Sitting of 3 May 1976

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

    Offshore Oil (Licences)
    Mr. Canavanasked the Secretary of State for Energy if he will make a statement about consultation with the oil companies on the next round of offshore drilling licences.
    The Secretary of State for Energy (Mr. Anthony Wedgwood Benn): I intend to obtain the views of the oil companies and other interested bodies on the general terms and conditions that I am proposing for the next offshore licensing round.
    Mr. Canavan: Will my right hon. Friend take a much tougher line with the oil companies than the Tories did? They practically gave away the licences for nothing. In particular, will he insist on the placing of orders to provide jobs for workers here? Will he insist on trade union recognition and ensure that full facts are given about any political donations provided by the oil companies?
    Mr. Benn: My hon. Friend will have noticed from my first answer that it is my intention to consult on these matters in order to provide an opportunity for comment from those who are concerned and interested before the Government reach a final view.
    Mr. Skeet: Would it not be fairer for oil companies if the right hon. Gentleman did not give BNOC and the British Gas Corporation a right to have whichever licences they want?
    Mr. Benn: I do not regard the defence of the national interest as being controversial.
    Mr. Gordon Wilson: In the course of his discussions with the oil companies, will the Secretary of State take up with them the fact that twice as many modules are built in England as in Scotland? This discrepancy in proportion is not particularly welcomed in Scotland, in the light of present employment prospects.
    Mr. Benn: I am aware of the problem that concerns the hon. Gentleman, and I should tell the House that I, together with all my colleagues in the Department, take the view that we should try as hard as we can to get orders placed in the United Kingdom, although we should not seek to discriminate between orders going to different places in the United Kingdom.
    Mr. Gray: Does the Secretary of State appreciate that there is considerable uncertaintly in the industry over the Government's delay in announcing when future licensing will take place? In view of the unemployment situation in the oil-related industries, will he now make a positive statement as to when he is likely to offer those licences?
    Mr. Benn: That point has not been made to me by the companies themselves. The argument the Opposition have used throughout, about uncertainty associated with the British Government's oil policy, has not turned out to be the case. There is concern about unemployment and, as the hon. Member knows well, when I made my statement in September about the 1976 round this was one of the factors I had in mind. He will appreciate that we do not wish to repeat the errors made over the last round of licensing.

  Electricity Generation (Thermal Efficiency)
  Mr. Rostasked the Secretary of State for Energy if he will discuss with the Central Electricity Generating Board a proposed programme of measures required to raise the thermal efficiency of electricity generation in the United Kingdom to average European standards.
  The Under-Secretary of State for Energy (Mr. Alex Eadie): As I indicated to the hon. Member on 5th April, it is extremely difficult to make meaningful international comparisons of thermal efficiency. The CEGB is continually seeking ways of increasing the thermal efficiency of its system, and over the past

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  10 years has achieved an improvement of about 3·3 percentage points. It is confident that by a programme of continuous plant monitoring and modification it will be able to achieve further improvements in the future.
  Mr. Rost: Does the Minister not accept that meaningful comparisons have been made—particularly by the EEC—on a strictly comparable basis, which show that the CEGB is bottom of the European league on thermal efficiency? Will he not at least instigate an inquiry into the reasons for this, as there would be savings in fuel and electricity bills to the consumer if we got up to the average European standards?
  Mr. Eadie: There are reasons, as the hon. Gentleman knows, for this situation, principally because the CEGB system contains a smaller proportion of hydroelectric plant than systems in other EEC countries. That is a fact. This type of plant is capable of a more flexible mode of operation than are conventional steam-fired plants and can meet demand peaks more efficiently. As the hon. Gentleman knows, there is also the question of age. I should tell him and the House that the highest thermal efficiencies in 1974 were achieved by the Fawley oil-fired station and the Ratcliffe coal-fired station, which both achieved efficiency in excess of 37 per cent.
  Mr. Palmer: Does the Minister not agree that our electricity supply industry could have no conceivable reason whatever for maintaining a low thermal efficiency if it could attain a higher one? The difficulty is the nature of our system as against, say, the French or German system.
  Mr. Eadie: As my hon. Friend knows, there is an investigation going on about this at the present time. The subject is currently being considered by a study group under the chairmanship of the Department's chief scientist.
  Mr. Rost: Will the Minister not admit that he himself has published figures that do not take into account hydro-electric power, and that the figures are therefore on a comparable basis? Furthermore, the Plowden Committee has criticised the CEGB for using its fuel inefficiently. Will the hon. Gentleman not instigate an inquiry in his Department?
  Mr. Eadie: The hon. Gentleman is talking about figures that I supplied to him in answer to a Question. I did say that those figures were accurate. I am not questioning the accuracy of the hon. Gentleman's question. However, the CEGB has clear responsibilities—which have been recognised by Plowden and by the CEGB—for improving performance in this area, and it is accepting that responsibility. Different factors apply as between this country and the EEC countries, and hydro-electric power is one of them.
  Mr. Skinner: In view of the relatively low thermal efficiency in some power stations, of all kinds, including coal-fired power stations but mainly oil-fired power stations, would it not be a good idea to introduce the two new coal-fired power stations—Drax B and Burton B—in order to raise the overall level of efficiency for all the others?
  Mr. Eadie: I could not agree more. This whole question is being examined, as my hon. Friend knows. The question of extra coal-fired power stations is being discussed by the various sub-groups. However, the fact remains that we are talking about the age of our power stations, and that is a fact that the House and the country cannot ignore.

  Offshore Oil (Development)
  Mr. Formanasked the Secretary of State for Energy what methods of finance his Department proposes to encourage in order to develop discoveries of offshore oil up to 1980.
  The Under-Secretary of State for Energy (Mr. Gordon Oakes): My Department recognises the importance of financing considerations. It is not for me to encourage any particular method of raising finance for Continental Shelf development. The Department will take what action it properly can to facilitate the provision of finance, as the recent Claymore and Tricentrol transactions show.
  Mr. Forman: As between £8 billion and £10 billion will probably be needed to finance development up to 1980, will the hon. Gentleman give an undertaking that his Department will do everything possible to encourage private financing as well as other forms of financing in the

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  North Sea? Further, will he look favourably on such imaginative developments as the idea of syndicates of insurance companies and pension funds to provide finance for offshore oil?
  Mr. Oakes: Yes. My Department keeps in close touch with the financial community in order to play a constructive rôle in transactions where consent is needed and to ensure that Government policy is not misunderstood. The hon. Gentleman will be aware of considerable funding of finance coming from United States bankers to help oil companies at present.
  Mr. Gray: As the Government now have a borrowing requirement in excess of £12,000 million, will the Minister give an assurance that he will not encourage the BNOC to commit public funds in any future financing and that he will give every incentive to the private sector?
  Mr. Oakes: I shall most certainly not give that assurance to the House. The BNOC has an important rôle to play. Indeed, it is empowered to give loans and guarantees, subject to Government consent. Occasions could arise when the BNOC could fruitfully make use of its powers and considerably assist the development of British oilfields.
  Mr. Viggers: Will future participation agreements follow the pattern of the Gulf-Conoco agreement?
  Mr. Oakes: The House must await a statement on that matter.

  OPEC
  Mr. Tim Rentonasked the Secretary of State for Energy whether he has plans to meet with his colleagues from the OPEC countries.
  Mr. Benn: I have discussed matters of mutual interest with representatives of OPEC countries on a number of occasions and will continue to do so as opportunity offers. I have, however, no specific plans for such meetings in the near future.
  Mr. Renton: Now that Britain is an exporter of oil and is to be an exporter of liquefied petroleum gas, has the Secretary of State given any thought to the possibility of our seeking to join OPEC at some stage in the future? If we were
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  to do so, and if our membership were to be accepted, would we not be able to play a very useful part in forming OPEC's future policies?
  Mr. Benn: There have been a number of rather jocular references to British membership of OPEC, which subject has certainly highlighted Britain's entry into the world oil producers' league, and by 1980 we shall be the tenth largest oil producer in the world. The Government have no plans to join OPEC. On the other hand, it is a fact that our common interests and the common experience that we can offer, world-wide, in the export of equipment and in other ways indicate that our voice will be listened to—and I think that it is already listened to with some interest in other oil-producing countries.
  Mr. Donald Stewart: Will the Secretary of State bear in mind that an independent Scotland will be a net exporter of oil and that England never will be, and that Scotland will therefore he eligible and England never will be?
  Mr. Benn: I am sure that Sheikh Yamani and others will note with interest what the hon. Gentleman said.
  Mr. Skinner: When my right hon. Friend meets some of the leaders of these ex-colonial territories, will he tell them that the recent arrangements that have been made in respect of the Gulf-Conoco deal are not an example of what he intends to do in the future about further participation plans and that not only shall we have the ability to purchase the oil, which at present we have got only from the Gulf-Conoco deal, but we shall also, under the new participation plans, control it as well as own it?
  Mr. Benn: My hon. Friend will remember that, in the case of the Gulf-Conoco agreement, the National Coal Board—the NCB (Ex)—was a one-third full partner in the operation, and therefore the participation deal with Gulf-Conoco reflected that public participation to the full extent of the one-third. In the case of the arrangements with Burmah, the BNOC is acquiring the Ninian field and it has been agreed that Burmah Overseas Development Limited will have a majority BNOC stake. I think that as my hon. Friend observes

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  the development policies he will see that there is some merit in flexibility, though our intention to acquire a right to 51 per cent. of the oil is one that is embedded in Government intentions.
  Mr. Aitken: Has the Secretary of State forgotten that the former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), said that Britain would be seeking to join OPEC, and specifically said that he did not make his reference jocularly? Has Government policy changed, or is the Secretary of State indulging in yet another demonstration of his interpretation of collective Cabinet irresponsibility?
  Mr. Benn: I can only say that no ministerial consideration has been given to an application to join OPEC—though as to the presidency of OPEC it would be open to my right hon. Friend the Member for Huyton (Sir H. Wilson) to apply for that individually.

  Energy Saving
  Mr. Laneasked the Secretary of State for Energy if he will make a further statement on the progress of his energy-saving campaign.
  Mr. Oakes: The Government's energy-saving campaign is continually being developed. My right hon. Friend will have no new announcement to make until we have completed our study of the reports of the Select Committee on Science and Technology and the Advisory Council on Energy Conservation.
  Mr. Lane: I congratulate the Minister on his translation to this important post and wish him an enjoyable but short tenure of it. Will he consider whether enough is being done to bring home to individual members of the public the urgency of this whole problem, for example, through local energy-saving campaigns? If not, is it not time that the Government did more in that direction?
  Mr. Oakes: I thank the hon. Gentleman for his kind remarks. I know that my stay will be enjoyable. I hope that it will be long as well.
  It cannot be over-emphasised how important this campaign is, not only to the temporary position with regard to energy but to the whole of our future energy policy. One of the recommendations
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  that we are looking at is for local committees.
  Mr. Madden: In any publicity in this regard, will the Minister ensure that the elderly, the sick and those with young children are reminded of the importance of proper heating provision? Despite the departure of the former Under-Secretary Lord Lovell-Davis, from the Department of Energy, may I be assured that the inquiry that he is heading is continuing with all speed?
  Mr. Oakes: Yes. I have taken that over from my noble predecessor, and a report will be produced for the House before the end of this month. As regards the "Save It" campaign in general, one of the important aspects of energy conservation is the way in which people can be kept warm enough and yet at the sane time energy can be saved. That can be done by proper insulation, and so on.
  Mr. Rost: Has the Minister studied the wide range of positive financial incentives that many EEC countries are implementing, many of which were recommendations in the Select Committee's Report? What is he going to do about them?
  Mr. Oakes: We are looking at them, together with the recommendations in the Select Committee's Report that deal with conservation policies in Europe.
  Mrs. Millie Miller: Will the Minister bear in mind the need for helping the elderly and the categories of people referred to by my hon. Friend the Member for Sowerby (Mr. Madden) in the matter of insulation, equally as in the matter of tariffs for energy charges?
  Mr. Oakes: Yes. That is certainly one of the things that we are looking into, particularly in the case of advice, because people need advice on how to conserve energy.
  Mr. Skeet: The Minister referred to the Select Committee's Report. That Report has been before him for months. When will he report on it? Why has he been so dilatory?
  Mr. Oakes: Because there were over 42 recommendations in the Report. They were recommendations of the sort that concern not only my Department. They go right across the board and concern

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  nearly every Department of State. Therefore, we want to get the package right when it is produced.
  Mr. Pavitt: Will my hon. Friend consider the basic question of competition between gas and electricity in relation to the energy-saving campaign, and especially in relation to new housing estates where local authorities have a responsibility to ensure that the maximum amount of energy is saved, but not by competition between two different sources?
  Mr. Oakes: That matter is likely to be raised at the National Energy Conference that my right hon. Friend is proposing later in the year.

  North Sea Oil (Production)
  Mr. Peter Morrisonasked the Secretary of State for Energy whether he remains satisfied with the proposed output of oil from the North Sea during the next four years.
  Mr. Benn: I am satisfied with the progress made, and the prospects remain good.
  Mr. Morrison: If the right hon. Gentleman remains satisfied and if we are to become an oil-exporting nation, why does he not consider it necessary to become a member of OPEC?
  Mr. Benn: I have dealt with that matter in answer to an earlier Question. [HON. MEMBERS: "No".] I did not speak about the future, I said that we had not applied to be considered for membership. However, if the House feels that this matter merits special consideration I feel sure that the Government will listen to all proposals which are made. That had not been our intention, but we shall be the tenth largest oil producer and a very important oil exporter as well.
  Mr. Teddy Taylor: Does the right hon. Gentleman agree that output depends a great deal upon price? Does he really think that it will be possible for the OPEC price ring to maintain the present high price level for oil at a time when there is a world glut of oil, as there will be for a long time to come?
  Mr. Benn: The world price of oil and the forecasts are a matter of great concern to all oil-consuming countries as well as oil-producing countries. Like any
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  Minister in my position, I try to find out what the prospects are. There are many factors, some of which are being discussed at the CIEC conference which is taking place between oil producers and oil consumers, and there are other factors bearing on the strength of recovery of the world economy. I should not like to give a forecast, but I should like to reassure the House that this is a matter which we are keeping carefully under review.
  Mr. Edwin Wainwright: Will my right hon. Friend take into account that it is essential that we should maintain greater contact with the OPEC countries, not only for the purpose of discussing oil but because in those countries, especially Kuwait, there is a demand for equipment and technical know-how? Will my right hon. Friend, together with the Secretaries of State for Trade and for Industry, bear in mind that in combination they can work for the benefit of trade between the OPEC countries and this country?
  Mr. Benn: I agree strongly with what my hon. Friend has said. In fact, one of the first things I did when I was appointed to my present position was to invite the OPEC ambassadors to come and see me in my Department to discuss this and other matters. The Department of Trade has pursued these possibilities. The Offshore Supplies Office is very much concerned. I referred in my first supplementary answer to the importance of developing the opportunities for exports of oil-related equipment, and I share the view which my hon. Friend has expressed.

  Fuel Industries (Subsidies)
  Mr. Gowasked the Secretary of State for Energy what is his latest estimate of the amount of subsidies payable to the gas, electricity and coal industries during the current financial year; and what were the actual figures for the year ended 5th April 1976.
  Mr. Eadie: The information which my right hon. Friend gave to my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Thomas) on 31st March in respect of payments in 1975–76 and 1976–77 stands, except that the latest estimate for compensation for price

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  restraint to the electricity industry—England and Wales—for 1975–76 is now £11–6 million, not £21·6 million.
  Mr. Gow: Will the Minister accept the congratulations of hon. Members on this side of the House on the policy of the Government to phase out these subsidies to nationalised industries? Will he also confirm that there is no danger of the Government weakening in their resolve to face this matter?
  Mr. Eadie: I note the hon. Gentleman's congratulatory remarks, but I ought to point out to him that the legacies from his Government are still carrying on for some considerable time. For example, payments to the Central Electricity Generating Board for accelerating investment in the power stations are likely to continue until 1980–81.
  Mr. Palmer: Does my hon. Friend agree that the subsidies to the gas and electricity industries were introduced by the Conservative Government against the wishes of those industries?
  Mr. Eadie: Yes, and I particularly remember my hon. Friend and myself taking part in some of those debates. It is fortunate that there is a certain rapport between the Opposition and the Government in trying to deal with this problem.
  Mr. Cryer: Does not my hon. Friend acknowledge that the congratulations of the Opposition are indictment enough on the phasing out of these subsidies? Is not the effect of the cuts in public expenditure that pensioners, single-parent families and people in real need are having to pay higher prices for gas and electricity, and is it not time that the Government reversed the policy, retained subsidies and kept prices down?
  Mr. Eadie: I think that my hon. Friend and I are at one on this point, but I do not think my hon. Friend would want to support the policies inaugurated by the previous Government. I agree with him that there is a problem of severe fuel bills for pensioners, but I think he will agree that by means of pension provision and social security payments the Government have tried to grasp this nettle in order to assist pensioners and people to whom he has referred. Indeed, it was my right hon. Friend the Secretary of State who
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  faced this problem recently and tried to assist pensioners by preventing their fuel supplies from being cut off.

  Coal Production
  Mr. Patrick McNair-Wilsonasked the Secretary of State for Energy what are the latest estimates of United Kingdom coal production in the years 1980, 1985 and 1990.
  Mr. Eadie: The National Coal Board's estimate for 1980 is 130 million to 135 million tons, and for 1985 at least 135 million tons. These figures include licensed mines and opencast coal. Production in 1990 is expected to be on a substantial scale but it is not possible to make specific forecasts at the moment.
  Mr. McNair-Wilson: While recognizing the problem which the Minister has described, may I say that the figures he has mentioned are large and are encouraging? However, in spite of the good financial figures given to us by the chairman of the board last week, does not the hon. Gentleman agree that there is now a real worry about the ability of the industry to finance the capital projects which are necessary to bring the coal to the surface without additional heavy borrowing, once again crippling the industry with an unmanageable debt?
  Mr. Eadie: The hon. Gentleman has to some extent underlined the terrible problem and dilemma which the Government face in their tremendous commitment to coal. As I have said before, we are attempting to do in 10 years what should have been done in 25 years. The hon. Gentleman knows from the speeches made by my right hon. Friend and myself from the Dispatch Box that we have given a firm commitment to coal, not simply from compassion but because we believe that the nation urgently needs the coal. To this extent we are trying to overcome the financial problems of the board.
  Mr. Skinner: Is my hon. Friend aware that if the figure of 135 million tons is to have any realism he has to get something done about establishing markets to sell the coal that he hopes will be produced in the years mentioned in the Question? Does he not agree that one of the first things to be done is to tell our so-called partners in the Common Market that they have an obligation to

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  assist in getting rid of the 30 million tons of coal stocked in this country, in the same way as we are expected to absorb their mountains of butter and goodness knows what and other surpluses that they keep on creating on the Continent?
  Mr. Eadie: I do not underestimate in any way what my hon. Friend has said about the coal and energy requirements of the Community. This problem exists not only in this country but also within the EEC countries. My hon. Friend has expressed a view which is probably spreading throughout the House when he suggests that it would be helpful if we could export coal to Europe to the extent that we would like. I have no doubt that the market exists for coal, and the National Coal Board in particular is doing all it can to find new export outlets. My right hon. Friend is also looking into the question of additional means of coal-burning in this country.

  Domestic Energy Saving
  Mr. Hannamasked the Secretary of State for Energy what progress has been made towards the introduction of legislation to encourage domestic energy savings in the United Kingdom.
  Mr. Oakes: Enabling legislation exists in the Fuel and Electricity (Control) Act 1973. Similar powers have been proposed in the Energy Bill, recently introduced in another place. But the Government are not at present contemplating the introduction of statutory controls of domestic energy use. We prefer to rely on voluntary effort related to realistic pricing and helped by the provision of information on the financial advantages of energy saving.
  Mr. Hannam: Is the hon. Gentleman aware that a great opportunity has been missed in the new Energy Bill, in that measures are not introduced aimed at achieving a solution to the major cause of energy wastage, which is the lack of proper building insulation in this country? Is he aware that Britain is bottom of the European league in measures designed to achieve a solution to this great problem?
  Mr. Oakes: Building insulation is one of the many matters that we are examining, but we have no immediate intention to introduce legislation on it. With refer-
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  ence to what happened in the other place in regard to the powers that we were taking to control the use of energy, perhaps I may add that I hope that we shall have the hon. Gentleman's support, and that of his hon. Friends, when we seek to put those powers back in the Bill when it reaches this House.
  Mr. Powell: Does the Minister agree that the public and all concerned are perfectly capable of adapting themselves to variations in price and can be hindered in doing this efficiently only by attempts at legislation and bureaucratic interference?
  Mr. Oakes: The legislation, as contemplated, does not deal with that aspect of the matter. I repeat that when the Bill reaches this House we shall seek to put back those powers with regard to energy conservation which were taken out.
  Mr. Palmer: Does my hon. Friend realise that he has just given an answer that appears to suggest that the Government have already rejected one of the recommendations of the Select Committee on Science and Technology for energy conservation legislation? In these circumstances, is it not imperative—I ask this as Chairman of the Select Committee—that we have the White Paper fairly soon?
  Mr. Oakes: I hope that I have not misled the House. I assure my hon. Friend that it is not the case that we have so far rejected anything that the Select Committee has put before us. I was asked whether immediate legislation was envisaged. As I think I said in reply to another supplementary question, we are looking at the recommendations of the Select Committee, together with other recommendations, and I hope that my right hon. Friend will soon be in a position to make an announcement.

  Coal (Exports)
  Mr. Jim Lesterasked the Secretary of State for Energy whether he expects an increase in coal exports in the year 1976; and what steps he has taken to increase such exports.
  Mr. Eadie: This is primarily a matter for the National Coal Board. The board is seeking to expand exports to existing

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  outlets and to secure new ones in anticipation of new export opportunities when economic activity picks up. But the market remains weak, and I understand that on present trends the board is unable to predict an increase in 1976.
  Mr. Lester: I accept that in the first place it is a matter for the National Coal Board, but does the hon. Gentleman not agree that he, too, can be helpful in discussions with his colleagues in Europe in terms of promoting coal technology, especially the new technologies? Does he further agree that the National Coal Board and the miners themselves can make a contribution towards this important part of the coal industry's future by producing coal as competitively as possible and settling down to good productivity agreements in order to produce the coal that we need and also the rewards to miners for getting it?
  Mr. Eadie: I could not agree more with the hon. Gentleman on the question of aiding coal exports. We are very good at the introduction and development of coal technology. Certainly, this is a matter that must be examined. In my view, it is a question of exporting coal plus the technology alongside it, and I welcome what the hon. Gentleman said about that. As for what he said about the rôle of the miners, I am sure that he will agree that they are very conscious of the rôle that they have to play. I think that one can fairly say that there is a peace and stability within the industry now which we have not experienced for many years, and I believe that, as a consequence, we shall be able to achieve the aim which the hon. Gentleman has expressed.
  Mr. Ioan Evans: Will my hon. Friend keep in mind the need not only to encourage productivity but to ensure safety? There have been a number of deaths in the South Wales coalfield recently. Secondly, will my hon. Friend direct active attention to the concern felt by miners who see coal stocks building up when they know at the same time that other nationalised industries are still importing coal from abroad? I realise that long-term contracts are involved here, but will he look at that matter again?
  Mr. Eadie: I assure my hon. Friend that both my right hon. Friend and I were seriously concerned about the trend of accidents which took place, notably in the South Wales coalfield. Because of my own technical and practical experience, I personally examined the trend of these accidents. I cannot say that I am pleased to tell my hon. Friend this, since the toll was unduly high, but I should say that there is nothing specially significant about it, although, of course, we must all be distressed at what happened. I give my hon. Friend the assurance—since he asks about the getting of coal in relation to safety considerations—that safety will come first and the mining of coal second.
  We are looking at the whole question of imports. My hon. Friend will know from previous answers that I have given him that the amount of coal imported will be substantially reduced this year. He will recollect that it was previously 2½ million tons, but it will be reduced. [HON. MEMBERS: "Too long."] I apologise, Mr. Speaker.
  Mr. Patrick McNair-Wilson: Does the Under-Secretary recall that 30 per cent. of the coal imported into the EEC is coming from Iron Curtain countries? Will he and his right hon. Friend try to persuade our EEC partners to stop importing subsidised Polish coal at the expense of the British coal miner?
  Mr. Eadie: The hon. Gentleman puts to me a concern, which has been expressed also by some of my hon. Friends, on the question of coal being imported—not only from countries behind the Iron Curtain but from elsewhere—at below the cost of production. This was not something that we envisaged happening within the EEC, and I agree that the point certainly should receive attention.

  Gas Prices
  Mr. Teddy Taylorasked the Secretary of State for Energy what was the average price per therm of gas in Scotland and England, respectively, at the most recent date for which figures are available.
  Mr. Eadie: Such figures based on current tariffs are not available. However, in half the English gas regions most

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  elements of the tariffs are now the same as in Scotland.
  Mr. Taylor: How can the hon. Gentleman say that these figures are not available when I have had such figures provided by Ministers in each of the past 10 years? Why cannot we have a British gas industry supplying gas at British prices? Does not the hon. Gentleman realise that it makes it difficult for unionists such as myself to argue a fully convincing case against the Scottish nationalists if we cannot at least have a British price for British gas?
  Mr. Eadie: The supplementary question that the hon. Gentleman puts, with some humour, does not really arise from his main Question. It is a fact that landings of gas in Scotland are at exactly the same price as for the rest of Britain, but, as I have explained to the hon. Member in various previous answers, the increased cost arises from distribution costs and problems of geography. As he put it himself at one time, the reason for this is that we have some independence in relation to gas.
  Mr. William Hamilton: Will my hon. Friend confirm that two-thirds of the gas in Scotland comes from England? Can he say what will happen about that when Scotland gets its independence?
  Mr. Eadie: That would be rather difficult, because there will not be any gas available for the system from Scottish waters before late 1977, and this does not affect the current gas tariff.
  Mr. Gordon Wilson: Will the Minister confirm, from his great knowledge in these matters, that in terms of total reserves there is three times as much gas in the Northern sector—the Scottish sector—as in the Southern sector?
  Mr. Eadie: The hon. Gentleman must examine some of the figures that he has given to the House. Anticipation and landing are two different aspects.

  Offshore Oil (Production Platforms)
  Mr. Grayasked the Secretary of State for Energy what consultations have so far been held with oil companies to encourage the placing of orders for oil platforms in British yards; and what the results of those consultations have been.
  Mr. Bean: My hon. Friend the previous Minister of State has had talks with a number of oil companies about their development plans for their fields in the United Kingdom sector of the North Sea and the possibility of their advancing orders for oil production platforms. These talks have been very useful in providing a full understanding of the technical considerations which play a very important ô in the companies' field development thinking. It is my intention to follow up these exploratory talks with detailed discussions with some of the companies.
  Mr. Gray: Is the Secretary of State aware that the Government have produced precisely nothing so far and that all the time that they are dithering over this matter the loom of unemployment becomes more real for those who are affected by it in the platform industry? What is the Secretary of State going to do to reassure those who work in that industry that there will be positive steps instead of just the talk that has taken place so far?
  Mr. Benn: As usual, the hon. Gentleman has got it wrong. The Government are not dithering at all. Each of the platforms costs about £150 million, and the ordering of them is for the companies. We have been in continual contact with them and the construction companies. I personally got in touch with all the oil companies last summer and my hon. Friend the former Minister of State took this up again. There are technical factors in the shift from steel to concrete. Studies are taking place to see whether the fields can be drained with fewer platforms, because of the cost involved. It is wholly false to imply that the Government are responsible for the present difficult position and its employment implications.
  Mr. Heffer: Is my right hon. Friend aware that some of the most highly skilled labour that can be used on the production of these platforms is in the areas with the highest unemployment, such as shipbuilding areas and in the construction industry areas, such as Merseyside? Will my right hon. Friend take that into consideration, because the work can be done and the skill is available? During the war the Mulberry harbours proved that the technical abilities were there. It is a question of getting on with the job and persuading companies to use existing labour.
  Mr. Benn: I share my hon. Friend's hopes on this subject. We considered the possibility of off-the-peg orders, but the design of platforms depends upon their sites being precisely known. There was a technical report, which I made available to the unions so that they could check from their own knowledge whether the recommendation that they could not be made off-the-peg was correct. I recently spent one and a half hours with the oil liaison committee of the STUC in Perth, and there will be further discussions on the matter. We are hopeful that orders will come, but there is nothing that the Government can do to place £150 million orders at this time.
  Mrs. Bain: Will the Secretary of State encourage oil companies to place orders for the semi-submersible rig that is being developed and built on Clydebank, an area of high unemployment? Does he agree that such a move would prevent rising unemployment and encourage technological advance in Scotland?
  Mr. Benn: I appreciate the hon. Lady's concern. The Offshore Supplies Office in Glasgow has been engaged in vigorous activities on behalf of British firms building a whole range of platforms, including semi-submersibles. Attempts are being made to get the building of them directed in a way that will provide jobs in this country.

  North Sea Oil (Export)
  Mr. Skeetasked the Secretary of State for Energy whether North Sea oil will be freely available for export in the 1980s.
  Mr. Benn: We have always envisaged that North Sea oil that we do not need for our own purposes will be exported, and the amount could be substantial in the 1980s.
  Mr. Skeet: Does the Secretary of State agree with the statement by Mr. Willmott that two-thirds of the North Sea oil must be refined here? Does he agree that that is tantamount to putting a qualification on the amount of oil that can go abroad? As the refinery mix is 25 per cent. low sulphur and the remainder lower-grade oil, would it not be advantageous to the balance of payments to export more than was first anticipated?
  Mr. Bean: It is unusual to refer in the House to statements of civil servants, but the reference made by the civil servant in the United States followed precisely the statement made in the House in December 1974. We are anxious to maximise the benefits for this country from North Sea oil. It follows, from the type of oil coming from the North Sea compared with the needs of this country, that we shall be trading in oil by exporting and importing. That is the broad thinking behind the policy that we have announced, including our desire that up to two-thirds of the oil should be refined in the United Kingdom.

  OVERSEAS DEVELOPMENT UNCTAD IV
  Mr. Canavanasked the Minister for Overseas Development whether he will make a statement about UNCTAD IV.
  Mr. Spearingasked the Minister for Overseas Development what consultations Her Majesty's Government have had with the Ministers of the EEC in respect of issues likely to be raised at UNCTAD IV.
  The Minister for Overseas Development (Mr. Reg Prentice): My right hon. Friend the Secretary of State for Trade will be addressing the conference in Nairobi next week. I can say now that the Government are approaching UNCTAD IV in a positive spirit, and we hope that progress can be made in the various important issues under discussion. Commodity trade will undoubtedly be a very important issue in Nairobi, and we expect that debt problems, resource transfers, institutional reform and transfer of technology will also figure prominently. Amongst other things, the Government hope to achieve at Nairobi a wider recognition of the need of the poorest countries for an increase in the volume and an improvement of the terms of aid. These matters were discussed by the EEC Council of Ministers on 5th and 6th April and 8th April, and my right hon. Friend the Secretary of State for Trade is taking part in a final Council meeting today which will, amongst other things, consider the Community position.
  Mr. Canavan: Will the Minister be supporting the creation of a common fund to finance an integrated programme of commodity agreements? Bearing in mind the recent White Paper, which says that in the current financial year we propose to spend 10 times as much on defence as on overseas aid, where would our contribution to such a fund come from? Would it come from our already inadequate overseas aid programme, or from some other source?
  Mr. Prentice: It is a difficult matter. The conference does not start until next week. It is a global conference, with a wide agenda, and it is not possible for any Government to set out their policy in detail, because it will be negotiated over a few weeks. I hope progress will be made on international guidelines or commodity trading that can be complemented by appropriate specific arrangements on a case-by-case footing.
  Mr. Brocklebank-Fowler: The Dutch Government are sending two Ministers to the conference. Will the Minister say why only his right hon. Friend is going to Nairobi and he is not?
  Mr. Prentice: On present plans my hon. Friend will go to Nairobi for the latter stage of the conference. This has been the pattern at previous conferences, under both Governments. The Secretary of State for Trade takes the lead at the beginning of the conference and, generally, the Minister for Overseas Development goes later.
  Mr. Spearing: Does my right hon. Friend recognise that that reply will be disappointing? I should like both Ministers to be there all the time. Will our representatives be meeting representatives of the Commonwealth prior to UNCTAD IV, to follow up the initiative of my right hon. Friend the Member for Huyton (Sir H. Wilson) in Jamaica? Would it not be appropriate for them to meet representatives of the Commonwealth before meeting EEC representatives?
  Mr. Prentice: I should like to go to the conference, but other things intervene, including matters concerning the House. There will not be any formal Commonwealth meeting to determine a joint Commonwealth approach prior to UNCTAD IV.
  Mr. Tugendhat: I agree with much of what the Minister has said in answer to the first question, but does he agree that it is important to support Dr. Kissinger's proposals for endeavouring to finance least-developed countries? Does he agree that economic development could be achieved more rapidly if a larger rôle were given to foreign direct investment?
  Mr. Prentice: We shall study Dr. Kissinger's proposals with care. Direct private investment may be the quickest way forward for some countries, but for others, including the poorest countries, there is no substitute for a more relevant trade programme, because such countries do not always attract private investment.

  Crown Agents
  Mr. Skinnerasked the Minister for Overseas Development when he expects to receive the report of the Fay Committee dealing with the Crown Agents.
  Mr. Prentice: The best estimate that I can give the House is that I expect to receive the report at about the end of the year.
  Mr. Skinner: It is a little late now. Will my right hon. Friend give a categorical assurance that the Fay Report will be published in full detail, including all those references to circumstances in which civil servants in both the Treasury and the Ministry for Overseas Development failed to give Ministers, of varying hues and descriptions, the correct position regarding the Crown Agents at the appropriate time? Will my right hon. Friend also ensure that in the report a full list will be included of those Members of Parliament who were involved in companies which had borrowings from the Crown Agents during the period when all these sleazy enterprises were indulged in by the Crown Agents?
  Mr. Prentice: I do not think that my hon. Friend does any service to the House by making insinuations, couched in vague terms, against people who are in no position to reply. It is and always has been my intention that the report should be published. I made that clear in my statement last October—my hon. Friend was present at the time—and it will be published, as I said, subject to any editing to protect the interests of

  833
  developing countries or information given on a strictly confidential basis. That was the intention of my predecessor, my right hon. Friend the Member for Lanark (Mrs. Hart), as she made clear, and I have repeated it on more than one occasion as my intention, too.
  Mr. Skinner: Another cover-up.
  Mr. riggers: Will the right hon. Gentleman assure us that it will be the Government's policy that the massive and unique value of the Crown Agents to the economy will not be damaged?
  Mr. Prentice: Yes, Sir. I am grateful to the hon. Gentleman for that supplementary question. Inevitably and rightly, there has been a lot of concern about unfortunate developments over the last few years, but that should not obscure the fact that the ongoing work of the Crown Agents has been of great value to the country and very significant overseas.
  Mr. George Cunningham: Pending the production of the Fay Report, will my right hon. Friend clarify the position of those cases that have been reported to the Director of Public Prosecutions? Is the Director still actively considering some such papers? When can we expect the outcome of his consideration?
  Mr. Prentice: The Director of Public Prosecutions is considering two or three cases. I do not know when we can expect the outcome of his consideration.

  Aid
  Mr. Formanasked the Minister for Overseas Development when he expects that the United Kingdom will be able to achieve the Pearson target of 0·7 per cent. of gross national product in official aid to the developing countries.
  Mr. Prentice: The Government have always made it clear that, while we accept the 0·7 per cent. target in principle, we cannot set a date by which we shall reach it. Our progress towards it must be determined by the pace of our own economic recovery and by the other calls on our resources.
  Mr. Forman: In view of the commitment in the Labour Party manifesto, is the right hon. Gentleman not rather ashamed of the rather poor progress so far on official aid? In view of the rather
  834
  pious statements in the recent White Paper on overseas development, would it not be better if more aid rather than less was going to rural development and projects for rural advancement?
  Mr. Prentice: I agree that more priority should be given to rural development. That was one of the cardinal points of the White Paper published a few months ago. I am disappointed with the progress made on the volume of aid under both Governments over the last 12 years. The percentage of the gross national product devoted to aid has declined from 0·52 per cent. to 0·38 per cent. On the other hand, the House should recognise and acknowledge that, against the background of having to make very severe cuts in public expenditure, the overseas aid programme was practically the only programme not affected by those cuts.
  Mr. James Johnson: Since it is very unlikely that any Western nation, still less the United Kingdom, will fulfil its target of 0·7 per cent. of the gross national product, why did not my right hon. Friend show enthusiasm for the suggestion made earlier in the supplementary question by my hon. Friend the Member for West Stirlingshire (Mr. Canavan)? Is it not the case that, with the failure to hit this target, the only other means of helping the Third World is by an international commodity bank of the nature that, I understand, Dr. Kissinger is to suggest in Nairobi in a few days' time?
  Mr. Prentice: The only reason for my caution in reply to my hon. Friend the Member for West Stirlingshire (Mr. Canavan) was, as I explained at the time, that in a negotiating conference it is difficult to be positive before the conference has opened. I think that we should not regard a better deal on commodities as an alternative solution to a greater flow of development aid. The developing world needs more of both.

  European Community (Ministers' Meeting)
  Mr. Hooleyasked the Minister for Overseas Development if he will make a statement on the meeting of EEC Ministers responsible for overseas development held on 8th April 1976.
  Mr. Prentice: I apologise for the length of the reply, but I was asked for a statement on the meeting.
  So far as progress in the Community's own programmes is concerned, this was a disappointing meeting. No agreement was reached on spending the 20 million units of account for the non-associated developing countries provided in the 1976 Community budget, in fulfilment of the decision in principle which was taken in July 1974. There was no agreement on a Community contribution to the International Fund for Agricultural Development, nor on spending 2·5 million units of account provided in the budget for collaboration between the EEC and nongovernmental organisations, nor on the forward planning of food aid. The Commission will make further proposals on harmonisation and co-ordination of member States' bilateral policies for consideration at the next Development Council this summer.
  The Council did, however, agree on the member States' common position on major aid issues for last week's discussion of the transfer of resources by the Conference on International Economic Co-operation. These include undertakings of progress towards better harmonisation of aid terms for each developing country and improved terms for those countries whose needs are greatest, and the idea of an agreement among donors to devote aid increases principally to those experiencing the worst difficulties and the greatest needs.
  Mr. Hooley: Will my right hon. Friend give an assurance that our own aid policies in relation to food and rural development will not be held back because of the obscurantist attitude of certain members of the EEC? Will he take note of the excellent behaviour of the Netherlands Government, who have taken an intiative with regard to UNCTAD without waiting for the Commission to pronounce at all?
  Mr. Prentice: The policies contained in the Government's White Paper and expressed to the House on several occasions will not be adversely affected by any ideas to the contrary on the part of other member Governments of the EEC. Meanwhile, we shall press for a more outward-looking policy by the Community as a whole, particularly an aid policy for the Community that is world-
  836
  wide and gives more priority to the poorest countries.
  Mr. Marten: Is the right hon. Gentleman aware that the attitude of the EEC towards the question of the price for the importing of 1·3 milion tons of cane sugar is both selfish and inward-looking? The Government should stand up for our old partners in the Commonwealth Sugar Agreement, who looked after us so well—as we did them. Is the right hon. Gentleman going to let this happen?
  Mr. Prentice: That is a matter for my right hon. Friend rather than for me, but I hope that I have made it clear that the Government are not satisfied with the stance taken by the Community on overseas development matters and are pressing for a number of fundamental changes.
  Mr. Jay: Will my right hon. Friend say what action the Government propose to take on the sugar negotiations, which apparently have now reached a deadlock?
  Mr. Prentice: I cannot. As I made clear, that is a matter for my right hon. Friend.
  Mr. Tim Renton: Is the Community making progress towards the idea of a European export-import bank, which would be of assistance in financing commodity stabilisation schemes and new mineral deposits in less-developed countries?
  Mr. Prentice: That is not primarily a matter for me, but I shall look into it and see that I or or my colleagues write to the hon. Gentleman about it.
  Mr. Spearing: Is my right hon. Friend aware that many of us will find that statement disappointing? May I revert to the question of the common fund and the attitude taken in Holland? Is it not a fact that the Netherlands Government have indicated that they are in principle prepared to contribute to a common fund? What is the Government's attitude to this matter, in particular, to the point of view of the Netherlands—a view that, I understand, is shared by Norway?
  Mr. Prentice: As I explained in answer to an earlier Question, my right hon. Friend the Secretary of State for Trade is attending a Council of Ministers meeting today which will be discussing the

  837
  Community's attitude to this problem and other problems that will come up at the UNCTAD conference.

WATER SUPPLY
Mr. Michael Morris(by Private Notice) asked the Secretary of State for the Environment if he will make a statement on the water supply situation in general and specifically for the county of Northamptonshire, and what action is being taken to transfer water from those areas with adequate supplies to those beleaguered areas which are already experiencing extreme shortage.
The Minister for Planning and Local Government (Mr. John Silkin): I am grateful to the hon. Gentleman for giving me the opportunity to comment on the situation.
Parts of the country are certainly facing water shortages this year. The severity of the shortages differs very much from area to area, but the effects are localised, depending on the pattern of water supply and the measures open to the water authorities to make alternative arrangements.
As my right hon. Friend made clear to the House last week, I have set up a group of senior officials and representatives of the water industry to assess the situation to keep me in touch on a weekly basis, and to advise what contingency measures may be needed in addition to the plans that the water authorities have already made. The group will meet regularly, and Ministers will be discussing its first report with the chairmen of the regional water authorities next week. At this stage, it appears that the immediate position is under control. Given sensible use of water by domestic consumers, industry and agriculture, the water authorities tell me that they hope to avoid major interruptions of supplies during the summer, although there is bound to be local inconvenience, and possibly even a degree of hardship. There may be specific problems in relation to spray irrigation.
As regards the particular situation in Northamptonshire, where storage reservoirs are about one-third full and the River Nene is very low, steps have been taken to transfer in extra quantities of
838
water from Grafham Water, and a Drought Order has been made to allow maximum advantage to be taken of any storm flows in the Nene that may occur. The water authority tells me that these measures are proving effective.
This assessment, as I have made clear, is on the basis of our having something like an average rainfall this summer. But we are already working with the water authorities on the contingency measures that would be needed to deal with the problems of an altogether different order that could arise with an abnormally dry summer.
The crucial thing is that people should use water sensibly and prudently. The water authorities are in the best position to judge what economies are needed in their individual areas, and people should follow the guidance they give.
Mr. Morris: I am most grateful to the Minister for that very full answer. If there is another summer similar to that of last year, is he confident that he has all the necessary powers and that the necessary research has been done to ensure that there will not be extreme hardship to industry, agriculture and domestic consumers in the areas that are now suffering an extreme shortage?
Mr. Silkin: As I said in my opening statement, if there are problems they will be local problems. We are not in a national drought situation, or in any danger of one. The whole purpose of the ongoing contingency meeting, and of the group itself, is to see that we meet these problems before they come upon us.
Mr. Raphael Tuck: Is my right hon. Friend aware that his right hon. Friend the Secretary of State for the Environment will be taking 12 days to meet the National Water Council and regional authorities? Why wait 12 days? Is my right hon. Friend further aware that the Meteorological Office has said that even if we have monsoon weather we shall not have sufficient rainfall this summer? As people do not use their supplies reasonably, would it not be wise to make regulations to conserve water—for example, by prohibiting the use of garden hoses?
Mr. Silkin: Unless my arithmetic is at fault, between 3rd and 12th May is not 12 days but nine days. It may seem like

839
12 days. During this period there will be a series of ongoing official meetings. Reports are coming in. The point that my hon. Friend makes may be applicable in certain areas but not in every area throughout the country. I have tried to stress that we are dealing with a localised situation, not a national one.
Sir John Hall: Does the right hon. Gentleman agree that, quite apart from the effect of a dry summer this year, we shall face year by year an increasing problem over our water supply because of increasing usage? What steps is the right hon. Gentleman taking to impress upon the nation as a whole the need for the utmost economy in the use of water? What investigations is he making into alternative sources of supply—for example, desalination?
Mr. Silkin: If the hon. Gentleman were to study fairly closely the consultative document that was issued recently by my Department—I forget the exact date on which it was issued—he would see that we are presaging the formation of a national water authority, a strong authority with the power to examine all the questions that he raises, with the possible exception of desalination, which at the moment does not seem to be necessary.
Mr. Spearing: Will my right hon. Friend tell the House what progress has been made by the Central Water Planning Unit as regards the Water Resources Board's posthumous report of 1973? Has it now developed that report as the board would have done had it not been abolished by the Conservative Government? Does my right hon. Friend agree that the proposals in the Green Paper to which he has referred show the wisdom of the Government's present suggestions?
Mr. Silkin: I am grateful to my hon. Friend for what he has said. I believe that a proper national view of the whole situation is the right way of proceeding. For example, we must use all the existing links—and there are a number of links that can be used—to bring water from one area to another. We must consider what extension there might be in future.
Mr. Maxwell-Hyslop: Does the right hon. Gentleman agree that the use of
840
water for food production, including home food production, should have priority over the washing of cars? Would it not be excellent for water authorities to concentrate on their prime duties of collecting, impounding and distributing water, rather than squandering money on exotic exercises such as direct building, which waste effort and money and have nothing to do with their prime duties?
Mr. Silkin: The whole House will agree that where there is a water shortage and where there is not, the production of food must take precedence over the washing of cars. There cannot be any dispute between us on that subject. Direct building is the King Charles's head of the hon. Gentleman. As the hon. Gentleman will be fully aware, I have looked into the matter and taken the advice of the local authority associations. I have tried to follow their guidance and assistance.
Mr. Raison: Is the right hon. Gentleman aware that there is a strong sense of concern about this matter, especially in the Wales, Essex and Anglia regions, and among the farming community? Is he satisfied that enough is being done to put over the need to save water, and the way in which it can be done in those areas? Will the right hon. Gentleman tell us when the Leader of the House expects to give us a debate on the important topic of water?
Mr. Silkin: Of course I was not satisfied. If I had been satisfied I should not have set up the contingency group. One always runs the risk of being alarmist, on the one hand, and being thought too complacent on the other. I felt that the time had come when we should be making as clear contingency planning as possible. As regards a debate, I am sure that the hon. Gentleman can have a word with my extremely reasonable right hon. Friend the Leader of the House. Should my right hon. Friend think that there is any justice in what he says, no doubt he will consider the matter.
Several hon. Members Several hon. Members rose—
Mr. Speaker: I shall allow two more questions.
Mr. Skinner: Will my right hon. Friend ensure that whatever contingency plans he comes up with, he will refrain from deciding upon a system which results in our having another column, another army of people going about the country telling consumers how to save water and being paid expensive salaries for doing precisely that? Is he aware that there are some other simple formulae such as persuading people to put a brick in their toilet cistern? If that were done 15 million times over we should make an immeasurable saving. It is in that regard that perhaps we might be able to resolve the problem.
Mr. Silkin: I know that my hon. Friend will acquit me of having had any part whatever in the reorganisation of the water industry. The present Government can at least be acquitted on that score. The various water authorities know the position in their own localities. This is not a national problem but a regional problem here and there. Therefore, they must be left to make their own decisions. Some authorities have given just the sort of advice stated by my hon. Friend.
Mr. Eldon Griffiths: I accept that this is a regional problem rather than a national one, but does the Minister agree that we face a prospect in which the average per capita consumption of water is now about 50 gallons per head per day and is expected to rise to 100 gallons per head per day within 20 years? Therefore, in those circumstances does he not agree that it is a national problem, and will he take steps to see that the recycling of water is carried out more effectively?
Mr. Silkin: I refer the hon. Gentleman to the consultative document, which is very important. Problems of this sort underline the reason for our having a strong national water authority.

MINISTERS' STATEMENTS (EEC MEETINGS)
Mr. Marten: On a point of order, Mr. Speaker. On Question No. 30 in answer
842
to a supplementary question on the sugar agreement being negotiated in the Common Market, I was told that the Minister for Overseas Development had passed the matter to the Minister of Agriculture. On Thursday and Friday the Minister of Agriculture had a meeting in Brussels, and once again no statement was made to the House. May I remind you, Mr. Speaker, that the Chancellor of the Exchequer failed to make a statement to the House after his recent meeting, as did the Prime Minister and Minister of Agriculture after their meetings. What can you do, Mr. Speaker, to protect Back Benchers who want to know what has been going on in their names over in Brussels? Is there anything you can do to help us?
Mr. Speaker: First of all, I have allowed the hon. Gentleman to make his point, which is what I think he wanted to do. I shall consider the rest of his point of order.

BUSINESS OF THE HOUSE
Ordered,
That, at this day's Sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or after they have been entered upon, whichever is the later, and at the end of that period Mr. Speaker shall proceed to put any question necessary to dispose of those proceedings.—[Mr. Graham.]

STATUTORY INSTRUMENTS, &c.
Ordered,
That the draft Sheriff Courts (Scotland) Act 1971 (Privative Jurisdiction, &c.) Order 1976 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Graham.]

ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  Mr. Speaker: I should like to inform the House that I propose to call the amendment in the name of the right hon. Lady the Leader of the official Opposition.
  3.43 p.m.
  The Chancellor of the Exchequer (Mr. Denis Healey): I beg to move, That the Bill be now read a Second time.
  In previous years the Finance Bill has normally embodied in full the tax proposals made in the Budget speech. The House has, in some cases, discussed and voted on such proposals in relative isolation from other elements of economic policy—and sometimes it has subsequently been necessary to reverse or modify certain provisions to take account of shifts in the economy.
  This Finance Bill is different. In a sense it is incomplete, because, as the House knows, it makes no provision for my Budget proposal to link tax reliefs to the acceptance of a pay limit for the next round which is consistent with a further halving of our inflation rate during 1977.
  This conditional element in my Budget triggered a fit of instant opposition from the Conservative Front Bench. It argued that the Government's approach to getting a voluntary agreement on pay cut across the prerogative of Parliament to determine our affairs.
  This argument was conclusively demolished by my right hon. Friends the Leader of the House and the Secretary of State for Trade during the Budget debate. It may still show a timid flicker from time to time in the correspondence columns of Conservative newspapers, but the country as a whole takes exactly the opposite view. The overwhelming majority of British men and women, whether they are themselves trade unionists or not, recognise that our approach, which accepts the crucial rôle of wage settlements in influencing the management of demand, gives Parliament and people the opportunity to take a more balanced and informed view of our
  844
  judgment than if I had introduced a conventional unconditional Budget.
  When the House comes to vote on the amendments to this Bill, which I shall move at an appropriate stage after we have published a White Paper on the pay agreement, it will be voting in the full knowledge of how those amendments relate to what will be a major factor in determining our economic progress for the next two years.
  The level of wage settlements will determine not only how far and how fast we can reduce our rate of inflation to levels at least comparable to those of our competitors. It will determine also how rapidly we can bring down the level of unemployment and how soon the whole community can once again benefit from higher living standards.
  The Government, unlike their predecessor, have based their strategy on the assumption that co-operation and not confrontation is the only way forward. This has enabled us to help the trade unions by guaranteeing that, through reduced income tax, the working population as a whole is no worse off by accepting a low rather than a high pay limit. Furthermore, it has enabled trade unionists, who must reach a decision on the new pay limit, to do so in the full knowledge of all the advantages of making it as low as possible.
  There were those, of course, both inside and outside the House, who believed that my proposals were too complex to be generally understood. If so, I trust they have read the results of the National Opinion Poll published in last Thursday's Daily Mail. They confirm the evidence of earlier opinion polls that my proposal for linking tax cuts to a low pay limit is fully understood and overwhelmingly supported.
  Similar support is quite clear from the vast amount of correspondence which I have received since presenting my Budget. It is not difficult to see why. The experience of the last 18 months can have left nobody in any doubt about the automatic link between pay, prices and jobs. It is an immutable fact that high pay increases are self-defeating unless there is a corresponding increase in national productivity.
  If we insist on wages higher than the economy can support, people will be

  845
  priced out of jobs. In the short run some people may be a little better off—but only at the cost of making others worse off or actually causing them to lose their jobs. Within a few months the advantage of higher wages, even for those who receive them, will be wiped out by the higher prices which must follow.
  As I have often reminded the House, the increase in oil and other import prices in 1973 and 1974 reduced our real national disposable income by nearly 5 per cent. Our standard of living was not reduced by nearly as much. Overseas borrowing has helped us to cushion the impact of import prices on our living standards. In the meantime, we have to adjust to the new situation.
  Most of the necessary adjustment has now already taken place and the outlook over the next 18 months is for living standards to decline by perhaps 1 or 2 per cent. This is part of the unavoidable price we have to pay for getting unemployment down.
  The universal acceptance and observance of the £6 limit has been a striking demonstration of the extent to which these basic economic truths have been accepted by working people. There is now conclusive evidence that their common sense is bearing fruit. Last week's report from the Price Commission, for example, shows that in the last nine months we have halved the rate of inflation.
  Moreover, it is now generally recognised that if we had not had the £6 limit, our exports would not have performed so well, our balance of payments would have become much worse, and unemployment would still be on a sharply rising trend. The £6 limit also guarantees that our rate of inflation will continue to fall for the rest of 1976. But there will still be a long way to go before we close the gap between our rate and that of our major competitors.
  In the OECD countries as a whole inflation averaged 8 per cent. in the second half of last year compared with 14 per cent. in the United Kingdom. Changes in wages, prices and the exchange rate take time to work through the economy, so prices in 1977 will be influenced by recent movements in the exchange rate and by the impact of pay increases during the current round.
  846
  There will, therefore, continue to be a good deal of upward pressure on prices in 1977, and to reduce the rate of inflation further we must ensure that pay increases during the next round are much smaller than in the present round. We must use the benefits of higher productivity as the economy expands to reduce the inflationary pressure, not to increase it.
  Hon. Members will not expect me to anticipate today the outcome of the current discussions on pay policy. All of those who are involved in the discussions are agreed on the objective—to halve the rate of inflation once again in 1977. That means, as I told the House in my Budget speech, that earnings must rise in the next pay round by under half as much as they rose in the current pay round. We understand well enough that unless we achieve this objective we shall not get the industrial recovery which, at the end of the day, is the only guarantee of higher employment and living standards.
  Our necessary preoccupation with these domestic matters should not blind us to the international dimensions of many of the problems which confront us. In my Budget speech I said that the United Kingdom was taking the lead in international discussions of the common problems of the industrialised economies so that we can develop coordinated strategies for dealing with them.
  I suggested to my colleagues in the EEC that we should make a fundamental examination of the question of unemployment, covering not just the short-term measures appropriate to the present situation but also the scale and nature of the problem in the medium term—up to 1980 and beyond. We made a very valuable start at our meeting in Luxembourg a week ago.
  The most interesting point to emerge was that we were all agreed that the key problem is the management of overall demand and output in relation to production and potential—rather than what are sometimes called the structural problems of technological change, or regional and sectoral differences, important as these may be. Moreover—I hope the Opposiiton Front Bench will note this—we all agreed that it will be impossible

  847
  for any of us to achieve the level of output required for full employment without some sort of incomes policy. On this basis we shall be carrying forward our discussions both within the Community—where a tripartite conference involving employers' organisations and the trade unions has been arranged for the end of June—and in other international bodies
  Mr. Eric S. Heffer: Will my right hon. Friend say whether at this conference there are papers which indicate that rather than making cuts in public expenditure, one way of dealing with the problem of unemployment is by an extension of public expenditure?
  Mr. Healey: No, Sir. I am not aware of any such papers. Papers were circulated by ourselves and by the Commission which suggested that one way of dealing with the immediate problem was by adopting the type of package of micro-economic measures which the Government introduced last September, in December and February. I am glad to say that some other Governments have followed that example. There was no suggestion that the answer to the problem was a vast increase in public expenditure. On the contrary, the point I am making is that demand and output must be increased at a level which is related to the national increase in productive potential if unemployment is to fall. The important conclusion, with which we all agree, is that that is the central problem, rather than the structural problem, as it is sometimes described, of technological change or regional differences and the other factors which I mentioned.
  The meeting of European Community Finance Ministers took place a week ago when sterling had just been under serious pressure. Both my German and French colleagues agreed that there was no justification for that pressure in the recent performance of the British economy. Indeed, Chancellor Schmidt has just paid an important tribute to the success of our economic policies. Indeed, ever since I presented the Budget less than a month ago all the statistics have confirmed the continued improvement of our economy. The March increase in the retail price index was the smallest monthly rise since the summer of 1974. The March surplus on our current balance of payments, £101
  848
  million, was the biggest monthly surplus since September 1971 The March figure for the money supply showed an increase of ½ per cent., bringing the growth over the last year to 8½ per cent. And we have just begun to export North Sea oil.
  My right hon. Friend indicated in the House a week a that conditions in the exchange markets were already quietening down after the pressure in the immediate post-Easter period. As hon. Members are aware, this calmer atmosphere has continued, and I am hopeful that the improved conditions we are now seeing will be sustained.
  We intervened substantially during last month and this has undoubtedly had a significant cumulative effect in helping sterling. Apart from this and the rise in minimum lending rate, reinforcement has come from the market's realisation that there will be a satisfactory pay deal and that sterling is now very competitive. But we must maintain this competitiveness from now on through keeping up the momentum of progress in beating inflation.
  I will now turn to the substance of the Bill, and I hope that the House will find it convenient if I deal in detail only with those clauses which have caused the most controversy or stand in need of some clarification.
  No provision, perhaps, has generated more heat and less light than that contained in Clause 48 and Schedule 6 which gives the Inland Revenue additional powers to obtain information—information which is necessary to uncover illegal tax evasion. From the way in which some sections of the Press have conjured up Kafkaesque fantasies over these provisions, an uninformed observer might be excused if he assumed that the sanctity and tranquillity of family life were about to be disrupted all over the country by the midnight knock on the door in pursuit of an overdue tax return. This is, of course, a ridiculous fantasy.
  Mrs. Elaine Kellett-Bowman: It is the thin end of the wedge.
  Mr. Healey: The thin end of the wedge was introduced by the Conservative Government many years ago. I am very glad that it was, and so are most taxpayers and the overwhelming majority of hon. Members.

  849
  The vast majority of people pay their tax automatically through the pay-as-you-earn system. Their income is revealed as a matter of course to the Inland Revenue and the necessary tax is deducted at source. There is nothing which offends their sense of justice more, or which poses a greater threat to the equity and credibility of the tax system, than the scope which a small minority currently enjoy for evading taxation because there are limitations in the power of the Inland Revenue.
  Let me be precise about the nature of the problem. Evasion is, quite simply, tax dodging which is outside the law. It is a criminal offence, and the loss of revenue from those who indulge in evasion has to be made up by ordinary taxpayers who bear their proper share of tax through PAYE. Of course it is not possible to put a figure on the amount of revenue that is lost through evasion. If the tax authorities knew how much was involved they would probably be in a position to identify the culprits.
  Mr. Alexander Fletcher: Have a guess.
  Mr. Healey: I am about to make a guess.
  There are, however, many signs that the sums involved are substantial and that they are growing. In the year to March 1975 the amount of evaded tax in major cases which the Inland Revenue was able to uncover amounted to some £17 million. As a proportion of the total tax yield this was only about one-fifth as much as the Revenue secured 15 years earlier. I am afraid, and I believe most hon. Members will agree, that there is little reason to suppose that the standard of compliance is now much higher than it was. Right hon. and hon. Members on the Tory Benches always talk about a great erosion of tax morality over recent years. The fact is that the amount of tax evasion uncovered by the Revenue has fallen by 80 per cent. in recent years, although according to the Conservative Party, the degree of tax morality is now much lower than it was.
  Mr. William Hamilton: My right hon. Friend will surely make the point that the most noise coming from the Opposition concerns fraud with
  850
  supplementary benefits and not fraud with wealthy taxpayers, with which this part of the Bill is concerned.
  Mr. Healey: The whole country will have noticed the extraordinary discrimination exercised by the Conservative Party in pursuing the widow or unemployed worker for minuscule amounts of tax while raising a major campaign in the national Press to protect the millionaire who is defrauding the Revenue of millions of pounds.
  It therefore seems, from the figures, that there has been a significant decline in the ability of the Revenue to detect and counter illegal evasion.
  I hope the House will forgive me if I explain my proposals in some detail. The amount of misinformed comment about them makes it necessary that I should do so. They fall under two headings. The first concerns the power of a tax inspector to issue a notice calling for documents which relate to an individual's tax liability. For the overwhelming majority of tax payers this is automatic because they pay under PAYE. There is nothing in this provision which will empower the Inland Revenue to interrogate people or to require anyone to testify against anybody. Anyone who fails to comply with such a notice to call for documents may, however, attract a financial penalty.
  If it is found necessary to approach any person other than the taxpayer, this can be done only with the consent of a General or Special Commissioner of Income Tax, and the Commissioner can give such a consent only when he is satisfied that in all the circumstances of the case the inspector is justified in seeking to issue a notice.
  The second part of my proposals concerns the power to enter premises with a warrant. The relevant section provides that, where a justice of the peace is satisfied by information which he has received on oath that there are reasonable grounds for suspecting an offence involving tax fraud, he may issue a warrant to an officer of the Board of Inland Revenue. The officer will then be authorised to enter premises, search for and seize documents and other evidence which might be needed for proceedings relating to such an offence.

  851
  The House and the country should be quite clear what this means. In this provision we are concerned only with the suspicion of a criminal offence involving deliberate dishonesty. We are concerned with nothing else. The Inland Revenue will not be able to obtain a warrant merely on the grounds that a taxpayer has omitted something from his tax return through negligence or carelessness—because, of course, that is not a criminal offence.
  It is wilful nonsense to pretend that tax inspectors will be walking into all sorts of people's premises and homes. There is nothing new for the Inland Revenue in the procedure for entering premises and searching them. It happened under the last Conservative Government. Under the existing law it is possible for the Revenue to apply for a search warrant in connection with tax investigations, for example under Section 26 of the Theft Act of 1968 or under Section 16 of the Forgery Act 1913.
  The sort of circumstances in which it might be necessary to use the power of entry we now propose are those where the Revenue, if it tried to obtain documents under other powers and without a search warrant, would run the risk of the documents being destroyed or conveniently mislaid before it could get hold of them. On this basis, I envisage that the powers will be used at the most in only a handful of the most serious cases each year.
  It has been suggested, Mr. Speaker, that a Treasury Minister should countersign every search warrant issued to the Inland Revenue by a justice of the peace. If hon. Members think about this, particularly Tory Members, they will recognise that it would run completely contrary to the traditions underlying the administration of direct taxation in this country to involve Ministers of the Crown in decisions on particular cases.
  Ministers stand apart from the detailed operation of the tax system, and it is important that they should, so that we can avoid any claim that important decisions affecting individual taxpayers are influenced by political considerations. I am sure right hon. Gentlemen on the Tory Benches will agree that that should remain an essential part of the administration of tax in this country. I do not
  852
  think they want, any more than we do, Ministers to be able to form a view on the tax circumstances of their political opponents, interesting as on occasions that might be.
  Mr. Nigel Lawson: No one on the Conservative side of the House, or, I am sure, elsewhere in the House, is in favour of tax evasion. I am sure that the Chancellor will agree that there is an important balance to be struck. Why has he decided to take powers in the Bill which go considerably beyond those powers recommended by the Royal Commission on Taxation of 1955?
  Mr. Healey: The reason is as I have said, that there is a great deal of evidence—not conclusive I admit—since 1955 that the amount of undiscovered tax evasion has enormously increased. One reason for this is the fact that our tax authorities do not have the same powers as the tax authorities in nearly all other democratic countries. I will give chapter and verse for this in a moment. I agree with the hon. Gentleman that in managing our tax system it is important to balance the requirements of effectiveness and equity with the proper regard for the privacy of the citizen.
  I am as concerned as anyone that the individual should be properly protected. The safeguard for him in these proposals is the necessity for a justice of the peace to be satisfied that there are reasonable grounds for suspecting a criminal offence.
  Justices, in our legal system, are empowered to issue warrants under a wide range of statutory provisions. There are over 50 such provisions including the two I have mentioned—the Theft Act and the Forgery Act—both of which are sometimes made use of by the Revenue now as they were under the last Conservative Government. The experience and independence of magistrates means that they are ideally placed to look after the interests of the individual. I hope no one will dispute that.
  Most people realise that the tax man is not seeking to invade their homes. They realise, too, that it is in their interests to ensure that the authorities are in a position to deal with the special cases of those who are adept at defrauding the State and who—because of the Inland Revenue's present limited powers—manage to do so with impunity.

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  Some people have chosen to see this issue in terms of civil rights. They should reflect that the ordinary taxpayer, too, has a fundamental right—the right to be protected from the need to pay more tax because of the dishonest and fraudulent few, whom I think Conservative Members would not seek to protect. Other democratic countries have moved further towards securing that right than we propose to do in the Bill.
  The powers available to the tax authorities in Canada, Australia and the United States are a good deal wider than those proposed in this Finance Bill. Those countries give tax authorities wide powers of access to premises in the ordinary course of administering the tax system and, where force is needed, they can obtain warrants as we propose the tax authorities should be enabled to do in this country. Anyone who reflects on the facts will agree that it is high time that we caught up with those other democratic, English-speaking countries, in which many of us have relatives and friends and in which they have been operating this system for years without a hypocritical outcry such as we have had from some Tory Members.
  Sir John Hall: Does the right hon. Gentleman agree that Schedule 6 provides for one spouse to be called upon to give evidence against the other spouse? Is that not contrary to the law of this country as it now stands?
  Mr. Healey: No. I think that perhaps I spoke more quietly than normal. I made it absolutely clear that there was no provision to require spouses or relatives to testify, but where they possess documents which are relevant—the hon Gentleman will not require to use much imagination, as I have no doubt that he has great experience of these higher tax matters, to recognise that there are many situations where individuals—
  Mr. Nicholas Ridley (Cirenceser and Tewkesbury): On a point of order, Mr. Speaker. The Chancellor, in response to my hon. Friend's intervention, spoke words which could only be interpreted as suggesting that my hon. Friend was in some way skilled at or had even practised tax evasion. There was no doubt that the Chancellor's reply firmly
  854
  cast my hon. Friend with the group of people whom he is trying to chase in the Bill. I suggest that he should be asked to apologise to my hon. Friend and to withdraw that remark.
  Mr. Speaker: Order. I was listening carefully, and I made no such interpretation. Perhaps the Chancellor will make his position clear.
  Mr. Healey: Of course, Mr. Speaker. I suggested nothing of that nature. If the hon. Gentleman wants to wear the cap and feels that it will fit him, he may do so. The point that I was making was that the hon. Gentleman must be aware of the ways in which companies, particularly family companies, operate. There are often many cases in which a spouse or a son possesses documents which are relevant to the tax situation of a taxpayer and where the Revenue must have the right to obtain those documents, as in other countries. Lest there be any suggestion in what I said that I intended anything else, I should make it clear that I did not. I think that my hon. Friends are clear that I had no intention of making such an imputation.
  Mr. David Mitchell: On a point of order, Mr. Speaker. Is it in order for the Chancellor to suggest that an hon. Member is not honourable, which is precisely what he suggested when he said that, if the cap fitted, my hon. Friend should wear it?
  Mr. Speaker: Order. It is not in order for any Member to suggest that anybody else in this place is not honourable, because it has officially been ruled that we are all honourable.
  Mr. Ridley: The Chancellor said that if I thought that the cap would fit, I should wear it, the implication again being that my hon. Friend the Member for Wycombe (Sir J. Hall) and I have in some way been connected with tax fiddles. I request that the Chancellor be asked to desist from casting personal aspersions.
  Mr. Speaker: Order. The hon. Gentleman concerned has made no protest, and he is listening to the debate.
  Sir Geoffrey Howe Sir Geoffrey Howe (Surrey, East)rose—
  Mr. Speaker: Order. I am on my feet. I thought that the reference was to the hon. Member for Wycombe (Sir J. Hall).
  Sir G. Howe: Further to that point of order, Mr. Speaker. The reference made by the Chancellor, in his inelegant withdrawal of what he previously said, was to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) It was to him that the right hon. Gentleman said that, if the cap fitted, he should wear it. My hon. Friend suggested that that was an attack which should be withdrawn.
  Mr. Speaker: Order. We want to get on with the debate. I thought that the Chancellor had made it clear that he intended to cast no slur on anyone.
  Mr. Healey: Perhaps I can dispose of this ridiculous rigmarole which is being raised by hon. Gentlemen opposite. I state clearly and frankly, on a personal basis, that in my opinion the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) would be quite incapable of wearing this cap or any other of which I can easily think.
  I come now to Clauses 51 to 62—
  Mr. Graham Page: Before the right hon. Gentleman leaves that point, may I ask whether entry with a warrant to obtain documents would extend to entry into the taxpayer's legal adviser's office?
  Mr. Healey: Not without notice. I am ready to confess my fallibility as a guide on all these detailed tax matters. I will ask my right hon. Friend the Chief Secretary to answer that question in winding up the debate.
  Mr. Maurice Macmillan: The right hon. Gentleman, in referring to those who were likely to be tax evaders as opposed to legal avoiders, said that family businesses were particularly prone to that practice. I hope that he will make it plain that that does not apply to all family businesses, many of which are respectably conducted.
  Mr. Healey: I thought that I had made that point crystal clear. I am a little surprised and shocked at the sensitivity of right hon. and hon. Gentlemen opposite on this matter. I made it absolutely clear that there were only a handful of cases
  856
  in which these powers would be likely to be sought in a full year. Of course I do not suggest that all family businesses come into that category. However, it is the fact that some sections of the population, which do not declare their income or pay their tax automatically to the Inland Revenue, do evade tax. We have evidence of that.
  The powers of the Revenue, inferior as they are, compared with those of tax authorities in other democratic countries, require to be increased to reduce the amount of tax evasion. The hon. Member for Blaby (Mr. Lawson), I hope on behalf of the Conservative Party, agreed that nobody in that party wishes tax evasion to continue on any scale which can be avoided by sensible action such as that which has been taken in other countries.
  I come now, at long last, to Clauses 51 to 62 which contain the revised rules for the taxation of fringe benefits. The proposals follow an undertaking which I gave last year to review the legislation in this area. They are of two kinds.
  First, we are extending the scope of the existing rules by bringing in employees and office holders earning over £5,000 a year in the public sector and in other non-trading concerns, and by applying the rules of benefits provided for an employee by a third party as well as by his employer. We intend that in future there should be no difference in treatment between the public and the private sectors. I should imagine that the Opposition would at least agree so far.
  Thus, for example, the use of official cars by Ministers of either party—should the Conservative Party ever acquire office again—will be subject to the same rules as the use of company cars.
  I suspect that hon. Members will feel cheated if I do not refer in this context to recent stories in the Press about the treatment of official residences, which seem to suggest that I have committed a form of fiscal hara-kiri. It is true that the tax changes I have introduced in the last two years have hurt me and my colleagues as much as anyone else on the same salary or in similar circumstances. This Finance Bill is no different in that respect. But I should take this opportunity of making it clear to the House that no change is intended in the rules

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  governing the provision of accommodation either for Ministers or for anyone else in the public or private sectors. The legislation which governs the provision of benefits, including accommodation, goes back to 1948, and this is being re-enacted in the Bill.
  Employees and holders of office in the public sector are already subject to tax on accommodation made available by their employers. The tax treatment in each case depends on the same criteria as apply under the benefits legislation. They will now, for the first time, be brought specifically within a statutory provision. I hope that right hon. and hon. Gentlemen opposite will also welcome that change.
  There is no intention to distinguish the treatment of Ministers and others in the public sector from that of those in the private sector—for example, bank managers living over banks and others in a similar situation, such as lock keepers, as The Sunday Times pointed out yesterday.
  Nor do we intend to change the present treatment, which has applied for many years, under which official premises provided for occupation by Ministers and other holders of public office are not regarded as taxable. The Committee will, of course, have its usual opportunity of examining the wording of the clause. If it takes a different view from that of the Government, it will have a chance of expressing that view, and, if it has a majority, of amending the legislation.
  The second set of changes in these clauses deal with the value placed on certain benefits for tax purposes where the present rules are unsatisfactory—as in the case of company cars—or ineffective, as in the case of cheap loans.
  Mr. John Nott: Perhaps the Chancellor could clear up this point. If a company director is a representative occupier, why is that director taxed? Why should directors be treated differently from Ministers? Why should a company director be chargeable, when Ministers are not chargeable?
  Mr. Healey: The reason is the one which commended itself to the Treasury when the hon. Member was himself a
  858
  member of the Treasury team. He did not try to change it then. Whereas bank managers in the private sector have no power to change the circumstances in which they live, company directors in close companies have the power to buy themselves enormously expensive houses at the taxpayers' expense. Examples of that were widely publicised in the newspapers recently. The hon. Gentleman knows this very well from when he was a Minister in the Treasury. I wish he would not keep fouling the nest which he recently occupied so cosily for four years.
  Mr. Nott: I am sorry, but I rose on a question of fact arising from the Chancellor's legislation. I cannot understand why the Chancellor cannot give a straight answer to a straight question.
  Mr. Healey: In his excitement the hon. Member for St. Ives (Mr. Nott) did not listen to the reply I gave. My hon. Friends heard me and they understood it well.
  The new rules for taxing the benefit derived from a company car by reference to a scale rather than individual mileage will bring a much-needed simplification into the tax system. No one can claim that the scales are unduly severe. The amounts are based on 1975 costs and they are not being brought fully into effect until 1978. This will minimise any adverse effects on the British motor industry with which we shall be having consultations about the provisions.
  The proposal that cheap or interest-free loans provided for employees should be taxable as a benefit, unless the interest would have been eligible for relief, fills a gap in the existing law. We are allowing those with existing loans an extra year to rearrange their affairs before they become liable to tax on the benefit.
  Mr. A. P. Costain: What about free travel for British Rail employees from their place of residence to their place of work? They have had this privilege for many years. Many live in outside areas believing that this privilege will continue. What is the position with that?
  Mr. Healey: It may have escaped the hon. Gentleman's attention, but these employees are neither directors, nor are they

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  living on incomes of over £5,000 a year, so they are not included.
  I now turn to the Opposition amendment. I will give it all the attention it deserves—about two minutes. There can be no more final and conclusive answer to the claim that the Finance Bill is
  "profoundly discouraging to skill and enterprise"
  than the views of those in British industry whose professional concern is, above all, with skill and enterprise.
  The Confederation of British Industry, representing the employers' side of industry, has expressed itself in words which allow no argument—Sir Ralph Bateman, its president, in Tokyo last week, and the noble Lord, Lord Watkinson, a distinguished former Conservative Minister, in London. The Retail Consortium, in its Economic Newsletter this morning, has been even more explicit. Its leader is another distinguished ex-Conservative Minister, the noble Lord, Lord Redmayne. This morning's survey by the Financial Times of business opinion reports a further rise in industrial confidence, based on growing evidence of a revival in industrial activity and a promising outlook for exports. No doubt there will be a further expression of confidence in the CBI survey which is due to appear tomorrow.
  I think all of us on this side of the House well understand and deeply sympathise with the difficulties of right hon. Members opposite. Even their own party's supporters in the newspapers regard them as the most incompetent group of leaders the Conservative Party has had in living memory. But I must tell them that they should not expect to revive their fortunes by fouling their own nest. I hope they will resist the temptation to sell Britain short as they have done in recent weeks, notably the Shadow Chancellor in a speech he made—very aptly—to the Toy Manufacturers' Association.
  Right hon. Members on the Front Bench opposite and their acolytes on the Back Benches, should heed what Lord Watkinson pointed out last week—that those who do sell Britain short face a united Government, TUC, CBI and people. That is a formidable combination to confront the sort of Tory Trotskyism which is spawning so rapidly in the damp cellars of the Carlton Club and Annabel's.
  860
  The Conservative Party has proved once again in its amendment today that it is unfit to present itself to the country even as the official Opposition, and still less as a potential Government. I ask the House to reject their amendment and to give the Bill a Second Reading.
  4.28 p.m.
  Sir Geoffrey Howe: beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
  "this House declines to give a Second Reading to a Finance Bill which attempts to meet the cost of spendthrift Government by increasing the real tax burden upon rich and pool alike, and is profoundly discouraging to skill and enterprise."
  The Chancellor's closing passage was entirely in character with the quite unjustifiable and monstrous attack he made a moment ago on my hon. Friend the Member for St. Ives (Mr. Nott). My hon. Friend asked a straightforward question of fact, which immediately provoked a barrage of the trailer of abuse from the Chancellor which he had been reserving for his peroration.
  For us to have to listen to lectures on patriotism from the Chancellor is absolutely intolerable. The performance of my party in Opposition is that we support the Government when that support is justified. We supported them against their hon. Friends below the Gangway on defence, and we supported them on an incomes policy. If the Chancellor's party had given us the same support and understanding for our policies when our Government were in office, this country would not be in the mess it is in today. Imagine the irresponsibility of the Leader of the House throughout that period when he was actually saying that a victory for the miners was a victory for the nation. The Labour Party is not a party from which we are prepared to take lessons in patriotism—or in anything else
  The Chancellor tends to repeat his curious little phrases—"Tory Trots", for example. All I can say is that people who live in Marxist glasshouses should be careful before they throw epithets like that around. The right hon. Gentleman knows more about Trotskism, Leninism and Communism than I would ever hope to know. The Chancellor and his Government should take lessons in fair play

  861
  and democracy regarding the constitution of Committees of this House.
  The motion for committal of this Bill arises from agreement between the Chief Secretary to the Treasury and myself and it was entered into in good faith, but until we have clarified beyond doubt questions about the Standing Committee on the Finance Bill or any other Bill the Government cannot count on our support for that committal motion or any other. We are entitled to know the position before we send the Bill upstairs.
  Mr. Geoffrey Robinson: What justification can there be for the speech of the right hon. and learned Member for Hexham (Mr. Rippon), which even the Director-General of the CBI called utter rubbish and which I call inflammatory rubbish?
  Sir G. Howe: There is a good deal of justification for the encouragement which he gave to everyone in a position to do so to speak out loud and clear against the disastrous policies of this Government.
  Mr. Healey: I am glad that the right hon. and learned Gentleman had a word to say about the speech of the right hon. and learned Member for Hexham (Mr. Rippon). Will he clear up one thing which is puzzling my right hon. and hon. Friends and myself? The right hon. and learned Member for Hexham attributed the behaviour of British employers to a mixture of idleness, greed and self-seeking. The Sunday Telegraph suggested that it was stupidity. Will the right hon. and learned Gentleman tell us on which side of this argument he stands?
  Sir G. Howe: The Chancellor is trying to be a great deal too clever. He has been praying in aid as though they were the archangels themselves the authority and evidence of the very people about which he is seeking to question me.
  Mr. Healey: They were attacked by the right hon. and learned Member for Hexham.
  Sir G. Howe: The right hon. Gentleman cannot have his argument all ways by seeking to support them, to attack
  862
  them and to call them in aid in his own support.
  Mr. Healey Mr. Healey rose—
  Hon. Members: Sit down.
  Sir G. Howe: I want to say something now about the strategy that the Chancellor is following in his approach to a bargain with the trade unions. I wish him to listen to the measured way in which the Opposition approach this matter. I begin at once by saying that one aspect of this approach to Budget-making, and only one part of it, is welcome—that is, the movement towards great openness in the making of that part of fiscal policy. Public expenditure is still worked out on secret figures not disclosed to us and with a refusal to disclose many key assumptions. However, some progress has been achieved if we have moved in the direction of openness as regards the Budget. I hope that we shall move in this direction over a wider area of consultation with a wider range of people.
  As regards the rest of the Chancellor's approach, I noted with interest his statement that his colleagues in the European Community do not think it possible to get by without some sort of incomes policy. If that is any form of description of the situation which prevails in West Germany, I am content to go along with that as a description of an incomes policy.
  It is not a subject on which we should be wholly dogmatic—
  The Chief Secretary to the Treasury (Mr. Joel Barnett): Oh!
  Sir G. Howe: The right hon. Gentleman can mutter and titter as much as he likes. Let him have the sense to recognise that on questions of this kind there are divisions of opinion, and always have been, in both parties. The Chief Secretary knows better than I do the range of dissension on this matter which lies along the Government Front Bench; there is plenty of dispute over there as well.
  Let us approach the matter sensibly and recognise that, if the general level of wage bargaining is significantly reduced, there are real advantages; the pay and salaries element in public expenditure is itself reduced. Unions and their leaders should be helped to understand the relationship between wage rates and

  863
  the risk of unemployment for their members. That is nothing but gain. Further, expectations about pay bargaining are significantly reduced, which itself is worth while, if the tearaway inflation that we have been going through in the past year or two is reduced. All that is gain.
  It is worth asking for a moment whether the Chancellor has considered with sufficient modesty and insight why he now finds himself facing this huge task for which the second stage of the incomes policy has been prepared. He told us recently that a year ago we were on the brink of economic collapse. The Prime Minister, in an unusually graphic phrase, said that we were on a treadmill to disaster.
  A year ago the Government used to talk about it as the social contract. I suppose that we must count ourselves lucky that there has been that advance and recognition that the social contract as originally presented was an anaesthetic prescription for economic disaster and nothing else. That is what it proves to have been if we consider the record over the past two years—an explosive growth of public spending and a corresponding explosion in wages and salaries, which were up by 54 per cent. in two years; and all this at a time when the gross national product has not expanded at all and today is still less than it was during the three-day working week.
  As a reward for those two years' management by the Chancellor, we have got nothing except a steady fall in standards of public service and a steady rise in levels of unemployment. We must oblige the Chancellor to face the fact and oblige the people to face the fact, that the first two years of this Chancellor's stewardship are the years that the locust has eaten. The bed of nails on which the Chancellor is now groaning is a bed of nails that he made for himself. There is no escaping from that conclusion.
  What else is there to be said about the Chancellor's procedures for continued private bargaining with union leaders about taxes which are to be paid by the rest of us? Of course, it is no bad thing that trade union leaders should be required to recognise that the power they claim to exercise must, in the interests of their members, be matched by responsibility. Of course, it is right that there
  864
  should be consultation about the Government's economic policies.
  However, before the Chancellor becomes too smug about these things, it must still be said that there are very unattractive features about the way in which the Chancellor has chosen and is choosing to handle these negotiations. Less than half the working population of Britain belong to unions affiliated to the Trades Union Congress and much less than half that number have any great enthusiasm for many of the policies adopted by that body. The people with whom these negotiations are taking place are in practical terms a small handful of intensely political, exclusively Socialist men, men upon whose patronage many of the occupants of the Government Front Bench depend for their positions of influence in the Labour Party. Those people are the controlling shareholders of the Labour Party.
  The unattractive feature is that from these discussions the great mass of taxpayers and their representatives are excluded. In the form adopted by the Chancellor, this move towards open government is a very unattractive form of government by a Socialist elite It is
  now as it was when he first started—profoundly undemocratic. I say to the Chancellor—he should heed this warning—that anything like this form of negotiations in its present form should never happen again.
  Mr. James Tinn: It may appeal to Conservative Members to point to the proportion of the working population who are members of trade unions. Can the right hon. and learned Gentleman explain why the responsibility for inflationary wage pressures is put entirely at the door of the trade unions by Tory Members?
  Sir G. Howe: No one is doing anything like that. No one anywhere in the House that I have known of for a long time is doing that. Everyone recognises that at the heart of inflation lies the proper management of monetary policies. It is important that trade unionists and their leaders should understand the relationship between those policies and wage rates, among other things, and inflation.

  865
  It is not just political danger that the Chancellor is courting but economic danger as well, because to many people outside the country as well as to people inside the country he appears to have surrendered a large part of his economic responsibility and duty to people outside the House and beyond his control. The events of the past four weeks have shown the peril of allowing the condition of the pound and of our economy to depend upon the views of the last trade union leader to speak. It is a profoundly dangerous course.
  What are we to make of the weeks that lie ahead? No doubt this week some agreement will be arrived at and announced with a fanfare of trumpets. When will Parliament have an opportunity to consider it? Apparently it is to be considered by the TUC at a special conference on 16th June. Meantime, as we move towards that conference, what is to happen to the economy and to the pound? It will have to survive an obstacle course of at least eight trade union conferences and heaven knows how many speeches and asides from union leaders in that time. Three of them were reported on the 1 o'clock news today, ail critical of the Chancellor's policy.
  It may be all very well for ex-Governors Ronald Reagan and Jimmy Carter to withstand a series of well-publicised primaries, but the Chancellor, in exposing his economic policies and the pound sterling itself to a similar process of trial by ordeal—let us make no mistake about it, that is what he is doing—is taking a very serious risk with the economy.
  But there are equally disturbing economic dangers. The gravest danger is that a deal will be regarded as an alibi or excuse for neglecting other economic policies of real and overwhelming importance.
  The Chancellor of the Exchequer has said more than once that confidence in our future was transformed as a result of the £6 pay deal, but the performance of the pound since that deal was entered into should warn him against making over-complacent statements of that kind. He should beware of deceiving himself in a similar way again. Unfortunately. Governments are far too easily deceived
  866
  by the early months, or even years, of agreement on an incomes policy which leads them to neglect the more important issues to which they should also be attending.
  There are three things that the Government must do above all else. First, the huge overload of public spending must be rolled back. The Chancellor had the cheek to talk a few moments ago about a united Government, TUC and people. Many of us will doubt the unity of the Government and their capacity to roll back public expenditure while the Secretary of State for Energy is allowed to remain in insolent occupation of a seat at the Cabinet table while apparently dissenting from Government policy.
  Secondly, the dangerously low level of industrial profits must be restored to health. Thirdly, the immensely depressing burden of direct taxation must, sooner rather than later, be reduced. If the Chancellor does not recognise that this is at the heart of our amendment, I regret it very much.
  There is another great danger in the negotiations. The Chancellor may be forced to give other hostages to fortune which will themselves do great damage. Far too many hostages have already been given. Almost the whole of the Government's legislative programme in the past two years falls into that category—from the Trade Union and Labour Relations (Amendment) Act on the one hand to the Dock Work Regulation Bill on the other. Many Labour Members know that perfectly well, and each time they reflect upon their reluctant support for that kind of package of measures they should hang their heads in shame for what they have inflicted on the people of this country.
  In his private bargaining, the Chancellor of the Exchequer must hold fast to his declared recognition of the desperate need to restore profitability to British trade and industry. That must mean a relaxation of price controls. In his Budget speech the Chancellor described that as crucial. Let him hold to that. If he does, he can count on the support of my party for that kind of courageous policy in the national interest.
  The Chancellor must not succumb to pressures to introduce or extend a single subsidy. The outspoken and sensible members of the Government recognise

  867
  this fact. The Secretary of State for Prices and Consumer Protection can scarcely conceal her desire to dispose of her subsidy programme as soon as possible, and the Foreign Secretary, when he was Secretary of State for the Environment, was only too anxious to begin unwinding the housing subsidies. The Chancellor has rightly been taking credit for phasing out subsidies to nationalised industries. Let him stick to the logic of that course. If he does, he can count on our support.
  Mr. John Ovenden: Perhaps the right hon. and learned Gentleman could clear up one point about the Conservative Party's stand on subsidies. Would he approve the complete phasing out of subsidies on commuter rail travel? We should like to know where the Opposition stand on that issue.
  Sir G. Howe: There is no doubt about our position. Subsidies of all kinds must be kept within limits and, where possible, reduced. Our position on commuter rail travel has been made clear in debate after debate. We believe that there is a great deal of waste and inefficiency in the way commuter and other lines are run. Subsidies could be reduced and the commuters could get a fairer deal.
  We are not making any selective qualifications on this matter. When the Labour Party begins spelling out with the same courage as we show that the world does not owe us a living, that food subsidies must be eliminated and that housing and nationalised industry subsidies must be reduced, then will be the time for Labour Members to criticise us.
  Mr. Healey Mr. Healey rose—
  Sir Stephen McAdden: On a point of order, Mr. Deputy Speaker. Is it in order for two hon. Members, let alone two right hon. Members, to be on their feet at the same time?
  Mr. Deputy Speaker (Mr. Oscar Murton): I think that the matter was resolving itself.
  Sir G. Howe: I have given way to the Chancellor on a number of occasions and would like to do so again, but I refuse to give way when he stands at the Dis-
  868
  patch Box in a hectoring, bullying manner as though he has some divine right to require anyone to give way.
  The Chancellor ought also to recognise, in considering the way the Bill is taking us in the wrong direction, that it represents a real and increasingly unbearable increase in the burden of direct taxation on almost every section of the community. The right hon. Gentleman spoke earlier as though he had a prerogative right to look after widows and that we were constantly hounding these poor creatures. However, as a result of the Budget, a widow on the standard social security benefit will still be paying extra tax on every pound she earns on top of her basic social security pension. What kind of Budget is that to bring before the House?
  Couples about to be married this year apparently have to face the instant disappearance of the tax benefit on which many of them have been depending. The Chief Secretary chuckles. He may be amused by this action, though he seeks immediately to evade it by shaking his head, but I have received dozens of letters, and many more have appeared in the Press, from couples throughout the country who were expecting a tax bonus of £230 this year and were depending on it for their wedding plans.
  There may be a case for withdrawing this bonus as an anomaly, but it is a pretty mean-minded thing to do. If it had to be done, couples should at least have been given a year's grace to adjust to a new situation. The economy must be in a pretty desperate plight if the Chancellor, in order to stop these gaps, has been reduced to ransacking the contents of 400,000 bottom drawers for extra cash.
  Another group to whom the right hon. Gentleman has given little attention is the pensioners, who last year were able to earn nearly £8 a week without paying taxes. This year, they will have that amount reduced to less than £6 per week.
  Every class one looks at is facing heavier taxes under this Budget. The worker on average wages, even if the deal goes through in the form proposed by the Chancellor, will pay more and will face another discouragement later in the year. From October, a worker will see his neighbour who is out of work

  869
  becoming £2 or £3 a week better off than himself because of increases in unemployment pay.
  In his Budget speech, the Chancellor said that to achieve the economic miracle for which he is looking we needed only a marginal improvement in our industrial performance at every level. He has a strange idea of the way to bring that about. We need exactly the opposite to this increased burden of taxes if we are to unleash the will to work which is necessary in order to restore our economy. Almost the whole of the right hon. Gentleman's proposals will have the opposite effect.
  It is true that the Bill contains provisions to remove some of the more grotesque follies of capital transfer tax. Last year the Bill in which CTT was contained ran to 34 clauses and nine schedules. We argued that it was damaging and misconceived in many respects, but the Government brushed aside our objections and drove the legislation through under a guillotine. In this year's Bill we find concessions on many, though not all, of the points we were making, contained, if hon. Members can believe it, in 42 clauses and five schedules. That is what is thought necessary to set aside the mistakes in the 34 sections of last year's Act. There has been no comparable confession of error on this scale since the present Prime Minister resigned as Chancellor of the Exchequer in 1967.
  The Bill contains almost nothing but a tightening of the noose around the necks of those upon whose enterprise and energy we vitally depend. The skilled craftsmen, salesmen, managers and people earning between £5,000 and £8,000 a year who have been listening to the Chancellor making his benevolent noises towards them realise that he was shedding nothing but crocodile tears. Those who so far through their share ownership have been able to have a stake through beneficial ownership in the success of companies for which they have been working are to face a heavy extra load of taxes. For those who have built up these enterprises, the fringe benefits which have come to form an important part of remuneration in our grossly overtaxed society are to be taxed away.
  870
  I have no affection for tax-free perks. I would far rather live in a society where the company car and things like that did not exist and where people were able to own their own cars, to save enough capital to allow them to snap their fingers at those whose inefficiency they cannot tolerate and have enough capital to allow them to move off and set up their own prosperous businesses. We have no hope of seeing that kind of society as long as this Government remain in office. We shall begin to move in that direction only when we get our tax rates down to about the European average of 60p in the pound. That is the direction in which we ought to be moving, and not the one along which we are being taken by the Chancellor of the Exchequer.
  In the context of the present structure of tax rates, the Chancellor's latest measures will be seen as another move towards the transformation of Britain into some kind of fiscal Lubyanka. The Chancellor will succeed only in turning the trek of talent from this island into a veritable torrent. If this is the climate of envy and equality that is to prevail, the answer given by the Chancellor of the Exchequer to the important question of ministerial benefits will not do. If equality and envy are to be the order of the day, to allow Ministers to be left in tax-free enjoyment of their Downing Street dachas could amount to the final outrage.
  I come finally to the proposals on which the Chancellor of the Exchequer understandably spent a lot of time—his proposals to increase the powers of the Inland Revenue. I repudiate absolutely the absurd notion which the Chancellor puts forward that the Labour Party represents an army of voters consisting exclusively of PAYE taxpayers who are wholly and exclusively virtuous and honest and that there is some kind of division between his party and this side of the House. We are all against tax evasion, but I want to consider the powers further.
  Why, having been so virtuous and forthright about it today, was the Chancellor so furtive in his description of this in the Finance Bill, published as it was on a dark Maundy Thursday morning? Let me remind the House what it amounts to. What the Chancellor is proposing is a right for the tax authorities to enter a taxpayer's

  871
  home by force at any time and to remove anything that can be used in evidence and to do so—this is important—on the authority of any one of 19,000 justices of the peace. I have great admiration for justices of the peace and the important work they do, but this is a strange way of dealing with powers that will be used as seldom as the Chancellor says they will be.
  When one looks at the background to these proposals, one sees that they go beyond the recommendations of the Royal Commission of 1955—a Commission of which one of the most prominent members was the man who is now the Chancellor of the Exchequer's special tax adviser, Lord Kaldor, which is not a very encouraging background for the creation of a fiscally efficient and just society. I am reminded of a story about Lord Kaldor, who served in the last Labour Government. The rumour reached his ears that he might be transferred from the Department in which he was serving to another, and he is said to have expressed surprise at the prospect because, as he understood it, all the major mistakes had already been made in that Department.
  These proposals were considered more than 20 years ago, and the Inland Revenue has got on without them ever since. One must therefore wonder why they have been brought forward now. One cannot resist the suspicion that have been brought forward as a result of pressure from the Inland Revenue Staff Federation, a union that is affiliated to the TUC. That suspicion is powerfully fortified by the fact that the words of the Chancellor this afternoon verbatim and precisely correspond with text of the article written yesterday by the general secretary of that union. The two statements agree word for word, but the Chancellor is so conditioned that he cannot recognise that he is spouting his master's voice. It is no wonder that people are intensely fearful about where we are going. The present balance of power in our society strikes more and more people as increasingly offensive, and I give the Chancellor notice that we shall want to examine the case for these proposals with a deeply critical eye.
  We are told that these powers will be used in only a handful of cases each year. Whether we listen to the Chancellor or read the article, if that is so why do
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  these powers need to be placed in the hands of 19,000 justices of the peace? Four new justices of the peace are appointed every day of the week. Are all these people to be given training in the way in which to carry out the powers that are to be placed in their hands?
  It may be constitutionally unacceptable to place these powers in the hands of Ministers, and especially in the hands of Ministers of the present Government, but why should not these powers be placed in the authority of a High Court judge for a handful of cases a year? If these powers or anything like them come on to the statute book, people would regard it as a powerful safeguard if these powers were placed in those hands rather than in the hands of justices of the peace.
  The real importance of these proposals goes deeper than that. In a free society, a vital feature is the maintenance of trust between the taxpayer and the tax gatherer. If that is to survive, the level of taxes must be bearable and not intolerable, and the methods of collecting those taxes must be equally respected and tolerable. The bond of trust between the taxpayer and the tax collector is the social contract that is at the heart of a free democratic society, and it is that which has been placed in jeopardy by the combination of the measures which the Government have brought forward.
  It is all very well for the Chancellor to say that beneficent countries such as Canada and the United States, which enjoy far lower marginal tax rates than our own and have a tax system of self-assessment which is different from the methods in this country, are prepared to live with inspection methods of this kind. It is significant that the right hon. Gentleman did not mention Sweden, where penally high tax rates, combined with powers of this kind, are resulting in some of that country's leading intellectuals being driven into refuge from that society.
  It is this foundation of our society that the Government are more and more placing in jeopardy by their combination of high taxes and high-handed methods of collection. The Chancellor will find that the people of this country will increasingly be rising in anger against taxes

  873
  that are intolerably high if they also are to be collected by methods that are equally intolerably high-handed. That is the price that we are being asked to pay for this spendthrift Government. I ask right hon. and hon. Members to make it plain by their vote tonight that the House of Commons is no longer prepared to pay that price for this intolerable Government.
  5.0 p.m.
  Mr. Norman Atkinson: I shall return in a moment to the question already raised by Members on both sides of the House about the additional search powers sought by the Treasury, but, briefly, I want to mention two points raised by the spokesman for the Opposition, the right hon. and learned Member for Surrey, East (Sir G. Howe), about the "Socialist elite" which has been created. The right hon. and learned Gentleman himself has to decide which horse in the race he will back. He has to make a decision about his own approach in the relationship between the Government and the trade unions or between the Government and the CBI, for instance. In all these discussions there is, by necessity, bound to be a degree of elitism, but the alternative is much worse than that. That is the real question which spokesmen on the Opposition side of the House have to recognise.
  A voluntary wage agreement can be established only by the Government themselves meeting trade union leaders and involving themselves in discussions that ultimately, they hope, will result in a voluntary agreement. The essential attribute of a voluntary agrement is that both sides come together, discuss the matter, arrive at a conclusion and agree voluntarily to pursue that policy. If the right hon. and learned Gentleman is saying that it is wrong for the Government to do that, he can only be arguing for a statutory policy.
  The only way in which Parliament can assert itself independently of those outside with whom the Government are at present negotiating is by saying that we shall have a statutory policy, that this will be the maximum wage agreement, and that whether the trade unions or management like it or not, those are the parameters set down by the Government
  874
  and, therefore, there is no need to discuss it. Which of these two arguments is the right hon. and learned Gentleman talking about? I take it from his silence that he has no answer to them and that he has not made up his mind whether the Opposition want a statutory policy or a voluntary agreement that could arise from the sort of discussions going on at the moment.
  My own personal view—I believe that it is the majority opinion on the Government side of the House—is in favour of a voluntary agreement being reached. People like myself have had a lot to say about this business of negotiations elsewhere and the diminution of the power of Back Bench Members in the House, but in the kind of arrangement in which there is a voluntary national wage agreement topped up by tax concessions from the Exchequer, plus, perhaps, a nationally negotiated reduction in prices—a very complicated package—Parliament must assert itself in negotiations of the social wage rather than the wage inside the wage packet. That is our responsibility in this situation—to make minimum demands on the Government to maintain the social wage and their obligation towards the extension of the public sector to do that, and also to be concerned about taxation in this country.
  We can argue that it is an extension of democratic right when the Government go outside Parliament to negotiate directly with the trade unions in order to reach a voluntary agreement. I submit that this is an extension of democratic practice rather than a restriction of it, because of all the factors I have attempted to set out. However, the Government should now be absolutely honest. I do not think they can escape the consequences of lowered living standards unless they are absolutely honest at the outset. There is a tendency on the part of all Governments to move around in their stocking feet, hoping that no one will really hear them when they talk about lowered living standards. We should now be saying clearly to what extent we expect living standards to drop as a result of the policies, and it will be substantially higher than any of the figures that have been mentioned so far. By the time we get to August 1977 there will be a substantial reduction in the purchasing power of workers' wages in this

  875
  country tar in excess of any figure mentioned at the moment. The Government have an obligation to be absolutely honest and set out the picture, as they see it, in terms of the percentages.
  On the question of tax evasion there are two ways, as the Chancellor said. There is PAYE and "pay as you declare". Presumably, the Chancellor is seeking powers to do something about the latter point, but he is looking in the wrong place. He is looking in an area in which he will shed no light, despite the powers he will have. It is all done by cash. The deals that the Chancellor is concerned about are not, in the main, on paper. There are already ways in which the Government can search for documents in various companies if they are looking for massive company evasion of taxation. Indeed, the Price Commission could give a lot of information if it were working according to the statute.
  There are ways in which the Government can overcome the evasion of company taxation, but there is an area much more lucrative than that—the whole business of moonlighting, and work done outside normal hours. It is estimated—I have no reason to doubt it—that each year about £3,000 million is earned but not declared for tax purposes. That must be the case, if one considers the very nature of the jobs done by professionals or skilled men working in various building trades, and other areas. I am not only talking about "lump" labour I am talking about the wide area of odd-jobbing and self-employment of one sort and another outside normal working hours. There must be between £3,000 million and £3,500 million worth of work being done, at a minimum estimate. This is a very large area, which is not taxed at the moment because it is all paid in cash. The only way in which the Government can overcome the problem of massive tax evasion in the City and elsewhere is by insisting that any payment over £50, or whichever figure is selected, is made not in cash but by cheque.
  People may say the consequences of that are too severe for a democracy and that it will not work. If that is the case, then we will have to put up with the evasion. There are other countries in
  876
  the world, from the United States to Hong Kong, which have failed to catch the tax dodger because the money is paid in cash. If the price of stopping them is too great a strain for democracy, so be it, but we must recognise that the only way it can be done is by saying that no sum of more than £50 will be allowed in cash, and that it must be paid by cheque. Then the Government will have access to the information it needs about tax evasion.
  Mr. David Mitchell: Is it not a fact that the situation that the hon. Member has described is brought about by over high levels of taxation on such people, and that the answer is to shift taxation from earnings to taxation on spending?
  Mr. Atkinson: Even if tax was 2p in the pound a lot of people would want to evade paying it. It is a sort of national sport. There is also a great sophisticated profession that sets out to advise people how to evade taxation. It is a sophisticated business. Even if tax were only 2p in the pound I am certain that some people would pit their wits against the Government in order to escape paying it. In that sense, I should like to repeat the Chancellor's words and say that perhaps my right hon. Friend the Chief Secretary will have a great deal of advice to give in that regard, knowing something about the less scrupulous operations that take place—although not having experience of them personally, of course.
  I want to mention the whole business of the monetary strategy and what has happened in the City in regard to currency dealing and the position of the pound. My conclusion, and that of many of my hon. Friends, is that we have now reached the stage at which the £ sterling is totally and grotesquely undervalued—so much so that we are now suffering from the fall in its value in terms of employment prospects. The situation is the opposite of that being suggested by many leading experts when they say that by reducing the value of the pound we can sell our exports much more easily and that this, therefore, should assist in an early return to full employment. I have to tell my right hon. Friends that our experience is not that at all, but the opposite.
  There is only one way in which one can assess the value of the pound, and

  877
  that is by comparing a process of manufacture in Britain with an identical process overseas. Taking West Germany, for instance, our position is far less favourable than theirs, in terms of the labour content of any equivalent product. Whatever comparison one makes in this regard, if one makes exact comparisons, the pound is, of necessity, seriously undervalued. That is the challenge that faces us on the present exchange rate and what it is doing to our employment prospects.
  From my own analysis of the figures produced by the Exchequer, by employers' organisations and by those who have analysed the work content in the products that we are exporting, it is undoubtedly the case that for every three hours of labour effort that we export, we are importing four hours. That is a ratio far higher than our existing external deficit. Therefore, we are importing unempolyment as a result of the lowering of the exchange rate, and our work people are at a disadvantage when they should never he in that situation.
  Mr. Ian Gow: Is not the true value of the pound that price which people overseas are prepared to pay for it or to accept for it, whether they are buying it or selling it? Is the hon. Gentleman really advocating a return to a fixed parity?
  Mr. Atkinson: Yes, indeed; I am about to draw just that conclusion. That is exactly my conclusion. I shall say so in a second or two. We should not allow people overseas, or people in the City of London who are advising people overseas, to determine the rate of exchange. Our employment prospects are far too important for that. It is not a question of allowing the propensity of the market, and so on, to determine the level of exchange. Since the Conservative Party floated the pound in June 1972, and floated it downwards, it has gone down by almost 36 per cent., compared, on average, with the leading currencies in the Western world. That is an awful amount.
  There was no justification for that whatsoever, despite the antics of those who have overseas holdings. One of the reasons they give is that the biggest holders of sterling are the Arabs, who, by agreement, are the very people who
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  have pushed up our domestic prices far higher than any other group. There is no mystery about inflation as far as the Arabs are concerned. They are the people who caused it. Their oil prices rose fivefold, so surely they are in no ignorance about our domestic problems. They may be the largest holders of sterling, but it does not lie in their mouths to determine the value of British workmanship and efforts.
  Therefore, we take an entirely different view. I have a statement which was issued this month about our car and commercial vehicle exports. It is illuminating. Not only have our exports dropped considerably in volume terms since the devaluation of the pound; proportionately they are now earning even less for us. We must take into account our rise in domestic prices, and not only the lowering of the pound overseas and what is happening elsewhere in the world.
  On the figures produced for us by all the inquiries being undertaken by the NEDC and others, the position since the Tories devalued the pound is that the labour content of our exports has dropped by one-third. The labour content of our exports of motor cars and commercial vehicles has dropped by one-third—almost the identical amount by which the pound has dropped. Therefore, I think that we are right in concluding that we are importing unemployment as a result.
  The only conclusion that we can reach—the hon. Member for Eastbourne (Mr. Gow) was absolutely right—is that we must now campaign for the earliest return to a fixed parity, and the trade unions must exert the maximum possible pressure on the Government to that end. That is the only conclusion that we can reach if we are to make a serious contribution towards returning to full employment as quickly as possible.
  The rate of exchange must be determined by the Government and not overseas dealers in sterling, or any other currency for that matter. Therefore, this matter involves not external demand but our own needs and how we ourselves will manage our economy.
  Mr. Peter Rees: I have been following with interest the point that the hon. Gentleman has been making. Will he tell the House at what rate he would recommend his right hon.

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  and hon. Friends to fix the pound vis-à-vis the dollar?
  Mr. Atkinson: That is precisely my final point—the business of returning to a Government-fixed parity. It is not for me to decide what that rate should be. When the decision is taken, it will be the criteria that exist at the time, particularly in Europe, that will determine the rate. The point is that if we could agree about the rate at present and say that the correct value is $2, how on earth, in the present system, would we return to $2? There is no likelihood that the pound can rise in that way in a free market. It has never happened in Europe. It cannot rise to its true value by the methods that exist now. Can any Opposition Member—and there are a number of experts present—foresee a situation in which the pound will climb back about $2?
  Mr. Gow: With a change of Government.
  Mr. Atkinson: We must face reality. We shall have a Labour Government for the next 10 years, at least. There is no conceivable way in which a free exchange will push the pound back above the $2 level, yet in order to restore full employment that is what we must try to do.
  Dr. Jeremy Bray: Surely, to be fully understood, what my hon. Friend is asking is for the Treasury to take enormous reserves from somewhere, by which it can build up the exchange rate. The only way in which it can get those enormous reserves would be by the most shattering deflation of the United Kingdom economy. My hon. Friend seems to be asking the Government to deflate the economy to produce the reserves.
  Mr. Atkinson: No, not at all. My final point is the key to the whole thing. If we are arguing for a directly planned economy, a centralised economy in that sense, of necessity my argument must mean that we control all imports, and if we are to get any planning sense at all into the priorities of our economy, this must mean that we do two things together. First, there must be a return to a fixed parity at the same time as we start to establish priorities in the materials and goods which this country imports.
  880
  The two go together. Import controls and a much stricter currency control are essential if we are to get anywhere at all.
  I am arguing against deflation. I am arguing for reflation and a planned economy. But this is being sabotaged by the nature of free exchange in the world—by the way in which it is undermining our efforts to return to full employment. My purpose is to put the alternative, which is direct Government intervention in the economy and the establishment of centralised planning as an absolute essential if we are to do these other things. Those things go together.
  We cannot proceed unless there are priorities in our imports. We must be able to distinguish essential from nonessential goods and services. That is the essence of my argument. But unless we get some understanding about currency regulations, unless it is the Government who determine our rate of exchange—and I remind hon. Members that that was the case before 1972—until we get back to that state of affairs with these other essential elements that I am talking about, we cannot look forward to a progressive move towards the establishment of full employment.
  5.22 p.m.
  Mr. David Mitchell: The Finance Bill is the central machinery of the Government's economic policy. It has to be viewed against the appalling record of the Government since they have been in office, with unemployment doubled, the cost of living up by 50 per cent. by the time the Finance Bill reaches the statute book, Government expenditure doubled and the country running out of money—a record of which the Government should be ashamed.
  It is against this background that I want to consider two matters—first, the general economic situation and, second, the position of small businesses as a result of the Finance Bill. I think we all agree—even the hon. Member for Tottenham (Mr. Atkinson)—about the need to see an increase in production. Indeed, it was central to the theme of the hon. Member's speech. The question is: how do we arrive at it? I suggest that we arrive at it by a tripod—a three-headed partnership of motivated management, skilled workers and capital—at a rate of interest which industry can afford. If we do not

  881
  get those three things in partnership, we shall have decadent industry, unemployed workers and emigrating talent from our management. Looking at each of those three factors we have disappointingly to record that the Budget has done little or nothing to help, and in some cases it has made the situation worse.
  Let us deal with motivated management. It is motivated mainly by money, and by a certain amount of fringe benefits because the taxation of money incomes is so high. We get the sort of management for which we pay. There is an old phrase in industry—"If you pay peanuts you get monkeys." The difficulty is that in this country we are paying our management too little. Management is something that can move from one country to another. There is a steady and growing drain on our skilled management to other countries. Last year the record number of emigrations—250,000—from this country contained a larger number of management skills than at any time before.
  I was talking to a manager of an enterprise in my constituency with similar sister companies in other countries. To the management of its German company it pays £24,000 a year. To the managing director in France it pays £24,000 a year, and out of his £24,000 the managing director in France is left with £18,000. I have done the conversion at 9 francs to the pound. That is £18,000 spending money. In this country we pay the managing director £10,200 and he has £6,000 left as spending money. With a threefold difference in spending money after tax, it will not be long before there will be a flood of applicants to work as second, third, fourth and fifth under the managing director of the French enterprise rather than work for this company in this country. In "motivated management" there is a debilitating, haemorrhaging loss of skilled management that we need desperately to keep in this country.
  Coming to the question of skilled workers, we have enough of these. We have the plight of the skilled worker who is unemployed. Idle hands are the most savage indictment of the record of this Government. I recognise that a period of enforced idleness sears into man's heart and soul. One frequently hears blame laid on the workers and trade
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  unions because it is said that the workers are lazy. I do not believe that is true. I believe that the real reason for our low productivity and the slow moving of income into our companies is that there is too little capital behind each worker compared with our companies' competitors abroad. Capital is the prime need. There are two aspects of this. The first is that there should be a plentiful supply of it so that it is not too expensive. Second, there should be more behind each worker.
  Let us consider the level of interest rates. This is of crucial importance in deciding whether enterprises are going to pay. One has to borrow money. When borrowing money the factor which determines whether it is worth setting out on the investment and whether it is worth tooling up for a particular job is very often the level of interest that one has to pay. There are many marginal products and new businesses that would get under way and provide jobs if the level of interest were right.
  With interest levels the important factor is supply and demand. The sad fact is that the Chancellor is borrowing £12,000 million this year. I ask the House to consider what would be the effect on interest rates in this country if that were not done. Interest rates would have to come down to an extent that many more jobs would be created in the productive sector of the economy than exist at the moment.
  The worst aspect of the matter is that last year the Government got their borrowing because there was a lot of unused liquidity in British industry. But today the Government talk of an upturn in trade as the year proceeds. The Chancellor spoke of it this afternoon. As that upturn in trade takes place, so British industry will require to draw back from the gilt-edged market the money that it has laid out there in order to stock up and buy the raw materials and tool up for the growing export trade of which the Chancellor speaks. Then where will the Chancellor get his borrowing? There will be an inevitable rise in interest rates, which will choke off the incipient recovery in jobs and production.
  I come to my second point on capital—more capital behind each worker. Investment needs investors, and we need to encourage investors. "They also

  883
  serve"—who only put up the money. We must recognise that fact, and ensure that they are paid adequately for doing it. When the Chancellor of the Exchequer takes pride in having put up the rate of tax on investment income to 98 per cent., having done his damnedest to push investors away and to discourage them, he need not be surprised that there is too little investment in British industry and that British workers have to work with outdated machinery, unable to compete with their counterparts abroad.
  The irony of it is that the more the Chancellor does to satisfy his hon. Friends on the Left Wing below the Gangway by clobbering the rich, the more he clobbers the investor and the more he creates unemployment and makes worse the situation of those whom he is trying to help. The Budget stands condemned for its lost opportunity, its failure to restore motivation to management, to ecourage the investor or to create jobs for workers.
  I turn now to the position of the smaller business. The Chancellor expects an upturn in trade during the latter part of this year, and I think that he is probably right. Because of the low level of sterling, there will, I believe, be an upsurge in export orders, but these will come mainly to our large industries—to the great assembly industries, to the motor vehicle industry, if it is able to get on and produce, to the shipbuilding industry, if it is not in chaos after nationalisation, and to the aircraft industry, if, that also is not in chaos after nationalisation, and so on.
  The orders will come to our major industries, and those industries will in turn be looking to a massive number of smaller firms to supply them with the parts that they need for their work. The sad truth, however, is that in many cases the Government will find that production not forthcoming, so that the larger industries will have to get their parts from Europe, from Germany, from France, from Holland—from countries which can send their goods in through the Common Market with no tax or tariff on entry into this country. That is what will happen, because the small businesses of Britain on which we should rely for those parts have been so clobbered by what the Government have done in the past two years and have been subjected to such a savage
  884
  attack that they have had the stuffing knocked out of them. The number of bankruptcies is a record since figures were first recorded in 1914, there is a record number of companies simply closing and going away, and there is a record cut in industrial investment in this sector.
  I give the Chancellor due praise for having recognised in his Budget that this is a sector for which something has to be done. He has, I believe, gone out of his way with certain measures which he has announced—I shall come back to them in a moment—to try to do something to help. The difficulty is that what he has done has been wholly inadequate against the size of the problem and against the background of the level of inflation since the measures which he is revising were first introduced.
  Let us look for a moment at both the small and the growing medium-size firm. For the very smallest, there is a failure in the Budget to do anything in fairness for the self-employed, who have a substantial part to play, by allowing their national insurance contributions for tax purposes. That would be only elementary justice.
  Next, there is the failure to lift the turnover starting point for VAT. When it was first introduced in 1972, the starting point was £5,000. Currently, that is equivalent to about £8,550, and by the time the Finance Bill becomes law it will be about £9,000. If the Chancellor were to lift the starting point for VAT to £9,000, exactly the equivalent of what it was when first introduced, that would take no fewer than 250,000 small firms out of all the form-filling involved, firms whose management time should be used in getting on with the job of producing, not filling up forms.
  Mr. Ovenden: Will the hon. Gentleman give way?
  Mr. Mitchell: I am trying to get through a lot as quickly as I can, and I promised not to take long. I hope that the hon. Gentleman will take his own opportunity later.
  I come next to the medium-size firm, and here I must refer to some important aspects of the Government's concessions, and lack of them. I refer, first, to the decision to leave the smaller business rate of corporation tax unchanged at 42

  885
  per cent. The small German industrialist or business man pays 22 per cent. on retained profits, but in this country the rate is 42 per cent. Is it surprising that the Germans plough money back into their businesses far more than is done in Britain? This is certainly one area to which the Government should give attention.
  Then there is the question of the definition of a small business for small business corporation tax relief. In this respect, I thank the Chancellor for having put the starting figure up from £25,000 to £30,000, but that increase in respect of small businesses for small business corporation tax relief does not even take account of inflation since this special rate was introduced. I am surprised to see sitting on the Front Bench the right hon Gentleman the Chief Secretary, who has so often told us that he wants to go back to the classical form of corporation tax in place of the imputation system. He knows as well as I do that this change to £30,000 does not go back to the classical form for the small business which does not distribute its profits but relies wholly on the ploughing back of profits for investment within the company for the sake of future production.
  The truth is that the figure should have been lifted to about £100,000 if the right hon. Gentleman wanted the equivalent of a return to the classical system of corporation tax for these companies which do not distribute their profits by way of dividend.
  Mr. Joel Barnett: The hon. Gentleman has correctly stated my position, but he is totally ignoring the new situation wherein there are 100 per cent. capital allowances and stock appreciation relief, which mean that the vast majority of companies do not pay corporation tax.
  Mr. Mitchell: There is a part-truth in what the right hon. Gentleman says in its relevance to this situation—I am not suggesting that he is trying to mislead the House, of course—but there is a whole host of areas of expenditure vital to such companies which are not allowed for tax. Whether one refers to debtors or a whole host of other things, the right hon. Gentleman knows as well as I do that that is so. We shall debate the details later on the appropriate clauses.
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  Next, there is the capital transfer tax concession, but this also is wholly inadequate in relation to the movement of inflation since that tax was introduced. Because of the rate of inflation, companies have been driven into a higher bracket, far higher even than the 30 per cent. concession given by the Chancellor. Moreover, there still remains the death trap for the small business man of having to pay capital gains tax on the same appreciation and then paying capital transfer tax when he passes the business from one generation to another. This, together with the Chancellor's failure to announce the abandonment of the wealth tax, means that we shall still have thousands upon thousands of small businesses in this country looking to the future and deciding that it is not worth building themselves up, not worth investing, not worth seeking to create increased production and more and better jobs. It is not just worth while because, at the end of the day, it is the Chancellor of the Exchequer who takes the business—and no man works for that motivation. It is time that the Chancellor realised that he must work with the grain of human nature.
  Thus, for the small business the Chancellor has rightly recognised the need for change, and he stands the more condemned for failing to deal with it.
  5.39 p.m.
  Mr. John Ovenden: The debate so far has concentrated upon the Chancellor's economic strategy, but I shall not entirely follow that line, because I believe that the occasion of the Budget should be an opportunity not only to review or revise our economic strategy but also to look carefully at the anomalies and injustices in our tax system itself and try to correct them.
  I regret that the Chancellor has not been more imaginative in his approach, especially to the personal allowances system. For a long time now, this system has been haphazard and, many would say, entirely illogical. Personal allowances have for some time ceased to take any genuine account of commitments. Here are a few examples.
  First, I take the tax allowance for a married couple in a case where, because of family commitments, only one partner works. This allowance is far too low in

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  comparison with the allowances enjoyed where both partners in a marriage are in a position to work. Next, there are the tax allowances for older children, which are far too low in comparison with the personal allowances often enjoyed by children of the same age who have left school and are out at work. It is impossible to justify a taxation system in which the same allowance is granted to a single householder—say, a widow or widowed mother—as is granted to a young person living at home with parents.
  Our tax allowance system has become illogical. Inflation has destroyed much of its real value and the original reasoning behind it. My right hon. Friend the Chancellor had a unique opportunity, this year, to recast the system. The old system has been made meaningless by inflation. Instead of adding roughly the same percentages to personal tax allowances it would have been better if the Chancellor had taken a more imaginative view and recast the system. I see that my right hon. Friend the Chief Secretary is nodding in agreement. The Chancellor made some changes but he missed a valuable opportunity to recast the system.
  Widows are badly hit by the present tax system. The right hon. and learned Member for Surrey, East (Sir G. Howe) has cried his usual crocodile tears over widows, but he was a member of a Government who failed to do anything at all for them. Although it may be a convenient stick with which to beat this Government, the right hon. and learned Gentleman's own record needs careful examination. He stressed the increased burden of tax on widows. I agree about that—but their position has come about not through the deliberate action of this Government, or a change in policy, but because this Government have carried on a tax system that they inherited from their predecessors. It therefore ill becomes the right hon. and learned Gentleman to weep crocodile tears over the plight of widows.
  Many widows were confident that the Chancellor of the Exchequer would be unable to ignore their claims for fairer treatment this time. Many are bitterly disappointed by the omission from the Budget of any significant help. There are a few minor changes, but there is very
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  little for working widows, on whom the burden of tax falls heavily. Inflation is making that burden excessive.
  I recently asked the Chancellor of the Exchequer about the tax position of widows earning one-third of average earnings in addition to a pension. Widows often earn modest incomes, and many of them work only part time. I was astonished to discover that a widow with two children under 11 on one-third of average earnings paid £142 in tax last year—about £3 a week. It is time for the Government to look seriously at that situation, because it causes bitterness not only to widows but to their families, and is a matter of concern to that section of the population which wishes to see a fairer deal for widows.
  The majority of widows work alongside married women, and their feelings of bitterness stem directly from their experience in that situation. That bitterness is understandable if one examines the situation. For example, let us take the position of two women earning £17 a week at a part-time job, each woman having two children of 12 and 9 years Of age. The widow pays £4·55 a week in tax and the married woman pays £1·50 a week in tax. Admittedly, the widow has a pension of £24·80, but the married woman's husband has a tax allowance permitting him a tax-free income of £27 a week. The widow looks upon her pension as the equivalent of the married woman's housekeeping money, and that is not taxed. The husband often enjoys a tax allowance which is higher than the widow's pension.
  There are a number of ways in which the Chancellor could have helped widows. It has been suggested that pensions should be tax-free, but that approach has been rightly rejected by successive Chancellors because it would give the greatest benefit to wealthier widows. Unfortunately, in rejecting that approach successive Chancellors have tended to use the argument against it as an argument against any concessions to widows. I accept that such reasoning could be used against a general increase in personal tax allowances but the National Association of Widows has made proposals to the Chancellor to which objection cannot be made on those grounds. The association's proposal is for a small income exemption allowance similar to that given to pensioners. So

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  that if other income does not exceed a certain level—perhaps the level of £3,250 which is the amount that pensioners are allowed—the widow should be entitled to an additional personal allowance.
  I cannot understand why such tax treatment is justifiable for retirement pensioners but unjustifiable for widows. There are differences, but those differences show that the widow is in a less favourable rather than a more favourable position than is a pensioner. It could, therefore, be argued that widows are even more entitled to that favourable treatment than are pensioners.
  The National Association of Widows argued that widows had a stronger claim for an extra tax allowance than did pensioners. It argued that pensioners received a number of financial concessions that were not available to widows. For instance, retirement pensioners travel at reduced fares or free on buses and British Rail; they have free prescriptions, free dental and optical treatment, and many other concessions from private firms. In that respect, the widow is worse off than the pensioner.
  Retirement immediately follows a period of high earnings, and it is a period for which plans can be made. Widowhood cannot be planned. It is usually sudden, and often a woman becomes a widow after a long period of nursing a sick husband, in a situation that might have caused financial difficulty. In that respect she is in a less favourable position than a pensioner.
  Many male retirement pensioners are still active when they stop work and can still do maintenance work around their homes. I know that we live in a world of sex equality, but there are still many widows and many women living on their own who cannot tackle the jobs around the house and who therefore incur considerable expense in employing someone else to do work for them. Widows are therefore in a less favourable position than retirement pensioners in that respect.
  The case that has been made out points to the fact that in taxation widows ought to be regarded in the same way as retirement pensioners, and that their pensions should be treated in the same way. Widows have waited for a long time to get
  890
  some justice out of the tax system. They have had a lot of sympathy from Treasury Ministers and a lot of crocodile tears from the right hon. and learned Member for Surrey, East, but they are becoming very impatient with both sympathy and crocodile tears, and are waiting for action.
  I believe that more than any other Government the present Government are likely to face the requirements of widows and give them an element of justice. I hope that my right hon. Friend will not allow this Bill to pass without trying to insert in it a provision to make sure that widows feel that their faith in the Government is justified and deserved.
  5.50 p.m.
  Mr. Robert Cooke: The financial problems which assail the national heritage are as important as any other issue raised here today. It is historic Britain that attracts tourism, earning more than £2,000 million a year in foreign exchange. Yet in this century we have lost hundreds of major historic buildings and landscapes and seen the dispersal of priceless treasures overseas. It is to our historic places that our constituents flock on their day out, and we must think, too, of them.
  A year ago, Heritage Year 1975 aroused widespread interest. This is to be carried through into Heritage Education Year 1977, warmly supported by the Secretary of State for Education and Science. Let us hope that neither of these proves to be a hollow sham. I know that the Chancellor of the Exchequer is not unmindful of the problems of the heritage. I hope that he will find time to translate his genuine interest into effective action.
  I seek to highlight the problem and to propose a solution. This will involve, inevitably, certain strictures on the Government's capital taxation proposals, but I hope that the Government will accept that my strictures are made in a helpful spirit.
  The largely man-made landscape provides a setting for a wealth and variety of buildings unequalled anywhere else in the world. Many of these buildings still contain collections of works of art far richer than those in most public galleries. Practically every major house is open to the public. All of this is threatened by alarm and uncertainty stemming from

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  recent capital taxation, both enacted and prospective.
  Over the weekend, many of us will have read of the imminent sales of some of the finest pictures remaining in private hands. We all recall the Radnor Velasquez, which went to America for £2·3 million, and the Harewood Titian, which was eventually saved, after months of agony and hectic public subscription, for getting on for £2 million. It is a sobering thought that a pair of Titians of the same series as Lord Harewood's—"Death of Actaeon", regarded by some as being finer than Lord Harewood's—which are in a private collection, are threatened by the Government's new taxation policy. This pair of Titians could well fetch £10 million by public auction. For years they have been on loan to a public collection and have been enjoyed by hundreds of thousands of people.
  There are, of course, many more pictures and works of art of incalculable value on view in privately-owned historic houses, and all these are under threat. It has been suggested by certain national experts that some 25 paintings of major national importance are still in private hands. How can these experts know that? There must be many as yet undiscovered—they are being discovered all the time—and there are also those which are as yet unappreciated. I am thinking here of works of the late nineteenth and early twentieth centuries. The problem is enormous.
  Why is it all happening? Both the capital transfer tax and the wealth tax are, in this context, designed as social engineering and not as revenue raisers. But there will be an actual cost to the community because of the vast amounts of public money needed to replace private owners and their remaining resources—and where, in any case, are we to put all the displaced objects? Today we have a cri de coeur from the Standing Commission on Museums and Galleries. It is about the university museums on this occasion, but national institutions and local museums are all in the same boat. The only result of this social engineering so far as the heritage is concerned is that a spanner has all but destroyed the delicate mechanism, the hitherto happy and satisfactory relationship between private owners, public collections and the public interest.
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  There has been a positive acceleration of the dispersal which we all seek to avoid. The floodgates are opening. They will be irresistibly jammed wide open before the Bill becomes law unless immediate action is taken. Last year's agony served to clear our minds. The mass of evidence which came out of the wealth tax hearings and the accompanying public debate was traumatic to live through, but—to use the Chancellor's favourite phrase—it resulted in a far wider parliamentary and public appreciation of the scale and nature of the problem.
  I welcome what emerged from last year's debates—the amended capital transfer tax provisions—although in their new form in this Bill they may well prove to be counter-productive. The Chancellor's toughening up may prove too daunting, if only because a taxpayer could be liable for the actions of others over which he has no control. I draw the Chief Secretary's attention to the article by Mr. Wintersgill in The Guardian today. He has probably already seen it. I want to explore all this if possible at a later stage. The toughening up may be over-tough. I hope that there will be good-humoured exchanges in Committee on this and all the other aspects of the problem, because surely it should not be a matter of political controversy.
  From the capital transfer tax, we now have conditional exemption for outstanding historic houses, their precincts and their outstanding contents, but a heavy extra responsibility is placed upon the owners, all in exchange for reasonable public access. They are tough rules, and I suggest that a new tax case will be required to deal with this aspect because neither Case I nor Case VI of Schedule D will suffice. I note a flicker of recognition from the Chief Secretary, sitting not so impassively on the Government Front Bench.
  All this is progress of a kind, but no provision has been made for any income-producing privately-owned assets, whether in the shape of land or other things, for the support of the heritage. This is crucial to the whole matter, because without the supporting resources in the form of stringently-supervised maintenance funds we shall see land sold to pay taxes, contents dispersed to pay taxes and empty

  893
  houses left as public liabilities in derelict landscapes.
  Much skilful work has been done on the subject of maintenance funds—that is, privately-owned income-producing assets, land or otherwise, set aside under strict Treasury supervision to provide financial support for the heritage. The Government have themselves been engaged upon this as part of the Chancellor of the Duchy of Lancaster's arts finance remit. It has been raised with him and with other Ministers over many months. The Government must by now have found that workable schemes are a practical possibility, and an amendment of only a few simple words is all that is required—"conditional exemption for maintenance funds." The detailed rules can safely be supplied and applied by the Treasury, aided as it is already by the Government-nominated Historic Buildings Council, somewhat strengthened to deal with wider responsibilities.
  Let us dispense once and for all with another old argument—namely, that we advocate a special privileged class of taxpayer. That is not so. It is the heritage that we seek to protect. The owners and their possesions are already hedged in by restrictions and loaded with responsibilities. Any further curtailment of the freedom of action of owners of the heritage will undoubtedly cause further sales and dispersals.
  Another idea has been canvassed—namely, that of forcing owners to hand over to trustees all that they possess. That has nowhere found a welcome. No public body concerned with the heritage either advocates that approach or is anxious to collaborate with it. The few private trusts that have been set up have not found it easy to find suitable trustees. I reflect that there is no great building or landscape that was ever created by a committee or board of trustees.
  It is recognised by the Government in their Green Paper and elsewhere that private owners can do the best job. I am not suggesting that they should not be closely scrutinised by the Treasury while they are doing it. That scrutiny has always been part of my submission to the House on this matter. It is a central and crucial matter.
  I believe that the question of resources is very much a Second Reading point
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  that deserves more than just a nod from the Treasury Bench. I hope that the Minister will be able to say something useful.
  Mr. Joel Barnett Mr. Joel Barnett indicated assent.
  Mr. Cooke: I am grateful to have a nod from the Treasury Bench. That in-inspires me to think that we shall have something useful. But a nod will not quite do, nor will a confused series of exchanges in Committee. I forgive the Chief Secretary for what happened last year. It was all part of the educative process that took place across the House. We can do a better job than stage a confused Committee and an overcrowded Report.
  The proposal which I have put to the right hon. Gentleman has the united support of all the national amenity societies through their joint committee and the National Trust which is associated with it. The Historic Buildings Council advocates it. There is wide acceptance on both sides of the House. Certainly the Opposition are united behind it. My hon. Friend the Member for Eastbourne (Mr. Gow), my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) and my hon. Friend the Member for Kidderminster (Mr. Bulmer) could easily deliver a speech in support of this subject, although I have no doubt that they will have other things to say this afternoon.
  Mr. Jasper More: And Ludlow.
  Mr. Cooke: I am glad to have the support of my hon. Friend the Member for Ludlow (Mr. More). I know that I have the support of many more colleagues, including my hon. Friend the Member for St. Albans (Mr. Goodhew). I know that I do not embarrass my hon. Friend on the Front Bench, the hon. Member for Guildford (Mr. Howell), when I say that I know he will confirm that all my colleagues on the Front Bench have these matters very much in mind.
  In conclusion, I call in aid the words of the National Trust and Historic Buildings Council for England. It might be said that the National Trust can do it all. There is a lot of misunderstanding on that score. I remember hearing the owner of a great historic house who was having his difficulties, as happens to all owners, being

  895
  asked by a tourist "Why don't you flog it to the National Trust?" What ignorance that displayed. Perhaps it is our fault for not explaining matters, but the National Trust could not take on any more, nor does it seek to do so.
  I read from the National Trust's recent memorandum, which says:
  "The National Trust prizes its independence highly. It would not want to see the small proportion of its funds that comes from the public purse increase substantially. If this were to happen it … might jeopardise the support it receives from the public".
  The memorandum continues:
  "it does not seek to replace the private owners of heritage properties … nor would it be capable of doing so … it is no substitute for enlightened private ownership"—
  that is, the National Trust ownership.
  "It has therefore consistently argued in favour of conditions that will enable the private owner to contrive to care for his property adequately, with due regard for the public benefit."
  My last quotation is from the 1973–75 report of the Historic Buildings Council for England, a Government-appointed agency. In its report to the Secretary of State for the Environment, it says:
  "we must also draw your attention publicly … to the problems that will arise if provision is not made for the exemption from capital transfer tax and wealth tax of funds for the upkeep of historic buildings in private ownership and their collections."
  It continues:
  "the undiscriminating application of these taxes to privately owned historic buildings of outstanding interest would in a large measure nullify the present policy of preserving the country's architectural heritage".
  That is evidence enough that right is on our side and that there is massive support for what we advocate. I believe that now is the time for decisive action. Informed public opinion grows impatient at parliamentary procrastination.
  At the end of last year a petition was presented by the hon. Member for Edmonton (Mr. Graham), who is now a member of the Government. As chairman of the all-party Heritage Committee, the hon. Gentleman did sterling work. The petition that he presented attracted a million and more signatures. I am sure that the Government do not want to stir up a renewed onslaught in the Press and media such as that which assailed them last year. I hope that even
  896
  in this gloomy hour of economic crisis we can have the imagination and foresight to point the heritage towards a "settled future". I steal that phrase from the hon. Member for Edmonton. I hope that it can have a settled future so that it will still be there to brighten the lives of future generations.
  6.8 p.m.
  Mr. Eric S. Heffer: I hope that the hon. Member for Bristol, West (Mr. Cooke) will forgive me if I do not take up his argument completely. However, I make one comment upon it. I believe that everyone wishes to see our historic buildings remain open to the public. I am not sure whether the hon. Gentleman's answer to the problem is the right one, but I hope we all accept that our fine buildings should remain open. Incidentally, they show us how over the years the rich have lived magnificently and how ordinary working people and peasants have worked to keep them living in their palaces. That is the greatest lesson that anyone gets who visits our wonderful historic houses.
  I look with amazement and wonderment when I visit such places and see the beautiful objects of art. I think how they were all created by ordinary craftsmen and working people, created for the enjoyment of a few and not for the enjoyment of the many. It is a good thing that the many are beginning to enjoy these objects where previously they were shut away from them.
  Mr. Robert Cooke: Perhaps the hon. Gentleman does not know that most of the great palaces to which he refers were publicly accessible from the very day they were created. They were built as show places and not as places in which their owners could hide away. Does the hon. Gentleman realise that Communist countries look after their historic buildings better than we do in this country?
  Mr. Heffer: I do not know why the hon. Gentleman should introduce the subject of Communism. I could not care less what happens in Communist States as long as we do not have their political systems. I do not understand what relevance Communism has to any arguments that we are having on this matter. However, I do not want to pursue that topic at any length. I merely wished to make

  897
  a brief comment on the matters raised by the hon. Gentleman.
  I begin my few remarks by taking up that which appears to be the central issue of the Government's economic strategy—namely, the question of a wages policy. It is true that we do not have a statutory incomes policy. If we had one, there would have been a gigantic blow-up on these Benches and in the trade union movement. If there were a statutory incomes policy of the type that we have had in the past, undoubtedly the situation would be very different. However, we have a type of voluntary policy with certain statutory overtones which were clearly brought out and discussed during an earlier debate on inflation.
  I fail to understand the argument, constantly deployed on both sides of the House, that if we controlled wages and had a wages policy, that would in some way deal with the question of inflation. If one opposes that argument, one is considered to be an economic illiterate. I find it a remarkable argument because of the fact that countries with the highest inflation rates are precisely the countries with the lowest wages and the countries with no organised trade union movement to fight to keep up wages.
  Let me take as an example Chile, which is ruled by a military dictatorship. It is a strange dictatorship in the sense that it has not accepted the Fascist corporatist state, although the dictatorship has acted on Fascist lines. However, it has accepted the theories of Milton Friedman involving a free market. Although Chile operates a free market system, it has a much higher rate of inflation than ours and its trade unions have been suppressed.
  Let me take as another example Brazil, whose President comes to this country tomorrow, much to my regret. The so-called economic miracle of Brazil is adequately explained in The Times supplement today, and I recommend that supplement to any hon. Member who has the time to read it. But let me add that the rate of inflation in Brazil is almost impossible for those of us in the United Kingdom to visualise. Again, in that country there are no free trade unions. Those are just two examples of many underdeveloped or partially-developed countries with much higher inflation
  898
  rates than we have, with depressed wages and with no organised trade union movement to fight for better wages and conditions.
  Mr. Gow: Will the hon. Gentleman tell the House the rate of increase in money supply in Chile and Brazil?
  Mr. Heffer: No, I cannot—at least, not without notice.
  Dr. Bray: As my hon. Friend will know, when Friedman took on the job of advising the Chilean dictators they made slashing cuts in money supply, whereupon the rate of inflation escalated fantastically and the level of unemployment soared.
  Mr. Heffer: I welcome the point made by my hon. Friend. I have often said in this House that even if one mentions the moon there will be some hon. Member who will say "I was there only yesterday". There is always somebody who has the answer to these extremely important matters raised in the House, and I am grateful to my hon. Friend for supplying the answer.
  Let me return to the subject of inflation. I believe that the causes of inflation are manifold. My hon. Friend the Member for Tottenham (Mr. Atkinson) argued the case for fixed parities. I am not certain that he is right, but I shall certainly not say that he is wrong. In the past the greatest advocates in this House of the floating pound have been those who believed passionately in the private enterprise laissez-faire system in the extreme. I always felt a certain amount of scepticism when that argument was advanced. Because of the devaluation that has taken place in the period during which the pound has floated, the downward movement has led to increased import prices. That has been one of the causes of inflation.
  Another cause of inflation is our continued membership of the EEC—and I refer particularly to its mad and stupid agricultural policy. Even my hon. Friends who are pro-Marketeers agree that the system is wrong and requires changing. Unemployment is also a factor in increasing inflation because, even though people are laid off, unit costs still rise and that has an effect on prices.

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  We must then consider the rôle of the multinational companies. It is easy to say that the subject is of no importance and that the difficulties are overestimated in terms of transfer pricing and all the rest of it, but I believe that multinational companies also add to inflation trends.
  I have never argued that wages have no impact on inflation, but it is wrong to make the subject of wage restraint and control the central issue in the Government's economic strategy. The right hon. and learned Member for Surrey, East (Sir G. Howe) was correct to say that other things require to be done to deal with our economic problems separately from the question of wages policy and wage restraint. Naturally we differ fundamentally about what should be done, but he was right to argue that in developing other ways to deal with the problem there must be an alternative economic strategy.
  However, the right hon. and learned Gentleman said that the House of Commons was being ignored and that some form of elitism was involved in the Government's meeting trade union leaders in negotiations behind the scenes. I think that it is right for the trade union movement to be brought into all discussions. On economic policy and budgetary matters, the country and the House should have a series of options put before them, we should be able to consider those options and the Government should then be prepared to take our views into consideration. There is nothing wrong with that principle.
  I am worried that in the present situation the TUC could be on a hiding to nothing. If the TUC does not agree with the 3 per cent., it may be said to be holding back the tax concessions which would have been given to other people who are not members of the TUC or the trade union movement in general. If, on the other hand, the TUC holds out and wants more than 3 per cent.—perhaps 4½ per cent. or 5 percent.—it may be said, allied with the other argument, that the trade unions are being irresponsible and are not concerned with solving the country's problems.
  What I object to is that the trade unions alone are being placed in that position. That is why I have misgivings about it.
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  I am concerned not about the principle but about the way it is being done. It has been said that it is a form of black mail.That is a bit harsh, but when it is put in those terms to the trade unions it is getting rather near blackmail.
  There is no doubt that there will be an agreement, because the trade union movement has more patriotism than any business interests will ever have. Business people do not display one-eighth of the patriotism displayed by the trade union movement. Already, the imposition of the £6 limit has meant a cut in the living standards of the workers. They know that from the negotiations will come an additional cut. If working people are prepared to accept a sacrifice of that sort, there must be genuine equality of sacrifice. By that I do not mean that we should say to the Opposition and their business friends "Please be good boys and let us see a bit of sacrifice from you."
  What we have seen today from the Opposition in dealing with the clause that tackles tax evasion is not a display of patriotism. To use the word used by the right hon. and learned Member for Hexham (Mr. Rippon), it is a display of greed. We have to introduce the other side of the coin and make sure that there is genuine equality of sacrifice between the trade union movement and business interests. That is why I wish to put forward some proposals.
  Mr. Dennis Skinner: I am a little worried about equating patriotism with propping up this declining capitalist system. I think that my hon. Friend is talking about patriotism in a completely different way. On the question of the nuts and bolts of the proposition which the Chancellor put before the trade union leadership, rather than the trade unions, would my hon. Friend care to comment on the fact that by offering a wage increase of 3 per cent., plus a cut in certain taxes to compensate for fiscal drag, the Chancellor is giving the impression to the trade union movement and the nation at large that low relative wages equal tax cuts? Is not that a bad philosophy for a Socialist Government?
  Mr. Heffer: I have argued from the beginning that low wages have nothing to do with fighting inflation. The suggestion that low wages mean less unemployment has nothing to do with reality.

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  Countries with low wages also have high levels of unemployment. What is required is an alternative economic strategy, and that is the case I am arguing. The people in the trade union movement are so patriotic that they will accept sacrifices. Unfortunately, they are accepting the brunt of the sacrifices while the rich are not accepting any sacrifices, despite the squeals and howls that come from Opposition Members.
  We need a Socialist strategy and a Socialist alternative economic policy. We are committed to the concept of a wealth tax. I know that a wealth tax would not solve the problems and would not bring in enormous sums of money but, if we are serious, a wealth tax must be brought in at the earliest moment so that our people can see that the Government are taking steps to tax the wealthy more heavily. It is nonsense to suggest that the wealthy cannot pay higher taxes. If there is to be equality of sacrifice, there must be a move in that direction.
  Secondly, the banks and the financial institutions must be controlled by an extension of public ownership so that capital can be properly channelled into the industrial investment that is required. As the hon. Member for Basingstoke (Mr. Mitchell) said, each worker has insufficient capital to back him up. To rely on the voluntary policy—which we have had for so long—is impossible in the present crisis.
  Mr. David Mitchell: Will the hon. Gentleman say by how much he thinks that a wealth tax would reduce the amount of investment and how many jobs would be lost as a result?
  Mr. Heffer: I made clear that I do not think that a wealth tax would bring in vast quantities of money. It should be used as an indication of the seriousness of the Government in ensuring genuine equality of sacrifice. The money brought in from a wealth tax would not solve anything. It would be infinitesimal compared with what is required. I am not arguing that case. I ask the hon. Gentleman to do me the courtesy of listening to what I say and not comment on what he thinks I may have said. I am not saying that the wealth tax would
  902
  provide all the capital that is required. The next step is the control of banks and financial institutions.
  The third step that is required is for the National Enterprise Board to be given real teeth. The Industry Act needs to be amended to give the NEB the sort of powers that were originally envisaged by the Labour Party in the Green Paper and the 1973 programme. The NEB needs to have compulsory take-over powers and more money must be available to enable it to extend its activities into the profitable sector.
  An immediate inquiry is needed into financial speculation, and action must be taken against speculators who have endangered the country's economy. It is ludicrous that, when a number of workers go on strike or there is a hold-up in the discussions between the Government and the General Council, the pound falls and there is a flutter in the City. It is an absolute nonsense, and it is time that the Government began to deal with it. Of course, that means that radical and fundamental measures have to be taken.
  We cannot live for ever in the shadow of the problems of the City, which gets nervous whenever there is some discussion about a strike. It does not happen in other countries and it ought not to happen here. There ought to be rigid control on capital going out of this country. The time has come for Britain to stop being a depository for hot money. The Government must control the overseas portfolios. Those portfolios were mobilised before and can be mobilised again.
  Either the situation is so serious—every-one tells us that it is—and requires the most serious measures to deal with it, or the people have been conned for the past 10 years and it is not serious at all. I believe that the situation is serious. Our crisis has its own peculiarities grafted on to the world crisis. We have to deal with them in a positive, Socialist way. There is no other answer except that of moving towards the more Right-wing type of dictatorship which could end up with a straitjacket being placed on the whole of our society. The alternative is a democratic, Socialist answer. We have not got that yet from the Government. It is not, as the hon. Member for Lancaster

  903
  (Mrs. Kellett-Bowman) always suggests in her speeches, that we have had too much Socialism. My complaint is that we have never tried it. We have never even begun to get anything like Socialism. What we have is semi-controlled capitalism.
  If we are to solve our problems, we need a democratic Socialist country. We need to plan our resources and our economy. That means that we have to carry out the other side of the proposals of the TUC. We can begin by imposing import controls on a selective basis. We can begin by giving more money to the National Enterprise Board. We can inject more cash now to help bring down unemployment in the construction industry. We can begin the process of reversing the trend of high unemployment. There are now 1¼ million unemployed. What is required is a true alternative strategy. I hope that sooner or later the reality of that will get across to the Government.
  6.32 p.m.
  Mr. John Pardoe: We have been listening for the last few minutes to what has been termed by the hon. Member for Liverpool, Walton (Mr. Heifer) a Socialist strategy. He complains that what is wrong with a Socialist strategy is not that we have had too much of it but that it has not been tried. It may not have been tried in this country, but it has certainly been tried elsewhere. From time to time the hon. Gentleman waxes wrathful about the EEC, particularly its agricultural policy. That policy has produced surpluses, we know, and that is a problem. But the Russian agricultural policy produces shortages, and on the whole I would rather deal with surpluses than shortages.
  If the hon. Member can point to one successful Socialist society in the world's history which has been any better at solving the problems he has enunciated, I might be more prepared to listen to him.
  It is incredible to hear the hon. Member say that it is nonsense to suggest that the wealthy cannot be taxed any higher. What revenue would we get from that aspect of his Socialist strategy? A wealth tax would bring in peanuts. If we told all those with an income of over £5,000 a year that they could not take home any part of that income over £5,000, what
  904
  would that do to the borrowing requirement? It would not begin to touch it. It is nonsense to suggest that that is the way forward.
  The hon. Gentleman gave himself away in his comments on the speech of the hon. Member for Bristol, West (Mr. Cooke), who mentioned the national heritage. He said that when he went into these great national heritage houses the only thing he thought about was the appalling social system that allowed the owners of those houses to dominate the poor and needy in the past. Imagine what the hon. Gentleman must think every time he listens to a Mozart sonata or a violin concerto or whatever. All he has to think about is the iniquity of the system which allowed some wealthy Austrian patron to pay the composer for writing it. It must be a pretty miserable life for the hon. Gentleman. Imagine what he thinks when he wanders round Florence or Venice and stands before, say Michelangelo's David—not a quiver of artistic appreciation but simply a feeling of deep, desperate Marxist gloom.
  Mr. Heffer: The hon. Gentleman may not be aware that I spend most of my holidays in Italy going to places like Venice, Florence and Rome to see the great historical treasures. The hon. Gentleman has again deliberately twisted and misinterpreted what I said. This is a typical example of the shallowness of his thinking and that of his party.
  Mr. Pardoe: I am absolutely delighted to hear that the hon. Gentleman spends his holidays on what is clearly an international tour of misery, travelling around the art treasures of the world, in which he sees only economic causes. He can find a splendid pen portrait of himself and his views in the work of a good Socialist, Bernard Shaw. I refer to "The Apple Cart". He is getting to look and sound every day more and more like Bill Boanerges. If he would like to read the thing, he will see what I mean. No doubt he has read it already.
  The hon. Gentleman was even more nonsensical when he tried to tell us, with his political sophistry, that we do not have a statutory incomes policy. We have a rigid incomes policy. It has been enforced. We have passed an Act of Parliament to bring that policy into effect.

  905
  How statutory can we get? Let us hear no more of the reasons why the hon. Gentleman did not have to exercise his Socialist conscience in tearing this Government apart and why he feels that he can possibly accept a new variation of the incomes policy. The fact is that we have a statutory incomes policy, as my right hon. and hon. Friends and I said we would. We have an effective incomes policy which has worked. I congratulate the Government. It is a pity the hon. Gentleman does not accept that part of the story.
  I am sorry that the debate has to take place on the Opposition's amendment rather than on our amendment. The Opposition's amendment is so worded that it is almost impossible for any member of the Opposition not to vote for it, but it is exactly what we might expect of one of the partners in our system of adversarial politics. It is mere mindless rhetoric. It speaks of the Finance Bill
  "which attempts to meet the cost of spendthrift Government by increasing the real tax burden upon rich and poor alike".
  Of course. When did a Government not do just that, at least in the imagination of an Opposition? All Oppositions think like this. When did we not have a spendthrift Government? When was the real tax burden upon the right and poor alike not increased? I cannot think of any member of any Opposition in the history of this House who has not castigated monstrous increases in tax on rich and poor alike over the centuries.
  Where are the Opposition's proposals for encouraging the skill and enterprise which they want? Why, if the Conservative Government encouraged skill and enterprise in the past, as presumably they did, and if this encouragement is such a major factor as they say it is for the prosperity of our economy, have we not been more successful in the past?
  I do not want to debate the link between taxation and pay policy—
  Mr. Skinner: Why?
  Mr. Pardoe: I am glad the hon. Gentleman asked that question. The answer is that we did so at some length in the debate on the Budget proposals. I and my right hon. Friend the Leader of the Liberal Party made it clear that in principle we supported the Government's
  906
  proposal. That proposal is a recognition of the fact that, as a result of the increased power of various pressure groups, including the trade unions, and the decline of the power of Parliament, parliamentary representative democracy is sick almost to the point of death. We put forward proposals for resurrecting it and for trying to do something about the monopoly bargaining power of these pressure groups.
  I should like to raise with the Chief Secretary a matter which I mentioned in my speech on the Budget proposals to which I did not receive an answer. What is the real value of the bait which the Chancellor has, in my view, properly offered to the trade unions? The increases in personal tax allowances, which are conditional upon the pay policy, are in essence trifling. Even if they are passed by this House on subsequent Government amendments to the Bill, they will still mean that too many low-paid people and too many people who are not paid at all—those who are living on benefits of one kind or another—will have to pay income tax.
  For instance, the present allowance for a married man is £955. If we add the £130 which the Chancellor is proposing, that will go up to £1,085. At present, supplementary benefit on the long-term scale for a married couple is £21·55 a week, which works out at £1,121 a year. On the basic mathematics, someone on supplementary benefit will still be within the income tax net. That cannot go on. Yet, if we are to advocate lower thresholds and, therefore, higher allowances, we shall be asked whether we want to increase the borrowing requirement. I can almost hear the Chief Secretary saying that now. Of course we do not want to increase the borrowing requirement, but that is not the only possible way of dealing with this matter. The permanent answer to high taxation is lower public expenditure, but we are not debating that matter today.
  What about increasing taxes on expenditure? There is ample evidence in the constituencies and in the mailbags of all hon. Members—we cannot deny it—that people would rather pay their taxes on expenditure than as a deduction from income in their pay packets each week. There may be other arguments which we

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  should put to them to the effect "You want to do this, but it is not a good thing to do." However, no Government in recent years have argued that case very strongly.
  Some indication of what I am getting at is given in Table 9 on page 19 of the Financial Statement and Budget Report. That shows, for instance, that income tax in 1975–76 raised a total of about £15,000 million. If this House did nothing at all, if we did not change a dot or comma of any financial legislation, the revenue this year would be about £17,970 million. If we do nothing at all, the Government will receive £2,900 million more in income tax than they did last year.
  Parliament made no decision about that. In my view, Parliament should make a decision about it. It may be that we would come to the conclusion that in our wisdom, and with the advice that the Government may give us and all the arguments they may put forward, it is right that they should achieve that kind of revenue. But it is better to have the matter put forward in a proper way. We can then choose and the Government will have to make a public choice whether they should get this extra revenue which they need to balance the books—they do not quite balance—by raising the rate of taxation or raising the rates of different bands of taxation, or whether they wish to bring down the threshold, as they have done as a result of inflation but without telling anybody that they have done it.
  Indexation is essential if Parliament is to re-establish its control. I ask the Chief Secretary: what about a lower band of taxation? I suggest that 35 per cent. is hideously high for anyone to come into the income tax net. We ought to think seriously about, say, 20 per cent. to 25 per cent. as an introductory band. I am not suggesting that we should go back to two or three lower bands—that is a complicated procedure—but 35 per cent. is very high indeed as a starter. We all know that income tax is too high at almost every level of income. Some Labour Members below the Gangway may not accept that. They believe that a lot of people in our society can easily pay more income tax. That is not true.
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  The level of tax is too high for the poor and for the rich.
  The Conservative Party may pretend that it would be much better at dealing with this problem. However, it does not have history on its side. Still, the Shadow Chancellor of the Exchequer lectured the Chancellor of the Exchequer about many matters, including subsidies. The right hon. and learned Gentleman said that subsidies were an iniquity. I agree that subsidies are a useless way of trying to solve the problems which have confronted Governments over many years. But subsidies did not begin with this Government. The Opposition, when they were last in Opposition between 1964 and 1970, attacked subsidies. We all remember the attacks that they made in those years. Total Government subsidies were running at about £574 million, and they rose to £900 million in the last year of the then Labour Government.
  Did the Conservative Government cut subsidies? Of course not. They found that it was impossible. Indeed, far from cutting them, they increased them enormously, particularly the subsidies mentioned by the Shadow Chancellor. I thought that the Conservatives had got around to leaving out the dirty word about nationalised industry subsidies. I thought that they might have too much of a conscience to mention that matter. However, when we look at what happened regarding subsidies to the nationalised industries during the 3½ to 4 years that the Conservatives were in power, we find that they rose astronomically. Total subsidies rose from £900 million in 1970 to £1,526 million in 1973. The same was true of public expenditure and of the borrowing requirement. It is a case of the pot calling the kettle black.
  In order to cut expenditure and taxation generally, which would be the only real solution to the problem, we need to rethink the whole question of what the State should do and what we should be left to do for ourselves. That will require extremely radical policies and—I say this to the Conservative Party—a political settlement which ensures that we have a Government for long enough to carry them out It will take a very long time to carry them out. It is no use thinking that it can be done in 3½

  909
  to 4 years, because then we should have another bout of collectivism all over again. If the Opposition are serious about wishing to revise the boundaries between what the State and the individual do, they will have to go for political reforms which will make it possible.
  Such a policy would undoubtedly arouse great controversy in this House. There would be great differences about it. But there are some matters about which we should all be able to agree. Some of those matters were touched on by the hon. Member for Gravesend (Mr. Ovenden), who spoke this afternoon on behalf of the widows. I agree with the view that the assortment and variety of allowances which we have allowed to build up over the years have no rhyme or reason. No Government have ever come to us and tried to defend the levels of any of these allowances. They go on from year to year, adding a bit here and a bit there, and there is no rhyme or reason to them.
  Are these allowance necessary? Most of them are necessary only because of the high rates of taxation which we have allowed to envelop us over the years. Many hon. Members may have been attracted by the proposal in the Economist this week—that total income is £100 billion and that if we taxed that at 17 per cent. we should get £17 billion, which is what we are getting by all this paraphernalia of allowances, varieties of rates and so on.
  I do not go as far as the Economist, because I think that there are much greater complexities than it has allowed for in a simplified version. But there is a very reasonable case for looking seriously at the level of allowances. For instance, in 1974–75 the single person's allowance cost the Revenue £1,875 million in revenue forgone. The married person's allowance cost £3,615 million, the wife's earned income relief cost £960 million, and the child allowance in that year cost £1,150 million. Those allowances alone total £7,600 million, which compares with revenues in that year which were not anything as high as they are now. The total tax on income in 1974 was £12,000 million and the total tax on expenditure £11,000 million. It might seem terrible to scrap all these allowances, and so it would be unless we offered a quid pro quo of
  910
  much lower rates of tax and a much more effective anti-poverty programme.
  It is nonsense for Government Members to think—and I know they think it because I did once also, but I am now admitting the error of my ways—that this progressive system of taxation has done very much to bring about equality in this country. It has certainly not tackled the poverty problem. We have far too much poverty in Britain and we are tackling it inadequately.
  It would be far better to go for a much simpler tax system and deal with poverty through larger cash grants—grants in the form of family allowances, not family tax allowances.
  Mr. Skinner: Subsidies.
  Mr. Pardoe: I have no objection to subsidising people. Subsidising goods and services is what worries me because it distorts the economy.
  We have no evidence whatever to suggest that industrial subsidies ever increase the totality of investment. Indeed, one begins to wonder whether it is the totality of investment that is the problem or whether it is not the problem of low output of investment in Britain.
  The problem of tax evasion is a matter of great controversy. Tax evasion is a serious matter and it is not something which should be dealt with lightly either by the Opposition or by the Government. It is a fraud on society, and many of us in all parts of the House reckon that the powers of investigation should be the same as for other frauds.
  The Conservative Party waxes wrathful about the proposed powers, but there are precedents in their own legislation. The powers of entry given to the Customs and Excise when the Conservatives introduced VAT were formidable indeed. The Social Security Act 1975 gives powers to solve problems which are trifling when compared with the amounts that we are dealing with in tax evasion. The Inland Revenue is asking for similar powers to those which the Customs and Excise already has. I understand its needs for the powers—it wants them to do its job better.
  I do not think that the Chancellor made out his case today. No one should be persuaded easily by arguments for these powers; we should have very

  911
  powerful arguments, and we have not heard them yet. I am open to be persuaded. I am not committed to voting against the introduction of these powers at this stage. But the Chancellor will have to do far more to persuade us. Perhaps the Second Reading debate is not the place for the full panoply of his arguments, but I hope we shall hear them in Committee.
  The need for these measures—if there is a need—is not because, as the Chancellor half suggested, the British people are now less honest than they were five or 10 years ago but because they have become ruinously over-taxed.
  Compare this with the history of Customs and Excise when duties rose too high centuries ago. There was mass evasion and the Government of the day tried every conceivable method to block the loopholes. They hanged Cornishmen for smuggling goods across Cornwall to Jamaica Inn, which is in my constituency. Indeed, the severity of the penalties for smuggling is part of Cornish history. However, it did not do the blindest bit of good and the Government of the day had to retreat and lower the customs and excise duties. People became much more law-abiding and revenues from customs and excise duties rose magically at the lower rates.
  I suspect that there is a parallel with our situation here. Just as customs and excise duties had risen to a point beyond which a free people could not be taxed, our rates of tax, certainly above the 35 per cent. standard rate, up to 98 per cent. on investment income and 83 per cent. on earned income, are beyond all reason. As long as they are beyond all reason, all the investigative powers that the Government can get and all the penalties they can provide will not do anything to stop tax evasion, because tax evasion is a disease of a nation that is over-taxed.
  6.57 p.m.
  Mr. David Lane: There is much refreshing truth in what the hon. Member for Cornwall, North (Mr. Pardoe) said about high taxation and evasion. I hope that he will have many chances to return to this theme. I apologise to the House, particularly to my hon. Friend the Member for Guildford (Mr. Howell) and the Chief Secretary, that I shall
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  have to be away for a good deal of the rest of the debate.
  I shall confine myself to three general comments and three specific provisions in the Bill. My judgment remains very much the same as it was immediately after the Budget speech. The Government's whole strategy and the Bill, which is an important embodiment of it, do not sufficiently measure up to the needs of the moment.
  The Chancellor himself, whose offensive sneers this afternoon were particularly deplorable on a matter of such importance, is not facing the seriousness of the situation, which is wholly the responsibility of this Government because of their ill-judged policies in and after 1974. The danger now is one of premature euphoria. I read reports of the Chancellor's speech yesterday in Nottingham which was altogether too blithe. Too many people are living in a kind of cloud-cuckoo-land, which is the fault of this Government with their soft talk and their soft options.
  I give a constituency example. On Saturday in Cambridge there was a May Day meeting organised by the local trade unions—at which the audience was smaller than that at a Conservative May Day rally in another part of the city—and one of the trade union banners carried the slogan. "A 35-hour week now." Our national disease in Britain today is not too much work but too little. Until we in this country—I am talking of managers as well as of workers on the shop floor—are willing to work as hard and as efficiently as other comparable nations, we shall have to do without many desirable things, both in our personal lives and in the public services. There is now no alternative but lower living standards for the vast majority of us for at least a year or two ahead. I wish that the Chancellor would spell out these truths much more frankly.
  Secondly, may I say a few words about the conditional tax changes, which are not in the Bill. I believe that the most serious immediate consequence of the Budget has been the continuing fall in the value of the pound, which is the world's judgment on the Government and on Britain's economic performance and which, as some Labour Members

  913
  have already said, is adding all the time to the inflationary pressures.
  A major reason for this weakness of the pound has been that too much of the tune is being called by the Trades Union Congress. Of course the Government have got to consult, as we did when we were in Government, but they should be consulting many others besides the trade unions—and these other people now feel that they are being left out of decision-making. The Government insist on elevating the TUC to an excessive eminence in the processes of national decision-making. Too frequently trade union leaders get a platform from which to talk the sort of arrant economic nonsense we heard recently in that call for a 35-hour week.
  I hope that the Government succeed in persuading the TUC to a low pay limit. Indeed, many people believe that even 3 per cent., which may well drift up to 5 per cent. or 6 per cent., is too high. But we shall want to know two other things about this package. First, what price is the TUC exacting in further irrelevant and unrealistic economic policies—for example, for increased public expenditure and subsidies—before it will agree to any deal? Second, if the TUC refuses to settle at a level as low as the Chancellor suggested in his Budget speech—he said nothing about this this afternoon; perhaps the Chief Secretary will say something later—will the tax concessions be correspondingly reduced? If not, the Chancellor will be shown to have been irresponsible and his credibility will suffer even more. If so, let him make clear to the country whose fault it is.
  My third general comment is that an incomes policy, however tough, is not enough in itself. This is the basis of our amendment. Several other things are essential to national economic recovery. Above all, there must be a reduction in the levels of public spending and of taxation.
  Mr. Skinner: Where?
  Mr. Lane: I could give a number of examples—on subsidies and on the money which is wasted on industry and on nationalisation—but I shall not be diverted now. I ask: where today are the incentives for more investment, for
  914
  greater effort, for higher productivity and production?
  In 1962—National Productivity Year—the Duke of Edinburgh said:
  "No amount of economic juggling can alter the fact that in the long run our solvency depends upon the efficiency of our industries and upon national productivity."
  In particular, the Chancellor is not doing enough to encourage skilled workers and middle managers. Volumes were spoken in one sentence in yesterday's Sunday Times leader to which I think that the Chancellor himself referred:
  "A more just level of income tax would curtail the expanding problem of perks."
  I go back to my constituency again for a small practical example of the disincentive effect of today's tax levels. I was telephoned during the Easter Recess by a small stallholder on the Cambridge Market who sells sheepskin goods. He was very disturbed that a supplier in the West Country had just turned down an extra order for a considerable quantity of the goods because, as the supplier had said, "It is not worth my while at present tax rates."
  I want to make three brief criticisms of certain provisions of the Bill.
  Mr. Atkinson Mr. Atkinson rose—
  Mr. Lane: If the hon. Gentleman will excuse me I shall not give way, because I have promised to end my speech within 10 minutes.
  Mr. Atkinson: I thank the hon. Gentleman for giving way.
  Mr. Speaker: Order. The hon. Member for Cambridge (Mr. Lane) is not giving way.
  Mr. Lane: First, and I hope that I shall carry the hon. Gentleman with me in this, there is strong feeling among my constituents that when the Government are raising more revenue—this was another area which the hon. Member for Cornwall, North touched upon—they should look to other sources which are not being sufficiently tapped. Gambling has proved to be one of the real growth industries. I know that there are difficulties, but I regret that there is no proposal in the Bill for greater taxes on gambling. I hope that the Treasury will look at this point afresh.

  915
  Secondly, there is strong feeling among my constituents that the Government are not doing enough to help widows. There was some relief for widows in the Budget, but they still feel a sense of injustice. They contrast, for example, the position of a middle-aged widow who has a home and a family to keep with that of a single person who is still living in his or her parents' home. They contrast, too, the position of the widow at work with that of the married woman at work in similar circumstances. I hope that the Government will look again at this problem, too, before the Bill goes through.
  Thirdly, there is strong feeling among my constituents that the capital gains tax should be made less onerous on householders who let rooms in a small way to lodgers. I continue to receive evidence in Cambridge that the present arrangements are a disincentive to resident landlords, with the result that badly-needed accommodation is being wasted. When I went to see the Minister of State, Treasury last summer about this matter, I had a very courteous hearing. He said that it would be considered in the whole review of the capital gains tax. I was all the more disappointed that nothing was said about this by the Chancellor in his Budget speech and there is nothing in the Bill. If total exemption is not possible for the portion of a house which is let to lodgers in this small way, could the Government at least consider some lower rate? I urge them to examine the problem again and to introduce changes before the Bill reaches the statute book.
  What we need from the Government today is bolder deeds and blunter words. The Chancellor has fallen short of what is required. I believe that his Budget and his Bill do not carry conviction because his party does not carry conviction, and the calls for national unity that we have heard from the new Labour Prime Minister will continue to ring hollow while the ideological and partisan content of the Government's programme remains as high as it is.
  7.7 p.m.
  Dr. Jeremy Bray: I understand that in the Philippines the monitoring of the tax accounts of millionaires is in the hands
  916
  of the wife of President Marcos. The first lady is a very beautiful and a very redoubtable lady whom no doubt the Chief Secretary will be pleased to entertain when she and her husband pay us a State visit shortly, in line with the tradition of State visits that we seem to be establishing.
  One advantage of having the president's wife looking after the tax accounts of millionaires is that one is never short of funds for good causes. There has been a remarkable series of private gifts for culture and the national heritage in the Philippines which has made possible the construction of museums and galleries of all kinds, including a museum of folk arts which was built especially to house the Miss Universe contest.
  Clearly this is the pattern of tax monitoring that Tory Members wish to establish in seeking to place the oversight of higher income tax accounts in the hands of a Minister.
  Sir John Hall: I am interested to hear about what happens in this regard in the Philippines. The hon. Member will not omit to mention to the House that gifts made for charitable and cultural purposes are allowable against the donor's income tax.
  Dr. Bray: I have no doubt that that is the case. I am not clear whether the hon. Gentleman refers to this country.
  Sir John Hall: The Philippines.
  Dr. Bray: Yes, indeed, and that is why they are so forthcoming. I wonder whether the hon. Member for Bristol, West (Mr. Cooke) really hankers after that sort of regime.
  There are 42 clauses in the Bill dealing with capital transfer tax, substantially more than the 34 clauses dealing with the tax in last year's Bill. I wonder how many clauses they will breed in the 1977 Bill. This illustrates the problems we face, particularly on this side of the House, in dealing with tax matters. There is a fantastically elaborate structure to the Finance Bill and its working out in the case law established by Finance Acts. They are monstrously boring to any hon. Member who does not stand to benefit or lose from their workings. There is not an enormous number of hon. Members on this side who are liable to pay CTT or the wealth tax and it is conceivable

  917
  that, on detailed points, we do not always bring to bear on Ministers the scrutiny and pressure that perhaps we should. By contrast, hon. Members opposite are eager and avid in their representations.
  Of course, Ministers are gentle, softhearted and kind men who always wish to please. They are clear-sighted and always absolutely precise in their statements of the Government's intentions and effects of proposed legislation. However, that does not stop a certain impression that Treasury Ministers may not be under expert pressure from their Back Benchers on, to take an example from this Bill, conditionally exempt transfers and under which chargeable events they do or do not become taxable.
  I challenge any of my hon. Friends to explain the meaning of a chargeable event. I am sure there are many hon. Members opposite who would be able to enlighten us and, no doubt, will do so at enormous and boring length in Committee.
  One consequence of this situation is that we get in Finance Bills proposals such as the provision that the value of a farm may be reduced by 30 per cent. for capital transfer tax purposes when it is transferred. Since the value of a farm is set, more or less, by its value, not for producing wheat, milk, beef or anything useful, but for tax avoidance purposes, the effect of this 30 per cent. reduction in the liability for CTT will be substantially to increase the price of farms. This is very nice for those who have land, and not intolerable for those who wish to avoid tax, but it has precious little to do with the economics of farming, except in a damaging and harmful sense.
  There is also a proposal for the reduction in the value of private businesses by 30 per cent. Being simple-minded and kind hearted constituency Members, anxious to secure the well-being of small firms in our constituencies, we want them to be treated fairly, but if a whole lot of phony creations are set up as small businesses in order to avoid liability for tax, our good will is being exploited.
  I am not sure what steps can be taken to deal with this situation. We are exploited in other ways. Appeals are made to our concern for the national heritage.
  918
  The hon. Member for Bristol, West did this when he called for maintenance funds to be provided for stately homes.
  It may not be entirely clear to hon. Members what maintenance funds are. If one has a beautiful old house, surrounded by thousands of acres of farmland which yields a handsome income, and one uses the income from that land to pay the butler for polishing the silver, it could be exempt from liability to CTT. We are told that the splendid people in the National Trust and every amenity society are in favour of financing the butler to polish the family silver through the kind of relief measures proposed by the hon. Member for Bristol, West, and which may, I fear, receive a sympathetic hearing from Treasury Ministers. Tax provisions are the wrong place to start in looking after and preserving our national heritage.
  The hon. Member for Cornwall, North (Mr. Pardoe) asked what Socialist or Communist State had made a success of anything. The hon. Member for Bristol, West pointed out that the Soviet Union looks after its national heritage a great deal better than we look after our heritage. I have a more practical example. When the cities of Italy were under the control of Italian Liberals or Tories their national treasures were neglected. Only when the Communists took control of cities were the art treasures looked after properly, though there is still a long way to go.
  We should get clear in our minds what our policy for the arts and culture should be and then get on with it properly so that we are not constantly pushed around on tax provisions which spread far beyond the scope of what we intend and which are used to drive a coach and horses through our financial legislation.
  I do not know what can be done to deal with the technicalities of the Finance Bill which are so little understood in this House and so much exploited by the Opposition and their friends. It is extra-ordinary that the Finance Bill should be virtually the only measure which does not have a memorandum of explanation published with it. I appreciate that it would be an enormous and complex memorandum, so perhaps a better idea would be for Treasury Ministers, at later stages of the Bill, to make copious notes on clauses available to any hon. Member who wishes to have them. During the

  919
  passage of a number of local government reform Bills Ministers of successive Governments have made available notes on clauses.
  The Finance Bill is the piece of legislation in which, above all, the technicalities should be explained so that hon. Members on this side who do not have professional advisers may be given a fair chance to examine the effect of the legislation.
  Mr. Robert Cooke: The Inland Revenue has published a Press release on the capital transfer tax which the hon. Member can easily obtain. There are 18 paragraphs explaining the latest tax proposals, and 10 of them deal with the complexities of national heritage and how it is to be hemmed in under the amended version of what we got last year. I shall not follow the hon. Member in his wild fantasy about butlers polishing the silver being supported by the taxpayer and other such nonsense. The only alternative to maintaining private ownership and public accessibility in this country is that which exists in Communist countries—nationalisation and empty museums.
  Dr. Bray: The spirit in which the hon. Member speaks does not do credit to his personal concern for our national heritage and the steps which I know he takes privately to protect it. The goodwill and cultural concern of the House are being exploited for tax avoidance purposes. If an explanatory memorandum published by the Inland Revenue on the CTT consists of 18 paragraphs, that is less than one paragraph for every two clauses. If the hon. Gentleman reads the Finance Bill in detail he will see that that is a rather inadequate explanation, especially if he compares that with the fullness of notes on clauses of other Bills. I do not know whether he has ever looked at the notes on clauses of other Bills, but if he has he will realise that they are usually very much fuller than what we have in this case. We can deal in detail in Committee with the nature and framing of the CTT provisions, and I shall, therefore, leave the matter there.
  One interesting point was raised by my hon. Friend the Member for Tottenham (Mr. Atkinson). He rightly drew attention to the importance of the
  920
  exchange rate in the present management of the economy and to the whole background of the Bill. I pointed out that simply to peg the exchange rate would result in the most colossal deflation, and he then talked about import controls. It would need more than import controls to deal with this situation, as I am sure my hon. Friend appreciates. It would need an enormous panoply of exchange controls and financing. It would have to be set out clearly which types of sterling were allowed and which types of purposes were allowed.
  I am not sure that my hon. Friend appreciates the scale of the operation. There are at present on deposit in United Kingdom banks about £175,000 million in overseas currencies. In deposits on terms of maturity of less than one year there is an excess of liabilities of United Kingdom banks over assets of about £29,000 million. This is some of the hot money to which my hon. Frend the Member for Liverpool, Walton (Mr. Heffer) referred. If sums of that magnitude are to be subjected to a regime of fixed exchange rates one would need the most extraordinary panoply of differential exchanges for essential imports, for not quite so essential imports, for entirely voluntary imports, and so on. I wonder whether such an apparatus, which we designed merely by administrative fiat, and bearing in mind that we would have no idea whether the rules would have anything like the effect we intended, would not land us in a great deal worse mess than we are in now.
  I take the point about considering the exchange rates, but I suggest that the way ahead in integrating properly the management of the exchange rates into the framework of domestic policy is a tedious, long drawn out and difficult process of international negotiation so that we bring overseas holders of sterling, overseas managers of their currencies, central banks, Ministries of Finance, and so on, into the discussion.
  I am not satisfied with the initiative taken in international bodies by Finance Ministries. It seems that rules of thumb are being proposed on far too superficial a basis of analysis. Work is going on in the project Link, managed by Professor Klain at Wharton, to piece together models of national economies of the major industrial nations, those that are

  921
  responsible for the major trading currencies. This makes possible a proper analysis and policy design exercise, using methods which are very much in their infancy in the international agencies and the Ministries of Finance. This is important for getting a properly and smoothly managed economy.
  My hon. Friend will recall that for many years we had fixed exchange rates, but all the progressives were clamouring for floating exchange rates. Now we hear the clamour for a wholly fixed exchange rate.
  Mr. Atkinson: What the progressives on this side of the House were arguing for was a fixed devaluation. The clamour to which my hon. Friend refers came from the monitarists and extreme Conservative Trotskyites on the other side of the House. They were arguing for a floating exchange rate, and none more so than the right hon. Member for Down, South (Mr. Powell), who was the leading advocate of a floating exchange rate.
  Dr. Bray: Somewhere in that range is the answer that we would like to see—fixed but adjustable exchange rates. The problem is, what is the range of float, in what circumstances does one adjust, and what are the rules of adjustment. It is this detailed study, preceding negotiations, that we need.
  The overall impression left by the Government's posture, not only on this Bill but the important discussions going on with the TUC, is that there is an air of realism about it. They know that the problem will not be solved this year. They are not calling for enormous hair-shirt policies giving zero growth for years in the national income or zero growth in consumer expenditure. That is not the backcloth, but there will be difficulties for years to come.
  It is a pity that, against the background of wide national understanding and considerable advances in realism in the Government's policy, they did not explore the medium-term options for the economy and publish a full medium-term forecast to accompany the Finance Bill, or at least in the financial memorandum to the Budget speech. We shall get the statutory requirement from the Treasury to publish economic forecasts a year from the activation of the Industry Act 1975, and that at least will
  922
  ensure for the future that this medium-term background is available to the House so that we are all able to debate a lot more intelligently the sense or nonsense—and with this Government I believe it is the sense—of the Government's policy.
  7.27 p.m.
  Mr. Douglas Crawford: It would appear that there is little that is new in the United Kingdom economic and political scene. The aridity of the debate, in which positions have been taken and during which there has been much sniping across the Floor of the House, is not helping a dialogue.
  I except from that the speech of the hon. Member for Motherwell and Wishaw (Dr. Bray), who put forward interesting suggestions and said that it might he possible to build computer models of the economies of the industrialised nations of the world. I think he will accept that that is a difficult task, which needs a lot of research and programming.
  I exclude from my stricture also the speech of the hon. Member for Cornwall, North (Mr. Pardoe). One gets the feeling that, irrespective of which party is in power, the fiddling goes on while the economy is burning. Perhaps it can do no other. Perhaps a political as well as economic rebirth is what is needed. Let us hope that this is inevitable.
  Having said that the arguments have been rehearsed over and over again. I must add that it was interesting to listen to the hon. Member for Basingstoke (Mr. Mitchell) on the subject of emigration and the drain of skills. He called it a haemorrhage. We in Scotland have been well aware of this haemorrhage for many years past, and it is interesting that a Member for an English constituency thinks it is bad enough in England for note to be taken of it.
  The Chancellor of the Exchequer was honest, and the hon. Member for Cambridge (Mr. Lane) was a little less than fair in this regard. I think that the Chancellor was honest in what he said, and I hope that the people of Scotland who voted for the Labour Party, and those who did not, will note his words. The right hon. Gentleman said that living standards would come down by 1 per cent. in 1977, and he added that there would be a continuing upward

  923
  pressure of prices in 1977 because of what he called currency changes. It will be interesting to know whether the Chief Secretary can say whether the upward pressure of prices in 1977 will be the result of the devaluation that has taken place in the pound, or whether he assumes that there is to be a further devaluation this year and next.
  The Chancellor also said, in the context of the EEC, that central demand management of the economy was more important than solving regional difficulties and differences. Presumably, in this context he included Scotland as a region. I should like Scottish Members to take that on board and be as honest in Scotland as the Chancellor has been in this House. Let them tell their constituents in Scotland that this Government, which campaigned in Scotland, as in the rest of the United Kingdom, on the promise of increased prosperity and the slogan "Back to Work with Labour", are producing the exact opposite. I hope they will show the same honesty as the Chancellor.
  My party is opposed to the Bill for several reasons. The first concerns that part of Clause 1 which deals with whisky. You will be aware, Mr. Deputy Speaker, that my party opposed the Money Resolution on this subject at the end of the Budget debate last month. We had the support of the serried ranks of six hon. Members of the Conservative Party against the Government in that vote, three of whom were from Scotland. I understand that the duty on whisky amounted to £380 million for 1975–76. I would have thought that that would surely have been enough. It is not right to penalise employment in the industry any more. Also, my hon. Friend the Member for Banff (Mr. Watt) got no reply, either in his Adjournment debate on the subject or during the debate on the Budget, to his plea that the duty on whisky should be levied not when it comes out of bond but when it is actually sold over the counter.
  Our second reason for opposing the Bill concerns Clause 8, which deals with hydrocarbon oil and the increase in petrol duty. Many of us have constituencies with large rural areas, and this will be a further imposition on people living there. This time the serried ranks of Conservatives who voted with us dropped from
  924
  six to two—a point worth putting on the record. We are also against the delay in the increase in pensions. By the time the increase has been paid, no doubt inflation will have taken all of it up.
  Our main reason, however, for objecting to the Bill is that it does not differentiate or recognise that Scotland has an economy that is becoming increasingly different from that of England. We have been told that wage rates in Scotland are now nearly equal to those within the rest of the United Kingdom, but the important criterion is not wage rates; it is family income. When we take family income into consideration, Scotland still lags behind the rest of the United Kingdom.
  Mr. Tam Dalyell: Will the hon. Gentleman spell out precisely what he means by this and give the figures for family income, as opposed to wage rates? What figure does he base this on?
  Mr. Crawford: I cannot give the exact figures.
  Mr. Dalyell: As usual.
  Mr. Crawford: If the family income is 100 for the rest of the United Kingdom, it is in the order of 92 or 93 in Scotland.
  Mr. William Ross: Will the hon. Gentleman relate families to old-age pensioners and the number of children?
  Mr. Crawford: I do not think that is all that relevant. I am talking about income per family in Scotland compared with the rest of the United Kingdom.
  As far as unemployment is concerned, I would produce comparative figures based on a touchstone which gives a fair comparison between other European countries and Scotland. The number unemployed per 1,000 in January 1976, was for Norway, 3·4; Switzerland, 4·9; Sweden, 11·2; Austria, 12·9; England, 24·2, and Scotland, 31·1. That figure will speak for itself. We do not wish to be compared with England; we would rather be compared with the thriving economies of other small European countries.
  Mr. Dalyell: Perhaps the hon. Gentleman ought to take into account the figures

  925
  from the gastarbeiter. The Swiss figures are totally misleading.
  Mr. Crawford: The third important difference is the position of natural resources in Scotland compared with natural resources in the rest of the United Kingdom. On the same day as the hon. Member for West Stirlingshire (Mr. Canavan) accused the SNP of misleading the House—he actually used a word that is not normally accepted as parliamentary—when he said we were roughly in an import-export balance situation, the first shipment of Scottish oil was exported to Germany. I am sure the irony of this will not have escaped the Scottish electorate. The Chancellor said today, preening himself, that we have just begun to export North Sea oil.
  If I may turn briefly to the question of trade unions and bargaining, I speak as a member of a trade union. The right hon. and learned Member for Surrey, East (Sir G. Howe) said that trade union leaders were exclusively Socialist. I am not a trade union leader, nor exclusively Socialist, but it is important that this House should realise the historic links between the Labour Party and the trade unions. It should not necessarily blame the present Government for consulting the trade unions. Whether or not one agrees with what is going on, one should at least recognise the historic rationale behind what is happening at the present time.
  In the Scottish trade union context, I would ask the Scottish TUC whether it would prefer to deal with a Scottish Government or have its affairs dealt with by long-armed links with its masters in London.
  Mr. Dalyell: The hon. Gentleman did not attend the conference that we attended. He did not even bother to go, although it was in his own constituency.
  Mr. Crawford: I wish they had invited me.
  Mr. Dalyell: The hon. Member did not bother to go.
  Mr. Crawford: I should be delighted to attend the next meeting.
  Mr. Deputy Speaker (Mr. Bryant Godman Irvin)Order. Sedentary
  926
  observations are not contributing anything to this debate.
  Mr. Crawford: I would also ask the Scottish TUC if it would not rather be closer both to the Government and the governed in Scotland than it is now.
  Mr. Dalyell: It is all cliches.
  Mr. Crawford: Would it not be possible to reach a more equitable solution in the context of a smaller rather than a larger unit, and in the context of Scotland rather than the United Kingdom as a whole? The Scottish Assembly and Scottish Government, when they are established—and that establishment will be soon—will adopt a compromise, a variation of the Swedish experience. We realise that all is not perfect in Sweden, but its industrial relations policy is working reasonably well. The compromise is that the cake, having been agreed, as it has in Sweden, there should still be scope for free bargaining within an agreed framework. I agree that this argument is rather like that of the hon. Member for Motherwell and Wishaw, who says that exchange rates should be fixed but disposable. It is a difficult compromise to achieve. However, we would do something like that, and I feel we would be achieving something positive.
  That having been said, the Finance Bill is bad for Scotland. It will lead to more unemployment, raise taxation and cut off the springs of motivation. It will scourge one of Scotland's most important industries—whisky—and it will penalise those who live in rural areas of the country and need a car to travel to work. For these reasons, and for the reason that it does not accept that Scotland is a different and hopeful economy, my party will be voting against the Bill.
  7.38 p.m.
  Mr. William Hamilton: The House may find it difficult to believe that the hon. Member for Perth and East Perthshire (Mr. Crawford) is the economic and financial expert for the Scottish National Party. What must the rest he like if that is the specialist view of the Scottish economy? I gather that the hon. Gentleman is voting against the Bill because he objects to whisky and petrol going up in price. That is about the substance of it.
  Dr. Bray: My hon. Friend is being grossly unfair to the hon. Gentleman. He

  927
  is brilliantly intelligent, but all he has said is anwered by the hon. Member for Western Isles (Mr. Stewart).
  Mr. Hamilton: I do not accept that. The hon. Gentleman is not only the expert; he is also the official spokesman on economic policy for the SNP, and he speaks with great ability and is an ex-member of the Tory Party.
  Mr. William Ross: He used to advise them.
  Mr. Hamilton: That becomes more obvious every time he speaks. He plucked out of the air a figure about the relationship between family income in the United Kingdom and that in Scotland and said that it was 92 compared with 100. Where the hell these figures come from I do not know. The SNP simply seem to pluck figures out of the air. The hon. Gentleman is sitting there already asleep. He simply cannot tell me where these figures come from. He said that if the United Kingdom figure was 100, the Scottish figure for family income was 92. Either that is official statistical information or it is a lot of ruddy nonsense. It is one or the other. If the hon. Gentleman would care to get up and tell me where I can get this information officially, I should be very glad to know.
  Mr. Crawford: Is the hon. Member suggesting that everything which comes by way of Government statistics is not nonsense?
  Mr. Hamilton: The hon. Gentleman cannot get away with it in that way. He is on record as saying that Scottish family income was 92 per cent.—not 91 per cent. or 93 per cent.—of United Kingdom family income. Where did he get that figure?
  Mr. Crawford: I imagined that the hon. Gentleman would assume that the SNP, to which I am proud to belong, actually has research departments as well.
  Mr. Hamilton: So this figure came from the department run by the husband of the hon. Member for Dunbartonshire, East (Mrs. Bain). That is the figure that comes from the SNP research department, so now we know that it is officially the figure that the SNP will parade throughout Scotland. Now that the wages argu-
  928
  ment has disappeared, we come back to the mythical figure of family income.
  As for the Scottish TUC, I think the hon. Gentleman said that it would rather deal with a separate Scottish Government. The Scottish TUC gave the answer to that question in his own constituency last week. This very week the trade union movement is celebrating the fiftieth anniversary of the most devastating industrial upheaval this century. That was created by the confrontation of capital and labour. That problem will exist whatever happens to the machinery of government in Scotland, one way or the other. There will still be a confrontation of capital and labour, and the hon. Gentleman and his party will be on the side of capital. That is where he came from and that is where he will end up.
  Mr. Crawford Mr. Crawford rose—
  Mr. Hamilton: I shall not give way any more. The hon. Gentleman has had his say, and I leave the matter there because it is not worth pursuing much further.
  I want to return to the statement made by my right hon. Friend the Chancellor of the Exchequer and to one or two facets of the Bill. My right hon. Friend talked about reduction in the standard of living of about 1 per cent. in 1977. He did not put forward his projections much further than that, and he was probably right not to do so. However, I hope that we are now in for a period of much firmer and, frankly, more brutal, truthful and open government than we have had hitherto. For far too long we have suffered from government by stealth, ignorance, dishonesty and unreality.
  We have had some depressing speeches from both sides of the House in this debate in the sense that extreme views have been expressed by people who do not really believe what they have been saying. They have been exaggerating, for party political purposes. I have no wish to be accused of doing that. I heard the hon. Member for Basingstoke (Mr. Mitchell) talking about our not paying management enough. He went on to talk about the penalties suffered by the small employers, small industrialists and so on. Indeed, long before the Budget was presented the Chancellor was recognising this same problem in a speech in which he said that there must be tax concessions to middle management. I remember that speech very

  929
  well. I think that he quoted a specific figure in that speech.
  There is some substance in that point. It must, however, be good management, and all too often that is under-emphasised in debates of this kind. There is abundant evidence of very bad management. Our problems do not emanate entirely or even mainly from the trade unions. They emanate predominantly from inefficient management. We have seen examples of that in Rolls-Royce. The motor cycle industry, for instance, has fallen easy prey to the Japanese solely and wholly because of bad management, bad sales research and so on. The same applies to the car industry and even to the newspaper industry. We get constant sermons from newspaper proprietors about had industrial relations. No example has been worse than the example set by themselves in the newspaper industry, where there is a combination of weak, inefficient management and conservative, myopic trade union restrictive practices, which in newspapers and elsewhere are a recipe for certain national disaster.
  I do not believe that this Bill or any other proposals that the Government may put forward can possibly pretend to give our people any short-term easy or soft options. There are none available to us. The trade unions at present recognise that. I believe that the masses of our people recognise the need for sacrifices to be made. It is the Government's responsibility to ensure that those sacrifices are fairly borne.
  My criticism of the Bill and the Government's policies overall in the last two years is that that has not been as manifest as it ought to have been. There is little evidence of a massive and irreversible redistribution of wealth in the United Kingdom, as we promised at the last General Election. Unacceptably high rates of inflation have brought the full weight of taxation on to the incomes of families with average and even below average earnings. The figures have been quoted here, and they were quoted by Baroness Wootton in another place last week.
  I recently sent to the Inland Revenue details of the case of a working widow—widows have been mentioned on all sides of the House in this debate—who is receiving just over £1,000 a year and who
  930
  comes into the 35 per cent. tax bracket. I went into her house. She had had the most cursory demand note from the Inland Revenue, saying in effect "Pay up or else". She was in tears when I went to her house. She said "Will they come and lift my carpets, Willie?" That is the picture being created by the Inland Revenue among ordinary, decent working folk who are struggling for a livelihood.
  I have seen the Opposition Benches packed today to complain—about what? It is to complain about the Inland Revenue having the right to search—but not that widow's house, by God, no; the Opposition are not frightened of that. She never said to me "I am frightened of the tax man coming in to look at my documents." She would have been only too glad for them to look at her documents. What she was frightened of was that they would lift her carpets because she could not pay about 30 per cent.-odd tax on slightly more than £1,000 income.
  I compare that with a scandal commented on in the Sunday Times of 4th April this year. The Sunday Times is not widely read in Central Fife. Therefore, people there might have missed it. I quote this article merely as an example of the great divisions between that working widow I went to see and the affairs mentioned in this article in the City column under the heading
  "Storm clouds over directors' houses"
  The article says,
  "Rather late in the day shareholders in Greenfield Milletts, the leisurewear stores company, are being called to an extraordinary general meeting to give their retrospective blessing to a decision of their board involving the company and the private interests of John and David Greenfield, two of its main shareholders and joint managing directors."
  Briefly, the story is that
  "In January 1975 the board of the company agreed to buy from the Greenfield brothers their luxury Surrey homes for a total consideration of £230,000 as valued by independent surveyors and to rent these back to them for a mere £4,500 a year. The company is also paying £9,000 additional fees."
  It is a long article about these directors' houses which were sold for £230,000 and then relet to the directors. It continues:
  "The Greenfield interests and their family trust own 40 per cent. of the company's 9·36 million shares. But there is at least one other substantial family holder with 22 per cent. of the remaining shares."

  931
  That is the kind of racket that is going on and which the Government must deal with. I am not saying that by dealing with those matters there will be enormous sums of money to be obtained, but psychologically the reaction of our people would be out of all proportion to the sums involved.
  Trade union leaders have been subject to gibes by Opposition Members. People like Jack Jones, Len Murray and Lawrence Daly have said they will co-operate with the Government to moderate the demands of their workers on the economy, and, as one of my hon. Friends said, this is a true measure of their patriotism in the best sense of the word. I think the reality of power today is that the sovereignty of this House is properly being increasingly shared—not taken away but shared—with outside bodies like the TUC as the best representative body of labour that we have in this country. The CBI represents in some measure the employers' interests. The Retail Consortium represents the retail trade, and so on. That is the kind of sharing of sovereignty, of power and of decision-making that must be accepted by this House.
  I do not think we shall solve our problems by anything other than cooperation and consensus politics and policies, and not with any kind of coalition Government. We already have that in some important respects, in practice if not in theory, in the Labour Party. The Labour Party is a coalition of varying and very often extreme interests from one side of the political spectrum to the other. The role of any Government, and particularly a Labour Government, in those circumstances must be to create an atmosphere of national unity and purpose and to instil into all our people the feeling that if the workers produce enough efficiently and competitively they will get from the Government the maximum degree of social and economic justice. Those are very broad concepts which must be subject to political judgment and decisions on social priorities and the rest.
  I mentioned earlier that there are one or two declarations of intent which would have profound psychological effects even though the economic and financial return in cash terms would be minimal. I shall
  932
  run the risk of being accused of riding hobby-horses. Nevertheless I run that risk. My right hon. Friend the Chief Secretary to the Treasury served on the Civil List Committee with me. In that Committee we got figures about the tax-free income for certain people who are presumed to maintain moral standards and give a lead to the nation. If any Member of this House cares to go to the Library and ask for the last year's return of the Duchy of Cornwall, he will see there that the Duke of Cornwall last year got a tax-free income of £145,000, and that was a lean year. In the previous year it was over £200,000.
  My right hon. Friend was very forthright within the close confines of that Committee. I wish he would be just as forthright when at the Dispatch Box he deals with that kind of privilege, because we shall have a repetition of it tomorrow when we debate a Bill on tied cottages. There are certain tied cottages belonging to people who are exempt from the provisions of that Bill. It is absolutely appalling that a Labour Government should allow that kind of exemption and special treatment.
  The same applies to Bank of England employees. They have been manipulating the currency. I hope that this will not be swept under the carpet. I hope we shall have a full, frank and complete disclosure and that the most Draconian disciplinary measures will be taken.
  Mrs. Kellett-Bowman Mrs. Kellett-Bowman rose—
  Mr. Hamilton: I shall not give way. The hon. Lady has just come into the Chamber.
  Mrs. Kellett-Bowman Mrs. Kellett-Bowman rose—
  Mr. Hamilton: For goodness sake, sit down. I also want to make the same point in respect of BP—
  Mrs. Kellett-Bowman: Will the hon. Gentleman allow me?
  Mr. Hamilton: No. The hon. Lady must contain herself. She should get across to Strasbourg or somewhere. She cannot come here and after a minute expect to intervene.
  Mrs. Kellett-Bowman Mrs. Kellett-Bowman rose—
  Mr. Hamilton: The hon. Lady must contain herself. I am coming to the end of my remarks.
  Mrs. Kellett-Bowman: The hon. Gentleman is afraid to give way.
  Mr. Hamilton: My right hon. Friend the Chief Secretary will have to take into account the fact that we believe that there are important things to be done which would not cost all that much in money terms but would be a declaration of intent.
  I have already mentioned the Bank of England, the Duchy of Cornwall and tied cottages. Then there are the payments which BP has been making to Right-wing political parties in Europe. They are accountable to us in this House and to the Government. I hope that the Government will be forthcoming in proceeding urgently with the investigations into the practices of the Bank of England employees and the BP directors and give us the facts and figures, because until we deal with these matters our supporters will believe that we are maintaining a system economically and socially which is manifestly unfair and unjust.
  We are facing an extremely critical situation. Nevertheless we have been in more critical situations. I do not believe that we need get too desperately anxious about it. On the other hand, the Government must be much more forthright and honest in assessing the short-term, medium-term, and long-term prospects for our economy and at the same time give evidence that they are making much speedier progress towards a kind of fairer and more socially just society than they have done in the last few years.
  8.0 p.m.
  Mr. Esmond Bulmer: I join the hon. Member for Fife, Central (Mr. Hamilton) in recognising the need for co-operation, but I shall not follow him in pursuit of some of the hares that he started. In particular, I question what the hon. Gentleman said about the inevitability of the conflict between capital and labour. In my experience, it need not exist. The real division in our society today, I believe, is between those who create wealth, by technical ability, by managerial skill or by lending their savings, and those who administer the wealth that is created.
  934
  I do not regard the Bill as wholly bad. I have some strong personal reservations about Clause 2, which the Chief Secretary will understand—I shall come to that later—but at least the Government have recognised some of the damage that they have done in the past, notably with the capital transfer tax and its effect on industry, agriculture and the national heritage. My hon. Friend the Member for Bristol, West (Mr. Cooke) made a powerful plea for the national heritage, and I am sure that, in Committee, the Chief Secretary will wish to take up the points that he made, notably that about extending the conditional exemption on a house and garden to maintenance funds.
  I turn now to Part II. In his Budget Statement, the Chancellor said:
  "Although the severity of the 25 per cent. Increase was necessary in the especially difficult circumstances of last year, I have decided that in the longer term the 25 per cent. rate is too high. It could damage some parts of manufacturing industry and jeopardise employment."—[Official Report, 6th April 1976; Vol. 909, c. 255.]
  Where has the Chancellor been for the past 12 months? If he had come to my constituency, he could have met all too many people who had lost their jobs as a result of that increase in value added tax. He could have met people whose businesses were put at risk, people who had stared bankruptcy in the face, and many others who had been greatly discomforted. He owes more to those people than a facile statement of that kind.
  The House is entitled to ask the Chancellor what estimate he made before introducing that large increase to 25 per cent. Did he make any estimate at all? If he did, was he correct in his assumptions? If he was correct, one can only say that he deliberately put a lot of people out of work. If he was wrong, perhaps he will tell us why he was wrong. Perhaps he did not even try. If that was the case, he should tell us why not.
  Perhaps the right hon. Gentleman will tell us why he did not consult the Department of Employment and ask for its views. I am not sure that he would have got much help there, because, when I questioned the Secretary of State about the effect on particular companies in my constituency, I was told that the figures

  935
  were not available. I therefore asked the Secretary of State whether he would make arrangements to monitor the effect of the 25 per cent. VAT, and the reply came:
  "My Department maintains statistics of employment in all industries, though no formal investigation of the effects on employment of changes in the rate of VAT have been carried out. Her Majesty's Customs and Excise, however, is continuing to monitor carefully the effects of the 25 per cent. rate of VAT on the industries affected, including any employment effects."—[Official Report, 16th March 1976; Vol. 907, c. 480.]
  Thus encouraged, I put down a further Question to the Secretary of State to ask what evidence he had received from Customs and Excise of the effect on employment of VAT at 25 per cent., and the reply was:
  "None.…."—[Official Report, 30th March 1976; Vol. 908, c. 439.]
  That is a rather casual attitude. Is it not part of the business of the Department of Employment to study the statistics and make representations to the Chancellor? According to the Chancellor, Customs and Excise has apparently been monitoring the effect. Perhaps the facts were too embarrassing to be made public. Hon. Members on the Government side know very well the effect there has been on some industries in their constituencies, and it is probably very much the result of pressure exerted by them which has led the Chancellor now to realise that that damaging increase should be reduced. It is incumbent on the Chancellor to give recognition of the effect that his error has had on the lives of a great many people.
  I do not know whether the Chief Secretary believes that the Treasury has learned anything from that mistake. Many of us in industry feel that the Treasury is basically unsympathetic to industry—that it does not understand it. Whether that be right or wrong, what is clear is that the Treasury is not staffed by people who understand industry or who have had experience in industry. I believe that if individual members of the Treasury staff actually ran a small business for a year, or spent a year in a company—not one of the great companies, such as ICI, Shell or the multinationals, but one where the real pressures of life are felt—we might find a rather different attitude.
  Mrs. Kellett-Bowman: And we might lose a few civil servants.
  Mr. Bulmer: I put it to the Chief Secretary that in future his fiscal and employment policies ought to work more closely together. Anyone in industry could have told him that to put a 20 per cent. increase on the price of a product at a time when inflation was running at 30 per cent. would be likely to lead to a dramatic fall in demand.
  Just one category of product has been picked out for a repeat performance of an increase on that scale—I declare my interest here—and that is cider. No doubt, hon. Members on the Government Benches will dismiss what I have to say here as special pleading, but if I share with them my experiences over the past two or three years they may understand a little more clearly why so many of us in industry have the greatest difficulty investing in the way we should like.
  The first reason, of course, is the operation of the Price Commission and the Price Code. The Chancellor has said that he will look at this again, but one of the real problems is the allowable cost regime, which does not give allowance for marketing costs. If a small company competing with large brewers cannot advertise its product, it goes out of business. Yet that cost is not allowed.
  Again, the constraints on productivity are clearly counter-productive. The change in base date for allowable costs, which, I regret to say, was the work of my right hon. and hon. Friends, hit us very hard, because we did not increase our prices as we could have done. We tried to hold them down, but we then found that we were penalised because, as inflation went ahead, we could not put up our prices, with the result that there was a huge increase of debt and we had to cut our investment by 50 per cent. I am sure that this is an experience that many other companies have had.
  Happily, in order to get out of that situation, everyone worked the hell of a lot harder, and productivity went up by 20 per cent. But could we recognise that? No, we could not.
  I am sure that the hon. Member for Liverpool, Walton (Mr. Heller) is right when he says that there is a great fund

  937
  of patriotism and a great desire to work hard and do as well as possible for the company and the country. I believe that to be true, but enormous resentment is caused when individual workers see the money that their productivity has justified in being paid to them being paid instead to other companies, where there is indiscipline and bad management. Certainly, when a man who has worked hard and well sees what goes on in Chrysler and British Leyland, he does not think that his money has been well spent.
  Equally, there is the effect of the incomes policy on managers. My company has lost one of its most able to Canada because we cannot pay management properly. The hon. Member for Fife, Central talked about bad management. One is likely to have bad management if one cannot pay for the best management and cannot keep one's own good managers. Hon. Members who refer to the survey produced by the British Institute of Management will understand that a man on £5,000 a year has seen his standard of living fall by 17 per cent. in the past three years, and the man on £20,000 has seen his fall by 33 per cent.
  The hon. Member for Walton talked about patriotism on the shop floor. Surely, it is a demonstration of the patriotism of management that many more people are not going abroad although they know only too well that they could earn far more by so doing.
  I come now to Clause 2, which provides for the duty increase. All of us in industry are accustomed to having further increases on our products. What matters here is the scale of the increase. The Secretary of State for Prices and Consumer Protection requested our company to put its products in her shopping basket. We agreed to hold prices down, but for our restraint we have been faced with making increases on a scale that we would never have dreamt of.
  Honourable Members on the Labour Benches will know the feelings of miners in South Wales. If the right hon. Lady had told them five or six years ago that 1p was to be put on a pint she would have had a poor reception. But the present increase is 7½d, or 3p. That is a large increase, and the companies con-
  938
  cerned have had no chance to make representations.
  It would be helpful for industry if there were more consultation—if the Treasury would really argue through the merits of, for instance, high alcohol versus low alcohol, indigenous products versus non-indigenous products, and those which require long investment, such as orchards.
  Efforts to hold down prices have resulted in the Treasury saying "Here is a product whose price has been held down—let us pump a large increase on it" Productivity increases by the work force are ignored.
  Further, to finance the loan which is implicit, dividend restraint has meant that the capitalisation of the company is probably 50 per cent. of what it would otherwise have been, and the effects on a rights issue could be serious.
  I have tried to illustrate, from my own experience, how the planning and operation of business has been handicapped at every turn by Government intervention—how price control, control of remuneration and stultification of the capital market have caused key decisions to be pre-empted. It is impossible to run a company as efficiently as one would like. Most people are trying to operate in a world of politically-induced uncertainty. It would be helpful if the Chief Secretary could explain how this uncertainty might be reduced. If industry knew that it would not suffer arbitrary price increases of more than X per cent., or that some of its freedoms were to be restored, uncertainty would be diminished. The web that the Government are weaving is not likely to release energy or promote investment. In industry we resent the fact that many of those who tell us what to do are not accountable, and have total job security and inflation-proof pensions, whereas all of us are in the firing line.
  Both sides of industry have a common interest. A common interest exists between all those at work. There is a need for profit and a need to recognise the responsibility carried by management and by trade union officials.
  A paradox that sometimes arises is that if one talks to a shop steward and agrees that he carries much weight and responsibility, and that the district official carries

  939
  more, and one asks him if, when negotiating with managers, he would like the person acting on his behalf to be as good as, if not better than, the person with whom he is negotiating, he says "Yes". But if you suggest to the shop steward that the price that has to be paid is an increase in subscriptions he answers "No". That might be at the root of some TUC representations on managerial salaries.
  I support the criticism made by my right hon. Friend the Leader of the Opposition in the amendment.
  8.15 p.m.
  Mr. Denis Skinner: It would have been better, Mr. Deputy Speaker, if my hon. Friend the Chairman of the Manifesto Group had caught your eye first. I am not, therefore, able to follow a speech by my hon. Friend the Member for Gateshead, West (Mr. Horam). We did a double act, however, at the beginning of the year in his constituency when we agreed on a number of fundamentals within the confines of a constituency dinner.
  I wish to comment on some of the things said in the debate notwithstanding the fact that my hon. Friend the Member for Gateshead, West will want to comment further on those points. I listened with care and interest to the Liberal Party representative, the hon. Member for Cornwall, North (Mr. Pardoe)—at least, I think he represents the Liberal Party. He does not represent the Liberal Benches now. The minority parties are not represented in the House just now. That is worth noting on this important day when later we are to discuss the vexed question of the Committee of Selection. Apart from the right hon. Member for Down, South (Mr. Powell), who is not now in the House, the minority parties are poorly represented.
  Mrs. Kellett-Bowman: Get on with it.
  Mr. Skinner: I have been disturbed by the hon. Lady, who represents a constituency somewhere in Lancashire, who represents the House in Strasbourg on some occasions and who comes here late at night because the Whips have sent for her.
  Mrs. Kellett-Bowman: I have been here all day.
  Mr. Skinner: The hon. Lady keeps on interrupting me.
  Mr. Deputy Speaker: It might be better if the hon. Gentleman returned to the Finance Bill.
  Mr. Skinner: When one begins a speech, on whatever subject, it is important to take account of the total environment. Today, in no more than a few paragraphs, it is important to take account of the surroundings, to get the feel and right atmosphere of the Chamber.
  Mr. Tony Newton: Will the hon. Gentleman at least recognise that he has now been so successful that there is one Irishman present and one Scotsman on the fringe?
  Mrs. Kellett-Bowman: The House will soon hear a Lancastrian.
  Mr. Skinner: Having spent many long hours under your guidance, Mr. Deputy Speaker, I know that you will deal properly with the interruptions. They are not contributing to the debate, and I know that you will deal firmly with them for the future.
  I said that I had been listening to the Liberal Party spokesman. It was an extraordinary speech, because the hon. Member for Cornwall, North launched an attack on my hon. Friend the Member for Liverpool, Walton (Mr. Heifer), and since my hon. Friend is not here it is necessary for me to defend him from that wild and outrageous onslaught. I shall remind the House of some of the things that the hon. Member for Cornwall, North said. He began by saying that to balance the Budget there should be less taxation. When we are currently in deficit to the tune of about £10,000 million, rising to £12,000 million in the next financial year, I find it hard to believe that anyone representing any party in the House could talk in those terms. Not only did the hon. Member want to reduce the level of taxation, but he wanted to reduce the starting level of taxation—and some of my hon. Friends would argue along that line. Liberalism appears to mean everything to all people and that one should back every runner in the race.
  The hon. Gentleman talked about the indexation of taxation, which, I understand, means a return to the status quo. Representing the Liberal Party, the hon. Gentleman launched forth on some new radical approach to taxation. He wanted

  941
  to tackle poverty. He had already argued for a reduction in the taxation level by a massive amount, but, despite that, he said that he wanted to reduce poverty and to assist widows, pensioners and the others.
  My main reason for speaking, however, is to place on record a point of view different from that of the Government and, to a certain extent, that of the trade union leadership. I choose my words carefully. I am referring specifically to the trade union leadership, notwithstanding an opinion poll which suggests that 70 per cent. of the people are in favour of the current kind of incomes policy. I speak for no one else, either in the Tribune Group or elsewhere, when I say that I believe that the next stage of this incomes policy is fraught with exceeding danger.
  I say that on the premise that when we discussed the £6 pay limit last year we did so in an environment not dissimilar from the situation of a few days ago. I remember reading, in the Daily Telegraph and other newspapers which I have to read to keep up with the economic jargon, reports saying that the pound was under severe pressure and that a pay policy was necessary—and here we should bear in mind that we had fought two General Elections on the basis of having no interference with free collective bargaining. Accordingly, the Government and the trade union leadership came forth with the policy of a limit of a £6-a-week increase for all those earning below £8,500, not taking into account the many loopholes which those above £8,500, and some below, are able to exploit in order to improve their take-home pay.
  The £6 pay policy was sold on the basis of certain fundamentals. The first of these was that it would keep down the level of unemployment. We all know the answer to that. When people say to me that the £6 limit has succeeded, I say that it has been accepted but that the other side of the bargain has not been kept, because unemployment has almost doubled in the period since the policy was introduced. Despite all the claims of the trade union leaders, despite all their attempts and exhortations, they have failed dismally in their effort to get the other side of this so-called bargain kept.
  942
  Secondly, the same is true of price control. There has been a modicum of success—no more than that. But in the negotiations on the £6 limit—no different from the present situation—it was agreed that prices should be held down. "Price Check" is not doing much good. On the prices side of the bargain, we have got hardly anywhere. That is perhaps exemplified best by the fact that my right hon. Friend the Secretary of State for Prices and Consumer Protection is not able to do anything at all about the price of potatoes. "Price Check" presumably includes about 50 items, yet when it comes to something like potatoes, where the wages content of the commodity is surely very small, my right hon. Friend is unable to do anything. Despite all the pleas of the trade union leaders, they have not succeeded in achieving much on the prices side of the bargain.
  The third negotiating counter was to do with the retention of the social wage. That, too, has failed. We all recall the many times we were told that the social wage was equal to about £20 a week. What happened? Within the same year of the £6 pay policy, and at the same time as the Chancellor of the Exchequer and others were acclaiming it to the skies, a White Paper showed that the social wage was to be cut drastically. In other words, housing, hospitals and education, the latter to the extent of £620 million over the next three years, were to be cut. For whom? It was not for the people represented by the Opposition.
  The cut in the social wage represented in the White Paper equals misery and a cut in the standard of living for working-class people. It means that the working class are to be deprived of many of the social provisions which are part of the social wage that they need if we are to redistribute income in favour of those working-class families for whom we all campaigned on this side of the House in the February and October elections of 1974.
  I want to know from my right hon. Friend the Chief Secretary whether he is happy to see this reduction in the social wage over the next four years, because we are talking in the Budget of a pay policy for the working class, based on the current negotiations, which is to

  943
  extend until March 1978, which is a long time and is the period during which these cuts in the social wage are to be perpetrated if the whilte Paper continues in its present form.
  Therefore, on these three fundamentals it can be said, tragically, that the Government have not been able to deliver the package. What is worse, the trade union leadership has not responded in the way it should have done in order to ensure that if there were another package it would not be caught again. It looks as if it will be caught. In Tribune this week, Mr. Jack Jones has a splendid article setting out nine points which he feels ought to be implemented by the Government, including import controls and the direction of investment by control of the financial institutions. These are all very worthy objectives. He should take that article to the Treasury and Downing Street.
  There, Jack Jones should say "These are our points. We are negotiating about a policy which is some sort of contract, and, unlike with the last policy and its predecessors, I want to see these points implemented, because we have not got the other side of the bargain that we negotiated last time. One of my friends said so at the Labour Party Conference Tribune Group meeting and I did not like it, and I do not want it to happen again."
  Some of us on this side of the House are going to remind Jack Jones and his colleagues—this is not a personal issue—of their failure to extract from the Government not a price but part of a deal, part of an arrangement, which they had entered into.
  We contantly hear from the Opposition and from the media generally about the price that the Government must pay because of trade union demands. I have never heard such nonsense in my life. I do not know what these trade union demands are, I do not know what prices have to be paid. In any event, they are not being extracted from the Chancellor. On that point, too, I have to say to my right hon. Friend the Chief Secretary, that dapper little fellow on the Front Bench, that the contract was not fulfilled.
  944
  It does not make me feel pleased or elated to have to say these things, but although the £6 pay policy received consent the other side of the bargain has not been upheld. The worst feature of all—this is probably the one that takes into account the first of the three items to which I have referred—is that I remember hearing about the spin-offs that would result from the £6 pay policy.
  We constantly hear about the result of sacrifices, of belt-tightening and of pulling up our socks. Of course, that applies to the workers. It is always the same class of people—namely, those who can be banded together, those who are in a trade union. It is easy to pick off a quarter of a million miners because they all have a union card. In the same way, it is easy to pick off the railwaymen and those in public employment. It is easy to build a nice little fence around them, to collectivise them and to direct a nice little incomes policy at them.
  But there are many thousands in our society who cannot be found when we start to think in terms of an incomes policy, regardless of all the exhortations. Apart from the matters that I have mentioned, we were told that if we had an incomes policy, however distasteful, and if we interfered with free collective bargaining, the money that would not be expended in wages by those in the public and private sectors would be available for investment, the additional money enabling the country to grow again. We all remember that argument. We were told that if we reduced the wages bill there would be more money available to invest in various forms in the public or private sectors.
  In fact, that has not happened. Many of the theories that we have heard over the past few years have not come to fruition. Many claims have been made but the required investment has not taken place, despite the tax allowances that were introduced by the Tory Government. As a result of the latest edition of a pay policy, none of the additional money has gone into the area that is so important if we are to achieve growth.
  On that basis, the contract with the trade unions has not been a raving success. It is true that it has assisted in helping us to reduce the rate of inflation. That is because to some extent the wages bill has been reduced. I do not deny

  945
  that for a moment. But that is not the only reason.
  My right hon. Friend the Chief Secretary is an expert on these matters and he knows that during the past financial year there have been two main reasons for our seeing a reduction in inflationary trends. First, the price of most commodities that we have to buy on the world market in order to live and manufacture has fallen fairly significantly during the past 18 months. There has been a fall after the mammoth rises that took place when oil and many other commodities were rising in price. For the past 18 months those commodities have in many cases reduced in price or otherwise remained stable. That has meant that they have become relatively lower in price, bearing in mind our rate of inflation. That has been one of the reasons for our being able to reduce the rate of inflation.
  The second reason for our seeing a reduction in inflationary trends is the absence of our old friends the thresholds. We are now calculating our year-on-year wage index on the basis of its not containing any threshold payments for the previous year. For a long time we made calculations based on an increase in threshold. That added to inflationary trends and was a factor which had to be considered in addition to increased wages.
  My right hon. Friend is an honest man and he understands what I am saying. For the two reasons that I have cited, we were bound to have a reduction in inflation. Naturally, I do not want to sound disparaging about that. I am pleased that the reduction has taken place. However, the necessary investment has not taken place. The trade union leadership has recommended that its members should make great sacrifices, the result of which has been a wage redistribution away from the poorer classes to those who are relatively better off.
  I do not want to over-dramatise the situation. I do not want to give the impression that the shift has been a tremendous one right across the board through all the strata of our society. But it is true to say that the pendulum has gone the other way. What we are doing by means of the Budget is causing the pendulum to swing a little further.
  946
  If we have to reduce the total standard of living, I believe that there are those who must bear the brunt. I agree totally with my hon. Friend the Member for Walton in his remarks about the introduction of a wealth tax. However, because there are many clever accountants and advisers to assist people on large salaries, we shall not get much from that tax. Those clever gentlemen will find a little loophole here and a little piece of evasion there, and the net result will be that we shall not be given much in return. However, we must make that attempt. We must show people outside that we intend to introduce that tax. Indeed, it could have been done within the provisions of the Finance Bill. We should give some indication to those people that there will he, if not a redistribution in their favour, certainly a movement in favour of fairness.
  That is my view of the current situation. I believe that there is something a little nauseating, perhaps even sinister, in the package thrown at the trade union movement. I do not think that it should have been presented in this way. It must be remembered that the trade union and labour movements comprise two wings. On occasions the two wings do not overlap, and I believe that that is how it should be. Before I came to this place, I used to argue at trade union branch meetings that the system divided itself into industrial matters and political matters.
  I believe that before the Government launched out with the scheme described in the Budget, the trade union movement should have been made aware of what was in the Chancellor's mind so that the matter could have been thrashed out before it was placed before the trade unions. If the trade union leadership had rejected the matter out of hand—as its members almost did because they did not know what was coming—probably the Government would have deserved such action.
  I hope that the Government will not want to repeat this exercise. What will be the impression among those who read the newspaper headlines? They will get the impression that because the country is adopting a system of lower wages, which in turn will result in lower tax levels, this will happen again and again. My right hon. Friend the Chancellor will

  947
  not redeem his £12,000 million deficit if he argues on the basis of cutting tax levels. If we are to do our duty by the working-class people who send us here, we must increase the social wage. We need better houses, hospitals and schools for working-class people and we need to improve their pensions. That means that we cannot necessarily talk in terms of reducing taxation. The philosophy behind my right hon. Friend's proposal to give a little bit back, because of the consequences of fiscal drag and all the rest of it, is alien to our party. We should not repeat that exercise.
  We have always argued that our job is to increase the proportion of the gross national product devoted to public expenditure. In answer to a question from me some time ago, my right hon. Friend disagreed with the Home Secretary's view that going beyond 60 per cent. would create a danger to the pluralist society. It has always been our philosophy to increase public sector expenditure and the social wage. Only by doing that can we get anywhere near the promise contained in our election manifesto to redistribute wealth in favour of working-class people and their families. I feel that I have to remind my right hon. Friend of the joint commitments we made in October 1974. We shall have a few opportunities to remedy the problems to which I have referred before we again meet the electorate. We have a duty to redeem our election promise as quickly as possible.
  8.41 p.m.
  Mr. Nigel Forman: I feel sure that the House will not expect me—one of the newest and most innocent Members—to follow, let alone to emulate, the inimitable style and delivery of the hon. Member for Bolsover (Mr. Skinner). The amendment comes to the nub of this matter by pointing out that the Finance Bill attempts to meet the cost of spendthrift policies by increasing the real tax burden and by profoundly discouraging both skill and enterprise.
  The Government have certainly spent more, borrowed more, and taxed more than any previous Government since the war, yet the Chancellor is claiming that Britain will be home and dry within the next 18 months. Before the unlikely event of our reaching such an enviable position
  948
  it is perhaps worth repeating yet again a few of the salient statistics that quantify the magnitude of the Government's spend thrift tendencies.
  As we know only too well, public spending now accounts for about 60 per cent. of the gross national product. At £64,000 million in the coming year it means that total public spending will be almost double what it was in 1973–74, under the previous Conservative Government. The public sector borrowing requirement seems likely to be about £12,000 million this year, again, which means, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) put it, that the Government intend to borrow about £1 for every £5 it spends, or about £550 a year for every family in the country. On the matter of public borrowing the question for the Government must surely be whether they will be able to continue financing such vast sums without accelerating further the growth of the money supply.
  I understand from what I have read in the Press that the Chancellor is allowing for about 15 per cent. growth in M3 over the coming year, but he will undoubtedly have to face some difficult choices when our economic recovery gathers pace and the present high rate of savings starts to fall. The Government have already had to raise interest rates—we have seen that with the jacking-up of the minimum lending rate—because of the pressures on sterling, and may have to do so again by a percentage point or so as the situation worsens and as international confidence seeps away. However, I feel that the use of the interest rate weapon will not prove sufficient to maintain international confidence in our currency and there will therefore have to be other further painful cuts in public expenditure. That must be one of the measures that the Chancellor had in mind when he emphasised to the House that if the money supply could not be held at a rate consistent with his overall strategy he would take—
  "any action, monetary or other, which may be necessary to correct it."—[Official Report, 12th April 1976; Vol. 909, c. 1037.]
  The real indictment of this Government's economic management is not so much that they are now pursuing the wrong policies as that they are guilty of doing too little too late, having spent

  949
  the best part of their first 18 months in office doing too much with the wrong policies too soon. The House will recall that the Chancellor's self-defence when replying to the Budget debate on 12th April, was that:
  "To have attempted to adjust immediately to that double blow"—
  here he was referring to the so-called "legacy" from the last Conservative Government and to the effects of the fivefold rise in the price of oil and other commodities—
  "at a time when the world was already moving into recession would have meant unemployment in Britain far above the levels that we have had to endure in recent months. But now that the world recovery is under way, we must make that adjustment, painful though it may be."
  The result of that deliberate delay on the part of the Government has been that the British economy is now entering the world upturn in a less favourable condition than it should be at this stage of the world's economic cycle. We are entering this stage of the upturn with a rate of inflation of between 12 per cent. and 13 per cent. which is still about double that of some of our major international competitors. We have a level of unemployment that is most unlikely to come down to the TUC target of between 600,000 and 700,000 by 1979. We also have a level of industrial production—let us not forget this—still below its level in March 1974.
  The even more important political point is that the Government's previous reluctance to grasp the nettle of economic adjustment early enough has led directly to the present excessive levels of public spending and the present penal rates of taxation, which are referred to in the Opposition amendment. Each of these is the consequence of the Government's delay in tackling the problem of inflation. The result of this pincer movement on personal consumption has been a fall in real take-home pay, which fell by about 5 per cent. in the second quarter of 1975 and which is scheduled to continue to fall by one or two percentage points in 1976 and 1977. In his speech on 12th April the Chancellor described this fall as:
  "part of the price the nation has to pay for getting unemployment down."—[Official Report, 12th April 1976; Vol. 909, c. 1039–40.]
  That is true in the limited sense that the £6 policy and, now, this hybrid tax and
  950
  incomes policy on which the Government are relying has helped and can help to limit the unemployment consequences of previously generated inflation as well as reduce public expenditure.
  In broader terms it would be more accurate to say that the fall in real take-home pay is the price that the people of the country are having to pay for a Government who have spent more, borrowed more and taxed more than any other Government since the war. The tragedy lies in the way the Government have squandered their opportunities for public education in the realities of life, presented to them over the past two years. After the shattering events of 1973–74, at home and abroad, people knew full well that they would have to adjust. But they got no timely, responsible leadership from the Labour Government. Instead they were offered a series of electoral blandishments between February and October 1974. Then there was the inflationary device known as the social contract, between October 1974 and July 1975, and, more recently, this still inflationary £6 policy for the period to August.
  My contention is that the British people know in their hearts what needs to be done. They knew all along. They knew this long before the Government were able to summon up the courage to spell out the objectives that we needed to follow, let alone to implement, the necessary policies.
  Naturally, I welcome the Government's belated conversion to economic common sense, but I deeply regret that sensible measures have been introduced so late in the day that, even now, they are disproportionately reliant upon a form of incomes policy which cannot be watertight—least of all with this new complicated formula—and that the range of measures still does not include sufficient evidence of the Government's readiness to abandon their doctrinaire and damaging policies in other areas, such as nationalisation and price control, both of which will continue to be part of the heavy price exacted by the TUC for the next stage of the incomes policy. Unless the Government resolve to take all the action necessary in the interests of economic common sense, they will still fail to inspire sufficient confidence in British management and industrialists at home and in holders of sterling abroad.

  951
  The truth is that since the nation is still being allowed to live beyond its means, and since the Government still have not tackled the cancer of the underlying and growing public deficit, to which my right hon. Friend the Leader of the Opposition referred in her immediate response to the Budget Statement, there can be no effective substitute for the Government setting the main example. I submit that the way to do that is by rigorously controlling the growth of money supply, by curbing still further the increase in public spending, and by putting real conviction into their new industrial policy, which came such a cropper over Chrysler, to restore the health of the productive wealth-creating sector of the economy.
  Since the Government show no signs of doing enough on any of those three counts, I shall, of course, be voting with my right hon. and hon. Friends in the Lobby tonight.
  8.53 p.m.
  Mr. John Horam: Before commenting on the speeches by my hon. Friends the Members for Bolsover (Mr. Skinner) and Liverpool, Walton (Mr. Heifer), who, unfortunately, has left the Chamber, I should like to make one remark about the eloquent speech by my hon. Friend the Member for Gravesend (Mr. Ovenden), which was a plea about the plight of widows. I should like to add to that by referring to the position of war widows. I am sure that my right hon. Friend the Chief Secretary will be aware of their situation, as I have always assumed that he knows everything about taxation.
  Many war widows are to have their pensions taxed for the first time from April. There was some expectation that they would be taken out of taxation in the measures that my right hon. Friend the Chancellor of the Exchequer proposed in the Budget. They were not taken out, and there was considerable disappointment on that account. My right hon. Friend the Chief Secretary may not have time to deal with this specific point tonight, given the lateness of the hour but it is a matter about which, rightly or wrongly, expectations were raised. A number of people wrote to me about this
  952
  matter—other hon. Members may have received similar letters—but nothing was done about it in the Budget.
  On the main question of the Government's broad economic strategy and all that goes with it, I have heard the argument put forward by the Tribune Group on many occasions. I understand the force of the argument and why my hon. Friends are concerned, but I thought that tonight they went over the top. Almost everything they said was the reverse of any objective view of the situation.
  For example, my hon. Friend the Member for Walton maintained that the Government had not asked for the same kind of sacrifices from the rich as they had asked of working people. That is total nonsense. We have had the capital transfer tax, which was the first serious attempt to have proper taxation of the transfer of wealth on death and the most important source of inequalities in wealth and income. It was an even more radical proposal than anything put forward by the Attlee Government. Sometimes my hon. Friends refer disparagingly to the Wilson and Callaghan Governments, as compared with the Attlee Government.
  We have had higher taxation of investment incomes and a total stop, under the pay policy, on increases to those earning above £8,000. The real value of share capital has dropped to 40 per cent. of what it was in 1972. That is in consequence of the decline in the capital market. All this has had a massive effect on the wealth holding sectors in the community. One only has to look at the Diamond Commission to see the change in distribution in income and wealth in the last 50 years, even before my right hon. Friends got to work on it.
  In the last two years, since this Government came to power, there has been to quote the manifesto—something of which I have knowledge and for which I have a regard—a fundamental and irreversible shift in the balance of wealth. It is irreversible in that I hope the Government will keep winning elections. It is fundamental in that there has been measurable progress towards this goal, and one cannot maintain, as my hon. Friend the Member for Walton did, that no sacrifice has been asked from the richer people. Of course it has.
  Mr. Skinner: Asked, yes, but not delivered.
  Mr. Horam: Not only asked, but signed, sealed and delivered. The cries from Opposition Members indicate that it has not been pleasant from their point of view.
  It is a nonsensical claim that the Government have not been even-handed. The policies have been more than evenhanded. The real standard of living of the pensioner has risen by 13 per cent. compared with the top wealth creators. This shows the fairness of the Government.
  My hon. Friend the Member for Bolsover listed four points in the social contract between the Government and the trade unions. I am a sponsored trade union Member, as he is. The first point was unemployment, and it is quite clear to anyone with any understanding of the basic situation that the unemployment this year is the consequence of not having a proper pay policy last year. What we should now be looking at is what will happen to unemployment next year, as the result of the £6 limit last year. What would happen next year, as the result of a £2 or £3 limit this year? There is a lag in these things. We all knew —Jack Jones certainly knew—that unemployment would be high last winter. So the first point that my hon. Friend for Bolsover made on unemployment is nonsense.
  My hon. Friend also said, secondly, that prices have not been reined in, because the policy of the Secretary of State for Prices and Consumer Protection, who is now also the Paymaster-General, has not worked as well as was hoped. Well, perhaps it has not worked as well as we hoped, but the fact is that inflation is coming down as a consequence of the £6 policy and of the social contract, which my hon. Friend derides.
  My hon. Friend also talked of the social wage. Much has been talked about this by members of the Government. Now it can be argued that the money wage of people has declined in the past six months. Prices have gone ahead of wages under the £6 policy. That cannot be denied, and we knew that sacrifices had to be made. But it cannot be argued that the social wage—that part made up of public expenditure—has declined,
  954
  because public expenditure has not yet been cut. It is to be cut in the next financial year and the following financial year, or, rather, the increase in its growth is to be restrained. But so far we have not had the massive cuts of which my hon. Friends in the Tribune Group are always complaining.
  I am aware of the situation in my constituency, as my constituents are, on the whole, among the lower paid. What they would benefit from now would be a cut in taxation as much as an increase in public expenditure. We have reached that point in the balance between the two where it would be counter-productive in welfare terms to take on the public expenditure being asked of the Government by some sections of the Labour movement.
  Public expenditure is a means to an end, and the end is the betterment of the standard of living of our worst-off constituents. I would not like to say which would benefit them the more—a reduction in taxation or an increase in public expenditure. My hon. Friend will find from the facts that we are taking £750 million a year in taxation from people on supplementary benefit level. That is the rate at which taxation has bitten into the lower income groups as well as everybody else. Regard must be paid to this. My hon. Friends who ignore this are living very dangerously.
  Mr. Skinner: On the basis of that argument, and as my hon. Friend and I both agree that people on these poverty levels should be relieved from paying tax, would it not have been better if my right hon. Friend the Chancellor had said, in accordance with his policy and mine, "I shall move these people out of tax at a stroke and not go into the tax bargain"? He could have offered more on the other side.
  Mr. Horam: My right hon. Friend the Chancellor could have done that, but how could he have done it and also met the demands of my hon. Friends the Members for Walton and Bolsover for money for the National Enterprise Board and the construction industry? My hon. Friend complained that the sums to which the hon. Member for Cornwall, North (Mr. Pardoe) treated the House did not add up. His own sums do not add up; that is the gap at the heart of his policy.

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  The arithmetic of the Tribune Group does not work, because its members do not live in the real world. They do not have to make the sums add up, as do my right hon. and hon. Friends on the Government Front Bench. I do not totally agree with everything that my right hon. and hon. Friends in the Government do, but I do not have to follow the nonsense uttered by my hon. Friends the Members for Bolsover and others, sincere though they are. They must face the facts of life sooner or later.
  In my view, the Government are basically on the right course. They will fail only if they are insufficiently radical and insufficiently bold. They will be insufficiently radical and insufficiently bold if they pay too much attention to the irrelevant conservatism of the extreme Left and, instead, ignore the basic common sense of the working class, who are right behind them.
  9.2 p.m.
  Mr. David Howell: I am glad that in this debate we were able to get the Chairman of the Manifesto Group in at the end. It provided a useful antacid to the rather indigestible operatic performance from Members below the Gangway.
  We were treated to the marvellous spectacle of a lacuna arguing with a gap. I know which of the two I prefer. It also illustrated—this was interesting for those of us who came in towards the end —the terrific and massive unity that exists in the Labour Party—a unity to which the Chancellor referred—which goes right the way to the top, and which was demonstrated with vigour tonight. We shall all take note of it, and of the Chancellor's heavy reliance on that unity in expressing his views.
  That aside, the debate has returned again and again to the two priorities concerned with taxation and tax reform in Britain—priorities that the Finance Bill does not succeed in meeting. I refer, first, to the need to sort out the preposterous tangle of income tax and social security benefits and, secondly, to the need to reduce the political or anti-enterprise taxes which have very little revenue implication and which, in Britain, have reached, as I think most people recognise, unique levels of complexity,
  956
  inequity, and uncertainty amongst all Western countries.
  We have reached the stage, if we are concerned about our reputation abroad, when these levels of taxation bring ridicule to Britain. By mobilising an army of 80,000 members of the Inland Revenue to try to bring sense to the system they cast ridicule on this country, as well as on the organising competence of the Government.
  The Chancellor has not tackled the first of these priorities, because he cannot. The money needed to raise tax thresholds, to unscramble the overlap between income tax and social security is already owed elsewhere on a very large scale. The Government, the Chancellor and the Bill have not attempted to tackle the second priority, because they will not. As the Chancellor said in the now notorious Wall Street Journal article of 2nd March, he does not believe that high taxation has much to do with economic growth.
  I thought that was an unwise view to express. Though I do not connect cause and effect, I cannot help but notice that the slide in sterling began the next day—long before we got on to the present hair-raising big dipper on which sterling is connected to the latest statements and news bulletins from the front on the pay deal. Dealing first with what he cannot do, we wish we were convinced that the Chancellor fully understands the limitations placed on the financing of the public sector borrowing requirement in the coming year.
  The Chancellor has let it go a little to his head that he succeeded in getting through last year without a vast expansion in the money supply. He is very proud of that fact, and often repeats it. But circumstances are different this year. Last year, the public sector borrowing requirement financed 25 per cent. inflation. A lot of money is needed to do that. As inflation falls, the public sector borrowing requirement should fall. If the borrowing requirement is maintained or increased, it will pump massive sums of money into the economy, and this will be the result if we have an outturn of about £12,000 million this year.
  The borrowing requirement should fall during a business recovery, and Government revenue should rise. That is what

  957
  is happening in the United States, West Germany and every other country, but it will not happen here. We are committed to a continuing high borrowing requirement, perhaps even higher, in money terms, than last year. One would expect that with a recovery, revenues would rise, and payments such as unemployment benefit would fall, and that therefore the public sector borrowing requirement would shrink.
  The central message of the current budgetary situation and of the Bill is that the conditions in 1976 for financing a deficit will be totally different. Anyone who assumes that we can go into 1976–77 and finance the same-sized deficit as we did last year without heaving up interest rates to levels that will turn people out of jobs even more than at present, and which will wreck even more investment prospects, is living in a dangerous fool's paradise.
  One of my hon. Friends has reminded us that even if the deal goes through in the next few days as proposed by the Chancellor of the Exchequer, the finance that the right hon. Gentleman will have to find will put between £700 million and £900 million on the borrowing requirement. This is finance that the Chancellor does not have; he already owes it elsewhere.
  Establishing a firm idea of pay limits is useful in enabling trade union leaders to understand that if they go beyond it, they will throw their members out of work. And it is useful in the public sector and nationalised industries in preventing unions forcing through excessive wage increases and having them paid from cash the State does not have, so sending the Government into a further cartwheel of inflationary financing.
  That is fine. My right hon. and learned Friend made clear that that kind of endeavour and outcome is one that we support, but the question is, how much has to be paid for it? As hon. Members have asked, what is the price going to be? If the price is in itself more inflationary than any curbing of inflation that may or may not arise from a deal and an agreement to wage restraint and a commitment to a particular flat-rate plus percentage, we are not very much further forward. That is not a new deal; that is the old roundabout on which we have been before, and which nearly whirled us to perdition.
  958
  The question is whether, given the commitment to a gigantic borrowing requirement, the financing of which will be very difficult, we can afford to enlarge that deficit any more for any reasons. Even if we could, it would be very small beer. The lifting of the threshold as the Chancellor proposes would be very small beer indeed compared with the billions that would have to be taken off the deficit and that are needed to establish a sounder financial position.
  But those billions are needed also to lift the threshold back at least to 1974 levels and achieve some disentangling of the high levels of income tax from social security benefits. No one need imagine that the small additional lifting of the threshold offered by the Chancellor in the deal even begins to take us a tiny way along the road to disentangling income tax from social security benefits. It goes no way to creating a situation in which people will again find it worth while to work for an average wage if they have two children—something which at present they do not find it worth while to do.
  The hon. Member for Cornwall, North (Mr. Pardoe) gave some interesting figures, and I propose to add to them to show by how much taxation has been increased, not lowered, in this Budget. If the age allowance ceiling of £3,250 is to compensate for inflation in the last year, it should be £3,600. The single person allowance has been raised to £735, but it should be £817 to compensate. The married allowance is £1,085, but it should be £1,155. The investment income surcharge, which is depicted by hon. Gentlemen below the Gangway as a reinforcement for well-heeled capitalism but is, in fact, often the basic remuneration for elderly people in quite straitened circumstances, has not been changed at all. In fact, as a result of not being changed it has been increased and is therefore a heavier burden.
  Let me give one example, which I regard as disgraceful. If maintenance payments to a divorced woman exceed £2,000 a year—£40 a week—they carry a surcharge of 50 per cent. This rate has been unchanged, so the divorced woman sustains a substantial further increase in taxation.
  As my right hon. and learned Friend made clear, taxes have been raised right

  959
  across the board. There has been no move whatsoever towards disentangling the complexity of and the inter-relationship between income tax and social security and means-tested welfare benefits. Last year hundreds of thousands of families—and we have seen and talked to them in our constituencies—found to their dismay that high income tax, combined with benefits, cancelled out any earnings increase, and they will find that again this year with or without the concessions that the Chancellor offers on the basis of the trade union deal.
  This year we have taxes up across the board. Income tax is up, and benefits have been raised. They were raised last November, and they are to be raised again next November, so the overlap will be very much greater. We have reached what is regarded by most people as a lunatic situation, in which a man on £50 or £55, on a near-average wage, finds that, if he has two children, it does not pay him to go to work, certainly not when he is drawing PAYE accumulated rebates. That situation has not been tackled at all. The Bill has not attempted at any point to address itself to that situation. I understand why. It is because the Chancellor is locked in and has decided not to cut public spending but rather allow it to increase by 14·4 per cent., in money terms, or something of that order. He is unable to find the resources necessary to lift tax thresholds even to the point which would put us back to the level of last year, let alone to the level of 1974.
  Now, none of these arguments about where to find the revenue arises when we come to the other major tax problem—the political taxes. By "political taxes" I mean taxes on the statute book not designed to raise revenue, balance out the books or reduce the deficit, but those which are there for reasons of political pressure and because they make hon. Members opposite, particularly those who are here this afternoon, feel good. Why they make them feel good I found harder and harder to understand as I listened particularly to the hon. Member for Liverpool, Walton (Mr. Heller) who started off in the most enticing way. One almost thought one would agree with him, only to find that his solution for the problems he analysed was to bring in a wealth tax.
  960
  The hon. Gentleman wanted to put more people out of work. Having analysed the situation and found it unsatisfactory, he wanted a higher tax on wealth creation, with the loss of more job opportunities. That was his proposal. I am afraid it is hard to follow why it should in any way relate to the interests of working people in this country. I know that hon. Members below the Gangway have they own little world, in which they debate these things, and perhaps they can sort them out.
  Let me return to the political taxes, because a number are mentioned in the Finance Bill. We shall have to debate them at great length both on the Floor of the House and in Committee. As far as the capital transfer tax is concerned, changes have indeed been made, but they will just about compensate for inflation. In fact, if one takes the figures as announced in March 1974, the change falls considerably far short of compensating for inflation. We shall be raising many questions about capital transfer tax. It is just as much of a job wrecker now as in March 1974. We have instances—I am sure that Chief Secretary has many others—where it is placing firms and the jobs in those firms in direct jeopardy. It is still a job wrecker, and it is still a firm wrecker. There are several other aspects of capital transfer tax that we shall want to discuss.
  My hon. Friend the Member for Bristol, West (Mr. Cooke) talked about maintenance funds for historic houses. I realise the difficulties here and we shall want to come to them, because I do not understand or follow the point made by the hon. Member for Motherwell and Wishaw (Dr. Bray). What is the point of having ruined mansions? What is the point of allowing these houses to crumble? Is the hon. Member suggesting that bureaucracy should take over and run them? If the kind of proposals that the hon. Gentleman appeared to be talking about are adopted, that will be the end of the historic house and the heritage of this country, because there will not be the finance there to run them any further and the State will not provide it.
  The second political tax included in the Finance Bill is the small companies rate. The initial instinct is to welcome what has been proposed, that the ceiling

  961
  rate for profits below which corporation tax at the lower rate can be claimed has been raised to £30,000. But that was set in 1973 at £25,000, and £25,000 in 1973 is not £30,000 now; it is more like £42,000. Again, there has been an increase, as my hon. Friend the Member for Basingstoke (Mr. Mitchell), in an excellent speech, recognised. The screws have been further turned on small companies seeking the lower corporation tax rate. It has not been decereased; it has been increased.
  We then come to VAT, where, no doubt, Ministers will argue, as the Chancellor has argued, that there has been some help to small business. I must say that this whole VAT high-rate situation is a banana-skin episode in fiscal legislation. We argued from the start that it was madness to put a high-rate tax on electric irons and cuckoo clocks. We argued that there was no such thing as a socially less desirable luxury good. However, the Ministers had received their instructions and they had to follow this nonsensical legislation through.
  After a year, it has been discovered that it did great damage. All kinds of provisions had to be rushed in to try to offset the damage. Now we have new clauses in the new Bill to put it half right. We still have two rates. It is a complete waste of administration. One rate at 10 per cent. would be much simpler. That is what we believe the Chancellor should have done. But obviously there were difficulties in swallowing the whole of the humble pie. Therefore, we had to have the 12½ per cent. rate.
  There is a case not only for the single rate but for looking at the exemption level—a matter raised by some of my hon. Friends. Even if one were to keep pace with the depreciation of the currency, it would, as my hon. Friend the Member for Basingstoke said, have to rise to between £8,000 and £9,000. So much for that aspect of political taxes where changes could be made without any cost to the Revenue at all and yet are not made.
  We turn now to the other aspect of political taxes, that is, the high rate of income tax on the £80-£160 group, the people on £4,000 to £8,000, who the Chancellor in happier days was rash enough to say had had quite a caning.
  962
  Under this Bill the caning continues harder than ever. It is true that the tax rate bands of the higher rates may be raised if the deal with the trade unions comes off, but that would not anything like compensate for inflation. For instance, to move the £4,500 rate to £5,000 would still leave it £500 short of where it should be to put us back to the levels of last year.
  Therefore, those in this group are being more highly taxed. They are paying higher national insurance contributions The fringe benefits and perks are under attack. We in the Opposition have stated our view that under a more moderate level of income taxation, half of these perks would not have arisen in the first place. It would not be necessary to think up ways of providing emoluments and benefits outside the tax system. There will be great difficulties in deciding what is the arm's-length price of certain benefits—for instance, the arm's-length price of an airline ticket to an employee of an airline company. When seeking to buy an airline ticket I always find that there are about 16 different prices going. The same applies to tangible goods, such as washing machines. What is the arm's-length price? It is illegal to have a fixed price. There is no resale price maintenance. How shall we sort out that difficulty?
  There will be a great deal of difficulty, and much manpower will be absorbed in the hunt for the perks. If that manpower was, as it should be, diverted from thinking up ways of lower taxation, or done away with altogether, a great deal of effort and the Chancellor's energies and adrenalin would be saved in the tremendous manhunt that will otherwise continue.
  Now we come to yet another area in which the £4,000-£8,000 man, who expected not to be caned, will face greater difficulties. That is at the top rate of income tax. In the words of Labour Weekly—it is not my regular reading, but this is that publication's view—the 83 per cent. and the 98 per cent. rates are a figleaf for the Socialist conscience. That is the view of that publication. It is right. These things are fiscal absurdities. They do great damage abroad. Everyone thinks we are barmy to be running a 98 per cent. rate. It is confiscation less 2 per cent. Why bother

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  to operate it? It adds nothing to the glamour of the Socialist State. It proves nothing about the virility of Socialist policy. It does nothing but create an impossible disincentive situation, and it provides the outside world with a constant beacon and reminder of our chaotic and incompetent tax system.
  As to the investigatory powers mentioned by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), we are not reassured by what the Chancellor had to say, or about the reminder that the local magistrate will be called upon to provide permission for the Inland Revenue men to come in. We are even less reassured when it turns out that the words that the Chancellor used in his speech today were, verbatim—I noted them—the words used by the General Secretary of the Inland Revenue Staff Federation in an article in the Sunday Times yesterday.
  This is a bit much. With respect, we do not expect all that much from the Chancellor, but we are at least entitled to get a fresh speech from him, and not the words of the General Secretary of the Inland Revenue Staff Federation served up as the Chancellor's speech the following day. There is something very funny indeed about this arrangement. Perhaps the Chief Secretary will explain whose words we were hearing out of the Chancellor's mouth this afternoon. Could we put in a plea to the Chancellor to give us a fresh speech in future? That is the least that we are entitled to expect.
  Still on the things which will hit the £4,000-£8,000-a-year men—the skilled workers on £80 a week and upwards, and junior management—there is a nasty bit in Clause 58 which hits at share incentive schemes. It is characteristic and in line with the attitude of the Labour Party that ownership is somehow not quite right—that working people should not be entrusted with the ownership of a house or of assets. Clause 58 is in line with that tradition.
  One good thing came out not in the Chancellor's speech—but a little afterwards, when the Chief Secretary told us that capital transfer tax is to be lifted when all shares are transferred to an employee trust under Clause 78. We shall want to look at the small print, but in
  964
  general that seems a step in the right direction. I do not know how that got past the Labour Party's Home Policy Group. The group does not like that sort of thing at all. The group is not keen on workers acquiring any kind of economic independence, because, as it has told us, the ownership which it believes in is the so-called public ownership. It does not like the diffusion of ownership. It likes ownership to fall into the hands of the public bureaucratic machine—the party bosses and organisers of the great State industries. It does not want ownership in the hands of the workers. It would go a long way to stop it, but it does not seem to have gone far enough this time.
  So this is one tiny little clause that has got through, despite the deep antipathy of lion. Members opposite to working people owning anything. [Interruption.] I thought that would rouse the hon. Member for Walton. I am glad he feels that ownership is such a terrible thing and that he owns nothing. We know that the Chancellor owns nothing. We know that he would never dream of establishing a position as an owner of anything.
  I saw, on television yesterday, the Chancellor in Nottingham making a speech to the somewhat bewildered and, I thought, a little hostile burghers. I noticed at the back of the picture some bad vibrations coming up, and I think the Chancellor must have noticed them too. He was telling us characteristically that it was going to be all right and that we shall be—to use his phrase—"home and dry" by the end of 1977. I think that is a phrase of which we shall hear more. Who is going to be home, and who is going to be dry? That is the question to which we shall be returning again and again when we look back to that speech in Nottingham yesterday.
  The Chancellor keeps telling us—or, rather, it is a fact recognised in the editorials and public comment—that he cannot responsibly cut taxes, or not by anything comparable to what is needed to start solving the problems that I have mentioned. The reason, he says—or again he does not say it, but it is obvious —is that he will not cut expenditure this year. In the fiscal year 1976–77 it will rise. The Chancellor will not cut expenditure, he argues, because it will

  965
  lose jobs. That is the argument to which he and his hon. Friends return again and again. I do not believe that is so. Of course, it will lose some jobs. My hon. Friends have pointed out that those public programmes which are cut will result in a loss of jobs but that they will also involve a substantial gain in jobs. My hon. Friend the Member for Basingstoke put this clearly. If hon. Members opposite had been listening they would have heard him. He said that in the independent business sector, where 6 million people work, providing that interest rates are not through the roof and providing the State is not attracting all the funds and resources, there is the opportunity of a very considerable expansion.
  I believe that, given the chance of reasonable interest rates, we could see a major expansion of jobs in the independent business sector. But we certainly shall not do so if we have interest rates of 11 per cent. and 12 per cent. We shall not do so if we have the wealth tax which the hon. Member for Walton wants, and we shall not have very many new jobs even under the changes which the Chancellor now proposes. But there is no doubt that cutting public expenditure, far from losing jobs, as the Chancellor constantly argues, would in fact pave the way for an expansion and the creation of new job opportunities of a kind which would really add to the nation's productive wealth.
  The members of the independent business sector—those 6 million people—have no say in the deal about which negotiations are now going on, and about which we are shortly to hear. As my right hon. and learned Friend reminded the House, this deal was presented to us as an advance in open government. Yet the Sunday newspapers are full of stories about the extreme secrecy in which the deal is being conducted. One newspaper, indeed, said that so secret were the talks that information officers in Government Departments were denying that they were taking place at all. That seems a curious "Alice in Wonderland" demonstration of open government.
  In fact, it is not open government at all. It is open so far as debate and the world exchange markets are concerned, but what is being fixed up is being done on the old boy network of the classic kind. That is where the deal
  966
  will be brewed up. Meanwhile, for the people I have mentioned—the millions of independent business people and the 15 million not in trade unions, as well as the rest of Britain—we shall have to go along as best we can with the Finance Bill as it stands. We shall have to go along with a tax regime of unparalleled incompetence and with tax and spending plans which are appallingly inconsistent. That is the background against which we must consider the Bill.
  My favourite moment nowadays, when we are discussing economics, usually comes at about this time—he is a little late today—when the Lord President of the Council comes ambling in—the old Pied Piper himself—to remind us that Labour policies are working. That is his theme, and he keeps repeating it. [Interruption.] I hear it said that that is true. Very well. All I can say is that those who take that view must share with the Lord President the same blind spot when they look at their right hon. Friend the Chancellor of the Exchequer, because the truth is that they are looking at a Chancellor with an astonishing record. We are considering a state of affairs in which no Chancellor has ever before in British history raised taxes so high. No Chancellor has ever borrowed so much. No Chancellor has ever presided over such a colossal increase in prices.
  That is Labour policies working, is it? No Chancellor has ever presided over such a high rise in unemployment, and no Chancellor has ever misled the British people with such devastating plausibility as the present Chanceller did yesterday, when he talked about "home and dry" in 1977.
  That is the only compliment that I can scrape together for the Chancellor tonight—that he is an extremely plausible citizen. As it is my only compliment, it will not be enough to convince my right hon. and hon. Friends to do other than reject this melancholy document and vote for our amendment.
  9.33 p.m.
  The Chief Secretary to the Treasury (Mr. Joel Barnett): The hon. Member for Guildford (Mr. Howell) certainly used the right word at the end, if only at that point. Even when he makes what he thinks are good jokes, he is always very

  967
  melancholy about it, and I hope that he will forgive us for not laughing at his jokes since he does not laugh himself.
  What I like about the hon. Gentleman is that he started off wanting to have his cake and eat it. He told us about various areas in which he wants to cut taxation, and he could not forbear from telling us also about the borrowing requirement. I shall come back to that presently. What the hon. Gentleman obviously did not do, however, was listen to his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), because he spent a good deal of time at the beginning of his speech talking about the pay policy and suggesting that it was not an open policy at all, whereas his right hon. and learned Friend welcomed the greater openness of the pay proposals. That was very different, I may say, from the instant reaction of the right hon. Lady the Leader of the Opposition, and perhaps the hon. Member for Guildford was trying to curry favour with her by agreeing that he did not like it either.
  In a very interesting remark at one point, the right hon. and learned Member for Surrey, East told us that he would not be dogmatic about incomes policies. We know the reason for that. One has only to look at the right hon. and learned Gentleman's hon. Friends on the Front Bench and below the Gangway to find it. But he still went on to complain that consultation with the trade unions did not affect more than 50 per cent. of the workers. My hon. Friend the Member for Redcar (Mr. Tinn) intervened to say that the right hon. and learned Gentleman had consistently blamed the trade unions for all our problems and that he was now implying that the trade unions were not responsible. My hon. Friend the Member for Tottenham (Mr. Atkinson) also intervened to ask the right hon. and learned Gentleman what was the alternative if he disagreed with pay policies. There was total silence. That is typical of the two speeches from the Opposition Front Bench today. Not one constructive comment has been made.
  The nub of the criticism from the Opposition has been the burden of taxation. That has also been referred to by a number of my hon. Friends, who have frequently said that the level of taxation
  968
  is not too high and that it is not as high as in many other countries. While I agree with some of the things my hon. Friends say, and I accept that that is true statistically, I am bound to accept that we have a very high and steeply progressive rate of personal taxation. Personally, I would like to see it somewhat lower, but I do not apologise for the fact that we have a progressive rate of income tax, because since the war we have not experienced the same rates of growth and output as many other countries. The demands for public services are as persistent as demands for fairer taxes, and the fairest method of paying for those public services is by progressive income tax. The former Chancellor of the Exchequer, Lord Barber, tried a policy of higher public expenditure and lower taxes, and we are still paying for that policy.
  If it is right that we should have a progressive tax system, it is also right to recognise that inflation has reduced the thresholds for higher rates of tax as well and that many middle managers have been hard hit. I hope that those who demand substantial tax reductions in that area, even where the cost would be comparatively small, will recognise that there are millions at the lower end of the income scale who also have been hard hit and that the cost of even a moderate relief for them would be high. Nevertheless, the effect of fiscal drag at what might be called the lower end of the higher income level is plain to see.
  My right hon. Friend therefore thought it right to include some relief for higher incomes amongst his conditional reliefs for all taxpayers, and given a satisfactory pay settlement he proposes to raise by £500 the starting point for the higher rate of tax and for each of the next four thresholds. But there will be no change in the starting point for the rates from 65 per cent. to 83 per cent. In this way, the maximum benefit from the higher thresholds would be reached at a taxable income of £8,500. It would then be the same at higher levels of income.
  Some Opposition Members feel that those proposals do not go nearly far enough. Some of my hon. Friends say that they go too far. To those who claim that the higher rate relief is unnecessary, I would say that the facts dispute that claim. The effects of inflation on those enjoying the higher thresholds cannot be

  969
  denied, and when coupled with sharply-rising progressives rates of tax on incomes of over £4,500, which is one and a half times the earnings of the average worker, the effect is compounded.
  Families who used to pay tax on income at the basic rate now find themselves, because of inflation, paying tax at the rate of 40 per cent. or 50 per cent. on incomes which are no larger in real terms. The same is true of the higher of the income scales, and some lightening of the income tax scale at these levels is now accepted by most people. It will not be paid for by the effect of inflation. That is not the intention. It is a compromise in an attempt to offset the fall in the real value of the take-home pay of middle managers, for example, and the need for continued restraint by every section of the community.
  Mr. John MacGregor: Will not the right hon. Gentleman come clean and say clearly that one of the major problems is that it is impossible to attract back here middle and senior managers who have experience abroad, that one of the chief reasons for that is that the higher income groups have not kept pace with inflation but have suffered an erosion in their living standards, and that what the Chancellor proposes goes nowhere near far enough to deal with the problem?
  Mr. Barnett: The hon. Gentleman could not have been listening. That is precisely the point I am making. We recognise their problems. It is absurd for the Opposition to demand a reduction in taxation for that kind of taxpayer at a comparatively small cost when it is difficult, if not impossible, to make the substantial cuts required to help those at the lower end of the income scale. That absurd point is constantly being made by the Opposition. My hon. Friends the Members for Liverpool, Walton (Mr. Heifer) and Fife, Central (Mr. Hamilton) made the crucial point that what we want is equality of sacrifice, but that is the last thing we are being asked to do by the Opposition.
  We have also heard the customary Liberal panacea—although it is really the panacea of the hon. Member for Blaby (Mr. Lawson). My hon. Friend the Member for Bolsover (Mr. Skinner) took the Liberal Party apart in its absence. The
  970
  case for improving tax allowances to offset the effect of inflation is not denied, but action must be considered in the context of the wider economic situation and it is more sensible to have an annual review of rates and allowances which may be adjusted flexibly in the light of the situation rather than a policy of automatic indexation. Indexation, as the hon. Member for Blaby constantly fails to recognise, would build into the tax system far greater rigidity than anything at present. It presupposes that all tax allowances are or should be indexed by the same proportionate amount every year.
  My hon. Friend the Member for Gravesend (Mr. Ovenden) made an eloquent plea for a recasting of the tax system to help widows. He may have overlooked the fact that my right hon. Friend has done a great deal for widows, particularly the widow with young children. The widow today gets an additional personal allowance which is equivalent to the tax allowance for a married man. In addition, this year the Chancellor has increased child tax allowances substantially more than was necessary in order precisely to help that kind of single-parent family and other families with children. What the hon. Member for Blaby seeks to do would build into the system the tax allowances as now exist.
  Mr. Lawson Mr. Lawson rose—
  Mr. Barnett: I have not time to give way. I have heard the hon. Gentleman frequently on this subject.
  Mr. Lawson Mr. Lawson rose—
  Mr. Barnett: Very well.
  Mr. Lawson: I am sorry that the right hon. Gentleman has chosen to sink so low and beneath his usual form. He knows perfectly well that the effect of indexation is to give back to Parliament the discretion to alter widows' allowances, or any allowances that it wishes, instead of leaving such matters to arbitrary factors and giving the Government a vested interest in inflation.
  Mr. Barnett: I have noted the hon. Gentleman's point.
  I now turn to the Liberal amendment, which was not called. It seems a bit odd that it should seek to deal with the indexing of indirect tax rates as well. That is important because it is generally

  971
  accepted that indexation cannot be applied to only one form of tax or only to direct taxes. It must be applied to indirect taxes as well.
  I do not know whether the hon. Member for Cornwall, North (Mr. Pardoe) quite appreciated the terms of the Liberal amendment. Perhaps he did not draft it. Maybe it was drafted by his hon. Friend the Member for Rochdale (Mr. Smith) or by another of his hon. Friends The Liberal amendment does not agree with anything that the hon. Member for Cornwall, North said.
  The hon. Gentleman gave us a strange but interesting story about Cornish smugglers. He told us how it was necessary to reduce the rate of customs duty to avoid a serious situation that arose in those days. But what he is seeking to do by means of his party's amendment he did not make altogether clear in his speech. In fact, the terms of the amendment would automatically increase the rates of indirect taxes. It would probably bring back Cornish smugglers.
  Mr. Pardoe: The Chief Secretary has become woefully muddled. Many of the customs and excise duties are cash amounts, and we have had to increase them in the Bill. I am urging that they should be percentage amounts. That is what is meant by the relevant phrase in the Liberal amendment.
  Mr. Barnett: I am obliged to the hon. Gentleman for that explanation. So he is not now wanting automatically to index the rates of indirect taxes.
  Mr. Pardoe: That is what it would do.
  Mr. Barnett: I shall tell the hon. Gentleman the consequences of what he is asking the House to do, since he did not tell the House himself. If we did what he suggests, we should have to face a serious consequence—namely, the effect of foreshadowing earlier increases in indirect taxation, which could be inferred from the movement of the RPI with which he would seek to tie it. That would encourage a forestalling and disruption of trade. That is precisely what it would do. There would be frequent changes in duty rates in line with inflation.
  Mr. Pardoe: Total rubbish.
  Mr. Barnett: It is no use the hon. Gentleman disagreeing. He has not thought it through. The effect of frequent changes in duty rates in line with inflation—[Interruption.] If the hon. Gentleman has finished, I shall continue. Frequent changes—[Interruption.]Perhaps the hon. Gentleman left school not so very long ago, but he must remember where he is. I am trying to explain to the hon. Gentleman what I gather most hon. Members will have understood already. The course that he is suggesting would have appalling consequences for investment and employment in industry, as well as on distribution. I ask the hon. Gentleman to have some words with his Liberal friends, who might understand the matter a little more.
  The hon. Gentleman's indexation proposals, or any of his proposals, are made —[Interruption.] In some ways the hon. Gentleman is even more arrogant than the hon. Member for Blaby. It is a fine balance. I hope he will accept that there is no panacea in indexation.
  My hon. Friend the Member for Fife, Central had a few words to say about fringe benefits in certain areas. I hope he will forgive me if I do not follow him entirely in that direction. I believe that the new system of taxing cars has been grossly misunderstood. There must be millions who pay the full cost of running a car who would very much like to run one privately on the scales for assessment as set out in the schedule. They are very modest scales. The whole idea of moving to a scale is recognised by accountants as a considerable simplification and will save a great deal of administrative trouble, not only for the Revenue but particularly for the accountancy profession.
  I should like to say a few words on the capital transfer tax. I know that the hon. Member for Bstol, West (Mr. Cooke) is keeping a close eye on me because he raised a number of points on that tax. In regard to capital transfer tax, we made clear from the outset that it was no part of our intention to harm productive assets. The general weight of the tax is in some ways considerably less than in the case of estate duty, particularly in respect of small businesses. Our further consideration of the impact of the tax on businesses and farms, as part of the general review of the tax, has led

  973
  us to conclude that further measures of relief directed to those assets are called for, and they are in the Bill as drafted.
  The only reason why businesses could cope with the high rates of estate duty was that it was a highly avoidable tax, and it was avoided by many people. Indeed, it was unfair in its incidence, not least to the small business man whom the Opposition purport to represent. It is right that scope for avoidance should be kept to the minimum. I hope that Opposition Members go along with that view. The corollary is to provide special relief for businesses, including farms, in so far as the existing special relief on farmland is not available.
  Let me deal with a number of other points which have been raised in the debate. The hon. Member for Bristol, West and others referred to our national heritage. My hon. Friend the Member for Walton told the House of his interesting tours in Venice, Rome, Florence and elsewhere. Obviously, he supports any move to avoid hurting our heritage too much.
  We shall table an amendment in Committee to provide exemption from taxation on funds established for the maintenance of historic houses where those houses meet certain conditions of exemption. The majority of the Select Committee on a Wealth Tax recommended that such exemption should be given from capital transfer tax, provided that the fund was exclusively devoted to the maintenance of the building. I am happy to be able to tell the hon. Member for Bristol, West that we shall be taking that step in Committee.
  Mr. Jasper More: Before the right hon. Gentleman leaves the subject of capital transfer tax, will he say what benefit, if any, will be derived by forestry interests from the measures introduced in the Budget?
  Mr. Barnett: I am sure that the details can be discussed in Committee. I want to finish my remarks by 10 o'clock, and I shall be happy to deal with the subject of forestry on some other occasion.
  I wish to say something about the information powers in the Finance Bill. These powers are contained in Clause 48 and Schedule 6. The criticisms made by the right hon. and learned Member for
  974
  Surrey, East were grotesque. I was happy to note that he was not followed in that vein by many Opposition speakers. Obviously, they have listened to my right hon. Friend the Chancellor of the Exchequer and have realised how foolish were some of the criticisms made by the right hon. and learned Gentleman. His remarks totally distorted the powers we are proposing to take.
  Let us be clear what we are talking about. We are talking about those who break the law, those who are dodging their fair share of tax.
  Mr. Nott: No.
  Mr. Barnett: I must tell the hon. Member for St. Ives (Mr. Nott) that I am talking about a provision in the schedule that deals with the obtaining of a warrant from a justice of the peace giving the right to go into premises. There would have to be a criminal offence.
  Mr. Nott: No.
  Mr. Barnett: Yes. The person concerned would have to be cheating the Revenue.
  Sir Geoffrey Howe Sir Geoffrey Howe rose—
  Mr. Barnett: Before the right hon. and learned Gentleman gets too excited, I should tell him that an inspector of taxes would have to swear on oath to a justice of the peace that there was suspicion of fraud. [HON. MEMBERS: "Ah."] I take it that the right hon. and learned Gentleman does not object to that.
  Sir Geoffrey Howe indicated assent.
  Mr. Barnett: That makes rather a difference. He does not complain about that.
  I accept entirely that the right hon. and learned Gentleman and the Opposition generally recognise that a man who cheats the Revenue cheats his neighbour—the average honest taxpayer. An inspector of taxes who has good grounds for believing that fraud has been perpetrated will swear on oath accordingly to a justice of the peace, and only then will the justice of the peace give him a search warrant to see whether there are papers which will be helpful in his inquiries. I am happy to see that the

  975
  right hon. and learned Gentleman accepts that.
  Sir Geoffrey Howe: The right hon. Gentleman challenged me. I made clear in my speech that one matter that caused us anxiety was that the power to grant a search warrant to enter the home of anybody at any time should be placed in the hands of any one of 40,000 magistrates. That was precisely the point to which we objected.
  Mr. Barnett: I am very surprised. Justices of the peace have power to issue warrants on all kinds of occasions. Why should the right hon. and learned Gentleman be so concerned about those who are suspected of cheating the Revenue? I cannot understand it.
  I recognise that, despite the need to stop evasion, we must be careful about not going too far with the powers we seek to take. We must balance the need to protect the rights of the honest taxpayer with the need to protect the rights of the individual citizen. It is strange that some Opposition Members who do not have too many scruples about those who break the social security laws for trivial sums should suddenly have scruples about those who are suspected of defrauding the Revenue of large sums of money. Despite that, I recognise that personal privacy should not be breached too readily. We have to be very careful about it.
  In addition to the safeguards that we have written into the Bill, the right hon. and learned Member for Surrey, East suggested that we might consider a High Court judge for this purpose. The Chancellor and I are prepared to consider all kinds of safeguards to protect the individual's liberty, provided it is understood and recognised that it is the responsibility of the House to stop evasion if at all possible.
  Mr. Graham Page: Will the right hon. Gentleman give way?
  Mr. Barnett: The right hon. Member for Crosby (Mr. Page) asked about entry into solicitors' premises in the case of suspected fraud. The answer is "Yes."
  I shall deal briefly, because that is all it deserves, with the Opposition's amendment. It is the most cynical and dishonest proposal that the House has seen for a long time. The implication is that substantial reductions in taxation can be made. That does the maximum possible harm by building up expectations that cannot be fulfilled and it would cost many thousands of millions of pounds that are not available. The amendment exposes the Opposition's irresponsibility. I ask my hon. Friends to vote against it and in favour of the Second Reading of the Bill.
  Question put, That the amendment be made:—
  The House divided: Ayes 274. Noes 288.

  Division No. 116.]

  AYES

  10 p.m.

  Adley, Robert

  Bryan, Sir Paul

  Durant, Tony

  Aitken, Jonathan

  Buchanan-Smith, Alick

  Dykes, Hugh

  Alison, Michael

  Budgen, Nick

  Eden, Rt Hon Sir John

  Amery, Rt Hon Julian

  Bulmer, Esmond

  Edwards, Nicholas (Pembroke)

  Arnold, Tom

  Burden, F. A.

  Elliott, Sir William

  Atkins, Rt Hon H. (Spelthorne)

  Butler, Adam (Bosworth)

  Emery, Peter

  Awdry, Daniel

  Carlisle, Mark

  Ewing, Mrs Winifred (Moray)

  Bain, Mrs Margaret

  Chalker, Mrs Lynda

  Eyre, Reginald

  Baker, Kenneth

  Churchill, W. S.

  Fairbairn, Nicholas

  Banks, Robert

  Clark, Alan (Plymouth, Sutton)

  Fairgrieve, Russell

  Beith, A. J.

  Clark, William(Croydon S)

  Fell, Anthony

  Bell, Ronald

  Clarke, Kenneth (Rushcliffe)

  Finsberg, Geoffrey

  Bennett, Dr Reginald (Fareham)

  Clegg, Walter

  Fisher, Sir Nigel

  Benyon, W.

  Cockcroft, John

  Fletcher, Alex (Edinburgh N)

  Berry, Hon Anthony

  Cooke, Robert (Bristol W)

  Fletcher-Cooke, Charles

  Biffen, John

  Cope, John

  Forman, Nigel

  Biggs-Davison, John

  Cormack, Patrick

  Fowler, Norman (Sutton C'f'd)

  Blaker, Peter

  Corrie, John

  Fox, Marcus

  Body, Richard

  Costain, A. P.

  Fraser, Rt Hon H. (Stafford & St)

  Boscawen, Hon Robert

  Crawford, Douglas

  Freud, Clement

  Bottomley, Peter

  Crouch, David

  Fry, Peter

  Bowden, A. (Brighton, Kemptown)

  Crowder, F. P.

  Galbraith, Hon T. G. D.

  Boyson, Dr Rhodes (Brent)

  Davies, Rt Hon J. (Knutsford)

  Gardner, Edward (S Fylde)

  Braine, Sir Bernard

  Dean, Paul (N Somerset)

  Gilmour, Rt Hon Ian (Chesham)

  Brittan, Leon

  Dodsworth, Geoffrey

  Glyn, Dr Alan

  Brocklebank-Fowler, C.

  Douglas-Hamilton, Lord James

  Godber, Rt Hon Joseph

  Brotherton, Michael

  Drayson, Burnaby

  Goodhart, Philip

  Brown, Sir Edward (Bath)

  du Cann, Rt Hon Edward

  Goodhew, Victor

  Goodlad, Alastair

  Macfarlane, Nell

  Rossi, Hugh (Hornsey)

  Gorst, John

  MacGregor, John

  Rost, Peter (SE Derbyshire)

  Gow, Ian (Eastbourne)

  Macmillan, Rt Hon M. (Farnham)

  Royle, Sir Anthony

  Gower, Sir Raymond (Barry)

  McNair-Wilson, M. (Newbury)

  Sainsbury, Tim

  Grant, Anthony (Harrow C)

  McNair-Wilson, P. (New Forest)

  St. John-Stevas, Norman

  Gray, Hamish

  Made], David

  Scott, Nicholas

  Griffiths, Eldon

  Marshall, Michael (Arundel)

  Scott-Hopkins, James

  Grimond, Rt Hon J.

  Marten, Neil

  Shaw, Giles (Pudsey)

  Grist, Ian

  Mates, Michael

  Shaw, Michael (Scarborough)

  Grylls, Michael

  Mather, Carol

  Shelton, William (Streatham)

  Hall, Sir John

  Maude, Angus

  Shepherd, Colin

  Hall-Davis, A. G. F.

  Maudling, Rt Hon Reginald

  Shersby, Michael

  Hamilton, Michael (Salisbury)

  Mawby, Ray

  Silvester, Fred

  Hampson, Dr Keith

  Maxwell-Hyslop, Robin

  Sims, Roger

  Hannam, John

  Mayhew, Patrick

  Sinclair, Sir George

  Harvie Anderson, Rt Hon Miss

  Meyer, Sir Anthony

  Skeet, T. H. H.

  Hastings, Stephen

  Miller, Hal (Bromsgrove)

  Smith, Dudley (Warwick)

  Havers, Sir Michael

  Miscampbell, Norman

  Speed, Keith

  Hayhoe, Barney

  Mitchell, David (Basingstoke)

  Spence, John

  Heath, Rt Hon Edward

  Moate, Roger

  Spicer, Jim (W Dorset)

  Henderson, Douglas

  Monro, Hector

  Spicer, Michael (S Worcester)

  Heseltine, Michael

  Montgomery, Fergus

  Sproat, Iain

  Hicks, Robert

  Moore, John (Croydon C)

  Stainton, Keith

  Higgins, Terence L.

  More, Jasper (Ludlow)

  Stanbrook, Ivor

  Holland, Philip

  Morgan, Geraint

  Stanley, John

  Hooson, Emlyn

  Morgan-Giles, Rear-Admiral

  Steen, Anthony (Wavertree)

  Hordern, Peter

  Morris, Michael (Northampton S)

  Stewart, Donald (Western Isles)

  Howe, Rt Hon Sir Geoffrey

  Morrison, Charles (Devizes)

  Stewart, Ian (Hitchin)

  Howell, David (Guildford)

  Morrison, Hon Peter (Chester)

  Stokes, John

  Howell, Ralph (North Norfolk)

  Mudd, David

  Stonehouse, Rt Hon John

  Howells, Geraint (Cardigan)

  Neave, Airey

  Tapsell, Peter

  Hunt, David (Wirral)

  Nelson, Anthony

  Taylor, R. (Croydon NW)

  Hurd, Douglas

  Neubert, Michael

  Taylor, Teddy (Cathcart)

  Hutchison, Michael Clark

  Newton, Tony

  Tebbit, Norman

  Irving, Charles (Cheltenham)

  Nott, John

  Temple-Morris, Peter

  James, David

  Onslow, Cranley

  Thatcher, Rt Hon Margaret

  Jenkin, Rt Hn P. (Wanst'd & W'df'd)

  Oppenheim, Mrs Sally

  Thomas, Rt Hon P. (Hendon S)

  Johnson Smith, G. (E Grinstead)

  Osborn, John

  Thompson, George

  Johnston, Russell (Inverness)

  Page, Rt Hon R. Graham (Crosby)

  Thorpe, Rt Hon Jeremy (N Devon)

  Jones, Arthur (Daventry)

  Pardee, John

  Townsend, Cyril D.

  Jopling, Michael

  Pattie, Geoffrey

  Trotter, Neville

  Joseph, Rt Hon Sir Keith

  Penhaligon, David

  Tugendhat, Christopher

  Kaberry, Sir Donald

  Percival, Ian

  van Straubenzee, W. R.

  Kellett-Bowman, Mrs Elaine

  Peyton, Rt Hon John

  Vaughan, Dr Gerard

  Kershaw, Anthony

  Pink, R. Bonner

  Viggers, Peter

  Kilfedder, James

  Price, David (Eastleigh)

  Wakeham, John

  Kimball, Marcus

  Prior, Rt Hon James

  Walder, David (Clitheroe)

  King, Evelyn (South Dorset)

  Pym, Rt Hon Francis

  Walker, Rt Hon P. (Worcester)

  King, Tom (Bridgwater)

  Raison, Timothy

  Walker-Smith, Rt Hon Sir Derek

  Knight, Mrs Ji

  Rathbone, Tim

  Wall, Patrick

  Knox, David

  Rawlinson, Rt Hon Sir Peter

  Walters, Dennis

  Lamont, Norman

  Rees, Peter (Dover & Deal)

  Weatherill, Bernard

  Lane, David

  Rees-Davies, W. R.

  Wells, John

  Langford-Holt, Sir John

  Reid, George

  Welsh, Andrew

  Latham, Michael (Melton)

  Renton, Rt Hon Sir D. (Hunts)

  Whitelaw, Rt Hon William

  Lawrence, Ivan

  Renton, Tim (Mid-Sussex)

  Wiggin, Jerry

  Lawson, Nigel

  Rhys Williams, Sir Brandon

  Wilson, Gordon (Dundee E)

  Lester, Jim (Beeston)

  Ridley, Hon Nicholas

  Winterton, Nicholas

  Lewis, Kenneth (Rutland)

  Ridsdale, Julian

  Wood, Rt Hon Richard

  Lloyd, Ian

  Rifkind, Malcolm

  Young, Sir G. (Ealing, Acton)

  Loveridge, John

  Rippon, Rt Hon Geoffrey

  Younger, Hon George

  Luce, Richard

  Roberts, Michael (Cardiff NW)

  McAdden, Sir Stephen

  Roberts, Wyn (Conway)

  TELLERS FOR THE AYES:

  MacCormick, Iain

  Ross, Stephen (Isle of Wight)

  Mr. Spencer Le Marchant and

  McCrindle, Robert

  Mr. Cecil Parkinson

  NOES

  Abse, Leo

  Blenkinsop, Arthur

  Carter, Ray

  Allaun, Frank

  Boardman, H.

  Carter-Jones, Lewis

  Anderson, Donald

  Booth, Rt Hon Albert

  Cartwright, John

  Archer, Peter

  Bradley, Tom

  Castle, Rt Hon Barbara

  Armstrong, Ernest

  Bray, Dr Jeremy

  Clemitson, Ivor

  Ashley, Jack

  Broughton, Sir Alfred

  Cocks, Michael (Bristol S)

  Ashton, Joe

  Brown, Hugh D. (Provan)

  Cohen, Stanley

  Atkins, Ronald (Preston N)

  Brown, Robert C. (Newcastle W)

  Coleman, Donald

  Atkinson, Norman

  Buchan, Norman

  Colquhoun, Ms Maureen

  Barnett, Guy (Greenwich)

  Buchanan, Richard

  Conlan, Bernard

  Barnett, Rt Hon Joel (Heywood)

  Butler, Mrs Joyce(Wood Green)

  Cook, Robin F. (Edin C)

  Bates, Alf

  Callaghan, Rt Hon J. (Cardiff SE)

  Corbett, Robin

  Bean, R. E.

  Callaghan, Jim (Middleton & P)

  Cox, Thomas (Tooting)

  Benn, Rt Hn Anthony Wedgwood

  Campbell, Ian

  Crawshaw, Richard

  Bennett, Andrew (Stockport N)

  Canavan, Dennis

  Cryer, Bob

  Bidwell, Sydney

  Cant, R. B.

  Cunningham, G. (Islington S)

  Bishop, E. S.

  Carmichael, Neil

  Cunningham, Dr J. (Whiteh)

  978

  979

  Dalyell, Tam

  Johnson, James (Hull West)

  Radice, Giles

  Davidson, Arthur

  Johnson, Walter (Derby S)

  Rees, Rt Hon Merlyn (Leeds S)

  Davies, Denzil (Llanelll)

  Jones, Alec (Rhondda)

  Richardson, Miss Jo

  Davies, Ifor (Gower)

  Jones, Barry (East Flint)

  Roberts, Albert (Normanton)

  Davis, Clinton (Hackney, C)

  Jones, Dan (Burnley)

  Roberts, Gwilym (Cannock)

  Deakins, Eric

  Judd, Frank

  Robertson, John (Paisley)

  Dean, Joseph (Leeds W)

  Kaufman, Gerald

  Robinson, Geoffrey

  de Freitas, Rt Hon Sir Geoffrey

  Kelley, Richard

  Roderick, Caerwyn

  Delargy, Hugh

  Kerr, Russell

  Rodgers, George (Chorley)

  Dell, Rt Hon Edmund

  Kilroy-Silk, Robert

  Rodgers, William (Stockton)

  Dempsey, James

  Kinnock Neil

  Rooker, J. W.

  Doig, Peter

  Lambie, David

  Rose, Paul B.

  Dormand, J. D.

  Lamborn, Harry

  Ross, Rt Hon W. (Kilmarnock)

  Douglas-Mann, Bruce

  Lamond, James

  Rowlands, Ted

  Duffy, A. E. P.

  Latham, Arthur (Paddington)

  Sandelson, Neville

  Dunn, James A.

  Leadbitter, Ted

  Sedgemore, Brian

  Dunnett, Jack

  Lee, John

  Selby, Harry

  Dunwoody, Mrs Gwyneth

  Lestor, Miss Joan (Eton & Slough)

  Shaw, Arnold (Ilford South

  Eadie, Alex

  Lever, Rt Hon Harold

  Sheldon, Robert (Ashton-u-Lyne)

  Edge, Geoff

  Lipton, Marcus

  Shore, Rt Hon Peter

  Edwards, Robert (Wolv SE)

  Litterick, Tom

  Short, Rt Hon E.(Newcastle C)

  Ellis, John (Brigg & Scun)

  Lomas, Kenneth

  Short, Mrs Renée (Wolv NE)

  Ellis, Tom (Wrexham)

  Loyden, Eddie

  Silkin, Rt Hon John (Deptford)

  English, Michael

  Luard, Evan

  Silkin, Rt Hon S. C. (Dulwich)

  Ennals, David

  Lyon, Alexander (York)

  Silverman, Julius

  Evans, Fred (Caerphilly)

  Lyons, Edward (Bradford W)

  Skinner, Dennis

  Evans, Ioan (Aberdare)

  McElhone, Frank

  Small, William

  Evans, John (Newton)

  MacFarquhar, Roderick

  Smith, John (N Lanarkshire)

  Ewing, Harry (Stirling)

  McGuire, Michael (Ince)

  Snape, Peter

  Fernyhough, Rt Hon E.

  Mackenzie, Gregor

  Spearing, Nigel

  Fitch, Alan (Wigan)

  Mackintosh, John P.

  Spriggs, Leslie

  Fitt, Gerard (Belfast W)

  Maclennan, Robert

  Stallard, A. W.

  Flannery, Martin

  McMillan, Tom (Glasgow C)

  Stewart, Rt Hon M. (Fulham)

  Fletcher, Raymond (Ilkeston)

  Madden, Max

  Stoddart, David

  Fletcher, Ted (Darlington)

  Magee, Bryan

  Stott, Roger

  Foot, Rt Hon Michael

  Maguire, Frank (Fermanagh)

  Strang, Gavin

  Ford, Ben

  Mahon, Simon

  Strauss, Rt Hon G. R.

  Forrester, John

  Mallalieu, J. P. W.

  Summerskill, Hon Dr Shirley

  Fowler, Gerald (The Wrekin)

  Marks, Kenneth

  Swain, Thomas

  Fraser, John (Lambeth, N'w'd)

  Marquand, David

  Thomas, Dafydd (Merioneth)

  Freeson, Reginald

  Marshall, Dr Edmund (Goole)

  Thomas, Jeffrey (Abertillery)

  Garrett, John (Norwich S)

  Marshall, Jim (Leicester S)

  Thomas, Mike (Newcastle E)

  Garrett, W. E. (Wallsend)

  Mason, Rt Hon Roy

  Thomas, Ron (Bristol NW)

  George, Bruce

  Maynard, Miss Joan

  Thorne, Stan (Preston South)

  Gilbert, Dr John

  Meacher, Michael

  Tierney, Sydney

  Ginsburg, David

  Mellish, Rt Hon Robert

  Tinn, James

  Golding, John

  Mikardo, Ian

  Tomlinson, John

  Gould Bryan

  Millan, Bruce

  Tomney, Frank

  Gourley, Harry

  Miller, Dr M. S. (E Kilbride)

  Torney, Tom

  Graham, Ted

  Miller, Mrs Millie (Ilford N)

  Tuck, Raphael

  Grant, George (Morpeth)

  Molloy, William

  Varley, Rt Hon Eric G.

  Grant, John (Islington C)

  Moonman, Eric

  Wainwright, Edwin (Dearne V)

  Grocott, Bruce

  Morris, Alfred (Wythenshawe)

  Walden, Brian (B'ham, L'dyw'd)

  Hamilton, W. W. (Central Fife)

  Morris, Charles R. (Openshaw)

  Walker, Harold (Doncaster)

  Harrison, Walter (Wakefield)

  Morris, Rt Hon J. (Aberavon)

  Walker, Terry (Kingswood)

  Hart, Rt Hon Judith

  Moyle, Roland

  Ward, Michael

  Hattersley, Rt Hon Roy

  Mulley, Rt Hon Frederick

  Watkins, David

  Hatton, Frank

  Murray, Rt Hon Ronald King

  Weetch, Ken

  Hayman, Mrs Helene

  Newens, Stanley

  Weitzman, David

  Healey, Rt Hon Denis

  Noble, Mike

  Wellbeloved, James

  Heffer, Eric S.

  Oakes, Gordon

  While, Frank R. (Bury)

  Hooley, Frank

  Ogden, Eric

  White, James (Pollok)

  Horam, John

  O'Halloran, Michael

  Whitlock, William

  Howell, Rt Hon Denis

  Orbach, Maurice

  Willey, Rt Hon Frederick

  Hoyle, Doug (Nelson)

  Orme, Rt Hon Stanley

  Williams, Alan (Swansea W)

  Huckfield, Les

  Ovenden, John

  Williams, Alan (Swansea W)

  Hughes, Rt Hon C. (Anglesey)

  Owen, Dr David

  Williams, Rt Hon Shirley (Hertford)

  Hughes, Mark (Durham)

  Padley, Walter

  Williams, Sir Thomas

  Hughes, Robert (Aberdeen N)

  Palmer, Arthur

  Wilson, Alexander (Hamilton)

  Hughes, Roy (Newport)

  Park, George

  Wilson, Rt Hon H. (Huyton)

  Hunter, Adam

  Parker, John

  Wilson, William (Coventry SE)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Parry, Robert

  Wise, Mrs Audrey

  Irving, Rt Hon S. (Dartford)

  Pavitt, Laurie

  Woodall, Alec

  Jackson, Colin (Brighouse)

  Peart, Rt Hon Fred

  Woof, Robert

  Jackson, Miss Margaret (Lincoln)

  Pendry, Tom

  Wrigglesworth, Ian

  Janner, Greville

  Perry, Ernest

  Young, David (Bolton E)

  Jay, Rt Hon Douglas

  Prentice, Rt Hon Reg

  Jeger, Mrs Lena

  Prescott, John

  TELLERS FOR THE NOES:

  Jenkins, Hugh (Putney)

  Price, C. (Lewisham W)

  Mr. Joseph Harper and

  Jenkins, Rt Hon Roy (Stechford)

  Price, William (Rugby)

  Mr. James Hamilton.

  John, Brynmor

  Question accordingly negatived.

  Main Question put forthwith, pursuant to Standing Order No. 39 (Amendment on Second or Third reading), and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  BUSINESS OF THE HOUSE
  Ordered,
  That the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with at this day's Sitting, though opposed, until Twelve o'clock, or for two hours after it has been entered upon, whichever is the later—[Prime Minister.]

  COMMITTEE OF SELECTION
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Walter Harrison.]
  10.15 p.m.
  Mr. Hugh Delargy: I can appreciate the discontent—indeed, the indignation—of some Opposition Members at any rate at the decision taken by the Committee of Selection last Wednesday. That indignation is perfectly understandable.
  I am personally unhappy about the disagreement of the Conservative members of the Committee of Selection, with whom I have worked amiably for a very long time. In fact, about the only reward for serving on that Committee is the pleasure I have had from working with these honourable men. Politics apart, I regard them as my friends. However, as a philsopher said, magis amica veritas.
  The truth is that the decision we reached was just and proper in every respect. My reasons for saying this are so simple and compelling that I do not need to make a long speech.
  Before I go further, I wish to reiterate with emphasis what was said last Thursday afternoon by my right hon. Friends the Prime Minister and the Leader of the House, namely, that we were under no pressure; we received no word of instruction from anybody. Some hon. Members seem to have doubted that. It seemed to me that the Leader of the Liberal Party doubted it, because he said he accepted that it was
  "pure coincidence"
  that the Labour Members on the Committee
  "all voted the same way."—[Official Report 29th April 1976; Vol. 910, c. 558.]
  984
  However, the right hon. Gentleman said it in such a tone of voice—and his voice is a very expressive one—as to convey the meaning that he did not accept it at all. I hope he will accept from me that we received no instructions from anybody. The responsibility for the decision was ours, and ours alone. I repeat that I believe that it was the right decision.
  The guidance that we have from Standing Orders for choosing the membership of Standing Committees is short and rather vague. I believe that it is deliberately vague. Standing Orders are drawn up strictly for the guidance of Members. If a Standing Order is vague, it is meant to be. Standing Order No. 62, in dealing with the nomination of Standing Committees, states that
  "the Committee of Selection shall have regard to the…composition of the House".
  That is what the whole argument is about, the composition of the House.
  The main argument of our critics—indeed, the only one—is that, due to a transfer of personnel, the Labour Party has lost its overall majority on the Floor of the House. I agree that, on paper, it has lost its overall majority, but it does not follow that the Opposition have a majority in the House. They do not. They are in a minority.
  The Labour Party has a majority of 39 over the Conservatives. Most of the other 40 or so hon. Members belong to four political parties. They are independent parties with their own Leaders, their own Whips and, more important, their own policies. They are the Liberals, the Scottish National Party, the United Ulster Unionist coalition and Plaid Cymru. There is also the SDLP of Northern Ireland. None of these parties was elected to support the Conservative Party in this House. They were not elected primarily to oppose the Labour Party. They were elected for positive reasons—to pursue certain policies and to serve their electorates.
  Combining those parties as though they were one united group is wrong. Uniting them with the Conservative Party is doubly wrong. Lumping those parties together and saying they are a united Opposition is simply a wild and crashing confusion of thought. That is why I say that the Opposition are not in a majority in the House. There is no united

  985
  Opposition. That is why the main argument of our critics is demolished.
  Mr. Gordon Wilson: I have been following the sophistry of the hon. Gentleman's argument carefully. Is he saying that, besides the Labour and Conservative Parties, the other parties to which he referred should also be represented on the Committe of Selection?
  Mr. Delargy: That is not a question for me. I have troubles enough of my own. That is a question to be decided by the House. An amendment could have been moved and voted upon when the Committee was set up at the beginning of this Parliament. We appoint Standing Committees; we do not appoint ourselves. A motion tabled by the Leader of the Opposition and several of her right hon. Friends instructs us to change a Standing Committee, discharge it or something of the sort.
  I have been looking up precedents as far back as 1906 and all Speakers who have been asked to decide upon the procedure of the Committee of Selection have been united on one point: that there should be no interference with the Committee by the House. Once the Committee has been set up, it should be left alone.
  Sir Kingsley Wood, whom many people will remember, said way back in 1924—but the ruling has not been changed—
  "I have ascertained"—
  this is parallel to what we did last Wednesday—
  "that the Committee of Selection have made a rule of their own account, but I venture to put it to you, Sir, that that in no way binds the House or the Government. All I wish to ask you is, whether it will be possible for any Member of the House or for the Government themselves, to put down on the Paper a Motion".
  Mr. Speaker replied:
  "The hon. Member has referred to a rule made by the Committee of Selection within its province. It can, if it thinks fit, suspend or rescind that rule, but the House entrusts to the Committee the selection of Standing Committees, and it is not for the House, by Resolution or otherwise, interfere with the full discretion of the Committee of Selection."—[Official Report, 19th March 1924; Vol. 171, c. 451.]
  I thought I would remind the House of that ruling. It is not for me to give a ruling, not here anyway, no matter what I do upstairs, but I thought it would be
  986
  as well to remind the House of what was said on that occasion.
  I wonder about these Committees, how we have set them up and how we have endeavoured at all times to be fair and just, having in mind particularly the minority parties. It has been our practice to appoint Members of the smaller parties to Standing Committees on a rotation basis, and for the purpose of determining the places available these parties have been regarded as a block of 39 Members. I have already indicated that it is rather illogical to regard them as a unified block, but for the sake of peace and quiet and to ensure that representation of minority parties on Committees we thought that that was the best rule to adopt.
  However, we were even fairer than that. We were so fair as to be unfair to ourselves, because among those 39 Members who are more or less lined up against us there are two Members—[Interruption.] Yes, lined up against the Labour Party. I have said that if the House consists of hon. Members who cannot sit for the Labour Party they will sit for some other party in Committees. The two hon. Members whom I have in mind are my hon. Friends—and they are my friends—the Members for Belfast, West (Mr. Fitt) and Fermanagh and South Tyrone (Mr. Maguire). They always sit on this side of the House and invariably vote with the Labour Party. I assure the House that they would be mighty indignant if they were described a supporters of the Tory Party.
  Mr. A. J. Beith: The hon. Gentleman described the hon. Member for Belfast, West (Mr. Fitt) as being on the Government side. Can he explain why that hon. Member's party is happy to take part in a scheme to provide funds at public expense for Opposition parties?
  Mr. Delargy: I may be unusually slow tonight, but I cannot see the relevance of that question.
  Since November 1974 the Committee of Selection has nominated 85 Standing Committees on Bills. We have appointed even more Committees on Statutory Instruments, but they are in a special category of their own: anybody can attend them. Of those 85 Standing Committees, 103 places have been given to

  987
  hon. Members of minority parties—the Liberals, 42, the Scottish National Party 33, the United Ulster Unionist Party 20, Plaid Cymru seven, and the Social Democratic and Labour Party of Northern Ireland one. That was on a Committee dealing with fair employment in Northern Ireland to which are also appointed four Unionists. I think that is a pretty fair representation. At all events it has been on our part a great effort to satisfy, as we should, the minority parties in the House.
  I can add something else. In order to be more fair, all those 103 nominations have been made by the Conservative Party on our Committee. Indeed, I think that the Opposition spokesman will allow me to say that one of the suggestions made last Wednesday was that if there was parity among the parties I would be allowed to nominate an independent Member.
  Mr. Philip Holland: May I correct what the hon. Gentleman said—not "allowed to", but "would have the sole right to nominate"?
  Mr. Delargy: I thank the hon. Member. I should not really thank him, however, because I have a powerful argument against him here. I was going to say hat the Opposition were offering, as a gesture of generosity, something they considered to be a right of their own. The chief point is that of those 103 nominations made by the Conservative spokesman, exception was taken to only one. That was the only time we voted—and, incidentally, we lost. One of our chaps was absent, so the voting was four on the Conservative side and three on our side. Alas, on that occasion I could not have the casting vote.
  In our efforts we have tried to be fair to all the minority parties in the House—[An HON. MEMBER: "Not last Wednesday."] Oh, yes, we were. We obeyed Standing Orders as we interpreted them, and I repeat that the composition of the House has to be interpreted, as the former Mr. Speaker said, by the Committee of Selection and by nobody else. If the House wants Standing Orders changed, do not blame the Committee of Selection; change the Standing Orders. We do not make the Standing Orders.
  Mr. Patrick Cormack Mr. Patrick Cormack (Staffordshire, South-West)rose—
  Mr. Speaker: Order. Is the hon. Gentleman giving way?
  Mr. Delargy: I am not giving way, Mr. Speaker. Time is getting on. [HON. MEMBERS: "Give way."] We interpreted the Standing Orders in a way which we thought proper and just.
  Since then, the four Labour Members on the Committee have been accused in the House and in the Press, chiefly by people who did not know the facts, of cheating, twisting and lying, of submitting to pressure and bending the rules, and all sorts of dishonourable conduct. We are not dishonourable men, and we have done no dishonourable thing.
  10.36 p.m.
  The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I hope in a few minutes to be able to make what I consider to be a constructive proposal to the House as to how we should deal with the situation we now face. However, I should like first to explain—I believe that the House will agree with what was suggested—why I though it was right, and why the Government thought it was right, that we should proceed to deal with this matter in the way we are doing this evening.
  First of all, I believed that it was right —indeed, only a matter of natural justice—that my hon. Friend the Member for Thurrock (Mr. Delargy), the Chairman of the Committee of Selection, should have the chance to state to the House of Commons and to those who report the affairs of this House what were the reasons why his Committee reached the conclusion that it did and why the members of that Committee took the attitude they did. I believe that was right on political and general grounds, but also, on personal grounds, I believe that everyone who has heard my hon. Friend speak—certainly I have known him since 1945—will agree that we have used the word "honourable" of one another in this House but that there is no hon. Member to whom that can be applied more aptly than to my hon. Friend. It is on that basis, first, that I thought it was right that he should have the chance to put his case to the House of Commons.
  However, I also thought it was right because in dealing with any such matter as the conduct of a Committee of this

  989
  character, and certainly the Committee of Selection, such an opportunity should be given to the House.
  Then I thought that it was right that this should happen also in order that we should have the chance to repudiate the suggestions that have been made that we were in any way seeking to rig the arrangements or to do anything of the sort. It is not the case that I or any of my hon. Friends sought to bring any pressure whatsoever on the Committee of Selection. It would have been quite wrong if we had sought to do so. believe that it is right that in this House that should be made absolutely plain, and that is the fact of the matter.
  Then also I believed that it was necessary that we should be able to make it clear to the House that we have acted in strict conformity with the traditions and the properties of the House in dealing with these matters. My hon. Friend the Member for Thurrock quoted one of the principal precedents, the ruling given about what should be the relationship between the House of Commons and the Committee of Selection laid down by Mr. Speaker Whitley, an eminent Liberal Speaker. My hon. Friend quoted what was said on that occasion.
  That has been the view that has been taken generally by the House and by Speakers from 1924 onwards, in varying circumstances, about the Committee of Selection. I know that Committees of Selection have not always been the same bodies, but the House of Commons has always taken the view upon which my hon. Friend concluded his speech—that is, that Committees of Selection act under the Standing Order under which they are established, and that if their conduct is to be altered the Standing Order is to be altered.
  Sir David Renton: Will the Leader of the House tell us whether the ruling given in 1924 was given before the Standing Order was formulated in its present terms, or had it already been formulated?
  Mr. Foot: The Standing Orders stood in very much the same form. [HON. MEMBERS: "Ah!"] There was no alteration in the general form but there was an alteration in the nature of some of the Committees, because some of those
  990
  added to the Committees were added to a nucleus which prevails in all Committees. I am not saying that the actual situation in each Committee was the same, but the rule has been the same. I can quote examples which have happened since then, and I shall come later to another in another context which confirms what I am saying.
  There has never been any doubt in the House that if there was to be an alteration in the operations of the Committee of Selction it had to be done by an alteration of the Standing Order itself. It certainly should not be done by any casual statement by Members of this House or by the Government or by any such means as that. I shall come a little later to a proposal as to how we should deal with this aspect of the matter.
  Sir Derek Walker-Smith: Further to the inquiry put to the right hon. Gentleman by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton), may I say that the Standing Order in its present form dates only from 8th March 1971, in contradistinction to certain Standing Orders which go back even to the last century? Has or has not the right hon. Gentleman checked the wording of the Standing Order as it was when the ruling relied on was made in 1924 to see whether the provision was the same in regard to the question of the composition of the House being reflected?
  Mr. Foot: The question of the composition of the House being reflected was always taken into account and has been there, as far as I recollect, since 1888, if I have got the date right. So the question of the wording
  "the composition of the House"
  has been there for a very long time. There has, however, been some change in the nature of the Committees, which does not, in my opinion, make any difference to the claim which I was making or which was made by my hon. Friend about the precedents of the Committee of Selection itself and how the House of Commons should go about dealing with them.
  I well understand that hon. Members in different parts of the House, particularly in this present House of Commons,

  991
  may say "Whatever may have been the situation in the past, and whatever may have been the situation in previous Parliaments, this is a different kind of Parliament because of the numbers of parties which are represented here, because of the numbers of different parties which are represented here, because of the balance between those different parties. This House of Commons is unique in that sense and, therefore, some fresh way should be discovered for interpreting the words in the Standing Order 'the composition of the House'."
  "The composition of the House"
  does not by any means mean, as my hon. Friend the Member for Thurrock has illustrated—and he has been seeking to interpret
  "the composition of the House"—
  that all the parties which are ranged against the Government are to be locked into one category ranged against the Government. The composition of the House may vary from Bill to Bill. It may vary from moment to moment, and it may vary according to the attitude of different parties to the Government. That is the situation that my hon. Friend the Member for Thurrock has illustrated.
  As I say, I am not seeking to argue the permutations of these matters now. I believe that there is a better way in which this matter can be settled, and I shall describe that to the House in a few minutes if the House will permit me to do so. There is a different way in which this can be dealt with. All I am insisting upon—I believe that this is perfectly justified, and, indeed, I do not see how it can be contested—is that there are different interpretations of what might be a proper reflection of
  "the composition of the House".
  I can understand that some might say "There are equal numbers". That is what we say; there should be equal numbers between the Government party and all the other parties. But there are others who might make a different interpretation, taking account of the way in which the different parties normally vote in the House. That could be a perfectly legitimate position—
  Mr. Jeremy Thorpe: Will the right hon. Gentleman tell us precisely what he meant when he said:
  "Maybe we shall have to return to the kind of arrangement we had between March and October 1974 when the then Government took account of the numbers in the House. Governments have to bow to the House of Commons and the numbers in it."—[Official Report. 13th April 1976; vol. 909, c. 1219.]
  Why was the right hon. Gentleman in favour of returning to that system on 13th April but not now?
  Mr. Foot: If the right hon. Member for Devon, North (Mr. Thorpe) will listen to the end of my remarks, he will discover the answer to his question.
  I stand by every word in that statement. I still believe that the House of Commons, in seeking to apply Standing Orders and to devise Standing Orders to guide the operation of the Committee of Selection, must take account of the changing numbers of the House itself.
  As I was saying, I can understand that it may be argued in the House that we should make a fresh Standing Order to guide the Committee of Selection. I am arguing that no criticism stands against the present Committee of Selection because of the interpretation that we have made. If we reach that conclusion, we should consider together how best to deal with criticism of the Committee and with suggestions that there should be an alteration in procedures.
  Fortunately, there is an excellent precedent to deal with that situation. In 1962 the same question was raised by some Opposition Members and was put to the then Prime Minister, Mr. Harold Macmillan. The way in which the Committee of Selection did its duty was criticised and the then Prime Minister gave his reply, no doubt on behalf of members of his Government. The right hon. Members for Yeovil (Mr. Peyton) and for Penrith and The Border (Mr. Whitelaw) and the right hon. Lady the Leader of the Opposition were members of that Government and no doubt they accepted the Prime Minister's doctrine. He suggested what I am suggesting. On 6th March 1962 he said that he did not accept the criticism made of the Committee of Selection—as I do not accept the criticism today—and suggested that

  993
  the matter be referred to the Select Committee on Procedure to see whether there should be a change in the Standing Order to deal with the situation. [Interruption.] I am sorry that a suggestion from a former Conservative Prime Minister should be greeted with such scepticism.
  A Committee was established for the purpose. It did not take a great deal of time to present its work. It produced a report within a measurable time which made a recommendation to the House, not altering the Standing Order that had been in operation but sustaining that situation. That is exactly what I propose that the House should do now. [Interruption.] I cannot understand why it should be regarded as a disreputable way to deal with the matter to propose that we should deal with it by exactly the same proposition as Mr. Harold Macmillan put forward in 1962.
  Mr. Peter Tapsell: Is there not a great deal of difference between a Governments majority of 99, as it was then, and a Government minority of one now??
  Mr. Foot: It does not make any difference—[Interruption.]—to the rules of the House of Commons dealing with how we carry out our procedures. It is Tory Members who are trying to twist the rules of the House to suit themselves.
  What I propose is that we should follow exactly the precedent laid down on that occasion. I suggest that we refer the matter either to a Select Committee on Procedure or that, if it is preferred because it would be speedy—I accept that it should be dealt with speedily—the issue could be referred for immediate discussions between the usual channels with the heads of the other parties participating in the discussions. We could go about it that way if that were preferred. The purpose of such an investigation should be to see whether we believe it is right that a new Standing Order of the House should be devised to give parliamentary guidance, backed by the House, to the Committee.
  I wish to make the proposal as satisfactory as possible because I believe that it is a way of overcoming all our difficulties. It might be asked by some hon. Members, what is to happen to the Committees that have already been
  994
  established in the past few days on the form, to which objection has been taken, adopted by the Committee of Selection? That is a perfectly reasonable question. When we had the discussions on Thursday last, I said that in the light of the discussions taking place in the House we would suspend the introduction of those Committees. But it would clearly be impossible for the Government to hold up the operation of those Committees and thereby risk the whole of their legislative programme.
  However, to accommodate any doubts or difficulties which hon. Members might have in this respect, I make another suggestion, which I hope will be found to be eminently fair and reasonable. That is, that if the Committee which I propose, or the discussion between the heads of the parties, produces a Standing Order which changes the guidance to be given to the Committee of Selection and it goes through the House, the new procedure should be made to apply to those Committees that have been set up in the past few weeks.
  That would be a fair proposal. It would apply to the new Committees, to which some hon. Members are taking exception, as to the other ones. I hope that the House will recognise that in making this proposal I have made a proposal by which the House can discover a solution to the problem with which we are faced.
  I do not believe that the problem can be solved by the motion which the right hon. Lady the Leader of the Opposition and her right hon. and hon. Friends have tabled for a new Standing Order which has not been examined by the House. It is a new Standing Order which has many difficulties in it, and it does not represent what has been the normal method of dealing with the situation ever since Committees were established. It is a proposition which does not accord with the way in which we have dealt with matters.
  In the light of the discussions that I have suggested, I believe that we should speedily devise a proper way of dealing with this matter, bring it to the House speedily and remove the controversy on the issue. That is the proposition that I make to the House. I believe that it can make quite superfluous any vote tonight or tomorrow.
  10.55 p.m.
  Mr. John Peyton: Not even all the undoubted parliamentary skills of the Leader of the House can possibly disguise the paucity and meagreness of the offer that he has made It speaks volumes only for his power of salesmanship that he was able to make it at all.
  First, there is no argument about the honour and honesty of the hon. Member for Thurrock (Mr. Delargy). The hon. Gentleman has been a respected and well-liked Member for many years. [HON. MEMBERS: "Hear, hear."] Nothing in the motion on the Order Paper or in anything I shall say is any reflection upon his integrity. Nor am I suggesting that there has been any attempt—indeed, the right hon. Gentleman has specifically denied this—to rig or influence the Committee in any way. However, I wish that the right hon. Gentleman had taken the excellent opportunity afforded to him tonight to underline that by accepting otherwise than in mere words that the composition of the House had changed.
  The right hon. Gentleman has thrown a good deal of dust in the eyes of the House, but I ask him whether there has ever been a parliamentary situation when the Government of the day ceased to have a majority and the Committee of Selection went on as before and ceased, in effect, to have regard to the fact that the composition of the House had changed.
  The right hon. Gentleman used one extraordinary sentence when he said that the composition of the House might vary from moment to moment, from Bill to Bill. If the Government are to adopt that as the basis of their operations, at least we know how nimble-footed they are becoming, but that gives no reassurance to those of us who are worried about how they will handle our affairs. When the right hon. Gentleman offers us a Select Committee on Procedure or some device such as that, and adds that the new procedure, when agreed, would be applied in retrospect to the new Committees now set up, I am bound to say that I think we shall need a great deal of further explanation of what he means.
  I shall make clear how the Opposition—
  Mr. Foot: I do not think that there should be any difficulty about the matter.
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  If the new Standing Order gave rise to a different configuration of Committees—namely, different numbers from different parties arising from the new Standing Order—the new method should be applied to the Committees set up by the Committee of Selection of my hon. Friend the Member for Thurrock (Mr. Delargy). I do not think that there is any difficulty about that.
  Mr. Peyton: In that case, the right hon. Gentleman envisages the Committee of Selection confirming the appointment of Committees and inviting Members to serve on them in a speculative way, with no assurance that what they did would endure beyond the deliberations of another Committee. [HON. MEMBERS: "No."] If that is not the case, I find it difficult to understand one word of what the right hon. Gentleman said.
  Our complaint against the right hon. Gentleman and his colleagues is that the Government have always insisted that they should not be deterred from putting through controversial legislation by the mere fact that they have only a narrow majority. To them a majority is a majority, no matter how small. As long as they have that majority, nothing will deter them from pursuing the ghastly manifesto to which they constantly refer. Not one word of it is to be modified out of any regard for the opinions of other people. Therefore, they are to continue with their controversial and, in our view, destructive policy.
  The situation has changed. First of all there was a by-election, which the Government lost. Then the right hon. Member for Walsall, North (Mr. Stone-house) crossed the Floor of the House, and the Government's majority disappeared. Much has been made of the fact that some hon. Gentlemen have voted, when they have voted at all, with the Government rather than with the Opposition parties.
  Mr. George Grant: The right hon. Member for Yeovil (Mr. Peyton) has referred to a right hon. Gentleman who crossed from the opposite side. Will he also admit that that same right hon. Gentleman who crossed is still on the same manifesto?
  Mr. Peyton: The hon. Gentleman has the most engaging way of describing his party's manifesto, as if it were some kind of canoe which his erstwhile right hon. Friend the Member for Walsall, North used to cross the Floor of the House. That is an argument that the hon. Gentleman should pursue with the right hon. Gentleman rather than with me.
  Our major point is that a Committee of this House is the House of Commons in miniature. "Erskine May"—that dreadful book has just been republished in yet another edition today—lays it down that the selection of Members to serve on Standing Committees should be on the basis of Members' qualifications and the composition of the House. Until a few weeks ago that rule was followed without difficulty or quarrel by the Government and by the Committee of Selection. But now, suddenly, it has become inconvenient and, therefore, objectionable—of course, as always, on democratic principles.
  I wonder why the Government are so fussed about it. Even if the mild suggestion made by the Opposition were to be conceded, we should be far from securing all or even a tithe of what we want. The Government are so obstinate and pig-headed that they are determined to take no risks with their awful policy—that hallowed thing. They are, however, prepared to play ducks and drakes with the rules. The language which is used by the opposition compared with that which would be used were the situation reversed is mild.
  The point I am delicately approaching is that some intemperate people in judging such conduct would be tempted to describe it as cheating, but that would be greatly resented by right hon. and hon. Gentlemen on the Government Benches, who are never happy to have such slurs hurled at them. Such words are reserved for their use against other people.
  I have already paid a genuine tribute to the hon. Member for Thurrock, and I wish to comment on his remarks. He complained that the Standing Order was vague. It was not vague until the hon. Gentleman got at it. It is the aura of suggestion that is making it vague. After all these years, it seems to me that the hon. Gentleman has allowed his attention to wander ever so slightly from Standing Orders and "Erskine May". I
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  concede that anyone who allows his attention to wander from either of those dreadful books can be forgiven, but on this occasion it is serious.
  I should like to quote to the House what the hon. Gentleman said in the course of a recent broadcast:
  "We have to decide how it is that the Government can get its business through even though it has not got an overall majority on the Floor of the House, but you must remember that the Government has still got a majority of 40 over the Conservatives".
  [HON. MEMBERS: "Hear, hear."] Hon. Gentlemen on the Government side say "Hear, hear" with relief, but they are the first to cheer and welcome the irrelevancy. That does not let them out of their dilemma.
  The hon. Gentleman went on to say that none of the minor Opposition parties, if I may so respectfully term them, was elected to support the Conservative Party or to oppose the Labour Party. Equally, the hon. Gentleman must concede that the converse holds true: that none of these parties was elected to support the Labour Party or oppose the Conservative Party.
  Then we come to the question of there being no interference with Select Committees. The hon. Gentleman was galloping away a bit too fast on this one. He was expecting a total licence for a Select Committee, once appointed, to behave as it wished. There is nothing in any precedent or in anything stated from that Chair, Sir, which would justify such an argument.
  What we are saying, very mildly, to the hon. Gentleman is that he was very unwise in present circumstances to use his casting vote as he did. We therefore put down our motion, in restrained language, prejudging no one and nothing, in the hope that the Leader of the House would quickly seize the opportunity to show that he meant what he said in reply to a question of mine on 13th April.
  I was gratified on that occasion when the right hon. Gentleman made clear that he thought my question was easy and simple, as I did. The right hon. Gentleman said, however:
  "The second question the right hon. Member put was slightly more awkward but not all that difficult."
  He then drew a comparison between Committees already in being and those

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  to be set up in the future. What on earth, I ask him, could his words have meant unless it was that he intended to take some positive action which actually recognised the fact that the composition of the House had changed? The right hon. Gentleman continued:
  "Of course, the Government must take account of the alteration in numbers as must the Selection Committee."
  Mr. Foot: Of course, I believe that it is perfectly proper for the House to give new instructions or guidance to the Committee of Selection, but it must do it by changing the Standing Order. It cannot do it by a word from the Leader of the House.
  Mr. Peyton: I do not think there is much argument between the right hon. Gentleman and myself on this, but I do not believe that it is necessary to change the Standing Orders if a Select Committee has plainly, and in the view of the House, erred in its construction of Standing Orders.
  The right hon. Gentleman went on to say, emphasising his words but taking account very clearly of the fact that the situation had changed:
  "Maybe we shall have to return to the kind of arrangement we had between March and October 1974."—[Official Report, 13th April 1976; Vol. 909, c. 1219.]
  Very well. What a good idea! Perhaps the right hon. Gentleman would care to look at the list of Committees set up in that Parliament. Let him look particularly at two not absolutely uncontroversial Bills. The Standing Committee on the Trade Union and Labour Relations Bill had 30 members, 14 Labour, 14 Conservatives, one Liberal and one Scottish National Party Member. The Standing Committee on the Finance Bill—very relevant to this discussion—had 40 members, 19 Labour, 19 Conservatives, one Liberal and one Ulster Unionist.
  In the House the other day the Prime Minister, answering questions in a most engaging way, told us that he had been whiling away the time waiting for his ordeal by reading "Erskine May". I find that a little difficult to believe, but that was what he told us. He was a little too coy, however, to tell us which page he had been studying. One was hardly surprised by that fact when one came to realise that the bit to which he
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  referred subsequently did not occur in "Erskine May" at all Probably he had been reading a different book and had merely mistaken or misread the title page.
  Then we have had over the weekend the great thrill of one of those really characteristically delicate interventions which we get every now and again from that master of refinement the Chancellor of the Exchequer, who, speaking without restraint in the open air, attacked us as Trotskyites. There are so many things that I could say. Is not this a classic example of Satan rebuking sin? However, perhaps I should content myself with saying that the right hon. Gentleman, in this argument as in so many other arguments, has the advantage of me, because he is much more familiar with the jargon of that party than I am.
  I come back to the Leader of the House, whose skills many of us have admired. One can only be sorry when someone with those formidable skills finds himself confronted with such a rotten case that not even the great shining garment of his eloquence is sufficient to cover up the horror of it.
  The right hon. Gentleman—[Interruption.]—offers us a Select Committee on Procedure. I thought I heard one hon. Gentleman opposite say "Do not get cynical." It is Labour Members who make me cynical.
  The right hon. Gentleman suggested that a Select Committee on Procedure should be set up. We agree that the setting up of such a Committee is well overdue. But we object to letting the Government's programme of legislation go ahead as if nothing had changed.[HON. MEMBERS: "Ah"] The fact is that because the Opposition have not always seized upon every opportunity to exploit the Government's disadvantages they have sometimes been mistakenly criticised.
  We now conclude that the Government are claiming that they alone have all the rights and the Opposition have none, that the referee is to be consigned to the stand and have his whistle taken away, that the rule book should be withdrawn while it is rewritten and that, meanwhile, Committees set up as before, under the old situation, will decide upon a legislative programme which we find objectionable and highly obnoxious.

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  The Government may not like our motion, but they should at least show respect for the rules which make possible the passage of their legislative programme. They should pause—seriously pause—before they persist in a course which could and will easily undermine the whole of the working of Parliament.
  11.18 p.m.
  Mr. Robert Mellish: I hope to try to cool some of the argument and get us back to the reality of the situation by calling upon my experience over the last few years of situations of this kind.
  The success of this and of many other Parliaments has been the result of what are called "the usual channels". Many hon. Members on both sides of the House sneer and jeer at the usual channels. I recall that a Chief Whip of the Liberal Party once described the usual channels as a cooked-up, sad story. But the fact is that this House cannot function without them. Let everybody understand that without the usual channels you, Mr. Speaker, could not do your job properly. Somehow the system works.
  What are the usual channels about? There is nothing mysterious about them. They are a discussion by, I hope, civilised people trying to arrive at the best pay in which the business of the coming week can be formulated and arranged.
  I should like to put on record that when the Opposition Chief Whip—I know of no more honourable man—gave me an undertaking on behalf of his party, he kept his word. I knew he could not always control his mavericks. I know how it is. I had my mavericks as well. The difference was in the way one dealt with them. I used to keep by fingers crossed when a Division took place late at night. But it was the discussions which counted.
  To my right hon. Friends on the Front Bench I say that one can win a battle, but I am not sure that at the end of the day one wins the war.
  To the Chairman of the Selection Committee I say that there can be no doubt that the structure of the House was changed by the defection of the right hon. Member for Walsall, North (Mr. Stone-house). He will not be surprised to learn that I was not surprised by his defection. He was not much good to me
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  when he was here anyway. When I did my sums, as I did every day—surprise, surprise, I can count—I always assumed that the right hon. Member for Walsall, North would vote against the Government. If he voted with us or abstained, that was a bonus. In the whole structure of the way in which we handled our business, I never counted him as of any consequence whatever to the Labour Party. Now that he has gone over to the official Opposition, and formed some silly daft party, the name of which I do not know, it cannot be denied that there has been a change. That is a simple, elementary fact.
  If the argument used by the main Opposition party is the pursuit of parity and the inevitable conclusion to which that leads, what does parity mean? On Committees on normal Bills there are nine Government Members and seven Opposition Members, making a total of 16. In the parity argument it would be eight and eight. Let us be quite clear that eight Opposition Members does not mean eight Conservatives. It means seven Conservatives; that is the most they can expect out of eight. Who is the eighth Member to be? That is an interesting position. There is the Liberal Party, which I know so well. Do not let the Liberals ever believe that they are desperately anxious to get on to Committees, because a more bone idle lot I have never met. I remember reading a copy of one document issued by the Liberal Chief Whip, who said "Please could we all be together here in one heap"—and that with 14 Members. He should have my job. It would have done him the world of good he would have lost some weight.
  Then there is the Scottish National Party, and a first-class shower they are. They hate the English—
  Mrs. Winifred Ewing: Rubbish!
  Mr. Mellish: They hate the English, they detest the Welsh, they detest the Irish. The only people they are concerned with are the Scots. That is fair enough, but they cannot complain if they never get on a Committee, except for the Scottish Grand Committee. That deals with them.
  Mrs. Winifred Ewing: That is cheap.
  Mr. Mellish: The hon. Lady should shut up.
  I hope I shall not be regarded as unnecessarily flattering, but I have enormous regard for the right hon. Member for Down, South (Mr. Powell). He is a first-class parliamentarian. Though I disagree with many of his political views and attitudes, his knowledge of the House and its procedures cannot be denied. Negotiations with the right hon. Member as an individual could be considered. I am not so sure about his hon. Friends. Somebody once said that the Irish were as thick as two planks, but the knowledge which the right hon. Member for Down, South has of parliamentary procedure cannot be ignored.
  There are only three of the Plaid Cymru characters, and two of them are very decent. They are young and intelligent, but they have a leader who is so reactionary that he makes me feel ill. He might just as well join the Conservative Party and have done with it. Until he came in, the other two characters were very decent.
  We are talking of the one Committee member over whom the Conservatives have no control.
  Mr. Reginald Eyre: Will the right hon. Member give way?
  Mr. Mellish: It had better be intelligent.
  Mr. Eyre: The right hon. Gentleman spoke about a Committee of 16, with eight Labour and seven Conservative Members and one representative of a minority party to be nominated by the Chairman of the Committee of Selection. Will he accept that this was precisely the proposition put by Opposition Members in the Selection Committee?
  Mr. Mellish: I am trying to make my own case in my own way. Believe it or not, I am trying to cool down the argument. I am suggesting to my hon. Friend the Chairman of the Committee of Selection some of the matters he should take into account. Whether he will do so is another matter.
  If we get a Committee which is difficult—and, my goodness, I have had some—we change the Bill on the Floor of the House. This is where Bills start with
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  their Second Readings, this is where they are finally changed. Even on an eight-eight Committee, the Chairman is duty bound not to accept wrecking amendments. He must do his best to send the Bill back almost intact to the House.
  I do not see why we are getting worked up. The final decision on Bills will be made on the Floor of the House. When I was Chief Whip, colleagues often said that they had had a terrible time in Committee with three or four defeats in a morning. I replied "So what? We can deal with that on the Floor of the House."
  There are two concepts to our democracy which must never be shaken: Governments must govern and Oppositions must oppose. Interfering with either of these concepts can cause great dangers for everything we stand for and everything for which we have fought. Democracy really only started in this country in the 1920s. People had to fight for democracy, for votes for women. Do not let us tamper with it.
  We can finally settle disputes on the Floor of the House. If a Committee misbehaves and an Opposition are aiming to frustrate or destroy a Bill, the Government must have the alternative of a guillotine motion.
  I have never believed that guillotine motions were a bad thing. I speak as an ex-party manager. The one thing that destroyed me again and again as a party manager was never knowing when a Bill would come back to the House and then go to the other place. No democracy expects a situation of that kind to go on without some form of assurance of getting the Bill through.
  The Conservative Party or one of the other Opposition parties may be the Government of the day in the years that lie ahead—I do not think it will be in the immediate future—and I put it to them that there is nothing immoral in a guillotine motion. Let the Opposition beware. They have the right to fight and the right to oppose, but the Government of the day have the right to get their legislation through, and we shall get our legislation through by the only means left to us.
  I put it to my right hon. and hon. Friends that two-thirds of our manifesto

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  on which I fought the last General Election—and on which the right hon. Member for Walsall, North (Mr. Stonehouse) fought it—is already on the statute book. What about that? That cannot be bad for democracy as we know it in this House. I am saying that two-thirds of the manifesto is already here in statute form.
  I say to my hon. Friend the Member for Thurrock (Mr. Delargy) that it is against that background that we should face the problem. I ask for no losing of tempers. There is no one on the Government Front Bench who can be accused of corruption or an attempt to do anything dishonest. No one can accuse my hon. Friend the Member for Thurrock of being dishonest. Let us start talking about the best way to deal with this problem. My right hon. Friend the Leader of the House has made an honourable suggestion. I do not know whether it is practical, but I do know that unless the usual channels function in the way that everyone in this House wants them to do we shall all suffer.
  I have been a bad member of the usual channels. I remember that on the Industrial Relations Bill I drove some of my right hon. Friends almost frantic, because when this House sits through the night it gets no votes outside. It earns nothing but contempt from the public when it does that. There is not one vote to be gained from it. People outside marvel at how stupid we can be. That is why timetable motions are relevant. My right hon. Friends have the right to decide when discussion on a Bill shall be brought to an end, and the majority of hon. Members and the minority parties understand that and support it.
  My day as Chief Whip is over, and for that I am grateful. Yes, I am very grateful indeed. I am not one of those who complain about what may happen now or in the future, and on looking back I can say that I had the experience of doing a job on behalf of the party of which I am proud and of working for a House of Commons of which I am even more proud.
  11.33 p.m.
  Mr. Jeremy Thorpe: The right hon. Member for Bermondsey (Mr. Mellish) has done a great service to this debate because he tried to speak on behalf of the House of Commons as
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  a whole, and I shall attempt, albeit inadequately, to follow in that spirit.
  What the right hon. Gentleman was saying was that although there may be a tactical victory here or there, the whole basis on which the House operates is an acceptance of certain conventions, certain tolerances and a certain inbuilt fairness. The right hon. Gentleman got the very point which I believe the hon. Member for Thurrock (Mr. Delargy) did not get: that we do not believe that Standing Order No. 62 has been properly interpreted to reflect the changed balance in the House. That is what we are saying.
  I must say that I enjoyed the right hon. Gentleman's thumb-nail sketch of the House of Commons. He was the rich man's Andrew Roth, although he collectivised and got one of his remarks wrong. He got the leader of one national party mixed up with another one. He thought one was on the Left and one was on the Right. I think he got them muddled up but, be that as it may, I leave them to defend their own position. However, when the hon. Gentleman said that it was eight to eight, that meant eight for the Government, seven for the Opposition and one for the minority parties. That was implicit in the Leader of the Opposition's motion. When the right hon. Gentleman says that that might produce problems, of course he is quite right. But I believe it is a problem which can be overcome, and I believe that it was overcome between March and October 1974.
  I shall mention one or two Bills which the right hon. Member for Yeovil (Mr. Peyton) did not mention. On the Prices Bill, there were 11 Labour Members, 10 Conservatives and one Liberal, so that the Government, in fact, only had parity. On the Housing Bill there were 11 Labour Members, 10 Conservatives and one Plaid Cymru—again, one minority party, parity to the Government and not a majority. The right hon. Gentleman mentioned the Trade Union and Labour Relations Bill and the Finance Bill. On the former there were 14 Labour Members, 14 Conservatives, one Liberal and one Scottish National, while on the Finance Bill there were 19 Labour Members, 19 Conservatives, one Liberal and one Ulster Unionist.
  Far be it for me to speak on behalf on the minority parties—it is sometimes difficult enough to speak on behalf of my

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  own party—but we are talking about the changed balance of the House of Commons, which means that what we are asking for is equality between the Government side and the Opposition side. If that means that the minority parties have to discuss between themselves who shall serve on each Committee, it will certainly be their responsibility to come up with a civilised proposal and I see no reason why they should not be forthcoming.
  The speech which we would like to have heard tonight, which would perhaps have been one of the greatest parliamentary performances for many years, would have been the speech by the right hon. Member for Ebbw Vale (Mr. Foot), now Leader of the House, had he been sitting on the Opposition Front Bench. I am quite certain that we would have had at least one quotation from Burke. Cicero and the Greeks and the Romans would all have been pulled in. There would have been a reference to Churchill for the benefit of the Conservative Party if they were on the Government Benches, and no doubt Mr. Gladstone and others would have been brought in. By this stage the right hon. Gentleman's hair would simply have been flowing in the wind of his own creation. But that was not his position.
  I acquit the Government of giving orders to the Committee of Selection, because the Committee of Selection did precisely the reverse of what the right hon. Gentleman thought they were going to do.
  On 13th April—the right hon. Member for Yeovil has quoted it—the Leader of the House said:
  "Of course, the Government must take account of the alteration in numbers as must the Selection Committee".
  Well, they did not.
  "Maybe we shall have to return to the kind of arrangement we had between March and October 1974 when the then Government took account of the numbers in the House. Governments have to bow to the House of Commons and the numbers in it."—[Official Report, 13th April 1976, Vol. 909, c. 1219.]
  That was clearly what the right hon. Gentleman expected, if words mean anything, was likely to happen—that the Committee would have to take account of the changed balance which he accepted had occurred. Of course, it might well mean a return to the sort
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  of system we had between March and October 1974 when the Government sometimes had parity and were sometimes in a minority. No one is asking for a minority situation. We are asking for parity between the Government side and the Opposition side.
  It seems to me that the precedents are perfectly straightforward. What we are saying to the right hon. Gentleman is that we do not want a new Standing Order because we have the appropriate Standing Order—No. 62(2) relating to the composition of the House. Why we are saying that this is a rigged result is because there has been a misinterpretation of Standing Order No. 62.
  The Prime Minister on Thursday, when I asked him, simply said "Well, what is Standing Order 62?". I acquit the hon. Member for Thurrock of ignorance on this particular aspect, but when it comes to the Prime Minister I am reminded of the present Chancellor of the Duchy of Lancaster, who once said that he would always acquit any Government of dishonesty when a simple explanation of stupidity would suffice. I acquit the right hon. Gentleman as well. I do not think that at this stage Standing Order No. 62 was engraven on his heart.
  Then the Prime Minister came up with a very dangerous new constitutional argument—not one adopted by the hon. Member for Thurrock—that if the Government get a majority on Second Reading they must automatically have a majority in the Committee. What happens, for example, if it is an unopposed Second Reading? Are there to be no Opposition Members on the Committee? It is a ridiculous argument. No one but the Prime Minister has put it forward. The Leader of the House did not put it forward. The hon. Member for Thurrock did not put it forward, and neither did the former Chief Whip. It is a constitutional nonsense which should be dead and buried.
  I very much challenge the interpretation placed upon the 1924 ruling. Is it seriously to be said that the House of Commons can never pass judgment upon the way in which the Standing Orders of the House are implemented on its behalf by a Select Committee which it has set up? If that is the view, there is

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  only one alternative, and that is to discharge that Committee of Selection. That would have to be done by a motion, for which time would have to be provided in Private Business.
  If the Committee of Selection would find it helpful to have an interpretation of what Standing Order No. 62 means by saying
  "have regard…to the composition of the House",
  I for one would be very happy to see a body set up to interpret it. But I do not believe that it is necessary on the basis of past precedents. We have seen what happened. The right hon. Member for Bermondsey referred to the most recent precedent, which was the previous minority situation between March and October 1974. Therefore, I believe that the right hon. Lady the Leader of the Opposition is perfectly correct in saying that we should discharge those Committees that have been set up, because in my view they have not been set up on the basis of a correct implementation of Standing Order No. 62.
  However, there is one other matter that is equally important. I believe not only that we should maintain the balance in the House on Standing Committees but that the Committee of Selection itself should reflect the composition of the House. That might well mean a change in Standing Orders. It would be Standing Order No. 109, of which no doubt the Prime Minister has also heard, but it relates to the Private Business. The last occasion on which it was amended was to reduce the numbers from 11 to nine. I see no reason why, by a very simple amendment, the numbers could not be increased to 10, five for the Government and five for the Opposition parties, meaning that four would be official Opposition and one would be from a minority party.
  As the hon. Member for Thurrock properly said, we are dealing in this House with 40 Members from five Opposition parties, and it is no good anyone saying "Oh, well, Bloggins and somebody else usually vote Labour, so we can count them as ours. "The fact that someone comes into one's back yard regularly does not entitle one to claim in any paternity action. As my hon. Friend the Member for Berwick-upon-
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  Tweed (Mr. Beith) acutely pointed out, one of these adopted children from Belfast is recognised as an Opposition party for the purposes of receiving money granted to Opposition parties under the Short plan. The Government cannot have it both ways. If that hon. Member is so clasped to their bosom, no doubt all the Opposition minority parties could share what little money he receives. At least, that would be logical.
  What we need, first, is to realise that the issue is a balance of equality between the Government and the Opposition parties. The second point is that we must get a balance that reflects the views of the House of Commons on the Committee of Selection itself. If that cannot be done, if we cannot reach agreement on that, if we cannot get an interpretation of Standing Order No. 62 that is generally acceptable to the House and will last the vicissitudes of many years, we shall have this issue reopened every time a change is brought about by a by-election here or there. What is vitally important to the House of Commons is that we interpret this Standing Order in a way that is generally accepted and agreed. If that means giving further instructions or guidance to the Committee of Selection, that must be done.
  I do not want to end on a harsh note, but if the right hon. Gentleman says that the Committee of Selection and its rulings cannot be changed and that it was perfectly well carrying out Standing Order No. 62 within the meaning of the Standing Order on the basis of past precedents, he leaves us with only one option and that is to put down a motion to discharge that Committee. I warn him that that may well be a proposition for which there may be a majority in the House.
  Mr. Foot: May I quote the words that Harold Macmillan used on this precise subject of how a change could be made? He said in March 1962:
  "I do not think it would be right to criticise the Selection Committee, which does its duty as it thinks right in accordance with the Standing Orders. If the matter should be changed, then the Standing Orders must be changed."—[Official Report, 6th March 1962; Vol. 655, cc. 203–4.]
  That is the proposition according to which the House of Commons has always sought to conduct its business.
  Mr. Thorpe: I am grateful to the right hon. Gentleman. Would he not confirm that this was a criticism made before these appointments had been made? We are now dealing with a situation in which the Committee has acted on our behalf. If the House of Commons is a free House of Commons and disapproves of what has happened and disapproves of Standing Orders, it is entitled to say so.
  11.47 p.m.
  Mr. Richard Crawshaw: This debate is one of the most important that we have had for some time. There is no doubt at all that unless there are usual channels, and so on, between the two sides of this House, Parliament becomes impossible. It certainly becomes impossible if there is any suspicion that the party in power is using unfair means to get legislation through.
  If anything disappoints me tonight, apart from having to say what I am going to say, it is that the speech of my right hon. Friend the Member for Bermondsey (Mr. Mellish) was not made from the Dispatch Box. I believe that what he said represents the feeling of the majority of Members.
  I do not want to be unduly critical of my right hon. Friend the Leader of the House. I believe that he is in a difficult situation. I think that, quite wrongly, he feels that he must give undivided support to his colleague who is Chairman of the Committee of Selection. It is unfortunate that he did that, because the proposal that he made tonight is one that would have commended itself to the House had he not prefaced it with certain remarks that created a certain amount of doubt whether he felt that, ultimately, there should be equality between the two sides of the House. If, at some stage, it is possible for him to make, it clear that his mind is completely open on this matter, I am sure that his proposal will commend itself to the majority of hon. Members opposite.
  People talk about changing the Standing Order. For the life of me, I cannot see anything ambiguous about its working. When one talks about the composition of the House, one talks about the numbers in the House. If there is any doubt about that, I call the attention of hon. Members to a statement made by Mr. Speaker on 8th March 1951. At that
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  time there was equality in the Committees, but the Labour Government had a majority—a very small one—in the House. The Chairman and Deputy-Chairman of the Committee of Selection discussed this matter and they could not come to a decision, so they went to the Speaker and asked his advice on the matter.
  In a statement, which was discussed in the House, the Speaker made it quite clear that when they came to see him he said that they must have regard to the composition of the House. In fact, he said that a Committee of 20 should give the Labour Party 11 and the Opposition 9. That was at a time when the majority of the Labour Party went to two places of decimals in the House. My hon. Friend the Member for Thurrock (Mr. Delargy), the Chairman of the Committee, for whom I have tremendous respect, was ill advised to use his casting vote in this way.
  Mr. Delargy: I was not advised.
  Mr. Crawshaw: I did not use the word "advised" in that sense. My hon. Friend was very unwise to use his casting vote. For the life of me I cannot think why he rejected the offer of equality that would allow him to select the odd man out on the Committee. Legally, this side of the House is not entitled to that.
  It has been pointed out that equality on a Committee does not mean that the Government cannot get their business through and in that respect I correct the interpretation of my right hon. Friend the Member for Bermondsey. The Chairman of a Committee can select amendments, but it is important to remember that he votes according to precedent. If it is an amendment to change the Bill, he must vote to leave the Bill as it was when it left the House.
  Mr. Mellish: That is what I said.
  Mr. Crawshaw: If that is what my right hon. Friend said, I accept it. [Interruption.] I do not expect help from my hon. Friends who have read nothing about the matter. Some of them are not even concerned about it. They merely mouth democracy without taking part in it. The way in which the Opposition will select their members is not the point of the discussion. The debate concerns

  1013
  the question of how many seats we should have on a Committee.
  There is no doubt that composition—and there is no ambiguity about the wording—as Mr. Speaker said in 1951, means Members in the House. We should have equality on the Committee, and my hon. Friend the Member for Thurrock was unwise to reject the offer made.
  Of course, when a Chairman uses his casting vote in Committee, the Bill can come back to the House unchanged. It does not mean that the party cannot get its legislation. It might mean that legislation will be better thought out than it sometimes is before it goes to Committee, and therefore there will be no need for amendments. The Government will certainly not be hamstrung if there is equality in Committee. To say, because we may not get legislation through, that these rules are ambiguous, when they are not, does no service to the House or to my right hon. Friend the Leader of the House.
  11.54 p.m.
  Mr. Philip Holland: Since the hon. Member for Thurrock (Mr. Delargy) represents the views of only half the Committee it may be convenient if I explain the mechanics of the Committee of Selection as I understand and operate them. I shall also explain the view of the other half of the Committee membership.
  In the normal weekly operation of the process of selection my function, on behalf of all parties other than the Labour Party, closely parallels that of the Chairman of the Committee on behalf of the Labour Party. The factors that I regard as governing selection are availability—because we cannot use the same Members on several Committees running concurrently—and Members' interests, so far as they are known to me. Because these usually fail to provide an adequate number for a Committee there always has to be a certain random element at the end of the day. We have to have, perhaps, "pressed" men.
  It has never been my practice to consult Division lists. It may be argued that I ought to. On the other hand, it may be argued that I ought not. I am explaining what my practice is. My con-
  1014
  cern—and this is why it is not my practice to consult Division lists—is always to try to ensure that in the preparatory work each party, other than the Labour Party, is properly represented on a fair spread of Committees in accordance with the party strength in the House.
  Mr. Gordon Wilson: I have been following the hon. Members' argument with some interest. In those circumstances, why was it that the Scottish National Party was kept off the Salmon and Freshwater Fisheries [Lords] Bill, which was a Scottish Bill? Why was it kept off the Housing (Amendment) (Scotland) Bill? In view of the hon. Gentleman's interest in making sure that my party is properly represented in relation to its support, why, when the Consentatives have only five seats more in Scotland than we have, with a smaller share of the vote, have they six or seven Members on Scottish Standing Committees, whereas we are left with one, it we are lucky?
  Mr. Holland: The hon. Member has raised a number of questions and there is not time to answer them in full. I should be glad to talk to him afterwards and explain things to him. The difficulty about the representation of a minority party on a Bill is that there are often other minority parties with the same interests. There has to be a variation in the representatives of minority parties. There are liberal Members who have an interest in Scottish matters. Sometimes we have to put them on to a Bill dealing with Scottish matters. I do my best, and when I have difficulties I often consult the minority parties and seek their advice. The SNP knows that I seek its advice from time to time when I am in a difficulty about selecting the right Member for a particular Committee.
  What I have never done, and what, until last Wednesday, no member of the present Committee of Selection has ever done, is to decide what is a fair division as between the parties, on Standing Committees of different sizes. That decision is crucial to the responsibility of the Committee of Selection to ensure that Standing Committees reflect the composition of the House. It is a responsibility that in the past has been based precisely on a mathematical table prepared by the

  1015
  impartial Clerk of the Committee and adopted without amendment by the Committee.
  Since the Committee has no authority to chop hon. Members into little pieces —although sometimes there is the temptation—the Clerk does a rounding-up or rounding-down operation to achieve the number of whole Members for each Committee. In the table produced following the last General Election, the Clerk, in his wisdom, decided to round up almost any decimal point to the next number in the column for Labour Members and to reduce, in some cases, to the lower figure almost any fraction for Conservative Members.
  For example, in a Committee of 16, the proper proportion would be 8·048 Labour Members to 6·96 Conservative Members to 0·984 Members of minority parties. This was translated by the Clerk into whole numbers, so that the 8·048 became nine Labour Members, the 6·96 became six Conservative Members and the ·984 became one minority party member. For a Committee of 21—to give an odd number and a larger Committee—the figure of 10·06 Labour Members became 11, while 8·7 Conservatives became nine and 1·23 others became one.
  Thus, Labour Members have been over-represented, in fractional terms, on the basis of the tables prepared by the Clerk. That is probably because he took the view that even an overall majority of one in the House as a whole should be reflected by the smallest possible overall majority in Standing Committees, which again is one. Nobody disputed that in the Committee of Selection, because as long as the table was exactly as presented by the Clerk it was objective and impartial. It was accepted that any weighting given would be for administrative or practical reasons rather than to give any party political advantage to either side.
  I should point out that in round figures each member of a Committee represents about 40 Members in the House. Actually, it is 38 to 40, depending on whether the Committee has 16 or 18 members. That is why a Labour majority of 38 or 39, or whatever it may be, over the Conservatives in the House, entitles Labour to a majority of one over Con-
  1016
  servatives. That is not in dispute, and it was not in dispute in the Selection Committee.
  In the same-sized Committee, about 40 members of a group of minority parties, taken together, are entitled to one Member in each Committee. That partly answers the point raised by the hon. Member for Dundee, East (Mr. Wilson)—namely, why we cannot always put Scottish nationalists on all Committees dealing with Scottish Bills. This is a difficult problem.
  Although the Labour Party has been heavily over-represented in Standing Committees, the recent change in the composition of the House would not have caused any need for a change in Committee. But it was the crossing of the Floor of the House of the right hon. Member for Walsall, North (Mr. Stonehouse) that was the final touch that tipped the scales. So it was that the Clerk of the Committee, at the request of the Committee at its meeting just before the Easter Recess, prepared a full set of tables setting out the exact entitlement of each party, or group of parties, in Standing Committees of 16 to 45 Members. It was that impartial and objective set of tables, prepared by a neutral officer of the House, that the members of the Committee of Selection refused to accept, because it reflected the loss of overall majority that has occurred in the House.
  In a Committee of 16, for example, on the new tables prepared by the Clerk, Labour would be entitled to 7·98, Conservatives to 7·2 and others to 1·01. It is almost an exact 8:7:1: relationship. The argument was used that if the Government won a Second Reading Division on a controversial piece of legislation with the aid of one or more members of a minority party, that would not be a true reflection of the existing parity. It seemed to me, and to most of the members of the Committee, that there was a good deal of substance in that argument. We therefore proposed to preserve the ground rules established by custom and practice and work to the table prepared by the Clerk. Are we to accept in all such cases that the minority party members, or members of the Committee, should be the sole selection of the Labour side of the Committee? This would have effectively given the Government a majority of two in all Committees on controversial business

  1017
  where they had the support of minority parties on Second Reading.
  Mr. Harry Lamborn: Is the hon. Gentleman aware that he is suggesting that on any controversial Bill a Member of a minority party would be placed on the Bill only if he voted with the Government?
  Mr. Holland: No. The hon. Gentleman knows full well—he was sitting on the Committee last Wednesday—that if the Government won a Second Reading with the help of minority party Members, they could choose one of the minority party Members to support them on the Committee. That would be reasonable and fair. We recognise that.
  Mr. Thorpe: Is not the converse of this strange formula that the more a minority party votes against a Second Reading, and the smaller the Government's majority, the more chance there is of getting appointed, on the basis of parity between Government and Opposition?
  Mr. Holland: Yes. It is also true that if the minority parties vote against the Government on Second Reading the Government do not get a Second Reading.
  What was lost last Wednesday was not just a vote about whether the Government should expect the Committee of Selection to reflect the composition of the House; what was lost was the impartiality of selection in the House. What was also lost was confidence and good will between members of the Committee—a Committee which, until now, has always relied on that confidence for the efficient conduct of its business.
  I join with the hon. Member for Thurrock in deeply regretting this situation. Unless reason prevails and an amicable formula can be worked out, I believe that the House will come to regret what has happened.
  12.6 a.m.
  Mr. Gordon Wilson: Since I represent a party that has been through an earlier period of time when there was a minority Government, I wish to make one or two observations.
  A simple reading of Standing Order No. 62 leads one to believe that there is no proper interpretation of the phrase
  1018
  "composition of the House" that would meet the explanation offered by the Chairman of the Committee of Selection, or that put forward by the right hon. Gentleman the Leader of the House. I shall not refer to some of the cheap-jack arguments deployed by the right hon. Member for Bermondsey (Mr. Mellish), but he was on sounder ground when he said that the Government would still be in a fairly strong position if they gave up their obvious attempt to appear to hang on to power, by whatever means. The attempt by which they have chosen to safeguard their interests will merit very little respect in Scotland, or, indeed, in England.
  It has already been said that the Government have achieved about 66 per cent. of their manifesto commitment—and it is probably true to say that most of their contentious legislation has been included in that 66 per cent. Obviously, the Government's strategy was to get through most of their controversial legislation before they lost their majority. Had the Government the sense to think out that strategy they would have been saved a great deal of embarrassment.
  There are two points with which I wish to deal on behalf of my party. I wish, first, to deal with the need for representation of minority parties in the Committee of Selection. It is true to say that that Committee has nominated Members of my party to serve on Committees in which they have been interested. The Committee occasionally has accepted advice and guidance given to it, and also advice sought by its members. But on other occasions the behaviour of the Committee has appeared somewhat erratic. I was recently asked for recommendations in relation to appointment of Members to a Scottish Bill. I put forward three names, but a fourth name was eventually decided on by the Committee of Selection. That fourth name was mine, and I could not serve on the new Committee because I was already serving on another Committee. Therefore, the reasoning of the Committee is not always clear to us. Since we are not represented on the Committee of Selection, we have no understanding of the way in which it operates.
  Mr. Thorpe: Is the hon. Gentleman aware that up to 1950 there were three political parties in the House. It has not always been a two-party preserve.
  Mr. Wilson: The right hon. Member for Devon, North (Mr. Thorpe) is making the point that in the past there has been third-party representation. I should like to suggest how minority parties should be represented on the Committee of Selection so as to be capable of dealing with all the many and varied interests involved.
  When the smaller parties were offered two Supply days, to be divided between them, it was left to the parties to arrive at a formula for the division of the time and when the time might be taken, and the parties were able to work out a satisfactory programme. I do not agree that it should be for the Government to select a representative from the smaller parties; it should be for the parties that wish to be represented on the Committee of Selection, by agreement, to choose a common representative.
  Scottish National Party Members spend a great deal of Committee time on United Kingdom Committees, although the SNP, in terms of representation in Scotland, is the third largest party in the House. Our representation on Scottish Standing Committees is not equivalent to our standing or status in Scotland, or to the specific interest that we have in our own country and its legislation. A proposal was put forward through the usual channels by the right hon. Member for Bermondsey and the former Leader of the House for a formula to achieve satisfactory representation, but I am not sure what has happened to the channels. They seem to be bogged down.
  If the official Opposition are claiming a right to alter the balance of the Committee of Selection to account for the overall political situation, we in Scotland have the right to have our situation clarified. I hope there will be an opportunity for both the Government and the official Opposition to comment on this clamant injustice. Otherwise, the people in Scotland will take it as an unjustifiable defence of privilege.
  12.12 a.m.
  Mr. William Whitelaw: The right hon. Member for Bermondsey (Mr. Mellish) said—I
  could not agree with him more—that it is extremely unfortunate that matters concerning the usual channels have to be debated acrimoniously in the House. As one who has spent as much time as anyone, save my right hon. Friend the Member for Sidcup (Mr. Heath), in the usual channels, I regard it as a great pity.
  Is it really necessary to continue with this argument? As the right hon. Member for Bermondsey said, the Standing Order is perfectly clear. Why do we have to change it? Why cannot we accept the position that arose between February and October 1964, as my right hon. Friend the Member for Yeovil (Mr. Peyton) suggested? Why cannot we be sensible? Why do we have to make all this fuss, when we can perfectly well do what the right hon. Member for Bermondsey suggested?
  Mr. Foot: With the leave of the House, Mr. Speaker, I should like to speak again. I fully concur with what was said by my right hon. Friend the Member for Bermondsey (Mr. Mellish) about the high desirability—I would almost say the necessity—of sustaining the proper functioning of the usual channels, because without that we cannot function properly. I accept that.
  I do not accept that my hon. Friend the Member for Thurrock (Mr. Delargy) behaved dishonourably or wrongly. I do not accept that the Committee of Selection behaved wrongly. The members of the Committee interpreted the situation as they saw it. The only way in which we can change that situation according to the precedents of the House is by changing the Standing Order. I suggest to the House that we should adopt the proposal made and thereby get common agreement in the House for dealing with the question.
  Mr. Humphrey Atkins rose in his place and claimed to move. That the Question be now put.
  Question, That the Question be now put, put and agreed to.
  Question put accordingly, That this House do now adjourn:—
  The House divided: Ayes 280, Noes 286.

  Division No.117.]

  AYES

  [12.14 a.m

  Adley, Robert

  Aitken, Jonathan

  Alison, Michael

  Amery, Rt Hon Julian

  Gow, Ian (Eastbourne)

  Montgomery, Fergus

  Arnold, Tom

  Gower, Sir Raymond (Barry)

  Moore, John (Croydon C)

  Atkins, Rt Hon H. (Spelthorne)

  Grant, Anthony (Harrow C)

  More, Jasper (Ludlow)

  Awdry, Daniel

  Gray, Hamish

  Morgan, Geraint

  Bain, Mrs Margaret

  Griffiths, Eldon

  Morgan-Giles, Rear-Admiral

  Baker, Kenneth

  Grimond, Rt Hon J.

  Morris, Michael (Northampton S)

  Banks, Robert

  Grist, Ian

  Morrison, Charles (Devizes)

  Beith, A. J.

  Grylls, Michael

  Morrison, Hon Peter (Chester)

  Bell, Ronald

  Hall, Sir John

  Mudd, David

  Bennett, Dr Reginald (Fareham)

  Hall-Davis, A. G. F.

  Neave, Airey

  Benyon, W.

  Hamilton, Michael (Salisbury)

  Nelson, Anthony

  Berry, Hon Anthony

  Hampson, Dr Keith

  Neubert, Michael

  Biffen, John

  Hannam, John

  Newton, Tony

  Biggs-Davison, John

  Harvie Anderson, Rt Hon Miss

  Nott, John

  Blaker, Peter

  Hastings, Stephen

  Onslow, Cranley

  Body, Richard

  Havers, Sir Michael

  Oppenheim, Mrs Sally

  Boscawen, Hon Robert

  Hayhoe, Barney

  Osborn, John

  Bottomley, Peter

  Heath, Rt Hon Edward

  Page, Rt Hon R. Graham (Crosby)

  Bowden, A. (Brighton, Kemptown)

  Henderson, Douglas

  Paisley, Rev Ian

  Boyson, Dr Rhodes (Brent)

  Heseltine, Michael

  Pardoe, John

  Bradford, Rev Robert

  Hicks, Robert

  Pattie, Geoffrey

  Braine, Sir Bernard

  Higgins, Terence L.

  Penhaligon, David

  Brittan, Leon

  Holland, Philip

  Percival, Ian

  Brocklebank-Fowler, C.

  Hooson, Emlyn

  Peyton, Rt Hon John

  Brotherton, Michael

  Hordern, Peter

  Pink, R. Bonner

  Brown, Sir Edward (Bath)

  Howe, Rt Hon Sir Geoffrey

  Price, David (Eastleigh)

  Bryan, Sir Paul

  Howell, David (Guildford)

  Prior, Rt Hon James

  Buchanan-Smith, Alick

  Howell, Ralph (North Norfolk)

  Pym, Rt Hon Francis

  Budgen, Nick

  Howells, Geraint (Cardigan)

  Raison, Timothy

  Bulmer, Esmond

  Hunt, David (Wirral)

  Rathbone, Tim

  Burden, F. A.

  Hurd, Douglas

  Rawlinson, Rt Hon Sir Peter

  Butler, Adam (Bosworth)

  Hutchison, Michael Clark

  Rees, Peter (Dover & Deal)

  Carlisle, Mark

  Irving, Charles (Cheltenham)

  Rees-Davies, W. R.

  Chalker, Mrs Lynda

  James, David

  Reid, George

  Churchill, W. S.

  Jenkin, Rt Hn P. (Wanst'd & W'df'd)

  Renton, Rt Hon Sir D. (Hunts)

  Clark, Alan (Plymouth, Sutton)

  Johnson Smith, G. (E Grinstead)

  Renton, Tim (Mid-Sussex)

  Clark, William(Croydon S)

  Johnston, Russell (Inverness)

  Rhys Williams, Sir Brandon

  Clarke, Kenneth (Rushcliffe)

  Jones, Arthur (Daventry)

  Ridley, Hon Nicholas

  Clegg, Walter

  Jopling, Michael

  Ridsdale, Julian

  Cockcroft, John

  Joseph, Rt Hon Sir Keith

  Rifkind, Malcolm

  Cooke, Robert (Bristol W

  Kaberry, Sir Donald

  Rippon, Rt Hon Geoffrey

  Cope, John

  Kellett-Bowman, Mrs Elaine

  Roberts, Michael (Cardiff NW)

  Cormack, Patrick

  Kershaw, Anthony

  Roberts, Wyn (Conway)

  Corrie, John

  Kilfedder, James

  Ross, Stephen (Isle of Wight)

  Costain, A. P.

  Kimball, Marcus

  Rossi, Hugh (Hornsey)

  Craig, Rt Hon W. (Belfast E)

  King, Evelyn (South Dorset)

  Rost, Peter (SE Derbyshire)

  Crawford, Douglas

  King, Tom (Bridgwater)

  Royle, Sir Anthony

  Crouch, David

  Knight, Mrs Jill

  Sainsbury, Tim

  Crowder, F. P.

  Knox, David

  St. John-Stevas, Norman

  Davies, Rt Hon J. (Knutsford)

  Lamont, Norman

  Scott, Nicholas

  Dean, Paul (N Somerset)

  Lane, David

  Scott-Hopkins, James

  Dodsworth, Geoffrey

  Langford-Holt, Sir John

  Shaw, Giles (Pudsey)

  Douglas-Hamilton, Lord James

  Latham, Michael (Melton)

  Shaw, Michael (Scarborough)

  Drayson, Burnaby

  Lawrence, Ivan

  Shelton, William (Streatham)

  du Cann, Rt Hon Edward

  Lawson, Nigel

  Shepherd, Colin

  Durant, Tony

  Lester, Jim (Beeston)

  Shersby, Michael

  Dykes, Hugh

  Lewis, Kenneth (Rutland)

  Silvester, Fred

  Eden, Rt Hon Sir John

  Lloyd, Ian

  Sims, Roger

  Edwards, Nicholas (Pembroke)

  Loveridge, John

  Sinclair, Sir George

  Elliott, Sir William

  Luce, Richard

  Skeet, T. H. H.

  Emery, Peter

  McAdden, Sir Stephen

  Smith, Dudley (Warwick)

  Ewing, Mrs Winifred (Moray)

  MacCormick, Iain

  Speed, Keith

  Eyre, Reginald

  McCrindle, Robert

  Spence, John

  Fairbairn, Nicholas

  McCusker, H.

  Spicer, Jim (W Dorset)

  Fairgrieve, Russell

  Macfarlane, Nell

  Spicer, Michael (S Worcester)

  Fell, Anthony

  MacGregor, John

  Sproat, Iain

  Finsberg, Geoffrey

  Macmillan, Rt Hon M. (Farnham)

  Stainton, Keith

  Fisher, Sir Nigel

  McNair-Wilson, M. (Newbury)

  Stanbrook, Ivor

  Fletcher, Alex (Edinburgh N)

  McNair-Wilson, P. (New Forest)

  Stanley, John

  Fletcher-Cooke, Charles

  Madel, David

  Steen, Anthony (Wavertree)

  Forman, Nigel

  Marshall, Michael (Arundel)

  Stewart, Donald (Western Isles)

  Fowler, Norman (Sutton C'f'd)

  Marten, Neil

  Stewart, Ian (Hitchin)

  Fox, Marcus

  Mates, Michael

  Stokes, John

  Fraser, Rt Hon H. (Stafford & St)

  Mather, Carol

  Stonehouse, Rt Hon John

  Freud, Clement

  Maude, Angus

  Tapsell, Peter

  Fry, Peter

  Maudling, Rt Hon Reginald

  Taylor, R. (Croydon NW)

  Galbraith, Hon T. G. D.

  Mawby, Ray

  Taylor, Teddy (Cathcart)

  Gardner, Edward (S Fylde)

  Maxwell-Hyslop, Robin

  Tebbit, Norman

  Gilmour, Rt Hon Ian (Chesham)

  Mayhew, Patrick

  Temple-Morris, Peter

  Glyn, Dr Alan

  Meyer, Sir Anthony

  Thatcher, Rt Hon Margaret

  Godber, Rt Hon Joseph

  Miller, Hal (Bromsgrove)

  Thomas, Dafydd (Merioneth)

  Goodhart, Phillip

  Miscampbell, Norman

  Thomas, Rt Hon P. (Hendon S)

  Goodhew, Victor

  Mitchell, David (Basingstoke)

  Thompson, George

  Goodlad, Alastair

  Moate, Roger

  Thorpe, Rt Hon Jeremy (N Devon)

  Gorst John

  Monro, Hector

  Townsend, Cyril D.

  1022

  1023

  Trotter, Neville

  Walker-Smith, Rt Hon Sir Derek

  Winterton, Nicholas

  Tugendhat, Christopher

  Wall, Patrick

  Wood, Rt Hon Richard

  van Straubenzee, W. R.

  Walters, Dennis

  Young, Sir G. (Ealing, Acton)

  Vaughan, Dr Gerard

  Weatherill, Bernard

  Younger, Hon George

  Viggers, Peter

  Wells, John

  Wainwright, Richard (Colne v)

  Welsh, Andrew

  TELLERS FOR THE AYES:

  Wakeham, John

  Whitelaw, Rt Hon William

  Mr. Spencer Le Marchant and

  Welder, David (Ciltheroe)

  Wiggin, Jerry

  Mr. Cecil Parkinson.

  Walker, Rt Hon P. (Worcester)

  Wilson, Gordon (Dundee E)

  NOES

  Abse, Leo

  English, Michael

  Lee, John

  Allaun, Frank

  Ennais, David

  Lester, Miss Joan (Eton & Slough)

  Anderson, Donald

  Evans, Fred (Caerphilly)

  Lever, Rt Hon Harold

  Archer, Peter

  Evans, Ioan (Aberdare)

  Lipton, Marcus

  Armstrong, Ernest

  Evans, John (Newton)

  Litterick, Tom

  Ashley, Jack

  Ewing, Harry (Stirling)

  Lomas, Kenneth

  Ashton, Joe

  Fernyhough, Rt Hon E.

  Leyden, Eddie

  Atkins, Ronald (Preston N)

  Fitch, Alan (Wigan)

  Luard, Evan

  Atkinson, Norman

  Fitt, Gerard (Belfast W)

  Lyon, Alexander (York)

  Barnett, Guy (Greenwich)

  Flannery, Martin

  Lyons, Edward (Bradford W)

  Barnett, Rt Hon Joel (Heywood)

  Fletcher, Raymond (Ilkeston)

  McElhone, Frank

  Bates, Alf

  Fletcher, Ted (Darlington)

  MacFarquhar, Roderick

  Bean, R. E.

  Foot, Rt Hon Michael

  McGuire, Michael (Ince)

  Benn, Rt Hn Anthony Wedgwood

  Ford, Ben

  Mackenzie, Gregor

  Bennett, Andrew (Stockport N)

  Forrester, John

  Maclennan, Robert

  Bidwell, Sydney

  Fowler, Gerald (The Wrekin)

  McMillan, Tom (Glasgow C)

  Bishop, E. S.

  Fraser, John (Lambeth, N'w'd)

  Madden, Max

  Blenkinsop, Arthur

  Freeson, Reginald

  Magee, Bryan

  Boardman, H.

  Garrett, John (Norwich S)

  Maguire, Frank (Fermanagh)

  Booth, Rt Hon Albert

  Garrett, W. E. (Wallsend)

  Mahon, Simon

  Bradley, Tom

  George, Bruce

  Mallalieu, J. P. W.

  Bray, Dr Jeremy

  Gilbert, Dr John

  Marks, Kenneth

  Broughton, Sir Alfred

  Ginsburg, David

  Marquand, David

  Brown, Hugh D. (Proven)

  Golding, John

  Marshall, Dr Edmund (Goole)

  Brown, Robert C. (Newcastle W)

  Gould, Bryan

  Marshall, Jim (Leicester S)

  Buchan, Norman

  Gourley, Harry

  Mason, Rt Hon Roy

  Buchanan, Richard

  Graham, Ted

  Maynard, Miss Joan

  Butler, Mrs Joyce(Wood Green)

  Grant, George (Morpeth)

  Meacher, Michael

  Callaghan, Rt Hon J. (Cardiff SE)

  Grant, John (Islington C)

  Mellish, Rt Hon Robert

  Callaghan, Jim (Middleton & P)

  Grocolt, Bruce

  Mikardo, Ian

  Campbell, Ian

  Hamilton, W. W. (Central Fife)

  Millen, Bruce

  Canavan, Dennis

  Harrison, Walter (Wakefield)

  Miller, Dr M. S. (E Kilbride)

  Cant, R. B.

  Hart, Rt Hon Judith

  Miller, Mrs Millie (Ilford N)

  Carmichael, Neil

  Hattersley, Rt Hon Roy

  Molloy, William

  Carter, Ray

  Hatton, Frank

  Moonman, Eric

  Carter-Jones, Lewis

  Hayman, Mrs Helene

  Morris, Alfred (Wythenshawe)

  Cartwright, John

  Healey, Rt Hon Denis

  Morris, Charles R. (Openshaw)

  Castle, Rt Hon Barbara

  Heffer, Eric S.

  Morris, Rt Hon J. (Aberavon)

  Clemitson, Ivor

  Hooley, Frank

  Moyle, Roland

  Cocks, Michael (Bristol S)

  Horam, John

  Mulley, Rt Hon Frederick

  Cohen, Stanley

  Howell, Rt Hon Denis

  Murray, Rt Hon Ronald King

  Coleman, Donald

  Hoyle, Doug (Nelson)

  Newens, Stanley

  Colquhoun, Ms Maureen

  Huckfield, Les

  Noble, Mike

  Concannon, J. D.

  Hughes, Rt Hon C. (Anglesey)

  Oakes, Gordon

  Conlan, Bernard

  Hughes, Mark (Durham)

  Ogden, Eric

  Cook, Robin F. (Edin C)

  Hughes, Robert (Aberdeen N)

  O'Halloran, Michael

  Corbett, Robin

  Hughes, Roy (Newport)

  Orbach, Maurice

  Cox, Thomas (Tooting)

  Hunter, Adam

  Orme, Rt Hon Stanley

  Cryer, Bob

  Irvine, Rt Hon Sir A. (Edge Hill)

  Ovenden, John

  Cunningham, G. (Islington S)

  Irving, Rt Hon S. (Dartford)

  Owen, Dr David

  Cunningham, Dr J. (Whiteh)

  Jackson, Colin (Brighouse)

  Padley, Walter

  Dalyell, Tam

  Jackson, Miss Margaret (Lincoln)

  Palmer, Arthur

  Davidson, Arthur

  Janney, Greville

  Park, George

  Davies, Denzil (Llanelli)

  Jay, Rt Hon Douglas

  Parker, John

  Davies, Ifor (Gower)

  Jeger, Mrs Lena

  Parry, Robert

  Davis, Clinton (Hackney, C)

  Jenkins, Hugh (Putney)

  Pavitt, Laurie

  Deakins, Eric

  Jenkins, Rt Hon Roy (Stechlord)

  Peart, Rt Hon Fred

  Dean, Joseph (Leeds W)

  John, Brynmor

  Pendry, Tom

  de Freitas, Rt Hon Sir Geoffrey

  Johnson, James (Hull West)

  Perry, Ernest

  Delargy, Hugh

  Johnson, Walter (Derby S)

  Prentice, Rt Hon Reg

  Dell, Rt Hon Edmund

  Jones, Alec (Rhondda)

  Prescott, John

  Dempsey, James

  Jones, Barry (East Flint)

  Price, C. (Lewisham W)

  Doig, Peter

  Jones, Dan (Burnley)

  Price, William (Rugby)

  Dormand, J. D.

  Judd, Frank

  Radice, Giles

  Douglas-Mann, Bruce

  Kaufman, Gerald

  Rees, Rt Hon Merlyn (Leeds S)

  Duffy, A. E. P.

  Kelley, Richard

  Richardson, Miss Jo

  Dunn, James A.

  Kerr, Russell

  Roberts, Albert (Normanton)

  Dunnett, Jack

  Kilroy-Silk, Robert

  Roberts, Gwilym (Cannock)

  Dunwoody, Mrs Gwyneth

  Kinnock Neil

  Robertson, John (Paisley)

  Eadie, Alex

  Lambie, David

  Robinson, Geoffrey

  Edge, Geoff

  Lamborn, Harry

  Roderick, Caerwyn

  Edwards, Robert (Wolv SE)

  Lamond, James

  Rodgers, George (Chorley)

  Ellis, John (Brlgg & Scun)

  Latham, Arthur (Paddington)

  Rodgers, William (Stockton)

  Ellis, Tom (Wrexham)

  Leadbitter, Ted

  Rooker, J. W.

  1024

  1025

  Rose, Paul B.

  Stott, Roger

  Weitzman, David

  Ross, Rt Hon W. (Kilmarnock)

  Strang, Gavin

  Wellbeloved, James

  Rowlands, Ted

  Strauss, Rt Hon G. R.

  White, Frank R. (Bury)

  Sandelson, Neville

  Summersklll, Hon Dr Shirley

  White, James (Pollok)

  Sedgemore, Brian

  Swain, Thomas

  Willey, Rt Hon Frederick

  Selby, Harry

  Thomas, Jeffrey (Abertillery)

  Williams, Alan (Swansea W)

  Shaw, Arnold (Ilford South)

  Thomas, Mike (Newcastle E)

  Whitlock, William

  Sheldon, Robert (Ashton-u-Lyne)

  Thomas, Ron (Bristol NW)

  Williams, Alan Lee (Hornch'ch)

  Shore, Rt Hon Peter

  Thorne, Stan (Preston South)

  Williams, Rt Hon Shirley (Hertford)

  Short, Rt Hon E. (Newcastle C)

  Tierney, Sydney

  Williams, Sir Thomas

  Short, Mrs Renée (Wolv NE)

  Tim, James

  Wilson Alexander (Hamilton)

  Silkin, Rt Hon John (Deptford)

  Tomlinson, John

  Wilson, Rt Hon H. (Huyton)

  Silkin, Rt Hon S. C. (Dulwich)

  Tomney, Frank

  Wilson, William (Coventry SE)

  Silverman, Julius

  Torney, Tom

  Wise, Mrs Audrey

  Skinner, Dennis

  Tuck, Raphael

  Woodall, Alec

  Small, William

  Varley, Rt Hon Eric G.

  Woof, Robert

  Smith, John (N Lanarkshire)

  Wainwright, Edwin (Deanne V)

  Wrigglesworth, Ian

  Snape, Peter

  Walden, Brian (B'ham, L'dyw'd)

  Young, David (Bolton E)

  Spearing, Nigel

  Walker, Harold (Doncaster)

  Spriggs, Leslie

  Walker, Terry (Kingswood)

  TELLERS FOR THE NOES:

  Stallard, A. W.

  Ward, Michael

  Mr. James Hamilton and

  Stewart, Rt Hon M. (Fulham)

  Watkins, David

  Mr. John Ellis.

  Stoddart, David

  Weetch, Ken

  Question accordingly negatived.

  SERVICE WIDOWS (PENSIONS)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]
  12.30 a.m.
  Mr. Peter Viggers: I am grateful for the opportunity of drawing the attention of the House to the pension position of Service widows.
  It is with great pleasure that I see the new Under-Secretary on the Government Front Bench. I have equal pleasure in noting that his predecessor has been transferred to the Ministry of Overseas Development, where I wish him well.
  The wives of currently serving officers and men in the Armed Forces have favourable pension arrangements. Since 31st March 1973, the widow of a retired Service man has received a pension of one-half of what her husband would have received, and since the Pensions (Increase) Act 1971, those pensions have been related to the cost of living, because it has been the policy of consecutive Governments to adopt the provisions of the Act for Service pensions. Service men and their wives can look forward to a secure retirement on completion of the period of Service engagement. That is right and proper.
  However, some situations remain that cannot be regarded as satisfactory, including those involving the treatment of men injured and widows of men killed in Northern Ireland. However, the greatest sense of injustice is felt by war
  1026
  widows and those known as "the pre–1950 widows".
  It is a disturbing fact that British war widows are treated less favourably than those of many other countries, including the Commonwealth and Europe—not excluding West Germany. My hon. Friend the Member for Wallasey (Mrs. Chalker) has put down Early-Day Motion No. 14 on the subject of war widows, and it has been signed by more than 140 hon. Members. The treatment of our war widows is a subject deserving of sympathy and action.
  My principal purpose tonight is to draw attention to the circumstances of the pre–1950 widows of Service men below the rank of warrant officer, first class who retired before 1st September 1950. These widows receive no pension. Historically, widows of officers and war-rant officers, class 1, received pensions, but widows of men below that rank received none. That situation was partially rectified by the Forces Family Pension Scheme of 1952, which gave eligibility for pensions to widows whose husbands left the Services on or after the qualifying date of 1st September 1950, but widows of men discharged before that date remained ineligible, regardless of the length of service of their husbands. A further change was introduced in 1973, when the pension received by a Service widow was increased from one-third to one-half of her husband's pension.
  When the Forces Family Pension Scheme was introduced, it was regarded as an advance, and people looked forward to future advantage rather than back to retrospective unfairness. We are now in a situation in which we can consider the

  1027
  overall situation objectively and decide whether it is fair.
  There are three groups of widows—those receiving one-half of their husband's pension, protected against inflation; those receiving one-third of their husband's pension, similarly protected against inflation; and those receiving nothing, which is what they have always received.
  In 1970, it was estimated that there were 30,000 ineligible widows and that the cost of granting pensions would be about £3 million a year. In 1972 it was estimated that the cost would be£4 million, and it was said that the number of ineligible widows was increasing. A recent survey in the Portsmouth area, however, has indicated that the numbers may be diminishing, as most of the widows are elderly.
  Many wives do not examine financial matters in detail, and when one widow receives a pension, it may be thought reasonable that another widow will receive a pension as well. I have been told that some widows are angry and distressed when they discover that they are not eligible for any pension from the Services. After all, Service men who retired before 1950 are more likely than their successors to have seen service in one or more world wars. They served at a time when domestic conditions and pay were poor. Pay in the Armed Services was such that there was no chance of making substantial savings, and, indeed, the expectation of life in war conditions was not good and would have made it difficult for an individual to implement private insurance arrangements. These are all good reasons why we should now grant pensions, or at least consider doing so.
  When the issue of pensions for pre–1950 widows has been put forward in the past a number of arguments have been used to oppose it, and I hope that I shall be in order if I anticipate the arguments that may be put forward tonight and seek to destroy them.
  It has been said that the granting of pensions to pre–1950 widows would create an anomaly. That is a weak argument, because nothing could be more anomalous than the situation that currently exists among Service widows—a situation in which some receive an inflation-protected
  1028
  half pension, some receive an inflation-protected one-third pension, and some receive nothing at all. Moreover, once a widow is in receipt of a pension she becomes established on the moving escalator of inflation protection and need have no future worries.
  It has been said that the granting of a pension will create a precedent. That might be a good argument if it were true, but it is not. My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), in the National Insurance (Old Persons' and Widows' Pensions and Attendance Allowance) Bill, felicitously broke new ground by giving help to very elderly non-pensioners, whom he called the "left outs". I quote from his speech on the Second Reading of the Bill:
  "…we came to see that the strict logic of the case had in the past too narrow a foundation and must take second place to a broader understanding of the human realities of the situation. These 'left out' very elderly, mostly living on fixed incomes, have seen the pensions which they lacked through no fault of their own grow steadily in real value and importance."—[Official Report, 10th July 1970: Vol. 803, c. 1008.]
  I submit that the same spirit of compassion ought to be applied to the case of the pre–1950 widows.
  I give a further example. When the Redundant Mine Workers (Payments Scheme) was established in 1968, mine workers who became redundant at the age of 55 or over had their income supplemented to the extent of 90 per cent. of their previous earnings for three years, to help them adjust to their new circumstances, and there was a qualifying date, which was their fifty-fifth birthday. It became apparent that a few men became redundant before their fifty-fifth birthday, and the Government took the view that it was unfair that a difference of a few days should bar these men from benefiting from the scheme. It was therefore decided that ex gratia payments should be made, and I have seen a Press report, which I am not able to corroborate, which gives an example of the operation of this discretionary payment, when a man was granted an ex gratia payment of£1,166 because he was made redundant three days before his fifty-fifth birthday. I underline the point by reminding the Under-Secretary of State that a widow whose husband retired a year, a month,

  1029
  or even one day before 1st September 1950 will receive absolutely no pension.
  Another argument that has been put forward is that any pre–1950 widow suffering hardship should be able to rely on supplementary benefits, rate rebates and other provisions. Why should that be necessary? We are dealing with proud people—people who are rightly proud, in view of their husbands' past service. They prefer to rely on money that they feel has been earned rather than money that they feel is given to them by way of charity—and it is worth bearing in mind that any money that is given to pre–1950 widows by way of pension is money that will not need to be given by way of rate rebates and supplementary benefits.
  The widows whose cause I am pleading are the very last people to cause disorder or difficulty. They have no economic sanctions or industrial pressure to bring to bear. They are, by definition, people who have helped to serve the country. Surely, in a fair, just and law-abiding society, they are the very people whose cause should be given some consideration.
  The point I am making is not a political one in a way; in the past it has been pleaded with great eloquence by hon. Members on both sides of the House. I believe that the granting of pensions to pre–1950 widows should be accepted in principle, as something that the Government wish to do.
  It then becomes a question of the priority that the Government should give to pensions. I believe it should be a high priority. Because of the country's economic position I do not expect the Minister to announce tonight that pensions are to be implemented for pre–1950 widows forthwith. However, I do urge him to accept the implementation of such pensions as a high priority and to take an interest and involve himself in the campaign by the pre–1950 widows, supported as they are by a wide range of associations, such as the Submarine Old Comrades Association and the Royal Marines Association.
  A petition supporting the campaign for pensions for pre–1950 widows has been prepared, and has already been signed by thousands of people. It is proposed that this should be presented at 10 Downing Street on 9th June. I hope that the Prime Minister as an old sailor, will be able to
  1030
  accept the petition in person and give some message of hope to a group of worthy people whose cause has been overlooked for too long.
  Mr. Philip Goodhart Mr. Philip Goodhart (Beckenham)rose—
  Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I take it that the hon. Gentleman and the Minister have no objection to the hon. Member for Beckenham (Mr. Goodhart) saying a few words?
  Mr. Viggers: I am quite happy that my hon. Friend should say a few words, Mr. Deputy Speaker.
  12.41 a.m.
  Mr. Philip Goodhart: I join in the congratulations to the Under-Secretary on his promotion and thank him for allowing me to say a few words in this debate. I also congratulate my hon. Friend on the way in which he has moved his Adjournment debate. It was right to stress the case of the pre–1950 widows.
  In view of the current economic stringency the Officers' Pensions Society has, as a compromise suggestion, put forward the idea that the entitlement date for the widows of non-commissioned Service men should be back-dated from September 1950 to 8th May 1945. That would bring Service widows into line with Civil Service widows and would go a considerable way towards removing some of the present hardships. I give strong support to that suggestion.
  12.42 a.m.
  Rear-Admiral Morgan-Giles: I support my hon. Friend the Member for Gosport (Mr. Viggers) who has introduced this Adjournment debate, as well as my hon. Friend the Member for Beckenham (Mr. Goodhart). I remind the House that this is a time when we frequently hear the Dunkirk spirit, and all sorts of war-time parallels, being called to mind to deal with our present problems. Let us put that into effect not only by word, but by deed, in respect of these widows.
  12.43 a.m.
  The Under-Secretary of State for Defence for the Royal Navy (Mr. A. E. P. Duffy): Since learning that I was to reply to this debate I have become increasingly and—I admit—uncomfortably aware that pensions for the Forces is a very

  1031
  large subject, with many ramifications—a subject that has attracted the support of many hon. Members. That is evident tonight from the contributions of hon. Gentlemen. I am much obliged for the remarks of the hon. Member for Beckenham (Mr. Goodhart). The question is, above all, well illustrated by the notice of subject for debate given by the hon. Member for Gosport (Mr. Viggers), which refers to war widows and widows of Service men who retired before 1950. The subject embraces two quite distinct categories of widows and the responsibilities of two separate Government Departments. I think the hon. Gentleman will acknowledge that.
  A war widow is the widow of anyone whose death resulted from service in the Armed Forces. The person concerned may have been a Regular Service man, a war-time volunteer, or a conscript. As I know the hon. Gentleman is aware, pensions for these are administered, and paid, by the Department of Health and Social Security. I should therefore be going beyond my remit if I were to attempt to deal with these matters here, but I have taken note of the hon. Gentleman's remarks and will ensure that they are passed on to the responsible Minister at the Department of Health and Social Security.
  By contrast, the widows of Service men who retired before 1950—the "pre–1950 widows", as they are known—are the widows of Regular Service men. It is to the pension arrangements for this second group or, rather, the lack of arrangements—that the hon. Gentleman has devoted a significant part of his speech tonight. This, of course, is the departmental responsibility of the Ministry of Defence. I know that the hon. Gentleman will understand why I can concentrate only on this aspect in my reply.
  The situation of the pre–1950 widows have been debated many times in the House, as the hon. Gentleman implied, and there must be few, if any, speakers in past debates who have not felt an instinctive sympathy for them. That doubtless explains the presence of other hon. Members tonight.
  The position prior to 1950 was that if an officer or warrant officer, class I, or the equivalent in the other Services, were
  1032
  to die, whether in service or after retirement, provided he had given sufficient length of service his widow qualified for a pension. If the husband's rank was lower, however, there could be no pension for the widow, however long or meritorious her husband's service had been. The consequence is that many widows today receive no pension from the Ministry of Defence, solely because their husbands did not attain sufficient rank in the Service.
  This kind of "Upstairs, Downstairs" distinction cannot, of course, be justified in equity and, indeed, is completely an-achronistic in modern eyes. If, today, we were constructing an occupational pension scheme for any group of workers, it would obviously be unthinkable to include a rule that no one below a certain rank or grade could earn a pension for his widow. Indeed, in the case of the Forces the inequity of this arrangement was recognised in 1950, a full quarter of a century ago, when the new Armed Forces Pension Scheme made provision for all ranks down to private to earn a widow's pension if they gave long enough service. Even here there was a rank distinction. For a corporal or a private, the qualifying period was 32 years, while for a sergeant it was 27 years—but at least no rank was debarred from earning a widow's pension.
  That was an important step forward, but even today, in 1976, we are still living with the consequences of the pre–1950 rules, since there are many widows still alive whose husbands ceased to give service, either through death or retirement, before the change-over date of 1st September 1950. How many there are we do not know. Our records do not show how many men were involved, how many have subsequently died, what their marital circumstances were, or how many of the widows are still alive. In a written reply to a Question from the hon. Gentleman last October, my predecessor quoted a figure of about 30,000 widows, but made it clear that this was no more than a "guesstimate". However, the numbers are clearly considerable.
  Coming entirely fresh to the problem, I am bound to say that my sympathies are very much with these widows. I hope that the hon. Gentleman will accept that. If the problem could be viewed in isolation, and if the economy were not in a critical state, with public expenditure

  1033
  being pruned wherever possible, I should very much like to be able to give these ladies a pension of some kind, even at this late stage. I know that this was the view of my predecessor, my hon. Friend the Member for Portsmouth, North (Mr. Judd). I should like to pay tribute tonight—I wonder whether the hon. Gentleman really anticipated the argument that I might deploy—to my hon. Friend's personal effort and the time that he devoted to the examination of this problem in the greatest depth. I also know of the diligence that he employed in his search for a solution. Similar comments apply to my hon. Friend the Under-Secretary of State for Defence for the Army.
  The hard fact is that this problem cannot be looked at in isolation; indeed, it must be viewed from quite a different perspective. In fact, in the years before 1950 the arrangement whereby officers and WOIs in the Forces could earn pensions for their widows was considerably in advance of its time. There were no such arrangements for the widows of civil servants, local government officers, teachers or other public servants until 1949. In this respect, therefore, Service officers were a favoured category, while junior ranks in the Services were on a par with the rest of the public service and, indeed, became eligible for widow's pensions at about the same time. If, therefore, we were to contemplate giving the pre–1950 widows a pension at this stage, we would be logically bound to consider making a similar concession to widows of civil servants, teachers, and so forth. This, of course, would immediately make the whole proposition very much more expensive.
  So I come to my penultimate point. The argument goes wider. The years since the Second World War have seen very great improvements in occupational pension schemes in both the public and private sectors. Indeed, in the last four years the Armed Forces Pension Scheme itself has been strikingly improved. In 1972 a consistent relationship was established between Service pay and pensions for all ranks, and this resulted in increased pensions for Service men, in particular. The year 1973 saw improvements in invaliding pensions, pensions for injury and death attribute-
  1034
  able to service and, indeed, in widows' pensions—the subject that we are now debating. In 1975, preserved pensions were introduced for those giving relatively short service.
  Due credit for these improvements must go to the hon. Gentleman's party as well as to my own. These changes were all made on the basis that they would benefit those giving service on or after the qualifying date, but not those who had already retired. Indeed, this a general and fundamental principle of pensions, in the public and private sectors alike. It would, in theory, be possible to adopt quite a different approach and to make it a general rule that any improvement in pensions that is introduced must work backwards to all those who have already retired. That, of course, would inevitably mean that, within any given sum of money available for improving pensions, the degree of improvement that could be achieved would be much less, because the jam would have to be spread more thinly.
  I would go further, and say that the improvements for the Forces made in 1972 and 1973 by the hon. Gentleman's party, and in 1975 by my own, would not have been possible on anything like the same scale if they had been made retrospective. But there must be a consistent principle one way or the other; one cannot pick and choose, and for better or worse—I would say better—successive Governments have worked on the principle that improvements apply to the future only, and cannot be made retrospective.
  It follows, I think, that if we were now to introduce a pension for the pre–1950 widows, we would be breaching this fundamental principle, which underlies our whole occupational pensions system, and we would have no logical answer to those who pressed for the recent improvements for the Forces, to which I have referred, to be applied retrospectively to those who had already retired, or, indeed, to other public service groups in like circumstances. The cost of doing so would be quite prohibitive.
  I come to my last point. These were the conclusions reached by the Government, in the light of the study of the problem by my predecessor and my hon. Friend, during the last few months. To

  1035
  award even a small pension to the pre–1950 widows would have led to wide-spread feelings of unfairness among other groups, but to introduce improvements for all would also have been quite simply beyond the country's means.
  Having studied the papers—and I can assure the hon. Gentleman that I have; it is the first task that I have had to undertake, with the utmost thoroughness—I can only say that I believe that this conclusion was right and, indeed, inevitable. I share the regret that my predecessor felt that no change was possible. I hope, however, that it may be of some limited consolation to the hon. Gentleman whose motion we are debating that this issue was explored in part because of his own interest, with the greatest possible care, and that the decision that nothing could be done was taken only with the greatest regret and for the very strongest reasons.
  12.55 a.m.
  Mr. Graham Page: The Minister has said that this would be too expensive. Does he realise that 6,000 war widows die every year, and that that is a saving to the Government of over £7 million? Cannot that sum be spread amongst those who do not receive pensions now? The argument that it is too expensive is cheese-paring by the Government, because the unfortunate death of widows each year saves money, and the numbers involved will increase. In both 1973 and 1974, 3,000 war widows died. In 1975, 6,000 died, and this year the figure will be higher. That means a saving of between £7 million and £8 million a year. Why cannot that money be devoted to these war widows?
  1036
  Why do the Government have to save here without meeting the demands of war widows whose husbands died in service in the First and Second World Wars, or before 1950? The Government are putting into the taxpayers' pockets money which should go to these widows. They must look again at the case and not argue that it is too expensive because it is not.
  It would cost about £100 million to bring these war widows into line with those whose husbands have been killed in Northern Ireland. That sum does not take account of the tax position, because it is the gross figure to be paid out. The sum of £100 million is small compared with the sort of figures talked about in the Budget, and it is a small amount to pay to those whose husbands gave their lives in service. They are not recognised in the same way as war widows in almost every part of the world. All the European countries, the old Commonwealth countries, and nearly all the new Commonwealth countries give war widows better pensions than we do.
  It is wrong to discriminate between those whose husbands retired before 1950 or were killed in the two world wars by giving them £22 a week less than those whose husbands were killed in service since 1966.
  I wish that the Government would think again and not use the excuse that it would be too expensive. Nothing is too expensive for those who give their lives for their country. We have disgraced our country by not recognising them.
  Question put and agreed to.
  Adjourned accordingly at two minutes to One o'clock.

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  Metrication
  Metrication
  Council House Sales (Liverpool)
  Council House Sales (Liverpool)
  Decimalisation
  Decimalisation
  Potatoes
  Potatoes
SOCIAL SERVICES
  Child Custody
  Child Custody
  Widowed Mothers
  Widowed Mothers
  Death Grant
  Death Grant
  Beneficiaries (Capital Assets)
  Beneficiaries (Capital Assets)
  Students
  Students
  Fraudulent Claims
  Fraudulent Claims
  Pension Payments (Bank Accounts)
  Pension Payments (Bank Accounts)
  Leeds (Ambulance Dispute)
  Leeds (Ambulance Dispute)
  Rents
  Rents
  Hospitals (Food Hygiene)
  Hospitals (Food Hygiene)
  Departmental (Publications
  Departmental (Publications
  Pensions
  Pensions
  Invalidity Pension
  Invalidity Pension
  Cohabitation
  Cohabitation
  Influenza
  Influenza
  Fertility Drugs
  Fertility Drugs
  Epileptics
  Epileptics
  Pharmacists
  Pharmacists
  Child Benefit
  Child Benefit
  Fuel Bills
  Fuel Bills
  Private Hospitals
  Private Hospitals