Sitting of 10 May 1977

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

    Child Benefit
    Sir George Youngasked the Secretary of State for Social Services whether he will make a statement on the payment of child benefit for non-resident children.
    The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): Subject to EEC arrangements and reciprocal agreements with other countries, child benefit is not payable in respect of a non-resident child unless the child has previously been in Great Britain but is temporarily absent. This was also the position for family allowances.
    For the definition of temporary absence I refer the hon. Member to my reply to my hon. Friend the Member for Rotherham (Mr. Crowther) on 5th May.
    Sir G. Young: If the Minister accepts that the costs of those with the responsibility of bringing up families are higher than the costs of those without such responsibilities, what is the moral argument for not extending the new child benefit to 200,000 families with non-resident children?
    Mr. Deakins: We are adopting the same policy on child benefit as we did on family allowances. The scheme is a replacement of one cash benefit by another cash benefit. Family allowances were not paid in respect of children living abroad. We are operating the same principle with the child benefit scheme.
    Mrs. Castle: I recognise the difficulties of paying child benefit to non-resident children, but does my hon. Friend
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    not agree that it would be grossly unfair to withdraw the child tax allowance from those who cannot get the benefit of the child allowance for their children overseas? At the least, until such parents have had a full opportunity to bring these dependent children over here if they wish to do so, will my hon. Friend postpone the cancellation of child tax allowance for these children?
    Mr. Deakins: Child tax allowances are a matter for my right hon. Friend the Chancellor of the Exchequer. A concession has been made on those allowances for the current financial year in Clause 23 of the Finance Bill. An announcement about future years was made by the Financial Secretary on 1st April.
    Mr. Patrick Jenkin: Since, when this policy was discussed in June last year, the Secretary of State accused me of wanting to leave 200,000 families positively and sharply worse off, will the Under-Secretary of State ask his right hon. Friend to withdraw his criticism—or does he now admit the charge?
    Mr. Deakins: I am sure that my right hon. Friend can deal with that charge. Those families will not be sharply worse off, because of the concession that is being made by the Government in the current Finance Bill.
    Mr. Kenneth Clarke: Does the Minister accept that these families will be made sharply worse off as soon as the Government's decision to phase out tax allowances is finally put into effect? Does he agree that as child benefit is a combination of family allowance and child tax allowance, making child benefit not payable is sharply discriminatory to heads of families who happen to have children abroad?
    Mr. Deakins: We have made a special concession on child tax allowance for non-resident children for the present financial year. Thereafter they will revert to the child tax allowance that is appropriate to other families in this country. We have tempered the wind to the shorn lamb for the present financial year.
    Mr. Hall-Davisasked the Secretary of State for Social Services whether it is administratively possible to begin the full

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    child benefit in April 1978 instead of waiting until 1979–8.
    Mrs. Chalkerasked the Secretary of State for Social Services whether he will increase child benefit rates in November 1977.
    The Secretary of State for Social Services (Mr. David Ennals): It would be administratively possible to begin the full child benefit scheme in April 1978, but our intention is to continue with the phasing in of the full scheme over the period up to April 1979 in line with the recommendation of the Joint Labour Party-TUC Working Party.
    Child benefit will not be increased in November 1977; it is to go up in April 1978 in accordance with the next phase of the transfer of family support from child tax allowances.
    Mr. Hall-Davis: Does the Secretary of State recognise that the position of families with children is relatively worse now than when this Government came to office, and that the increase in bread and milk prices in the past seven days will further aggravate family poverty? Is not the Government's record over child benefit one of a complete lack of courage and concern for married couples with children, on whom inflation falls particularly hard?
    Mr. Ennals: Whatever the hon. Member may say, when his Government were in power child benefits were not introduced. I am very proud that this Government have fulfilled their pledge and have introduced child benefits, which will be the foundation of family support for years to come.
    Mrs. Chalker: Does the right hon. Gentleman accept that large increases in unemployment dependency allowances for children, by comparison with the small increases in child benefit, will make it more worth while for many family men with children to be unemployed than employed? Will he talk to his right hon. Friend the Chancellor about putting this state of affairs right so that we have a proper family policy?
    Mr. Ennals: I believe that we have a proper family policy. The number of people for whom it is any advantage at all to be unemployed as opposed to being in employment is very small indeed. This is one of those canards that the
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    Opposition have flogged around the country. It is absolutely untrue, and it does a great deal of damage.
    Mrs. Castle: Is it not a fact that since the working party produced its compromise report for phasing in child benefit the Chancellor has made £1,800 million available for tax reliefs which do not benefit children at all? In that situation, will not my right hon. Friend fight for an earlier increase in child benefit and, at the very least, for the automatic up-rating of child benefit in November with the rest of the benefits?
    Mr. Ennals: I can assure my right hon. Friend that I want to see the most substantial increase in child benefit that is possible in April next year. The possibility of an increase in November is simply not on, but I hope that next year we shall see a substantial increase, which will show the full significance of child benefit as introduced in this House.
    Mr. Wigley: Will the right hon. Gentleman urgently review the special cases that are worse off in absolute terms as a result of the child benefit scheme, concerning which I have already written to his Department?
    Mr. Ennals: I shall examine the correspondence that has come from the hon. Gentleman. If we take into consideration the tax remissions in the Budget, there is no one who is actually worse off in this context. There were some high taxpayers who were marginally worse off as a result of the child benefit scheme, but they will be marginally better off as a result of decisions already announced by my right hon. Friend the Chancellor.

    Personal Social Services (Expenditure)
    Mr. Madelasked the Secretary of State for Social Services what will be the percentage increase in expenditure in real terms on the personal social services between 1976–77 and 1977–78.
    Mr. Ennals: We are planning for an increase in current expenditure in England of about 1 per cent. in real terms and a decrease of 30 per cent. in capital expenditure. But I have increased from £8 million to £21 million the amount that health authorities may contribute to mutually beneficial social

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    services schemes financed jointly with local authorities. The £21 million represents about 2 per cent. of overall local authority expenditure on the social services, and that will enable spending to be maintained at about the same level as last year.
    Mr. Madel: Is it not a fact that demand on personal social services is expanding at over 2 per cent. per annum? Given that there is this pressure on personal social services, is the Secretary of State satisfied that he has the right priorities between expenditure on the National Health Service and expenditure on personal social services?
    Mr. Ennals: The Government planned for a 2 per cent. growth in current expenditure on personal social services. It is estimated that expenditure in 1976–77 reached the level planned for 1977–78. Because I was so worried that some services might slip, I increased by almost threefold the amount of funds available for joint financing. That has been welcomed by the local authorities.
    Mr. Ashley: I recognise my right hon. Friend's difficulty, but is he aware that many local authorities are neglecting the Chronically Sick and Disabled Persons Act? Will he press all local authorities to aim at a 90 per cent. increase in expenditure under Section 2 of that Act, as envisaged in last year's priority document?
    Mr. Ennals: I shall be publishing shortly the results of the consultations on the consultative document. I am concerned about the extraordinary variation in performance between one local authority and another. The Minister with special responsibility for the disabled is frequently in touch with local authorities about this. I am anxious that some local authorities, as a result of events last Thursday, may be less prepared to look after the needs of disabled people than they were before.
    Mrs. Chalker: While noting that the Secretary of State has just made a totally untrue allegation, may I ask him what encouragement he intends to give to voluntary organisations and self-help groups, which are springing up all round the country, to assist in the personal social services, which we regard as the mainspring for helping people who need
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    the real help that we ought to give as a society?
    Mr. Ennals: Bearing in mind the hon. Lady's initial comment, having read the manifestos of a number of those Conservative candidates who were successful, I think that I have every reason to express concern because of the threats about cutting expenditure. However, to deal with the main part of the question, I agree with the hon. Lady. There is a very important rôle for voluntary organisations. That is why, in the budget for this year, I have increased by 60 per cent. the amount of money available from my Department to assist voluntary organisations.
    Mr. Raphael Tuck: The Conservatives say that you want to cut it.

    Industrial Injury (Hardship Allowances)
    Miss Joan Lestorasked the Secretary of State for Social Services how many people are currently in receipt of hardship allowances as a result of industrial injury.
    The Minister for Social Services (Mr. Stanley Orme): 142,000 people were receiving special hardship allowance on 30th September 1975, the latest date for which figures are available.
    Miss Lestor: Will my right hon. Friend explain why it is that where so many of these benefits, such as hardship allowance, are linked to a medical examination, very often the allowance is curtailed before the medical examination takes place, thus meaning that the person is without money pending confirmation that he is still in need of hardship compensation?
    Mr. Orme: That is not the policy of the Department. If my hon. Friend has in mind specific cases, perhaps she will draw them to my attention.

    Mobility Allowance
    Mr. Hannamasked the Secretary of State for Social Services whether he has any proposals to commute the mobility allowance.
    Mr. Ennals: I am hopeful that a scheme may be worked out that will enable some disabled people to use their enhanced mobility allowance for the

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    purchase of their own vehicle. I and my officials are assisting in every way we can to get such a scheme ready for implementation. The British Association for Disability and Rehabilitation—BADAR—recognises that such a scheme will have to be selective and cannot depend entirely on Government funds.
    Mr. Hannam: Will the right hon. Gentleman make every effort to persuade the Chancellor of the Exchequer to relieve the commuted mobility allowance of taxation? In view of the 3,500 disabled people who, since his announcement last year, are no longer eligible for vehicles, will he reverse his decision to withdraw the invalid vehicle service?
    Mr. Ennals: We debated this matter at some length about 10 days ago. In answer to the second half of the hon. Gentleman's question, I cannot possibly reverse the decision. I gave the reasons then for not doing so. Certainly if I were to do so many disabled people who know the dangers of the trikes, particularly for new drivers, would be very angry indeed. The hon. Gentleman will remember the very strong campaign that was run in order that we should phase out the trikes. I think that the most important thing of all is that we should be able to achieve a scheme—I am determined to add my efforts to those of my hon. Friend the Under-Secretary—that will enable the maximum number of disabled people to purchase a vehicle suitable to their needs.
    Mrs. Bain: Has the right hon. Gentleman any idea when this scheme will be implemented? What is the extent of the experiments that will be initiated at these early stages?
    Mr. Ennals: We are working as quickly as we can. There has been a series of meetings with what used to be the CCD and is now the BADAR in its combined form. I cannot give a date by which we shall be able to make an announcement. However, it is encouraging that other organisations are coming forward ready to help. Chrysler's scheme to enable disabled people to buy cars at a substantial discount is already in operation. British Leyland and Vauxhall will begin their schemes on 1st June. There are now negotiations with Ford, among others, and they, too, are well advanced. Therefore, from a variety of sources—and I believe that we shall find cash from
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    voluntary sources—a great deal is now being done.
    Mr. Hooley: What progress is being made with the design and possible production of a vehicle specially designed to replace the trike?
    Mr. Ennals: There is a Question later on the Order Paper on precisely that matter.
    Mrs. Knight: May I put it to the Secretary of State that he fudged the issue when replying to my hon. Friend the Member for Exeter (Mr. Hannam) when he spoke about the 3,500 disabled people who would have received three-wheelers under the old rules but will not now receive them under the new rules? Does the right hon. Gentleman appreciate the frustration and let-down felt by those people when they hear of increased expenditure on the disabled?
    Mr. Ennals: I say again that this question of urging that there should be increased expenditure is a little too much. The argument has been put forward that it is of great concern to people who cannot immediately now claim a trike, which they could do previously, and who have now seen the announcement that there is an increase in the mobility allowance. The mobility allowance will help precisely those who cause the hon. Lady concern, as well as many other seriously disabled people who have no possibility of driving at all. It is quite unreasonable for the Opposition constantly to press that we should put into reverse a policy that they themselves supported when it was first announced in the House.
    Mr. George Cunningham: When my right hon. Friend is looking for money for this very desirable purpose, will he take a leaf out of the Foreign Office's book, because it has transpired over the last few days that the Foreign Office has been providing for its staff interest-free car purchase loans for 28 years, completely without parliamentary authority and without Parliament being told? If the Foreign Office can be caught with its hand in the till in that way, why cannot the Secretary of State get his hands on some of the money?
    Mr. Ennals: I shall study with very great care the observations of my hon. Friend.

    Hospital Waiting Lists
    Mr. Michael McNair-Wilsonasked the Secretary of State for Social Services in which year waiting lists for National Health Service hospitals were longer than in 1976.
    Mr. Ennals: I have only provisional figures, and it seems likely that in 1976 there will have been the longest lists of patients waiting and the largest number of in-patients treated.
    I am determined to tackle this problem of waiting lists, which has plagued the NHS for the past 20 years. Under my supervision a report on waiting times has now been prepared with a series of constructive proposals. I am seeking the views of the health authorities, the Joint Consultants Committee and other professional bodies.
    Mr. McNair-Wilson: To what extent does the Secretary of State think that the Government's cut-backs in hospital spending are causing these lists to be as long as they are? What thought has he given to keeping open the surgical and other medical facilities at small hospitals, such as that in Newbury, which appear to be having to be closed down because they do not rate as district general hospitals?
    Mr. Ennals: There is a variety of reasons why the waiting list has in creased, such as the increasing elderly population and, therefore, the increasing demand for surgery in particular, and for other forms of treatment. There is also the industrial action that took place, and certainly, of course, the limitations on public expenditure—though I cannot say that in this case it is a question of cutbacks in public expenditure, because we are still in a position of growth in terms of public expenditure. However, I do not believe that the problem would be solved by any means by simply holding on to a large number of small, uneconomic hospitals. There is a wide variety of solutions to the problem. The document that I am now circulating puts forward some very constructive proposals.
    Mr. George Rodgers: Is my right hon. Friend aware that a constituent of mine who is awaiting admission to the plastic surgery unit at Sharoe Green Hospital, Preston, has been advised in the last few days, by letter, that 1,500 people are
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    waiting for admission and that some will have to wait for a period of 10 years before they receive treatment? Is that situation not totally outrageous? What effect does queue-jumping have upon the situation?
    Mr. Ennals: In answering the original Question I said that I am extremely concerned about the matter of waiting lists. It is a problem that exists in my constituency as well as in the constituency of my hon. Friend. It is at least encouraging that 90 per cent. of those on waiting lists are classified as waiting for non-urgent treatment. The situation is now improving somewhat, because the number of people awaiting admission to hospital for urgent treatment fell by 5½ per cent. between March and September 1976, so what had been a worsening situation is now a situation which, for the first time for some time, is beginning to improve.
    Mr. Patrick Jenkin: Since the length of the waiting lists is in some part dependent on the level of morale in the National Health Service, is the Minister aware that medical morale is being very severely shaken by the dreadful handling of the Doctors' and Dentists' Review Body Report? This report has been leaked to the medical Press and some family practitioner committees have draft amended statements on fees and commissions. When will the Government tighten up on this sort of thing, and when will they publish the report?
    Mr. Ennals: I do not follow how this question arises from a Question about waiting lists. If the right hon. Member will table a Question, I shall answer it. He touches on the subject of the morale of consultants. He should be aware that the number of consultants in post in England and Wales has increased by 3·4 per cent. in the last year, which indicates a movement forward in the National Health Service.

    Pensions
    Mr. Skinnerasked the Secretary of State for Social Services whether he will introduce an interim increase for retirement pensioners in the summer.
    Mr. Orme: No. As my right hon. Friend has already made clear, pensions and other social security benefits will be uprated in November.
    Mr. Skinner: Does my right hon. Friend agree that in this year, when we have two transition periods as a result of our entry into the EEC—which has resulted in greater increases in food prices, which particularly hit old-age pensioners—there is a cast iron case for having two pension increases instead of one? Will he tell us whether pensioners will get the £35 put forward by the TUC when he makes his announcement for the autumn increase?
    Mr. Orme: I am aware of my hon. Friend's concern about this matter and, indeed, the concern of the whole House about pensioners. I remind my hon. Friend that there has been a net increase of 15 per cent. in the purchasing power of the pension since we came to office. I give him an assurance that the uprating in November will more than cover the rise in inflation.
    Mrs. Knight: Will the Minister confirm that even with the 12 per cent. uprating widows and women who retire at 60 are still paying tax even though they have no income except the pension? Does he have any plans to talk to the Chancellor about this disgraceful state of affairs?
    Mr. Orme: The hon. Lady knows that the Chancellor is aware of tax levels. He referred to them in his Budget and he has already done something about them.
    Mr. Penhaligon: Will the pension uprating be based on what inflation was or what the Government would like to think it might be?
    Mr. Orme: There is a later Question on the Order Paper on that point. The uprating will be on a November-to- November basis and will be based on whichever is higher, inflation or wage increases.

    Disabled Persons (Vehicles)
    Mr. Shepherdasked the Secretary of State for Social Services what studies he has made of cars for disabled drivers in other EEC countries.
    The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): A number of other EEC countries have provisions for helping disabled people to acquire cars, subject to conditions varying from one country to another. I under
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    stand that in most of these countries Government benefits do not include either the issue of a specialised vehicle or a cash benefit, like the mobility allowance, which is paid without conditions as to employment or ability to drive. My Department is seeking fuller information from the EEC Commission.
    Mr. Shepherd: Does the Minister recognise that for two years now we have been pressing him for this information, and that the delay is causing some concern? Is he aware that the need for a replacement for the trike is a matter of considerable urgency? Will he tell the House the exact state of affairs concerning the design of the replacement for the trike?
    Mr. Morris: I can assure the hon. Member that we are in touch with the European Commission on this matter. I remind him that the Director of the Central Council for the Disabled, and its successor organisation, the British Association for Disability and Rehabilitation, speaking of the British mobility allowance scheme, said that the Government had
    "produced a most imaginative scheme in the Mobility Allowance. The concept is much admired by Europe."
    There are Questions later on the Order Paper about making specialist vehicles. I am in close touch with all developments in this field.
    Mr. Carter-Jones: Many of us are concerned that as there is no one vehicle to satisfy all the needs of the disabled, the Minister should consider great flexibility in this field. Many of us feel that all those disabled people who are able to drive should be able to do so, and that to talk of one single vehicle is to hold out a false promise.
    Mr. Morris: Those are very wise words. Disabled people are not standard, and to talk of providing a standard car is to make a false assumption. The point that my hon. Friend the Member for Eccles (Mr. Carter-Jones) has made is very much in my mind and in the minds of all those hon. Members on both sides of the House who think deeply about these matters.
    Dr. Vaughan: Will the Minister justify the statement that was made earlier and tell us what evidence there is that disabled people do not want to see a continuation of the trike until an alternative

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    vehicle is available? In February this year there was a unanimous request that the trike policy should be changed. Will the Minister talk to representatives of the disabled on 17th May?
    Mr. Morris: There are many claims upon us in this field. There is a very strong campaign, on safety grounds, against the invalid tricycle, and I have answered one question after another on that issue. There are people who want the trike, and my right hon. Friend has explained why it cannot be supplied indefinitely. I assure the hon. Member that I am closely in touch with organisations representing the disabled and I shall certainly see anybody representing the national organisations. In fact, arrangements are being made for me to see national representatives on 17th May.

    Granny Bashing
    Mr. Andrew F. Bennettasked the Secretary of State for Social Services what evidence he has that so-called "granny bashing" is a growing problem; and if he will set up an investigation to establish the relationship between this problem and the need to care for elderly relatives.
    Mr. Ennals: Domiciliary care staff are well aware of the need to be on the alert for any possible signs of ill-treatment but I have no evidence that this problem is increasing. I have, however, decided to fund a research project into the support needed by families caring for elderly relatives. I am sure that good neighbours can be an important factor in helping to provide such support.
    Mr. Bennett: While thanking the Secretary of State for his announcement, I wonder whether he is fully aware that many people suffer great hardship from looking after elderly relatives for long periods, especially in areas where there is an acute shortage of geriatric beds. Will he do more to increase the supply of geriatric beds so that relatives can get a break from caring for elderly relatives, and will he see that more community support is available for caring for these elderly people?
    Mr. Ennals: I agree absolutely about the need for more geriatric beds. Also, it is essential that there should be more provision for these elderly people in the community. It is interesting that in the
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    joint financing project a high proportion is devoted to helping people in this category. The purpose of the research is very important. There is a whole range of specific factors, such as incontinence and sleep disturbance, which provoke crises in families looking after elderly people. The research will investigate all the facts and the possibility of relieving measures, such as measures for dealing with incontinence, laundry services, sitter-in services, night sitting and night nursing facilities, and a whole range of other services to assist families who have the responsibility of caring for elderly relatives.
    Mr. Speaker: I appeal for shorter questions and shorter answers.
    Mr. Greville Janner: As my right hon. Friend spent much of last Friday in my constituency, did he take note of the prodigious work done in hospitals there—hospitals that are grossly under-staffed—and in domiciliary services? Does he accept that, while his research project is welcome, it is no substitute whatever for more help in the hospitals and more domiciliary care for the elderly?
    Mr. Ennals: What I saw in my hon. and learned Friend's constituency was one of the finest examples of a new community hospital, which at the moment is dedicated entirely to providing support services for precisely the sort of elderly people whom we are talking about. I thought that it was a prime example of the sort of service that the Health Service can provide and is increasingly trying to provide to meet just this problem.

    Death Grant
    Mr. Bowdenasked the Secretary of State for Social Services what representation he has received from the National Federation of Old Age Pensioners about the level of the death grant.
    Mr. Orme: Representatives of the federation urged my right hon. Friend to raise the death grant when he met them in February. Two branches of the federation have also written to us this year on the same issue.
    Mr. Bowden: Does the right hon. Gentleman accept that the present level of death grant is creating great personal distress for some elderly people, particularly those who have no savings left?

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    It is therefore imposing a burden on their families. Will he admit that it is scandalous that there has been no increase in the death grant since 1967?
    Mr. Orme: The straight answer is that this is a question of priorities. The Government have to consider this matter against pensions and other benefits. We know that the pressure is on for an increase, but this matter comes lower down the scale at the moment.
    Mr. Lipton: Is my right hon. Friend aware that I have a later Question relating to this matter? Is he also aware that the death benefit is hardly sufficient to pay the tips of the men who are handling the burial? Will he please consider the urgency of increasing the death grant?
    Mr. Orme: I am aware that many hon. Members, including my hon. Friend, have raised this matter with mc, but I must reiterate that it is a question of finance, public expenditure and priorities.
    Mr. Boscawen: Although one recognises that this question is a matter of priorities and that it is unlikely that the death grant can be increased for everybody for a long time ahead, does the right hon. Gentleman agree that it is time that there was some selectivity and that those whose families are in receipt of supplementary benefit should be allowed an increase in the death grant?
    Mr. Orme: I find it difficult to follow the hon. Gentleman's reference to selectivity. I can understand much of the pressure that I am getting from my hon. Friends on this matter, but not that from Opposition Members. They are again urging more public expenditure at a time like the present.
    Mr. Donald Stewart: Does the right hon. Gentleman not recognise that for these schemes to have reality the benefits must bear some relationship to the contributions? Since the contributions have been advancing steadily over the years, is it not high time that the death grant was raised?
    Mr. Orme: That is a very fair point and I take note of it. Certainly the Government want to do something about this matter when the finance is available.
    Mr. Noble: Is my right hon. Friend aware that the Tory-controlled local authority in Rossendale, in my constituency, recently introduced massive increases in charges for grave spaces and that this action in itself is causing a great deal of hardship among old people who are concerned about the fact that they can no longer afford to purchase a grave space for their relatives?
    Mr. Orme: I am tempted to say that that is a very grave matter. In effect, my hon. Friend has reiterated the point made by the Secretary of State earlier today about expenditure by some of these Tory authorities. When it comes to the issue, they cut vital social services.

    Health Services Board
    Mr. Newtonasked the Secretary of State for Social Services whether he is satisfied with the working of the Health Services Board.
    Mr. Ennals: The Health Services Board is an independent statutory body and is not responsible to me for the way in which it discharges its duties under the Health Services Act. I have every confidence in it.
    Mr. Newton: How many pay beds have so far been phased out and how many extra beds have become available as a result to NHS patients? Will the right hon. Gentleman comment on allegations by the Socialist Medical Association that the spaces left vacant by pay beds are being turned into storerooms and laboratories?
    Mr. Ennals: On the second half of that question, the Act requires that every effort is made to ensure that the pay beds that are closed are used productively. An amendment to that effect was accepted in debates on the Bill. As for the number of beds phased out, as the House will know, I am responsible for the phasing out of the first 1,000. I have been in consultation with the health authorities. I have now completed that consultation, and authorisations will take effect as from 20th May, and I shall make a further announcement to the House about the matter.
    Mr. Kilroy-Silk: Does my right hon. Friend accept that progress in phasing out pay beds from the National Health

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    Service has not been fast enough and that until all pay beds are eliminated from it we shall never have an equitable or efficient Health Service?
    Mr. Ennals: I shall not go over the whole debate that we had. I think that I and all my hon. Friends recognise the wisdom of the measure that we passed through the House. Quite apart from the 1,000 pay beds that will be phased out by my decision, the board is now busy consulting about the first group of beds for which it has responsibility and it will be reporting to me in July.
    Dr. Vaughan: Does the right hon. Gentleman accept that there is widespread and serious criticism of the way in which the board was set up and is conducting its business? Is it not clear that if it is to fulfil the requirements of the Act, it will need more time than it has at the moment?
    Mr. Ennals: I do not accept that there has been any such criticism. This is a very well balanced board which has got down to its job quickly. Its members asked me whether they could have a little more time to make their first report to me, and I readily agreed. In fact, I offered them more than they asked for but they said that they did not need it. I am very satisfied that the board is doing its job thoroughly, with maximum consultation.

    Retirement Age (Men)
    Mr. Greville Jannerasked the Secretary of State for Social Services whether he will seek power to introduce phased retirement for men.
    Mr. Orme: No, Sir. I refer my hon. and learned Friend to the arguments and costings in my Department's memorandum of last year entitled "Pension Age".
    Mr. Janner: Is my right hon. Friend agreed that in principle there can be no justification for different retirement ages for men and women? Is he agreed in principal on retirement equality for men?
    Mr. Orme: My hon. and learned Friend asks me about principle. Obviously the Government would want to work towards equalisation, but that will take time. This is a matter of costings. My hon. and learned Friend will have seen the sort of public expenditure that
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    would be needed to bring about an equal pension retirement age in the paper that we produced.
    Mr. Gwilym Roberts: In the present situation, in which we are faced with long-term structural unemployment, does my right hon. Friend agree that the odds are very heavy that the job of every man who is put on pension will be taken up by someone on the unemployment register and that the net costing of such an operation would be little or nothing? If there is the long-term phasing in of a lower retirement age, and, having looked at the booklet in some detail—
    Mr. Speaker: Order. This is not a time for the giving of views.
    Mr. Orme: We shall learn a great deal from the job exchange scheme. Sometimes people who retire quite rightly seek other employment. We hope that when we return to full employment the problems to which my hon. Friend has drawn attention will not exist.
    Mr. Marten: In the meantime, can we not make a start by offering the option of a retirement pension to those over 60 who are made redundant?
    Mr. Orme: Again, the point is the cost. Pensioners would not want to take a reduced pension. If they were to get the full pension, the State would have to pay for it.

    Benefits (Uprating)
    Mr. Peter Bottomleyasked the Secretary of State for Social Services when the social security uprating announcement will be made.
    Mr. Ennals: I will be making an announcement soon.
    Mr. Bottomley: Does the right hon. Gentleman regard the review that he carried out in the previous financial year as a State secret? If so, why?
    Mr. Ennals: No, it is not a State secret. I am prepared to reveal it.
    Mr. Ashley: Although my right hon. Friend must get fed up with the double standards of Opposition Members who advocate savage cuts in public expenditure on the one hand and increases on the other, will he bear in mind that the proposed increases in the charges

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    for meals will hit some families extremely hard? Surely this should be taken into account when considering whether he is able to increase the child benefit allowances.
    Mr. Ennals: I can assure my hon. Friend that in taking what must be a difficult decision on what should be the level of uprating to take place from November, I must take into account all the different changes in prices, including the price of food and the retail price index. I can assure the House that the uprating will be sufficient to restore the value of benefits that were introduced in November 1976.
    Mr. Patrick Jenkin: As we were told by the right hon. Member for Blackburn (Mrs. Castle) on 29th April that the latest date to start an orderly implementation was last week if the increases were to be paid by November, why is the Secretary of State waiting? Will he give an absolute, categorical denial that there is no question of using the size of the uprating as a bargaining counter with the TUC?
    Mr. Ennals: I can assure the right hon. Gentleman that I shall be making my announcement very soon. It will be based entirely on a decision taken by the Government. It will not be part of any bargaining counter. I can assure the right hon. Gentleman that he is wrong about the date. The latest date for announcing a mid-November uprating would be early in June. That would be inconvenient in view of what is likely to be the recess. I hope, therefore, that the announcement will be made before the end of the month.

    Handicapped Children (Pamphlet)
    Mr. Formanasked the Secretary of State for Social Services whether he will make a statement about the recent pamphlet on handicapped children by the National Development Group.
    The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): I refer the hon. Gentleman to my right hon. Friend's reply to my hon. Friend the Member for Brent, South (Mr. Pavitt) on 9th March.
    Mr. Forman: Does the hon. Gentleman accept that the pamphlet issued by the National Development Group strongly
    1098
    endorses the recommendations of the Court Committee? Will he agree to give positive discrimination in favour of handicapped children as a matter of policy, if necessary on a joint financing basis?
    Mr. Moyle: I think that I can consider all those points sympathetically. We are consulting on the pamphlet and on the Court Committee. We are giving the highest priority to mentally handicapped children and we expect joint financing to make a considerable contribution.

    MERSEYSIDE
    Mr. Loydenasked the Prime Minister when he next intends to pay an official visit to Merseyside.
    The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): In the absence of my right hon. Friend, who is presiding at a meeting of the NATO Council of Ministers. I have been asked to reply.
    My right hon. Friend has at present no plans to do so.
    Mr. Loyden: I ask my right hon. Friend the Lord President whether he will ask his right hon. Friend to reflect on the election results of last Thursday if he cannot visit Merseyside. Will he point out to the Prime Minister that the electorate on Merseyside, scourged with heavy unemployment, is not reacting to the Lib-Lab pact as being the ways and means of finding a solution to its problems? Will he further urge my right hon. Friend to consider the possibility of a pact with the National Executive Committee of the Labour Party and the Labour Party Conference to find Socialist solutions to the problems on Merseyside?
    Mr. Foot: I agree with my hon. Friend that the results are extremely serious from the point of view of everyone on Merseyside. I can assure my hon. Friend that the Government will take account of them. They will take account of all the representations that he and others have made on the matter. We shall seek to sustain our policies for assisting, in particular, the firms on whose behalf my hon. Friend has made strong representations. I am doubtful whether we shall get any assistance on these matters from the newly-elected representatives on Merseyside.
    Mr. Whitelaw: In view of the question of the hon. Member for Liverpool, Garston (Mr. Loyden), would not the right hon. Gentleman be wise to take the opportunity of going to Merseyside and meeting the architect of the Liberal showpiece on Merseyside, "Jones the Vote"? Should not the right hon. Gentleman comfort his new colleagues with the fact that both their parties had catastropic results in the Merseyside elections?
    Mr. Foot: If I might use the same colloquial terms as the right hon. Gentleman, I have always preferred "Steel the Vote" to "Jones the Vote". On the whole, he has delivered it a good deal better.
    Mr. Kilroy-Silk: Does my right hon. Friend accept that one of the best examples of Tory freedom in action is the manner in which Foster Plastics, of Rain-ford, in my constituency, has sold out to a competitor without consulting or considering the interests of the workers, most of whom have been callously thrown on the scrapheap? Is this not an example of Tory freedom and free enterprise, in which the interests of workers come last, and when the pawns in the takeover battles are never consulted or considered?
    Mr. Foot: My hon. Friend raises matters of great seriousness. We should all be aware of the extremely serious employment situation on Merseyside. In reply to the questions of my hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk) and Liverpool, Garston (Mr. Loyden) I would say that in response to the representations that have been made to us by the hon. Members for Garston, Liverpool, Walton (Mr. Heffer) and others from Merseyside on the cases of individual firms, asking for Government intervention and Government money, there has been a considerable amount of intervention and a considerable amount of money has been supplied. But that is contrary to the policies preached by those who have temporarily taken power in Merseyside.
    Mr. Hunt: Will the Lord President advise his right hon. Friend that the anti-Labour feeling in Merseyside is due to a rejection of Socialism, which is shown by
    1100
    the two-thirds majority that the Conservatives now hold? Do the right hon. Gentleman and his right hon. Friend realise that the rejection of Socialism has occurred because there are now no jobs on Merseyside? What hope can he give to school leavers in my constituency that under this Government there is a chance of their getting a job when they leave school?
    Mr. Foot: If it had not been for intervention by the Government, about 20,000 people now in jobs in Merseyside would not have had them. That work has been sustained by Government intervention. We believe that that process has to be extended over the period to come. The Manpower Services Commission, in particular, has produced a recent report in which it has made recommendations—and I believe that the Government will be eager to act upon them as speedily as possible—for further assistance for young people, who form a major part of the problem. What is requited is Government intervention, and those on the Government Benches understand the fact.
    Mr. Heffer: Is my right hon. Friend aware that if one analyses the votes on Merseyside one sees that Opposition Members have nothing to crow about and that in a General Election the results on Merseyside would be precisely as they are now? [Interruption.] Yes—with more Labour seats than Tory seats. Is my right hon. Friend further aware that if Conservative policies were carried out, with massive further cuts in public expenditure plus a failure to assist in bringing industry to Merseyside, unemployment there would be far higher than it is?
    Mr. Foot: I fully accept what my hon. Friend has said. I could not have said it better myself. If those Opposition Members who to judge from these questions, have apparently shown some interest in Merseyside had taken rather more interest in previous discussions, they would have realised that representations have been made by my right hon. and hon. Friends on matters affecting employment on Merseyside over many months and that some of the improvements that we have been able to achieve have been achieved precisely because we have responded to those representations.

    FOREIGN SECRETARY (SPEECH)
    Mr. Pattieasked the Prime Minister if the speech made by the Secretary of State for Foreign and Commonwealth Affairs on economic policy at Castleford Trades and Labour Clubs on 23rd April 1977 represents Government policy.
    Mr. Aitkenasked the Prime Minister if the speech made by the Secretary of State for Foreign and Commonwealth Affairs on economic policy at Castleford Trades and Labour Clubs on 23rd April 1977 represents Government policy.
    Mr. Michael Lathamasked the Prime Minister if the public speech by the Secretary of State for Foreign and Commonwealth Affairs on economic policy in Castleford on 23rd April 1977 represents Government policy.
    Mr. Foot: I have been asked to reply.
    I refer the hon. Members to the reply that my right hon. Friend gave to the hon. Member for Christchurch and Lymington (Mr. Adley) on 2nd May.
    Mr. Pattie: Does the right hon. Gentleman recall that in his speech the Foreign Secretary said specifically that the Government, ahead of any negotiations with the TUC, had already decided on a ceiling of 8 per cent. or 9 per cent. for wages policy in phase 3, and that he went on to say that if this was not possible we should be in danger of losing all the ground so painfully won? As most sections of society have now experienced the pain, can the right hon. Gentleman give some examples of the ground that has been won?
    Mr. Foot: The hon. Gentleman is under a misapprehension. My right hon. Friend the Foreign Secretary did not state the matter in the terms set out by the hon. Gentleman. The figure that he referred to in his speech was a single-figure pay-price equation. He referred to the desirability of securing such a figure, and, of course, that figure itself was referred to by the TUC in its economic review.
    Mr. Aitken: In the light of the statement made by the Prime Minister following the economic Summit, can the right hon. Gentleman clarify whether it is the
    1102
    lowering of the inflation rate or the lowering of the unemployment total that is now the Government's new and first priority? If it is the latter, will he help the House by giving a forecast of the number of people who will be unemployed by the end of the year?
    Mr. Foot: The hon. Gentleman seeks to play with words. My right hon. Friend and the communiqué stated plainly that priority would be given to creating jobs and overcoming the common unemployment problem that we have in all our countries. My right hon. Friend and others emphasised also that this is inextricably tied up with the fight against inflation as well.
    Mr. Latham: In relation to pay and prices policy, have not the events of the last 24 hours shown clearly that High Street competition, with or without Green Shield stamps, is worth more to the housewife than any number of stage 3s, prices Bills and price codes?
    Mr. Foot: I do not think that that is what most of the housewives in the country think about the situation. Indeed, if they were satisfied with that form of competition, they would not have been misled into voting as they did on Merseyside. It is precisely because of the general inflation that they took many of the courses they did. I assure the hon. Gentleman that his solution is not one that can be applied properly and successfully across the economy as a whole.
    Mr. Cohen: As the Question refers to the economic policy of the Government, will my right hon. Friend confirm that the agreement reached at the Summit Conference will in no way adversely affect the existing hope of extending legislation in respect of dumping in the clothing, steel, textile, leather and other industries in this country?
    Mr. Foot: I can give my hon. Friend confirmation on that point. As my right hon. Friend the Prime Minister indicated, there was no change of policy in that respect. These matters are governed by provisions involved in international arrangements which have already been reached.
    Mr. Pardoe: I recognise the right hon. Gentleman's reluctance to give a figure in respect of pay policy, but does he

    1103
    accept that in phase 3 of the Conservative Government's policy an earnings increase of well over 16 per cent. was allowed? Does he accept that anything better than that would at least be an advance on Toryism?
    Mr. Foot: I would not go into any figures, but I hope that I shall not cause any difficulties with the hon. Gentleman. One of the special difficulties that the Conservatives left us in dealing with these matters was their insistence on a statutory incomes policy. We do not believe that that is the right way to deal with the situation. As far as figures are concerned, I have indicated the general terms in which my right hon. Friend the Foreign Secretary referred to the matter. But all these aspects are for general discussion between the Government and representatives of the TUC, and we have not discussed matters in these terms at all.
    Mr. Mates: Why has the right hon. Gentleman not answered the supplementary question put by my hon. Friend the Member for Thanet, East (Mr. Aitken)? If the Prime Minister was being serious yesterday in saying that the fight to find jobs for our people is now the primary fight, why cannot the right hon. Gentleman give even a target for the end of this year?
    Mr. Foot: The hon. Gentleman knows, and everyone with experience knows, that it would be absurd to give a figure for the whole of the countries that are involved. There are 15 million unemployed in the Western world. No one could give a sensible target of what could be achieved by the end of the year in that respect. Therefore, it would not be possible to relate these general measures to particular countries, either. This matter does not bear any relevance to the rather dodgy supplementary question that the hon. Member for Thanet, East (Mr. Aitken) put. [Interruption.] The answer has been dodged because the question was not designed to get a clear answer.
    Mrs. Castle: If the Government have not a target for the movement of employment over the next 12 months, quite apart from the question whether they could hit that target, will it not be extremely difficult for them to announce very shortly, as they promised, the figure for the up-rating of pensions next November, which,
    1104
    under the forecasting method, has to be linked with the future movement of earnings? Would it not therefore be wiser for the Government to return to the historical method, or allow a very large margin of contingency in case earnings turn out to be a great deal higher than they intend?
    Mr. Foot: I did not make any statement about the Government not having a target for earnings; I was asked whether the Government would give a target for unemployment by a specific time, or at any rate an approximate time. That did not relate to anything about earnings. The hon. Member for Chertsey and Walton (Mr. Pattie) asked me about the speech by my right hon. Friend the Foreign Secretary, and I recalled the general terms in which this matter was referred to in the TUC document. As I indicated earlier, we have not reached any discussion of the detailed figures in talks with the TUC on these matters as yet, and therefore the question put by my right hon. Friend the Member for Blackburn (Mrs. Castle) does not arise.
    Mr. Patrick Jenkin: Since the Foreign Secretary is a member of the medical profession, and since leaks of the Doctors' and Dentists' Review Body Report show that it is entirely within the pay policy, why has that report not yet been published?
    Mr. Foot: The right hon. Gentleman seems to have an obsession with this subject. The Government are entitled to consider the matter, and I am sure that all the right hon. Gentleman's doubts will eventually be allayed.

QUESTION OF PRIVILEGE (MR. SPEAKER'S RULING)
Mr. Speaker: Yesterday the hon. Member for Sowerby (Mr. Madden) raised as a matter of privilege certain expressions allegedly used about his fellow Members by the hon. Member for Antrim, North (Rev. Ian Paisley) during the course of a radio broadcast on Wednesday of last week.
Before I rule on whether I am able to give this complaint precedence over the Orders of the Day, I must explain both to the hon. Member for Sowerby

1105
and to the House that I am bound by the practice of my predecessors, which has now become a firm rule of the House, acknowledged by the Select Committee on Parliamentary Privilege of 1967–68. That is, that a Speaker can afford precedence only if a complaint of privilege is raised at the earliest opportunity.
It would be a departure from that rule if I allowed a Member to wait until a broadcasting authority supplied him with a copy of a transcript of a broadcast before deciding whether or not to make a complaint. Statements broadcast by radio are in this sense no different from any other statements; they must be raised as soon as possible.
In this particular case, I find that the words complained of by the hon. Member for Sowerby were reported almost word for word in at least one national daily newspaper on the day after the broadcast and could have been raised with me last week.
I must therefore rule that I cannot give the complaint precedence over the Orders of the Day.
Having said that, I think I would be failing in my duty as Speaker if I did not condemn in the strongest possible terms the use of such language by the hon. Member for Antrim, North about his colleagues in this House, if he has been correctly reported. Expressions of this nature should not be used by any Member about other hon. Members, whether inside or outside the Chamber.
I regret that I have to say this in the absence of the hon. Member for Antrim, North. I would much rather have said it in his presence, if that had been possible.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: I shall take points of order, but I hope they are not challenging my ruling.
Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. Following that ruling, it would be helpful to the House if we could have guidance on one point. As I understand the practice, in the past Speakers have preferred, after an hon. Member has made a verbal complaint of breach of privilege of this nature, to have
1106
the original source of record handed to the Speaker on which to investigate. If it is to be the case that in future Mr. Speaker prefers a second-hand reference, and not a primary authority of the words recorded, it would be helpful if this were explicitly stated from the Chair, because I think many hon. Members were genuinely under the impression that the Chair preferred to have an authentic record of the words said, spoken or written on the first occasion when they were available rather than a second-hand record of words which had been spoken elsewhere and which might not be a correct record.
I respectfully submit that if the Chair adopts the preference of a second-hand report this might involve the Chair in having to rule on words which have not in fact been spoken and which could be inaccurate in the second-hand report. Not with reference to this particular case, Mr. Speaker, but on the general principle, I would be most grateful if you would give consideration to this point of general principle and share your thoughts with the House when you have considered it.
The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to that point of order, Mr. Speaker. May I support what the hon. Member for Tiverton (Mr. Maxwell-Hyslop) has said in the sense that I believe that it would be desirable to look at this aspect of the question? Possibly, since the Committee of Privileges is looking at another general aspect of the matter, it might look at this aspect as well and include some reference to it in the report which the Committee is preparing for the House.
Mr. Madden: Further to that point of order, Mr. Speaker. I shall in no way challenge your statement, because I think it reflects the difficulties in which all of us are placed with regard to matters of alleged breach of privilege which are broadcast as opposed to those which are published in newspapers. I would ask whether you would allow consideration to be given to a modification of the rules under which we work at present, because I believe we are placed in considerable difficulty.
I understand the need to bring matters of privilege to your notice at the earliest opportunity. Equally, I think we must

1107
always have an accurate record of what is said, and I think it must also be borne in mind that matters of alleged breach of privilege which are broadcast are not necessarily published correctly in newspapers and in some cases are not reproduced at all in newspapers. Therefore, if we are to have two classes of privilege, as it were, it would seem that matters which are broadcast have a very good chance of escaping our notice while those which are published in newspapers can be brought before you at the earliest opportunity.
Therefore, in view of the difficulties which many of us have in promptly obtaining accurate transcripts from the broadcasting authorities, I would ask whether you could give consideration to this matter which, I believe, is one which will concern us increasingly in future.
Mr. Speaker: I am grateful to the hon. Members for Tiverton (Mr. Maxwell-Hyslop) and Sowerby (Mr. Madden) and to the Lord President for what they have said. I have the feeling myself, as I approach this, that it is wrong for the House to be defeated on a technicality from pursuing a question which it might wish to do. But, on the other hand, I am the guardian of the rules of the House, and I certainly undertake to look into the matters raised by the hon. Members and the suggestion made by the Lord President.

STATUTORY INSTRUMENTS; &c;
Ordered,
That the Safety Representatives and Safety Committees Regulations 1977 (S.I. 1977, No. 500) be referred to a Standing Committee on Statutory Instruments, &.—[Mr. Foot.]

RENT ACT 1974 (AMENDMENT)
3.38 p.m.
Mr. Tim Renton: I beg to move,
That leave be given to bring in a Bill to amend the Rent Act 1974.
Many of us will deeply regret that the Labour Party's Home Policy Committee has decided to continue its vendetta against private landlords. What a stupid and short-sighted decision! Let me say straight away that the purpose of my Bill is to encourage the private landlord to provide accommodation for letting and thus to ease the problem of the young, the single, the homeless and the newly married, who traditionally use private rented accommodation but who are now finding it harder and harder to obtain.
It has been estimated that in 1975 there was a loss of at least 90,000 dwellings from the private rented sector. During the same year over 51,000 applications by homeless families for accommodation were recorded by councils in England. This compares with 28,000 in 1972, namely, approximately a doubling in three years. There must be some correlation between the tragic and rapid rise in homelessness and the continuing and sharp decline in the private rented sector.
Never, I believe, has there been such a perverse act as the Rent Act 1974. It reminds me of the Chinese saying describing the behaviour of fools:
"Lifting a rock only to drop it on one's own feet".
The Act aimed to provide greater security of tenure for the tenant, but how can there be greater security when there is no flat or house for the tenant to tenant? That is the greatest insecurity of them all. Equally, the Act purported to give the resident landlord a greater possibility to let accommodation in his own house while at the same time granting security of tenure to the tenant. But the Act is so convoluted and difficult to understand, and there are so many exemptions and exclusions within it, that the landlord does not know where he stands. Where his own home is involved he prefers to leave accommodation empty to letting part of the house to a tenant whom the landlord subsequently finds he cannot remove and

1109
whose presence considerably diminishes the capital value of the house.
Let me give one example of the complexity and convolution in the Act. Suppose that you, Mr. Deputy Speaker, were to be invited by Mr. Speaker to share a few rooms in the Speaker's House—because Mr. Speaker might feel somewhat lonely in that large building—and you were to agree to go for a trial period until the end of the Session. Suppose also that after that time you found that you enjoyed talking politics together at breakfast and that Mr. Speaker suggested renewing the agreement until the end of the next Session. The fact is that he could not get rid of you at the end of that time. You would be there as a protected tenant by virtue of having had two fixed-term tenancies. You would have been given the status of irremovability. I would congratulate you upon that, Mr. Deputy Speaker, but it would certainly not have been Mr. Speaker's intention that you should remain in that house when he first invited you to stay.
That is precisely the sort of booby trap which exists within the 1974 Act. That is why resident landlords are so chary of letting and why those in search of private rented accommodation find it increasingly difficult to obtain it.
I have thought it right, therefore, to bring forward this short Bill. It has the support of many of my hon. Friends and the hon. Member for Isle of Wight (Mr. Ross). It has as its main purpose to simplify the position of the resident land-lord and thus to encourage him to put more accommodation on the market.
The Bill will provide that three months after it has been enacted, all new tenancies where a resident landlord is letting accommodation in his own house will be exempted from the constraints of the Rent Acts unless both landlord and tenant agree in writing that the provisions of the Acts are to apply. This means that from that time a resident landlord will let to new tenants accommodation in his own home for fixed periods of time that may or may not be renewed, or for an unspecified period, at market rent and without creating security of tenure. The minimum period of notice to be given to such non-protected tenants will be 90 days.
1110
I shall also seek to amend the 1974 Act so that a non-resident landlord with a genuine need to possess and occupy at a certain future date should, with the agreement of his prospective tenant, be able to grant a fixed-term tenancy without granting security of tenure. This could be implemented in two ways. First, there could be a mutually agreed fixed-term lease, operating within the existing fair rent arrangements. Here I would be following closely the pattern already suggested by my hon. Friend the Member for Kensington (Sir B. Rhys Williams).
The second possibility is that in exceptional cases a higher than fair rent could be justified, for example, where a landlord had to discharge mortgage repayments. In such a case the parties should be able to agree both a fixed term and a rent higher than that registerable generally. These agreements would be concluded in the presence of a rent officer who would thus be able to advise the parties on the implications and terms of the proposed agreement.
I am reminded of a tragic comment made in The Economist which read:
"People complain that housing policy has become so complicated that they no longer understand it. But imagine their complaints if they had understood it."
My suggestions would utilise a good deal of property that is currently empty because possession cannot be guaranteed at a given future date. Even if local authorities were required to rehouse tenants after the end of the fixed term, an advantage would have been gained by delaying the time when this has to happen and the maximum possible use would have been made meanwhile of the housing stock at a time when new flats and houses are not being built in sufficient numbers.
It is imperative that we help those who need private rented accommodation. I believe that my Bill would go some way to doing that.
3.45 p.m.
Mr. Arthur Latham: I rise to oppose the Bill. The hon. Member for Mid-Sussex (Mr. Renton) began with a piece of completely false logic. He said that since there had been an increase in the number of empty properties and in difficulties of homelessness since the 1974 Act was passed, there must be a correlation. I dispute that. The process of

1111
which he complains started long before 1974. I certainly know, on behalf of my constituents, that a great deal of unhappiness and misery has been saved as a consequence of the Government extending security of tenure to tenants of furnished accommodation.
It is true that fewer furnished dwellings are being advertised in the newspapers. Clearly, more vacancies will be advertised if the complete licence to evict, which existed for landlords of furnished accommodation hitherto, is reinstated. Similarly, since before 1974 the security granted to unfurnished tenancies did not extend to furnished tenancies, there was a motivation for landlords to transfer unfurnished accommodation into furnished by putting in a few sticks of furniture. This denied the tenants their security. When that device was prohibited it was clear that there would be less furnished accommodation arising from that source.
It is true that there is some misunderstanding among resident landlords. That, frankly, is less a consequence of the legislation and more a consequence of Tory propaganda, which has sought to use the private resident landlord as an excuse for urging greater freedom for landlords of the Freshwater and Stern variety, which are rife in my constituency and in many others.
If the hon. Member for Mid-Sussex is concerned about the number of empty properties, he would have done far better to be in the House when my hon. Friend the Member for Salford, East (Mr. Allaun) sought to introduce a Bill dealing with the requisitioning of empty properties. That would have dealt with the bulk of the problem, with the kind of landlord—not the resident landlord—who finds it
more profitable to leave one or two flats empty in a multi-storey block with a view to selling it and enhancing its value. That Bill would have helped people who are in dire need of accommodation by providing these premises at a reasonable rent.
This Bill should be opposed because it gives a completely false impression of the nature of homelessness and of the reasons for empty properties. If the House were to pass the Bill it would strike a chill fear into the tenants of furnished accommodation who were granted security in 1974.
One of the constant problems from which furnished tenancies suffered was that formerly tenants could not use the provisions of other Rent Acts to have rents reduced or to have unsatisfactory conditions remedied by the landlord, because if they had asserted their rights, eviction would have followed as sure as day follows night. Following from that situation, other safeguards which were not available to furnished tenants until 1974 have now become available to them.
I hope that the House will have the good sense to throw the Bill out and to wait for a more worthwhile measure to be introduced by the Government, making any adjustments that are necessary and, most particularly, introducing powers to allow empty properties to be requisitioned.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at the commencement of Public Business) :—
The House divided: Ayes 175, Noes 199.

Division No. 127]

AYES

[3.50 p.m.

Adley, Robert

Budgen, Nick

Fairgrieve, Russell

Amery, Rt Hon Julian

Burden, F. A.

Fell, Anthony

Arnold, Tom

Butler, Adam (Bosworth)

Finsberg, Geoffrey

Atkins, Rt Hon H. (Spelthorne)

Chalker, Mrs Lynda

Fletcher, Alex (Edinburgh N)

Bain, Mrs Margaret

Clarke, Kenneth (Rushcliffe)

Fookes, Miss Janet

Belth, A. J.

Clegg, Walter

Forman, Nigel

Bell, Ronald

Cope, John

Fowler, Norman (Sutton C'f'd)

Benyon, W.

Costain, A. P.

Freud, Clement

Berry, Hon Anthony

Crawlord, Douglas

Fry, Peter

Biggs-Davison, John

Crouch, David

Gardner, Edward (S Fylde)

Blaker, Peter

Davies, Rt Hon J. (Knutsford)

Gilmour, Rt Hon Sir Ian (Chesham)

Body, Richard

Dean, Paul (N Somerset)

Goodhart, Philip

Boscawen, Hon Robert

Douglas-Hamilton, Lord James

Goodhew, Victor

Bottomley, Peter

Drayson, Burnaby

Goodlad, Alastair

Bowden, A. (Brighton, Kemptown)

Durant, Tony

Gow, Ian (Eastbourne)

Boyson, Dr Rhodes (Brent)

Edwards, Nicholas (Pembroke)

Gower, Sir Raymond (Barry)

Braine, Sir Bernard

Elliott, Sir William

Gray, Hamish

Brocklebank-Fowler, C.

Ewing, Mrs Winifred (Moray)

Grimond, Rt Hon J.

Brooke, Peter

Eyre, Reglnald

Grist, Ian

Buchanan-Smith, Alick

Fairbairn, Nicholas

Gryils, Michael

Hall, Sir John

Mitchell, David (Basingstoke)

Shersby, Michael

Hamilton, Michael (Salisbury)

Moate, Roger

Sims, Roger

Hannam, John

Molyneaux, James

Sinclair, Sir George

Harrison, Col Sir Harwood (Eye)

Monro, Hector

Skeet, T.H.H.

Hicks, Robert

Montgomery, Fergus

Smith, Dudley (Warwick)

Higgins, Terence L.

More, Jasper (Ludlow)

Smith, Timothy John (Ashfield)

Holland, Philip

Morgan, Geraint

Spence, John

Hordern, Peter

Morgan-Giles, Rear-Admiral

Spicer, Michael (S Worcester)

Howe, Rt Hon Sir Geoffrey

Morrison, Charles (Devizes)

Stenbrook, Ivor

Howell, David (Guildford)

Morrison, Hon Peter (Chester)

Stanley, John

Howells, Geraint (Cardigan)

Mudd, David

Steel, Rt Hon David

Hunt, David (Wirral)

Neave, Airey

Steen, Anthony (Wavertree)

Hunt, John (Bromley)

Nelson, Anthony

Stewart, Rt Hon Donald

Irving, Charles (Cheltenham)

Neubert, Michael

Stokes, John

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

Newton, Tony

Stradling Thomas, J.

Johnson Smith, G. (E Grinstead)

Nott, John

Taylor, Teddy (Cathcart)

Johnston, Russell (Inverness)

Oppenheim, Mrs Sally

Tebbit, Norman

Jopling, Michael

Page, John (Harrow West)

Thatcher, Rt Hon Margaret

Kaberry, Sir Donald

Page, Rt Hon R, Graham (Crosby)

Thompson, George

Kershaw, Anthony

Page, Richard (Workington)

Thorpe, Rt Hon Jeremy (N Devon)

Knight, Mrs Jill

Pardoe, John

Townsend, Cyril D.

Lamont, Norman

Parkinson, Cecil

Wakeham, John

Latham, Michael (Melton)

Pattie, Geoffrey

Wall, Patrick

Lawson, Nigel

Penhaligon, David

Walters, Dennis

Le Marchant, Spencer

Percival, Ian

Weatherill, Bernard

Lewis, Kenneth (Rutland)

Peyton, Rt Hon John

Wells, John

Lloyd, Ian

Powell, Rt Hon J. Enoch

Welsh, Andrew

Luce, Richard

Price, David (Eastleigh)

Whitelaw, Rt Hon William

McAdden, Sir Stephen

Pym, Rt Hon Francis

Wiggin, Jerry

Macfarlane, Neil

Renton, Rt Hon Sir D. (Hunts)

Wigley, Dafydd

MacGregor, John

Renton, Tim (Mid-Sussex)

Wilson, Gordon (Dundee E)

Mackay, Andrew James

Rhodes James, R.

Winterton, Nicholas

McNair-Wilson, M. (Newbury)

Ridley, Hon Nicholas

Wood, Rt Hon Richard

Marten, Neil

Rifkind, Malcolm

young, Sir G. (Ealing, Acton)

Mather, Carol

Roberts, Michael (Cardiff NW)

Younger, Hon George

Maudling, Rt Hon Reginald

Roberts, Wyn (Conway)

Mawby, Ray

Ross, Stephen (Isle of Wight)

TELLERS FOR THE AYES:

Mayhew, Patrick

Rost, Peter (SE Derbyshire)

Mr. Michael Marshall and

Meyer, Sir Anthony

Shaw, Giles (Pudsay)

Mr. Michael Morris.

Mills, Peter

Shepherd, Colin

NOES

Archer, Peter

Dean, Joseph (Leeds West)

Jackson, Miss Margaret (Lincoln)

Armstrong, Ernest

Dempsey, James

Jay, Rt Hon Douglas

Ashley, Jack

Doig, Peter

Jenkins, Hugh (Putney)

Ashton, Joe

Dunn, James A.

John, Brynmor

Atkins, Ronald (Preston N)

Eadie, Alex

Johnson, James (Hull West)

Atkinson, Norman

Edge, Geoff

Johnson, Walter (Derby S)

Bates, Alf

Ellis, John (Brigg & Scun)

Jones, Alec (Rhondda)

Bidwell, Sydney

English, Michael

Jones, Barry (East Flint)

Bishop, E. S.

Ennals, David

Kaufman, Gerald

Blenkinsop, Arthur

Evans, Ioan (Aberdare)

Kelley, Richard

Booth, Rt Hon Albert

Ewing, Harry (Stirling)

Kerr, Russell

Boothroyd, Miss Betty

Faulds, Andrew

Kilroy-Silk, Robert

Bottomley, Rt Hon Arthur

Fitch, Alan (Wigan)

Kinnock, Neil

Bradley, Tom

Flannery, Martin

Lambie, David

Brown, Hugh D. (Provan)

Fletcher, Ted (Darlington)

Lamborn, Harry

Buchan, Norman

Foot, Rt Hon Michael

Lamond, James

Buchanan, Richard

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

Latham, Arthur (Paddington)

Butler, Mrs Joyce (Wood Green)

Freeson, Reginald

Lestor, Miss Joan (Eton and Slough

Callaghan, Jim (Middleton & P)

Garrett, John (Norwich S)

Lewis, Ron (Carlisle)

Campbell, Ian

George, Bruce

Lipton, Marcus

Canavan, Dennis

Ginsburg, David

Loyden, Eddie

Cant, R. B.

Golding, John

Lyon, Alexander (York)

Carmichael, Neil

Gould, Bryan

Mabon, Rt Hon Dr J. Dickson

Carter-Jones, Lewis

Graham, Ted

McCartney, Hugh

Cartwright, John

Grant, George (Morpeth)

McDonald, Dr Oonagh

Castle, Rt Hon Barbara

Grant, John (Islington C)

McElhone, Frank

Clemitson, Ivor

Hamilton, James (Bothwell)

MacFarquhar, Roderick

Cocks, Rt Hon Michael

Harper, Joseph

McMillan, Tom (Glasgow C)

Cohen, Stanley

Harrison, Walter (Wakefield)

McNamara, Kevin

Coleman, Donald

Hatton, Frank

Madden, Max

Colquhoun, Ms Maureen

Healey, Rt Hon Denis

Magee, Bryan

Conlan, Bernard

Heffer, Eric S.

Mahon, Simon

Cook, Robin F. (Edin C)

Hooley, Frank

Mallalieu, J.P.W.

Corbett, Robin

Horam, John

Marshall, Jim (Leicester S)

Cowans, Harry

Hoyle, Doug (Nelson)

Maynard, Miss Joan

Cox, Thomas (Tooting)

Huckfield, Les

Mendelson, John

Crawshaw, Richard

Hughes, Rt Hon C. (Anglesey)

Mikardo, Ian

Crowther, Stan (Rothetham)

Hughes, Robert (Aberdeen N)

Millan, Rt Hon Bruce

Cryer, Bob

Hughes, Roy (Newport)

Miller, Mrs Millie (Ilford N)

Cunningham, G. (Islington S)

Hunter, Adam

Mitchell, Austin Vernon (Grimsby)

Davies, Bryan (Enfield N)

Irvine, Rt Hon Sir A. (Edge Hill)

Molloy, William

Deakins, Eric

Irving, Rt Hon S. (Dartford)

Moonman, Eric

1114

1115

Morris, Alfred (Wythenshawe)

Rom, Rt Hon W. (Kilmarnock)

Torney, Tom

Morris, Charles R. (Openshaw)

Rowlands, Ted

Tuck, Raphael

Morris, Rt Hon J. (Aberavon)

Sandelson, Neville

Varley, Rt Hon Eric G.

Moyle, Roland

Sedgemore, Brian

Wainwright, Edwin (Dearne V)

Mulley, Rt Hon Frederick

Selby, Harry

Walker, Terry (Kingswood)

Murray, Rt Hon Ronald King

Shaw, Arnold (Ilford South)

Ward, Michael

Newens, Stanley

Sheldon, Rt Hon Robert

Watkins, David

Noble, Mike

Short, Mrs Renee (Wolv NE)

Watkinson, John

O'Halloran, Michael

Silkin, Rt Hon John (Deptford)

Weitzman, David

Orbach, Maurice

Silkin, Rt Hon S. C. (Dulwich)

White, James (Pollok)

Orme, Rt Hon Stanley

Silverman, Julius

Whitlock, William

Padley, Walter

Skinner, Dennis

Willey, Rt Hon Frederick

Park, George

Small, William

Williams, Rt Hon Alan (Swansea W)

Pavitt, Laurie

Smith, John (N Lanarkshire)

Williams, Alan Lee (Hornch'ch)

Pendry, Tom

Spearing, Nigel

Williams, Rt Hon Shirley (Hertford)

Perry, Ernest

Spriggs, Lesile

Wilson, Alexander (Hamilton)

Radice, Giles

Stallard, A. W.

Wilson, William (Coventry SE)

Rees, Rt Hon Merlyn (Leeds S)

Stewart, Rt Hon M. (Fulham)

Wise, Mrs Audrey

Richardson, Miss Jo

Stoddart, David

Woodall, Alec

Roberts, Albert (Normanton)

Strauss, Rt Hon G. R.

Woof, Robert

Roberts, Gwilym (Cannock)

Summerskill, Hon Dr Shirley

Young, David (Bolton E)

Robinson, Geoffrey

Taylor, Mrs Ann (Bolton W)

Roderick, Caerwyn

Thomas, Jeffrey (Abertillery)

TELLERS FOR THE NOES:

Rodgers, George (Chorley)

Thomas, Mike (Newcastle E)

Mr. Ron Thomas and

Rooker, J. W.

Thorne, Stan (Preston South)

Mr. Frank Allaun.

Rose, Paul B.

Tinn, James

Question accordingly negativated

ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 4, 15, 21; new clauses relating to value added tax, sub-contractors in the construction industry, benefits from employment (motor cars), and capital gains tax).
  Considered in Committee [Progress 9th May].
  [Mr. BRYANT GODMAN IRVINE in the Chair]

  FINANCE BILL

    Clause 15
    CHARGE FOR INCOME TAX FOR 1977–78
    4.2 p.m.
    Dr. Oonagh McDonald: I beg to move Amendment No. 17, in page 17, in page 11, leave out lines 13 to 36 and add
    "all other rates of income tax shall be the same for 1977–78 as for 1976–77".
    The amendment concerns the tax concessions given in the Budget to those who have to pay higher rates of income tax. If adopted, it would save £320 million, which the supporters of the amendment argue would be better spent in giving greater relief to the lower paid or in more greatly funding child benefit.
    The arguments to which the Chancellor of the Exchequer has listened over the last few weeks have led him to give these tax concessions to the higher paid. He has been seduced yet again by the siren voices of the CBI. He has listened to the argument that suggests that the social contract has brought about a significant improvement in the relative position of the low paid at the expense of the higher paid. He has listened to the view that the relative rewards of mangement and professional groups have been severely eroded because of the effects of the incomes policies. Both arguments are false, and the Chancellor should not even have listened to them, let alone have been taken in by them.
    Let us look at the effect of incomes policy during 1975–76, which is the only year for which we have full statistics available. We can compare matched groups and see, for example, that the earnings of accountants
    1118
    increased by 22 per cent. in that year while the earnings of manual workers went up by only 17 per cent. It may be suggested that by picking out accountants I am putting the argument in the most favourable terms for myself, but the sorts of increases gained by accountants in that year were not untypical. In every case the percentage increase of non-manual groups was higher than the percentage increase for manual workers.
    The figures show that the first year of incomes policy did nothing to give a greater benefit to low-paid manual workers at the expense of the higher-paid. We do not have the full statistics for 1976–77, but there is no reason to believe that there has been an improvement in the position of the low paid during the past year at the expense of higher paid, non-manual workers. The reason is that the best chance of such an improvement coming about was in 1975–76—the year of the flat-rate £6 per week increase.
    Generally, non-manual workers have received greater percentage increases than have manual workers. In the weeks preceding the Budget there were many rumours of tax concessions, and middle management made its voice heard. Middle managers are supposed to have been especially badly treated, but if we look at the way their relative position changed, we find that in 1975 the management group received 189 per cent. of the earnings of the lowest paid group and in 1976 that figure had risen to 195 per cent. In other words, the differential between middle management and the lowest paid has increased while the pay policy has been in operation.
    We cannot look only at increases in wages and salaries, because the management group benefits also from increments, artificial regrading or promotion as a way round the pay code and fringe benefits that are not reflected in the earnings figures to which I have referred. A survey of the salaries of 7,000 executives in nearly 600 companies brought this out clearly. It showed that the average increase in executives' salaries was £508 in the year up to July 1976—when the maximum increase was supposed to be £312 a year. In that period, the average company secretary in the private sector received an increase of £803, and the report also shows an

    1119
    increase in the number of employees receiving fringe benefits.
    In that period, certain professional groups managed to maintain or even improve their relative position in the structure of rewards. Meanwhile, the low paid suffered not just from having their wages held down but also because their overtime rates remained unchanged. They also suffered from the effects of income tax on those overtime rates and, although the low-paid workers would benefit most from a consolidation and raising of the tax thresholds beyond that which the Chancellor has offered in the Budget, nothing of that sort has been seriously offered as a way of improving their position.
    It is clear that the Budget has done little to improve the lot of the lowest paid. If we take the very lowest paid, we can see what an enormous difference in wages and salaries exists in our society and that the Chancellor of the Exchequer in the Finance Bill does little or nothing to correct it.
    Let us take those covered by the 43 wages councils. These set legal minimum rates of pay for about 3 million people. The Opposition weep crocodile tears about the low-paid workers and the need for an incentive to work. When I look at the wage rates for these 3 million people, I cannot understand why they bother to go to work at all. But, of course, if the Opposition spent less time weeping crocodile tears and more time asking for the Government to increase the investigation of those employers who fail to pay the minimum wages, for more charges to be brought against mean and stingy employers, and for more severe punishments to be imposed on those same employers, we might no longer regard them as crocodile tears.
    Mr. Sydney Bidwell: Bring back the birch.
    Dr. McDonald: Let us get back to those covered by the wages councils. After two stages of pay policy, this group's wages range from £34 at the top end to £23·35 at the bottom end of the scale. When we look at those figures, which are bad enough as they stand, we have to remember that many workers have not yet received stage 2 of the pay policy, for about one-third of the wages councils have not yet come to a decision,
    1120
    although it is now May, about the stage 2 settlements. But, of course, the problems of these workers are made worse, not better, by the tax system. It has become increasingly less progressive each year and is having a severe effect on the living standards of the low paid. When we take national insurance contributions into account, we see that they suffer even more from this kind of imposition.
    The Chancellor of the Exchequer claims to have helped this group. Raising the tax threshold does help, and no doubt low-paid workers and the least well-off are glad of the little concession that the Chancellor has given in this Budget. Some people have been brought out of tax altogether, and some will get some boost to their income during the course of this year. But when we look at the figures given with the Finance Bill, we find that they are not among those who benefit most, as the Treasury's own figures make clear.
    The costs of tax concessions in the Finance Bill to those who earn under £4,000 a year are £796 million. To those earning £4,000 a year and more, the cost of the concessions is £1,454 million. In fact, what the Chancellor has done in this Budget is to use the tax system to widen differentials and not to decrease them. This is directly contrary to the priorities as set out by the TUC and the Government—that is, to help the low paid most—at the beginning of the social contract.
    If we look at what has been done in the Budget, we find first that the increases in the personal tax allowances are not enough to restore them to their real value of a year ago. Secondly, we find that the increases in the tax allowances are more than enough to offset the effects of inflation for the higher paid.
    4.15 p.m.
    When it comes to cushioning people against the worst effects of inflation, the Chancellor has quite deliberately rigged the Budget so that it protects the higher paid—not, I agree, the most highly paid—much more than the lower paid. Perhaps the Chancellor has reason for doing this, for the Chancellor takes first the average male earnings as being £80 a week. I shall not argue about that figure. It is possibly a little bit up or down. But he does not notice that 60 per cent of

    1121
    male wage and salary earners earn less than £80 a week.
    The Chancellor is one of two people in the country at the moment who believe that skilled workers earn £120 a week. The first is a Mrs. King, who wrote to the Prime Minister about this point a couple of weeks ago and complained about it. The other is the Chancellor. If skilled workers are earning £120 a week, I should like to know where those skilled workers exist. There may be one or two who, because of overtime and so on, have reached that magnificent sum, but in talking to workers in the engineering industry I find that for a 40-hour basic week engineers' earnings are somewhere between £58 and £65.
    Taking average weekly earnings for typical engineers during March 1977—this is including overtime and so on—a typical month goes like this: first week, £72, second week, £81, third week, £75, and fourth week, £90. That, of course, includes overtime, bonuses and so forth, but, in spite of all those efforts on the part of a skilled engineer, it is still nowhere near £120 a week. If we take miners, for example, and look at the wages of face workers, we find that the top rate is £70 a week, with surface workers and other underground workers earning considerably less than that.
    In other words, skilled workers are nowhere near the figure of £120 a week which the Chancellor has dreamed up in order to justify the kinds of tax concessions that he gives in his Budget. It is no wonder that The Sunday Times reported that there had been laughter in the executive washrooms after the Budget. But, of course, there was no laughter in the toolrooms, as the by-election result at Stechford two days after the Budget no doubt showed, but apparently not clearly enough.
    To sum up, this Budget does not do enough to help working people, neither skilled workers nor unskilled manual workers. By adopting this amendment and saving £320 million, the Government could better use that sum to benefit the low paid. This could be done either by raising the child benefit by about 50p a week, or, by abandoning the tax reduction from 35 per cent. to 33 per cent., raising the threshold of the child benefit—this would benefit those who most
    1122
    need help—rather than falling once again for the line that is shot by the CBI.
    Mr. Nicholas Ridley: I came to listen to the hon. Member for Thurrock (Dr. McDonald) thinking that she would talk about the higher rates of tax, but instead she talked about rates of earnings. I have no criticism to make of her because of that, especially as she succeeded in keeping within your watchful eye, Mr. Godman Irvine. On the other hand, if the hon. Lady can do that, I suppose I am not debarred from making a few remarks about earnings.
    I wish I had known that the hon. Lady was going to do this, because I have on my desk a table of the increase of earnings in the public sector since the Government came to power. Unfortunately, I shall have to try to remember the figure. I think I am right in saying—it might be a few points wrong—that non-manual public servants, that is to say, the Civil Service, since the Government came to power have had on average an increase of 92 per cent. in earnings, whereas in the manual grade the figure is 78 per cent. In a sense this bears out the point that the hon. Lady was making in regard to the public sector, but if she were to look at the figures for the private sector she would find a very different story.
    Another ground on which the hon. Lady may be said to be putting misleading figures before the House is that she mostly quoted figures for 1975 over 1974, when, of course, there was no pay policy—
    Dr. McDonald: I said repeatedly 1975 to 1976.
    Mr. Ridley: Obviously, I misheard the hon. Lady, but the point is still valid—namely, that if she examines the whole period from 1976 to 1977 she will find a greatly reducing differential.
    There is another point which the hon. Lady failed to take into account. As inflation moves people through wage increases into the higher bands of tax, net incomes are much more greatly reduced. I am certain that if the hon. Lady were to present those figures in terms of net income, after allowing for inflation in the period between the time

    1123
    the Government came in and the present, she would find a great compression of differentials. I commend her to make that calculation. If I had known that she was about to mention the subject of earnings, I would have worked out the figures before I rose to speak.
    It is a good job that the words of hon. Members who speak in these discussions seldom if ever find their way to the constituencies. I do not think the speech made by the hon. Lady this afternoon would go down very well in Thurrock. I promise that I shall not go to Thurrock and tell them what she said. She will probably remember that recently there were strikes at The Times among printers, at British Leyland among toolroom workers, and at Heathrow among engineers—strikes all concerned with differentials. A million days were lost due to the erosion of differentials because workers wished to reassert the relative position.
    I know that these matters are awkward for the Labour Party. The new doctrine of mid-term unpopularity has taken over in Labour minds from the doctrine of the manifesto. Each time Labour loses a local election, it will all be put down to the doctrines of mid-term unpopularity. It is the same sort of problem faced by the Russian leaders, and the problem in their case is that there is no end to their term of office. Indeed, what worries me is that there may be no end to the term here, if the Lord President has his way. But these matters touch democracy and the hon. Lady must pay heed to them. I was told the other day that democracy is very similar to sex—when it is good it is very, very good and when it is bad it is not all that bad. That is my advice to the hon. Member for Thurrock.
    The hon. Lady should listen to the people, because a large part of the unpopularity of the Labour Party is due to the compression of differentials which, under stages 1 and 2, has caused intense irritation among the workers. Whether she can find figures to prove that that is wrong or right, I must tell her that that is the fact. Compression of differentials is not only infuriating to the skilled and hard-working employee, but it is infuriating to managements, who have the remedies in their own hands by ceasing to manage Britain and going and
    1124
    managing elsewhere. That is the effect which the hon. Lady's policies are having on this country.
    Mr. Ron Thomas: I agree with the hon. Gentleman, but let us come to the point of the amendment. We are talking of people who receive £7,000 a year-plus. We are are not talking about the toolmakers of British Leyland and others who rightly protest against the incomes policy, which has the support of the Opposition.
    Mr. Ridley: I can talk about anybody I like. I am not going to be told about whom I may talk. I am talking about skilled workers. I make it clear to the hon. Lady that her policies for total blanket egalitarianism are not popular in this country and that the Labour Party will commit political suicide if it persists with them. Whether the matter is rectified by removing the limits of pay rises for the higher earners or by a major realignment of the higher tax bands is not so important as that the Labour Party should realise that the British are not egalitarian-minded. I repeat that the policies pursued by the hon. Lady are leading to electoral suicide.
    We are told by the Prime Minister about the golden decade that is to come in the 1980s. It would be better to describe it as stage 5 to stage 15. When the great economic miracle arrives, we are told that there will be enormous resources available from the great profits of British industry and the technological white heat, and all that rubbish, which will flow in, including the profits from North Sea oil. The impression is that the Chancellor of the Exchequer will be able to make major tax cuts in the golden decade—a decade which never actually arrives. But how is the hon. Lady intending to employ that revenue which the Chancellor intends to give away? Will she reduce the higher rate taxes, or will she spend it all on child benefit, more hospitals and more roads?
    It would be helpful if, in the hypothesis of economic planning, the Labour Party were to say whether it believed that the State knew better than anybody else how to spend everybody's money, and whether it will continue to compress differentials or take money away from the higher earners—managers or skilled workers—or will let that money go back to the people to fructify in their pockets.
    Sir John Hall: Does my hon. Friend not agree that it is only by cutting the taxes of those who create the earnings that we shall have any chance of reaching the golden age about which my hon. Friend speaks?
    Mr. Ridley: My hon. Friend makes the point on which I am about to conclude. The hon. Member for Thurrock has fallen for the fallacy of the static cake. She believes that there is a thing called the national cake, that it is always the same size, and that all one has to do is to allocate the slices to everybody and to attempt to make each slice nearly the same. But the cake is not static, and there are two things that can happen to it. The cake can either grow as the years go by or, under a Labour Government, it can actually become smaller.
    The policy pursued by the Labour Government has resulted in a cake which daily gets smaller and, as the slices become more equal and smaller, everybody's slice becomes smaller. That is the reason for the unpopularity of the Labour Party. If we allow the cake to grow, not only will there be a growing slice for everybody but there will be more and more larger slices for some than for others. Judging by the hon. Lady's remarks, that simple little thought has never crossed her mind.
    The way to make the cake grow larger is to employ the best managers, the best investors and the best entrepreneurs—the people who can move industry into the modern era and make investments that succeed rather than fail. That is what will result in increased prosperity.
    My final message to the hon. Lady, who spoke most charmingly and delighted the House with her elegant contribution, is that until she and her party realise these things, the people of this country will be condemned to suffer a dwindling standard of living. One could term it equality of misery for all, and that is what is happening under Labour rule. I am sorry that the hon. Lady had to leave the Chamber and was unable to hear my peroration.
    4.30 p.m.
    Mr. Ron Thomas: It was interesting to hear the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) express
    1126
    such anxiety about the possibility of the Government committing suicide. It is similar to the advice recently given by the right hon. and learned Member for Surrey, East (Sir G. Howe) on public expenditure. Unfortunately, the Government accepted that kind of advice, although the right hon. and learned Member said that it took the Government three instalments to do what he had advised them to do in one.
    I believe that this Budget—and I speak as a member of the Labour Party—does not do anything like enough to help working people. They have seen their standards of living cut considerably under the social contracts in the hope of winning a quid pro quo in measures to deal with unemployment, increases in social benefits, improvements in health, education provision and all the rest of it. While they have seen cuts in their earnings they have also seen cuts in the social wage and unemployment rising to an intolerable level. The Government have followed far too much the kind of orthodox Tory policies demanded by the Opposition. We shall begin to deal with the capitalist crisis in our country only by means of a totally different economic strategy.
    Sir Raymond Gower: Has it not occurred to the hon. Gentleman that companies in successful capitalist countries such as West Germany, Holland and the United States make bigger profits and pay bigger wages, that individuals and companies are taxed less, and that Holland and West Germany, for example, can afford bigger social benefits? Does he realise that by doing the things he advocates we are lessening the ability to pay such social benefits?
    Mr. Thomas: The hon. Gentleman should remember that West Germany has about 1 million unemployed after sending back more than 1 million immigrant workers to Turkey, Yugoslavia and elsewhere. In many debates here it has been shown, as it will no doubt be shown again, that rates of taxation in Britain compare quite favourably with those in all the other countries which the Opposition claim have such considerable virtues.
    My hon. Friend the Member for Thurrock (Dr. McDonald) was right to say that this part of the Budget gives a considerable tax handout to the high

    1127
    income receivers, those who, with allowances—on high mortgages and the rest—are probably earning £7,000 to £7,500 a year and more. The Budget Statement often talks about "income", but we are talking here about taxable income after all kinds of allowances. If we agree on nothing else we should all agree that those with the highest level of earnings have all the advice possible from accountants and others to ensure that they receive the highest possible allowances.
    The Sunday Times, looking at this part of the Budget, said on 3rd April:
    "The fattest favours go to the married man, with no children, on £22,225 a year, the sort of money a director of a biggish industrial company … earns. He makes a clear £916 a year out of the Budget, a massive 9·4 per cent. increase in his take-home pay, something he could never have made out of any conceivable jump in pay under the old tax rules. And only 1·2 per cent. of this is conditional."
    All this is conditional on the move from 35 per cent. to 33 per cent. These high income receivers will have three bites at the cherry. They will receive their part of the increase in the tax thresholds; they will benefit from the reduction in the standard rate from 35p to 33p, if it happens; and they will gain something from the change in the bands above £6,000.
    It was suggested that my hon. Friend the Member for Thurrock was talking too much about earnings, but earnings are related to this matter. The only justification given by the Government Front Bench is that a certain number of our supporters—we have been given no estimate, and I am not concerned about the Opposition's supporters—fall within these taxable income bands. I question this very much. As even my right hon. Friend the Chancellor said in his Budget Statement, it is one thing to talk of average earnings. I am sure that my hon. Friend the Minister of State, with his statistical knowledge, will agree with me—even if no one else will—that to talk of average earnings is often nonsense. Let us take, for example, the level of average incomes last October, which we can raise to allow for any increases under stage 2 of the incomes policy. Average earnings for male workers then ranged from £53 to £76, but the so-called average earnings are very misleading.
    The latest detailed breakdown, as far as I know, is in the New Earnings Survey
    1128
    for 1976 produced by the Department of Employment. I take manual workers first. With overtime, payments by results, bonuses and so on taken into account, the median level of weekly earnings for male manual workers was £62. This figure, which can be updated to allow for the phase 2 award, with an increase of 4 per cent. or 4½ per cent. means that 50 per cent. were earning less than £62. The third quartile were earning £75 a week, which means that 75 per cent. were earning less than £75. The highest decile were earning £90 a week, so 90 per cent. were earning less than that. We see that only 5 per cent. were earning more than £100 per week.
    We are led to believe that some people were earning at least £120 a week, and political capital is made out of that, but, according to the statistics, even for non-manual workers the median was £73·9, which meant that 50 per cent. were receiving less. The upper quartile were earning £96·4, so 75 per cent. were receiving less than £96. The top 10 per cent. were averaging £123·7. There are only a tiny few in that category, a fraction of 5 per cent. of manual workers and a fraction of 10 per cent. of non-manual workers, depending on their allowances.
    The other argument is that the high level of taxation in Britain produces a disincentive effect. We can only presume from that that there are executives and innovating entrepreneurs in Britain who are calculating every day that they will give not 100 per cent. effort but only 90 per cent., who do not give a day for Britain but say each morning "Let me work it out. In Germany I would pay only so much tax, so I shall work only 75 per cent. as hard as I might have done. I shall write only three-quarters of a memo instead of the whole of it. I shall attend only half the meeting instead of the whole meeting". That idea is nonsense. Are some of these people selling Britain down the river by refusing to use their capabilities to the full, by holding back 10 per cent., 20 per cent., or 30 per cent., because of the monetary aspect?
    I think that my hon. Friend will agree that there has been no detailed analysis in recent years of the so-called disincentive effect and levels of taxation. I do not know of any study since the Radcliffe Report some 20 years ago. Therefore,

    1129
    I think that I have a right to quote what that distinguished panel of economists said on the disincentive question. They said in paragraph 149:
    "But if we are asked to infer from this that the heavy rates have any special disincentive effect upon the receivers of the higher levels of income, so as to justify a shifting of the existing weight of taxation from these ranges to lower levels of income, we are bound to reply that we see no evidence that the higher income earners are specially affected by disincentive."
    I agree that that was said some years ago, but I repeat that there has been no detailed study since. All that we have had is innuendo and blatant comment from the Conservative Party.
    Sir John Hall: Does the hon. Gentleman agree that the disincentive to skilled workers, for example, of the combination of restrictions on pay increases and high taxation is shown by the fact that they are striking with increasing frequency? Does he also agree that the disincentive to higher-paid executives is measured not by their day-to-day reaction to their task but by the increasing number leaving this country to find jobs abroad? If the hon. Gentleman wishes to look at a survey, he should look at the one recently carried out by the chemical industry, which found example after example of evidence of increasing numbers of senior men and, even worse, skilled chemists leaving this country because they were no longer able to keep their families in the style in which they thought they were entitled to keep them, under the tax system operating here.
    Mr. Thomas: On the latter point, skilled and professional workers have been leaving this country since we opened up the New World 200 or 300 years ago. I do not believe that the figures were any different under the Tory Government, who bent over backwards to give massive tax hand-outs to the wealthier members of our community.
    I have seen nothing in the strikes about differentials regarding taxation. The strikes have been concerned with what the workers felt were rigidities in the Government's incomes policy. Some Labour Members are opposed to that policy and have tabled a number of amendments to try to push some flexibility into it.
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    In my judgment the Budget does not go anywhere near far enough to help those who vote for the Labour Party at local and General Elections. That is all I am concerned about. I am not concerned about any others.
    I suggest that the money which is proposed to be given to these high income earners could be better used to push up the tax threshold or to deal with some of the situations which have been created by the cut-back in public expenditure. I think that we should reconsider having a smaller band rather than a marginal rate of 35 per cent. I know that this matter was discussed last night. The Government could do something about the marginal rate of 35 per cent.
    All in all, what is proposed for working-class people is insufficient. I appeal to the Minister to delete this subsection and to use the money for better purposes.
    Mr. J. W. Rooker: This debate is about a small section of the working population. I shall not repeat what was said by my hon. Friend the Member for Bristol, North-West (Mr. Thomas). We are talking about the higher tax rate bands. We are not talking about skilled craftsmen, because they are not paying 40 per cent. tax on any part of their income. They may bellyache justifiably about the general rate of 35 per cent. tax, but they are not paying the higher rates of tax. This debate is about page 11, lines 13 to 36 of the Bill, and nothing else.
    The Chancellor in his Budget Statement said that 80 per cent. of the working population were earning between £50 and £110 a week. The Treasury's figures, backed by the Department of Employment, show that 15 per cent. of the working population earn less than £50 a week. Therefore, that leaves 5 per cent. earning more than £110 a week gross. We are concerned not with gross earnings but with taxable earnings. We are talking about those earning £7,000-plus a year.
    Precisely whom are we talking about today? Who are the people earning £7,000-plus a year—£140 a week—to whom the Government wish to give a massive tax handout? They are not the skilled craftsmen in my constituency. They are certainly not any of the British

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    Leyland toolmakers who were on strike a couple of months ago. Not one of them is concerned with this debate. It is false to bring in such people, because it makes it look as though we are seeking to cut back on the net take-home pay of millions of ordinary skilled workers. That is far from the truth.
    4.45 p.m.
    My hon. Friend the Member for Bristol, North-West referred to the New Earnings Survey 1976 for the general level of earnings. Part D—"Analysis by occupation"—tells us something about the occupations in which gross earnings of more than £140 a week are possible. When I look at Table 86,
    "Average gross weekly earnings, hourly earnings and weekly hours Full-time men, aged 21 and over",
    I could not find anyone earning £140 a week. That is because the table refers to averages. Not one occupation, manual or non-manual, achieves average earnings of £140 a week. The highest is accountants at £86 a week. That is the average.
    Table 96 gives the top 10 per cent. for the various occupations. Therefore, I cast my eye down the top 10 per cent. to pick up occupations in which gross earnings are more than £140 a week, because the Government seem to believe that such people are in dire need of assistance.
    Top of the list are top managers in trading organisations, who earn over £207 a week, so they are not too badly off anyway. Next come judges, barristers and solicitors, who are largely represented in the House of Commons. In fact, they are so well represented that when we have a Bill which involves the legal profession the Standing Committee cannot meet in the mornings because such Members are at the courts. That is why the Criminal Law Bill Committee can start only at 4.30 p.m. today. The top 10 per cent. of judges, barristers and solicitors are on £193 a week. That is over £140 a week. The Government think that such people are in dire need of assistance. The next in line are company secretaries, who are in receipt of £157 a week.
    Going down the list, the top 10 per cent. of finance, insurance and tax specialists—they know a thing or two about Finance Bills—are earning £190 a week. They are well within the Government's
    1132
    guideline of £140 a week. Personnel and industrial relations officers and managers are next. The top 10 per cent. are in receipt of £156 a week. Journalists just come in. The top 10 per cent. of our friends in the Gallery are on £144 a week. I suspect that there are not too many of them in the Gallery, although most of them earn more than full-time Members of Parliament.
    Architects and town planners, who make a great contribution to society, earn £149 a week. They are well within the Government's guideline for urgent assistance. These are the people on whose behalf the Treasury must make out a case for assistance.
    I do not want to be accused of putting only one side. Looking down the manual workers' list in Table 96 I could not find anyone earning over £140 a week. The top 10 per cent. of toolmakers earn £91 a week. I appreciate that these are April 1976 figures and that perhaps they should be adjusted by between 8 and 9 per cent. Even so, the top 10 per cent. of skilled toolmakers would be nowhere near paying the higher rate of tax.
    Mr. Ian Mikardo: My hon. Friend is making an overwhelming case which demands an answer from the Government. The one group for which the highest decile is not included in those tables comprises those in receipt of unearned income. They are the people who will benefit most from this provision.
    Mr. Rooker: My hon. Friend is perfectly correct. I shall conclude my remarks with an example of a group which is not within the figures that I have quoted from the New Earnings Survey. Not one of the manual workers in that section pays the higher rate tax. I do not mind my speech being printed in the local Press. I do not get enough publicity. None of my constituents is affected by this higher rate of tax. There may be one or two judges and barristers lurking in the undergrowth who may vote Labour. They are right to do that, because my Government have done more for them than any Tory Government.
    It has been said that Britain has a high rate of taxation. A set of statistics appears in the April edition of Economic Trends for the distribution of tax units by income for the year 1974–75. I assume

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    that the figures are the latest available. Total income before tax on all earnings in this country—28 million tax units—was £64,000 million. The amount of tax paid on that income was only £11,000 million. That is not an astronomical sum of tax to pay for the goods and services that we require in the public sector. Those figures give the lie to the theory that Britain is a high tax rate country. It is not true. Britain is not overtaxed.
    The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) talked of take-home pay. He made an excellent point an that important matter. I can give a good example. Since 1967 companies have been forced to publish the broad bands of directors' salaries. At first, companies lumped them together in the form of gross salaries. When people like myself "misused" those figures by telling their constituents about them, some companies began to publish a column for take-home pay alongside gross income. I have told the House before about the Delta Metal Company and how Viscount Caldecote received a pay increase during the pay freeze.
    In its 1975 accounts, the Delta Metal Company said that two directors—I do not know which two—received take-home pay of between £12,500 and £15,000 a year. The 1976 report shows that one of those directors remains in that band. The other director has not merely moved up into the next band—that is not good enough—but he has moved to the £17,500 to £20,000 bracket. Assuming that he was on the highest level of this band in 1975 and earning £15,000 a year and that he is now on the lowest level of his present band, earning £17,500, he must have had an increase in take-home pay last year of not less than £50 a week. The company's annual report shows that clearly. The company boasts about giving figures for take-home pay. It is not breaking the law, but the hon. Member for Cirencester and Tewkesbury said that take-home pay was important.
    Mr. John MacGregor: The hon. Member said that the tax take of income was £11 billion. The latest figures show that it is forecast to be over £18 billion. Is that not what everyone is complaining about at a time when incomes are low and inflation high?
    Mr. Rooker: What the hon. Member says is true, but income before tax has gone up. The percentage of income tax paid out of total income is small.
    Income tax represents a large part of total Government revenue. We are always being told by the CBI that company profits and corporation tax pay for our hospitals and schools. That is a lie. Recent figures from the Treasury show that corporation tax accounts for about 9 per cent. of Government revenue. Most revenue comes from income tax—from the pockets of all workers, whether they are high or low paid. Corporation tax no longer funds the social services in this country. They are paid for by income tax, straight from the pay packet.
    I do not like that system. I should like it changed, but I should like the Government to take more from those earning more than £140 a week. There are only a few such people. Only about 800,000 people, or about 3½ per cent. of the working population are affected. They can afford to pay that tax.
    The Finance Bill seeks to introduce concessions for certain people working abroad. The New Earnings Survey does not include such people. There is no column for members of the European Commission, for instance. Mr. Roy Jenkins, the President of the Commission, earns £5,000 a month, tax-free. He also gets expenses. There is no reason why Mr. Roy Jenkins should not say to the Inland Revenue "I am a Socialist worker. I know how to screw the workers and close the tax loopholes in the Cayman Islands. Please tax me as if I were working in Britain. I can afford it because I earn £70,000 a year gross." This man knows no distinction between take-home pay and gross pay.
    The Birmingham Post published an article about this. In the first edition the article was entitled Socialist Workers". The copy in the Library is entitled "Wages of Socialism" It is written by the former editor of the Sunday Mercury, who has a column in the Birmingham Post. He says that people should not get on this public sector gravy train in a manner which abuses Britain's entry to the Common Market.
    I know that I shall be called to order if I continue along those lines, but it is a good example of an occupation that

    1135
    is not included in the list of those earning more than £140 a week. I shall have no compunction about voting for the amendment.
    5.0 p.m.
    Mrs. Audrey Wise: Opposition Members are strangely silent in this debate. That certainly improves the level of debate. However, that is not the reason for their silence. They are quiet because they hesitate openly to defend these tax concessions to the best-off. Even Opposition Members are not too sure of their ground and of how they would be received by ordinary people. Even when they have risen to their feet, they have managed to talk in ways which are completely irrelevant to the terms of the amendment.
    As has been shown in the excellent speech of my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), the amendment is not about skilled workers, neither their wages nor their taxes. Skilled workers will not lose a penny if the amendment is carried. In fact, the Government would have £325 million available which they could dispose of as they chose to skilled workers, semi-skilled workers or unskilled workers, all of whom have a better claim to it than those earning £140 a week and more.
    The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has now left the Chamber. He eulogised democracy. I was interested in that because he is the same hon. Member who, as a member of the Committee discussing the Industry Bill some two years ago, pointed out that he would rather be ruled from and by Brussels than by the elected Government of this country. I think that his attachment to democracy is, therefore, a little fickle.
    However, it may have been improved by the fact—I regret to say this—that members of my own Front Bench are more and more seeking to carry out policies that smack of Tory policies. If, as the hon. Member for Cirencester and Tewkesbury suggested, they are committing suicide, that is the reason. "Midterm unpopularity" has nothing to do with the particular date on the calendar, but it has everything to do with the fact that too many policies are designed to help the better off and not those most in need.
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    The policy and the clause in the Bill about which we are complaining actually manages to give the highest benefit to those with a taxable income of £20,000 or more. The highest benefit goes to those people, in both percentage terms and absolute money terms. That is really outrageous. It would be outrageous coming from any Government, and it is both outrageous and sad coming from a Labour Government. That is not what we were elected to do. I think that my right hon. and hon. Friends on the Front Bench know that, although they will not admit it.
    Mr. Nick Budgen: Do not go on too long.
    Mrs. Wise: I shall go on for exactly as long as I choose. If the hon. Gentleman wishes to make a speech, I suggest that he tries to catch the eye of the Chair.
    At the same time as we find amounts totalling £1,455 million being given to the higher paid, we are still in a situation in which a married couple can start paying tax, even after the Budget concessions, on an income of less than £24 a week. That is an extraordinary state of affairs. How can a Labour Government consider relieving those at the top of the wage and income scale at all when that is the situation at the bottom of the scale?
    If there is an explanation, I should be genuinely interested in hearing it. It cannot be the incentive argument. My hon. Friend the Member for Perry Barr, in his analysis of occupations, has disposed of that. It cannot be maintained by a Labour Government that the main creators of wealth in Britain are those at the top end of the income scale. Surely all of us on the Government side of the House would agree that the wealth of the country comes from the hands of ordinary workers, and many of them are on really low incomes.
    Therefore, surely the Government Front Bench will accept the amendment, having had a little longer to consider it. If they are short of suggestions as to how to use the £325 million, they should note that some of my hon. Friends and myself have tabled an amendment to Clause 21, which will also be discussed by the Committee of the whole House,

    1137
    which would enable the Government to give reliefs to certain people with children—widows, people with guardians' allowances and so on. Would not that be a worthy direction in which to channel some of this £325 million?
    How can my right hon. and hon. Friends say that that kind of help to widows, one-parent families and the low paid cannot be afforded while at the same time they are giving massive amounts of money to people receiving £20,000 a year or more?
    The man receiving £20,000 or more will get, on figures obtained through a parliamentary answer, £679 a year in tax relief. That is on the unconditional part of the Budget. If the conditional parts go through, the figure will be £799. That is almost as much as the new total personal allowance for a single person. I find it difficult to believe that my hon. Friend the Minister can have read and digested the figures in his own parliamentary answer. I shall certainly be very interested to hear his reply on the points that we are raising.
    My hon. Friend the Member for Perry Barr made an equally valid point when he referred to the increased burden which is now falling on individuals rather than on companies. I wonder whether, at some stage during the passage of the Bill, my hon. Friend the Minister will comment on this matter, because it is a fact that the burden of taxation has shifted very substantially from companies to individuals. Many of my hon. Friends think that that is a very bad development.
    Once again, I ask my hon. Friend the Minister to accept the amendment. It is entirely in line with the basis on which we were elected to the House of Commons. That was to achieve a shift in wealth towards working people and their families. In our election manifesto we were talking not about the top 10 per cent. of judges and barristers but about those at the lowest end of the scale, who have had the worst out of the Chancellor's Budget.
    Mr. Budgen: It is not for me to add to the splendid exposition by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in making the classic case for what I call the incentive
    1138
    argument. However, perhaps I may make some comments about the further arguments that can be adduced for allowing a diverse society to evolve with at least some members of that society both earning and keeping large incomes.
    It is those who keep a reasonable proportion of a high income who are most of all the people who invest. It is not for me to comment, for instance, upon the splendid words that we have so often heard from the present Secretary of State for Trade, who so often reminds us that Government investment habits and intentions are more often than not mistaken, whereas if we allow the greater part of our investment to be undertaken by individuals—I am even so vulgar as to say "rich individuals"—there will be a diversity of investment decisions, which in the end is the greatest safeguard for the fullest employment of what the hon. Member for Coventry. South-West (Mrs. Wise) keeps describing as ordinary working people.
    Those of us who want to see more investment, and investment in industries that will grow, and grow because they are truly profitable know that these investment decisions will be taken only by people who themselves have earned large incomes, have kept a large proportion of those incomes, and have made their individual decisions as to where they will get the best return for that money.
    Mrs. Wise: Would the hon. Member like to suggest that tax relief should be conditional on investment being made, and being made in this country?
    Mr. Budgen: No, I am so biased as to believe in freedom. I believe that the individual is entitled to make his own decision about his own money. I concede immediately that in a free society some people, if allowed to keep a larger proportion of their income, will fritter it away. There are some people who, if they have £5,000 in their hands, will put it all on the nose of a horse, and others who will go to Monte Carlo and waste it. But that is an essential part of a free society. There are even some people who may decide not to work at all, but once again that is an essential choice in a free society.
    Those who are prepared to work hard and risk hard will be most inclined to

    1139
    value the money that they are able to keep. They will make investment decisions on the basis of where they can get the best return. The place in which they can get the best return will be the place in which the workers have the most secure jobs. That is the investment argument.
    There is a deeper and more philosophical argument which supports the retention of wealth and riches for those who work and risk hard. That is the independence argument and it is, perhaps, the most important of all.
    Those persons in our society who keep wealth are more capable of forming an independent view of the great issues of the country than those who are dependent upon the whims of politicians. It matters not whether the politicians are from the dreaded National Front, the respectable Tory Party, or one or another of the Socialist parties. All of us are inclined to be wrong. All of us, when we have any sort of power, are likely to abuse it. Only by allowing individuals to have enough wealth and investment rights shall we see the creation of people in society who are prepared to dispute the orthodoxies of the moment.
    I shall steal a quote that I heard from someone in the City—I do not mix much with these grand gentlemen; I am not respectable enough for such contacts. This gentleman said that if we had not had the barons, we should not have had the Magna Carta. Today if we do not have rich people, we shall have a nation of people who continue to believe in whatever the current orthodoxy may be.
    5.15 p.m.
    The Minister of State, Treasury (Mr. Denzil Davies): In moving this amendment my hon. Friend the Member for Thurrock (Dr. McDonald) developed an interesting argument about wage differentials and their effect on an incomes policy. She said that she disapproved of the £320 million which, if the amendment is not carried, will be given to people with higher incomes. But the £320 million is not an amorphous sum that is going to some group of persons. It is necessary to break it down, and my hon. Friend did not do that. This £320 million relates to different areas.
    To start with, it includes £45 million which represents the increase in the threshold for the investment income surcharge.
    1140
    This threshold has been increased from £1,000 to £1,500 for those under 65, and from £1,500 to £2,000 for those over 65. The investment income surcharge of 15 per cent. on top of the rate of tax will not apply until the income reaches £1,500 or £2,000, depending on whether a person is under 65 or over 65. Obviously, some of that money will go to people who do not need it. But I suggest that this is not unfair as many elderly people on fairly small incomes would, as a result of inflation, be caught by the investment income surcharge.
    Most people when they retire have some sort of pension—a State pension, superannuation, or a pension from a pension fund. That is treated as earned income and is not taxed or charged under the investment income surcharge. But there are others—probably a minority—who cannot take advantage of the various pension arrangements, so they save their money. The income from these savings is not treated as earned income but is subject to the investment income surcharge. One reason for the modest increase in the threshold is that we want to help people in that category. Therefore, the £45 million will not necessarily go to those who are earning more than £20,000 a year.
    Mrs. Wise: I am interested in my hon. Friend's comments. Would he care to undertake to come back to the House with an amendment to meet the point that he is making? Some of us would be prepared to meet him on those terms.
    Mr. Davies: I am grateful to my hon. Friend for saying that. I will not bring an amendment forward, but, nevertheless, I am grateful for what she has said. The explanation that I have just given knocks out £45 million from the £320 million that the amendment seeks to remove from the Bill.
    The next tranche is £90 million that the Exchequer loses as a result of raising the higher rate threshold from £5,000 to £6,000. But if we do not increase that threshold this year we shall bring 500,000 extra persons into the higher rate of tax for the first time. I do not know who all these people are, but they cannot be terribly rich by definition. Perhaps they are managers, skilled people, or households in which the income of the husband

    1141
    and wife total more than £5,000. They are not necessarily those who are earning very high salaries. If the amendment were accepted and the threshold kept at £5,000, the extra 500,000 people—some of whom may be Labour supporters—would find themselves with an increased tax bill this year because inflation and perhaps increases in their incomes would bring them into a higher rate of tax.
    Mrs. Wise: Will my hon. Friend accept that this argument would be more convincing if in his Budget the Chancellor had fully compensated for inflation at the lowest end of the scale? Bearing in mind that husbands and wives whose income is in excess of £5,000 can opt for separate taxation anyway, would this not take them out of the higher tax band?
    Mr. Davies: I doubt whether at these levels the option for separate assessment would make any difference at all. It is a fact that if the amendment were carried, 500,000 extra people would find themselves with an increased tax bill as a result of our not doing anything for them in the Budget. If my hon. Friends press the amendment to a Division and it is carried, that would be one of the consequences, even though it might not be intended.
    Mr. Ron Thomas: If my hon. Friend is saying that 500,000 people might or might not be brought into a higher tax band, this must mean that for the Government to give this sort of tax hand-out other members of the community will have to pay more tax, or there will have to be a lower level of public services and a lower social wage than there otherwise would have been, which is far less beneficial to those people whom we represent.
    Mr. Davies: I would remind my hon. Friend that we are talking about £90 million. I suppose that one can have a few hopitals for that amount, but it is only a fraction of the income tax reduction of £2¼ billion in the Budget. One effect of this package of reduction of £320 million is to keep 500,000 people out of the higher rate tax bands. If we do not do this during this year, about 1·8 million people will be paying at the higher rate, whereas this change will bring the figure down to 1 million. The discrepancy
    1142
    is caused by the 300,000 who are now in the higher rate and who will come out of it. That compares with 300,000 people who were in the higher rate band in 1974.
    I am not saying that the figure of 300,000 then was right—perhaps it should have been higher—but if one compares the position then with what the amendment would produce, one sees that six times as many people-1·8 million—would be in the higher bracket. As a result of the Budget changes, the number this year will be kept to about 1 million, but that is still three times the 1974 figure. My hon. Friends have talked about a shift in wealth and perhaps an increase by three times is relevant to that.
    Therefore, if one takes the £45 million that my hon. Friend the Member for Coventry, South-West (Mrs. Wise) seems prepared to give me and the £90 million which perhaps she is not, the balance is £185 million. Does my hon. Friend wish to intervene?
    Mrs. Wise: I was making a gesture I do not agree that the £45 million change in our amendment is unjustifiable but was prepared to accommodate my hon. Friend—to compromise.
    Mr. Davies: I am grateful. As I said, the balance is then £185 million, part of which is a consequence of raising the threshold from £5,000 to £6,000. Then, of course, the higher thresholds have to be raised as well. Thus, most of that £185 million goes to those on the higher levels of tax.
    It could be argued, as my hon. Friends have argued, that that money could be better spent. However, I repeat that that is £185 million out of a total income reduction of £2¼ billion. I was interested to note that my hon. Friend the Member for Thurrock did not suggest how this money should be better used. She suggested not reducing the basic rate by 2 per cent. and doing something else with all the money saved. Perhaps with that extra money we could introduce a reduced rate band, but if that is what my hon. Friend wants, she must face the fact that if there is no reduction in the basic rate, we shall not help many people in the middle and on incomes of lower than average who are clearly supporters of my hon. Friends.

    1143
    Unfortunately, these are the choices that we have to make. No one says that we have done enough in this Budget for ordinary people. I wish that we could have done more. I wish that we could have introduced a reduced rate band and increased the allowances to take full account of inflation, but that would have cost an enormous amount—certainly not the £185 million or £320 million in the amendment. It would have cost far more than the total by which the Chancellor felt able to reduce tax in the Budget. Thus, in terms of the total tax bill, we are talking of very small sums.
    Most of this £320 million will not go to those at the top end of the tax bracket. As a result of increasing the threshold, the top marginal rate of 83 per cent. will apply now to incomes of £21,000, not £20,000. That is not a substantial change and it is justified because of our high marginal rates.
    I accept that the effective rate is the one that we should look at, but, unfortunately, people tend to consider the marginal rates instead. The marginal rate of 83 per cent. is high by international standards and in this field we must compete internationally. We have an interest in ensuring that managers come to this country when their multinational firms come to invest.
    Mr. Ron Thomas: Would my hon. Friend confirm the statement in The Sunday Times of 3rd April that someone on £22,225 a year will save £796, plus £120 if the basic rate is reduced from 35 to 33 per cent.? That is over £900 a year.
    Mr. Davies: The figures may be correct and, taken in isolation, they seem rather horrific, but one must consider the amount involved in relation to the total tax bill. We want a tax system that is fair to most taxpayers, including those on average and below average incomes. That would cost far more money and £185 million would make no dent in the problem.
    Mr. Peter Rees: To reassure his hon. Friend the Member for Bristol, North-West (Mr. Thomas), perhaps the Minister will tell him by how much the tax bill of the person he quoted went up as a result of the first two Finance Bills introduced by the Chancellor in 1974.
    Mr. Davies: I could not answer that question and I do not think that it is entirely relevant to my hon. Friend's point.
    We have had long debates about the advantage of a reduced rate band over reducing the basic rate by 2 per cent. so perhaps I may give some indication of the cost. A reduced rate band of 25 per cent. on the first £1,000 of taxable income would cost £2·2 billion, which is almost equivalent to the £2¼ billion by which my right hon. Friend reduced taxation in his Budget. A reduced rate band of 30 per cent. on the first £750 of taxable income would cost £870 million and a reduced rate band of 20 per cent. on the first £500, as suggested by my hon. Friend the Member for Thurrock in the Budget debate, would cost £1·5 billion.
    When one considers that £45 million of this reduction is on investment income surcharge and £90 million is to keep 500,000 people out of the higher rates, I think that my hon. Friends will agree that the remaining £185 million would not make much contribution to solving the problem. In terms of the whole Budget package, £320 million is not a large sum. We wish that we could have reduced the basic rate by more and increased the allowances by more, but that would cost an enormous sum and at the moment it is not possible. Therefore, if my hon. Friends wish to press the amendment, I ask the Committee to reject it.
    5.30 p.m.
    Mr. David Howell: It would be wrong to let this occasion pass without saying how much we welcome the debate. Naturally, we do not welcome the amendment. We welcome the debate as it provides a good insight into the way in which the minds of hon. Members in the heart of the Labour Party are working. When we look at amendments of this sort on the Order Paper we are led to ask where those who have tabled them have been all this time. They are talking about a world that is passing away, or one that has passed. In a sense they are the parliamentary epigone, the pensioners of the past. They are museum pieces.
    The arguments that have been put forward this afternoon, which the Minister has rightly put down, do not relate to the problems that the country or the ordinary people face. We all recognise the plight

    1145
    of the lower paid. They are grotesquely over-taxed. They are more highly taxed in income terms than they would be in any other country in the free world. However, it seems that the hon. Member for Thurrock (Dr. McDonald) is suggesting that the way to help the lower paid is to victimise middle income groups by increasing their taxation. That is what lies behind the amendment. To imagine that by victimising that group we shall help the lower paid is a proposition so bizarre that it is almost past understanding.
    Mr. Martin Flannery: The hon. Gentleman is making a valiant attempt to defend the Labour Government while some of my hon. Friends are attacking them. The hon. Gentleman uses the word "victimising" to symbolise trying to take money from the very rich to give to ordinary people. He describes those who support that approach as epigones and people from museums. Is the focal point of the hon. Gentleman's argument that we should give more to those who have and take from those who have not?
    Mr. Howell: The hon. Member for Thurrock spoke in a way that did not really become her of the need for punishment of those on higher incomes. I am arguing that if we want to help the lower paid the way not to do it is to victimise or punish those who are higher paid, which happens to be about 2 million in this country.
    Mrs. Wise: My hon. Friend the Member for Thurrock (Dr. McDonald) was not talking about punishing the higher paid or anyone else in respect of receiving, wages. My hon. Friend was advocating that we should punish employers who pay below the statutory legal minimum as set down by wages councils. She was speaking against the prosecution policy, which is, in effect, that employers should not be prosecuted for these flagrant breaches of the law. That was my hon. Friend's reference to punishment.
    Mr. Howell: I take note of what the hon. Lady says. I shall check that in Hansard. If "punishment" is the word we are using, it is the punishment of the tax system that is hitting the lower paid. It is taking intolerable chunks out of low incomes and middling low incomes, which
    1146
    is something that I wish Labour Members below the Gangway would use more energy arguing about. If they adopted that approach, they would obtain a better deal for the workers.
    In the past hour or so of debate we have witnessed a predictable attack. It has been so predictable that it has represented almost an authentic part of the old Britain that many people hoped had passed. It has been an entirely predictable attack on a gigantic cadre of trained, honourable, exceptionally hardworking and devoted people. As we know, there are about 2 million of them.
    The Minister has said that last year there were about 1·8 million people in the higher paid bracket. However, the attack has spread over a wider number than that. There are about 2 million people in the £100 to £200 a week bracket. The attack on these people is an attack on management.
    Some hon. Members on the Labour Benches below the Gangway may welcome the fact that we are approaching a management catastrophe. Every piece of evidence in every newspaper and daily and monthly publication brings it home that we are facing such a catastrophe. It is evident that the management cadre and the skilled worker cadre are totally demoralised. They are thinking, if they can, of voting with their feet. They are worrying with an intensity that cannot be right for output and production about their living standards and how to meet the bills. At the same time the hon. Member for Thurrock and others have argued that in some way they are being helped by the Budget.
    Labour Members below the Gangway say that the management and skilled worker cadres have done better than manual workers. That defies the latest survey in The Times, namely, the national management salary survey showing that managerial pay rose by 1·8 per cent. last year compared with an average rise of 11·8 per cent. for other workers. The £6 or the £4·50 was not the average pay increase or the average earnings increase. In fact, 11·8 per cent. was the average whereas the average for management was 1·8 per cent. That is a colossal fall.
    The figures show that for many managers and those in the middle and

    1147
    higher paid groups there has been a fall of over one-third in their net purchasing power and take-home pay. These are the people who have come under attack and faced the indignation of Labour Members below the Gangway. Those hon. Members have claimed that there has been more help in the Budget for those people. If they analysed the facts, they would find that there has been very little net help.
    According to some calculations, management is supposed to have gained in money terms although not in real terms. That is as a result of lower taxation on higher incomes. However, against that we must set increased national insurance contributions. There was a large increase for those earning £100 a week, for example. They have had to pay higher rates, increased fuel bills, increased petrol prices, increased vehicle excise duty, more expensive bank loans, more expensive car use and the fact that interest-free loans will be taxed next year. Commuter fares have also been increased.
    Against that background we believe that there should be an improvement. It is said that the Budget does not harm these people and that it seeks to restore incentives, but the idea that there has been an improvement is absurd.
    If Labour Members think that they can treat the management cadre in this country in such a way, they have failed to learn not only from experience in this country but in the Soviet Union and practically every other country. No other country would dream of treating its skilled workers and managers as we propose, let alone in the manner proposed by some Labour Members.
    Mr. George Cunningham: What increase in national insurance contributions has there been for anyone with an income of over £145 a week?
    Mr. Howell: From 6th April 1977 the £100 a week man will pay another £2·19
    while the £150 a week man will pay another £3·54. That is the effect of the adjustment of national insurance contributions from 6th April.
    I was about to say that the debate has highlighted the catastrophic damage that has been done to management, but perhaps that is an exaggeration. The truth is that the debate has done catastrophic damage to the prospects of the Labour Party. That is why I began by welcoming the debate. I am glad that certain things have been said by Labour Members below the Gangway.
    The reality is that workers do not spend their time in nail-biting envy of management and management rewards. They are not envious in that way of the differentials of those with greater responsibilities and higher pay. That is not the way in which they think. That is the way of thinking of the small museum group on the Labour Benches.
    Most working people know that good management needs good pay. I suspect that most working people would argue that far greater rewards are required for responsibilities and skills than anything remotely offered in the Budget. That is why we shall be moving amendments on those lines. That is why my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) will be spelling out the real case in later speeches in Committee if he catches your eye, Mr. Godman Irvine.
    That is why we welcome the half hearted defence of the Budget on the part of the Minister of State. That is why we believe that it does not begin to recognise the real needs of working people, the lower paid, management and productive capacity.
    Question put, That the amendment be made:—
    The Committee divided: Ayes 53, Noes, 205.

    Division No. 128]

    AYES

    [5.39 p.m.

    Allaun, Frank

    Colquhoun, Ms Maureen

    Heffer, Eric S.

    Atkins, Ronald (Preston N)

    Cook, Robin F. (Edin C)

    Koyle, Doug (Nelson)

    Atkinson, Norman

    Cowans, Harry

    Hughes, Robert (Aberdeen N)

    Bennett, Andrew (Stockport N)

    Edge, Geoff

    Hughes, Roy (Newport)

    Bidwell, Sydney

    Fletcher, Ted (Darlington)

    Jeger, Mrs Lena

    Buchan, Norman

    Fowler, Gerald (The Wrekin)

    Jenkins, Hugh (Putney)

    Canavan, Dennis

    Garrett, John (Norwich S)

    Kelley, Richard

    Carmichael, Neil

    Gould, Bryan

    Kilroy-Silk, Robert

    Cohen, Stanley

    Hayman, Mrs Helene

    Kinnock, Neil

    Lamond, James

    Miller, Dr M. S. (E Kilbride)

    Skinner, Dennis

    Latham, Arthur (Paddington)

    Miller, Mrs Millie (Ilford N)

    Spearing, Nigel

    Lee, John

    Newens, Stanley

    Thomas, Ron (Bristol NW)

    Loyden, Eddie

    Ovenden, John

    Thorne, Stan (Preston South)

    Lyon, Alexander (York)

    Richardson, Miss Jo

    Wilson, William (Coventry SE)

    McDonald, Dr Oonagh

    Roberts, Gwilym (Cannock)

    Wise, Mrs Audrey

    Madden, Max

    Rooker, J. W.

    Marshall, Jim (Leicester S)

    Rose, Paul B.

    TELLERS FOR THE AYES:

    Maynard, Miss Joan

    Selby, Harry

    Mr. Russell Kerr and

    Mikardo, Ian

    Silverman, Julius

    Mr. Martin Flannery

    NOES

    Abse, Leo

    Harrison, Walter (Wakefield)

    Perry, Ernest

    Archer, Peter

    Hatton, Frank

    Price, William (Rugby)

    Armstrong, Ernest

    Healey, Rt Hon Denis

    Radice, Giles

    Ashton, Joe

    Henderson, Douglas

    Rees, Rt Hon Merlyn (Leeds S)

    Bain, Mrs Margaret

    Hooley, Frank

    Roberts, Albert (Normanton)

    Bates, Alf

    Hooson, Emlyn

    Robinson, Geoffrey

    Bean, R. E.

    Horam, John

    Roderick, Caerwyn

    Beith, A. J.

    Howell, Rt Hon Denis (B'ham, Sm H)

    Rodgers, George (Chorley)

    Bishop, E. S.

    Howells, Geraint (Cardigan)

    Rodgers, Rt Hon William (Stockton)

    Blenkinsop, Arthur

    Hoyle, Doug (Nelson)

    Ross, Stephen (Isle of Wight)

    Boardman, H.

    Huckfield, Les

    Ross, Rt Hon W. (Kilmarnock)

    Booth, Rt Hon Albert

    Hughes, Rt Hon C. (Anglesey)

    Rowlands, Ted

    Boothroyd, Miss Betty

    Hunter, Adam

    Ryman, John

    Bradley, Tom

    Irvine, Rt Hon Sir A. (Edge Hill)

    Sandelson, Neville

    Brown, Hugh D. (Provan)

    Irving, Rt Hon S. (Dartford)

    Sheldon, Rt Hon Robert

    Brown, Robert C. (Newcastle W)

    Jackson, Colin (Brighouse)

    Shore, Rt Hon Peter

    Buchanan, Richard

    Jackson, Miss Margaret (Lincoln)

    Short, Mrs Renée (Wolv NE)

    Callaghan, Jim (Middlelon & P)

    Jay, Rt Hon Douglas

    Silkin, Rt Hon John (Deptford)

    Campbell, Ian

    John, Brynmor

    Silkin, Rt Hon S. C. (Dulwich)

    Cant, R. B.

    Johnson, James (Hull West)

    Small, William

    Carter-Jones, Lewis

    Johnson, Walter (Derby S)

    Smith, John (N Lanarkshire)

    Cartwright, John

    Johnston, Russell (Inverness)

    Snape, Peter

    Castle, Rt Hon Barbara

    Jones, Alec (Rhondda)

    Spriggs, Leslie

    Cocks, Rt Hon Michael

    Jones, Barry (East Flint)

    Stallard, A. W.

    Coleman, Donald

    Kaufman, Gerald

    Steel, Rt Hon David

    Conlan, Bernard

    Lamble, David

    Stewart, Rt Hon Donald

    Corbett, Robin

    Lamborn, Harry

    Stewart, Rt Hon M. (Fulham)

    Crawlord, Douglas

    Lestor, Miss Joan (Eton and Slough)

    Stoddart, David

    Crawshaw, Richard

    Lever, Rt Hon Harold

    Stott, Roger

    Crowther, Stan (Rotherham)

    Lewis, Ron (Carlisle)

    Strang, Gavin

    Cryer, Bob

    Lipton, Marcus

    Strauss, Rt Hon G. R.

    Cunningham, G. (Islington S)

    Lomas, Kenneth

    Summerskill, Hon Dr Shirley

    Davidson, Arthur

    Luard, Evan

    Taylor, Mrs Ann (Bolton W)

    Davies, Bryan (Enfield N)

    Lyons, Edward (Bradford W)

    Thomas, Jeffrey (Abertillery)

    Davies, Denzil (Llanelli)

    Mabon, Rt Hon Dr J. Dickson

    Thomas, Mike (Newcastle E)

    Davis, Clinton (Hackney C)

    McCartney, Hugh

    Thompson, George

    Deakins, Eric

    MacCormick, lain

    Thorpe, Rt Hon Jeremy (N Devon)

    Dean, Paul (N Somerset)

    McElhone, Frank

    Tierney, Sydney

    Dell, Rt Hon Edmund

    MacFarquhar, Roderick

    Tomney, Frank

    Dempsey, James

    MacKenzie, Gregor

    Torney, Tom

    Doig, Peter

    Mackintosh, John P.

    Tuck, Raphael

    Douglas-Mann, Bruce

    McMillan, Tom (Glasgow C)

    Varley, Rt Hon Eric G.

    Dunn, James A.

    McNamara, Kevin

    Wainwright, Edwin (Dearne V)

    Dunnett, Jack

    Magee, Bryan

    Walker, Harold (Doncaster)

    Eadie, Alex

    Mahon, Simon

    Walker, Terry (Kingswood)

    Ellis, John (Brigg & Scun)

    Mallalieu, J.P.W.

    Ward, Michael

    English, Michael

    Meacher, Michael

    Watkins, David

    Ennals, David

    Mendelson, John

    Weetch, Ken

    Evans, Fred (Caerphilly)

    Millan, Rt Hon Bruce

    Weitzman, David

    Evans, Ioan (Aberdare)

    Mitchell, Austin Vernon (Grimsby)

    Welsh, Andrew

    Ewing, Harry (Stirling)

    Molloy, William

    White, Frank R. (Bury)

    Ewing, Mrs Winifred (Moray)

    Moonman, Eric

    White, James (Pollok)

    Faulds, Andrew

    Morris, Alfred (Wythenshawe)

    Whitlock, William

    Fitch, Alan (Wigan)

    Morris, Charles R. (Openshaw)

    Wigley, Dafydd

    Foot, Rt Hon Michael

    Morris, Rt Hon J. (Aberavon)

    Willey, Rt Hon Frederick

    Ford, Ben

    Moyle, Roland

    Williams, Rt Hon Alan (Swansea W)

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

    Mulley, Rt Hon Frederick

    Williams, Alan Lee (Hornch'ch)

    Freeson, Reginald

    Murray, Rt Hon Ronald King

    Williams, Rt Hon Shirley (Hertford)

    Freud, Clement

    Noble, Mike

    Williams, Sir Thomas (Warrington)

    George, Bruce

    Oakes, Gordon

    Wilson, Alexander (Hamilton)

    Gilbert, Dr John

    Ogden, Eric

    Wilson. Gordon (Dundee E)

    Ginsburg, David

    O'Halloran, Michael

    Woodall, Alec

    Golding, John

    Orme, Rt Hon Stanley

    Woof, Robert

    Gourlay, Harry

    Padley, Walter

    Wrigglesworth, Ian

    Graham, Ted

    Palmer, Arthur

    Young, David (Bolton E)

    Grant, George (Morpeth)

    Pardoe, John

    Grant, John (Islington C)

    Park, George

    TELLERS FOR THE NOES:

    Grocott, Bruce

    Pavitt, Laurie

    Mr. James Tinn and

    Hamilton, James (Bothwell)

    Pendry, Tom

    Mr. Thomas Cox

    Harper, Joseph

    Penhaligon, David

    Question accordingly negatived.
    Mr. MacGregor: I beg to move Amendment No. 18, in page 11, line 14, leave out '£6,000' and insert '£9,000'.
    The Second Deputy Chairman (Mr. Bryant Godman Irvine): With this we may take the following amendments:
    No. 33, in page 11, line 14, leave out '£6,000' and insert '£8,000'.
    No. 25, in page 11, leave out lines 27 to 36 and insert—

    'Part of excess over £9,000

    Higher rate

    The first £2,000

    40 per cent.

    The next £2,000

    45 per cent.

    The next £2,000

    50 per cent.

    The next £2,000

    60 per cent.

    The remainder

    70 per cent.'

    No. 32, in page 11, leave out lines 27 to 36 and insert—

    'Part of excess over £8,000

    Higher rate

    The first £2,000

    40 per cent.

    The next £2,000

    45 per cent.

    The next £2,000

    50 per cent.

    The next £2,000

    55 per cent.

    The next £2,000

    60 per cent.

    The next £5,000

    65 per cent.

    The next £5,000

    70 per cent.

    The remainder

    75 per cent.'.

    Mr. MacGregor: By way of preliminary I would make two remarks. The first is that I have for long felt that the problem of income tax goes right across all the ranges of income. I wish to make that clear at the outset. In this group of amendments I am not singling one particular group for tax reductions. I believe, and, had I had the opportunity to be called last night, I would have made this point, that this problem covers the whole range, from those on the lowest income scale, where we are all now familiar with the differentials between those in work and those out of work, to those on average earnings in work, to the widows and pensioners and all the scales below the level of income about which we are talking in this amendment.
    Looking at differentials I feel that there is now a serious problem for the foreman and supervisor, whom I classify to some extent in the category of management and about whom I shall be talking mainly in this amendment. I have increasingly found that this attitude is taken in my constituency and among every company that I have talked to. I have looked at some alarming figures prepared by companies in my constituency showing that, when we combine the comparative increase in pay that foremen
    1152
    and skilled workers receive and the massive effect of present levels of tax upon it, there is alarmingly little difference between the net take-home pay they receive and that of unskilled workers and people with fewer skills.
    Unquestionably this is a serious problem which has still to be tackled. I make this point simply to emphasise to those, Labour Members, who may feel like rebutting this amendment by saying that we are singling out a special category, why I believe this general level of direct taxation exists right across the scale. I hope that we shall continue to make our attack right across the scale. It is not just management which is suffering, but the amendment, nevertheless, pinpoints a major problem which I think it right to identify.
    As the Minister of State made clear in his reply to the last amendment, the cost of dealing with this particular group proportionate to total tax relief is very much less than it is for dealing with the other problem to which I have just referred. The reason the amendment is so important is that we are witnessing the start of a great deterioration in the morale of British management. Indeed, I believe that the crisis of morale is already upon us, especially among what one might describe as the cream at all levels.
    If we do not remotivate the best of British management at all levels we are sunk. The issue is as serious as that. I hope to show that those who are most at risk are those in management whom we as a country can least afford to lose.
    The second preliminary comment I wish to make is by way of commenting on the remarks of those hon. Members who supported the last amendment. Of course, I understand that they have an ideological commitment to an egalitarian society. The two sides of the House of Commons will never agree about that. I would plead with those hon. Members to understand that we as politicians have to be concerned with the practical and real world of business and commerce and, indeed, of the public sector as well.
    Most people outside politics—clearly a very large proportion of the British population—simply do not share the political conviction of hon. Members opposite or their ideological commitments. The plain fact, as we have seen in the local

    1153
    election results last week, is that many people are fed up with the constant process of having more of their income taken in tax and spent as politicians wish to spend it. What they are concerned about is doing the best for their companies, making the best use of their skills, getting the rewards which they believe are appropriate for the sacrifices that they have made in their earlier life at the expense of acquiring skills and qualifications, and providing for themselves and their families.
    If we do not recognise that fact, we shall demotivate them and we shall also lose the very best among the young, who will simply go abroad because, as the figures clearly show, this country is now taxing them much more heavily than any of our competitor countries. Many young people are free to take their skills to those other countries. In fact, this point was well put last year by the Financial Secretary, who frequently pointed out the way that differentials between the highest paid and the lowest paid in this country, if we take after-tax incomes, are now very much narrower than those in practically every other country, not just our serious industrial competitors, but every other country, including the Communist world. I believe that differentials are far too narrow. The Financial Secretary and I are probably at one in recognising that the real problem is that differentials have now got to their present state.
    Amendments Nos. 18 and 25 go together and Nos. 33 and 32 go together. My own view is that we should press Nos. 33 and 32. But the significance of Nos. 18 and 25 is that to some extent they indicate the erosion in tax over the past three years among the group about which I am concerned. I would say to Labour Members that it is not just a question of looking at the past year alone. What one has to look at is the trend of massive inflation over the past three years.
    Amendments Nos. 18 and 25, curiously enough, are modest, because they are well below the level at which many of the tax thresholds should be if one simply takes into account erosion in terms of inflation. Starting from the situation in April 1973, the time of the last Conservative Budget, the starting point should be not £9,000 but £9,745. A Treasury
    1154
    answer on 4th April confirmed that. At the 70 per cent. level the starting point should be over £23,000 and not, as in the amendment, £19,000. At the top rate of 83 per cent. rather than £21,000, as in the present Budget the figure should be over £38,000. These figures clearly demonstrate the erosion in net take-home pay of the management group directly caused as a result of inflation.
    Equally, the amendments are modest when one looks at the international situation. Of course, this is also relevant with regard to the high level of taxation on the lower paid, but we have to recognise that the lower paid are not likely to be enticed abroad because of their particular skills, whereas management will be. It is relevant to consider the international comparisons.
    I simply take two countries, Germany and the United States, to compare with ourselves. Again, according to a Treasury answer on 24th January, our 83 per cent. maximum rate begins at £21,000. In Germany the maximum rate is 56 per cent., starting at an equivalent of £64,000, and in the United States it is 50 per cent., starting at the equivalent of nearly £30,000. Those international comparisons clearly indicate that this group of amendments is very modest.
    I come to the reasons why it is necessary to press this case this afternoon. If we have been listening properly to the whole range of our constituents, all of us will know that the problem of the erosion of net take-home pay and living standards of managers, whether they are what one might describe as front line—the foreman and the supervisor—middle managers, or senior managers, is now becoming one of the main areas of complaint. MI of us will know from the statements by the chairmen of many British companies—it is remarkable how this has become a common feature of such statements over the past few years—that more and more boards of directors are having to direct an undue proportion of their time to the problem of how to motivate their managements, how to keep them in this country, how to see that they are adequately rewarded, and how to keep them doing the jobs they are supposed to be doing.
    6.0 p.m.
    We all know from the many surveys which have been carried out, from the

    1155
    head-hunter surveys and from those dealing with the emigration of British management—and this includes surveys by the Government's own Professional and Executive Recruitment Service—that the group that has suffered most in terms of a reduction of living standards over the last three to four years is middle and senior management. People at the lower and average income levels have begun in the last six to nine months to suffer for the first time a real reduction in their living standards.
    But the plain fact is that management, and particularly higher management, has suffered over the last three years a reduction in living standards of about 25 per cent. in real terms. Now a simply staggering increase in gross pay is required to restore these living standards, and one of the major factors which has required this staggering increase is that tax now takes so much of the extra marginal income above £.10,000.
    Of all the surveys I have seen on the subject that recently produced by the Opinion Research Centre is the best, and I wish to refer to it. It is the best because it is the most comprehensive and the most scientific. Rather than looking simply at groups of management, such as the British Institute of Management members, as some surveys have done, the ORC survey has looked across a broad range in Great Britain. It started with a sample of 106,000, which enabled it to come down to a group of 1,800 managers, and it studied them in depth.
    It discovered that we are talking here about more than 1 million key decision takers in the country. In the debate on the last amendment the Minister quoted the figures of those who would have been brought into the higher tax bands had the adjustment not been made in the Budget proposals. He quoted the enormous increase in the figures of those who over the past three years have been brought into the higher tax bands. So we are talking about a comparatively small proportion of the total population, but about a very large number of people, and they are the key decision takers. They are to be found in the industrial and the commercial sectors and, to be fair, in the public sector.
    Let us consider the results of the survey. Those results should seriously
    1156
    concern every hon. Member, because if we are to get the economic growth and performance we seek, we depend on this group of people, and nothing that we as politicians do will make the difference that those people can make if they are properly motivated.
    Almost 100,000 managers are serious enough about leaving Britain to have inquired about jobs abroad or about the regulations. More than 500,000 managers would consider taking a job abroad. What is particularly worrying about this aspect is that the majority who are really serious and who may carry out their intentions are among the young.
    Those in their 30s and 40s face other difficulties which may prevent their ultimately fulfilling their intentions. I have in mind such factors as children at school. But among the young who do not have these problems the level of desire to seek jobs abroad is truly frightening. I heard today of a company which is being audited by six young chartered accountants aged between 23 and 24. Five of them have said that they are being attracted by offers abroad at this moment. Accountants at that age are among the better paid of our managers, and yet five out of six of this group are seriously considering leaving the country.
    I am worried that if they go abroad and see the attractions of the net take-home pay levels and the living standards that they can enjoy there, and if they marry there and have children, it will be extremely difficult with today's tax rates to attract them back to this country.
    Mr. Malcolm Rifkind: My hon. Friend is rightly concentrating on middle management, but does he agree that his arguments apply with equal force to the professions, particularly the medical profession? There we are suffering severe difficulties in persuading the most able members of that profession to remain in this country.
    Mr. MacGregor: I have been using the word "managers" as a shorthand term, but, of course, we are talking about the middle and higher income groups, and they include the professions. Those are the skills that are so easily translatable abroad, and it is not surprising that we are losing people in that group as well.

    1157
    A further result of the ORC survey is that about a fifth of the total work force of managers is doing less work outside normal hours than used to be the case. I am sure that the explanation is that pay is no longer a satisfactory reward and that therefore these people are seeking their rewards elsewhere. That means less commitment to the company, to the professional firm, or to the hospital for which they work.
    One in four managers—which means well over 250,000—now say that it is not worth accepting promotion because of the effect of taxation on pay increases. I have talked to a number of such people in my constituency and around the country who have given me practical examples of where they have been offered promotion at what looked like an attractive increase in gross salary but where, after taking account of the cost of moving and the net addition to their take-home pay, they discovered that it was not worth while. This has become an increasing problem at home.
    There is a strong reluctance, therefore, among these people to accept posts in other parts of the country, even with substantial gross increases in pay. I am sure that many companies could testify to the difficulties they have had in getting mobility among their managers, especially in this country, and in attracting them back from overseas for this very reason.
    Sir John Hall: Does my hon. Friend agree that in trying to attract executives to another part of the country companies have to give very high salary increases, which distort the salary patterns within companies?
    Mr. MacGregor: I agree with my hon. Friend. That is also a problem in attracting people back to this country. I am sure that we are all well aware of examples of this. ICI is a substantial example in point. Large numbers of middle managers overseas are being paid so much more in net take-home pay than their senior directors in this country that there is no possibility of attracting them back.
    The majority of managers agree that the lack of financial reward is causing them to be less efficient and less enthusiastic
    1158
    in their work. The ORC survey found that dishonesty is on the increase, and that is a factor of the tax levels which greatly worries me. It is particularly disturbing among this group, which has been one of the most law-abiding groups in the community. Nevertheless, it is beginning to be regarded in that group as legitimate to find ways around the tax system simply to protect one's standard of living. I deplore that, but I fear that the fault lies largely with the Government and with us in this House.
    A tenth of managers are now moonlighting. Basically, they are spending a great deal of their time doing jobs sometimes for gain, but sometimes at home on a do-it-yourself basis. They are carrying out tasks for which they would previously have employed people but which they now find it more cost-effective to do themselves. They do that work at the expense of the effort they should be making in the export drive and for their companies at home.
    The high level of direct tax has caused a concentration of fringe benefits. I dislike too much of a concentration of fringe benefits. I would much prefer to see a higher level of pay associated with lower tax so that people could spend their money as they wished. However, because of our high rates of tax, fringe benefits have become one of the inevitable ways of seeking to keep management working within a company or in the country. Last year's attack on fringe benefits simply made the situation worse.
    That is a brief rundown of the main elements in the survey, and it reveals a most disturbing situation. It is clear that the Government's modest improvement, which puts managers back to roughly where they were last year—or perhaps makes them a little better off—is nothing like enough to deal with the rapid rundown in morale.
    I readily concede that alterations to income tax are not the only answer. The incomes policy during the last two years, particularly the cut-off point at £8,500, has hit senior management hard. I accept that British management is sometimes not good enough, but we should be rewarding the brightest managers better and keeping them in this country. I fear that we are losing the brightest and that in some instances we are left with those who

    1159
    are content just to coast along. That is not what we require as a country.
    Some loss of morale was caused by the majority report of the Bullock Commmittee. It left many managers thinking that they were left out. Many of the Government's interventionist policies have not helped. Tax has made a big difference and the higher that one is up the incomes scale, the worse one's situation is. I am concerned not just about the rapid loss of morale among management but that the brightest and best of management, many of them young people, will go abroad and that many senior managers at home will make less effort.
    It is clear from the survey that I mentioned that the better qualified are more likely to go abroad. Those higher up the scale with more responsibility are more likely to be better. The situation has become much worse during the last two or three years.
    Tax measures of the kind proposed in this amendment will help. It is therefore right that we should put these amendments forward in order to draw attention to the problem and to urge upon the Government that what they have done is a start on the right road, but that it does not go anywhere like far enough.
    Sir Geoffrey Howe: I rise to support my hon. Friend the Member for Norfolk, South (Mr. MacGregor) in moving Amendment No. 18 and, like him, to invite my hon. Friends to vote in support of Amendment No. 33.
    The Committee cannot be too often or too forcefully reminded of the gross damage that has been done to the country and to our economy by the cripplingly high rates of tax imposed upon earned income. I endorse every word that my hon. Friend the Member for Norfolk, South said, particularly his argument that this is true of tax on earnings at all levels. However, in this debate we are concerned with those who pay tax at above the standard rate.
    The rates themselves are much too high, and there is a far too low starting point for the higher rates. This has given rise to what my hon. Friend the Member for Guildford (Mr. Howell) rightly described as a management catastrophe—a catastrophe for all management groups in this country I include in those groups
    1160
    all those who have skills and qualifications in professions, technology, and so on. I dare say that the Minister appreciates that this pattern of taxation is really economic nonsense. There is no economic justification for it whatsoever. It reduces the nation's talents and wealth as well as the nation's capacity to create jobs. It even reduces the yield from income tax, so that there is less money available for social spending—if that is what one wishes to do with the money.
    John Methven, the Director General of the CBI, was not exaggerating when he said some months ago that we are
    "threatening to turn our country into a managerial leper colony."
    It will be a leper colony not just for managers but for all people with all kinds of skills because we have turned our island into an island of fiscal insanity by maintaining, notwithstanding inflation, these increasingly severe rates of direct taxation.
    The amendments that we are now discussing do not go far enough to restore the position that existed in 1973. They would not remedy the damage that has been done by inflation in imposing on these people tax increases that Parliament has not authorised but that have been increased by the stealthy process of inflation. I am not saying that, in the context of this Budget, we should make these precise reliefs but that we should vote for the amendment in order to underline the urgent importance of making much more substantial progress in lightening the tax burden even more than the Government have already started to do.
    6.15 p.m.
    The sensible target for a top rate of tax on earned income should not exceed 60p in the pound at any level. Even that would be above the top rate applicable in the United States, France and Germany where there are also much higher starting points for the higher tax rates.
    Since the oil crisis and the world recession sacrifices have been necessary, but the discriminatory way in which sacrifices have been inflicted on people vital in our economy has caused an intolerable amount of damage. No doubt the House will recall the figures that were quoted by Kenneth Bond of GEC in a letter to The Times last year when he pointed that between 1972 and 1976 a

    1161
    tremendous erosion had taken place in living standards. There has been at least a 10 per cent. reduction in take-home pay for skilled manual workers, 20 per cent. for managers; and for group managing directors the figure was 30 per cent.
    We were told in the debate last year that the differential in earnings between manual workers and senior management had shrunk from 8 to 1 to 4 to 1 and it is now narrower than it is in the most non-egalitarian and capitalist of countries such as the Soviet Union and China. This will continue to have a grave effect on the morale of these key people, on their mobility within the country from job to job, and on their job motivation. The effect is, of course, also being expressed in the growing interest in emigration from this country.
    My hon. Friend the Member for Norfolk, South cited some examples that were given in a report by the Opinion Research Centre. In order to supplement that information I refer the Committee to similar evidence produced by an inquiry conducted by the Overseas Recruitment Service and published in March 1977. It had questioned 991 people who had applied for appointments overseas in engineering, and in secretarial and medical work, as well as for jobs requiring other qualifications. It showed particularly disturbing features about the attitudes of the young. Among those aged between 31 and 50, whom the report described as being the bulk of people who were "trained, qualified and experienced", the second most important factor for wanting to leave the country was the present United Kingdom taxation system. The most important factor was the prospect of a higher salary abroad. Some 68 per cent. of those questioned put that first. We can do little about that while we are less well off than those in other European economies, but to add to that the double handicap of penal taxation is totally absurd.
    The report said that the people wishing to work abroad
    "have already reached a certain level of responsibility, have plenty of working years ahead of them in which to deploy their working talent and experience".
    These people are in the prime of life and have a lot to offer the country. They are
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    people the country can ill afford to lo without.
    The proportion of those complaining about the tax system, according to the survey, rose in line with income. Among those earning more than £10,000 a year, 80 per cent. gave taxation as their main reason for wanting to leave the country. That is reflected in the emigration figures. More than three-quarters of those emigrating are less than 45 years old. If one studies the pattern of those going to Australia one finds that in 1970 about 40 per cent. of them were highly skilled or professional people. In 1975 the proportion was 64 per cent. Although the numbers may not be increasing greatly, the proportion of those with skills, people we can ill afford to lose, is rising steadily.
    It is this pattern of taxation that has led to some of the nonsense contained in the Bill. There is provision in Schedule 7—a schedule four pages long—to give a series of licensed loopholes for those who are lucky enough to have overseas earnings. It is full of jargon about the qualifying tests, and the newspapers have been full of comment about whether one qualifies for relief if one leaves the country before or after midnight, whether one has one's toothbrush and leaves for more than two days at a time. Just think of all the travellers in business outside this country who will be thinking at least as much about whether they can get through the loopholes designed by Treasury Ministers as about what they should be doing for their companies. This is another ridiculous consequence of our absurd rates of taxation.
    We also have to consider the whole jungle of benefits in kind that have been growing as a means of escaping from high taxation. They give an interesting sideline to what is happening, because next year the P.11.D starting point for taxation of benefits in kind goes up from £5,000 to £7,500, which is just keeping ahead of the level of average earnings. That provides us with another absurd illustration.
    We should be wrong to ignore what is happening to those undertaking deep-sea diving in the North Sea. Many hon. Members will have read reports that the men who undertake this hazardous work rightly receive substantial rewards, but

    1163
    that they are being pursued in order to have their tax status changed—to be transformed from self-employed people liable to tax under Schedule D so as to be brought within the net of taxation under Schedule E. It would not be right for me to comment on the tax status of any individual, but the reaction of these men to the imposition of the full, unqualified burden of our tax rates is one of great hostility, and they are indicating that they are likely to cease residing here for tax purposes and to cease to be available for this dangerous work. This is one of the consequences of pursuing to the limit a tax system with rates as high as they are.
    In one report I have received from one of the larger diving contractor companies, it is said that they will shift their British divers to locations outside the United Kingdom and will replace them with foreign nationals. They foresee considerable difficulty in obtaining and retaining deep-sea expertise in British waters because of the imposition of these tax rates. According to the report the net result would seem to be
    "a downgrading of available expertise and an influx of foreign nationals to do much of the work which could and should be done by British divers. It follows that the Inland Revenue stands to lose thereby considerable sums in tax revenue anyway"
    Why in heaven's name has this country been driven into this absurd and lunatic position? It is because the hair-shirt hermits of the Tribune Group, who were here earlier, have had great success in peddling political myths to the great destruction of the economic health of this country. There are so many illusions and myths that it is worth spending a moment or two in identifying and destroying them.
    Mr. Denzil Davies: The amendment will cost about £435 million. Can the right hon. and learned Gentleman tell us where he is going to get this money?
    Sir G. Howe: The amendment is being proposed in the context of the case that we have argued many times, namely, that our tax system needs to shift away from direct to indirect taxation. Our case has been that the Government have recklessly and irresponsibly moved away from a 10 per cent. rate of VAT. If they returned to that they would get an extra £700 million. This is the folly. The Government must understand that they have cast away £700 million in revenue that would
    1164
    have been raised by a 10 per cent. rate of VAT. Instead, they have locked themselves into a straitjacket and are attempting to justify a burden of direct taxation which is intolerable, lunatic and mad. They know where they could have got the resources. We are still paying the price for the profligate promises made by the Chancellor of the Exchequer in order to buy votes in October 1974. The sooner Ministers learn that, the better.
    I return to the myths and illusions. The first concerns the impact of inflation on our tax system. In 1967, 55 people working for ICI were receiving salaries of more than £10,000 a year. In 1975, the figure was 1,377. On the face of it, the rich in ICI had multiplied twentyfold. The reality is that in 1975 only two people at ICI had take-home pay as large as that which they had received in 1967. Despite the multiplication of inflationary, illusionary salaries, the great mass of these people were worse off.
    Another myth being propagated by the Left—[HON. MEMBERS "Where are they?"] They are drying and cleaning their hair shirts ready for the next foray.
    Mr. Ridley: One of them has left his shirt behind.
    Sir G. Howe: I hope that it does not find its way on to the back of a Treasury Minister. Treasury Ministers are sufficiently austere. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) is right to cross the Chamber to investigate what has been left behind. It may be a sleeping member of the Tribune Group.
    The second illusion is the gross pay illusion in which hon. Members opposite below the Gangway talk about salaries of £10,000 and £15,000 a year. They are totally misleading people about the level of rewards being paid. At last year's tax rates a salary of £10,000 a year is worth £6,600, or £120 net a week, which is not far above the level of average earnings.
    The third myth is that we live in some sort of closed economy or a siege economy in which we can insulate our-selves from those places around the world to which our people can emigrate. I do not know where members of the Tribune Group live or move, but I find it almost impossible to go to any significant employing organisation without receiving

    1165
    complaints about the departure of two or three key men to much higher paid jobs outside this country.
    The fourth illusion propagated by the Tribune Group comes when they say that they may be persuaded by our arguments but that they can carry on in the short run because they will be able to put things right in a different way in the long run. By then, however, the people to whom I am referring will all have fled.
    The fifth illusion, and one which has been propagated by the Chancellor of the Exchequer from time to time, is that chaps do not work for take-home pay, that they are motivated by massive job satisfaction—such as, presumably, the pleasures of carrying dispatch boxes from one IMF conference to another or of waving to the cameras outside No. 11 Downing Street. That is an odd argument from Ministers who have been noticeably successful in material terms. I am sure that the Chancellor must get some pleasure from his farmstead in Sussex, his homestead in Highgate, his occupation of No. 11, the car, the chauffeur and the rest. Even for so altruistic a character, material considerations must have played some part in motivating him. Material rewards matter in a free society. Even in an unfree society on the other side of the Iron Curtain material rewards are not conspicuous by their absence.
    6.30 p.m.
    The sixth illusion is that higher rewards are of only little consequence to those who receive them. These people who deserve to face lower taxes and to receive better net take-home pay are the minority who play the key part in creating wealth for the rest of the community. To persist in these policies without change is to drive them away, to the great disadvantage of this country.
    All these things flow from the extent to which Labour Members have enforced upon conventional wisdom in this country the belief that equality is something to be pursued for its own sake. If we continue to pursue equality in this way we shall not merely be perpetuating the management catastrophe about which my hon. Friend spoke. We shall be endorsing a prescription for the pauperisation
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    of our country. That is why I support the amendment.
    Mr. Budgen: I hope I shall be forgiven, Sir Myer, if I take the peroration of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) a little further, because I think that he and my hon. Friend the Member for Norfolk, South (Mr. MacGregor) relied most of all upon what I call the efficiency argument. They relied upon the argument that the many worthy people who earn high salaries work primarily. or at least partly, for money, and that if we do not give them adequate net incomes they are thereby frustrated in their objectives, they work less hard, they tend to emigrate, they tend to look at ways in which they can preserve their real position by tax dodges, and all the rest.
    It is a good argument and one with which I agree, but the argument surely goes much wider than that. There is a danger about that argument because it accepts the premise of the Puritans on the Labour Benches. It suggests that those who are rich are also worthy, and surely that is a dangerous fallacy.
    The reasons for people being rich are diverse. They are dependent upon the chances of the market. They are in some instances dependent upon persons having odd and particular skills, quite unconnected with the moral worth of their character, or they may equally be wealthy because of the oddity of the chances of having been born to rich parents or having inherited vast wealth.
    All of these are a necessary part of a diverse and free society, but if we say that everybody who is rich is worthy the Puritans on the Labour Benches are perfectly entitled to say "Look at that manager earning £12,000 a year. He is having a very pleasant way of life. Of course he has to take some difficult decisions, but for my part"—as the man on the shop floor might say—"I would much rather be jetting around the world for 12 grand a year than working at my lathe and doing a boring, repetitive job". If we counter that argument by saying that the manager is in some way morally better and taking a more responsible rôle in society, surely we are only storing up for ourselves a spirit of envy from the Labour Benches.

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    We say, do we not, that it is from the chances of the market, the oddities of life, that some people are richer than others? It does not mean that they are any better. It does not necessarily mean that they are intellectually any abler. They are merely richer, and their riches are a necessary part of a free and diverse society in which people are capable of taking independent action and of taking independent points of view. If we say that, we are surely making it more bearable for others who have not the good fortune to be so benefited in the odd and changing society in which we live.
    I say, therefore, that we support the amendment not just for the managers, who may be very worthy, and not just for those who work very hard, although I dare say they do not work any harder than people who spend their time cleaning out lavatories all day. We say that rich people are a necessary part of society. It matters not how they got their riches or how they retain their riches. We need rich people in order that we may have an independent and diverse society. We on the Conservative Benches support the concept of independent private property.
    Mr. John Wakeham: I should like to think that this Budget and this Finance Bill mark a watershed in the Socialist way of life that we have had in this country for a number of years. I should like to think that they mark a great change in direction. We hope that it will be the last Socialist Budget for a good many years, but it is important to remember in this context that we have had a Socialist Government for 10 out of the last 13 years. These amendments are designed to help the welcome change of direction to move considerably further in the light of the damage which has been done to our tax system during the period since 1964.
    I do not think we fully realise what a social revolution has occurred in this country as a result of the changes in the tax system made by the two Labour Governments in the period from 1964 to 1970 and from 1974 to 1977.
    When the Labour Government were returned in 1964, a person on average earnings retained some 90 per cent. of his take-home pay after direct taxation and national insurance contributions. Such a person now retains some 75 percent.
    1168
    —a reduction of 15 per cent. For a person on five times average earnings, the respective figures are 73 per cent. in 1964 and under 50 per cent. now—a reduction of about 23 per cent. For a person on 10 times average earnings, the proportion left after payment of tax and national insurance has dropped from 62 per cent. to 34 per cent.
    Looking at those figures in another way, comparing the net after-tax income in 1964 with the present time and comparing a person on average earnings with a person on 10 times average earnings, the differential was seven times in 1974 and it is now four times. As my right hon. and learned Friend the member for Surrey, East (Sir G. Howe) said, that is very much the sort of after-tax differential that may be seen in many countries in the world, particularly a number of those behind the Iron Curtain.
    There has, therefore, been a very substantial switch in resources as a result of having a Labour Government in this country over a long period. I do not believe that Labour Members below the Gangway should be dissatisfied with the ravages which the Labour Government have wrought with our system of direct taxation.
    Taking the period of about four years since the last Conservative Budget, there has been an increase in retail prices of some 70 per cent., and it is interesting to look at the increase in indirect taxes. Taxes on expenditure have gone up broadly by about the same figure. The increase in rates has been broadly around the 70 per cent. mark. National insurance contributions have increased by perhaps a bit less—about 65 per cent. But the increase in direct taxation has been about 130 per cent.
    I believe, therefore, that the very modest change in direction which has been forced upon the Government by events ought to be looked at in the context of a series of Governments who have shifted taxation very substantially indeed away from indirect to direct taxation, and last year's effort is a very uncharacteristic example of what Labour Governments have been doing to this country over a considerable number of years. They have managed to do what they have done only by reason of high inflation coupled with high taxation. Without high inflation,

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    no Chancellor of the Exchequer could have got away with the social revolution brought about by the present Socialist Government. Inflation has been the ally of the Socialist endeavour to impose high direct taxation.
    I support these amendments because they go some way to encourage the change which we have seen in this Budget—the first change in a long time. I hope that the amendments will be agreed to.
    Mr. Peter Walker: In fairness to the Chancellor of the Exchequer, one must point out that he recognises the problem which has been outlined in this debate. He recognises it every year in the period between September and January and he forgets it every year in the period between March and April.
    This was the second major Budget prior to which the Chancellor made many promises that those who had been particularly hard hit in middle management and in higher management would be thought of in the preparation of his Budget plans. It is a great technique adopted by the present Chancellor that for many months of the year he keeps people content and happy on false promises and raises hopes that are never fulfilled. In that sphere he has been almost more disastrous than he has been in a good many other spheres which compete for that accolade.
    For three years, middle management and higher management groups in British industry have been hard hit by a combination of the Chancellor's policies. The incomes policy operated by the Government in the last two years has been harder and tougher on that group of people than on anybody else. They have suffered a combination of tough policies and a complete freeze on their incomes, and they have also suffered because of levels of tax and the effect on mortgage interest rates. Therefore, there is a whole band of highly important people in society whose standards of living have dropped constantly for three years—probably in total by as much as one-third. No group of people can go through the process of adjusting themselves to such a drop in their standards of living without suffering immense difficulty and anxiety.
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    I wish to underline two points in asking the Government to consider this amendment carefully. The first is that, in the Government's endeavours to obtain a successful phase 3 in terms of income policy, one of the great problems in Britain is that the whole of British management is in a mood in which it would like to see the end of incomes policy, if only for a few months, so that it could obtain the adjustment which it has lost over the past three years. The fact that management is in that mood at present is not helpful to the Government.
    Although many recognise the necessity for the Government to be successful in obtaining some form of wage restraint because of the incomes policy which is operated against them—a feeling of unfairness compared with the rest of the country—this, in combination with tax levels, leads them to believe that they have lost out in this particular phase.
    6.45 p.m.
    Secondly, the Government must recognise the effect which their policy has had on services for which they are directly responsible. In this context, no section has been harder hit than the National Health Service. As a result, a whole body of our most skilled surgeons are developing a nine-till-five working mentality, having been frustrated by years of lack of recognition of their talents, skills and efforts. This has led in the last two or three years to a massive increase in waiting lists at almost every hospital to see consultants. This is directly related to the manner in which these men of great skill have been treated.
    Another factor, which the Government may try to brush aside, is the perpetual argument of the pay trend. I warn the Government that if they ignore the trends of the past few years—and the lack of reward to a fair number of people is the barometer by which one can judge future trends—they will be in for a nasty surprise. Many management recruiting agencies in Europe find that the one place in which they can recruit talent easily is Great Britain. They are making a greater attempt to recruit people from this country than ever before.
    Let me try to point out what is likely to happen in the next five or 10 years in terms of some of the new emerging economies such as Iran, Venezuela and

    1171
    Brazil. All have immense wealth and considerable plans for industrial development but a total lack of managerial ability.
    All those Governments have decided that they need to recruit on a large scale. A recent governmental commission in Venezuela has recommended that in the next five years it should try to recruit from abroad between 250,000 and 500,000 skilled and managerial personnel to assist in development plans. If those Governments are looking for countries in which to recruit that talent, Britain is the obvious target. Britain has the men with ability, skill and great managerial background, but it also has a Government who clobber such people with high taxes. That makes it easier for them to recruit in Britain than to recruit in Germany, France, the United States or any other major industrial country.
    I hope that the Government will not brush this amendment aside and replace it with yet further promises to consider the lot of middle and higher management in the months to come. Before the 1976 Budget the Chancellor of the Exchequer, in speech after speech to employers' organisations and groups of managers, said how much he felt for their problems and said that he intended to recognise them. In the following Budget he did nothing for them. He took the same course in the months before the present Budget. Again, he has done virtually nothing. If this goes on much longer, this Government may experience the fact that such men will fail to pursue their occupations with the energy which the country so desperately needs.
    Mr. Rifkind: It is astonishing that when the Committee is considering a major amendment to this central piece of legislation the Benches behind the Treasury Minister are occupied by only one reclining Member and one equally reclining garment. It is not surprising that support for the Government in the House is comparable with the support given to the Budget by the country and the electorate.
    I wish to make two short points in support of the amendment. My hon. Friend the Member for Norfolk, South (Mr. MacGregor) sought to deal with the problems of middle management and the crisis facing industry. I do not dissent from his remarks, but I wish to emphasise that it
    1172
    is not only middle management or industry which is suffering from the present high level of taxation. There are a number of other people and groups within the community whose support and continued presence in this country are necessary for our general well-being. I refer to the professions, and particularly to the medical profession. Those professions have in the last few years suffered a severe drain of sorely needed talent to other countries, for exactly the same reasons as apply to industry.
    Similar considerations apply to those with literary, artistic and other scarce talents. In some respects those products may not be admired by everybody, but the wealth of the country depends on our being able to retain people with talent. They are the creative groups, the professional men and the entrepreneurs, and they all share something in common—namely, the possession of scarce skills.
    I wish slightly to disagree with my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), who suggested that in some way the possession of a higher income is something arbitrary and is either never or rarely related to the ability of those in the group who receive it. I believe that to a large extent high income in all countries, whether capitalist or Socialist, goes to those with rare skills, and it is those people whom the community most particularly needs.
    I also warn the Government that this country faces the threat of the emigration of our skilled minority to a far greater extent than the rest of Europe could suffer even if its taxation were similarly severe. We have both the advantage and the disadvantage of speaking an international language. Therefore, disaffected members of our community can contemplate starting a new career and a new life in many other countries in the rest of the world far more easily than those belonging to a community whose native language is spoken only in their own country. It is easy for someone in this country suffering from the effects of taxation to consider starting a new career in the United States, Canada, Australia, New Zealand, South Africa or many of the other countries where English is the common language.
    The language problem can often dissuade a person from emigrating when all

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    the other factors in his life might encourage him in the other direction. Even if Germany, France, Italy, Spain or Greece had serious taxation problems or its own difficulties, this extra factor might keep some of its skilled people at home despite the other factors which might persuade them to go elsewhere. I hope that the Minister will take into account that, because it is relatively easy for the skilled members of our community to begin a new career and a new life in other English-speaking countries, we must make special efforts to persuade them to remain here.
    In sonic respects the Government are gradually seeing the light, and there is now an element of common sense in their whole attitude towards taxation. Four or five years ago it would have been impossible to envisage a Socialist Government offering income tax incentives to the trade union movement in order to secure co-operation over a prices and incomes policy. Four or five years ago the current orthodoxy was that direct taxation was a privilege that the middle classes and the higher income groups were supposed to enjoy in order to benefit the rest of the community. Now even the present pig-headed Government are realising that high direct taxation leads to suffering and hardship in the community as a whole. If it has taken an economic blizzard to bring them to their senses on this matter, there is at least a hope that the problems faced by other income groups will lead the Government to see similar common sense in regard to them in the not-too-distant future.
    The problem is that we cannot afford to wait for that to come about simply by a process of slow infusion of intelligence into the minds of those on the Treasury Bench. I remind the Minister that although the seriousness of the problem is now emphasised by the difficulties in industry, it is in the professions and creative groups, those engaged in literary and other creativity, that we are losing out to many other countries in a way that no community can afford for long. I hope that the Government will take that into account. If we cannot restore the level of allowances and the tax position of those groups to what they were a mere three years ago, at least we can
    1174
    do significantly better than was proposed in the Budget.
    Mr. A. P. Costain: Most of the arguments I had intended to advance have already been put, so I shall be brief.
    I can confirm from my own business experience that there is a drain of brains from this country and that it is having a serious effect. Does the Minister not realise that if we drive away the income group with which we are here concerned there will be a tremendous effect on employment? If the people with pleasant gardens and a standard of life which reflects well on this country, people who already have heavy commitments, are not allowed to have a reasonable spendable income, we shall create a country which has no quality products, and the standard of our shops will go down. The people in that group, such as the women who spend more on their dresses and thus give employment to specialist firms, have an important effect on employment. If we are to continue as a country of which we can be proud, it is a group that needs to be encouraged.
    Mr. John Pardoe: I find myself in complete agreement with almost everything that has been said in the debate so far. These high rates of tax are ridiculous both in absolute terms and by international comparison.
    I do not share the anti-egalitarian views expressed by the right hon. and learned Member for Surrey, East (Sir G. Howe). I believe in greater equality, and I do not think that our low-income groups are yet over-privileged, but I challenge the view held by many on the Labour Benches that income tax is an egalitarian tax. To a large extent it has worked the other way and is not a very efficient redistributor of income.
    That was pointed out many years ago by, I think, Professer Titmuss in a book in which he said that, although the Inland Revenue's figures tended to convince everybody that income tax had been a redistributor of income, there was in fact so large an incentive to reduce the taxable income at those higher levels by all manner of allowances and non-taxable benefits that the Inland Revenue grossly overstated its redistributive effects.

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    That argument certainly convinced me then, 15 or 20 years ago, and if it was true then it must be even more true today.
    Income tax is too high because it is too high a proportion of our total tax burden. It has been said in the debates yesterday and today that we do not suffer from being a high-tax country, if we take the total of our tax revenue as a proportion of our gross national product. That is certainly true. The problem with all rates of income tax is that we are bedevilled by the fact that we have allowed ourselves to take far too great a share of the total tax revenue in income tax because it is too darned easy to do.
    Inflation does it for Governments without Parliament having to vote it. Therefore, general indexation of the allowances and the bands is a principle which the Committee must at some time come to accept, although I certainly agree with the right hon. and learned Gentleman about the need to raise the bands to the levels at which they were, in line with the rise in the cost of living, the fall in the value of money. I hope that this will become part of a general principle of indexation accepted by the Conservative Party.
    The fact that income tax is too high, and at these levels of tax much too high, is now generally accepted in the Committee, though not universally, as we saw in the previous debate. It is fairly generally accepted among all shades of political opinion. As we have seen from speeches by the Chancellor, the Chief Secretary and other Ministers, including the Prime Minister, it is certainly accepted by them.
    This year's Budget is a step in the direction of reducing the high dependence on income tax, but we cannot change the burden of income tax in isolation. We must do it as part of a gradual—I hope not too gradual—plan to change from taxes on incomes to taxes on expenditure. People tend to think that one is advocating increasing VAT to an extraordinary rate when one suggests a change to taxes on expenditure, but there are many taxes on expenditure.
    The most important deficiency in our tax system at present in terms of its revenue yield is the corporate sector. The British corporate sector, both nationalised and private, is contributing a much lower proportion of the total tax burden than is
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    the corporate sector in nearly all our industrial competitor countries. There is not much that we can do about that through corporation tax, because profits are so low. Therefore, corporation tax looks high, at 52 per cent., but in real terms it is no higher than in all other countries. In a number of Western industrial countries corporation tax is a higher burden on industry generally.
    Mr. Peter Hordern: I do not believe that the hon. Gentleman is correct in saying that profits are low. That is not the case with companies. The position is that investment allowances are exceedingly generous. Is the hon. Gentleman suggesting on behalf of the Liberal Party that they should not be as generous as they now are?
    7.0 p.m.
    Mr. Pardoe: Yes. I am indeed. I share the views of many Conservative Members who question the relevance of investment allowances in terms of creating investment. I do not believe that any Government have succeeded in bribing business men to invest more through investment allowances.
    One interesting document to emerge from the Government in recent years is a large blue tome, which was the result of a seminar organised by the economics adviser to the Department of Industry, Professor Alan Peacock. It is an assemblage of learned papers on the effect of various investment incentives. The conclusion of each of the papers is that the experts do not have the foggiest idea of what the incentives are doing to investment.
    The hon. Member for Horsham and Crawley (Mr. Hordern) has put his finger on a point that I wanted to make and which constitutes the crux of the problem. We in this country, in both corporation and income tax terms, have high tax rates and high allowances. The rates look ridiculously large. In some cases they are ridiculous. However, they look even more ridiculous than they are because of the high allowances. That is true of the 52 per cent. corporation tax. Because there are large investment allowances, the yield is low. I deal with these other taxes only because I believe that we must consider ways of reducing income tax, especially at the upper levels, in the context of how we raise revenue from other sources.
    Sir John Hall: Does the hon. Gentleman agree that, if we are looking for a way of switching the burden of tax more on to corporations, the tax on corporations is on profits which in real terms often do not exist? Therefore, the Government are getting revenue out of the assets of a company, not out of its pocket.
    Mr. Pardoe: I entirely agree with the hon. Gentleman. Over the years some company chairmen, until they got wise to it, were making themselves look ludicrous by getting up at annual general meetings and announcing the splendid profits which had been made when they had not been made at all looked at in real terms. The real return in British industry is catastrophically low—about 3½ per cent. last year. It is difficult to say now what it is, because profits are beginning to rise.
    Taxable income in Britain in 1976–77 was £48·7 billion. That is the total tax base for personal income. Allowances and deductions amounted to £33·1 billion. I wonder whether it is sensible to have a tax system which relies so much on high rates of tax which people often quote, certainly in the international context. These rates are not real in any meaningful sense because so many allowances are set against them.
    The reduction of these tax rates is desirable. Indeed, I sometimes think that it might be better to have none at all. I should dearly love to abolish income tax if we could find a better tax for it. The graduated expenditure tax advocated by the Meade Commission is a step in that direction. The Meade Commission pointed out that income tax is a tax not solely on income, but on income less certain types of savings. It would be better to say that it is a tax on income less all types of savings rather than to try to distort the market in favour of institutionalised savings.
    Mr. MacGregor: I accept the point made by the hon. Gentleman that there are allowances, though they are not as generous as he makes out, and many international comparisons take them into account. But does he agree that, because the higher rates or tax bands are so narrow, there is a massive disincentive at these income levels irrespective of allowances?
    Mr. Pardoe: I agree entirely with the hon. Gentleman.
    The First Deputy Chairman (Sir Myer Galpern): Order. The hon. Member for Cornwall, North (Mr. Pardoe) has digressed considerably from the substance of the amendment. However, if he is about to discuss the abolition of income tax, I should remind him that it is not part of the Jubilee celebrations.
    Mr. Pardoe: No, Sir Myer, I was not about to debate the abolition of income tax. I was making the point that all personal taxes, not just these upper rates, are too high.
    I agree with the hon. Member for Norfolk, South (Mr. MacGregor) that the bands are now so narrow that there is a substantial disincentive at that level. Indeed, there is a disincentive throughout the income tax scale. Yesterday there was reference to low levels of tax and the poverty trap. The disincentive is even greater at that level.
    Whatever economic and utilitarian arguments we advance for a reduction in the top rates of tax, regrettably we are politicians. The amendment calls for substantial increases this year in net take-home pay for a small, though important, section of the community. We are talking about a married couple with two children and an income of £8,000 or more a year. Indeed, the amendment would put it up to about £10,000 a year or more. We are proposing considerable increases in net take-home pay for such people. Frankly, I do not believe that we could get away with that. We must take account of the feelings of the British people, who are not in a mood at the moment to accept that such increases should be made.
    Sir John Hall: I cannot understand how the hon. Gentleman can advance this argument when he has tabled an amendment which would have the effect that no one should pay more than 50 per cent. of his income in tax, and that could benefit only those earning about £30,000 or more a year.
    Mr. Pardoe: Indeed. With the permission of the Chair, which I sought from your predecessor, Sir Myer, I was going to discuss a small aspect of the amendment.

    1179
    I was about to say that the best start this year would be a fairly modest proposal which would at least announce that we are not the most grotesquely overtaxed nation in the world. An amendment—for example, Amendment No. 24—stipulating that no one should pay more than 50 per cent. of his income in tax would affect a small number of people and would cost very little. I do not think that the Treasury knows how much it would cost, because it is a difficult calculation to make. I suspect that such a proposal would affect very few people in this country. We are talking about people with incomes well over £20,000 a year. However, they are bound to have allowances which are not normally taken into account—for example, various pension arrangements and so on.
    It is absolute nonsense for anyone in a civilised, efficient, competent country to be asked to pay more than 50 per cent. of his earned income in tax to the Government. The fact that such a proposal applies only to a small number of people means that we could dispense with the fiction of being branded throughout the world as a country with high tax rates. It is well known that high tax rates have an effect on management selection, about which the right hon. and learned Member for Surrey, East was talking. People, wherever they are, tend to regard Britain as a grotesquely and extravagantly high tax country. Britain is a fairly high tax country in terms of income tax, but the rates are not all that high. We might as well carry the amendment as a start in the process of announcing to the world that we intend to put our house in order.
    I hope that over the next few years it will be possible to bring sanity into the tax system, to reduce the burden of income tax both absolutely and as a proportion of the total revenue received by the Government and, through an overall reform of the tax system, to make it politically possible to reduce the upper rates of tax. However, as I shall argue later on investment tax, if I catch your eye, Sir Meyer, I believe that the quid pro quo for that is a heavy wealth tax. I do not believe that my constituents or the great majority of people in this country would accept a reduction in these high rates of tax without a quid pro quo.
    Mr. Ian Gow: We have heard a rather typical speech from the deputy leader of the Liberal Party.
    Mr. Pardoe: I am not deputy leader We do not have one.
    Mr. Gow: The hon. Member for Cornwall, North (Mr. Pardoe) is perhaps the loss-leader of the Liberal Party.
    He began by saying that he did not share the anti-egalitarian views of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). He went on to say that he was a warm supporter of the principles behind the amendment. Later he was compelled to admit that he had drafted Amendment No. 24. The argument that he used to justify the principle behind that amendment was that it would not cost the Treasury very much money to exempt from tax half of what a man had in his earnings. He argued a moment ago that it would be politically impossible to have a substantial reduction in earned income tax. As usual the hon. Member is trying to have his argument both ways. He ended up in great confusion when he told us that he was a keen advocate of a massive wealth tax. We shall see how far he can impress his views on the Government and whether we shall have a massive wealth tax in the next Budget
    Mr. Pardoe: I have pushed my views on to the Tory Party. The majority of Members of the Select Committee investigating a wealth tax supported my proposals.
    Mr. Gow: The hon. Member is gravely misleading the House. My hon. Friend the Member for Blaby (Mr. Lawson) and I were members of that Committee.
    Sir John Hall: We already have a wealth tax in the capital gains tax.
    Mr. Gow: We have an even bigger wealth tax in the form of inflation.
    The hon. Member for Cornwall, North referred to a book by Professor Titmuss. It would be better if he read the book written by my right hon. Friend, "The Ascent of Britain". Perhaps a copy could be presented to the spokesman of the Liberal Party.
    One of the strange features of our time is that just before Christmas each year

    1181
    the Chancellor of the Exchequer composes a letter. It is addressed to the Managing Director of the International Monetary Fund. In some ways it is a model letter. My only criticism of the copy which the Chancellor of the Exchequer places in the Library is that we are not let into the secret of the greeting at the beginning and the salutation at the end. That is written in manuscript. Last year it was sent on 15th December. The relevant paragraph is paragraph 12. It highlights precisely the amendment moved by my right hon. Friend.
    Paragraph 12 finishes with a reference to the need to reduce the burden of taxation. It begins with another important Socialist measure. The paragraph states:
    "As a result of … a sale during 1977–78 of British Petroleum shares calculated to yield £500 million, the aim is to hold the PSBR at £8·7 billion in that year."
    The hon. Member for Cornwall, North said that there were only two ingredients in the measures that we are discussing to reduce the burden of direct taxation—namely, what proportion of revenue should be raised by direct taxation and what proportion by indirect taxation. There is another crucial ingredient that the hon. Member left out. What is to be the total level of public expenditure?
    It is upon those elements that these amendments depend. We need to bend down the curve of public expenditure and to bend down the curve of direct taxation. That will mean a substantial increase in indirect taxation. The hon. Member for Cornwall, North did not mention the need to reduce public expenditure. For him, indiscriminate food and housing subsidies are acceptable. We assert that there should be a substantial reduction in public expenditure as well as on taxation on direct income.
    7.15 p.m.
    Paragraph 12 continues:
    "My own belief"—
    that is the belief of the Chancellor—
    "is that the present levels of direct taxation have proved discouraging to effort and efficiency, and if they were to continue unchanged they could threaten the improvement in our economic performance which is an essential objective of the Government's strategy."
    Who would put up the taxes to the level about which the Chancellor of the
    1182
    Exchequer was obliged to write to Dr. Witteveen and say that they had not reached a level at which they were a disincentive? Until the Chancellor was compelled to have these discussions with Dr. Witteveen we did not hear about the disincentive effect of taxation. We were all misled into believing that perhaps the Chancellor of the Exchequer would have the courage of his convictions and do something radical about direct rates of tax.
    There was an opportunity to follow up the famous letter of 15th December in this Finance Bill but the Chancellor has failed to take it. That is why we tabled these amendments. I hope that in the further discussions between the Government and Dr. Witteveen in the autumn the Government will listen closely to what he says and to the advice that he gives on this crucial element of direct taxation.
    The brain drain, the brain flood and lack of motivation are dangers that will come to pass. The argument by the hon. Member for Cornwall, North—that the cost of making these reductions is small—should weigh heavily with the Government. A little more courage and imagination from Ministers would be welcome.
    Mr. Denzil Davies: I shall speak mainly to Amendment No. 33, although it is not much different from the amendment tabled by the hon. Member for Norfolk, South (Mr. MacGregor). The only difference of substance is that the official Opposition's amendment is slightly more modest in cost—to the tune of about £40 million. Nevertheless, the Opposition amendment seeks a further immediate reflation of £435 million into the economy. The right hon. and learned Member for Surrey, East (Sir G. Howe) shakes his head, but he is asking for a further taxation reduction of £435 million.
    In my brief experience of Finance Bill Committees I have discovered that when we debate capital taxes the Opposition manage to find an impecunious disabled lady living somewhere in the country who happens to be the beneficiary of a discretionary trust in the Cayman Islands. The Opposition always argue that if we introduce a particular clause it will cause that lady difficulties. When we debate income tax, the Opposition talk of

    1183
    managers working for the good of the country and say that taxes should be reduced for their benefit.
    That might be the case, but the hon. Member for Wolverhampton, South-West (Mr. Budgen) was more honest. He said that we were concerned with making rich men and keeping men rich. He implied that talk about worthy managers was to cloak the amendments with a certain amount of respectability. [Interruption.] This is my own brief. Having sat here for hours, I am entitled to make my own speech.
    We are not concerned with the tax rates of managers and of no one else, or, indeed, the tax rates of only the worthy surgeon or physician. We are concerned with reducing the tax rates for everyone who pays at the higher rates. There is no amendment seeking to reduce the taxes on managers of multinational companies or managers of ball-bearing companies in the Midlands or whatever other worthy activities in which managers are involved. Indeed, if the Government were to introduce an amendment—even if we were able to frame one—to reduce the higher rates of tax for managers and surgeons and to leave as they are higher rates for solicitors, bankers, stockbrokers, lawyers and other worthy people, we should hear long speeches from Conservative Members about discrimination, danger to the economy, the balance of payments and invisibles and reductions in taxation in general.
    Therefore, I do not think that we should take too seriously the long speeches, particularly that of the right hon. and learned Member for Surrey, East, about the need to reduce taxes for managers. The Bill will reduce taxation for everyone earning these higher levels of income.
    Who are these people who earn more than £20,000 a year? I do not know. No doubt some are managers, but I suspect that the majority are not managers. I have no figures to support that view, but I have a feeling that most, perhaps, are either self-employed—I am not saying that they are not worthy people—or are professional people such as solicitors, accountants and economic advisers, and perhaps some civil servants. Perhaps the majority are not managers. Therefore, we should not make too much
    1184
    of the point that here we are seeking to hand tax back—if that is the right phrase—or to reduce the burden of taxation to the extent of £435 million for these worthy managers.
    I asked the right hon. and learned Member for Surrey, East "Where will you find the money?" He said "We shall raise indirect taxation". Then he specified that he would raise the rate of value added tax, to 10 per cent. presumably, to pay for this £435 million. Therefore, the Opposition are quite prepared to relieve this burden of £435 million of tax on the higher income groups and to do so by ensuring that the British public in general pay the bill through increasing the cost of living—that is the effect of raising the rate of VAT to 10 per cent.—on everyone in order to pay for this £435 million. That was what the right hon. and learned Gentleman said.
    In addition to that, there are other amendments to the Bill and no doubt we shall hear the same story again: "We shall pay for this by raising the rate of VAT." I read in the Daily Mail today an article saying that the Tory Party would now abolish rates and pay for the extra £2,000 million, presumably, again by raising VAT. I do not know what the rate of VAT will ultimately be when the Opposition have finished with it.
    However, the £435 million is to be paid for, as the Opposition would have it, by increasing the cost of living. No doubt the British public will be very interested in that proposition.
    Then we come to another word—"reflation". That was not mentioned at all by Opposition Members. That is curious, especially as the hon. Member for Eastbourne (Mr. Gow) has taken part in the debate. He was very concerned—I understand his concern—that we should not reflate the economy because that creates inflation, yet we have had speech after speech seeking a reflation of £435 million. Last night the hon. Member for Guildford (Mr. Howell) said that the Government have a bottle from which they take a reflationary swig from time to time. However, it seems that the Opposition have the bottle. They are the people who want to reflate—tonight to the tune of £435 million.

    1185
    One wonders about reflation. When it benefits the higher paid it is all right for society, according to the Opposition, but when it benefits the lower and middle income groups there is apparently a danger.
    Sir G. Howe: The hon. Gentleman must understand that the purpose of the debate is to press as strongly as we can on the present Government the folly that they are committing in maintaining this level of taxation on these kinds of taxpayers. This is a serious amendment on which we shall be voting to underline the importance of the message. It is not suggesting a method of balancing the management of the economy. The House of Commons is the place in which we argue cases of this nature. That is the right way of doing it. But a change of this kind would have to be made in the context of the reconstruction of the Budget. We shall be voting to drive upon the Minister the importance of the principles of the amendment.
    Mr. Davies: It seems that the amendment has been moved to raise the issue, which the right hon. and learned Gentleman considers to be important, but I think that when we vote we should do so seriously. It is a specific vote and not about an argument or a principle. It is about reducing taxation by £435 million for people who earn £5,000 and more a year. The right hon. and learned Gentleman cannot get out of it in that way. He is presumably saying "We shall vote, but we hope we shall lose". He is concerned not with winning the vote but with making a point. That is rather discourteous to the procedures of the House of Commons.
    Once again, with reflation to the extent of £435 million, it is said that inflation here is a good thing and that there is nothing wrong with it. The Opposition say "We want this kind of reflation, even though it makes inflation worse and benefits one particular group". [Interruption.] The right hon. and learned Gentleman should not mutter. He has made his point. He is on a bad point.
    Finally, we have, of course, accepted that the marginal rates of tax—we are talking about a marginal rate of 83 per cent.; it is not an effective rate—on international comparisons, looking at
    1186
    what managers are paid in other countries by multinational companies, mean that managers in this country are probably worse off in terms of after-tax income than managers in many other countries. We accept that we have to compete in this market, whether or not we like it, and we have to try to get to a situation in which this disparity is to some extent evened out.
    That is what the Government have tried to do by the Budget. We have had a previous debate on the matter. The Sunday Times Business News—a very weighty and influential newspaper—was quoted at me. Apparently, The Sunday Times thought that the £270 million that we are already giving—the increase in the threshold and the other rates—meant that executives were laughing in the boardrooms, or the washrooms, or wherever The Sunday Times thought executives were laughing.
    If we added another £435 million—that is what the amendment is about—to that £270 million, we should be going much too far to benefit one group when there are so many other groups in our society who have suffered perhaps more than some of those at the top end of the income scale. It would be completely indefensible, especially considering the need to secure a third year of incomes policy. It would be wrong to do it. We should be going much too far.
    The Government have made a start on the problem. I do not pretend that we have gone as far as we can. There are problems. I think that we should go further and reduce the top rate of income tax. However, this year we have gone as far as we can by reducing income tax by £2¼ billion altogether.
    The right hon. and learned Member for Surrey, East says that the Opposition will be voting but that they are not serious about it. I ask him to withdraw the amendment, not only because it is intrinsically bad but because the Opposition, in pressing it to a vote, are not keen on winning it. They are playing games with our procedures. I suggest that if they have any responsibility at all, they should withdraw the amendment. They have made their points and expressed their arguments, but now they are afraid to withdraw the amendment. I suggest to the Committee that if the Opposition do

    1187
    not withdraw the amendment it should be thrown out.
    Mr. MacGregor: I think that we should prefer to make our point on Amendment No. 33 and not on Amendment No. 18. Therefore, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Amendment proposed: No. 33, in page 11, line 14, leave out '£6,000' and insert '£8,000'.—[Sir G. Howe.]
    Question put, That the amendment be made:—
    The Committee divided: Ayes 208, Noes 235.

    Division No. 129]

    AYES

    [7.29 p.m.

    Adley, Robert

    Gower, Sir Raymond (Barry)

    Morrison, Charles (Devizes)

    Alison, Michael

    Gray, Hamish

    Morrison, Hon Peter (Chester)

    Amery, Rt Hon Julian

    Griffiths, Eldon

    Mudd, David

    Arnold, Tom

    Grist, Ian

    Neave, Airey

    Atkins, Rt Hon H. (Spelthorne)

    Gryils, Michael

    Nelson, Anthony

    Awdry, Daniel

    Hall, Sir John

    Neubert, Michael

    Bain, Mrs Margaret

    Hamilton, Michael (Salisbury)

    Newton, Tony

    Baker, Kenneth

    Hampson, Dr Keith

    Onslow, Cranley

    Bell, Ronald

    Hannam, John

    Oppenheim, Mrs Sally

    Benyon, W.

    Harrison, Col Sir Harwood (Eye)

    Page, John (Harrow West)

    Berry, Hon Anthony

    Harvie Anderson, Rt Hon Miss

    Page, Rt Hon R. Graham (Crosby)

    Biffen, John

    Havers, Sir Michael

    Page, Richard (Workington)

    Biggs-Davison, John

    Hayhoe, Barney

    Parkinson, Cecil

    Blaker, Peter

    Henderson, Douglas

    Pattie, Geoffrey

    Body, Richard

    Higgins, Terence L.

    Percival, Ian

    Bottomley, Peter

    Hodgson, Robin

    Peyton, Rt Hon John

    Bowden, A. (Brighton, Kemptown)

    Holland, Philip

    Price, David (Eastleigh)

    Boyson, Dr Rhodes (Brent)

    Hordern, Peter

    Prior, Rt Hon James

    Braine, Sir Bernard

    Howe, Rt Hon Sir Geoffrey

    Pym, Rt Hon Francis

    Brittan, Leon

    Howell, David (Guildford)

    Rathbone, Tim

    Brocklebank-Fowler, C.

    Hunt, John (Bromley)

    Rawlinson, Rt Hon Sir Peter

    Brooke, Peter

    Hurd, Douglas

    Rees, Peter (Dover & Deal)

    Brotherton, Michael

    Hutchison, Michael Clark

    Rees-Davies, W. R.

    Brown, Sir Edward (Bath)

    James, David

    Renton, Rt Hon Sir D. (Hunts)

    Bryan, Sir Paul

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

    Renton, Tim (Mid-Sussex)

    Buchanan-Smith, Alick

    Johnson Smith, G. (E Grinstead)

    Rhodes James, R.

    Buck, Antony

    Jones, Arthur (Daventry)

    Ridley, Hon Nicholas

    Budgen, Nick

    Jopling, Michael

    Rlfkind, Malcolm

    Bulmer, Esmond

    Kaberry, Sir Donald

    Roberts, Michael (Cardiff NW)

    Burden, F. A.

    King, Evelyn (South Dorset)

    Roberts, Wyn (Conway)

    Carlisle, Mark

    King, Tom (Bridgwater)

    Rossi, Hugh (Hornsey)

    Chalker, Mrs Lynda

    Knight, Mrs Jill

    Rost, Peter (SE Derbyshire)

    Churchill, W. S.

    Knox, David

    St. John-Stevas, Norman

    Clark, Alan (Plymouth, Sutton)

    Latham, Michael (Melton)

    Scott, Nicholas

    Clark, William (Croydon S)

    Lawrence, Ivan

    Shaw, Giles (Pudsey)

    Clarke, Kenneth (Rushcliffe)

    Lawson, Nigel

    Shelton, William (Streatham)

    Clegg, Walter

    Lester, Jim (Beeston)

    Shepherd, Colin

    Cockcroft, John

    Lewis, Kenneth (Rutland)

    Shersby, Michael

    Cope, John

    Lloyd, Ian

    Silvester, Fred

    Cormack, Patrick

    Loveridge, John

    Sims, Roger

    Costain, A. P.

    McAdden, Sir Stephen

    Sinclair, Sir George

    Crawlord, Douglas

    MacCormick, lain

    Skeet, T.H.H.

    Crowder, F. P.

    McCrindle, Robert

    Smith, Timothy John (Ashfield)

    Dodsworth, Geoffrey

    Macfarlane, Nell

    Speed, Keith

    Douglas-Hamilton, Lord James

    MacGregor, John

    Spence, John

    Drayson, Burnaby

    Mackay, Andrew James

    Spicer, Michael (S Worcester)

    Durant, Tony

    Macmillan, Rt Hon W. (Farnham)

    Sproat, Iain

    Eden, Rt Hon Sir John

    McNair-Wilson, M. (Newbury)

    Stainton, Keith

    Elliott, Sir William

    McNair-Wilson, P. (New Forest)

    Stanbrook, Ivor

    Emery, peter

    Madel, David

    Steen, Anthony (Wavertree)

    Evans, Gwynfor (Carmarthen)

    Marshall, Michael (Arundel)

    Stewart, Rt Hon Donald

    Ewing, Mrs Winifred (Moray)

    Mates, Michael

    Stewart, Ian (Hitchin)

    Eyre, Reginald

    Mather, Carol

    Stokes, John

    Fairbairn, Nicholas

    Maude, Angus

    Stradling Thomas, J.

    Fairgrieve, Russell

    Maudling, Rt Hon Reginald

    Tapsell, Peter

    Fell, Anthony

    Mawby, Ray

    Taylor, Teddy (Cathcart)

    Fisher, Sir Nigel

    Mavhew, Patrick

    Tebbit, Norman

    Fletcher, Alex (Edinburgh N)

    Meyer, Sir Anthony

    Temple-Morris, Peter

    Forman, Nigel

    Miller, Hal (Bromsgrove)

    Thomas, Rt Hon P. (Hendon S)

    Fox, Marcus

    Mills, Peter

    Thompson, George

    Gardiner, George (Reigate)

    Miscampbell, Norman

    Townsend, Cyril D.

    Gardner, Edward (S Fylde)

    Moate, Roger

    Viggers, Peter

    Gilmour, Sir John (East Fife)

    Monro, Hector

    Wakeham, John

    Glyn, Dr Alan

    Montgomery, Fergus

    Walder, David (Clitheroe)

    Godber, Rt Hon Joseph

    Moore, John (Croydon C)

    Walker, Rt Hon P. (Worcester)

    Goodlad, Alastair

    Morgan, Geraint

    Weatherill, Bernard

    Gorst, John

    Morgan-Giles, Rear-Admiral

    Wells, John

    Gow, Ian (Eastbourne)

    Morris, Michael (Northampton S)

    Welsh, Andrew

    Wigley, Dafydd

    Wlnterton, Nicholas

    TELLERS FOR THE AYES:

    Wilson, Gordon (Dundee E)

    Younger, Hon George

    Mr. Spencer Le Merchant and Sir George Young

    NOES

    Abse, Leo

    Hamilton, James (Bothwell)

    Orme, Rt Hon Stanley

    Allaun, Frank

    Harrison, Walter (Wakefield)

    Ovenden, John

    Archer, Peter

    Hart, Rt Hon Judith

    Padley, Walter

    Armstrong, Ernest

    Hatton, Frank

    Palmer, Arthur

    Ashley, Jack

    Hayman, Mrs Helene

    Pardoe, John

    Ashton, Joe

    Heffer, Eric S.

    Park, George

    Atkins, Ronald (Preston N)

    Hooley, Frank

    Pavitt, Laurie

    Atkinson, Norman

    Hooson, Emlyn

    Pendry, Tom

    Bates, Alf

    Horam, John

    Penhaligon, David

    Bean, R. E.

    Howell, Rt Hon Denis (B'ham, Sm H)

    Price, William (Rugby)

    Beith, A. J.

    Howells, Geraint (Cardigan)

    Radice, Giles

    Bennett, Andrew (Stockport N)

    Hoyle, Doug (Nelson)

    Rees, Rt Hon Merlyn (Leeds S)

    Bidwell, Sydney

    Huckfield, Les

    Richardson, Miss Jo

    Bishop, E. S.

    Hughes, Robert (Aberdeen N)

    Roberts, Albert (Normanton)

    Blenkinsop, Arthur

    Hughes, Roy (Newport)

    Roberts, Gwilym (Cannock)

    Boardman, H.

    Hunter, Adam

    Robinson, Geoffrey

    Booth, Rt Hon Albert

    Irvine, Rt Hon Sir A. (Edge Hill)

    Roderick, Caerwyn

    Boothroyd, Miss Betty

    Irving, Rt Hon S. (Dartford)

    Rodgers, George (Chorley)

    Brown, Hugh D. (Provan)

    Jackson, Colin (Brighouse)

    Rooker, J. W.

    Buchan, Norman

    Jackson, Miss Margaret (Lincoln)

    Rose, Paul B.

    Buchanan, Richard

    Jay, Rt Hon Douglas

    Ross, Stephen (Isle of Wight)

    Callaghan, Jim (Middleton & P)

    Jeger, Mrs Lena

    Ross, Rt Hon W. (Kilmarnock)

    Campbell, Ian

    Jenkins, Hugh (Putney)

    Rowlands, Ted

    Canavan Dennis

    John, Brynmor

    Ryman, John

    Cant, R. B.

    Johnson, James (Hull West)

    Sedgemore, Brian

    Carmichael, Neil

    Johnson, Walter (Derby S)

    Selby, Harry

    Carter-Jones, Lewis

    Johnston, Russell (Inverness)

    Sheldon, Rt Hon Robert

    Cartwright, John

    Jones, Alec (Rhondda)

    Shore, Rt Hon Peter

    Castle, Rt Hon Barbara

    Jones, Barry (East Flint)

    Short, Mrs Renée (Wolv NE)

    Clemitson, Ivor

    Kaufman, Gerald

    Silkin, Rt Hon John (Deptford)

    Cocks, Rt Hon Michael

    Kelley, Richard

    Silkin, Rt Hon S. C. (Dulwich)

    Cohen, Stanley

    Kerr, Russell

    Silverman, Julius

    Coleman, Donald

    Kilroy-Silk, Robert

    Skinner, Dennis

    Colquhoun, Ms Maureen

    Kinnock, Neil

    Small, William

    Conlan, Bernard

    Lambie, David

    Smith, Cyril (Rochdale)

    Cook, Robin F. (Edin C)

    Lamborn, Harry

    Smith, John (N Lanarkshire)

    Corbett, Robin

    Lamond, James

    Spearing, Nigel

    Cowans, Harry

    Latham, Arthur (Paddington)

    Spriggs, Leslie

    Cox, Thomas (Tooting)

    Lee, John

    Stallard, A. W.

    Crawshaw, Richard

    Lestor, Miss Joan (Eton and Slough)

    Stewart, Rt Hon M. (Fulham)

    Crowther, Stan (Rotherham)

    Lever, Rt Hon Harold

    Stoddart, David

    Cryer, Bob

    Lewis, Ron (Carlisle)

    Stott, Roger

    Cunningham, G. (Islington S)

    Loyden, Eddie

    Strang, Gavin

    Davidson, Arthur

    Luard, Evan

    Summerskill, Hon Dr Shirley

    Davies, Bryan (Enfield N)

    Lyon, Alexander (York)

    Taylor, Mrs Ann (Bolton W)

    Davies, Denzil (Llanelli)

    Lyons, Edward (Bradford W)

    Thomas, Jeffrey (Abertillery)

    Davis, Clinton (Hackney C)

    Mabon, Rt Hon Dr J. Dickson

    Thomas, Mike (Newcastle E)

    Deakins, Eric

    McCartncy, Hugh

    Thomas, Ron (Bristol NW)

    Dean, Joseph (Leeds West)

    McDonald, Dr Oonagh

    Thorne, Stan (Preston South)

    Dell, Rt Hon Edmund

    McElhone, Frank

    Thorpe, Rt Hon Jeremy (N Devon)

    Dempsey, James

    MacFarquhar, Roderick

    Tierney, Sydney

    Doig, Peter

    MacKenzie, Gregor

    Tinn, James

    Douglas-Mann, Bruce

    Mackintosh, John P.

    Torney, Tom

    Dunn, James A.

    McMillan, Tom (Glasgow C)

    Tugendhat, Christopher

    Dunnett, Jack

    McNamara, Kevin

    Varley, Rt Hon Eric G.

    Eadie, Alex

    Madden, Max

    Wainwright, Edwin (Dearne V)

    Edge, Geoff

    Mahon, Simon

    Walker, Terry (Kingswood)

    Ellis, John (Brigg & Scun)

    Mallalieu, J.P.W.

    Ward, Michael

    English, Michael

    Marks, Kenneth

    Watkins, David

    Evans, Fred (Caerphilly)

    Marshall, Jim (Leicester S)

    Weitzman, David

    Evans, Ioan (Aberdare)

    Maynard, Miss Joan

    White, Frank R. (Bury)

    Ewing, Harry (Stirling)

    Meacher, Michael

    White, James (Pollok)

    Faulds, Andrew

    Mendelson, John

    Whitlock, William

    Flannery, Martin

    Mikardo, Ian

    Willey, Rt Hon Frederick

    Fletcher, Ted (Darlington)

    Millan, Rt Hon Bruce

    Williams, Rt Hon Alan (Swansea W)

    Foot, Rt Hon Michael

    Miller, Dr M. S. (E Kilbride)

    Williams, Rt Hon Shirley (Hertford)

    Ford, Ben

    Miller, Mrs Millie (Ilford N)

    Williams, Sir Thomas (Warrington)

    Fowler, Gerald (The Wrakin)

    Mitchell, Austin Vernon (Grimsby)

    Wilson, Alexander (Hamilton)

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

    Molloy, William

    Wilson, Rt Hon Sir Harold (Huyton)

    Freeson, Reginald

    Moonman, Eric

    Wilson, William (Coventry SE)

    Garrett, John (Norwich S)

    Morris, Alfred (Wythenshawe)

    Wise, Mrs Audrey

    George, Bruce

    Morris, Charles R. (Openshaw)

    Woodall, Alec

    Gilbert, Dr John

    Morris, Rt Hon J. (Aberavon)

    Woof, Robert

    Golding, John

    Moyle, Roland

    Wrigglesworth, Ian

    Gould, Bryan

    Murray, Rt Hon Ronald King

    Young, David (Bolton E)

    Gourlay, Harry

    Newens, Stanley

    Graham, Ted

    Noble, Mike

    TELLERS FOR THE NOES:

    Grant, George (Morpeth)

    Oakes, Gordon

    Mr. Peter Snape and

    Grant, John (Islington C)

    Ogden, Eric

    Mr. Joseph Harper.

    Grocott, Bruce

    O'Halloran, Michael

    Question accordingly negatived.
    Mr. Hordern: I beg to move Amendment No. 19, in page 11, leave out lines 18 to 25 and insert
    '£4,000 at the additional rate of 15 per cent.'.
    This amendment, which seeks to raise the threshold at which the investment income surcharge becomes payable, is a modest proposal. I hope that I shall not be told that, because it would cost £200 million, or whatever the figure is, the amendment is disgraceful. It would simply restore the position of someone who had an investment income up to the surcharge limit in 1973.
    Although it can be argued strongly that the surcharge after the £4,000 limit which we suggest would be a penal rate at 15 per cent., it would do no more than restore the position to what it was when the Conservatives were last in power. All that has happened is that inflation has moved the effective value of the surcharge from £2,000 in 1973 to £4,000 today.
    I believe that we should be able to expect whole-hearted Liberal support on the amendment. I am glad that the hon. Member for Cornwall, North (Mr. Pardoe) is with us, since I want to remind him of something he said in the equivalent debate last year. I do not know whether he was deputy leader of his party then, but at least as his party's economic spokesman he said:
    "I do not wish to amplify the arguments which have already been deployed, but rather to recap on a previous period. During that Utopian period when democracy was restored to our parliamentary institutions, when the Liberal Party held the balance of power—the quicker it happens again the better—what good sense was produced. We managed to defeat the Treasury Bench and to increase the threshold for investment income to £2,000. It is a pity we cannot do that again tonight".—[Official Report, 11th May 1977; Vol. 911, c. 383.]
    But we can do that again tonight. If one revalorised what we did then with the help of the Liberal Party, one would get exactly what is proposed in the amendment. I look forward to the hon. Gentleman's support. Otherwise it would be the rankest inconsistency, and I know that he would not wish anyone to accuse him of that.
    We should remember that the basic rate in 1973 was not 35 per cent. but 30 per cent. We are, therefore, talking in a
    1192
    different order of magnitude about the surcharge on the basic rate.
    If, as was argued strongly at the time, things were very difficult for retired people then, they are so much more difficult for retired people living on investment income today. For example, let us suppose that by some miraculous advice a retired married couple had been able to increase their investment income from £2,000 to £4,000—which would allow only for the increase in the cost of living over the period. I know of no such wizard, but let us suppose that that had happened. As a result, they would he paying the top marginal rate of 50 per cent. on the marginal level of investment income over and above the £2,000. That in any case would be a penal rate of tax, even supposing that the married couple had managed to achieve an extraordinary increase in investment income.
    7.45 p.m.
    However, far from there being any increase in investment income, it is more likely that those who are retired and depend on investment income have their investments in fixed-interest securities and have received no real increase in investment income. They have had to bear the extraordinary increase in the cost of living over that time, the increase in rates and other increases of every kind. These are the people who have suffered most from this restraint.
    The Government have recognised this situation in some degree by allowing these people to have index-linked bonds up to a stake of £500. However, if the Government decided to increase the amount to, say £1,000, these people would stand a risk before long of paying surtax and the investment income surcharge simply through having bonds which managed to keep their real value. That is the extraordinary position that we have reached under this Government.
    Since, I understand, about 42 per cent. of investment income surcharge payers are retired, there is a strong case for the total exemption of pensioners. I understand from the reply to a Question that I put down a few months ago that the cost would be about £130 million. If the Minister of State says that we cannot afford that sum, let him tell us what it would cost to exempt all pensioners with investment incomes of less than

    1193
    £4,000. I do not know what that cost would be, but at any rate the case for such an exemption must be very strong.
    This case is not simply one for comparison with other people in society: it is a very strong case in equity. These people cannot extort larger wage increases. They have to depend largely on fixed-interest security and they receive no increases in the value of their investment income.
    It is also useful to recall the position of some of those to whom the Minister of State said earlier that the Government are particularly favourable—the small managers. It is not out of this world to suggest that a middle manager would be able to buy his own house and to set up a life policy, leaving both the house and the matured policy to his widow when he died. In such circumstances it is likely that the widow would sell the house as it is probable that it would be too large. It is likely that she would find herself with a sum of £20,000 after buying herself a small bungalow or flat, and perhaps over £20,000 from the proceeds of the life policy.
    Again, there is the extraordinary distinction between the person who receives a pension from an institution or firm and the person who has saved throughout his life and receives investment income. That is a distinction that is difficult to justify. However, the sums that I have mentioned represent a perfectly ordinary expectation for a middle manager to be able to secure for his widow. One would have thought that it was an admirable thing to do.
    That sum when invested would secure an income which would be liable now—especially if the widow were over 60 years of age—to the surcharge on the investment income. That would lead to a marginal rate of 50 per cent. I say that that is an inhuman rate of tax for a person in the situation that I have outlined. We are not talking about very rich people. We are talking about the ordinary person's expectation. We are talking about a sum that a widow should be able to receive as a result of the hard work of her husband and through the sale of a house and a life policy.
    Mr. Denzil Davies: I am sure that the hon. Gentleman wishes to make it
    1194
    clear that the surcharge would not apply to the first £1,500 of income. If the widow is between 60 and 65, the surcharge starts to apply only after she has received £1,500.
    Mr. Hordern: I am aware of that. However, even now an income of about £1,500 can easily be secured through investment in long-dated Government bonds. It is still possible to secure 13 per cent. or 14 per cent. without any great difficulty. In those circumstances the marginal rate would be 50 per cent. That is an extortionate rate and one that cannot be found in any other civilised country.
    Let us take the example of someone who has been made an award for an industrial injury. Compensation is given in a lump sum. Alternatively, compensation might be awarded to someone who has been wounded, for example, in action in Northern Ireland. The investment income from such an award is liable to the surcharge. I do not think that that is defensible, either.
    I had a case of a constituent who was run over and who suffered severe injuries. The constituent was awarded a sum that is not substantial. He is able to work but finds great difficulty in obtaining employment. I understand that he has been seeking employment for more than six months. As the Committee knows, after that period he is no longer entitled to any unemployment benefit. He has been told that to qualify for social security benefit he must relinquish the award that he obtained from the industrial tribunal.
    That is a disgraceful state of affairs. As it is not especially relevant to the amendment I hasten to pass on. I mentioned the matter in passing because of the disgraceful treatment of those who receive awards, whether for industrial injuries or personal injury, and the treatment of investment income from such awards. It is equally disgraceful whether it is an award of the sort to which I have referred or income originating from capital that has been invested.
    It is well known that about 37 per cent. of all farm land in England and Wales is farmed by tenant farmers. The position has been well made out by the farming community that it receives a low return on its investment and takes a considerable interest in the way that

    1195
    the land is farmed. It is recognised that management expenses and expenses incurred in running the land can be offset against income before tax. The principle is already allowed. Surely there is a strong case for exempting tenanted land from the surcharge on investment income and making no distinction between investment and earned income.
    If we consider the level of the surcharge on investment income, it is clear that we live in a different environment from any other country. In most countries there is no distinction between earned income and investment income. Perhaps even more important, no other country starts tax from such low thresholds and at such high rates.
    I thought it would be interesting to get some figures. I am told that for a 40 per cent. rate to apply in France—in France I do not think that there is any distinction between earned and investment income—£10,500 of taxable earnings would have to be received. In Germany there would have to be £8,000 of taxable earnings for a 30 per cent. rate. In the United States there would have to be earnings of £31,000 for a 30 per cent. rate. In the United Kingdom a retired couple pay 50 per cent. marginal tax on taxable investment income of £2,500. I ask the Committee to compare those extraordinary figures.
    If we consider the expediency of those who have saved hard for their old age and compare their position with the ordinary expectation of any such couple in any other civilised country, whether it is a country in Western Europe or the United States, the comparison is appalling. When the Minister of State says, as he does so often, that we have to think of the position of the less fortunate members of our society—we must think of them and, of course, that is an acceptable argument—we must also remember the extraordinary disparity of treatment of those here who have saved hard and worked hard all their lives and the treatment of such people in any other country.
    I believe that our system represents a gross injustice for retired people. If this is how we treat retired people, it is difficult to justify calling ourselves a civilised country, as other countries can, bearing in mind the way in which they
    1196
    treat those who have worked hard and saved hard all their lives.
    The truth is that the Labour Party has never cared very much for savers, whether they are small investors or large. This is not merely a matter of fair treatment for those who have saved hard and worked hard all their lives. There is a substantial economic factor that must be considered. Under the present arrangements there is no incentive to save. There is no incentive for any private person to make any disposition of his earnings after tax, such as they must be with tax as it is, in order to save. That is partly because the return on investment is so small, especially with dividend restraint and the present level of inflation. Any return on investment must appear to be very poor when compared with the present level of inflation.
    The effect of the present position has been seen clearly in the past five years. The private investor has been getting out of his savings. That has been happening on an increasing scale over the past five years. The fact is that 10 years ago private investors were responsible for about 70 per cent. of the turnover in the equity market on the Stock Exchange. At that time the institutions were responsible for about 30 per cent. of that turnover. Three years ago private investors were responsible for 44 per cent. of the turnover while institutional investors were responsible for 56 per cent.
    The latest figures that I have received from the Stock Exchange indicate that the private sector has declined to 32 per cent. of all the turnover in equities while the institutions have increased their turnover to 68 per cent. It cannot be very long before private investors cease to be a force of any sort in the equity market.
    It might be asked whether it matters if the institutions are to dominate the stock markets, as they do at present. Indeed, they are increasingly bound to do so. For a start, it makes a nonsense of dividend restraint. As a high proportion of investment is carried out by institutional investors, most dividend restraint is being applied to the investments of pension funds and insurance companies. Most of their members work in factories and are to be found on the shop floor. Those most affected by the change and turn of events are those whom the Labour

    1197
    Party fondly imagines to be its supporters. I believe that the effect of dividend restraint is wholly harmful to the longterm prospects of those in pension funds. This is becoming increasingly known, not least by the trade unions themselves.
    8 p.m.
    It is also likely to have another effect—that their investment is becoming increasingly tied to the public sector borrowing requirement. Referring to last year, the Financial Statement states:
    "By late June and early July, a prospective conflict was emerging between public and private borrowing."
    It is easy to forget, less than a year later, what the position was then. There was strong competition for funds, and the Government were at that time totally unable to raise funds on the Stock Exchange through the sale of gilt-edged securities.
    Now the position has changed. The Government do not find it so difficult to raise funds by the sale of gilt-edged securities. But the reason is that private investors and institutional funds have long since stopped investing in equities because the return on Government securities was so large. So there is a direct link between the size of the public sector borrowing requirement and the institutional direction of investment.
    If the public sector borrowing requirement is large, and the Government are dependent on the massive sale of gilt-edged securities to the non-bank public, that can only lead to the result that institutions must invest in gilt-edged securities. The effect is that the outlook for the market in equities becomes depressed and the ability of companies to raise money on the Stock Exchange is very adversely affected. Equities are doing so well because the equity market has been flat on its back for a long time and only very recently are the institutions turning their investing in Government securities towards equities. The market has gone so far up because of the very small presence of private investors. It is almost wholly institutional investment, and is likely to become more so.
    The position is clear. We do not need the Wilson Committee to tell us about it. The larger the public sector borrowing
    1198
    requirement, the more the institutions will invest in gilt-edged securities and the less money there will be available for industry. It is a clear course of events. I hope that it will be put plainly to the Wilson Committee.
    If ever there was a useless line of inquiry, it is that of the Wilson Committee. Talking about a Royal Commission, the right hon. Member for Huyton (Sir H. Wilson) said that it would take minutes and waste years. I do not suppose that he will waste years, but he will take minutes, and what is to be found out about the situation is already well known.
    The surcharge on investment income has had a considerable effect on the level of private savings in industry generally. All those who are in the position of depending on investment income—and a large proportion of them are elderly people—have tended to invest in safe, gilt-edged securities. They have seen over the years the value of their investments decline—many of them by half, let alone what it is in real terms. These securities are still depressed. The least we can do is try to restore some kind of increase in earnings and some reduction of taxation of those who might rightly be called the most hard-pressed members of our society.
    Sir John Hall: I shall be brief, if only because I have spoken on this subject already on various occasions, particularly in the Finance Bill Committee last year. Since then, and with this Bill, we have had a modest but inadequate improvement of the situation.
    I support everything said by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). He is right to say that the Labour Party dislikes savers. There seems to be in that party a deep, almost subconscious, dislike of investment income. There is the idea that, somehow or other those with investment income, however small, are wealthy people and can be clobbered without particular regard to the effect upon them as individuals.
    I shall confine myself to one example, since many others have been given, of the damaging impact of this tax. Such cases must be common throughout the country. The man in Question retired

    1199
    with an endowment policy that he had accumulated in many years' service to the company of which he was a longstanding employee. I drew attention on Second Reading to the savage contrast between the way in which public service pensioners with indexed pensions are treated and the way in which those retiring on endowment policies or company pension schemes with invested savings are treated.
    This gentleman was able to commute a considerable amount of his pension. Quite naturally and rightly, because the pension element is fixed, he commuted a large part in the hope that he would be able to invest to offset inflation. But he finds that his investment is not bringing in as much as he had hoped, because of dividend restraint. The increase in dividends has fallen far behind the increase in the cost of living in recent years. It has been impossibe to keep up with inflation by investing in equities in the hope that one's income will increase appropriately.
    He invested in equities and various other forms of investment, but then found that his total investment income brought him within the 10 per cent. surcharge. Thus, in addition to his normal rate of tax, he pays the surcharge of 10 per cent. Indeed, he goes on to 15 per cent.
    We should contrast his situation with that of the retired public servant. This man has for many years served a company well. He gets his pension at the end of it, but transmutes part of it into capital, which now bears the burden of the surcharge. The public servant retires on the same sort of pension arrangement, but with an indexed pension increased automatically year by year to take account of increases in the cost of living.
    What is the justification for treating the income of a man who retired in the same circumstances, who has built up a pension on the same length of service but to a company, differently from the income of those, whether public servants or not, who escape this surcharge altogether? Had this gentleman retained his whole pension without commuting part, he would have escaped the surcharge on the total pension. But because he tried to cover himself against inflation, he is penalised.
    1200
    That is just one example. There must be hundreds of other such examples of people on modest incomes, built up over a lifetime, on which they had hoped they would be able to have a reasonable standard of living. What is the point of treating them as if they were on large incomes of £30,000 or £40,000 a year? There is no justice in it. I shall be interested to hear the Minister of State trying to justify this type of taxation on people unfortunate enough to have small incomes derived from savings income.
    Mr. Peter Rees: I am moved to intervene, although not so much by the merits of the amendment, which is modest, perhaps over modest. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) moved it in the eloquent and persuasive manner that one expects of him since he speaks with such authority. I intervene more to encourage the Minister to display perhaps some ministerial valour by resisting the outpourings of antediluvian envy of his hon. Friends, particularly the hon. Member for Coventry, South-West (Mrs. Wise), whose absence from the Chamber is marked by a mohair—or perhaps it is a cashmere—pullover draped on the Back Benches. We may discover that the Chancellor of the Exchequer wants not 98 per cent. but only 95 per cent. of the higher levels of investment income.
    I believe that it is dangerous to distinguish on moral, or maybe political, grounds between various categories of income. If we venture into that area we shall be compelled to base judgments on the relative merits of our various occupations, and how will the Minister distinguish between the income earned by nurses, policemen—I take these categories at random—bookmakers, Members of Parliament, or members of the Prime Minister's private office? Are they to be awarded a differing moral scale and be subject to tax at differing rates?
    I am sure that the Minister of State, if not his hon. Friends below the Gangway, will soon recognise the political and practical difficulties of such a course. In any event, the distinction between earned and unearned income is extremely capricious. Why should a landowner—I take a particularly emotive category in the absence from the Chamber of the Tribune Group—be subject to the investment income

    1201
    surcharge on his rental income when the Committee knows that the management of property, whether agricultural or urban, is particularly complex in this day and age? Why should he be subject to the surcharge when, if he chooses to employ an estate agent, that estate agent would not be subject to investment income surcharge on the fees that he received?
    Or let us take the case of a retired farmer. It may be in the experience of the Committee that although farmers' incomes are somewhat low, they depend on the capital appreciation of their property. When the farmer comes to retire, he sells that property and invests. He is left with what is laughingly described as investment income, which in fact is the fruits of a particularly arduous career. Why should farmers be subject to the surcharge of 15 per cent. while those in other occupations are treated as though they received earned income?
    My hon. Friend the Member for Wycombe (Sir J. Hall) aptly told us of the person who chooses to commute his retirement annuity and invest it, and perhaps that of his wife. Why should he be treated in any different guise from a person who receives a Civil Service annuity? Distinctions, at the end of the day, are arbitrary and capricious. As my hon. Friend the Member for Horsham and Crawley pointed out, 42 per cent. of the investment income surcharge is paid by taxpayers over the age of 65, which shows that we are dealing in most cases with savings income and not a windfall of the kind apparently so offensive to those hon. Members sitting, or rather absent from, below the Gangway.
    I hope the Committee will forgive me if I remind it of the historic basis for the distinction between earned and investment income. The Minister of State is smiling. No doubt he has received the usual meticulous brief from Somerset House. But I would remind the Committee that initially there was no distinction of earned income relief, which was introduced some time before the First World War as a recognition of the deterioration of hand, eye and brain. It was a capital allowance for human capacity, as it were, and a recognition of the impermanence of employment.
    But the converse is frankly not true. It was never designed as a penalty for thrift
    1202
    or enterprise as it has now become under the singularly maladroit stewardship of the present Chancellor of the Exchequer.
    In case hon. Members think that capital does not bear any fiscal burden, I would remind the Committee that capital bears stamp duty at 2 per cent. and stamp duty was originally introduced as a kind of capital levy. There is capital gains tax, which is now no more than a capital levy, bearing in mind the ravages of inflation. Finally, we have capital transfer tax at rates that are quite unimaginable in our competing countries of the Common Market.
    8.15 p.m.
    There has been a great deal of distasteful talk about an investment strike by means of owners of capital. For myself, I find this a rather distasteful metaphor. When one considers the commercial hazards to which investment is subjected and the hazards of the Socialist Government, which make it subject to capital gains tax at rates between 95 per cent. and 98 per cent., can we wonder why there is a certain reticence in this country on the part of the investor?
    The amendment goes a very small way to remedying this injustice. I hope that the Minister of State will turn his back on his absent colleagues below the Gangway and rise to the challenge. I am sure that the understanding and sympathy, which I know have made him a byword in Somerset House, will induce him on this occasion to accept what is perhaps an over-modest amendment.
    Mr. Pardoe: I find myself very much in agreement with many of the remarks that have been made in this debate. I found the arguments used by the hon. Member for Horsham and Crawley (Mr. Hordern) familiar, because they are arguments that I have used on more than one occasion and shall do so again.
    The hon. Gentleman quoted some remarks about the beneficial effect of the Liberals holding the balance of power in 1974, when we were able to raise the investment income surcharge threshold quite considerably. I would say that some of the effects of the Liberals holding the balance of power are already apparent in this Finance Bill debate, although the hon. Gentleman's right hon. and hon. Friends will not have it that

    1203
    way. We may not be successful on investment income surcharge, but we have petrol and tomorrow we shall be debating VAT, and there are certain concessions on that.
    Mr. Peter Rees Mr. Peter Rees rose—
    Mr. Pardoe: I shall answer the hon. and learned Gentleman without his intervening. The fact is that the Government have tabled an amendment and he will have seen that already. He knows that the Government propose to raise the VAT threshold to £7,500, not as much as he or I would wish, but nevertheless a step in the right direction, as I am sure the hon. and learned Gentleman will admit. Petrol and VAT are two subjects on which we have been successful, and one has to have moderation in all things.
    Mr. Hordern: This argument cannot be skated over like that. What the hon. Gentleman said was:
    "We managed to defeat the Treasury Bench and to increase the threshold for investment income to £2,000. It is a pity we cannot do that again tonight."—[Official Report, 11th May 1977; Vol. 911, c. 383.]
    He was recalling the circumstances of what happened in 1974.
    But it is not just a question of what the hon. Gentleman said. It is a question of what he actually did. He and his colleagues joined us in increasing the investment income surcharge threshold in that particular year. If he does not vote with us tonight, he will be inconsistent not only with his words but with his actions.
    Mr. Pardoe: On that occasion it was not a question of my joining the Conservatives. In fact, it was the Conservatives who voted for my amendment. Let us get it the right way round.
    I am not trying to shirk the responsibility for that glorious deed. What I am saying is that the hon. Gentleman may not have noticed that the Government have accepted the argument for increasing the investment income surcharge threshold, because in this Finance Bill the threshold is in fact increased. It is increased by 50 per cent., from £1,000 to £1,500 and for elderly people over 65 it has been raised to the level for which I asked in 1974, £2,000. £2,000 is not worth what it was in 1974—
    Mr. Hordern: That is too much! What happened was that we voted to put up the threshold to £2,000, but at the end of October the Government came back with an increased majority and put it down. What they are now doing is to restore it to the position for which we voted in March 1974. But, because of the lapse of time, the correct figure should be £4,000. If the hon. Gentleman voted for it then, he must vote for it tonight.
    Mr. Pardoe: That would mean that the Conservative Party had to join me in accepting the principle of indexation of the tax system. It is not prepared to do that, because the right hon. and learned Member for Surrey, East (Sir G. Howe) knows perfectly well that if by any incredible mischance of fate he should actually end up on the Government Benches, he would not want to be bound by indexation and by a commitment to raising tax thresholds in line with the cost of living, as the hon. Member for Horsham and Crawley is now arguing. That is a principle that I accept and that I have argued in this House for many years. I accept that principle, but I have not yet been able to persuade the Conservative Party to do the same. I hope that the hon. Member for Blaby (Mr. Lawson) will have more success in that direction.
    The speeches we have heard from the Conservatives in this debate seem to have ignored entirely the fact that the Government have restored the position for which we argued in 1974. That is not enough. It is certainly not as much as I want, and it certainly does not coincide with the rise in the cost of living and the fall in the value of money. Nevertheless, it is a step in the right direction.
    I am far more concerned to persuade the Government in the long term to reform our tax system than to make minor changes in taxation rates. In any case, as I have said, the Government have already made some minor changes in that direction.
    I come now to the comments of the hon. and learned Member for Dover and Deal (Mr. Rees). He raised the fundamental question of whether we should be distinguishing between different types of income. There is a great deal to be said for that line of argument. I was

    1205
    interested in his history of the investment income surcharge, but I was not entirely sure that that was the main line of argument used when the surcharge was introduced. After all, we are not the only country to discriminate against income from investment.
    Sir John Hall: We are almost the only one.
    Mr. Pardoe: By no means are we almost the only country to do that. When we introduced our system, we did so on the basis that the investment income conferred on the beneficiary some advantage over and above the advantage conferred upon him by income from work. The argument goes—and I do not necessarily accept it, because circumstances have changed since then, which is why I accept to a large extent the argument that the hon. and learned Gentleman was making—that in distinguishing between these two sorts of income an investment income confers a benefit because it is more permanent than income from work. A job could cease, or a man could become sick, or his working life could end. Income from investment would continue through all those circumstances.
    Mr. Peter Rees: I think that the hon. Member for Cornwall, North (Mr. Pardoe) is starting from the wrong premise. It was argued not that investment income was more permanent, but that employment income was more precarious. There is a fundamental divide there. The hon. Member ought to recognise that fact in developing his interesting argument.
    Mr. Pardoe: I believe that the hon. and learned Gentleman is splitting hairs, but we are basically on the same wavelength. If income from investment is more certain, it follows that income from work is more precarious.
    At the time that the system was introduced, this country moved in the direction of a surcharge on investment income. Other European countries moved towards taxing the wealth direct. Whatever we may think now, and whether or not it would be possible to change, and how long that would take, I have no doubt that the arguments in favour of taxing the wealth from which the income derives rather than the income itself have enormous advantages. Those countries made
    1206
    the right decision and we made the wrong one.
    In a previous debate, the hon. Member for Eastbourne (Mr. Gow) challenged me on the question of the wealth tax and said that he would be surprised if I were able to persuade the Government on this point. I have before me Volume I of the proceedings of the Select Committee on the Wealth Tax. It is true that the name of the hon. Member for Eastbourne is not shown as voting for a low threshold and heavy wealth tax. But the names of those voting in favour of that include
    'Mr. Peter Rees, Mr. Paul Hawkins, Mr. Nigel Lawson"—
    The First Deputy Chairman: Order. The hon. Gentleman must refer to hon. Members by their constituencies.
    Mr. Pardoe: I apologise, Sir Myer, but I was quoting from a report to the House of Commons, and I should have thought that I could quote names, although I stand corrected if I am wrong.
    The First Deputy Chairman: On reflection, I am sure, the hon. Member will appreciate that we ought to refer to constituencies. If the hon. Member has a list of names before him, it may present problems, although if he wishes to discover the constituencies of the Members concerned, I am sure that the Committee will bear with him.
    Mr. Pardoe: I think that I can get most of them, Sir Myer. The names include the right hon. Member for Farnham (Mr. Macmillan), the hon. and learned Member for Dover and Deal, and the hon. Members for Blaby and Hove (Mr. Sainsbury). There are also the names of various others who voted in favour of my proposals.
    Mr. Peter Rees: I apologise for interrupting the hon. Gentleman a second time, but the hon. Gentleman should remind the Committee of the considered view of my hon. Friends and myself in that Select Committee. There were certain tactical dilemmas about how we should vote. But I think that our considered views are embodied in the majority report. I happened to be one of the majority. It was only because the hon. Gentleman's particular views were put to us first that we voted for them. We did so on the basis that if a tax were to be introduced on the basis suggested by the

    1207
    hon. Gentleman, it should be matched by reductions in other direct taxation, which would have been unimaginable under the present Chancellor.
    Mr. Pardoe: The hon. and learned Gentleman's memory of those proceedings is extraordinarily defective. The whole point about that Committee was that there was no majority report. He and his colleagues had no majority. The chairman did not command a majority, and nor did my colleagues. There was no majority, but my proposal won as many votes as did the proposal of the hon. and learned Gentleman. I think, therefore, that I can claim that I had the support of the majority of the Conservative Members of the Committee for a low threshold wealth tax instead of a surcharge on investment income. That is the only point I am making.
    I believe that that is a sensible course to adopt, because to tax income from wealth means inevitably that we encourage people to use their wealth unproductively. If we tax the wealth rather than the income, we encourage people to use their wealth productively instead of spending it on such items as a Rolls-Royce, or even a picture. I am not saying that we should stop people owning such items. A person is encouraged to spend £20,000 or £30,000 on a Rolls-Royce because the benefit from that car is greater than the benefit that remains after he has paid the 98 per cent. rate of tax.
    That is how investment income surcharge distorts saving. It has been argued from the Conservative Benches that it is quite wrong, for instance, that some of these large public service index-linked pensions are counted as earned income and are not subject to the investment income surcharge, whereas income from quite small sums of investment are so regarded. That kind of distinction is entirely wrong. A tax on wealth would be right provided we counted the wealth factor in the pension—calculated according to any actuarial principles—as wealth for taxation purposes. It would be far better to scrap investment income surcharge completely and to replace it with a tax on wealth. I hope that we shall move in that direction during the next year or two.
    Meanwhile, I welcome any increase in that direction, and I therefore welcome the increase that is taking place here. It
    1208
    is a modest advance, but on this occasion it would not be right for the House substantially to increase the net take-home pay of people in this category at a time when we are doing everything that we can to keep total incomes down over the next year.
    8.30 p.m.
    Sir G. Howe: The hon. Member for Cornwall, North (Mr. Pardoe) has just given us an interesting insight into the process of self-torture that his party is inflicting on itself by its present parliamentary posture. We must look at the record aright. Two or three years ago, when the Liberal Party was in its halcyon days and held the balance of power in the House, the Liberals were proud to vote in our support, to precisely this effect.
    Mr. Pardoe: It was a vote for me.
    Sir G. Howe: I care not. I do not wish to have too much insight into the Liberal Party's anguish.
    The parties joined together to vote for an amendment on investment income surcharge. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) referred to a speech in which the hon. Member for Cornwall, North announced his intention of doing such a thing again if the opportunity re-presented itself. To night the Liberal Party has within its grasp a chance of restoring the limit to £4,000. That is what the Liberal Party strove for, voluntarily, two or three years ago, yet it will not vote for the same proposal tonight.
    The hon. Member for Cornwall, North has treated the House to an elaborate excursion into wealth and the investment income surcharge, but he is no longer in a position to stand up for the cause that he voted for then and that he presented to his electors because he is chained by the Lib-Lab pact. That has prevented him from achieving that which his electors and our electors want. United the Liberals and the Government totter, and united they will fall.
    Mr. Pardoe: It is not a matter of my being chained at all but that I prefer, this time round, to reduce other taxes. That is the only choice that I have to make. The right hon. and learned Member for Surrey, East (Sir G. Howe) is free and irresponsible enough to want to lower every tax and we shall tot up

    1209
    the total number of taxes that he has advocated lowering during these debates.
    Sir Geoffrey Howe: That argument by the Liberal Party is more bizarre than most of its others. The arguments are common ground on this side of the Committee, and we could carry them in the Division. Dividend restraint and investment income surcharge are repelling and destroying private investors' motivation. Investment income surcharge, as my hon. Friend the Member for Wycombe (Sir J. Hall) stated, is imposing an injustice upon pensioners. It is particularly unjust because 43 per cent. of the yield of that tax, as my hon. Friend the Member for Horsham and Crawley said, comes from pensioners.
    I can join with the hon. Member for Cornwall, North, and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) in saying that the whole principle of investment income surcharge is increasingly questionable. The distinction was originally invented by the Liberal Party in about 1907, before Lloyd George moved into No. 11. It was probably invented by McKenna.
    Mr. Pardoe: A great mistake.
    Sir G. Howe: Probably, but the Liberal Party during its time of activity made many mistakes, and it still does.
    A distinction was made between the security and permanence of investment income and the insecurity and precariousness of income from employment. However, if one looks at what has happened to investment income during the last 15 years, because of inflation and the tax burden that has drawn it downward, the situation has become increasingly bizarre. Investment income surcharge was introduced when income tax was at a rate of 10 per cent. and when there was no capital transfer tax or capital gains tax. The principle should be re-examined in order to discover whether it should survive any longer.
    That is why I invite my colleagues to support the amendment. We are confronted with a curious Government. Ministers repeatedly say that they want more employment and yet they clobber the employer; they say that they want more investment and yet they clobber the investors; they talk about an investment
    1210
    strike and cause an investment lockout.
    Mr. Denzil Davies: The hon. Member for Horsham and Crawley (Mr. Hordern) ranged fairly widely and covered the problems of dividend control, bemoaned the demise of the small investor and the increasing power of the institutions, and claimed that the Government were against savings. I suggest that perhaps the major reason that private investors are not very strong compared with institutional investors is the enormous tax benefit that Governments of both parties have given to institutional saving. It is largely because of these benefits that institutional investors have become so powerful.
    In many other countries benefits for institutional savings are not so great and the tax reliefs are not so large. Consequently, the institutional investor is not so powerful. The situation is not quite as simplistic as the hon. Gentleman makes out.
    Mr. Hordern: I am always grateful to receive advice from the Minister on these matters. Most institutions are concerned with regular savings in the form of pension contributions. These contributions are not voluntary. It is not that employees want to pay them: they are bound to do so. Institutional investment has grown because many pension funds have had to top up their savings because of inflation, and they are finding it increasingly difficult.
    Mr. Davies: The hon. Gentleman has not met my point—that because of the enormous tax benefits for contractual savings, institutions have grown increasingly powerful. This is part of their empire and they have an enormous vested interest in keeping it that way. In many other countries contractual savings are a lower proportion of total savings.
    We have been told how the distinction between earned and unearned income was put into our law. I am not sure what the philosophical reasons were, but until 1972 or 1973 there was a distinction between earned and unearned income and no threshold on which the surcharge operated.
    Governments of both parties—including Conservative Governments for a long time—have accepted that unearned income should be taxed more heavily than

    1211
    earned income and there was not even a threshold of relief. In 1973 the Conservatives finally plucked up courage and managed to slip through with their unification of surtax and basic rate tax and an exemption of £2,000. They did not have the political courage to do it before then, but Lord Barber saw the opportunity to slip it through without anyone noticing. In the Budget we are increasing the threshold to £1,500 for persons under 65 and £2,000 for those over 65.
    I accept what the hon. Member for Wycombe (Sir J. Hall) said about the anomaly of pensions from institutional savings being regarded as earned income with no investment income surcharge being levied on them while a person who saves for his old age in some other way finds his income being treated as unearned. However, the amendment is not concerned with income from savings. It is concerned with investment income, whether derived from savings or from money accruing in any other way. It does not seek to isolate income from savings. I accept that there is an anomaly and it is partly to cover that that we have the exemption from surcharge for a certain proportion of investment income.
    Sir John Hall: I stress again that although the Government have now increased the amount from £1,500 to £2,000, it is still in real terms half of the value when it was first granted.
    Mr. Davies: I am coming to that. It has only taken it back to half of what it was. We do not entirely accept that the original levels were correct or right. But, leaving that aside, Conservative Members are seeking in the amendment the full indexation of the investment income surcharge threshold or relief. They sought in their last amendment to index the higher rate relief, but they have not got any further with their indexation. Unless they have changed it in the last day or so, the indexation of tax reliefs is not their general policy.
    They have tabled no amendment to index personal allowances. They say that they want indexation for higher rate relief and to get the full benefit, or not to be subjected to the full rigours of inflation. They say that they want investment income surcharge to be fully indexed, but that is as far as they want to go. That is unfair. If they believe that
    1212
    indexation is right, they should say that they want it throughout the tax system instead of wishing to give the benefit to people who are better off.
    This attitude betrays some of the anomaly in the Conservatives' argument. They want indexation only where it benefits most the people who tend to support them most. That is not the kind of approach that the Government believe to be right in the present circumstances.
    The hon. Member for Cornwall, North (Mr. Pardoe) made the fair point that if we had a wealth tax, no doubt we would look again at the desirability of having an investment income surcharge. There were many arguments about this in the Select Committee and I was interested to note that so many Conservative Members are in favour of a heavy wealth tax. The hon. and learned Member for Dover and Deal (Mr. Rees), for instance, is in favour of this impost.
    Mr. Peter Rees: Let me nail that canard at once. I have never put my name to any report whatever suggesting that there should be a heavy wealth tax.
    Mr. Davies: I accept that. I shall read again the minutes of the Select Committee proceedings and see what exactly was said.
    Mr. Pardoe: The proposal was for a wealth tax with a threshold of £30,000. That is a very low threshold by comparison with the Government's £100,000, although not low by European standards. It was for a progressive wealth tax rising to 2½ per cent. on incomes over £500,000. A tax of 2½ per cent. is a heavy wealth tax.
    Mr. Davies: I am grateful to the hon. Gentleman. If we had a heavy wealth tax of that kind, the case would be even greater for considering whether it would be fair and equitable to have an investment income surcharge as well. That is a matter for the future. It was discussed by the Committee, and will no doubt be discussed here again and again in the future.
    We accept the need for a threshold and that many persons who pay the investment income surcharge are not very well off. Others are. We think it is fair in present circumstances to raise the threshold to £1,500 and £2,000 respectively for people under and over 65. We do not believe that the indexation which the

    1213
    Conservatives desire is fair and right in relation to other taxpayers. I ask the Committee for that reason to reject the amendment.
    Question put, That the amendment be made:—
    The Committee divided: Ayes 194, Noes 237.

    Division No. 130]

    AYES

    [8.44 p.m.

    Adley, Robert

    Hall, Sir John

    Newton, Tony

    Alison, Michael

    Hamilton, Michael (Salisbury)

    Onslow, Cranley

    Amery, Rt Hon Julian

    Hampson, Dr Keith

    Oppenheim, Mrs Sally

    Arnold, Tom

    Hannam, John

    Page, John (Harrow West)

    Atkins, Rt Hon H. (Spelthorne)

    Harrison, Col Sir Harwood (Eye)

    Page, Rt Hon R. Graham (Crosby)

    Awdry, Daniel

    Harvie Anderson, Rt Hon Miss

    Page, Richard (Workington)

    Baker, Kenneth

    Havers, Sir Michael

    Parkinson, Cecil

    Bell, Ronald

    Hayhoe, Barney

    Pattie, Geoffrey

    Benyon, W.

    Higgins, Terence L.

    Percival, Ian

    Berry, Hon Anthony

    Hodgson, Robin

    Peyton, Rt Hon John

    Biffen, John

    Holland, Philip

    Powell, Rt Hon J. Enoch

    Biggs-Davison, John

    Hordern, Peter

    Price, David (Eastleigh)

    Blaker, Peter

    Howe, Rt Hon Sir Geoffrey

    Prior, Rt Hon James

    Bottomley, Peter

    Howell, David (Guildford)

    Pym, Rt Hon Francis

    Bowden, A. (Brighton, Kemptown)

    Hunt, John (Bromley)

    Rathbone, Tim

    Boyson, Dr Rhodes (Brent)

    Hurd, Douglas

    Rawlinson, Rt Hon Sir Peter

    Braine, Sir Bernard

    Hutchison, Michael Clark

    Rees, Peter (Dover & Deal)

    Brittan, Leon

    James, David

    Rees-Davies, W. R.

    Brocklebank-Fowler, C.

    Jenkin, Rt Hon P. (Wanst'd & W'dt'd)

    Renton, Rt Hon Sir D. (Hunts)

    Brooke, Peter

    Johnson Smith, G. (E Grinstead)

    Renton, Tim (Mid-Sussex)

    Brotherton, Michael

    Jones, Arthur (Daventry)

    Rhodes James, R.

    Brown, Sir Edward (Bath)

    Jopling, Michael

    Ridley, Hon Nicholas

    Bryan, Sir Paul

    Kaberry, Sir Donald

    Rifkind, Malcolm

    Buchanan-Smith, Alick

    King, Evelyn (South Dorset)

    Roberts, Michael (Cardiff NW)

    Budgen, Nick

    King, Tom (Bridgwater)

    Roberts, Wyn (Conway)

    Bulmer, Esmond

    Knight, Mrs Jill

    Rossi, Hugh (Hornsey)

    Burden, F. A.

    Knox, David

    Rost, Peter (SE Derbyshire)

    Canlisle, Mark

    Latham, Michael (Melton)

    St. John-Stevas, Norman

    Chalker, Mrs Lynda

    Lawrence, Ivan

    Scott, Nicholas

    Churchill, W. S.

    Lawson, Nigel

    Shaw, Giles (Pudsey)

    Clark, Alan (Plymouth, Sutton)

    Le Marchant, Spencer

    Shelton, William (Streatham)

    Clark, William (Croydon S)

    Lewis, Kenneth (Rutland)

    Shepherd, Colin

    Clarke, Kenneth (Rushcliffe)

    Lloyd, Ian

    Shersby, Michael

    Clegg, Walter

    Loveridge, John

    Silvester, Fred

    Cockcroft, John

    McAdden, Sir Stephen

    Sims, Roger

    Cope, John

    McCrindle, Robert

    Sinclair, Sir George

    Cormack, Patrick

    Macfarlane, Nell

    Skeet, T.H.H.

    Costain, A. P.

    MacGregor, John

    Smith, Timothy John (Ashfield)

    Dodsworth, Geoffrey

    Mackay, Andrew James

    Speed, Keith

    Douglas-Hamilton, Lord James

    Macmillan, Rt Hon M. (Farnham)

    Spence, John

    Drayson, Burnaby

    McNair-Wilson, M. (Newbury)

    Spicer, Michael (S Worcester)

    Durant, Tony

    McNair-Wilson, P. (New Forest)

    Sproat, lain

    Eden, Rt Hon Sir John

    Madel, David

    Stainton, Keith

    Edwards, Nicholas (Pembroke)

    Marshall, Michael (Arundel)

    Stanbrook, Ivor

    Elliott, Sir William

    Mates, Michael

    Steen, Anthony (Wavertree)

    Emery, Peter

    Mather, Carol

    Stewart, Ian (Hitchin)

    Eyre, Reginald

    Maude, Angus

    Stokes, John

    Fairbairn, Nicholas

    Mawby, Ray

    Stradling Thomas, J.

    Falrgrieve, Russell

    Mayhew, Patrick

    Tapsell, Peter

    Fisher, Sir Nigel

    Meyer, Sir Anthony

    Taylor, Teddy (Cathcart)

    Fletcher, Alex (Edinburgh N)

    Miller, Hal (Bromsgrove)

    Tebbit, Norman

    Forman, Nigel

    Mills, Peter

    Temple-Morris, Peter

    Fox, Marcus

    Miscampbell, Norman

    Thomas, Rt Hon P. (Hendon S)

    Gardiner, George (Reigate)

    Moate, Roger

    Townsend, Cyril D.

    Gardner, Edward (S Fylde)

    Molyneaux, James

    Viggers, Peter

    Gilmour, Sir John (East Fife)

    Monro, Hector

    Wakeham, John

    Glyn, Dr Alan

    Montgomery, Fergus

    Walder, David (Clitheroe)

    Godber, Rt Hon Joseph

    Moore, John (Croydon C)

    Walker, Rt Hon P. (Worcester)

    Goodlad, Alastair

    Morgan, Geraint

    Weatherill, Bernard

    Gorst, John

    Morgan-Giles, Rear-Admiral

    Wells, John

    Gow, Ian (Eastbourne)

    Morris, Michael (Northampton S)

    Winterton, Nicholas

    Gower, Sir Raymond (Barry)

    Morrison, Charles (Devizes)

    Younger, Hon George

    Gray, Hamish

    Morrison, Hon Peter (Chester)

    Griffiths, Eldon

    Mudd, David

    TELLERS FOR THE AYES:

    Grist, Ian

    Neave, Airey

    Sir George Young and

    Grylls, Michael

    Nelson, Anthony

    Mr. Jim Lester.

    NOES

    Abse, Leo

    Atkins, Ronald (Preston N)

    Bidwell, Sydney

    Allaun, Frank

    Atkinson, Norman

    Bishop, E. S.

    Archer, Peter

    Bates, Alf

    Blenkinsop, Arthur

    Armstrong, Ernest

    Bean, R. E.

    Boardman, H.

    Ashley, Jack

    Beith, A. J.

    Booth, Rt Hon Albert

    Ashton, Joe

    Bennett, Andrew (Stockport N)

    Boothroyd, Miss Betty

    Brown, Hugh D. (Provan)

    Horam, John

    Pavitt, Laurie

    Buchan, Norman

    Howell, Rt Hon Denis (B'ham, Sm H)

    Pendry, Tom

    Buchanan, Richard

    Howells, Geraint (Cardigan)

    Penhaligon, Daid

    Callaghan, Jim (Middleton & P)

    Hoyle, Doug (Nelson)

    Price, William (Rugby)

    Campbell, Ian

    Hughes, Robert (Aberdeen N)

    Radice, Giles

    Canavan, Dennis

    Hughes, Roy (Newport)

    Rees, Rt Hon Merlyn (Leeds S)

    Cant, R. B.

    Hunter, Adam

    Richardson, Miss Jo

    Carmlehael, Neil

    Irvine, Rt Hon Sir A. (Edge Hill)

    Roberts, Albert (Normanton)

    Carter-Jones, Lewis

    Irving, Rt Hon S. (Dartford)

    Roberts, Gwilym (Cannock)

    Cartwright, John

    Jackson, Colin (Brighouse)

    Robinson, Geoffrey

    Castle, Rt Hon Barbara

    Jackson, Miss Margaret (Lincoln)

    Roderick, Caerwyn

    Clemitson, Ivor

    Jeger, Mrs Lena

    Rodgers, George (Chorley)

    Cocks, Rt Hon Michael

    Jenkins, Hugh (Putney)

    Rooker, J. W.

    Cohen, Stanley

    John, Brynmor

    Rose, Paul B.

    Coleman, Donald

    Johnson, James (Hull West)

    Ross, Stephen (Isle of Wight)

    Colquhoun, Us Maureen

    Johnson, Walter (Derby S)

    Ross, Rt Hon W. (Kilmarnock)

    Conlan, Bernard

    Jones, Alec (Rhondda)

    Rowlands, Ted

    Cook, Robin F. (Edin C)

    Jones, Barry (East Flint)

    Ryman, John

    Corbett, Robin

    Kaufman, Gerald

    Sedgemore, Brian

    Cowans, Harry

    Kelley, Richard

    Selby, Harry

    Cox, Thomas (Tooting)

    Kerr, Russell

    Sheldon, Rt Hon Robert

    Crawlord, Douglas

    Kilroy-Silk, Robert

    Shore, Rt Hon Peter

    Crawshaw, Richard

    Kinnock, Neil

    Short, Mrs Renée (Wolv NE)

    Crowther, Stan (Rotherham)

    Lamble, David

    Silkin, Rt Hon John (Deptford)

    Cryer, Bob

    Lamborn, Harry

    Silkin, Rt Hon S. C. (Dulwich)

    Cunningham, G. (Islington S)

    Lamond, James

    Silverman, Julius

    Davidson, Arthur

    Latham, Arthur (Paddington)

    Skinner, Dennis

    Davies, Bryan (Enfield N)

    Lee, John

    Small, William

    Davies, Denzil (Llanelli)

    Lestor, Miss Joan (Eton and Slough)

    Smith, Cyril (Rochdale)

    Davis, Clinton (Hackney C)

    Lever, Rt Hon Harold

    Smith, John (N Lanarkshire)

    Deakins, Eric

    Lewis, Ror Carlisle)

    Snape, Peter

    Dean, Joseph (Leeds West)

    Loyden, Eddie

    Spearing, Nigel

    Dell, Rt Hon Edmund

    Luard, Evan

    Spriggs, Leslie

    Dempsey, James

    Lyons, Edward (Bradford W)

    Stallard, A. W.

    Doig, Peter

    Mabon, Rt Hon Dr J. Dickson

    Stewart, Rt Hon Donald

    Douglas-Mann, Bruce

    McCartney, Hugh

    Stewart, Rt Hon M. (Fulham)

    Dunn, James A.

    McDonald, Dr Oonagh

    Stoddart, David

    Dunnett, Jack

    McElhone, Frank

    Stott, Roger

    Eadie, Alex

    MacFarquhar, Roderick

    Strang, Gavin

    Edge, Geoff

    MacKenzie, Gregor

    Taylor, Mrs Ann (Bolton W)

    Ellis, John (Brigg & Scun)

    Mnckintosh John P.

    Thomas, Dafydd (Merconeth)

    Ennals, David

    McMillan, Tom (Glasgow C)

    Thomas, Jeffrey (Abertillery)

    Evans, Fred (Caerphilly)

    McNamara, Kevin

    Thomas, Mike (Newcastle E)

    Evans, Gwynfor (Carmarthen)

    Madden, Max

    Thomas, Ron (Bristol NW)

    Evans, Ioan (Aberdare)

    Mahon, Simon

    Thompson, George

    Ewing, Harry (Stirling)

    Mallalieu, J. P. W.

    Thorne, Stan (Preston South)

    Ewing, Mrs Winiftred (Moray)

    Marks, Kenneth

    Tierney, Sydney

    Faulds, Andrew

    Marshall, Jim (Leicester S)

    Torney, Tom

    Flannery, Martin

    Maynard, Miss Joan

    Tuck, Raphael

    Fletcher, Ted (Darlington)

    Meacher, Michael

    Varley, Rt Hon Eric G.

    Foot, Rt Hon Michael

    Mendelson, John

    Wainwright, Edwin (Dearne V)

    Ford, Ben

    Mikardo, Ian

    Walker, Terry (Kingswood)

    Fowler, Gerald (The Wrekin)

    Millan, Rt Hon Bruce

    Ward, Michael

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

    Miller, Dr M. S. (E Kilbride)

    Watkins, David

    Freeson, Reginald

    Miller, Mrs Millie (Ilford N)

    Welsh, Andrew

    Garrett, John (Norwich S)

    Mitchell, Austin Vernon (Grimsby)

    White, James (Pollok)

    George, Bruce

    Molloy, William

    Whitlock, William

    Gilbert, Dr John

    Moonman, Eric

    Wigley, Dafydd

    Golding, John

    Morris, Alfred (Wythenshawe)

    Willey, Rt Hon Frederick

    Gould, Bryan

    Morris, Charles R. (Openshaw)

    Williams, Rt Hon Alan (Swansea W)

    Gourlay, Harry

    Morris, Rt Hon J. (Aberavon)

    Williams, Sir Thomas (Warrington)

    Graham, Ted

    Moyle, Roland

    Wilson, Alexander (Hamilton)

    Grant, George (Morpeth)

    Murray, Rt Hon Ronald King

    Wilson, Gordon (Dundee E)

    Grant, John (Islington C)

    Newens, Stanley

    Wilson, Rt Hon Sir Harold (Huyton)

    Grocott, Bruce

    Noble, Mike

    Wilson, William (Coventry SE)

    Hamilton, James (Bothwell)

    Oakes, Gordon

    Wise, Mrs Audrey

    Harper, Joseph

    Ogden, Eric

    Woodall, Alec

    Harrison, Walter (Wakefield)

    O'Halloran, Michael

    Woof, Robert

    Hart, Rt Hon Judith

    Orme, Rt Hon Stanley

    Wrigglesworth, Ian

    Hatton, Frank

    Ovenden, John

    Young, David (Bolton E)

    Hayman, Mrs Helene

    Padley, Walter

    Heffer, Eric S.

    Palmer, Arthur

    TELLERS FOR THE NOES:

    Henderson, Douglas

    Pardoe, John

    Mr. Frank R. White and

    Hooley, Frank

    Park, George

    Mr. James Tinn.

    Hooson, Emlyn

    Question accordingly negatived.
    Mrs. Wise: I beg to move amendment No. 20, in page 11, line 20, at end insert
    'provided that any income derived from moneys awarded as compensation damages
    1216
    and insurance in respect of industrial or personal accident or injury shall be treated as earned income and not as investment income'.
    I shall be brief, because this proposal should not be controversial.
    It is clear that when a person is awarded a sizeable lump sum for an

    1217
    injury it is in nature different from a source of investment made by someone who has been able to save out of a large surplus income. It is different both in origin and in nature. I therefore ask my right hon. Friend the Financial Secretary to ensure that it is treated differently for tax purposes.
    The proposal to treat such money as earned income rather than investment income so that it avoids the investment surcharge is equitable and should meet with a good deal of approval. A person who has had a bad injury, perhaps at work, and who in the normal course of events would not have a large lump sum available for investment may suddenly find that the income from his compensation award attracts the higher rates of tax applicable to someone living on unearned income.
    I believe that the Financial Secretary may be sympathetic to the objective of the amendment. If so, I should appreciate it if he would try to meet us on this matter. At first glance it may seem difficult to distinguish between one kind of investment income and another. However, I suggest that account is already kept of what happens to investment income. For example, if investments are bought and sold, a record must be kept in order that capital gains tax may be recouped. My hon. Friends and I have taken some accountancy advice. We believe that it is possible to find a way to keep track of the income which derives from a compensation or other lump sum award.
    If my right hon. Friend will meet us on this matter, we shall be pleased to seek to withdraw the amendment. He may wish to take it away and bring forward some other wording or to suggest another mechanism. However, if he feels unable to meet us we shall he compelled to push the amendment to a vote. It is an important point of principle. The effect of carrying the amendment would be to help a number of people who are already suffering misfortune because of serious accident or injury.
    9.0 p.m.
    Mr. Robert Kilroy-Silk: I support my hon. Friend the Member for Coventry, South-West (Mrs. Wise) and I
    1218
    urge the Financial Secretary to give serious and sympathetic consideration to what she has said. She is talking about a group of people in different categories who already, through no fault of their own, suffer injury and distress. They are being penalised by a taxation system which most hon. Members regard as inequitable.
    Their income is being taxed as investment income and it is subject to investment surcharge. Such income attracts higher rates of tax than are either proper or appropriate. There is no reason why they should not receive, and there is every reason why they should be able to receive, the maximum earned income tax allowances.
    I hope that my right hon. Friend will reply in the spirit in which the amendment was moved. I hope that he will be able to give more positive guarantees than this Government and previous Governments have given so far. I hope that it will not be necessary for hon. Members who support the amendment to push it to a vote.
    The Financial Secretary to the Treasury (Mr. Robert Sheldon): The amendment seeks to exempt from investment income surcharge any income that arises from an investment of moneys which have been awarded as compensation for industrial or personal accident. My hon. Friend the Member for Coventry, South-West (Mrs. Wise) asked whether I was sympathetic to the amendment's objective. She does not need me to repeat that many people who are disabled—frequently for life, sometimes completely and sometimes partially—have a serious problem in adjusting to their future if compensation is their only form of income, apart from that which the State is able to provide.
    I am sympathetic to the objective of the amendment, but there are a number of problems which remain difficult. My hon. Friend mentioned the possibility of obtaining outside advice. I believe that she has some matters on which she can inform the House. Perhaps we can hear about them at another stage. I must remind her of some of the problems of which I know she is aware. I shall examine them fairly briefly and explain them to those who are not as conversant as my hon. Friend with the subject.

    1219
    The difficulty involves identifying the income arising from these awards. My hon. Friend mentioned the possibility of keeping track of capital. In that she is wholly right. Of course one can keep track of capital, even when it changes. If one changes the purpose of one's capital—whether to buy a picture, possibly, or a house, or investments—one can keep track of the varying use to which that capital is put.
    The problem about investments is that when the dividends arising from them are taxed it is not possible to know through the multiplicity of changes that can take place from exactly where they come.
    I give one simple example. It may be that a person in the category in question has other income. It may be that his investments are very successful and that they become enlarged. It may be that they diminish. However, the one common feature about them is that they change.
    Dr. McDonald: My reason for intervening now is, first, to correct a statement that my right hon. Friend made. We have already taken advice on this point and have discovered that there are at least two ways in which the problem that my hon. Friend the Member for Coventry, South-West (Mrs. Wise) has outlined can be overcome. One suggestion is that the investment income deriving from an award as a result of damages for industrial accident or injury could be held in a separate account. The other suggestion is that the income from the original investment could be treated as the first part of any further capital that the individual may have available for investment.
    I do not say that either of those suggestions will prove the best possible solution to the problem. I give them as illustrations of the fact that the problem was not thought to be a very difficult problem to solve when we sought financial advice about it. I am sure that if my right hon. Friend and his officials in the Treasury gave their minds to it for a short period they could find an adequate solution to the problems that he is detailing.
    Mr. Sheldon: I understand that point. I have thought about this aspect of the matter too. There is obviously the difficulty that if we were to lock such a person into a trust or some such arrangement, that might not necessarily be the
    1220
    best use of the money. There are problems of that kind. However, if my hon. Friend has details of the plans that she has worked out, she knows that I would be more than delighted to look into those aspects and see how far they can improve upon the kinds of methods that I believed were generally available to deal with that aspect of the problem.
    Sir G. Howe: My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and I, with some not very accurate recollection—perhaps the Minister will help us—believe that there has existed on the statute book a provision for giving special treatment to sums awarded by way of compensation, damages or otherwise, for personal injury. My own recollection is that there was a provision which exempted the income from such sums from aggregation with the income of parents when children's and parents' income was aggregated under a previous Labour Government. My right hon. Friend has the recollection that sums awarded by way of compensation for the effects of thalidomide were certainly exempted from aggregation under 1968 legislation. That is his recollection. My own thinking is that the provision had actually gone further, so as to exempt the income from taxation to some extent as well. However, it certainly looks as though this category of money has previously been defined and exempted on the statute book. Perhaps the Minister would care to look at those precedents.
    Mr. Sheldon: That was not the case, for the simple reason that before the unified tax structure came into operation there was earned income and unearned income. That is the position right up to now. The income was not dependent upon the category of people concerned; rather was it dependent on the type of income. If the income was earned through employment, it was treated in one way; if it was unearned, it was treated in another way. That was the sole basis and it remains so today. In fact, it was taken as being the case when the matter of the thalidomide compensation arose. In that case there was a particular problem whereby these people were settling on one basis of tax treatment and then they found that it was not the basis that they had understood in the kind of settlement to which they agreed. Because of possible tax implications, the

    1221
    Government at the time made a grant in order to overcome that problem. I speak from recollection, but I think that a grant of £5 million was made to avoid this kind of taxation problem.
    My hon. Friends have taken some advice on this matter, and I would be very glad at any time to listen to that advice. The fact remains, however, that we have these two problems—the problem of separating earned income from investment income, and the point which I have made about the difficulty of being able to trace that income.
    There is a third possible problem. I am not sure about it, for two reasons. I am not sure of the amount of weight that I can attach to it, and I have no close personal knowledge that I would like to have to use in an argument. The problem is that the courts themselves take taxation into account. Perhaps the changes being proposed in our taxation system would offset this difficulty, and I accept that this might be the case at this stage of consideration. Obviously, I am always happy to listen to further advice, and if my hon. Friends have any information for me perhaps we could take the matter up on that basis.
    Mr. Patrick Jenkin: I hesitate to intervene, but we seem to be drawing on recollections of previous occasions. My recollection of the thalidomide grant is that when the Family Fund was set up it was done because of the taxation problem. This was a valuable initiative by the then Government. It was taken by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who made the point that the Government had a responsibility in this regard.
    My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said earlier that when we considered in 1968 the last Labour Government's proposals for aggregating investment income for children we persuaded Ministers on the Treasury Bench to make an exception for income from compensation paid for personal injury to a child. That is not on all fours with the case that we are putting up now, but there is a case for the treatment of such income as earned rather than investment income. The Government should look at this. May be it
    1222
    does not constitute a precedent, but there is a precedent for different treatment of such income.
    This is a cause which must engage our sympathies. As long as one has broad sympathy for the general issue, it is hard to say that income from compensation paid for industrial injury, or for injury caused by the drug thalidomide, should be treated as investment income and be subject to the surcharge. There is a precedent for singling it out for special fiscal treatment.
    Mr. Sheldon: I am not sure how much the right hon. Member for Wanstead and Woodford (Mr. Jenkin) has added to what I have already said. On the thalidomide case I was correct; the amount of the Government grant was £5 million, paid in 1974. The Government made a once and-for-all capital payment to the thalidomide children's trust which was specifically intended to increase the funds available to the trust to offset the effects of taxation. That is the problem. It is clear, however, that my hon. Friends have something new to add to the argument. I do not think that the comparison that the right hon. Member for Wanstead and Woodford drew quite meets the arguments of my hon. Friends.
    9.15 p.m.
    Mr. William Wilson: There might be difficulty in tracing income, where it comes from and where it goes to, when an individual has a multiplicity of sources of income and capital, but in my experience most of the people affected by the amendment will only ever receive one capital sum. Nothing could be easier than to set up a fund for that separate sum of money and for it to be earmarked.
    I think my right hon. Friend is assuming that recipients of this sort of money possess a number of sources of wealth and that they are great wealthy people, but they are not. They have single items of capital paid to them, which remain with them, being dissipated as time goes by on ordinary expenses. From my personal experience, I can say that in most cases the problem would not be as great as the Minister is making out.
    Mr. Ridley: I must confess that I agree with the Financial Secretary, that this is one of those rare occasions when I think

    1223
    that he might be on the right lines. That is not to say that I do not have enormous sympathy with the hon. Member for Coventry, South-West (Mrs. Wise) and share her concern entirely about the plight of these people. I have her point of view about the desirability of achieving what she seeks, but I also share the Financial Secretary's doubts about the difficulties of achieving it in the way that she suggests.
    Let us consider the possibility that a fund is set up, which I think would have to be in trust if there were not to be some form of evasion. If it were not in trust, other people could lend to the fund and derive their income from it free of investment income surcharge—as it were, on the back of the previous payment of an injury compensation benefit. I think that that is the answer to the hon. Member for Coventry, South-East (Mr. Wilson)—that, although the person who suffered the injury might initially be in possession of no other funds, it is surprising how clever tax avoiders and other financiers would find a way of using that fund to their own advantage. So some sort of trust would have to be set up.
    Moreover, it is not true, as the hon. Member said, that this is likely to be the only asset of the recipient of the income. In many cases he might have a house or be able to arrange a mortgage and be able to put the extra funds into the trust and derive extra income from the trust, thereby evading the investment income surcharge through the means suggested in the amendment.
    Thus, there would be possibilities for tax avoidance not only for the parasite but for the recipient himself. There would have to be strict rules governing these trusts if they were to be proof against the sort of abuses that I have tried to describe.
    Mr. Kilroy-Silk: The hon. Member is very good at finding problems and potential abuses when we are talking about our people, about poor people—about people, as my hon. Friend the Member for Coventry, South-East (Mr. Wilson) said, who get small amounts of money once in a lifetime after an injury when they have been disabled. Yet when the hon. Gentleman several weeks ago was talking about the self-employed and their inability to obtain a tax exemption certificate, he
    1224
    made light of the potential difficulties and abuses that we had pointed out and had no time for them. According to him, there were no problems and all the self-employed should have tax exemption certificates.
    Is there not something of a double standard here? Is not the hon. Gentleman applying one set of standards to one category of people and a completely different set to those about whom we are talking, who are disadvantaged and unfortunate and at the lower end of the income scale?
    Mr. Ridley: The hon. Gentleman is quite wrong. We shall be debating the tax exemption certificates on Thursday. If I have the good fortune to catch the eye of the Chair, I shall seek to say that the point of the regulations in respect of sub-contractors is not to avoid taxes but the fact that they take a view as to the suitability of the taxpayer. That is a new principle to which I strongly object.
    The hon. Member for Ormskirk (Mr. Kilroy-Silk) has not heard me out. I am not out of sympathy with the aim of the amendment. I merely say that I do not think the hon. Lady is going about it in the right way. If she will hear me out, she will hear what I believe to be the right way to achieve her objective.
    I cannot understand the proposition that recipients of industrial injury compensation are necessarily poor people. It may well be that the recipients of industrial injury compensation are from the middle income group or are very well off. There are many rich men who have been injured, as well as poor people.
    It seems that there is an extraordinary series of demonologies in the mind of the hon. Member for Ormskirk. The hon. Gentleman seems to think that those who suffer industrial injury are by nature poor whereas all those who have investment income are by nature rich. That little thought might give the hon. Gentleman the clue to the answer that I shall give very shortly.
    Before I seek to do that, let us pursue the thought of the trust. Let us suppose that there was a trust in which the sum of compensation was placed and that by good management by the trustees, or the injured person, there was investment in Poseidon. Let us suppose that the investor, or investors, got out at the right moment

    1225
    and put the money into Slater Walker, getting out at the right moment and ending up with investment capital of £10 million, having started, shall we say, with £5,000. Is the hon. Lady saying that the whole of the investment income from that sum should be free of investment income surcharge, bearing in mind that 10 years later the original sum had grown to £10 million or whatever the figure might be?
    With my sayings on the record, that is a proposition to which I might not object so strongly as the hon. Lady. In fact, the hon. Lady is encouraging everybody to be a capitalist and to speculate with his capital. She is seeking to give a tax advantage as well. It might happen that the person concerned was not a very clever speculator and invested the whole lot in British Government War Loan and found that the original value of the money had decreased by a half or a quarter in real terms. However, the hon. Lady is encouraging speculation by her amendment.
    This is not the way to do it. I never like to leave a question without seeking to be constructive. I suggest that the hon. Lady has come upon the inequity of the investment income surcharge when applied to those with low incomes. I do not know whether she was present during the last debate when by hon. Friends tried to raise the threshold of the investment income surcharge. In any event, I am sure that she voted against them. In fact, she should have voted with my hon. Friends, as they were trying to do exactly what she is attempting, only for a wider category of people than she has selected.
    Surely the whole Committee will agree that her selection—the recipients of industrial compensation due to injury—are particularly worthy subjects to have relief from investment income surcharge. No doubt we all agree about that. However, there are some who feel that there might be other categories in receipt of investment income who deserve equal treatment.
    Rightly or wrongly—I know that this is arguable—my hon. Friends believe that the right way to approach this matter is not to seek to find the source of the investment income but to seek to find the total resources of the recipient and to say where the resources are not very great—for example, £4,000 has been mentioned,
    1226
    but we could argue about that—and the investment income does not amount to a very great sum that it should be free from the surcharge. If she were able to accept that point of view, the hon. Lady would have been able to vote with us on the last amendment, thereby helping the people who are the subject of her own amendment, as well as a lot of other deserving cases.
    The hon. Lady should put away her prejudices. She should put aside her belief that those suffering from industrial injuries are her own people, who vote for her and her party and therefore deserve special relief even from her prejudices. She should realise that the crucial point is the low level at which the investment income surcharge begins and change her views about the fundamental issue of taxation directed so much against investment income.
    Mr. John Mendelson: I rise in case my right hon. Friend the Financial Secretary is tempted to abandon the useful attitude that he was approaching earlier because of the mischievous intervention of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). My right hon. Friend adopted that approach to the simple, straightforward and honest amendment, moved so well by my hon. Friend the Member for Coventry, South-West (Mrs. Wise). He gave it, at least in principle, sympathetic consideration. I hasten to point out how misguided is the propaganda of the hon. Member for Cirencester and Tewkesbury. I want my right hon. Friend to support my hon. Friend instead of trying to catch her on the propagandist wave of the hon. Member for Cirencester and Tewkesbury, thereby trying to lead her into all sorts of postures that she might not want to support.
    The burden of the amendment is that the majority of people who suffer industrial injuries are wage earners and are therefore not rich people; nor are they in possession of other resources.
    Mr. Ridley: The North Sea oil divers probably run the most dangerous risks of anyone, but, at least until recently, they have been self-employed. They have very high emoluments. Are they in the hon. Gentleman's category of rich people?
    Mr. Mendelson: The hon. Gentleman understands figures and he knows that the number of cases of that kind are infinitesimal compared with the large number of people who suffer industrial injuries in ordinary occupations throughout the year. I do not want my right hon. Friend to be encouraged by the hon. Gentleman's intervention. I want him to stick to his original attitude in support of the amendment.
    When a person who has worked in industry for wages suffers a serious industrial accident, the payment of compensation to him enables him to have an income to take the place of the wages he would have earned had the accident not occurred. That limits the argument, the reasoning behind it and the equity behind it. It should not be beyond the wit of man—including the excellent advisers of my right hon. Friend—to find a way of limitation that would be satisfactory to all concerned. The argument that it really represents another wage, although our insurance laws are not based on that principle, should commend itself to him. I hope that he will now give an assurance that he will get together with my hon. Friend and do his best to see how it can be done.
    Mr. Robert Sheldon: I assure my hon. Friend the Member for Penistone (Mr. Mendelson) that when the argument of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) came to the problem of tax avoiders I did not even consider it, let alone let it weigh heavily with me. Although one can admire the hon. Gentleman's ingenuity, the practicality of his suggestions does not have much bearing on the important matter we are discussing. In my earlier speech I gave way to what I thought were interventions and, therefore, I did not finish what I wanted to say. Instead I found myself, in effect, originating a debate.
    9.30 p.m.
    Perhaps I might end, as I had intended to do, by saying to my hon. Friend the Member for Coventry, South-West (Mrs. Wise) that I am delighted to accept the point she makes. She has given some good advice, and I am more than willing to listen to any advice from whatever quarter and to evaluate it. Bearing in mind the problems that I have mentioned, we can perhaps have some
    1228
    further consultations following the debate. I therefore ask my hon. Friend to withdraw the amendment.
    Mrs. Wise: I ought to deal with one or two of my hon. Friend's points. He mentioned the problem of altering the actions of judges with regard to the amount of compensation that they award. Once Parliament clearly indicated by passing this amendment that it wanted people who had suffered injury to benefit from this amendment, I would hope that judges would try to act in the light of that knowledge. It would be very unfortunate if they tried to thwart Parliament's intention and if they reduced compensation awards that is what they would be doing: they would be thwarting Parliament's intention of giving additional help to people in these circumstances. Although I have some scepticism about and natural suspicion of judges, I would rather give them the benefit of the doubt on this occasion and hope that they would take into account the clear intention of Parliament if an amendment like this were carried.
    Another problem that my hon. Friend mentioned was that of distinguishing between any other earned income of the recipient and the investment income. I do not see that as a problem, because, if I understand my hon. Friend, the objective is to treat this kind of investment income as though it were earned income. It therefore does not seem to be a problem. The distinction between earned income and this kind of investment income cannot be insuperable since the objective is to treat them alike.
    The only matter of substance with which we have to deal is the question of keeping track of the results of an award of compensation. If, for example, one of my hon. Friends were awarded £50,000, it should be possible for it to be deemed a special fund and be kept track of so that we could attach some sort of source to the income from that amount. Our tax system already copes with things that are more complicated. I am not surprised that we fail to collect corporation tax if we cannot deal with a relatively simple matter like this. If we cannot deal with that, I do not think that we can hope to deal with the complexity of taxing huge multinational companies.
    Mr. William Wilson: I think the Minister has got the facts wrong about the

    1229
    allowance that judges make in respect of tax. When computing the loss of wages they certainly take into account the amount of tax that would have been paid upon those wages.
    But my hon. Friend should appreciate that the Front Bench cannot have it both ways. If the Front Bench is saying that it cannot allow this tax relief which the amendment is seeking to give because it is so difficult to compute what might happen to the money, and if all the wisdom of the Treasury cannot compute that, how can a judge compute it? My hon. Friend the Financial Secretary has got it wrong. The wages that are represented by the award are what is taken into account, not the taxation that might be payable in future in respect of the award.
    Mrs. Wise: I am grateful to my hon. Friend the Member for Coventry, South-East (Mr. Wilson) for his intervention, and I take his point.
    I think that we should ignore the wild imaginings of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who seems to think that every person who is disabled in an accident and receives compensation automatically becomes a speculator and a tax avoider and evader. I believe that when someone suffers a severe accident—and it must be severe if it is to involve the sums we are discussing—he has quite enough to do coping with the ordinary problems of life.
    Mr. Ridley: Is the hon. Lady aware that the largest amounts of compensation are usually paid to film stars who, perhaps, suffer an injury to a leg, which inhibits their power to earn hundreds of thousands of pounds a year? Does she realise that those are the people who would benefit most from the amendment she is proposing?
    Mrs. Wise: The hon. Gentleman is disgracing his colleagues. I thought that the interventions from the Opposition Front Bench were reasonable and helpful. It seemed to me that this was not a party matter but a subject on which we could combine to try to help people who are suddenly deprived, through an accident, of a limb or a faculty. It is disgraceful that the hon. Member should seek to turn people suffering in that way into
    1230
    some sort of petty criminals. He might in those circumstances bend his mind in that direction, but I do not believe that most of the disabled people in the country would do that. His interventions are mischievous and irrelevant and they expose his outlook. I am sorry that his Front Bench—
    Mr. Ridley: Will the hon. Lady give way?
    Mrs. Wise: No. I appreciated the interventions from the Conservative Front Bench because I thought that they were genuinely attempts to find a way round any practical problems that might exist.
    If my hon. Friend the Financial Secretary is saying that he would like to try to meet the point of the amendment and will try to bring forward a proposal, I am certainly willing to accept that undertaking and perhaps to have some further discussion about it. I hope that we shall find a way of ensuring that people who have suffered injury, whether an industrial injury or any other—and that includes the effects of being attacked by criminals—are helped under the Bill. In those circumstances, I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Mr. Tony Newton: I beg to move Amendment No. 22, in page 11, line 23, after 'more', insert:
    or in the case of a widow or single woman that her age was sixty years or more '
    If I speak briefly to it, that is only because I have moved similar amendments on previous Finance Bills, and I hope to have further opportunities of raising similar points in Standing Committee. If I am brief, it will not be because I believe in any way that the point covered by the amendment is not important. On the contrary, the treatment of single women and widows between the ages of 60 and 65 gives rise to some of the more glaring injustices of our tax system.
    The case for the amendment is overwhelming and conclusive. Within our tax system we acknowledge the case for favourable treatment for people over retirement age. There is a special age allowance in relation to their income as a whole—principally, of course, on their earned income—which was introduced

    1231
    under considerable pressure from this side of the Committee and other quarters two or three years ago. There is a special threshold for investment income surcharge, which is currently under debate and which the Government propose to raise from £1,500 to £2,000 for those who qualify.
    That is all absolutely right and proper. I support it totally and I have urged before that we should have this special treatment for the retired section of the population. Many of us on this side would like to see these reliefs go further and become more generous.
    The problem covered in my amendment is that when we come to define who should gain and who should not gain from the special concessions—which I take as being concessions for the retired—a form of male chauvinism takes over. The Treasury, the Inland Revenue and the law define the rule in terms of the age of 65, which is the normal retirement age for men. Instead of applying to women their normal retirement age of 60, the Government say that they, too, should receive the benefit of the additional tax reliefs only when they reach the age of 65. That is, we apply to women the normal male retirement age in allowing additional tax reliefs.
    I have said previously in such debates that we drop single women and widows into a hole between the social security system, which treats them as retired at the age of 60, and the tax system, which treats them as being retired in this case at the age of 65. There is a five-year fiscal limbo into which we cast a substantial group of the population.
    That is totally unfair, because in the world as it now is single women and widows of that age have already suffered a harder time than men of that age. Whatever the position may be in the new world of liberation and equality into which we are now moving, women now reaching retirement age tend to have had less earning power and to have been less able to save for their retirement.
    Such women have laboured under disadvantages because of social attitudes in the past, attitudes that still linger to some extent, yet in addition to that we lumber them with this disadvantage. We do not allow them in their first five years of retirement the benefits that we think
    1232
    are proper for retired men within the tax system.
    I said that this represents a form of male chauvinism, but it is worth registering how serious the anomalies can be. A man aged 50 or even 40 or 30 who happens to be married to a woman aged over 65 will get the benefit of this allowance because the law is defined in terms of a man or his wife living with him being over the age of 65. It does not matter how young the man is. Provided his wife is over the age of 65, he will receive additional tax relief on investment income, although a woman alone cannot receive that relief until she reaches the age of 65. One cannot be much more male chauvinist than that.
    The situation is utterly unfair and I find it even more difficult to accept that it should be allowed to continue when I consider the triviality of the cost involved to put it right. That is especially so in the context of the debate that we had yesterday on petrol. When I raised this matter last year in two separate amendments—one dealing with single women and one dealing with widows—the Chief Secretary gave some figures of the cost of such relief. At that time the surcharge threshold was £1,500, so the figures are a little out of date, but the difference cannot be very great.
    I was told that to extend the investment income surcharge relief to all widows—not just those over 60—would cost only £1½ million. To extend it to the other single women over 60 would cost £1 million. The money involved is peanuts in the context of the arguments that we have on this Bill and my proposal cannot be resisted on that ground.
    9.45 p.m.
    To be fair to them, I do not believe that Ministers would attempt to resist it on that basis. What other arguments do they have? It has been suggested that the real unfairness is in the difference in retirement ages. Treasury Ministers have said that I might have a point, but the real trouble is that women are allowed to retire too early or that men are made to retire too late and we should be equalising retirement ages.
    I agree with that argument, but that is not what happens and we are treating women aged between 60 and 65 unjustly. The fact that we should like to see a

    1233
    change in retirement ages in the long term is neither here nor there. The logic of that ministerial argument is that the retiring age for women should be raised. That suggestion is not widely heard.
    The widely heard suggestion is that the retiring age for men should be reduced. There is widespread support for that on both sides of the House. However, even at Question Time today Social Security Ministers were resisting any move in that direction on the ground of cost.
    As long as Ministers are saying that it is not practicable to move towards what we should like to see in the social security system, it is up to them to deal with the parallel injustice in the tax system. I hope that we shall hear something more constructive from Ministers, because their arguments so far have not been good enough.
    The only other point that the Chief Secretary put to me last year in a debate on roughly similar amendments was a virtual accusation that I was seeking to discriminate between different groups of taxpayers. That is standing the argument on its head. The Chief Secretary said:
    "The best way to deal with the matter is to deal with it on income."—[Official Report, 11th May 1976; Vol. 911, c. 401.]
    That does not mean anything. How can we deal with the problems of retired women aged between 60 and 65 through dealing with their income? If that means anything at all, it must mean dealing with it through the social security system, and through their pensions. Can any Minister seriously claim that there is the slightest chance, prospect or justification for paying women aged between 60 and 65 a higher pension than we pay women over 65 in order to offset the effects of the tax system? That is the only thing that the Chief Secretary could have meant and it is nonsense.
    Arguments against the modest cost that I am proposing do not stand up. The number of people involved in investment income surcharge cannot be large. The number of single women and widows aged between 60 and 65 is probably in the thousands rather than the millions or even hundreds of thousands. The numbers argument is much more important on the age allowance that we shall be debating upstairs.
    1234
    However, the injustice is no less clear for the fact that it is a relatively limited point affecting relatively few people. It is part of the growing bitterness felt by widows and, to some extent, by single women in comparable circumstances about how our tax system treats them. It is difficult to defend.
    I had hoped that we should see something done about this in the Budget, because earlier this year, for the first time in my experience, a Minister made a reasonably encouraging noise about it. I put this on the record because it is worth repeating to the Committee. I asked the Minister of State, Treasury:
    "Is the hon. Gentleman aware that, apart from the disincentive to working widows, one of the most serious injustices in the tax system is the treatment of widows and single women between the ages of 60 and 65? Does he accept that something must be done about this problem?"
    The Minister of State replied:
    "The hon. Gentleman is right. The problem is most acute for those women aged between 60 and 65 because the age allowance is not available then. For women over 65 age allowances are quite generous and take widows out of the tax net. However, I accept that there is a problem for women aged between 60 and 65."—[Official Report, 24th February 1977;Vol. 926, c. 1620.]
    I was very glad when the Minister said that. I took it as a hint that the Treasury hearts might be about to soften in the couple of months before the Budget. I am very sorry indeed that they did not.
    I hope that we shall have some sign from the Financial Secretary to the Treasury tonight that the Government will take another look at this matter, because I believe that there is great concern about it on both sides of the House. The way in which these women are treated is indefensible, and it would cost us very little to do a bit of justice in this matter.
    Mr. Cyril Smith: I support the case made by the hon. Member for Braintree (Mr. Newton). One of the principal reasons why I support him is that the proposal would do a little to alleviate discrimination against some widows and, indeed single women.
    I should like to see the Government tackle the whole question of widows' benefits, tax allowances and so on and move towards a position in which we had a householder's allowance for tax purposes, irrespective of whether a person

    1235
    was widowed, single, married or anything else. The allowance would be paid because a person had to maintain a home and not because he or she happened to be married or single.
    Widows get a very raw deal. The hon. Member's amendment would at any rate assist a small section of them. It is worthy of support if for no other reason than that. The older a woman is when she becomes a widow, the more difficult it is for her to adjust to new styles of living, income and so forth. There is great need, therefore, for the State to assist women who find themselves in that plight.
    I compliment the hon. Member on having moved the amendment and for the manner in which he moved it. I hope that the Government will find it possible to make a concession in this matter. I hope that there will be a wider concession to assist widows generally, but at this stage it would be of great assistance if the Government were to help these particular widows between the ages of 60 and 65.
    Mr. Graham Page: I support my hon. Friend the Member for Braintree (Mr. Newton). He has sought year after year to obtain this concession, and I hope that this will be a successful occasion for him.
    This provision in our tax law might have been written by Lewis Carroll, Gilbert and Sullivan and the late A. P. Herbert all rolled into one. It is a most extraordinary provision that a man, whatever his age, will get the benefit of relief from the surcharge provided that his wife is over the age of 65. Could there be anything more foolish in our tax provisions than that?
    We must add to that situation the fact that a widow or single woman who reaches the age of retirement at 60 is not entitled to this relief, whereas a man at retirement age is so entitled. In law we recognise the retirement age of 60 for women and 65 for men, yet we do not recognise it in this relief. Treatment of widows between the ages of 60 and 65 appears in this instance to be most illogical and unjust. It is extraordinary that year after year we should continue this discrimination.
    It is true that a married woman does not reach the theoretical retiring age until her husband reaches 65. In other words,
    1236
    if she reaches 60 she is not entitled to consider that she has retired until her husband reaches the age of 65. However, that is not the case in this context. We are talking about widows and single women of that age. We are also talking about investment income, which in general means savings, and savings in the case of a widow or single woman of this age are far more difficult to achieve than for men. The present situation is a disincentive for such a woman to seek to provide for herself.
    As was emphasised by my hon. Friend the Member for Braintree, the cost in this context is infinitesimal compared with the other matters which we consider in the Finance Bill. I hope that we shall right this injustice in the present Finance Bill. I hope that we shall do away with this "Alice in Wonderland" provision in relation to surcharge. Therefore, I warmly support the amendment.
    Mr. MacGregor: I wish to support the amendment, with which I am associated. I support it, but I wish to add a caveat to which my hon. Friend the Member for Braintree (Mr. Newton) referred. In the long term we shall have to sort out the disparity as to the age at which men and women retire. It is clear that many women wish to continue working beyond the age of 60, and we have come to accept the concept of equality at work. I appreciate that pressure is now being mounted for men to be able to retire at the age of 60, but I tend to share the Government's view that in current circumstances this would be expensive. Since I am realistic, I do not see that aim being achieved for many years ahead. I believe that in the long run, however, this anomaly will have to be sorted out.
    I was fascinated to read a recent pamphlet written by Mr. Michael Pilch of Noble Lowndes, who is a colleague of mine since I am involved in a company which is associated with his company. It was a pamphlet which Mr. Pilch wrote on his own account and in which he put forward suggestions by which we could move more flexibly to a situation in which it was possibile to deal with the transitional stage in arriving at a mutual retirement age. I am sure that we shall have to give more thought to this difficult problem in the coming years. That is my caveat—namely, that we should seek to obtain an identical retirement age but that it

    1237
    is a long way off. Meanwhile, we have to face the present anomaly.
    10 p.m.
    I support the amendment for two reasons. First, it is clear that the anomaly in the present state of the law concerning tax treatment and pension treatment must be cleared up. Secondly, there is the anomaly, which will apply for the next five to 10 years, in relation to the retirement age for women of 60 and beyond. I have great sympathy with this group of people for a wide variety of reasons. It is true that if only we could raise the tax threshhold much more significantly for all taxpayers—a point that we have argued in previous Finance Bill debates—the position of these widows would be much improved. I am sure that hon. Members on both sides will agree that we are constantly being berated by widows because of their tax position. If we cannot raise the tax threshold to the level that we should like, let us at least try to deal with this situation.
    The reason why I have particular sympathy with widows and single women covered by this amendment and the amendment on age allowance that my hon. Friend is to move in Committee is as follows. Most young women, certainly before they marry, and many married women returning to work after having children find it easy to return to work, but the age group that we are talking about has found it difficult to do so. It was not normally the practice for them to obtain work. Work opportunities were much more limited than they are today, so they are probably very dependent not only on their widow's pension—much more so than later generations, who will have occupational pensions—but on such investment income as they can obtain, which has probably been raised through their husbands' savings in the case of the widows or their parents' savings in the case of the single women. Single women in this age group have probably not had a job for long in their lives. Not many years ago they looked after their parents until it was too late to obtain a job.
    For those reasons, over the next five or 10 years, before we can sort out the whole pension situation, these groups will face particular difficulties. My hon. Friend is right to draw attention to this
    1238
    anomaly, and his amendment should be supported.
    Mr. Robert Sheldon: We have had debates on this subject from time to time. They are always among the more difficult debates to reply to, largely because we are faced with anomalies of the type that the hon. Member for Norfolk, South (Mr. MacGregor) frankly recognised.
    It is a little easier to reply to this amendment than some of the amendments put forward in the past which dealt especially with the problems of widows. With widows there is a dual problem—that referred to by the hon. Member for Braintree (Mr. Newton) and the emotional problem with which we are all familiar and to which there is no simple solution. Taxation can put right a number of things, but it cannot deal with some of the gravest problems that people face, such as the loss of a husband. This has usually been a complication when trying to analyse and discuss the matter dispassionately.
    The amendment now before the Committee is much simpler than former amendments as it deals with women generally. Here we are discussing only the women's age and whether the ability to obtain the advantage of the higher investment income surcharge threshold should be given to them at their retirement age of 60 or, as in the case of men, at 65.
    I remind the Committee that these problems have been with us for 40 to 50 years. The Royal Commission agreed that the age of retirement and the age at which women became eligible for other advantages should be regarded as separate issues. This is not simply a question of anomalies. It reflects the way in which social patterns are changing. The hon. Member for Norfolk, South made a brief reference to this. He understood that, fundamentally, what we do in any tax system is to reflect social circumstances and our attitudes to them. Inevitably in these matters there is a fair time lag in making tax changes consequent upon our perception of social circumstances. This problem becomes greater when social circumstances are changing.
    The hon. Member for Norfolk, South referred to the way in which women are now able to claim greater equality. There will obviously be fewer problems in the

    1239
    future than there are today. He will be aware that certain problems pertain to this matter. I understand the point made by the hon. Member for Rochdale (Mr. Smith) about this matter and about householders' allowances. He will be aware that certain problems appertain to that matter.
    The main problem is not only changing social circumstances, with which we have to come to grips, but the way in which men will perceive their position. At present men have to wait five years longer than women for their pensions. We know that men tend to live for shorter periods than women after retirement age. Men are increasingly aware of this factor. There is the further problem that, if men have to wait longer for investment income surcharge relief or any other kind of advantage than women, it might strain their patience even more.
    The Government have to take account of the various social strands and try to produce equitable solutions. The hon. Member for Norfolk, South suggested that the only perfect solution would be for the retirement age somehow to be made the same and to reflect changing social circumstances. How much time lag there would be between the one and the other is a matter for argument. Some benefit from social changes much later than others.
    Those are the problems facing us. In view of the difficulties, we might replace a lesser anomaly with a greater one. The hon. Member for Braintree was right to point to the anomaly that a woman retires at 60 years of age and does not get the invesment income surcharge relief until she is 65. If she were to get the relief at 60 years of age, that would reduce one anomaly but would create another. Both men and women at present qualify for the investment income surcharge relief at 65 years of age. If women were to qualify for relief at 60 years of age, that would create an another. Both men and women at present do not qualify for the relief between the ages of 60 and 65. It is oversimplifying the matter to say that we should reduce the anomalies. In one sense we should, but in another sense we should not.
    Mr. Rifkind: I am trying to follow the right hon. Gentleman, but I find it difficult to understand the strength of the argument that he is putting forward.
    1240
    Surely relief on investment income surcharge is given at the age of retirement for men because at that time—not before—they cease to have an income from earnings and become increasingly, if not entirely, dependent on income from investment sources. If that is the whole basis of the relief for men, given that many women are obliged to retire at 60, it would not be anomalous but would coincide with common sense to provide relief at 60.
    Mr. Sheldon: That is not the argument which has been put over by successive Governments. The argument has been that certain disadvantages are experienced by old people in their ability to carry out some of the everyday tasks that they have to undertake. It is right that there should be an increased allowance to take account of old age. That is not the same thing as retirement. We are talking of age. That is one of the problems that must be considered.
    One can never say that the decisions that we take now are for all time. That is inherent in the nature of tax, which reflects social attitudes. However, even at this time of change in the circumstances which we have discussed, the present position should be retained. However, as I have said, these matters are examined from time to time.
    Mr. Graham Page: Can the Financial Secretary say what the cost would be at present? The matter was raised by my hon. Friends and myself. It is important that the Committee should know what it would cost. If the sum involved is small, we hope that the Government will give way.
    Mr. Sheldon: I do not know the cost but it is unlikely to be large. It is difficult to estimate.
    Mr. Newton: I do not wish to take up too much time. Much as I respect the Financial Secretary, his speech was a classic example of a Treasury Minister under pressure using words to cloak the absence of an argument. I sympathise with my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) in saying that he could not follow the Minister. I doubt whether the Minister was following what he said himself.
    My hon. Friend the Member for Norfolk, South (Mr. MacGregor) spoke cogently in support of the amendment.

    1241
    His argument was stood on its head by the Financial Secretary with all his waffle about social circumstances. We know that circumstances are changing and that the position of women between the ages of 60 and 65 may be different in 25 years' time. The whole burden of the argument, however, is that in the social circumstances as they are now the tax system should take account of them as they are now. If it did that, it would provide the advantages of tax relief for women between the ages of 60 and 65 and not refuse them until they are 65.
    The argument that the decision is made on the ground of age and not of retirement is utterly ludicrous. There can be no justification for choosing to give special benefits to taxpayers at 65 other than that it is the normal retirement age for men. The normal retirement age for women is 60. We should recognise that and give the same tax allowances to single women and widows, instead of leaving them in a fiscal limbo until they are 65.
    I shall not press the amendent to a Division, because we shall return to the matter upstairs in Committee when we consider the wider question. I serve notice to the Financial Secretary—and I speak for other hon. Members—that we shall return to this subject again and again until something is done or until we receive more sensible and acceptable answers.
    I beg to ask leave to withdraw the amendment.
    Amendment, by leave, withdrawn.
    Mr. Jack Ashley: I beg to move Amendment No. 23, in page 11, line 23, after 'more' insert:
    'or either he or his wife living with him was in receipt of invalidity benefit or non-contributory invalidity pension'.
    I shall make a short speech. The amendment is supported by the hon. Member for Exeter (Mr. Hannam).
    The amendment extends to invalidity pensioners relief from the 10 per cent. investment surcharge on the first £500 of the excess above £1,500 of unearned income. I am not usually concerned with people who derive unearned income—normally I could not care less about their
    1242
    problems—but the amendment concerns a specific and particular point. I seek for disabled people a concession which is already enjoyed by old-age pensioners. Presumably on the ground that they no longer work, it is considered wrong to penalise them for having unearned income and that the penalty is less appropriate for old people. Exactly the same consideration applies to disabled people of normal working age who are incapable of working. Disabled people should be treated in exactly the same way as old-age pensioners.
    10.15 p.m.
    Retirement pensioners also enjoy relaxation of the earnings rule and investment income surcharge relief, but disabled people of working age have no such advantage, and if they earn more than £9 a week they lose their entitlement to invalidity benefit. Therefore, to tax this so-called unearned income at a higher rate than that applied to able-bodied contemporaries is quite unjustifiable. If the amendment is not passed, the discrimination against disabled people will be perpetuated.
    The amendment would give only marginal relief. Its costs would be minimal, and the categories of people who would be most likely to benefit are those who are very gravely disabled and who are receiving compensation, such as thalidomide children, who are now reaching working age. It is important to avoid discrimination against people of that kind. Other disabled people who would be helped would be those who have been left a little money by anxious and harassed parents who have been concerned about what will happen when they die.
    I should like the Minister to bear in mind that the possession of this small amount of capital by disabled people is likely to disqualify them from receiving supplementary benefit because the supplementary benefit system is designed to eat up that small amount of capital.
    In conclusion, I believe that disabled people should be treated in the same way as elderly people who get extra tax relief because they cannot earn. Severely disabled people cannot earn either. Various representations have been made to the Treasury that disabled people should be helped in this way. The Treasury's reply

    1243
    is that disabled people should be helped through the social security system as tax relief does not help the poorest and is less flexible. That is a fine standard argument, but it does not take account of the fact that disabled people have received the compensation of which I am speaking because of their loss of earning capacity, and their compensation should be treated for tax purposes as earnings. It is quite unfair that they should pay more tax than someone who gets the same amount through unearned income.
    The people in the Treasury are not the ogres that they are sometimes made out to be. They have a very difficult job to do. Everyone makes demands. I think that my right hon. Friend the Financial Secretary will recognise that, by and large, I support the people in the Treasury. I have said publicly and privately that I support the Treasury in its very difficult tasks. However, the point I want to make now, in addition to the point about helping disabled people, is that that support does not mean that one must become a voting zombie, and it must not entail automatic support for the Government. I propose, therefore, to press the amendment to a Division, conscious of the fact that many hon. Members have gone home already and that I shall not receive the support in the Lobby that the amendment ought perhaps to have. Nevertheless, I put forward the amendment with all the good will in the world, recognising the problems of the Treasury but hoping that my right hon. Friend will see fit to accept the amendment rather than to force a Division.
    Mr. Robert Sheldon: My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) is one of the more beguiling Members of the House, and if I were able to assist him in his great campaigns there are few things that would give me greater pleasure. He has taken up a number of the most worthy and deserving causes that have ever come to the attention of the House. In his campaigns the House knows that he is eager to help and he seeks ways in which he can provide assistance to people who are the most unfortunate among our fellow citizens. He seeks to do that in every way he is able to pursue.
    I do not think I am misrepresenting my hon. Friend if I comment that if there
    1244
    were better opportunities to help the people whom he wishes to help he might not regard this amendment as the most important method that he could use.
    One of the things about the tax system is that it is a very crude instrument for providing direct assistance, which is the best form of assistance for people in greatest need. We have this difficulty about the use of the income tax system for social security purposes. One can find oneself constructing an enormously complicated and parallel system—and because it is parallel it is less useful—to duplicate the work of the social security system.
    The main advantage of the social security system is that it gives the greatest help to those with the greatest need because it pinpoints and focuses attention in a much more refined way on the areas where need is greatest. However, the income tax system, being a much more diffused operation, assists those who have the most money to the greatest extent and those who need assistance least.
    Mr. Ashley: I appreciate what my right hon. Friend is saying. Is he objecting in principle? I recognise the principle. Has he costed this exercise? If so, can he tell the Committee how much it would cost for the Government to accept the amendment, so that we may have some idea of the added magnitude? Is it principle or cost, or both?
    Mr. Sheldon: It is very hard to ascertain the exact amount, but I would not expect it to be large. But here we have the problem of bringing the investment income surcharge threshold into new areas, and there are a number of administrative complexities and disadvantages. It also has the real defect of helping only those who, by the standards that my hon. Friend is using, are not those with the greatest financial problems. They would need to have capital capable of generating £2,000 a year. The amount of capital required for that is considerable. Of course, it is unlikely that they will have capital for generating that income if, at the same time, they have used some of their capital on something like buying a house, for example. We are not talking about the main area of concern in which my hon. Friend is trying his utmost to help.

    1245
    I am grateful for what my hon. Friend said about the Treasury, but in the end we have to concern ourselves with those in greatest need. There are those who are disabled but ineligible for benefit. A distinction would be drawn between such people and those whom my hon. Friend has in mind. Although I am happy to assist him whenever I can, I regret that on this occasion I am unable to accept the amendment that he has so movingly put forward.
    Mr. Ashley: I greatly appreciate my right hon. Friend's speech. If anything could persuade me not to press the amendment, that speech would. However, I intend to press it, for good reasons. First, the thalidomide children
    1246
    are a special category of disabled and they are the main ones who would benefit from the amendment. Second, the Minister has admitted that it would not cost very much. Third, I do not believe that it would damage the Government in any considerable way if the amendment were passed. Fourth, I believe in the principle of helping specific groups with particular problems.
    My respect for the Treasury grows. I have said some harsh things about the Treasury recently—some, but not all, of which I meant—but I now withdraw any personal attacks. Nevertheless, I propose to press the amendment in the spirit in which I have moved it and in which my hon. Friend has replied to it.
    Amendment negatived.
    Amendment proposed: No. 24, in page 11, line 25, at end insert:
    'and
    (ii) the tax payable by an individual in respect of his earned income shall not exceed one half of such income.
    (2) For the purpose of subsection (1) above the tax applicable to a person's earned income is such proportion of the income tax (other than income tax at the additional rate) borne on his total income as his earned income bears to the aggregate of his earned income and his investment income, and for this purpose" investment
    income" has the same meaning as in section 32 of the Finance Act 1971.
    (3) For the purpose of subsection (2) above deductions from total income under Chapter 11 of Part I of the Taxes Act shall be disregarded and no reduction shall be made for any deductions of a type specified in subsection (3) of section 528 of the Taxes Act or under section 75 of the Finance Act 1972'.[Mr. Pardoe.]
    Question put, That the amendment be made:—
    The Committee divided: Ayes 16, Noes 199.

    Division No. 131]

    AYES

    [10.31 p.m.

    Carlisle, Mark

    MacGregor, John

    Thorpe, Rt Hon Jeremy (N Devorn)

    Cope, John

    Newton, Tony

    Wigley, Dafydd

    Durant, Tony

    Penhaligon, David

    Evans, Gwynfor (Carmarthen)

    Ross, Stephen (Isle of Wight)

    TELLERS FOR THE AYES:

    Grimond, Rt Hon J.

    Sinclair, Sir George

    Mr. A. J. Beith and

    Howells, Geraint (Cardigan)

    Smith, Cyril (Rochdale)

    Mr. John Pardoe.

    Hunt, David (Wirral)

    Thomas, Dafydd (Merioneth)

    NOES

    Abse, Leo

    Evans, Fred (Caerphilly)

    Loyden, Eddie

    Allaun, Frank

    Evans, Ioan (Aberdare)

    Luard, Evan

    Archer, Peter

    Ewing, Harry (Stirling)

    Lyon, Alexander (York)

    Armstrong, Ernest

    Faulds, Andrew

    Lyons, Edward (Bradford W)

    Ashley, Jack

    Flannery, Martin

    Mabon, Rt Hon Dr J. Dickson

    Atkins, Ronald (Preston N)

    Fletcher, Ted (Darlington)

    McCartney, Hugh

    Atkinson, Norman

    Foot, Rt Hon Michael

    McDonald, Dr Oonagh

    Bates, Alf

    Ford, Ben

    McElhone, Frank

    Bean, R. E.

    Fowler, Gerald (The Wrekin)

    MacFarquhar, Roderick

    Bennett, Andrew (Stockport N)

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

    MacKenzie, Gregor

    Bidwell, Sydney

    Freeson, Reginald

    McMillan, Tom (Glasgow C)

    Bishop, E. S.

    Garrett, John (Norwich S)

    McNamara, Kevin

    Blenkinsop, Arthur

    George, Bruce

    Madden, Max

    Boardman, H.

    Gilbert, Dr John

    Mahon, Simon

    Booth, Rt Hon Albert

    Golding, John

    Mallalieu, J. P. W.

    Boothroyd, Miss Betty

    Gourlay, Harry

    Marks, Kenneth

    Brown, Hugh D. (Provan)

    Graham, Ted

    Marshall, Jim (Leicester S)

    Buchan, Norman

    Grant, George (Morpeth)

    Maynard, Miss Joan

    Buchanan, Richard

    Grant, John (Islington C)

    Meacher, Michael

    Callaghan, Jim (Middleton & P)

    Hamilton, James (Bothwell)

    Mendelson, John

    Campbell, Ian

    Harper, Joseph

    Millan, Rt Hon Bruce

    Canavan, Dennis

    Harrison, Walter (Wakefield)

    Miller, Dr M. S. (E Kilbride)

    Cant, R. B.

    Hart, Rt Hon Judith

    Mitchell, Austin Vernon (Grimsby)

    Carmichael, Neil

    Hatton, Frank

    Molloy, William

    Castle, Rt Hon Barbara

    Hayman, Mrs Helene

    Moonman, Eric

    Clemitson, Ivor

    Hooley, Frank

    Morris, Alfred (Wythenshawe)

    Cocks, Rt Hon Michael

    Horam, John

    Morris, Charles R. (Openshaw)

    Cohen, Stanley

    Howell, Rt Hon Denis (B'ham, Sm H)

    Morris, Rt Hon J. (Aberavon)

    Coleman, Donald

    Hoyle, Doug (Nelson)

    Moyle, Roland

    Conlan, Bernard

    Hughes, Robert (Aberdeen N)

    Murray, Rt Hon Ronald King

    Cook, Robin F. (Edin C)

    Hunter, Adam

    Newens, Stanley

    Corbett, Robin

    Irvine, Rt Hon Sir A. (Edge Hill)

    Noble, Mike

    Cowans, Harry

    Irving, Rt Hon S. (Dartford)

    Oakes, Gordon

    Crawshaw, Richard

    Jackson, Colin (Brighouse)

    Ogden, Eric

    Crowther, Stan (Rotherham)

    Jackson, Miss Margaret (Lincoln)

    Orme, Rt Hon Stanley

    Cryer, Bob

    Jenkins, Hugh (Putney)

    Ovenden, John

    Cunningham, G. (Islington S)

    John, Brynmor

    Padley, Walter

    Davidson, Arthur

    Johnson, James (Hull West)

    Palmer, Arthur

    Davies, Denzil (Llanelli)

    Jones, Alec (Rhondda)

    Park, George

    Davis, Clinton (Hackney C)

    Jones, Barry (East Flint)

    Pavitt, Laurie

    Deakins, Eric

    Kaufman, Gerald

    Pendry, Tom

    Dean, Joseph (Leeds West)

    Kerr, Russell

    Price, William (Rugby)

    Dell, Rt Hon Edmund

    Kilroy-Silk, Robert

    Radice, Giles

    Dempsey, James

    Kinnock, Neil

    Rees, Rt Hon Merlyn (Leeds S)

    Doig, Peter

    Lambie, David

    Richardson, Miss Jo

    Douglas-Mann, Bruce

    Lamborn, Harry

    Roberts, Albert (Normanton)

    Dunn, James A.

    Lamond, James

    Roberts, Gwilym (Cannock)

    Dunnett, Jack

    Latham, Arthur (Paddington)

    Robinson, Geoffrey

    Eadie, Alex

    Lestor, Miss Joan (Eton and Slough)

    Rodgers, George (Choriey)

    Edge, Geolf

    Lever, Rt Hon Harold

    Rooker, J. W.

    Ellis, John (Brigg & Scun)

    Lewis, Ron (Carlisle)

    Ross, Rt Hon W. (Kilmarnock)

    Rowlands, Ted

    Stoddart, David

    White, James (Pollok)

    Sedgemore, Brian

    Stott, Roger

    Whitlock, William

    Selby, Harry

    Strang, Gavin

    Williams, Rt Hon Alan (Swansea W)

    Sheldon, Rt Hon Robert

    Taylor, Mrs Ann (Bolton W)

    Williams, Sir Thomas (Warrington)

    Shore, Rt Hon Peter

    Thomas, Jeffrey (Abertillery)

    Wilson, Alexander (Hamilton)

    Short, Mrs Renée (Wolv NE)

    Thomas, Mike (Newcastle E)

    Wilson, Rt Hon Sir Harold (Huyton)

    Silkin, Rt Hon John (Deptford)

    Thomas, Ron (Bristol NW)

    Wilson, William (Coventry SE)

    Silkin, Rt Hon S. C. (Dulwich)

    Thorne, Stan (Preston South)

    Wise, Mrs Audrey

    Silverman, Julius

    Tierney, Sydney

    Woodall, Alec

    Skinner, Dennis

    Tinn, James

    Woof, Robert

    Small, William

    Torney, Tom

    Wrigglesworth, Ian

    Smith, John (N Lanarkshire)

    Varley, Rt Hon Eric G.

    Young, David (Bolton E)

    Snape, Peter

    Wainwright, Edwin (Dearne V)

    Spearing, Nigel

    Walker, Terry (Kingswood)

    TELLERS FOR THE NOES:

    Spriggs, Leslie

    Ward, Michael

    Mr. Thomas Cox and

    Stallard, A. W.

    Watkins, David

    Mr. Joseph Ashton.

    Stewart, Rt Hon M. (Fulham)

    White, Frank R. (Bury)

    Question accordingly negatived.
    Clause 15 ordered to stand part of the Bill.

Clause 21

  CHILD BENEFIT AND OTHER BENEFITS IN RESPECT OF CHILDREN
  Mrs. Wise: I beg to move Amendment No. 31, in page 13, line 12, leave out from 'deemed' to end of line 15 and insert:
  'to exclude any of the payments made in respect of that child as listed in subsection (4)'.
  The Committee might find the amendment a little cryptic, and it is therefore necessary to explain its purpose and how it arises. Unfortunately, subsections (3) and (4), with which the amendment deals, are themselves cryptic and difficult to follow, so I had better begin by explaining their purpose.
  An anomaly was created, through the introduction of the child benefit scheme, for widows and certain other people receiving State allowances. Those people were to lose £1 from their allowances and also the appropriate part of the child tax allowance. This was to be replaced only by the single payment of £1 child benefit. Therefore, whereas other taxpayers would lose the child tax allowance, with the child benefit moving in to balance up the payment in their favour, that was not so in the case of widows, who would actually be worse off. The Government therefore took appropriate action to remedy that anomaly, and I am at one with them in that.
  However, in considering subsections (3) and (4) it seemed to me that there was an opportunity for improving the situation of widowed mothers, guardians and those receiving certain other State allowances for children. I believed that
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  it would be a pity to miss that opportunity.
  The effect of the amendment is therefore to exclude from the reckoning of the taxable income of the parent concerned not only £52 a year—the equivalent of the child benefit—but the whole of the amount being paid by the State in respect of that child. Therefore, under the amendment the whole of the widowed mother's allowance attributable to the child or children would be excluded from the reckoning. That would, of course, have the effect of improving considerably the tax position of widows and certain other one-parent families and guardians. The people concerned are listed in Clause 31(4). but those who scrutinise the list may not find it crystal clear about those to whom the payments refer.
  10.45 p.m.
  Perhaps I should explain that, for instance, in Clause 31(4)(a) the child's special allowance under the 1975 Social Security Act relates to the amount that is paid in respect of a child or children to a divorced woman whose ex-husband has died. The guardian's allowance is the amount that is paid to guardians in cases where both parents have died or where one parent has died and the other is missing, or where one parent has died and the other parent is in prison.
  Mr. Patrick Jenkin: I am trying to follow the hon. Lady's argument, Can it be stated, briefly, that she is arguing that the child benefit should become a payment on top of social security benefits rather than instead of them?
  Mrs. Wise: No. I mean that there is a constant complaint that widows and other people in receipt of similar benefits are penalised by the tax system at least to this extent. I am arguing not that the child benefit should be an additional

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  payment but that the amount paid to a widow in respect of children should be tax-free. We are often told that the whole of a widow's pension should be tax-free, but I am not asking for that now. I am asking only that the amount paid in respect of children should be tax-free. That would be worth while. There are, of course, other things that I should prefer, but I am inevitably forced into a rather messy approach because we on the Back Benches have to work on the basis of things that are put before us. If we were starting with a clean sheet, I should like to have a greatly uprated child benefit and I should prefer other things to be more neat and tidy.
  However, it must be said that child benefit was in any case designed specifically to help families with two parents rather than those already in receipt of State benefits. That is why a widow is docked £1. It is because the child benefit is not specifically designed to help the widow. The effect of this amendment would be to relieve from taxation the amount of the widow's benefit which relates to children.
  Mr. Robert Sheldon: My hon. Friend said that £1 is docked from the widow. Does she understand that the widow is no worse off and that the purpose of the clause is to ensure that that is so?
  Mrs. Wise: I understand that the purpose of Clause 21 (3) and (4) is to ensure that widows are not worse off as a result of the introduction of child benefit.
  Mr. John Ovenden: Is my hon. Friend aware that widows are the one category of people who are no better off as a result of child benefit and that while two-parent families, where the husband is paying the standard rate of income tax, are 30p a week beter off as a result of child benefit, widows do not have a net gain? Is that a fair situation?
  Mrs. Wise: It is precisely because I want widows with children, and guardians and those who are receiving industrial death benefit, to be better off that I am introducing the amendment.
  I have no complaint about the clause as far as it goes. It is intended to remove the anomaly that leaves widows and others worse off. The Government want to bring them back to square one. That is fine as far as it goes, but it does not go far enough.
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  All hon. Members know that there is considerable pressure from widows and that the pressure is particularly justified in relation to their children. That is why I am not seeking to relieve from tax all the widow's pension or any part other than that relating to children. I am endeavouring not only to bring them back to square one but to take them on a little to square two or three. That is a very desirable objective.
  I shall explain the categories to whom clause 21 (4) applies because some hon. Members may not be aware of them. Subsection (4) (b) refers to an allowance under Section 70 of the Social Security Act 1975, namely, the industrial death benefit and the amount paid to a widow for the children whose father has been killed in an industrial accident.
  Subsection 4 (c) is self-explanatory and includes the widow's allowance which widows receive for the first six months. The amendment would affect only that part of the allowance relating to children. The same applies to the retirement pension, for the few pensioners who have dependent children. The widowed mother's allowance and the invalid care allowance, which also are listed in subsection (4) (c), are self-explanator.
  The amendment should meet with approval, especially on this side of the Committee. We are aware that families with children are often hard-pressed. Families with only one parent are particularly hard-pressed. We should like to have found a way of helping all one-parent families, but it was not possible under the clause.
  Within the limits of what is possible within this clause, the amendment helps as many one-parent families as is humanly practicable. I commend it to the Government Front Bench and hope that Ministers will accept it. They would have found it easier to accept if they had accepted our earlier amendment in which we tried to find the money for this amendment. It is not our fault if our Front Bench, aided and abetted by Opposition Members, ensured that tax concessions would go to the better off. We tried to find the money to help poorer people. The Government flung that back in our faces, and I suggest that they must now find that money from somewhere else.
  I commend the amendment Lo the Committee. It is designed specifically to help

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  widows and others with children in relation to the income they receive from the State for those children.
  Mr. Patrick Jenkin: I listened to the hon. Member for Coventry, South-West (Mrs. Wise) with considerable attention. I am not sure that she has explained the purpose of her amendment accurately. It seems to me—I might be wrong, but this is a measure of the complexity that we face—that subsections (3) and (4) are intended, following the change of last September to which I might refer later in the debate on the Question "That the clause stand part of the Bill", to reflect the broad proposition that child benefit is intended primarily to help those who, in the words of Frank Field, earn their poverty, those who are earning but who do not get the benefit of the child tax allowance.
  If that is right—and I believe that it is at the core of the whole system and was always envisaged with child tax credits which were the subject of the Green Paper published by the previous Conservative Government—it must follow logically that, where families are getting other benefits from the State through the social security system, to that extent the child benefit comes in substitution for those other benefits and not in addition to them.
  It is a separate question whether one needs to make some additional provision for widows. That has been argued on other occasions. These provisions go a good deal wider than widows. They refer to people in receipt of retirement pension, invalid care allowance and so on. It is not only one-parent families.
  The point about widows—perhaps I shall take the hon. Lady with me here—is that when the Government made their announcement on 23rd September they forgot about them. They forgot that widows had not suffered the clawback of their family allowance. As soon as the Government published the results of their study and announced a change of tack for the second time in child benefit, the organisations representing widows and one-parent families, Gingerbread and others said "You are making them worse off by £1 a week". The Government did not address their mind to widows, but that is a matter that can be pursued on another occasion.
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  The Government then had to announce a special £52 addition which put the widows back, as the hon. Lady said, to square one, but one cannot move on from that within the framework of the child benefit scheme and say that chid benefit will be paid in addition to the national insurance benefit, which is what the hon. Lady's amendment provides, whatever she may have said.
  Mrs. Wise: The right hon. Gentleman is wrong. My amendment is not working within the framework of the child benefit scheme. It is working within the framework of the tax scheme, which is different.
  It may be that the Government included subsections (3) and (4) in the clause because of child benefit. That is their problem which they are solving, but it is not the problem to which I have addressed myself.
  My amendment is not about the child benefit scheme. Any wide discussion about child benefits would be out of order. My amendment is about giving tax concessions to widows and certain others on low incomes. The right hon. Gentleman is right in saying that it is not only widows who are concerned but pensioners with dependent children and some others.
  That is what the amendment is about. It is not about child benefit. The fact that the Government had to tidy up the situation because of child benefit gave me the opportunity to put forward the amendment, but it is not about child benefit. If the right hon. Gentleman wants to discuss child benefit, I suggest that he does it on the Question "That the clause stand part of the Bill".
  Mr. Jenkin: It is all very well for the hon. Lady to say that. It may have done for procedural reasons, but the amendment is hung on these provisions which are the direct consequence of the decision that child benefits should be a tax-free benefit and that the child tax allowance should be reduced.
  11.0 p.m.
  I have been studying the Questions which a number of hon. Members below the Gangway on the Government side have been putting down on the subject. The hon. Member for Gravesend (Mr. Ovenden) is one and the hon. Member

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  for Kingston upon Hull, East (Mr. Prescott) is another. It seems to have come as a surprise to them—so much so that the amendment is starred—that child benefit will be in substitution for national insurance benefits, and, indeed, for a wide range of means-tested benefits, and not in addition to them.
  I do not know why that should be so. It should not be so, because on 8th November my hon. Friend the Member for Wallasey (Mrs. Chalker) asked the Secretary of State for Social Services
  'whether he will confirm that under the Child Benefit Act 1975 increases in child benefit for first children will be taken into account for unemployment and sickness benefit purposes, but that increases in child benefit in respect of second and subsequent children will not be taken into account.'
  That is what we are talking about. The Minister for Social Security replied:
  "I can confirm that the rates of child benefit which will apply from April 1977 will require the allowances paid for first children, with unemployment or sickness benefit, to be reduced—by the amount of child benefit—but not those for second and subsequent children."—[Official Report, 8th November 1976; Vol. 919, c. 58.]
  That is exactly what is happening, and, according to the logic, purposes and intent of the scheme, it is exactly what should happen.
  I understand the hon. Lady's intention in the amendment, but the effect is not to try to give a special allowance for categories of parents with national insurance children's benefit at a huge range of different rates. That is one thing to which one hopes that the child benefit scheme will ultimately bring some sense.
  Mr. George Cunningham: Is the right hon. Member being completely logical about this? Surely at first, if child benefit is being paid only to such an extent as it is wholly financed by reduction in tax allowances, there is a case for saying that the child benefit ought not to be offset by a reduction in other benefits, even if, when we have gone the whole way the incidence of child benefit ought entirely to replace those other benefits.
  Mr. Jenkin: Perhaps I should not have given way to the hon. Member, because I was coming to that point. What the Government are doing—and they may have been a little coy about it—is to meet the case that the Chancellor described last November when he said this
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  was causing great concern among large numbers of people.
  This is the problem, which has been referred to frequently since the Ashfield by-election, of people finding themselves better off out of work than in work. The Government are taking one small step to put that right. We are giving additional child benefit to families who are in work and making sure that it does not accrue, for whatever reason, to those who are out of work.
  If people are in receipt of taxable benefit when they are out of work, they do not end up by being worse off, but there are certain categories of people who get benefit which is not taxable, who are in receipt of sickness, unemployment, and invalidity benefit. Those benefits are not taxable. What will happen with those people is that, after having been unemployed for part of a year—unemployed or sick for two or three months—they will have enough income to absorb the full child benefit tax allowances and, therefore, will suffer the effect of the reduction of child tax allowance pound for pound. They would have been 30p a week better off, but if they are off work sick and have some other benefit set off pound for pound by child addition in national insurance schemes they will suffer a reduction. There is no answer to that. There will come a point where there is a cross-over, and the double deduction will mean cancelling the extra 30p when they are in work.
  I think that that is the logic of the scheme, but we need to know whether it is what the Government intend. It means that they are not responding to the deep public concern about people who are better off out of work. One could make a long speech on that subject alone. My hon. Friend the Member for Norfolk, North (Mr. Howell) has pursued it with a tenacity that hon. Members on both sides of the House must admire, whatever they think of the case—and I think that it is very strong. The problem is now widely recognised to exist and is causing great concern.
  The Government are now meeting the problem, but not in the way that would make real sense by making sure that all national insurance benefits were brought within the tax net. They are reducing the net income of those who are out of

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  work and who draw benefits which are not taxable.
  Dr. McDonald: The right hon. Gentleman's remarks are interesting but have nothing to do with the amendment, which is concerned not with unemployment benefit or sickness benefit but with the list of benefits in subsection (4). The point of the amendment is to exclude all the child allowance portion of those benefits from taxation. It has nothing to do with child benefit either. I suggest that the right hon. Gentleman keeps the rest of his remarks for debate on the clause.
  Mr. Jenkin: The hon. Lady must allow me to make my own speech. I am pointing out that what the Tribune Group is trying to do through the amendment of the hon. Member for Coventry, South-West is contrary to the whole concept and purpose of the child benefit scheme. The Under-Secretary of State for Health and Social Security, who follows these matters with great perspicacity, will not have been surprised at my saying that the Government are meeting a case put with great force by my hon. Friend the Member for Norfolk, North, who has been subject to much abuse because of it, and by many of my right hon. and hon. Friends, that there are large numbers of people who find themselves better off out of work or who suffer so little detriment that they feel that the incentive to work has largely disappeared. The Chairman of the Supplementary Benefits Commission thought that the figure was one in 10, but, to judge from the interviews with them, the voters of Ashfield recognised that it was much higher.
  I have paid tribute to the Government for meeting the problem, but they are not doing it in the most humane way. They are reducing the net income of those who are receiving untaxed national insurance benefit—sickness benefit, unemployment benefit and invalidity benefit. If that is not the Government's intention, they will presumably want to put the matter right. Incidentally, I am glad to see that the Secretary of State for Social Services is here.
  The question of the means-tested benefits is perhaps outside the scope of the amendment, but I should like to say that I have received from the Minister for
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  Social Security a letter in which he assured me:
  "We fully accept the principle that the improvement of universal benefits should reduce dependence on means-tested benefits."
  But exactly the same applies to the national insurance benefits, the dependency benefits for children. What is happening is intended, no doubt, to go some way—not far, but a small first step—to redress the balance, so that those in work will have the advantage of child benefit for the addition and it will not accrue to those out of work. But the consequence is that if their benefit when out of work is not taxable they can suffer the deduction twice. The double deduction may not merely offset the 30p extra, which depends on the ratio of the number of weeks in and out of work, but may go beyond it, and they may end up worse off over the year.
  That seems to me to be the position that stems from the two subsections and at any rate part of the point raised in the amendment. I can only advise my right hon. and hon. Friends that, admirable though the intention of the amendment may be to try to do something to help widows, it is not the right way or the right vehicle. Therefore, it would not be right for us to support it. I should like to know whether I have correctly spelt out the Government's intention in relation to the difference in the treatment of dependency benefit and child benefit when somebody is in work.
  Mr. Robert Sheldon: My hon. Friend the Member for Coventry, South-West (Mrs. Wise) gave a warm welcome to the introduction of child benefit. I think that she echoed in that welcome the feelings of most people concerned.
  The complexities to which my hon. Friend referred arise essentially from two basic causes. First, we are trying to bring about a change from a tax allowance to a benefit. Secondly, there is the question of phasing. At each stage, as we move from tax allowance to benefit and as we try to phase this over a period of years, we must try to ensure that nobody loses and that, to put in a small Treasury point, it does not cost too much. Clearly these are problems.
  When I refer to its not costing too much, I mean not costing too much as a necessary consequence of a change in

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  the structure rather than a Cabinet decision, which can be taken at any time, to increase the sums made available to those in need. That is a different matter. Those are the reasons for the complexities.
  The amendment seeks to exempt from tax the taxable dependency allowance for dependent children of widows and others. My hon. Friend gave a detailed description of those concerned—widows, retirement pensioners and others. Therefore, I need not go over that in more detail.
  I should point out one matter which my hon. Friend certainly understands and which I am sure the Committee will accept. The benefit is only for those who have sufficient income to take advantage of the tax changes. The child tax allowance did not give assistance to those who did not have sufficient taxable income against which to offset the allowance.
  A number of my hon. Friends felt that it was wrong that there should be an artificial distinction between allowances and benefits which meant that those who had as much need as others were unable to take advantage of allowances because their income was insufficient. We sought to remedy what we felt to be wrong. Unfortunately, for the reasons that I have given, the result has been the complexities that we see in this clause.
  Mrs. Wise: Does my right hon. Friend accept that the amendment refers not to child tax allowances but to making certain tax-free payments for children, which is a different matter? For example, whereas he wants to make £1 of the £6·45 paid as guardian's allowance tax-free, I want to make the whole amount tax-free. That is not the same as a reintroduction of the child tax allowance.
  Mr. Sheldon: I understand the point made by my hon. Friend. I was trying to establish the purpose behind the move towards child benefits. If we can establish the purpose behind it, we can see how successful we have been in meeting this purpose and how far we might wish to deviate from the original intention. That is why I mentioned at the outset the intention of the scheme.
  11.15 p.m.
  The intention was not to try to achieve a larger benefit, since that could be done
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  through the social security system. We were trying to achieve a move to child benefit from tax allowances to help those whose income is not sufficient for them to benefit from the child tax allowances. We have been able to meet that objective in the complicated manner that I have described.
  We have had the particular problem of widows. That problem arises because for the ordinary taxpayer in receipt of family allowances there was a clawback provision. In the case of the allowance for dependent children there was no claw-back. We had to introduce the changes proposed in Clause 21 so that these families would be no worse off. It was never the intention to make them better off.
  I understand my hon. Friends seeking an opportunity to say that these families should be better off. But I am relating the issue to the original intention of child benefit. If my hon. Friends feel that the benefits available under the social security system are inadequate, they are right to press the Department of Health and Social Security for increased benefits. These matters will arise again. I do not need to instruct my hon. Friends about how they should proceed.
  This was simply a matter of changing the child tax allowance to child benefit to ensure that people with insufficient income to gain benefit from child tax allowance received that benefit and were not made worse off as a result.
  Mr. Ovenden: I repeat the question that I asked in a previous intervention. Is there any justification for making two-parent families on the standard rate of tax better off and widows no better off? Why should they not be 30p a week better off like two-parent families?
  Mr. Sheldon: The answer lies in a complex series of arithmetical calculations. It is an administrative problem. It is not a major problem, and it can be remedied by other means, but not in this way.
  I understand why hon. Members bring to these debates a number of matters which would normally be discussed in a debate on social security, but such debates do not occur as frequently as Finance Bill debates. I understand that there are not many opportunities for raising such issues. Many arguments find their way into Finance Bill debates.
  Mr. MacGregor: I accept the right hon. Gentleman's remarks and I understand that the purpose of the clause is to ensure that widows and others are not worse off as a result of the introduction of child benefit. But we are offering the Financial Secretary a simple and easy way of ensuring that widows and others are better off without waiting for a social security debate.
  Mr. Sheldon: The difficulty about that is that it would not be simple, because, unfortunately, the system is not simple. Apart from the not inconsiderable moneys involved, there is the problem of the next stage of the phasing operations. This proposal would make it more difficult to carry out the final phases in the move towards a full child benefit system which we all wish to see.
  My hon. Friends are anxious to bring about certain social security changes, and they are importing those arguments into this very limited debate. I feel that the remedy for this lies elsewhere. We have met the aims which the Government set out to achieve in the change from child tax allowances to child benefit, and, despite the complexities, that is the right way to proceed.
  Mr. Patrick Jenkin: The Financial Secretary has said that this is inherent in the scheme. Will this be the pattern in subsequent stages of the child benefit? Will he say something about the double deduction because of the reduction in the child tax allowance?
  Mr. Sheldon: The right hon. Member should also await a debate on social security before bringing these matters forward. In the transition from child tax allowances to child benefit, the exact nature of the next stage has yet to be settled, but when it is settled the House will be informed.
  Mr. George Cunningham: With the greatest respect to the Financial Secretary, I do not think that in future we can rely on separate discussions on social security matters and personal income tax matters. The two are so inextricably intertwined, and will be so for at least the next five years, that the House must find sensible ways—although the House never does this—to discuss these subjects at the same time and with the same people taking part, preferably upstairs and not on the Floor of the House.
  Mrs. Wise: My right hon. Friend said that the purpose we seek to accomplish in the amendment would be better done by changes in the rates of benefit. I believe that there is a good case for making these particular payments tax-free, but for the sake of argument I shall accept for the moment the Financial Secretary's statement that we should do it by increasing benefits. If he had said that the Government intend to increase benefits by the equivalent amount of that in my amendment, I would have accepted his method. But he is not saying that. He is telling me to do something that I have learnt in my three years in the House that it is not possible to do. I am not convinced by his remarks.
  If the Government provide the means of ensuring the kind of result that we are seeking, we shall take advantage of it. If they do not, we must try to find whatever means we can. Slowly and painfully we are learning that some means exist.
  It ill becomes the Treasury to try to put the whole responsibility for this kind of thing on the Department of Health and Social Security. It is my conviction that the efforts that the DHSS would make in this direction are constantly and consistently thwarted by the Treasury. Therefore, we are justified in placing the responsibility quite firmly on the backs of the Treasury. It thwarts other efforts, so it should deal directly with the problems. Let the Treasury grapple with the efforts to help widows and retired people. It must not simply say that this is a problem for the Secretary of State for Social Services.
  This has nothing to do with the child benefit scheme as such or with the phasing out of child tax allowances. We agree with the phasing out of the allowances. The amendment is about making certain payments in respect of children tax-free.
  Mr. Newton: I have a lot of sympathy with the hon. Lady, but I have now departed from her. She says that the amendment has nothing to do with child benefit, but the practical effect of creating tax-free income for these categories is exactly the same as a tax allowance. So far as the dependency allowances are the same for the different categories, this proposal would be exactly the same as a tax allowance, equivalent to the value of the

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  dependency allowances or to a flat-rate tax allowance. So far as the dependency allowance is varied, the tax allowance will be different for one category or another. But the practical effect of granting a slice of tax-free income is identical with that of a tax allowance.
  I cannot understand why, instead of operating in this complex way, the hon. Lady does not operate on Clause 20(2), under which additional relief is given to widows and others in respect of children—a straightforward tax allowance for the group she is trying to help. Surely it is better to operate by way of a tax allowance which Ministers proposed to increase.
  Mrs. Wise: We are dealing with Clause 21, and if I sought to introduce an amendment relating to Clause 20 I should be ruled out of order. That is a good reason for proceeding on the basis of this amendment, which is in order.
  This proposal is not the same as providing a child tax allowance, because it is related not to the existence of children and parents in general but to the existence of particular categories with special problems. That is different from the original purpose of child tax allowances.
  The Government are seeking to make £1 of the widowed mother's allowance, the guardian's allowance and the industrial death benefit tax-free. I am seeking to make the whole of it—which in most cases means £6·45—tax-free. That would directly benefit people with children and with these special problems. They are old, they are widows, or they are invalids. This is worth while. It is unlikely to be done by other means, and the Government do not offer any other means. They say "Do not put pressure on us now. Put pressure on us in some other way at some other time." I believe that these people need some help now.
  We have exposed the Opposition's inability to grasp complex matters and their refusal to be particularly interested in these matters when it comes to the crunch. But I have not been looking for their support. That is their decision. The amendment is worth while, it will help those who need help, and I urge my hon. Friends to support it.
  11.30 p.m.
  Mr. Newton: I apologise for intervening at this stage, but I do not apologise too much because it is clear that hon.
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  Members on the Government side of the Committee who intend to vote for the amendment have not fully appreciated what they are doing. I do not want to labour the point except to say to the hon. Member for Coventry, South-West (Mrs. Wise) that if a child dependency allowance is £2 a week—I take the figure out of the air—or £104 a year, the effect of exempting it from tax is the same as granting that same person a child tax allowance of £104 a year.
  To that extent, if what the hon. Member wants to do is to help widows and other single parents there is no doubt—and it is she who has not grasped the point—that it would be simpler to increase the existing tax allowance for widows and others in respect of children—not tax allowances generally, but the allowances we have specifically directed to those about whom the hon. Lady is talking.
  The fundamental objection to either of these courses, which we would normally hear from the Labour Benches and which we have heard from the Minister, is that they help only those who pay tax. I do not have any objection to that, although clearly it is not much help to many single-parent families. What the hon. Lady is asking her hon. Friends to vote for is a method of helping single-parent families who are better off than the average, those who are paying enough tax—[Interruption.] It is clear that the hon. Lady and her hon. Friends do not understand what is being proposed. It is that additional benefits should be given to those whose incomes are large enough to pay sufficient tax so that if they receive some of the income tax-free they save money. By definition, any family not earning enough income to pay tax will not benefit from what the hon. Lady proposes.
  Mrs. Wise: Bearing in mind what the hon. Member and his hon. Friends are always telling us about the low level of pay at which tax bites, I am surprised that he is not grapsing the point. A one-parent family of only one child can start paying tax on earnings of about £26 a week. I do not consider that that is a family too well off to be worthy of consideration.
  Mr. Newton: I agree. The point is that these families are already getting the additional tax allowance proposed in the previous clause. To that extent they are

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  already well below the tax threshold if their income is as low as the hon. Lady suggests. What she cannot get away from is a matter of pure logic. It is an argument we have heard often enough from her hon. Friends, namely, that in trying to help people by tax-free income or tax allowances, we are helping those who are comparatively better off.
  In certain contexts that is a reasonable thing to do. But we are not talking about the argument from an incentive point of view. We are talking about helping the less well off. Labour Members appear to think that those of us who attach importance to the arguments about incentive are necessarily excluded from worrying about the less well off. It is
  one of their myths about the Conservatives. At the moment we are not talking about the taxation argument, which is totally different. We are talking about how to help the less well off. The hon. Lady's proposition is not sensibly directed to that end. If what she wants to do is to help those who are paying significant amounts of tax, she could find simpler ways of doing it. She has fallen between two stools, and she would do better not to take too many of her hon. Friends into the Lobby to make fools of themselves with her.
  Question put, That the amendment be made:—
  The Committee divided: Ayes 41, Noes 129.

  Division No. 132]

  AYES

  [11.35 p.m.

  Allaun, Frank

  Kinnock, Neil

  Selby, Harry

  Atkinson, Norman

  Lamble, David

  Skinner, Dennis

  Beith, A. J.

  Latham, Arthur (Paddington)

  Smith, Cyril (Rochdale)

  Bennett, Andrew (Stockport N)

  Lestor, Miss Joan (Eton and Slough)

  Spearing, Nigel

  Bidwell, Sydney

  Loyden, Eddie

  Thomas, Ron (Bristol NW)

  Canavan, Dennis

  MacCormick, Iain

  Thorne, Stan (Preston South)

  Cook, Robin F. (Edin C)

  Madden, Max

  Thorpe, Rt Hon Jeremy (N Devon)

  Crawlord, Douglas

  Maynard, Miss Joan

  Watkins, David

  Evans, Ioan (Aberdare)

  Mendelson, John

  Wigley, Dafydd

  Flannery, Martin

  Miller, Dr M. S. (E Kilbride)

  Wilson, Gordon (Dundee E)

  Grimond, Rt Non J.

  Newens, Stanley

  Wise, Mrs Audrey

  Hooley, Frank

  Penhaligon, David

  Hoyle, Doug (Nelson)

  Richardson, Miss Jo

  TELLERS FOR THE AYES:

  Kerr, Russell

  Rodgers, George (Chorley)

  Dr. Oonagh McDonald and

  Kilroy-Silk, Robert

  Rooker, J. W.

  Mr. John Ovenden.

  NOES

  Archer, Peter

  Dunnett, Jack

  Lyons, Edward (Bradford W)

  Armstrong, Ernest

  Eadie, Alex

  Mabon, Rt Hon Dr J. Dickson

  Ashton, Joe

  Ennals, David

  McCartney, Hugh

  Bates, Alf

  Ewing, Harry (Stirling)

  McElhone, Frank

  Bean, R. E.

  Foot, Rt Hon Michael

  MacFarquhar, Roderick

  Bishop, E. S.

  Fowler, Gerald (The Wrekin)

  MacKenzie, Gregor

  Bienkinsop, Arthur

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

  McMillan, Tom (Glasgow C)

  Booth, Rt Hon Albert

  Freeson, Reginald

  Mahon, Simon

  Boothroyd, Miss Betty

  Gilbert, Dr John

  Mallalieu, J.P.W.

  Brown, Hugh D. (Provan)

  Golding, John

  Marks, Kenneth

  Buchan, Norman

  Gourlay, Harry

  Meacher, Michael

  Buchanan, Richard

  Graham, Ted

  Millan, Rt Hon Bruce

  Callaghan, Jim (Middleton & P)

  Grant, George (Morpeth)

  Mitchell, Austin Vernon (Grimsby)

  Campbell, Ian

  Grant, John (Islington C)

  Moonman, Eric

  Cant, R. B.

  Hamilton, James (Bothwell)

  Morris, Alfred (Wythenshawe)

  Carmichael, Neil

  Harper, Joseph

  Morris, Charles R. (Oponshaw)

  Castle, Rt Hon Barbara

  Karrison, Walter (Wakefield)

  Morris, Rt Hon J. (Aberavon)

  Cocks, Rt Hon Michael

  Katton, Frank

  Moyle, Roland

  Cohen, Stanley

  Horam, John

  Murray, Rt Hon Ronald King

  Coleman, Donald

  Howell, Rt Hon Denis (B'ham, Sm H)

  Noble, Mike

  Conlan, Bernard

  Hughes, Robert (Aberdeen N)

  Oakes, Gordon

  Cowans, Harry

  Hunter, Adam

  Ogden, Eric

  Cox, Thomas (Tooting)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Orme, Rt Hon Stanley

  Crawshaw, Richard

  Irving, Rt Hon S. (Dartford)

  Palmer, Arthur

  Crowther, Stan (Rotherham)

  Jackson, Colin (Brighouse)

  Pavitt, Laurie

  Cunningham, G. (Islington S)

  Jackson, Miss Margaret (Lincoln)

  Pendry, Tom

  Davidson, Arthur

  John, Brynmor

  Radice, Giles

  Davies, Denzil (Llanelli)

  Johnson, James (Hull West)

  Rees, Rt Hon Merlyn (Leeds S)

  Davis, Clinton (Hackney C)

  Jones, Alec (Rhondda)

  Robinson, Geoffrey

  Deakins, Eric

  Jones, Barry (East Flint)

  Ross, Rt Hon W. (Kilmarnock)

  Dean, Joseph (Leeds West)

  Kaufman, Gerald

  Rowlands, Ted

  Dell, Rt Hon Edmund

  Kerr, Russell

  Sheldon, Rt Hon Robert

  Dempsey, James

  Lamborn, Harry

  Shore, Rt Hon Peter

  Doiġ, Peter

  Lewis, Ron (Carlisle)

  Silkin, Rt Hon S. C. (Dulwich)

  Douglas-Mann, Bruce

  Luard, Evan

  Silverman, Julius

  Dunn, James A.

  Lyon, Alexander (York)

  Small, William

  Smith, John (N Lanarkshire)

  Walker, Terry (Kingswood)

  Woodall, Alec

  Snape, Peter

  Ward, Michael

  Woof, Robert

  Spriggs, Leslie

  White, Frank R. (Bury)

  Wrigglesworth, Ian

  Stallard, A. W.

  White, James (Pollok)

  Young, David (Bolton E)

  Stewart, Rt Hon M. (Fulham)

  Whitlock, William

  Strang, Gavin

  Williams, Rt Hon Alan (Swansea W)

  TELLERS FOR THE NOES:

  Thomas, Jeffrey (Abertillery)

  Wilson, Alexander (Hamilton)

  Miss Ann Taylor and

  Thomas, Mike (Newcastle E)

  Wilson, William (Coventry SE)

  Mr. David Stoddart.

  Tinn, James

  Question accordingly negatived.
  Question proposed, That the clause stand part of the Bill.
  11.45 p.m.
  Mr. Patrick Jenkin: Clause 21 is the key provision in the structure of the child benefit scheme because this provision reverses the relevant provisions of last year's Finance Bill and makes the child benefit a tax-free benefit. It is the heart of the tax credit principle first put forward by the Conservative Government in their Green Paper on tax credits. Because it occupies such a key position in that structure, a debate on Clause 21 is in reality a debate about the principle of the child benefit scheme—and child benefit relates to tax credits for children.
  There are consequential matters contained in Clause 22 dealing with the reduction of child tax allowances, in Clause 23 which deals with children overseas, and in Clause 24 which deals with students which will be dealt with in Committee upstairs. We are debating Clause 21 on the Floor because it is the provision that sets out the principle of the child benefit scheme—namely, that it is a tax-free payment to mothers for children. The Chair has indicated that a fairly general debate on the child benefit scheme and references going beyond freedom from tax would not be out of order.
  It is right to remind the Committee that a tax-free payment was always envisaged, certainly at the time of the Green Paper and at the time of the Child Benefit Act. That legislation was taken through the House by the right hon. Lady the Member for Blackburn (Mrs. Castle), who I am glad to see present for this debate. It was only the Cabinet's surrender to the male chauvinists in the Labour Party a year ago, when it was decided to abandon child benefit, that upset that principle.
  It is worth pointing out that the pamphlet "The Great Child Benefit Robbery"
  1268
  sets out a detailed analysis of the rôle played over the years by the Prime Minister in his attitudes to family support. It is clear from quotations from the Cross-man diaries that the Prime Minister has never understood or accepted the case for a tax-free cash payment to mothers. The pamphlet points out that a so-called survey of Back-Bench opinion was in fact a survey of Government Whips, and it states:
  "A feminist backbencher has since said that if you asked the Whips today about votes for women they would no doubt be against it".
  The Prime Minister was against the child benefit scheme and, therefore, last May that scheme was abandoned and child benefits were then said to be simply a taxable extension of family allowances.
  Amendments were tabled to last year's Finance Bill at a late stage to change the whole pattern of what was envisaged at an earlier stage. [Interruption.] The Minister for Social Security says that the scheme was not abandoned. He will no doubt agree, that the tax-free cash payment, which he calls the central pillar of the Government's system of family support, was abandoned last May. From that dismal surrender has flowed all the trouble.
  The Minister for Social Security (Mr. Stanley Orme): The right hon. Gentleman may say that it was abandoned in May, but when the working party was set up and the phasing-in started the child benefit was introduced.
  Mr. Jenkin: The Minister anticipates almost my next words. He is now conceding that last May it was abandoned, and he is trying to say that some attempt to recover the position was made later in the year.
  I shall not list the long sad saga of order, counter-order and disorder that followed the surrender of last May. I am sure that hon. Members in all parts of the Committee have been made fully aware by their constituents of the confusion which has ensued.

  1269
  Let me restate briefly the Conservative view of what the Government should have done. I spelt it out in the debate on 28th June last. They should have introduced the child benefit not at £1 a week but at £2-plus, and the figure is probably £2·34 as the precise equivalent of the under-11 child tax allowance. They should have paid the 30p premium for third and subsequent children. They should have eliminated the child tax allowance at the under-11 level, retained the child tax allowance over 11 where that exceeded the under-11 rate, and retained the full child tax allowance for rates of tax in excess of 35 per cent., so that someone paying 40 per cent. would get relief at 5 per cent., and so on.
  That would have produced five clear advantages. It would have given real help, not just 30p a week, to the working poor. It would have cased the soul-destroying impact of the poverty trap. It would have reduced the imbalance between those in work and those out of work. It would have given real help to those one-parent families in work; and it would have switched resources substantially from the wallet to the purse. It would not have left anyone worse off, except perhaps a few very wealthy families, and I concede that it would not have have given 30p to standard rate taxpaying families. The right hon. Member for Blackburn, however, had left the Government's cupboard in the Social Security Department so bare that there were no resources for a general improvement in family support. I spelt out last June what could and what should have been done, but it was not done and that is a matter of great regret.
  I recognise that it cannot now be done for 1977–78, and we are now stuck with Clause 21 and the other consequential clauses. But I must state clearly without any "ifs" and "buts" that it will be our intention, when we win the next General Election, to introduce a full child benefit as soon as it is practicable as the first stage of phasing in a tax credit scheme. For the present we must face the consequences of last May's "surrender to chauvinism", to quote the right hon. Lady, plus last September's belated attempt to recover the position.
  In September the Government changed tack yet again. The child benefit was
  1270
  now not to be taxed, as this clause achieves that objective. There was to be no clawback—that is to go too. The child tax allowances were not to be left as had been earlier proposed but were now to be reduced. The result of that dramatic change of direction has been to produce the shambles which is now widely acknowledged.
  Officials in the Inland Revenue, the Department of Health and Social Security and the Post Office—three giant Departments—have struggled manfully to perform the miracles that they have carried out to get the scheme as far ahead as it is. They have done it against all odds. The fault that the matter has been so mishandled rests squarely with Ministers who have forced these huge Departments to grapple with radical changes of policy and who have allowed totally inadequate time for the Departments to react to them in the sensible and measured way in which administration should be carried out.
  The measure of the difficulties that those Departments have faced becomes clear from an answer I received from the Minister for Social Security to a Question I tabled immediately after the Budget. I asked the Secretary of State for Social Services
  "if he will list successive changes of Government policy on child benefit and consequential arrangements since the Child Benefit Act became law."—[Official Report, 14th April 1977; Vol. 930, c. 62.]
  From the Minister's answer one can identify no fewer than 11 distinct and separate changes in policy that have taken place since the Act became law.
  The story started with the decision on 25th May 1976 to make the child benefit a taxable allowance, and last year's Finance Bill did just that. This clause is intended to reverse that. The story ended with the special transitional arrangements for students that were announced on 29th March 1977. There have been 11 separate changes in policy. I shall not list them all. They can all be seen in Hansard. I referred to 23rd September 1976 and the announcements by the Chief Secretary. Three of them were special changes in FIS. There was an announcement about the effect on free school meals and about the effect on students, as well as the new student arrangements announced on 28th March

  1271
  and the full child tax allowance for students aged over 19, coupled with the benefit from increases in parental contributions.
  There have been 11 separate changes of policy during the course of the year. How on earth people are expected to grapple with that is past understanding. In fact, they have not been able to do so. Practically nobody outside the House can begin to understand how the child benefit scheme now works and its effects. What is much more serious, however, is the position of the staffs of the Post Office, the Inland Revenue and the DHSS who must grapple with these changes. One asks how they are expected to cope, and the answer is that they cannot and are not doing so. In the eyes of these staff, the child benefit scheme has become a bad joke. However, it was the fault of Ministers and not of the staff. It is entirely the fault of the Treasury Bench. These staffs are the victims of the Government's ineptitude.
  Mr. Orme: I should like to inform the right hon. Gentleman and the Committee that the flow-back to the Department about the operation of the scheme indicates that its coming into operation has been far more even than the right hon. Gentleman has given it credit for.
  Mr. Jenkin: If that is so I am glad to hear it, but is it really suggested that this is a sensible way to administer a major change in tax and social policy—to dribble out a whole series of decisions with the last one being announced only five days before the scheme is due to begin? Do the Government regard that as sensible administration? Of course it is not. Two major changes of tack in the course of one year have resulted in the chaotic introduction of the scheme. One-child families would receive tax-free benefit under the clause, but how many hundreds of thousands of such families have not yet claimed child benefit tax-free? If the child tax allowances are cut, such families will realise that they are losing out, and presumably they will then claim quickly.
  But what of the single parent in part-time employment who is below the tax threshold and who stands to gain most because there is no child tax allowance to be cut?
  1272
  We know that the outturn of the child interim benefit was 10 per cent. below what was estimated—£19 million against £21 million. One family in 10 did not claim CHIB before the end of the year. What steps are the Government taking to reach the families who have not yet claimed child benefit and will not get the benefit of Clause 21?
  12 midnight.
  In a telling speech on Second Reading of the Finance Bill, the right hon. Member for Blackburn said that it was a disaster that no part of the tax cuts in the Budget would go to families with children. She referred to
  "the major flaw in the Budget"
  and
  "serious flaw in the Bill".—[Official Report, 28th April 1977; Vol. 930, c. 1530.]
  I do not often agree with the right hon. Lady, and I hope that she will not consider it an insult if I agree with her on this occasion. The right hon. Lady was right. She and I support the concept of the full child benefit. I was at the Treasury when the scheme was invented, and the right hon. Lady piloted the Child Benefit Bill through the House and gave it flesh and blood. Neither of us envisaged that the introduction of the scheme would make it impossible for the Government to switch resources to the family when taxes were being cut. This has happened, and we must ask whether it is an inevitable consequence of this form of child benefit.
  My wife's child benefit book provides for a benefit of £2·50 a week until next April. when my youngest child but one reaches the age of 19. After that, there will be £1 a week for the remaining child under 19. But that goes through to May next year.
  We were told at Question Time today that it was intended to increase the benefit not in November but in the next Budget. One of the arguments canvassed before the Select Committee was that benefit payments should appear in the books as units that could be given different values by a relatively simple administrative step. For example, up to a certain date the units would be worth, say, 50p and after that 60p—a 20 per cent. increase that could be achieved with the minimum of trouble. There would be no question of changing the books. The vouchers are

  1273
  already dated and post office staff would have to check only the date. That is a simple way of providing tax-free increases.
  What are the objections to such a scheme? We were told in the joint study of the Labour Party and the TUC which considered whether the rates of chid benefit should be changed from April that
  "There would be severe operational difficulties. As far as DHSS is concerned, the order hooks have already been printed at the £1/£1·50 rate and would all (about seven million have to be overstamped. This would involve staff costs of well over £1 million. It would inevitably result in confusion for staff and public alike, at a high administrative cost, for no net gain to families. And there is a real risk of breakdown with people being without order books for the proper amount, and even without orders books at all, for some weeks."
  Much of this seems to be happening already. Although this was forecast, it could be avoided if we had books of units. I do not understand why this cannot be done. The Government must examine the matter, especially in light of the administrative savings.
  Then there is the argument that this would mean more public expense. This raises the question of whether a tax-free payment, such as this is under Clause 21, is public expenditure or whether it should be regarded as a deduction from tax in the way that tax allowances are now regarded. Is that one of the probems that the Government are facing with this question of varying the rate? I cannot believe that it need be.
  In the public expenditure White Paper—
  Mr. George Cunningham: It is a Blue Book. It should be called a Blue Paper.
  Mr. Jenkin: The hon. Gentleman is always anxious to rewrite the rules of the House. If he wants to call it a Blue Book I shall not complain, but we know it as the public expenditure White Paper.
  What the Government did—this was commented on favourably by the Sub-Committee of the Expenditure Committee—was to show the gross child benefit paid and then the deduction of the reduction in child allowance. The Government said in paragraph 7 of the White Paper:
  "it is this net cost which is included in the programme totals".
  1274
  I say that that is a sensible way of looking at it, but it means that the net cost is still regarded as public expenditure. It replaces tax allowances, and tax allowances and tax credits have the same ecomic effect, almost however one looks at it. That is why the Americans talk about tax expenditure. One wonders whether this is not the right way of dealing with it.
  My third question to the Financial Secretary is this. When will this child benefit be increased? We were told this afternoon that it would not be in November, and there is a suggestion that it might be increased next April. Will it be increased only by the amount of the reduction in the tax allowance, or will there be a real increase in value in this tax-free child benefit under Clause 21?
  In the Second Reading debate, the right hon. Member for Blackburn said:
  "I am alarmed because by then"
  the right hon. Lady meant by November, but she will be even more alarmed in April—
  "it will be administratively too late to increase child benefit. If the Chancellor comes along with more tax reliefs in the autumn, under the formula of the Bill we shall be compelled to leave the children out."—[Official Report, 28th April 1977; Vol. 930, c. 1532.]
  That is what is to happen. There is now no intention of increasing child tax benefit although the £1 or £1·50 was fixed a year ago, in May 1976, and it will be April 1978 before there is any question of increasing it.
  I think that this gets us into a difficult situation indeed. The Government can increase the tax allowance without reference to the Contingency Reserve, but they cannot increase child benefits because that is a charge on the Contingency Reserve and it cannot be done. If that is so, are not we in an absurd situation?
  The economic effect of an increase in tax allowance and an increase in child benefit is the same. If the limiting factor is the size of the public sector borrowing requirement—and that is the central feature of the IMF Letter of Intent—whether it is a tax cut or an increase in child benefit, in either case it puts more cash into the hands of the taxpayer. I must ask the Financial Secretary to spell out exactly how the Government see this. What are the administrative constraints?

  1275
  Is it a question of the printing of booklets, or is it a question of the economic classification of public expenditure limits?
  There is a fourth question that arises out of this tax-free child benefit under the clause. Do the Government accept the proposition that over a prolonged period families with children have fallen back relative to families without children? Do they accept that there is a need to redress the balance? Many studies have exposed this trend. I mention only two. First there is the CPAG—the Child Poverty Action Group—Budget memorandum in which tables show that family allowances in 1976–77 were half their real value of 30 years earlier. Another study which has come into my hands is that of the Outer Circle Policy Group. It showed the relativities of child tax allowance to single and married allowances and went back to before the war. It showed that child tax allowances had relatively been sharply reduced.
  Incidentally, that report also shows that child tax allowances, expressed as a percentage of the single person's tax allowance, tended to increase under Tory Chancellors but to reduce under Labour Chancellors.
  When one looks at the combined figure of family and child allowances, one sees a steady decline over the years with benefits going to families with children, in relation to the single and the married couples. The CPAG's conclusion is that
  "support to children whose parents are working has been steadily eroded."
  When this is combined with the effect of the disastrous lowering of tax thresholds in real terms over the last three years, Ashfield begins to fall into place. One point that my hon. Friend the Member for Ashfield (Mr. Smith) made throughout his campaign was that people were paying too much tax. The electorate agreed with him, and he won.
  But there is another effect. I come to the matter on which I was invited by the Financial Secretary to put my points on the Question "That the clause stand part of the Bill": the relative position of those in work and those out of work. I know that the Financial Secretary took it on board when I said it before, so I shall be brief.
  The effect of what is being done in this clause, making the child benefit
  1276
  tax-free, is to ensure that there is an advantage to the poor family when in work. Under the Government's scheme, the advantage is 30p to all families and £1 to poor families per week. There is no comparable advantage to those on national insurance and social security benefit. I have accepted that that is right and in accordance with the principle of redressing the balance between those in work and those out of work. It is a small step but nevertheless a step in the right direction.
  If one looks at it in relation to short-term benefits for unemployment, sickness and invalidity, these are tax-free and the effect is that there will be duplication of detriment. The double detriment is because tax allowance is reduced and child benefit takes its place with 30p extra a week. But once the family goes out of work and becomes unemployed or sick, the child benefit is set, again, against their dependancy allowance under the social security scheme. At some point the detriment of double deduction will offset the advantage of the extra 30p received while in work, and those families in the course of a year will end up worse off.
  That is one way of redressing the balance between those in work and those out of work. But is it what the Government intend? The right answer, surely, is a full tax credit. That would make the benefits taxable in the way in which long-term benefits are taxable and nobody would be worse off, because the advantages are set off one against the other. This benefit does not help families with students in college now who will end their courses in July. They do not benefit from the reduction in parental contribution which starts next September.
  We shall no doubt debate the question of overseas children in Committee upstairs, but the Government's decision to phase out the child tax allowance for children overseas, notwithstanding that they do not get child benefit, is in line with the report of the Select Committee which examined this matter in 1972–73. It said, and I quote paragraph 109
  "We appreciate that this change in the system will alter very materially the position of those who now claim the allowances in respect of overseas dependants and we should welcome any step which could be taken to mitigate hardship in this field."

  1277
  It has been postponed for a year. Therefore, the Under-Secretary of State for Health and Social Security says that the word "sharply" used by the Secretary of State in the debate last June is no longer justified. That is a matter of semantics.
  The paragraph continues:
  "We doubt whether allowing tax relief on proof of remittances actually sent abroad would be satisfactory, because the proof of despatch would by no means be proof that the remittance would be bona fide for the benefit of a dependant."
  Then there is a key sentence:
  "But we think that an extension of the covenant system might be further investigated."
  Do the Government have it in mind to extend the covenant system so that a covenant for a child overseas could qualify for tax relief as the tax credit Select Committee recommended?
  12.15 a.m.
  What would the reaction have been if it had been a Tory Government who reduced the child tax allowances for overseas children? The reaction in the House would have been one of utter hysteria. We should have been accused of racial discrimination, of causing grave hardship to the poorest in the country, of a savage attack on the immigrant community—all of which is said in a letter to me from the Redbridge Community Relations Council.
  Yet this is probably the right decision. But the Government must examine the arguments of the Select Committee to see whether there is some way of relieving what might be hardship. We are a responsible Opposition. We see the strength of the case, but we want to know about the covenant scheme.
  The clause may represent a significant step on the road to a proper structure of support for families with children, but it is a minuscule step. In the words of the poet Horace,
  "Parturiuni montes: nascitur ridiculus mus"
  Although I have been critical of the way in which the child benefit has been introduced, we support the benefit and I do not suggest that we vote against the clause, because it is integral to the scheme. But Ministers continue to make absurd claims for the "ridiculus mus" that they have produced. The Minister for Social
  1278
  Security, who, I suspect, has left to catch his train, said on 4th April:
  "the present two systems of support for children, child tax allowances and family allowances, are being replaced by a single tax-free cash benefit".
  That is not true. There is only a small first step along that road. He continued:
  "all the support for children is going where it properly belongs, to the mother"
  That is not true either. It will not happen for years. The Government are trying to pretend that the scheme is a great deal more important than it is and as it would have been if they had introduced our proposal.
  The last word must go to the Secretary of State for Social Services, who went to Washington, County Durham, to praise the merits of the child benefit scheme. He may have said "Ha'way the staff", but he did not have the nerve to say "Ha'way the children", because they get precious little out of it. The clause is a small step and we shall not vote against it, but the Government must know that those who complain of the "Great Child Benefit Robbery" have a great deal of right on their side.
  Mrs. Barbara Castle: It was typical of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that he should spend so much of his speech on resurrecting so many stale mythologies. To listen to him one would have imagined that if there had been a Conservative Government in office we should have had, in April this year, the introduction of a child benefit scheme that would have spread richness, light and joy throughout every family in the country. One would never have imagined that Conservative Governments never increased the family allowance in the whole 13 years they were in office, and certainly never took the step of extending it to the first child.
  Let me begin by disposing of some of the mythology. We should be talking about the need to increase family support. The child benefit scheme which the right hon. Member for Wanstead and Woodford told the Committee the Conservative Government would have introduced, had they still been in office, would not have done that. When the Government announced the postponement of the scheme the right hon. Gentleman argued,

  1279
  as he has argued again today, that we could have had the child benefit scheme without any additional cost at a rate of £2—
  Mr. Patrick Jenkin Mr. Patrick Jenkin rose—
  Mrs. Castle: I do not want to be interrupted at the moment.
  Mr. Peter Bottomley: I believe that my right hon. Friend's comments were made when the Government were providing the extra £90 million. That was included in what he was saying. Therefore, the right hon. Lady is not quite correct.
  Mrs. Castle: Yes, at no additional cost to what the Government were providing—I know the figures perfectly well—giving a level of child benefit of £2·35 a week.
  The right hon. Gentleman then had the audacity and the dishonesty to tell the Committee that it could not be proceeded with because I had left the cupboard bare. But, by his own admission, he was not going to take anything extra out of the cupboard. That was another of his distortions and irrelevancies.
  Mr. Patrick Jenkin: There is a lot on which the right hon. Lady and I agree. I have been rough with her and she is entitled to be rough with me, provided that we get it right. I made it clear that in my scheme there would have been no general improvement, but there would have been a big improvement for the children of those at the bottom end of the income scale. They would have got a benefit two or three times larger than has been given and there would have been a corresponding switch from the wallet to the purse. There would have been no general 30p. That is the difference between what we would have done and what the Government have done.
  Mrs. Castle: That is the point of difference. I am saying that the Opposition do not believe in an increased level of family support.
  Mr. Patrick Jenkin: There is no money for it.
  Mrs. Castle: Exactly. That is what he is now saying. Therefore, he cannot say that I left the cupboard bare. The right hon. Gentleman did not believe in any
  1280
  additional public expenditure. What I did that emptied the cupboard, if that is the phrase that the right hon. Gentleman wants to use, was to increase old-age pensions, which I am sure the Opposition consider was extravagant, and to extend the disablement scheme, about which the hon. Member for Wallasey (Mrs. Chalker) prates. That takes money. The money cannot be there if it has been spent on helping disabled housewives and mobility allowances. That was what emptied the cupboard, again to use the right hon. Gentleman's phrase.
  The right hon. Gentleman attempted to justify as highly desirable the introduction of a full child benefit scheme at no additional cost. If he imagines that would have spread enthusiasm throughout the land or got rid of any of the difficulties of the transitional anomalies, he is living in cloud-cuckoo-land.
  What we ought to be fighting for tonight, and what I had been fighting for in my speeches quoted by the right hon. Gentleman, is for this country to devote an increased level of its resources to family support. I totally reject the concept that the cupboard was bare. It was always intended that the child benefit scheme should be covered by the contingency reserve which stood at £800 million.
  I considered that a minimum level for the full introduction this year of child benefit would be £2·70 per week. That has been variously estimated as costing between £110 million, compared with £94 million and what the Treasury maintains is £180 million. I dispute that figure. Even accepting the Treasury's figure, I maintain that at a time of rising inflation and particularly in a year when there has been such economic overkill that we are having to give money back through tax reliefs it is scandalous to suggest that the cupboard is too bare to find £180 million.
  That is the indictment that we should be making tonight. It is also an indictment against the Opposition. If we had a Conservative Government we should not have a child benefit scheme at all, let alone one at the level that I consider to be the minimum required. The evidence is that in the last few years of the Tory Party's conversion to a total abhorrence of public expenditure and to

  1281
  cut it at all costs, Opposition spokesmen have told us that the tax credit scheme on which they produced a Green Paper would have had to be reviewed.
  The Opposition would not have introduced anything like the social improvements introduced by this Government. We know that. May we now dispense with the hypocrisy and turn to what should be done now? Increasing the level of family support is of dominant urgency.
  Of course, it is useful to have a child benefit scheme for its own sake, whatever the level, because it extends benefit to those who are too poor to pay tax. But let us realise that we are talking about a tiny minority—about 250,000 families. We should be talking about the 7 million or more children whom we want to benefit and who are going short. They are the new poor in our society.
  I regret deeply the postponement of the full introduction of the child benefit scheme. I accept that this is a transitional phase, which creates the type of anomalies that we discussed earlier. But I plead with the Government to recognise that this year they have deliberately refused to introduce a proper child benefit scheme at a reasonable level. At the same time they have given away £1,800 million in tax reliefs, not a penny of which has gone directly to benefit the children who are so much in need.
  My right hon. Friend the Financial Secretary said that we must concern ourselves with those who are in greatest need. Those in greatest need today are the families on modest incomes with children to bring up at a time when inflation is continuing at an intolerable level. Out of the £900 million spent on raising the tax threshold in the Budget, only £360 million goes to parents with dependent children. Families with children are becoming relatively poorer in relation to the single person. We spread the available resources so broadly that we have to leave out the children. That is an intolerable situation, which will become doubly intolerable if—as I hopc—we have another reflationary injection of relief and easement of economic and financial stringencies in the autumn.
  What are the Government going to do about the family in that situation? I totally reject the idea that it is administratively
  1282
  too late to increase child benefit this November. I have proof of that. When I expressed anxiety about whether we were running too late administratively to increase the pensions and other benefits in timefor the November uprating, I was told, only this afternoon, by the Secretary of State, that there was no need to worry. He said that there was plenty of time left, and that the middle of June would be a perfectly satisfactory starting date. I hope that he does not have the same trouble with the Civil Service unions that I had through apparently rushing an uprating. This House has until mid-June to decide to increase child benefit in November. We should do it.
  12.30 a.m.
  That is what concerns me tonight. I am not concerned with the past—with my disappointment over the delay and the phasing. I am concerned with one thing only—that before it is too late we should increase the level of support for families. I ask my right hon. Friend, in his reply, to repudiate the answer that I received earlier today, when I was told categorically that there would be no increase in child benefit this year—not even as part of the annual uprating. This is what I find intolerable.
  Mr. Peter Bottomley: I follow with some pleasure the speech of the right hon. Member for Blackburn (Mrs. Castle), especially the middle and later parts, which were on topics on which we agree.
  There are various problems that could easily be considered in this debate on the clause, but I shall take up the right hon. Lady on only one or two issues. She said she wanted to deal with the mythology surrounding these matters. I thing that she created some of her own, or that she was rather selective in her memories.
  What a shame that the Labour Government did not introduce the full child benefit scheme in April 1976. I think I would have the right hon. Lady's agreement on that point. It was a great pity that, as Secretary of State in those days, she could not persuade her Cabinet colleagues. Had she done so the scheme would have been in effect and running for more than a year. The uprating would have come—not automatically, because we know how the Treasury Ministers have to deal with the trade unions, and they have a blind spot when it comes to

  1283
  looking at elements of family support as part of the wage negotiations and bargaining.
  It is a shame that all benefits are not put in the Finance Bill for confirmation. That would give Back Benchers like myself the opportunity to attack the problems of increasing child benefit directly without having to mess around with child tax allowances. There is all-party agreement for bringing in child benefit, yet we have a Finance Bill that does not give us the opportunity of looking directly at benefits that are equally a part of Government expenditure as tax allowances or other benefits. The Treasury Ministers should consider this point in future.
  The House should support the suggestion of putting units on vouchers for child benefit. One reason why this has not been done in the past is not that the Post Office actually needs to read the sum on the form but to give the Treasury an excuse to delay increasing these benefits, which should be raised in line with inflation in the same way as old-age pensions.
  If we have a universal system of old-age pensions and a universal system of family support through child benefit, what is so peculiar about children that we ignore the ravages of inflation on them? How are they different from pensioners? Why does the old-age pension go up automatically while the child benefit does not? Is there some distinction that I have missed in my two years in the House? Or are we supposed to assume that because some families with children are at work, they get extra increases at work because of their family responsibilities?
  We know that that is not true. The 8 million old-age pensioners are treated differently from the 14 million children, who are left to muddle through in a fog of inflation, beset by the ravages described by the right hon. Member for Blackburn. Yet the House has so far seen no reason to change. In fact, the right hon. Lady led her colleagues into the Division Lobby against a suggestion that there should be even an annual review of the level of the child benefit. The picture seems to change according to whether one is on the Back Benches or the Front Bench.
  1284
  However, I think that the right hon. Lady will now agree that it would have been right to have not only an annual review but the automatic uprating, following that review, which we have with old-age pensions. I am not blaming the right hon. Lady for her actions; I am blaming her Cabinet colleagues for not having the foresight, the compassion or even the common humanity to recognise that dependent children should be treated on all fours with pensioners.
  It is now 30 years since Eleanor Rathbone won her campaign for family allowances. For those 30 years, we did without a benefit for the first child. We now have it. But in the case of our nearest Common Market partner, France, for an additional child a mother will get £1,000 over two years. In this country she gets less than £100. Are we so down on the family?
  Perhaps the reason is the composition of our political parties. The Labour movement is built around the representation of the person at work. In discussions about distributing increased production or incomes policy, do its members discuss with the Government the position of those with family responsibilities? Are they discussing now with the Chancellor and the Secretary of State for Social Services how, in the next stage of incomes policy, the tax-free child benefit can be increased so as to introduce some equity—
  The First Deputy Chairman (Sir Myer Galpern): Order. I have only just come into the Chair, but I have begun to wonder where the hon. Member's speech is going. He has been looking at me quizzically and smiling, and he has reason. He is not relating his argument to taxation. The question of the level of child benefit is strictly out of order.
  Mr. Bottomley: I am grateful for that guidance—
  The First Deputy Chairman: The hon. Gentleman did not require guidance.
  Mr. Bottomley: I was smiling because I remembered a jest from the Chair earlier tonight and wondered whether I was going to be treated to another.
  The First Deputy Chairman: I make only one per evening.
  Mr. Bottomley: I say, "Good morning," to you now, Sir.
  If I may try to relate my remarks more closely to the clause, I was alluding to the present discussions, which have a impact on taxation and therefore the level of tax that is not being levied on child benefit. The Government at the moment are apparently ignoring the 14 million children affected by this tax-free child benefit. They seem to ignore the 14 million parents—the 28 million people, or 27½ million if we assume that there are a number of one-parent families.
  The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): The hon. Member's arithmetic is slightly wrong. Some parents have more than one child, and therefore one does not double the number of children to arrive at the number of parents.
  Mr. Bottomley: I am grateful to the Minister, but may I draw his attention to the fact that most children have two parents? Therefore it can work out that way. If there are 7 million first children, it suggests that there are roughly 7 million families. If, on average, a child has two parents, that means there are 14 million parents. Seven million first children plus 7 million subsequent children, plus 14 million parents, totals 28 million. I may have got my sums wrong, but it seems to be logical, if we are dealing with this number, that they ought to be given more consideration than we can give in a short debate, which possibly verges on being out of order, early in the morning.
  The proceedings on the Finance Bill should make provision for a serious debate on the topic with which the right hon. Member for Blackburn and I are concerned, namely increasing the level of family support. It is time that there was a family movement as effective in terms of its reasoning and logic in presenting a case to Government as the trade union movement, which represents 11 million people out of a working population of 23 million. That is much less than the 28 million people involved here.
  When the Minister replies I ask him to tell us whether there is to be a proper increase in child benefit in April next and, if so, what kind of legislation will be introduced to make that possible. When will it come forward—
  The First Deputy Chairman: Order. We are not discussing the level of child benefit. I hope that I do not have to repeat that.
  Mr. Bottomley: Not only shall we not be able to give help to one-parent families at the level that is, perhaps, higher than the benefit specified in this clause; we shall not be able to increase it properly until we have a child benefit that is substantially higher than it is at the moment, and getting on towards the level in France.
  If the Conservatives had come into government after the Child Benefit Act had been enacted and found themselves in the position in which the Labour Government now are there would have been a row that would have lifted the roof off this place—a proper row. I hope that the Government will feel as contrite and as guilty as they ought to and that when they go into opposition—shortly—they will put pressure on a Conservative Government to introduce the sort of family support that is needed.
  Mrs. Lynda Chalker: I shall try not to detain the Committee longer than is necessary, but we have had some success tonight, in that this is the first time that we have had a joint meeting of the Treasury and the Department of Health and Social Security teams on this question of child benefit being tax-free. In many of the arguments that have been bandied between the Department of Health and Social Security and the Treasury it has been the Treasury which has been pulling the strings.
  I am conscious of the title of this clause. We all recognise that the child benefit should be a benefit as of right and tax-free. We cannot discuss its level at present but we do feel strongly that if we are to have a benefit as of right it should be meaningful, particularly for the lower-paid families and those who come below the tax threshold. They will not benefit to the degree that the right hon. Member for Blackburn (Mrs. Castle) wishes, or to the extent that my right hon. and hon. Friends believe is correct, without a proper child benefit scheme.
  12.45 a.m.
  I shall not go over the 12-month ever-changing scene described in the parliamentary answer of 19th April. It suffices

  1287
  to say that in reaching the full tax-free child benefit in three separate stages of reducing the child tax allowance, we are still leaving the general public in considerable confusion. The volume of correspondence received by accountants throughout the country about this tax-free benefit and the reduction of the tax allowances is phenomenal. If the Government have done one thing by the manner in which they have introduced this benefit, it is to give increased work to the accountancy profession. Many have found the instructions, however simplified they may now be, a continuing source of argument and discussion as the various changes have been brought to bear over the past 12 months.
  From everyone who has spoken in this short debate we have heard of the plight of families with chidren. However, there is one question that I should like to ask about those student children, if they can be called such, who are over 19.
  In a Written Answer on 29th March—columns 111 and 112 of Hansard—the Chief Secretary to the Treasury explained in considerable detail the way in which the child tax allowances were to be phased for students still in full-time education on 31st December last year and how this would be worked out for the coming year. As I understand it, that process will need to be repeated. This is because the levels of grant, especially when they are discretionary from the local authorities, are likely to be changed. So we are not coming to the end of the road in simplifying the situation for parents of students over 19.
  There will be great difficulties, particularly next year, when we come to the second deduction in the tax allowances. Then, we hope, the child benefit will become more the real benefit that it is intended to be. I hope that shortly we shall clarify the matter, so that parents are looking not simply 12 months ahead when thinking of the support that they will need to give to their offspring, but a little further than that, in the light of guidance given by the Treasury.
  There is another issue involved in the child benefit being a benefit as of right. It is what we do about increases in costs paid by families that are not well off. The child benefit will be more than offset by the increase in the cost of school
  1288
  meals that is to follow this September. Adjustments are being made, but if the changes in the tax-free child benefit are not to occur until April 1978, families will have been grappling with increases in the cost of school meals for about seven months, and those increases will be far greater than the child benefit.
  This, too, is a matter that has been insufficiently discussed by local authorities, the Department of the Environment, which is responsible for the budgeting of local authorities, and the Treasury. Many low-paid families will be in great difficulty because of the increase in school meal costs.
  There are many benefits that interact with the tax-free child benefit. If we are to do what the Committee would wish, which is to ensure that a start is made and the still outstanding difficulties are ironed out, we must look to eventual simplification of the scheme. I repeat the words of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) when he asked the Government to consider again a unit system that would make any further changes not a nightmare for the staff involved but a matter of simple adaptation as time goes on and the benefit becomes part of a real child credit scheme.
  It is easy to understand why the right hon. Member for Blackburn protested too much. The right hon. Lady feels passionately on these matters and we understand and welcome the constant spurring that she is giving the Government Front Bench and also the thinking that she is encouraging to take place in other quarters as a result of her efforts. However, there is one thing that must be said from both Front Benches—namely, that we cannot make identical the conditions of child tax allowances and child benefit, tax free as it is. There will be problems such as the one that I have outlined.
  We should be seeking to reach a tax credit position in which no one is worse off and some people—for example, those who are poorer—are better off than those who can afford to make small sacrifices. That is not to say that we should be penalising those who have made the effort. It has always been part of the Conservative case that we should ensure that those who make greater work effort should retain a greater proportion of their

  1289
  earnings. That is what the tax debate is all about.
  We say that it is high time that the clause made its appearance. It is not all that we would wish it to be. This is not because of anything that happened during 1970–73 but because we have suffered such mammoth inflation over the past three years. We know that inflation has harmed families most, especially those with many children. The clause may begin to help but it is a tiny drop in the ocean of increased prices and the general burden that families have had to bear under the past three years of Labour Government.
  Mr. Robert Sheldon: The hon. Member for Wallasey (Mrs. Chalker) is pleased that on this occasion at least the Treasury is involved in child benefits. I understand the hon. Lady's concern, because in the case of many others who see the hand of the Treasury behind the control of expenditure, there is frequently a misapprehension about the rôle of the Treasury.
  The main task of the Treasury in these matters—the right hon. Member for Wan-stead and Woodford (Mr. Jenkin) might understand this better—is not to determine levels of expenditure bat to ensure that they fit in with the decisions taken by the Cabinet.
  When my right hon. Friend the Member for Blackburn (Mrs. Castle)—she has unrivalled experience in these matters—went into the problems of the family support systems that we have examined, she mentioned the increased level of resources that needs to be found. We can treat that comment only with the greatest respect and hope that it will be possible to meet her objectives and the objectives of many others of those who take part in these debates.
  I know your strictures, Sir Myer, on mentioning the question of increases in child benefits. I think that I can more easily comply with your demands, partly because I do not have responsibility for dealing with the question of increases and also because these matters were raised in Question Time today. It is obvious that even though I desired to do so I should be unable to go beyond what the Secretary of State said this afternoon on this matter.
  1290
  The right hon. Member for Wanstead and Woodford spoke a great deal about past matters. My right hon. Friend the Member for Blackburn said that she was not concerned with the past but with the future. The right hon. Gentleman previously suggested a scheme in connection with child benefits, and I recall that he advanced another scheme in respect of petroleum revenue tax. The right hon. Gentleman is fond of introducing schemes. He must beware of the excessive pride of parentage that can make one too devoted to schemes that may be reasonably satisfactory or useful as a basis for argument but that are not the only way of looking at matters.
  Mr. Patrick Senkin: The Minister is probably right to chide me about excessive pride in the parentage of schemes, but I have always regarded it as part of the duties of an Opposition to be constructive as well as critical. I like to be able to answer the question "What would you have done, chum?" On both the petroleum revenue tax and on this provision, I have done my best to answer that question. I have told the Government what they should have done. In both cases they would have been much wiser to take my advice.
  Mr. Sheldon: I am glad to see the confidence that the right hon. Gentleman retains in schemes that did not see the light of day. One can be a little overenthusiastic about devices that one thinks up oneself and a little more objective about those thought up by somebody else. I do not deny the right hon. Gentleman's interest and involvement in these matters, and I have some admiration for him on that score, but I am seeking to point out the penalties that come from over-enthusiasm for schemes that one devises oneself, since one does not look upon them as critically as one would examine other schemes.
  The right hon. Gentleman asked how many one-child families have not claimed child benefit. He will know that they have had 12 months in which to claim. I am informed, although this matter is not within my own responsibility, that only 3 per cent. of one-child families, eligible have not claimed child benefit.
  Mr. Patrick Senkin: Is it 3 per cent. of one-child families, or 3 per cent. of all families?
  Mr. Sheldon: The figure is 3 per cent. of all families. I am sorry if I did not make that clear.
  The right hon. Gentleman also pointed out the advantage for families in tax-free child benefit. He suggested that there was no comparable advantage available to those drawing national insurance benefits. He then dealt with the point about the problem of short-term benefits being tax-free and leading to a double disadvantage. The main problem is that we as a Government believe that the administrative problem of the taxation of short-term benefits is a matter that no Government will readily be able to accept. Those are the difficulties that face us.
  I think that we are right to have started the child benefit scheme and to try to phase it in in a way that produces the least disruption to those concerned. I appreciate that anxieties of those who would wish to see it implemented over a shorter period of time, but we must pay attention to the representations made on behalf of industry, among others. Although this has led to a much more complicated form, it is the right way to handle it.
  Mr. Peter Bottomley: When the Financial Secretary speaks of representations from industry, what does he mean? Did the CBI and the TUC come forward? Did the right hon. Gentleman get a wave of letters from people?
  1.0 a.m.
  Mr. Sheldon: I thought it was general knowledge that the Labour Party-TUC committee that met on this matter expressed its anxieties. Those anxieties came from various sources, including industry. I do not say that the whole of industry made representations, but representations were certainly received from industry.
  These provisions will be implemented over the three-year period starting April 1977 and this is only the first stage. A number of matters have yet to be decided.
  My right hon. Friend the Member for Blackburn dealt with one of the most important points when she condemned some of the criticism that we heard from the Conservatives. She pointed out quite fairly that the child benefit is a reality. The tax credit scheme was a dream.
  I am aware of the expansionary conditions of the time when the Conservatives
  1292
  first formed their ideas, but since then there have been substantial changes in the views of that party's Front Bench. That has some connection with the control of public expenditure, which the Conservatives believe is too high. They have spoken of the need to cut public expenditure, and I have not heard the right hon. Member for Wanstead and Woodford refute that. I am sure that their scheme would have been a prime candidate for such treatment.
  Mr. Patrick Jenkin: Does the right hon. Gentleman realise that another major event since the Select Committee reported is that the real value of tax thresholds has been very sharply reduced and that therefore the cost of converting the tax allowance into a tax credit is very much smaller than it was at the time of the Green Paper and the Select Committee? Therefore, the Minister's arguments that it was £1,300 million and is now £5,000 million is so wide of the mark as to be ludicrous. The cost of introducing tax credits now will be much less, in real terms, than it was then.
  Mr. Sheldon: I cannot believe that the right hon. Gentleman, if he ever had the chance of bringing in a scheme that would cost several thousand million pounds—[Interruption.] The old scheme was to have cost £1,500 million, and that figure is not likely to have been much reduced. In the debates in the Select Committee we were talking in terms of thousands of millions, and it would cost that much to introduce the scheme now.
  I note the right hon. Gentleman's disclaimer on this matter. I note, too, the figure that we have been able to put on the scheme. Perhaps these matters could be debated at greater length. But the right hon. Gentleman must accept this point. At a time when the Conservatives are anxious to cut public expenditure, when their economic spokesmen have spoken of the need for a cut in transfer payments. it would have been astonishing if this scheme had not been a prime example of something that needed to be cut, or, indeed, of something that did not need to be introduced. It is against that background that we should see the Government's achievements, of which, in this field and many others, I am proud.
  Question put and agreed to.
  Clause 21 ordered to stand part of the Bill.
  To report progress and ask leave to sit again.—[Mr. Tinn.]
  Committee report progress: to sit again this day.

  CHARTIST COTTAGES, DODFORD
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]
  1.7 a.m.
  Mr. Hal Miller: It is with a sense of profound relief that I am able to place before the House and the Government tonight questions arising out of the listing of six Chartist cottages at Dodford in my constituency as buildings of historic and architectural importance.
  As far as I have been able to trace, the affairs of Dodford last came before the House in 1848, when the affairs of the National Land Company were the subject of examination by a committee of inquiry, and subsequently, in 1857, with the passing of Acts for the winding-up of that company, which was concerned with the purchase of an estate at Dodford for settlement by the Chartists under the leadership of Fergus O'Connor, who promoted that company and was the leader of what is known as the Chartist movement.
  Dodford was the last of three settlements built to the same design. I summarise briefly. The houses comprised two bedrooms, one store room, one sitting room and one kitchen, which included a pump and a well inside the building.
  I wish that I had been able to take advantage of the Minister's presence in the West Midlands today to take him to Dodford so that he could see for himself the attractions of the area and the beauty of the surroundings. I hope that he would not have been lulled into a false sense of security about the strength of character and feelings of the inhabitants of Dodford—and I can illustrate that point by remarking that it is the only area in my constituency where I have had a gun drawn on me while canvassing. I hope that the Minister will
  1294
  not leave the House this morning with any doubt about hte resolution of the inhabitants of these Chartist cottages.
  I come more up to date. Since the war the area has become liable to redevelopment and, of course, in such a favoured area plots of four acres in extent—which is what these cottages have—have become desirable properties. A number of the plots have been bought up and the original bungalows demolished. That is hardly surprising, since the cottages were built without solid floors or foundations, despite the clay nature of the soil, and the materials from which they were built have not managed to withstand the passage of more than 100 years. Many of the cottages are now in need of substantial repair and need the provision of amenities that are now expected, such as a bathroom and, indeed, an inside lavatory.
  I should at this stage make reference to a valuable publication for those who are interested in this subject. It is "From Hamlet to Parish, the Story of Dodford, Worcestershire" by Miss Winifred Bond, whom it might have been possible for the Minister to engage in conversation had he visited the area today.
  Following discussion in the parish council during the autumn of 1974 the area was designated a conservation area in August 1975. It was at that time suggested by the council that certain buildings in the area might be the subject of listing. Notices to that effect were served in December 1975 on the six cottages that are the subject of this debate. As far as I can see from the records—though it has not been clearly established—they were confirmed by the Secretary of State in May 1976, despite representations that I made just before that on behalf of the occupants of the cottages and following a well-attended meeting of the parish council that unanimously opposed the listing.
  It is not my purpose to go over the procedure and manner of the listing and the serving of notices by the district council. There is grave doubt about the propriety with which that was carried out and it is the subject of a reference to the Commissioner for Local Government who is considering whether a formal investigation is required. My purpose is to deal with the consequences of the listing for

  1295
  the residents and to raise the wider subject of how the community sees its responsibility in preserving benefits for itself at the expense of the individuals living in the listed buildings.
  Of the 27 such cottages that remain substantially extant, according to Miss Bond's book, only six have been listed so there is an element of discrimination, which has been aggravated during the course of the events that I have recounted. One cottage that was in a much better state of repair and in a much more authentic condition was offered for sale to anyone interested in preserving it. It was subsequently demolished and a much larger building erected on the site. I trust that the Minister will therefore understand the vexed feelings of people who were already perturbed and troubled by the original listing that this neighbouring property should have been allowed to be demolished.
  Apart from that discrimination, the occupiers of the six cottages have suffered injury because of the cost of repairs. The buildings are more than 100 years old and were built without foundations. Naturally there has been considerable settlement. When such a listed building has to be repaired, one must expect difficulties in finding replacement materials of the same type and same dimensions as those used originally.
  An occupant of another cottage received an estimate following his application to install a bathroom. The estimate for repairs was more than £10,000 and the House will readily appreciate the alarm that this caused to the inhabitants of the six listed cottages.
  These inhabitants also fear that there has been a loss in the value of their properties, because they have seen other properties bought for development at favourable prices and they apprehend that there may not be such favourable prices for listed buildings that are subject to all the restrictions applying to such properties.
  There has never been an attempt to consult local opinion, which showed itself solidly opposed to the listing. Because of the conservation order, the inhabitants naturally supposed that the exercise of planning controls and the requirements of the order would provide adequate protection. Correspondence continued unhelpfully
  1296
  through the summer after I wrote to the Secretary of State in April 1976. I accompanied a delegation of residents to the Department on 29th November 1976, but it did not seem to receive a very clear reply and certainly I was unable to trace the response. Since then I have been seeking to raise this matter on the Adjournment.
  I have tried to establish that these six cottagers feel that they have been the subject of discrimination. They feel that they have been most unjustly treated, that there was no consultation, and that adequate powers exist under the conservation order and the existing planning control, and they wish that the Secretary of State would reconsider the possibility of removing these orders.
  There has been some discussion whether the Secretary of State has power to lift an order. As far as I can trace in the legislation, there is no question of there being a prohibition on the lifting of an order, and there are some grounds for supposing that the power to do so does exist, because the Secretary of State is able to give his consent to the demolition of a listed building. That would lead one to suppose that the listing order was lifted before the consent to demolish was given.
  To alleviate the lively and real apprehensions of my constituents, I ask the Minister to give some indication how that situation is viewed and to say whether, in particular, he is able to substantiate the suggestion that has been made by the district council in writing that he would consider favourably an application for demolition if it could be shown that restoration was an uneconomic or impracticable proposition. That has never been substantiated to the satisfaction or the relief of my constituents.
  I should like the Minister to address himself to the wider question whether it is appropriate that when such buildings are listed and preserved for the wider benefit of the community the entire cost and consequences of such a listing should fall solely on the shoulders of the occupants of the cottages.
  I might at this stage perhaps mention that in two of the cases those concerned are direct descendants of the original inhabitants, and therefore they have preserved unbroken the link going back to

  1297
  the very beginning of this enterprise which, as I said, was last brought to the attention of the House in 1857.
  1.18 a.m.
  The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I am indebted to the hon. Member for Bromsgrove and Redditch (Mr. Miller) for bringing these events before the House. There is another link between us in this matter, in that not only did we both go to the West Midlands today, the hon. Gentleman to his constituency and I to Coventry, but the Chartists had a great deal to do in the area that I represent. Indeed, the great Chartist poet, Ernest Jones, was buried in what eventually became the playing fields of the school at which I taught.
  I hope that the hon. Gentleman is not too disposed to suggest that a few people have been selected for arbitrary and callous treatment by a local authority and departmental machine. I want to take the opportunity to demonstrate to the hon. Gentleman that in its actions my Department has been carrying out the wishes of the House in the proposals made for listing.
  Under Section 54 of the Town and Country Planning Act 1971, the Secretary of State has a duty to compile a list of buildings of special architectural or historic interest. The purpose of this list is to offer guidance to local authorities in framing their planning policies and development plans. Effectively, the list indicates those buildings whose future should be carefully and formally weighed if there is ever a question whether they should be demolished or changed in any major way.
  My right hon. Friend and his predecessors have had this responsibility since 1947, and the whole country has been surveyed once to produce a statutory list of buildings of special interest for each local authority area
  In deciding what criteria should be followed in the selection of buildings for listing, my right hon. Friend is required to take appropriate advice, and in practice he looks to the Historic Buildings Council, his statutory adviser on the matter, to provide this. It recommends the criteria, which have been accepted
  1298
  and published, and which are followed by the Department's professional investigators in selecting the buildings to be listed.
  The first survey was completed in 1968, but, reflecting the public's growing concern for the numbers of familiar buildings that were being destroyed and the revised assessments of what was accepted as architecturally or historically important, the Historic Buildings Council recommended that the listing criteria should be brought into line with current standards. Its advice was accepted, and at present the statutory lists are being systematically revised. About one-third of the local authority area lists are now up to date. The full revision programme is expected to take another 10 to 15 years to complete.
  In the usual way an investigator from the Department will visit an area that is to be resurveyed, get what information he can from the local authority and local amenity groups, and then assess the buildings in accordance with the accepted criteria. He will usually be able to assess the building externally and will not need to go inside or trouble the owner.
  If, following his advice, it is concluded that a building is of special architectural or historic merit—and my right hon. Friend can take account only of those two factors—it will be included in the revised list and published in due course.
  I should like to emphasise here at this stage only the building's architectural or historic merit is in question. The condition of the building, the means of its owner, and the qeustion whether it is in the way of a proposed redevelopment, are not relevant to the decision whether it should be included in the list, although, of course, factors like these could be highly relevant if there were to be a subsequent proposal to demolish or change the building.
  This is the way buildings are usually included in the statutory lists, and the greater part of the 15,000 or so buildings which are now being added to the lists each year are dealt with in this way. The resurvey is a slow process, however, and the Department relies on the help of local authorities and others to let it know about buildings which may be of architectural or historic merit in areas which may not be resurveyed for some time.

  1299
  Where a building is threatened with demolition, or an urgent assessment of its area or historic merit is requested, the Department of the Environment operates an emergency listing process. Here an urgent assessment can be made of a building, and if it merits inclusion in the lists it is quickly added and the local authority is informed at once and asked, as the law requires, to inform the owner that his building has been listed.
  The Department also sends an informal letter to the occupier telling him or her of the listing. Many of these emergency or spot listings are in response to requests from local authorities who ask that buildings that have been recommended for listing in the normal resurvey process should be formally listed in advance of the publication of the complete list.
  The other broad way in which buildings are listed, and the one that was used for the Chartist cottages at Dodford, in the hon. Member's constituency, is by means of a building preservation notice. All local planning authorities may issue such a notice in respect of a threatened building not included in the list. The effect of this notice is to give the building the same protection afforded by normal listing—it cannot be demolished or altered significantly without listed building consent. The notice is effective for six months, enabling my right hon. Friend to decide within that time whether or not he should include the building in the list.
  It is perhaps necessary to mention here one other way in which buildings can be afforded the same protection as if they were listed buildings. Under the Town and Country Amenity Act 1974 unlisted buildings in designated conservation areas cannot be demolished or significantly altered without formal listed building consent.
  The designation of a conservation area itself has, therefore, much the same effect as if all the buildings within the bounds of the conservation area were listed. The cottages at Dodford are within the Dodford conservation area and, indeed, form its nucleus.
  In March 1976 the Bromsgrove District Council served building preservation notices on the owners and occupiers of six of the Chartist cottages in Dodford and asked my right hon. Friend to consider
  1300
  the buildings for inclusion in the statutory list.
  The cottages form part of a settlement designed by the social reformer Fergus O'Connor as part of his scheme within the Chartist movement to settle working men on smallholdings. They thus form an extremely interesting and early attempt at social reform, particularly related to the depressed conditions of the latter 1840s, and my right hon. Friend concluded that they should be listed as being buildings of special historic interest, so the six cottages were included in the list on 12th May 1976.
  I appreciate the hon. Member's concern for the fears of the occupiers when the building preservation notices were served. I can assure him and those concerned that the inclusion of their cottages in the statutory list does not itself mean that they must be preserved as they are now for all time, or that they cannot be adapted to meet modern living standards. The inclusion in the lists—and the same considerations apply to the remainder of the unlisted cottages in the conservation area—is a penalty only if the hon. Member insists on regarding it as a penalty, in that proposals to demolish or change the cottages in any significant way will require formal listed building consent. The local authority will usually be able to decide whether alterations can be permitted.
  I might here say that this control does not extend to alterations made before the date of the issuing. Proposals to demolish a listed building have to be submitted to the local authority, which must advertise the application and notify the four national amenity societies concerned with historic buildings. If the local authority is minded to grant the application to demolish the building, it must inform my right hon. Friend, who may, if he so decides, call in the application and decide it himself—usually after a public inquiry.
  The hon. Member may have in mind, in his conception of penalties, the powers available to the local authorities and to the Department to take action against the owner of a listed building who, as sometimes happens, deliberately neglects it and allows it to deteriorate. Section 101 of the Town and Country Planning Act 1971 empowers a local authority to effect emergency repairs on an unoccupied listed

  1301
  building and to recover the costs from the owner. Section 115 of that Act enables a local authority to issue a repairs notice to the owner of a listed building. This notice must specify the repairs that are needed to maintain the building. If the repairs are not effected within a period of two months, the local authority can compulsorily acquire the building at its existing use value.
  The owners of the Chartist cottages, however, need have no inordinate fear of the use of these powers. They have been used sparingly in the past and are usually revoked only when a building falls into extremely bad repair, such as might make the collapse of the building an immiment possibility. They are not likely to be used merely to ensure routine maintenance, and there is no intention that they should be considered as an immediate consequence of listing a building.
  I hope that from this the hon. Gentleman will be able to convince his constituents that they are worrying unneecessarily about the effects of the listing. I think that he will know that a senior officer of the Department has visited some of the owners concerned and has discussed their fears with the chief executive of Bromsgrove District Council. The chief executive has undertaken, as far as he is able, to ensure that the district council adopts a sympathetic and helpful attitude to the occupiers of the cottages. I note that the hon. Gentleman has asked the Ombudsman, the Commissioner for Local Government, to investigate the local council's action.
  The hon. Member also suggested that the Government, having listed the buildings, should make some financial contribution to help bring them up to the required standard. The Government do indeed help with grants for repairs to outstanding historic houses and towards projects undertaken to present and enhance the character of outstanding conservation areas. We expect to allocate, in grants this year, overe £4 million in this way, and a small amount has been allocated on the recommendation of the Historic Building Council to projects in the non-outstanding conservation areas. Local authorities may also make discretionary grants for the repair and maintenance
  1302
  of historic buildings under the Local Authorities (Historic Buildings) Act 1962.
  But this country has a rich architectural heritage, and the available money usually goes to the most outstanding projects. Central and local government expenditure is currently under scrutiny, but in the best of times it would not be feasible or appropriate to assist each and every owner of the nearly 250,000 buildings listed in this way.
  The hon. Gentleman is under a misapprehension if he considers that the inclusion of a building in the statutory list means that money must immediately be spent on bringing it up to some specified standard. Where the listed buildings are modest dwellings, as at Dodford, it would be quite unreasonable to expect standards greater than their occupants would strive towards if they were not living in listed buildings. The listing itself puts a marker on a building and asks that the owner, local authority and central Government treat its claim to survive with care. It does not mean that it should take on the attributes of an ideal home or showplace.
  I shall examine the point made by the hon. Gentleman about improvement grants and the heavy demands that have been made by the local authority.
  The hon. Gentleman referred to a deputation that he brought to the Department at the end of November, to which there had been no reply. I understand that on 13th December my noble Friend Baroness Birk wrote a detailed reply to the petition that was presented on that occasion. I shall certainly send him a copy of that letter of several months ago.
  As I indicated earlier, I am glad of this opportunity to deal with several apparent misconceptions about the way that buildings are selected for listing and why we list them. This country has a good record in conserving its historic buildings, and an adequate inventory is a basic element in helping us to conserve them. I trust the cottagers at Dodford can in future regard their historic houses as rather more than an oppressive burden.
  Question put and agreed to.
  Adjourned accordingly at twenty-eight minutes to Two o'clock.

AGRICULTURE, FISHERIES AND FOOD
  Horticulture
  Horticulture
  Lands
  Lands
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  Labelling
  Food Production
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  Retailing Income (Distribution)
  Retailing Income (Distribution)
CIVIL SERVICE
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  A6 (Burton Latimer and Rushden)
  A6 (Burton Latimer and Rushden)
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  Road Accidents (Costs)
TRANSPORT
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  Road Accidents (Casualties)
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Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Carlisle.

CIVIL DEFENCE: "PROTECT AND SURVIVE"
Baroness VICKERS: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government when a pamphlet entitled Protect and Survive, printed by the Home Office, is to be made public.
Lord WELLS-PESTELL: My Lords, the booklet Protect and Survive was issued in October 1976 to local authorities for training purposes. It could only be distributed to householders in conjunction with a television and radio campaign to advise the public of the immediate precautions to be taken in the event of an international crisis.
Baroness VICKERS: My Lords, while thanking the noble Lord for that reply, may I ask whether local authorities are getting on with working out their schemes? May I also ask whether the real reason why this booklet has not been distributed is that on 22nd March the Minister in another place stated that no collective decision had been made in respect to the early airborne warning system?
Lord WELLS-PESTELL: My Lords, in reply to the first part of the noble Baroness's supplementary question, I myself asked whether in fact local authorities are going ahead with this matter and my information is that in every county council—which includes the Greater London Council—not only has the chief executive a copy of the booklet but there is a team of emergency planning officers responsible for civil defence planning. That is a matter which is going on the whole time. With regard to the second part of the supplementary question,
156
there may well be some disagreement as to when a state of emergency is likely to exist, but the fact remains that there are television videotapes, sound radio tapes and a great deal of material for the national Press which can be brought into operation in, I think it is fair to say, a matter of minutes. That would be far more useful than issuing something now which we hope may not be needed for a long time.

UNIVERSITY OF RHODESIA: STAFF RECRUITMENT
2.38 p.m.
Lord CARRINGTON: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are placing any difficulties in the way of the recruitment of academic staff for the University of Rhodesia.
The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): No, my Lords; the Government are always ready to license advertisements for staff for the University. These advertisements must include a notice urging prospective applicants to seek official advice about the risks involved before taking up employment in Rhodesia, but we understand that the University authorities are content with this arrangement.
Lord CARRINGTON: My Lords, is the noble Lord aware, as he must be, that the University of Rhodesia is non-racial? Indeed, is he aware that there are more black students than white students, that the University is doing a good job and that it is very largely supported financially by the British Government? Is he further aware that their licence to advertise was revoked last year unless three conditions were inserted in the advertisements, three conditions which would have put off any academic staff from applying for any job in the University of Rhodesia? Can he tell me whether his Answer this afternoon means that is is not now necessary for the University to insert those three conditions into the advertisements?
Lord GORONWY-ROBERTS: My Lords, on the last point, the position is that advertisements should carry a required statement which I think is perfectly reasonable and helpful. This is the statement:
"Revised warning to be carried in advertisements.
"The British Government urge that United Kingdom nationals who wish to visit Rhodesia or to take up employment there should consult the Foreign and Commonwealth Office, Rhodesia Department, or the nearest British Consular Office before doing so".
I think that this is a natural precaution both in the interests of prospective applicants and, indeed, to keep us within the terms of the sanctions order.
As to the first part of the noble Lord's supplementary question, I entirely agree that we greatly appreciate the excellent work of this University in the past and in the present as a multi-racial institution. We hope that it will be able to carry on its multiracial function in the future, whatever the form of government in Southern Rhodesia proves to be. The noble Lord is also quite right about the considerable amount of financial support that we give to the University to promote this kind of policy. In the current financial year, we expect to be contributing some £380,000 in the form of grants to students at the University and, as the noble Lord has remarked, the majority of its students are, indeed, Rhodesian Africans.
Lord CARRINGTON: My Lords, to remove all doubt, could the noble Lord confirm that the Government have, in fact, altered the revocation of the licence, about which Sir Hugh Springer informed the Vice-Chancellor of the University of Rhodesia on 27th August 1976, and that the three conditions which it was then necessary to insert in the advertisement are no longer required?
Lord GORONWY-ROBERTS: Yes, my Lords; I can provide confirmation in these terms. I have a copy of the two variants. The first, which proved unacceptable to the University authorities, we withdrew. The second, which I will not quote in full, has proved to be not only acceptable to the University authorities but has elicited a letter which I have here, from which I cannot quote, from the
158
Vice-Chancellor, saying how pleased lie is with the concessions we have made.
Lord HARMAR-NICHOLLS: My Lords, when applicants apply to the Rhodesian Department of the Commonwealth Office, as the advertisement says they must, what happens then? What exchanges take place? What questions are asked? What exchange takes place following an application under the advertisement?
Lord GORONWY-ROBERTS: My Lords, when applicants come to the Rhodesian Department, they are told what the position is in Rhodesia; for instance, in regard to national service, which, after two years, applies to people who go there to work. The!, are also given necessary information about the internal position and, indeed, the position in regard to insurgent activities. It is an informal but factual exchange of question and answer designed to help applicants to make up their minds as to whether they are taking the right action in going there. After all, there are no consular or other facilities in that country to help them if they find themselves in a difficulty once they are there.
Lord SEGAL: My Lords, would my noble friend not agree that the tilling of these vacancies could provide a useful channel for disseminating the Government's present policy towards Rhodesia?
Lord GORONWY-ROBERTS: My Lords, that may well be so. I join, also, with the noble Lord, Lord Carrington, in looking forward to the time when this University— and I repeat that it has done excellent work in a multi-racial way in the past, and it is continuing to do so—may be enabled to do excellent work whatever the future regime in Zimbabwe may be.
Lord DAVIES of LEEK: My Lords, may I ask my noble friend, briefly, whether, if an academic, a lecturer or professor, takes an appointment, his superannuation situation would be in order later on if he moves from a university post?
Lord GORONWY-ROBERS: My Lords, I could not answer that question without due notice.
The Earl of ONSLOW: My Lords, could the noble Lord tell us how many advertisements are being placed and the number of academic staff who are going from this country to Rhodesia to teach in the University?
Lord GORONWY-ROBERTS: My Lords, without advice I am afraid that I could not be precise about either point.
Lord REDCLIFFE-MAUD: My Lords, is the noble Lord aware of the great satisfaction which his Answer to the noble Lord, Lord Carrington, will give to noble Lords in all parts of the House and to everyone who believes that this university in Rhodesia is one of the outstanding successes of the British Government's efforts for Rhodesia?
Lord GORONWY-ROBERTS: My Lords, I am delighted to receive confirmation and support from so distinguished a quarter for our attitude and the attitude of successive Governments.

TELEVISION PROGRAMMES: OVERSEAS TRANSACTIONS
2.47 p.m.
Lord THOMAS: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how much money in hard and soft currency did British Television Authorities spend in the last 12 months for which figures are available, in the hire or purchase of foreign (especially American) features, to show to the British public, and what is the reciprocal amount collected by Britain in selling and/or hiring out feature films for showing in foreign countries in the same period.
Lord WELLS-PESTELL: My Lords, the questions of programme content, and in particular the purchase of foreign feature films, are matters, as the noble Lord will know, for the broadcasting authorities. Section 4(1)(c) of the Independent Broadcasting Authority Act 1973 requires the IBA to satisfy itself that the programmes broadcast by the Authority include proper proportions of material of British origin and performance. The BBC acknowledges similar obligations under its licence and agreement. The Department of Industry undertakes an annual inquiry relating to the production and exhibition of cinematograph films and television material. Their most recent report, for 1975, was published in Trade and Industry dated 20th August 1976. From this inquiry figures are available which I will, with permission, circulate in the Official Report as they are substantial.
Lord THOMAS: My Lords, I am very much obliged and very grateful for that helpful and carefully worded reply. It is good to know that, on the whole, we are on the right side. Am I right in that assumption?
Lord WELLS-PESTELL: Yes, my Lords. If I could give one figure which might be helpful, receipts from overseas, including North America, for all purposes, of completed programmes and the production of films in 1975 came to £45·1 million. Of that amount, £20·5 million came from North America. So far as the outgoing amount was concerned, the total was only £10·8 million as against an income of £45·1 million. Of that £,10·8 million, payments to North America amounted to £5·5 million. There are more figures which will be included in the Official Report.
Lord THOMAS: I am very grateful, my Lords; and I am very glad I asked the Question, too.
Following are the figures referred to:

FILMS AND TELEVISION MATERIAL OVERSEAS TRANSACTIONS IN 1975

£million

Television Screening Rights and Performance

Performance in Cinemas

Total

Production of films and programmes

Total

Receipts from overseas residents

BBC and ITV(a)

10·3

—

10·3

2·3

12·6

Film companies

1·6

21·0

22·6

9·9

32·5

Total

11·9

21·0

32·9

12·2

45·1

of which North America

BBC and ITV(a)

2·9

—

2·9

1·4

4·3

Film companies

N/A

N/A

10·6

5·6

16·2

Total

N/A

N/A

13·5

7·0

20·5

Payments to overseas residents

BBC and ITV(a)

5·0

—

5·0

5·8

10·8

of which to North America

3·6

—

3·6

1·9

5·5

N/A indicates information not collected.

(a) Includes transactions in respect of BBC sound broadcasting and Independent Television News.
Source: Departments of Industry, Trade, and Prices and Consumer Protection annual enquiry into overseas transactions relating to the production and exhibition of cinematograph films and television material in 1975.

LONDON TRAFFIC SPEED
2.49 p.m.
Lord THOMAS: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what is the average speed of traffic in the Metropolitan Area of London at the latest available date, compared with what it was—

(a) 12 months previously, and

(b) 10 years before that.

Baroness STEDMAN: My Lords, I regret the information is not available in precisely the form for which it has been asked. Surveys carried out by the Greater London Council showed that the average day-time off-peak speed of traffic was 20·6 mph in 1962, 21·3 mph in 1968–70 and 21·6 mph in 1971–73. A further survey was carried out in 1974–76 but the results for the Metroplitan Area have yet to he analysed.
Lord THOMAS: My Lords, while thanking the noble Baroness for that
162
Answer, may I ask whether she is aware that the public impression is that London traffic is slowing down and it is getting harder and harder to get from place to place? May I further ask what is being done to prevent further deterioration?
Baroness STEDMAN: My Lords, to my surprise I found that the speed of traffic, off-peak, was slower than in the peak hours. That seems somewhat surprising, but I am assured it is correct. The changes of speed have to be viewed in relation to the increase in traffic levels. There has been an increase it traffic of about 11 per cent. in the off-peak period and somewhat less of an increase during the peak period. Since 1962, which was the first year the noble Lord asked about, traffic levels have increased by about two-thirds. The road system still seems to be coping at off-peak times but sometimes creaks under the strain. We believe that the overall peak period average speed of about 18 mph is some way from the grinding halt that was forecast some years ago.
Lord DRUMALBYN: My Lords, is not an overall peak figure somewhat misleading, in that in some areas traffic is

163
nearly grinding to a halt in peak periods while in other areas it is flowing very freely?
Baroness STEDMAN: As I said, my Lords, the figures for which the noble Lord asked were not available in exactly the form in which he framed his Question. Also, it is sometimes misleading to ask for an average in this sort of area. No doubt, if we are getting an average, in some places it is faster and in others it is slower.
The Earl of HALSBURY: My Lords, would not the noble Baroness agree that an average quoted without its standard of deviation is about the most misleading statistic there can be?
Baroness STEDMAN: My Lords, so I was informed before I came into the Chamber!
Lord WYNNE-JONES: My Lords, has my noble friend in her reply been talking about arithmetic means and, if not, what sort of average is being referred to? It would appear that there are so many averages that the Question is almost impossible to answer.
Baroness STEDMAN: My Lords, my noble friend is far too advanced for me. I take the average figure as provided from the analysis which was done by the Transport and Road Research Laboratory.

AUSTRALIA AND NEW ZEALAND BANKING GROUP BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
INTERNATIONAL PLANNED PARENTHOOD FEDERATION BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
NEW TOWNS (SCOTLAND) BILL
Read 3a, and passed.

SEXUAL OFFENCES (SCOTLAND)BILL [H.L.]
2.56 p.m.
Lord BOOTHBY: My Lords, I beg to move that this Bill be now read a second time. I can be quite brief. My sole purpose is to bring the law of Scotland and the law of England into alignment, because I think that in this case it is highly undesirable that they should differ. I want to say only two things to your Lordships: first, to repeat that such is my sole purpose; and, secondly, that I have put into the Bill the age of 18 instead of 21 as the age of consent. I have done that because I think it is more sensible. Also, I think that 21 would be found in practice to be unenforceable. I also put in the age of 18 because my noble friend Lord Arran not long ago introduced a Bill to reduce the age to 18 and I thought that your Lordships might have passed it. Unfortunately, the noble Lord, Lord Arran, became ill and has been unable to move the Second Reading of his Bill. That will come up next month. As my object is not to change the law in any way, I therefore propose myself to move Amendments at the Committee stage of the Bill to retain the age of consent at 21—in which case, as I think is right, your Lordships will have the opportunity to take a separate decision on the age of consent on a separate Bill. As I said earlier, my object is simply to bring the two laws of the two countries into alignment.
My second main reason is this. The Lord Advocate recently made a public statement in which he said that he did not propose to prosecute under the Statutes and the law of Scotland indecent actions between consenting adults. I think that is unprecedented. The Lord Advocate cannot bind his successor. What he has said is that the Crown Office of Scotland, under his direction, does not propose to enforce the law of Scotland as it now stands. This can only bring the law itself into disrepute. It is unprecedented and undesirable, and the only action that we can take is to change the law so that it can be enforced by the Crown Office. T think this is very dangerous and highly objectionable and it should be corrected at the earliest possible moment.

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My final point concerns the Amendment to the Motion moved by my noble friend Lord Ferrier—if I may still call him that. He calls in aid of his Amendment a nonexistent and at present purely hypothetical Scottish National Assembly. I think that proves that he feels himself to be on pretty shaky ground. He refers to proposals which are now before Parliament with regard to a Scottish National Assembly and its powers. I know of no such powers: they do not exist. In fact, the noble Lord, Lord Ferrier, sits on the Conservative Benches and therefore must, I think, envisage the possibility that the Conservatives will win the next General Election. If that should be the case, there has been a statement in the Press, not contradicted, that on Saturday next the Leader of the Opposition and of his own Party, Mrs. Thatcher, is going to announce that a Scottish National Assembly is not going to be part of the programme of the Conservative Party at the next Election. I would add to that that there are many people—perhaps more than the noble Lord may realise—who have had a long experience of public life in Scotland and who are strongly opposed to a National Assembly in Edinburgh. It is quite possible that it will be years before a National Assembly comes into existence if, indeed, it ever does.
This is a matter that cannot wait for years. It is urgent. For my part, I will gladly and gratefully accept any drafting Amendments that the Government may see fit to propose in the Committee stage, and, as I have told your Lordships, myself propose to move an Amendment, which I hope will be passed, to retain the age of consent at 21, because I am not out to change the law at the present time and in the present Bill. Also, I will resist any Amendments that may be moved with the object of changing the law. That is not my purpose, or the purpose of this Bill. The sole purpose of this Bill is to bring the law of Scotland and the law of England into alignment, and then to enforce and uphold it. My Lords, I beg to move.
Moved, That the Bill be now read 2a. —(Lord Boothhy.)
3.1 p.m.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill):My
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Lords, I rise at this stage to Rive your Lordships some indication of the Government's attitude to the proposals in this Bill. On subjects such as these, it is generally accepted that the Government should not seek to influence the views of Parliament, but rather remain neutral, so as to allow the question to be decided according to the consciences of individual Peers and Members. This is our intention in respect of the present Bill.
When the Sexual Offences Act 1967, which broadly gave effect to the recommendations of the Wolfenden Committee in legalising homosexual activity between consenting adults in private in England and Wales, was being debated in Parliament, there was little pressure for it to extend to Scotland. Partly, this was in recognition of the fact that, because of the Scottish public prosecution system and higher standard of evidence required by the rules relating to corroboration under Scottish criminal law, prosecutions for homosexual acts between consenting adults are virtually unknown. There were, therefore, fewer practical reasons for pressure to amend the law of Scotland in this respect. Other soundings at that time suggested that opposition to removing homosexual behaviour between consenting adults from the criminal law might be substantially stronger in Scotland than in England and Wales.
Since then, there has bees growing pressure, especially from the Scottish Minorities Group, to reform the law of Scotland on this point. As many of your Lordships will be aware, there was, in particular, some criticism during the passage of the Sexual Offences (Scotland) Act 1976 through your Lordships' House last year, because that Act reproduced, as Section 7, the provision of the Criminal Law Amendment Act 1885, which made gross indecency between males a criminal offence in Scotland. As I explained at that time, the 1976 Act was a pure consolidation measure, which did not permit of amending or excluding any of the sections of the Acts which were being consolidated. I stressed then that the decision to include Section 7 in the new Act was a technical one related to the consolidation procedure, and did not indicate Government commitment to retaining the offence on its merits.
In a Written Reply on 18th October 1976, the present Lord Advocate, who, as your

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Lordships will be aware, has responsibility for the public prosecution of crime in Scotland, indicated that he had not changed the policy adopted by previous Lord Advocates not to prosecute cases of homosexual activities between consenting adults in private. The Lord Advocate gave as the criteria for not prosecuting homosexual activities that both parties must be over 21, each must clearly and freely have consented, and the place must be private in the sense that the public have no right of access to it and that what is done there cannot be observed by the public. There have been no prosecutions in Scotland for many years for the type of homosexual activity which became legal in England and Wales with the passing of the 1967 Act, and certainly none since 1967 which would not have taken place in England and Wales.
During the passage of the 1976 Act, the Lord Advocate and I both stressed that the appropriate way to seek a change in the law of Scotland in this matter was by the introduction of a Bill by a Private Peer or Private Member. Whatever our individual attitudes to the Bill itself, in principle or in detail, we should thank the noble Lord, Lord Boothby, for giving us this early opportunity of discussing what is for many people an important issue, and one not free from controversy, as the noble Lord, Lord Ferrier, will presumably indicate when he rises to speak.
No doubt the question will be raised as to whether it is appropriate to allow a change to he made now as regards a matter which is to be given to the Scottish Assembly, were such an Assembly to be created; and the noble Lord, Lord Boothby, has spoken on that point. It is certainly the case that the subject matter would be within the competence of the Scottish Assembly, and in due course it would be for the Scottish Administration to formulate its policies on legislative proposals in devolved fields. However, I can see no reason why a change of this kind should not be made now, if Parliament wish to do so, particularly when the change is, in the main, more one of recognising existing practice than of anything else.
Although the Government may be neutral on the general principles of the Bill, they must share concern about both its potential effects and its workability.
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The one point of substance I would wish to raise is to express a considerable degree of doubt about the proposal that the minimum age should be 16, instead of 21 as in England and Wales. I am sure that it is desirable that the age should be the same in both countries; and I am aware that the noble Earl, Lord Arran, has a Bill reducing the English age to 18. But my doubts relate not only to the case for uniformity, but to the proposal to have a lower age. For this reason, my anxieties are relieved by the announcement of the noble Lord, Lord Boothby, that he will move an Amendment at Committee stage to make the age of consent 21 in his Bill.
Apart from this point of substance, there are a number of matters of detail and drafting where the Bill could be improved and have defects removed. Perhaps the most gross example—if I might use that term—is that the Bill at various points refers to "buggery", whereas the corresponding Scottish offence is "sodomy". There are a number of other points, mainly directed to assimilating the Bill better to the code it amends, the Sexual Offences (Scotland) Act 1976. But these, I must stress, are matters of detail which can be taken up later. As to the Bill as a whole, the Government are content, as I have indicated, that a decision should be left to individual Members of your Lordships' House.
Baroness PHILLIPS: My Lords, before the Minister sits down, may I ask him this? It was probably a slip of the tongue, but we seem to have 16, 18 and 21 years of age. We all know that the age of consent is one thing, the age of criminal responsibility is something else, and there is a kind of grey area in the middle. But which one are we talking about today?
Lord KIRKHILL: My Lords, the noble Lord, Lord Boothby, in his Bill as it stands before your Lordships' House, has the age of 18. He has indicated that he will move an Amendment to raise this to 21, and the age of 21 is the present position under English law.
Lord CAMPBELL of CROY: My Lords, I think it was a slip of the tongue. At one moment, the noble Lord said "16" when he meant "18", but I did not interrupt him.
Lord KIRKHILL: My Lords, I can only apologise to your Lordships. I did not intend to say the age of 16.
3.9 p.m.
Lord FERRIER Lord FERRIER rose to move as an Amendment to the Motion for Second Reading "to leave out all the words after 'that' and insert 'in view of the present proposals for a Scottish Assembly now before Parliament, and of the subject matter of this Scottish Bill, this House considers its introduction inappropriate and untimely and declines to give the Bill a Second Reading.'." The noble Lord said: My Lords, I beg to move the Amendment that stands in my name on the Order Paper. Although what the noble Lord, Lord Kirkhill, has said may enable me to curtail my speech, which, in any case, will not be long, I cannot say that I am grateful to him, because if I have my way—and I hope that your Lordships will support me—this Bill will never reach its Committee stage. These details can be left to another body, perhaps the Assembly. As I said when the noble Lord, Lord Boothby, spoke, I am one of those who hope that there will not be an Assembly. However, when that matter is settled, presumably the details will be dealt with there.
I move this Amendment with some reluctance. It seems to me to be a pity that this controversial matter should be raised now. I have studied the exchanges which took place in your Lordships' House in October. Admittedly it has been left to a Private Member to introduce the Bill, but I feel compelled to resist its terms, as I felt compelled to resist the 1966 Bill. I regard it as another step down the slope leading to a decadent society. In addition, I hesitate to take up your Lordships' time on a matter which has been discussed so often before, particularly in the case of the 1966 Bill and subsequently the Wolfenden Committee. However, the situation that arises out of the present Bill is new, in that it refers to Scotland alone. I shall return later to this matter in order to answer the points made by my noble friend Lord Boothby.
As I have told your Lordships, I took the trouble to study the exchanges in October when the Government made it clear that they had no intention of promoting a Bill. We heard about that
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from the noble Lord, Lord Kirkhill, who put the matter in a nutshell in October in the answers he gave to quest ions asked of him on the 8th of that month. As for the subject matter of the Bill, it is necessary for me to set out the objections, as I see them, to the proposals, which I shall do as briefly as I can. They are contained at some length in the speech that I made on 10th May 1966, to which I shall not refer again except to say that in the course of it I declared my support for the views contained in the late Mr. James Adair's well-known Reservation No. 1 to the conclusions of the Wolfenden Committee. It was written as the expression of opinion of an experienced Scottish procurator fiscal. I think that he was procurator fiscal in Glasgow for many years. On the occasion of thy: 1966 Bill I voted, as did 28 other noble Lords, against its Second Reading. I can hardly do other than take the same stand today.
As has been said before, there are as many variations of homosexuality as there are colours in the rainbow. They range from the mentally ill through the compulsive lecher to the decadent pervert. It seems to me to follow that the attitude of the individual towards the matter varies from the utmost compassion through passive indifference to the bitterest contempt. Realising the difficulties which confront the homosexual, whom I regard as an unfortunate, it is very tempting to brush the whole problem under the carpet, but it seems to some of us that this will not do. Other people are concerned: namely, the vast majority of ordinary, normal folk. As Mr. Adair said in his paragraph 2, from which I shall read only one sentence:
"The presence in a district of, for example, adult male lovers living openly and notoriously under the approval of the law is bound to have a regrettable and pernicious effect on the young people of the community".
In my view, the same applies to the opposite sex. Incidentally, to many people the word "lovers" in this context may well seem incongruous.
What must be appreciated is that the flagrant existence of this kind of behaviour in almost any community can be a profound shock to decent people. My compassion goes out to this majority, whose voice is so seldom heard in an increasingly permissive society. What with X-films, pornography, lewd and

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even blasphemous gramophone records, where are we going? In saying this, I emphasise that I also regard the mentally unbalanced with sincere compassion. The fact is that the supporters of the Bill seek a relaxation of moral standards. This I believe to be a situation which should be resisted.
In addition to Clause 1 of the Bill, the kernel of the problem is to be found in Clause 3, which would remove Section 7 of the 1976 Act and substitute another, from which flow the subsequent clauses. I make no reference to the incongruity of Clause 2 which refers to merchant seamen and the like, nor to the situation whereby no prosecution has been launched by the Lord Advocate for so long. I wrote in my speech that they are not part of my case. Since, however, the noble Lord, Lord Kirkhill, has spoken before me, although I understood that I was to follow the noble Lord, Lord Boothby, may I refer again to the very odd attitude of the Lord Advocate. i agree with the noble Lord, Lord Boothby, that the situation is almost not capable of being understood; but there it is, and there it can stay so far as I am concerned.
Apart from the fact that homosexual acts have been rejected as heinous sin by every known ethic since time began, there are two specific points about the Bill that I should like to emphasise to your Lordships. First, the Bill is a charter for the male prostitute. Secondly, it puts power into the hands of a pervert who is in a position to influence promotion and the like—power that can be used to pervert a subordinate or an employee. This corresponds with "the casting office couch", so deplored in another context. The problem of blackmail has not been mentioned. However, I hope it will be referred to when the matter is broached by following speakers. Something which the noble Lord, Lord Kirkhill, said makes me feel I am right in thinking that the law in Scotland in respect of evidence and the like has some bearing upon the problem of blackmail.
Lord BOOTHBY: My Lords, may I interrupt the noble Lord for just one moment. A senior police official, whose name, for obvious reasons, I cannot give, said to me about six months ago, "No one will ever realise the amount of
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blackmail that has been stopped as a result of the implementation of the recommendations of the Wolfenden Committee". It was a profession. It is no longer a profession.
Lord FERRIER: My Lords, that is why I said that I thought there was something, despite the nonsensical situation, to be said for the stand taken by the Lord Advocate. However, this reference to the English position brings me to the Scottish situation. It has been contended that it is necessary—the noble Lord, Lord Boothby, makes a strong point of this—for the law in Scotland to be brought into line with that of England. Why, my Lords? This Bill is in an entirely different category from one such as the Divorce (Scotland) Bill which my noble friend Lord Selkirk recently steered through the House. This is not a necessary measure; it is entirely a social measure. Also it is a measure reserved entirely for Scotland. It is an attack on moral standards in Scotland, where I can assure noble Lords it will meet with stout resistence. May I say that my noble friend the very reverend Lord MacLeod of Fuinary has authorised me to say that he would have been supporting my Amendment had he been able to he here, but he is in Iona because of his duties connected with the Iona community.
In Scotland we have our law. In some respects, we have our own language. In addition to the Gaelic, to which I do not refer, I am thinking of words like, "outwith", "anent" and "remit", and whether one says "if" or "whether or no" and so on. We have our own individuality which we are perfectly able to maintain, as we have done for centuries, within the framework of the United Kingdom, under the British Crown, thanks be to God. It has been said that the phrasing of my Amendment is a suggestion of support for the Scottish National Party. It is nothing of the kind. It is quite the reverse. But the fact is, and we must accept it, that all political Parties include the establishment of a Scottish Assembly as part of their policy. Whether that will be so on Saturday I am not prepared to say. but we are speaking of today.
Lord BOOTHBY: It will not be, my Lords.
Lord FERRIER: My Lords, that I for one see no need for such an Assembly is neither here nor there; it is the fact that matters. But as matters stand today—and today is today—if the Assembly is constituted then that will be the proper place for a Bill of this nature as it is essentially social and entirely Scottish; not here in Westminster at this time. That, therefore, as distinct from its demerits, is another reason why I hope your Lordships will reject this Bill, leaving it to the Promoters to bring it forward when the new devolution question is settled one way or the other.
One Member of your Lordships' House has told me that I appear to have no consideration for the poor deranged people who may find themselves in prison under the terms of Section 7, and to whom the noble Lord, Lord Boothby, made some reference. That is not so, my Lords. I have consideration for them. Prison is the wrong place for their possible redemption. Here the Lord Advocate may have been wise in what he is doing, but the remedy is to devise a new approach to the whole question of penalties and to amend Section 7 accordingly. But any law such as this is bound to hurt somebody: is it to be the weak or the strong who suffer? Kleptomaniacs, arsonists, compulsive homosexuals are all sick people; how can they claim that they have rights? When they do, are they not whistling in the dark? Is it fair to risk injuring normal people, as this Bill does, in order that the abnormal may be shielded? In 1945 the Old Bailey had five courts; today I believe it has 29. Crime, whether it be violence, stealing, cheating, fiddling or drug-peddling is fast becoming the norm. Why should it? Because, my Lords, too many people do not seem to have the will or the power to stand up and say "enough".
I feel I have carried out the unpleasant task which my conscience prompted me to undertake when I tabled the Amendment on this revolting subject. I appreciate that the Promoters and supporters of this Bill are actuated by views sincerely held, and all I ask is that those who oppose it should in return be similarly credited. I ask your Lordships to support me in the "Content" Lobby when we come to a Division on the matter. I beg to move.
Moved, as an Amendment to the Motion for Second Reading "to leave out all the words after 'that' and insert 'in view of the present proposals for a Scottish Assembly now before Parliament, and of the subject matter of this Scottish Bill, this House considers its introduction inappropriate and untimely and declines to give the Bill a Second Reading.'."—(Lord Ferrier.)
3.25 p.m.
Lord BEAUMONT of WHITLEY: My Lords, I for one, and I am sure a great many of your Lordships, are very grateful to the noble Lord, Lord Boothby, for bringing this extremely sensible and overdue measure before your Lordships' House. There is now an overwhelming agreement that the 1967 Sexual Offences Act was a good measure and that people would not like to see it repealed. There are of course a number of people who do not yet feel that way, but I think the objection in principle to what we did then for England and what is proposed now for Scotland is still among such a small minority that I need not weary your Lordships' House by going over the grounds in principle once more. Therefore the only reference I would make to that part of the speech made by the noble Lord, Lord Ferrier, is to ask him whether he really consigns 5 per cent.—as it probably is—of the human race to the mentally ill, the compulsive lechers and the degenerate perverts.
We have been playing parlour games on this Bench, my Lords, trying to think of the distinguished and good people in history who were homosexuals, starting with Socrates and ending—because we decided not to include people alive—with that distinguished Member of your Lordships' House, whose recent death was such a tragic loss, the late Lord Britten. Certainly among the homosexuals that I know are some of the gentlest, the best, the most creative and the most pastoral-minded humans I know and we cannot just write them off in this sweeping and rather aggressive way.
It is not sufficient to leave the Law as it is because, as the noble Lord, Lord Boothby, rightly said, to have a criminal law on the Statute Book which is acknowledged not to be administered is to bring the law into disrepute. It is difficult

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enough these days to keep alive in people a strong sense of the necessity of obeying the law of the land even when at times it does not particularly suit them, without having this tremendously anomalous situation of something which the police will do nothing about but which apparently is still illegal and therefore to some extent is certainly still open to blackmail.
It has been suggested that we should put this Bill off until the Scottish Assembly can consider it. I think the speech made by the noble Lord, Lord Ferrier, shows that this is something of a ploy; that what he really wants is merely the throwing out of this Bill, and indeed, if he could have it, the reversal of the 1967 Sexual Offences Act. As the noble Lord, Lord Boothby, pointed out, we have not yet got an Assembly. The Government may pass legislation for an Assembly, with a little help from their friends, but if the friendship is not reciprocated then in the fairly near future, depending on what the Government decide to do about Europe, there might be a General Election; and, as the noble Lord, Lord Boothby, has pointed out, who can then say what would be the fate of a Scottish Assembly?
I should like to take that argument one step further. I am a very strong devolutionist indeed—more so certainly than most in your Lordships' House and probably as strong a devolutionist as any, but I think the last thing one should devolve are matters dealing with civic rights. Those are the things which should be made as universal as possible. The guardianship of the rights of minorities must be taken as far away from local passions and prejudices as it is possible to do. That is why we strive to have a United Nations recognised authority on human rights; that is why we have a European authority and subscribe to it ourselves and undergo judgment under it, which is the right thing to do. Civil rights are the last thing that should be devolved: everything else should be devolved first, and even then I feel they should not go down any further than is absolutely necessary. Therefore, even if there were a Scottish Assembly now, which there is not, I would say that we ought to pass this Bill today.
There is a strong feeling that in matters of personal liberty and civil rights the law
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should be the same throughout the United Kingdom. I am told that when the question of the Divorce Reform Bill came up in another place two or three years ago and was blocked there was in Scotland a wave of feeling of enormous strength that the law should be the same for the whole of the United Kingdom. The passing of the Divorce Reform (Scotland) Act was a direct result of that feeling which swept over Scotland.
When the Bill comes to the Committee stage, as I hope your Lordships will let it, there are in fact one or two Amendments that I should like to move, even to make the law different from the law in England. The Amendments will not be tremendously controversial. The present law has not always worked exactly as Parliament would have wanted it to work. Whereas I entirely agree that the law should be brought into line with that in England and Wales, I do not see any reason for it to be the same in every detail. As the noble Lord, Lord Ferrier, has pointed out, the Scottish legal system has its own ways, its own laws. I do not see any reason why we should not amend and improve this Bill in some respects, but that can wait until the Committee stage.
I am delighted that from the point of view of taking this Bill forward the noble Lord, Lord Boothby, is going to move an Amendment to the age of consent. I think the age of consent should be changed in all the countries of the United Kingdom, but I agree that this is probably not the right place to do it. My Lords, as I said, this is a sensible and an overdue Bill. Do not let us be distracted by talk of non-existent Scottish Assemblies. Let us overwhelmingly give the Bill a Second Reading today.
3.32 p.m.
Lord CAMPBELL of CROY: My Lords, the noble Lord, Lord Boothby, has explained very clearly the intention of his Bill, and I respect and understand what he is trying to do in it. He is attempting to rationalise the law and bring the law in Scotland into line with what it has been in England and Wales for 10 years. The criminal law, as it is, is different since the Bill of the honourable Member Mr. Abse was presented and passed through the House of Commons. I was a Member of that House at that time and I remember the debates that took

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place. The Bill referred only, and applied only, to England and Wales, and not to Scotland.
My Lords, in practice there has in the last 10 years been little, if any, difference in the effects of the different states of law North and South of the Border, because no prosecutions have been brought in Scotland in the circumstances covered by the Abse Bill—that is to say, consenting adults in private. In Scotland the responsibility for bringing prosecutions lies with the Lord Advocate. He is a Law Officer and a member of the Government of the day. I understand that the situation is different in England and Wales, where a duty lies upon the Director of Public Prosecutions to bring prosecutions. So there has been a difference because of the fact that the Lord Advocate could control what happened in Scotland.
As I see it, the principal issue to be decided today is whether anything need or should be done to obtain uniformity in the Statutes North and South of the Border, or whether it would be better to leave things as they are for the present on the basis that in practice no one is being treated unfairly in Scotland. It can be said in favour of the Bill that a Lord Advocate in the future might change the policy and initiate proceedings; and that is what the noble Lord, Lord Boothby, in introducing the Bill, suggested was a possibility. It can also be argued that it is unwise to have laws that are deliberately ignored; that this tends to bring the whole system of law into disrepute. I certainly sympathise with that argument where Scotland is concerned.
My Lords, against the Bill it can be pointed out that for a period of 10 years there have in practice been no differences in what has happened North and South of the Border, and there has been no unfairness to homosexuals North of the Border. As I was Secretary of State for Scotland for nearly four years during that period, from 1970 to 1974, I was well aware that there was this difference in the law, but nothing occurred during that period which suggested that it was necessary to make a change in order to avoid unfairness. It can also be said against the Bill that raising this subject opens up possibilities of going further and introducing into this Bill Amendments and additions which would go further than the law
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at present existing in England and Wales, that attempts may be made to make additions. Certainly some of us have already received letters front various bodies representing what are called civil rights suggesting that this Bill might have things added to it which would take it considerably further than the law now existing in England and Wales.
I am very glad that the no ale Lord, Lord Boothby, told us today that if the Bill goes to Committee stage he would move to amend the age of 18 to 21—which is the one significant difference in his Bill from the existing law in England and Wales. I was aware that the noble Earl, Lord Arran, has a Bill before this House which seeks to reduce the age for the whole country, on the basis that this Bill has gone through, from 21 to 18. But for the moment I am sure i he noble Lord, Lord Boothby, must try simply in his Bill to make the law in Scotland the same as it now is in England. So I was delighted to hear him say that today.
My noble friend Lord Ferrier is opposed to the Bill and does net wish it to have a Second Reading for reasons that he has just given. I will say straight away that this is one of those subjects upon which traditionally Governments and official Oppositions do not formulate Party policies; it is left to individuals to reach their own conclusions upon the issues which arise. Therefore, any views which I express from this Bench will be personal.
Two principal questions have to be answered. First, does it matter whether the law on this subject is different North and South of the Border? If the reply to that is, No, because in practice there will be no prosecutions, we come to the second question. Does it matter that the present law in Scotland stands but no notice is being taken of it? Is this harmful to the public attitude towards the system of law in general? I would welcome views of lawyers on this question. On the first question, I think we must distinguish what we are considering today from recent Scottish Bills which have been before your Lordships' House, en which I and others have argued that it IA as to the advantage of Scotland and England and Wales that differences in law should be ironed out, because as these differences exist at present they could cause confusion

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and distress; and, of course, I am referring to the Divorce (Scotland) Bill and the Marriage (Scotland) Bill.
On the first one I supported my noble friend Lord Selkirk, because the difference in the law North and South of the Border could cause distress, and had been causing distress. I knew of many cases where distress had been caused. But, in that case, it was not criminal law but was a matter which depended on the domicile of those concerned. Situations also arose where spouses were Scottish, English or Welsh.
In the marriage Bill, which left us for another place, we thought it important, in order to avoid confusion, to bring various aspects of marriage law together and promote uniformity between Scotland, and England and Wales. For example, on the question of the forbidden degrees of relationship for marriage, clearly it would be highly confusing if, as it seemed at one time in Scotland, it was to be forbidden to marry a deceased wife's sister, whereas it was possible to do so in England and Wales. Therefore, some of us have argued recently in your Lordships' House in favour of uniformity in matters where confusion could arise and where, in relation to divorce, there could be distress.
I am delighted that the Bill which my noble friend Lord Selkirk promoted is now an Act. However, I suggest that those considerations do not apply in the present case. Here we are dealing with criminal law and it relates to a homosexual act that takes place either in Scotland or South of the Border. It does not have the continuing life-long effects of divorce or marriage or all the complications that I have described. I do not see an urgent need for the Bill, though I am well aware of the anomalous situation on paper and how that has arisen historically. In fact, no one is being discriminated against or being unfairly treated in Scotland, and it is very unlikely that in the future a Lord Advocate will change the present policy. However, the noble Lord, Lord Wilson of Langside, is due to speak and I shall listen to what he says because he was a law officer in a previous Labour Government and also served on the legal side in the Scottish Office when I was Secretary of State for Scotland.
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The Amendment which my noble friend Lord Ferrier has moved refers to a Scottish Assembly. I certainly do not want to go into the question of devolution now—we have discussed it at some length in the past. However, in passing I must comment that when the noble Lord, Lord Boothby, referred to some guesses published in the Press as to what my right honourable friend Mrs. Thatcher may say on Saturday at a conference in Perth, that is speculation and I would hope that your Lordships' House would treat it as speculation until a statement has been made either by her or a spokesman on her behalf. It is certainly dangerous to make assumptions.
My noble friend Lord Ferrier has made it clear that he is not very enamoured of the idea of an Assembly and I think it can be said that none of us in your Lordships' House knows whether or when an Assembly may be set up and what power or functions it may have in Scotland. I agree that if such an Assembly existed it would probably be the place where the powers and functions in this area would lie, but it is not possible to depend on an Assembly, which would consider this matter, necessarily being in existence in the next two or three years.
The Government Bill on devolution proved to be unsatisfactory, so no detailed proposals are before Parliament at present. However, the extensive administrative devolution—which has already occurred in Scotland over the past 40 years and which means that the Secretary of State and the Scottish Office Ministers are virtually responsible for every domestic subject in Scotland except industry and finance—means that the Scottish Executive, together with its law officers, can ensure that the present situation continues without unfairness or discrimination against persons in Scotland as distinct from persons South of the Border.
I was surprised that the noble Lord, Lord Boothby, should have thought that this was an urgent matter. I can certainly appreciate that it is untidy and that one would not wish to have the differences that exist in law between Scotland and England. However, if I understand his presentation of his case, I do not think that he knows of any instances in which any persons in Scotland in the last 10

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years have suffered in any way as a result of the way in which the law in practice is carried out.
Lord BOOTHBY: My Lords, that is my whole point and it is that about which I am complaining. The law is not being enforced. It should be enforced.
Lord CAMPBELL of CROY: My Lords, I am grateful to the noble Lord, because I want to establish the position clearly. No one has, in fact, suffered as a result of the differences in the last 10 years. I was really making the second point as to whether law is brought into disrepute if it is on the Statute book and not being observed.
Lord WIGODER: My Lords, is the noble Lord, Lord Campbell of Croy, asserting as a fact that in the last ten years there have been no instances of attempted blackmail in Scotland because of the existing law there?
Lord CAMPBELL of CROY: My Lords, I certainly am unable to make any such statement, and I have given the noble Lord, Lord Wigoder, the opportunity to point out that this is an aspect of the situation which could arise. I and others who have been concerned with this subject do not know of any instances where people have suffered either because of a prosecution or because of the threat of a prosecution, because it has been understood in Scotland that the law would be observed in the way in which it had been changed in England and Wales. So anyone who attempted blackmail was not really onto a good thing from his point of view.
I suggest that it is a matter for individual Peers to decide whether they allow the Bill to have a Second Reading or take the view advanced by my noble friend Lord Ferrier. I was Secretary of State for Scotland for a period of nearly four years during which the present situation obtained. Therefore, I believe that it would be appropriate for me to abstain, but I hope that I have been able to put before noble Lords the main issues arising from the Bill.
3.47 p.m.
Lord WILSON of LANGSIDE: My Lords, your Lordships' House is surely in debt to the noble Lord, Lord Boothby,
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for his initiative in presenting this measure to your Lordships today. This is surely a necessary Bill. Standing the law in England and Wales as it presently does and standing the remarkable, one might almost say quaint, statement made by the Lord Advocate when presenting the Sexual Offences (Scotland) Act 1976 to Parliament, it is surely beyond dispute that this is a necessary measure. There is, perhaps, room for discussion whether that necessity should be a matter for laughter or for tears. However, it is certainly a regrettable necessity, for more reasons than one. That necessity and the circumstances giving rise to it—and I wish to touch on this because it is important to the law in Scotland—surely illustrate yet again, in a small but not insignificant way, how little wisdom at present is applied in regulating affairs in this particular corner of the Scottish field, the field of criminal law.
What are these circumstances? They have, of course, already been touched on today by almost every noble Lord who has spoken. I make no apology for touching upon them again, and I must confess that I feel a little less tolerant about them than do apparently most of your Lordships who have spoken up to the moment. The Government decided to consolidate certain enactments relating to sexual offences in Scotland. This was not a matter of any urgency. This was not a matter of major importance. In the result, we got Section 7 of the Sexual Offences (Scotland) Act 1976, which re-enacted the earlier Scottish provisions making it a criminal offence attracting a sentence of up to two years' imprisonment for any male person to engage in homosexual acts, whether in public or in private. This was of course in sharp conflict with the state of the law in England and Wales, and had the Government said, as the noble Lord, Lord Ferrier, at one point suggested might be a proper approach, that on the advice of Scottish Ministers they accepted that the law in the two countries should be different, that might have been a tenable position. We might not have agreed with it—I certainly would not—but it would have been an arguable stance. The Government did not adopt it.
The noble Lord, Lord Kirkhill, will no doubt correct me if I am wrong about this. At the close of his opening speech

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I endeavoured to seek clarification on this point from him but was unsuccessful. An alternative, as I understand it, would have been by minor amendment to exclude from the ambit of Section 7 homosexual acts committed in private. The crucial provision of Section 7 is to the effect that:
"Any male person who, in public or private, commits … any act of gross indecency with another male person shall be liable on conviction on indictment to imprisonment for a term not exceeding two years …".
The deletion of the words "in private" in relation to the commission of the offence would surely, would it not, have been a more sensible course? Of course I may be wrong; it would not have covered every contingency and the situation may be much more complicated than that.
Would that not have been more in accord with common sense than the course which the Government adopted? That was—and this is what I must confess I feel a little intolerant about—to ask Parliament solemnly to re-enact the law as it stood, at the same time acknowledging that it was bad law. That is what the Lord Advocate did before Parliament, and on his behalf it was stated in this House. It was bad law, so he was not going to enforce it.
I regard that as a farcical reversal of common sense. I suppose it is too much to expect that the Minister who replies on behalf of the Government will acknowledge that in accepting, as I hoped he would, the principle behind Lord Boothby's Bill. I should dearly have liked to know what the noble and learned Lord the Lord Chancellor thought of the way in which this matter was handled when it was before Parliament in 1976. I am afraid that that privilege will be denied us. I am sure that his gentlemanly and, in normal circumstances, altogether desirable reluctance to stand on Scottish toes would inhibit him from expressing himself freely, but I find it difficult to believe that the situation which has given rise to the need for this Bill could be regarded as acceptable to any lawyer with a pride in the law of his country.
As for Lord Ferrier's Amendment, I would say only that had there been any real prospect of the measure before Parliament passing into law at an early
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date, there might have been much to be said for the course which the noble Lord proposes. Since, happily, for the people of Scotland and the United Kingdom this is a remote possibility, I suggest that we should get on with our business of rationalising the law in Scotland as elsewhere. In conclusion—
Lord DRUMALBYN: My Lords, before the noble and learned Lord reaches his conclusion, may I put a question to him that I hope will not embarrass him, because he is, after all, the only person in this House who can answer it. As at the present time it must follow that homosexual acts between consenting adults are offences, are all such acts that are brought to the attention of the police reported to the Lord Advocate? Presumably there must be some record somewhere of those acts. Can the noble and learned Lord tell me whether there is such a record and, if so, what use is made of it?
Lord WILSON of LANGSIDE: My Lords, I am not aware of any such record, or of any use which could be made of it. In conclusion, I would say only this: two things restrain me, so far as Lord Ferrier's Amendment is concerned, from saying that all the indicators suggest that the Scotland and Wales Bill is sunk without trace, to the enormous benefit of Scotland. First, it would surely be out of order, since I think the measure is still in another place. It is certainly somewhere; it is not here. Secondly, I have in mind that there is nothing more calculated to rally the faithful behind the more dotty measures of a Labour Administration than the publicly expressed hostility to these Acts by unknown, elderly Peers, especially if they may be dubbed, however unfairly, "renegades". My Lords, I would commend this Bill to your Lordships' House.
3.58 p.m.
Lord MONSON: My Lords, the noble Lord, Lord Ferrier, maintained, if I heard him correctly, that homosexual activity offends all decent people. Had he been referring to public homosexual activity I would have totally agreed with him. However, we are not talking about public activity, but about what takes place in private. Private activity cannot, by definition, offend third parties unless those third

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parties deliberately intrude upon the privacy of others. This is not really a Bill about homosexuality, the prevalence of which can scarcely be affected one way or another by legislation. This Bill is first and foremost about individual freedom; specifically the freedom of the individual to conduct himself as he chooses in the privacy and within the four walls of his own home, always provided that children are not involved in any illicit behaviour, and that no injuries are caused to third parties thereby.
We are rightly contemptuous in this country of the way in which South African policemen are said to skulk round people's bedrooms in order to try and discover what individuals of different races are doing together. But so long as in any part of the United Kingdom there exists a state of affairs in which our policemen rummage around bedrooms to discover what individuals of the same sex are doing together, we cannot in all honesty, in all conscience, condemn what happens in other countries. I submit that to require policemen to peer through keyholes—to compel them to act as Peeping Toms, as it were—is highly degrading to the policemen concerned and indeed to society at large. It is high time we put a stop to it.
The noble Lord, Lord Ferrier, contends that no action should be taken pending the establishment of a Scottish Assembly. But as the noble Lord, Lord Boothby, and others have pointed out, there is no guarantee whenever that a Scottish Assembly will be set up, either in the short term or indeed in the longer term. If and when such an Assembly comes into being there is equally no guarantee that it will be granted the powers to legislate on matters of this sort, although I suppose that, provided Scottish representation were reduced to Ulster proportions, in all probability it would be granted such powers. But in that event there would be absolutely nothing to prevent such an Assembly from legislating to make this sort of behaviaour a criminal offence once again, though I doubt very much whether that would happen in practice.
At the present time there is only one body in the United Kingdom competent to legislate on such matters, and that is Parliament at Westminster, in both Houses of which Scottish interests are more than
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adequately represented. That being so, if there exists a strong body of opinion opposed to such a Bill—if the consensus of Scottish opinion is antagonistic towards it—I dare say they will be able to block it in another place; we shall have to wait and see. In the meantime, your Lordships have, when it comes to the big issues, nearly always come out strongly on the side of individual freedom, and for that reason I hope the House will give the Bill a Second Reading today.
Lord STRATHCLYDE: My Lords, I hope the House will excuse my intervening in the debate—
Several noble Lords: Order!
4.3 p.m.
Lord PLATT: My Lords, I was not sure whether the noble Lord, Lord Strathclyde, was rising to make a brief intervention or a speech. As I gather he intends to make a speech and as my name appears on the list of speakers for this debate, perhaps he will allow me to say what I was going to say before he speaks. I must oppose the Amendment and vote in favour of what the noble Lord, Lord Boothby, has put before us. I see the Amendment as a kind of shelving of responsibility and, to some extent, a refusal to acknowledge the facts as they are today. If I oppose the Amendment, then I support the Bill; but let me say straight away that to me the whole concept of a male-to-male relationship is loathsome; my whole inclination all my life has been so strongly heterosexual that it has led me into difficulties from time to time.
Lord BOOTHBY: Never mind.
Lord PLATT: My Lords, as a musician manqué, as I can perhaps claim to be, I must acknowledge the debt of in music and other arts to the largely homosexual Church of the 15th and 16th centuries, with its various practices including the castrati and so on. The noble Lord, Lord Ferrier, was, I thought, tying at one point to give us the idea that a gradual deterioration of moral standards had happened in the last few years, whereas in fact one need only go back to the ancient Greeks, let alone the medieval Church, to discover that there is nothing very new about it.

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Most of us could today name musicians and artists who are clearly homosexual in their inclinations. Moreover, we in this enlightened age do not think they should be treated like Oscar Wilde and relegated to Reading Gaol. We must realise that there are such people, some of them creative in art, music and literature. My psychiatrist friends who have worked in universities tell me that if one wants to find homosexuals one should look, first, in the faculty of theology and, secondly, in the faculty of music. I make no further comment on that.
Noble Lords will see that what I am really trying to say is in the nature of a disclaimer. For me, justice demands that I vote in favour of the Bill and— because, if there is a Division, my name will be against the Amendment—I am trying to avoid any possible suspicion of having myself sided with homosexuals. It would be much easier to abstain or vote for the Amendment, but to me that would be an act of cowardice.
4.6 p.m.
Lord STRATHCLYDE: My Lords, I apologise for intervening a few moments ago at the wrong place. Perhaps I may be forgiven for wishing to make a few comments on this subject. I do not know a great deal about sodomy and what I do know about it I learned when I was in the Navy over a period of some 20 years. I know the great fear there was among the higher command of the Fleet when thousands of men were tied up in ships in Scapa Flow for four years and more. The fear was that there would be an outbreak of sodomy. There was not, but the reason for the fear about it was over the effect it would have on the morale of the Fleet. I believe the same question arises in Scotland in connection with the Bill; there may be a great effect on the morale of people who have been brought up as Presbyterians with very strict views on matters such as this.
When I was in the Navy I recall being approached by the master at arms one evening in my cabin and asked whether I would be good enough to act as prisoner's friend to a boy who was being court-martialed for sodomy. I said I did not want to be mixed up in the matter, but he pointed out that traditionally it
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was the duty of every commissioned officer, when asked by men to represent them as friends, to do so. I went to the cells and saw this wretched creature, for that is what he was, and he told me that what had happened to him was a question of assault. I discovered from the medical officers a good deal about this practice and eventually I appeared as the prisoner's friend. I put both of the doctors in the witness box and then I put the wretched boy in the witness box and the result was that he got off.
After the court-martial my captain told me a good many home truths about myself which had better not be printed, but he entirely disagreed with what I had done. He said there was no answer to it and that the boy should have gone to prison or some other place. On the other hand, I got quite a reputation as one who stood up for the lower deck, though I am sorry to say that my next case resulted in three years in a Maltese prison for a man who struck his superior officer in the execution of his duty.
In my view this change is not wanted by the people of Scotland as I know them. I do not believe a word that has been said about its being a necessity. I do not know anything about the law on the subject, but I would leave it as it is: we are too fond of poking our noses into the law. Let us leave it to the people to decide and not go messing about with it. Noble Lords will appreciate that my vote will be for the Amendment.
Lord KIRKHILL: My Lords, if I may, with the leave of the House, speak again at this stage, I should like to say that the noble Lord, Lord Wilson of Langside, put the suggestion to me in the course of his remarks that the same effect might be achieved by omitting the words "in private" from Section 7 of the Sexual Offences (Scotland) Act 1976. I have now been advised that Section 7 covers all homosexual acts between males in public or private. Therefore it would not be sufficient to omit the words "in private", as Section 7 would not then make illegal, for example, acts between adults and those under 21 and acts between adults one of whom does not consent. However, there is much to be said for seeking to achieve what the Bill seeks to achieve by modelling the drafting more closely

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on the 1976 Act, rather than on the 1967 Act. Such an approach would produce a more satisfactory Act, and I thought that such a comment might be useful at this stage in your Lordships' deliberations.
4.11 p.m.
The Earl of SELKIRK: My Lords, I should like to say a few words on this matter because I belong to the guilty party who was on the Consolidation Committee which is the basis from which this whole wretched business started. In consolidation one does not omit, one consolidates the matter as it stands, and nobody really noticed what was the situation until the Consolidation Bill came out, and then the furore started. I am very glad that the noble Lord, Lord Boothby, has raised the age to 21, because I think that that makes the position much easier. However, I do not feel frightfully strongly about bringing the laws together identically, particularly bearing in mind, as the noble Lord said, that it is no more than a recognition of the existing situation. The situation has been going on for so long, on the basis of the Lord Advocate's decision, that I do not think there is the slightest chance of any Lord Advocate in the future changing his policy one way or the other.
I should like to ask a question here. I wonder whether the system existing in Scotland is not rather more elastic than that in the Bill which we have in front of us. In the Bill there is, quite inevitably, a series of exceptions. Exceptions can be read, or can be interpreted in due course, and there will be narrow limits, inevitably, as to what applies and what does not apply. There will be a whole range of such matters, which I need not go into now. However, to my mind the Lord Advocate's discretion in this matter is probably rather wider. I do not know exactly how this discretion would be exercised, but, to give an obvious example, I should be extremely reluctant to believe that the Lord Advocate would prosecute someone aged, say, 20. The Bill, however, would compel him to do that. That is only one point, but there may be a whole range of others.
I wonder whether in the present circumstances this is a necessary Bill—I very much wonder whether it is. There are
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many definitions here. More definitions could be put in, or the definitions could be amended, but they will always be difficult to interpret, and in any case at the end of the day the Lord Advocate has to make up his mind. The prosecutions are entirely confined to the Lord Advocate, and he has to make up his mind. As I think the noble Lord, Lord Wilson of Langside, knows very well, what makes the Lord Advocate make up his mind is not the question of whether an offence has been committed, but whether that offence can be proved. This is why prosecutions are brought.
I should have liked to know whether blackmail is prevalent in Scotland under the present arrangements. The noble Lord, Lord Campbell, said that he did not know about it. The noble Lord, Lord Wilson of Langside, probably knows much more about this than any of us. I should have liked the Scottish Law Commission to look at this subject before we went straight into it. It is a subject which people feel extremely strongly about. If there was ever a Scottish Assembly this would be a proper subject for that body. I find it very hard to say that this is a necessary Bill, and I do not think it would make the slightest difference at all.
Lord WILSON of LANGSIDE: My Lords, I should like to put a point to the noble Earl before he sits down. I wonder whether he appreciates that my point about the Lord Advocate which I made when I was addressing your Lordships' House, was not critical of the right of any Lord Advocate to have a discretion. My complaint was that the Lord Advocate in this situation gave up his discretion and said, "I shall not prosecute". This is the point."
The Earl of SELKIRK: My Lords, I appreciate that point, but the Lord Advocate was doing no more than following a long line of Lord Advocates before him—
Lord BOOTHBY: But none of them had said it.
The Earl of SELKIRK: No, perhaps that was a mistake of the Lord Advocate, but I am not sure that it was a mistake in the procedure.
4.15 p.m.
Lord HUGHES: My Lords, I must apologise for taking part in the debate without having put my name on the list of speakers, but until late last night I was not certain that I could manage to he here. I should like to say a few words about this matter, exercising the freedom which is now mine, having moved along the Chamber a little way. I do not accept the first grounds on which the noble Lord, Lord Boothby, put forward the Bill; the desirability of bringing the law of Scotland into line with the law of England. I have been responsible for moving in your Lordships' House far too many Bills in which the law of Scotland was to continue to be different from that of England to accept that that in itself is a reasonable ground for doing it.
The position is in fact that the administration of the law in England and Scotland is identical at present because of what the Lord Advocate openly admitted last year. He did not make any change in the practice; to my knowledge at least three of his predecessors acted in exactly the same way, in both Labour and Conservative Administrations. I believe that the practice of the Lord Advocates in changing the law administratively preceded the actual change of the law in England, because it was not only in 1967 that Lord Advocates started to ignore the law in Scotland; they had been doing it for at least some years before that. I would suspect that the present practice in Scotland goes back not 10 years, but at least 20 years; just as the law on abortion in Scotland was ignored before the law was changed.
I should like to turn for a few moments to what was said by the noble Lord, Lord Ferrier. We must all have been impressed by the total sincerity with which he expressed his views. I think that this would be the feeling of even those who totally disagree with what he said. My only criticism of what the noble Lord, Lord Ferrier, said was on the point put forward by the noble Lord, Lord Beaumont of Whitley—that referring to the Assembly was rather a ploy than a reason. In his speech the noble Lord, Lord Ferrier, made it clear that he was opposed to this measure root and branch. If it comes before an Assembly he would be against it there, if he were in the Assembly. If there is not an Assembly, and a Bill such
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as this comes forward at some future time in this Chamber, he would still be against it. His opposition is to the principle, not to the place where the legislation would take place.
But as I have said, the position taken up by Lord Advocates over a succession of years could be accepted so long as it was being applied but not openly admitted. The present Lord Advocate has totally changed the position. He has created the situation that an officer of the law has publicly stated that he is not going to apply the law of Scotland. It may be that that is a wise thing to do, but surely once we know that position the correct remedy is to make the law what the Lord Advocate is prepared to implement. In recent years there have been far too many instances of people choosing the laws which they wish to obey. We can all give many examples of these.
Surely it is not conducive to good law if there is a situation where an officer of the law is stating exactly the same position —that he is going to choose the laws which he will prosecute. Surely the remedy is to make the law what it ought to be, and it so happens that in that case the best course would be to adopt something similar, if not identical, to the law which now prevails South of the Border. If that were done, then we would at least have done something in this House, and in Government, to make certain that we are not joining with those who choose the laws which they are going to obey.
The noble Lord, Lord Strathclyde, referred to the question of morale, and the effect which this change would have on the morale of Scotland. Even when people in Scotland knew that the Lord Advocate was not applying the law, I was not aware of any request from any member of the public that the law should be enforced—and, after all, I was at the Scottish Office for more than seven years. Since the statement was made by the present Lord Advocate there has been no demand from the public, either generally or through organisations of which I am aware, asking that the Lord Advocate should apply the law. In that case, I would suggest that the people of Scotland accept that the present position is a desirable one, and therefore I think it should be made the legal one.
4.21 p.m.
Lord BOOTHBY: My Lords, I do not really have anything to add. I think that the speeches of the noble and learned Lord, Lord Wilson of Langside, and the noble Lord, Lord Hughes, among others, have been quite decisive. I made it quite clear that I am not out to change the law of England; I made it quite clear that at the Committee stage I would resist any Amendments of this Bill which sought to change the law of England. I also made it quite clear that the Lord Advocate, having publicly stated that he did not propose to enforce a particular Act on the Statute Book, then the Statute Book, as the law, should be changed so that he can enforce it; because if the Crown Office of Scotland publicly states that it is not going to enforce a law on the Statute Book it cannot fail to bring the law into disrepute. I am ready, therefore, to accept any drafting Amendments that the Government may propose and to resist any proposed changes.
My Lords, to strike a lighter note, I am delighted to substitute "sodomy" for
"buggery". It makes no difference to what I am trying to carry out. I only want to see the law upheld and enforced.
Lord FERRIER: My Lords, we have had enough of this, I think. I do not want to make any long speech although I might have some more to say; but the last few speeches have made it clear to me in my own mind that my doubts about the advisability of changing the law have been well founded. On behalf of those noble Lords who might support me and others who have supported me here, I should like to know who is in favour and who is against. I propose to divide the House and I will not detain your Lordships any longer.
4.24 p.m.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: Contents, 27; Not-Contents, 125.

CONTENTS

Alport, L.

Granville of Eye, L.

Monck, V.

Blyton, L.

Gridley, L.

Newall, L.

Chesham, L.

Hankey, L.

Norwich, Bp.

Clwyd, L.

Hawke, L.

Sharples, B.

Derwent, L.

Kinloss, Ly.

Shinwell, L.

Effingham, E.

Loudoun, C.

Strathclyde, L.

Exeter, M.

Lyell, L.

Suffield, L.

Ferrier, L. [Teller.]

Margadale, L.

Vivian, L.

Glenkinglas, L. [Teller.]

Maybray-King, L.

Ward of North Tyneside, B.

NOT-CONTENTS

Airedale, L.

Cooper of Stockton Heath. L.

Hale, L.

Alexander of Tunis, E.

Cranbrook, E.

Halsbury, E. [Teller.]

Allerton, L.

Crook, L.

Hanworth, V.

Amherst, E.

Davies of Leek, L.

Harcourt, V.

Ampthill, L.

Denham, L.

Harmar-Nicholls, L.

Annan, L.

Douglas of Barloch, L.

Harris of Greenwich, L.

Arwyn, L.

Drumalbyn, L.

Hatherton, L.

Avebury, L.

Duncan-Sandys, L.

Henderson, L.

Aylestone, L.

Dundee, E.

Hertford, M.

Balerno, L.

Ebbisham, L.

Hives, L.

Balogh, L.

Ellenborough, L.

Home of the Hirsel, L.

Banks, L.

Elton, L.

Houghton of Sowerby, L.

Beaumont of Whitley, L.

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

Hughes, L.

Blake, L.

Evans of Hungershall, L.

Jacques, L.

Boothby, L. [Teller.]

Fisher, L.

Janner, L.

Boston of Faversham, L.

Foot, L.

Killearn, L.

Brock, L.

Fraser of Kilmorack, L.

Kilmarnock, L.

Brockway, L.

Fulton, L.

Kirkhill, L.

Burntwood, L.

Gaitskell, B.

Leinster, D.

Caccia, L.

Gardiner, L.

Listowel, E.

Campbell of Eskan, L.

Gladwyn, L.

Llewelyn-Davies of Hastoe, B

Castle, L.

Gordon-Walker, L.

Lloyd of Hampstead, L.

Cawley, L.

Greenway, L.

Long, V.

Collison, L.

Grey, E.

Lovell-Davis, L.

Mancroft, L.

Roberthall, L.

Teynham, L.

Marley, L.

Rochdale, V.

Thurso, V.

Monson, L.

Rusholme, L.

Trefgarne, L.

Morris, L.

Ruthven of Freeland, Ly.

Vernon, L.

Morris of Grasmere, L.

Sainsbury, L.

Wakefield of Kendal, L

Northfield, L.

St. Davids, V.

Wallace of Coslany, L.

Onslow, E.

Segal, L.

Walston, L.

Oram, L.

Shackleton, L.

Ward of Witley, V.

Pannell, L.

Sligo, M.

Wells-Pestell, L.

Pargiter, L.

Snow, L.

White, B.

Peart, L. (L. Privy Seal.)

Spens, L.

Wigoder, L.

Peddie, L.

Stamp, L.

Willis, L.

Platt, L.

Stedman, B.

Wilson of Langside, L.

Porritt, L.

Stone, L.

Winterbottom, L.

Rankeillour, L.

Strabolgi, L.

Wolfenden, L.

Redcliffe-Maud, L.

Strathcarron, L.

Wootton of Abinger, B.

Ritchie-Calder, L.

Taylor of Gryfe, L.

Wynne-Jones, L.

Robbins, L.

Taylor of Mansfield, L.

Resolved in the negative, and Amendment disagreed to accordingly; Bill read 2a and committed to a Committee of the Whole House.

UNFAIR CONTRACT TERMS BILL
Brought from the Commons; read 1a, and to be printed.

IMPORT OF LIVE FISH (SCOTLAND) BILL [H.L.]
4.33 p.m.
Viscount THURSO: My Lords, I beg to move that this Bill be now read a second time. This is a very small Bill in size, but to anyone connected with the salmon industry, with the fish-farming industry, with tourism or even with ecology and conservation, the implications of this Bill are larger than its printed size would indicate. Your Lordships will be aware of the Questions, both written and oral, which have been put in your Lordships' House on the matter of the importation of Pacific salmon into Scotland. Similar Questions were also put in another place, and as a result it has emerged that there is what one might describe as a gap in the law, or, rather, a gap in the powers of the Secretary of State to control the import of varous species of fish into Scotland. There is, of course, legislation which deals with the import and release of fish from a health point of view, but there is nothing in the Secretary of State's powers which enables him to take a total ecological view of the effect of an import of fish into Scotland, or of the release into Scottish waters of species of fish which do not already exist there.
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At this time there is considerable interest in the benefits of fish farming and acquaculture, as we are now told to call it—benefits from the proper use of our natural resources and the proper use of our indigenous species of fish—and, indeed, there is considerable interest in the possibility of improving the output, the quality and so forth of fish farms. I have no doubt that it is with this in mind that the people who wished to import Coho salmon into Scotland made their application to the Secretary of State.
My Lords, I do not quarrel with this as an ideal. I think that even if the Bill which I have put before your Lordships' House becomes law, and even if the Secretary of State is given powers to restrict the import into Scotland of other species—exotic species, if you like to call them that, but non-native, non-indigenous species—there may well be cases where it is advisable, where it is desirable and where it is not thought to be harmful to make such an import. But I am quite convinced that it is wrong that the power to consider this from the general point of view of the ecology of Scotland, from the general point of view of the indigenous species of fish which live in Scotland, should be lacking; and therefore, my Lords, I felt it wise to bring forward this Bill to empower the Secretary of State accordingly.
Your Lordships will notice from the Long Title of the Bill that it seeks to do one or other of two things; and lower down your Lordships will see that there is an endeavour to give the Secretary of State power to control two possible situations that may arise as a result of an import. The first thing that the Bill seeks to give the Secretary of State power to restrict is the import of fish or their eggs

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in certain conditions; that is, if they are thought to be harmful to any of our native breeds or to any of the species of fish which, over a long number of years, have become acclimatised within Scottish waters. This may be thought to be unnecessary in certain respects. On the other hand, it has been proved to be necessary, from the point of view of fish eggs, to have this power, because otherwise the only power which is in the hands of the Secretary of State is the power to restrict the entry of eggs on the grounds of disease. In other words, if an importer can prove that the eggs are disease-free, he may demand that he is entitled to import them without let or hindrance.
The second part of the Bill is therefore designed to cope with the situation where, if fish have been allowed into the country, it is possible to restrict their release into a wild state where they could do harm to the general ecology of the rivers, lochs or coastal waters of Scotland. Where the eggs have been reared in captivity, the fish have then bred in captivity and the progeny of imported fish are then sought to be released into Scottish waters.
This is a real possibility. It is perfectly possible to rear fish in a totally enclosed environment, bring them to sexual maturity, breed them and obtain fish eggs. One can then claim that they are native fish and therefore not subject to any restriction. So the second part of the Bill seeks to give the Secretary of State powers to control the rearing of fish and prohibit the rearing of fish, if necessary, and finally at all costs to prohibit, if necessary and it is thought desirable, the release of these fish to the wild state. We are greatly concerned about this.
If it was possible always economically to enclose the fish within fish farms, the arguments against allowing imports would be much more slender; but we all know that the final stage of rearing in a fish farm usually takes place in a sea cage. This is the economic way in which to carry salmon or salmonoid fish through the last stage of their rearing. Sea cages are subject to storms. They can rupture and release the fish within them. They are subject to attack from seals and can be torn from outside. The fish can get out, and so forth. It is necessary, if one is to be certain that the Secretary of State
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is armed with adequate powers, to make sure that he is given powers to control the situation, not merely at the moment of import but at any other stage of the rearing of these fish that might be suspect and is thought to be necessary.
In other words, if I may put it this way, by Lords: so that there is no means by which an imported fish can get under his net; that the powers would be there even if the fish had been reared in captivity but it was then intended at a later stage to release them to the wild state.
The first clause of the Bill says:
"The Secretary of State for Scotland may by order forbid the import, the rearing of the release to the wild of any species of fish of their eggs which could in his opinion complete with, displace, prey on or harm the habitat of any of Scotland's native or acclimatised species of fish".
I am seeking here to preserve the ecology of the native species of fish, and the habitat of the native species of fish from attack by any introduced species. I feel that it is incumbent upon us to think seriously of these matters, the preservation of the habitat of our fish, while at the same time giving serious thought to the needs of fish farming and aquaculture.
My Lords, your Lordships will notice that the only other part of the Bill is to confer powers upon the Secretary of State. It says that the power to make orders,
"shall be exercisable by statutory instrument, which shall be subject to annulment in pursuance of a resolution of either House of Parliament; and
(b) shall include power to revoke or vary a previous order…".
This obviously is necessary, because one would envisage that advances may be made in the techniques of fishfarming which would make a situation desirable which previously had been undesirable, where new techniques which would prevent fish escaping would make it possible to consider the importing of a type of fish which one would not want to see escape but still might be useful to the fishfarming industry.
This small Bill seeks to give the Secretary of State for Scotland another weapon in his armoury to protect our fisheries, without in any way wishing to be hard upon the fish farming industry, but merely seeking that it is controlled in

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such a way that it abides by that old tag of Scottish law:
"You shall not so use your own property so as to harm your neighbour"
Baroness EMMET of AMBER LEY: My Lords, before the noble Viscount sits down, may I ask how he intends to put this Bill into practical effect? Would anybody importing Coho eggs or any other eggs or any other fish, have to apply to the Minister for a licence? Otherwise, I would support his general point of view.
Viscount THURSO: My Lords, indeed anybody wishing to import any eggs into Scotland has to apply for a licence. As I read the law as it stands, the Secretary of State refuses the licence only on the grounds of disease or for the health of the fish. If these powers were given to the Secretary of State, he would then be empowered to refuse the licence if he thought there were other grounds that would harm the existing breeds of fish in Scottish waters. My Lords, I beg to move.
Moved, That the Bill be read 2a.— (Viscount Thurso.)
4.48 p.m.
Lord KIRKHILL: My Lords, I should like to congratulate the noble Viscount upon a most lucid exposition in moving the Second Reading of this Bill, and advise your Lordships' House that the Government support its aims; that is, to provide powers to prevent the introduction of species of fish which could harm stocks already established in this country, either native or well-established immigrants.
It may have been with some surprise that some noble Lords heard that no such powers exist, at the present time, except on disease grounds. They have existed for mammals ever since 1932 when the Destructive Imported Animals Act was introduced. It was the destructive habits of the musk rat—probably better known in fashionable circles as musquash—which prompted the introduction of that piece of legislation and provision was made in that Act to extend its cover to any mammalian species. But this does not apply to fish. Similar anxiety is now
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being expressed about the prospect of a certain species of fish—equally feared in some quarters to judge by the outcry against its entry—being allowed to enter Great Britain.
Mention of this species—Coho salmon —prompts me to stress to noble Lords the need to keep an open mind when it comes to considering the case for and against the entry of any particular species. Any legislation aiming at controls of this type must be framed in a way which provides for a balanced judgment being taken. We must take care not to create a situation which is prejudicial to sensible and valuable introductions. Powers, such as the noble Viscount's Bill provides, could have been invoked, had they existed, to prevent the introduction, for example, of rainbow trout—a fish which has proved of great value to us both on the table market and for sporting purposes. I should like to emphasise that this is not the time to arrive at a final decision for or against authorising the use of Coho salmon as a fish farm stock. This issue would arise in the event of the noble Viscount's Bill reaching the Statute Book. Until then my right honourable friend has not the power to take such a decision on ecological grounds.
Whatever the strength or weakness of the case against Coho salmon in 1977, or the musk rat in 1932, the principle of control of entry of exotic species of animals of all kinds is undeniable, especially in these days when a rapidly shrinking world makes reality of what in earlier times might have been only a pipedream. I can therefore indicate the Government's support for the principle underlying the noble Viscount's Bill, although I should say, with the greatest respect, that we would need to look at it further to consider some refinements before it could be regarded as being fully apt for its purpose. We would be ready, should noble Lords today give the Bill their blessing, to consider and discuss these matters.
Noble Lords will not expect me to go into detail at this stage, but I will indicate some of the points we would need to have in mind. First, there is the need for consultation before the making of an order and the need for powers to enable research for scientific purposes to take place. This implies powers to license

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imports in special circumstances and to impose conditions for the keeping of imported material under stringent "quarantine." conditions. There is also the question of providing that infractions should constitute offences and invoke appropriate penalties. Equally, there is the question of compensation for those who might lawfully have imported a species which might subsequently, by order, have to be destroyed.
I make these comments in connection with certain points of detail, but I confirm that the Government welcome the Bill in principle. I should say, however, that having been introduced at this stage, the Bill has very little prospect of becoming law in this Parliamentary Session. Nevertheless, the Government will be ready, in the light of your Lordships' views, to look further at the drafting of the Bill.
4.57 p.m.
Lord CAMPBELL of CROY: My Lords, I too should like to congratulate the noble Viscount, Lord Thurso, on his vigilance in the protection of our native stocks of fish, and of salmon in particular. He has put down Questions which have elicited from the Government the fact that they possess only certain powers related to the prevention of disease; and they do not possess powers to stop the import of fish in all the circumstances which can be foreseen, when that might be desirable. T ought to declare a small interest, which I have declared before, in that I own fishing on a river that flows near my home and where an occasional salmon allows itself to be caught.
A noble Lord: Hear, hear!
Lord CAMPBELL of CROY: The noble Viscount has explained the reasons for the Bill. One of them, which I should like to stress, concerns the possible effects on the ecology of the life in our rivers, streams and lochs if new types of fish are imported from abroad. A species might be introduced which could have adverse effects on existing stocks unless considerable research and experiment are carried out beforehand. At a later stage of the Bill's progress—because I am sure your Lordships will give it a Second Reading—I should like the Government to give us some assurances that in any case they would
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wish to satisfy themselves entirely on that score as well as on matters of disease.
As I understand it, this question has arisen because of the intentions and applications of certain persons in Scotland to introduce the Coho salmon (the Pacific salmon) for the purposes of fish farming and also perhaps for the purpose of releasing them into other waters. Whatever the powers possessed by the Secretary of State at present, I am sure it would be a valuable safeguard if he possessed the kind of power which is visualised in this Bill. I should like to make it clear that I am not against the introduction of new species of fish. As the noble Lord, Lord Kirkhill, reminded us, the rainbow trout is not indigenous to this country but it has on the whole been a great success. However, every precaution should be taken before similar introductions are carried out.
My Lords, for a moment or two I should like to draw attention to the asset that salmon represents in Scotland. Very often it is not properly understood to what extent the existence of salmon assists finances in Scotland. For example, salmon fishings, particularly those on very attractive waters and expensive beats, are very highly rated. The money paid in rates goes directly into the coffers of the local authorities, and householders' rates in those areas would be a great deal higher if the salmon were to be decimated or to disappear. There are waters in Scotland, of course, which are not very valuable as regards salmon fishing, and there are other waters which are prolific and which belong to towns or to angling associations. There are also other waters which are much sought after by visitors to Scotland and who are prepared to pay a lot of money for a week or two on certain beat. When people say that perhaps these waters should all be kept for local Scots, it should be remembered that those visitors are indirectly making a very large contribution, not only, if they pay in dollars, to the balance of payments, but also to the local rates. That is one side of the matter that I think ought to be remembered when we are talking of preserving our native salmon, because they are an important asset for Scotland and they make a considerable contribution to local finances.
As regards the text of the Bill, when we come to Committee stage I hope that we

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shall be able to get some comments from the Government as to whether they consider the Bill to be technically correct. I think there may be some defects. For example, the expression, "release to the wild" of any species of fish could lead to considerable ambiguity over the interpretation as to what exactly is "the wild". I am sure that at the Committee stage the noble Viscount will tell us his ideas about this. We know quite clearly what his intention is, but if the Bill goes through, either in this Session or in the next, we want to be able to reduce the area of dispute that may arise later as to whether fish are being released "to the wild" or to some area which is thought to be a fish farm and enclosed waters.
It is clear from what I have said that I support the principle of the Bill and would commend it to your Lordships' House. However, I believe that quite a lot of work on the drafting of the Bill may be necessary before it is enacted.
4.59 p.m.
Lord WYNNE-JONES: My Lords, I hope that your Lordships will allow me to speak on this Bill although I have not put down my name. On reading the Bill, I found myself largely in agreement with it, and I congratulate the noble Viscount on putting it forward. However, there is one point to which I should like to call attention; that is, that the power is vested entirely in the Secretary of State for Scotland and there is no reference to consultation with anybody at all. I should have hoped that, as in other Bills dealing with conservation and ecological matters, reference would be made to some body that was consultative and could advise the Secretary of State. It seems to me that it is not quite right that one should leave the power with the Secretary of State, with no instruction to consult. I do not know which is the correct body. The Nature Conservancy Council should certainly be one body, and there may be others. But I should like to suggest to the noble Viscount that consultation on a matter like this is extremely important, because this is, after all, a question which requires considerable expertise, and a full understanding of exactly what will happen. As the noble Lord, Lord Kirkhill, said, we do not want to prevent experimentation
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or to stop research. We wish to see that any species might be imported, if it were considered suitable and safe, and that it ought to be done under strict licence. With those reservations, I agree with the Bill and congratulate the noble Viscount on introducing it.
Lord KIRKHILL: My Lords, if I have the leave of your Lordships' House, may I say that perhaps I was not quite as explicit as I should have been. So that my noble friend will understand the Government's position, may I emphasise that one of the difficulties about the Bill as drafted is exactly that we have to take into account the possibility of consultation. I made that point in the course of my remarks, and the Government are aware of that difficulty as the Bill stands at present.
5.2 p.m.
Viscount THURSO: My Lords, I am most grateful to your Lordships for the welcome which you have given to this Bill, and for the most constructive criticisms of it which I have, as it were, taken aboard with interest and will certainly take to heart. I am especially grateful to the noble Lord, Lord Kirkhill, for his assurance that the Government are friendly towards my purpose in this Bill, and I am very happy to give him the assurance that I should like to work with him, and to receive the advice which he has so freely offered to give me. I agree with him, most particularly, that this is not a moment to be prejudiced. However, there is not a great deal of time to waste.
If, for instance, it were decided, when the matter was considered, that it was undesirable to release Coho salmon into the seas around Scotland, the powers of the Secretary of State would require to be there within two years from last November. Otherwise, it might be too late, because it is possible to breed a Coho salmon to maturity in two years. So that two to three years is about all the time we have, and in Parliamentary terms things slip on and it is therefore wise to be not hurried, but expeditious. I agree that I was probably being too expeditious in the drafting, of this Bill, and therefore there are flaws which should be corrected, and refinements which should be added.
I am grateful both to the noble Lord, Lord Kirkhill, and to the noble Lord,

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Lord Wynne-Jones, for drawing my attention to the question of consultation. I had slightly felt that this was not so desperately necessary, because the Secretary of State takes advice on these subjects, in any case. But I agree that it is probably wise to specify it. I am also grateful to the noble Lord, Lord Campbell of Croy, for his assurance that he welcomes the spirit of this Bill, and that he will help at Committee stage to try to improve it.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

IMMIGRATION: CHANGES IN RULES
5.5 p.m.
Lord AVEBURY Lord AVEBURY rose to move, That the Statement of Changes in Immigration Rules for Control on Entry of Commonwealth Citizens, laid before the House on 22nd March, be disapproved. The noble Lord said: My Lords, I beg to move the first of the Motions standing in my name on the Order Paper concerning the Statement of Changes in the Immigration Rules, which was published on 22nd March.
In moving this Motion, I should like to say, first, that there has been very widespread disquiet about the terms in which these rules are framed, and I hope that as a result of this afternoon's debate we will have an opportunity of clearing up some of the doubts that have been expressed, although I myself hold that the changes which are now being proposed are, in some respects, intrinsically so objectionable that, whatever the Minister may say this afternoon, there will remain among many of the ethnic minorities in this country considerable reservations about the way in which husbands and fiancés are now to be treated. And not only among the ethnic minorities, because the Catholic Commission for Racial Justice, indeed, says that the principle involved in these changes in the rules contravenes Canon 10/12 of the Code of Canon Law, which states that,
"a marriage is deemed to be valid until it is proved otherwise. Canon Law insists that, with every marriage, whether Catholic or not, the presumption must be heavily in favour of validity".
whereas, under these changes in the rules that we are now discussing, the test of whether or not a marriage is valid is not
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finally determined until the end of the 12 months' period.
As I said, these changes in the rules concern mainly husbands and fiancés of women who are settled in the United Kingdom, and I shall say nothing about the other aspects of them which think are uncontroversial. Ostensibly, the changes do not affect the principle which was established in 1974, after very widespread and considerable agitation, that a man who marries a woman who is already settled in the United Kingdom is entitled to come here and live with her, in the same way as a woman who married a man settled in the United Kingdom could already do so. It may be recalled that up until January 1969 we had admitted spouses and persons engaged to be married without distinction as to sex, but that on 30th January 1969 the then Home Secretary, Mr. James Callaghan, now Prime Minister, announced that in future men would not be admitted, because the number of Commonwealth citizens coming for the purpose of marriage to women resident in the United Kingdom,
"…have risen steeply over the last year or so and are now on such a scale that it seems that marriage is being used by many young men of working age as a means of entering, working and settling in this country". [Official Report, Commons; col. 36].
Mr. Merlyn Rees, who was, of course, at that time the Junior Minister at the Home Office, defended that decision with the statement that,
"…this rests on the idea that immigrants should live in the men's country, not the women's",
an idea which I think clashes with the legislation which has been passed, through unanimous acclaim, eliminating discrimination on grounds of sex, since that statement was made.
The proposition that we now have to consider is not that men, fiancés and husbands ought to be excluded altogether from the United Kingdom, but that we should apply more stringent criteria to them than we do to women who are coming here as wives or fiancées. I believe that it will be convenient first to consider the case of an individual who gets married after arrival in the United Kingdom, whether or not he originally entered for that purpose. That person has to seek a variation of the leave originally given to him to enter for a limited time. The Immigration Appeals

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Tribunal has recently laid down under paragraph 4 of the rules for control after entry that,
"the fact that any applicant satisfies the formal requirements of the succeeding paragraphs is not conclusive in his favour".
The determination that I have just quoted concerned a case where the appellant was an over-stayer who had entered into a blatant marriage of convenience in the hope of frustrating the Home Office's intention to remove him. There is no argument about that.
The first question that I should like to put to the Minister is why, if it is possible to use paragraph 4 of the rules for control after entry in this way, it is necessary to introduce these changes, unless there is something more to the changes than appears at first sight? To help us in our consideration of this matter, can the Minister give us some examples of cases that would be caught by the new rules and not by the decision of the tribunal which I have just quoted?
My second point is that a marriage of convenience is, as I understand it, one in which the parties do not intend to live together but have gone through a ceremony of marriage for some other reason. In the cases that we are considering the motive is no doubt to acquire a right of abode in the United Kingdom. The Minister, Dr. Shirley Summerskill, said that she was satisfied that there was substantial abuse by people of a wide range of nationalities. I presume, therefore, that there must be some evidence of the number of married persons not living together, one of whom came from overseas, and that this can be compared with the extent to which separation takes place in marriages both partners to which were already either natives or had right of abode in the United Kingdom. However, Dr. Summerskill says that the operation of the Immigration Rules does not permit any precise figures to be given. No doubt this is because once a person is admitted to the country he or she is not checked up on every so often.
What, then, is the nature of the evidence? That is the second question to which I should be grateful for an answer. If there are uncontested removals on the grounds that a marriage entered into by someone who is overstaying is bogus, or if persons
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who are removed for some other reason decide to come clean and say that, in an attempt to remain here, they were entering into a marriage of convenience or had done so, or if, for some reason of their own, they disclose to the authorities that the marriage was not genuine, then it should not be difficult to give some figures over a period of, say, a month or three months so that we can form some conclusion for ourselves and know what the Minister means when she talks about this phenomenon being "substantial". But, as long as we are merely told that the scale of the bogus marriages is substantial, I am bound to say that the case has not been made out to my satisfaction, because I know that there is a predisposition among immigration officials to be highly suspicious—it is part of their trade—and to treat many marriages, which on examination turn out to be perfectly valid, as being marriages of convenience.
As the Minister knows, there is a widespread fear among the minorities and particularly those from the Indian subcontinent that some Home Office officials, at any rate, are not able to draw a clear distinction between a marriage of convenience and what are called "arranged" marriages. These are marriages which are arranged for the parties by their parents. I should like it made absolutely clear by the Minister when he comes to reply that an arranged marriage between a girl who is resident in the United Kingdom and a boy from overseas is absolutely permissible within the rules and that the question as to whether or not a proposed marriage is an arranged one is not a factor which has to he taken into account by the entry clearance officer or the immigration officer in deciding whether to grant an application.
As I understand it, the intention of the Home Office is that, if an entry certificate officer in an overseas post has any doubt about the validity of an intended marriage, he will refer the case to Lunar House, the department of the Home Office which deals with these matters in the United Kingdom. It might appear from that that the applicants are being saved from the trouble of appealing in certain instances where the doubts of the entry certificate officer in the country of origin can be cleared up on further examination by an official in this country. However, knowing as I do the leaden pace with which some of

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these matters are examined at Lunar House, I am afraid that we could risk increasing delays by this procedure. Where reference is made to the United Kingdom from overseas, I should like to suggest that we should place a time limit on the consideration within which a decision has to be made. If, at the end of the time which is specified, whatever it may be, the officials have not had time to complete their investigations, the entry clearance should be granted automatically. I do not believe that that would happen often because I think that, if the Home Office had such a rule which it had to apply, the immigration officials would make very certain that they had carried out the necessary investigation within the time scale.
It is necessary to bear in mind that there are already very many stages in the process of coming here which can take several years. First, there is the lengthy queue before a person gets to the stage of being interviewed by the entry certificate officer in his country of origin. Then, it may be that at his first interview there are certain facts that are not clear and the applicant is asked to come back after a period of several months. Then, the entry certificate officer may wish to refer the case to Lunar House as, I understand it, is invariably to be done under this new rule. Then, it is for Lunar House to make its own inquiries. If, having done so, they confirm the refusal, then the applicant has to make an appeal before the adjudicator which will result in another considerable delay because, apart from getting into the adjudicator's list there is the necessity of awaiting a statement by the Home Office of the grounds for its refusal.
This process, in the very simplest of cases, may take as much as three years. I had one case the other day of some aged parents who wanted to come to stay with their daughter in the United Kingdom and return to India after three months. It took three years for them to get through these various stages and to be allowed simply to come to visit their daughter. It would be very disturbing to think that we were indirectly lengthening the time scale in response, perhaps indirectly, to racist pressures at home. I believe that we ought to know by now through bitter experience that one does not appease racism by tightening up on the immigration laws and making the process of
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complying with the requirements more difficult because racism merely feeds on the concessions one makes to it.
Coming to the question of the husbands and fiancés, the reason why one suspects that the introduction of these rules is indirectly of a racist nature is the remarks that have been made about the increase in the number of those husbands and fiancés since the concession was introduced and since 1974 when Mr. Roy Jenkins, as Home Secretary, equalised the treatment between the sexes.
The numbers are still minute. In 1976, according to the evidence given by the Home Office to the Select Committee on Race Relations and Immigration, 2,900 husbands were accepted for settlement on arrival, of whom 1,900 were from the new Commonwealth or Pakistan. In addition, some 8,200 men were accepted, following the removal of conditions as a result of their marriage to women already resident in the United Kingdom, of whom 4,500 were from the new Commonwealth or Pakistan. Generally speaking, it is worth pointing out that these numbers were smaller than the number of women settling on marriage, indicating that there is no statistical evidence of abuse by men—as, indeed, Mr. Alex Lyon has pointed out.
The Home Office evidence to the Select Committee goes on to say that the numbers would be expected to increase, anyway, because of the number of children of overseas origin reaching marriageable age and the persistence of the arranged marriage system in the cultures of the people who came here from the Indian sub-Continent. However, they go on to point out again that the propensity to marry a partner from overseas could be expected to diminish in the longer run as cultural patterns begin to reflect the growing proportion of people of Indian sub-Continental ethnic origin who were born and brought up here and whose customs are more like those of the host community. Whether or not the number begins to decline in future, inevitably there will be some abuse, as there is with any large-scale administrative system. The question is whether the abuse is on such a scale as to justify the new checks which are to be carried out "selectively" at the end of 12 months.
The next question that I should like to put to the Minister is this: what is meant precisely by this word, "selectively", which has caused a great deal of anxiety? As the Minister knows, it is interpreted by the ethnic minorities as meaning that marriages between individuals, one of whom is of non-European ethnic origin, will come under suspicion. I am sure that that will be vigorously denied by the Minister, and the more specific the assurances that he can give me on this point the better. Then the question arises as to how this selection is to be applied. If it is a matter of investigating cases where the Home Office already has some reason to believe that the marriage is not genuine, what is the nature of the evidence which they will receive and where will it come from? I hope that the Minister will give me an assurance that there will not be any transfer of information from other Government Departments—for example, from the Department of Health and Social Security and certainly not from the Inland Revenue which has always had a rule of absolute confidentiality in all cases except treason and murder.
That leaves in the air the question: where is the evidence going to come from which leads them to suspect that a particular marriage is bogus and, therefore, to institute an investigation? Having decided that there is a prima facie case for investigation, how are the checks then to be conducted? To begin with, may I suggest to the Minister that the partners ought not to be visited in their own homes. They ought to be invited to attend at an office of the immigration service or, if there is not one reasonably close to their home, I suggest that then they should be asked to attend the office of the social service department of the local authority. I believe that it is undesirable for the police to have to carry out these checks. The relationships between the police and the ethnic minorities have not been so happy in recent years as to make it desirable that there should be a further cause of friction introduced between them. The police are already very busy and undermanned. I know that it will be said that the social service departments of the local authorities are in the same position, but I think that most people would agree that on the
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whole it is preferable for the social service departments to carry out these checks.
May I ask the Minister whether the partners to a marriage would be entitled to have a representative of their own choice present at any interview. I understand that they are entitled under the rules to have a solicitor present to sit in with them while they are being interviewed but that the presence of any other representative who is not legally qualified is at the discretion of the interviewing officer. I do not see why this discretion should not be removed. You do not say to a person who is appearing before an industrial or a social security tribunal that he cannot be represented by a particular individual. I dare say that the industrial tribunals might like to do that. They might have some people coming along to act as friends of the appellants whom they think are a frightful nuisance. However, they do not have any choice in the matter and I do not see why the immigration officials should be able to turn down any particular individual whom the appellant wants to represent him. There has been some correspondence on the matter between the Joint Council for the Welfare of Immigrants and the office of the Minister, Dr. Shirley Summerskill, who appeared to think that the JCWI were asking for special facilities. I should like to assure the Minister that this was not the case. They were merely asking for equal treatment with any other friend whom the person would like to be with him during the conduct of the interview.
How is the validity of the marriage to be established? As the joint council has shown in a paper published last month, some extremely impertinent questions about the private sexual conduct of individuals under suspicion have been put by Home Office officials in the past. I think it is quite unnecessary to enter into that kind of very personal detail to establish whether or not two persons are living together. I should be grateful if the Minister could tell me what instructions are to be given to immigration officers concerning the type of questions which they are allowed to put.
Next, what would happen if the marriage is valid but has broken up before the expiry of the 12 months? I should like

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to draw the Minister's attention to an article by Miss Sarah Leigh in The Times of 3rd May where she points out that if the husband is removed it will have the effect of preventing him from defending himself effectively in any action that may come before the courts for annulment or divorce, maintenance or custody of any child, and that conversely the wife is going to be prevented from enforcing any maintenance order for herself and for the child. I should have thought that any action in the courts resulting from a breakdown of the marriage should surely be completed before removal.
Finally, what happens in the sad circumstance that the wife dies? Would the husband then be permitted to remain? Perhaps I may ask one technical question. The new rules state that a husband will be granted an extension of stay for a period not exceeding 12 months if the marriage took place within the 12 months immediately preceding the application. If a man applies, for example, six months after he has married and the application remains under consideration in the Home Office for nine months—and that has been so in quite a number of cases, I understand—and the application is then granted, is it right that although the marriage is accepted as genuine now, 15 months after it took place, he will be allowed to stay only for a further 12 months and the marriage is then again subjected to inquiries at the end of that period? This may be a question which the Minister is unable to answer this afternoon. I quite appreciate that it is rather a complex question, but it has only just been drawn to my attention, otherwise I should have been able to give the Minister notice of it. However, it could be of importance in a minority of cases.
If the Minister can give assurances on some of the points which I have raised it will be helpful. However, we cannot deny that, however humanely the rules are administered, they are, as The Times put it, distasteful or, if you prefer the words of Mr. Roy Jenkins, they bring back into the law the stark and unacceptable nature of discrimination. My Lords, I beg to move.
Moved, That the Statement of Changes in Immigration Rules for Control on Entry of Commonwealth Citizens, laid before the House on 22nd March, be disapproved.—(Lord Avebury.)
5.29 p.m.
The Earl of MANSFIELD: My Lords, although the noble Lord, Lord Avebury, did not specifically say that he was speaking to all four of his Motions at once, I take it that indeed he was. I certainly intend to do so, and if I do not follow the noble Lord down every by-way, and certainly not at the same length, I very much hope that he will forgive me. The matters which the noble Lord has raised this afternoon are indeed important and certainly they merit serious consideration. The problems posed by immigration to this country cause anxiety to many people, and that anxiety is reflected at present by what seems to be increased support for political movements which certainly command no support in your Lordships' House, and little general support in the country as a whole, except in the geographical areas where people feel particularly vulnerable.
We on these Benches and in the Conservative Party have repeatedly made plain the policy which we seek to adopt, but it may be helpful if I quote what my noble friend Lord Carr of Hadley said when, as Home Secretary in another place, he made a Statement on the occasion when these rules were introduced in 1973. He said:
"Control over the rate of Commonwealth immigration was first introduced in 1962 and has since been strengthened by successive Governments because it has been generally recognised that there is a limit to the rate at which any nation can absorb new immigrants without endangering good community relations. The Government are convinced that at a time when our housing and educational resources and the social services generally are under severe strain this policy must be not only continued but further strengthened".—[Official Report, Commons; 25/1/73, col. 653.]
Circumstances are certainly no better and therefore I suggest that any policy which the Government wish to see put into practice, and which goes to reduce the severe strain, is one which would commend itself to your Lordships' House.
It is in the light of what my noble friend said on that occasion that I suggest we should perhaps examine the proposals contained in the various changes, and for myself I understand that the effect will be considerably to tighten up the rules under which entry clearance will be granted to Commonwealth and foreign male nationals who seek admittance, either as husbands or fiancés. As the noble Lord, Lord Avebury, has pointed out, of possible greater effect are the proposed changes in

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relation to control after the entry of such persons. If I may use the phrase, the performance of husbands and fiancés will be monitored for up to 12 months so that, in effect, if the marriage does not take place or is bogus in that sense—in fact it is merely a marriage of convenience—the man will not be permitted to settle in this country. The authorities will be given the duty to inquire into such delicate matters as cohabitation, and that raises a number of constitutional points.
The first question which I want to ask the noble Lord, Lord Harris of Greenwich, arises from this situation: A measure of publicity has been given to the seemingly growing abuse of immigration procedures by the proliferation of arranged marriage partners and fiancés, and one has even heard of agencies which organise and arrange bogus marriage partners and fiancés. I think the Government must justify their actions by stating definitively that the abuse has been growing worse and that action needs to be taken. So in short form my question is this: What evidence is there of the abuse of the Immigration Rules and the fact that the position is getting worse?
Secondly, if the need for these changes exists, we must be sure that the new rules will be fair in the sense that they apply to all would-be immigrants, regardless of colour and creed. Therefore my question is this: Can the noble Lord assure the House that these rules are not discriminatory in the sense that they are not aimed at any particular ethnic group, such as Asians or coloured persons or the subjects of quite properly arranged marriages, in the normally accepted sense of the phrase?
Thirdly, it follows that there will he some invasion of privacy so far as immigrants are concerned in order to establish that the immigrants are not in breach of sub-paragraphs (c), (d) or (e), or of paragraphs 24(a) or 26(a) of the new rules for control of entry, and I am sure the noble Lord will be familiar with those of which I speak. Can the noble Lord go some way towards satisfying us that there will not be what I call foolish bureaucratic prying, and, above all, that so far as possible the Press will not be given the excuse of relating salacious incidents of civil servants peeping through gaps in curtains to see who is doing what and
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when?—because that would be self-defeating and would produce a volume of criticism which indeed would be justified.
Fourthly and lastly, I should like to be satisfied about the timing of these changes. I understand that there is a Select Committee of Members of the other place looking into this very question at the moment, and I am further informed that a report from that Select Committee is expected this summer. If that be so, one asks why the Government do not wait until the report of the Select Committee is published before acting, when the justification for these changes—if justification there be—will be apparent for all to see. In the alternative, one can put the question in this way: What is so urgent about the present situation, and what are the facts which justify the changes being made a matter of a month or two before the expected report comes out?
I have asked—I hope reasonably succinctly—a number of questions which I feel deserve answers. If they are answered satisfactorily—and one hopes that the noble Lord, Lord Harris, will be in that happy position—then I for one will be content to support these proposed changes. As the noble Lord, Lord Avebury, has said, they are distasteful and, as the Conservative Party likes to think of itself as being the Party of individual freedom, we never like any changes in our law which derogate in any way from the freedom of the individual. Nevertheless, we live in an increasingly complex and difficult society and, like so many other facets of our law, we have to accept that in certain circumstances we have to chip away at freedoms which hitherto we have all enjoyed; but we should not do so unless there is every justification for so doing.
5.38 p.m.
Lord BROCKWAY: My Lords, it is characteristic of the noble Lord, Lord Avebury, that he should be moving this Prayer. I think Members of the House in all Parties will appreciate the continued stand which he has made for personal liberties, irrespective of sex or colour. I want to begin by endorsing also the series of questions which has been put to the Minister by the noble Earl, Lord Mansfield. The first was the question as

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to whether marriages of convenience have so increased that it has been necessary for these regulations to be introduced. No evidence of that has yet been given, and the figures which the noble Lord, Lord Avebury, gave to the House about male and female immigrants do not suggest that there has been such an increase of arranged marriages that action was necessary before the publication of the report of the Select Committee.
My Lords, arranged marriage in order to enable immigration to take place, in order to enable British nationality to be adopted, is not a recent development; it has happened over the years. I am going to acknowledge to this House that I have been guilty of seeking to make arrangements for marriages of convenience in order to enable entrance to this country to take place. I did so during the Hitler-Fascist period, when there were refugees from Nazi-ism in Germany and in Austria who sought to escape concentration camps and death by coming to this country. I am not sure that I ought to say this, but there was a young woman from Vienna whom I endeavoured to marry to a young man who is now a very respected Member of this House. He was quite ready to marry her, but his mother objected. Fortunately, I was able to enable that young woman to marry a young man in Sweden and the marriage turned out very happily. The point I am making is that arranged marriage for entry to this country and to obtain British nationality is not just a recent development. I think the Government must demonstrate that there has been such an increase that it justifies these regulations before the Select Committee has reported.
My Lords, the second point I want to make is that there are already powers to prevent people coming to this country by means of these arranged marriages. The Appeal Tribunal already has power to reject cases of marriages of convenience. Its rule relating to marriage contemplates,
"…a marriage which was entered into for the purpose of living together as man and wife and founding a family."
And the rule concludes by saying:
"Motivation for the marriage is thus relevant."
So the Appeal Tribunal already has the right to prevent immigrants coming to this country by arranging marriages which
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they are not intending to make real marriages.
There is an incidental point arising from this that I want to mention. Under these new regulations, the right of appeal will be limited. Under the recent House of Lords' Judgment in the Suthendran case, there will be no right of appeal for men who are refused permission to remain as husbands if their previous leave had expired. I ask the Government to look at that point.
My Lords, my main concern about these new regulations is their attitude to sex discrimination. A wife or fiancée is allowed to come into this country to join a husband who is here. A husband or fiancé cannot come into this country under these regulations to join a wife who is here. I raised this very point in this House when the Immigration Bill of 1971 was being considered, and Lord Windlesham, who was then in charge of the Bill, promised consideration of this sex discrimination. Mrs. Lena Jager afterwards introduced a Bill in another place, end in 1974 this sex discrimination was ended. Now it is being reintroduced. This regulation assumes that a woman is a junior partner in marriage, is a subordinate, that the man is necessarily head of the family, the breadwinner. All of us who are opposed to sex discrimination must, surely, oppose that regulation.
My third point is this. These regulations inevitably mean an invasion of privacy which none of us should accept. The Government have said that selective tests will be made in order to see whether the male immigrants are in fact cohabiting with their wives. My Lords, there are four points, in the securing of this evidence, which seem to me to be absolutely unacceptable. First, there are repeated police visits and searches to confirm cohabitation; second, questions are asked regarding the sleeping arrangements of the man and wife; third, questions are asked about their practice of birth control; and fourth, questions are asked, when a man is 28 years of age, why he did not marry before.
As the noble Lord, Lord Avebury, has said, the Joint Council for the Welfare of Immigrants has published a whole series of cases which are an appalling interference with the privacy of men and women. I intend to quote only one.

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Mr. and Mrs. H. were interviewed at the London Bridge office of the Immigration Department on 24th March. The questions to Mr. H. included the following:

"(a) the names of all persons staying in the same house;

(b) where each of these persons sleeps;

(c) where he and his wife sleep;

(d) whether he decorated the bedroom himself;

(e) whether their bedroom has wallpaper or has painted walls;

(f) whether he can drive a car;

(g) whether he smokes;

(h) whether he drinks; and

(i) whether he goes to the pictures."

These questions were asked first of Mr. H., and then of Mrs. H. separately, rather like the television programme, "Mr. and Mrs.", where man and wife are interviewed separately. When it emerged that Mrs. H. was not working because she was pregnant, Mr. H. was asked for how long they had practised family planning and why they had stopped doing so. At the end of the interview, Mr. H. was asked who had advised him to write to his Member of Parliament and whether he would inform this person about the interview. My Lords, I do not believe that there is a Member of this House who would for one moment endorse that kind of invasion of privacy under this regulation—and that instance is not an exception to the many such invasions which take place.
Next, I want to say something which is a little difficult but which again indicates the sensitivity and the privacy of the interviews which are occurring. This kind of interrogation is particularly unhappy in cases where sexual strains and difficulties are experienced, as often happens in the early period of marriage, even when that marriage is contracted with the genuine intention of living together. During that period, due to these interviews, pressure may be brought to bear on the wife to continue to cohabit, despite her disinclination, lest her husband be required to leave the country; or, indeed, lest the removal of the husband may destroy any hope of the continuation of the marriage. That is an area of sensitive privacy which police visits and official investigations should not invade.
I oppose these regulations also on the ground of racial discrimination. If these
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police visits and investigations were taking place in the homes of men and women from the United States of America, Canada or Australia, they would not be tolerated for a moment. They are tolerated and practised because they take place in the homes of those who are non-whites.
Finally, there is great danger of confusion between arranged marriages to enable people to come to this country and the arranged marriages which are traditional, for example, in Indian society. Happily, the younger generation of Indians is now revolting against marriages arranged by their parents. However, such marriages are still frequent and the Government must be extremely careful in these rules that they do not identify traditional arranged marriages in Indian society with those marriages arranged for the purpose of entry to this country.
My Lords, I am grateful to the noble Lord, Lord Avebury, for raising this matter. I am grateful to the noble Earl, Lord Mansfield, for asking such questions as he has. I hope that in reply the Minister may be able to give us some reassurance about the matters that we have raised.
5.55 p.m.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, I am obliged to the noble Lord, Lord Avebury, for his speech and for what my noble friend Lord Brockway has just said. I am also obliged to the noble Earl, Lord Mansfield, who asked me a number of questions which I shall certainly do my best to answer. I hope that my reply will reassure at least my noble friend Lord Brockway and, indeed, the other two noble Lords on some of the issues which they raised. Probably the most sensible way in which to deal with this matter would be, first, to discuss briefly the content of these rules which my right honourable friend the Home Secretary thought it necessary to introduce, before going on to deal with some of the more detailed questions affecting their operation, which have just been asked by my noble friend and the other noble Lords who have spoken.
These new rules provide in essence that where a marriage overseas has been recently contracted the husband is no longer granted settlement on arrival but

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instead is admitted for a period of up to 12 months before settlement is entertained. Similar arrangements apply where marriages are contracted here. There is specific power, which now exists, to refuse admission or settlement in any case where there is reason to believe that the marriage is one of convenience. There is, in effect, a rebuttable presumption that the marriage is in that category where the husband has overstayed, or is under the threat of deportation before marrying, or where he is admitted as a fiance and ends up marrying a woman other than the one originally named by him as his prospective spouse. Inquiries will be instituted in selected cases, usually at the end of the period of 12 months, with a view to deciding whether the marriage was genuine and whether it is still in existence. If it is clear that the marriage has been one of convenience, settlement will be refused and the man will be told to leave this country. Where the couple have parted by the end of the 12-month period or the marriage has been legally terminated the husband will have no prescriptive right to remain, whether or not the marriage is believed to be one of convenience—
Lord AVEBURY: My Lords, may I interrupt the noble Lord?
Lord HARRIS of GREENWICH: My Lords, perhaps I could just outline these particular points for the benefit of the House and then, if the noble Lord wishes to intervene, I shall gladly give way. As I said, where the couple have parted by the end of the 12-month period, or the marriage has been legally terminated, the husband will have no prescriptive right to remain, whether or not the marriage is believed to be one of convenience, although all the circumstances of the case will be taken into account in deciding whether to allow him to stay. I shall say more about that later.
Lord AVEBURY: My Lords, was the word "legally" intended to be inserted in sub-paragraph (d) of paragraph 24A because the noble Lord has just used the phrase, "legally terminated"? The rule actually says that the marriage has been terminated. I wondered whether there was a difference here.
Lord HARRIS of GREENWICH: My Lords, with great respect, I do not think there is. It is a distinction which has no great significance. It is either terminated or it is not. Perhaps I was ill-advised to use the word, "legally", because the question to which we are addressing our minds is whether or not the marriage has been terminated. That is what is provided for in the rules.
The entry clearance officers overseas may also refuse an application where the marriage is believed to be one of convenience, or where the husband has no intention of living with the wife, but they are under instruction to refer to the Home Office before exercising this power in any individual case. I do not expect much use of this power to he made abroae; the abuse primarily takes place in this country and it is here that the problem must be tackled.
It will not be necessary to have a check made in all cases, but only where the facts suggest that it would be desirable to make inquiries before settlement in granted. It will often be possible to interview the parties at an immigration centre near where they live rather than to arrange for a visit to the home. In general, I hope that the bulk of the inquiries will be carried out by members of the Immigration Service, although some will have to be made by the police if only because there is no complete coverage of the country by the Immigration Service, and because there will be cases in which criminal proceedings may have to be initiated. Clearly, in circumstances of that kind, it is wholly appropriate that the inquiries should be conducted by police officers. I must emphasise that there will of course be the normal right of appeal to the immigration appellate authorities against a decision to refuse an extension of stay or settlement on the strength of marriage.
Having dealt with the changes in the rules, let me turn to the position of our critics, both as expressed today and by the wider audience outside this House. The position of our critics (and this deals with some of the points made by the noble Lord, Lord Avebury), I can rum up in these terms: first, that it is unnecessary to have laid these rules at all; secondly, it is suggested that there is no widespread abuse; thirdly, that the rules that have recently been displaced were sufficient to deal with such minor abuse as did exist;

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and, lastly, that what the Government are really seeking to do is to place some curb on the tradition of arranged marriages within Asian culture.
I entirely reject these suggestions. First, I must make it clear that evidence within the Home Office left no doubt that there was substantial abuse by men from a wide variety of nationalities, and that the previous rules were inadequate to deal with it. In the nature of things no precise indication can be given of the scale of the abuse because, as the rules stood, it was only where the circumstances in which a marriage was contracted gave rise to suspicion that the possibility that it was a sham was brought to attention. But we believe that there have in fact been several hundred cases a year of that kind, in which men were seeking settlement on the basis of marriages which seemed dubious, to say the least of it.
Of course I recognise the distinction between marriages of convenience where the marriage is never intended to endure by either of the parties to the marriage, and the perfectly genuine arranged marriages that are normal in Asian communities. The noble Lord, Lord Avebury, raised this precise point with me when he spoke at the beginning of the debate. Certainly we recognise that the tradition of arranged marriages is an important matter. It was one of the factors to which my right honourable friend's predecessor gave careful attention before deciding that husbands and wives should have freedom of choice whether to live here or elsewhere. Since arranged marriages are part of the Hindu and Muslim traditions, we saw no reason to exclude them from the rules introduced in 1974, and the new measures are in no sense aimed at them.
The noble Earl, Lord Mansfield, raised the question, perfectly legitimately, as to whether the new rules would apply at all. Yes, indeed they will. The noble Lord, Lord Avebury, asked me to give some indication of the character of the problem. He asked about its scale and character. Although I would not seek to generalise from one example, I should like to describe the circumstances of one particular case that has arisen in the fairly recent past that I think demonstrates the significance of the problem with which the Government
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were confronted when they had to consider whether to introduce these rules.
There was a recent case in which a man arrived from Germany (he was not a German) where he was working and asked to be admitted for two or three weeks, as he described it, to visit a friend. He was granted leave to enter for a month, but a month later he married a British girl, and in the month after that he applied for permission to remain permanently on the strength of the marriage. When interviewed, he was living with two other compatriots in a room owned by the friend whom he had come to visit, and he said that his wife had lived with him but had had to move out when his compatriots moved in, and she was now living with her parents. That was the situation as he described it.
This man had, he said, met his wife in Germany when she was there on holiday, and had met her again by chance at a bus stop in Hull. The applicant's friend, on the other hand, said that the wife had never been to Germany, and her father said that the couple had never lived together. The wife claimed that she had met her husband in Germany, having travelled there on a British passport that she had obtained by post. She said that she could not produce the passport, which was hardly surprising because she had never been issued with one. Her story was wildly improbable, and it was quite clear that she had never been to Germany.
I think that the circumstances of that case illustrate the kind of abuse which has arisen in a number of cases. I do not wish to exaggerate the extent of the problem but, as I have indicated, in our judgment it certainly amounts to several hundred cases a year. It has been said by the noble Lord, Lord Avebury, and indeed by my noble friend Lord Brockway, that even without these amendments which we are discussing today the After-Entry Immigration Rules would, they say, still provide some defence against bogus marriages since they require full account to be taken of all the circumstances of the case before settlement is conferred. Where it could clearly be demonstrated that the marriage was a sham, usually because of an admission by one of the parties, it was undoubtedly possible to refuse a bogus case under the previous rules. But there was no adequate remedy where both parties stoutly maintained that

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the marriage was genuine despite all the indications to the contrary. Far too many bogus cases in this situation were getting through.
The noble Earl, Lord Mansfield, asked whether there was really a need for as urgent action as the Government have taken. Was it not right to wait for the deliberations of the Select Committee? In the view of my right honourable friend —and I think he is undoubtedly right in having taken this view—it was clearly necessary, once it became clearly established that there was a significant abuse here, to take prompt action. Certainly—and here I would agree with at least part of the argument of the noble Earl, Lord Mansfield —it is undoubtedly true that if it is widely believed that there is substantial abuse of the Immigration Rules and that significant numbers of people are coming into this country as a result of that abuse of the rules, I cannot think of anything more certain to poison race relations in this country, and it is to improving those relations that the Government are determined to dedicate their efforts.
In this situation it has become apparent that a number of well organised rackets have begun to infiltrate men into this country on the strength of marriage, and that the problem was becoming one of quite serious proportions. What has troubled us has been the large volume of cases in which there was every reason to suppose that some semblance of a marriage was being preserved solely for the purpose of achieving settlement.
We have been told by some of our critics that Home Office officials are too ready to infer that a marriage is one of convenience. But what other conclusion is to be reached in the circumstances of the case which I have just described to your Lordships, and in cases where the husband has contracted a marriage immediately after admission to this country for a very short visit, or immediately after refusal of permission to stay here, and the parties cannot even begin to agree on such essential matters as how they met and where they have lived since the ceremony? In such cases, the parties have hardly gone out of their way to advertise their deception once they have secured their objective. But even so it was not uncommon for the truth to emerge after the husband had been granted indefinite leave to remain and for
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our misgivings to prove only too well founded. In this situation, the Government could not simply stand by and allow the immigration control to degenerate into farce.
We do not pretend that these rules can provide a water-tight defence against every sham marriage—that would be an absurd statement—and there may well be instances when the appearance of a genuine marriage will still be artificially maintained at the end of the 12-month period. But in most of the suspicious cases that come our way the semblance of a marriage is probably secured only with difficulty and it is inherently unlikely to subsist for long, so I think the probationary period laid down in the rules will serve a very useful purpose.
I should say a word about the situations envisaged in the rules in which a marraige will he presumed to he one of convenience. There will be a wide variety of cases involving overstaying. Experience hitherto shows that they range from a man who comes here as a visitor and sets about bribing or coercing a woman to marry him in order to settle here but does not succeed until after his limited leave has expired, to the case of the overstayer who goes to ground and does not marry until after the police catch up with him, perhaps some years later. There will undoubtedly be some genuine cases in which persons have married women settled here after overstaying for a short period through inadvertence or otherwise, and these applicants will of course be allowed to stay.
Then there is the applicant against whom deportation proceedings have been taken. There have been quite a number of cases in which deporation orders have have had to be revoked or deportation proceedings abandoned against our better judgment because, within a matter of days after the orders have been signed or the proceedings have commenced, the man has found himself a wife, often a woman whom he has known for an exceptionally short period of time. Finally, there will also be a rebuttable presumption that the marriage is a sham where a man admitted from overseas to marry eventually marries someone other than his named fiancée. That does not seem to me to be an unreasonable power to take at a time like this. There have been relatively few

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cases of that kind, and while I readily accept that there may be bona fide cases in which this situation will arise, the new rules will enable us to look at these cases far more closely.
I turn to the criticism that the rules will enable men whose marriages have broken up during the probationary period to be sent away, even though their marriages were genuine. This provision in the rules is not an innovation. It is broadly modelled on that which applied before 1973 to foreign nationals married to British women whose marriages were as a general rule required to be still subsisting at the end of the 12-month period before settlement was entertained.
The argument, as I understand it, is that it is wrong to penalise a man whose marriage has failed, perhaps through no fault of his own, if there is no reason to suppose that he entered into it in order to circumvent the immigration control. It would, of course, have been possible to frame the rules so as to give a man in this category a prescriptive right to remain here on the basis of a marriage that had irretrievably broken up before the question of granting settlement fell to be determined, provided that the marriage was not one of convenience. But I do not think it would have been right to do so. Let me take an analogy: a man who comes to this country with a work permit has an expectation of obtaining settlement on completion of four years in approved employment; but there cannot be any obligation to allow him to remain here indefinitely where the employment for which the work permit was issued has unexpectedly come to an end and there is no other available employment for him that can be approved.
Quite apart from the question of principle as to whether settlement should be granted when there is no viable remaining basis for permission to remain, I think that a commitment always to allow a husband to stay, even though his marriage had been terminated or there was no question of his living with his wife, would have left a wide area of potential abuse, particularly in cases where the couple had parted very shortly after the mrriage, and where it might be exceptionally difficult to decide whether the marriage was a sham or not.
But although this particular rule will enable settlement to be refused where there
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is no valid ground for allowing the husband to stay, it is my right honourable friend's intention that it should be sympathetically applied. The instructions will require the staff always to consider whether the husband may qualify to remain under some other provision of the rules; such as if the Department of Employment is prepared to approve his employment. If no such possibility arises, careful consideration will be given to any representations that may be made that it would be an undue hardship for the husband to have to leave the United Kingdom. A particularly sympathetic attitude will of course be adopted—I was specifically asked about this by Lord Avebury—to any case where the wife has died. Account will also be taken of any factors which might point to the possibility of a reconciliation. Cases in which it is proposed to exercise the power in relation to those marriages which have quickly broken up will always be referred to senior official level and, where necessary, to Ministers.
Noble Lords have raised the question of the possible intrusion of privacy which has risen or might arise as a result of some of the checks that have had to be carried out. My right honourable friend accepts that deep feelings have been aroused by questions concerning the consummation of the marriage, and he is particularly anxious that inquiries into these marriages should be carried out with circumspection and understanding. After giving the matter much thought, he has come to the conclusion that it should generally be possible to get at the truth, even in the more dubious cases, without probing the physical side of the marriage. He has therefore decided that Home Office officials should no longer question parties to a marriage as to their sexual relationship and that this aspect should not be discussed during the interview, unless the parties volunteer information on the subject, as they often do. Where cases are referred to the police they will be advised that they should follow the same principle.
As I have indicated, we are determined to enforce the rule with humanity and commonsense. Where men come to this country to contract a genuine marriage, which both parties intend to endure, they have nothing to fear by having to wait for settlement. I commend the rules to your Lordships.
Lord MORRIS: My Lords, before the noble Lord sits down may I ask him a question in relation to the question asked by the noble Earl, Lord Mansfield—which he did not answer—as to whether these Ministerial decrees contain any element of racial discrimination? Has the noble Lord considered one element of difference in these decrees vis-à-vis Commonwealth citizens and non-Commonwealth nationals? It reads:
"If such a person holds a clearance issued upon proof that one of his grandparents was born in the United Kingdom and Islands, he should, subject to paragraph 12, be admitted for settlement".
I read that to mean that an applicant, say, of 25 years of age would have had grandparents born about the turn of the century; that would in the majority of cases not put the applicant beyond the pale, so to speak. Is it not possible that this might clearly be construed as discrimination on the ground of colour, as the vast majority of Commonwealth citizens are beyond the pale?
Lord HARRIS of GREENWICH: My Lords, as I think the House will be aware, I had, in fact, sat down, but, in answer to the point that the noble Lord has put to me, I indicated the situation in answer to the noble Earl. There is no element of racial discrimination so far as the rules are concerned. What the Government have been anxious to do is to deal with what we have considered to be a significant abuse of the existing system, but I must emphasise that these rules apply to anybody.
6.20 p.m.
Lord AVEBURY: My Lords, I am sure that the House is most grateful for the assurances that the Minister has given in respect of the manner in which these rules will be applied, and that the ethnic minorities will take some comfort in particular from his absolute and categorical assurance that there is no intention whatsoever of interfering with the custom of arranged marriages which prevails among some of the Hindu and Moslem communities. The fact that we have that assurance on the record will, I believe, have made this afternoon's proceedings worth while. It will be tremendously helpful to have it on the record that instructions are to be given to the immigration officers not to ask intensely personal questions of the kind mentioned
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by the noble Lord, Lord Brockway—a particularly disgusting instance of intrusion into privacy, but one that was certainly not untypical of a series given in the document published by the Joint Council for the Welfare of Immigrants. The instructions to both the immigration officers and the police who may be required to conduct inquiries on their behalf not to put those intensely personal questions will, I believe, he widely welcomed.
I am sorry that the Minister was not able to give me any hope on the question of inquiries being conducted by the officers of local social services departments where it was inconvenient for the immigration officials to do so. I hope that this may be reconsidered because I am sure that the noble Lord, Lord Harris, realises that many people fear dealings with the police, possibly quite unjustifiably. If one has been brought up to think of the police as friends, one will have no fear of going into a police station or, indeed, of a policeman calling at one's home; but many people do not see it in that way. If they had to deal in the first instance with a sympathetic social worker from the local authority, I feel certain that the results would be improved.
Let us face it, my Lords, we are doing what the noble Earl, Lord Mansfield, called "chipping away at freedom", and that process is still as unpalatable as it was before I heard the assurances of the Minister. I do not feel that he made out a very good case on the evidence. He produced one story about a ma n arriving from Germany as a visitor and entering a form of marriage within two or three weeks of his arrival. By the way, that case would have been perfectly easily dealt with under the existing rules. It could have been dealt with under paragraph 4 of the rules for control after entry, and I daresay it was so dealt with, because I imagine that the noble Lord WE3 speaking about a case that occurred before March 22nd when these rules were made.
The production of a single example, though it may illustrate the kind of abuse which the noble Lord says is taking place, tells us nothing at all about the scale, which is something which we have continually asked for. We are told that there is evidence in the Home Office that leaves no doubt in the minds of Ministers that such a change in the rules is necessary.

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I cannot understand why, if the evidence is available in the Home Office, it cannot be given to the House. The nature of things, the Minister has said, is that we can give no precise indication, and that is a repetition of what his honourable friend Dr. Shirley Summerskill said in another place. However, as I say, if one monitored for a period of a month or three months how many cases of the sort that the noble Lord has described come to the attention of officials, I believe that there could be some indication. I feel that these figures are probably available and that for some reason which is not immediately obvious the Ministers are reluctant to give them to Parliament. That is something of which I take a fairly serious view because what the Minister thinks is substantial evasion of the existing rules may to the rest of us appear to be thoroughly trivial.
The Minister said, quite rightly, that if it were to be widely believed that abuse was taking place either through bogus marriages or in any other respect, he could think of nothing more certain to harm or poison race relations. I completely agree with him, but I believe it is equally possible for race relations to be harmed if unspecified allegations are made against the immigrant community, or against particular ethnic minorities, of widespread rackets into which it is said they are entering in order to acquire a right of abode in the United Kingdom—and this on the basis of evidence that would certainly not be accepted in any court of law.
So I believe that, at some time in the future, the Home Office and the Minister, who has been very courteous in answering many of our questions, will have to come clean and produce this evidence. But I know that we shall not persuade him to go any further this afternoon, so I conclude by saying that we are grateful for the half loaf that we have received and that I hope that the assurances which the noble Lord has given to the House this afternoon will be given as wide publicity as possible among the ethnic minorities. I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

  EEC DIRECTIVE ON WILD BIRDS
  EEC DIRECTIVE ON WILD BIRDS
  KNIGHTHOODS AND THE PUBLIC SECTOR
  KNIGHTHOODS AND THE PUBLIC SECTOR