend, may I ask this question. Is not the extent of the impatience and the boredom of young people at school in their last year exacerbated by the fact that, although the raising of the school leaving age to 16 was a good principle in itself, neither the Conservative Government nor the Labour Government prepared for this? Is this

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not another reason for allowing children to leave school when they reach the age of 16?
LORD GARNSWORTHY: My Lords, I should not wish to over-generalise on this because practice varies from local authority to local authority. My information is that in some areas it is working extremely well. At the same time, it would appear that some L.E.A.s were not as prepared as they might have been. I think all of us appreciate that the economic situation has allowed neither Government to spend all the money on all the things they would like to do.
LORD SHINWELL: My Lords, can the noble Lord tell me what happens to the boy or girl who passes an examination, reaches the age of 16, and decides to leave at the age of 16? What would the noble Lord do—prosecute them?
LORD GARNSWORTHY: My Lords, it is not for me to prosecute anyone. I would think this is a matter that can safely be left to the discretion of the boards of governors of schools.
LORD FRASER OF LONSDALE: My Lords. I should like to ask just one question that I think has not been raised. Would not the leaving of these children at this time, which has been so well argued, create vacancies in schools which are much needed? The plea of the noble Lord that there are difficulties seems to me pathetic. Are not difficulties made to be overcome?
LORD GARNSWORTHY: Yes, my Lords, but if we acceded to the suggestion of the noble Lord I think we should probably be creating more difficulties than we were curing.
LORD POPPLEWELL: My Lords, would not the noble Lord agree that although the school leaving age of 16 has been in operation for only a short period of time, there is a general anxiety whether the best use is being made of this last year at school, as enumerated by my noble friend Lady Gaitskell? Would the noble Lord have a word with the Secretary of State with a view to having some inquiries undertaken as to whether the best use is being made of the last year at school for these children, and eventually a report made on the findings?
LORD GARNSWORTHY: My Lords, I shall be very pleased to do just that.
LORD ELTON: My Lords, if the noble Lord cannot assure us that he can give us an earlier leaving date birthday by birthday, can he work towards a single date earlier than the end of the summer term? Is the noble Lord aware that the disruption to which he refers of administrative inconvenience such as release birthday by birthday is more than equalled by the disruption caused by unwilling pupils in schools which do not have equipment and staff to deal with them? And may I inform him, as one who—
LORD GARNSWORTHY: My Lords, I have a feeling that we are in danger of exaggerating the difficulties that exist. While I would not wish to minimise them, I would ask the House to he a little more patient before it passes final judgment.I have indicated that new legislation would be required. I had thought it common ground between the Opposition and ourselves that the school leaving age should be raised to 16; and it has been raised to 16 in the only manner in which the law provides. My right honourable friend is fully aware of the concern, and is giving constant attention to it. I am quite certain that if he feels it necessary to introduce new legislation, he will not hesitate to do so.
Loan PEDDIE: My Lords, I appreciate the opportunity of asking my noble friend the simple question: what proportion of truancy occurs among those scholars who are kept at school after the age of 16?
LORD GARNSWORTHY: My Lords, I cannot give a figure for the country; it varies from area to area and from school to school. Such inquiries as I have been able to make indicate that the position has been exaggerated in terms of the national situation. It may well be that we shall have statistics later on, but as. I indicated in reply to a Question a few weeks ago, the statistics are not available, and have not been available, on this and sundry matters.
BARONESS SUMMERSKILL: My Lords, having in mind a 6 ft. 16-year-old with an incipient moustache, does the noble Lord think it is in the interests of the youth or the teacher, or the class,

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that a youth of this kind should be kept on at school against his will?
LORD GARNSWORTHY: My Lords, I am no expert on what to do about incipient moustaches, but it seems to me that some of these questions might have been given some thought before we all agreed to the raising of the school leaving age to 16.

SOCIAL WORK REPORTS: DISCLOSURE OF CONTENTS
3.35 p.m.
LORD REIGATE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will confirm that the reports on in-patients in hospital prepared by the medical or psychiatric social workers will remain the exclusive property of the hospital concerned and the area health authority and not divulged to the local authorities without the written consent of the patient.
LORD WELLS-PESTELL: My Lords, as the noble Lord knows, hospital based social workers are now employed by local social services authorities. The custody of social work reports is under the control of the social worker concerned and the disclosure of their contents is a matter of professional ethics for the social worker, in consultation in appropriate cases with other members of the hospital team.
LORD REIGATE: My Lords, will the noble Lord agree that the present confidentiality of these reports, which may include reports on psychiatric conditions, should be limited so far as possible to the clinical team who may be working on them?
LORD WELLS-PESTELL: My Lords, it depends entirely on the nature of the reports. Medical case notes about a patient, which may include a contribution by a person who is not employed by the Health Service, remain the property of the hospital authority.
LORD PLATT: My Lords, in view of the very great importance of confidentiality, which worries many of us more and more, and especially the importance
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of psychiatric reports, may we have a rather more positive reply to the Question of the noble Lord, Lord Reigate?
LORD WELLS-PESTELL: My Lords, I thought I had given a positive reply, in the sense that I said that where a report forms part of the medical notes it remains within the jurisdiction of the hospital authority. But, in the last analysis, one has to bear in mind that when a patient leaves hospital and returns to the community he very often requires assistance from the local social worker. If the real purpose of social work is to do what is best for the client, then the medical social worker and the local social worker in the community should be able to get together to discuss how best to support that person in the community.
LORD REIGATE: My Lords, will the noble Lord accept that this is really a very unsatisfactory situation, and one which will cause widespread concern? Is he aware that in many cases the reports prepared are part of the clinical notes? Is he also aware that there are other matters included in these social reports which are not suitable for divulging to others working in the local authority, of which the patient may not even be a citizen?
LORD WELLS-PESTELL: My Lords, with very great respect I thought I had answered that point. I say very clearly that when a person leaves a hospital and returns to his or her community needing further support, presumably the medical social worker will then suggest to the patient that he or she may need further help in the community. If there were any matter which the medical social worker felt that the other social worker should know about, presumably he would seek the assistance of the patient to pass that information on.
BARONESS WOOTTON or ABINGER: My Lords, would the Minister make absolutely clear that he is not only getting the assistance of the patient but that he will not divulge the information without the patient's consent, which is what the Question asked?
LORD WELLS-PESTELL: My Lords, I do not think that any professional social worker would disclose information about a patient returning to the community without the patient's consent. In the last analysis one must realise that

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social workers outside the hospital setup are well aware of the professional ethics involved, and I think it must be left to the professional ability of the people concerned.
LORD DOUGLASS OF CLEVELAND: My Lords, if the noble Lord feels that no professional worker would divulge the information he possesses, what is wrong with making it legal that he should not?
LORD WELLS-PESTELL: My Lords, I think it would be a pity if we tried to deal with this matter by some form of legality. I think we ought to keep in the forefront of our minds the fact that if a person needs help after leaving a hospital we ought to be concerned with what is best to help that particular person. It is a matter, surely, for the local authority social worker to get together with the medical social worker, so that they can decide how best to deal with the situation. It might interest the noble Lord to know that there are discussions taking place at the present moment between the British Medical Association and the British Association of Social Workers on this very point.
LORD GEORGE-BROWN: My Lords. may I ask my noble friend whether he has not got it wrong? Many of us on these Benches, and I imagine on the other Benches, think that when it comes to giving this kind of detailed information, which has been collected under a special relationship, it ought not to be done by somebody the noble Lord calls "we". It should be done only if the patient, (a) knows that it is being done, and (b) says, "I do not mind that it should be done". This is not a matter of legality. May I ask my noble friend whether this is not a matter of protection of a person's personal privacy? If it is not the practice at the moment, will he at least tell us that he will consider the reasonable concern that I and many of my noble friends are showing about this matter. Privacy is becoming the last thing that some of us in this House ought to defend.
LORD WELLS-PESTELL: My Lords, with great respect to my noble friend, I thought I had dealt with this very clearly. I thought I had made it perfectly clear that, if it is a matter about which there has to be discussion between the medical social worker and the local authority
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social worker, it is surely a matter for the medical social worker to seek the views of the patients. As to whether information contained in the patient's case notes ought to be disclosed to the local authority social worker—
LORD GEORGE-BROWN: No——
LORD SHEPHERD: My Lords, I must intervene. We have been on Questions for 28 minutes. The House will agree with me that an important matter is being questioned here, but I think we are unlikely to reach a satisfactory conclusion. I wonder whether those noble Lords who have expressed an interest could meet my noble friend immediately after Questions, or at some other suitable time, to pursue it, and then if necessary raise it again on the Floor of the House. I recognise the importance of this matter, but I think we have to take into account the amount of business.

STATUTE LAW (REPEALS) BILL [H.L.]
3.15 p.m.
THE LORD CHANCELLOR (LORD ELWYN-JONES): My Lords, I understand that no Amendment has been set down to this Bill and that no noble Lord wishes to move a manuscript Amendment, or to speak to any clause or Schedule, and I therefore beg to move that the Order of Recommitment be discharged. Before the House is asked to decide on this Motion, I should inform the House that this is a Bill prepared by the Law Commissions to promote the reform of the Statute Law by repeal. That is being done in accordance with the recommendations of the Commissions in respect of certain enactments which, except in so far as their effect is preserved, are no longer of practical utility. The Joint Committee on Consolidation Bills sat on two occasions to consider this Bill and made three amendments to the Schedule to the Bill to correct printing errors. They were of the opinion that the remaining enactments proposed for repeal were obsolete, spent, unnecessary, superseded or no longer of practical utility, and in consequence they approved the repeal of those enactments.
I ought perhaps to remind the House that a Statute Law Repeal Bill was introduced in the last Session of Parliament

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and fell owing to the Dissolution of Parliament. By then the Joint Committee had had one meeting to consider that Bill, and, as a result of that meeting and of the opinions expressed in the Committee, Part II of the Schedule to that Bill, which concerned the repeal of enactments relating to obsolete taxes, was, save one enactment, not included in the Bill which was re-introduced in the present Session. As I have said, this Bill was amended by the Joint Committee on Consolidation Bills. I understand that no further Amendments have been set down to the Bill, and, as I have said, no noble Lord has indicated a wish to move a manuscript Amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the Order of Recommitment be discharged.
Moved, That the Order of Recommitment he discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

RENT BILL [H.L.]
3.20 p.m.
LORD GARNSWORTHY: My Lords, on behalf of my noble friend, I beg to move that this Bill be now read a second time. Its main purpose is to extend to the majority of those who live in rented furnished accommodation the full protection under the Rent Acts which is already available to unfurnished tenants. There are some exceptions to which I will come later. Your Lordships will no doubt be aware that the 1965 Rent Act (subsequently consolidated in the 1968 Act) which created the system of regulated tenancies subject to fair rents and established the rent officer service, excluded furnished tenancies from full protection and left them only with the limited protection afforded by the rent tribunals.
When the 1965 Act came into operation, furnished lettings accounted for a comparatively insignificant part of the private rented sector and interest in them was concentrated largely on those instances which were most typical, that is to say, lettings by owner-occupiers and winter lettings of holiday accommodation in seaside resorts. Since then however we have seen a change. Over the last few years, the private letting of dwellings has fallen. Whatever the reasons for this, there can be no doubt
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that there has been a considerable decline in the availability of rented accommodation.
The Government—and indeed most experts in the field of housing—believe that this trend is unlikely to be reversed. From now on we must look elsewhere for a solution to our housing difficulties, and this indeed is what the Government are setting out to do in our programme, to increase the rate of local authority house building, and to encourage social ownership of rented accommodation. But meanwhile there can be no doubt that the decline in the privately rented sector adds to the difficulties of those who are dependent on renting. This contraction is, as we all know, conspicuous in the unfurnished sector, and those who have sought to find their homes in this market have been increasingly compelled to make do with furnished accommodation.
This means that the furnished sector is to-day catering for a much wider variety of tenants than was previously the case. It is now taking in not only the mobile individual seeking a temporary home, but we are finding that young couples, families, and old people who are not in a position to buy a home of their own, and who cannot obtain a council house or flat, are also having to make their homes in furnished lettings. For such people the fact that furnished lettings are not protected constitutes a very serious hardship. It means that landlords can demand high rents with impunity. It means that tenants too often feel that they dare not apply to the rent tribunal for a reduction in the scarcity rent they are forced to pay. It means that they have such incomplete security of tenure that many live in permanent fear of eviction and subsequent homelessness. It is for such people that this Bill is designed to provide help.
I readily admit to your Lordships that, taken by itself, the Bill as printed is difficult to understand, and I have to apologise for presenting a piece of rent legislation which is involved and difficult. But, as so often in the past, we are faced with the task of producing urgently needed legislation on a complex subject in a piecemeal fashion. In this case I ask the House to accept that the urgency is acute, since the knowledge that we intend to legislate may well be a stimulus, to landlords to regain possession from

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furnished tenants before the law comes into force. There are already hints and reports in the Press that this is happening, In such circumstances speed must take precedence over the evolution of a polished piece of legislation.
It is for this reason that the Bill works by reference to the existing law rather than as a self-contained measure. It can only be understood by reference to the main legislation—that is the Rent Act 1968 and the Rent (Scotland) Act 1971. What it does is to remove, by virtue of Clause 1, the exclusion in the main legislation which denies to furnished tenants the security of tenure and rent-fixing facilities available to unfurnished tenants. It gives them the indefinite security of tenure which they so desperately need. It provides the right to go immediately to the rent officer to have a rent registered. These tenants will have the right of appeal to the rent assessment committee if they consider the rent officer's assessment too high. These rent-fixing procedures have been in operation for many years now for tenants of unfurnished accommodation. I ought to say that the Government have it in mind to review the whole question of the future of renting policy, including the fair rent system, in the light of their proposals for housing generally. In the meantime, we are extending the existing system to cover an additional class of tenant.
It has been necessary to make a number of amendments to the existing law to take account of this extension in its scope. We have, for example, to create two additional grounds on which a landlord may apply to a court for possession of a dwelling which is subject to full Rent Act protection. The Bill provides in Schedule 1 that possession may be granted where the tenant ill-treats furniture provided for his use, and in Clause 3 that possession must be granted where holiday accommodation has been let on a short out-of-season tenancy and where the landlord has given notice that he will claim possession on this ground. There are consequential amendments to the existing grounds for possession specified in the Rent Acts, together with adjustments to the formula for fixing fair rents to take into account the provision of furniture, and an amendment to deal with the situation where a regulated furnished tenancy is a sub-tenancy and, on the coming to
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the end of the intermediate tenancy, the sub-tenant becomes the tenant of the head landlord.
There are a number of necessary transitional provisions, mostly of a purely technical nature, with which I need not trouble your Lordships at this stage. But I think I ought to mention the special provision we are making to preserve existing tenancies where a notice to quit has been served and where a court order for possession has already been made, but not executed. The tenant in the latter case will have the right to go back to the court which will be empowered to rescind the order if they would not have made it had the Bill already been in force.
I turn now to the remaining parts of the Bill, which are concerned chiefly with certain classes of tenancy which the Government think it right to exclude from full protection and leave subject to the existing provisions. The first two of these are lettings to students by educational institutions to be specified by the Secretary of State and also lettings for holiday purposes. I think your Lordships will agree that neither of these exclusions require much explanation or justification. So I come immediately to the third and major exemption, which consists of lettings by resident landlords. The Government have taken the view, which, I think, will be widely shared, that if an owner-occupier is forced to share his home with a tenant when he does not wish to, that in itself would probably be sufficient to guarantee a permanent state of hostility between them. The Government have certainly no wish to discourage the owner-occupier from letting off part of his home when he is in a position to do so. Such lettings make good use of the spare accommodation many people have in their homes—for example when families have grown up and moved—and these homes are particularly suitable for meeting the needs of those who require accommodation for a limited period. It would in our view be a matter for regret if, by curtailing unreasonably the freedom of resident landlords, we were to cause this supply of lettings to dry up. I might add that the introduction of a distinction between protected and unprotected tenancies, based on whether landlord and tenant live under the same roof, has the advantage of being easily understood by both. This is no

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small advantage in an area where many people affected have little understanding of the law.
My Lords, the Bill provides in Schedule 2 that, in addition to existing furnished lettings by a resident landlord, new lettings—whether furnished or unfurnished—shall be treated as Part VI contracts and come within the jurisdiction of the rent tribunals. This exemption will extend to all new periodic tenancies let by resident landlords, but only to the first fixed-term contract let by a resident landlord to any particular tenant. I should explain the reasoning behind this restriction to one fixed-term contract. A fixed-term tenancy expires by the effluxion of time and does not require the service of a notice to quit to terminate it, and that puts the matter beyond the control of the Rent Tribunal. The noble Baroness looks a little puzzled. I do not know whether she would like me to repeat that last remark. A fixed-term tenancy expires by the effluxion of time and does not require the service of a notice to quit to terminate it, and that puts the matter beyond the control of the Rent Tribunal.
I have to say that while it seems reasonable to allow a landlord to let fixed-term once, we do not wish to encourage the repeated use of contracts under which the tenant has no recourse to the rent tribunal at the termination of his tenancy. All these tenants, whether fixed-term or periodic, will have access to the rent tribunal for the fixing of a reasonable rent, and the periodic tenants will, of course, be able to ask for periods of temporary security. The maximum period for the rent tribunal's suspension of a notice to quit is extended by Clauses 7 and 9 of the Bill from 6 months to 12 months. Tenants who do not enjoy full Rent Act protection may now have at least the benefit of an extended period of temporary security, which con of course be further extended for up to 12 months at a time on second and subsequent applications. We have every confidence that rent tribunals will continue in the new situation to exercise their discretion with the wisdom they have long shown.
It is, perhaps, appropriate to mention here that the Bill raises for England and Wales the rateable value limits within
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which furnished dwellings come within the scope of rent tribunal jurisdiction to bring them into line with the limits of unfurnished dwellings. Noble Lords will remember that the limits for furnished and unfurnished protection were the same in 1965, and whereas the last Government extended protection in the unfurnished field they did not do so in the furnished field. The Bill brings the limits for Part VI contracts and protected tenancies into line once more. The limits for both kinds of dwellings in England and Wales will now be £1,500 in Greater London and £750 elsewhere. This will ensure that all dwellings for which some measure of protection is appropriate are brought within the scope of the Act. This increase does not apply to Scotland, since the rateable value limits there are already the same for furnished and unfurnished tenancies.
My Lords, the Government believe that the resident landlord exemption set out in Schedule 2 to the Bill achieves a reasonable balance between the needs of the tenant and what can realistically be expected of resident landlords if they are to continue to provide much-needed accommodation. We also believe that it is a logical way to proceed in as much as it represents a substantial step towards the complete merging of the furnished and unfurnished codes into a coherent whole. The present distinction between one tenant's security and another's depending on whether or not furniture is provided, has become increasingly unrealistic and outdated in recent years, and we have therefore established instead a new distinction based on whether the landlord is an absentee or lives on the same premises. This distinction has the merit of simplicity in that both landlord and tenant know where they are and it should therefore remove one possible source of had relations.
I am aware that there are some who argue that the provision in this Bill may well lead to a further reduction in the number of private lettings available and that it will, therefore, exacerbate the serious housing shortage faced by this country to-day. To such I would say that I doubt that the Bill will cause tile private rented sector to contract any further than it is doing anyway. But, even if we accept this as a risk I sincerely believe that it is one worth

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taking for the sake of bringing immediate relief to many who are forced to live in private rented homes and who could otherwise never be free of the threat of imminent eviction. This is a necessary and a humane measure and I commend it to your Lordships.
In conclusion I would add that I have referred to the involved form that the Bill takes. We shall of course take vigorous steps to ensure that its effects are widely known and understood. I beg to move.
Moved, That the Bill be now read 2a.— (Lord Garnsworthy.)
3.38 p.m.
BARONESS YOUNG: My Lords, I should like to begin by thanking the noble Lord, Lord Garnsworthy, for explaining this Bill to us, particularly the relationship of this Bill to the Rent Act 1968, and for the help which his office have given me in sending me notes on clauses, although as they arrived only this morning I have not had time to study them at all thoroughly. Once again the House is being asked to work to a very tight timetable. As I have already indicated privately to the noble Lord, Lord Garnsworthy, we on this side of the House do not agree with the principle behind this Bill, and although in the course of its passage through the House we would not wish in any way to be needlessly critical, it is only right that the House should have the opportunity to look at it carefully and the time for proper consultation and consideration in an unhurried atmosphere. This consideration is all the more important as the Bill bears all the marks of hasty drafting.
Perhaps this is not surprising, as I quote from a document called Labour's Programme 1973, page 47 of which reads:
"The next Labour Government will extend security of tenure to furnished tenants, but this will he just a stop-gap until the programme of municipalisation has been carried out."
I do not intend to comment at length in this debate on the merits of a society in which it might be possible only to be an owner-occupier or a council tenant, except to say that in such a society people will be more restricted in their choice of accommodation, more rigidly disciplined and far less mobile, with all the disastrous consequences for industrial
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growth which that might imply, and in which, I much regret to say, there will be far greater opportunities for corruption.
But it is important to have adequate time for discussion, because housing is so important in the life of everyone. Because this is so, I believe that it would be totally irresponsible for anyone in public life to advocate any course of action in housing without the most careful consideration. Therefore, in preparation for this debate to-day, I have discussed this Bill not only with officers in local government to see what effect it would have on council house waiting lists, but with the director of a housing aid centre, with estate agents and with the chairman of a rent tribunal. As a consequence, I am not at all clear what consultation or discussion the Government have had with anyone before introducing the Bill.
I have discovered that a week before the publication of the Bill the chairmen of rent tribunals were summoned to London to meet a Minister at the Department of the Environment to be told of the contents of the Bill. It might well be thought that such a group of men, with extensive practical experience in the field of both furnished and unfurnished tenancies, would have had something constructive to say. If they had we shall not know, for their advice was not sought. This seems all the more regrettable in view of the number of people likely to be affected. My figures may be out of date, because I have had considerable difficulty in finding anything very recent, but I can quote from the Economist of three weeks ago which said:
"At the time of the 1971 census, there were about 800,000 furnished tenancies, containing under 5 per cent. of all households, or about 1·7 million people."
If one needed only one reason for opposing the Bill, it would be that it is entirely contrary to the basic philosophy of the Francis Committee's Report, which is surely a report which must be compulsory reading for anyone who tries to understand the problems of housing. The Committee was, after all, set up by the former Labour Government in 1969. What it said, in general terms, was that, if one grants automatic security of tenure to tenants of furnished accommodation, one is most likely to dry up completely

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the supply of furnished tenancies. I quote from the Committee's Report:
"The eventual overall reduction in the supply of privately rented accommodation would, as we think, be substantial… greater security for those in occupation when the extended security code came into force could well be bought at the cost of greater hardship and difficulty for the much larger number of households seeking such accommodation in the following weeks, months and years…. For the reasons we have indicated, we cannot recommend such an extension. On the contrary, we venture to sound a solemn warning against it."
This view was supported by a leading article in the Observer two Sundays ago. Again, I quote:
"Unfortunately, there is a strong likelihood that its effects"—
that is, the effects of the Bill—
"will be to worsen the housing problem, rather than to alleviate it. Present tenants of furnished flats and houses will undoubtedly benefit, but the probability is that the new legislation will lead to a drying-up in the supply of furnished flats, just as similar earlier legislation has almost completely dried up the supply of unfurnished flats."
Indeed, I am sure that this view is supported by no less a person than Mr. Reginald Freeson, now Minister of Housing, for when he spoke in the debate on the Second Reading of the Furnished Lettings (Rent Allowances) Bill, he said—and he was quoting figures of tenancies—
"Between 1966 and 1971 rented accommodation fell by just under 68,000 tenancies. In the unfurnished sector the fall was 122,000-plus and in the furnished sector there was a growth of 54,500 tenancies."—[OFFKIAL REPORT, Commons, 23/1/73; col. 334.]
If I understand the argument of the noble Lord, Lord Garnsworthy, on the point of the supply of rented accommodation, there is less unfurnished accommodation; it has decreased year by year. We all know this to be a fact, and we all know the basic reason why it has decreased. It is because it is no longer an economic proposition to let unfurnished. But, much more to the point, if a landlord lets unfurnished he cannot get rid of a tenant should he wish to do so. It is this fear that a landlord will not have freedom to use his property that has caused the supply of unfurnished property to diminish so much in the housing market. We now have a Bill dealing with furnished accommodation, which will have precisely the same effect on the whole
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furnished letting market. Any landlord knows that when his tenants leave his only option, once the Bill has been passed, will be to sell his house if he wants to keep its value.
My Lords, this is a short Bill of only 13 clauses, but it is right in a Second Reading debate that I should, in fairness, try to weigh up the advantages and disadvantages of giving security of tenure to tenants of furnished accommodation, with certain exceptions. It is quite true, as the noble Lord, Lord Garnsworthy, has said, that some people will benefit. They will be those who are at present living in self-contained furnished accommodation. They alone will have security of tenure under Clause 1. But against this must be balanced those who will not be helped. Perhaps the most tragic fact is that it is just those tenants in the worst type of furnished accommodation who are unlikely to be helped.
For example, let us take the case of a landlord who buys a house in which he himself lives, and who lets off most of it as furnished accommodation. This is frequently the poorest type of furnished accommodation, and the only accommodation which newcomers and many of the poorest members of the population can get. Those tenants will not have security, because the landlord is living in the house. Many of those landlords are the very worst of the landlords in the furnished property market, and by giving preference to them this Bill could well be a recipe for more squalid furnished accommodation. Indeed, this morning I received in the post a memorandum from Shelter, which made precisely the same point, that this Bill may not help those tenants who, it could be argued, are most in need.
But equally important in consideration of the Bill are the unknown thousands of people who are trying to find accommodation, and for whom furnished accommodation is the only answer. In my opinion, the most hard-hit in this group, will be newly married couples. They cannot afford to buy a house and they certainly will not be eligible for a council house. Where can they go, except into furnished accommodation? A small flat or rooms will be their first home and I am sure that this group of people, above all, will find it increasingly difficult to obtain self-contained furnished

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accommodation in which they can start their married life. We all know enough of the social consequences of starting married life in cramped unsuitable accommodation shared, usually, with parents. I should like to know whether the Government have any evidence at all as to the number of people who will be put at a severe disadvantage as a result of the Bill and because of this problem, and what they will say to those getting married this year and in the next few years who will search desperately for an ever-diminishing supply of furnished accommodation.
LORD AVEBURY: My Lords, I wonder whether the noble Baroness will allow me to interrupt. She probably remembers the discussions we have had on security of tenure and regulation of the rent of people who live in caravans. It occurs to me that young married people who are not able to afford to buy a house, and who cannot get on to local authority waiting lists, will frequently look to the caravan sector for their first home. So is it not equally important to give consideration to their needs as well as to those who rent furnished flats?
BARONESS YOUNG: My Lords, the noble Lord, Lord Avebury, has raised a quite separate point about caravans. I should like to consider what he has said before commenting on it. But, so far as I can see, if security of tenure is given to everybody in caravans, there will be fewer caravans to let, and precisely the same argument will apply in their case as will apply to furnished accommodation.
In general, I welcome the extension of the fair rent principle, though I should say in passing that I cannot understand why the Government are prepared to extend this principle to furnished tenancies and not to council house tenants. I also welcome the extension of the higher rateable value limits, which are explained under Clause 5. However, the Bill makes no reference to the different obligations of landlords in the case of unfurnished and furnished tenancies. In the case of an unfurnished tenancy the landlord is responsible only for the fabric of the building and the external decoration; in that of a furnished tenancy the landlord is responsible for everything, outside and inside, including structural repairs and internal decoration. Any fair rent must surely therefore take into
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account this increased obligation. Indeed, it may well be that the term "furnished accommodation" in Clause 1 needs to be much more clearly defined, for furniture is included in a fair rent calculation. So far as I can see, nothing is said about the cost of services, whether these are provided, either of light, heat, repairs or possibly of a porter. Surely these general services must also he taken into account when determining a fair rent?
My Lords, I turn now to Clause 2 which contains the exemptions, those tenants who will not have security of tenure. It is easy to see the reasons behind these for, I believe, the exemptions are based on the recommendations of the Francis Committee Report. They are designed to help students who, by definition, are temporary residents, and landladies who let holiday accommodation. I think, however, that a further definition is necessary of what constitutes a course of study. For example, does it cover a secretarial course? However, only certain students will benefit, those who will be in specified educational institutions. Those that will he hard done by under this clause, and indeed by the Bill generally, are students presently living in furnished flats which are privately owned, and other young single men and women, many of whom arc still studying. such as nurses, apprentices at technical schools, young social workers, those training to be solicitors and doctors; the list is almost endless. All of these young people who come to the larger cities to work will need accommodation. It is extremely unlikely that they will be able to afford to buy a house, even if they wanted to; and they will certainly not be eligible for a council flat because they are unlikely to be permanent residents. They need furnished accommodation. Frequently to-day they do not want to be in"digs"with a landlady; they prefer the freedom of a flat. They are most unlikely to find one once the Bill becomes law.
There is however one notable omission from Clause 2. While Clause 1 gives security of tenure to all tenants of furnished accommodation, there is no reference in Clause 2 to fixed term tenancies. These are tenancies usually agreed in writing between the owner of a house who lets it for a tenant while he is away for a fixed period and as it is the owner's

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only place of residence he must have it back when he returns. Under the present law, as I understand it, there is no power for a rent tribunal to grant security to the tenant. The fact is, therefore, that if an owner returns home and wants his house while the tenant may refuse to leave lie nevertheless knows that he will have to go because he has no security. However, he may think that the landlord must go to the rent tribunal, and as there may be some doubt on the point he may not be willing to leave. I think that this is an important matter because there are a number of categories of people who, for one reason or another, want to let their house. I refer to service people, particularly those serving overseas, those possibly in the Foreign Office and, if I may strike a personal note, those in universities who go on Sabbatical leave.
I do not intend to go through the Bill clause by clause, my Lords, but I should like to ask a number of questions. I shall be glad to know whether the noble Lord, Lord Garnsworthy, can say what is the position of the tenants of a completely self-contained flat in a house in which the landlord is resident. Has the tenant security of tenure in such circumstances? Secondly is my understanding of the Bill correct, that if the landlord is resident tenants in unfurnished accommodation let within the house do not have security of tenure on a first letting? If that is a correct reading, it is a provision which I welcome because it means the freeing of some part of the market in unfurnished accommodation.
I do not see anywhere in the Bill the right of a landlord to turn out his tenant for non-payment of rent, but perhaps the noble Lord, Lord Garnsworthy, could comment about that. However, I welcome the power in Clause 6(1) to increase the rent. This I believe follows a recommendation of the Francis Committee; otherwise tenants could well be given protection at a completely uneconomic rent. The noble Lord referred to the provisions in Schedule I whereby a landlord may turn out a tenant if the tenant damages the furniture. This reads very well, but I suspect it will be a completely unrealistic provision. Unless there is a complete schedule of accommodation when it is let the landlord will go to court and say that the furniture has been dam-
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aged while the tenant will claim that the landlord was responsible, with the landlord counter-claiming that the tenant was responsible. It will be exceedingly difficult to determine who is right. But perhaps this matter has been gone into with a great deal more detail than would appear from a first reading of the Bill.
As the noble Lord, Lord Garnsworthy, said, it is a technical Bill. In concluding my remarks I think it only right to try to weigh up the balances of advantage and disadvantage. The advantage goes to those at present in self-contained furnished accommodation who will have security of tenure. The disadvantage will be to those looking for accommodation which will, I believe, be increasingly difficult to find. The Bill will not help young married couples, young people starting out to work; it will not help the poorest section of tenants in the worst accommodation where the landlord is resident. Because of this it is difficult to see that it will reduce the number of homeless families. On the contrary it could well make a contribution to there being even more of them. It could well lead to the under-occupation of large houses because, once again, it is a Bill aimed largely against the private landlord, making people fearful of letting in case they should suddenly be unable to ask tenants to leave if the situation becomes unbearable. It is this fear that will prevent landlords from letting and will, as a consequence, mean there will be much less furnished accommodation to let. It is not a Bill that will provide one more house or flat. For all these reasons we on the Opposition side of the House cannot support it.
3.59 p.m.
LORD GIFFORD: My Lords, the Bill is about security of tenure, and in view of parts of the speech of the noble Baroness, Lady Young, which we have just heard, it is necessary for the House to consider carefully, and to remember, what the phrase"security of tenure"means. It means something which everyone in this House no doubt enjoys and which every family in Britain should enjoy—the right to be free from arbitrary expulsion from one's home. It is a right taken for granted by owner-occupiers; it is a right which in practice is enjoyed by all council tenants. It is not enjoyed under the law, which always seems to me

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to be strange, and council tenants should have the protection afforded by the Rent Act as well. However, in practice it is enjoyed by council tenants. The right is enjoyed at present by tenants of unfurnished accommodation who cannot be evicted except by an order of the court, and such an order cannot be made unless certain circumstances have arisen. Briefly, those are either that suitable alternative accommodation has been provided, or the tenant has arrears of rent or is in breach of some obligation, or has been a nuisance or an annoyance.
My Lords, something of the thinking of the Opposition Party was revealed in the speech of the noble Baroness when she talked about landlords not wanting to let their property because they would not have the freedom to get rid of their tenants. A little later she talked of the right to ask tenants to leave if the situation became unbearable. The freedom to get rid of one's tenants is exactly the philosophy of great numbers of landlords who let property in the City; and I am not one who believes that it is any joy for the tenant, particularly if the tenant has a family, if the landlord is in a position to get rid of him when he has done nothing wrong, and when he has nowhere to go—all this purely at the whim of the landlord, who may want to sell with vacant possession at a profit or do up the house so that, equally, he can make a"killing ", as so many property companies have done. The Bill at least brings to an end the distinction between furnished and unfurnished accommodation, and will—and I applaud it for this—give security of tenure (which is something I should like to see extended to every family in this country) to a number of families who do not have it at present.
My Lords, the existence of a class of people—and my information is that it extends to over half a million lettings—who do not have the right not to be arbitrarily expelled from their homes is a social evil of the most scandalous kind. It is an evil, not merely for a man to own another's home but to be the master, the arbiter, of how long he is allowed to stay in it. It is an evil where, as in the case of the distressed areas of London, according to the Francis Committee, 49 per cent. of furnished tenants are not young students or young married couples but families. Sometimes the Labour Party
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and those who speak in favour of tenants are accused of being anti-landlord, of having prejudices against landlords. I confess to that prejudice, not because of any sinful aspect of the character of persons who own property, but because of the nature of the relationship, which inevitably leads to exploitation by the dominant party, the landlord, of the weaker party, the tenant.
Let the noble Baroness and others of her persuasion know that the law gives ample protection to landlords against bad tenants. In the Rent Acts the grounds are specified on which the landlord of a protected dwelling can gain possession, and being a bad tenant is one of them, whether you are a nuisance, whether you do not pay the rent or whatever, subject of course to fair judicial control. But the law does not give adequate protection to good tenants against bad landlords, and far more social abuses stem from that. My own experience shows that every loophole of the law will be used by landlords who wish to have—and I quote the noble Baroness again—" the freedom to get rid of their tenants"whenever they can do so in order to obtain more money at less cost. The best loophole, of course, is the right to evict someone because, for instance, he complains that the rent is too high or because he tries to enforce obligations to repair, or because in some other way he stands up for his rights; and, of course, what we have seen over the last years is that, since the law allows it, understandably enough more and more property owners fill their flats with a collection of shoddy, unwanted furniture in order to preserve that position of power. The distinction between furnished and unfurnished tenancies is utterly without logic, and I am delighted that it is to disappear.
However, my Lords, a new distinction is introduced, between tenants of resident landlords and tenants of nonresident landlords. Again taking the statistics of the Francis Committee. I understand that that will account for 27 per cent. of the present furnished tenants, and in the distressed areas, where the problem is most acute, it will account for 39 per cent. of those who are now furnished tenants; and, of course, it will bring into the area of non-protection many thousands more dwellings which

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are at present let on unfurnished tenancies. The justification given by my noble friend was, I think, that "it is undesirable that an owner of property should be forced to share his home with somebody he does not get on with." Another justification which my noble friend indicated or hinted at, and upon which the noble Baroness relied strongly, was that without such an exemption owner-occupiers would not let out spare accommodation.
As to the second of those objections, I would dispute the premise that small landlords, owner-occupying landlords, would not let out their accommodation if the letting was to be a protected one. These are, of course, by definition, as the noble Baroness in fact said, the small landlords, and the small landlords are likely to be those who need the income most. Just as in the past landlords have accepted, because it is the law, that if, for instance, they buy a property with controlled tenants, those tenants have the right to remain and to continue to call the place their home unless suitable alternative accommodation is provided. so, in future, if there is no choice the owner-occupier would treat those who live in his house or in the dwelling in which he lives as people who had a right to stay.
But even if the premise is justified, the remedy is not to perpetuate insecurity for thousands more families, but to increase the powers of local authorities to nominate tenants for properties which are left empty deliberately. But if a concession has to be made—nd it may have to be made for the limited grounds argued for by my noble friend Lord Garnsworthy; namely, that"it is undesirable that people should have to share their homes with tenants they do not get on with "—then there is absolutely no justification for making the exemption as broad as it has been made in the Bill. As I understand the Bill, no matter how large the building is, even if it is a block of flats with 50 flats inside it, if one flat is occupied by the landlord then the rest of the tenants in the building would have no protection. I can readily imagine that there will be a spate of conveyances from property companies into the names of individuals—relatives, friends of the controller of the company;"stooge"nominees—who will move in
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and occupy one little part of a much larger building in order to come within the terms of this exemption.
If a distinction is needed to cover the particular area of which my noble friend spoke, then there is a perfectly good precedent in the Race Relations Act of 1968. Parliament had to consider there whether to limit the provisions against discrimination in cases where people were living in close quarters, and a definition of"small premises"was enacted—small premises in which it would not be unlawful to practice discrimination. Such premises were limited to those where there were normally no more than two units of accommodation, besides that of the landlord, and to cases where the landlord shared facilities, other than access and storage facilities, with his tenants. In cases of shared accommodation in the real sense of the word, where the landlord and tenant have to use the same kitchen or the same bathroom, I would certainly agree with an exemption, but no more than that.
LORD AVEBURY: My Lords, will the noble Lord forgive my interrupting him? In the case where the landlord shares the kitchen or the bathroom it probably is not a tenancy at all. But to return to the large block of flats which the noble Lord mentioned, which is at present in the name of the property company and where the noble Lord suggests that the controlling shareholder in the property company might move into one vacant flat and thereby acquire exemption under the Bill, surely such a man can do so only if at the same time the lease is taken out of the name of the company and put in his own name; and would the noble Lord not agree it is very unlikely that that would be accomplished?
LORD GARNSWORTHY: My Lords, I wonder whether it would help (and it might save me coming back to the matter) if I were to say that it would have to he taken up as the main residence of the person occupying the flat, and that he may be called upon to prove this.
LORD GIFFORD: My Lords, I recognise that in the case of a block of flats the real owner would not immediately be able to deprive the tenants of security but be could arrange a conveyance from

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the company's name into his own name, or the name of his relative who would hold it for him, and any new lettings made within that block would be lettings outside the protection of the Rent Acts. I shall perhaps come back in Committee to my noble friend's point as to whether it has to be his main residence because I do not think the Schedule actually says so. He has to occupy it as his residence, and no doubt if it was one of two or three residences he may well get by unless there is some amendment to that provision.
My Lords, I come back to the possibility of a more limited definition of the category of exempted persons; namely, that which was laid down by Parliament in the Race Relations Act. It is somewhat absurd if, while a resident landlord may not discriminate in his letting if it is outside the terms of that Act, nevertheless he is in a position where he may lawfully evict subject only to the rent tribunal's power to give extra security to anybody he does not like. In the majority of these lettings by resident landlords, the landlord has a self-contained unit in the basement or on the top floor, the tenants have self-contained units, and there is absolutely no reason why, if the Rent Act grounds do not exist and if the tenant is a perfectly good tenant, his tenancy should be put at risk in the way I described earlier. I claim that while the Bill gives generously with one hand it takes away far too broadly with the other and unless amended it cannot be supported very warmly by those who have to deal with the miseries of insecurity of tenure, because undoubtedly, particularly in the cases of small resident landlords, those miseries will persist.
My Lords, I had thought that there was another major flaw in the Bill; that is to say, that it did not deal with the abuse of granting fixed-term tenancies. As I understand what my noble friend Lord Garnsworthy said—and I hope he will confirm it in winding up—the abuse now practised by landlords, to grant a succession of three-monthly or six-monthly tenancies in order to avoid having to submit to the Rent Tribunal jurisdiction, will not be possible under the new Bill and that a landlord who tries to do that will find that his tenant is a protected tenant and has the full protection of the Rent Act.
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The Bill cannot end the many injustices caused by the malpractices of landlords —the winkling out of tenants, the overcharging of rents, the refusal to do repairs. Only a determined policy, as my noble friend mentioned, of public ownership of rented property can do that. If improved, however, the Bill can give to that most depressed class of furnished tenants, and to those in law centres, Shelter, and Housing Action Centres who try to defend their interests, more weapons to fight against the greed and callousness for which developers of property are regrettably notorious.
4.14 p.m.
LORD BALERNO: My Lords, I apologise to your Lordships in general and to the noble Lord, Lord Garnsworthy, in particular for being unable to be here at the start of the debate. It is not my intention to follow the noble Lord, Lord Gifford, who dealt mainly with the principles of the Bill. I wish to deal with certain aspects, minor aspects one might say, that come out of it.
My first point is to raise a query for my own education. It may be a rather silly question, but we have before us at the present moment the Land Tenure Reform (Scotland) Bill and that Bill puts a limit of 20 years on tenancies. Will the limit put on by this Scottish Bill, when it becomes an Act, in any way cause an anomaly in this Bill? Would it not be logical for it to mean that a continuing tenancy under this Bill could not go on for a longer period than 20 years? If it could not go on for more than 20 years with a formal lease, should it be allowed to go on for more than 20 years with a renewing lease such as this? That is one point, and I do not necessarily expect to get the answer to it to-day.
My main interest lies in how this Bill will affect the universities and other educational establishments. I strongly support what my noble friend Lady Young said about the numbers of students who are now living in flatted houses. The student who cannot get into a residence or who does not want to get into a residence, no longer wants to go to the private landlady and be looked after by the private landlady. That is against the feeling of independence of the modern student. In Edinburgh we say that the day of the bunk wife is over.

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Instead, the students are moving into flats—two, three, four, five, six or if possible more, students are renting a flat and living in it. Under the Bill it is clear that those public-spirited landlords who have been and still are meeting this demand for student accommodation in flats which has sprung up only within the last 10 years in any magnitude, will most certainly stop because of the hazards of any student in whose name the flat has been taken over, getting married—as so many students do—going on to take a postgraduate degree and raising a family in the flat that was rented as a student's flat. That means that that landlord has his flat"sterilised ", as it were, for another purpose altogether.
I wonder whether the Government appreciate the magnitude of this problem and the numbers of students who are living in flats. I had time only to make inquiries about Edinburgh, but so far as I can make out 30 per cent. of all students in Edinburgh and Heriot Watt Universities are living in such flats. The number is of the order of 3,000 to 4,000 students. If one adds the colleges of education, the colleges of art, the colleges of physical education, technical colleges and others, there must be at least 5,000 students in Edinburgh living in flats. No further accommodation can be built by the universities. The arrangements with the University Grants Committee are such that the universities must discover the money for building any further residences. Universities will not borrow money at 15 per cent. in order to put up student residences. When money was cheaper they could do it and hope to make a reasonable commercial proposition of it, but as things are now, the building of student accommodation by universities has stopped and is unlikely to be increased. The bunk wife has gone and we have only the flats to take over for the students and to a certain extent we have council houses that happen to be surplus and are not otherwise required.
This is a very serious situation. If there should be any reduction in the number of flats available for students or if there should be no further expansion in the numbers, then the universities are going to be faced with great difficulties.
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I have given the example merely of Edinburgh. but your Lordships need only multiply the Edinburgh figure by the number of other university centres and it is easy to realise that there will be something like 50,000 students whose living accommodation would be placed in jeopardy as a result of this Bill. I beseech the Government to take another look at this point. I can quite understand why they have slipped up on this. They have made certain exemptions in respect of the residential accommodation provided by the universities and educational establishments but not in respect of that provided by, as it were, private enterprise. I think it would be quite easy for the Government to put down an Amendment which would put this right.
Another point affecting universities was also touched upon by my noble friend Lady Young: the sabbatical year. This is becoming increasingly important and it is also becoming less and less of a sabbatical year—in other words, it is occurring with much greater frequency than once every seven years, which was its original definition. University staff are being encouraged to go abroad for a sabbatical year with greater and greater frequency. It is greatly to their advantage, as a member of the staff, to increase their knowledge and eventually gain promotion. It is also greatly to the advantage of the universities that a staff member should come back from another university, in another country perhaps, with a better knowledge of his subject. Unless such members of staff who go on sabbaticals can be quite certain they are going to get their home back when they return to their own university, they will not go away. They could not possibly risk going away with their children and then coming back to no decent home because their tenants are still sitting tight in it.
My third and last point concerning Scotland refers to the minister in his manse. There are still, as in England many charges and the majority of them have a tied house. Of recent years it has become increasingly common for a minister to anticipate his retirement by buying a house, frequently on mortgage, for himself and his wife to retire into in the place where they eventually wish to live. So far as I can make out from the

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Bill, this practice will be entirely stopped. Therefore, I again suggest that the Government might slip in an Amendment during the Committee stage. It should not be beyond their wit to devise such an Amendment and I hope that they will do this, because to make Amendments on the three points I have mentioned would be rather tricky for anyone who has not at his disposal the services of a Parliamentary draftsman. Parliamentary draftsmen are fully acquainted with the intricacies of the law regarding rent. So I would beseech the Government, for their own sakes and in their own defence, to put forward suitable Amendments during the Committee stage and thereby avoid having"amateur"Amendments put forward by myself and my friends to put these things right.
4.26 p.m.
LORD MELCHETT: My Lords, I warmly welcome this Bill. It has been urgently needed almost ever since the 1968 Rent Act was passed. I do not intend to follow the tactical points on the Scottish situation which were put forward by the noble Lord opposite. So far as I can see, the only real objection to the Bill has been raised by those who, like the noble Baroness, Lady Young, claim that bringing furnished tenants under similar controls to those for unfurnished tenants will dry up the supply of furnished accommodation. I can only speak for the area in which I live—Pimlico—which, incidentally, is a fairly typical inner-city housing stress area.
I would have some sympathy with the argument that this Bill will lead to a reduction in the availability of furnished flats, if it were not for the fact that for many years now property owners and developers have been ruthlessly emptying furnished flats. As soon as developers have seen the chance to make"a quick buck"by emptying a property of furnished tenants and converting it into flats for sale, no airy-fairy worries about diminishing the total stock of furnished dwellings have held them back. I, for one, am not at all sorry to see several property companies in difficulties at the moment. The fact, earnestly and endlessly repeated by their apologists, that these companies have the savings of large numbers of ordinary men and women invested with
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them, through pension funds and so on, does not, in my view, alter the fact that many of these companies made their money by destroying poor people's homes and building in their place office blocks, hotels, shopping precints and rich people's homes.
The urgent need now is to preserve what is left of the rapidly dwindling stock of cheap rented accommodation. Furnished premises represent over 25 per cent, of all households in an area like Westminster, and over 10 per cent. of all London's households. The number of applications to the rent tribunals rises by leaps and bounds every year—for example, in London alone, from 9.500 in 1970 to over 15,000 last year. Eighty per cent. of these applications were concerned with security of tenure. Housing problems are by far and away the major preoccupation of people living in inner-city areas, and approximately two-thirds of the families in London who become homeless are coming from the furnished sector.
My Lords, it is vital that this Bill is passed into law as soon as possible. During its passage through Parliament, many furnished tenants will be at risk. But it is equally important that the Bill, when it becomes law, does not contain any readily-useable loopholes—because I regret to say it is my belief that, if there arc loopholes available, they will be used by landlords. Here I agree with my noble friend Lord Gifford.
There are three areas in particular in which I feel that the Bill could be strengthened and improved. In the first place, the Bill omits any provisions relating to the form of notices to quit. I think that the Government should have implemented the recommendations of the Francis Committee in this respect. The Francis Committee recommended that notices to quit should be in a prescribed form and that this should contain various items of information—first, that tenants could not be compelled to leave except under a court order; and, secondly, that they may apply to the rent tribunal for security of tenure at any time before their notice to quit expires. I would add something not mentioned by the Francis Committee but of practical value; namely, the address of the relevant rent tribunal.

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An amendment may be included in the Housing Bill at present being considered in another place requiring anyone who issues a notice to quit to inform the relevant local authority, so that local authorities are alerted in advance of impending homelessness in their areas. That requirement should apply to notices to quit issued under the 1968 Rent Act and under this Bill.
The Francis Committee were told in evidence by the Association of Municipal Corporations that:
"... due to ignorance of the security provisions available and a lack of supply of suitable accommodation, tenants will quickly feel intimidated by relatively minor pressures from landlords."
The Committee went on to say:
"... many ignorant tenants are led by the common law form of notice to quit (which calls on a tenant ' to quit and deliver up possession ' at the expiration of the notice or on a specified date at least one month hence) actually to leave their dwelling, notwithstanding the fact that they are protected, or, if furnished, are entitled to apply to the rent tribunal for a period of security."
The Committee doubted whether or not this"misapprehension"was widespread. Information on this point is very difficult to obtain, but a survey of 101 properties in Pimlico, all owned by one property company that was attempting to clear them for redevelopment, showed that since 1971 over half the people who had left these properties had not gone to the rent tribunal; this in spite of a very active local campaign against the evictions and the redevelopment.
My Lords, it is my firm conviction that it is very little use Parliament passing Acts designed to help people unless it also ensures that these people are informed about their newly conferred rights. It will halve the effectiveness of this Bill if. after it is passed, half the people who are told to leave furnished premises think they must do what they are told, just like that.
The second aspect of this Bill that I am not happy about is the new case, Case 3A in Schedule 1. This enables landlords to get rid of tenants who damage furniture provided by the landlord, just as they may currently get rid of tenants who damage the fabric of the property. Damage to furniture is thus placed on a par with damage to the property itself. I do not think that this is fair to the tenant.
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Furniture may be old and dilapidated when supplied, or removed or exchanged by the landlord during the tenancy. Landlords may not fulfil their implied covenant to repair or replace items that are not usable because of fair wear and tear. And the final difficulty, mentioned by the noble Baroness, Lady Young, is that there will often be no inventory of the furniture as supplied by the landlord at the start of the tenancy. My own view is that landlords may already have sufficient rights to sue for damages at common law. If not, at the very least the courts should have to give tenants a chance to repair or replace damaged items before eviction is considered.
Thirdly, there is this problem of premises with a resident landlord. This is a difficult area, and as the Francis Committee was told in evidence,
"Both complaints of offences and actual offences (by no means always the same things) are particularl), likely to occur where landlord and tenant share accommodation."
Here the Bill, on my understanding, exempts from its provisions all furnished lettings, and all new unfurnished lettings, as my noble friend Lord Gifford said, of whatever size. Like my noble friend Lord Gifford. I favour the recommendations of Miss Evans contained in her excellent Minority Report to the Francis Committee's recommendations. This would involve a provision along the lines of Section 7 of the Race Relations Act. If this were done, existing unfurnished tenancies in"small"premises would have to be excluded from the Bill so that they would retain their existing protection. And, to answer a point that the noble Lord, Lord Garnsworthy, made, I do not really think that this would be too complicated a provision to enact for people to understand it. My Lords, there is a very real need to distinguish between householders who let rooms that are surplus to their own requirements and the resident landlord who lets to make a
Having dwelt on what are, in my view. some particular weak spots in the Bill, let me say that overall I think this is an excellent Bill. The Government have done very well to bring such a complex piece of legislation before Parliament so soon after taking Office. This Bill implements yet another of the Labour Party's pledges in the Election Manifesto; and I would urge your Lordships to give the Bill the speedy passage that it desperately

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needs through all its stages in your Lordships' House.
4.35 p.m.
THE EARL OF BALFOUR: My Lords, I regret that I am seldom in your Lordships' House, the sole reason being that 1 cannot come to London very often. However, I am glad to have an opportunity to take part in this debate, but my speech will not be short because the real purpose of this Bill requires explanation. May I say at this stage that it was very interesting to listen to the other speeches, particularly that of the noble Lord, Lord Melchett, who spoke so well about London and the South of England. He mentioned the Francis Committee's Report, but I do not think the effects of the Rent Act 1965 had really"bitten"when that Report came out.
I ask your Lordships to accept this Bill and to give it a speedy passage through this House. But I hope that this Bill will not be extended or amended in such a way as to give security of tenure beyond what is already provided for. The reason why I ask your Lordships to accept this Bill is that it introduces nothing that the average landlord has not expected; and let me make it perfectly clear that the real purpose behind this Bill is not to give security of tenure to the tenant, but to reduce the availability of rented accommodation. This Bill is not designed to hit the landlord. It has, after all, been part of the Labour Party's Manifesto for a long time and only a fool would have expected otherwise. The whole purpose of this Bill is to restrict the movement of people from one local authority area to another. This Bill is skilfully designed to prevent the prospective tenant from moving out of the local authority area in which he is domiciled. If a Government want to prevent people doing something, or to reduce the availability of something, they put restrictions on it. In this case, if Her Majesty's Government wanted to encourage landlords to let their property, they would relax the restrictions, not tighten them up. This Bill is merely to increase the restrictions that already exist in the various Rent Acts, particularly the last Rent Act of 1965.
In order that your Lordships may fully comprehend the reasons why this Government have introduced this Bill, it is necessary for me to go back in history to the
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reasons why the then Government introduced the 1965 Rent Act. Most of that Act, and the earlier Acts, were consolidated in the Rent Act 1968 and the Rent (Scotland) Act 1971. From the tenants' point of view, these Acts divide them into two distinct groups giving the tenants either complete security of tenure or absolutely none at all. By far the largest property owners, if you take them as a group, are the local authorities and the housing associations, amounting to some 55 per cent. of the houses and flats available to rent. These authorities and associations are expressly excluded from the provisions of the Rent Acts, and their tenants have no security of tenure at all. In fact, these landlords are the only landlords who can charge a rent on a tied house; for example, a groundsman or school caretaker would lose his house if he left or was sacked from his work, although he could he charged almost the same rent as a similar tenant of any other local authority house. Similar tenancies which are not protected at all are tenancies of Government Departments or held in trust for Her Majesty, or of property belonging to the Armed Forces or the National Health Service et cetera, amounting perhaps to a further 5 per cent., but this does not cover a nationalised industry.
The next largest group whose tenants have security of tenure are the National Coal Board and the big insurance companies. The N.C.B. must have more tenanted houses than any other company in Britain and are certainly one of the largest landowners in this country. These companies have a large number of tenants and probably cover a further 20 per cent., but they have one great advantage over the individual landlord: they never die and are therefore not involved in death duties. When any of their property becomes vacant they can either sell it or relet it depending on whether they need capital or are prepared to wait. The next group of landlords are the private individuals and, although there are many such people, they collectively cater for a steadily decreasing number of tenants for three main reasons: death duties, capital gains tax, and the rent restrictions. The private individual does not normally want to tie his heirs to agreements he made in his lifetime, and he also has to think, because of taxation, about all his assets, particularly capital.

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A tenant of a private landlord has complete security of tenure, not only for himself but for his wife and his children, except in a few specific cases. In these specific cases everything depends on the last occupant. The cases are briefly, first, the owner occupier again requires the house for himself or any member of his family who occupied the house before it was let; secondly, the house was last occupied by a minister of religion and is again required for a minister; thirdly, the house was last occupied by an agricultural worker and is again required by an agricultural worker.
The individual landlord having a house vacant can usually sell it at a handsome profit, but if he lets that house to a family with children its capital value drops to approximately one-fifth of its open market value the day after he has let it, which in itself is a serious deterrent. Therefore, he usually chooses tenants who do not have children.
Now I should like your Lordships to look at the position of the prospective tenant, and again for the sake of simplicity I shall illustrate this with two examples. First, a man with a wife and three young children who has become redundant or who is ambitious and seeks a job in another area from the local authority area in which he lives; and secondly, a middle-aged barren couple who are looking for a house to retire in. First, these two men apply to the local authority, but they are unlikely to be seriously considered for a house unless they or their wives have been born in the area, have lived in the area, or work there, and even then they may have to wait several years. For example, a Member of your Lordships' House has little chance of getting a council house or flat in Westminster or any of the surrounding boroughs, and certainly would not be considered in front of anybody actually living or working in this area. The prospects of these prospective tenants are unlikely to be much better if they apply to a housing association or the N.C.B. But even then the barren couple are more likely to be accommodated first because any house, small or large, would meet their needs.
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The prospective tenants then try the big insurance companies, who are much more likely to offer any accommodation they have to the barren couple than to the family with children, for the simple reason that the family without children will die first. Next they try the private landlords. The man with three children could be, as many are, lucky and find a kind-hearted farmer who allows them to move into a farm cottage and live there rent free. But one thing is certain. The first question either of these prospective tenants is asked is,"Have you any children?"How often do we see an advertisement for a house or flat with the remark, "No children. No pets "? To the barren couple,"Yes, sir! No, Sir! Three bags full, sir! "; a negotiated rent will be fixed very quickly. But the chances of the man with children are very slim. So in desperation he seeks the only accommodation available to him—the furnished room, or the few cases where the tenant has no security of tenure under the Rent Acts.
This Bill, in giving security of tenure to a tenant living in furnished accommodation, has removed one large group of house owners from ever letting their houses—those who have a mortgage. A person buying his house with a mortgage like a minister, as my noble friend Lord Balerno mentioned, cannot let his house under the Mortgage Restriction Acts which go back to the 1920s, but up to now such a person could let his home fully furnished if he got a job overseas, or his job took him elsewhere in the country, and the mortgage companies would agree to this because, even if he was killed in an accident, the mortgagor could evict the tenant, and sell the house. Under this Bill, unless the owner has a life insurance policy greater than the value of the house the mortgagor will not in future allow him to let that house even if it is fully furnished and the owner will in future have to sell his home, put his name on the local authority housing list and hope to get a council house when he returns to this country, or returns home.
Above all. I ask your Lordships to contemplate the awful position of the ambitious man with children wanting to move to another area; the difficulties and hardships that face him at every turn. He

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has to leave his wife and family behind. On his own he can get"digs"almost anywhere. Even the local authorities who forbid subletting turn a blind eye to the single man boarding in a council house. Unfortunately, in his loneliness he often drinks a little too much and may go along a dangerous road into the hands of other women, perhaps ending in divorce. That would be another split family.
However, I try never to criticise anything without attempting to put forward ideas to improve the position and the answer is in the hands of the present Labour Government and no others: by making further use of the rent officer, the very officer they introduced in 1965, and by using that officer to fix the rent payable, depending upon the length of the lease. As I hope I have pointed out, vast numbers of people require a lease for a comparatively short length of time. In a great many cases it takes three years to get a council house. In some areas the waiting list is shorter and in some a little longer. But one thing I can say for certain. No local authority will continue to build houses when it ceases to have a waiting list, for the simple reason that the ratepayers would be up in arms if the local authority had houses standing empty. Another difficulty for the prospective tenant seeking a council house is that if he is a tenant in private property the local authority will not consider him, on the perfectly sound basis that he is already adequately catered for. So here is another case where the tenant is a prisoner in his own house.
I should like to suggest that one ought to allow the landlord to let his property for a contracted number of years. In other words, the tenant has complete security of tenure for the length of the contracted lease, but he may terminate the lease by giving the landlord two months' notice in writing. This contracted lease should be agreed between the landlord and the prospective tenant. with the rent officer acting as arbiter and having the final say in any dispute. Once the period of years is agreed the rent officer shall fix the rent. For a lease of not more than five years the maximum rent shall be not more than two-thirds of the current rateable value, which, if your
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Lordships remember, on March 23, 1965, was considered to be a rent below that of the Rent Act. For a lease of not more than 10 years the maximum rent shall be not more than the gross annual value, less 10 per cent. For a lease of not more than 15 years, the maximum rent shall be a fair rent less 10 per cent. or the gross annual value plus 25 per cent., whichever is the least.
For a contracted lease of over 15 years a full fair rent may be charged. When the lease has expired the landlord may apply to court for re-possession of the house and the court must grant repossession at a period of not more than 6 months after the landlord's application. This may itself not be attractive to some of your Lordships, but do not think of the existing tenant. Think of the poor man looking for somewhere to live. Think of the children. It is the children who prevent him from finding accommodation. It is something like this that is needed to allow landlords, particularly in the country, to let their property to families with young children so that those children may be brought up in the country which is the best place for them. But with the law as it is, nobody can afford to do this.
However, I suspect that Her Majesty's Government will never agree to such an idea and will persevere in restricting tenancies. They have already frozen rents. If the property is a little below standard, the local authority can slap a demolition order upon it under the Housing (Scotland) Act, 1969. I am not sure what the English equivalent is, but I think it is the Housing Act 1968. Then it cannot be re-occupied. Or perhaps they can bring back owner's rates which caused the removal of hundreds of roofs of country cottages in Scotland. It costs a great deal of money to improve a cottage that is below standard or has been damaged by vandals, and the average landlord has little hope of recouping that expense by letting it, particularly if rents are restricted or reduced.
My Lords, it is for these reasons that I hope this Bill is given a speedy passage through your Lordships' House. But for the sake of the prospective tenant I hope that this Bill is unamended, with the

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exception of its Title in Clause 10 which should read:
"This Act may be cited as the House Confinement and Rent Restriction Act of 1974".
This is at least giving the Bill its true Title.
4.57 p.m.
LORD GISBOROUGH: My Lords, I must declare an interest as the owner of a very small number of furnished lettings. In parts, I did not find this a very easy Bill to understand. I found also that it was an unneccessary Bill and I am not convinced by the noble Lord, Lord Garnsworthy, that it is necessary. He said how fearful people were of eviction. But he produced no figures to prove that there is any incidence of evictions, other than saying that the fear of this Bill has set off the prospect of some evictions as people try to beat the Bill. The noble Lord, Lord Gifford, said he had a prejudice against all landlords, and 1 think it is just such prejudice that brings on this damaging legislation. I must confess that I look at this Bill from the viewpoint of a country landlord near a typical dormitory town outside an industrial city where furnished accommodation is in demand by the staff of contractors temporarily in the area, people building their own houses on moving to the area and a proportion of permanent tenants, often single people or single people sharing together.
Landlords usually only furnish their lettings to keep the control which they feel they need for the protection of themselves and of their other tenants. Removing this control will encourage landlords to remove their furniture which will reduce the supply of furnished lettings from the market and deter the provision of further furnished lettings. I know that this has been said over and over again but I think that it must be said again: what landlord will bother to buy and risk his furniture in the future? The needy, prospective tenants will find increasing difficulty in finding furnished accommodation, and the rents, subject to freezes, will correspondingly rise. A tenant on occasion may become a nuisance and irritation to other tenants in a house made into flats to an unacceptable degree. I can think of one tenant who may by noise cause other tenants repeatedly to complain to their
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landlord. In future, the nuisance tenant, who could have been evicted subject to control by the court, will have security under this Bill unless his nuisance can be proved to be adequate for his eviction to be sanctioned by a long and costly civil action.
The satisfactory and respectable tenant—in other words the vast and overwhelming majority—will, if he can find a furnished letting, have legal security which is little needed in practice and have to put up with his unruly neighbour who cannot be got rid of. The cost of this security will be that as the market dries up others will be quite unable to obtain furnished lettings. However, if one accepts the inevitability of this Bill, then perhaps it can at least be improved. Ill-treatment of furniture might allow the landlord to obtain possession, but this would be after a court hearing obtainable only after several months—such is the delay for a civil action. There would be further months awarded for the tenant to obtain new accommodation. As this would apply only to a bad tenant, anyhow, the further damage to furniture in that period could be considerable even if the court actually awarded the landlord possession. Would ill-treatment also cover lack of maintenance, because wilful lack of maintenance and failure to report to a landlord minor breakdowns of furniture can be as destructive as ill-treatment.
The attempt to cover holiday cottages may not succeed. What if the winter out-of-season tenant refuses to leave in spring, claiming protection under this Bill? By the time the court has given possession, it will be August and the holiday-booked families will have had to go elsewhere. What of the occupier—and this has been mentioned more than once—who goes away from his flat on business? Will he no longer be able to let his flat for fear of not getting repossession when he returns? It is, of course, right that a landlord should retain control of lettings in the building in which he resides. But there are many places in the country where stabling has been made into fiats which are not actually part of the landlord's house, yet are part of the premises. A bad tenant in such a place could be disastrous to the landlord and to other tenants, but not being actually in the landlord's building the nuisance

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tenant would have protection and could not be got rid of.
There are thousands of houses converted to furnished flats where the landlord does not reside in one of them. Yet tenants are often carefully selected so that they are reasonably compatible with one another living in the same house. If one tenant turns out to be a petty nuisance the landlord can do nothing and the other reasonable and well-behaved tenants—again, the vast majority—must just put up with it. This Bill will give protection to a tiny majority of bad tenants who could have been, would have been and probably should have been ejected from furnished lettings, at the expense of the vast majority of prospective tenants who will find it increasingly difficult to obtain furnished accommodation as a result of the disincentive to landlords. There is a need for furnished lettings, the provision of which should be encouraged, whereas this Bill will discourage such provision. That will be the obvious and not very constructive result of this Bill.
5.3 p.m.
LORD JANNER: My Lords, I hope your Lordships will forgive me for saying a few words, not having put down my name to speak. But I have listened to some of this debate and it reminds me of what has been going on for many years in respect of Rent Acts and properties being protected. I was reminded of my maiden speech which was made on a similar subject 40 years ago. During the period that has intervened there has always been a desire on the part of those who are reasonable to see to it that the Acts, in so far as security of tenure is concerned, shall be extended to furnished apartments. We are asked to declare an interest in this House, as in the other place. I have an interest which is rather against me and my clients, but I think it only fair to present to the House some indication of why I feel that this change is essential.
At long last, a Bill is being introduced into the House which gives to the tenant of a furnished apartment protection similar to that given to a tenant who has no furniture in his tenancy. I do not understand the kind of argument that is being used against this change, and I say that with the greatest respect to the noble Lord who has just spoken.
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Furnished apartments to-day have certain restrictions placed upon them which apply even if there is a change of tenancy. Indeed, if the tenant of a furnished apartment applies to the appropriate officer and finds that his rent is beyond the amount that should be charged for that apartment, the rent decided upon applies not only to that tenant but to all subsequent tenants. So the argument that there will be less accommodation available is hardly sustainable, because a subsequent tenant has to pay the same registered rent. So there is no question of a landlord being better off with another tenant than with his present tenant.
Loan GISBOROUGH: My Lords, that is true. Therefore, there is no earthly reason why anybody should give notice to quit to his tenants. So there is no problem. The argument against the Bill is that when there is protection the landlord will not bother to furnish his flat.
LORD JANNER: My Lords, I am coming to the question of protection. What is the present position with regard to protection? The tenant has a right to apply for an extension of the period after a notice terminates. At present six months can be given, but further periods of extension can also be given. It is true that under the present Bill the period is being extended to 12 months. But what I am driving at is that if a person is prepared to let his house as furnished apartments, he is no better off with another tenant than with the one he has at present, in so far as his financial position is concerned.
I concede that at times there are difficulties with regard to tenants being nuisances. But I do not hold the same view as the noble Lord, Lord Gisborough, that it would take so long to have a tenant ejected on the grounds of nuisance. Does the noble Lord not realise that this is a matter which can be decided in a county court, and the period would not be so long before a decision could be given? So I do not think that argument holds. The only argument that holds—and here I agree with those who put forward this view—is with regard to the person who does not want to live in his house. In some cases there may be hardship, as there was when tenancies were not furnished. But the fact of the

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matter is that one has to balance the advantage to the community as a whole with the disadvantage to the few. So that it resolves itself into this position. I hope I am not over-simplifying it, but I think this is what the position actually is.
If a person is prepared to let, he suffers no disadvantage under this Bill—none at all, unless he is not prepared to exercise his right to have the tenant ejected on the grounds available. The person who could derive no benefit from it would be the person who desires to let his place for a particular period, and wishes at some time or another to sell at a higher price. As I said before, this applies in all kinds of lettings, whether they be furnished or unfurnished. It is true that at the present moment it does not apply to furnished lettings, but frequently the term given to a tenant to retain his tenancy, even under the present Acts, would prevent a sale except for a fairly long period, and consequently, sales would drop.
We have to consider whether a furnished tenant should have the fear of being dispossessed removed from him. I fought for this for many years, right through the Rent Acts in the other place, from 1945 onwards. I remember the position in the First World War, when the extremely serious conditions prevailing in consequence of the raising of rents, and so on, produced the 1915 Rent Act. We have coped with that, to a certain extent, with regard to furnished apartments. Any person who at present takes a furnished apartment could apply to have the rent adjusted. Frankly, weighing up the position and the difficulties which prevail at present for tenants in getting alternative accommodation, think that we must extend to furnished apartments what now applies with regard to unfurnished apartments. It is long overdue. Of course, the exceptions contained in the Bill cover important matters. If we read the Bill carefully, we see that careful consideration has been given to what the exceptions should be; but apart from that, and ideas which may emerge during Committee stage, see no reason why we should not accept the Bill as it stands.
TILE EARL OF KTNNOULL: My Lords, before the noble Lord sits down,
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may I say I listened with great interest to his speech. The noble Lord has wide experience of the subject. From his wide experience and practice, could he say whether in cases of furnished tenancies he has ever come across hardship in the sense that tenants have been evicted against their wishes and despite application to the court, as against hardship in unfurnished tenancies? Is the noble Lord trying to draw a distinction between hardship under furnished tenancies as against hardship under unfurnished tenancies?
LORD JANNER: My Lords, that is a difficult question to answer. May I put it this way: In my own profession one comes across the exceptional cases: one does not come across the general run of things. To give an answer to a question like that of the noble Earl, Lord Kinnoull, is difficult. Of course there is hardship at times; there is no doubt about that. But as I said in the course of my speech, and I hope I made it clear, the situation is not entirely all black or white. One has to compare what is the benefit to the community as a whole with the exceptional cases. Certainly I have seen hardship in respect of cases of widows or people who have inherited properties, where the old argument has been used. Unfortunately, one cannot really in an Act cater entirely for the exceptional cases. One has to accept that there will be hardship in certain cases, but that in the main it is essential to have a Bill and a system.
5.16 p.m.
LORD AVEBURY: My Lords, I too must apologise for not having given notice that I was going to speak. I have been prompted to do so by some of the speeches that i have listened to during the course of the afternoon, and in particular by the remark made by the noble Lord. Lord Janner, and others before him, that this legislation is long overdue. In dealing with furnished accommodation we should have adopted many years ago the procedures that apply already to unfurnished accommodation. I think the noble Lord, Lord Melchett, mentioned the 1968 Rent Act, which was, of course, a consolidation Act and included the provisions of the 1965 Rent Act that preceded it. On the 1965 Rent Bill in I Standing Committee I put down an

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Amendment providing for this very thing to be done, for furnished houses to be assimilated with unfurnished. I was told at the time that this was inappropriate because the late Aneurin Bevan had said there was a distinction in principle between furnished and unfurnished accommodation, and the Government at that time were not prepared to consider it, in spite of the fact that I drew attention to the risk which the Government of 1965 were placing upon these tenants, that landlords would simply instal a few sticks of furniture in order to escape the provisions of the Bill.
As your Lordships know that is precisely what has happened, and it is the reason for the figures given by the noble Baroness, Lady Young, earlier in the debate. It is the reason why there has been a reduction in the total amount of rented accommodation between the censuses of 1966 and 1971. But within the total, there has been an increase —a small increase, it is true—in the supply of furnished accommodation, and a much larger decrease in the supply of unfurnished accommodation. I think the noble Baroness will probably agree that the reason is obvious—that as landlords got vacant possession, if they did not wish to sell off the properties, then they did put in a few sticks of furniture, to which I referred in 1965, and thereby escaped the provisions of the 1968 Rent Act. I am sure the noble Baroness would agree that to be true. Like the noble Lord, Lord Janner, I cannot understand how we have gone on for so long, making this spurious distinction between furnished and unfurnished accommodation. There is no logic in that distinction.
My Lords, I think the Government have been quite right to bring this legislation before us as quickly as possible, although I, too, am anxious that it should have been so complicated, because of the need to express it in a form of legislation by reference, which the late Mr. Crossman deplored at the time of the 1965 Bill. He said at that time (and I think it is still very true to-day) that particularly where one is concerned with a measure of social reform, the import of which it is vital that millions of ordinary people should understand, one does not want, if one can possibly avoid it, to legislate by reference. I was interested
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to hear the noble Lord, Lord Garnsworthy, say that there was underway a comprehensive review of the whole of this legislation. One hopes that the Bill, when an Act, will be on the Statute Book for only a short time and that it will be followed, as was the 1965 Rent Act, by a consolidation measure which will be more clear and simple for those affected to understand.
I want to touch on one or two of the other points raised by the noble Baroness, Lady Young, in the course of her criticisms of the Bill. She said first—and this is an important point for us to answer—that the Bill was going to result in restriction of choice for the less mobile and for young married people who had no other possibility of finding a home. She said—and this is a very important matter at this time—that it was going to increase the opportunities for corruption. I am not quite sure what the noble Baroness meant by that, whether it was that in the situation of having only local authority housing to go for the young married couples would attempt to bribe the housing officers, or whether she had something else in mind. If it was the former, I do not think she need have any anxiety, because in the period of acute housing stress such as we have experienced ever since the war I do not recall—although I may be corrected by other noble Lords—any instance where a housing officer has been convicted of accepting a bribe in order to place somebody on the list or to give him preferential treatment when he had already had his application registered.
With regard to the noble Baroness's other criticism, that it implies restriction of choice for the young married couple, I do not think that is a very realistic criticism. Young married couples would obviously try to place their names on the local authority list because the accommodation which they would ultimately get would be very much cheaper than anything else. They only go in for furnished accommodation, as the noble Baroness recognises, because they have no other choice, even though it is much more expensive than if they were able to get a council house. Surely the answer to this problem is to increase the supply of council houses. I agree with the noble Baroness that the Bill does nothing to achieve that, and it was not intended to do so. That is another matter that we

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ought to tackle with urgency, but not in the course of the proceedings on this Bill.
BARONESS YOUNG: My Lords, perhaps I may say to the noble Lord that I made my remarks in the context of what I think is an undoubted fact, that as a result of this Bill there will be less furnished accommodation to let, and we will therefore get into the position, which I understand the Government wish to do, in which the only choices available will be to buy and become owner-occupiers or to become council tenants. I think it is a very serious matter indeed for young married couples, who will find it increasingly difficult to find anywhere to live. They will have to be on the council list for about a year as a minimum requirement before getting a house, and so far as I can see neither the Government nor the noble Lord, Lord Avebury, have given any indication as to where they will live in the intervening time.
LORD AVEBURY: My Lords, there is a third choice, which the noble Baroness did not mention and which I would expect her to give attention to, and that is the growth of housing associations, which I hope the Government will continue to encourage. This is a possibility which is open to young married couples which does not involve them in relations with a landlord, which sometimes cause acute anxiety at the beginning of married life. I speak from personal experience, because I am probably the only Member of your Lordships' House who has been evicted from furnished accommodation at the beginning of my married life. In fact I was evicted for damaging the landlady's furniture. I placed a soda-water syphon on a table in the single room which I occupied at the vast cost of £4 a week, which was quite a lot of money in the early 1950s. The landlady was in the habit of coming into this room while we were out, because she had a separate key, and when I caught her there one day, having returned unexpectedly on a Sunday morning, she said that she was not going to have her furniture wilfully abused and gave me notice to quit on the spot. So I think I can speak with some experience on this matter.
Going back to the noble Baroness's criticisms, young married couples do not go into furnished accommodation unless
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there is no other choice open to them. I hope she will bear in mind that housing associations are there as a third choice, of equal importance to local authority accommodation, or buying a house if they can possibly afford it.
THE EARL OF KINNOULL: My Lords, I am grateful to the noble Lord for giving way. Does he know what percentage the housing associations represent in the rented furnished or unfurnished market?
LORD AVEBURY: My Lords, I think the figures are available in the Census. I tried to look them up just before I came into the Chamber, but unfortunately we have not got the ten-year tables of the Census in our Library; they are only in the Library of another place. That is a matter to which one might call attention on another occasion. But I agree with the implication of the noble Lord's question: that the housing associations are a very small percentage of the total. I am saying that we ought to see whether any measures can be taken by the Government to increase it, as a substitute in the long term for furnished accommodation, which I agree is going rapidly to decline. If one looks at the figures over a number of years, this is what is happening under any legislation. Prior to the 1965 Rent Act, there was a decline in the total supply of rented accommodation, and since then it has gone on at the same pace.
I can at least give the noble Lord some overall figures of the amount of privately rented accommodation: 1960, 4,297,000 dwellings; in 1965 it had gone down to 3.6 million; 1970 2.9 million; 1972—the latest figures in the social trend—2.68 million. So the noble Lord can see that there has been a steady decline over the last fifteen years, and that has proceeded irrespective of the kind of legislation on the Statute Book. I think we shall find that when this Bill becomes law it will not in any way affect the total amount of accommodation available for private tenants. There may be an alteration in the mix. And the practice of landlords, to which the noble Baroness drew attention, of putting a few sticks of furniture in and calling the flat furnished and thereby escaping the provisions of the 1968 Act, may decline, so that we do not get an increase in the provision of furnished accommodation accompanied by a correspondingly larger decrease in the

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volume of unfurnished accommodation available. I certainly do not agree that there will be a drying up of the supply of furnished flats, if only for the reason that landlords will still be able to get a slightly larger rent for furnished flats than for the equivalent unfurnished. If landlords have already provided furniture, it is very unlikely that they will take it out and let the property unfurnished.
As regards the criticisms of the noble Lord, Lord Balerno, in regard to university accommodation, I think personally that landladies in places like Edinburgh, where the volume of accommodation required by the universities may be quite large in proportion to the total, will continue to let properties furnished, as they have done in the past, in the knowledge that most students when they finish their university course will go to some other part of the country. I think the noble Lord was rather exaggerating when he said that most of them would get married and would go in for further degrees, and that therefore they would tend to remain in the accommodation, and, as he put it, sterilize it for any other use. I should have thought that if one was a landlord in Edinburgh and one was anxious about recovering possession of a flat, one would, if anything, tend to prefer students to other people in the community in the light of the fact that one was likely to recover possession at the end of their university course when they went down and sought employment in some other field.
LORD BALER NO: My Lords, may I inform the noble Lord on this point? I would not be here to-day speaking on this Bill if it were not that I have received a series of telephone calls and messages from the accommodation officers and the Chairman of the Edinburgh University Students Accommodation Committee expressing dire distress at the provisions of this Bill. I have come down especially because of the pressure in the university circles in Edinburgh, which I believe to be reflected in other universities in Scotland.
LORD AVEBURY: My Lords, I am certainly not denying what the noble Lord has said, that many of the people he has consulted, and others in university towns elsewhere in the United Kingdom, feel anxiety about the effects of this Bill.
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What I am suggesting, however, is that these anxieties are perhaps a little exaggerated. Students are not, as a class, likely to remain in furnished accommodation as long as other kinds of tenant. The persons in Edinburgh who are giving preference to students in letting their accommodation are in a much better position to recover possession in the long run than people who are letting to nonstudents. I should have thought that that stands to reason. I think that when the experience of Edinburgh is examined after a few years one will find that these anxieties have really not got the force which the noble Lord has expressed this afternoon.
LORD BALERNO: My Lords, if the noble Lord will excuse me once again, may I say that the very fact that the owners of these flats which arc being let furnished are now exceedingly apprehensive will mean that they are going to unload them, and that they will sell them and be clear of the trouble of owning them under the new circumstances. Their apprehension may or may not be justified, but it is there, and in consequence of that apprehension there will quite definitely be fewer furnished flats to let for students.
LORD AVEBURY: My Lords, I was coming on to the question of landlords being encouraged to sell the accommodation in the way that the noble Lord and also the noble Baroness, Lady Young, has mentioned. I am going to upset them by saying that I personally believe that it is a good thing if they sell to the local authorities. I should like to see this measure accompanied by encouragement given to the local authorities to buy up accommodation which landlords no longer wish to let themselves on a completely voluntary basis, because I think that if one looks at the tendencies of the last fifteen or twenty years the private landlord is a dying animal; he is disappearing off the face of the earth. I am making no criticism of private landlords. I do not agree with the noble Lord, Lord Melchett, who thought that all landlords were evil.
I ought to have declared an interest at the beginning of my speech because I own a small number of unfurnished properties. Whether one likes it or not, the fact stares us in the face that the

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private landlord of residential accommodation is disappearing off the face of the earth. It is our task, as a responsible Legislature, to see how we can replace him in the scheme of things.
I am suggesting to your Lordships, not in connection with this measure but concurrently with it, that we should give encouragement to local authorities to take this property into their ownership, and to ensure therefore that it continues to be used for the same purposes. I cannot see why the Edinburgh Corporation should not offer to buy out any of the landlords who are feeling the anxieties that the noble Lord, Lord Balerno, described, because then everybody would be happy. The landlords would be happy because they would have got back their capital (and at the moment they can invest it at a much higher return than they would get from the students); presumably the local authorities would be happy because they would increase the stock of rented accommodation for their own purposes; and the students would be happy because they would be dealing with the local authority as a landlord instead of a private individual.
Generally speaking, I think that most tenants would prefer to deal with a local authority rather than a private individual who is not governed necessarily by the same rules of conduct—I agree that many of them are—and who are also subject to a democratic control which cannot be exercised in the case of a private landlord.
THE EARL OF KINNOULL: My Lords, may I ask the noble Lord, for the benefit of the House, whether a tenant of a local authority has any security of tenure?
LORD AVEBURY: My Lords, I think that the noble Lord, Lord Gifford. mentioned that he has practical security of tenure, if not theoretical. Is it the Small Tenement Recovery Act 1838 that enables a local authority to regain possession of a dwelling without going to the county courts? The noble Lord, Lord Gifford, who is much more of an expert on these matters than I am, will correct me if I am wrong, but I believe that it is not current practice for local authorities to exercise their rights under the Small Tenement Recovery Act, so in practice a council tenant has absolute security of tenure.
THE EARL OF BALFOUR: My Lords, I really must interrupt the noble Lord, Lord Avebury. I always enjoy listening to him. He will find (and I am fairly certain that it is in several of the Rent Acts) that local authorities are expressly excluded from the provisions of any of the Rent Acts—certainly the 1965 Rent Act, the 1971 Rent (Scotland) Act, and the 1968 consolidation Act. If a local authority, or a housing association, such as the Scottish Special Housing Association, applies to the court to evict somebody, the court must grant that order. In almost every other case with a private landlord the court may grant an eviction order. There is a big difference between"may"and"must ". This, I promise you, is the law.
LORD AVEBURY: My Lords, I am sure that the noble Earl is right. He reminds me that it was the case in the 1965 Act that local authorities were not subject to the same restriction as the private landlord, but they have this power under the Small Tenement Recovery Act 1838 which, in practice, I do not think they ever use. The point is still valid that the local authority is subject to democratic control, and if a housing officer were to evict somebody unjustly there would be an enormous row about it in the locality. The local newspaper would take it up, councillors would be able to intervene on the tenant's behalf, and it is likely that if any injustice had been done it would be swiftly rectified by the influence of public opinion in that locality. That is why I say that a tenant of a local authority is generally much better off than a tenant of a private landlord.
I am sorry that I have been led astray by the multitude of interventions to speak far longer than I intended. I want to mention only one other point, and that is the question of sabbatical years raised by the noble Lord, Lord Balerno, and what happens in the case of a university lecturer who goes away once in seven years for a period at some overseas university and then comes back and wants to regain possession of a house he has let in the meanwhile. This a point that should receive the serious consideration of the House. In the 1965 Act the provision was that if somebody had lived in a house before he let it and announced his intention of recovering it after a stated period, then the court was bound to grant him an

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order for possession. This provision was specifically designed to cater for cases such as the noble Lord, Lord Balerno, mentioned, and also those of officials of the Foreign Office, personnel of the Armed Forces, and so on. I thought that that was a useful exemption from the krestrictions on recovery of possession that applied to other landlords. I would hope that it would be read across from the unfurnished to the furnished properties.
Subject to these minor amendments that I have discussed, this is a good Bill. It should receive the welcome of the House, and I hope that your Lordships have paid close attention to what the noble Lord, Lord Garnsworthy, said about the risks of delay, and that we shall pass it through this House with great expedition so that it becomes law before the summer.
5.39 p.m.
LORD GARNSWORTHY: My Lords, may I first apologise to the noble Baroness, Lady Young, for the delay in the arrival of the notes on the clauses. I think that she will understand that I did everything I could to expedite the matter. I gather that she has an urgent appointment that is likely to take her away before we have concluded the Second Reading debate. May I say before she goes that I listened carefully to the speech she made and I shall be returning to it and attempting to answer some of the points she raised.
Although the noble Baroness indicated that from the point of view of the Party for whom she speaks we need to deal with this Bill at a reasonably leisurely rate, I am much more impressed by the approach of the noble Lord, Lord Avebury, and some others. There is tremendous need for speed because whether or not we like the Bill if we take an undue period of time in discussing it we are likely to achieve many of the results that I think nobody in the House has indicated this afternoon that they want to see brought about. I think it is generally recognised, now that the Government have announced their intention of legislating, that the quicker we can get on with it the better for everyone concerned. That, as I said when I opened the debate, is the reason why we have not taken an overlong time in endeavouring to produce
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a perfect Bill that would meet all cases. It is an urgent Bill and no one from this side of the House has pretended or will pretend that it will add to the stock of total housing accommodation. I repeat what has been said by myself and by others that is not the purpose of the Bill. The purpose of the Bill is to give a sense of security to those who have lacked it.
The noble Lord, Lord Gisborough, and one or two other noble Lords have raised the issue as to whether a case could be made out. If anybody is in doubt let him read this publication by Shelter, Priorities for Housing Action. From a brief glance at the statistics given in Table 8 on page 19 it is clear that a substantial number of our neighbours are evicted annually. A great many others are moving, and we have good reason to doubt whether all of them have known their rights or possessed the determination to take issues to court.
My Lords, the noble Baroness, Lady Young, quoted a number of organisations which have not welcomed the Bill. It was right and proper that she should so tell us. She referred to Shelter and I hope she will not mind if I make a special reference to what she said. I have in front of me a communication that I received shortly before I came into the Chamber which sets out Shelter's position. I am sure that the noble Baroness will be interested to know what they have to say. The first sentence reads—
"Shelter warmly welcomes the Government's proposals to extend security of tenure to furnished tenants."
On that document the only Amendment of any significance that I have noted is that they wish that the Bill did not propose to exclude all tenants of owner-occupiers. This means that Shelter feels that this Bill does not go far enough.
The noble Baroness indicated that the Bill is opposed in principle by the other side, although the Opposition will not oppose the Second Reading. That comes as no surprise because when we come to deal with the matter of housing we often find that here is the great divide, the gulf where we take rather different views. We on our side see housing as a social service. On the other side, it seems to me—and I hope I do them no injustice—they see housing as a community need that can be exploited for

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gain. Indeed, I believe it is their view that this is the way to overcome the problem of enough homes for people to live in—to allow people to make a profit out of supplying houses and to go on making it until they have satisfied the market. We on this side take a different view. I welcome the support we have received from my noble friends Lord Gifford, Lord Melchett and Lord Janner, and I welcome also the support which the noble Lord, Lord Avebury, has given the Bill.
A number of questions have been asked and I will do my best to answer them. If I miss any it will not be intentional, but if I try to answer all the points that have been raised we shall be here for a very long time. A number of the debating points that have been made have been answered as the debate has gone along. My noble friends Lord Gifford and Lord Melchett raised questions as to what we mean when we use the term"occupied as a residence ". In the resident landlord exemption clause we do this. They ask whether the landlord could evade the provisions of this Bill by moving into a residence for just a few days. Interpretation of this clause, as of all other provisions of the Bill, will of course be a matter for the courts. Many of your Lordships will know that there is already a substantial body of case law relating not only to Rent Acts but to other legislation as to what constitutes residence. A landlord claiming the rights afforded to a resident landlord will have to satisfy the court that the dwelling is genuinely his residence. The court will be expected to look carefully at all the facts of the case and would not, I venture to suggest, be likely to accent the claim where the circumstances were as dubious as has been suggested.
My noble friends Lord Gifford and Lord Melchett suggested that perhaps the Bill might have followed the example set by the Race Relations Act in regard to the position of landlords. I know that many people advocate the adoption of a resident landlord exemption based on the exemption from discrimination provisions in the Race Relations Act of 1968. Indeed, this was the solution recommended by Miss Lindell Evans in
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her minority report advocating security of tenure for furnished tenants in the Francis Committee Report in 1971. Noble Lords have also suggested to-day that we should use this method. We considered seriously whether we should adapt it to meet the purposes of this Bill. I repeat what I said at the outset, that it has been our intention to make this law as simple as possible so that ordinary people can understand it and live with it without difficulty. That is the reason why we have dealt with the matter in that way. The noble Baroness, Lady Young, and the noble Lord, Lord Balerno—
LORD GIFFORD: My Lords, as my noble friend is leaving the resident landlord exemption could he repeat the purpose of the exemption? Is it, as he said in his opening speech, really the Government's intention to include in this exemption, lettings of 10, 20 or even 50 units in one building?
LORD GARNSWORTHY: My Lords, with regard to the last part of my noble friend's question, I do not know whether there will be many of the order of 50, but I think I am right in saying that the answer is,"Yes ". We have adopted the yardstick of which we have spoken because we believe it will be simple for everybody to understand what we mean by it. I would, however, draw my noble friend's attention to what I said at the beginning that it is our intention to look at the whole situation, and I hope we shall not have to wait too many months before we are able to undertake that. The noble Lord, Lord Balerno, the noble Earl, Lord Balfour, as well as the noble Baroness, Lady Young, indicated that in their view the measure will convert an increase in the supply of furnished dwellings available for letting into a decline. Whatever the reasons for it, the decline in the supply of dwellings to let by private landlords is an inevitable feature of the housing market to-day. There is no discouragement of lettings by absentee landlords, and in fact the Bill will maintain their position.
In our view, the proper providers of dwellings to let are the social landlords —local authorities and housing associations. The Government are already taking steps to expand the supply from

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these sources, and to encourage the transfer of privately rented dwellings into social ownership. In 1974–75, an extra £350 million is to be made available to local housing authorities in England and Wales, £50 million of which will be allotted to municipalisation. The Housing Bill now under examination in another place includes measures designed to stimulate the provision of dwellings by the voluntary housing movement. We expect the rate of increase in supplies from this source to double by 1976. Thus, there is every hope that not only the existing loss from the private sector, but also any additional loss which might result from this measure, will be more than made up by the expansion of the sector in social ownership.
LORD BALER NO: My Lords, before the noble Lord moves on to the next point, may I ask him to add the University Grants Committee to the list of public bodies which can provide accommodation for students and others? Could it be given money to pass on to the universities for the construction of residences and flats for students? At the present time, there is no provision officially available to the universities from the University Grants Committee and private benefice has practically dried up.
LORD GARNSWORTHY: The noble Lord, Lord Balerno, will appreciate that that is not really my province, though I can undertake to pass on what he has had to say to the appropriate authority. There have been questions asked about the owner-occupier who lets his home while, for instance, he goes on a tour of duty overseas. Such owner-occupiers will continue to enjoy the protection which is already available to them under Schedule 3 of the Rent Act, which requires the court to grant possession of a building in which the landlord has previously lived as an owner-occupier, where at the commencement of the tenancy he has given notice to the tenant that he might wish to regain possession of his house in order that he can move back into residence. Owner-occupiers who are currently letting their homes furnished while they are temporarily absent will have up to six months from the passing of the Act to give the appropriate notice to their tenants. But if they have already given notice under
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that part of the Rent Act which currently concerns furnished tenants, that will be sufficient to enable them to regain possession without further notice.
The noble Lord, Lord Balerno, and one or two others, raised questions about the situation in university towns, such as Edinburgh. If landlords were concerned about getting permanent tenants in place of temporary tenants, one would have thought they would be likely to continue catering for the student. However, I appreciate the point the noble Lord has made, that there may be some students who feel at the end of their studentship that they would very much like to stay on and there may be some difficulty. I think that the fairest thing I can say is that I will have the matter looked at and it will be considered by my right honourable friend. If I can write to noble Lords I will do so, but perhaps this is a matter to which we could return at Committee stage.
My noble friend Lord Melchett raised several matters, some of which I have dealt with because a number of other noble Lords asked similar questions. He raised the issue of whether local authorities should be made aware of the service of a notice to quit by a landlord. He suggested that such a notice to quit ought to be in a prescribed form. I understand that a notice to quit must already comply with Section 16 of the Rent Act 1957, which requires that it be given not less than four weeks before it is to take effect. We have never had reason to suppose that the absence of any requirement as to form in addition to this requirement as to period is causing uncertainty or injury to tenants. But if my noble friend has evidence of this I should be most grateful if he could let me or my right honourable friend have it. In the absence of evidence that the existence of such a requirement would be of real benefit to tenants, I should feel some doubt as to introducing one.
THE EARL OF BALFOUR: My Lords, if I may interrupt for just one moment, the problem facing a tenant under eviction or something similar is that he may either fail to get a court notice or fail to appreciate its importance, and in very many cases an eviction has gone through the courts without the tenant taking action and appearing in court. In Scotland, there is the Sheriff Court and not

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more than three weeks ago there was a case in my own area in which this happened. I am a member of a local authority, as I think the noble Lord knows, and it is a problem when a tenant who might have been able to prevent an eviction does not bother to go to the court.
LORD GARNSWORTHY: I am grateful to the noble Earl for attempting to render some assistance on this point. My noble friend Lord Melchett will have listened to what he has had to say. However, I was saying that in the absence of evidence that the existence of such a requirement would be of real benefit to tenants, I should feel some doubt as to introducing one. The imposition of doubtfully useful obligations is always to to avoided, particularly where those who must comply with them are ill-acquainted with the law and unaccustomed to employing solicitors. This is particularly likely to be the case with people who let part of their own homes, because it is on the resident landlord that the burden of such a requirement would fall and, in general, a landlord under a protected tenancy needs to serve notice to quit only if and when he wishes to convert a periodic contractual tenancy into a statutory tenancy. I have dealt with that matter at some length, because I thought it desirable to place those points on the record.
The noble Baroness, Lady Young, asked a number of other questions. She drew attention to the fact that different obligations are imposed on furnished and unfurnished landlords, and she raised the issue of a definition of"furnished tenancy ". She suggested that such a definition was required to ensure that the landlord knows what his obligations are. I have to say that it is not quite clear what the noble Baroness has in mind. The landlord knows what contractual obligations he has undertaken, and there are no additional statutory obligations which depend on whether or not the tenancy is furnished. But if the noble Baroness can clarify the matter and is not satisfied with what I have said I shall be pleased to pursue it. She then asked—
LORD SOMERS: My Lords, I interrupt the noble Lord for one moment— I am sorry that he is being interrupted
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rather frequently—to ask whether there is a definition of"furnished "? I heard of a case recently of someone who was evicted from his flat, which was furnished nominally. But the furniture was so rudimentary that it was unusable; most of it was rotten and the carpet was falling to pieces. That was all that had been provided.
LORD GARNSWORTHY: My Lords, if the noble Lord, Lord Somers, will read what I said at the beginning of the debate he will appreciate that the Bill is intended to deal with the kind of unsatisfactory situation to which he has referred. I welcome his interest. If he is not satisfied with what has been said this afternoon perhaps he will return to the subject when we reach the Committee stage.
The noble Baroness asked whether part of the landlord's home let unfurnished would be subject to security. New lettings of that kind will not be subject to full security; they will be subject to Part VI. The noble Baroness also asked why no provision had been made for repossession from tenants who do not pay the rent. The reply is that this is already a ground for possession under Case 1 of Schedule 3 of the Rent Act.
A good deal has been said this afternoon about the part that local authorities can play in providing homes for our people. Questions have been raised about the security of tenure enjoyed by council tenants. Of course they do not at present enjoy the same security as other people. I myself have long felt that they ought to enjoy as much security as the tenant of the private owner. But I have to say that it is seldom one finds local authorities evicting on any large scale. The number of evictions from local authority houses and flats is, I think, comparatively small in relation to the total number of evictions. We can rely on local authorities to show a sense of social responsibility. That is why we on this side of the House are glad to note that we are supported by others out-side. I gather that the noble Lord, Lord Avebury, supports us in that direction also. We feel that the ultimate solution to the problem of finding enough homes and to give people security of tenure in those homes lies largely with the local authorities and with the housing associations. I would not at this stage exclude the owners of properties

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who Possess a sense of social responsibility.
If, as I understand, the Bill is to have an unopposed Second Reading, may I express my appreciation of that. I am sure many of the issues which we have discussed this afternoon will be dealt with in more detailed fashion when we enter the Committee stage. Before closing I should like to re-emphasise that we regard the purpose of the Bill as being extremely urgent. Those who feel that we should be leisurely will have to accept the consequences if the result of leisurely consideration—which none of us wants to see—leads to the kind of situation which was hinted at in the weekend Press.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

MERCHANT SHIPPING BILL [H.L.]
6.5 p.m.
THE MINISTER OF STATE, DEPARTMENT OF INDUSTRY (LORD BESWICK): 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 Beswick.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Lord Nugent of Guildford in the Chair.]
Clauses 1 to 11 agreed to.
Clause 12 [Restrictions on tankers sailing front United Kingdom ports.]
LORD BESWICK LORD BESWICK moved Amendment No. 1:
Page 14, line 29, leave out (" a tanker construction certificate or")
The noble Lord said: The clearance of outward bound tankers will be effected by customs officers who are not able to determine whether a foreign tanker would qualify for a tanker construction certificate. The information required is not that which would he at the disposal of a customs officer. Such cases therefore will need to be referred to the Secretary of State and dealt with by the Department of Trade. They will have the necessary
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information or access to the information. Subsection (2) provides that leave to sail shall be granted if the Secretary of State is satisfied that a tanker will qualify. I beg to move.
On Question, Amendment agreed to.
LORD BESWICK LORD BESWICK moved Amendment No. 2:
Page 14, line 33, leave out from the beginning to"may be") in line 40 and insert—
(" (2) Where an application is made for leave to sail to be issued to an oil tanker, then—

(a) if the tanker is registered in the United Kingdom, the Secretary of State may issue it with leave to sail where he considers it appropriate to do so;

(b) if the tanker is not registered in the United Kingdom, the Secretary of State—

(i) shall issue it with leave to sail if he is satisfied that it would qualify for the issue of a tanker construction certificate if it were a United Kingdom oil tanker; and

(ii) may, if he is not so satisfied, issue it with leave to sail where he considers it appropriate to do so.

(3) Leave to sail issued under paragraph (a) or (b)(ii) of subsection (2) above")
The noble Lord said: The purpose of this Amendment is simply to remove what I think the Committee will agree is an ambiguity in the present text. The substance of subsections (2) and (3) remains unchanged, but the wording
"In any other case"
leaves a certain amount of ambiguity which will be removed by the Amendment. I beg to move.
On Question, Amendment agreed to.
Clause 12, as amended, agreed to.
Clause 13 agreed to.
Clause 14 [Foreign action affecting shipping]
On Question, Whether Clause 14 shall stand part of the Bill?
6.9 p.m.
LORD SHINWELL: As I understand it, Clause 14 relates to any threat to British shipping interests. It appears to me that the clause requires further definition. Perhaps my noble friend Lord Beswick could inform the Committee what is meant by a threat to British shipping interests by a foreign Power. Does it refer, for example, to flag discrimination? If it does—and flag discrimination undoubtedly is a threat to British shipping interests—then the clause seems

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to require further definition. It might be advisable either to provide for it in the regulations—and even the regulations should be more definitive—or perhaps some other form of words could be used.
Let us take an example. Let us assume that an intermediate cargo liner is trading regularly between a British port and a port in India, loading cargo in a British port and discharging it at a port in India, and then is ready to operate and accept a cargo for despatch to a British port. But let us assume that the Indian Government intervene, as they could, on behalf of Indian shipping interests and so arrange matters as to prevent the cargo being loaded on the British vessel, preferring that it should be loaded on a registered Indian vessel which intends to call at a British port. That is an example of what is meant in shipping circles by flag discrimination. It is only one example; there are several others. There is nothing in the clause itself—it is simply a series of words and references—which indicates what kind of example the Government have in mind, and I think that perhaps it might be desirable if my noble friend could give some indication of what the Government are thinking.
LORD BESWICK: I am bound to say that I thought the clause was self-explanatory, but I can see from what my noble friend says that it is not. I wonder whether he will allow me to consider the example he gives and either write to him or deal with it on the next stage of the Bill. 1 am not able to say as of now (though, of course, I may be in a better position in a moment) exactly how the example which he gave would be covered. I can say now, however, that the wording to which he referred and which, as he rightly says, is quite lengthy is drawn broadly so that it will cover precisely the kind of possibility that he has in mind, and the specific examples would be dealt with as the orders are introduced under the powers granted by this clause.
LORD SHINWELL: With great respect, it seems to me, if I may say so, that that is not altogether satisfactory. Perhaps I may be permitted to read the preamble to Clause 14, which says:
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"The Secretary of State may exercise the powers conferred by this section if he is satisfied that a foreign government,"—
and let us assume the Government of India, although it may be of Burma, the United States, or the Soviet Union—
" or any agency or authority of a foreign government, have adopted, or propose to adopt, measures or practices concerning or affecting the carriage of goods by sea which—
(a) are damaging or threaten to damage the shipping or trading interests of the United Kingdom,...".
What do the Government mean by that? What is a threat to British shipping interests? What does it mean? It means, to my understanding, one of the various forms of flag discrimination. I leave out flags of convenience because that is another story—an important one, but it is not injected into this legislation, and for a good reason. I am anxious to content myself with anything that my noble friend Lord Beswick says, but I think there ought to be an answer of some kind, and if we cannot have it now perhaps we could have it on Report stage.
LORD BESWICK: Certainly, having briefed myself appropriately, I would deal with it on Report stage, but I understand the whole point of this is that it is designed to cover a very wide area, and if you try to insert* in this clause specific cases then you are, as my noble friend will know, immediately limiting the power. Once you try to define you limit your powers. The powers here are of necessity broad. The possibilities of threats could conceivably be wide, as my noble friend says, but if a threat arises then it can be dealt with by the order which is introduced, given the powers of this clause. However, I shall study what my noble friend has said, and I will certainly try to deal with it more satisfactorily on Report stage if he feels I have not dealt with it satisfactorily already. Similarly, let me make this offer to him. If he has particular cases in mind where he thinks some more specific reference should be made to threats, then, again, I should be glad to consult with him to see what we can do on Report stage.
Clause 14 agreed to.
Clause 15 [Parliamentary control of orders under Part III]:
6.16 p.m.
LORD BESWICK LORD BESWICK moved Amendment No. 3:
Page 18, line 34, leave out (" or giving ").
The noble Lord said: This is a minor drafting Amendment. Under Clause 15(2) an order under Clause 14(3) (which enables the Secretary of State, by order, to make provision protecting United Kingdom shipping interests where foreign Governments adopt measures which damage those interests) has to be approved by Parliament before it can take effect. In cases of urgency an order can be immediately made, but ceases to have effect unless it gets Parliamentary approval within 28 days. In that connection Clause 15(2) preserves the validity of anything done under such an order in case it should not get that approval, and it also preserves the power to make a new order in such a case. In preserving that power the present text of the Bill speaks of making"or giving"a new order. The words I have quoted,"or giving ", are obviously not suitable in this context, and the Amendment removes them. I beg to move.
On Question, Amendment agreed to.
Clause 15, as amended, agreed to.
Clauses 16 and 17 agreed to.
Clause 18 [Commissioners of Northern Lighthouses]:
On Question, Whether Clause 18 shall stand part of the Bill?
LORD SHINWELL: My noble friend will recall that on the Second Reading of this Bill I referred to the need for some penal court or organisation to which seamen who are accused of committing an offence aboard ship might be permitted to state their case, because otherwise we are leaving the decision as to whether an offence has been committed aboard ship while the ship is at sea entirely to the master of the vessel. I say nothing disrespectful of master mariners or ships' officers in general. I must not, in particular, because one of my grandsons happens to be a master mariner sailing on a China Steam Navigation vessel at present; but, in any event, I have a high regard for ships' officers. But it sometimes happens that they are inclined to go off the deep end, because of some misdemeanour committed by a member
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of the ship's crew. This is often resented and causes trouble aboard ship.
For example, take a minor case of drunkenness, not when a seaman joins the vessel but in a foreign port. He goes ashore, as seamen are permitted to do, and he or a number of the crew buy some liquor, come back aboard the vessel and then, when the ship proceeds to sea, they have a little jollification as a result of which the Master reprimands them and they are threatened with a fine or even with imprisonment. Something in the nature of an appeal is essential. In the course of the Second Reading debate I suggested that there might be an arrangement provided through the regulations to enable a seaman to appeal to the Mercantile Marine Superintendent at the Board of Trade office; that is, the shipping office in a port. He should be permitted to do that. The Marine Superintendent would deal with the matter and the man could be represented either legally or by one of his colleagues, or he could represent himself and put his case. The men must have some kind of safeguard.
I do not condone misdemeanours of the kind which I suspect are under review in this legislation, but there are occasions, as I know from my knowledge of seafaring men over a long period of time, when cases of this kind occur, when the Master is rather brusque, rough or harsh—perhaps too harsh—as a result of which there is trouble aboard ship. I should like my noble friend to give me an assurance that some kind of appeal would be made available.
LORD BESWICK: I think my noble friend is addressing himself to matters which arise under Clause 19 and not under Clause 18.
LORD SHINWELL: I beg your Lordships' pardon.
LORD BESWICK: Could we put ourselves in order by agreeing to Clause 18? Then I will remember what my noble friend has said and reply to it on Clause 19.
Clause 18 agreed to.
Clause 19 [Offences by seamen]:
On Question, Whether Clause 19 shall stand part of the Bill?
LORD BESWICK: I remember that my noble friend raised this question on Second Reading. I thought I made it clear—but obviously I have not—that a right of appeal would lie under Section 35 of the 1970 Act, and I should have hoped that that would satisfy my noble friend. As he rightly said, there is the Mercantile Marine Office Superintendent, and this Bill does not in any way restrict the right of appeal to that office under Section 35 of the 1970 Act.
LORD SHINWELL: Can my noble friend say whether in consultations with the Navigating Officers' Union and the National Union of Seamen agreement has been reached about this matter of the right of appeal?
LORD BESWICK: To the best of my knowledge there has been no disagreement about this matter, but I will make certain that I am right there. I think I am right in saying that there is satisfaction on this point. Of course, if it is a matter on which it is thought that appeal procedures are not satisfactory, then, as I have said, there will be the fullest possible consultations and we shall have to consider the matter. But to the best of my knowledge there has been no complaint about this matter.
Clause 19 agreed to.
Remaining clauses agreed to.
Schedule 1 agreed to.
Schedule 2 [Oil Tankers]:
6.25 p.m.
LORD BESWICK LORD BESWICK moved Amendment No. 4:
Page 23, line 44, leave out from ("Secretary of State ") to the end of line 45.
The noble Lord said: I wonder whether it would be convenient to speak to Amendments Nos. 4 and 5 together. Between them these two Amendments make suitable provision as to fees for the surveys and inspections and the issue of certificates under Part II of the Bill. There is nothing new in the charging of fees for such surveys and inspections, but we are creating in Part II of the Bill the need for further surveys and inspections, and this Amendment will give the power so to do. There is no mention of any scale of fees. The actual rates will be subject to fees regulations which will
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have to be laid before the House and will be subject to the Negative Resolution procedure. I beg to move.
LORD STRATHCONA AND MOUNT ROYAL: This is probably a resuscitation of a small piece of the old Clause 17, the demise of which I mourned during the Second Reading debate. There are a couple of questions which arise out of it. Does the new paragraph 6 mean that the Government intend to take powers to regulate charges made by these authorised organisations? That is the main question, but there is a small question of drafting which I do not quite understand. I am not quite clear why we have to use the wording,"persons appointed by such organisations ". Surely it is the organisations which are to be paid the fees and not the individual agents who are working for them. I may be quite wrong about this point and I am not a legal draftsman, but it may be worth clarifying this point if the noble Lord is able to do so.
LORD BESWICK: Yes, the noble Lord is quite right. The omission of Clause 17 was rather more complete than was intended and the second Amendment that I shall move restores the power which should never have been taken away in the first place. He asked me about the fees to be charged by the persons or organisations appointed, and I can assure him that the fees will be the subject of consultation in the first place, but they will be subject to a regulation laid before the House by the Secretary of State. The fees will be fixed by the Secretary of State and either House will have the right to pray against those regulations. The noble Lord asked me about the actual wording. He means, I imagine, sub-paragraph (c)——
LORD STRATHCONA AND MOUNT ROYAL: Yes.
LORD BESWICK: —"... issued by persons appointed by organisations authorised under paragraph 1". The point here, as the noble Lord knows, is that weare considering the delegation to various organisations and this is a power which may or may not be used. As lie rightly said, it is possible that organisations will mostly be involved, but conceivably there might be a case where a person is

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involved and then the fees will be payable to that person.
On Question, Amendment agreed to.
LORD BESWICK LORD BESWICK: I beg to move Amendment No. 5.
Amendment moved—
Page 25, line 23, at end insert—
("Fees
6. Oil tanker construction rules—

(a) may, with the approval of the Treasury, prescribe the fees payable in respect of surveys and inspections carried out, and certificates issued, under the rules;

(b) shall, subject to sub-paragraph (c) below, provide for all fees payable under the rules to be paid to the Secretary of State; and

(c) may, in the case of surveys and inspections carried out, and certificates issued, by persons appointed by organisations authorised under paragraph 1 above, provide for fees to be payable to those persons or organisations.").—(Lord Beswick.)

On Question, Amendment agreed to.
Schedule 2, as amended, agreed to.
Remaining Schedules agreed to.
House resumed: Bill reported with the Amendments.

DUMPING AT SEA BILL
6.31 p.m.
LORD WELLS-PESTELL: 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 WellsPestell.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Baroness Emmet of Amberley in the Chair.]
Clause 1 [Restrictions on dumping in the sea]:
On Question, Whether Clause I shall stand part of the Bill?
LORD AVEBURY: May I refer briefly to an aspect of Clause 1, which received attention in another place on Second Reading and also in Standing Committee? I had an opportunity of discussing it briefly with the Minister of State and drawing his attention to an aspect of the
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wording of Clause 1(2), which still causes me a little anxiety in spite of the explanations which he gave. He said in column 1496 on March 22 in another place that the Bill—
"... does not cover the procedures for giving consents to discharges through pipelines, which will be dealt with at length in another measure."
But then Mr. Peter Rees suggested that pipelines might be regarded as covered by the words—
"... a structure on land, constructed or adapted wholly or mainly for the purpose of depositing solids in the sea."
The Minister held that since pipelines discharged liquids, then almost by definition they are not caught by the provisions of this Bill. During the Committee stage, the matter was discussed further when both Mr. Rees and the Minister appeared to overlook the definition of marine structure in the Bill, which certainly does not include pipelines.
To summarise the position, one needs a licence to dump solids or liquids from
"... a vehicle, ship, aircraft, hovercraft or marine structure...",
where"marine structure"means a platform or other man-made structure at sea, and also for the dumping of solids only from a structure on land, constructed or adapted wholly or mainly for the purpose of depositing solids at sea.
The point I put to Mr. Norman Buchan was that if one had solid wastes to dispose of which could readily be put into suspension in water, one could dispose of them through a pipeline. Examples which occurred to me were wastes which arose from the china clay operations in Cornwall, or surplus ash from power stations (although the bulk of that ash is now sold by the C.E.G.B. as a construction material, there may still be some left over), and other kinds of mining waste arising from the operations of the National Coal Board. It might be convenient to dispose of these wastes by suspending them in water and taking them by pipeline out to sea. The purpose of the pipeline would then obviously be to deposit the solids in the sea. It is the purpose of the structure which brings it within the definition of Clause itself. If it is possible for the effluent 1(2) and not the nature of the effluent to be in liquid form, while the purpose is still to dispose of a waste which was

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originally solid, then surely it must be coarse, and I would suggest to the Minister there should be an enabler"between this Bill and the further legislation dealing specifically with pipelines, which was referred to by the Minister in another place. I suggested to him that this could very readily be dealt with by adding the words"other than a pipeline"after the end of Clause 1(2). I did not put this down as an Amendment because I was given to understand that the legal advice in the Department was to the effect that it was unnecessary; but on further reflection it seemed to be worth raising this point in your Lordships' House, just to make absolutely certain that there is no overlap between this Bill and other legislation going through concurrently.
LORD WELLS-PESTELL: I understand that this matter has been gone into very thoroughly, as the noble Lord said, and a good deal of consideration has been given to this particular point. As I understand it, the solid matters to which the noble Lord refers can become liquid matters. It is held to be outside the scope of this particular Bill. I do not know whether the noble Lord is prepared to leave it there or whether he would like me to give him an assurance that in the light of his comments and observations we can look at it to see whether something ought to be done. However, my information is that it is not required in this particular Bill: it is not part of it.
LORD ELTON: I should also like to intervene at this stage, if I may, to refer to a matter about which there was a great deal of discussion during Committee stage in another place, about the effect of subsection (3) as it stands. The effect is to exclude from control by this Bill the act of throwing garbage overboard from a ship. Any of your Lordships who have had occasion to spend much of their time on the coasts—particularly the Channel coast, at times when the local authorities have not been engaged in collecting garbage off the beach--will have cause to know what a really astonishing amount of rubbish now collects on some of our beautiful coastline. The chief cause is the increased use of plastic containers and plastic objects of all kinds. These do not sink and neither do they dissolve. They accumulate until they are disposed
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of by the hand of man. I accept that clearly the regulation of this activity would be a very difficult matter and, equally, it would not be suitable to include such a regulation in this Bill unless there were to be considerable additions to the machinery provided. But it is also clear that the obligations of Her Majesty's Government, which have been assumed by the signature of the Oslo Convention and the signature and ratification of the London Convention and also by our membership of the Intergovernmental Maritime Consultative Organisation (usually called IMCO) include that of controlling this common and increasing nuisance.
My purpose in intervening at this point is simply to secure from the noble Lord an acknowledgement of the obligation to control this nuisance and an undertaking that it will be fulfilled in the future by some other means. If not, it should be included in this Bill. It is a problem which can only get worse until it is tackled, and the sooner it is tackled the better it will be for everybody.
LORD WELLS-PESTELL: I am much obliged to the noble Lord for his comments and observations, because we have considerable sympathy with what he said. But I must point out to your Lordships that this Bill is concerned with dumping at sea, and the matter raised by the noble Lord does not really come within its scope and function because the kind of discharge of garbage to which the noble Lord has referred is regarded as part of the normal operation of a vessel. I do not deny that such a normal operation can put into the sea a good deal of unnecessary material, but I think the noble Lord has put his finger on the matter in referring to the Inter-governmental Maritime Consultative Organisation, which is known as IMCO. This is a matter for their concern, it is their responsibility. As the noble Lord knows, this functions under the United Nations, and we are satisfied that, being their responsibility, this is a matter which they ought to deal with, and we ought not to seek to put it in this Bill and complicate it even further.
LORD ELTON: May I press this further by referring to the fairly clear undertakings given by the Secretary of State at the Committee stage in another place on May 7. I am not allowed to quote

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his words, but he gave honourable Members the impression that he was to sponsor early legislation on this matter. This is a concern of both Houses, and I wish to bring it to the notice of this Committee. Would the noble Lord be prepared to follow the Secretary of State in that undertaking?
LORD WELLS-PESTELL: My understanding is that this Bill has been through the other place. If I remember rightly, it started in this House under the last Government and received its First Reading in the other place. It has been through the other place and now takes the final hurdle here. I do not think that it would he fair of me to lead the noble Lord to believe that one can entertain this with a view to including it in the Bill.
LORD ELTON: That I accept.
Clause 1 agreed to.
Clause 2 [Licences]:
6.41 p.m.
LORD AVEBURY LORD AVEBURY moved Amendment No. 1:
Page 4, line 8, at end insert—

"(e) may contain limits on the areas within which and the times at which dumping is permitted;

(f) shall specify any other conditions which the licensing authority thinks fit."

The noble Lord said: This Amendment, enables the licensing authority to limit permission for dumping at stated areas and times. Paragraph (d) of this subsection may be wide enough in scope to cover the restrictions I have in mind, but it is not clear whether the words:
"may make different provision as to different descriptions of substances or articles "
include different provisions regarding the limits on the times and areas where the materials or solids may be dumped.
We have been advised that some parts of the sea, or sea-bed, may be more susceptible to damage by dumping than others, and also that at certain times of the year this may be more hazardous to marine organisms, depending on their life cycle. The spread of material which is dumped will depend on tidal, wind induced and other currents. Combinations of these may take the material from a perfectly safe place into a sensitive area such as the coastline itself from which the material
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ought to be excluded. I believe that the parties to the Oslo Convention must have had something like this in mind when they provided in Article 11 that each contracting party shall keep records of the dates, places and methods of dumping. The parties to the Convention would not have thought it worth while to record that information unless they felt it was of importance in licensing. This matter should be spelt out in the sun-section we are looking at. I beg to move.
LORD WELLS-PESTELL: I am grateful for what the noble Lord has said. I do not think there is much between us, if there is anything at all. I hope that I will be able to convince the noble Lord, Lord Avebury, and your Lordships, that the Amendment is unnecessary because it seeks to do what is already provided for in this clause. The Amendment would add to the list at Clause 2(7) a provision which would specify precisely where and when dumping may take place, and a general power to specify any other conditions which a licensing authority may think necessary.
But I should like to draw attention to an earlier provision in the Bill, in Clause 2(1). This empowers a licensing authority to include in a licence any condition so long as that condition seems to the licensing authority to be necessary or expedient for the protection of the marine environment and the living resources it supports. I would have thought that met precisely what the noble Lord has in mind. I appreciate that Clause 2(7) specifies certain points to be included in a licence, but this is merely to provide a detailed indication of the facts which should be stated in it. The subsection does not relate to conditions of licences as such. As I have said, the noble Lord will find these are already covered by Clause 2(1).
The noble Lord has referred to the Oslo Agreement and I should explain that under the voluntary dumping arrangements, conditions are set out which are relevant to the nature of the waste and the dumping area. This practice will continue. We have been doing it, as the noble Lord knows, for some considerable time. Such conditions would specify the dumping area and any restrictions on times of dumping, the speed of the ship, and, as necessary, the initial dilution, the

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manner of discharge—for example into the wake of the vessel to ensure rapid dispersion, the procedures for washing of tanks in which the waste was contained. There are many possible permutations of conditions since these are tailored to the specific waste and would include, for example, when it is relevant to do so, post-operational monitoring.
It was for this reason that Clause 2(1) was drawn up in the precise terms one finds in the Bill. I do not think I can say anything more that would be useful. I can only hope that I have in some measure satisfied the noble Lord, and that he will not feel it necessary to press his Amendment.
LORD AVEBURY: I entirely take the point that the noble Lord made, that the power to impose conditions in granting the licence is given to the licensing authority in Clause 2(1). It is merely a question whether that should be spelt out in Clause 2(7), which refers to a document which will be issued to the applicant telling him precisely what he can do. If the licensing authority is to impose conditions such as the noble Lord mentioned—and this is what I had in mind in my suggested paragraph (f)—matters like the speed of the vessel, whether the material is to be discharged into the wake of the vessel, and so on, in addition to the specific matters that I have covered in paragraph (e). then it is best if those could be spelled out in the licence document. Then there would be no possible ambiguity in interpreting that document by the applicant or by anyone who wishes to see whether it is properly enforced—and this is equally important later when we come to the disclosure provisions. Also the international authority could then see we were doing what was laid down in the Oslo Convention and would ensure that the restrictions on times and places which we had agreed to impose, where appropriate, were contained in the licence document.
LORD ELTON: May I support that in one particular point. Under Clause 2(1) the licensing authority is required to specify matters which concern the preservation of the marine environment and living resources. There is room for it to differ in its interpretation from the inter-
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pretation set upon that matter by the Oslo Convention and also the London Convention (in which Article 6 closely follows Article 11 of the Oslo Convention). Under Clause 4 all these matters have to be kept on record by the licensing authority, and, as Her Majesty's Government are required to report thereupon to international bodies, I would have thought it prudent for skippers of dumping ships to know precisely where and how they are undertaking to dump the material so that Her Majesty's Government are certain that what they are reporting has happened and is correct.
LORD WELLS-PESTELL: I take the point that both noble Lords have made. There is a danger in trying to write into a clause something one hopes will be completely and entirely comprehensive. The danger is that when one does that one so often leaves out or limits what one can do. I should have thought that the clauses referred to by the noble Lords, Lord Avebury and Lord Elton, are sufficiently worded so as to enable the authority to put in what is considered necessary. I would say to the noble Lord, Lord Elton, that Clause 2(7) specifies what must be on the licence—and it means, of course, the authority can then determine what must go on the licence without restriction: whereas Clause 2(1) merely sets out the conditions of the licence. This is not a matter which has escaped us. We have spoken about this a good deal, and I should not have thought that the provision would be improved by what has been suggested.
LORD AVEBURY: I accept that the noble Lord thinks, as at present advised, that the licence may include a complete description of all the conditions which are imposed by Clause 2(1). Subject to consultation with my noble friend on what we may do at a later stage, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Clause 3 [Right to make representations]:
6.52 p.m.
LORD AVEBURY LORD AVEBURY moved Amendment No. 2:
Page 5, line 2, leave out (" authority ") and insert ("Minister ").
The noble Lord said: I am not sure whether it might not be for the convenience of the Committee if this group of Amendments were taken together because, as I recall when I put them down, they all relate to the same point. Under Clause 3 it is the duty of the licensing authority to draw up, and from time to time revise, a panel of persons especially qualified, in the authority's opinion, to be members of a committee of appeal. The point I am hoping we might discuss briefly is whether it is appropriate for the licensing authority itself to draw up the panel of persons from which will be constituted the appeal committee. It strikes me as a rather curious procedure. Therefore, what I have suggested here is that those persons who appear on the panel shall be identified by the Minister, and not by the body against which the appeal is to he heard, so that there can be some independence. I am not suggesting that the licensing authority would draw up a list of stooges who would he likely to endorse any decisions it had made, but from the point of view of appearances it would be better if the appointment of persons to such a panel was undertaken by somebody other than the committee itself.
LORD WELLS-PESTELL: If I understand the noble Lord correctly, he is taking all these Amendments together now. This is a matter which has exercised our minds because, as the noble Lord said, these Amendments have the effect of giving the Minister responsibility for taking certain actions under this clause. The Amendments would make the Minister responsible for deciding who should be on the panel from which will be drawn members of the committee. It might be of interest to your Lordships to know that this procedure was agreed with the Council on Tribunals. People will be invited to form the panel, from which the committees will be drawn, on recommendation to the appropriate authorities from representatives of the industry. It is the intention, if it has not already been done, for the various bodies concerned with this particular matter to nominate persons for the panel. But I should like to draw your Lordships' attention to the Interpretation clause of the Bill, which is Clause 12, at page 10. This makes it clear that the Bill already provides that the licensing authority will be the Minister
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in relation to waste loaded for dumping in England and Wales. It goes on to specify that the Secretary of State for Scotland will be similarly responsible in relation to Scotland, and the Department of the Environment, Northern Ireland, will be responsible in that area. I do not think there is anything between us in the matter of who should have the responsibility; it is a question of terminology.
I should mention that these Amendments would in practice make the Minister of Agriculture responsible for the establishment of panels and the constitution of committees throughout the Uited Kingdom. We should thus be runing into grave difficulties because this would of course mean that the Secretary of State for Scotland in the circumstances would have no standing; and at the present moment the position in Northern Ireland is far from clear. I do not know—and I say that because I really do not know—whether it would be the Secretary of State for Northern Ireland who would be concerned. Having regard to the position of Scotland, it seems that the appropriate person should be the Secretary of State for Scotland. Having regard to the situation in Northern Ireland, I think again it is right and proper that it should he the Department of the Environment for Northern Ireland which is involved, and so far as England and Wales are concerned the person responsible should be the Minister of Agriculture himself. I hope that in the light of these words the noble Lord will feel that this explanation is quite reasonable, having regard to what is involved, and will feel that what is stated in the Bill itself, particularly in Clause 12, is probably right in the circumstances.
LORD AVEBURY: I understand from the explanation given by the Minister that I have not achieved the object which I aimed at in drafting this Amendment, which was to ensure that the members of the panel were appointed in every case by somebody different from the licensing authority. Obviously I shall have to rethink this matter in the light of what the noble Lord has said about the Council on Tribunals—and I should be grateful if I might be in touch with him later about the advice they have given. But it would appear he satisfied them that there is no conflict here

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between the licensing authority in the capacity of licensing authority and in its capacity as the person who appoints the members of the appeal committee. I should like to consider that advice before deciding whether to take the matter further on another stage. Meanwhile, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 [Publicity]:
6.59 p.m.
LORD AVEBURY LORD AVEBURY moved Amendment No. 6:
Page 6, line 10, after ("Act") insert ("the required information, sample analysis and a copy of the licence itself ").
The noble Lord said: What I am seeking to do by this Amendment—and perhaps we might take the remaining two Amendments with No. 6, because they are all concerned with the same point—is to ensure that as much information as possible is given to the public. The information which I have set out here is the information which is required by the licensing authority itself under Clause 2(5) and any analysis of samples which the licensing authority may have requested and which is permitted by the same clause. If one looks at the records which the licensing authority is obliged to compile and keep available for public inspection as laid down in Clause 4(1), one finds that only the"notified particulars"which have an assigned meaning are particularly mentioned there. But obviously the licensing authority has a great deal more information at its disposal—or would have if it had decided to exercise those powers laid down in Clause 2(5).
I am attempting to ensure that any information which is given to the licensing authority also passes into the public domain. I think that this would be in accordance with what we are doing in our domestic legislation. where there is far greater willingness on the part of the Government and the public authorities to ensure that the people know, for example, what is being put into the rivers. We should ensure that the same freedom of information is applied in this Bill relating to dumping at sea. I beg to move.
LORD WELLS-PESTELL: It might be helpful to your Lordships if I deal with the three Amendments, the first of which the noble Lord has moved. Under the proposed arrangements, the record of particulars notifiable to the Secretariat of the Oslo Commission would be made available for inspection by any member of the public. The particulars which will be available will be precisely those which other countries regard as necessary for them to assure themselves, within the context of the Oslo Commission, that the United Kingdom is meeting its obligations under the Convention. Perhaps I ought to acid that before a conclusion was reached in the international discussions on this very issue, very close examination was given to what data were necessary for this purpose. In fact, the"notifiable particulars"already cover the ground proposed by the Amendments. They are, in effect, a summary of the information upon which the decision to grant a licence was taken and the conditions under which the dumping operations should be carried out.
Contracting parties to the Oslo Convention will have to notify for each licence the quantity and nature of the waste authorised for dumping—whether it is solid, sludge or liquid—the chemical analysis of the waste and the production process from which it was derived: for example, treatment of sewage, pickling of steel or the manufacture of a particular chemical, the properties of waste, and I refer particularly to solubility, density, acidity or alkalinity, the geographical location of the dumping area, the depth of water, the distance from the nearest coast and the method of release into the sea and, as necessary, information on toxicity and biological properties. This information will be collated by the Secretariat of the Oslo Commission so that an overall view can be taken from all contracting parties of inputs into the seas in the North East Atlantic. This information will provide the basis for scientific monitoring programmes to be undertaken by the Oslo Commission to establish the effectiveness of the controls being applied.
The situation with dumping at sea differs from that for disposal on land or for discharge into rivers and estuaries

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where there is a constant discharge and a distinct effect. At sea the dilution dispersal of substances dumped is much more rapid. The internationally agreed criteria, which are set out in the annex to the dumping conventions and which no doubt the noble Lord has got with him upon which licence decisions are taken, take account of this and are so framed as to ensure that pollution will not result from the dumping. They are designed essentially to ensure that no damage will be done to fisheries resources and that persistent toxic substances do not find their way into the food chain.
As at present drafted, this clause provides that any member of the public should have access to the information which the United Kingdom is obliged to give to the Oslo Commission to show that the criteria in the Convention are being complied with. The information will be available for an individual licence, or for all of the licences for a period. It seems to the Government that the wording of this clause is widely enough drawn for anybody to satisfy himself on the possible effects of a single dumping licence, or all licences issued, and on the effectiveness of the implementation by the United Kingdom of the Oslo Convention.
I think, too, one has to bear in mind that in the main the licences as a whole (although I do not know about this) will be applied for by those who are to be responsible for the dumping and not necessarily by the people who are going to provide the waste. There is also, perhaps, this added difficulty. I can foresee that if one disclosed all the information which I assume—and it is an assumption on my part—that the noble Lord has in mind, we could run into difficulties, in that some firms, for trade reasons, for secrecy reasons, may not want their competitors to know what is being discharged by them. The responsibility, however, will be upon the authority to find out the nature of it in order that it can be disposed of in as near perfect circumstances as possible. I do not think I can take the argument any further than that. I can only hope that I have in some way satisfied the noble Lord.
LORD AVEBURY: The noble Lord rather tempts me in referring to the possible commercial implications of full
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disclosure of the chemical analysis of any waste, because he will recall that this matter was considered by the Royal Commission on Environmental Pollution and that they took evidence from quite a large number of chemical firms who all said that they had no objection whatsoever to the analysis of effluent going into the rivers, since that is what the Royal Commission was looking at in that context, being divulged to the public. The same argument would obviously apply to commercial secrecy aspects of any wastes that there being dumped in the oceans. However, the noble Lord has certainly helped me a great deal in going into the definition of"notifiable particulars"and what it will contain, and it seems to me that the public will have as much information as they can reasonably require about what is being discharged. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clause 5 [Enforcement of Act]:
On Question, Whether Clause 5 shall stand part of the Bill?
LORD ELTON: My noble friend Lord Ferrers drew attention at Second Reading to the change in the order of subsections (8) to (10) of the Bill as we had it in the last Parliament and as we have it now. If the present order seems to the noble Lord the Minister to be preferable to the old order I will not dispute the matter with him. But I should like to draw his attention to one small change which has possibly inadvertently crept into the terms of the Bill as a result of this. In the Bill as we had it before the Dissolution, it was specified that the powers now invested in a British enforcement officer under subsection (8) might only be expected to be exercised"in particular, in the course of any such examination or enquiry ". In referring to"any such examination"the subsection referred to the"boarding"and"examination"of suspected vessels by a British enforcement officer which under the old order were mentioned in subsections (8) and (9) and preceded this subsection. They now come after it and in the transposition we seem to have lost the sentence which limits the inquisitorial powers of the British enforcement officer to the occasions when he is pursuing his duties at

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sea. Will the noble Lord say whether or not this change, which amounts to a considerable extension of the powers of the officer, is intentional? I am prepared to elaborate the point a little more if it would be of service to the noble Lord while reinforcements are reaching him. But I am sure he takes the point that as the Bill now stands the British enforcement officer is given considerable powers at any time, and not merely when he is boarding ships at sea.
LORD WELLS-PESTELL: With regard to the first point raised by the noble Lord. Lord Elton, I gave an undertaking to his noble friend, the noble Earl, Lord Ferrers, to look into the question of the order of subsections (8), (9) and (10). It is not a point which his noble friend was pressing. I have looked into this and am under the impression that I wrote to the noble Earl about it, but I have written to him on a number of points and perhaps I decided to leave it until to-day. We are advised by our legal advisers that this is really the right sequence and therefore we propose to leave it as it is. With regard to the second point raised by the noble Lord, I do not think that at this stage I can give a satisfactory answer. I was not aware—and it is no good my pre-tending that I was—that there had been some change in the construction of the clause to which he referred. I wonder whether he would let me look at it and write to him, meanwhile accepting it as it is set out?
LORD ELTON: By all means. I merely wish to ensure that the Government do not unintentionally give powers to those acting on their behalf.
Clause 5 agreed to.
Clauses 6 to 12 agreed to.
Clause 13 [Savings]:
On Question, whether Clause 13 shall stand part of the Bill?
LORD ELTON: This point is so small that I am almost embarrassed to raise it. But your Lordships will observe that on page 13 at line 18 there appears the closing of a parenthesis which has never been opened. I presume this is merely a
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printing error, but I suppose it is up to all of us to look for these minute points. If the noble Lord opposite cares to examine that point and deal with it as he thinks fit before Report stage, that is all that is required.
LORD WELLS-PESTELL: I am much obliged to the noble Lord. The closing of the parenthesis seems rather pointless, so we will look at this point and either put something in or take the bracket out.
Clause 13 agreed to.
Clause 14 [Orders]:
On Question, whether Clause 14 shall stand part of the Bill?
LORD ELTON: I wonder whether the noble Lord will kindly enlighten me on a point to which I probably ought to know the answer. Is the Negative Resolution procedure or the Affirmative Resolution procedure intended under this clause?
LORD WELLS-PESTELL: Before I reply to the noble Lord, I should like to say how grateful I am to him for giving me notice of these points. It is obviously a help to a Minister, and a help to your Lordships' House to get what I hope are accurate and reasonable replies. I understand that these matters will be dealt with by the Negative Resolution procedure. If I remember rightly, this relates to Clause 6 and to Clause 12(3). Clause 15, as the noble Lord, Lord Elton, will undoubtedly have seen, is a matter for an Order in Council. But in reply to the question which he has put to me, these orders will be dealt with by way of the Negative Resolution procedure.
Clause 14 agreed to.
Remaining clause agreed to.
House resumed: Bill reported without Amendment: Report received.

GREATER LONDON COUNCIL (MONEY) BILL
[PETITION FOR ADDITIONAL PROVISION]
Examiners Certificate that the Standing Orders have not been complied with; referred to the Standing Orders Committee.

WEYMOUTH AND PORTLAND SPORTS BILL [H.L.]
The CHAIRMAN OF COMMITTEES informed the House that the opposition to the Bill was withdrawn. The Order made on March 21 last discharged, and Bill committed to the Committee on Unopposed Bills.
EASTBOURNE HARBOUR BILL [H.L.]
The CHAIRMAN OF COMMITTEES informed the House that the opposition to the Bill was withdrawn. The Order made on March 20 last discharged, and Bill committed to the Committee on Unopposed Bills.
HOUSE OF LORDS OFFICES
Second Report from the Select Committee, made and to be printed.
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